| CP selling two landmark hotels to investment trust The Edmonton Journal / Nov 1, 2000 The hotel unit of Canadian Pacific Ltd. is selling the picturesque Chateau Frontenac, one of the landmarks of Quebec City, as part of a $305-million deal. Legacy Hotels Real Estate Investment Trust is buying the Chateau Frontenac for $185 million and the Empress hotel in Victoria for $120 million, Canadian Pacific Hotels and Resorts Inc. announced Tuesday. Canadian Pacific Hotels is a major shareholder of Legacy, with a 34-per-cent stake in the real estate company. "With the sale of the Empress and Le Chateau Frontenac to the Legacy REIT we are able to realize the value of some of our real estate assets while maintaining long-term management contracts at these premier properties," CP president David O'Brien said in a release. "Over the past three years we have significantly expanded our hotel business and will continue to look at opportunities to grow both within North America and internationally." CP Hotels sold Edmonton's Hotel Macdonald in 1997 to the Legacy Hotels Real Estate Investment Trust, but retained a one-third stake through the trust. Calgary-based Canadian Pacific is one of Canada's biggest companies, with operations in the railway, shipping, energy and hotel industries. The conglomerate's operating companies include Canadian Pacific Railway, CP Ships, PanCanadian Petroleum, Fording Coal and Canadian Pacific Hotels and Resorts. Canadian Pacific Hotels now owns just four resort hotels in Canada -- the Banff Springs, Chateau Lake Louise and Jasper Park Lodge, all in Alberta, and Chateau Montebello in Quebec. "Over time, we would look at the possibility of transferring or selling additional resort properties into Legacy," said William Fatt, chief executive of CP Hotels. "Our focus is clearly on the hotel management business and it's not necessary in that business to own 100 per cent of the real estate that you manage," added Fatt, who is also vice-chair and chief executive of Legacy. Legacy said the two hotels it is buying are two of Canada's premier resort properties located in the cultural centres of their respective cities. Both properties are managed by Fairmont Hotels and Resorts, a major hotel-management company which is majority owned by CP Hotels. "Legacy believes that the resort sector has significant growth prospects," said Neil Labatte, the real estate trust's president and chief operating officer. "These two hotels provide Legacy with several benefits, including expansion into the resort sector, a more diversified revenue base, high-quality assets that will enhance Legacy's current portfolio and an investment in major cities where Legacy does not have a presence." A MATTER OF TRUSTS Investment trusts include the sub-categories of real-estate investment trusts (REITs) and royalty trusts. REITS are pools of funds that invest in real estate assets. Royalty trusts are pools that buy the cash flow from resource operations -- natural gas wells and coal mines, for instance. In both cases, the trust nature provides tax advantages. The trust often can borrow money to buy additional assets, providing investors the prospect of capital gain, which is taxed more favourably than employment income. |