Capital BLF Inc.
TSX VENTURE : BLF.P

July 13, 2007 16:10 ET

Capital BLF Inc. Announces Trust Reorganization and Acquisition of a Multi-Residential Property as its Proposed Qualifying Transaction

MONTREAL, QUEBEC--(Marketwire - July 13, 2007) - Capital BLF Inc. (TSX VENTURE:BLF.P) (the "Corporation"), a capital pool company listed on the TSX Venture Exchange (the "Exchange"), announced today its proposed Qualifying Transaction as defined under Exchange Policy 2.4 - Capital Pool Companies (the "CPC Policy").

The proposed Qualifying Transaction involves three primary components: (i) the reorganization of the Corporation into a real estate investment trust (the "REIT") by way of a plan of arrangement (the "Arrangement") under section 192 of the Canada Business Corporations Act; (ii) a public offering (the "Public Offering") of trust units (the "Units") of the REIT (unless the trustees of the REIT arrange for an alternative financing in order to meet the Exchange's minimum listing requirements); and (iii) the purchase (the "Acquisition") of a five-storey student residence (the "QT Property") located at 475 Sainte-Croix Avenue, in the borough of Saint-Laurent, Province of Quebec from Societe en commandite Les residences collegiales St-Laurent, a limited partnership created under the laws of the Province of Quebec (the "Vendor"), pursuant to an offer to purchase between the Corporation and the Vendor (the "Offer") finalized on July 10, 2007, which will eventually be assigned to the REIT by the Corporation. The Vendor is at arm's length to the Corporation and the REIT. The proposed Qualifying Transaction is therefore not a "Non Arm's Length Qualifying Transaction" as defined under the CPC Policy.

In connection with the Qualifying Transaction, the REIT intends to retain the services of National Bank Financial Inc. as agent (the "Agent"), to conduct the Public Offering on a best efforts basis.

Pursuant to the Arrangement, among other things: (i) the issued and outstanding common shares (the "Shares") of the Corporation will be exchanged for Units of the REIT on a basis to be determined by the Corporation and the Agent (the "Exchange Ratio"); (ii) the issued and outstanding options (the "Options") to purchase Shares of the Corporation will be exchanged for options (the "BLF Options") to purchase Units on terms and conditions identical to the terms and conditions of the Options, subject to adjustments to the exercise price of, and the number of Units underlying, the BLF Options based upon the Exchange Ratio.

The REIT will use a portion of the cash it receives from the Corporation pursuant to the Arrangement and proceeds it receives from the Public Offering to purchase (through a nominee) the QT Property pursuant to the Acquisition for a total purchase price of approximately $9,250,000 to be paid in cash upon closing, subject to the usual adjustments, free and clear of any hypothec.

Pursuant to the terms of the Offer, a non-refundable amount of $25,000 has been deposited in trust with counsel for the Corporation to be applied against the purchase price.

The QT Property can accommodate approximately 250 students, offers single and double occupancy units and meets the highest standards of the industry. It is a modern concrete building, built in 2005, which is located on the campus of CEGEP St-Laurent and adjacent to Vanier College in the borough of Saint-Laurent. The area is quiet and safe, in close proximity to public transportation and has an array of services nearby. The QT Property is expected to generate net operating income of approximately $727,000 for the financial year ending in 2007.

The REIT intends to use the balance of the proceeds of the proposed Public Offering to identify and evaluate additional properties and to satisfy (in whole or in part) the purchase price for subsequent acquisitions.

Upon completion of the Qualifying Transaction, the resulting issuer, being the REIT, is expected to meet all of the minimum listing requirements of the Exchange for a real estate issuer.

The Arrangement requires the approval of shareholders of the Corporation by special resolution and on a "majority of the minority basis" due to the fact that the Canada Business Corporations Act requires shareholders to approve the plan of arrangement, which is a "business combination" as defined under Exchange Policy 5.9 - Insider Bids, Issuer Bids, Business Combinations and Related Party Transactions.

It is anticipated that Mr. Claude Blanchet will be President and Chief Executive Officer and that Mr. Pierre L. Martel will be Vice President and Chief Financial Officer of the REIT.

Except for the nomination of at least one non-beneficiary trustee, it is anticipated that there will be no changes to the insiders as a result of the Qualifying Transaction.

Insiders of the Resulting Issuer (as defined in the CPC Policy) are expected to be Messrs. Claude Blanchet, Pierre L. Martel, Francois Bourbonnais, Pierre Laflamme, Dino Fuoco, Philippe Morin and Frank A. Dottori.

Each of Messrs. Blanchet, Martel, Bourbonnais, Laflamme, Fuoco, Morin and Dottori is a current director of the Corporation, will be an initial trustee of the REIT (prior to the Arrangement) and is proposed to be elected as a trustee of the REIT at the special meeting.

The backgrounds of the directors of the Corporation are contained in the final prospectus of the Corporation dated May 17, 2007 which is available on the SEDAR website at www.sedar.com.

The Corporation will apply for a waiver of the sponsorship requirement for the Qualifying Transaction.

The completion of the Qualifying Transaction is conditional upon, among other things, the completion of the Public Offering (unless the trustees of the REIT arrange for an alternative financing in order to meet the Exchange's minimum listing requirements), shareholders' approval by special resolution and on a majority of the minority basis, receipt of a final order of the Superior Court of Quebec and final Exchange acceptance of the Qualifying Transaction.

The Corporation has requested that trading on its Shares be halted until the closing of the Qualifying Transaction.

It is the Corporation's expectation that the closing of the Qualifying Transaction will occur on or about September 30, 2007.

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 proposed transaction, any information released or received with respect to the proposed 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.

Contact Information

  • Capital BLF Inc.
    Mr. Pierre L. Martel
    Chief Financial Officer and Secretary
    514-238-2199