Service Properties Trust (Form: 10-Q, Received: 11/08/2019 16:49:56)

false--12-31Q320190000945394P6M05509000454000165280001361000P3Y257000026890000.010.012000000002000000001644417091645653031644417091645653030.0100.0110.03950.04250.04350.043750.0450.04650.04750.04950.04950.05250.050.045P3Y0.0027701000005485000300030003000300024.6724.6724.6724.67258000 0000945394 2019-01-01 2019-09-30 0000945394 2019-11-07 0000945394 2018-12-31 0000945394 2019-09-30 0000945394 2018-07-01 2018-09-30 0000945394 2019-07-01 2019-09-30 0000945394 2018-01-01 2018-09-30 0000945394 svc:RentalIncomeMember 2018-01-01 2018-09-30 0000945394 svc:RentalIncomeMember 2019-07-01 2019-09-30 0000945394 svc:RentalIncomeMember 2019-01-01 2019-09-30 0000945394 svc:FurnitureFixturesAndEquipmentReserveIncomeMember 2019-07-01 2019-09-30 0000945394 srt:HotelMember 2018-01-01 2018-09-30 0000945394 svc:RentalIncomeMember 2018-07-01 2018-09-30 0000945394 srt:HotelMember 2019-07-01 2019-09-30 0000945394 srt:HotelMember 2019-01-01 2019-09-30 0000945394 srt:HotelMember 2018-07-01 2018-09-30 0000945394 svc:FurnitureFixturesAndEquipmentReserveIncomeMember 2018-07-01 2018-09-30 0000945394 svc:FurnitureFixturesAndEquipmentReserveIncomeMember 2019-01-01 2019-09-30 0000945394 svc:FurnitureFixturesAndEquipmentReserveIncomeMember 2018-01-01 2018-09-30 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-09-30 0000945394 us-gaap:CommonStockMember 2018-09-30 0000945394 us-gaap:AdditionalPaidInCapitalMember 2019-09-30 0000945394 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0000945394 2018-01-01 2018-03-31 0000945394 us-gaap:CommonStockMember 2018-03-31 0000945394 us-gaap:RetainedEarningsMember 2018-09-30 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000945394 us-gaap:CommonStockMember 2019-09-30 0000945394 svc:CumulativeCommonDistributionsMember 2019-01-01 2019-03-31 0000945394 us-gaap:AccountingStandardsUpdate201601Member 2018-01-01 0000945394 us-gaap:AdditionalPaidInCapitalMember 2018-07-01 2018-09-30 0000945394 2019-01-01 2019-03-31 0000945394 2018-04-01 2018-06-30 0000945394 us-gaap:CommonStockMember 2017-12-31 0000945394 us-gaap:CommonStockMember 2018-12-31 0000945394 us-gaap:AdditionalPaidInCapitalMember 2018-09-30 0000945394 us-gaap:CommonStockMember 2018-01-01 2018-03-31 0000945394 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0000945394 svc:CumulativeCommonDistributionsMember 2018-04-01 2018-06-30 0000945394 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-30 0000945394 svc:CumulativeCommonDistributionsMember 2017-12-31 0000945394 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0000945394 us-gaap:CommonStockMember 2018-07-01 2018-09-30 0000945394 us-gaap:RetainedEarningsMember 2018-07-01 2018-09-30 0000945394 svc:CumulativeCommonDistributionsMember 2019-06-30 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0000945394 us-gaap:CommonStockMember 2019-07-01 2019-09-30 0000945394 us-gaap:RetainedEarningsMember 2018-06-30 0000945394 svc:CumulativeCommonDistributionsMember 2019-07-01 2019-09-30 0000945394 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-03-31 0000945394 us-gaap:RetainedEarningsMember 2019-06-30 0000945394 2019-04-01 2019-06-30 0000945394 svc:CumulativeCommonDistributionsMember 2018-01-01 2018-03-31 0000945394 us-gaap:CommonStockMember 2018-04-01 2018-06-30 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-03-31 0000945394 us-gaap:RetainedEarningsMember 2017-12-31 0000945394 us-gaap:CommonStockMember 2018-06-30 0000945394 us-gaap:CommonStockMember 2019-06-30 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0000945394 svc:CumulativeCommonDistributionsMember 2018-09-30 0000945394 us-gaap:RetainedEarningsMember 2019-07-01 2019-09-30 0000945394 us-gaap:AdditionalPaidInCapitalMember 2019-07-01 2019-09-30 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-03-31 0000945394 svc:CumulativeCommonDistributionsMember 2018-06-30 0000945394 2019-03-31 0000945394 us-gaap:RetainedEarningsMember 2019-01-01 2019-03-31 0000945394 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-07-01 2019-09-30 0000945394 us-gaap:RetainedEarningsMember 2018-03-31 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-04-01 2018-06-30 0000945394 svc:CumulativeCommonDistributionsMember 2019-09-30 0000945394 svc:CumulativeCommonDistributionsMember 2019-03-31 0000945394 us-gaap:AdditionalPaidInCapitalMember 2018-04-01 2018-06-30 0000945394 us-gaap:RetainedEarningsMember 2018-04-01 2018-06-30 0000945394 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000945394 svc:CumulativeCommonDistributionsMember 2019-04-01 2019-06-30 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0000945394 2018-03-31 0000945394 svc:CumulativeCommonDistributionsMember 2018-03-31 0000945394 2019-06-30 0000945394 2018-06-30 0000945394 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0000945394 us-gaap:CommonStockMember 2019-03-31 0000945394 us-gaap:AccountingStandardsUpdate201601Member us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 0000945394 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0000945394 us-gaap:RetainedEarningsMember 2019-03-31 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-07-01 2018-09-30 0000945394 2017-12-31 0000945394 2018-09-30 0000945394 us-gaap:RetainedEarningsMember 2018-01-01 2018-03-31 0000945394 svc:CumulativeCommonDistributionsMember 2018-12-31 0000945394 svc:CumulativeCommonDistributionsMember 2018-07-01 2018-09-30 0000945394 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0000945394 us-gaap:AccountingStandardsUpdate201601Member us-gaap:RetainedEarningsMember 2018-01-01 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0000945394 us-gaap:RetainedEarningsMember 2019-09-30 0000945394 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-03-31 0000945394 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0000945394 us-gaap:RetainedEarningsMember 2018-12-31 0000945394 us-gaap:AccountingStandardsUpdate201811Member 2019-01-01 0000945394 srt:AffiliatedEntityMember 2018-07-01 2018-09-30 0000945394 srt:AffiliatedEntityMember 2019-07-01 2019-09-30 0000945394 srt:AffiliatedEntityMember 2019-01-01 2019-09-30 0000945394 srt:AffiliatedEntityMember 2018-12-31 0000945394 srt:AffiliatedEntityMember 2019-09-30 0000945394 srt:AffiliatedEntityMember 2018-01-01 2018-09-30 0000945394 2019-05-16 2019-05-16 0000945394 2019-07-03 2019-07-03 0000945394 svc:TrusteeOneMember 2019-06-13 2019-06-13 0000945394 2019-04-05 2019-04-05 0000945394 us-gaap:SubsequentEventMember 2019-10-17 2019-10-17 0000945394 svc:OfficersAndCertainOtherEmployeesMember 2019-09-18 2019-09-18 0000945394 2019-09-25 2019-09-25 0000945394 2019-02-21 2019-02-21 0000945394 2019-08-15 2019-08-15 0000945394 svc:TrusteeFourMember 2019-06-13 2019-06-13 0000945394 svc:TrusteeThreeMember 2019-06-13 2019-06-13 0000945394 svc:TrusteeTwoMember 2019-06-13 2019-06-13 0000945394 svc:TrusteeFiveMember 2019-06-13 2019-06-13 0000945394 us-gaap:RevolvingCreditFacilityMember 2019-01-01 2019-09-30 0000945394 us-gaap:SeniorNotesMember 2019-09-30 0000945394 us-gaap:RevolvingCreditFacilityMember us-gaap:SubsequentEventMember 2019-11-07 0000945394 us-gaap:UnsecuredDebtMember 2019-09-30 0000945394 svc:UnsecuredSeniorNotesDue2026Member us-gaap:SeniorNotesMember 2019-09-18 0000945394 us-gaap:RevolvingCreditFacilityMember 2019-07-01 2019-09-30 0000945394 svc:UnsecuredSeniorNotesDue2029Member us-gaap:SeniorNotesMember 2019-09-18 0000945394 us-gaap:UnsecuredDebtMember 2018-01-01 2018-09-30 0000945394 svc:UnsecuredSeniorNotesDue2024Member us-gaap:SeniorNotesMember 2019-09-18 0000945394 us-gaap:RevolvingCreditFacilityMember 2018-07-01 2018-09-30 0000945394 us-gaap:UnsecuredDebtMember 2018-07-01 2018-09-30 0000945394 us-gaap:RevolvingCreditFacilityMember 2019-09-30 0000945394 2019-09-20 2019-09-20 0000945394 us-gaap:UnsecuredDebtMember us-gaap:SubsequentEventMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-10-01 2019-10-01 0000945394 us-gaap:UnsecuredDebtMember 2019-01-01 2019-09-30 0000945394 us-gaap:RevolvingCreditFacilityMember us-gaap:SubsequentEventMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-10-01 2019-10-01 0000945394 us-gaap:UnsecuredDebtMember 2019-07-01 2019-09-30 0000945394 us-gaap:SeniorNotesMember 2019-09-18 2019-09-18 0000945394 us-gaap:RevolvingCreditFacilityMember 2018-01-01 2018-09-30 0000945394 2019-09-20 0000945394 svc:UnsecuredRevolvingCreditFacilityAndTermLoanMember 2019-09-30 0000945394 us-gaap:RevolvingCreditFacilityMember us-gaap:SubsequentEventMember 2019-10-01 2019-10-01 0000945394 us-gaap:UnsecuredDebtMember 2019-09-20 0000945394 us-gaap:UnsecuredDebtMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-09-30 0000945394 us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-09-30 0000945394 svc:TravelCentersMember svc:TravelCentersOfAmericaMember 2019-01-31 0000945394 srt:HotelMember 2019-09-30 0000945394 srt:HotelMember svc:HotelPalomarMember stpr:DC 2019-02-22 2019-02-22 0000945394 svc:HermantownMNMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember us-gaap:SubsequentEventMember 2019-10-29 2019-10-29 0000945394 srt:HotelMember svc:HotelPalomarMember svc:ChicagoILMember us-gaap:SubsequentEventMember 2019-10-09 0000945394 svc:TravelCentersMember svc:SouthingtonCTMember svc:TravelCentersOfAmericaMember 2019-08-01 2019-08-01 0000945394 svc:VariousLocationsMember 2019-09-20 2019-09-20 0000945394 svc:HotelsAndTravelCentersMember 2019-01-01 2019-09-30 0000945394 us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember us-gaap:SubsequentEventMember 2019-10-11 2019-10-11 0000945394 svc:VariousLocationsMember 2019-09-30 0000945394 svc:TravelCentersMember svc:TravelCentersOfAmericaMember 2019-01-01 2019-01-31 0000945394 srt:HotelMember svc:CrownePlazaHotelsMember svc:MilwaukeeWIMember 2019-05-07 2019-05-07 0000945394 srt:HotelMember svc:HotelPalomarMember stpr:DC 2019-02-22 0000945394 srt:HotelMember 2019-01-01 2019-09-30 0000945394 us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember us-gaap:SubsequentEventMember 2019-10-11 0000945394 svc:HermantownMNMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember us-gaap:SubsequentEventMember 2019-10-22 2019-10-22 0000945394 svc:HermantownMNMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember us-gaap:SubsequentEventMember 2019-10-22 0000945394 srt:HotelMember svc:CrownePlazaHotelsMember svc:MilwaukeeWIMember 2019-05-07 0000945394 srt:HotelMember srt:MaximumMember 2019-09-30 0000945394 svc:HermantownMNMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember us-gaap:SubsequentEventMember 2019-10-29 0000945394 srt:HotelMember svc:HotelPalomarMember svc:ChicagoILMember us-gaap:SubsequentEventMember 2019-10-09 2019-10-09 0000945394 svc:VariousLocationsMember 2019-09-20 0000945394 svc:TravelCentersMember svc:SouthingtonCTMember svc:TravelCentersOfAmericaMember 2019-08-01 0000945394 svc:TravelCentersMember svc:TravelCentersOfAmericaMember 2019-01-01 2019-09-30 0000945394 svc:RentalIncomeMember svc:SpiritMTAREITTransactionMember 2019-07-01 2019-09-30 0000945394 srt:HotelMember svc:RadissonAgreementMember 2019-01-01 2019-09-30 0000945394 svc:VacationUnitsMember svc:WyndhamDestinationsAgreementMember 2018-07-01 2018-09-30 0000945394 srt:HotelMember svc:SonestaAgreementMember 2018-07-01 2018-09-30 0000945394 srt:HotelMember 2018-01-01 2018-09-30 0000945394 srt:HotelMember svc:RadissonAgreementMember 2018-01-01 2018-09-30 0000945394 srt:HotelMember svc:SonestaAgreementMember 2019-07-01 2019-09-30 0000945394 svc:SpiritMTAREITTransactionMember 2018-07-01 2018-09-30 0000945394 srt:HotelMember svc:WyndhamAgreementMember 2019-01-01 2019-09-30 0000945394 srt:HotelMember svc:WyndhamAgreementMember 2018-01-01 2018-09-30 0000945394 svc:TravelCentersMember svc:TravelCentersOfAmericaMember 2018-07-01 2018-09-30 0000945394 srt:HotelMember svc:MarriottAgreement1Member 2018-01-01 2018-09-30 0000945394 srt:HotelMember svc:MarriottAgreement1Member 2019-01-01 2019-09-30 0000945394 srt:HotelMember svc:SonestaInternationalHotelsCorporationMember 2018-06-30 0000945394 svc:TravelCentersMember svc:TravelCentersOfAmericaMember 2018-12-31 0000945394 srt:HotelMember 2019-07-01 2019-09-30 0000945394 svc:TravelCentersMember srt:ScenarioForecastMember svc:TravelCentersOfAmericaMember 2020-12-31 0000945394 srt:HotelMember svc:MarriottAgreement234Member 2019-01-01 2019-09-30 0000945394 svc:TravelCentersMember svc:TravelCentersOfAmericaMember us-gaap:SubsequentEventMember 2019-10-14 0000945394 svc:TravelCentersMember us-gaap:LandMember 2019-01-01 2019-09-30 0000945394 svc:SpiritMTAREITTransactionMember 2019-09-30 0000945394 srt:HotelMember svc:MarriottAgreement234Member 2018-01-01 2018-09-30 0000945394 srt:HotelMember svc:MarriottAgreement234Member 2019-09-30 0000945394 svc:TravelCentersMember svc:TravelCentersOfAmericaMember 2019-07-01 2019-09-30 0000945394 srt:HotelMember svc:IHGAgreementMember 2019-01-01 2019-09-30 0000945394 srt:HotelMember svc:RadissonAgreementMember 2019-09-30 0000945394 srt:HotelMember svc:LimitedServicesHotelMember svc:SonestaInternationalHotelsCorporationMember 2019-09-30 0000945394 us-gaap:AccountingStandardsUpdate201811Member 2019-09-30 0000945394 srt:HotelMember svc:SonestaInternationalHotelsCorporationMember 2019-09-30 0000945394 srt:HotelMember svc:SonestaAgreementMember 2019-01-01 2019-09-30 0000945394 us-gaap:LandMember 2019-09-30 0000945394 svc:TravelCentersMember svc:RentalIncomeMember svc:TravelCentersOfAmericaMember 2018-01-01 2018-09-30 0000945394 srt:HotelMember svc:HyattHotelsCorporationContractMember 2019-07-01 2019-09-30 0000945394 svc:TravelCentersMember svc:TravelCentersOfAmericaMember 2019-09-30 0000945394 srt:HotelMember svc:WyndhamAgreementMember 2019-09-30 0000945394 svc:WyndhamAgreementMember 2019-01-01 2019-09-30 0000945394 srt:MaximumMember us-gaap:LandMember 2019-09-30 0000945394 svc:VacationUnitsMember svc:WyndhamDestinationsAgreementMember 2019-07-01 2019-09-30 0000945394 srt:HotelMember 2018-07-01 2018-09-30 0000945394 srt:HotelMember svc:HyattHotelsCorporationContractMember 2019-01-01 2019-09-30 0000945394 svc:TravelCentersMember svc:RentalIncomeMember svc:TravelCentersOfAmericaMember 2018-07-01 2018-09-30 0000945394 svc:HotelOperatingLeasesMember 2019-09-30 0000945394 srt:HotelMember srt:MinimumMember 2019-09-30 0000945394 srt:HotelMember svc:IHGAgreementMember 2018-01-01 2018-09-30 0000945394 srt:HotelMember svc:WyndhamAgreementMember 2018-07-01 2018-09-30 0000945394 svc:TravelCentersMember svc:TravelCentersOfAmericaMember 2018-01-01 2018-09-30 0000945394 srt:HotelMember svc:IHGAgreementMember 2018-07-01 2018-09-30 0000945394 svc:VacationUnitsMember svc:WyndhamDestinationsAgreementMember 2019-01-01 2019-09-30 0000945394 srt:HotelMember svc:RadissonAgreementMember 2018-07-01 2018-09-30 0000945394 srt:HotelMember svc:MarriottAgreement1Member 2019-07-01 2019-09-30 0000945394 srt:HotelMember svc:SonestaAgreementMember 2018-01-01 2018-09-30 0000945394 srt:HotelMember svc:MarriottAgreement1Member 2019-09-30 0000945394 srt:HotelMember svc:MarriottAgreement234Member 2019-07-01 2019-09-30 0000945394 svc:TravelCentersMember svc:TravelCentersAgreementMember svc:TravelCentersOfAmericaMember 2019-09-30 0000945394 srt:HotelMember svc:IHGAgreementMember 2019-07-01 2019-09-30 0000945394 svc:TravelCentersMember svc:OperatingLeaseExpenseMember us-gaap:CustomerConcentrationRiskMember svc:TravelCentersOfAmericaMember 2019-01-01 2019-09-30 0000945394 svc:TravelCentersMember svc:RentalIncomeMember svc:TravelCentersOfAmericaMember 2019-07-01 2019-09-30 0000945394 srt:HotelMember svc:FullServiceHotelMember svc:SonestaInternationalHotelsCorporationMember 2019-09-30 0000945394 srt:HotelMember svc:MarriottAgreement234Member 2018-07-01 2018-09-30 0000945394 srt:HotelMember svc:MarriottNo5ContractMember 2018-01-01 2018-09-30 0000945394 srt:HotelMember svc:MarriottNo5ContractMember 2019-07-01 2019-09-30 0000945394 srt:HotelMember svc:MarriottAgreement1Member 2018-07-01 2018-09-30 0000945394 srt:HotelMember srt:MaximumMember 2019-01-01 2019-09-30 0000945394 svc:SpiritMTAREITTransactionMember 2019-01-01 2019-09-30 0000945394 svc:VacationUnitsMember svc:WyndhamDestinationsAgreementMember 2019-09-30 0000945394 srt:HotelMember svc:RadissonAgreementMember 2019-07-01 2019-09-30 0000945394 svc:TravelCentersMember us-gaap:LandMember 2019-09-30 0000945394 srt:HotelMember svc:HyattHotelsCorporationContractMember 2019-09-30 0000945394 srt:HotelMember svc:MarriottNo5ContractMember 2019-01-01 2019-09-30 0000945394 svc:TravelCentersMember svc:RentalIncomeMember svc:TravelCentersOfAmericaMember 2019-01-01 2019-09-30 0000945394 srt:HotelMember svc:IHGAgreementMember 2019-09-30 0000945394 srt:HotelMember svc:MarriottNo5ContractMember 2019-09-30 0000945394 srt:MaximumMember svc:HotelOperatingLeasesMember 2019-09-30 0000945394 srt:HotelMember svc:MarriottNo5ContractMember 2018-07-01 2018-09-30 0000945394 srt:HotelMember srt:MinimumMember 2019-01-01 2019-09-30 0000945394 srt:HotelMember svc:WyndhamAgreementMember 2019-07-01 2019-09-30 0000945394 srt:MinimumMember svc:HotelOperatingLeasesMember 2019-09-30 0000945394 svc:VacationUnitsMember svc:WyndhamDestinationsAgreementMember 2018-01-01 2018-09-30 0000945394 srt:MinimumMember us-gaap:LandMember 2019-09-30 0000945394 svc:TravelCentersMember srt:MaximumMember us-gaap:LandMember 2019-09-30 0000945394 srt:HotelMember svc:HyattHotelsCorporationContractMember 2018-01-01 2018-09-30 0000945394 srt:HotelMember svc:HyattHotelsCorporationContractMember 2018-07-01 2018-09-30 0000945394 svc:RentalIncomeMember svc:SpiritMTAREITTransactionMember 2019-01-01 2019-09-30 0000945394 svc:TravelCentersMember srt:MinimumMember us-gaap:LandMember 2019-09-30 0000945394 svc:ReitManagementAndResearchLLCMember svc:AmendedAndRestateBusinessManagementAgreementMember 2019-01-01 2019-09-30 0000945394 svc:ReitManagementAndResearchLLCMember svc:AmendedAndRestateBusinessManagementAgreementMember 2019-07-01 2019-09-30 0000945394 svc:ReitManagementAndResearchLLCMember svc:AmendedAndRestateBusinessManagementAgreementMember 2018-07-01 2018-09-30 0000945394 svc:ReitManagementAndResearchLLCMember svc:AmendedAndRestateBusinessManagementAgreementMember 2019-09-30 0000945394 svc:ReitManagementAndResearchLLCMember svc:AmendedAndRestateBusinessManagementAgreementMember 2018-01-01 2018-09-30 0000945394 svc:ReitManagementAndResearchLLCMember svc:AmendedAndRestateBusinessManagementAgreementMember 2019-01-01 2019-01-31 0000945394 svc:ReitManagementAndResearchLLCMember svc:TravelCentersOfAmericaMember 2019-09-30 0000945394 svc:TravelCentersOfAmericaMember 2019-09-30 0000945394 svc:ReitManagementAndResearchIncMember us-gaap:CommonClassAMember 2019-07-01 0000945394 svc:AffiliatesInsuranceCompanyMember 2019-09-30 0000945394 svc:AffiliatesInsuranceCompanyMember 2018-01-01 2018-09-30 0000945394 svc:ReitManagementAndResearchIncMember us-gaap:CommonClassAMember 2019-07-01 2019-07-01 0000945394 svc:AffiliatesInsuranceCompanyMember 2019-07-01 2019-09-30 0000945394 svc:AffiliatesInsuranceCompanyMember 2019-01-01 2019-09-30 0000945394 svc:AffiliatesInsuranceCompanyMember 2018-07-01 2018-09-30 0000945394 svc:AffiliatesInsuranceCompanyMember 2018-12-31 0000945394 svc:SonestaInternationalHotelsCorporationMember 2019-09-30 0000945394 us-gaap:CorporateNonSegmentMember 2018-01-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:TravelCentersSegmentMember 2018-07-01 2018-09-30 0000945394 us-gaap:CorporateNonSegmentMember 2018-07-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:TravelCentersSegmentMember 2018-01-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:FurnitureFixturesAndEquipmentReserveIncomeMember svc:HotelsSegmentMember 2018-07-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:HotelsSegmentMember 2018-07-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember srt:HotelMember svc:HotelsSegmentMember 2018-01-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:RentalIncomeMember svc:HotelsSegmentMember 2018-07-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:HotelsSegmentMember 2018-01-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember srt:HotelMember svc:TravelCentersSegmentMember 2018-07-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember srt:HotelMember svc:HotelsSegmentMember 2018-07-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:RentalIncomeMember svc:TravelCentersSegmentMember 2018-01-01 2018-09-30 0000945394 us-gaap:CorporateNonSegmentMember srt:HotelMember 2018-01-01 2018-09-30 0000945394 us-gaap:CorporateNonSegmentMember svc:FurnitureFixturesAndEquipmentReserveIncomeMember 2018-07-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:RentalIncomeMember svc:TravelCentersSegmentMember 2018-07-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember srt:HotelMember svc:TravelCentersSegmentMember 2018-01-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:FurnitureFixturesAndEquipmentReserveIncomeMember svc:HotelsSegmentMember 2018-01-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:HotelsSegmentMember 2018-12-31 0000945394 us-gaap:OperatingSegmentsMember svc:FurnitureFixturesAndEquipmentReserveIncomeMember svc:TravelCentersSegmentMember 2018-01-01 2018-09-30 0000945394 us-gaap:CorporateNonSegmentMember svc:RentalIncomeMember 2018-01-01 2018-09-30 0000945394 us-gaap:CorporateNonSegmentMember svc:FurnitureFixturesAndEquipmentReserveIncomeMember 2018-01-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:RentalIncomeMember svc:HotelsSegmentMember 2018-01-01 2018-09-30 0000945394 us-gaap:CorporateNonSegmentMember srt:HotelMember 2018-07-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:TravelCentersSegmentMember 2018-12-31 0000945394 us-gaap:CorporateNonSegmentMember svc:RentalIncomeMember 2018-07-01 2018-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:FurnitureFixturesAndEquipmentReserveIncomeMember svc:TravelCentersSegmentMember 2018-07-01 2018-09-30 0000945394 us-gaap:CorporateNonSegmentMember 2018-12-31 0000945394 us-gaap:OperatingSegmentsMember svc:HotelsSegmentMember 2019-07-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:TravelCentersSegmentMember 2019-01-01 2019-09-30 0000945394 us-gaap:CorporateNonSegmentMember 2019-07-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:FurnitureFixturesAndEquipmentReserveIncomeMember svc:HotelsSegmentMember 2019-07-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:TravelCentersSegmentMember 2019-07-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:HotelsSegmentMember 2019-01-01 2019-09-30 0000945394 us-gaap:CorporateNonSegmentMember svc:RentalIncomeMember 2019-01-01 2019-09-30 0000945394 us-gaap:CorporateNonSegmentMember 2019-01-01 2019-09-30 0000945394 us-gaap:CorporateNonSegmentMember srt:HotelMember 2019-01-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:HotelsSegmentMember 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:RentalIncomeMember svc:TravelCentersSegmentMember 2019-07-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:RentalIncomeMember svc:HotelsSegmentMember 2019-07-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:FurnitureFixturesAndEquipmentReserveIncomeMember svc:TravelCentersSegmentMember 2019-01-01 2019-09-30 0000945394 us-gaap:CorporateNonSegmentMember 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:FurnitureFixturesAndEquipmentReserveIncomeMember svc:HotelsSegmentMember 2019-01-01 2019-09-30 0000945394 us-gaap:CorporateNonSegmentMember svc:FurnitureFixturesAndEquipmentReserveIncomeMember 2019-01-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:FurnitureFixturesAndEquipmentReserveIncomeMember svc:TravelCentersSegmentMember 2019-07-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember srt:HotelMember svc:TravelCentersSegmentMember 2019-01-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:RentalIncomeMember svc:HotelsSegmentMember 2019-01-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember srt:HotelMember svc:HotelsSegmentMember 2019-07-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember srt:HotelMember svc:TravelCentersSegmentMember 2019-07-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:RentalIncomeMember svc:TravelCentersSegmentMember 2019-01-01 2019-09-30 0000945394 us-gaap:CorporateNonSegmentMember srt:HotelMember 2019-07-01 2019-09-30 0000945394 us-gaap:CorporateNonSegmentMember svc:RentalIncomeMember 2019-07-01 2019-09-30 0000945394 us-gaap:CorporateNonSegmentMember svc:FurnitureFixturesAndEquipmentReserveIncomeMember 2019-07-01 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember svc:TravelCentersSegmentMember 2019-09-30 0000945394 us-gaap:OperatingSegmentsMember srt:HotelMember svc:HotelsSegmentMember 2019-01-01 2019-09-30 0000945394 svc:SpiritMTAREITTransactionMember us-gaap:FairValueInputsLevel2Member 2019-09-30 0000945394 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2019-09-30 0000945394 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2019-09-30 0000945394 svc:TravelCentersOfAmericaMember 2019-07-01 2019-09-30 0000945394 svc:TravelCentersOfAmericaMember 2019-01-01 2019-09-30 0000945394 svc:TravelCentersOfAmericaMember 2018-01-01 2018-09-30 0000945394 svc:TravelCentersOfAmericaMember us-gaap:FairValueInputsLevel1Member 2019-09-30 0000945394 svc:TravelCentersOfAmericaMember 2018-07-01 2018-09-30 0000945394 svc:SeniorNotes4.25PercentDue2021Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.25PercentDue2021Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.25PercentDue2021Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.95PercentDue2027Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 svc:UnsecuredSeniorNotes4.50PercentDue2025Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.375PercentDue2030Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes5.25PercentDue2026Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes5PercentDue2022Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.35PercentDue2024Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.95PercentDue2029Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.75PercentDue2026Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes3.95PercentDue2028Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.75PercentDue2026Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.65PercentDue2024Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.95PercentDue2027Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.95PercentDue2029Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.65PercentDue2024Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.375PercentDue2030Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.95PercentDue2027Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 svc:UnsecuredSeniorNotes4.50PercentDue2025Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.5PercentDue2023Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.5PercentDue2023Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.375PercentDue2030Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 svc:UnsecuredSeniorNotes4.50PercentDue2025Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes3.95PercentDue2028Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.35PercentDue2024Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.75PercentDue2026Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes5.25PercentDue2026Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes5PercentDue2022Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.5PercentDue2023Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes5PercentDue2022Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:UnsecuredSeniorNotes4.50PercentDue2025Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.95PercentDue2027Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.25PercentDue2021Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.65PercentDue2024Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.95PercentDue2029Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes5.25PercentDue2026Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes5PercentDue2022Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.375PercentDue2030Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.75PercentDue2026Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.5PercentDue2023Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes3.95PercentDue2028Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.35PercentDue2024Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.35PercentDue2024Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes4.95PercentDue2029Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes3.95PercentDue2028Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 svc:SeniorNotes4.65PercentDue2024Member us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000945394 svc:SeniorNotes5.25PercentDue2026Member us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-09-30 0000945394 us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsNonrecurringMember 2019-09-30 0000945394 svc:TravelCentersOfAmericaMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-09-30 0000945394 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2019-09-30 0000945394 svc:TravelCentersOfAmericaMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-09-30 0000945394 svc:TravelCentersOfAmericaMember us-gaap:CarryingReportedAmountFairValueDisclosureMember us-gaap:FairValueMeasurementsRecurringMember 2019-09-30 0000945394 svc:TravelCentersOfAmericaMember us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-09-30 0000945394 svc:SeniorNotes4.25PercentDue2021Member 2019-09-30 0000945394 svc:SeniorNotes4.95PercentDue2029Member 2019-09-30 0000945394 svc:SeniorNotes3.95PercentDue2028Member 2019-09-30 0000945394 svc:SeniorNotes4.5PercentDue2023Member 2019-09-30 0000945394 svc:SeniorNotes4.375PercentDue2030Member 2019-09-30 0000945394 svc:SeniorNotes4.35PercentDue2024Member 2019-09-30 0000945394 svc:SeniorNotes5PercentDue2022Member 2019-09-30 0000945394 svc:UnsecuredSeniorNotes4.50PercentDue2025Member 2019-09-30 0000945394 svc:SeniorNotes5.25PercentDue2026Member 2019-09-30 0000945394 svc:SeniorNotes4.95PercentDue2027Member 2019-09-30 0000945394 svc:SeniorNotes4.75PercentDue2026Member 2019-09-30 0000945394 svc:SeniorNotes4.65PercentDue2024Member 2019-09-30 svc:tenant svc:travel_center svc:asset svc:agreement svc:retail_property svc:hotel svc:state svc:triple_net_property svc:property svc:room svc:brand utreg:sqft xbrli:shares iso4217:USD svc:lease_agreement iso4217:USD xbrli:shares svc:industry xbrli:pure svc:extension svc:unit svc:quarterly_installment svc:employee svc:segment

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-11527

SERVICE PROPERTIES TRUST

(Exact Name of Registrant as Specified in Its Charter)



Maryland		04-3262075
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts, 02458-1634

(Address of Principal Executive Offices) (Zip Code)

617-964-8389

(Registrant’s Telephone Number, Including Area Code)

Hospitality Properties Trust

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol	Name of each Exchange on which Registered
Common Shares of Beneficial Interest	SVC	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of registrant’s common shares of beneficial interest, $.01 par value per share, outstanding as of November 7, 2019: 164,564,523

Table of Contents

SERVICE PROPERTIES TRUST

FORM 10-Q

September 30, 2019

INDEX



		Page
PART I	Financial Information (unaudited)

	Item 1. Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets — September 30, 2019 and December 31, 2018	3

	Condensed Consolidated Statements of Comprehensive Income — Three and Nine Months Ended September 30, 2019 and 2018	4

	Condensed Consolidated Statements of Shareholders' Equity — Three and Nine Months Ended September 30, 2019 and 2018	5

	Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, 2019 and 2018	7

	Notes to Condensed Consolidated Financial Statements	8

	Item 2.
	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

	Item 3.
	Quantitative and Qualitative Disclosures About Market Risk	48

	Item 4.
	Controls and Procedures	50

	Warning Concerning Forward-Looking Statements	50

	Statement Concerning Limited Liability	54

PART II	Other Information

	Item 1A.
	Risk Factors	55

	Item 2.
	Unregistered Sales of Equity Securities and Use of Proceeds	58

	Item 6.
	Exhibits	58

	Signatures	61

References in this Quarterly Report on Form 10-Q to the Company, SVC, we, us or our include Service Properties Trust (formerly known as Hospitality Properties Trust) and our consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.

Table of Contents

Part I Financial Information

Item 1. Financial Statements

SERVICE PROPERTIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(dollars in thousands, except share data)



	September 30,			December 31,
	2019			2018
ASSETS
Real estate properties:
Land	$	2,062,776		$	1,626,239
Buildings, improvements and equipment	9,237,760			7,896,734
Total real estate properties, gross	11,300,536			9,522,973
Accumulated depreciation	(3,086,684		)	(2,973,384		)
Total real estate properties, net	8,213,852			6,549,589
Acquired real estate leases and other intangibles	392,673			105,749
Assets held for sale	604,989			144,008
Cash and cash equivalents	16,990			25,966
Restricted cash	53,519			50,037
Due from related persons	72,587			91,212
Other assets, net	160,893			210,518
Total assets	$	9,515,503		$	7,177,079

LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility	$	790,000		$	177,000
Unsecured term loan, net	397,740			397,292
Senior unsecured notes, net	5,284,933			3,598,295
Security deposits	122,763			132,816
Accounts payable and other liabilities	292,161			211,332
Due to related persons	18,920			62,913
Total liabilities	6,906,517			4,579,648

Commitments and contingencies

Shareholders’ equity:
Common shares of beneficial interest, $.01 par value; 200,000,000 shares authorized; 164,565,303 and 164,441,709 shares issued and outstanding, respectively	1,646			1,644
Additional paid in capital	4,547,055			4,545,481
Cumulative other comprehensive loss	(175		)	(266		)
Cumulative net income available for common shareholders	3,506,538			3,231,895
Cumulative common distributions	(5,446,078		)	(5,181,323		)
Total shareholders’ equity	2,608,986			2,597,431
Total liabilities and shareholders’ equity	$	9,515,503		$	7,177,079

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SERVICE PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(dollars in thousands, except share data)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Hotel operating revenues	$	525,290		$	520,618		$	1,521,368		$	1,494,283
Rental income	73,619			81,322			210,509			245,543
FF&E reserve income	863			1,213			3,365			3,911
Total revenues	599,772			603,153			1,735,242			1,743,737

Expenses:
Hotel operating expenses	377,895			365,526			1,076,011			1,052,121
Other operating expenses	1,707			1,468			4,419			3,936
Depreciation and amortization	103,160			101,007			301,721			300,308
General and administrative	12,464			13,425			36,906			38,280
Total expenses	495,226			481,426			1,419,057			1,394,645

Gain on sale of real estate	—			—			159,535			—
Dividend income	—			626			1,752			1,878
Unrealized gains (losses) on equity securities, net	(3,950		)	43,453			(43,761		)	89,348
Interest income	688			478			1,774			1,093
Interest expense (including amortization of debt issuance costs and debt discounts and premiums of $2,689, $2,570, $7,829 and $7,607, respectively)	(52,375		)	(49,308		)	(151,742		)	(145,589		)
Loss on early extinguishment of debt	(8,451		)	—			(8,451		)	(160		)
Income before income taxes and equity in earnings of an investee	40,458			116,976			275,292			295,662
Income tax expense	(467		)	(707		)	(1,266		)	(1,949		)
Equity in earnings of an investee	83			830			617			881
Net income	40,074			117,099			274,643			294,594

Other comprehensive income (loss):
Equity interest in investee’s unrealized gains (losses)	(46		)	173			91			90
Other comprehensive income (loss)	(46		)	173			91			90
Comprehensive income	$	40,028		$	117,272		$	274,734		$	294,684

Weighted average common shares outstanding (basic)	164,321			164,232			164,294			164,212
Weighted average common shares outstanding (diluted)	164,348			164,274			164,332			164,242

Net income per common share (basic and diluted)	$	0.24		$	0.71		$	1.67		$	1.79

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SERVICE PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited)

(in thousands, except share data)



	Common Shares							Additional Paid in Capital			Cumulative Net Income Available for Common Shareholders		Cumulative Other Comprehensive Income (Loss)
	Number of Shares		Common Shares		Cumulative Common Distributions
	Number of Shares		Common Shares		Cumulative Common Distributions											Total

Balance at December 31, 2018	164,441,709		$	1,644	$	(5,181,323	)	$	4,545,481		$	3,231,895	$	(266	)	$	2,597,431
Net income	—		—		—			—			225,787		—			225,787
Equity interest in investee’s unrealized gains	—		—		—			—			—		66			66
Common share grants	—		—		—			436			—		—			436
Distributions	—		—		(87,154		)	—			—		—			(87,154		)
Balance at March 31, 2019	164,441,709		$	1,644	$	(5,268,477	)	$	4,545,917		$	3,457,682	$	(200	)	$	2,736,566
Net income	—		—		—			—			8,782		—			8,782
Equity interest in investee’s unrealized gains	—		—		—			—			—		71			71
Common share grants	15,000		1		—			868			—		—			869
Common share repurchases and forfeitures	(2,172	)	—		—			(48		)	—		—			(48		)
Distributions	—		—		(88,798		)	—			—		—			(88,798		)
Balance at June 30, 2019	164,454,537		$	1,645	$	(5,357,275	)	$	4,546,737		$	3,466,464	$	(129	)	$	2,657,442
Net income	—		—		—			—			40,074		—			40,074
Equity interest in investee’s unrealized losses	—		—		—			—			—		(46		)	(46		)
Common share grants	140,100		1		—			1,067			—		—			1,068
Common share repurchases	(29,334	)	—		—			(749		)	—		—			(749		)
Distributions	—		—		(88,803		)	—			—		—			(88,803		)
Balance at September 30, 2019	164,565,303		$	1,646	$	(5,446,078	)	$	4,547,055		$	3,506,538	$	(175	)	$	2,608,986

Table of Contents



	Common Shares								Additional Paid in Capital			Cumulative Net Income Available for Common Shareholders		Cumulative Other Comprehensive Income (Loss)
	Number of Shares		Common Shares			Cumulative Common Distributions
	Number of Shares		Common Shares			Cumulative Common Distributions											Total

Balance at December 31, 2017	164,349,141		$	1,643		$	(4,834,491	)	$	4,542,307		$	2,966,605	$	79,358		$	2,755,422
Cumulative effect of accounting change	—		—			—			—			79,556		(79,556		)	—
Net income	—		—			—			—			80,206		—			80,206
Equity interest in investee’s unrealized losses	—		—			—			—			—		(93		)	(93		)
Common share repurchases	(3,394	)	—			—			(101		)	—		—			(101		)
Distributions	—		—			(85,460		)	—			—		—			(85,460		)
Balance at March 31, 2018	164,345,747		$	1,643		$	(4,919,951	)	$	4,542,206		$	3,126,367	$	(291	)	$	2,749,974
Net income	—		—			—			—			97,289		—			97,289
Equity interest in investee’s unrealized gains	—		—			—			—			—		10			10
Common share grants	18,000		1			—			500			—		—			501
Distributions	—		—			(87,105		)	—			—		—			(87,105		)
Balance at June 30, 2018	164,363,747		$	1,644		$	(5,007,056	)	$	4,542,706		$	3,223,656	$	(281	)	$	2,760,669
Net income	—		—			—			—			117,099		—			117,099
Equity interest in investee’s unrealized gains	—		—			—			—			—		173			173
Common share grants	97,000		1			—			2,242			—		—			2,243
Common share repurchases	(18,368	)	(1		)	—			(499		)	—		—			(500		)
Distributions	—		—			(87,113		)	—			—		—			(87,113		)
Balance at September 30, 2018	164,442,379		$	1,644		$	(5,094,169	)	$	4,544,449		$	3,340,755	$	(108	)	$	2,792,571

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SERVICE PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)



	For the Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities:
Net income	$	274,643		$	294,594
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	301,721			300,308
Amortization of debt issuance costs and debt discounts and premiums as interest	7,829			7,607
Straight line rental income	7,368			(9,359		)
Security deposits replenished (utilized)	(10,052		)	7,687
Loss on early extinguishment of debt	8,451			160
Unrealized (gains) and losses on equity securities, net	43,761			(89,348		)
Equity in earnings of an investee	(617		)	(881		)
Gain on sale of real estate	(159,535		)	—
Other non-cash (income) expense, net	109			(2,226		)
Changes in assets and liabilities:
Due from related persons	3,609			(585		)
Other assets	(6,352		)	(8,627		)
Accounts payable and other liabilities	12,743			(21,259		)
Due to related persons	(51,148		)	(74,667		)
Net cash provided by operating activities	432,530			403,404

Cash flows from investing activities:
Real estate acquisitions and deposits	(2,659,186		)	(95,208		)
Real estate improvements	(71,024		)	(111,248		)
Hotel managers’ purchases with restricted cash	(143,692		)	(89,401		)
Hotel manager’s deposit of insurance proceeds into restricted cash	14,325			18,000
Net proceeds from sale of real estate	308,200			—
Net proceeds from sale of equity securities	93,892			—
Net cash used in investing activities	(2,457,485		)	(277,857		)

Cash flows from financing activities:
Proceeds from issuance of senior unsecured notes, after discounts and premiums	1,693,879			389,976
Borrowings under unsecured revolving credit facility	997,000			395,000
Repayments of unsecured revolving credit facility	(384,000		)	(650,000		)
Deferred financing costs	(21,869		)	(12,242		)
Repurchase of common shares	(794		)	(606		)
Distributions to common shareholders	(264,755		)	(259,678		)
Net cash provided by (used in) financing activities	2,019,461			(137,550		)
Decrease in cash and cash equivalents and restricted cash	(5,494		)	(12,003		)
Cash and cash equivalents and restricted cash at beginning of period	76,003			97,496
Cash and cash equivalents and restricted cash at end of period	$	70,509		$	85,493

Supplemental disclosure of cash and cash equivalents and restricted cash:
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amount shown in the condensed consolidated statements of cash flows:
Cash and cash equivalents	$	16,990		$	19,849
Restricted cash	53,519			65,644
Total cash and cash equivalents and restricted cash	$	70,509		$	85,493

Supplemental cash flow information:
Cash paid for interest	$	171,418		$	158,056
Cash paid for income taxes	2,614			2,804

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

Note 1. Basis of Presentation

The accompanying condensed consolidated financial statements of Service Properties Trust (formerly known as Hospitality Properties Trust) and its subsidiaries, or SVC, we, our or us, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2018, or our 2018 Annual Report. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair statement of results for the interim period, have been included. These condensed consolidated financial statements include the accounts of SVC and our subsidiaries, all of which are 100% owned directly or indirectly by SVC. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods and those of our managers and tenants are not necessarily indicative of the results that may be expected for the full year. Reclassifications have been made to the prior year’s condensed consolidated financial statements to conform to the current year’s presentation.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in our condensed consolidated financial statements include the allowance for doubtful accounts, purchase price allocations, useful lives of fixed assets, impairment of real estate and the valuation of intangible assets.

We have determined that each of our wholly owned taxable REIT subsidiaries, or TRSs, is a variable interest entity, or VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards 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 VIEs’ performance and we have the obligation to absorb losses or the right to receive benefits from each VIE that could be significant to the VIE and are, therefore, the primary beneficiary of each VIE. The assets of our TRSs were $33,794 and $31,917 as of September 30, 2019 and December 31, 2018, respectively, and consist primarily of amounts due from and working capital advances to certain of our hotel managers. The liabilities of our TRSs were $148,017 and $148,459 as of September 30, 2019 and December 31, 2018, respectively, and consist primarily of security deposits they hold and amounts payable to certain of our hotel managers. The assets of our TRSs are available to satisfy our TRSs’ obligations and we have guaranteed certain obligations of our TRSs.

Note 2. New Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update, or ASU, No. 2016-02, Leases. Additional guidance and targeted improvements to ASU No. 2016-02 were made through the issuance of supplemental ASUs in July 2018, December 2018 and March 2019, or collectively with ASU No. 2016-02, the Lease Standard. We adopted the Lease Standard on January 1, 2019. The Lease Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The Lease Standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. Upon adoption, we applied the package of practical expedients that allowed us not to reassess (i) whether any expired or existing contracts are or contain leases, (ii) lease classification for any expired or existing leases, (iii) initial direct costs for any expired or existing leases and (iv) the option to initially apply the Lease Standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption, although we did not have such an adjustment. Additionally, our leases met the criteria not to separate non-lease components from the related lease component.

As a lessor. We are required to account for leases using an approach that is substantially equivalent to existing guidance for sales type leases, direct financing leases and operating leases. Adoption of the Lease Standard did not have a material impact in our condensed consolidated financial statements for our leases where we are the lessor.

As a lessee. We are required to record right of use assets and lease liabilities in our condensed consolidated balance sheets for leases with terms greater than 12 months, where we are the lessee. We recorded right of use assets and related lease liabilities of $77,010 upon implementation of the Lease Standard. Adoption of the Lease Standard did not have a material effect

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

in our condensed consolidated statements of comprehensive income or condensed consolidated statements of cash flows for our leases where we are the lessee.

See Note 8 for further information regarding our leases and the adoption of the Lease Standard.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU No. 2016-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. We are currently assessing the potential impact the adoption of ASU No. 2016-13 will have in our condensed consolidated financial statements. Lease related receivables are governed by the Lease Standards referred to above and are not subject to ASU No. 2016-13. We currently expect to adopt the standard using the modified retrospective approach.

Note 3. Revenue Recognition

We report hotel operating revenues for managed hotels in our condensed consolidated statements of comprehensive income. We generally recognize hotel operating revenues, consisting primarily of room and food and beverage sales, when goods and services are provided.

We report rental income for leased properties in our condensed consolidated statements of comprehensive income. We recognize rental income from operating leases on a straight line basis over the term of the lease agreements. We reduced rental income by $3,046 and $7,368 for the three and nine months ended September 30, 2019, respectively, and increased rental income by $3,136 and $9,359 for the three and nine months ended September 30, 2018, respectively, to record scheduled rent changes under certain of our leases, the deferred rent obligations payable to us under our leases with TravelCenters of America Inc., or 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. See Notes 8 and 10 for further information regarding our TA leases. Due from related persons includes $51,071 and $66,347 and other assets, net, includes $3,135 and $3,073 of straight line rent receivables at September 30, 2019 and December 31, 2018, respectively.

Certain of our lease agreements require additional percentage rent if gross revenues of our properties exceed certain thresholds defined in our lease agreements. We may determine percentage rent due to us under our leases monthly, quarterly or annually, depending on the specific lease terms, and recognize it when all contingencies are met and the rent is earned. We had deferred estimated percentage rent of $1,020 and $3,047 for the three and nine months ended September 30, 2019, respectively, and $978 and $2,762 for the three and nine months ended September 30, 2018, respectively.

We own all the FF&E reserve escrows for our hotels. We report deposits by our third-party tenants into the escrow accounts as FF&E reserve income. We do not report the amounts which are escrowed as reserves established for the regular refurbishment of our hotels, or FF&E reserves, for our managed hotels as FF&E reserve income.

Note 4. Weighted Average Common Shares

The following table provides a reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per share:



	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2019	2018	2019	2018
	(in thousands)
Weighted average common shares for basic earnings per share	164,321	164,232	164,294	164,212
Effect of dilutive securities: Unvested share awards	27	42	38	30
Weighted average common shares for diluted earnings per share	164,348	164,274	164,332	164,242

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

Note 5. Shareholders' Equity

Share Awards

On June 13, 2019, in accordance with our Trustee compensation arrangements, we granted 3,000 of our common shares, valued at $24.67 per common share, the closing price of our common shares on The Nasdaq Stock Market LLC, or Nasdaq, on that day to each of our five Trustees as part of their annual compensation.

On September 18, 2019, we granted an aggregate of 140,100 of our common shares, valued at $25.03 per common share, the closing price of our common shares on Nasdaq on that day, to our officers and certain other employees of The RMR Group LLC, or RMR LLC, under our equity compensation plan.

Share Purchases

On April 5, 2019, we purchased an aggregate of 1,642 of our common shares for $26.64 per common share, the closing price of our common shares on Nasdaq on that day, from a former officer of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

On July 3, 2019, we purchased an aggregate of 5,041 of our common shares for $25.20 per common share, the closing price of our common shares on Nasdaq on that day, from our former officer and former employee of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

On September 25, 2019, we purchased an aggregate of 24,293 of our common shares for $25.64 per common share, the closing price of our common shares on that day, from our officers and certain employees of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

Distributions

On February 21, 2019, we paid a regular quarterly distribution to our common shareholders of record on January 28, 2019 of $0.53 per share, or $87,154. On May 16, 2019, we paid a regular quarterly distribution to our common shareholders of record on April 29, 2019 of $0.54 per share, or $88,798. On August 15, 2019, we paid a regular quarterly distribution to our common shareholders of record on July 29, 2019 of $0.54 per share, or $88,803. On October 17, 2019, we declared a regular quarterly distribution to our common shareholders of record on October 28, 2019 of $0.54 per share, or $88,865. We expect to pay this amount on or about November 14, 2019.

Cumulative Other Comprehensive Loss

Cumulative other comprehensive loss, as of September 30, 2019, represents our share of the comprehensive loss of Affiliates Insurance Company, or AIC. See Note 10 for further information regarding this investment.

Note 6. Indebtedness

Our principal debt obligations at September 30, 2019 were: (1) $790,000 of outstanding borrowings under our $1,000,000 unsecured revolving credit facility; (2) our $400,000 unsecured term loan; and (3) $5,350,000 aggregate outstanding principal amount of senior unsecured notes. Our revolving credit facility and our term loan are governed by a credit agreement with a syndicate of institutional lenders.

Our $1,000,000 revolving credit facility is available for general business purposes, including acquisitions. The maturity date of our revolving credit facility is July 15, 2022, and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to extend the maturity date of the facility for two additional six-month periods. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity. We are required to pay interest on borrowings under our revolving credit facility at the rate of LIBOR plus a premium, which was 100 basis points per annum as of September 30, 2019. We also pay a facility fee, which was 20 basis points per annum at September 30, 2019, on the total amount of lending commitments under our revolving credit facility. Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings. On October 1, 2019, the interest rate premium and the facility fee increased to 1.20% and 0.25%, respectively, as the result of our credit rating being lowered by a rating agency. As of September 30, 2019, the annual interest rate payable on borrowings under our revolving credit facility was 2.92%. The weighted average annual interest rate for borrowings under our revolving credit facility was

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

3.10% and 3.34% for the three and nine months ended September 30, 2019, respectively, and 2.97% and 3.00% for the three and nine months ended September 30, 2018, respectively. As of September 30, 2019, we had $790,000 outstanding and $210,000 available under our revolving credit facility. As of November 7, 2019, we had $700,000 outstanding and $300,000 available to borrow under our revolving credit facility.

Our $400,000 term loan, which matures on July 15, 2023, is prepayable without penalty at any time. We are required to pay interest on the amount outstanding under our term loan at the rate of LIBOR plus a premium, which was 110 basis points per annum as of September 30, 2019. The interest rate premium is subject to adjustment based on changes to our credit ratings. On October 1, 2019 the interest rate premium increased to 1.35% as a result of our credit rating being lowered by a rating agency. As of September 30, 2019, the annual interest rate for the amount outstanding under our term loan was 3.20%. The weighted average annual interest rate for borrowings under our term loan was 3.35% and 3.51% for the three and nine months ended September 30, 2019, respectively, and 3.19% and 3.02% for the three and nine months ended September 30, 2018, respectively.

Our credit agreement also includes a feature under which maximum aggregate borrowings may be increased to up to $2,300,000 on a combined basis in certain circumstances. 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 LLC ceasing to act as our business manager. Our credit agreement and our unsecured senior notes indentures and their supplements also contain covenants, including those that restrict our ability to incur debts or to make distributions under certain circumstances and generally require us to maintain certain financial ratios. We believe we were in compliance with the terms and conditions of our credit agreement and our unsecured senior notes indentures and their supplements at September 30, 2019.

On September 18, 2019, we issued $825,000 principal amount of our 4.35% unsecured senior notes due 2024, $450,000 principal amount of our 4.75% unsecured senior notes due 2026 and $425,000 principal amount of our 4.95% unsecured senior notes due 2029. The aggregate net proceeds from these offerings were $1,680,461, after underwriting discounts and other offering expenses.

In connection with our acquisition of a 767-property net lease portfolio from Spirit MTA REIT, a Maryland real estate investment trust, or REIT, (NYSE: SMTA), or SMTA, located in 45 states, or the SMTA Transaction, a syndicate of lenders committed to provide us with a one year unsecured term loan facility, under which we would be able to borrow up to $2,000,000. We terminated these commitments in September 2019 and recorded a loss on early extinguishment of debt of $8,451 during the three months ended September 30, 2019 to write off unamortized issuance costs. See Note 7 for further information about the SMTA Transaction.

Note 7. Real Estate Properties

At September 30, 2019, we owned 328 hotels with 51,086 rooms or suites and 946 service-oriented retail properties with approximately 17.6 million square feet that are primarily subject to “triple net” leases, or net leases where the tenant is generally responsible for payment of operating expenses and capital expenditures of the property during the lease term. Our properties had an aggregate undepreciated carrying value of $11,905,525, including $604,989 classified as held for sale as of September 30, 2019.

During the nine months ended September 30, 2019, we funded $123,190 for improvements to certain of our properties which, pursuant to the terms of our management and lease agreements with our managers and tenants, resulted in increases in our contractual annual minimum returns and rents of $9,097. See Note 8 for further information about our management and lease agreements and our fundings of improvements to certain of our properties.

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

Acquisitions

We completed the SMTA Transaction and acquired two hotels and a land parcel during the nine months ended September 30, 2019. We accounted for these transactions as acquisitions of assets. Our allocation of the purchase price of each of these acquisitions based on the estimated fair value of the acquired assets is presented in the table below.



Acquisition Date	Location	Purchase Price		Land		Land Improvements		Building and Improvements		Furniture, Fixtures and Equipment		Held for Sale		Intangible Assets / Liabilities, net
2/22/2019	Washington, D.C. ⁽¹⁾	$	143,742	$	44,972	$	151	$	93,412	$	5,207	$	—	$	—
5/7/2019	Milwaukee, WI ⁽²⁾	30,235		3,442		1,053		25,132		608		—		—
8/1/2019	Southington, CT ⁽³⁾	66		66		—		—		—		—		—
9/20/2019	Various ⁽⁴⁾	2,482,382		388,057		—		1,201,922		—		604,989		287,414
		$	2,656,425	$	436,537	$	1,204	$	1,320,466	$	5,815	$	604,989	$	287,414

(1)

On February 22, 2019, we acquired the 335 room Hotel Palomar located in Washington, D.C. for a purchase price of $143,742, including capitalized acquisition costs of $2,292. We added this Kimpton^® branded hotel to our management agreement with InterContinental Hotels Group, plc, or IHG. See Note 8 for further information regarding our management agreement with IHG for 102 hotels, or our IHG agreement.


(2)	On May 7, 2019, we acquired the 198 room Crowne Plaza Milwaukee West hotel in Milwaukee, WI for a purchase price of $30,235, including capitalized acquisition costs of $235. We added this Crowne Plaza^®branded hotel to our management agreement with IHG. See Note 8 for further information regarding our IHG agreement.


(3)	On August 1, 2019, we acquired a land parcel adjacent to our travel center located in Southington, CT for a purchase price of $66, including capitalized acquisition costs of $6. This land parcel has been added to the TA lease for that travel center.


(4)	On September 20, 2019, we completed the SMTA Transaction for total consideration of $2,482,382. See below for further information regarding the SMTA Transaction. As of September 30, 2019, 148 assets included in the SMTA Transaction with a carrying value of $604,989 were classified as held for sale.

On September 20, 2019, we completed the SMTA Transaction as a result of which, we acquired 767 net lease service-oriented retail properties with 12.4 million rentable square feet. The aggregate transaction value of the SMTA Transaction was $2,482,382, including $2,384,577 in cash consideration, $82,069 of prepayment penalties related to SMTA’s extinguishment of the mortgage debt on the portfolio and $15,736 of other capitalized acquisition costs. The properties included in the portfolio are net leased to 279 tenants operating in 23 distinct industries and 163 brands that include quick service and casual dining restaurants, movie theaters, health and fitness, automotive parts and services and other service-oriented and necessity-based industries across 45 states. We financed the SMTA Transaction with borrowings under our revolving credit facility and with cash on hand, including net proceeds from our public offerings of senior unsecured notes, as described further in Note 6. As of September 30, 2019, we had $5,900 of unspent leasing-related obligations assumed as a part of the SMTA Transaction.

On October 9, 2019, we acquired the 261-room Kimpton Palomar Hotel located in Chicago, IL for a purchase price of $55,000, excluding acquisition related costs. We added this Kimpton^® branded hotel to our management agreement with IHG.

Dispositions

In January 2019, in a series of transactions, we sold 20 travel centers in 15 states to TA for $308,200. We recorded a gain of $159,535 in the first quarter of 2019 as a result of these sales. See Notes 8 and 10 for further information regarding these transactions, our relationship and agreements with TA.

On October 11, 2019, we entered an agreement to sell 126 net lease properties we acquired in the SMTA Transaction with approximately 2.4 million square feet in 26 states with an aggregate of $34,300 of annual minimum rents as of September 30, 2019 for an aggregate sales price of $438,000, excluding closing costs. We expect this sale to be completed prior to December 31, 2019.

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

Note 8. Management Agreements and Leases

As of September 30, 2019, we owned 328 hotels which were included in eight operating agreements and 946 service orientated retail properties net leased to 279 tenants. We do not operate any of our properties.

Hotel agreements

As of September 30, 2019, 326 of our hotels were leased to our TRSs and managed by independent hotel operating companies and two hotels were leased to third parties. As of September 30, 2019, our hotel properties were managed by or leased to separate subsidiaries of Marriott International, Inc., or Marriott, IHG, Sonesta International Hotels Corporation, or Sonesta, Wyndham Hotels & Resorts, Inc., or Wyndham, Hyatt Hotels Corporation, or Hyatt, and Radisson Hospitality, Inc., or Radisson, under eight agreements. These hotel agreements have initial terms expiring between 2019 and 2038. Each of these agreements is for between one and 102 of our hotels. In general, the agreements contain renewal options for all, but not less than all, of the affected properties included in each agreement, and the renewal terms range between 20 to 60 years. Most of these agreements require the third party manager or tenant to: (1) make payments to us of minimum returns or minimum rents; (2) deposit a percentage of total hotel sales into FF&E reserves; and (3) for our managed hotels, make payments to our TRSs of additional returns to the extent of available cash flows after payment of operating expenses, funding of the FF&E reserves, payment of our minimum returns, payment of certain management fees and replenishment of security deposits or guarantees. Some of our managers or tenants or their affiliates have provided deposits or guarantees to secure their obligations to pay us.

Marriott No. 1 agreement. Our management agreement with Marriott for 53 hotels, or our Marriott No. 1 agreement, provides that, as of September 30, 2019, we are to be paid an annual minimum return of $71,714 to the extent that gross revenues of the hotels, after payment of hotel operating expenses and funding of the FF&E reserve, are sufficient to do so. Marriott’s base and incentive management fees are only earned after we receive our minimum returns. We realized minimum returns of $17,908 and $17,335 during the three months ended September 30, 2019 and 2018, respectively, and minimum returns of $53,467 and $51,954 during the nine months ended September 30, 2019 and 2018, respectively, under this agreement. We also realized additional returns of $1,985 and $3,560 during the three and nine months ended September 30, 2019, respectively, and $2,584 and $5,113 during the three and nine months ended September 30, 2018, respectively, which represent our share of hotel cash flows in excess of the minimum returns due to us for these periods. We do not have any security deposits or guarantees for our minimum returns from the 53 hotels included in our Marriott No. 1 agreement. Accordingly, the minimum returns we receive from these hotels managed by Marriott are limited to the hotels’ available cash flows after payment of operating expenses and funding of the FF&E reserve.

We funded $15,778 and $1,769 for capital improvements to certain of the hotels included in our Marriott No. 1 agreement during the nine months ended September 30, 2019 and 2018, respectively, which resulted in increases in our contractual annual minimum returns of $1,578 and $177, respectively.

Marriott No. 234 agreement. Our management agreement with Marriott for 68 hotels, or our Marriott No. 234 agreement, provides that, as of September 30, 2019, we are to be paid an annual minimum return of $109,024. We realized minimum returns of $27,256 and $26,772 during the three months ended September 30, 2019 and 2018, respectively, and $81,206 and $80,199 during the nine months ended September 30, 2019 and 2018, respectively, under this agreement. Pursuant to our Marriott No. 234 agreement, Marriott has provided us with a security deposit to cover minimum return payment shortfalls, if any. Under this agreement, this security deposit may be replenished and increased up to $64,700 from a share of hotel cash flows in excess of the minimum returns due to us. Marriott’s base and incentive management fees are only earned after we receive our minimum returns. During the nine months ended September 30, 2019, our available security deposit was replenished by $3,910 from a share of hotel cash flows in excess of the minimum returns due to us during the period. The available balance of this security deposit was $36,621 as of September 30, 2019. Pursuant to our Marriott No. 234 agreement, Marriott has also provided us with a limited guaranty which expires in 2019 for shortfalls up to 90% of our minimum returns, if and after the available security deposit has been depleted. The available balance of the guaranty was $30,672 as of September 30, 2019.

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

We funded $18,600 and $6,355 for capital improvements to certain of the hotels included in our Marriott No. 234 agreement during the nine months ended September 30, 2019 and 2018, respectively, which resulted in increases in our contractual annual minimum returns of $1,674 and $572, respectively.

Marriott No. 5 agreement. We lease one hotel in Kauai, HI to Marriott which requires that, as of September 30, 2019, we are paid annual minimum rents of $10,518. This lease is guaranteed by Marriott and we realized $2,630 and $2,580 of rent for this hotel during the three months ended September 30, 2019 and 2018, respectively, and $7,889 and $7,740 during the nine months ended September 30, 2019 and 2018, respectively. The guaranty provided by Marriott with respect to this leased hotel is unlimited. Marriott has four renewal options for 15 years each. On August 31, 2016, Marriott notified us that it will not exercise its renewal option at the expiration of the current lease term ending on December 31, 2019.

IHG agreement. Our IHG agreement provides that, as of September 30, 2019, we are to be paid annual minimum returns and rents of $207,411. We realized minimum returns and rents of $51,853 and $47,630 during the three months ended September 30, 2019 and 2018, respectively, and $153,053 and $142,316 during the nine months ended September 30, 2019 and 2018, respectively, under this agreement. We also realized additional returns under this agreement of $6,653 and $8,373 during the three and nine months ended September 30, 2018 from our share of hotel cash flows in excess of the minimum returns and rents due to us for that period. We did not realize any additional returns during either the three or nine months ended September 30, 2019.

Pursuant to our IHG agreement, IHG has provided us with a security deposit to cover minimum payment shortfalls, if any. Under this agreement, IHG is required to maintain a minimum security deposit of $37,000 and this security deposit may be replenished and increased up to $100,000 from a share of future cash flows from the hotels in excess of our minimum returns and rents. During the nine months ended September 30, 2019, we reduced the available security deposit by $14,259 to cover shortfalls in hotel cash flows available to pay the minimum returns and rents due to us for the period. The available balance of this security deposit was $85,741 as of September 30, 2019.

We did not fund any capital improvements to our IHG hotels during each of the nine months ended September 30, 2019 and 2018.

Sonesta agreement. As of September 30, 2019, Sonesta managed 12 of our full service hotels and 39 of our limited service hotels pursuant to management agreements for each of the hotels, which we refer to collectively as our Sonesta agreement, and a pooling agreement, which combines those management agreements for purposes of calculating gross revenues, payment of hotel operating expenses, payment of fees and distributions and minimum returns due to us.

Our Sonesta agreement provides that we are paid a fixed annual minimum return equal to 8% of our invested capital, as defined therein, if gross revenues of the hotels, after payment of hotel operating expenses and management and related fees (other than Sonesta’s incentive fee, if applicable), are sufficient to do so. Our fixed annual minimum return under our Sonesta agreement was $131,229 as of September 30, 2019. Our Sonesta agreement further provides that we are paid an additional return based upon operating profits, as defined therein, after payment of Sonesta’s incentive fee, if applicable. We realized returns of $15,629 and $21,732 during the three months ended September 30, 2019 and 2018, respectively, and $57,794 and $61,606 during the nine months ended September 30, 2019, and 2018, respectively, under our Sonesta agreement. We do not have any security deposits or guarantees for our Sonesta hotels. Accordingly, the returns we receive from our Sonesta hotels are limited to the hotels’ available cash flows after payment of operating expenses, including management and related fees.

Pursuant to our Sonesta agreement, we incurred management, reservation and system fees and reimbursement costs for certain guest loyalty, marketing program and third party reservation transmission fees of $9,313 and $9,437 for the three months ended September 30, 2019 and 2018, respectively, and $28,016 and $26,245 for the nine months ended September 30, 2019 and 2018, respectively. In addition, we incurred procurement and construction supervision fees of $928 and $713 for the three months ended September 30, 2019 and 2018, respectively, and $1,914 and $1,907 for the nine months ended September 30, 2019 and 2018, respectively, pursuant to our Sonesta agreement. These amounts are included in hotel operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements.

Our Sonesta agreement does not require FF&E escrow deposits, but does require us to fund capital expenditures at our Sonesta hotels. We funded $67,495 and $64,032 for renovations and other capital improvements to certain hotels included in our Sonesta agreement during the nine months ended September 30, 2019 and 2018, respectively, which resulted in increases in our contractual annual minimum returns of $4,140 and $3,948, respectively. The annual minimum returns due to us under our Sonesta agreement increase by 8% of the capital expenditure amounts we fund in excess of threshold amounts, as defined

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

therein. We owed Sonesta $14,879 and $6,735 for capital expenditure and other reimbursements at September 30, 2019 and 2018, respectively. Amounts due from Sonesta are included in due from related persons and amounts owed to Sonesta are included in due to related persons in our condensed consolidated balance sheets.

See Note 10 for further information regarding our relationship, agreements and transactions with Sonesta.

Wyndham agreements. Our management agreement with Wyndham for 22 hotels, or our Wyndham agreement, provides that, as of September 30, 2019, we are to be paid annual minimum returns of $27,973. Pursuant to our Wyndham agreement, Wyndham has provided us with a guaranty, which was limited to $35,656, subject to an annual payment limit of $17,828, and expires on July 28, 2020. This guaranty was depleted during 2017 and remained depleted as of September 30, 2019. This guaranty may be replenished from a share of future cash flows from these hotels in excess of our minimum returns. To avoid default, Wyndham was required to pay 85% of the minimum returns due to us. We realized returns of $5,944 and $5,869 during the three months ended September 30, 2019 and 2018, respectively, and $17,780 and $17,588 during the nine months ended September 30, 2019 and 2018, respectively, which represents 85% of the minimum returns due for the period, under this agreement.

Our Wyndham agreement requires FF&E escrow deposits equal to 5% of total hotel sales for all hotels included in the agreement subject to available cash flows after payment of our minimum return. No FF&E escrow deposits were made during the nine months ended September 30, 2019. We funded $2,283 and $1,449 for capital improvements to certain of the hotels included in our Wyndham agreement during the nine months ended September 30, 2019 and 2018, respectively, which resulted in increases in our contractual annual minimum returns of $183 and $116, respectively.

In October 2019, we amended our agreement with Wyndham whereby the term of the management agreement will expire on September 30, 2020 unless sooner terminated with respect to any hotels that are sold or rebranded. Under the amendment, Wyndham will pay us all cash flows of the hotels after payment of hotel operating costs. Wyndham will not be entitled to any base management fees for the remainder of the agreement term.

We lease 48 vacation units in one of our hotels to a subsidiary of Wyndham Destinations, Inc. (NYSE: WYND), or Destinations, which requires that, as of September 30, 2019, we are paid annual minimum rents of $1,493. The guaranty provided by Destinations with respect to the Destinations lease for part of one hotel is unlimited. We recognized the contractual rents of $454 during both the three months ended September 30, 2019 and 2018 and $1,361 during each of the nine months ended September 30, 2019 and 2018 under our Destinations lease agreement. Rental income for the three months ended September 30, 2019 and 2018 for this lease includes $80 and $91, respectively, and $241 and $273 for the nine months ended September 30, 2019 and 2018, respectively, of adjustments necessary to record rent on a straight line basis.

On November 1, 2019, we rebranded two full-service hotels previously managed by Wyndham (Chicago, IL and Irvine, CA) to the Sonesta brands under a short term agreement with Sonesta that expires on December 31, 2020. We have amended the lease of the 48 vacation units at the Chicago hotel to Destinations so the term of the lease expires on March 31, 2020, at which time Destinations will vacate the leased space.

Hyatt agreement. Our management agreement with Hyatt for 22 hotels, or our Hyatt agreement, provides that, as of September 30, 2019, we are to be paid an annual minimum return of $22,037. We realized minimum returns of $5,509 during each of the three months ended September 30, 2019 and 2018 and minimum returns of $16,528 during each of the nine months ended September 30, 2019 and 2018 under this agreement. Pursuant to our Hyatt agreement, Hyatt has provided us with a guaranty, which is limited to $50,000. During the nine months ended September 30, 2019, the hotels under this agreement generated cash flows that were less than the minimum returns due to us for the period, and Hyatt made $569 of guaranty payments to cover the shortfall. The available balance of the guaranty was $21,346 as of September 30, 2019.

Radisson agreement. Our management agreement with Radisson for nine hotels, or our Radisson agreement, provides that, as of September 30, 2019, we are to be paid an annual minimum return of $20,442. We realized minimum returns of $5,099 and $4,730 during the three months ended September 30, 2019 and 2018, respectively, and $14,945 and $11,453 during the nine months ended September 30, 2019 and 2018, respectively, under this agreement. Pursuant to our Radisson agreement, Radisson has provided us with a limited guaranty which, as a result of capital improvement amounts funded by us during the nine months ended September 30, 2019, as described below, was increased $1,523 to a total of $47,523. During the nine months ended September 30, 2019, the hotels under this agreement generated cash flows that were less than the minimum returns due to us for the period, and Radisson made $93 of guaranty payments to cover the shortfall. The available balance of the guaranty was $42,466 as of September 30, 2019.

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

We funded $19,034 for capital improvements at certain of the hotels included in our Radisson agreement during the nine months ended September 30, 2019, which resulted in increases in our contractual annual minimum returns of $1,523. We did not fund any capital improvements to the hotels included in our Radisson agreement during the nine months ended September 30, 2018.

Net lease portfolio

As of September 30, 2019, we owned 946 net lease service-oriented retail properties with 17.6 million square feet with annual minimum rent of $418,635 with a weighted (by annual minimum rents) average lease term of 11.3 years. The portfolio was 98% leased by 279 tenants operating under 163 brands in 23 distinct industries. As of September 30, 2019, 148 properties we acquired in the SMTA Transaction with 3.2 million square feet with annual minimum rent of $43,081 and a carrying value of $604,989 were classified as held for sale.

TA Leases

In January 2019, we entered agreements with TA, pursuant to which:


•	In January 2019, we sold to TA 20 travel center properties, which TA previously leased from us, for a total purchase price of $308,200.


•	Upon completing these sales, these travel center properties were removed from the TA leases and TA’s annual minimum rent payable to us decreased by $43,148.

•

Commencing on April 1, 2019, TA paid us the first of 16 quarterly installments of approximately $4,400 each (an aggregate of $70,458) to fully satisfy and discharge its $150,000 deferred rent obligation to us that otherwise would have become due in five installments between 2024 and 2030. TA paid to us $4,400 and $8,800 in respect of such obligation for the three and nine months ended September 30, 2019, respectively.


•	Commencing with the year ending December 31, 2020, TA will be obligated to pay to us an additional amount of percentage rent equal to one-half percent (0.5%) of the excess of its annual non-fuel revenues at leased sites over the non-fuel revenues for each respective site for the year ending December 31, 2019.


•	The term of each TA lease was extended by three years.


•	Certain of the travel center properties that we did not sell to TA and that TA continued to lease from us were reallocated among the TA leases.

See Note 7 for further information regarding the effects of certain of our property dispositions on our leases with TA.

TA is our largest tenant. As of September 30, 2019, we leased to TA a total of 179 travel centers under five leases that expire between 2029 and 2035 and require annual minimum returns of $246,088 which represents approximately 24.1% of our total annual minimum rents as of September 30, 2019.

We recognized rental income from TA of $62,537 and $74,797 for the three months ended September 30, 2019 and 2018, respectively, and $188,227 and $223,458 for the nine months ended September 30, 2019 and 2018, respectively. We reduced rental income by $3,390 and $7,880 for the three and nine months ended September 30, 2019, respectively, and increased rental income by $3,037 and $9,066 for the three and nine months ended September 30, 2018, respectively, to record the deferred rent obligations under our TA leases and the estimated future payments to us by TA for the cost of removing underground storage tanks on a straight line basis. As of September 30, 2019 and December 31, 2018, we had receivables for current rent amounts owed to us by TA and straight line rent adjustments of $72,587 and $91,212, respectively. These amounts are included in due from related persons in our condensed consolidated balance sheets.

On October 14, 2019, we and TA amended the five TA Leases, pursuant to which, among other things, certain of the 179 travel center properties that we lease to TA were reallocated among the TA Leases. As part of these amendments, we removed TA’s outstanding deferred rent obligations from the lease we refer to as our TA Lease No. 5 agreement for 35 travel centers, which expires in June 2035, and reallocated that amount to our other four TA leases. These amendments were entered into as part of our exploration of possible secured debt and joint venture financing with respect to the 35 properties subject to this lease.

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

Our TA leases do not require FF&E escrow deposits. However, TA is required to maintain the leased travel centers, including structural and non-structural components.

Under our TA leases, TA may request that we fund capital improvements in return for increases in TA’s annual minimum rent equal to 8.5% of the amounts funded. We did not fund any capital improvements to our properties that we leased to TA during the nine months ended September 30, 2019. We funded $44,653 of capital improvements to our properties that we leased to TA for the nine months ended September 30, 2018. As a result, TA’s annual minimum rent payable to us increased by $3,795.

In addition to the rental income that we recognized during the three months ended September 30, 2019 and 2018 as described above, our TA leases require TA to pay us percentage rent based upon increases in certain sales. We determine percentage rent due under our TA leases annually and recognize any resulting amount as rental income when all contingencies are met. We had aggregate deferred percentage rent under our TA leases of $1,020 and $934 for the three months ended September 30, 2019 and 2018, respectively, and $3,047 and $2,630 for the nine months ended September 30, 2019 and 2018, respectively.

See Note 10 for further information regarding our relationship with TA.

Other net lease agreements

We recognized rental income from the net lease properties we acquired under the SMTA Transaction of $5,485 for both the three and nine months ended September 30, 2019. We increased rental income by $258 for the three and nine months ended September 30, 2019 to record scheduled rent changes under certain of our leases on a straight line basis.

Additional lease information (as lessor). As of September 30, 2019, our leases with parties other than our TRSs provide for contractual minimum rents to be paid to us during the remaining current terms as follows:



2019	$	184,600
2020	440,093
2021	436,348
2022	428,645
2023	412,430
Thereafter	3,260,594
Total	$	5,162,710

Additional lease information (as lessee). As of January 1, 2019, 14 of our hotels and one of our net lease portfolio locations were subject to ground leases where we are the lessee. In addition, our hotel operators enter various leases on our behalf in the normal course of business at our hotels, or our hotel operating leases. We calculated right of use assets and lease liabilities as the present value of the remaining lease payment obligations for our operating leases, which include the ground leases and hotel operating leases, over the remaining lease term using our estimated incremental borrowing rate. The right of use assets and related lease liabilities are included within other assets, net and accounts payable and other liabilities, respectively, in our condensed consolidated balance sheets.

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

At September 30, 2019, our right of use assets and related lease liabilities totaled $75,746 and $76,224, respectively, which represented our future obligations under our operating lease agreements. Our operating leases require minimum fixed rent payments, percentage rent payments based on a percentage of hotel revenues in excess of certain thresholds, or rent payments equal to the greater of a minimum fixed rent or percentage rent. Rental expense related to our operating leases of $3,601 and $10,594 for the three and nine months ended September 30, 2019, respectively, is included in hotel operating expenses within our condensed consolidated statements of comprehensive income. As of September 30, 2019, our operating leases provide for contractual minimum rent payments to third parties during the remaining lease terms, as follows:



2019	$	1,841
2020	6,910
2021	6,229
2022	5,691
2023	5,564
Thereafter	145,374
Total lease payments	171,609
Less: imputed interest	(95,385		)
Present value of lease liabilities ⁽¹⁾	$	76,224


(1)	The weighted average discount rate used to calculate the lease liability and the weighted average remaining term for our ground leases (assuming all extension options) and our hotel operating leases are approximately 5.45% and 31 years (range of 12 to 68 years) and 5.47% and 30 years (range of 1 month to 54 years), respectively.

As of September 30, 2019, 15 of our net lease properties are on land we leased partially or entirely from unrelated third parties. We are not required to record right of use assets and lease liabilities for these properties as we are not the primary obligor under the leases. The average remaining term of these 15 ground leases was 14 years (range of two to 31 years) with rents averaging $419 per year.

Generally, payments of ground lease obligations are made by our managers or tenants. However, if a manager or tenant did not perform obligations under a ground lease or did not renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected property.

Guarantees and security deposits generally. When we reduce the amounts of the security deposits we hold for any of our operating agreements for payment deficiencies, it does not result in additional cash flows to us of the deficiency amounts, but reduces the refunds due to the respective tenants or managers who have provided us with these security deposits upon expiration of the applicable operating agreement. The security deposits are non-interest bearing and are not held in escrow. Under these agreements, any amount of the security deposits which are applied to payment deficits may be replenished from a share of future cash flows from the applicable hotel operations pursuant to the terms of the applicable agreements.

Certain of our managed hotel portfolios had net operating results that were, in the aggregate, $19,631 and $9,216 less than the minimum returns due to us for the three months ended September 30, 2019 and 2018, respectively, and $54,112 and $31,030 less than the minimum returns due to us for the nine months ended September 30, 2019 and 2018, respectively. When managers of these hotels are required to fund the shortfalls under the terms of our management agreements or their guarantees, we reflect such fundings (including security deposit applications) in our condensed consolidated statements of comprehensive income as a reduction of hotel operating expenses. We reduced hotel operating expenses by $3,630 and $299 for the three months ended September 30, 2019 and 2018, respectively, and $17,166 and $2,377 for the nine months ended September 30, 2019 and 2018, respectively. We had shortfalls at certain of our managed hotel portfolios not funded by the managers of these hotels under the terms of our management agreements of $17,758 and $9,818 for the three months ended September 30, 2019 and 2018, respectively, and $41,555 and $28,653 for the nine months ended September 30, 2019 and 2018, respectively, which represent the unguaranteed portions of our minimum returns from our Sonesta and Wyndham agreements.

Certain of our managed hotel portfolios had net operating results that were, in the aggregate, $9,076 and $21,321 more than the minimum returns due to us for the three months ended September 30, 2019 and 2018, respectively, and $16,966 and $47,901 more than the minimum returns due to us for the nine months ended September 30, 2019 and 2018, respectively. Certain of our guarantees and our security deposits may be replenished by a share of future cash flows from the applicable hotel

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

operations in excess of the minimum returns due to us pursuant to the terms of the respective agreements. When our guarantees and security deposits are replenished by cash flows from hotel operations, we reflect such replenishments in our condensed consolidated statements of comprehensive income as an increase to hotel operating expenses. We had $3,631 and $5,204 of guaranty and security deposit replenishments for the three months ended September 30, 2019 and 2018, respectively, and $3,910 and $14,299 of guaranty and security deposit replenishments for the nine months ended September 30, 2019 and 2018, respectively.

Note 9. Business and Property Management Agreements with RMR LLC

We have no employees. The personnel and various services we require to operate our business are provided to us by RMR LLC. We have two agreements with RMR LLC to provide management services to us: (1) a business management agreement, which relates to our business generally; and (2) a property management agreement, which currently relates to our property level operations of the office building component of one of our hotels for the periods presented and, beginning on September 20, 2019, also includes the 767 properties we acquired pursuant to the SMTA Transaction.

Pursuant to our business management agreement, we recognized net business management fees of $9,919 and $10,430 for the three months ended September 30, 2019 and 2018, respectively, and $29,307 and $30,048 for the nine months ended September 30, 2019 and 2018, respectively. Based on our common share total return, as defined in our business management agreement, as of September 30, 2019, no incentive fees are included in the net business management fees we recognized for the three and nine months ended September 30, 2019. The actual amount of annual incentive fees for 2019, if any, will be based on our common share total return, as defined in our business management agreement, for the three year period ending December 31, 2019, and will be payable in 2020. The net business management fees we recognized for the three and nine months ended September 30, 2018 did not include any estimated incentive fees. In January 2019, we paid RMR LLC an incentive fee of $53,635 for 2018. We include business management fee amounts in general and administrative expenses in our condensed consolidated statements of comprehensive income.

Pursuant to our property management agreement with RMR LLC, we recognized property management fees of $163 and $18 for the three months ended September 30, 2019 and 2018, respectively, and $201 and $43 for the nine months ended September 30, 2019 and 2018, respectively. These amounts are included in other operating expenses in our condensed consolidated statements of comprehensive income.

We are generally responsible for all our operating expenses, including certain expenses incurred or arranged by RMR LLC on our behalf. We are generally not responsible for payment of RMR LLC’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR LLC employees assigned to work exclusively or partly at the properties that are subject to the property management agreement, our share of the wages, benefits and other related costs of RMR LLC’s centralized accounting personnel, our share of RMR LLC’s costs for providing our internal audit function, and as otherwise agreed. We reimbursed RMR LLC $136 and $106 for these expenses and costs for the three months ended September 30, 2019 and 2018, respectively, and $478 and $340 for the nine months ended September 30, 2019 and 2018, respectively. We included these amounts in other operating expenses and selling, general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income.

Note 10. Related Person Transactions

We have relationships and historical and continuing transactions with TA, Sonesta, RMR LLC, The RMR Group Inc., or RMR Inc., AIC and others related to them, including other companies to which RMR LLC or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers.

TA. TA is our largest tenant and property operator, leasing 26.6% of our gross carrying value of real estate properties as of September 30, 2019. We lease 179 of our travel centers to TA under the TA leases. We are also TA’s largest shareholder; as of September 30, 2019, we owned 684,000 common shares of TA, representing approximately 8.5% of TA’s outstanding common shares. RMR LLC provides management services to both us and TA, and Adam D. Portnoy, the Chair of our Board of Trustees and one of our Managing Trustees, also serves as the chair of the board of directors and as a managing director of TA. As of September 30, 2019, RMR LLC owned 298,538 common shares of TA, representing approximately 3.7% of TA’s outstanding common shares. Share amounts as of September 30, 2019 reflect a one-for-five reverse stock split completed by TA on August 1, 2019. See Note 8 for further information regarding our relationships, agreements and transactions with TA and Note 13 for further information regarding our investment in TA.

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

Sonesta. Sonesta is a private company owned in part by Adam Portnoy. Mr. Portnoy, our other Managing Trustee, President and Chief Executive Officer, and our Secretary are directors of Sonesta. As of September 30, 2019, Sonesta managed 51 of our hotels pursuant to management and pooling agreements. See Note 8 for further information regarding our relationships, agreements and transactions with Sonesta.

Our Manager, RMR LLC. We have two agreements with RMR LLC to provide management services to us. See Note 9 for further information regarding our management agreements with RMR LLC.

See Note 5 for information relating to the annual share awards we made in September 2019 to our officers and certain other employees of RMR LLC and common shares we purchased from our current and former officers and certain other employees of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares to them. We include amounts recognized as expense for share awards to RMR LLC employees in general and administrative expenses in our condensed consolidated statements of comprehensive income.

RMR Inc. RMR LLC is a majority owned subsidiary of RMR Inc. and RMR Inc. is the managing member of RMR LLC. Adam Portnoy is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR LLC. John G. Murray, our other Managing Trustee and our President and Chief Executive Officer, also serves as an officer and employee of RMR LLC, and each of our other officers is also an officer and employee of RMR LLC, including Ethan S. Bornstein, the brother-in-law of Adam Portnoy.

On July 1, 2019, we sold all the shares of class A common stock of RMR Inc. that we owned in an underwritten public offering at a price to the public of $40.00 per share pursuant to an underwriting agreement among us, RMR Inc., certain other REITs managed by RMR LLC that also sold their class A common stock of RMR Inc. in the offering, and the underwriters named therein. We received net proceeds of $93,568 from this sale, after deducting the underwriting discounts, commissions and other costs.

AIC. We, ABP Trust, TA and four other companies to which RMR LLC provides management services currently own AIC, an Indiana insurance company, in equal amounts. We and the other AIC shareholders historically participated in a combined property insurance program arranged and reinsured in part by AIC. The policies under that program expired on September 30, 2019, and we and the other AIC shareholders elected not to renew the AIC property insurance program; we have instead purchased standalone property insurance coverage with unrelated third party insurance providers.

As of September 30, 2019 and December 31, 2018, our investment in AIC had a carrying value of $9,347 and $8,639, respectively. These amounts are included in other assets in our condensed consolidated balance sheets. We recognized income of $83 and $830 for the three months ended September 30, 2019 and 2018, respectively, and $617 and $881 for the nine months ended September 30, 2019 and 2018, respectively, related to our investment in AIC, which amounts are presented as equity in earnings of an investee in our condensed consolidated statements of comprehensive income. Our other comprehensive income (loss) includes our proportionate part of unrealized gains (losses) on fixed income securities that are owned by AIC related to our investment in AIC.

AIC is in the process of dissolving. In connection with its dissolution, we expect to receive a capital distribution in the fourth quarter of 2019.

For further information about these and certain other such relationships and certain other related person transactions, refer to our 2018 Annual Report.

Note 11. Income Taxes

We have elected to be taxed as a REIT under the United States Internal Revenue Code of 1986, as amended, or the IRC, and, as such, are generally not subject to federal and most state income taxation on our operating income provided we distribute our taxable income to our shareholders and meet certain organization and operating requirements. We are subject to income tax in Canada, Puerto Rico and certain states despite our qualification for taxation as a REIT. 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 taxes. Our consolidated income tax provision includes the income tax provision related to the

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

operations of our TRSs and certain state and foreign income taxes incurred by us despite our qualification for taxation as a REIT.

During the three and nine months ended September 30, 2019, we recognized income tax expense of $467 and $1,266, respectively, which includes $229 and $447, respectively of foreign taxes and $238 and $819, respectively of state taxes. During the three and nine months ended September 30, 2018, we recognized income tax expense of $707 and $1,949, respectively, which includes $291 and $631, respectively, of foreign taxes and $416 and $1,318, respectively, of state taxes.

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

Note 12. Segment Information

We aggregate our hotels and net lease portfolio into two reportable segments, hotel investments and net lease investments (previously named travel centers), based on their similar operating and economic characteristics.



	For the Three Months Ended September 30, 2019
	Hotels		Net Lease		Corporate			Consolidated
Revenues:
Hotel operating revenues	$	525,290	$	—	$	—		$	525,290
Rental income	5,565		68,054		—			73,619
FF&E reserve income	863		—		—			863
Total revenues	531,718		68,054		—			599,772

Expenses:
Hotel operating expenses	377,895		—		—			377,895
Other operating expenses	369		1,338		—			1,707
Depreciation and amortization	66,929		36,231		—			103,160
General and administrative	—		—		12,464			12,464
Total expenses	445,193		37,569		12,464			495,226

Dividend income	—		—		—			—
Unrealized losses on equity securities	—		—		(3,950		)	(3,950		)
Interest income	177		—		511			688
Interest expense	—		—		(52,375		)	(52,375		)
Loss on early extinguishment of debt	—		—		(8,451		)	(8,451		)
Income (loss) before income taxes and equity in earnings of an investee	86,702		30,485		(76,729		)	40,458
Income tax expense	—		—		(467		)	(467		)
Equity in earnings of an investee	—		—		83			83
Net income (loss)	$	86,702	$	30,485	$	(77,113	)	$	40,074

	For the Nine Months Ended September 30, 2019
	Hotels		Net Lease		Corporate			Consolidated
Revenues:
Hotel operating revenues	$	1,521,368	$	—	$	—		$	1,521,368
Rental income	16,700		193,809		—			210,509
FF&E reserve income	3,365		—		—			3,365
Total revenues	1,541,433		193,809		—			1,735,242

Expenses:
Hotel operating expenses	1,076,011		—		—			1,076,011
Other operating expenses	1,101		3,318		—			4,419
Depreciation and amortization	200,533		101,188		—			301,721
General and administrative	—		—		36,906			36,906
Total expenses	1,277,645		104,506		36,906			1,419,057

Gain on sale of real estate	—		159,535		—			159,535
Dividend income	—		—		1,752			1,752
Unrealized losses on equity securities	—		—		(43,761		)	(43,761		)
Interest income	603		—		1,171			1,774
Interest expense	—		—		(151,742		)	(151,742		)
Loss on early extinguishment of debt	—		—		(8,451		)	(8,451		)
Income (loss) before income taxes and equity in earnings of an investee	264,391		248,838		(237,937		)	275,292
Income tax expense	—		—		(1,266		)	(1,266		)
Equity in earnings of an investee	—		—		617			617
Net income (loss)	$	264,391	$	248,838	$	(238,586	)	$	274,643

	As of September 30, 2019
	Hotels		Net Lease		Corporate			Consolidated
Total assets	$	4,823,114	$	4,642,072	$	50,317		$	9,515,503

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)



	For the Three Months Ended September 30, 2018
	Hotels		Net Lease		Corporate			Consolidated
Revenues:
Hotel operating revenues	$	520,618	$	—	$	—		$	520,618
Rental income	6,404		74,918		—			81,322
FF&E reserve income	1,213		—		—			1,213
Total revenues	528,235		74,918		—			603,153

Expenses:
Hotel operating expenses	365,526		—		—			365,526
Other operating expenses	427		1,041		—			1,468
Depreciation and amortization	64,415		36,592		—			101,007
General and administrative	—		—		13,425			13,425
Total expenses	430,368		37,633		13,425			481,426

Dividend income	—		—		626			626
Unrealized gains and losses on equity securities, net	—		—		43,453			43,453
Interest income	314		—		164			478
Interest expense	—		—		(49,308		)	(49,308		)
Loss on early extinguishment of debt	—		—		—			—
Income (loss) before income taxes and equity in earnings of an investee	98,181		37,285		(18,490		)	116,976
Income tax expense	—		—		(707		)	(707		)
Equity in earnings of an investee	—		—		830			830
Net income (loss)	$	98,181	$	37,285	$	(18,367	)	$	117,099

	For the Nine Months Ended September 30, 2018
	Hotels		Net Lease		Corporate			Consolidated
Revenues:
Hotel operating revenues	$	1,494,283	$	—	$	—		$	1,494,283
Rental income	21,827		223,716		—			245,543
FF&E reserve income	3,911		—		—			3,911
Total revenues	1,520,021		223,716		—			1,743,737

Expenses:
Hotel operating expenses	1,052,121		—		—			1,052,121
Other operating expenses	1,231		2,705		—			3,936
Depreciation and amortization	189,814		110,494		—			300,308
General and administrative	—		—		38,280			38,280
Total expenses	1,243,166		113,199		38,280			1,394,645

Dividend income	—		—		1,878			1,878
Unrealized gains and losses on equity securities, net	—		—		89,348			89,348
Interest income	717		—		376			1,093
Interest expense	—		—		(145,589		)	(145,589		)
Loss on early extinguishment of debt	—		—		(160		)	(160		)
Income (loss) before income taxes and equity in earnings of an investee	277,572		110,517		(92,427		)	295,662
Income tax expense	—		—		(1,949		)	(1,949		)
Equity in earnings of an investee	—		—		881			881
Net income (loss)	$	277,572	$	110,517	$	(93,495	)	$	294,594

	As of December 31, 2018
	Hotels		Net Lease		Corporate			Consolidated
Total assets	$	4,586,709	$	2,398,118	$	192,252		$	7,177,079

Table of Contents

SERVICE PROPERTIES TRUST

Notes to Condensed Consolidated Financial Statements

(dollars in thousands, except share data)

(Unaudited)

Note 13. Fair Value of Assets and Liabilities

The table below presents certain of our assets and liabilities carried at fair value at September 30, 2019, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset or liability.



			Fair Value at Reporting Date Using
			Quoted Prices in
			Active Markets for		Significant Other		Significant
	Carrying Value at		Identical Assets		Observable Inputs		Unobservable Inputs
Description	September 30, 2019		(Level 1)		(Level 2)		(Level 3)
Recurring Fair Value Measurement Assets:
Investment in TA ⁽¹⁾	$	8,430	$	8,430	$	—	$	—
Non-recurring Fair Value Measurement Assets:
Assets of properties held for sale⁽²⁾	$	607,636	$	—	$	518,300	$	89,336

(1)

Our 684,000 common shares of TA, which are included in other assets in our condensed consolidated balance sheets, are reported at fair value which is based on quoted market prices (Level 1 inputs). Our historical cost basis for these shares is $17,407 as of September 30, 2019. During the three and nine months ended September 30, 2019, we recorded unrealized losses of $3,950 and $4,429, respectively, and during the three and nine months ended September 30, 2018, we recorded unrealized gains of $7,524 and $5,472, respectively, to adjust the carrying value of our investment in TA shares to its fair value.

(2)

As of September 30, 2019, we owned 148 net lease properties located in 26 states classified as held for sale of $604,989, which is net of estimated costs to sell of $2,647. We have recorded 136 of these properties at their estimated fair value of $518,300 based on negotiated selling prices with third party buyers (Level 2 inputs as defined in the fair value hierarchy under GAAP). The remaining 12 of these properties are recorded at their estimated fair value of $89,336 based on information derived from third party appraisals (Level 3 inputs as defined in the fair value hierarchy under GAAP).

In addition to the investment securities included in the table above, our financial instruments include our cash and cash equivalents, restricted cash, rents receivable, revolving credit facility, term loan, senior notes and security deposits. At September 30, 2019 and December 31, 2018, the fair values of these additional financial instruments approximated their carrying values in our condensed consolidated balance sheets due to their short term nature or floating interest rates, except as follows:



	September 30, 2019				December 31, 2018
	Carrying		Fair		Carrying		Fair
	Value ⁽¹⁾		Value		Value ⁽¹⁾		Value
Senior Unsecured Notes, due 2021 at 4.25%	$	398,019	$	405,594	$	396,938	$	404,582
Senior Unsecured Notes, due 2022 at 5.00%	496,518		524,058		495,609		510,658
Senior Unsecured Notes, due 2023 at 4.50%	499,391		515,003		499,268		503,295
Senior Unsecured Notes, due 2024 at 4.65%	348,193		360,395		347,890		349,741
Senior Unsecured Notes, due 2024 at 4.35%	817,713		836,026		—		—
Senior Unsecured Notes, due 2025 at 4.50%	346,259		355,420		345,743		341,114
Senior Unsecured Notes, due 2026 at 5.25%	342,801		363,979		341,955		354,060
Senior Unsecured Notes, due 2026 at 4.75%	445,756		453,076		—		—
Senior Unsecured Notes, due 2027 at 4.95%	394,460		406,718		393,893		391,660
Senior Unsecured Notes, due 2028 at 3.95%	390,472		379,724		389,610		361,232
Senior Unsecured Notes, due 2029 at 4.95%	417,112		406,604		—		—
Senior Unsecured Notes, due 2030 at 4.375%	388,239		383,118		387,389		367,110
Total financial liabilities	$	5,284,933	$	5,389,715	$	3,598,295	$	3,583,452


(1)	Carrying value includes unamortized discounts and premiums and issuance costs.

At September 30, 2019 and December 31, 2018, we estimated the fair values of our senior notes using an average of the bid and ask price of our then outstanding issuances of senior notes (Level 2 inputs).

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our 2018 Annual Report.

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 September 30, 2019, we owned 1,274 properties in 48 states, the District of Columbia, Canada and Puerto Rico.

On September 20, 2019, we completed the SMTA Transaction as a result of which, we acquired 767 properties with 12.4 million rentable square feet for an aggregate transaction value of $2,482,382. The portfolio consists of 767 service-oriented retail properties net leased to tenants in 23 distinct industries and 163 brands that include quick service and casual dining restaurants, movie theaters, health and fitness, automotive parts and services and other service-oriented and necessity-based industries across 45 states.

Management agreements and leases. At September 30, 2019, we owned 328 hotels operated under eight agreements. We leased 326 of these hotels to our wholly owned TRSs that are managed by hotel operating companies, and the two remaining hotels are leased to hotel operating companies. We own 946 service-oriented properties with 279 tenants subject to “triple net” leases, where the tenants are generally responsible for the payment of operating expenses and capital expenditures. Our condensed consolidated statements of comprehensive income include hotel operating revenues and hotel operating expenses from our managed hotels and rental income and other operating expenses from our leased hotels and net lease properties.

Many of our operating agreements and net leases contain security features, such as guarantees and security deposits, which are intended to protect minimum returns and rents due to us in accordance with our agreements regardless of property performance. However, the effectiveness of various security features to provide us uninterrupted receipt of minimum returns and rents is not assured, especially if economic conditions generally decline for a prolonged period. Also, certain of the guarantees that we hold are limited in amount and duration and do not provide for payment of the entire amount of the applicable minimum returns. If our tenants, managers or guarantors do not earn or pay the minimum returns and rents due to us, our cash flows will decline and we may be unable to repay our debt, fund our debt service obligations, pay distributions to our shareholders or the amounts of our distributions may decline.

Hotel Portfolio

Comparable hotels data. We present revenue per available room, or RevPAR, average daily rate, or 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 three months ended September 30, 2019 and 2018, we excluded six hotels from our comparable results. Three of these hotels were not owned for the entire periods and three were closed for major renovations during part of the periods presented. For the nine months ended September 30, 2019 and 2018, we excluded eight hotels from our comparable results. Five of these hotels were not owned for the entire periods and three were closed for major renovations during part of the periods presented.

Hotel operations. During the three and nine months ended September 30, 2019, the U.S. hotel industry generally realized increases in ADR and RevPAR and declines in occupancy compared to the same period in 2018. During the three months ended September 30, 2019, our 322 comparable hotels that we owned continuously since July 1, 2018 produced aggregate year over year decreases in ADR, occupancy and RevPAR. During the nine months ended September 30, 2019, our 320 comparable hotels that we owned continuously since January 1, 2018 produced aggregate year over year decreases in ADR, occupancy and RevPAR. We believe these results are, in part, due to the disruption and displacement at certain of our hotels undergoing renovations, increased competition from new hotel room supply in certain markets and decreased business activity in areas where some of our hotels are located.

For the three months ended September 30, 2019 compared to the same period in 2018 for our 322 comparable hotels: ADR decreased 1.6% to $126.80; occupancy increased 1.0 percentage point to 77.9%; and RevPAR decreased 0.3% to $98.78.

For the three months ended September 30, 2019 compared to the same period in 2018 for all our 328 hotels: ADR decreased 2.2% to $127.82; occupancy remained unchanged at 77.0%; and RevPAR decreased 2.2% to $98.42.

For the nine months ended September 30, 2019 compared to the same period in 2018 for our 320 comparable hotels: ADR decreased 0.7% to $127.39; occupancy decreased 0.9 percentage points to 74.2%; and RevPAR decreased 1.9% to $94.52.

Table of Contents

For the nine months ended September 30, 2019 compared to the same period in 2018 for all our 328 hotels: ADR decreased 0.9% to $129.91; occupancy decreased 1.2 percentage points to 73.9%; and RevPAR decreased 2.5% to $96.00.

Net Lease Portfolio. As of September 30, 2019, we owned 946 net lease service-oriented retail properties with 17.6 million square feet and annual minimum rent of $418,635, which represented approximately 41% of our total annual minimum returns and rents. Our net lease portfolio was 98% occupied as of September 30, 2019, by 279 tenants with a weighted (by annual minimum rent) lease term of 11.3 years, operating under 163 brands in 23 distinct industries. TA is our largest tenant. As of September 30, 2019, we leased 179 travel centers to TA under five leases that expire between 2029 and 2035 and require annual minimum rents of $246,088 which represents 24.1% of our consolidated annual minimum rents and returns.

Additional details of our hotel operating agreements and our net lease agreements are set forth in Notes 8 and 10 to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q and in the table and notes thereto on pages 38 through 45 below.

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

Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018



	For the Three Months Ended September 30,
							Increase			% Increase
	2019			2018			(Decrease)			(Decrease)
Revenues:
Hotel operating revenues	$	525,290		$	520,618		$	4,672		0.9	%
Rental income - hotels	5,565			6,404			(839		)	(13.1	)%
Rental income - net lease portfolio	68,054			74,918			(6,864		)	(9.2	)%
Total rental income	73,619			81,322			(7,703		)	(9.5	)%
FF&E reserve income	863			1,213			(350		)	(28.9	)%

Expenses:
Hotel operating expenses	377,895			365,526			12,369			3.4	%
Other operating expenses	1,707			1,468			239			16.3	%
Depreciation and amortization - hotels	66,929			64,415			2,514			3.9	%
Depreciation and amortization - net lease portfolio	36,231			36,592			(361		)	(1.0	)%
Total depreciation and amortization	103,160			101,007			2,153			2.1	%
General and administrative	12,464			13,425			(961		)	(7.2	)%

Dividend income	—			626			(626		)	(100.0	)%
Unrealized gains (losses) on equity securities, net	(3,950		)	43,453			(47,403		)	n/m
Interest income	688			478			210			43.9	%
Interest expense	(52,375		)	(49,308		)	(3,067		)	6.2	%
Loss on early extinguishment of debt	(8,451		)	—			(8,451		)	n/m
Income before income taxes and equity earnings of an investee	40,458			116,976			(76,518		)	(65.4	)%
Income tax expense	(467		)	(707		)	240			(33.9	)%
Equity in earnings of an investee	83			830			(747		)	(90.0	)%
Net income	$	40,074		$	117,099		$	(77,025	)	(65.8	)%

Weighted average shares outstanding (basic)	164,321			164,232			89			0.1	%
Weighted average shares outstanding (diluted)	164,348			164,274			74			n/m

Net income per common share (basic and diluted)	$	0.24		$	0.71		$	(0.47	)	(66.2	)%

References to changes in the income and expense categories below relate to the comparison of consolidated results for the three months ended September 30, 2019, compared to the three months ended September 30, 2018.

Hotel operating revenues. The increase in hotel operating revenues is a result of increased revenues at certain of our managed hotels due to increases in ADR and higher occupancies ($18,683) and our hotel acquisitions since July 1, 2018

Table of Contents

($9,538), partially offset by decreased revenues at certain of our managed hotels primarily as a result of lower occupancies ($13,347) and decreased revenues at certain of our other managed hotels undergoing renovations during all or part of the 2019 period resulting primarily from lower occupancies ($10,202). Additional operating statistics of our hotels are included in the table on page 39.

Rental income - hotels. The decrease in rental income – hotels is primarily the result of a previously deferred gain from a historical lease default becoming fully amortized in 2018 ($888), partially offset by contractual rent increases under certain of our hotel leases ($49). Rental income - hotels for the 2019 and 2018 periods includes $85 and $100, respectively, of adjustments to record rent on a straight line basis.

Rental income - net lease portfolio. The decrease in rental income - net lease portfolio is a result of the sale of 20 travel centers to TA and our lease amendments with TA in January 2019 ($12,349), partially offset by our rents from properties we acquired pursuant to the SMTA Transaction ($5,485). See Notes 7 and 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding these transactions. We reduced rental income by $3,131 in the 2019 period and increased rental income by $3,036 in the 2018 period to record scheduled rent increases under certain leases, the deferred rent obligations payable to us under our TA leases and the estimated future payments to us under our TA leases for the cost of removing underground storage tanks on a straight line basis.

FF&E reserve income. FF&E reserve income represents amounts paid by certain of our hotel tenants into restricted accounts owned by us to accumulate funds for future capital expenditures. The terms of our hotel leases require these amounts to be calculated as a percentage of total sales at our hotels. We do not report the amounts, if any, which are escrowed as FF&E reserves for our managed hotels as FF&E reserve income. The decrease in FF&E reserve income is the result of decreased sales at certain of our leased hotels in the 2019 period.

Hotel operating expenses. The increase in hotel operating expenses is a result of an increase in wage and benefit costs, sales and marketing expenses and other operating costs at certain of our managed hotels resulting primarily from higher occupancies and general price increases ($15,031), our hotel acquisitions since July 1, 2018 ($9,603) and an increase in real estate taxes at certain of our hotels ($3,163), partially offset by operating expense decreases at certain managed hotels undergoing renovations during all or part of the 2019 period resulting primarily from lower occupancies ($10,524), an increase in the amount of guaranty and security deposit utilization under certain of our hotel management agreements ($3,331) and a decrease in the amount of guaranty and security deposit replenishment under certain of our hotel management agreements ($1,573). Certain guarantees and security deposits which have been applied to past payment deficits may be replenished from a share of subsequent cash flows from the applicable hotel operations pursuant to the terms of the respective operating agreements. When our guarantees and our security deposits are replenished by cash flows from hotel operations, we reflect such replenishments in our condensed consolidated statements of comprehensive income as an increase to hotel operating expenses. Hotel operating expenses were increased by $3,631 and $5,204 during the three months ended September 30, 2019 and 2018, respectively, as a result of such replenishments. When our guarantees and security deposits are utilized to cover shortfalls of hotel cash flows from the minimum payments due to us, we reflect such utilizations in our condensed consolidated statements of comprehensive income as a decrease to hotel operating expenses. Hotel operating expenses were decreased by $3,630 and $299 during the three months ended September 30, 2019 and 2018, respectively, as a result of such utilization.

Other operating expenses. The increase in other operating expenses is a result of operating expenses we pay at certain properties we acquired as part of the SMTA Transaction in September 2019.

Depreciation and amortization - hotels. The increase in depreciation and amortization - hotels is a result of the depreciation and amortization of improvements acquired with funds from our FF&E reserves or directly funded by us since July 1, 2018 ($5,771) and our hotel acquisitions since July 1, 2018 ($1,256), partially offset by certain of our depreciable assets becoming fully depreciated since July 1, 2018 ($4,513).

Depreciation and amortization - net lease portfolio. The decrease in depreciation and amortization - net lease portfolio is a result of our travel center dispositions since July 1, 2018 ($2,783) and certain of our depreciable assets becoming fully depreciated since July 1, 2018 ($1,857), partially offset by the depreciation and amortization of properties we acquired as part of the SMTA Transaction ($4,253) and the depreciation and amortization of net lease improvements we purchased since July 1, 2018 ($26).

General and administrative. The decrease in general and administrative costs is primarily due to decreases in business management fees and professional service expenses.

Dividend income. Dividend income represents the dividends we received from our former investment in RMR Inc.

Table of Contents

Unrealized gains and (losses) on equity securities, net. Unrealized gains and losses on equity securities, net represent the adjustment required to adjust the carrying value of our investments in RMR Inc., which we sold in July 2019, and TA common shares to their fair value as of September 30, 2019 and September 30, 2018.

Interest income. The increase in interest income is due to higher average cash balances during the 2019 period.

Interest expense. The increase in interest expense is due to higher average outstanding borrowings and weighted average interest rate in the 2019 period.

Loss on early extinguishment of debt. We recorded a loss of $8,451 on early extinguishment of debt in the 2019 period resulting from the termination of a term loan commitment we arranged in connection with the SMTA Transaction. We recorded a loss of $160 on early extinguishment of debt in the 2018 period in connection with amending our revolving credit facility and term loan.

Income tax expense. We recognized lower state taxes during the 2019 period primarily due to a decrease in the amount of state sourced income subject to income taxes.

Equity in earnings of an investee. Equity in earnings of an investee represents our proportionate share of the earnings of AIC.

Net income. Our net income and net income per common share (basic and diluted) each decreased in the 2019 period compared to the 2018 period primarily due to the revenue and expense changes discussed above.

Table of Contents

Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018



	For the Nine Months Ended September 30,
							Increase			% Increase
	2019			2018			(Decrease)			(Decrease)
Revenues:
Hotel operating revenues	$	1,521,368		$	1,494,283		$	27,085		1.8	%
Rental income - hotels	16,700			21,827			(5,127		)	(23.5	)%
Rental income - net lease portfolio	193,809			223,716			(29,907		)	(13.4	)%
Total rental income	210,509			245,543			(35,034		)	(14.3	)%
FF&E reserve income	3,365			3,911			(546		)	(14.0	)%

Expenses:
Hotel operating expenses	1,076,011			1,052,121			23,890			2.3	%
Other operating expenses	4,419			3,936			483			12.3	%
Depreciation and amortization - hotels	200,533			189,814			10,719			5.6	%
Depreciation and amortization - net lease portfolio	101,188			110,494			(9,306		)	(8.4	)%
Total depreciation and amortization	301,721			300,308			1,413			0.5	%
General and administrative	36,906			38,280			(1,374		)	(3.6	)%

Gain on sale of real estate	159,535			—			159,535			n/m
Dividend income	1,752			1,878			(126		)	(6.7	)%
Unrealized gains (losses) on equity securities, net	(43,761		)	89,348			(133,109		)	n/m
Interest income	1,774			1,093			681			62.3	%
Interest expense	(151,742		)	(145,589		)	(6,153		)	4.2	%
Loss on early extinguishment of debt	(8,451		)	(160		)	(8,291		)	5,181.9	%
Income before income taxes and equity earnings of an investee	275,292			295,662			(20,370		)	(6.9	)%
Income tax expense	(1,266		)	(1,949		)	683			(35.0	)%
Equity in earnings of an investee	617			881			(264		)	(30.0	)%
Net income	$	274,643		$	294,594		$	(19,951	)	(6.8	)%

Weighted average shares outstanding (basic)	164,294			164,212			82			n/m
Weighted average shares outstanding (diluted)	164,332			164,242			90			0.1	%

Net income per common share (basic and diluted)	$	1.67		$	1.79		$	(0.12	)	(6.7	)%

References to changes in the income and expense categories below relate to the comparison of consolidated results for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018.

Hotel operating revenues. The increase in hotel operating revenues is a result of our hotel acquisitions since January 1, 2018 ($39,010), increased revenues at certain of our managed hotels due to increases in ADR and higher occupancies ($38,012) and the conversion of one hotel from a leased to managed property during the 2018 period ($12,572), partially offset by decreased revenues at certain of our other managed hotels primarily as a result of lower occupancies ($31,533) and decreased revenues at certain of our other managed hotels undergoing renovations during all or part of the 2019 period resulting primarily from lower occupancies ($30,976). Additional operating statistics of our hotels are included in the table on page 39.

Rental income - hotels. The decrease in rental income - hotels is primarily a result of the conversion of one hotel from a leased to managed property during the 2018 period ($2,812) and a previously deferred gain from a historical lease default becoming fully amortized in 2018 ($2,364), partially offset by contractual rent increases under certain of our hotel leases ($49). Rental income - hotels for the 2019 and 2018 periods includes $254 and $293, respectively, of adjustments to record rent on a straight line basis.

Table of Contents

rental income by $7,622 in the 2019 period and increased rental income by $9,066 in the 2018 period to record scheduled rent increases under certain leases, the deferred rent obligations payable to us under our TA leases and the estimated future payments to us under our TA leases for the cost of removing underground storage tanks on a straight line basis.

FF&E reserve income. The decrease in FF&E reserve income is the result of decreased sales at certain of our leased hotels in the 2019 period.

Hotel operating expenses. The increase in hotel operating expenses is a result of our hotel acquisitions since January 1, 2018 ($39,350), an increase in wage and benefit costs, sales and marketing expenses and other operating costs at certain of our managed hotels resulting primarily from higher occupancies and general price increases ($23,749), the conversion of one hotel from a leased to managed property during the 2018 period ($13,186) and an increase in real estate taxes at certain of our hotels ($4,160), partially offset by operating expense decreases at certain managed hotels undergoing renovations during all or part of the 2019 period resulting primarily from lower occupancies ($31,377), an increase in the amount of guaranty and security deposit utilization under certain of our hotel management agreements ($14,789) and a decrease in the amount of guaranty and security deposit replenishment under certain of our hotel management agreements ($10,389). When our guarantees and our security deposits are replenished by cash flows from hotel operations, we reflect such replenishments in our condensed consolidated statements of comprehensive income as an increase to hotel operating expenses. Hotel operating expenses were increased by $3,910 and $14,299 during the nine months ended September 30, 2019 and 2018, respectively, as a result of replenishment of security deposits and guarantees under certain of our hotel management agreements. When our guarantees and security deposits are utilized to cover shortfalls of hotel cash flows from the minimum payments due to us, we reflect such utilizations in our condensed consolidated statements of comprehensive income as a decrease to hotel operating expenses. Hotel operating expenses were decreased by $17,166 and $2,377 during the nine months ended September 30, 2019 and 2018, respectively, as a result of such utilization.

Other operating expenses. The increase in other operating expenses is a result of operating expenses we pay at certain properties we acquired as part of the SMTA Transaction in September 2019.

Depreciation and amortization - hotels. The increase in depreciation and amortization - hotels is a result of the depreciation and amortization of improvements acquired with funds from our FF&E reserves or directly funded by us since January 1, 2018 ($18,628) and our hotel acquisitions since January 1, 2018 ($4,183), partially offset by certain of our depreciable assets becoming fully depreciated since January 1, 2018 ($12,092).

Depreciation and amortization - net lease portfolio. The decrease in depreciation and amortization - net lease portfolio is a result of our travel center dispositions since January 1, 2018 ($8,377) and certain of our depreciable assets becoming fully depreciated since January 1, 2018 ($5,918), partially offset by the depreciation and amortization of properties we acquired as part of the SMTA Transaction ($4,256) and the depreciation and amortization of travel center improvements we purchased since January 1, 2018 ($733).

General and administrative. The decrease in general and administrative costs is primarily due to decreases in business management fees and professional service expenses.

Gain on sale of real estate. We recorded a $159,535 gain on sale of real estate in the 2019 period in connection with the sales of 20 travel centers.

Dividend income. Dividend income represents the dividends we received from our former investment in RMR Inc.

Interest income. The increase in interest income is due to higher average cash balances during the 2019 period.

Interest expense. The increase in interest expense is due to higher average outstanding borrowings and weighted average interest rate in the 2019 period.

Loss on early extinguishment of debt. We recorded a loss of $8,451 on early extinguishment of debt in the 2019 period resulting from the termination of a term loan commitment in connection with the SMTA Transaction. We recorded a loss of $160 on early extinguishment of debt in the 2018 period in connection with amending our revolving credit facility and term loan.

Table of Contents

Income tax expense. We recognized lower state and foreign taxes during the 2019 period primarily due to a decrease in the amount of state and foreign sourced income subject to income taxes.

Equity in earnings of an investee. Equity in earnings of an investee represents our proportionate share of the earnings of AIC.

Table of Contents

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

Our Managers and Tenants

As of September 30, 2019, 327 of our hotels (including one leased hotel) were included in seven combination portfolio agreements and one of our hotels was leased and not included in a portfolio; and all 328 hotels were managed by or leased to hotel operating companies. Our 946 net lease properties are leased to 279 tenants as of September 30, 2019. 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 minimum returns and rents, from their separate resources. Our hotel managers and tenants include Marriott, IHG, Sonesta, Wyndham, Hyatt and Radisson. TA is our largest net lease tenant. No other net lease tenant represents more than 1% of our total annualized minimum returns or rents.

We define coverage for each of our hotel management agreements or leases as total hotel property level revenues minus all hotel property level expenses and FF&E reserve escrows which are not subordinated to the hotel minimum returns or rents due to us divided by the hotel minimum returns or rents due to us. More detail regarding coverage, guarantees and other features of our hotel operating agreements is presented in the tables and related notes on pages 38 through 45. For the twelve months ended September 30, 2019, five of our eight hotel operating agreements, representing 40% of our total annual minimum returns and minimum rents, generated coverage of less than 1.0x (with a range from 0.58x to 0.95x).

We define net lease coverage as annual property level adjusted 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. The annual property level adjusted EBITDAR is determined based on the most recent operating statements, 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. Properties that do not report operating information are excluded from the coverage calculations. As of September 30, 2019, our net lease properties generated coverage of 2.27x.

Certain of our management arrangements or leases are subject to full or limited guarantees or are secured by a security deposit which we control. These guarantees may provide us with continued payments if the property level cash flows fail to equal or exceed guaranteed amounts due to us. Some of our managers and tenants, or their affiliates, may also supplement cash flows from our properties in order to make payments to us and preserve their rights to continue operating our properties even if they are not required to do so by guarantees or security deposits. Guarantee payments, security deposit applications or supplemental payments to us, if any, made under any of our management agreements or leases do not subject us to repayment obligations, but, under some of our agreements, the manager or tenant may recover these guarantee or supplemental payments and the security deposits may be replenished from subsequent cash flows from our properties after our future minimum returns and rents are paid.

When cash flows from our hotels under certain of our agreements are less than the minimum returns or rents contractually due to us, we have utilized the applicable security features in our agreements to cover some of these shortfalls. However, several of the guarantees and all the security deposits we hold are for limited amounts, are for limited durations and may be exhausted or expire, especially if our hotel renovation and rebranding activities do not result in improved operating results at these hotels. Accordingly, the effectiveness of our various security features to provide uninterrupted payments to us is not assured. If any of our hotel managers, tenants or guarantors default in their payment obligations to us, our cash flows will decline and we may become unable to continue to pay distributions to our shareholders or the amount of the distributions may decline.

In particular, Wyndham’s guarantee of the minimum returns due from our hotels which are managed by Wyndham was depleted during 2017 and remained depleted as of September 30, 2019. The Wyndham agreement provides that if the hotel cash flows available after payment of hotel operating expenses are less than the minimum returns due to us and the guaranty has been depleted, to avoid default Wyndham is required to pay us the greater of the available hotel cash flows after payment of hotel operating expenses and 85% of the contractual amount due. During the three and nine months ended September 30, 2019, Wyndham paid 85% of the minimum returns due under the management agreement, which payments were an aggregate of $1,049 and $3,137, respectively, less than the minimum returns due for those periods. We are exiting our relationship with Wyndham and expect to sell or rebrand our 22 hotels currently managed by Wyndham. We amended our agreement with Wyndham by SVC in October 2019 whereby the term of the management agreement will expire on September 30, 2020 unless sooner terminated with respect to any hotels that are sold or rebranded. As of September 30, 2019, Wyndham was paying 85% of the annual minimum returns due us to avoid a default. Under the amendment, Wyndham will pay to us all available cash

Table of Contents

flows of the hotels after payment of hotel operating expenses. Wyndham will not be entitled to any base management fees for the remainder of the agreement term.

On November 1, 2019, we rebranded two full-service hotels previously managed by Wyndham in Chicago, IL and Irvine, CA to the Sonesta brands under a short term agreement with Sonesta that expires on December 31, 2020. We currently lease 48 vacation units in the Chicago hotel to Destinations, which requires annual minimum rent of $1,493 (approximately $373 per quarter). We amended this lease so the term of the lease expires on March 31, 2020, at which time Destinations will vacate the leased space.

Marriott has notified us that they will not renew the lease for the Kauai Marriott under our Marriott No. 5 agreement, which expires December 31, 2019. We are in negotiations with Marriott regarding this hotel, but we can provide no assurance that we and Marriott will reach an agreement regarding the Kauai Marriott or what its terms may be. If we and Marriott are unable to reach an agreement, we will evaluate alternatives for this hotel, which may include rebranding or selling it.

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 minimum returns from our managed hotels, minimum rents from our leased hotels and net lease portfolio and borrowings under our revolving credit facility. We receive minimum 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 and capital expenses, 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 or otherwise, our managers and tenants may become unable or unwilling to pay minimum 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.

Changes in our cash flows for the nine months ended September 30, 2019 compared to the same period in 2018 were as follows: (1) cash flows provided by operating activities increased from $403,404 in 2018 to $432,530 in 2019; (2) cash flows used in investing activities increased from $277,857 in 2018 to $2,457,485 in 2019; and (3) cash flows from financing activities changed from $137,550 of cash used in financing activities in 2018 to $2,019,461 of cash provided by financing activities in 2019.

The increase in cash flows provided by operating activities for the nine months ended September 30, 2019 as compared to the prior year period is primarily due to an increase in the minimum returns and rents paid to us in the 2019 period due to our acquisitions and funding of improvements to our hotels since January 1, 2018 and a decrease in incentive business management fees paid to RMR LLC in the 2019 period, partially offset by a decrease in minimum rents paid to us in the 2019 period under our travel center leases, higher interest payments in the 2019 period and an increase in security deposit utilization in the 2019 period. The increase in cash flows used in investing activities for the nine months ended September 30, 2019 as compared to the prior year is primarily due to an increase in real estate acquisition activity in the 2019 period and an increase in our capital improvement fundings in the 2019 period, partially offset by the proceeds received from our sale of 20 travel centers and the sale of our shares of RMR Inc. in the 2019 period. The increase in cash used in financing activities for the nine months ended September 30, 2019 as compared to the prior year period is primarily due to an increase in our issuance of notes in the 2019 period and higher net borrowings under our revolving credit facility compared to the 2018 period.

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

Our Investment and Financing Liquidity and Capital Resources

Various percentages of total sales at some of our hotels are escrowed as FF&E reserves to fund future capital improvements. During the nine months ended September 30, 2019, our hotel managers and tenants deposited $54,440 to these accounts and spent $143,692 from the FF&E reserve escrow accounts to renovate and refurbish our hotels. As of September 30, 2019, there was $53,519 on deposit in these escrow accounts, which was held directly by us and is reflected in our condensed consolidated balance sheets as restricted cash.

Table of Contents

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. To the extent we make such additional fundings, our annual minimum returns or rents generally increase by a percentage of the amount we fund. During the nine months ended September 30, 2019, we funded $123,190 for capital improvements in excess of FF&E reserve fundings available from hotel operations to our hotels as follows:

•

During the nine months ended September 30, 2019, we funded $15,778 for capital improvements to certain hotels under our Marriott No. 1 agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund $1,300 for capital improvements under this agreement during the last three months of 2019 using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us increase.

•

During the nine months ended September 30, 2019, we funded $18,600 for capital improvements to certain hotels under our Marriott No. 234 agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund approximately $11,700 for capital improvements under this agreement during the last three months of 2019 using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us increase.

•

We did not fund any capital improvements to hotels under our IHG agreement during the nine months ended September 30, 2019. We currently expect to fund approximately $65,500 during the last three months of 2019 for capital improvements under this agreement using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us increase.

•

Our Sonesta agreement does not require FF&E escrow deposits. Under our Sonesta agreement, we are required to fund capital expenditures made at our hotels. During the nine months ended September 30, 2019, we funded $67,495 for capital improvements to certain hotels included in our Sonesta agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund approximately $48,000 during the last three months of 2019 and $28,000 during 2020 for capital improvements under this agreement using cash on hand or borrowings under our revolving credit facility. As we fund these improvements, the contractual minimum returns payable to us increase to the extent amounts funded exceed threshold amounts, as defined in our Sonesta agreement.

•

Our Wyndham agreement required FF&E escrow deposits only if there are excess cash flows after payment of our minimum returns. No FF&E escrow deposits were required during the nine months ended September 30, 2019. During the nine months ended September 30, 2019, we funded $2,283 for capital improvements to certain hotels included in our Wyndham agreement using cash on hand and borrowings under our revolving credit facility. We currently expect to fund $1,000 capital improvements under this agreement during the last three months of 2019 using cash on hand and borrowings under our revolving credit facility.


•	During the nine months ended September 30, 2019, we funded $19,034 for capital improvements to certain hotels under our Radisson agreement using cash on hand and borrowings under our revolving credit facility. We currently do not expect to fund capital improvements under this agreement during the last three months of 2019.

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. Certain of our net lease portfolio leases, including under all of our TA leases, lessees may request that we purchase qualifying capital improvements to the leased facilities in return for minimum rent increases. We did not fund any capital improvements to properties under these lease provisions during the nine months ended September 30, 2019. Tenants are not obligated to request and we are not obligated to purchase any such improvements.

As of September 30, 2019, we had $5,900 of unspent leasing-related obligations assumed as a part of the SMTA Transaction.

In January 2019, in a series of transactions, we sold 20 travel centers in 15 states to TA for $308,200. We used a portion of the proceeds from these sales to repay borrowings under our revolving credit facility and for general business purposes, including hotel acquisitions.

Table of Contents

common shareholders of record on July 29, 2019 of $0.54 per share, or $88,803. On October 17, 2019, we declared a regular quarterly distribution to our common shareholders of record on October 28, 2019 of $0.54 per share, or $88,865. We expect to pay this amount on or about November 14, 2019 using cash on hand and borrowings under our revolving credit facility.

On February 22, 2019, we acquired the 335 room Kimpton Hotel Palomar in Washington, D.C. for a purchase price of $141,450, excluding capitalized acquisition costs of $2,292, using proceeds from our sale of the travel centers described above.

On May 7, 2019, we acquired the 198 room Crowne Plaza Milwaukee West hotel in Milwaukee, WI for a purchase price of $30,000, excluding capitalized acquisition costs of $235, using proceeds from our sale of the travel centers described above.

On August 1, 2019, we acquired a land parcel adjacent to our travel center located in Southington, CT for a purchase price of $60, excluding capitalized acquisition costs of $6, using cash on hand. This land parcel has been added to the TA lease for that travel center.

On September 18, 2019, we issued $825,000 principal amount of our 4.35% unsecured senior notes due 2024, $450,000 principal amount of our 4.75% unsecured senior notes due 2026 and $425,000 principal amount of our 4.95% unsecured senior notes due 2029. We used the aggregate net proceedings from these offerings of $1,680,461, after underwriting discounts and other offering expenses, to finance a portion of the SMTA Transaction.

On September 20, 2019, we completed the SMTA Transaction as a result of which, we acquired 767 net lease service-oriented retail properties with 12.4 million rentable square feet. The aggregate transaction value of the SMTA Transaction was $2,482,382, including $2,384,577 in cash consideration, $82,069 of prepayment penalties to extinguish mortgage debt on the portfolio and $15,736 of other capitalized acquisition costs. The properties included in the portfolio are net leased to tenants in 23 distinct industries and 163 brands that include quick service and casual dining restaurants, movie theaters, health and fitness, automotive parts and services and other service-oriented and necessity-based industries across 45 states. We financed the SMTA Transaction with borrowings under our revolving credit facility and with cash on hand, including net proceeds from our public offerings of senior unsecured notes, as further described above.

On October 9, 2019, we acquired the 261-room Kimpton Hotel Palomar located in Chicago, IL for a purchase price of $55,000, excluding acquisition related costs, using cash on hand. We added this Kimpton^® branded hotel to our management agreement with IHG.

On October 11, 2019, we entered an agreement to sell 126 net lease properties we acquired in the SMTA Transaction with approximately 2.4 million square feet in 26 states with an aggregate of $34,300 of annual minimum rents as of September 30, 2019, for an aggregate sales price of $438,000, excluding closing costs. We expect this sale to be completed prior to December 31, 2019 and to use the proceeds to reduce outstanding borrowings under our revolving credit facility.

On October 22, 2019, we sold a net lease property we acquired in the SMTA Transaction in Hermantown, MN with 103,631 square feet with annual minimum rent of $913 as of September 30, 2019 for $6,250, excluding closing costs of $46. We used the proceeds of this sale to reduce outstanding borrowings under our revolving credit facility.

On October 29, 2019, we sold a net lease office property we acquired in the SMTA Transaction in Las Vegas, NV with 138,558 square feet with annual minimum rent of $3,561 as of September 30, 2019 for $57,000, excluding closing costs. We used the proceeds of this sale to reduce outstanding borrowings under our revolving credit facility.

We have also commenced marketing certain hotels as part of our previously announced plan to sell approximately $300,000 of hotels to reduce our financial leverage. We expect to rebrand or sell the 22 hotels currently managed by Wyndham and are currently in discussions with Marriott to, amongst other things, potentially sell certain Marriott hotels.

On July 1, 2019, we sold all the shares of class A common stock of RMR Inc. we owned in an underwritten public offering at a price to the public of $40.00 per share pursuant to an underwriting agreement among us, RMR Inc., certain other REITs managed by RMR LLC that also sold their class A common stock of RMR Inc. in the offering and the underwriters named therein. We received net proceeds of $93,568 from this sale, after deducting the underwriting discounts and commissions and after other offering expenses, which we used to repay borrowings under our revolving credit facility. For more information regarding the sale of our shares of class A common stock of RMR Inc., see Note 10 to our condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

We currently intend to continue to expand our investments by primarily acquiring additional hotels and other single tenant, net lease service-oriented based properties and we expect to use the extensive nationwide resources of RMR LLC to locate, acquire and manage such properties. One of our goals in acquiring single tenant, net lease service-oriented based properties is to further diversify our sources of rents and returns with the intention of improving the security of our cash flows. Another of

Table of Contents

our goals is to purchase properties that produce rents, less property operating expenses, that are greater than our capital costs to acquire the properties and, accordingly, allow us to increase distributions to our shareholders over time. We expect that most of our acquisition efforts will focus on hotel and net lease based properties; however, we may consider acquiring other types of properties.

In order to fund acquisitions and to meet cash needs that may result from our desire or need to make distributions or pay operating or capital expenses, we maintain a $1,000,000 revolving credit facility and $400,000 term loan which are governed by a credit agreement with a syndicate of institutional lenders. The maturity date of our revolving credit facility is July 15, 2022, and, subject to the payment of an extension fee and meeting certain other conditions, we have an option to extend the maturity date of this facility for two additional six month periods. We are required to pay interest at the rate of LIBOR plus a premium, which was 100 basis points per annum at September 30, 2019, 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 20 basis points per annum at September 30, 2019. Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings. On October 1, 2019, the interest rate premium and facility fee increased to 1.20% and 0.25% respectively, as the result of our credit rating being lowered by a rating agency in connection with the SMTA Transaction and related financings. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity. As of September 30, 2019, the annual interest rate payable on borrowings under our revolving credit facility was 2.92%. As of September 30, 2019, we had $790,000 outstanding and $210,000 available to borrow under our revolving credit facility. As of November 7, 2019, we had $700,000 amounts outstanding and $300,000 available to borrow under our revolving credit facility.

Our term loan, which matures on July 15, 2023, is prepayable without penalty at any time. We are required to pay interest on the amount outstanding under our term loan at the rate of LIBOR plus a premium, which was 110 basis points per annum at September 30, 2019. The interest rate premium is subject to adjustment based upon changes to our credit ratings. On October 1, 2019 the interest rate premium increased to 1.35% as a result of our credit rating being lowered by a rating agency in connection with the SMTA Transaction and related financings. As of September 30, 2019, the annual interest rate for the amount outstanding under our term loan was 3.20%.

Our credit agreement also includes a feature under which the maximum borrowing availability may be increased to up to $2,300,000 on a combined basis in certain circumstances.

Our term debt maturities (other than our revolving credit facility and term loan) as of September 30, 2019 were as follows: $400,000 in 2021, $500,000 in 2022, $500,000 in 2023, $1,175,000 in 2024, $350,000 in 2025, $800,000 in 2026, $400,000 in 2027, $400,000 in 2028, $425,000 in 2029 and $400,000 in 2030.

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

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 future debt maturities, operations, capital expenditures, distributions to our shareholders, property acquisitions 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 securities. We may also seek to participate in joint ventures or other arrangements that may provide us additional sources of financing. Although we have not historically done so, we may also assume mortgage debt on properties we may acquire or obtain mortgage financing on our existing properties.

While we believe we will 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 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

Table of Contents

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, but we cannot be sure that we will be able to successfully carry out that intention.

Off Balance Sheet Arrangements

As of September 30, 2019, we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Debt Covenants

Our debt obligations at September 30, 2019 consisted of outstanding borrowings under our $1,000,000 revolving credit facility, our $400,000 term loan and $5,350,000 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 and our credit agreement restricts our ability to make distributions under certain circumstances. 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 LLC ceasing to act as our business manager. As of September 30, 2019, we believe we were in compliance with all of the covenants under our indentures and their supplements and our credit agreement.

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 and term loan 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.

Management Agreements, Leases and Operating Statistics (dollar amounts in thousands)

As of September 30, 2019, we owned and managed a diverse portfolio of hotels and net lease properties across the United States and in Puerto Rico and Canada with 185 brands across 24 industries.

Hotel Portfolio

As of September 30, 2019, 327 of our hotels (including one leased hotel) were included in seven portfolio agreements and one hotel was not included in a portfolio and was leased. As of September 30, 2019, our hotels were managed by or leased to separate affiliates of Marriott, IHG, Sonesta, Wyndham, Hyatt and Radisson under eight agreements.

Table of Contents

The tables and related notes below through page 39 summarize significant terms of our hotel leases and management agreements as of September 30, 2019. These tables also include statistics reported to us or derived from information reported to us by our hotel managers and tenants. These statistics include coverage of our minimum returns or minimum rents and occupancy, ADR and RevPAR for our hotel properties. We consider these statistics and the management agreement or lease security features also presented in the tables and related notes on the following pages to be important measures of our managers’ and tenants’ success in operating our hotel properties and their ability to continue to pay us. However, this third party reported information is not a direct measure of our financial performance and we have not independently verified the operating data.



Operating Agreement Reference Name	Number of Properties	Number of Rooms or Suites (Hotels)	Investment ⁽¹⁾		Annual Minimum Return/Rent ⁽²⁾		Rent / Return Coverage ⁽³⁾
							Three Months Ended		Twelve Months Ended
							September 30,		September 30,
							2019	2018	2019	2018
Marriott (No. 1) ⁽⁴⁾	53	7,609	$	722,087	$	71,714	1.30x	1.38x	1.16x	1.20x
Marriott (No. 234) ⁽⁵⁾	68	9,120	1,030,994		109,024		1.06x	1.14x	1.04x	1.10x
Marriott (No. 5) ⁽⁶⁾	1	356	90,078		10,518		1.17x	1.04x	1.01x	1.07x
Subtotal / Average Marriott	122	17,085	1,843,159		191,256		1.16x	1.22x	1.08x	1.13x
IHG ⁽⁷⁾	102	16,893	2,267,462		207,411		0.88x	1.18x	0.90x	1.12x
Sonesta ⁽⁸⁾	51	8,862	1,763,319		131,229		0.48x	0.68x	0.58x	0.68x
Wyndham ⁽⁹⁾	22	3,583	398,964		29,466		0.93x	0.99x	0.58x	0.75x
Hyatt ⁽¹⁰⁾	22	2,724	301,942		22,037		0.77x	0.95x	0.90x	1.08x
Radisson ⁽¹¹⁾	9	1,939	289,139		20,442		1.38x	1.34x	0.95x	1.10x
Total / Average Hotels	328	51,086	$	6,863,985	$	601,841	0.90x	1.07x	0.87x	1.01x


(1)	Represents the historical cost of our hotel properties plus capital improvements funded by us less impairment write-downs, if any, and excludes capital improvements made from FF&E reserves funded from hotel operations which do not result in increases in hotel minimum returns or rents.

(2)

Each of our hotel management agreements or leases provides for payment to us of an annual minimum return or rent, respectively. Certain of these minimum payment amounts are secured by full or limited guarantees or security deposits as more fully described below. In addition, certain of our hotel management agreements provide for payment to us of additional amounts to the extent of available cash flows as defined in the management agreement. Payments of these additional amounts are not guaranteed or secured by deposits. Annualized minimum rent amounts represent cash rent amounts due to us and exclude adjustments necessary to record rent on a straight line basis.

(3)

We define hotel coverage as combined total hotel property level revenues minus all hotel property level expenses and FF&E reserve escrows which are not subordinated to hotel minimum returns or rents due to us (which data is provided to us by our hotel managers or tenants), divided by the hotel minimum returns or rents due to us. Coverage amounts for our IHG, Sonesta and Radisson agreements include data for periods prior to our ownership of certain hotel properties. Coverage amounts for our Sonesta agreement include data for one hotel prior to when it was managed by Sonesta. Coverage amounts for our Radisson agreement excludes data for certain properties we sold during the periods presented.


(4)	We lease 53 Courtyard by Marriott^® branded hotels in 24 states to one of our TRSs. The hotels are managed by a subsidiary of Marriott under a combination management agreement which expires in 2024; Marriott has two renewal options for 12 years each for all, but not less than all, of the hotels.

We have no security deposit or guarantee from Marriott for these 53 hotels. Accordingly, payment by Marriott of the minimum return due to us under this management agreement is limited to the hotels’ available cash flows after payment of operating expenses and funding of the FF&E reserve. In addition to our minimum return, this agreement provides for payment to us of 50% of the hotels’ available cash flows after payment of hotel operating expenses, funding of the required FF&E reserve, payment of our minimum return and payment of certain management fees.

(5)

We lease 68 of our Marriott^® branded hotels (one full service Marriott^®, 35 Residence Inn by Marriott^®, 18 Courtyard by Marriott^®, 12 TownePlace Suites by Marriott^® and two SpringHill Suites by Marriott^® hotels) in 22 states to one of our TRSs. The hotels are managed by subsidiaries of Marriott under a combination management agreement which expires in 2025; Marriott has two renewal options for 10 years each for all, but not less than all, of the hotels.

We originally held a security deposit of $64,700 under this agreement to cover payment shortfalls of our minimum return. As of September 30, 2019, the available balance of this security deposit was $36,621. This security deposit may be replenished from a share of the hotels’ available cash flows in excess of our minimum return and certain management fees. Marriott has also provided us with a $40,000 limited guaranty to cover payment shortfalls up to 90% of our minimum return after the available security deposit balance has been depleted. This limited guaranty expires on December 31, 2019. As of September 30, 2019, the available Marriott guaranty was $30,672.

In addition to our minimum return, this agreement provides for payment to us of 62.5% of the hotels’ available cash flows after payment of hotel operating expenses, funding of the required FF&E reserve, payment of our minimum return, payment of certain management fees and replenishment of the security deposit. This additional return amount is not guaranteed or secured by the security deposit.

(6)

We lease one Marriott^® branded hotel in Kauai, HI to a subsidiary of Marriott under a lease that expires in 2019. Marriott has four renewal options for 15 years each. On August 31, 2016, Marriott notified us that it will not exercise its renewal option at the expiration of the current lease term ending on December 31, 2019. This lease is guaranteed by Marriott and provides for increases in the annual minimum rent payable to us based on changes in the consumer price index.

Table of Contents

(7)

We lease 101 IHG branded hotels (20 Staybridge Suites^®, 61 Candlewood Suites^®, two InterContinental^®, 11 Crowne Plaza^®, four Kimpton^®Hotels & Restaurants and three Holiday Inn^®) in 30 states in the U.S., the District of Columbia and Ontario, Canada to one of our TRSs. These 101 hotels are managed by subsidiaries of IHG under a combination management agreement. We lease one additional InterContinental^® branded hotel in Puerto Rico to a subsidiary of IHG. The annual minimum return amount presented in the table on page 38 includes $7,908 of minimum rent related to the leased Puerto Rico hotel. The management agreement and the lease expire in 2036; IHG has two renewal options for 15 years each for all, but not less than all, of the hotels.

As of September 30, 2019, we held a security deposit of $85,741 under this agreement to cover payment shortfalls of our minimum return. This security deposit, if utilized, may be replenished and increased up to $100,000 from the hotels’ available cash flows in excess of our minimum return and certain management fees. Under this agreement, IHG is required to maintain a minimum security deposit of $37,000.

In addition to our minimum return, this management agreement provides for an annual additional return payment to us of $12,067 from the hotels’ available cash flows after payment of hotel operating expenses, funding of the required FF&E reserve, if any, payment of our minimum return, payment of certain management fees and replenishment and expansion of the security deposit. In addition, the agreement provides for payment to us of 50% of the hotels’ available cash flows after payment to us of the annual additional return amount. These additional return amounts are not guaranteed or secured by the security deposit we hold.


(8)	We lease our 51 Sonesta branded hotels (six Royal Sonesta^® Hotels, six Sonesta Hotels & Resorts^® and 39 Sonesta ES Suites^® hotels) in 26 states to one of our TRSs. The hotels are managed by Sonesta under a combination management agreement which expires in 2037; Sonesta has two renewal options for 15 years each for all, but not less than all, of the hotels.

We have no security deposit or guaranty from Sonesta. Accordingly, payment by Sonesta of the minimum return due to us under this management agreement is limited to the hotels’ available cash flows after the payment of operating expenses, including certain management fees, and we are financially responsible for operating cash flows deficits, if any.

In addition to our minimum return, this management agreement provides for payment to us of 80% of the hotels’ available cash flows after payment of hotel operating expenses, management fees to Sonesta, our minimum return, an imputed FF&E reserve to us and reimbursement of operating loss or working capital advances, if any.


(9)	We lease our 22 Wyndham branded hotels (six Wyndham Hotels and Resorts^® and 16 Hawthorn Suites^® hotels) in 14 states to one of our TRSs. The hotels are managed by subsidiaries of Wyndham under a combination management agreement which expires in 2038; Wyndham has two renewal options for 15 years each for all, but not less than all, of the hotels.

We have a limited guaranty of $35,656 under the management agreement to cover payment shortfalls of our minimum return, subject to an annual payment limit of $17,828. This guaranty expires in 2020. As of September 30, 2019, the Wyndham guaranty was depleted. This guaranty may be replenished from the hotels' available cash flows in excess of our minimum return. This agreement provides that if the hotel cash flows available after payment of hotel operating expenses are less than the minimum returns due to us and if the guaranty is depleted, to avoid a default, Wyndham is required to pay us the greater of the available hotel cash flows after payment of hotel operating expenses and 85% of our minimum return.

In addition to our minimum return, this management agreement provides for payment to us of 50% of the hotels' available cash flows after payment of hotel operating expenses, payment of our minimum return, funding of the FF&E reserve, if any, payment of certain management fees and reimbursement of any Wyndham guaranty advances. This additional return amount is not guaranteed.

We lease 48 vacation units in one of the hotels to Destinations under a lease that expires in 2037; Destinations has two renewal options for 15 years each for all, but not less than all, of the vacation units. The lease is guaranteed by Destinations and provides for rent increases of 3% per annum. The annual minimum return amount presented in the table on page 39 includes $1,493 of minimum rent related to the Destinations lease.


(10)	We lease our 22 Hyatt Place^® branded hotels in 14 states to one of our TRSs. The hotels are managed by a subsidiary of Hyatt under a combination management agreement that expires in 2030; Hyatt has two renewal options for 15 years each for all, but not less than all, of the hotels.

We have a limited guaranty of $50,000 under this agreement to cover payment shortfalls of our minimum return. As of September 30, 2019, the available Hyatt guaranty was $21,346. The guaranty is limited in amount but does not expire in time and may be replenished from a share of the hotels’ available cash flows in excess of our minimum return.

In addition to our minimum return, this management agreement provides for payment to us of 50% of the hotels’ available cash flows after payment of operating expenses, funding the required FF&E reserve, payment of our minimum return and reimbursement to Hyatt of working capital and guaranty advances, if any. This additional return is not guaranteed.


(11)	We lease our nine Radisson branded hotels (four Radisson^® Hotels & Resorts, four Country Inns & Suites^® by Radisson and one Radisson Blu^® hotel) in six states to one of our TRSs and these hotels are managed by a subsidiary of Radisson under a combination management agreement which expires in 2035 and Radisson has two 15 year renewal options for all, but not less than all, of the hotels.

We have a limited guaranty of $47,523 under this agreement to cover payment shortfalls of our minimum return. As of September 30, 2019, the available Radisson guaranty was $42,466. The guaranty is limited in amount but does not expire in time and may be replenished from a share of the hotels’ available cash flows in excess of our minimum return. Also, this guaranty cap may be increased if we fund excess renovation costs under our agreement with Radisson.

In addition to our minimum return, this management agreement provides for payment to us of 50% of the hotels’ available cash flows after payment of operating expenses, funding the required FF&E reserve, payment of our minimum return and reimbursement to Radisson of working capital and guaranty advances, if any. This additional return is not guaranteed.

Table of Contents

The following tables summarize the operating statistics, including ADR, occupancy and RevPAR reported to us by our hotel managers or tenants by management agreement or lease for the periods indicated. All operating data presented are based upon the operating results provided by our managers and tenants for the indicated periods. We have not independently verified our hotel managers’ or tenants’ operating data.



	No. of	No. of Rooms /	Three Months Ended September 30,								Nine Months Ended September 30,
	Hotels	Suites	2019			2018			Change		2019			2018			Change
ADR
Marriott (No. 1)	53	7,609	$	132.70		$	132.67		—	%	$	134.27		$	132.19		1.6	%
Marriott (No. 234)	68	9,120	132.40			134.75			(1.7	%)	134.44			134.05			0.3	%
Marriott (No. 5)	1	356	308.12			301.59			2.2	%	304.95			290.71			4.9	%
Subtotal / Average Marriott	122	17,085	136.82			137.88			(0.8	%)	138.67			137.32			1.0	%
IHG ⁽¹⁾	102	16,893	120.44			123.97			(2.8	%)	122.04			125.37			(2.7	%)
Sonesta ^{(1) (2)}	51	8,862	140.45			146.63			(4.2	%)	147.47			149.31			(1.2	%)
Wyndham	22	3,583	100.63			103.40			(2.7	%)	97.67			100.96			(3.3	%)
Hyatt	22	2,724	105.76			109.34			(3.3	%)	109.67			112.64			(2.6	%)
Radisson ⁽¹⁾	9	1,939	141.65			141.16			0.3	%	136.66			134.29			1.8	%
All Hotels Total / Average	328	51,086	$	127.82		$	130.68		(2.2	%)	$	129.91		$	131.15		(0.9	%)

OCCUPANCY
Marriott (No. 1)	53	7,609	73.1		%	72.5		%	0.6 pts		68.8		%	70.1		%	-1.3 pts
Marriott (No. 234)	68	9,120	77.4		%	76.7		%	0.7 pts		74.9		%	76.2		%	-1.3 pts
Marriott (No. 5)	1	356	88.6		%	87.0		%	1.6 pts		87.7		%	91.7		%	-4.0 pts
Subtotal / Average Marriott	122	17,085	75.7		%	75.1		%	0.6 pts		72.4		%	73.8		%	-1.4 pts
IHG ⁽¹⁾	102	16,893	79.8		%	82.0		%	-2.2 pts		77.7		%	80.0		%	-2.3 pts
Sonesta ^{(1) (2)}	51	8,862	73.8		%	72.3		%	1.5 pts		70.0		%	69.2		%	0.8 pts
Wyndham	22	3,583	74.5		%	72.3		%	2.2 pts		69.4		%	69.6		%	-0.2 pts
Hyatt	22	2,724	79.4		%	80.1		%	-0.7 pts		78.9		%	80.5		%	-1.6 pts
Radisson ⁽¹⁾	9	1,939	79.5		%	75.4		%	4.1 pts		72.7		%	74.6		%	-1.9 pts
All Hotels Total / Average	328	51,086	77.0		%	77.0		%	0.0 pts		73.9		%	75.1		%	-1.2 pts

RevPAR
Marriott (No. 1)	53	7,609	$	97.00		$	96.19		0.8	%	$	92.38		$	92.67		(0.3	%)
Marriott (No. 234)	68	9,120	102.48			103.35			(0.8	%)	100.70			102.15			(1.4	%)
Marriott (No. 5)	1	356	272.99			262.38			4.0	%	267.44			266.58			0.3	%
Subtotal / Average Marriott	122	17,085	103.57			103.55			—	%	100.40			101.34			(0.9	%)
IHG ⁽¹⁾	102	16,893	96.11			101.66			(5.5	%)	94.83			100.30			(5.5	%)
Sonesta ^{(1) (2)}	51	8,862	103.65			106.01			(2.2	%)	103.23			103.32			(0.1	%)
Wyndham	22	3,583	74.97			74.76			0.3	%	67.78			70.27			(3.5	%)
Hyatt	22	2,724	83.97			87.58			(4.1	%)	86.53			90.68			(4.6	%)
Radisson ⁽¹⁾	9	1,939	112.61			106.43			5.8	%	99.35			100.18			(0.8	%)
All Hotels Total / Average	328	51,086	$	98.42		$	100.62		(2.2	%)	$	96.00		$	98.49		(2.5	%)


(1)	Operating data includes data for certain hotels for periods prior to when we acquired them.


(2)	Operating data includes data for one hotel prior to when it was managed by Sonesta.

Net Lease Portfolio

As of September 30, 2019, our 946 net lease properties located in 45 states were leased to 279 tenants. These tenants operate in 23 distinct industries including travel centers, casual dining and quick service restaurants, movie theaters, health and fitness, automobile service and others. TA is our largest tenant and leases 179 travel centers under 5 lease agreements that expire between 2029 and 2035 and require annual minimum rents of $246,088, which represents approximately 24.1% of our total minimum returns and rent as of September 30, 2019.

Table of Contents

As of September 30, 2019, our net lease tenants operated across more than 160 brands. The following table identifies the top ten brands.



	Brand	No. of Buildings	Investment ^{(1) (2)}		Percent of Total Investment		Annualized Minimum Rent ⁽²⁾		Percent of Total Annualized Minimum Rent ^{(2) (3)}		Coverage ⁽⁴⁾

1.	TravelCenters of America	134	$	2,281,589	39.3	%	$	167,990	40.1	%	1.95x
2.	Petro Stopping Centers	45	1,021,227		17.7	%	78,099		18.7	%	1.62x
3.	AMC Theatres	14	123,554		2.1	%	10,725		2.6	%	1.36x
4.	The Great Escape	14	98,242		1.7	%	7,140		1.7	%	4.12x
5.	Creme de la Creme	9	68,712		1.2	%	5,811		1.4	%	1.84x
6.	Goodrich Quality Theaters	4	59,743		1.0	%	5,396		1.3	%	1.48x
7.	Life Time Fitness	3	92,617		1.6	%	5,246		1.3	%	3.56x
8.	Casual Male	1	69,973		1.2	%	5,221		1.2	%	1.24x
9.	Buehler's Fresh Foods	5	76,536		1.3	%	5,143		1.2	%	2.22x
10.	CarMax	4	66,119		1.1	%	4,878		1.2	%	2.51x
11.	Other ⁽⁵⁾	713	1,826,885		31.8	%	122,986		29.3	%	3.15x
	Total	946	$	5,785,197	100.0	%	$	418,635	100.0	%	2.27x


(1)	Represents historical cost of our 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)	As of September 30, 2019, we have 148 net lease properties with a carrying value of $604,989 and annual minimum rent of $43,081 classified as held for sale.


(4)	See page 39 for our definition of coverage. Coverage amounts include data for certain properties for periods prior to when we assumed ownership of them.


(5)	Other includes 153 distinct brands with an average investment of $11,940 and average annual minimum rent of $804.

Table of Contents

As of September 30, 2019, our top 10 net lease tenants are listed below.



	Tenant	Brand Affiliation	No. of Buildings	Investment ^{(1) (2)}		Percent of Total Investment		Annualized Minimum Rent ^{(2) (3)}		Percent of Total Annualized Minimum Rent		Coverage ⁽⁴⁾

1.	TravelCenters of America Inc.	TravelCenters of America / Petro Stopping Centers	179	$	3,302,816	57.0	%	$	246,088	58.7	%	1.84x	^{(5) (6)}
2.	Universal Pool Co., Inc.	The Great Escape	14	98,242		1.7	%	7,140		1.7	%	4.12x
3.	Creme De La Creme, Inc.	Creme De La Creme	9	68,712		1.2	%	5,811		1.4	%	1.84x	⁽⁵⁾
4.	Goodrich Quality Theaters, Inc.	Goodrich Quality Theaters	4	59,743		1.0	%	5,396		1.3	%	1.48x
5.	Healthy Way of Life II, LLC	Life Time Fitness	3	92,617		1.6	%	5,246		1.3	%	3.56x	⁽⁵⁾
6.	Destination XL Group, Inc.	Casual Male	1	69,973		1.2	%	5,221		1.2	%	1.24x
7.	Styx Acquisition, LLC	Buehler's Fresh Foods	5	76,536		1.3	%	5,143		1.2	%	2.22x
8.	Professional Resource Development, Inc.	Heartland Dental	59	61,120		1.1	%	4,427		1.1	%	3.50x
9.	Station Casinos, Inc. ⁽⁷⁾	Station Casino	1	56,083		1.0	%	3,561		0.9	%	3.00x
10.	Express Oil Change, L.L.C.	Express Oil Change	23	49,724		0.9	%	3,379		0.8	%	3.62x
	Subtotal, top 10		298	3,935,566		68.0	%	291,412		69.6	%	1.88x
11.	Other ⁽⁸⁾	Various	648	1,849,631		32.0	%	127,223		30.4	%	2.95x
	Total		946	$	5,785,197	100.0	%	$	418,635	100.0	%	2.27x


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

(2)


(3)	As of September 30, 2019, we have 148 net lease properties with a carrying value of $604,989 and annual minimum rent of $43,081 classified as held for sale.


(4)	See page 39 for our definition of coverage. Coverage amounts include data for certain properties for periods prior to when we assumed ownership of them.


(5)	Leases subject to full or partial corporate guarantee.

(6)

TA is our largest tenant. We lease 179 travel centers (134 under the TravelCenters of America brand and 45 under the Petro Stopping Centers brand) to a subsidiary of TA under master leases that expire in 2029, 2031, 2032, 2033 and 2035, respectively. 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% of non-fuel revenues above 2015 non-fuel revenues). Commencing in 2020, these leases provide for payment of an additional half percent (0.5%) of non-fuel revenues above 2019 non-fuel base revenues. TA's remaining deferred rent obligation of $61,650 is being paid in quarterly installments of $4,404 through January 31, 2023.


(7)	On October 29, 2019, we sold a net lease office property in Las Vegas, NV with 138,558 square feet with annual minimum rent of $3,561 as of September 30, 2019 for $57,000, excluding closing costs.


(8)	Other includes 270 tenants with an average investment of $6,850 and average annual minimum rent of $470.

Table of Contents

As of September 30, 2019, our net lease tenants operated across 23 distinct industries within the service-oriented retail sector of the U.S. economy.



Industry	No. of Buildings	Investment ^{(1) (2)}		Percent of Total Investment	Annualized Minimum Rent ^{(2) (3)}		Percent of Total Annualized Minimum Rent		Coverage ⁽⁴⁾

Travel Centers	182	$	3,344,497	58.0%	$	249,209	59.4	%	1.85x
Restaurants-Quick Service	301	382,275		6.6%	25,473		6.1	%	2.27x
Movie Theaters	29	271,441		4.7%	23,479		5.6	%	1.51x
Restaurants-Casual Dining	87	302,734		5.2%	19,095		4.6	%	2.56x
Health and Fitness	17	208,975		3.6%	12,704		3.0	%	2.40x
Miscellaneous Retail	21	129,364		2.2%	9,986		2.4	%	3.49x
Medical/Dental Office	79	127,973		2.2%	8,886		2.1	%	4.98x
Automotive Parts and Service	73	126,263		2.2%	8,719		2.1	%	2.75x
Grocery	19	129,219		2.2%	8,587		2.1	%	2.99x
Automotive Dealers	12	110,059		1.9%	8,176		2.0	%	3.65x
Educational Services	14	95,227		1.6%	7,677		1.8	%	1.46x
Home Furnishings	18	123,653		2.1%	7,549		1.8	%	2.69x
Apparel	3	82,284		1.4%	6,086		1.5	%	1.57x
Other	3	64,366		1.1%	5,001		1.2	%	2.47x
Entertainment	4	61,436		1.1%	4,222		1.0	%	1.97x
Sporting Goods	3	52,022		0.9%	3,481		0.8	%	2.82x
Miscellaneous Manufacturing	7	32,873		0.6%	2,402		0.6	%	25.28x
Car Washes	6	32,028		0.6%	2,319		0.6	%	4.56x
Building Materials	28	31,124		0.5%	2,124		0.5	%	3.15x
Drug Stores and Pharmacies	8	23,970		0.4%	1,646		0.4	%	1.79x
Legal Services	5	11,362		0.2%	974		0.2	%	1.47x
General Merchandise	3	7,492		0.1%	555		0.1	%	3.27x
Dollar Stores	5	7,196		0.1%	285		0.1	%	2.89x
Vacant	19	27,364		0.5%	—		—	%	N/A
Total	946	$	5,785,197	100.0%	$	418,635	100.0	%	2.27x


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


(2)	As of September 30, 2019, we have 148 net lease properties with a carrying value of $604,989 and annual minimum rent of $43,081 classified as held for sale.

(3)

Each of our leases 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.


(4)	See page 39 for our definition of coverage. Coverage amounts include data for certain properties for periods prior to when we assumed ownership of them.

Table of Contents

As shown below, approximately 0.3% of total net lease rented square feet and total net lease annualized minimum rents are from leases scheduled to expire by December 31, 2019. As of September 30, 2019, lease expirations at our net lease properties by year are as follows.



				Percent of Total	Cumulative % of
	Square	Annualized Minimum		Annualized Minimum	Total Minimum
Year⁽¹⁾	Feet	Rent Expiring ⁽²⁾		Rent Expiring	Rent Expiring

2019	215,102	$	1,313	0.3%	0.3%
2020	482,492	6,799		1.6%	1.9%
2021	708,121	9,398		2.2%	4.1%
2022	1,071,820	12,408		3.0%	7.1%
2023	371,812	4,200		1.0%	8.1%
2024	773,833	11,924		2.8%	10.9%
2025	496,061	11,995		2.9%	13.8%
2026	1,805,166	17,702		4.2%	18.0%
2027	1,903,833	24,643		5.9%	23.9%
2028	796,385	13,838		3.3%	27.2%
2029	1,590,922	50,122		12.0%	39.2%
2030	201,492	4,443		1.1%	40.3%
2031	1,405,662	50,535		12.1%	52.4%
2032	1,230,829	50,182		12.0%	64.4%
2033	1,217,338	52,466		12.5%	76.9%
2034	399,368	11,903		2.8%	79.7%
2035	2,241,467	79,995		19.1%	98.8%
2036	274,141	3,854		1.0%	99.8%
2037	—	—		0.0%	—%
2038	10,183	409		0.1%	99.9%
2039	40,334	438		0.1%	100.0%
2040	1,739	68		0.0%	100.0%
Total	17,238,100	$	418,635	100.0%


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


(2)	As of September 30, 2019, we have 148 net lease properties with a carrying value of $604,989 and annual minimum rent of $43,081 classified as held for sale.

Table of Contents

As of September 30, 2019, shown below is the list of our top 20 states where our net lease properties were located. No other state represents more than 3% of our net lease annual minimum rents.



				Percent of Total
	Square	Annualized Minimum		Annualized Minimum
State	Feet	Rent		Rent

Texas	1,551,655	$	34,599	8.3%
Illinois	1,174,051	30,775		7.4%
Ohio	1,449,126	27,697		6.6%
California	399,045	23,230		5.5%
Georgia	716,878	22,202		5.3%
Indiana	762,556	21,057		5.0%
Arizona	543,972	17,587		4.2%
Florida	562,324	16,224		3.9%
Pennsylvania	642,533	15,441		3.7%
Nevada	328,820	13,165		3.1%
Michigan	715,471	11,692		2.8%
New Mexico	246,478	10,982		2.6%
Tennessee	293,543	10,965		2.6%
Missouri	532,849	10,757		2.6%
South Carolina	418,883	10,003		2.4%
New York	234,464	9,220		2.2%
Colorado	370,532	9,068		2.2%
North Carolina	474,095	8,785		2.1%
Alabama	228,722	8,694		2.1%
Arkansas	436,134	8,386		2.0%
Other	5,481,328	98,106		23.4%
Total	17,563,459	$	418,635	100.0%

Table of Contents

Related Person Transactions

We have relationships and historical and continuing transactions with RMR LLC, RMR Inc. and others related to them. For example: we have no employees and the personnel and various services we require to operate our business are provided to us by RMR LLC pursuant to our business and property management agreements with RMR LLC; RMR Inc. is the managing member of RMR LLC; Adam Portnoy, the Chair of our Board of Trustees and one of our Managing Trustees, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., a managing director, president and chief executive officer of RMR Inc. and an officer and employee of RMR LLC; John Murray, our other Managing Trustee and our President and Chief Executive Officer, also serves as an executive officer of RMR LLC; and, until July 1, 2019, we owned shares of class A common stock of RMR Inc. We also have relationships and historical and continuing transactions with other companies to which RMR LLC or its subsidiaries provide management services and which may have trustees, directors and officers who are also trustees, directors or officers of us, RMR LLC or RMR Inc., including: TA, which is our former subsidiary and largest tenant and of which we are the largest shareholder; and Sonesta, which is one of our hotel managers and is owned in part by Adam Portnoy.

For further information about these and other such relationships and related person transactions, see Notes 7, 8, 9 and 10 to our to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2018 Annual Report, our definitive Proxy Statement for our 2019 Annual Meeting of Shareholders and our other filings with the Securities and Exchange Commission, or SEC. In addition, see the section captioned “Risk Factors” of our 2018 Annual Report and other filings with the SEC for a description of risks that may arise as a result of these and other related person transactions and relationships. Our filings with the SEC and copies of certain of our agreements with these related persons, including our business and property management agreements with RMR LLC and our various agreements with TA and Sonesta, are available as exhibits to our filings with the SEC and accessible at the SEC’s website, www.sec.gov. We may engage in additional transactions with related persons, including businesses to which RMR LLC or its subsidiaries provide management services.

Non-GAAP Financial Measures

We present certain “non-GAAP financial measures” within the meaning of applicable SEC rules, including funds from operations, or FFO, and normalized funds from operations, or 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 as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income as presented in our condensed consolidated statements of income. We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income. 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, 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 certain other adjustments currently not applicable to us. In calculating Normalized FFO, we adjust for the item shown below and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. 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 maintain our qualification for taxation as a REIT, limitations in our credit agreement and public debt covenants, 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.

Our calculations of FFO and Normalized FFO for the three and nine months ended September 30, 2019 and 2018 and reconciliations of net income, the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements, to those amounts appear in the following table (amounts in thousands, except per share amounts).

Table of Contents



		For the Three Months Ended September 30,					For the Nine Months Ended September 30,
		2019		2018			2019			2018
Net income		$	40,074	$	117,099		$	274,643		$	294,594
Add (Less):	Depreciation and amortization expense	103,160		101,007			301,721			300,308
	Gain on sale of real estate ⁽¹⁾	—		—			(159,535		)	—
	Unrealized (gains) and losses on equity securities, net ⁽²⁾	3,950		(43,453		)	43,761			(89,348		)
FFO		147,184		174,653			460,590			505,554
Add:	Loss on early extinguishment of debt ⁽³⁾	8,451		—			8,451			160
Normalized FFO		$	155,635	$	174,653		$	469,041		$	505,714

	Weighted average shares outstanding (basic)	164,321		164,232			164,294			164,212
	Weighted average shares outstanding (diluted) ⁽⁴⁾	164,348		164,274			164,332			164,242

Basic and diluted per common share amounts:
	Net income	$	0.24	$	0.71		$	1.67		$	1.79
	FFO	$	0.90	$	1.06		$	2.80		$	3.08
	Normalized FFO	$	0.95	$	1.06		$	2.85		$	3.08
	Distributions declared per share	$	0.54	$	0.53		$	1.61		$	1.58


(1)	We recorded a $159,535 gain on sale of real estate during the three months ended March 31, 2019 in connection with the sales of 20 travel centers.


(2)	Unrealized gains and losses on equity securities, net represent the adjustment required to adjust the carrying value of our investments in RMR Inc. and TA common shares to their fair value as of the end of the period. We sold our shares of RMR Inc. on July 1, 2019.


(3)	We recorded a loss of $8,451 on early extinguishment of debt in the three months ended September 30, 2019 related to the termination of a term loan commitment we arranged in connection with the SMTA Transaction. We recorded a loss of $160 on early extinguishment of debt in the three months ended June 30, 2018 in connection with amending our revolving credit facility and term loan.


(4)	Represents weighted average common shares adjusted to reflect the potential dilution of unvested share awards.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk (dollar amounts in thousands, except per share amounts)

We are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by monitoring available financing alternatives. Our strategy to manage exposure to changes in interest rates has not materially changed since December 31, 2018. Other than as described below, we do not currently foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future.

Fixed Rate Debt

At September 30, 2019, our outstanding publicly tradable debt consisted of 12 issues of fixed rate, senior notes:



Principal Balance		Annual Interest Rate		Annual Interest Expense		Maturity	Interest Payments Due
$	400,000	4.250	%	$	17,000	2021	Semi-Annually
500,000		5.000	%	25,000		2022	Semi-Annually
500,000		4.500	%	22,500		2023	Semi-Annually
350,000		4.650	%	16,275		2024	Semi-Annually
825,000		4.350	%	35,888		2024	Semi-Annually
350,000		4.500	%	15,750		2025	Semi-Annually
350,000		5.250	%	18,375		2026	Semi-Annually
450,000		4.750	%	21,375		2026	Semi-Annually
400,000		4.950	%	19,800		2027	Semi-Annually
400,000		3.950	%	15,800		2028	Semi-Annually
425,000		4.950	%	21,038		2029	Semi-Annually
400,000		4.375	%	17,500		2030	Semi-Annually
$	5,350,000			$	246,301

No principal repayments are due under these notes until maturity. Because these notes require interest at fixed rates, changes in market interest rates during the term of these debts will not affect our interest obligations. If these notes were refinanced at interest rates which are one percentage point higher than the rates shown above, our per annum interest cost would increase by approximately $53,500. Changes in market interest rates would affect the fair value of our fixed rate debt obligations; increases in market interest rates decrease the fair value of our fixed rate debt while decreases in market interest rates increase the fair value of our fixed rate debt. Based on the balances outstanding at September 30, 2019 and discounted cash flows analyses through the respective maturity dates, and assuming no other changes in factors that may affect the fair value of our fixed rate debt obligations, a hypothetical immediate one percentage point change in interest rates would change the fair value of those debt obligations by approximately $253,614.

Each of these fixed rate unsecured debt arrangements allows us to make repayments earlier than the stated maturity date. We are generally allowed to make prepayments only at a premium equal to a make whole amount, as defined, which is generally designed to preserve a stated yield to the noteholder. Also, we have in the past repurchased and retired some of our outstanding debts and we may do so again in the future. These prepayment rights and our ability to repurchase and retire outstanding debt may afford us opportunities to mitigate the risks of refinancing our debts at their maturities at higher rates by refinancing prior to maturity.

Floating Rate Debt

At September 30, 2019, our floating rate debt consisted of $790,000 outstanding under our $1,000,000 revolving credit facility and our $400,000 term loan. The maturity date of our revolving credit facility is July 15, 2022, and subject to our meeting certain conditions, including our payment of an extension fee, we have an option to extend the stated maturity date of the facility for two additional six month periods. The maturity date of our term loan is July 15, 2023. No principal repayments are required under our revolving credit facility prior to maturity, and repayments may be made and redrawn subject to conditions at any time without penalty. No principal prepayments are required under our term loan prior to maturity and we can repay principal amounts outstanding under the term loan subject to conditions at any time without penalty, but after amounts outstanding under our term loan are repaid, amounts may not be redrawn. Borrowings under our revolving credit facility and term loan are in U.S. dollars and require annual interest to be paid at the rate of LIBOR plus premiums that are subject to adjustment based upon changes to our credit ratings. Accordingly, we are vulnerable to changes in U.S. dollar based short term interest rates, specifically LIBOR, and to changes in our credit ratings. In addition, upon renewal or refinancing of our revolving credit facility or our term loan, we are vulnerable to increases in interest rate premiums due to market conditions or

Table of Contents

our perceived credit characteristics. Generally, a change in interest rates would not affect the value of this floating rate debt but would affect our operating results.

The following table presents the impact a one percentage point increase in interest rates would have on our annual floating rate interest expense as of September 30, 2019:



	Impact of Increase in Interest Rates
	Interest Rate Per Year ⁽¹⁾		Outstanding Debt		Total Interest Expense Per Year		Annual Per Share Impact ⁽²⁾
At September 30, 2019	3.02	%	$	1,190,000	$	35,938	$	0.22
One percentage point increase	4.02	%	$	1,190,000	$	47,838	$	0.29

(1)Weighted average based on the interest rates and the respective outstanding borrowings as of September 30, 2019.

(2)Based on diluted weighted average common shares outstanding for the nine months ended September 30, 2019.

The following table presents the impact a one percentage point increase in interest rates would have on our annual floating rate interest expense at September 30, 2019 if we were fully drawn on our revolving credit facility and our $400,000 term loan remained outstanding:



	Impact of Increase in Interest Rates
	Interest Rate Per Year ⁽¹⁾		Outstanding Debt		Total Interest Expense Per Year		Annual Per Share Impact ⁽²⁾
At September 30, 2019	2.99	%	$	1,400,000	$	41,860	$	0.25
One percentage point increase	3.99	%	$	1,400,000	$	55,860	$	0.34


(1)	Weighted average based on the interest rates and the respective outstanding borrowings (assuming fully drawn) as of September 30, 2019.


(2)	Based on diluted weighted average common shares outstanding for the nine months ended September 30, 2019.

The foregoing tables show the impact of an immediate increase in floating interest rates as of September 30, 2019. If interest rates were to increase gradually over time, the impact would be spread over time. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amounts under our revolving credit facility and term loan or other floating rate debt, if any. Although we have no present plans to do so, we may in the future enter into hedge arrangements from time to time to mitigate our exposure to changes in interest rates.

LIBOR Phase Out

LIBOR is currently expected to be phased out in 2021. We are required to pay interest on borrowings under our credit facility and term loan at floating rates based on LIBOR. Future debt that we may incur may also require that we pay interest based upon LIBOR. We currently expect that the determination of interest under our credit agreement would be revised as provided under the agreement or amended as necessary to provide for an interest rate that approximates the existing interest rate as calculated in accordance with LIBOR for similar types of loans. Despite our current expectations, we cannot be sure that, if LIBOR is phased out or transitioned, the changes to the determination of interest under our agreements would approximate the current calculation in accordance with LIBOR. We do not know what standard, if any, will replace LIBOR if it is phased out or transitioned.

Table of Contents

Item 4. Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management carried out an evaluation, under the supervision and with the participation of our President and Chief Executive Officer and our Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Warning Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever we use words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, we are making forward-looking statements. These forward-looking statements are based upon our present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Forward-looking statements in this Quarterly Report on Form 10-Q relate to various aspects of our business, including:


•	The performance of our operators’ abilities to pay the contractual amounts of returns or rents due to us,


•	Our sales and acquisition of properties,


•	Our ability to compete for acquisitions effectively,


•	Our policies and plans regarding investments, financings and dispositions,


•	Our ability to pay distributions to our shareholders and to sustain the amount of such distributions,


•	Our ability to raise debt or equity capital,


•	Our ability to appropriately balance our use of debt and equity capital,


•	Our intent to make improvements to certain of our properties and the success of our hotel renovations,


•	Our ability to engage and retain qualified managers and tenants for our hotels and net lease properties on satisfactory terms,


•	The future availability of borrowings under our revolving credit facility,


•	Our ability to pay interest on and principal of our debt,


•	Our credit ratings,


•	The ability of TA to pay current and deferred rent amounts and other obligations due to us,


•	Our expectation that we benefit from our relationships with RMR Inc.,


•	Our qualification for taxation as a REIT,


•	Changes in federal or state tax laws, and


•	Other matters.

Our actual results may differ materially from those contained in or implied by our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. Risks, uncertainties and other factors that could have a material adverse effect on our forward-looking statements and upon our business, results of operations, financial condition, FFO, Normalized FFO, cash flows, liquidity and prospects include, but are not limited to:


•	The impact of conditions in the economy and the capital markets on us and our managers and tenants,

Table of Contents


•	Competition within the real estate, hotel, transportation and travel center and other industries in which our tenants operate, particularly in those markets in which our properties are located,


•	Compliance with, and changes to, federal, state and local laws and regulations, accounting rules, tax laws and similar matters,


•	Limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification for taxation as a REIT for U.S. federal income tax purposes,


•	Acts of terrorism, outbreaks of so-called pandemics or other manmade or natural disasters beyond our control, and


•	Actual and potential conflicts of interest with our related parties, including our managing trustees, TA, Sonesta, RMR Inc., RMR LLC and others affiliated with them.

For example:

•

Our ability to make future distributions to our shareholders and to make payments of principal and interest on our indebtedness depends upon a number of factors, including our future earnings, the capital costs we incur to acquire and maintain our properties and our working capital requirements. We may be unable to pay our debt obligations or to increase or maintain our current rate of distributions on our common shares and future distributions may be reduced or eliminated,

•

The security deposits which we hold are not in segregated cash accounts or otherwise separate from our other assets and liabilities. Accordingly, when we record income by reducing our security deposit liabilities, we do not receive any additional cash payment. Because we do not receive any additional cash payment as we apply security deposits to cover payment shortfalls, the failure of our managers or tenants to pay minimum returns or rents due to us may reduce our cash flows and our ability to pay distributions to shareholders,

•

Certain of our aggregate annual minimum returns and rents were secured by guarantees or security deposits from our managers and tenants. This may imply that these minimum returns and rents will be paid. In fact, certain of these guarantees and security deposits are limited in amount and duration and all the guarantees are subject to the guarantors’ abilities and willingness to pay. We cannot be sure of the future financial performance of our properties and whether such performance will cover our minimum returns and rents, whether the guarantees or security deposits will be adequate to cover future shortfalls in the minimum returns or rents due to us which they guarantee or secure, or regarding our managers’, tenants’ or guarantors’ future actions if and when the guarantees and security deposits expire or are depleted or their abilities or willingness to pay minimum returns and rents owed to us. Moreover, the security deposits we hold are not segregated from our other assets and, although the application of security deposits to cover payment shortfalls will result in us recording income, it will not result in us receiving additional cash. The balance of our annual minimum returns and rents as of September 30, 2019 was not secured by guarantees or security deposits,


•	We have no guarantees or security deposits for the minimum returns due to us from our Marriott No. 1, Sonesta or Wyndham agreements. Accordingly, we may receive amounts that are less than the contractual minimum returns stated in these agreements,

•

We have recently renovated certain hotels and are currently renovating additional hotels. We currently expect to fund approximately $127.5 million during the last three months of 2019 and $28.0 million in 2020 for renovations and other capital improvement costs at certain of our hotels. The cost of capital projects associated with such renovations may be greater than we currently anticipate. Operating results at our hotels may decline as a result of having rooms out of service or other disruptions during renovations. Also, while our funding of these capital projects will cause our contractual minimum returns to increase, the hotels’ operating results may not increase or may not increase to the extent that the minimum returns increase. Accordingly, coverage of our minimum returns at these hotels may remain depressed for an extended period,

•

Hotel room demand and trucking activity are often reflections of the general economic activity in the country and in the geographic areas where certain of our properties are located. If economic activity declines, the operating results of certain of our properties may decline, the financial results of our managers and our tenants may suffer and these managers and tenants may be unable to pay our returns or rents. Also, depressed operating results from our properties for extended periods may result in the operators of some or all of our properties becoming unable or unwilling to meet their obligations or their guarantees and security deposits we hold may be exhausted,

Table of Contents


•	Hotel and other competitive forms of temporary lodging supply (for example, Airbnb) have been increasing and may affect our hotel operators’ ability to grow ADR and occupancy, and ADR and occupancy could decline due to increased competition which may cause our hotel operators to become unable to pay our returns or rents,

•

If the current level of commercial activity in the country declines, if the price of diesel fuel increases significantly, if fuel conservation measures are increased, if freight business is directed away from trucking, if TA is unable to effectively compete or operate its business, if fuel efficiencies, the use of alternative fuels or transportation technologies reduce the demand for products and services TA sells or for various other reasons, TA may become unable to pay current and deferred rents due to us,

•

Our ability to grow our business and increase our distributions depends in large part upon our ability to buy properties that generate returns or can be leased for rents which exceed our operating and capital costs. We may be unable to identify properties that we want to acquire and we may fail to reach agreement with the sellers and complete the purchases of any properties we do want to acquire. In addition, any properties we may acquire may not generate returns or rents which exceed our operating and capital costs,


•	We may not realize the benefits we expect from the SMTA Transaction, including a more secure financial profile, increased scale and greater diversity in tenant base, property type and geography, and we may realize losses as a result of the transaction,


•	We believe that our portfolio agreements include diverse groups of properties. Our portfolio agreements may not increase the security of our cash flows or increase the likelihood our agreements will be renewed as we expect,


•	We expect that most of our acquisition efforts will focus on hotel and net lease service-oriented based properties; however, the focus of our acquisition efforts may include other types of properties,

•

To reduce our leverage, we have sold assets and have targeted additional assets to sell aggregating approximately $800.0 million. We may not complete the sales of any additional assets we plan to sell, and we may determine to sell fewer, additional or other assets than those we may target for sale. Also, we may sell assets at prices that are less than we expect and less than their carrying values and we may incur losses on these sales or with respect to these assets, or may not ultimately use any proceeds we may receive to reduce debt leverage,


•	Contingencies in our acquisition and sale agreements may not be satisfied and any expected acquisitions and sales and any related management or lease arrangements we expect to enter may not occur, may be delayed or the terms of such transactions or arrangements may change,

•

At September 30, 2019, we had $17.0 million of cash and cash equivalents, $210.0 million available under our $1.0 billion revolving credit facility and security deposits and guarantees covering some of our minimum returns and rents. These statements may imply that we have sufficient working capital and liquidity. However, our managers and tenants may not be able to fund minimum returns and rents due to us from operating our properties or from other resources; in the past and currently, certain of our tenants and managers have in fact not paid the minimum amounts due to us from their operations of our leased or managed properties. Also, certain of the security deposits and guarantees we have to cover any such shortfalls are limited in amount and duration, and any security deposits we apply for such shortfalls do not result in additional cash flows to us. Our properties require, and we have agreed to provide, significant funding for capital improvements, renovations and other matters. Accordingly, we may not have sufficient working capital or liquidity,


•	We may be unable to repay our debt obligations when they become due,


•	We intend to conduct our business activities in a manner that will afford us reasonable access to capital for investment and financing activities. However, we may not succeed in this regard and we may not have reasonable access to capital,


•	Continued availability of borrowings under our revolving credit facility is subject to our satisfying certain financial covenants and other credit facility conditions that we may be unable to satisfy,


•	Actual costs under our revolving credit facility or other floating rate debt will be higher than LIBOR plus a premium because of fees and expenses associated with such debt,


•	The maximum borrowing availability under our revolving credit facility and term loan may be increased to up to $2.3 billion on a combined basis in certain circumstances; however, increasing the maximum borrowing availability under

Table of Contents

our revolving credit facility and term loan is subject to our obtaining additional commitments from lenders, which may not occur,


•	The premiums used to determine the interest rate payable on our revolving credit facility and term loan and the facility fee payable on our revolving credit facility are based on our credit ratings. Changes in our credit ratings may cause the interest and fees we pay to increase,


•	We have the option to extend the maturity date of our revolving credit facility upon payment of a fee and meeting other conditions; however, the applicable conditions may not be met,


•	The business and property management agreements between us and RMR LLC have continuing 20 year terms. However, those agreements permit early termination in certain circumstances. Accordingly, we cannot be sure that these agreements will remain in effect for continuing 20 year terms,


•	We believe that our relationships with our related parties, including RMR LLC, RMR Inc., TA, Sonesta and others affiliated with them may benefit us and provide us with competitive advantages in operating and growing our business. However, the advantages we believe we may realize from these relationships may not materialize,

•

Marriott has notified us that it does not intend to extend its lease for our resort hotel on Kauai, Hawaii when that lease expires on December 31, 2019. We are in negotiations with Marriott regarding this hotel and other hotels managed by Marriott. If we and Marriott are unable to reach agreement, we will evaluate alternatives for the Kauai hotel, which may include rebranding or selling the hotel. These statements may imply that Marriott will not operate the Kauai hotel in the future or that we may have other alternatives for this hotel that may be more beneficial to maintaining Marriott as the operator of that hotel if we are unable to reach agreement with Marriott. At this time, we cannot predict how our negotiations with Marriott will impact the future of the Kauai hotel or our disposition plans for certain hotels. For example, the Kauai hotel may continue to be operated by Marriott on different contract terms than the current lease, we may identify a different operator for this hotel or the cash flows which we receive from our ownership of this hotel may be different than the rent we now receive. Also, although the current lease expires on December 31, 2019, we and Marriott may agree upon a different termination date. Our discussions with Marriott are ongoing and we cannot be certain we will reach any agreement with Marriott for the Kauai or any other Marriott managed hotel that we own and our disposition plans may change or we may sell more or less assets than we currently intend or none at all. There can be no assurance we can find buyers for our properties or sell them at attractive prices,

•

We are exiting our relationship with Wyndham and expect to rebrand or sell our 22 hotels currently managed by Wyndham. There can be no assurance that rebranding any of these hotels will result in improved performance. In fact, rebranding hotels will result in short term disruption to operations. In addition, we cannot be sure we will be able to sell any of these hotels and any sales we may complete may be at prices less than we expect and less than net book value. We may incur losses in connection with any rebranding or sales of these hotels or as a result of any plan to rebrand or sell these hotels,


•	We expect to receive a capital distribution in the fourth quarter of 2019 in connection with the dissolution of AIC. We cannot be sure that such distribution will occur when expected or at all or what the amount of any such distribution will be, and


•	We are currently exploring secured financing and the formation of a joint venture with a portfolio of travel centers. There can be no assurance we will be successful with any financing or this venture or move forward at all with such transactions.

Currently unexpected results could occur due to many different circumstances, some of which are beyond our control, such as acts of terrorism, natural disasters, changes in our managers’ or tenants’ revenues or expenses, changes in our managers’ or tenants’ financial conditions, the market demand for hotel rooms or the goods and services provided at our properties or changes in capital markets or the economy generally.

The information contained in this Quarterly Report on Form 10-Q and in our 2018 Annual Report or in our other filings with the SEC, including under the caption “Risk Factors”, or incorporated herein or therein, identifies other important factors that could cause differences from our forward-looking statements. Our filings with the SEC are available on the SEC’s website at www.sec.gov.

You should not place undue reliance upon our forward-looking statements.

Table of Contents

Except as required by law, we do not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

Statement Concerning Limited Liability

The Amended and Restated Declaration of Trust establishing Service Properties Trust (formerly known as Hospitality Properties Trust), dated August 21, 1995, as amended and supplemented, as filed with the State Department of Assessments and Taxation of Maryland, provides that no trustee, officer, shareholder, employee or agent of Service Properties Trust shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, Service Properties Trust. All persons dealing with Service Properties Trust in any way shall look only to the assets of Service Properties Trust for the payment of any sum or the performance of any obligation.

Table of Contents

Part II Other Information

Item 1A. Risk Factors

Our business faces many risks, a number of which are described under the caption “Risk Factors” in our 2018 Annual Report. The completion of the SMTA Transaction may subject us to additional risks that are described below. The risks described in our 2018 Annual Report and below may not be the only risks we face. Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results. If any of the events or circumstances described in the risk factors contained in our 2018 Annual Report or described below occurs, our business, financial condition or results of operations could be adversely impacted and the value of an investment in our securities could decline. Investors and prospective investors should consider the risks described in our 2018 Annual Report and below, and the information contained under the caption “Warning Concerning Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q before deciding whether to invest in our securities.

Risks Related to us as a Result of the Completion of the SMTA Transaction

Our Normalized FFO per share may not increase as a result of the completion of the SMTA Transaction.

We believe the SMTA Transaction will increase our Normalized FFO per share in 2020 on an annualized basis after expected asset sales. Any unexpected event, including, but not limited to, performance of the SMTA portfolio below our expectations and our receipt of proceeds from asset sales below our target, may lead to our realizing Normalized FFO per share below our expectations or in a decrease in Normalized FFO per share. Furthermore, our existing business is subject to various risks, including risks beyond our control. As a result, even if the SMTA portfolio performs as we expect and we receive our targeted proceeds on asset sales, our Normalized FFO may not increase following the SMTA Transaction and it could decline.

The SMTA properties have significantly increased our property portfolio and we are now operating in industries that are new to us, and we may not successfully integrate or operate these properties and we expect to incur additional costs.

The SMTA Transaction involved the acquisition of 767 properties. We and RMR LLC are devoting significant management time and attention to integrating and operating these properties. Unexpected difficulties or delays may arise during this integration process, including, for example, difficulties or delays in transitioning the management or financial and tax reporting functions with respect to all, or some of, the acquired properties. Similarly, we will incur additional costs to lease these properties, which may exceed the amounts we expect. Historically, our property management agreement with RMR LLC has been limited to the office building component of one of our hotels. The SMTA properties were added to the property management agreement upon closing the SMTA Transaction, resulting in a significant increase in the scope of property management services RMR LLC is providing to us and our costs for property management services. Also, any unexpected transition and integration difficulties and any increased costs may reduce, delay or eliminate the benefits we expect to realize from the SMTA Transaction.

Following the closing of the SMTA Transaction, we have an expanded portfolio and operations in industries that are new to us and in which we have limited or no experience. Our future success will depend, in part, upon our ability to: adapt to operating and competing in new industries; attract and retain tenants in these new markets at rents that we expect; integrate new operations into our existing business in an efficient and timely manner; successfully manage our operations and costs; avoid this new operation negatively impacting the performance of our existing business; and maintain necessary internal controls. We cannot be sure that we will be able to increase future cash flows or property level rent coverage, maintain current rents and occupancy at the SMTA properties, that we will realize any expected benefits from the SMTA Transaction, particularly with respect to the properties in new industries in which we have limited or no experience, or that the SMTA Transaction will not negatively impact the performance of our existing business.

We may be subject to unknown or contingent liabilities related to the SMTA properties for which we may have no recourse against SMTA.

The SMTA properties may be subject to unknown or contingent liabilities, including environmental liabilities, for which we may have no recourse against SMTA. The amount of liabilities associated with the SMTA properties may exceed our expectations. We do not believe that it is possible to understand fully a property before it is owned and operated for a reasonable period of time, and, notwithstanding pre-acquisition due diligence, we may have acquired a property that contains undisclosed defects in design or construction or which was not properly operated.

Table of Contents

Risks Relating to Our Indebtedness

In connection with the SMTA Transaction, we incurred significant additional indebtedness.

In connection with the SMTA Transaction, we incurred significant additional indebtedness. This increased indebtedness could adversely affect us for numerous reasons, including by:


•	increasing our vulnerability to general adverse economic and business conditions;


•	increasing the costs to us of incurring additional debt;


•	increasing our exposure to floating interest rates;


•	limiting our ability to compete with other companies that are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions;


•	restricting us from making strategic acquisitions, developing properties or exploiting business opportunities;


•	restricting the way in which we conduct our business because of financial and operating covenants in the agreements governing our existing and future indebtedness;


•	exposing us to potential events of default (if not cured or waived) under covenants contained in debt instruments that could have a material adverse effect on our business, financial condition and operating results;


•	limiting our ability to react to changing market conditions in our industry;


•	limiting our ability to obtain additional financing to fund future acquisitions, working capital, capital expenditures and other general business requirements;


•	requiring the use of a substantial portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, acquisitions, capital expenditures, distributions to our shareholders and general operating requirements; and


•	limiting our flexibility in planning for, or reacting to, changes in our business.

We intend to sell approximately $800 million of assets to reduce our debt levels. We may not achieve our asset disposition plan, which may limit our ability to reduce leverage and adversely affect our credit profile.

We have identified approximately $800 million of assets to be sold to reduce our debt levels. Although we have made some sales in furtherance of this plan, we cannot be sure that we will be able to find attractive sale opportunities for additional assets or that any sale will be completed in a timely manner, if at all. Our ability to sell these or any of our other properties, and the prices we receive upon a sale, may be affected by many factors, and we may be unable to execute our strategy. In particular, these factors could arise from weakness in or the lack of an established market for a property, changes in the financial condition or prospects of prospective purchasers and the tenants of the properties, the terms of the leases with tenants at the properties, the characteristics, quality and prospects of the properties, and the availability of financing to potential purchasers on reasonable terms, the number of prospective purchasers, the number of competing properties in the market, unfavorable local, national or international economic conditions, industry trends, and changes in laws, regulations or fiscal policies of jurisdictions in which the property is located. We may not succeed in selling properties that we have identified, or in the future identify, for sale, the terms of any such sales may not meet our expectations and we may incur losses in connection with these potential sales. In addition, we may elect to change the amount or mix of assets we may seek to sell or to otherwise change or abandon the plan. If we are unable to realize proceeds from the sale of properties sufficient to allow us to reduce our leverage to a level we believe appropriate or which ratings agencies and possible financing sources believe appropriate, our credit ratings may be lowered, we may reduce our acquisition activity, we may reduce the amount we invest in our properties or pay for expenses and we may reduce the amount of distributions we pay to our shareholders.

Our credit ratings have been adversely affected by the SMTA Transaction.

As a result of the SMTA Transaction, S&P Global assigned a negative outlook to our credit ratings and Moody’s downgraded our credit ratings. These negative actions imply that our debt ratings may be downgraded to below "investment

Table of Contents

grade." If our credit ratings are further downgraded, we may have difficulty accessing debt capital markets to meet our obligations or pursue business opportunities and the costs of any debt we do obtain may be increased. For example, the interest rates we are required to pay on our revolving credit facility, term loan and our other floating rate debt obligations will increase if our debt ratings are further downgraded. We intend to sell some assets to reduce leverage and to take other actions which we believe may avoid our credit ratings being downgraded below investment grade; however, we can provide no assurance that these efforts will be successful in avoiding our credit ratings being downgraded below investment grade.

We may not be able to continue paying distributions at or above our current annualized distribution rate.

Our current annualized distribution rate is $2.16 per common share. We may not be able to sustain our current distribution rate, or pay distributions at all, for various reasons, including that:


•	Our ability to pay distributions may be adversely affected if any of the risks described herein or in our 2018 Annual Report, or other significant events, occur;


•	Our declaration and payment of distributions is subject to compliance with restrictions contained in our revolving credit facility and term loan agreement and may be subject to restrictions governing future debt that we may incur;


•	We may desire to retain cash to obtain, maintain or improve our credit ratings, to reduce leverage or pursue other business opportunities; and

•

We have no obligation to pay distributions, and each distribution is made at the discretion of our Board of Trustees and the payment of a distribution depends on various factors that our Board of Trustees at the time deems relevant, including among other things, requirements to maintain our qualification for taxation as a REIT, limitations in our credit agreement and public debt covenants, the availability to us of debt and equity capital, our dividend yield and 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.

For these reasons, among others, we may not be able to meet or sustain our current annualized distribution rate and we may cease making distributions.

Table of Contents

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer purchases of equity securities. The following table provides information about our purchases of our equity securities during the quarter ended September 30, 2019:



Calendar Month	Number of Shares Purchased ⁽¹⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 2019	5,041	$	25.20	$	—	$	—
September 2019	24,293		25.64	$	—	$	—
Total	29,334	$	25.56	$	—	$	—

(1)

These common share withholdings and purchases were made to satisfy the tax withholding and payment obligations of certain of our current and former officers and certain other current and former RMR LLC employees in connection with awards of our common shares and the vesting of awards of those and prior awards of common shares to them. We withheld and purchased these shares at their fair market value based upon the trading price of our common shares at the close of trading on Nasdaq on the purchase date.

Item 6. Exhibits



Exhibit Number			Description
3.1			Composite Copy of Amended and Restated Declaration of Trust, dated as of August 21, 1995, as amended to date. (Incorporated by reference to the Company’s Current Report on Form 8-K dated September 23, 2019.)
3.2			Composite Copy of Amended and Restated Declaration of Trust, dated as of August 21, 1995, as amended to date. (marked copy) (Incorporated by reference to the Company’s Current Report on Form 8-K dated September 23, 2019.)
4.1			Form of Common Share Certificate. (Incorporated by reference to the Company’s Current Report on Form 8-K dated September 23, 2019.)
4.2			Indenture, dated as of February 25, 1998, between the Company and State Street Bank and Trust Company. (Incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997.)
4.3			Supplemental Indenture No. 14, dated as of August 16, 2012, between the Company and U.S. Bank National Association, relating to the Company’s 5.000% Senior Notes due 2022, including form thereof. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.)
4.4			Supplemental Indenture No. 15, dated as of June 6, 2013, between the Company and U.S. Bank National Association, relating to the Company’s 4.500% Senior Notes due 2023, including form thereof. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.)
4.5			Authentication Order, dated January 13, 2017, from the Company to U.S. Bank National Association, relating to the Company’s 4.500% Senior Notes due 2023. (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.)
4.6			Supplemental Indenture No. 16, dated as of March 12, 2014, between the Company and U.S. Bank National Association, relating to the Company’s 4.650% Senior Notes due 2024, including form thereof. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.)
4.7			Supplemental Indenture No. 17, dated as of September 12, 2014, between the Company and U.S. Bank National Association, relating to the Company’s 4.50% Senior Notes due 2025, including form thereof. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.)
4.8			Indenture, dated as of February 3, 2016, between the Company and U.S. Bank National Association. (Incorporated by reference to the Company’s Current Report on Form 8-K dated February 1, 2016.)
4.9			First Supplemental Indenture, dated as of February 3, 2016, between the Company and U.S. Bank National Association, relating to the Company’s 4.25% Senior Notes due 2021, including form thereof. (Incorporated by reference to the Company’s Current Report on Form 8-K dated February 1, 2016.)
4.10			Second Supplemental Indenture, dated as of February 3, 2016, between the Company and U.S. Bank National Association, relating to the Company’s 5.25% Senior Notes due 2026, including form thereof. (Incorporated by reference to the Company’s Current Report on Form 8-K dated February 1, 2016.)

Table of Contents



Exhibit Number			Description
4.11			Third Supplemental Indenture, dated as of January 13, 2017, between the Company and U.S. Bank National Association, relating to the Company’s 4.950% Senior Notes due 2027, including form thereof. (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.)
4.12			Fourth Supplemental Indenture, dated as of October 26, 2017, between the Company and U.S. Bank National Association, relating to the Company’s 3.950% Senior Notes due 2028, including form thereof. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017.)
4.13			Fifth Supplemental Indenture, dated as of February 2, 2018, between the Company and U.S. Bank National Association, relating to the Company’s 4.375% Senior Notes due 2030, including form thereof. (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.)
4.14			Sixth Supplemental Indenture, dated as of September 18, 2019, between the Company and U.S. Bank National Association, relating to the Company’s 4.350% Senior Notes due 2024, including form thereof. (Incorporated by reference to the Company’s Current Report on Form 8-K dated September 18, 2019.)
4.15			Seventh Supplemental Indenture, dated as of September 18, 2019, between the Company and U.S. Bank National Association, relating to the Company’s 4.750% Senior Notes due 2026, including form thereof. (Incorporated by reference to the Company’s Current Report on Form 8-K dated September 18, 2019.)
4.16			Eighth Supplemental Indenture, dated as of September 18, 2019, between the Company and U.S. Bank National Association, relating to the Company’s 4.950% Senior Notes due 2029, including form thereof. (Incorporated by reference to the Company’s Current Report on Form 8-K dated September 18, 2019.)
4.17			Registration Rights and Lock-Up Agreement, dated as of June 5, 2015, among the Company, ABP Trust (f/k/a Reit Management & Research Trust), Barry M. Portnoy and Adam D. Portnoy. (Incorporated by reference to the Company’s Current Report on Form 8-K dated June 5, 2015.)
10.1			Seventh Amendment to Management Agreement, dated as of October 9, 2019, among HPT TRS IHG-2, Inc., InterContinental Hotels Group Resources, Inc., IHG Management (Maryland) LLC and InterContinental Hotels Group (Canada), Inc. (Filed herewith).
10.2			Second Amended and Restated Lease Agreement No. 1, dated as of October 14, 2019, among HPT TA Properties Trust, HPT TA Properties LLC and TA Operating LLC. (Filed herewith.)
10.3			Second Amended and Restated Lease Agreement No. 2, dated as of October 14, 2019, among HPT TA Properties Trust, HPT TA Properties LLC and TA Operating LLC. (Filed herewith.)
10.4			Second Amended and Restated Lease Agreement No. 3, dated as of October 14, 2019, among HPT TA Properties Trust, HPT TA Properties LLC and TA Operating LLC. (Filed herewith.)
10.5			Second Amended and Restated Lease Agreement No. 4, dated as of October 14, 2019, among HPT TA Properties Trust, HPT TA Properties LLC and TA Operating LLC. (Filed herewith.)
10.6			Amended and Restated Lease Agreement No. 5, dated as of October 14, 2019, among Highway Ventures Properties Trust, Highway Ventures Properties LLC and TA Operating LLC. (Filed herewith.)
10.7			Amended and Restated Guaranty Agreement, dated as of October 14, 2019, by TravelCenters of America Inc. for the benefit of HPT TA Properties Trust and HPT TA Properties LLC (relating to Second Amended and Restated Lease Agreement No. 1). (Filed herewith.)
10.8			Amended and Restated Guaranty Agreement, dated as of October 14, 2019, by TravelCenters of America Inc. for the benefit of HPT TA Properties Trust and HPT TA Properties LLC (relating to Second Amended and Restated Lease Agreement No. 2). (Filed herewith.)
10.9			Amended and Restated Guaranty Agreement, dated as of October 14, 2019, by TravelCenters of America Inc. for the benefit of HPT TA Properties Trust and HPT TA Properties LLC (relating to Second Amended and Restated Lease Agreement No. 3). (Filed herewith.)
10.10			Amended and Restated Guaranty Agreement, dated as of October 14, 2019, by TravelCenters of America Inc. for the benefit of HPT TA Properties Trust and HPT TA Properties LLC (relating to Second Amended and Restated Lease Agreement No. 4). (Filed herewith.)
10.11			Amended and Restated Guaranty Agreement, dated as of October 14, 2019, by TravelCenters of America Inc. for the benefit of Highway Ventures Properties Trust and Highway Ventures Properties LLC (relating to Amended and Restated Lease Agreement No. 5). (Filed herewith.)
10.12			Representative Form of Management Agreement between Sonesta International Hotels Corporation and Cambridge TRS, Inc. (full service). (Incorporated by reference to the Company’s Current Report on Form 8-K dated April 23, 2012.) (Schedule of applicable agreements filed herewith.)
10.13			Pooling Agreement, dated April 23, 2012, as updated through November 1, 2019, among Sonesta International Hotels Corporation, Cambridge TRS, Inc. and HPT Clift TRS LLC. (Filed herewith.)
31.1			Rule 13a-14(a) Certification. (Filed herewith.)
31.2			Rule 13a-14(a) Certification. (Filed herewith.)

Table of Contents



Exhibit Number			Description
32.1			Section 1350 Certification. (Furnished herewith.)
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			XBRL Taxonomy Extension Schema Document. (Filed herewith.)
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)
101.LAB			XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




	SERVICE PROPERTIES TRUST


	/s/ John G. Murray
	John G. Murray
	President and Chief Executive Officer
	Dated: November 8, 2019


	/s/ Brian E. Donley
	Brian E. Donley
	Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer)
	Dated: November 8, 2019

Exhibit 10.1

SEVENTH AMENDMENT TO MANAGEMENT AGREEMENT

THIS SEVENTH AMENDMENT TO MANAGEMENT AGREEMENT (this “Amendment”) is made and entered into as of October 9, 2019, by and among HPT TRS IHG-2, INC. (“Owner”), a Maryland corporation (successor by merger to HPT TRS IHG-1, Inc. and HPT TRS IHG-3, Inc.), and INTERCONTINENTAL HOTELS GROUP RESOURCES, INC. (“Resources”), a Delaware corporation, IHG MANAGEMENT (MARYLAND) LLC (“Maryland”), a Maryland limited liability company, and INTERCONTINENTAL HOTELS GROUP (CANADA), INC. (“Canada”), a corporation under the laws of Ontario, Canada (Resources, Maryland and Canada, collectively, “Manager”).

W I T N E S S E T H

WHEREAS, Owner (for itself and as successor by merger to HPT TRS IHG-1, Inc. and HPT TRS IHG-3, Inc.) and Manager are parties to that certain Management Agreement, dated as of July 1, 2011, as amended by that certain Amendment to Management Agreement, dated as of March 16, 2015, that certain Second Amendment to Management Agreement, dated as of February 11, 2016, that certain Third Amendment to Management Agreement, dated as of February 1, 2017, that certain Fourth Amendment to Management Agreement, dated as of March 24, 2017, that certain Fifth Amendment to Management Agreement, dated as of June 28, 2017, and that certain Sixth Amendment to Management Agreement, dated as of May 11, 2018 (as so amended, the “Management Agreement”); and

WHEREAS, Owner and Manager desire to provide for the simultaneous termination of the Management Agreement and that certain Amended and Restated Management Agreement between HPT State Street TRS LLC, an affiliate of Owner, and Kimpton Hotel and Restaurant Group LLC and KHRG State Street, LLC, both affiliates of Manager, with respect to the Kimpton Hotel Palomar Chicago having an address at 505 North State Street, Chicago, Illinois (the “Kimpton Hotel Palomar Chicago”); and

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Owner and Manager, intending to be legally bound, herby agree, effective from and after the date hereof, as follows:

1.Capitalized Terms. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings given such terms in the Management Agreement.

2.Technology Fee. Section 9.2(d) of the Management Agreement is amended such that the Technology Fee is currently $14.36 per guest room per month.

3.Early Termination. Any termination of the Affiliate Management Agreement for the Kimpton Hotel Palomar Chicago pursuant to Sections 5.1, 10.3, 17.2, 17.3, or 17.4 of the Affiliate Management Agreement for the Kimpton Hotel Palomar Chicago shall also result in a termination of the Management Agreement pursuant to the corresponding section of the Management Agreement.

4.Kimpton Hotels Reward Program Participation. Notwithstanding anything contained in the Management Agreement to the contrary, all Hotels that are branded as Kimpton Hotels, Hotel Monaco Hotels and Hotel Palomar Hotels will participate in the IHG Rewards Club Program and policies. Manager covenants and agrees that the IHG Rewards Club Fee shall be charged consistently for substantially all of the New Kimpton Hotels. For purposes of the preceding sentence, “New Kimpton Hotels” shall means Kimpton Hotels in the United States and Canada managed by Manager and/or its Affiliates and added to the Kimpton system pursuant to hotel operating agreements executed on or after August 18, 2015 and which were not under the Kimpton brand prior to January 16, 2015 (but excluding any such hotels with respect to which the material economic terms of the hotel operating agreements were agreed prior to January 1, 2015).

5.Ratification. As amended hereby, the Management Agreement remains in full force and effect and is ratified and confirmed.

6.Counterparts. This Amendment may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute one agreement. Any such counterpart may be delivered by facsimile or e-mail (in .pdf format), and any signature so delivered shall be deemed an original signature for all purposes.

[Remainder of page intentionally left blank; Signature pages follow]

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Amendment effective as of the day and year first above written.

OWNER:

HPT TRS IHG-2, INC.

By: /s/ John G. Murray

John G. Murray

President

MANAGER:

INTERCONTINENTAL HOTELS GROUP

RESOURCES, INC.

By: /s/ Robert Chitty

Name: Robert Chitty

Title: Senior Vice President

IHG MANAGEMENT (MARYLAND) LLC

By: /s/ Robert Chitty

Name: Robert Chitty

Title: Senior Vice President

INTERCONTINENTAL HOTELS GROUP

(CANADA), INC.

By: /s/ Robert Chitty

Name: Robert Chitty

Title: Senior Vice President

[Signature Page to Seventh Amendment to Management Agreement]

Each of the parties comprising Landlord joins in the foregoing Amendment to evidence its continued agreement to be bound by the terms of Sections 4.1 through 4.7 and Articles 15 and 16 of the Management Agreement, as may be amended by the foregoing Amendment, in each case to the extent applicable to it, subject to the terms of Sections 24.18.

LANDLORD:

HPT CW MA REALTY TRUST

By: /s/ John G. Murray

John G. Murray

Trustee and not individually

HPT IHG CANADA PROPERTIES TRUST

HPT IHG GA PROPERTIES LLC

HPT IHG-2 PROPERTIES TRUST

HPT IHG-3 PROPERTIES LLC

By: /s/ John G. Murray

John G. Murray

President

[Landlord Signature Page to Seventh Amendment to Management Agreement]

AGREEMENT BY

INTERCONTINENTAL HOTELS (PUERTO RICO) INC.

Reference is made to that certain Guaranty Agreement, dated as of July 1, 2011, by Intercontinental Hotels (Puerto Rico) Inc. (“PR Tenant”) for the benefit of HPT TRS IHG-1, Inc., HPT TRS IHG-2, Inc., HPT TRS IHG-3, Inc., HPT IHG PR, Inc. and Hospitality Properties Trust (the “PR Guaranty”).

PR Tenant acknowledges receipt of the foregoing Seventh Amendment to Management Agreement by and among HPT TRS IHG-2, Inc., Intercontinental Hotels Group Resources, Inc., IHG Management (Maryland) LLC and Intercontinental Hotels Group (Canada), Inc. (the “Amendment”).

PR Tenant also confirms that all references to the “Management Agreement” to the PR Guaranty shall refer to the Management Agreement (as defined in the Amendment) as amended by the Amendment and that the PR Guaranty remains in full force and effect.

PR TENANT:

INTERCONTINENTAL HOTELS (PUERTO RICO) INC.,

a Puerto Rico corporation

By: /s/ Robert Chitty

Name: Robert Chitty

Title: Senior Vice President

[PR Tenant Signature Page to Seventh Amendment to Management Agreement]

Exhibit 10.2

SECOND AMENDED AND RESTATED LEASE AGREEMENT NO. 1,

dated as of October 14, 2019,

by and between

HPT TA PROPERTIES TRUST and HPT TA PROPERTIES LLC,

AS LANDLORD,

AND

TA OPERATING LLC,

AS TENANT

{S2482617; 4}

TABLE OF CONTENTS


	Page
Article 1 DEFINITIONS			1
	1.1 AAA	1
	1.2 Additional Charges	1
	1.3 Additional Rent	1
	1.4 Affiliated Person	1
	1.5 Agreement	2
	1.6 Appellate Rules	2
	1.7 Applicable Laws	2
	1.8 Arbitration Award	2
	1.9 Award	2
	1.10 Base Year	2
	1.11 Business Day	2
	1.12 Capital Addition	2
	1.13 Capital Expenditure	2
	1.14 Capital Replacements Budget	3
	1.15 Change in Control	3
	1.16 Claim	3
	1.17 Code	3
	1.18 Commencement Date	3
	1.19 Condemnation	3
	1.20 Condemnor	3
	1.21 Consolidated Financials	3
	1.22 Default	4
	1.23 Disbursement Rate	4
	1.24 Disputes	4
	1.25 Distribution	4
	1.26 Easement Agreement	4
	1.27 Effective Date	4
	1.28 Encumbrance	4
	1.29 Entity	4
	1.30 Environment	4
	1.31 Environmental Obligation	4
	1.32 Environmental Notice	4
	1.33 Environmental Report	4
	1.34 Event of Default	4
	1.35 Existing Third Party Trade Names and Service Mark Rights	5
	1.36 Extended Term	5
	1.37 Fair Market Value Rent	5
	1.38 Financial Officer’s Certificate	5


			1.39 Fiscal Year			5
			1.40 Fixed Term			5
			1.41 Fixtures			5
			1.42 GAAP			5
			1.43 Government Agencies			5
			1.44 Gross Revenues			5
			1.45 Ground Leases			6
			1.46 Guarantor			6
			1.47 Guaranty			6
			1.48 Hazardous Substances			6
			1.49 Immediate Family			7
			1.50 Impositions			7
			1.51 Indebtedness			8
			1.52 Insurance Requirements			8
			1.53 Interest Rate			8
			1.54 Land			8
			1.55 Landlord			8
			1.56 Landlord Default			8
			1.57 Landlord Liens			8
			1.58 Later Acquired Property			9
			1.59 Lease Year			9
			1.60 Leased Improvements			9
			1.61 Leased Intangible Property			9
			1.62 Leased Property			9
			1.63 Legal Requirements			9
			1.64 Lien			9
			1.65 Management Agreement			9
			1.66 Manager			9
			1.67 Minimum Rent			10
			1.68 Notice			10
			1.69 Offer			10
			1.70 Officer’s Certificate			10
			1.71 Operating Rights			10
			1.72 Other Leases			10
			1.73 Overdue Rate			10
			1.74 Parent			10
			1.75 Percentage Reduction			10
			1.76 Permitted Encumbrances			10
			1.77 Permitted Use			10
			1.78 Person			10
			1.79 Prior Lease			11
			1.80 Prior Rent			11


	1.81 Property	11
	1.82 Property Mortgage	11
	1.83 Property Mortgagee	11
	1.84 Real Property	11
	1.85 Rent	11
	1.86 Rules	11
	1.87 SARA	11
	1.88 SEC	11
	1.89 Shell	11
	1.90 Shell Agreement	11
	1.91 Shell SNDA	11
	1.92 State	11
	1.93 Subordinated Creditor	11
	1.94 Subordination Agreement	11
	1.95 Subsidiary	11
	1.96 Successor Landlord	12
	1.97 Superior Landlord	12
	1.98 Superior Lease	12
	1.99 Superior Mortgage	12
	1.100 Superior Mortgagee	12
	1.101 TA Franchise Agreement	12
	1.102 TCA	12
	1.103 Tenant	12
	1.104 Tenant’s Personal Property	12
	1.105 Term	12
	1.106 Transferred Trademarks	12
	1.107 Travel Center	12
	1.108 UCC	13
	1.109 Unsuitable for Its Permitted Use	13
	1.110 Work	13

Article 2 LEASED PROPERTY AND TERM			13
	2.1 Leased Property.	13
	2.2 Condition of Leased Property.	14
	2.3 Term.	14
	2.4 Extended Terms.	15
	2.5 Right to Repool Properties.	15
	2.6 Right of First Refusal.	16

Article 3 RENT			16
	3.1 Rent.	16
	3.2 Late Payment of Rent, Etc.	21
	3.3 Net Lease, Etc.	21

iii


	3.4 No Termination, Abatement, Etc.	21

Article 4 USE OF THE LEASED PROPERTY			22
	4.1 Permitted Use	22
	4.2 Compliance with Legal/Insurance Requirements, Etc.	23
	4.3 Environmental Matters.	24
	4.4 Ground Leases.	25
	4.5 Shell Agreement.	25

Article 5 MAINTENANCE AND REPAIRS			26
	5.1 Maintenance and Repair.	26
	5.2 Tenant’s Personal Property.	27
	5.3 Yield Up.	28
	5.4 Management and Franchise Agreements.	28

Article 6 IMPROVEMENTS, ETC.			29
	6.1 Improvements to the Leased Property.	29
	6.2 Salvage.	29

Article 7 LIENS			29

Article 8 PERMITTED CONTESTS			29

Article 9 INSURANCE AND INDEMNIFICATION			30
	9.1 General Insurance Requirements.	30
	9.2 Waiver of Subrogation.	30
	9.3 Form Satisfactory, Etc.	31
	9.4 No Separate Insurance; Self-Insurance.	31
	9.5 Indemnification of Landlord.	31

Article 10 CASUALTY			32
	10.1 Insurance Proceeds.	32
	10.2 Damage or Destruction.	32
	10.3 Damage Near End of Term.	34
	10.4 Tenant’s Personal Property.	34
	10.5 Restoration of Tenant’s Personal Property.	34
	10.6 No Abatement of Rent.	34
	10.7 Waiver.	35

Article 11 CONDEMNATION			35
	11.1 Total Condemnation, Etc.	35
	11.2 Partial Condemnation.	35
	11.3 Abatement of Rent.	36
	11.4 Temporary Condemnation.	36
	11.5 Allocation of Award.	36

Article 12 DEFAULTS AND REMEDIES			37
	12.1 Events of Default.	37
	12.2 Remedies.	38


	12.3 Tenant’s Waiver.	40
	12.4 Application of Funds.	40
	12.5 Landlord’s Right to Cure Tenant’s Default.	40
	12.6 Landlord’s Right to Cure Tenant Defaults under the Shell Agreement.	40

Article 13 HOLDING OVER			41

Article 14 LANDLORD DEFAULT			41

Article 15 PURCHASE OF TENANT’S PERSONAL PROPERTY			41

Article 16 SUBLETTING AND ASSIGNMENT			42
	16.1 Subletting and Assignment.	42
	16.2 Required Sublease Provisions.	43
	16.3 Permitted Sublease.	44
	16.4 Sublease Limitation.	44

Article 17 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS			45
	17.1 Estoppel Certificates.	45
	17.2 Financial Statements.	45

Article 18 LANDLORD’S RIGHT TO INSPECT, QUALITY CONTROL, USE OF TRANSFERRED TRADEMARKS AND ENFORCEMENT			46
	18.1 Inspection.	46
	18.2 Quality Control.	46
	18.3 Transferred Trademarks, Registration and Maintenance.	46
	18.4 Enforcement.	46

Article 19 EASEMENTS			47
	19.1 Grant of Easements.	47
	19.2 Exercise of Rights by Tenant.	47
	19.3 Permitted Encumbrances.	47

Article 20 PROPERTY MORTGAGES			47
	20.1 Landlord May Grant Liens.	47
	20.2 Subordination of Lease.	47
	20.3 Notice to Mortgagee and Superior Landlord.	49

Article 21 ADDITIONAL COVENANTS OF LANDLORD AND TENANT			49
	21.1 Prompt Payment of Indebtedness.	49
	21.2 Conduct of Business.	49
	21.3 Maintenance of Accounts and Records.	49
	21.4 Notice of Litigation, Etc.	50
	21.5 Indebtedness of Tenant.	50
	21.6 Distributions, Payments to Affiliated Persons, Etc.	51
	21.7 Prohibited Transactions.	51
	21.8 Liens and Encumbrances.	51
	21.9 Merger; Sale of Assets; Etc.	51
	21.10 Bankruptcy Remote Entities.	52
	21.11 Trade Area Restriction.	52


Article 22 ARBITRATION			52
	22.1 Disputes.	52
	22.2 Selection of Arbitrators.	53
	22.3 Location of Arbitration.	53
	22.4 Scope of Discovery.	53
	22.5 Arbitration Award.	53
	22.6 Costs.	54
	22.7 Appeals.	54
	22.8 Final Judgment.	54
	22.9 Intended Beneficiaries.	54

Article 23 MISCELLANEOUS			55
	23.1 Limitation on Payment of Rent.	55
	23.2 No Waiver.	55
	23.3 Remedies Cumulative.	55
	23.4 Severability.	55
	23.5 Acceptance of Surrender.	55
	23.6 No Merger of Title.	55
	23.7 Conveyance by Landlord.	56
	23.8 Quiet Enjoyment.	56
	23.9 No Recordation.	56
	23.10 Notices.	56
	23.11 Construction.	57
	23.12 Counterparts; Headings.	57
	23.13 Applicable Law, Etc.	58
	23.14 Right to Make Agreement.	58
	23.15 Attorneys’ Fees.	58
	23.16 Nonliability of Trustees.	58

SECOND AMENDED AND RESTATED LEASE AGREEMENT NO. 1

THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT NO. 1 is entered into as of October 14, 2019 (the “Effective Date”), by and between HPT TA PROPERTIES TRUST, a Maryland real estate investment trust, and HPT TA PROPERTIES LLC, a Maryland limited liability company (collectively, “Landlord”), and TA OPERATING LLC, a Delaware limited liability company (“Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord and Tenant (as successor by merger with TA Leasing LLC) are parties to that certain Amended and Restated Lease Agreement No. 1, dated as of June 9, 2015, as amended from time to time (as so amended, the “Prior Lease”); and

WHEREAS, Landlord and Tenant wish to amend and restate certain terms and conditions of the Prior Lease as herein provided;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree, effective as of the Effective Date, that the Prior Lease shall be amended and restated as follows:

Article 1

DEFINITIONS

For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (a) the terms defined in this Article shall have the meanings assigned to them in this Article and include the plural as well as the singular, (b) all accounting terms not otherwise defined herein shall have the meanings assigned to them in accordance with GAAP, (c) all references in this Agreement to designated “Articles”, “Sections” and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement, and (d) the words “herein”, “hereof”, “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision.

1.1 “AAA” shall have the meaning given such term in Section 22.1.

1.2 “Additional Charges” shall have the meaning given such term in Section 3.1.3.

1.3 “Additional Rent” shall have the meaning given such term in Section 3.1.2(a).

1.4 “Affiliated Person” shall mean, with respect to any Person, (a) in the case of any such Person which is a partnership, any partner in such partnership, (b) in the case of any such Person which is a limited liability company, any member of such company, (c) any other Person which is a Parent, a Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or more of the Persons referred to in the preceding clauses (a) and (b), (d) any other Person who is an officer, director, trustee or employee of, or partner in or member of, such Person or any Person referred to in the preceding clauses (a), (b) and (c), and (e) any other

Person who is a member of the Immediate Family of such Person or of any Person referred to in the preceding clauses (a) through (d).

1.5 “Agreement” shall mean this Second Amended and Restated Lease Agreement No. 1, including all exhibits attached hereto, as it and they may be amended from time to time as herein provided.

1.6 “Appellate Rules” shall have the meaning given such term in Section 22.7.

1.7 “Applicable Laws” shall mean all applicable laws, statutes, regulations, rules, ordinances, codes, licenses, permits, notices and orders, from time to time in existence, of all courts of competent jurisdiction and Government Agencies, and all applicable judicial and administrative and regulatory decrees, judgments and orders, including common law rulings and determinations, relating to injury to, conservation of, or the protection of, real or personal property, Transferred Trademarks or human health or the Environment, including, without limitation, all valid and lawful requirements of courts and other Government Agencies pertaining to reporting, licensing, permitting, investigation, remediation and removal of underground improvements (including, without limitation, treatment or storage tanks, or water, natural gas or oil wells), or emissions, discharges, releases or threatened releases of Hazardous Substances, chemical substances, pesticides, petroleum or petroleum products, pollutants, contaminants or hazardous or toxic substances, materials or wastes whether solid, liquid or gaseous in nature, into the Environment, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances, underground improvements (including, without limitation, treatment or storage tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature.

1.8 “Arbitration Award” shall have the meaning given such term in Section 22.5.

1.9 “Award” shall mean all compensation, sums or other value awarded, paid or received by virtue of a total or partial Condemnation of any Property (after deduction of all reasonable legal fees and other reasonable costs and expenses, including, without limitation, expert witness fees, incurred by Landlord, in connection with obtaining any such award).

1.10 “Base Year” shall mean, with respect to each Property, the calendar year identified as the Initial Base Year on Exhibit A for such Property (the “Initial Base Year”) and/or the 2019 calendar year (the “2019 Base Year”), as applicable.

1.11 “Business Day” shall mean any day other than Saturday, Sunday, or any other day on which banking institutions in The Commonwealth of Massachusetts are authorized by law or executive action to close.

1.12 “Capital Addition” shall mean, with respect to any Property, any renovation, repair or improvement to such Property, the cost of which constitutes a Capital Expenditure.

1.13 “Capital Expenditure” shall mean any expenditure treated as capital in nature in accordance with GAAP.

1.14 “Capital Replacements Budget” shall have the meaning given such term in Section 5.1.1(b).

1.15 “Change in Control” shall mean (a) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC) of 9.8% or more, or rights, options or warrants to acquire 9.8% or more, of the outstanding shares of voting stock or other voting interests of Tenant or any Guarantor, as the case may be, or the power to direct the management and policies of Tenant or any Guarantor, directly or indirectly, (b) the merger or consolidation of Tenant or any Guarantor with or into any other Person (other than the merger or consolidation of any Person into Tenant or any Guarantor that does not result in a Change in Control of Tenant or such Guarantor under clauses (a), (c) or (d) of this definition), (c) any one or more sales or conveyances to any Person of all or any material portion of its assets (including capital stock or other equity interests) or business of Tenant or any Guarantor, as the case may be, or (d) the cessation, for any reason, of the individuals who at the beginning of any twenty-four (24) consecutive month period (commencing on January 31, 2007) constituted the board of directors of Tenant or any Guarantor (together with any new directors whose election by such board or whose nomination for election by the shareholders of Tenant or such Guarantor, as the case may be, was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of any such period or whose election or nomination for election was previously so approved) to constitute a majority of the board of directors of Tenant or any Guarantor then in office.

1.16 “Claim” shall have the meaning given such term in Article 8.

1.17 “Code” shall mean the Internal Revenue Code of 1986 and, to the extent applicable, the Treasury Regulations promulgated thereunder, each as from time to time amended.

1.18 “Commencement Date” shall mean, with respect to each Property, the date identified as the Commencement Date for such Property on Exhibit A attached hereto.

1.19 “Condemnation” shall mean, with respect to any Property, or any portion thereof, (a) the exercise of any governmental power with respect to such Property, whether by legal proceedings or otherwise, by a Condemnor of its power of condemnation, (b) a voluntary sale or transfer of such Property by Landlord to any Condemnor, either under threat of condemnation or while legal proceedings for condemnation are pending, or (c) a taking or voluntary conveyance of such Property, or any interest therein, or right accruing thereto or use thereof, as the result or in settlement of any condemnation or other eminent domain proceeding affecting such Property, whether or not the same shall have actually been commenced.

1.20 “Condemnor” shall mean any public or quasi-public Person, having the power of Condemnation.

1.21 “Consolidated Financials” shall mean, for any Fiscal Year or other accounting period of TCA, annual audited and quarterly unaudited financial statements of TCA prepared on a consolidated basis, including TCA’s consolidated balance sheet and the related statements of income and cash flows, all in reasonable detail, and setting forth in comparative form the

corresponding figures for the corresponding period in the preceding Fiscal Year, and prepared in accordance with GAAP throughout the periods reflected.

1.22 “Default” shall mean any event or condition which with the giving of notice and/or lapse of time would be an Event of Default.

1.23 “Disbursement Rate” shall mean an annual rate of interest, as of the date of determination, equal to the greater of (i) the Interest Rate and (ii) the per annum rate for ten (10) year U.S. Treasury Obligations as published in The Wall Street Journal plus three hundred fifty (350) basis points.

1.24 “Disputes” shall have the meaning given such term in Section 22.1.

1.25 “Distribution” shall mean (a) any declaration or payment of any dividend (except ordinary cash dividends payable in common stock or other equity interests of Tenant) on or in respect of any shares of any class of capital stock or other equity interests of Tenant, (b) any purchase, redemption, retirement or other acquisition of any shares of any class of capital stock of a corporation, (c) any other distribution on or in respect of any shares of any class of capital stock of Tenant or (d) any return of capital to shareholders.

1.26 “Easement Agreement” shall mean any conditions, covenants and restrictions, easements, declarations, licenses and other agreements which are Permitted Encumbrances and such other agreements as may be granted in accordance with Section 19.1.

1.27 “Effective Date” shall have the meaning given such term in the preambles to this Agreement.

1.28 “Encumbrance” shall have the meaning given such term in Section 20.1.

1.29 “Entity” shall mean any corporation, general or limited partnership, limited liability company or partnership, stock company or association, joint venture, association, company, trust, bank, trust company, land trust, business trust, real estate investment trust, cooperative, any government or agency, authority or political subdivision thereof or any other entity.

1.30 “Environment” shall mean soil, surface waters, ground waters, land, biota, sediments, surface or subsurface strata and ambient air.

1.31 “Environmental Obligation” shall have the meaning given such term in Section 4.3.1.

1.32 “Environmental Notice” shall have the meaning given such term in Section 4.3.1.

1.33 “Environmental Report” shall have the meaning given such term in Section 4.3.2.

1.34 “Event of Default” shall have the meaning given such term in Section 12.1.

1.35 “Existing Third Party Trade Names and Service Mark Rights” shall mean the rights as set forth in any TA Franchise Agreement in effect as of January 31, 2007 licensed to third parties in the trade names, trademarks, service marks, domain names, logos and other brand-source indicia, including all goodwill related thereto which constitute a part of the Transferred Trademarks.

1.36 “Extended Term” shall have the meaning given such term in Section 2.4.

1.37 “Fair Market Value Rent” shall mean the per annum minimum rent which would be payable monthly in advance for the applicable Property or the Leased Property (as the case may be) in its then current condition and for its then current use, on the terms and conditions of this Agreement (including, without limitation, the obligation to pay Additional Rent).

1.38 “Financial Officer’s Certificate” shall mean, as to any Person, a certificate of the chief executive officer, chief financial officer or chief accounting officer (or such officers’ authorized designee) of such Person, duly authorized, accompanying the financial statements required to be delivered by such Person pursuant to Section 17.2, in which such officer shall certify (a) that such statements have been properly prepared in accordance with GAAP and are true, correct and complete in all material respects and fairly present the consolidated financial condition of such Person at and as of the dates thereof and the results of its operations for the periods covered thereby, and (b) in the event that the certifying party is an officer of Tenant and the certificate is being given in such capacity, that no Event of Default has occurred and is continuing hereunder.

1.39 “Fiscal Year” shall mean the calendar year or such other annual period designated by Tenant and approved by Landlord.

1.40 “Fixed Term” shall have the meaning given such term in Section 2.3.

1.41 “Fixtures” shall have the meaning given such term in Section 2.1(d).

1.42 “GAAP” shall mean generally accepted accounting principles consistently applied.

1.43 “Government Agencies” shall mean any court, agency, authority, board (including, without limitation, environmental protection, planning and zoning), bureau, commission, department, office or instrumentality of any nature whatsoever of any governmental or quasi-governmental unit of the United States or any State or any county or any political subdivision of any of the foregoing, whether now or hereafter in existence, having jurisdiction over Tenant or any Property, or any portion thereof, or any Travel Center operated thereon.

1.44 “Gross Revenues” shall mean, with respect to any Property, for each Fiscal Year during the Term, all revenues and receipts (determined on an accrual basis and in all material respects in accordance with GAAP) of every kind derived from renting, using and/or operating such Property and parts thereof, including, but not limited to: all rents and revenues received or receivable for the use of or otherwise by reason of all goods sold, services performed, space or facilities subleased on such Property, or any portion thereof, including, without limitation, any other arrangements with third parties relating to the possession or use of any portion of such

Property; and proceeds, if any, from business interruption or other loss of income insurance; provided, however, that Gross Revenues shall not include the following: allowances according to GAAP for uncollectible accounts, including credit card accounts and other administrative discounts; federal, state or municipal excise, sales, use, occupancy or similar taxes included as part of the sales price of any goods or services; insurance proceeds (other than proceeds from business interruption or other loss of income insurance); Award proceeds (other than for a temporary Condemnation); any proceeds from any sale of such Property or from the refinancing of any debt encumbering such Property; proceeds from the disposition of furnishings, fixture and equipment no longer necessary for the operation of the Travel Center located thereon; any security deposits and other advance deposits, until and unless the same are forfeited to Tenant or applied for the purpose for which they were collected; interest income from any bank account or investment of Tenant; any revenues or receipts of every kind derived from the provision, sale or trade of motor fuel and gasoline at such Property (including, without limitation, any amounts that arise out of the Shell Agreement); any revenues or receipts derived from gaming operations (but Gross Revenues shall include any revenue or receipts derived from sales of lottery tickets without adjustment for payouts); or any amount based on the income or profits of any Person if as a consequence thereof the Rent or other amounts payable by Tenant hereunder would fail to qualify, in whole or in part, as “rents from real property” within the meaning of Section 856(d) of the Code.

1.45 “Ground Leases” shall mean, collectively, any and all ground leases in effect with respect to any portion of the Real Property.

1.46 “Guarantor” shall mean, collectively, TCA, TravelCenters of America Holding Company LLC, and each and every other guarantor of Tenant’s obligations under this Agreement, and each such guarantor’s successors and assigns, jointly and severally.

1.47 “Guaranty” shall mean any guaranty agreement executed by a Guarantor in favor of Landlord pursuant to which the payment or performance of Tenant’s obligations under this Agreement are guaranteed, together with all modifications, amendments and supplements thereto.

1.48 “Hazardous Substances” shall mean any substance:

(a) the presence of which requires or may hereafter require notification, investigation or remediation under any Applicable Law; or

(b) which is or becomes defined as a “hazardous waste”, “hazardous material” or “hazardous substance” or “pollutant” or “contaminant” under any Applicable Law including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) and the regulations promulgated thereunder; or

(c) which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by any Governmental Agencies; or

(d) the presence of which on any Property, or any portion thereof, causes or materially threatens to cause an unlawful nuisance upon such Property, or any portion thereof, or to adjacent properties or poses or materially threatens to pose a hazard to such Property, or any portion thereof, or to the health or safety of persons; or

(e) without limitation, which contains gasoline, diesel fuel or other petroleum hydrocarbons or volatile organic compounds; or

(f) without limitation, which contains polychlorinated biphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or

(g) without limitation, which contains or emits radioactive particles, waves or material.

1.49 “Immediate Family” shall mean, with respect to any individual, such individual’s spouse, parents, brothers, sisters, children (natural or adopted), stepchildren, grandchildren, grandparents, parents-in-law, brothers-in-law, sisters-in-law, nephews and nieces.

1.50 “Impositions” shall mean, collectively, all taxes (including, without limitation, all taxes imposed under the laws of any State, as such laws may be amended from time to time, and all ad valorem, sales and use, occupancy, or similar taxes as the same relate to or are imposed upon Landlord, Tenant or the business conducted upon the Leased Property), assessments (including, without limitation, all assessments for public improvements or benefit, whether or not commenced or completed prior to the date hereof), water, sewer or other rents and charges, excises, tax levies, fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every character in respect of the Leased Property or the business conducted upon the Leased Property by Tenant (including all interest and penalties thereon due to any failure in payment by Tenant), which at any time prior to, during or in respect of the Term hereof may be assessed or imposed on or in respect of or be a lien upon (a) Landlord’s interest in the Leased Property, (b) the Leased Property or any part thereof or any rent therefrom or any estate, right, title or interest therein, or (c) any occupancy, operation, use or possession of, or sales from, or activity conducted on, or in connection with the Leased Property or the leasing or use of the Leased Property or any part thereof by Tenant; provided, however, that nothing contained herein shall be construed to require Tenant to pay and the term “Impositions” shall not include (i) any tax based on net income imposed on Landlord, (ii) any net revenue tax of Landlord, (iii) any transfer fee (but excluding any mortgage or similar tax payable in connection with a Property Mortgage) or other tax imposed with respect to the sale, exchange or other disposition by Landlord of the Leased Property or the proceeds thereof, (iv) any single business, gross receipts tax, transaction privilege, rent or similar taxes as the same relate to or are imposed upon Landlord, (v) any interest or penalties imposed on Landlord as a result of the failure of Landlord to file any return or report timely and in the form prescribed by law or to pay any tax or imposition, except to the extent such failure is a result of a breach by Tenant of its obligations pursuant to Section 3.1.3, (vi) any impositions imposed on Landlord that are a result of Landlord not being considered a “United States person” as defined in Section 7701(a)(30) of the Code, (vii) any impositions that are enacted or adopted by their express terms as a substitute for any tax that would not have been payable by Tenant pursuant to the terms of

this Agreement or (viii) any impositions imposed as a result of a breach of covenant or representation by Landlord in any agreement governing Landlord’s conduct or operation or as a result of the negligence or willful misconduct of Landlord.

1.51 “Indebtedness” shall mean (without duplication), (a) all obligations for borrowed money, (b) the maximum amount available to be drawn under all surety bonds, letters of credit and bankers’ acceptances issued or created for the account of Tenant and, without duplication, all unreimbursed drafts drawn thereunder, (c) all obligations to pay the deferred purchase price of property or services, excluding trade payables incurred in the ordinary course of business, but including all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by Tenant, (d) all leases required, in accordance with GAAP, to be recorded as capital leases on Tenant’s balance sheet, (e) the principal balance outstanding and owing by Tenant under any synthetic lease, tax retention operating lease or similar off-balance sheet financing product, and (f) all guaranties of or other liabilities with respect to the debt of another Person.

1.52 “Insurance Requirements” shall mean all terms of any insurance policy required by this Agreement and all requirements of the issuer of any such policy and all orders, rules and regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon Landlord, Tenant, any Manager or the Leased Property.

1.53 “Interest Rate” shall mean eight and one half percent (8.5%) per annum.

1.54 “Land” shall have the meaning given such term in Section 2.1(a).

1.55 “Landlord” shall have the meaning given such term in the preambles to this Agreement and shall also include their respective permitted successors and assigns.

1.56 “Landlord Default” shall have the meaning given such term in Article 14.

1.57 “Landlord Liens” shall mean liens on or against the Leased Property or any payment of Rent (a) which result from any act of, or any claim against, Landlord or any owner of a direct or indirect interest in the Leased Property (other than the lessor under any ground lease affecting any portion of the Leased Property), or which result from any violation by Landlord of any terms of this Agreement, or (b) which result from liens in favor of any taxing authority by reason of any tax owed by Landlord or any fee owner of a direct or indirect interest in the Leased Property (other than the lessor under any ground lease affecting any portion of the Leased Property); provided, however, that “Landlord Lien” shall not include any lien resulting from any tax for which Tenant is obligated to pay or indemnify Landlord against until such time as Tenant shall have already paid to or on behalf of Landlord the tax or the required indemnity with respect to the same.

1.58 “Later Acquired Property” shall mean each Property identified with an asterisk (*) on Exhibit A attached hereto.

1.59 “Lease Year” shall mean any Fiscal Year or portion thereof during the Term.

1.60 “Leased Improvements” shall have the meaning given such term in Section 2.1(b).

1.61 “Leased Intangible Property” shall mean all agreements, service contracts, equipment leases and other arrangements or agreements affecting the ownership, repair, maintenance, management, leasing or operation of the Leased Property, or any portion thereof, to which Landlord is a party; all books, records and files relating to the leasing, maintenance, management or operation of the Leased Property, or any portion thereof, belonging to Landlord; all transferable or assignable permits, certificates of occupancy, operating permits, sign permits, development rights and approvals, certificates, licenses, warranties and guarantees, rights to deposits and telephone exchange numbers identified with the Leased Property; and all other transferable intangible property, miscellaneous rights, benefits and privileges of any kind or character belonging to Landlord with respect to the Leased Property.

1.62 “Leased Property” shall have the meaning given such term in Section 2.1.

1.63 “Legal Requirements” shall mean all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions affecting the Leased Property or the maintenance, construction, alteration or operation thereof, whether now or hereafter enacted or in existence, including, without limitation, (a) all permits, licenses, authorizations and regulations necessary to operate any Property for its Permitted Use, and (b) all covenants, agreements, restrictions and encumbrances contained in any instruments at any time in force affecting any Property, including those which may (i) require material repairs, modifications or alterations in or to any Property or (ii) in any way materially and adversely affect the use and enjoyment thereof, but excluding any requirements arising as a result of Landlord’s status as a real estate investment trust.

1.64 “Lien” shall mean any mortgage, security interest, pledge, collateral assignment, or other encumbrance, lien or charge of any kind, or any transfer of property or assets for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of general creditors.

1.65 “Management Agreement” shall mean, with respect to any Property, any operating, management, franchise or branding agreement from time to time entered into by Tenant with respect to such Property in accordance with the applicable provisions of this Agreement, together with all amendments, modifications and supplements thereto, excluding, however, any TA Franchise Agreement.

1.66 “Manager” shall mean, with respect to any Property, the operator or manager under any Management Agreement from time to time in effect with respect to such Property, and its permitted successors and assigns.

1.67 “Minimum Rent” shall mean Forty-Nine Million Seven Hundred Six Thousand Nine Hundred Thirty-Two and 00/100ths Dollars ($49,706,932.00), subject to adjustment as provided in Section 3.1.1(b).

1.68 “Notice” shall mean a notice given in accordance with Section 23.10.

1.69 “Offer” shall have the meaning given such term in Section 4.1.1(b).

1.70 “Officer’s Certificate” shall mean a certificate signed by an officer or other duly authorized individual of the certifying Entity duly authorized by the board of directors or other governing body of the certifying Entity.

1.71 “Operating Rights” shall have the meaning given such term in Section 5.3.

1.72 “Other Leases” shall mean, collectively, (a) that certain Second Amended and Restated Lease Agreement No. 2, dated as of the Effective Date, between Landlord and Tenant, together with all modifications, amendments and supplements thereto and (b) that certain Second Amended and Restated Lease Agreement No. 3, dated as of the Effective Date, between Landlord and Tenant, together with all modifications, amendments and supplements thereto and (c) that certain Second Amended and Restated Lease Agreement No. 4, dated as of the Effective Date, between Landlord and Tenant, together with all modifications, amendments and supplements thereto.

1.73 “Overdue Rate” shall mean, on any date, a per annum rate of interest equal to the lesser of the Disbursement Rate plus four percent (4%) and the maximum rate then permitted under applicable law.

1.74 “Parent” shall mean, with respect to any Person, any Person which owns directly, or indirectly through one or more Subsidiaries or Affiliated Persons, twenty percent (20%) or more of the voting or beneficial interest in, or otherwise has the right or power (whether by contract, through ownership of securities or otherwise) to control, such Person.

1.75 “Percentage Reduction” shall be eight and one-half percent (8.5%) other than for any Later Acquired Property, as to which the Percentage Reduction shall be eight and six tenths percent (8.6%).

1.76 “Permitted Encumbrances” shall mean, with respect to any Property, all rights, restrictions, and easements of record set forth on Schedule B to the applicable owner’s or leasehold title insurance policy issued to Landlord with respect to such Property, plus any other encumbrances as may have been granted or caused by Landlord or otherwise consented to in writing by Landlord from time to time.

1.77 “Permitted Use” shall mean, with respect to any Property, any use of such Property permitted pursuant to Section 4.1.1.

1.78 “Person” shall mean any individual or Entity, and the heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so admits.

1.79 “Prior Lease” shall have the meaning given such term in the recitals to this Agreement.

1.80 “Prior Rent” shall have the meaning given such term in Section 2.4.

1.81 “Property” shall have the meaning given such term in Section 2.1.

1.82 “Property Mortgage” shall mean any Encumbrance placed upon the Leased Property, or any portion thereof, in accordance with Article 20.

1.83 “Property Mortgagee” shall mean the holder of any Property Mortgage.

1.84 “Real Property” shall have the meaning given such term in Section 2.1.

1.85 “Rent” shall mean, collectively, the Minimum Rent, Additional Rent and Additional Charges.

1.86 “Rules” shall have the meaning given such term in Section 22.1.

1.87 “SARA” shall mean the Superfund Amendments and Reauthorization Act of 1986, as the same has been and may be amended, restated, modified or supplemented from time to time.

1.88 “SEC” shall mean the Securities and Exchange Commission.

1.89 “Shell” shall mean Equilon Enterprises LLC (doing business as Shell Oil Products US), a Delaware limited liability company.

1.90 “Shell Agreement” shall mean that certain Liquefied Natural Gas Dispensing Site License and Sales Agreement, dated as of April 15, 2013, between Tenant and Shell, together with all modifications, amendments and supplements thereto.

1.91 “Shell SNDA” shall have the meaning given such term in Section 4.5.

1.92 “State” shall mean, with respect to any Property, the state, commonwealth or district in which such Property is located.

1.93 “Subordinated Creditor” shall mean any creditor of Tenant which is a party to a Subordination Agreement in favor of Landlord.

1.94 “Subordination Agreement” shall mean any agreement (and any amendments thereto) executed by a Subordinated Creditor pursuant to which the payment and performance of Tenant’s obligations to such Subordinated Creditor are subordinated to the payment and performance of Tenant’s obligations to Landlord under this Agreement.

1.95 “Subsidiary” shall mean, with respect to any Person, any Entity (a) in which such Person owns directly, or indirectly through one or more Subsidiaries, twenty percent (20%) or more of the voting or beneficial interest or (b) which such Person otherwise has the right or power to control (whether by contract, through ownership of securities or otherwise).

1.96 “Successor Landlord” shall have the meaning given such term in Section 20.2.

1.97 “Superior Landlord” shall have the meaning given such term in Section 20.2.

1.98 “Superior Lease” shall have the meaning given such term in Section 20.2.

1.99 “Superior Mortgage” shall have the meaning given such term in Section 20.2.

1.100 “Superior Mortgagee” shall have the meaning given such term in Section 20.2.

1.101 “TA Franchise Agreement” shall mean a franchise agreement and, if applicable, any network lease agreement associated with such franchise agreement, between TCA, or one of its Affiliated Persons, as franchisor, and a Person who is not an Affiliated Person of TCA, as franchisee, for the operation of a Travel Center or other hospitality, fuel and/or service facility by such Person.

1.102 “TCA” shall mean TravelCenters of America Inc., a Maryland corporation, and its permitted successors and assigns.

1.103 “Tenant” shall have the meaning given such term in the preambles to this Agreement and shall also include its permitted successors and assigns.

1.104 “Tenant’s Personal Property” shall mean all motor vehicles and consumable inventory and supplies, furniture, furnishings, equipment, movable walls and partitions, equipment and machinery and all other tangible personal property of Tenant acquired by Tenant before, on or after the Commencement Date and located at the Leased Property or used in Tenant’s business at the Leased Property and all modifications, replacements, alterations and additions to such personal property installed at the expense of Tenant, other than any items included within the definition of Fixtures.

1.105 “Term” shall mean, collectively, the Fixed Term and each Extended Term, to the extent properly exercised pursuant to the provisions of Section 2.4, unless sooner terminated pursuant to the provisions of this Agreement.

1.106 “Transferred Trademarks” shall mean all trade names, trademarks, service marks, domain names, logos and other brand-source indicia, including all goodwill related thereto, owned by or licensed to Landlord and used in connection with any Travel Center or any other hospitality, fuel and service facility including without limitation trade names, trademarks, service marks, domain names, logos and other brand-source indicia, including all goodwill related thereto, such as “TravelCenters of America”, “TA”, “Goasis”, “Country Pride”, “Fork in the Road” and “Buckhorn Family Restaurants” whether or not used at or on the Real Property; and all other licensable intellectual property of any kind or character belonging to Landlord with respect to the Leased Property.

1.107 “Travel Center” shall mean, with respect to any Property, collectively, the hospitality, fuel and service facilities located at such Property, including, hotel, food and beverage services facilities, fuel pumps, facilities for the storage and distribution of petroleum

products, retail shops and other facilities and services being operated or proposed to be operated on such Property.

1.108 “UCC” shall mean the Uniform Commercial Code as in effect in the State of Ohio.

1.109 “Unsuitable for Its Permitted Use” shall mean, with respect to any Travel Center, a state or condition such that following any damage, destruction or Condemnation, such Travel Center cannot be operated on a commercially practicable basis for its Permitted Use and it cannot reasonably be expected to be restored to substantially the same condition as existed immediately before such damage, destruction or Condemnation, and as otherwise required by this Agreement, within twenty-four (24) months following such damage, destruction or Condemnation or such longer period of time as to which business interruption insurance or Award proceeds is available to cover Rent and other costs related to the applicable Property following such damage, destruction or Condemnation.

1.110 “Work” shall have the meaning given such term in Section 10.2.4.

Article 2

LEASED PROPERTY AND TERM

2.1 Leased Property. Upon and subject to the terms and conditions hereinafter set forth, Landlord leases and licenses to Tenant and Tenant leases and licenses from Landlord all of Landlord’s right, title and interest in and to all of the following (each of items (a) through (f) below which, as of the Commencement Date, relates to any single Travel Center, a “Property” and together with item (g) below, collectively, the “Leased Property”, and those portions of the Leased Property described in items (a) through (d) below being the “Real Property”):

(a) those certain tracts, pieces and parcels of land, as more particularly described in Exhibits A-1 through A-36, attached hereto and made a part hereof (the “Land”);

(b) all buildings, structures and other improvements of every kind including, but not limited to, underground storage tanks, alleyways and connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site and off-site), parking areas and roadways appurtenant to such buildings and structures presently situated upon the Land (collectively, the “Leased Improvements”);

deemed by the parties hereto to constitute real estate, together with all replacements, modifications, alterations and additions thereto, but specifically excluding all items included within the category of Tenant’s Personal Property (collectively, the “Fixtures”);

(e) all of the Leased Intangible Property;

(f) any and all leases of space in the Leased Improvements; and

(g) all of the Transferred Trademarks whether or not used at or on any Property (such rights of Tenant in the Transferred Trademarks being nonexclusive, worldwide, non-assignable but sublicensable to the extent expressly set forth in this Agreement).

2.2 Condition of Leased Property. Tenant acknowledges receipt and delivery of possession of the Leased Property and Tenant accepts the Leased Property in its “as is” condition, subject to the rights of parties in possession, the existing state of title, including all covenants, conditions, restrictions, reservations, mineral leases, easements and other matters of record or that are visible or apparent on the Leased Property, all applicable Legal Requirements, the lien of any financing instruments, mortgages and deeds of trust existing prior to the Commencement Date or permitted by the terms of this Agreement, and such other matters which would be disclosed by an inspection of the Leased Property and the record title thereto or by an accurate survey thereof. TENANT REPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD’S AGENTS OR EMPLOYEES WITH RESPECT THERETO AND TENANT WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED PROPERTY. LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT. To the maximum extent permitted by law, however, Landlord hereby assigns to Tenant all of Landlord’s rights to proceed against any predecessor in interest or insurer for breaches of warranties or representations or for latent defects in the Leased Property. Landlord shall fully cooperate with Tenant in the prosecution of any such claims, in Landlord’s or Tenant’s name, all at Tenant’s sole cost and expense. Tenant shall indemnify, defend, and hold harmless Landlord from and against any loss, cost, damage or liability (including reasonable attorneys’ fees) incurred by Landlord in connection with such cooperation.

2.3 Term. The initial term of this Agreement (the “Fixed Term”) shall commence on the Commencement Date and shall expire on December 31, 2032.

hereof, or any earlier termination of the Term hereof, and Tenant’s obligations hereunder to Landlord with respect to any such Existing Third Party Trade Names and Service Mark Rights shall apply throughout such additional period as if it were part of the Term; Tenant hereby representing that such extension for the period beyond what would have been the Term had it expired by passage of time does not apply to more than five (5) Travel Centers or other hospitality, fuel and service facilities in the aggregate.

2.4 Extended Terms. Tenant shall have the right to extend the Term for two (2) renewal terms of fifteen (15) years each (each, an “Extended Term”), provided that no Event of Default shall have occurred and be continuing at the time Tenant exercises a right to extend the Term.

If and to the extent Tenant shall exercise the foregoing options to extend the Term, the first Extended Term shall commence on January 1, 2033 and expire on December 31, 2047 and the second Extended Term shall commence on January 1, January 1, 2048 and expire on December 31, 2062. All of the terms, covenants and provisions of this Agreement shall apply to each Extended Term, except that (x) the Minimum Rent payable during such Extended Term shall be the greater of the Prior Rent and the Fair Market Value Rent for the Leased Property (such Fair Market Value Rent to be determined by agreement of the parties or, absent agreement, by an appraiser designated by Landlord) (taking into account that the Initial Base Year and the 2019 Base Year, as applicable, shall remain unchanged) and (y) Tenant shall have no right to extend the Term beyond December 31, 2062. For purposes of this Section 2.4, “Prior Rent” shall mean an amount equal to the per annum Minimum Rent in effect on the last day of the Fixed Term or Extended Term immediately preceding such Extended Term. If Tenant shall elect to exercise the option to extend the Term for the first Extended Term, it shall do so by giving Landlord Notice thereof not later than December 31, 2031, and if Tenant shall elect to exercise its option to extend the Term for the second Extended Term after having elected to extend the Term for the first Extended Term, it shall do so by giving Landlord Notice not later than December 31, 2046, it being understood and agreed that time shall be of the essence with respect to the giving of any such Notice. If Tenant shall fail to give any such Notice, this Agreement shall automatically terminate at the end of the Fixed Term or the first Extended Term as applicable and Tenant shall have no further option to extend the Term of this Agreement. If Tenant shall give such Notice, the extension of this Agreement shall be automatically effected without the execution of any additional documents; it being understood and agreed, however, that Tenant and Landlord shall execute such documents and agreements as either party shall reasonably require to evidence the same. Notwithstanding the provisions of the foregoing sentence, if, subsequent to the giving of such Notice, an Event of Default shall occur, at Landlord’s option, the extension of this Agreement shall cease to take effect and this Agreement shall automatically terminate at the end of the Fixed Term or the first Extended Term, as applicable, and Tenant shall have no further option to extend the Term of this Agreement.

consent shall not be unreasonably withheld, conditioned or delayed. Each party agrees to execute and deliver such documentation as the other party may reasonably request in connection with any such new lease or repooling, including, without limitation, a new lease, a lease amendment, and a new guaranty from Guarantor or confirmation from Guarantor that its existing Guaranty applies to any such new lease or lease amendment.

2.6 Right of First Refusal. At no time during the term of this Agreement may Tenant or any Affiliated Person as to Tenant (including, without limitation, TCA or any Affiliated Person as to TCA), directly or indirectly, purchase, lease, mortgage or otherwise finance (including through a sale and leaseback transaction), or participate in the purchase, lease, mortgage or financing of, any Travel Center, or any property intended to be used as a Travel Center in the United States or Canada, without first having (i) provided written notice of such proposed transaction to Landlord, describing such proposed transaction in sufficient detail (including pricing and all other material terms) and offering Landlord the right to purchase, lease, mortgage or finance such Travel Center or property and (ii) negotiated in good faith with Landlord. If, after ten (10) Business Days, Landlord and Tenant (or any applicable Affiliated Person as to Tenant) have not reached agreement on the terms of such purchase, lease, mortgage or financing, Tenant (or such Affiliated Person as to Tenant) will be free to purchase, lease, mortgage or finance such Travel Center or property itself or with others, free of the restrictions of this Section 2.6.

Tenant agrees that irreparable damage would occur if its obligations under this Section 2.6 were not performed in accordance with their terms and that Landlord’s remedy at law for Tenant’s breach of its obligations under this Section 2.6 would be inadequate. Upon any such breach, Landlord shall be entitled (in addition to any other rights or remedies it may have at law) to seek an injunction enjoining and restraining Tenant and/or such Affiliated Person as to Tenant from continuing such breach. Tenant agrees that the period of restriction and the geographical area of restriction imposed upon Tenant are fair and reasonable. If the provisions of this Section 2.6 relating to the period or the area of restriction are determined to exceed the maximum period or areas which a court having jurisdiction over the matter would deem enforceable, such period or area shall, for purposes of this Agreement, be deemed to be the maximum period or area which such court determines valid and enforceable. Nothing contained in this Section 2.6(b) shall limit Landlord from pursuing any other rights or remedies available to it for any breach by Tenant of any of its obligations under Section 2.6 (including, without limitation, any of the rights or remedies contemplated by Article 12 of this Agreement).

Article 3

RENT

3.1 Rent. Tenant shall pay, in lawful money of the United States of America which shall be legal tender for the payment of public and private debts, without offset, abatement, demand or deduction (unless otherwise expressly provided in this Agreement), Minimum Rent and Additional Rent to Landlord and Additional Charges to the party to whom such Additional Charges are payable, during the Term. All payments to Landlord shall be made by wire transfer of immediately available federal funds or by other means acceptable to Landlord in its sole discretion. Rent for any partial calendar month shall be prorated on a per diem basis.

3.1.1 Minimum Rent

(a) Payments. Minimum Rent shall be paid in equal monthly installments in arrears on the first Business Day of each calendar month during the Term.

(b) Adjustments of Minimum Rent Following Disbursements Under Sections 5.1.2(b), 10.2.3 and 11.2. Effective on the date of each disbursement to pay for the cost of any repairs, maintenance, renovations or replacements pursuant to Sections 5.1.2(b), 10.2.3 or 11.2, the annual Minimum Rent shall be increased by a per annum amount equal to the Disbursement Rate times the amount so disbursed.

3.1.2 Additional Rent

(a) Amount. Tenant shall pay additional rent (“Additional Rent”) with respect to each Lease Year (or portion thereof) during the Term subsequent to the Initial Base Year, with respect to each Property, in an amount equal to three percent (3%) of the amount by which Gross Revenues at such Property during such Lease Year exceed Gross Revenues at such Property during the Initial Base Year (or the equivalent portion thereof). In addition, Tenant shall pay Additional Rent with respect to each Lease Year (or portion thereof) during the Term subsequent to the 2019 Base Year, with respect to each Property, in an amount equal to one-half percent (0.5%) of the amount by which Gross Revenues at such Property during such Lease Year exceed Gross Revenues at such Property during the 2019 Base Year (or the equivalent portion thereof). For the avoidance of doubt, the payment of Additional Rent based on Gross Revenues in excess of Gross Revenues for the Initial Base Year and the payment of Additional Rent based on Gross Revenues in excess of Gross Revenues for the 2019 Base Year are separate and independent obligations.

(b) Quarterly Installments. Installments of Additional Rent for each Lease Year during the Term, or portion thereof, shall be calculated and paid quarterly in arrears, on the first Business Day of the subsequent quarter, together with an Officer’s Certificate setting forth the calculation of Additional Rent due and payable for such quarter.

(c) Reconciliation of Additional Rent. In addition, within seventy-five (75) days after the end of the Base Year and each Lease Year thereafter (or any portion thereof occurring during the Term), Tenant shall deliver, or cause to be delivered, to Landlord (i) a financial report setting forth the Gross Revenues for each Property for such preceding Lease Year, or portion thereof, together with an Officer’s Certificate, signed by an officer of Tenant, certifying that, to the best of Tenant’s knowledge, such report is true, correct and complete, and (ii) a statement showing Tenant’s calculation of Additional Rent due for such preceding Lease Year based on the Gross Revenues set forth in such financial report, together with an Officer’s Certificate, signed by an officer of Tenant, certifying that, to the best of Tenant’s knowledge, such statement is true, correct and complete.

If the annual Additional Rent for such preceding Lease Year as set forth in Tenant’s statement thereof exceeds the amount previously paid with respect thereto by Tenant, Tenant shall pay such excess to Landlord at such time as the statement is delivered, together with interest at the Interest Rate, which interest shall accrue from the close of such preceding Lease Year until the date that such statement is required to be delivered and, thereafter, such interest shall accrue at the Overdue Rate, until the amount of such difference shall be paid or otherwise discharged. If the annual Additional Rent for such preceding Lease Year as shown in such statement is less than the amount previously paid with respect thereto by Tenant, Landlord shall grant Tenant a credit against the Additional Rent next coming due in the amount of such difference, together with interest at the Interest Rate, which interest shall accrue from the date of payment by Tenant until the date such credit is applied or paid, as the case may be. If such credit cannot be made because the Term has expired prior to application in full thereof, Landlord shall pay the unapplied balance of such credit to Tenant, together with interest at the Interest Rate, which interest shall accrue from the date of payment by Tenant until the date of payment by Landlord.

(d) Confirmation of Additional Rent. Tenant shall utilize, or cause to be utilized, an accounting system for the Leased Property in accordance with its usual and customary practices and in all material respects in accordance with GAAP, which will accurately record all Gross Revenues and Tenant shall retain, for at least three (3) years after the expiration of each Lease Year, reasonably adequate records conforming to such accounting system showing all Gross Revenues for such Lease Year. Landlord, at its own expense, shall have the right, exercisable by Notice to Tenant, to review Tenant’s books and records and/or to retain an independent public accounting firm of Landlord’s choice to audit the information set forth in the Officer’s Certificate referred to in subparagraph (c) above and, in connection with any such audit, to examine Tenant’s books and records with respect thereto (including supporting data and sales and excise tax returns). Landlord shall begin any such review or audit as soon as reasonably possible following its receipt of the applicable Officer’s Certificate (or in the case of an audit after a review, promptly following completion of the review) and shall complete such review or audit as soon as reasonably possible thereafter. Any such review or audit shall be performed at the location where such books and records are customarily kept and in such a manner so as to minimize any interference with Tenant’s business operations. If any such review of Tenant’s books and records by Landlord discloses a deficiency in the payment of Additional Rent and Tenant agrees, or the decision of any arbitration shall have been that there shall have been a deficiency in payment of Additional Rent, Tenant shall forthwith pay to Landlord the amount of such deficiency together with interest at the Interest Rate from the date such payment should have been made to the date of payment thereof. If any such audit discloses a deficiency in the payment of Additional Rent, Tenant shall forthwith pay to Landlord the amount of the deficiency, as determined by such audit, together with interest at the Interest Rate, from the date such payment should have been made to the date of payment thereof. If any such audit discloses a deficiency in the payment of Additional Rent of more than five percent (5%), Tenant shall forthwith pay to Landlord an amount equal to one hundred twenty-five percent (125%) of any third party costs incurred by Landlord in connection with such audit. If any such audit discloses that Tenant paid more Additional Rent for any Lease Year than was due

hereunder, and Landlord agrees with the result of such audit or such overpayment shall have been determined by arbitration if Landlord does not agree with such audit, Landlord shall, at Landlord’s option, either grant Tenant a credit or pay to Tenant an amount equal to the amount of such overpayment against Additional Rent next coming due in the amount of such difference, as finally agreed or determined, together with interest at the Interest Rate, which interest shall accrue from the time of payment by Tenant until the date such credit is applied or paid, as the case may be; provided, however, that, upon the expiration or sooner termination of the Term, Landlord shall pay the unapplied balance of such credit to Tenant, together with interest at the Interest Rate, which interest shall accrue from the date of payment by Tenant until the date of payment from Landlord. Any dispute concerning the correctness of an audit or a Landlord review shall be settled by arbitration pursuant to the provisions of Article 22.

Any proprietary information obtained by Landlord with respect to Tenant pursuant to the provisions of this Agreement shall be treated as confidential, except that such information may be disclosed or used, subject to appropriate confidentiality safeguards, pursuant to court order or in any litigation between the parties and except further that Landlord may disclose such information to its prospective lenders, provided that Landlord shall direct such lenders to maintain such information as confidential. The obligations of Tenant and Landlord contained in this Section 3.1.2 shall survive the expiration or earlier termination of this Agreement.

3.1.3 Additional Charges. In addition to the Minimum Rent and Additional Rent payable hereunder, Tenant shall pay (or cause to be paid) to the appropriate parties and discharge (or cause to be discharged) as and when due and payable the following (collectively, “Additional Charges”):

shall, upon request of the other, provide such data as is maintained by the party to whom the request is made with respect to the Leased Property as may be necessary to prepare any required returns and reports. In the event Government Agencies classify any property covered by this Agreement as personal property, Tenant shall file, or cause to be filed, all personal property tax returns in such jurisdictions where it may legally so file. Each party shall, to the extent it possesses the same, provide the other, upon request, with cost and depreciation records necessary for filing returns for any property so classified as personal property. Where Landlord is legally required to file personal property tax returns for property covered by this Agreement, Landlord shall provide Tenant with copies of assessment notices in sufficient time for Tenant to file a protest. All Impositions assessed against such personal property shall be (irrespective of whether Landlord or Tenant shall file the relevant return) paid by Tenant not later than the last date on which the same may be made without interest or penalty, subject to the provisions of Article 8.

Landlord shall give prompt Notice to Tenant of all Impositions payable by Tenant hereunder of which Landlord at any time has knowledge; provided, however, that Landlord’s failure to give any such notice shall in no way diminish Tenant’s obligation hereunder to pay such Impositions.

(b) Utility Charges. Tenant shall pay or cause to be paid all charges for electricity, power, gas, oil, water and other utilities used in connection with the Leased Property.

(c) Insurance Premiums. Tenant shall pay or cause to be paid all premiums for the insurance coverage required to be maintained pursuant to Article 9.

(d) Other Charges. Tenant shall pay or cause to be paid all other amounts, liabilities and obligations, including, without limitation, all amounts payable under any equipment leases and all agreements to indemnify Landlord under Section 9.5.

(e) Reimbursement for Additional Charges. If Tenant pays or causes to be paid property taxes or similar or other Additional Charges attributable to periods after the end of the Term, whether upon expiration or sooner termination of this Agreement, Tenant may, within a reasonable time after the end of the Term, provide Notice to Landlord of its estimate of such amounts. Landlord shall promptly reimburse Tenant for all payments of such taxes and other similar Additional Charges that are attributable to any period after the Term of this Agreement.

(f) Deferred Rent. Commencing on January 1, 2020 through January 31, 2023, Tenant shall pay to Landlord, the total amount of Fifteen Million One Hundred Forty-Seven Thousand Seven Hundred Twenty and 00/100ths Dollars ($15,147,720.00) in thirteen (13) equal quarterly installments of One Million One Hundred Sixty-Five Thousand Two Hundred Nine and 00/100ths Dollars ($1,165,209.00) on the first Business Day of each calendar quarter during such period.

3.2 Late Payment of Rent, Etc. If any installment of Minimum Rent or Additional Rent or any Additional Charges (but only as to those Additional Charges which are payable directly to Landlord) shall not be paid on its due date, Tenant shall pay Landlord, on demand, as Additional Charges, a late charge (to the extent permitted by law) computed at the Overdue Rate on the amount of such installment, from the due date of such installment or amount to the date of payment thereof. To the extent that Tenant pays any Additional Charges directly to Landlord or any Property Mortgagee pursuant to any requirement of this Agreement, Tenant shall be relieved of its obligation to pay such Additional Charges to the Entity to which they would otherwise be due. If any payments due from Landlord to Tenant shall not be paid within ten (10) days after its due date, Landlord shall pay to Tenant, on demand, a late charge (to the extent permitted by law) computed at the Overdue Rate on the amount of such installment from the due date of such installment to the date of payment thereof.

In the event of any failure by Tenant to pay any Additional Charges when due, Tenant shall promptly pay and discharge, as Additional Charges, every fine, penalty, interest and cost which is added for non-payment or late payment of such items. Landlord shall have all legal, equitable and contractual rights, powers and remedies provided either in this Agreement or by statute or otherwise in the case of non-payment of the Additional Charges as in the case of non-payment of the Minimum Rent and Additional Rent.

3.3 Net Lease, Etc. The Rent shall be absolutely net to Landlord so that this Agreement shall yield to Landlord the full amount of the installments or amounts of the Rent throughout the Term, subject to any other provisions of this Agreement which expressly provide otherwise, including those provisions for adjustment or abatement of such Rent. Landlord and Tenant acknowledge and agree that none of the Rent provided for under this Agreement is allocable to any personal property included in the Leased Property.

3.4 No Termination, Abatement, Etc. Except as otherwise specifically provided in this Agreement, each of Landlord and Tenant, to the maximum extent permitted by law, shall remain bound by this Agreement in accordance with its terms and shall not take any action without the consent of the other to modify, surrender or terminate this Agreement. In addition, except as otherwise expressly provided in this Agreement, Tenant shall not seek, or be entitled to, any abatement, deduction, deferment or reduction of the Rent, or set-off against the Rent, nor shall the respective obligations of Landlord and Tenant be otherwise affected by reason of (a) any damage to or destruction of the Leased Property, or any portion thereof, from whatever  cause or any Condemnation; (b) the lawful or unlawful prohibition of, or restriction upon, Tenant’s use of the Leased Property, or any portion thereof, or the interference with such use by any Person or by reason of eviction by paramount title; (c) any claim which Tenant may have against Landlord by reason of any default (other than a monetary default) or breach of any warranty by Landlord under this Agreement or any other agreement between Landlord and Tenant, or to which Landlord and Tenant are parties; (d) any bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding up or other proceedings affecting Landlord or any assignee or transferee of Landlord; or (e) for any other cause whether similar or dissimilar to any of the foregoing (other than a monetary default by Landlord). Except as otherwise specifically provided in this Agreement, Tenant hereby waives all rights arising from any occurrence whatsoever, which may now or hereafter be conferred upon it by law (a) to modify, surrender or terminate this Agreement or quit or surrender the

Leased Property, or any portion thereof, or (b) which would entitle Tenant to any abatement, reduction, suspension or deferment of the Rent or other sums payable or other obligations to be performed by Tenant hereunder. The obligations of Tenant hereunder shall be separate and independent covenants and agreements, and the Rent and all other sums payable by Tenant hereunder shall continue to be payable in all events unless the obligations to pay the same shall be terminated pursuant to the express provisions of this Agreement.

Article 4

USE OF THE LEASED PROPERTY

4.1 Permitted Use

4.1.1 Permitted Use

(a) Tenant shall, at all times during the Term, and at any other time that Tenant shall be in possession of any Property, continuously use and operate, or cause to be used and operated, such Property as a Travel Center, as currently operated, and any uses incidental thereto. Tenant shall operate the Travel Centers under the name “TA”, “Travel Centers of America” or “Goasis”, or such other names as Tenant shall use for the travel center locations operated by it and its Affiliated Persons. Tenant shall not use (and shall not permit any Person to use) any Property, or any portion thereof, for any other use without the prior written consent of Landlord, which approval shall not be unreasonably withheld, delayed or conditioned. No use shall be made or permitted to be made of any Property and no acts shall be done thereon which will cause the cancellation of any insurance policy covering such Property or any part thereof (unless another adequate policy is available) or which would constitute a default under any ground lease affecting such Property, nor shall Tenant sell or otherwise provide, or permit to be kept, used or sold in or about any Property any article which may be prohibited by law or by the standard form of fire insurance policies, or any other insurance policies required to be carried hereunder, or fire underwriter’s regulations. Tenant shall, at its sole cost (except as expressly provided in Section 5.1.2(b)), comply or cause to be complied with all Insurance Requirements. Tenant shall not take or omit to take, or permit to be taken or omitted to be taken, any action, the taking or omission of which materially impairs the value or the usefulness of any Property or any part thereof for its Permitted Use.

that Landlord shall fail to accept or reject such Offer within thirty (30) days after receipt of such Notice, such Offer shall be deemed to be rejected by Landlord. If Landlord shall sell the Property pursuant to such Offer, then, effective as of the date of such sale, this Agreement shall terminate with respect to such Property, and the Minimum Rent shall be reduced by an amount equal to, at Landlord’s option, (x) the Percentage Reduction of the net proceeds of sale received by Landlord or (y) the Fair Market Value Rent of the applicable Property on the Commencement Date, such Fair Market Value Rent to be determined by agreement of the parties or, absent agreement, by an appraiser designated by Landlord. If Landlord shall reject (or be deemed to have rejected) such Offer, then, effective as of the proposed date of such sale, this Agreement shall terminate with respect to such Property, and the Minimum Rent shall be reduced by an amount equal to, at Landlord’s option (x) the applicable Percentage Reduction of the projected net proceeds determined by reference to such Offer or (y) the Fair Market Value Rent of the applicable Property on the Commencement Date, such Fair Market Value Rent to be determined by agreement of the parties or, absent agreement, by an appraiser designated by Landlord. Notwithstanding the foregoing, Tenant shall not have the right to invoke the provisions of this Section 4.1.1(b) with respect to more than twenty (20) Properties in the aggregate under this Agreement and the Other Leases during the Term. For purposes of the preceding sentence, “Properties” shall include any Property under this Lease and any “Property” (as defined therein) under any Other Lease.

4.1.2 Necessary Approvals. Tenant shall proceed with all due diligence and exercise reasonable efforts to obtain and maintain, or cause to be obtained and maintained, all approvals necessary to use and operate, for its Permitted Use, each Property and the Travel Center located thereon under applicable law.

4.1.3 Lawful Use, Etc. Tenant shall not, and shall not permit any Person to, use or suffer or permit the use of any Property or Tenant’s Personal Property, if any, for any unlawful purpose. Tenant shall not, and shall not permit any Person to, commit or suffer to be committed any waste on any Property, or in any Travel Center, nor shall Tenant cause or permit any unlawful nuisance thereon or therein. Tenant shall not, and shall not permit any Person to, suffer nor permit any Property, or any portion thereof, to be used in such a manner as (i) may materially and adversely impair Landlord’s or Tenant’s title thereto or to any portion thereof, or (ii) may reasonably allow a claim or claims for adverse usage or adverse possession by the public, as such, or of implied dedication of such Property, or any portion thereof.

4.2 Compliance with Legal/Insurance Requirements, Etc. Subject to the provisions of Section 5.1.2(b) and Article 8, Tenant, at its sole expense, shall (i) comply with (or cause to be complied with) all material Legal Requirements and Insurance Requirements in respect of the use, operation, maintenance, repair, alteration and restoration of any Property and with the terms and conditions of any ground lease affecting any Property, (ii) perform (or cause to be performed) in a timely fashion all of Landlord’s obligations under any ground lease affecting any Property except as provided in Section 4.4 and (iii) procure, maintain and comply with (or cause to be procured, maintained and complied with) all material licenses, permits and other authorizations and agreements required for any use of any Property and Tenant’s Personal Property, if any, then being made, and for the proper erection, installation, operation and maintenance of the Leased Property or any part thereof.

4.3 Environmental Matters.

4.3.1 Restriction on Use, Etc. During the Term and any other time that Tenant shall be in possession of any Property, Tenant shall not, and shall not permit any Person to, store on, release or spill upon, dispose of or transfer to or from such Property any Hazardous Substance, except in compliance with all Applicable Laws. During the Term and any other time that Tenant shall be in possession of any Property, Tenant shall maintain (or shall cause to be maintained) such Property at all times free of any Hazardous Substance (except in compliance with all Applicable Laws). Tenant shall promptly (and shall direct any Manager to promptly): (a) upon receipt of notice or knowledge, notify Landlord in writing of any material change in the nature or extent of Hazardous Substances at any Property, (b) transmit to Landlord a copy of any report which is required to be filed by Tenant or any Manager with respect to any Property pursuant to SARA Title III or any other Applicable Law, (c) transmit to Landlord copies of any citations, orders, notices or other governmental communications received by Tenant or any Manager or their respective agents or representatives with respect to Hazardous Substances or violations or alleged violations of Applicable Law (each an “Environmental Notice”), which Environmental Notice requires a written response or any action to be taken and/or if such Environmental Notice gives notice of and/or presents a material risk of any material violation of any Applicable Law and/or presents a material risk of any material cost, expense, loss or damage (an “Environmental Obligation”), (d) observe and comply with (or cause to be observed and complied with) all Applicable Laws relating to the use, storage, maintenance and disposal of Hazardous Substances and all orders or directives from any official, court or agency of competent jurisdiction relating to the use, storage or maintenance, or requiring the removal, treatment, containment or other disposition of Hazardous Substances, and (e) pay or otherwise dispose (or cause to be paid or otherwise disposed) of any fine, charge or Imposition related to Hazardous Substances or violations of Applicable Law for which Tenant or any Person claiming by, through or under Tenant and/or Landlord are legally liable, unless Tenant or any Manager shall contest the same in good faith and by appropriate proceedings and the right to use and the value of any of the Leased Property is not materially and adversely affected thereby.

If, at any time prior to the termination of this Agreement, Hazardous Substances (other than those maintained in accordance with Applicable Laws) are discovered on any Property, subject to Tenant’s right to contest the same in accordance with Article 8, Tenant shall take (and shall cause to be taken) all actions and incur any and all expenses, as are required by any Government Agency and by Applicable Law, (i) to clean up and remove from and about such Property all Hazardous Substances thereon, (ii) to contain and prevent any further discharge, release or threat of discharge or release of Hazardous Substances on or about such Property and (iii) to use good faith efforts to eliminate any further discharge, release or threat of discharge or release of Hazardous Substances on or about such Property.

request, Tenant shall remove from the Leased Property on or before the expiration or sooner termination hereof. An “Environmental Report” shall be a so-called “Phase I” report or such other level of investigation which shall be the standard of diligence in the purchase or lease of similar property at the time, together with any additional investigation and report which would be needed to make the conclusions required above or which would customarily follow any discovery contained in any initial report(s), and for which the investigation and testing on which the conclusions shall have been based shall have been performed not earlier than thirty (30) days prior to the date of such report.

4.3.3 Underground Storage Tanks. It is expressly understood and agreed that Tenant’s obligations under this Agreement shall include the maintenance and, if necessary, replacement of underground storage tanks at the Leased Property. Upon the expiration or sooner termination of this Agreement, Tenant shall pay to Landlord the amount of any asset retirement obligation reserve for underground storage tanks located at the Leased Property that Tenant would be required to recognize on its books and records pursuant to GAAP if Tenant owned those underground storage tanks. Upon such payment, Tenant’s obligations under this Agreement with respect to the maintenance and replacement of underground storage tanks shall terminate.

4.3.4 Survival. The provisions of this Section 4.3 shall survive the expiration or sooner termination of this Agreement.

4.4 Ground Leases. Tenant shall pay and perform all of Landlord’s obligations as tenant under the Ground Leases. If Landlord has the right, under the provisions of any of the Ground Leases, to elect to renew or extend the term of such Ground Leases or to purchase the ground leased property, Tenant shall so notify Landlord at least one hundred eighty (180) days (but no more than one (1) year) prior to the expiration of the period within which Landlord is obligated to notify the landlord under such Ground Leases of its election to renew, extend or purchase, as the case may be. Such notice from Tenant shall contain all of the relevant facts about the impending election to renew, extend or purchase, including, as applicable, the length of the period of renewal, the rental rate and/or the purchase price. In the event of the expiration or termination of any Ground Lease, this Agreement shall terminate with respect to such Property as of the date of such expiration or termination; provided, however, in such event, there shall be no reduction in the Minimum Rent. Landlord shall provide Tenant copies of notices received by Landlord from the lessor under any Ground Lease.

4.5 Shell Agreement. Tenant shall comply with its obligations under the Shell Agreement and Landlord and Tenant agree that this Agreement and the Other Leases shall, for purposes of Section 2 of the Subordination, Non-Disturbance and Attornment Agreement among Landlord, HPT PSC Properties Trust, HPT PSC Properties LLC, Tenant and Shell entered into as of April 15, 2013 (“Shell SNDA”) in connection with the Shell Agreement, constitute a replacement “Lease”, as defined in the SNDA, for the Prior Lease.

Article 5

MAINTENANCE AND REPAIRS

5.1 Maintenance and Repair.

5.1.1 Tenant’s General Obligations.

(a) Tenant shall keep (or cause to be kept), at Tenant’s sole cost and expense, the Leased Property and all private roadways, sidewalks and curbs appurtenant thereto (and Tenant’s Personal Property) in good order and repair, reasonable wear and tear excepted (whether or not the need for such repairs occurs as a result of Tenant’s or any Manager’s use, any prior use, the elements or the age of the Leased Property or Tenant’s Personal Property or any portion thereof), and shall promptly make or cause to be made all necessary and appropriate repairs and replacements thereto of every kind and nature, whether interior or exterior, structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen or arising by reason of a condition existing prior to the commencement of the Term (concealed or otherwise). All repairs shall be made in a good, workmanlike manner, consistent with industry standards for comparable Travel Centers in like locales, in accordance with all applicable federal, state and local statutes, ordinances, codes, rules and regulations relating to any such work. Tenant shall not take or omit to take (or permit any Person to take or omit to take) any action, the taking or omission of which would materially and adversely impair the value or the usefulness of the Leased Property or any material part thereof for its Permitted Use. Tenant’s use, occupancy and maintenance of the Leased Property shall comply with all published requirements imposed from time to time on a system-wide basis for TCA Travel Centers. Tenant’s obligations under this Section 5.1.1 shall be limited in the event of any casualty or Condemnation as set forth in Article 10 and Article 11 and Tenant’s obligations with respect to Hazardous Substances are as set forth in Section 4.3.

(b) Tenant shall prepare and submit to Landlord, on or before December 15 of each Lease Year during the Term hereof and for the next following Lease Year, a reasonably detailed budget (the “Capital Replacements Budget”) for the Leased Property, projecting all costs, expenses and expenditures expected to be incurred at the Leased Property during the following Lease Year for Capital Additions. The Capital Replacements Budget shall be supplemented by such information as Landlord shall reasonably request from time to time.

5.1.2 Landlord’s Obligations.

(a) Except as otherwise expressly provided in this Agreement, Landlord shall not, under any circumstances, be required to build or rebuild any improvement on the Real Property, or to make any repairs, replacements, alterations, restorations or renewals of any nature or description to the Leased Property, whether ordinary or extraordinary, structural or nonstructural, foreseen or unforeseen, or to make any expenditure whatsoever with respect thereto, or to maintain the Leased Property in any way. Except as otherwise expressly provided in this Agreement, Tenant hereby waives, to the maximum extent permitted by law, the right to make repairs at the expense

of Landlord pursuant to any law in effect on the Commencement Date or thereafter enacted. Landlord shall have the right to give, record and post, as appropriate, notices of nonresponsibility under any mechanic’s lien laws now or hereafter existing.

(b) If, pursuant to the terms of this Agreement, Tenant is required to make any Capital Expenditures, including, without limitation, the Capital Expenditures identified in any Capital Replacements Budget, Tenant may, at its election, advance such funds or give Landlord Notice thereof, which Notice shall set forth, in reasonable detail, the nature of the required Capital Expenditure, the estimated cost thereof and such other information with respect thereto as Landlord may reasonably require. Provided that no Event of Default shall have occurred and be continuing and Tenant shall otherwise comply with the applicable provisions of Article 6, Landlord shall, within ten (10) Business Days after such Notice, subject to and in accordance with the applicable provisions of Article 6, disburse such required funds to Tenant (or, if Tenant shall so elect, directly to the Manager or any other Person performing the required work) and, upon such disbursement, the Minimum Rent shall be adjusted as provided in Section 3.1.1(b). Notwithstanding the foregoing, Landlord may elect not to disburse such required funds to Tenant; provided, however, that if Landlord shall elect not to disburse such required funds as aforesaid, Tenant’s obligation to make such required Capital Expenditure shall be deemed waived by Landlord, and, notwithstanding anything contained in this Agreement to the contrary, Tenant shall have no obligation to make such Capital Expenditure.

5.1.3 Nonresponsibility of Landlord, Etc. All materialmen, contractors, artisans, mechanics and laborers and other persons contracting with Tenant with respect to the Leased Property, or any part thereof, are hereby charged with notice that liens on the Leased Property or on Landlord’s interest therein are expressly prohibited and that they must look solely to Tenant to secure payment for any work done or material furnished to Tenant or any Manager or for any other purpose during the term of this Agreement.

Nothing contained in this Agreement shall be deemed or construed in any way as constituting the consent or request of Landlord, express or implied, by inference or otherwise, to any contractor, subcontractor, laborer or materialmen for the performance of any labor or the furnishing of any materials for any alteration, addition, improvement or repair to the Leased Property or any part thereof or as giving Tenant any right, power or authority to contract for or permit the rendering of any services or the furnishing of any materials that would give rise to the filing of any lien against the Leased Property or any part thereof nor to subject Landlord’s estate in the Leased Property or any part thereof to liability under any mechanic’s lien law of any State in any way, it being expressly understood Landlord’s estate shall not be subject to any such liability.

5.2 Tenant’s Personal Property. Tenant shall provide and maintain (or cause to be provided and maintained) throughout the Term all such Tenant’s Personal Property as shall be necessary in order to operate in compliance with applicable material Legal Requirements and Insurance Requirements and otherwise in accordance with customary practice in the industry for the Permitted Use.

5.3 Yield Up. Upon the expiration or sooner termination of this Agreement, Tenant shall remove all of Tenant’s Personal Property (other than that purchased by Landlord pursuant to Article 15) and vacate and surrender the Leased Property to Landlord (except that Tenant shall not surrender its rights to use the trade names, trademarks, service marks, domain names, logos and other brand-source indicia, including all goodwill related thereto, to the extent necessary for it to comply with its obligations with respect to the Existing Third Party Trade Names and Service Mark Rights until the various dates on which the rights thereto of such third parties expire, to the extent and as more particularly described in Section 2.3) in substantially the same condition in which the Leased Property was in on the Commencement Date, except as repaired, rebuilt, restored, altered or added to as permitted or required by the provisions of this Agreement, reasonable wear and tear excepted (and casualty damage and Condemnation, in the event that this Agreement is terminated following a casualty or Condemnation in accordance with Article 10 or Article 11, excepted).

In addition, upon the expiration or earlier termination of this Agreement, Tenant shall, at Landlord’s sole cost and expense, use its good faith efforts to transfer (or cause to be transferred) to Landlord or its nominee, and cooperate with Landlord or Landlord’s nominee in connection with the processing of all applications for, licenses, operating permits and other governmental authorizations and all contracts, including contracts with Government Agencies and rights with third party franchisors which may be necessary for the use and operation of the Travel Centers as then operated (all such licenses, permits, authorizations and contracts being “Operating Rights”). Tenant hereby appoints Landlord as its attorney-in-fact, with full power of substitution, for the purpose of carrying out the provisions of this paragraph and taking any action, including, without limitation, executing, delivering and filing applications, certificates, instruments and other documents and papers with Government Agencies, and executing any instruments, assignments, conveyances, and other transfers which are required to be taken or executed by Tenant, on its behalf and in its name, which appointment is coupled with an interest, is irrevocable and durable and shall survive the subsequent dissolution of Tenant.

If requested by Landlord, Tenant shall continue to manage one or more of the Travel Centers after the expiration of the Term for up to one hundred eighty (180) days, on such reasonable terms (including receipt by Tenant of a market management fee), as Landlord shall reasonably request.

5.4 Management and Franchise Agreements. Tenant shall not, without Landlord’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned with respect to Tenant’s Affiliated Persons), enter into, amend or modify the provisions of, or extend or renew (or allow to be entered into, amended, modified, extended or renewed) any Management Agreement or TA Franchise Agreement. Any agreements entered into pursuant to the provisions of this Section 5.4 shall be subordinate to this Agreement and shall provide, inter alia, that all amounts due from Tenant thereunder shall be subordinate to all amounts due from Tenant to Landlord (provided that, as long as no Event of Default has occurred and is continuing, Tenant may pay all amounts due from it thereunder) and for termination thereof, at Landlord’s option, upon the termination of this Agreement. Tenant shall not take any action, grant any consent or permit any action or consent under, any Management Agreement or TA Franchise Agreement which might have a material adverse effect on Landlord, without the prior written

consent of Landlord. Tenant shall enforce, or cause to be enforced, all rights of the franchisor under the TA Franchise Agreements.

Article 6

IMPROVEMENTS, ETC.

6.1 Improvements to the Leased Property. Tenant may make, construct or install (or permit to be made, constructed or installed) any Capital Additions provided that construction or installation of the same will not adversely affect or violate any material Legal Requirement or Insurance Requirement applicable to any Property. No Capital Addition shall be made which would tie in or connect any Leased Improvements with any other improvements on property adjacent to any Property (and not part of the Land) including, without limitation, tie-ins of buildings or other structures or utilities. Except as permitted herein, Tenant shall not finance the cost of any construction of such improvement by the granting of a lien on or security interest in the Leased Property or such improvement, or Tenant’s interest therein, without the prior written consent of Landlord, which consent may be withheld by Landlord in Landlord’s sole discretion. Any such improvements shall, upon the expiration or sooner termination of this Agreement, remain or pass to and become the property of Landlord, free and clear of all encumbrances other than Permitted Encumbrances.

6.2 Salvage. All materials which are scrapped or removed in connection with the making of either Capital Additions or non-Capital Additions or repairs required by Article 5 shall be or become the property of the party that paid for such work.

Article 7

LIENS

Subject to Article 8, Tenant shall use its best efforts not, directly or indirectly, to create or allow to remain and shall promptly discharge (or cause to be discharged), at its expense, any lien, encumbrance, attachment, title retention agreement or claim upon the Leased Property, or any portion thereof, or Tenant’s leasehold interest therein or any attachment, levy, claim or encumbrance in respect of the Rent, other than (a) Permitted Encumbrances, (b) restrictions, liens and other encumbrances which are consented to in writing by Landlord, (c) liens for those taxes of Landlord which Tenant is not required to pay hereunder, (d) subleases permitted by Article 16, (e) liens for Impositions or for sums resulting from noncompliance with Legal Requirements so long as (i) the same are not yet due and payable, or (ii) are being contested in accordance with Article 8, (f) liens of mechanics, laborers, materialmen, suppliers or vendors incurred in the ordinary course of business that are not yet due and payable or are for sums that are being contested in accordance with Article 8, (g) any Property Mortgages or other liens which are the responsibility of Landlord pursuant to the provisions of Article 20 and (h) Landlord Liens and any other voluntary liens created by Landlord.

Article 8

PERMITTED CONTESTS

Tenant shall have the right to contest the amount or validity of any Imposition, Legal Requirement, Insurance Requirement, Environmental Obligation, lien, attachment, levy,

encumbrance, charge or claim (collectively, “Claims”) as to the Leased Property, by appropriate legal proceedings, conducted in good faith and with due diligence, provided that (a) the foregoing shall in no way be construed as relieving, modifying or extending Tenant’s obligation to pay (or cause to be paid) any Claims as finally determined, (b) such contest shall not cause Landlord or Tenant to be in default under any ground lease, mortgage or deed of trust encumbering the Leased Property, or any portion thereof (Landlord agreeing that any such ground lease, mortgage or deed of trust shall permit Tenant to exercise the rights granted pursuant to this Article 8) or any interest therein or result in or reasonably be expected to result in a lien attaching to the Leased Property, or any portion thereof, (c) no part of the Leased Property nor any Rent therefrom shall be in any immediate danger of sale, forfeiture, attachment or loss, and (d) Tenant shall indemnify and hold harmless Landlord from and against any cost, claim, damage, penalty or reasonable expense, including reasonable attorneys’ fees, incurred by Landlord in connection therewith or as a result thereof. Landlord agrees to join in any such proceedings if required legally to prosecute such contest, provided that Landlord shall not thereby be subjected to any liability therefor (including, without limitation, for the payment of any costs or expenses in connection therewith) unless Tenant agrees by agreement in form and substance reasonably satisfactory to Landlord, to assume and indemnify Landlord with respect to the same. Tenant shall be entitled to any refund of any Claims and such charges and penalties or interest thereon which have been paid by Tenant or paid by Landlord to the extent that Landlord has been fully reimbursed by Tenant. If Tenant shall fail (x) to pay or cause to be paid any Claims when finally determined, (y) to provide reasonable security therefor or (z) to prosecute or cause to be prosecuted any such contest diligently and in good faith, Landlord may, upon reasonable notice to Tenant (which notice shall not be required if Landlord shall reasonably determine that the same is not practicable), pay such charges, together with interest and penalties due with respect thereto, and Tenant shall reimburse Landlord therefor, upon demand, as Additional Charges.

Article 9

INSURANCE AND INDEMNIFICATION

9.1 General Insurance Requirements. Tenant shall, at all times during the Term and at any other time Tenant shall be in possession of any Property, or any portion thereof, keep (or cause to be kept) such Property and all property located therein or thereon, insured against the risks and in such amounts as Landlord shall reasonably require and may be commercially reasonable. Tenant shall prepare a proposal setting forth the insurance Tenant proposes to be maintained with respect to each Property during the ensuing Lease Year, and shall submit such proposal to Landlord on or before December 1^st of the preceding Lease Year, for Landlord’s review and approval, which approval shall not be unreasonably withheld, delayed or conditioned. In the event that Landlord shall fail to respond within thirty (30) days after receipt of such proposal, such proposal shall be deemed approved.

insurance companies (and, if Landlord or Tenant shall self insure in accordance with the terms hereof, Landlord or Tenant, as the case may be) shall have no right of subrogation against the other on account thereof, even though extra premium may result therefrom. In the event that any extra premium is payable by Tenant as a result of this provision, Landlord shall not be liable for reimbursement to Tenant for such extra premium.

9.3 Form Satisfactory, Etc. All insurance policies and endorsements required pursuant to this Article 9 shall be fully paid for, nonassessable, and issued by reputable insurance companies authorized to do business in the State and having a general policy holder’s rating of no less than A in Best’s latest rating guide. All property, business interruption, liability and flood insurance policies with respect to each Property shall include no deductible in excess of Five Hundred Thousand Dollars ($500,000). At all times, all property, business interruption, liability and flood insurance policies, with the exception of worker’s compensation insurance coverage, shall name Landlord and any Property Mortgagee as additional insureds, as their interests may appear. All loss adjustments shall be payable as provided in Article 10, except that losses under liability and worker’s compensation insurance policies shall be payable directly to the party entitled thereto. Tenant shall cause all insurance premiums to be paid and shall deliver (or cause to be delivered) policies or certificates thereof to Landlord prior to their effective date (and, with respect to any renewal policy, prior to the expiration of the existing policy). All such policies shall provide Landlord (and any Property Mortgagee if required by the same) thirty (30) days prior written notice of any material change or cancellation of such policy. In the event Tenant shall fail to effect (or cause to be effected) such insurance as herein required, to pay (or cause to be paid) the premiums therefor or to deliver (or cause to be delivered) such policies or certificates to Landlord or any Property Mortgagee at the times required, Landlord shall have the right, upon Notice to Tenant, but not the obligation, to acquire such insurance and pay the premiums therefor, which amounts shall be payable to Landlord, upon demand, as Additional Charges, together with interest accrued thereon at the Overdue Rate from the date such payment is made until (but excluding) the date repaid.

9.4 No Separate Insurance; Self-Insurance. Tenant shall not take (or permit any Person to take) out separate insurance, concurrent in form or contributing in the event of loss with that required by this Article 9, or increase the amount of any existing insurance by securing an additional policy or additional policies, unless all parties having an insurable interest in the subject matter of such insurance, including Landlord and all Property Mortgagees, are included therein as additional insureds and the loss is payable under such insurance in the same manner as losses are payable under this Agreement. In the event Tenant shall take out any such separate insurance or increase any of the amounts of the then existing insurance, Tenant shall give Landlord prompt Notice thereof. Tenant shall not self-insure (or permit any Person to self-insure).

death of, persons or loss of or damage to property occurring on or about any Property or portion thereof or adjoining sidewalks or rights of way during the Term, (b) any past, present or future condition or use, misuse, non-use, management, maintenance or repair by Tenant, any Manager or anyone claiming under any of them of any Property, Tenant’s Personal Property or Transferred Trademarks, or any litigation, proceeding or claim by governmental entities (other than Condemnation proceedings) or other third parties relating to any Property or portion thereof or Tenant’s Personal Property or such use, misuse, non-use, condition, management, maintenance, or repair thereof, including failure to perform obligations under this Agreement, to which Landlord is made a party during the Term (limited, in the case of Environmental Obligations, to those provided in Section 4.3.1), (c) any Impositions that are the obligations of Tenant to pay pursuant to the applicable provisions of this Agreement, and (d) any failure on the part of Tenant or anyone claiming under Tenant to perform or comply with any of the terms of this Agreement. Tenant, at its expense, shall contest, resist and defend any such claim, action or proceeding asserted or instituted against Landlord (and shall not be responsible for any duplicative attorneys’ fees incurred by Landlord) or may compromise or otherwise dispose of the same, with Landlord’s prior written consent (which consent may not be unreasonably withheld, delayed or conditioned). The obligations of Tenant under this Section 9.5 shall survive the termination of this Agreement.

Article 10

CASUALTY

10.1 Insurance Proceeds. Except as provided in the last clause of this sentence, all proceeds payable by reason of any loss or damage to any Property, or any portion thereof, and insured under any policy of insurance required by Article 9 (other than the proceeds of any business interruption insurance or insurance proceeds for Tenant’s Personal Property) shall be paid directly to Landlord (subject to the provisions of Section 10.2) and all loss adjustments with respect to losses payable to Landlord shall require the prior written consent of Landlord, which consent shall not be unreasonably withheld, delayed or conditioned; provided, however, that, so long as no Event of Default shall have occurred and be continuing, all such proceeds less than or equal to Two Hundred Fifty Thousand Dollars ($250,000) shall be paid directly to Tenant and such losses may be adjusted without Landlord’s consent. If Tenant is required to reconstruct or repair any Property as provided herein, such proceeds shall be paid out by Landlord from time to time for the reasonable costs of reconstruction or repair of such Property necessitated by such damage or destruction, subject to and in accordance with the provisions of Section 10.2.4. Any excess proceeds of insurance remaining after the completion of the restoration shall be paid to Tenant. In the event that the provisions of Section 10.2.1 are applicable, the insurance proceeds shall be retained by the party entitled thereto pursuant to Section 10.2.1.

10.2 Damage or Destruction.

to Landlord the amount of any deductible under the insurance policies covering such Travel Center, the amount of any uninsured loss and any difference between the replacement cost of the affected Property and the casualty insurance proceeds therefor, and the Minimum Rent shall be reduced by, at Landlord’s option, (x) the applicable Percentage Reduction of the total amount received by Landlord or (y) the Fair Market Value Rent of the applicable Property on the Commencement Date, such Fair Market Value Rent to be determined by agreement of the parties or, absent agreement, an appraiser designated by Landlord.

10.2.2 Partial Damage or Destruction. If, during the Term, any Property shall be totally or partially destroyed but the Travel Center located thereon is not rendered Unsuitable for Its Permitted Use, Tenant shall, subject to Section 10.2.3, promptly restore such Travel Center as provided in Section 10.2.4.

10.2.3 Insufficient Insurance Proceeds. If the cost of the repair or restoration of the applicable Travel Center exceeds the amount of insurance proceeds received by Landlord and Tenant pursuant to Section 9.1, Tenant shall give Landlord Notice thereof which notice shall set forth in reasonable detail the nature of such deficiency and whether Tenant shall pay and assume the amount of such deficiency (Tenant having no obligation to do so, except that, if Tenant shall elect to make such funds available, the same shall become an irrevocable obligation of Tenant pursuant to this Agreement). In the event Tenant shall elect not to pay and assume the amount of such deficiency, Landlord shall have the right (but not the obligation), exercisable in Landlord’s sole discretion by Notice to Tenant, given within sixty (60) days after Tenant’s notice of the deficiency, to elect to make available for application to the cost of repair or restoration the amount of such deficiency; provided, however, in such event, upon any disbursement by Landlord thereof, the Minimum Rent shall be adjusted as provided in Section 3.1.1(b). In the event that neither Landlord nor Tenant shall elect to make such deficiency available for restoration, either Landlord or Tenant may terminate this Agreement with respect to the affected Property by Notice to the other, whereupon, this Agreement shall so terminate and insurance proceeds shall be distributed as provided in Section 10.2.1. It is expressly understood and agreed, however, that, notwithstanding anything in this Agreement to the contrary, Tenant shall be strictly liable and solely responsible for the amount of any deductible and shall, upon any insurable loss, pay over the amount of such deductible to Landlord at the time and in the manner herein provided for payment of the applicable proceeds to Landlord.

Forms G702 and G703 (or on such other form or forms as may be reasonably acceptable to Landlord). Landlord may, at its option, condition advancement of such insurance proceeds and other amounts on (i) its approval of plans and specifications of an architect satisfactory to Landlord (which approval shall not be unreasonably withheld, delayed or conditioned), (ii) general contractors’ estimates, (iii) architect’s certificates, (iv) conditional lien waivers of general contractors, if available, (v) evidence of approval by all governmental authorities and other regulatory bodies whose approval is required, (vi) if Tenant has elected to advance deficiency funds pursuant to Section 10.2.3, Tenant depositing the amount thereof with Landlord and (vii) such other certificates as Landlord may, from time to time, reasonably require.

Landlord’s obligation to disburse insurance proceeds under this Article 10 shall be subject to the release of such proceeds by any Property Mortgagee to Landlord.

Tenant’s obligation to restore the applicable Property pursuant to this Article 10 shall be subject to the release of available insurance proceeds by the applicable Property Mortgagee to Landlord or directly to Tenant and, in the event such proceeds are insufficient, Landlord electing to make such deficiency available therefor (and disbursement of such deficiency).

10.3 Damage Near End of Term. Notwithstanding any provisions of Section 10.1 or 10.2 to the contrary, if damage to or destruction of any Property occurs during the last twelve (12) months of the Term and if such damage or destruction cannot reasonably be expected to be fully repaired and restored prior to the date that is six (6) months prior to the end of the Term, the provisions of Section 10.2.1 shall apply as if such Property had been totally or partially destroyed and the Travel Center thereon rendered Unsuitable for Its Permitted Use.

10.4 Tenant’s Personal Property. All insurance proceeds payable by reason of any loss of or damage to any of Tenant’s Personal Property shall be paid to Tenant and, to the extent necessary to repair or replace Tenant’s Personal Property in accordance with Section 10.5, Tenant shall hold such proceeds in trust to pay the cost of repairing or replacing damaged Tenant’s Personal Property.

10.5 Restoration of Tenant’s Personal Property. If Tenant is required to restore any Property as hereinabove provided, Tenant shall either (a) restore all alterations and improvements made by Tenant and Tenant’s Personal Property, or (b) replace such alterations and improvements and Tenant’s Personal Property with improvements or items of the same or better quality and utility in the operation of such Property.

10.6 No Abatement of Rent. This Agreement shall remain in full force and effect and Tenant’s obligation to make all payments of Rent and to pay all other charges as and when required under this Agreement shall remain unabated during the Term notwithstanding any damage involving the Leased Property, or any portion thereof (provided that Landlord shall credit against such payments any amounts paid to Landlord as a consequence of such damage under any business interruption insurance obtained by Tenant hereunder). The provisions of this Article 10 shall be considered an express agreement governing any cause of damage or destruction to the Leased Property, or any portion thereof, and, to the maximum extent permitted by law, no local or State statute, laws, rules, regulation or ordinance in effect during the Term which provide for such a contingency shall have any application in such case.

10.7 Waiver. Tenant hereby waives any statutory rights of termination which may arise by reason of any damage or destruction of the Leased Property, or any portion thereof.

Article 11

CONDEMNATION

11.1 Total Condemnation, Etc. If either (i) the whole of any Property shall be taken by Condemnation or (ii) a Condemnation of less than the whole of any Property renders any Property Unsuitable for Its Permitted Use, this Agreement shall terminate with respect to such Property, and Tenant and Landlord shall seek the Award for their interests in the applicable Property as provided in Section 11.5. Upon payment to Landlord of any such Award, the Minimum Rent shall be reduced by, at Landlord’s option, (x) the applicable Percentage Reduction of the amount of such Award received by Landlord or (y) the Fair Market Value Rent of the applicable Property on the Commencement Date, such Fair Market Value Rent to be determined by agreement of the parties or, absent agreement, an appraiser designated by Landlord.

11.2 Partial Condemnation. In the event of a Condemnation of less than the whole of any Property such that such Property is still suitable for its Permitted Use, Tenant shall, to the extent of the Award and any additional amounts disbursed by Landlord as hereinafter provided, commence (or cause to be commenced) promptly and continue diligently to restore (or cause to be restored) the untaken portion of the applicable Leased Improvements so that such Leased Improvements shall constitute a complete architectural unit of the same general character and condition (as nearly as may be possible under the circumstances) as such Leased Improvements existing immediately prior to such Condemnation, in material compliance with all Legal Requirements, subject to the provisions of this Section 11.2. If the cost of the repair or restoration of the affected Property exceeds the amount of the Award, Tenant shall give Landlord Notice thereof which notice shall set forth in reasonable detail the nature of such deficiency and whether Tenant shall pay and assume the amount of such deficiency (Tenant having no obligation to do so, except that if Tenant shall elect to make such funds available, the same shall become an irrevocable obligation of Tenant pursuant to this Agreement). In the event Tenant shall elect not to pay and assume the amount of such deficiency, Landlord shall have the right (but not the obligation), exercisable at Landlord’s sole election by Notice to Tenant given within sixty (60) days after Tenant’s Notice of the deficiency, to elect to make available for application to the cost of repair or restoration the amount of such deficiency; provided, however, in such event, upon any disbursement by Landlord thereof, the Minimum Rent shall be adjusted as provided in Section 3.1.1(b). In the event that neither Landlord nor Tenant shall elect to make such deficiency available for restoration, either Landlord or Tenant may terminate this Agreement with respect to the affected Property and the entire Award shall be allocated as set forth in Section 11.5.

plans and specifications of an architect satisfactory to Landlord (which approval shall not be unreasonably withheld, delayed or conditioned), (b) general contractors’ estimates, (c) architect’s certificates, (d) conditional lien waivers of general contractors, if available, (e) evidence of approval by all governmental authorities and other regulatory bodies whose approval is required, (f) if Tenant has elected to advance deficiency funds pursuant to the preceding paragraph, Tenant depositing the amount thereof with Landlord and (g) such other certificates as Landlord may, from time to time, reasonably require. Landlord’s obligation under this Section 11.2 to disburse the Award and such other amounts shall be subject to (x) the collection thereof by Landlord and (y) the satisfaction of any applicable requirements of any Property Mortgage, and the release of such Award by the applicable Property Mortgagee. Tenant’s obligation to restore the Leased Property shall be subject to the release of any portion of the Award by the applicable Property Mortgagee to Landlord.

11.3 Abatement of Rent. Other than as specifically provided in this Agreement, this Agreement shall remain in full force and effect and Tenant’s obligation to make all payments of Rent and to pay all other charges as and when required under this Agreement shall remain unabated during the Term notwithstanding any Condemnation involving the Leased Property, or any portion thereof. The provisions of this Article 11 shall be considered an express agreement governing any Condemnation involving the Leased Property and, to the maximum extent permitted by law, no local or State statute, law, rule, regulation or ordinance in effect during the Term which provides for such a contingency shall have any application in such case.

11.4 Temporary Condemnation. In the event of any temporary Condemnation of any Property or Tenant’s interest therein, this Agreement shall continue in full force and effect and Tenant shall continue to pay (or cause to be paid), in the manner and on the terms herein specified, the full amount of the Rent. Tenant shall continue to perform and observe (or cause to be performed and observed) all of the other terms and conditions of this Agreement on the part of the Tenant to be performed and observed. The entire amount of any Award made for such temporary Condemnation allocable to the Term, whether paid by way of damages, rent or otherwise, shall be paid to Tenant. Tenant shall, promptly upon the termination of any such period of temporary Condemnation, at its sole cost and expense, restore the affected Property to the condition that existed immediately prior to such Condemnation, in material compliance with all applicable Legal Requirements, unless such period of temporary Condemnation shall extend beyond the expiration of the Term, in which event Tenant shall not be required to make such restoration.

11.5 Allocation of Award. Except as provided in Section 11.4 and the second sentence of this Section 11.5, the total Award shall be solely the property of and payable to Landlord. Any portion of the Award made for the taking of Tenant’s leasehold interest in the Leased Property, loss of business during the remainder of the Term, the taking of Tenant’s Personal Property, the taking of Capital Additions paid for by Tenant and Tenant’s removal and relocation expenses shall be the sole property of and payable to Tenant. In any Condemnation proceedings, Landlord and Tenant shall each seek its own Award in conformity herewith, at its own expense.

Article 12

DEFAULTS AND REMEDIES

12.1 Events of Default. The occurrence of any one or more of the following events shall constitute an “Event of Default” hereunder:

(a) should Tenant fail to make any payment of the Rent or any other sum payable hereunder when due and should such failure continue for a period of five (5) Business Days after Notice thereof from Landlord to Tenant; or

(b) should Tenant default in the due observance or performance of any of the terms, covenants or agreements contained herein to be performed or observed by it (other than as specified in clause (a) above) and should such default continue for a period of thirty (30) days after Notice thereof from Landlord to Tenant; provided, however, that if such default is susceptible of cure but such cure cannot be accomplished with due diligence within such period of time and if, in addition, Tenant commences to cure or cause to be cured such default within thirty (30) days after Notice thereof from Landlord and thereafter prosecutes the curing of such default with all due diligence, such period of time shall be extended to such period of time (not to exceed an additional ninety (90) days in the aggregate) as may be necessary to cure such default with all due diligence; or

(c) should any obligation of Tenant or any Guarantor in respect of any Indebtedness of Ten Million Dollars ($10,000,000) or more for money borrowed or for any material property or services, or any guaranty relating thereto, be declared to be or become due and payable prior to the stated maturity thereof, or should there occur and be continuing with respect to any such Indebtedness any event of default under any instrument or agreement evidencing or securing the same, the effect of which is to permit the holder or holders of such instrument or agreement or a trustee, agent or other representative on behalf of such holder or holders, to cause any such obligations to become due prior to its stated maturity; or

(d) should an event of default occur and be continuing beyond the expiration of any applicable cure period under any Guaranty; or

(e) should Tenant or any Guarantor generally not be paying its debts as they become due or should Tenant or any Guarantor make a general assignment for the benefit of creditors; or

(f) should any petition be filed by or against Tenant or any Guarantor under the Federal bankruptcy laws, or should any other proceeding be instituted by or against Tenant or any Guarantor seeking to adjudicate Tenant or any Guarantor a bankrupt or insolvent, or seeking liquidation, reorganization, arrangement, adjustment or composition of Tenant’s or any Guarantor’s debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for Tenant or any Guarantor or for any substantial part of the property of Tenant or any Guarantor and

such proceeding is not dismissed within one hundred eighty (180) days after institution thereof; or

(g) should Tenant or any Guarantor cause or institute any proceeding for its dissolution or termination; or

(h) should the estate or interest of Tenant in the Leased Property or any part thereof be levied upon or attached in any proceeding and the same shall not be vacated or discharged within the later of (x) ninety (90) days after commencement thereof, unless the amount in dispute is less than $250,000, in which case Tenant shall give Notice to Landlord of the dispute but Tenant may defend in any suitable way, and (y) two hundred seventy (270) days after receipt by Tenant of Notice thereof from Landlord (unless Tenant shall be contesting such lien or attachment in good faith in accordance with Article 8); or

(i) should there occur any direct or indirect Change in Control of Tenant or any Guarantor, except as otherwise permitted by Article 16; or

(j) should there occur any “Event of Default” (as defined therein) under any Other Lease.

then, and in any such event, Landlord, in addition to all other remedies available to it, may terminate this Agreement with respect to any or all of the Leased Property (except with respect to any Existing Third Party Trade Names and Service Mark Rights to the extent and as more particularly described in Section 2.3) by giving Notice thereof to Tenant and upon the expiration of the time, if any, fixed in such Notice, this Agreement shall terminate with respect to all or the designated portion of the Leased Property and all rights of Tenant under this Agreement with respect thereto shall cease. Landlord shall have and may exercise all rights and remedies available at law and in equity to Landlord as a result of Tenant’s breach of this Agreement.

Upon the termination of this Agreement in connection with any Event of Default, Landlord may, in addition to any other remedies provided herein (including the rights set forth in Section 5.3), enter upon the Real Property, or any portion thereof and take possession thereof, without liability for trespass or conversion (Tenant hereby waiving any right to notice or hearing prior to such taking of possession by Landlord).

as current damages, the Rent (Additional Rent and Additional Charges to be reasonably calculated by Landlord) which would be payable hereunder for the remainder of the Term had such termination not occurred, less the net proceeds, if any, of any reletting of the Leased Property, or any portion thereof, after deducting all reasonable expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys’ fees, advertising, expenses of employees, alteration costs and expenses of preparation for such reletting. Tenant shall pay such current damages to Landlord monthly on the days on which the Minimum Rent would have been payable hereunder if this Agreement had not been so terminated with respect to such of the Leased Property.

At any time after such termination, whether or not Landlord shall have collected any such current damages, as liquidated final damages beyond the date of such termination, at Landlord’s election, Tenant shall pay to Landlord an amount equal to the present value (as reasonably determined by Landlord using a discount rate equal to five percent (5%) per annum) of the excess, if any, of the Rent and other charges which would be payable hereunder from the date of such termination (assuming that, for the purposes of this paragraph, annual payments by Tenant on account of Additional Rent and Additional Charges would be the same as payments required for the immediately preceding twelve calendar months, or if less than twelve calendar months have expired since the Commencement Date, the payments required for such lesser period projected to an annual amount) for what would be the then unexpired term of this Agreement if the same remained in effect, over the fair market rental for the same period. Nothing contained in this Agreement shall, however, limit or prejudice the right of Landlord to prove and obtain in proceedings for bankruptcy or insolvency an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater than, equal to, or less than the amount of the loss or damages referred to above.

In case of any Event of Default, re-entry, expiration and dispossession by summary proceedings or otherwise, Landlord may, (a) relet the Leased Property or any part or parts thereof, either in the name of Landlord or otherwise, for a term or terms which may at Landlord’s option, be equal to, less than or exceed the period which would otherwise have constituted the balance of the Term and may grant concessions or free rent to the extent that Landlord considers advisable and necessary to relet the same, and (b) may make such reasonable alterations, repairs and decorations in the Leased Property, or any portion thereof, as Landlord, in its sole and absolute discretion, considers advisable and necessary for the purpose of reletting the Leased Property; and the making of such alterations, repairs and decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Landlord shall in no event be liable in any way whatsoever for any failure to relet all or any portion of the Leased Property, or, in the event that the Leased Property is relet, for failure to collect the rent under such reletting. To the maximum extent permitted by law, Tenant hereby expressly waives any and all rights of redemption granted under any present or future laws in the event of Tenant being evicted or dispossessed, or in the event of Landlord obtaining possession of the Leased Property, by reason of the occurrence and continuation of an Event of Default hereunder.

other Section of this Agreement), in no event shall the damages recovered by Landlord pursuant to this Agreement exceed an amount equal to the sum of (i) the present value (as reasonably determined by Landlord using a discount rate equal to ten and eight tenths percent (10.8%) per annum) of the Minimum Rent which would be payable hereunder from the date of such termination for what would be the then unexpired Term of this Agreement if the same remained in effect; and (ii) all amounts due and unpaid under this Agreement as of the date of the occurrence of the Event of Default.

12.3 Tenant’s Waiver. IF THIS AGREEMENT IS TERMINATED PURSUANT TO SECTION 12.1 OR 12.2, TENANT WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN THE EVENT OF SUMMARY PROCEEDINGS TO ENFORCE THE REMEDIES SET FORTH IN THIS ARTICLE 12, AND THE BENEFIT OF ANY LAWS NOW OR HEREAFTER IN FORCE EXEMPTING PROPERTY FROM LIABILITY FOR RENT OR FOR DEBT.

12.4 Application of Funds. Any payments received by Landlord under any of the provisions of this Agreement during the existence or continuance of any Event of Default (and any payment made to Landlord rather than Tenant due to the existence of any Event of Default) shall be applied to Tenant’s current and past due obligations under this Agreement in such order as Landlord may determine or as may be prescribed by the laws of the State. Any balance shall be paid to Tenant.

12.5 Landlord’s Right to Cure Tenant’s Default. If an Event of Default shall have occurred and be continuing, Landlord, after Notice to Tenant (which Notice shall not be required if Landlord shall reasonably determine immediate action is necessary to protect person or property), without waiving or releasing any obligation of Tenant and without waiving or releasing any Event of Default, may (but shall not be obligated to), at any time thereafter, make such payment or perform such act for the account and at the expense of Tenant, and may, to the maximum extent permitted by law, enter upon the Real Property, or any portion thereof, for such purpose and take all such action thereon as, in Landlord’s sole and absolute discretion, may be necessary or appropriate therefor. No such entry shall be deemed an eviction of Tenant. All reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees) incurred by Landlord in connection therewith, together with interest thereon (to the extent permitted by law) at the Overdue Rate from the date such sums are paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.

12.6 Landlord’s Right to Cure Tenant Defaults under the Shell Agreement. If a default by Tenant or any of its applicable affiliates shall have occurred and be continuing under the Shell Agreement, Landlord, after Notice to Tenant (which Notice shall not be required if Landlord shall reasonably determine immediate action is necessary to protect person or property), without waiving or releasing any obligation of Tenant and without waiving or releasing any default, may (but shall not be obligated to), at any time thereafter, make such payment or perform such act for the account and at the expense of Tenant, and may, to the maximum extent permitted by law, enter upon the Property, or any portion thereof, for such purpose and take all such action thereon as, in Landlord’s sole and absolute discretion, may be necessary or appropriate therefor. No such entry shall be deemed an eviction of Tenant. All reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees) incurred

by Landlord in connection therewith, together with interest thereon (to the extent permitted by law) at the Overdue Rate from the date such sums are paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.

Article 13

HOLDING OVER

Any holding over by Tenant after the expiration or sooner termination of this Agreement shall be treated as a daily tenancy at sufferance at a rate equal to two (2) times the Minimum Rent and other charges herein provided (prorated on a daily basis). Tenant shall also pay to Landlord all damages (direct or indirect) sustained by reason of any such holding over. Otherwise, such holding over shall be on the terms and conditions set forth in this Agreement, to the extent applicable. Nothing contained herein shall constitute the consent, express or implied, of Landlord to the holding over of Tenant after the expiration or earlier termination of this Agreement.

Article 14

LANDLORD DEFAULT

If Landlord shall default in the performance or observance of any of its covenants or obligations set forth in this Agreement or any obligation of Landlord, if any, under any agreement affecting the Leased Property, the performance of which is not Tenant’s obligation pursuant to this Agreement, and any such default shall continue for a period of thirty (30) days after Notice thereof from Tenant to Landlord and any applicable Property Mortgagee, or such additional period as may be reasonably required to correct the same, Tenant may declare the occurrence of a “Landlord Default” by a second Notice to Landlord and to such Property Mortgagee. Thereafter, Tenant may forthwith cure the same and, subject to the provisions of the following paragraph, invoice Landlord for costs and expenses (including reasonable attorneys’ fees and court costs) incurred by Tenant in curing the same, together with interest thereon (to the extent permitted by law) from the date Landlord receives Tenant’s invoice until paid, at the Overdue Rate. Tenant shall have no right to terminate this Agreement for any default by Landlord hereunder and no right, for any such default, to offset or counterclaim against any Rent or other charges due hereunder.

If Landlord shall in good faith dispute the occurrence of any Landlord Default and Landlord, before the expiration of the applicable cure period, shall give Notice thereof to Tenant, setting forth, in reasonable detail, the basis therefor, no Landlord Default shall be deemed to have occurred and Landlord shall have no obligation with respect thereto until final adverse determination thereof. If Tenant and Landlord shall fail, in good faith, to resolve any such dispute within ten (10) days after Landlord’s Notice of dispute, either may submit the matter for resolution in accordance with Article 22.

Article 15

PURCHASE OF TENANT’S PERSONAL PROPERTY

Landlord shall have the option to purchase Tenant’s Personal Property and any other property of any of Tenant’s subtenants which are Affiliated Persons of Tenant and which is used

in connection with the operation of any Travel Center, at the expiration or sooner termination of this Agreement, for an amount equal to the then fair market value thereof (current replacement cost as determined by agreement of the parties or, in the absence of such agreement, appraisal), subject to, and with appropriate price adjustments for, all liabilities assumed such as equipment leases, conditional sale contracts and other encumbrances securing such liabilities to which such Personal Property or property of such subtenant is subject. In addition, upon the expiration or sooner termination of this Agreement, Landlord shall have the right (i) to require Tenant or any Affiliated Person of Tenant to grant a perpetual license to Landlord or its nominee all software programs and similar intellectual property owned or licensed by Tenant or any such Affiliated Person used at the Travel Centers for an amount equal to the then fair market value thereof (current replacement cost as determined by agreement of the parties or, in the absence of such agreement, appraisal), subject to, and with appropriate price adjustments for, all liabilities assumed, and (ii) to offer employment to any and all employees of Tenant and any Affiliated Person of Tenant employed at the Travel Centers. Tenant shall cause each Affiliated Person of Tenant to enter into any license and sub-license necessary to effectuate the foregoing and shall not interfere with, and shall cause each such Affiliated Person to cooperate with Landlord and its nominees, and not to interfere with, the exercise of such right.

Article 16

SUBLETTING AND ASSIGNMENT

16.1 Subletting and Assignment. Except as provided in Section 16.3, Tenant shall not, without Landlord’s prior written consent (which consent may be given or withheld in Landlord’s sole and absolute discretion), assign, mortgage, pledge, hypothecate, encumber or otherwise transfer this Agreement or sublease or permit the sublease (which term shall be deemed to include the granting of concessions, licenses, sublicenses and the like), of the Leased Property, or any portion thereof, or suffer or permit this Agreement or the leasehold estate created hereby or any other rights arising under this Agreement to be assigned, transferred, mortgaged, pledged, hypothecated or encumbered, in whole or in part, whether voluntarily, involuntarily or by operation of law, or permit the use or operation of the Leased Property, or any portion thereof, by anyone other than Tenant or any Manager approved by Landlord pursuant to the applicable provisions of this Agreement, or the Leased Property, or any portion thereof, to be offered or advertised for assignment or subletting.

For purposes of this Section 16.1, an assignment of this Agreement shall be deemed to include, without limitation, any direct or indirect Change in Control of Tenant.

If this Agreement is assigned or if the Leased Property, or any portion thereof is sublet (or occupied by anybody other than Tenant or any Manager and their respective employees), after termination of this Agreement, Landlord may collect the rents from such assignee, subtenant or occupant, as the case may be, but no such collection shall be deemed a waiver of the provisions set forth in the first paragraph of this Section 16.1, the acceptance by Landlord of such assignee, subtenant or occupant, as the case may be, as a tenant, or a release of Tenant from the future performance by Tenant of its covenants, agreements or obligations contained in this Agreement.

Any assignment or transfer of Tenant’s interest under this Agreement shall be subject to such assignee’s or transferee’s delivery to Landlord of a Guaranty, which Guaranty shall be in form and substance satisfactory to Landlord in its sole discretion and which Guaranty shall constitute a Guaranty hereunder.

No subletting or assignment shall in any way impair the continuing primary liability of Tenant hereunder (unless Landlord and Tenant expressly otherwise agree that Tenant shall be released from all obligations hereunder), and no consent to any subletting or assignment in a particular instance shall be deemed to be a waiver of the prohibition set forth in this Section 16.1. No assignment, subletting or occupancy shall affect any Permitted Use. Any subletting, assignment or other transfer of Tenant’s interest under this Agreement in contravention of this Section 16.1 shall be voidable at Landlord’s option.

16.2 Required Sublease Provisions. Except for subleases which are terminable at will by Tenant on not more than sixty (60) days’ prior notice, any sublease of all or any portion of the Leased Property entered into on or after the Commencement Date shall provide (a) that the subtenant shall, at Landlord’s or Tenant’s request pursuant to Tenant’s obligations or Landlord’s rights under Section 5.3 or Article 15, transfer as so requested any of its Operating Rights and/or other property relating to such Leased Property (and shall be deemed to have granted Landlord the power of attorney with respect to its Operating Rights and other property as Tenant has granted pursuant to the second sentence of the second paragraph of Section 5.3); (b) that it is subject and subordinate to this Agreement and to the matters to which this Agreement is or shall be subject or subordinate; (c) that in the event of termination of this Agreement or reentry or dispossession of Tenant by Landlord under this Agreement, Landlord may, at its option, terminate such sublease or take over all of the right, title and interest of Tenant, as sublessor under such sublease, and such subtenant shall, at Landlord’s option, attorn to Landlord pursuant to the then executory provisions of such sublease, except that neither Landlord nor any Property Mortgagee, as holder of a mortgage or as Landlord under this Agreement, if such mortgagee succeeds to that position, shall (i) be liable for any act or omission of Tenant under such sublease, (ii) be subject to any credit, counterclaim, offset or defense which theretofore accrued to such subtenant against Tenant, (iii) be bound by any previous modification of such sublease not consented to in writing by Landlord or by any previous prepayment of more than one (1) month’s rent, (iv) be bound by any covenant of Tenant to undertake or complete any construction of the applicable Property, or any portion thereof, (v) be required to account for any security deposit of the subtenant other than any security deposit actually delivered to Landlord by Tenant, (vi) be bound by any obligation to make any payment to such subtenant or grant any credits, except for services, repairs, maintenance and restoration provided for under the sublease that are performed after the date of such attornment, (vii) be responsible for any monies owing by Tenant to the credit of such subtenant unless actually delivered to Landlord by Tenant, or (viii) be required to remove any Person occupying any portion of the Leased Property; and (d) in the event that such subtenant receives a written Notice from Landlord or any Property Mortgagee stating that this Agreement has terminated, such subtenant shall thereafter be obligated to pay all rentals accruing under such sublease directly to the party giving such Notice or as such party may direct. Such sublease shall provide that the subtenant thereunder shall, at the request of Landlord, execute a suitable instrument in confirmation of such agreement to attorn. An original counterpart of each such sublease and assignment and assumption, duly executed by Tenant and such subtenant or assignee, as the case may be, in form and substance reasonably satisfactory to

Landlord, shall be delivered promptly to Landlord and (a) in the case of an assignment, the assignee shall assume in writing and agree to keep and perform all of the terms of this Agreement on the part of Tenant to be kept and performed and shall be, and become, jointly and severally liable with Tenant for the performance thereof and (b) in case of either an assignment or subletting, Tenant shall remain primarily liable, as principal rather than as surety, for the prompt payment of the Rent and for the performance and observance of all of the covenants and conditions to be performed by Tenant hereunder.

The provisions of this Section 16.2 shall not be deemed a waiver of the provisions set forth in the first paragraph of Section 16.1.

16.3 Permitted Sublease. Subject to the provisions of Section 16.2 and Section 16.4 and any other express conditions or limitations set forth herein, Tenant may, in each instance without consent, (a) enter into third party agreements or sublease space at any Property for fuel station, restaurant/food service or mechanical repair purposes or other concessions in furtherance of the Permitted Use, so long as such subleases will not violate or affect any Legal Requirement or Insurance Requirement, and Tenant shall provide such additional insurance coverage applicable to the activities to be conducted in such subleased space as Landlord and any Property Mortgagee may reasonably require, and (b) enter into one or more subleases or licenses with Affiliated Persons of Tenant with respect to the Leased Property, or any portion thereof (including but without limitation with respect to any trade names, trademarks, service marks, domain names, logos and other brand-source indicia, including all goodwill related thereto, constituting part of the Transferred Trademarks), provided such subleases or licenses or sublicenses do not grant any rights beyond the Term. Landlord and Tenant acknowledge and agree that if Tenant enters into one (1) or more subleases, licenses or sublicenses with Affiliated Persons of Tenant with respect to any Property, or any portion thereof, in accordance with the preceding clause (b), Tenant may allocate the rent and other charges with respect to the affected Property in any reasonable manner; provided, however, that such allocation shall not affect Tenant’s (nor any Guarantor’s) liability for the Rent and other obligations of Tenant under this Agreement; and, provided, further, that Tenant shall give Landlord prompt written notice of any allocation or reallocation of the rent and other charges with respect to the affected Property and, in any event, Tenant shall give Landlord written notice of the amount of such allocations at least ten (10) Business Days prior to the date that Landlord or any beneficial owner of Landlord is required to file any tax returns in any State where such affected Leased Property is located.

16.4 Sublease Limitation. Anything contained in this Agreement to the contrary notwithstanding, Tenant shall not sublet or sublicense the Leased Property, or any portion thereof, on any basis such that the rental to be paid by any sublessee or sublicensee thereunder would be based, in whole or in part, on the net income or profits derived by the business activities of such sublessee or sublicensee, any other formula such that any portion of such sublease rental or sublicense would fail to qualify as “rents from real property” within the meaning of Section 856(d) of the Code, or any similar or successor provision thereto or would otherwise disqualify Landlord or any Affiliated Person for treatment as a “real estate investment trust” under the Code.

Article 17

ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS

17.1 Estoppel Certificates. At any time and from time to time, but not more than a reasonable number of times per year, upon not less than ten (10) Business Days prior Notice by either party, the party receiving such Notice shall furnish to the other an Officer’s Certificate certifying that this Agreement is unmodified and in full force and effect (or that this Agreement is in full force and effect as modified and setting forth the modifications), the date to which the Rent has been paid, that no Default or an Event of Default has occurred and is continuing or, if a Default or an Event of Default shall exist, specifying in reasonable detail the nature thereof, and the steps being taken to remedy the same, and such additional information as the requesting party may reasonably request. Any such certificate furnished pursuant to this Section 17.1 may be relied upon by the requesting party, its lenders and any prospective purchaser or mortgagee of the Leased Property, or any portion thereof, or the leasehold estate created hereby.

17.2 Financial Statements. Tenant shall furnish or cause TCA to furnish, as applicable, the following statements to Landlord:

(a) within forty-five (45) days after each of the first three fiscal quarters of any Fiscal Year, the most recent Consolidated Financials, accompanied by the Financial Officer’s Certificate; provided, however, if (i) Tenant’s or Guarantor’s financial statements are accessible online through filings with the SEC, (ii) such filings have been filed timely and completely as required by the SEC and (iii) Tenant shall be a wholly owned subsidiary of Guarantor, then Tenant shall not be required to provide Landlord with any Consolidated Financials or a Financial Officer’s Certificate;

(b) within ninety (90) days after the end of each Fiscal Year, the most recent Consolidated Financials and financials of Tenant for such year, certified by an independent certified public accountant reasonably satisfactory to Landlord and accompanied by a Financial Officer’s Certificate; provided, however, if (i) Tenant’s or Guarantor’s audited financial statements are accessible online through filings with the SEC, (ii) such filings have been filed timely and completely as required by the SEC and (iii) Tenant shall be a wholly owned subsidiary of Guarantor, then Tenant shall not be required to provide Landlord with any Consolidated Financials or a Financial Officer’s Certificate;

(c) within forty-five (45) days after the end of each month, an unaudited operating statement and statement of Capital Expenditures prepared on a Property by Property basis and a combined basis, accompanied by a Financial Officer’s Certificate;

(d) at any time and from time to time upon not less than twenty (20) days Notice from Landlord or such additional period as may be reasonable under the circumstances, any Consolidated Financials, Tenant financials or any other audited or unaudited financial reporting information required to be filed by Landlord with any securities and exchange commission, the SEC or any successor agency, or any other governmental authority, or required pursuant to any order issued by any court,

governmental authority or arbitrator in any litigation to which Landlord is a party, for purposes of compliance therewith;

(e) promptly after receipt or sending thereof, copies of all notices alleging a material default given or received by Tenant under any Management Agreement or TA Franchise Agreement; and

(f) promptly upon Notice from Landlord, such other information concerning the business, financial condition and affairs of Tenant, any Guarantor, and/or any Affiliated Person of Tenant as Landlord reasonably may request from time to time.

Landlord may at any time, and from time to time, provide any Property Mortgagee with copies of any of the foregoing statements, subject to Landlord obtaining the agreement of such Property Mortgagee to maintain such statements and the information therein as confidential.

Article 18

LANDLORD’S RIGHT TO INSPECT, QUALITY CONTROL, USE OF TRANSFERRED TRADEMARKS AND ENFORCEMENT

18.1 Inspection. Tenant shall permit Landlord and its authorized representatives to inspect the Leased Property, or any portion thereof, during usual business hours upon not less than forty-eight (48) hours’ notice and to make such repairs as Landlord is permitted or required to make pursuant to the terms of this Agreement, provided that any inspection or repair by Landlord or its representatives will not unreasonably interfere with Tenant’s use and operation of the Leased Property and further provided that in the event of an emergency, as determined by Landlord in its reasonable discretion, prior Notice shall not be necessary.

18.2 Quality Control. Landlord shall have the right to exercise quality control over the use made by Tenant (and any and all Affiliated Persons and permitted sublicensees) of the Transferred Trademarks to a degree reasonably necessary to maintain the validity and enforceability of the Transferred Trademarks and to protect the goodwill associated therewith. Tenant (and any and all Affiliated Persons and permitted sublicensees) shall not combine the Transferred Trademarks with any other trademarks, service marks, trade names, logos, domain names or other brand-source indicia unless it obtains Landlord’s prior written consent.

18.3 Transferred Trademarks, Registration and Maintenance. Tenant shall be responsible for trademark registration and maintenance on behalf of Landlord.

18.4 Enforcement. In the event that Tenant (or any Affiliated Person or sublicensee) learns of any infringement or unauthorized use of any of the Transferred Trademarks, it shall promptly notify Landlord. If requested to do so, Tenant (and any and all Affiliated Persons and sublicensees) shall cooperate with and assist Landlord in any action that Landlord may commence to protect its right, title and interest in the Transferred Trademarks, including joining the action as a party if necessary.

Article 19

EASEMENTS

19.1 Grant of Easements. Provided no Event of Default has occurred and is continuing, Landlord will join in granting and, if necessary, modifying or abandoning such rights-of-way, easements and other interests as may be reasonably requested by Tenant for ingress and egress, and electric, telephone, gas, water, sewer and other utilities so long as:

(a) the instrument creating, modifying or abandoning any such easement, right-of-way or other interest is satisfactory to and approved by Landlord (which approval shall not be unreasonably withheld, delayed or conditioned);

(b) Landlord receives an Officer’s Certificate from Tenant stating (i) that such grant, modification or abandonment is not detrimental to the proper conduct of business on such Property, (ii) the consideration, if any, being paid for such grant, modification or abandonment (which consideration shall be paid by Tenant), (iii) that such grant, modification or abandonment does not impair the use or value of such Property for the Permitted Use, and (iv) that, for as long as this Agreement shall be in effect, Tenant will perform all obligations, if any, of Landlord under any such instrument; and

(c) Landlord receives evidence satisfactory to Landlord that the Manager has granted its consent to such grant, modification or abandonment in accordance with the requirements of such Manager’s Management Agreement or that such consent is not required.

19.2 Exercise of Rights by Tenant. So long as no Event of Default has occurred and is continuing, Tenant shall have the right to exercise all rights of Landlord under the Easement Agreements and, in connection therewith, Landlord shall execute and promptly return to Tenant such documents as Tenant shall reasonably request. Tenant shall perform all obligations of Landlord under the Easement Agreements.

19.3 Permitted Encumbrances. Any agreements entered into in accordance with this Article 19 shall be deemed a Permitted Encumbrance.

Article 20

PROPERTY MORTGAGES

20.1 Landlord May Grant Liens. Without the consent of Tenant, Landlord may, from time to time, directly or indirectly, create or otherwise cause to exist any lien, encumbrance or title retention agreement (“Encumbrance”) upon the Leased Property, or any portion thereof, or interest therein, whether to secure any borrowing or other means of financing or refinancing.

shall also cover other lands and/or buildings and/or leases, to each and every advance made or hereafter to be made under such mortgages and deeds of trust, and to all renewals, modifications, replacements and extensions of such leases and such mortgages and deeds of trust and all consolidations of such mortgages and deeds of trust. This section shall be self-operative and no further instrument of subordination shall be required. In confirmation of such subordination, Tenant shall promptly execute, acknowledge and deliver any instrument that Landlord, the lessor under any such lease or the holder of any such mortgage or the trustee or beneficiary of any deed of trust or any of their respective successors in interest may reasonably request to evidence such subordination. Any lease to which this Agreement is, at the time referred to, subject and subordinate is herein called “Superior Lease” and the lessor of a Superior Lease or its successor in interest at the time referred to is herein called “Superior Landlord” and any mortgage or deed of trust to which this Agreement is, at the time referred to, subject and subordinate is herein called “Superior Mortgage” and the holder, trustee or beneficiary of a Superior Mortgage is herein called “Superior Mortgagee”. Tenant shall have no obligations under any Superior Lease or Superior Mortgage other than those expressly set forth in this Section 20.2.

If any Superior Landlord or Superior Mortgagee or the nominee or designee of any Superior Landlord or Superior Mortgagee shall succeed to the rights of Landlord under this Agreement (any such person, “Successor Landlord”), whether through possession or foreclosure action or delivery of a new lease or deed, or otherwise, at such Successor Landlord’s request, Tenant shall attorn to and recognize the Successor Landlord as Tenant’s landlord under this Agreement and Tenant shall promptly execute and deliver any instrument that such Successor Landlord may reasonably request to evidence such attornment (provided that such instrument does not alter the terms of this Agreement), whereupon, this Agreement shall continue in full force and effect as a direct lease between the Successor Landlord and Tenant upon all of the terms, conditions and covenants as are set forth in this Agreement, except that the Successor Landlord (unless formerly the landlord under this Agreement or its nominee or designee) shall not be (a) liable in any way to Tenant for any act or omission, neglect or default on the part of any prior Landlord under this Agreement, (b) responsible for any monies owing by or on deposit with any prior Landlord to the credit of Tenant (except to the extent actually paid or delivered to the Successor Landlord), (c) subject to any counterclaim or setoff which theretofore accrued to Tenant against any prior Landlord, (d) bound by any modification of this Agreement subsequent to such Superior Lease or Mortgage, or by any previous prepayment of Rent for more than one (1) month in advance of the date due hereunder, which was not approved in writing by the Superior Landlord or the Superior Mortgagee thereto, (e) liable to Tenant beyond the Successor Landlord’s interest in the Leased Property and the rents, income, receipts, revenues, issues and profits issuing from the Leased Property, (f) responsible for the performance of any work to be done by the Landlord under this Agreement to render the Leased Property ready for occupancy by Tenant (subject to Landlord’s obligations under Section 5.1.2(b) or with respect to any insurance or Condemnation proceeds), or (g) required to remove any Person occupying the Leased Property or any part thereof, except if such Person claims by, through or under the Successor Landlord. Tenant agrees at any time and from time to time to execute a suitable instrument in confirmation of Tenant’s agreement to attorn, as aforesaid, and Landlord agrees to provide Tenant with an instrument of nondisturbance and attornment from each such Superior Mortgagee and Superior Landlord (other than the lessors under any ground leases with respect to the Leased Property, or any portion thereof) in form and substance reasonably satisfactory to Tenant. Notwithstanding the foregoing, any Successor Landlord shall be liable (a) to pay to

Tenant any amounts owed under Section 5.1.2(b), and (b) to pay to Tenant any portions of insurance proceeds or Awards received by Landlord or the Successor Landlord required to be paid to Tenant pursuant to the terms of this Agreement, and, as a condition to any mortgage, lien or lease in respect of the Leased Property, or any portion thereof, and the subordination of this Agreement thereto, the mortgagee, lienholder or lessor, as applicable, shall expressly agree, for the benefit of Tenant, to make such payments, which agreement shall be embodied in an instrument in form reasonably satisfactory to Tenant.

20.3 Notice to Mortgagee and Superior Landlord. Subsequent to the receipt by Tenant of Notice from Landlord as to the identity of any Property Mortgagee or Superior Landlord under a lease with Landlord, as ground lessee, which includes the Leased Property, or any portion thereof, as part of the demised premises and which complies with Section 20.1 (which Notice shall be accompanied by a copy of the applicable mortgage or lease), no Notice from Tenant to Landlord as to a default by Landlord under this Agreement shall be effective with respect to a Property Mortgagee or Superior Landlord unless and until a copy of the same is given to such Property Mortgagee or Superior Landlord at the address set forth in the above described Notice, and the curing of any of Landlord’s defaults within the applicable notice and cure periods set forth in Article 14 by such Property Mortgagee or Superior Landlord shall be treated as performance by Landlord.

Article 21

ADDITIONAL COVENANTS OF LANDLORD AND TENANT

21.1 Prompt Payment of Indebtedness. Tenant shall (a) pay or cause to be paid when due all payments of principal of and premium and interest on Tenant’s Indebtedness for money borrowed and shall not permit or suffer any such Indebtedness to become or remain in default beyond any applicable grace or cure period, (b) pay or cause to be paid when due all lawful claims for labor and rents with respect to the Leased Property, (c) pay or cause to be paid when due all trade payables and (d) pay or cause to be paid when due all other of Tenant’s Indebtedness upon which it is or becomes obligated, except, in each case, other than that referred to in clause (a), to the extent payment is being contested in good faith by appropriate proceedings in accordance with Article 8 and if Tenant shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP, if appropriate, or unless and until foreclosure, distraint sale or other similar proceedings shall have been commenced.

21.2 Conduct of Business. Tenant shall not engage in any business other than the leasing and operation of the Leased Property (including any incidental or ancillary business relating thereto) and shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect and in good standing its legal existence and its rights and licenses necessary to conduct such business.

Tenant shall provide to Landlord either in a footnote to the financial statements delivered under Section 17.2 which relate to the period in which such change occurs, or in separate schedules to such financial statements, information sufficient to show the effect of any such changes on such financial statements.

21.4 Notice of Litigation, Etc. Tenant shall give prompt Notice to Landlord of any litigation or any administrative proceeding to which it may hereafter become a party of which Tenant has notice or actual knowledge which involves a potential liability equal to or greater than Two Hundred Fifty Thousand Dollars ($250,000) or which may otherwise result in any material adverse change in the business, operations, property, prospects, results of operation or condition, financial or other, of Tenant. Forthwith upon Tenant obtaining knowledge of any Default, Event of Default or any default or event of default under any agreement relating to Indebtedness for money borrowed in an aggregate amount exceeding, at any one time, Two Hundred Fifty Thousand Dollars ($250,000), or any event or condition that would be required to be disclosed in a current report filed by Tenant on Form 8-K or in Part II of a quarterly report on Form 10-Q if Tenant were required to file such reports under the Securities Exchange Act of 1934, as amended, Tenant shall furnish Notice thereof to Landlord specifying the nature and period of existence thereof and what action Tenant has taken or is taking or proposes to take with respect thereto.

21.5 Indebtedness of Tenant. Tenant shall not create, incur, assume or guarantee, or permit to exist, or become or remain liable directly or indirectly upon, any Indebtedness except the following:

(a) Indebtedness of Tenant to Landlord;

(b) Indebtedness of Tenant for Impositions, to the extent that payment thereof shall not at the time be required to be made in accordance with the provisions of Article 8;

(c) Indebtedness of Tenant in respect of judgments or awards (i) which have been in force for less than the applicable appeal period and in respect of which execution thereof shall have been stayed pending such appeal or review, or (ii) which are fully covered by insurance payable to Tenant, or (iii) which are for an amount not in excess of $250,000 in the aggregate at any one time outstanding and (x) which have been in force for not longer than the applicable appeal period, so long as execution is not levied thereunder or (y) in respect of which an appeal or proceedings for review shall at the time be prosecuted in good faith in accordance with the provisions of Article 8, and in respect of which execution thereof shall have been stayed pending such appeal or review;

(d) unsecured borrowings of Tenant from its Affiliated Persons which are by their terms expressly subordinate pursuant to a Subordination Agreement to the payment and performance of Tenant’s obligations under this Agreement; or

(e) Indebtedness for purchase money financing in accordance with Section 21.8(a) and other operating liabilities incurred in the ordinary course of Tenant’s business;

(f) Indebtedness of Tenant as guarantor or borrower secured by Liens permitted under Section 21.8(c); or

(g) A guaranty of TCA’s obligations under its revolving line of credit and for any privately placed or publicly issued debt.

21.6 Distributions, Payments to Affiliated Persons, Etc. Tenant shall not declare, order, pay or make, directly or indirectly, any Distributions or any payment to any Affiliated Person of Tenant (including payments in the ordinary course of business) or set apart any sum or property therefor, or agree to do so, if, at the time of such proposed action, or immediately after giving effect thereto, any Event of Default shall have occurred and be continuing. Otherwise, as long as no Event of Default shall have occurred and be continuing, Tenant may make Distributions and payments to Affiliated Persons; provided, however, that any such payments shall at all times be subordinate to Tenant’s obligations under this Agreement.

21.7 Prohibited Transactions. Tenant shall not permit to exist or enter into any agreement or arrangement whereby it engages in a transaction of any kind with any Affiliated Person as to Tenant or any Guarantor, except on terms and conditions which are commercially reasonable.

21.8 Liens and Encumbrances. Except as permitted by Article 7 and Section 21.5, Tenant shall not create or incur or suffer to be created or incurred or to exist any Lien on this Agreement or any of Tenant’s assets, properties, rights or income, or any of its interest therein, now or at any time hereafter owned, other than:

(a) Security interests securing the purchase price of equipment or personal property whether acquired before or after the Commencement Date; provided, however, that (i) such Lien shall at all times be confined solely to the asset in question and (ii) the aggregate principal amount of Indebtedness secured by any such Lien shall not exceed the cost of acquisition or construction of the property subject thereto;

(b) Permitted Encumbrances;

(c) Security interests in Accounts or Chattel Paper, in Support Obligations, General Intangibles or Deposit Accounts relating to such Accounts or Chattel Paper, in any Instruments or Investment Property evidencing or arising from such Accounts or Chattel Paper, in any documents, books, records or other information (including, without limitation, computer programs, tapes, discs, punch cards, data processing software and related property and rights) maintained with respect to any property described in this Section 21.8(c) or in any Proceeds of any of the foregoing (capitalized terms used in this Section 21.8(c) without definition being used as defined in or for purposes of Article 9 of the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts); or

(d) As permitted pursuant to Section 21.5.

21.9 Merger; Sale of Assets; Etc. Without Landlord’s prior written consent (which consent may be given or withheld in Landlord’s sole discretion), Tenant shall not (i) sell, lease

(as lessor or sublessor), transfer or otherwise dispose of, or abandon, all or any material portion of its assets (including capital stock or other equity interests) or business to any Person, (ii) merge into or with or consolidate with any other Entity, or (iii) sell, lease (as lessor or sublessor), transfer or otherwise dispose of, or abandon, any personal property or fixtures or any real property; provided, however, that, notwithstanding the provisions of clause (iii) preceding, Tenant may dispose of equipment or fixtures which have become inadequate, obsolete, worn-out, unsuitable, undesirable or unnecessary, provided substitute equipment or fixtures having equal or greater value and utility (but not necessarily having the same function) have been provided.

21.10 Bankruptcy Remote Entities. At Landlord’s request, Tenant shall make such amendments, modifications or other changes to its charter documents and governing bodies (including, without limitation, Tenant’s board of directors), and take such other actions, as may from time to time be necessary to qualify Tenant as a “bankruptcy remote entity”, provided that Landlord shall reimburse Tenant for all costs and expenses reasonably incurred by Tenant in connection with the making of such amendments or modifications.

21.11 Trade Area Restriction. Notwithstanding anything to the contrary in this Agreement, except for Travel Centers owned by Landlord or any Affiliated Person of Landlord, neither Tenant nor any Affiliated Person of Tenant shall acquire, own, franchise, finance, lease, manage, operate or open any Travel Center or similar business (it being agreed by Landlord and Tenant that convenience stores which provide services primarily to non-professional drivers shall not be a “similar business”) within seventy-five (75) miles in either direction along the primary interstate on which any Property is located without Landlord’s consent, which consent may be given or withheld in Landlord’s sole discretion. Notwithstanding the foregoing, Landlord confirms that, subject to the other terms and conditions of this Agreement, Tenant or any Affiliated Person of Tenant may acquire, own, franchise, finance, lease, manage, operate or open the Travel Centers identified on Exhibit B attached hereto.

Article 22

ARBITRATION

22.1 Disputes. Any disputes, claims or controversies between or among the parties (a) arising out of or relating to this Agreement or (b) brought by or on behalf of any shareholder of any party or a direct or indirect parent of a party (which, for purposes of this Article 22 shall mean any shareholder of record or any beneficial owner of shares of any party, or any former shareholder of record or beneficial owner of shares of any party), either on his, her or its own behalf, on behalf of any party or on behalf of any series or class of shares of any party or shareholders of any party against any party or any member, trustee, director, officer, manager (including The RMR Group LLC or its successor), agent or employee of any party, including disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of this Agreement, including this arbitration provision, or the declarations of trust, limited liability company agreements, charters, bylaws or other governing documents of any party hereto (all of which are referred to as “Disputes”), or relating in any way to such a Dispute or Disputes shall, on the demand of any party to such Dispute be resolved through binding and final arbitration in accordance with the Commercial Arbitration Rules (the “Rules”) of the American Arbitration Association (“AAA”) then in effect, except as those Rules may be modified in this Article 22. For the avoidance of doubt, and not as a limitation, Disputes

are intended to include derivative actions against trustees, directors, officers or managers of any party and class actions by a shareholder against those individuals or entities and any party. For the avoidance of doubt, a Dispute shall include a Dispute made derivatively on behalf of one party against another party. For purposes of this Article 22, the term “party” shall include any direct or indirect parent of a party.

22.2 Selection of Arbitrators. There shall be three (3) arbitrators. If there are only two (2) parties to the Dispute, each party shall select one arbitrator within fifteen (15) days after receipt of a demand for arbitration. Such arbitrators may be affiliated or interested persons of such parties. If there are more than two (2) parties to the Dispute, all claimants, on the one hand, and all respondents, on the other hand, shall each select, by the vote of a majority of the claimants or the respondents, as the case may be, one arbitrator within fifteen (15) days after receipt of a demand for arbitration. Such arbitrators may be affiliated or interested persons of the claimants or the respondents, as the case may be. If either a claimant (or all claimants) or a respondent (or all respondents) fail to timely select an arbitrator then the party (or parties) who has selected an arbitrator may request the AAA to provide a list of three (3) proposed arbitrators in accordance with the Rules (each of whom shall be neutral, impartial and unaffiliated with any party) and the party (or parties) that failed to timely appoint an arbitrator shall have ten (10) days from the date the AAA provides such list to select one of the three (3) arbitrators proposed by AAA. If such party (or parties) fail to select such arbitrator by such time, the party (or parties) who have appointed the first arbitrator shall then have ten (10) days to select one of the three (3) arbitrators proposed by AAA to be the second arbitrator; and, if he/they should fail to select such arbitrator by such time, the AAA shall select, within fifteen (15) days thereafter, one of the three (3) arbitrators it had proposed as the second arbitrator. The two (2) arbitrators so appointed shall jointly appoint the third and presiding arbitrator (who shall be neutral, impartial and unaffiliated with any party) within fifteen (15) days of the appointment of the second arbitrator. If the third arbitrator has not been appointed within the time limit specified herein, then the AAA shall provide a list of proposed arbitrators in accordance with the Rules, and the arbitrator shall be appointed by the AAA in accordance with a listing, striking and ranking procedure, with each party having a limited number of strikes, excluding strikes for cause.

22.3 Location of Arbitration. The place of arbitration shall be Boston, Massachusetts unless otherwise agreed by the parties.

22.4 Scope of Discovery. There shall be only limited documentary discovery of documents directly related to the issues in dispute, as may be ordered by the arbitrators.For the avoidance of doubt, it is intended that there shall be no depositions and no other discovery other than limited documentary discovery as described in the preceding sentence.

22.5 Arbitration Award. In rendering an award or decision (the “Arbitration Award”), the arbitrators shall be required to follow the laws of the State of Maryland. Any arbitration proceedings or Arbitration Award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act, 9 U.S.C. §1 et seq. The Arbitration Award shall be in writing and may, but shall not be required to, briefly state the findings of fact and conclusions of law on which it is based.Any monetary Arbitration Award shall be made and payable in U.S. dollars free of any tax, deduction or offset. Subject to Section 22.7, each party against which an Arbitration Award assesses a monetary

obligation shall pay that obligation on or before the thirtieth (30th) day following the date of such Arbitration Award or such other date as such Arbitration Award may provide.

22.6 Costs. Except to the extent expressly provided by this Agreement or as otherwise agreed by the parties, to the maximum extent permitted by Maryland law, each party involved in a Dispute shall bear its own costs and expenses (including attorneys’ fees), and the arbitrators shall not render an Arbitration Award that would include shifting of any such costs or expenses (including attorneys’ fees) or, in a derivative case or class action, award any portion of a party’s Arbitration Award to the claimant or the claimant’s attorneys. Each party (or, if there are more than two (2) parties to the Dispute, all claimants, on the one hand, and all respondents, on the other hand, respectively) shall bear the costs and expenses of its (or their) selected arbitrator and the parties (or, if there are more than two (2) parties to the Dispute, all claimants, on the one hand, and all respondents, on the other hand) shall equally bear the costs and expenses of the third (3^rd) appointed arbitrator.

22.7 Appeals. Notwithstanding any language to the contrary in this Agreement, any Arbitration Award, including but not limited to any interim Arbitration Award, may be appealed pursuant to the AAA’s Optional Appellate Arbitration Rules (“Appellate Rules”). An Arbitration Award shall not be considered final until after the time for filing the notice of appeal pursuant to the Appellate Rules has expired. Appeals must be initiated within thirty (30) days of receipt of an Arbitration Award by filing a notice of appeal with any AAA office. Following the appeal process, the decision rendered by the appeal tribunal may be entered in any court having jurisdiction thereof. For the avoidance of doubt, and despite any contrary provision of the Appellate Rules, the above paragraph relating to costs and expenses shall apply to any appeal pursuant to this Article 22 and the appeal tribunal shall not render an Arbitration Award that would include shifting of any costs or expenses (including attorneys’ fees) of any party.

22.8 Final Judgment. Following the expiration of the time for filing the notice of appeal, or the conclusion of the appeal process set forth in Section 22.7, an Arbitration Award shall be final and binding upon the parties thereto and shall be the sole and exclusive remedy between those parties relating to the Dispute, including any claims, counterclaims, issues or accounting presented to the arbitrators. Judgment upon an Arbitration Award may be entered in any court having jurisdiction. To the fullest extent permitted by law, no application or appeal to any court of competent jurisdiction may be made in connection with any question of law arising in the course of arbitration or with respect to any Arbitration Award made, except for actions relating to enforcement of this Article 22 or any arbitral award issued hereunder, and except for actions seeking interim or other provisional relief in aid of arbitration proceedings in any court of competent jurisdiction.

22.9 Intended Beneficiaries. This Article 22 is intended to benefit and be enforceable by the parties and their respective shareholders, members, direct and indirect parents, trustees, directors, officers, managers (including The RMR Group Inc. and The RMR Group LLC), agents or employees of any party and their respective successors and assigns and shall be binding on the shareholders of any party and the parties, as applicable, and shall be in addition to, and not in substitution for, any other rights to indemnification or contribution that such individuals or entities may have by contract or otherwise.

Article 23

MISCELLANEOUS

23.1 Limitation on Payment of Rent. All agreements between Landlord and Tenant herein are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the Rent or any other amounts payable to Landlord under this Agreement exceed the maximum permissible under applicable law, the benefit of which may be asserted by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of any provision of this Agreement, at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by law, or if from any circumstances Landlord should ever receive as fulfillment of such provision such an excessive amount, then, ipso facto, the amount which would be excessive shall be applied to the reduction of the installment(s) of Minimum Rent next due and not to the payment of such excessive amount. This provision shall control every other provision of this Agreement and any other agreements between Landlord and Tenant.

23.2 No Waiver. No failure by Landlord or Tenant to insist upon the strict performance of any term hereof or to exercise any right, power or remedy consequent upon a breach thereof, and no acceptance of full or partial payment of Rent during the continuance of any such breach, shall constitute a waiver of any such breach or of any such term. To the maximum extent permitted by law, no waiver of any breach shall affect or alter this Agreement, which shall continue in full force and effect with respect to any other then existing or subsequent breach.

23.3 Remedies Cumulative. To the maximum extent permitted by law, each legal, equitable or contractual right, power and remedy of Landlord or Tenant, now or hereafter provided either in this Agreement or by statute or otherwise, shall be cumulative and concurrent and shall be in addition to every other right, power and remedy and the exercise or beginning of the exercise by Landlord or Tenant (as applicable) of any one or more of such rights, powers and remedies shall not preclude the simultaneous or subsequent exercise by Landlord of any or all of such other rights, powers and remedies.

23.4 Severability. Any clause, sentence, paragraph, section or provision of this Agreement held by a court of competent jurisdiction to be invalid, illegal or ineffective shall not impair, invalidate or nullify the remainder of this Agreement, but rather the effect thereof shall be confined to the clause, sentence, paragraph, section or provision so held to be invalid, illegal or ineffective, and this Agreement shall be construed as if such invalid, illegal or ineffective provisions had never been contained therein.

23.5 Acceptance of Surrender. No surrender to Landlord of this Agreement or of the Leased Property or any part thereof, or of any interest therein, shall be valid or effective unless agreed to and accepted in writing by Landlord and no act by Landlord or any representative or agent of Landlord, other than such a written acceptance by Landlord, shall constitute an acceptance of any such surrender.

23.6 No Merger of Title. It is expressly acknowledged and agreed that it is the intent of the parties that there shall be no merger of this Agreement or of the leasehold estate created

hereby by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, this Agreement or the leasehold estate created hereby and the fee estate or ground landlord’s interest in the Leased Property.

23.7 Conveyance by Landlord. If Landlord or any successor owner of all or any portion of the Leased Property shall convey all or any portion of the Leased Property in accordance with the terms hereof other than as security for a debt, and the grantee or transferee of such of the Leased Property shall expressly assume all obligations of Landlord hereunder arising or accruing from and after the date of such conveyance or transfer, Landlord or such successor owner, as the case may be, shall thereupon be released from all future liabilities and obligations of Landlord under this Agreement with respect to such of the Leased Property arising or accruing from and after the date of such conveyance or other transfer and all such future liabilities and obligations shall thereupon be binding upon the new owner.

23.8 Quiet Enjoyment. Tenant shall peaceably and quietly have, hold and enjoy the Real Property for the Term, free of hindrance or molestation by Landlord or anyone claiming by, through or under Landlord, but subject to (a) any Encumbrance permitted under Article 20 or otherwise permitted to be created by Landlord hereunder, (b) all Permitted Encumbrances, (c) liens as to obligations of Landlord that are either not yet due or which are being contested in good faith and by proper proceedings, provided the same do not materially interfere with Tenant’s ability to operate any Travel Center and (d) liens that have been consented to in writing by Tenant. Except as otherwise provided in this Agreement, no failure by Landlord to comply with the foregoing covenant shall give Tenant any right to cancel or terminate this Agreement or abate, reduce or make a deduction from or offset against the Rent or any other sum payable under this Agreement, or to fail to perform any other obligation of Tenant hereunder.

23.9 No Recordation. Neither Landlord nor Tenant shall record this Agreement.

23.10 Notices.

(a) Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Agreement shall be deemed adequately given if in writing and the same shall be delivered either in hand, by telecopier with written acknowledgment of receipt, or by mail or Federal Express or similar expedited commercial carrier, addressed to the recipient of the notice, postpaid and registered or certified with return receipt requested (if by mail), or with all freight charges prepaid (if by Federal Express or similar carrier).

(b) All notices required or permitted to be sent hereunder shall be deemed to have been given for all purposes of this Agreement upon the date of acknowledged receipt, in the case of a notice by telecopier, and, in all other cases, upon the date of receipt or refusal, except that whenever under this Agreement a notice is either received on a day which is not a Business Day or is required to be delivered on or before a specific day which is not a Business Day, the day of receipt or required delivery shall automatically be extended to the next Business Day.

if to Landlord:

c/o Service Properties Trust

Two Newton Place

255 Washington Street, Suite 300

Newton, Massachusetts 02458

Attn: Mr. John G. Murray

Email: jmurray@rmrgroup.com

if to Tenant:

c/o TravelCenters of America Inc.

24601 Center Ridge Road

Westlake, Ohio 44145

Attn: Mr. Mark R. Young

Email: myoung@ta-petro.com

(d) By notice given as herein provided, the parties hereto and their respective successors and assigns shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses effective upon receipt by the other parties of such notice and each shall have the right to specify as its address any other address within the United States of America.

23.11 Construction. Anything contained in this Agreement to the contrary notwithstanding, all claims against, and liabilities of, Tenant or Landlord arising prior to any date of termination or expiration of this Agreement with respect to the Leased Property shall survive such termination or expiration. In no event shall Landlord be liable for any consequential damages suffered by Tenant as the result of a breach of this Agreement by Landlord. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by the party to be charged. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Each term or provision of this Agreement to be performed by Tenant shall be construed as an independent covenant and condition. Time is of the essence with respect to the provisions of this Agreement. Except as otherwise set forth in this Agreement, any obligations of Tenant (including without limitation, any monetary, repair and indemnification obligations) and Landlord shall survive the expiration or sooner termination of this Agreement. Tenant hereby acknowledges that the agreement between Landlord and Tenant to treat this Agreement as a single lease in all respects was and is of primary importance, and a material inducement, to Landlord to enter into this Agreement. Without limiting the generality of the foregoing, the parties hereto acknowledge that this Agreement constitutes a single lease of the Leased Property and is not divisible notwithstanding any references herein to any individual Property and notwithstanding the possibility that certain individual Properties may be deleted herefrom pursuant to the express provisions of this Agreement.

hereof, which, when taken together, bear the signatures of each of the parties hereto shall have been signed. Headings in this Agreement are for purposes of reference only and shall not limit or affect the meaning of the provisions hereof.

23.13 Applicable Law, Etc. Except as to matters regarding the internal affairs of Landlord and issues of or limitations on any personal liability of the shareholders and trustees or directors of Landlord for obligations of Landlord, as to which the laws of the State of Maryland shall govern, this Agreement shall be interpreted, construed, applied and enforced in accordance with the laws of The Commonwealth of Massachusetts applicable to contracts between residents of Massachusetts which are to be performed entirely within Massachusetts, regardless of (i) where this Agreement is executed or delivered; or (ii) where any payment or other performance required by this Agreement is made or required to be made; or (iii) where any breach of any provision of this Agreement occurs, or any cause of action otherwise accrues; or (iv) where any action or other proceeding is instituted or pending; or (v) the nationality, citizenship, domicile, principal place of business, or jurisdiction of organization or domestication of any party; or (vi) whether the laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction other than Massachusetts; or (vii) any combination of the foregoing. Notwithstanding the foregoing, the laws of the State shall apply to the perfection and priority of liens upon and the disposition of any Property.

23.14 Right to Make Agreement. Each party warrants, with respect to itself, that neither the execution of this Agreement, nor the consummation of any transaction contemplated hereby, shall violate any provision of any law, or any judgment, writ, injunction, order or decree of any court or governmental authority having jurisdiction over it; nor result in or constitute a breach or default under any indenture, contract, other commitment or restriction to which it is a party or by which it is bound; nor require any consent, vote or approval which has not been given or taken, or at the time of the transaction involved shall not have been given or taken. Each party covenants that it has and will continue to have throughout the term of this Agreement and any extensions thereof, the full right to enter into this Agreement and perform its obligations hereunder.

23.15 Attorneys’ Fees. If any lawsuit or arbitration or other legal proceeding arises in connection with the interpretation or enforcement of this Agreement, the prevailing party therein shall be entitled to receive from the other party the prevailing party’s costs and expenses, including reasonable attorneys’ fees incurred in connection therewith, in preparation therefor and on appeal therefrom, which amounts shall be included in any judgment therein.

23.16 Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING HPT TA PROPERTIES TRUST, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME OF SUCH ENTITY REFERS TO THE TRUSTEES UNDER SUCH DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SUCH ENTITY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SUCH ENTITY. ALL PERSONS DEALING WITH SUCH ENTITY, IN ANY WAY, SHALL LOOK ONLY TO

THE ASSETS OF SUCH ENTITY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

[Remainder of Page Left Blank Intentionally]

IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed instrument as of the Effective Date.


			LANDLORD: HPT TA PROPERTIES TRUST By: /s/ Brian E. Donley________________ Brian E. Donley Treasurer and Chief Executive Officer


			HPT TA PROPERTIES LLC By: /s/ Brian E. Donley________________ Brian E. Donley Treasurer and Chief Executive Officer


			TENANT: TA OPERATING LLC By: /s/ Mark R. Young________________ Mark R. Young Executive Vice President

[Signature Page to Second Amended and Restated Lease Agreement No. 1]{S2482617; 4}

EXHIBITS A-1 through A-36

LAND

Exhibit

TA
Site No.

Property Address

Commencement
Date

Initial
Base
Year

A-1

226

1501 N. Fort Grant Road, Wilcox, AZ 85643

June 9, 2015

2015

A-2

311

I-40 & I-55 at Club Road, W. Memphis, AR 72301

May 30, 2007

2012

A-3

160

27769 Lagoon Drive, Buttonwillow, CA 93206

June 9, 2015

2015

A-4

162

4325 Guasti Road, Ontario, CA 91761

June 9, 2015

2015

A-5

163

12310 S. Highway 33, Santa Nella, CA 95322

June 9, 2015

2015

A-6

174

12151 W. 44th Avenue, Wheat Ridge (Denver West), CO 80033

June 9, 2015

2015

A-7

171

3 East Industrial Road, Branford (New Haven), CT 06405

June 9, 2015

2015

A-8

178

2112 Highway 71 South, Marianna, FL 32448

June 9, 2015

2015

A-9

197

8909 20th Street, Vero Beach, FL 32966

June 9, 2015

2015

A-10

177

4401 Highway 17, Richmond Hill (Savannah), GA 31324

June 9, 2015

2015

A-11

19 N. 430 Route 20, Hampshire (Elgin), IL 60140

June 9, 2015

2015

A-12*

236*

21 Romines Dr., Morris, IL 60450*

June 9, 2015*

2015*

A-13

345

7265 N. Baker Road, Fremont, IN 46737

May 30, 2007

2012

A-14

382

4230 West Highway 24, Remington, IN 47977

June 22, 2016

2017

A-15

224 Highway 65 South, Tallulah, LA 71284

June 9, 2015

2015

A-16

151

7401 Assateague Drive, Jessup, MD 20794

June 9, 2015

2015

A-17

200 Baker Road, Dexter (Ann Arbor), MI 48130

June 9, 2015

2015

A-18

2150 Russell Mt. Gilead Rd., Meridian, MS 39301

June 9, 2015

2015

A-19

108

8050 Dean Martin Drive, Las Vegas, NV 89139

January 17, 2019

2015

A-20

172

200 North McCarran Blvd., Sparks, NV 89431

June 9, 2015

2015

A-21

211

108 Ocean Drive, Greenland, NH 03840

June 9, 2015

2015

A-22

3404 W. Highway 66, Gallup, NM 87301

June 9, 2015

2015

A-23

202 N. Motel Blvd., Las Cruces, NM 88005

June 9, 2015

2015

A-24

208

9616 Commerce Drive, Dansville, NY 14437

June 9, 2015

2015

A-25

940 US Rt. 42, NE, London, OH 43140

June 9, 2015

2015

A-26

8834 Lake Road, Seville, OH 44273

June 9, 2015

2015

A-27

5400 Seventy Six Drive, Youngstown, OH 44515

June 9, 2015

2015

A-28

212

6 Buckhorn Road, Bloomsburg, PA 17815

June 9, 2015

2015

A-29

245 Allegheny Blvd., Brookville, PA 15825

June 9, 2015

2015

A-30

117

13011 Old Hickory Blvd., Antioch, TN 37013

June 9, 2015

2015

A-31

2105 S. Goliad Street, Rockwall, TX 75087

June 9, 2015

2015

A-32

8836 N. Highway 40, Tooele (Salt Lake City), UT 84074

June 9, 2015

2015

A-33

143

1025 Peppers Ferry Rd., Wytheville, VA 24382

June 9, 2015

2015

A-34

176

46630 North Bend Way, North Bend (Seattle East), WA 98045

June 9, 2015

2015

A-35

339

10506 West Aero Road, Spokane, WA 99224

May 30, 2007

2012

A-36

187

4000 I-80 Service Rd., Burns (Cheyenne), WY 82053

June 9, 2015

2015

[See attached copies.]

EXHIBIT B

Trade Area Restriction Waivers


TA Site No.			Property Address
397			426 Alabama Highway 69 S, Hanceville, AL 35077.
260			75246 Alabama 77, Lincoln, AL 35096.
399			2842 SE Frontage Rd., Johnstown, CO 80534.
377			10200 Old Federal Rd., Carnesville, GA 30521.
241			11166 W. State Road 10, DeMotte, IN 46310.
250			1441 W. US Hwy 20, Porter, IN 46304.
220			1600 W. US Hwy 20, Porter, IN 46304.
243			15587 M-60, Tekonsha, MI 49092.
385			14150 Hwy 418 SW, Deming, NM 88030.
251			1670 U.S. Hwy 601 North, Mocksville, NC 27028.
378			98 Grove St., DuPont, PA 18641.
253			849 Victory Hwy. West, West Greenwich, RI 02817.
340			101 Cornelius Road North, Hillsboro, TX 76645.
281			4403 Hwy. 42, Kilgore, TX 75662.
394			110 Interstate 35 Frontage Rd., Pearsall, TX 78061.

Exhibit 10.3

SECOND AMENDED AND RESTATED LEASE AGREEMENT NO. 2,

dated as of October 14, 2019,

by and between

HPT TA PROPERTIES TRUST and HPT TA PROPERTIES LLC,

AS LANDLORD,

AND

TA OPERATING LLC,

AS TENANT

{S2482620; 4}

TABLE OF CONTENTS


	Page
ARTICLE 1 DEFINITIONS			1
	1.1 AAA	1
	1.2 Additional Charges	1
	1.3 Additional Rent	1
	1.4 Affiliated Person	1
	1.5 Agreement	2
	1.6 Appellate Rules	2
	1.7 Applicable Laws	2
	1.8 Arbitration Award	2
	1.9 Award	2
	1.10 Base Year	2
	1.11 Business Day	2
	1.12 Capital Addition	2
	1.13 Capital Expenditure	2
	1.14 Capital Replacements Budget	3
	1.15 Change in Control	3
	1.16 Claim	3
	1.17 Code	3
	1.18 Commencement Date	3
	1.19 Condemnation	3
	1.20 Condemnor	3
	1.21 Consolidated Financials	3
	1.22 Default	4
	1.23 Disbursement Rate	4
	1.24 Disputes	4
	1.25 Distribution	4
	1.26 Easement Agreement	4
	1.27 Effective Date	4
	1.28 Encumbrance	4
	1.29 Entity	4
	1.30 Environment	4
	1.31 Environmental Obligation	4
	1.32 Environmental Notice	4
	1.33 Environmental Report	4
	1.34 Event of Default	4
	1.35 Existing Third Party Trade Names and Service Mark Rights	5
	1.36 Extended Term	5
	1.37 Fair Market Value Rent	5
	1.38 Financial Officer’s Certificate	5
	1.39 Fiscal Year	5


			1.40 Fixed Term			5
			1.41 Fixtures			5
			1.42 GAAP			5
			1.43 Government Agencies			5
			1.44 Gross Revenues			5
			1.45 Ground Leases			6
			1.46 Guarantor			6
			1.47 Guaranty			6
			1.48 Hazardous Substances			6
			1.49 Immediate Family			7
			1.50 Impositions			7
			1.51 Indebtedness			8
			1.52 Insurance Requirements			8
			1.53 Interest Rate			8
			1.54 Land			8
			1.55 Landlord			8
			1.56 Landlord Default			8
			1.57 Landlord Liens			8
			1.58 Later Acquired Property			8
			1.59 Lease Year			8
			1.60 Leased Improvements			9
			1.61 Leased Intangible Property			9
			1.62 Leased Property			9
			1.63 Legal Requirements			9
			1.64 Lien			9
			1.65 Management Agreement			9
			1.66 Manager			9
			1.67 Minimum Rent			9
			1.68 Notice			9
			1.69 Offer			10
			1.70 Officer’s Certificate			10
			1.71 Operating Rights			10
			1.72 Other Leases			10
			1.73 Overdue Rate			10
			1.74 Parent			10
			1.75 Percentage Reduction			10
			1.76 Permitted Encumbrances			10
			1.77 Permitted Use			10
			1.78 Person			10
			1.79 Prior Lease			10
			1.80 Prior Rent			10
			1.81 Property			11


	1.82 Property Mortgage	11
	1.83 Property Mortgagee	11
	1.84 Real Property	11
	1.85 Rent	11
	1.86 Rules	11
	1.87 SARA	11
	1.88 SEC	11
	1.89 Shell	11
	1.90 Shell Agreement	11
	1.91 Shell SNDA	11
	1.92 State	11
	1.93 Subordinated Creditor	11
	1.94 Subordination Agreement	11
	1.95 Subsidiary	11
	1.96 Successor Landlord	11
	1.97 Superior Landlord	11
	1.98 Superior Lease	12
	1.99 Superior Mortgage	12
	1.100 Superior Mortgagee	12
	1.101 TA Franchise Agreement	12
	1.102 TCA	12
	1.103 Tenant	12
	1.104 Tenant’s Personal Property	12
	1.105 Term	12
	1.106 Transferred Trademarks	12
	1.107 Travel Center	12
	1.108 UCC	12
	1.109 Unsuitable for Its Permitted Use	13
	1.110 Work	13

ARTICLE 2 LEASED PROPERTY AND TERM			13
	2.1 Leased Property.	13
	2.2 Condition of Leased Property.	14
	2.3 Term.	14
	2.4 Extended Terms.	15
	2.5 Right to Repool Properties.	15
	2.6 Right of First Refusal.	15

ARTICLE 3 RENT			16
	3.1 Rent.	16
	3.2 Late Payment of Rent, Etc.	20
	3.3 Net Lease, Etc.	21
	3.4 No Termination, Abatement, Etc.	21

iii


ARTICLE 4 USE OF THE LEASED PROPERTY			21
	4.1 Permitted Use.	21
	4.2 Compliance with Legal/Insurance Requirements, Etc.	23
	4.3 Environmental Matters.	23
	4.4 Ground Leases.	25
	4.5 Shell Agreement.	25

ARTICLE 5 MAINTENANCE AND REPAIRS			25
	5.1 Maintenance and Repair.	25
	5.2 Tenant’s Personal Property.	27
	5.3 Yield Up.	27
	5.4 Management and Franchise Agreements.	28

ARTICLE 6 IMPROVEMENTS, ETC.			28
	6.1 Improvements to the Leased Property.	28
	6.2 Salvage.	28

ARTICLE 7 LIENS			29

ARTICLE 8 PERMITTED CONTESTS			29

ARTICLE 9 INSURANCE AND INDEMNIFICATION			30
	9.1 General Insurance Requirements.	30
	9.2 Waiver of Subrogation.	30
	9.3 Form Satisfactory, Etc.	30
	9.4 No Separate Insurance; Self-Insurance.	31
	9.5 Indemnification of Landlord.	31

ARTICLE 10 CASUALTY			32
	10.1 Insurance Proceeds.	32
	10.2 Damage or Destruction.	32
	10.3 Damage Near End of Term.	34
	10.4 Tenant’s Personal Property.	34
	10.5 Restoration of Tenant’s Personal Property.	34
	10.6 No Abatement of Rent.	34
	10.7 Waiver.	34

ARTICLE 11 CONDEMNATION			34
	11.1 Total Condemnation, Etc.	34
	11.2 Partial Condemnation.	35
	11.3 Abatement of Rent.	35
	11.4 Temporary Condemnation.	36
	11.5 Allocation of Award.	36

ARTICLE 12 DEFAULTS AND REMEDIES			36
	12.1 Events of Default.	36
	12.2 Remedies.	38
	12.3 Tenant’s Waiver.	39


	12.4 Application of Funds.	39
	12.5 Landlord’s Right to Cure Tenant’s Default.	40
	12.6 Landlord’s Right to Cure Tenant Defaults under the Shell Agreement.	40

ARTICLE 13 HOLDING OVER			40

ARTICLE 14 LANDLORD DEFAULT			41

ARTICLE 15 PURCHASE OF TENANT’S PERSONAL PROPERTY			41

ARTICLE 16 SUBLETTING AND ASSIGNMENT			42
	16.1 Subletting and Assignment.	42
	16.2 Required Sublease Provisions.	43
	16.3 Permitted Sublease.	43
	16.4 Sublease Limitation.	44

ARTICLE 17 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS			44
	17.1 Estoppel Certificates.	44
	17.2 Financial Statements.	45

ARTICLE 18 LANDLORD’S RIGHT TO INSPECT, QUALITY CONTROL, USE OF TRANSFERRED TRADEMARKS AND ENFORCEMENT			46
	18.1 Inspection.	46
	18.2 Quality Control.	46
	18.3 Transferred Trademarks, Registration and Maintenance.	46
	18.4 Enforcement.	46

ARTICLE 19 EASEMENTS			46
	19.1 Grant of Easements.	46
	19.2 Exercise of Rights by Tenant.	47
	19.3 Permitted Encumbrances.	47

ARTICLE 20 PROPERTY MORTGAGES			47
	20.1 Landlord May Grant Liens.	47
	20.2 Subordination of Lease.	47
	20.3 Notice to Mortgagee and Superior Landlord.	48

ARTICLE 21 ADDITIONAL COVENANTS OF LANDLORD AND TENANT			49
	21.1 Prompt Payment of Indebtedness.	49
	21.2 Conduct of Business.	49
	21.3 Maintenance of Accounts and Records.	49
	21.4 Notice of Litigation, Etc.	49
	21.5 Indebtedness of Tenant.	50
	21.6 Distributions, Payments to Affiliated Persons, Etc.	50
	21.7 Prohibited Transactions.	50
	21.8 Liens and Encumbrances.	51
	21.9 Merger; Sale of Assets; Etc.	51
	21.10 Bankruptcy Remote Entities.	51
	21.11 Trade Area Restriction.	51

ARTICLE 22 ARBITRATION			52


	22.1 Disputes.	52
	22.2 Selection of Arbitrators.	52
	22.3 Location of Arbitration.	53
	22.4 Scope of Discovery.	53
	22.5 Arbitration Award.	53
	22.6 Costs.	53
	22.7 Appeals.	53
	22.8 Final Judgment.	54
	22.9 Intended Beneficiaries.	54

ARTICLE 23 MISCELLANEOUS			54
	23.1 Limitation on Payment of Rent.	54
	23.2 No Waiver.	55
	23.3 Remedies Cumulative.	55
	23.4 Severability.	55
	23.5 Acceptance of Surrender.	55
	23.6 No Merger of Title.	55
	23.7 Conveyance by Landlord.	55
	23.8 Quiet Enjoyment.	55
	23.9 No Recordation.	56
	23.10 Notices.	56
	23.11 Construction.	57
	23.12 Counterparts; Headings.	57
	23.13 Applicable Law, Etc.	57
	23.14 Right to Make Agreement.	58
	23.15 Attorneys’ Fees.	58
	23.16 Nonliability of Trustees.	58

SECOND AMENDED AND RESTATED LEASE AGREEMENT NO. 2

THIS SECOND AMENDED AND RESTATED LEASE AGREEMENT NO. 2 is entered into as of October 14, 2019 (the “Effective Date”), by and between HPT TA PROPERTIES TRUST, a Maryland real estate investment trust, and HPT TA PROPERTIES LLC, a Maryland limited liability company (collectively, “Landlord”), and TA OPERATING LLC, a Delaware limited liability company (“Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord and Tenant (as successor by merger with TA Leasing LLC) are parties to that certain Amended and Restated Lease Agreement No. 2, dated as of June 9, 2015, as amended from time to time (as so amended, the “Prior Lease”); and

WHEREAS, Landlord and Tenant wish to amend and restate certain terms and conditions of the Prior Lease as herein provided;

ARTICLE 1

DEFINITIONS

1.1 “AAA” shall have the meaning given such term in Section 22.1.

1.2 “Additional Charges” shall have the meaning given such term in Section 3.1.3.

1.3 “Additional Rent” shall have the meaning given such term in Section 3.1.2(a).

Person who is an officer, director, trustee or employee of, or partner in or member of, such Person or any Person referred to in the preceding clauses (a), (b) and (c), and (e) any other Person who is a member of the Immediate Family of such Person or of any Person referred to in the preceding clauses (a) through (d).

1.5 “Agreement” shall mean this Second Amended and Restated Lease Agreement No. 2, including all exhibits attached hereto, as it and they may be amended from time to time as herein provided.