FAM Real Estate Investment Trust announces transformational acquisition of seven office properties located in the GTA

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Highlights

• FAM REIT to acquire seven office properties located in attractive submarkets within the Greater Toronto Area, which are complementary to FAM's current office portfolio and comprise an aggregate of approximately 1.1 million square feet of gross leasable area.
• Purchase price of $190.0 million compares favourably to the aggregate value of the Acquisition Properties in the Independent Appraisals, estimated at $202.4 million.
• Acquisition Properties have cash flow growth opportunities from contractual rental increases, near-term leasing opportunities and below market rents.
• The Purchase Price implies price per square foot of approximately $176, significantly below estimated replacement cost, and a capitalization rate of approximately 6.91%.
• As partial consideration, the vendor will be issued or delivered, as applicable, (i) 2,794,363 trust units of the REIT (the "Units"), and (ii) 2,316,748 Class B limited partnership units (economically equivalent to and exchangeable for Units) of a FAM limited partnership (the "New Class B LP Units"), in each case at a price of $9.00 per unit.
• The REIT's independent Trustees unanimously recommend that Unitholders vote in favour of the Acquisition. A special meeting is expected to be held on December 5, 2014 to obtain approval of the Acquisition by minority Unitholders.

TORONTO, Oct. 29, 2014 /CNW/ - FAM Real Estate Investment Trust (TSX: F.UN) (TSX: F.WT) (the "REIT") announces today that it has agreed to acquire (the "Acquisition"), through a REIT limited partnership (the "Acquisition Partnership"), a portfolio of seven office properties (the "Acquisition Properties") from Slate GTA Suburban Office Inc. ("Slate GTA"), an affiliate of Slate Properties Inc. (Slate Properties Inc. and its affiliates are collectively referred to as "Slate"), for $190.0 million, subject to adjustment in accordance with the terms of the Acquisition Agreement (as defined below) (the "Purchase Price").

The Purchase Price implies a price per square foot of approximately $176, significantly below estimated replacement cost, and a capitalization rate of approximately 6.91%. The Purchase Price will be satisfied by a combination of: (i) $144.0 million in cash, and (ii) the issuance to Slate GTA or its designee of 2,794,363 Units and 2,316,748 New Class B LP Units.

Description of the Acquisition Properties

The Acquisition Properties consist of seven office properties comprising an aggregate of approximately 1.1 million square feet of gross leasable area, located in attractive submarkets within the Greater Toronto Area ("GTA"), which are currently 90.2% leased. The REIT believes that the Acquisition Properties have cash flow growth opportunities through contractual rental increases, near-term opportunities to increase occupancy, and rental upside given in-place rents are below market.

The following table highlights certain information about the Acquisition Properties, including occupancy levels, which are set out as at September 1, 2014:

Property	City	GLA (sq. ft)	Occupancy	Site Area (acres)
Woodbine Complex	Markham	360,574	90.2%	12.1
Centennial Centre Complex	Toronto	235,605	91.0%	11.3
2285 Speakman Drive	Mississauga	126,270	100.0%	5.7
2599 Speakman Drive	Mississauga	111,461	86.1%	8.4
1 Eva Road	Toronto	90,747	90.1%	2.5
Queen's Plate	Toronto	93,770	76.3%	3.0
Meadowpine Corporate Centre	Mississauga	59,094	96.9%	3.8
TOTAL		1,077,521	90.2%	46.8

"We are pleased to acquire this attractive portfolio of assets and to continue to lay the foundation for our future  growth through a strategy focused on the Canadian office sector. Since our IPO, the REIT has made three of its four acquisitions in the office sector and these properties are complementary to our current office portfolio," said Gary Samuel, Chairman of the special committee of independent Trustees of the REIT (the "Special Committee"). "We believe the Acquisition Properties are high quality assets with significant embedded cash flow growth located in mature GTA commercial real estate nodes."

Blair Welch, Partner and co-founder of Slate, commented, "We believe this acquisition provides FAM a strong foundation on which to build a highly compelling pure-play office REIT. In the current market environment the transaction offers compelling value and upside for Unitholders of FAM."

The Acquisition Agreement

The Acquisition will be completed pursuant to an agreement of purchase and sale (the "Acquisition Agreement") among FAM Management Limited Partnership ("FAM LP"), a subsidiary of the REIT, Slate GTA and Slate Capital Corp. and is conditional upon the satisfaction of certain conditions including the completion of the Huntingdon Transaction (defined below), the approval of disinterested holders of Units and special voting units ("Special Voting Units") of the REIT ("Unitholders"), the entering into of acceptable financing arrangements to pay the cash portion of the Purchase Price, Competition Act (Canada) approval and Toronto Stock Exchange ("TSX") approval. The Acquisition Agreement contains customary provisions for transactions of this nature, including representations, warranties, covenants and indemnities of the parties. A copy of the Acquisition Agreement has been filed by the REIT on www.sedar.com. Completion of the Acquisition is expected to occur in late 2014.

Slate Capital Corp., an affiliated entity (as such term is defined for purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101")) of Slate, may be considered a "related party" of the REIT by virtue of its agreement to acquire all of the issued and outstanding shares of Huntingdon Capital Corp. ("Huntingdon"), a significant holder of Units and the manager of the REIT, by plan of arrangement transaction (the "Huntingdon Transaction"). Huntingdon's securityholders approved the Huntingdon Transaction on October 16, 2014 and the transaction is expected to close on or about November 4, 2014. Should the Huntingdon Transaction close, Slate will, among other things, effectively assume Huntingdon's obligations as the REIT's manager and become the indirect owner of all Units, Class B LP Units of FAM LP and Special Voting Units held by Huntingdon. In addition, an aggregate of 2,794,363 Units and 2,316,748 New Class B LP Units will be issued or delivered, as applicable, to Slate GTA or its designee pursuant to the Acquisition Agreement. The REIT understands that following completion of the Acquisition, Slate will transfer the 2,794,363 Units issued to it pursuant to the Acquisition to Incore Equities Inc. ("Incore") (or will otherwise direct the REIT to issue and deliver such Units directly to Incore as the designee of Slate GTA), effectively in satisfaction of certain rights of Incore relating to, among other things, the Acquisition Properties (the "Incore Transfer"). Incore is a private corporation managed by Greystone Managed Investments Inc. on behalf of certain pension fund clients.  Accordingly, following the completion of the Huntingdon Transaction, the Acquisition and the Incore Transfer, Slate will hold an approximate 34.4% effective interest in the REIT through the ownership of, or the control or direction over, Units, Class B LP Units of FAM LP, New Class B LP Units and Special Voting Units, and Incore will hold an approximate 13.8% effective interest in the REIT through the ownership of, or the control or direction over, Units.

Accordingly, the Acquisition constitutes a "related party transaction" under MI 61-101. Pursuant to MI 61-101, the REIT is required to obtain prior approval of the Acquisition by a majority of the Unitholders, other than Huntingdon, Slate and their respective affiliates as determined pursuant to MI 61-101 (the "Minority Unitholders"), at a special meeting (the "Meeting") of unitholders expected to be held on December 5, 2014.

Recommendation of the Board of Trustees of FAM REIT

On February 20, 2014, the Trustees of the REIT established the Special Committee with a mandate to evaluate the impact of Huntingdon's strategic review process on, and all options available to, the REIT. In connection with its mandate, the Special Committee is also responsible for supervising the process to be carried out by the REIT and its professional financial and legal advisors in connection with the Acquisition, making recommendations to the Trustees in respect of matters that it considers relevant with respect to the Acquisition, and ensuring that the REIT completes the Acquisition in compliance with the requirements of MI 61-101, the REIT's Declaration of Trust, applicable policies of the TSX and applicable law.

Pursuant to the requirements of MI 61-101, the Special Committee retained Altus Group Limited to prepare a formal valuation (the "Independent Appraisals") of each of the Acquisition Properties. The Special Committee also retained TD Securities Inc. ("TD Securities") to act as financial advisor to the Special Committee in respect of its mandate and to provide its opinion (the "Fairness Opinion") regarding the fairness, from a financial point of view, of the consideration to be paid to Slate pursuant to the Acquisition Agreement to the REIT.

In arriving at its conclusions and recommendations, the Special Committee reviewed and considered all aspects of the Acquisition, including the financial, legal and tax implications of the Acquisition and the anticipated benefits to the REIT and its Unitholders. The conclusions and recommendations of the Special Committee are based upon the following factors, among others:

• The Acquisition represents a transformational transaction for the REIT which will benefit Unitholders through increased scale and improved asset quality.
• The Acquisition Properties are located in attractive submarkets within the GTA which have compelling real estate fundamentals and are complementary to the REIT's existing office property portfolio.
• The Purchase Price is below the estimated appraisal value of $202.4 million in the Independent Appraisals (inclusive of a 2% portfolio premium).
• The Purchase Price compares favourably to estimated market values and allows the REIT to acquire performing assets for less than their replacement cost.
• The Acquisition Properties have cash flow growth opportunities through contractual rental increases, near-term opportunities to increase occupancy and rental upside given in-place rents are below market.
• The Acquisition Properties are located in the GTA suburban market which has numerous attractive qualities including favourable demographics, significant scale, steadily increasing rents and attractive yield characteristics.
• The Acquisition is consistent with several of the recent acquisitions by the REIT. Three of the REIT's four post-Initial Public Offering acquisitions have been suburban office buildings, including the Promontory, 1700 Ellice and 4211 Yonge. The REIT's latest investment, the MTS Data Centre, is expected to remain in the REIT's portfolio.
• TD Securities concluded in its Fairness Opinion that, based upon and subject to the scope of review, assumptions and limitations and other matters described therein and contemplated by the Engagement Agreement, as of October 29, 2014, the Consideration (as defined below) to be paid to Slate pursuant to the Acquisition Agreement is fair, from a financial point of view, to the REIT.
• The Special Committee commissioned new building condition reports and environmental reports to determine the capital requirements of the Acquisition Properties and to identify any potential environmental issues. The reports have concluded that the buildings are in good physical condition with no environmental contamination, no deferred capital expenditures and limited capital required over the near term.
• The Acquisition Properties have performed well since Slate's acquisition and have benefited from a number of capital improvements which will serve to enhance their competitive position in the market.
• While the Acquisition will require the REIT to temporarily increase its leverage, the REIT intends to align its capital structure to return to within its stated target leverage level (50% to 55% of the REIT's gross book value) following the expected disposition of the REIT's retail and industrial properties.
• The Acquisition is accretive to the REIT's adjusted funds from operations per Unit.
• Pursuant to the terms of the asset management agreement dated December 28, 2012 between Huntingdon Capital Corp. and the REIT, pursuant to which Huntingdon provides asset management, as amended, advisory and administrative services to the REIT and its Subsidiaries, no acquisition fee will be paid to Huntingdon or any successor in connection with the Acquisition.
• The requirement under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions and the rules of the TSX that the resolution to be voted on by the Unitholders for the Acquisition must be approved by the affirmative vote of a majority of votes cast by Minority Unitholders present in person or represented by proxy at the Meeting.

The Board of Trustees of the REIT (with Mr. Zachary R. George recusing himself), based on the recommendation of the Special Committee and the factors referred to above, unanimously: (i) determined that the Acquisition is in the best interests of the REIT and its Unitholders; (ii) approved the Acquisition Agreement and all other documents as may be necessary to complete the Acquisition; and (iii) recommends that Unitholders vote FOR the Acquisition at the Meeting.

Purchase Price

The Purchase Price for the Acquisition Properties of $190.0 million (subject to adjustment in accordance with the terms of the Acquisition Agreement) will be satisfied by a combination of: (i) $144.0 million in cash, and (ii) the issuance or delivery, as applicable, to Slate GTA or its designee of 2,794,363 Units and 2,316,748 New Class B LP Units (the "Consideration").

New Mortgages

The cash portion of the Purchase Price is expected to be funded pursuant to mortgages (the "New Mortgages") to be entered into pursuant to a financing term sheet (the "New Mortgages Term Sheet") regarding a proposed first mortgage financing in the amount of $144.0 million in respect of the Acquisition Properties. The REIT expects the New Mortgages to fund on the date of completion of the Acquisition.  The New Mortgages will be floating rate, first mortgage financing with a 24 month term, interest rate of 2.25% over the 90-day Canadian Bankers' Acceptance rate and secured by each of the Acquisition Properties. There will be no upfront fees payable related to the New Mortgages.

Issuance of New Class B LP Units and Special Voting Units

The remaining portion of the Purchase Price will be satisfied by the issuance to Slate GTA or its designee of: (i) 2,794,363 Units and (ii) (A) 2,316,748 New Class B LP Units (each New Class B LP Unit being exchangeable by the holder into one Unit subject to customary anti-dilution adjustments) and (B) 2,316,748 accompanying Special Voting Units (which provide the holder thereof with voting rights in respect of the REIT). The Units and New Class B LP Units will be issued or delivered, as applicable, in each case, at a price of $9.00 per unit. The New Class B LP Units will be economically equivalent to Units. Each New Class B LP Unit entitles its holder to receive distributions of cash from the Acquisition Partnership equal to the distributions that the holder of the New Class B LP Unit would have received if it was holding one Unit (subject to customary anti-dilution adjustments) instead of the New Class B LP Unit.

About FAM Real Estate Investment Trust

The REIT is presently a diversified commercial real estate investment trust currently focused on owning and acquiring strategically well-located office, industrial and retail real estate located primarily across Canada's large population centres.

Unitholders are advised that additional information relating to the Acquisition is available pursuant to a presentation entitled "Slate Office Portfolio Acquisition Overview" which may be found by visiting the REIT's website at: http://www.famreit.com/investors/presentation/SlateOfficePortfolioAcquisitionOverview/.

About Slate Properties Inc.

Slate is a Toronto-based commercial real estate investor and asset manager. Slate's founding partners each have nearly two decades of experience in the industry managing complex real estate transactions in domestic and international markets. Since 2005, the company has acquired over C$2.7 billion of commercial real estate assets across North America. The company currently co-invests in and manages various investment vehicles, including Slate Retail REIT (TSX: SRT.UN/SRT.U), an open-ended investment trust that is listed on the Toronto Stock Exchange. Slate also owns and manages a portfolio of Canadian office properties with domestic institutional equity. For more information, visit www.slateproperties.ca.

Forward-Looking Information and Cautionary Statements:

Certain statements contained in this press release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking statements are provided for the purposes of assisting the reader in understanding the REIT's financial performance, financial position and cash flows as at and for the periods ended on certain dates and to present information about the REIT's current expectations and plans relating to the future and readers are cautioned such statements may not be appropriate for other purposes. Forward-looking information may relate to future results, performance, achievements, events, prospects or opportunities for the REIT or the real estate industry and may include statements regarding: the REIT's financial position; business strategy; budgets; projected costs; capital expenditures; financial results; occupancy levels; average monthly rent; taxes; the REIT's intention with respect to, and ability to execute, its growth strategies; and distributions to be paid to holders of Units or New Class B LP Units. In some cases, forward-looking information can be identified by such terms such as "may", "might", "will", "could", "should", "would", "occur", "expect" "plan" "anticipate" "believe" "intend" "seek" "aim" "estimate" "target" "goal" "project" "predict" "forecast", "potential", "continue", "likely", "schedule", or the negative thereof or other similar expressions concerning matters that are not historical facts. Some of the specific forward-looking statements in this press release include, but are not limited to, statements with respect to the following:

• the expected timing and completion of the Acquisition;
• the effect of the Acquisition on the financial performance of the REIT;
• the New Mortgages and the terms thereof, including the availability of the New Mortgages in order to pay the cash portion of the Consideration for the Acquisition;
• the REIT's ability to enter into acceptable financing arrangements should the New Mortgages be unavailable in order to pay the cash portion of the Consideration for the Acquisition;
• the REIT's capital expenditure requirements for the Acquisition Properties;
• the REIT's intention to focus its strategy to concentrate on acquiring, holding, developing, maintaining, improving, leasing, managing or otherwise dealing with office properties in Canada and the effect of such focus;
• the REIT's ability to dispose of its retail and industrial properties at attractive prices and on other attractive terms, if at all;
• the expected timing and completion of the Huntingdon Transaction;
• the REIT's expected relationship and arrangements with Slate;
• Slate's expected interest in the REIT;
• the REIT's expected and target operating leverage ratios; and
• the expected timing and completion of the Incore Transfer.

Forward-looking statements necessarily involve known and unknown risks and uncertainties that may be general or specific and that give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, assumptions may not be correct and objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which are beyond the REIT's control, affect the operations, performance and results of the REIT and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to: the risks discussed in the REIT's materials filed with Canadian securities regulatory authorities from time to time, risks related to the REIT and its business including risks related to the Acquisition (possible failure to complete the Acquisition, possible failure to obtain New Mortgages or other alternative forms of financings, possible failure to realize expected returns on the Acquisition, use of property valuation, fairness opinion and historical financial information), risks related to the REIT's relationship with Huntingdon and Slate (upon completion of the Huntingdon Transaction and the Acquisition), "Risk Factors" in the information circular of the REIT to be filed in connection with the Meeting (the "Circular"), "Risk Factors" in the REIT's annual information form for the year ended December 31, 2013 (the "AIF"), and risks disclosed in "Risks and Uncertainties" in the REIT's most recent management's discussion and analysis (the "MD&A"). The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements as there can be no assurance actual results will be consistent with such forward-looking statements.

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 the REIT's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including the following: the Canadian economy will remain stable over the next 12 months; inflation will remain relatively low; interest rates will remain stable; conditions within the office real estate market, including competition for acquisitions, will be consistent with the current climate; the Canadian capital markets will provide the REIT with access to equity and/or debt at reasonable rates when required; and that the risks referenced above, collectively, will not have a material impact on the REIT. While the REIT considers these assumptions to be reasonable based on currently available information, they may prove to be incorrect. See "Risk Factors" in the Circular, "Risk Factors" in the AIF and "Risks and Uncertainties" in the MD&A.

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. Except as required by applicable law, the REIT undertakes no 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. Additional information about these assumptions and risks and uncertainties is contained in the REIT's filings with securities regulators, including the Circular, AIF and MD&A. These filings are also available at the REIT's website at www.famreit.com.

Non-IFRS Measures

Certain terms used in this press release, such as adjusted funds from operations ("AFFO"), are not measures defined under IFRS, do not have standardized meanings prescribed by IFRS and should not be compared to or construed as alternatives to profit/loss, cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS. AFFO is a supplemental non-IFRS financial measure that is used in the real estate industry to assess the sustainability of future cash distributions. AFFO is indicative of available cash flow after capital expenditures and leasing costs including leasing commissions, tenant improvements and inducements. AFFO is defined by the REIT as funds from operations (another supplemental non-IFRS financial measure) adjusted for the amortization of deferred transaction costs, accretion of debt, fair value adjustments to interest rate swaps, the interest rate and capital expenditure subsidies, straight-line rent, and deducts capitalized leasing costs and capital expenditures. Funds from operations is widely used for evaluating operating performance in the Canadian real estate industry. The REIT calculates funds from operations in accordance with the guidelines set out by the Real Property Association of Canada, specifically, as net income in accordance with IFRS adjusted for most non-cash expenses.

SOURCE: FAM Real Estate Investment Trust

Laurel Hill Advisory Group, the Information Agent for the Meeting; North America Toll Free: 1-877-452-7184; Collect Calls outside North America: 416-304-0211; Email: [email protected]