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DESCRIPTIONOF THE BUSINESSGeneral Information The REIT was formed to own a portfolio of incomeproducing properties, comprised primarily of retail, officeand industrial properties. The REIT trades on the TorontoStock Exchange under the symbol “MR.UN.”In 2015, we acquired 31,629 sf of GLA from Melcoron properties that met the REIT acquisition criteria(90% occupied and rent paying, constructioncompleted and titled).The REIT’s portfolio is comprised of properties located inwestern Canada, specifically in the metropolitan areas ofEdmonton, Calgary, Lethbridge and Red Deer, Alberta;Regina, Saskatchewan; and Kelowna, British Columbia.In 2014, we acquired 793,941 sf of GLA from Melcor.The objectives of the REIT are to: (i) generate stable andgrowing cash distributions on a tax-efficient basis;(ii) enhance the value of the REIT’s assets and maximizelong-term Unit value through active asset and propertymanagement; and (iii) expand the asset base of the REITand increase adjusted funds from operations (AFFO) perUnit, primarily through acquisitions and improvement ofits properties, including the Initial Properties, throughtargeted and strategically deployed capital expenditures.The REIT is externally managed, administered andoperated by Melcor pursuant to the Asset ManagementAgreement and the Property Management Agreemententered into in connection with the IPO and acquisition ofthe Initial Properties. Melcor is a diversified real estatedevelopment and management company with over 90years of stable returns in real estate.Management StrategyThe REIT’s strategy is to invest in a diversified portfolio ofincome-producing properties that provide stable andgrowing monthly cash distributions to unitholders. TheREIT’s strategy for growth involves acquiring andimproving appropriate properties.Acquiring:Our acquisition growth strategy is focused on: Increasing penetration in existing geographic marketsto exploit existing competitive advantageDiversifying our property portfolio, andExpanding to adjacent geographic markets.We focus on two channels to support our acquisitiongrowth strategy:Acquiring properties via our proprietary pipeline: AsMelcor completes development and leasing ofcommercial properties, the REIT has a right topurchase each asset for its portfolio. This organicasset pipeline is unique to the REIT.Based on projects currently being developed orplanned to begin in the near-term, we expectMelcor’s pipeline to yield approximately 7 million sfof GLA over the next 5-10 years. Under thedevelopment and opportunities agreement enteredinto at the IPO, the REIT has a priority right to acquirethese assets, and also has the opportunity toparticipate in investment opportunities, jointventures and mezzanine financing on Melcorprojects.Melcor currently has 130,554 sf under developmentand 418,279 sf of developed property undermanagement. Acquiring accretive income-producing propertiesfrom third parties: We actively seek strategicproperty acquisitions that fit our SMART investmentcriteria: properties that have a good Story, are in theright Market, Accretive to AFFO per Unit, at the Rightprice and in our Targeted areas. Target acquisitionsinclude properties with potential to increase valuethrough expansion, redevelopment or improvedproperty management.In 2015, we did not complete any externalacquisitions.In 2014, we completed 3 external acquisitions, adding249,361 sf of GLA to our portfolio for 42.83 million.In 2013, we completed 2 external acquisitions, adding123,042 sf of retail GLA to our portfolio for a totalpurchase price of 25.55 million.Melcor REIT 2015 ANNUAL INFORMATION FORM5

Each of these acquisitions has been consistent withour acquisition growth strategy and has helped todiversify our portfolio.In contemplating and completing strategicacquisitions, we use our proven due diligence processand ability to quickly execute on opportunities.Improving:There are two key components to improving our existingassets – property management and asset enhancement.The goals of our property management and assetenhancement programs are to: Maximize occupancyMaximize tenant retentionIncrease rental incomeProperty ManagementTo ensure that our occupancy rates remain high and thatour space is leased at attractive rates, we are committedto being the Landlord of Choice by providing consistent,high quality service and our signature customer careprogram to our clients.Efficient property management optimizes operating costs,occupancy and rental rates. Our hands-on, on-sitebuilding management identifies issues early on forprompt resolution, and with continuous logging andmonitoring of all maintenance activity, we can makecapital investment decisions at the right time to sustainlong-term operating margins.Our property management practices are designed toimprove operating efficiency and reduce cost while at thesame time increasing client satisfaction and thusretention rates. We enjoy strong, long-term relationshipswith our clients, some of whom have been with Melcorand the REIT for over 20 years.Our signature customer care program is focused onresponsiveness. We are proud of our track record ofresponding to over 95% of service requests within 30minutes during business hours. Our signature customercare program was enhanced and rebranded shortly afterthe IPO. We added an online customer care portal andextended the program to our retail and industrialproperties.Asset EnhancementsOur capital expenditures program strategy has twoelements:Preserve: Inner works (boilers, roofs, maintenance)Maintain asset value through routine care Improve efficiencies through upgrades (lowerbuilding operating costs)Driven by annual building & equipment conditionassessmentsEnhance: Visible improvements (common areas upgrades,landscaping, improved comfort & aestheticsUpgrades that help lease buildings & retaintenantsDriven by lease expiries/vacancy and needWe continually look to improve our assets with valueadding investments that enhance property quality, whichleads to higher occupancy and rental rates. Theseupgrades typically focus on increasing operatingefficiency, property attractiveness, functionality anddesirability. We use our intimate knowledge of thebuildings we operate to support capital investmentdecisions, optimize operating efficiency and continuouslyimprove our buildings for improved client satisfaction.Each building undergoes an annual assessment to identifypreventative maintenance and capital investmentrequirements, and we continuously monitor and log allequipment and maintenance activity.Specialized Skill and KnowledgeThe REIT’s external manager, Melcor, has an experiencedteam of real estate professionals with diversebackgrounds in the acquisition, divestiture, development,financing and operation of commercial income producingreal estate.Melcor also provides significant redevelopment expertisewith the ability to undertake property expansion andredevelopment opportunities, where appropriate, incompliance with the investment guidelines and operatingpolicies of the REIT.Competitive ConditionsA description of competitive conditions relevant to theREIT’s business is set out in the Business Environment andRisks section of the 2015 Management’s Discussion andAnalysis under the heading “Competitive Conditions” andis incorporated by reference.FinancingThe REIT has strong relationships with its major lenders.The REIT uses fixed rate, long-term mortgages on itsrevenue-producing assets to raise capital for acquisitionsand other business expenditures. As such, most of itsborrowings are in the form of long-term financingssecured by specific assets.Melcor REIT 2015 ANNUAL INFORMATION FORM6

Operations are also supplemented by a syndicatedoperating line of credit, which is secured by certain assetsowned by the REIT.To support its growth objectives, the REIT expects toaccess capital markets through public offerings,dependent on market conditions.Overview of Property PortfolioAt December 31, 2015, the REIT owned interests in aportfolio of 38 income-producing properties located inWestern Canada.The composition of the portfolio as at December 31, 2015by geographic location is as follows:Region2015 GLA2014 GLAEdmonton regionCalgary regionLethbridgeReginaKelownaRed 94%1%13%1%Leasable sf is updated periodically, typically as leases renew.The following charts summarize the portfolio bygeographic region as at December 31, 2015.2015 GLA by Region2014 GLA by Region13%28%13%59%Northern AlbertaSouthern AlbertaSaskatchewan & BC2015 NOI by Region28%Northern AlbertaSouthern AlbertaSaskatchewan & BC2014 NOI by Region12%27%59%12%24%61%Northern AlbertaSouthern AlbertaSaskatchewan & BC64%Northern AlbertaSouthern AlbertaSaskatchewan & BCPortfolio CompositionThe following table details the REIT’s investment propertyholdings as at December 31, 2015:CommercialEdmonton Region100 Street PlaceBirks BuildingCapilano Centre1Coast Home CentreCorinthia PlazaLeduc Common2Melton BuildingMiller CrossingPrinceton PlaceRoyal Bank BuildingSelect BuildingStanley BuildingsSterling BusinessCentreTelfordTKE BuildingTrail Business CentreVillage at BlackmudCreekWest HendayPromenadeWestcor BuildingWestgate BusinessCentreWestgrove CommonWhite OaksCalgary RegionChestermere Station1,3Crowfoot BuildingKensington RoadBuildingKingsview MarketLethbridge, ABLC IndustrialLethbridge IndustrialLethCentreGLA4% ceOfficeOffice2014-15200220022014Red Deer, AB63,317100Liberty Crossing2013Retail63,317100Regina, SK265,40994Executive Terrace2007Office42,84588Market Mall2014Retail42,58693Parliament Place2007Office24,41186Towers Mall2007Retail114,33197University Park2014Retail41,238100Kelowna, BC101,26485Kelowna Business2006Office72,28681CentreRichter Street2007Office28,97895Total @ 100% ownership2,888,246Total net of JV ownerships2,768,7501. Owned through joint arrangement.2. Includes 56,980 sf of land leases.3. Includes 3,186 sf of land leases.4. Leasable sf is updated periodically, typically as leases renew.5. Date Melcor or the REIT first acquired the property, whetherpurchased from a third party or transferred to Melcor InvestmentPropertiesMelcor REIT 2015 ANNUAL INFORMATION FORM7

ResidentialLocationYear AcquiredUnits% LeasedWatergrove1Calgary, AB1995308Total3081. Watergrove is a manufactured home community that the REITowns through a joint arrangement (50%)Environmental ProtectionThe REIT is subject to various laws and regulationsconcerning the protection of the environment. Forexample, laws apply to releasing hazardous, toxic or otherregulated substances into the environment. Suchsubstances may be present at or under our properties.Such requirements often impose liability without regardto whether the owner or operator knew of, or wasresponsible for, the release or presence of suchsubstances. Additional liability may be incurred by theREIT with respect to the release of such substances fromthe REIT’s properties to properties owned by third parties,including properties adjacent to the REIT’s properties orwith respect to the exposure of persons to suchsubstances. The failure to remove or otherwise addresssuch substances may materially adversely affect theREIT’s ability to sell such property, maximize the value ofsuch property or borrow using such property as collateralsecurity, and could potentially result in claims or otherproceedings against the REIT.The REIT maintains a rigorous due diligence process priorto the acquisition of any investment property to mitigateits exposure to these potential issues.Environmental protection requirements did not have asignificant financial or operational effect on the REIT’scapital expenditures, earnings or competitive positionduring 2015, and management does not expect significanteffects in future years.Risk FactorsReference is made to the REIT’s MD&A for the year endedDecember 31, 2015 under the heading “BusinessEnvironment & Risks”, which is incorporated by referenceinto this Annual Information Form.Acquisition of Future Properties from MelcorThe REIT’s ability to expand its asset base and increaseAFFO per Unit through acquisitions is affected by theREIT’s ability to leverage its relationship with Melcor toacquire additional investment properties that satisfy theREIT’s investment guidelines. Melcor has advised the REITthat its current intention is to offer to sell to the REITadditional investment properties that it owns and/ordevelops in one or more transactions over the next fewyears, subject to market conditions, although no100100assurances can be given in that regard or in respect ofMelcor’s future development sites. There can be noassurance that the REIT will be able to access suchopportunities and acquire additional properties or do soon terms favourable to the REIT. The inability of the REITto expand its asset base by virtue of its relationship withMelcor or pursuant to the Right of First Offer, the JointVenture Option, the Development Property Option andthe Mezzanine Financing Option may have a materialadverse effect on the REIT’s business, cash flows, financialcondition and results of operations and ability to makedistributions to unitholders.Potential Conflicts of Interest with MelcorMelcor’s continuing businesses may lead to conflicts ofinterest between Melcor and the REIT. The REIT may notbe able to resolve any such conflicts, and, even if it does,the resolution may be less favourable to the REIT than if itwere dealing with a party that was not a holder of asignificant interest in the REIT. The agreements betweenthe REIT and Melcor may be amended upon agreementbetween the parties, subject to applicable law andapproval of the Independent Trustees. See“Arrangements with Melcor”. As a result of Melcor’ssignificant holdings in the REIT, the REIT may not have theleverage to negotiate any required amendments to theseagreements on terms as favourable to the REIT as thosethe REIT could secure with a party that was not asignificant unitholders.Dependence on Melcor and the PartnershipThe REIT is dependent on Melcor for management,administrative and operations services relating to theREIT’s business. The Asset Management Agreement has aterm of five years, with automatic five-year renewals, andmay at times in the future not reflect current marketterms for duties and responsibilities of Melcor. There is arisk that, because of the term and termination provisionsof the Asset Management Agreement, termination of theAsset Management Agreement may be uneconomical forthe REIT and accordingly not in the best interest of theREIT.Should Melcor terminate the Asset ManagementAgreement or the Property Management Agreement, theREIT may be required to engage the services of anexternal asset manager and/or property manager. TheREIT may be unable to engage an asset manager and/orproperty manager on acceptable terms, in which case theREIT’s operations and cash available for distribution maybe materially adversely affected. Alternatively, it may beable to engage an asset manager and/or propertymanager on acceptable terms or it may elect toMelcor REIT 2015 ANNUAL INFORMATION FORM8

internalize its external management structure, but theprocess undertaken to engage such manager(s) or tointernalize management could be costly and timeconsuming and may divert the attention of managementand key personnel away from the REIT’s businessoperations, which could materially adversely affect itsfinancial condition.Additionally, the Development and OpportunitiesAgreement provides that, subject to certain exceptions,the REIT will not engage a party other than Melcor or itsaffiliates to perform any of the services to be performedby Melcor pursuant to the Asset ManagementAgreement.While the Trustees have oversight responsibility withrespect to the services provided by Melcor pursuant tothe Asset Management Agreement and the PropertyManagement Agreement, the services provided byMelcor under such agreements will not be performed byemployees of the REIT or the Partnership, but by Melcordirectly, and through entities to which it may subcontractits duties. Further, the foregoing arrangements aresubject to limited termination rights in favour of the REIT.See “Arrangements with Melcor”. As a result, Melcor willdirectly, and indirectly through entities to which it maysubcontract, have the ability to influence many mattersaffecting the REIT and the performance of its propertiesnow and in the foreseeable future.Melcor’s senior management team to act as ChiefExecutive Officer and Chief Financial Officer, and(c) advising the Board on strategic matters, includingpotential acquisitions, dispositions, financings anddevelopment. In providing the asset managementservices, Melcor will exercise the degree of care,diligence, judgment and skill that would be exercised by aprofessional, prudent and competent person who isexperienced in providing substantially similar services.Asset Management FeeMelcor is entitled to the following fees for the services itprovides pursuant to the Asset Management Agreement:(a)a base annual management fee calculated andpayable on a quarterly basis, equal to 0.25% ofGross Book Value of the REIT’s investmentproperties;(b)a capital expenditures fee equal to 5.0% of all

The objectives of the REIT are to: (i)generate stable and growing cash distributions on a tax-efficient basis; (ii) enhance the value of the REIT's assets and maximize long-term Unit value through active asset and property management; and (iii) expand the asset base of the REIT and increase adjusted funds from operations (AFFO) per