Canadian distributor Strongco Corp. plans to monetize several real estate holdings through sale and leaseback transactions, in line with its strategy of not committing capital to real estate assets on a long-term basis. The anticipated gross proceeds from the transactions will be about CDN $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 two recently constructed branches in Fort McMurray, Alberta, and Saint Augustin-de-Desmaures, Quebec. The Quebec agreement also includes branches in Val D’Or, P.Q., 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 headquarters office in Mississauga, Ontario.
All proposed transactions are subject to due diligence and normal commercial conditions. The company expects to complete the Fort McMurray and Mississauga transcactions by June 30, and the remaining transaction by July 31.
“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.”
Strongco has owned the Mississauga, Val D’Or and Moncton for some time, and said the current market value of the properties exceeds the carrying value substantially. The company expects an overall profit of about $9 million before taxes.
“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.”
Based in Mississauga, Ontario, Strongco Corp. is No. 66 on the RER 100.