Service Properties Trust amends management agreement with Radisson

Service Properties Trust (SVC) has reached an agreement with a subsidiary of Radisson Hospitality Inc. to amend its previous management agreement for nine hotels owned by subsidiaries of SVC.

Under the amended agreement, Radisson will continue to manage eight of the hotels, including five Radisson and three Country Inn & Suites by Radisson properties, for a 10-year term effective as of Aug. 1. Among other terms, the new agreement with Radisson provides as follows:

  • SVC’s owner’s priority return is set at $10.2 million annually, supported by a $22 million guaranty for 75% of the aggregate annual owner’s priority return beginning in 2023.
  • A management fee equal to 3% of gross revenue for Radisson branded hotels and 5% of gross revenue for Country Inn & Suites hotels payable to Radisson will be an operating cost paid senior to SVC’s owner’s priority return.
  • Following payment of SVC’s owner’s priority return and reimbursement of certain advances, if any, Radisson may earn a 20% incentive management fee and SVC will receive the remaining cash flow.
  • SVC will fund approximately $12 million for renovations expected to be completed by the end of 2022. As such funding is advanced by SVC, the aggregate annual owner’s priority return due to SVC under the amended agreement will increase by 6% of the amounts funded.

“SVC and Radisson have had a productive business relationship since 2005,” said John Murray, president/CEO, SVC. “The amended agreement extends that relationship at least through 2031, maintains credit support for SVC’s owner’s priority return and provides for renovation activity, which will enhance the portfolio and is expected to result in improved coverage of SVC’s owner’s priority return for the portfolio.”

SVC and Radisson transitioned management of one hotel to Sonesta International Hotels Corporation under the Royal Sonesta brand on Oct. 31. SVC also owns approximately 34% of Sonesta.