/NOT FOR DISTRIBUTION IN THE U.S. OR OVER U.S. NEWSWIRES/
TORONTO, Oct. 23, 2013 /CNW/ - True North Commercial Real Estate
Investment Trust (the "REIT") (TSX: TNT.UN) is pleased to announce that it has agreed to acquire
(the "Acquisition") an office property located at 551 King Street in Fredericton, New
Brunswick (the "King Street Property"). The Acquisition is expected to be immediately accretive to the
REIT's adjusted funds from operations ("AFFO").
King Street Property
The purchase price for the King Street Property of approximately $17.0
million, subject to customary adjustments and closing costs, represents
an implied capitalization rate of approximately 7.1%. The Acquisition
is expected to be satisfied through the payment of approximately $2.1
million of cash and the issuance to the vendor of 454,545 class B
limited partnership units of True North Commercial Limited Partnership
("Class B LP Units"), which are economically equivalent to, and exchangeable for, the
REIT's trust units ("Units"), at a price of $6.60 per Class B LP Unit, with the balance of the
purchase price funded by a new five year mortgage in the amount of
approximately $11.9 million with an expected interest rate of
approximately 3.9%. The Class B LP Unit consideration paid to the
vendor will be subject to applicable first trade restrictions under
applicable Canadian securities laws. Upon completion of the
Acquisition, the REIT is expected to have a debt to gross book value of
approximately 57.9%.
The King Street Property is a stand-alone premier office building
situated in the heart of downtown Fredericton, New Brunswick with a
total of 84,915 rentable square feet. Built in 2002, the property is
100% occupied with an average lease term of 8.9 years remaining and is well situated with accessibility to major
arterial highways and routes including the Trans-Canada Highway. The
tenant base of the King Street Property is comprised of a number of
government or credit rated tenants including the Government of New
Brunswick and National Bank of Canada, providing for long-term visible
credit-backed cash flow and representing 98.4% of the King Street
Property's gross revenue.
Daniel Drimmer, the REIT's Chief Executive Officer and Chairman of the
Board of Trustees stated, "We are very pleased to acquire this
off-market office property which meets the REIT's acquisition criteria
and will help to contribute to the overall quality of the REIT's
portfolio. This acquisition strengthens the REIT's presence in New
Brunswick and confirms our ability to execute on our stated strategy of
acquiring quality properties at competitive capitalization rates that
are accretive to the REIT's key operating and financial metrics. With
the addition of this property, it is expected the REIT's aggregate
portfolio gross revenue from government or credit rated tenants will
increase to 88%."
The purchase and sale agreement for the acquisition of the King Street
Property contains customary provisions for transactions of a similar
nature, including representations, warranties and covenants of the
parties. A copy of the purchase agreement, as amended, will be
available at www.sedar.com. Completion of the Acquisition is expected to occur on or about
November 13, 2013 and is conditional upon the satisfaction of customary
conditions, including approval of the Toronto Stock Exchange (the "TSX").
Private Placement
To finance the cash component of the purchase price for the Acquisition
and related closing costs, the REIT has agreed to sell, on a
non-brokered private placement basis, 386,364 Units at a price of $6.60 per Unit (the "Private Placement") for aggregate gross proceeds of approximately $2.55 million. D.D.
Acquisitions Partnership, an affiliate of Daniel Drimmer, has agreed to
purchase 378,788 Units pursuant to the Private Placement. Each of the
subscription agreements in connection with the Private Placement
contains customary provisions for transactions of a similar nature,
including representations, warranties and covenants. The Units issued
pursuant to the Private Placement will be subject to applicable first
trade restrictions under applicable Canadian securities laws. Closing
of the Private Placement is expected to occur concurrently with the
Acquisition and is subject to the approval of the TSX.
Following the completion of the Private Placement, Mr. Drimmer will hold
an approximate 21.74% effective interest in the REIT (based on the
number of issued and outstanding Units and Class B LP Units as at
September 30, 2013 and including the Class B LP Units and Units issued
in connection with the Acquisition and the Private Placement, but
excluding Mr. Drimmer's options to purchase Units) through his
ownership of, or control or direction over, Units, 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 REIT to holders of Units.
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 due to the fair market value of Mr. Drimmer's
participation in the Private Placement being below 25% of the REIT's
market capitalization for purposes of MI 61-101. The Private Placement
was approved unanimously by the Board of Trustees of the REIT (other
than Daniel Drimmer, who declared his interest in the Private Placement
and was recused from voting) in accordance with the REIT's amended and
restated declaration of trust made as of December 14, 2012. The REIT
will file a material change report in respect of the Acquisition and
the Private Placement; however, the material change report is expected
to be filed less than 21 days prior to the closing of the Acquisition
and the Private Placement. The shorter time period is necessary in
order to permit the REIT to close the Acquisition and the Private
Placement in the time frame contemplated in the agreement of purchase
and sale.
Asset Management
Upon completion of the Acquisition, Starlight Investments Ltd. ("Starlight") will be paid an acquisition fee of $144,075 (inclusive of applicable
tax) pursuant to an asset management agreement with the REIT dated as
of December 14, 2012 which is available at www.sedar.com.
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 is focused on acquiring and operating commercial rental
properties across Canada and such other jurisdictions where
opportunities exist. Additional information concerning the REIT is
available at www.sedar.com.
Non-IFRS Financial Measures
The REIT's consolidated financial statements are prepared in accordance
with International Financial Reporting Standards ("IFRS"). AFFO, as well as other measures discussed elsewhere in this news
release, does not have a standardized definition prescribed by IFRS and
is, therefore, unlikely to be comparable to similar measures presented
by other reporting issuers. The REIT uses non-IFRS measures to better
assess the REIT's underlying performance and financial position and
provides these additional measures so that investors may do the same.
AFFO is an important performance measure to determine the
sustainability of future distributions paid to holders of Units after a
provision for capital expenditures. AFFO should not be interpreted as
an indicator of cash generated from operating activities as it does not
consider changes in working capital. Management considers this
non-IFRS measure to be an important measure of the REIT's operating
performance. Details on non-IFRS measures are set out in the REIT's
Management's Discussion and Analysis for the period ended June 30, 2013
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 position and
results of operations 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 and readers are cautioned that such
statements may not be appropriate for other purposes. Forward-looking
information may relate to the REIT's future outlook and anticipated
events, including completion of the Acquisition, the Private Placement,
or other financial or operating results and may include statements
regarding the financial position, business strategy, budgets, financing
rates and costs, the capitalization rate attributable to the
Acquisition, taxes and plans and objectives of or involving the REIT.
Particularly, statements regarding future results, performance,
achievements, prospects or opportunities for the REIT or the real
estate industry are forward-looking statements. In some cases,
forward-looking information can be identified by terms such as "may",
"might", "will", "could", "should", "would", "occur", "expect", "plan",
"anticipate", "believe", "intend", "seek", "aim", "estimate", "target",
"project", "predict", "forecast", "potential", "continue", "likely",
"schedule", or the negative thereof or other similar expressions
concerning matters that are not historical facts.
Forward-looking statements necessarily involve known and unknown risks
and uncertainties, that 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 will
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 to differ
materially from current expectations of estimated or anticipated events
or results. These factors include, but are not limited to, the risks
discussed in the REIT's materials filed with Canadian securities
regulatory authorities from time to time on www.sedar.com. 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
that actual results will be consistent with such forward-looking
statements.
Information contained in forward-looking statements is based upon
certain material assumptions, including management's perceptions of
historical trends, current conditions and expected future developments,
including the closing of the Acquisition and the Private Placement, as
well as other considerations that are believed to be appropriate in the
circumstances, such as: 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 continue to provide
the REIT with access to equity and/or debt at reasonable rates when
required; Starlight will continue its involvement as asset manager of
the REIT in accordance with its current asset management agreement; and
the risks identified or 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 in this press release are dated, and
relate only to events or information, as of the date of this press
release. Except as specifically required by 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
