Canadian real estate private equity firm KingSett Capital and InnVest Real Estate Investment Trust (TSX: INN.UN) have completed their previously announced purchase of a majority stake in Toronto’s Fairmont Royal York Hotel. The deal, which is priced at $186.5 million, gives the two investors a joint 80 percent interest in the property. KingSett, the managing partner of the joint venture, took the largest share. The selling party, Ivanhoé Cambridge, the real estate investment arm of the Caisse de dépôt et placement du Québec, will retain a 20 percent investment stake in the hotel.
InnVest REIT, KingSett Capital and Ivanhoe Cambridge Complete the Acquisition of the Fairmont Royal York Hotel
TORONTO, ONTARIO–(Marketwired – Feb. 2, 2015) – InnVest Real Estate Investment Trust (“InnVest”) (TSX:INN.UN) and KingSett Real Estate Growth LP No. 5 (“KingSett”), announced today the completion of its previously announced joint venture acquisition from Ivanhoé Cambridge (“Ivanhoé Cambridge”) of an aggregate 80% interest in the Fairmont Royal York Hotel in Toronto (the “Royal York Hotel”). Ivanhoé Cambridge retained a 20% interest in the property.
The joint venture acquired the 1,363-room Royal York Hotel for an aggregate price of $186.5 million, or $137,000 per room, with InnVest’s 20% share in the joint venture being acquired for approximately $37.3 million. The joint venture financed the acquisition with an approximate $100 million, 3-year, 3.8% floating rate mortgage. InnVest funded its proportionate share of the acquisition equity with available cash.
KingSett, with its 60% interest in the joint venture, is the managing partner of the joint venture. InnVest is the hotel asset manager and will oversee the property’s hospitality operations, working with Fairmont Hotels and Resorts, the operator of the Royal York Hotel.
The parties to the joint venture believe in the long term future success of the Royal York Hotel and expect to invest over $50 million of additional funds for renovations over the next 24 months.
“InnVest’s ability to participate in this important hospitality real estate transaction is a testament to its position as one of the leading growth platforms in our industry,” said Drew Coles, InnVest’s President and Chief Executive Officer. “We see tremendous potential for the Royal York Hotel given its irreplaceable location, notable infrastructure improvements to its immediate area, as well as significant value-enhancing opportunities through planned and completed renovations.”
Built in 1929, the Royal York Hotel has benefitted from significant capital investments in recent years including renovations to more than 500 guestrooms. Further, there are several potential redevelopment possibilities to capitalize on the surrounding market’s growth, including re-configuration of the Hotel’s retail space. The Hotel features 1,363 guest rooms including 82 Fairmont Gold Rooms and 92 suites, and offers over 65,000 square feet of meeting space, 30,000 square feet of retail space and six food and beverage outlets.
ABOUT KINGSETT CAPITAL
KingSett Capital is Canada’s leading private equity real estate investment business, co-investing with institutional and high net worth individuals, using active management to deliver premium risk weighted returns. KingSett invests through its Growth, Income and Mortgage funds and has over $5 billion of assets under management.
ABOUT IVANHOE CAMBRIDGE
Ivanhoé Cambridge is a world-class real estate company that leverages its high-level expertise in all aspects of real estate including investment, development, asset management, leasing and operations, to deliver optimal returns for its investors. Its assets, held through multiple subsidiaries and located mainly in Canada, the United States, Europe, Brazil and Asia, totalled more than Cdn$40 billion as at December 31, 2013. Its portfolio consists mainly of shopping centres, office and multi-residential properties. Ivanhoé Cambridge is a real estate subsidiary of the Caisse de dépôt et placement du Québec www.lacaisse.com, one of Canada’s leading institutional fund managers. For further information: www.ivanhoecambridge.com.
InnVest Real Estate Investment Trust is an unincorporated open-ended real estate investment trust which owns a portfolio of approximately 110 hotels across Canada representing over 14,000 guest rooms operated under internationally recognized brands. InnVest also holds a 50% interest in Choice Hotels Canada Inc., one of the largest franchisors of hotels in Canada.
InnVest’s units and convertible debentures trade on the Toronto Stock Exchange (the “TSX”) under the symbols INN.UN, INN.DB.D, INN.DB.E, INN.DB.F and INN.DB.G.
FORWARD LOOKING STATEMENTS
Statements contained in this press release that are not historical facts are forward-looking statements. These forward-looking statements include statements with respect to assumptions and forecasts of future results of and capital investments in the Royal York Hotel. These forward-looking statements are based on current expectations of management and involve risks and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. Among the key factors that could cause such differences are InnVest’s available sources of funds, real estate investment risks, hotel industry risks and competition. In making such forward-looking statements, management has relied upon a number of material factors and assumptions, including with respect to current and future levels of investment in and renovations of the Royal York Hotel. Although management of InnVest believes that the expectations with respect to such forward-looking statements are reasonable, such forward-looking statements are subject to known and unknown risks and uncertainties and, accordingly, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the foregoing list is not exhaustive. The forward-looking statements included herein are made as of the date hereof and InnVest disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by applicable securities law.
InnVest Real Estate Investment Trust
Vice President, Finance and Investor Relations
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