Winnipeg Free Press
Saturday February 26 2005
By Geoff Kirbyson
ARNI Thorsteinson's real estate investment trust empire expanded yesterday.
WPVC Inc., the five-month-old junior capital pool company of which he is CEO, closed its qualifying transaction with the purchase of the 113,800-square-foot building at 1935 Sargent Ave., adjacent to the Winnipeg International Airport.
At the same time, WPVC has been reorganized into a REIT and renamed Huntingdon Real Estate Investment Trust.
Gino Romagnoli, manager of investor relations for Huntingdon, said it will focus on the commercial and industrial sector of the real estate market, differentiating itself from Thorsteinson's other REIT, Lanesborough Real Estate Investment Trust, which specializes in multi-family apartment buildings.
He said the new property, which has been leased by Purolator Courier Ltd. for the last eight years, is an ideal first acquisition for Huntingdon.
"Purolator is a stable tenant (with another 17 years remaining on its lease) and it's effectively owned by Canada Post, which is effectively owned by the government of Canada," he said in an interview yesterday. Thorsteinson was out of town yesterday and unavailable for comment.
Junior capital pools, which are shell companies that raise seed capital based on the strength of their management, have 18 months from their inception to make a qualifying transaction, according to stock exchange bylaws. The JCP model allows young firms to go public more quickly and economically than the traditional initial public offering route.
Romagnoli noted the acquisition is a sign of things to come.
"We'll have follow-up transactions to grow the REIT. We certainly will have future product and as we identify them, we will announce them," he said.
He said Huntingdon is exploring possibilities across Canada with both single- and multi-tenant properties.
"We don't have a particular focus in Winnipeg, although it is certainly one of our target markets. We're looking for properties that make financial sense," he said. Brent Bottomley, vice-president of corporate finance at Wellington West Capital, which helped WPVC raise its initial public offering money, said another "fairly large" raising of capital is on tap for Huntingdon.
"This is the foundation to build a really attractive industrial REIT, he said in an interview yesterday. "The same model was used for Lanesborough, which has done extremely well and has assets of well over $100 million."
Huntingdon purchased its first property for $8.1 million, 50 per cent of which was owned by the parent company of Shelter Canadian Properties, where Thorsteinson is also
president.
To eliminate the perception of any conflicts of interest, Romagnoli noted Thorsteinson abstained from the WPVC shareholder vote on the deal.
Peter Chapman, executive director of the Shareholder Association for Research and Education, a Vancouver-based non-profit organization, said it's important in making arm's-length transactions to have a process that ensures fair valuations and ethical behaviour.
"Non-arm's length transactions aren't something you ban, they're something you manage through proper procedures," he said in an interview.
Nearly three-quarters of the purchase price of the Sargent Avenue building ($5.9 million) was financed through the assumption of a mortgage while $500,000 was paid for through the issuance of 250,000 units at $2 each to Shelter's parent, a numbered company. The balance was paid in cash from the proceeds of a private placement of units in conjunction with Huntingdon's qualifying transaction.
geoff.kirbyson@freepress.mb.ca