News---Ableauctions Enters into Development Agreement to Explore Second Phase of Gruv Development
OJAI, Calif., Oct 09, 2008 (BUSINESS WIRE) -- Ableauctions.com Inc. (AMEX:AAC) (the "Company") announced today that, in response to the decision by eBay to wind down the operations of its Live Auctions platform effective December 31, 2008 and because of the continued weakness in the U.S. economy, both of which have negatively impacted the Company's liquidation and live auction broadcast services business, the Company intends to continue expanding its investment and property development business because management believes that these segments of its business will provide good long-term value to its shareholders.
To this end, the Company has entered into a development agreement to acquire a 50% interest in Surrey Central City Holdings Ltd., a private company controlled by Abdul Ladha, the Company's chief executive officer and a director. Surrey owns four properties adjacent to the Company's current development project located in Surrey, British Columbia. By purchasing this interest, the Company can explore the potential of developing the four properties, through Surrey, by improving them with a residential complex consisting of 76 to 138 condominiums and potentially generating revenue of approximately $16 million CAD to $30 million CAD before expenses and income splitting (Phase II).
The Company's current development, known as Gruv (Phase I), is expected to be completed on or around September 30, 2009 and currently remains on schedule and on budget. The Company expects revenue of approximately $25.4 million CAD from the sale of the commercial and residential units and estimates that the cost to develop the property will be approximately $21.2 million CAD.
Under the terms of the development agreement, the Company will acquire a 50% interest in the shares of Surrey from Surrey's sole shareholder. Surrey owns four properties (collectively referred to as the "Property"). The purchase price for the 50% interest is $1,347,440 USD. The Company will pay one-half of the purchase price in cash and the remainder with a promissory note due in one year bearing interest at the prime rate as announced by the Royal Bank of Canada plus 2% per annum. The promissory note also includes a provision allowing the seller to convert the principal amount owed, and any accrued interest, into shares of the Company's common stock. The purchase of the interest in Surrey and the corresponding conversion of the promissory note to stock are subject to shareholder and regulatory approval. The Company will have the right, for a period of one year, to sell back its interest in Surrey for the original purchase price, less one-half of the expenses incurred by Surrey in its efforts to develop the Property, in the event financing or approval of a preliminary development plan cannot be obtained.
The development agreement anticipates that Mr. Ladha and Overture Development Corporation will provide services to Surrey in developing the Property. These services include managing the build-out; working with government agencies to obtain approval of the development and obtaining the plans, permits and approvals required to complete the build-out; providing contractor's services, including liaising with various trades to coordinate construction of the build-out and supervising and directing construction of the build-out; preparing and implementing a marketing plan; providing the construction bonds; and obtaining financing and home warranty coverage for the development. Mr. Ladha and Overture Development Corporation will jointly receive 25% of the net profit from phase I and 12.5% of the net profit from phase II for providing these services.
In 2005, in an effort to increase shareholder value, diversify the Company's assets and provide a reliable source of income, the Company's board of directors approved the acquisition of the Gruv (Phase I) development opportunity presented by the Company's President and CEO, Mr. Abdul Ladha. Management believes that acquiring the additional land adjacent to the Gruv is the natural progression to this investment strategy.
About Ableauctions.com
Ableauctions.com Inc. (AMEX "aac") is a high-tech liquidator and on-line auction facilitator that operates the domains iCollector.com, Naalive.com and Unlimited Closeouts.com.
As an on-line auction facilitator, the Company, with the experience of over 3,000 auctions, has developed state-of-the-art technology to broadcast auctions over the Internet (www.ableauctions.com/technology) and currently provides the technology and related services to auction houses, enabling them to broadcast auctions over the Internet. The Company broadcasts business and industrial auctions over the Internet for auctioneers and members of the National Auctioneers Association (NAA) and art, antique and collectible auctions for numerous galleries and auction houses around the world through eBay Live Auctions.
