MR.UN Melcor Real Estate Investment Trust

Melcor Real Estate Investment Trust (“Melcor REIT” or the “REIT”) is reiterating its support for the previously announced plan of arrangement (the “Arrangement”) with Melcor Developments Ltd. (“MRD”), whereby, among other steps, the outstanding trust units of the REIT will be redeemed in exchange for $4.95 per unit held in cash (the “Consideration”), through a series of steps outlined in the management information circular (“Circular”) mailed to unitholders of the REIT (“Unitholders”), filed under the REIT’s profile on SEDAR+ (http://sedarplus.com) and on the REIT’s website at https://melcorreit.ca/special-meeting/.

THE ARRANGEMENT IS IN THE BEST INTERESTS OF UNITHOLDERS AND SUPPORTED BY BOTH LEADING PROXY ADVISORY FIRMS REVIEWING THE TRANSACTION

The Independent Committee reiterates its recommendation that the Arrangement is the best outcome for Unitholders. In coming to this recommendation, the independent committee of trustees of the REIT (the “Independent Committee”), together with its experienced and qualified financial and legal advisors, considered various alternatives reasonably available to the REIT, including the continued execution of the REIT’s strategic business plan, sales of assets and soliciting other potential buyers of the REIT and/or of the REIT’s assets.

In addition to the Independent Committee’s recommendation, BOTH leading independent proxy advisory firms – Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis & Co. (“Glass Lewis”) – have recommended that Unitholders vote FOR the Arrangement.

UNITHOLDERS HAVE A CLEAR CHOICE; DERISKING AT A SIGNIFICANT PREMIUM OR ‎UNCERTAIN FUTURE, SIGNIFICANT HEADWINDS, AND NO VISIBLE PATH TO DISTRIBUTION ‎RESUMPTION

If the Arrangement is approved, the outcome is clear; Unitholders will receive the all-cash ‎consideration at a significant premium to recent trading levels, providing Unitholders with ‎certainty of value, immediate liquidity, and removes the risks associated with the REIT remaining ‎an independent public entity, to which there is no certainty the REIT’s trading price will be able to get to, remain at or ‎exceed $4.95 over any reasonable period. ‎

If the dissidents are successful in having the Arrangement resolution voted down at the special ‎meeting of Unitholders (the “Meeting”), the outcome is less clear. The ‎Independent Committee warns Unitholders that non-approval comes with significant risks, ‎including:

• Impact on Trading Price of the Units: The trading price of the REIT’s Units will be uncertain and could return to trading levels prior to when the Arrangement was announced. The trading price of the REIT’s Units could be further impacted due to the REIT’s diminished liquidity and the risk that further value-maximizing transactions could be prevented by dissident Unitholders.
• Viability of the REIT: The REIT faces significant risks to its viability as a publicly traded real estate investment trust as a result of the REIT’s operating environment, increased costs of tenant inducements and capital expenditures, limited existing liquidity profile, mortgage maturities, credit facility constraints, and headwinds associated with accessing additional debt and equity capital. The REIT will continue to face these risks should the Arrangement not be completed.
• No Prospect of Resuming Distributions: Should the Arrangement not be completed, it is unlikely the REIT will be in a financial position to reinstitute distributions in the near to medium term, as a result of the ongoing liquidity and capital constraints.
• Risks and Implications Associated with Individual Asset Sales: The dissidents have suggested that selling the REIT’s assets on an asset-by-asset basis would result in a higher ultimate price to be received by Unitholders, as opposed to the cash consideration under the Arrangement. However, the strategy to liquidate the REIT’s assets was carefully reviewed during the strategic review process and was deemed not to be a viable path. Not only has the REIT had limited success in selling assets listed for sale to date, the Independent Committee’s advisors have suggested that it could take years to fully liquidate the REIT’s portfolio for after tax proceeds to Unitholders that are unknown and subject to market and liquidity risk and material transaction costs. Even were it possible for the assets to be immediately sold for IFRS values, the tax implications and costs of such sales must be factored into any comparison to the $4.95 cash per unit transaction price.Importantly, the cost of these properties for tax purposes would need to be taken into account if assessing the dissidents’ proposed liquidation strategy. The chart below includes an aggregated summary of the REIT assets’ estimated and unaudited tax attributes as of the date of this release:

LandsTax Cost(1)	BuildingsTax Cost(1)	BuildingsTax Depreciation Claimed(1)	BuildingsUndepreciated Tax Cost(1)
$132,000,000	$373,000,000	$148,000,000	$225,000,000
(1) Figures are rounded to the nearest million.

Given these tax attributes, the REIT expects that an asset sale strategy would materially reduce many Unitholders’ proceeds on an after-tax basis.

The above risks are only some of the reasons the Independent Committee recommends you vote FOR the Arrangement. The Independent Committee urges all Unitholders to also refer to the more extensive list of reasons contained in the Circular.

VOTING IS FAST AND EASY - VOTE FOR THE ARRANGEMENT TODAY

	Unitholders are urged to vote their Units TODAY in advance of the Meeting. Even if you have never voted before, every vote will count no matter how many Units you own. Unitholders can switch their vote at any time to vote FOR the Arrangement. Only the latest-dated proxy counts.

The Independent Committee and the Board (with cross-trustees abstaining) continue to recommend Unitholders vote FOR the Arrangement at the Meeting. The Meeting will be held at the Windsor Room, Third Floor, Manulife Place, 10180 101st Street, Edmonton, Alberta, T5J 3V5 on November 26, 2024 at 9:30 a.m. (Mountain Time).

Unitholders are encouraged to vote well in advance of the proxy cut-off which is at 9:30 a.m. (Mountain Time) on November 22, 2024.

QUESTIONS AND VOTING ASSISTANCE

Voting Unitholders who have questions or need assistance in voting should contact Melcor REIT’s strategic unitholder advisor and ‎proxy solicitation agent, Laurel Hill Advisory Group, by telephone at 1-877-452-7184 (North American Toll Free) or 1-416-304-0211 (Outside North America), or by email at assistance@laurelhill.com.

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 Canadian markets. Its portfolio is currently made up of interests in 36 properties representing approximately 3.072 million square feet of gross leasable area located across Alberta and in Regina, Saskatchewan.

Forward Looking Statement Cautions and Disclaimers:

This news release includes forward-looking information within the meaning of applicable Canadian securities laws. In some cases, forward-looking information can be identified by the use of words such as “may”, “will”, “should”, “expect”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, and by discussions of strategies that involve risks and uncertainties, certain of which are beyond the REIT’s control. In this news release, forward-looking information includes, among other things, statements relating to the Meeting proceeding as described herein or at all, expectations with respect to the timing and outcome of the Arrangement, the anticipated benefits of the Arrangement, the timing of the Meeting and the results thereof, the risks associated with non-completion of the Arrangement, the potential impact on the REIT’s trading price, ability to resume distributions and viability as a publicly traded real estate investment trust if the Arrangement does not proceed, risks and implications associated with the REIT conducting individual asset sales, including tax implications on Unitholders, anticipated net proceeds to be received by Unitholders in various alternatives, tax implications on the REIT and Unitholders of asset sales in the future, the time required to liquidate the REIT’s portfolio or the success thereof, and ability of the REIT to sell assets in the future and the price of any such sales. The forward-looking information is based on certain key expectations and assumptions made by the REIT, including with respect to the structure of the Arrangement and all other statements that are not historical facts. The timing and completion of the Arrangement is subject to customary closing conditions, termination rights and other risks and uncertainties including, without limitation, required regulatory, court, and Unitholder approvals. Although management of the REIT believes that the expectations reflected in the forward-looking information are reasonable, there can be no assurance that any transaction, including the Arrangement, will occur or that it will occur on the timetable or on the terms and conditions contemplated in this news release. The Arrangement could be modified, restructured or terminated. Readers are cautioned not to place undue reliance on forward-looking information. Additional information on these and other factors that could affect the REIT are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR+ website (www.sedarplus.ca).

By its nature, such forward-looking information necessarily involves known and unknown risks and uncertainties that may cause actual results, performance, prospects and opportunities in future periods of the REIT to differ materially from those expressed or implied by such forward-looking statements. Furthermore, the forward-looking statements contained in this news release are made as of the date of this news release and neither the REIT nor any other person assumes responsibility for the accuracy and completeness of any forward-looking information, and no one has any obligation to update or revise any forward-looking information, whether as a result of new information, future events or such other factors which affect this information, except as required by law.