Vincent Lo
Sneha Naik
Yi Ding
Kitty Liu

REITs Overview

RioCan REITs

Boardwalk REITs

H&R REITs




REIT is a real estate investment trust that originated in
the United States in the 1960’s and was introduced in
Canada in 1993 as publicly traded securities
Pools capital into real estate that is structured to
generate regular distributions of cash
Investors are not directly investing in real estate
property, they are investing in REIT units that are
publicly traded
REITs are 100% eligible as Canadian content for
registered portfolios

REITs are income stocks because:

Canadian REITs must pay 85% its net income to
shareholders

They pay dividends monthly

REIT regulations restrict or discourage “merchant
building”

Most REITs have limited development rights





Dual market situation where two parallel markets exist for trading
real estate
Stock market valuation of property (indirect market), and the
private market valuation (direct market) are not always the same
Indirect market (REIT market) tends to lead the private market
When two markets disagree REITs can undertake positive NPV
investments either by buying or selling in the private market
When the stock market values property more highly than private
property market, REITs can grow merely by buying properties,
and thus becoming growth stocks, at least temporarily

U.S.



136 equity REITs listed on major exchanges
Market capitalization of US $191 billion
Canada


25 REITs listed on TSX
Market capitalization of $21.2 billion

Pre-tax income flows through to investors

Investors get favorable tax treatment on the income



A component of the tax obligation is deferred until the
units are sold
Offer diversification and a level of stability, without
sacrificing growth potential
Provide exposure to real estate – real assets with
tangible value and reliable income streams – in a
highly liquid, marketable security


Distinct in their combination of relatively
steady income, capital gains potential, tax
benefits and professional, active management
As a trust, REITs are subject to more stringent
regulations in areas such as leverage and
financial reporting, providing investors with an
added layer of security




Mutual funds
Stocks
Bonds
But because real estate has limited correlation
to most other stocks and bonds, REITs provide
one more layer of diversification



Equity REITs
Equity REITS invest in and own properties (thus responsible for
the equity or value of their real estate assets). Their revenues come
principally from their properties' rents
Mortgage REITs
Mortgage REITs deal in investment and ownership of property
mortgages. These REITs loan money for mortgages to owners of
real estate, or invest in (purchase) existing mortgages or mortgage
backed securities. Their revenues are generated primarily by the
interest that they earn on the mortgage loans
Hybrid REITs
Hybrid REITs combine the investment strategies of Equity REITs
and Mortgage REITs by investing in both properties and
mortgages

Minimum of 150 unit holders, and are listed on a recognized
Canadian Exchange

No more than 50% of the shares can be held by five or fewer
individuals




At least 95% of its income must be derived from the
disposition of or income earned from qualifying
investments
At least 80% of its property must be held in any combination
of real property in Canada and other qualifying investments
No more than 10% of its property (on a non-consolidated
basis) should consist of bonds, securities or shares in the
capital stock of any one corporation or debtor
Income is not taxed within the trust as long it is distributed
to unit holders

Applicable to all Canadian trusts companies that begin trading after
Oct. 31, 2006, except qualified REITs
1) At no time in the year hold any non-portfolio property other than
real properties situated in Canada
2) Must have at least 95% of its income for the year from properties
3) Have more than 75% of its income to be directly or indirectly
attributable to rents from, mortgages on, or gains from the
disposition of real properties situated in Canada
4) Hold throughout the year real properties situated in Canada, cash,
and debt or other obligations of governments in Canada with a total
fair market value that is not less than 75% of its equity value.

Four year transition period for existing trusts (2011)


Rise in Interest Rates – Interest expense increases
Fall in Interest Rates – Interest expense reduces
1.
2.
3.
4.
•
5.
•
•
6.
•
7.
•
Management Expertise
Net Asset Value per Share
Portfolio Diversification
Strong Growth Prospects
Access to funding
Low Leverage
Interest Coverage Ratio
%Long term debt to Capitalization
Earnings available for distribution
FFO, AFFO (or FAD) instead of Net Income
Cash Distribution to Unitholders
FFO or AFFO Payout Ratio




Net income (NI) or GAAP Earnings – not the best
measure largely due to depreciation allowance
Funds from operations (FFO) – closer to economic
truth but ignores capital improvements
Funds available for distribution (FAD) – cash flow
available to share holders if there is no change in
working capital or no new debt
Free cash flow (FCF) – this is REIT’s true operating
cash flow
=
+
=
Real estate revenue
Real estate expense
Depreciation & amortization of real estate
Income from real estate
Other Income
General and administrative expense
Net Income per GAAP
=
+
=
Net income per GAAP
Gains from sale of real estate
Adjusted net income
Depreciation and amortization of real estate
Funds From Operation
Funds from operation
+ Rent adjustments
- Capital improvements
= Funds Available for Distribution
+
+
+
=
Funds available for distribution
Real estate acquisitions (new investments)
Changes in working capital
Principal payments
New debt issue
Gain on sale of real estate
New equity issue
Free Cash Flow to Equity

AFFO per unit is calculated by adjusting FFO
from straight line and market rent adjustments,
non-cash compensation expenses, actual costs
incurred for capital expenditures and leasing
costs for maintaining shopping centre
infrastructure and current lease revenues
Stock Market Overview




Ticker: REI.UN
Industry: Real Estate
Investment Trust
Exchange: Toronto Stock
Exchange
Market Capitalization:
$4,570.16 million

RIOCAN OVERVIEW:






12/18: Announced completion of acquisition of four retail
properties in Canada
12/01: Announced completion of $100.9 million public
offering of trust units and over-allotment option
11/18: Announced firm contracts on retail properties in
Canada
11/03: Closed $150 million of unsecured debenture issue
10/30: Formed a joint venture to acquire retail real estate
in the U.S owned 80% by RioCan and 20% by Cedar
Shopping Centers, Inc.
10/26: Announced agreements with Cedar Shopping
Centers Inc.
RioCan Real Estate Investment Trust is an unincorporated
“closed-end” trust governed by the laws of the Province of
Ontario

RioCan is publicly traded and is listed on the Toronto Stock
Exchange

RioCan is Canada’s largest real estate investment trust with a
total market capitalization of approximately $4.57 million

Ownership interest in a portfolio of 258 retail properties,
including 12 under development across Canada comprising of
over 60 million square feet

Over $2.3 billion distributed to unit holders since the IPO and
$3.5 billion of debt under management

Revenue of $187 million in Q2 of 2009 and a diversified tenant
base with total tenancies of 5,600

Management
Team

Edward Sonshine – President &
CEO, RioCan REIT

CEO of RioCan REIT since late
1993 and has overseen its
growth from an asset base of
under $100 million to its current
enterprise value of $7 billion

Previously practiced law for 15
years and was awarded his
Queen’s Counsel in 1983

Member of the board of
directors of RBC, Chair of
Chesswood Income Fund, and
Chair of Mount Sinai Hospital
Foundation
Management
Team

Frederic A. Waks – Senior Vice
President & COO, RioCan REIT

COO of RioCan since 1995

Started real estate carrier in 1981
with Royal LePage and earned the
honourable designation of Rookie
of the Year in the Commercial
Division and President’s Round
Table

In 1984, joined First Plazas as Vice
President of Leasing/Marketing
and then moved to Dominion Trust
in 1988 under the position of Senior
Vice President. From 1993 to 1995,
acted as Vice President of Retail
Leasing for Confederation Life

Raghunath Davloor – Senior Vice President &
CFO, RioCan REIT

CFO of RioCan since 2008

Over 25 years of real estate, management, finance,
accounting, and tax experience

Started with Arthur Anderson & Co where he spent 8
years in audit, tax and advisory roles, followed by over 10
years at O&Y Properties and O&Y REIT ultimately
becoming CFO. Prior to coming to RioCan, worked as
Vice President and Director in corporate finance for 2
years at TD Securities where he focused on real estate
industry coverage



As of December 31, 2009, RioCan has ownership
interests in a portfolio of 246 shopping centres
comprising of 54.5 million sq. ft. compared to 50.6
million sq. ft. in 2008
RioCan has ownership interests in 12 Greenfield
Development projects as of December 31, 2009
Upon completion this comprises of approximately
8.5 million sq. ft. of which RioCan’s ownership
interest is approximately 3 million sq. ft.




On October 30, 2009, RioCan formed a joint venture to
acquire retail real estate in the U.S owned 80% by RioCan
and 20% by Cedar Shopping Centers, Inc. [NYSE:CDR,
“Cedar”]
Properties are 7 grocery-anchored shopping centres in
Massachusetts, Pennsylvania, and Connecticut owned by
Cedar
Total consideration paid by RioCan in this initial investment
is approximately US$181 million resulting in a net equity
investment of US$106 million
Provides RioCan with a platform for growth opportunities
in the U.S





During 2009, RioCan completed total acquisitions of $348 million that
comprised of approximately 1.8 million sq. ft.
Three month period ended December 31, 2009, and RioCan completed
total acquisitions of $257.1 million that comprised of approximately 1.2
million sq. ft.
In March 2009, RioCan acquired interest in 6 grocery anchored retail
properties in Greater Montreal Area totaling 454,000 sq. ft. for a total
purchase price of $67.5 million
RioCan holds 100% interest in two of the properties and 50% interest in
these four properties
Annualized net operating income expected to be generated from this
portfolio is approximately $6.1 million
1) Concord Centre, Laval
2) La Prairie Centre, La Prairie
3) Rene-A.-Robert Centre
4) Sicard Centre, Ste-Therese
5) St. Jean, St-Jean-sur-Richelieu
6) Ste-Therese Ste Julie, Ste Julie
YEAR








DISTRIBUTION
YTD 2010
2009
2008
2007
2006
2005
2004
2003
$0.23
$1.38
$1.36
$1.3275
$1.2975
$1.2725
$1.2275
$1.14








YEAR
DISTRIBUTION
2002
2001
2000
1999
1998
1997
1996
1995
$1.105
$1.075
$1.07125
$1.04
$0.95
$1.55
$1.30
$1.15




Debt-to-Gross Book Value of 55.8% as of June 30,
2009
Total operating lines of $293.5 million with
approximately $193 million available
Cash on hand as at June 30, 2009 was
approximately $300 million
In 2009, S&P affirmed RioCan’s issuer credit rating
of BBB

Geographic Diversification

As of June 30, 2009, approximately 85% of RioCan’s
annualized rental revenue was derived from
national and anchor tenants

Approximately two-thirds of RioCan’s revenue came
from properties within the below stated six high
growth major Canadian markets
Rental Revenue
Ontario
17.10%
18.00%
Net Leasable Area
3.00%
0.00%
4.20%
0.40%
Quebec
18.70%
Eastern
Canada
61.90%
Quebec
Wester
n
Canada
Eastern
Canada
Western
Canada
United
States
Ontario
18.10%
United
States
58.60%
10.00%
5.70%
17.90%
2.10%
0.50%
0.50%
0.50%
0.40%
0.10%
Ontario
Quebec
Alberta
British Columbia
New Brunswick
Saskatchewan
Prince Edward Island
Manitoba
Newfoundland
Nova Scotia
62.30%



RioCan’s core investment strategy is to focus on
stable, low risk, predominantly retail properties in
either stable or high growth markets
Aim at creating stable and over time growing cash
flows from its property portfolio
Retail assets in which RioCan currently invests are:




New format retail centres
Neighbourhood convenience unenclosed centres
Enclosed shopping centres
Urban retail properties
Annualized Rental Revenue
by Property Type
7.40% 4.40%
4.30%
9.80%
Net Leasable Area by
Property Type
17.90%
New Format
Retail
Enclosed
Shopping
New Format
Retail
5.00%
21.80%
4.50%
Grocery
Anchored
15.00%
Grocery
Anchored
Urban Retail
37.00%
49.10%
Office
Non-Grocery
Anchored
Urban Retail
47.10%
Enclosed
Shopping
Non-Grocery
Anchored
Office





The occupancy rate of RioCan’s Canadian portfolio has remained
relatively stable over the most recent eight fiscal quarters as can be
seen in the diagram in the next few slides
Occupancy rate as of December 31, 2009 is 97.4%
Up 50 basis points from December 31, 2008 and 10 basis points from
September 30, 2009
Economic occupancy rate at December 31, 2009 is slightly lower at
96.4% that represents the occupied NLA for which tenants are open
and in business
RioCan’s portfolio performed strongly, but financial results were
affected due to the economic environment that resulted in greater
than normal tenant bankruptcies and bad debts

Greenfield Development

Development is carried out through in-house capabilities and
with partners such as Trinity and Canada Pension Plan
Investment Board (CPPIB)

As of June 20, 2009, total Greenfield developments comprised
of 9.4 million sq. ft.

RioCan owns interest in the property consisting of 3.3 million
sq. ft. and invested $261 million in the project

Total estimated cost is $6.1 billion, with RioCan’s interest being
approximately $690 million

Generated unlevered yield between 7% to 11% at the weighted
average of 8.5% to 9.5%

Strategic sales to CPPIB

In June 2008, 50% of non-managing interest in
Jacksonport development in Calgary

In October 2008, 37.5% of non-managing ownership
interest in two or three phases in East Hills in Calgary

Sales allowed RioCan to recoup 100% of its equity in
these projects

Strengthen relationship with Canada’s largest pension
fund


Capitalize on trend in Canada’s six high growth
markets towards densifying existing urban
locations by

Prohibiting costs of expanding infrastructure beyond
urban boundaries

Concerns towards environment issues

Maximizing use of transit
Generate high yields on land that is currently owned

Younge Eglintion Centre, Toronto, Ontario

Largest acquisition at $223 million
Acquired in January 2007
Office Area: 750,126 sq. ft.
Rental Area: 264,391 sq. ft.
Launched a revitalization and expansion plan to
capitalize on the area’s residential intensification
 Improvements to parking




 46,000 sq. ft. of new retail and a connection to office towers
and to the food court
 12-storey, 210,000 sq. ft. expansion of office towers

Increase leasing and capital improvement has increased
NOI (net operating income) and occupancy rate

Tillicum Centre in Victoria, BC



Acquired in July 2002
Total area: 62,000 sq. ft.
Improved tenant quality and aesthetics and
increased NOI from $5.3 million at purchase to $7.0
million in 2008

Operational and Financial Highlights

Balance Sheet

Income Statement

Cash Flow Statement

Funds from Operations (FFO)

Adjusted Funds from Operations (AFFO)



RioCan’s reported net earnings for the year ended
December 31, 2009 of $113.9 million ($0.49 per
unit) compared to $145.1 million ($0.67 per unit) in
2008
FFO as of December 31, 2009 is $275.7 million
($1.20 per unit) compared to $323.6 million ($1.48
per unit) in 2008
Difference between net earning and FFO is
amortization expense, future income tax and
impairments

$47.9 million decrease in FFO is primarily due to
the following changes:

Decreased gains on properties held for resale of $35.6
million

Increased interest expense of $24.9 million

Decreased fees and other income of $2 million; offset by

Increased net operating income from rental properties of
$13.3 million due to acquisitions, completion of
Greenfield Developments and intensification of existing
properties
SELL!!!
Ticker: BEI.UN – T
Industry : Real Estate
Exchange: Toronto Stock Exchange
Open
41.27
Beta
0.69
High
40.82
Market Cap
2,140.60M
Low
40.60
EPS
1.08
Bid ×0 lots
40.82
P/E
37.77
Ask × 0 lots
40.85
Forward P/E
15.32
Volume
52,538
PEG
--
Previous Close
40.76
Annual Dividend 1.80
52-week High
41.65
Yield
52-week Low
24.10
4.40







Canada's largest public owner/operator of multifamily rental communities
Unincorporated, open-ended real estate
investment trust created pursuant to a Declaration
of Trust, dated January 9, 2004
Listed in Toronto Stock Exchange Market since
2004
Currently owns and operates in excess of 260
properties with 36,418 units
Approximately 31 million net rentable square feet
Rental universe of over 1.5MM units in major
Canadian CMA’s)
Total Gross Book Value: about $4 billion in
Canadian dollar



Feb. 23 – Announcement of $0.15 distribution
for February and March
Jan. 07 – Enter into an automatic trust unit
purchase plan in order to facilitate repurchases
of its trust units under its previously
announced normal course issuer bid in August,
2009.
Dec. 31 – Declared distributions of $95.3
million, representing approximately 70% of the
reported DI for the year.

Sam Kolias – CEO

He and his brother Van Kolias, Senior VP of Quality
Control of Boardwalk, are at #81 of the top 100
richest people in Canada as compiled by Canadian
Business magazine for 2006.

They originally bought a large chunk of apartment
real estate in Alberta and Saskatchewan. Through
their public company, Boardwalk Rental
Communities, they have entered B.C., Ontario, and
Quebec.


William Wong – CFO
Jonathan Brimmell – Vice President, Operations, Ontario &
Quebec

Dean Burns – Vice President, General Counsel & Secretary

Ian Dingle – Vice President, Purchasing



Kelly Mahajan – Vice President, Customer Services & Process
Design
Lisa Russell – Vice President, Acquisitions, Western Canada
Lizaine Wheeler – Vice President, Operations, British Columbia,
Alberta & Saskatchewan

Boardwalk invested approximately $70.4 million in its
properties in the form of project enhancements in 2009
a decrease of $17.9 million from the $88.3 million invested in
2008.
 The decrease is due primarily to a decrease in the expenditures
largely related to building exterior and suite improvements



Only one apartment unit in Edmonton, Alberta
Acquire addition Boardwalk REIT units on public
market


In 2009, bought back 790,000 units for total investment
$22.8 million
Fund of acquisition
Sale of Non-Core properties: 367 apartment units sold for
$39.8 million
 NHA to insure a historical low interest rate


Compared to 2008
298 units acquired all in Alberta
 Bought back 2.3 million trust units by $85.4million

Year
2009
2008
2007
2006
2005
2004
Distribution
$1.80
$1.80
$1.5933
$1.2967
$1.26
$1.245
Alberta
12 Months 09
12 Months 08
173,320
170,311
% change
1.8%
Calgary
49,706
49,761
-0.11%
Edmonton
103,276
101,352
1.898%
Other Alberta
17,270
17,456
-1.066%
Saskatchewan
35,904
28,753
24.9%
Ontario
19,262
18,026
6.9%
Quebec
43,869
41,794
5.0%
British Columbia
7,945
7,180
10.72%
2009
2008
% Change
Total Assets
$2,378,278
$2,358,924
0.8%
Total Rental
Revenue
$427,686
$419,799
1.9%
Net Earnings
$62,067
$45,685
Total FFO
$133,094
$129,918
2.4%
Distributable
Income
$135,308
$131,443
2.9%
Net Earnings
per unit
$1.17
$0.84
FFO per unit
$2.51
$2.39
5.0%
Distributable
income per
unit
$2.55
$2.41
5.8%
From 2004-2008
Leverage ratio
-- related to DOT
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
2004
2005
2006
2007
2008
2009
HOLD!!!





Ticker: HR. UN
Industry: Real Estate Investment Fund
Exchange: Toronto Stock Exchange
Fund Type: Open-end
Units Outstanding: 143.871 million, as of Feb
25, 2010

142.676 million as of Sept 30, 2009
Open
16.65
Beta
1.19
High
16.65
Market Cap
2,377.43M
Low
16.51
EPS
0.66
Bid x2 lots
16.53
P/E
25.05
Ask x44 lots
16.59
Forward P/E
10.86
Volume
216,645
PEG
-
Previous Close
16.53
Annual Dividend
0.72
52-week High
17.4
Yield
4.3
52-week Low
6.56






IPO in December, 1996
Invests in both U.S. and Canada
Major player in office complexes
The REIT holds interests in 34 office properties, 118
single-tenant industrial properties, 117 retail
properties and 3 development projects, principally in
the Greater Toronto Area.
In 2009, the REIT paid out approximately 48% of its
adjusted funds from operations to its unit holders.
Is currently building The Bow, a two million square
foot office building in Calgary’s downtown financial
district.


Created H&R Finance Trust in Oct, 2008
“Stapled unit”



Shared the same ticker symbol with H&R REIT
Will not trade independently
Purpose

To save U.S tax
During the fourth quarter 2009, H&R
 Issued $175 million of 6.00% convertible unsecured
subordinated debentures
 Sold an industrial property for gross proceeds of
$140 million, and redeemed 28.6 million warrants
 Issued to Fairfax Financial Holdings Limited for
approximately $186 million
 Did not acquire any properties, sold seven
properties for gross proceeds of $217 million, and
raised $525 million from three debentures.

Jan 17, 2010



Announced $230mm senior unsecured debenture
financing
Announced an agreement to repurchase the Fairfax
debentures
Feb 3, 2010


Closed $230 million senior unsecured debenture
financing
repurchased the Fairfax debentures

Thomas J. Hofstedter


Larry Froom



President and Chief Executive Officer since the
creation of H&R
C.A., Chief Financial Officer
joined H&R in 1997, but became CFO since 2006
Nathan Uhr

Vice-President, Acquisitions, since 1996
Year
H&R REIT (in $)
H&R Finance Trust
(in $)
2009
0.6143
0.1057
2008
1.4030
0.0370
2007
1.3704
-
2006
1.3344
-
2005
1.3044
-
2004
1.2440
-
2003
1.2240
-
*Based on estimated annualized gross revenue, excluding the straight lining of contractual rental and discontinued operations

Average term to
maturity


Lease: 10.5 years
Mortgages: 8.3
years


High quality real estate
Predictable income




Creditworthy tenants
Solid balance sheet
Long-term financing
Capital risk management
Number of
Properties
Net
Rentable
Area (sf in
thousands)
Book Value
($ millions)
Occupancy
Rate (%)
Office
34
8,285
1,565
98.4%
Industrial
119
22,779
1,378
98.9%
Retail
117
7,636
1,172
99.9%
Developmen
t
3
N/A
795
N/A
Number of Ontario
Properties
Office
Industrial
Retail
Total
US
Alberta Quebec
Other
Total
23
2
4
1
4
34
54
16
19
11
19
119
32
72
5
5
3
117
109
90
28
17
26
270
* Before interest, depreciation and amortization for the quarter ended December 31, 2009
* Before interest, depreciation and amortization for the quarter ended December 31, 2009





Encana’s Corporate headquarters in Calgary
Approximately 2 million SF, 58-story office
tower
Budged about $1.5 billion, with full completion
and the lease commencement date expected by
April 2012
Had pre-leased 100% by Encana in the next 25
years
Will generate in excess of $94 million of NOI in
the first leasing year
As at December 31, 2009
$5,351,123
$3,762,335
$1,513,666
$5,442,074
$3,715,039
$1,651,668

As at year end 2009, H&R’s debt to gross book
value was 52.5% compared to 54.8% as at Dec
31, 2009.
$86,525
$97,706
$86,525
$238,941
$97,706
$233,200
$109,505
$17,683
$1,651,668
$1, 513,666
47.7%
95.4%

Moderate buy and hold
Stable balance sheet
 High quality and diversified portfolio
 Long terms stability
 Potential growth

THANK YOU!!!!