legacy hotel real eastate trust

8/3/2019 Legacy Hotel Real Eastate Trust

1/39

Assumption

Revenue Growht rate 7.50%

EBITDA Margin 29.00%

Tax for Trust 0.96%

Terminal GR 2%Property taxes, rent and insurance 7%

Interest Expenses 6.12%

Debt 300,000,000

Advisory Fees 0.40%

Other trust expenses 0.20%

Year 1997 1998 1999 2000

Operating revenues 322,317 343,555 369,322 397,021

EBITDA 93,472 99,631 107,103 115,136

Less: Property taxes, rent and insurance 22,562 24,049 25,853 27,791

Less: Depreciation 12,408 13,040 13,040 13,040

NOI from hotel operations 58,502 62,542 68,211 74,305

Less: Advisory fee 3,412 3,485 3,000 3,000

Less: Other Trust expenses 580 575 739 794

NOI 54,510 58,482 64,472 70,511

Less: Interest Expenses 4,583 18,373 18,373 18,373

EBT 49,927 40,110 46,100 52,138

less : Income Tax Expenses 479 385 443 501

Net Income 49,447 39,725 45,657 51,637Add: Interest expenses after tax 4,539 18,196 18,196 18,196

Add: Depreciation 12,408 13,040 13,040 13,040

Net Cash Flow 66,394 70,961 76,893 82,874

Time 0 1 2 3

Net Cas Flow 66,394 70,961 76,893 82,874

Pv of Cash Flow 64,495 63,518 62,220

Total Trust Value 1,069,204

Less: Debt Servicing 300,000

Net Trust Value 769,204No. of Units 59200

Unit per price 12.99


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Rf Equity Beta

CAPM 5.74% 0.90

Cost Of Equity 10.46%

Cost Of Debt 6.12%

Return After Tax

Cost Of Debt 6.12% 6.07%Cost Of Equity 10.46%

WACC(Unadjusted)

Add: Business Risk Premium

WACC

Net Asset Value 750,000

Purchase price 835,600

Rquired Capital 920,900

2001 2002

426,797 458,807 Equity Beta D/E

123,771 133,054 CHIP REIT (HOT.IR) 0.86 41%

29,876 32,116 Legacy Hotel 0.90 48%

13,040 13,040

80,855 87,898

3,000 3,000

854 918

77,002 83,980

14,225 14,225

62,777 69,755

603 670

62,174 69,08514,088 14,088

13,040 13,040

89,303 96,214 Perpetual

4 5 5

89,303 96,214 1,222,782

60,938 59,671 758,362


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Risk Premium Market Return

5.22% 10.96%

Weight Total

32.58% 1.98%67.42% 7.05%

9.03%

1.00%

10.03%

Assets Beta Tax Rate

0.61 0.96%

0.61 0.96%


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Capital replacement reserve to NI 30.89%

No. of Units 59200

Year 1997 1998 1999 2000

Net Income 49,447 39,725 45,657 51,637

Add: Depreciation 12,408 13,040 13,040 13,040Less: capital replacement reserve 15,274 12,271 14,103 15,951

Distributable Income 46,581 40,494 44,594 48,727

Distributable income per Unit 0.79 0.68 0.75 0.82

Trailing Distributable Imcome per unit 0.79

Leading Distributable Imcome per unit 0.85

REIT prospective yield 8.00%

Trailing Price per unit 9.84

Leading Price per unit 10.58

Average 10.21


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2001 2002

62,174 69,085

13,040 13,04019,206 21,340

56,009 60,785

0.95 1.03


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Net Asset Value for Hotel Portfolio 750,000

less: Debt Issue 300,000

Net Asset Value for RIET 450,000

Number of Unit 59,200

Per unit Value 7.60

NAV Approach


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less: Debt Issue 300,000

Net Asset Value for 450,000


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Purchase price paid now 654800

Purchase price will be paid later 180800

Acqisition of operator 60600

Acquisition cost of Initial Hotel Portfolio 14500

Capex and NWC 10200

Total 920900Debt 300000

Equity 620900

Unit Price Determination

Net Asset Value 7.60

Intrinsic Value(DFCF) 12.99

Yeald Spread 10.21

Trading Value(FFO Multiple) 13.46

TEV/EBITDA Multiple 14.31

Average 11.71

Price Volatility 20%

Upper Limit 14.06

Lower Limit 9.37

Price Range 10.50-14.00

CP Hotel Public Issue Total

Average price 11.71 11.71

Underpricing 10% 6%

Unit Price per share 10.5 11

Number of Unit 19536 39,664 59,200Procced from Issue 205128 436304 641,432

Less: Issue Cost (2%) 14500

Net Procced from Issue 626,932

Required procced 620900

Excess procced 6,032


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Series Years to maturity Amount Coupon rate

1998 1999

1A 3 75000 5.53% 4147.5 4147.5

1B 5 100000 5.93% 5930 5930

1C 7 75000 6.34% 4755 4755

1D 10 50000 7.08% 3540 3540Total 18373 18373

Series Years to maturity Amount Coupon rate Weight total

1A 3 75 5.53% 25% 1.382500%

1B 5 100 5.93% 33% 1.976667%

1C 7 75 6.34% 25% 1.585000%

1D 10 50 7.08% 17% 1.180000%

300 6.22% 6.124167%

Interest rate schedule


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2000 2001 2002

4147.5 0 0

5930 5930 5930

4755 4755 4755

3540 3540 354018373 14225 14225

INTEREST


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($000)

Dec. 31, March 31, June 30, Sept. 30,

1997 1998 1998 1998

Operating revenues 77450 64403 93945 101153

Direct operating expenses 55835 53624 60008 58940

Hotel management fees 2324 1932 2818 3035

Total Operating Expenses 58159 55556 62826 61975

Gross operating profit 19291 8847 31119 39178

Property taxes, rent and insurance 5328 5509 5545 5609

7% 9% 6% 6%

Depreciation 3102 3272 3273 3272

750000

0.44%

Net operating income from hotel operations 10861 66 22301 30297

Advisory fee 853 871 871 871

Other Trust expenses 145 144 144 144

Total Trust expenses 998 1015 1015 1015

Operating income 9863 -949 21286 29282

Interest expense, net 4583 4497 4498 4497

Income (loss) before income taxes 5280 -5446 16788 24785

Income tax expense 84 107 108 107

1.59%

Net income (loss) 5196 -5553 16680 24678

Add: depreciation 3102 3272 3223 3272

Less: capital replacement reserve -3098 -2576 -3758 -4046

Distributable income 5200 -4857 16145 23904

Estimated distribution 5180 10958 10959 10959

Distributable income per Unit .087 -.082 .273 .403

Estimated quarterly distribution per Unit .087 .185 .185 .185

Note:

Exhibit 7

LEGACY HOTELS INVESTMENT TRUST

FORECAST CONSOLIDATED STATEMENTS OF NET INCOME AND DIS


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(1) Capital replacement reserve is a deduction in determining Distributable Income. Based on the Trust acq

Hotel Portfolio. Revenue and operating expenses are based on the current individual budgets of the hotels.

intends to distribute 100 per cent of the Distributable Income in the period covered by the Financial Forecas

\"Distribution Policy.\" Based on 59.2 million Units outstanding.


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Dec. 31, Annual

1998 1998 1994 1995

84054 343555 343555 252976 272965

7%

58464 231036 231036

2522 10307 10307

60986 241343 241343

23068 102212 102212 44912 55233

18% 20%

5492 22155 22155

7% 6% 6%

3273 13090 13090

12.66892

14303 66967 66967

872 3485 3485

143 575 575

1015 4060 4060

13288 62907 62907

4498 17990 1799029%

8790 44917 44917

108 430 430

0.96% 0.96%

8682 44487 44487

3273 13040 13040

-3362 -13742 -13742

8593 43785 43785

10959 43785 43785

.146 .74 .74

.185 .74 .74

TRIBUTABLE INCOME

An


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uiring the Initial

The Trust

t. See


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1996 1997 1998 CS-

297175 322317 343555

8% 8% 6% 7%

231036

10307

241343

66200 83784 102212

22% 26% 30%

21312 22155

7% 6%

12408 13090

50064 66967

3412 3485

580 575

0.18% 0.17%

3992 4060

46072 62907

18332 1799040%

27740 44917

336 430 1.21% 0.96%

1.21% 0.96%

27404 44487

12408 13040

-12392 -13742

20800 43785

20720 43785

0.35 0.74 59200

0.35 0.74 59200

nual Data


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Exhibit 12

SELECTED DATA FOR U.S. REAL ESTATE INVESTMENT TR

Current Funds From Operat

Price Annualized (FFO)/Uni

Company Ticker 9/30/1997 Dist. Yield 1995 1996

American General Hospitality AGT 28.69 $1.71 6.% $1.84 $2.13

Equity Inns, Inc. ENN 15.44 $1.16 7.5% $1.23 $1.22FelCor Suite Hotels, Inc. FCH 40.5 $2.2 5.4% $2.31 $2.65

InnKeepers USA Trust KPA 16.63 $1.04 6.3% $1.03 $1.25

Patriot American Hospitality PAH 31.94 $1.06 3.3% $1.11 $1.53

RFS Hotel Investors Inc. RFS 19.63 $1.44 7.3% $1.65 $1.85

Starwood Lodging Trust (Westin) HOT 55.75 $1.92 3.4% $1.61 $2.13

Winston Hotels WXH 13.38 $.88 6.6% $1.37 $1.5

AVERAGE $1.43 5.7%


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USTS

ions Equity

t FFO Multiple Mkt Cap

1997 1998 1995 1996 1997 1998 (Mil)

$2.43 $2.85 15.59 13.47 11.81 10.07 $486.

$1.5 $1.65 12.55 12.66 10.29 9.36 $510.7$3.3 $3.8 17.53 15.28 12.27 10.66 $1,599.5

$1.45 $1.67 16.15 13.30 11.47 9.96 $649.4

$1.8 $2.45 28.77 20.88 17.74 13.04 $2,370.1

$2.05 $2.24 11.90 10.61 9.58 8.76 $532.6

$2.95 $3.9 34.63 26.17 18.90 14.29 $3.255.6

$1.51 $1.72 9.77 8.92 8.86 7.78 $229.3

18.4x 15.2x 12.6x 10.5x $1,204.1


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Debt Debt

Mkt Cap TEV to 5-year FFO Growth Rate

(Mil) (Mil) TEV Beta 96/95 97/96 98/97

$207.2 $693.2 29.9% .7 15.8% 14.1% 17.3%

$207.8 $718.5 28.9% .48 (0.8)% 23.% 10.%$504.9 $2,104.4 16.8% .6 14.7% 24.5% 15.2%

$100.4 $749.8 13.4% .63 21.4% 16.% 15.2%

$734.5 $3,104.6 23.7% .68 37.8% 17.6% 36.1%

$144.8 $677.4 21.4% .39 12.1% 10.8% 9.3%

$1,350.4 $4,606. 29.3% .66 32.3% 38.5% 32.2%

$63.1 $292.4 21.6% .46 9.5% .7% 13.9%

$414.1 $1,618.3 23.1% .57 17.8% 18.1% 18.6%


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1997E 1998E

70.40% 60.0%

77.3% 67.1%66.7% 57.9%

71.7% 62.7%

58.8% 47.1%

70.2% 64.3%

65.1% 49.2%

58.3% 61.4%

67.3% 58.7%

Dividend/FFO Payout Ratio


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Assumption 1997 1998

Revenue Growht rate 7.50%

EBITDA Margin 27% 25% 29%

Tax for Hotel Business 1%

Tax for Trust 0.96%

Terminal GR 3%Property taxes, rent and insurance 7%

Management Fees 3%

Year 1997 1998

Operating revenues 322,317 343,555

EBITDA 83,784 102,212

Less: Property taxes, rent and insurance 22,562 24,049

Less: Depreciation 12,408 13,040

NOI from hotel operations 48,814 65,123

Less: Advisory fee 3,412 3,485

Less: Other Trust expenses 580 575

NOI 44,822 61,063

Less: Interest Expenses 18,332 17,990

EBT 26,490 43,073

less : Income Tax Expenses 254 414

Net Income 26,236 42,660

Add: Interest expenses after tax 252 410Add: Depreciation 12,408 13,040

Net Cash Flow 38,895 56,109 Perpetual

Time 0 1 1

Net Cas Flow 38,895 56,109 824,013

Pv of Cash Flow 51,002 749,010

Total Trust Value 800,013

Less: Debt Servicing 300,000

net Trust Value 500,013

No. of Units 59200Unit per price 8.45


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Rf Proxy Beta

CAPM 5.74% 0.9

Cost Of Equity 10.44%

Net Asset Value 750,000,000 Cost Of Debt 6.12%

Purchase price 835,600,000 Return After Tax

Rquired Capital 920,900,000 Cost Of Debt 6.12% 6.07%

Cost Of Equity 10.44%WACC

Add: Premium

WACC


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Risk Premium Market Return

5.22% 10.96%

Weight Total

32.58% 1.98%

67.42% 7.04%9.01%

1%

10.01%


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ADJ. Equity

Principal 52 Week Forward Mkt

Property Price High/Low Yield Cap

Type 9/30/1997 ($) (%) Units ($Mil)

CompanyAvista REIT (AVS.IR) Diversified 7.05 7.25/6.55 7.40% 18.16 128

CAP REIT (CAR.IR) Apartment 7.40 7.40/5.90 8.40% 7.97 59

CHIP REIT (HOT.IR) Hotel 9.85 10.40/6.75 8.20% 26.90 265

CPL (CPL.IR) Healthcare 13.35 13.65/5.95 7.80% 12.28 164

CREIT (REF.U) Diversified 14.40 15.25/10.40 7.60% 19.79 285

H&R REIT (HR.U) Office 7.50 8.15/6.20 8.10% 16.53 124

RealFund (RFN.U) Retail 15.65 18.25/14.05 8.40% 17.76 278

RioCan (RIO.U) Retail 19.90 21.00/13.70 8.40% 19.15 381

Summit REIT (SMU.U) Diversified 17.25 18.50/13.55 8.40% 7.25 125

AVERAGE 12.48 8.08%

Legacy Hotel 10.488176 59.2 620.9

Current Funds From Operatio

Price Annualized (FFO)/Uni

Company Ticker 9/30/1997 Dist. Yield

1995 1996Legacy 10.488176 0.35 3%

SELECTED DATA FOR CANADIAN REAL EST

Exhibit 11


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Debt Total Ent.

Mkt Value Debt TEV/ TEV/

Cap (TEV) to 1997 1997 1998 1998 1997

($Mil) ($Mil) TEV EBITDA EBITDA EBITDA EBITDA Dist.

Times ($)73 201 36.3% 11 18.3 25 8.0 N/A

32 91 35.2% 8 11.4 14 6.5 N/A

109 374 29.1% 14 26.7 32 11.7 N/A

98 262 37.4% 15 17.5 33 7.9 1.03

143 428 33.4% 45 9.5 47 9.1 1.04

74 198 37.4% 35 5.7 45 4.4 0.97

134 412 32.5% 42 9.8 41 10.0 1.32

208 589 35.3% 60 9.8 72 8.2 1.53

91 216 42.1% 23 9.4 39 5.5 1.38

35.42% 13 8

300 920.9 33% 81 11 99 9 0.35

ns Equity Debt

t FFO Multiple Mkt Cap Mkt Cap

(Mil) (Mil)

1997 1998 1995 1996 1997 19981.13 1.21 9.278556 8.681233 620.9 300

ATE INVESTMENT TRUSTS


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Est. 1997 Est. 1997

1998 Dist. Tax Dist. Tax MM/

Dist. Deferred Deferred BETA YY Occupancy

($) (%) (%) Est. (%)0.81 68 85 0.48 07/97 94

0.95 100 100 0.87 05/97 97

1.13 N/A 80 0.86 06/97 61

1.34 90 70 0.94 05/97 97

1.09 65 65 0.67 06/96 94

0.93 95 65 0.27 12/95 98

1.32 70 70 0.55 12/95 95

1.68 60 70 0.64 12/95 93

1.45 65 55 0.54 01/96 94

91

0.74

Debt

TEV to 5-year FFO Growth Rate

(Mil) TEV Beta 96/95 97/96 98/97

920.9 33%


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Largest Rental Markets

Greater Toronto, Southern Ontario

Greater Toronto

Alberta, Prairies, Ontario, Quebec, Maritimes

Ontario, Prairies

Ontario, British Columbia, Alberta

Toronto

Ontario, British Columbia, Alberta

Ontario, Alberta, Saskatchewan, New Brunswick

Ontario, Alberta, Nova Scotia, United States

1997E 1998E

Dividend/FFO Payout Ratio


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U. S. Yields

Bank Rate 3.5 Discount Rate 5

Prime Rate 4.75 Prime Rate 8.5Call Loan Average 3.35 Fed. Funds 5.69

1 Month 2.72 1 Month 4.55



1 Year 4.13 1 Year 5.16

2-Year 4.54 2-Year 5.785-Year 5.21 5-Year 5.99

7-Year 5.48 7-Year 6.07

10-Year 5.74 10-Year 6.09

30-Year 6.31 30-Year 6.38

Source: Financial Post, September 30, 1997.

Canadian Yields

Exhibit 10

FINANCIAL MARKET DATA

SEPTEMBER 30, 1997

T-Bills: T-Bills:

Government Bond Yields: Government Bond Yields:


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Estimated Long-Term Canadian Market Risk Premium, Arithmetic Means = 12.20 7.21

Estimated Long-Term Canadian Market Risk Premium, Geometric Means = 10.96 6.72

Estimated Medium-Term Canadian Market Risk Premium, Arithmetic Means = 12.20 7.31

Estimated Medium-Term Canadian Market Risk Premium, Geometric Means = 10.96 6.98

Estimated Short-Term Canadian Market Risk Premium, Arithmetic Means = 12.20 6.49

Estimated Short-Term Canadian Market Risk Premium, Geometric Means = 10.96 6.32

Source: TSE Common Equities CD-ROM.

VolatilityEstimated Legacy Hotels REIT Unit Price Volatility 20%

Canadian Equity Market Annual Risk Premiums January 1950 to December 199


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4.99

4.24

4.41

3.98

5.81

4.64

6


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($000)

Dec. 31, March 31, June 30, Sept. 30,

1997 1998 1998 1998

Operating revenues 77450 64403 93945 101153

Direct operating expenses 55835 53624 60008 58940

Hotel management fees 2324 1932 2818 3035

Total Operating Expenses 58159 55556 62826 61975

Gross operating profit 19291 8847 31119 39178

Gross Margin

EBITDA

EBITDA Margin 0.249077

EBITDA PER UNIT

Property taxes, rent and insurance 5328 5509 5545 5609

Depreciation 3102 3272 3273 3272

Net operating income from hotel operations 10861 66 22301 30297

Advisory fee 853 871 871 871

Other Trust expenses 145 144 144 144

Total Trust expenses 998 1015 1015 1015

Operating income 9863 -949 21286 29282

Interest expense, net 4583 4497 4498 4497

Income (loss) before income taxes 5280 -5446 16788 24785

Income tax expense 84 107 108 107

Net income (loss) 5196 -5553 16680 24678

Add: depreciation 3102 3272 3223 3272

0.463893 -0.2253 -0.16395

Less: capital replacement reserve -3098 -2576 -3758 -4046

Distributable income 5200 -4857 16145 23904

Estimated distribution 5180 10958 10959 10959

Distributable income per Unit .087 -.082 .273 .403

Estimated quarterly distribution per Unit .087 .185 .185 .185

Note:

(1) Capital replacement reserve is a deduction in determining Distributable Income. Based on the Trust acq

Hotel Portfolio. Revenue and operating expenses are based on the current individual budgets of the hotels.

Exhibit 7

LEGACY HOTELS INVESTMENT TRUST

FORECAST CONSOLIDATED STATEMENTS OF NET INCOME AND DIS


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intends to distribute 100 per cent of the Distributable Income in the period covered by the Financial Forecas

\"Distribution Policy.\" Based on 59.2 million Units outstanding.


33/39

Dec. 31, Annual

1998 1998 1994 1995

84054 343555 343555 252976 272965

7%

58464 231036 231036

2522 10307 10307

60986 241343 241343

23068 102212 102212 44912 55233

43564.64 53576.01

5492 22155 22155

3273 13090 13090

14303 66967 66967

872 3485 3485

143 575 575

1015 4060 4060

13288 62907 62907

4498 17990 17990

8790 44917 44917

108 430 430

8682 44487 44487

3273 13040 13040

-0.38724 -0.3089 -0.308899229

-3362 -13742 -13742

8593 43785 43785

10959 43785 43785

.146 .74 .74

.185 .74 .74

uiring the Initial

The Trust

TRIBUTABLE INCOME

An


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t. See


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1996 1997 1998 CS-

297175 322317 343555

8% 8% 6% 7%

231036

10307

241343

66200 83784 102212

26% 30%

64214 81270.48 99145.64

25% 29%

1.37 1.67

21312 22155

12408 13090

50064 66967

3412 3485

580 575

3992 4060

46072 62907

18332 17990

27740 44917

336 430 1.21% 0.96%

27404 44487

12408 13040

-12392 -13742

20800 43785

20720 43785

0.35 0.74 59200

0.35 0.74 59200

nual Data


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Location

1 Vancouver, BC2 Vancouver, BC

3 Calgary, AB

4 Calgary, AB

5 Edmonton, AB

6 Toronto, ON

7 Ottawa, ON

8 Montral, QC

9 Charlottetown, PEI

10 Halifax, NS

11 Moncton, NB


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Property Year Built

(Year of Major

Renovations)

Hotel Vancouver 1939 (1996)Waterfront Centre Hotel 1991

Calgary Airport Hotel 1979 (1989/1990) 1979(1989/1990)

The Palliser 1914 (1990/1991)

Hotel Macdonald 1915 (1991)

Royal York 1929 (1990/1991)

Chteau Laurier 1912 (1991)

The Queen Elizabeth 1958 (1990/1991)

The Prince Edward 1984 (1995)

Hotel Halifax 1975 (1989/1990)

Hotel Beausjour 1972 (1996)

INITIAL HOTEL PORTFOLIO

Notes:

(1) Total revenues for the 12 months ended December 31, 1996.

(2) Average daily rate for the 12 months ended December 31, 1996.

(3) Average occupancy for the 12 months ended December 31, 1996.

(4) Leasehold interest.

SELECTED INFORMATION CONCERNING THE INITIAL HOT


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Total ADR, Occupancy,

Number of Guest Room Revenues, 1,996. 1,996.

1,996. ($) (%)

($ millions)

550 38.2 146.32 80489 32.6 156.41 81.5

296 13.1 99.25 78.7

405 22.7 125.65 70.4

198 11.5 114.36 70.6

1365 75.3 117.5 75.1

425 28.9 124.2 75.5

1020 48.3 115.74 66.7

211 8.4 107.87 57

300 8.8 86.33 65.5

310 9.4 80.52 63.3

5569 297 116 71

EL PORTFOLIO


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Exhibit 6

1994 1995 1996 1997

Occupancy 69.3% 72.1% 72.3% N/A

ADR $103.27 $109.29 $120.71 N/A

RevPAR $71.53 $78.82 $87.3 N/A

Total Revenue (thousands) $252,976. $272,965. $297,175. $244,867.

Net operating income before depreciation, interest $44,912. $55,233. $66,200. $64,492.

and income and capital taxes (EBITDA) (thousands)

EBITDA Margin 17.8% 20.2% 22.3% 26.3%

Increase 1994 - 1995 1995 - 1996

Occupancy (percentage points) 2.8 .2

ADR 5.8% 10.4%

RevPAR 10.2% 10.8%

Total Revenue 7.9% 8.%

EBITDA 23.% 19.9%

EBITDA Margin (percentage points) 2.4 2.1

KEY FINANCIAL AND OPERATING STATISTICS FOR THE INITIAL HOTEL PORTFOLIO

(1) The Initial Hotel Portfolio was operated by Canadian Pacific Hotels as 100 per cent-owned or leased hotelsaccordingly the Portfolio EBITDA figures do not reflect the deduction of management fees.

Note:

legacy hotel real eastate trust

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