RTL WESTCAN STRIKES 10 PROPERTY, $68 MILLION SALE/LEASEBACK
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.