Real Estate Weekly Newsletter (from KPMG)

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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.
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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.
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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.
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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.
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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
2004.
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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.
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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.
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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.
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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.
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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.
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According to the Mortgage Bankers Association, its seasonally adjusted index of
mortgage-application activity rose 3.6% in the last week of December.
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According to Moody’s Economy.com, 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.
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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.
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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.
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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.
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