FAM REIT announces $43 million Toronto office acquisition and completion of two-stage capital redeployment initiative

RICHMOND, BC, March 27, 2013 /CNW/ - FAM Real Estate Investment Trust (TSX: F.UN, F.WT) ("FAM REIT" or the "REIT") announced today that it has agreed to acquire a 170,000 square foot urban office building municipally known as 4211 Yonge Street, Toronto, Ontario ("4211 Yonge"). The acquisition is expected to close on or about May 2, 2013. The purchase price is $43 million (exclusive of closing costs), subject to certain adjustments, representing an attractive going-in capitalization rate of approximately 6.7%.

4211 Yonge is currently 92% leased with a 5.4 year weighted average remaining lease term. The property is well-located in a prime transit-oriented office node just south of Highway 401, along the Yonge-University-Spadina TTC subway line. The property also includes a 320 stall indoor parking lot representing 1.9 stalls per 1,000 square feet, providing a healthy mix of parking and transit options for tenants.

Management believes that in place net rental rates at 4211 Yonge are approximately 25% below estimated current market net rents, providing an opportunity to increase cash flow. Existing zoning allows for additional retail uses at 4211 Yonge, providing attractive optionality to this asset given the large number of recently completed affluent residential condominium units within walking distance  that currently lack the benefit of ground-level retail amenities.

Shant Poladian, Chief Executive Officer of FAM REIT, commented, "The acquisition of 4211 Yonge completes our two-stage capital redeployment initiative which commenced with the previously announced agreement to sell our 50% non-managing interest in 220 Portage Ave. We estimate these transactions will immediately generate 3% accretion to our annualized Adjusted Funds From Operations ("AFFO") per diluted unit on a leverage neutral basis. It is also important to note these transactions did not require the issuance of any new equity, with FAM REIT's improved risk-reward profile fully accruing to the benefit of our existing unitholders."

Financing for the acquisition consists of the following:

      (i) a new $25 million first mortgage from a Canadian Schedule I bank, with a 10-year term, 25-year loan amortization, and bearing a fixed interest rate equal to 200 basis points above the 10-year Government of Canada bond yield, or approximately 3.9% (based on the current benchmark government bond yield);
      (ii) approximately $13.5 million of net cash proceeds from the disposition of FAM REIT's 50% interest in the property municipally known as 220 Portage Avenue, Winnipeg, Manitoba ("220 Portage") pursuant to the exercise of the Put Option, as defined below; and
      (iii) the remaining balance from FAM REIT's existing liquidity.

Put Option Exercise for 220 Portage Ave

FAM REIT also announced today that it has exercised its previously disclosed irrevocable right and option (the "Put Option") to compel Artis Real Estate Investment Trust ("Artis") to buy the REIT's interest in the property municipally known as 220 Portage.  FAM REIT currently owns a 50% non-managing interest in 220 Portage.  The aggregate purchase price under the Put Option will be $20.5 million, subject to certain adjustments.  The disposition is expected to close on or about April 30, 2013.

FAM REIT will recognize a gain on its interest in 220 Portage, which will be included in its financial results for the quarter ended March 31, 2013. After taking into account repayment of the existing first mortgage, estimated debt extinguishment costs and closing adjustments, FAM REIT expects the net cash proceeds will be approximately $13.5 million.

Shant Poladian further commented, "The sale of our interest in 220 Portage and purchase of 4211 Yonge meaningfully increase our diversification. In particular, the annualized Net Operating Income ("NOI") of our portfolio in primary markets (GTA and Calgary) increases significantly to 39% from 24%, while our Winnipeg concentration declines to 40% from 53%. These actions further strengthen the quality and reliability of our cash distribution."

About FAM Real Estate Investment Trust

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

Cautionary Statements

This press release contains forward-looking information within the meaning of applicable securities legislation, which reflects the REIT's current expectations regarding future events. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT's control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to, the failure by Artis to complete the acquisition of the REIT's 50% interest in 220 Portage or the failure by the REIT to complete the acquisition of 4211 Yonge St. These forward-looking statements are made as of the date of this press release and, except as expressly required by applicable law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

"AFFO" and "NOI" are not measures recognized under IFRS and do not have any standardized meanings prescribed by IFRS. AFFO is a supplemental non-IFRS financial measure that is used in the real estate industry to assess the sustainability of future cash distributions paid by REITs. Management considers NOI to be an appropriate supplemental performance measure as it reflects the operating performance of the real estate portfolio. AFFO and NOI, as computed by the REIT, may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to AFFO and NOI reported by such organizations. For additional information regarding each of the foregoing non-IFRS measures, including the definitions thereof, refer to the REIT's management's discussion and analysis of results of operations and financial condition for the period from date of formation on August 27, 2012 to December 31, 2012, a copy of which is filed on www.sedar.com.

SOURCE: FAM Real Estate Investment Trust

For further information:

Shant Poladian, CA, CPA
Chief Executive Officer
FAM Real Estate Investment Trust
Tel: 1-647-256-5002
Email: spoladian@famreit.com

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FAM Real Estate Investment Trust

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