Carlton Trail Limited Partnership

December 05, 2006 18:45 ET

Carlton Trail Limited Partnership to Purchase Westcan Income '1' Ltd

CALGARY, ALBERTA--(CCNMatthews - Dec. 5, 2006) - Carlton Trail Properties Ltd. (the "Carlton GP"), the General Partner of Carlton Trail Limited Partnership ("Carlton Trail") (TSX VENTURE:CTP.UN.A), is pleased to announce that Carlton Trail is purchasing Westcan Income (1) Ltd. ("Westcan GP") for cash consideration in the amount of $500,000 and scheduled to close on December 29, 2006. Westcan GP, a private Alberta corporation, is the general partner of Westcan Income Limited Partnership I ("Westcan LP"). In a transaction which closed on September 26, 2006, Carlton Trail acquired 100% of the issued and outstanding partnership units of Westcan LP. Westcan LP currently has cash holdings of approximately $2,170,000, in addition to certain assets and liabilities resulting from a defeased mortgage. The Transaction will allow Carlton Trail the option of distributing to its unitholders additional funds from Westcan LP. This is because, as Westcan GP will be wholly-owned by Carlton Trail, Westcan GP will no longer require the same security requirements it currently requires from Westcan LP. This will allow Carlton Trail to pool funds and realize savings.

Further, the Transaction will allow Carlton Trail to capture the full economic value from the activities of Westcan LP, including the projected fees to Westcan GP in the range of $677,419 to $862,009 up to July 28, 2013. The Transaction would also give Carlton Trail unencumbered access to use of the Westcan LP name, which holds considerable value as it is seen as a reliable and successful investment partnership by the many investors who formerly held units in Westcan LP, and the financial advisors of such investors. Upon closing of the Transaction, Carlton Trail may use Westcan LP as a new strategic investment partnership. If so, the Transaction would save approximately $50,000 to $100,000 in legal and other organizational costs.

Westcan GP is 100% owned by Westcan Income Corp., which is 50% owned by Henry Bustard and 50% owned by Calgary Capital Inc. Calgary Capital Inc. is 100% owned by Geoffrey Fulton. Mr. Fulton is a director and senior officer of Carlton Trail Properties Ltd., which is the general partner of Carlton Trail. Further, Mr. Bustard and Mr. Fulton each directly and/or indirectly own 42.91% of the outstanding Class A units of Carlton Trail. Mr. Fulton directly and/or indirectly owns 52.61% of the outstanding Class B preferred units, and Mr. Bustard directly/indirectly owns 8.2% of the outstanding Class C preferred units. By way of these associations, Mr. Fulton and Mr. Bustard have material interests in the Transaction. The Transaction will not have any effect on the percentage of securities directly or indirectly held by Messrs. Fulton or Bustard in the above-noted entities, with the exception that they will no longer hold (directly or indirectly) any securities in Westcan GP.

The board of directors of Carlton GP (the "Board") undertook a review process of the Transaction which included a review of information concerning the Transaction and discussion as to the economic benefit to Carlton Trail. The Board was provided with a detailed description of the Transaction, supporting financial analysis, independent assessments of the value of the Transaction by Colliers International Property Consultants, Inc. ("Colliers") and Valco Consultants Inc. ("Valco"), a detailed description of the effect of the Transaction on Carlton Trail and a description of the material interests of insiders in the Transaction. Subsequently, a meeting of the Board was held on November 29, 2006 to discuss and vote on the Transaction. The Board's two independent directors voted in favour of the Transaction, with the remaining director, Mr. Fulton, abstaining due to his material interest in the Transaction.

The Transaction is exempt from the formal valuation and minority approval requirements of 61-501 in accordance with sections 5.5(2) and 5.7(2), Fair Market Value Not More Than 25% of Market Capitalization. Carlton Trail's current market capitalization is approximately $4,467,913, while the fair market value of the consideration to be paid is $500,000 (or approximately 11.19% of Carlton Trail's current market capitalization).

An assessment of the value of the Transaction was prepared on November 30, 2006 by Colliers and provided to the Board. The assessment was premised on a letter of Valco dated October 30, 2006. Both Colliers and Valco are independent of all interested parties to the Transaction. The Colliers assessment was based on the following assumptions:

1. The investment would have first year yields equaling 8.5% to 9.0% (this assumption is consistent with those contained in the Valco letter, which showed first year yields of 8.5% to 9.5%).

2. Consideration for the purchases consisting of 100% investment of the funds in Westcan LP, and third party debt financing.

3. The fees to be paid to Westcan GP will be based on the current formula contained in the Limited Partnership Agreement.

Further, the Colliers assessment was based on a period of 6.33 years, which is consistent with the remaining term for fees of Westcan GP contained in the Limited Partnership Agreement. Fees were also discounted in the Colliers assessment at 8.0% to determine the value of the transaction.

The total fees shown in the Colliers assessment were $677,419 to $862,009 with a discounted transaction value of $506,464 to $645,856.

The above-referenced documents can be inspected at the offices of Carlton Trail as specified under Item 1. A copy of the foregoing documents will be sent to any securityholder upon request and without charge by contacting the Executive Officer specified under Item 8.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Carlton Trail Properties Ltd.
    Henry Bustard
    (403) 250-6688
    Carlton Trail Properties Ltd.
    #1, 1715-27th Ave. NE
    Calgary, Alberta T2E 7E1
    (403) 250-6688