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MONTREAL, Nov. 10, 2020 /CNW Telbec/ - (TSXV:
FRO.UN) Fronsac Real Estate Investment Trust (the
"REIT" or "Fronsac") is pleased to announce that it
has agreed to acquire five grocery store properties leased to
affiliated brands of Loblaws™ located in Beauport, QC, Roberval, QC, Sydney, NS, New
Glasgow, NS, and Kirkland Lake,
ON (collectively, the "Acquisition Properties"), its
intention to undertake a public offering (the "Public
Offering") of units of Fronsac (the "Units") and its
intention to undertake a non-brokered private placement (the
"Private Placement") of convertible debentures of Fronsac
(the "Convertible Debentures").
The REIT also announces that it has completed today the
previously-announced consolidation of the issued and outstanding
Units on a basis of one (1) post-consolidation Unit for every ten
(10) pre-consolidation Units.
Acquisition Properties
The Acquisition Properties are
comprised of five grocery stores located in Québec, Nova Scotia and Ontario, aggregating approximately 246,000
square feet of gross leasable area. The Acquisition Properties are
100% occupied, with a weighted average remaining lease term of
approximately 6.1 years, and are all single-tenant properties
leased on a triple net basis.
The combined net operating income in respect of the Acquisition
Properties is approximately $3.0
million, representing a 7.0% weighted average capitalization
rate based on the aggregate purchase price of approximately
$43.4 million (excluding transaction
costs).
Public Offering of Units
The REIT is expected to raise
gross proceeds of up to $15.0 million pursuant to the Public
Offering. The Public Offering is being made through a syndicate of
agents co-led by Paradigm Capital Inc. and Canaccord Genuity Corp.,
acting as joint bookrunners (collectively, the "Agents").
The offering price of the Units (the "Offering Price") will
be determined by the REIT and the Agents in the context of the
market. The REIT has granted the Agents an option to offer for sale
up to an additional $2.25 million in
Units, on the same terms and conditions, exercisable in whole or in
part at any time until 30 days after closing, to cover any
over-allotments, if any, and for market stabilization purposes. The
Public Offering is expected to close on or about November 25,
2020 and is subject to customary conditions, including the entering
into of a definitive agency agreement and receipt of all regulatory
approvals, including the approval of the TSX Venture Exchange (the
"TSX-V"). The Units will be offered by way of a short form
prospectus to be filed with the securities commissions and other
similar regulatory authorities in each of the provinces of
Canada.
The Public Offering will be made on a "best efforts" agency
basis and is subject to market conditions, and there can be no
assurance as to whether or when the Public Offering may be
completed, or as to the final size and terms of the Public
Offering.
Certain trustees and members of management of the REIT have
indicated an interest in purchasing Units as part of the Public
Offering.
A copy of the preliminary short form prospectus of the REIT is
available under the REIT's profile on SEDAR at
www.sedar.com or may be obtained by contacting the Agents. The
REIT's preliminary short form prospectus is subject to completion
or amendment. There will not be any sale or any acceptance of an
offer to buy the Units until a receipt for the final short form
prospectus has been issued and a copy thereof has been sent to the
purchaser.
Private Placement of Convertible Debentures
The Convertible Debentures will be offered for minimum gross
proceeds of $5.0 million (the
"Minimum Private Placement") and maximum gross proceeds of
approximately $8.0 million (the
"Maximum Private Placement") to the REIT. The Convertible
Debentures will mature five (5) years from their date of issuance,
will bear an annual interest rate of 6.0% payable semi-annually,
and will be convertible into Units at a conversion price equal to
125% of the Offering Price (the "Conversion Price"). Fronsac
will have the right to redeem the Convertible Debentures on or
after the third anniversary of their issuance should the closing
price of the Units on the TSX-V be higher than 135% of the Offering
Price for a period of forty-five (45) consecutive trading days. At
any time upon giving 10 days' advance written notice to the holders
of the Convertible Debentures, the REIT may force the conversion of
the principal amount of the then outstanding Convertible Debentures
into Units at the Conversion Price if the closing price of the
Units on the TSX-V is greater than 135% of the Conversion Price for
any forty-five (45) consecutive trading days. The Private Placement
is expected to close prior to the closing of the Public Offering
and is subject to customary conditions, including the entering into
of definitive subscription agreements with investors and receipt of
all regulatory approvals, including the approval of the TSX-V. The
Convertible Debentures and the Units issuable upon conversion of
the Convertible Debentures will be subject to a hold period under
applicable Canadian securities laws.
Use of Proceeds
Assuming the Public Offering is fully subscribed, the REIT
intends to use the net proceeds of the Public Offering and the
Private Placement as follows:
(i) approximately
$10.4 million to partially fund
the acquisition of the Acquisition Properties, with the remainder
of such acquisition to be funded by new mortgage financing;
(ii) approximately
$7.3 million to repay a portion
of the outstanding indebtedness under certain of Fronsac's credit
facilities, including additional indebtedness incurred in
connection with the acquisition of a 50%-interest in two properties
located in Drummondville, QC,
which is expected to close on November 22,
2020;
(iii) approximately
$0.3 million for expenses incurred by
the REIT in connection with the Public Offering and the Private
Placement;
(iv) approximately
$0.8 million for real estate
transaction costs expected to be incurred in connection with the
acquisition of the Acquisition Properties, primarily comprised of
land transfer and other taxes, insurance, bank underwriting fees,
legal fees and third-party consultant fees; and
(v) approximately
$0.4 million, assuming the
completion of the Minimum Private Placement, and approximately
$3.4 million, assuming the
completion of the Maximum Private Placement, for working capital
and general trust purposes.
About Fronsac – Fronsac Real Estate Investment Trust
is an open-ended trust that acquires and owns high quality triple
net and management-free commercial real estate properties.
Forward-Looking Statements – This press release
contains forward-looking statements and information as defined by
applicable securities laws. Fronsac warns the reader that actual
events may differ materially from current expectations due to known
and unknown risks, uncertainties and other factors that could cause
actual results to differ materially from the results anticipated in
such statements. Such risks, uncertainties and other factors
include the risk that the Public Offering and the Private Placement
may not be completed on favorable terms or at all, the risk that
Fronsac may not be able to obtain all necessary regulatory and
stock exchange approvals, including the approval of the TSX-V, the
risk that Fronsac may apply the net proceeds of the Public Offering
and the Private Placement differently than as stated herein
depending on future circumstances, the risks related to
economic conditions, including the risks related to the impacts of
the current Covid-19 pandemic on the REIT's tenants and the real
estate market, the risks associated with the local real estate
market and real estate activities generally, the risks related to
the dependence on the financial condition of tenants, the changes
in interest rates, the availability of financing in the form of
debt or equity and the effects related to the adoption of new
accounting standards, as well as other risks, uncertainties and
factors to be described in the preliminary short form prospectus of
Fronsac and described from time to time in the documents filed by
Fronsac with the securities commissions and similar regulatory
authorities, including Fronsac's annual information form and
management's discussions and analysis. Fronsac does not intend or
undertake to update or modify its forward-looking statements even
if future events occur or for any other reason, unless required by
law or any regulatory authority.
Neither the TSX Venture Exchange Inc. nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts any responsibility for the adequacy
or accuracy of this release.
SOURCE Fronsac Real Estate Investment Trust