Newton, Mass.-based real estate investment trust Service Properties Trust (which commonly goes by its Nasdaq symbol SVC) has received a notice of termination from a subsidiary of Hyatt Hotels Corp. with respect to the management agreement for 22 Hyatt Place hotels owned by subsidiaries of SVC.
Hyatt’s obligations under the management agreement, which requires minimum returns of $22 million annually, is supported by a $50 million limited guaranty. While Hyatt is current on its payments to SVC at this time, it recently exhausted this $50 million guaranty and under the terms of the management agreement, Hyatt may terminate the agreement upon 90 days’ notice once the guaranty has been fully utilized. The effective date of the termination pursuant to Hyatt’s notice is April 8.
SVC and Hyatt are in discussions regarding possible changes to the management agreement that may enable some or all of the hotels to remain Hyatt Place hotels managed by Hyatt. However, if such discussions do not result in a mutually acceptable agreement, SVC expects to transition management of the 22 hotels to Sonesta International Hotels Corp. on April 8 under the Sonesta Select brand.
SVC owns 34 percent of Sonesta, and has rebranded a number of its owned hotels in recent months. In December, the REIT completed the shift of 99 hotels from IHG to Sonesta and announced plans to transfer the branding and management of 98 Marriott hotels in October. At the end of December, Sonesta announced plans to acquire RLH Corp. in an all-cash transaction valued at approximately $90 million.