European Commercial Real Estate Limited
TSX VENTURE : ERE

March 24, 2017 15:55 ET

European Commercial Real Estate Limited Announces Filing of Preliminary Prospectus, Conversion Into a REIT and Share Consolidation

TORONTO, ONTARIO--(Marketwired - March 24, 2017) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

European Commercial Real Estate Limited (together with its subsidiaries, as the context may require, the "Corporation") (TSX VENTURE:ERE) is pleased to announce that, in connection with the previously announced agreement to acquire an office property located in Landshut, Germany, part of the greater Munich metropolitan region, for approximately EUR30.2 million (the "Acquisition Property"), the Corporation has filed a preliminary short form prospectus (the "Preliminary Prospectus") for a marketed offering (the "Offering") of 6,000,000 class B common shares (the "Class B Shares") of the Corporation.

The Corporation is also pleased to announce that it intends to reorganize into a publicly listed real estate investment trust to be named European Commercial Real Estate Investment Trust (the "REIT") pursuant to a plan of arrangement under the Business Corporations Act (Ontario) (the "Arrangement"), subject to receipt of all necessary approvals, including the approval of the TSX Venture Exchange (the "TSXV") and the holders ("Common Shareholders") of common shares (the "Common Shares") of the Corporation. As part of the Arrangement, all issued and outstanding Common Shares will be consolidated based on a ratio of one (1) Common Share for every 31.25 Common Shares held, or such other ratio determined by the board of directors of the Corporation with reference to the trading price of the Common Shares and the Offering Price and publicly disclosed prior to the Special Meeting (as defined herein) (the "Consolidation Ratio").

The Acquisition Property

The Acquisition Property is an approximately 172,900 square foot (16,000 square meters) office property 100% leased to a subsidiary of E.ON SE, a Global 500 Company with an investment grade credit rating and is well served by a comprehensive road and public transportation network. The Acquisition Property comprises two building complexes with four phases, erected between 2002 and 2012. The contractual lease has a weighted average lease term greater than 8 years.

The Offering

The Corporation has filed the Preliminary Prospectus in all of the provinces and territories of Canada. The Class B Shares will be offered at a price of $5.00 per Class B Share (the "Offering Price") for aggregate gross proceeds of $30,000,000 by a syndicate of underwriters (the "Underwriters") led by CIBC Capital Markets.

Upon closing of the Arrangement and conversion into a REIT, holders ("Class B Shareholders") of the Class B Shares will automatically become holders ("Unitholders") of units of the REIT (the "Units").

The Corporation has also granted the Underwriters an over-allotment option (the "Over-Allotment Option") to purchase up to an additional 900,000 Class B Shares (or, following completion of the Arrangement, Units) at the Offering Price, exercisable no later than 30 days after the closing of the Offering which, if exercised in full, would bring the gross proceeds of the Offering to $34,500,000.

The Corporation or the REIT will make an application to list the Units on the TSXV. Listing is subject to the REIT fulfilling all of the listing requirements. The Arrangement is conditional upon, among other things, receiving the final acceptance of the TSXV and the Units issuable in connection with the Arrangement being approved for listing on the TSXV.

The REIT Conversion

Pursuant to the Arrangement, among other things, Common Shareholders will transfer their Common Shares to ECRE Limited Partnership ("ECRE LP"), a subsidiary of the REIT, for Units and/or, in the case of certain eligible Common Shareholders, for class B limited partnership units of ECRE LP ("Class B LP Units"), in each case, at an exchange ratio of one (1) to one (1) (the "Exchange Ratio"). Prior to such transfer, the Common Shares will be consolidated based on the Consolidation Ratio.

The Class B LP Units are intended to be the economic equivalent of the Units and will be exchangeable for Units. The Class B LP Units will not be listed on the TSXV or on any other stock exchange or quotation system. Holders of Class B LP Units will receive special voting units of the REIT that will each initially entitle the holder to one vote at meetings of Unitholders.

Pursuant to the Arrangement, the issued and outstanding options ("Options") to purchase Common Shares will be exchanged for options ("REIT Options") to purchase Units on terms and conditions substantially similar to the terms and conditions of the Options, subject to adjustments to the exercise price of, and the number of Units underlying, the REIT Options based upon the Consolidation Ratio.

There are currently 86,000,000 Common Shares and 8,600,000 Options issued and outstanding. It is expected that following completion of the Arrangement and the Offering (without accounting for the Over-Allotment Option), there will be 8,752,000 Units and REIT Options exercisable for 275,200 Units issued and outstanding (assuming no eligible Common Shareholders elect to receive Class B LP Units).

Shareholder Meeting

The Corporation intends to present the terms of the Arrangement to the Common Shareholders for approval at a special meeting of Common Shareholders (the "Special Meeting") to be held by the Corporation. The Common Shareholders are advised to read the materials relating to the Arrangement that will be filed with securities regulatory authorities in Canada, including the notice of meeting, the plan of arrangement, the arrangement agreement and the management information circular, when they become available, as they will contain important information respecting the Arrangement and the Special Meeting. Anyone may obtain copies of these documents when available, free of charge, under the Corporation's profile on SEDAR at www.sedar.com. This announcement is for informational purposes only and does not constitute a solicitation of a proxy. As of the date of this announcement, the Corporation has not retained a proxy solicitation firm.

About European Commercial Real Estate Limited

The Corporation's business is the ownership of and investment in commercial properties in Europe. It currently owns and operates one commercial property in Düsseldorf, Germany, which constituted the Corporation's "qualifying transaction" under the TSXV rules, and it has a second commercial property in Landshut, Germany, a suburb of Munich, under contract. The Corporation's strategy is to aggregate a bespoke portfolio of high-quality, non-prime, core assets in key European markets designed primarily to deliver long-term, secure income with additional potential for capital appreciation.

The information in this news release includes certain information and statements about management's view of future events, expectations, plans and prospects that constitute forward looking statements. These statements are based upon assumptions that are subject to significant risks and uncertainties. Because of these risks and uncertainties and as a result of a variety of factors, the actual results, expectations, achievements or performance may differ materially from those anticipated and indicated by these forward looking statements. Forward-looking statements in this news release include, but are not limited to, the ability of the Corporation to complete the acquisition of the Acquisition Property, the Offering and the Arrangement. Any number of factors could cause actual results to differ materially from these forward-looking statements as well as future results. Although the Corporation believes that the expectations reflected in forward looking statements are reasonable, it can give no assurances that the expectations of any forward looking statements will prove to be correct. Except as required by law, the Corporation disclaims any intention and assumes no obligation to update or revise any forward looking statements to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such forward looking statements or otherwise.

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

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