KEYreit Says Announced Huntingdon Takeover Proposal Still Inadequate and Recommendation Remains Unchanged

KEYreit provided a preliminary view that a proposed new bid from Huntingdon Capital Corp. (Huntingdon) still remains financially inadequate.
 
"We know there is a lot of upside to KEYreit's units, and Huntingdon knows it too," said John Bitove, KEYreit's Chief Executive Officer. "Huntingdon's CEO Zachary George asked to meet with me on "friendly terms" before he launched the hostile takeover bid, and in that meeting he admitted that KEYreit is worth more than $8.00 per unit. I told Mr. George then, and I continue to believe, that KEYreit is worth far more than that."
 
Donald Biback, Chairman of the board of trustees, added, "Clearly Huntingdon realized that its original partial takeover bid was doomed to fail. Now it is proposing a bid for all units, but the price remains unchanged at an inadequate $7.00 per unit.  As the offer price has not increased, our view continues to be that Huntingdon still does not intend to fairly compensate Unitholders for KEYreit's assets, its stabilized net operating income and its future growth opportunities."
 
KEYreit's board of trustees will fully review Huntingdon's new offer, if and when it is sent to Unitholders. Meanwhile, the board stands by its original opinion that the bid is financially inadequate. The board of trustees and management, representing 17% of KEYreit's issued and outstanding units, have stated that they will not tender to Huntingdon's $7.00 unsolicited bid. KEYreit continues to explore the strategic alternatives available to it in its efforts to maximize Unitholder value.
 
KEYreit's Record Financial Results Show It Has Turned The Corner
 
On February 27, 2013, KEYreit disclosed early financial highlights for the fourth quarter of 2012 including record revenue, record net operating income and a return to 97% committed occupancy.  KEYreit also disclosed a strong outlook for 2013 and 2014, including $50 million of potential acquisitions lined up for the year thus far. The results and outlook demonstrate that KEYreit has dealt with perceived risks around its business and is well poised to grow and create Unitholder value going forward.
 
"Huntingdon has clearly selected an opportune time to make its proposal, considering that nearly all of the KFC restaurants have been re-leased and the IPO mortgage has been paid off," added Bitove. "Our financial results release and guidance were intended to inform Unitholders that we have a lot more value in this company than is suggested by Huntingdon's proposal."
 
Among its retail assets, KEYreit has a number of single-tenant properties with significant upside potential. As currently recorded on KEYreit's books, the value of these properties, in key Canadian urban markets like Toronto, Calgary, Vancouver and Montreal, is not reflective of the highest and best possible use of the land. KEYreit believes it can achieve maximum value over the long term by developing the excess density on these properties and none of this value is captured in the unit price.
 
KEYreit is the only publicly traded Canadian real estate investment trust focused on the small-box retail sector. Since the IPO in 2005, KEYreit has significantly diversified its tenant base. Today, 80% of its space is leased to tenants operating under national banners, with Shoppers Drug Mart as its largest tenant. Further, over 72% of the REIT's GLA is comprised of unique "quadruple net leases" where not only does the tenant pay for all carrying costs related to a property, but it also pays for capital maintenance expenditures.
 
Huntingdon's Proposal Does Not Address Inadequate Price
 
Huntingdon, in a news release issued on February 26, 2013, said that it proposes to make a takeover bid for all of KEYreit's units, rather than for just 45% of KEYreit's units. But the proposal clearly states that Huntingdon is not increasing the inadequate $7.00 per unit offer price, which represents a premium of only 8% to the closing price per unit of $6.48 on January 9, 2013, the day KEYreit launched its recent equity offering.
 
"Huntingdon is unfairly using the equity offering discount as a basis to measure its takeover premium," said Teresa Neto, KEYreit's Chief Financial Officer. "While such a discount is customary when issuing units in an equity offering to fund growth, the discount does not reflect KEYreit's inherent trading price and it is misleading for Huntingdon to suggest otherwise."
 
Subject to receipt of further information from Huntingdon, the recommendation of the board of trustees set out in the trustees' circular dated February 15, 2013 remains unchanged that Unitholders should REJECT the Huntingdon bid and NOT TENDER their units.  The trustees' circular has been mailed to Unitholders. KEYreit urges Unitholders to carefully review the trustees' circular and cover letter.

on March 1, 2013