Melcor REIT Announces $15.25 Million Property Acquisition from Melcor Developments Ltd.

EDMONTON, ALBERTA–(Marketwired – Nov. 9, 2015) – Melcor Real Estate Investment Trust (TSX:MR.UN) (the “REIT”) announced today that its board of trustees has approved the acquisition of interests in two commercial properties (together, the “Acquisitions”) representing approximately 53,207 square feet of gross leasable area (“GLA”) for an aggregate cash purchase price of approximately $15.25 million (exclusive of closing and transaction costs). The Acquisitions, expected to close on or about November 12, 2015, are to be acquired from Melcor Developments Ltd. (“Melcor”), the REIT’s external asset manager and property manager.

The Acquisitions consist of (i) a 50% joint venture interest in a 43,116 square foot retail complex developed by Melcor, with construction completed in early 2015, and located in Chestermere, Alberta (“Chestermere Station Phase Six”); and (ii) a 10,091 square foot single tenant industrial building developed by Melcor, with construction completed in 2015, and located in Leduc, Alberta (“Telford Industrial Lot Four”). Chestermere Station Phase Six is an additional phase of Chestermere Station, a retail centre containing approximately 148,100 square feet of GLA (inclusive of Phase Six), in which the REIT acquired a 50% joint venture interest at the time of its IPO. Telford Industrial Lot Four is an additional phase of Telford Industrial, an industrial park containing 98,790 square feet of GLA (inclusive of Lot Four), purchase by the REIT in December, 2014.

In connection with the Acquisitions, the REIT expects that the Chestermere Station joint venture nominee will obtain approximately $12.5 million of new mortgage financing in respect of Chestermere Station Phase Six, of which the REIT intends to use approximately $6.25 million to partially fund the purchase price for the Acquisitions. The REIT expects such mortgage will have an interest rate of approximately 3.42% and a maturity date of November, 2025.

Darin Rayburn, Chief Executive Officer of the REIT, commented:

“We continue to execute on our growth strategy with these add-on acquisitions, accessing the high quality buildings that Melcor Developments continues to develop in properties that are already in our portfolio. These complementary acquisitions provide a solid pipeline for the REIT to continue to grow our portfolio and build value for investors for years to come.”

The Acquisitions constitute a “related party transaction” under Multilateral Instrument 61-101 – Protection of Minority Shareholders in Special Transactions (“MI 61-101”). Pursuant to a decision of the Ontario Securities Commission dated March 25, 2014, the REIT has been granted exemptive relief from certain of the “related party transaction” requirements of MI 61-101 such that, subject to certain conditions, the REIT is exempt from the minority approval and valuation requirements for related party transactions that would have a value of less than 25% of the REIT’s market capitalization, if the Class B LP Units held by Melcor and/or any subsidiary thereof are included in the calculation of the REIT’s market capitalization.

Management expects the acquisition to increase AFFO by $0.012 per unit.

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 2.77 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 contains “forward-looking information” as defined under applicable Canadian securities law (“forward-looking information” or “forward-looking statements”) which reflect management’s expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance, business prospects and opportunities of the REIT. Statements other than statements of historical fact contained in this press release may be forward-looking information. Some of the specific forward-looking statements in this press release include, but are not limited to, statements with respect to: the closing of the Acquisitions and the expected terms and closing dates thereof; the REIT’s plans for financing the Acquisitions, including expected interest rates and principal amounts of for new mortgages; the impact of the Acquisitions on the REIT’s business, operations and financial performance; and expectations, projections or other characterizations of future events or circumstances and the future economic performance of the REIT. The REIT has based these forward-looking statements on its current expectations and assumptions about future events, which may prove to be incorrect.

When relying on forward looking statements to make decisions, readers are cautioned not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results and do not take into account the effect of transactions or other items announced or occurring after the statements are made. All forward-looking information in this press release speaks as of the date of this press release. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements. The REIT does not undertake any obligation to update any such forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable law.

Non-IFRS Measures

Adjusted funds from operations (“AFFO”) is a key measures of performance used by real estate businesses. However, such measure is not recognized under International Financial Reporting Standards as issued by the International Accounting Standards Board and as adopted by the Canadian Institute of Chartered Accountants in Part I of The Canadian Institute of Chartered Accountants Handbook – Accounting, as amended from time to time (“IFRS”) and does not have a standardized meaning prescribed by IFRS. Management believes that AFFO is a supplemental measure of a Canadian real estate investment trust’s performance and the REIT believes that it is a relevant measure of the ability of the REIT to earn and distribute cash returns to investors in Units and to evaluate the REIT’s performance.

“AFFO” is defined as FFO (as defined below) subject to certain adjustments, including: (i) amortization of fair value mark-to-market adjustments on mortgages acquired; (ii) interest rate subsidy amounts received; (iii) non-cash finance costs; (iv) adjusting for any differences resulting from recognizing property revenues on a straight-line basis; and (v) deducting a reserve for normalized maintenance capital expenditures, tenant inducements and leasing costs, as determined by us. Other adjustments may be made to AFFO as determined by the Board in its discretion.

“FFO” is defined as net income in accordance with IFRS, excluding: (i) fair value adjustments to investment properties; (ii) gains (or losses) from sales of investment properties; (iii) amortization of tenant incentives; (iv) fair value adjustments, interest expense and other effects of redeemable units classified as liabilities; and (v) acquisition costs expensed as a result of the purchase of a property being accounted for as a business combination.

FFO and AFFO should not be construed as alternatives to net income or cash flow from operating activities determined in accordance with IFRS as indicators of the REIT’s performance. The REIT’s method of calculating FFO and AFFO may differ from other issuers’ methods and accordingly may not be comparable to measures used by other issuers.