(Bloomberg)—Service Properties Trust is moving to cancel management contracts with Marriott International Inc. covering 122 hotels and is selling two dozen of the properties for $153 million.
The Newton, Massachusetts-based real estate investment trust is also set to transfer branding and management of 98 Marriott-branded hotels to Sonesta International Hotels Corp. after Marriott missed payments due Monday.
Lodging companies have been trimming expenses as the industry grapples with a collapse of travel that has left hotels largely empty. For Service Properties, which owns a 34% stake in Sonesta, nixing the agreements with Marriott allows it to expand the lodging brand while cutting costs and giving it flexibility to sell more assets or convert hotels into apartments.
“We knew that if we had a significant number of defaults, we’d be able to take back the keys,” Chief Executive Officer John G. Murray said in an interview. “It’s a great opportunity that presented itself.”
A representative for Marriott declined to comment.
Service Properties had previously asked Marriott to cover revenue requirements on the properties as part of the management contracts. It sent a termination notice on Tuesday.
The agreements, which were set to expire in 2035, cover a hotel portfolio that includes properties across 31 U.S. states branded as Courtyard by Marriott, Residence Inn and TownePlace Suites, among others.
The relationship between property investors and hotel brands such as Marriott can be strained in the best of times, with owners bristling at investments they’re required to make in things like new televisions or bathroom fixtures to meet evolving brand standards.
While other owners have renegotiated brand contracts, Service Properties has taken a more aggressive approach. In August, the company terminated a contract with InterContinental Hotels Group Plc, clearing the way for the owner to convert 103 hotels to the Sonesta brand.
Sonesta CEO Carlos Flores said he intends to continue expanding and could increase his holdings to 1,000 properties over the next five years.
“The perverse reality is that the biggest opportunities can be found in down markets,” Flores said in an interview.
Shares of Service Properties were down 1.3% to $8.27 at 10:02 a.m. in New York. They’ve fallen 66% this year, compared with a 47% decline in a Bloomberg index of hotel REITs.
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