1. Real Estate Investment Trusts
Ben Mckay
Bradley Verbeek
Edmond Yee
Sean McIlmoyle

2. Agenda
Overview
RioCan
Calloway
H&R

3. What is a REIT? Real Estate Investment Trust
Pools capital from investors
Invests in real estate assets (homes, buildings, or mortgages)
Distributes at least 90% of income to investors as dividends
Investors purchase REIT units instead of directly purchasing real estate

4. REITs Structure REIT Trustee Unitholder Properties Management
Trustee Fees
Act on Behalf of Unitholders
REIT
Distributions
Property Income
Unitholder
Properties
Investment
Ownership
Management Services
Management Fees
Management

5. Shareholders’ Benefits
Professional Management
Portfolio Diversification
Liquidity
High Yields
Transparency

6. REITs Classification Equity Invest in and Own Properties
Revenue from Rent
Mortgage
Loan Money for Mortgages
Invest in Existing Mortgages or MBS
Revenue from Interest
Hybrid
Invest in Properties and Mortgages
Revenue from Rent and Interest

7. Value Drivers Interest Rates
Rise in Interest  Interest Expense Increase  Dividend Yield Decrease
Drop in Interest  Interest Expense Decrease  Dividend Yield Increase

8. Portfolio Diversification

9. REITs Timeline 1972: NAREIT Unveils REIT Index
1969: First European REIT (Netherlands)
1993: REITS Introduced in Canada
1960: REITS are Created (USA)
1960: NAREIT Formed
: Dramatic Real Estate Downturn
1960
1970
1980
1990
2000
2010
1965: First NYSE REIT (Continental Mortgage Investors)

10. American REITs
153 REITs
$389 Billion Market Capitalization

11. Canadian REITS
35 REITs
$29 billion market capitalization

12. Market Cap Growth (Canada)

13. REIT Index Performance

14. S&P/TSX Capped REIT vs. S&P/TSX Composite (1 yr)

15. S&P/TSX Capped REIT vs. S&P/TSX Composite (10 yr)

16. S&P/TSX Capped REIT vs. S&P/TSX Income Trust (1 yr)

17. S&P/TSX Capped REIT vs. S&P/TSX Income Trust (10 yr)

18. REIT Requirements (Canada)
Minimum of 150 unit holders, and are listed on a recognized Canadian Exchange
No more than 50% of the shares can be held by five or fewer individuals
At least 95% of its income must be derived from the disposition of or income earned from qualifying investments
At least 80% of its property must be held in any combination of real property in Canada and other qualifying investments
No more than 10% of its property should consist of bonds, securities or shares in the capital stock of any one corporation or debtor
Income is not taxed within the trust as long it is distributed to unit holders

19. Market Cap of Canadian Publicly Traded FTEs
Rapid growth of income trusts up to 2006 because of imbalanced tax treatment

20. Tax Fairness Plan
Applicable to all Canadian trusts companies that begin trading after Oct. 31, 2006, except qualified REITs to reduce companies converting to trusts
At no time in the year hold any non-portfolio property other than real properties situated in Canada
Have no less than 95% of its income for the year income from properties (whether in Canada or abroad, and including dividends, interest, rents, etc. and taxable capital gains from dispositions of real properties)
Have no less than 75% of its income for the year income that is directly or indirectly attributable to rents from, mortgages on, or gains from the disposition of, real properties situated in Canada
Hold throughout the year real properties situated in Canada, cash, and debt or other obligations of Governments in Canada with a total fair market value that is not less than 75% of its equity value

21. Affected REITs Cross-border REITs Hotel REITs & Senior Housing REITs
Significant US or Foreign Holdings
Hotel REITs & Senior Housing REITs
Passive Income vs. Active Income

22. Impact of Tax Fairness Plan

23. Impact of Tax Fairness Plan

24. Factors to Consider Management Portfolio Diversification Low Leverage
Net Asset Value per Share (NAV)
Earnings Available for Distribution
FFO & AFFO
Cash Distribution to Unitholders
FFO or AFFO Payout Ratio

25. Operating Performance: Net Income
Net Income = Revenue – Expenses
Depreciation makes up large part of expenses.
Poor measure of performance because real estate often appreciates rather than depreciate.

26. Operating Performance: FFO & AFFO
Funds from Operations (FFO) = Net Income + Depreciation – Gain on Sales of Property
Adjusted Funds from Operations (AFFO) = Funds from Operations – Capital Expenditures

27. REIT Market Caps

29. Stock Price Overview

30. RioCan Real Estate Investment

31. 1 year with SMA 50 and SMA 200

32. 5 year with SMA 50 and SMA 200

33. 1 year compared to iShare S&P TSX Capped REIT

34. 5 year compared to iShare S&P TSX Capped REIT

35. Company Overview

36. About RioCan
• Largest REIT in Canada with 314 properties, including 10 under development, owned interests totalling over 46 million sq. ft. (75 million sq. ft. including partners’ interests and shadow anchors) and an enterprise value of $11.9 billion • Since, Q RioCan has assembled a portfolio of 40 shopping centres, or 5.8 million square feet with a fair value in excess of $1.2 billion • Focused on retail real estate • Full service real estate entity with property management, asset management, leasing, acquisitions, development and financing capabilities with 615 employees • Approximately 7,000 tenants, no tenant representing over 4.8% of annualized rental revenue

37. About RioCan
“RioCan’s core strategy is the ownership and management of community oriented neighbourhood shopping centres anchored by supermarkets, together with a rapidly expanding mix of new format retail centres. Its investment strategy is to focus on stable, lower risk, predominantly retail properties in either stable or high growth markets in order to create stable and, over time, growing cash flows from the property portfolio.”

38. Unit Holders Summary

39. About RioCan

40. Distribution History

41. Portfolio Highlights As at September 30, 2011:
• High proportion of national tenants
• Approximately 86.0% of the annualized rental revenue is derived from national and anchor tenants
• Stable occupancy levels at 97.5% (total portfolio)
• For the quarter ended September 30, 2011, RioCan retained approximately 89% of expiring leases at an average net rent increase of 7.2%
• US Expansion:  
– Focus on grocery anchored strip centres – 97.8% occupancy at September 30, 2011

42. Property Diversification (Canadian Portfolio)

43. Geographic Diversification

44. Top 10 Tenants –Canada and US

45. Target Entry into Canada
• Target has selected 24 locations across five provinces that are owned by RioCan and its partners currently occupied by Zellers.
• Currently in discussions with Target to expand a number of the selected locations and is expected to be the anchor tenant at RioCan’s St. Clair and Weston Road development project.
• Target has committed substantial capital to remodel and renovate the selected locations, which will serve to modernize and bring the stores to a format that is in keeping with a typical Target store.
• RioCan will be Target ’s largest landlord in Canada.

46. Tanger Joint Venture
RioCan has entered into an arrangement to form an exclusive joint venture arrangement with Tanger factory Outlet Centers, Inc. for the acquisition, development and leasing of sites across Canada that are suitable for development as outlet shopping centres
It is the intention of the joint venture to develop as many as 10 to 15 outlet centres in larger urban markets and tourist areas across Canada, over a five to seven year period. Any projects developed will be co-owned on a 50/50 basis and will be branded as Tanger Outlet Centres

47. Top 10 Tenants - US

48. Recent U.S Expansions
Advance in U.S market due to the lowered real estate prices
Cedar shopping centers: 80% Interest (Massachusetts, Pennsylvania, and Connecticut). 22 income properties
Inland Western: 80% interest for usd $123.3 million and assume $68.2m property level debt with average interest rate of 5.6% and average term 6 years.
(Dallas – Fort Worth, Houston, and Austin
RioCan believes that the us market is expected to yield a greater number of attractive opportunities than will be available in canada. Riocan is presently invested in two geographic areas of the us: the north-eastern states and the state of texas.
Cedar: the real states through joint venture 80% owned by Riocan and 20% owned by Cedar, with the first properties in the joint venture being seven grocery-anchored shopping centre in Massachusetts, Pennsylvania, and Connecticut.
Riocan has owned from inland western an 80% interest in nine new format shopping centres for 80% interest for usd $123.3 million and assume $68.2m property level debt with average interest rate of 5.6% and average term 6 years.

49. Recent U.S Expansions(cont’d)
Kimco Realty – 31.7% Acquired Las Palmas Market Place in El Paso for $ million.
Sterling Organization Partnership – 80% ownership in August Focused on the opportunistic acquisition of quality grocery anchored and Big Box power center
On oct 8, 2010 RioCan announced the acquisition of Las palmas marketplace in El Paso, Texas through a joint venture arrangement with Kimco and Dunhill. Kimco is a publicly-traded real estate investment trust and is the United State’s largest owner and operator of neighbourhood and community shopping centres.
Las Palmas is a 638,000 square feet new format retail centre, the property is 98% leased and has an average lease term of approximately 7 years at an average lease rate of approximately $10 per square foot.

50. Recent U.S Expansions(cont’d)
The expansion in us is increasing rapidly.

51. Stable Occupancy

52. Lease Rollover

53. Acquisition Activity
2010

54. Strong Development Pipeline
At September 30, 2011
• Total developments comprise 8.9 million square feet, including shadow anchors
• RioCan and partners’ owned interest consists of 7.4 million square feet
• Total estimated project cost is $1.8 billion, with RioCan’s interest being approx. $1.4 billion
• Invested $427 million in these projects
• Generate unlevered yield between 7% to 11%, at a weighted average of 8.5% to 9.5%

55. Debt Maturity Schedule
• Long‐term, staggered debt maturity profile
• 5.3% Overall WAIR
• 4.7 Year weighted avg. term to maturity
• Minimal floating rate debt exposure (3.2% of total debt)
• Financing mortgages today at around 3.5% to 4.5% (dependent on term
RioCan’s debt ladder staggers maturities such that there are no single years with a large
exposure to maturing debt.
• This enables RioCan to take advantage of low interest rate environments and insulates
the impact of higher interest rate environments.
• In 2010, by refinancing maturing debt with an interest rate in excess of 7% into debt
with an average interest rate of 4.8% RioCan has generated annual interest savings in
excess of $6 million on refinanced mortgage debt.

56. Capital Structure

57. Portfolio Leasing Activity

58. Portfolio Leasing Activity

59. Outlook and Strategy
• Robust acquisition activity the past two years will have an impact in and 2012.
• Year to date RioCan completed total acquisitions of $620 million at an average cap rate of 6.7%
• In 2010, RioCan completed total acquisitions of $986 million at an average cap rate of 7.6%
• Contractual Rent Steps of $1 million expected in  remainder of and $4 million in 2012
• Increased development activity is expected in 2011 and 2012
• US tenant expansion into Canada
• Target, Marshall’s, J. Crew, Kohl’s, Bed Bath & Beyond, Dick’s Sporting Goods
• Interest savings on maturing debt are expected to continue in 2012
• Mortgage debt maturing in 2012 currently carries an average interest rate of 5.8% providing an opportunity for RioCan to reduce interest expense at current interest rate

60. Senior Management Team

61. CEO Edward Sonshine, Q.C. Ceo of RioCan since it became a REIT in 1993
Member of board of directors of Royal Bank of Canada, Ciniplex Galaxy Income Fund, and chair of Chesswood income fund.
BA university of Toronto, LLB Osgoode Hall Law School

62. CFO and Senior Vice President
Raghunath Davloor C.A.
CFO and Senior Vice President of RioCan since February 2008
More than 25 years of real estate, management, finance, accounting and tax experience
Prior to joining RioCan in February, 2008, he served as Vice President & Director of Investment Banking at TD Securities
Bachelor of Commerce degree from the University of Manitoba and is a Chartered Accountant. 

63. Executive Vice President & Chief Operating Officer
Frederic A. Waks
Joined RioCan in 1995 and became COO in 2008
30 years of real estate experience starting in 1981 with Royal LePage
1984 joined First Plazas as vice president of leasing/marketing
1988 he moved to Domion Trust
1993 Vice President of leasing at Confederation Life
Active community member and is on the board of a number of local and national charities

64. Financial Performance

65. Quarterly Balance Sheet

66. Annual Balance Sheet

67. Consolidated Statement of Earnings (Annual)

68. Quarterly Income Statement

69. Annual Cash Flow

70. Annual Cash Flow cont…

71. Quarterly Cash Flow

72. Quarterly Cash Flow cont…

73. Funds From Operations (FFO)

74. AFFO

75. Recommendation
Hold
(Long term buy)

76. CALLOWAY Real Estate Investment Trust
“The Right Fit for Customers,
Communities, and Investors”

77. Stock Price Overview

78. Market Capitalization Summary

79. Calloway REIT

80. 1 year with SMA 50 and SMA 200

81. 5 year with SMA 50 and SMA 200

82. 1 year compared to iShare S&P TSX Capped REIT

83. 5 year compared to iShare S&P TSX Capped REIT

84. Company Overview

85. About Calloway
Calloway Real Estate Investment Trust is an unincorporated open-ended mutual fund trust governed by the laws of the Province of Alberta.
Calloway’s purpose is to own and manage dominant shopping centers that provide retailers with a platform to reach their customers through convenient location, intelligent designs, and a desirable tenant

86. Portfolio Highlights

87. Portfolio Highlights

88. Recent News Highlights of the year to date
Maintained portfolio occupancy rate above the 99% level
Renewed 90% of expiring leases with an average rent increase of 8.1%
Acquired 3 Walmart anchored shopping centres
Entered into agreements with Target and Loblaws to convert select stores into Target and Loblaws stores
Issued $90 million in unsecured debentures bearing interest at 4.7% per annum to finance Walmart acquisitions
Invested $46.6 million in the quarter to complete the development and lease up of 181,317 square feet of leasable area with a 7.2% yield
FFO increased by $8.5 million ($0.025 per unit) to $41.4 million

89. Distribution History

90. Revenue by Province

91. Area by Province

92. Top 25 Tenants

93. Portfolio Occupancy and Age
Calloway has maintained high and industry-leading occupancy
Portfolio of high quality, newly developed assets with an average age of 9.1 years

94. Lease Maturity Average lease term of 8.3 years
Average remaining lease term for Walmart is 11.3 years
Average remaining lease term excluding Walmart is 6.2 years
Average lease term of top 10 tenants is 9.7 years
Average retention rate of over 90% and lifts on renewals of 7.3%

95. Strategic Partners - Walmart
Number of Walmarts
/ Supercenters
76 / 49
Number of Walmarts / Supercenters (including shadows)
93 / 57
Total GLA in Walmart anchored centres (sq. ft.)
21,551,445
Largest landlord of Walmart Canada

96. Strategic Partners - SmartCentres
Largest full service development company of open format shopping centres in Canada
SmartCentres owner, Mitchell Goldhar, owns 21.5% of Calloway
SmartCentres has had a long standing relationship with Walmart

97. Development Pipeline

98. Future Development Pipeline

99. Income Properties and Properties under Development

100. Management Team

101. Chief Executive Officer
Al Malwani
President, CEO
Replaced Simon Nyilassy as CEO on May 2, 2011
Chartered accountant
MBA from the University of Toronto and a Masters of Laws from Osgoode Hall Law School
Previously the President of Exponent Capital Partners, a real estate advisory and private equity firm
Previously the CFO for Oxford Properties Group for over 10 years

102. Chief Financial Officer
Bart Munn
Chief Financial Officer
Chartered Accountant
Bachelor of Commerce from Queen’s University
Vice President and CFO of Morguard Corporation ( )
Vice President and CFO of Morguard Real Estate Investment Trust ( )
Senior Vice President Finance and Administration for Morguard Investments Limited ( )

103. Executive Vice President
Rudy Gobin
Executive Vice President Asset Management
Chartered Accountant
Bachelor of Commerce from the University of Toronto
Former Strategy Officer of Calloway
Former Executive Vice President, Finance and Operations of SmartCentres ( )
CFO of Nexacor Realty Management ( )

104. Financial Performance

105. Quarterly Balance Sheet

106. Annual Balance Sheet

107. Capital Structure

108. Annual Income Statement

109. Quarterly Income Statement

110. Annual Cash Flow

111. Annual Cash Flow

112. Quarterly Cash Flow

113. Quarterly Cash Flow

114. AFFO and FFO

115. Cash Flow

116. Financial and Operational Highlights

117. Recommendation

118. Hold

119. H&R REIT

120. H&R Stock Stock Overview

121. 5 Year: 50 and 200 SMA

122. 1 Year: 50 and 200 SMA

123. 5 Year: H&R vs. S&P/TSX Capped REIT

124. About H&R Reit

125. H&R Reit Real Estate Investment Trust
Headquartered in Downsview, Canada
Owns and manages a portfolio 282 properties:
37 office properties
121 industrial properties
131 retail properties
3 development projects
Properties consist of over $39 million square feet has an aggregate total NBV of $5.3 billion as of December 31, 2010

126. H&R Reit Two primary objectives:
Provide unitholders with stable and growing cash distributions, generated by the revenue it derives from investments in income producing real estate properties
Maximize unit value through ongoing active management of the REIT’s assets, acquisition of additional properties and the development and construction of projects which are pre-leased to creditworthy tenants

127. H&R Reit The REIT’s strategy:
Accumulate a diversified portfolio of high quality income producing properties in Canada and the United States
Attract creditworthy tenants and focus on long-term leases.

128. Management

129. Management Profile Thomas J. Hofstedter
President and Chief Executive Officer
Has more than 30 years of real estate industry experience
Became President and Chief Executive Officer of H&R REIT at its creation in December 1996
Responsible for building most of the properties that comprised the initial assets of the REIT
In addition to commercial development, has experience in high- rise residential and was responsible for building many prominent Toronto condominiums such as Wellington Square, the Penrose, the Metropole and others

130. Management Profile Larry Froom, CA Chief Financial Officer
Has over 15 years of real estate industry experience
Joined H&R Developments in 1997 as Controller, was promoted to VP - Finance for the H&R Group in 2003, was appointed VP - Finance for H&R REIT in January 2006 and CFO in September 2006
Responsible for overseeing all financial transactions, Unit offerings and investor relations. Prior to joining H&R, he was manager at Ernst & Young where he serviced clients in the real estate industry

131. Management Profile Nathan Uhr Chief Operating Officer
Has over 30 years of real estate industry experience
H&R Developments' Director of Leasing and Property Management and held various other positions with H&R over 20 years before becoming Vice-President, Acquisitions of H&R REIT, at its inception, in December 1996.
Leads the due diligence team on any acquisition or mezzanine financing planned by the REIT and is responsible for management and leasing issues relating to the REIT's properties

132. Recent Events

133. Recent Events November October June May
H&R sold $187 million of stapled units at a price of $22.00 per unit. The REIT will concurrently sold $75 million principal amount of 4.50% convertible unsecured subordinated debentures
$100 million Senior Unsecured Debenture Financing at 4.9%
Announcement of Q3 ended September 30, 2011 financial statements
October
Completed the acquisition of the Two Gotham Tower for U.S. $415.5 million. The tower is described as a State-of-the-Art office tower in Long Island City, New York known as Two Gotham Center.
June
Completed the acquisition of the “Atrium on Bay” in Toronto, Ontario for gross proceeds of $344.8M. The REIT will assume a 7-year non-recourse mortgage of $190M. The acquisition is conditional upon the vendor meeting certain conditions.
Acquisition of 1M sq.ft. industrial property, Georgia, USD$56M
May
Completed offering $200 million offering of Stapled Units at $22.15
Acquisition of PWC Data centre, Georgia, USD$61M
Acquisition of Two industrial properties, eastern Canada, $20M

134. Recent Events February January
4th quarter results announced along with an increase in the quarterly distribution policy
Purchased a 42,000 square foot retail property in Teaneck, New Jersey for a purchase price of U.S. $10.3M. A mortgage payable of U.S. $6.4M was assumed on closing.
Purchased a 116,000 square foot retail property in Columbus, Ohio for a purchase price of U.S. $21.7M.
January
$180 million Senior Unsecured Debenture Financing at 4.778%
Completed the acquisition of the remaining 20% beneficial interest, not already owned by the REIT, of a property under development for an aggregate cash purchase price of approximately $11,000. The REIT now owns 100% of approximately 81 acres of land located in Brampton, Ontario (known as Airport Road).

135. Internal Reorganization
Created H&R Finance Trust in Oct, 2008
Unit holder's investments held through two separate trusts
Trade together as “Stapled units”
Shared the same ticker symbol
The sole activity of Finance Trust is to provide capital funding to H&R REIT (U.S.) Holdings Inc. ("U.S. Holdco"), a wholly owned U.S. subsidiary of the REIT
Purpose
To save U.S tax

136. Portfolio of Properties

137. Flagship Properties TransCanada Tower, Calgary, Alberta
936,000 square foot
TransCanada Pipelines
20-year lease commenced on May 1, 2001
100% Ownership Interest
Place Bell, Ottawa, Ontario
987,328 square foot
Bell Canada, Public Works of Canada, Accenture and Gowling Lafleur Henderson LLP.

138. Flagship Properties Telus, Burnaby, BC
686,697 square foot office complex
Telus
20-year lease
100% Ownership Interest
Bell Canada and Bell Mobility Mississauga, Ontario
1.1M square foot office complex
Bell Canada and Bell Mobility

139. Top 10 Assets As at June 30, 2011

140. List of Tenants and Credit Rating

141. The Bow: Under Development

142. The Bow: Under Development
2 million sq. ft. office complex in Calgary for EnCana Corporation
Completion by 2012
Fully pre-leased for 25 years
Budgeted cost of $1.6 billion
Set to incur approximately $360 million in development costs over the next twelve months
77% complete and on budget
Locked in 97% of total budgeted costs before contingencies and has successfully secured all of the financing required

143. The Bow: Under Development
3 months behind schedule with potential cost of $4.7 million for the delay. $30 million in contingency is available to cover this.
The first four tranche completion dates upon which floors are scheduled to be delivered are as follows:
floors 1-14 by July 3, 2011
floors by August 29, 2011
floors by October 12, 2011
Schedule of completion of floors is expected to be set by the end of March 2011
Year one projected income is approximately $94 million.
Rent step ups will be 0.75% per annum on office space and 1.5% per annum on parking income for the full 25-year term.

144. The Bow Budget

145. 2010 Acquisitions

146. 2010 Dispositions

147. Portfolio Overview

148. Number of Properties by Type of Asset

149. Net Book Value

150. Net Book Value by Region

151. Operating Income

152. Lease Expiries in Next 5 Years

153. Key Performance Drivers

154. Average Age of Portfolio From Date Built or Renovated

155. Mortgages Payable

156. Financial Information

157. Average Shares Outstanding
Year
2010
2009
2008
2007
2006
2005
2004
2003
Basic units (in millions)
144.35
142.51
135.00
124.19
109.39
95.43
88.44
74.68

158. Financial Highlights

159. Financial Highlights

160. Monthly Distribution Schedule

161. Updated Distribution Schedule

162. Net Property Operating Income

163. Debt to Gross Book Value

164. Financial Statements Analysis
All numbers in 000’s except unit and per unit amounts

165. Q3 2011 Balance Sheet Other Assets
Mortgages and amount receivable 3,000 (2010) 63,789 (2009)

166. 2010 Balance Sheet Other Assets
Mortgages and amount receivable 3,000 (2010) 63,789 (2009)

167. 2010 Income Statement

168. Q Income Statement

169. 2010 Cash Flow Statement

170. Q Cash Flow Statement

171. FFO, NFFO, and AFFO Funds from Operations
Normalized Funds from Operations
Adjusted Funds from Operations

172. Funds From Operations

173. Normalized Funds From Operations

174. Adjusted Funds From Operations

175. Recommendation
Buy