Real Estate Weekly Newsletter (from KPMG)

December 18, 2006

The following information was obtained from newspaper articles appearing in the Globe and Mail and the National Post for the week ending December 17, 2006:

RioCan REIT has signed a memorandum of understanding with Michigan-based Ramco-
Gershenson Properties Trust to buy and develop shopping centres across the U.S. The two
partners intend to create a joint venture that will begin with about US$450-million in property now owned by Ramco-Gershenson and plan to develop an additional US$1-billion in properties. The joint venture would be 70% owned by RioCan and 30% by Ramco-Gershenson. RioCan will also purchase a 4.5% stake in Ramco-Gershenson for US$36.39 a share, an investment worth about US$27-million, and the Canadian REIT will hold warrants for an additional 4.5% interest with a strike price of US$43.15.
RioCan REIT will reportedly purchase the Yonge-Eglinton Centre in midtown Toronto for $220-
million. The property includes a 300,000-square-foot mall and a 700,000-square-foot office tower.
RioCan REIT and Chartwell REIT’s development arm, Spectrum Seniors Housing Development LP, are teaming up in a $30-million joint venture deal that will involve the construction of a six-storey, 144-unit seniors apartment building at an existing strip mall in Mississauga’s Lorne Park area. The redevelopment project will include about 14,000 square feet of retail street-front space.
Brookfield Properties Corp. plans to raise about US$1.2-billion by issuing 30 million shares.
Parent company Brookfield Asset Management will purchase 11.25 million of the shares issued,
which would reduce its stake in Brookfield Properties to 48% from 51%. The company will use
US$420-million of the cash to repay debt incurred to finance the purchase of an equity stake in its purchase of Trizec Properties Inc. and another US$437-million will be used to take a larger
equity interest in the office fund Brookfield created to buy Trizec. The balance of the proceeds will go for general corporate purposes, repayment of lines of credit and help to facilitate acquisition and development opportunities.
The Casino Windsor will reopen as the Caesars Windsor in 2008 after a $400-million expansion
that will include a new 22-storey hotel and a 5,000-square-foot entertainment centre. Harrarh’s Entertainment Inc. is licensing the Caesar’s brand to the Ontario Gaming and Lottery Corp., which is renaming the casino, and Harrah’s will manage the casino.
According to CB Richard Ellis Ltd., the total value of investments in real estate in Canada is
expected to reach $23-billion in 2006, up from $19.7-billion in 2005.
Lasalle Investment Management recently attracted $309.5-million to its Canadian Income and
Growth II funds, which will use the funds for the acquisition of three-quarters of a billion dollars in industrial, office, retail and multifamily properties.
According to CIBC World Markets, the unweighted average compound return for the Canadian
REIT sector is 18% over the past 11 years, compared with 11% for the Standard & Poor’s/TSX
Composite Index.
According to Statistics Canada, the average price for a new home nationally increased 0.2% in
October from September. In Calgary, the average price dropped 0.5% from September. Prices
also fell 0.5% in Victoria, 0.1% in Toronto and 0.7% in Windsor. New-home prices increased in 11 of 21 major metropolitan areas, with increases of 2.2% in Edmonton, 0.6% in Winnipeg and 0.5% in Vancouver. Contractors’ selling prices have risen 11.4% over the past year in Canada, with gains of 53.5% in Calgary and 41.1% in Edmonton.
According to the Canadian Real Estate Association, sales of existing homes nationally increased 1.5% to 27,630 units in November from October. Sales for the first 11 months totalled 318,612 units, on par with levels last year. The average sale price increased 9.4% to $298,094 from a year ago. The average price in Edmonton rose 42.5% to $282,434. In Vancouver, sales volume fell 21% in November from November, 2005, and so far this year, volume is down nearly 13% from a year ago. The average price increased 20%.
According to Royal LePage Real Estate Services, the average price of a standard condominium
increased 16.5% to $218,015 this year from 2005. The price of a detached bungalow rose 16.2%
to $304,271, while the cost of a standard two-storey house was up 13.4% to $366,839. Housing
prices are expected to climb 10.5% across Canada in 2006 and 6.5% in 2007, with volume down
about 3% next year. Prices are projected to rise 38% in Calgary for 2006 and 10.1% in 2007.
The median value of a house in Canada appreciated by about $75,000 between 1999 and 2005,
according to Toronto-Dominion Bank and the Canadian Centre for Policy Alternatives.
According to Canada Mortgage and Housing Corp., resale home prices are expected to increase 3.1% for both Ontario and Quebec in 2007. Resale prices are projected to climb 12.6% in Alberta, following a 29.4% gain in 2006. In British Columbia, prices are projected to increase
7.7% in 2007, compared with 17.2% this year and 14.9% in 2005. The number of new houses
starting construction is expected to drop to 210,900 in 2007 from about 227,900 in 2006. The
national rental vacancy rate is projected to reach 2.7% this year and move up slightly in 2007.
According to Canada Mortgage and Housing Corp., the national rental vacancy rate dropped to
2.6% this year from 2.7% a year ago. Calgary and Victoria had the lowest apartment vacancy rate at 0.5%. In Edmonton, the vacancy rate plunged to 1.2% from 4.5% in 2005 and 5.3% in 2004. In Vancouver, the vacancy rate is 0.7% and a two-bedroom apartment rents for $1.045. The vacancy rate is 10.4% in Windsor and 6.8% in Saint John. In Toronto, the apartment vacancy rate is 3.2%, while the condo vacancy rate is 0.4%. A two-bedroom condo rents for an average of $1,487 a month, compared with $1,067 for an apartment. Rental rates climbed 19.5% in Calgary to $960 and 9.9% in Edmonton to $808 over the past year.
According to Canada Mortgage and Housing Corp., from January to October of 2006, there were 13,469 condominium housing starts in the GTA, accounting for 39.3% of all starts. During the same period there were 13,593 detached starts, representing 39.7% of starts, while semidetached houses accounted for 5% and townhouses represented 10% of the total. In 2004,
condos represented 30% of starts and detached houses accounted for 46.5%. The average price of a new detached home in the GTA rose 10.1% to $450,483 in the January-to-October period from 2005. The average price in 2004 was $363,118. In Halton, the average price of a new detached home is $507,920, compared with average prices of less than $400,000 in Durham and Peel.
According to Canada Mortgage and Housing Corp., construction began on a total of 3,381 homes in the GTA in November, representing a seasonally adjusted annual rate of 39,100 units. New home construction is down 9.5% for the first 11 months of 2006 from the same period last year.
According to the Greater Toronto Home Builders’ Association, new home sales rose 5% in
November in the GTA from 2005. Sales of high-rise condominiums climbed 13% in November,
while low-rise sales were down 2%. Condo sales soared 123% in Peel Region and rose 38% in
York Region. Sales are expected to top 40,000 units in the GTA for the year.
According to the Knight Frank Global House Price Index, Canada had an annual house price
increase of 9.8% in the third quarter, compared with 11.8% in the third quarter of 2005. The U.S. led the global slowdown in house prices with annualized price growth of 5.7% in the third quarter, down from 12.7% in the third quarter of 2005. Hungary, Portugal, Japan, Hong Kong and Germany had negative price growth of between 1% and 3%. Latvia had a price gain of 39.2%, while prices were up 19% in Bulgaria and 17.8% in Denmark.
Weyerhaeuser Inc. and Texas-based Temple-Inland Co. reportedly may seek to convert their
timber interests into REITs.
Fortress Investment Group LLC will purchase most of the properties that DB Real Estate
Investment GmbH owns in Germany for €2.1-billion ($3.2-billion).
Real estate developer Ziel Feldman has purchased control of Israeli holding company Polar
Investments Ltd. and plans to invest US$1-billion over the next two years in properties in Israel, Europe, India and North America.
Sunlight REIT, a property trust spun off by Hong Kong’s Henderson Land Development, has
reportedly raised US$402-million in an IPO. The REIT priced its 1,045 billion units at about US39 cents each.
Hilton Hotels Corp. plans to add about 120,000 hotel rooms over the next three years, with a
focus on international expansion. Hilton will expand its luxury hotels from 22 to 50 by 2010. The hotel operator plans to open as many as 10 Waldorf-Astoria hotels, including one that it may develop on the Las Vegas Strip.
Six Flags Inc. is reportedly seeking to sell Magic Mountain in California and eight other theme
parks, though not necessarily as a single package.
MGM Mirage has formed a joint venture with Mubadala Development Co. of the United Arab
Emirates to develop hotels and resorts without gambling in Abu Dhabi, Las Vegas and the United Kingdom. MGM Mirage is also holding talks to form a joint venture with Diaoyutai State
Guesthouse in Beijing aimed at developing luxury hotels and resorts in China.