/NOT FOR DISTRIBUTION IN THE U.S. OR OVER U.S. NEWSWIRES/
TORONTO, July 4, 2014 /CNW/ - True North Commercial Real Estate
Investment Trust (the "REIT") (TSX: TNT.UN) is pleased to announce that it has agreed to acquire
(the "Acquisitions") an industrial property located at 63 Innovation Drive in Hamilton,
Ontario (the "Innovation Drive Property") and an office property located at 295 Belliveau Avenue in Shediac,
New Brunswick (the "Belliveau Property").
The Acquisitions represent a combined implied capitalization rate of
approximately 7.9% and are expected to be immediately accretive to the
REIT's adjusted funds from operations ("AFFO"). Upon completion of the Acquisitions, the REIT's aggregate portfolio
gross revenue from government and credit rated tenants is anticipated
to be 87%, occupancy is expected to increase to 99.6% and average
remaining lease term will increase to 4.4 years.
The aggregate purchase price for the Acquisitions is $10.5 million,
exclusive of closing costs, and is expected to be satisfied with first
mortgage financing on each of the properties in the aggregate amount of
approximately $7.35 million, with an estimated 3.9% interest rate for a
7 year term in respect of the Innovation Drive Property and an
estimated 3.6% interest rate for a 5 year term in respect of the
Belliveau Property. The balance of the purchase price is expected to be
satisfied through: (i) a concurrent non-brokered private placement (the
"Private Placement") of 378,787 trust units of the REIT ("Units") at an issue price of $6.60 per Unit for aggregate proceeds of
approximately $2,500,000 with D. D. Acquisitions Partnership, an entity
controlled by Daniel Drimmer, the REIT's Chief Executive Officer and
Chairman of the Board; (ii) a 3.0% interest only vendor-take-back
mortgage in the amount of $750,000 in respect of the Innovation Drive
Property, repayable at any time without penalty, and with a term of up
to 9.5 years; and (iii) a drawdown of approximately $370,000 from the
REIT's credit facility.
"We are very pleased to announce two acquisitions which are immediately
accretive to AFFO, materially reduce the REIT's payout ratio, are
congruent with the REIT's acquisition criteria and will contribute to
the overall diversity of the REIT's portfolio," stated Daniel Drimmer,
the REIT's Chief Executive Officer and Chairman of the Board. "The
Innovation Drive Property is the REIT's first industrial acquisition
and the two acquisitions once again confirm 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," continued Mr. Drimmer.
Innovation Drive Property
The Innovation Drive Property is a stand-alone, single tenant industrial
building situated in Hamilton, Ontario with a total of 45,879 rentable
square feet and 24 feet of clear height. Built in 2001 with an
expansion in 2006, the property is 100% occupied with an average lease
term of 9.4 years and is well situated with access to major arterial highways
including Highway 403, the Queen Elizabeth Way and Highway 6. The
purchase and sale agreement entered into with an arms' length vendor
for the acquisition of the Innovation Drive Property contains customary
provisions for transactions of a similar nature, including
representations, warranties and covenants of the parties.
Belliveau Property
The Belliveau Property is a stand-alone, four-storey office building
with a total of 42,115 rentable square feet situated in Shediac, New
Brunswick, in close proximity to the Greater Moncton International
Airport and the TransCanada Highway. Built in 2006, with further
improvements made in 2007, the property is 100% occupied by the Federal
Government of Canada providing for long-term visible credit-backed cash
flow with an average lease term of 7.6 years. The purchase and sale agreement entered into with an entity
controlled by Daniel Drimmer, the REIT's Chief Executive Officer and
Chairman of the Board, for the acquisition of the Belliveau Property
contains customary provisions for transactions of a similar nature,
including representations, warranties and covenants of the parties.
Private Placement
In order to satisfy a portion of the purchase price for the
Acquisitions, the REIT intends to concurrently complete the Private
Placement with D. D. Acquisitions Partnership, an entity controlled by
Daniel Drimmer, the REIT's Chief Executive Officer and Chairman of the
Board. The subscription agreement to be entered into in connection with
the Private Placement is 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 first trade restrictions under
Canadian securities laws. The issue price for the Private Placement
represents an allowable discount to the current market price of the
Units. However, the issue price represented a premium when the
Acquisitions were first considered by the Investment Committee of the
Board of Trustees of the REIT and was at the current market price when
the Acquisitions and related Private Placement were approved by the
Board of Trustees of the REIT (as discussed below).
The Private Placement and the acquisition of the Belliveau Property each
constitute 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 Private Placement and the acquisition of the
Belliveau Property will be below 25% of the REIT's market
capitalization for purposes of MI 61-101. The Private Placement and the
acquisition of the Belliveau Property were each approved unanimously by
the Board of Trustees of the REIT (other than Daniel Drimmer, who
declared his interest in the Private Placement and the acquisition of
the Belliveau Property and was recused from voting) in accordance with
the REIT's amended and restated declaration of trust made as of
December 14, 2012, as amended.
Following the completion of the Private Placement, Mr. Drimmer is
expected to hold an approximate 24.66% 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 March 31, 2014 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.
Completion of the Acquisitions and Private Placement are expected to
occur on or about July 31, 2014 and are conditional upon the
satisfaction of customary conditions, including approval of the Toronto
Stock Exchange.
Asset Management
Upon completion of the Acquisition, Starlight Investments Ltd. ("Starlight") will be paid an acquisition fee of approximately $105,000 (exclusive
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 March 31,
2014 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 and the terms of the Acquisitions, 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 Acquisitions, the expected occupancy and lease term
of the REIT's portfolio resulting from the Acquisitions, 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 Acquisitions 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
