Rock to Road

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Strongco to reallocate real estate assets


May 21, 2014
By Rock to Road

May 21, 2014, Mississauga, Ont. – Strongco Corporation has
announced its plans to monetize several real estate holdings through sale and
leaseback transactions, in line with the company's strategy of not committing
capital to real estate assets over the long term. The anticipated gross
proceeds from these transactions will be approximately $47 million, which will
be used by Strongco to reduce debt.

May 21, 2014, Mississauga, Ont. – Strongco Corporation has
announced its plans to monetize several real estate holdings through sale and
leaseback transactions, in line with the company's strategy of not committing
capital to real estate assets over the long term. The anticipated gross
proceeds from these transactions will be approximately $47 million, which will
be used by Strongco to reduce debt.

 

The proposed transactions involve three different purchasers
and five properties. Separate Purchase and Sale agreements have been signed for
the two recently constructed branches in Fort McMurray, Alberta and Saint
Augustin-de-Desmaures, Quebec. The Quebec agreement also includes branches in
Val D'Or and Moncton, New Brunswick. A Letter of Intent with a third purchaser
has been agreed to for the sale and leaseback of Strongco's main branch and
head office in Mississauga, Ontario. All proposed transactions are subject to
due diligence and normal commercial conditions. It is anticipated that the Fort
McMurray and the Mississauga transactions may be completed by June 30 and the
remaining transaction by July 31, 2014.

 

"As with the sale and leaseback of our Acheson, Alberta
facility last year, it has always been our strategic intent to sell the new
branches we built and not tie up capital in real estate," said Bob
Dryburgh, president and CEO of Strongco. "With respect to the other
existing branches, market values have increased substantially and we believe
this is an opportune time to crystallize those gains and deploy the capital
more efficiently in the business."

 

The properties in Mississauga, Val D'Or and Moncton have
been owned by Strongco for some time, and the current market value of these
properties substantially exceeds the carrying value. An overall profit of
approximately $9 million, before taxes, is anticipated.

 

"A key focus for management is to improve Strongco's
debt by reducing operating inventory levels," added Dryburgh. "The
real estate transactions announced today further management's goal to
strengthen the company's balance sheet and efficiently deploy capital."