CALGARY, Alta. — Cervus Equipment Corp. today announced it has entered into a definitive agreement with a single purchaser for the long-term sale and leaseback of approximately $55.7 million of real estate currently owned by the Company.
The agreement provides for the sale of the land and buildings of 11 dealerships operated by Cervus and the leaseback by Cervus of those properties with initial lease terms ranging from 15-20 years. After retiring mortgages associated with the properties and rent deposits under the proposed lease, Cervus expects net free cashflow of approximately $27 million. The proposed sales prices and lease rates for the properties result in overall average market capitalization rates of 7.7% for those properties, which is not expected to negatively impact earnings per share. In the short term, proceeds from a successful transaction will be used to reduce debt. Cervus anticipates the sale and leaseback transaction will result in a gain on sale between $3 million to $4 million.
The transaction is expected to close in December 2016 but remains subject to customary closing conditions for transactions of this nature including, the purchaser obtaining financing and the purchaser satisfactorily completing its due diligence review of the properties.
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