TORONTO – Edgefront Realty Corp. (TSXV:ED) will pay the equivalent of $68 million, including about half in units of a new real estate investment trust, to acquire 10 industrial properties in western Canada.
The proposed deal is with RTL-Westcan, a bulk commodity hauler operating in western Canada, which will own about 86.1 per cent of the new REIT through its affiliates.
Under the proposed plan, about five per cent of the REIT’s units will be publicly traded and the remainder will be held by existing Edgefront shareholders, directors and officers.
Edgefront will manage the real estate trust and RTL-Westcan’s affiliates will lease back the properties under long-term agreements.
Edgefront Realty says its previously announced plan to acquire several properties in Ontario for $43 million has been called off.
It had conditionally agreed in June to buy several properties in Ajax for $29.5 million and the Chairman properties in Cambridge/Oakville for $13.5 million.
“Management feels that this transaction is superior to our previously announced but now abandoned property transaction, which was originally intended to form part of Edgefront’s REIT conversion transaction,” Kelly Hanczyk, Edgefront’s CEO, said Friday.
“We are acquiring a significant Western Canadian based property portfolio with a stable, long term tenant, without the need to obtain public market financing. In addition, Edgefront will become a pure play industrial REIT, a sector that we feel offers us considerable opportunities for future accretive growth.”
RTL-Westcan says the deal will allow it to recognize the value of its properties.
“We believe this transaction is a great fit for the unitholders of RTL-Westcan. It enables us to maximize the value of the RTL-Westcan real estate assets for the benefit of all unitholders,” said Cody Church, a director of RTL-Westcan.
Church is a co-founder of TriWest, a private equity firm that has invested in 23 companies including RTL-Westcan.
The RTL-Westcan properties are in Alberta, Saskatchewan, British Columbia and the Northwest Territories from affiliates of RTL-Westcan.
The purchase would be satisfied by $200,000 cash up front, $33.8 million from a new five-year credit facility and rest in units of Edgefront REIT.
The vendors would receive 17,000 units of the trust, valued at $2 each.