Morguard Closes On Sale Of 14 E. Canadian Hotels For $410m

Feb 8,2024 1 Comment By The Lilly Commercial Team

UPDATED WITH SALE CLOSING: Morguard Corp. has sold a portfolio of 14 hotels in eastern Canada for $410 million.

Morguard stated the move aligns with its “commitment to optimize its real estate portfolio, focusing on core real estate investments, including office, industrial, retail, and multi-suite residential properties.”

Morguard did not originally divulge the buyer, but InnVest Hotels of Toronto has acquired 10 of the properties.

The hotels Morguard sold are located in Halifax, Ottawa, four communities in the Greater Toronto Area and Sudbury and comprise a total of 2,248 rooms (see complete list below).

“It is an opportune moment to divest these properties given the current market demand for a hotel portfolio of this size and quality, as well as their enhanced market value,” K. Rai Sahi, Morguard’s chairman and chief executive officer, said in the release. “Morguard has strategically divested our hotel portfolio to align with our objectives of strengthening the company’s balance sheet while owning a high-quality portfolio of income producing real estate.”

In a separate release, InnVest said it acquired 10 properties in the Greater Toronto Area, Sudbury and Halifax. It acquired a total of 1,737 guest rooms with the portfolio, and 40,000 square feet of convention and meeting spaces.

InnVest plans to initiate a “multi-faceted renovation over the coming years to elevate the guest experience” the release states.

“We are delighted to announce our largest acquisition since 2007 which demonstrates confidence in our vertically integrated hospitality organization and the Canadian hotel market. We welcome the 766 new team members that have joined our organization.” Lydia Chen, president and CEO of InnVest, said in its release.

The 14-hotel portfolio being sold

The portfolio is encumbered with first-mortgage debt totalling $48.7 million, which will be repaid through proceeds of the sale, according to the release. This will result in net proceeds of $361.3 million for Morguard, before customary adjustments and closing costs.

The portfolio includes Marriott, Hilton, IHG and independently-branded hotels.

The GTA-area hotels are located in Toronto, Mississauga, Markham and Vaughan.

Morguard has retained ownership of two hotels: a dual-brand Hilton Garden Inn and Homewood Suites in Ottawa; and the Inn at the Quay in New Westminster, B.C..

“The heightened level of financial flexibility provided by this transaction will empower us to strategically deleverage, which is important given the current interest rate environment, Paul Miatello, Morguard’s chief financial officer, said in the announcement.

Hotels involved in the portfolio sale are:

Courtyard Marriott – Markham, Ont,, 144 rooms;
Residence Inn Marriott – Markham, 100 rooms;
Courtyard Marriott – Mississauga, 144 rooms;
Hilton Garden Inn Toronto Airport West – Mississauga, 152 rooms;
Cambridge Suites – Mississauga, 100 rooms;
Holiday Inn Express – Ottawa, 115 rooms;
Towne Place Suites by Marriott – Sudbury, 105 rooms;
Courtyard by Marriott Toronto Airport – Toronto, 168 rooms;
Hotel Carlingview Toronto Airport – Toronto, 112 rooms;
Residence Inn by Marriott Toronto Airport – Toronto, 137 rooms;
Toronto Airport Marriott – Toronto, 424 rooms;
Courtyard Marriott Vaughan – Vaughan, 144 rooms;
Cambridge Suites Hotel – Halifax, 200 rooms;
The Prince George Hotel – Halifax, 203 rooms.

Hotels acquired by Innvest are: the Marriott Toronto Airport, Courtyard Toronto Airport, Residence Inn Toronto Airport, Hotel Carlingview, Courtyard Vaughan, Courtyard Markham, Residence Inn Markham, Townplace Suites Sudbury, Cambridge Suites Halifax and The Prince George Halifax.

Aside from the Marriott Toronto Airport, which will continue to be managed by Marriott Hotels, the hotels will be managed by iHotels. The acquisition will grow InnVest’s Marriott branded franchise and managed portfolio to 14 hotels making us one of the largest owners of the brand in Canada.

About Morguard and InnVest

InnVest’s portfolio consists of more than 90 hotels, encompassing a number of hotel brands. Its management team oversees the daily operations of 85 owned and third-party owned hotels, making InnVest the largest owner and operator of hotels in Canada.

Morguard’s holdings, including its owned and managed properties, stood at approximately $18.6 billion as of the end of Q3 2023. This included $10.8 billion of owned real estate, approximately $4.1 billion of managed real estate and $3.7 billion of managed equities and fixed income investments.

The Mississauga-based real estate firm’s assets have been focused on the multiresidential, commercial and hotel sectors, though it has been reducing its hotel portfolio for the past couple of years.

At the end of 2021 Morguard owned 32 hotel properties, by the end of 2022 that was down to 17.

As of Sept. 30 2022 the firm reported a debt-to-total assets ratio of 47.8 per cent (total assets of $12.4 billion). As of Sept. 30, 2023 the ratio had risen to 49.5 per cent with total assets of $11.7 billion.

Morguard reported a $9.4 million loss in Q3, and a profit of $55.1 million through the first nine months of 2023.

Source Renx.ca. Click here to read a full story

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