Realex Properties Corp. is pleased to announce that it has completed its previously announced acquisition of a portfolio of 6 office buildings located in Kitchener and Waterloo, Ontario, comprising approximately 932,000 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 has also acquired the 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.
The aggregate purchase price for the Acquisition, including estimated closing and acquisition costs, is $142.0 million. The purchase price was satisfied through cash consideration of $44.7 million, vendor take-back mortgages aggregating $10.5 million, the assumption of existing property level mortgage debt totalling approximately $66.2 million, and the issuance of 7,444,071 common shares and 8,014,575 non-voting shares of Realex to the vendors at a deemed price of $1.33 per share. 6,880,161 of the common shares and 7,450,666 of the non-voting shares issued in connection with the Acquisition are subject to a four-month hold which expires on January 31, 2009.
The portfolio acquired is a multi-property collection of low and mid-rise office buildings that are 92% occupied and benefit from a number of national tenants. The portfolio has a weighted average lease term of 6.5 years and rental rates that will support future increases. The weighted average interest rate and remaining term on the assumed mortgages is 5.2% and 7.2 years respectively. The vendor take-back mortgages will bear interest at a weighted average rate of 6% per annum and have a weighted average term to maturity of approximately 2.4 years.
To fund a portion of the cash consideration, the Corporation completed a $25.0 million bridge financing, having an effective interest rate, including commitment fees, of approximately 9% and an initial term of 9 months, extendable for an additional 6 month period upon payment of an additional fee. The balance of the cash consideration was funded by a private placement of an aggregate of 11,906,435 subscription receipts at a price of $2.30 per subscription receipt, issued in July 2008, which resulted in aggregate gross proceeds of approximately $27.4 million. Upon closing of the Acquisition, each subscription receipt has automatically converted into one common share and one non-voting share of Realex, without any additional consideration. The common shares and the non-voting shares are subject to a four-month hold expiring on November 16, 2008. RBC Capital Markets and Genuity Capital Markets, acted as co-lead agents and co-bookrunners, and Desjardins Securities Inc. and TD Securities Inc. acted as agents for this private placement. The agents received an aggregate fee of $1,154,238 in connection with the private placement, $577,119 of which was paid on closing of the private placement and $577,119 (plus interest earned) of which was paid on closing of the Acquisition. Following completion of the Acquisition, Realex has an aggregate of 43,743,403 common shares and 109,620,940 non-voting shares outstanding.
With the acquisition of the portfolio (formerly owned by the Conrad family), Realex will be able to leverage a Southwestern Ontario team of 23 people led by Adrian Conrad, who has been appointed Vice President, Southwestern Ontario of the Corporation. Adrian Conrad has over 20 years of industry experience in the construction, development and property management business. In addition, Manfred Conrad has been appointed to the Realex Board of Directors, bringing with him over 30 years of experience as one of the Kitchener-Waterloo area's largest developers and managers of commercial real estate.
"We are pleased to have completed this strategic Acquisition, which establishes a national real estate platform for Realex, underpinned by excellent management teams in strong core markets in both western and central Canada. We welcome Manfred Conrad to our board of directors and Adrian Conrad to our senior management team as we look forward to working together to maximize Realex's internal growth potential and explore new expansion opportunities in the future," said Realex's President and Chief Executive Officer, Marc Sardachuk. -- www.cnxmarketlink.com
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