WINNIPEG, MB, May 22, 2024
/CNW/ - Lanesborough Real Estate Investment Trust ("LREIT")
(TSXV: LRT.UN) announces today that it has entered into three asset
purchase agreements (the "Agreements") in connection with
the sale of eleven properties (the "Rental Properties") and
a vacant land investment property located near the corner of Grant
Avenue and Kenaston Boulevard in Winnipeg, Manitoba (the "Vacant
Property" and together with the Rental Properties, the
"Properties"), representing all or substantially all of the
assets of LREIT, to 7254751 Manitoba Ltd. ("725") for
aggregate consideration of $41,683,800 (collectively, the "Sale
Transaction"). The Rental Properties consist of: (i) Millennium
Village; (ii) Lakewood Townhomes;
(iii) Whimbrel Terrace; (iv) Gannet Place; (v) Snowbird Manor; (vi)
Skyview Apartments; (vii) Lunar Apartments; (viii) Parkland
Apartments; (ix) Norglen Terrace; * Highland Tower; and (xi)
Chateau St. Michael's. The aggregate purchase price being paid by
725 for the Rental Properties is $41,283,800, which is the fair market value of
the Rental Properties included in the audited consolidated
financial statements of the Trust for the year-ended December 31, 2023. The purchase price being paid
by 725 for the Vacant Property is $400,000, which is the current fair market value
of the Vacant Property, as determined by LREIT. Following the Sale
Transaction, if approved by the holders ("Unitholders") of
trust units ("Units") of LREIT, LREIT will be wound-up and
terminated (the "Termination").
725 is a company controlled by Arni
Thorsteinson, an insider of LREIT. Accordingly, the Sale
Transaction is a "Related Party Transaction" under Multilateral
Instrument 61-101 – Protection of Minority Security Holders in
Special Transactions ("MI 61-101"). As LREIT is not
listed on the Toronto Stock Exchange, in accordance with Section
5.5(b) of MI 61-101, the Sale Transaction is exempt from the formal
valuation requirements of MI 61-101. As LREIT is experiencing
financial hardship, as defined in Section 5.5(g) of MI 61-101,
LREIT is also exempt from the requirement to obtain approval of a
majority of the minority unitholders of LREIT for the Sale
Transaction.
Pursuant to the terms of the Agreements, the policies of the TSX
Venture Exchange (the "Exchange") and the fourth amended and
restated declaration of trust of LREIT dated June 21, 2018, as amended, the Sale Transaction
and the Termination are subject to the approval of the Unitholders.
Accordingly, LREIT has called a general and special meeting of
Unitholders to be held on June 27,
2024 (the "Meeting"). At the Meeting, Unitholders
will be asked to pass a special resolution, requiring the
affirmative vote of 66 2/3% of the Unitholders at the Meeting,
approving the Sale Transaction (the "Sale Transaction
Resolution"). In accordance with Section 5.16 of Policy 5.3 of
the Exchange, the votes of Arni
Thorsteinson, 2668921 Manitoba Ltd. ("2668921") and
Shelter Canadian Properties Limited ("Shelter") and any
other non-arm's length parties, must be excluded from this
calculation of Unitholder approval. If the Sale Transaction
Resolution is approved by Unitholders, then, Unitholders will be
asked to pass a special resolution, requiring the affirmative vote
of 66 2/3% of the Unitholders at the Meeting, approving the
Termination (the "Termination Resolution").
As of March 31, 2024, LREIT had
total liabilities of $201,055,897,
including $159,169,309 owing to
2668921 and Shelter. Management of 2668921 have provided notice to
management of LREIT that they will not be willing to make any
significant further advances under the credit facility provided by
2668921 to LREIT or to defer the interest payments thereon
indefinitely. Management of Shelter have also provided notice to
management of LREIT that they will not defer the fees owed to
Shelter indefinitely.
If the Sale Transaction is approved by the Unitholders, it will
result in the assumption by 725 of all of the Trust's mortgage loan
debt, secured by the properties that form part of the Sale
Transaction, in the estimated amount of $33,806,578, as of March
31, 2024, and the assumption of an estimated $7,857,222 of debt under the revolving loan
facility by 725. 2668921 is committed to funding the cost of
the Termination, assuming the Termination Resolution is approved by
Unitholders.
In the event that the Unitholders of LREIT approve the Sale
Transaction Resolution, upon completion of the Sale Transaction,
LREIT will no longer have any material assets and will continue to
owe an aggregate estimated amount of $139,934,569 to 2668921 and Shelter and
$16,984,455 to the lender of the
mortgage loan formerly secured by LREIT's Woodland Park property.
LREIT will continue to incur the fixed costs associated with its
operations, including the cost of servicing its debt, professional
management fees, maintaining its listing on the Exchange and
complying with requisite disclosure obligations under applicable
securities laws. These financial obligations and costs mean that
LREIT has no ability to continue as a going concern.
Given the amount of indebtedness of LREIT, there is no
possibility LREIT will have sufficient funds following the sale of
the Properties to repay all of its outstanding indebtedness.
Accordingly, there will be no funds available for distribution to
the Unitholders following the sale of the Properties. As an
example, even if LREIT could have secured a purchase price for the
Properties equal to twice the aggregate consideration payable
pursuant to the Sale Transaction, all such funds would still be
required to repay indebtedness of LREIT.
If the Sale Transaction Resolution, and the Termination
Resolution are approved by the Unitholders at the Meeting,
Unitholders that hold their Units in unregistered accounts will
have the benefit of being able to realize their investment losses
in connection with the disposition of the Units and to use the
resulting allowable capital losses to offset taxable capital gains
realized from other investments. To the extent that Unitholders are
receiving no consideration for their Units, they will have a
capital loss in the amount of their adjusted cost base which they
can then offset against taxable capital gains.
Pursuant to the terms of the Agreements and the policies of the
Exchange, the closing of the Sale Transaction and the Termination
are subject to the approval of the Exchange.
In the event that the Sale Transaction and the Termination are
approved by the Unitholders, LREIT will close the Sale Transaction
as soon as possible following the Meeting and then proceed with the
Termination. Further details will be provided by LREIT following
the Meeting.
ABOUT LREIT
LREIT is a real estate investment trust, which is listed on the
TSX Venture Exchange under the symbol LRT.UN (Trust Units). For
further information on LREIT, please visit our website at
www.lreit.com.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as the term is defined in the policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Certain statements contained in this press release are
"forward-looking statements" that reflect the expectations of
management regarding the Sale Transaction and
Termination. Readers are cautioned not to place undue reliance on
forward-looking information. All statements other than statements
of historical fact contained herein are forward-looking statements.
Forward looking statements are often, but not always, identified
by the use of words such as "seek", "anticipate", "plan",
"continue", "estimate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could", "might",
"should", "believe" and similar expressions. Such forward-looking
statements reflect management's current beliefs and are based on
information currently available to management. Forward looking
statements involve significant risks and uncertainties. A number of
factors that could cause actual results to differ materially from
the results discussed in forward-looking statements are discussed
in LREIT's management discussion and analysis for the year ended
December 31, 2023 available on SEDAR+
at www.sedarplus.ca. Although the forward-looking
statements contained herein are based upon what management believes
to be reasonable assumptions, LREIT cannot assure investors that
actual results will be consistent with these forward-looking
statements.
The forward-looking statements contained herein are expressly
qualified in their entirety by this cautionary statement.
Forward-looking statements are made as of the date hereof, or such
other date specified in such statements, and neither LREIT nor any
other person assumes any obligation to update or revise such
forward-looking statements to reflect new information, events or
circumstances, except as expressly required by applicable
securities law.
SOURCE Lanesborough Real Estate Investment Trust