Melcor Developments Ltd. — Regulatory Filings 2024

Sep 19, 2024

FORM 51-102F3

MATERIAL CHANGE REPORT

1. Name and Address of the Company

Melcor Developments Ltd. 900, 10310 - Jasper Avenue Edmonton, Alberta T5J 1Y8 (hereinafter referred to as “ Melcor ”)

2. Date of Material Change

September 12, 2024

3. News Release

A press release was issued on September 12, 2024 for Canada wide distribution through the facilities of Globe Newswire and filed under Melcor’s profile on SEDAR+ at www.sedarplus.ca.

4. Summary of Material Change

On September 12, 2024, Melcor Real Estate Investment Trust (“ Melcor REIT ”) entered into an arrangement agreement (the “ Arrangement Agreement ”) with Melcor, pursuant to which, subject to approval of the holders of trust units (“ Trust Units ”) and special voting units (the “ Special Voting Units ”, and together with Trust Units, “ Units ”) of Melcor REIT and the terms and conditions of the Arrangement Agreement, Melcor will acquire by way of a court-approved plan of arrangement (the “ Arrangement ”) under the Business Corporations Act (Alberta) (the “ ABCA ”) its unowned equity interest in Melcor REIT Limited Partnership (“ REIT LP ”) for $4.95 per unit in cash consideration (the “ REIT LP Sale ”). Melcor’s unowned equity interest in REIT LP comprises all REIT LP’s outstanding Class A LP Units. In accordance with the Arrangement, Melcor REIT will use the proceeds from the REIT LP Sale to repurchase and cancel (collectively with the REIT LP Sale, the “ Transaction ”) all of the REIT’s outstanding Trust Units. Additionally, on or about the closing of the Transaction, Melcor will cause the redemption of, and will pay out in cash, all $46.0 million (plus any accrued and unpaid interest) of the REIT’s 5.10% convertible unsecured subordinated debentures having a maturity date of December 31, 2024 (the “ Debentures ”).

5. Full Description of Material Change

5.1 Full Description of Material Change

The Arrangement

On September 12, 2024, Melcor REIT entered into the Arrangement Agreement with Melcor, pursuant to which Melcor will complete the REIT LP Sale in which it will acquire its unowned equity interest in the REIT LP for $4.95 per unit in cash consideration. Melcor’s unowned equity interest in REIT LP comprises all REIT LP’s outstanding Class A LP Units. In accordance with the Arrangement, Melcor REIT will use the proceeds from the REIT LP Sale to repurchase and cancel all of the REIT’s outstanding Trust Units. The Arrangement will be implemented by way of a statutory plan of arrangement (the “ Plan of Arrangement ”) under the ABCA. Upon completion of the Arrangement, each Trust Unit will have been redeemed by Melcor REIT for cash consideration of $4.95 per Trust Unit (the “ Consideration ”) and Melcor will own all of the issued and outstanding Units of the REIT, all of the outstanding equity interest in the REIT LP and all of the outstanding shares of Melcor REIT GP Inc. (the “ GP ”), the general partner of the REIT LP. The Consideration represents a premium of 46.0% to Melcor REIT’s closing unit price on September 12, 2024, the last trading day prior to the announcement of the Transaction, and

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a 61.3% premium to the 30-day volume weighted average unit price. Additionally, on or about the closing of the Transaction, Melcor will cause the redemption of, and will pay out in cash, all $46.0 million (plus any accrued and unpaid interest) of the REIT’s outstanding Debentures.

The Arrangement will require the approval of (i) two-thirds (66 2/3%) of the votes cast by holders of Trust Units (“ REIT Unitholders ”) and holders of Special Voting Units present (“ Special Voting Unitholders ”, and together with REIT Unitholders, “ Unitholders ”) in person or represented by proxy at the special meeting to be called to approve the Arrangement (the “ Special Meeting ”), voting as a single class (each holder of Trust Units and Special Voting Units being entitled to one vote per Trust Unit or Special Voting Unit, as applicable); and (ii) a simple majority of the votes cast by holders of Trust Units present in person or represented by proxy at the Special Meeting, excluding the votes of Melcor, and any other unitholders whose votes are required to be excluded for the purposes of “minority approval” under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions .

Completion of the Arrangement is subject to customary closing conditions, including the approval of the Court of King’s Bench of Alberta and the receipt of all other necessary approvals and other customary conditions. The Plan of Arrangement will include a distribution by Melcor REIT to REIT Unitholders of record immediately prior to closing in an amount equal to the REIT’s estimate of its taxable income, including taxable income to be allocated from the REIT LP to Melcor REIT, in its current taxation year. Such distribution will be payable by the issuance of additional Trust Units which will immediately be consolidated.

Pursuant to the Arrangement Agreement, Melcor REIT has a 30-day go-shop period that will extend from September 12, 2024 to October 14, 2024 (the " Go-Shop Period "), during which it is permitted to solicit third-party interest in submitting a proposal which is superior to the proposal made by Melcor. Melcor will have the right to match a superior proposal during and after the Go-Shop Period. There can be no assurance that the go-shop process will result in a superior proposal. If the REIT is successful in soliciting a superior proposal as a result of the go-shop process, there will be a fee payable to Melcor of $2.9 million (a “ Go-Shop Fee ”). The Arrangement Agreement also includes customary provisions, including non-solicitation by the REIT of alternative transactions following the conclusion of the Go-Shop Period, and a $5.8 million termination fee payable to Melcor under certain customary circumstances where a Go-Shop Fee is not otherwise payable.

Melcor expects the Arrangement to close in the fourth quarter of this year, subject to receipt of unitholder, court, and regulatory approvals, as well as the satisfaction or waiver of all conditions under the Arrangement Agreement. In connection with and subject to closing of the Arrangement, it is expected that the Trust Units and the Debentures will cease to be listed from the Toronto Stock Exchange.

The foregoing summary of the Arrangement Agreement and the Plan of Arrangement does not purport to be complete and is qualified in its entirety by reference to the Arrangement Agreement, to which the Plan of Arrangement is attached as Schedule A, a copy of which has been filed under Melcor’s profile on SEDAR+ at www.sedarplus.ca. The representations, warranties and covenants contained in the Arrangement Agreement and the Plan of Arrangement were made only for purposes of those agreements and as of specific dates, were solely for the benefit of the parties to the Arrangement Agreement and the Plan of Arrangement, may be subject to limitations agreed upon by the parties and may be subject to standards of materiality applicable to the parties that differ from those applicable to investors.

Further information regarding the Arrangement will be contained in a management information circular (the “ Circular ”) to be prepared by Melcor REIT in connection with the Special Meeting, which Circular will be filed under Melcor REIT’s profile on SEDAR+ at www.sedarplus.ca.

Approval of Special Committee and Board of Directors

Melcor REIT's Board of Trustees (the “ REIT Board ”), based on the recommendation of a special committee of independent trustees of the REIT Board (the " REIT Independent Committee "), recommended that Unitholders vote in favour of the Arrangement.

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BMO Capital Markets is acting as exclusive financial advisor to Melcor REIT and Ventum Financial Corp. (“ Ventum Capital Markets ”) is acting as independent financial advisor and independent valuator to the REIT Independent Committee.

Fairness Opinions

BMO Capital Markets, financial advisor to Melcor REIT, and Ventum Capital Markets, independent financial advisor and independent valuator to the REIT Independent Committee, each rendered fairness opinions to the effect that, as at September 12, 2024, subject to the assumptions and limitations described therein, the Consideration to be received by the REIT Unitholders pursuant to the Transaction is fair, from a financial point of view.

Formal Valuation

Ventum Capital Markets delivered an independent formal valuation to the REIT Independent Committee, pursuant to which it concluded that, as at September 12, 2024, that, subject to the assumptions and limitations described therein, the fair market value of the Trust Units is in the range of $3.50 to $5.00 per Trust Unit.

Backstop Loan Agreement

With respect to the redemption of the REIT’s Debentures, Melcor, the REIT and the REIT LP entered into a credit agreement (the “ Backstop Loan Agreement ”) pursuant to which Melcor agreed to loan to Melcor REIT an amount sufficient to repay the principal amount of the outstanding Debentures on or before December 31, 2024 if the Transaction is not completed prior to December 17, 2024 (subject to certain prescribed exceptions). Any amount advanced under the Backstop Loan Agreement will bear interest at a rate of 12% per annum, payable semi-annually, and have a maturity date three years following the date of advance.

The foregoing summary of the Backstop Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the Backstop Loan Agreement, a copy of which has been filed under Melcor REIT’s profile on SEDAR+ at www.sedarplus.ca. The representations, warranties and covenants contained in the Backstop Loan Agreement were made only for purposes of that agreement and as of specific dates, were solely for the benefit of the parties to the Backstop Loan Agreement, may be subject to limitations agreed upon by the parties and may be subject to standards of materiality applicable to the parties that differ from those applicable to investors.

5.2 Disclosure for Restructuring Transactions

Not applicable.

6. Reliance on Subsection 7.1(2) of National Instrument 51-102

Not applicable.

7. Omitted Information

Not applicable.

8. Executive Officer

Naomi Stefura Chief Operating Officer Telephone: 1.855.673.6931

9. Date of Report

September 19, 2024

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- Cautionary Note Regarding Forward Looking Statements

This material change report includes forward-looking information within the meaning of applicable Canadian securities laws. In some cases, forward-looking information can be identified by the use of words such as “may”, “will”, “should”, “expect”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, and by discussions of strategies that involve risks and uncertainties, certain of which are beyond Melcor's and the REIT’s control. In this material change report, forward-looking information includes, among other things, statements relating to expectations with respect to the timing and outcome of the Transaction and the anticipated benefits of the Transaction to the parties and their respective security holders. The forward-looking information is based on certain key expectations and assumptions made by each of Melcor and the REIT, including with respect to the structure of the Transaction and all other statements that are not historical facts. The timing and completion of the Transaction is subject to customary closing conditions, termination rights and other risks and uncertainties including, without limitation, required regulatory, court, and unitholder approvals. Although management of each of Melcor and the REIT believe that the expectations reflected in the forward-looking information are reasonable, there can be no assurance that any transaction, including the Transaction, will occur or that it will occur on the timetable or on the terms and conditions contemplated in this material change report. The Transaction could be modified, restructured or terminated. Readers are cautioned not to place undue reliance on forward-looking information. Additional information on these and other factors that could affect Melcor and the REIT are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR+ website (www.sedarplus.ca).

By its nature, such forward-looking information necessarily involves known and unknown risks and uncertainties that may cause actual results, performance, prospects and opportunities in future periods of Melcor and the REIT to differ materially from those expressed or implied by such forward-looking statements. Furthermore, the forward-looking statements contained in this material change report are made as of the date of this material change report and neither Melcor, nor the REIT nor any other person assumes responsibility for the accuracy and completeness of any forward-looking information, and no one has any obligation to update or revise any forward-looking information, whether as a result of new information, future events or such other factors which affect this information, except as required by law.

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