MR.UN Melcor Real Estate Investment Trust

Melcor Real Estate Investment Trust (“Melcor REIT” or the “REIT”) is pleased to announce the filing of its management information circular (the “Circular”) and related documents for the special meeting (“Meeting”) of the holders of units (“Units”) and special voting units (“SVUs” and together with Units, the “Voting Units”) of the REIT (collectively, “Voting Unitholders”) to consider a special resolution approving the previously-announced plan of arrangement (the “Arrangement”) under the Business Corporations Act (Alberta) involving the REIT, Melcor REIT GP Inc. (the “GP”) and Melcor Developments Ltd. (“Purchaser” or “MRD”). The Meeting will be held at the Windsor Room, Third Floor, Manulife Place, 10180 101st Street, Edmonton, Alberta,T5J 3V5 on November 26, 2024 at 9:30 a.m. (Edmonton time). The materials can be found under the REIT’s profile on SEDAR+ (www.sedarplus.ca) as well as on Melcor REIT’s website at http://melcorreit.ca/special-meeting. The REIT has also commenced the process of mailing the Circular and related documents to ‎Unitholders. ‎

Under the terms of the Arrangement, Voting Unitholders will receive cash consideration of $4.95 per Unit (the “Consideration”) representing a premium of 46.0% to the REIT's closing Unit price of $3.39 on September 12, 2024, the last trading day prior to the announcement of the Arrangement, and a 61.3% premium to the 30-day volume weighted average Unit price ending September 12, 2024. Additionally, on or about the closing of the Arrangement, the REIT will cause the redemption of, and the Purchaser will pay out in cash, all principal amount of the $46.0 million of the REIT's 5.10% convertible unsecured subordinated debentures having a maturity date of December 31, 2024 (the “Debentures”), with the REIT paying any accrued but unpaid interest on the Debentures.

The special resolution approving the Arrangement (the “Arrangement Resolution”) must be approved by: (i) not less than 66 2/3% of the votes cast by Voting Unitholders, voting as a single class, ‎present ‎in person or represented by proxy and entitled to vote at the Meeting; and (ii) a simple majority of ‎the votes cast by Voting Unitholders present in person or represented by ‎proxy and entitled to vote at the Meeting, ‎excluding for this purpose votes attached to 100% of ‎the SVUs and Units held by Unitholders who are ‎excluded pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions.

REASONS TO SUPPORT THE ARRANGEMENT

The REIT’s board of trustees (the “REIT Board”) formed a committee of independent trustees (the “Independent Committee”) to, among other ‎things, evaluate the proposal received from the Purchaser and other alternatives available to the REIT, as well as ‎direct and supervise the negotiations of the Arrangement with the benefit of financial and legal advice. The REIT Board, after careful consideration and acting on the unanimous recommendation of the Independent Committee after receiving legal and ‎financial advice, the fairness opinion from BMO Nesbitt Burns Inc. (“BMO”) and the formal valuation and fairness opinion from Ventum Financial Corp. (“Ventum”), has unanimously (with the exception of Mr. Andrew Melton, Ms. Naomi Stefura and Mr. Ralph Young, each of whom declared their interest in, or position as a director and/or officer of, the Purchaser and abstained from voting in respect thereof) determined that the Arrangement is in the best interests of the REIT and its stakeholders, and is recommending that Voting Unitholders vote FOR the Arrangement at the Meeting for the following reasons, among others:‎

• Best Current Prospect for Maximizing Unitholder Value. The Independent Committee and the REIT Board determined that the Arrangement was the best current prospect for maximizing Unitholder value based on various considerations.
• Significant Premium to Market Price. The Arrangement ‎values the Units at $4.95 per Unit, which represents a ‎premium of 46.0% to the Units’ September 12, 2024 closing price on the TSX and a premium of 61.3% to the 30-day VWAP ending ‎September 12, 2024.‎
• Certainty of Value and Immediate Liquidity. The Consideration will be payable ‎entirely in cash and provides Unitholders with certainty of value and immediate liquidity and ‎removes the risks associated with the REIT remaining an independent public entity. These risks include operational challenges for Canadian office real estate assets and certain external factors that are beyond the control of the REIT, the REIT Board and its management team.
• Strategic Process and Review of Strategic Alternatives. Prior to executing the Arrangement Agreement dated September 12, 2024 among the REIT, the Purchaser and Melcor REIT GP Inc. (the “Arrangement Agreement”), the ‎Independent Committee, with the assistance of its legal and financial advisors, undertook a comprehensive strategic review process to assess the benefits, risks and potential timelines of alternatives ‎reasonably available to the REIT. The ‎Independent Committee concluded that: (i) the Consideration to be received by Unitholders represents compelling value relative to the continued execution of the REIT's ‎strategic business plan; and (ii) it was unlikely that any other party would acquire the REIT on more favorable terms to ‎Unitholders‎, from a financial point of view, than the Arrangement. The Independent Committee concluded that the Arrangement Agreement was the most favourable alternative reasonably available.‎
• Viability, Liquidity and Capital Constraints. Prior to executing the Arrangement Agreement, ‎the ‎Independent Committee, with the assistance of its legal and financial advisors, carefully reviewed ‎the REIT's ability to remain a viable publicly traded real estate investment trust and the potential risks and impact on ‎Unitholders related thereto, including, among others, the REIT’s significant office portfolio, the REIT’s existing liquidity profile, maturity of the REIT’s convertible debentures, headwinds associated with accessing capital, and the REIT’s limited success in its efforts to sell properties publicly listed for sale in 2023 and 2024. The REIT is currently under contract on two potential asset sales (with one such contract still subject to a due diligence condition), and continues its normal course efforts to secure appropriate asset divestiture transactions in this challenging market.
• No Prospects of Reinstituting the REIT’s Distribution in the Foreseeable Future. As a result of the ongoing liquidity and capital constraints, the Independent Committee concluded that it was unlikely that ‎the REIT could reinstitute distributions in the near to medium term.‎
• Go-Shop Provision. The Arrangement Agreement contains a "go-shop" provision, which allowed the REIT to solicit potential acquisition proposals for a 30-day period. The go-shop period expired on October 15, 2024 with no proposals received.
• Arm’s Length Negotiation and Role of the Independent Committee. The Arrangement is the result of a rigorous arm’s length negotiation process that was undertaken between the Independent Committee and its financial and legal advisors, on the one hand, and the Purchaser and its advisors, on the other hand. The Independent Committee was and is composed entirely of independent trustees of the REIT Board who are free from any conflict of interest with respect to the Purchaser.
• The Consideration is Supported by an Independent Valuation and Fairness Opinions. The Consideration of $4.95 per Unit is well above the midpoint of the range for the fair market value of the Units contained in the formal valuation delivered to the Independent Committee by Ventum dated September 12, 2024. The Ventum formal valuation sets a range of $3.50 to $5.00 for the fair market value per Unit. Ventum was paid a fixed fee for the delivery of the Ventum formal valuation and fairness opinion‎, and no ‎portion of the fees payable to Ventum are contingent upon the conclusions reached in the formal valuation or completion of the Arrangement. The Independent Committee also received a fairness opinion from each of BMO and Ventum that, as of September 12, 2024, and subject to the assumptions, limitations and qualifications set out therein, the Consideration of $4.95 per Unit was fair, from a financial point of view, to Unitholders (other than the Purchaser and its affiliates).

A comprehensive discussion of the reasons for the Independent Committee’s and the REIT Board's recommendations to vote FOR the Arrangement ‎can be found under "The Arrangement — Reasons for the Recommendations" in the Circular.

INDEPENDENT VALUATION & RESEARCH CONSENSUS NET ASSET VALUE

Ventum delivered its formal valuation to the Independent Committee on September 12, 2024, the date the Arrangement Agreement was entered into, which reflects Ventum's determination that, as of such date, and based upon and subject to the assumptions, limitations, qualifications and other matters set forth therein, the fair market value of the Units was in the range of $3.50 and $5.00 per Unit.

The equity analysts that cover the REIT provide their own net asset value per unit estimates (“Estimated NAV”) and they are materially lower than the REIT’s IFRS net asset value (“NAV”). RBC Capital Markets and CIBC Capital Markets, the two firms with equity analysts covering the REIT, had estimated NAVs of $6.00 and $4.50, respectively, as of their most recent equity notes, or a consensus Estimated NAV (“Consensus NAV”) of $5.25. CIBC Capital Markets’ July 31, 2024 research note highlighted that the REIT had traded below Consensus NAV at all periods since 2015, at an average discount of approximately 19% to Consensus NAV, and at a discount to Consensus NAV of 43% as of the date of the note. The Consideration under the Arrangement closes the discount to Consensus NAV to approximately 5.7%. Further, the Consideration provides Unitholders with a premium to the analysts’ consensus 12-month price target ($3.25) of 52.3%, while also removing execution risk.

THE REIT BOARD (WITH CERTAIN TRUSTEES ABSTAINING) UNANIMOUSLY RECOMMENDS THAT UNITHOLDERS VOTE FOR THE ARRANGEMENT RESOLUTION.

Voting Unitholders are encouraged to vote in advance of the Meeting, in accordance with the instructions accompanying the form of proxy or voting instruction form being mailed to Voting Unitholders together with the Circular. Further details and voting instructions can be found in the Circular under the section entitled “Voting Information”.

Voting Methods	Website	Telephone	Mail
Non-registered Voting UnitholdersUnits held with a broker, bank or other intermediary and have a 16-digit control number.	Vote online at http://www.proxyvote.com	Canada: 1-800-474-7493 (EN)or 1-800-474-7501 (FR)USA: 1-800-454-8683	Return the completed Form of Proxy or Voting Instruction Form in the enclosed postage paid envelope.
Registered Voting UnitholdersUnits held in own name and represented by a physical certificate or DRS statement.	Vote online at https://vote.odysseytrust.com	N/A

The close of business on October 22, 2024 is the record date for the determination of Voting Unitholders who will be entitled to receive notice of and vote at the Meeting and at any adjournment or postponement of the Meeting.

The deadline for Voting Unitholders to submit their vote is Friday, November 22, 2024 at 9:30 a.m. (Mountain time), or ‎not less than 48 hours (excluding Saturdays, Sundays and holidays) before ‎the time set for the holding of the Meeting or any adjournment thereof.

QUESTIONS AND VOTING ASSISTANCE

Voting Unitholders who have questions or need assistance in voting should contact Melcor REIT’s strategic unitholder advisor and ‎proxy solicitation agent, Laurel Hill Advisory Group, by telephone at 1-877-452-7184 (North American Toll Free) or 1-416- 304-0211 (Outside North America), or by email at assistance@laurelhill.com.

RECEIPT OF INTERIM COURT ORDER

The REIT is also announcing that on October 24, 2024, it was granted an interim order (the “Interim Order”) by the Court of King’s Bench of Alberta (the “Court”). The Interim Order authorizes Melcor REIT to proceed with various matters, including the holding of the Meeting to consider the vote on the proposed Arrangement.

ADDITIONAL DETAILS

In addition to satisfying the conditions set forth in the Arrangement Agreement and described in the Circular, the implementation of the Arrangement is subject to obtaining the final order of the Court, approval of the Arrangement from Voting Unitholders at the Meeting and satisfaction of certain other conditions to implementing the Arrangement, as set forth in the Arrangement Agreement, a copy of which is available on the REIT’s ‎profile on SEDAR+ at www.sedarplus.ca‎.‎

For a more detailed description of the Arrangement and the Arrangement Resolution to be voted upon at the Meeting, Voting Unitholders are urged to review and carefully consider the Circular and meeting materials, as they contain important information concerning the Arrangement and the rights and entitlements of the Voting Unitholders in relation thereto and consult with their financial, tax, legal and other professional advisors.

Voting Unitholders are strongly encouraged to read the Circular before exercising their vote.

About Melcor REIT

Melcor REIT is an unincorporated, open-ended real estate investment trust. Melcor REIT owns, acquires, manages and leases quality retail, office and industrial income-generating properties in western Canadian markets. Its portfolio is currently made up of interests in 36 properties representing approximately 3.072 million square feet of gross leasable area located across Alberta and in Regina, Saskatchewan; and Kelowna, British Columbia.

For further information, please contact:

Investor Relations:Tel: 1.780-945-4795ir@melcor.ca

Voting Unitholders:Laurel Hill Advisory GroupNorth America (toll-free): 1-877-452-7184Outside North America: 1-416-304-0211Email: assistance@laurelhill.com.

Forward Looking Statement Cautions:

This news release includes forward-looking information within the meaning of applicable Canadian securities laws. In some cases, forward-looking information can be identified by the use of words such as “may”, “will”, “should”, “expect”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, and by discussions of strategies that involve risks and uncertainties, certain of which are beyond the Purchaser’s and the REIT’s control. In this news release, forward-looking information includes, among other things, statements relating to the Meeting proceeding as ‎described herein or at all, expectations with respect to the timing and outcome of the Arrangement and the anticipated benefits of the Arrangement to the parties and their respective security holders, the timing of the Meeting and the results thereof. The forward-looking information is based on certain key expectations and assumptions made by each of the Purchaser and the REIT, including with respect to the structure of the Arrangement and all other statements that are not historical facts. The timing and completion of the Arrangement is subject to customary closing conditions, termination rights and other risks and uncertainties including, without limitation, required regulatory, court, and unitholder approvals. Although management of each of the Purchaser and the REIT believe that the expectations reflected in the forward-looking information are reasonable, there can be no assurance that any transaction, including the Arrangement, will occur or that it will occur on the timetable or on the terms and conditions contemplated in this news release. The Arrangement could be modified, restructured or terminated. Readers are cautioned not to place undue reliance on forward-looking information. Additional information on these and other factors that could affect the Purchaser and the REIT are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR+ website (www.sedarplus.ca).

By its nature, such forward-looking information necessarily involves known and unknown risks and uncertainties that may cause actual results, performance, prospects and opportunities in future periods of the Purchaser and the REIT to differ materially from those expressed or implied by such forward-looking statements. Furthermore, the forward-looking statements contained in this news release are made as of the date of this news release and neither the Purchaser, nor the REIT nor any other person assumes responsibility for the accuracy and completeness of any forward-looking information, and no one has any obligation to update or revise any forward-looking information, whether as a result of new information, future events or such other factors which affect this information, except as required by law.