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Share Name | Share Symbol | Market | Type |
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TSXV:DVO.U | TSX Venture | Common Stock |
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/NOT FOR DISTRIBUTION IN THE UNITED STATES OR THROUGH U.S. NEWSWIRE SERVICES/
*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:
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:
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:
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
Copyright 2016 Canada NewsWire
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