Slate Office REIT Announces Transformative Agreement to Acquire C$254.8 Million Irish Entity That Owns a Portfolio of Office, Life Sciences and Lite-Industrial Real Estate in Ireland, and Related C$130.0 Million Bought Deal Financings and C$5.8 Million Private Placement

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TORONTO, Nov. 15, 2021 /CNW/ - Slate Office REIT (TSX: SOT.UN) (the "REIT"), an owner and operator of office real estate, announced today that it has reached agreement with Yew Grove REIT Plc ("Yew Grove"), on the terms of the proposed cash offer pursuant to which an indirect wholly-owned subsidiary of the REIT would acquire all of the issued and outstanding shares of Yew Grove, for cash consideration of €1.017 per share (the "Proposed Acquisition"). The Proposed Acquisition remains conditional on, amongst other things, the closing of the Offering, following which the REIT will make a formal offer to acquire Yew Grove, and the approval of Yew Grove's shareholders. The Proposed Acquisition was announced today by the REIT and Yew Grove by way of an announcement of a possible offer in accordance with the requirements of Rule 2.4 of the Irish Takeover Panel Act 1997, Takeover Rules 2013 (the "Irish Takeover Rules"). A copy of that announcement can be accessed on the REIT's website at slateofficereit.com/regulatory-filings.

Yew Grove is a REIT that is dual-listed on the Euronext Dublin (Ireland) and London stock exchanges. Yew Grove owns a high quality, fit-for-purpose portfolio of 23 office, life sciences and lite-industrial properties located in Ireland (the "Portfolio").

The Proposed Acquisition is valued at C$254.8 million¹ (€177.4 million), and the Board of Yew Grove have confirmed their recommendation of the Proposed Acquisition, conditional only on the closing of the Offering (as defined below) and the making of a firm offer by the REIT in accordance with Rule 2.5 of the Irish Takeover Rules.

"This is a transformational opportunity for Slate Office REIT to acquire a portfolio of modern properties underpinned by exceptional quality tenants," said Steve Hodgson, Chief Executive Officer of Slate Office REIT. "The Proposed Acquisition, upon completion, would improve the REIT's portfolio metrics and the durability of our cash flows, generating immediate accretion for unitholders. With this initial acquisition in Ireland, we would be well positioned to pursue other attractive growth opportunities across Europe."

Brady Welch, a Trustee of the Board of the REIT and a London-based Founding Partner of Slate Asset Management ("Slate"), the REIT's manager, added: "We have developed a deep understanding of the landscape in Europe since entering the market in 2013, having underwritten over €21 billion of office opportunities in the last few years alone. These are quality properties in a rapidly-growing market with strong real estate fundamentals, and we are very pleased to be investing alongside the Offering and supporting the Proposed Acquisition with our established platform in the region."

HIGHLIGHTS OF THE PROPOSED ACQUISITION

• Entry into a growing new market below replacement cost:
• Ireland's pro-business environment, leading GDP growth, strong foreign direct investment ("FDI") and growing, highly educated workforce make it an attractive market in Europe
• Well-located Portfolio being acquired below replacement cost
• Improves portfolio metrics and accretive to adjusted funds from operations ("AFFO"):
• Improves the REIT's operating metrics and income growth potential, with a Portfolio occupancy of 94.8%, an 8.9 year weighted average lease term ("WALT") and in-place rents that are below market
• Increases exposure to credit-quality tenants, with 95% of the Portfolio's income secured by investment grade, FDI and government occupiers
• Expected to be immediately accretive to funds from operations ("FFO") per unit and AFFO per unit
• Increases portfolio's scale, diversification and pipeline for future growth:
• Adds high-quality life sciences and technology tenants driving strong local office demand
• Further diversifies and derisks the REIT's revenue streams, with 65% of pro forma net operating income ("NOI") derived from Canada, 18% from the U.S. and 17% from Ireland
• Significantly increases the REIT's future acquisition pipeline
• Supported by Slate's established platform in Europe:
• Slate is investing in the deal through a private placement to maintain its 9.5% pro-rata ownership interest in the REIT
• Slate's approximately €1.2 billion European platform has offices in London, Dublin, Frankfurt and Luxembourg with 20 professionals who provide local market knowledge and relationships

Subject to the satisfaction of certain conditions, the Proposed Acquisition is expected to close in Q1 2022.

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¹ Assumes EUR-CAD exchange rate of 1.4365

FINANCING FOR THE PROPOSED ACQUISITION
The Proposed Acquisition will be financed through: (i) the sale, on a "bought deal" basis, of C$55.0 million of subscription receipts (the "Subscription Receipts") and C$75.0 million aggregate principal amount of 5.50% extendible convertible unsecured subordinated debentures (the "Debentures") (collectively, the "Offering"), (ii) a C$5.8 million private placement of units of the REIT to Slate (the "Private Placement"), (iii) approximately C$134.4 million² of new property-level debt at an attractive effective interest rate of 2.65%, and (iv) existing balance sheet liquidity.

Through a cross currency interest rate swap, the REIT intends to exchange the Canadian dollar denominated principal and interest payments for the Debentures to Euro denominated principal and interest payments, resulting in an effective interest rate to the REIT of approximately 3.70% for the Debentures.

In addition to the previously completed disposition of 1 Eva Road in Toronto, ON and 4 Herald Avenue in Corner Brook, NL for approximately C$37 million, management intends to continue to selectively recycle capital and has earmarked approximately C$100 million of properties to dispose of in early 2022 (collectively, the "Dispositions"). Pro forma for the Proposed Acquisition, the Offering, the Private Placement and the Dispositions, the REIT's leverage is expected to be approximately 59%. The REIT intends to actively lower its leverage ratio towards its long-term target of approximately 55%.

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² Assumes EUR-CAD exchange rate of 1.4365

PORTFOLIO OVERVIEW
The properties are well located in major markets across Ireland, with 52% of assets in the Portfolio located in the Dublin catchment. Life sciences and technology occupiers comprise nearly half of the Portfolio by net rent, increasing the REIT's exposure to emerging industries that are fueling strong office demand in the region. Importantly, 95% of the Portfolio's NOI is secured by credit-quality tenants, complementing the REIT's existing high quality tenant base. Throughout the COVID-19 pandemic, the portfolio demonstrated best-in-class resilience, with rent collections averaging approximately 99%.

MANAGEMENT PLATFORM
Upon completion of the Proposed Acquisition, Slate would onboard the existing Yew Grove team to ensure continuity. The team has a strong track record of growth in Ireland and in-depth local market knowledge and relationships, which would position the REIT to capitalize on a significant pipeline.

IRELAND MARKET OVERVIEW
Slate has reviewed over €21 billion of office opportunities across Europe in recent years and identified Ireland as a compelling new growth market that has the potential to complement and significantly expand the REIT's existing platform. According to the European Commission's Summer 2021 Economic Forecast, Ireland's 2021 GDP growth is forecast to be 7.2%, the second highest growth level in the European Union ("EU"). The country's growing economy is supported by the Industrial Development Agency ("IDA"), a government agency focused on business development and FDI into Ireland. It is the only English-speaking nation in the EU and, according to Eurostat, has one of the youngest and fastest growing populations in the region, with 33% being under the age of 25 years old. The country's pro-business environment, strong economic profile and compelling investment fundamentals have attracted many of the world's largest and most influential businesses to the region.

Dublin's position as a top global technology city of the future is driving strong demand for office space. Office fundamentals across broader Ireland remain robust, with positive leasing momentum in Q3 2021. Dublin rents in particular are forecasted to grow after 2022, as projects under construction, which are estimated to be 40% pre-let, come online and office fundamentals continue to strengthen. Likewise, industrial fundamentals remain strong across Ireland, with vacancy rates at near all-time lows and limited new construction supporting strong rental levels.

THE OFFERING AND PRIVATE PLACEMENT
In connection with the Proposed Acquisition, the REIT has entered into an agreement with a syndicate of underwriters (the "Underwriters") led by RBC Capital Markets and BMO Capital Markets (the "Lead Underwriters"), to sell on a "bought deal" basis: (i) 11,225,000 Subscription Receipts of the REIT at a price of C$4.90 per Subscription Receipt for gross proceeds of approximately C$55.0 million, and (ii) C$75.0 million aggregate principal amount of Debentures. In addition, the REIT has granted the Underwriters over-allotment options to purchase up to an additional 1,683,750 Subscription Receipts and C$11.3 million aggregate principal amount of Debentures on the same terms and conditions, exercisable at any time, in whole or in part, until the earlier of (i) 30 days following closing of the Offering, and (ii) the occurrence of a Termination Event (as defined below).

In addition to the Offering, Slate has agreed to purchase approximately C$5.8 million of units of the REIT pursuant to a private placement. The closing of the Private Placement will constitute an Escrow Release Condition (as defined below). As a result of the Private Placement, Slate's effective ownership interest in the REIT is expected to remain at approximately 9.5% (before the exercise of the over-allotment option).

On satisfaction of the Escrow Release Conditions: (i) one unit of the REIT (each, a "Unit") will be automatically issued in exchange for each Subscription Receipt (subject to customary anti-dilution adjustments), without payment of additional consideration or further action by the holder thereof, (ii) an amount per Subscription Receipt equal to the amount per Unit of any cash distributions made by the REIT for which record dates have occurred during the period from closing of the Offering to the date immediately preceding the date upon which the Units are issued or deemed to be issued to the holders of the Subscription Receipts, pursuant to the terms of the agreement governing the Subscription Receipts (the "Subscription Receipt Agreement"), net of any applicable withholding taxes, will become payable in respect of each Subscription Receipt, and (iii) the net proceeds from the sale of the Subscription Receipts and the Debentures will be released from escrow to or as directed by the REIT.

The net proceeds from the sale of the Subscription Receipts and the Debentures will be held by an escrow agent pending satisfaction or waiver of (A) all conditions precedent to the Proposed Acquisition in accordance with the terms of the material documents relating to the Proposed Acquisition, without amendment or waiver in a manner that would be materially adverse to the terms and conditions upon which the REIT proposes to effect the Proposed Acquisition, unless the consent of the Lead Underwriters is given to such amendment or waiver, other than (i) the payment of the consideration to be paid for the Proposed Acquisition for which the escrowed funds are required, and (ii) such conditions precedent that by their nature are to be satisfied at the time of the closing of the Proposed Acquisition, and (B) all conditions precedent to the Private Placement in accordance with the terms of the material agreements relating to the Private Placement, without amendment or waiver in a manner that would be materially adverse to the terms and conditions upon which the REIT is effecting the Private Placement, in each case unless the consent of the Lead Underwriters is given to such amendment or waiver, other than the payment of the consideration to be paid for the Private Placement that will occur concurrently with the delivery of an escrow release notice in accordance with the terms of the Subscription Receipt Agreement (the "Escrow Release Conditions"). There can be no assurance that any requisite approvals will be obtained, closing conditions will be met or that the Proposed Acquisition will be consummated on the terms described herein, if at all.

The Debentures will bear an interest rate of 5.50% per annum, payable semi-annually in arrears on June 30 and December 31 in each year commencing June 30, 2022. The June 30, 2022 interest payment will represent accrued interest for the period from closing of the Offering to June 30, 2022.

The maturity date for the Debentures will initially be the date upon which a Termination Event occurs (the "Initial Maturity Date"). If the Proposed Acquisition closing occurs prior to the occurrence of a Termination Event, the maturity date for the Debentures will automatically be extended to December 31, 2026 (the "Final Maturity Date"). Provided that the maturity date for the Debentures has been automatically extended to the Final Maturity Date, each Debenture will be convertible into Units at the option of the holder prior to the close of business on the earliest of: (i) the last business day before the Final Maturity Date, or (ii) if called for redemption, the business day immediately preceding the date specified by the REIT for redemption of the Debentures at a conversion rate of approximately 153.8462 Units per C$1,000 principal amount of Debentures, which is equal to a conversion price of C$6.50 per Unit.

Upon the occurrence of a Termination Event, the gross proceeds of the Offering and pro rata entitlement to interest earned or deemed to be earned on the Subscription Receipts, net of any applicable withholding taxes, will be paid to holders of the Subscription Receipts, and the Subscription Receipts will be cancelled.

A "Termination Event" means the earliest to occur of any of: (i) the failure to satisfy (or to be deemed to have satisfied) the Escrow Release Conditions on or before 5:00 p.m. (Toronto time) March 4, 2022 as such date may be extended upon written agreement by the REIT and the Lead Underwriters, (ii) the REIT delivering to the Lead Underwriters a notice declaring that the Proposed Acquisition has been terminated or that the REIT will not be proceeding with the Proposed Acquisition, or (iii) the REIT formally announcing to the public by way of a press release that it does not intend to proceed with the Proposed Acquisition.

The Subscription Receipts and Debentures will be offered by way of a prospectus supplement to the REIT's short form base shelf prospectus dated April 29, 2021, which prospectus supplement is expected to be filed with the securities commissions and other similar regulatory authorities in each of the provinces and territories of Canada on or about November 16, 2021. Further information regarding the Offering, the Private Placement and the Proposed Acquisition, including related risk factors, will be set out in the prospectus supplement. The Offering and the Private Placement are subject to the receipt of all necessary approvals, including the approval of the Toronto Stock Exchange. Closing of the Offering is expected to take place on or about November 19, 2021, and closing of the Private Placement is expected to occur immediately prior to the closing of the Proposed Acquisition.

The Subscription Receipts and the Debentures have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, "U.S. persons" (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any Subscription Receipts or Debentures in the United States or to, or for the account or benefit of, U.S. persons.

About Slate Office REIT (TSX: SOT.UN)
Slate Office REIT is an owner and operator of office real estate. The REIT owns interests in and operates a portfolio of 32 strategic and well-located real estate assets across Canada's major population centres and includes two assets in downtown Chicago, Illinois. 61% of the REIT's portfolio is comprised of government or credit rated tenants. The REIT acquires quality assets at a discount to replacement cost and creates value for unitholders by applying hands-on asset management strategies to grow rental revenue, extend lease term and increase occupancy. Visit slateofficereit.com to learn more.

About Slate Asset Management
Slate Asset Management is a global alternative investment platform focused on real estate. We focus on fundamentals with the objective of creating long-term value for our investors and partners. Slate's platform spans a range of investment strategies, including opportunistic, value add, core plus and debt investments. We are supported by exceptional people and flexible capital, which enables us to originate and execute on a wide range of compelling investment opportunities. Visit slateam.com to learn more.

Statements required by the Irish Takeover Rules
The trustees of the REIT accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the trustees of the REIT (who have taken all reasonable care to ensure that this is the case) the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.

Forward-Looking Statements
Certain information herein constitutes "forward-looking information" as defined under Canadian securities laws which reflect management's expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance, business prospects and opportunities of the REIT. Some of the specific forward-looking statements contained herein include, but are not limited to, statements with respect to the intention of the REIT to complete the closing of the Proposed Acquisition, the Offering, the Private Placement and the related transactions contemplated herein on the terms and conditions described herein, the effect of the Proposed Acquisition, the Offering, the Private Placement and the related transactions contemplated herein on the financial performance of the REIT, the expected timing for completion of the Proposed Acquisition, the closing date of the Offering and the Private Placement and the use of proceeds of the Offering and the Private Placement. The words "plans", "expects", "does not expect", "scheduled", "estimates", "intends", "anticipates", "does not anticipate", "projects", "believes", or variations of such words and phrases or statements to the effect that certain actions, events or results "may", "will", "could", "would", "might", "occur", "be achieved", or "continue" and similar expressions identify forward-looking statements. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations.

Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable by management as of the date hereof, are inherently subject to significant business, economic and competitive uncertainties and contingencies. When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements. Additional information about risks and uncertainties is contained in the filings of the REIT with securities regulators.

SOT-AD

SOURCE Slate Office REIT

Investor Relations, [phone], [email protected]