MELCOR REIT ANNOUNCES THE CLOSING OF $54.8 MILLION THIRD PARTY PROPERTY ACQUISITION, $10.0 MILLION PRIVATE PLACEMENT OF CLASS B LP UNITS TO MELCOR DEVELOPMENTS INC. AND THE REDEMPTION OF OUTSTANDING $34.5 MILLION CONVERTIBLE DEBENTURES

Edmonton, Alberta | November 13, 2019

NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICES.

Melcor Real Estate Investment Trust (TSX:MR.UN) (the “REIT”) announced today the closing of the purchase (the “Acquisition”) from an arm’s length third party of a multi-building open retail power centre containing 283,235 square feet of gross leasable area developed on a 33.3-acre site located in Grande Prairie, Alberta (the “Acquisition Property”). The Acquisition Property will be managed by Melcor Developments Ltd. (“Melcor”), the REIT’s external asset manager and property manager.

In connection with the Acquisition, Melcor REIT Limited Partnership (the “Partnership”) issued to Melcor, on a private placement basis, 1,225,822 Class B LP Units, for an aggregate subscription price equal of $10 million (the “Concurrent Private Placement”). Each such Class B LP Unit had an issue price of $8.16, representing a 1.5% premium to the 5-day VWAP of the trust units (“Units”) of the REIT on the TSX as at the end of trading on November 11, 2019.

Melcor currently holds an approximate 55.1% effective interest in the REIT through the ownership of: (i) 16,125,147 Special Voting Units of the REIT; and (ii) 16,125,147 Class B LP Units of the Partnership, each of which is economically equivalent to, and exchangeable for, one Unit.

Also in connection with the Acquisition, the REIT obtained approximately $35.62 million of new mortgage financing in respect of the Acquisition Property. Such mortgage has an interest rate of 3.46% and a maturity date of November 30, 2029.

Darin Rayburn, Chief Executive Officer of the REIT commented: “This acquisition is the fruition of our thoughtful, targeted strategy to find appropriate opportunities in our own back yard. Grande Prairie is a market that we’ve been looking to enter for an extended period of time, and we are pleased with the warm reception Grande Prairie has shown us so far.

This acquisition will add 283,000 square feet to our portfolio gross leasable area, increase our retail properties to 44% of our overall portfolio gross leasable area, and be immediately accretive to AFFO per Unit.”

The REIT also announced today that it has issued a notice (the “Notice”) of redemption to holders of its currently outstanding 5.50% extendible convertible unsecured subordinated debentures due December 31, 2019 (the “Debentures”). As set out in the Notice, the redemption date of the Debentures will be December 19, 2019 (the “Redemption Date”). The Debentures are redeemable for an amount (the “Redemption Price”) equal to the principal amount of the Debentures plus accrued unpaid interest up to, but excluding, the Redemption Date. There are approximately $34.5 million aggregate principal amount of the Debentures outstanding.

Prior to the redemption of the Debentures, each holder will have the right to convert their Debentures into Units at a conversion price of $12.65 per Unit (the “Conversion Price”) at any time on or prior to December 18, 2019. The required form of Conversion Notice will be available on SEDAR at www.sedar.com, and should be submitted to AST Trust Company (Canada), as follows:

AST Trust Company (Canada)
1 Toronto Street, Suite 1200
Toronto, ON M5C 2V6
Attention: Corporate Actions
Fax: 541-985-8842

A holder electing to convert the principal amount of their Debentures will receive 79.0514 Units for each $1,000 principal amount of Debentures converted. No fractional Units will be issued on conversion but, in lieu thereof, the REIT shall pay the cash equivalent thereof determined on the basis of the current market price of the Units on the conversion date, as applicable (less any tax required to be deducted, if any).

All holders of Debentures who fail to deliver a notice of conversion on or prior to December 18, 2019 shall have their Debentures redeemed for cash on the Redemption Date.

Beneficial holders of Debentures who wish to convert their Debentures into Units should consult with their financial institutions as soon as possible and allow for sufficient time to complete the conversion process.

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 in western Canada. Its portfolio is currently made up of interests in 39 properties representing approximately 3.21 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.