Retrocom Mid-Market Real Estate Investment Trust

Retrocom Mid-Market Real Estate Investment Trust

April 30, 2008 16:56 ET

Retrocom Mid-Market REIT Announces $55 Million of Property Acquisitions

TORONTO, ONTARIO--(Marketwire - April 30, 2008) -


Attention Business Editors

Retrocom Mid-Market Real Estate Investment Trust (the "REIT" or "Retrocom") (TSX:RMM.UN) announced today that it has entered into a definitive purchase and support agreement with a vendor group (the "Vendor") led by Mitchell Goldhar, owner of SmartCentres Inc., pursuant to which Retrocom will acquire four properties for a purchase price of approximately $55 million. The purchase price will be satisfied by the assumption of existing mortgage debt and the issuance to the Vendor of Class B units of Retrocom Limited Partnership ("Retrocom LP") at a price of $5.00 per unit. As a result of the transaction, there will be a change in effective control (approximately 38%) of the REIT.

The four properties, totaling approximately 522,915 square feet of gross leasable area, are strategically located in the major metropolitan market of the Greater Toronto Area ("GTA"). These properties currently have an occupancy rate of approximately 98% and have a number of high quality tenants. The properties are located at 1480/1490 Dundas Street East, Mississauga, 1224 Dundas Street East, Mississauga, 750/760 Birchmount Road, Toronto, and 1100/1140/1170 Burnhamthorpe Road West, Mississauga.

In addition, on closing of the transaction, SmartCentres will become the property manager for substantially all of the REIT's portfolio of enclosed community and regional malls and strip centres pursuant to a long-term property management contract. Retrocom believes that this relationship with SmartCentres will provide it with future strategic opportunities to purchase additional properties, as well as allow it to benefit from SmartCentres' relationships with many of the premier tenants in Canada including many of those in the REIT's current portfolio.

David Fiume, President and CEO of the REIT said, "This transaction represents the turning of the corner for Retrocom's investors and a beginning of a new phase of growth for the REIT. The acquisition of these four properties is an excellent opportunity for the REIT and its unitholders as it provides the REIT with its first presence in the GTA and exposes the REIT to the largest real estate market in Canada. By entering into a property management contract for our portfolio with SmartCentres, the leading developer and manager in Canada, we have significantly enhanced the REIT's future growth prospects. Through a strategic program of selective acquisitions and dispositions, we believe we can, through repositioning, strengthen the REIT. This transaction significantly enhances the REIT by creating a new relationship with a prominent real estate team and bringing innovative management and development expertise to our portfolio."

"We are pleased to be entering into this transaction with Retrocom. We look forward to begin working with the REIT and are committed to help grow it. We view our new relationship with the REIT as an opportunity to further expand the scope of our business," said Richard Michaeloff, Senior Vice President Finance at SmartCentres.

The acquisition is expected to close in early July 2008, unless extended by mutual agreement of the parties, and remains subject to closing conditions, including obtaining approval of the REIT's unitholders, the receipt of regulatory approvals and certain third party consents, and other conditions customary for real estate transactions.

Closing of the transaction is also conditional on the REIT having available, or having in place adequate arrangements to ensure that it will have available, sufficient funds to repay or prepay its existing $30 million debenture on or prior to the maturity date of July 26, 2008. It is the REIT's intention to seek a commitment for one or more loan facilities that have been proposed to it by a Canadian chartered bank and use a combination of such facilities and the proceeds of refinancing of mortgage debt on a number of its underleveraged properties to repay the outstanding debenture.

The transaction was reviewed by a special committee of the Board of Trustees (the "Special Committee") comprised of all five of the REIT's independent trustees. The Special Committee has concluded that the transaction is in the best interests of the REIT and its unitholders. TD Securities Inc., the financial adviser to the Special Committee, has provided a fairness opinion in respect of the consideration to be paid pursuant to the transaction. Based on the foregoing and other factors, the REIT's Board of Trustees believes that the transaction is in the best interests of the REIT and its unitholders and, accordingly, has resolved to recommend that the REIT's unitholders approve the proposed transaction at an annual and special meeting to be held on or about June 27, 2008. Each of the members of the Board of Trustees who holds units of the REIT has indicated that he intends to vote his units in favour of the transaction.

Additional Important Details of the Transaction


The following is a summary of certain details concerning the transaction:

The purchase price of approximately $55 million, which represents a 9% capitalization rate on an estimated 2008 net operating income, will be satisfied by the assumption of existing mortgage debt in the amount of approximately $9.2 million and the issuance to the Vendor of approximately 9.1 million Class B units of Retrocom Limited Partnership ("Retrocom LP") at a price of $5.00 per unit representing a premium of approximately 23% over the 20-day volume weighted average price for the REIT's trust units on the Toronto Stock Exchange for the period ending on April 29, 2008, the last full trading day prior to this announcement. The Class B units of Retrocom LP, an indirect wholly-owned subsidiary of the REIT and the beneficial owner of the REIT's entire property portfolio, will be exchangeable by the Vendor into units of the REIT on a one for one basis. The Class B units will be economically equivalent to owning an equal number of units of the REIT, including with respect to receiving distributions from the REIT. The Vendor will also be issued Special Voting Units of the REIT which provide one vote at any meeting of unitholders of the REIT equal to the number of Class B units issued. As a result of the transaction, Mitchell Goldhar will have an approximately 38% voting interest in Retrocom.

On closing, the REIT will increase the number of Trustees from six to eight and amend its declaration of trust to provide Mitchell Goldhar with the right to appoint (i) three of the Board members of the REIT while the Vendor and its affiliates hold at least 25% of the REIT's total aggregate issued and outstanding units and Special Voting Units, (ii) two of eight Board members while the Vendor and its affiliates hold at least 15% but less than 25% of the REIT's units and Special Voting Units and (iii) one of eight Board members while the Vendor and its affiliates hold at least 5% but less than 15% of the REIT's units and Special Voting Units. The Vendor will also be granted the right, under certain circumstances, to receive additional Special Voting Units of the REIT in order to maintain its voting interest at a minimum of 25% for a period of five years. This right of the Vendor may be extended for a further five year period under certain circumstances, including in the event that the Vendor or its affiliates sell or originate the sale to the REIT of at least $300 million of assets.

In addition to the purchase price payable to the Vendor at closing, the REIT will pay to SmartCentres or its designee a one-time structuring fee of $1.25 million and issue to SmartCentres or its designee warrants to purchase, at any time during the 5-year period after closing, 1.5 million REIT units at an exercise price of $5.50 per unit. The agreement also allows for customary "fiduciary out" provisions and a termination fee of $2.7 million payable by the REIT in certain circumstances. The REIT expects to incur approximately $3.5 million in expenses and costs associated with the transaction.

Retrocom will hold a conference call on May 1, 2008 at 10:00 a.m. Eastern Standard Time. Investors are invited to access the call by dialing 416-642-5213 or 1-866-321-8231 - they will be required to identify themselves and their organization, or on whose behalf they are participating.

Retrocom Mid-Market REIT is an Ontario unincorporated open-end real estate investment trust which focuses on owning and acquiring mid-market commercial properties in primary and secondary cities across Canada with the objective of producing a geographically diversified portfolio of properties with stable and growing cash flows.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy Units of the REIT, which may be made only by means of a prospectus, nor shall there be any sale of the Units in any state, province or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under securities laws of any such state, province or other jurisdiction. The Units of the REIT have not been, and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered, sold or delivered in the United States absent registration or an application for exemption from the registration requirements of U.S. securities laws.

This press release contains forward-looking statements. The statements that are not historical facts contained in this press release are forward-looking statements that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the REIT to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. 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 which may prove to be incorrect, including, but not limited to: the approval by unitholders of the REIT as well as the projected benefits to be derived from the transaction. While the REIT anticipates that subsequent events and developments may cause the REIT's views to change, the REIT specifically disclaims any obligation to update these forward-looking statements. 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. Although the REIT has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. 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. Further information can be found in the disclosure documents filed by Retrocom Mid-Market Real Estate Investment Trust with the securities regulatory authorities, available at

Contact Information

  • Retrocom Mid-Market REIT
    David Fiume
    Chief Executive Officer
    (416) 741-7999 ext. 227
    (416) 741-7993