EXECUTIVE SUMMARY
For most investors, 2008 could not have ended soon enough. The Bloomberg Canadian
REIT Index was down 40.6%, with all sub-sectors contributing to the negative
performance. The lodging sector was the worst performer returning -59.0%, and not
surprisingly, the multi-residential sector performed best returning -33.5%. In the
global context, Canadian REITs were one of the best relative performers, outperforming
the FTSE EPRA/NAREIT Global Index (USD) and the MSCI US REIT Index by 930
and 90 basis points, respectively. Canada’s out-performance has continued into
2009 with the benchmark index down 50bps, but 9.4 and 10.5 percentage points
ahead of the respective indices. Volatility was at unprecedented levels in 2008 and
continues to be high in 2009…so far. Although the US REIT market was significantly
more volatile than the Canadian market in 2008, Canada was no slouch with daily
index price swings at record levels. For example, the US REITs as defined by the
MSCI US REIT Index (TR) had 17 trading sessions with +/-10% daily swings in the
price level. While the Bloomberg Canadian REIT Index had no +/-10% price level
swings in 2008, it recorded 8 days with +/-5% swings. In our opinion, the US
volatility has been largely influenced by the trading executed by exchange traded
funds. We suspect that as the credit markets hopefully “normalize” through
2009, so to should the volatility of the equity markets and REIT’s. We believe
this will be the precursor to a reversion back to historical average valuation
levels for Canadian REITs.
We remain cautious in 2009 and believe there is no urgency to dive into these
uncharted waters. Although it could take time to restore investor confidence and
stabilize the financial markets, we are confident that better times are ahead for the
survivors of this market turmoil. While it is still too early to say when a turn around
will happen, or if it gets worse before getting better, one can say with certainty that
the “bricks and mortar” which is at the epicentre of global commerce is not going
anywhere, nor is people’s basic need for shelter. Following is a list of themes we
believe will play-out in 2009 and beyond: 1) The multi-residential sector should
continue to outperform other real estate sectors, 2) Money will continue to seek
yield – real estate fits that bill, 3) Cash on the side-lines will likely not return until
confidence has been restored in the economy and regulatory environment, 4) Limited
new development for at least the next 3-5 years bodes well for the medium-term
fundamental outlook of commercial real estate, 5) Canada should fare better than
most global real estate market as it started the down-cycle with historic low vacancy
and a limited development overhang (the exception Calgary and Toronto office

markets), and 6) the commercial mortgage-backed securities market will likely come
back, but in a more simplified form (not likely until 2010 and beyond).
Our Top Trading Ideas for 2009 are: 1) BUY units of Boardwalk REIT: In our
opinion Boardwalk is well positioned to benefit from the market turmoil as it has
access to significant capital (~$350MM as at Sept. 30/08), leverage remains relatively
conservative at 61%, it continues to have access to financing (CMHC-insured
mortgages) at improved rates and while its core market, Alberta, might be slowing,
we believe western Canada should continue to outperform relative to other North
American economies if you believe the long-term argument for commodities is intact.
2) Bar-Bell Strategy: BUY Boardwalk REIT and Killam Properties: This enhances
the liquidity of a Killam only strategy and gives investor’s exposure to the aboveaverage
growth potential of the Western and Atlantic Canada multi-residential rental
markets with limited exposure to Ontario and Quebec. 3) Pairs Trade: BUY Boardwalk
REIT and Short Canadian Apartment Properties REIT: This is a short term trading
strategy based on the current relative valuation. Our long term fundamental rating for
CAP REIT is NEUTRAL. See page 17.

Contents
EXECUTIVE SUMMARY ......................................................................................................................................... 4
A RETROSPECT: NOW AND THEN ....................................................................................................................... 5
OUR TAKE ON WHAT THE FUTURE COULD BEHOLD ..................................................................................... 11
OUR TOP TRADING IDEAS FOR 2009 ................................................................................................................. 14
A BALANCE SHEET PERSPECTIVE .................................................................................................................... 15
VALUATION .......................................................................................................................................................... 19
MULTI-RESIDENTIAL PEER GROUP COMPARISON
Valuation Analysis ......................................................................................................................................................... 21
Operating Analysis ........................................................................................................................................................ 22
Leverage Analysis ......................................................................................................................................................... 23
THE CANADIAN MULTI-RESIDENTIAL RENTAL MARKET ................................................................................. 24
THE INVESTOR-OWNED RENTAL CONDO MARKET........................................................................................ 27
CMHC RENTAL MARKET OUTLOOK
British Columbia ........................................................................................................................................................... 28
Alberta .......................................................................................................................................................................... 29
Saskatchewan .............................................................................................................................................................. 30
Manitoba ....................................................................................................................................................................... 31
Ontario ......................................................................................................................................................................... 32
Quebec ........................................................................................................................................................................ 33
Atlantic Canada ............................................................................................................................................................ 34
Northern Canada .......................................................................................................................................................... 35
THE CANADIAN COMMERCIAL REAL ESTATE MARKET .................................................................................. 36
COMPANY OVERVIEW & RECOMMENDATIONS
Pure Industrial Real Estate Trust (AAR.UN-V) ................................................................................................................ 39
Boardwalk REIT (BEI.UN-T) ......................................................................................................................................... 40
Canadian Apartment Properties REIT (CAR.UN-T) ........................................................................................................ 41
Calloway REIT (CWT.UN-T) ......................................................................................................................................... 42
InStorage REIT (IS.UN-T).............................................................................................................................................. 43
InterRent REIT (IIP.UN.T) .............................................................................................................................................. 44
Killam Properties Inc. (KMP-T) ..................................................................................................................................... 45
Lanesborough REIT (LRT.UN-T) ................................................................................................................................... 46
Mainstreet Equity Corporation (MEQ-T) ......................................................................................................................... 47
Northern Property REIT (NPR.UN-T) ............................................................................................................................. 48
Whiterock REIT (WRL-UN.T) ....................................................................................................................................... 49
APPENDICES ...................................................................................................................................................... 50

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