Orange Capital Announces Premium Tender to Purchase Units of Partners Real Estate Investment Trust

  • Premium Tender offers unitholders $5.00 per unit payable in cash for up to 10% of the Partners REIT units outstanding prior to the Ontario Property Acquisition;
  • Orange Capital intends to nominate new, independent trustees for election at the upcoming AGM of Partners REIT;
  • Newly elected trustees will restore credibility to the REIT and take all measures necessary to hold the parties that approved the Ontario Property Acquisition accountable for their actions; and
  • Concurrent proxy solicitation will allow unitholders to assist in Orange Capital's effort to bring much-needed change to Partners REIT for the benefit of all unitholders.

TORONTO, May 28, 2014 /CNW/ - Orange Capital, LLC ("Orange Capital") is pleased to announce a premium tender offer (the "Premium Tender") to purchase up to 2,604,956 units of Partners Real Estate Investment Trust (TSX: PAR.UN) ("Partners REIT" or the "REIT") at a price of $5.00 per unit (the "Purchase Price"), payable in cash.

The Purchase Price is equal to a 7.1% premium to the $4.67 closing price of the units on the Toronto Stock Exchange (the "TSX") on May 27, 2014 (the last trading day prior to the announcement of the Premium Tender) and an approximate 15% premium to the volume-weighted average trading price of $4.38 per unit over the last 30 trading days.

The Premium Tender is for up to 10% of the Partners REIT units outstanding prior to the closing of the purchase of three (3) Ontario properties by the REIT from Holyrood Holdings Limited ("Holyrood") on April 23, 2014 (the "Ontario Property Acquisition") and is open for acceptance until 5:00 p.m. (Toronto time) on Thursday, June 12, 2014 (the "Expiry Time"), unless the Premium Tender is extended, varied or withdrawn. In order for units to be eligible for take up and payment pursuant to the Premium Tender, a depositing unitholder will be required to appoint Orange Capital as its nominee and proxy for the 2014 annual general meeting of Partners REIT and any adjournments or postponements thereof (the "Meeting") and must be a holder of such units as of the record date for the Meeting. Orange Capital intends to mail a proxy circular (the "Circular") to all unitholders, including those whose proxies will be requested in accordance with the Premium Tender. The Circular will provide required disclosures to permit unitholders to make an informed decision, including details on Orange Capital's trustee nominees for election to the board of Partners REIT. Unitholders tendering to the Premium Tender shall be required to appoint Orange Capital as such unitholder's nominee and proxy in respect of the Meeting for all deposited units, regardless of the number of deposited units actually taken up and paid for by Orange Capital under the Premium Tender. Please see "Details of The Premium Tender" at the conclusion of this press release for additional information.

As will be detailed in its Circular, all proxies solicited by Orange Capital will be voted in favour of a new slate of independent trustees to be nominated by Orange Capital at the upcoming Meeting. The concurrent proxy solicitation will offer fellow disenfranchised unitholders the ability to vote for the much-needed change that is required to restore credibility to Partners REIT and to maximize the value for all unitholders of the REIT.

On closing of the Premium Tender, Orange Capital will remain in full compliance with the REIT's existing unitholder rights plan (the "Rights Plan") as in all cases it will own less than 20% of the outstanding Partners REIT units.

Should you have any questions with respect to the Premium Tender or require any assistance delivering your units, please contact Kingsdale Shareholder Services, the Depositary for the Premium Tender and Orange Capital's Information Agent at 1-855-682-9437 (North American Toll Free Number) or 1-416-867-2272 (collect outside North America). You can also email Kingsdale at contactus@kingsdaleshareholder.com.

REASONS TO ACCEPT ORANGE CAPITAL'S PREMIUM TENDER

(1)      Unitholders will receive immediate liquidity at a significant premium to the current trading price of the units at a time when Partners REIT faces significant financial and legal challenges, including potential regulatory actions and shareholder litigation against current and former trustees and management;
(2)      Orange Capital believes that it is highly likely that Partners REIT's distribution will be reduced in the very near future. The REIT has an unsustainable payout ratio, excessive financial leverage (at approximately 75% debt to enterprise value), and limited access to low cost debt and equity capital;
(3)      Orange Capital believes that an en-bloc sale of the REIT at a premium (or any other attractive alternative for unitholders) is highly unlikely.  The current discredited trustees recently announced that they hired a financial advisor to conduct a strategic review process.  Partners REIT ran a similar strategic review process just six months ago, led by the same financial advisor, without a successful transaction;
(4)      It is highly uncertain if the REIT will be able to unwind the value-destroying Ontario Property Acquisition. Even if unwinding the transaction is possible, the magnitude of the financial and legal costs of doing so are unknown at this time; and
(5)      Partners REIT's acting trustees have limited flexibility to improve the condition of the REIT.  In a highly unusual step, the TSX recently advised the REIT that it would not be approving any further transactions of the REIT until the Compliance and Disclosure department of the TSX has completed a review of the REIT and is satisfied that the business of Partners REIT can be conducted in compliance with the rules and regulations of the TSX, as well as the best interests of the REIT's security holders and the investing public.

Orange Capital believes that if its Premium Tender is successful, it is highly likely that its trustee nominees will be elected at the upcoming Meeting. If more than 2,604,956 units accept the Premium Tender, unitholders will help facilitate, and have an opportunity to benefit from, any potential operational and financial turnaround at the REIT in partnership with a leading shareholder activist.

Orange Capital has a long track record of seeking improved governance and creating unitholder value in the REIT sector.  Daniel Lewis, Managing Partner of Orange Capital, is currently the lead director of InnVest Real Estate Investment Trust ("InnVest REIT"). Orange Capital's campaign at InnVest REIT is widely regarded as a leading example of a successful unitholder-focused campaign.

INDUSTRY-WORST PERFORMANCE & APPALLING GOVERNANCE AT PARTNERS REIT

The trading price of Partners REIT units has declined by over 50% since January 1, 2013.  This loss of unitholder value is the result of neglectful trustee oversight, industry-worst corporate governance, repeated management turnover and excessive financial leverage. The disastrous Ontario Property Acquisition is one of the most egregious cases of failed governance controls by a group of Canadian trustees in recent years.

Since McCowan & Associates Ltd. ("McCowan & Associates") purchased its units in November 2013:

(1)      Five independent trustees and two CEOs have resigned;
(2)      The disastrous Ontario Property Acquisition was approved and closed by the current trustees.  The Ontario Property Acquisition is an appalling example of failed governance, board oversight and inadequate due diligence;
(3)      The three acting trustees that approved the Ontario Property Acquisition have not been elected by unitholders;
(4)      The trustees, with the REIT having nearly run out of cash, elected to pay the April distribution, we believe, by raising highly dilutive 10% second mortgage financing from a high-risk lender; and
(5)      The TSX recently logged the Ontario Property Acquisition as an incident of "significant non-compliance" and reported the matter to the Ontario Securities Commission.  Despite having this information since May 6, 2014, the acting trustees failed to disclose this information in a press release, even going so far as to exclude this information from the announcement of the REIT's first quarter financial results and burying the information in the associated MD&A.

TIMELINE OF THE RECENT VALUE DESTROYING ACTIONS AT PARTNERS REIT

October 22, 2013: Partners REIT hires a financial advisor to evaluate strategic alternatives. No transaction was ultimately consummated.

November 25, 2013: Partners REIT announces the resignation of its Chief Investment Officer, who also resigns as a trustee, and its Chief Financial Officer ("CFO").

November 28, 2013: McCowan and Associates purchases 14.95% of Partners REIT.

December 4, 2013: All three (3) Partners REIT independent trustees resign and Joseph Feldman and Allen Weinberg are added as trustees. As of this date, a majority of the trustees were: (a) not elected by unitholders; and (b) appointed after McCowan & Associates purchased its 14.95% stake.

December 4, 2013: The REIT terminates its previously announced strategic review process.

December 12, 2013: Laura Philp, the owner of Holyrood, is no longer listed as an officer of McCowan & Associates.

December 16, 2013: The trustees of Partners REIT approve a transaction whereby McCowan & Associates acquires the League Asset Corp.'s ("League") existing management contract for $1.5 million, and agrees to internalize management of the REIT by no later than February 15, 2014.  A termination fee was paid to League despite it being in CCAA.

December 18, 2013: The REIT enters into the Ontario Property Acquisition.  As consideration, the undisclosed vendor would receive approximately 19.9% of the Partners REIT units outstanding. To facilitate the Ontario Property Acquisition, the trustees approved an amendment to the Rights Plan, giving them the discretion to waive its application in order to issue Partners REIT units as consideration for real estate acquisitions.

February 11, 2014: Ron McCowan, who to our knowledge has never been an officer of a public company, is appointed CEO of Partners REIT, replacing Patrick Miniutti. Derrick West is also appointed CFO.

February 11, 2014: Holyrood is finally identified as the vendor of the Ontario Property Acquisition and the terms of the transaction are amended. The announcement made no reference to any related party or joint actor connection between McCowan & Associates and Holyrood.

February 14, 2014: Partners REIT completes its internalization plan and co-locates its head office with McCowan & Associates in Barrie, Ontario. The trustees failed to disclose that the REIT's head office is owned by Holyrood.  McCowan & Associates is paid a $1.5 million internalization fee.

February 14, 2014: Marc Charlebois is appointed as a trustee of Partners REIT.

March 24, 2014: Patrick Miniutti resigns as a trustee of Partners REIT.  Effective this date: (i) none of Partners REIT's trustees were elected by unitholders; and (ii) all Partners REIT trustees were appointed after McCowan & Associates purchased its units.

April 3, 2014: Lindsay Weiss and Kevin VanAmburg are appointed as trustees. Allen Weinberg resigns as a trustee after only four months since his appointment.

April 23, 2014: Despite analyst reports and media articles suggesting that the Holyrood transaction was in fact a related party transaction, the trustees approve the transaction and the REIT closes the Ontario Property Acquisition. Each of the current trustees of Partners REIT approved the Ontario Property Acquisition. The REIT announces that an "extensive due diligence process" was conducted and that two of the existing trustees, Marc Charlebois and Joseph Feldman, intensively reviewed and assisted in the negotiation of the transaction.

April 30, 2014: Partners REIT announces a financing commitment for a 10% second mortgage loan.  The trustees make no disclosure as to the REIT's need for high cost debt financing at this time or the use of proceeds.

May 1, 2014: Orange Capital, a concerned unitholder, issues a press release that: (i) calls for an independent forensic investigation into the Ontario Property Acquisition and CEO Ron McCowan; (ii) states that the current trustees are responsible for the poor due diligence and disclosure associated with the Ontario Property Acquisition; (iii) asserts that the Ontario Property Acquisition was a related party transaction and is a change of control by joint actors that prejudiced and disregarded the interests of minority unitholders; (iv) offers information which was widely available in the public domain that Ron McCowan and Laura Philp have been business associates for over twenty-five years; and (v) discloses it made an offer to provide voting convertible securities, payable in cash or units with a cap on Orange Capital's voting rights, in an effort to protect all unitholders.

May 2, 2014: The REIT announces that Lindsay Weiss resigned as a Partners REIT trustee only one month after being appointed to the board of trustees.

May 4, 2014: The trustees announce they have obtained material "new" information revealing that Ron McCowan has a close business relationship with Laura Philp sufficient that they should be considered as acting together under applicable regulation and that if the trustees had been aware of this information, the Ontario Property Acquisition would have been submitted to unitholders for their approval. The trustees ask Holyrood to unwind the Ontario Property Acquisition. Ron McCowan resigns as CEO of Partners REIT.

May 5, 2014: Orange Capital: (i) demands that the trustees of Partners REIT immediately resign; (ii) rejects the trustees' reckless settlement offer of one board seat to Orange Capital; and (iii) questions the independence of Marc Charlebois and Joseph Feldman as well as the integrity of the trustees.

May 13, 2014: For the second time in approximately 6 months, the same financial advisor is hired to conduct a strategic review process. Orange Capital is accused of making an "opportunistic" financing proposal by Partners REIT.

May 16, 2014: Partners REIT's first quarter 2014 financial statements disclose that on May 6, 2014, the TSX indicated to the REIT that until the earlier of the Ontario Property Acquisition being unwound, or the requisite unitholder approval being obtained, the TSX requires that the REIT enter into agreements or arrangements with Holyrood to limit the voting, conversion, liquidation and distribution rights of the units issued to Holyrood in connection with the Ontario Property Acquisition. The TSX further advised the REIT that it would not be approving any further transactions of the REIT until the Compliance and Disclosure department of the TSX has completed a review of the REIT and is satisfied that the business of Partners REIT can be conducted in compliance with the rules and regulations of the TSX, as well as the best interests of the REIT's security holders and the investing public. The TSX also confirmed that the Ontario Property Acquisition has been logged as an incident of significant non-compliance and will be reported to the Ontario Securities Commission.

DETAILS OF THE PREMIUM TENDER

The Premium Tender is open for acceptance until 5:00 p.m. (Toronto time) on Thursday, June 12, 2014, provided however that Orange Capital reserves the right, in its sole and absolute discretion at any time, to: (i) extend, vary or withdraw the Premium Tender at any time, and if withdrawn, it will not be required to take up or pay for units delivered pursuant to the Premium Tender; or (ii) reduce or extend the period of time during which the Premium Tender is open, and/or advance or postpone taking up and paying for any units delivered under the Premium Tender. If the Premium Tender is withdrawn by Orange Capital, Orange Capital shall cause all Units delivered pursuant to the Premium Tender to be returned to the Unitholders.

Full details of the Premium Tender will be included in a letter to unitholders of the REIT, complete with instructions for the tendering and delivery of REIT units to Orange Capital. In order to deposit their Units to the Premium Tender, Unitholders must complete the documentation and follow the instructions provided by their investment dealer, broker or other nominee. Investment dealers, brokers and other nominees may set a deadline for the delivery of deposit instructions that is earlier than the Expiry Time, and as such Unitholders should contact their investment dealer, broker or other nominee for assistance at their earliest convenience. Deposited units may be withdrawn at any time prior to the time they are taken up by Orange Capital. Unitholders who wish to withdraw units tendered pursuant to the Premium Tender should contact their investment dealer, broker or other nominee in order to take the necessary steps to be able to withdraw such units. Participants of CDS should contact CDS with respect to the deposit or withdrawal of units tendered pursuant to the Premium Tender. Tendering unitholders should consult their own independent professional financial and legal advisors before tendering any REIT units to the Premium Tender.

The Premium Tender will be subject to certain conditions set out in the letter to unitholders which, unless waived, must be satisfied, including, but not limited to, that the number of units accepted under the Premium Tender be greater than or equal to 2,604,956 units. In order for units to be eligible for take up and payment pursuant to the Premium Tender, a depositing unitholder will be required to appoint Orange Capital as its nominee and proxy for the upcoming Meeting and must be a holder of such units as of the record date for the Meeting.

If more than the maximum number of units for which the Premium Tender is made are delivered in accordance with the Premium Tender and not withdrawn at the time of take up of the units, the units to be purchased from each depositing unitholder will be determined on a pro rata basis according to the number of units delivered by each unitholder, disregarding fractions, by rounding down to the nearest whole number of units.

Orange Capital intends to mail the Circular to all unitholders, including those whose proxies will be requested pursuant to the Premium Tender. The Circular will provide required disclosures to permit unitholders to make an informed decision, including details on Orange Capital's trustee nominees for election to the board of Partners REIT. Unitholders tendering to the Premium Tender shall be required to appoint Orange Capital as such unitholder's nominee and proxy in respect of the Meeting for all deposited units, regardless of the number of deposited units actually taken up and paid for by Orange Capital under the Premium Tender. Unitholders will receive additional instructions regarding the deposit of proxies from their investment dealer, broker or other nominee in due course once Partners REIT confirms the date of the Meeting.

If you have any questions with respect to the Premium Tender, or need assistance in depositing your units, please contact the Depositary and Information Agent for the Premium Tender:

Kingsdale Shareholder Services

Toll Free (North America): 1-855-682-9437

Outside North America Call Collect: 1-416-867-2272

Email: contactus@kingsdaleshareholder.com

ORANGE CAPITAL'S ADVISORS

Orange Capital has engaged Kingsdale Shareholder Services as depositary and information agent, Trimaven Capital Advisors Inc. as financial advisor, and Norton Rose Fulbright Canada LLP as legal advisor.

ABOUT ORANGE CAPITAL

Orange Capital is a New York based investment firm. The firm is a value-oriented investor in event-driven securities. Orange Capital was co-founded in 2005 by Daniel Lewis and Russell Hoffman. Prior to founding the firm, Orange Capital's portfolio manager, Daniel Lewis, was a director with Citigroup's Global Special Situations Group.

SOURCE

Orange Capital, LLC

ADDITIONAL INFORMATION

The information contained in this press release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable securities laws. Although Orange Capital is proposing to nominate trustees to the board of Partners REIT at the Meeting, unitholders are not being asked at this time to execute a proxy in favour of any nominees. Orange Capital intends to file the Circular in due course in compliance with applicable securities laws.

Notwithstanding the foregoing, Orange Capital is voluntarily providing the disclosure required under section 9.2(4) of National Instrument 51-102 - Continuous Disclosure Obligations in accordance with securities laws applicable to public broadcast solicitations.

This press release and any solicitation made by Orange Capital in advance of the Meeting is, or will be, as applicable, made by Orange Capital, on behalf of Orange Capital Master I, Ltd., and not by or on behalf of the management of Partners REIT. All costs incurred for any solicitation will be borne by Orange Capital, provided that, subject to applicable law, Orange Capital may seek reimbursement from Partners REIT of Orange Capital's out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with any successful reconstitution of Partners REIT's board of trustees.

Any proxies solicited by Orange Capital will be solicited pursuant to a Circular sent to unitholders of Partners REIT. Solicitations may be made by or on behalf of Orange Capital, by mail, telephone, fax, email or other electronic means, and in person by directors, officers and employees of the Orange Capital or its proxy advisor or by the Nominees. Orange Capital has also retained Kingsdale as its proxy advisors. Kingsdale's responsibilities will principally include providing strategic advice, liaising with proxy advisory firms, developing and implementing unitholder communication and engagement strategies, and advising Orange Capital with respect to the Meeting and proxy protocol. Kingsdale will receive a proxy solicitation fee of $100,000 for its services plus disbursements.

Any proxies solicited by Orange Capital in connection with the Meeting may be revoked by instrument in writing by the unitholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by law.

None of Orange Capital and its directors and officers, or, to the knowledge of Orange Capital, any associates or affiliates of the foregoing, has any material interest, direct or indirect, in any transaction since the commencement of Partners REIT's most recently completed financial year, or in any proposed transaction which has materially affected or will materially affect Partners REIT or any of its subsidiaries. None of Orange Capital or, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at the Meeting, other than the election of trustees.

Partners REIT's principal business office is 158 Dunlop Street East, Barrie, Ontario, L4M 1B1.

A copy of this press release may be obtained on Partners REIT's SEDAR profile at www.sedar.com.

SOURCE Orange Capital, LLC

For further information:

MEDIA CONTACT

Riyaz Lalani

Bayfield Strategy, Inc.

416-907-9365

rlalani@bayfieldstrategy.com

www.bayfieldstrategy.com