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*All amounts stated in USD, unless otherwise
stated.
TORONTO, June 8, 2016 /CNW/ - Delavaco Residential
Properties Corp. ("Delavaco" or the "Company")
(TSXV: DVO.U) is pleased to announce the corporate following
updates, subject to all applicable regulatory and shareholder
approvals:
SENIOR SECURED NOTES ("SSN") MATURITY DATE EXTENSION
The Company has sent out notices to all holders of the 7.5% SSN
due June 30, 2016 of a request for a
maturity date extension. The Company is requesting SSN holders
approve extending the maturity date of the SSN from June 30, 2016 to December
31, 2017 (the "Maturity Date Extension"). As all
shareholders and SSN holders are aware, the Company has been
aggressively paying down the SSN from its original $25 million principal balance to its current
balance of approximately $12.3
million. This has been facilitated, in part, by the Company
disposing of its South Florida
single family home portfolio on a 'one-off' basis in addition to
the recent SSN revision to allow repayments to occur from
$2.5 million of escrowed cash to just
$100,000. As a result, the SSN
outstanding balance is less than 50% of what it was when the SSN
were first issued in 2013.
The Company has also lined up an additional 35 home sales in
South Florida that are under
contract but have various closing conditions attached that need to
be completed before the sales close that could potentially generate
an additional $2.9 million of net
sale proceeds over the next 45 days. Further, the Company has begun
the process of disposing of its Atlanta single family home portfolio on a
'one-off' basis to maximize and ensure the highest valuation
possible for all stakeholders. The Atlanta portfolio currently consists of 312
single family homes, of which 64 homes are completely unencumbered
while 128 homes are encumbered by the SSN and the remainder 120
homes by a $4.0 million first
mortgage. The Company has listed the unencumbered and SSN
encumbered homes with agents and undertaken a program to sell these
homes in a similar fashion as the South
Florida assets. From this portfolio the Company has five
homes under contract for an aggregate contract price of
approximately $275,000 that should
close during the second quarter of 2016. Assuming all of these
sales close, the SSN balance will be reduced by a further
$3.3 million to just $9.0 million by June 30,
2016.
To repay the remaining SSN balance, the Company has looked at a
number of scenarios which involve not only the disposition of the
remaining single family homes in South
Florida, but also all of Atlanta. Based on its best forecasts, the
Company anticipates having disposed entirely of its South Florida and Atlanta single family home portfolios by no
later than December 31, 2017. This is
due in part to the fact that while SSN holders to date have been
repaid a significant amount of monies from the South Florida dispositions, these sales have
been difficult to achieve due to the various lien code violations
attached to a number of these homes and the length of time required
to have these violations both remediated and cleared. Further, to
ensure the maximum valuation possible is achieved, the Company has
commenced disposing of the Atlanta
single family portfolio on an individual basis as demand for these
homes by 'end users' is strong. Nonetheless, it does take time to
sell these homes on a 'one-off' basis and given that there are 312
homes to dispose, it will take at least 18 months given the
Company's historical experience in disposing of the South Florida portfolio. After stress testing
the Atlanta portfolio it was
determined that the 'one-off' sales approach will yield
substantively more sale proceeds than a bulk sale to one buyer.
The Maturity Date Extension is critical to the Company's
repositioning and deleveraging plan. The manager of the Company,
Firm Capital Realty Partners Advisors Inc. and its affiliated
and/or associated entities ("Firm Capital" or the
"Manager") has advised the Company that unless all SSN
holders agree to the Maturity Date Extension, they will consider
terminating their asset management agreement with the Company (the
"Asset Management Agreement") which may leave the Company at
risk as a going concern.
A formal letter along with the Maturity Date Extension notice
(the "Notice") has been mailed to all SSN holders. We are
requesting SSN holders return this Notice to the Company's
attention no later than June 30,
2016.
Should the SSN holders approve the Maturity Date Extension, the
Company expects the following will occur, subject to all applicable
regulatory and shareholder approvals:
- Rebranding and New Business Focus Update: Corporate name
change to Firm Capital American Realty Partners Corp. and new
business focus;
- Board of Directors and Senior Management Appointments:
Reconstitution of new senior management team and board of
directors; and
- Proposed $10 Million Rights
Offering to Existing Shareholders and Share Consolidation:
Proceed with a proposed $10 million
rights offering with the proceeds expected to be used for future
investments of the Company.
The following items are outlined in detail below:
REBRANDING AND NEW BUSINESS FOCUS UPDATE
As disclosed in a press release dated December 29, 2015, following completion of
certain milestones, and subject to the receipt of all applicable
regulatory and shareholder approvals, the Company intends to
rebrand itself as "Firm Capital American Realty Partners
Corp.". In addition, the Company has applied to the TSX Venture
Exchange (the "TSXV") to have its ticker symbol changed to
"FCA". The board of directors have agreed to rebrand the Company
and change the ticker symbol following: (i) requisite shareholder
approval at the Company's next annual and special meeting of
shareholders expected to be held in July (the ("AGM"); and
(ii) completion of the Maturity Date Extension as outlined
above.
Firm Capital American Realty Partners Corp. will be focused on
the following U.S. based real estate platforms:
- Income Producing Real Estate: The Company intends to
acquire income producing U.S. real estate assets in major cities
located across the United States.
The acquisitions would be completed either solely by the Company or
in joint-venture partnership through Firm Capital's managed
accounts or with industry joint venture partners; and
- Debt Investment Platform: The Company would create a
U.S. real estate debt and equity lending platform focused on
lending in major cities across the United
States. The focus will be on providing bridge mortgage loans
and joint venture capital. The investments would be completed
either solely by the Company or in partnership through Firm
Capital's managed accounts or in partnership with other
lenders.
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
RECONSTITUTION
As disclosed on December 29, 2015,
the board of directors has agreed to reconstitute itself and will
consist of both existing members as well as new members. Further, a
new senior management team will be provided by the Manager to
operate the daily operations of the Company. The board of directors
have agreed to change both the senior management team and board of
directors following: (i) requisite disinterested shareholder
approval at the Company's next AGM expected to be held in July,
with respect to the change in senior management; (ii) requisite
approval by a majority of all shareholders at the AGM with respect
to the change in the board of directors; and (iii) completion of
the Maturity Date Extension as outlined above.
The new proposed senior management team and consolidated board
have a deep understanding and many years of experience in finance,
accounting, real estate and the capital markets. The vast majority
of the board and senior management have a vested financial interest
in the Company. The proposed senior management team and board of
directors consists of the following individuals:
- Sandy Poklar – President, CEO
& Director: Sandy Poklar,
CPA, CA is currently the Chief Operating Officer and Managing
Director, Capital Markets & Strategic Developments for Firm
Capital Corporation, Chief Operating Officer for Firm Capital
Mortgage Investment Corporation (a publicly traded mortgage
investment corporation) and the Chief Financial Officer and Trustee
for Firm Capital Property Trust (a publicly traded REIT). Sandy is
currently a Trustee for True North Commercial REIT (a publicly
traded REIT) and was a Director of Genesis Land Development
Corporation (a publicly traded real estate company). Prior to
joining Firm Capital, Sandy was employed at Macquarie Capital and
TD Securities where he was a Vice President and an Associate in
their Real Estate Investment Banking Groups, respectively. Sandy is
a chartered accountant and has his ICD.D designation;
- Stuart Pasternak – CFO:
Stuart Pasternak, CPA, CA is a
Chartered Professional Accountant with over twenty-five years of
business experience in North
America; in manufacturing, real estate and construction
industries. Stuart previously held various CFO, Vice
President-Finance, Director of Finance and Controller positions,
and in 2009 started his own consulting practice focusing on small
to mid-size enterprises assisting them with achieving efficiencies
and growth strategies;
- Jorge Aldecoa – CIO:
Jorge Aldecoa is a licensed Florida
Real Estate Broker with over a decade of experience in both
Residential & Commercial Real Estate Sectors specializing in
the acquisitions, dispositions, and asset management of income
producing real estate. Jorge previously served as the Regional Vice
President for Invitation homes South
Florida operations, a division of The Blackstone Group LP
(NYSE : BX). Jorge also served as the Director of Single Family
Residential and Commercial Services for First Service Residential
Realty. Jorge is an Accredited Commercial Manager through IREM and
bachelor's degree in Residential Development and Property
Management from Florida State
University.
- Geoffrey Bledin – Independent
Director: Geoffrey Bledin, a
retired chartered accountant, was the past President and Chief
Executive Officer of The Equitable Trust Company from 1990 to 2007
(a deposit taking institution that specializes in residential and
commercial real estate lending). Prior to 1990 Mr. Bledin was a
partner at Price Waterhouse. Mr. Bledin is also a Director of Firm
Capital Mortgage Investment Corporation (a publicly traded mortgage
investment corporation) and a Trustee of Firm Capital Property
Trust (a publicly traded REIT);
- Eli Dadouch – Vice Chairman
& Director: Eli Dadouch is
President, CEO and a Director of Firm Capital Mortgage Investment
Corporation (a publicly traded mortgage investment corporation) and
a Vice Chair & Co-Chief Investment Officer and Trustee of Firm
Capital Property Trust (a publicly traded REIT);
- Romeo De Gasperis –
Independent Director: Romeo De
Gasperis is the Vice President and Chief Executive Officer
of Condrain Group. He has had extensive experience working in the
construction and civil engineering industry for the past 30 years
through his family's business. He is currently the Vice President
of Countrywide Homes and Condor Properties. Mr. De Gasperis has
also served as President and Chief Executive Officer of Futureway
Communications (FCI Broadband) from 2002 to 2003 and as a director
of FCI Broadband until 2007. He also served as a director of Cool
Brands International from 1996 to 2007. He is also chairman and
director of Ebuild.ca while also serving as a director of Metrus
Land Development. More recently his involvement in Aquatech
Dewatering as Vice President came from a growing demand for
enhanced environmental awareness;
- Pat DiCapo – Independent
Director: Pat DiCapo is the
Founder of PowerOne Capital Markets Limited. PowerOne has
participated in over 300 transactions involving emerging private
and public companies with a total value in excess of $2 billion. Pat and PowerOne are also very
passionate about supporting numerous charitable causes, as well as
assisting with the continued development of its industry by acting
as a Member of the TSX-V Ontario Advisory Committee and Director of
the Exempt Market Dealers Association. Prior to founding PowerOne,
Pat worked at Smith Lyons LLP (now Gowlings LLP) in Toronto and with Goodwin Procter LLP in
Boston, MA. Pat is a graduate of
Osgoode Hall Law School and a member of the Ontario Bar Association
and the Law Society of Upper
Canada;
- Robert Janson – Independent
Director: Robert Janson is
currently the Chief Investment Officer of Westcourt Capital
Corporation. As well, as a Client Advisor in Switzerland, Robert also taught Financial
Planning for the Ecole Superieur de Banque et Finance for students
who were vying for their Swiss Federal Diploma in Banking
Economics. In 2010 Robert held the position of Director for UBS
Bank Canada for the 'Ultra High Net Worth' wealth management team.
In Canada he holds the 2
professional designations of a Financial Management Advisor (FMA)
and Fellow of the Canadian Securities Institute (FCSI). Robert has
his 'Master of Finance (MFin)' from Queen's School of Business and
is a licensed Portfolio Manager (Advising Representative) in
Ontario, Quebec, Alberta and BC. He is also licensed to trade
options in Canada (OLC);
- Keith L. Ray – Independent
Chairman: Keith L. Ray served
for 27 years as a partner at KPMG, where, among other duties, he
carried the role of audit partner and relationship partner for
H&R REIT from its inception in 1996 until his retirement in
2007. In addition, Mr. Ray was audit partner for Firm Capital
Mortgage Investment Trust (now Firm Capital Mortgage Investment
Corporation (TSX: FC)), an income trust, which operated as a
mortgage lender primarily in Ontario. Mr. Ray is currently a member of the
Board of Directors of Firm Capital Mortgage Investment Corporation,
a TSX listed mortgage company, and Cliffside Capital Ltd., a seed
capital company listed on the TSX-V. Mr. Ray's community
involvement includes serving on the board, and as Treasurer of UJA
Federation of Greater Toronto, and
serving on the audit committee of Mount Sinai Hospital. Mr. Ray
holds a B. Comm from the University of
Toronto and a Chartered Professional Accountant, Chartered
Accountant (CPA, CA) designation;
- Scott Reid – Independent
Director: Scott Reid is the
President and founder of Stornoway Portfolio Management, an asset
management firm and has over 15 years of experience in the area of
distressed securities. Prior to founding Stornoway, Scott co-founded National Bank
Financial's High Yield Group where he focused on researching,
trading, and investing in high yield and distressed securities and
was a key member of the firm's restructuring practice; and
- Howard Smuschkowitz –
Director: Howard Smuschkowitz is
currently an Independent Trustee of Firm Capital Property Trust (a
publicly traded REIT) and President of Total Body Care Inc., a
manufacturer of private label health and beauty aid products, since
2011. Prior to joining Total Body Care Inc., president of Homeland
Self Storage from 2005 until its sale in 2011 and president of
Concord Confections Inc. (Dubble Bubble) from 1986 to 2004, the
company was sold to Tootsie Roll Industries, Inc.
PROPOSED $10 MILLION RIGHTS
OFFERING TO EXISTING SHAREHOLDERS AND SHARE CONSOLIDATION
In an effort to provide the necessary capital to fund future
cash-flowing investments of the Company, subject to completion of
the Maturity Date Extension and the approval of the board of
directors of the Company, the Company intends to complete a
$10 million rights offering of its
common shares to current shareholders (the "Rights
Offering"). Pricing for the Rights Offering has yet to be
determined but will be in the context of the market, and is subject
to the requirements of the TSXV. In the event that not all
shareholders participate in the Rights Offering, the Company
expects that a group of shareholders holding approximately 51% of
the issued and outstanding common shares may take up any and all
shares not exercised. The Rights Offering is contingent on
the Maturity Date Extension as outlined above, and will be more
particularly described in the notice of the Rights Offering to be
filed and mailed to shareholders before the commencement of an
exercise period in respect of the Rights Offering.
Subsequent to the completion of the Rights Offering, the Company
intends to commence with a share consolidation of all of its issued
and outstanding common shares such that the trading price of the
post-consolidation common shares is in the US$5.00 – US$7.00
per share range, and subject to the Corporation meeting its
continuing TSXV listing requirements. The post-consolidation common
share price will be at the discretion of the board of directors of
the Company. The completion of the share consolidation is subject
to (i) approval by the requisite majority of shareholders at the
AGM; (ii) completion of the Maturity Date Extension as outlined
above; and (iii) completion of the Rights Offering as outlined
above.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: Certain
information in this news release constitutes forward-looking
statements under applicable securities law. Any statements that are
contained in this news release that are not statements of
historical fact may be deemed to be forward-looking statements.
Forward-looking statements are often identified by terms such as
"may", "should", "anticipate", "expect", "intend" and similar
expressions. Forward-looking statements in this news release
include, but are not limited to, statements regarding the
arrangements described above with Firm Capital, including the Asset
Management Agreement, the Maturity Date Extension, the possible
termination of the Asset Management Agreement, the proposed name
change, the proposed Rights Offering (and the proposed use of the
proceeds thereof), the proposed share consolidation and the
proposed disposition of homes in South
Florida and Atlanta, which
may not be completed within the estimated time frames specified,
and as described, above or at all. In the event that such steps are
not completed to the satisfaction of Firm Capital, the rebranding,
Board and senior management restructuring and new business focus
described above will likely be subject to amendment or may not
proceed, which could have a material adverse effect upon the
Company. Failure to complete the steps or any delays in their
implementation may have a material adverse affect upon the business
of the Company and its market value. There is no assurance that the
Company will be able to complete the disposition of the single
property disposition portfolio at anticipated values or at all or
that market conditions will support the debt and equity raises
contemplated by the Company. Failure to achieve these objectives,
including failure to receive all approvals in connection with the
Maturity Date Extension, will have a material and adverse effect
upon the Company. There is no assurance that the Maturity Date
Extension, the proposed name change, proposed share consolidation,
proposed reconstitution of the Board and senior management and the
proposed disposition of homes in South
Florida and Atlanta will
occur as described herein or at all. There is no assurance that the
proposed Rights Offering will occur as described herein or at all.
There is no assurance that the implementation of the steps, even if
completed as described above, will increase the market value of the
Company's securities, which is subject to numerous factors beyond
the Company's control. Forward-looking statements necessarily
involve known and unknown risks, including, without limitation,
risks associated with general economic conditions; adverse factors
affecting the U.S. real estate market generally or those specific
markets in which the Company holds properties; volatility of real
estate prices; inability to complete the single family property
disposition program or debt restructuring in a timely manner;
inability to access sufficient capital from internal and external
sources, and/or inability to access sufficient capital on
favourable terms; industry and government regulation; changes in
legislation, income tax and regulatory matters; the ability of
Delavaco to implement its business strategies; competition;
currency and interest rate fluctuations and other risks. Readers
are cautioned that the foregoing list is not exhaustive. Readers
are further cautioned not to place undue reliance on
forward-looking statements as there can be no assurance that the
plans, intentions or expectations upon which they are placed will
occur. Such information, although considered reasonable by
management at the time of preparation, may prove to be incorrect
and actual results may differ materially from those anticipated.
Forward-looking statements contained in this news release are
expressly qualified by this cautionary statement. Certain financial
information presented in this press release reflect certain
non-International Financial Reporting Standards ("IFRS") financial
measures, which include NOI, FFO and AFFO. These measures are
commonly used by real estate investment companies as useful metrics
for measuring performance, however, they do not have standardized
meaning prescribed by IFRS and are not necessarily comparable to
similar measures presented by other real estate investment
companies. Delavaco believes that FFO and AFFO are important
measures of operating performance. The IFRS measurement most
directly comparable to AFFO is net income. These terms are defined
in Delavaco's Management's Discussion and Analysis for the Quarter
Ended March 31, 2016 filed on
www.sedar.com. Neither the Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Additional information about Delavaco Residential Properties
Corp. is available at www.delavacoproperties.com or
www.sedar.com.
SOURCE Delavaco Residential Properties Corp