CHARTER REALTY HOLDINGS LTD.
TSX VENTURE : CRH.P

CHARTER REALTY HOLDINGS LTD.

December 22, 2006 15:23 ET

Charter Realty Holdings Ltd. 'TSX-V:CRH.P' Announces Agreement in Principle to Acquire Commercial Properties Leased to Rona Inc. as its Proposed Qualifying Transaction

TORONTO, ONTARIO--(CCNMatthews - Dec. 22, 2006) - Charter Realty Holdings Ltd. (the "Company")(TSX VENTURE:CRH.P) a capital pool company listed on the TSX Venture Exchange (the "Exchange"), is pleased to announce it has entered into an agreement in principle with Hensall District Co-operative, Incorporated (the "Vendor"), which is resident in Ontario, for the acquisition of three commercial properties from the Vendor. This acquisition is the Company's proposed Qualifying Transaction under Exchange Policy 2.4 - Capital Pool Companies (the "CPC Policy").

The proposed Qualifying Transaction involves two components: (i) a private placement of up to 15,000,000 common shares of the Company at a price of $0.20 per common share (the "Private Placement"), and (ii) the purchase (the "Acquisition") of three free-standing commercial retail properties (the "QT Properties") pursuant to an offer to purchase between the Company and the Vendor dated December 22, 2006 (the "Offer"). The Vendor is at arm's length to the Company, and the proposed Qualifying Transaction is therefore not a "Non Arm's Length Qualifying Transaction" as defined under the CPC Policy, and does not require shareholder approval.

Pursuant to the Acquisition, the Company will acquire the QT Properties, which are located in Exeter, Seaforth, and Zurich, Ontario, for an aggregate cash purchase price of $2,080,000 (subject to customary adjustments). The Company paid a deposit of $25,000 at the time of executing the Offer, which becomes non-refundable after January 30, 2007. An additional deposit (the "Additional Deposit") of $25,000 will be payable by the Company in the event that the Company extends the scheduled date of closing of the Acquisition past March 1, 2006. The Additional Deposit is subject to Exchange approval.

Each of the QT Properties is currently leased to Rona Inc. Collectively, the QT Properties comprise more than 34,000 square feet of finished retail space, with an additional 52,000 square feet of enclosed warehouse space.

Collectively, the QT Properties generated annual net operating income ("NOI") of $211,549 (un-audited) for the year ended July 31, 2006, as disclosed in the annual financial statements for the QT Properties, which are being audited in connection with the Offer. The QT Properties are leased on a net lease basis to Rona Inc. for an initial term of fifteen (15) years, expiring on March 12, 2015. Pursuant to the terms of the lease, the rent payable on the QT properties will increase by 10% as of March 13, 2010. Rona Inc., and its predecessor Cashway Building Centres Ltd., have been leasing the QT Properties since March 13, 2000. Rona Inc. has one five (5) year renewal option on each property at fair market rents, with six (6) months written notice required to exercise the option.

Under the lease Rona Inc. pays all common area charges associated with the QT Properties and is obligated to maintain and repair the premises - the landlord is not responsible for any costs, charges, expenses or outlays of any nature, and realty taxes are paid by the landlord and recovered from the tenant.

Pursuant to the Private Placement, the Company intends to raise gross proceeds of up to $3,000,000 that will be used to: (i) complete the Acquisition; (ii) pay for the costs associated with the Acquisition and the Private Placement; (iii) identify and pay deposits on further real estate properties; and (iv) finance general corporate expenditures.

At this time, the Company does not plan to engage the services of a registered dealer or adviser to act on its behalf with respect to the Private Placement; however, it reserves the right to do so in the future, subject to the approval of the Exchange. Insiders of the Company (in particular, C.A. Bancorp Inc., the Company's principal shareholder and an existing control person) are expected to participate in the Private Placement, for up to $2,500,000. The Private Placement will not result in the creation of a new control person.

The completion of the Qualifying Transaction is conditional upon, among other things, the completion of the Private Placement and final Exchange acceptance of the Qualifying Transaction. It is the Company's expectation that the closing of the Qualifying Transaction will occur on or before March 1, 2007. Upon completion of the Qualifying Transaction, the Company is expected to meet all minimum listing requirements for a Real Estate Issuer.

It is anticipated that there will be no changes to the insiders of the Company as a result of the Qualifying Transaction. The officers of the Company are John F. Driscoll, President and Chief Executive Officer, Ari Silverberg, Chief Operating Officer, Paolo De Luca, Chief Financial Officer, Kevin Cohen, General Counsel and Corporate Secretary, and Jeff Lawson, Assistant Secretary. The directors of the Company are John F. Driscoll, Mark Gardhouse, Richard Zarzeczny, and John Nestor. With the exception of Messrs. Gardhouse, Silverberg, De Luca, and Cohen, the backgrounds of the directors and officers of the Company are contained in the management information circular of the Company dated May 24, 2006 which is available on the SEDAR website at www.sedar.com.

Mr. Silverberg joined the Company as its Chief Operating Officer in the fall of 2006. Mr. Silverberg has significant experience in negotiating, structuring and managing real estate transactions. Prior to joining the Company, Mr. Silverberg worked as a senior director at Chicago-based General Growth Properties Inc., responsible for the evaluation, acquisition and development of retail and mixed-use real estate opportunities. Previously, he served as a member of RioCan REIT's development group in Toronto. Mr. Silverberg earned his MBA in 2001 from the Wharton School at the University of Pennsylvania. He also holds a LL.B. from the University of British Columbia and a BA from the University of Western Ontario.

Mr. De Luca is the Chief Financial Officer the Company. In addition, Mr. De Luca serves as the Chief Financial Officer of C.A. Bancorp Inc. Previously, Mr. De Luca was a Senior Manager at a Canadian chartered bank. He worked in a risk management capacity, focusing on derivatives, structured products and other trading business lines within the securities division. Prior to that, Mr. De Luca was a Senior Manager at the public accounting firm of Ernst & Young LLP. He specialized in accounting for complex transactions, derivatives, securitizations and long-term investments including private equity transactions. Mr. De Luca began his career at Arthur Andersen LLP before moving to Deloitte & Touche LLP, where he was engaged in various assurance and business advisory capacities, serving primarily financial institutions including large Canadian, United States and international banks and investment dealers. Mr. De Luca earned a Bachelor of Business Administration degree from the Schulich School of Business at York University. In addition, he holds a Chartered Accountant designation and is a CFA Charterholder. Mr. De Luca is a member of the Institute of Chartered Accountants of Ontario as well as the CFA Institute.

Mr. Cohen is General Counsel and Corporate Secretary of the Company. He also acts as General Counsel and Corporate Secretary of C.A. Bancorp Inc. Previously, Mr. Cohen practised corporate and securities law with Torys LLP from 2004 to 2006. From 2002 to 2004, Mr. Cohen attended the Richard Ivey School of Business at the University of Western Ontario, graduating in 2004 with a Master of Business Administration degree. From 1994 to 2002, Mr. Cohen practised law in Vancouver after obtaining his Bachelor of Laws degree in 1994 from the University of British Columbia.

Mr. Gardhouse is the President of the C.A. Bancorp Inc. Mr. Gardhouse has over 22 years experience as a merchant banker both at financial institutions and as a principal. From 1998 to 2005, Mr. Gardhouse was Managing Director of Corporate Finance of Roynat Capital Inc.'s mid-market internal equity buyout group. In this position, he headed a team of professionals located in Toronto, Calgary and Montreal to lead majority investments and acquisitions in the Canadian mid-market sector. Mr. Gardhouse has experience in various industries including distribution, auto parts manufacturing, heavy industrial products and food manufacturing and wholesaling. Prior to his tenure at Roynat Capital Inc., Mr. Gardhouse negotiated and structured financial investments and acquisitions for different firms and banks, including Canadian chartered banks, Lincoln Capital Corp. and First Chicago Inc. He received his Bachelor of Arts (Honours) degree in Economics from the University of Toronto and his Master of Business Administration degree from the Richard Ivey School of Business at the University of Western Ontario in 1983.

C.A. Bancorp Inc. ("CAB") currently owns 42% of the issued and outstanding Common Shares of the Company. CAB is a merchant bank established to provide investors with access to a range of private equity and other alternative investment opportunities typically available only to large institutional and high-net-worth investors. CAB is focused on investments, either directly or through entities managed and/or sponsored by it, across a broad range of industries. CAB's focus is on investment opportunities in the industrials, real estate, infrastructure and financial services sectors. Further information regarding CAB is available on the SEDAR website at www.sedar.com.

Upon the completion of the Qualifying Transaction, it is management's intention to acquire further real estate properties, raise additional funds in the marketplace and to convert the Company into a real estate investment trust (a "REIT"), subject to receipt of all necessary approvals, including, where applicable, the approval of the Exchange and the shareholders of the Company.

This press release contains forward-looking statements with respect to the Acquisition, the Private Placement, and matters concerning the business, operations, strategy, and financial performance of the QT Properties and the Company. These statements generally can be identified by use of forward looking word such as "may", "will", "expect", "estimate", "anticipate", "intends", "believe" or "continue or the negative thereof or similar variations. The completion of the Acquisition and/or the Private Placement, the possible conversion of the Company into a REIT and the future business, operations and performance of the QT Properties and the Company discussed herein could differ materially from those expressed or implied by such statements. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including that the transaction contemplated herein is completed. Forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the ability of the Company to obtain necessary financing to complete the Acquisition or to satisfy the requirements of the Exchange with respect to the Acquisition or the Private Placement. Additional, important factors that could cause actual results to differ material from expectations include, among other things, general economic and market factors, local real estate conditions, including the development of properties in close proximity to the QT Properties, competition, changes in government regulation, dependence on tenants' financial conditions, interest rates, the availability of equity and debt financing, environmental and tax related matters, and reliance on key personnel. The cautionary statements qualify all forward-looking statements attributable to the Company and persons acting on its behalf. Unless otherwise stated, all forward looking statements speak only as of the date of this press release and the Company has no obligation to update such statements except as required by law.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the filing statement to be prepared in connection with the transaction, any information released or received with respect to the 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 Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Contact Information

  • Charter Realty Holdings Ltd.
    Ari Silverberg
    Chief Operating Officer
    (416) 861-8729
    (416) 364-2398 (FAX)