Holloway Lodging Real Estate Investment Trust Announces Agreement to Convert
to a Corporation


HALIFAX, April 21 /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 May 25, 2010 (the "Meeting"). If approved, the Conversion will result in the reorganization of the REIT into a new corporation called Holloway Lodging Corporation ("New Holloway").

Under Holloway's current trust structure, it is difficult for the REIT to attract sufficient capital to fund or pursue future growth initiatives and acquisitions. It is expected the Conversion will provide New Holloway with more flexibility regarding the growth and retention of its capital than enjoyed by the REIT, such that the resulting corporation will be better positioned to facilitate its future growth plans. Furthermore, 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 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 Conversion.

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 subsidiaries.

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, 2010.

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, 2010 in connection with the Meeting. Among other items of business, Unitholders of record on April 9, 2010 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 December 31, 2010. 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, 2009 and "Risk Factors" in the REIT's Annual Information Form for the year ended December 31, 2009 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 applicable law.

About Holloway

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 21 hotels with 2,320 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.

%SEDAR: 00023845E

SOURCE Holloway Lodging Real Estate Investment Trust

For further information: For further information: Mr. Glenn Squires, Chief Executive Officer of the REIT, (902) 404-3499; Ms. Tracy Sherren, Chief Financial Officer of the REIT, (902) 404-3499

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Holloway Lodging Real Estate Investment Trust

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