TORONTO,
May 3, 2013 /CNW/ - Edgefront Realty
Corp. ("Edgefront") (TSXV: ED) announces today that it has
entered into two agreements, each dated May
3, 2013, with MM Sam Ltd. (an Ontario corporation) to purchase a 150,000
square foot industrial property in Cambridge, Ontario (the "Cambridge
Property") and a 16,200 square foot retail property in
Oakville, Ontario (the
"Oakville Property", together with the Cambridge Property,
the "Properties") for an aggregate purchase price of
approximately $13,750,000, to be
satisfied by a combination of $11,750,000 of cash, generated from new mortgages
and the previously announced private placement of common shares at
a price of $0.15 per share for
aggregate gross proceeds of up to $45
million which will be sold on a best efforts basis through a
syndicate of agents co-led by Desjardins Securities Inc. and
Dundee Securities Ltd., and a
share issuance to MM Sam Ltd. of $2,000,000 of Edgefront shares at a deemed price
of $0.15 per share (approximately
13,333,333 Edgefront shares). The Cambridge Property is fully
leased to a manufacturing company for a remaining term of 2.4
years. The Oakville Property
consists of two prime located multi-tenant retail properties in
Bronte Village with future potential development opportunity.
The acquisition of the Properties will form part
of a series of transactions relating to the previously announced
conversion of Edgefront into a real estate investment trust having
an external asset management structure. Mario Forgione, the Chairman and a director of
Edgefront, is the President and a director of MM Sam Ltd., which
currently owns the Properties. As such the acquisition of the
Properties will be non-Arm's Length Transactions and will be
subject to Multilateral Instrument 61-101 and TSXV Policy 5.9, and
will be subject to all necessary approvals, including the approval
by the affirmative vote of a majority of votes cast by minority
shareholders voting at a special meeting of shareholders to be held
on June 14, 2013. Such transactions
are expected to close on or about the end of June 2013.
The acquisition of the Properties has not yet
received TSXV approval and is subject to certain closing
conditions, including completion of satisfactory due diligence,
receipt of any necessary shareholder and other regulatory approval
and successful financing. Edgefront retained CBRE Limited as its
independent appraiser to determine the market value of the
Cambridge Property and the Oakville Property. In its report,
the independent appraiser concluded that the market value of the
Cambridge Property as at April 29,
2013 was $7,500,000 based on
various factors including annual total gross revenue of
$744,000 (unaudited) for the
property, and the market value of the Oakville Property as at
April 26, 2013 was $6,350,000 based on various factors including
annual total gross revenue of $582,857 (unaudited) for the property.
Management Agreement
In connection with Edgefront's previously
announced conversion into a real estate investment trust (the
"REIT"), it is currently expected that the REIT will enter
into a management agreement with Edgefront Realty Advisors Inc.
(the "Manager") pursuant to which the Manager will provide
advisory, consultation and investment management services to the
REIT regarding strategic matters, including potential acquisitions,
dispositions, financings and developments as well as services
regarding the identification and evaluation of acquisitions,
dispositions and other transactions.
The management agreement is expected to contain
provision for the termination or internalization of the management
of the REIT upon the earlier of the REIT achieving a market
capitalization of $500 million or
five years after conversion. In addition, it is expected that the
Manager will have the right, in its sole discretion, to elect to
internalize management at no cost to the REIT at any time.
The REIT is expected to have the right to terminate the management
agreement upon 30-days written notice in the event of a material
default.
Certain trustees and persons acting in the
capacity of executive officers of the REIT will own the Manager. As
such, the Manager will be a non-arm's length party to the
REIT. Shareholder approval will be sought for the conversion
of Edgefront into a real estate investment trust, which will
include approval of the management agreement by a majority of the
votes cast by disinterested shareholders, at a special meeting of
shareholders to be held on June 14,
2013.
Closing of New Brunswick Acquisition
Edgefront is also pleased to announce that on
May 1, 2013 Edgefront closed its
previously announced acquisition of an approximate 28,950 square
foot two-storey Class A office property in Miramichi, New Brunswick for a total price of
$5.465 million. Newly built in 2012,
the property is leased to a department of the federal government
until September 30, 2022 (with one
five-year renewal option). The total purchase price for the
transaction was satisfied by Edgefront with cash on hand as well as
cash generated from a new 10 year mortgage. The transaction
was an Arm's Length Transaction (as that term is defined in TSXV
Policy 1.1), and received TSXV approval on April 29, 2013.
About Edgefront
Edgefront is a growth oriented, diversified real
estate company focused on increasing shareholder value through the
acquisition, ownership and management of commercial real estate
assets initially located in secondary markets. It is the intention
of Edgefront to expand its business of purchasing, owning and
operating real estate assets and to raise funds in the marketplace
in order to convert Edgefront into a real estate investment trust
having an external asset management structure, subject to receipt
of all necessary approvals, including that of the TSXV. As
compensation for services provided to the REIT, it is expected that
the Manager will be entitled to: (a) an annual asset management fee
in the amount of 0.75% of the REIT's gross book value up to
$150 million to be paid in REIT
units, 0.65% of the REIT's gross book value between $150 million and $300 million to be paid 50% in
REIT units and 50% in cash and 0.50% of the REIT's gross book value
over $300 million to be paid 50% in
REIT units and 50% in cash; (b) a construction management fee
payable on capital projects in an amount equal to 5% of all hard
construction costs incurred on a project excluding work done on
behalf of tenants or any maintenance capital expenditures; (c) an
acquisition fee in the amount of 0.50% of the purchase price of any
property acquired by the REIT payable in cash on completion of each
acquisition; and (d) a property management fee on a cost recovery
basis.
Completion of the acquisition of Properties
(the "Transactions") remains subject to TSXV approval. There
can be no assurance that the Transactions will be completed as
proposed or at all.
The TSXV has in no way passed upon the merits
of the Transactions 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 Transactions, completion of the
private placement and entering into of the management
agreement. Although Edgefront believes that such information
is reasonable, it can give no assurance that such expectations will
prove to be correct. In particular, this news release contains
forward-looking information relating to the expected completion of
the Transactions and the business strategies of Edgefront.
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 Transactions;
the state of the real estate sector in the event the Transactions
are completed; recent market volatility; Edgefront's ability to
secure the necessary 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.
SOURCE Edgefront Realty Corp.