Metro Vancouver Properties Corp. (“Metro Vancouver” or the “Company”), a Vancouver-based real estate company, wishes to provide its shareholders with an update and additional information with respect to the previously announced going private transaction (the “Transaction”) by way of a share consolidation.

Under the share consolidation, all Class B voting common shares (“Class B Shares”) are being consolidated on the basis of one post-consolidation Class B Share for each 1,941,489 pre-consolidation Class B Shares, without any entitlement to receive fractional shares (including any beneficial shareholder). In lieu of receiving a fractional share, minority shareholders will be paid cash consideration of $0.36 per pre-consolidation Class B share (with no amount payable to registered shareholders who would be entitled to receive, net of withholding taxes, less than $5). Upon completion of the Transaction, Madison Pacific Properties Inc. (“Madison Pacific”), which currently owns 99.75% of the equity interests of the Company, would be the sole remaining shareholder of the Company. Minority shareholders of the Company will vote on the share consolidation at a shareholder’s meeting scheduled for June 27, 2024. Further details of the Transaction are contained in the information circular of the Company dated May 21, 2024 (the “Circular”), which has been mailed to securityholders and filed on SEDAR+ at www.sedarplus.ca in connection with the shareholder meeting.

Additional Background to the Transaction

Metro Vancouver’s reporting issuer status derived from a plan of arrangement transaction in 2010 that resulted in Metro Vancouver becoming the successor to a biotechnology company, Migenix Inc. The assets of the biotechnology company, as well as its TSX listing, were transferred to a new biotechnology company in which Metro Vancouver has no interest. Since 2010, Metro Vancouver has not undertaken any material capital markets transactions, and its shares have remained unlisted. Metro Vancouver has continued to incur significant public company costs each year, which are disproportionate to the value of the minority interests in the Company.

At the time of and subsequent to the 2010 plan of arrangement, management of Metro Vancouver was considering a subsequent recapitalization or reorganization transaction involving the Company. However, recent developments, including challenges to the dual share structure of the Company and similar companies in the real estate industry by the Canada Revenue Agency, have complicated any potential recapitalization or reorganization of the Company. As a result, no recapitalization or reorganization transaction has materialized to date and it is unlikely that any such transaction will occur in the future.

In July 2023, John DeLucchi was appointed as Chief Executive Officer of Metro Vancouver (and Madison Pacific) following the retirement of the previous CEO. One of Mr. DeLucchi’s tasks as the new CEO was to review the corporate structure and consider cost efficiencies. Mr. DeLucchi initiated consideration of a going private transaction as a means to address the inefficient public company structure of the Company, which at this point has become long overdue.

John DeLucchi, along with Dino Di Marco, Chairman of Metro Vancouver and the former CFO of Madison Pacific, initiated discussions surrounding a potential going private transaction with external legal counsel in early 2024.

Transaction Proposal and Special Committee

On March 7, 2024, John DeLucchi and Dino Di Marco made a proposal to the Board of Directors of the Company to effect a going private transaction by way of a share consolidation with minority shareholders to be paid fair value. There was no specific transaction price included as part of this proposal, other than minority shareholders were to be paid fair value. This proposal was formally presented at the March 7, 2024 board meeting of Metro Vancouver.

At the March 7, 2024 board meeting, the Board of Directors formed a committee of independent directors (the “Special Committee”), consisting of Robert Wiens and Alistair Duncan, Jr., to consider the proposed Transaction. The mandate of the Special Committee did not include a consideration of alternative sale transactions. An alternative sale transaction was not considered possible given that Madison Pacific owns 99.75% of the equity value of the Issuer, and Madison Pacific would not consider a sale of the entire company or the bulk sale of its assets or property portfolio. Given the very small minority equity interest as compared to other public market transactions that are typically of a much larger value, the mandate of the Special Committee only reflected consideration of a going private transaction that would result in Madison Pacific owning 100% of the Company. However, the Special Committee was not restrained in terms of determining fair value for minority shareholders or the specific structure of the Transaction in order to ensure that minority shareholders were treated fairly.

The Special Committee received asset value and financial information materials from members of management, including Bernice Yip and Peter Grippo who are both employees of Madison Pacific. The Special Committee was comfortable that the involvement of such Madison Pacific employees did not raise any material conflicts of interest issues. The members of the Special Committee are experienced directors of the Company who are very familiar with the assets of the Company and its financial statement disclosure, and reviewed the work of the Madison Pacific employees very closely. In addition, the Transaction is not a material transaction to Madison Pacific, and the Special Committee was of the view there was no particular financial incentive for the Madison Pacific employees to act unfairly. Mr. DeLucchi was not involved in the determination of fair value or negotiation of the other terms of the Transaction.

The Board and the Special Committee considered alternatives to the Transaction in terms of transaction structure such as an insider bid by Madison Pacific, a plan of arrangement with Madison Pacific or an amalgamation. Other sale transactions were not considered in light of the small minority interest and Madison Pacific’s unwillingness to sell the Company as a whole or to sell the assets or property portfolio of the Company in bulk.

The Board and Special Committee did not consider the status quo to be a desirable option. The status quo situation has been in place since 2010 which has provided no liquidity to minority shareholders while the Company has incurred substantial public company costs. Given that no recapitalization or reorganization transaction is likely to occur, it was the Board and Special Committee’s view that no other liquidity transaction for minority shareholders is evident other than a going private transaction that would result in Madison Pacific becoming the sole owner of the Company.

Ultimately, the Special Committee determined that the Transaction should take the form of a share consolidation at a consolidation ratio set that would result in Madison Pacific becoming the sole holder of the Class B Shares. The Special Committee determined that the fair value to be paid to minority shareholders would be at net asset value as adjusted to reflect fair value and to include a 20% premium (further information with respect to the fair value is described in the Circular). The Special Committee did not retain any financial advisors to assist in determining the quantum of the premium, although an independent fairness opinion was obtained from Evans & Evans as described in the Circular.

The premium was determined by the Special Committee through consideration of the premium in other public company transactions (which typically involved listed companies). The Special Committee was of the view that its members had sufficient experience with public market transactions to assess a proper range for a premium. The Special Committee viewed 20% as being on the high range of a typical premium. The Special Committee was also of the view that the premium was a “true premium” in the sense that the assets were fully and fairly valued with a premium applied on top of this and that this was not a situation where there was an asset with a contingent value that made valuation difficult. The Special Committee was also of the view that a premium may be necessary in order to obtain shareholder support for the Transaction, and as a factor as to why dissent rights were not necessary (the rationale for lack of dissent rights is described in the Circular). The Special Committee was also of the view that the Class B Shares, as voting securities, should be entitled to a premium in the context of the dual share structure of the Company, even though the economic rights with the non-voting shares are equal.

The Special Committee did not identify any materially concerning features of the Transaction to the minority shareholders. The Special Committee’s understanding is that most of the minority shareholders have held their shares since the 2010 plan of arrangement described above as previous investors in Migenix. The Special Committee was of the view that most of the minority holders had either written off their investment in the Company or forgotten about their investment altogether. Given the unlikelihood of achieving any sort of alternative liquidity transaction, and that the tax consequences of the Transaction were expected to be similar to any alternatively structured going private transaction (the tax consequences of the Transaction are described in the Circular), the Transaction represents a liquidity opportunity for all shareholders to recover fair value plus a premium.

The Special Committee’s authority under its mandate authorized the Special Committee to retain independent legal counsel. Norton Rose Fulbright Canada LLP was retained by the Special Committee on a stand-by basis. The Special Committee subsequently determined that no formal legal advice from Norton Rose was required and Norton Rose was not involved in negotiation of the Transaction.

Ownership of Securities of the Company

The following table sets forth the number, designation and percentage of the outstanding securities of any class of securities of the Company beneficially owned or over which control or direction is exercised (a) by each director and officer of the Company, (b) if known after reasonable enquiry, by (i) each associate or affiliate of an insider of the Company, (ii) each associate or affiliate of the Company, (iii) an insider of the Company, other than a director or officer of the Company, and (iv) each person acting jointly or in concert with the Company.

Name Relationship Class B Sharesand percentage ofclass Class C Non-VotingShares and percentage ofclass
Madison Pacific Insider 1,941,489 (41.1%) 1,124,295,307(1) (100%)
John DeLucchi Director and officer Nil Nil
Robert Wiens Director Nil Nil
Roger Francke Director Nil Nil
Paul Brennan Director Nil Nil
Robert S. Pringle Director Nil Nil
Alistair Duncan, Jr. Director 50 (0.0001%) Nil
Dino Di Marco Director and Chairman Nil Nil
Bernice Yip Officer Nil Nil

   (1) 85,145,092 Class C Shares are held by Madison Pacific and 1,039,150,215 Class C Shares are held by Madison Pacific’s subsidiary 1073774 Properties Inc.

No securities of the Company were purchased or sold by the Company or Madison Pacific or their associates, affiliates, insiders or joint actors during the previous twelve months.

Additional Information

Additional information relating to the Company may be found on SEDAR+ at www.sedarplus.ca. Additional financial information is contained in the Company’s audited consolidated financial statements and related Management’s Discussion and Analysis for the year ended August 31, 2023 and its unaudited consolidated interim financial statements and related Management’s Discussion and Analysis for the six-month period ended February 29, 2024. Copies of those financial reports will be sent without charge to any security holder requesting them.

For more information or to request a copy of the most recent financial reports please contact:

Contact: Mr. John Delucchi Ms. Bernice Yip
  President & CEO Chief Financial Officer
Telephone: (604) 732-6540 (604) 732-6540
     
Address: 389 West 6th Avenue  
  Vancouver, B.C. V5Y 1L1