PRV.UN Pro Real Estate Investment Trust

PRO Real Estate Investment Trust (TSX: PRV.UN) ("PROREIT" or the "REIT") today announced that it has entered into agreements to acquire a 100% interest in 15 industrial properties located in Atlantic Canada representing 1,074,269 square feet of gross leasable area ("GLA") and one industrial property in Winnipeg, Manitoba representing 106,737 square feet of GLA (collectively, the “Acquisitions”) for an aggregate purchase price of $163.2 million (excluding closing costs), representing an implied weighted average capitalization rate of 5.9% and approximately $138 per square foot.

"The acquisitions of these high-quality institutional assets represent a strategic transaction for the REIT and provide AFFO accretion. The assets offer significant growth potential and substantially increase PROREIT's exposure to the industrial sector across key markets. The acquisitions also demonstrate the REIT’s continued success and ability to source and acquire assets in the highly competitive industrial segment where we are focused,” said James Beckerleg, CEO.

"We are also very pleased with continued commitment from an institutional investor of the caliber of the Bragg Group of Companies through the private placement. We are excited to continue to grow with this strong partner at our side," added James Beckerleg.

Public Offering and Concurrent Private Placement

The REIT also announced today that it has entered into an agreement to issue 8,760,000 trust units of the REIT (“Units”) from treasury on a bought deal basis at a price of $6.85 per unit (the “Offering Price”) to a syndicate of underwriters with TD Securities Inc. and Scotiabank acting as bookrunners and co-led by Canaccord Genuity Corp. (collectively, the “Underwriters”) for gross proceeds of approximately $60 million (the “Offering”). The REIT has granted the Underwriters an over-allotment option to purchase up to an additional 1,314,000 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 Offering is expected to close on or about October 6, 2021 and is subject to customary conditions, including regulatory approval. The Units will be offered by way of a prospectus supplement to the REIT's base shelf prospectus dated July 13, 2021, 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 44-102 – Shelf Distributions (the "Prospectus Supplement").

PROREIT also entered into a concurrent binding subscription agreement to issue approximately $14 million of Units on a non-brokered private placement basis at the Offering Price to Collingwood Investments Incorporated, a member of the Bragg Group of Companies, from Nova Scotia (the "Private Placement"). Upon closing of the Private Placement, Collingwood Investments Incorporated, will maintain its voting and economic interest of approximately 19.23% in PROREIT, or approximately 19.5% together with one of its related parties. Collingwood Investments Incorporated will be entitled at closing of the Private Placement to a capital commitment fee equal to 2% of the gross proceeds of the Private Placement.

The Private Placement is subject to customary conditions, including regulatory approval. Closing of the Offering is conditional upon the concurrent closing of the Private Placement, and closing of the Private Placement is conditional upon the concurrent closing of the Offering.

The REIT intends to use the net proceeds from the Offering and the Private Placement (collectively, with the Acquisitions and the Sale Transaction (as defined below), the "Transactions") to partially fund the Acquisitions, to repay certain indebtedness which may be subsequently redrawn, and the balance if any to fund future acquisitions and for general business and working capital purposes.

The Acquisitions

Atlantic Canada Acquisition

The assets represent a complementary expansion of PROREIT’s existing portfolio and include 14 industrial assets strategically located within Halifax's most sought-after industrial node, Burnside Industrial Park ("Burnside"), and one asset located in Moncton, New Brunswick. The 14 assets will increase the REIT's presence in Burnside to 1.5 million square feet, providing meaningful operational and leasing synergies. The assets total 1,074,269 square feet of GLA, contain 135 tenants, feature clear heights of 12 to 24 feet, have efficient bay sizes, ample loading doors, and are comprised of warehouse, light industrial, and flex office spaces. Currently the properties are approximately 99% leased to a diverse mix of tenants with a weighted average lease term of 3.3 years. Many of the in-place leases benefit from the inclusion of contracted rent step escalations. Since the beginning of 2021 the cost to lease industrial space in Burnside has seen significant increases. Current industrial market rents in Halifax are $9.791 per square foot, largely above the portfolio's weighted average in-place rent of $7.05 per square foot, presenting substantial future rental upside upon turnover.

Halifax's highly sought-after Burnside Industrial Park is one of Canada's strongest industrial hubs and is the largest industrial node east of Montréal and north of Boston, USA. Burnside currently benefits from strong underlying fundamentals surrounding its industrial markets with vacancy rates at all-time lows (2.6%) and consistent growth in net rental rates2. The Atlantic Canadian economy, more specifically Nova Scotia, has significantly outperformed the rest of the country over the last few years, including during the COVID-19 pandemic, driven by investment and strong immigration tailwinds.

Moncton is the largest census metropolitan area in the province of New Brunswick and the third largest in Atlantic Canada. Moncton benefits from its central location in Atlantic Canada, having roughly 1.3 million people living within approximately a 2.5 hour drive of the city. The city has continued to benefit from its relatively low-cost of operating for businesses and has been growing its presence across transportation and manufacturing sectors in recent years.

Winnipeg Acquisition

In addition, PROREIT has entered into an agreement to acquire one industrial building in Winnipeg, Manitoba, totaling 106,737 square feet of GLA, further expanding the REIT's footprint in the city. Strategically located in an industrial park at the traffic-intensive intersection of Notre Dame Avenue and Dublin Avenue and within close proximity to both downtown and the Trans-Canada Highway, the asset features clear heights of approximately 16 feet and is currently 100% occupied by a blend of high-quality commercial tenants with a weighted average lease term of 2.6 years. With a weighted average in-place industrial rent of $5.86 per square foot3 the property is well-positioned to generate rental revenue upside in future years as market industrial rates are around 44% higher at $8.41 per square foot4 in Winnipeg's West submarket.

Winnipeg's proximity to the Canada-US border along with its central location positions the city well as a distribution hub within North America. The Winnipeg industrial market has a vacancy rate of 4.1% (West submarket at 3.7%)4 and is continuing to trend downward. In Q2 2021 alone, there was over 300,000 square feet of absorption across the market, illustrating the market's continued strength and demand for high-quality industrial space4. Strong tenant demand and leasing activity in the city are supported by continued robust immigration and employment along with its growing popularity as an e-commerce logistic centre, as evidenced by Amazon's new delivery centre in the city.

Financing of the Acquisitions

The aggregate purchase price (excluding closing costs) for the Acquisitions is anticipated to be approximately $163.2 million. The purchase price of the Acquisitions is expected to be satisfied by a combination of the following funding sources: (i) approximately $54.6 million in cash from the Offering and the Private Placement, (ii) approximately $105.0 million from a bridge facility which will be replaced with an aggregate principal amount of new mortgage financing to be determined by closing, and (iii) an $8 million mortgage assumption.  Closing costs for the Acquisitions, estimated at approximately $4.9 million, will be funded with cash from the Offering and the Private Placement.  The balance of the proceeds will be used to repay the REIT's credit facilities.

Sale Transaction

PROREIT has also entered into an agreement to sell three predominantly retail properties located in New Brunswick for a total consideration of approximately $8.1 million (the “Sale Transaction”). The proceeds of the sale are expected to be used to pay out approximately $5.0 million of mortgages and the balance to repay certain amounts outstanding under the REIT’s credit facilities and for general trust purposes. The Sale Transaction is expected to close in the coming days and is subject to customary conditions.

Impact of the Transactions on the REIT’s Overall Portfolio

Upon completion of the Transactions, the REIT’s portfolio will be comprised of 120 income producing commercial properties representing approximately 6.6 million square feet of GLA and $928 million of total assets with a weighted average lease term of 4.5 years. The addition of the industrial properties will improve portfolio balance by increasing PROREIT’s portfolio exposure to the industrial segment to 78% by GLA and 63% by base rent, pro forma the Transactions.

The Acquisitions are subject to customary closing conditions, including with respect to regulatory approvals, and are expected to close in the fourth quarter of 2021.

Portfolio Pro Forma the Transactions

Province	% By Base Rent		% By GLA			Asset Class	% By Base Rent		% By GLA
Maritime Provinces	47	%	51	%		Industrial	63	%	78	%
Ontario	27	%	24	%		Retail	26	%	15	%
Western Canada	16	%	14	%		Office	11	%	7	%
Quebec	10	%	12	%
Total	100.0	%	100.0	%		Total	100.0	%	100.0	%

Enhanced Liquidity and Repayment of Debt

In addition to the Acquisitions, PROREIT intends to use a portion of the net proceeds of the Offering and Private Placement to repay certain indebtedness, including a significant pay down of the REIT’s credit facilities, and for general trust purposes. Following the closing of the Offering and the Private Placement, PROREIT will have significant available liquidity under credit facilities to continue to execute on its growth plan.

Additional information related to the Transactions will be included in the Prospectus Supplement.

* Represents a non-IFRS measure. See “Non-IFRS and Operational Key Performance Indicators” below.

About PRO Real Estate Investment Trust

PROREIT is an unincorporated open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. PROREIT was established in March 2013 to own a portfolio of diversified commercial real estate properties in Canada, with a focus on primary and secondary markets in Québec, Atlantic Canada and Ontario with selective expansion into Western Canada. PROREIT’s portfolio is diversified by property type and geography.

The securities offered have not and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any U.S. State securities laws and may not be offered or sold, directly or indirectly, within the United States or its territories or possessions or to or for the account of any U.S. person (as defined in Regulation S under the U.S. Securities Act) other than pursuant to an available exemption from the registration requirements of the U.S. Securities Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any such securities within the United States, or its territories or possessions, or to or for the account of any U.S. person.

For more information on PROREIT, please visit the REIT’s website at: https://proreit.com.

Non-IFRS and Operational Key Performance Indicators

PROREIT’s condensed consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). In this press release, as a complement to results provided in accordance with IFRS, PROREIT discloses and discusses certain non-IFRS financial measures, including adjusted funds from operations (“AFFO”) and AFFO payout ratio as well as other measures discussed elsewhere in this release. These non-IFRS measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other issuers. PROREIT has presented such non-IFRS measures as management believes they are relevant measures of PROREIT’s underlying operating performance and debt management. Non-IFRS measures should not be considered as alternatives to net income, cash generated from (utilized in) operating activities or comparable metrics determined in accordance with IFRS as indicators of PROREIT’s performance, liquidity, cash flow, and profitability. For a full description of these measures and, where applicable, a reconciliation to the most directly comparable measure calculated in accordance with IFRS, please refer to the “Non-IFRS and Operational Key Performance Indicators” section in PROREIT’s Management’s Discussion and Analysis for the three months ended June 30, 2021, available on SEDAR at www.sedar.com.

Forward-Looking Information

This news release contains forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements are based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond PROREIT’s control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements.

Forward-looking statements contained in this press release include, without limitation, statements pertaining to the closing of the Offering, the Private Placement, each of the Acquisitions and the Sale Transaction, the use of the net proceeds of the Offering and the Private Placement, the impact of the Acquisitions on PROREIT’s future financial performance, the impact of the Transactions on the REIT's AFFO per unit and AFFO Payout Ratio, and the ability of PROREIT to execute its growth strategies. PROREIT’s objectives and forward-looking statements are based on certain assumptions, including that (i) PROREIT will receive financing on favorable terms; (ii) the future level of indebtedness of PROREIT and its future growth potential will remain consistent with REIT’s current expectations; (iii) there will be no changes to tax laws adversely affecting PROREIT’s financing capacity or operations; (iv) the impact of the current economic climate and the current global financial conditions on PROREIT’s operations, including its financing capacity and asset value, will remain consistent with PROREIT’s current expectations; (v) the performance of PROREIT’s investments in Canada will proceed on a basis consistent with PROREIT’s current expectations; and (vi) capital markets will provide PROREIT with readily available access to equity and/or debt.

The forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. All forward-looking statements in this press release are made as of the date of this press release. PROREIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by law.

Additional information about these assumptions and risks and uncertainties is contained under “Risk Factors” in PROREIT’s latest annual information form, which is available on SEDAR at www.sedar.com.

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

For further information, please contact:

PRO Real Estate Investment TrustJames W. BeckerlegPresident and Chief Executive Officer514-933-9552

PRO Real Estate Investment TrustGordon G. Lawlor, CPA, CAExecutive Vice President and Chief Financial Officer514-933-9552

1         Colliers Canada National Market Snapshot Q3 2021.2         Colliers Q2 2021 Halifax Industrial Report.3         Based on industrial space, excludes office portion (~9% of GLA); total property weighted average in-place rent is $6.08 per square foot.4         Capital Commercial Real Estate Services Inc. Winnipeg Industrial Market Snapshot Q2 2021.