Internal Growth Through Active Asset Management

The REIT’s internal growth strategy has been to focus on increasing rental income through actively managing the tenant mix of each property, leasing vacant space and maintaining good relations with tenants.

Arcturus Realty Corporation, formerly O&Y Enterprise LP, provides property management services to the REIT. SmartCentres provides leasing and development services to the REIT. The REIT expects that both Arcturus and SmartCentres will contribute significantly to the REIT’s growth strategy.

A leasing strategy for each property has been developed that reflects the nature of the property and its position within the marketplace, as well as prevailing and forecast economic conditions. The REIT has pursued a strategy of renewing existing tenant leases since tenant renewals, as contrasted with tenant replacements, often minimize transaction costs associated with marketing, leasing and tenant improvements, and avoid costs of renovations and interruptions in the generation of rental income that result from periods of vacancy. Where an existing tenant chooses not to renew its lease, the REIT attempts to identify as early as possible a replacement tenant at the best available market terms and lowest possible transaction costs.

To assist in implementing this strategy, the REIT will continue to utilize and co-ordinate with the brokerage leasing community and retain appropriate agents on a best-in-class basis for each of the assets. The goal of this strategy is to maximize expansion and renewal opportunities and the strategy will involve aggressive, proactive leasing programs. Where appropriate, capital improvement projects, renovations and remarketing initiatives have and will continue to be implemented.

External Growth Through Acquisitions

The REIT’s external growth strategy has been to focus on future acquisitions. The REIT actively seeks accretive acquisitions in its existing and adjacent markets and in new Canadian markets that present opportunities for favourable returns. The REIT believes that current market conditions are providing buyers of mid-market commercial real estate the opportunity to benefit from attractive going-in yields on an unleveraged basis, significant potential for capital appreciation and the availability of both short and long-term financing at favourable interest rates.

Throughout the acquisition process, the REIT identifies potential property acquisitions using investment criteria that focus primarily on return on equity, security of cash flow, the potential for capital appreciation and the potential to increase value by more efficient management of the assets being acquired, including accessing capital for expansion and development of those assets, which access might not otherwise be available to competitors and other property owners.

The REIT implements an investment strategy to pursue the acquisition of commercial properties from various sources, including the following: (i) the property market for mid-market commercial properties, including institutional investors disposing of commercial properties in order to rebalance their investment portfolios; and (ii) a network of contacts in real estate development and ownership, including pension funds and other owners of commercial real estate that are in the process of, or are contemplating, divesting certain real estate investments as part of rebalancing their investment portfolios.