LANESBOROUGH REIT ANNOUNCES PLANS TO SELL ALL OF ITS PROPERTIES AND TO WIND-UP AND TERMINATE LANESBOROUGH REIT

WINNIPEG, MB, May 22, 2024 /CNW/ - Lanesborough Real Estate Investment Trust ("LREIT") (TSXV: LRT.UN) announces today that it has entered into three asset purchase agreements (the "Agreements") in connection with the sale of eleven properties (the "Rental Properties") and a vacant land investment property located near the corner of Grant Avenue and Kenaston Boulevard in Winnipeg, Manitoba (the "Vacant Property" and together with the Rental Properties, the "Properties"), representing all or substantially all of the assets of LREIT, to 7254751 Manitoba Ltd. ("725") for aggregate consideration of $41,683,800 (collectively, the "Sale Transaction"). The Rental Properties consist of: (i) Millennium Village; (ii) Lakewood Townhomes; (iii) Whimbrel Terrace; (iv) Gannet Place; (v) Snowbird Manor; (vi) Skyview Apartments; (vii) Lunar Apartments; (viii) Parkland Apartments; (ix) Norglen Terrace; * Highland Tower; and (xi) Chateau St. Michael's. The aggregate purchase price being paid by 725 for the Rental Properties is $41,283,800, which is the fair market value of the Rental Properties included in the audited consolidated financial statements of the Trust for the year-ended December 31, 2023. The purchase price being paid by 725 for the Vacant Property is $400,000, which is the current fair market value of the Vacant Property, as determined by LREIT. Following the Sale Transaction, if approved by the holders ("Unitholders") of trust units ("Units") of LREIT, LREIT will be wound-up and terminated (the "Termination").

725 is a company controlled by Arni Thorsteinson, an insider of LREIT. Accordingly, the Sale Transaction is a "Related Party Transaction" under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). As LREIT is not listed on the Toronto Stock Exchange, in accordance with Section 5.5(b) of MI 61-101, the Sale Transaction is exempt from the formal valuation requirements of MI 61-101. As LREIT is experiencing financial hardship, as defined in Section 5.5(g) of MI 61-101, LREIT is also exempt from the requirement to obtain approval of a majority of the minority unitholders of LREIT for the Sale Transaction.

Pursuant to the terms of the Agreements, the policies of the TSX Venture Exchange (the "Exchange") and the fourth amended and restated declaration of trust of LREIT dated June 21, 2018, as amended, the Sale Transaction and the Termination are subject to the approval of the Unitholders. Accordingly, LREIT has called a general and special meeting of Unitholders to be held on June 27, 2024 (the "Meeting"). At the Meeting, Unitholders will be asked to pass a special resolution, requiring the affirmative vote of 66 2/3% of the Unitholders at the Meeting, approving the Sale Transaction (the "Sale Transaction Resolution"). In accordance with Section 5.16 of Policy 5.3 of the Exchange, the votes of Arni Thorsteinson, 2668921 Manitoba Ltd. ("2668921") and Shelter Canadian Properties Limited ("Shelter") and any other non-arm's length parties, must be excluded from this calculation of Unitholder approval. If the Sale Transaction Resolution is approved by Unitholders, then, Unitholders will be asked to pass a special resolution, requiring the affirmative vote of 66 2/3% of the Unitholders at the Meeting, approving the Termination (the "Termination Resolution").

As of March 31, 2024, LREIT had total liabilities of $201,055,897, including $159,169,309 owing to 2668921 and Shelter. Management of 2668921 have provided notice to management of LREIT that they will not be willing to make any significant further advances under the credit facility provided by 2668921 to LREIT or to defer the interest payments thereon indefinitely. Management of Shelter have also provided notice to management of LREIT that they will not defer the fees owed to Shelter indefinitely.

If the Sale Transaction is approved by the Unitholders, it will result in the assumption by 725 of all of the Trust's mortgage loan debt, secured by the properties that form part of the Sale Transaction, in the estimated amount of $33,806,578, as of March 31, 2024, and the assumption of an estimated $7,857,222 of debt under the revolving loan facility by 725.  2668921 is committed to funding the cost of the Termination, assuming the Termination Resolution is approved by Unitholders.

In the event that the Unitholders of LREIT approve the Sale Transaction Resolution, upon completion of the Sale Transaction, LREIT will no longer have any material assets and will continue to owe an aggregate estimated amount of $139,934,569 to 2668921 and Shelter and $16,984,455 to the lender of the mortgage loan formerly secured by LREIT's Woodland Park property. LREIT will continue to incur the fixed costs associated with its operations, including the cost of servicing its debt, professional management fees, maintaining its listing on the Exchange and complying with requisite disclosure obligations under applicable securities laws. These financial obligations and costs mean that LREIT has no ability to continue as a going concern.

Given the amount of indebtedness of LREIT, there is no possibility LREIT will have sufficient funds following the sale of the Properties to repay all of its outstanding indebtedness. Accordingly, there will be no funds available for distribution to the Unitholders following the sale of the Properties. As an example, even if LREIT could have secured a purchase price for the Properties equal to twice the aggregate consideration payable pursuant to the Sale Transaction, all such funds would still be required to repay indebtedness of LREIT.

If the Sale Transaction Resolution, and the Termination Resolution are approved by the Unitholders at the Meeting, Unitholders that hold their Units in unregistered accounts will have the benefit of being able to realize their investment losses in connection with the disposition of the Units and to use the resulting allowable capital losses to offset taxable capital gains realized from other investments. To the extent that Unitholders are receiving no consideration for their Units, they will have a capital loss in the amount of their adjusted cost base which they can then offset against taxable capital gains.

Pursuant to the terms of the Agreements and the policies of the Exchange, the closing of the Sale Transaction and the Termination are subject to the approval of the Exchange.

In the event that the Sale Transaction and the Termination are approved by the Unitholders, LREIT will close the Sale Transaction as soon as possible following the Meeting and then proceed with the Termination. Further details will be provided by LREIT following the Meeting.

ABOUT LREIT

LREIT is a real estate investment trust, which is listed on the TSX Venture Exchange under the symbol LRT.UN (Trust Units). For further information on LREIT, please visit our website at www.lreit.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Certain statements contained in this press release are "forward-looking statements" that reflect the expectations of management regarding the Sale Transaction and Termination. Readers are cautioned not to place undue reliance on forward-looking information. All statements other than statements of historical fact contained herein are forward-looking statements. Forward­ looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. Forward­ looking statements involve significant risks and uncertainties. A number of factors that could cause actual results to differ materially from the results discussed in forward-looking statements are discussed in LREIT's management discussion and analysis for the year ended December 31, 2023 available on SEDAR+ at www.sedarplus.ca. Although the forward-looking statements contained herein are based upon what management believes to be reasonable assumptions, LREIT cannot assure investors that actual results will be consistent with these forward-looking statements.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. Forward-looking statements are made as of the date hereof, or such other date specified in such statements, and neither LREIT nor any other person assumes any obligation to update or revise such forward-looking statements to reflect new information, events or circumstances, except as expressly required by applicable securities law.

SOURCE Lanesborough Real Estate Investment Trust

Gino Romagnoli, Chief Executive Officer, or Arni Thorsteinson, Vice-Chair, Tel: [phone], Fax: [phone], Email: [email protected]