FORM F2. March 31, 2011

Transcription

1 2010 FORM F2 ANNUAL INFORMATION FORM For the Year Ended December 31, 2010

2 TABLE OF CONTENTS EXPLANATORY NOTES...1 CORPORATE STRUCTURE...2 GENERAL DEVELOPMENT OF ALTUS...4 BUSINESS OF ALTUS...9 RISK FACTORS...22 DISTRIBUTIONS...28 CAPITAL STRUCTURE OF ALTUS...29 MARKET FOR SECURITIES...31 DIRECTORS AND OFFICERS...32 AUDIT COMMITTEE...36 LEGAL PROCEEDINGS...37 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS...37 TRANSFER AGENT AND REGISTRAR...37 MATERIAL CONTRACTS...38 INTERESTS OF EXPERTS...38 ADDITIONAL INFORMATION...38 GLOSSARY OF TERMS...39 SCHEDULE A... i

3 EXPLANATORY NOTES The information disclosed in this is stated as at December 31, 2010 or for the year ended December 31, 2010, as applicable, unless otherwise indicated. For an explanation of the capitalized terms and expressions, please refer to the Glossary of Terms at the end of this. Unless otherwise indicated, all dollar amounts are expressed in Canadian dollars and references to $ are to the lawful currency of Canada. Unless the context indicates otherwise, all references to Altus and the Company refer to Altus Group Limited and, as applicable, its predecessor, Altus Group Income Fund. Certain statements in this may constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Altus and its subsidiary entities to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this, such statements use words such as may, will, expect, believe, plan, would, could and other similar terminology. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties which could cause actual results to differ materially from the forward-looking statements, including those described in Altus publicly filed documents (which are available on SEDAR at and in this document under Risk Factors - Risks Related to the Business and the Industry. Those risks and uncertainties include: general state of the economy; dependence on oil and gas sector; competition in the industry; ability to attract and retain professionals; interest rate risk; currency risk; credit risk; ability to maintain profitability and manage growth; revenue and cash flow volatility; dependence on Canadian multi-residential market; integration of acquisitions; protection of intellectual property; weather; fixed-price and contingency engagements; performance of obligations / maintenance of client satisfaction; appraisal mandates; customer concentration; operating risks; risk of future legal proceedings; legislative and regulatory changes; and, insurance limits, income tax matters, fluctuation of cash dividends, unpredictability and volatility of common share price, capital investment, dilution of existing shareholder interests, leverage and restrictive covenants and investment eligibility. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. These statements reflect management s current expectations regarding future events and operating performance and speak only as of the date of this. Although the forward-looking statements contained in this are based upon what management believes to be reasonable assumptions, Altus cannot assure investors that actual results will be consistent with these forwardlooking statements. These forward-looking statements are made as of the date of this Annual Information Form, and, except in accordance with applicable law, Altus assumes no obligations to update or revise them to reflect new events or circumstances. Additionally, Altus undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of Altus, its financial or operating results, or its securities. Altus Group Limited 1

4 CORPORATE STRUCTURE Altus Group Limited ( Altus or the Company ) is governed by the Business Corporations Act (Ontario) (the OBCA ) pursuant to articles of arrangement dated January 1, The head and registered office of the Company is located at Leslie Street, Unit 7, Newmarket, Ontario, Canada L3Y 8E1. Altus Group Income Fund (the Fund ), the predecessor to the Company, was an unincorporated, openended, limited purpose trust established under the laws of the Province of Ontario. On January 1, 2011, the Fund completed a conversion (the Conversion ) pursuant to a plan of arrangement (the Arrangement ) under the OBCA, involving, among others, the Company and the Fund. As a result of the Arrangement and related transactions, the Company now owns and operates, directly and indirectly, the businesses which were owned and operated by the Fund and its subsidiaries prior to the completion of the Arrangement. Upon completion of the Arrangement, on January 1, 2011, each of the Fund, the Trust and Altus LP were wound up and dissolved. See General Development of Altus Conversion to a Corporation. The following chart illustrates, on a simplified basis, the structure of Altus and its principal subsidiaries as at January 1, 2011 (including jurisdiction of establishment/incorporation of the various entities). Public 2 Land Surveyors (1) Altus Group Tax Consulting Paralegal PC (6) (Ontario) Altus Group Limited (Ontario) Altus Geomatics Land Surveying BC Limited (5) (British Columbia) 51% 100% 100% 100% 100% 100% 49% Altus Group Asia Pacific Limited (Ontario) Altus Residential Limited (Ontario) Altus Group U.S. Inc. (Delaware) Altus Group Advisory Services Limited (Ontario) Altus Group (UK) Limited (United Kingdom) Altus Geomatics General Partner Corporation (Alberta) 99.9% 0.1% Asia Pacific Entities (2) US Entities (3) UK Entities (4) Altus Geomatics Limited Partnership (Alberta) Notes: 1. The two individuals are employees of Altus Geomatics, who are registered with the Land Surveyors Association (Alberta). 2. Altus Group Asia Pacific entities: a) Altus Group Australia Pty Limited (i) Altus Group Consulting Pty Limited (ii) Altus Group Cost Management Pty Ltd (iii) Page Kirkland Queensland Pty Ltd. (iv) Altus Group (A.C.T.) Pty Ltd. b) Altus Group Consulting (Thailand) Company Limited Altus Group Limited 2

5 (i) Altus Group Management Holdings (Thailand) Company Limited (ii) Altus Group Services (Thailand) Company Limited (iii) Altus Group Construction Professionals (Thailand) Company Limited (iv) Ontario Limited, a Canadian corporation, holds one share in each of Altus Group Consulting (Thailand) Company Limited and Altus Group Management Holdings (Thailand) Company Limited (v) Altus Group Limited holds one share in Altus Group Consulting (Thailand) Company Limited. c) Altus Group (Hong Kong) Limited (i) Altus Construction Consultancy (Shanghai) Limited d) Altus Group (Singapore) Private Limited e) Altus Group (Vietnam) Limited f) Altus Group (India) Private Limited (i) Altus Group Limited holds one share in Altus Group (India) Private Limited g) Altus Egypt LLC 3. Altus Group US entities: a) Physical Planning Technologies Ltd. b) Altus Group (Hawaii) Inc. c) Altus Group ULC (i) Altus Group LLC 4. Altus Group UK entities: a) Altus Group (UK2) Limited b) Altus UK LLP 5. Altus Geomatics Land Surveying BC Limited was formed to allow Altus Geomatics to provide survey services in British Columbia in compliance with the regulations of the Association of British Columbia Land Surveyors. 6. Altus Group Tax Consulting Paralegal PC was formed in compliance with the regulations of the Law Society of Upper Canada (as defined in the Law Society Act). The realty tax consulting practice in Ontario is organized as a separate professional corporation to comply with the rules and regulations of the Law Society Act. Altus Group Limited 3

6 GENERAL DEVELOPMENT OF ALTUS Three Year History 2008 During the year ended December 31, 2008, Altus completed eight acquisitions. Total consideration for the eight acquisitions was $43.7 million, including the issue of 29,544 Units and 489,339 Class B LP Units: RVA added three new service lines in First, the specialty area of Seniors Housing was added with the acquisition of the business assets of HealthTrust Canada ULC and Ontario Limited. Retail Research and Market Analysis was added as a service line when Altus acquired the business assets of Géocom Recherche Inc. ( Géocom ). Altus InSite added office market information to its product offerings with the acquisition of the business assets of Commercial Data Solutions Corp. The acquisition of the Property Tax Practice of Deloitte Canada ( Deloitte ) expanded Altus Realty Tax consulting presence in Western Canada and broadened its client portfolio in the multi-unit residential, commercial, industrial and retail industries. Altus added a Cost Consulting practice to the UK operations with the acquisition of the business assets of Andrews Group. Cost expanded into the specialty practice of capital planning systems for organizations and municipalities looking for effective strategies to manage their capital spending in real estate and infrastructure assets portfolios. Altus acquired the business assets of Capital Planning Solutions Inc. ( CPSI ) and Harfan Technologies Inc., which continue to operate as Altus Capital Planning. Altus recorded two purchase price adjustments in 2008 totalling $1.64 million related to the 2007 acquisitions of Edwin Hill, Chartered Surveyors and Crape Geomatics Corporation ( Crape ). In July, 2008, Altus completed two equity transactions; a private equity placement to CI Investments Inc. of 2,250,000 Units for gross proceeds of $41.0 million; and the issue of 30,000 Class B LP Units, valued at $0.5 million, to All West Surveys Ltd., pursuant to an amendment to the Combination Agreement dated April 24, Effective May 2008, the realty tax consulting practice in Ontario was reorganized as a separate professional corporation to comply with the rules and regulations of the Law Society Act and the consultants were licensed as paralegals During the year ended December 31, 2009, Altus completed two key acquisitions and one strategic investment. Total consideration for the acquisitions and investment in 2009 was approximately $42.7 million including the issue of 758,144 Units and 130,909 Class B LP Units: On April 30, 2009, Altus increased its investment in Solidifi Inc. ( Solidifi ) by $3.0 million to a total of $6.0 million, representing approximately a 20% interest. Solidifi is a leading provider of Altus Group Limited 4

7 single family residential appraisals, collateral risk management and data analytic services to the North American financial services industry. On May 1, 2009, Altus indirectly acquired certain business assets of Suvius Inc. ( Suvius ) for approximately $5.1 million, subject to adjustments. As partial consideration, Altus issued 130,909 Class B LP Units. Suvius provided administrative and field services support to Lennon Trilogy Professional Land Surveyors ( Lennon Trilogy ). Altus Geomatics will continue to provide administrative and field services support in Manitoba to Lennon Trilogy. The Suvius acquisition, in conjunction with the aforementioned formation of Altus Geomatics BC, expanded the geographic reach of the Geomatics division in Canada. On July 31, 2009, Altus indirectly acquired shares in certain businesses carried on by the Page Kirkland Group ( Page Kirkland ) for approximately $34.6 million, subject to adjustments. As partial consideration, Altus issued 758,144 Units. Page Kirkland operated in eight countries across the Asia Pacific region and Hawaii, US, providing services including cost management, project management, asset and facilities management and development management. The acquisition of Page Kirkland expanded Altus global footprint. In addition, Altus created Altus Residential in 2009 in response to North American mortgage lenders seeking an independent, transparent source for quality collateral valuations on residential property at a committed price and service level. Altus Residential provides appraisal management services, working exclusively with Solidifi, a leading provider of appraisal management technology and collateral underwriting tools, to facilitate the delivery and execution of this new service pursuant to the terms of the Services Agreement. Altus also recorded four purchase price adjustments in 2009 related to prior year acquisitions: The purchase price with respect to the Crape acquisition was finalized for $1.1 million of which $0.6 million had been accrued as at December 31, As partial consideration, Altus issued 46,791 Class B LP Units. Altus recorded three additional purchase price adjustments in 2009 totalling $(1.6) million related to the 2008 acquisitions of Deloitte, Géocom and CPSI Altus continued to deliver on its strategic plan and enhance its competitive position with three acquisitions during the year ended December 31, Total consideration for the three acquisitions was approximately $20.6 million including the issue of 257,090 Units and 9,868 Class B LP Units: On June 1, 2010, Altus indirectly acquired certain business assets of Brazos Tax Group LLP ( Brazos ) for approximately $2.2 million, subject to certain adjustments. As partial consideration, Altus issued 20,886 Units. Two holdbacks of $0.1 million US Dollars each are due on the first and second anniversary of the acquisition. Another holdback of $0.5 million US Dollars is due on the second anniversary of the acquisition subject to certain performance targets being achieved. Brazos was a US-based property tax company providing services such as business and personal property tax compliance and appeals, real estate valuation appeals and property tax payment administration and due diligence. Altus Group Limited 5

8 On July 2, 2010, Altus indirectly acquired certain business assets of Peters Surveys Ltd. ( Peters ) for approximately $1.0 million, subject to certain adjustments. As partial consideration, Altus issued 9,868 Class B LP Units. A holdback of $1.0 million is due on September 30, 2011 subject to certain performance targets being achieved. At the acquisition date, only $0.6 million, $0.5 million on a discounted basis, of this holdback was included in the purchase price. Peters was a professional land surveying and planning firm, providing a broad range of geomatic services within the province of Saskatchewan, Canada. On July 30, 2010, Altus indirectly acquired certain business assets of PricewaterhouseCoopers' US-based Real Estate Appraisal Management Practice ( PwC Appraisal Management Practice ) for approximately $17.4 million, subject to certain adjustments. As partial consideration, Altus issued 236,204 Units. The agreement provides for an additional purchase payment if average earnings exceed a certain threshold on the three-year anniversary. While there is no maximum amount stipulated in the agreement, Altus has estimated the contingent consideration to be approximately $5.3 million, on a discounted basis, which is reflected in the purchase price. The PwC Appraisal Management Practice provided comprehensive valuation consulting and analytic services to a roster of global clients through a national practice operated from offices in Jersey City, Houston, Irvine and Atlanta in the US. Altus also revised the purchase price with respect to the Page Kirkland acquisition. Included in the total consideration for the Page Kirkland acquisition was a holdback of $9.4 million which would only be paid to the vendors if certain performance targets were achieved over a two to three year period. During the fourth quarter of 2010, the amount was reversed with a corresponding adjustment to goodwill and intangible assets as it was determined that the performance targets were not likely to be achieved. Further, the interest accretion and net foreign exchange losses previously recorded related to this holdback of $2.3 million and $1.0 million, respectively, have also been reversed. To the extent that there is an additional payment, this will result in an increase to goodwill. In 2010, Altus increased its investment in Solidifi and now holds approximately 23.6% of the outstanding shares of Solidifi. On July 29, 2010, Solidifi changed its name to Real Matters Inc. ( Real Matters ). Real Matters is the leading provider of property information services in North America. It fuses unique data gathered from a network of more than 17,000 field agents with the technological power of its cloud-based redihive TM environment to propel the next generation of businesses that provide insight into residential and commercial properties. Real Matters currently serves leading global financial institutions and is located in Chicago, Toronto, Montreal and Calgary. Effective October 28, 2010, Altus amended its credit facilities with its bankers, increasing the revolving operating facility from $87.9 million to $97.9 million over the remaining term. On December 1, 2010, Altus completed the issuance of $50.0 million convertible unsecured subordinated debentures (the Convertible Debentures ) with a maturity date of December 31, The Convertible Debentures bear interest at a rate of 5.75% per annum, and are payable semi-annually on June 30 and December 31 each year. Each Convertible Debenture is convertible into Common Shares at the option of the holder at a conversion price of $18.60 per Common Share at any time after January 3, 2011 and prior to the close of business on the earlier of December 31, 2017 and the business day immediately preceding the date fixed for redemption. Altus Group Limited 6

9 Conversion of the Fund to a Corporation On October 31, 2006, the Canadian government announced its plan to change the tax treatment of SIFTs, which includes income trusts such as the Fund. Now enacted, the SIFT Rules impose a tax at the trust level on distributions of certain income from publicly traded mutual fund trusts that were previously not subject to income tax under the Tax Act. The SIFT tax rate is comparable to the combined federal and provincial corporate tax rate and the SIFT Rules treat distributions from SIFTs in a manner similar to dividends paid to shareholders of a Canadian corporation. Trusts that were publicly traded at the time of the announcement were given a four year transition period and generally were not subject to the new rules until January 1, 2011, provided such trusts experienced only normal growth and no undue expansion before then. The announcement had an immediate impact on the Canadian capital markets and, generally, resulted in a significant decline in trading prices for publicly traded income trusts. Following the October 31, 2006 announcement, management of the Fund considered the potential impact and significance of the proposed tax changes to the Fund, and conducted a series of detailed analyses concerning the strategic direction of the Fund. In connection with this process, management of the Fund considered a broad range of strategic alternatives, including new corporate structures and acquisition opportunities. On November 8, 2010, the Fund filed a management information circular outlining its proposal to convert from an income trust structure to a corporate structure pursuant to the Arrangement under the OBCA involving, among others, the Company and the Fund. On December 8, 2010, the Arrangement was approved by Unitholders and Special Voting Unitholders at a special meeting of the Fund. On December 10, 2010 the Arrangement was approved by the Ontario Superior Court of Justice allowing for the conversion of the income trust into a corporation, effective January 1, On January 1, 2011, Unitholders and holders of Class B LP Units each received one Common Share of the Company for each Unit or Class B LP Unit, as applicable, held on the effective date. Following completion of the Arrangement, the Fund, the Trust and Altus LP were each dissolved. Effective on the closing of the Arrangement and related transactions, the Company now owns and operates, directly and indirectly, the businesses which were previously owned and operated by the Fund and its subsidiaries. The management and trustees of the Fund are now the management and directors of the Company. Details of the Conversion including a copy of the Plan of Arrangement and the Arrangement Agreement may be found in the management information circular dated November 8, 2010 filed under the Company s profile on SEDAR at and on the Company s website at Altus Group Limited 7

10 Outlook Altus is well positioned to benefit from continued global recovery in Following a strong performance in 2010, the Tax practice in North America is expected to remain vibrant in The Brazos acquisition provided Altus with a base on which to grow the business in the US both organically and through acquisitions. In the UK, the ramp-up of the 2010 re-valuation program has been slower than anticipated due to completions of 2005 appeals and a slower pace in decision turnarounds from Inland Revenue. In 2011, it is expected that UK revenues will rebound by the second half of the year. In 2011, RVA will benefit from a full year of the PwC Appraisal Management Practice acquisition. This acquisition has surpassed expectations and continues to exceed performance targets as new clients sign on. In addition, the Databridge product, a BI software and data tool purchased with the PwC Appraisal Management Practice acquisition, has been gaining traction in both the US and Canada. The Cost practice is only now beginning to benefit from the economic rebound as its performance tends to lag economic cycles should see stronger revenue performance as new assignments increase in both Canada and the US. Altus Capital Planning is expected to outperform its 2010 results due to significant new contract awards, such as the recently signed contract with the Ontario Board of Education. Altus Asia Pacific is expected to see improved results in 2011 resulting from both top line growth and expense reduction programs. China and India continue to provide attractive growth opportunities. With supply concerns having crept back into the marketplace, oil has recently seen prices above the $100 a barrel mark. This bodes very well for Geomatics as drilling activity continues to increase in western Canada and the demand for its services continue to grow. Altus continues to seek new growth opportunities by leveraging its resources and assets and by making strategic acquisitions. Altus has a very rich base of data resources that is derived from its core research and consulting services. In addition, strategic investments in technology are providing Altus with a distinct competitive advantage. Altus technology products such as Databridge, Capital Planning, Insite, and AVM are examples of a growing trend in the market and exhibit the importance of data, technology and analytic solutions that help businesses manage assets, enhance value and make strategic decisions. Data, technology and analytics will be key drivers for future growth and a key differentiator in the marketplace. Altus is focused and determined to be the industry leader. Altus Group Limited 8

11 BUSINESS OF ALTUS Overview Real estate assets have a long life-cycle which includes surveying, planning and design, development, construction, and on-going management of assets. Over this entire life-cycle, property developers, managers, and owners require many real estate consulting and advisory services. Altus is a leading, multi-disciplinary provider of a broad range of professional real estate consulting, advisory and technical services covering the entire life cycle of real estate. These services are provided through four real estaterelated practice areas: Research, Valuation and Advisory; Cost Consulting and Project Management; Realty Tax Consulting; and Geomatics. Each business unit is considered a leading service provider within its respective practice area. Management believes its multidisciplinary business model is unique, as each of these service sectors tends to be highly fragmented and locally based. The principal client base for professional services of the types provided by Altus include national, provincial, and local government agencies and public institutions, as well as public and private owners of real estate. All of these clients are becoming increasingly reliant on professional services that are either not readily available from internal sources or are not within their core competencies. Industry growth and change are also being influenced by certain trends, including increased concentration of ownership and management of real estate assets, more professional management of real estate assets, increased reliance on outsourcing and more complex transactions and financing structures. Altus Group Limited 9

12 Geographic Coverage Altus operates in 13 countries. Offices are leased unless otherwise indicated. Canada Alberta Calgary (2 offices) Edmonton (2 offices, 1 office owned) (1) Grande Prairie (owned) Lloydminster (owned) Medicine Hat British Columbia Vancouver Manitoba Brandon Winnipeg Virden (2) New Brunswick Fredericton Moncton Newfoundland St. John s (4) Prince Edward Island Charlottetown United States of America California Irvine Florida Miami Georgia Atlanta Hawaii Honolulu Iowa Des Moines United Kingdom London (Regional Office) Birmingham Bracknell Darlington Dartford (5) 34 offices Nova Scotia Dartmouth Halifax Ontario Newmarket (Corporate Office) London Ottawa Toronto (4 offices) Québec Maria Montreal Québec (2 offices) Saskatchewan Regina Saskatoon (2 offices) Swift Current (owned) Weyburn (3) Yorkton 9 offices New York New York City New Jersey Jersey City Texas Fort Worth Houston 10 offices Heathrow Hook Manchester Potters Bar Southampton Altus Group Limited 10

13 Asia Pacific Region Australia Australian Capital Territory Canberra New South Wales Sydney (Regional Office) Queensland Cairns Brisbane Western Australia Perth Victoria Melbourne Egypt Cairo Hong Kong Special Administrative Region of the Peoples Republic of China (Regional Office) (6) 19 offices Thailand Bangkok Vietnam Hanoi Ho Chi Minh City Da Nang India Mumbai New Delhi China Shanghai Tianjin Taiwan Singapore United Arab Emirates Dubai Notes: 1) One of the Edmonton, Alberta offices leases office space in a building owned by three employees who are holders of Common Shares. The lease commenced February 1, 2007 for a term of 5 years. At inception of the lease, rent was set at rates deemed by the owners and Altus to reflect market for comparable office space, based on a study of comparable properties in the Edmonton market by an independent appraiser. 2) The office in Virden, Manitoba leases premises in a building owned by five employees who are holders of Common Shares. The lease commenced on May 1, 2009 for a term of five years. At inception of the lease, rent was set at rates deemed by the owners and Altus to reflect market for comparable office space. 3) The office in Weyburn, Saskatchewan is tenant in a building owned by two employees who are holders of Common Shares. The lease commenced January 1, 2001 on a year-to-year term. Rent was deemed by Altus management to reflect market for comparable office space. 4) The St. John s, Newfoundland office leases office space in a building partially owned by two employees who are holders of Common Shares. The lease commenced in September 1999 for a term of 10 years. The lease was renewed on September 1, 2009, with a lease term of five years. Rent was set at rates deemed by the owners and Altus to reflect market for comparable office space. 5) Altus UK LLP leases premises in Dartford, Kent, from a trust, the beneficiaries of which are partners of Altus UK LLP. The lease expires on January 31, Rent was deemed by Altus management to reflect market for comparable office space. 6) Altus Hong Kong leases premises in Stanley, Island South, Hong Kong, from a company whose director is an employee and holder of Common Shares. The lease commenced in November 2009 for a term of three years. Rent was deemed by Altus management to reflect market for comparable space. Altus Group Limited 11

14 Revenue Contribution by Geography Altus revenue is geographically disbursed as follows: ($,000) Year ended December 31, 2010 Year Ended December 31, 2009 Year Ended December 31, 2008 Canada 187, , ,629 UK 23,464 27,049 30,683 USA 11,008 1, Asia Pacific 30,130 14,568 - Total 252, , ,458 Principal Services Altus provides comprehensive breadth-of-service offerings that incorporate the entire real estate development cycle. Through collaborative business units, Altus' leverages expertise to streamline multifaceted projects and provide customized solutions for clients. Altus scope of services allows it to mine vast quantities of data and create innovative software solutions, which help clients make informed decisions and streamline projects. RVA RVA delivers consistent and accurate market analysis. Supported by a comprehensive market knowledge infrastructure, Altus professionals have a thorough understanding of how individual market dynamics relate to national and international trends and an ability to deliver solid, independent advice. The valuation of office, retail, industrial and multi-residential properties is an ongoing need of the real estate industry. Properties are typically valued on a regular basis as a result of acquisitions, dispositions, new financings, covenants of existing financings, expropriation and/or litigation and general portfolio management. RVA added residential appraisal management to its service offerings in 2009, working exclusively in partnership with Real Matters, as further described in the section headed General Development of Altus In 2010, RVA added US-based valuation consulting and analytic services to its range of service offerings through the acquisition of the PwC Appraisal Management Practice, as further described in the section headed General Development of Altus RVA also offers expropriation services in Canada. A specialized practice area staffed by seasoned senior professionals, it acts for expropriating authorities and also for those subject to expropriation. The services include independent estimates of compensation payable, negotiation, expert testimony and arbitration. Research is central to the valuation process. It encompasses database management and analyzing actual lease and sale transaction data, as well as customized research, such as the impact of mergers on office space demand, consolidating tenant rosters and lease expiry schedules for key markets, feasibility analysis, occupancy strategies for private and public companies, asset or portfolio benchmarking and vacancy forecasts. Altus Economic Consulting Group provides both public and private sector clients with strategic advice and information that helps them make the right decisions. Solid understanding of demographics, economies and real estate markets result in streamlined analysis that saves clients time and money. Altus Group Limited 12

15 RVA operates in Canada, the UK and the US. Cost Consulting Cost Consulting provides market intelligence that facilitates investment and development decisions, transforming ventures from thoughts on a page to bricks on the ground. Accurate and reliable cost consulting and development cost management are integral to the financial success of a capital development project. Given the significant fluctuations in construction and development costs, property developers and owners rely on cost consulting specialists to obtain the optimal cost structure for their property development projects and to understand and manage the risks associated with the development cost side of the real estate equation. In addition, assessing life-cycle costs, deferred capital repairs and the replacement value of a building is an important element in determining whether to acquire, rebuild or refurbish a building and to properly assess the insurance requirements of that property. Project management is the discipline of managing the risks associated with the development of real estate projects through four principal phases: initiation and concept, planning and development, implementation and execution, leading to handover and evaluation. Altus diverse service offerings are uniquely positioned to provide insight into the burgeoning infrastructure sector. The Infrastructure group consists of professionals drawn from all four business units, offering consulting solutions in the areas of Development Planning, Land Management, Cost Management, Economic Consulting and Project Management. Altus has developed cross-divisional expertise and resources in linear infrastructure related to the telecommunications, energy/alternative energy, transportation/transit, and oil and gas markets. The Capital Planning group develops capital planning systems for organizations looking for effective strategies to manage capital spending on real estate and infrastructure asset portfolios. It has specialty capital planning technology platforms for vertical and linear infrastructure in addition to road and bridge maintenance. Cost Consulting has operations in all 13 countries. Realty Tax Realty Tax Consulting plays a pivotal role in the ultimate value of an investment, by assisting with complex property tax implications. Property tax is typically the largest cost in property ownership after debt-service. Further, realty tax regimes vary significantly between provinces and local jurisdictions. Given the magnitude and complexity of this expense, property managers and owners are increasingly seeking professional expertise to manage this cost. Equipped with a full spectrum of real estate tax consulting services, this unit includes assessment appeal (including expert witness), tax due diligence, vacancy rebate counsel, new construction/preliminary property assessment studies as well as on-going property tax management and budgeting. Altus recently added US property tax consulting services to its range of service offerings through the acquisition of certain business assets of Brazos, as further described in the section headed General Altus Group Limited 13

16 Development of Altus Altus now offers consulting services in the US, including business and personal property tax compliance and appeals, real estate valuation appeals and property tax payment administration and due diligence. Realty Tax operates in Canada, the UK and the US. Geomatics Exploration and development activity in the oil and gas sector in Western Canada requires land surveys and geomatics services to confirm route and corridor selection in addition to land settlement surveys, 3D control surveys and laser scanning, construction and well site surveys, oilfield surveys and GPS and internet mapping products. This team of professionals undertakes a variety of consulting projects using: GPS; GIS; digital mapping and remote sensing; and, software and application development solutions. Geomatics operates in Canada. Revenue Contribution by Segment Altus delivers its services by the previously defined business units. ($,000) Year Ended December 31, 2010 Year Ended December 31, 2009 Year Ended December 31, 2008 RVA 60,988 54,799 56,006 Realty Tax 69,591 67,793 55,507 Cost 70,624 59,024 37,839 Geomatics 51,278 38,113 60,008 Corporate Total 252, , ,458 Competitive Conditions Competitive Strengths Management believes that Altus has a number of competitive strengths in the real estate service practice areas in which it competes. The expertise and skills of the professional employees, the breadth and depth of services and the global footprint combine to provide a significant competitive advantage that allows Altus to meet clients needs for a range of services sourced from a single provider. Leading Service Provider Altus offers its services through more than 1,700 professionals, paraprofessionals and technicians located in 13 countries. With increased consolidation in the real estate market, ownership of assets is increasingly concentrated on a national or multi-regional, rather than a local level, and frequently is held by international investors. This trend has created a strong demand for consistent professional advisory service providers with broad geographic capabilities. Altus intends to leverage its national and international reach to respond to this demand. Extensive Service Offering Altus offers a broad diversity of professional real estate services: RVA, Cost, Realty Tax, and Geomatics services in Canada; Realty Tax, Cost and RVA services in the UK; Realty Tax, Cost and RVA services in the US; and Cost services in Australia, Asia and the Middle East. Management believes that Altus Altus Group Limited 14

17 breadth and depth of services provides it with a distinct business model in Canada, one that it wants to replicate in other regions. This capability is particularly important for larger clients, such as banks, pension funds, property development companies, insurance companies and public real estate investors, who require a variety of professional real estate services on a regular basis. Clients are able to benefit from this diversity of services through the collective knowledge, experience and information available to Altus with respect to cost and value parameters gained by Altus through its provision of other services to the client. Most clients use more than one of the services offered and, where available, often use services from more than one practice area. Stable and Diversified Revenue Base Revenues are well diversified across a wide base of clients, wide range of services and broad geographic area. Clients serviced tend to be larger clients such as banks, pension funds, property development companies and insurance companies which require a variety of professional real estate services on a regular basis. Industry, Market and Asset-Specific Knowledge In those markets in which it has chosen to operate, Altus has extensive industry, market and assetspecific knowledge as a result of its broad range of experience and its access to multiple information databases. Altus has a critical mass of professionals which allows for increased specialization within its practice areas. The knowledge amassed by Altus positions it to provide expert advice with respect to a wide variety of properties. In addition, having advised and compiled information on many of the most significant properties in various urban centres, Altus has developed an in-depth knowledge of these properties and is often retained to provide a variety of services over the life-cycle of the property. With each additional engagement on a specific property, management believes Altus reinforces its status as the preferred consultant with respect to that property. The accessibility of broad information databases in each of its practice areas is a significant competitive advantage for Altus, helping it attract and service clients, which in turn leads to additional information being made available and developed. Having provided services for a number of unique projects and a diversity of real estate holdings, including office buildings, retail centres, industrial properties, multi-unit residential properties, hotels, hospitals and government properties (including entertainment complexes, cultural centres, infrastructure projects and educational facilities), Altus has developed significant databases in each of its practice areas on which its professionals can base their analysis and advice. Information accumulated in connection with the various real estate properties is maintained in internally developed databases. Experienced Management Team Altus has an experienced and proven management team which oversees more than 1,700 professional, paraprofessional and technical service providers. Altus management committee has, collectively, more than 200 years of industry experience. Through the development and retention of senior members of each practice area, Altus has been able to offer its clients continuity in its relationships as well as the benefit of a significant knowledge base with respect to their real estate portfolio and development assets. Altus capitalizes on the combined experience of each practice area's management team by involving them in the senior management of Altus. The president of each practice area sits on the management committee of Altus. Each president is accountable for the business and financial performance of that practice area. Altus Group Limited 15

18 Ability to Attract and Retain Professional Talent Altus has successfully attracted and retained talented professional staff due to its position as an industry leader. It is able to offer the opportunity for professionals to develop a broad and unique skill set through participation in diverse projects and high profile assignments. Most of Altus professionals have advanced degrees or accreditations relating to their areas of specialization. Altus has traditionally experienced a low turnover rate among its professional staff. This can be attributed to its selective recruitment and hiring process, training and ongoing development programs, competitive compensation, collegial atmosphere and willingness to promote staff as they demonstrate an ability to assume a higher level of authority and responsibility. Strong Client Portfolio Management believes that Altus has strong relationships with its clients, who value its quality of services, customized reporting and, in many cases, familiarity with the history of the client's real estate and development portfolio. Clients include some of the most prominent organizations in Canada, the UK, the US, Australia, Asia Pacific and the Middle East such as banking institutions, pension funds, insurance companies, accounting firms, public real estate organizations (including REITs), industrial companies, private investors, asset and fund managers, real estate developers, governmental institutions, utilities, telecommunications companies and oil and gas companies. Altus focuses primarily on the following types of real estate and development holdings in the provision of its services: office buildings, retail centres, industrial properties, multi-unit residential properties, hotels, hospitals, undeveloped land, land being explored for oil and gas, land being traversed for pipeline construction, and government owned properties (including entertainment complexes, cultural centres, infrastructure projects and educational facilities). Many of the offered services are integral to the holding of real estate assets, such as property appraisals for owners of real estate, including pension funds, land surveys to facilitate drilling for oil and gas and management of property tax bills. Altus is typically engaged either on an hourly, fixed price or contingency basis. These engagements are usually on a project-by-project basis, although some clients have annual or multi-year arrangements for the provision of services. While many clients have used its services for a number of years, Altus also attracts clients based on referrals, as a result of participation in professional associations and speaking engagements, by responding to requests for proposals to provide services or by acting for purchasers as part of due diligence on acquisitions. Often where it is retained to provide advice on one stage of the life-cycle of a property or development or project, Altus is retained to act on later stages as well. Competition Altus faces competition from three main sources: Local or regional firms offering professional real estate or land-based services these firms tend to be smaller in size than Altus and compete on projects where the real property is geographically proximate. Brokerages certain firms have a national and international base and compete with Altus for larger clients with multi jurisdictional, multi service professional real estate service requirements. Altus Group Limited 16

19 Accounting and Engineering firms certain firms have a national and international base and compete with Altus for larger clients with multi jurisdictional, multi service professional real estate service requirements. Employees As a professional services provider, Altus considers its employees as its most valuable assets. In order to fulfill its objective of being a leading provider of professional real estate services, Altus is dependent on being able to attract, retain and motivate a sufficient number of qualified individuals who can provide the level of service its clients expect. Altus has been able to successfully attract and retain talented professional staff due to its position as an industry leader. This gives Altus the ability to offer the opportunity for professionals to develop a broad and unique skill set through participation in a diversity of projects, practice areas and high profile assignments. At December 31, 2010, Altus employed over 1,700 personnel. Professional staff are trained in a variety of academic and professional backgrounds including business administration, design, various engineering disciplines, land survey, quantity survey, economics, forestry and land use and appraisal: Canada advisory staff in RVA; 166 consultants in Cost; 196 advisory staff in Realty Tax; and 396 professional and technical staff in Geomatics, US 48 advisory staff in RVA; 10 consultants in Cost; and 14 advisory staff in Realty Tax, UK - 25 advisory staff in RVA; 8 consultants in Cost; and 65 advisory staff in Realty Tax, and Asia Pacific 311 consultants in Cost. Professionals in the RVA practice area are accredited by Canadian, UK, US, Australian and international professional organizations and must undergo rigorous training and qualifying written and competency tests. They are typically members of the Royal Institution of Chartered Surveyors, the Appraisal Institute of Canada or Ordre des Evaluateurs Agreés (Québec), the Association of Professional Land Economists, the Real Estate Institute of Canada, and the International Right-of-Way Association and may have other professional designations. Professionals in the Cost practice area are accredited by Canadian, UK, US, Australian and international professional organizations, and must undergo rigorous training and qualifying written and competency tests. They are typically members of the Royal Institution of Chartered Surveyors, Canadian Institute of Quantity Surveyors, Australian Institute of Quantity Surveyors, Hong Kong Institute of Surveyors and Australian Institute of Project Management and may have another professional designation such as Engineer or Architect. Professionals in the Realty Tax practice area are primarily from real estate, accounting, legal and government assessment backgrounds and are typically members of one of the Association of Professional Land Economists, the Royal Institution of Chartered Surveyors, the Real Estate Institute of Canada, the or the International Right-of-Way Association. Realty Tax professionals in Ontario, Canada are also paralegals, governed by regulations of the Law Society of Upper Canada. In addition, professionals in the US maintain memberships with the Institute for Professionals in Taxation, International Association of Assessing Officers, Texas Association of Assessing Officers, Texas Association of Property Tax Professionals and may other state and regional professional organizations. Altus Group Limited 17

20 Geomatics has two areas of practice: professionals in Land Survey and Geomatics who are registered surveyors are members of the Alberta Land Surveyors Association, Saskatchewan Land Surveyors Association, Manitoba Land Surveyors Association, British Columbia Land Surveyors Association or the Association of Canada Land Surveyors and are typically Geomatic or Professional Engineers. Professionals in Environmental Land Use are Registered Professional Foresters or forestry technicians with underlying degrees in forestry, science or engineering. Intangible Property Trademarks Management believes that the trademark Altus enjoys significant brand recognition within the professional real estate services industry. Acquired companies may continue to carry the original name prefaced by Altus during a transition period determined in consultation with the Management Committee. Information Systems Management believes that Altus information technology is a critical component of its success. Altus has internally developed software customized to its practice areas. Altus has taken a proactive approach to identify areas where it can improve its technology in order to better serve clients. Clients are increasingly relying on information technology to manage complex real property portfolios and property development and respond more quickly to informational needs. RVA has developed proprietary information technology that delivers automated valuations primarily for single family residential properties using internet based or desktop delivery systems, called VALeRI. The technology allows a user to obtain an estimate of value and the associated variables, along with an explanation thereof, on an almost real time basis. Altus is a leading provider of technology-based assessment solutions for local governments in Québec. The application of VALeRI has been extended into the residential mortgage market, for use by real estate agents and is being considered for the development of a house price index in Canada. RVA has standardized reporting forms by property type so that reporting, both internally and externally to clients, is done on a consistent basis regardless of the regional office or offices that perform the services. In some cases, reports have been customized to a high level of detail to a particular client so that the client receives a consistent report regardless of the office in which it was produced. RVA has enhanced the lease and sales databases in its knowledge management platform. Cost has specialty technology platforms for vertical and linear infrastructure capital planning. Expanding on this database of construction cost information, Altus Capital Planning has developed capital planning systems for organizations to manage capital spending in real estate portfolios and infrastructure assets and infrastructure management software products targeted at North American municipalities. Additionally, Altus acquired database software applications which are in use by Ontario s municipalities to manage their road infrastructure. Realty Tax relies on its information systems in Canada, the UK and the US to manage the property tax appeal processes. Through this system, Realty Tax is able to make an assessment of the property tax applicable to a particular property or portfolio of properties and the effect that any changes to the Altus Group Limited 18