/NOT FOR DISTRIBUTION ON U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES/
HALIFAX, April 27 /CNW/ - Holloway Lodging Real Estate Investment Trust
(TSX: HLR.UN HLR.DB HLR.DB.A) ("Holloway" or the "REIT") today announced that the REIT and its affiliated entities have
entered into an agreement (the "Arrangement Agreement") for the conversion of the REIT from an income trust structure to a
corporation (the "Conversion") pursuant to a statutory plan of arrangement (the "Plan of Arrangement") under Section 182 of the Business Corporation Act (Ontario) ("OBCA"). The Conversion will be presented to unitholders for approval at the
REIT's annual and special meeting on June 6, 2011 (the "Meeting"). If approved, the Conversion will result in the reorganization of
the REIT into a new corporation called Holloway Lodging Corporation ("New Holloway").
The nature of Holloway's assets and operations means that Holloway does
not currently qualify for the "REIT Exception" from the tax on
"specified investment flow through entities" ("SIFTs") that was adopted in 2007 (the "SIFT Rules") by the Canadian federal government and currently applies to the REIT
(due to the REIT having exceeded the "normal growth" rates as defined
in the guidelines issued by the Department of Finance) at a rate
comparable to the combined federal and provincial corporate tax rate.
Therefore, continuing as an income trust does not provide any
meaningful long term benefits to Holloway or its unitholders.
The proposed Conversion is substantially similar to the conversion
transaction that Holloway pursued in 2010. The prior conversion
transaction was not completed because it did not receive the requisite
approval of Holloway's unitholders. As Holloway has previously
indicated, it continues to believe that the Conversion is in the best
interests of the REIT and has therefore resolved to continue to pursue
the Conversion at this time.
The board of trustees 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
Pursuant to the Conversion, holders of trust units of the REIT and
limited partnership units of Holloway Lodging Limited Partnership ("Holloway Lodging LP") will receive, through a series of steps, in exchange for each such
unit they hold on the effective date of the Conversion, one common
share of New Holloway. It is expected that the Conversion will be
completed on a tax-free, rollover basis for Canadian income tax
purposes. As part of the Conversion, the REIT and HL Trust will be
wound up into New Holloway, leaving New Holloway holding directly the
interest in Holloway Lodging LP that is currently indirectly owned by
the REIT, the intent being to convert to a simplified corporate
structure while maintaining as nearly as possible all of the existing
rights and relationships among the affected parties. New Holloway will
indirectly own and operate the existing business of the REIT and its
It is anticipated that the board of directors of New Holloway will be
comprised of the trustees of the REIT duly elected as at the Meeting,
and senior management of New Holloway will be comprised of the current
senior management of the REIT. The hotel business and properties of
New Holloway will continue to be managed by Pacrim Hospitality Services
Inc., in its capacity as hotel management service provider.
It is not anticipated that the Conversion will have any impact on the
REIT's existing distribution policy -monthly distributions on the
REIT's units were suspended in July 2009 and New Holloway does not
anticipate that it will commence paying dividends in connection with
the Conversion. Following the Conversion, New Holloway's dividend
policy will be subject to the discretion of the board of directors of
New Holloway and may vary depending on, among other things, New
Holloway's earnings, financial requirements, growth opportunities, the
satisfaction of solvency tests imposed by the OBCA for the declaration
of dividends and general economic conditions.
Completion of the Conversion is subject to a number of conditions,
including unitholder, TSX and court approval, as well as receipt of all
required consents, orders, approvals, authorizations and releases, if
any, from third parties. The Conversion is also subject to receipt of
all required consents from lenders holding conventional mortgages, as
well as the approval by the holders of the REIT's 6.5% convertible
unsecured subordinated debentures (the "6.5% Debentures") of a special resolution confirming that the Conversion is deemed not
to be a change of control for purposes of the trust indenture governing
the 6.5% Debentures (the "Debentureholder Approval"). A meeting of the holders of the 6.5% Debentures to consider this
special resolution is proposed to take place following the Meeting.
Notice and information in connection with such meeting is expected to
be mailed to holders of 6.5% Debentures on or about May 4, 2011.
Annual and Special Meeting and Information Circular
Full details of the proposed Conversion will be contained in the
management information circular to be mailed on or about May 4, 2011 in
connection with the Meeting. Among other items of business,
Unitholders of record on April 26, 2011 will be invited to consider,
and if thought advisable approve, the Conversion at the Meeting. The
REIT intends to complete the Conversion on or about January 1, 2012.
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.
The securities offered have not been and will not be registered under
the United States Securities Act of 1933, as amended (the "U.S.
Securities Act"), and may not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons except,
and in compliance with applicable U.S. state securities laws, in
certain transactions exempt from the registration requirements of the
U.S. Securities Act.
Notice to Readers
Certain forward-looking statements are made in this news release, within
the meaning of applicable Canadian securities laws. Forward-looking
statements used in this new release may contain words such as "may",
"will", "should", "believe", "expect", "plan", "anticipate", "intend",
"estimate", "predict", "potential", "continue", "future", or the
negative of these terms or other similar expressions. Forward-looking
statements in this news release, include, without limitation,
statements regarding possible future action by the REIT, treatment
under tax laws, the Conversion, the expected benefits of the
Conversion, the receipt of consents and approvals, including the
approval of unitholders and the court, required to effect the
Conversion, receipt of the Debentureholder Approval, the occurrence of
the effective date of the Conversion and the business to be carried on
by New Holloway and its subsidiaries upon completion of the Conversion.
These statements reflect Holloway's current expectations regarding
future events and are based on information currently available to
management, but involve known and unknown risks, uncertainties and
other factors which may cause the outcome of the Conversion or the
actual results, performance or achievements of Holloway, any of its
subsidiaries and/or New Holloway, to be materially different from any
future results, performance or achievements anticipated, expressed or
implied by such forward-looking statements. Factors that could cause
actual results to differ materially from those set forth in the
forward-looking statements include, but are not limited to,
fluctuations in interest rates and currency values, legislative and
regulatory developments, legal developments, the occurrence of
weather-related and other natural catastrophes, changes in tax laws,
failure of the parties to the Arrangement Agreement to satisfy the
conditions set out therein, inability of the parties to obtain required
consents, permits or approvals, including court approval of the
Conversion and the approval by unitholders of the resolution approving
the Conversion, the Debentureholder Approval, failure to complete and
realize anticipated benefits of the Conversion, and those other risks,
factors and uncertainties detailed in the section entitled "Risks and
Uncertainties" in the REIT's Management's Discussion and Analysis for
the year ended December 31, 2010 and "Risk Factors" in the REIT's
Annual Information Form for the year ended December 31, 2010 which are
available on the REIT's profile on the SEDAR website at www.sedar.com. The preceding list is not an exhaustive list of possible factors.
These and other factors should be considered carefully and readers are
cautioned that forward-looking statements should not be read as
guarantees of future performance, outcomes or results, should not be
unduly relied upon, and will not necessarily be accurate indications of
whether or not such results will be achieved. Forward-looking
information is based on various material factors or assumptions, which
are based on information currently available to the REIT. Material
factors or assumptions that were applied in drawing a conclusion or
making an estimate set out in the forward-looking information may
include: the completion of the Conversion and the realization of the
anticipated benefits of the Conversion. Readers are cautioned that the
preceding list of material factors or assumptions is not exhaustive.
Although the forward-looking statements contained in this news release
are based upon what management believes are reasonable assumptions, the
REIT cannot assure readers that actual results will be consistent with
these forward-looking statements. These forward-looking statements are
made as of the date of this news release, and should not be relied upon
as representing the REIT's views as of any date subsequent to the date
of this news release. The REIT undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise, other than as required by
Holloway is a real estate investment trust focused on acquiring, owning
and operating select and limited service lodging properties and a small
complement of full service hotels primarily in secondary, tertiary and
suburban markets. Holloway currently owns 22 hotels with 2,386 rooms.
Holloway's units and convertible debentures trade on the Toronto Stock
Exchange under the symbols HLR.UN, HLR.DB and HLR.DB.A, respectively.
SOURCE HOLLOWAY LODGING REAL ESTATE INVESTMENT TRUST
For further information:
Mr. Glenn Squires, Chief Executive Officer of the REIT or Ms. Tracy Sherren, Chief Financial Officer of the REIT, (902) 404-3499.