Royal Host Real Estate Investment Trust

Royal Host Real Estate Investment Trust

September 27, 2010 08:00 ET

Royal Host Real Estate Investment Trust Announces Intention to Convert to a Dividend Paying Corporation

HALIFAX, NOVA SCOTIA--(Marketwire - Sept. 27, 2010) - Royal Host Real Estate Investment Trust (TSX:RYL.UN)(TSX:RYL.DB.B)(TSX:RYL.DB.C)(TSX:RYL.DB.D) ("Royal Host") announced today that the Trustees have determined to proceed with the conversion of Royal Host to a publicly traded corporation through a plan of arrangement (the "Arrangement") intended to take effect as of January 1, 2011 (the "Effective Time"). While Royal Host had previously indicated that it would not pursue a conversion in the near term, the Trustees have determined that a conversion at this time is appropriate to allow for a restructuring that will better achieve the objectives of the business and to take advantage of growth opportunities that exist.

It is anticipated that Royal Host will incorporate a new wholly-owned subsidiary ("Newco") and enter into an arrangement agreement with Newco (the "Arrangement Agreement") to give effect to the Arrangement. Under the Arrangement, the Trust's unitholders (the "Unitholders") will receive, at the Effective Time, one common share of the resulting public entity, Newco ("Newco Share"), for each unit of the Trust ("Unit") held and Newco will assume all of the covenants and obligations of the Fund in connection with the Fund's outstanding debentures.

Subject to the approval of the Toronto Stock Exchange ("TSX"), at the Effective Time, the Newco Shares will be listed, and the debentures will continue to be listed, on the TSX.

Additional details of the Arrangement will be announced by way of news release in the coming weeks.

Royal Host expects to mail an information circular (the "Circular") to Unitholders by early November 2010 in connection with the holding of a special meeting of Unitholders by mid-December 2010 (the "Meeting"). The Circular will include a summary of the Arrangement Agreement and additional details concerning the Arrangement. Unitholders should review the full text of the Arrangement Agreement which will be filed on SEDAR at

The Arrangement will be subject to, among other customary conditions, approval of the Nova Scotia Supreme Court of the plan of arrangement by which the Arrangement will be implemented, a positive vote in favour of the Arrangement by the holders of at least 66 2/3% of Royal Host's Units represented at the Meeting and the approval of the TSX to the listing of the Newco Shares.


Royal Host expects that the Fund will pay regular monthly cash distributions in the normal course up until the Arrangement takes effect, subject to the discretion of the Trustees. Following the completion of the Arrangement, the intention is for Newco to adopt a cash management policy that will enable it to pay regular dividends to shareholders while allowing Newco the flexibility to maximize long term shareholder value.

While it is the intention for Newco to pay regular dividends, no assurance can be given as to whether Newco will pay dividends, or the frequency or amount of any such dividend. The declaration of dividends will be subject to the discretion of the board of directors of Newco and may vary depending on, among other things, Newco's operating cash flow, financial requirements, limitations or restrictions under credit facilities, the requirements of the Canada Business Corporations Act for the declaration of dividends and other conditions existing at such future time.

Forward-Looking Statements

This press release contain forward-looking statements. Forward-looking information and statements are identified by words or phrases such as "anticipates", "expects", "believes", "estimates", "intends", "could", "may", "plans", "predicts", "projects", "will", "would", "foresees", "remain confident that" and other similar expressions or the negative of these terms and include, without limitation, forward-looking statements made in this press release relating to: (i) distributions and dividends; (ii) expected timing of the Arrangement; (iii) listing on stock exchanges and the timing thereof; (iv) expected timing of court hearings; (v) tax implications of the Arrangement; and (vi) mailing and filing date of meeting materials. Actual events or results may differ materially.

Forward-looking statements included in this press release are made based on management's belief as well as assumptions made by, and information currently available to, management of the Trust. While such beliefs and assumptions are considered reasonable by the Trust, they are inherently subject to significant business, economic and competitive uncertainties and contingencies. A number of important factors could cause actual results to differ materially from those projected in the forward-looking statements. These uncertainties and risks include, but are not limited to: (i) changes in laws and regulations affecting the Trust or Newco and their respective business operations, (ii) changes in taxation of the Trust or Newco, (iii) general economic and business conditions in the markets affecting the Trust or Newco, (iv) failure to satisfy the conditions of the conversion, (v) inability to meet stock exchange listing requirements, (vi) inability to obtain required consents, permits or approvals, for the conversion, including the requisite Unitholder approval and court approval of the Arrangement, (vii) inability to meet or continue to meet listing requirements; (viii) failure to realize anticipated benefits of the Arrangement; (ix) actual future market conditions and actual future operating and financial results being different than anticipated by management and the board of trustees of the Trust; (x) stock market volatility and the inability to access sufficient capital from internal and external sources; (xi) fluctuation in foreign exchange or interest rates. The foregoing list is not exhaustive. In addition, these forward-looking statements relate to the date on which they are made. Although the forward-looking statements contained herein are based upon what management believes to be reasonable assumptions, the Trust cannot assure Unitholders that actual results will be consistent with these forward-looking statements, and, except as required by law, the Trust disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In formulating the forward-looking statements herein, management has assumed that business and economic conditions affecting it will continue substantially in the ordinary course, including without limitation with respect to industry conditions, general levels of economic activity, regulation, taxes, foreign exchange rates and interest rates, that there will be no unexpected material changes in its facilities, customer and employee relations, credit arrangements or credit and collections experience.

About Royal Host

Royal Host is a hospitality trust that delivers Unitholder value through hotel ownership, investment, and franchising. Royal Host's portfolio of Canadian hotels operates under a variety of recognizable brands as well as a number of unbranded properties. The Trust's hotel portfolio is further enhanced by a stable franchising business, and a portfolio of publicly-traded securities from within the hospitality and service sectors.

Royal Host trust units and convertible debentures are traded on the Toronto Stock Exchange under the trading symbols "RYL.UN", "RYL.DB.B", "RYL.DB.C" and "RYL.DB.D", respectively.

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