Lanesborough REIT Announces a Proposed Transaction to Restructure its Convertible Debentures

WINNIPEG, MB, Nov. 18, 2021 /CNW/ - Lanesborough Real Estate Investment Trust ("LREIT") (TSXV: LRT.UN) announces a proposed transaction to settle its $24,810,800 principal amount of outstanding 5.00% Series G redeemable subordinated secured debentures due June 30, 2022 (the "Debentures"), and all the accrued or unpaid interest owing thereon, in exchange for trust units in the capital of LREIT (the "Trust Units") (collectively, the "Exchange Transaction").

The Exchange Transaction

LREIT intends to make a proposal to the holders of the Debentures (the "Debentureholders") pursuant to which all of the Debentures will be settled and all claims of the Debentureholders thereunder will be extinguished in exchange for Trust Units, including the payment, in the form of Trust Units, of the accrued and unpaid interest owing on the Debentures on the closing date of the Exchange Transaction on the basis of a deemed price of $0.05 per Trust Unit. The closing of the Exchange Transaction is expected to be on or shortly after December 22, 2021. It is anticipated that the amount of interest owing on the Debentures as at December 22, 2021 will be approximately $7,973,444.

In the event that the Exchange Transaction is approved, upon completion of the Exchange Transaction the current Debentureholders, as of the date hereof, will hold approximately 96.96% of the issued and outstanding Trust Units. Accordingly, the Exchange Transaction would effectively transfer control of LREIT from the current holders of Trust Units to the Debentureholders.

The Exchange Price

The price at which the Trust Units are being issued in payment of the principal amount of the outstanding Debentures and the interest accrued thereon is the lowest price permitted by the TSX Venture Exchange (the "TSXV"), being $0.05 per Trust Unit.

Advantages and Background to the Exchange Transaction

The Board of Trustees of LREIT has determined that the Exchange Transaction is in the best interests of LREIT as it will reduce LREIT's overall debt and interest burden, simplify its capital structure and improve its balance sheet. LREIT is unable to obtain financing and/or refinancing and does not have the ability to repay the Debentures. If the Debentures remain outstanding when they mature on June 30, 2022, management of LREIT anticipates that LREIT will be forced into insolvency due to the inability to repay the Debentures and the cross-defaults that would occur under the other indebtedness of LREIT. Additionally, in an insolvency scenario, the assets of LREIT would likely be required to be liquidated, which could result in LREIT's properties being sold at prices that may not be reflective of their fair market value.

If LREIT were to be forced into insolvency upon the maturity of the Debentures, given the amount of indebtedness of LREIT with security that ranks ahead of the Debentures, management of LREIT believes that the Debentureholders would not receive any payment for their Debentures. By converting the Debentures and all outstanding interest thereon into Trust Units pursuant to the Exchange Transaction, the Debentureholders may have the opportunity to participate in a possible recovery of LREIT in the future. In the view of the management of LREIT, merely extending the maturity date of the Debentures five years past June 30, 2022 will not be sufficient to allow LREIT a chance to recover from its financial difficulties as compounding interest continues to accumulate on the approximately $275 million of existing debt which ranks in priority to the Debentures.  For the foreseeable future, all available cash flow will be required to service the senior indebtedness of LREIT.

Key Steps to the Exchange Transaction

LREIT has applied to the TSXV for approval of the listing of the Trust Units to be issued as a result of the Exchange Transaction. The listing will be subject to LREIT satisfying all of the requirements of the TSXV. The Trust Units will continue to trade on the TSXV under the symbol "LRT.UN". LREIT will apply to have the Debentures delisted following the completion of the Exchange Transaction.

The current terms of the Debentures are set forth in the first supplemental trust indenture between LREIT and CIBC Mellon Trust Company (the "Indenture Trustee") dated as of October 28, 2011, as amended by the second supplemental trust indenture between LREIT and the Indenture Trustee dated as of June 17, 2014, as amended by the third supplemental trust indenture between LREIT and the Indenture Trustee dated as of June 22, 2016 (collectively, the "Trust Indenture"), which replaced the original trust indenture between LREIT and the Indenture Trustee dated as of December 8, 2006. A copy of the Trust Indenture is posted for public access on LREIT's SEDAR profile at www.sedar.com.

A special meeting (the "Meeting") of the Debentureholders be held at the offices of Shelter Canadian Properties Limited, 2600 Seven Evergreen Place, Winnipeg, Manitoba, R3L 2T3, on December 21, 2021 at 3:00 pm (Winnipeg time). The record date for the Meeting will be November 19, 2021. The Meeting will be requested by LREIT pursuant to Article 14 of the Trust Indenture to obtain the approval of the Debentureholders for the Exchange Transaction in accordance with the Trust Indenture by way of an "Extraordinary Resolution".

The Trust Indenture defines the term "Extraordinary Resolution" as a resolution proposed to be passed at a meeting of Debentureholders (including an adjourned meeting) duly convened for the purpose and held in accordance with the provisions of Article 14 of the Trust Indenture at which the holders of not less than 25% in principal amount of the Debentures then outstanding, are present in person or represented by proxy and passed by the favourable votes of holders of not less than 66 2/3% of the principal amount of the Debentures represented at the meeting and voted on a poll upon such resolution. At the Meeting, the Debentureholders will be asked to consider and, if deemed advisable, to approve, with or without amendment, an Extraordinary Resolution approving the Exchange Transaction.

In the event that LREIT becomes aware that the Exchange Transaction will result in the creation of a new "Control Person" or "Insider", as those terms are defined by the TSXV, LREIT will not deliver any Trust Units to such new Control Person or Insider until such time as all requirements of the TSXV with respect to the creation of a new Control Person or Insider have been satisfied.

Further information about the Exchange Transaction and the Meeting will be provided in an information circular expected to be distributed to Debentureholders in the near future, as well as in other LREIT continuous disclosure filings available on SEDAR (www.sedar.com), or from LREIT on request.

Wellington-Altus Financial Inc. will act as solicitation agent of LREIT for the Exchange Transaction.

ABOUT LREIT

LREIT is a real estate investment trust, which is listed on the Toronto Stock Exchange under the symbols LRT.UN (Trust Units) and LRT.DB.G (Series G Debentures). 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 Exchange Transaction. 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 six-month period ended June 30, 2021 available on SEDAR at www.sedar.com. 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

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