News Release

Strategic Planning

As has been previously announced, the Adventus Board and Management have been conducting a strategic review of all Adventus business operations since July 2020. In addition to our internal reviews, we have sought input and analysis from many leading Canadian and US investment banks and real estate firms. We have carefully reviewed all of their respective opinions and recommendations in order to develop an action plan for our business and, most importantly, to refine our plan to provide liquidity to our Investors (Investor Liquidity).

Short-term Liquidity

While undertaking this review, we have also been dealing with short-term liquidity issues created by the Covid-19 pandemic as we have previously explained. We are taking proactive steps to remedy these issues as a first order of business and this approach is aligned with the recommendations received from outside advisors. We need to resolve these issues prior to taking further steps to create Investor Liquidity.

The reasons for the short-term liquidity issues are:

1.  A number of ordinary-course and economically favourable early lease renewals entered into in Q4 2019/Q1 2020 requiring significant capital expenditures (not financed before Covid-19 inception);

2.  The need to lease up major space at Riverway in Chicago (175k ft - $12.5M);

3.  Our $4M Operating Line was cancelled by a US Bank in Q1 2020 (due to Covid-19);

4.  Covid-19, resulting in declining market conditions generally; and

5.  Closure of Debt/Equity financing markets in Q2 2020 (due to Covid-19)

Two-Phase Plan

We have determined that it would be best to proceed with a two-phase plan. In late January 2021, we embarked upon Phase I which is to strengthen our balance sheet and eliminate the short-term liquidity issues by Q3 2021. We will then enter Phase II and work diligently to provide for Investor Liquidity in a manner which achieves the best overall outcome for all unitholders.

We are still working toward achieving Investor Liquidity as soon as reasonably possible but there is no doubt that Covid-19 has impacted our timelines and created some uncertainty.

Phase I (Q1 to Q3 2021) – Pursue equity and debt financings to strengthen our balance sheet; and
Phase II (start Q3 2021) – Investor Liquidity planning and engagement of appropriate strategic advisor for Phase II

We hope to achieve a minimum financing level for Phase I of US $100M with an upper Target of $140M for Phase I financing. We have engaged advisors and commenced working toward achieving the Phase I financing goals.

Sources of Financing – Phase I

The sources of financing to achieve the desired Phase I results by the end of Q3 2021 are as follows:

1.  Discounted Common Equity Issue – US $25M (Minimum) – we are planning a private placement of Units of the Trust in Q2 2021 at an estimated issue price equivalent to a 25-30% discount to the NAV/Unit at December 31, 2020;

2.  Preferred Equity Issue by the Trust’s wholly-owned subsidiary, Adventus Holdings LP (US REIT) – US $50M-$75M – a private placement by our US REIT to be led by Meridian Capital Group, LLC (NY) for preferred equity financing with a 3-5 year term and a low double-digit coupon rate;

3.  Other mortgage-secured bank refinancings for existing assets – US $15M-20M; and

4.  Sale of 2 Non-Core Assets located in Chicago – US $15M-20M (net).

Use of Proceeds

The Phase I financing proceeds will be utilized as follows:

Goals of Phase I Financings

The goals we wish to achieve by the end of Q3 2021 from the Phase I financings are:

1. Cash management requirements met for 2021 to 2022 (to handle sub-optimal, lumpy NOI ending in early 2023);
2. Partial Distributions to be reinstated by Q2 2021;
3. Debt leverage maintained at 65% or lower; and
4. Additional assets to be acquired in Dallas (for diversification) and/or Atlanta (to grow critical mass in Atlanta), assuming sufficient financing is raised and only after other goals met.

Conversion of Existing Convertible Debentures

As part of the discounted Common Equity Offering, we will provide existing Convertible Debenture holders with the option to immediately convert their convertible debentures into Units of Adventus at the same price as the upcoming discounted Common Equity offering for a limited period of time. This option may be attractive to some of our Convertible Debenture holders.

Ongoing Planning

The financial and real estate markets continue to change on a daily basis and, accordingly, our strategic planning activities are continuing and may evolve to suit market conditions. We are proactively managing our business to provide for the best possible outcome for our unitholders and we are acutely aware of the financial impact to our Investors from the suspension of Distributions. We have been working diligently to return to normal business operations, including the reinstatement of Distributions. As we work throughout the Phase I financing activities, we will communicate frequently to advise our Investors. 

Thank you for your patience during this difficult period.

About Adventus
Adventus is a Canadian based private Real Estate Investment Trust (REIT) and is focused on US income producing commercial real estate, in the suburban office markets of Chicago, Illinois and Atlanta, Georgia. For more information on Adventus, including our team, corporate strategy, photo gallery, details of our portfolio and press releases, we invite you to visit our website at www.adventusrealty.com.

Cautionary Statements Regarding Forward-Looking Statements
This press release may contain forward-looking statements with respect to the REIT and its operations, strategy, financial performance and financial condition, as well as with respect to the previously disclosed acquisitions and future acquisitions of properties. These statements generally can be identified by the use of forward-looking terminology such as “anticipate”, “believe”, “plan”, “forecast”, “expect”, “intend”, “would”, “could”, “if”, “may” and similar expressions. The actual results and performance of the REIT and the acquisitions discussed herein could differ materially from those expressed or implied by such statements. Accordingly, readers should not place undue reliance on forward-looking statements. These cautionary statements qualify all forward-looking statements attributable to the REIT and persons acting on its behalf. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Some important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, changes in interest rates, competition and changes in securities or other laws or regulations or the application thereof. The cautionary statements qualify all forward-looking statements attributable to the REIT and persons acting on its behalf.

Unless otherwise stated, all forward-looking statements speak only as of the date of this press release. Except as required by applicable law, the REIT specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

ADVENTUS REALTY TRUST
By its Trustee: ADVENTUS REALTY SERVICES INC.

Per: Rodney B. Johnston, FCPA, FCA
President and Chief Executive Officer