TORONTO, Oct. 5 /CNW/ - GT Canada Capital Corporation (TSX-V: MOB.P) (the "Corporation"), a capital pool company listed on the TSX Venture Exchange (the "Exchange"), announced today that it has agreed to acquire the "Queenston Medical-Dental Centre", a 15,584 square foot medical office building in Hamilton, Ontario (the "QT Property"), as its proposed qualifying transaction (the "Qualifying Transaction") under Exchange Policy 2.4 Capital Pool Companies (the "CPC Policy").
The QT Property
The QT Property is a medical office building located at 631 Queenston Road, on the east side of Hamilton. It is 100% leased to 16 tenants with lease expirations staggered over the next eight years.
The QT Property is currently subject to a first mortgage in the principal amount of approximately $2.1 million that bears interest at a rate of 5.4% per annum and has a term expiring in 2013 (the "First Mortgage") and second mortgage in the amount of $500,000 (the "Second Mortgage"). The Corporation intends to assume the First Mortgage and repay the Second Mortgage as part of its acquisition of the QT Property.
Revenue and net income for the QT Property were $274,883 and $99,400 (six months ended June 30, 2009 - unaudited), $532,186 and $245,002 (year ended December 31, 2008 - unaudited), $489,520 and $214,307 (year ended December 31, 2007 - unaudited) and $483,678 and $173,992 (year ended December 31, 2006 - unaudited). As at June 30, 2009, the QT Property had total assets of $1,904,947 (unaudited) and total liabilities of $2,704,600 (unaudited).
The Corporation has retained MacKenzie, Ray, Heron & Edwardh (the "Appraiser") to provide an independent appraisal of the market value of the QT Property. The Appraiser has, on a preliminary basis, estimated the market value of the QT Property (land and building) as at September 21, 2009 to be $3,600,000.
The QT Property is currently managed by CMD Management Ltd. (the "Property Manager"), a corporation that is indirectly controlled by Ed Thornley, a resident of Ontario and director of the Corporation, and owned by Mr. Thornley and members of his family. In connection with the Qualifying Transaction, the Corporation expects to enter into a property management agreement with the Property Manager (the "Property Management Agreement") pursuant to which the Property Manager will continue to manage the QT Property following completion of the Qualifying Transaction. Further information regarding the Property Manager is set forth below under "The Property Manager".
The current owner of the QT Property is 941703 Ontario Limited (the "Vendor"), an Ontario corporation that is controlled by Thornley Holdings Limited, a corporation that is indirectly controlled by Ed Thornley and owned by Mr. Thornley and members of his family. Thornley Holdings Limited currently owns 1,512,500 common shares of the Corporation representing approximately 20% of the outstanding common shares of the Corporation. As a result, the Qualifying Transaction is a non-arm's length transaction and will be subject to majority of the minority shareholder approval.
The Qualifying Transaction
The Corporation and the Vendor have entered into a purchase agreement dated October 1, 2009 (the "Purchase Agreement") pursuant to which the Corporation has agreed to purchase the QT Property from the Vendor for a purchase price of $3,569,000 (the "Purchase Price"). The Purchase Price will be subject to customary adjustments and will be payable as follows:
- the Corporation's assumption of the First Mortgage and repayment of
the Second Mortgage; and
- the balance (approximately $969,000) in cash.
The cash portion of the purchase price will be funded by the Corporation using cash on hand and the proceeds from a proposed private placement of approximately 10,000,000 Common Shares at a price of $0.25 per share for gross proceeds of approximately $2,500,000 (the "Private Placement"). M Partners Inc. (the "Agent") is acting as agent to the Corporation, on a commercially reasonable best efforts basis, in connection with the Private Placement. In consideration for acting as agent, the Agent will receive a commission equal to 6% of the gross proceeds raised under the Private Placement and warrants to acquire that number of Common Shares equal to 5% of the Common Shares issued under the Private Placement at a price of $0.25 per share for a period of two years from completion of the Private Placement. The shares issued pursuant to the Private Placement will be subject to a four-month hold period and will also be subject to escrow requirements under the CPC Policy.
Pursuant to the Purchase Agreement, completion of the Qualifying Transaction is subject to the prior satisfaction or waiver of a number of conditions, including the receipt of Exchange and majority of the minority shareholder approval, completion of the Private Placement and execution of the Property Management Agreement. The Corporation intends to fix a date for a shareholder meeting to consider approval of the Qualifying Transaction and to mail an information circular to shareholders in connection therewith following receipt of conditional approval for the Qualifying Transaction from the Exchange.
The board of directors of the Corporation (the "Board") has unanimously determined that the Qualifying Transaction is fair to shareholders of the Corporation and in the best interests of the Corporation. Accordingly, the Board has approved the Qualifying Transaction and will unanimously recommend that shareholders vote in favour of the Qualifying Transaction. In connection with the Board's approval of the Qualifying Transaction, Ed Thornley declared his interest in the Qualifying Transaction and abstained from voting on the Qualifying Transaction.
The Corporation intends to apply for an exemption from the Exchange's sponsorship requirement for the Qualifying Transaction.
The Corporation was incorporated under the laws of Canada on March 25, 2008 and completed its initial public offering under the CPC Policy on July 10, 2008. Throughout this time, the Corporation's business has been restricted to the identification and evaluation of real property in the commercial real estate sector for the purpose of completing its Qualifying Transaction.
Following the Qualifying Transaction, the Corporation intends to focus upon achieving its goal of becoming the leading owner and developer of medical office properties throughout Canada by an aggressive acquisition, development and management program aimed at creating a geographically diversified portfolio of high quality properties that will generate stable and growing rental income and capital appreciation opportunities.
The directors and officers of the Corporation are currently:
- Seymour Temkin - Chairman
- Andrew I. Shapack - Chief Executive Officer
- Morris Hurwitz - Interim Chief Financial Officer
- Darren Thornley - Chief Operating Officer
- Douglas G. Friars, MD - Director
- Richard Michaeloff - Director
- Richard Shapack - Director
- Stanley Swartzman - Director
- Ed Thornley - Director
Backgrounds of the existing directors and officers are contained in the final initial public offering prospectus of the Corporation dated June 17, 2008 and the management information circular of the Corporation dated May 27, 2009, both of which are available on the SEDAR website at www.sedar.com, except as described below.
Upon completion of the Qualifying Transaction it is anticipated that Denim Smith will be appointed as a director of the Corporation. Brief biographies of Mr. Thornley, Mr. Hurwitz and Mr. Smith are set out below.
Darren Thornley is the President of the Property Manager and has over 25 years experience in medical office construction, leasing and management. In his capacity as President of the Property Manager, he is currently responsible for over 200,000 square feet of medical office building operations in Ontario and British Columbia, including leasing, management, renovations and financial reporting. Over the course of Mr. Thornley's career, he has participated in the development of over 25 medical office buildings.
Morris Hurwitz most recently served as the Director of Finance for Multi-Industries Inc. Prior thereto, Mr. Hurwitz was Controller for Gambles Ontario Produce Inc. from 2004 to 2007. Before then, he held several financial positions with Jutan International Limited, Tupperware Canada Inc., Toronto Medical Corp. and Newell Canada. Mr. Hurwitz began his career with Clarkson Gordon Chartered Accountants and holds a Chartered Accountant designation. He has a degree in Administrative and Commercial Studies from the University of Western Ontario.
Denim Smith is a partner at SMH Partners Ltd, a real estate consulting company and CEO of the Internet start-up, My Internet Corporation. He was most recently the Vice President of Blackmont Capital Inc.'s real estate investment banking practice involved with over $300 million of capital markets transactions and over $3 billion of advisory and valuation mandates. Prior to Blackmont, Mr. Smith was part of the team which formed KeyBanc Capital Markets Real Estate Group responsible for over US$3.5 Billion of capital markets transactions and US$600 million of successful sell-side advisory mandates. Previously, he was a real estate investment banker at RBC Capital Markets. Mr. Smith is a graduate of the University of Western Ontario, a licensed representative, completed the CFA Level 2 exam and was a member of the Boston Security Analysts Society Inc. (BSAS).
Except as outlined above, there will be no changes to the insiders of the Corporation as a result of the Qualifying Transaction.
Upon completion of the Qualifying Transaction, the Corporation expects that its Common Shares will be listed on Tier 2 of the Exchange.
The Property Manager
As indicated above, the Property Manager will manage the QT Property on behalf of the Corporation following completion of the Qualifying Transaction pursuant to the Property Management Agreement.
The Property Manager is a leading medical office management and development company based in Toronto, Ontario that currently manages over 200,000 square feet of medical office building space in Ontario and British Columbia, including several buildings in Ontario that are also owned by it. The Property Manager has developed and constructed 51 medical office buildings across Canada and has strong relationships with medical office property owners, pharmacies, laboratories, doctors and other participants and stakeholders in the medical community, including the Ontario Ministry of Health and Long Term Care. As a result of the Property Manager's existing portfolio of medical office buildings and its relationships and reputation in the medical office industry, the Corporation expects that the Property Manager will provide it with access to a significant and exclusive pipeline of acquisition and development opportunities.
This press release contains forward-looking statements. 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 involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Examples of such statements include the intention to complete the Private Placement and the Qualifying Transaction. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Accordingly, readers should not place undue reliance on forward-looking statements. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the ability of the Corporation to obtain necessary financing; satisfy conditions under the Purchase Agreement; satisfy the requirements of the Exchange with respect to the Qualifying Transaction or the Private Placement or the level of activity in the commercial real estate business and the economy generally; competition; and anticipated and unanticipated costs. The factors identified above are not intended to represent a complete list of the factors that could affect the Corporation. Additional factors are noted under "Risk Factors" in the Corporation's initial public offering prospectus dated June 17, 2008, a copy of which may be obtained on the SEDAR website at www.sedar.com.
Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and majority of the minority shareholder approval. The transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the proposed transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this press release.
SOURCE GT CANADA CAPITAL CORPORATION
For further information: For further information: Andrew I. Shapack, Chief Executive Officer, (416) 572-2170