Selling West Coast properties is an option for owners
Derrick Penner
Sun
Vancouver-based Canadian Hotel Income Properties Real Estate Investment Trust is joining a growing list of hotel properties testing the hot real estate market. Sun File Photo
Vancouver-based Canadian Hotel Income Properties Real Estate Investment Trust is joining a growing list of hotel properties testing the hot real estate market.
Canadian Hotel said Wednesday it has struck an independent committee to advise its board on ways to increase value to unit-holders — including the possible sale of properties.
Legacy Hotels Real Estate Investment Trust, which holds several landmark Fairmont Hotel properties such as the Hotel Vancouver and Victoria’s Empress in its portfolio, put itself in play March 1.
And five Westin properties, including Vancouver’s Bayshore Hotel, were put on the block in January.
“We initiated this process in response to the considerable appetite strategic and financial buyers have shown in recent months for Canadian hotel properties,” Janice Rennie, chairwoman of the special committee said in a news release.
No one was answering phones at Canadian Hotel Wednesday.
Vancouver-based holding company Belkorp Group is Canadian Hotel’s biggest shareholder, which has said it is supportive of the process.
Rennie, in the news release, also cited pending federal legislation that may exclude hotels as real estate income trusts (REITs).
Other options the committee will consider include restructuring or amalgamation. A sale could include some or all of the trust’s assets.
Canadian Hotel owns 32 hotel properties with more than 7,000 rooms including the Delta Victoria Ocean Pointe Resort, Harbour Towers Hotel and Suites in Victoria and Vancouver’s Residence Inn by Marriott.
Its $34-million purchase of the Ocean Pointe Resort included Vancouver’s Cannery Seafood Restaurant and the Fish House in Stanley Park.
In 2006, Canadian Hotel posted a total annual return of 35 per cent, including cash distributions and price appreciation on units, a whopping increase from 18.3 per cent in 2005.
It’s net 2006 income was $36.3 million on $335.1 million revenue compared with $21.7 million on $299 million in revenue the year before.
Brian Flood, vice-president of C.B. Richard Ellis Hotels, a major commercial real-estate broker, said many Canadian real-estate trusts are in the same boat as Canadian Hotel because of the federal government’s reversal on income-trust taxation.
Trusts have to be sure they abide by the new tax rules. While they make those adjustments, it’s logical to figure out what the trusts could make on the open market, Flood said.
“If you are considering [a sale], now is probably the best time in many years to look at that option,” Flood said.
Hedge funds, pensions and other institutional investors have been clamoring to buy any commercial property that generates cashflow.
ING Group bought an industrially focused trust, Summit, for $3.3 billion last year. GWL Realty Advisers also purchased TGS North American trust’s 2.3 million square feet of office space in Vancouver, Edmonton and Houston for $265 million.
As for hotels, Colliers International counted a record $3 billion in hotel transactions, including the $1.5-billion US sale of seven Fairmont hotels to the Ontario Municipal Employees Retirement Board (Omers).
Flood said hotels never used to appeal to institutional investors. However, high prices for office and retail real estate has driven down their rates of return, making hotels more attractive.
Canadian Hotel’s units rose 30 cents to close at $15.98 in trading Wednesday on the Toronto Stock Exchange.
© The Vancouver Sun 2007
