InterRent Real Estate Investment Trust
TSX : IIP.UN

InterRent Real Estate Investment Trust

August 06, 2009 09:53 ET

InterRent REIT Sets the Record Straight

CLV Group's Proposal Provides Superior Unitholder Value

TORONTO, ONTARIO--(Marketwire - Aug. 6, 2009) - InterRent Real Estate Investment Trust (TSX:IIP.UN) ("InterRent") today provided an explanation as to why the proposal provided by CLV Group Inc. ("CLV")'s provides superior unitholder value over all other proposals received.

"The Special Committee of the board of trustees completed a value maximization process over the past six months and thoroughly examined a number of options," said Mike Newman, Chief Executive Officer. "Yesterday, we were pleased to receive TSX conditional approval for the private placement portion of the CLV transaction."

The REIT's board of trustees believes the CLV proposal represents the best alternative for unitholders of the REIT for the following reasons:

- CLV's proposal is financially superior- The REIT's board of trustees selected the CLV financing proposal, which provided for a maximum of $14 million to be raised through a private placement of units at a price of $1.50 per unit. To date, approximately $12 million of this amount has already been raised and is being held in trust. This offer was financially superior to NorthWest Value Partners Inc. ("NorthWest")'s proposal of a private placement in tranches (the second of which being subject to unitholder approval) of approximately $6 million at $1.275 per unit.

In addition, CLV's financing proposal is expected to:

- Significantly improve InterRent's balance sheet

- Reduce InterRent's cost of borrowing

- create a more widely held unitholder base with increased market liquidity

- Make capital available for property improvements and future accretive acquisitions

- Significantly reduce debt levels to approximately 66% of gross book value

- The CLV proposal was the result of a fair and transparent process with all proposals being treated fairly - InterRent's formal process ran for nearly seven months. Together with Scotia Capital Inc., whom the Special Committee of independent directors engaged as its financial advisor in late November 2008, a number of parties were contacted, confidentiality agreements were signed and proposals were received from four parties. InterRent's board of trustees had a fiduciary duty to ensure that any and all transactions were evaluated to ensure they maximized unitholder value.

At the end of the process, InterRent dealt with the two remaining parties and accepted CLV's superior proposal that was financially superior and otherwise in the best interests of InterRent and its unitholders.

- The externalization of property management makes good business sense and is expected to eventually reduce expenses significantly- InterRent has analyzed the possible cost savings if property management is externalized. The REIT has determined it expects to eventually reduce its general and administrative expenses by over $500,000 annually after externalizing property management. It is generally accepted in the real estate investment trust sector that externalizing property management is the most logical way to reduce the relatively high percentage of the REIT's general and administrative expenses in smaller sized REITs. Given the REIT's current size, it is InterRent's view that externalization of property management to proven successful managers such as CLV makes good business sense and is in the best interests of unitholders.

Externalizing property management is also expected to result in the following benefits to the REIT:

- Bringing aboard, for the entire property portfolio, an experienced property manager with a proven successful track record in the multi-residential property sector, that has an excellent track record of managing InterRent's best performing portfolio in Ottawa over the past 7 years

- Improved operating margins

- Reduced labour and material costs with volume purchasing

- Improved overall occupancy

The property management agreement will be subject to unitholder approval at the REIT's next unitholder meeting which shall occur on or before September 30, 2009.

- The pricing of the CLV private placement is not at a discount to market - CLV's proposal of $1.50 per unit is approximately 18% greater than NorthWest's final discounted price of $1.275 per unit that was part of its final proposal.

In addition to inferior pricing, NorthWest's final proposal contained certain conditions brought into question its approach towards the governance of a public REIT such as InterRent:

- NorthWest's proposed nominees to the Board of Trustees did not fall within the existing definition of "Independent Trustee" as outlined in InterRent's declaration of trust - NorthWest's proposed solution to this governance problem was, as a condition to its proposal, to require InterRent to amend its declaration of trust to water down the definition of "Independent Trustee" to permit their nominees to stand.

- NorthWest also insisted upon an amendment to InterRent's declaration of trust to increase the permissible level of debt from 70% to 85% of gross book value - This would allow the NorthWest trustees to substantially increase debt levels to the detriment of InterRent's unitholders.

- NorthWest has no strategic or operating plan- NorthWest has not shared its plans with InterRent as to how it intends to manage the REIT. Unitholders have no idea how the REIT will be managed or whether existing unit distribution levels will be maintained.

With approximately $12 million of the total private placement already funded and held in trust, InterRent looks forward to being able to complete its financing. InterRent shall advise its unitholders by way of a future press release when a closing date for the financing has been finalized.

As previously disclosed, InterRent received a Notice of Application from NorthWest yesterday which must be resolved prior to completion of the financing. InterRent views the allegations contained in the Notice of Application to be entirely without merit and intends to defend the matter vigorously. InterRent intents to hold NorthWest responsible for any damages resulting from its actions as well as the substantial legal expenses involved in defending itself against these baseless allegations which it views as a waste of trust resources.

InterRent's unitholders can show their support for the CLV Proposal by sending management an e-mail at info@interrentreit.com or registering at www.interrentreit.com. All information will be kept confidential.

Conference Call

InterRent is hosting a conference call today, Thursday, August 6, 2009 at 11 a.m. ET to provide an update on its recently announced CLV Group transaction.

The event will be hosted by G. Michael Newman, Chief Executive Officer and Victor Stone, Trustee and Member of the Special Committee.

The numbers to call to listen to the conference are 416-695-7806 or 1-888-789-9572 followed by the passcode 47920#. A simultaneous live audio webcast will be available and archived on www.interrentreit.com.

About InterRent

InterRent is a rapidly expanding, growth oriented real estate investment trust engaged in building unitholder value through the accretive acquisition, ownership and operation of strategically located income producing multi-residential real estate, with 4,033 apartment suites under ownership.

Forward Looking Statements

This news release contains "forward-looking statements under applicable Canadian securities legislation. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "anticipated", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". In particular, there is no assurance that the CLV proposal referred to in this release will be completed on the on the terms disclosed or at all. There is no assurance that the expected benefits of the CLV proposal specified herein will be achieved in whole or in part. There is no assurance that the anticipated benefits associated with externalization of property management will be achieved in whole or in part. InterRent is subject to significant risks and uncertainties which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements contained in this release. A full description of these risk factors can be found in InterRent's publicly filed information which may be located at www.sedar.com. InterRent cannot assure investors that actual results will be consistent with these forward looking statements and InterRent assumes no obligation to update or revise the forward looking statements contained in this release to reflect actual events or new circumstances.

The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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