TORONTO, March 24, 2015 /CNW/ - Trez Capital Mortgage Investment Corporation (TSX: TZZ) (the "Corporation") currently holds a mortgage (the "Mortgage") on the property located at 1450 Don Mills Road, Toronto, ON (the "Don Mills Property") with an aggregate amount outstanding thereunder of $23,030,599. Due principally to the loss of the sole tenant, Postmedia Network Canada Corp., the borrower has defaulted under the Mortgage. The Corporation has since undertaken extensive efforts to locate a purchaser or tenant(s) for the Don Mills Property. In terms of a sale, it has been concluded that the Corporation may not receive sufficient value from such a sale in the near term while the Don Mills Property remains unoccupied. For this reason, the Corporation has decided to commence an initiative through Trez Capital Fund Management Limited Partnership (the "Manager") to purchase the Don Mills Property. The initiative would see the Corporation repaid all amounts owed to it in respect of the Don Mills Property within the next three years while receiving interest at 5% per annum on such amounts in the interim.
The independent directors of the Corporation have approved a series of transactions (together, the "Proposed Transaction") that will result in an affiliate of the Manager becoming the new owner and mortgagor of the Don Mills Property. In particular:
- Using the remedies available in the Mortgage, the court appointed receiver will cause the Don Mills Property to be sold to TG Property Investments Inc. ("TG") that will be wholly-owned by Trez Capital Group LP, which is the ultimate parent company of the Manager.
- The purchase price for the Don Mills Property will be $23,030,599, all of which will be financed by the Corporation through a vendor take-back mortgage (the "VTB") with a term of 3 years from the date of closing.
- TG will be entitled to borrow additional funds under the VTB during its term to fund the payment of tenant/ leasehold improvements and interest payments to a maximum aggregate amount under the VTB of $30,000,000.
- The VTB will bear interest at 5% per annum. TG will make monthly payments of interest only during the term of the VTB by way of an interest budget. The VTB may be prepaid at any time, without penalty.
- All obligations of TG under the Mortgage will be fully and unconditionally guaranteed by Trez Capital Group LP.
The principal advantage to the Corporation of the Proposed Transaction is that it guarantees repayment in full to the Corporation by a credit worthy guarantor, no later than 3 years from the date of closing, of (i) the current amount owed under the Mortgage, (ii) advances made under the interest budget and (iii) the additional costs that will be necessary in order to lease and tenant and/or sell the Don Mills Property. The Corporation also will earn a 5% per annum return on such amounts. Note that the Corporation stopped accruing interest under the Mortgage in May 2014.
The independent directors of the Corporation have unanimously approved this transaction in accordance with the applicable securities and corporate laws and requirements. The Proposed Transaction is subject to receiving court approval which is expected on or about April 9, 2015.
SOURCE Trez Capital Junior Mortgage Investment Corporation
For further information: Michael J.R. Nisker, President & Chief Executive Officer, Trez Capital Mortgage Investment Corporation, Tel: (416) 350-1299, E-mail: MichaelN@trezcapital.com; Karyn Phuong, Vice President, Investor Relations, Trez Capital, Tel: (647) 788-1788, E-mail: KarynP@trezcapital.com