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TORONTO, May 12 /CNW/ - ISG Capital Corporation (TSX-V: SUS.P) (the "Corporation"), a capital pool company listed on the TSX Venture Exchange (the "Exchange"), announced today that it has agreed to acquire a 200,615 square foot distribution facility situated on approximately 20 acres of land in Ingersoll, Ontario (the "QT Property") as its proposed qualifying transaction (the "Qualifying Transaction") under Exchange Policy 2.4 Capital Pool Companies (the "CPC Policy").
The QT Property
The QT Property is 100% leased to Hercules Tire Company of Canada Inc. for a period of 10 years expiring March 31, 2017. The lease is indemnified by the U.S. parent Hercules Tire & Rubber Company. The site is located directly north of Highway 401, across from the 1.6 million square foot CAMI automotive production facility. CAMI is a joint venture between Suzuki Motor Corporation and General Motors of Canada. Toyota's new Woodstock plant, a $1.1 billion environmentally friendly production facility, is scheduled to open in 2008. It will be only 15 kilometres away. The QT Property has lot coverage of only 23% which offers the possibility of significant future expansion of the distribution facility or re-development of the site
The QT Property is currently subject to a first mortgage in the principal amount of $7,045,000 that bears interest at a rate of 6.14% per annum (interest only until August 2009) and has a term expiring in 2014 (the "Existing Mortgage"). The Corporation intends to assume this mortgage as part of its acquisition of the QT Property.
Revenue and net income for the QT Property were $763,857 and $104,147 (366 day period ended March 31, 2008 - audited), $712,176 and $351,068 (364 day period ended March 31, 2007 - unaudited) and $654,173 and $430,467 (year ended March 31, 2006 - unaudited). As at March 31, 2008, the QT Property had total assets of $7,958,139 and total liabilities of $7,049,023.
The Corporation retained Altus Group Limited (the "Appraiser") to provide an independent appraisal (the "Appraisal") of the market value of the QT Property. The Appraiser estimated the market value of the QT Property (land and building) as at April 1, 2008 to be $10,430,000.
The Corporation intends to assess the performance of existing equipment, processes and systems at the QT Property to verify opportunities and apply energy efficiency and sustainable technologies to achieve both operating cost and greenhouse gas reductions. These initiatives are driven by the Corporation's broader objective of lowering energy costs, reducing greenhouse gas emissions and improving indoor air quality at the properties it acquires, thereby enhancing their environmental and financial performance.
The current owner of the QT Property is Secure Capital Income & Growth (I) LP, an Ontario limited partnership which is indirectly owned and controlled (on a 50/50 basis) by David Ogden and Joseph Sorbara, each of whom is an officer, director and shareholder of the Corporation and a resident of Ontario. Each of Mr. Ogden and Mr. Sorbara currently own 1,650,000 common shares of the Corporation representing approximately 13.2% of the outstanding common shares of the Corporation. As a result, the Qualifying Transaction is a non-arm's length transaction and will be subject to shareholder approval.
The Qualifying Transaction
The Corporation and the Vendor have entered into a purchase agreement dated May 9, 2008 (the "Purchase Agreement") pursuant to which the Corporation has agreed to purchase the QT Property from the Vendor for a purchase price of $9,908,500 (the "Purchase Price"). This represents 95% of the appraised value of the QT Property. The Purchase Price will be subject to customary adjustments and will be payable as follows:
- $2,105,000 in cash;
- $758,500 by the issuance of 1,517,000 common shares of the
Corporation ("Common Shares") issuable at the price of $0.50 per
share; and
- the Corporation's assumption of the Existing Mortgage.
The Corporation has paid a $25,000 deposit to the Vendor, which deposit will be credited towards the cash portion of the purchase price payable by the Corporation on closing.
The cash portion of the purchase price will be funded by the Corporation using cash on hand and a portion of the proceeds from a proposed private placement of 4,200,000 Common Shares at a price of $0.50 per share for gross proceeds of approximately $2,100,000 (the "Private Placement"). Canaccord Capital Corporation (the "Agent") is acting as agent to the Corporation, on a commercially reasonable best efforts basis, in connection with the Private Placement. In consideration for acting as agent, the Agent will receive a commission equal to 6% of the gross proceeds raised under the Private Placement. The shares issued pursuant to the Private Placement will be subject to a four-month hold period.
Pursuant to the Purchase Agreement, completion of the Qualifying Transaction is subject to the prior satisfaction or waiver of a number of conditions, including the receipt of Exchange and shareholder approval and completion of the Private Placement. The Corporation intends to fix a date for a shareholder meeting to consider approval of the Qualifying Transaction and to mail an information circular to shareholders in connection therewith following receipt of conditional approval for the Qualifying Transaction from the Exchange.
The board of directors of the Corporation (the "Board") has unanimously determined that the Qualifying Transaction is fair to shareholders of the Corporation and in the best interests of the Corporation and its shareholders. Accordingly, the Board has approved the Qualifying Transaction and will unanimously recommend that shareholders vote in favour of the Qualifying Transaction. In connection with the Board's approval of the Qualifying Transaction, Messrs. Ogden and Sorbara declared their interests in the Qualifying Transaction and abstained from voting on the Qualifying Transaction.
The Corporation intends to apply for an exemption from the Exchange's sponsorship requirement for the Qualifying Transaction.
The Corporation
The Corporation was incorporated under the laws of Canada on July 23, 2007 and completed its initial public offering under the CPC Policy on November 28, 2007. Throughout this time, the Corporation's business has been restricted to the identification and evaluation of real property in the commercial real estate sector for the purpose of completing its Qualifying Transaction. In this regard, the Corporation has been focused on identifying properties that would provide the necessary elements to allow the Corporation to showcase its strategy of creating value in the properties it acquires through proactive asset management and implementation of sustainable initiatives that lower operating costs and increase the productivity of tenant employees.
The Corporation plans on enhancing property values and generating superior risk-adjusted returns on investments through a targeted acquisition strategy, proactive asset management and the implementation of sustainable initiatives and environmental improvements to commercial properties.
Upon completion of the Qualifying Transaction, the Corporation expects that its Common Shares will be listed on Tier 2 of the Exchange.
There will be no changes to the insiders of the Corporation as a result of the Qualifying Transaction. The directors and officers of the Corporation are:
- John Roy - Chairman - David Ogden - Director and Chief Executive Officer - Philip Rossiter - Director and Chief Financial Officer - Joseph Sorbara - Director and Secretary - Garry Beres - Director - Amy Erixon - Director
The backgrounds of the directors and officers are contained in the final initial public offering prospectus of the Corporation dated November 21, 2007 which is available on the SEDAR website at www.sedar.com.
This press release contains forward-looking statements. Forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "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. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Examples of such statements include the intention to complete the Private Placement and the Qualifying Transaction. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Accordingly, readers should not place undue reliance on forward-looking statements. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the ability of the Corporation to obtain necessary financing; satisfy conditions under the Purchase Agreement; satisfy the requirements of the Exchange with respect to the Qualifying Transaction or the Private Placement or the level of activity in the commercial real estate business and the economy generally; competition; and anticipated and unanticipated costs. The factors identified above are not intended to represent a complete list of the factors that could affect the Corporation. Additional factors are noted under "Risk Factors" in the Corporation's initial public offering prospectus dated November 21, 2007, a copy of which may be obtained on the SEDAR website at www.sedar.com.
Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and majority of the minority shareholder approval. The transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the proposed transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits of the
proposed transaction and has neither approved nor disapproved the
contents of this press release. The TSX Venture Exchange does not accept
responsibility for the adequacy or accuracy of this press release.