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/NOT FOR DISTRIBUTION ON U.S. WIRE SERVICES/
TORONTO, Dec. 12 /CNW/ - Holloway Lodging Real Estate Investment Trust
(TSXV: HLR.UN) ("Holloway" or the "REIT") today announced that it has:
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- conditionally agreed to acquire three hotel properties ("Conditional
Acquisitions") - two in Alberta and one in Myrtle Beach, South
Carolina - for an aggregate purchase price of approximately
$42.5 million;
- conditionally agreed to lend out approximately $4.9 million in
mezzanine loans ("Mezzanine Loans") to Winport Developments for hotel
developments located in Regina, Saskatchewan and Windsor, Nova Scotia;
and
- entered into an agreement with Canaccord Adams (the "Underwriter") to
sell, on a bought deal private placement basis, 1,941,748 trust units
(the "Units") at a price of $5.15 per Unit, for gross proceeds to the
REIT of $10,000,002.
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Conditional Acquisitions
The hotel properties that Holloway has agreed to acquire are the Radisson
Fort McMurray, the Holiday Inn Express Myrtle Beach and the Super 8 Three
Hills (Three Hills, Alberta). The average occupancy rate of these three
properties for 2006 year to date was 72.1% and their average daily rate over
this period was $121.57. Each of the proposed acquisitions meet Holloway's
stated strategy of generating stable cash distributions, expanding Holloway's
asset base through accretive acquisitions and internal growth initiatives and
enhancing the value of its assets through active management.
The total purchase price of approximately $42.5 million represents a
weighted average going in unlevered return ("capitalization rate") of 9.72%
(and a per suite value of $129,000). Holloway believes that, upon closing,
these acquisitions will be immediately accretive to cash flow on a per unit
basis and that each of the hotels offer significant organic growth
opportunities through repositioning, enhanced management and controls and
expansion opportunities. The purchase price will be satisfied using a
combination of proceeds from Holloway's proposed private placement of units,
mortgage financing proceeds and the issuance of up to $2 million in units of
the REIT or exchangeable securities of a subsidiary of the REIT. Upon
completion of these acquisitions, the related private placement and mortgage
financings and the Mezzanine Loans, it is expected that Holloway's mortgage
debt to gross book value will be approximately 45%.
Holloway has entered into agreements of purchase and sale with respect to
the Radisson Fort McMurray and the Holiday Inn Express Myrtle Beach and a
letter of intent with respect to the Super 8 Three Hills. Holloway expects to
enter into an agreement of purchase and sale for the Super 8 Three Hills
shortly and all three acquisitions are expected to close in January or
February of 2007. Each of the acquisitions is subject to numerous conditions.
There can be no assurance that these acquisitions will be completed on the
terms announced or at all.
Bought Deal Private Placement
The REIT has entered into an agreement with Canaccord Adams (the
"Underwriter") to sell, on a bought deal private placement basis, 1,941,748
trust units (the "Units") at a price of $5.15 per Unit, for gross proceeds to
the REIT of $10,000,002 (the "Financing"). The Underwriter will have the
option to increase the Financing by up to 582,525 Units for additional gross
proceeds of up to $3,000,004 at any time prior to closing. The Financing is
expected to close on or about December 29, 2006 and the units sold under the
offering will be subject to a four-month hold period pursuant to applicable
securities laws.
The net proceeds of the private placement will be used to fund a portion
of the purchase price for the Conditional Acquisitions and to partially fund
the Mezzanine Loans. The REIT will fund the remainder of the purchase price
for the Conditional Acquisitions and the Mezzanine Loans with available cash
on hand and mortgage financing on the Conditional Acquisitions and on the
Calgary Five.
The first cash distribution of the REIT that purchasers of Units under
the Financing will be entitled to receive will be for the month of January
2007, based on an anticipated record date of January 31, 2007 and a payment
date of February 15, 2006.
SIFT Proposals
On October 31, 2006, the Minister of Finance (Canada) announced proposed
changes to the taxation of income trusts for Canadian federal income tax
purposes (the "SIFT Proposals"). Draft legislation giving effect to the SIFT
Proposals has not yet been released. The SIFT Proposals contain a specific
exemption from the proposed tax for certain REITs and outlines the
requirements a REIT would have to meet in order to be eligible for the
exemption. Holloway is continuing to assess the potential impact of the SIFT
Proposals on the REIT. Holloway's current structure may not allow it to
qualify as an exempt REIT under the SIFT Proposals based on the information
provided to date. If Holloway does not qualify as an exempt REIT under the
SIFT Proposals, it would generally be subject to tax under the SIFT Proposals
starting in 2011. If necessary, Holloway will consider alternative measures,
provided that they are in the best interests of Holloway and its unitholders,
in order to qualify as an exempt REIT under the SIFT Proposals based on the
legislation as finally enacted.
About Holloway
Holloway Lodging REIT is a real estate investment trust listed as a
Tier 2 issuer on the TSX Venture Exchange with the objective of acquiring and
maintaining a growing portfolio of lodging properties with stable cash
distributions.
Forward Looking Statements
This press release contains forward-looking information within the
meaning of applicable securities laws. Forward-looking information may relate
to the Trust's future outlook and anticipated events or results and may
include statements regarding the future financial position, property
acquisition strategies and opportunities, business strategy, financial results
and plans and objectives of the Trust. Particularly, statements regarding the
Trust's future operating results, property acquisition strategies and
opportunities and economic performance are forward-looking statements. In some
cases, forward-looking information can be identified by terms such as "may",
"will", "should", "expect", "plan", "anticipate", "believe", "intend",
"estimate", "predict", "potential", "continue" or other similar expressions
concerning matters that are not historical facts. Forward looking-information
is subject to certain factors, including risks and uncertainties, that could
cause actual results to differ materially from what the Trust currently
expects and there can be no assurance that such statements will prove to be
accurate. Some of these risks and uncertainties are described under "Risk
Factors" in the management information circular of Holloway Capital
Corporation dated May 4, 2006. Other risks and uncertainties include the risk
that the Trust may not be able to complete the proposed acquisition of the
hotel properties or the proposed private placement on the terms described
herein or at all and risks associated with the SIFT Proposals.
This press release shall not constitute an offer to sell, or the
solicitation of an offer to buy any securities in any jurisdiction. The
securities being offered have not been and will not be registered under the
U.S. Securities Act of 1933 and state securities laws. Accordingly, the
securities may not be offered or sold to U.S. persons except pursuant to
applicable exemptions from registration.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this press release.
For further information: Mr. Glenn Squires, Chief Executive Officer of
the REIT, at (902) 457-1907
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