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GT CANADA MEDICAL PROPERTIES INC. ANNOUNCES PROPOSED REIT CONVERSION AND ACQUISITION

  //business-finance.news-articles.net/content/201 .. es-proposed-reit-conversion-and-acquisition.html
  Published in Business and Finance on Tuesday, October 19th 2010 at 12:55 GMT by Market Wire
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TORONTO, Oct. 19 /CNW/ - GT Canada Medical Properties Inc. ("GT Canada") is pleased to announce today that its board of directors has approved:

• the proposed conversion (the "Conversion") of GT Canada into a real estate investment trust (the "REIT"); and
  
  
• the proposed acquisition (the "Acquisition") by the REIT of a portfolio of five medical office buildings, including one substantially pre-leased property currently under construction (collectively, the "Acquired Properties"). 

GT Canada intends to present the Conversion and Acquisition to its shareholders for approval at a special meeting scheduled for November 16, 2010, in Toronto, Ontario.

The Conversion

GT Canada has decided to pursue the Conversion because the resulting trust structure is expected to:

• enhance shareholder value;
  
• create a favourable platform for growth and development of the business of GT Canada; and
• provide a vehicle to deliver cash flow from the properties held by GT Canada to securityholders in a tax efficient manner.

Completion of the Conversion is subject to the approval of the TSX Venture Exchange (the "TSXV"), the Ontario Superior Court of Justice, and GT Canada's shareholders. The Conversion and the Acquisition will be subject to "majority of the minority" shareholder approval in accordance with applicable securities laws and stock exchange requirements.

The Acquisition

The Acquired Properties consist of five medical office buildings, including one substantially pre-leased property currently under construction, all in Ontario, containing an aggregate gross leasable area of approximately 154,400 square feet. The Acquired Properties have a well-diversified tenant profile with 89 tenants.  The tenants are a mix of family health teams, medical and diagnostic imaging clinics, medical practitioners, pharmacies and laboratories.

The aggregate purchase price for the Acquired Properties is approximately $39,950,000 (subject to adjustments), comprised of: (i) the assumption by the REIT of approximately $16,800,000 in mortgage debt on the Acquired Properties; (ii) the issuance of up to $650,000 in securities of a subsidiary of the REIT (priced at closing based on the approximate market value of the REIT's units on closing and which will be convertible into REIT units on a one-for-one basis); and (iii) approximately $22,500,000 in cash (a portion of which will be used to pay certain liabilities associated with the Acquired Properties).

The $650,000 in securities  to be received by certain vendors will be exchangeable at the option of the holder for one unit of the REIT (subject to customary anti-dilution adjustments), will be accompanied by one "special voting unit" of the REIT (which provides for the same voting rights in the REIT as a unit) and will be entitled to distributions of cash equal to the cash distributions paid to holders of units by the REIT.

In connection with the Acquisition, Colliers International will receive a commission equal to 1.50% (of which the REIT will pay half) of the purchase price for the Acquired Properties, provided that no commission will be paid in respect of the one Acquired Property currently under construction.

In connection with the Acquisition, GT Canada retained Altus Group Ltd. (the "Appraiser") to provide an independent appraisal of the market value of the Acquired Properties. The Appraiser has estimated the market value of the Acquired Properties (land and building) as at June 15, 2010 to be approximately $40,200,000.

Completion of the Acquisition is subject to the prior satisfaction or waiver of a number of conditions, including TSXV acceptance, shareholder approval and successful completion of financing arrangements for minimum proceeds of $25,000,000.

Thornley Holdings Limited (an Ontario corporation that is indirectly controlled by Edward Thornley, a director of GT Canada and trustee of the REIT and Darren Thornley, an officer of GT Canada and the REIT), Douglas Friars, M.D., a director of GT Canada and a trustee of the REIT, and Darren Thornley all hold partial interests in certain of the Acquired Properties (through shareholdings in certain of the vendors). As a result of these interests, Thornley Holdings Limited, Douglas Friars, M.D. and Darren Thornley are each expected to indirectly receive approximately $9,600,000, $5,200,000 and $250,000, respectively, in proceeds from the Acquisition (in the case of Thornley Holdings and Douglas Friars, M.D., including up to $500,000 and $150,000 in securities convertible into REIT units, respectively).  Accordingly, the Acquisition is a "non-arm's length transaction" and will be subject to majority of the minority shareholder approval.

Thornley Holdings Limited, Edward Thornley, Darren Thornley and Douglas Friars, M.D. collectively own or exercise control or direction over an aggregate of 2,055,333 common shares of GT Canada, representing approximately 9.8% of the outstanding common shares.

Board Review and Approval

Following the recommendation of GT Canada's investment committee (which consists of Stanley Swartzman, Seymour Temkin and Richard Michaeloff, all of whom are independent of the vendors of the Acquired Properties), the board of directors of GT Canada (the "Board") has determined that the Conversion (the completion of which is a condition of the Acquisition) and the Acquisition are fair to GT Canada's shareholders and in the best interests of GT Canada and its stakeholders.  Accordingly, the Board has unanimously approved (with Edward Thornley and Douglas Friars abstaining) the Conversion and the Acquisition, and recommends that shareholders vote in favour of the resolutions approving the Conversion and the Acquisition.  An information circular detailing the terms of the proposed Conversion and Acquisition is expected to be mailed to GT Canada shareholders on or about October 25, 2010, at which time a copy will be made available at [ www.sedar.com ].

Reader Advisory

This news release contains "forward-looking statements" within the meaning of applicable securities laws relating to the proposal to complete the proposed transaction, including statements regarding the terms and conditions of the proposed transaction. Readers are cautioned not to place undue reliance on forward-looking statements. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the parties will not proceed with the Conversion and Acquisition, that the ultimate terms of the Conversion and Acquisition will differ from those that currently are contemplated, and that the Conversion and Acquisition will not be successfully completed for any reason (including the failure to obtain the required financing, TSXV acceptance, failure to satisfy the conditions of the agreement between the REIT and GT Canada, court approval or shareholder approval). There can be no assurance that the Conversion and Acquisition will be completed as proposed or at all.  The factors identified above are not intended to represent a complete list of the factors that could affect GT Canada. For a complete discussion of such risk factors, see the information circular to be mailed to shareholders in connection with the Conversion and Acquisition, a copy of which will be made available at [ www.sedar.com ].

Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the Conversion and Acquisition, any information released or received with respect to the Conversion and Acquisition may not be accurate or complete and should not be relied upon. 

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transactions and has neither approved nor disapproved the contents of this press release.

For Further Information:

Andrew Shapack, Chief Executive Officer
GT Canada Medical Properties Inc.
(416) 572-2170