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Gold/Mining/Energy : Canadian REITS, Trusts & Dividend Stocks -- Ignore unavailable to you. Want to Upgrade?

To: BioInv who wrote (235)	6/10/1999 8:24:00 PM
From: Kitskid	Read Replies (1) \| Respond to of 11633

It looks like Royal Host's low offer is shriveling. <snip> newswire.ca - CHIP REIT trustees recommend rejection of Royal Host offer VANCOUVER, June 10 /CNW/ - Canadian Hotel Income Properties Real Estate Investment Trust HOT.un Canadian Hotel Income Properties Real Estate Investment Trust (''CHIP REIT'') today recommended that CHIP REIT unitholders reject the offer from Royal Host REIT for all the units of CHIP REIT. This recommendation is supported by the opinion of TD Securities Inc., the financial advisor to CHIP REIT's Special Committee of Trustees, that the offer is inadequate from a financial point of view. ''We urge CHIP REIT unitholders not to tender their units to this offer,'' said Rhys Eyton, Chairman, President and CEO of CHIP REIT. ''The offer provides no discernible value to CHIP REIT unitholders. It results in a financially weaker entity that would increase our unitholders' exposure to the less attractive limited-service hotel segment.'' In making their recommendation, the Trustees considered all aspects of the offer and identified a number of factors indicating that the offer is not in the best interests of CHIP REIT unitholders. The offer is inadequate and unfair ---------------------------------- - No material increase in recurring distributable cash to CHIP REIT unitholders is expected. - To the extent that any benefits from the combination of the REITs could be realized, they would flow primarily to Royal Host unitholders. - There is no clear enhancement of value to CHIP REIT unitholders. - The offer provides only a negligible premium (2.4%) to CHIP REIT's pre-announcement trading price. Combining with Royal Host would weaken CHIP REIT's financial position --------------------------------------------------------------------- - CHIP REIT is larger and better capitalized than Royal Host. The combined entity would have a weaker balance sheet with a higher cost of debt and reduced access to capital. - The combined entity would have virtually no uncommitted cash or debt capacity, restricting future growth prospects. - CHIP REIT unitholders would be exposed to significant re-financing risks with $70 million of Royal Host's debt due in the coming year. - On May 20, 1999 -- the day after Royal Host announced their intention to make an offer for CHIP REIT -- Canadian Bond Rating Service placed CHIP REIT on credit watch with negative implications stating, ''If successful, Royal Host's bid is expected to result in a REIT possessing a much weaker credit profile than CHIP REIT would have on a stand-alone basis.'' Combining with Royal Host would weaken CHIP REIT's hotel portfolio ------------------------------------------------------------------ - Royal Host's portfolio is dominated by smaller, limited-service hotels which are more susceptible to new competition. Their portfolio reflects a business strategy that has been less attractive to providers of debt and equity capital than CHIP REIT's strategy which is founded on larger, full-service hotels. Overstated synergies -------------------- - Royal Host's claimed cost savings and synergies are significantly overstated. Negative tax implications ------------------------- - The exchange of CHIP REIT units for units of Royal Host will result in tax being payable for some CHIP REIT unitholders, without providing cash to unitholders to fund the taxes payable. On Monday, CHIP REIT asked securities regulators to cease trade the Royal Host offer because it contains misleading, inaccurate and incomplete information that would prejudice CHIP REIT unitholders in assessing the value of the Royal Host units being offered. CHIP REIT is concerned that Royal Host's public financial forecast has not been updated as required since July 1998 despite a number of material changes to its business and operations. Accordingly, Royal Host's 1999 forecast is of little use to CHIP REIT unitholders in assessing the offer, and may be misleading. ''We are continuing to seek out and evaluate transactions that will benefit our unitholders,'' said Eyton. ''The Special Committee of Trustees has retained TD Securities Inc. and Merrill Lynch & Co. to assist in this process.'' A Trustees' circular has been mailed to all CHIP REIT unitholders detailing the Trustees' recommendation and the reasons for it, which includes the supporting opinion from TD Securities. CHIP REIT was Canada's first hotel real estate investment trust and has a focus on mid-market and upscale full-service hotels. Through upgrades, repositioning and franchising, CHIP REIT and its wholly-owned hotel manager, CHIP Hospitality, improve the operating performance of the properties within the portfolio to create value for investors. CHIP REIT currently owns and operates 36 hotels with close to 8,000 rooms across Canada. CHIP REIT units trade on The Toronto Stock Exchange under the symbol HOT.un. -30-