Nobel REIT announces completion of bridge loan financing and details of proposed transactions

MONTREAL, June 2, 2014 /CNW/ - Nobel Real Estate Investment Trust ("Nobel REIT" or the "REIT") (TSXV: NEL.UN) is pleased to announce that it has completed the $1.2-million secured bridge loan financing (the "Bridge Loan") with RFA Capital Partners Inc., pursuant to the letter of intent between the parties (the "LOI"), previously announced on May 15, 2014. The Bridge Loan is intended as a preliminary transaction preceding a series of related proposed transactions (the "Transactions") to be submitted to the REIT's unitholders for approval and confirmation at its upcoming annual general and special meeting of unitholders, to be held on June 26, 2014 (the "Meeting"), which include:

• a brokered $10-million private placement (the "Offering") of Trust Units and trust unit purchase warrants (the "Warrants") to be entirely subscribed by RFA Capital Partners Inc. or an affiliate thereof ("RFA Capital");
• an assignment of various fees payable under the REIT's property and asset management agreement, dated May 30, 2013 (the "Management Agreement") to RFA Capital;
• a 10:1 consolidation (the "Consolidation") of the REIT's Trust Units and Special Voting Units (collectively, the "Units"); and
• an amendment to the REIT's unitholder rights plan (the "Rights Plan") in order to facilitate the Offering and the creation of a new "Control Person" (the "Rights Plan Amendment").

Bridge Loan and the Offering

Pursuant to the terms of the loan agreement entered into between the REIT's majority owned subsidiary, Nobel REIT Limited Partnership ("Nobel LP"), as borrower, the REIT, as guarantor, and RFA Capital, as the lender, the Bridge Loan will bear interest at a rate of 10% per annum (calculated monthly and not in advance), which interest will accrue and be added to the principal amount of the Bridge Loan until July 30, 2014, following which the interest will become immediately due and payable with monthly payments commencing thereafter.  The principal of the Bridge Loan is to be paid in full by September 1, 2015 (the "Maturity Date"). The Bridge Loan is secured by a second ranking security over all present and future movable and immovable property of Nobel LP, including the REIT's two immovable properties, which are held through Nobel LP, located at 1190 Place Nobel in Boucherville, Québec and 1185-1195 chemin du Tremblay in Longueuil, Québec.

$700,000 of the proceeds from the Bridge Loan was used to repay Nobel LP's existing indebtedness owing to Firm Capital Mortgage Fund Inc. and the balance will be used for working capital purposes.

At the option of RFA Capital and subject to the approval of the TSX Venture Exchange (the "Exchange"), the Bridge Loan, together with all accrued and unpaid interest, may be converted and applied toward the subscription price of the Trust Units and Warrants under the Offering.

The Offering will consist of 166,666,667 Trust Units and 16,666,667 Warrants on a pre-Consolidation basis. Each Warrant shall entitle the holder thereof to acquire one Trust Unit at an exercise price of $0.10 per Trust Unit on a pre-Consolidation basis (or $1.00 on a post-Consolidation basis) for a period of 5 years following completion of the Offering.

Upon completion of the Offering, RFA Capital will own approximately 82.85% of the issued and outstanding Units on a non-diluted basis. As a result, the Offering will result in RFA Capital becoming a new "Control Person" of the REIT and, in accordance with Exchange policies, will be subject to the prior approval of the REIT's unitholders and Exchange acceptance.

In the event that the Transactions are not approved by the REIT's unitholders at the Meeting or the Transactions are not otherwise not completed before July 30, 2014, any accrued and unpaid interest under the Bridge Loan must be immediately paid, following which monthly interest payments will commence under the Bridge Loan until the outstanding principal balance of the Bridge Loan is paid in full by the Maturity Date. If the Transactions are approved by unitholders, but the Board elects not to proceed with the Transactions, a break-up fee in the amount of $500,000 will be due and payable to RFA Capital by the REIT.

It is anticipated that a commission in the amount of $400,000 will be payable to an exempt market dealer, Realty Financial Advisors Inc., in connection with the Offering.

Under the definitive agreements to be entered into in respect of the Offering, $500,000 of the net proceeds must be used by the REIT for working capital purposes and the remainder must be used to complete acquisitions of additional properties.

Assignment of Fees and Rights Granted to RFA Capital

Pursuant to the terms of the LOI, in consideration of the Bridge Loan and RFA's investment under the Offering, RFA Capital will be entitled to receive 50% of the "Asset Management Fee", the "Acquisition Fee", the "Disposition Fee", and the "Termination Fee" and 25% of the "Additional Fee" payable to the manager, Société Immobilière Maestri Terra Inc., under the Management Agreement. Further detailed descriptions of these fees are set out in the management information circular sent to unitholders in respect of the Meeting (the "Circular") and in the Management Agreement, copies of which may be consulted under the REIT's profile on SEDAR at www.sedar.com.

Under the LOI, RFA Capital is also entitled to nominate two (2) individuals for election to the board of trustees of the REIT (the "Board"), including RFA Capital's first nominee, Mr. Ben Rodney, President of RFA Capital and Realty Financial Advisors, who has been nominated for election as a trustee at the Meeting.

Consolidation

The Board intends to pass a resolution to consolidate the REIT's issued and outstanding Units on the basis of one (1) post-Consolidation Unit for every ten (10) pre-Consolidation Units (the "Consolidation Ratio"). The principal purpose of the Consolidation is to give effect to a condition of the Offering under the LOI and to enhance the REIT's liquidity and the marketability of its Units.

The number of securities of the REIT currently outstanding prior to the proposed Consolidation is 30,862,500 Trust Units, 3,637,500 Special Voting Units, and 2,000,000 options to acquire Trust Units (the "Options"). If the proposed Consolidation is implemented:

(a)	the number of outstanding securities of the REIT prior to completion of the Offering will be 3,086,250 Trust Units, 363,750 Special Voting Units, and 200,000 Options;
(b)	each holder of Trust Units and Special Voting Units will become entitled to receive such number of new post-Consolidation Trust Units and Special Voting Units, as applicable, as is equal to the number of Trust Units and Special Voting Units currently held divided by the Consolidation Ratio;
(c)	each Option, share purchase warrant, or other convertible security of the REIT not yet converted, exercised or cancelled, and still valid at the date of the Consolidation, will be adjusted on the same Consolidation Ratio and each holder of such securities will become entitled to the corresponding number of new post-Consolidation Units; and
(d)	no fractional Units shall be issued in connection with the Consolidation and no cash shall be paid in the event that a Unitholder would otherwise be entitled to receive a fractional Unit upon such Consolidation. Any fractions resulting therefrom will be rounded up or rounded down to the nearest whole number.

Rights Plan Amendment

At the Meeting, unitholders will also be asked to approve an ordinary resolution to amend the definition of "Exempt Acquisition" under the REIT's Rights Plan in order to facilitate the Offering and the emergence of RFA Capital as a new "Control Person" of the REIT without triggering the dilutive features of the Rights Plan. Further details regarding the Rights Plan Amendment, including the full text of the resolution in respect thereof, are set out in the Circular. A copy of the Rights Plan is also available under the REIT's profile on SEDAR.

Completion of the Transactions remains subject to a number of conditions, including but not limited to, completion of satisfactory due diligence by RFA Capital; execution of definitive agreements in respect of the Offering; distinterested unitholder approval and Exchange acceptance of the Offering, of RFA Capital as a new "Control Person", of the Consolidation, and of the Rights Plan Amendment, compliance with applicable securities regulations and Exchange policies, and to standard closing conditions for transactions of this nature.

About Nobel REIT

Nobel REIT is a recently created unincorporated open-ended real estate investment trust governed by the laws of the Province of Québec. Nobel REIT has been created for the purpose of acquiring and owning income producing properties. The REIT will focus on acquiring commercial retail, mixed-used retail, and industrial and suburban office properties in the primary and secondary markets in the Province of Québec.

Nobel REIT currently owns two commercial properties located in Québec, comprising 71,747 square feet of gross leasable area.

About RFA Capital Partners Inc.

RFA Capital is a real estate private equity firm involved in both commercial real estate and financing (www.rfacanada.com).

Disclaimer – Safe Harbour Forward–Looking Statements

Forward-looking statements contained in this press release involve known and unknown risks, uncertainties and other factors that may cause actual results, performance and achievements of Nobel REIT to be materially different from any future results, performance or achievements expressed or implied by the said forward-looking statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. 

SOURCE: Nobel Real Estate Investment Trust

For additional information, please contact Louis Lemire, CPA, CA, Chief Financial Officer, at 450-655-4338