European Commercial Real Estate Investment Trust

July 04, 2017 12:21 ET

European Commercial Real Estate Investment Trust Announces Highly Accretive Acquisition in Belgium, Filing of Preliminary Prospectus and Private Placement

TORONTO, ONTARIO--(Marketwired - July 4, 2017) -


European Commercial Real Estate Investment Trust ("EC-REIT" or the "REIT") (TSX VENTURE:ERE.UN) is pleased to announce that it has entered into an agreement (the "Acquisition Agreement") to acquire an approximately 169,000 square foot (15,700 square meter) office property in the central business district of Brussels, Belgium (the "Brussels Property") for approximately EUR40.7 million from an arm's length party. The Brussels Property is 100% leased to the Fédération Wallonie-Bruxelles ("FWB"), a government agency with an investment grade credit rating.

The Brussels Property was constructed in 2005 specifically for the FWB, which has approximately 7.5 years remaining on its initial lease. The acquisition is expected to be financed partially by way of a EUR25.5 million secured mortgage from a German bank with an approximate 1.8% interest rate for an approximate 7.5 year term.

Based upon an audited forecast and proposed financing pursuant to the Prospectus (as defined below) and the Private Placement (as defined below), the Brussels Property is expected to increase adjusted funds from operations ("AFFO") per Unit (as defined below) by more than 35%.

Following the acquisition of the Brussels Property, the REIT will own a portfolio of three stable, income-producing commercial properties (the "Properties"). The Properties are approximately 99.9% occupied and have a weighted remaining average lease term of approximately 7.4 years, with most leases having rental indexation clauses generating organic growth in cash flow. The Properties have minimal lease rollovers in the near-term, offering a stable lease profile. The Properties are, or will be, encumbered with first mortgages provided by certain European banks with a weighted average debt term of approximately 7.1 years and a weighted average interest rate of approximately 1.8%.

"The proposed acquisition demonstrates EC-REIT's ability to deliver our stated strategy of acquiring accretive, high-quality, non-prime core commercial properties with strong tenants and stable, growing cash flows," said Phillip Burns, CEO of EC-REIT. Mr. Burns continued, "Driven by management's relationships across Europe, EC-REIT intends to exploit a robust and accretive pipeline of potential acquisitions which will allow EC-REIT to continue its growth strategy."

Thomas Schwartz, EC-REIT's Chairman of the Board added, "I continue to believe that acquiring assets in Europe presents an attractive investment opportunity and EC-REIT's focus on non-prime core commercial properties located in strong markets, such as the Brussels Property, will deliver stable income and growth for EC-REIT and our Unitholders."

The Offering

In order to finance a portion of the purchase price of the Brussels Property including certain costs, the REIT has filed a preliminary short form prospectus (the "Preliminary Prospectus") for a marketed offering (the "Offering") of 7,000,000 units of the REIT (the "Units") in all of the provinces and territories of Canada. The Units will be offered at a price of $5.00 per Unit (the "Offering Price") for aggregate gross proceeds of $35,000,000 by a syndicate of underwriters (the "Underwriters") led by CIBC Capital Markets.

The REIT also has granted the Underwriters an over-allotment option (the "Over-Allotment Option") to purchase up to an additional 1,050,000 Units at the Offering Price, exercisable no later than 30 days after the closing of the Offering which, if exercised in full, would bring the gross proceeds of the Offering to $40,250,000.

The Private Placement

In connection with the Offering, the REIT also expects to enter into subscription agreements with non-Canadian exempt purchasers, including the officers of the REIT, pursuant to which such purchasers will agree to purchase, on a private placement basis, an aggregate of 105,000 Units at the Offering Price, subject to TSXV approval, for gross proceeds of $525,000 (the "Private Placement"). Closing of the Private Placement is conditional upon, and is expected to occur substantially concurrently with, the closing of the Offering. The net proceeds of the Private Placement will also be used to finance a portion of the purchase price of the Brussels Property.

The REIT will make an application to list the Units sold pursuant to the Offering and the Private Placement on the TSXV. Listing will be subject to the REIT fulfilling all listing requirements.

About European Commercial Real Estate Investment Trust

EC-REIT is an unincorporated, open-ended real estate investment trust focused on aggregating a bespoke portfolio of high-quality, non-prime core commercial real estate assets in key European markets with strong fundamentals. EC-REIT's strategy is designed primarily to deliver long-term, secure income with additional potential for capital appreciation. The REIT intends to grow by acquiring additional assets consistent with its strategy and which are expected to be accretive, on a per Unit basis, to its earnings. EC-REIT's Units are listed on the TSXV under the symbol ERE.UN.

Certain statements contained in this press release constitute forward-looking statements within the meaning of applicable Canadian securities laws which reflect the REIT's current expectations and projections about future results. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "expect", "intent", "estimate", "anticipate", "believe", "should", "plans", "predict", "estimate", "potential", "could", "likely", "approximately", "scheduled", "forecast", "variation" or "continue", or similar expressions suggesting future outcomes or events. They include, but are not limited to, statements with respect to expectations, projections or other characterizations of future events or circumstances, and the REIT's objectives, goals, strategies, beliefs, intentions, plans, estimates, projections and outlook, including statements relating to the REIT's plans and objectives of the REIT's Board of Trustees, or estimates or predictions of actions of tenants, suppliers, competitors or regulatory authorities and statements regarding the REIT's future economic performance. The REIT has based these forward-looking statements on its current expectations about future events. Some of the specific forward-looking statements in this press release include, but are not limited to, statements with respect to: (i) the REIT's intention to provide stable, sustainable and growing cash flows through investments in commercial real estate in Europe and the REIT's other stated objectives; (ii) the completion of the acquisition of the Brussels Property, the Offering and the Private Placement; (iii) the REIT's ability to execute its business and growth strategies with its asset manager's assistance where applicable, including by making additional acquisitions of properties in Europe when appropriate; and (iv) the REIT's ability to complete acquisitions on terms and conditions favourable to the REIT. The forward-looking statements made in this press release relate only to events or information as of the date on which the statements are made in this press release. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Such forward-looking statements are based on a number of assumptions that may prove to be incorrect.

Except as specifically required by applicable Canadian securities law, the REIT undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. These forward-looking statements should not be relied upon as representing the REIT's views as of any date subsequent to the date of this press release. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The factors identified above are not intended to represent a complete list of the factors that could affect the REIT. For more information, please see "Forward Looking Statements" and "Financial Instruments and Risks and Uncertainties" in the REIT's management discussion and analysis for the three-month period ended March 31, 2017 and European Commercial Real Estate Limited's management information circular dated March 20, 2017 as well as "Forward-Looking Information" in the Preliminary Prospectus.

The REIT uses financial measures regarding itself, such as AFFO, that do not have standardized meaning under the International Financial Reporting Standards ("IFRS") and may not be comparable to similar measures presented by other entities ("non-IFRS measures"). Further information relating to non-IFRS measures, is set out in the Preliminary Prospectus under the heading "Non-IFRS Measures" and "Non-IFRS Reconciliation".

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

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