Melcor REIT Announces the Closing of $138.25 Million Property Acquisition

EDMONTON, ALBERTA–(Marketwired – Dec. 18, 2014) –

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Melcor Real Estate Investment Trust (TSX:MR.UN) (the “REIT”) announced today the closing of the purchase (the “Acquisition”) of six commercial properties (the “Acquisition Properties”) from Melcor Developments Ltd. (“Melcor”). The Acquisition Properties, which represent approximately 738,080 square feet of gross leasable area, will be managed by Melcor, the REIT’s external asset manager and property manager.

The purchase price for the Acquisition Properties was satisfied as follows: (i) approximately $45.0 million by the issuance to Melcor of 4,390,244 Class B LP Units of Melcor REIT Limited Partnership, a subsidiary of the REIT, each with an issue price of $10.25, (ii) approximately $78.4 million by the assumption of existing mortgages; and (iii) approximately $14.8 million in cash.

Melcor currently holds an approximate 56.5% effective interest in the REIT through the ownership of: (i) 14,615,878 Special Voting Units of the REIT; and (ii) 14,615,878 Class B LP Units of the Partnership, each of which is economically equivalent to, and exchangeable for, one trust unit of the REIT.

As the Acquisition was considered a “related party transaction” under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions, the REIT was required to obtain prior approval of the Acquisition (the “Unitholder Approval”) by a majority of the minority unitholders of the REIT at a special meeting (the “Meeting”) held on December 17, 2014. The Acquisition received the requisite Unitholder Approval at the Meeting.

In order to partially finance the Acquisition, the REIT completed a “bought deal” public offering (the “Offering”) of $34.5 million aggregate principal amount of 5.50% extendible convertible unsecured subordinated debentures (the “Debentures”) on December 3, 2014. The Offering was underwritten by a syndicate of underwriters co-led by RBC Capital Markets and CIBC World Markets Inc. as bookrunners, and included TD Securities Inc., Desjardins Securities Inc., National Bank Financial Inc., Scotia Capital Inc., Canaccord Genuity Corp., Laurentian Bank Securities Inc. and Raymond James Ltd.

Contemporaneously with the closing of the Acquisition, the maturity date of the Debentures was automatically extended to December 31, 2019 (the “Maturity Date”). The Debentures have a coupon of 5.50% per annum and will pay interest semi-annually in arrears on June 30 and December 31 in each year commencing on June 30, 2015.

Each $1,000 principal amount of Debentures will be convertible into trust units (“Units”) of the REIT at the option of the holder at any time after the date hereof and prior to the close of business on the earlier of the Maturity Date and the business day immediately preceding the date specified by the REIT for redemption of the Debentures, at a conversion price of $12.65 per Unit, being a ratio of approximately 79.0514 Units per $1,000 principal amount of Debentures, subject to adjustment in certain events in accordance with the trust indenture governing the Debentures.

Darin Rayburn, Chief Executive Officer of the REIT commented on the transaction: “We thank our unitholders for supporting our growth strategy by approving this transaction. These acquisitions add approximately 738,000 sq. ft. of high quality gross leasable area to our portfolio and feature innovative mixed-use new developments and redeveloped properties. They bring our GLA growth to 74% since IPO. We are well-positioned for continued growth with our enhanced real estate portfolio.”

About Melcor REIT

Melcor REIT is an unincorporated, open-ended real estate investment trust. Melcor REIT owns, acquires, manages and leases quality retail, office and industrial income-generating properties with exposure to high growth Canadian markets. Its portfolio is currently made up of interests in 38 properties representing approximately 2.73 million square feet of gross leasable area located across Alberta and in Regina, Saskatchewan and Kelowna, British Columbia. For more information, please visit www.melcorREIT.ca.

Forward-Looking Statements

This press release may contain forward‐looking information within the meaning of applicable securities legislation, which reflects the REIT’s current expectations regarding future events. Forward‐looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT’s control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward‐looking information. Such risks and uncertainties include, but are not limited to, general and local economic and business conditions; the financial condition of tenants; the REIT’s ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; and interest rate fluctuations. The REIT’s objectives and forward‐looking statements are based on certain assumptions, including that the general economy remains stable, interest rates remain stable, conditions within the real estate market remain consistent, competition for acquisitions remains consistent with the current climate and that the capital markets continue to provide ready access to equity and/or debt. All forward‐looking information in this press release speaks as of the date of this press release. The REIT does not undertake to update any such forward‐looking information whether as a result of new information, future events or otherwise.

Additional information about these assumptions and risks and uncertainties is contained in the REIT’s filings with securities regulators.