The K2 Principal Fund L.P. Proposes Four New Trustees for the Board of H&R REIT

• Management is sluggish and inactive in face of the Trust being dramatically undervalued
• Immediate Board refresh is needed to preserve unitholder value and execute the Trust's strategic initiatives in a timely manner

TORONTO, April 3, 2023 /CNW/ - The K2 Principal Fund L.P. (the "Concerned Unitholder"), represented by its manager, K2 & Associates Investment Management Inc. ("K2"), announced today that it has submitted a notice (the "Notice") to H&R Real Estate Investment Trust (the "Trust") that it will nominate four new trustees for election to the board of trustees of the Trust (the "Board") at the Trust's upcoming annual meeting of unitholders and special voting unitholders (together, the "Unitholders") of the Trust to be held on June 15, 2023 (the "Meeting").

As set out in the Notice submitted to the Trust on April 3, 2023, pursuant to the advance notice provisions under Section 6.12 of the 2022 Amended and Restated Declaration of Trust (the "Declaration of Trust"), the Concerned Unitholder is putting forward four highly qualified and independent trustee nominees for election at the Meeting to add experienced and independent voices to the Board. An immediate reconstitution of the Board with independent and experienced trustees is necessary to ensure Unitholder value is not destroyed due to Board sluggishness and inaction.

"We look forward to working with H&R's management to optimize capital allocation amidst market stress," commented Shawn Kimel, founder and Chief Investment Officer of K2. "Our track record of performance in general market downturns meshes well with our strategy with H&R."

BACKGROUND TO THE NOMINATION

On October 27, 2021, the Trust announced that it would execute certain "strategic repositioning initiatives" (the "Strategic Initiatives"), including:

1. "Disposition of the following property groups (the "Strategic Dispositions"), synchronized to match capital funding requirements. The Strategic Dispositions are poised to generate gross proceeds of approximately $3.4 billion over time:

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• Exit retail - sale of approximately $600 million of grocery-anchored and essential service retail and monetization of H&R's CDN $470 million equity interest in Echo Realty LP; and
• Exit office - sale of approximately $2.3 billion of office properties with the remaining $1.4 billion to be held for redevelopment into Class A multi-residential and industrial redevelopments.

2. Reinvestment of proceeds generated from the Strategic Dispositions to fund H&R's significant multi-residential and industrial development pipeline and for select acquisitions, in prime locations in Toronto, Montreal, Vancouver, and high-growth U.S. sunbelt and gateway cities."

On March 1, 2023, K2 sent a letter to the Board, advising that they support the Strategic Initiatives, however, believe that execution has not been fast enough and that, as a result, significant constructive opportunities have not been executed upon. Further, K2 outlined that the proceeds of the Strategic Dispositions would bolster needed liquidity to advance the Trust's strategy to repurchase units of the Trust (the "Units") in order to take advantage of the fact that the Units are currently significantly undervalued (the "Buy-Back Strategy").

On March 6, 2023, the Board responded to K2, simply expressing their appreciation for K2's support of the Strategic Initiatives and stating that the Board "must be mindful of the current market environment and ensure that the timing and execution of our strategy align with achieving the optimum outcome for unitholders." This lackluster response is not sufficient and provides no tangible options to execute on the Strategic Initiatives and the Buy-Back Strategy in a timely manner.

Between March 6, 2023 and March 31, 2023, K2 continued to attempt to constructively discuss with the Board potential nominees that could provide the experience and spark required for the Trust to effectively execute on the Strategic Initiatives and Buy-Back Strategy. In response, the Board continued to dismiss the Concerned Unitholder with empty responses and, while K2 was trying to engage the Board constructively, appointed Donald Clow to the Board without notifying the Concerned Unitholder that the Board had no intention of considering the Concerned Unitholder's proposed nominees. While K2 views Donald Clow's appointment as a positive change, it still maintains that more change is necessary, and that time is of the essence.

The Concerned Unitholder has been patient, providing the Board over two years to execute on the Strategic Initiatives and the Buy-Back Strategy and attempting to engage in a constructive dialogue with the Board, but fear any further delay would result in significant destruction of Unitholder value - immediate action is required.

FULLY INDEPENDENT, HIGHLY QUALIFIED AND ACCOUNTABLE NOMINEES

Having been rebuffed in its attempts to engage the Board productively, the Concerned Unitholder is now seeking to elect the following four new independent, highly qualified and accountable trustees of the Board, who are ready to identify constructive opportunities to advance the Strategic Initiatives and the Buy-Back Strategy (the "Concerned Unitholder Nominees", and each, a "Concerned Unitholder Nominee"): 

Josef Vejvoda

Mr. Vejvoda acts as a special advisor to K2. Previously, Mr. Vejvoda was a portfolio manager at K2 from August 2013 and became K2's Chief Compliance Officer in March 2017 and Chief Executive Officer in October 2018, until stepping back from administrative duties in March 2021 to focus solely on special projects. Mr. Vejvoda has over 25 years of extensive capital markets experience and has held senior management roles at a number of the country's largest financial institutions including Merrill Lynch Canada, National Bank Financial and TD Securities. Mr. Vejvoda has served on numerous public company boards and has contributed to the realization of significant increases in shareholder value. Mr. Vejvoda graduated from Queen's University with a bachelor degree in computer science. He has also earned the Chartered Investment Manager designation from the Canadian Securities Institute and is a graduate of the Institute of Corporate Directors having achieved the ICD.D designation.

Mordecai (Moti) Jungreis

Mr. Jungreis is currently a private investor in various businesses. Prior to this, Mr. Jungreis was the Vice Chair and Head of Global Markets of TD Securities, where he was responsible for leading the Sales, Trading, and Origination teams for all of TD Securities globally. Under his leadership, the Global Markets team delivered innovative solutions and best-in-class execution, providing products and services to corporate, government, and institutional clients. Mr. Jungreis joined TD Securities as an entry-level Trading Associate in 1996 and quickly established himself as a macro trader with a contrarian mindset. In 2016, Moti was promoted to Head of Global Markets of TD Securities. Further, Mr. Jungreis sits on the Board of Sinai Health Foundation. Prior to joining TD Securities, Mr. Jungreis served as a Lieutenant in the Israel Defense Forces. He holds a Master of Business Administration from the Joseph L. Rotman School of Management as well as a Bachelor of Arts in Economics and Political Science from the University of Toronto.

Michael E. Siskind

Mr. Siskind is a seasoned real estate developer and is currently a principal of both Decade Capital Corporation and Decade Group Inc. as well as the President of Self Storage Plus, the self storage division of Decade Group Inc. As founder of Self Storage Plus, Mr. Siskind negotiated the sale of multiple facilities for over $60 million to InStorage REIT as one of their qualifying assets. His portfolio ranges from multi-family buildings, to commercial plazas and self storage sites. While running private companies, Mr. Siskind has also been involved in moving assets from the private realm into the public markets, and stays actively involved in the process. He currently sits on the Independent Review Committee for Ravensource Fund, a TSX listed closed-end investment trust and is an active supporter of numerous charities. Mr. Siskind is an Economics graduate from McGill University.

Daniel Farb

Daniel Farb is an experienced investor and public company director and is currently the Managing Member of Mill Pond Capital. Previously, Mr. Farb served as a director of Pharmacyte Biotech in 2022 and as a director of MEG Energy Corp. from 2017 to 2018. From 2001 to 2019, Mr. Farb was a Managing Director at Highfields Capital Management and has also worked at Goldman Sachs & Co. in the Mergers & Acquisitions and Principal Investment Groups. Mr. Farb is a graduate of the Harvard Business School, and holds a Bachelor of Commerce degree from McGill University.

INFORMATION CONCERNING THE CONCERNED UNITHOLDER NOMINEES

As set out in the Notice, the Concerned Unitholder Nominees are Josef Vejvoda, Mordecai Jungreis, Michael Siskind, and Daniel Farb. The table below sets out, in respect of each Concerned Unitholder Nominee, his name, province or state and country of residence, his principal occupation, business or employment within the five preceding years, and the number of Units beneficially owned, or controlled or directed, directly or indirectly, by such Concerned Unitholder Nominee.

Other Boards of Reporting Issuers

As at the date of this press release, Josef Vejvoda is an independent director and chairman of Moneta Gold Inc. (TSX: ME) (OTCQX: MEAUF) (FSE: MOPA) and has been nominated for election to the board of directors of American Hotel Income Properties REIT (GP) Inc., the general partner of American Hotel Income Properties REIT LP (TSX: HOT.UN) (TSX: HOT.U) (TSX: HOT.DB.V). Further, Michael E. Siskind is currently the Chair of the independent review committee of Ravensource Fund (TSX: RAV.UN).

Other Information Concerning the Concerned Unitholder Nominees

To the knowledge of the Concerned Unitholder, no Concerned Unitholder Nominee is, at the date hereof, or has been, within ten (10) years before the date hereof: (a) a director, chief executive officer or chief financial officer of any company that (i) was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than thirty (30) consecutive days (each, an "order"), in each case that was issued while the Concerned Unitholder Nominee was acting in the capacity as director, chief executive officer or chief financial officer, or (ii) was subject to an order that was issued after the Concerned Unitholder Nominee ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; (b) a director or executive officer of any company that, while such Concerned Unitholder Nominee was acting in that capacity, or within one (1) year of such Concerned Unitholder Nominee ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (c) someone who became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or became subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of such Concerned Unitholder Nominee.

To the knowledge of the Concerned Unitholder, as at the date hereof, no Concerned Unitholder Nominee has been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation, or by a securities regulatory authority, or has entered into a settlement agreement with a securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a Concerned Unitholder Nominee.

To the knowledge of the Concerned Unitholder, none of the directors or officers of the Concerned Unitholder, or any associates or affiliates of the foregoing, or any of the Concerned Unitholder Nominees or their respective associates or affiliates, has: (a) any material interest, direct or indirect, in any transaction since the commencement of the Trust's most recently completed financial year or in any proposed transaction which has materially affected or will materially affect the Trust or any of its subsidiaries; or (b) any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on at the Meeting, other than the re-constitution of the Board.

ADDITIONAL INFORMATION

The information contained in this news release does not and is not meant to constitute a solicitation of a proxy within the meaning of applicable securities laws. Although the Concerned Unitholder has submitted the Notice for the Meeting, Unitholders are not being asked at this time to execute a proxy in favour of the Concerned Unitholder Nominees. In connection with any solicitation in respect of the Meeting, the Concerned Unitholder will file a dissident information circular (the "Information Circular") in due course in compliance with applicable securities laws.

Notwithstanding the foregoing, the Concerned Unitholder is voluntarily providing the disclosure required under section 9.2(4) of National Instrument 51-102 ? Continuous Disclosure Obligations in accordance with securities laws applicable to public broadcast solicitations. In connection therewith, certain information regarding, among other things, the Concerned Unitholder Nominees has been provided in this press release under the section entitled "Information Concerning the Concerned Unitholder Nominees".

This news release and any solicitation made by the Concerned Unitholder in advance of the Meeting is, or will be, as applicable, made by the Concerned Unitholder, and not by or on behalf of the management of the Trust. All costs incurred for any solicitation will be borne by the Concerned Unitholder, provided that, subject to applicable law, the Concerned Unitholder may seek reimbursement from the Trust of the Concerned Unitholder's out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with a successful reconstitution of the Board.

The Concerned Unitholder is not soliciting proxies in connection with the Meeting at this time, and Unitholders are not being asked at this time to execute proxies in favour of the Concerned Unitholder Nominees (in respect of the Meeting). Proxies may be solicited by the Concerned Unitholder pursuant to an Information Circular sent to Unitholders after which solicitations may be made by or on behalf of the Concerned Unitholder, by mail, telephone, fax, email or other electronic means as well as by newspaper or other media advertising, and in person by directors, officers and employees of the Concerned Unitholder, who will not be specifically remunerated therefor. The Concerned Unitholder may also solicit proxies in reliance upon applicable exemptions to the solicitation requirements under Canadian corporate and securities laws, which may include by way of public broadcast, including through press releases, speeches or publications, and by any other manner permitted under applicable Canadian laws. The Concerned Unitholder may engage the services of one or more agents and authorize other persons to assist in soliciting proxies on their behalf. Once the Concerned Unitholder has commenced a formal solicitation of proxies in connection with the Meeting, proxies may be revoked by instrument in writing by the Unitholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by law and the Declaration of Trust.

Neither the Concerned Unitholder nor, to its knowledge, any of their associates or affiliates, have any material interest, direct or indirect, (i) in any transaction since the beginning of the Trust's most recently completed financial year or in any proposed transaction that has materially affected or would materially affect the Trust or any of its subsidiaries; or (ii) by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on at the Meeting, other than the election of trustees to the Board.

H&R Real Estate Investment Trust's principal office address is Suite 500, 3625 Dufferin Street, Toronto, Ontario M3K 1N4. A copy of this news release may be obtained on the Trust's SEDAR profile at www.sedar.com.

ADVISORS

The Special Situations Group at Norton Rose Fulbright Canada LLP is acting as legal counsel.

ABOUT THE K2 PRINCIPAL FUND L.P.

Founded in December of 2000, The K2 Principal Fund L.P. has a broadly diversified Canadian and U.S. portfolio and is the flagship fund of K2 & Associates Investment Management Inc. We are active managers and seek out best in class companies who drive optimal return on capital. We use a range of hedging techniques to mitigate downside risk including the extensive use of options where possible. For more information about K2, visit www.k2.ca.

SOURCE K2 Principal Fund L.P.