ED Edgefront Realty Corp

All Properties to be 100% leased to RTL-Westcan

TORONTO, Nov. 1, 2013 /CNW/ - Edgefront Realty Corp. ("Edgefront") (TSXV: ED) announces today that it has entered into an agreement dated November 1, 2013 with affiliates of RTL-Westcan Limited Partnership ("RTL Westcan" ), an Alberta limited partnership, and certain limited partners of RTL Westcan (collectively, the "Vendors") to purchase, indirectly through the purchase of two newly created holding companies and a newly created limited partnership, a portfolio of 10 industrial properties (collectively, the "Properties") totaling approximately 435,000 square feet of building area on approximately 122 acres of land located in Alberta, Saskatchewan, British Columbia and the Northwest Territories.  The acquisition of the Properties is expected to occur in connection with the conversion of Edgefront into a real estate investment trust ("Edgefront REIT"). The total purchase price of the Properties is $68,000,000 (subject to closing adjustments), to be satisfied by way of (i) an initial cash deposit of $200,000 to be paid by November 6, 2013, (ii) the issuance to the Vendors of $34,000,000 of units of Edgefront REIT at an issue price of $2.00 per unit (or 17,000,000 Edgefront REIT units), based on a valuation of $0.10 per Edgefront common share and an effective exchange rate of one Edgefront REIT unit for every 20 Edgefront common shares, and (iii) the remainder of $33,800,000 from a new five year secured credit facility to be negotiated with a major financial institution based in Western Canada, and from cash on hand.  As part of the property transaction, two subsidiaries of RTL-Westcan, which will not be acquired by Edgefront, have agreed to lease 100% of the Properties for an initial 12 year term, with four 5 year renewal options, at a net annual minimum rent of $5,364,000 for the first three years with annual increases thereafter calculated as the lesser of CPI and 2.5%. As a result of entering into this agreement with RTL Westcan, Edgefront has opted not to proceed with the previously announced acquisition of the Ajax Properties and the Chairman Properties and the purchase agreements respecting such properties were terminated.

"Management feels that this transaction is superior to our previously announced but now abandoned property transaction, which was originally intended to form part of Edgefront's REIT conversion transaction", commented Kelly Hanczyk, Edgefront's Chief Executive Officer.  "We are acquiring a significant Western Canadian based property portfolio with a stable, long term tenant, without the need to obtain public market financing. In addition, Edgefront will become a pure play industrial REIT, a sector that we feel offers us considerable opportunities for future accretive growth".

"We believe this transaction is a great fit for the unitholders of RTL-Westcan.  It enables us to maximize the value of the RTL-Westcan real estate assets for the benefit of all unitholders.  With this transaction, unitholders are able to monetize half of that value while retaining the ability to participate in any future value increase through ownership of Edgefront equity", added Cody Church, a Director of RTL-Westcan and a Senior Managing Director of TriWest Capital Partners ("TriWest"). RTL Westcan is a portfolio investment of TriWest held through an Alberta limited partnership known as TriWest Capital Growth Fund Limited Partnership No. II ("Fund II").  "RTL-Westcan unitholders are fortunate to be aligned with such a highly experienced real estate management team led by Kelly Hanczyk and we believe in Edgefront's strategy of becoming a leading pure play industrial REIT".

The acquisition of the Properties is an Arm's Length Transaction (as that term is defined in TSX Venture Exchange ("TSXV") Policy 1.1), as none of the Edgefront insiders, or their associates and affiliates, have any interest in such acquisition or are otherwise an insider of, or have any relationship with, RTL-Westcan or its limited partners. The acquisition is also a Reverse Takeover (as that term is defined in TSXV Policy 5.2). The acquisition will form part of a new series of transactions relating to the conversion of Edgefront into Edgefront REIT with an external asset management structure (such acquisition and conversion herein collectively called the "Proposed Transaction"), replacing the series of transactions described in Edgefront's management information circular dated May 15, 2013.  As part of the Proposed Transaction, every 20 Edgefront shares will be effectively exchanged for one Edgefront REIT unit.  A new management information circular describing the Proposed Transaction will be prepared and mailed to the Edgefront shareholders as soon as possible following receipt of TSXV conditional approval.  It is anticipated that the Proposed Transaction will close in January 2014.

Fund II owns approximately 64% of the outstanding limited partnership units of RTL-Westcan Holdings Limited Partnership ("Holdings LP"), an Alberta limited partnership. Holdings LP in turn owns approximately 76% of the outstanding limited partnership units of RTL Westcan with the balance of the units held (directly or through holding companies) by 23 members of the RTL-Westcan management team, 6 former owners/operators of the RTL-Westcan business and 1 former member of the RTL-Westcan management team.

Assessment and Description of the Properties

The acquisition of the Properties is on a sale and leaseback basis, as the Properties have historically been used by RTL Westcan in conjunction with its business.  As such, under applicable securities laws, the acquisition of such Properties is considered an acquisition of assets rather than an acquisition of a business and no historical financial statements of the Properties are required to be presented. Independent appraisals were obtained from either Cushman Wakefield or CBRE Limited to determine the market value of the Properties.  In their reports, the independent appraisers concluded that the market value of the Properties as at the dates listed below, in the aggregate was $71,180,000.

The following table highlights information about the Properties:

Consolidated Capitalization

The following table sets out the consolidated capitalization of Edgefront as at the date of the latest interim financial statements and of Edgefront REIT after giving effect to the Proposed Transaction:

Pro Forma Ownership of Edgefront REIT

The following table sets forth the pro forma ownership of Edgefront REIT after giving effect to the Proposed Transaction:

Management and Board of Trustees

Following completion of the Proposed Transaction, it is expected that Kelly Hanczyk and Robert Chiasson will continue as Edgefront REIT's President and Chief Executive Officer, and Chief Financial Officer and Corporate Secretary, respectively, and that Mario Forgione, Ted Manziaris and Kelly Hanczyk will continue as trustees of Edgefront REIT. As part of the purchase transaction, Holdings LP will be entitled to nominate two trustees of Edgefront REIT, including the Chairman, and will have the right to pre-approve an additional nominee as trustee of Edgefront REIT under certain circumstances. Subject to TSXV approval, it is proposed that, Cody Church and Chad Danard (being nominees of Holdings LP),  Lorne Jacobson (pre-approved by Holdings LP) and Robert Dickson will be appointed as trustees of Edgefront REIT.  The following are the biographies of Messrs. Church, Danard, Dickson and Jacobson.

Cody Church - Proposed Trustee and Chairman

Mr. Church co-founded TriWest in 1998 and, as a Senior Managing Director, contributes a broad spectrum of financial, structuring, and deal execution experience to TriWest.  Mr. Church has been involved in all facets of Triwest's business including funding, investments and divestitures and has served on the board of directors (or equivalent entity) of over half of TriWest's portfolio investments. Mr. Church graduated cum laude with a Bachelor of Economics from Harvard University.  He was recognized as one of Canada's Top 40 Under 40 in 2010.

Chad Danard - Proposed Trustee

Mr. Danard is a Managing Director at TriWest.  Prior to joining TriWest in 2005, Mr. Danard worked at Morgan Stanley in the Global Energy and Utility Group in New York and in the Canada Group in Toronto.  While at Morgan Stanley, he was involved in a variety of M&A-related strategic advisory assignments, equity offerings and both private and public debt financings.  Mr. Danard also spent time in India, where he co-managed the day-to-day operations for the investment banking division of Morgan Stanley Advantage Services.  He currently serves as a board member for the Calgary Chapter of the Association for Corporate Growth.  Mr. Danard received a Bachelor of Commerce degree (finance concentration) from the Queen's School of Business, where he graduated at the top of his class.

Robert E. Dickson - Proposed Trustee

Robert E. Dickson graduated from University College, Oxford in 1980 with a B.A. (Jurisprudence) and graduated from the University of Toronto Law School in 1982 with an LL.B. Since June 2011, Mr. Dickson has been an independent strategic financial consultant in the marketing and communications industry. Prior to that, from 2000, Mr. Dickson had been Executive Vice-President, Corporate Development, Maxxcom Inc. and Managing Director, MDC Partners Inc., both public companies. Prior to that time, he practiced corporate law at Fraser Milner Casgrain LLP (now Dentons LLP) where Mr. Dickson specialized in mergers and acquisitions and financing transactions.  Mr. Dickson has been a trustee and the Chair of the Audit Committee of H&R Real Estate Investment Trust since 2000 and 2002, respectively.

Lorne Jacobson - Proposed Trustee

Lorne Jacobson co-founded TriWest in 1998, and, as Senior Managing Director, contributes a wealth of knowledge in the areas of corporate development and law. From 1994 to 1998 he served as Vice President, Corporate Development and General Counsel of Burns Foods Limited. He was responsible for a variety of corporate acquisitions, divestitures and financings as part of the management team for this leading Canadian food company. Prior to Burns Foods, Mr. Jacobson was a partner in the Calgary office of the national law firm of Bennett Jones where he specialized in corporate and securities law. Mr. Jacobson serves as a director or officer on a number of public and private companies and charitable organizations.

Management Agreement

Edgefront Realty Advisors Limited Partnership (the "Manager") will be the manager of Edgefront REIT and will provide the strategic, advisory, asset management, project management, property management and administrative services necessary to manage the operations of Edgefront REIT. The general partner of the Manager is Edgefront Realty Advisors Inc., and each of the general partner and the equity in the Manager will be owned by Kelly Hanczyk, Robert Chiasson and TriWest.

The Manager will be entitled to receive the following fees for its services: (a) an annual asset management fee in the amount of (i) 0.75% of the gross book value of the assets of the REIT ("Gross Book Value") up to $150 million, to be paid in escrowed securities; (ii) 0.65% of the Gross Book Value between $150 million and $300 million, to be paid 50% in escrowed securities and 50% in cash, and 0.50% of Gross Book Value over $300 million, to be paid 50% in escrowed securities and 50% in cash; (b) a construction management fee equal to 5% of construction costs incurred; (c) an acquisition fee equal to 0.50% of the purchase price of any property acquired by the REIT, and (d) a property management fee recovered from tenants on a cost recovery basis.

Conditions of Completion

The Proposed Transaction will be subject to receipt of all necessary regulatory and other approvals, including those of Edgefront shareholders, the Ontario Superior Court of Justice (Commercial List) and the TSXV, including a waiver by the TSXV of the sponsorship requirements.  Specifically, the acquisition of the Properties will require the approval by the affirmative vote of a majority of votes cast by shareholders; the REIT conversion will require the approval by the affirmative vote of two-thirds of votes cast by shareholders; and the issue of securities to the Manager as manager compensation will require the approval by the affirmative vote of a majority of votes cast by disinterested shareholders, as it is subject to Multilateral Instrument 61-101 and TSXV Policy 5.9.  In addition, the acquisition of the Properties is subject to certain closing conditions, including completion of satisfactory due diligence and successful completion of the credit arrangement to be negotiated with a major financial institution based in Western Canada.

Trading Halt

Edgefront's common shares are currently halted and Edgefront anticipates they will remain halted until the documentation required by the TSXV for the Proposed Transaction can be provided to the TSXV.

About RTL-Westcan and TriWest

RTL-Westcan is the premier bulk commodity hauler in Western Canada and is a leading transportation and infrastructure company in Canada's Northwest Territories.

TriWest is a leading Western Canadian-based private equity firm with over 15 years of experience investing in 23 companies representing a broad cross-section of the economy.  TriWest was built on the pillars of operational experience and financial expertise and continues to focus on the principle of partnership on which it was founded.  It has raised over $775 million of committed capital.

About Edgefront

Edgefront is a growth oriented real estate company focused on increasing shareholder value through the acquisition, ownership and management of industrial properties located in primary and secondary markets in North America, with an initial focus on Western Canada.  It is the intention of Edgefront to expand its business of purchasing, owning and operating real estate assets and to convert into a real estate investment trust having an external asset management structure, subject to receipt of all necessary approvals, including that of the TSXV.

Cautions Regarding Future Plans and Forward Looking Information

Completion of the Proposed Transaction is subject to a number of conditions, including TSXV acceptance and shareholder approval.  The transaction cannot close until the required shareholder approval is obtained.  There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon.  Trading in the securities of Edgefront should be considered highly speculative.

The TSXV has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved the contents of this press release.  Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

This press release contains forward-looking information within the meaning of Canadian securities laws.  Such information includes, without limitation, information regarding the completion of the Proposed Transaction and the business strategies of Edgefront.  Although Edgefront believes that such information is reasonable, it can give no assurance that such expectations will prove to be correct.

Forward looking information is typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate and similar expressions, or are those, which, by their nature, refer to future events.  Edgefront cautions investors that any forward-looking information provided by Edgefront is not a guarantee of future results or performance, and that actual results may differ materially from those in forward looking information as a result of various factors, including, but not limited to: Edgefront's ability to complete the Proposed Transaction; the state of the real estate sector in the event the Proposed Transaction is completed; recent market volatility; Edgefront's ability to secure the necessary bank financing or to be fully able to implement its business strategies and other risks and factors that Edgefront is unaware of at this time.  The reader is referred to Edgefront's initial public offering Prospectus and Filing Statement for a more complete discussion of risk factors relating to Edgefront and their potential effects, copies of which may be accessed through Edgefront's page on SEDAR at www.sedar.com.  This news release shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there by any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

SOURCE Edgefront Realty Corp.