TORONTO, Dec. 16, 2015 /CNW/ - InnVest Real Estate Investment Trust ("InnVest" or the "REIT") (TSX:INN.UN) announced today it has entered into a definitive agreement, with a private seller, to acquire a 100% interest in the Ottawa Marriott Hotel located in downtown Ottawa, Ontario. The purchase price is $115 million or $235,000 per room, and is planned to be funded by first mortgage financing of approximately 50% to 55%, cash on hand, availability under the REIT's existing credit facilities. Final terms of the mortgage financing for the Ottawa Marriott Hotel acquisition are under negotiation. The 2016 anticipated cap rate is 6.5% with solid growth potential. The transaction is expected to be completed in the first quarter of 2016, subject to customary closing conditions.
Drew Coles, InnVest REIT President and Chief Executive Officer, stated, "This is a great opportunity to acquire a premier property, located in one of Canada's top markets. This transaction is another important step in advancing InnVest's strategy to prudently invest in high quality assets while maintaining a strong balance sheet. In addition, the Marriott Ottawa Hotel increases our prime market focus while diversifying our overall property portfolio."
The property is a premier full-service, upper upscale hotel located in the centre of downtown Ottawa. The hotel is well-positioned and is expected to benefit from the significant Ottawa celebrations in 2017 for the 150th anniversary of Canada. The hotel has 489 guestrooms, 35,000 square feet of function space in 22 rooms including a revolving rooftop function facility. In addition, the hotel provides a 130-seat restaurant, and best-in-class guest amenities including an indoor heated pool and sauna, fitness club, business centre and lobby market. Adding to its central business district and Parliament district access, the Ottawa Marriott Hotel will have a direct connection to the new Confederation Line Light Rail Transit (LRT) network anticipated to be completed in 2018. Constructed in 1972, the property has undergone significant renovations and upgrades over the last five years.
InnVest also announced today that as part of its ongoing program to recycle capital to enhance portfolio quality, it has identified certain non-core hotels for sale, which include three hotels previously earmarked for disposition. InnVest expects the hotel dispositions to generate aggregate net proceeds, after the repayment of associated debt, of approximately $50 million. The net proceeds intend to reduce debt, including debt incurred from the Marriott acquisition. In the fourth quarter as planned, InnVest disposed of the Delta Trois-Rivieres, Quebec and the Holiday Inn Dartmouth, Nova Scotia, for combined net proceeds of approximately $14 million. "In line with our stated strategy to recycle capital from the sales of non-strategic assets to fund our growth, we have identified a number of hotel properties for disposition. The net proceeds from these sales will be used to pay down short term borrowings consistent with reducing overall debt leverage. This is a very exciting time for InnVest as we continue moving forward with our strategy", said Mr. Coles.
About InnVest REIT
InnVest Real Estate Investment Trust is an unincorporated open-ended real estate investment trust which owns a portfolio of approximately 109 hotels across Canada representing over 14,000 guest rooms operated under internationally recognized brands. InnVest also holds a 50% interest in Choice Hotels Canada Inc., one of the largest franchisors of hotels in Canada. InnVest's units and convertible debentures trade on the Toronto Stock Exchange (the "TSX") under the symbols INN.UN, INN.DB.E, INN.DB.F and INN.DB.G.
Cautionary and Forward Looking Statements
References to Net Operating Income and capitalization rate in respect of the hotel to be acquired by InnVest reflect management's appraisal of the hotel and expected net operating income of the hotel based on past results. There can be no assurance that the appraised value of the hotel is an accurate reflection of the value of the hotel as at the date hereof or on any other date. In addition, there can be no assurance that the valuation method or the capitalization rate used in appraising the hotel was appropriate for such property as at the date hereof or on any other date.
Statements contained in this press release that are not historical facts are forward-looking statements. These forward-looking statements include statements with respect to assumptions and forecasts of future results of and capital investments in the Ottawa Marriott Hotel, and the acquisition of the hotel. These forward-looking statements are based on current expectations of management and involve risks and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. Among the key factors that could cause such differences are InnVest's available and planned sources of funds, hotel divestment plans, leverage reduction plans, real estate investment risks, hotel industry risks and competition. These and other factors are discussed in InnVest's annual information form for the year ended December 31, 2014, which is available at www.sedar.com. In making such forward-looking statements, management has relied upon a number of material factors and assumptions, including with respect to: current and future financial performance of the Ottawa Marriott Hotel, the terms and conditions on which the acquisition of the Ottawa Marriott Hotel will be completed and financed, and the anticipated financial impact of the acquisition on InnVest. Although management of InnVest believes that the expectations with respect to such forward-looking statements are reasonable, such forward-looking statements are subject to known and unknown risks and uncertainties and, accordingly, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the foregoing list is not exhaustive. The forward-looking statements included herein are made as of the date hereof and InnVest disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by applicable securities law.
SOURCE InnVest Real Estate Investment Trust
For further information: Denise Achonu, Vice President, Finance, Tel: (416) 607-2333, Website: www.innvestreit.com