Firm Capital Apartment REIT Announces Completion of Previously Announced $26.8 Million Houston Property Joint Venture Buy-Out and $3.5 Million, 12% Preferred Capital Investment
May 02 2022 - 4:01PM
Firm Capital Apartment REIT (the “
Trust”), (TSXV:
FCA.U), (TSXV: FCA) is pleased to announce the closing of the
previously announced (see press release dated April 18, 2022)
acquisitions of a 50% interest in another of the Trust’s Equity
Accounted Investments located in Houston, Texas based on a $26.8
million valuation (the “
Houston Transaction”
and/or “
Houston Property”) and previously
announced (see press release dated April 18, 2022) $3.5 million,
12% Preferred Capital Investment. In addition, the Trust has
completed the full draw of the previously announced (see press
releases dated April 18, 2022 and April 21, 2022) CAD$13 million
bridge loan (the “
Bridge Loan”):
- $26.8 Million Houston
Property Joint Venture Buy-Out: The Trust is pleased to
announce the closing of the acquisition from its unrelated
partner of their 50% interest in another of the Trust’s Houston,
Texas Equity Accounted Investments. The buy-out price of the 50%
interest from the unrelated partner is based on a $26.8 million
valuation for 100% of the Houston Property that was received by way
of an unsolicited offer from an unrelated third party. Based on the
existing $11.1 million first mortgage and the Trust’s $4.7 million
current common and preferred investment, the Trust bought out the
unrelated partner for approximately $5.3 million (including closing
costs). Based on the $26.8 million valuation, the Trust is
acquiring the controlling interest at a forecasted five year Return
on Equity or ROE of approximately 7.4% and a weighted average
capitalization rate of 6.6%. The Trust now controls 100% of the
Houston Property and will report it going forward as an Investment
Property on the Trust’s financial statements;
- $3.5 Million, 12% Preferred
Capital Investment: The Trust has completed the previously
announced $3.5 million investment in the form of Preferred Capital
to an unrelated third party for the recapitalization of a
multi-residential portfolio located in Sioux Falls, South Dakota.
Terms of the three year Preferred Capital Investment were as
follows: (i) 12% interest per annum throughout the entire three
year term, of which 7% per annum is current pay, with the remaining
5% per annum to accrue and compound monthly for the first year;
(ii) 8% per annum with the remaining 4% per annum to accrue and
compound monthly for the second year; (iii) 9% per annum with the
remaining 3% per annum to accrue and compound monthly for the third
year;
- CAD$13 Million Bridge
Loan: In order to complete the above referenced
transactions, the Trust drew down the remaining CAD$8 million under
the Bridge Loan. The borrower under the Bridge Loan is FCARP
Limited Partnership, a wholly owned subsidiary of the Trust. The
Bridge Loan was provided by a related party of the Trust, and
thereafter transferred to, among others, certain trustees of the
Trust (who together have a total commitment of CAD$4.65 million of
the total CAD$13 million), As noted in the Trust's April 18, 2022
press release, the Trust has agreed to guarantee the payment and
performance of the Bridge Loan. As such, the provision of the
Bridge Loan and the guarantee by the Trust constitutes a "related
party transaction" as defined in Multilateral Instrument 61- 101 –
Protection of Minority Securityholders in Special Transactions
("MI 61-101"), but is exempt from the valuation
requirement and the minority approval requirement pursuant to
subsections 5.5(a) and 5.7(a) of MI 61-101, respectively, as the
value of the Bridge Loan and associated guarantee does not
represent more than 25% of the Trust's market capitalization, as
determined in accordance with MI 61-101.
The Bridge Loan and guarantee provided by the
Trust in connection therewith was approved by the trustees of the
Trust who were independent in respect of the transactions. The
material change report in respect of the transaction will be filed
less than 21 days before the closing of the transaction as the
Trust would like to proceed with the transaction in a timely
manner.
ABOUT FIRM CAPITAL APARTMENT REAL ESTATE
INVESTMENT TRUST Firm Capital Apartment Real Estate
Investment Trust is a U.S. focused real estate investment trust
that pursues multi-residential income producing real estate and
related debt investments on both a wholly owned and joint venture
basis. The Trust has ownership interests in a total of 1,846
apartment units diversely located in Florida, Connecticut, Texas,
New York, New Jersey, Georgia and Maryland.
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 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 Trust holds properties; volatility of real
estate prices; 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 the
Trust to implement its business strategies; competition; currency
and interest rate fluctuations and other risks. Additional risk
factors that may impact the Trust or cause actual results and
performance to differ from the forward looking statements contained
herein are set forth in the Trust's Annual Information Form under
the heading Risk Factors (a copy of which can be obtained under the
Trust's profile on www.sedar.com).
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. Except as
required by applicable law, the Trust undertakes no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future events or otherwise.
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.
For further information, please contact:
Sandy Poklar |
|
Mark Goldreich |
President & Chief Executive Officer |
|
Chief Financial Officer |
(416) 635-0221 |
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(416) 635-0221 |
|
|
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For Investor Relations information, please
contact: |
|
|
|
Victoria Moayedi |
|
|
Director, Investor Relations |
|
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(416) 635-0221 |
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