FAM REIT Announces Investment in $53 Million Fully Pre-Leased Data Centre Development Project in Winnipeg, MB and $21 Million Equity Financing

TORONTO, ONTARIO--(Marketwired - April 22, 2014) -

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FAM Real Estate Investment Trust (TSX:F.UN)(TSX:F.WT) (the "REIT") announced today that it has entered into a firm agreement to invest $16 million in a fully pre-leased 64,000 sf data centre development in Winnipeg, Manitoba ("MTS Data Centre") and has also agreed to a $21.4 million equity issue, consisting of a $15 million bought-deal equity offering through a syndicate of underwriters, led by TD Securities Inc., and a $6.4 million concurrent private placement with Huntingdon Capital Corp.

Highlights

• $53 million data centre development in Winnipeg, MB on a fixed price and bonded basis
• Site work has already commenced and substantial completion is slated for May 2015
• 100% pre-leased for an initial term of 15 years to Manitoba Telecom Services Inc. ("MTS") with rent commencement slated for June 2015
• MTS is Manitoba's leading full-service telecommunications provider
• The REIT will make a $16 million investment to fund the project equity, inclusive of (i) a $9.5 million investment to acquire a 50% equity ownership in the development project and (ii) a $6.5 million mezzanine loan to its joint venture partner
• Full project debt financing package approved, inclusive of a $37 million construction loan and $37 million long-term fixed rate takeout mortgage

Shant Poladian, CEO of the REIT, said, "The MTS Data Centre is the first of its kind in Manitoba and will support growing local business demand for server colocation, managed hosting and cloud services. Our property type diversification into data centres adds an attractive and underserved growth segment to our portfolio while maintaining our focus on Canada's large population centres. This transaction demonstrates our unique approach to value creation, and mitigates key risks normally associated with development, including lease-up, cost overruns, and project financing. At a 50% ownership interest, our $9.5 million equity investment is projected to generate $2.9 million of NOI, $2.0 million of AFFO, and $1.2 million of free cash flow after deducting mortgage principal repayments in the first full year following rent commencement in mid-2015."

Development project details

• The data centre will be located in Winnipeg, Manitoba, and is being designed to meet Uptime Institute's Tier III certification, along with other reliability enhancements
• The total building space will be approximately 64,000 sf, inclusive of approximately 25,000 sf of raised floor to accommodate server racks, with an initial critical power load of 3 MW and connected power up to 7.5 MVA
• The data centre location is a 6.3 acre site that has sufficient land to expand the data centre up to twice the initial size and connected power. The REIT has not assigned any value to the potential development of Phase II expansion in its investment underwriting
• The design-build construction contract has been awarded to an engineering, procurement and construction firm (the "contractor") on a fixed price basis. The contractor has over 20 years of experience specializing in the design and construction of data centres. The construction contract is bonded as to 50% for performance and 50% for labour and materials

Lease details

• Rent commencement is expected in June 2015 following substantial completion. $5.8 million of annualized NOI in year one of the lease, with periodic rent increases during the initial lease term
• There are three consecutive five year lease renewal options in favour of MTS
• There is a $12 million purchase option in favour of MTS at the end of year 15
• The REIT's underwriting assumes MTS will exercise its purchase option at the end of year 15 instead of exercising its lease renewal options
• The lease is a quadruple net lease whereby the tenant pays all realty taxes, operating costs, utilities, repairs and maintenance in respect of the building and equipment

Investment Overview

On April 22, 2014, The REIT entered into an unconditional agreement with an arm's length company to invest $16 million in the development of the MTS Data Centre. The REIT's investment in the MTS Data Centre development consists of two tranches:

• $9.5 million investment to acquire a 50% equity ownership interest in the MTS Data Centre
• $6.5 million mezzanine loan (the "Mezzanine Loan") to the REIT's 50% partner in the MTS Data Centre (the "JV Partner"), an arms' length company to fund its partner's share of incremental project equity
  1. If the Mezzanine Loan is not repaid in full, it will be converted into a 30% equity ownership interest in the MTS Data Centre development
  2. The Mezzanine Loan is repayable at any time on or before the earlier of (a) rent commencement under the tenant lease and (b) July 31, 2015
  3. Mezzanine Loan interest will accrue at a rate of 13.3% per annum

The remaining 20% equity ownership held by the REIT's JV Partner is subject to a put-call option:

• The put-call option becomes effective if at least 50% of the Mezzanine Loan's face value ($3.25 million) is not repaid
• Under the put-call, the REIT will have the option to purchase its JV Partner's remaining equity interest at fair market value
• Similarly, the REIT's JV Partner will have the option to obligate the REIT to purchase the residual equity interest at fair market value

Shant Poladian further commented, "The $6.5 million Mezzanine Loan we are advancing to fund our partner's share of incremental project equity provides an appropriate risk-adjusted return on our capital, de-risks the project's equity capital requirements, and allows the REIT to increase its ownership to 80% in the project in the event the loan is not repaid. In the event that at least 50% of the mezzanine loan is not repaid, the put-call feature provides the opportunity for the REIT to increase its ownership to 100%."

Debt Financing

Construction loan and take out mortgage financing have been approved by a major financial institution, inclusive of:

• A $37 million construction facility at prime plus 0.5%
• A $37 million mortgage facility to take out the construction loan upon completion. The $37 million take out mortgage has a term of 15 years, a 17 year amortization period, and will bear interest at a fixed rate of interest using a spread of 205 bps over the interpolated Government of Canada bond yield
• A $2 million short term operating facility to be used solely to fund sales taxes during construction

The REIT and its partner have the ability to lock in a fixed interest rate on the take out mortgage during the construction period.

Equity Financing

In connection with the investment in the MTS Data Centre, the REIT announced today that it has entered into an agreement to issue and sell to a syndicate of underwriters led by TD Securities Inc. (collectively, the "Underwriters"), on a bought deal basis, 1,700,000 trust units ("Units") at a price of $8.85 per Unit (the "Offering Price") for gross proceeds to the REIT of approximately $15 million (the "Offering"). The REIT has also granted the Underwriters an over-allotment option to purchase up to an additional 255,000 Units on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the closing of the Offering (the "Over-Allotment Option").

The proceeds from the Offering and the Private Placement will be used to (i) fund the investment in the MTS Data Centre including the Mezzanine Loan and any additional amounts payable for closing costs, (ii) to repay amounts drawn on the REIT's revolving credit facility, and (iii) for general corporate purposes. The Offering is expected to close on or about May 13, 2014 and is subject to customary conditions, including regulatory approval. The Offering is not conditional upon closing of MTS Data Centre acquisition.

The Units will be offered by way of a short form prospectus to be filed with the securities commissions and other similar regulatory authorities in each of the provinces and territories of Canada, pursuant to National Instrument 44-101 - Short Form Prospectus Distributions.

The Units 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.

Huntingdon Private Placement

Concurrent with the closing of the Offering, the REIT will issue 723,164 Units on a private placement basis to Huntingdon Capital Corp. (TSX:HNT)(TSX:HNT.DB)(TSX:HNT.WT) ("Huntingdon"), the manager of the REIT, at a purchase price of $8.85 per Unit for gross proceeds of $6.4 million subject to any proportionate increase in Units issued to Huntingdon to allow it to maintain its pro rata ownership interest in the REIT, in accordance with its pre-emptive right, in the event of a full or partial exercise of the Over-Allotment Option. As of the date hereof, Huntingdon holds an approximate 29.8% interest in the REIT.

About FAM Real Estate Investment Trust

The REIT is a diversified commercial real estate investment trust focused on owning and acquiring strategically well-located office, industrial and retail real estate located primarily across Canada's large population centres.

Forward-Looking Information and Cautionary Statements:

This press release contains forward-looking statements with respect to the REIT and its operations, strategy, financial performance and financial condition, as well as with respect to the MTS Data Centre Transaction. These statements generally can be identified by the use of forward-looking words such as "forecast", "may", "will", "would", "expect", "estimate", "anticipate", "intend", "believe" or "continue" or the negative thereof or similar variations. Some of the specific forward-looking statements in this press release include, but are not limited to, statements with respect to the closing of the transactions contemplated herein and the effect of the transactions contemplated herein on the financial performance of the REIT. The actual results and performance of the REIT and the properties discussed herein could differ materially from those expressed or implied by such statements. See the risk factors in the public filings of the REIT. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Some important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, the failure to receive any required approvals or consents in connection with the MTS Data Centre acquisition or the failure to satisfy or waive any other condition to the MTS Data Centre acquisition, the failure of the REIT to realize expected benefits from the acquisition of the MTS Data Centre acquisition, the failure of the REIT to satisfy the conditions of the Offering or otherwise close the Offering, the performance of the MTS Data Centre acquisition generally, and changes in securities or other laws or regulations or the application thereof. The cautionary statements qualify all forward-looking statements attributable to the REIT and persons acting on its behalf. The assumptions made in making forward-looking statements are referred to in the public filings of the REIT. The assumptions made in making forward-looking statements in this press release also include the assumption that the REIT will be in a position to satisfy the conditions in respect of the acquisition of the MTS Data Centre acquisition and the Offering and complete those transactions.

Unless otherwise stated, all forward-looking statements speak only as of the date of this press release. Except as required by applicable law, the REIT specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. Additional information about these assumptions and risks and uncertainties is contained in the REIT's filings with securities regulators, including its latest annual information form and MD&A. These filings are also available at the REIT's website at www.famreit.com.

"NOI", "FFO" and "AFFO" are not measures recognized under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and do not have any standardized meaning prescribed by IFRS. Management considers NOI, FFO and AFFO to be appropriate supplemental performance measures as these reflect the operating performance of the real estate portfolio. NOI, FFO, and AFFO as computed by the REIT, may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to NOI, FFO and AFFO reported by such organizations. For additional information regarding this non-IFRS measure, including the definition thereof, refer to the REIT's management's discussion and analysis of results of operations and financial condition for the three and twelve months ended December 31, 2013, a copy of which is filed on www.sedar.com.