KPMG Weekly Newsletter – For the Week Ending January 28, 2007

January 29, 2007

The following information was obtained from newspaper articles appearing
in the Globe and Mail and the National Post for the week ending January 28, 2007:

Homburg Invest Inc. increased its stake in Alexis Nihon REIT from 8.6% to 19.5% by acquiring 2.96 million shares in a private placement. Cominar REIT sweetened its bid for Alexis Nihon to $18.50 from $17, with the extra $1.50 coming in cash. Cominar also extended the deadline to vote on the offer to February 22.
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Toronto-based FirstService Corp. invested a total of US$14-million to acquire controlling interests in two consulting companies. First Service purchased an 80% interest in the San Francisco-based hotel consulting group PFK Consulting Corp. and its PFK Hospitality Research. First Service also bought a 60% interest in Ottawa-based MHPM Project Managers.
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According to a prospectus filed by Column Canada Issuer Corp., the owners of the West Edmonton Mall, the Ghermezian family, are raising $600-million through the issuance of mortgages secured by the mall’s assets. The $600-million in proceeds received through the sale of multi-class pass-through certificates of Column Canada represent a stake in a first mortgage bond issued by West Edmonton Mall Property Inc. West Edmonton Mall is estimated to have an appraised value of $926-million, a 54% increase from the appraised
value of $603-million in April, 2003.
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In the fourth quarter of 2006, mortgage-backed securities transactions in Canada included $386.3-million by Canada Mortgage Acceptance Corp., $553.6-million by Merrill Lynch Financial Assets Inc. and $787.6-million by Real Estate Asset Liquidity Trust.
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Imperial Oil Ltd. will begin talks with Calgary City Council regarding the purchase of a laneway between two pieces of property it owns, as part of a potential plan to build a new office tower in Calgary. Imperial is considering building a 35-storey, 700,000-square-foot tower to house employees now working in three buildings.
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Vancouver-based Concord Adex Investments Ltd. is planning to build 20 condominium towers with nearly 4,000 units on about 40 acres of land near the southwestern corner of Sheppard and Leslie in Toronto. Concord purchased the land from Canadian Tire Corp. for $149.7-million in October, 2006.
According to N. Barry Lyon Consultants, 9,995 new condominium suites along the Sheppard corridor will go on the market in 2007.
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According to J.J. Barnicke Ltd., the office vacancy rate in the Broadway Corridor in Vancouver is 3.4%, compared with about 6% in 2006. The vacancy rate for light-industrial tenants in the area is below 1%. By 2009, two new projects in the area will add 420,000 square feet of retail and office space occupied largely by national retailers. Vancouver-based PCI Group’s Crossroads project will redevelop the site of the former Fairchild Plaza mall with about 98,000 square feet of office space, 122,000 square feet of retail space and 98
condo units. Grosvenor Canada is developing a $150-million mixed-use project on a 2.2- acre site that will include big-box retailers, such as Home Depot.
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According to Canaccord Adams, the Canadian REIT sector is expected to produce a 12% to 15% total return in 2007.
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According to Demographia International, Canada’s housing market is the most affordable among six countries that include the U.S., Ireland, Britain, Australia and New Zealand. Regina was tied for first place with Fort Wayne, Indiana, and Youngstown, Ohio, as most affordable among 159 major urban housing markets. It would take a worker earning the average wage in Regina two years to make as much as the average home price in that city. Winnipeg and Quebec City placed ninth at 2.5 years. Vancouver made the list of the top 25 least affordable cities at 7.7 years of annual income to equal the average price of a home. The most expensive cities were Los Angeles at 11.4 years and San Diego at 10.5 years. Australia had the least affordable housing market of the six countries.
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According to Re/Max, residential housing values in Canada rose 264% to an average of $276,824 in 2006 from $76,021 in 1981. Nationally, the compounded annual rate of return was 5.3% over the past 25 years. The largest gain occurred in Barrie, where the average home value soared 372% to $244,000 in 2006 from $51,665 in 1981. Prices climbed 297% to $257,481 from $64,854 in Ottawa, jumped 290% to $351,941 from $90,203 in the GTA,
and increased to $203,178 from $59,366 in Halifax-Dartmouth. Increases of 292% were reported in Montreal, 242% in the Greater Vancouver Area, 229% in Victoria and 227% in Calgary.
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According to Statistics Canada, homeowners’ replacement costs increased 8.2% in December from a year earlier.
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According to Urbanation Inc., more than 3,000 new condominium units were sold in the Toronto Census Metropolitan Area in the fourth quarter of 2006. Total new condominium apartment sales reached more than 113,000 units in the past 10 years.
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Blackstone Group LP raised its bid for Equity Office Properties Trust to US$22.4-billion, or US$54 a share from US$48.50. Including debt, the offer is valued at US$38.3-billion. The revised bid tops Vornado Realty Trust’s offer of about US$21.6-billion or US$52 a share.
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The value of takeovers of property companies in the U.S. doubled to nearly US$200-billion in 2006. Blackstone Group LP’s real estate funds have generated annual returns of 35% to 40% since 1992. Blackstone reportedly plans to raise another US$8-billion to US$10-billion real estate fund by June, 2007.
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Los Angeles-based Coastal Resources LLC purchased two adjacent Santa Barbara County cattle ranches from Bixby Ranch Co. for a price reportedly very close to the combined asking price of US$155-million. Both the 8,580-acre Cojo Ranch and the 15,814- acre Jalama Ranch are categorized in California as noncommercial properties.
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According to the National Association of Realtors, sales of existing homes in the U.S. fell 0.8% to a seasonally adjusted annual rate of 6.22 million units in December from November. Sales of condominiums rose 2.1%, while sales of single-family homes dropped 1.3%. Sales of existing homes for all of 2006 fell 8.4% to 6.48 million units from 2005, the biggest annual decline since 1989. Sales of single-family homes dropped 8.1% to 5.68 million, while sales of condominiums and cooperatives were down 10.4% to 803,000 units. Sales dropped 15.5% in the West, 7.1% in the South, 5.5% in the Northeast and 5.8% in the Midwest. The existing-home median price increased 1.1% to US$222,000. The NAR forecasts sales will decline 1.2% in 2007, while Fannie Mae projects a drop of 7% to 8%.
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According to Merrill Lynch, office vacancy rates in New York City are 10.3%, down 112 basis points from 2006. Rents are climbing 30% year-over-year in New York, making it the top office market in the U.S.
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According to the UK property Web site Rightmove, house prices are expected to rise 6% across the UK in 2007. The number of properties for sale is down 18% from January, 2006, helping to boost average prices 0.5% so far in January of this year. The price of an average home in the U.K. rose 13.5% in the past year and reached £222,859 in January. Prices in the top end of the London market climbed 22.4% last year to a record £356,192 ($826,353) and Savills forecasts a gain of 15% in 2007. The biggest increase in a London borough was seen in Kensington and Chelsea, where the average price grew 61.8% to £1.15-million over the year.
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According to Standard and Poor’s, Macau reported that earnings from gambling activities climbed 22% to US$7-billion in 2006 from the previous year. Earnings from gambling activities on the Las Vegas Strip are reportedly expected to reach about US$6.6-billion for 2006. Macau’s earnings are projected to reach US$10-billion by 2010.
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Richard Branson, owner of Virgin Group Ltd., reportedly may open his first casino in Las Vegas or Macau and is seeking possible partners.
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