Slate Office REIT Announces Transformational Acquisition, $80 Million Subscription Receipt Offering and $35 Million Private Placement

TORONTO, ONTARIO--(Marketwired - May 21, 2015) -

NOT FOR DISSEMINATION IN THE UNITED STATES

Slate Office REIT (the "REIT") (TSX:SOT.UN)(TSX:SOT.WT) today announced that it has agreed to acquire (the "Acquisition") a portfolio of 14 commercial properties (the "Portfolio") from Fortis Properties Corporation (the "Vendor") for an aggregate purchase price of $430 million. As part of the Acquisition, the REIT will enter into a strategic co-ownership agreement with a Canadian institutional real estate fund (the "Co-Owner"), pursuant to which the REIT will retain a 10% interest in three of the properties and the Co-Owner will acquire a 90% interest in such properties.

The REIT's proportionate share of the Portfolio purchase price is $304 million before transaction costs. The Acquisition will be primarily funded with proceeds from an $80 million public offering of subscription receipts of the REIT, a $35 million private placement of units of the REIT (each a "Unit") to Fortis Inc., an affiliate of the Vendor, and $189 million from new acquisition credit facilities.

The Portfolio comprises some of Atlantic Canada's highest-quality commercial buildings, including ten office buildings, one mixed-use office complex and three retail centres totalling 2.8 million square feet of gross leasable area ("GLA"). Notable regional addresses include Maritime Centre in Halifax, Nova Scotia; the Blue Cross Centre in Moncton, New Brunswick; and Fortis Place in St. John's, Newfoundland. The REIT's proportionate interest in the Portfolio comprises 2.5 million square feet of GLA.

Highlights of the Acquisition

• Significantly Enhances the REIT's Position as an Office REIT - The Portfolio principally consists of high quality office buildings located in major markets in Atlantic Canada. The Acquisition nearly doubles the REIT's asset base and creates a national footprint with 49 properties and total GLA of 5.4 million square feet. Pro forma, approximately 86% of the REIT's net operating income ("NOI")* will come from office properties. This transaction delivers on the REIT's stated growth strategy and focus on office assets.
  
  
• Attractive Valuation Metrics - The REIT's proportionate interest in the Portfolio is being purchased significantly below replacement cost at $123 per square foot and at an attractive going-in cap rate of 8.2%.
  
  
• Immediately and Highly Accretive - The Acquisition is approximately 10% accretive to the REIT's Adjusted Funds from Operations ("AFFO")* per Unit and the REIT's AFFO payout ratio will also decrease.
  
  
• Future Growth Potential - The REIT's proportionate interest in the Portfolio has an average occupancy of 88.8%, which represents an opportunity for the REIT to increase occupancy and add value by introducing its hands-on management approach to the acquired assets.
  
  

* These items are non-IFRS financial measures. See "Non-IFRS Financial Measures" below.

Commenting on the Acquisition, Scott Antoniak, Chief Executive Officer of the REIT said: "When the Slate team began the transformation of the REIT just over six months ago, our goal was to build a compelling pure-play office REIT with quality assets, and we are delivering on that pledge with this transformational acquisition. These are flagship properties in their markets, and we were able to acquire them at valuations that will immediately benefit our unitholders. The REIT is purchasing the portfolio at attractive capitalization rates and at a price per square foot that is meaningfully below replacement cost, in keeping with the REIT's strategy of focusing on undervalued assets."

Commenting on the REIT's entrance into Atlantic Canada, Mr. Antoniak added: "This is a great region, with a wonderful history and a bright future. We look forward to building upon the excellent work Fortis did creating and growing this portfolio and managing these properties, and we are very excited to get to know our new tenants and partners in Atlantic Canada. At Slate, we are known as hands-on operators who go to great lengths to deliver best-in-class service, and all of our tenants should expect a smooth transition."

Description of Portfolio

The REIT will acquire interests in a portfolio of 14 commercial properties consisting of ten office buildings, one mixed-use office complex and three retail centres. The table below sets out details on each of the properties comprising the Portfolio.

Property Name		Location	REIT Ownership	Total GLA	REIT Owned GLA(1)		Major Tenants(2)
Kings Place		Fredericton, NB	100%	292,986	292,986		Province of New Brunswick, a Canadian Schedule I Bank
Blue Cross Centre		Moncton, NB	100%	325,735	325,735		Medavie Inc., Moncton Library, Atlantic Canada Opportunities Agency
Maritime Centre		Halifax, NS	100%	567,925	567,925		Bell Aliant, Province of Nova Scotia, the Government of Canada
Fortis Building		St John's, NL	100%	82,648	82,648		Curtis Dawe, Fortis
Water Street Properties		St John's, NL	100%	73,496	73,496		Downtown Development Commission
Fort William Building		St John's, NL	100%	188,170	188,170		Bell Aliant
Fortis Tower		Corner Brook, NL	100%	68,196	68,196		Newfoundland and Labrador Department of Forestry
Brunswick Square & Delta Brunswick Hotel		Saint John, NB	100%	521,464 (3)	521,464 (3)		Bell Aliant, Irving Oil, Salesforce.com
Millbrook Mall		Corner Brook, NL	100%	114,386	114,386		Shoppers Drug Mart, Cineplex Odeon, Humber Community YMCA
Fraser Mall		Gander, NL	100%	98,883	98,883		Province of Newfoundland and Labrador, Sobey's, Wescal Sports Ltd.
Marystown Mall		Marystown, NL	100%	91,990	91,990		Loblaw, Home Furniture Gallery
TD Place		St John's, NL	10%	99,470	9,947		Canada-Newfoundland and Labrador Offshore Petroleum Board, KPMG, a Canadian Schedule I Bank
Fortis Place		St John's, NL	10%	143,516	14,352		Deloitte, Fortis Inc., Schlumberger Canada Limited
Cabot Place		St John's, NL	10%	137,324	13,732		Hibernia Management & Development Company, Stewart McKelvey, BMO Nesbitt Burns
Total				2,806,189	2,463,910
1. As at March 31, 2015. 2. Represents post-acquisition tenants. 3. Excludes Delta Brunswick Hotel GLA of 221,303 square feet comprising 254 guest rooms.

Impact of the Acquisition on the REIT's Portfolio

On a pro forma basis following the Acquisition, the REIT will have a portfolio of 49 properties, 5.4 million square feet of total GLA and 4.2 million square feet of office GLA. The REIT will have a pro forma occupancy rate of 90.3% and a weighted average lease term of 4.9 years. The addition of the acquired properties will raise the percentage of the REIT's portfolio represented by office space to approximately 86% based on the REIT's pro forma NOI.

	REIT Current		Fortis Properties Corporation		REIT Pro Forma
Number of Properties	35		14		49
% of Properties Office (by NOI)	79	%	93	%	86	%
Gross Leasable Area	2,903,398		2,463,910		5,367,308
Occupancy	91.7	%	88.8	%	90.3	%
Weighted Average Lease Term	5.2		4.5		4.9

To view the figures associated with this press release, please visit the following link: http://media3.marketwire.com/docs/ProFormaNOIbyProvince.pdf.

Public Offering of Subscription Receipts

In conjunction with the Acquisition, the REIT also entered into an agreement with a syndicate of underwriters co-led by TD Securities Inc. and BMO Capital Markets (the "Underwriters"), to sell, on a bought deal basis 10,820,000 subscription receipts (the "Subscription Receipts") of the REIT at a price of $7.40 per Subscription Receipt for gross proceeds of approximately $80 million (the "Offering"). The REIT has also granted the underwriters an over-allotment option to purchase up to an additional 15% of the Subscription Receipts (or in certain circumstances, 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.

On closing of the Acquisition: (i) one Unit will be automatically issued in exchange for each Subscription Receipt (subject to customary anti-dilution protection), without payment of additional consideration or further action by the holder thereof, (ii) an amount per Subscription Receipt equal to the amount per Unit of any cash distributions made by the REIT for which record dates have occurred during the period that the Subscription Receipts are outstanding, net of any applicable withholding taxes, will become payable in respect of each Subscription Receipt, and (iii) the net proceeds from the sale of the Subscription Receipts will be released from escrow to the REIT.

The net proceeds from the sale of the Subscription Receipts will be held by an escrow agent pending the fulfillment or waiver of all outstanding conditions precedent to closing of the Acquisition, including, among other things, receipt of the Toronto Stock Exchange ("TSX") approval, Competition Act approval and all other regulatory and government approvals required to finalize such sales. There can be no assurance that regulatory approval will be obtained, closing conditions will be met or that the Acquisition will be consummated.

If the Acquisition fails to close as described above by September 30, 2015, or the Acquisition is terminated at an earlier time, the gross proceeds of the Offering and pro rata entitlement to interest earned or deemed to be earned on the Subscription Receipts, net of any applicable withholding taxes, will be paid to holders of the Subscription Receipts and the Subscription Receipts will be cancelled. The Acquisition is expected to close late in the second quarter or early in the third quarter.

The Subscription Receipts will be offered in all provinces and territories of Canada by way of a short form prospectus dated on or about May 27, 2015. The Offering is subject to the receipt of all necessary regulatory and stock exchange approvals, including the approval of the TSX. Closing of the Offering is expected to occur on or about June 10, 2015.

Fortis Private Placement and Revolving Acquisition Facility

In connection with the Acquisition, the REIT will issue to Fortis Inc., an affiliate of the Vendor, approximately $35 million of Units by way of a private placement at a price of $7.40 per Unit. These Units will be subject to a one-year hold period. The private placement will close simultaneously with the Acquisition. Following closing, Fortis Inc. will own approximately 13% of the outstanding Units and so long as it holds 10% or more of the outstanding Units, it will have the right to nominate one Trustee of the REIT and will also have piggy-back and demand registration rights in respect of these Units.

In addition, the REIT has received a commitment letter from Toronto-Dominion Bank and Bank of Montreal to provide acquisition financing to fund the Acquisition in the amount of up to $230 million, of which $189 million is anticipated to be drawn at closing of the Acquisition. The revolving acquisition facility will have a three year term and will be secured by a first charge over the properties.

Forward-Looking Statements

Certain information herein constitutes "forward-looking statements" within the meaning of applicable securities legislation. Forward- looking statements include statements about management's expectations regarding objectives, plans, goals, strategies, future growth, operating results and performance, business prospects and opportunities of the REIT. Forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "might", "should", "seeks", "intends", "plans", "pro- forma", "estimates" or "anticipates"; or variations of such words; and phrases or statements that certain actions, events or results "may", "could" or "might" occur or be achieved; or the negative connotation thereof. Forward-looking statements are made based on reasonable assumptions, however, there is no assurance that the events or circumstances reflected in forward-looking statements will occur or be achieved. Forward-looking statements are based on numerous assumptions of factors that if untrue, could cause actual results to differ materially from those that are implied by such forward-looking statements. These factors include but are not limited to: general and local economic and real estate business conditions; the financial condition of tenants; occupancy rates; rental rates; the ability of the REIT to refinance maturing debt; the REIT's ability to source and complete accretive acquisitions; changes in government, environmental and tax regulations; inflation and interest rate fluctuations; the REIT's ability to obtain equity or debt financing for additional funding requirements; and adequacy of insurance.

Forward-looking statements are subject to risks and uncertainties, many of which are beyond the REIT's control. These risks and uncertainties include, but are not limited to: risks related to general and local financial conditions including available equity and debt financing at reasonable costs and interest rate fluctuations; operational risks including timely leasing of vacant space and re-leasing of occupied space on expiration of current leases on terms at current or anticipated rental rates; tenant defaults and bankruptcies; uncertainties of acquisition activities including availability of suitable property acquisitions and integration of acquisitions; competition including development of properties in close proximity to the REIT's properties; loss of key management and employees; governmental, environmental, taxation and other regulatory risks; litigation risks and other risks and factors described from time to time in the documents filed by the REIT with the securities regulators.

The REIT has attempted to identify important factors that could cause actual results to differ materially from those contained in forward- looking statements. However, there may be other factors that could cause results to not be as anticipated, estimated or intended. Forward-looking statements are provided to inform readers about management's current expectations and plans and allow investors and others to better understand the REIT's operating environment. However, readers should not place undue reliance on forward- looking statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future performance or results, or of the timing that such performance or results will be achieved. Additional information about risks and uncertainties is contained in the REIT's annual information form for the year ended December 31, 2014 available on SEDAR at www.sedar.com.

Non-IFRS Financial Measures

The REIT has employed certain non-IFRS financial measures including AFFO and NOI, which are not generally accepted accounting principles as defined under International Financial Reporting Standards (IFRS). Management believes that in addition to conventional measures prepared in accordance with IFRS, investors in the real estate industry use these non-IFRS financial measures to evaluate the REIT's performance and ability to generate cash flows. Accordingly, these non-IFRS financial measures are intended to provide additional information and should not be considered in isolation or as a substitute for performance measures prepared in accordance with IFRS. In addition, they do not have standardized meanings and may not be comparable to measures used by other issuers in the real estate industry or other industries.

About Slate Office REIT

Slate Office REIT is an open-ended real estate investment trust. The REIT's portfolio currently comprises 35 strategic and well-located real estate assets located primarily across Canada's major population centres. The REIT is focused on maximizing value through internal organic rental and occupancy growth and strategic acquisitions. More information is available at www.slateofficereit.com.

About Slate

Slate Asset Management L.P. is a leading real estate investment platform with over $2.5 billion in assets under management. Slate is a value-oriented company and a significant sponsor of all its private and publicly-traded investment vehicles, which are tailored to the unique goals and objectives of its investors. The firm's careful and selective investment approach creates long term value with an emphasis on capital preservation and outsized returns. Slate is supported by exceptional people, flexible capital and a proven ability to originate and execute on a wide range of compelling investment opportunities. More information is available at www.slateam.com.

Note to Media

Images of the assets Slate Office REIT is acquiring are available at https://app.box.com/s/rh1zatr6ixr62gohkymmhtcj3rcd3j69.