government’s infighting and paralysis, many Somalis are asking whether a new administration will make a difference.

Some Somalis have turned to the Shabab for services that would ideally be delivered by a functioning state. Many in Mogadishu regularly travel to areas dozens of miles north of the city to get their cases heard at Shabab-operated mobile courts.

One of them is Ali Ahmed, a businessman from a minority tribe whose family home in Mogadishu was occupied for years by members of a powerful tribe. Mr. Ahmed said the Shabab-run court ruled that the occupiers should vacate his house — and they did.

“It’s sad, but no one goes to the government to get justice,” he said. “Even government judges will secretly advise you to go to Al Shabab.”

according to the World Food Program, with nearly 760,000 people displaced.

according to the United Nations. Aid organizations are not able to reach them there, crops are failing and the Shabab demand taxes on livestock, according to interviews with officials and displaced people.

To find food and water, families travel hundreds of miles, sometimes on foot, to cities and towns like Mogadishu and Doolow in the southern Gedo region. Some parents said they buried their children on the way, while others left weak children behind to save others who were hardier.

Dealing with the Shabab will be among the first challenges facing Somalia’s next government, said Afyare Abdi Elmi, executive director of the Heritage Institute for Policy Studies in Mogadishu.

But the new leader, he said, needs also to deliver a new Constitution, reform the economy, deal with climate change, open dialogue with the breakaway region of Somaliland and unite a polarized nation.

“Governance in Somalia became too confrontational over the past few years,” Mr. Elmi said. “It was like pulling teeth. People are now ready for a new dawn.”

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Grim search in blown-out Havana hotel, death toll at 26 

HAVANA, May 7 (Reuters) – Cuban rescue workers on Saturday picked through rubble for bodies and possible survivors after a Havana boutique hotel was devastated by what authorities said was a gas explosion, leaving at least 26 dead.

The blast at the Hotel Saratoga, just a block from the iconic capitol building in a renovated area of downtown Havana, seriously damaged two adjoining upscale apartment buildings and inflicted lighter damage to 17 structures within a two-block radius. Debris fell on pedestrians in the heavily traveled area and glass and debris went flying at a nearby grammar school.

Local authorities said 50 adults and 14 children were injured. Four of the dead were children, they said, providing few details. One of the dead was a Spanish tourist.

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Authorities and local media said rescuers were working to get to a passage way to the basement in hopes there were survivors. They said it was slow going as engineers had to check the stability of what remained of the building.

The hotel, housed in a more than century-old building, had been closed and only workers were inside at the time of the explosion, state-run TV said.

Residents of the adjoining apartment building often rented out to tourists.

The neoclassical-style hotel was remodeled by a British company after the fall of the Soviet Union and for many years was considered the place to stay by visiting government officials and celebrities.

Recently, it had lost some of its shine with the opening of new hotels in Havana, but was still a five-star venue just a minute away from various historic sites such as the renovated, century-old Marti Theater, which sustained moderate damage.

“Well, its just more bad news. There was Trump, Biden, the pandemic, shortages, and I could go on and on,” Michael Serano, a nurse who doubles as a handyman,” said, shrugging his shoulders and looking to the sky.

The Cuban tourism industry was largely shuttered for the last two years and is in the process of reopening now that locally developed vaccines appear to have tamed the new coronavirus, though arrivals remain at around 30% of pre-pandemic levels.

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Reporting by Marc Frank
Editing by Alistair Bell

Our Standards: The Thomson Reuters Trust Principles.

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Service Properties Trust Announces Fourth Quarter 2021 Results

NEWTON, Mass.–(BUSINESS WIRE)–Service Properties Trust (Nasdaq: SVC) today announced its financial results for the quarter ended December 31, 2021.

John Murray, President and Chief Executive Officer of SVC, made the following statement:

The fourth quarter marked a period of stability in the overall recovery for SVC’s hotel portfolio, as normal seasonality and the impact of the Omicron variant late in the quarter were offset by solid extended stay occupancy and continued leisure demand. SVC’s comparable RevPAR for the 2021 fourth quarter came in ahead of our expectations at 72.1% of the pre-COVID-19 comparable RevPAR for the 2019 fourth quarter. With weekly COVID-19 cases again on the decline, we expect to benefit from a rebound in business travel in the coming quarters, particularly at our full service hotels as urban centers re-open. Our net lease portfolio continues to provide steady cash flows driven by our diverse mix of tenants and industries.

We have either closed or are under contract for $430 million of our previously announced hotel sales at pricing that has been in line with our expectations. We expect these and the balance of the announced sales to close over the next few months. Approximately 72.1% of the sale hotels will be sold encumbered by Sonesta branding, maintaining Sonesta’s distribution and jump starting franchising of the Sonesta brands, which we believe will benefit SVC. With expected proceeds from our hotel sales of over $560 million, over $940 million of cash on our balance sheet and positive cash flow from our hotel portfolio before capital expenditures, we believe we have sufficient liquidity and financial flexibility to address our upcoming debt maturities, as well as an improved hotel portfolio that is well positioned to benefit SVC as lodging trends continue to rebound.”

 

Results for the Quarter Ended December 31, 2021:

 

 

Three Months Ended December 31,

 

 

2021

 

 

 

2020

 

 

($ in thousands, except per share data)

Net loss

$

(198,793

)

 

$

(137,740

)

Net loss per common share

$

(1.21

)

 

$

(0.84

)

Normalized FFO (1)

$

27,936

 

 

$

(22,474

)

Normalized FFO per common share (1)

$

0.17

 

 

$

(0.14

)

Adjusted EBITDAre (1)

$

118,997

 

 

$

64,953

 

(1) Additional information and reconciliations of net loss determined in accordance with U.S. generally accepted accounting principles, or GAAP, to certain non-GAAP measures, including FFO, Normalized FFO, EBITDA, EBITDAre and Adjusted EBITDAre for the quarters ended December 31, 2021 and 2020 appear later in this press release.

 

Hotel Portfolio:

As of December 31, 2021, SVC’s 303 hotels were operated by subsidiaries of Sonesta Holdco Corporation, or Sonesta (261 hotels), Hyatt Hotels Corporation, or Hyatt (17 hotels), Radisson Hospitality, Inc., or Radisson (eight hotels), Marriott International, Inc., or Marriott (16 hotels), and InterContinental Hotels Group, plc, or IHG (one hotel).

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

 

2021

 

 

 

2020

 

 

Change

 

 

2021

 

 

 

2020

 

 

Change

 

 

($ in thousands, except hotel statistics)

Comparable Hotels

 

 

 

 

 

 

 

 

 

 

 

 

No. of hotels

 

 

298

 

 

 

298

 

 

 

 

 

280

 

 

 

280

 

 

 

No. of rooms or suites

 

 

46,920

 

 

 

46,920

 

 

 

 

 

42,101

 

 

 

42,101

 

 

 

Occupancy

 

 

55.9

%

 

 

39.9

%

 

16.0 pts

 

 

54.2

%

 

 

44.1

%

 

10.1 pts

ADR

 

$

110.26

 

 

$

87.30

 

 

26.3

%

 

$

98.07

 

 

$

96.84

 

 

1.3

%

Hotel RevPAR

 

$

61.64

 

 

$

34.83

 

 

77.0

%

 

$

53.15

 

 

$

42.71

 

 

24.4

%

Hotel operating revenues (1)

 

$

303,507

 

 

$

166,843

 

 

81.9

%

 

$

884,460

 

 

$

726,757

 

 

21.7

%

Hotel operating expenses (1)

 

$

267,182

 

 

$

193,329

 

 

38.2

%

 

$

822,470

 

 

$

727,724

 

 

13.0

%

Hotel EBITDA (1)

 

$

36,325

 

 

$

(26,486

)

 

n/m

 

 

$

61,990

 

 

$

(967

)

 

n/m

 

Adjusted Hotel EBITDA (1)

 

$

36,325

 

 

$

(26,817

)

 

n/m

 

 

$

61,990

 

 

$

(1,298

)

 

n/m

 

Hotel EBITDA margin

 

 

12.0

%

 

 

(16.1

) %

 

n/m

 

 

 

7.0

%

 

 

(0.2

) %

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All Hotels (2)

 

 

 

 

 

 

 

 

 

 

 

 

No. of hotels

 

 

303

 

 

 

310

 

 

(7

)

 

 

303

 

 

 

310

 

 

(7

)

No. of rooms or suites

 

 

48,346

 

 

 

49,014

 

 

(668

)

 

 

48,346

 

 

 

49,014

 

 

(668

)

Occupancy

 

 

55.2

%

 

 

39.8

%

 

15.4 pts

 

 

53.0

%

 

 

42.0

%

 

11.0 pts

ADR

 

$

112.30

 

 

$

87.53

 

 

28.3

%

 

$

105.36

 

 

$

100.77

 

 

4.6

%

Hotel RevPAR

 

$

61.99

 

 

$

34.84

 

 

77.9

%

 

$

55.84

 

 

$

42.32

 

 

31.9

%

Hotel operating revenues (1)

 

$

317,215

 

 

$

176,418

 

 

79.8

%

 

$

1,104,678

 

 

$

888,741

 

 

24.3

%

Hotel operating expenses (1)

 

$

288,825

 

 

$

206,521

 

 

39.9

%

 

$

1,033,463

 

 

$

943,064

 

 

9.6

%

Hotel EBITDA (1)

 

$

28,390

 

 

$

(30,103

)

 

n/m

 

 

$

71,215

 

 

$

(54,323

)

 

n/m

 

Adjusted Hotel EBITDA (1)

 

$

28,390

 

 

$

(26,141

)

 

n/m

 

 

$

71,215

 

 

$

(50,361

)

 

n/m

 

Hotel EBITDA margin

 

 

8.9

%

 

 

(3.1

) %

 

n/m

 

 

 

6.4

%

 

 

(5.7

) %

 

n/m

 

(1) Reconciliations of hotel operating revenues and hotel operating expenses used to determine Hotel EBITDA and Adjusted Hotel EBITDA from hotel operating revenues and hotel operating expenses determined in accordance with GAAP for the quarters ended December 31, 2021 and 2020 appear later in this press release.

(2) Results of all hotels as owned during the periods presented, including the results of hotels sold by SVC for the period owned by SVC.

 

Recent operating statistics for SVC’s hotels are as follows:

 

Comparable Hotels

 

 

 

298 Hotels, 46,919 rooms

 

2021 vs 2019

 

 

Occupancy

 

Average Daily Rate

 

RevPAR

 

Occupancy

 

Average Daily Rate

 

RevPAR

October

 

61.3 %

 

$114.35

 

$70.10

 

(16.6) pts

 

(13.3) %

 

(31.7) %

November

 

56.1 %

 

$107.95

 

$60.56

 

(13.4) pts

 

(12.2) %

 

(29.1) %

December

 

50.6 %

 

$107.95

 

$54.62

 

(9.1) pts

 

(6.0) %

 

(20.3) %

 
 

All Hotels

 

 

 

303 Hotels, 48,346 rooms

 

2021 vs 2019

 

 

Occupancy

 

Average Daily Rate

 

RevPAR

 

Occupancy

 

Average Daily Rate

 

RevPAR

October

 

60.5 %

 

$116.18

 

$70.29

 

(17.0) pts

 

(13.2) %

 

(32.3) %

November

 

55.4 %

 

$109.59

 

$60.71

 

(13.7) pts

 

(12.0) %

 

(29.5) %

December

 

50.1 %

 

$110.64

 

$55.43

 

(9.4) pts

 

(5.8) %

 

(20.7) %

 

For SVC’s 302 hotels owned as of February 24, 2022, January 2022 occupancy, ADR and RevPAR were 45.6%, $105.11 and $47.93, respectively.

Hotel Agreements:

As previously announced, on January 7, 2022, SVC and Sonesta amended and restated their management agreements effective January 1, 2022. The amendments to the agreements are substantially the same as those made earlier in 2021 to the agreements for SVC’s Hyatt and Radisson portfolios and the amendments made to SVC’s agreements with Sonesta in 2020 for certain Sonesta hotels. As of January 1, 2022, SVC owned 261 hotels managed by Sonesta and 67 of these hotels are expected to be sold, or the sale hotels. Among other things, the amendments to the agreements between SVC and Sonesta for 194 hotels, or the retained hotels, are as follows:

For the sale hotels, the term was extended to the earlier of December 31, 2022 or until the hotels are sold and the FF&E reserve funding requirement was removed. SVC’s owner’s priority return will be reduced by the current owner’s priority return for a sale hotel once sold. The total owner’s priority for all the sale hotels is $84.7 million.

Net Lease Retail Portfolio:

SVC’s net lease retail portfolio is summarized as follows:

 

 

 

As of December 31, 2021

Number of properties

 

788

Industries

 

21

Tenants

 

174

Brands

 

134

Square feet

 

13.5 million

Occupancy

 

98.1%

Weighted average lease term (by annual minimum rent)

 

10.2 years

Rent Coverage

 

2.58x

 

During the quarter ended December 31, 2021, SVC reduced its reserve for uncollectible revenues by $0.6 million for certain of its net lease tenants. During the quarter ended December 31, 2020, SVC recorded reserves for uncollectible revenues of $4.5 million for certain of its net lease tenants.

Recent Investment Activities:

During the quarter ended December 31, 2021, SVC sold one hotel with 93 keys for a sales price of $8.5 million, excluding closing costs, and six net lease properties with an aggregate of 52,596 rentable square feet for an aggregate sales price of $9.1 million, excluding closing costs. In January 2022, SVC sold 1 hotel with 295 keys for a sales price of $19.0 million, excluding closing costs.

SVC has entered into agreements to sell 45 Sonesta branded hotels (35 extended stay hotels with 4,185 keys, 9 select service hotels with 1,114 keys and one full service hotels with 381 keys) located in 21 states with an aggregate net carrying value of $352.5 million as of December 31, 2021 for an aggregate sales price of $402.4 million. SVC expects to enter agreements to sell 19 additional Sonesta branded hotels with 2,420 keys with an aggregate carrying value of $125.6 million as of December 31, 2021 for an aggregate sales price of $131.9 million. SVC expects these sales to be completed by the end of the second quarter of 2022. SVC continues to market two additional hotels with 272 keys for sale. SVC currently expects that approximately 72.1% of the sale hotels will be sold encumbered by Sonesta branding, maintaining Sonesta’s distribution and jump-starting franchising of the Sonesta brands, which SVC believes it will benefit from through its 34% ownership of Sonesta.

Capital expenditures made at certain of SVC’s properties for the quarter ended December 31, 2021 were $30.4 million.

Liquidity and Financing Activities:

As of December 31, 2021, SVC had $944.0 million of cash and cash equivalents.

SVC’s $1 billion revolving credit facility matures on July 15, 2022 and SVC is currently in discussions with its lenders regarding an extension of the maturity date of the facility and additional covenant waivers. There is no assurance SVC will come to terms with its lenders or that it will be granted such additional covenant relief.

Conference Call:

On February 25, 2022 at 10:00 a.m. Eastern Time, John Murray, Chief Executive Officer, Brian Donley, Chief Financial Officer, and Todd Hargreaves, Chief Investment Officer, will host a conference call to discuss SVC’s fourth quarter 2021 financial results. The conference call telephone number is (877) 329-3720. Participants calling from outside the United States and Canada should dial (412) 317-5434. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through Friday, March 4, 2022. To access the replay, dial (412) 317-0088. The replay pass code is 8820658.

A live audio webcast of the conference call will also be available in a listen-only mode on SVC’s website, www.svcreit.com. Participants wanting to access the webcast should visit SVC’s website about five minutes before the call. The archived webcast will be available for replay on SVC’s website for about one week after the call. The transcription, recording and retransmission in any way of SVC’s fourth quarter conference call is strictly prohibited without the prior written consent of SVC.

Supplemental Data:

A copy of SVC’s Fourth Quarter 2021 Supplemental Operating and Financial Data is available for download at SVC’s website, www.svcreit.com. SVC’s website is not incorporated as part of this press release.

Service Properties Trust (Nasdaq: SVC) is a real estate investment trust, or REIT, with more than $12 billion invested in two asset categories: hotels and service-focused retail net lease properties. As of December 31, 2021, SVC owned 303 hotels with over 48,000 guest rooms throughout the United States and in Puerto Rico and Canada, the majority of which are extended stay and select service. As of December 31, 2021, SVC also owned 788 retail service-focused net lease properties totaling over 13 million square feet throughout United States. SVC is managed by The RMR Group (Nasdaq: RMR), an alternative asset management company with more than $33 billion in assets under management as of December 31, 2021 and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. SVC is headquartered in Newton, MA. For more information, visit www.svcreit.com.

Non-GAAP Financial Measures and Certain Definitions:

SVC presents certain “non-GAAP financial measures” within the meaning of the applicable Securities and Exchange Commission, or SEC, rules, including funds from operations, or FFO, Normalized FFO, earnings before interest, taxes, depreciation and amortization, or EBITDA, Hotel EBITDA, Adjusted Hotel EBITDA, EBITDA for real estate, or EBITDAre, and Adjusted EBITDAre. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) as indicators of SVC’s operating performance or as measures of SVC’s liquidity. These measures should be considered in conjunction with net income (loss) as presented in SVC’s consolidated statements of income (loss). SVC considers these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss). SVC believes 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 SVC’s operating performance between periods and with other REITs and, in the case of Hotel EBITDA, reflecting only those income and expense items that are generated and incurred at the hotel level may help both investors and management to understand the operations of SVC’s hotels.

Please see the pages attached hereto for a more detailed statement of SVC’s operating results and financial condition and for an explanation of SVC’s calculation of FFO and Normalized FFO, EBITDA, Hotel EBITDA, Adjusted Hotel EBITDA, EBITDAre and Adjusted EBITDAre and a reconciliation of those amounts to amounts determined in accordance with GAAP.

Occupancy represents the total number of room nights sold divided by the total number of room nights available at a hotel or group of hotels. Occupancy is an important measure of the utilization rate and demand of SVC’s hotels.

Average Daily Rate, or ADR, represents rooms revenue divided by the total number of room nights sold in a given period. ADR provides useful insight on pricing at SVC’s hotels and is a measure widely used in the hotel industry.

Revenue per Available Room, or RevPAR, represents rooms revenue divided by the total number of room nights available to guests for a given period. RevPAR is an industry metric correlated to occupancy and ADR and helps measure revenue performance over comparable periods.

Hotel EBITDA and Adjusted Hotel EBITDA: Hotel EBITDA is calculated as hotel operating revenues less hotel operating expenses of all managed and leased hotels, prior to any adjustments required for presentation in SVC’s consolidated statements of income (loss) in accordance with GAAP. In calculating Adjusted EBITDAre, SVC adjusts for the items shown on page 12.

Hotel EBITDA Margin and Adjusted Hotel EBITDA Margin: Hotel EBITDA Margin is Hotel EBITDA as a percentage of hotel operating revenues. Adjusted Hotel EBITDA Margin is Adjusted Hotel EBITDA as a percentage of hotel operating expenses.

Comparable Hotels Data: SVC presents RevPAR, ADR, and occupancy for the periods presented on a comparable basis to facilitate comparisons between periods. SVC generally defines comparable hotels as those that were owned by it on December 31, 2021 and were open and operating for the entire periods being compared. For the three months ended December 31, 2021 and 2020, SVC’s comparable results excluded five hotels that had suspended operations during part of the periods presented. For the year ended December 31, 2021 and 2020, SVC’s comparable results excluded 23 hotels that had suspended operations during part of the periods presented.

Rent Coverage: SVC defines Rent Coverage as earnings before interest, taxes, depreciation, amortization and rent, or EBITDAR, divided by the annual minimum rent due to SVC weighted by the minimum rent of the property to total minimum rents of the net lease portfolio. EBITDAR amounts used to determine rent coverage are generally for the latest twelve-month period reported based on the most recent operating information, 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 SVC. Tenants that do not report operating information are excluded from the rent coverage calculations. In instances where SVC does not have financial information for the most recent quarter from its tenants, it has calculated an implied EBITDAR for the 2021 fourth quarter using industry benchmark data to reflect current operating trends. SVC believes using this industry benchmark data provides a reasonable estimate of recent operating results and rent coverage for those tenants.

 

SERVICE PROPERTIES TRUST

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

(unaudited)

 

 

 

As of December 31,

 

 

 

2021

 

 

 

2020

 

ASSETS

 

 

 

 

Real estate properties:

 

 

 

 

Land

 

$

1,918,385

 

 

$

2,030,440

 

Buildings, improvements and equipment

 

 

8,307,248

 

 

 

9,131,832

 

Total real estate properties, gross

 

 

10,225,633

 

 

 

11,162,272

 

Accumulated depreciation

 

 

(3,281,659

)

 

 

(3,280,110

)

Total real estate properties, net

 

 

6,943,974

 

 

 

7,882,162

 

Acquired real estate leases and other intangibles, net

 

 

283,241

 

 

 

325,845

 

Assets held for sale

 

 

515,518

 

 

 

13,543

 

Cash and cash equivalents

 

 

944,043

 

 

 

73,332

 

Restricted cash

 

 

3,375

 

 

 

18,124

 

Due from related persons

 

 

48,168

 

 

 

55,530

 

Other assets, net

 

 

414,996

 

 

 

318,783

 

Total assets

 

$

9,153,315

 

 

$

8,687,319

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

Revolving credit facility

 

$

1,000,000

 

 

$

78,424

 

Senior unsecured notes, net

 

 

6,143,022

 

 

 

6,130,166

 

Accounts payable and other liabilities

 

 

433,448

 

 

 

345,373

 

Due to related persons

 

 

21,539

 

 

 

30,566

 

Total liabilities

 

 

7,598,009

 

 

 

6,584,529

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

Common shares of beneficial interest, $.01 par value; 200,000,000 shares authorized; 165,092,333 and 164,823,833 shares issued and outstanding, respectively

 

 

1,651

 

 

 

1,648

 

Additional paid in capital

 

 

4,552,558

 

 

 

4,550,385

 

Cumulative other comprehensive income (loss)

 

 

779

 

 

 

(760

)

Cumulative net income available for common shareholders

 

 

2,635,660

 

 

 

3,180,263

 

Cumulative common distributions

 

 

(5,635,342

)

 

 

(5,628,746

)

Total shareholders’ equity

 

 

1,555,306

 

 

 

2,102,790

 

Total liabilities and shareholders’ equity

 

$

9,153,315

 

 

$

8,687,319

 

 
 

SERVICE PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(amounts in thousands, except per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
December 31,

 

Year Ended

December 31,

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

Hotel operating revenues (1)

 

$

317,215

 

 

$

174,520

 

 

$

1,104,678

 

 

$

875,098

 

Rental income (2)

 

 

104,160

 

 

 

95,523

 

 

 

390,902

 

 

 

390,156

 

Total revenues

 

 

421,375

 

 

 

270,043

 

 

 

1,495,580

 

 

 

1,265,254

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

Hotel operating expenses (1)(3)

 

 

286,968

 

 

 

189,898

 

 

 

1,010,737

 

 

 

682,804

 

Other operating expenses

 

 

3,900

 

 

 

4,179

 

 

 

15,658

 

 

 

15,208

 

Depreciation and amortization

 

 

115,757

 

 

 

121,351

 

 

 

485,965

 

 

 

498,908

 

General and administrative

 

 

12,601

 

 

 

13,046

 

 

 

53,439

 

 

 

50,668

 

Transaction related costs (4)

 

 

35,830

 

 

 

15,100

 

 

 

64,764

 

 

 

15,100

 

Loss on asset impairment (5)

 

 

76,510

 

 

 

254

 

 

 

78,620

 

 

 

55,756

 

Total expenses

 

 

531,566

 

 

 

343,828

 

 

 

1,709,183

 

 

 

1,318,444

 

 

 

 

 

 

 

 

 

 

Gain on sale of real estate, net (6)

 

 

588

 

 

 

11,916

 

 

 

11,522

 

 

 

2,261

 

Unrealized gain on equity securities, net (7)

 

 

2,168

 

 

 

15,473

 

 

 

22,535

 

 

 

19,882

 

Gain on insurance settlement (8)

 

 

 

 

 

 

 

 

 

 

 

62,386

 

Interest income

 

 

177

 

 

 

1

 

 

 

664

 

 

 

284

 

Interest expense (including amortization of debt issuance costs and debt discounts and premiums of $5,913, $4,220, $21,036 and $14,870, respectively)

 

 

(92,494

)

 

 

(82,811

)

 

 

(365,721

)

 

 

(306,490

)

Loss on early extinguishment of debt (9)

 

 

 

 

 

(2,424

)

 

 

 

 

 

(9,394

)

Loss before income taxes and equity in losses of an investee

 

 

(199,752

)

 

 

(131,630

)

 

 

(544,603

)

 

 

(284,261

)

Income tax benefit (expense) (8)

 

 

1,950

 

 

 

(505

)

 

 

941

 

 

 

(17,211

)

Equity in losses of an investee (10)

 

 

(991

)

 

 

(5,605

)

 

 

(941

)

 

 

(9,910

)

Net loss

 

$

(198,793

)

 

$

(137,740

)

 

$

(544,603

)

 

$

(311,382

)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic and diluted)

 

 

164,667

 

 

 

164,498

 

 

 

164,566

 

 

 

164,422

 

 

 

 

 

 

 

 

 

 

Net loss per common share (basic and diluted)

 

$

(1.21

)

 

$

(0.84

)

 

$

(3.31

)

 

$

(1.89

)

 
See Notes  
 

SERVICE PROPERTIES TRUST

RECONCILIATIONS OF FUNDS FROM OPERATIONS, NORMALIZED FUNDS

FROM OPERATIONS

(amounts in thousands, except per share data)

(unaudited)

 

 

Three Months Ended
December 31,

 

Year Ended

December 31,

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

Calculation of FFO and Normalized FFO: (11)

 

 

 

 

 

 

 

Net loss

$

(198,793

)

 

$

(137,740

)

 

$

(544,603

)

 

$

(311,382

)

Add (Less): Depreciation and amortization

 

115,757

 

 

 

121,351

 

 

 

485,965

 

 

 

498,908

 

Loss on asset impairment (5)

 

76,510

 

 

 

254

 

 

 

78,620

 

 

 

55,756

 

Gain on sale of real estate, net (6)

 

(588

)

 

 

(11,916

)

 

 

(11,522

)

 

 

(2,261

)

Unrealized gain on equity securities, net (7)

 

(2,168

)

 

 

(15,473

)

 

 

(22,535

)

 

 

(19,882

)

Adjustments to reflect SVC’s share of FFO attributable to an investee (10)

 

737

 

 

 

400

 

 

 

2,605

 

 

 

(61

)

FFO

 

(8,545

)

 

 

(43,124

)

 

 

(11,470

)

 

 

221,078

 

 

 

 

 

 

 

 

 

Add (Less): Transaction related costs (4)

 

35,830

 

 

 

15,100

 

 

 

64,764

 

 

 

15,100

 

Loss contingency (13)

 

 

 

 

3,962

 

 

 

 

 

 

3,962

 

Gain on insurance settlement, net of tax (8)

 

 

 

 

(1,800

)

 

 

 

 

 

(48,536

)

Loss on early extinguishment of debt (9)

 

 

 

 

2,424

 

 

 

 

 

 

9,394

 

Adjustments to reflect SVC’s share of Normalized FFO attributable to an investee (10)

 

651

 

 

 

964

 

 

 

2,270

 

 

 

964

 

Normalized FFO

$

27,936

 

 

$

(22,474

)

 

$

55,564

 

 

$

201,962

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic and diluted)

 

164,667

 

 

 

164,498

 

 

 

164,566

 

 

 

164,422

 

 

 

 

 

 

 

 

 

Basic and diluted per common share amounts:

 

 

 

 

 

 

 

Net loss per share

$

(1.21

)

 

$

(0.84

)

 

$

(3.31

)

 

$

(1.89

)

FFO

$

(0.05

)

 

$

(0.26

)

 

$

(0.07

)

 

$

1.34

 

Normalized FFO

$

0.17

 

 

$

(0.14

)

 

$

0.34

 

 

$

1.23

 

Distributions declared per share

$

0.01

 

 

$

0.01

 

 

$

0.04

 

 

$

0.57

 

 
See Notes  
 

SERVICE PROPERTIES TRUST

RECONCILIATIONS OF EBITDA, EBITDAre AND ADJUSTED EBITDAre

(amounts in thousands, except per share data)

(unaudited)

 

 

Three Months Ended
December 31,

 

Year Ended

December 31,

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

Calculation of EBITDA, EBITDAre and Adjusted EBITDAre:(12)

 

 

 

 

 

 

 

Net loss

$

(198,793

)

 

$

(137,740

)

 

$

(544,603

)

 

$

(311,382

)

Add (Less): Interest expense

 

92,494

 

 

 

82,811

 

 

 

365,721

 

 

 

306,490

 

Income tax (benefit) expense (8)

 

(1,950

)

 

 

505

 

 

 

(941

)

 

 

17,211

 

Depreciation and amortization

 

115,757

 

 

 

121,351

 

 

 

485,965

 

 

 

498,908

 

EBITDA

 

7,508

 

 

 

66,927

 

 

 

306,142

 

 

 

511,227

 

Add (Less): Loss on asset impairment (5)

 

76,510

 

 

 

254

 

 

 

78,620

 

 

 

55,756

 

Gain on sale of real estate, net (6)

 

(588

)

 

 

(11,916

)

 

 

(11,522

)

 

 

(2,261

)

Adjustments to reflect SVC’s share of EBITDAre attributable to an investee (10)

 

781

 

 

 

 

 

 

2,904

 

 

 

 

EBITDAre

 

84,211

 

 

 

55,265

 

 

 

376,144

 

 

 

564,722

 

Add (Less): Transaction related costs (4)

 

35,830

 

 

 

15,100

 

 

 

64,764

 

 

 

15,100

 

Unrealized gain on equity securities, net (7)

 

(2,168

)

 

 

(15,473

)

 

 

(22,535

)

 

 

(19,882

)

Gain on insurance settlement (8)

 

 

 

 

 

 

 

 

 

 

(62,386

)

Loss on early extinguishment of debt (9)

 

 

 

 

2,424

 

 

 

 

 

 

9,394

 

Adjustments to reflect SVC’s share of Adjusted EBITDAre attributable to an investee (10)

 

651

 

 

 

2,755

 

 

 

2,270

 

 

 

1,751

 

General and administrative expense paid in common shares (14)

 

473

 

 

 

920

 

 

 

2,963

 

 

 

3,206

 

Loss contingency (13)

 

 

 

 

3,962

 

 

 

 

 

 

3,962

 

Adjusted EBITDAre

$

118,997

 

 

$

64,953

 

 

$

423,606

 

 

$

515,867

 

 

 

 

 

 

 

 

 

See Notes  
 

SERVICE PROPERTIES TRUST

CALCULATION AND RECONCILIATION OF HOTEL EBITDA AND ADJUSTED HOTEL EBITDA

Comparable Hotels

(amounts in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended
December 31,

 

Year Ended

December 31,

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

Number of hotels

 

298

 

 

 

298

 

 

 

280

 

 

 

280

 

Room revenues

$

263,312

 

 

$

150,226

 

 

$

812,506

 

 

$

656,990

 

Food and beverage revenues

 

28,700

 

 

 

7,707

 

 

 

44,517

 

 

 

41,787

 

Other revenues

 

11,495

 

 

 

8,910

 

 

 

27,437

 

 

 

27,980

 

Hotel operating revenues – comparable hotels

 

303,507

 

 

 

166,843

 

 

 

884,460

 

 

 

726,757

 

Rooms expenses

 

85,800

 

 

 

56,857

 

 

 

267,010

 

 

 

223,641

 

Food and beverage expenses

 

23,458

 

 

 

9,598

 

 

 

38,393

 

 

 

43,535

 

Other direct and indirect expenses

 

119,706

 

 

 

96,576

 

 

 

385,088

 

 

 

350,702

 

Management fees

 

12,139

 

 

 

2,131

 

 

 

34,590

 

 

 

5,580

 

Real estate taxes, insurance and other

 

24,843

 

 

 

27,777

 

 

 

93,343

 

 

 

94,088

 

FF&E reserves (15)

 

1,236

 

 

 

390

 

 

 

4,046

 

 

 

10,178

 

Hotel operating expenses – comparable hotels

 

267,182

 

 

 

193,329

 

 

 

822,470

 

 

 

727,724

 

 

 

 

 

 

 

 

 

Hotel EBITDA – comparable hotels

$

36,325

 

 

$

(26,486

)

 

$

61,990

 

 

$

(967

)

Loss contingency (13)

 

 

 

 

(331

)

 

 

 

 

 

(331

)

Adjusted Hotel EBITDA

$

36,325

 

 

$

(26,817

)

 

$

61,990

 

 

$

(1,298

)

Adjusted Hotel EBITDA Margin

 

12.0

%

 

 

(16.1

) %

 

 

7.0

%

 

 

(0.2

) %

 

 

 

 

 

 

 

 

Hotel operating revenues (GAAP) (1)

$

317,215

 

 

$

174,520

 

 

$

1,104,678

 

 

$

875,098

 

Add (Less):

 

 

 

 

 

 

 

Hotel operating revenues from leased hotels

 

 

 

 

1,898

 

 

 

 

 

 

13,643

 

Hotel operating revenues from non-comparable hotels

 

(13,708

)

 

 

(9,575

)

 

 

(220,218

)

 

 

(161,984

)

Hotel operating revenues – comparable hotels

$

303,507

 

 

$

166,843

 

 

$

884,460

 

 

$

726,757

 

 

 

 

 

 

 

 

 

Hotel operating expenses (GAAP) (1)

$

286,968

 

 

$

189,898

 

 

$

1,010,737

 

 

$

682,804

 

Add (Less):

 

 

 

 

 

 

 

Hotel operating expenses from non-comparable hotels

 

(21,643

)

 

 

(13,192

)

 

 

(210,993

)

 

 

(215,340

)

Reduction for security deposit and guaranty fundings, net (3)

 

 

 

 

13,387

 

 

 

15,696

 

 

 

235,522

 

Hotel operating expenses of leased hotels

 

 

 

 

2,225

 

 

 

 

 

 

11,074

 

FF&E reserves from managed hotel operations (15)

 

1,236

 

 

 

390

 

 

 

4,546

 

 

 

11,594

 

Other (16)

 

621

 

 

 

621

 

 

 

2,484

 

 

 

2,070

 

Hotel operating expenses – comparable hotels

$

267,182

 

 

$

193,329

 

 

$

822,470

 

 

$

727,724

 

 
See Notes  
 

SERVICE PROPERTIES TRUST

CALCULATION AND RECONCILIATION OF HOTEL EBITDA AND ADJUSTED HOTEL EBITDA

All Hotels

(amounts in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

 

 

 

 

 

 

Room revenues

$

272,458

 

 

$

159,022

 

 

$

972,411

 

 

$

773,572

 

Food and beverage revenues

 

31,503

 

 

 

7,911

 

 

 

84,430

 

 

 

66,830

 

Other revenues

 

13,254

 

 

 

9,485

 

 

 

47,837

 

 

 

48,339

 

Hotel operating revenues

 

317,215

 

 

 

176,418

 

 

 

1,104,678

 

 

 

888,741

 

Rooms expenses

 

90,705

 

 

 

59,784

 

 

 

321,228

 

 

 

270,828

 

Food and beverage expenses

 

26,768

 

 

 

9,928

 

 

 

72,884

 

 

 

75,718

 

Other direct and indirect expenses

 

126,208

 

 

 

97,328

 

 

 

458,586

 

 

 

422,819

 

Management fees

 

11,869

 

 

 

2,436

 

 

 

40,478

 

 

 

8,050

 

Real estate taxes, insurance and other

 

32,039

 

 

 

36,655

 

 

 

135,741

 

 

 

154,375

 

FF&E reserves (15)

 

1,236

 

 

 

390

 

 

 

4,546

 

 

 

11,274

 

Hotel operating expenses

 

288,825

 

 

 

206,521

 

 

 

1,033,463

 

 

 

943,064

 

 

 

 

 

 

 

 

 

Hotel EBITDA

$

28,390

 

 

$

(30,103

)

 

$

71,215

 

 

$

(54,323

)

Loss contingency (13)

 

 

 

 

3,962

 

 

 

 

 

 

3,962

 

Adjusted Hotel EBITDA

$

28,390

 

 

$

(26,141

)

 

$

71,215

 

 

$

(50,361

)

Adjusted Hotel EBITDA Margin

 

8.9

%

 

 

(14.8

) %

 

 

6.4

%

 

 

(5.7

) %

 

 

 

 

 

 

 

 

Hotel operating revenues (GAAP) (1)

$

317,215

 

 

$

174,520

 

 

$

1,104,678

 

 

$

875,098

 

Add: hotel revenues of leased hotels (1)

 

 

 

 

1,898

 

 

 

 

 

 

13,643

 

Hotel operating revenues

$

317,215

 

 

$

176,418

 

 

$

1,104,678

 

 

$

888,741

 

 

 

 

 

 

 

 

 

Hotel operating expenses (GAAP) (1)

$

286,968

 

 

$

189,898

 

 

$

1,010,737

 

 

$

682,804

 

Add (Less):

 

 

 

 

 

 

 

Reduction for security deposit and guaranty fundings, net (3)

 

 

 

 

13,387

 

 

 

15,696

 

 

 

235,522

 

Hotel operating expenses of leased hotels

 

 

 

 

2,225

 

 

 

 

 

 

11,074

 

FF&E reserves from managed hotels operations (15)

 

1,236

 

 

 

390

 

 

 

4,546

 

 

 

11,594

 

Other (16)

 

621

 

 

 

621

 

 

 

2,484

 

 

 

2,070

 

Hotel operating expenses

$

288,825

 

 

$

206,521

 

 

$

1,033,463

 

 

$

943,064

 

 
See Notes  
  1. As of December 31, 2021, SVC owned 303 hotels. SVC’s consolidated statements of income (loss) include hotel operating revenues and expenses of managed hotels and rental income from leased hotels.
  2. SVC increased  rental income by $466 and reduced rental income by $416 for the three months ended December 31, 2021 and 2020, respectively, and reduced rental income by $2,621 and $714 for the years ended December 31, 2021 and 2020, respectively, to record scheduled rent changes under certain of SVC’s leases, the deferred rent obligations under SVC’s leases with TA and the estimated future payments to SVC under its leases with TA for the cost of removing underground storage tanks on a straight-line basis.
  3. When managers of SVC’s hotels are required to fund the shortfalls of minimum returns under the terms of SVC’s management agreements or their guarantees, SVC reflects such fundings (including security deposit applications) in its consolidated statements of income (loss) as a reduction of hotel operating expenses. The net reduction to hotel operating expenses was $13,387 for the three months ended December 31, 2020 and $15,697 and $235,522 for the years ended December 31, 2021 and 2020, respectively. There was no net reduction to hotel operating expenses during the three months ended December 31, 2021.
  4. Transaction related costs for the three months ended December 31, 2021 of $35,830 primarily consists of working capital advances SVC previously funded under its agreements with Marriott and IHG as a result of the amounts no longer expected to be recoverable. Transaction related costs for the year ended December 31, 2021 include $38,446 of working capital advances SVC previously funded under its agreements with Marriott, IHG and Hyatt as a result of the amounts no longer expected to be recoverable, $19,920 of hotel manager transition related costs resulting from the rebranding of 94 hotels during the period, and $6,398 of legal costs related to SVC’s arbitration proceeding with Marriott. Transaction costs for the three months and year ended December 31, 2020 primarily consisted of transition related costs resulting from the rebranding of 115 hotels previously managed by IHG, Marriott and Wyndham Hotels & Resorts, Inc. to Sonesta.
  5. SVC recorded a $76,510 loss on asset impairment during the three months ended December 31, 2021 to reduce the carrying value of 35 hotel properties and 21 net lease properties to their estimated fair value less costs to sell and a $254 loss on asset impairment during the three months ended December 31, 2020, to reduce the carrying value of five net lease properties to their estimated fair value less costs to sell. SVC recorded a $78,620 loss on asset impairment during the year ended December 31, 2021 to reduce the carrying value of 35 hotels and 26 net lease properties to their estimated fair value less costs to sell and a $55,756 loss on asset impairment during the year ended December 31, 2020 to reduce the carrying value of 18 hotel properties and 13 net lease properties to their estimated fair value less costs to sell.
  6. SVC recorded a $588 net gain on sale of real estate during the three months ended December 31, 2021 in connection with the sale of one hotel and six net lease properties and recorded a $11,916 net gain on sale of real estate during the three months ended December 31, 2020 in connection with the sale of 18 hotels and six net lease properties. SVC recorded a $11,522 net gain on sale of real estate during the year ended December 31, 2021 in connection with the sale of seven hotels and eleven net lease properties and recorded a net gain on sale of real estate of $2,261 during the year ended December 31, 2020 in connection with the sale of 18 hotels and 21 net lease properties.
  7. Unrealized gain on equity securities, net represents the adjustment required to adjust the carrying value of SVC’s investment in shares of TA common stock to its fair value.
  8. SVC recorded a $62,386 gain on insurance settlement during the year ended December 31, 2020 for insurance proceeds received for its then leased hotel in San Juan, PR related to Hurricane Maria. Under GAAP, SVC was required to increase the building basis of this hotel for the amount of the insurance proceeds. SVC also recorded a $13,850 deferred tax liability as a result of the book value to tax basis difference related to this accounting during the year ended December 31, 2020.
  9. SVC recorded a loss on extinguishment of debt of $2,424 and $9,394 during the three months and year ended December 31, 2020, respectively, relating to its repayment of its $400 million term loan and certain unsecured senior notes.
  10. Represents SVC’s proportionate share from its equity investment in Sonesta.
  11. SVC calculates FFO and Normalized FFO as shown above. FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, or Nareit, which is net income (loss), 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 adjustments to reflect SVC’s share of FFO attributable to an investee and certain other adjustments currently not applicable to SVC. In calculating Normalized FFO, SVC adjusts for the items shown above. FFO and Normalized FFO are among the factors considered by SVC’s Board of Trustees when determining the amount of distributions to its shareholders. Other factors include, but are not limited to, requirements to satisfy SVC’s REIT distribution requirements, limitations in its credit agreement and public debt covenants, the availability to SVC of debt and equity capital, SVC’s distribution rate as a percentage of the trading price of its common shares, or dividend yield, and to the dividend yield of other REITs, SVC’s expectation of its future capital requirements and operating performance and SVC’s expected needs for and availability of cash to pay its obligations. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than SVC does.
  12. SVC calculates EBITDA, EBITDAre, and Adjusted EBITDAre as shown above. EBITDAre is calculated on the basis defined by Nareit which is EBITDA, excluding gains and losses on the sale of real estate, loss on impairment of real estate assets, if any, and adjustments to reflect SVC’s share of EBITDAre attributable to an investee. In calculating Adjusted EBITDAre, SVC adjusts for the items shown above. Other real estate companies and REITs may calculate EBITDA, EBITDAre and Adjusted EBITDAre differently than SVC does.
  13. Hotel operating expenses for the three months ended December 31, 2020 includes a $3,962 loss contingency related to a litigation matter relating to certain of SVC’s hotels.
  14. Amounts represent the equity compensation for SVC’s Trustees, officers and certain other employees of SVC’s manager.
  15. Various percentages of total sales at certain of SVC’s hotels are escrowed as reserves for future renovations or refurbishments, or FF&E reserve escrows. SVC owns all the FF&E reserve escrows for its hotels.
  16. SVC is amortizing a liability it recorded for the fair value of its initial investment in Sonesta as a reduction to hotel operating expenses in its consolidated statements of income (loss). SVC reduced hotel operating expenses by $621 for each of the three months ended December 31, 2021 and 2020, and $2,483 and $2,070 for the years ended December 31, 2021 and 2020, respectively, for this liability.

Warning Concerning Forward-Looking Statements

This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Whenever SVC uses words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “will,” “may” and negatives or derivatives of these or similar expressions, SVC is making forward-looking statements. These forward-looking statements are based upon SVC’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by SVC’s forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond SVC’s control. For example:

The information contained in SVC’s filings with the SEC, including under the caption “Risk Factors” in SVC’s periodic reports, or incorporated therein, identifies other important factors that could cause differences from SVC’s forward-looking statements. SVC’s filings with the SEC are available on the SEC’s website at www.sec.gov.

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More Than a Million Afghans Flee as Economy Collapses

ZARANJ, Afghanistan — From their hide-out in the desert ravine, the migrants could just make out the white lights of the Iranian border glaring over the horizon.

The air was cold and their breath heavy. Many had spent the last of their savings on food weeks before and cobbled together cash from relatives, hoping to escape Afghanistan’s economic collapse. Now, looking at the border they saw a lifeline: work, money, food to eat.

“There is no other option for me, I cannot go back,” said Najaf Akhlaqi, 26, staring at the smugglers scouring the moonlit landscape for Taliban patrols. Then he jolted to his feet as the smugglers barked at the group to run.

Since the United States withdrew troops and the Taliban seized power, Afghanistan has plunged into an economic crisis that has pushed millions already living hand-to-mouth over the edge. Incomes have vanished, life-threatening hunger has become widespread and badly needed aid has been stymied by Western sanctions against Taliban officials.

Aid organizations estimate that around 4,000 to 5,000 people are crossing into Iran each day.

European Union last fall pledged over $1 billion in humanitarian aid for Afghanistan and neighboring countries hosting Afghans who have fled.

“We need new agreements and commitments in place to be able to assist and help an extremely vulnerable civil population,” Jonas Gahr Store, the Norwegian prime minister, said in a statement at the U.N. Security Council’s meeting on Afghanistan last month. “We must do what we can to avoid another migration crisis and another source of instability in the region and beyond.”

But Western donors are still wrestling with complicated questions over how to meet their humanitarian obligations to ordinary Afghans without propping up the new Taliban government.

As the humanitarian situation worsened, the United States also issued some exemptions to sanctionsand committed $308 million in aid last month — bringing the total U.S. assistance to the country to $782 million since October last year.

But aid can only go so far in a country facing economic collapse, experts say. Unless Western donors move more quickly to release their chokehold on the economy and revive the financial system, Afghans desperate for work will likely continue to look abroad.

Crouching among the migrant group in the desert, Mr. Akhlaqi steeled himself for the desperate dash ahead: A mile-long scramble over churned-earth trenches, a 15-foot-high border wall topped with barbed wire and a vast stretch of scrubland flush with Iranian security forces. Over the past month, he had crossed the border 19 times, he said. Each time, he was arrested and returned over the border.

A police officer under the former government, Mr. Akhlaqi went into hiding in relatives’ homes for fear of Taliban retribution. As the little savings that fed his family ran dry, he moved from city to city looking for a new job. But the work was scarce. So in early November, he linked up with smugglers in Nimruz Province determined to get to Iran.

asylum claims in Europe, after Syria, and one of the world’s largest populations of refugees and asylum seekers — around 3 million people — most of whom live in Iran and Pakistan.

Many fled through Nimruz, a remote corner of southwest Afghanistan wedged between the borders of Iran and Pakistan that has served as a smuggling haven for decades. In its capital, Zaranj, Afghans from around the country crowd into smuggler-run hotels that line the main road and gather around street vendors’ kebab stands, exchanging stories about the grueling journey ahead.

At a parking lot at the center of town known as “The Terminal,” men pile into the backs of pickup trucks bound for Pakistan while young boys hawk goggles and water bottles. On a recent day, their sales pitches — “Who wants water?” — were nearly smothered by the sounds of honking cars and the angry shouts of haggling men exchanging tattered Afghani bank notes for Iranian toman.

Standing in line to climb into the back of a pickup, Abdul, 25, had arrived the day before from Kunduz, a commercial hub in northern Afghanistan that was wracked with fighting last summer during the Taliban’s blitz offensive. As the thuds of mortar fire engulfed the city, his business sputtered to a halt. After the takeover, his shop stood empty as people saved the little money they had for basics like food and medicine.

As the months dragged on, Abdul borrowed money to feed his own family, plunging further and further into debt. Finally, he decided leaving for Iran was his only option.

“I don’t want to leave my country, but I have no other choice,” said Abdul, who asked that The Times use only his first name, fearing that his family could face retaliation. “If the economic situation continues like this, there will be no future here.”

As the economic crisis has worsened, local Taliban officials have sought to profit off the exodus by regulating the lucrative smuggling business. At the Terminal, a Taliban official sitting in a small silver car collects a new tax — 1,000 Afghanis, or about $10 — from each car heading to Pakistan.

At first, Taliban officials also taxed the city’s other main migrant route, a smuggler-escorted journey across the desert and over the border wall directly into Iran. But after accusations in September that a smuggler had raped a girl, the Taliban reversed course, cracking down on this desert route.

Still, such efforts have done little to deter smugglers.

Speeding through a desert road around midnight, one smuggler, S., who preferred to go by only his first initial because of the illegal nature of his work, blasted Arabic pop music from his stereo. A music video with a woman swaying in a tight black dress played on the car’s navigation screen. As he neared his safe house, he cut the back lights to avoid being followed.

Moving people each night requires a delicate dance: First, he strikes a deal with a low-ranking Iranian border guard to allow a certain number of migrants to cross. Then, he tells other smugglers to bring migrants from their hotel to a safe house in the desert and coordinates with his business partner to meet the group on the other side of the border. Once the sun sets, he and others drive for hours, scoping the area for Taliban patrols and — once the route is clear — take the migrants from the safe house to the border.

We don’t have a home, our home is our car, all night driving near to the border — one day my wife will kick me out of home,” S. said, erupting in laughter.

Crossing the border is just the first hurdle that Afghans must overcome. Since the takeover, both Pakistan and Iran have stepped up deportations, warning that their fragile economies cannot handle an influx of migrants and refugees.

In the last five months of 2021, more than 500,000 who entered these countries illegally were either deported or voluntarily returned to Afghanistan, likely fearing deportation, according to the U.N.’s International Organization for Migration.

Sitting on the ragged blue carpet of one hotel was Negar, 35, who goes by only one name. She had climbed over the border wall into Iran with her six children two nights before desperate to start a new life in Iran. For months, she had stretched out her family’s meager savings, buying little more than bread and firewood to survive. When that cash ran out, she sold her only goat to make the journey here.

But once she touched Iranian soil, a pack of border guards descended on the group of migrants and fired shots into the pre-dawn darkness. Lying on the ground, Negar called out to her children and had a horrifying realization: Her two youngest sons were missing.

After two agonizing days, smugglers in Iran found her sons and sent them back to her in Zaranj. But shaken by losing them, she was at a loss over whether to attempt to cross again.

“I’m worried,” she said. “What if I can never make it to Iran?”

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