ROYAL HOST REFUTES CHIP MISINFORMATION
Press Release: Royal Host
(Full text of press release from Canadian Corporate News)
June 17, 1999
Royal Host Real Estate Investment Trust (Royal Host) announced that it mailed on June 14 a Notice of Change and
Extension regarding its offer to purchase 100 percent of Canadian Hotel Income Properties Real Estate Investment
Trust (CHIP). The offer is on the basis of 1.19 trust units of Royal Host for each CHIP unit. In the Notice, Royal
Host provided the following responds to inaccurate and misleading statements contained in the CHIP trustees' circular
with respect to the Royal Host
offer:
- The synergies and operational savings and other benefits from the combination are substantial and will be shared
equitably between all unitholders, with CHIP unitholders receiving a disproportionate share. This represents a
clear enhancement of value to CHIP unitholders.
- The Royal Host and CHIP portfolios are complementary, with the combination leading to a more balanced, stronger
portfolio for the benefit of all unitholders.
- The Notice clarifies CHIP's miscategorization of the Royal Host and CHIP hotel portfolios. Royal Host noted,
among other things, the following:
- With the majority of its properties operating in the upper mid-market and upscale segments, Royal Host's average
RevPAR of $52.29 in 1998 was higher than the CHIP RevPAR at $51.86. This demonstrates that the Royal Host and CHIP
portfolios are similar in quality. - Fully 73 percent of the Royal Host portfolio consists of properties with amenities
such as restaurants, meeting rooms and other facilities. This is an aspect that was not recognized by CHIP.
- In 1998, 19 percent of Royal Host revenues were derived from food and beverage providing a more balanced revenue
stream compared to 43 percent of CHIP's revenues that were derived from food and beverage and other.
-The maximization of value for the combined hotel portfolios requires an experienced and committed hotel management
team. The Royal Host management team has extensive hotel operating experience as well as a substantial equity interest
in Royal Host. This is in contrast to the minimal experience and equity interest held by CHIP management.
- The larger asset and equity base of the combined entity will provide
greater financial flexibility.
The Notice includes an updated financial forecast for Royal Host for the year ending December 31, 1999. The updated
financial forecast, shows improved distributable cash of $1.24 per unit (compared to $1.23 in the previous forecast).
As a result of the issuance of the updated forecast, the previous forecast has been withdrawn. The Notice also
corrects certain items in the original offer that were noted in the CHIP trustees' circular.
Royal Host has also extended the period for acceptance of the offer to 8:00 p.m. (Calgary time) on June 25, 1999.
"The updated forecast eliminates any uncertainty CHIP unitholders may have regarding Royal Host's prospective
financial performance, and will allow them to make a timely and informed decision on the offer,'' said R.B. Royer,
President and CEO of Royal Host.
The following summarizes some of the elements of the updated Royal Host financial forecast.
- Total revenues are $135,921,000 in the updated forecast as compared to $107,332,000 in the original forecast.
This reflects an increase in the number of hotel rooms, an increase in forecast RevPAR, additional revenues from
food and beverage associated with the properties acquired in 1998, and additional revenues from the Royco/RVI hotel
management, franchise and "timeshare'' businesses.
- Hospitality expenses are forecast to be $89,437,000 as compared to $67,711,000 in the original forecast. The
increase is a result of additional rooms and expenses associated with more food and beverage operations.
- Operating income is forecast to be $46,484,000 as compared to $39,621,000 in the original forecast. This will
result in operating income (as a percentage of total revenues) remaining relatively constant. Distributable cash
is forecast to be $27,161,000 as compared to $23,162,000 in the original forecast, reflecting the net margins from
the properties and Royco/RVI businesses acquired in 1998.
The Royal Host trust units may be offered only pursuant to the takeover
bid circular that may be obtained from Royal Host and that contains detailed information about Royal Host and its
management, as well as financial statements. This press release does not constitute an offer to sell or a solicitation
of an offer to buy. Nor shall there be any sale of these securities, in the United States or any other jurisdiction
in which such solicitation or sale would be unlawful prior to the registration or qualification under the securities
laws of the United States or such other jurisdiction.
Royal Host is a closed-end real estate investment trust with a national portfolio of 36 hotels with over 4,400
guest rooms primarily in the upper mid-market and upscale market segments. Royal Host owns the Travelodge Master
Franchise in Canada provides hotel and resort management services, markets vacation intervals in hotels, resorts
and luxury houseboats and
operates a facility for customers to trade and bank prepaid vacations.
Royal Host maximizes earnings while minimizing risk through efficient operations, strong marketing and a focus
on providing travelers with superior accommodations and travel experiences.
Royal Host units are traded on The Toronto Stock Exchange (RYL.UN).
Statements contained in this news release regarding expected financial results and other planned events are forward-looking
statements. As a result, they are subject to uncertainties and risks, including the ability of Royal Host to successfully
implement its strategies including: the acquisition of CHIP; the successful integration of this acquisition into
Royal Host; and, the subsequent realization of expected synergies. Each of these events and conditions affecting
real estate investment and the hotel industry generally may be impacted, among other things, by economic, competitive
or regulatory conditions.