Service Properties Trust Shares Face Significant Market Skepticism

Shares of Service Properties Trust (SVC) are trading at a steep discount to the company's estimated net asset value, reflecting investor apprehension. The real estate investment trust is actively pursuing a strategy of substantial asset sales and debt reduction to stabilize its financial position.

A central pillar of the REIT's current strategy is an extensive divestment program aimed at strengthening its balance sheet. The company carries a substantial debt load of $5.7 billion.

• The plan involves selling 113 hotel properties, with total expected proceeds of $913.3 million.
• As of the end of November 2025, transactions for 85 hotels have been completed, generating $618.5 million.
• The remaining 28 assets are slated for sale by the end of 2025, anticipated to bring in an additional $294.8 million.
• Management has indicated that the capital raised is primarily allocated for debt repayment.

Trading at a Deep Discount to NAV

Market valuation of Service Properties Trust reveals pronounced pessimism. On December 4, the stock closed at $1.81, marking a daily decline of 2.69% and continuing a recent weak trend.

The equity currently shows the largest discount to its consensus-estimated Net Asset Value (NAV) among all publicly traded REITs with a market capitalization of at least $200 million. At the end of November, shares traded at $1.74. This price represented a 63.4% discount to the consensus NAV estimate of $4.75 per share.

Should investors sell immediately? Or is it worth buying Service Properties Trust?

Third-Quarter 2025 Results: A Mixed Bag

The company's financial update for Q3 2025, released on November 5, presented contrasting signals. While top-line performance slightly exceeded expectations, profitability metrics deteriorated.

• Revenue: Came in at $478.77 million, a narrow beat over analyst forecasts.
• Earnings Per Share (EPS): The trust reported a loss of $0.28 per share, missing the analyst consensus estimate for a loss of $0.25.
• Normalized FFO: A key measure of operating cash flow for REITs, Normalized Funds From Operations declined to $0.20 per share. This compares to $0.32 per share reported in the same quarter the previous year.
• Margin Compression: The gross operating profit margin contracted by 330 basis points to 24.4%.

Despite the disappointing bottom-line figures, the market reaction on the earnings release day was notably positive, with the stock climbing approximately 10.7% to $2.18.

Strategic Shift: Lower Spending, Sharper Focus

Alongside its asset disposal initiative, Service Properties Trust is scaling back capital expenditures to preserve liquidity. The forecast for 2025 capital investments has been reduced from $250 million to $200 million. Looking ahead to 2026, the company plans a further reduction to $150 million. These steps underscore a strategic pivot squarely focused on deleveraging and optimizing the property portfolio.

The analyst community maintains a cautious stance. The average price target for the stock sits at $2.75, and the consensus recommendation is frequently categorized as "Hold" or "Reduce." The future trajectory of the share price is expected to be heavily influenced by the execution of the ongoing sales program and the broader recovery trajectory in the hotel sector.