European Commercial REIT Files Supplement to Management Information Circular for Special Meeting of Unitholders and Provides Financial Forecast

TORONTO, March 13, 2019 /CNW/ - European Commercial Real Estate Investment Trust (TSX-V:ERE.UN, "ECREIT") today announced that it will be filing on SEDAR and mailing to its unitholders of record on February 19, 2019 (the "Unitholders") a supplement (the "Supplement") to its management information circular dated February 22, 2019 (the "Circular"), which was previously distributed to Unitholders in connection with the special meeting of Unitholders to be held in Toronto on March 21, 2019 (the "Meeting"). Reference is made to the joint press release of ECREIT and Canadian Apartment Properties Real Estate Investment Trust (TSX:CAR.UN, "CAPREIT") dated December 11, 2018, which announced, among other things, that ECREIT had entered into an agreement to acquire, indirectly, from CAPREIT (the "Transaction") a portfolio of multi-residential properties located in the Netherlands comprising 2,091 suites in 41 properties (the "Acquisition Properties").

ECREIT also announced that it has filed the following documents on SEDAR, which also supplement the Circular:

(a)	the audited financial forecast of net income for ECREIT for each of the three-month periods ending June 30, 2019, September 30, 2019, December 31, 2019 and March 31, 2020, and for the twelve-month period ending March 31, 2020 (the "Financial Forecast") reflecting ECREIT's current properties and the Acquisition Properties; and
(b)	the management discussion & analysis relating to the special purpose combined financial statements for the year ended December 31, 2018 for the Acquisition Properties comprising the "Ring Portfolio" (the "MD&A").

Supplement to Circular and Approval of the Issuance of Additional Units Under the Pipeline Agreement

The Supplement supplements the information contained in the Circular and provides certain important clarifications in respect of the matters to be considered at the Meeting. Specifically, the Supplement amends the resolution approving the Transaction, as found in Appendix "B" of the Circular (the "Transaction Resolution"), in order to clarify that the approval of the Transaction Resolution includes the approval of the issuance, subject to TSX Venture Exchange ("TSX-V") approval, of up to 65,500,000 additional Units (as defined below) to CAPREIT, which may be used as consideration for any potential acquisition of properties pursuant to the Pipeline Agreement (as defined below) that is completed within six months after the effective date of the Pipeline Agreement.    

As described in the Circular, on closing of the Transaction, ECREIT will enter into a pipeline agreement (the "Pipeline Agreement") with CAPREIT pursuant to which CAPREIT will, among other things, have the right to require ECREIT to acquire, and ECREIT shall have the right to require CAPREIT to sell to ECREIT, directly or indirectly and in accordance with the terms of the Pipeline Agreement, European multi-residential properties that fit within ECREIT's investment guidelines and other properties that fit within ECREIT's investment guidelines, which CAPREIT may own, from time to time. Under the Pipeline Agreement, if ECREIT acquires any eligible properties from CAPREIT or its affiliates, CAPREIT will have the option of receiving consideration from ECREIT for any such properties in the form of cash, trust units of ECREIT ("Units"), class B limited partnership units of ECRE Limited Partnership ("Class B LP Units"), a promissory note (that may be convertible into Units or Class B LP Units) (a "Note") or a combination of cash, Units, Class B LP Units and/or Notes in satisfaction of the acquisition price for the properties. For more information regarding the Pipeline Agreement, please see the Circular under "Particulars of Matters to be Acted Upon – The Acquisition – Pipeline Agreement". 

The Supplement is being delivered to the Unitholders in advance of the Meeting, describing in further detail the aforementioned amendment to the Transaction Resolution and other particulars related to voting at the Meeting. The Supplement, together with the Financial Forecast and the MD&A, are available on SEDAR at www.sedar.com and are a supplement to, are incorporated by reference in, and form an integral part of, the Circular and should be read in conjunction with the Circular.

Voting and Proxies for the Meeting

The forms of proxy that were previously mailed to the Unitholders with the Circular remain valid. No new forms of proxy will be sent to Unitholders for the Meeting. If Unitholders have already submitted proxies or voting directions and do not wish to change their vote, no further action is required on their part and their votes will be counted at the Meeting in accordance with the proxies or voting directions already submitted. If Unitholders have not already submitted proxies or voting directions, or wish to change their vote, such Unitholders should follow the instructions provided on the form of proxy and in the Information Circular (as amended by the Supplement) previously provided to them to either vote or revoke their proxies. In consideration of the Supplement, the Financial Forecast and the MD&A, as well as the timing of the Meeting, ECREIT has waived the deadline to submit proxies or revoke proxies, as applicable, such that Unitholders shall be entitled to vote their proxies or revoke their proxies, as applicable, any time prior to the Meeting (being 9:00 a.m. (Toronto time) on March 21, 2019). Please refer to the Circular for all relevant voting instructions and procedures. Pursuant to the discretionary authority conferred under the proxy, any votes previously cast FOR the Transaction Resolution that are not changed or revoked, will be voted FOR the Transaction Resolution as amended by the Supplement, including the approval of the issuance of the Additional Units.

Financial Forecast

The following table provides a summary of the Financial Forecast for each of the three-month periods ending June 30, 2019, September 30, 2019, December 31, 2019 and March 31, 2020, and for the twelve-month period ending March 31, 2020, which is based on certain key assumptions.

(€ Thousands)						Twelve-Month Period Ending March 31, 2020
	Three Month Periods Ending
	June 30, 2019	September 30, 2019	December 31, 2019	March 31, 2020
Net Rental Income
Property Revenue	€ 7,387	€ 7,575	€ 7,591	€ 7,608		€ 30,161
Property Expenses	(1,741)	(1,827)	(1,757)	(1,780)		(7,105)
Net Rental Income	5,646	5,748	5,834	5,828		23,056
General & Administrative  Expenses	(870)	(865)	(865)	(856)		(3,456)
Unit-Based Compensation	(173)	(166)	(144)	(113)		(596)
Income Before Financing Expenses	4,603	4,717	4,825	4,859		19,004
Finance Expenses
Interest Expense	(3,351)	(3,371)	(3,373)	(3,369)		(13,464)
Income Before Income Tax	1,252	1,346	1,452	1,490		5,540
Income Tax Expense	(217)	(253)	(255)	(263)		(988)
Net Income For The Period	€ 1,035	€ 1,093	€ 1,197	€ 1,227		€ 4,552

The Financial Forecast has been prepared using assumptions that reflect management's intended course of action for ECREIT for the periods covered, given management's assumption as to the most probable set of economic conditions. The assumptions used in preparing the Financial Forecast, although considered reasonable at the time of preparation, may not materialize as forecasted, and unanticipated events and circumstances may occur subsequent to the date of the Financial Forecast. Accordingly, there is a significant risk that the actual results achieved for the periods contemplated in the Financial Forecast will vary from the forecast results, and the variations may be material. There is no representation by ECREIT that actual results achieved during the forecast period will be the same, in whole or in part, as those forecasted. See "Cautions Regarding Future Plans and Forward Looking Information" below.

Non-IFRS Reconciliation

The following table reconciles forecast net income to Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO"). For the purposes of the forecast, FFO and AFFO are defined as follows: (i) FFO is a measure of operating performance based on the funds generated by the business before reinvestment or provision for other capital needs; and (ii) AFFO is a measure of economic earnings that incorporates a provision for capital needs. FFO and AFFO as presented are in accordance with the recommendations of the Real Property Association of Canada (REALpac) in the published white paper, "Paper on Funds from Operations and Adjusted Funds from Operations" dated February 2017 and updated as of February 2019. These definitions of FFO and AFFO are specific to this financial forecast only and differ from those presented elsewhere in the Circular and may also not be comparable to similar measures presented by other real estate investment trusts or companies in similar or different industries.

(€ Thousands)	Three Month Periods Ending					Twelve-Month Period Ending March 31, 2020
	June 30, 2019	September 30, 2019	December 31, 2019	March 31, 2020
Net Income For The Period	€ 1,035	€ 1,093	€ 1,197	€ 1,227		€ 4,552
Adjustments:
Interest on Class B LP Units	2,143	2,143	2,143	2,143		8,572
Deferred Income Tax    Expenses	203	239	241	249		932
FFO	€ 3,381	€ 3,475	€ 3,581	€ 3,619		€ 14,056
FFO per Unit - Basic^(1)	€ 0.034	€ 0.035	€ 0.036	€ 0.037		€ 0.143
Adjustments:
Capital Expenditure Reserve^(2)	(321)	(321)	(321)	(321)		(1,284)
Leasing Costs Reserve	(52)	(52)	(52)	(52)		(208)
AFFO	€ 3,008	€ 3,102	€ 3,208	€ 3,246		€ 12,564
AFFO per Unit - Basic^(1)	€ 0.031	€ 0.031	€ 0.033	€ 0.033		€ 0.127
Note: (1)  Based on a weighted average number of Units of 98,610,974, which includes Units and Class B LP Units and excludes the dilutive unexercised Unit options. (2)  Annual Capital Expenditure Reserve consists of € 550 per residential suite. The remainder relates to ECREIT's existing three commercial properties.

Significant Accounting Policies

The Financial Forecast has been prepared in accordance with Parts 4A and 4B of National Instrument 51-102 Continuous Disclosure Obligations issued by the Canadian Securities Administrators and has been prepared in accordance with the accounting policies that ECREIT expects to use to prepare its historical financial statements for the period covered by the Financial Forecast and should be read in conjunction with the audited consolidated financial statements of ECREIT as at December 31, 2017, the unaudited condensed consolidated interim financial statements of ECREIT as at September 30, 2018, the special purpose consolidated financial statements of the CAPREIT NL Holding B.V. as at December 31, 2018 and the special purpose consolidated financial statements of the "Ring Portfolio" as at December 31, 2018 included by reference in the Circular.

MD&A

ECREIT has also filed on SEDAR the MD&A, which relates to the special purpose combined financial statements for the year ended December 31, 2018 for the Acquisition Properties comprising the "Ring Portfolio". For a description of the Acquisition Properties comprising the "Ring Portfolio", please see the Circular under "Glossary".

About ECREIT

ECREIT is an unincorporated, open-ended real estate investment trust. ECREIT's units are listed on the TSX-V under the symbol ERE.UN. For more information, please visit our website at www.ECREIT.com.

About CAPREIT

As one of Canada's largest residential landlords, CAPREIT is a growth-oriented investment trust owning interests in 52,039 residential units, comprising 45,446 residential suites and 32 manufactured home communities comprising 6,593 land lease sites located in and near major urban centres across Canada and the Netherlands. Since its Initial Public Offering in May 1997, CAPREIT has grown monthly cash distributions per Unit by 86%. For more information about CAPREIT, its business and its investment highlights, please refer to our website at www.caprent.com or www.capreit.net and our public disclosure, which can be found under our profile at www.sedar.com. 

Cautions Regarding Future Plans and Forward Looking Information

Certain statements contained in this press release constitute forward-looking statements within the meaning of applicable Canadian securities laws which reflect ECREIT's current expectations and projections about future results. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "expect", "intent", "estimate", "anticipate", "believe", "consider", "should", "plans", "predict", "estimate", "potential", "could", "likely", "approximately", "scheduled", "forecast", "variation" or "continue", or similar expressions suggesting future outcomes or events. The forward-looking statements made in this press release relate only to events or information as of the date on which the statements are made in this press release. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Such forward-looking statements are based on a number of assumptions that may prove to be incorrect.

Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including without limitation, management's perceptions of, among other things, historical trends, ECREIT's future financial position, ECREIT's future growth, foreign exchange rates, current conditions and expected future developments, including the closing of the Transaction, as well as other considerations that are believed to be appropriate in the circumstances, including the following: the Canadian and European economies will remain stable over the next 12 months; inflation will remain relatively low; interest rates will remain stable; conditions within the Canadian and European real estate markets, including competition for acquisitions, will be consistent with the current climate; and the capital markets will provide ECREIT with access to equity and/or debt at reasonable rates when required. While management considers these assumptions to be reasonable based on currently available information, they may prove to be incorrect.

Except as specifically required by applicable Canadian securities law, ECREIT does not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. These forward-looking statements should not be relied upon as representing ECREIT's views as of any date subsequent to the date of this press release. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Completion of each of the Transaction, the acquisition of additional properties pursuant to the Pipeline Agreement and the issuance of any securities as consideration for any such potential acquisition under the Pipeline Agreement, is subject to a number of conditions, including but not limited to, acceptance by the TSX-V and, if applicable, disinterested Unitholder approval. There can be no assurance that the Transaction and the acquisition of additional properties pursuant to the Pipeline Agreement will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Circular and the Supplement, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of ECREIT should be considered highly speculative.

ECREIT uses financial measures regarding itself, such as AFFO, that do not have standardized meaning under International Financial Reporting Standards ("IFRS") and may not be comparable to similar measures presented by other entities ("non-IFRS measures"). Further information relating to non-IFRS measures, is set out in the Circular under the "Non-IFRS Measures".

Neither the TSX-V nor its Regulation Services Provider (as that term is defined in the policies of the TSX-V) have in no way passed upon the merits of the proposed Transaction and have neither approved nor disapproved the contents of this news release.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities of ECREIT.

SOURCE European Commercial Real Estate Investment Trust (ECREIT)

ECREIT: Mr. Phillip Burns, Chief Executive Officer, [email protected]