Financially strapped Lanesborough REIT has announced that it will sell all of its real estate assets and wind up the business.

Winnipeg-based Lanesborough (LREIT) said that it has agreed to sell 11 rental properties in Alberta, Saskatchewan and Ontario for $41.7 million. The REIT has also struck a deal to sell a vacant Winnipeg development land parcel for $400,000.

“Given the amount of indebtedness of LREIT, there is no possibility LREIT will have sufficient funds following the sale of the properties to repay all of its outstanding indebtedness,:” said Lanesborough in a news release. “Accordingly, there will be no funds available for distribution to the unitholders following the sale of the properties.” 

A Manitoba numbered company known as 725 is the proposed buyer. The firm is owned by Arni Thorsteinson, a Lanesborough insider.

If unitholders approve the deal at a special meeting June 27, the buyer will assume a mortgage, which had an estimated value of $33.9 million as of March 31 and is secured by properties that form part of the sale, said Lanesborough. The purchaser will also assume an estimated $7.9 million of debt under revolving loan facility.

Following the asset sale and debt assumption, Lanesborough will still owe $139.9 million to a different Manitoba numbered company and $17 million to a lender that provided a mortgage formerly secured by one of the REIT’s properties.

“LREIT will continue to incur the fixed costs associated with its operations, including the cost of servicing its debt, professional management fees, maintaining its listing on the [TSX Venture] Exchange and complying with requisite disclosure obligations under applicable securities laws,” said the REIT.

“These financial obligations and costs mean that LREIT has no ability to continue as a going concern.”

Photo: Lanesborough REIT