KEYreit Says Announced Huntingdon Takeover Proposal Still Inadequate and Recommendation Remains Unchanged; Unitholders Urged to Vote FOR Rights Plan

-In Pre-bid Meeting, Huntingdon's CEO Zachary George Admitted KEYreit Worth At Least $8-

TORONTO, March 1, 2013 /CNW/ - KEYreit (TSX: KRE.UN) today provided a preliminary view that a proposed new bid from Huntingdon Capital Corp. ("Huntingdon") still remains financially inadequate.

"We know there is a lot of upside to KEYreit's units, and Huntingdon knows it too," said John Bitove, KEYreit's Chief Executive Officer. "Huntingdon's CEO Zachary George asked to meet with me on "friendly terms" before he launched the hostile takeover bid, and in that meeting he admitted that KEYreit is worth more than $8.00 per unit. I told Mr. George then, and I continue to believe, that KEYreit is worth far more than that."

Donald Biback, Chairman of the board of trustees, added, "Clearly Huntingdon realized that its original partial takeover bid was doomed to fail. Now it is proposing a bid for all units, but the price remains unchanged at an inadequate $7.00 per unit.  As the offer price has not increased, our view continues to be that Huntingdon still does not intend to fairly compensate Unitholders for KEYreit's assets, its stabilized net operating income and its future growth opportunities."

KEYreit's board of trustees will fully review Huntingdon's new offer, if and when it is sent to Unitholders. Meanwhile, the board stands by its original opinion that the bid is financially inadequate. The board of trustees and management, representing 17% of KEYreit's issued and outstanding units, have stated that they will not tender to Huntingdon's $7.00 unsolicited bid. KEYreit continues to explore the strategic alternatives available to it in its efforts to maximize Unitholder value.

KEYreit's Record Financial Results Show It Has Turned The Corner

On February 27, 2013, KEYreit disclosed early financial highlights for the fourth quarter of 2012 including record revenue, record net operating income and a return to 97% committed occupancy.  KEYreit also disclosed a strong outlook for 2013 and 2014, including $50 million of potential acquisitions lined up for the year thus far. The results and outlook demonstrate that KEYreit has dealt with perceived risks around its business and is well poised to grow and create Unitholder value going forward.

"Huntingdon has clearly selected an opportune time to make its proposal, considering that nearly all of the KFC restaurants have been re-leased and the IPO mortgage has been paid off," added Bitove. "Our financial results release and guidance were intended to inform Unitholders that we have a lot more value in this company than is suggested by Huntingdon's proposal."

Among its retail assets, KEYreit has a number of single-tenant properties with significant upside potential. As currently recorded on KEYreit's books, the value of these properties, in key Canadian urban markets like Toronto, Calgary, Vancouver and Montreal, is not reflective of the highest and best possible use of the land. KEYreit believes it can achieve maximum value over the long term by developing the excess density on these properties and none of this value is captured in the unit price.

KEYreit is the only publicly traded Canadian real estate investment trust focused on the small-box retail sector. Since the IPO in 2005, KEYreit has significantly diversified its tenant base. Today, 80% of its space is leased to tenants operating under national banners, with Shoppers Drug Mart as its largest tenant. Further, over 72% of the REIT's GLA is comprised of unique "quadruple net leases" where not only does the tenant pay for all carrying costs related to a property, but it also pays for capital maintenance expenditures.

Huntingdon's Proposal Does Not Address Inadequate Price

Huntingdon, in a news release issued on February 26, 2013, said that it proposes to make a takeover bid for all of KEYreit's units, rather than for just 45% of KEYreit's units. But the proposal clearly states that Huntingdon is not increasing the inadequate $7.00 per unit offer price, which represents a premium of only 8% to the closing price per unit of $6.48 on January 9, 2013, the day KEYreit launched its recent equity offering.

"Huntingdon is unfairly using the equity offering discount as a basis to measure its takeover premium," said Teresa Neto, KEYreit's Chief Financial Officer. "While such a discount is customary when issuing units in an equity offering to fund growth, the discount does not reflect KEYreit's inherent trading price and it is misleading for Huntingdon to suggest otherwise."

Subject to receipt of further information from Huntingdon, the recommendation of the board of trustees set out in the trustees' circular dated February 15, 2013 remains unchanged that Unitholders should REJECT the Huntingdon bid and NOT TENDER their units.  The trustees' circular has been mailed to Unitholders. KEYreit urges Unitholders to carefully review the trustees' circular and cover letter.

Unitholder Rights Plan Vote

KEYreit has also mailed to Unitholders an information circular and cover letter with regard to the Unitholders' meeting and the Rights Plan vote. Unitholder approval of the Rights Plan can ensure that Unitholders are treated fairly in any takeover bid.

These documents are available on KEYreit's website www.keyreittruevalue.com and at www.sedar.com. Unitholders should carefully review the Rights Plan circular and cover letter and then VOTE FOR the Rights Plan.

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.

Non-IFRS Measures

Net Operating Income ("NOI")

NOI is not a measure recognized under IFRS and does not have a standardized meaning prescribed by IFRS. NOI is presented because management of KEYreit believes that this non-IFRS measure is a relevant measure of the ability of KEYreit to earn and distribute cash to Unitholders. NOI as computed by KEYreit may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable. NOI computed by KEYreit represents total revenue from investment properties less property operating expenses.

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 the 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 the KEYreit's 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 the 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 the 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]