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Platform 9, CGI Merchant to firm up deal by Aug. 31

2020-07-03 21:30 ET - News Release

Mr. John Travaglini reports


Platform 9 Capital Corp. has provided an update to its proposed transaction with CGI Merchant Group LLC pursuant to a letter of intent entered into on Dec. 13, 2019, and previously announced on Dec. 17, 2019.

The transaction was paused in March, 2020, due to significant disruption in the hotel business caused by the COVID-19 pandemic. The parties have now agreed to proceed with the transaction (as set out herein) and propose to complete their due diligence and enter definitive agreement by Aug. 31, 2020, at which time a further news release will be issued. The parties now expect to complete the qualifying transaction by Oct. 31, 2020.

The original agreement provided that the target would be an affiliate of CGI. The affiliate has now been formed, which is called CGI Hospitality Opportunity Fund (Canada) LP, and therefore, the parties deem it necessary to enter into an amended and restated letter of intent between the fund and Platform. This amended letter sets forth the basic terms and conditions of a proposed business combination between the fund and Platform, which will complete a reorganization pursuant to a plan of arrangement under the Business Corporations Act (Ontario) into a limited partnership formed under the laws of Ontario. The transaction will constitute a qualifying transaction for Platform as such term is defined in Policy 2.4 of the corporate finance manual of the TSX Venture Exchange.

Pursuant to the terms of the transaction, each equity share of Platform shall be exchanged for a limited partnership unit of the fund on the basis of an exchange ratio determined having regard for the proportionate valuations of Platform and the fund on a posttransaction basis, and each outstanding agent warrant of Platform shall be exchanged for a comparable convertible security of the fund, having regard for the exchange ratio. The parties have agreed to a valuation of Platform of $1,541,730 and an approximate valuation of the fund of $50-million (U.S.). The fund valuation is subject to change based on the final valuation of the Gabriel Miami Hotel and the percentage interest acquired by the fund.

Upon completion of the transaction, the fund is expected to meet all of the minimum listing requirements of the TSX-V. Completion of the transaction is subject to a number of conditions, including, but not limited to: (i) completion of mutually satisfactory due diligence; (ii) execution of a definitive agreement with respect to the transaction; (iii) requisite board and shareholder approvals; (iv) completion of a concurrent financing; (iv) acquisition of the Gabriel Miami Hotel by the fund; and (vi) receipt of all requisite regulatory approvals relating to the transaction, including, without limitation, the TSX-V.

Hospitality fund

CGI Merchant Group LLC is an institutional investment manager that is establishing an institutional fund platform composed of general partner and limited partner capital, a legal fund structure with access to asset acquisition resources, and hotel asset management expertise for a new hospitality concept: the Gabriel -- a conscious certified hotel. The fund will indirectly purchase equity interests of the hospitality fund.

The hospitality fund's core strategy is to deploy capital to opportunistically acquire hotels and other hospitality assets in a pandemic and postpandemic environment. The hospitality fund intends to rebrand its acquired hotels using the brand umbrella developed and owned by an affiliate of the hospitality fund: conscious certified hotel.

The hospitality fund's investment objectives are: an attractive risk-adjusted rate of return as measured by cash-on-cash returns net of all fees, expenses and carried interests, a reasonable diversification among investments within the total portfolio, a limited life structure that aligns fund management and general partner and limited partner interests and goals, and a distribution policy that returns cash to limited partners as rapidly as possible given the nature of the underlying portfolio.

The Gabriel Miami

The seed institutionally held asset to be held in the portfolio of the hospitality fund will be the Gabriel Miami. The Gabriel Miami is operationally and financially committed to the core social values of its targeted travellers -- the socially conscious traveller. The Gabriel Miami is a Hilton hotel under the Curio Collection and managed by Evolution Hospitality, a subsidiary of Aimbridge Hospitality. The property includes five revenue-generating components: hotel (the Gabriel Miami), restaurant (Cvltvra Restaurant), spa (Dermamex), wallscape (two billboards operated by Outfront Media) and parking. The iconic building is a trophy Class A high-rise in Miami's skyline and is located in the heart of downtown Miami, just steps away from Miami's most known visited sports arena, art and culture, and shopping venues in south Florida. The Gabriel Miami is located in the arts and culture epicentre of Miami, which, in the aggregate, is one of the areas with the most foot traffic in the city. The hotel is surrounded by the city's biggest arena, the city's opera and ballet venue, the two biggest science and arts museums, and the biggest marketplace, to name a few. The majority of these venues and attractions was finished or renovated in the past five years. Currently, there are 30 under-construction developments, including a 4-billion (U.S.) World-Center project and an entertainment and observation sky rise set to be the tallest building in the state, as well as a $1-billion (U.S.) signature bridge. The capital influx that this particular area has seen and is expected to receive surpasses that of any other area in Miami. The Gabriel Miami has been awarded the deal of the year award from the National Association of Black Hotel Owners, Operators and Developers (Nabhood) sponsored by Hilton at its annual conference on July 24, 2019, in downtown Miami. This is an event of national reach, and the award was presented by the chairman of Nabhood and Hilton's president and chief executive officer.

Trading in the company's shares has been halted as a result of the announcement of the transaction. The company expects that trading will remain halted pending closing of the transaction, subject to the earlier resumption upon TSX-V acceptance of the transaction and the filing of required materials in accordance with TSX-V policies. Further information with respect to the terms of the transaction will be announced in a subsequent press release once available.

About Platform 9 Capital Corp.

The company is incorporated under the Business Corporations Act (Ontario) and is a capital pool company listed on the TSX-V. The company has no commercial operations and has no assets other than cash.

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