/NOT FOR DISTRIBUTION IN THE U.S. OR OVER U.S.
NEWSWIRES/
TORONTO,
July 5, 2016 /CNW/ - True North
Commercial Real Estate Investment Trust (the "REIT") (TSX:
TNT.UN) is pleased to announce it has agreed to acquire an office
property located at 6865 Century Avenue, Mississauga, Ontario (the "Century
Property"). The acquisition of the Century Property is expected
to be accretive to Funds from Operations ("FFO") and
Adjusted Funds from Operations ("AFFO") per trust unit of
the REIT ("Unit"). The REIT has also entered into a
non-binding letter of intent to acquire another Mississauga office property (the
"Mississauga Property") and intends to complete a
$9.25 million Private Placement (as
defined and discussed below) to fund the cash portion of the two
transactions.
Century Property
The purchase price for the Century Property is
$13.4 million, subject to customary
adjustments and closing costs, which represents an implied
capitalization rate of 7.6%, and is expected to be satisfied with
first mortgage financing in the aggregate amount of approximately
$9.380 million, with an estimated
2.66% interest rate for a five year term. The balance of the
purchase price for the Century Property is expected to be satisfied
by the Private Placement. Upon completion of the acquisition of the
Century Property, the REIT's aggregate portfolio gross revenue from
government and credit-rated tenants is anticipated to remain stable
at 88%, occupancy is expected to increase to 97.7% and average
remaining lease term will increase to 4.3 years.
The property is a two-story office building
situated on 2.66 acres with a total of approximately 64,000
rentable square feet and 226 surface parking stalls with direct
exposure from Highway 401 and is well situated with excellent
access to Highways 401 and 403. The building has been
well-maintained including upgrades to the exterior façade, windows,
paving, elevator, washrooms and building HVAC systems. With an
average lease term of 5.1 years remaining, the property is 100%
occupied with two credit-rated tenants accounting for 75% of the
Century Property's revenue.
Mississauga Property
The REIT has entered into a non-binding letter of
intent to acquire the Mississauga Property, a 40,000 square foot
office property located in Mississauga,
Ontario. The Mississauga Property is 100% occupied with
excellent access to Highways 401, 427 and 409. The acquisition
of the Mississauga Property is subject to the REIT entering into a
formal acquisition agreement and completing standard due
diligence.
"The acquisition of the Century Property,
together with the potential addition of the Mississauga Property,
allows us to increase the REIT's presence in the attractive
Greater Toronto Area ," said
Daniel Drimmer, the REIT's President
and Chief Executive Officer. "With the funds raised through the
Private Placement, the REIT will continue to execute on our core
strategy of acquiring high quality buildings, predominately
tenanted with credited-rated organizations."
Private Placement
To satisfy the cash portion of the purchase price
for the Century Property and the Mississauga Property (upon
completion of standard due diligence and execution of an
acquisition agreement), the REIT intends to complete a private
placement (the "Private Placement"), which includes: (i) a
private placement (the "Brokered Tranche") of a 1,538,461
Units at a price of $5.85 per Unit,
with three agents, led by and including CIBC Capital Markets, for
aggregate gross proceeds of $9.0
million; and (ii) a non-brokered private placement
("Non-Brokered Tranche") of 42,735 Units at a price of
$5.85 per Unit, with D.D.
Acquisitions Partnership, an entity controlled by Daniel Drimmer, the REIT's President, Chief
Executive Officer and Chairman of the Board, for aggregate proceeds
of approximately $250,000. The issue
price per Unit of $5.85 was the
closing price of the Units on the TSX on July 4, 2016.
The REIT intends to close the Private Placement
concurrently with the closing of the acquisition of the Century
Property, on or about July 22, 2016.
Closing of the acquisition of the Mississauga Property will be
confirmed when the REIT enters into a formal acquisition agreement
and completes standard due diligence. Completion of the Private
Placement, as well as the acquisition of the Century Property and
the Mississauga Property are conditional upon the satisfaction of
customary conditions, including approval of the TSX.
Subscription agreements will be entered into in
connection with both the Brokered Tranche and the Non-Brokered
Tranche and are expected to contain customary provisions for
transactions of a similar nature, including representations,
warranties and covenants of the parties. The Units issued pursuant
to the Private Placement will be subject to applicable hold periods
under Canadian securities laws.
The Brokered Tranche
In connection with the Brokered Tranche of the
Private Placement, the REIT intends to issue 1,538,461 Units
through three agents, led by and including CIBC Capital Markets,
with subscribers to be comprised of a combination of institutional
and retail investors. The REIT has agreed to pay a total of
$227,500 in fees to the agents in
connection with the completion of the Brokered Tranche of the
Private Placement.
The Non-Brokered Tranche
Daniel Drimmer,
the REIT's President, Chief Executive Officer and Chairman of the
Board, through D.D. Acquisitions Partnership, an entity controlled
by Mr. Drimmer, intends to subscribe for 42,735 Units at a price of
$5.85 per Unit on a non-brokered
private placement basis. No commission or other fees will be paid
in connection with the Non-Brokered Tranche of the Private
Placement.
The Non-Brokered Tranche of the Private Placement
constitutes a "related party transaction" under Multilateral
Instrument 61-101 – Protection of Minority Security Holders in
Special Transactions ("MI 61-101"). Pursuant to Section
5.5(a) and 5.7(1)(a) of MI 61-101, the REIT is exempt from
obtaining a formal valuation and minority approval of the REIT's
unitholders because the fair market value of Mr. Drimmer's
participation in the Non-Brokered Tranche of the Private Placement
will be below 25% of the REIT's market capitalization for purposes
of MI 61-101. The Non-Brokered Tranche of the Private Placement was
approved unanimously by the Board of Trustees of the REIT (other
than Daniel Drimmer, who declared
his interest and recused himself from voting) in accordance with
the REIT's second amended and restated declaration of trust made as
of May 22, 2014, as amended.
Following the completion of the Private
Placement, Mr. Drimmer is expected to hold an approximate 17.66%
effective interest in the REIT (based on the number of issued and
outstanding Units and class B limited partnership units ("Class
B LP Units") of True North Commercial Limited Partnership, a
limited partnership controlled by the REIT, as at July 22, 2016 and including the Units issued in
connection with the Private Placement, but excluding Mr. Drimmer's
options to purchase Units) through his ownership of, or control or
direction over Units and Class B LP Units, and the accompanying
special voting units of the REIT, which provide a holder of Class B
LP Units with equivalent voting rights in respect of the Class B LP
Units that the REIT provides to holders of Units.
This press release is not an offer of securities
for sale in the United States. The
securities have not been and will not be registered under the U.S.
Securities Act of 1933, as amended, and may not be offered or sold
in the United States absent
registration or an applicable exemption from registration. This
press release shall not constitute an offer to sell or solicitation
of an offer to buy nor shall there be any sale of the above
described securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful.
About the REIT
The REIT is an unincorporated, open-ended real
estate investment trust established under the laws of the Province
of Ontario. The REIT currently
owns and operates a portfolio of 25 commercial properties
consisting of approximately 1.4 million square feet in secondary
markets across Canada.
The REIT is focused on growing its portfolio
principally through acquisitions across Canada and such other jurisdictions where
opportunities exist. Additional information concerning the
REIT is available at www.sedar.com or the REIT's website at
www.truenorthreit.com.
Non-IFRS measures
FFO and AFFO are not measures defined under
International Financial Reporting Standards ("IFRS") as
prescribed by the International Accounting Standards Board, do not
have standardized meanings prescribed by IFRS and should not be
compared to or construed as alternatives to profit/loss, cash flow
from operating activities or other measures of financial
performance calculated in accordance with IFRS. FFO and AFFO as
computed by the REIT may not be comparable to similar measures
presented by other issuers. The REIT uses these measures to better
assess the REIT's underlying performance and provides these
additional measures so that investors may do the same. Details on
non-IFRS measures are set out in the REIT's Management's Discussion
and Analysis ("MD&A") for the period ended March 31, 2016 and Annual Information Form
("AIF") for the year ended December
31, 2015 and available on the REIT's profile at
www.sedar.com.
Forward-looking Statements
Certain statements contained in this press
release constitute forward-looking information within the meaning
of Canadian securities laws. Forward-looking statements are
provided for the purposes of assisting the reader in understanding
the REIT's financial performance, financial position and cash flows
as at and for the periods ended on certain dates and to present
information about management's current expectations and plans
relating to the future including the successful completion of the
acquisition of the Century Property and the Mississauga Property,
and the financial performance of the REIT resulting from the
acquisition of the Century Property and the Mississauga Property,
and readers are cautioned such statements may not be appropriate
for other purposes. Forward-looking information may relate to
future results, performance, achievements, events, prospects or
opportunities for the REIT or the real estate industry and may
include statements regarding the Private Placement, the acquisition
of the Century Property, the Mississauga Property and the use of
proceeds in the event that the acquisition of the Mississauga
Property is not completed, as well as the financial position,
business strategy, budgets, projected costs, capital expenditures,
financial results, taxes, plans and objectives of or involving the
REIT. In some cases, forward-looking information can be
identified by such terms as "may", "might", "will", "could",
"should", "would", "expect", "plan", "anticipate", "believe",
"intend", "seek", "aim", "estimate", "target", "goal", "project",
"predict", "forecast", "potential", "continue", "likely", or
the negative thereof or other similar expressions concerning
matters that are not historical facts.
Forward-looking statements involve known and
unknown risks and uncertainties, which may be general or specific
and which give rise to the possibility that expectations,
forecasts, predictions, projections or conclusions will not prove
to be accurate, assumptions may not be correct and objectives,
strategic goals and priorities may not be achieved. A variety of
factors, many of which are beyond the REIT's control, affect the
operations, performance and results of the REIT and its business,
and could cause actual results, including those relating to the
acquisition of the Century Property and the Mississauga Property,
to differ materially from current expectations of estimated or
anticipated events or results. These factors include, but are not
limited to, risks related to the Units and risks related to the
REIT's AIF and MD&A at "Risks and Uncertainties". The reader is
cautioned to consider these and other factors, uncertainties and
potential events carefully and not to put undue reliance on
forward-looking statements as there can be no assurance actual
results will be consistent with such forward-looking
statements.
Information contained in forward-looking
statements is based upon certain material assumptions that were
applied in drawing a conclusion or making a forecast or projection,
including management's perceptions of historical trends, current
conditions, expected future developments and the financial
performance of the REIT resulting from the acquisition of the
Century Propety and the Mississauga Property, as well as other
considerations believed to be appropriate in the circumstances,
including the following: the ability of the REIT to complete the
acquisition of the Century Propety and the Mississauga Property and
secure acceptable mortgage financing and complete the Private
Placement, the Canadian economy will remain stable over the next 12
months; inflation will remain relatively low; interest rates will
remain stable; conditions within the real estate market, including
competition for acquisitions, will be consistent with the current
climate; the Canadian capital markets will provide the REIT with
access to equity and/or debt at reasonable rates when required;
Starlight Investments Ltd. will continue its involvement as asset
manager of the REIT in accordance with its current asset management
agreement; and the risks referenced above, collectively, will not
have a material impact on the REIT. While management considers
these assumptions to be reasonable based on currently available
information, they may prove to be incorrect.
The forward-looking statements made relate only
to events or information as of the date on which the statements are
made in this press release. Except as specifically required by
applicable Canadian law, the REIT undertakes no obligation to
update or revise publicly any forward-looking statements, whether
as a result of new information, future events or otherwise, after
the date on which the statements are made or to reflect the
occurrence of unanticipated events.
SOURCE True North Commercial Real Estate Investment Trust