Lakeview Hotel REIT Announces Plan to Convert to a Corporation

/NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO U.S NEWS WIRE SERVICES/

WINNIPEG, Oct. 11, 2012 /CNW/ - Lakeview Hotel Real Estate Investment Trust (TSXV: LHR.UN) (the "REIT") today announced that the REIT and its affiliated entities, Lakeview Hotel REIT Operating Trust, Lakeview Flag Operating LP General Partner Inc., Lakeview Management G.P. I Inc., Lakeview Flag Operating Limited Partnership, Lakeview Management Inc., as well as a newly incorporated corporation named "Lakeview Hotel Investment Corp." have entered into an agreement (the "Arrangement Agreement") relating to a proposed conversion of the REIT from a trust to a corporation (the "Conversion") pursuant to a statutory plan of arrangement (the "Plan of Arrangement") under the Canada Business Corporations Act (the "CBCA"). The Conversion will be presented to holders ("Unitholders") of trust units ("Units") of the REIT for approval at a special meeting (the "Meeting ") of the Unitholders at a date and time to be determined. If approved, the Conversion will result in the reorganization of the REIT into a new corporation called Lakeview Hotel Investment Corp. ("LHIC").

Based on their review of the REIT's current income trust structure, the Board of Trustees of the REIT and management noted that there is diminishing value to remaining as an income trust as it no longer provides any meaningful benefits to the REIT or its Unitholders.  The proposed corporate structure would eliminate the risks and uncertainty facing the REIT as a result of the tax legislation relating to income trusts and will be better suited to the REIT's growth strategy.

The board of trustees of the REIT believes that the Conversion is in the best interests of the REIT and has unanimously determined that the Conversion is fair to Unitholders and in the best interests of the REIT and unanimously recommends that Unitholders vote in favour of the Conversion at the Meeting.

Pursuant to the Conversion:

(i)      Unitholders will receive one common share in LHIC for each Unit held on a one for one basis; and
   
(ii)      Holders of options to acquire Units will receive options to acquire common shares of LHIC which provide for the same vesting provisions, exercise prices and expiry dates;

As a condition of the completion of the Conversion, the obligations of the REIT under its Class C Redeemable Subordinated Debentures, its Class D Redeemable Subordinated Debentures and its warrants outstanding immediately prior to the Conversion will be assumed by LHIC pursuant to the successor provisions of the trust indentures governing such debentures and the successor provisions of the warrant indenture governing such warrants, respectively.  In addition, holders of the REIT's warrants will be entitled to exercise such warrants for the same number of common shares of LHIC on the same terms and conditions as they can currently exercise such warrants into Units of the REIT.

The board of directors of LHIC will be comprised of the current trustees of the REIT.  The services agreement entered into by Lakeview Management Inc. and the REIT whereby certain management individuals provided by Lakeview Management Inc. serve as management of the REIT will be assigned by the REIT to LHIC.  Such senior management of LHIC include Mr. Keith Levit as President and Chief Executive Officer, Mr. Rudy Beyer as Chief Financial Officer and Avrum Senensky as Executive Vice-President. The hotel properties of LHIC will continue to be managed by Lakeview Management Inc.

Completion of the Conversion is subject to a number of conditions, including the approval of Unitholders, the TSX Venture Exchange and the Manitoba Court of Queen's Bench, as well as receipt of all required consents, orders, approvals, authorizations and releases, if any, from third parties. Full details of the proposed Conversion will be contained in a management information circular anticipated to be mailed to Unitholders in November, 2012 in connection with the Meeting. Among other items of business, Unitholders will be asked to consider, and if thought advisable approve, the Conversion at the Meeting. There can be no assurance at this time that all approvals, consents and conditions required to effect the Conversion will be obtained or satisfied, as applicable, within that timeframe or at all. Accordingly, there can be no assurance that the Conversion will be completed on the terms described in this news release or at all.

Notice to Readers

Included in this Press Release, are "forward-looking statements" as defined under applicable Canadian securities legislation. These forward-looking statements typically, but not always, contain words such as "anticipate", "does not anticipate", "believe", "estimate", "forecast", "intend", "expect", "does not expect", "may", "will", "should", "plan" or other similar terms that are predictive in nature. These statements are not historical facts, but instead only represent management's expectations, estimates, assumptions, plans, and projections concerning the outcome of future events. Forward-looking statements rely on certain underlying assumptions that, if not realized, can result in such forward-looking statements not being achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the REIT to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. Readers are therefore cautioned that management's expectations, estimates and assumptions, although considered reasonable, may prove to be incorrect and readers should not place undue reliance on forward-looking statements.

Forward-looking statements, by their nature, are based on assumptions and are subject to important risks and uncertainties. Any forecasts or forward-looking predictions or statements cannot be relied upon due to, amongst other things, changing external events and general uncertainties of the business and its corporate structure. Results indicated in forward-looking statements may differ materially from actual results for a number of reasons, including without limitation, competitive conditions, whether related to new competitors or current competitors; general economic conditions, levels of travel in the REIT's key market areas, political conditions and events, competitive pressures; changes in demographic trends; changes in consumer preferences and discretionary spending patterns; changes in national and local business and economic conditions; changes in legislation and governmental regulation; changes in accounting policies and practices; the results of operations and financial condition of LHIC; the delay of or the inability to complete the proposed Arrangement on the contemplated terms; and the challenges related to the re-integration of the combined businesses' operations. The forward-looking statements contained herein represent the expectations of management as of the date of this Press Release, and are subject to change after such date. However, the REIT disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

About the REIT

Lakeview REIT is a real estate investment trust, which is listed on the TSX Venture Exchange under the symbol "LHR.UN".  Lakeview REIT receives income from ownership, management and licensing of hotel properties.  For further information on Lakeview REIT please visit our website www.lakeviewreit.com.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE: Lakeview Hotel Real Estate Investment Trust

For further information:

Keith Levit, President, or Avrum Senensky, Executive Vice President

Tel: (204) 947-1161, Fax: (204) 957-1697, Email asenensky@lakeviewhotels.com