Ms. Lisa-Marie Iannitelli reports

DELAVACO RESIDENTIAL PROPERTIES CORP. PROVIDES UPDATE ON POSSIBLE TRANSACTION, CHANGES TO THE BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT AND OPERATIONS

Delavaco Residential Properties Corp. is providing the following update.

Possible transaction

As reported on April 15, 2015, the company had entered into discussions regarding a possible transaction to acquire a controlling interest in the company. The board of directors had previously established a special committee of the board comprising two independent directors, Michael Serruya and Romeo DeGasperis, to review and consider proposals in respect of such a possible transaction. The special committee completed the mandate and made its recommendation to the board and the board unanimously concluded that the company will no longer pursue any such possible transaction and that the mandate of the special committee has been completed.

Change of management and board of directors

The company would like announce that Andrew DeFrancesco, chairman of the board and chief executive officer (CEO), has resigned as CEO effective immediately and relinquished his position as chairman. Mr. DeFrancesco will continue on the board to serve as a director. There is no termination fee associated with Mr. DeFrancesco's departure. The company would like to express its sincere thanks to Mr. DeFrancesco for his commitment to date and the board looks forward to continuing this relationship through his directorship. The board will temporarily leave the CEO position unfilled.

The compensation and governance committee, comprising Michael Serruya (chairman), Kelly Hanczyk and Marc Muzzo, have recommended, and the board has unanimously approved, Keith Ray, a current independent director, to assume the role of interim chairman. At the operational level, Jorge Aldecoa, currently senior asset manager, will be promoted into the role of interim chief operating officer and will report directly to the board. Mr. Ray has been a member of the board since helping take the company public in January, 2014, and shall remain chairman of the audit committee. Mr. Ray carries a breadth of experience in various private and public real estate companies, including both private and public real estate investment trusts, and currently acts as a director of two other Canadian-listed reporting issuers, Firm Capital Mortgage Investment Corporation, listed on the Toronto Stock Exchange, and Cliffside Capital Ltd, listed on the TSX Venture Exchange.

For 27 years until his retirement in 2007, Mr. Ray was a chartered professional accountant and partner at KPMG LLP and a KPMG LLP predecessor firm where he served as audit partner and relationship partner for a wide variety of public and private companies, mostly in the real estate industry. Mr. Aldecoa has more than 10 years of experience in residential and commercial asset management. Mr. Aldecoa's most recent positions include Regional vice-president of Invitation Homes, a single-family homes operator in the United States with over 45,000 rentals nationwide. In this role, Mr. Aldecoa was instrumental in developing the framework for property management. Mr. Aldecoa also acted as regional director, single-family residential/commercial services, for FirstService Residential Realty, LLC where he assisted in the redevelopment and implementation of a new business segment focused on the single-family-homes asset space.

Mr. Aldecoa was recruited by the company in November, 2014, and has brought a wealth of knowledge and structure to the organization. Mr. Aldecoa is an accredited commercial manager, Florida-licensed real estate broker and certified apartment manager. The board is pleased to add Mr. Ray and Mr. Aldecoa to these interim roles.

Operational updates

Related-party loan and managing Park Colony

As reported in the company's first quarter 2015 consolidated results, Mr. DeFrancesco was provided two separate advances in the amounts of approximately $4.3-million and $789,000 in the form of promissory notes bearing interest at a rate of 7.00 per cent per annum, maturing on Dec. 30, 2015. The $4.3-million note is dated Dec. 30, 2013, while the $789,000 note is dated May 25, 2015.

Both notes resulted from the company's previous intention to purchase from Mr. DeFrancesco a 316-door multifamily residential unit asset located within the Park Colony Apartment Homes in Hollywood, Fla., a property currently third party managed by GREP Southeast, LLC (Greystar). The company has determined that it no longer desires to purchase this asset and as such the parties have agreed to amend the repayment terms of the notes by collecting from Mr. DeFrancesco in stages over the duration of the term of the notes commencing immediately.

As of the date of this press release, $200,000 has been repaid under these notes. Mr. DeFrancesco has provided the company with security for such indebtedness that will remain in place until the debt has been repaid. The company and Mr. DeFrancesco have also agreed to amend the $789,000 note such that the interest accrued and payable shall commence on the date it was originally financed being Oct. 28, 2013, removing an initial interest-free period originally contemplated. The proceeds shall be directed toward working capital. Furthermore, the company currently provides oversight of Greystar on behalf of Mr. DeFrancesco for a fee of 1 per cent of gross revenue of the Park Colony property. The parties intend to enter into a formal agreement to continue this arrangement at the same rate for one-year rolling periods. Either party shall have the ability to terminate this relationship at any time.

Advisory fee

On Dec. 30, 2013, the company signed an advisory services agreement with Delavaco Capital Inc. (DCI), a company managed by Mr. DeFrancesco, whereby Mr. DeFrancesco agreed to continue providing services related to two multifamily properties that were acquired by the company in Austin, Tex., including acting as a required guarantor for certain banks. Under the terms of the advisory agreement, the company is required to pay DCI $23,500 per month. The company and Mr. DeFrancesco have decided to terminate the advisory agreement effective June 30, 2015, and replace it with a new agreement which shall indemnify Mr. DeFrancesco for all exposure related to the advisory properties for a period of one year. Both parties have agreed that there will be no termination fee applied to the cancellation of the advisory agreement and no fees associated with entering into the new agreement. During this time, the company shall commit its best efforts to have Mr. DeFrancesco removed as guarantor.

Sale of single-family portfolio and debt repayment

The company continues to sell its single-family-home portfolio. To date, the company has sold 76 single-family homes in Florida and has 45 homes pending sale with executed contracts in place. The company will continue to divest itself of its single-family home portfolio in Florida, Georgia and New Jersey while using proceeds there from to pay down its corporate debt facilities. In March of 2015, the company successfully paid down $2.5-million of its corporate debt and paid down another $2.5-million on June 30, 2015, a total debt repayment of $5-million representing 20 per cent of the original principal amount being $25-million. This debt was incurred pursuant to a debenture carrying an annual interest rate of 7.5 per cent, with interest only payments and maturing in June, 2016. The company remains confident that the sale of the single-family home portfolio accompanied by the pay down of debt shall strengthen its balance sheet's leverage profile while increasing operating income by eliminating the costs associated with operations of the single-family-home portfolio.

New Jersey note

On March 26, 2014, the company completed the acquisition of 96 residential units across 19 multifamily properties in Paterson, N.J. As part of the acquisition, the company issued promissory notes dated May 1, 2015, to Petrogas Holdings Inc. payable in the amount of $3,188,685. The New Jersey notes bear interest at a rate of 5.5 per cent per annum and matured on Nov. 1, 2014. The parties subsequently agreed the New Jersey notes would not be called for the time being and remain on demand terms. Commencing July 2, 2015, the parties will enter into an extension agreement whereby the New Jersey notes will roll on a bimonthly basis provided the parties mutually agree to such extensions on a bimonthly basis, failing which outstanding amounts on the New Jersey notes will become immediately due and payable. The company is currently working to divest itself of the New Jersey portfolio and intends to pay down the rolling note immediately upon divestiture.

Municipal code violations

The company has received notices of fines and penalties relating to liens placed by municipal authorities as a result of various code violations pertaining to some of the Florida investment properties, which it estimates totalled approximately $8,404,824 as at March 31, 2015. The company is aggressively rectifying the outstanding issues and currently expects to resolve these violations over the next three to six months. Since March 31, 2015, the company has successfully settled approximately $970,000 of these fines and penalties at a cost of approximately $47,000. The company has also taken actions to remove and discharge liens of approximately $4.0-million and awaits settlement of such liens while the balance of the liens continue to be addressed. The rate at which these liens are being remedied has increased substantially due to the efforts of the company's advisers and the interim chief operating officer. As previously press released, based on past experience and discussions with advisers specializing in the area of code violations, the company expects to settle the penalties and fines for approximately 5 per cent of the lien totals. The board is very aware of the impact of these liens on operations and has mandated they be managed on the basis of efficiency, timeliness and foremost with the lowest impact to working capital. To ensure this issue is not repeated, the interim chief operating officer has implemented appropriate operating procedures so that this exposure is significantly reduced and brought to a level in line with industry standards.

Operating costs

The board is currently working to review all operating, general and administrative costs in order to reduce the cash burn of the company. All costs shall be reviewed with the help of the chief financial officer and the newly appointed interim chief operating officer with immediate effect. Costs to be affected include compensation to senior officers, rent in Toronto, and Florida and all others necessary and appropriate measures to achieve reductions that are meaningful to operating income.

We seek Safe Harbor.