ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST

Transcription

1 ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST ANNUAL INFORMATION FORM For the year ended December 31, 2004 March 31, 2005

2 TABLE OF CONTENTS GLOSSARY...3 DISTRIBUTABLE INCOME...6 FORWARD-LOOKING STATEMENTS...6 DOWNTOWN TORONTO OFFICE MARKET...7 DOWNTOWN MONTRÉAL OFFICE MARKET...8 THE REIT...9 RECENT ACQUISITIONS...10 PROPERTY PORTFOLIO...11 THE OPTION AGREEMENT...22 RISK FACTORS...24 MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...28 MANAGEMENT OF THE REIT...28 MANAGEMENT OF THE PROPERTIES...34 NON-COMPETITION ARRANGEMENTS...35 INVESTMENT GUIDELINES AND OPERATING POLICIES...35 DECLARATION OF TRUST AND DESCRIPTION OF UNITS...40 PRICE RANGE AND TRADING VOLUME OF THE UNITS...41 DISTRIBUTIONS AND DISTRIBUTION POLICY...41 UNITHOLDERS RIGHTS PLAN...43 INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS...45 EXPERTS...46 LEGAL PROCEEDINGS...46 AUDITORS, TRANSFER AGENT AND REGISTRAR...46 MATERIAL CONTRACTS...46 ADDITIONAL INFORMATION

3 GLOSSARY As used in this Annual Information Form, the following acronyms and terms have the respective meanings set out below: Adjusted Unitholders Equity means, at any time, the aggregate of the amount of Unitholders equity and the amount of accumulated depreciation and amortization recorded in the books and records of the REIT in respect of its properties calculated in accordance with GAAP. affiliate means, with respect to any person, any other person directly or indirectly controlling, controlled by or under direct or indirect common control with, such person. associate has the meaning ascribed thereto in the Securities Act (Ontario), as amended. Business Acquisition Report means the business acquisition report of the REIT dated August 16, 2004 in respect of the acquisition by the REIT of the Queen Richmond Centre; Change in Control means at any time any change, through the issue, transfer, acquisition, conversion, exchange of securities or otherwise, as a result of which, a person or group of persons acting jointly or in concert, acting at arm s length to the REIT, either individually or together with its or their associates and affiliates, beneficially own greater than fifty percent (50%) of the outstanding Units. Declaration of Trust means the trust declaration dated October 25, 2002, and amended on February 6, 2003, governed by the laws of the Province of Ontario, pursuant to which the REIT was created, as the same may be amended, supplemented or varied from time to time. Development Property means any Office Property that is not a Stabilized Property or any undeveloped land which is best developed into an Office Property or which is best used as a parking lot for an Office Property. Distributable Income means for any period, the consolidated net income of the REIT and its subsidiaries determined in accordance with GAAP, adjusted by adding back or deducting, as required, the following: (a) (b) (c) (d) (e) (f) depreciation on rental properties; amortization of the premiums or discounts on assumed mortgages; non-cash rental revenue recorded to recognize rental income rateably over the life of each lease; non-cash compensation expenses with respect to the long term incentive plan; amortization of values ascribed in a building acquisition to in-place leases and customer relationships; and amortization of values ascribed in a building acquisition to above-market and below-market leases; and to reflect any other adjustments determined by the Trustees in their discretion. Distributable Income may be estimated whenever the actual amount has not been fully determined, which estimates shall be adjusted as of the first Distribution Date by which the amount of such Distributable Income has been fully determined. Distribution Date means, in respect of a month, on or about the 15th day of the following month except for the month of December in respect of which the Distribution Date shall be December 31. GAAP or generally accepted accounting principles means accounting principles so described and promulgated by the Canadian Institute of Chartered Accountants which are applicable as at the date on which any calculation hereunder is to be effective. 3

4 GLA or Gross Leaseable Area in relation to a building means the area of the premises that are intended to be leased to tenants in such building, measured using accepted industry standards of measurement. Gross Book Value means, at any time, the book value of the assets of the REIT, as shown on its then most recent consolidated balance sheet, plus the amount of accumulated depreciation and amortization included therein or in the notes thereto. Independent Trustee means a Trustee who is both unrelated (as defined in the Toronto Stock Exchange Guidelines on Corporate Governance) and not related within the meaning of the Tax Act to Allied Canadian Corporation and its affiliates. Initial Properties means, collectively, King Street West, King Street West, 468 King Street West, King Street West, 420 Wellington Street West, 425 Adelaide Street West, 388 King Street West, 82 Peter Street, Adelaide Street West, Adelaide Street West, 134 Peter Street, 230 Richmond Street East, Front Street East and Front Street East, each located in Toronto, Ontario, and Initial Property means any one of them. LTIP means the long-term incentive plan of the REIT that permits the Trustees, officers and employees of the REIT and any subsidiary, officer and employee of Allied Canadian Corporation and its subsidiary, as selected by the Governance and Compensation Committee, to purchase Units on an instalment basis. Mortgages means the mortgages to which the Properties are subject. net rent per square foot means, generally, the minimum rent per square foot of leaseable area of the leased premises on an annualized basis, exclusive of additional rents for the landlord s proportionate share of recoverable expenses in respect of such leased premises. Non-Competition Agreements means the non-competition agreements entered into between the REIT and each of Allied Canadian Corporation, Michael R. Emory, the President and Chief Executive Officer of the REIT, and Wayne L. Jacobs, the Executive Vice President of the REIT. Office Property means, at any time, a building or real property in Canada in which not less than 50% of the GLA is used or is reasonably capable of being used as office space. Option Agreement means the option agreement dated February 20, 2003 between the REIT, Allied Canadian Corporation and the other Related Parties pursuant to which the REIT has been granted certain rights to purchase Office Properties from Allied Canadian Corporation and the other Related Parties from time to time. Properties means, collectively, all properties owned by the REIT as at the date hereof, including the Initial Properties and Property means any one of them. Property Management Agreement means the property management agreement dated February 20, 2003 between the REIT and the Property Manager, pursuant to which the Property Manager manages the REIT s properties and acts as leasing manager for the REIT. Property Manager means Allied Canadian Corporation. Related Parties means Allied Canadian Corporation and any affiliate of Allied Canadian Corporation, Michael R. Emory, Wayne L. Jacobs and any members of the immediate family of either Michael R. Emory or Wayne L. Jacobs. REIT means Allied Properties Real Estate Investment Trust, and if applicable, includes any subsidiaries of the REIT. Rights Plan means the Unitholders rights protection plan to be established by the REIT on or prior to Closing. 4

5 Stabilized Property means, at any time, an Office Property that does not in the following 24 months require capital expenditures exceeding 33% of the property s proposed acquisition cost in order for the property to function at its highest and best use. subsidiary has the meaning ascribed thereto in the Securities Act (Ontario), as amended. Substantial Completion in respect of a property occurs when: (i) 90% of the GLA of the property is leased to third parties who are in occupancy, are paying rent and who deal at arm s length to the owner of the property, Allied Canadian Corporation and the Related Parties; and (ii) substantially all of the capital expenditures required in order for the property to function at its highest and best use have been spent or due provision has been made for such expenditures. Tax Act means the Income Tax Act (Canada), as amended. TSX means the Toronto Stock Exchange. Trustees means the trustees of the REIT from time to time. Unitholder means a holder of a Unit. Unit Option Plan means the unit option plan of the REIT which provides for the grant, from time to time, at the discretion of the Trustees, of options to purchase Units for cash to the Trustees, officers and employees of the REIT and any subsidiary, officers and employees of Allied Canadian Corporation and its subsidiaries and certain parties related to the foregoing. Units means units in a single class of units of the REIT and includes a fraction of a unit of the REIT. 5

6 DISTRIBUTABLE INCOME The REIT defines Distributable Income as the net income of the REIT determined in accordance with GAAP adjusted by adding back or deducting as required: (i) depreciation on rental properties; (ii) amortization of the premiums or discounts on assumed mortgages; (iii) non-cash rental revenue recorded to recognize rental income rateably over the life of each lease; (iv) non-cash compensation expenses with respect to the long term incentive plan; (v) amortization of values ascribed in a building acquisition to in-place leases and customer relationships; and (vi) amortization of values ascribed in a building acquisition to above-market and below-market leases. Distributable Income is a non-gaap financial measure and should not be considered as an alternative to net income, cash flow from operations or any other measure prescribed under GAAP. The REIT considers Distributable Income to be a measure of its overall operating performance and is one of Management s key performance indicators. See Distribution Policy. FORWARD-LOOKING STATEMENTS This Annual Information Form includes certain statements that are forward-looking statements. All statements, other than statements of historical fact, in this Annual Information Form that address activities, events or developments that the REIT or a third party expects or anticipates will or may occur in the future, including the REIT s future growth, results of operations, performance and business prospects and opportunities, and the assumptions underlying any of the foregoing, are forward-looking statements. These forward-looking statements reflect the REIT s current beliefs and are based on information currently available to the REIT and on assumptions the REIT believes are reasonable. Actual results and developments may differ materially from results and developments discussed in the forward-looking statements as they are subject to a number of significant risks and uncertainties, including those discussed under Risk Factors and elsewhere in this Annual Information Form. Certain of these risk factors and uncertainties are beyond the REIT s control. Consequently, all of the forwardlooking statements made in this Annual Information Form are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the REIT. These forward-looking statements are made as of the date of this Annual Information Form and the REIT assumes no obligation to update or revise them to reflect subsequent information, events or circumstances or otherwise. 6

7 DOWNTOWN TORONTO OFFICE MARKET General Unless otherwise indicated, information relating to market statistics has been derived from information published by Royal LePage Commercial Inc. on its website at The downtown Toronto office market is comprised of approximately 63.5 million square feet of office space and is customarily divided into six sub-markets: the Downtown Core, Downtown North, Downtown South, Downtown East, Downtown West and King West (also known as West King West ). While identifiable at any given point in time, these sub-markets are not static. They tend to expand geographically with the passage of time and the dynamics of urban growth. The map below identifies the current boundaries of the sub-markets in downtown Toronto. The Downtown Core is the largest of the six sub-markets, comprising approximately 34 million square feet of office space, and is dominated by high-rise office towers. Downtown North is the second largest of the six sub-markets, comprising approximately 14 million square feet of office space, and is dominated by institutional office properties, while Downtown South is a relatively small sub-market of 2 million square feet of office space. There has been little new office development in these three sub-markets over the past decade. The Toronto Target Market A significant amount of new office space has been created over the past seven years in the remaining three submarkets: Downtown East, Downtown West and West King West (collectively, the Toronto Target Market ). Comprised of approximately 13.5 million square feet of office space, the Toronto Target Market represents approximately 21% of the downtown Toronto office market and is equivalent to approximately 40% of the Downtown Core sub-market. All of the Properties located in Toronto are located in the Toronto Target Market. 7

8 DOWNTOWN MONTRÉAL OFFICE MARKET General Unless otherwise indicated, information relating to market statistics has been derived from information published by Royal LePage Commercial Inc. on its website at The downtown Montréal office market is comprised of approximately 50 million square feet of office space and is customarily divided into four sub-markets: the Financial Core, Downtown East, Downtown West and Old Montréal. While identifiable at any given point in time, these sub-markets are not static. They tend to expand geographically with the passage of time and the dynamics of urban growth. The map below identifies the current boundaries of the sub-markets in downtown Montréal. The Financial Core is the largest of the four sub-markets, comprising approximately 25 million square feet of office space, and is dominated by high-rise office towers. The Montréal Target Market The remaining three sub-markets are Downtown East, Downtown West and Old Montréal. Together with the a portion of the southern perimeter of the Financial Core which is part of the International District, these three submarkets make up the Montréal Target Market. Comprised of approximately 25 million square feet of office space, the Montréal Target Market represents approximately 50% of the downtown Montréal office market and is equivalent in size the Downtown Core sub-market. The one Property located in Montréal is located in the Montréal Target Market. 8

9 CLASS I OFFICE SPACE Class I properties are created through the adaptive re-use of older industrial structures in urban areas. Many of these structures were originally constructed in the early part of the twentieth century for light industrial purposes, particularly garment manufacturing and distribution. They tended to be low-rise buildings, standing three to eight stories, with architecturally ornate facades. The interior attributes of these structures were equally distinctive, featuring high ceilings, abundant natural light afforded by continuous perimeter windows, exposed post-and-beam structural frames, exposed interior brick and hardwood floors. Not only did these structures perform very practical functions, they also served as a form of expression and identification for their original owner-users. With appropriate restoration and retrofitting, these buildings can satisfy the technological needs of the most demanding office tenants, as well as affording contemporary office space. Typically, restoration and retrofitting involves the restoration and illumination of facades, the reconstruction of lobbies and entrances, the replacement of mechanical, electrical, life-safety, security and window systems, the installation of information technology infrastructures and, where possible, the sandblasting of interior brick and wood surfaces and the restoration of hardwood floors. The restored space is suitable for open-plan office layouts, facilitating flexible and creative use of space, as well as more conventional layouts. Class I buildings can be given additional vitality by incorporating retail use at the street level. When numerous Class I buildings are operated in a co-ordinated manner with the use of open courtyards, carefully selected restaurants and other amenities, they can contribute meaningfully to a sense of community. Class I buildings are now recognized as a distinct and important category in the overall Toronto office market and are beginning to be recognized as such in the overall Montréal office market. Class I office buildings offer a compelling value proposition to their tenants relative to other types of office space available in the downtown Toronto and Montréal office markets: Location: Environment: Cost Savings: They are located in close proximity to the central business district and in areas generally well served by public transportation and other amenities. They have distinctive internal and external environments and afford both spacious and naturally illuminated work areas and a sense of community, thereby assisting tenants in attracting, motivating and retaining valued employees. They have significantly lower gross occupancy costs than space in the office towers in the central business district. 19 of the 21 Properties located in the Toronto Target Market fall within the Class I office category and the one Property located in the Montréal Target Market falls within this category. THE REIT Allied Properties Real Estate Investment Trust (the REIT ) is an unincorporated real estate investment trust created by the Declaration of Trust under, and governed by, the laws of the Province of Ontario. The REIT is a closed-end investment trust. Although the REIT qualifies as a mutual fund trust as defined by the Tax Act, the REIT is not a mutual fund as defined by applicable securities legislation. The head office of the REIT is located at 469 King Street West, Fourth Floor, Toronto, Ontario, M5V 1K4. The REIT has 22 wholly-owned subsidiaries, all of which are incorporated under the laws of the Province of Ontario, which act as nominee title holders to the Properties. The objectives of the REIT are: (i) to provide Unitholders with stable and growing cash distributions from investments in income-producing office properties in Canada; and (ii) to maximize Unit value through on-going 9

10 active management of the REIT s assets and the acquisition of additional office properties pursuant to the Option Agreement and otherwise. Through on-going active management and a comprehensive leasing strategy, the REIT will strive to optimize the net operating income from its portfolio of properties. The REIT will strive to achieve growth through strategic acquisitions of additional office properties pursuant to the Option Agreement and otherwise Wellington Street East, Toronto RECENT ACQUISITIONS On April 30, 2004, the REIT acquired Wellington Street East, Toronto, for an aggregate purchase price of $5,250,000. The purchase price was satisfied by paying $3,223,000 in cash, assuming a first mortgage in the approximate principal amount of $1,911,000 and assuming certain other liabilities. The first mortgage matures in May 2007 and is at an interest rate of 5.5%. The cash portion of the purchase price for Wellington Street East was financed through the REIT s credit facilities which were repaid with a portion of the proceeds of the Unit offering of the REIT completed in May 2004 and a second mortgage refinancing of $1,740,000 at an interest rate of 5.3% and maturing in May The Queen Richmond Centre, Queen Street East and Richmond Street East, Toronto On June 3, 2004, the REIT acquired the Queen Richmond Centre, located at Queen Street East and Richmond Street East, Toronto for a purchase price of $39,500,000. The purchase price was satisfied by paying $15,100,000 in cash and placing a first mortgage in the approximate principal amount of $24,400,000 for a term of 10 years at an interest rate of 6.42%. The acquisition of the Queen Richmond Centre was a significant acquisition under Canadian securities law. Selected financial statements which present historical financial information relating to the Queen Richmond Centre and a detailed description of the Queen Richmond Centre can be found in the Business Acquisition Report, which is incorporated by reference into this Annual Information Form. The Castle Phase I, 41 and 53 Fraser Avenue and 8 Pardee Avenue, Toronto On June 30, 2004, the REIT acquired The Castle Phase I for a purchase price of $11,600,000. The purchase price was satisfied by paying $4,100,000 in cash and placing a first mortgage in the approximate principal amount of $7,500,000 for a term of 10 years at an interest rate of 6.55%. 425 Viger Avenue West, Montréal On November 30, 2004, the REIT acquired a Class I office property in Montréal, Québec for a total purchase price of $29,200,000. The Purchase price was satisfied by paying $8,800,000 in cash and placing a first mortgage in the approximate principal amount of $20,400,000 for a term of ten years at an interest rate of 5.55%. 469 King Street West, Toronto On January 4, 2005, the REIT purchased 469 King Street West, Toronto. The purchase price of $16,000,000 was satisfied by the REIT paying approximately $10,940,000 in cash and assuming a first mortgage in the approximate principal amount of $5,060,000 at an interest rate of 6.132% for a term expiring July 1, Allied Canadian Corporation has provided bridge covenants to the REIT in respect of certain of the leased office space of the property. Pursuant thereto, Allied Canadian Corporation is obligated to pay to the REIT the difference between certain rents which are actually payable and the rents which will be payable under the new rental obligations when they come into effect on May 1, 2005 and February 1, 2006 for the period from the closing of the purchase of the property until such dates. The estimated value of Allied Canadian Corporation s financial commitment is approximately $445,

11 For more information about these properties see Property Portfolio. PROPERTY PORTFOLIO The following table provides additional information regarding the Properties: Property Selected Tenants (1) West King West, Toronto 905 King Street West, Toronto MTS Allstream Lavalife Date Built/ Date Renovated Office Area (square feet) Retail Area (square feet) Total GLA (square feet) Occupancy (%) (2) ,054 9, ,886 (3) 100 The Castle Phase I Downtown West, Toronto (King & Spadina) Nelvana Joseph Mimran 1912/ ,002 16,562 75, Spadina Avenue Algorithmics 1916/ , , Spadina Avenue Blast Radius 1901/ ,267 12,613 51, King Street West Offices PC Financial Interactive Executive Newell Rubbermaid King Street West Toron Capital Markets Totum Life Sciences 468 King Street West Indigo Books & Music Organic Online 469 King Street West OMA e-services The Body Shop Canada Allied Canadian Rodney s Oyster House King Street West Cossette Communications Acton Leather BMW Canada 1910/ ,052 25,134 99, / ,942 23,048 50,990 (4) / , , / ,599 11,250 73, / ,892 27, ,597 (5) Wellington Street West Bensimon Byrne 1912/ ,813 3,137 36, Adelaide Street West Ontario Legal Aid AXYZ Edit 1989/ ,156 4,104 78, (6) Downtown West, Toronto (King & Peter) 388 King Street West toronto.com Second City Shoppers Drug Mart 1930s/ ,483 11,765 40,248 (7) Peter Street Indigo Books and Music 1928/ ,623 8,287 46, Adelaide Street West Ryder, Wright, Blair & Doyle LLP Bickford, Forget and Matthews LLP 1925/ ,345 3,209 23,

12 Property Selected Tenants (1) Adelaide Street West Project 360 Investments Davinci Technologies High Road Communications Partners Film Date Built/ Date Renovated Office Area (square feet) Retail Area (square feet) Total GLA (square feet) Occupancy (%) (2) 1920/ ,986 18,263 54, Peter Street Salter Farrow Pilon 1915/ ,502 19,804 49, Richmond Street Easy & The Fifth 1920/ ,221 21,684 56, West Downtown East, Toronto 230 Richmond Street East DWL DoubleClick Front Street East Redwood Custom Communications Mobilia Interiors 1909/ , , / ,811 16,606 47,417 (9) Front Street East Mobilia Interiors 1875/ ,809 13,735 33,544 (10) Wellington Street East Scott Thornley & Company The Canadian Football League 1930/ ,144 11,049 32, The Queen Richmond Centre Montréal St. Joseph Media Verity Publicis St. Joseph Corp. 1870/ ,000 48, , Viger Avenue West Fédération des caisse Desjardins du Quebec 1915/ , , Total 1,448, ,831 1,714, Notes: (1) The information presented in the above table under the heading, Selected Tenants reflects the trade names of such tenants. The legal names appear elsewhere in this prospectus, under the heading, Property Portfolio - Description of Properties. (2) As at December 31, 2004, except for 469 King St.West, which is as of the date hereof. (3) Excludes 7,576 square feet of storage space. (4) Excludes 709 square feet of storage space. (5) Excludes 5,750 square feet of storage space. (6) After giving effect to head leasing arrangements, pursuant to the Head Leases. See Property Portfolio Head Leases. (7) Excludes 4,046 square feet of storage space. (8) Excludes 8,161 square feet of storage space. (9) Excludes 4,894 square feet of storage space. (10) Excludes 13,361 square feet of storage space. Tenant Mix There are 135 tenants in the Properties and no single tenant accounts for more than 10.0% of the gross revenue from the Properties. As shown in the pie chart below, the Properties have a diversified tenant base, which is expected to provide the REIT with stable and predictable cash flows. The following pie chart shows the tenant mix for the Properties as at December 31, 2004 on the basis of percentage of annual gross revenue (excluding parking and signage revenue). 12

13 Tenant Mix Governement 3.1% Other Financial Services 3.3% 4.0% Media and Film 13.7% Service/Professional 39.5% (1) Telecommunications 15.6% Retail/Entertainment 20.8% Note: (1) Includes law, marketing, advertising, architectural and design firms. The following table shows the ten largest tenants of the Properties ranked by annual gross revenues, the percentage of total annual gross revenues represented by such tenants and the year of expiry of such tenants leases. 13

14 Tenant (1) Percentage of Gross Revenue (%) Year of Lease Expiry 1 Cossette Communication MTS Allstream / Indigo Books Blast Radius Algorithmics Publicis DWL Inc Bensimon Byrne DoubleClick Lavalife Total 38.9 Note: (1) The information in the above table under the heading Tenants reflects the trade names of such tenants. The legal names appear elsewhere in this prospectus under the heading, Property Portfolio Description of Properties. Due to the demand for Class I office space, the REIT has been able to be very selective with respect to the office and retail tenants in the Properties, both on a property-by-property basis and on a portfolio basis. This has resulted in a balanced mix of tenants without undue exposure to any tenant type. Lease Maturities The following table sets forth the total occupied square footage of the Properties subject to lease maturities during the period ended December 31, 2009 (assuming tenants do not exercise renewal options) and the percentage of the total GLA relating to the Properties represented by such: Year Total Square Feet (1) Total Square Feet Expiry as a Percentage of Total Properties GLA (1) (%) , , , , , Notes: (1) Excludes all storage space. Includes 469 King St. West, which was acquired by the REIT on January 4, Description of Properties The following is a description of each of the Properties. All of the Properties are located in Toronto except for 425 Viger Avenue West, Montréal. In the description below, basements that are partially above ground and that are used as office or retail space are referred to herein as a storey. The information in the tables below reflects the legal names of tenants. The trade names of such tenants appear elsewhere in this annual information form. 14

15 West King West, Toronto 905 King Street West 905 King Street West is a six-storey, office/retail building. Located on the south side of King Street West, west of the intersection with Bathurst Street, the property is comprised of 112,886 square feet of GLA and 118 underground parking spaces. The property is 100% leased. The property was built in 1987 and features raised floors and enhanced security features. Key Tenants Nature of Business Area Leased % of GLA Lease Expiry Date (square feet) MTS Allstream Inc. telecommunications 64, September 30, 2009 (1) Lavalife Inc. companionship service 40, September 20, 2009 (2) Notes: (1) As to 55,764 square feet. This lease expires as to 9,122 feet on August 31, (2) As to 20,843 square feet. This lease expires as to 19,405 feet on March 31, The Castle Phase I, 41 and 53 Fraser Avenue and 8 Pardee Avenue, Toronto The Castle Phase I is a Class I office complex located at 41 and 53 Fraser Avenue and 8 Pardee Avenue in downtown Toronto. The Castle Phase I is comprised of three buildings including a restored, 5-storey, Class I office/retail building. Built in 1912 by E.W. Gillett Company for use in the production of Magic Baking Powder, the property is known in the surrounding community as The Castle. Located near the intersection of King Street West and Dufferin Street, Toronto, the property is comprised of 190,134 total square feet of GLA (excluding 16,103 square feet of storage space) of which The Castle Phase I is comprised of 75,564 square feet of GLA and is 100% leased to the three tenants. The Castle Phase I has four surface parking spaces. The property was renovated and retrofitted for office and retail use in 2001 through Key Tenants Nature of Business Area Leased % of GLA Lease Expiry Date (square feet) Nelvana Limited entertainment company 64,002 (1) 79 May 2011 Joseph Mimran & Associates home furnishings supplier 14, October 2007 Note: (1) Includes 5,000 square feet of storage space. Downtown West, Toronto (King & Spadina, King West Central ) 185 Spadina Avenue 185 Spadina Avenue is a restored, seven-storey, brick-and-beam office building. Located on the east side of Spadina Avenue, just to the north of Queen Street, the property is comprised of 55,800 square feet of GLA. The property is 100% leased to a single tenant. Built in 1916, the property was extensively renovated and retrofitted for office use in Key Tenant Nature of Business Area Leased % of GLA Lease Expiry Date (square feet) Algorithmics Incorporated risk management software provider 55, December 31, Spadina Avenue 99 Spadina Avenue is a restored, seven-storey, brick-and-beam office/retail building. Located on the east side of Spadina Avenue, just to the north of the intersection with King Street West, the property is comprised of 51,850 15

16 square feet of GLA and a large third-party sign facing north. The property is 100% leased. Built in 1910, the property was extensively renovated and expanded for office and retail use in 2000 and Key Tenant Nature of Business Area Leased % of GLA Lease Expiry Date (square feet) Blast Radius Inc. marketing solutions provider 23, October 31, 2008 The Samuel Building, King Street West The Samuel Building is a restored, seven-storey, brick-and-beam office/retail building. Located on the southwest corner of the intersection of King Street West and Spadina Avenue, the property is comprised of 98,974 square feet of GLA, surface parking for four vehicles and one large third-party sign facing south on Spadina Avenue. The property is 100% leased. Built in 1910 and home to garment industry tenants for decades, the property was extensively renovated and retrofitted for office and retail use in Key Tenant Nature of Business Area Leased % of GLA Lease Expiry Date (square feet) Interactive Executive Offices (King work-space provider 29, September 2014 West) Corp. Loblaws Properties Limited and financial services company 21, November 2005 Canadian Imperial Bank of Commerce Newell Industries Canada Inc. consumer products company 8,440 9 March 2008 The Krangle Building, King Street West The Krangle Building is a restored, five-storey, brick-and-beam office/retail building. Located on the south side of King Street West, west of the intersection with Spadina Avenue, the property is comprised of 50,236 square feet of GLA. The property is 90.17% leased. Built in 1910 and home to garment industry tenants for decades, the property was extensively renovated and retrofitted for office and retail use in Key Tenants Nature of Business Area Leased (square feet) Toron Capital Markets Inc. financial services 10,834 Totum LifeScience Inc. wellness facility 10,778 % of GLA Lease Expiry Date 22 December May King Street West 468 King Street West is a restored, seven-storey, brick-and-beam office/retail building. Located on the north side of King Street West, west of the intersection with Spadina Avenue, the property is comprised of 65,039 square feet of GLA, leased surface parking for 14 vehicles and one third-party sign facing west on King Street West. The property is 85.7% leased. Built in 1910 and home to the Ontario Cabinet & Furniture Works for decades, the property was extensively renovated and retrofitted in 1999 for office and retail use, though currently it is leased solely for office use. Key Tenants Nature of Business Area Leased (square feet) % of GLA Lease Expiry Date Indigo Books & Music, Inc. book retailer (head office) 37, May 2009 Organic Online Canada Inc. web-based business solutions provider 17, March King Street West, Toronto 469 King Street West is a restored, 5-storey, brick-and-beam, Class I office/retail building within the REIT s target market in downtown Toronto. The property is comprised of 73,889 square feet of GLA with eight surface parking spaces and is 100% leased to 6 tenants. Built in 1903, the property was extensively renovated and retrofitted for office and retail use in 1999 and

17 Key Tenants Nature of Business Area Leased % of GLA Lease Expiry Date (square feet) OMA e-services Inc. professional association 23, December 2009 (1) The Body Shop health and beauty products 17, December 2013 Canada Allied Canadian property management 15, October 2005 Corporation (2) Rodney s Oyster House restaurant 10, July 2011 Notes: (1) The OMA has the right to terminate its lease effective December 31, 2007 upon payment of 3 months rent in the event its government funding is not renewed beyond January 8, (2) Newport Partners Inc., a financial services firm, has committed to lease this space commencing November 1, Newport Partners Inc. has the right to terminate its lease effective February 6, King Street West King Street West is a restored, five-storey brick-and-beam office/retail building. Located on the northeast corner of the intersection of King Street West and Brant Street, the property is comprised of 122,475 square feet of GLA and surface parking for three vehicles. The property is 100% leased. Built in 1872 and expanded in the early 1890 s to house the Gurney Stove Factory, the property was extensively renovated and retrofitted for office and retail use in 2000 and Key Tenants Nature of Business Area Leased (square feet) % of GLA Lease Expiry Date Cossette Communication Inc. advertising agency 94, April 2012 The Hide Market (Acton) Limited leather products retailer 8,352 9 November 2011 BMW Canada Inc. automobile showroom 6,195 5 February Wellington Street West 420 Wellington Street West is a restored three-storey, brick-and-beam office/retail building. Located on the north side of Wellington Street West, west of the intersection with Spadina Avenue, this property is comprised of 36,950 square feet of GLA and surface parking for three vehicles. The property is 100% leased. Built in 1912 by The Dominion Paper Box Company and home to garment industry tenants for decades, the property was extensively renovated and retrofitted for office and retail use in Key Tenant Nature of Business Area Leased (square feet) % of GLA Lease Expiry Date TMG MacManus Canada Inc. (o/a Bensimon Byrne) advertising agency 33, August Adelaide Street West 425 Adelaide Street West is a 10-storey, brick-and-concrete office/retail building. Located on the southeast corner of the intersection of Adelaide Street West and Brant Street, the property is comprised of 77,915 square feet of GLA and underground parking for 42 vehicles. The property is 94.83% leased. Built in 1989, the property was cosmetically renovated in Key Tenants Nature of Business Area Leased (square feet) % of GLA Lease Expiry Date Legal Aid Ontario legal aid research 18, December 2010 AXYZ Edit Inc. post-production film company 14, May

18 Downtown West, Toronto (King & Peter, Entertainment District ) 388 King Street West 388 King Street West is a restored three-storey, brick-and-concrete office/retail building. Located on the northwest corner of the intersection of King Street West and Peter Street, the property is comprised of 40,766 square feet of GLA and surface parking for nine vehicles. The property is 100% leased. Built in the 1930 s and home to garment industry tenants for decades, the property was extensively renovated and retrofitted for office use in the 1980 s and again for office and retail use in Key Tenants Nature of Business Area Leased (square feet) % of GLA Lease Expiry Date toronto.com (by its general online city guide 22, February 2010 partner Ontario Inc.) Second City Communications Inc. production company 6, March 2009 Shoppers Drug Mart retail 11, August Peter Street 82 Peter Street is a restored six-storey, brick-and-beam office/retail building. Located on the west side of Peter Street, just north of 388 King Street West, the property is comprised of 46,910 square feet of GLA and surface parking for 14 vehicles. The property is 100% leased. Built in 1928 and home to garment industry tenants for decades, the property was extensively renovated and retrofitted in 1999 for office and retail use, though currently the building is leased solely for office use. Key Tenant Nature of Business Area Leased (square feet) % of GLA Lease Expiry Date Indigo Books & Music, Inc. (head office) book retailer 15, May 2009 The Fremes Building, Adelaide Street West The Fremes Building is a restored six-storey, brick-and-beam office/retail building. Located on the southwest corner of the intersection of Adelaide Street West and Peter Street, the property is comprised of 22,535 square feet of GLA and two large third-party signs, one facing south on Peter Street and one facing west on Adelaide Street West. The property is 84.12% leased to a diverse group of single-floor tenants. Built in 1925 and home to the Ontario Clock Company for decades, the property was renovated and retrofitted for office and retail use in 1987 and further renovated in The Weld Building, Adelaide Street West The Weld Building is a six-storey, brick-and-concrete office/retail building. Located on the north side of Adelaide Street West, west of the intersection with Peter Street, the property is comprised of 54,157 square feet of GLA and surface parking for four vehicles. The property is 100%. Built in 1920 and home to The Bryant Press for decades, the property was extensively renovated and retrofitted for office and retail use in Key Tenants Nature of Business Area Leased (square feet) % of GLA Lease Expiry Date Project 360 Investments Limited nightclub 18, March 2007 Davinci Technologies Inc. software developer 8, April 2006 High Road Communications Inc. public relations firm 8, October 2009 The Partners Film Company Limited film production company 8, October

19 134 Peter Street 134 Peter Street is a four-storey, brick-and-beam office/retail building close to Queen Street West. Located on the northwest corner of the intersection of Peter Street and Richmond Street West, the property is comprised of 49,024 square feet of GLA, surface parking for 12 vehicles and a large third-party sign facing east on Richmond Street West. The property is 100% leased. Built in 1915 and home to G. Weston Bread Limited for decades, the property was partially renovated and retrofitted for office and retail use in 1987 and further renovated in Key Tenants Nature of Business Area Leased (square feet) % of GLA Lease Expiry Date N.C.S. Management (1998) Inc. architectural firm 12, August Ontario Limited and Ontario Limited (o/a District/134 Restaurant & Bar) restaurant/nightclub 11, August 2009 The Gelber Building, Richmond Street West Richmond Street West is a restored, six-storey, brick-and-beam office/retail building. Located on the southwest corner of the intersection of King Street West and Duncan Street, the property is comprised of 54,453 square feet of GLA. The property is 100% leased to 11 tenants. Built in the 1920 s, the property was renovated and retrofitted for office and retail use in the 1980 s. Key Tenants Nature of Business Area Leased (square feet) % of GLA Lease Expiry Date Barracuda Management Inc. and The Fifth Inc. (o/a Easy & The Fifth) night club/restaurant 15, December 2007 (1) Note: (1) 10,660 square feet expires April Downtown East, Toronto 230 Richmond Street East 230 Richmond Street East is a restored four-storey, brick-and-beam office building. Located on the north side of Richmond Street East, to the east of the intersection with Jarvis Street, the property is comprised of 62,514 square feet of GLA, with surface parking for 62 vehicles and a large third-party sign. The property is 100% leased. Built in 1909, the property was extensively renovated and retrofitted for office use in Key Tenants Nature of Business Area Leased (square feet) % of GLA Lease Expiry Date DWL Incorporated customer-management 32, January 2006 software provider DoubleClick Inc. marketing solutions provider 29, January 2007 DWL Incorporated is a provider of customer-management software applications to the financial services industry in North America. DoubleClick Canada Inc. is a subsidiary of DoubleClick Inc., a U.S. public company that provides technology-driven marketing and advertising solutions to customers worldwide. The Beardmore Building, Front Street East The Beardmore Building is a restored, four-storey, brick-and-beam office/retail building. Located on the south side of Front Street East, east of the intersection with Yonge Street, the property is comprised of 47,417 square feet of GLA and seven underground parking spaces. The property is 100% leased. Built in 1872, the property was extensively renovated and retrofitted for office and retail use in 1986 and further renovated in This property has been designated by the City of Toronto as having historical or architectural value. 19

20 Key Tenants Nature of Business Area Leased (square feet) Redwood Custom publisher 30,811 Communications Inc. Mobilia Interiors furniture retailer 10,153 % of GLA Lease Expiry Date 65 February April 2006 The Perkins/Dixon Building, Front Street East The Perkins/Dixon Building is a restored, four-storey, brick-and-beam office/retail building. Located on the south side of Front Street East, just east of The Beardmore Building, the property is comprised of 33,544 square feet of GLA. The property is 100% leased. Built in 1875, the property was extensively renovated and retrofitted for office and retail use in 1985 and further renovated in This property has been designated by the City of Toronto as having historical or architectural value. Key Tenants Nature of Business Area Leased % of GLA Lease Expiry Date (square feet) Mobilia Interiors furniture retailer 9, April 2006 Queen Richmond Centre, Queen Street East and Richmond Street East, Toronto The Queen Richmond Centre is a restored, 6-storey, Class I office/retain building within the REIT s target market in downtown Toronto comprised of 223,588 square feet of GLA. The property is 100% leased. Built between 1870 and 1910, the property was renovated and retrofitted for office and retail use in Key Tenants Nature of Business Area Leased % of GLA Lease Expiry Date (square feet) St. Joseph Media Inc. media publisher 61, December 2013 Veritprop Limited woman s private club 43, January 2024 Publicis Toronto Inc. advertising and 44, November 2012 communications company St. Joseph Corporation holding company 16,689 7 May Wellington Street East, Toronto Wellington Street East, located on the north side of Wellington Street East, just west of Church Street, is a five-storey, Class I office building located in the REIT s target market in downtown Toronto with 32,193 square feet of GLA. The property was extensively renovated for office use in the 1980s and in the 1990s. The property is 100% leased. Key Tenants Nature of Business Area Leased % of GLA Lease Expiry Date (square feet) Scott Thornley & Company advertising 7, June 2006 The Canadian Football League sports league 6, December 2006 Montréal 425 Viger Avenue West, Montréal 425 Viger Avenue West is located just north of Old Montréal. The Montréal property is an 11-storey office building that was built in 1915 and renovated in and The property is comprised of 201,410 total square feet of GLA, which will increase to 206,134 square feet on May 1, 2005, and is 100% leased. Key Tenants Nature of Business Area Leased % of GLA Lease Expiry Date (square feet) Fédération des caisse Desjardins du Québec financial services 165,184 (1) 82 December 2012 Public Works Canada government 7, March 2005 (2) 20

21 Telus Québec Inc. telecommunications 7,058 (3) 3.5 December 2019 (4) Québec Cystic Fibrosis Association charity 5, June 2008 Notes: (1) The area occupied by this tenant, which includes 15,850 square feet of sublet space, will increase to 187,764 square feet on May 1, 2005 or 91% of GLA. (2) The Fédération des caisse Desjardins du Québec has committed to lease this space as of May 1, (3) Telus Québec has sublet an additional 9,000 square feet of space to the Fédération des caisse Desjardins du Québec. The Fédération des caisse Desjardins du Québec committed to lease such space directly from the REIT commencing April 2005 until December (4) Telus Québec has the right to terminate its lease effective December 31, 2010 upon payment of 12 months rent. A physical due diligence report by an independent engineering firm obtained by the REIT prior to the acquisition of the Montréal Property estimates $590,500 in building expenditures over the next five years. Mortgages The following table lists the Mortgages and particulars regarding the respective Properties, the balance of the debt as at December 31, 2004, the year of maturity of the debt, the rate of interest attaching to the debt and the expected principal balance of the debt at maturity. To the knowledge of the REIT, as at March 31, 2005 the Mortgages are all in good standing. Mortgaged Property West King West, Toronto Balance as at December 31, 2004 ($) 21 Year of Maturity Interest Rate (%) Balance at Maturity ($) 905 King Street West 9,460,401 Jan ,735,248 The Castle Phase I 7,492,726 Sept ,943,092 Downtown West, Toronto (King & Spadina) 185 Spadina Avenue 6,790,168 Dec ,302, Spadina Avenue 6,542,300 Sept ,171, King Street West 11,169,517 Jan ,997, King Street West 4,922,142 Jan ,405, King Street West 5,055,228 Jun ,027, King Street West 14,942,392 Aug ,279, Wellington Street West 1,850,000 May ,850, Adelaide Street West 5,397,108 Jun ,974, King Street West 5,059,689 Jul Downtown West, Toronto (King & Peter) 82 Peter Street 2,544,875 Nov Adelaide Street West 2,977,227 Jan ,243, Peter Street 3,111,342 Jan ,998, Richmond Street West 5,524,360 Nov ,968,042 Downtown East, Toronto 230 Richmond Street East 7,301,175 Jun ,931, Wellington Street East 3,589,204 May ,293,758 The Queen Richmond Centre 24,231,086 Jun ,820,856 Montréal 425 Viger Avenue West 20,400,000 Dec ,450,451