Toronto, Ontario--(Newsfile Corp. - April 1, 2025) - Sun Residential Real Estate Investment Trust (TSXV: SRES) ("Sun") announces today that it has entered into separate purchase agreements (the "PurchaseAgreements") in connection with the sale of its interests in its two properties (the "Properties"), being a 51% interest in Evergreen at Southwood ("Evergreen at Southwood"), a "Class A" multi-family residential property located in Tallahassee, Florida comprising 12 buildings with 288 rental units, and 4815 Tudor Drive ("Tudor"), an 8-unit multi-family property located in Cape Coral, Florida which is currently being renovated by Sun (collectively, the "Sale Transactions"). The Properties represent substantially all of Sun's assets. Following completion of the Sale Transactions, if approved by, among others, the holders ("Unitholders") of trust units ("Units") of Sun, Sun will be wound-up and terminated (the "Termination"). Sun intends to distribute the net proceeds of the Sale Transactions and Sun's remaining cash (after payment of all liabilities and obligations of Sun) to Unitholders. Sun will provide Unitholders with further details on the Sale Transactions, the Termination and the distribution of remaining proceeds in the Circular (as defined below).
Details of Sale Transactions
Evergreen at Southwood is being sold to Westdale Galesi Partners, LLC, the current owner of the remaining 49% interest in Evergreen at Southwood. Under the Purchase Agreement for Evergreen at Southwood, signed April 1, 2025, Westdale Galesi Partners, LLC has agreed to acquire Sun's 51% of the interests in Westdale Evergreen Southwood LLC, the owner of Evergreen at Southwood, for US$14,055,600, an amount in excess of the fair market value of Sun's interest in Evergreen at Southwood as included in the audited consolidated financial statements of Sun for the year ended December 31, 2024. The mortgage loan for Evergreen at Southwood will remain with Westdale Evergreen Southwood LLC.
Tudor is being sold to 4815 Tudor Drive, LLC. Under the Purchase Agreement for Tudor, signed April 1, 2025, 4815 Tudor Drive, LLC has agreed to acquire Tudor for US$1,250,000, an amount consistent with recent broker opinions of value obtained by Sun. Tudor is mortgage free and its renovation is expected to be completed before its sale closes.
4815 Tudor Drive, LLC is a company controlled by Robert C. Wetenhall Jr., a trustee and the Chief Executive Officer of Sun. Accordingly, the Tudor portion of the Sale Transactions is a "related party transaction" under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"), as adopted by TSXV Policy 5.9 - Protection of Minority Security Holders in Special Transactions. As Sun is not listed on the Toronto Stock Exchange, in accordance with Section 5.5(b) of MI 61-101, the Tudor portion of the Sale Transactions is exempt from the formal valuation requirements of MI 61-101. As neither the fair market value of Tudor, nor the fair market value of the consideration for Tudor, exceeds 25% of Sun's market capitalization, as determined under Section 5.5(a) of MI 61-101, Sun is also exempt from the requirement to obtain approval of a majority of the minority Unitholders for the Tudor portion of the Sale Transactions.
Benefits of the Sale Transactions
Over the last few years, the trustees of Sun (the "Board") have reviewed the strategic alternatives available versus continuing with the status quo. In doing so, the Board considered and canvassed the ability of Sun to attract the public equity capital necessary to execute its growth-oriented business plan of acquiring and operating additional multi-family residential properties located in the Sunbelt region of the United States. The Board determined that Sun will face challenges as the conditions in Canada for raising public equity capital remain challenging in the foreseeable future for small growth-oriented issuers such as Sun. Given Sun's small existing asset base and market capitalization, the Board determined that Sun would continue to suffer from diseconomies of scale (the fixed costs of Sun, including, among others, the costs of management, maintaining a listing on the TSX Venture Exchange (the "TSXV") and complying with disclosure obligations under securities laws, are allocated over the small asset base of Sun), which would continue to severely limit the ability of Sun to explore any other growth initiatives. As a result of the foregoing, the Board proceeded to seek alternatives to dispose of the Properties.
In the event that the Sale Transactions are completed according to the terms of the Purchase Agreements and approvals received, Sun will not have any active business operations or material assets other than cash. Sun expects to be delisted from the TSXV and to proceed with the Termination following the completion of the Sale Transactions. Sun intends to distribute the net proceeds of the Sale Transactions and Sun's remaining cash (after payment of Sale Transactions costs, Termination costs, severance and cessation costs, and payment of all other liabilities and obligations of Sun) to Unitholders in one or more installments. Sun will provide Unitholders with further updates with respect to the proposed distribution(s) in the Circular (as defined below) and upon completion of the Sale Transactions.
Upon completion of the Sale Transactions and at or about the time of the Termination, the employment of each of the Chief Executive Officer, Chief Financial Officer and Controller of Sun will be terminated. Accordingly, Sun will be responsible for severance obligations with respect to those employees. Furthermore, upon completion of the Sale Transactions and at or about the time of the Termination, the service of each of the members of the Board will cease. To date, no compensation has been provided to the trustees for acting as a member of the Board, and each will receive a cessation payment. Certain of the foregoing payments will qualify as a "collateral benefit" under MI 61-101. As Sun is not listed on the Toronto Stock Exchange, in accordance with Section 4.4(1)(a) of MI 61-101, such payments are exempt from the formal valuation requirements of MI 61-101. In accordance with Section 4.5 of MI 61-101, Sun will be required to obtain approval of a majority of the minority Unitholders for the Termination as result of the "collateral benefits" arising thereunder.
Completion of the Sale Transactions, Unitholder Meeting and Termination
Pursuant to the terms of the Purchase Agreements, the policies of the TSXV and the second amended and restated declaration of trust of Sun dated November 4, 2020, the Sale Transactions and the Termination are, among other things, subject to the approval of the Unitholders and the TSXV.
The Sale Transactions are subject to customary closing conditions for transactions of this nature, including the receipt of the approval of the TSXV, receipt of any lender approval and the approval of the Sale Transactions by not less than 66⅔% of votes cast by Unitholders in person or by proxy at an annual and special meeting of Unitholders (the "Meeting"). If the Sale Transactions are approved by Unitholders at the Meeting, Unitholders will also vote to approve the Termination, including the proposed delisting of the Units from the TSXV. The Termination must be approved at the Meeting by not less than 66⅔% of the votes cast by Unitholders in person or by proxy, as well as a majority of the votes cast by the Unitholders, excluding those votes cast by persons whose votes are to be excluded pursuant to MI 61-101 and any TSXV policy.
The Meeting will be held on May 28, 2025 in Toronto. In the event that the Sale Transactions and the Termination are approved by the Unitholders, it is expected that Sun will complete the Sale Transactions as soon as possible following the Meeting and then proceed with the Termination. Further details will be provided by Sun following the Meeting.
Details of the Sale Transactions and the Termination process will be set out in greater detail in the proxy materials, comprised of the notice of meeting, management information circular (the "Circular") and instrument of proxy, which will be mailed out on or about May 1, 2025. Unitholders are encouraged to read the Circular as well as the Purchase Agreements. Copies of the Circular and the Purchase Agreements will be available under Sun's profile on SEDAR+ at www.sedarplus.ca.
The Board has unanimously determined (with Mr. Wetenhall abstaining in relation to the sale of Tudor), based upon such factors considered by the Board to be relevant as will be set out in the Circular, to approve each Purchase Agreement and to recommend that Unitholders vote in favour of the resolutions approving the Sale Transactions and the Termination, as outlined above, at the Meeting.
About Sun Residential Real Estate Investment Trust
Sun Residential Real Estate Investment Trust is an unincorporated open-ended real estate investment trust established pursuant to a declaration of trust dated January 22, 2019, as amended and restated on March 22, 2019 and November 4, 2020. The business of Sun is to acquire multi-family residential properties in the Sunbelt region of the United States.
Caution regarding forward-looking statements
Forward-looking statements in this news release, including, among others, statements associated with the ability to satisfy regulatory, stock exchange and commercial closing conditions of the Sale Transactions and the Termination and the expected timing of the Meeting and the completion of the Sale Transactions and the Termination, reflect Sun's current assumptions, expectations, and projections. Often, but not always, forward‐looking statements can be identified by words such as "planned," "expects," "expecting," "anticipated," or "believes," or variations of such words and phrases or state that certain actions, events, or results "may," "could," "would," "might," "should," or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause Sun's actual results or achievements to be materially different from those expressed or implied by the forward-looking statements. The forward-looking statements made in this news release relate only to events or information as of the date hereof. All forward-looking statements are based on assumptions that may prove to be incorrect. Furthermore, forward-looking statements are qualified in their entirety by the inherent risks, uncertainties and changes in circumstances surrounding future expectations that are difficult to predict and mostly beyond the control of Sun.
Except as specifically required by Canadian securities law, Sun undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Many factors will cause actual results to differ, perhaps materially, from results in the forward-looking statements: for a description of such factors please refer to the Management's Discussion and Analysis for the year ended December 31, 2024 available at www.sedarplus.ca or at www.sunresreit.com.
Neither the 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.
No securities regulatory authority has either approved or disapproved of the contents of this news release. This news release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States or to or for the account or benefit of U.S. persons (as such terms are defined in Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act")), absent registration or an exemption from registration. The securities offered have not been and will not be registered under the U.S. Securities Act or any state securities laws and, therefore, may not be offered for sale in the United States, except in transactions exempt from registration under the U.S. Securities Act and applicable state securities laws. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.
