CHC Realty Capital Corp.
TSX VENTURE : CHC

October 06, 2014 08:15 ET

CHC Realty Capital Corp. Announces Property Acquisition and Private Placement

TORONTO, ONTARIO--(Marketwired - Oct. 6, 2014) - CHC Realty Capital Corp. ("CHC" or the "Company") (TSX VENTURE:CHC) is pleased to announce that it has entered into an arm's length agreement (dated August 7, 2014 and amended by a waiver and amending agreement dated October 3, 2014) to acquire a property in London, Ontario. The property is a 17 storey apartment building located at 675 Richmond Street in downtown London, approximately 2.0 km from the University of Western Ontario. The purchase price for the property is $55.0 million, subject to adjustments and excluding acquisition costs. CHC has paid the vendor $1.0 million in non-refundable deposits in respect of the acquisition (except in the event of a default by the vendor).

The building, which is fully condominiumized and has 368 beds in 187 apartments as well as 12,642 s.f. of commercial space, was built in 1998 and is currently undergoing renovations which are scheduled to be completed in 2015. At present, the property is approximately 84% occupied (including vacant units under renovation). Average monthly rents for the property are approximately $1,670 per unit and the property generates annual effective gross income of approximately $3.8 million. CHC expects year one net operating income of approximately $2.75 million, resulting in a going-in capitalization rate of approximately 5.05%. The vendor has agreed to pay CHC an income guarantee on monthly gross rental income from the property based on 96% occupancy for a period of one year from the closing date.

"675 Richmond is a trophy asset which we are pleased to be able to acquire for CHC's student housing business" said Mark Hansen, President and CEO of CHC. "It is an institutional quality building located close to one of Canada's pre-eminent universities and is in the heart of downtown London where students want to live. Although it has been rented mainly to students to date, it has still been run as a traditional apartment building and we believe that we can add value by focusing the building solely on student rental. Following the acquisition, we intend to implement a student-oriented marketing and operations strategy, including adding additional beds, furnishing all units to appeal to students, adopting new leasing strategies, improving active property management and executing upon other value-added plans with the objective of growing net operating income. Although we are continuing to evaluate CHC's plans for the property post-acquisition, we are confident that a student housing strategy for the building will lead to improved performance and increased value."

CHC also announces that in connection with the acquisition, it intends to complete a brokered private placement to raise a minimum of $8.15 million and a maximum of $10.85 million through the issuance of a minimum of 74,090,910 units and a maximum of 98,636,364 units at a price of $0.11 per unit. Each unit will consist of one common share of the Company and one-half of one common share purchase warrant of the Company. Each whole warrant will be exercisable to acquire one common share of the Company at an exercise price of $0.13 per share for a period of 24 months from issuance.

The net proceeds of the private placement will be used for the acquisition of the property, together with: (i) a first mortgage on the property from GE Canada Real Estate in the amount of $33.0 million bearing interest at the rate of 3 Month Banker's Acceptance Rate plus 2.15% (currently 3.37%) per annum, maturing in three years from closing and payable with respect to interest only; (ii) an additional first mortgage on the property from GE Canada Real Estate in the amount of $5.5 million bearing interest at the rate of 6.0% per annum, maturing in one year from closing and payable with respect to interest only; and (iii) a second mortgage on the property from Timbercreek Mortgage Servicing Inc. in the amount of $8.25 million bearing interest at the rate of 12.0% per annum for the first six months and increasing to 14.0% thereafter, maturing seven months from closing and payable with respect to interest only.

In the event that the Company does not raise the maximum proceeds under the private placement, it will satisfy any balance of the purchase price for the property through a credit facility from Timbercreek Mortgage Servicing Inc. in an amount up to $2.5 million bearing interest at the rate of 14.0% per annum for the first six months and increasing to 18.0% thereafter, maturing seven months from closing and payable with respect to interest only.

Subsequent to the acquisition of the property, CHC intends to seek additional financing in order to de-leverage the Company, potentially acquire additional properties which it is currently reviewing and potentially internalize asset management on certain separately owned student housing properties.

The placement will be conducted by a syndicate of agents led by Raymond James Ltd. In connection with the placement, CHC will pay the agents a cash commission equal to 7.0% of the gross proceeds of the placement as well as a $35,000 corporate finance fee. The private placement is expected to close on or about November 10, 2014.

The units will be offered by way of private placement in all of the provinces of Canada, and in jurisdictions outside of Canada. Pursuant to applicable Canadian securities laws, all securities issued pursuant to the private placement will be subject to a statutory hold period expiring on date that is four months and a day from the date of closing of the private placement.

The vendor of the property, Kanco-673 Richmond Ltd. and Kanco-675 Richmond Ltd. collectively, is arm's length to CHC. The acquisition is expected to close on or before November 17, 2014.

The acquisition and the private placement are subject to the receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange.

The securities described herein have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States unless registered under the Act or unless an exemption from registration is available.

About CHC Realty Capital Corp.

CHC Realty Capital Corp. is an owner and operator of student housing properties which is focused on acquiring high quality properties in close proximity to universities and colleges in primary and well understood secondary markets in Canada.

Cautions Regarding Future Plans and Forward Looking Information

This press release contains forward-looking information within the meaning of Canadian securities laws. Such information includes, without limitation, information regarding the completion of the proposed transaction and the business strategies of CHC. Although CHC believes that such information is reasonable, it can give no assurance that such expectations will prove to be correct. Forward looking information is typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate and similar expressions, or are those, which, by their nature, refer to future events. CHC cautions investors that any forward-looking information provided by CHC is not a guarantee of future results or performance, and that actual results may differ materially from those in forward looking information as a result of various factors, including, but not limited to: CHC's ability to complete the proposed transactions; the state of the real estate sector in the event the proposed transactions are completed; recent market volatility; CHC's ability to secure the necessary financing or to be fully able to implement its business strategies; and other risks and factors that CHC is unaware of at this time. The reader is referred to CHC's continuous disclosure documents for a more complete discussion of risk factors relating to CHC and their potential effects, copies of which may be accessed through CHC's profile on SEDAR at www.sedar.com.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there by any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

The TSX Venture Exchange ("TSXV") has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release. Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • CHC Realty Capital Corp.
    Mark Hansen
    President and Chief Executive Officer
    (647) 288-9355
    mhansen@chcrealty.ca

    CHC Realty Capital Corp.
    Robert Waxman
    Chief Financial Officer
    (647) 288-9375
    rwaxman@chcrealty.ca