FAM REIT Announces Name Change to Slate Office REIT, 2015 Strategy Update and Fourth Quarter and Fiscal 2014 Results


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FAM REIT Announces Name Change to Slate Office REIT, 2015 Strategy Update and Fourth Quarter and Fiscal 2014 Results

Monday, May 18, 2015

Key Highlights

  • Slate Asset Management LP ("Slate") assumed management of the REIT on November 4
  • Completed the transformational acquisition of 7 office properties (the "Acquired Properties") in the Greater Toronto Area ("GTA") on December 17 as a first step in the REIT's repositioning to an office focused vehicle -Increase in gross leasable area of 1.1 million square feet or 57.1% since September 2014
  • Funds from Operations ("FFO") was $0.01 per unit for the three months ended December 31, 2014 After adjusting for a $0.07 per unit ($1.1 million) non-cash fair value loss on an interest rate swap and $0.08 per unit ($1.4 million) related to Special Committee related expenses, FFO was $0.16 per unit
  • Subsequent to the quarter end, the REIT appointed Scott Antoniak as its new Chief Executive Officer and Brian Moncik as its new Chief Financial Officer
  • Planned name change to "Slate Office REIT"




FAM Real Estate Investment Trust ("FAM REIT", or the "REIT") (TSX: F.UN) (TSX: F.WT) announced today a planned name change to Slate Office Real Estate Investment Trust ("Slate Office REIT") as well as an update on the REIT's outlook as it enters a transformational year under new management. The REIT also announced its financial results for the three months and full year ended December 31, 2014. Scott Antoniak, Chief Executive Officer of the REIT, said:

"We are excited to be embarking on a new course for the REIT, having completed the purchase of an attractive portfolio of office buildings in the GTA that we believe will be a solid foundation for our new focus on the office sector. We are currently reviewing further accretive opportunities that are complimentary to this strategy which we believe will create a stronger platform for value creation and will be an attractive alternative for investors. "We are also leveraging the significant operational expertise and resources of our new manager, Slate Asset Management LP, to ensure we provide the best value to our investors and tenants," added Mr. Antoniak.

2015 Strategy Update
Under its new management by Slate and new leadership team, the REIT has renewed its strategic objectives:

Reposition the REIT as a pure play Office REIT by divesting existing retail and industrial portfolios in a disciplined and orderly fashion to maximize unitholder value. The acquisitions made by the REIT in December 2014 are consistent with this strategy. Focus growth on high quality, non-core assets including downtown and suburban office properties.

Create an institutional quality investment vehicle leveraging Slate's sophisticated and professional management resources.

As a manager and the largest single unitholder, with an approximate 33.8% interest in the REIT as at December 31, 2014, Slate is highly motivated to increase the value of the portfolio and provide stable, reliable and growing returns to the REIT's unitholders.

In addition, the REIT's repositioning as a pure play on office real estate has created increased institutional ownership. Greystone Managed Investments, a leading pension fund manager, acquired a 13.8% interest in the December 17 transaction in which the REIT took ownership of the Acquired Properties.

Our strong financial position and liquidity allow us to withstand unforeseen short-term challenges while remaining focused on long-term value creation. We are aggressively focused on improving the quality and reliability of our cash flow, and addressing the occupancy issues we faced during the third quarter.

During the fourth quarter of 2014, we continued to work on further de-risking our leasing profile. In particular, we executed a 25-year lease renewal with the Province of Manitoba for 74,000 square feet at 114 Garry Street, Winnipeg. The Province occupies 100% of the property.

The new MTS Data Centre (the "Date Centre") is a fully pre-leased development in Winnipeg. In 2014 the REIT acquired a 50% equity ownership interest in a limited partnership that will own the Data Centre through a $9.5 million investment. The 15-year lease with MTS is on a quadruple net basis and is slated to commence in June 2015. The Data Centre is expected to have a significant positive impact on FAM REIT's financial performance. On an annualized basis, the incremental year one contribution to FFO will be approximately $2.3 million, or $0.12 per unit.

Management believes that the elevated Adjusted Funds from Operations payout ratio is temporary and the current level of distributions is sustainable, as the newly acquired office properties will generate cash flow growth through near-term leasing opportunities. In addition, several vacancies encountered in 2014 have or are expected to be occupied in 2015. The Data Centre development is also scheduled for substantial completion in May 2015 with lease commencement in June 2015. The cash required for future capital expenditures and leasing costs will be funded using the REIT's existing revolving credit facility, and from the proceeds arising from the divestment of existing retail and industrial portfolios.

Forward-Looking Statements
Certain information herein constitutes "forward-looking statements" within the meaning of applicable securities legislation. Forward-looking statements include statements about management's expectations regarding objectives, plans, goals, strategies, future growth, operating results and performance, business prospects and opportunities of the REIT. Forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "might", "should", "seeks", "intends", "plans", "pro-forma", "estimates" or "anticipates"; or variations of such words; and phrases or statements that certain actions, events or results "may", "could" or "might" occur or be achieved; or the negative connotation thereof. Forward-looking statements are made based on reasonable assumptions, however, there is no assurance that the events or circumstances reflected in forward-looking statements will occur or be achieved. Forward-looking statements are based on numerous assumptions of factors that if untrue, could cause actual results to differ materially from those that are implied by such forward-looking statements. These factors include but are not limited to: general and local economic and real estate business conditions; the financial condition of tenants; occupancy rates; rental rates; the ability of the REIT to refinance maturing debt; the REIT's ability to source and complete accretive acquisitions; changes in government, environmental and tax regulations; inflation and interest rate fluctuations; the REIT's ability to obtain equity or debt financing for additional funding requirements; and adequacy of insurance.

Forward-looking statements are subject to risks and uncertainties, many of which are beyond the REIT's control. These risks and uncertainties include, but are not limited to: risks related to general and local financial conditions including available equity and debt financing at reasonable costs and interest rate fluctuations; operational risks including timely leasing of vacant space and re-leasing of occupied space on expiration of current leases on terms at current or anticipated rental rates; tenant defaults and bankruptcies; uncertainties of acquisition activities including availability of suitable property acquisitions and integration of acquisitions; competition including development of properties in close proximity to the REIT's properties; loss of key management and employees; governmental, environmental, taxation and other regulatory risks; litigation risks and other risks and factors described from time to time in the documents filed by the REIT with the securities regulators.

The REIT has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements. However, there may be other factors that could cause results to not be as anticipated, estimated or intended. Forward-looking statements are provided to inform readers about management's current expectations and plans and allow investors and others to better understand the REIT's operating environment. However, readers should not place undue reliance on forward-looking statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future performance or results, or of the timing that such performance or results will be achieved. Additional information about risks and uncertainties is contained in FAM REIT's annual information form for the year ended December 31, 2014 available on SEDAR at www.sedar.com.

Non-IFRS Financial Measures
The REIT has employed certain non-IFRS financial measures. Management believes that in addition to conventional measures prepared in accordance with IFRS, investors in the real estate industry use these non-IFRS financial measures to evaluate the REIT's performance and ability to generate cash flows. Accordingly, these non-IFRS financial measures are intended to provide additional information and should not be considered in isolation or as a substitute for performance measures prepared in accordance with IFRS. In addition, they do not have standardized meanings and may not be comparable to measures used by other issuers in the real estate industry or other industries.

FAM REIT is an open-ended real estate investment trust. The REIT's portfolio comprises 35 strategic and well-located real estate assets located primarily across Canada's major population centres. The REIT is focused on maximizing value through internal organic rental and occupancy growth and strategic acquisitions. More information is available at www.famreit.com.

About Slate
Slate Asset Management LP is a leading real estate investment platform with over $2.3 billion in assets under management. Slate is a value-oriented company and a significant sponsor of all its private and publicly-traded investment vehicles, which are tailored to the unique goals and objectives of its investors. The firm's careful and selective investment approach creates long term value with an emphasis on capital preservation and outsized returns. Slate is supported by exceptional people, flexible capital and a proven ability to originate and execute on a wide range of compelling investment opportunities. More information is available at www.slateam.com.


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