/NOT FOR DISTRIBUTION TO U.S. NEWSWIRES OR
DISSEMINATION IN THE UNITED
STATES/
TORONTO, Dec. 7, 2021 /CNW/ - VM Hotel
Acquisition Corp. (TSX: VMH.U) (TSX: VMH.WT.U) ("VMH"), a
special purpose acquisition company ("SPAC"), today
announced its proposed qualifying acquisition (the "Qualifying
Acquisition") of a US$411 million
portfolio of five premier hotels, consisting of 2,079 keys in four
cities and two countries, to create an initial cross-border North
American portfolio of high-quality hotel properties (the
"Initial Portfolio"). Following the Qualifying
Acquisition, VMH will be a publicly-traded real estate operating
company ("REOC"), allowing investors to participate in a
long-term real estate strategy of acquiring and growing a portfolio
of high quality, iconic and well-located upper-upscale and luxury
North American hotel and resort properties at a discount to their
stabilized values and replacement costs.
The US$411 million purchase price
is expected to be funded through a combination of approximately
US$260 million of mortgage financing
and US$20 million raised through the
issuance of VMH shares to a vendor, with the remaining portion
funded through cash on hand and the PIPE Investment (as defined
below).
Ian McAuley, VMH's President and
CEO, said, "We are excited to announce the Qualifying Acquisition,
which, upon closing, will allow our shareholders to participate in
the unique buying opportunity created by the COVID-19 pandemic to
acquire high quality hotels at significant discounted prices
relative to their intrinsic value and replacement
cost. Following closing of our Qualifying Acquisition, we
believe that our REOC structure will offer investors private
equity-like returns and liquidity of the public capital markets,
while we continue to invest in the rebound of the hotel
industry".
VMH's Executive Chair, Tom
Vukota, added, "As a publicly-listed REOC targeting the
upper-upscale and luxury hotel segment, we believe VMH will be
uniquely positioned to consolidate the space and transact on an
expected significant pipeline of follow-on U.S. and Canadian
acquisitions the company expects to pursue post-closing".
Initial Portfolio Highlights
High-Quality, Irreplaceable Assets – The hotels in
the Initial Portfolio, set out below, are upper-upscale and luxury
properties that are well-positioned within their respective
competitive sets and located within stable markets with significant
high barriers to entry for new competitors. All of the hotels are
currently operating and together comprise 2,079 keys in four cities
– Boston, Massachusetts,
Cleveland, Ohio, Montreal, Quebec and Panama City Beach, Florida.
Hotel
|
Location
|
Rooms
|
Battery
Wharf
|
Boston,
Massachusetts
|
150
|
Hyatt
Regency
|
Cleveland,
Ohio
|
293
|
The
Renaissance
|
Cleveland,
Ohio
|
491
|
Sheraton
Centre
|
Montreal,
Quebec
|
825
|
Sheraton Golf
& Spa
|
Panama City Beach,
Florida
|
320
|
The majority of the hotels are fully renovated, with all "hard"
construction improvements recently completed. The remaining
renovations to be completed following the Qualifying Acquisition
are primarily "soft" goods that will involve minimal interruption
and disruption to the guest experience or operations.
Attractive Valuation – The Initial Portfolio is
being acquired at an attractive valuation. The total purchase price
of US$411 million represents a 25%
discount to current appraised stabilized values, a 65% discount to
replacement cost and a weighted-average portfolio acquisition cost
of approximately US$198,000 per
key.
Key Partnerships – Through the Qualifying
Acquisition, VMH will be partnering with leading hotel brands and
world-class operators including Hyatt Hotels Corporation, Marriott
International, Inc., Aimbridge Hospitality, Westmont Hospitality
Group and Crescent Hotels and Resorts.
Rebound of the Hotel Industry – In recent history,
the hotel industry has weathered several "black swan events".
Previous disruptions, such as 9/11, resulted in sharp periods of
demand downturns, however, after each such event lodging demand
rebounded within 10 to 14 months to pre-event levels. While the
COVID-19 pandemic has had a drastic impact on hotel demand and
performance, current available data indicates the hotel industry is
well poised for a quicker than expected rebound to pre-pandemic
levels.
Benefits of REOC Structure
As a REOC, VMH will have an efficient capital structure and
attractive relative value compared to yield-driven hotel real
estate investment trusts. The REOC structure is designed to
generate significant risk-adjusted returns through non-dilutive
growth. It will allow VMH to own hotels across borders, and to
reinvest 100% of its net income and cash flow into acquiring
additional assets, which will enable VMH to grow its asset base
exponentially after the Qualifying Acquisition.
VMH has established a deep pipeline of off-market opportunities
in top markets across Canada and
the U.S. to drive future growth. In the pursuit of this growth
strategy, VMH expects to have the flexibility to unlock the
increase in future values of the Initial Portfolio and access
non-dilutive debt at conservative loan-to-value ratios to pursue an
accretive acquisition pipeline without the need to access the
capital markets.
Experienced and Committed Management Team and Board
VMH has a seasoned due diligence team that has conducted
hundreds of similar hotel transactions and has strong relationships
with each operator and brand in the Initial Portfolio. Following
the Qualifying Acquisition, VMH's current President and CEO,
Ian McAuley, Executive Chair,
Tom Vukota, and CFO, Tom Wenner will continue to lead the business.
In addition to the multi-billion dollar hotel transaction
experience of both the CEO and the Executive Chair, VMH's CFO has
completed over 175 real estate transactions and over CDN$1.2 billion in debt and equity
financings.
VMH is guided by a highly capable and experienced board of
directors including independent board members Tracy Sherren (current President, Canadian
Commercial, Starlight Investments), Charles
Suddaby (who has provided advisory and valuation services to
the hotel industry for over forty years) and Dr. John Andrew (Executive Director of Queen's
University's Commercial Real Estate Executive Seminars and a
professor at Queen's School of Urban and Regional Planning).
Blake D. Lyon (current CEO and a
director at Skyline Investments (TLV: SKLN) ("Skyline"))
will join the board at closing.
Transaction Details
The Qualifying Acquisition is intended to constitute VMH's
qualifying acquisition under Part X of the Toronto Stock Exchange
(the "TSX"). The closing of the Qualifying Acquisition,
which is subject to obtaining certain regulatory approvals, the
satisfaction of certain conditions (including the approval of the
TSX) and the continued listing of VMH's common shares on the TSX,
is anticipated to occur in the first quarter of 2022. The outside
date for the Qualifying Acquisition is February 28, 2022, or such other date as the
applicable counterparties and VMH may mutually agree in
writing.
The purchase agreements provide for the acquisition by VMH
of the hotels comprising the Initial Portfolio for an aggregate
purchase price of US$411 million,
subject to adjustments and payable in accordance with the terms of
the purchase agreements. Following the closing, VMH will have a
100% interest in each of the hotels other than the Renaissance, in
which it will have a 90% interest, with Skyline retaining a 10%
interest as part of a strategic partnership with VMH. The purchase
agreements contain covenants and representations and
warranties and related indemnities, subject to certain thresholds
and caps. They also include specific covenants in respect of VMH's
requirements to file a non-offering prospectus in respect of the
Qualifying Acquisition and the PIPE Investment.
In the event that any of the transactions comprising the
Qualifying Acquisition cannot be completed for any reason, VMH may
decide to proceed, subject to meeting all applicable regulatory and
contractual requirements, with its acquisition of the others assets
comprising the Initial Portfolio. In the event that it is not able
to meet all applicable regulatory and contractual requirements, VMH
will not proceed with the Qualifying Acquisition.
An investor presentation will be available under VMH's profile
on SEDAR at www.sedar.com, which will contain further information
in respect of the Qualifying Acquisition. VMH will also file a
non-offering prospectus in accordance with the rules of the TSX in
each of the provinces and territories of Canada other than Quebec in due course.
Debt Financing
VMH has negotiated term sheets with qualified lenders to provide
approximately US$260 million of
property level debt and interest reserves, which will be used to
partially fund the purchase price.
Private Placement Equity Financing
In connection with the Qualifying Acquisition, VMH has launched
a private placement with the intention to raise gross proceeds of
US$145 million through the issuance
of 14.5 million subscription receipts (automatically exchanged into
common shares of VMH upon the successful completion of the
Qualifying Acquisition) at an issue price of US$10.00 per subscription receipt (the "PIPE
Investment"). The proceeds of the PIPE Investment are necessary
to satisfy the minimum cash required to complete the Qualifying
Acquisition and are intended to be used to provide sufficient
working capital and to fund the growth of VMH following closing.
The obligations to consummate the transactions contemplated by the
PIPE Investment are conditional upon, among other things, the
consummation of the Qualifying Acquisition.
This press release is not an offer of securities for sale in the
U.S., and the securities referred to herein may not be offered or
sold in the U.S. absent registration or an exemption from
registration. The securities have not been and will not be
registered under the U.S. Securities Act of 1933.
Sponsors
The sponsors of VMH are VM HA Sponsor LP and VM HA Sponsor Corp.
(the "Sponsors"). The Sponsors are controlled by
Ian McAuley and Tom Vukota, respectively.
Advisors
Echelon Capital Markets and Janney Montgomery Scott LLC are
acting as co-bookrunners and co-lead agents on the PIPE Investment
as well as serving as financial advisors to VMH. Goodmans LLP
is serving as legal counsel to VMH and the Sponsors.
About VM Hotel Acquisition Corp.
VMH is a SPAC incorporated under the laws of the Province of
British Columbia for the purpose
of effecting a qualifying acquisition within a specified period of
time. VMH's head office is located at Brookfield Place, 161 Bay
Street, Suite 2420, Toronto, ON,
M5J 2S1 and the registered office is located at 700 West Georgia
Street, Floor 25, Vancouver, BC
V7Y 1B3.
Forward-Looking Statements
This press release may contain forward-looking information
within the meaning of applicable securities legislation, which
reflects the Sponsors' and the VMH's current expectations
regarding future events. The words "will", "expects", "intends" and
similar expressions are often intended to identify forward-looking
information, although not all forward-looking information contains
these identifying words. Specific forward-looking information
contained in this press release includes, but is not limited to,
statements with respect to the following: the completion and
proposed terms of, and matters relating to, the Qualifying
Acquisition, including the satisfaction of the conditions to
consummate the Qualifying Acquisition, and the expected timing
related thereto; the completion and proposed terms of, and matters
relating to, the PIPE Investment; the expected operations,
financial results and condition of VMH following the Qualifying
Acquisition; the expected benefits of the Qualifying Acquisition
to, and resulting treatment of, securityholders of VMH; and the
expectations regarding trends in the hotel industry, overall market
growth rates and the VMH's growth rates. Forward-looking
information is based on a number of assumptions and is subject to a
number of risks and uncertainties, many of which are beyond VMH's
control, which could cause actual results and events to differ
materially from those that are disclosed in or implied by such
forward-looking information. Such risks and uncertainties include,
but are not limited to: there can be no assurance that the
Qualifying Acquisition and PIPE Investment will be completed on the
expected terms, or at all; the continuing effects of the COVID-19
pandemic on the hotel and resort properties industry could have a
material and adverse effect on the VMH's business, financial
condition, liquidity and results of operations; VMH may not be able
to successfully implement its business strategy on a timely basis
or at all, and may be unable to manage future growth effectively;
VMH's business may be adversely affected by various operating risks
common to the hotel and resort properties industry and the
ownership of real property in general, including competition,
over-supply and dependence on business travel and tourism; as well
as the factors discussed under the heading "Risk Factors" in the
investor presentation to be filed and those to be set out in the
preliminary prospectus, which will be available under VMH's profile
on SEDAR at www.sedar.com.
The Sponsors and VMH undertake no obligation to update such
forward-looking information, whether as a result of new
information, future events or otherwise, except as expressly
required by applicable law.
SOURCE VM Hotel Acquisition Corp