Service Properties Trust spent the first half of the year buying time rather than buying growth. An April common share sale funded the retirement of the next unsecured note wall and left the revolving credit line undrawn, which is the difference between a going concern debate and a recapitalized dual portfolio landlord. The cost of that rescue sits in the share count. Per share normalized funds from operations, the REIT cash earnings yardstick that adds back real estate depreciation and strips one time items, compressed even as dollar FFO held near last year's run rate. The investment debate is no longer whether the trust survives the maturity calendar. It is whether a smaller, cleaner hotel book and a service focused net lease platform can rebuild earnings power on a share base that is several times larger than a year ago.
The operating split underneath the recap is the part the market still prices as a hotel residual. The retained hotel cohort, the properties management intends to keep, lifted revenue per available room almost seven percent even while renovations at the Nautilus South Beach muted the print. Adjusted hotel earnings before interest, taxes, depreciation and amortization for those retained assets rose to $57 million. The fifteen hotels marked for sale still lost money on the quarter. On the other side of the house, the net lease book stayed nearly full and lifted cash net operating income, the property level rent residual after operating costs, on contractual bumps and a firmer TravelCenters of America coverage ratio. That coverage ratio is the credit tell for the largest tenant relationship in the portfolio.
A $189 million impairment on the exit hotels is the clearing price confession for the last slice of the old lodging book. Normalized FFO of $55 million sat in line with the Street and management kept the full year range. The question the next two prints resolve is whether retained hotel margins expand once the Nautilus rooms come back and the exit assets close, or whether nine times net debt to trailing adjusted EBITDAre still forces another capital event before the September twenty twenty seven secured notes are refinanced.