Mr. Paul Dykeman reports

SUMMIT INDUSTRIAL INCOME REIT ANNOUNCES SOLID GROWTH & STRONG PERFORMANCE IN 2016

Summit Industrial Income REIT had solid growth and strong operating performance for the three months and year ended Dec. 31, 2016.

2016 highlights:

• Acquired seven income-producing properties totalling 763,898 square feet for $80.9-million at average cap rate of 7.05 per cent;
• Entered into first value-added transaction with acquisition of 50-per-cent interest in 156,925-square-foot Montreal property. Property has been leased for a 15-year term commencing Feb. 15, 2017;
• Portfolio growth generates 17.1-per-cent increase in revenues;
• FFO (funds from operations) up 15.6 per cent due to revenue growth and strong operating performance. Fourth quarter FFO up 27.5 per cent;
• Growth accretive as FFO per unit up 2.9 per cent despite 12.4-per-cent increase in units outstanding;
• Strong FFO payout ratio of 82.6 per cent -- 69.1 per cent with DRIP (dividend reinvestment plan) benefit;
• Completed successful $34.2-million bought-deal equity offering on June 17, 2016;
• Occupancy remains strong at 98.9 per cent at Dec. 31, 2016, with average lease term of 5.4 years and contractual rent steps of 1.7 per cent per year;
• A strong year of leasing, completing 633,291 square feet of new and renewal leasing compared with 372,270 square feet in 2015;
• Obtained $20.4-million in new mortgage financings at an average fixed interest rate of 3.2 per cent for an average eight-year term to maturity;
• Manager and insiders interest remains strongly aligned with unitholders through 12.9-per-cent insider ownership of REIT units outstanding;
• 100 per cent of 2016 distributions tax deferred as a return of capital.

Subsequent to year-end:

• Completed successful $46.0-million bought deal equity offering on Jan. 31, 2017;
• Acquired a $17.0-million income-producing property and waived conditions, and proceeding to close on an additional $28.2-million of acquisitions;
• In addition, the REIT is currently performing due diligence on three acquisitions for a total of approximately $54.0-million;
• Expected to finance the various acquisitions with new and assumed five-year mortgages at interest rates between 3.00 per cent and 3.15 per cent.

"Two thousand sixteen was another active and successful year for Summit as we continued to execute our focused value-enhancing strategies. We expanded and strengthened our property portfolio with strategic and accretive acquisitions in our target markets, we embarked on our first joint venture property development project, and we generated solid organic growth through our pro-active leasing and property management programs," commented Paul Dykeman, chief executive officer. "Looking ahead, we are confident this growth and strong operating performance will continue, leading to solid, stable and sustainable returns for our unitholders over the long term."

Strong operating and financial results

Operating revenues increased to $12.8-million and $45.0-million for the three months and year ended Dec. 31, 2016, respectively, from $9.7-million and $38.4-million, respectively, last year, due primarily to the REIT's portfolio growth, strong operating performance and successful leasing activities. Occupancy increased to 98.9 per cent at Dec. 31, 2016, from 98.1 per cent at the end of 2015. Net operating income (NOI) rose to $8.3-million and $30.3-million in the fourth quarter and year ended Dec. 31, 2016, compared with $6.7-million and $26.5-million in the same prior-year periods.

Funds from operations for the three months and year ended Dec. 31, 2016, were $5.5-million (15.7 cents per unit) and $19.6-million (61.0 cents per unit), compared with $4.3-million (15.0 cents per unit) and $17.0-million (59.3 cents per unit) in the same periods last year. The REIT's FFO payout ratio was 82.6 per cent (69.1 per cent including benefit of DRIP) in 2016, compared with 85.0 per cent (71.4 per cent including benefit of DRIP) last year.

Solid portfolio growth

During 2016, the REIT acquired seven income-producing properties in the greater Montreal area, Edmonton and Calgary, adding approximately 763,898 square feet to the property portfolio for a total cost of approximately $80.9-million, generating a very strong capitalization rate of 7.05 per cent. In addition, pursuant to its stated growth strategy, the REIT acquired its first value-added property with the purchase of a 50-per-cent interest in a 156,925-square-foot Montreal property for a cost to the REIT of $3.6-million. With these acquisitions, at Dec. 31, 2016, the portfolio totalled 53 properties well diversified in major Canadian industrial markets totalling 5.2 million square feet of gross leasable area (GLA).

Active leasing program

Portfolio occupancy at Dec. 31, 2016, was 98.9 per cent, up from 98.1 per cent at the end of 2015. The weighted average lease term for the portfolio was approximately 5.4 years at Dec. 31, 2016, with leases containing contractual steps in rent of approximately 1.7 per cent per year over this term. The REIT continues to be pro-active in addressing lease expiries well in advance of their expiry date. Leasing costs were approximately $1.87-million in 2016, compared with $1.40-million in 2015. During 2016, 440,244 square feet of renewal leasing was completed as well as 193,047 square feet of new leases for a total of 633,291 square feet, compared with 372,270 square feet in 2015.

For the year ended Dec. 31, 2017, approximately 390,000 square feet, or 7.7 per cent of the total portfolio, is up for lease renewal. In Q1 2017, approximately 121,138 square feet (31 per cent of the 2017 expiries) has been renewed for a five-year term with rent starting 4.4 per cent higher than the expiring rent. Discussions are also under way on the renewal of an additional 114,275 square feet (29 per cent of the 2017 expiries).

In Q1 2017, the value-added property in Montreal has been leased for a 15-year term commencing Feb. 15, 2017. The property will produce an average yield of approximately 8.5 per cent. Also, in Q1 2017, 38,386 square feet of the vacancy at Dec. 31, 2016, hav been leased to a short-term tenant.

Strong balance sheet and liquidity position

Total assets increased to $500.8-million at Dec. 31, 2016, up from $406.4-million at Dec. 31, 2015, due to the acquisition of interests in seven income-producing properties and one value-added property in 2016. Fair value gains for the year ended Dec. 31, 2016, were $5.6-million, compared with fair value losses of $27,000, for the same period in 2015. This is mainly attributable to increasing market values of the properties in the Greater Toronto Area.

Total debt was $270.6-million at Dec. 31, 2016, compared with $218.4-million at Dec. 31, 2015. The increase was due primarily to financings related to property acquisitions completed through 2016, offset by the $32.5-million in net proceeds from a public offering of approximately 5.7 million trust units completed on June 17, 2016. As of Dec. 31, 2016, $34.3-million was drawn on the available $39.2-million revolving credit facility.

As at Dec. 31, 2016, the REIT's debt leverage ratio was 54.0 per cent, compared with 53.7 per cent at Dec. 31, 2015. The weighted average effective interest rate on the REIT's mortgage portfolio reduced to 3.43 per cent at Dec. 31, 2016, down from 3.52 per cent at the prior year-end, with a weighted average term to maturity of 4.5 years, consistent with the prior year-end. Debt service and interest coverage ratios were 1.80 times and 3.05 times, respectively, compared with 1.77 times and 2.94 times, respectively, at Dec. 31, 2015.

Subsequent events

On Jan. 31, 2017, the trust completed a public offering of approximately 7.4 million units at a price of $6.20 for total gross proceeds of approximately $46.0-million. The offering incurred issue costs of $2.1-million for net proceeds of $43.9-million. The offering proceeds were used to repay outstanding debt under the revolving credit facility and will be used to finance subsequent acquisitions.

On Feb. 14, 2017, the trust acquired a light industrial property in Calgary, aggregating 120,690 square feet of GLA for $17.0-million. The acquisition was satisfied with proceeds from the offering. The trust expects to finance this property with approximately $11.2-million in new mortgage financing at an indicative rate of 3.00 per cent for a term of five years. The property is fully leased to two tenants with a weighted average lease term of 7.7 years.

The trust waived conditions on acquiring a light industrial property in the Greater Toronto Area, aggregating 260,830 square feet of GLA for $28.2-million. The acquisition is expected to be satisfied by a new mortgage of $17.7-million bearing an interest rate to be set at five-year government of Canada bonds plus 1.90 per cent and term to maturity of five years with the balance from the offering. The expected closing date is on or before Feb. 28, 2017. This property is a single-tenant building with a remaining lease term of 10-year term.

With the completion of these recent acquisitions, the REIT's total property portfolio will comprise interests in 55 light industrial properties totalling 5.6 million square feet of GLA.

Investor conference call

A conference call will be hosted by Summit II's management team on Wednesday, Feb. 22, 2017, at 9:30 a.m. ET. The telephone numbers to participate in the conference call are North America toll-free 866-225-0198 and local Toronto/international 416-340-2218. The live audio conference call will also be available as a webcast. To access the audio webcast, please access the link on the investor information page on the REIT's website. The telephone numbers to listen to the call after it is completed (instant replay) are North American toll-free 800-408-3053 or local Toronto/international 905-694-9451. The passcode for the instant replay is 6712799 followed by the pound key. A webcast of the call will also be archived on the REIT's website.

                               FINANCIAL AND OPERATING HIGHLIGHTS
           (in thousands of Canadian dollars, except per-unit amounts and as indicated) 

                                          Three months ended Dec. 31,                 Years ended Dec. 31,
                                                     2016       2015                      2016       2015
Portfolio performance       
Occupancy (%)                                       98.9%      98.1%                     98.9%      98.1%
Revenue from income properties                  $  12,766  $   9,708                 $  44,950  $  38,377
Property operating expenses                         4,429      2,966                    14,697     11,865
Net operating income                                8,337      6,742                    30,253     26,512
Interest expense                                    2,382      2,008                     8,943      8,100
Net income                                          9,830      4,956                    24,376     17,935
Operating performance     
FFO per unit (1)                                    0.157      0.150                     0.610      0.593
Regular distributions per unit declared 
to unitholders                                      0.126      0.126                     0.504      0.504
Special distributions per unit declared 
to unitholders (2)                                      -          -                         -      0.016
Regular FFO payout ratio without DRIP benefit       80.0%      84.3%                     82.6%      85.0%
Regular FFO payout ratio with DRIP benefit          67.5%      70.8%                     69.1%      71.4%
Total distributions per unit declared to 
unitholders                                         0.126      0.126                     0.504      0.520
Liquidity and leverage        
Total assets                                      500,807    406,411                   500,807    406,411
Total debt (loans and borrowings)                 270,635    218,369                   270,635    218,369
Weighted average effective mortgage 
interest rate                                       3.43%      3.52%                     3.43%      3.52%
Weighted average mortgage term (years)               4.51       4.47                      4.51       4.47
Leverage ratio                                      54.0%      53.7%                     54.0%      53.7%
Interest coverage (times)                            3.16       3.01                      3.05       2.94
Debt service coverage (times)                        1.83       1.77                      1.80       1.77
Other       
Properties acquired                                     -          -                         8         11
Non-core properties disposed                            -          -                         -          -

(1) On June 17, 2016, approximately 5.65 million units were issued on completion of a public offering. On
Jan. 7, 2015, approximately 5.13 million units were issued on completion of a public offering. 

(2) On the sale of a 75-per-cent interest in two properties, the trustees approved a special distribution 
of 1.6 cents per unit payable to shareholders of record May 31, 2015, which was paid June 15, 2015.

Summit II's audited consolidated financial statements and MD&A (management discussion and analysis) for the three months and year ended Dec. 31, 2016, are available on the REIT's website.

About Summit Industrial Income REIT

Summit Industrial is an unincorporated open-ended trust focused on growing and managing a portfolio of light industrial properties across Canada.

We seek Safe Harbor.