Royal Host Real Estate Investment Trust

Royal Host Real Estate Investment Trust

August 22, 2006 08:14 ET

Royal Host REIT Announces $60 Million Convertible Debenture Issue

CALGARY, ALBERTA--(CCNMatthews - Aug. 22, 2006) -

Not for distribution to U.S. newswire services or distribution in the United States

Royal Host REIT (TSX:RYL.UN)(TSX:RYL.DB)(TSX:RYL.DB.A)(TSX:RYL.DB.B) ("Royal Host" or the "Trust") today announced that it has entered into an agreement to sell to a syndicate of underwriters co-led by National Bank Financial Inc. and CIBC World Markets Inc., on a bought deal basis, $60,000,000 principal amount of Convertible Unsecured Subordinated Debentures (the "Debentures") with a coupon rate of 6.25% per annum payable semi-annually on September 30 and March 31 commencing on March 31, 2007. The Debentures will mature on September 30, 2013 (the "Maturity Date"). Royal Host has granted the underwriters an over-allotment option to purchase up to an additional $9,000,000 million principal amount of Debentures for a period of 30 days following closing of the offering. The net proceeds to Royal Host from the offering will be used to reduce outstanding indebtedness on income producing properties, including any applicable penalties, which management believes will significantly improve operating flexibility. The balance may be used to repay the 9.25% convertible debentures due March 2007, to upgrade and reposition its existing hotel properties, for working capital and general Trust purposes, including future acquisitions of hotel properties. The offering is expected to close on or about September 12, 2006 and is subject to regulatory approval.

The Debentures will be convertible at the holder's option into Trust Units at the earlier of any time prior to the Maturity Date and the business day immediately preceding the date fixed by the Trust for redemption at a conversion price of $7.00 per Trust unit (the "Conversion Price"). The Debentures will not be redeemable on or before September 30, 2009. After September 30, 2009 and on or prior to September 30, 2011 the Debentures may be redeemed in whole or in part from time to time at Royal Host's option on at least 30 days and not more than 60 days notice at a redemption price equal to par plus accrued and unpaid interest, provided that the weighted average trading price of the Units on the TSX for the 20 consecutive trading days ending five trading days preceding the date on which notice of redemption is given exceeds 125% of the Conversion Price. After September 30, 2011, the Debentures may be redeemed in whole or in part from time to time at Royal Host's option at a price equal to their principal amount plus accrued interest. On at least 30 days and not more than 60 days' notice, subject to regulatory approval, Royal Host REIT may satisfy its obligation to repay the principal amount of the Debentures on redemption or at maturity, in whole or in part, by delivering that number of Trust units equal to the amount due divided by 95% of the market price for the units at that time, plus accrued interest in cash.

The securities offered have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.

About Royal Host REIT

Royal Host owns 37 hotels, manages 126 properties and franchises 113 locations representing 18,000 guestrooms in the mid-market to upscale segments. It also owns the master franchise rights for the Travelodge brand in Canada and provides management services to third party properties.

Royal Host is committed to creating stable and repeatable earnings through high quality assets, efficient operations and exceptional people. Through strategic management and growth of its assets, and ongoing training, communication and teamwork, it is committed to achieving ongoing improvements to its bottom line results. Royal Host Units and Convertible Debentures are traded on the Toronto Stock Exchange under the trading symbols "RYL.UN", "RYL.DB" and "RYL.DB.A" and "RYL.DB.B", respectively.

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