Strictly Private and Confidential
NAIOP Toronto
2009 Forecast Breakfast
Disclaimer
This presentation was prepared exclusively for the benefit and internal use of the recipient for the purpose of considering the
transaction or transactions contemplated herein. This presentation is confidential and proprietary to RBC Capital Markets and
may not be disclosed, reproduced, distributed or used for any other purpose by the recipient without our express written consent.
The information and any analyses contained in this presentation are taken from, or based upon, information obtained from the
recipient or from publicly available sources, the completeness and accuracy of which has not been independently verified, and
cannot be assured by RBC Capital Markets. The information and any analyses in these materials reflect prevailing conditions
and our views as of this date, all of which are subject to change.
To the extent projections and financial analyses are set forth herein, they may be based on estimated financial performance
prepared by or in consultation with the recipient and are intended only to suggest reasonable ranges of results. The printed
presentation is incomplete without reference to the oral presentation or other written materials that supplement it.
Employees of RBC Capital Markets are expressly prohibited from offering directly or indirectly a specific price target, or
offering or threatening to change research, a rating or a price target, to a company as inducement for the receipt of business
or compensation.
Canadian Real GDP
Canada’s real GDP Growth
8
Annualized % change, quarter-over-quarter
Annual Grow th rates
'07
6
2.7
'08f
'09f
'10f
0.6
0.0
2.7
06
07
08
Forecast
4
2
0
-2
-4
00
01
02
03
04
05
09
10
Source: Statistics Canada, RBC Economics Research
2
Equity Market Volatility
CBOE S&P500 Volatility Index (VIX) - 2002 – present
85
75
Index Level
65
55
45
35
25
15
5
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
3
Financial Index Performance
Relative Performance
Canadian and U.S. Financial Index Performance - 2005 – present
150%
140%
130%
120%
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
Jan-05
Jan-06
S&P 500 Financial Index
Jan-07
Jan-08
Jan-09
S&P/TSX Financial Index
4
Canadian Labour Market
Canadian labour market
%
% change, year-over-year
8.8
Unemployment rate (LHS)
Employment (RHS)
8.3
4.5
4.0
3.5
7.8
3.0
7.3
2.5
2.0
6.8
1.5
6.3
1.0
5.8
0.5
5.3
0.0
00
01
02
03
04
05
06
07
08
Source: Statistics Canada, RBC Economics
5
Bank of Canada Overnight Rate and 10-Year GoC Yield
Bank of Canada overnight rate &
10 year bond yield
7
6
%
Forecast
BoC overnight rate
10 year bond yield
5
4
3
2
1
0
00
01
02
03
04
05
06
07
Source: Bank of Canada, RBC Economics Research
08
09
10
6
Corporate Bond Spreads
Canadian Corporate Bond Spreads
Spread over GoC (bps)
600
531 bps
500
458 bps
400
300
299 bps
200
100
0
Jan-07 Mar-07 May-07 Jul-07
Source: RBC Capital Markets
Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08
AA
A
Sep-08 Nov-08 Jan-09
BBB
U.S. Corporate Bond Spreads
700
600
Spread over UST (bps)
564 bps
500
400
394 bps
300
327 bps
200
100
0
Jul-07
Sep-07
Nov-07
AA
Jan-08
Mar-08
A
May-08
Jul-08
BBB
Sep-08
Nov-08
Jan-09
Source: Bloomberg
7
Canadian CMBS Spreads
Canadian CMBS Spreads
800
800bps
700
700 bps
600
550 bps
Spreads (bps)
500
450 bps
400
300
200
100
0
Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08
AAA 10 year
AA 10 year
A 10 year
BBB 10 year
Source: RBC Capital Markets
8
U.S. High Yield Spreads Since January 2008
Spread (bps)
4,000
3,500
3,000
HY Index Spread
BB Spread
B Spread
CCC Spread
3,037 bps
2,500
2,000
1,500
1,683 bps
1,450 bps
1,000
1,141 bps
500
0
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Source: Bloomberg
9
REIT Index Performance and Cdn. REIT Price Premium /
Discount to NAV
2008 Index Price Performance
Historical Premium/Discount to NAV
40%
120%
110%
30%
Maximum: 28.0%
100%
20%
90%
10%
80%
70%
-35.0%
60%
-41.5%
50%
-43.1%
0%
-10%
Current: -12.4%
-20%
40%
Maximum: -25.0%
30%
-30%
J a n08
F e b08
M a r08
A pr08
M a y08
S&P/TSX REIT Index
Note:
Average: 5.4%
Price only return
J un08
J ul08
A ug08
RMZ Index
S e p08
Oct08
N o v08
D ec08
S&P/TSX Composite
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Group-Average Premium (Discount) To NAV
Period Average
Source: RBC Capital Markets Research
10
Canadian REIT Universe – Equity Market Capitalization
Total Equity Capitalization of Canadian REIT Universe ($billions)
$35
Jan-07: Summit REIT privatized, equity value of $2.1B
Feb- 07: Retirement Residences REIT privatized, equity value of $780MM
Apr-07: Sunrise Senior Living REIT acquired, equity value of $1.1B
May-07: Alexis Nihon REIT acquired, equity value of $0.5B
Aug-07: Dundee REIT: Cancellation of ~66% of its units following a
large portfolio sale to GE Real Estate, equity value of $1.1B
Sep-07: Legacy Hotels REIT acquired, equity value $1.5B
Dec-07: CHIP REIT privatized, equity value $925MM
Dec-07: IPC US REIT acquired, equity value of $425MM
$30
$25
$20
$14.3 Billion
Jun-06: TGS NA REIT privatized, equity value of $265MM
$15
Nov-05: O&Y REIT privatized, equity value of $1.0B
$10
$5
$0
Q1/95
Q1/96
Q1/97
Q1/98
Q1/99
Q1/00
Q1/01
Q1/02
Q1/03
Q1/04
Q1/05
Q1/06
Q1/07
Q1/08
Current
11
Canadian REIT Comparables
NAV Estimate (2)
Canadian REITs
Commercial REITs
Allied Properties REIT
Artis REIT
Calloway REIT
Cominar REIT
CREIT
Crombie REIT
Dundee REIT
H&R REIT
Huntingdon REIT
InStorage REIT
Morguard REIT
Primaris Retail REIT
Retrocom Mid-Market REIT
RioCan REIT
Scott's REIT
Whiterock REIT
19-Jan-09
Close
Total / Weighted Average
Residential REITs
Boardwalk REIT
CAP REIT
InterRent REIT
Lanesborough REIT
Northern Property REIT
Total / Weighted Average
Hospitality REITs
Holloway Lodging REIT
InnVest REIT
Royal Host REIT
Total / Weighted Average
Seniors Housing REITs
Chartwell Seniors Housing REIT
Extendicare REIT
Total / Weighted Average
$11.90
$7.15
$12.40
$16.13
$21.00
$8.00
$10.90
$7.93
$0.25
$3.77
$10.84
$11.30
$1.69
$13.50
$4.27
$14.80
$25.25
$14.65
$1.30
$2.99
$18.21
$1.13
$3.53
$3.29
$5.65
$5.77
2008 Price
Change
Mkt Cap
($MM)(1)
(2)
Yield
FFO Multiples
2009E
2010E
-40.0%
-51.1%
-53.7%
-21.5%
-22.1%
-30.3%
-62.6%
-62.4%
-91.3%
-46.4%
-11.2%
-41.5%
-63.7%
-37.4%
-42.9%
-56.8%
$372
$236
$1,176
$739
$1,282
$419
$229
$1,161
$18
$98
$640
$703
$47
$2,976
$32
$58
11.1%
15.1%
12.5%
9.0%
6.5%
11.1%
20.1%
9.1%
0.0%
0.0%
8.3%
10.8%
26.6%
10.2%
19.9%
22.7%
6.9 x
4.2 x
7.0 x
8.8 x
9.0 x
5.6 x
3.6 x
5.1 x
1.4 x
11.4 x
9.1 x
8.7 x
3.3 x
8.8 x
4.3 x
3.6 x
7.2 x
4.5 x
7.3 x
8.4 x
8.9 x
5.6 x
3.9 x
5.9 x
n/a
n/a
9.2 x
8.7 x
n/a
8.7 x
n/a
n/a
-38.8%
$10,185
10.2%
7.7 x
7.9 x
-42.6%
-1.8%
-73.1%
-53.9%
-27.5%
$1,359
$988
$24
$53
$456
7.1%
7.4%
9.2%
18.7%
8.1%
10.5 x
11.4 x
5.7 x
4.7 x
8.6 x
11.0 x
11.0 x
5.8 x
5.4 x
8.4 x
-26.7%
$2,879
7.6%
10.4 x
10.5 x
-77.9%
-64.1%
-49.5%
$44
$263
$68
18.6%
21.2%
20.1%
2.9 x
2.9 x
5.0 x
n/a
2.9 x
4.8 x
-63.1%
$375
20.7%
3.3 x
3.3 x
-52.4%
-53.2%
-52.7%
$574
$428
$1,002
13.1%
14.6%
13.7%
8.0 x
4.1 x
6.3 x
7.8 x
3.7 x
6.1 x
Per Unit
$15.25
$8.25
$15.00
$15.75
$24.00
$9.58
$18.50
$12.50
$0.46
$4.00
$12.50
$14.25
$2.43
$16.00
$5.51
$28.35
$34.63
$15.25
$2.29
$3.90
$18.00
$2.75
$5.00
$2.60
$6.50
$9.35
Prem /
(Disc)
1.
Based on most recent publicly
available information
2.
Estimates from RBC
Research, except for Charter,
Crombie, Huntingdon,
Retrocom, Scott's, Whiterock,
InterRent, Lanesborough,
Holloway, Extendicare, BTB,
Charter, Lakeview and
Temple, whose estimates are
consensus
App.
CR
-22.0%
-13.3%
-17.3%
2.4%
-12.5%
-16.5%
-41.1%
-36.6%
-45.1%
-5.8%
-13.3%
-20.7%
-30.5%
-15.6%
-22.6%
-47.8%
8.75%
9.00%
8.00%
8.50%
7.75%
9.00%
9.00%
8.25%
10.18%
8.25%
8.00%
8.00%
9.85%
7.75%
8.98%
7.88%
-17.7%
8.09%
-27.1%
-3.9%
-43.2%
-23.3%
1.2%
7.00%
6.75%
7.69%
8.50%
9.00%
-14.7%
7.26%
-58.9%
-29.4%
26.5%
n/a
9.00%
10.00%
-22.7%
9.21%
-13.1%
8.50%
-38.3% 14.00%
-23.8% 10.85%
12
Canadian REIT M&A Overview: Deals Completed in 2007
 2007 was an extremely active year for REIT M&A market in Canada, with transactions totaling ~$17 billion in value being
completed
Transaction
acquisition of
Date Announced/
Closing Date
8/14/2007 /
12/12/2007
acquisition of
8/1/2007 /
12/4/2007
acquisition of
7/12/2007 /
9/18/2007
acquisition of a large
portfolio of real
estate from, and an
equity stake in
6/4/2007 /
8/24/2007 (Real Estate
Sale) /
8/27/2007 (Equity
acquisition of
acquisition of
acquisition of
acquisition of
1/12/2007 /
4/26/2007
12/1/2006 /
5/22/2007
10/5/2006 /
2/2/2007
8/30/2006 /
1/26/2007
$2.3 Billion
$1.0 Billion
$2.8 Billion
$3.3 Billion
Investment)
Transaction
Value
US$1.4 Billion
$1.2 Billion
$2.5 Billion
i) $2.3B in Direct Real
Estate
ii) $165MM of Equity
(~16%)
Bid Price
US$9.75
$19.10
$12.60
$47.50
$16.50
$18.60
$8.35
$30.00
Price Prior to
Announcement
US$9.30
$14.26
$12.00
$39.96
$11.05
$14.89
$6.79
$25.45
Bid Premium Over
Prior Day Price
4.8%
33.9%
5.0%
18.9%
49.3%
24.9%
23.0%
17.9%
Implied Cap Rate
at Bid Price(1)
7.5%
6.7%
6.5%
6.0%
5.8%
6.8%
8.4%
6.0%
FFO Multiple(1,2)
10.9x
12.2x
12.7x
16.3x
21.0x
13.4x
10.0x
15.1x
AFFO Multiple(1,2)
15.5x
15.2x
20.1x
20.5x
22.6x
18.2x
13.0x
18.1x
(1) Implied cap rates and FFO/AFFO multiples are based on consensus street estimates
(2) Multiples are based on 1-year forward estimates
13
Class ‘A’ Cap Rate Trends1 Vs. 10-Year GoC Bond Yields
7.5%
Multi-Tenant Industrial
Single-Tenant Industrial
Power Centres
7.0%
CBD Office
6.5%
Regional Mall
Cap Rate
6.0%
The “rear view” nature of this
information is likely causing
it to underestimate current
market cap rates
5.5%
5.0%
4.5%
4.0%
3.5%
10-Year GoC Yield
3.0%
2.5%
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
December 31, 2007
Dec-07
Mar-08
Jun-08
Sep-08
December 31, 2008
Dec-08
YoY Change
GoC: 3.99%
Power: 5.90%
GoC: 2.69%
Power: 6.80%
GoC: -1.30%
Power: +0.90%
CBD: 5.90%
Multi: 6.50%
CBD: 6.60%
Multi: 7.50%
CBD: +0.70%
Multi: +1.00%
Single: 6.30%
Reg: 5.50%
Single: 7.20%
Reg: 6.1%
Single: +0.90% Reg: +0.60%
Source: Altus InSite Investment Trends Survey
Note 1: Toronto cap rates used as proxy
14
Canadian GoC Bond Yields and Mortgage Rates
8.00%
7.00%
10-Year Mortgage
6.00%
5.00%
4.00%
Spread
3.00%
10-Year GoC Yield
2.00%
1.00%
0.00%
Jan-07
Apr-07
Jul-07
Source: RBC Capital Markets
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
15