June 26, 2017

PROREIT announces closing of profitable sale transaction and unitholder meeting for previously announced acquisition

PRO Real Estate Investment Trust (“PROREIT” or the “REIT”) (TSXV: PRV.UN) is pleased to announce the closing of its previously announced sale of two industrial properties in Etobicoke, Ontario for gross proceeds of $22.3 million (the “Sale Transaction”) and the unitholder meeting date for its previously announced acquisition of two light industrial buildings in Woodstock, Ontario (the “Woodstock Properties”) for a total purchase price of $30.0 million (excluding closing costs) (the “Woodstock Acquisition”).

“As we have previously advised, we are very pleased with these transactions, which together with certain recently announced proposed acquisitions result in the addition of $20 million of newer high quality assets to our portfolio on a net basis. As a result of our recently announced transactions, the REIT’s portfolio will increase by approximately 250,000 square feet of gross leasable area upon closing of the transactions and enable us to increase the quality, size, and diversity of cash flow of the portfolio,” said James W. Beckerleg, President and Chief Executive Officer of the REIT. “We believe the new assets being acquired are superior to the older buildings being sold and that they will deliver higher returns immediately. They fit our overall portfolio objectives very well.”

Details of the Sale Transaction

PROREIT is pleased to report that it has completed the sale of two industrial properties in Etobicoke, Ontario for gross proceeds of $22.3 million, representing a capitalization rate on sale of approximately 6%. The two properties, which were acquired by PROREIT in June 2015 and had a total capital cost of $20.1 million, were sold opportunistically, resulting in an approximate gain of $2 million on their capital cost and a $0.6 million gain over the properties’ 2016 IFRS carrying values. The Sale Transaction has generated in excess of $10 million in free cash, all of which is expected to be used to settle the purchase price of the Woodstock Acquisition and certain other recently announced proposed acquisitions. The two properties, which are 100% leased, represented approximately 298,000 square feet of gross leasable area (“GLA”).

Details of the Woodstock Acquisition

The Woodstock Properties, built in 2007 and 2008, are fully leased and enjoy 28 and 30 foot clear ceiling heights and are strategically located near major markets in both Canada and the United States. The properties are 100% leased to seven national or multi-national tenants with leases ranging in size from 26,000 square feet to 132,000 square feet of GLA. The Woodstock Acquisition is expected to increase the value of the REIT’s asset base by approximately 12.4% to approximately $271 million, and the GLA of the REIT by approximately 25% to over 2.2 million square feet of GLA, with an enhanced footprint in Ontario. The Woodstock Properties are located in an attractive market in Southern Ontario and the Woodstock Acquisition is expected to be accretive to the REIT’s adjusted funds from operations (AFFO) per unit.

The purchase price for the Woodstock Properties is $30.0 million, excluding closing costs (the “Purchase Price”), subject to customary closing date and post-closing adjustments, which implies a price per square foot of $66 and a going-in capitalization rate of approximately 6.8%. The purchase price is expected to be satisfied by a combination of: (i) the assumption of approximately $16.5 million in mortgages, (ii) the issuance to the vendor of $7.25 million of Class B limited partnership units of PROREIT Limited Partnership (“Class B LP Units”), a subsidiary of the REIT, which are economically equivalent to and exchangeable for trust units of the REIT (“Trust Units”) and are each accompanied by one special voting unit of the REIT (“Special Voting Units”), each such Class B LP Unit to be issued at a price of $2.25 per unit, representing the offering price of the Trust Units under the REIT’s prospectus offering completed on June 13, 2017, and (iii) the balance with cash from the net proceeds of the Sale Transaction. The Woodstock Acquisition will be completed pursuant to a purchase agreement that contains customary conditions for transactions of this nature.

The Woodstock Acquisition may constitute a “related party transaction” under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”) as the vendor is a limited partnership in which two trustees of the REIT, Peter Aghar and Shenoor Jadavji, hold 25% of the limited partnership units, and all of the shares of the general partner of the vendor are held by two corporations respectively controlled by Mr. Aghar and Ms. Jadavji. The vendor may therefore be considered a “related party” of the REIT.

After an extensive review and analysis of the Woodstock Acquisition and consideration of, among other things, the unanimous recommendation of the special committee (the “Special Committee”) comprised of independent trustees of the REIT (the “Board”), the independent appraisals of the Woodstock Properties, a fairness opinion provided by Trimaven Capital Advisors (“Trimaven”), the terms of the Woodstock Acquisition, and such other considerations that it deemed relevant, the Board has unanimously determined that in its view, the Woodstock Acquisition is fair to the REIT’s unitholders and is in the best interests of the REIT. Mr. Aghar and Ms. Jadavji recused themselves from the deliberations of the Board concerning the Woodstock Acquisition.

The Special Committee was responsible for supervising the process to be carried out by the REIT and its professional advisors in connection with the Woodstock Acquisition, making recommendations to the Board in respect of matters that it considered relevant with respect to the Woodstock Acquisition, and ensuring that the REIT completes the Woodstock Acquisition in compliance with the requirements of MI 61-101, the REIT’s declaration of trust, applicable policies of the TSX Venture Exchange and applicable law. The Special Committee has advised the Board that, based on a number of factors, the Woodstock Acquisition is in its view in the best interests of the REIT.

Colliers International Realty Advisors Inc. (the “Appraiser”) was retained to prepare an independent appraisal of the market value of each of the Woodstock Properties (the “Independent Appraisals”). The Independent Appraisals estimated the aggregate market value of the Woodstock Properties, as of May 2, 2017, to be $32.35 million. The Special Committee also retained Trimaven to act as an independent financial advisor and to provide a fairness opinion, which stated that the Purchase Price payable by the REIT pursuant to the Woodstock Acquisition is fair, from a financial point of view, to the unitholders of the REIT, other than the vendor and certain of its associates and affiliates.

Pursuant to MI 61-101, the REIT is required to obtain prior approval of the Woodstock Acquisition by a majority of disinterested unitholders, as determined pursuant to MI 61-101. The vote on the Woodstock Acquisition is expected to take place at a special meeting of unitholders to be held on August 3, 2017. If approved, the Woodstock Acquisition is expected to close in early August, 2017. The closing of the Woodstock Acquisition is also subject to the satisfaction of standard closing conditions and to the approval of the TSX Venture Exchange.

A management proxy circular for the special meeting of unitholders is expected to be filed under PROREIT’s SEDAR profile at www.sedar.com (the “Proxy Circular”) in early July. The Proxy Circular will also be mailed to the REIT’s unitholders, and will provide unitholders with important information about the Woodstock Acquisition. Details of the Woodstock Acquisition, as well as the rationale for the support of the transaction by the Board and a copy of the fairness opinion, will also be set out in the Proxy Circular.

The Woodstock Acquisition is exempt from the formal valuation requirements of Section 5.4 of MI 61 101 pursuant to Section 5.5(b) of such instrument. Notwithstanding the fact that the Woodstock Acquisition is exempt from the formal valuation requirement of Section 5.4 of MI 61-101, the REIT has obtained the Independent Appraisals from the Appraiser.

As at June 26, 2017, Mr. Aghar and Ms. Jadavji and certain of their associates and affiliates hold an approximate 6.7% effective interest in the REIT through the ownership of, or the control or direction over, 2,393,600 Trust Units and 1,457,511 Class B LP Units and the accompanying 1,457,511 Special Voting Units. Following the completion of the Woodstock Acquisition, based on the number of Trust Units and Class B LP Units outstanding as at the date of this press release, such parties will hold an approximate 11.6% effective interest in the REIT through their ownership of, control or direction over 2,393,600 Trust Units and 4,679,733 Class B LP Units and the accompanying 4,679,733 Special Voting Units.

In accordance with the terms of the management agreement of the REIT with its external manager, a fee of approximately $300,000 will be paid to the manager in connection with the Woodstock Acquisition. In accordance with the terms of the strategic investment agreement with Lotus Crux Acquisition LP, a fee of approximately $262,500 will be paid to Lotus Crux Acquisition LP in connection with Woodstock Acquisition.


PROREIT is an unincorporated open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. PROREIT was established in March 2013 to own a portfolio of diversified commercial real estate properties in Canada, with a focus on primary and secondary markets in Québec, Atlantic Canada and Ontario with selective expansion into Western Canada.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements are based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond PROREIT’s control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements.

Forward-looking statements contained in this press release include, without limitation, statements pertaining to the expected timing and completion of the Woodstock Acquisitions; the effect of the Woodstock Acquisitions on the financial performance of the REIT; the use of the net proceeds of the Sale Transaction; the satisfaction of the conditions precedent to consummation of the Woodstock Acquisition, including the approval of the REIT’s unitholders; the ability to obtain required regulatory approvals; and the ability of PROREIT to execute its business and growth strategies. PROREIT’s objectives and forward-looking statements are based on certain assumptions, including that (i) PROREIT will receive financing on favourable terms; (ii) the future level of indebtedness of PROREIT and its future growth potential will remain consistent with REIT’s current expectations; (iii) there will be no changes to tax laws adversely affecting PROREIT’s financing capacity or operations; (iv) the impact of the current economic climate and the current global financial conditions on PROREIT’s operations, including its financing capacity and asset value, will remain consistent with PROREIT’s current expectations; (v) the performance of PROREIT’s investments in Canada will proceed on a basis consistent with PROREIT’s current expectations; and (vi) capital markets will provide PROREIT with readily available access to equity and/or debt.

The forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. All forward-looking statements in this press release are made as of the date of this press release. PROREIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by law.

Additional information about these assumptions and risks and uncertainties is contained under “Risk Factors” in PROREIT’s latest annual information form, which is available on SEDAR at www.sedar.com. Additional information will also be contained in the Proxy Circular.

Neither the TSX Venture 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:

PRO Real Estate Investment Trust

James W. Beckerleg

President and Chief Executive Officer


PRO Real Estate Investment Trust

Gordon G. Lawlor, CPA, CA

Chief Financial Officer


For further information:


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