European Commercial Real Estate Limited
TSX VENTURE : ERE.P

November 18, 2016 13:06 ET

European Commercial Real Estate Limited Announces Proposed Acquisition of Dusseldorf Property as Qualifying Transaction

TORONTO, ONTARIO--(Marketwired - Nov. 18, 2016) -

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European Commercial Real Estate Limited (together with its subsidiaries, as the context may require, the "Corporation") (TSX VENTURE:ERE.P), a capital pool company (as defined in Policy 2.4 (the "CPC Policy") of the TSX Venture Exchange (the "TSXV") Corporate Finance Manual), is pleased to announce that it has entered into a definitive agreement of purchase and sale (the "Acquisition Agreement") with Kilrush S.à r.l. (the "Vendor") dated November 18, 2016, with respect to the acquisition of an initial commercial office property located in Düsseldorf, Germany (the "QT Property"). Subject to the terms and conditions of the Acquisition Agreement and the completion of certain conditions precedent, including the receipt of all necessary regulatory approvals, including TSXV approval and the filing of a prospectus with the Ontario Securities Commission, the proposed transaction will qualify as the Corporation's "Qualifying Transaction" as defined in the CPC Policy.

Pursuant to the terms of the Acquisition Agreement, the Corporation will acquire the QT Property from the Vendor for an aggregate purchase price of approximately EUR11 million, subject to customary adjustments and standard real estate acquisition terms. The purchase price for the QT Property is expected to be financed primarily by approximately EUR7.5 million in secured mortgage financing with a German bank with the balance of the purchase price satisfied in cash from the Corporation's existing funds and the proceeds of the Private Placement (as defined below). Interest on the new mortgage financing is expected to be incurred by the Corporation at a cost per annum of 1.1% margin plus Euribor for a seven-year term, with an expected amortization of 2.5% per annum over the seven-year term. The mortgage will be secured by a first-priority lien on the QT Property. The acquisition of the QT Property is expected to close in Q1 2017.

Description of the QT Property

The QT Property is located at Bismarckstraße 101 in Düsseldorf, Germany. Düsseldorf is the capital city of the German state of North Rhine-Westphalia and is located in the centre of the Rhine-Ruhr region. The city of Düsseldorf has a population of approximately 600,000 people and is the seventh most populous city in Germany.

The QT Property was originally built in 1969 and subsequently refurbished in 2001, following which it has been operated and occupied on a rental basis. The building comprises approximately 5,263 square meters of leasable space, of which approximately 4,402 square meters is office space and approximately 861 square meters is storage space, plus approximately 20 underground parking spaces. The QT Property is currently 99.3% occupied, primarily by medical tenants and a medical insurance company.

The vendor of the QT Property is Kilrush S.à r.l., a corporation incorporated under the laws of Luxembourg. The Vendor is not related to the Corporation or any of its directors and officers. As such, the acquisition will not be a Non-Arm's Length Qualifying Transaction (as that term is defined in the CPC Policy) and approval of the Corporation's shareholders will not be required for the completion of the acquisition. The principal shareholder of the Vendor is Cornerstone Düsseldorf Holdings SA, a corporation incorporated under the laws of Luxembourg.

Under German law, the acquisition of the QT Property by the Corporation is conditional upon the expiry of the local municipality's right to purchase the QT Property, which is expected to expire on, or be waived prior to, the date that is two calendar months after the execution and filing of the Acquisition Agreement with the City of Düsseldorf. Management does not expect the local municipality to exercise the foregoing right or purchase.

Asset Management Agreement

In connection with the acquisition of the QT Property, the Corporation intends to enter into an asset management agreement with Maple Knoll Capital Ltd. (the "Manager"), pursuant to which the Manager will be the manager of the Corporation and will provide the strategic, advisory, asset management, project management, construction management and administrative services necessary to manage the operations of the Corporation. The Manager will also supervise and oversee the property manager of the QT Property, which the Corporation expects to engage on market terms. The Manager is a London, England-based private equity investor, asset manager and advisor with a primary focus on real estate investment opportunities. Phillip Burns (Chief Executive Officer and director of the Corporation) and Ian Dyke (Chief Financial Officer of the Corporation) are principals of the Manager and collectively own 31% of the common shares of the Corporation prior to completion of the Qualifying Transaction and the Private Placement. The independent directors of the Corporation collectively own more than 36% of the issued and outstanding common shares of the Corporation prior to completion of the Qualifying Transaction and the Private Placement.

Concurrent Private Placement

In connection with the Qualifying Transaction, the Corporation expects to enter into subscription agreements with accredited investors or other exempt purchasers pursuant to which such purchasers will agree to purchase, on a private placement basis, an aggregate of 30,000,000 Common Shares at a price of $0.10 per Common Share, subject to TSXV approval, for gross proceeds of $3,000,000 (the "Private Placement"). Closing of the Private Placement is conditional upon, and is expected to occur substantially concurrently with, the closing of the Qualifying Transaction.

Directors and Officers

There will be no changes to the directors and officers of the Corporation as a result of the Qualifying Transaction. The directors and officers of the Corporation are Phillip Burns (Chief Executive Officer and director), Ian Dyke (Chief Financial Officer), Thomas Schwartz (director), David Ehrlich (director), Frederic Waks (director) and Jan Arie Breure (director). Additional information about the directors and officers of the Corporation is contained in the prospectus of the Corporation dated October 6, 2016 relating to its initial public offering, which is available under the Corporation's profile on SEDAR at www.sedar.com.

General

In connection with the closing of the acquisition of the QT Property and the Private Placement, the Corporation will apply to meet the "Tier 1" initial listing requirements of the TSXV for a real estate issuer.

Following the acquisition of the QT Property the Corporation intends to carry on business as an owner and operator of commercial office properties located in Europe and, at an appropriate time, expects to effectively convert the Corporation into a real estate investment trust focused on commercial office properties located in Europe. There can be no assurances that the Corporation will convert into a real estate investment trust in the future and no representation is made to that effect.

The Corporation's head office address is 199 Bay Street, Suite 5300, Commerce Court West, Toronto, Ontario M5L 1B9.

The information in this news release includes certain information and statements about management's view of future events, expectations, plans and prospects that constitute forward looking statements. These statements are based upon assumptions that are subject to significant risks and uncertainties. Because of these risks and uncertainties and as a result of a variety of factors, the actual results, expectations, achievements or performance may differ materially from those anticipated and indicated by these forward looking statements. Forward-looking statements in this news release include, but are not limited to, the ability of the Corporation to complete a Qualifying Transaction or the Private Placement. Any number of factors could cause actual results to differ materially from these forward-looking statements as well as future results. Although the Corporation believes that the expectations reflected in forward looking statements are reasonable, it can give no assurances that the expectations of any forward looking statements will prove to be correct. Except as required by law, the Corporation disclaims any intention and assumes no obligation to update or revise any forward looking statements to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such forward looking statements or otherwise.

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.

Completion of the Qualifying Transaction and the Private Placement is subject to a number of conditions, including but not limited to, TSX Venture Exchange Inc. acceptance and if applicable pursuant to TSX Venture Exchange Inc. Requirements, majority of the minority shareholder approval. Where applicable, the Qualifying Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Qualifying Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the prospectus to be prepared in connection with the Qualifying Transaction, any information released or received with respect to the Qualifying 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 Qualifying Transaction and has neither approved nor disapproved the contents of this press release.

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