Realex Properties Corp. announces strategic acquisition and subscription receipts financing



    CALGARY, June 25 /CNW/ - Realex Properties Corp. ("Realex") is pleased to
announce that it has entered into an arm's length letter of intent with The
Cora Group Inc. ("Cora"), a Waterloo, Ontario based owner, developer and
manager of commercial real estate, to acquire a portfolio of 6 office
buildings located in Kitchener and Waterloo, Ontario, comprising approximately
933,000 sq. ft. of rentable area, approximately 2,000 parking stalls and
470,000 sq. ft of development entitlements. The development entitlements
include lands held for development, an option to purchase a leasehold interest
in an additional building as well as options to jointly develop certain lands,
all within the Kitchener-Waterloo area. As part of the transaction, Realex
will also acquire Cora's property management company, which currently manages
the properties being acquired, and has third party management contracts in
place for 100,000 sq. ft. of additional commercial space (collectively, these
transactions constitute the "Acquisition").
    The aggregate purchase price for the office portfolio and the management
company, including estimated closing costs, is $141.8 million. It is intended
that the purchase price will be satisfied through cash consideration of $42.9
million (see sale of subscription receipts and bridge financing below), a
vendor take-back note of $4.5 million, the assumption of existing property
level mortgage debt totalling approximately $72.4 million and the issuance of
7,729,000 common shares and 7,729,000 non-voting shares of Realex to the owner
of Cora at a price of $1.33 per share.
    The portfolio being acquired is a multi-property collection of low and
mid-rise office buildings that are 92% occupied and benefit from a number of
strong covenant tenants including the Government of Canada, Rogers Wireless,
Gowlings, MCAP, Region of Waterloo, London Life Insurance and Scotiabank. The
portfolio has a weighted average lease term of 6.5 years and rents that are
currently under market. The weighted average interest rate and remaining term
on the assumed mortgages is 5.3% and 8 years respectively. The vendor
take-back notes will bear interest at 5% per annum and have an average term to
maturity of approximately 4 years. The $21.2 million bridge financing has an
effective interest rate, including commitment fees, of approximately 9% and an
initial term of 9 months, extendable for an additional period upon payment of
an additional fee.
    "This Acquisition will help Realex achieve its strategic objective of
building a national real estate platform with core property holdings in high
growth geographic areas - in the commodity based economy of Western Canada and
in the technology focused economy of the Kitchener-Waterloo region - and
operating platforms with 'best-in-class' management teams in each of these
high growth markets" said Realex's President and Chief Executive Officer, Marc
    With the acquisition of the management company, Realex will be able to
leverage a Southwestern Ontario team of 25 people led by Adrian Conrad, the
owner of the property management company, who, following completion of the
Acquisition, will join Realex as a Vice President. Adrian Conrad has over 20
years of industry experience in the construction, development and property
management business. In addition, Manfred Conrad, the principal shareholder of
Cora will, subject to regulatory approval, join the Realex Board of Directors
following completion of the Acquisition, bringing with him over 30 years of
experience as one of the Kitchener-Waterloo area's largest developer and
manager of commercial real estate.
    Subject to settling definitive documentation, the Acquisition is expected
to close on or before August 29, 2008 and will be subject to customary closing
conditions including sale of the subscription receipts, consent of certain
lenders and regulatory approval.
    In order to finance the cash component of the Acquisition, Realex will
enter into an agency agreement with RBC Capital Markets and Genuity Capital
Markets, as co-lead agents and co-bookrunners, and TD Securities Inc. and
Desjardins Securities Inc. (collectively, the "Agents"), pursuant to which
Realex has agreed to offer for sale, on a private placement basis, up to 11
million subscription receipts at a price of $2.30 per subscription receipt for
gross proceeds of approximately $25.3 million. Approximately 20% (or 2.2
million) of the subscription receipts being offered for sale will be taken up
by directors of Realex and a further 1.26 million of the subscription receipts
will be purchased by Adrian Conrad, Realex's proposed Vice President in charge
of the Southwestern Ontario Region. Each subscription receipt will represent
the right to receive one common share and one non-voting common share of
Realex upon completion of the Acquisition. Any remaining proceeds from the
subscription receipts offering will be used to repay existing indebtedness, to
fund future acquisition and development activities and for general corporate
purposes. The Agents will receive a fee of up to 6% of the gross proceeds of
the offering, 50% of which will be payable on closing of the private
placement, with the remaining 50% payable on closing of the Acquisition.
    Closing of the subscription receipt private placement is expected to
occur on July 11, 2008. The net proceeds from the sale of the subscription
receipts will be deposited in escrow and released to Realex upon closing of
the Acquisition. Upon release of the escrowed funds to Realex, holders of
subscription receipts will receive one common share and one non-voting share
of Realex for each subscription receipt held. In the event the Acquisition
does not close on or before 5:00 p.m. (EST) on September 30, 2008 (the
"Termination Date"), or if Realex decides that it will not be proceeding with
the Acquisition, holders of subscription receipts shall be entitled to receive
an amount equal to their original subscription price and pro rata entitlement
to any accrued interest earned thereon. If the Acquisition is completed on or
before the Termination Date, holders of subscription receipts will be entitled
to any dividends declared on either the common shares or non-voting shares
where the record dates for such dividends occurred during the period from
closing of the private placement to the date that the common shares and
non-voting shares are issued in accordance with the terms of the subscription
receipts. Under these circumstances, holders of subscription receipts will not
be entitled to the accrued interest.
    This Acquisition is of key strategic importance in advancing Realex's
goal of building a critical mass and a national platform with core assets
centered around two of the strongest economic drivers in Canada - commodities
and technology. The issuance of new equity from treasury at an average price
of $1.22 is below both the September 2006 qualifying transaction offering
price and more recently, the consideration paid upon the internalization of
the asset manager earlier this year - both completed at a $1.434 per share.
This discount is directly reflective of the current challenging capital
markets environment. However, Realex believes that the dilution to existing
shareholders will be temporary and offset by the added scale and
diversification that the Acquisition brings to Realex.
    For more information on the Acquisition and the subscription receipt
offering, please refer to the June 2008 Investor Presentation posted in the
investor's section of the Corporation's website -

    The TSX Venture Exchange has neither approved nor disapproved the
contents of this news release. The TSX Venture Exchange does not accept
responsibility for the adequacy or accuracy of this news release.

    This press release may contain forward looking statements and information
within the meaning of applicable securities legislation. Although Realex
Properties Corp. believes that the anticipated future results, performance or
achievements expressed or implied by the forward looking statements and
information are based upon reasonable assumptions and expectations, the reader
should not place undue reliance on forward looking statements and information
because they involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of Realex to
differ materially from anticipated future results, performance or achievement
expressed or implied by such forward looking statements and information.
Accordingly, Realex cannot give any assurance that its expectations will in
fact occur and cautions that actual results may differ materially from those
in the forward looking statements. Factors that could cause actual results to
differ materially from those set forth in the forward looking statements and
information include:  general economic conditions; local real estate
conditions including the development of properties in close proximity to
Realex's properties; timely leasing of newly-developed properties and
re-leasing of occupied square footage upon expiration; dependence on tenants'
financial condition; the uncertainties of real estate development and
acquisition activity; the ability to effectively integrate acquisitions;
interest rates; availability of equity and debt financing; the impact of
newly-adopted accounting principles on Realex's accounting policies and on
period-to-period comparisons of financial results; and other risks and factors
described from time to time in the documents filed by Realex with the
securities regulators in Canada, including in the Annual Information Form
under the heading "Description of the Business - Risk Factors" and in Realex's
annual Management's Discussion and Analysis. Realex undertakes no obligation
to publicly update or revise any forward looking statements or information,
whether as a result of new information, future events or otherwise, except as
required by securities laws.

For further information:

For further information: Marc Sardachuk, President and Chief Executive
Officer, Realex Properties Corp., Telephone: (403) 264-5889, Facsimile: (403)
264-5892; Mark Suchan, Chief Financial Officer, Realex Properties Corp.,
Telephone: (403) 264-5889, Facsimile: (403) 264-5892

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