Two questions today: 1. what do you think of the Legacy/CP deal on hotels; 2. did anyone want to comment on the REE.IR (Residential Equities REIT) that just hit the Exchange in the last 2 weeks. (?)
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1. From yesterday: (my question pertains to the following: does anyone feel that the following represents sleight-of-hand by CP, or is this a legitimate financing structure to the benefit of one and all... including unitholders?)
CANADIAN PACIFIC HOTELS FINALIZES HOTEL ACQUISITIONS WITH FINANCING FROM
LEGACY REAL ESTATE INVESTMENT TRUST
TORONTO, Feb. 25 /CNW/ - Canadian Pacific Hotels (''CPH'') today
announced that it has completed the purchase of two corporations from a Hong
Kong based investment group, Shui On, with financing from Legacy Hotels Real
Estate Investment Trust (''Legacy''). Canadian Pacific Hotels has purchased
the corporations for $65 million, $55 million of which has been attributed to
hotels assets and $10 million to other assets. These hotels, the Sheraton
Toronto East and the Sheraton Four Points will be owned and operated by
Canadian Pacific Hotels.
The Sheraton Toronto East is located at Kennedy Road and Highway 401 in
Scarborough. It has 368 rooms and approximately 22,000 square feet of function
space. A high-end property that is well positioned to serve the needs of both
business and leisure guests, the Toronto East provides an excellent fit with
other hotels under the Canadian Pacific brand. The hotel will be repositioned
and launched as ''Canadian Pacific's Hotel Toronto East'' in May, 1998.
The Sheraton Four Points, located in Mississauga, has 296 rooms and 21
meeting rooms. The hotel performs well in its niche and while it will be
operated and managed by Canadian Pacific Hotels, it will continue to carry the
Four Points brand under a franchise agreement with Sheraton.
According to independent valuations, $37.2 million of the $55 million
hotel asset value is attributed to the Toronto East property and $17.8 million
to the Four Points. At the Toronto East hotel, the per room cost was $101,100,
and at the Four Points it was $60,100, in both cases substantially lower than
the replacement value of the properties. Canadian Pacific Hotels expects to
spend approximately $5 million to reposition the hotels and improve the
quality of both assets.
Legacy has purchased a $60.5 million note (current value of hotel assets
plus expected improvements) from CPH with a rate of interest at 9.5% maturing
in September 1999. Legacy has separately entered into a credit agreement with
a Canadian chartered bank for the same amount and has provided the note as
security, on a limited-recourse basis, at an effective interest rate of about
6%.
Legacy and CPH have also entered into agreements which, after the hotels
are repositioned by CPH, provide Legacy with the option to acquire these
hotels on September 30, 1999 for an amount equal to today's current value
($55 million) plus the cost of capital improvements. CPH has the option to put
the properties to Legacy at the same price, or to satisfy the option with cash
equal to the fair value of the hotels in September 1999.
-30-
For further information: Ann Layton, Vice President Public Affairs &
Communications, Canadian Pacific Hotels, Telephone: (416) 367-7101
2. Regarding the REE.IR and comparing it to CAR.IR. Any comments? Are Apartment REIT's a bona-fide investment vehicle?
Hey folks......... let's keep this thread alive! |
