SOURCE: Delavaco Residential Properties Corp.

Delavaco Residential Properties Corp.

September 01, 2015 14:44 ET

Delavaco Residential Properties Corp. Reports Possible Transaction, Director Resignation and Second Quarter Financial and Operating Results

TORONTO, ON--(Marketwired - September 01, 2015) - Delavaco Residential Properties Corp. ("Delavaco" or the "Company") (TSX VENTURE: DVO.U) (OTCQX: DELAF) is pleased to announce the following update.

Possible Transaction:

Delavaco would like to announce that it has entered into discussions with a third party private equity group regarding a possible transaction that would see the Company refocused on acquisitions of income producing real estate and real estate debt and equity investments located in major cities across the U.S. The third party is currently in due diligence with the Company and there can be no guarantee that a transaction will be consummated.

Director Resignation and Restitution:

The Company would also like to announce the resignation of Andy DeFrancesco as a Director. Given the unsuccessful results experienced by the Company including those reported today, Mr. DeFrancesco has voluntarily offered to tender to the Company 3 million common shares for cancellation at no cost and the repayment of an advisory fee payable to Mr. DeFrancesco totaling $352,500 by June 30, 2016. The Company accepts this offer and is thankful for this voluntary gesture.

Second Quarter Financial Results:

*All amounts stated in USD, unless otherwise stated.

Corporate:

  • On June 30, 2015, Delavaco completed a $2,500,000 partial redemption of its original $25,000,000 7.50% secured notes, leaving $20,000,000 in principal remaining. As of June 4, 2015, the Company is not exposed to any penalties for early redemption.

Portfolio:

  • Fair value of investment properties and assets held for sale as at June 30, 2015, was $87,280,887, of which $51,885,400 is the single-family portfolio and $35,395,487 is the multi-family portfolio.
  • As at June 30, 2015, Delavaco owned 790 single-family units and 311 multi-family units bringing the total unit count to 1,101.
  • Aggregate portfolio occupancy as at June 30, 2015, was 65%. Single-family portfolio occupancy was 53% while multi-family portfolio occupancy was 97%.
  • Average monthly rent for the aggregate portfolio was $944. Single-family average rent was $926 while average rent for the multi-family portfolio was $968.

Operational and Financial Performance:

  • Revenue for the three months ended June 30, 2015, was $2,005,120, compared to $2,561,291 for the three months ended June 30, 2014.
  • During the three months ended June 30, 2015, Delavaco sold 24 single-family units located in Florida for an aggregate sale price of approximately $2,200,000.

Occupancy (as at June 30, 2015):

The following table provides a leasing performance summary of our owned and operated portfolio as at June 30, 2015:

 
Region
 
 
Number
of Units
 
 
Units
Leased
 
 
Units
Vacant
 
 
 
Occupancy
 
 
Average
Monthly Rent
Florida single-family(1)  356  136  220  38.2%  $932
Georgia single-family  312  194  118  62.2%   830
New Jersey single-family(1)  122  86  36  70.5%   1,132
Florida multi-family  153  150  3  98.0%   1,097
Texas multi-family  158  152  6  96.2%   842
Total - owned properties  1,101  718  383  65.2%  $944
Properties managed (not owned)  316  282  34  89.2%    
Total - owned and operated  1,417  1,000  417  70.6%    

(1) Includes assets held for sale

Summary of Properties:

Quarter Total   2015 Q2   2015 Q1   2014 Q4   2014 Q3
Single-Family Doors: Florida(1)    356    382    399    434
Single-Family Doors: Georgia    312    312    312    312
Single-Family Doors: New Jersey(1)    122    122    112    108
Multi-Family Units: Florida    153    153    153    153
Multi-Family Units: Texas    158    158    158    158
Total Units    1,101    1,127    1,134    1,165
Fair Value of Properties   $87,280,887   $101,353,631   $102,166,871   $109,227,102
Average Fair Value per Unit   $79,274   $89,932   $90,094   $93,757

(1) Includes assets held for sale

Fair Value Write downs:

The fair value loss on the portfolio for the three months ended June 30, 2015, was $12,561,535. This significant loss is a result of an analysis of our recent sales and the condition of the single-family home portfolio.

As part of an accelerated sales process on the single-family portfolio during Q2 2015, the Company reclassified a significant portion of its single-family homes as held for sale. This reclassification results in assets being recognized at their estimated net sale proceeds value which includes an 8% reduction in value to account for all closing costs. This valuation methodology was applied to the entire single-family portfolio as the Company feels it is a more appropriate way to value this particular asset class given that it expects to classify such assets as held for sale during the next year.

New Jersey Notes:

On March 26, 2014, the Company completed the acquisition of 96 residential units across 19 multi-family properties in Paterson, New Jersey (the "New Jersey Portfolio"). As part of the acquisition, the Company issued promissory notes dated May 1, 2015 to Petrogas Holdings Inc. ("Petrogas") payable in the amount of $3,188,685 (the "New Jersey Notes"). The New Jersey Notes bear interest at a rate of 5.5% per annum and matured on November 1, 2014. The parties subsequently agreed the New Jersey Notes would not be called for the time being and remain on demand terms. Commencing July 2, 2015, the parties were scheduled to enter into an extension agreement whereby the New Jersey Notes would roll on a bi-monthly basis provided the parties mutually agree to such extensions on a bi-monthly basis, failing which outstanding amounts on the New Jersey Notes will become immediately due and payable (the "Rolling Note"). The Company did not successfully enter into an extension agreement to convert to the Rolling Notes, as a result, the New Jersey Notes will continue to remain on an on demand basis. The Company is currently working to divest itself of the New Jersey Portfolio.

About Delavaco

Delavaco Residential Properties Corp. was formed on January 27, 2011 to take advantage of the U.S. housing crisis with the goal of significant capital appreciation through the recovery of the housing sector. Now a public company, Delavaco has its shares listed for trading on the TSX Venture Exchange and the OTCQX marketplace in the U.S. Delavaco is focused on the ownership and management of single and multi-family residential properties located principally in the south-eastern United States. Delavaco's real estate portfolio consists of single-family homes in Florida, Georgia and New Jersey, and multi-family buildings in Florida and Texas. Delavaco also manages a multi-family property located in Hollywood Florida. Delavaco's acquisition strategy has historically involved the identification and purchase of under- valued residential properties located in highly populated and dynamic urban centers within the lower to middle income demographic sector. Delavaco's security holders include some of the leading Canadian institutional investors and real estate holding companies.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: Certain information in this news release constitutes forward-looking statements under applicable securities law. Any statements that are contained in this news release that are not statements of historical fact may be deemed to be forward- looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expect", "intend" and similar expressions. Forward-looking statements in this news release include, but are not limited to, statements with respect to Delavaco's intended acquisition focus. Forward-looking statements necessarily involve known and unknown risks, including, without limitation, risks associated with general economic conditions; adverse industry events; marketing costs; loss of markets; volatility of real estate prices; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favourable terms; industry and government regulation; changes in legislation, income tax and regulatory matters; the ability of Delavaco to implement its business strategies; competition; currency and interest rate fluctuations and other risks.

Readers are cautioned that the foregoing list is not exhaustive. Readers are further cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are placed will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

Neither the Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • For more information please contact:

    Michael Galloro
    Chief Financial Officer
    Delavaco Residential Properties Corp.
    The Exchange Tower
    130 King Street West, Suite 2210
    Toronto, ON M5X 1A9
    Phone: (416) 362-4441
    E-mail: Email contact