MONTREAL, March 4, 2013 /CNW Telbec/ - Capital BLF Inc. (the "Corporation"), a company listed on the TSX Venture Exchange (the "TSX-V", (symbol: BLF)), announced today that it has entered into agreements
to acquire three apartment properties (the "Acquisition Properties") in the province of Québec for an aggregate purchase price of $55
million (the "Acquisitions"). In addition to the Acquisitions, the Corporation announced a number
of strategic and structural initiatives, including:
A proposed private placement of between $20 million and $25 million of
common shares (the "Private Placement")
Confirmation of QSSP II eligibility
Amendments to the Corporation's management agreements
Implementation of a dividend policy
Initiation of a feasibility study in connection with a possible
conversion into a real estate investment trust
The Acquisition Properties consist of three properties comprised of a
total of 554 apartment suites, with two properties comprised of 330
suites located in Québec City and one property comprised of 224 suites
located in Montréal. The aggregate purchase price of $55 million, to be
paid in cash, represents a capitalization rate of approximately 6.0%
and an implied value of approximately $99,000 per suite. The weighted
average occupancy at the Acquisition Properties is 99%, with an average
monthly rent of $795 per suite. The Corporation obtained independent
third-party appraisals for each of the Acquisition Properties, which
valued the Acquisition Properties at approximately $57 million in
aggregate, or $2 million in excess of the proposed aggregate purchase
price. Two of the three Acquisition Properties were sourced off-market
on an exclusive basis, and demonstrate the Corporation's ability to
leverage its deep local relationships to efficiently locate and secure
acquisition opportunities throughout the province of Québec.
"Our goal is to become the preeminent consolidator and landlord of
multi-residential real estate in the Province of Québec, Canada's
largest rental market. These acquisitions fully reflect the new focus
of our company which is to leverage our local, entrepreneurial and
prominent presence in our target markets in order to identify
attractive and accretive acquisition opportunities for the company,"
said Mathieu Duguay, President and CEO.
The Acquisitions are expected to close in March 2013, subject to
obtaining the required financing and TSX-V approval.
No finder's fee is payable by the Corporation in connection with any of
the Acquisition Properties. In addition, each of the sellers of the
Acquisitions Properties is acting at arm's length with the Corporation
and its insiders.
Domaine de Brugnon ("Brugnon")
Brugnon is a 246 suite apartment complex located on Père-Lelièvre Blvd
in Québec City, just south of the Galeries de la Capitale shopping
complex. Brugnon was built as a "condo-style" residence in 1995, and
consists of 42 individual buildings with direct tenant access to large
apartment suites. The property offers a number of attractive community
amenities including two heated swimming pools, a volleyball court and a
mini-putt course. Brugnon is currently 100% occupied. The annual
normalized net operating income for Brugnon is approximately $1.9
million and the purchase price for Brugnon represents a capitalization
rate of approximately 5.7%. The sellers of Brugnon are 9092-6064
Québec inc. and Stéphan Huot.
1111-1121 Mistral Street ("Mistral")
Mistral is a 224 suite apartment complex located in the Villeray
neighbourhood of Montréal with close access to major transportation
routes including highway 40 and Christophe Colomb Avenue. The property
consists of two towers of six storeys each, was constructed in 1977 and
has had major repair and upgrading work done over the past ten years.
The property has 38 interior and 123 exterior parking spaces, and
offers tenants desirable amenities such as a swimming pool which are
unavailable to tenants at many of the surrounding six-storey
properties. Mistral is currently 99% occupied. The annual normalized
net operating income for Mistral is approximately $1.0 million and the
purchase price for Mistral represents a capitalization rate of
approximately 6.7%. The seller of Mistral is La Société en commandite
les immeubles 1111-21 Mistral.
111-115 Johnny-Parent ("Loretteville")
Loretteville is an 84 suite apartment complex located in the "Haute
St-Charles" borough in the northwest part of Québec City, and is
strategically located along major transportation routes including
highway 40 and highway 573. The property consists of four, three-storey
buildings, and was built in 1971 with renovations between 2003 and
2008. The property contains 100 parking spaces and a recently renovated
swimming pool, and is situated near many small shopping centres.
Loretteville is currently 95% occupied. The annual normalized net
operating income for Loretteville is approximately $400,000 and the
purchase price for Loretteville represents a capitalization rate of
approximately 6.0%. The sellers of Loretteville are Danyel Rodrigue,
Jocelyne Morisette, Monique Badeau and Arcadius Audet.
The annual normalized net operating income of each of the Acquisition
Properties is derived from the historical financial information made
available to management of the Corporation in the course of
management's due diligence. Management has normalized the historical
figures for certain non-recurring expenses, for revenues derived from
leases and renewals entered into after the date of the financial
information, as well as for updated expenses estimates since such
historical data was made available. The normalized net operating
income for Brugnon includes a contractual income guarantee which is
determined by a formula based upon revenue derived from lease renewals
already signed for contracts beginning July 1, 2013.
Financing for the Acquisitions
The Corporation intends to finance the Acquisitions through
approximately $38 million of new and assumed CMHC insured mortgage
financing with a weighted average interest rate of 3.1% and a weighted
average term to maturity of 9.3 years, with the balance coming from the
net proceeds of the Private Placement.
The Corporation is also in discussions with a lender to provide a $10
million revolving acquisition facility that would be available to the
Corporation to finance future acquisitions.
The Private Placement
The Corporation has entered into an agency agreement with Scotiabank and
National Bank Financial Inc., as co-lead agents, to complete a private
placement of common shares, at an issue price of $0.23 per share, on a
best-efforts basis of between $20 million and $25 million. In
connection with the Private Placement, the co-lead agents will receive
a fee equal to 4% of the gross proceeds raised from investors other
than Mathieu Duguay, the President Chief Executive Officer of the
Corporation, upon closing. Mr. Duguay has indicated his intention to
purchase shares for an amount equal to 20% of the proceeds of such
Private Placement, subject to a maximum amount of $4.7 million. In
addition, Mr. Claude Blanchet, Chairman of the Board of the
Corporation, has indicated his intention to purchase shares in the
Private Placement for an amount equal to $500,000. Following closing of
the Private Placement, assuming gross proceeds raised of $23.5 million,
Mr. Duguay and Mr. Blanchet will hold an ownership interest in the
Corporation representing approximately 19.99% and 3.27%, respectively.
In connection with the Private Placement, the Corporation is relying on
an exemption from the requirement to obtain minority approval under
Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions given the fact that Fonds immobilier de solidarité FTQ II, s.e.c. ("FIS"), a shareholder of the Corporation acting at arm's length with Mr.
Duguay and Mr. Blanchet and owning approximately 20.56% of the issued
and outstanding common shares of the Corporation, confirmed that it
will not participate in the Private Placement and that it supports the
The Private Placement will be subject to all applicable regulations,
including a four month hold period on the shares issued, and closing of
the Private Placement will be subject to the applicable conditions of
Canadian securities laws and the TSX-V being met.
Pro Forma Financial Profile of the Corporation
Management estimates that upon closing of the Acquisitions and the
Private Placement, assuming gross proceeds raised of $23.5 million at
an issue price of $0.23 per share, the pro forma net asset value of the
Corporation would be $0.22 per share, the pro forma adjusted funds from
operations of the Corporation for 2012 would be $0.012 per share and
the pro forma debt/gross book value of the Corporation would be 58%.
QSSP II Eligibility
The Corporation has obtained an advance ruling from the Ministère du Revenu du Québec confirming that the Corporation is a qualified corporation for the
purposes of the Québec Stock Savings Plan II ("QSSP II") and that the common shares to be issued as part of the Private
Placement will be "qualified shares" for a QSSP II qualified mutual
Amendments to Management Agreements
The Corporation has made a number of amendments to the previously
announced conditional asset management agreement with First Investor,
L.P. and conditional property management agreement with Société de
gestion Cogir s.e.n.c. (the "Amended and Restated Asset Management Agreement" and "Amended and Restated Property Management Agreement", respectively).
As per the terms of the Amended and Restated Asset Management Agreement
and the Amended and Restated Property Management Agreement, these
agreements will become effective upon closing of the Private Placement.
The following is a summary of the amendments to the agreements:
New Asset Management Agreement
The incentive fee payable to First Investor in connection with the
Amended and Restated Asset Management Agreement will be equal to 15% of
the Corporation's AFFO per share (as such term is defined in the
Amended and Restated Asset Management Agreement) in excess of an AFFO
per share hurdle rate of $0.012 (the "AFFO Hurdle"), multiplied by the Corporation's number of shares outstanding. The
AFFO Hurdle will be adjusted yearly on the basis of 50% of the increase
in the weighted average consumer price index. Previously, the incentive
fee was based on the Corporation's FFO per share.
The acquisition fee payable to First Investor in connection with the
Amended and Restated Asset Management Agreement will now be 0.75% of
the purchase price paid by the Corporation for the first $200 million
of acquisitions in any given year, and 0.50% of the purchase price paid
by the Corporation on all acquisitions in that year thereafter.
Previously, the acquisition fee payable was 0.75% of the purchase price
paid by the Corporation for all acquisitions.
The incentive fee and the acquisition fee may be payable in shares,
subject to TSX-V approval.
The term of the Amended and Restated Asset Management Agreement will now
expire at the earlier of i) five (5) years or ii) the time the
Corporation reaches an equity market capitalization of $500 million.
Previously, the Amended and Restated Asset Management Agreement had an
initial term of ten (10) years, renewable for three additional five (5)
New Property Management Agreement
The term of the Amended and Restated Property Management Agreement will
now expire at the earlier of i) five (5) years or ii) the time the
Corporation reaches an equity market capitalization of $500 million.
Previously, the Amended and Restated Property Management Agreement had
an initial term of ten (10) years, renewable for three additional five
(5) year periods.
Conditionally upon closing of the Acquisitions and the Private
Placement, the Board of Directors of the Corporation will implement a
dividend policy whereby the Corporation intends to pay a monthly cash
dividend to holders of its common shares. The Corporation intends to
pay dividends on or about the 15th of each month to shareholders of record on the last business day of the
preceding month. Conditionally upon closing of the Acquisitions and the
Private Placement, the Corporation's first dividend, in the amount
$0.0008 per share (representing an annualized dividend of $0.0092 per
share) is expected to be paid on May 15, 2013 to shareholders of record
on April 30, 2013. The amount and timing of any future dividends will be determined
by the Directors of the Corporation in their absolute discretion. After
closing of the Acquisitions and the Private Placement, the Corporation
will issue a press release confirming the payment of a monthly cash
dividend to holders of its common shares.
Conditionally upon closing of the Acquisitions and the Private
Placement, the Board of Directors of the Corporation will grant to
certain members of management and its directors stock options for
common shares representing, in the aggregate, 5% of the issued and
outstanding common shares of the Corporation at closing. The stock
options will have a term of 5 years, an exercise price to be determined
on the basis of the closing price per share the day before the grant
but of at least $0.28 per share and they will vest after a period of 2
Feasibility Study of REIT Conversion
Following closing of the Acquisitions, the Board of Directors of the
Corporation intends to investigate the feasibility of converting the
Corporation to a real estate investment trust (the "REIT Conversion"). Following consultations with its legal, tax and financial advisors,
if the Board determines that it would be in the best interests of the
Corporation's shareholders to undertake the REIT Conversion, the Board
will make a proposal to shareholders for approval.
About Capital BLF Inc.
The principal business of the Corporation is acquiring, holding,
developing, maintaining, improving, leasing, managing or otherwise
dealing with income-producing multi-unit residential properties located
throughout Canada, primarily in the province of Québec. The Corporation
currently owns four properties consisting of nine individual buildings
located in Montréal, Dorval and Québec City.
This press release contains forward-looking statements. Often, but not
always, forward-looking statements can be identified by the use of
words such as "plans", "expects" or "does not expect", "is expected",
"estimates", "intends", "anticipates" or "does not anticipate", or
"believes", or variations of such words and phrases or state that
certain actions, events or results "may", "could", "would", "might" or
"will" be taken, occur or be achieved. Forward-looking statements
involved known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievements expressed or
implied by the forward-looking statements. Accordingly, readers should
not place undue reliance on forward-looking statements. The factors
identified above are not intended to represent a complete list of the
factors that could affect the Corporation.
There can be no assurance that the acquisitions will be completed or
that an equity financing will be completed. Investors are cautioned
that any information released or received with respect to such
transactions may not be accurate or complete and should not be relied
upon. Management disclaims any intention or obligation to update or
revise any forward-looking statements whether as a result of new
information, future events or circumstances, except as required by law.
The TSX-V has in no way passed upon the merits of the proposed
transactions and has neither approved nor disapproved the contents of
this press release.
Neither the TSX-V nor its Regulation Services Provider (as that term is
defined in policies of the TSX-V) accepts responsibility for the
adequacy or accuracy of this release.
SOURCE: CAPITAL BLF INC.
For further information:
Mr. Mathieu Duguay
President and Chief Executive Officer