Special Meeting of Limited Partners to be held
October 10, 2019 to Approve
CALGARY, Sept. 19, 2019
/CNW/ - Genesis Land Development Corp. ("Genesis") is
pleased to announce that it has entered into a purchase and sale
agreement (the "Sale Agreement") dated September 19, 2019 to acquire a $20.5 million vendor take-back mortgage from
Limited Partnership Land Pool (2007) ("LPLP" or the
"Partnership") for $22.02
million.
The general partner of LPLP is a wholly owned subsidiary of
Genesis. The transaction is subject to approval by the limited
partners of LPLP by way of special resolution (the "Special
Resolution") to be considered at a special meeting of limited
partners ("Limited Partners") to be held on October 10, 2019 (the "Meeting") in
Calgary, Alberta.
Background
In December 2017, the Partnership
sold 318.97 acres of land in the City of
Airdrie to a third-party purchaser for $41 million and
granted the purchaser a three-year vendor take-back mortgage in the
principal amount of $20.5 million
with interest payable annually at the rate of 6.5% per annum (the
"VTB").
A statement of claim was filed several years ago in the
Alberta Court of Queen's Bench by
one of the Limited Partners of the Partnership, a limited partner
of LP RRSP Limited Partnership #1 and a limited partner of LP RRSP
Limited Partnership #2 naming, among others, the Partnership and
Genesis as defendants (the "Proposed Class Action"). Genesis
was served with this statement of claim in September 2017 and has been vigorously defending
it along with the Partnership and its affiliated entities. The
Proposed Class Action is at an early stage in the litigation and
class action process and Genesis believes that it is without
merit.
However, as a result of the Partnership's potential liability
under the Proposed Class Action, it is unlikely that the
Partnership would be able to make any significant cash
distributions to its Limited Partners of the net proceeds of the
repayment of the VTB expected to be received by the Partnership in
December 2020 until the action is
ended or resolved, which could take a number of years.
Largest Limited Partner's Request
2474514 Ontario Inc., which holds 22% of all of the issued and
outstanding limited partnership units of the Partnership on behalf
of Caja Paraguaya de Jubilaciones y Pensiones del Personal de
Itaipu Binacional ("Cajubi"), was seeking a resolution that
did not involve it in the Proposed Class Action and requested that
Genesis make a proposal to Limited Partners that would result in a
final liquidating cash distribution being paid to Limited Partners
in 2019, or an economically similar proposal. Following
negotiations with Cajubi, Genesis entered into the Sale Agreement
to purchase the VTB from the Partnership for $22.02 million within 5 business days of the
Meeting. The net cash proceeds to the Partnership of the sale
(after repayment of $11.66 million
owing under the loan by Genesis to the Partnership (including the
waiver by Genesis of interest in 2019 of approximately $650,000)) would be $10.36
million or $0.2364 per limited
partnership unit. The net cash proceeds would be immediately
available for a pro rata distribution to Cajubi following closing
of the VTB purchase, and would be available for distribution to all
other Limited Partners following receipt of a release and
undertaking and the Partnership obtaining the appropriate Court
approvals.
Genesis will seek to obtain appropriate approvals from the Court
of Queen's Bench of Alberta as
soon as possible for the distribution to those Limited Partners
who, as a condition of receiving the distribution, will agree not
to participate in the Proposed Class Action and sign a release and
undertaking in favour of all of the defendants in the Proposed
Class Action. Genesis will also seek the appropriate approvals of
the Court for any remaining funds to be paid into Court or
otherwise transferred out of the Partnership in a Court-approved
manner that preserves the funds subject to further order of the
Court.
Based on the VTB sale, the net cash proceeds available for
distribution would be 105% of the amount of distributable cash that
is expected to be potentially available for distribution to Limited
Partners in December 2020, the
scheduled VTB re-payment date, assuming that the Proposed Class
Action has been resolved by such date. The purchase by Genesis of
the VTB, the sole asset of the Partnership, provides Limited
Partners, including Cajubi, with an opportunity to realize cash
proceeds as soon as possible. Genesis is prepared to purchase the
VTB at a premium so that Limited Partners may realize cash proceeds
earlier, to resolve matters relating to the Proposed Class Action
and to facilitate the winding-up of the Partnership.
As a part of the closing of the sale of the VTB to Genesis, and
subject to obtaining the appropriate Court approvals, Genesis will
agree to indemnify the Partnership (and other related parties) in
respect of the Proposed Class Action, and Genesis and the
Partnership (and various related parties) will enter into mutual
releases, such that, following the liquidating distribution to all
Limited Partners, the Partnership will cease to have any assets or
liabilities and will be wound-up.
Under the Sale Agreement, Genesis has agreed to reimburse the
Partnership for costs and expenses incurred by the Partnership in
connection with the Sale Agreement, the Meeting and the winding up
of the Partnership.
Special Meeting of Limited Partners Called for October 10, 2019 to Approve Special
Resolution
A notice of meeting and information circular in respect of a
special meeting of Limited Partners to be held on October 10,
2019 has been prepared by Genesis and will be mailed to Limited
Partners on September 19, 2019 and
will be available electronically at www.genesisland.com.
The sale of the VTB by the Partnership and related matters is
conditional on, among other matters, the approval of the Limited
Partners by Special Resolution passed by at least 66 2/3% of the
votes cast in person or represented by proxy at the Meeting. In the
event that the Special Resolution is not duly approved by the
Limited Partners, the Sale Agreement will be terminated. Assuming
approval of the Special Resolution, closing of the Sale Transaction
will occur within five business days of the Meeting date.
If the sale of the VTB is completed, the Partnership will
immediately distribute a pro-rata share of the net cash proceeds of
the VTB sale to Cajubi, and intends to obtain the appropriate court
approvals to distribute a pro-rata share of the net cash proceeds
to other Limited Partners. To receive his or her distribution, and
subject to obtaining the appropriate court approvals, a Limited
Partner will be required to agree to a full and final release of
all claims he or she may have against Genesis and its related
entities in respect of the Partnership and an undertaking to
cooperate as necessary in obtaining the appropriate approvals of
the Court of Queen's Bench of Alberta.
Voting Support Agreement
Cajubi has entered into a voting support agreement with Genesis
in which they have agreed to vote in favour of the Special
Resolution to be considered at the Meeting. This agreement provides
that, if the Special Resolution to be considered at the Meeting is
approved and the transactions contemplated by the Sale Agreement
are completed, Cajubi will be paid its pro-rata share of the net
cash proceeds of the VTB sale and will be reimbursed a portion of
Cajubi's legal fees and other costs associated with negotiating and
evaluating the proposed sale transaction in the amount of
$100,000.
About Genesis
Genesis Land Development Corp. is a land developer and
residential home builder in the Calgary Metropolitan Area. The Corporation's
common shares are listed on the Toronto Stock Exchange (TSX:
GDC).
ADVISORIES
Forward-Looking Statements
This news release may contain certain statements which
constitute forward-looking statements or information
("forward-looking statements") within the meaning of applicable
securities legislation, including Canadian Securities
Administrators' National Instrument 51-102 Continuous Disclosure
Obligations, concerning the proposed VTB sale, the Proposed Class
Action, the proposed distribution of the net cash proceeds of the
VTB sale, the winding-up of the Partnership and the obtaining of
the appropriate court approvals. Generally, these forward-looking
statements can be identified by the use of forward-looking
terminology such as "plans", "expects" or "does not expect", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes",
or variations of such words and phrases or state that certain
actions, events or results "may", "could", "would", "might" or
"will be taken", "occur" or "be achieved".
Although Genesis believes that the anticipated future
results, performance or achievements expressed or implied by
forward-looking statements are based upon reasonable assumptions
and expectations, the reader should not place undue reliance on
forward-looking statements because they involve assumptions, known
and unknown risks, uncertainties and other factors many of which
are beyond the Corporation's control, which may cause the actual
results, performance or achievements of Genesis to differ
materially from anticipated future results, performance or
achievement expressed or implied by such forward-looking
statements. Accordingly, Genesis cannot give any assurance that its
expectations will in fact occur and cautions that actual results
may differ materially from those in the forward-looking
statements.
Factors that could cause actual results to differ materially
from those set forth in the forward-looking statements include, but
are not limited to: the failure to obtain the requisite Limited
Partner approval of the VTB sale and matters relating thereto; the
failure to complete the proposed VTB sale as proposed or at all;
the failure to obtain any necessary court approvals as proposed or
at all; adverse events or outcomes of the Proposed Class Action,
ability to access capital on favourable terms; not realizing on the
anticipated benefits from transactions or not realizing on such
anticipated benefits within the expected time frame; and other
risks and factors described from time to time in the documents
filed by Genesis with the securities regulators in Canada available at www.sedar.com, including
the Corporation's MD&A under the heading "Risks and
Uncertainties" and the AIF under the heading "Risk
Factors".
The forward-looking statements contained in this news release
are made as of the date of this news release and, except as
required by applicable law, Genesis does not undertake any
obligation to publicly update or to revise any of the
forward-looking statements, whether as a result of new information,
future events or otherwise.
SOURCE Genesis Land Development Corp.