Kingsway Arms Retirement Residences Inc.
TSX VENTURE : KWA.P

May 01, 2008 18:15 ET

Kingsway Arms Retirement Residences Inc. Announces an Agreement in Principle to Acquire a Retirement Facility as Its Proposed Qualifying Transaction

TORONTO, ONTARIO--(Marketwire - May 1, 2008) -

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.

Kingsway Arms Retirement Residences Inc. (TSX VENTURE:KWA.P) (the "Corporation" or "Kingsway"), a capital pool company listed on the TSX Venture Exchange (the "Exchange"), announced today its proposed Qualifying Transaction as defined under Exchange Policy 2.4 - Capital Pool Companies (the "CPC Policy").

The proposed Qualifying Transaction involves two components: (i) the purchase (the "Acquisition") by the Corporation of a seniors housing facility located at 145 Murray Drive, in Aurora, Ontario (the "Target Property") from Alert Care 87-2 Limited Partnership, a limited partnership created under the laws of the Province of Ontario (the "Vendor"), pursuant to the terms of an amended and restated agreement of purchase and sale dated as of April 25, 2008 (the "Agreement"); and (ii) a private placement of up to 4,000,000 common shares of the Corporation at a price of $0.25 per common share (the "Private Placement").

The Vendor is a reporting issuer in the Province of Ontario which is beneficially controlled by, directly or indirectly, 71 limited partners, of which Chartwell Master Care LP (a non wholly-owned affiliate of Chartwell Seniors Housing REIT) is the largest equity owner with an ownership of 38.75% of the units of the Vendor. The remaining 61.25% of the units of the Vendor are owned by the other limited partners of the Vendor, all of which individually own or control, directly or indirectly, less than 10% of the outstanding securities of the Vendor. The Vendor and Chartwell Master Care LP are at arm's length to the Corporation. As such, the proposed Qualifying Transaction is an "Arm's Length Qualifying Transaction" as defined under the CPC Policy and thus does not require shareholder approval.

The Corporation will use a portion of its cash on hand, together with the assumption of approximately $2.5 million of mortgage debt, to purchase the Target Property pursuant to the Acquisition for an aggregate purchase price of approximately $3.9 million (the "Purchase Price") to be paid upon closing, subject to industry standard adjustments, free and clear of any encumbrances other than the assumed mortgage debt.

Pursuant to the Agreement, the Corporation submitted to the Vendor's counsel, in trust, a deposit of $25,000 (the "Deposit"), which sum shall be held as a deposit in connection with the Acquisition. The Deposit will be credited against the Purchase Price upon completion of the Acquisition, which will be subject to the satisfactory completion of customary closing conditions. Failing such completion of the Acquisition, the Deposit, together with interest accrued thereon, shall be released to the Vendors as non-refundable.

The Target Property is located in Aurora, Ontario, a rapidly expanding and affluent enclave north of Toronto. Situated in the heart of an established residential neighbourhood filled with tree lined streets, residents enjoy access to parks, golf courses, and a wide range of shops and services along the nearby Yonge Street corridor. The Target Property's 53 units range from single studios to two-room suites with en-suite bathrooms with tub or shower. A full range of amenities are provided including a hair salon, billiard lounge, laundry facilities, and a full service dining room. Services include: 24 hour call bell monitoring and supervision, assistance with weekly bath, weekly housekeeping, and weekly towel and linen service. The audited financial statements for the Target Property for the year ended December 31, 2007 report gross revenue of $1,298,896, total operating expenses of $1,025,376 and net operating income of $273,520; and total assets are reported as $1,991,656; and total liabilities are reported as $2,691,558 with a partners' deficiency of $699,902 as at December 31, 2007.

Pursuant to the Private Placement, the Corporation intends to raise gross proceeds of up to $1,000,000 that will be used to: (i) pay for the costs associated with the Acquisition and the Private Placement; (ii) identify and pay deposits on further retirement residence facilities or similar properties; and (iii) finance general corporate expenditures.

As disclosed by the Corporation in a press release dated April 24, 2008, the Corporation has engaged National Bank Financial Inc. ("NBF") to act as sole agent and book runner, on a best-efforts basis, on behalf of the Corporation in connection with the Private Placement. Upon completion of the Private Placement, the Corporation has agreed to pay NBF a commission payable in cash in an amount equal to 6% of the gross proceeds raised in the Private Placement, other than certain gross proceeds raised by management of the Corporation directly. Insiders of the Corporation may participate in the Private Placement, however the Private Placement will not result in the creation of a new control person.

Insiders of the Corporation after completion of the Qualifying Transaction will remain Messrs. Patrick Byrne, Graham Parker, Robert Kanee, John Mackinnon, Dino Chiesa, Peter Williams, Richard Dubrovsky and Dan Kowalchuk, each a director and/or officer of the corporation, as applicable.

With the exception of Mr. Kowalchuk, the backgrounds of all of the directors and officers of the Corporation are contained in the final prospectus of the Corporation dated July 24, 2007, which is available on the SEDAR website at www.sedar.com.

Mr. Kowalchuk was appointed as CFO of the Corporation on November 28, 2007, as announced in a press release of same date. Since 2004, Mr. Dan Kowalchuk has been CFO of ASG Financial Corporation, an investment management and advisory firm specializing in real estate syndications. In 1981, he joined Horwath Orenstein LLP, a chartered accounting firm, as a Chartered Accountant, and became a partner of the firm in 1993 where he remained until 2005. Mr. Kowalchuk has significant experience in financial reporting, planning, internal control and cost control as well as experience in providing tax consulting services for companies in the real estate industries. Mr. Kowalchuk is a member of the Canadian Institute of Chartered Accountants. He obtained his C.A. designation in 1985 and holds a Bachelor of Commerce degree (1981) from Laurentian University.

The completion of the Qualifying Transaction is conditional upon the completion of the Acquisition and the Private Placement and final Exchange acceptance of the Qualifying Transaction. Upon completion of the Qualifying Transaction, the Corporation is expected to meet all minimum listing requirements for a Real Estate Issuer.

The Qualifying Transaction is currently anticipated to be completed on or prior to May 30, 2008.

Kingsway Arms Retirement Residences Inc.

Kingsway is a capital pool company listed on the Exchange. The principal business of the Corporation is the identification and evaluation of assets or businesses with a view to completing a Qualifying Transaction. The Corporation has not commenced commercial operations and has no assets other than cash.

This press release is not an offer of securities for sale in the United States. The securities of the Corporation referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended. Securities of the Corporation may not be offered or sold in the United States absent registration or an exemption from registration.

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

This Press Release contains forward-looking statements. These statements generally can be identified by use of forward looking word such as "may", "will", "expect", "plans", "estimate", "anticipate", "intends", "believe" or "could" or the negative thereof or similar variations. The completion of the Qualifying Transaction and the future business, operations and performance of the Target Property 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 Qualifying Transaction 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 Corporation to complete the Private Placement or to satisfy the requirements of the Exchange with respect to the Qualifying Transaction. 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 Target Property, 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. There can be no assurances 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 cautionary statements qualify all forward-looking statements attributable to the Corporation 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 Corporation has no obligation to update such statements except as required by law.

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this press release.

Contact Information

  • Kingsway Arms Retirement Residences Inc.
    Mr. Patrick Byrne
    Chief Executive Officer
    (647) 288-2942 ext. 102
    or
    Kingsway Arms Retirement Residences Inc.
    Mr. Graham Parker
    Chief Operating Officer
    (647) 288-2942 ext. 101