Holloway Lodging REIT Enters into Credit Agreement

Holloway Lodging Real Estate Investment Trust (REIT) announced that the REIT has entered into a credit agreement effective as of June 15, 2011 with Geosam Capital Inc., and together with any other person who becomes a party to the Credit Agreement as a lender, for the advancement of a secured, non-revolving term loan in the amount of up to $20,000,000 (further referred to as the Credit Facility). The proceeds of the Credit Facility, to be provided by way of a single drawdown, will be used solely to repay all or part of the REIT's 8% convertible debentures maturing August 1, 2011.

The Credit Facility has a maturity date of March 31, 2013 and bears interest at the annual rate of 12.5%, payable monthly. It may be prepaid at any time prior to the maturity date, in whole or in part, without premium or penalty. Subject to receipt of all necessary regulatory approvals (including approval of the Toronto Stock Exchange) and conditional upon funding of the Credit Facility, the REIT will issue to the Lender up to 3,000,000 warrants to purchase units of the REIT  on the basis of 150,000 units per $1,000,000 drawn under the Credit Facility, except that the REIT will be required to issue a minimum of 2,000,000 Warrants to the Lender irrespective of the amount drawn by the REIT. Subject to adjustment as set out in the Credit Agreement, the Warrants will be exercisable for a period of three years from the date of issuance for up to 3,000,000 units of the REIT (representing approximately 7.7% of the REIT's issued and outstanding voting units on a non-diluted basis as at the date hereof) at an initial exercise price equal to $0.40. If the REIT is unable to issue the Warrants in certain circumstances, the REIT will be obligated to pay to the Lender the sum of $1,000,000.

As a result of George Armoyan and Michael Rapps being trustees of the REIT and also officers of Geosam (and, in the case of Mr. Armoyan, also a principal of Geosam), the Credit Facility and related issuance of Warrants are considered to be related party transactions under applicable securities laws. Where available, the REIT has relied upon exemptions in respect of the formal valuation and minority unitholder approval requirements under applicable securities laws. The Credit Facility is not subject to the formal valuation requirements under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions, and the REIT has relied upon the exemption in paragraph (f) of section 5.7 of MI 61-101 as the Credit Facility was obtained on reasonable commercial terms that are not less advantageous to the REIT than if obtained from an arm's length party. However, the issuance of the Warrants constitutes a related party transaction under applicable securities laws requiring disinterested unitholder approval and a formal valuation of the Warrants by qualified and independent valuators. A formal valuation of the Warrants was completed by Stonecap Securities Inc. (as disclosed in Appendix P to the Circular) and unitholder approval was successfully obtained at the Meeting for the potential issuance of Warrants to Geosam (or a legal entity in which Geosam and one or more other parties have an interest) and/or to a syndicate of lenders that includes Geosam

on June 23, 2011