KEYreit Board Unanimously Confirms Recommendation To Reject Huntingdon's Inadequate Take-over Bid

-Active and Robust Strategic Alternatives Process Is Underway-

TORONTO, March 8, 2013 /CNW/ - KEYreit (TSX: KRE.UN) today announced that its board of trustees (the "Board") unanimously confirmed its recommendation that unitholders REJECT a revised offer dated March 7, 2013 (the "Revised Offer") from Huntingdon Capital Corp. ("Huntingdon") at an unchanged and inadequate price of $7.00 per unit.

"After a thorough consideration of the Revised Offer by the special committee of the Board and receipt of its recommendation to the Board, the Board remains unanimous," said Donald Biback, Chairman of the Board. "The $7.00 per unit being offered is wholly inadequate from a financial point of view and its terms and timing remain highly opportunistic. The Board is confident that given sufficient time to complete the value maximizing process that is underway, unitholders will benefit from a superior proposal."

KEYreit also wishes to provide unitholders with an update regarding its value maximizing process.  As detailed below, KEYreit is engaged in an active and robust value maximizing process and is confident that given the time needed to complete the process, unitholders will be presented with a proposal that will maximize unitholder value relative to the Revised Offer.

Reasons to reject Huntingdon's offer

The special committee of the Board ("Special Committee") has undertaken a full review of Huntingdon's formal Revised Offer as set out in the Notice of Variation and Extension dated March 7, 2013. Following the full review, the Special Committee recommended to the Board that unitholders reject the Revised Offer. The Board unanimously agreed.

The following is a summary of the reasons for the rejection recommendation of the Special Committee and the Board.

• the Revised Offer remains financially inadequate:
• the Special Committee and its advisors are undertaking an active and robust process to identify strategic alternatives with the objective of maximizing value for unitholders;
• the Revised Offer significantly undervalues KEYreit and fails to adequately compensate unitholders for KEYreit's assets and growth opportunities;
• KEYreit has successfully stabilized its property portfolio.  Strong Q4 2012 results and strong financial outlook provide evidence of the successful turnaround; and
• independent research analysts agree that KEYreit is a turnaround story and see value well in excess of $7.00 per unit. Dundee Capital Markets, in a report dated February 4, 2013, said it believes "the takeout value of KEYreit units is somewhere between $7.50 and $8.00" and that KEYreit is "worth about $8.00" based on IFRS fair value;
• the Revised Offer remains highly conditional and discretionary;
• the Revised Offer is not a "permitted bid" under the KEYreit's unitholder rights plan; and
• all of KEYreit's trustees and officers have indicated an intention to REJECT the Revised Offer and NOT TENDER their units.

The recommendation of the Board to reject the Revised Offer confirms the preliminary view of the Board as disclosed on March 1, 2013, that the terms of the offer intended to be proposed by Huntingdon were financially inadequate. The Board's preliminary view preceded the issuance of Huntingdon's Notice of Variation and Extension and was based on Huntingdon's announced proposal, which provided for no increase in the $7.00 per unit takeover price.

KEYreit will in the coming days file and mail a Notice of Change to its original trustees' circular to unitholders with full details regarding the Board's recommendation.

Update on the strategic alternatives process

As previously disclosed, the Special Committee was formed following the announcement of Huntingdon's original partial takeover bid (the "Original Partial Offer"). The Special Committee's purpose is, among other things, to consider possible value maximizing alternatives. Given the determination that the Original Partial Offer was partial, highly coercive and financially inadequate and that it was not the best time from a value perspective to sell KEYreit, the Special Committee determined that it would consider offers for 100% of KEYreit but would focus its value maximizing process on transactions that would deliver the most long-term value and the highest total returns to unitholders.

Following the announcement on February 26, 2013 that Huntingdon was proposing to revise its bid to be for 100% of the units, the Special Committee re-convened on February 27, 2013 to consider the proposal even though the full details of the proposal were not yet available. The Special Committee determined that a bid for 100% of the units was fundamentally and qualitatively different than the Original Partial Offer, in the sense that it addressed many of the coercive elements of the partial bid that concerned the Special Committee and the Board. Accordingly, the Special Committee determined that it was appropriate to expand its value maximizing process to actively seek offers for 100% of the units and directed its financial advisor accordingly.

Based on the results of the value maximizing process to date and the views of its financial advisor, the Special Committee is confident that given the time to complete the process, unitholders will benefit from a superior proposal to the Revised Offer in all material respects.

Huntingdon's baseless, misleading and irresponsible statements

Huntingdon's recent open letter made a number of public statements about KEYreit that are clearly baseless, misleading and irresponsible, such as the suggestion that KEYreit is a Ponzi scheme and that the KEYreit Board adopted a "just say no" defense.

KEYreit urges unitholders not to be distracted by Huntingdon's attempt to discredit KEYreit's dedicated Board and management team and shift the focus away from the fact that the Revised Offer is wholly inadequate and undervalues your investment.

Huntingdon mischaracterizes the Unitholder Rights Plan vote

Huntingdon mischaracterizes the upcoming vote on the Unitholder Rights Plan (the "Rights Plan") as "an attempt by the board of trustees to take away your right to choose." This is a false statement. In fact, it is Huntingdon that wants to take away the right of unitholders to choose.

There was no opportunity for a unitholder vote on February 8, 2013 when the Board adopted the Rights Plan as an emergency response to Huntingdon's coercive and undervalued Original Partial Offer. In order to provide unitholders with a say, the Board determined to call a special meeting of unitholders for March 26, 2013.

The evidence that Huntingdon does not want unitholders to have their say is clear. Huntingdon has applied to the Ontario Securities Commission to end the rights plan after having failed, on jurisdictional grounds, with a similar and highly inappropriate application to the BC Securities Commission. Huntingdon's BCSC application squandered KEYreit resources wastefully and unnecessarily and was initiated with complete disregard for unitholders' best interests.

KEYreit has previously mailed to unitholders an information circular and cover letter with regard to the unitholders' meeting and the Rights Plan vote. These documents are available on KEYreit's website www.keyreittruevalue.com and at www.sedar.com. KEYreit will also be mailing to unitholders a Notice of Change to the Trustees' Circular outlining the reasons to REJECT the Revised Offer. Unitholders should carefully review the Rights Plan circular and cover letter as supplemented by the Notice of Change to the Trustees' Circular which will be mailed shortly and then VOTE FOR the Rights Plan to defend against Huntingdon's Revised Offer.

If you have tendered your units, you should withdraw them immediately

Unitholders who have tendered units and who wish to obtain advice or assistance in withdrawing their units are urged to contact their broker or Kingsdale Shareholder Services Inc., the information agent retained by KEYreit, at 1-888-518-1562. Kingsdale is also available to respond to enquiries regarding the trustees' circular and the information circular.

About KEYreit

KEYreit (TSX: KRE.UN) is Canada's premier small-box retail property owner with 226 properties in nine provinces across Canada. KEYreit's properties are well located and geographically diverse across Canada with the majority of all properties containing long-term quadruple net leases.

To find out more about KEYreit (TSX: KRE.UN), visit our website at www.keyreit.com.

Forward-Looking Statements

This press release contains certain information or statements that may constitute forward-looking information within the meaning of securities laws, which reflect the current view of KEYreit with respect to KEYreit's objectives, plans, goals, strategies, future growth, results of financial and operating performance and business prospects and opportunities. In some cases, forward-looking information can be identified by the use of terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "forecast", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. In particular, forward-looking information included in this press release includes, but is not limited to, statements with respect to KEYreit's strategic alternative process, KEYreit's turnaround including its ability to lease vacant property units, execute planned acquisitions, collect minimum rents, diversify its tenant base, undertake land intensification projects, refinance loans and mortgages at their maturity, complete accretive acquisitions, and maintain or grow monthly cash distribution levels, and also with respect to the timing of such events. Forward-looking information should not be read as guarantees of future events, performance or results, and will not necessarily be accurate indications of whether, or the times at which, such events, performance or results will be achieved. All of the statements and information in this press release containing forward-looking information are qualified by these cautionary statements.

Forward-looking statements are based on information available at the time they are made, underlying estimates and assumptions made by management and management's good faith belief with respect to future events, performance and results, and are subject to inherent risks and uncertainties surrounding future expectations generally which could cause actual results to differ materially from what is currently expected. Such risks and uncertainties include, but are not limited to KEYreit's reliance on key tenants, risks associated with investment in real property, competition, reliance on key personnel, financing and refinancing risks, distributions, environmental matters, tenant risks, risks related to current economic conditions and other risk factors more particularly described in KEYreit's most recent Annual Information Form available on SEDAR at www.sedar.com. Additional risks and uncertainties not presently known to KEYreit or that KEYreit currently believes to be less significant may also adversely affect KEYreit.

KEYreit cautions readers that the list of factors is not exhaustive and that should certain risks or uncertainties materialize, or should underlying estimates or assumptions prove incorrect, actual events, performance and results may vary significantly from those expected. There can be no assurance that the actual results, performance, events or activities anticipated by KEYreit will be realized or, even if substantially realized, that they will have the expected consequences to, or effect on, KEYreit. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date.

KEYreit disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

SOURCE: KEYreit

KEYreit unitholders, please contact:
Kingsdale Shareholder Services Inc.
1-888-518-1562 toll-free in North America
1-416-867-2272 outside of North America (collect calls accepted)
[email protected]

Media, please contact: 
Longview Communications Inc.
Alan Bayless 604-694-6035, [email protected]
Olena Lobach 416-649-8009, [email protected]