KPMG Weekly Newsletter – For the Week Ending January 21, 2007

January 22, 2007

The following information was obtained from newspaper articles appearing
in the Globe and Mail and the National Post for the week ending
January 21, 2007

Brookfield Asset Management Corp. has agreed to purchase Mills Corp. for US$1.35-billion in cash, or US$21 a share. With debt and preferred stock, the total value of the deal is about US$7.5-billion. Brookfield will provide debt financing for Mills until the transaction is completed, probably in the second half of 2007. Brookfield’s long-term goal is to bring institutional partners into the acquisition.
Kentucky-based Ventas Inc. is offering $2.14-billion (including debt), or $15 a unit, for Sunrise Senior Living REIT. A special committee of the Canadian REIT’s board is recommending acceptance of the offer.
Chartwell REIT will spend $52-million on new acquisitions, mezzanine financings and the expansion of a nursing residence. Chartwell purchased a retirement home in Ontario for $22-million from Spectrum Seniors Housing Development LP and its partners. The REIT also acquired a 50% interest in the Peninsula Retirement Residence in White Rock, British Columbia, for $14.6-million and is investing about $3.1-million to expand a five-storey building attached to Manoir Pierrefonds in Montreal.
RioCan REIT closed a $151.5-million equity offering of six million units at $25.25 per unit through a syndicate of underwriters led by RBC Dominion Securities Inc. The proceeds will be used for acquisitions, including partially funding the recent $223-million purchase of the Yonge Eglinton Centre office-and-retail complex in midtown Toronto. The underwriters have the option to issue 600,000 additional units, which would generate additional proceeds
of about $15.2-million.
The Greater Toronto Airports Authority plans to lease land for a new hotel development and two office towers as part of a $300-million development project on a 15-acre site now used for parking. The proposed project could include between 300 and 400 new hotel rooms, and up to 400,000 square feet of office space in buildings limited by regulations to a height of about 12 or 13 storeys, as well as conference, restaurant and retail space. A request for proposal has been issued to the real estate community and the winning
developer is expected to be named in April, with preliminary planning work beginning in the summer of 2007.
Alcan Inc. has purchased the Salvation Army’s heritage-protected sanctuary and adjacent administrative building in Montreal, as part of a plan to expand its 25-year-old headquarters next door. Alcan plans to spend up to US$50-million to renovate and expand its head office complex.
Summit REIT, owned by ING Real Estate, reportedly acquired its 19.9% stake in Alexis Nihon REIT by purchasing about 2.8 million units from Fidelity Investments. Halifax-based Homberg Investment Inc. has purchased an 8.6% stake in Alexis Nihon.
Toronto-based Whiterock REIT announced last week that it is seeking a buyer or a merger partner.
Former Royal Host REIT CEO Greg Royer and his brother Terry purchased Royal Host’s US$3.6-million U.S. hotel management business in December and plan to grow it to 125 hotels by the end of 2007.
Magna Entertainment Corp. will cease operating the Great Lake Downs racetrack in Muskegon, Michigan, after the 2007 race meet. Great Lake Downs is expected to generate a pretax loss of about US$1.8-million for the year ended December 31, 2006.
According to Royal Bank of Canada, Canadian REITs generated returns of more than 25% in each of the last two years. In 2006, the market capitalization of REITs listed on the TSE rose nearly 40% to $31-billion.
According to the city of Vancouver’s recent jobs and land-use plan, downtown Vancouver will need about 65 million square feet of space to accommodate job growth over the next 20 years, which is about 10 million more square feet than the capacity under current land-use regulations. According to Cushman & Wakefield, Class A office vacancy rates in downtown Vancouver have dropped to 3.3% from 12.3% two years ago. There are currently 47 residential buildings under construction in the city’s central core.
According to the Canadian Real Estate Association, sales of existing homes in Canada totalled 336,271 in 2006, down slightly from a record 336,513 units in 2005. Calgary, Edmonton, Saskatoon, Winnipeg, Sudbury, Ottawa, Montreal and Quebec all set records for sales activity last year. Sales in December increased 4.9% to a seasonally adjusted 29,077 homes from 27,707 in November. Sales rose to a record monthly high of 2,015 units in Calgary, up 18% from November. New listings fell 0.6% nationally to 46,482 units. Average
prices in major markets rose 10.6% to a record $294,270 in 2006. The average price in December climbed 8.1% to $294,190. Prices increased 9.2% in the fourth quarter from a year earlier. The average price of a home in Calgary rose 32% to $361,611 in December from a year earlier.
According to Canada Mortgage and Housing Corp., construction starts on low-rise housing across the GTA fell 14% to 20,765 units in the period from January to November, 2006, from 24,247 units during the same period in 2005. The average price for a new detached home across the GTA increased 10.1% to $450,483 from $408,839. In Durham Region, the average price rose 11.9% to $341,853. In Halton Region, the average price climbed 20% to $507,920, with average prices of above $500,000 in Burlington and more than $650,000 in Oakville.
According to the Toronto Real Estate Board, sales of existing homes in the GTA rose 6% to 1,592 units in the first half of January from 2006. The average price dropped 1% to $340,793 from December but was up 10% from the same period in 2006.
Vornado Realty Trust teamed up with Starwood Capital Group Global LLC and Walton Street Capital LLC to offer US$21.6-billion, or US$52 a share, for Chicago-based Equity Office Properties Trust. This tops Blackstone Group LP’s offer of US$20-billion, or US$48.50 a share, accepted by Equity Office’s board on November 19.
Morgan Stanley Real Estate will purchase CNL Hotels & Resorts Inc. for about US$4.2-billion, or US$20.50 per share, including debt to take control of 8 luxury hotels. CNL Hotels will sell its remaining 51 properties to Ashford Hospitality Trust for about US$2.4-billion in cash immediately before its transaction with Morgan Stanley.
Investor Carl Icahn boosted his stake in Florida-based home builder WCI Communities Inc. to 6.1 million shares, or a 14.6% interest, from 1.7 million shares.
The U.S.-based National Association of Home Builders/Wells Fargo index of sentiment climbed to a six-month high reading of 35 in January from a revised 33 in December.
According to the Mortgage Bankers Association, applications for U.S. home mortgages have risen in seven of the past 11 weeks and are up 17% from their 2006 low in late October.
According to the National Association of Realtors, the median price of a new home in the U.S. is projected to climb 3% in 2007 to US$248,900, following a 0.3% increase in 2006.
California-based Mortgage Payment Deferral Inc. has launched a “no payment for 12 months” mortgage and plans to offer the product across the U.S. this year.
According to Mitchell, Maxwell and Jackson Inc., the average sale price of Manhattan apartments fell 5.7% in the third quarter of 2006. The average price of a condominium in the fourth quarter dropped to US$1,079,363 from US$1,144,024 a year earlier. Sales of properties worth more than US$2.5-million climbed from 4.7% to 6% of all transactions in the fourth quarter.

Real Estate News compiled by RealCash

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KPMG Weekly Newsletter – For the Week Ending January 14, 2007

January 15, 2007

The following information was obtained from newspaper articles appearing in the Globe and Mail and the National Post for the week ending January 14, 2007

RioCan REIT has cancelled its plans to expand into the U.S. through a US$1.45-billion joint venture with Michigan-based Ramco-Gershenson Properties Trust.
ING Real Estate will pay $91-million, or $17.50 per unit, for nearly 2.8 million units of Alexis Nihon REIT, giving ING a 19.9% interest in Alexis Nihon when combined with its existing holdings. The investment is being made through Summit REIT, which is now controlled by ING. In early December, Cominar REIT had offered $17 a unit for Alexis Nihon in a cash and-units deal.
According to Canada Mortgage and Housing Corp., the seasonally adjusted annual rate of housing starts dropped to 211,500 units in December from 229,300 units in November. Multiple family starts dropped 13.9%, while single family starts were down 3%. Starts dipped 19% in Alberta. Urban starts were down 20.5% in the Prairie region and 17.9% in the Atlantic region. Starts across Canada climbed to about 227,400 in 2006 and are expected to fall to 210,900 units in 2007.Starts were up 20% in Alberta in 2006 from 2005.
According to Canada Mortgage and Housing Corp, in Calgary the average price of a new single-family detached home is forecast to increase by nearly 38% to reach nearly $500,000 in 2007 from $353,662 in 2006.
According to Statistics Canada, building permits rose to a record monthly high of $6.3-billion in November. Non-residential permits increased substantially, while housing permits were down 2.2%. Total building permits for the first 11 months of 2006 reached $61.1-billion, up 0.5% from the previous record of $60.8-billion for all of 2005.
According to the Toronto Real Estate Board, sales of existing homes in the City of Toronto through the MLS increased 1% to a record 34,404 properties in 2006. The average resale price climbed 5% to $378,775. Sales for the GTA region from Burlington to Newcastle and north to Lake Simcoe reached 83,084 units, slightly below the 2005 record of 84,145 units. Sales in December were up 4% from a year earlier, with a 54% gain in Don Mills and in the South Humber neighbourhood of Etobicoke. The average home price for the region was $351,941.
According to the Greater Toronto Home Builders Association, sales of new homes and condos for 2006 are expected to top 40,000 units.
According to RealNet Canada, sales of new condominiums in the GTA totalled 16,948 from January to November, 2006. In 2005, there were 17,693 units sold for the full year, compared with 13,750 in 2004.
According to Urbanation, the overall index price for a new condominium apartment in downtown Toronto was $380 per square foot in third quarter of 2006, compared with an average of more than $600 in downtown Vancouver and US$1,120 in Manhattan. Sales of new condo units in the Toronto Census Metropolitan Area rose 1.9% in the third quarter of 2006 from a year earlier and unsold inventory fell 6% from the previous quarter to represent below 23% of total condominium inventory. The overall average index price for a new condo unit in the Toronto CMA was $337 per square foot in the third quarter, 2.1% higher than in the second quarter and 8.4% higher than in 2005.
U.S. home builder D.R. Horton Inc. reported that net sales orders fell to US$2.3-billion for the fiscal first quarter ended December 31, 2006, from US$3.2-billion in 2005. The order cancellation rate dropped to 33% from 40% in the previous quarter.
Meritage Homes Corp. reported net sales of 1,201 homes totaling US$356-million in the fourth quarter, down from 2,072 homes totaling US$723-million a year earlier. Fourth-quarter revenue dropped to US$821-million from US$1.04-billion in 2005.
Cerberus Capital Management is reportedly preparing an offer for Equity Office
Properties Trust.
Mills Corp., a U.S.-based shopping mall owner, will restate financial results for 2001 to 2004 and for the first three quarters of 2005. Errors in the results are expected to cost as much as US$354-million. According to a regulatory filing, Mills may seek bankruptcy protection if it can’t repay a US$1.1-billion loan.
A majority of the approximately 500 owners of the Briny Breezes trailer park in Florida voted to sell their property to Ocean Land Investments for about US$510-million. Ocean Land plans to build a complex that will include luxury condos, a hotel, retail space and a marina.
Hilton Hotels Corp. is building a 161-unit property on West 57th Street in Manhattan. Scheduled to open in 2009, it will be the first building in New York constructed specifically for time sharing. Hilton is selling shares of 78 units at its flagship hotel near Rockefeller Center for as much as US$70,000 each for seven days a year. Starwood Hotels & Resorts Worldwide Inc. has sold about half of its 22 four-week time-share blocks at the St. Regis Hotel in Manhattan for as much as US$750,000 each. Hyatt Corp. is considering adding time shares to a hotel it is planning for a former office building at Fifth Avenue and 42nd Street.
According to PricewaterhouseCoopers LLP, New York hotel occupancy is 84% and the average room rate is US$241 a night.
In 2005 and the first three quarters of 2006, U.S. residential mortgage lenders made US$900-billion in sub-prime loans. A total of 38% of all subprime mortgages in 2006 were for 100% of house price. In the third quarter of 2006, 12.5% of all subprime loans were delinquent on their payments after nine months. According to the Center for Responsible Lending, one out of every five sub-prime mortgage loans made in the past two years in the U.S. will go into foreclosure.
French ski operator Cie des Alpes has reportedly made an offer to purchase Sofival, a private company that owns the lift complex at the Val d’Isere ski resort in France.

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Real Estate Weekly Newsletter (from KPMG)

The following information was obtained from newspaper articles appearing in the Globe and Mail and the National Post for the week ending January 7, 2007

Morguard REIT will sell about 65% of its industrial portfolio for $156.7-million in two
separate transactions to three Canadian pension funds. Morguard has sold 11 properties
comprising a leaseable area of 876,000 square feet for $72-million and will close the sale of
nine properties with 1.06 million square feet of space for $84.7-million in the first quarter of
2007. The REIT also purchased a 50% interest in a 900,000-square-foot warehouse
development in Valleyfield, Quebec, to be leased to Diageo Canada. The project will be
jointly held with Morguard Industrial Property-1 Fund, which is owned by three major
Canadian pension funds.
Clarke Inc. paid $27.72-million to purchase 17.79% of Royal Host REIT from Geosam
Investments Ltd., an investment holding company controlled by Clarke’s chief executive,
George Armoyan. Clarke purchased 4,325,876 units for $6.42 per unit.
The Ontario Club and the Dominion Club of Canada will merge into The Ontario Club at 1
King West, effective March 1, 2007. The new club will be based in the historic Dominion
Bank building, which was recently renovated into a condo hotel with the addition of a 51-
storey tower.
According to Altus InSite Real Estate Information Systems Inc., 71 office towers are
under construction across Canada, nearly four times the level of activity seen two years ago.
Nearly half of all new office construction in Canada is occurring in Calgary, where vacancy
rates for prime space are currently below 1%. Construction is also taking place in Toronto,
with additional activity in Ottawa, Montreal, Edmonton and Vancouver. According to CB
Richard Ellis, close to 11 million square feet of new space will open in 2009, a 2.7%
increase to the national market.
According to Cushman & Wakefield LePage Inc., sales of industrial real estate in Canada
rose 73% to $7.1-billion in 2006. Industrial vacancy rates are less than 7% in all major cities
except Montreal and Halifax, which have an 8% vacancy rate. The industrial vacancy rate is
5.1% in Toronto and less than 1% in Calgary. Reserve prices for 36 industrial lots to be
auctioned in the City of Calgary will be between $430,000 and $440,000 an acre, but the
trading price may reach $550,000, compared with $375,000 an acre a year ago. Prices of
$750,000 an acre are expected in the City of Toronto, compared with $700,000 an acre in
Merrill Lynch & Co. Inc. purchased mortgage lender First Franklin and affiliates National
City Home Loan Services and NationPoint from National City Corp. for US$1.3-billion.
New York-based ING Clarion Partners has entered into talks to purchase Virginia-based
Apple Hospitality Two Inc., which owns 64 extended-stay hotels franchised by Hilton
Hotels Inc. and Marriott International Inc.
Boca Raton-based Ocean Land Investments Inc. has offered US$510-million to purchase
the Briny Breezes waterfront trailer park in South Florida. Ocean Land plans to build about
900 low-rise multimillion-dollar condo units, a high-end marina and a 300-room luxury motel.
Briny Breezes’ board recently approved the sale, which requires support from two-thirds of
the 488 mobile home owners to proceed.
An offer by Kirk Kerkorean’s Tracinda Corp. to buy up to 15 million shares of MGM Mirage
Inc. at US$55 per share ended with only about 445,000 shares being tendered.
Mortgage Lenders Network USA Inc. became the third U.S. mortgage company in a
month to stop issuing loans. Ownit Mortgage Solutions Inc. filed for bankruptcy protection
in late December and Sebring Capital Partners LP closed operations in December.
According to the Mortgage Bankers Association, late payments on sub-prime loans in the
U.S. climbed to 12.56% of the total during the third quarter of 2006.
According to the Mortgage Bankers Association, its seasonally adjusted index of
mortgage-application activity rose 3.6% in the last week of December.
According to Moody’s, the median sale price for an existing home in the
U.S. is projected to fall by 3.6% in 2007. The U.S. National Association of Realtors
expects that existing home sales for 2006 will total 5.47 million, down 8.6% from 2005.
OAO Gazprom is proposing to build a 320 metre (1,050 feet) tower in St. Petersburg,
Russia, 2.5 times higher than the city’s tallest building.
According to DTZ India, organized retail space is expected to rise from two million today to
14 million square feet in Delhi, Gurgaon and Noida by the end of 2007. According to Knight
Frank India, monthly rentals for discount stores in Mumbai city have climbed to more than
125 rupees per square foot from 55 rupees about two years ago. Monthly rentals in prime
commercial space in Mumbai are US$11 a square foot, compared with US$24 in Singapore
and US$80 in Hong Kong.
According to SSKI, demand for commercial real estate in India will reach 160 million square
feet over the next three to four years, while 15.9 billion square feet of construction in the
housing sector is projected by 2010. Prices of prime residential property in central Delhi
have increased more than 75% over the past two years.
According to Chinese Government figures, residential property prices have more than
doubled in China since 2000. Residential property purchases rose 24% in the first 10
months of 2006. Guangzhou R&F, a Chinese developer, reported a 60% gain in first-half
profit. China Overseas Land had a 48% increase in first-half profit.