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MTL_Legal-913011-v23-Final Prospectus - Alexis Nihon _with…

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MTL_Legal-913011-v23-Final Prospectus - Alexis Nihon _with… Powered By Docstoc
					This prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by
persons permitted to sell such securities. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim
otherwise. The securities offered under this prospectus have not been and will not be registered under the United States Securities Act of 1933, as amended
(the “US Securities Act”), or any state securities laws and may not be offered or sold in the United States or to US persons except in compliance with the
registration requirements of the US Securities Act and applicable state securities laws or pursuant to an exemption therefrom.

                                                                                         PROSPECTUS

Initial Public Offering                                                                                                                                   December 13, 2002




                                                                                      $85,000,000
                                                                                    8,500,000 Units
This prospectus qualifies the distribution of 8,500,000 units (the “Offered Units”) of Alexis Nihon Real Estate Investment
Trust (the “REIT”), as well as the distribution of up to 1,275,000 additional units by certain members of the
Nihon/Massicotte Group (as defined herein) upon the exercise, if any, of the over-allotment option referred to under “Plan of
Distribution”. The Offered Units are offered hereby at a price of $10.00 per Offered Unit. This prospectus also qualifies the
distribution of 8,401,200 units (the “Alexis Nihon Units”) (at the same price as the Offered Units) of the REIT to be issued to
Alexis Nihon in partial payment of the consideration payable to Alexis Nihon for the Purchased Assets under the Purchase
Agreement referred to under “Acquisition of the Portfolio, the Assets and the Management Assets”. No fee will be payable to
the Underwriters in connection with the distribution of the Alexis Nihon Units. The Offered Units and the Alexis Nihon Units
are sometimes collectively referred to herein as the “Units”. In addition, this prospectus qualifies the issuance of the AN
Convertible Debenture.
The REIT is an unincorporated closed-end investment trust governed by the laws of the Province of Québec, which has been
formed to acquire the Purchased Assets. See “The REIT”. The REIT intends to make cash distributions to Unitholders on or
about each monthly Distribution Date equal to, on an annual basis, approximately 87% of the Distributable Income of the
REIT, calculated as described under “Distribution Policy”. The REIT is not a trust company and is not registered under
applicable legislation governing trust companies as it does not carry on or intend to carry on the business of a trust
company. The Units are not “deposits” within the meaning of the Canada Deposit Insurance Corporation Act and are
not insured under the provisions of that act or any other legislation.
There is currently no market through which the Units may be sold and purchasers may not be able to resell the
securities purchased under this prospectus. The price of the Units offered hereby was established by arm’s length
negotiation between the REIT and the Underwriters. There are certain risk factors inherent in an investment in the Units and
in the activities of the REIT. See “Risk Factors”. In the opinion of counsel, the Units will, at the date of the closing, be
eligible for investment as set out under “Eligibility for Investment”.

The Toronto Stock Exchange has conditionally approved the listing of the Units under the symbol “AN.UN”. Listing is
subject to the REIT fulfilling all of the requirements of The Toronto Stock Exchange on or before February 24, 2003,
including the distribution of Units to a minimum number of public Unitholders.


                                                                         PRICE: $10.00 per Unit
                                                                                                                                                            Net Proceeds to the
                                                                                                                    Price             Underwriters’ Fee          REIT(1)

Per Offered Unit ...........................................................................................       $10.00                 $0.575                 $9.425
                       (2)
Total Offering               ...........................................................................................$85,000,000     $4,887,500            $80,112,500

Notes:
(1)
    After deducting the Underwriters’ Fee, but before deducting expenses of this offering estimated at $1,850,000, which will be paid by the REIT from the
    proceeds of this offering.
(2)
    The Underwriters have been granted an option (the “Over-Allotment Option”) to acquire up to 1,275,000 additional Units at the offering price to the
    public, exercisable for a period of 30 days from the date of closing of this Offering, to cover over-allotments, if any, and for market stabilization. To the
    extent that the Over-Allotment Option is exercised, the Units subject to the Over-Allotment Option will be sold by certain members of the
    Nihon/Massicotte Group. If the Over-Allotment Option is exercised in full, the total price to the public will be $97,750,000, the Underwriters’ fee will
   be $5,620,625, the net proceeds to the REIT will be $80,112,500, before deducting the expense of the Offering, and the net proceeds to the
   Nihon/Massicotte Group will be $12,016,875. The REIT will not receive any of the proceeds from the sale of Units upon the exercise of the Over-
   Allotment Option, if any. This prospectus also qualifies the issuance of the Over-Allotment Option and the distribution of up to 1,275,000 Units upon
   the exercise thereof. See “Prior Sales and Principal Holders”.

National Bank Financial Inc., CIBC World Markets Inc., BMO Nesbitt Burns Inc., RBC Dominion Securities Inc. and
Desjardins Securities Inc. (collectively, the “Underwriters”), as principals, conditionally offer the Offered Units, subject to
prior sale, if, as and when issued and delivered by the REIT and accepted by the Underwriters in accordance with the
conditions of the Underwriting Agreement referred to under “Plan of Distribution” and subject to approval of certain legal
matters on behalf of the REIT by Davies Ward Phillips & Vineberg LLP and on behalf of the Underwriters by Stikeman
Elliott.
Subscriptions for Offered Units will be received subject to rejection or allotment in whole or in part and the right is reserved
to close the subscription books at any time without notice. The closing is expected to occur on or about December 20, 2002
but in any event no later than January 23, 2003. It is expected that Unit certificates will be available for delivery at closing.
One of the Underwriters is a subsidiary of a financial institution, which will be a lender to the REIT pursuant to the Operating
Facility. See “Management Strategy of the REIT — Debt Management”. The REIT may, therefore, be considered a
connected issuer of such Underwriter for the purposes of Canadian securities legislation. See “Plan of Distribution”.
                                                                      TABLE OF CONTENTS
                                                                             Page                                                                            Page

ELIGIBILITY FOR INVESTMENT ........................... 3                                   Key Management Personnel.................................... 83
EXPLANATORY NOTES ............................................ 3                           Investment Committee.............................................. 87
SUMMARY...................................................................... 6            Audit Committee ....................................................... 87
GLOSSARY................................................................... 18             Compensation Committee........................................ 87
                                                                                           Governance Committee............................................ 87
THE REIT ....................................................................... 25
                                                                                           Remuneration of Trustees and Officers ................. 87
OBJECTIVES OF THE REIT ..................................... 25
                                                                                           Long Term Incentive Plan........................................ 87
ALEXIS NIHON GROUP ........................................... 27
                                                                                           Unit Option Plan........................................................ 88
MANAGEMENT STRATEGY OF THE REIT....... 28
                                                                                           Employment Agreement with
PROPERTIES ................................................................ 32               Paul J. Massicotte and Remuneration of
  Overview of the Properties ...................................... 32                       Senior Officers ........................................................ 89
  Maintenance, Repairs and Upgrades...................... 36                            INVESTMENT GUIDELINES AND
  Assumed Hypothecs.................................................. 37                  OPERATING POLICIES ......................................... 89
  Summary of the Properties....................................... 39                   NON-COMPETITION AGREEMENT ..................... 94
  Place Alexis Nihon.................................................... 41             PRO FORMA CONSOLIDATED
  Office Properties ........................................................ 44          CAPITALIZATION OF THE REIT....................... 95
  Retail Properties......................................................... 45         CONTRACT OF TRUST AND
  Industrial and Mixed-Use Properties...................... 45                           DESCRIPTION OF UNITS..................................... 95
  Co-Ownership Properties ......................................... 46                  DISTRIBUTION POLICY ........................................100
AN HEAD LEASE AND AN INCOME                                                             DISTRIBUTION REINVESTMENT PLAN..........101
 SUBSIDY.................................................................... 48         CANADIAN FEDERAL INCOME TAX
THE MONTREAL REAL ES TATE MARKET ...... 49                                               CONSIDERATIONS ..............................................102
ENVIRONMENTAL AND ENGINEERING.......... 54                                              LEGAL PROCEEDINGS ..........................................106
INDEPENDENT APPRAISA L OF THE                                                           RISK FACTORS .........................................................106
  VALUE OF THE PROPERTIES ............................ 55                               PLAN OF DISTRIBUTION ......................................112
MANAGEMENT OF THE PROPERTIES,                                                           PRIOR SALES AND PRINCIPAL HOLDERS ....114
  EMPLOYEE SERVICES AGREEMENTS
                                                                                        INTERESTS OF MANAGEMENT AND
  AND DEVELOPMENT AGREEMENT ............... 56
                                                                                          OTHERS IN MATERIAL TRANSACTIONS ...114
ACQUISITION OF THE PORTFOLIO, THE
                                                                                        MATERIAL CONTRACTS......................................114
  ASSETS AND THE MANAGEMENT
  ASSETS ....................................................................... 58     PROMOTER ................................................................115
AN CONVERTIBLE DEBENTURE......................... 60                                    LEGAL MATTERS ....................................................115
USE OF PROCEEDS.................................................... 61                  AUDITORS, TRANSFER A GENT AND
                                                                                          REGISTRAR ............................................................115
MANAGEMENT’S DISCUSSION AND
 ANALYSIS OF FINANCIAL CONDITION                                                        PURCHASERS’ STATUTORY RIGHTS..............115
 AND RESULTS OF OPERATIONS ..................... 62                                     FINANCIAL STATEMENTS................................... F-1
FINANCIAL FORECAST ........................................... 71                       CERTIFICATE OF THE REIT AND THE
MANAGEMENT OF THE REIT ............................... 80                                PROMOTER.............................................................C-1
  Trustees ....................................................................... 80   CERTIFICATE OF THE UNDERWRITERS........C-2
  Conflict of Interest Restrictions and
   Provisions................................................................. 81
  Trustees and Officers ................................................ 81
                                            ELIGIBILITY FOR INVESTMENT

         In the opinion of Davies Ward Phillips & Vineberg LLP, counsel to the REIT, and Stikeman Elliott, counsel to the
Underwriters, provided the REIT qualifies as a mutual fund trust for purposes of the Tax Act at the date of Closing (which
will require the satisfaction of certain requirements under the Tax Act, including the listing of the Units on a prescribed stock
exchange in Canada, within the time prescribed by the Tax Act) the Units will, at that date, be qualified investments under
the Tax Act and the Regulations for Deferred Income Plans and RESPs. Furthermore, based on representations of the REIT
and assuming that the REIT meets the requirements to be, at the date of Closing, a “registered investment” within the
meaning of the Tax Act, in the opinion of such counsel, the Units will not, at the date of Closing, constitute foreign property
for such Deferred Income Plans or any other person subject to Part XI of the Tax Act. The foregoing opinions assume, that
prior to the Closing, there will be no change in the applicable provisions of the Tax Act, the Regulations or any
administrative position of CCRA which would have an impact on the foregoing opinions. See “Canadian Federal Income Tax
Considerations”.


                                                  EXPLANATORY NOTES

         Certain terms used herein are defined in the Glossary appearing in this prospectus, or elsewhere in this prospectus.

       Unless otherwise noted, in this prospectus, measures of leasable area and space refer to gross leasable area,
and measurements in square feet refer to approximate measurements, and a reference to dollars or $ is a reference to
Canadian dollars.

        Unless otherwise noted, the information in this prospectus does not give effect to the exercise of the Over-Allotment
Option described under “Plan of Distribution”.

         In this prospectus, “Properties” means, collectively, the 25 office, retail, industrial and mixed-use properties,
including a multi-family residential property, owned or co-owned (see “ — Co -Ownership Properties”) by Alexis Nihon,
after giving effect to the corporate reorganization (see “ — Corporate Reorganization”), described under “Properties” and
“Property” means any one of them.

         In this prospectus, “Portfolio” means:

         (i)      a 100% ownership (or, as applicable, emphyteutic lessee’s) interest in Place Alexis Nihon, 1080 Beaver
                  Hall Hill, 4700 de la Savane, 455 Fénélon, 9900 Cavendish, 9999 Cavendish, 9960-9970 Côte-de-Liesse
                  Road, Centre Laval, 777 Ste-Catherine West and 1401 McGill College, 3071-3075 Louis A. Amos and
                  1922-1996 Onésime-Gagnon, 1615-1805 – 55th Avenue, 3339-3403 Griffith, 8100 Cavendish, 1949
                  Onésime -Gagnon, 2102-2150 – 32nd Avenue, 2024-2080 – 32nd Avenue, 2260 – 32nd Avenue, 3142-3190
                  Joseph-Dubreuil and 6320-6380 Côte-de-Liesse Road; and

         (ii)     the shares of De La Savane Lands Inc., the emphyteutic lessee of the parking lot located at 4700 de la
                  Savane.

         The term Portfolio excludes Alexis Nihon’s interests in the Co-Ownership Properties.




                                                               3
CO -OWNERSHIP PROPERTIES

          The “Co-Ownership Properties” consist of the following properties in which Alexis Nihon has a co-ownership
interest as set forth below:

                                                                                                                                       Percentage Owned by
                                                                   Property                                                                Alexis Nihon
                 1875 – 55th Avenue and 22-62 Lindsay, Montreal (Dorval),
                  Québec............................................................................................................         50.0%
                 1520 – 1660 – 55th Avenue and 5430 Fairway, Montreal
                  (Lachine), Québec.........................................................................................                 50.0%
                 1710 – 1850 – 55th Avenue and 5435 François -Cusson,
                  Montreal (Lachine), Québec .......................................................................                         50.0%
                                 th
                 1200 – 55 Avenue, Montreal (Lachine), Québec ...................................                                            50.0%
                 731 – 749 Meloche and 11450 Côte-de-Liesse Road, Montreal
                  (Dorval), Québec...........................................................................................                25.0%
                 679 – 701 Meloche and 135-137 Lindsay, Montreal (Dorval),
                  Québec............................................................................................................         25.0%
                 703 – 729 Meloche, Montreal (Dorval), Québec......................................                                          25.0%

         The Co-Ownership Properties are currently co-owned by Alexis Nihon and an arm’s length third party (the “Co-
Owner”), and managed by the Alexis Nihon Group. Following the Closing, the REIT intends to enter into negotiations with
the Co-Owner and Alexis Nihon with respect to the purchase of Alexis Nihon’s interests in each of the Co-Ownership
Properties in accordance with the terms of the co-ownership agreements with respect to such Properties, which agreements
include a right of first refusal in favour of the Co-Owner in the event that Alexis Nihon wishes to sell its interests in the Co-
Ownership Properties pursuant to an offer made by the REIT, as well as “buy-sell” provisions.

         The Co-Owner has requested from Alexis Nihon information in respect of the potential acquisition by the REIT of
Alexis Nihon’s interests in the Co-Ownership Properties and has advised Alexis Nihon that any such transaction must be
made in accordance with the provisions of the co-ownership agreements and the management agreements related to the Co-
Ownership Properties. There is no assurance that Alexis Nihon’s interests in the Co-Ownership Properties will be
acquired by the REIT. If Alexis Nihon’s interests in the Co-Ownership Properties are not acquired by the REIT, the
REIT’s initial portfolio will consist of 18 properties comprising 3,659,645 square feet of leasable area (as opposed to
25 properties comprising 4,070,062 square feet of leasable area). The total amount of Distributable Income for 2003 (after
adding back amortization and general and administrative and trust expenses) attributable to Alexis Nihon’s interests in the
Co-Ownership Properties represents only approximately 1.97% of the Distributable Income for 2003 (after adding back
amortization and general and administrative and trust expenses) attributable to Alexis Nihon’s interests in all of the
Properties. If the interests of Alexis Nihon in the Co-Ownership Properties are not acquired by the REIT, Management
believes that it will be able to re-invest the proceeds of the Offering that would otherwise be used for such acquisition to
acquire additional income producing properties.

          The co-ownership agreements between Alexis Nihon and the Co-Owner in respect of the Co-Ownership Properties
include certain restrictions on the ability to finance or refinance the Co-Ownership Properties. In addition, the management
agreements pursuant to which Alexis Nihon manages the Co-Ownership Properties provide that the consent of the Co-Owner
is required in connection with the assignment of such agreements. There can be no assurance that waivers of such
restrictions or consents to such assignments will be obtained or that the management of the Co-Ownership Properties
will be carried on by Alexis Nihon Management (Canada) Inc.

          Unless indicated otherwise, this prospectus and the information herein with respect to the Properties gives
effect to the acquisition by the REIT of the interests of Alexis Nihon in each of the Co-Ownership Properties (the “Co-
Ownership Closing”). See “Properties — Co-Ownership Properties”.

DISTRIBUTABLE INCOME

        Distributable income is not a generally accepted accounting principles (“GAAP”) measure. There is no standardized
measure of distributable income. Distributable income is presented in this prospectus because the REIT believes this non-
GAAP measure is a relevant measure of its ability to earn and distribute cash returns to Unitholders. Distributable Income as

                                                                                            4
computed by the REIT may differ from similar computations as reported by other similar organizations and, accordingly,
may not be comparable to distributable income as reported by such organizations.

         “Distributable Income” means, for any period, net income determined in accordance with GAAP, subject to certain
adjustments as set out in the Contract of Trust, including: (i) adding back amortization on income producing properties
(excluding amortization of tenant inducements and other leasing costs) that was deducted in computing the net income of the
REIT for a relevant period; (ii) adding back future income tax expense and deducting future income tax benefits; (iii) adding
amounts received under the AN Income Subsidy; and (iv) deducting interest on convertible debentures (including the AN
Convertible Debenture) to the extent not already deducted in computing net income for the period. See “AN Head Lease and
AN Income Subsidy — AN Income Subsidy”. Gains or losses on the disposition of any property or asset are excluded from
the computation of Distributable Income; and: (a) adjustments are to be made to reflect amortization of fair market value
debt; and (b) amortization of other assets and deferred expenses, including deferred financing charges are not added back in
calculating Distributable Income. The underlying reasons for the exclusion of each of these items are as follows:

        Amortization – as a non-cash item, amortization (excluding amortization of tenant inducements and other leasing
        costs and amortization of other assets and deferred expenses) has no impact on Distributable Income; and

        Future Income Taxes – future income taxes are a function of accounting for timing differences, tax laws and tax
        rates, and are affected by matters which are separate from the daily operations of the REIT.

         Pursuant to the Contract of Trust, other adjustments may be made to Distributable Income as determined by the
Trustees in their discretion.

CORPORATE R EORGANIZATION

         Prior to the Closing, a corporate reorganization (the “Corporate Reorganization”) will be completed involving
certain members of the Alexis Nihon Group pursuant to which, among other things, certain members of the Alexis Nihon
Group will be amalgamated, liquidated and/or wound up to form one or more corporations (collectively, “AN Mergeco”),
including winding up the corporation which is the emphyteutic lessor of Place Alexis Nihon into the corporation which is the
emphyteutic lessee of Place Alexis Nihon. Unless indicated otherwise, this prospectus gives effect to the Corporate
Reorganization.

        AN Mergeco, Alexis Nihon Industrial Inc., Alexis Nihon (J. Dubreuil) Inc., Alexis Nihon Ste-Catherine Inc., Centre
Laval (Québec) Inc., De La Savane Properties Inc., Fenelon Properties Inc., I.B.D.-Nihon Associates G.P., Mouyal-Nihon
1080 Inc., Nihon Management Services Inc., Place Alexis Nihon Inc., Société en Commandite Centre Laval, Ste.
Catherine/McGill College St. R.E.I.T., The A.N. Fenelon Trust and 054936 N.B. Inc. are referred to collectively in this
prospectus as “Alexis Nihon”. The term “Alexis Nihon” also includes, where the context so requires, the owners of the
Purchased Assets prior to the Corporate Reorganization or one or more members comprising Alexis Nihon.




                                                             5
                                                       SUMMARY

        The following is a summary only and is qualified by the more detailed information appearing elsewhere in this
prospectus. Capitalized terms used but not defined in this Summary have the meanings ascribed thereto in the Glossary.

                                                         The REIT

        Alexis Nihon Real Estate Investment Trust (the “REIT”) is an unincorporated closed-end investment trust created by
the Contract of Trust under, and governed by, the laws of the Province of Québec. The objectives of the REIT are: (i) to
provide Unitholders with stable and growing cash distributions, payable monthly and, to the maximum extent practicable,
income tax deferred, from investments in a diversified portfolio of income producing properties primarily located in the
Greater Montreal Area; and (ii) to improve and maximize Unit value through future acquisitions of additional income-
producing properties, the ongoing active management of the REIT’s properties or interests therein and the acquisition of
completed new developments pursuant to the Development Agreement. See “Objectives of the REIT”.

          The REIT was established on October 18, 2002 to acquire, directly and through the Acquiring Entities, the
Purchased Assets and Alexis Nihon’s interests in the Co -Ownership Properties. The REIT will continue and expand the
commercial real estate activities carried on by the Alexis Nihon Group (other than the construction and development
activities), which was formed in the late 1940’s and which, since 1980, has been engaged in acquiring, developing,
redeveloping, renovating, owning, managing and leasing properties primarily in the Greater Montreal Area. The Alexis
Nihon Group is controlled indirectly by members of the Nihon Family and members of the Massicotte Family. See “Alexis
Nihon Group”. On the Property Closing, the REIT will issue and the Acquiring Entities will transfer, as the case may be, to
Alexis Nihon an aggregate of 8,401,200 Alexis Nihon Units and the AN Convertible Debenture in partial payment of the
consideration payable under the Purchase Agreement referred to under “Acquisition of the Portfolio, the Assets and the
Management Assets”, in the case of Alexis Nihon Units, at a price per Alexis Nihon Unit equal to the price per Offered Unit
to the public pursuant to this Offering. See “Acquisition of the Portfolio, the Assets and the Management Assets” and “Plan
of Distribution”. The Alexis Nihon Units have the same attributes as the Offered Units. See “Contract of Trust and
Description of Units”.

         The Properties comprise 25 income -producing office, retail, industrial and mixed-use properties, including a
426-unit multi-family residential property, all located in the Greater Montreal Area and representing, in the aggregate,
approximately 4,070,062 square feet of leasable area. On the Property Closing, the REIT and the Acquiring Entities will
acquire the Purchased Assets from Alexis Nihon. In addition, all of the employees of Alexis Nihon relating to the property
and asset management of the Properties will be transferred to the REIT and Alexis Nihon Management (Canada) Inc. See
“Properties”, “Management of the Properties, Employee Services Agreements and Development Agreement” and
“Acquisition of the Portfolio, the Assets and the Management Assets”.

          Going forward, the REIT will seek to acquire properties at a discount to replacement cost that present an accretive
opportunity to create value and enhance cash flow. Future property acquisitions will be subject to specific investment
guidelines and the operation of the REIT will be subject to specific operating policies. See “Investment Guidelines and
Operating Policies”. The Trustees will be responsible for the general control, direction and management of the REIT. After
giving effect to the transfer of Alexis Nihon’s employees, systems and assets relating to the Properties, the REIT’s property
and asset management functions will be fully internalized, through Alexis Nihon Management (Canada) Inc., and the REIT
will operate as a fully-integrated, self-administered and self-managed real estate investment trust. Management believes that
the internalization of Alexis Nihon’s employees, administrative and management systems and assets relating to the Properties
will enhance the REIT’s economic and operating performance. See “Management Strategy of the REIT”, “Management of
the Properties, Employee Services Agreements and Development Agreement — Employee Services Agreements”,
“Acquisition of the Portfolio, the Assets and the Management Assets” and “Management of the REIT”.




                                                             6
                                              The Offering

Issue:                     Units of the REIT consisting of 8,500,000 Offered Units issued on a fully-paid basis.
                           Up to an additional 1,275,000 Offered Units may be offered to the public upon the
                           exercise of the Over-Allotment Option granted to the Underwriters. Immediately
                           following the Closing, approximately 49.7% of the outstanding Units will be owned
                           by Alexis Nihon (42.2% if the Over-Allotment Option is exercised in full). Alexis
                           Nihon has agreed with the REIT and the Underwriters to certain restrictions on the
                           resale of the Alexis Nihon Units and the AN Convertible Debenture. See “Plan of
                           Distribution”.

Price:                     $10.00 per Unit.

Size:                      $85,000,000.

Distributable Income:      The net income of the REIT for the twelve months ending December 31, 2003 is
                           forecast to be $17.4 million and the Distributable Income for the twelve months
                           ending December 31, 2003 is forecast to be $21.3 million or $1.26 per Unit. See
                           “Financial Forecast”. Cash distributions (based on 87% of forecast Distributable
                           Income) are forecast to be $18.6 million or $1.10 per Unit for the twelve months
                           ending December 31, 2003. See “Distribution Policy”.

Forecast Yield:            Based on the Financial Forecast, the yield for the twelve months ending December
                           31, 2003 (based on 87% of forecast Distributable Income) is forecast to be 11% per
                           Unit.

Attributes of the Units:   The Units represent the ownership interest of Unitholders in the REIT. Each Unit
                           carries one vote at meetings of Unitholders and a Unitholder is entitled to participate
                           equally and rateably in distributions by the REIT and in the event of any required
                           distribution of all of the property of the REIT, in the net assets of the REIT remaining
                           after satisfaction of all liabilities. The Alexis Nihon Units have the same attributes as
                           the Offered Units. See “Contract of Trust and Description of Units”.

AN Head Lease:             In order to provide Unitholders with stable, predictable revenues in respect of certain
                           vacant spaces that are expected to be leased in the near term, the AN Head Lessee
                           will enter into the AN Head Lease with the REIT. The AN Head Lease will be for a
                           term of ten years from Closing and will apply to approximately 218,000 square feet
                           of leasable area of the Properties at specified market rental rates. The AN Head Lease
                           accounts for the majority of the increase from the 90.7% occupancy rate as at
                           September 30, 2002 to the projected occupancy rate of 94.5% as at the end of the
                           forecast period. See “Management’s Discussion and Analysis of Financial Condition
                           and Results of Operation — Leasing Data” and “Financial Forecast”.

                           Once a tenant is found for the designated space, the AN Head Lease will be
                           permanently retired in respect of such space and the AN Head Lessee will no longer
                           have an obligation to pay rent with respect to such space, provided that: (i) the credit
                           quality of the tenant is similar to that of tenants that are typical for such space or
                           normally acceptable to a landlord for such space; (ii) the term is at least five years,
                           unless a shorter term would be typical for such lease or would normally be acceptable
                           to a landlord for such space; and (iii) the tenant has occupied the premises and has
                           commenced rental payment under its lease. See “AN Head Lease and AN Income
                           Subsidy — AN Head Lease”.

AN Income Subsidy:         In order to provide Unitholders with a current income stream reflecting, as and from
                           Closing: (i) a contractual increase scheduled for December 2003 in the Club Monaco
                           lease at 777 Ste-Catherine West; (ii) an increase to market rental rates in 2003 and a
                           January 2004 target renewal and increase in rental rate of and with respect to the
                           lease of ISM Information Management (a division of IBM Canada Ltd.) at the Xerox
                           Tower of Place Alexis Nihon; and (iii) certain renewal and lease-up assumptions with
                           respect to the Co-Ownership Properties, the AN Income Subsidy Provider will
                           provide the AN Income Subsidy to the REIT in the aggregate amount of

                                                   7
                                  approximately $1.182 million in respect of the 2003 fiscal year. However, the portion
                                  of the AN Income Subsidy relating to the Co-Ownership Properties (being up to a
                                  maximum amount of $172,000 per year for ten years), will only come into effect if,
                                  when and to the extent that Alexis Nihon’s interests in the Co-Ownership Properties
                                  are acquired by the REIT after Closing. With respect to the Co-Ownership Properties,
                                  the provisions of the AN Income Subsidy Agreement with respect to certain matters,
                                  including tenant improvement costs, leasing commissions and achievement of lease-
                                  up assumptions, shall be similar to those set forth in the AN Head Lease. Under the
                                  AN Income Subsidy Agreement, amounts are payable on a monthly basis, from
                                  Closing until such time as the scheduled contractual increase with respect to the Club
                                  Monaco lease at 777 Ste. Catherine Street West comes into effect or until such
                                  renewals and lease-up assumptions are met with respect to the ISM Information
                                  Management lease and the Co-Ownership Properties. In the event that the lease for
                                  the space leased by ISM Information Management is renewed for a period of at least
                                  five years and the rent payable by the then occupying tenant(s) is less than the target
                                  rental amount as set forth in the AN Income Subsidy for such space, the AN Income
                                                       ill
                                  Subsidy Provider w then immediately pay to the REIT an amount equal to the
                                  present value of the difference between the target rental amount and the rent payable
                                  by the then occupying tenant(s), discounted at a rate of 10% per year over a five-year
                                  period. In the event that the lease for the space leased by ISM Information
                                  Management is not renewed and the space is vacated, then such space shall be added
                                  to the space covered by the AN Head Lease and shall be governed by the terms and
                                  conditions of the AN Head Lease. See “AN Head Lease and AN Income Subsidy —
                                  AN Income Subsidy”.

AN Convertible Debenture:         On Closing, as part of the purchase price for the Purchased Assets, the REIT will
                                  issue to Alexis Nihon, pursuant to the Trust Indenture, $12.15 million principal
                                  amount of subordinated unsecured convertible debentures (the “AN Convertible
                                  Debenture”) at par. The AN Convertible Debenture will bear interest at a rate of 6.5%
                                  per annum, payable quarterly and will mature on December 31, 2005. Provided that
                                  there is not a then current event of default thereunder and subject to the limitations on
                                  the ownership of Units by persons who are non-residents of Canada (See “Contract of
                                  Trust and Description of Units — Limitation on Non-Resident Ownership”), the
                                  REIT may elect at its option to satisfy any obligation to pay principal or interest or to
                                  make any payment in respect of redemptions or retractions of the AN Convertible
                                  Debenture, in whole or in part, by delivering Units of the REIT equal in value, at the
                                  date of payment to the amount due to Alexis Nihon. The payment of the principal of,
                                  and interest on, the AN Convertible Debenture will be subordinated in right of
                                  payment to the prior payment in full of all Senior Indebtedness of the REIT. The AN
                                  Convertible Debenture will, subject to certain restrictions, be convertible, in whole or
                                  in part, at the holder’s option, at any time, into 8.695 Units per $100 of face value (in
                                  the aggregate, 1.057 million Units), subject to usual anti-dilution adjustments,
                                  representing a conversion price of $11.50 per Unit.

AN Pledge of Alexis Nihon Units   As security for the obligations of the AN Head Lessee and the AN Income Subsidy
 and/or AN Convertible            Provider under the AN Head Lease and the AN Income Subsidy, at Closing, the AN
 Debenture:                       Pledgor will pledge and hypothecate Alexis Nihon Units and/or all or a portion of the
                                  AN Convertible Debenture having an aggregate value of not less than $10 million.
                                  The amount of the AN Pledge will be recalculated and reduced from time to time, but
                                  not less frequently than on a quarterly basis, such that from and after Closing, the AN
                                  Pledge will be equal to the lesser of: (i) the aggregate value of the initially pledged
                                  Units and/or AN Convertible Debenture at Closing; and (ii) 50% of the maximum
                                  financial obligations that the AN Head Lessee or the AN Income Subsidy Provider
                                  may be required to fund for the remainder of the AN Head Lease and the AN Income
                                  Subsidy, assuming no further lease-up activity. The AN Pledgor will be permitted to
                                  pledge and hypothecate, or substitute, at any time, an equivalent value of marketable
                                  debt securities with a term not greater than five years bearing a rating issued by an
                                  internationally recognized rating agency of at least A(high). See “AN Head Lease
                                  and AN Income Subsidy — AN Pledge of Alexis Nihon Units and/or AN Convertible
                                  Debenture”.


                                                          8
 Use of Proceeds:                                              The net proceeds from this Offering, after deducting the Underwriters’ Fee of
                                                               $4,887,500 and the expenses of this Offering (estimated at $1,850,000), are estimated
                                                               to be $78,262,500. Approximately:

                                                                       •       $70,208,500 will be used by the REIT and the Acquiring Entities to pay the
                                                                               cash portion due to Alexis Nihon under the Purchase Agreement, from
                                                                               which amount the cash obligations of Alexis Nihon under each of the Place
                                                                               Alexis Nihon Closing, the Centre Laval Closing, the Beaver Hall Hill
                                                                               Closing, the De La Savane Closing and the Cavendish Closing; and

                                                                       •       $5,554,000 will be used to pay land transfer taxes incurred on the
                                                                               acquisition of the Purchased Assets;

                                                               and the balance will be used for future property acquisitions, including Alexis
                                                               Nihon’s co-ownership interests in the Co-Ownership Properties, if applicable, and for
                                                               working capital purposes.

                                                               The REIT intends to use working capital to finance its operations and the acquisition
                                                               of additional income-producing office, retail, industrial, mixed-use and multi-family
                                                               residential properties. See “ Use of Proceeds”.

     The following table summarizes certain aspects of the use of the net proceeds of this Offering after giving effect to the
Property Closing and the acquisition of Alexis Nihon’s interests in the Co-Ownership Properties:
                                                                                                                                                   Use of
                                                                                                                                               Net Proceeds
                                                                                                                                                after giving
                                                                                                                                                effect to the
                                                                                                                                                 Property
                                                                                                                                              Closing and the
                                                                                                                                               Acquisition of
                                                                                                                                              Alexis Nihon’s
                                                                                                Aggregate                                     Interests in the
                                                                                                Purchase     Land Transfer     Assumed        Co-Ownership
                                  Property Type                                                  Price (1)     Taxes (2)      Hypothecs (3)      Properties

 Office Properties (4) ...........................................................           $154,132,704    $2,315,081      $78,766,546      $77,681,239
 Retail Properties (5) ............................................................           128,248,628     1,926,300       69,534,808       60,640,120
 Industrial and Mixed-Use Properties.............................                             53,573,794         804,678      36,727,567        17,650,905
 Multi-family Residential Property(6) .............................                           33,817,374         507,941      18,873,476        15,451,839
 Sub-Total............................................................................       369,772,500       5,554,000     203,902,397      171,424,103
 Assets and Management Assets.....................................                                500,000             —                  —          500,000
 Total....................................................................................   $370,272,500    $5,554,000      $203,902,397     $171,924,103
                            (7)
 Working Capital ............................................................                                                                    2,500,000
                                                                                                                                              $174,424,103


Notes:
(1)
    The purchase price for the Properties is an approximation based upon the amount to be allocated to the Properties by the REIT as determined by
    reference to the appraised value of the Properties. See “Independent Appraisal of the Value of the Properties”.
(2)
    Derived from the allocation as determined by reference to the appraised value of the Properties. Includes estimated acquisition related expenses payable
    by the REIT, including land transfer taxes.
(3)
    The Assumed Hypothecs described under “Properties — Assumed Hypothecs” totalled $203,902,397, based on balances outstanding as at September
    30, 2002. Since September 30, 2002, Alexis Nihon has made scheduled payments, in the ordinary course, to certain hypothecary creditors in the
    aggregate amount of approximately $1.0 million. The total amount of the Assumed Hypothecs, based on balances outstanding as at November 30, 2002,
    is approximately $202,960,000.
(4)
    Includes 611,535 square feet of office space at, and an allocation of $45,177,456 of debt for, Place Alexis Nihon.
(5)
    Includes 382,900 square feet of retail space at, and an allocation of $21,875,400 of debt for, Place Alexis Nihon.
(6)
    Includes 300,321 square feet of multi-family residential space at, and an allocation of $18,873,476 of debt for, Place Alexis Nihon.
(7)
    Includes funds available for future property acquisitions, capital improvements and general purposes of the REIT.




                                                                                                  9
                                                   Independent Appraisal of the Value of the Properties

        The Properties have been jointly appraised to have an aggregate market value of $385 million within a price range of
$370 million to $390 million. See “Independent Appraisal of the Value of the Properties”.

                                                                   Alexis Nihon Group

         The Alexis Nihon Group currently owns and co-owns a diversified portfolio of 29 office, retail, industrial and
mixed-use properties, including a multi-family residential property, as well as approximately 1,929,000 square feet of land
for development and options to acquire more than 1,000,000 additional square feet of land for development. These properties
include approximately 1,810,831 square feet of office space, 1,040,988 square feet of retail space, 1,358,120 square feet of
industrial and mixed-use space and approximately 300,321 square feet of residential space, representing, in the aggregate,
approximately 4.5 million square feet of leasable area. The majority of the Properties are situated in prime locations along
major traffic arteries and benefit from high visibility and easy access by both tenants and tenants’ customers. The Alexis
Nihon Group provides a full range of real estate services including property and asset management, leasing, accounting,
legal, administrative, construction and development services, and provides space and services to over 530 tenancies.

                                                             Management Strategy of the REIT

        The REIT believes that the internalization of an experienced management is required to achieve, maintain and grow
value while ensuring that the interests of Management remain aligned with those of Unitholders and minimizing risk to
Unitholders. The REIT believes that its objectives can be best achieved through internalized management by employing a
comprehensive, proactive management strategy which leverages and builds upon the Alexis Nihon Group’s existing
competitive strengths in order to enhance the operating and financial performance of the REIT and its properties. See
“Management Strategy of the REIT”.

                                                                          Properties

         The Properties consist of 25 office, retail, industrial and mixed-use properties, including a multi-family residential
property, all located in the Greater Montreal Area. The Properties owned and co-owned by Alexis Nihon (which do not
include the Excluded Property) consist of approximately 1,370,633 square feet of office space, 1,040,988 square feet of retail
space, 1,358,120 square feet of industrial and mixed-use space and 300,321 square feet (426 units) of multi-family residential
space, representing, in aggregate, approximately 4,070,062 square feet of leasable area.

          The majority of the Properties are situated in prime locations near major traffic arteries and benefit from high
visibility and easy access by both tenants and tenants’ customers. On the Property Closing, the REIT will acquire the
Purchased Assets, directly or through the Acquiring Entities. While two of the Properties and part of a third Property are
subject to emphyteutic leases with unrelated parties, Management believes that the term to maturity and other terms and
conditions of the emphyteutic leases are acceptable from the perspective of the REIT. The Properties are generally well-
maintained and in good operating condition. See “Properties — Maintenance, Repair and Upgrades”.

                                                                Overview of the Properties

         The following table summarizes the distribution of the appraised values and estimated replacement cost of the
Properties by property type:

                                                                 Distribution by Property Type

                                                        Area                              Appraised Value
                                                                                                                                             Appraised
                                                                                                                           Estimated         Value as a
                                                                            Appraised                   Appraised        Replacement         Percentage
                             Number of       Leasable Area                    Value                      Value per         Cost per         of Estimated
     Property Type           Properties(1)   (Square Feet)        %          (000s) (2)        %       Square Foot (3)   Square Foot(4)   Replacement Cost

Commercial
Properties
Office Properties(5).....         7             1,370,633         33.7%      $160,480        41.7%          $117.08         $188.23           62.2%
Retail Properties(6)......        2             1,040,988         25.6%      $133,530        34.7%          $128.27         $148.02           86.7%
Industrial and Mixed-
Use Properties...........        16             1,358,120         33.3%       $55,780        14.5%          $41.07           $75.25           54.6%

Sub-Total                        25             3,769,741         92.6%      $349,790        90.9%          $92.79          $136.42           68.0%
Commercial

                                                                              10
                                                                       Area                                     Appraised Value
                                                                                                                                                                   Appraised
                                                                                                                                                 Estimated         Value as a
                                                                                                  Appraised                   Appraised        Replacement         Percentage
                                  Number of            Leasable Area                                Value                      Value per         Cost per         of Estimated
     Property Type                Properties(1)        (Square Feet)                 %             (000s) (2)        %       Square Foot (3)   Square Foot(4)   Replacement Cost
Commercial
Properties
Multi-family
Residential Property...              N/A (1)                  300,321(7)              7.4%          $35,210         9.1%          $117.24         $141.29            83.0%

Total                                   25                 4,070,062                 100%          $385,000        100%           $94.59          $136.78            69.2%


Notes:
(1)
     With respect to the “Number of Properties”, Place Alexis Nihon has been included in the office properties category and includes an office, retail and
     multi-family residential component.
(2)
     As determined by the Appraiser. See “Independent Appraisal of the Value of the Properties”.
(3)
     Derived from the allocation as determined by reference to the appraised value of the Properties. See “Independent Appraisal of the Value of the
     Properties”.
(4)
     Derived from the allocation as determined by reference to the Appraiser’s estimated replacement cost of the Properties. See “Independent Appraisal of
     the Value of the Properties”.
(5)
     Includes 611,535 square feet of office space at Place Alexis Nihon.
(6)
     Includes 382,900 square feet of retail space at Place Alexis Nihon, which for the purposes of the “Number of Properties” is included in the office
     properties category.
(7)
     Represents 426 multi-family residential units at Place Alexis Nihon, which for the purposes of the “Number of Properties” is included in the office
     properties category.

        The following table summarizes the distribution of net operating income of the Properties by property type for the
year ended December 31, 2001 and the nine months ended September 30, 2002:

                                                                                          Net Operating Income (1)

                                                                                                             Net Operating Income                   Net Operating Income
                                                                                                           for the Nine Months Ended                 for the Year Ended
                                                                                                               September 30, 2002                    December 31, 2001 (2)
                                                                                            Percentage
                                 Property Type                                               of Area            (000s)        Percentage           (000s)          Percentage
                               (3)
   Office Properties ......................................................                    33.7%              $8,814           40.8%             $11,726             40.5%
   Retail Properties (4).......................................................                25.6%              $7,629           35.4%              $9,296             32.2%
   Industrial and Mixed-Use Properties .......................                                 33.3%              $3,593           16.6%              $5,716             19.8%
   Multi-Family Residential Property(5).......................                                  7.4%              $1,549            7.2%              $2,175              7.5%

   Total ..............................................................................         100%             $21,585          100.0%             $28,913           100.0%

Notes:
(1)
     Includes only the portion of Net Operating Income for the Co-Ownership Properties which is equal to the percentage ownership of Alexis Nihon in
     such properties.
(2)
     Represents Management’s allocation of the Net Operating Income for the year ended December 31, 2001 set forth in the audited Consolidated
     Statement of Operations and Deficiency in Net Assets for the year ended December 31, 2001. See “Financial Statements”.
(3)
     Includes 611,535 square feet of office space at Place Alexis Nihon and Net Operating Income for the Place Alexis Nihon parking.
(4)
     Includes 382,900 square feet of retail space at Place Alexis Nihon.
(5)
     Includes 300,321 square feet of multi-family residential space at Place Alexis Nihon.

        As of September 30, 2002, the Properties were approximately 90.7% leased. The weighted average remaining lease
term for the Commercial Properties from October 1, 2002 is approximately 4.55 years. In each of 2002 and 2003,
approximately 0.9% and 14.4%, respectively, of the leasable area of the Commercial Properties is subject to lease renewals.
See “Alexis Nihon Group”, “Properties” and “Acquisition of the Portfolio, the Assets and the Management Assets”.

        The following table sets forth the leasing activities for the Commercial Properties for the years ended December 31,
1999, 2000 and 2001 and the nine-month period ending September 30, 2002, by category in terms of new tenant leases, and
renewals and expansions:




                                                                                                    11
                                                      Leasing Activity — Commercial Properties
                              New Leases                    Renewals and Expansions                   Total Leases
                    Leasable Area        Number          Leasable Area        Number        Leasable Area        Number          Average
        Period      (Square Feet)      of Tenancies      (Square Feet)      of Tenancies    (Square Feet)      of Tenancies     Occupancy

       1999            689,186              80              90,511               41            779,697               121            85.6%
       2000            421,422              85              477,869             105            899,291               190            91.5%
       2001            311,652              64              359,357              73            671,009               137            92.7%
       2002(1)         379,651              52              471,622              82            851,273               134            91.2% (2)

Notes:
(1)
     The information for 2002 reflects leasing activity for the nine months ended September 30, 2002 and occupancy adjusted to reflect recent leasing
     activity where space is leased, but not yet occupied.
(2)
     Approximately 172,000 square feet of industrial space, which was vacated during 2002, remains vacant and explains the decrease in the average
     occupancy rate from the previous year. See “Properties — Industrial and Mixed Use Properties”.




                                                                         12
             The following table summarizes the debt maturities of the Assumed Hypothecs as at September 30, 2002:

                                                                                     Debt Maturities (1) (2)(3)
                                                                                                                           Industrial
                                                                                                                              and           Multi-family
                                                                                          Office             Retail        Mixed-Use        Residential        Total
                                                                                                             (in thousands, except percentages and years)

 Debt Maturities
                                                                                                  —
 2002................................................................................................         —                —                  —             —
                                                                                              $15,912
 2003................................................................................................       $33,285           $1,942              —           $51,139
                                                                                                $6,940
 2004................................................................................................        $2,500          $19,664              —           $29,104
                                                                                                   $899
 2005................................................................................................       $11,874           $7,684              —           $20,457
                                                                                                $5,174
 2006................................................................................................         —                $124               —            $5,298
 Weighted Average Interest Rate on Assumed
  Hypothecs                                                                                      6.86%            6.88%        6.51%            6.53%           6.77%
 Weighted Average Term to Maturity on
  Assumed Hypothecs                                                                     3.90 years        2.33 years      3.07 years       4.83 years       3.31 years

Notes:
(1)
     With respect to the Co-Ownership Properties, includes only the portion of debt equal to the REIT’s percentage interest in such properties after giving
     effect to the acquisition by the REIT of Alexis Nihon’s interest in such properties.
(2)
     Estimates based on the current status of negotiations with lenders of terms expected to be in place at the Closing.
(3)
     The existing debt on Place Alexis Nihon has been allocated based on the appraised value of Place Alexis Nihon, as to $45,177,456 to the office
     properties category, as to $21,875,400 to the retail properties category and as to $18,873,476 to the multi-family residential property category.

                                                                         Environmental and Engineering

         Independent environmental consultants have performed Phase I environmental site assessments (also known as
environmental audits) on each of the Properties. These Phase I environmental site assessments did not reveal any material
environmental concerns. Substantially all of these Phase I environmental site assessments were performed by Inspec-Sol Inc.,
Jacques Whitford Environment Ltd. and Spectrum Laboratory Associates Inc. Phase II environmental site assessments have
also been performed on Place Alexis Nihon and Centre Laval. These Phase II environmental site assessments did not reveal
any environmental concerns which could materially adversely affect the REIT, its financial condition or its operations and
Management estimates that the cost of any environmental remedial work required (as per Phase I and Phase II environmental
assessments) with respect to the Properties is not expected to exceed $1.0 million. The reasonable cost of such remedial work
shall be borne by Alexis Nihon. The Purchase Agreement will contain environmental representations, warranties and
indemnities customary in arm’s length transactions of this nature. See “Acquisition of the Portfolio, the Assets and the
Management Assets — Purchase Agreement”.

          Groupe Stavibel Inc., Inspec-Sol Inc., Spectrum Laboratory Associates Inc. and Jacques Whitford Environment Ltd.,
independent firms of professional engineers, have been retained to carry out engineering inspections of each of the Properties.
The results of the engineering inspections indicate that, overall, the Properties have been well maintained and are generally in
good condition. Based upon their inspections, it is estimated that the REIT could spend up to $15.3 million for ongoing major
                                                                i
repairs and the replacement of capital items in the next fve years. The REIT agrees that the work identified in the
engineering reports will be required to be completed and intends to complete such repairs and replacement of capital items as
part of its ongoing maintenance program and as circumstances so require.

                                           Acquisition of the Portfolio, the Assets and the Management Assets

         Pursuant to the Purchase Agreement, the REIT and the Acquiring Entities will acquire the Purchased Assets from
Alexis Nihon for a purchase price of approximately $370.3 million, payable as to approximately $75.8 million in cash, as to
approximately $84 million by the issuance and/or transfer to Alexis Nihon of approximately 8.4 million Alexis Nihon Units
at a price per Alexis Nihon Unit equal to the price per Offered Unit to the public pursuant to this Offering, as to
approximately $203.9 million by the assumption of the Assumed Hypothecs, and as to approximately $12.15 million by the
issuance to Alexis Nihon of the AN Convertible Debenture, subject to normal adjustments. The Purchase Agreement will
provide for the transfer to the REIT of the employees of Alexis Nihon involved only in the management of the Properties
forming part of the Portfolio which are to be wholly and directly owned and operated exclusively for the benefit of the REIT.
The Purchase Agreement will also provide for the transfer of the employees of Alexis Nihon involved in the management of
properties to be co-owned by the REIT and properties wholly-owned by third parties to Alexis Nihon Management (Canada)


                                                                                                   13
Inc. See “Acquis ition of the Portfolio, the Assets and the Management Assets” and “Management of the Properties,
Employee Services Agreements and Development Agreement — Transitional Employee Services Agreement”.

                                                              Summary of Financial Forecast

         The selected financial forecast information set forth below is excerpted from the Financial Forecast approved by
Management using assumptions with an effective date of October 18, 2002. These assumptions reflect Management’s
intended course of action, given Management’s judgment as to the most probable set of economic conditions. Some of the
assumptions used in the preparation of the Financial Forecast, although considered reasonable by the REIT at the
time of preparation, may prove to be incorrect. The actual results for the forecast period will vary from the forecast
results and the variations may be material. See “Financial Forecast”.
                                              Forecast Consolidated Net Income and Distributable Income (1)
                                                                                              For the year ended
                                                                                              December 31, 2003
                                                                                                     (000s)

                              Revenues from rental operations..........................                    $67,561

                              Expenses:
                                Rental property operating costs .......................                      21,826
                                Realty taxes .........................................................        9,088
                                Ground rent.........................................................            516
                                Interest expense..................................................           13,038
                                General and administrative...............................                     1,572
                                Amortization.......................................................           3,722
                                                                                                             49,762
                              Income from operations.........................................                17,799
                              Trust expenses.........................................................           352
                              Net income ...............................................................     17,447
                              Add (Deduct):
                                 Interest on the AN Convertible Debenture ....                                (790)
                                 Income Subsidy..................................................            1,182
                                 Amortization.......................................................         3,432
                              Distributable income ..............................................          $21,271

Note:
(1)
    Forecast revenues from income-producing properties are based on rents from existing leases as well as potential income from leasing space that is
    currently vacant or will become vacant, contractual lease expiries, renewal rates and the AN Head Lease based on market trends. The overall occupancy
    for the property portfolio at the end of the forecast period is assumed to be approximately 94.5%. See “Properties”.

                                                                              Management

          The operations and affairs of the REIT will be subject to the control of the Trustees, a majority of whom must have
had at least five years substantial experience in the real estate industry and a majority of whom must be Independent Trustees.
The Contract of Trust provides for a minimum of three and a maximum of eleven Trustees. From the Closing, the
                                                                                    ber
Nihon/Massicotte Group will be entitled to appoint the following additional num of Trustees within the maximum number
of Trustees allowed under the Contract of Trust: (i) if the Nihon/Massicotte Group beneficially owns in the aggregate at least
20% of the number of Units then outstanding, three Trustees; (ii) if the Nihon/Massicotte Group beneficially owns in the
aggregate at least 12.5% but less than 20% of the number of Units then outstanding, two Trustees; and (iii) if the
Nihon/Massicotte Group beneficially owns in the aggregate at least 5% but less than 12.5% of the number of Units then
outstanding, one Trustee. Certain decisions respecting the REIT must be approved by a majority of the Independent Trustees
only. The operations and affairs of the REIT will be under the direction of Management. See “Management of the REIT” and
“Contract of Trust and Description of Units”.

         After giving effect to the transfer to the REIT and Alexis Nihon Management (Canada) Inc., of Alexis Nihon’s
employees and the Management Assets to Alexis Nihon Management (Canada) Inc., the REIT’s property and asset
management functions will be fully internalized directly and indirectly through the Employee Services Agreements and the
REIT will operate as a fully-integrated, self-administered and self-managed real estate investment trust. Management
believes that internalizing Alexis Nihon’s employees, systems and assets relating to the management of the Properties will


                                                                                       14
improve the REIT’s economic and operating performance. See “The REIT”, “Management Strategy of the REIT”,
“Management of the REIT” and “Management of the Properties, Employee Services Agreements and Development
Agreement”.

                                       Investment Guidelines and Operating Policies

         The Contract of Trust contains investment guidelines and operating policies. The investment guidelines include,
among other things, criteria with respect to the types and locations of properties which the REIT can acquire and the
maximum amounts of hypothecary or mortgage loans in which the REIT may invest. The operating policies address, among
other things, the level of the REIT’s debt and the requirements for independent property appraisals, insurance coverage and
environmental audits. The investment guidelines and certain of the operating policies may only be changed if approved by
two-thirds of the votes cast by Unitholders at a meeting called for such purpose. The remaining operating policies may be
changed if approved by the Trustees and by a majority of the votes cast by Unitholders at a meeting called for such purpose.
See “Investment Guidelines and Operating Policies”.

                                                           Borrowing

          The REIT will seek to maintain a combination of short, medium and long-term debt maturities which are appropriate
for the overall debt level of its portfolio, taking into account availability of financing and market conditions and the financial
terms of the leases from which the REIT derives its cash flow.

        The REIT may not incur or assume any indebtedness if, after giving effect to the incurring or assumption of the
indebtedness, the total indebtedness of the REIT would be more than 60% of the Gross Book V      alue (65% if convertible
debentures of the REIT are outstanding, including the full face value of any convertible debentures). At no time will
indebtedness aggregating more than 15% of Gross Book Value (other than trade payables, accrued expenses and distributions
payable) be at floating interest rates. Management estimates that the indebtedness of the REIT immediately following the
Closing will be approximately 53.9% of the Gross Book Value (excluding the AN Convertible Debenture). See “Investment
Guidelines and Operating Policies” and “Pro Forma Capitalization of the REIT”.

         The REIT intends to put in place the Operating Facility in the amount of $15.0 million at Closing. The Operating
Facility will be secured, inter alia, by way of a first ranking hypothec on 1080 Beaver Hall Hill and a second ranking
hypothec on Place Alexis Nihon. Advances under the Operating Facility will bear interest at the prime rate plus 0.5%, or, on
bankers’ acceptances, at the rate for bankers’ acceptances, plus 2.25%. The REIT intends to draw-down approximately $3.3
million under the Operating Facility following Closing, such amount to be used, together with an amount of approximately
$5 million to be drawn-down under the Re-Financing Loan following Closing, to discharge an outstanding first ranking
hypothec on 1080 Beaver Hall Hill. The terms of the Operating Facility will provide for conditions precedent to draw-down,
events of default and negative covenants customary for operating facilities of such nature and certain negative covenants with
respect to the incurrence of debt by the REIT. There is no assurance that the Operating Facility will be put in place. In
addition, the amount, terms and conditions of the Operating Facility may vary.

          The REIT intends to put in place the Re-financing Loan in the amount of $38.2 million with a Québec institutional
lender in place at or following Closing. The Re-financing Loan will be secured, inter alia, by way of a first ranking hypothec
on Centre Laval. The Re -financing Loan will be used, following Closing, to refinance the outstanding first-ranking hypothec
on Centre Laval and, along with a draw-down of approximately $3.3 million under the Operating Facility, to discharge an
outstanding first-ranking hypothec on 1080 Beaver Hall Hill. The Re-financing Loan may be syndicated by the lender and
will have a term of 60 months. The terms of the Re-financing Loan will provide for conditions precedent to draw-down,
events of default and negative covenants customary for loans of such nature and for certain negative covenants with respect
to the incurrence of debt by the REIT. There is no assurance that the Re-financing Loan will be put in place. In addition, the
amount, terms and conditions of the Re-financing Loan may vary.

         The REIT intends to put in place the Acquisition Facility in the amount of approximately $15.0 million following
Closing. The Acquisition Facility will be put in place primarily for the purpose of funding future immovable property
acquisitions and financing the expansion, redevelopment and improvement, and financing or re -financing of, its properties,
and certain operating expenses of the REIT and of its properties from time to time, subject to the Investment Guidelines and
Operating Policies of the REIT. There is no assurance that the REIT will be able to put the Acquisition Facility in place. In
addition, the amount, terms and conditions of the Acquisition Facility may vary. See “Management of the REIT — Debt
Management”.




                                                               15
         The ability of the REIT to draw down amounts under the Operating Facility and the Acquisition Facility from time
to time may be limited by the limitations on indebtedness which the REIT may incur, as set out above.

                                                      Distribution Policy

          The REIT intends to distribute to Unitholders monthly on or about the 15th day in each calendar month (other than
December 15, 2002 and January of each year) and on December 31st in each calendar year (including December 31, 2002),
not less than 85% of the Distributable Income of the REIT for the preceding calendar month and, in the case of distributions
made on December 31, for the calendar month then ended. Unitholders will be entitled to receive a distribution on
December 31 of each year of any excess of the net income of the REIT for the purposes of the Tax Act over the aggregate of:
(i) the distributions otherwise made for that year; and (ii) the amount of any available losses carried forward such that the
REIT will not be liable for income tax for such year. Distributions shall be made in cash and may be reinvested in Units
through the REIT’s Distribution Reinvestment Plan. See “Distribution Reinvestment Plan”. Monthly distributions will be
based on the Trustees’ estimate of yearly Distributable Income, subject to adjustment from time to time throughout the year.
If the Trustees anticipate a cash shortfall and determine that it would be in the best interests of the REIT, they may reduce for
any period the percentage of Distributable Income to be distributed to Unitholders. The Trustees may, in their discretion,
decide to distribute to Unitholders amounts in excess of Distributable Income or which do not otherwise form part of
Distributable Income, such as capital gains.

          It is the current intention of the REIT to distribute approximately 87% of yearly Distributable Income. Monthly
distributions will be based on the Trustees’ estimate of yearly Distributable Income, subject to adjustment from time to time
throughout the year. See “Distribution Policy”.

                                                Tax Deferral on Distributions

          Management estimates that approximately 60% of the dis tributions to be made by the REIT to Unitholders in 2003
will be income tax deferred by reason of the REIT’s ability to claim capital cost allowance and certain other deductions. See
“Canadian Federal Income Tax Considerations — Taxation of the REIT — Tax Deferred Distributions” and “Risk Factors —
Status For Tax Purposes and Investment Eligibility — Tax Deferred Distributions”. In the year of acquisition of a property,
capital cost allowance is effectively restricted to one-half of the normal annual rates. The percentage amount of the income
tax deferral for 2002 may be lower due in part to the “half-year rule” in respect of capital cost allowance under the Tax Act as
well as having to pro rate the amount of capital cost allowance otherwise available for the 2002 taxation year of the REIT to
reflect the number of days in such 2002 taxation year out of 365 days. The adjusted cost base of Units held by a Unitholder
will generally, subject to certain conditions under the Tax Act, be reduced by the non-taxable portion of distributions made to
the Unitholder (other than the non-taxable portion of certain capital gains). A Unitholder will generally realize a capital gain
to the extent that the adjusted cost base of the Unitholder’s Units would otherwise be a negative amount. See “Distribution
Policy — Tax Deferral on 2002 and 2003 Distributions” and “Canadian Federal Income Tax Considerations”.

                                           Non-Resident Ownership Restrictions

         The Contract of Trust provides that non-residents of Canada (within the meaning of the Tax Act) are precluded from
owning a number of Units in excess of 49% of the outstanding Units of the REIT at any time. Accordingly, the REIT will not
                                                                                                         ore
accept any subscriptions or issue or recognize a transfer of any Units if, after giving effect thereto, m than 49% of the
outstanding Units would be held or beneficially owned by persons who are non-residents of Canada. See “Contract of Trust
and Description of Units — Limitation on Non-Resident Ownership”.

                                               Distribution Reinvestment Plan

         Subject to regulatory approval, the REIT will implement a Distribution Reinvestment Plan pursuant to which
Unitholders resident in Canada may elect to have all their distributions of income of the REIT automatically reinvested in
additional Units at a price per Unit calculated by reference to the volume weighted average on the trading price of the Units
on the principal stock exchange on which the Units are listed for the five trading days immediately preceding the relevant
Distribution Date. See “Distribution Reinvestment Plan”.

                                                         Risk Factors

         There are certain risk factors inherent in an investment in the Units and in the activities of the REIT, including risks
related to the absence of a prior public market, ownership of immovable property, occupancy by tenants, forecasted
occupancy rates and revenues in excess of historical occupancy rates and revenues, lease renewals and rental increases, co-


                                                               16
ownership of properties, consents required, liquidity and access to capital, creditworthiness of the Alexis Nihon Group and
sufficiency of the AN Pledge, Unitholder liability, competition, availability of cash flow, emphyteutic leases, financial
forecast, acquisition and expansion, ownership of Units by the Nihon/Massicotte Group, interest rate fluctuations,
geographical concentration, government regulation, key personnel, potential conflicts of interest, general uninsured losses,
status for tax purposes and investment eligibility and dilution. See “Risk Factors”.




                                                            17
                                                       GLOSSARY

      The following terms used in this prospectus, including Eligibility for Investment, the Explanatory Notes and the
Summary, have the meanings set out below:

“Acquiring Entities” means, collectively, Alexis Nihon Management (Canada) Inc., De La Savane Acquisition Trust and
Alexis Nihon J.D. Acquisition Inc., which entities will acquire part of the Purchased Assets.

“Acquisition Facility” has the meaning ascribed thereto under “Management Strategy of the REIT — Debt Management”.

“Adjusted Unitholders’ Equity” means, at any time, the aggregate of the amount of Unitholders’ equity and the amount of
accumulated amortization recorded in the books and records of the REIT in respect of its properties calculated in accordance
with GAAP.

“Affected Holder” has the meaning ascribed thereto under “Contract of Trust and Description of Units — Limitation on Non-
Resident Ownership”.

“Affected Units” has the meaning ascribed thereto under “Contract of Trust and Description of Units — Limitation on Non-
Resident Ownership”.

“affiliate” has the meaning that would be ascribed thereto in the Securities Act (Québec), if the word “company” were
changed to “person” (as defined herein).

“Alexis Nihon” has the meaning ascribed thereto under “Explanatory Notes — Corporate Reorganization”.

“Alexis Nihon Group” means, collectively, 054938 N.B. Inc., 055436 N.B. Inc., 055458 N.B. Inc., 055460 N.B. Inc., 055812
N.B. Inc., 169566 Canada Inc., 2978831 Canada Inc., 3440281 Canada Inc., 3459331 Canada Inc., 3476928 Canada Inc.,
3495302 Canada Inc., 3560511 Canada Inc., 3582361 Canada Inc., 3650111 Canada Inc., 3773809 Canada Inc., 512908 N.B.
Inc., 512909 N.B. Inc., 512910 N.B. Inc., 512912 N.B. Inc., 512913 N.B. Inc., 512914 N.B. Inc., 513273 N.B. Inc., 513524
N.B. Inc., 515147 N.B. Inc., 603261 N.B. Inc., 603879 N.B. Inc., 603880 N.B. Inc., 604126 N.B. Inc., Alexis Nihon, Alexis
Nihon (55) Inc., Alexis Nihon Assets Inc., Alexis Nihon Associates Inc., Alexis Nihon Buildings Inc., Alexis Nihon Canada
Inc., Alexis Nihon Canam Inc., Alexis Nihon Capital Inc., Alexis Nihon Commerce Inc., Alexis Nihon (Commercial
Properties) Inc., Alexis Nihon Construction Inc., Alexis Nihon Enterprises Inc., Alexis Nihon Equities Inc., Alexis Nihon
Financial Services Inc., Alexis Nihon Inc., Alexis Nihon International Inc., Alexis Nihon (Malvern) Inc., Alexis Nihon
Management Inc., Alexis Nihon (Mega Centres) Inc., Alexis Nihon (Mega Centres II) Inc., Alexis Nihon (Mega Centres III)
Inc., Alexis Nihon Mt-Royal Inc., Alexis Nihon (N.A.) Inc., Alexis Nihon National Inc., Alexis Nihon (Parkway) Inc., Alexis
Nihon Prime Inc, Alexis Nihon Professional Management Services Inc., Alexis Nihon Realties Inc., Alexis Nihon Services
Inc., Alexis Nihon (South Common) Inc., A.N. 1080 Inc., AN (9900 Cavendish) Inc., AN (9999 Cavendish) Inc., AN (NAT)
Inc., Concorde/Souvenir Limited Partnership, De La Savane Lands Inc., Gatineau REIT, Nihon Management 1080 Inc.,
Nihon (PAN) Inc., Paul-Des-Ruisseaux Properties Inc., Place Alexis Nihon Management Services Inc. and Place Alexis
Nihon (Terrains) Inc.

“Alexis Nihon Management (Canada) Inc.” means Alexis Nihon Management (Canada) Inc., a wholly-owned subsidiary of
the REIT incorporated under the Canada Business Corporations Act.

“Alexis Nihon Units” means the Units of the REIT to be issued to Alexis Nihon in partial payment of the consideration
payable to Alexis Nihon for the Purchased Assets under the Purchase Agreement referred to under “Acquisition of the
Portfolio, the Assets and the Management Assets” at a price per Alexis Nihon Unit equal to the price per Offered Unit to the
public pursuant to this Offering.

“Altus Group” means Altus Group Montreal Real Estate Advisory Services General Partnership.

“AN Convertible Debenture” means, collectively, the convertible debentures of the REIT in the aggregate principal amount
of $12.15 million due December 31, 2005 to be issued at Closing to Alexis Nihon as part of the purchase price for the
Purchased Assets, described under “AN Convertible Debenture”.

“AN Head Lease” has the meaning ascribed thereto under “AN Head Lease and AN Income Subsidy — AN Head Lease”, as
amended, supplemented or restated from time to time.



                                                             18
“AN Head Lessee” means AN Mergeco, an entity controlled indirectly by the Nihon/Massicotte Group.

“AN Income Subsidy” has the meaning ascribed thereto under “AN Head Lease and AN Income Subsidy — AN Income
Subsidy”.

“AN Income Subsidy Agreement” means the income subsidy agreement to be entered into at Closing between the AN
Income Subsidy Provider and the REIT pursuant to which the AN Income Subsidy will be provided, as amended,
supplemented or restated fro m time to time.

“AN Income Subsidy Provider” means AN Mergeco, an entity controlled indirectly by the Nihon/Massicotte Group.

“AN Mergeco” has the meaning ascribed thereto under “Explanatory Notes — Corporate Reorganization”.

“AN Pledge” has the meaning ascribed thereto under “AN Head Lease and AN Income Subsidy — AN Pledge of Alexis
Nihon Units and/or AN Convertible Debenture”.

“AN Pledgor” means, AN Mergeco, an entity controlled indirectly by the Nihon/Massicotte Group.

“annuitant” has the meaning ascribed thereto under “Risk Factors — Unitholder Liability”.

“Appraiser” means Altus Group, which has reviewed and consolidated its appraisal reports with the appraisal reports of
Groupe Axima Gagnon / Goudreau, Royal LePage Advisors Inc., Roy Sanche Gold & Ass. and Valiquette, Martin,
Montmarquet & Ass. Inc., and has certified that the conclusions in such reports represent the market values of the applicable
Properties.

“Assets” means the movables, fixtures and leasehold improvements owned by Alexis Nihon and relating to the Properties,
other than the Management Assets, and includes the trade name “Alexis Nihon” and related trade marks.

“associate” has the meaning ascribed thereto in the Securities Act (Québec).

“Associate” means, where used to indicate a relationship between a person and a corporation, a person who beneficially
owns, directly or indirectly, voting securities carrying more than ten percent of the voting rights attached to all voting
securities of the corporation, a spouse of such individual or an immediate family member of such individual, where used to
indicate a relationship between a person and a partnership, a partner of that partnership and, if such partner is an individual, a
spouse of such individual or an immediate family member of such individual, and where used to indicate a relationship
between a person and a trust, a beneficiary or trustee of that trust and, if such person is a beneficiary or trustee of such trust, a
spouse of such individual or any immediate family member of such individual.

“Assumed Hypothecs” means the immovable hypothecs and the indebtedness secured thereby to which the Properties are
subject at Closing, which it is anticipated will be the assumed immovable hypothecs set out under “Properties — Assumed
Hypothecs”.

“Beaver Hall Hill Closing” has the meaning ascribed thereto under “Acquisition of the Portfolio, the Assets and the
Management Assets — Purchase Agreement”.

“BOMA” means the Building Owners Managers Association.

“business day” means any day other than a Saturday, Sunday or a day on which the Schedule 1 chartered banks located in
Montreal, Québec are not open for business during normal banking hours.

“Cavendish Closing” has the meaning ascribed thereto under “Acquisition of the Portfolio, the Assets and the Management
Assets — Purchase Agreement”.

“CCRA” means the Canada Customs and Revenue Agency.

“Centre Laval” means the 631,762 square foot regional shopping centre located at 1500 to 1690 Le Corbusier Boulevard in
Laval, Québec.




                                                                 19
“Centre Laval Closing” has the meaning ascribed thereto under “Acquisition of the Portfolio, the Assets and the
Management Assets — Purchase Agreement”.

“Closing” means the closing of this Offering.

“Commercial Properties” means all of the Properties except for the multi-family residential property located at Place Alexis
Nihon.

“Compensation Committee” means the Compensation Committee of the Trustees described under “Management of the REIT
— Compensation Committee”.

“Contract of Trust” means the contract of trust made as of October 18, 2002, governed by the laws of the Province of
Québec, pursuant to which the REIT was established, as amended, supplemented and/or restated from time to time.

“Co-Owner” has the meaning ascribed thereto under “Explanatory Notes — Co-Ownership Properties”.

“Co-Ownership Closing” has the meaning ascribed thereto under “Explanatory Notes — Co-Ownership Properties”.

“Co-Ownership Properties” has the meaning ascribed thereto under “Explanatory Notes — Co-Ownership Properties”.

“Corporate Reorganization” has the meaning ascribed thereto under “Explanatory Notes — Corporate Reorganization”.

“Deferred Income Plans” means, collectively, trusts governed by registered retirement savings plans, registered retirement
income funds and deferred profit sharing plans, each as defined in the Tax Act.

“De La Savane Closing” has the meaning ascribed thereto under “Acquisition of the Portfolio, the Assets and the
Management Assets — Purchase Agreement”.

“Developers” means, collectively, the Development Company and any affiliates thereof which may, from time to time, carry
on any development activities, all members of Alexis Nihon and the affiliates thereof which may, from time to time, carry on
any development activities, all members of the Alexis Nihon Group and the affiliates thereof which may, from time to time,
carry on development activities, all members of the Nihon Family and the affiliates thereof which may, from time to time,
carry on development activities, all members of the Massicotte Family and the affiliates thereof which may, from time to
time, carry on development activities, as well as the successors and assigns of any of the foregoing which may from time to
time carry on development activities.

“Development Agreement” means the Development Agreement to be entered into among the REIT, Alexis Nihon, the
Development Company, Robert A. Nihon and Paul J. Massicotte at Closing described under “Management of the Properties,
Employee Services Agreements and Development Agreement — Development Agreement”, as amended, supplemented
and/or restated from time to time.

“Developer Entity” means any person carrying on any property development activities which is an affiliate of a Developer,
which is controlled by one or more Developers or the development activities of which are principally directed by one or more
Developers acting jointly or in concert.

“Development Company” means Mt. St. Hilaire Properties Inc., a company controlled indirectly by Paul J. Massicotte.

“Distributable Income” has the meaning ascribed thereto under “Exp lanatory Notes — Distributable Income”.

“Distribution Date” has the meaning ascribed thereto under “Distribution Policy”.

“Distribution Reinvestment Plan” means the distribution reinvestment plan of the REIT described under “Distribution
Reinvestment Plan”, as amended, supplemented or restated from time to time.

“emphyteutic lease” means an agreement whereby an emphyteutic lessor grants to an emphyteutic lessee, for a determined
period of time, the real right of enjoyment of an immovable property, provided the emphyteutic lessee erects constructions
thereon (known as a “ground lease” at common law).




                                                            20
“Employee Services Agreements” has the meaning ascribed thereto under “Management of the Properties, Employee
Services Agreements and Development Agreement — Employee Services Agreements”, as amended, supplemented or
restated from time to time.

“Employment Agreement” means the employment agreement to be entered into between Paul J. Massicotte and Alexis
Nihon Management (Canada) Inc. at Closing described under “Management of the REIT — Employment Agreement with
Paul J. Massicotte and Remuneration of Senior Officers”, as amended, supplemented or restated from time to time.

“Excess Income” means the amount, if any, by which the aggregate of: (i) the net income of the REIT for a taxation year, as
determined in accordance with the provisions of the Tax Act (other than paragraph 82(1)(b) and subsection 104(6) of the Tax
Act) and excluding net realized capital gains; and (ii) the amount, if any, by which the net realized capital gains of the REIT
for a taxation year exceed the amount thereof that would not be subject to tax in the REIT by reason of the carry forward
from prior taxation years of “net capital losses” (as defined in the Tax Act) of the REIT to the extent not previously deducted,
exceeds the amounts that otherwise became payable by the REIT to Unitholders during the taxation year.

“Excluded Property” means, collectively, 9000, 9150 and 9200 L’Acadie Boulevard in Montreal, Québec, and vacant land
for development owned by the Alexis Nihon Group in Gatineau, Laval and Montreal, Québec.

“Financial Forecast” means the financial forecast of the REIT for the three-month periods ending March 31, June 30,
September 30 and December 31, 2003, and for the year ending Decemb er 31, 2003 included in this prospectus.

“GAAP” means Canadian generally accepted accounting principles, as defined in the Canadian Institute of Chartered
Accountants Handbook, as same may be amended, restated, supplemented and/or replaced from time to time.

“Governance Committee” means the Governance Committee of the Trustees described under “Management of the REIT —
Governance Committee”.

“Greater Montreal Area” means the areas and boroughs comprised of the City of Montreal and the City of Laval.

“Gross Book Value” means, at any time, the book value of the properties and assets of the REIT, as shown on its then most
recent balance sheet, plus the amount of accumulated amortization shown thereon, calculated in accordance with GAAP.

“hedging” has the meaning ascribed thereto under “Investment Guidelines and Operating Policies — Operating Policies”.

“immediate family member” when used to indicate a relationship with an individual, means a parent, child or sibling of such
individual.

“immovable hypothec” means a secured interest in an immovable property under the laws of the Province of Québec.

“immovable property” means immovable property under the laws of the Province of Québec or real property under other
applicable law.

“including” means including, without limitation, where the context so requires or permits.

“Independent Trustee” means a Trustee: (i) who is not a member of the Nihon/Massicotte Group, an associate, an Associate,
director, officer, trustee, beneficiary, officer or employee of a person comprising the Alexis Nihon Group or an affiliate
thereof; (ii) who is “unrelated” (as defined in The Toronto Stock Exchange Guidelines on Corporate Governance) to the
Alexis Nihon Group; (iii) who is not a person who is a “related person” (within the meaning of the Tax Act) in relation to the
Alexis Nihon Group or to any member of the Nihon/Massicotte Group; (iv) who has no material business relationships with
the REIT (other than his election or appointment as Trustee or, subject to the provisions of the Contract of Trust, his being a
Unitholder), any member of the Alexis Nihon Group or any member of the Nihon/Massicotte Group; and (v) who represents
to the REIT, upon his election or appointment as Trustee, that he satisfies the foregoing criteria. Any Trustee appointed by
the Nihon/Massicotte Group shall be deemed not to be an Independent Trustee.

“Independent Trustee Matters” means those decisions which require the approval of a majority of the Trustees who are
Independent Trustees, as set out under “Contract of Trust and Description of Units — Independent Trustee Matters”.

“Investment Committee” means the investment committee of the Trustees described under “Management of the REIT —
Investment Committee”.


                                                              21
“joint venture entity” has the meaning ascribed thereto under “Investment Guidelines and Operating Policies — Investment
Guidelines”.

“joint venturers” has the meaning ascribed thereto under “Investment Guidelines and Operating Policies — Investment
Guidelines”.

“Long Term Incentive Plan” or “LTIP” means the long term incentive plan for the Trustees and officers of the REIT to be
established prior to the Closing described under “Management of the REIT — Long Term Incentive Plan”, as amended,
supplemented or restated from time to time.

“Management” means management of the REIT.

“Management Assets” means all of the assets of Alexis Nihon related to the management of the Properties and the Assets,
which are not to be used and operated exclusively for the benefit of the REIT in respect of the management of the Properties
wholly and directly owned by the REIT and may include motor vehicles, equipment, systems, computers (hardware and
software), databases and marketing tools of Alexis Nihon, as well as head office furniture and fixtures.

“Massicotte Family” means, collectively: (i) Paul J. Massicotte; (ii) the descendants of Paul J. Massicotte, whether biological
or by adoption and the spouse or common law spouse (or the equivalent thereof) of Paul J. Massicotte; (iii) all trusts
established primarily for the benefit of any of the persons listed in (i) or (ii) above; (iv) other persons, the majority of the
economic interest of which is held by a combination of the foregoing; and (v) the executors or administrators of the persons
mentioned in (i) or (ii) above and the trustees of the trusts mentioned in (iii) above.

“net realized capital gains of the REIT” for any period means the amount, if any, by which the amount of the capital gains
of the REIT for the period exceeds the aggregate of the amount of any capital losses of the REIT for the period determined in
accordance with the Tax Act.

“Nihon Family” means, collectively: (i) Robert A. Nihon; (ii) the descendants of Robert A. Nihon, whether biological or by
adoption and the spouse or common law spouse (or the equivalent thereof) of Robert A. Nihon (iii) all trusts established
primarily for the benefit of any of the persons listed in (i) or (ii) above; (iv) other persons, the majority of the economic
interest of which is held by a combination of the foregoing; and (v) the executors or administrators of the persons mentioned
in (i) or (ii) above and the trustees of the trusts mentioned in (iii) above.

“Nihon/Massicotte Group” means, collectively, the Alexis Nihon Group, the Massicotte Family and the Nihon Family, and
their respective affiliates, associates and Associates or, where the context may require, any one or more of the foregoing.

“Non-Competition Agreement” means the non-competition agreement to be entered into at Closing among, inter alia, the
REIT, each person comprised in Alexis Nihon, the Development Company, Robert A. Nihon and Paul J. Massicotte
described under “Non-Competition Agreement”, as amended, supplemented or restated from time to time.

“Non-Unitholder Trustee” has the meaning ascribed thereto under “Management of the REIT — Trustees”.

“Offered Units” means the Units of the REIT offered hereby.

“Offering” means the offering of Units pursuant to this prospectus as described under “Plan of Distribution”.

“Operating Facility” has the meaning ascribed thereto under “Management Strategy of the REIT — Debt Management”.

“Option Period” has the meaning ascribed thereto under “Management of the Properties, Employee Services Agreements and
Development Agreement — Development Agreement”.

“Over-Allotment Option” means the over-allotment option granted to the Underwriters as described under “Plan of
Distribution”.

“person” means and includes individuals, corporations, limited partnerships, general partnerships, joint stock companies,
limited liability corporations, joint ventures, associations, companies, trusts, banks, trust companies, trustees, executors,
administrators or other legal personal representatives, two or more persons who together constitute all of the owners of a
Property, pension funds, land trusts, business trusts or other organizations, whether or not legal entities and regulatory bodies,
governments and agencies and political subdivisions thereof and municipalities.


                                                               22
“Place Alexis Nihon” means the 1,455,782 square foot multi-use office, retail and multi-family residential complex located
at 1500 Atwater Avenue, 3400-4000 De Maisonneuve Boulevard West and 4045-4049 Ste-Catherine Street West in
Montreal, Québec, including the land on which such complex is situated.

                                             scribed thereto under “Acquisition of the Portfolio, the Assets and the
“Place Alexis Nihon Closing” has the meaning a
Management Assets — Purchase Agreement”.

“Portfolio” has the meaning ascribed thereto under “Explanatory Notes”.

“Properties” has the meaning ascribed thereto under “Explanatory Notes” and includes the Co-Ownership Properties.

“Property Closing” means the closing of the Property acquisitions contemplated by the Purchase Agreement.

“Purchase Agreement” means the purchase agreement to be entered into among the REIT, the Acquiring Entities and Alexis
Nihon pursuant to which the REIT and the Acquiring Entities will acquire the Purchased Assets from Alexis Nihon at the
time of the Property Closing, as amended, supplemented or restated from time to time.

“Purchased Assets” means, collectively, the Portfolio, the Assets and the Management Assets.

“Re-financing Loan” has the meaning ascribed thereto under “Management Strategy of the REIT — Debt Management”.

“Regulations” means the regulations made under the Tax Act.

“REIT” means Alexis Nihon Real Estate Investment Trust.

“RESPs” means registered education savings plans, as defined in the Tax Act.

“Restricted Group” has the meaning ascribed thereto under “Non-Competition Agreement”.

“Sell Notice” has the meaning ascribed thereto under “Contract of Trust and Description of Units — Limitation on Non-
Resident Ownership”.

“Senior Indebtedness” means all indebtedness, liabilities and obligations of the REIT which, by the terms of the AN
Convertible Debenture, is or will be expressed to rank in right of payment in priority thereto, including any secured
indebtedness existing at the time of Closing and any secured indebtedness in connection with any financing or refinancing of
the properties and assets of the REIT.

“Tax Act” means the Income Tax Act (Canada), as amended.

“Tax Proposals” means all specific proposals to amend the Tax Act and the Regulations announced by or on behalf of the
Minister of Finance (Canada) prior to the date of this prospectus.

“Transitional Employee Services Agreement” has the meaning ascribed thereto under “Management of the Properties,
Employee Services Agreements and Development Agreement — Transitional Employee Services Agreement”.

“Trustees” means the trustees of the REIT and “Trustee” means any one of them.

“Trust Indenture” means the indenture to be entered into at Closing between the REIT and National Bank Trust Inc., as
trustee, pursuant to which the AN Convertible Debenture will be issued, as amended, supplemented or restated from time to
time.

“Underwriters” means National Bank Financial Inc., CIBC World Markets Inc., BMO Nesbitt Burns Inc., RBC Dominion
Securities Inc. and Desjardins Securities Inc.

“Underwriters’ Fee” means the fee payable to the Underwriters in connection with this Offering pursuant to the
Underwriting Agreement described under “Plan of Distribution”.

“Underwriting Agreement” means the underwriting agreement dated December 13, 2002 among the REIT, certain members
of Alexis Nihon and the Underwriters, as amended, supplemented or restated from time to time.

                                                             23
“Unit” means a unit of interest in the REIT issued from time to time in accordance with the Contract of Trust and includes
the Offered Units and the Alexis Nihon Units and, where the context so requires, units of the REIT issued pursuant to the
Distribution Reinvestment Plan and pursuant to the Unit Option Plan and units of the REIT issued upon conversion of the AN
Convertible Debenture, and includes a fraction of a unit of the REIT.

“Unitholder” means a holder of Units.

“Unit Option Plan” means the unit option plan of the REIT described under “Management of the REIT — Unit Option
Plan”.

“US Securities Act” means the United States Securities Act of 1933, as amended.




                                                            24
                                                        THE REIT

          Alexis Nihon Real Estate Investment Trust (the “REIT”) is an unincorporated closed-end investment trust created by
the Contract of Trust under, and governed by, the laws of the Province of Québec. The REIT was established on October 18,
2002 to acquire, directly and through the Acquiring Entities, the Purchased Assets and Alexis Nihon’s interests in the Co-
Ownership Properties. The REIT will continue and expand the commercial real estate activities carried on by the Alexis
Nihon Group (other than the construction and development activities), which was formed in the late 1940’s and which, since
1980, has been engaged in acquiring, developing, redeveloping, renovating, owning, managing and leasing properties
primarily in the Greater Montreal Area. The Alexis Nihon Group is controlled indirectly by members of the Nihon Family
and members of the Massicotte Family. See “Alexis Nihon Group”. On the Property Closing, the REIT will issue and the
Acquiring Entities will transfer, as the case may be, to Alexis Nihon an aggregate of 8,401,200 Alexis Nihon Units and the
AN Convertible Debenture in partial payment of the consideration payable under the Purchase Agreement referred to under
“Acquisition of the Portfolio, the Assets and the Management Assets”, in the case of the Alexis Nihon Units, at a price per
Alexis Nihon Unit equal to the price per Offered Unit to the public pursuant to this Offering. See “Acquisition of the
Portfolio, the Assets and the Management Assets” and “Plan of Distribution”. The Alexis Nihon Units have the same
attributes as the Offered Units. See “Contract of Trust and Description of Units”.

         The Properties comprise 25 income -producing office, retail, industrial and mixed-use properties, including a
426-unit multi-family residential property, all located in the Greater Montreal Area and representing, in the aggregate,
approximately 4,070,062 square feet of leasable area. On the Property Closing, the REIT and the Acquiring Entities will
acquire the Purchased Assets from Alexis Nihon. In addition, all of the employees of Alexis Nihon relating to the property
and asset management of the Properties will be transferred to the REIT and Alexis Nihon Management (Canada) Inc. See
“Properties”, “Management of the Properties, Employee Services Agreements and Development Agreement” and
“Acquisition of the Portfolio, the Assets and the Management Assets”.

          Going forward, the REIT will seek to acquire properties at a discount to replacement cost that present an accretive
opportunity to create value and enhance cash flow. Future property acquisitions will be subject to specific investment
guidelines and the operation of the REIT will be subject to specific operating policies. See “Investment Guidelines and
Operating Policies”. The Trustees will be responsible for the general control, direction and management of the REIT. After
giving effect to the transfer of Alexis Nihon’s employees, systems and assets relating to the Properties, the REIT’s property
and asset management functions will be fully internalized, through Alexis Nihon Management (Canada) Inc., and the REIT
will operate as a fully-integrated, self-administered and self-managed real estate investment trust. Management believes that
the internalization of Alexis Nihon’s employees, administrative and management systems and assets relating to the Properties
will enhance the REIT’s economic and operating performance. See “Management Strategy of the REIT”, “Management of
the Properties, Employee Services Agreements and Development Agreement — Employee Services Agreements”,
“Acquisition of the Portfolio, the Assets and the Management Assets” and “Management of the REIT”.

        Although it is intended that the REIT will qualify on the Closing as a “mutual fund trust” as defined by the Tax Act,
the REIT will not be a “mutual fund” as defined by applicable securities legislation.

         The head office of the REIT is located at one of the Properties, at 6380 Côte-de-Liesse Road, Montreal
(Saint-Laurent), Province of Québec, H4T 1E3.


                                              OBJECTIVES OF THE REIT

          The objectives of the REIT have been approved by the Trustees and may be amended or replaced by the Trustees
from time to time. In setting the objectives of the REIT, the Trustees are subject to the investment guidelines and operating
policies set out in the Contract of Trust. See “Investment Guidelines and Operating Policies”. The objectives of the REIT are:
(i) to provide Unitholders with stable and growing cash distributions, payable monthly and, to the maximum extent
practicable, income tax deferred, from investments in a diversified portfolio of income producing properties primarily located
in the Greater Montreal Area; and (ii) to improve and maximize Unit value through future acquisitions of additional income-
producing properties, the ongoing active management of the REIT’s properties or interests therein and the acquisition of
completed new developments pursuant to the Development Agreement.

         On November 2, 2002, an article regarding the Alexis Nihon Group and the REIT appeared in the French language
business publication Les Affaires. At the request of the Québec Securities Commission, the following statements (which are



                                                             25
unofficial translations of the statements as they appeared in the article), which were attributed in such article as statements of
Paul J. Massicotte, are being included in this prospectus:

         •   “This decision [for the REIT to proceed with an initial public offering] was made in order to access capital more
             easily and at a lower cost”;

         •   “Approximately $40 million [of the net proceeds received by Alexis Nihon] will be used to reduce debt [of the
             Alexis Nihon Group]”; and

         •   “We want to offer investors a stable (conservative) investment vehicle. The REIT will only hold stable, mature
             properties in order to minimize the risk to investors who were hurt by the performance of the markets in recent
             months”.

       Management expects that growth within the REIT will be achieved through both internal and external strategies. See
“Management Strategy of the REIT”.

         Internal growth is expected to be achieved through:

         •   nurturing existing tenant relationships, ensuring tenant retention and accommodating tenant growth;

         •   increasing rental income and minimizing operating expenses;

         •   providing value added property management through an integrated and internalized property and asset
             management structure;

         •   pursuing expansion and redevelopment opportunities within the REIT’s portfolio;

         •   maintaining asset class diversification within the REIT’s geographic areas of concentration and expertise;

         •   replacing tenants quickly at best available market terms and lowest possible transaction costs;

         •   practicing preventative maintenance and repair of properties; and

         •   facilitating the provision of additional tenant services, including tenant leasehold improvements and built-to-suit
             opportunities.

         External growth is expected to be achieved through:

         •   acquiring stable income -producing properties that provide incremental net yields greater than current yields to
             Unitholders;

         •   acquiring properties that can be repositioned by using the REIT’s redevelopment, leasing and repositioning
             expertise, and that provide incremental net yields greater than current yields to Unitholders;

         •   expanding into other geographic markets where the REIT can exploit its competitive advantages; and

         •   utilizing the REIT’s wholly-owned subsidiary, Alexis Nihon Management (Canada) Inc., to provide third party
             property management services.

         The REIT intends to continue to concentrate its efforts in the Greater Montreal Area where it can exploit its
competitive advantages, as well as in the Hull-Gatineau area where the REIT can pursue accretive acquisitions
complementary to its portfolio and management expertise. The Alexis Nihon Group currently has a 324,327 square foot fully
pre-leased office project under development in the Hull-Gatineau, Québec area in respect of which the REIT will have certain
rights. See “Management of the Properties, Employee Services Agreements and Development Agreement — Development
Agreement”.

         Management is currently assessing acquisition opportunities and believes it will be able to implement an investment
strategy of acquiring properties to provide additional cash flow and enhance long-term portfolio growth.

                                                                26
          It is expected that the REIT will have greater access to sources of financing and re-financing to finance future
acquisitions and, where appropriate, to re-finance the REIT’s portfolio on more favourable terms as a public entity than as a
private entity. The REIT expects to issue Units only where such issuances are not considered by the Trustees to be materially
dilutive to ensuing monthly distributions to existing Unitholders.

        Management believes that achieving the objectives outlined above will result in an increasingly diverse and stable
income stream intended to reduce both risk and volatility in respect of the returns realized by Unitholders.


                                                  ALEXIS NIHON GROUP

          The Alexis Nihon Group is a fully-integrated real estate organization that owns and manages a diverse portfolio of
real estate properties primarily located in the Greater Montreal Area. The Alexis Nihon Group is controlled, indirectly, by
members of the Nihon Family and members of the Massicotte Family.

         The Alexis Nihon Group currently owns and co-owns a diversified portfolio of 29 office, retail, industrial and
mixed-use properties, which include a multi-family residential property and approximately 1,929,000 square feet of land for
development and options to acquire more than 1,000,000 additional square feet of land for development. These properties
include approximately 1,810,831 square feet of office space, 1,040,988 square feet of retail space, 1,358,120 square feet of
industrial and mixed-use space and approximately 300,321 square feet of residential space, representing, in the aggregate,
approximately 4.5 million square feet of leasable area. The majority of the Properties are situated in prime locations along
major traffic arteries and benefit from high visibility and easy access by both tenants and tenants’ customers. The Alexis
Nihon Group provides a full range of real estate services including property and asset management, leasing, accounting,
legal, administrative, construction and development services, and provides space and services to over 530 tenancies. The
Alexis Nihon Group’s real estate operations currently employ 115 full-time employees, of which 107 are dedicated to
property and asset management and eight are dedicated to construction and other related services.

         The Alexis Nihon Group is well-positioned to meet tenants’ needs in its key markets. The Alexis Nihon Group’s
diversity in terms of asset class, property type and size enables it to attract new tenants, retain existing tenants and
accommodate tenants with changing and growing requirements. Over the past three years, the Alexis Nihon Group has
maintained an average occupancy rate for the Portfolio of approximately 90%. As at September 30, 2002, the Properties were
approximately 90.7% leased.

BACKGROUND

         The business activities of the Alexis Nihon Group were begun in Montreal in the early 1950’s by Mr. Alexis Nihon,
a Belgian-born inventor, industrialist and philanthropist who gave rise to the legacy of a respected and committed,
entrepreneurial m anagement culture which continues to characterize the Alexis Nihon Group. During his lifetime, Mr. Nihon
invented a new glass manufacturing process that enabled the group to be one of the few manufacturers of glass in Canada
during the Second World War. Mr. Alexis Nihon used part of the capital generated by his industrial activities to form the
foundation for the Alexis Nihon Group. From 1947 to 1980, the group acquired undeveloped land in Montreal between what
would become Dorval International Airport and downtown Montreal and, during this time, focussed on the management and
long-term leasing of its land bank.

         In the early 1980s, the Alexis Nihon Group, led by Robert A. Nihon, sought to take advantage of market
opportunities and devised a strategic plan for the active development and acquisition of industrial, office and retail properties
in the Greater Montreal Area, with particular emphasis on the western part of the city. In 1983, the Alexis Nihon Group
complemented its strength in the industrial sector by entering the office and retail markets with the acquisition of a major
mixed-use complex now known as Place Alexis Nihon. In the same year, Paul J. Massicotte joined the group as its Chief
Financial Officer and became president of the group in 1985. In 1986, the Alexis Nihon Group expanded Place Alexis Nihon
by developing a new 300,000 square feet office tower known as Tower II and redeveloped and expanded the entire retail
component of Place Alexis Nihon. In 1988, the Alexis Nihon Group rebuilt Tower I of Place Alexis Nihon, now known as
the “Xerox Tower”, which was damaged by fire in 1986. As at September 30, 2002, Tower II and the Xerox Tower were
approximately 92.7% leased. During the same period, development projects were launched in other areas, including industrial
parks in Lachine, Dorval and Saint-Laurent, Québec, which were branded with the Alexis Nihon name.

        In addition to its reputation as a developer and manager of properties, the Alexis Nihon Group has continued to
build upon its legacy of committed management and entrepreneurial corporate culture. Together, Robert A. Nihon, the
Chairman of the Alexis Nihon Group, and Paul J. Massicotte, the President of the Alexis Nihon Group, have over 50 years of
experience in real estate. Since the early 1980’s, Robert A. Nihon has directed the operations of the Alexis Nihon Group as

                                                               27
its Chairman and has overseen the group’s development into a significant developer, acquiror and manager of properties.
Mr. Robert A. Nihon is actively involved in all strategic decisions of the Alexis Nihon Group together with Paul J.
Massicotte. Mr. Massicotte’s experience in the Canadian real estate market includes the following positions which he has
held in the past: Vice President of John A. Flanders Ltd., Executive Vice President, Chief Financial Officer and director of
the Marwest Group of Companies, and Executive Vice President and director of Duraps Corporation. Mr. Massicotte is
currently Lead Director of the Bank of Canada’s board of directors. He has also contributed as a past member of the board of
directors and executive committee of the Canadian Institute of Public and Private Real Estate Companies (CIPPREC).

         The strength and commitment of the management of the Alexis Nihon Group is attested to by the fact that, during a
challenging period of economic downturn in the Montreal and Canadian real estate markets in the late 1980’s to mid-1990’s
during which other significant real estate companies were forced or voluntarily entered into bankruptcy and insolvency
proceedings or arrangements, the Alexis Nihon Group took advantage of its reputation and the confidence of its existing
lenders and secured creditors to retain a high-quality portfolio of assets. During that time, the Alexis Nihon Group, in
cooperation with its secured creditors, disposed of certain properties to both secured creditors and third parties. The
bankruptcy of a subsidiary of the Alexis Nihon Group that occurred recently was the result of a structured liquidation
arrangement with a secured creditor. Since 1997, the Alexis Nihon Group has focussed its external growth on new property
acquisitions at accretive capitalization rates and at prices below replacement cost, including Centre Laval, 1080 Beaver Hall
Hill, 4700 de la Savane, 455 Fénélon and 777 Ste-Catherine Street West. Of the Alexis Nihon Group’s current portfolio of
approximately 4.5 million square feet and 29 properties, 19 properties have been developed by the Alexis Nihon Group
representing 3.3 million square feet, and 10 properties comprising 1.2 million square feet have been acquired by the Alexis
Nihon Group. The Alexis Nihon Group has built and maintained a well recognized expertise in the office, retail, industrial
and mixed-use sectors of the Greater Montreal Area real estate market, with particular expertise in the areas surrounding
Dorval International Airport, Montreal’s main domestic and international passenger airport. According to Mid-Year 2002
Colliers International Industrial Report Montreal, this area is currently the most active industrial market in Montreal’s west
island.

         The Alexis Nihon Group remains a recognized owner, developer, lessor and acquiror of office, retail, industrial and
mixed-use properties in the Greater Montreal Area and continues to enjoy strong relationships with American and Canadian
lenders and to focus its efforts on the redevelopment and repositioning of existing properties, the acquisition of properties and
the development of new properties.

         The Alexis Nihon Group’s commitment to excellence has been recognized by numerous awards over the years,
including Company of the Year, Alpha awarded by the Saint-Laurent Chamber of Commerce in 1990, Building of the Year
for Cavendish Corporate Centre (1995-1996) awarded by BOMA, Building of the Year (1997) awarded by BOMA for Place
Alexis Nihon, the Prix du patrimoine commercial (2001) awarded by La Chambre Immobilière du Grand Montréal (Ville de
Montréal) for 777 Ste-Catherine Street West and the Prix mise en valeur du patrimoine commercial awarded by the City of
Montreal, also for 777 Ste-Catherine Street West, in 2001.

         As seen by the quality of its tenants and lease renewal rates, the Alexis Nihon Group’s expertise and property
management skills have enabled the Alexis Nihon Group to maintain and build a significant portfolio of properties in the
Greater Montreal Area. The REIT expects to continue to benefit from and build upon the Alexis Nihon Group’s reputation,
expertise, competitive strengths and brand name.


                                      MANAGEMENT STRATEGY OF THE REIT

        The REIT believes that the internalization of an experienced management is required to achieve, maintain and grow
value while insuring that the interests of Management remain aligned with those of Unitholders and minimizing risk to
Unitholders. The REIT believes that its objectives can be best achieved through internalized management by employing a
comprehensive, proactive management strategy which leverages and builds upon the Alexis Nihon Group’s existing
competitive strengths in order to enhance the operating and financial performance of the REIT and its properties. The internal
growth strategies of the REIT include:

             • Nurturing existing tenant relationships, ensuring tenant retention and accommodating tenant growth —
                Renewal of existing tenant leases, as opposed to tenant replacement, often provides the best opportunity for
                increasing operating results while minimizing marketing, leasing and tenant improvement costs and
                avoiding interruptions in rental income from periods of vacancy. The REIT plans to continue to nurture
                existing tenant relationships to retain its existing tenants and to meet their changing needs. Furthermore, the
                REIT intends to benefit from its relationship with the Alexis Nihon Group and enter into an agreement with


                                                               28
        a member of the Alexis Nihon Group pursuant to which general contracting services will be provided to the
        REIT at prevailing market rates.

    • Increasing rental income and minimizing operating expenses — The REIT expects to achieve increased
        occupancy levels and higher renewal rents for available space through a proactive leasing program.
        Ongoing preventative maintenance programs along with regular site visits and inspections help to ensure
        that the properties are well maintained. It is expected that the operating economies that result from these
        measures, as well as from a geographically clustered portfolio, will translate into stable and competitive
        operating expenses. Operating expenses will be reviewed monthly in order to ensure that costs are kept
        within budget.

    • Providing value-added property management through an integrated and internalized property and asset
       management structure — The REIT will have access to the necessary human resources in order to provide
       a full range of property and asset management and leasing services to the properties owned by the REIT.
       Management believes that the internalization of management will provide the infrastructure and depth of
       experience to enable the REIT to be aware of, and responsive to, the needs of tenants in a more efficient
       and economic manner rather than contracting for property management services from a third party.

    • Pursuing expansion and redevelopment opportunities within the REIT’s portfolio — The REIT will pursue
       expansion and redevelopment opportunities in order to meet the needs of existing tenants and to attract new
       tenants, as the Alexis Nihon Group has done with the expansion and redevelopment of Place Alexis Nihon,
       Centre Laval and 777 Ste-Catherine Street West.

    • Maintaining asset class diversification in the REIT’s geographic areas of concentration and expertise — The
       REIT will continue to own, acquire and manage properties across the office, retail, industrial, mixed-use
       and multi-family residential asset classes in the Greater Montreal Area. The REIT believes that a balanced
       portfolio, by property and by asset class, will decrease Unitholder risk through diversification.

    • Replacing tenants quickly at best available rates and lowest possible transaction costs — The REIT believes
       that the reputation of the Alexis Nihon Group for responsiveness to tenants’ needs and well-located, well-
       maintained properties will allow the REIT to fill vacancies quickly and that its internalized management
       structure will allow it to do so at the lowest possible transaction costs.

    • Practicing preventative maintenance and repair of properties — In addition to addressing current capital
       expenditure requirements, the REIT will employ a preventative maintenance program utilizing its
       familiarity with, and regular inspection of, building control systems as well as roofing and parking facilities
       in order to minimize capital expenditures going forward.

    • Facilitating the provision of additional tenant services — Management and employees of the REIT and
       Alexis Nihon Management (Canada) Inc. will make use of their knowledge in development and general
       contracting industries and other services to ensure that tenants receive the services they require from third
       parties at the best available cost to the REIT and to the tenant.

With respect to external growth, the REIT intends to employ the following strategies:

    • Acquiring stable income-producing properties that provide incremental net yields greater than current yields
       to Unitholders — The REIT will utilize the experience and expertise of Management and its development
       and leasing knowledge capabilities to select properties for acquisition which present an accretive
       opportunity to provide incremental net yields greater than current yields to Unitholders across the office,
       retail, industrial and mixed-use asset classes. Through the Development Agreement, the REIT will have an
       option on all properties developed by the Developers or the Development Entities for which the REIT has
       offered to provide mezzanine financing based on market terms and a right of first offer with respect to other
       properties developed by the Developers and the Development Entities. See “Management of the Properties,
       Employee Services Agreements and Development Agreement — Development Agreement”.

    • Acquiring properties that can be repositioned by using the REIT’s redevelopment, leasing and repositioning
       expertise, and that provide incremental net yields greater than current yields to Unitholders — Where
       appropriate, and without negatively affecting the stability of the REIT’s income, the REIT will acquire


                                                     29
                 underperforming properties that have the potential to be converted into better performing and stable income
                 producing properties through renovation, leasing and redevelopment.

             • Expanding into other geographic markets where the REIT can exploit its competitive advantages — The
                REIT is considering and will continue to consider expansion into other geographic markets where it can
                best exploit its competitive advantages. For example, in the Hull-Gatineau area, the REIT believes it can
                pursue accretive acquisitions complementary to its portfolio and management expertise.

             • Utilizing the REIT’s wholly-owned subsidiary, Alexis Nihon Management (Canada) Inc., to provide third
                party management services — While the primary objective of the REIT is the investment in quality,
                income -producing properties to be held for long-term ownership, Alexis Nihon Management (Canada) Inc.
                will offer comprehensive property management services to third parties.

COMPETITIVE S TRENGTHS

          The REIT’s main competitive strengths are the stability, commitment and reputation of Management and alignment
of the interests of Management and Unitholders, the internalized management structure of the REIT and Management’s
expertise and experience, particularly in the Greater Montreal Area. The REIT will also benefit from and continue the Alexis
Nihon Group’s committed, entrepreneurial and proactive management and corporate culture. In particular, the REIT intends
to capitalize on the following competitive strengths to achieve its objectives:

             • Stability, experience and expertise of management — Each of the senior officers of the REIT has a minimum
                 of 15 years of experience in the Canadian real estate market, the majority of which have been as
                 management of the Alexis Nihon Group. In addition, Management is highly committed to its objectives and
                 has guided the Alexis Nihon Group through both healthy and difficult financial periods from which the
                 Alexis Nihon Group emerged as a significant owner, developer and acquiror of quality properties. The
                 REIT will benefit from the reputation, experience, commitment and stability of Management going
                 forward.

             • Alignment of Management — At Closing, members of Management of the REIT will hold approximately
                49.7% of the outstanding Units, furthering the alignment of interests of Management and Unitholders.

             • Ability to manage properties effectively across four different asset classes — The REIT will benefit from
                Management’s proven ability to manage, develop and acquire properties across the office, retail, industrial,
                mixed-use and multi-family residential asset classes. In addition, the REIT will have the ability to manage
                properties across these asset classes using a single management information system.

             • Expertise in the Greater Montreal Area real estate market — The Alexis Nihon Group has developed a
                significant expertise in the Greater Montreal Area real estate market. The REIT will benefit from
                Management’s recognized strength and reputation in its areas of geographic concentration.

             • Entrepreneurial and responsive corporate culture — The REIT will benefit from Management’s
                entrepreneurial and responsive corporate culture and strong market knowledge, allowing it to move from
                the assessment of leasing and acquisition opportunities to the completion of projects in a careful yet timely
                manner.

             • Diversified Portfolio — The REIT will seek to maintain a balanced portfolio based on asset class and
                property type consistent with the Portfolio, but also in line with evolving market conditions. Management
                believes that this strategy, in conjunction with the geographic concentration of properties, will provide the
                REIT with a diversified tenant base, reduce cash flow volatility and increase potential capital appreciation.

             • Relationship with and confidence of lenders and secured creditors — Unlike other companies in the
                Montreal and Canadian real estate markets which were forced into bankruptcy or which voluntarily
                proceeded with bankruptcy or arrangement proceedings in the late 1980’s and mid-1990’s, management of
                                                                                    nd
                the Alexis Nihon Group benefited from its relationship with, a confidence of, lenders and secured
                creditors to restructure its portfolio of properties while retaining its most significant assets. The REIT
                intends to make use of the relationships with and confidence of financial institutions going forward in order
                to access capital and finance and re-finance properties, as and when necessary.


                                                             30
             • Privileged relationships with tenants — Stable and privileged relationships with tenants have enabled the
                Alexis Nihon Group and will help the REIT to achieve both a high tenant retention rate and a high tenant
                satisfaction rate and to accommodate existing tenants with changing or growing needs.

             • Ability to access and assess acquisition opportunities — The REIT will benefit from Management’s network
                of relationships and its ability to assess potential acquisitions in order to acquire income producing
                properties where the projected yield on acquisition would result in a yield on the outstanding Units greater
                than the current yield to Unitholders.

             • Redevelopment capabilities — The REIT intends to use its redevelopment expertise to provide the REIT with
                the ability to undertake property expansion and redevelopment opportunities in compliance with the
                investment guidelines and operating policies of the REIT. See “Investment Guidelines and Operating
                Policies”.

D EBT MANAGEMENT

         The REIT will seek to maintain a combination of short, medium and long-term debt maturities which are appropriate
for the overall debt level of its portfolio, taking into account availability of financing and market conditions and the financial
terms of the leases from which the REIT derives its cash flow. The REIT may not incur or assume any indebtedness if, after
giving effect to the incurring or assumption of the indebtedness, the total indebtedness of the REIT would be more than 60%
of the Gross Book Value (65% if convertible debentures of the REIT are outstanding, including the full face value of any
convertible debentures). At no time will indebtedness aggregating more than 15% of Gross Book Value (other than trade
payables, accrued expenses and distributions payable) be at floating interest rates. Management estimates that the
indebtedness of the REIT immediately following the Closing will be approximately 53.9% of the Gross Book Value
(excluding the AN Convertible Debenture). See “Investment Guidelines and Operating Policies” and “Pro Forma
Capitalization of the REIT”.

          The REIT intends to put in place an operating facility (the “Operating Facility”) in the amount of $15.0 million at
Closing. The Operating Facility will be secured, inter alia, by way of a first ranking hypothec on 1080 Beaver Hall Hill and a
second ranking hypothec on Place Alexis Nihon. Advances under the Operating Facility will bear interest at the prime rate
plus 0.5%, or, on bankers’ acceptances, at the rate for bankers’ acceptances plus 2.25%. The REIT intends to draw-down
approximately $3.3 million under the Operating Facility following Closing, such amount to be used, together with an amount
of approximately $5 million to be drawn-down under the Re-Financing Loan following Closing, to discharge an outstanding
first ranking hypothec on 1080 Beaver Hall Hill. The terms of the Operating Facility will provide for conditions precedent to
draw-down, events of default and negative covenants customary for operating facilities of such nature and certain negative
covenants with respect to the incurrence of debt by the REIT. There is no assurance that the Operating Facility will be put in
place. In addition, the amount, terms and conditions of the Operating Facility may vary.

          The REIT intends to put in place a re-financing loan (the “Re-financing Loan”) in the amount of $38.2 million with
a Québec institutional lender in place at or following Closing. The Re-financing Loan will be secured, inter alia, by way of a
first ranking hypothec on Centre Laval. The Re-financing Loan will be used, following Closing, to refinance the outstanding
first-ranking hypothec on Centre Laval and, along with a draw-down of approximately $3.3 million under the Operating
Facility, to discharge an outstanding first-ranking hypothec on 1080 Beaver Hall Hill. The Re -financing Loan may be
syndicated by the lender and will have a term of 60 months. The terms of the Re-financing Loan will provide for conditions
precedent to draw-down, events of default and negative covenants customary for loans of such nature and for certain negative
covenants with respect to the incurrence of debt by the REIT. There is no assurance that the Re-financing Loan will be put in
place. In addition, the amount, terms and conditions of the Re-financing Loan may vary.

         The REIT intends to put in place an acquisition facility (the “Acquisition Facility”) in the amount of approximately
$15.0 million following Closing. The Acquisition Facility will be put in place primarily for the purpose of funding future
immovable property acquisitions and financing the expansion, redevelopment and improvement, and financing or re-
financing of, its properties, and certain operating expenses of the REIT and of its properties from time to time, subject to the
Investment Guidelines and Operating Policies of the REIT. There is no assurance that the REIT will be able to put the
Acquisition Facility in place. In addition, the amount, terms and conditions of the Acquisition Facility may vary.

        The ability of the REIT to draw-down amounts under the Operating Facility and the Acquisition Facility from time
to time may be limited by the limitations on indebtedness which the REIT may incur, as set out above. See “Investment
Guidelines and Operating Policies”.



                                                               31
                                                                    PROPERTIES

         The Properties consist of 25 office, retail, industrial and mixed-use properties, including a multi-family residential
property, all located in the Greater Montreal Area. The Properties owned and co-owned by Alexis Nihon (which do not
include the Excluded Property) consist of approximately 1,370,633 square feet of office space, 1,040,988 square feet of retail
space, 1,358,120 square feet of industrial and mixed-use space and 300,321 square feet (426 units) of multi-family residential
space, representing, in aggregate, approximately 4,070,062 square feet of leasable area. The majority of the Properties are
situated in prime locations near major traffic arteries and benefit from high visibility and easy access by both tenants and
tenants’ customers. On the Property Closing, the REIT and the Acquiring Entities will acquire the Purchased Assets from
Alexis Nihon. See “Acquisition of the Portfolio, the Assets and the Management Assets”. While two of the Properties and
part of a third Property are subject to emphyteutic leases with unrelated parties, Management believes that the term to
maturity and other terms and conditions of the emphyteutic leases are acceptable from the perspective of the REIT. The
Properties are generally well-maintained and in good operating condition. See “Properties — Maintenance, Repairs and
Upgrades”.

OVERVIEW OF THE PROPERTIES

         The following table summarizes the distribution of the appraised values and estimated replacement cost of the
Properties by property type:

                                                               Distribution by Property Type

                                                        Area                            Appraised Value
                                                                                                                                           Appraised
                                                                                                                         Estimated         Value as a
                                                                          Appraised                   Appraised        Replacement         Percentage
                             Number of       Leasable Area                  Value                      Value per         Cost per         of Estimated
      Property Type          Properties(1)   (Square Feet)      %          (000s) (2)        %       Square Foot (3)   Square Foot(4)   Replacement Cost

Commercial
Properties
Office Properties(5).....         7             1,370,633       33.7%      $160,480        41.7%          $117.08         $188.23           62.2%
Retail Properties(6)......        2             1,040,988       25.6%      $133,530        34.7%          $128.27         $148.02           86.7%
Industrial and Mixed-
Use Properties...........        16             1,358,120       33.3%       $55,780        14.5%          $41.07           $75.25           54.6%

Sub-Total
Commercial
Properties                       25             3,769,741       92.6%      $349,790        90.9%          $92.79          $136.42           68.0%
Multi-family
Residential Property...        N/A (1)           300,321(7)      7.4%       $35,210         9.1%          $117.24         $141.29           83.0%

Total                            25             4,070,062       100%       $385,000        100%           $94.59          $136.78           69.2%


Notes:
(1)
      With respect to the “Number of Properties”, Place Alexis Nihon has been included in the office properties category and includes an office, retail and
      multi-family residential component.
(2)
      As determined by the Appraiser. See “Independent Appraisal of the Value of the Properties”.
(3)
      Derived from the allocation as determined by reference to the appraised value of the Properties. See “Independent Appraisal of the Value of the
      Properties”.
(4)
      Derived from the allocation as determined by reference to the Appraiser’s estimated replacement cost of the Properties. See “Independent Appraisal of
      the Value of the Properties”.
(5)
      Includes 611,535 square feet of office space at Place Alexis Nihon.
(6)
      Includes 382,900 square feet of retail space at Place Alexis Nihon, which for the purposes of the “Number of Properties” is included in the office
      properties category.
(7)
      Represents 426 multi-family residential units at Place Alexis Nih on, which for the purposes of the “Number of Properties” is included in the office
      properties category.

        The following table summarizes the distribution of net operating income of the Properties by property type for the
nine months ended September 30, 2002 and the year ended December 31, 2001:




                                                                            32
                                                                                                  Net Operating Income (1)

                                                                                                                              Net Operating Income                      Net Operating Income
                                                                                                                            for the Nine Months Ended                    for the Year Ended
                                                                                                                                September 30, 2002                       December 31, 2001 (2)
                                                                                                              Percentage
                                                Property Type                                                  of Area         (000s)           Percentage              (000s)       Percentage
                                              (3)
                  Office Properties .....................................................                        33.7%           $8,814                40.8%            $11,726          40.5%
                  Retail Properties (4)......................................................                    25.6%           $7,629                35.4%             $9,296          32.2%
                  Industrial and Mixed-Use Properties ......................                                     33.3%           $3,593                16.6%             $5,716          19.8%
                  Multi-Family Residential Property(5) ......................                                     7.4%           $1,549                 7.2%             $2,175           7.5%

                  Total..............................................................................            100%           $21,585               100.0%            $28,913         100.0%

            Notes:
            (1)
                 Includes only the portion of Net Operating Income for the Co-Ownership Properties which is equal to the percentage ownership of Alexis Nihon in
                 such properties.
            (2)
                                                          f
                 Represents Management’s allocation o the Net Operating Income for the year ended December 31, 2001 set forth in the audited Consolidated
                 Statement of Operations and Deficiency in Net Assets for the year ended December 31, 2001. See “Financial Statements”.
            (3)
                 Includes 611,535 square feet of office space at Place Alexis Nihon and Net Operating Income for the Place Alexis Nihon parking.
            (4)
                 Includes 382,900 square feet of retail space at Place Alexis Nihon.
            (5)
                 Includes 300,321 square feet of multi-family residential space at Place Alexis Nihon.


                                                                                                                                            Net Operating Income by Property Type
                             Percentage of Area by Property Type                                                                        for the Nine Months Ended September 30, 2002

                           Multi-Family Residential                                                                                         Multi-Family Residential
                                          (1)                                                                                                                     (1)
                                  Property                                                                                                               Property
                                    7.4%                                                                                                                      7.2%

                                                                                                        (2)
                                                                                  Office Properties
                                                                                        33.7%
                                                                                                                           Industrial and Mixed-Use                                                               (2)
                                                                                                                                                                                                  Office Properties
                                                                                                                                   Properties                                                           40.8%
                                                                                                                                     16.6%
Industrial and Mixed-Use
        Properties
          33.3%




                                                                                                    (3)
                                                                                Retail Properties                                                        (3)
                                                                                      25.6%                                              Retail Properties
                                                                                                                                               35.4%




            Notes:
            (1)
                 Includes 300,321 square feet of multi-family residential space at Place Alexis Nihon.
            (2)
                 Includes 611,535 square feet of office space at Place Alexis Nihon and Net Operating Income for the Place Alexis Nihon parking.
            (3)
                 Includes 382,900 square feet of retail space at Place Alexis Nihon.

            LEASING ACTIVITY

                      As of September 30, 2002, the Properties were, in the aggregate, approximately 90.7% leased. The weighted average
            remaining lease term from October 1, 2002 for the Commercial Properties is approximately 4.55 years. In the remainder of
            2002 and in 2003, approximately 0.9% and 14.4%, respectively, of the Commercial Property space is subject to lease
            renewals. Management believes that in 2003 the occupancy rate for the Commercial Properties will be higher than the current
            rate. Management also believes that, overall, rental rates from lease expiries for the Commercial Properties will increase
            in 2003. With the exception of a limited number of short term leases, all of the Commercial Properties are leased pursuant to
            net rent leases allowing for the recovery of virtually all operating expenses and taxes, thereby increasing the stability of net
            income to the REIT. The multi-family residential units are leased pursuant to gross rent leases, with the exception of
            furnished apartments.

                                                                                                                   33
         The REIT will continue the proactive leasing program which has historically maintained high occupancy levels of
the properties of the Alexis Nihon Group. A majority of the Commercial Property space leased, 53.06% in 2000 and 53.55%
in 2001, is comprised of renewals or expansion space for existing tenants.

         For the year ended December 31, 2001, 671,009 square feet of space was leased. Leasing momentum has continued
since the beginning of 2002, with 843,979 square feet of Commercial Property space having been leased as at September 30,
2002. The following table sets out the leasing activity for the Commercial Properties for the years ended December 31, 1999,
2000 and 2001 and the nine-month period ending September 30, 2002, by category in terms of new tenant leases, and
renewals and expansions:

                                                                       Leasing Activity — Commercial Properties

                                   New Leases                                  Renewals and Expansions                            Total Leases
                          Leasable Area     Number                           Leasable Area     Numbe r                    Leasable Area      Number         Average
          Period          (Square Feet)   of Tenancies                       (Square Feet)   of Tenancies                 (Square Feet)   of Tenancies     Occupancy
        1999                  689,186                       80                   90,511                        41           779,697           121            85.6%
        2000                  421,422                       85                   477,869                      105           899,291           190            91.5%
        2001                  311,652                       64                   359,357                       73           671,009           137            92.7%
        2002(1)               379,651                       52                   471,622                       82           851,273           134            91.2% (2)

Notes:
(1)
     The information for 2002 reflects leasing activity for the nine months ended September 30, 2002 and occupancy adjusted to reflect recent leasing
     activity where space is leased, but not yet occupied.
(2)
     Approximately 172,000 square feet of industrial space, which was vacated during 2002, remains vacant and explains the decrease in the average
     occupancy rate from the previous year. See “Properties — Industrial and Mixed Use Properties”.

         For the year ended December 31, 1999, average net rental rates for the Commercial Properties decreased by 16.0%
for renewals and new leases relative to expiry rates. For the years ended December 31, 2000 and 2001, average net rental
rates for the Commercial Properties increased by approximately 26.8% and 8.1% respectively. The following table
summarizes the leasing costs for the Commercial Properties for the years ended December 31, 1999, 2000 and 2001:

                                                                  Average Leasing Costs — Commercial Properties

                                                                                                                                          Industrial and
                                                                                                             Office (1)      Retail (2)     Mixed-Use         Total

     Total Leasable Area (square feet)(3) .........................................                          1,370,633       1,040,988       1,358,120       3,769,741
     Occupancy(3)..................................................................................             90.6%           95.3%           85.9%           90.2%
     Weighted Average Net Rent (per square foot)(3)...................                                          $10.27          $12.28           $5.10           $9.08
     Lease Renewals
     Number of Tenants
     1999................................................................................................         10              24               7             41
     2000................................................................................................         37              40              28            105
     2001................................................................................................         30              29              14             73
     Area (square feet)
     1999................................................................................................    24,059          22,445          44,007          90,511
     2000................................................................................................   126,403          48,290         303,176         477,869
     2001................................................................................................   153,166          38,586         167,605         359,357
     Weighted Average Net Rent on
     New Leases (per square foot)
     1999................................................................................................     $6.34         $18.43            $4.46           $6.71
     2000................................................................................................     $8.92         $34.66(4)         $5.28          $10.09
     2001................................................................................................     $9.50         $16.87            $5.51           $8.55
     Weighted Average Net Rent on
     Expiries (per square foot)
     1999................................................................................................     $7.02          $20.87           $4.61           $7.99
     2000................................................................................................     $9.59          $22.91           $5.53           $7.96
     2001................................................................................................     $7.54          $16.91           $5.20           $7.91
     Average Leasing Costs (5)(per square foot)
     1999................................................................................................    $6.49           $32.81           $1.30           $6.25
     2000................................................................................................   $15.90           $28.78           $1.19           $8.63

                                                                                                     34
                                                                                                                                             Industrial and
                                                                                                             Office (1)         Retail (2)     Mixed-Use               Total
      2001................................................................................................    $8.03             $22.64            $1.91                $6.57
      Average Term (years)
      1999................................................................................................       3.7                5.6             5.9                  5.2
      2000................................................................................................       5.6                7.0             2.1                  4.1
      2001................................................................................................       3.4                5.0             3.2                  3.6

Notes:
(1)
     Includes 611,535 square feet of office space at Place Alexis Nihon.
(2)
     Includes 382,900 square feet of retail space at Place Alexis Nihon.
(3)
     As at September 30, 2002, adjusted to reflect recent leasing activity where space is leased, but not yet occupied.
(4)
     Without taking into account the Club Monaco lease for premises at 777 Ste-Catherine West, the figure would be $19.31.
(5)
     Leasing costs include tenant allowances, brokerage commissions and other similar costs.

         The Alexis Nihon Group’s objective is to optimize net effective rents by seeking leasing opportunities that minimize
the capital cost and risk involved in tenant inducements. Net effective rent is net rent adjusted to reflect the amortization of
tenant inducements and leasing costs over the term of the lease.

         A significant portion of leases do not mature before the end of 2005. The following table sets forth the lease
maturities for the Commercial Properties as at September 30, 2002:

                                                                        Lease Maturities – Commercial Properties (1)

                                                                                                                              Industrial
                                                                                                                                 and
                                                          Office (2)             %              Retail (3)         %          Mixed-Use       %               Total            %

 Number of Tenants
                                                                    6
 2002 ................................................................          3.5%                  6            2.5%               2        2.0%              14             2.7%
                                                                  22
 2003 ................................................................         12.8%                 35           14.6%              26       26.3%              83            16.3%
                                                                  33
 2004 ................................................................         19.2%                 43           18.0%              30       30.3%             106            20.8%
                                                                  25
 2005 ................................................................         14.5%                 44           18.4%              17       17.2%              86            16.9%
                                                                  28
 2006 ................................................................         16.3%                 32           13.4%               9        9.1%              69            13.5%
                                                                  58
 Thereafter................................................................    33.7%                 79           33.1%              15       15.1%             152            29.8%
 Area (square feet)
                                                            17,163
 2002 ................................................................          1.3%           4,540               0.5%           8,717        0.8%          30,420             0.9%
 2003 ................................................................ (4)
                                                           163,458             12.7%          94,829               9.6%         229,051       20.8%         487,338            14.4%
                                                          197,980
 2004 ................................................................         15.4%          60,981               6.2%         274,053       24.8%         533,014            15.8%
                                                          174,565
 2005 ................................................................         13.6%          58,697               6.0%         216,049       19.6%         449,311            13.3%
                                                          184,313
 2006 ................................................................         14.3%          36,644               3.7%         146,515       13.3%         367,472            10.9%
                                                          550,452
 Thereafter................................................................    42.7%         728,714              74.0%         228,527       20.7%       1,507,693            44.7%
 Weighted Average Net Rent (per
 square foot) of Leases Expiring in:
                                                            $10.39
 2002 ................................................................               —         $25.38                     —       $4.73            —          $11.01               —
 2003 ................................................................(4)
                                                             $6.19                   —         $13.63                     —       $5.24            —           $7.19               —
                                                              $9.58
 2004 ................................................................               —         $20.16                     —       $5.10            —           $8.49               —
                                                            $12.83
 2005 ................................................................               —         $21.65                     —       $4.70            —          $10.08               —
                                                              $8.68
 2006 ................................................................               —         $32.68                     —       $5.41            —           $9.77               —


Notes:
(1)
     Information given for twelve months ending December 31 of each calendar year, except for 2002, for which information given for three months ending
     December 31.
(2)
     Includes maturities for leases of office space at Place Alexis Nihon.
(3)
     Includes maturities for leases of retail space at Place Alexis Nihon.
(4)
     Includes 83,417 square feet currently leased by ISM Information Management, with respect to which amounts under the AN Income Subsidy may be
     payable. See “AN Head Lese and AN Income Subsidy — AN Income Subsidy”.

         The multi-family residential units (other than the 72 furnished apartments which are leased for periods of less than a
year) are leased on a year-to-year basis. The occupancy rates for the last three calendar years have been 99.68%, 99.91% and
99.93%, and is currently 99.97% (as at September 30, 2002 (other than the 72 furnished apartments)). Rent increases
generally follow the annual guidelines of the Régie du logement du Québec.

          The Properties have a diversified tenant mix with over 530 tenancies. The following table sets forth the ten most
significant tenants in terms of annualized gross rents as a percentage of gross rental revenues of the Commercial Properties
for the nine-month period ending September 30, 2002:

                                                                                                       35
                                                                                         Significant Tenants

                                                                                                                        Percentage of
                                                                                                                        Gross Rental          Area
                                                    Tenant                                                               Revenues(1)       (Square feet)       Expiry

   Richter Management Limited(2)..................................................................                          3.4%               83,447        7/31/07
   Famous Players Inc.(3) ..................................................................................                2.5%               76,978        4/30/11
   ISM Information Management (a division of IBM Canada Ltd.) (4).....                                                      2.2%               83,417       12/31/03
   Speedware Ltd. (5)..........................................................................................             2.0%               33,615        5/31/05
   Klöckner Stadler Hurter Ltd(2). ...................................................................                      1.8%               61,131       12/31/09
   Wal Mart Canada Inc. .................................................................................                   1.6%              150,329        1/31/08
   Zellers Inc.(6) ..................................................................................................       1.5%              101,133       11/07/18
   Canadian Tire Corporation(7) ......................................................................                      1.4%               52,688        3/26/11
   Dare Foods Ltd.............................................................................................              1.0%              114,596       12/31/05
   GMAC Ltd. ...................................................................................................            1.0%               26,682        2/29/04
                                                                                               Total                       18.4%              784,016


Notes:
(1)
     Sets forth percentage of gross rental revenues of the Commercial Properties.
(2)
     Tenant has right to reduce space leased.
(3)
     Famous Players Inc. has entered into discussions with Alexis Nihon in order to terminate its lease, subject to certain conditions (including pre-leasing
     activity and the consent of hypothecary creditors), in consideration for a termination payment which remains to be agreed to by the REIT; which
     termination payment will be paid to the REIT upon termination. If Famous Players Inc. terminates its lease pursuant to such arrangement, the REIT
     intends to lease such space to other prospective tenants.
(4)
     While there is a January 2004 target renewal and increase to market rental rates of and with respect to the ISM Information Management lease at the
     Xerox Tower of Place Alexis Nihon, notwithstanding that the tenant has not informed Alexis Nihon of any intention not to renew its lease, there can be
     no assurance that the tenant will renew its lease or that it will renew its lease at the target rental rate. In the event the event that ISM Information
     Management does not renew its lease, the space subject to such lease will be subject to the AN Head Lease. See “AN Head Lease and AN Income
     Subsidy — AN Head Lease”.
(5)
     Sublessee of Tioxide Canada Inc.
(6)
     The consent of the tenant is required in connection with the assignment of its lease to the REIT as lessor.
(7)
     Tenant has the right to cancel the lease, upon payment of a penalty, in 2006.

         In addition, under the AN Head Lease, the AN Head Lessee will lease approximately 218,000 square feet of space.
The rent payable under the AN Head Lease will represent approximately 4.8% of the REIT’s forecast gross rental revenues
for 2003. See “Financial Forecast” and “AN Head Lease and AN Income Subsidy — AN Head Lease”.

MAINTENANCE, REPAIRS AND UPGRADES

         The Alexis Nihon Group has spent approximately $28.0 million on the renovation, repair and redevelopment of the
Properties over the past three years. Of that amount, approximately $11.7 million was spent on renovations, repairs and
upgrades as part of its ongoing property maintenance program. Management estimates that approximately $15.3 million will
be required to be expended over the next five years for major repairs and upgrades including those items set forth in the
engineering reports referred to under “Environmental and Engineering”. Approximately $7.6 million of such amount of $15.3
million is estimated by Management to be recoverable from tenants. Management believes that the Properties are generally in
a good state of repair. See “Environmental and Engineering”.

         The following table summarizes significant expenditures made in respect of the Properties in recent years as well as
projected significant expenditures for certain Properties for the next five years:

                                                                                     Significant Expenditures

                                                                                                                                Capital            Projected Capital
                                            Property                                                       Year               Investment       Expenditure Requirements


      Place Alexis Nihon,                                                                1999-2002                           $6,300,000          2003      $3,595,000
        Montréal Québec ................................................................                                                         2004      $1,100,000
                                                                                                                                                 2005      $1,290,000
                                                                                                                                                 2006      $1,800,000
                                                                                                                                                 2007      $1,100,000



                                                                                                     36
                                                                                                                            Capital              Projected Capital
                                            Property                                                        Year          Investment         Expenditure Requirements

      Centre Laval – 1500 to 1690 Le Corbusier Boulevard, 1998-2001                                                      $6,000,000            2003         $441,000
       Laval, Québec ........................................................................                                                  2004         $472,960
                                                                                                                                               2005               —
                                                                                                                                               2006         $500,000
                                                                                                                                               2007         $250,000

      1080 Beaver Hall Hill,                                                              2000-2002                      $1,200,000            2003       $1,600,000
        Montréal, Québec ................................................................                                                      2004       $1,250,000
                                                                                                                                               2005               —
                                                                                                                                               2006         $450,000
                                                                                                                                               2007       $1,400,000

      777 Ste-Catherine West and 1401 McGill College,                                     1999-2000                      $2,800,000            2003                 —
        Montréal, Québec ................................................................                                                      2004                 —
                                                                                                                                               2005                 —
                                                                                                                                               2006                 —
                                                                                                                                               2007                 —

ASSUMED HYPOTHECS

         The Properties are currently leveraged with predominantly fixed rate debt. Management estimates that the
indebtedness of the REIT immediately following the Closing will be approximately 53.9% of Gross Book Value (excluding
the AN Convertible Debenture). See “Pro Forma Capitalization of the REIT”. The timing of lease maturities and debt
maturities is structured to match where possible and practicable. The weighted average interest rate pursuant to the Assumed
Hypothecs is approximately 6.77% per annum and the weighted average term to m         aturity of the Assumed Hypothecs is
approximately 3.31 years.

        The information in the following table is based upon information as at September 30, 2002 and summarizes the
immovable hypothecs which are to constitute the Assumed Hypothecs and be in place on the Properties after giving effect to
the Property Closing, the Place Alexis Nihon Closing, the Centre Laval Closing and the Cavendish Closing, after payments
are made to creditors in respect of certain immovable hypothecs. See “Acquisition of the Portfolio, the Assets and the
Management Assets” and “Use of Proceeds”. These estimates are based on the current status of negotiations with lenders of
terms expected to be in place at the Closing, including in respect of 1080 Beaver Hall Hill and Centre Laval.

                                                                                     Assumed Hypothecs (1) (2)

                                                                                                               Balance to be
                                                                                                               Outstanding
                                                                                                               Immediately             Loan
                                            Properties                                                         After Closing      Interest Rate (3)      Maturity Date


 Place Alexis Nihon, Montreal, Québec ...........................................                             $85,926,332              6.53%          August 2007
 Office Properties
 1080 Beaver Hall Hill, Montreal, Québec.......................................                                $8,245,000        BA’s+3.50% (4)       May 2003
 4700 de la Savane, Montreal, Québec..............................................                             $4,665,110(5)        8.16%             April 2012
 455 Fénélon, Montreal (Dorval), Québec .......................................                                $6,939,578           8.00%             September 2004
 9900 Cavendish, Montreal (Saint-Laurent), Québec.....................                                         $7,666,560           6.85%             November 2003
 9999 Cavendish, Montreal (Saint-Laurent), Québec.....................                                         $5,173,900           7.30%             October 2006
 9960-9970 Côte-de-Liesse Road, Montreal (Lachine),
   Québec ...............................................................................................          $898,942            8.20%          May 2005
 Retail Properties
 Centre Laval – 1500 to 1690 Le Corbusier Boulevard,                                                          $29,352,060              7.00%          February 2003(6)
 Laval, Québec ......................................................................................          $3,933,122              7.35%          February 2003
                                                                               Sub-total                      $33,285,182




                                                                                                    37
                                                                                                           Balance to be
                                                                                                           Outstanding
                                                                                                           Immediately                 Loan
                                           Properties                                                      After Closing          Interest Rate (3)      Maturity Date



  777 Ste-Catherine West and 1401 McGill College,                                                          $7,843,734                7.87%            October 2005
    Montreal, Québec.............................................................................          $4,030,492              P +1.0% (7)        October 2005
                                                                                                           $2,500,000                0.00%            November 2004 (8)
                                                                            Sub-total                     $14,374,226
  Industrial and Mixed-Use Properties
  3071-3075 Louis A. Amos and 1922-1996
    Onésime -Gagnon, Montreal (Lachine), Québec.........................                                    $6,049,235               5.63%            March 2004
  1615-1805 – 55th Avenue, Montreal (Dorval), Québec ................                                       $5,375,810               5.50%            December 2004
  3339-3403 Griffith, Montreal (Saint-Laurent), Québec................                                      $4,755,633               5.88%            July 2005
  8100 Cavendish, Montreal (Saint-Laurent), Québec.....................                                     $2,928,653               5.88%            December 2005
  1949 Onésime-Gagnon, Montreal (Lachine), Québec ..................                                        $3,179,989               5.63%            March 2004
  2260 – 32nd Avenue and 3142-3190 Joseph-Dubreuil,
    Montreal (Lachine), Québec...........................................................                   $2,509,847(5)            8.65%            January 2007
  2102-2150 – 32nd Avenue, Montreal (Lachine), Québec..............                                         $1,941,639               6.75%            December 2003
  2024-2080 – 32nd Avenue, Montreal (Lachine), Québec..............                                         $2,422,013               5.63%            March 2004
  6320-6380 Côte-de-Liesse Road, Montreal (Saint-
    Laurent), Québec..............................................................................          $2,636,556             P +1.5% (9)        November 2004
  Co-Ownership Properties
  1875 – 55th Avenue and 22-62 Lindsay,
    Montreal (Dorval), Québec ............................................................                  $1,629,897              11.00%            October 2011
  1520-1660 – 55th Avenue and 5430 Fairway,
    Montreal (Lachine), Québec...........................................................                   $1,094,490              10.63%            October 2011
  1710-1850 – 55th Avenue and 5435 François -Cusson,
    Montreal (Lachine), Québec...........................................................                   $1,094,490              10.63%            October 2011
  1200 – 55th Avenue, Montreal (Lachine), Québec.........................                                     $985,252               6.35%            July 2007
  731-749 Meloche and 11450 Côte-de-Liesse Road,
    Montreal (Dorval), Québec ............................................................                       $64,113             7.00%            February 2006
  679-701 Meloche and 135-137 Lindsay, Montreal
    (Dorval), Québec..............................................................................                    —                 —             —
  703-729 Meloche, Montreal (Dorval), Québec..............................                                       $59,950             7.00%            February 2006
  Total....................................................................................................... $203,902,397 (1)

Notes:
(1)
     Since September 30, 2002, Alexis Nihon has made scheduled payments, in the ordinary course, to certain hypothecary creditors in the aggregate
     amount of approximately $1.0 million. Based on balances outstanding as at November 30, 2002, the total amount of the Assumed Hypothecs would be
     approximately $202,960,000.
(2)
      With respect to the Co-Ownership Properties, includes only the portion of the relevant hypothecs equal to the REIT’s percentage interest in such
      properties after giving effect to the acquisition by the REIT of Alexis Nihon’s interest in such properties.
(3)
      Rounded up or down to the closest hundredth of one percent.
(4)
      Banker’s acceptances plus 3.50%; as at September 30, 2002 the rate for Banker’s acceptance was 3.02%.
(5)
      Assumed indirectly through an Acquiring Entity.
(6)
      Based on the current status of negotiations, Management believes that it will be able to extend this loan and hypothec for a period of five years.
(7)
      Prime rate plus 1.0%; as of September 30, 2002, the prime rate was 4.50%.
(8)
      Balance of sale payable on demand after October 31, 2004.
(9)
      Prime rate plus 1.5%; as of September 30, 2002, the prime rate was 4.50%.




                                                                                               38
       The following table summarizes the debt maturities up to and including 2006 of the Assumed Hypothecs as at
September 30, 2002:

                                                                                     Debt Maturities (1) (2)(3)

                                                                                                                               Industrial
                                                                                                                                  and          Multi-family
                                                                                          Office              Retail           Mixed-Use       Residential             Total
                                                                                                              (in thousands, except percentages and years)
 Debt Maturities
                                                                                                  —
 2002................................................................................................           —                  —                 —                   —
                                                                                              $15,912
 2003................................................................................................         $33,285             $1,942             —                 $51,139
                                                                                                $6,940
 2004................................................................................................          $2,500            $19,664             —                 $29,104
                                                                                                   $899
 2005................................................................................................         $11,874             $7,684             —                 $20,457
                                                                                                $5,174
 2006................................................................................................           —                  $124              —                  $5,298
 Weighted Average Interest Rate on Assumed
  Hypothecs                                                                                      6.86%            6.88%           6.51%            6.53%                6.77%
 Weighted Average Term to Maturity on
  Assumed Hypothecs                                                                     3.90 years          2.33 years         3.07 years     4.83 years           3.31 years

Notes:
(1)
     With respect to the Co-Ownership Properties, includes only the portion of debt equal to the REIT’s percentage interest in such properties after giving
     effect to the acquisition by the REIT of Alexis Nihon’s interest in such properties.
(2)
     Estimates based on the current status of negotiations with lenders of terms expected to be in place at the Closing.
(3)
     The existing debt on Place Alexis Nihon has been allocated based on the appraised value of Place Alexis Nihon, as to $45,177,456 to the office
     properties category, as to $21,875,400 to the retail properties category and as to $18,873,476 to the multi-family residential property category.

        Certain of the Co -Ownership Properties are subject to hypothecs in favour of the Co-Owner in connection with
indemnification obligations of Alexis Nihon in favour of the Co-Owner. If the REIT acquires Alexis Nihon’s interest in the
Co-Ownership Properties, it will acquire such interest subject to such hypothecs. In addition to the Assumed Hypothecs, the
REIT will also have $12.15 million principal amount of AN Convertible Debenture outstanding. See “AN Convertible
Debenture”.

S UMMARY OF THE PROPERTIES

             The following table summarizes certain aspects of each of the Properties as at September 30, 2002:
                                                                          Leasable                                Net Rent
                                                                            Area                                    per
                                                 Year Built/              (Square            Percentage           Square
              Property                           Renovated                  Feet)              Leased             Foot(1)(2)                    Selected Tenants (3)

Office Properties
Place Alexis Nihon, Montreal,                1968-1988                    611,535                92.7%            $10.18         Accovia Inc., Canada Maritime Agencies Ltd.,
  Québec                                                                                                                         Essentus Inc., ISM Information Management (4),
                                                                                                                                 Klöckner Stadler Hurter Ltd., Richter
                                                                                                                                 Management Limited, Sport Maska Inc., Surefire
                                                                                                                                 Commerce Inc., Xerox Canada Inc.
1080 Beaver Hall Hill,                       1968/2000                    316,408                76.9%(5)          $9.66         Computer Sciences Canada Inc., Lewis Apeldaile
  Montreal, Québec                                                                                                               and Hanson Inc., Webhelp Canada Inc.(6)
4700 de la Savane, Montreal,                 1988/1998                    189,384                99.8%             $6.96         A Canadian chartered bank, Bombardier Inc.,
  Québec                                                                                                                         eNGENUITY Technologies Inc., Optimal
                                                                                                                                 Robotics Corp
455 Fénélon,                                 1990                           94,848               95.6%            $12.33         Danzas Canada Ltée, GMAC Ltd., Tetra
  Montreal (Dorval), Québec                                                                                                      Technologies Inc.
9900 Cavendish,                              1987                           82,977               96.0%            $12.46         CATO Research Canada Inc., CIBC World
  Montreal (Saint-Laurent),                                                                                                      Markets Inc., Kronos Computerized Time
  Québec                                                                                                                         Systems, Inc., Proctor & Gamble Inc.
9999 Cavendish,                              1988                           50,637               92.7%            $20.43         Famic Technologies 2000 Inc., Speedware Ltd. (7)
  Montreal (Saint-Laurent),
  Québec
9960-9970 Côte-de-Liesse                     1983                           24,844             100.0%              $9.51         Fishery Products International, Ralston Purina
  Road,                                                                                                                          Canada Inc. (Eveready)
  Montreal (Lachine),
  Québec
Sub-Total (Office)                                                      1,370,633                90.6%            $10.27




                                                                                                   39
                                                    Leasable                  Net Rent
                                                      Area                      per
                                  Year Built/       (Square      Percentage   Square
          Property                Renovated           Feet)        Leased     Foot(1)(2)                  Selected Tenants (3)

Retail Properties
Place Alexis Nihon, Montreal,   1967/1985/ 1986     382,900        90.5%      $13.71       A Canadian chartered bank, Canadian Tire
  Québec                                                                                   Corporation, Concept Énergie Cardio, I.G.A.,
                                                                                           L’Anjeu, Le Monde des Athlètes, Pharmaprix,
                                                                                           Restaurant Nickels, Sports Experts, Zellers Inc. (8)
Centre Laval - 1500 to 1690     1968-1991/1998-     631,762(9)     97.9%       $9.77       A Canadian chartered bank, Bouclair(10), Bureau
  Le Corbusier Boulevard,       1999                                                       en Gros, Dollarama, Famous Players Inc.(11),
  Laval, Québec                                                                            L’Équipeur, Librairie Champigny, Sociét é des
                                                                                           Alcools du Québec, Sports Experts, The Bay (9),
                                                                                           Wal Mart Canada Inc.
777, Ste-Catherine West and     circa                26,326       100.0%      $52.58       A Canadian chartered bank, Club Monaco
  1401 McGill College,          1885/1990/2000                                             (Caban)
  Montreal, Québec
Sub-Total (Retail)                                 1,040,988       95.3%      $12.28

Industrial and Mixed-Use
  Properties
3071-3075 Louis A. Amos         1987                164,262        97.2%       $4.95       Gelcore Company, Les Distributions RVI Ltée,
  and 1922-1996                                                                            Panasonic Canada Inc., Telav Inc.
  Onésime-Gagnon, Montreal
  (Lachine), Québec
1615-1805 – 55th Avenue,        1990                158,304        61.3%       $4.64       Commercial Plastics (C.P.) Inc., John L. Schultz
  Montreal (Dorval), Québec                                                                Limited, Premier Tech Ltd.
3339-3403 Griffith, Montreal    1987                118,114       100.0%       $6.06       Andritz Ltée, National Research Council of
  (Saint-Laurent), Québec                                                                  Canada, Tellabs Transport Group Inc.
8100 Cavendish,                 1981                114,596       100.0%       $3.50       Dare Foods Ltd.
  Montreal (Saint-Laurent),
  Québec
1949 Onésime-Gagnon,            1988                 95,795        57.7%       $4.60       PanGeo Québec Pharma Inc. (12)
  Montreal (Lachine),
  Québec
2260 – 32nd Avenue and          1983                 92,429        56.5%       $6.71       Berlex Canada Inc., PHH Vehicle Management
  3142-3190                                                                                Services Inc.
  Joseph-Dubreuil,
  Montreal (Lachine),
  Québec
2102-2150 – 32nd Avenue,        1984                 77,400       100.0%       $5.07       Intertape Polymer Group Inc., NSK-RHP
  Montreal (Lachine),                                                                      Canada Inc., Standard Life Assurance Company
  Québec
2024-2080 – 32nd Avenue,        1984                 68,320        87.9%       $5.86       Telav Inc., Trium Mobilier de Bureau Inc.
  Montreal (Lachine),
  Québec
6320-6380 Côte-de-Liesse        1954/1981/1990’s     58,483       100.0%       $6.72       Dajon Electroménagers Inc., Interfast Inc.,
  Road, Montreal (Saint-                                                                   Services de Gestion Nihon Inc.
  Laurent), Québec

Co-Ownership Properties
1875 – 55 th Avenue and         1988                 81,878       100.0%       $4.90       Amscan Distributors (Canada) Ltd., Groupe
  22-62 Lindsay,                                                                           Graham International Inc., Omnimedia
  Montreal (Dorval), Québec                                                                Corporation Limited
1520-1660 – 55th Avenue and     1986                 79,023        90.6%       $4.74       Joslyn Canada Inc., M.B.S. Bearing Service Inc.
  5430 Fairway,
  Montreal (Lachine),
  Québec
1710-1850 – 55th Avenue and     1986                 79,023        65.9%       $5.26       LH Mfg. Inc., Sanio Foods Ltd., Teco-
  5435 François-Cusson,                                                                    Westinghouse Motors (Canada) Inc.
  Montreal (Lachine),
  Québec
1200 – 55 th Avenue,            1987                 68,461       100.0%       $4.50       A.R. Medicom Inc. (13)
  Montreal (Lachine),
  Québec
731-749 Meloche and             1981                 35,567       100.0%       $5.28       99596 Canada Inc. (Fantasia), Services de
  11450 Côte-de-Liesse                                                                     Personnel Unique Inc. (14)
  Road, Montreal (Dorval),
  Québec
679-701 Meloche and             1981                 34,759       100.0%       $5.17       Fabrication D.E.C. Inc., TTX Canada Inc.
  135-137 Lindsay, Montreal
  (Dorval), Québec



                                                                    40
                                                           Leasable                         Net Rent
                                                             Area                             per
                                        Year Built/        (Square        Percentage        Square
            Property                    Renovated            Feet)          Leased          Foot(1)(2)                     Selected Tenants (3)

 703-729 Meloche,                   1980                     31,706           93.0%           $5.37         Chic-Tex Inc., Kufner Textiles Inc.
   Montreal (Dorval), Québec
 Sub-Total (Industrial and
   Mixed-Use)                                             1,358,120           85.9%           $5.10
 Sub-Total (Commercial
   Properties)                                            3,769,741           90.2%           $9.08

 Multi-family Residential
   Property
 Place Alexis Nihon,
   Montreal, Québec(2)              1971                    300,321           97.2%(15)    $972.17(2)
 Total Portfolio                                          4,070,062           90.7%          $9.67


Notes:
(1)
       Weighted average of the net rent of net leases and of the net rent component of gross leases calculated on a per square foot basis of occupied space as
       at September 30, 2002, adjusted to reflect leasing activity where space is leased but not occupied.
(2)
       In the case of the multi-family residential property, sets forth the average monthly gross rent per unit.
(3)
       Sets forth certain generally recognized tenants.
(4)
       While there is a January 2004 target renewal and increase to market rental rates of and with respect to the ISM Information Management lease at the
       Xerox Tower of Place Alexis Nihon, notwithstanding that the tenant has not informed Alexis Nihon of any intention not to renew its lease, there can be
       no assurance that the tenant will renew its lease or that it will renew its lease at the target rental rate. In the event that ISM Information Management
       does not renew its lease, the space subject to such lease will be subject to the AN Head Lease. See “AN Head Lease and AN Income Subsidy — AN
       Head Lease”.
(5)
       An increase to 80.7% as of February 2003 is expected due to recent leasing activity.
(6)
       Lease term commenced October 1, 2002.
(7)
       Sublessee of Tioxide Canada Inc.
(8)
       The consent of the tenant is required in connection with the assignment of its lease to the REIT as lessor.
(9)
       Includes 134,377 square feet owned by The Bay. The building operated by The Bay was constructed by The Bay. Pursuant to its lease, The Bay pays
       annual basic rent for the lease of the land on which the building is situated and the REIT will become the owner of the building at the end of such lease
       at no additional cost.
(10)
       Lease terminates on January 31, 2003.
(11)
       Famous Players Inc. has entered into discussions with Alexis Nihon in order to terminate its lease, subject to certain conditions (including pre-leasing
       activity and the consent of hypothecary creditors), in consideration for a termination payment which remains to be agreed to by the REIT; which
       termination payment will be paid to the REIT upon termination. If Famous Players Inc. terminates its lease pursuant to such arrangement, the REIT
       intends to lease such space to other prospective tenants.
(12)
       Lease commences on December 1, 2002 and tenant has a right of first refusal in connection with the sale of the Property during the term of the lease.
(13)
       Lease commences on November 1, 2002.
(14)
       Sublessee of Gemmar Systems International.
(15)
       Includes the 72 furnished apartments.

            The following is a summary of each of the Properties.

PLACE ALEXIS NIHON

         Place Alexis Nihon situated in Montreal, Québec was acquired by the Alexis Nihon Group in 1983. The property is
a 1,455,782 square feet multi-use office, retail and multi-family residential complex built between 1967 and 1988,
comprising 611,535 square feet of class A office space and 382,900 square feet of retail space, as well as 161,026 square feet
of storage and 300,321 square feet of multi-family residential space. The complex has sheltered parking for 1,235 cars, being
one space per 1,200 square feet of leasable area and including one space per multi-family residential unit. The complex is
composed of a seven level commercial podium, three levels of shopping concourse, three levels of parking, one level of
storage, two office towers of ten and 18 stories, respectively, and a 27 story multi-family residential tower. The land on
which Place Alexis Nihon is located is subject to an emphyteutic lease expiring in 2020. Prior to Closing, this emphyteutic
lease will be terminated. See “Explanatory Notes — Corporate Reorganization”.

        With direct access to Montreal’s underground network, including access to public transit (including Atwater Metro),
Place Alexis Nihon is located in the west sector of the Montreal business district, with exposure on Atwater Avenue,
Ste-Catherine Street and De Maisonneuve Boulevard. Place Alexis Nihon bears civic addresses 1500 Atwater Avenue,
3400-4000 De Maisonneuve Boulevard West and 4045-4049 Ste-Catherine Street West.




                                                                               41
         The following table sets forth the leasable area and number of tenants for Place Alexis Nihon as at September 30,
2002:
                                                                                                       Leasable Area                 Number of         Percentage
                                                  Type of Space                                        (Square Feet)                  Tenants           Leased

                         Office ...............................................................                611,535                    45              92.7%
                         Retail................................................................                382,900                   101              90.5%
                         Multi-family Residential (426 units)..........                                        300,321                   414              97.2%
                         Storage.............................................................                  161,026                    —                 —
                         Total.................................................................              1,455,782                   560              93.0% (1)

                         Note:
                         (1)
                                        Excludes all storage.

Office

         Place Alexis Nihon is one of the most effective business locations from which to access major arteries of the
metropolitan Montreal area. With ready access to the Ville Marie and Decarie expressways, Highway 20 and two bridges to
the south shore of Montreal, Place Alexis Nihon has the advantage of avoiding downtown traffic while remaining in the
Montreal business district. The convenient above-ground integrated parking facility provides direct access from the two
office towers. Tower I, the “Xerox Tower”, originally built in 1971, was reopened in 1988 after having been reconstructed by
Alexis Nihon following a fire in 1986. It has ten rectangular floors of approximately 30,000 square feet each, offering a rare
size opportunity to full floor tenants. Tower II’s 18 functional hexagonal floors of approximately 17,731 square feet each,
located in the prestigious Westmount borough of Montreal, were built by Alexis Nihon in 1986.

         The following table sets forth the major office tenants for Place Alexis Nihon as at September 30, 2002:

                                                                                                                                                               Percentage
                                                                                                                                                                of Office
                                                                                                                                        Leased Area          Space Leasable
                                                              Tenant                                                                   (Square Feet)              Area

         Richter Management Limited ......................................................................                                 83,447               13.6%
         ISM Information Management (a division of IBM Canada Ltd.)(1).......                                                              83,417               13.6%
         Klöckner Stadler Hurter Ltd. .......................................................................                              61,131               10.0%
         Surefire Commerce Inc.................................................................................                            44,102                7.2%
         Canada Maritime Agencies Ltd...................................................................                                   39,990                6.5%
         Xerox Canada Inc. .........................................................................................                       29,618                4.8%
         Total .................................................................................................................          341,705               55.7%

Note:
(1)
         While there is a January 2004 target renewal and increase to market rental rates of and with respect to the ISM Information Management lease at
         the Xerox Tower of Place Alexis Nihon, notwithstanding that the tenant has not informed Alexis Nihon of any intention not to renew its lease,
         there can be no assurance that the tenant will renew its lease or that it will renew its lease at the target rental rate. In the event that ISM
         Information Management does not renew its lease, the space subject to such lease will be subject to the AN Head Lease. See “AN Head Lease
         and AN Income Subsidy — AN Head Lease”.

        In addition to those tenants enumerated above, prominent office tenants also include Accovia Inc., Essentus Inc. and
Sport Maska Inc.

         The following table sets forth, as at September 30, 2002, the lease expiration schedule for Place Alexis Nihon office
space for each of the five years ending December 31, 2002 through 2006:

                                                                                      Office Lease Expiries
                                                                                                                                     Percentage
                                                                                                      Area                         of Office Space       Average Net Rent
                                              Year                                                (Square Feet)                     Leased Area          (per Square Foot)

         2002(1).......................................................................                    3,066                          0.5%                  $7.65
         2003(2).......................................................................                  101,000                         17.9%                  $3.76
         2004..........................................................................                   14,982                          2.7%                 $11.34
         2005 ..........................................................................                  60,552                         10.7%                 $12.89


                                                                                                    42
          2006..........................................................................                 42,108                  7.5%                   $7.66
          Thereafter ................................................................                   343,485                 60.7%                  $13.73

Notes:
(1)
      Sets forth office lease expiries for the three months ending December 31, 2002.
(2)
      Includes 83,417 square feet leased by ISM Information Management, which is covered by the AN Income Subsidy Agreement. See “AN Head Lease
      and AN Income Subsidy”.

         Under the AN Head Lease, the AN Head Lessee has agreed to lease approximately 15,643 square feet of office
space at Place Alexis Nihon.

Retail

         Place Alexis Nihon is situated on Ste-Catherine Street West, Atwater Avenue and De Maisonneuve Boulevard West,
with direct access from public transit (including Atwater Metro) and nearby major expressways and within walking distance
of many recognized academic institutions, hospitals, residential and office towers. Built in 1967, the retail space was
renovated by Alexis Nihon in 1985 and 1986. A skylight provides a view for the three levels of retail space.

         The average net rent per square foot for retail tenants at Place Alexis Nihon, as of September 30, 2002, was $13.71.
For the twelve-month periods ended December 31, 2001 and 2000, Place Alexis Nihon’s reporting retail tenants generated
approximately $375 and $324 in sales per square foot on average, respectively. The average net rental rates for the twelve-
month periods ended December 31, 2001 and 2000 for such tenants were $14.57 and $13.62 per square foot on average,
respectively.

           The following table sets forth the major retail tenants for Place Alexis Nihon as at September 30, 2002:

                                                                                                                                                Percentage
                                                                                                                       Leased Area               of Retail
                                                            Tenant                                                    (Square Feet)         Space Leasable Area

                   Zellers Inc. ...............................................................................           101,133                   26.4%
                   Canadian Tire Corporation ...................................................                           52,688                   13.8%
                   IGA ...........................................................................................         27,134                    7.1%
                   Sports Experts .........................................................................                16,181                    4.2%
                   Total..........................................................................................        197,136                   51.5%

        In addition to the tenants enumerated above, prominent retail tenants also include a Canadian chartered bank,
Concept Énergie Cardio, L’Anjeu, Le Monde des Athlètes, Pharmaprix and Restaurant Nickels.

         The following table sets forth, as at September 30, 2002, the lease expiration schedule for Place Alexis Nihon retail
space for each of the five years ending December 31, 2002 through 2006:

                                                                                     Retail Lease Expiries

                                                                                               Area                  Percentage of Retail     Average Net Rent
                                              Year                                         (Square Feet)             Space Leased Area        (per Square Foot)

                 2002(1) ........................................................                 800                      0.2%                     $40.00
                 2003............................................................              16,710                      4.9%                     $17.49
                 2004............................................................              16,176                      4.7%                     $20.16
                 2005............................................................              23,140                      6.7%                     $21.48
                 2006............................................................              16,976                      4.9%                     $40.56
                 Thereafter..................................................                 270,091                     78.6%                     $12.55

Note:
(1)
     Sets forth retail lease expiries for the three months ending December 31, 2002.

           Under the AN Head Lease, the AN Head Lessee has agreed to lease approximately 7,612 square feet of retail space.




                                                                                                   43
Multi-family Residential

         The 27 story multi-family residential tower was built in 1971. The 300,321 square feet of the tower comprise
426 apartments of which 53 are studio apartments, 27 are alcove apartments, 265 are one-bedroom apartments, 80 are two-
bedroom apartments and one is a three-bedroom apartment, of which 72 are furnished apartments. A recreational floor at the
podium roof-terrace level has a swimming pool, saunas and exercise rooms, as well as an outside sun-bathing terrace, two
tennis courts and a terrace garden. Common laundry facilities are also available for tenants. Each unit may benefit from one
sheltered parking space. As at September 30, 2002, the units were 97.2% leased to 414 tenants (99.97% leased if the 72
furnished apartments are excluded).

         The following is a summary of each of the other Properties comprising the Portfolio. Except as otherwise specified,
all occupancy rates and other figures are as at September 30, 2002.

OFFICE PROPERTIES

         1080 Beaver Hall Hill, Montreal, Québec

         A 316,408 square foot office building situated on 17,131 square feet of land. The building was built in 1968.
Following Alexis Nihon’s acquisition of a 50% interest in the Property in 1999, the building was renovated in 2000, resulting
in an upgrade from class C to class B. A total of approximately $1,200,000 was spent on such renovations to date. It has
approximately 150 indoor parking spaces. The building is 76.9% leased to 40 tenants. In light of the internal demand from
current tenants, Management is confident that the occupancy rate will increase to at least 90% during 2003. Approximately
41,145 square feet of space is subject to the AN Head Lease. Significant tenants include Computer Sciences Canada Inc.,
Lewis Apeldaile and Hanson Inc. and Webhelp Canada Inc. The property is subject to an emphyteutic lease expiring in 2047,
pursuant to which a third party emphyteutic lessor has an option to purchase the lessee’s rights in 2007 at market value less a
discount equal to the lesser of ten percent or $1 million.

         4700 de la Savane, Montreal, Québec

         A 189,384 square foot class B suburban office building situated on 260,310 square feet of land on de la Savane
Street, which links to Jean-Talon Street and the Decarie Expressway. The property offers certain particular features, such as
loading docks, which are not normally found in other office buildings in the area. The building was built in 1988 and, after
having managed the property for a Canadian chartered bank for approximately 18 months, Alexis Nihon purchased the
property in 1997 and initiated a two year, $300,000 renovation program in 1998. The property has 344 outdoor and 58 indoor
parking spaces and is 99.8% leased to 22 tenants. Significant tenants include a Canadian chartered bank, Bombardier Inc.,
eNGENUITY Technologies Inc. and Optimal Robotics Corp. Both the building site and parking area are subject to
emphyteutic leases that expire in 2046 and that may be renewed until 2066.

         455 Fénélon, Montreal (Dorval), Québec

         A 94,848 square foot class A suburban office building situated on 140,853 square feet of land in close proximity to
Dorval International Airport. The building was built in 1990 and acquired by Alexis Nihon in 1998. It has 232 outdoor and
65 basement level indoor parking spaces. It is 95.6% leased to 14 tenants. Approximately 1,516 square feet of space are
subject to the AN Head Lease. Significant tenants include Danzas Canada Ltée GMAC Ltd. and Tetra Technologies Inc.

         9900 Cavendish, Montreal (Saint-Laurent), Québec

         An 82,977 square foot class A suburban office building situated on 123,660 square feet of land located on
Cavendish Boulevard just south of Côte-Vertu Boulevard. The four story building was built in 1987 by Alexis Nihon and has
120 outdoor and 36 indoor parking spaces. It is 96.0% leased to 16 tenants. Approximately 2,264 square feet of space are
subject to the AN Head Lease. Significant tenants include CATO Research Canada Inc., CIBC World Markets Inc., Kronos
Computerized Time Systems, Inc. and Proctor & Gamble Inc.

         9999 Cavendish, Montreal (Saint-Laurent), Québec

          A 50,637 square foot class A suburban office building situated on 129,356 square feet of land. The three story
building was built by Alexis Nihon in 1988 and has 144 outdoor and 35 indoor parking spaces. It is 92.7% leased to three
tenants, including Famic Technologies 2000 Inc. and Speedware Ltd.



                                                              44
         9960-9970 Côte-de-Liesse Road, Montreal (Lachine), Québec

         A 24,844 square foot class B suburban office building situated on 107,046 square feet of land in close proximity to
Dorval International Airport. The building was built by Alexis Nihon in 1983 and has 82 outdoor parking spaces. It is 100%
leased to six tenants, which include Fishery Products International and Ralston Purina Canada Inc.

R ETAIL PROPERTIES

         Centre Laval – 1500 to 1690 Le Corbusier Boulevard, Laval, Québec

          Centre Laval is a 631,762 square foot regional shopping centre located at the intersection of Le Corbusier Boulevard
South and Saint-Martin Boulevard in Laval, and bordered by des Laurentides Autoroute (15), providing primary accessibility
and visibility. It is also located within walking distance of the planned Montmorency Metro station. The building was built in
four phases between 1968 and 1991 and renovated by the Alexis Nihon Group between 1998 and 2001. Over $6 million has
been spent on expansions and renovations since 1999. Situated on 2,073,185 square feet (47.6 acres) of land, it has over
3,200 outdoor parking spaces. The building, which includes 9,792 square feet of ancillary office space, is 97.9% leased. The
retail space is 97.5% leased to 130 tenants, and the office space is 100% leased to seven tenants. Approximately 6,676 square
feet of space are subject to the AN Head Lease. Benefiting from a diversified tenant mix, Centre Laval’s significant tenants
include a Canadian chartered bank, Bouclair, Bureau en Gros, Dollarama, Famous Players Inc., L’Équipeur, Librairie
Champigny, Société des Alcools du Québec, Sports Experts and Wal Mart Canada Inc. Famous Players Inc. has entered into
discussions with Alexis Nihon in order to terminate its lease, subject to certain conditions (including pre-leasing activity and
the consent of hypothecary creditors), in consideration for a termination payment which remains to be agreed to by the REIT;
which termination payment will be paid to the REIT upon termination. If Famous Players Inc. terminates its lease pursuant to
such arrangement, the REIT intends to lease such space to other prospective tenants. The leasable area includes
134,377 square feet owned by The Bay situated on land which is leased from the REIT. The building in which The Bay
operates was constructed by The Bay. Pursuant to its lease, The Bay pays annual basic rent for the lease of the land on which
the building is situated and the REIT will become the owner of the building at the end of such lease at no additional cost. For
the twelve months ended December 31, 2001, reporting retail tenants generated $286.06 of sales per square foot on average.
Approximately 576,349 square feet or approximately 28% of the site area are held under an emphyteutic lease expiring
in 2065.

         777 Ste-Catherine West and 1401 McGill College, Montreal, Québec

         A 26,326 square foot retail complex, including 6,573 square feet of prestige ancillary office space, situated on 6,467
square feet of land. The building, acquired in 1999 by the Alexis Nihon Group, was built circa 1885, renovated in 1990 and
redeveloped in 2000 for retail. A total of approximately $2.8 million has been spent by the Alexis Nihon Group on
renovations and redevelopment since 1999. The Property is located at one of downtown Montreal’s prime intersections, Ste-
Catherine Street West and McGill College Avenue. The building is 100% leased to two tenants. The retail space is leased to
Club Monaco (Caban) and is covered by the AN Income Subsidy Agreement. The office space is leased to a Canadian
chartered bank.

INDUSTRIAL AND MIXED-USE PROPERTIES

         3071-3075 Louis A. Amos and 1922-1996 Onésime-Gagnon, Montreal (Lachine), Québec

        A 164,262 square foot industrial building situated on 462,399 square feet of land which was built in 1987 by Alexis
Nihon. The building is 97.2% leased to six tenants and has 365 outdoor parking spaces. Significant tenants include Gelcore
Company, Les Distributions RVI Ltée, Panasonic Canada Inc. and Telav Inc.

         1615-1805 – 55 th Avenue, Montreal (Dorval), Québec

         A 158,304 square foot industrial building situated on 434,373 square feet of land in close proximity to Dorval
International Airport which was built in 1990 by Alexis Nihon. The building is 61.3% leased to seven tenants and has
252 outdoor parking spaces. Significant tenants include Commercial Plastics (C.P.) Inc., John L. Schultz Limited and Premier
Tech Ltd. Two tenants representing 61,278 square feet vacated their premises upon expiration of their leases in 2002. The
space is in good condition and Management is confident that it will be successful in leasing half of the available space by
March 2003 and the re mainder by December 2003. Approximately 51,012 square feet of space are subject to the AN Head
Lease.



                                                              45
        3339-3403 Griffith, Montreal (Saint-Laurent), Québec

        A 118,114 square foot industrial building, which was built in 1987 by Alexis Nihon, situated on 457,918 square feet
of land near Cavendish Boulevard and the Trans-Canada Highway. The building is 100% leased to 15 tenants and has
222 outdoor parking spaces. Significant tenants include Andritz Ltée, National Research Council of Canada and Tellabs
Transport Group Inc. Approximately 11,452 square feet of space are subject to the AN Head Lease.

        8100 Cavendish, Montreal (Saint-Laurent), Québec

         A 114,596 square foot industrial building situated on 262,913 square feet of land which was built in 1981 by Alexis
Nihon. The building is 100% leased to Dare Foods Ltd. and has 21 outdoor parking spaces, as well as a sizeable shipping and
trucking area.

        1949 Onésime-Gagnon, Montreal (Lachine), Québec

         A 95,795 square foot industrial building situated on 244,192 square feet of land which was built in 1988 by Alexis
Nihon. The building is 57.7% leased to PanGeo Québec Pharma Inc. and has 181 outdoor parking spaces, as well as a
sizeable shipping and trucking area. This class A building is well situated near major arteries. The entire building was
previously leased to a single tenant whose lease expired in May 2002. Management has already successfully leased over half
of this space and believes that the remaining vacant area should be leased by the second quarter of 2003. Approximately
40,568 square feet of space are subject to the AN Head Lease.

        2260 – 32 nd Avenue and 3142-3190 Joseph-Dubreuil, Montreal (Lachine), Québec

         A 92,429 square foot industrial building situated on 216,244 square feet of land which was built in 1983 by Alexis
Nihon. The building is 56.5% leased to two tenants, Berlex Canada Inc. and PHH Vehicle Management Services Inc., and
has 136 outdoor parking spaces. Management expects, during the first quarter of 2003, to lease up all of the current vacant
space, which was vacated on September 30, 2002 as a result of a tenant’s bankruptcy. Approximately 40,173 square feet of
space are subject to the AN Head Lease.

        2102-2150 – 32 nd Avenue, Montreal (Lachine), Québec

        A 77,400 square foot industrial building situated on 203,761 square feet of land which was built in 1984 by Alexis
Nihon. The building is 100% leased to ten tenants and has 109 outdoor parking spaces. Significant tenants include Intertape
Polymer Group Inc., NSK-RHP Canada Inc. and Standard Life Assurance Company.

        2024-2080 – 32 nd Avenue, Montreal (Lachine), Québec

        A 68,320 square foot industrial building situated on 182,983 square feet of land which was built in 1984 by Alexis
Nihon. The building is 87.9% leased to four tenants and has 99 outdoor parking spaces. Significant tenants include Telav Inc.
and Trium Mobilier de Bureau Inc.

        6320-6380 Côte-de-Liesse Road, Montreal (Saint-Laurent), Québec

         A 58,483 square foot industrial building situated on 253,203 square feet of land which was built in 1955 by Alexis
Nihon, renovated in 1981 and expanded twice in the 1990’s by Alexis Nihon. Over $2.0 million was spent on such
renovations and expansion. The building is 100% leased to four tenants and has 104 outdoor parking spaces. Significant
tenants include Dajon Electroménagers Inc., Interfast Inc. and Services de Gestion Nihon Inc. (the Alexis Nihon Group’s
administration head offices).

CO -OWNERSHIP PROPERTIES

         The Co-Ownership Properties are currently co-owned by Alexis Nihon and the Co-Owner and are managed by the
Alexis Nihon Group. Following the Closing, the REIT intends to enter into negotiations with the Co-Owner and Alexis
Nihon with respect to the purchase of Alexis Nihon’s interests in each of the Co-Ownership Properties in accordance with the
terms of the co-ownership agreements with respect to such Properties, which agreements include a right of first refusal in
favour of the Co-Owner in the event that Alexis Nihon wishes to sell its interests in the Co-Ownership Properties pursuant to
an offer made by the REIT, as well as “buy-sell” provisions.



                                                             46
          The Co-Owner has requested from Alexis Nihon information in respect of the potential acquisition by the REIT of
Alexis Nihon’s interests in to the Co-Ownership Properties and has advised Alexis Nihon that any such transaction must be
made in accordance with the provisions of the co-ownership agreements and the management agreements related to the Co-
Ownership Properties. There is no assurance that Alexis Nihon’s interest in the Co-Ownership Properties will be
acquired. If the Co-Ownership Properties are not acquired by the REIT, the REIT’s portfolio will consist of 18
properties comprising 3,659,645 square feet of leasable area (as opposed to 25 properties comprising 4,070,062 square
feet of leasable area). The total amount of Distributable Income for 2003 (after adding back amortization and general and
administrative and trust expenses) attributable to Alexis Nihon’s interests in the Co-Ownership Properties represents only
approximately 1.97% of the Distributable Income for 2003 (after adding back amortization and general and administrative
and trust expenses) attributable to Alexis Nihon’s interests in all of the Properties. If the interests of Alexis Nihon in the Co-
Ownership Properties are not acquired by the REIT, Management believes that it will be able to re-invest the proceeds of the
Offering that would otherwise be used for such acquisition to acquire additional income producing properties.

          The co-ownership agreements between Alexis Nihon and the Co-Owner in respect of the Co-Ownership Properties
include certain restrictions on the ability to finance or refinance the Co-Ownership Properties. In addition, the management
agreements pursuant to which Alexis Nihon manages the Co-Ownership Properties provide that the consent of the Co-Owner
is required in connection with the assignment of such agreements. There can be no assurance that waivers of such
restrictions or consents to such assignments will be obtained or that the management of the Co-Ownership Properties
will be carried on by Alexis Nihon Management (Canada) Inc.

         The Co-Ownership Properties are described below. Except as otherwise specified, all occupancy rates and other
figures are as at September 30, 2002.

         1875 – 55 th Avenue and 22-62 Lindsay, Montreal (Dorval), Québec

         An 81,878 square foot industrial building situated on 216,434 square feet of land in close proximity to Dorval
International Airport which was built in 1988 by Alexis Nihon. The building is 100% leased to eight tenants and has
171 outdoor parking spaces. Significant tenants include Amscan Distributors (Canada) Ltd., Groupe Graham
International Inc. and Omnimedia Corporation Limited. Alexis Nihon sold 50% of its interest in the property to the Co-
Owner in June 1990.

         1520-1660 – 55 th Avenue and 5430 Fairway, Montreal (Lachine), Québec

         A 79,023 square foot industrial building situated on 228,707 square feet of land in close proximity to Dorval
International Airport which was built in 1986 by Alexis Nihon. The building is 90.6% leased to six tenants and has
154 outdoor parking spaces. Significant tenants include Joslyn Canada Inc. and M.B.S. Bearing Service Inc. Alexis Nihon
sold 50% of its interest in the property to the Co-Owner in April 1989.

         1710-1850 – 55 th Avenue and 5435 François Cusson, Montreal (Lachine), Québec

         A 79,023 square foot industrial building situated on 222,781 square feet of land in close proximity to Dorval
International Airport which was built in 1986 by Alexis Nihon. The building is 65.9% leased to seven tenants and has
154 outdoor parking spaces. Significant tenants include LH Mfg. Inc., Sanio Foods Ltd. and Teco-Westinghouse Motors
(Canada) Inc. One tenant occupying 26,917 square feet vacated its premises in March 2002 at the end of its lease.
Management expects to be able to lease this space by March 2003, allowing for sufficient time to market the space and for a
reasonable fixturing period. Alexis Nihon sold 50% of its interest in the property to the Co-Owner in April 1989.

         1200 – 55 th Avenue, Montreal (Lachine), Québec

         A 68,461 square foot industrial building situated on 257,986 square feet of land in close proximity to Dorval
International Airport which was built in 1987 by Alexis Nihon. The building is 100% leased to A.R. Medicom Inc. and has
57 outdoor parking spaces. The building has expansion potential for approximately 35,000 additional square feet. Alexis
Nihon sold 50% of its interest in the property to the Co-Owner in June 1990.

         731-749 Meloche and 11450 Côte-de-Liesse Road, Montreal (Dorval), Québec

         A 35,567 square foot industrial building situated on 92,282 square feet of land in close proximity to Dorval
International Airport which was built in 1979 by Alexis Nihon with a joint venture partner. The building is 100% leased to



                                                               47
six tenants and has 20 outdoor parking spaces. Significant tenants include 99596 Canada Inc. (Fantasia) and Services de
Personnel Unique Inc. Alexis Nihon sold 75% of its interest in the property to the Co-Owner in April 1989.

         679-701 Meloche and 135-137 Lindsay, Montreal (Dorval), Québec

         A 34,759 square foot industrial building situated on 85,500 square feet of land in close proximity to Dorval
International Airport which was built by Alexis Nihon in 1981 with a joint venture partner. The building is 100% leased to
nine tenants and has 20 outdoor parking spaces. Significant tenants include Fabrication D.E.C. Inc. and TTX Canada Inc.
Alexis Nihon sold 75% of its interest in the property to the Co-Owner in April 1989.

         703-729 Meloche, Montreal (Dorval), Québec

         A 31,706 square foot industrial building situated on 75,567 square feet of land in close proximity to Dorval
International Airport which was built by Alexis Nihon in 1980 with a joint venture partner. The building is 93.0% leased to
eleven tenants, including Chic-Tex Inc. and Kufner Textiles Inc. Alexis Nihon sold 75% of its interest in the property to the
Co-Owner in April 1989.

         The AN Income Subsidy also applies to certain renewal and lease-up assumptions with respect to the Co-Ownership
Properties. However, the portion of the AN Income Subsidy relating to the Co-Ownership Properties (being up to a maximum
amount of $172,000 per year for ten years), will only come into effect if, when and to the extent that Alexis Nihon’s interests
in the Co-Ownership Properties are acquired by the REIT after Closing. With respect to the Co-Ownership Properties, the
provisions of the AN Income Subsidy Agreement with respect to certain matters, including tenant improvement costs, leasing
commissions and achievement of lease-up assumptions, shall be similar to those set forth in the AN Head Lease.


                                     AN HEAD LEASE AND AN INCOME SUBSIDY

AN HEAD LEASE

         In order to provide Unitholders with stable, predictable revenues in respect of certain vacant spaces that are expected
to be leased in the near term, the AN Head Lessee will enter into a head lease (the “AN Head Lease”) with the REIT. The AN
Head Lease will be for a term of ten years from Closing and will apply to approximately 218,000 square feet of leasable area
of the Properties at specified market rental rates. The AN Head Lease accounts for the majority of the increase from the
90.7% occupancy rate as at September 30, 2002 and the projected occupancy rate of 94.5% as at the end of the forecast
period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Leasing Data” and
“Financial Forecast”.

         Once a tenant is found for the designated space, the AN Head Lease will be permanently retired in respect of such
space and the AN Head Lessee will no longer have the obligation to pay rent with respect to such space, provided that: (i) the
credit quality of the tenant is similar to that of tenants that are typical for such space or normally acceptable to a landlord for
such space; (ii) the term of the lease is at least five years, unless a shorter term would be typical for such space or would
normally be acceptable to a landlord for such space; and (iii) the tenant has occupied the premises and has commenced rental
payment under its lease.

         The REIT will fund tenant improvements and leasing commissions for the AN Head Lease space up to the amounts
provided in the AN Head Lease, which are consistent with the amounts set out in the Financial Forecast. Any costs in excess
of such amounts will be funded by the AN Head Lessee. If, upon full lease-up of the AN Head Lease space there remain
tenant inducement and leasing commission funds provided for in the AN Head Lease which are unspent, such amounts will
be paid to the AN Head Lessee.

          In the event that the rental revenue achieved on lease-up is less than the prescribed market rental rate, the AN Head
Lessee will pay to the REIT an amount equal to the present value of the income shortfall discounted at a rate of 10% per year
over the term of the accepted lease. The REIT will retain 90% and the AN Head Lessee will retain 10% of the benefit of any
rental rates which are achieved in excess of the prescribed market rental rates. In addition, in connection with a sub-lease
between the AN Head Lessee and a tenant that does not meet the criteria set out above, the AN Head Lessee will retain the
full benefit of all rentals achieved, subject to the AN Head Lessee’s obligation to pay the rent under the AN Head Lease.




                                                                48
AN INCOME SUBSIDY

         In order to provide Unitholders with a current income stream reflecting, as and from Closing: (i) a contractual
increase scheduled for December 2003 in the Club Monaco lease at 777 Ste-Catherine West; (ii) an increase in market rental
rates in 2003 and a January 2004 target renewal and increase of and with respect to the lease of ISM Information
Management (a division of IBM Canada Ltd.) at the Xerox Tower of Place Alexis Nihon; and (iii) certain renewal and lease-
up assumptions with respect to the Co-Ownership Properties, the AN Income Subsidy Provider will provide an income
subsidy (the “AN Income Subsidy”) to the REIT in the aggregate amount of approximately $1.182 million in respect of the
2003 fiscal year. However, the portion of the AN Income Subsidy relating to the Co-Ownership Property (being up to a
maximum amount of $172,000 per year for ten years), will only come into effect if, when and to the extent that Alexis
Nihon’s interests in the Co-Ownership Properties are acquired by the REIT after Closing. With respect to the Co-Ownership
Properties, the provisions of the AN Income Subsidy Agreement with respect to certain matters, including tenant
improvement costs, leasing commissions and achievement of lease-up assumptions, shall be similar to those set forth in the
AN Head Lease. Under the AN Income Subsidy Agreement, amounts are payable on a monthly basis, from Closing until
such time as the scheduled contractual increase with respect to the Club Monaco lease at 777 Ste. Catherine Street West
comes into effect or until such renewals and lease-up assumptions are met with respect to ISM Information Management
lease and the Co-Ownership Properties. In the event that the lease for the space leased by ISM Information Management is
renewed for a period of at least five years and the rent payable by the then occupying tenant(s) is less than the target rental
amount set forth in the AN Income Subsidy for such space, the AN Income Subsidy Provider will then immediately pay to
the REIT an amount equal to the present value of the difference between the target rental amount and the rent payable by the
then occupying tenant(s), discounted at a rate of 10% per year over a five-year period. In the event that the lease for the space
leased by ISM Information Management is not renewed and the space is vacated, then such space shall be added to the space
covered by the AN Head Lease and shall be governed by the terms and conditions of the AN Head Lease.

AN PLEDGE OF ALEXIS NIHON UNITS AND/OR AN CONVERTIBLE D EBENTURE

         As security for the obligations of the AN Head Lessee and the AN Income Subsidy Provider under the AN Head
Lease and the AN Income Subsidy and for certain indemnification obligations of Alexis Nihon under the Purchase
Agreement, at Closing (see “Acquisition of the Portfolio, the Assets and the Management Assets”), the AN Pledgor will
pledge and hypothecate in favour of the REIT (the “AN Pledge”) Alexis Nihon Units and/or all or a portion of the AN
Convertible Debenture having an aggregate value of not less than $10 million. The amount of the AN Pledge will be
recalculated and reduced from time to time, but not less frequently than on a quarterly basis, such that from and after Closing,
the amount of the AN Pledge will be equal to the lesser of: (i) the aggregate value of the initially pledged Units and/or AN
Convertible Debenture at Closing; and (ii) 50% of the maximum financial obligations that the AN Head Lessee or the AN
Income Subsidy Provider may be required to fund for the remainder of the AN Head Lease and the AN Income Subsidy,
assuming no further lease-up activity. It is estimated that, at Closing, the AN Pledge will be sufficient to cover the obligations
of the AN Head Lessee under the AN Head Lease and the AN Income Subsidy Provider under the AN Income Subsidy for a
period of approximately two years (based on the value of the Units at the time of Closing). The AN Pledgor will be permitted
to pledge and hypothecate, or substitute, at any time, an equivalent value of marketable debt securities with a term not greater
than five years bearing a rating issued by an internationally recognized rating agency of at least A(high).

         Unless the AN Head Lessee or the AN Income Subsidy Provider is in default of its obligations under the AN Head
Lease, the AN Income Subsidy or any of the indemnification provisions set forth in the Purchase Agreement, and the REIT is
maintaining enforcement proceedings, the AN Pledgor will be entitled to exercise all rights of a holder of the securities which
are subject to the AN Pledge, including the right to vote such securities and to receive distributions on any Units subject to
the AN Pledge.


                                      THE MONTREAL REAL ESTATE MARKET

General

         The Montreal metropolitan area is home to approximately 3.4 million people, of which approximately 1.8 million
live in the City of Montreal directly. The Montreal metropolitan area ranks as the largest major urban centre within the
Province of Québec (47.3% of the population of the province) and as the second largest in Canada (11.4% of the Canadian
population). It is the economic centre of the Province of Québec and accounts for approximately half of its gross domestic
product.

         The aerospace, biotechnology, information technology, petro-chemical and pharmaceutical industries have made
significant contributions to Montreal’s economic growth and development. Some 2,500 companies in the aerospace,

                                                               49
biopharmaceutical and information technology sectors are established in the Greater Montreal Area. Montreal is currently
among the most important aeronautic centres in the world. Internationally renowned companies such as Bell Helicopter
Textron Inc., Bombardier Inc., CAE Inc., Héroux    -Devtek Inc. and Pratt & Whitney Canada Corp. all have a significant
presence in the Montreal area. Furthermore, companies of the “new economy” as well as more traditional enterprises benefit
from the advantages of a highly qualified workforce fuelled by the presence of four major universities in Montreal.

         Montreal is also an attractive business location due to its port, the leading container port in Canada and in the north-
eastern United States (North Atlantic Route) and its quick access to two international airports, one of which is dedicated to
cargo.

        Montreal’s attractive business environment is confirmed by KPMG’s study “Comparing Business Costs in North
America, Europe and Japan” in which Montreal ranked first in 2002 among large international cities for costs of business
operations.

        Montreal is home to the headquarters of a number of prestigious companies such as Abitibi-Consolidated Inc., Air
Canada, Alcan Inc., BCE Inc., Caisse de dépôt et placement du Québec, Canadian National Railway Company, Domtar Inc.
and SNC-Lavalin Group Inc. and four of the seven major Canadian chartered banks. Moreover, the city hosts a significant
number of international conferences and events and is home to many international organizations, including the International
Air Transportation Association (IATA) and the United Nation’s International Civil Aviation Organization (ICAO).

Montreal’s Real Estate Market – General Overview

        As a direct consequence of the good economic performance of the past few years, Montreal’s real estate market has
recovered from its difficulties encountered in the early 1990s.

         According to Moody’s Investors Service, Inc. (“Moody’s”), Montreal’s real estate market ranked first overall among
Canada’s four largest cities with a score of 81 out of a possible 100 points. In its report entitled “First Half 2002 Assessment
of Canadian Property Markets”, Moody’s assessed the largest Canadian cities in terms of vacancy rate and balance between
demand and supply. Montreal’s strong performance is attributed to a perfect score of 100 for the multi-family sector and
scores of 87 and 84 in the industrial and retail sectors, respectively. Montreal had a score of 64 for the office property sector.
                                               Assessment of Major Canadian Markets by Property Type
                  100




                  90




                  80
          Score




                  70




                  60




                  50




                  40
                        Multifamily              Retail                            Office                   Industrial   Average


                                                              Montreal   Calgary      Toronto   Vancouver


                         Source : Moody’s Investors Service

Office Real Estate Market

         The Montreal metropolitan area office market is comprised of approximately 80 million square feet of office space.
The following table shows the type of space in terms of area and vacancy rate for the Montreal downtown area for the first
half of 2002:




                                                                             50
                                                                                                                              Vacancy Rate
                                                   Area                 Class                Office Inventory                   Q2 2002
                                                                         A                          17,282,235                     8.5%
                                           Downtown Core                 B                          11,004,907                    16.9%
                                                                         C                           4,817,207                    24.4%
                                                                        Total                       33,104,349                    13.6%
                                                                         A                           2,508,264                     0.8%
                                           Downtown East                 B                           2,587,433                     2.9%
                                                                         C                             814,259                    18.8%
                                                                        Total                        5,909,956                     4.2%
                                                                         A                             856,907                     7.4%
                                           Downtown West                 B                             787,822                    11.7%
                                                                         C                             985,305                     4.1%
                                                                        Total                        2,630,035                     7.5%
                                                                         A                              831,141                    0.7%
                                               Old Montreal              B                           3,507,236                    10.9%
                                                                         C                           2,512,963                    12.5%
                                                                        Total                        6,851,340                    10.3%
                                                                         A                           21,478,547                    7.3%
                                           Total Downtown
                                                                         B                          17,887,398                    13.5%
                                                 Area
                                                                         C                           9,131,735                    18.2%
                                                                        Total                       48,497,680                    11.6%
                                           Source: Colliers International

         As shown in the graph below, the vacancy rate in the Montreal metropolitan area climbed above 17% in the early
1990’s and has decreased since 1992 (particularly between 1997 and 2000) as a result of a pause of new supply together with
an increase in demand. From 1993 to 2001, absorption consistently outpaced new construction.

                                                                        Montreal Metropolitan Office Market


                             4,500,000                                                                                                                    18.0%


                             4,000,000                                                                                                                    16.0%


                             3,500,000                                                                                                                    14.0%


                             3,000,000                                                                                                                    12.0%


                             2,500,000                                                                                                                    10.0%
                                                                                                                                                                  Vacancy Rate
               Square Feet




                             2,000,000                                                                                                                    8.0%


                             1,500,000                                                                                                                    6.0%


                             1,000,000                                                                                                                    4.0%


                               500,000                                                                                                                    2.0%


                                     0                                                                                                                    0.0%
                                                                                                                                               2002 YTD
                                            1990



                                                   1991



                                                          1992



                                                                 1993



                                                                          1994



                                                                                     1995



                                                                                             1996



                                                                                                      1997



                                                                                                              1998



                                                                                                                       1999



                                                                                                                                 2000



                                                                                                                                        2001




                              (500,000)                                                                                                                   -2.0%


                             (1,000,000)                                                                                                                  -4.0%

                                                                        New Supply           Absorption        Vacancy Rate

                             Source: Royal LePage Commercial Inc.

        Despite the recent economic slowdown across North America, the vacancy rate for the Montreal metropolitan office
leasing market has remained relatively stable. For the third quarter of 2002, the overall vacancy rate for the Montreal
metropolitan office market stood at 9.78% compared to 9.31% in December 2001. Based on data from CB Richard Ellis,
Class A rental rates in the Montreal metropolitan area increased by 1.5% in 2002 (to date), from an average of $16.10 in the
second half of 2001 to $16.88 as of June 2002. On the other hand, the Montreal metropolitan area Class B rental rates

                                                                                            51
decreased by 3% to $10.60 on average. Going forward, according to Royal LePage Commercial Inc., the demand for direct
and sublet office space is expected to increase. Furthermore, according to CB Richard Ellis, the long-term trend for the
Montreal office market is positive. Public and private buyers of office buildings have recognized this long-term strength, as
evidenced by the fact that over $270 million of office building transactions were registered in the first half of 2002.

Retail Space Market

          According to the International Council of Shopping Centres, in 2001, there were approximately 724 shopping
centres in the Province of Québec representing approximately 67.5 million square feet of leasable area, allowing the Province
of Québec to rank second in Canada both of in terms of numbers of shopping centres and of leasable area. In fact, this retail
space represented approximately 20% of Canada’s total retail space. Moreover, as demonstrated in the graphic below, since
1997, total retail sales in the Province of Québec posted a compounded average growth rate of 4.3%, growing from $55.9
billion to $66.0 billion. During that period, only seven shopping centres were added to inventory.
                                                             Total Retail Sales and Number of Shopping Centres In Québec

                                                750                                                                               120




                                                740                                                                               115
                   Number of Shopping Centres




                                                730                                                                               110




                                                                                                                                        Total Retail Sales
                                                                                       4.3% CAGR




                                                720                                                                               105




                                                710                                                                               100




                                                700                                                                               95
                                                      1997          1998                   1999                     2000   2001

                                                                             Shopping Centres      Total Retail Sales



                  Source: Statistics Canada and the International Council of Shopping Centres

          Furthermore, Montreal’s retail sales grew from $14.6 billion for the first six months of 2001 to $15.6 billion for the
first six months of 2002, a 6.5% increase. Over that same period, Montreal outperformed the Province of Québec and Canada
as a whole, w  hich posted increases of 5.6% and 5.8% respectively. Lower interest rates, lower income taxes and steady
employment have stimulated consumer spending, offsetting the impact of September 11, 2001 and the economic slowdown.
Ste-Catherine Street is one of Canada’s highest traffic and highest profile downtown retail streets. The building located at
777 Ste-Catherine West is in the heart of this area and Place Alexis Nihon is located at the western end of this retail section.

        Also, the vacancy rate in regional shopping centres in the Greater Montreal Area, such as Centre Laval, is low in
comparison with other major Canadian cities. In fact, based on research from Royal LePage Commercial Inc., Montreal’s
vacancy rate in 2002 stood at 2.0%, the lowest level compared to Toronto, Vancouver and Calgary.




                                                                                          52
                                                                 Vacancy Rate for Regional Shopping Centres in Major Canadian Cities

                                 5.0%


                                 4.5%


                                 4.0%


                                 3.5%


                                 3.0%
                  Vacancy Rate




                                 2.5%


                                 2.0%


                                 1.5%


                                 1.0%


                                 0.5%


                                 0.0%
                                                      Montreal                           Calgary                                 Vancouver                       Toronto




                 Source: Royal Lepage Commercial Inc.

Industrial Space Market

         Montreal’s industrial real estate market has benefited from the healthy economic conditions in the Montreal region
since the late 1990’s. Declining unemployment rates and robust economic activity over the past few years has favourably
reduced Montreal’s industrial vacancy rate.

         Although the supply of industrial space increased by more than 18 million square feet between 1992 and 2001, the
vacancy rate sharply declined from 12.0% in 1992 to 4.7% at mid-year 2002 due to a high absorption rate. Colliers
International expects that the vacancy rate will be 5.5% at year end 2002, with a slightly negative absorption.


                                                  Net New Supply, Absorption and Vacancy Rate in the Montreal Industrial Space Market
                                 14,000,000                                                                                                                                   14.0%




                                 12,000,000                                                                                                                                   12.0%




                                 10,000,000                                                                                                                                   10.0%




                                  8,000,000                                                                                                                                   8.0%
                  Square Feet




                                                                                                                                                                                      Vacancy Rate




                                  6,000,000                                                                                                                                   6.0%




                                  4,000,000                                                                                                                                   4.0%




                                  2,000,000                                                                                                                                   2.0%




                                          0                                                                                                                                   0.0%
                                               1992




                                                                 1993




                                                                         1994




                                                                                  1995




                                                                                               1996




                                                                                                           1997




                                                                                                                          1998




                                                                                                                                       1999




                                                                                                                                                   2000




                                                                                                                                                          2001




                                                                                                                                                                     2002*




                                 (2,000,000)                                                                                                                                  -2.0%

                                                                                                                                                                 * Forecast

                                 (4,000,000)                                                                                                                                  -4.0%


                                                                                    Net New Supply           Absorption             Vacancy Rate



                                 Source : Colliers International




                                                                                                      53
        Furthermore, the current vacancy rate has not resulted in a softening of the average rental rate, which remains at
approximately $5.19 per square foot, the same as in 2001.

                                        Average Net Rental Rates Per Square Foot (10% Office)
                                                    Small                       Mid-Size                   Large
       Region                                < 15,000 Square Feet       15,000-40,000 Square Feet   > 40,000 Square Feet
       West Island                                  $5.50                        $5.25                    $4.75
       Central                                      $5.75                        $5.50                    $5.00
       East                                         $5.25                        $5.00                    $4.50
       Laval                                        $5.25                        $5.00                    $4.50
       South Shore                                  $5.00                        $4.75                    $4.50
       Source: Colliers International


         According to Colliers International, quality industrial spaces with prime exposure, good shipping and clearances
continue to be in high demand on the island of Montreal. The most active market is Montreal’s West Island sector, which
offers excellent access to major transportation arteries and Dorval International Airport. The majority of Alexis Nihon’s
industrial portfolio is clustered in proximity to Dorval International Airport.

         Furthermore, according to CB Richard Ellis, the long-term trend for the Montreal industrial market is positive.
World-class excellence in aerospace, biotechnology, petro-chemicals and pharmaceuticals are expected to continue to attract
foreign investment, as is Montreal’s strong local economic development. This long-term strength has been recognized by
buyers, as approximately $231 million of industrial real estate was purchased in the first half of 2002.

Multi-Family Residential Space Market

        With the vacancy rate at a historical low point, unoccupied multi-family residential housing units in the Greater
Montreal Area are increasingly scarce. The vacancy rate now stands at 0.6% for Montreal and at 0.5% for Laval.
Furthermore, the multi-family residential market remains tight regardless of building size and rental range.

         This phenomenon is mainly due to the fact that since 1999, the multi-family residential market has been facing
strong demand. High youth employment and increasing net migration levels in the Greater Montreal Area have supported the
demand for multi-family residential housing. With few new units arriving on the market, the strong demand contributed to a
rapid contraction of the vacancy rate. Furthermore, the construction of rental buildings is expected to remain weak and rental
housing construction is expected to be mainly concentrated, as it has been the case for a few years already, in the retirement
home and luxury apartment niches.

        Concerning rental increases, the limited choice reflected by the low vacancy rates has incited landlords to raise rents.
Average rent increased by 4.2% in 2001 compared to 1.2% in 2000.

         In the future, the multi-family residential market is expected to remain very tight. It is expected that the vacancy rate
measured in October 2002 will be virtually identical (0.6%) to that recorded in 2001. In 2003, with the new supply of
housing, the vacancy rate is expected to ease slightly (1.0%). Canada Mortgage and Housing Corporation expects rental
increases comparable to those registered in 2001. It is anticipated that average rents will rise by 4.0% in 2002 and by another
3.5% in 2003.


                                        ENVIRONMENTAL AND ENGINEERING

         Independent environmental consultants have performed Phase I environmental site assessments (also known as
environmental audits) on each of the Properties. These Phase I environmental site assessments did not reveal any m   aterial
environmental concerns. Substantially all of these Phase I environmental site assessments were performed by Inspec-Sol Inc.,
Jacques Whitford Environment Ltd. and Spectrum Laboratory Associates Inc. Phase II environmental site assessments have
also been performed on Place Alexis Nihon and Centre Laval. These Phase II environmental site assessments did not reveal
any environmental concerns which could materially adversely affect the REIT, its financial condition or its operations and
Management estimates that the cost of any environmental remedial work required (as per Phase I and Phase II environmental
assessments) with respect to the Properties are not expected to exceed $1.0 million. The reasonable cost of such remedial
work shall be borne by Alexis Nihon. The Purchase Agreement will contain environmental representations, warranties and
indemnities customary in arm’s length transactions of this nature. See “Acquisition of the Portfolio, the Assets and the
Management Assets — Purchase Agreement”.


                                                                 54
          Groupe Stavibel Inc., Inspec-Sol Inc., Spectrum Laboratory Associates Inc. and Jacques Whitford Environment Ltd.,
independent firms of professional engineers, have been retained to carry out engineering inspections of each of the Properties.
The results of the engineering inspections indicate that, overall, the Properties have been well maintained and are generally in
good condition. Based upon their inspections, it is estimated that the REIT could spend up to $15.3 million for ongoing major
repairs and the replacement of capital items in the next five years. The REIT agrees that the work identified in the
engineering reports will be required to be completed and intends to complete such repairs, maintenance and replacement of
capital items as part of its ongoing maintenance program and as circumstances so require.


                                   INDEPENDENT APPRAISAL OF THE VALUE OF THE PROPERTIES

          Altus Group, Groupe Axima Gagnon/Goudreau, Royal LePage Advisors Inc., Roy Sanche Gold & Ass. and
Valiquette, Martin, Montmarquet & Ass. Inc. have been retained to provide independent appraisals of the market value of the
Properties. The appraisals were prepared in conformity with the Code of Professional Ethics and the Uniform Standards of
Professional Appraisal Practice of the Appraisal Institute of Canada and of the Ordre des Évaluateurs du Québec. The
Appraisal Institute of Canada defines market value as “the most probable price in terms of money which a property should
bring in a competitive and open market under all conditions requisite to a fair sale, between a willing buyer and a willing
seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimuli”. Altus Group was
retained to estimate the market value of the Properties. In connection therewith, Altus Group worked closely in conjunction
with the other appraisers, reviewed the parameters retained in their appraisal process and agreed on their final values. The
Appraiser consolidated the appraisals of all of the Properties in order to present a single report and their conclusions represent
the market values of the individual Properties as of the reference date.

         In its appraisal dated as of October 1, 2002, the Appraiser determined the approximate market value of each of the
Properties and determined the aggregate approximate market value and estimated replacement cost of the Properties as at
October 1, 2002, to be as follows:

                                                                                                                                 Estimated
                                                                                                            Value Range       Replacement Cost
                                               Properties                                                      (000s)              (000s)
           Office Properties (1) ............................................................           $154,228 / $162,564        $257,992
                                       (2)
           Retail Properties .............................................................              $128,327 / $135,264        $154,088
           Industrial and Mixed-Use Properties..............................                             $53,607 / $56,505         $102,194
           Multi-family Residential Property(3) ..............................                           $33,838 / $35,667          $42,433
           Total.....................................................................................   $370,000 / $390,000        $556,707

Notes:
(1)
     Includes an allocation of 53% of the value of Place Alexis Nihon.
(2)
     Includes an allocation of 25% of the value of Place Alexis Nihon.
(3)
     Includes an allocation of 22% of the value of Place Alexis Nihon.

        The Properties have been appraised to have an aggregate market value of $385 million within a price range of
$370 million to $390 million.

         The foregoing estimated values were determined by using an income approach to value, which utilized either a
direct capitalization rate method or a discounted cash flow method supported by a market data comparison approach. The
Appraiser gave appropriate consideration to a forecast of income for each Property in terms of market rental rates, growth
levels, vacancy rates, tenant rollovers, future tenant allowances and lease termination rights of significant tenants, options to
purchase, emphyteutic leases (where applicable), the AN Head Lease and the AN Income Subsidy. The Appraiser visited the
Properties to assess locational and physical characteristics. Appropriate valuation parameters were used, giving due regard to
an assessment of the income characteristics, current market conditions as well as prevailing economic and industry
information.

         In determining the approximate market value of the Properties, the Appraiser relied on operating and financial data
provided by or on behalf of Alexis Nihon, including detailed rent rolls and projected operating results. Based on its review of
the Properties and other relevant factors, the Appraiser considered such data to be reasonable and supportable.




                                                                                                   55
         In determining the approximate replacement cost of the Properties, the Appraiser relied on property information
provided by or on behalf of Alexis Nihon in conjunction with replacement cost indices. Based on its review of the Properties
and other relevant factors, the Appraiser considered such data to be reasonable and supportable.

         In appraising the Properties, the Appraiser assumed that title to the Properties is good and marketable and did not
take into account engineering, environmental, zoning, planning or related issues.

         Caution should be exercised in the evaluation and use of appraisal results. An appraisal is an estimate of existing
market value, it is not a precise measure of value but is based on a subjective comparison of related activity taking place in
the real estate market. The appraisals are based on various assumptions of future expectations and while the Appraiser’s
forecasts of income is considered to be reasonable at the current time, some of the assumptions may not materialize or may
differ materially fro m actual experience in the future.

         A publicly traded real estate investment trust will not necessarily trade at values determined solely by reference to
the underlying value of its real estate assets. Accordingly, the Units may trade at a premium or a discount to values implied
by the appraisal.


                MANAGEMENT OF THE PROPERTIES, EMPLOYEE S ERVICES AGREEMENTS
                               AND DEVELOPMENT AGREEMENT

MANAGEMENT OF THE PROPERTIES

          The REIT, directly and through the Employee Services Agreements, will administer the day-to-day operations of the
portfolio of properties which it owns directly and which will be operated exclusively for the benefit of the REIT. Alexis
Nihon Management (Canada) Inc. will manage the properties co-owned by the REIT and owned by subsidiaries or other
entities which are affiliates of the REIT. Alexis Nihon Management (Canada) Inc. will also provide a full range of services,
including property and facilities management, leasing, development, redevelopment, construction management, and
administrative and legal services to properties co-owned by the REIT and to third parties with respect to properties in which
the REIT does not have any interest. In such cases, Alexis Nihon Management (Canada) Inc. will enter into management
agreements with and receive management fees from third parties. In each case, Alexis Nihon Management (Canada) Inc. will
be acting as principal for its own account. Certain of the management agreements with respect to properties co-owned by
Alexis Nihon or with respect to properties wholly-owned by third parties which are managed by Alexis Nihon require the
consent of the co-owners or owners of such properties in order to transfer the management of such properties to Alexis Nihon
Management (Canada) Inc. There is no assurance that such consents will be obtained.

EMPLOYEE S ERVICES AGREEMENTS

        Employees of Alexis Nihon related to its property and asset management activities as well as the Management
Assets will be transferred to Alexis Nihon Management (Canada) Inc. and the REIT, respectively, as of January 1, 2003. See
“ — Transitional Employee Services Agreement”.

         The REIT, Alexis Nihon Management (Canada) Inc. and the Development Company will enter into employee
services agreements (the “Employee Services Agreements”) pursuant to which Alexis Nihon Management (Canada) Inc. will
provide employee services to each of the REIT and the Development Company, with the REIT having a first priority right to
such employee services with respect to the property and asset management of Properties owned by the REIT. Pursuant to the
Employee Services Agreements, each of the REIT and the Development Company will reimburse Alexis Nihon Management
(Canada) Inc. for their share of all costs and expenses, including salaries of employees, incurred by Alexis Nihon
Management (Canada) Inc. and their share in the carrying out by Alexis Nihon (Management) Canada Inc. of its obligations
under the Employee Services Agreements, as well as an annual fee, which in each case will be reviewable on an annual basis.

          The Employee Services Agreements between the REIT and Alexis Nihon Management (Canada) Inc. will have an
initial term of ten years and will be renewable for subsequent one-year terms, unless terminated earlier in accordance with
their respective terms. In the case of the Employee Services Agreement between the Development Company and Alexis
Nihon Management (Canada) Inc., the agreement will have an initial term of five years and will be automatically renewed for
further one year terms, unless cancelled by either party upon six-months’ written notice.




                                                             56
TRANSITIONAL EMPLOYEE S ERVICES AGREEMENT

         Concurrently with the execution of the Purchase Agreement, Alexis Nihon, the REIT and Alexis Nihon
Management (Canada) Inc. will enter into a transitional employee services agreement (the “Transitional Employee Services
Agreement”) pursuant to which the relevant Alexis Nihon entities will continue as the employer of all employees associated
with the ownership and management of the REIT’s properties and assets as well as any Acquiring Entity until December 31,
2002, at the sole cost of Alexis Nihon Management (Canada) Inc. and the REIT. These employees will be transferred to
Alexis Nihon Management (Canada) Inc. and the REIT on January 1, 2003.

D EVELOPMENT AGREEMENT

         A portion of the REIT’s ex  ternal growth is expected to be achieved through the acquisition of newly developed
properties. Accordingly, on Closing the REIT will enter into the Development Agreement with the Development Company,
Alexis Nihon, Robert A. Nihon and Paul J. Massicotte pursuant to which the REIT will be granted certain rights with respect
to properties developed by the Developers or by a Developer Entity. The Development Agreement will apply to all
development projects undertaken by the Developers in Canada. However, in the case where members of the Nihon Family
have an interest in a Developer Entity, the Development Agreement will only apply to the interests of the Nihon Family in
development projects in the Province of Québec.

         If the REIT avails itself of its rights under the Development Agreement, it will be able to avoid the obstacles
associated with property development, including locating and buying attractive development sites, paying carrying costs of
land and development, securing construction financing, obtaining development approvals, marketing and leasing and building
in advance of and during construction and earning no return during the construction period.

         The Development Agreement will have an initial term of five years and will be automatically renewed annually
thereafter for further one year terms unless cancelled by either party upon six months’ written notice.

          Under the Development Agreement, before seeking mezzanine financing from any third party, the Developers and
Developer Entities must first offer the REIT the opportunity to provide mezzanine financing for the Developer’s interest in
the projected equity component of all development properties to assist the Developers in their development activities. The
Developers will provide the REIT with the financial and other information necessary to enable it to make an informed
decision as to whether to offer to provide mezzanine financing. If, in relation to a particular development property: (i) the
REIT has made an offer to advance mezzanine financing on market terms, whether such offer is accepted by the Developers
or not; or (ii) the REIT was not provided the opportunity to make an offer to provide mezzanine financing, then the REIT will
have an option, in relation to such development property, to purchase such property exercisable during a 90-day period (the
“Option Period”) commencing on the earlier of the date that such development property is 90% occupied and the date which
is 18 months following substantial completion of the construction. In these circumstances, the purchase price payable under
such option will be equal to the greater of: (a) the development cost of the property; and (b) 95% of the appraised fair market
value of the development property as of the first day of the Option Period. Such option will be subject to the prior rights of
any lender, tenant or co-owner. In addition, a Developer or a Developer Entity may, subject to the prior consent of the REIT,
grant an option or right to purchase a development property to a tenant after the Developer shall have made a request for
mezzanine financing, and, in such case, the REIT will have the option to: (i) terminate any mezzanine financing provided by
the REIT and to require the Developer or the Developer Entity to repay the mezzanine loan to the REIT under such financing
upon 120 days prior written notice to the Developer, in which case the REIT shall forfeit its option to purchase the
development property; or (ii) maintain its option to purchase the development property subject to the option or right to
purchase granted to such tenant, in which case the REIT will be compensated by the Developer or Developer Entity for the
foregone purchase price discount set forth in (b) above.

          Each mezzanine loan will be repayable prior to maturity upon the REIT’s purchase of the development property or
the sale of the development property to a third party if the REIT should not exercise its right to purchase the development
property. The Developers will issue a promissory note evidencing each mezzanine loan and will use reasonable commercial
efforts to secure each such loan by a hypothec or mortgage on the applicable development property (failing which they will
provide for a negative pledge to not further encumber the applicable development property) which will be subordinated to
construction financing and any security in respect thereof. Each mezzanine loan will provide for full recourse to the particular
Developers plus any security, pledge or other covenant which may be mutually agreed upon. Construction financing secured
by the Developers for any development property that the REIT has financed will not be cross-collateralized to other debt of
the particular Developers . The debt secured by a development property may be assumed by the REIT upon its purchase only
to the extent that it will not cause the REIT to exceed its debt covenants or to breach its investment restrictions. See
“Investment Guidelines and Operating Policies — Operating Policies”.


                                                              57
         The proceeds of a mezzanine loan may be used to pay for any reasonable cost incurred by the Developers or the
Developer Entity in connection with the acquisition, pre-development, construction, development, leasing or operation of a
development property, including reimbursement to the Developers or the Developer Entity, as the case may be, for funds
invested in a development property up to the date of the mezzanine loan. At the REIT’s option, the proceeds of any
mezzanine loan will be held in an escrow account and advanced as costs are incurred. Until the sale of a development
property to the REIT or to a third party, the particular Developers or Developer Entity will bear all costs incurred in
connection with the development property.

          If the REIT does not make an offer to advance a mezzanine loan or does not make an offer to advance a mezzanine
loan on market terms, the REIT will have, subject to any prior rights of a lender, tenant or co-owner, a right of first offer to
purchase the development property exercisable within ten business days of the receipt of a notice from the Developers that
the Developers intend to sell the property in question, together with all relevant information. In the event that the Developers
do not accept the REIT’s offer to purchase the development property and that the Developers receive a bona fide offer from a
third party to purchase the development property on terms that are more favourable than those contained in the REIT’s offer,
taken as a whole, and which the Developers wish to accept, the Developers will have the right to sell the development
property. In the event that the Developers do not accept the REIT’s offer to purchase the development property and that the
Developers receive a bona fide offer from a third party to purchase the development property on terms that are equal to or
less favourable than those contained in the REIT’s offer, taken as a whole, and which the Developers wish to accept, the
REIT will then have a right of first refusal to purchase the development property on the same terms and conditions as those
contained in the third party offer. If the REIT has not yet had an opportunity to make an offer to provide mezzanine
financing, the REIT will have a right of first refusal in the event that the Developers receive a bona fide third party offer to
purchase a property which the Developers wish to accept, in which case the Developers must immediately provide the REIT
with a copy of such third party offer. The REIT will then have ten business days to exercise its right of first refusal from
receipt of any such third party offer, together with all relevant information.

         So long as the Developers have first provided the REIT with the opportunity to make an offer to provide mezzanine
financing, the Developers will be entitled to secure mezzanine financing from a third party lender on terms which are more
advantageous to the Developers than those offered by the REIT.

         Should the REIT not exercise its option to purchase a development property, the Developers will have the right to
deal with such property in their discretion or to sell it to a third party purchaser, notwithstanding the provisions of the Non-
Competition Agreement. If the Development Agreement is terminated, the REIT will continue to have the option and rights
described above relating to the then existing development properties for a period of 24 months from the date of such
termination.

         Notwithstanding the foregoing, where a Developer Entity is owned, directly or indirectly, only in part by one or
more Developers together with a third party or parties, the rights of the REIT described above shall only apply in respect of
the portion of the development property which is equal to the percentage interest in the Developer Entity held by the
Developer or Developers, unless such third party or parties otherwise agree.

       With respect to the property currently under development by the Alexis Nihon Group in the Hull-Gatineau area, the
REIT has decided not to offer mezzanine financing. As a result, the REIT will have a right of first offer and the
accompanying rights described above in respect of such project.

          Where the REIT has previously refused, or is deemed to have refused, to make an investment in a property offered
to it in accordance with the terms of the Non-Competition Agreement, the said property shall not be subject to the provis ions
of the Development Agreement.


                                       ACQUISITION OF THE PORTFOLIO,
                                   THE ASSETS AND THE MANAGEMENT ASSETS

GENERAL

         At or prior to the Closing, the REIT and the Acquiring Entities, on the one hand, and Alexis Nihon, on the other
hand, will enter into the Purchase Agreement, pursuant to which the REIT will acquire the Portfolio and the Assets and the
REIT and Alexis Nihon Management (Canada) Inc. will acquire the Management Assets. As soon as practicable after
Closing and in any event no later than one year from Closing, the entities comprising the Alexis Nihon Group will change
their names in order to remove all reference to the trade name “Alexis Nihon” and will cease to use all related trademarks.


                                                              58
PURCHASE AGREEMENT

         Pursuant to the Purchase Agreement, the REIT and the Acquiring Entities will acquire the Purchased Assets from
Alexis Nihon for a purchase price of $370.3 million, payable as to $75.8 million in cash, as to $84 million by the issuance
and/or transfer to Alexis Nihon of 8.4 million Alexis Nihon Units at a price per Alexis Nihon Unit equal to the price per
Offered Unit to the public pursuant to this Offering, as to $203.9 million by the assumption of the Assumed Hypothecs and as
to $12.15 million by the issuance to Alexis Nihon of the AN Convertible Debenture, subject to normal adjustments.

         The REIT will use a portion of net proceeds of the Offered Units sold pursuant to the Offering to, directly or
indirectly, satisfy the cash portion of the purchase price for the Purchased Assets.

        Concurrent with the Property Closing and the Closing, Alexis Nihon will:

        (i)      make a payment in the aggregate amount of approximately $15 million to three secured creditors in respect
                 of amounts owing under the outstanding first ranking hypothec on Place Alexis Nihon; and make payments
                 in the aggregate amount of $53.1 million payable as to $8.5 million in cash and as to $44.6 million by
                 delivery of 4,460,000 Alexis Nihon Units to members of the Nihon Family and members of the Massicotte
                 Family to discharge an outstanding second ranking hypothec on Place Alexis Nihon (collectively, the
                 “Place Alexis Nihon Closing”).

        (ii)     acquire the 45% interest in Centre Laval held by a co-owner of the Property for an aggregate amount of
                 approximately $2.8 million to be paid to such co-owner and make a payment in the amount of
                 approximately US$14.3 million to a hypothecary creditor to discharge a second ranking hypothec on Centre
                 Laval (collectively, the “Centre Laval Closing”);

        (iii)    acquire the 50% interest in 1080 Beaver Hall Hill held by a co-owner of the Property for an aggregate
                 amount of approximately $3.6 million to be paid to such co-owner (the “Beaver Hall Hill Closing”);

        (iv)     acquire the 20.2% interest in 4700 de la Savane held by two indirect co-owners of the Property for an
                 aggregate amount of approximately $0.4 million to be paid to such indirect co-owners (the “De La Savane
                 Closing”); and

        (v)      make a payment of approximately $0.5 million to a secured creditor in respect of amounts owing under the
                 outstanding first ranking hypothec on 9999 Cavendish (the “Cavendish Closing”).

          The Purchase Agreement will provide for the transfer to the REIT of the employees of Alexis Nihon involved only
in the management of the properties forming part of the Portfolio which are wholly and directly owned by the REIT and
operated exclusively for the benefit of the REIT. The Purchase Agreement will also provide for the transfer of the employees
of Alexis Nihon involved in the management of properties to be co-owned by the REIT and properties wholly-owned by third
parties (including those acquired by a subsidiary or affiliate of the REIT) to Alexis Nihon Management (Canada) Inc. See
“Management of the Properties, Employee Services Agreements and Development Agreement — Transitional Employee
Services Agreement”. The Purchase Agreement will contain indemnities in favour of the REIT relating to such employees’
claims and other matters arising prior to or after the Property Closing.

         The Closing and the Property Closing are conditional upon one another. The Purchase Agreement will also contain
representations, warranties and indemnities customary in arm’s length transactions of this nature, including in respect of
environmental matters, certain information with respect to the Properties, hypothecation and encumbrance of the Properties
and certain income tax related matters. Except in certain cases, such representations and warranties will survive for 18
months following the Property Closing. In the event that any amount is payable to the REIT under the various
indemnification provisions set forth in the Purchase Agreement, the REIT shall be entitled to set off any amount so owing
against any amounts of interest or principal payable in connection with the AN Convertible Debenture. See “AN Convertible
Debenture”. In addition, Alexis Nihon will pledge Alexis Nihon Units and/or all or a portion of the AN Convertible
Debenture as security for any amounts owing under the indemnities set forth in the Purchase Agreement. See “AN Head
Lease and AN Income Subsidy — AN Pledge of Alexis Nihon Units and/or AN Convertible Debenture”.

         Each of the Closing and the Property Closing is conditional upon each of the Place Alexis Nihon Closing, the Centre
Laval Closing, the Beaver Hall Hill Closing, the De La Savane Closing and the Cavendish Closing and each such closing is
conditional upon each of the Property Closing and the Closing. Following the Place Alexis Nihon Closing, the 1080 Beaver



                                                            59
Hall Hill Closing and the Property Closing, and concurrent with the Closing, certain material adverse encumbrances and prior
notices of default with respect to Place Alexis Nihon and 1080 Beaver Hall Hill will be discharged.

          In connection with the Property Closing, the hypothecary creditors of Alexis Nihon in respect of the Properties have
consented or will be required to consent to the transfer of the Properties on which they have security to the REIT, but have
not and will not pass upon the merits of this Offering in any respect, including as to the quality of an investment in Units or
the value of any of the Properties and none of the statements in this prospectus has been made by or on behalf of or is
attributable to, any such creditors. In addition, the Independent Trustees have acted and will act in their capacity as
Independent Trustees of the REIT and not as representatives of their employers and their employers may not, in any
circumstances, be held responsible for any act or omission of the Independent Trustees, acting as Trustees of the REIT.

         Thomas J. Leathong, one of the Trustees, is the Director, Commercial Mortgages, Underwriting/Asset Management
with Clarica Life Insurance Company, a hypothecary creditor of Place Alexis Nihon. Mr. Leathong will cease to occupy these
positions effective December 27, 2002. Until such time, Mr. Leathong will abstain from all matters relating to the transfer of
Place Alexis Nihon to the REIT or to the management of Place Alexis Nihon. Richard Guay, one of the Trustees, is Senior
Executive Vice President, Retail and Commercial Financial Services, of a Canadian chartered bank which is a hypothecary
creditor of the Properties located at 777 Ste-Catherine West and 1401 McGill College, 6320-6380 Côte-de-Liesse Road and
455 Fénélon. Mr. Guay will abstain from all matters relating to the transfer of such Properties to the REIT or to the
management of such Properties.


                                           AN CONVERTIBLE DEBENTURE

          On Closing, as part of the purchase price for the Purchased Assets, the REIT will issue to Alexis Nihon, pursuant to
a trust indenture (the “Trust Indenture”), $12.15 million principal amount of subordinated unsecured convertible debentures
(the “AN Convertible Debenture”) at par. The AN Convertible Debenture will bear interest at a rate of 6.5% per annum,
payable quarterly and will mature on December 31, 2005. Provided that there is not a then continuing event of default under
the AN Convertible Debenture and subject to the limitation on the ownership of Units by persons who are non-residents of
Canada (See “Contract of Trust and Description of Units — Limitation on Non-Resident Ownership”), the REIT may elect at
its option to satisfy, in whole or in part, any obligation to pay interest on any interest payment date, and/or the principal
amount on maturity or the redemption date, as well as in the case of a holder requiring the REIT to repurchase all or part of
its AN Convertible Debenture (as described below), by delivering Units of the REIT equal in value, at the date of payment to
the amount due to Alexis Nihon. In order to determine the value of a Unit for such purposes, the value of the Units on the
date of payment shall be deemed to be equal to the volume weighted average trading price (calculated by dividing the total
value by the total volume of Units traded for the relevant period) of the Units on The Toronto Stock Exchange during the 20
consecutive trading days ending five trading days preceding the date of payment. The payment of the principal of, and
interest on, the AN Convertible Debenture will be subordinated in right of payment to the prior payment in full of all Senior
Indebtedness of the REIT. Subject to the limitation on the ownership of Units by persons who are non-resident of Canada, the
AN Convertible Debenture will be convertible, in whole or in part, at the holder’s option, at any time, into 8.695 Units per
$100 of face value (in the aggregate, 1      .057 million Units), subject to usual anti-dilution adjustments, representing a
conversion price of $11.50 per Unit. However, the AN Convertible Debenture may not be converted in whole or in part, no
payment of interest or principal (whether upon maturity or redemption) and no Units may be issued in connection with the
retraction of all or part of the AN Convertible Debenture upon a change of control if any such issuance of Units would result
in the Nihon/Massicotte Group holding, in the aggregate, more than 49.9% of the issued and outstanding Units, after giving
effect to such proposed issuance of Units but without giving effect to the conversion of any other part of the AN Convertible
Debenture or to the exercise of any options, warrants, securities or instruments convertible into or pursuant to which a person
may be issued Units by, or acquire Units from, the REIT.

         The AN Convertible Debenture may not be redeemed by the REIT prior to December 31, 2004. On or after
January 1, 2005, the AN Convertible Debenture may be redeemed by the REIT in whole or in part at par plus accrued and
unpaid interest provided that the volume weighted average trading price (calculated by dividing the total value by the total
volume of Units traded for the relevant period) of the Units on The Toronto Stock Exchange during the 20 consecutive
trading days ending five trading days preceding the date on which the notice of redemption is given is not less than $11.50.

         Upon the occurrence of a change of control involving the acquisition of voting control or direction over 66 2 /3 % or
more of the outstanding Units by any person or group of persons acting jointly or in concert, Alexis Nihon has the right to
require the REIT to repurchase its AN Convertible Debenture, in whole or in part, at a price equal to 101% of the aggregate
principal amount of the AN Convertible Debenture, plus accrued and unpaid interest.




                                                              60
         However, no Units may be issued pursuant to the conversion of all or part of the AN Convertible Debenture, no
payment of interest or principal (whether upon maturity or redemption) may be made by the issuance of Units and no Units
may be issued in connection with the retraction of all or part of the AN Convertible Debenture upon a change of control if
any such issuance of Units would result in persons who are non-residents of Canada for the purpose of the Tax Act holding
more than 49% of issued and outstanding Units. See “Contract of Trust and Description of Units — Limitation on Non-
Resident Ownership”.

         The Trust Indenture will provide for events of default including: (i) any failure to pay principal when due or failure
to pay interest when due (subject to a 15-day cure period); (ii) any failure by the REIT to satisfy its obligations upon the
exercise of conversion rights (subject to a 15-day cure period); (iii) a default by the REIT in respect of any covenant or
condition of the AN Convertible Debenture (subject to a 30-day cure period); and (iv) the REIT becoming insolvent or
bankrupt, or consenting to the institution of insolvency or bankruptcy proceedings. The AN Convertible Debenture will not
contain any financial covenants or restrictions on distributions to Unitholders, the incurrence or assumption of additional
indebtedness by the REIT or the issuance or repurchase of securities by the REIT. The Trust Indenture will provide that the
REIT may set off any amount owing to a holder of the AN Convertible Debenture against any amount owing to the REIT
under the various indemnification provisions set forth in the Purchase Agreement. See “Acquisition of the Portfolio, the
Assets and the Management Assets”.

         The AN Convertible Debenture is considered an equity instrument for accounting purposes and, as such, will be
reflected on the balance sheet of the REIT as a component of Unitholders’ equity. Therefore, the interest related to the AN
Convertible Debenture will be chargeable directly to Unitholders’ equity.

        This prospectus also qualifies the distribution of the AN Convertible Debenture to Alexis Nihon. The AN
Convertible Debenture is not being underwritten by the Underwriters and no underwriting fee will be paid in respect of the
AN Convertible Debenture.

ASSUMED HYPOTHECS

          At Closing, the Properties will be subject to the Assumed Hypothecs. The REIT may be required to execute
assumption agreements with the various hypothecary creditors under the Assumed Hypothecs whereby the REIT or a
subsidiary of the REIT will assume the obligations of Alexis Nihon pursuant thereto. Alexis Nihon will use all reasonable
efforts to obtain acknowledgements from the hypothecary creditors under the Assumed Hypothecs that the obligations under
the Assumed Hypothecs will not be binding personally upon the Trustees, the Unitholders or any annuitant under a plan of
which a Unitholder acts as trustee or carrier (to the extent that such Trustee, Unitholder or annuitant has any personal liability
under applicable law).

LIABILITY OF ALEXIS NIHON

          Alexis Nihon will continue after the Property Closing to be liable as a guarantor or otherwise under certain of the
Assumed Hypothecs, as required by the hypothecary creditors as a condition of their consent to the assumption by the REIT
of such Assumed Hypothecs. The REIT will indemnify Alexis Nihon in respect of such continuing liability. The right of the
REIT to dispose of a Property in respect of which Alexis Nihon is so liable will be subject to the release of such liability or, if
such release is not obtained, subject to Alexis Nihon, acting reasonably, agreeing to the sufficiency of indemnification made
in its favour and to the hypothecary creditor agreeing to assign its security to Alexis Nihon if Alexis Nihon is required to and
in fact pays the relevant liability in full.


                                                     USE OF PROCEEDS

         The net proceeds from this Offering, after deducting the Underwriters’ Fee of $4,887,500 and the expenses of this
Offering (estimated at $1,850,000), are estimated to be $78,262,500. Approximately:

    •    $70,208,500 will be used by the REIT and the Acquiring Entities to pay the cash portion due to Alexis Nihon under
         the Purchase Agreement, from which amount the cash obligations of Alexis Nihon under each of the Place Alexis
         Nihon Closing, the Centre Laval Closing, the Beaver Hall Hill Closing, the De La Savane Closing and the
         Cavendish Closing as follows:

         −        $46.5 million will be used to make payments to secured creditors in respect of amounts owing under
                  outstanding hypothecs on three Properties; and


                                                                61
            −             $6.7 million will be used to acquire the interest in three Properties held by co-owners of such Properties;
                          and

     •      $5,554,000 will be used to pay land transfer taxes incurred on the acquisition of the Purchased Assets;

and the balance will be used for future property acquisitions, including Alexis Nihon’s co-ownership interests in the Co-
Ownership Properties, if applicable, and for working capital purposes.

         The net proceeds, if any, from the sale of Offered Units pursuant to the Over-Allotment Option will be added to the
working capital of the REIT. The REIT intends to use working capital to finance its operations and the acquisition of
additional income-producing office, retail, industrial, mixed-use and multi-family residential properties.

         The following table summarizes certain aspects of the use of the net proceeds of this Offering after giving effect to
the Property Closing and the acquisition of Alexis Nihon’s interest in the Co-Ownership Properties:
                                                                                                                                           Use of
                                                                                                                                       Net Proceeds
                                                                                                                                        after giving
                                                                                                                                        effect to the
                                                                                                                                         Property
                                                                                                                                      Closing and the
                                                                                                                                       Acquisition of
                                                                                                    Land Transfer                     Alexis Nihon’s
                                                                             Aggregate             Taxes and Other                    Interests in the
                                                                             Purchase                Acquisition       Assumed        Co-Ownership
                        Property Type                                         Price (1)                Costs (2)      Hypothecs (3)      Properties

 Office Properties (4) ...........................................................
                                                                             $154,132,704              $2,315,081    $78,766,546       $77,681,239
 Retail Properties (5) ............................................................
                                                                               128,248,628              1,926,300     69,534,808        60,640,120
 Industrial and Mixed-Use Properties.............................                53,573,794               804,678     36,727,567        17,650,905
 Multi-family Residential Property(6) .............................
                                                                 33,817,374                               507,941     18,873,476         15,451,839
 Sub-Total................................................................ 369,772,500                  5,554,000    203,902,397       171,424,103
 Assets and Management Assets................................                  500,000                       —                —            500,000
 Total....................................................................................
                                                                                    $370,272,500       $5,554,000    $203,902,397     $171,924,103
 Working Capital(7) ............................................................                                                          2,500,000
                                                                                                                                      $174,424,103


Notes:
(1)
    The purchase price for the Properties is an approximation based upon the amount to be allocated to the Properties by the REIT as determined by
    reference to the appraised value of the Properties. See “Independent Appraisal of the Value of the Properties”.
(2)
    Derived from the allocation as determined by reference to the appraised value of the Properties. Includes estimated acquisition related expenses payable
    by the REIT, including land transfer taxes.
(3)
    The Assumed Hypothecs described under “Properties — Assumed Hypothecs” totalled $203,902,397, based on balances outstanding as at September
    30, 2002. Since September 30, 2002, Alexis Nihon has made scheduled payments, in the ordinary course, to certain hypothecary creditors in the
    aggregate amount of approximately $1.0 million. The total amount of the Assumed Hypothecs, based on balances outstanding as at November 30, 2002,
    is approximately $202,960,000.
(4)
    Includes 611,535 square feet of office space at, and an allocation of $45,177,456 of debt for, Place Alexis Nihon.
(5)
    Includes 382,900 square feet of retail space at, and an allocation of $21,875,400 of debt for, Place Alexis Nihon.
(6)
    Includes 300,321 square feet of multi-family residential space at, and an allocation of $18,873,476 of debt for, Place Alexis Nihon.
(7)
    Includes funds available for future property acquisitions, capital improvements and general purposes of the REIT.


                                             MANAGEMENT’S DISCUSSION AND ANALYSIS OF
                                          FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

         The following discusses the financial condition and results of operations and changes thereto of the historical
information relating to the Properties owned or co-owned by the Alexis Nihon Group and should be read in conjunction with
the audited consolidated statements of operations and deficiencies in net assets and cash flows for the years ended
December 31, 2001, 2000 and 1999, the unaudited statements of operations and deficiency in net assets and cash flows for
the nine months ended September 30, 2002 and 2001 and the audited consolidated balance sheet as at December 31, 2001 and


                                                                                            62
2000, the unaudited consolidated balance sheet as at September 30, 2002 provided elsewhere in this prospectus. The REIT
will have a Decemb e r 31 year-end.

         The Properties are comprised of 25 income-producing office, retail, industrial and mixed-use properties, including a
426-unit multi-family residential property, all located in the Greater Montreal Area and representing, in the aggregate,
approximately 4,070,062 square feet of leasable area.

          The objective is to provide prospective investors with an analysis of the historical net operating income of the
Properties for the above-mentioned periods and the related elements of income before corporate income taxes. Less emphasis
has been placed on analyzing the historical capital structure and corporate income taxes of the Properties as the REIT’s future
capitalization structure and income tax status will be significantly different. The pro forma financial statements and Financial
Forecast reflect the impact of financial leverage and income tax status on a going forward basis.

          The results and analysis of the Properties have demonstrated over the periods consistent growth with respect to the
average occupancy rate and net operating income. Between 1999 and 2001, rental revenues increased by 14.4%, translating
into a corresponding increase in net operating income of 13.2%.

LEASING DATA

         During the first nine months of 2002, 843,979 square feet of space was leased in the Commercial Properties at a net
average rental rate of $9.71. The overall average occupancy for the Properties is as follows:

                                                                                                    Average Occupancy
                                                                                                                                                 Net Rent Per
                                                                                   1999              2000          2001          2002 (1)(2)     Square Foot(3)
         Office Properties (4)..................................                   76.3%             85.3%         88.9%          91.3%             $10.27
         Retail Properties (5)...................................                  89.4%             93.5%         93.4%          94.9%             $12.28
         Industrial and Mixed-Use Properties ...                                   92.2%             96.2%         95.9%          88.2%              $5.10
         Weighted Average Commercial
         Properties..................................................              85.6%             91.5%         92.7%          91.2%             $9.08
         Multi- Residential Property...................                            98.7%             99.4%         99.6%          98.9%           $972.17(6)
         Total: .........................................................          86.6%             92.1%         93.2%          91.7%             $9.67

Notes:
(1)
      The information for 2002 reflects leasing activity for the nine months ended September 30, 2002 and occupancy adjusted to reflect recent leasing
      activity where space is leased, but not yet occupied.
(2)
      Average for the nine-month period ended September 30, 2002.
(3)
      Weighted average of the net rent of net leases and of the net rent component of gross leases calculated on a per square foot basis of occupied space as
      at September 30, 2002.
(4)
      Includes 611,535 square feet of office space at Place Alexis Nihon.
(5)
      Includes 382,900 square feet of retail space at Place Alexis Nihon.
(6)
      In the case of the multi-family residential property, sets forth the average monthly rent per unit.

         The average occupancy levels of office and retail space have continued to grow over the last three years and into
2002. However, the average occupancy level of the industrial and mixed-use Properties has declined during the nine-month
period ended September 30, 2002, mainly as a result of space vacated following the expiry of three leases and the bankruptcy
of a tenant. Given the historically high average occupancy rates for the industrial and mixed-use Properties and the quality
and location of these Properties, the current vacancy rate is expected to decrease after allowing for a three to six-month re-
leasing and fixturing period.

         The following table indicates the total occupied area of the Commercial Properties subject to lease expiries through
the period ending December 31, 2006, the percentage of the total net rentable area represented by such expiries and the
weighted average net rental rate per square foot at the time of expiry.

                                                                                                Expiry as a Percentage
                                                                                                 of Total Commercial        Lease – Expiry
                                                                               Total                Properties Net        Weighted Average Net
                                             Year                           Square Foot               Lease Area          Rent per Square Foot
                                th
                              4 quarter 2002..........                         30,420                     0.9%                  $11.01
                              2003 .............................              487,338                    14.4%                   $7.19
                              2004 .............................              533,014                    15.8%                   $8.49

                                                                                           63
                                                                             Expiry as a Percentage
                                                                              of Total Commercial       Lease – Expiry
                                                          Total                  Properties Net       Weighted Average Net
                               Year                    Square Foot                 Lease Area         Rent per Square Foot
                  2005 .............................     449,311                      13.3%                 $10.08
                  2006 .............................     367,472                      10.9%                  $9.77

        There are no significant leases expiring during the fourth quarter of 2002. In 2003, five leases account for
approximately 40% of the space subject to lease expiries.

CONSOLIDATED R ESULTS OF OPERATIONS

Nine Months Ended September 30, 2002 compared to the Nine Months ended September 30, 2001 – Highlights

                                                                     Nine Months Ended
                                                                        September 30                   Change Favourable
                                                                 2002                  2001             (Unfavourable)
                                                                ($000s)              ($000s)          ($000s)          %
                Revenues from rental operations..             $42,132               $40,560            $1,572         3.9%
                Rental property operating costs ....          $20,547               $19,494           ($1,053)       (5.4)%
                Net operating income                          $21,585               $21,066             $519         2.5%

         Revenues from rental operations for the nine months ended September 30, 2002 increased by approximately
$1.6 million (3.9%) when compared with the nine-month period ended September 30, 2001. During the same period, total
rental operating costs increased by approximately $1.1 million and net property income increased by approximately
$0.5 million.

Segmented Analysis

Office

                                                                     Nine Months Ended
                                                                        September 30
                                                                                                       Change Favourable
                                                                 2002                  2001             (Unfavourable)
                                                                ($000s)              ($000s)          ($000s)          %
                Revenues from rental operations..            $18,080               $17,132              $948          5.5%
                Rental property operating costs ....          $9,266                $8,806             ($460)        (5.2)%

                Net operating income                           $8,814                $8,326             $488         5.9%

         Net operating income from office rental operations increased by approximately $0.5 million (5.9%) for the nine
months ended September 30, 2002 when compared with the nine-month period ended September 30, 2001. This increase
results primarily from increases in average occupancy rates and the recovery of the increase in operating costs. The most
significant increases in average occupancy rates were realized at 1080 Beaver Hall Hill (from 71.4% to 74.7%) and at Place
Alexis Nihon (from 93.0% to 96.4%).




                                                                        64
Retail

                                                                  Nine Months Ended
                                                                     September 30
                                                                                         Change Favourable
                                                                2002            2001      (Unfavourable)
                                                               ($000s)         ($000s)   ($000s)        %
                 Revenues from rental operations..            $13,865       $13,096        $769       5.9%
                 Rental property operating costs ....          $6,236        $6,093       ($143)     (2.3)%
                 Net operating income .....................    $7,629        $7,003        $626       8.9%

         Net operating income from retail operations, for the nine months ended September 30, 2002 increased by
approximately $0.6 million (8.9%) in comparison to the nine-month period ended September 30, 2001. This favourable
variance is attributable to tenant expansions, increases in percentage of sales rental revenues and contractual rent increases.

Industrial and Mixed-Use

                                                                  Nine Months Ended
                                                                     September 30        Change Favourable
                                                                2002            2001      (Unfavourable)
                                                               ($000s)         ($000s)   ($000s)        %
                 Revenues from rental operations..            $6,442         $6,656      ($214)       (3.2)%
                 Rental property operating costs ....         $2,849         $2,606      ($243)       (9.3)%
                 Net operating income .....................   $3,593         $4,050      ($457)      (11.3)%

          Historically, the industrial and mixed-use Properties have maintained a high average occupancy level. Over the last
three fiscal years, the average occupancy levels were 92.2%, 96.2% and 95.9%, respectively which is due to the quality and
favourable geographic locations of these Properties. In 2002, as a result of the expiry of three leases and the bankruptcy of a
tenant, the average occupancy level for the industrial and mixed-use Properties has decreased to 88.2% (as at September 30,
2002). Management expects that the current vacancies will be re-leased after allowing for sufficient time to market the space
and for a reasonable fixturing period. This expectation is supported by current shortages in the availability of good quality
industrial space in the area where these Properties are located and by interest demonstrated for such space by prospective
tenants.

        As a result of the decrease in occupancy, the net operating income for the nine-month period ended September 30,
2002 has decreased by approximately $0.5 million in comparison to the nine-months ended September 30, 2001.

Residential

                                                                  Nine Months Ended
                                                                     September 30        Change Favourable
                                                                2002            2001      (Unfavourable)
                                                               ($000s)         ($000s)   ($000s)        %
                 Revenues from rental operations..            $3,745         $3,676        $69         1.9%
                 Rental property operating costs ....         $2,196         $1,989      ($207)      (10.4)%
                 Net operating income .....................   $1,549         $1,687      ($138)       (8.2)%

         The continuation of historically low vacancy rates and shortages in residential units due to limited supply has
enabled the Alexis Nihon Group to increase rental rates. Revenues from the residential units for the nine-month period ended
September 30, 2002 in comparison to the period ended September 30, 2001 have increased by $69,000 (1.9%). The
occupancy rates for both periods were similar at approximately 99%.

         The unfavourable variance of approximately $0.2 million in direct operating costs results from non-recurring costs
associated with repairs and improvements to the units which are part of a program to upgrade the units upon rollover to new
tenants. These enhancements allow the Alexis Nihon Group to increase rental rates to market when the units are rolled over
to new tenants. The higher rental revenues thus generated reduce the payback period for the costs of such investments.




                                                                       65
Fiscal 2001 Compared to 2000 – Highlights

                                                                Year Ended December 31
                                                                                         Change Favourable
                                                                2001            2000      (Unfavourable)
                                                               ($000s)         ($000s)   ($000s)        %
                 Revenues from rental operations..            $55,471        $52,704     $2,767       5.3%
                 Rental property operating costs ....         $26,558        $26,602        $44       0.2%
                 Net operating income .....................   $28,913        $26,102     $2,811      10.8%

         Revenues from rental properties increased by approximately $2.8 million for the year ended December 31, 2001
over the same period in 2000 representing an increase of 5.3%. This increase results primarily from the 1.2% increase in
overall average occupancy and rollover of leases to new tenants at higher rental rates. Total rental operating costs remained
stable for the period ended December 31, 2001 in comparison to the period ended December 31, 2000. As a result, net
property income increased by approximately $2.8 million (10.8%).

Segmented Analysis

Office

                                                                Year Ended December 31
                                                                                         Change Favourable
                                                                2001            2000      (Unfavourable)
                                                               ($000s)         ($000s)   ($000s)        %
                 Revenues from rental operations..            $23,722        $23,085      $637        2.8%
                 Rental property operating costs ....         $11,996        $12,407      $411        3.3%
                 Net operating income .....................   $11,726        $10,678     $1,048       9.8%

         Net operating income from office rental operations increased by approximately $1.0 million (9.8%) for the year
ended December 31, 2001 in comparison to the year ended December 31, 2000. Factors contributing to this increase include a
3.6% increase in average occupancy and the rollover of leases to new tenants at higher rental rates. Revenues from rental
operations also included a cancellation penalty of $170,000 received in connection with the downsizing of space leased by a
tenant. This space was leased to a new tenant two months later.

         The decrease of approximately $0.4 million in rental property operating costs is essentially attributable to the
reduction of the City of Montreal surtax.

Retail

                                                                Year Ended December 31
                                                                                         Change Favourable
                                                                2001            2000      (Unfavourable)
                                                               ($000s)         ($000s)   ($000s)        %
                 Revenues from rental operations..            $17,809        $16,169     $1,640      10.1%
                 Rental property operating costs ....          $8,513         $8,403      ($110)     (1.3)%
                 Net operating income .....................    $9,296         $7,766     $1,530      19.7%

        Net operating income from rental properties for 2001 increased by approximately $1.5 million (19.7%) over the year
2000 despite a 0.1% decrease in the average occupancy. In 2001, revenues increased by approximately $1.6 million (10.1%)
over the year 2000. Approximately $1.0 million of this increase is attributable to a new tenancy that commenced in
December 2000. Contractual rent increases coupled with a 1.1% increase in average occupancy at Centre Laval (bringing the
average occupancy to 98.1%) contributed incremental revenues of approximately $0.4 million over the period.

         Cost saving measures resulted in rental property operating costs only increasing nominally by approximately $0.1
million (1.3%) in 2001 compared to 2000.




                                                                       66
Industrial and Mixed-Use

                                                                Year Ended December 31
                                                                                          Change Favourable
                                                                2001            2000       (Unfavourable)
                                                               ($000s)         ($000s)    ($000s)        %
                 Revenues from rental operations..            $9,033          $8,620       $413         4.8%
                 Rental property operating costs ....         $3,317          $3,205      ($112)       (3.5)%
                 Net operating income .....................   $5,716          $5,415       $301         5.6%

         While average occupancy rates remained relatively flat over the period, net operating income increased by
approximately $0.3 million (5.6%) as a result of lease renewals during the period at higher rates. Rental property operating
costs increased, mostly as a result of increases in insurance rate premiums. Such insurance increases are recoverable from
tenants and resulted in a corresponding increase in revenues from rental operations.

Residential

                                                                Year Ended December 31
                                                                                          Change Favourable
                                                                2001            2000       (Unfavourable)
                                                               ($000s)         ($000s)    ($000s)        %
                 Revenues from rental operations..            $4,907          $4,830        $77         1.6%
                 Rental property operating costs ....         $2,732          $2,587      ($145)       (5.6)%
                 Net operating income .....................   $2,175          $2,243       ($68)       (3.0)%

         During the year, revenues from the residential units increased by approximately $77,000 (1.6%). The units were on
average 99.9% leased during both years. The increase in revenues results primarily from allowable Régie du logement
increases. Rental property operating costs increased by approximately $145,000 (5.6%), which included expenses associated
with renovations and repairs.

Fiscal 2000 compared to 1999 – Highlights

                                                                Year Ended December 31
                                                                                          Change Favourable
                                                                2000            1999       (Unfavourable)
                                                               ($000s)         ($000s)    ($000s)        %
                 Revenues from rental operations..            $52,704        $48,504      $4,200        8.7%
                 Rental property operating costs ....         $26,602        $22,958     ($3,644)     (15.9)%
                 Net operating income .....................   $26,102        $25,546        $556        2.2%

         Net operating income for the year ended December 31, 2000 increased by approximately $0.6 million (2.2%) when
compared to the year ended December 31, 1999. The increase is primarily the result of investments in November 1999 in two
properties, namely 777 Ste-Catherine Street (retail) and a 50% interest in 1080 Beaver Hall Hill (office). The revenues
generated by these properties account for approximately $2.4 million of the revenue increase. An additional $0.4 million of
revenues was generated as a result of the continued redevelopment and repositioning of Centre Laval, which was acquired in
January 1998. The overall occupancy level at Centre Laval increased from 94.8% in 1999 to 97.0% in 2000.

Segmented Analysis

Office

                                                                Year Ended December 31
                                                                                          Change Favourable
                                                                2000            1999       (Unfavourable)
                                                               ($000s)         ($000s)    ($000s)        %
                 Revenues from rental operations..            $23,085        $21,284      $1,801        8.5%
                 Rental property operating costs ....         $12,407         $9,489     ($2,918)     (30.8)%
                 Net operating income .....................   $10,678        $11,795     ($1,117)      (9.5)%

         During 2000, the net operating income from office properties decreased by approximately $1.1 million. In June
1999, a tenant at Place Alexis Nihon exercised its right to terminate its lease and paid a cancellation penalty of $3.95 million.

                                                                       67
After deducting unamortized tenant improvements and other direct costs, the net impact on net operating income for 1999
with respect to the cancellation penalty was an increase of $1.1 million. The 60,381 square feet that the tenant was occupying
were leased to a new tenant in January 2000 at a net rental of $6.25 per square foot in comparison to the $21.00 per square
foot (which was an above market rental rate) paid by the previous tenant. This resulted in a decrease of net operating income
of approximately $0.9 million.

        Net operating income increased by $0.5 million as a result of the full year contribution of 1080 Beaver Hall Hill, as
compared two months for 1999. Increased occupancy rates for three suburban office Properties also contributed
approximately $0.4 million to the net operating income.

         The average occupancy levels for the office Properties increased from 76.3% in 1999 to 85.3% in 2000. However,
due to timing differences between leasing activity and the generation of revenues, the value of the increased occupancy level
of 9% was only fully reflected in the net operating income of 2001.

Retail

                                                                   Year Ended December 31
                                                                                            Change Favourable
                                                                    2000           1999      (Unfavourable)
                                                                   ($000s)        ($000s)   ($000s)        %
                 Revenues from rental operations........          $16,169       $14,336     $1,833      12.8%
                 Rental property operating costs..........         $8,403        $7,685      ($718)     (9.3)%
                 Net operating income .........................    $7,766        $6,651     $1,115      16.8%

         Net operating income from retail Properties increased by approximately $1.1 million (16.8%) for the year ended
December 31, 2000 when compared to the year ended December 31, 1999. Almost half of this increase is attributable to the
full year contribution of 777 Ste-Catherine Street in 2000 as opposed to two months in 1999. In addition, the average
occupancy of the retail Properties increased by 4.1% during the period.

Industrial and Mixed-Use

                                                                   Year Ended December 31
                                                                                            Change Favourable
                                                                    2000           1999      (Unfavourable)
                                                                   ($000s)        ($000s)   ($000s)        %
                 Revenues from rental operations..                $8,620         $8,182      $438        5.4%
                 Rental property operating costs ....             $3,205         $3,308      $103        3.1%
                 Net operating income .....................       $5,415         $4,874      $541       11.1%

         Net operating income from the industrial and mixed-use Properties for the year 2000 increased by approximately
$0.5 million (11.1%) when compared with the same period in 1999. The rollover of leases at higher rental rates and the lease-
up of vacant space account for the increases in net operating income during the period. The average occupancy for the
industrial and mixed-use Properties increased by 4.0% from 92.2% in 1999 to 96.2% in 2000.

Residential

                                                                   Year Ended December 31
                                                                                            Change Favourable
                                                                    2000           1999      (Unfavourable)
                                                                   ($000s)        ($000s)   ($000s)        %
                 Revenues from rental operations..                $4,830         $4,702       $128       2.7%
                 Rental property operating costs ....             $2,587         $2,476      ($111)     (4.5)%
                 Net operating income .....................       $2,243         $2,226        $17       0.8%

        Net operating income from the multi-family residential units increased by $17,000 (0.8%) for the period ended
December 31, 2000 when compared to December 31, 1999. Revenues increased by 2.7% as a result of an increase in average
occupancy of the 72 furnished apartments from 93.7% to 97.3%.




                                                                           68
INTEREST EXPENSES

         The following table summarizes the components of interest expense presented in this prospectus.

                                                           Nine Months Ended
                                                             September 30,                  Year Ended December 31,
                                                          2002          2001       2001              2000             1999
                                                         ($000s)       ($000s)    ($000s)           ($000s)       ($000s)
            Interest on long-term debt..............      $13,283    $13,504     $17,987          $18,437       $17,471
            Other interest................................ $5,668     $6,720      $9,785          $11,821       $10,563

        Interest on long-term debt consists primarily of interest paid on loans secured by mortgages on the Properties.
Refinancing of such debts during the periods have been renewed at market rates, which accounts for the variation in interest
expense from one period to the next.

          Other interest expense includes interest on bank indebtedness for the periods 1999 and 2000. For the periods 2000 to
2001, the other interest expense includes interest on debt due to companies controlled by certain members of the
Nihon/Massicotte Group. These loans bear interest at prime plus 1.5% to 3% which accounts for the variation in other
interest expense from one period to the next.

GENERAL AND ADMINISTRATIVE EXPENSES

          General and administrative expenses include costs relating to salaries and benefits, legal, consulting fees,
professional fees, bad debt and administrative fees. General and administrative expenses have remained relatively constant
over the prior periods. Fluctuations in comparative figures result from increases or decreases in the number of employees and
fluctuation in expenditures with respect to development projects. Costs for the nine-month period ended September 30, 2002
include a bad debt expense of $268,000.

D EBT PROFILE

         On August 1, 1997, the Alexis Nihon Group refinanced its first ranking mortgage on Place Alexis Nihon by issuing
approximately $101 million of distress preferred shares. These preferred shares paid dividends calculated at the rate of 7.2%
per annum on $57 million and 9.35% per annum on $44 million. On August 1, 2002, the preferred shares were redeemed and
replaced by a loan from the same parties and secured by a conventional first ranking mortgage. This loan bears interest at an
annual rate of 6.53% and matures in August 2007.

         On December 13, 2000 certain borrowings of the Alexis Nihon Group of approximately $154 million including
general bank indebtedness, debt on revenue producing property and accrued interest to that date, were purchased by members
of the Nihon Family and members of the Massicotte Family.

        The increase in the debt due to companies controlled by certain members of the Nihon/Massicotte Group is
explained by the capitalization of the interest expense pertaining thereto. Such indebtedness will not form part of the REIT’s
indebtedness following the Closing.

CHANGES IN FINANCIAL CONDITION

Investing Activities

         For the nine months ended September 30, 2002 investing activities amounted to approximately $3.4 million. This
consists of funds expended for capital expenditures at Place Alexis Nihon in the amount of approximately $1.78 million
mainly for renovations to the interior parking facility. Tenant improvements were expended for new tenants at 9900
Cavendish (approximately $0.2 million) and at 455 Fénélon (approximately $0.2 million). For the same period of the
previous year, the amount was approximately $3.0 million for total investing activities, which included capital expenditures
and tenant improvements at Place Alexis Nihon of approximately $2.3 million and the Alexis Nihon Group’s pro rata share
of capital expenditures and tenant improvements at 1080 Beaver Hall Hill of approximately $0.4 million.

         For the twelve months ended December 31, 2001, investing activities utilized net cash of approximately $3.5 million
compared to approximately $8.9 million in 2000, a decrease of approximately $5.4 million. In 2001, approximately
$2.3 million was expended on Place Alexis Nihon, approximately $0.4 million with respect to the Alexis Nihon Group’s pro


                                                                        69
rata share of 1080 Beaver Hall Hill and approximately $0.1 million on Central Laval. In 2000, approximately $2.4 million
was expended on tenant improvements at 777 Ste-Catherine Street West, approximately $3.7 million at Place Alexis Nihon
and approxi mately $1.0 million for the Alexis Nihon Group’s pro rata share of additions at Central Laval.

         In 1999, a 50% interest in 1080 Beaver Hall Hill was acquired for approximately $1.5 million (net of assumed
indebtedness) and 777 Ste-Catherine Street West was acquired for approximately $1.3 million (net of assumed indebtedness).
During the period, eight industrial and mixed-use and two office Properties were acquired from a related company in
consideration for $1.7 million in cash and the assumption of indebtedness. Capital expenditures and tenant improvements of
$1.4 million at Place Alexis Nihon were funded as well as the Alexis Nihon Group’s portion of expenditures and tenant
improvements at Centre Laval of approximately $4.0 million.

Financing Activities

         For the nine months ended September 30, 2002 financing activities included an additional loan of $1.9 million with
respect to 4700 de la Savane. Regularly scheduled repayments on debts amounted to approximately $3.2 million for the
period.

        For the nine months ended September 30, 2001, financing activities included additional financing in the aggregate
amount of approximately $1.0 million with respect to 777 Ste-Catherine Street West and 455 Fénélon. Regularly scheduled
repayments on debt amounted to approximately $3.1 million for the period.

        During the year 2001, approximately $3.4 million of debt was repaid as scheduled. Total new debt financing in the
aggregate amount of approximately $1.6 million was obtained in 2001, mostly to finance tenant improvements for 777 Ste-
Catherine Street West, 455 Fénélon and Centre Laval.

         In 2000, approximately $3.2 million of new debt was incurred. This amount included approximately $1.1 million for
tenant improvements at 777 Ste-Catherine Street West, approximately $0.4 million for tenant improvements at Centre Laval
and approximately $0.8 million of new loans with respect to certain industrial and mixed-use Properties. Regularly scheduled
repayments of debt amounted to approximately $3.2 million.

        In 1999, approximately $2.6 million of debt on income-producing Properties was repaid as scheduled.
Approximately $3.9 million of new debt was incurred in order to invest in 1080 Beaver Hall Hill and 777 Ste-Catherine
Street West.




                                                            70
                                                 FINANCIAL FORECAST

          The following Forecast Statement of Net Income and Distributable Income was approved by Management, using
assumptions with an effective date of October 18, 2002, and has been approved by the Trustees. Pursuant to applicable
securities policies, the REIT is required to update the forecast during the forecast period by identifying any material changes
from the forecast resulting from events that have occurred since it was issued and by comparing such forecast with annual
audited actual results and actual interim results for the periods covered. The results of this comparison will accompany the
annual or interim financial statements of the REIT for the relevant periods.

         The forecast has been prepared in accordance with generally accepted accounting principles relating to
measurement, presentation and disclosure of financial forecasts established by the Canadian Institute of Chartered
Accountants. The forecast has been prepared using assumptions that reflect Management’s intended course of action for the
periods covered, given Management’s judgment as to the most probable set of economic conditions. The forecast has been
prepared after giving effect to the Offering, the issuance of the Alexis Nihon Units and the AN Convertible Debenture and
the acquisition of the Purchased Assets described under “Acquisition of the Portfolio, the Assets and the Management Assets
— Purchase Agreement”.

         The reader is cautioned that some of the assumptions used in the preparation of the forecast, although
considered reasonable by the REIT at the time of preparation, may prove to be incorrect and will not materialize as
forecasted and unanticipated events and circumstances will occur subsequent to the date of the forecast. Accordingly,
the actual results achieved for the forecast period will vary from the forecast results and the variations may be
material. There is no representation that the forecast will be realized in whole or in part. Important factors that could
cause actual results to vary materially from the forecast are disclosed under “Risk Factors”.




                                                              71
                                ALEXIS NIHON REAL ESTATE INVESTMENT TRUST
                                 AUDITORS’ REPORT ON FINANCIAL FORECAST

To the Trustees of
Alexis Nihon Real Estate Investment Trust

The accompanying financial forecast of Alexis Nihon Real Estate Investment Trust (the “REIT”) consisting of the statements
of forecast consolidated net income and distributable income for each of the three-month periods ending March 31, June 30,
September 30 and December 31, 2003 and for the year ending December 31, 2003 have been prepared by management of the
REIT (“Management”) using assumptions with an effective date of October 18, 2002. We have examined the support
provided by Management for the assumptions, and the preparation and presentation of this financial forecast. Our
examination was made in accordance with the applicable Assurance and Related Services Guideline issued by The Canadian
Institute of Chartered Accountants. We have no responsibility to update this report for events and circumstances occurring
after the date of our report.

In our opinion:

    •    as at the date of this report, the assumptions developed by Management are suitably supported and consistent with
         the plans of the REIT and provide a reasonable basis for this financial forecast;

    •    this financial forecast reflects such assumptions; and

    •    this financial forecast complies with the presentation and disclosure standards for forecasts established by the
         Canadian Institute of Chartered Accountants.

Since this financial forecast is based on assumptions regarding future events, actual results will vary from the
infor mation presented and the variations may be material. Accordingly, we express no opinion as to whether this
financial forecast will be achieved.




                                                                     (Signed) RICHTER, USHER & VINEBERG
                                                                     GENERAL PARTNERSHIP
Montreal, Québec                                                     Chartered Accountants
December 13, 2002




                                                              72
                                   ALEXIS NIHON REAL ES TATE INVESTMENT TRUST
                                     STATEMENTS OF FORECAST CONSOLIDATED
                                      NET INCOME AND DISTRIBUTABLE INCOME

                                                   (in thousands of dollars)



                                                                                                         For the year
                                                      For the three months ending                           ending
                                     March 31,       June 30,          September 30,     December 31,    December 31,
                                      2003             2003                2003              2003            2003


Revenues from rental operations         $16,866          $16,852               $16,874        $16,969         $67,561
including AN Head Lease


Expenses
   Rental property     operating
   costs                                  5,570            5,445                 5,388          5,423          21,826
   Realty taxes                           2,272            2,272                 2,272          2,272           9,088
   Ground rent                              129              129                   129            129             516
   Interest expense                       3,260            3,259                 3,260          3,259          13,038
   General and administrative               393              393                   393            393           1,572
   Amortization                             918              931                   935            938           3,722
                                         12,542          12,429                 12,377         12,414          49,762

Income from operations                    4,324            4,423                 4,497          4,555          17,799


Trust expenses                               88                 88                  88             88             352



Net income                                4,236            4,335                 4,409          4,467          17,447


Add (Deduct):
  Interest on the AN
      Convertible Debenture                (197)           (198)                 (197)           (198)           (790)
   AN Income Subsidy                        302              302                  302             276           1,182
   Amortization                             858              858                  858             858           3,432


Distributable income                     $5,199          $5,297                 $5,372         $5,403         $21,271




                                                                73
                          ALEXIS NIHON REAL ES TATE INVESTMENT TRUST
                        NOTES TO STATEMENTS OF FORECAST CONSOLIDATED
                            NET INCOME AND DISTRIBUTABLE INCOME

                                          For the period ending December 31, 2003
                                   [in thousands of dollars, except for notes 4(i) and 4(ix)]

1.   Purpose of Forecast

     This financial forecast has been prepared by management (“Management”) of Alexis Nihon Real Estate Investment
     Trust (the “REIT”) for use by prospective investors in their evaluation of potential investments in the REIT and may
     not be appropriate for any other purpose.

2.   Basis of Presentation of Forecast

     This financial forecast consists of the consolidated statements of net income and distributable income of the REIT
     for each of the three-month periods ending March 31, 2003, June 30, 2003, September 30, 2003 and December 31,
     2003, and for the year ending December 31, 2003. This financial forecast has been prepared by Management using
     assumptions with an effective date of October 18, 2002 and reflects the assumptions described below.

     This financial forecast has been prepared using assumptions that reflect Management’s intended course of action for
     the periods covered, given Management’s judgment as to the most probable set of economic conditions. This
     financial forecast will be compared with the reported results for the forecast periods and any significant differences
     will be disclosed. The actual results achieved during periods will vary from the forecasted results, and these
     variations may be material.

3.   Summary of Significant Accounting Policies

     This financial forecast has been prepared in accordance with Canadian generally accepted accounting principles and
     reflects the following policies:

     Principles of Consolidation

     This financial forecast includes the forecast results of operations of the REIT and its subsidiaries and the
     proportionate share of the assets, liabilities, revenues and expenses of the joint ventures . On consolidation, all
     material intercompany transactions and balances have been eliminated.

     Revenue Recognition

     Revenues from rental properties include rents earned from tenants, realty taxes and operating cost recoveries, and
     parking and other incidental income.

     Amortization

     Amortization of buildings is provided using the sinking fund method in annual amounts increasing at a rate of 5%,
     compounded annually so as to fully amortize the buildings over their estimated useful lives, most of which are
     35 years.

     The amounts recorded for amortization of buildings are based on estimates of the remaining useful life of these
     assets. By their nature, these estimates are subject to measurement uncertainty and the effect of changes in such
     estimates on the consolidated financial statements of future periods could be significant. Maintenance and repairs
     are charged when incurred.

     Leasing costs and tenant improvements are deferred and amortized over the terms of the related leases.




                                                              74
                          ALEXIS NIHON REAL ESTATE INVESTMENT TRUST
                        NOTES TO STATEMENTS OF FORECAST CONSOLIDATED
                            NET INCOME AND DISTRIBUTABLE INCOME

                                           For the period ending December 31, 2003
                                    [in thousands of dollars, except for notes 4(i) and 4(ix)]

3.   Summary of Significant Accounting Policies (Cont’d.)

     Income Taxes

     The REIT is an unincorporated closed-ended investment trust created by a contract of trust (the “Contract of Trust”)
     under, and governed by, the laws of the Province of Québec. The REIT is taxed as a “mutual fund trust” for income
     tax purposes. Pursuant to the Contract of Trust, the REIT will make distributions or designate all taxable income
     earned, including the taxable part of the net realized capital gains, by the REIT to unitholders and will deduct such
     distributions and designations for income tax purposes.

     Income taxes are accounted for using the liability method. Under this method, future income taxes are recognized
     for the expected future tax consequences of differences between the carrying amount of balance sheet items and
     their corresponding tax values. Future income taxes are computed using substantively enacted corporate income tax
     rates for the years in which tax and accounting basis differences are expected to reverse.

     Future income tax liabilities of the REIT are primarily in relation to tax and accounting basis differences in
     corporate subsidiaries of the REIT.

4.   Significant Assumptions

     This financial forecast is based on the following assumptions:

     (i)      Initial Public Offering

              This financial forecast assumes that the REIT will raise gross proceeds of $85,000,000 through the issuance
              of 8.5 million units at a price of $10 per unit (the “Offering”). Costs relating to the Offering include
              underwriters’ fees, are assumed to be $6,737,500 and are charged directly to unitholders’ equity.

     (ii)     Asset Acquisition

              For the purpose of this financial forecast, the closing (the “Closing”) of the transactions as contemplated by
              the prospectus relating to the Offering is assumed to occur on January 1, 2003. It is also assumed that the
              interests of Alexis Nihon in certain co-owned properties located in Dorval, Québec and Lachine, Québec
              will be acquired by the REIT following Closing.

              The net proceeds of $78,263 from the Offering will be used by the REIT to acquire 25 income producing
              properties assumed to occur on January 1, 2003:

              Net assets acquired are as follows:
                       Initial properties acquired                                                       $370,273
                       Land transfer taxes capitalized to the initial properties                            5,554
                       Assumed mortgages and other loans                                                 (203,902)
                                                                                                         $171,925




                                                               75
                         ALEXIS NIHON REAL ESTATE INVESTMENT TRUST
                       NOTES TO STATEMENTS OF FORECAST CONSOLIDATED
                           NET INCOME AND DISTRIBUTABLE INCOME

                                          For the period ending December 31, 2003
                                   [in thousands of dollars, except for notes 4(i) and 4(ix)]

4.   Significant Assumptions (Cont’d)

             Consideration given by the REIT consists of the following:
                      Cash                                                                                   $ 75,763
                      AN Convertible Debentures                                                                12,150
                      Issue of units                                                                           84,012

                                                                                                            $171,925

             The REIT’s sources and uses of funds after the completion of the transactions contemplated in the Offering
             are as follows:
                      Initial public offering, net of issue costs                                            $ 78,263
                      Payment for the net assets acquired                                                     (30,781)
                      Payment of land transfer taxes                                                           (5,554)
                      Repayments of mortgages and other loans                                                 (39,428)
                      Working capital remaining                                                              $ 2,500

     (iii)   Revenues from Income-Producing Properties

             Forecast revenues from income-producing properties are based on rents from existing leases as well as
             potential income from leasing space that is currently vacant or will become vacant, contractual lease
             expiries and renewal rates based on market trends. The overall occupancy for the property portfolio at the
             end of the forecast period is assumed to be approximately 94.5%.

             In order to provide stable, predictable revenues in respect of certain vacant spaces that are expected to be
             leased in the near term, the vendor(s) of the Properties (as defined below) will enter into a head lease (the
             “AN Head Lease”) with the REIT. The AN Head Lease will be for a term of ten years from Closing and
             will apply to approximately 218,000 square feet of leasable area at current market rental rates. For 2003,
             the maximum estimated to be paid under the AN Head Lease is approximately $3,216.

             In preparing this financial forecast, it is assumed that all existing tenants will fulfill their contractual lease
             obligations and remain in occupancy and pay rent for the term of the forecast period.

     (iv)    Rental Property Operating Costs and Property Taxes

             Rental property operating costs and property taxes have been forecasted with reference to the operating
             plan budgets for the properties. This financial forecast reflects historical data adjusted for changes in costs
             due to inflationary and other major market trends and anticipated changes in property tax rates. The
             components of operating costs and taxes consist of realty taxes, utilities, service contracts, and repairs and
             maintenance.

     (v)     Leasing Costs and Tenant Inducements

             Leasing costs and tenant inducements are based on Management’s expectations of market conditions given
             renewal and leasing assumptions for the forecast period.




                                                              76
                          ALEXIS NIHON REAL ESTATE INVESTMENT TRUST
                        NOTES TO STATEMENTS OF FORECAST CONSOLIDATED
                            NET INCOME AND DISTRIBUTABLE INCOME
                                           For the period ending December 31, 2003
                                    [in thousands of dollars, except for notes 4(i) and 4(ix)]

4.   Significant Assumptions (Cont’d)

     (vi)     Interest Expense

              Interest expense consists of interest on the debt obligations that will be in existence immediately following
              the Closing. The REIT is expected to assume approximately $203,902 of existing mortgages and other
              loans on the acquisition of the properties of the REIT (the “Properties”). The mortgages are secured by the
              Properties and carry a weighted average annual interest rate of approximately 6.4%.

              Mortgages that come due during the forecast period are assumed to be renewed at the then principal amount
              outstanding at an annual interest rate of 6.50%. It is also assumed that Alexis Nihon will make scheduled
              payments to hypothecary creditors in the ordinary course in the aggregate of approximately $1,000 to and
              including November 30, 2002.

     (vii)    General and Administrative Expenses

              General and administrative expenses are forecasted based upon historical expenditures adjusted for current
              market prices.

     (viii)   Trust Expense

              Trust expenses are forecasted based on Management’s best estimates. The forecasted expenses include
              legal fees, annual report fees, auditing fees, registrar and transfer agent fees, external trustee fees and
              various other administrative costs.

     (ix)     Interest on the AN Convertible Debenture

              On Closing, as part of the purchase price for the Purchased Assets, the REIT will issue to the vendors
              $12.15 million principal amount of subordinated unsecured convertible debentures (the “AN Convertible
              Debenture”) at par. The AN Convertible Debenture will bear interest at a rate of 6.5% per annum, payable
              quarterly, and will mature on December 31, 2005. Provided that there is not a then current event of default
              thereunder, the REIT may elect at its option to satisfy any obligation to pay interest on any interest payment
              date, and/or the principal amount on maturity or the redemption date, as well as in the case of a holder
              requiring the REIT to repurchase all or a part of its AN Convertible Debenture, by delivering Units of the
              REIT equal in value, at the date of payment to the amount due to the holder of the Debenture. The payment
              of the principal of, and interest on, the AN Convertible Debenture will be subordinated in right of payment
              to the prior payment in full of all Senior Indebtedness of the REIT. The AN Convertible Debenture will be
              convertible, subject to certain restrictions, in whole or in part, at the holder’s option, at any time, into 8.695
              Units per $100 of face value (in the aggregate, 1.057 million Units), subject to usual anti-dilution
              adjustments, representing a conversion price of $11.50 per Unit.




                                                               77
                          ALEXIS NIHON REAL ESTATE INVESTMENT TRUST
                        NOTES TO STATEMENTS OF FORECAST CONSOLIDATED
                            NET INCOME AND DISTRIBUTABLE INCOME

                                           For the period ending December 31, 2003
                                    [in thousands of dollars, except for notes 4(i) and 4(ix)]

4.   Significant Assumptions (Cont’d)

              The AN Convertible Debenture is considered an equity instrument and, as such, will be reflected on the
              balance sheet of the REIT as a component of unitholders’ equity. Therefore, the interest related to the AN
              Convertible Debentures is chargeable directly to unitholders’ equity.

     (x)      AN Income Subsidy
              In order to provide unitholders of the REIT with a current income stream reflecting an expected lease
              renewal for a specific tenancy and a contractual rental increase for a specific tenancy otherwise affecting
              2004 as well as certain renewal and lease-up assumptions with respect to certain properties currently co-
              owned by Alexis Nihon and a third party, the vendor(s) of the Properties have agreed to provide an income
              subsidy (the “AN Income Subsidy”) to the REIT from the date of Closing equal to such expected renewal
              and contractual rental increase, until such time as the AN Income Subsidy has been replaced by rental
              income from occupying tenants. For 2003, the AN Income Subsidy amount is estimated to be $1,182.

     (xi)     Working Capital

              Management has forecasted monthly working capital balances throughout the forecast period. Cash is
              assumed to earn 3% per annum.

     (xii)    Capital Expenditures and Leasing Costs

              Capital expenditures on the Properties are forecast to be $5,636 for the forecast period. Leasing costs
              (tenant inducements and commissions) on lease renewals or new leases are forecast to be $1,707 for the
              same period.

     (xiii)   Acquisitions and Dispositions of Rental Properties

              This financial forecast does not reflect any potential sales or acquisitions of rental properties other than the
              acquisitions discussed in note 4(ii). However, it is possible that the REIT will make purchases and sales of
              rental properties during the forecast period which will only be undertaken on a basis considered by
              Management to be advantageous to the REIT and as approved by the Trustees of the REIT.

     (xiv)    Other Matters

              No significant changes in economic conditions and government legislation with respect to taxes, including
              realty taxes, other than announced changes, are anticipated during the forecast period.




                                                               78
                          ALEXIS NIHON REAL ESTATE INVESTMENT TRUST
                        NOTES TO STATEMENTS OF FORECAST CONSOLIDATED
                            NET INCOME AND DISTRIBUTABLE INCOME

                                          For the period ending December 31, 2003
                                   [in thousands of dollars, except for notes 4(i) and 4(ix)]

5.   Distributable Income

     Distributable income (“Distributable Income”) means, for any period, net income determined in accordance with
     Canadian generally accepted accounting principles, subject to certain adjustments as set out in the Contract of Trust,
     including: (i) adding back amortization on income producing properties (excluding amortization of tenant
     inducements and other leasing costs) that was deducted in computing the net income of the REIT for a relevant
     period; (ii) adding back future income tax expense and deducting future income tax benefits; (iii) adding amounts
     received under the AN Income Subsidy; and (iv) deducting interest on the AN Convertible Debenture to the extent
     not already deducted in computing net income for the period. Gains or losses on the disposition of any property or
     asset are excluded from the computation of Distributable Income; and: (a) adjustments are to be made to reflect
     amortization of fair value debt; and (b) amortization of other assets and deferred expenses, including deferred
     financing charges are not added back in calculating Distributable Income.




                                                              79
                                              MANAGEMENT OF THE REIT

          The operations and affairs of the REIT will be subject to the control of the Trustees and the operations of the REIT
will be under the direction of Management. Among other duties, Management will be responsible for providing the Trustees
and the Investment Committee with information and advice relating to acquisitions, dispositions and financing, maintaining
the books and financial records of the REIT, preparing reports and other information required to be sent to Unitholders and
other disclosure documents, calculating and determining all allocations, designations, elections and determinations to be
made in connection with the income and capital gains of the REIT for tax and accounting purposes, preparing all
documentation relating to meetings of Unitholders, completing or supervising completion of transactions, and recommending
suitable individuals for nomination as Trustees.

TRUSTEES

         The Contract of Trust provides that the assets and operations of the REIT will be subject to the control and authority
of a minimum of three and a maximum of eleven Trustees. Immediately following Closing, there will be seven Trustees.

         The term of office of each of the Trustees will expire after the first annual meeting of Unitholders following the
establishment of the REIT and, thereafter, at each annual meeting, unless a Trustee otherwise resigns, is removed or
disqualified.

          The Trustees, other than the Trustees to be appointed by the Nihon/Massicotte Group, are to be elected by resolution
passed by a majority of the votes cast at a meeting of the Unitholders. The Nihon/Massicotte Group also has the right to vote
its Units for the Trustees other than the Alexis Nihon Trustees (including for the Independent Trustees).

          A Trustee appointed or elected to fill a vacancy will be so appointed or elected for the remaining term of the Trustee
he is succeeding. The number of Trustees may be changed by Unitholders or, if authorized by Unitholders, by the Trustees,
provided that the Trustees may not, between meetings of Unitholders, appoint an additional Independent Trustee, if after such
appointment, the total number of Trustees would be greater than one and one-third times the number of Trustees in office
immediately following the last annual meeting of Unitholders. A vacancy occurring among the Independent Trustees may be
filled by resolution of the Independent Trustees only or by Unitholders at a meeting of Unitholders. An Independent Trustee
may be removed with or without cause by two-thirds of the votes cast at a meeting of Unitholders or with cause by the
majority of the remaining Independent Trustees.

         A majority of the Trustees must be resident Canadians. A majority of the Trustees must have had at least five years
substantial experience in the real estate industry, at least a majority of the Trustees must be Independent Trustees and at least
of majority of the Trustees on each committee (except for the Audit Committee and the Governance Committee, all of whose
members must be Independent Trustees) must be Independent Trustees. Certain decisions respecting the REIT must be
approved by a majority of the Independent Trustees only. See “Contract of Trust and Description of Units — Independent
Trustee Matters”. The initial Independent Trustees were appointed by 4020332 Canada Inc., the settlor of the REIT.

         The Contract of Trust provides that at all relevant times, it is intended that at least one Trustee will not be, directly
or indirectly, a Unitholder or a person who owns an option to acquire Units (a “Non-Unitholder Trustee”). The Contract of
Trust also provides that in the event that at any relevant time, there is no Non-Unitholder Trustee, the Trustees shall take
appropriate action during a period of no longer than 60 days thereafter to assure that there shall be at least one Non-
Unitholder Trustee. The Contract of Trust further provides that, notwithstanding anything therein contained to the contrary,
and to the fullest extent permitted by applicable law, all the acts of the Trustees otherwise in accordance with the Contract of
Trust shall be valid notwithstanding any temporary failure to comply with the foregoing provision.

         A quorum for all meetings of the Trustees or any committee thereof shall be at least a majority of the Trustees or of
the Trustees on such committee, as the case may be, present in person, at least one of whom shall, except for the Audit
Committee and for the Governance Committee (all of whose members must be Independent Trustees), be an Independent
Trustee. In addition, in order to transact any Independent Trustee Matter, a majority of the Independent Trustees or of the
Independent Trustees on such committee, as the case may be, must be present at the meeting of Trustees or of the committee.
The Trustees (or, when only the approval of a majority of all of the Independent Trustees is required, the Independent
Trustees) may act with or without a meeting. Any action of the Trustees (or the Independent Trustees in the circumstances
mentioned in the preceding sentence) may be taken at a meeting by vote or without a meeting by written consent or
resolution signed by all of the Trustees, or all of the Independent Trustees, as the case may be.


                                                               80
          The standard of care and duties of the Trustees provided in the Contract of Trust are similar to those imposed on a
director of a corporation governed by the Canada Business Corporations Act. Accordingly, the Contract of Trust requires
that the Trustees exercise their powers and carry out their functions honestly, in good faith, with a view to the best interests of
the REIT and the Unitholders and, in connection therewith, they exercise that degree of care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances. The duties and standard of care of the Trustees as
aforesaid are intended to be similar to and not greater than those imposed on an administrator of the property of others
charged with full administration pursuant to article 1309 of the Civil Code of Québec. The Contract of Trust provides that, to
the extent that the Trustees have contracted or delegated the performance of certain activities to a property manager, they
shall be deemed to have satisfied the aforesaid standard of care in relation thereto.

         The Contract of Trust provides for certain indemnities in favour of the Trustees and officers of the REIT and certain
other persons in certain circumstances.

          Immediately after the Closing, the Nihon/Massicotte Group shall have the right to appoint and remove the following
additional number of Trustees (i) if the Nihon/Massicotte Group beneficially owns, in the aggregate, at least 20% of the
number of Units then outstanding, three Trustees; (ii) if the Nihon/Massicotte Group beneficially owns, in the aggregate, at
least 12.5% but less than 20% of the number of Units then outstanding, two Trustees; and (iii) if the Nihon/Massicotte Group
beneficially owns, in the aggregate, at least 5% but less than 12.5% of the number of Units then outstanding, one Trustee.
Should the Nihon/Massicotte Group cease to beneficially own, in the aggregate, at least 5% of the number of Units then
outstanding, then the Nihon/Massicotte Group shall no longer have the right to appoint any Trustee. For such purposes, Units
outstanding include Units issuable upon conversion of the AN Convertible Debenture for so long as the AN Convertible
Debenture is beneficially owned by the Nihon/Massicotte Group. When the Nihon-Massicotte Group falls below any of the
thresholds provided above, it shall forever lose the right to appoint the number of Trustees related to such threshold even
though the Nihon/Massicotte Group may in the future satisfy such threshold again. The Contract of Trust provides that if the
total number of Trustees at any time is less or greater than seven, the number of Trustees which the Nihon/Massicotte Group
has the right to appoint and remove will be adjusted accordingly provided, however that at all times the majority of Trustees
will be Independent Trustees.

        Immediately following Closing, the Nihon/Massicotte Group intends to appoint Robert A. Nihon, Paul J. Massicotte
and Roger Turpin as Trustees.

CONFLICT OF INTEREST R ESTRICTIONS AND PROVISIONS

          The Contract of Trust contains “conflict of interest” provisions that serve to protect Unitholders without creating
undue limitations on the REIT. Given that the Trustees are engaged in a wide range of real estate and related activities, the
Contract of Trust contains provisions, similar to those contained in the Canada Business Corporations Act, that require each
Trustee to disclose to the REIT any interest in a material contract or transaction or proposed material contract or transaction
with the REIT (including a contract or transaction involving the making or disposition of any investment in immovable
property or a joint venture arrangement) or the fact that such person is a director or officer of, or otherwise has a material
interest in, any person who is a party to a material contract or transaction or proposed material contract or transaction with the
REIT. Such disclosure is required to be made at the meeting at which a proposed contract or transaction is first considered. In
the event that a material contract or transaction or proposed material contract or transaction is one that in the ordinary course
would not require approval by the Trustees or the Unitholders, a Trustee is required to disclose in writing to the REIT or
request to have entered into the minutes of the meetings, the nature and extent of his interest forthwith after the Trustee
becomes aware of the contract or transaction or proposed contract or transaction. In any case, a Trustee who has made
disclosure to the foregoing effect is not entitled to vote on any resolution to approve the contract or transaction unless the
contract or transaction is one relating primarily to his remuneration as a Trustee, officer, employee or agent of the REIT or
one for indemnity under the provisions of the Contract of Trust or the purchase of liability insurance.

TRUSTEES AND OFFICERS

         Currently, Richard Guay, Thomas J. Leathong, Gérard A. Limoges and Philip O’Brien are Trustees. Immediately
following Closing, Robert A. Nihon, Paul J. Massicotte and Roger Turpin will be appointed as Trustees. The name and
municipality of residence, office held with the REIT and principal occupation of each Trustee and proposed Trustee, and
officer of the REIT, are as follows:




                                                                81
Name and Municipality of Residence                         Office                             Principal Occupation


ROBERT A. NIHON(2)(4) .............................        Trustee, Chairman of the Board     Business investor
Nassau, Bahamas                                            of Trustees

PAUL J. M ASSICOTTE..............................          Trustee, President and Chief       President and Chief Executive Officer of the
Mont Saint-Hilaire, Québec                                 Executive Officer                  REIT

ROGER TURPIN.........................................      Trustee, Vice President,           Vice-President, Treasurer and Secretary of the
Saint-Eustache, Québec                                     Treasurer and Secretary            REIT

RICHARD GUAY(2)(3)(5) ...............................      Trustee                            Senior Executive Vice President, Retail and
Pointe-Claire, Québec                                                                         Commercial Financial Services, Laurentian
                                                                                              Bank of Canada

GÉRARD A. LIMOGES(1)(2)(3)(5) ...................          Trustee                            Chartered Accountant (Retired)
Montreal, Québec

THOMAS J. LEATHONG(1)(4)(5)....................            Trustee                            Director, Commercial Mortgages, Clarica Life
Burlington, Ontario                                                                           Insurance Company

PHILIP O’BRIEN(1)(3)(4)(5).............................    Trustee                            Chairman, Devencore Ltd.
Montreal, Québec

RENÉ FORTIN............................................    Vice President and Chief           Vice President and Chief Financial Officer of
Deux-Montagnes, Québec                                     Financial Officer                  the REIT

RAYMOND C. BOUCHARD ......................                 Vice President, Operations         Vice President, Operations of the REIT
Notre-Dame-de-l’Ile Perrot, Québec

W ALLY COMMISSO ..................................         Vice President, Property           Vice President, Property Management
Montreal, Québec                                           Management (Suburbs)               (Suburbs) of the REIT

DAVID DE SANTIS ...................................        Vice President, Acquisitions and   Vice President, Acquisitions and Development
Montreal, Québec                                           Development                        of the REIT

PIERRE DESTREMPES...............................           Vice President, Downtown           Vice President, Downtown Office Leasing of
Montreal, Québec                                           Office Leasing                     the REIT

CÉLINE FOURNIER...................................         Vice President, Shopping Centre    Vice President, Shopping Centre Leasing of the
Boucherville, Québec                                       Leasing                            REIT

SERGE M ORAND ......................................       Vice President, Industrial         Vice President, Industrial Leasing of the REIT
Laval, Québec                                              Leasing

LIEBA SHELL ............................................   Vice President, Legal Services     Vice President, Legal Services of the REIT
Montreal, Québec

Notes:
(1)
    Member of the Audit Committee
(2)
    Member of the Compensation Committee
(3)
    Member of the Governance Committee
(4)
    Member of the Investment Committee
(5)
    Independent Trustee

         Paul Kennedy was a Trustee of the REIT from October 18, 2002 until his resignation on November 12, 2002.
Mr. Kennedy resigned as a result of an internal policy of his employer prohibiting executives or employees from acting as
directors or trustees of public entities. Mr. Kennedy advised the REIT that his resignation was in no way related to any matter


                                                                                82
concerning the REIT or its Management and that his resignation was not due to a conflict of interest or his ineligibility to be a
Trustee. Mr. Kennedy was replaced by Mr. Gérard A. Limoges. Mr. Limoges is an Independent Trustee and became a
Trustee on November 25, 2002.

          In connection with the Property Closing, the hypothecary creditors of Alexis Nihon in respect of the Properties have
consented or will be required to consent to the transfer of the Properties on which they have security to the REIT, but have
not and will not pass upon the merits of this Offering in any respect, including as to the quality of an investment in Units or
the value of any of the Properties and none of the statements in this prospectus has been made by or on behalf of or is
attributable to, any such creditors. In addition, the Independent Trustees have acted and will act in their capacity as
Independent Trustees of the REIT and not as representatives of their employers and their employers may not, in any
circumstances, be held responsible for any act or omission of the Independent Trustees, acting as Trustees of the REIT.

         Thomas J. Leathong, one of the Trustees, is the Director, Commercial Mortgages, Underwriting/Asset Management
with Clarica Life Insurance Company, a hypothecary creditor of Place Alexis Nihon. Mr. Leathong will cease to occupy these
positions effective December 27, 2002. Until such time, Mr. Leathong will abstain from all matters relating to the transfer of
Place Alexis Nihon to the REIT or to the management of Place Alexis Nihon. Richard Guay, one of the Trustees, is Senior
Executive Vice President, Retail and Commercial Financial Services, of a Canadian chartered bank which is a hypothecary
creditor of the Properties located at 777 Ste-Catherine West and 1401 McGill College, 6320-6380 Côte-de-Liesse Road and
455 Fénélon. Mr. Guay will abstain from all matters relating to the transfer of such Properties to the REIT or to the
management of such Properties.

         Immediately prior to the completion of the Offering, no Trustee or executive officer of the REIT will hold any Units.
To the knowledge of the REIT, immediately following the completion of the Offering, no Trustee or executive officer of the
REIT (other than Paul J. Massicotte, Robert A. Nihon and René Fortin) will hold any Units. Following Closing, members of
the Nihon Family and members of the Massicotte Family will, directly and indirectly, exercise control over 8,401,200 Units,
representing approxi mately 49.7% of the Units to be outstanding immediately following the completion of the Offering,
without giving effect to the conversion of the AN Convertible Debenture or the exercise of the Over-Allotment Option.

KEY MANAGEMENT P ERSONNEL

         A majority of the Trustees and all of the officers of the REIT have been involved in a broad range of real estate and
related activities for at least five years. The REIT’s senior management team includes:

ROBERT A. NIHON, TRUSTEE AND CHAIRMAN

         Robert A. Nihon is the Chairman of the REIT. The Chairmanship of the REIT is a non-executive chairmanship. Mr.
Robert A. Nihon is the son of the founder of the Alexis Nihon Group, Mr. Alexis Nihon. Mr. Nihon has been Chairman of the
Alexis Nihon Group since 1980. Mr. Nihon is also Chairman & Chief Executive Officer of International Bankers Ltd. in
Nassau, Bahamas, a merchant banker. He is also a former member of the New York Stock Exchange. He is involved in many
philanthropic endeavours and is Chairman of The Governor General’s Youth Award Program and a Member of the Board of
Trustees of the Canadian Lyford Cay Foundation. Mr. Nihon has been the Honorary Consul for Canada to The Bahamas
since 1997.

PAUL J. MASSICOTTE , TRUSTEE AND PRESIDENT AND CHIEF EXECUTIVE OFFICER

         Paul J. Massicotte obtained his Bachelor of Commerce Degree in 1974 from the University of Manitoba and joined
Coopers & Lybrand as an articling accountant. In 1976, he received the designation of Chartered Accountant with the
Manitoba Institute of Chartered Accountants. The following year, he became a member of the Ordre des comptables agréés
du Québec. In 1977, Mr. Massicotte was appointed Vice President of John A. Flanders Ltd., a real estate and insurance
company, and the following year he became Executive Vice President, Chief Financial Officer and director of the Marwest
Group of Companies, real estate developers. In 1983, Mr. Massicotte was appointed Executive Vice President, Chief
Financial Officer and director of Duraps Corporation, a real estate developer, before moving to Montreal in 1985 to join the
Alexis Nihon Group where he has served as President since the end of that year.

         Mr. Massicotte is also Lead Director of the board of directors of the Bank of Canada and sits on the board of
                          or
directors of the Council f Canadian Unity and the Ste-Anne’s Hospital Foundation. He has also contributed as a past
member of the board of directors and of the Executive Committee of the Canadian Institute of Public and Private Real Estate
Companies (CIPPREC), the Canadian Chamber of Commerce, the Canadian Home Income Plan, the Board of Trade of
Metropolitan Montreal Foundation and Board of Trade of Metropolitan Montreal, as past Chairman of the Young President’s


                                                               83
Organization, Quebec Chapter, and past member of the Canadian Board of the Young Presidents’ Organization, as well as a
member of the Regional Council of the Société du Quartier International de Montreal (QIM). He was a founding director,
past Chairman and past President of the Urban Development Institute of Quebec and board member of La Solidarité, the
Study Committee on Fiscal Equity at the Municipal Level in the Montreal Area, and UDI Canada. In 1997/1998 he
volunteered as mentor to the Québec prize-winner of the Business Development Bank of Canada Award. Mr. Massicotte is
also active with several social and charitable institutions as Honorary Co-Chair of the 2002-2003 Fundraising Campaign for
the George Stephen House Trust Fund and Honorary Patron of the 2002-2003 Financial Campaign of Le Chaînon.

         Paul J. Massicotte was an officer of a corporation that was previously part of the Alexis Nihon Group and that held a
particular property and filed an assignment in bankruptcy in June 2002 pursuant to a liquidation plan mutually agreed to by
the corporation and its principal creditor, a Canadian chartered bank.

ROGER TURPIN, TRUSTEE, VICE PRESIDENT, TREASURER AND S ECRETARY

         Roger Turpin is Vice President, Treasurer of the Alexis Nihon Group since 1999 and Secretary since 1997. Prior to
joining the Alexis Nihon Group in 1982, he worked as a financial analyst for Armstrong Construction, which was then
involved in the development of Mirabel International Airport. As a result, Mr. Turpin has over 20 years of experience in real
estate.

         Mr. Turpin was the sole director of a corporation that was previously part of the Alexis Nihon Group and that held a
particular property and filed an assignment in bankruptcy in June 2002 pursuant to a liquidation plan mutually agreed to by
the corporation and its principal creditor, a Canadian chartered bank.

R ENÉ FORTIN, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

         René Fortin has been with the Alexis Nihon Group since 1985 and has been Vice President and Corporate Controller
since 1999. He holds a bachelor of commerce degree in accounting from Concordia Un iversity. Mr. Fortin received his CGA
designation and is a member of the Corporation professionnelle des comptables généraux licenciés du Québec since 1992.

RAYMOND C. BOUCHARD, VICE PRESIDENT, OPERATIONS

         Raymond Bouchard has over 30 years of experience in the real estate field. He joined the Alexis Nihon Group in
1997 and has been Vice President, Operations since 1998. Previously, Mr. Bouchard managed numerous super-regional
properties with the Cadillac Fairview Corporation in the retail field from 1974 to 1986, and became Vice-President,
Operations for Eastern Canada in 1986, being responsible for properties in Montreal, Québec City, Ottawa, Kingston and
Cornwall. He also was a marketing and advertising account executive with the Ivanhoe Corporation from 1968 to 1974.
Mr. Bouchard studied business administration at McGill University and Michigan State University.

         Mr. Bouchard is President of BOMA Québec and is active on the board of directors of the multiple sclerosis society
of the Province of Québec.

WALLY COMMISSO , VICE PRESIDENT, PROPERTY MANAGEMENT

         Wally Commisso has been with the Alexis Nihon Group since 1986, when he joined the construction department as
project director. He was appointed Property Manager for the Alexis Nihon suburban properties portfolio in 1992, and
promoted to Vice President, Property Management (Suburbs) in 1999, where he now heads the professional team which
manages the Alexis Nihon Group’s suburban portfolio. He has pursued recognized property management courses and is
currently working towards his accreditation with BOMA for a Registered Property Management Certificate.

DAVID DE S ANTIS , VICE PRESIDENT, ACQUISITIONS AND DEVELOPMENT

         David De Santis joined the Alexis Nihon Group in 1989 as a project manager for development and was subsequently
promoted to Vice President, Acquisitions and Development. Mr. De Santis has over 15 years of experience in real estate. A
graduate of the McGill University School of Architecture, he also has five years of practice in architectural design. Mr. De
Santis currently serves on the board of directors of Quebec’s Urban Development Institute and Montreal’s West Island
Business Development Council.




                                                             84
PIERRE D ESTREMPES , VICE PRESIDENT, DOWNTOWN OFFICE LEASING

         Pierre Destrempes has been with the Alexis Nihon Group since 1997 and has been Vice President, Downtown
Office Leasing since 1999. Prior to joining Alexis Nihon, Mr. Destrempes held positions as Leasing Director of Magil
Laurentienne from 1994 to 1997 and as a leasing representative at Trizec from 1986 to 1994. Mr. Destrempes is a graduate of
the University of Moncton, where he received a bachelor’s degree in geography and of the University of Ottawa, where he
received a bachelor’s degree in political science.

C ÉLINE FOURNIER , V ICE PRESIDENT S HOPPING CENTRE LEASING

          Céline Fournier joined the Alexis Nihon Group in 1995 and has been Vice President, Shopping Centre Leasing since
1999. Mrs. Fournier has over 20 years of experience in real estate having held management positions with various entities
including Cadillac Fairview Corporation, Brookfield Development Corporation and J.K. Investments Ltd. Mrs. Fournier is
actively involved in several volunteer organizations, including as a member of the fund-raising team of UNICEF Montérégie,
as a speaker and member of the Réseau des Femmes d’Affaires du Québec and as a member of the Conseil Québecois du
Commerce de Détail and of the International Council of Shopping Centres.

S ERGE MORAND, VICE PRESIDENT, INDUSTRIAL LEASING

         Serge Morand has over 16 years of experience working for major real estate organizations in Montreal, specializing
in the development and leasing of industrial and suburban properties. He holds a Bachelor of Arts in Economics from
Concordia University. Mr. Morand joined the Alexis Nihon Group in 1996 and was appointed to his current role as Vice-
President, Industrial Leasing in 1999. Mr. Morand is directly responsible for the leasing of the Alexis Nihon Group’s
suburban industrial and office space.

LIEBA SHELL, VICE PRESIDENT, LEGAL S ERVICES

         Lieba Shell graduated from McGill University (BCL/LLB) and Yale University (BA) and was admitted to the
Québec Bar in 1981. Mrs. Shell has more than 15 years of experience both in private practice, at Martineau Walker (now
Fasken Martineau DuMoulin LLP) and Godin, Raymond, Harris, Thomas, and as “in-house” legal counsel. Her expertise is
in corporate and real estate law, with strong emphasis on all aspects of commercial real estate, including acquisitions,
dispositions, financing, negotiation and business related matters. Mrs. Shell joined the Alexis Nihon Group in 1992 and
became Vice President, Legal Services in 1999.

        The initial Independent Trustees will be:

RICHARD GUAY, TRUSTEE

         Richard Guay is Senior Executive Vice President, Retail and Commercial Financial S     ervices, of the Laurentian
Bank of Canada, President and Chef de la direction of BLC Trust, President of Trust La Laurentienne du Canada Inc. and
President of Fondation Banque Laurentienne. Mr. Guay joined La Financière Coopérants prêt épargne Inc. in 1991 which
was later acquired by Laurentian Bank of Canada, and has remained with this institution ever since. Previously, he worked
for 12 years at the National Bank of Canada. Currently, the Canadian chartered bank of which Mr. Guay is an executive is a
hypothecary lender to the Alexis Nihon Group which has provided approximately 12% of the existing financing in respect of
the Properties.

        A graduate of the Université du Québec à Montréal (UQAM), Mr. Guay also pursued the University of Western
Ontario’s Management Training Course and Harvard University’s International Senior Management Program. He is a
member of the board of directors and President of the Executive Committee of the Fondation de l’Université du Québec à
Montréal, Vice President of the board of directors, President of the Executive Committee and President of the Audit
Committee of UQAM and President of the board of directors of Corporation Financière Brome Inc.

       Mr. Guay has recently been recognized by the École des Sciences de la Gestion de l’UQAM in the context of their
Gala Reconnaissance and previously received the UQAM medal and Prix Performance awarded by the Réseau Gestion
UQAM to a graduate having particularly distinguished itself in the Quebec business field.




                                                            85
GÉRARD A. LIMOGES , TRUSTEE

        Gérard A. Limoges is a chartered accountant by profession. After holding the offices of President of Caron Bélanger
Ernst & Young and of Deputy Chairman of Ernst & Young Canada, Mr. Limoges retired in September 1999.

        Mr. Limoges began his career at Ernst & Young (formerly Clarkson Gordon) in Montreal in 1962. A graduate of
HEC (University of Montreal), Mr. Limoges became a Chartered Accountant in 1967. He successively held various positions
within Ernst & Young, including managing partner of the Montreal office, President of Ernst & Young for the Province of
Québec and Vice-President of Ernst & Young Canada.

         Mr. Limoges has served as an advisor for various governmental projects and as an officer for numerous charitable
organizations. He is currently a member of the board of several organizations and companies, including B.N.Y. Trust
Company of Canada and Fiducie Desjardins.

THOMAS J. LEATHONG, TRUSTEE

         Since 1992, Mr. Leathong has been Director, Commercial Mortgages, Underwriting / Asset Management with
Clarica Life Insurance Company. Mr. Leathong will cease to occupy his positions with Clarica Life Insurance Company
effective December 27, 2002. He was responsible for all commercial mortgage asset management for a $4.5 billion portfolio
across Canada. From 1992 to 2002, Mr. Leathong was responsible for the internal valuation of the mortgage assets insuring
compliance with the Office of the Superintendent of Financial Institutions, Canada, as well as internal and external audit
requirements. While Mr. Leathong voluntarily declared personal bankruptcy in 1995, he was discharged therefrom in 1996.
Mr. Leathong has experience in underwriting and reviewing mortgage proposals from across Canada for multi-family
residential, office, retail and industrial properties.

         From 1984 to 1992, Mr. Leathong was Vice President, Commercial Mortgage Lending, Central and Western Canada
for Castor Holdings Ltd. located in Toronto, a company specializing in interim and mezzanine type commercial mortgages
syndicated to commercial investors both in Europe and North America. From 1982 to 1984, he was Assistant Manager,
Commercial Mortgage Investments for the Ontario Municipal Employees Retirement Fund (OMERS) in Toronto. In this
position, he was responsible for commercial and NHA insured mortgage investments located throughout Canada.

         From 1978 to 1982, Mr. Leathong was Vice President of Mortgages for District Trust Company located in London,
Ontario, responsible for head office mortgage operations and five mortgage lending branches throughout south-western
Ontario. He was Commercial Mortgage Officer, Montreal Trust Company from 1975 to 1977. This was a Head Office
Department located in Toronto and responsible for all commercial mortgage lending outside of the Province of Québec. This
department was also responsible for syndication of commercial mortgage products to Montreal Trust clients such as
Metropolitan Life and Travellers Insurance.

PHILIP O’B RIEN, TRUSTEE

          Philip O’Brien is the founder and Chairman of Devencore Ltd., a real estate company based in Montreal. Devencore
provides its expertise to businesses and governments on real estate strategies and implementations in the commercial,
institutional, and industrial sectors.

         Mr. O’Brien has acted as a key participant in the following urban initiatives in Montréal: the preservation of McGill
College Avenue, the design and planning of Montreal’s Old Port, the building and financing of the Montreal World Trade
Centre and the Inter-Continental Hotel complex, the building of the Place Mercantile and the facilitating of the joint venture
to build Place de la Cathédrale.

         Mr. O’Brien is the Chairman of the Foundation for the Canadian Centre for Architecture, a member of the Board of
Directors of Blue Cross Insurance Group, a member of the Board of Trustees of the Canadian Centre for Architecture, a
member of the Board of Governors of McGill University, a member of the Board of Directors of the Montreal General
Hospital, a member of the Business Council on National Issues and on Canada/US Trade Committee, a member of the Board
of Directors of the McGill University Health Centre, a member of the Advisory Committee of Station Mont-Tremblant and a
member of the Advisory Committee for Tourism Investment for Société générale de financement du Québec.




                                                             86
INVESTMENT COMMITTEE

         The Contract of Trust provides that the Trustees may, subject to applicable law, from time to time appoint from
among their number an Investment Committee consisting of at least three Trustees. At least two-thirds of the members of the
Investment Committee must have had at least five years substantial experience in the real estate industry. In addition, a
majority of the members of the Investment Committee must be Independent Trustees and one member must be an Alexis
Nihon Trustee (for so long as the Nihon/Massicotte Group is entitled to appoint at least one Trustee).

          On the Closing, the Trustees will appoint an Investment Committee consisting of three Trustees, being Thomas J.
Leathong, Philip O’Brien and Robert A. Nihon. The Investment Committee will recommend to the Trustees whether to
approve or reject proposed transactions, including proposed acquisitions and dispositions of investments and borrowings
(including the assumption or granting of any immovable hypothec or mortgage) by the REIT. Subject to the provisions
relating to Independent Trustee matters, the Trustees may delegate to the Investment Committee the power to approve or
reject proposed acquisitions, dispositions or borrowings, as the case may be, provided that the Trustees must approve any
transaction where the acquisition, disposition or borrowing, as the case may be, would be in or for an amount in excess of
ten percent of Adjusted Unitholders’ Equity. Investment Committee approval is not required for the renewal, extension or
modification of any existing immovable hypothec or mortgage (including the Assumed Hypothecs) or for the transactions
contemplated by the Purchase Agreement.

AUDIT COMMITTEE

        The Contract of Trust requires the creation, subject to applicable law, of an Audit Committee, consisting of at least
three Trustees, to review the financial statements of the REIT. All of the members of the Audit Committee must be
Independent Trustees. The Trustees have appointed an Audit Committee consisting of three Trustees, being
Thomas J. Leathong , Gérard A. Limoges and Philip O’Brien.

COMPENSATION COMMITTEE

           The Contract of Trust requires the creation, subject to applicable law, of a Compensation Committee, consisting of
at least three Trustees, to review Management’s compensation. The majority of the members of the Compensation Committee
must be Independent Trustees and one member must be an Alexis Nihon Trustee (for so long as the Nihon/Massicotte Group
is entitled to appoint one Trustee). Immediately following Closing, the Trustees will appoint a Compensation Committee
consisting of three Trustees, being Richard Guay, Gérard A. Limoges and Robert A. Nihon.

GOVERNANCE COMMITTEE

          The Contract of Trust requires the creation, subject to applicable law, of a Governance Committee, consisting of at
least three Trustees, to review the governance of the REIT. All of the members of the Governance Committee must be
Independent Trustees. Immediately following Closing, the Trustees will appoint a Governance Committee consisting of three
Trustees, being Richard Guay, Gérard A. Limoges and Philip O’Brien.

R EMUNERATION OF TRUSTEES AND OFFICERS

         A person who is employed by and receives salary from the REIT or a wholly-owned subsidiary of the REIT will not
receive any remuneration from the REIT for serving as a Trustee. Trustees who are not so employed will receive
remuneration from the REIT in the amount of $15,000 per year and $1,000 for each meeting of Trustees attended in person
and $500 for each meeting of Trustees attended by telephone. In all cases, Trustees will be entitled to reimbursement from
the REIT of their out-of-pocket expenses incurred in acting as Trustees. The Chairman of the Board of Trustees and the
Chairman of each committee of Trustees of the REIT will receive additional remuneration from the REIT in the amount of
$2,000 per year. Robert A. Nihon has agreed to waive all remuneration he would otherwise be entitled to for serving as
Trustee, Chairman of the Board of Trustees or Chairman of any committee of Trustees of the REIT, and will be reimbursed
exclusively for out-of-pocket expenses incurred in the exercise of such functions.

LONG TERM INCENTIVE PLAN

         It is intended that the Trustees and senior officers of the REIT, its wholly-owned subsidiaries as well as certain trusts
of which the REIT is, directly or indirectly, the beneficiary will be eligible to participate in the REIT’s Long-Term Incentive
Plan (the “Long Term Incentive Plan” or “LTIP”) to be established by the REIT following Closing. The purpose of the LTIP
will be to enhance the REIT’s ability to attract, retain and motivate key personnel, and reward senior officers for significant


                                                               87
performance and cash flow growth of the REIT. Pursuant to the LTIP, the REIT would set aside a pool of funds based upon
the REIT’s financial performance benchmarked against certain distributable income thresholds amounts. The REIT, or a trust
established for such purpose, would then purchase Units, if and when required to, in the market with such pool of funds and
would hold such Units until such time as ownership vests with each participant. Participants would be entitled to receive the
vested portion of their awards in Units or up to a percentage in cash to be determined by the Trustees and set forth in the
LTIP. The LTIP would be administered by the Compensation Committee or the Trustees who would have the power to,
among other things: (i) determine those senior officers or key employees who participate in the LTIP; and (ii) determine the
awards allocated under the LTIP to each participant.

UNIT OPTION PLAN

          At or prior to Closing, the REIT will adopt a unit option plan (the “Unit Option Plan”). Participation in the Unit
Option Plan will be restricted to the Trustees, directors, officers and employees of the REIT, its wholly-owned subsidiaries as
well as certain trusts of which the REIT is, directly or indirectly, the beneficiary, all as resolved by the Compensation
Committee or the Trustees. The Trustees will have the power, subject to any other specific provisions of the Unit Option
Plan, among others, to determine (i) the eligible persons to whom options are granted, (ii) the number of Units covered by
each option, (iii) the exercise price of each option, (iv) the time or times when options will be granted and exercisable and to
establish policies and to adopt rules and regulations for carrying out the purposes, provisions and administration of the Unit
Option Plan. Options will have a maximum term of ten years and will be exercisable at a price not less than the market price
of the Units, which for the purpose of the Unit Option Plan, shall be calculated by reference to the reported closing sale price
for the Units on the principal stock exchange on which the Units are trading on the last trading day before the day on which
an option is granted. No option or any interest therein will be transferable or assignable otherwise than by will or pursuant to
the laws of succession. The maximum number of Units reserved for issuance pursuant to the Unit Option Plan will be
2,535,180 Units. An option shall expire and terminate immediately upon the optionee who holds such option ceasing to be
eligible for a grant of options under the Unit Option Plan. However, the Trustees may, in their entire discretion, at the time of
the granting of options, determine the provisions relating to expiration of an option upon the bankruptcy, death, or
termination of employment or position of an optionee while holding an option which has not been fully exercised, provided,
however, that (i) upon the termination of an optionee’s employment or position with the REIT otherwise than by reason of
death, any option or unexercised part thereof granted to such optionee may be exercised by him for that number of Units only
which he was entitled to acquire under the option at the time of such termination and provided further that such option shall
in no event expire later than the earlier of (a) one year following the optionee’s employment or position being terminated; and
(b) the expiry date of such option; and (ii) in the event of death of an optionee, any option or unexercised part thereof granted
to such optionee may be exercised by the legal representative of such optionee for that number of Units only which the
deceased optionee was entitled to acquire under the option at the time of such optionee’s death and provided further that such
option shall in no event expire later than the earlier of (a) three years following the optionee’s death; and (b) the expiry date
of such option. The Trustees will have the right to extend the period of time over which any Option held by an optionee who
has ceased to be an Eligible Person is exercisable, subject to any required consent or approval from any securities exchange
or governmental or regulatory body.

         The total number of Units issuable to any optionee under the Unit Option Plan, together with any Units reserved for
issuance to such optionee under any other treasury unit compensation arrangement of the REIT, will not exceed 5 % of the
issued and outstanding Units at the date of the grant of the option. In addition, except with the approval of the Unitholders of
the REIT given by the affirmative vote of a majority of the votes cast at a meeting of the Unitholders of the REIT, excluding
the votes attaching to Units beneficially owned by Insiders (as defined in the Unit Option Plan) to whom Units may be issued
pursuant to the Unit Option Plan and any other treasury unit compensation arrangement of the REIT, no options shall be
granted to any optionee if such grant could result, at any time, in:

         (i)     the number of Units reserved for issuance to Insiders pursuant to options granted under the Unit Option Plan
                 and any other treasury unit compensation arrangement of the REIT exceeding 10% of the issued and
                 outstanding Units;

         (ii)    the issuance to Insiders pursuant to options granted under the Unit Option Plan and any other treasury unit
                 compensation arrangement of the REIT, within a one-year period, of a number of Units exceeding 10% of the
                 issued and outstanding Units; or

         (iii)   the issuance to any one Insider and such Insider's associates and Associates pursuant to options granted under
                 the Unit Option Plan and any other treasury unit compensation arrangement of the REIT, within a one-year
                 period, of a number of Units exceeding 5% of the issued and outstanding Units.



                                                               88
        In the event the REIT proposes to consolidate, merge or amalgamate with any other trust or entity (other than a
wholly-owned entity) or to distribute all of its assets or to liquidate, dissolve or wind-up, or in the event that an offer to
purchase or repurchase the Units of the REIT or any part thereof shall be made to all or substantially all unitholders of the
REIT, including, without limitation, a take-over bid, the Trustees may, in their sole discretion, give notice in writing to each
optionee advising such optionee that all options (whether vested or unvested) may be exercised in whole or in part by the
optionees, upon the conditions determined by the Trustees, and any options not so exercised shall automatically expire.

         No options will be granted under the Unit Option Plan at Closing and grants of options under the Unit Option Plan
will be made by the Compensation Committee or the Trustees from and after Closing.

EMPLOYMENT AGREEMENT WITH PAUL J. MASSICOTTE AND REMUNERATION OF S ENIOR OFFICERS

          At or prior to Closing, Alexis Nihon Management (Canada) Inc. will enter into an employment agreement (the
“Employment Agreement”) with Paul J. Massicotte. The obligations of Alexis Nihon Management (Canada) Inc. under the
Employment Agreement will be guaranteed by the REIT. The Employment Agreement provides that Mr. Massicotte will be
eligible to participate in any annual performance bonus plans, long-term incentive plans, or equity-based compensation plans
established or maintained by the REIT and/or Alexis Nihon Management (Canada) Inc. for its senior executive officers,
and/or employees including the LTIP and the Unit Option Plan.

         The Employment Agreement provides that if Alexis Nihon Management (Canada) Inc. terminates Mr. Massicotte’s
employment “without cause” or Mr. Massicotte terminates his employment with “good reason” in circumstances where a
“change of control” has not occurred, Alexis Nihon Management (Canada) Inc. will: (i) pay Mr. Massicotte an amount equal
to two times his annual base salary and other related employment benefits, and two times the highest of the amount of his
Bonus (as defined below); (ii) continue his coverage under the REIT’s and/or Alexis Nihon Management (Canada) Inc.’s
medical, dental, life, and other executive benefit plans for two years following the termination of employment, provided that
these perquisites will be reduced to the extent he receives comparable perquisites without cost during the two year period
following the termination of employment; (iv) continue the vesting of any outstanding options and other equity-based
compensation awards, including with respect to options granted under the Unit Option Plan; and (v) the retention period with
respect to any Units purchased by or for Mr. Massicotte under the LTIP will immediately expire.

         The Employment Agreement also provides that if, within three years following a “change of control” of the REIT,
Alexis Nihon Management (Canada) Inc. terminates Mr. Massicotte’s employment “without cause” or he terminates his
employment with “good reason”, Alexis Nihon Management (Canada) Inc. will: (i) pay him three times his annual base
salary and other related employment benefits; (ii) three times the highest of: (a) the average annual bonus paid for the three
fiscal years immediately preceding the termination of employment; (b) the target bonus for the fiscal year in which such
termination of employment occurs, or (c) the actual bonus attained for the fiscal year in which such termination occurs (the
bonuses in (a), (b) and (c) above, the “Bonus”); (iii) continue his coverage under the REIT’s and/or Alexis Nihon
Management (Canada) Inc.’s medical, dental, life and other executive benefit plans for three years following termination of
employment; (iv) pay the value of three years of continued coverage under any pension, profit sharing or other retirement
plan maintained by the REIT and/or Alexis Nihon Management (Canada) Inc. for three years following termination of
employment; (v) continue to provide him with certain perquisites, provided that these perquis ites will be reduced to the
extent Mr. Massicotte receives comparable perquisites without cost during the three year period following his termination of
employment; (vi) immediately vest all options and other equity-based awards, including with respect to options granted under
the Unit Option Plan; and (vii) the retention period with respect to any Units purchased by or for Mr. Massicotte under the
LTIP will immediately expire.

        Salary ranges for the REIT’s officers will be based on salaries paid by other publicly held Canadian real estate
investments trusts for positions similar in magnitude, scope and complexity.

        It is anticipated that the officers of the REIT and its affiliates will also be eligible to receive annual bonuses
depending upon the financial performance of the REIT and will be eligible to participate in the LTIP and the Unit Option
Plan.


                             INVESTMENT GUIDELINES AND OPERATING POLICIES

INVESTMENT GUIDELINES

         The Contract of Trust provides for certain guidelines on investments which may be made by the REIT.


                                                              89
The assets of the REIT may be invested only in accordance with the following guidelines:

(i)     the REIT will focus its acquisition activities on existing income -producing properties in Canada and the
        United States that are capital property of the REIT, including office, retail, industrial, mixed-use and multi-
        family residential properties;

(ii)    notwithstanding anything in the Contract of Trust, the REIT shall not make any investment or take any action
        or omit to take any action that would result in Units not being units of a “mutual fund trust” and of a “unit
        trust” within the meaning of the Tax Act (or otherwise disqualify the REIT as a “mutual fund trust” or a “unit
        trust” within the meaning of the Tax Act) that would result in Units being disqualified for investment by
        Deferred Income Plans or RESPs, that would result in the REIT being liable under the Tax Act to pay a tax
        imposed as a result of holdings by the REIT of foreign property as defined in the Tax Act, that would result
        in Units being foreign property for the purposes of the Tax Act or that would result in the REIT paying a tax
        under the registered investment provisions of the Tax Act imposed for exceeding certain investment limits;

(iii)   subject to paragraph (ii) above, the REIT may invest in a joint venture arrangement only if:

        (a)   the arrangement is one pursuant to which the REIT holds an interest in immovable property jointly or in
              common with others (“joint venturers”) either directly or through the ownership of an interest in a
              corporation or other entity (a “joint venture entity”) as co-owners and not as partners and such
              immovable property is capital property of the REIT and if owned through the ownership of an interest
              in a joint venture entity, the said immovable property is capital property of the joint venture entity;

        (b)   the REIT’s interest in the joint venture arrangement is not subject to any restriction on transfer other
              than a right of first offer or a right of first refusal, if any, in favour of the joint venturers;

        (c)   the REIT has a right of first offer or a right of first refusal to buy the interests of the other joint
              venturers;

        (d)   the joint venture arrangement provides an appropriate buy-sell mechanism to enable a joint venturer to
              purchase the other joint venturers’ interests or to sell its interest;

        (e)   the joint venture arrangement provides that the liability of the REIT to third parties is joint and not
              solidary (the common law equivalent being “several and not joint and several”), provided however, that
                                                                     ay
              subject to any remedies that each joint venturer m have against the other joint venturers, a joint
              venturer shall be hypothecarily liable to the full extent of the property and, further, may be required to
              give up its interest in any particular property owned by the joint venture entity as a result of another
              joint venturer’s failure to honour its proportionate share of the obligations relating to such property; and

        (f)   the joint venture arrangement permits, but does not require, the REIT or its designee to participate fully
              in the management thereof;

        provided that, notwithstanding the foregoing, the REIT may from time to time enter into any joint venture
        arrangement which does not comply with any of subparagraphs (b), (c), (d) or (e) above if the Trustees
        determine that the investment is desirable for the REIT and otherwise complies with the investment
        guidelines and operating policies of the REIT;

(iv)    except for temporary investments held in cash, deposits with a Canadian chartered bank or trust company
        registered under the laws of a province of Canada, short-term government debt securities, or in money
        market instruments of, or guaranteed by, a Schedule 1 Canadian chartered bank maturing prior to one year
        from the date of issue, or except as permitted in the investment guidelines of the REIT, the REIT may not
        hold securities other than securities of a joint venture entity or an entity or corporation which is wholly
        owned by the REIT or a trust of which the REIT is the sole beneficiary, in each case, formed and operated
        solely for the purpose of holding a particular immovable property or immovable properties or for any
        purpose relating to the activities of the REIT, and provided further that, notwithstanding anything contained
        in the Contract of Trust to the contrary, the REIT may acquire securities of other real estate investment trusts
        and the REIT may hold Units, including for resale or pursuant to the exercise of a recourse under any surety
        agreement, the whole subject to paragraph (ii) above;



                                                       90
(v)     the REIT shall not invest in general partnerships or limited partnerships provided that the REIT may invest in
        a limited partnership if: (a) the limited partnership is formed and operated solely for the purpose of acquiring,
        owning, maintaining, improving, leasing or managing a particular immovable property or properties or
        interests therein; (b) the REIT’s interest in the limited partnership is not subject to any restriction on transfer
        other than a right of first offer or right of first refusal, if any, in favour of any other partner or any affiliate
        thereof; (c) the REIT has a right of first offer or right of first refusal to buy the interests of the other partners;
        and (d) the REIT has received a legal opinion to the effect that the investment (A) would not result in the
        REIT or any Deferred Income Plan being liable under the Tax Act to pay tax imposed as a result of holdings
        by the REIT of foreign property as defined in the Tax Act, (B) would not disqualify the REIT as a “mutual
        fund trust” within the meaning of the Tax Act, and (C) would not result in the REIT losing any status under
        the Tax Act that is otherwise beneficial to the REIT and its Unitholders, provided that, notwithstanding the
        foregoing, the REIT may from time to time enter into any limited partnership arrangement which does not
        comply with any of clauses (b) or (c) above if the Trustees determine that the investment is desirable for the
        REIT and otherwise complies with the investment guidelines and operating policies of the REIT, the whole
        pursuant to paragraph (ii) above;

(vi)                                           h
        except as otherwise prohibited in t e Contract of Trust, the REIT may invest in interests (including
        ownership and leasehold interests) in income-producing immovable property in Canada and the United States
        that is capital property of the REIT;

(vii)   the REIT shall not invest in rights to or interests in mineral or other natural resources, including oil or gas,
        except as incidental to an investment in immovable property that is capital property of the REIT, the whole
        subject to paragraph (ii) above;

(viii) the REIT shall not invest in operating businesses;

(ix)    the REIT shall not invest in raw land for development except for properties adjacent to existing properties of
        the REIT for the purpose of: (a) the renovation or expansion of existing facilities that are capital property of
        the REIT; or (b) the development of new facilities which will be capital property of the REIT, the whole
        subject to paragraph (ii) above;

(x)     subject to paragraph (ii) above, the REIT may invest in immovable hypothecs, mortgages, hypothecary bonds
        or mortgage bonds (including, with the consent of a majority of the Trustees, a participating or convertible
        immovable hypothec or mortgage) where:

        (a)   the immovable property which is security therefor is income-producing immovable property which
              otherwise meets the investment guidelines and operating policies of the REIT;

        (b)   the immovable hypothec or mortgage is an immovable hypothec or mortgage registered on title to the
              immovable property which is security therefor; and

        (c)   the aggregate value of the investments of the REIT in these immovable hypothecs and mortgages, after
              giving effect to the proposed investment, will not exceed 20% of the Adjusted Unitholders’ Equity;

(xi)    subject to paragraph (ii) above, the REIT may invest in immovable hypothecs or mortgages if the sole
        intention is to use the acquisition of the immovable hypothecs and mortgages as a method of acquiring
        control of an income-producing immovable property which would otherwise meet the investment guidelines
        and operating policies of the REIT and provided the aggregate value of the investments of the REIT in these
        immovable hypothecs and mortgages after giving effect to the proposed investment, will not exceed 20% of
        the Adjusted Unitholders’ Equity;

(xii)   at no time will indebtedness aggregating more than 15% of Gross Book Value (other than trade payables,
        accrued expenses and distributions payable) be at floating interest rates;

(xiii) subject to paragraph (ii) above, the REIT may invest an amount (which, in the case of an amount invested to
       acquire immovable property, is the purchase price less the amount of any indebtedness assumed or incurred
       by the REIT and secured by an immovable hypothec or mortgage on such property) of up to 15% of the
       Adjusted Unitholders’ Equity in investments or transactions which do not comply with paragraphs (iv), (vi),
       (x) and (xi) above under the heading “Investment Guidelines and Operating Policies — Investment


                                                         91
                Guidelines” or paragraph (iii) above under the heading “Investment Guidelines and Operating Policies —
                Operating Policies”;

        (xiv) subject to paragraph (ii) above, the REIT may lend money, whether secured or unsecured, including under
              the Development Agreement; and

        (xv)    the REIT may invest in one or more wholly-owned subsidiaries which provide a full range of asset and
                property management and leasing services, including property facilities management, leasing, design,
                development, redevelopment, construction management and administrative and legal services, to the
                Properties and other immovable properties owned only in part by the REIT or completely owned by third
                parties.

         For the purpose of the foregoing guidelines (except paragraph (ii) above), the properties, assets, liabilities and
transactions of a corporation, trust or other entity wholly or partially owned by the REIT will be deemed to be those of the
REIT on a proportionate consolidation basis. In addition, any references in the foregoing to investment in immovable
property will be deemed to include an investment in a joint venture arrangement. Except as specifically set forth in the
Contract of Trust to the contrary, all of the foregoing prohibitions, limitations or requirements for investment shall be
determined as at the date of investment by the REIT, the whole subject to paragraph (ii) above under “— Investment
Guidelines”.

OPERATING POLICIES

        The Contract of Trust provides that the operations and affairs of the REIT shall be conducted in accordance with the
following policies, the whole subject to paragraph (ii) above under “Investment Guidelines”:

        (i)     the REIT shall not purchase, sell, market or trade in currency or interest rate futures contracts otherwise than
                for hedging purposes where, for the purposes hereof, the term “hedging” shall have the meaning ascribed
                thereto by National Instrument 81-102 Mutual Funds adopted by the Canadian Securities Administrators, as
                amended from time to time;

        (ii)    (a) any written instrument creating an obligation which is or includes the granting by the REIT of an
                immovable hypothec or mortgage, and (b) to the extent the Trustees determine to be practicable and
                consistent with their duty to act in the best interests of the Unitholders, any written instrument which is, in
                the judgment of the Trustees, a material obligation, shall contain a provision or be subject to an
                acknowledgement to the effect that the obligation being created is not personally binding upon, and that
                resort shall not be had to, nor shall recourse or satisfaction be sought from, the private property of any of the
                Trustees, Unitholders, annuitants under a plan of which a Unitholder acts as a trustee or carrier, or officers,
                employees or agents of the REIT, but that only property of the REIT or a specific portion thereof shall be
                bound; the REIT, however, is not required, but shall use all reasonable efforts, to comply with this
                requirement in respect of obligations assumed by the REIT upon the acquisition of immovable property;

        (iii)   except pursuant to the AN Head Lease, as amended, supplemented or restated from time to time, the REIT
                shall not lease or sublease to any person any immovable property, premises or space where that person and
                its affiliates would, after the contemplated lease or sublease, be leasing or subleasing immovable property,
                premises or space having a fair market value net of encumbrances in excess of 20% of the Adjusted
                Unitholders’ Equity;

        (iv)    the limitation contained in paragraph (iii) above shall not apply to the renewal of a lease or sublease and shall
                not apply where the lessee or sublessee is, or where the lease or sublease is guaranteed by:

                (a)   the Government of Canada, the Government of the United States, and any province of Canada, any state
                      of the United States or any municipality in Canada or the United States, or any agency thereof;

                (b)   any corporation, any of the bonds, debentures or other evidences of indebtedness of which are of, or are
                      guaranteed by an issuer, or any of the other securities of an issuer which have received and continue to
                      hold, an “investment grade” rating from a recognized credit rating agency, in each case at the time the
                      lease or sublease is entered into, or at the time other satisfactory leasing or pre-leasing arrangements (as
                      determined by the Trustees in their discretion) were entered into. In the case of an investment permitted



                                                               92
                       pursuant to paragraph (iii) above, the foregoing may be determined at the time that the option or right to
                       acquire an interest in the project is granted; or

                 (c)   a Canadian chartered bank registered under the laws of a province of Canada;

         (v)     except for renovation or expansion of existing facilities and the development of new facilities on property
                 adjacent to existing properties of the REIT as permitted under paragraph (ix) above under the heading
                 “Investment Guidelines and Operating Policies — Investment Guidelines”, the REIT shall not engage in
                 construction or development of immovable property except as necessary to maintain its immovable
                 properties in good repair or to enhance the income producing ability of properties in which the REIT has an
                 interest;

         (vi)    title to each immovable property shall be drawn up in the name of the Trustees or, to the extent permitted by
                 applicable law, the REIT or a corporation or other entity wholly-owned by the REIT or jointly by the REIT
                 with joint venturers;

         (vii)   the REIT shall not incur or assume any indebtedness if, after giving effect to the incurring or assumption of
                 the indebtedness, the total indebtedness of the REIT would be more than 60% of the Gross Book Value (65%
                 if convertible debentures of the REIT are outstanding, including the full face value of any convertible
                 debentures);

         (viii) the REIT shall not directly or indirectly guarantee any indebtedness or liabilities of any kind of any person
                unless such guarantee is given in connection with or incidental to an investment that is otherwise permitted
                under the investment guidelines of the REIT. In addition, the REIT will not directly or indirectly guarantee
                any indebtedness or liabilities of any person if so doing: (a) would result in the REIT or any Deferred Income
                Plan or RESPs being liable under the Tax Act to pay tax imposed as a result of holding by the REIT of a
                foreign property, as defined in the Tax Act; (b) would disqualify the REIT as a “mutual fund trust” within the
                meaning of the Tax Act; or (c) would result in the REIT losing any status under the Tax Act that is otherwise
                beneficial to the REIT and Unitholders;

         (ix)    the REIT shall obtain an independent appraisal of each property that it intends to acquire;

         (x)     the REIT shall obtain and maintain at all times insurance coverage in respect of potential liabilities of the
                 REIT and the accidental loss of value of the properties and assets of the REIT from risks, in amounts, with
                 such insurers, and on such terms as the Trustees consider appropriate, taking into account all relevant factors
                 including the practices of owners of comparable properties; and

         (xi)    the REIT shall have conducted a Phase I environmental audit of each immovable property to be acquired by
                 it and, if the Phase I environmental audit report recommends a Phase II environmental audit be conducted,
                 the REIT shall have conducted a Phase II environmental audit, in each case by an independent and
                 experienced environmental consultant; such audit(s) as a condition to any acquisition, shall be satisfactory to
                 the Trustees. All new leases granted by the REIT shall contain appropriate covenants from the lessee
                 respecting environmental matters as determined by the Trustees from time to time.

         For the purposes of the foregoing policies, the properties, assets, liabilities and transactions of a corporation, trust or
other entity wholly or partially owned by the REIT will be deemed to be those of the REIT on a proportionate consolidation
basis. In addition, any references in the foregoing to investment in immovable property will be deemed to include an
investment in a joint venture. Except as specifically set forth in the Contract of Trust to the contrary, all of the foregoing
prohibitions, limitations or requirements pursuant to the foregoing policies shall be determined as at the date of investment or
other action by the REIT, the whole subject to paragraph (ii) above under the heading “Inves tment Guidelines and Operating
Policies — Investment Guidelines”.

AMENDMENTS TO INVESTMENT GUIDELINES AND OPERATING POLICIES

         Pursuant to the Contract of Trust, all of the investment guidelines set out under the heading “Investment Guidelines
and Operating Policies — Investment Guidelines” and the operating policies contained in subparagraphs (v), (vii), (viii), (ix),
(x) and (xi) above under the heading “Investment Guidelines and Operating Policies — Operating Policies” may be amended
only if such amendment is approved by two-thirds of the votes cast by Unitholders of the REIT at a meeting of Unitholders



                                                                93
called for such purpose. The remaining operating policies may be amended if such amendment is approved by the Trustees
and by a majority of the votes cast by Unitholders at a meeting called for such purpose.


                                           NON-COMPETITION AGREEMENT

GENERAL

          At Closing, Alexis Nihon, the Development Company, Robert A. Nihon and Paul J. Massicotte (collectively, the
“Restricted Group”) will enter into the Non-Competition Agreement with the REIT pursuant to which they will agree to
restrict certain of their and their affiliates’ real estate related activities.

SCOPE OF RESTRICTIONS AND RIGHT OF FIRST REFUSAL

         Except as contemplated by the Development Agreement and except as permitted in the Non-Competition
Agreement, each member of the Restricted Group and their respective affiliates will be prohibited from investing in fully
developed and substantially leased, income -producing office, retail, industrial, mixed-use and multi-family residential
properties in Canada, unless the REIT has been offered such investment in accordance with the terms of the Non-
Competition Agreement. In the case of Robert A. Nihon, the territorial scope of the Non-Competition Agreement will be
limited to the Province of Québec.

          The Non-Competition Agreement will provide that each member of the Restricted Group and their respective
affiliates will not solicit any tenant to move to a building in which the REIT does not have an interest during the term of any
lease of a tenant of any property owned, in whole or in part, by the REIT from time to time or within 60 days after the expiry
thereof. The foregoing restriction will not apply to a tenant which has ceased to be a tenant of any property of the REIT
which requires additional space which the REIT is unable to accommodate.

          The Non-Competition Agreement shall not prevent any member of the Restricted Group and their respective
affiliates from holding, directly or indirectly, strictly for portfolio purposes and as a passive investor, any securities in any
entity, whether or not the business of such entity is in competition, in whole or in part, with the business of the REIT.

TERM OF RESTRICTIONS

         The restrictions in the Non-Competition Agreement will apply to members or the Restricted Group (other than
Robert A. Nihon, Paul J. Massicotte and their respective Spouses) until, in the case of members of the Restricted Group
which are affiliates of Robert A. Nihon, one year following the date on which Robert A. Nihon ceases to be a Trustee, officer
or employee of the REIT or, in the case of members of the Restricted Group which are affiliates of Paul J. Massicotte, one
year following the date on which Paul J. Massicotte ceases to be a Trustee, officer or employee of the REIT.

        Messrs. Robert A. Nihon and Paul J. Massicotte will be bound by such restrictions until one year after Messrs.
Robert A. Nihon or Paul J. Massicotte, as the case may be, ceases to be a Trustee, officer or employee of the REIT.

          A breach of the Non-Competition Agreement by Robert A. Nihon or Paul J. Massicotte (so long as he has an active
role in the management of the Alexis Nihon Group) shall entitle the Trustees to remove Mr. Nihon as Chairman of the REIT
or to terminate Mr. Massicotte as an employee and/or officer of the REIT, as the case may be, without entitlement to
severance, in addition to all of the REIT’s other recourses.

EXCLUSIONS FROM RESTRICTIONS

         The restrictions in the Non-Competition Agreement will not apply to any property in respect of which any member
of the Restricted Group has no active management or which they do not control.

         In addition, any member of the Restricted Group and his spouse shall have the right to invest in and develop any of
the Excluded Property or any immovable property transmitted by way of donation, will, succession or bequest to him or her,
provided that in either case, as soon as practicable (but in any event within 90 days) after the date on which such property is
substantially non-residentially leased, the REIT is offered the opportunity to purchase their interest (except with respect to the
Excluded Property located in Gatineau, Québec) in accordance with the provisions of the Non-Competition Agreement,
except, however, in the case of immovable property transmitted at arm’s length by way of donation, will, succession or
bequest which is gratuitous and stipulates inalienability. However, no exclusion limits the restriction on soliciting tenants as
described above. In addition, if the interests of Alexis Nihon in the Co-Ownership Properties are not acquired by the REIT,

                                                               94
the holding by Alexis Nihon of its interests in such properties will not constitute a breach of the provisions of the Non-
Competition Agreement.


                              PRO FORMA CONSOLIDATED CAPITALIZATION OF THE REIT

         The following table sets forth the unaudited pro forma consolidated capitalization of the REIT as at September 30,
2002 after giving effect to this Offering and the completion of the Property Closing, and after giving effect to the acquisition
by the REIT of Alexis Nihon’s interest in the Co-Ownership Properties but without giving effect to the conversion of the AN
Convertible Debenture or the exercise of the Over-Allotment Option. The following table should be read in conjunction with
the pro forma consolidated financial statements and the notes thereto contained in this prospectus.
                                                                                                                     As at
                                                                                                             September 30, 2002
                                                                                                             (after giving effect
                                                                                                               to the Offering,
                                                                                                            the Property Closing
                                                                                                           and the Co-Ownership
                                                                                                                 Closing) (1) (2)
                                                                                                                  (unaudited)
                                                                                                           (in thousands of dollars)


                 Indebtedness                                                                                    $203,902


                 Unitholders’ Equity(3) (4)
                    (Authorized unlimited; Issued 16,901,200)(5)                                                 $174,425
                                                                                                                 $378,327



Notes:
(1)
    On December 13, 2002, the REIT entered into an agreement to issue 8.5 million Units for cash proceeds of $85 million, after payment of Underwriters
    Fee of $4.888 million and costs of the Offering estimated to be $1.850 million.
(2)
    Assuming no exercise by the Underwriters of the Over-Allotment Option.
(3)
    See note 4 to the Pro Forma Consolidated Financial Statements of the REIT.
(4)
    Under GAAP, the AN Convertible Debenture is considered an equity instrument and, as such, is included as a component of Unitholders’ equity and
    interest related to the AN Convertible Debenture will be chargeable directly to Unitholder’s equity.
(5)
    Assuming no conversion of the AN Convertible Debenture.


                                     CONTRACT OF TRUST AND DESCRIPTION OF UNITS

         The following is a summary of certain terms of the Contract of Trust which, together with other summaries of the
terms of the Contract of Trust appearing elsewhere in this prospectus, are qualified in their entirety by reference to the text of
the Contract of Trust.

GENERAL

        The REIT is an unincorporated trust created pursuant to the Contract of Trust and governed by the laws of the
Province of Québec.

UNITS

         Units represent a Unitholder’s proportionate ownership interest in the REIT. The aggregate number of Units which
the REIT may issue is unlimited. Units will be issued in registered form, will be non-assessable when issued and will be
transferable. Upon the Closing of this Offering, there will be 16,901,200 Units outstanding, of which 8,500,000 will be
Offered Units and 8,401,200 will be Alexis Nihon Units. At the Property Closing, the Alexis Nihon Units and the AN
Convertible Debenture will be issued to Alexis Nihon in partial payment of the consideration payable to Alexis Nihon for the
Portfolio and the Assets under the Purchase Agreement referred to under “Acquisition of the Portfolio, the Assets and the
Management Assets”, in the case of the Alexis Nihon Units at a price per Alexis Nihon Unit equal to the price per Offered
Unit to the public pursuant to this Offering. No Unitholder has or is deemed to have any right of ownership in any of the
assets of the REIT. Each Unit confers the right to one vote at any meeting of Unitholders and to participate equally and


                                                                          95
rateably in any distributions by the REIT and, in the event of any required distribution of all of the property of the REIT, in
the net assets of the REIT remaining after satisfaction of all liabilities. Issued and outstanding Units may be subdivided or
consolidated from time to time by the Trustees without Unitholder approval. No certificates for fractional Units will be issued
and fractional Units will not entitle the holders thereof to vote.

         The Units shall be issued upon the terms and subject to the conditions of the Contract of Trust, which Contract of
Trust shall be binding upon all holders of Units and by acceptance of the certificate representing such Units, the holder
thereof shall agree to be bound by the Contract of Trust.

PURCHASE OF UNITS

         The REIT may purchase for cancellation at any time the whole or any part of the outstanding Units, at a price per
Unit (or fraction of a Unit, if applicable) and on a basis determined by the Trustees, the whole in compliance with all
applicable securities regulatory laws, regulations and policies and the policies of any applicable stock exchange. Any such
purchases will constitute an “issuer bid” under Canadian provincial securities legislation and must be conducted in
accordance with the applicable requirements thereof. A Unitholder will not have the right at any time to require the REIT to
purchase such Unitholder’s Units.

TAKE-OVER BIDS

          The Contract of Trust contains provisions to the effect that if a take -over bid is made for Units within the meaning of
the Securities Act (Québec) and not less than 90% of the Units (other than Units held at the date of the take-over bid by or on
behalf of the offeror or associates or affiliates of the offeror) are taken up and paid for by the offeror, the offeror will be
entitled to acquire the Units held by Unitholders who did not accept the offer either, at the election of such Unitholders, on
the terms offered by the offeror or at the fair value of such Unitholders’ Units determined in accordance with the procedures
set out in the Contract of Trust.

MEETINGS OF UNITHOLDERS

          The Contract of Trust provides that meetings of Unitholders must be called and held for the election or removal with
or without cause of Trustees (other than Trustees appointed by the Nihon/Massicotte Group for so long as the
Nihon/Massicotte Group is entitled to appoint at least one Trustee), the appointment or removal of the auditors of the REIT,
the approval of amendments to the Contract of Trust (as described under “Amendments to Contract of Trust”), an increase or
decrease by the Unitholders in the number of Trustees within the minimum and maximum number of Trustees provided in
the Contract of Trust (or any authorization by the Unitholders to the Trustees to effect such increase or decrease and, if
applicable, to appoint additional Independent Trustees provided that the Trustees may not, between meeting of Unitholders,
appoint an additional Independent Trustee, if after such appointment, the total number of Trustees would be greater that one
and one-third times the number of Trustees in office immediately following the last annual meeting of Unitholders or any
increase in the maximum number of Trustees (to more than eleven Trustees) or decrease in the minimum number of Trustees
(to less than three Trustees) the sale of the assets of the REIT as an entirety or substantially as an entirety other than as part of
an internal reorganization of the assets of the REIT as approved by the Trustees and to require that all of the property of the
REIT be distributed. Meetings of Unitholders will be called and held annually for the election of the Trustees (other than
Trustees appointed by the Nihon/Massicotte Group for so long as the Nihon/Massicotte Group is entitled to appoint at least
one Trustee) and the appointment of auditors of the REIT.

          A meeting of Unitholders may be convened at any time and for any purpose by the Trustees and must be convened,
except in certain circumstances, if requisitioned by the holders of not less than 5% of the Units then outstanding by a written
requisition. A requisition must state in reasonable detail the business proposed to be transacted at the meeting. Unitholders
have the right to obtain a list of Unitholders to the same extent and upon the same conditions as those which apply to
shareholders of a corporation governed by the Canada Business Corporations Act.

         Unitholders will be entitled to attend and vote at all meetings of the Unitholders either in person or by proxy and a
proxyholder will not be required to be a Unitholder. Two persons present in person or represented by proxy and holding in
the aggregate not less than 25% of the outstanding Units will constitute a quorum for the transaction of business at all such
meetings. At any meeting for which quorum is not present within 30 minutes within the time fixed for the holding of such
meeting, the meeting, if called by request of Unitholders, shall be terminated, but in any other case, the meeting shall be
adjourned to a date not less than 14 days later and to such place and time as may be determined by the chairman of the
meeting. If at such adjourned meeting a quorum, as above defined, is not present, the Unitholder(s) present either personally



                                                                 96
or by proxy shall form a quorum and any business may be brought before or dealt with at such adjourned meeting which
might have been brought or dealt with at the original meeting in accordance with the notice calling same.

        The Contract of Trust contains provisions as to the notice required and other procedures with respect to the calling
and holding of meetings of Unitholders.

ISSUANCE OF UNITS

         The REIT may issue new Units from time to time. Unitholders do not have any pre-emptive rights whereby
additional Units proposed to be issued are first offered to existing Unitholders. New Units may be issued for cash through
public offerings, through rights offerings to existing Unitholders (i.e., in which Unitholders receive rights to subscribe for
new Units in proportion to their existing holdings of the Units, which rights may be exercised or sold to other investors) or
through private placements (i.e., offerings to specific investors which are not made generally available to the public or
existing Unitholders). In certain instances, the REIT may also issue new Units as consideration for the acquisition of new
properties or assets. The price or the value of the consideration for which Units may be issued will be determined by the
Trustees, generally in consultation with investment dealers or brokers who may act as underwriters or agents in connection
with offerings of Units.

LIMITATION ON NON-R ESIDENT OWNERSHIP

         Not more than 49% of the Units outstanding at any time shall be held or beneficially owned, directly or indirectly,
by persons who are non-residents of Canada for purposes of the Tax Act (individually, a “non-resident”, and collectively
“non-residents”). The Trustees may, in their discretion, from time to time and at such time as the Trustees deem appropriate,
require from the Unitholders and the Unitholders shall furnish diligently to the Trustees a declaration as to their respective
residency and should any Unitholder not be the beneficial owner of the Units registered in his name, the residency of the
beneficial owner of such Units. In the event that it appears from the Register (as such term is defined in the Contract of Trust)
or from the declarations of residency delivered to the Trustees that, or in the event that the Trustees otherwise determine that,
there has been a contravention of the foregoing non-resident ownership constraint or that, after giving effect to any proposed
subscription, issue or transfer of Units to a non-resident, there would be a contravention of the non-resident ownership
constraint, the REIT shall cause a public announcement to be made to such effect and shall not accept any subscription for
Units from any non-resident, issue any Units to any such person or register or otherwise recognize the transfer of any Units to
any non-resident. In addition, in the event that it appears from the Register (as such term is defined in the Contract of Trust)
or from the declarations of residency delivered to the Trustees that, or in the event that the Trustees otherwise determine that,
there has been a contravention of the foregoing non-resident ownership constraint, the REIT shall send a written notice (a
“Sell Notice”) to the registered holders of such of those Units as shall be chosen on the basis of inverse order to the order of
acquisition or registration of all non-residents, by law or by such other method that is authorized by the Trustees’
determination (each such selected registered holder to be hereinafter known as an “Affected Holder”). Such Sell Notice shall
require that an Affected Holder sell to a person who is not a non-resident of Canada the total number of Units specified in the
Sell Notice (the “Affected Units”) within the prescribed period stipulated in the Sell Notice. Any such Sell Notice to be
delivered to an Affected Holder shall be given by registered prepaid mail or delivered directly to the Affected Holder and
shall specify a date, which shall not be more than 60 days, within which the Affected Units must be sold on a basis that does
not result in the contravention of the Contract of Trust. The Sell Notice shall also require the Affected Holder to notify the
REIT of the sale or disposition requested when completed. In the event that the Affected Units have not been sold by the
Affected Holder on or prior to the date stipulated in the Sell Notice or the Affected Holder has not provided evidence
satisfactory to the Trustees to the effect that it is not a non-resident prior to such date, the REIT may elect to sell the Affected
Units on behalf of the Affected Holder without further notice on and subject to the terms herein contained and to forthwith
suspend the rights of the Affected Holder to vote or to receive distribution in connection with the Affected Units. Upon such
sale the Affected Holders shall cease to be holders of the Affected Units and their rights shall be limited to receiving the net
proceeds of sale upon surrender of the certificate representing such Affected Units.

INFORMATION AND REPORTS

        The REIT will furnish to Unitholders such financial statements (including quarterly and annual financial statements)
and other reports as are from time to time required by applicable law, including prescribed forms needed for the completion
of Unitholders’ tax returns under the Tax Act or equivalent provincial legislation.

        Prior to each annual and special meeting of Unitholders, the Trustees will provide the Unitholders (along with notice
of such meeting) information similar to that required to be provided to shareholders of a public corporation governed by the
Canada Business Corporations Act.


                                                                97
AMENDMENTS TO CONTRACT OF TRUST

         The Contract of Trust may be amended or altered from time to time. Certain amendments must be approved by at
least two-thirds of the votes cast at a meeting of the Unitholders called for such purpose. These include:

         (i)     any amendment to change a right with respect to any outstanding Units of the REIT, to reduce the amount
                 payable thereon upon termination of the REIT or to diminish or eliminate any voting rights pertaining
                 thereto;

         (ii)    any amendment to the duration or term of the REIT;

         (iii)   any amendment to increase the maximum number of Trustees (to more than eleven Trustees) or to decrease
                 the minimum number of Trustees (to less than three Trustees), any change by the Unitholders in the number
                 of Trustees within the minimum and maximum number of Trustees provided in the Contract of Trust, or any
                 authorization by the Unitholders to the Trustees to effect such change and, if applicable, to appoint additional
                 Independent Trustees within such minimum and maximum number of Trustees, provided that the Trustees
                 may, between meetings of Unitholders, appoint additional Independent Trustees, if after such appointment,
                 the total number of Trustees would not be greater that one and one-third times the number of Trustees in
                 office immediately following the last annual meeting of Unitholders; and

         (iv)    any amendment relating to the powers, duties, obligations, liabilities or indemnification of the Trustees.

         Amendments to the Contract of Trust, not requiring the approval of at least two-thirds of the votes cast at a meeting
of the Unitholders called for such purpose, must be approved by a majority of the votes cast at a meeting of the Unitholders
called for such purpose.

        The Trustees may, without the approval of, or any prior notice to, Unitholders, make certain amendments to the
Contract of Trust, including amendments:

         (i)     for the purpose of ensuring continuing compliance with applicable laws, regulations, requirements or policies
                 of any governmental authority having jurisdiction over the Trustees or over the REIT, its status as a “unit
                 trust”, a “mutual fund trust” and a “registered investment” under the Tax Act or the distribution of Units;

         (ii)    which, in the opinion of the Trustees, provide additional protection for the Unitholders;

         (iii)   to remove any conflicts or inconsistencies in the Contract of Trust or to make minor corrections which are, in
                 the opinion of the Trustees, necessary or desirable and not prejudicial to the Unitholders;

         (iv)    which, in the opinion of the Trustees, are necessary or desirable to conform the Contract of Trust to the
                 disclosure in the final prospectus (or any subsequent amended prospectus) for this Offering;

         (v)     which, in the opinion of the Trustees, are necessary or desirable as a result of changes in taxation laws from
                 time to time;

         (vi)    for any purpose (except one in respect of which a Unitholder vote is specifically otherwise required) if the
                 Trustees are of the opinion that the amendment is not prejudicial to Unitholders and is necessary or desirable;
                 and

         (vii)   which, in the opinion of the Trustees, are necessary or desirable to enable the REIT to issue Units for which
                 the purchase price is payable on an instalment basis.

S ALE OF ASSETS

          Any sale or transfer of the assets of the REIT as an entirety or substantially as an entirety (other than as part of an
internal reorganization of the assets of the REIT as approved by the Trustees) shall occur only if approved by at least two-
thirds of the votes cast at a meeting of the Unitholders called for such purpose.




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TERM OF THE REIT

                                                                                               s
          The REIT has been established for a term to continue until no property of the REIT i held by the Trustees. The
distribution of all of the property of the REIT may be required by the affirmative vote of two-thirds of the votes cast at a
meeting of Unitholders called for such purpose.

INDEPENDENT TRUSTEE MATTERS

        At least a majority of the Trustees must be Independent Trustees. Pursuant to the Contract of Trust, all Independent
Trustee Matters will require the approval of a majority of the Independent Trustees only. “Independent Trustee Matter”
means any decision:

        (i)     to enter into arrangements, ventures or contracts, including any renewal, extension, termination or
                amendment thereof in which any person comprised in the Alexis Nihon Group, the Nihon/Massicotte Group
                or any affiliate, associate or Associate of any of them has a material interest;

        (ii)    (a) to appoint, where permitted under the Contract of Trust, an Independent Trustee to fill a vacancy among
                the Independent Trustees, and (b) to recommend to the Unitholders that the number of Trustees be increased
                or decreased and, if applicable, to nominate for election by the Unitholders individuals as Independent
                Trustees to fill any office of Trustee so created;

        (iii)   to increase the compensation of Management;

        (iv)    in relation to a claim by or against any person comprised in the Alexis Nihon Group, any member of the
                Nihon/Massicotte Group, or any affiliate, associate or Associate of any of the foregoing or in which the
                interest of one of the foregoing differs from the interests of the REIT;

        (v)     for the acquisition of immovable property in which any person comprised in the Alexis Nihon Group, any
                member of the Nihon/Massicotte Group or any affiliate, associate or Associate of any of the foregoing has
                any direct or indirect interest;

        (vi)    in relation to the approval of, or a material change to, the AN Convertible Debenture, the AN Head Lease,
                the AN Income Subsidy Agreement, the AN Pledge, the Development Agreement (including any loan
                agreement entered into pursuant thereto), the Employee Services Agreements, the Employment Agreement,
                the Non-Competition Agreement, the Purchase Agreement, the Transitional Employee Services Agreement,
                the Trust Indenture or the Underwriting Agreement or any renewal, extension or termination thereof or
                waiver of any material right thereunder or any increase in the fees or other amounts payable thereunder or the
                exercise by the REIT of any right thereunder;

        (vii)   in relation to the grant of options or other rights under any Unit option plan, long-term incentive plan or other
                plan approved by the Trustees, including the Distribution Reinvestment Plan, the Long Term Incentive Plan
                or the Unit Option Plan, to any member of the Nihon/Massicotte Group, any person comprised in the Alexis
                Nihon Group or any affiliate, associate or Associate of any of the foregoing or their respective officers,
                directors or employees, or officers, directors or employees of any affiliate, associate or Associate of any
                person comprised in the Alexis Nihon Group;

        (viii) in relation to the making of any mezzanine loan or the purchase by the REIT of any immovable property
               pursuant to the Development Agreement; or

        (ix)    in relation to the making of any co-investment with any member of the Nihon/Massicotte Group or any
                person comprised in the Alexis Nihon Group or any affiliate, associate or Associate of any of the foregoing;

        and to the extent that any of the foregoing involves a subsidiary of the REIT any decision of the REIT relating
        thereto in its capacity as a shareholder thereof.

TRUSTEES APPOINTED BY THE NIHON/MASSICOTTE GROUP

         Immediately after the Closing, the Nihon/Massicotte Group shall have the right to appoint and remove the following
additional number of Trustees: (i) if the Nihon/Massicotte Group beneficially owns, in the aggregate, at least 20% of the


                                                               99
Units then outstanding, three Trustees; (ii) if the Nihon/Massicotte Group beneficially owns, in the aggregate, at least 12.5%
but less than 20% of the number of Units then outstanding, two Trustees; and (iii) if the Nihon/Massicotte Group beneficially
owns, in the aggregate, at least 5% but less than 12.5% of the number of Units then outstanding, one Trustee. Should the
Nihon/Massicotte Group cease to beneficially own, in the aggregate, at least 5% of the number of Units then outstanding,
then the Nihon/Massicotte Group shall no longer have the right to appoint any Trustee. For such purposes, Units outstanding
include Units issuable upon conversion of the AN Convertible Debenture for so long as the AN Convertible Debenture is
beneficially owned by the Nihon/Massicotte Group. When the Nihon-Massicotte Group falls below any of the thresholds
provided above, it shall forever lose the right to appoint the number of Trustees related to such threshold even though the
Nihon/Massicotte Group may in the future satisfy such threshold again. The Contract of Trust provides that if the total
number of Trustees at any time is less or greater than seven, the number of Trustees which the Nihon/Massicotte Group has
the right to appoint and remove will be adjusted accordingly, provided, however that at all times the majority of Trustees will
be Independent Trustees. Immediately following Closing, the Nihon/Massicotte Group intends to appoint Robert A. Nihon,
Paul J. Massicotte and Roger Turpin as Trustees.

INCOME TAX MATTERS

          The Contract of Trust provides that all determinations of the Trustees which are made in good faith with respect to
any matters relating to the REIT, including, without limiting the generality of the foregoing, whether any particular
investment or disposition meets the requirements of the Contract of Trust, shall be final and conclusive and shall be binding
upon the REIT and all Unitholders (and, where the Unitholder is a Deferred Income Plan, RESP, registered pension fund or
plan as defined in the Tax Act, or such other fund or plan registered under the Tax Act, upon plan beneficiaries and plan
holders past, present and future) and Units of the REIT shall be issued and sold on the condition and understanding that any
and all such determinations shall be binding as aforesaid.


                                                  DISTRIBUTION POLICY

        The following outlines the distribution policy of the REIT as contained in the Contract of Trust. The distribution
policy may be amended only with the approval of a majority of the votes cast at a meeting of Unitholders.

GENERAL

         The REIT intends to distribute to Unitholders monthly on or about the 15th day of each calendar month (other than
December 15, 2002 and January of each year) and on December 31st of each calendar year (including December 31, 2002)
(each a “Distribution Date”), not less than 85% of the Distributable Income of the REIT for the preceding calendar month
and, in the case of distributions made on December 31, for the calendar month then ended. Unitholders also are entitled to
receive a distribution on December 31 of each year of any excess of the net income (determined in accordance with the
provisions of the Tax Act other than paragraph 82(1)(b) and subsection 104(6) of the Tax Act) of the REIT over the
aggregate of: (i) distributions otherwise made for that year; and (ii) the amount of any available losses carried forward, such
that the REIT will not be liable for income tax for such year.

          Monthly distributions will be based on the Trustees’ estimate of yearly Distributable Income, subject to adjustment
from time to time throughout the year. Distributions shall be made in cash and may be reinvested in Units through the REIT’s
distribution reinvestment plan. See “Distribution Reinvestment Plan”. Distributions may be adjusted for amounts paid in
prior periods if the actual Distributable Income for the prior periods is greater than or less than the Trustees’ estimates for the
prior periods.

         If the Trustees anticipate a cash shortfall and determine that it would be in the best interests of the REIT, they may
reduce for any period the percentage of Distributable Income to be distributed to Unitholders. The Trustees may, in their
discretion, decide to distribute to Unitholders amounts in excess of Distributable Income or which do not otherwise form part
of Distributable Income, such as capital gains.

          It is the current intention of the REIT to distribute approximately 87% of yearly Distributable Income. Monthly
distributions will be based on the Trustees’ estimate of yearly Distributable Income, subject to adjustment from time to time
throughout the year.

         The REIT will deduct for tax purposes such amount as is paid or payable to Unitholders for the year as is necessary
to ensure that the REIT is not liable for income tax payable under Part I of the Tax Act in any year. The distribution for any
month will be payable to Unitholders of record on the last business day of such month.


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         Holders of Units who are non-residents of Canada will be required to pay all withholding taxes payable in respect of
any distributions of income by the REIT, whether those distributions are in the form of cash or additional Units. The REIT
will withhold such taxes as required by the Tax Act and remit such payment to the tax authorities on behalf of the Unitholder.
Non-Residents should consult their own tax advisors regarding the tax consequences of investing in the Units.

COMPUTATION OF DISTRIBUTABLE INCOME FOR DISTRIBUTION PURPOSES

         Distributable Income means, for any period, net income determined in accordance with GAAP, subject to certain
adjustments as set out in the Contract of Trust, including: (i) adding back amortization on income producing properties
(excluding amortization of tenant inducements and other leasing costs) that was deducted in computing the net income of the
REIT for a relevant period; (ii) adding back future income tax expense and deducting future income tax benefits; (iii) adding
amounts received under the AN Income Subsidy (see “AN Head Lease and AN Income Subsidy — AN Income Subsidy”);
and (iv) deducting interest on convertible debentures (including the AN Convertible Debenture) to the extent not already
deducted in computing net income for the period. Gains or losses on the disposition of any property or asset are excluded
from the computation of Distributable Income; and: (a) adjustments are to be made to reflect amortization of fair value debt;
and (b) amortization of other assets and deferred expenses, including deferred financing charges are not added back in
calculating Distributable Income.

INCOME TAX D EFERRAL ON 2002 AND 2003 DISTRIBUTIONS

          Management estimates that approximately 60% of the distributions to be made by the REIT to Unitholders in 2003
will be income tax deferred by reason of the REIT’s ability to claim capital cost allowance and certain other deductions. See
“Canadian Federal Income Tax Considerations — Taxation of the REIT — Tax Deferred Distributions” and “Risk Factors —
Status for Tax Purposes and Investment Eligibility — Tax Deferred Distributions”. In the year of acquisition of a property,
capital cost allowance is effectively restricted to one-half of the normal annual rates. The percentage amount of the income
tax deferral for 2002 may be lower due in part to the “half-year rule” in respect of capital cost allowance under the Tax Act as
well as having to pro rate the amount of capital cost allowance otherwise available for the 2002 taxation year of the REIT to
reflect the number of days in such 2002 taxation year out of 365 days. The adjusted cost base of Units held by a Unitholder
will generally, subject to certain conditions under the Tax Act, be reduced by the non-taxable portion of distributions made to
the Unitholder (other than the non-taxable portion of certain capital gains). A Unitholder will generally realize a capital gain
to the extent that the adjusted cost base of the Unitholder’s Units would otherwise be a negative amount. See “Canadian
Federal Income Tax Considerations”.

2003 DISTRIBUTIONS TO UNITHOLDERS

        Assuming that 87% of the forecast Distributable Income is distributed in 2003, cash distributions to Unitholders are
estimated by the REIT to be approximately $18.6 million in the aggregate. See “Financial Forecast”.


                                        DISTRIBUTION REINVES TMENT PLAN

          Subject to receipt of all regulatory approval, the REIT will implement a Distribution Reinvestment Plan pursuant to
which Unitholders resident in Canada may elect to have all their cash distributions of income of the REIT automatically
reinvested in additional Units at a price per Unit calculated by reference to the volume weighted average of the trading price
of the Units on the principal stock exchange on which the Units are listed for the five trading days immediately preceding the
relevant Distribution Date. A Unitholder who so elects to participate in the Distribution Reinvestment Plan will also have the
right to receive an additional distribution, payable in Units, in an amount equal in value to 3% of each distribution that was
reinvested by the Unitholder.

          No brokerage commissions will be payable in connection with the purchase of Units under the Distribution
Reinvestment Plan and all administrative costs will be borne by the REIT. Cash undistributed by the REIT upon the issuance
of additional Units under the Distribution Reinvestment Plan will be used by the REIT for future property acquisitions,
capital improvements and working capital.

        Unitholders resident outside of Canada will not be entitled to participate in the Distribution Reinvestment Plan.
Upon ceasing to be a resident of Canada, a Unitholder must terminate the Unitholder’s participation in the Distribution
Reinvestment Plan.




                                                              101
        Beneficial Unitholders (individuals or entities who hold Units through an investment dealer) may enrol in the plan
through such an investment dealer. Further administrative details and enrolment documents regarding the Distribution
Reinvestment Plan will be forwarded to registered Unitholders prior to the fourth Distribution Date.

         The issue of Units under the Distribution Reinvestment Plan may not be exempt from the registration and prospectus
requirements of relevant securities legislation in certain provinces of Canada. In addition, Units issued under the Distribution
Reinvestment Plan may not be freely tradable under the provisions of such legislation until such time as the REIT has been a
reporting issuer for at least twelve months. The REIT intends to make applications for discretionary re lief from the applicable
securities regulatory authorities to permit such Units to be issued and to be freely tradable.


                               CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

          In the opinion of Davies Ward Phillips & Vineberg LLP, counsel to the REIT, and Stikeman Elliott, counsel to the
Underwriters, the following is, as of the date hereof, a summary of the principal Canadian federal income tax considerations
generally applicable under the Tax Act to the acquisition, holding and disposition of Units by a Unitholder who acquires
Units pursuant to this offering. This summary is applicable to a Unitholder who, for purposes of the Tax Act, is resident in
Canada, deals at arm’s length with the REIT and holds the Units as capital property. Generally, Units will be considered to be
capital property to a Unitholder provided that the Unitholder does not hold the Units in the course of carrying on a business
and has not acquired them in one or more transactions considered to be an adventure or concern in the nature of trade. Certain
Unitholders who might not otherwise be considered to hold their Units as capital property may, in certain circumstances, be
entitled to have them treated as capital property by making the irrevocable election permitted by subsection 39(4) of the Tax
Act. Such Unitholders should consult their own tax advisors regarding their particular circumstances.

        This summary is not applicable to a Unitholder that is a “financial institution”, as defined in the Tax Act for
purposes of the mark-to-market rules, a “specified financial institution” or a Unitholder an interest in which is a “tax shelter
investment” (all as defined in the Tax Act). Such Unitholders should consult their own tax advisors to determine the tax
consequences to them of the acquisition, holding and disposition of Offered Units acquired pursuant to this Offering.

          This summary is based upon the facts set out in this prospectus, the current provisions of the Tax Act and the
Regulations and counsel’s understanding, based on publicly available published materials, of the current administrative and
assessing practices of the CCRA, all in effect as of the date of this prospectus. This summary takes into account the Tax
Proposals and this summary is based on certificates of the REIT, the Trustees and certain members of the Alexis Nihon
Group, as to certain factual matters. This summary does not otherwise take into account or anticipate any changes in law,
whether by legislative governmental or judicial decision or action, and does not take into account provincial, territorial or
foreign tax legislation or considerations, which may differ significantly from those discussed herein. This summary assumes
that the Tax Proposals will be enacted as proposed, but no assurances can be given that this will be the case. There can be no
assurances that the CCRA will not change its administrative and assessing practices. With respect to opinions and views
based on representations and statements as to matter of fact, counsel has assumed the accuracy of such representations and
statements in giving such opinions and views. This summary is also based on the assumption that the REIT will at all times
comply with the Contract of Trust and on certificates of the REIT as to certain factual matters.

        This summary is not exhaustive of all possible Canadian federal tax considerations applicable to an
investment in Units. Moreover, the income and other tax consequences of acquiring, holding or disposing of Units will
vary depending on the Unitholder’s particular circumstances. Accordingly, this summary is of a general nature only
and is not intended to be legal or tax advice to any prospective purchaser of Units. Consequently, a prospective
Unitholder should consult the holder’s own tax advisor for advice with respect to the tax consequences of an
investment in Units based on the prospective Unitholder’s particular circumstances.

S TATUS OF THE REIT

         Qualification as a Mutual Fund Trust

          This summary assumes that the REIT will qualify as a “unit trust” and a “mutual fund trust” as defined in the Tax
Act on Closing and will thereafter continuously qualify as a mutual fund trust. The REIT has advised counsel that it expects
that it will be able to elect to be a “mutual fund trust” from the date it is established and that it will qualify as a “mutual fund
trust” upon Closing and continue to qualify as a “mutual fund trust” under the provisions of the Tax Act and the balance of
this summary assumes that the REIT does and will continue to so qualify.




                                                                102
         To qualify as a “mutual fund trust”, the REIT mu st be a “unit trust” and must, among other matters, restrict its
undertaking to: (i) the investing of its funds in property (other than real property or an interest in real property); and (ii) the
acquiring, holding, maintaining, improving, leasing or managing of any real property (or interest in real property) that is
capital property of the REIT; or (iii) any combination of the activities described in (i) and (ii), and must have at least 150
Unitholders holding not less than a prescribed number of Units of the REIT which are qualified for distribution to the public
and each of such Unitholders must hold Units which have an aggregate fair market value of not less than $500.

          This summary assumes that the REIT will be able to elect to be deemed to be a “mutual fund trust” from the date it
is established. This summary also assumes that the REIT is not established or maintained primarily for the benefit of non-
residents. As well, this summary assumes that the REIT will list the Units on a prescribed stock exchange in Canada within
the time prescribed in the Tax Act. Counsel is of the view that the foregoing assumptions are reasonable in light of the terms
of the Contract of Trust and the restrictions on the ownership of Units by non-resident persons which are contained in the
Contract of Trust.

         If the REIT were not to qualify as a “mutual fund trust”, the income tax considerations as described below would, in
some respects, be materially and adversely different. In particular, if the REIT ceases to qualify as a mu tual fund trust, the
REIT may be required to pay a tax under Part XII.2 of the Tax Act. The payment of Part XII.2 tax by the REIT may have
adverse income tax consequences for certain Unitholders, including non-resident Persons.

        It should be noted that although the REIT will qualify as a “mutual fund trust” under the provisions of the Tax Act,
the REIT will not be a “mutual fund” as defined by applicable securities legislation.

         Registered Investment

          The Contract of Trust of the REIT provides that the REIT will apply to become a registered investment for the
purposes of the Tax Act. It will be eligible to be registered if it is a mutual fund trust, and it may have its registration revoked
by the CCRA if it ceases to be a mutual fund trust. Assuming the REIT becomes a registered investment, the REIT may be
liable to pay special tax under Part XI of the Tax Act by reason of failing to comply with certain restrictions relating to the
acquisition of foreign property (as defined in the Tax Act) or by entering into agreements to buy shares of a corporation at a
price that may differ from the fair market value thereof. The REIT is required by the Contract of Trust of the REIT to restrict
its investments so as to ensure that it will not become liable for such taxes.

         Qualified Investments

         Providing that the REIT qualifies as a “mutual fund trust” or is a “registered investment” for purposes of the Tax
Act at a particular time, the Units will be qualified investments for Deferred Income Plan and RESPs at such time. If the
REIT ceases to qualify as a mutual fund trust and the REIT’s registration as a registered investment under the Tax Act is
revoked, the Units will cease to be qualified investments under the Tax Act for Deferred Income Plans and RESPs. Where, at
the end of a month, a Deferred Income Plan or RESP holds units or other properties that are not qualified investments, the
Deferred Income Plan or RESP may, in respect of that month, be required to be pay a tax under Part XI.1 of the Tax Act.
Holding of a non-qualified investment by an RESP can also cause the revocation of the RESP.

         Foreign Property

         Based on representations of the REIT as to certain factual matters, provided that the REIT is a “mutual fund trust”
and restricts its holdings of foreign property within the limits provided under the Tax Act (30% based on cost in 2002), or the
REIT is a “registered investment” within the meaning of the Tax Act (as described above), the Units will not constitute
foreign property for Deferred Income Plans, registered pension plans or other persons subject to tax under Part XI of the Tax
Act. RESPs are not liable for such tax.

TAXATION OF THE REIT

          The taxation year of the REIT is the calendar year. In each taxation year, the REIT will be subject to tax under the
Tax Act on its income for the year, including net realized taxable capital gains, computed in accordance with the detailed
provisions of the Tax Act, less the portion thereof that it deducts in respect of the amounts paid or payable or deemed to be
paid or payable in the year to Unitholders. An amount will be considered to be payable to a Unitholder in a taxation year if it
is paid to the Unitholder in the year by the REIT or if the Unitholder is entitled in that year to enforce payment of the amount.




                                                               103
          The income for purposes of the Tax Act of the REIT will include: income realized from the rental of its rental
properties in the Portfolio; income payable to it by other trusts in which the REIT is beneficially interested, dividends
received from corporations in which it holds shares; and any taxable capital gains or recapture of capital cost allowance
arising from dispositions by it of properties, including those forming part of the Portfolio and Assets.

         In computing its income for purposes of the Tax Act, the REIT may deduct reasonable administrative costs, interest
and other expenses incurred by it for the purpose of earning income. The REIT may also deduct from its income for the year
a portion of the expenses incurred by it to issue Units pursuant to this offering. The portion of the issue expenses deductible
by the REIT in a taxation year is 20% of those issue expenses, pro rated where the REIT’s taxation year is less than 365 days.

          The Contract of Trust provides that as of the last Distribution Date for a taxation year an amount equal to the Excess
Income of the REIT for the taxation year less the amount of non-capital losses, as defined in the Tax Act, of the REIT
available to be carried forward shall be paid to the Unitholders. The Contract of Trust further provides that the REIT will
deduct for tax purposes such amount as is paid or payable to Unitholders for the year as is necessary to ensure that the REIT
is not liable for income tax payable under Part I of the Tax Act in any year.

        Losses incurred by the REIT cannot be allocated to Unitholders but may be deducted by the REIT in future years in
accordance with the Tax Act.

          The Tax Act provides for a special tax, Part XII.2 tax, on the designated income (including income from Canadian
real property) of certain trusts which have designated beneficiaries (including non-resident persons and certain tax exempt
persons). This special tax does not apply to a trust for a taxation year if the trust is a mutual fund trust throughout such year.
Accordingly, provided the REIT qualifies as a mutual trust fund throughout a taxation year, it will not be subject to the
special tax for such taxation year. The REIT has indicated that it will file on a timely basis an election to be deemed to have
been a mutual fund trust throughout its first taxation year ending on December 31, 2002.

         Tax Deferred Distributions

         In circumstances where a taxpayer acquires depreciable property from a non arm’s length party, the Tax Act
contains rules to limit the capital cost upon which the taxpayer can claim capital cost allowance to an amount equal to the
capital cost of the depreciable property disposed of by the non arm’s length party and one-half of the difference between the
proceeds of disposition realized by such party and the capital cost of the said depreciable property to the said non arm’s
length party. Factual considerations are extremely important in determining whether or not a trust and a third party deal with
one another at arm’s length and, unless the facts indicate otherwise, CCRA will consider a trust and a beneficiary not to be
dealing with one another at arm’s length. Although the REIT considers there is reasonable basis to regard it and Alexis Nihon
as dealing with one another at arm’s length with respect to the acquisition by the REIT of the Purchased Assets, there can be
no assurance that the rules in the Tax Act as described above (which would otherwise limit capital cost allowance), will not
apply with respect to the acquisition of the Purchased Assets by the REIT. If CCRA successfully challenges the arm’s length
status of the REIT and Alexis Nihon, the extent to which distributions by the REIT will be income tax deferred would be
materially adversely affected.

TAXATION OF UNITHOLDERS

         Trust Distributions

         A Unitholder will generally be required to include in income for a particular taxation year the portion of the net
income of the REIT for a taxation year, including net realized taxable capital gains (determined for purposes of the Tax Act),
that is paid or payable to the Unitholder in the particular taxation year, whether or not those amounts are reinvested in
additional Units pursuant to the REIT’s distribution reinvestment plan.

         The non-taxable portion of any net realized capital gains of the REIT paid or payable to a Unitholder in a taxation
year will not be included in computing the Unitholder’s income for the year.

          The Contract of Trust generally requires the REIT to claim the maximum amount of capital cost allowance available
to it in computing its income for tax purposes. Based on the distribution policy, the amount distributed to Unitholders in a
year may exceed the net income of the REIT for tax purposes for that year. Distributions in excess of the REIT’s net income
for tax purposes in a year, including the three percent additional bonus distribution of Units acquired pursuant to the
distribution reinvestment plan, will not generally be included in the Unitholder’s income for the year. However, such amount
(other than the non taxable portion of the net realized capital gains of the REIT for the year, the taxable portion of which was


                                                               104
designated by the REIT in respect of the Unitholder) will reduce the adjusted cost base of the Units held by the Unitholder
and the Unitholder will realize a capital gain in the year to the extent the adjusted cost base of the Units would otherwise be a
negative amount.

         The REIT will designate, to the extent permitted by the Tax Act, the portion of the taxable income distributed to
Unitholders as may reasonably be considered to consist of net taxable capital gains of the REIT. Any such designated amount
will be deemed for tax purposes to be received by Unitholders in the year as a taxable capital gain and will be subject to the
general rules relating to the taxation of capital gains described below. The REIT will also designate, to the extent permitted
by the Tax Act, the portion of taxable dividends received by the REIT from Alexis Nihon Management (Canada) Inc. and any
other Canadian corporation owned by the REIT as may reasonably be considered to be an amo unt included in the income of
Unitholders. Any such designated amount will be deemed for purposes of the Tax Act, other than non-resident withholding
purposes, to be received by the Unitholders as a taxable dividend and will be subject to the general rules regarding the
taxation of taxable dividends paid by taxable Canadian corporations. Thus, to the extent that amounts are designated as
taxable dividends from Alexis Nihon Management (Canada) Inc. and any other Canadian corporation owned by the REIT,
they will be subject, inter alia, to the gross-up and dividend tax credit provisions in respect of Unitholders who are
individuals, to the refundable tax under Part IV of the Tax Act in respect of Unitholders that are private corporations and
certain other corporations controlled directly or indirectly by or for the benefit of an individual or related group of
individuals, and to the deduction in computing taxable income in respect of Unitholders that are corporations. Such amounts
so designated will also be taken into account in determining the Unitholder’s liability, if any, for alternative minimum tax
under the Tax Act.

          The cost of Units acquired by reinvestment of distributions pursuant to the distribution reinvestment plan will be the
amount of such reinvestment. There will be no net increase or decrease in the adjusted cost base of all of a holder’s Units as a
result of the receipt of bonus Units under the distribution reinvestment plan. However, the receipt of bonus Units under the
distribution reinvestment plan will result in a per Unit reduction of adjusted cost base to the holder.

        For the purposes of determining the adjusted cost base to a Unitholder of Units, when a Unit is acquired, whether as
a Unit acquired pursuant to the distribution reinvestment plan or otherwise, the cost of the newly-acquired Unit will be
averaged with the adjusted cost base of all of the Units owned by the Unitholder as capital property immediately before that
time.

         Purchasers of Units

         Since the net income of the REIT will be distributed on a monthly basis, a purchaser of a Unit may become taxable
on a portion of the net income of the REIT accrued or realized by the REIT in a month before the time the Unit was
purchased but which was not paid or made payable to Unitholders until the end of the month and after the time the Unit was
purchased. A similar result may apply on an annual basis in respect of net recapture income for a year or a portion of capital
gains accrued or realized by the REIT in a year before the time the Unit was purchased but which is paid or made payable to
Unitholders at year end and after the time the Unit was purchased. When such amounts are paid by the REIT, they generally
must be included in computing the income of the Unitholder for tax purposes.

         Dispositions of Units

         On the disposition or deemed disposition of a Unit, the Unitholder will realize a capital gain (or capital loss) equal to
the amount by which the Unitholder’s proceeds of disposition exceed (or are less than) the aggregate of the adjusted cost base
of the Unit and any reasonable costs of disposition. Proceeds of disposition will not include an amount that is otherwise
required to be included in the Unitholder’s income.

         Capital Gains and Capital Losses

         One-half of any capital gains realized by a Unitholder and the amount of any net taxable capital gains designated by
the REIT in respect of a Unitholder will be included in the Unitholder’s income as a taxable capital gain. One-half of any
capital loss realized by a Unitholder may generally be deducted only from taxable capital gains in accordance with the
provisions of the Tax Act. Where a Unitholder that is a corporation or trust (other than a mutual fund trust) disposes of a
Unit, the Unitholder’s capital loss from the disposition will generally be reduced by the amount of any dividends received by
the REIT previously designated by the REIT to the Unitholder, except to the extent that a loss on a previous disposition of a
Unit has been reduced by those dividends. Analogous rules apply where a corporation or trust (other than a mutual fund trust)
is a member of a partnership that disposes of Units.



                                                               105
         A Unitholder that is a “Canadian-controlled private corporation” as defined in the Tax Act may be liable to pay an
additional refundable tax of 6-2/3% on its “aggregate investment income” for the year, which will include an amount in
respect of taxable capital gains.

         Alternative Minimum Tax

          In general terms, net income of the REIT paid or payable to a Unitholder who is an individual or a certain type of
trust that is designated as taxable dividends or as net realized capital gains and capital gains realized on the disposition of
Units may increase the Unitholder’s liability for alternative minimum tax.


                                                 LEGAL PROCEEDINGS

         The REIT and Alexis Nihon, either collectively or independently or in any combination thereof, are not currently
subject to any litigation or proceedings which, individually or in the aggregate, are material in nature or amount to the REIT.


                                                      RISK FACTORS

                                                  n
        There are certain risks inherent in an i vestment in the Units and in the activities of the REIT, including the
following, which investors should carefully consider before investing in the Units.

ABSENCE OF PRIOR PUBLIC MARKET

         The REIT is a newly -formed unincorporated trust. The REIT cannot predict at what prices the Units will trade and
there can be no assurance that an active trading market in the Units will develop or be sustained.

         A publicly traded real estate investment trust will not necessarily trade at values determined solely by reference to
the underlying value of its real estate assets. Accordingly, the Units may trade at a premium or a discount to values implied
by the appraisal.

         One of the factors that may influence the market price of the Units is the annual yield on the Units. Accordingly, an
increase in market interest rates may lead purchasers of Units to demand a higher annual yield which could adversely affect
the market price of the Units. In addition, the market price for the Units may be affected by changes in general market
conditions, fluctuations in the markets for equity securities, changes in the economic environment and numerous other factors
beyond the control of the REIT.

OWNERSHIP OF IMMOVABLE PROPERTY

        All immovable property investments are subject to elements of risk. Such investments are affected by general
economic conditions, local real estate markets, demand for leased premises, competition from other available premises,
municipal valuations and assessments and various other factors. In the case of the REIT, such risk is heightened by the
concentration of properties in one geographical area.

          The value of immovable property and any improvements thereto may also depend on the credit and financial
stability of the tenants and the economic environment in which they operate. The REIT’s income and Distributable Income
would be adversely affected if one or more major tenants or a significant number of tenants were to become unable to meet
their obligations under their leases or if a significant amount of available space in the properties in which the REIT will have
an interest is not able to be leased on economically favourable lease terms. In the event of default by a tenant, delays or
limitations in enforcing rights as lessor may be experienced and substantial costs in protecting the REIT’s investment may be
incurred. The ability to rent unleased space in the properties in which the REIT will have an interest will be affected by many
factors, including but not limited to the level of economic activity generally and the comp etition for tenants by other
properties. Costs may be incurred in making improvements or repairs to property required by a new tenant. The failure to rent
unleased space on a timely basis or at all would likely have an adverse effect on the REIT’s financia l condition.

         Certain significant expenditures, including property taxes, maintenance costs, hypothecary payments, insurance
costs and related charges must be made throughout the period of ownership of immovable property regardless of whether the
property is producing any income. If the REIT is unable to meet hypothecary payments on any property, loss could be
sustained as a result of the hypothecary creditor’s exercise of its hypothecary recourses.



                                                              106
          Immovable property investments tend to be relatively illiquid, with the degree of liquidity generally fluctuating in
relationship with demand for and the perceived desirability of such investments. Such illiquidity may tend to limit the REIT’s
ability to vary its portfolio promptly in response to changing economic or investment conditions. If the REIT were to be
required to liquidate its immovable property investments, the proceeds to the REIT might be significantly less than the
aggregate carrying value of its properties.

         The Properties are comprised of office, retail, industrial and mixed-use properties, including a multi-family
residential property. Although the average lease term of the Properties is approximately 4.55 years from October 1, 2002, the
REIT may, in the future, be exposed to a general decline of demand by tenants for space in properties of such nature. See
“Properties — Leasing Activity”.

         The REIT will be subject to the risks associated with debt financing, including the risk that existing hypothecary
indebtedness secured by the Properties will not be able to be re-financed or that the terms of such re-financing will not be as
favourable as the terms of existing indebtedness. In order to minimize this risk, the REIT will attempt to appropriately
structure the timing of the renewal of significant tenant leases on the respective Properties in relation to the time at which
hypothecary indebtedness on such Properties becomes due for re-financing.

         Certain of the leases of the Properties have early termination provisions which, if exercised, would reduce the
average lease term. However, such termination rights are generally exercisable only at a cost to the tenant and the amount of
space in the Portfolio which could be affected and operating revenues derived therefrom are not significant.

CO -OWNERSHIP OF PROPERTIES

         In certain situations, the REIT may be adversely affected by a default by a co-owner of a property co-owned by the
REIT and a third party under the terms of a mortgage, hypothec, lease or other agreement. Although co-owner agreements
entered into by the REIT do and will provide for remedies to the REIT in such circumstances, such remedies may not be
exercisable in all circumstances, or may be insufficient or delayed, and may not cure a default in the event that such default
by a co-owner is deemed to be a default of the REIT. There can be no assurance that the REIT will acquire the Co-Ownership
Properties or that, if the REIT does not acquire the Co-Ownership Properties, the REIT will be able to invest or re-deploy the
funds that would have been used for such acquisition in a timely manner or in a fashion that is not dilutive to Unitholders.

OCCUPANCY BY TENANTS

          Although certain, but not all, leases contain a provision requiring tenants to maintain continuous occupancy of
leased premises, there can be no assurance that such tenants will continue to occupy such premises. Certain tenants have a
right to terminate their leases upon payment of a penalty. There can be no assurance that tenants will continue their activities
and continue occupancy of premises. Any cessation of occupancy by tenants may have an adverse effect on the REIT. See
“Explanatory Notes — Properties”.

FORECASTED OCCUPANCY RATES AND REVENUES IN EXCESS OF HISTORICAL OCCUPANCY RATES AND REVENUES

         Historical occupancy rates and revenues are not necessarily an accurate prediction of the “normal” occupancy rates
for the Properties or revenues which will be derived therefrom. In addition, upon expiry or termination of the AN Head Lease
and/or the AN Income Subsidy, average occupancy rates and revenues of the REIT may tend to decline towards “normal”
historical occupancy rates and revenues.

LEASE R ENEWALS AND RENTAL INCREASES

         Expiries of certain leases will occur in both the short and long term, including expiry of leases of certain significant
tenants, and although certain lease renewals and or rental increases are expected to occur in the future, there can be no
assurance that such renewals or rental increases will occur or be achieved. The non-occurrence or failure to achieve such
renewals and/or rental increases may have an adverse effect on the financial condition of the REIT.

CONSENTS REQUIRED

         Certain consents of hypothecary and secured creditors are required in connection with the transfer of the Properties
to the REIT. In addition, the consent of co-owners and of owners of certain properties managed by the Alexis Nihon Group
are required in connection with the transfer of properties and/or the transfer of the management of properties to Alexis Nihon
Management (Canada) Inc. There is no assurance that such consents will be obtained.


                                                              107
LIQUIDITY AND ACCESS TO CAPITAL

          Although the REIT has entered into a letter agreement with a Canadian chartered bank with respect to the Operating
Facility, and intends to put the Re-financing Loan in place at Closing and to put the Acquisition Facility in place following
Closing, there can be no assurance that such facilities and loan will be put in place or that the REIT will otherwise have
access to sufficient capital or access to capital on terms favourable to the REIT for future property acquisitions, financing or
refinancing of properties, funding operating expenses or other purposes. In addition, there can be no assurance that the REIT
will be able to draw down amounts it may wish to draw down from time to time under such facilities and loan due to the
limitations on the incurrence of debt by the REIT set forth in the Contract of Trust. See “Investment Guidelines and
Operating Policies”.

CREDITWORTHINESS OF ALEXIS NIHON GROUP AND SUFFICIENCYOF AN PLEDGE

         There is no certainty that the Alexis Nihon Group or its affiliates will be able to fund the amounts owing to the REIT
under any indemnification obligations under the Purchase Agreement or under future mezzanine financings. Although the
obligations of the AN Head Lessee and the AN Income Subsidy Provider under the AN Head Lease and the AN Income
Subsidy as well as the indemnification obligation under the Purchase Agreement will be partially secured by the AN Pledge,
there can be no assurance that the AN Head Lessee will be able to perform its obligations to the REIT in connection with the
AN Head Lease, that the AN Income Subsidy Provider will be able to perform its obligations to the REIT in connection with
the AN Income Subsidy or that the AN Pledgor will be able to perform its obligations to the REIT in connection with the AN
Pledge. It is estimated that, at Closing, the AN Pledge will be sufficient to cover the obligations of the AN Head Lessee under
the AN Head Lease and the AN Income Subsidy Provider under the AN Income Subsidy for a period of approximately two
years (based on the value of the Units at the time of Closing). There can be no assurance that the value of the securities
subject to the AN Pledge at any relevant time will be sufficient to cover any or all amounts which are or may become owing
under each of the AN Head Lease, the AN Income Subsidy and/or the indemnification obligations of Alexis Nihon under the
Purchase Agreement. In addition, there may not be a market for the securities subject to the AN Pledge and/or such securities
may be subject to resale restrictions.

UNITHOLDER LIABILITY

          The Contract of Trust provides that no Unitholder or annuitant under a plan of which a Unitholder acts as trustee or
carrier (an “annuitant”) will be held to have any personal liability as such, and that no resort shall be had to the private
property of any Unitholder or annuitant for satisfaction of any obligation or claim arising out of or in connection with any
contract or obligation of the REIT or of the Trustees. Only assets of the REIT are intended to be liable and subject to levy or
execution.

          The Contract of Trust further provides that certain written instruments signed by the REIT (including all immovable
hypothecs and mortgages and, to the extent the Trustees determine to be practicable and consistent with their obligation as
Trustees to act in the best interests of the Unitholders, other written instruments creating a material obligation of the REIT)
shall contain a provision or be subject to an acknowledgment to the effect that such obligation will not be binding upon
Unitholders personally or upon any annuitant. In the opinion of Davies Ward Phillips & Vineberg LLP, counsel to the REIT,
and Stikeman Elliott, counsel to the Underwriters, except in case of bad faith or gross negligence on their part, no personal
liability will attach under the laws of the Province of Québec to Unitholders or annuitants for contract claims under any
written instrument disclaiming personal liability as aforesaid.

         However, in conducting its affairs the REIT will be acquiring immovable property investments, including its interest
in the Portfolio, subject to existing contractual obligations, including obligations under hypothecs or mortgages and leases.
The Trustees will use all reasonable efforts to have any such obligations, other than leases, modified so as not to have such
obligations binding upon any of the Unitholders or annuitants personally. However, the REIT may not be able to obtain such
modification in all cases. To the extent that claims are not satisfied by the REIT, there is a risk that a Unitholder or annuitant
will be held personally liable for obligations of the REIT where the liability is not disavowed as described above. In the
opinion of Davies Ward Phillips & Vineberg LLP and Stikeman Elliott, the possibility of any personal liability attaching to
Unitholders or annuitants under the laws of the Province of Québec for contract claims where the liability is not so disavowed
is remote.

        Alexis Nihon will use all reasonable efforts to obtain acknowledgments from the hypothecary creditors under the
Assumed Hypothecs that the Assumed Hypothec obligations will not be binding personally upon the Trustees, the
Unitholders or any annuitant.



                                                               108
         Claims against the REIT may arise other than under contracts, including claims in delict, claims for taxes and
possibly certain other statutory liabilities. The possibility of any personal liability of Unitholders for such claims is
considered remote under the laws of Québec and, as well, the nature of the REIT’s activities will be such that most of its
obligations will arise by contract, with non-contractual risks being largely insurable. In the event that payment of a REIT
obligation were to be made by a Unitholder, such Unitholder would be entitled to reimbursement from the available assets of
the REIT.

         As it is intended that the employees of Alexis Nihon relating to the management of the Portfolio be transferred to the
REIT or a wholly-owned subsidiary of the REIT, those obligations to employees of Alexis Nihon who become employees of
such subsidiary, to the extent required by applicable law to be assumed by their new employer, including those obligations
arising from their past service with Alexis Nihon, may be incumbent not upon the REIT but upon such subsidiary of the
REIT.

          Article 1322 of the Civil Code of Québec effectively states that the beneficiary of a trust is liable towards third
persons for the damage caused by the fault of the trustees of such trust in carrying out their duties only up to the amount of
the benefit such beneficiary has derived from the act of such trustees and that such obligations are to be satisfied from the
trust patrimony. Accordingly, although this provision remains to be interpreted by the courts, it should provide additional
protection to Unitholders with respect to such obligations.

          The Trustees will cause the activities of the REIT to be conducted, with the advice of counsel, in such a way and in
such jurisdictions as to avoid, to the extent they determine to be practicable and consistent with their duty to act in the best
interests of the Unitholders, any material risk of liability on the Unitholders for claims against the REIT. The Trustees will, to
the extent available on terms which they determine to be practicable, cause the insurance carried by the REIT, to the extent
applicable, to cover the Unitholders and annuitants as additional insureds.

COMPETITION

          The REIT will be competing for suitable immovable property investments with individuals, corporations and
institutions (both Canadian and foreign) which are presently seeking or which may seek in the future immovable property
investments similar to those desired by the REIT. Many of those investors will have greater financial resources than those of
the REIT, or operate without the investment or operating restrictions of the REIT or according to more flexible conditions.
An increase in the availability of investment funds and an increase in interest in immovable property investments may tend to
increase competition for immovable property investments, thereby increasing purchase prices and reducing the yield on them.

         In addition, numerous other developers, managers and owners of properties will compete with the REIT in seeking
tenants. The existence of competing developers, managers and owners and competition for the REIT’s tenants could have an
adverse effect on the REIT’s ability to lease space in its properties and on the rents charged, and could adversely affect the
REIT’s revenues and, consequently, its ability to meet its debt obligations. In addition, any increase in the supply of available
space in the markets in which the REIT operates or may operate could have an adverse effect on the REIT.

AVAILABILITY OF CASH FLOW

          Distributable Income may exceed actual cash available to the REIT from time to time because of items such as
principal repayments, tenant allowances, leasing commissions and capital expenditures. The REIT may be required to use
part of its debt capacity or to reduce distributions in order to accommodate such items.

EMPHYTEUTIC LEASES

         To the extent the properties in which the REIT has or will have an interest are located on leased land, the land leases
may be subject to periodic rental rate resets which may fluctuate and may result in significant rental rate adjustments.
Currently, portions of Centre Laval are subject to an emphyteutic lease expiring in 2065, the Property located at 4700
de la Savane is subject to an emphyteutic lease expiring in 2046 and the Property located at 1080 Beaver Hall Hill is subject
to an emphyteutic lease expiring in 2047.

FINANCIAL FORECAST

         Actual results for the forecast period will vary from the forecast results and those variations may be material. There
is no representation by the REIT that actual results achieved in the forecast period will be the same, in whole or in part, as
those forecasted herein.


                                                              109
ACQUISITION AND EXPANSION

        The REIT’s business plan includes growth through identifying suitable acquisition opportunities, pursuing such
opportunities, consummating acquisitions and effectively operating and leasing such properties. If the REIT is unable to
manage its growth effectively, its business, operating results and financial condition could be adversely affected.

OWNERSHIP OF UNITS BY THE NIHON/MASSICOTTE GROUP

         At Closing, it is expected that the Nihon/Massicotte Group will hold approximately 49.7% of the outstanding Units.
Furthermore, the Nihon/Massicotte Group is entitled to appoint a certain number of Trustees based on the percentage of Units
held by it. See “Contact of Trust and Description of Units — Trustees Appointed by the Nihon/Massicotte Group ”. Thus, the
Nihon/Massicotte Group and Alexis Nihon are in a position to exercise a certain influence with respect to the affairs of the
REIT.

INTEREST RATE FLUCTUATIONS

         At Closing, the REIT’s financing may include indebtedness with interest rates based on variable lending rates that
will result in fluctuations in the REIT’s cost of borrowing. Approximately 7.3% of the existing mortgages are at variable
rates.

GEOGRAPHICAL CONCENTRATION

         Although diversified by asset class and property type, the REIT’s portfolio will be concentrated in the Greater
Montreal Area and will derive all of its income from properties located in the Province of Québec. Consequently, the market
value of the Properties and the income generated from them could be negatively affected by changes in local and regional
economic conditions.

GOVERNMENT R EGULATION

          The REIT and the Portfolio are subject to various governmental legislation and regulation. Any change in such
legislation or regulation adverse to the REIT and the Portfolio could affect the operating and financial performance of the
REIT.

         In addition, environmental and ecological legislation, regulations and policies have become increasingly important
in recent years. Under various laws and regulations, the REIT could become liable for the costs of removal or remediation of
certain hazardous or toxic substances released on or in its properties or disposed of at other locations or for the costs of other
remedial or preventive work. The failure to remove or remediate such substances, or to effect such remedial or preventive
work if any, may adversely affect an owner’s ability to sell such real estate or to borrow using such real estate as collateral,
and could potentially also result in claims against the owner by private plaintiffs. Notwithstanding the above, the REIT is not
aware of any material non-compliance, liability or other claim in connection with any of the Properties, nor is the REIT
aware of any environmental condition with respect to any of the Properties that it believes would involve material
expenditure by the REIT. It is the REIT’s operating policy to obtain a Phase I environmental assessment, conducted by an
independent and experienced environmental consultant, prior to acquiring a property. Phase I environmental assessments
have been performed in respect of each of the Properties and did not reveal any material environmental concerns. Phase II
environmental assessments have also been performed on two of the Properties. Such reports have not revealed any
environmental concerns which could materially adversely affect the REIT, its financial condition or its operations. It is
estimated that the cost of any remedial work required (as per Phase I and Phase II environmental assessments) with respect to
the Properties will not exceed $1.0 million. The reasonable cost of such remedial work shall be borne by Alexis Nihon. The
Purchase Agreement will contain environmental representations, warranties and indemnities in favour of the REIT from
Alexis Nihon. See “Environmental and Engineering” and “Acquisition of the Portfolio, the Assets and the Management
Assets — Purchase Agreement”.

KEY P ERSONNEL

         The services of certain personnel, including Messrs. Paul J. Massicotte and René Fortin are key to the management
of the REIT. The loss of the services of any of these key personnel could have an adverse effect on the REIT.




                                                               110
POTENTIAL CONFLICTS OF INTEREST

         Pursuant to the Property Closing, Alexis Nihon will receive cash, the Alexis Nihon Units and the AN Convertible
Debenture in consideration of the transfer of the Purchased Assets to the REIT. As a result, the economic interest of Alexis
Nihon and, indirectly, of the Nihon/Massicotte Group, in the Properties will be significantly decreased. In addition, the REIT
may be subject to various conflicts of interest because of the fact that members of the Alexis Nihon Group and their
respective directors, officers and associates, as well as the Trustees, are engaged in a wide range of real estate and other
business activities. The REIT may become involved in transactions which conflict with the interests of the foregoing.

         The Trustees may from time to time deal with persons, firms, institutions or corporations with which the REIT may
be dealing, or which may be seeking investments similar to those desired by the REIT. The interests of these persons could
conflict with those of the REIT. In addition, from time to time, these persons may be competing with the REIT for available
investment opportunities.

         Any decisions regarding the enforcement by the REIT of the terms of any agreement entered into by the REIT with
a Trustee who is not an Independent Trustee, with the Alexis Nihon Group or an affiliate thereof, or with an associate of a
non-Independent Trustee or the Alexis Nihon Group may be made by a majority of the Independent Trustees only.

         The Contract of Trust contains “conflicts of interest” provisions requiring Trustees to disclose material interests in
material contracts and transactions and refrain from voting thereon. See “Management of the REIT — Conflict of Interest
Restrictions and Provisions”. The REIT will enter into the Non-Competition Agreement with Alexis Nihon, Robert A. Nihon
and Paul J. Massicotte, which will address certain, but not all, potential conflicts of interest. See “Non-Competition
Agreement”.

GENERAL UNINSURED LOSSES

         On or prior to the Property Closing, the REIT will put in place blanket comprehensive general liability, fire , flood,
extended coverage and rental loss insurance with policy specifications, limits and deductibles customarily carried for similar
properties. There are, however, certain types of risks (generally of a catastrophic nature such as from wars or environmental
contamination) which are either uninsurable or not insurable on an economically viable basis. The REIT will, subject to
standard industry practices, also carry insurance for earthquake risks, subject to certain policy limits, deductibles and self-
insurance arrangements, and will continue to carry such insurance if it is economical to do so. Should an uninsured or
underinsured loss occur, the REIT could lose its investment in, and anticipated profits and cash flows from, one or more of its
properties, but the REIT would continue to be obligated to repay any hypothecary recourse or mortgage indebtedness on such
properties.

S TATUS FOR TAX PURPOSES AND INVESTMENT ELIGIBILITY

          There can be no assurance that income tax laws or the judicial interpretation thereof or the administrative and/or
assessing practices of the CCRA respecting the treatment of mutual fund trusts or the deductibility of interest will not be
changed in a manner which adversely affects Unitholders. Although the REIT intends to qualify as a “mutual fund trust”
under the Tax Act, if the REIT fails or ceases to so qualify, the Units will not be qualified investments or will cease to be
qualified investments for Deferred Income Plans and RESPs. In addition, the REIT will then be required to pay a tax under
Part XII.2 of the Tax Act. The payment of Part XII.2 tax by the REIT may have adverse income tax consequences for certain
Unitholders including non-resident persons and Deferred Income Plans and RESPs that acquired an interest in the REIT
directly or indirectly from another Unitholder. If the REIT fails or ceases to qualify as a “mutual trust fund” and a “registered
investment” under the Tax Act, the Units will not be or will cease to be qualified investments for Deferred Income Plans and
RESPs. The REIT will endeavour to ensure that the Units constitute and continue to be qualified investments for Deferred
Income Plans and RESPs. The Tax Act imposes penalties for the acquisition or holding of non-qualified or ineligible
investments and there is no assurance that the conditions prescribed for such qualified or eligible investments will be adhered
to at any particular time. See “Eligibility for Investment” and “Canadian Federal Income Tax Considerations”.

          The extent to which distributions will be ta x-deferred in the future will depend on the extent that the REIT can
shelter its taxable income by claiming capital cost allowances and other available deductions. While Management estimates
that 60% of distributions to be made by the REIT to Unitholders in 2003 will be income tax deferred by reason of the REIT’s
ability to claim capital cost allowance and certain other deductions, this figure may change as a result of the final form of the
Corporate Reorganization and the final allocation of the purchase price amongst the Purchased Assets.




                                                              111
         Although the REIT is of the view that all expenses to be claimed by it in the determination of its income under the
Tax Act will be reasonable and deductible in accordance with the applicable provisions of the Tax Act and that the REIT’s
“undepreciated capital cost” has been determined in accordance with the applicable provisions of the Tax Act, there can be
no assurance that the Tax Act or the interpretation of the Tax Act will not change, or that CCRA will agree with the expenses
claimed or the determination and computation of the REIT’s “undepreciated capital costs” or the claims made by the REIT in
respect thereof. If CCRA successfully challenges the deductibility of such expenses or the correctness of such amounts or
claims, the extent to which distributions by the REIT will be income tax deferred would be materially adversely affected.

         Tax Deferred Distributions

         In circumstances where a taxpayer acquires depreciable property from a non arm’s length party, the Tax Act
contains rules to limit the capital cost upon which the taxpayer can claim capital cost allowance to an amount equal to the
capital cost of the depreciable property disposed of by the non arm’s length party and one-half of the difference between the
proceeds of disposition realized by such party and the capital cost of the said depreciable property to the said non arm’s
length party. Factual considerations are extremely important in determining whether or not a trust and a third party deal with
one another at arm’s length and, unless the facts indicate otherwise, CCRA will consider a trust and a beneficiary not to be
dealing with one another at arm’s length. Although the REIT considers there is reasonable basis to regard it and Alexis Nihon
as dealing with one another at arm’s length with respect to the acquisition by the REIT of the Purchased Assets, there can be
no assurance that the rules in the Tax Act as described above (which would otherwise limit capital cost allowance), will not
apply with respect to the acquisition of the Purchased Assets by the REIT. If CCRA successfully challenges the arm’s length
status of the REIT and Alexis Nihon, the extent to which distributions by the REIT will be income tax deferred would be
materially adversely affected.

DILUTION

         The number of Units the REIT is authorized to issue is unlimited. The Trustees have the discretion to issue
additional Units in other circumstances. Additional Units may also be issued pursuant to the Distribution Reinvestment Plan
or the conversion of the AN Convertible Debenture. Any issuance of Units may have a dilutive effect on the purchasers of
Units offered hereby.


                                                PLAN OF DISTRIBUTION

          Under the Underwriting Agreement, the REIT has agreed to sell and National Bank Financial Inc., CIBC World
Markets Inc., BMO Nesbitt Burns Inc., RBC Dominion Securities Inc. and Desjardins Securities Inc. have severally and not
solidarily (or jointly and severally) agreed in the proportions set out in the Underwriting Agreement to purchase on December
20, 2002 or on such other date as may be agreed upon but in any event not later than January 23, 2002, subject to the terms
and conditions stated therein, an aggregate of 8,500,000 Offered Units at a purchase price of $10.00 per Offered Unit, for an
aggregate consideration of $85,000,000. The price of the Units was arrived at following arm’s length negotiations between
the REIT and the Underwriters and is based on the appraised value of the Properties and the value of the Portfolio. See
“Independent Appraisal of the V    alue of the Properties”. The REIT has agreed to pay the Underwriters a fee of $0.575 per
Offered Unit purchased by the Underwriters, being an aggregate of $4,887,500. The obligations of the Underwriters under
the Underwriting Agreement may be terminated at their discretion upon the occurrence of certain stated events (including
their assessment of the state of the financial markets) and are conditional upon the completion of the transactions
contemplated by the Purchase Agreement. The Underwriters are however obligated to take up and pay for all such Offered
Units if any such Offered Units are purchased under the Underwriting Agreement.

          This prospectus also qualifies the distribution of 8,401,200 Alexis Nihon Units and the AN Convertible Debenture
(as well as the Units issuable upon conversion thereof) to be issued to Alexis Nihon in partial payment of the consideration
payable to Alexis Nihon for the Purchased Assets under the Purchase Agreement referred to under “Acquisition of the
Portfolio, the Assets and the Management Assets”, in the case of the Alexis Nihon Units, at a price per Alexis Nihon Unit
equal to the price per Offered Unit to the public pursuant to this Offering. The Alexis Nihon Units and the Offered Units have
the same attributes. No Underwriters’ fee will be payable in connection with the distribution of the Alexis Nihon Units or the
issuance of the AN Convertible Debenture.

         The Underwriters have been granted the Over-Allotment Option which entitles them to acquire up to 1,275,000
million additional Units, if, as and when issued, at the offering price to the public, exercisable for a period of 30 days from
the date of Closing, to cover over-allotments, if any, and for market stabilization. To the extent that the Over-Allotment
Option is exercised, the additional Units will be sold by certain members of the Nihon/Massicotte Group. Upon completion
of the Closing, members of the Nihon Family and members of the Massicotte Family will hold an aggregate of 8,401,200

                                                             112
Units, representing approximately 49.7% of the Units to be issued and outstanding at Closing. In the event the Over-
Allotment Option is exercised in full, members of the Nihon Family and members of the Massicotte Family will hold an
aggregate of 7,126,200 Units, representing approximately 42.2% of the issued and outstanding Units, the whole without
giving effect to the conversion of the AN Convertible Debenture.

          If the Over-Allotment Option is exercised in full, the total price to the public will be $97,750,000, the Underwriters’
fee will be $5,620,625, the net proceeds to the REIT will be $80,112,500, before deducting the expenses of the Offering, and
the net proceeds to the Nihon/Massicotte Group will be $12,016,875. The REIT will not receive any of the proceeds from the
sale of Units upon the exercise of the Over-Allotment Option, if any. This prospectus also qualifies the issuance of the Over-
Allotment Option to the Underwriters and the distribution of Units upon the exercise thereof.

          In connection with this Offering, subject to the foregoing, the Underwriters may over-allot or effect transactions that
stabilize or maintain the market price of the Units at levels other than those which might otherwise prevail on the open
market. Such transactions, if commenced, may be discontinued at any time.

          Pursuant to policy statements of the relevant securities commissions, the Underwriters may not, throughout the
period of distribution, bid for or purchase any Units. The policy statements allow certain exceptions to the foregoing
prohibitions. The Underwriters may only avail themselves of such exceptions on the condition that the bid or purchase not be
engaged in for the purpose of creating actual or apparent active trading in, or raising the price of, the Units. These exceptions
include a bid or purchase permitted under the by-laws and rules of applicable stock exchanges relating to market stabilization
and passive market making activities and a bid or purchase made for and on behalf of a customer where the order was not
solicited during the period of distribution.

         The Units have not been and will not be registered under the US Securities Act and, subject to certain exceptions,
may not be offered or sold in the United States. The Underwriters have agreed that they will not offer or sell these securities
within the United States. In addition, until 40 days after the commencement of this Offering, an offer or sale of the Units
within the United States by any dealer (whether or not participating in the Offering) may violate the registration requirements
of the US Securities Act if such offer or sale is made other than in accordance with an exemption from such registration
requirements.

           The REIT has agreed to indemnify the Underwriters and their directors, officers and employees against certain
liabilities.

        Prior to this Offering, there has been no public market for the Units. The initial offering price of the Units offered by
the Underwriters has been determined by negotiation between the REIT and the Underwriters.

         The REIT has agreed that it will not, without the prior consent of the Underwriters, offer, sell or otherwise dispose
of any Units or any securities convertible into or exchangeable or exercisable for Units (other than the Offered Units offered
hereby, the Alexis Nihon Units, the AN Convertible Debenture, Units issuable upon conversion of the AN Convertible
Debenture, Units issuable pursuant to the Distribution Reinvestment Plan and Units issued to third parties in consideration of
the payment in full or in part of the purchase price of a property, as long as the payment in Units does not represent a
discount to the offering price) for a period of 180 days from the date of this prospectus or agree to do so or publicly announce
any intention to do so.

          Alexis Nihon and the Nihon/Massicotte Group have agreed with the REIT and the Underwriters to certain
restrictions on the resale of the Alexis Nihon Units and the AN Convertible Debenture issued to it pursuant to the Purchase
Agreement. Alexis Nihon will undertake not to resell any Alexis Nihon Units or the AN Convertible Debenture during the
period of 180 days following the Closing. Notwithstanding the foregoing, Alexis Nihon will be entitled, at any time, to sell
Alexis Nihon Units to satisfy tax liabilities of Alexis Nihon, the Nihon Family or the Massicotte Family and shall also be
entitled to hypothecate such Alexis Nihon Units to secure indebtedness of up to 50% of the then market value of such Alexis
Nihon Units. At any time and from time to time, Alexis Nihon will also be entitled to transfer Alexis Nihon Units to: (i)
wholly-owned subsidiaries; (ii) an Alexis Nihon entity; or (iii) a member of the Nihon Family or the Massicotte Family,
provided such transferee assumes all of the obligations of the transferor pursuant to: (a) the Non-Competition Agreement; (b)
the indemnity obligations of the transferor pursuant to the Purchase Agreement; (c) the Underwriting Agreement; and (d) the
AN Pledge (as the case may be), and provided further the transferor remains liable for such obligations.

         One of the Underwriters, CIBC World Markets Inc., is a subsidiary of a Canadian chartered bank which will be a
lender to the REIT under the Operating Facility. See “Management Strategy of the REIT — Debt Management”. The REIT
may, therefore, be considered a connected issuer of such Underwriter for the purposes of Canadian securities legislation. The


                                                              113
decision to offer the Offered Units for sale, including the determination of the price and other terms of this Offering, has been
made through arm’s length negotiations between the REIT and the Underwriters. The Canadian chartered bank of which
CIBC World Markets Inc. is a subsidiary has not had any involvement in such decision or determination. As a consequence
of this Offering, CIBC World Markets Inc. will receive its share of the Underwriters’ Fee.

          In October 1992, Wood Gundy Inc. (now CIBC World Markets Inc.) instituted an action in the Superior Court of
Québec against International Distributors Ltd., a Bahamian company, Mr. Robert A. Nihon and others claiming an amount of
approximately US$4.8 million, representing a shortfall in securities trading accounts maintained by International Distributors
Ltd. with Wood Gundy Inc. after liquidation of the securities held in such accounts. In August 1993 actions were also
commenced by Wood Gundy Inc. against the defendants in the Supreme Court of the Commonwealth of the Bahamas and the
U.S. District Court for the Southern District of New York in respect of the same matters. These actions and all related
proceedings (including all interlocutory orders granted by the Bahamian and U.S. courts) were settled by agreement of all
parties in 1993.

         The Alexis Nihon Units will be issued at the Property Closing to Alexis Nihon under the Purchase Agreement.


                                          PRIOR SALES AND PRINCIPAL HOLDERS

          The REIT issued one Unit to 4020332 Canada Inc. for $10.00 on October 18, 2002. In connection with the Property
Closing, 8,401,200 Alexis Nihon Units and the AN Convertible Debenture will be issued. Following Closing, members of the
Nihon Family will, directly and indirectly, exercise control over approximately 5,600,800 Units, representing, approximately
33.1% of Units to be outstanding immediately following Closing, without giving effect to the conversion of the AN
Convertible Debenture or the exercise of the Over-Allotment Option and members of the Massicotte Family will, directly and
indirectly, exercise control over approximately 2,800,400 Units, representing, approximately 16.6% of Units to be
outstanding immediately following Closing, without giving effect to the conversion of the AN Convertible Debenture or the
exercise of the Over-Allotment Option.

         In the event that the Over-Allotment Option is exercised in full, members of the Nihon Family will hold 4,750,800
Units, representing approximately 28.1% of the issued and outstanding Units, without giving effect to the conversion of the
AN Convertible Debenture and members of the Massicotte Family will hold 2,375,400 Units, representing approximately
14.1% of the issued and outstanding Units, without giving effect to the conversion of the AN Convertible Debenture.


                 INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

         Robert A. Nihon and Paul J. Massicotte, who are Trustees and/or officers of the REIT, will be parties, and are
shareholders or associates of shareholders of corporations or partners in partnerships which will be parties, to one or more of
the AN Head Lease, the AN Income Subsidy Agreement, the AN Pledge, the Contract of Trust, the Development Agreement,
the Employee Services Agreement, the Employm         ent Agreement, the Non-Competition Agreement and the Purchase
Agreement. As part of the consideration under the Purchase Agreement, the AN Convertible Debenture will be issued to
Alexis Nihon and members of the Nihon Family and members of the Massicotte Family will receive an aggregate of $8.1
million of the proceeds of the Offering and 4.05 million Alexis Nihon Units in connection with the Place Alexis Nihon
Closing.


                                                 MATERIAL CONTRACTS

         The following are the only material contracts, other than contracts entered into in the ordinary course of business,
entered into or proposed to be entered into by the REIT:

         (i)     the AN Head Lease;

         (ii)    the AN Income Subsidy Agreement;

         (iii)   the AN Pledge;

         (iv)    the Contract of Trust;

         (v)     the Development Agreement;


                                                              114
           (vi)    the Distribution Reinvestment Plan;

           (vii)   the Employee Services Agreements;

           (viii) the Employment Agreement;

           (ix)    the Non-Competition Agreement;

           (x)     the Purchase Agreement;

           (xi)    the Trust Indenture; and

           (xii)   the Underwriting Agreement.

         Copies of the contracts set out above may be inspected during ordinary business hours at the offices of the REIT,
6380 Côte-de-Liesse Road, Montreal (Saint-Laurent), Québec, H4T 1E3, during the period of distribution of the securities
offered hereunder and for a period of 30 days thereafter.


                                                           PROMOTER

        Alexis Nihon Inc. has taken the initiative in founding and organizing the REIT and may therefore be considered a
promoter of the REIT for purposes of applicable securities legislation.


                                                         LEGAL MATTERS

       Legal matters in connection with the offering of the Units will be passed upon on behalf of the REIT by Davies
Ward Phillips & Vineberg LLP and on behalf of the Underwriters by Stikeman Elliott.


                                    AUDITORS, TRANSFER AGENT AND REGISTRAR

         The auditors of the REIT are Richter Usher & Vineberg. Richter Management Limited, a corporation owned by the
partners or parties related to the partners of Richter, Usher & Vineberg, is a significant tenant in Place Alexis Nihon and a
significant portion of the space leased by such corporation is occupied by the auditors of the REIT.

           The transfer agent and registrar for the Units is National Bank Trust Inc. at its principal offices in Montreal and
Toronto.


                                              PURCHASERS’ STATUTORY RIGHTS

          Securities legislation in certain of the provinces and territories of Canada provides purchasers with the right to
withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or
deemed receipt of a prospectus and any amendment. In several of the provinces and territories, securities legislation further
provides a purchaser with remedies for rescission or, in some jurisdictions, damages where the prospectus and any
amendment contains a misrepresentation or is not delivered to the purchaser, provided that such remedies for rescission or
damages are exercised by the purchaser within the time limit prescribed by the securities legislation of his or her province or
territory. The purchaser should refer to any applicable provisions of the securities legislation of his or her province or
territory for the particulars of these rights or consult with a legal adviser.




                                                              115
                                                                       FINANCIAL STATEMENTS




The REIT                                                                                                                                                                               Page

Pro Forma Consolidated Financial Statements........................................................................................................................................F-2

Opening Balance Sheet as at October 18, 2002.....................................................................................................................................F-14

Alexis Nihon Properties (as defined)

Consolidated Financial Statements..........................................................................................................................................................F-18




                                                                                            F-1
                                                 COMPILATION REPORT


To the Trustees of
Alexis Nihon Real Estate Investment Trust

         We have reviewed, as to compilation only, the accompanying pro forma consolidated balance sheet of Alexis Nihon
Real Estate Investment Trust (the “REIT”) as at September 30, 2002 and the pro forma consolidated statements of net income
for the nine months ended September 30, 2002 and the year ended December 31, 2001, which have been prepared for
inclusion in the prospectus relating to the initial public offering of units of Alexis Nihon Real Estate Investment Trust. In our
opinion, the pro forma consolidated financial statements have been properly compiled to give effect to the proposed
transactions and assumptions described in the notes thereto.




Montreal, Québec                                                                        (Signed) RICHTER, USHER & VINEBERG
December 13, 2002                                                                                         General Partnership
                                                                                                       Chartered Accountants




                                                              F-2
                                        ALEXIS NIHON REAL ES TATE INVESTMENT TRUST
                                         PRO FORMA CONSOLIDATED BALANCE SHEET
                                                    As at September 30, 2002
                                                            (unaudited)
                                                     (in thousands of dollars)


                                                                    Alexis Nihon
                                                                       REIT               Alexis Nihon          Pro forma                        Pro forma
                                                                       Note 1              Properties          Adjustments                      Consolidated
                                                                          $                     $                   $                                $

  ASSETS

  Income-producing properties                                              —                239,185               28,564           3(a)          375,827
                                                                                                                 108,078           3(b)
  Cash and cash equivalents                                               —(1)                 4,639               1,148           3(a)             2,500
                                                                                                                   2,500           3(b)
                                                                                                                  (5,787)          3(c)
  Other assets                                                             —                   4,080               2,593           3(a)                 —
                                                                                                                  (6,673)          3(c)
                                                                           —                247,904              130,423                         378,327

  LIABILITIES

  Debts on income-producing properties                                     —                204,838              25,184            3(a)          193,157
                                                                                                                (36,865)           3(b)
  Balance of purchase price payable                                        —                   6,623              6,685            3(a)           10,745
                                                                                                                 (2,563)           3(b)
  Debts due to the Alexis Nihon Group                                      —                165,800            (165,800)           3(g)                 —
  Future income taxes                                                      —                 12,443             (12,443)           3(j)                 —
  Accounts payable and accrued liabilities                                 —                  3,148               1,272            3(a)                 —
                                                                                                                 (4,420)           3(c)
                                                                           —                392,852            (188,950)                         203,902

  EQUITY (DEFICIENCY) IN NET ASSETS                                       —(1)            (144,948)              144,948           3(b)          174,425
                                                                                                                  78,263           3(b)
                                                                                                                  84,012           3(b)
                                                                                                                  12,150           3(f)

                                                                           —                247,904              130,423                         378,327

Note:
(1) The REIT has a nominal value of initial cash and trust equity to settle the trust, but no value is reflected here due to rounding to nearest thousand dollars.

           On behalf of the Trustees:




           (Signed) RICHARD GUAY, Trustee                                                                              (Signed) PHILIP O’BRIEN, Trustee




                                                                               F-3
                           ALEXIS NIHON REAL ES TATE INVESTMENT TRUST
                        PRO FORMA CONSOLIDATED STATEMENT OF NET INCOME
                                  Nine months ended September 30, 2002
                                               (unaudited)
                                        (in thousands of dollars)


                                          Alexis Nihon
                                             REIT        Alexis Nihon    Pro forma            Pro forma
                                             Note 1       Properties    Adjustments          Consolidated
                                                $              $             $                    $


Revenues from rental operations                —           42,132          6,261      3(a)     47,552
                                                                            (841)     3(j)
                                                                           5,420
Rental property operating costs                —           20,547          2,850      3(a)     22,466
                                                                            (931)     3(j)
                                                                           1,919
Net operating income                           —           21,585          3,501               25,086


Interest on long-term debt                     —           13,283          2,707      3(a)     11,797
                                                                          (4,193)     3(e)
Other interest                                 —            5,668         (5,327)     3(g)        341
General and administrative                     —            2,890            702      3(a)      2,970
                                                                            (622)     3(i)
Amortization                                   —            5,766            491      3(a)      2,644
                                                                          (3,613)     3(h)
                                               —           27,607         (9,855)              17,752
Income (Loss) Before Taxes                     —           (6,022)        13,356                7,334
Income taxes (recovery)                        —           (1,527)         1,527      3(j)         —
Net Income (Loss)                              —           (4,495)        11,829                7,334




                                                F-4
                           ALEXIS NIHON REAL ES TATE INVESTMENT TRUST
                        PRO FORMA CONSOLIDATED STATEMENT OF NET INCOME
                                     Year ended December 31, 2001
                                               (unaudited)
                                        (in thousands of dollars)


                                          Alexis Nihon
                                             REIT        Alexis Nihon    Pro forma            Pro forma
                                             Note 1       Properties    Adjustments          Consolidated
                                                $              $             $                    $

Revenue from rental operations                —            55,471          8,058      3(a)    62,408
                                                                          (1,121)     3(j)
                                                                           6,937
Rental property operating costs               —            26,558          4,145      3(a)    29,461
                                                                          (1,242)     3(j)
                                                                           2,903
Net operating income                          —            28,913          4,034              32,947


Interest on long-term debt                    —            17,987         3,413       3(a)    15,946
                                                                         (5,454)      3(e)
Other interest                                —             9,785        (9,619)      3(g)        166
General and administrative                    —             3,729           754       3(a)      3,689
                                                                           (794)      3(i)
Amortization                                  —             7,212           676       3(a)      3,350
                                                                         (4,538)      3(h)
                                              —            38,713       (15,562)              23,151
Income (Loss) Before Taxes                    —            (9,800)       19,596                9,796
Income taxes (recovery)                       —            (2,469)        2,469       3(j)        —
Net Income (Loss)                             —            (7,331)       17,127                9,796




                                               F-5
                       ALEXIS NIHON REAL ES TATE INVESTMENT TRUST
               NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

                                                 September 30, 2002
                                                    (unaudited)

                        (all amounts are in thousands of dollars unless otherwise specified)




1.   Basis of Presentation

     Alexis Nihon Real Estate Investment Trust (the “REIT”) is an unincorporated closed-ended investment trust created
     by a contract of trust (the “Contract of Trust”) dated October 18, 2002, when one trust unit was issued for $10. The
     REIT was established under, and is governed by, the laws of the Province of Québec.

     These pro forma consolidated financial statements reflect the acquisition of 25 income-producing properties owned
     or co-owned by companies controlled directly or indirectly by Robert Nihon and Paul Massicotte and members of
     their immediate families (the “Alexis Nihon Group”) including certain acquisitions to take place prior to the closing
     of the offering (the “Closing”). Robert A. Nihon and Paul J. Mas sicotte are Trustees of the REIT. Such acquisitions,
     which are not reflected in the historical financial statements but have been adjusted for in the pro forma consolidated
     financial statements (see note 3(a)), are as follows:

     •        The acquisition of the 45% interest in Centre Laval held by a third party
     •        The acquisition of the 50% interest in 1080 Beaver Hall Hill held by a third party
     •        The acquisition of the 20.2% interest in 4700 de la Savane held by third parties

     In addition, following Closing, the REIT will enter into negotiations with respect to the purchase of Alexis Nihon
     Group’s interest in seven properties co-owned by Alexis Nihon Group and a third-party. The co-owners have a right
     of first refusal on any purchase of the other co-owner’s interest in each co-owned property. These pro forma
     financial statements have been prepared assuming the acquisition of Alexis Nihon Group’s interest in the seven co-
     owned properties.

     These pro forma consolidated financial statements have been prepared in accordance with C            anadian generally
     accepted accounting principles and reflect the accounting policies and assumptions described below. The pro forma
     balance sheet gives effect to the transactions in note 3 as if they had occurred on September 30, 2002. The pro forma
     statements of net income give effect to the transactions as if they had occurred on January 1, 2001.

     The pro forma consolidated financial statements are not necessarily indicative of the results that would have actually
     occurred had the transactions been consummated at the dates indicated, nor are they necessarily indicative of future
     operating results or the financial position of the REIT.

2.   Summary of Significant Accounting Policies

     Principles of Consolidation

     The consolidated pro forma financial statements include the accounts of the REIT, its subsidiaries and the
     proportionate share of the assets, liabilities, revenues and expenses of joint ventures. On consolidation, all material
     intercompany transactions and balances have been eliminated.




                                                          F-6
                       ALEXIS NIHON REAL ESTATE INVESTMENT TRUST
               NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

                                                 September 30, 2002
                                                    (unaudited)

                       (all amounts are in thousands of dollars unless otherwise specified)




2.   Summary of Significant Accounting Policies (Cont’d)

     Income -Producing Properties

     Income-producing properties are stated on the pro forma balance sheet at the lower of cost less accumulated
     amortization and net recoverable amounts. Cost includes the original cost of the property, due diligence costs and
     other acquisition-related costs. Net recoverable amounts represents the estimated future net cash flows expected to
     be received from the ongoing use and residual worth of the properties.

     Amortization

     Amortization of buildings is provided using the sinking fund method in annual amounts increasing at a rate of 5%,
     compounded annually so as to fully amortize the buildings over their estimated useful lives, most of which are 35
     years.

     The amounts recorded for amortization of buildings are based on estimates of the remaining useful life of these
     assets. By their nature, these estimates are subject to measurement uncertainty and the effect of changes in such
     estimates on the consolidated financial statements of future periods could be significant. Maintenance and repairs are
     charged to expense when incurred.

     Leasing costs and tenant improvements are deferred and amortized over the terms of the related leases.

     Revenue Recognition

     Revenue from rental properties include rents earned from tenants, realty taxes and operating cost recoveries,
     parking, and other incidental income.

     Income Taxes

     The REIT is an unincorporated closed-ended investment trust created by the Contract of Trust. The REIT is taxed as
     a “mutual fund trust” for income tax purposes. Pursuant to the Contract of Trust, the REIT will make distributions or
     designate all taxable income earned, including the taxable part of the net realized capital gains by the REIT, to
     unitholders and will deduct such distributions and designations for income tax purposes.




                                                         F-7
                       ALEXIS NIHON REAL ES TATE INVESTMENT TRUST
               NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

                                                September 30, 2002
                                                   (unaudited)

                       (all amounts are in thousands of dollars unless otherwise specified)




2.   Summary of Significant Accounting Policies (Cont’d)

     Income taxes are accounted for using the liability method. Under this method, future income taxes are recognized for
     the expected future tax consequences of differences between the carrying amount of balance sheet items and their
     corresponding tax values. Future income taxes are computed using substantively enacted corporate income tax rates
     for the years in which tax and accounting basis differences are expected to reverse.

                                                                                                                 n
     Future income tax liabilities of the REIT are primarily in relation to tax and accounting basis differences i
     corporate subsidiaries of the REIT.

3.   Pro Forma Assumptions

     The pro forma adjustments to the pro forma consolidated balance sheet and pro forma consolidated statements of net
     income have been prepared to account for the impact of the acquisition transactions contemplated by the prospectus
     as described below:

     (a)      Prior to closing

              Alexis Nihon Group will acquire from third parties the remaining interest it does not already own in the
              following properties:

              •   45% of Centre Laval;
              •   50% of 1080 Beaver Hall Hill; and
              •   20.2% of 4700 de la Savane;




                                                        F-8
                       ALEXIS NIHON REAL ES TATE INVESTMENT TRUST
               NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

                                                September 30, 2002
                                                   (unaudited)

                       (all amounts are in thousands of dollars unless otherwise specified)




3.   Pro Forma Assumptions (Cont’d)

     The pro forma financial statements have been adjusted with respect to the above noted acquisitions as follows:

                                                                                 Balance Sheet
                                                                           as at September 30, 2002
                                                                                  (unaudited)

                                                  Centre Laval    1080 Beaver Hall Hill     4700 de la Savane
                                                     45%                 50%                     20.2%           Total
                                                       $                   $                        $             $

      Assets

      Income-producing properties                   20,928                    7,014                    622      28,564
      Cash and cash equivalents                        934                      179                     35       1,148
      Other Assets                                   1,054                    1,461                     78       2,593
                                                    22,916                    8,654                    735      32,305

      Liabilities

      Debts on income-producing properties          24,242                                             942      25,184
      Balance of purchase price payable                                       6,685                              6,685
      Accounts payable and accrued                     299                      940                     33       1,272
       liabilities
                                                    24,541                    7,625                    975      33,141

      Equity (deficiency) in net assets             (1,625)                   1,029                   (240)      (836)
                                                    22,916                    8,654                    735      32,305



                                                                           Statement of Operations
                                                                     Nine months ended September 30, 2002
                                                                                  (unaudited)

                                                  Centre Laval    1080 Beaver Hall Hill     4700 de la Savane
                                                     45%                 50%                     20.2%           Total
                                                       $                   $                        $             $

      Revenue from rental operations                 4,108                    1,786                    367       6,261
      Rental property operating costs                1,683                      951                    216       2,850
      Net operating income                           2,425                      835                    151       3,411

      Interest on long-term debt                     2,273                     380                      54       2,707
      General and administrative                       379                     244                      79         702
      Amortization                                     277                     191                      23         491
                                                     2,929                     815                     156       3,900
      Net income (loss)                               (504)                     20                      (5)       (489)




                                                          F-9
                      ALEXIS NIHON REAL ESTATE INVESTMENT TRUST
              NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

                                                 September 30, 2002
                                                    (unaudited)

                      (all amounts are in thousands of dollars unless otherwise specified)




3.   Pro Forma Assumptions (Cont’d)
                                                                                Statement of Operations
                                                                         For the year ended December 31, 2001
                                                                                       (unaudited)

                                                   Centre Laval     1080 Beaver Hall Hill         4700 de la Savane
                                                      45%                  50%                         20.2%            Total
                                                        $                    $                            $               $

      Revenue from rental operations                  5,343                       2,235                         480    8,058
      Rental property operating costs                 2,420                       1,494                         231    4,145
      Net operating income                            2,923                         741                         249    3,913

      Interest on long-term debt                      2,962                         415                          36    3,413
      General and administrative                        487                         173                          94      754
      Amortization                                      495                         152                          29      676
                                                      3,944                         740                         159    4,843
      Net income (loss)                              (1,021)                          1                          90     (930)

     (b)     Asset Acquisition

             The REIT will raise gross proceeds of $85,000 through the issuance of 8.5 million units at a price of $10
             per unit (the “Offering”). Costs relating to the Offering include underwriters’ fees, are assumed to be
             $6,738 and are charged directly to unitholders’ equity.

             Under the prospectus it is contemplated that the closing will occur on or about December 20, 2002. Is it
             also assumed that the interests of Alexis Nihon in certain co-owned properties located in Dorval, Québec
             and Lachine, Québec will be acquired by the REIT following Closing.

             The net proceeds of $78,263 from the Offering will be used by the REIT to acquire 25 income-producing
             properties (the “Properties”).

             Net assets acquired are as follows:

             Initial properties acquired                                                                              $370,273
             Land transfer taxes capitalized to the initial properties                                                   5,554
             Assumed mortgages and other loans                                                                        (203,902)
                                                                                                                      $171,925

             Consideration given by the REIT consists of the following:

             Cash                                                                                                      $75,763
             AN Convertible Debenture                                                                                   12,150
             Issue of units                                                                                             84,012
                                                                                                                      $171,925




                                                          F-10
                      ALEXIS NIHON REAL ES TATE INVESTMENT TRUST
              NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

                                                   September 30, 2002
                                                      (unaudited)

                       (all amounts are in thousands of dollars unless otherwise specified)




3.   Pro Forma Assumptions (Cont’d)

     The REIT’s sources and uses of funds after the completion of the transactions contemplated in the Offering are as
     follows:

     Initial public offering, net of issue costs                                      $78,263
     Payment for the net assets acquired                                              (30,781)
     Payment of land transfer taxes                                                    (5,554)
     Repayments of mortgages and other loans                                          (39,428)
     Working capital remaining                                                       $ 2,500

     (c)     Working Capital

             Other assets, accounts payable and accrued liabilities as well as cash and cash equivalents will not be
             transferred on Closing.

     (d)     Tenant Improvements and Leasing Costs

             No portion of the purchase price has been allocated to tenant improvements and leasing costs.

     (e)     Interest expense

             Interest expense consists of interest on the debt obligations that will be in existence immediately following
             the Closing. The REIT is expected to assume approximately $203,902 of existing mortgages and other
             loans on the acquisition of the Properties. The mortgages are secured by a charge on the Properties.

             Pro forma interest expense has been reduced by $4,193 for the nine month period ended September 30,
             2002 and $5,454 for the year ended December 31, 2001, to reflect the impact of repayments of mortgages
             and other loans.




                                                          F-11
                     ALEXIS NIHON REAL ES TATE INVESTMENT TRUST
             NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

                                               September 30, 2002
                                                  (unaudited)

                      (all amounts are in thousands of dollars unless otherwise specified)




3.   Pro Forma Assumptions (Cont’d)

     (f)    Interest on the AN Convertible Debenture

            On Closing, as part of the purchase price, the REIT will issue to the Alexis Nihon Group $12.15 million
            principal amount of subordinated unsecured convertible debentures (the “AN Convertible Debenture”) at
            par. The AN Convertible Debenture will bear interest at 6.5% per annum, payable quarterly and will mature
            in December 31, 2005. Provided that there is not a then current event of default, the REIT may elect at its
            option to satisfy any obligation to pay interest on any interest payment date, and/or the principal amount on
            maturity or the redemption date, by delivering Units of the REIT equal in value, at the date of payment to
            the amount due to the Alexis Nihon Group. The payment of the principal of, and interest on the AN
            Convertible Debenture will be subordinated in the right of payment to the prior payment in full of all Senior
            indebtedness of the REIT. The AN Convertible Debenture will be convertible, subject to certain
            restrictions, in whole or in part, at the holder’s option, at any time, into 8.695 Units per $100 of face value
            (in aggregate, 1.057 million Units), subject to usual anti-dilution adjustments, representing a conversion
            price of $11.50 per Unit.

            The AN Convertible Debenture is considered an equity instrument and, as such, will be reflected on the
            balance sheet of the REIT as a component of unitholders’ equity. Therefore, the interest related to the AN
            Convertible Debenture is chargeable directly to unitholders’ equity.

     (g)    Debts due to the Alexis Nihon Group

            These debts will not be transferred to the REIT.

     (h)    Amortization

            Amortization has been decreased by $3,613 for the nine month period ended September 30, 2002 and
            $4,538 for the year ended December 31, 2001, to reflect the acquisition of the Properties by the REIT and
            the commencement of the sinking fund method of amortization by the REIT.

     (i)    General and Administrative expenses

            General and administrative expenses have been decreased by $622 for the nine month period ended
            September 30, 2002 and $794 for the year ended December 31, 2001 to reflect certain expenditures that will
            not be of a recurring nature for the REIT.

     (j)    Income and Capital Taxes

            All capital taxes, current income taxes and future income taxes expenses have been eliminated in the pro
            forma financial statements to reflect the tax status of the REIT.




                                                        F-12
                          ALEXIS NIHON REAL ES TATE INVESTMENT TRUST
               NOTES TO THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

                                                September 30, 2002
                                                   (unaudited)

                       (all amounts are in thousands of dollars unless otherwise specified)




4.   Unitholders’ Equity

                                                                         Number of          Amounts
                                                                           Units              $
      Voting units issued in the Offering (other than the
         Alexis Nihon Group)                                            8,500,000            78,263
      Voting units issued to the Alexis Nihon Group                     8,401,200            84,012
      AN Convertible Debenture issued to the Alexis Nihon Group                —             12,150
                                                                       16,901,200           174,425

5.   Distributable Income

     Distributable income means, for any period, net income determined in accordance with Canadian generally accepted
     accounting principles, subject to certain adjustments as set out in the Contract of Trust, including: (i) adding back
     amortization on income-producing properties (excluding amortization of tenant inducements and other leasing costs)
     that was deducted in computing the net income of the REIT for a relevant period; (ii) adding back future income tax
     expense and deducting future income tax benefits; (iii) adding amounts received under the AN Income Subsidy; and
     (iv) deducting interest on the AN Convertible Debenture to the extent not already deducted in computing net income
     for the period. Gains or losses on the disposition of any property or asset are excluded from the computation of
     distributable income; and (a) adjustments are to be made to reflect amortization of fair value debt; and (b)
     amortization of other assets and deferred expenses, including deferred financing charges are not added back in
     calculating distributable income.

     Pro forma consolidated distributable income is computed as follows:

                                                                            Nine month
                                                                           Period ended      Year Ended
                                                                           September 30,    December 31,
                                                                               2002            2001
                                                                                 $                $


     Pro forma consolidated net income                                         7,334           9,796
     Add (deduct)
        Amortization                                                           2,644           3,350
        Interest on the AN Convertible Debenture                                (591)          (789)
     Pro forma consolidated distributable income                               9,387          12,357




                                                        F-13
                                                  AUDITORS’ REPORT




To the Trustees of
Alexis Nihon Real Estate Investment Trust

We have audited the balance sheet of Alexis Nihon Real Estate Investment Trust as at October 18, 2002. This financial
statement is the responsibility of the management of Alexis Nihon Real Estate Investment Trust. Our responsibility is to
express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.

In our opinion, this financial statement presents fairly, in all material respects, the financial position of Alexis Nihon Real
Estate Investment Trust as at October 18, 2002 in accordance with Canadian generally accepted accounting principles.




Montreal, Québec                                                                       (Signed) RICHTER, USHER & VINEBERG
December 13, 2002                                                                                        General Partnership
                                                                                                     Chartered Accountants




                                                             F-14
                              ALEXIS NIHON REAL ESTATE INVESTMENT TRUST
                                            BALANCE SHEET

                                            October 18, 2002




ASSET

Cash                                                                 $ 10

UNITHOLDERS’ EQUITY                                                  $ 10




        On behalf of the Trustees:




        (Signed) RICHARD GUAY, Trustee                         (Signed) PHILIP O’BRIEN, Trustee




                                                  F-15
                           ALEXIS NIHON REAL ESTATE INVESTMENT TRUST
                                   NOTES TO THE BALANCE SHEET

                                                October 18, 2002
                       (all amounts are in thousands of dollars unless otherwise specified)

1.   The Trust

     Alexis Nihon Real Estate Investment Trust (the “REIT”) is an unincorporated closed-ended real estate investment
     trust that was created by a contract of trust dated October 18, 2002 when one trust unit was issued for $10 cash. The
     REIT was established under the laws of the Province of Québec.

2.   Subsequent Event

     On December 13, 2002, the REIT entered into an underwriting agreement whereby the REIT will raise gross
     proceeds of $85,000 pursuant to an initial public offering (the “Offering”) through the issuance of 8,500,000 voting
     units at a price of $10 per unit (excluding any over-allotment option). Costs relating to the Offering, including
     underwriters’ fees, are expected to be $6,738 and will be charged directly to unitholders’ equity.

     On closing, the REIT will issue to companies controlled directly or indirectly by Robert Nihon and Paul Massicotte
     and or members of their immediate families (the “Alexis Nihon Group”) 8,401,200 units and $12,150 principal
     amount of convertible debenture at par, as partial consideration for 18 income-producing properties and related
     assets (the “Properties”). The remaining consideration consists of cash and the assumption by the REIT of certain
     existing mortgages relating to the Properties. Robert Nihon and Paul Massicotte are Trustees of the REIT.

     Following the Closing, the REIT intends to enter into negotiations to acquire the Alexis Nihon Group’s co-
     ownership interest in seven properties. Such co-ownership properties are currently co-owned by the Alexis Nihon
     Group and a third party (the “Co-Owner”) and are managed by the Alexis Nihon Group. It is assumed that the
     interests of the Alexis Nihon Group in such properties will be acquired by the REIT.

     At or prior to Closing, the REIT will adopt the Unit Option Plan for which participation will be restricted to
     Trustees, officers and employees of the REIT, its wholly-owned subsidiaries as well as certain trusts of which the
     REIT is, directly or indirectly, the beneficiary. The maximum number of units that may be reserved under the Unit
     Option Plan may not exceed 2,535,180 units. The exercise price of options will be equal to the market price of the
     units on the day before the day on which the option is granted.

     The Properties and the Alexis Nihon Group’s co-ownership interest in the seven co-owned properties are to be
     acquired for a purchase price of approximately $8,700. The purchase price is to be supported by an independent
     valuation. Land transfer tax in the amount of $5,554 will be funded from cash proceeds raised from the Offering.

             Net assets to be acquired are as follows:
                Initial properties acquired                                                 $370,273
                Land transfer tax capitalized to the initial properties                         5,554
                Assumed mortgages and other loans                                           (203,902)
                                                                                            $171,925

             Consideration to be given by the REIT consists of the following:
                Cash                                                                        $ 75,763
                AN Convertible Debenture                                                      12,150
                Issue of units                                                                84,012
                                                                                            $171,925

             The REIT’s sources and uses of funds will be as follows:
                Initial public offering, net of issue costs                                   $78,263
                Payment for the net assets acquired                                          (30,781)
                Payment of land transfer taxes                                                 (5,554)
                Repayments of mortgages and other loans                                      (39,428)
                Working capital remaining                                                   $ 2,500



                                                          F-16
                                                    AUDITORS’ REPORT




To the Trustees of
Alexis Nihon Real Estate Investment Trust

We have audited the consolidated balance sheets of Alexis Nihon Properties as at December 31, 2001 and 2000, and the
consolidated statements of operations and deficiency in net assets and cash flows for the years ended December 31, 2001,
2000 and 1999. These financial statements are the responsibility of management of the Alexis Nihon Real Estate Investment
Trust (the “REIT”). Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as the
overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Alexis
Nihon Properties as at December 31, 2001 and 2000 and the results of its operations and its cash flows for the years ended
December 31, 2001, 2000 and 1999 in accordance with Canadian generally accepted accounting principles.




Montreal, Québec                                                                         (signed) RICHTER, U SHER & VINEBERG
April 8, 2002 (Except for note 16 which is dated December 13, 2002)                                        General Partnership
                                                                                                        Chartered Accountants




                                                              F-17
                                          ALEXIS NIHON PROPERTIES
                                        CONSOLIDATED BALANCE SHEETS
                                             (in thousands of dollars)



                                                   As at September 30,             As at December 31,
                                                          2002
                                                       (unaudited)             2001                     2000
                                                            $                    $                        $


ASSETS

Income-producing properties (note 3)                      239,185                241,510                 245,306
Cash and cash equivalents (note 4)                          4,639                  3,431                   2,682
Other assets (note 5)                                       4,080                  3,969                   4,236
                                                          247,904                248,910                 252,224

LIABILITIES

Debts on income-producing properties (note 6)             204,838                203,666                 203,813
Balance of purchase price payable (note 7)                  6,623                  6,716                   7,498
Debts due to the Alexis Nihon Group (note 8)              165,800                159,466                 149,749
Future income taxes (note 9)                               12,443                 14,365                  17,362
Accounts payable and accrued liabilities                    3,148                  5,150                   6,924
                                                          392,852                389,363                 385,346

Contingencies and Commitments (note 10)

Deficiency in Net Assets                                 (144,948)              (140,453)               (133,122)

                                                          247,904                248,910                 252,224

See accompanying notes

       On behalf of the Trustees:




       (Signed) RICHARD GUAY, Trustee                                    (Signed) PHILIP O’BRIEN, Trustee




                                                      F-18
                                          ALEXIS NIHON PROPERTIES
                                   CONSOLIDATED STATEMENTS OF OPERATIONS
                                        AND DEFICIENCY IN NET ASSETS
                                             (in thousands of dollars)




                                                 Nine months ended                           Year ended

                                          September 30,     September 30,    December 31,   December 31,   December 31,
                                              2002              2001            2001           2000           1999
                                           (Unaudited)       (unaudited)
                                                $                 $               $              $              $


 Revenues From Rental Operations               42,132              40,560         55,471         52,704         48,504
 Rental property operating costs               20,547              19,494         26,558         26,602         22,958

 Net Operating Income                          21,585              21,066         28,913         26,102         25,546
 Expenses
   Interest on long-term debt                  13,283              13,504         17,987         18,437         17,471
   Other interest                               5,668               6,720          9,785         11,821         10,563
   General and administrative                   2,890               2,788          3,729          3,076          3,950
   Amortization                                 5,766               5,232          7,212          6,790          7,183
                                               27,607              28,244         38,713         40,124         39,167

 Loss Before Taxes                             (6,022)             (7,178)       (9,800)       (14,022)       (13,621)
 Income taxes (recovery)(note 9)               (1,527)             (2,063)       (2,469)        17,893            533

 Net Loss                                      (4,495)             (5,115)        (7,331)      (31,915)       (14,154)

 Net Deficiency, Beginning of Period        (140,453)            (133,122)     (133,122)      (101,207)       (87,053)

 Net Deficiency, End of Period              (144,948)            (138,237)     (140,453)      (133,122)      (101,207)

See accompanying notes




                                                          F-19
                                              ALEXIS NIHON PROPERTIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 (in thousands of dollars)

                                                     Nine months ended                                Year ended

                                             September 30,       September 30,     December 31,      December 31,      December 31,
                                                 2002                2001             2001              2000              1999
                                              (unaudited)         (unaudited)
                                                   $                   $                $                 $                 $
FUNDS PROVIDED (USED) —
 OPERATING ACTIVITIES
Net loss                                         (4,495)                 (5,115)         (7,331)          (31,915)          (14,154)
Amortization                                      5,766                  5,232              7,212             6,790             7,183
Future income taxes                              (1,922)                 (2,464)         (2,997)          17,362                  —
Proceeds relating to lease cancellation
  penalties                                          —                      —                  —                —               3,954
Gain on lease cancellation penalties                 —                      —                  —                —            (1,111)
Interest capitalized                              8,939                  9,079          11,393            13,692            11,804
Write-off of income-producing properties             —                      —                  40              114                —
                                                  8,288                  6,732              8,317             6,043             7,676
Changes in non-cash operating working
 capital items:
Other assets                                       (111)                  (339)              267              (733)              159
Accounts payable and accrued liabilities         (2,002)                 (2,387)         (1,774)              2,111              517
                                                 (2,113)                 (2,726)         (1,507)              1,378              676
                                                  6,175                  4,006              6,810             7,421             8,352
FINANCING ACTIVITIES
Restricted cash                                      —                    (152)             (152)               (20)              (22)
Repayments in debts on income-producing
  properties                                     (3,230)                 (3,081)         (3,393)           (3,238)           (2,583)
Increase in debts on income-producing
  properties                                      1,797                    979              1,570             3,164             3,942
Balance of purchase price                            —                      —                (680)               —                 —
Repayment of balance of purchase price              (93)                    (94)            (102)               —                 —
Debts due to the Alexis Nihon Group                  —                     441                 —                —               1,185
Decrease in bank indebtedness                        —                      —                  —                —               (333)
                                                 (1,526)                 (1,907)         (2,757)                (94)            2,189
INVESTING ACTIVITIES
Additions to income-producing properties         (3,441)                 (3,089)         (3,456)           (8,884)          (12,873)
INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                            1,208                   (990)              597           (1,557)           (2,332)
CASH AND CASH EQUIVALENTS –
 BEGINNING OF PERIOD                              3,131                  2,534              2,534             4,091             6,423
CASH AND CASH EQUIVALENTS -
 END OF PERIOD                                    4,339                  1,544              3,131             2,534             4,091
Represented by:
   Cash                                           4,639                  1,844              3,431             2,682             4,219
   Less: restricted cash                           (300)                  (300)             (300)             (148)             (128)
                                                  4,339                  1,544              3,131             2,534             4,091

See accompanying notes




                                                              F-20
                                    ALEXIS NIHON PROPERTIES
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         (information as at September 30, 2002 and for the nine months
                               ended September 30, 2002 and 2001 is unaudited)
                       (all amounts are in thousands of dollars unless otherwise specified)




1.   Basis of Presentation

     The financial statements of Alexis Nihon Properties have been prepared on a carve out basis from the financial
     statements of entities controlled directly or indirectly by Robert Nihon and Paul Massicotte and members of their
     immediate families (the “Alexis Nihon Group”), to account solely for the properties which the REIT anticipates
     purchasing. Robert Nihon and Paul Massicotte are Trustees of the REIT. In particular, these financial statements
     have been prepared for the specific purpose of reporting upon the assets, liabilities, revenues, expenses and
     deficiency in net assets of Alexis Nihon Properties included in, and for inclusion in, the prospectus relating to the
     initial public offering of the units of the REIT.

     Because the properties were part of a corporate group, these financial statements depict the deficiency in net assets
     representing the net deficiency associated specifically with these properties. All corporate group assets, liabilities,
     revenues and expenses have been allocated to these properties to best represent the specific operations of these
     properties. Management’s estimates, where necessary, have been used to prepare such allocation.

     Alexis Nihon Properties is not a legal entity and is comprised of the following properties located in the Province of
     Québec:

     •        a 100% ownership interest in Place Alexis Nihon, 9960-9970 Côte-de-Liesse Road, 9900 Cavendish, 9999
              Cavendish, 455 Fénélon, 777 Ste-Catherine West and 1401 McGill College, 2102-2150 - 32nd Avenue,
              2024-2080 -32nd Avenue, 8100 Cavendish, 1949 Onésime -Gagnon, 3071-3075 Louis A. Amos and 1922-
              1996 Onésime-Gagnon, 6320-6380 Côte-de-Liesse Road, 3339-3403 Griffith, 1615-1805 - 55th Avenue and
              2260 - 32nd Avenue and 3142-3190 Joseph-Dubreuil;

     •        a 79.8% ownership interest in 4700 de la Savane;

     •        a 50% and 55% partnership interest in 1080 Beaver Hall Hill and Centre Laval, respectively; and

     •        various ownership interests of 25% and 50% in joint ventures.

     All amounts, except income and capital taxes and certain general and administrative expenses, have been derived
     from records specific to the properties to be sold to the REIT. Income taxes have been calculated based on the
     operations of, and taxable timing differences related to, the net assets of Alexis Nihon Properties, using rates
     applicable to Alexis Nihon Properties. Capital taxes have been allocated based on the proportion of the net book
     value of income-producing properties of Alexis Nihon Properties. Certain general and administrative expenses have
     been allocated based on the percentage of time as estimated by management that corporate management has spent
     managing the Alexis Nihon Properties.




                                                         F-21
                                   ALEXIS NIHON PROPERTIES
                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         (information as at September 30, 2002 and for the nine months
                               ended September 30, 2002 and 2001 is unaudited)
                       (all amounts are in thousands of dollars unless otherwise specified)




2.   Summary of Significant Accounting Policies

     Cash and Cash Equivalents

     Cash and cash equivalents consist of cash and highly liquid investments with original maturities of less than three
     months from the date of acquisition.

     Income -Producing Properties

     Income-producing properties are recorded on the balance sheets at the lesser of cost less accumulated amortization
     and net recoverable amounts. The net recoverable amounts represent the estimated future net cash flows expected to
     be received form the ongoing use and residual worth of the properties.

     Amortization

     Amortization of buildings is provided using the sinking fund method in annual amounts increasing at a rate of 5%,
     compounded annually so as to fully amortize the buildings over their estimated useful lives, most of which are 35
     years.

     The amounts recorded for amortization of buildings are based on estimates of the remaining useful life of these
     assets. By their nature, these estimates are subject to measurement uncertainty and the effect of changes in such
     estimates on the consolidated financial statements of future periods could be significant. Maintenance and repairs
     are charged to expense when incurred.

     Leasing costs and tenant improvement costs are deferred and amortized over the terms of the related leases.

     Consolidation

     The consolidated financial statements include the accounts of Alexis Nihon Properties and its proportionate share of
     assets, liabilities, revenues and expenses of joint ventures and partnerships.

     On consolidation, all material intercompany transactions and balances have been eliminated.

     Revenue Recognition

     Revenues from rental properties include rents earned from tenants, realty taxes and operating cost recoveries,
     parking and other incidental income.




                                                        F-22
                                    ALEXIS NIHON PROPERTIES
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          (information as at September 30, 2002 and for the nine months
                                ended September 30, 2002 and 2001 is unaudited)
                        (all amounts are in thousands of dollars unless otherwise specified)




2.   Summary of Significant Accounting Policies (Cont’d)

     Future Income Taxes

     Alexis Nihon Properties has adopted the new recommendations of the CICA Handbook with respect to accounting
     for income taxes. Under the new recommendations, the liability method is used whereby future tax assets and
     liabilities are determined based on differences between the carrying amount and the tax basis of assets and liabilities
     (temporary differences). Future income tax assets and liabilities are measured using the enacted tax rates that will be
     in effect when these differences are expected to reverse. Future income tax assets, if any, are recognized only to the
     extent that, in the opinion of management, it is more likely than not that the assets will be realized.

     Use of Estimates

     The preparation of the consolidated financial statements in conformity with Canadian generally accepted accounting
     principles requires management to make estimates and assumptions that affect the reported amounts of assets and
     liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and
     the reported amounts of revenue and expenses during the reporting period. Because of the use of estimates inherent
     in the financial reporting process, actual results could differ from those estimates.

3.   Income -Producing Properties

                                                                           September 30,     December 31,      December 31,
                                                                               2002             2001              2000
                                                                            (unaudited)
                                                                                 $                $                 $

      Land                                                                    36,476            36,476            36,476
      Buildings and tenants’ improvements                                    260,005           256,889           253,381
                                                                             296,481           293,365           289,857
      Accumulated amortization                                               (61,151)          (55,385)          (48,173)
                                                                             235,330           237,980           241,684
      Leasing costs, net of accumulated amortization                           3,855             3,530             3,622
                                                                             239,185           241,510           245,306




                                                          F-23
                                   ALEXIS NIHON PROPERTIES
                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         (information as at September 30, 2002 and for the nine months
                               ended September 30, 2002 and 2001 is unaudited)
                       (all amounts are in thousands of dollars unless otherwise specified)




4.   Cash and Cash Equivalents

     Included in cash and cash equivalent is restricted cash amounting to approximately $300 (2001 - $300; 2000 - $148)
     held pursuant to agreements with various mortgage lenders.

5.   Other Assets

                                                                       September 30,
                                                                           2002         December 31,      December 31,
                                                                        (unaudited)
                                                                             $                $                $
      Prepaid expenses                                                     1,777                828             812
      Accounts receivable                                                  1,822              2,877           3,144
      Deposits                                                               481                264             280
                                                                           4,080              3,969           4,236

6.   Debts on Income-Producing Properties

                                                                       September 30,    December 31,      December 31,
                                                                           2002            2001              2000
                                                                        (unaudited)
                                                                             $                 $               $


      Loans secured by mortgages on income-producing properties,
      bearing interest at a weighted average annual rate of 6.73% at
      September 30, 2002, 8.74% at December 31, 2001 and 9.12%
      at December 31, 2000, are repayable in blended monthly
      instalments of $1,356 at September 2002, $631 at
      December 2001 and $488 at December 2000, maturing at
      various dates, no later than October 1, 2011.                      204,838          102,579          102,726
      In August 1997, Alexis Nihon Properties refinanced a first
      ranking mortgage by issuing distress preferred shares in the
      amount of $101,087. These preferred shares bear dividends
      calculated at the annual rate of 7.2% on $57,008 and 9.35%
      on $44,079 and are payable monthly, secured by all of the
      assets of one of the properties and land under an emphyteutic
      lease. The preferred shares were converted into debt on
      August 1, 2002.                                                         —           101,087          101,087
                                                                         204,838          203,666          203,813




                                                        F-24
                                   ALEXIS NIHON PROPERTIES
                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         (information as at September 30, 2002 and for the nine months
                               ended September 30, 2002 and 2001 is unaudited)
                       (all amounts are in thousands of dollars unless otherwise specified)




6.   Debts on Income-Producing Properties (Cont’d)

     On July 11, 1997, a first ranking mortgage lender with debt amounting to $100,926 (2001 - $101,087;
     2000 - $101,087) registered a prior notice against an income-producing property having a net carrying amount of
     $129,329 (2001 - $130,781; 2000 - $133,477).

     Principal repayments of debt on income-producing properties are due as follows:

                                                           Instalments        Due on
                                                            payments          maturity         Total
                                                                $                $              $
                      2002                                    1,334             —               1,334
                      2003                                    5,057            40,064          45,121
                      2004                                    4,290            23,587          27,877
                      2005                                    3,608            18,055          21,663
                      2006                                    3,078             4,568           7,646
                      Subsequent to 2006                      3,263            97,934         101,197
                                                             20,630           184,208         204,838

7.   Balance of Purchase Price Payable

                                                                         September 30,   December 31,   December 31,
                                                                             2002           2001           2000
                                                                          (unaudited)
                                                                               $               $             $

      Loan secured by a second ranking hypothec on an income-
      producing property, non-interest bearing, payable upon
      demand starting in 2004.                                               2,500            2,500         2,500
      Loan secured by a mortgage on income -producing property,
      bearing interest at an annual rate of bankers’ acceptances plus
      3.5%, payable in monthly instalments of $8.5, with the
      balance payable November 4, 2001. On December 18, 2001
      the first ranking lender registered a prior notice against an
      income -producing property having a net carrying amount of
      $7,014.                                                                4,123            4,216         4,998
                                                                             6,623            6,716         7,498




                                                        F-25
                                    ALEXIS NIHON PROPERTIES
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         (information as at September 30, 2002 and for the nine months
                               ended September 30, 2002 and 2001 is unaudited)
                       (all amounts are in thousands of dollars unless otherwise specified)




8.   Debts Due to the Alexis Nihon Group

                                                                         September 30,        December 31,   December 31,
                                                                             2002                2001           2000
                                                                          (unaudited)
                                                                               $                   $              $

      Debt secured by income-producing property payable on
      demand and bearing interest at varying rate based on prime
      plus 1.5% to 3%                                                       121,758             115,883        106,264
      Preferred shares, redeemable and retractable at $39.3 million
      with the right to a non-cumulative annual dividend between
      0% and 12%                                                             39,300              39,300         39,300
      Loans payable, non-interest bearing and no specific terms of
      repayment                                                               2,200                2,200          2,200
      Loan bearing interest at the prime rate plus 1.75% per annum
      with no specified terms of repayment                                      800                    800            800
      Loan payable, secured by a second ranking hypothec on an
      income -producing property, bearing interest at an annual
      interest rate of 8% due May 2003                                        1,742               1,283          1,185
                                                                            165,800             159,466        149,749

9.   Income Taxes

     Significant components of future income tax asset and liability include the following:

                                                                         September 30,        December 31,   December 31,
                                                                             2002                2001           2000
                                                                          (unaudited)
                                                                               $                   $              $
      Future income tax assets:
        Tax loss carryforwards                                              (3,383)              (3,490)        (3,029)
      Future income tax liabilities:
        Net carrying amounts of income-producing properties in
        excess of tax values                                                15,826              17,855         20,391
      Future income tax liabilities, net                                    12,443              14,365         17,362




                                                         F-26
                                   ALEXIS NIHON PROPERTIES
                         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         (information as at September 30, 2002 and for the nine months
                               ended September 30, 2002 and 2001 is unaudited)
                       (all amounts are in thousands of dollars unless otherwise specified)




9.   Income Taxes (Cont’d)

     Significant components of the income tax expense are as follows:

                                                  Nine months ended                              Year ended

                                          September 30,          September 30,   December 31,   December 31,   December 31,
                                              2002                   2001           2001           2000           1999
                                           (unaudited)            (unaudited)
                                                $                      $              $              $               $

      Current tax expense                         —                       —               —              —               —
      Future tax expense relating to
          origination and reversal of
          temporary differences               (1,922)                (2,464)       (2,997)        17,362              —
      Large Corporation Tax                      395                    401           528            531             533
      Income tax expense                      (1,527)                (2,063)       (2,469)        17,893             533

     Income taxes reported differ from the amount computed by applying the statutory rates to loss before taxes. The
     reasons are as follows:

                                                 Nine months ended                              Year ended

                                          September 30,          September 30,   December 31,   December 31,   December 31,
                                              2002                   2001           2001           2000           1999
                                           (unaudited)            (unaudited)
                                                $                      $              $              $              $
      Statutory tax rates                     35.16%                 37.16%         37.16%        38.27%         38.27%
      Income taxes, at the statutory
          rates                               (2,117)               (2,667)        (3,641)       (5,366)        (5,213)
      Large Corporation Tax                      395                    401           528            531           533
      Debt due to the Alexis Nihon
          Group net of previously
          unrecorded future income
          tax asset                               —                      —                —      22,728             —
      Unrecorded future income tax
          asset                                   —                     —              —             —           5,213
      Other                                      195                   203            644            —              —
      Total tax provision                     (1,527)               (2,063)        (2,469)       17,893            533




                                                          F-27
                                  ALEXIS NIHON PROPERTIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                       (information as at September 30, 2002 and for the nine months
                             ended September 30, 2002 and 2001 is unaudited)
                     (all amounts are in thousands of dollars unless otherwise specified)




10.   Commitments and Contingencies

      a)     As at September 30, 2002, the annual future payments required under emphyteutic leases, expiring from
             2020 to 2065 on land for the income-producing property, are as follows:


             October 1, 2002 – December 31, 2002                                                        $ 72
             2003                                                                                        288
             2004                                                                                        288
             2005                                                                                        288
             2006                                                                                        288
             Subsequent to 2006                                                                        5,015

      b)     Alexis Nihon Properties is committed to payments under a service agreement for the maintenance and
             management of an income -producing property, expiring in June 2006.

             As at September 30, 2002, the estimated minimu m payments required under this agreement are
             approximately as follows:


             2003                                                                                    $ 1,583
             2004                                                                                      1,605
             2005                                                                                      1,628
             2006                                                                                        825

      c)     Alexis Nihon Properties is contingently liable for its co-venturer’s share of the obligations of
             unincorporated joint ventures described in note 11. However, all the assets of the joint ventures are
             available for the purposes of satisfying such obligations.

      d)     Alexis Nihon Properties has been named defendant in lawsuits and has received claims in the aggregate
             amount of $815. In the opinion of management, these matters are without substantial merit and no
             provision has been made for them in the accounts.




                                                     F-28
                                    ALEXIS NIHON PROPERTIES
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          (information as at September 30, 2002 and for the nine months
                                ended September 30, 2002 and 2001 is unaudited)
                        (all amounts are in thousands of dollars unless otherwise specified)




11.   Investments in Joint Ventures

      Alexis Nihon Properties’ pro-rata share of assets, liabilities, revenues, expenses and cash flows from operating,
      financing and investing activities of Alexis Nihon Properties’ joint ventures is as follows:

                                                     Nine months ended                            Year ended

                                              September 30,       September 30,   December 31,   December 31,   December 31,
                                                  2002                2001           2001           2000           1999
                                               (unaudited)         (unaudited)
                                                    $                   $              $              $              $
      Income-producing properties                  2,445              2,560          2,461          2,610          2,731
      Debt on income -producing properties         3,942              4,075          4,133          4,370          4,588
      Accounts payable and accrued
         liabilities                                  73                 83             90             72             86
                                                   4,015              4,158          4,223          4,442          4,674
      Revenues                                       572                557            769            745            935
      Expenses                                       325                360            574            586            739
      Net earnings                                   247                 197           195            159            196

      Cash flows from:
        Operating activities                         240                286            254            488            293
        Financing activities                        (244)              (296)          (164)          (394)          (200)
        Investing activities                           4                 10             (90)           (94)           (93)

12.   Related Party Transactions

      Transactions with the Alexis Nihon Group are measured at the exchange amount which is the amount of
      consideration established and agreed by the related parties. These transactions comprise the following:

                                                     Nine months ended                            Year ended

                                               September 30,      September 30,   December 31,   December 31,   December 31,
                                                   2002               2001           2001           2000           1999
                                                (unaudited)        (unaudited)
                                                     $                  $              $              $              $

      Interest incurred on debts due to the
          Alexis Nihon Group                       5,327              6,629         9,619             317             —
      Construction fees incurred                     689              1,458         2,255           5,830          4,857

      Included in accounts payable and accrued liabilities is approximately $NIL (2001:$1,316; 2000:$331) due to
      companies under common control.




                                                           F-29
                                     ALEXIS NIHON PROPERTIES
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          (information as at September 30, 2002 and for the nine months
                                ended September 30, 2002 and 2001 is unaudited)
                        (all amounts are in thousands of dollars unless otherwise specified)




13.   Additional Cash Flow Information

      Additional cash flow information is as follows:

                                                    Nine months ended                           Year ended
                                              September 30,      September 30,   December 31,   December 31,   December 31,
                                                  2002               2001           2001           2000           1999
                                               (unaudited)        (unaudited)
                                                    $                  $              $              $              $

      Interest paid                             12,310               14,205        16,904         16,417         12,509
      Income taxes paid                            395                 401            528            531            533

14.   Financial Instruments

      Credit risk

      Management reviews a new tenant’s credit history before signing new leases and conducts regular reviews of its
      existing tenant’s credit performance.

      Interest Rate Risk

      Alexis Nihon Properties is exposed to interest rate risk on debt on revenue-producing properties which bear interest
      based on prime rates. The fair value of the debt will fluctuate as a result of changes in interest rates.

      Fair Value

      The fair value of all instruments approximates their carrying value.

15.   Segmented Information

      Alexis Nihon P     roperties, its subsidiaries and the joint ventures operate in Québec in four reportable segments:
      office, retail, industrial and mixed-use and multi-family residential properties.




                                                              F-30
                                      ALEXIS NIHON PROPERTIES
                            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           (information as at September 30, 2002 and for the nine months
                                  ended September 30, 2002 and 2001 is unaudited)
                         (all amounts are in thousands of dollars unless otherwise specified)




15.    Segmented Information (Cont’d)

       The accounting policies of the segments are the same as those described in note 2. Alexis Nihon Properties primarily
       evaluates operating performance based on net rental income. A reconciliation of net rental income to net loss is not
       considered necessary as all other line items on the face of the consolidated statements of income are not allocated to
       specific segments.

                                                                           September 30, 2002
                                                                               (unaudited)

                                                                               Industrial       Multi-family
                                              Office              Retail     and mixed-use      Residential        Total
                                                $                   $              $                 $              $

      Revenues from rental operations         18,080           13,865           6,442              3,745          42,132
      Rental property operating costs          9,266            6,236           2,849              2,196          20,547
      Net operating income                     8,814            7,629           3,593              1,549          21,585
      Income-producing properties             94,728           77,869          36,456             30,132         239,185

                                                                           September 30, 2001
                                                                               (unaudited)

                                                                               Industrial       Multi-family
                                              Office              Retail     and mixed-use      Residential        Total
                                                $                   $              $                 $              $
      Revenues from rental operations         17,132           13,096            6,656              3,676         40,560
      Rental property operating costs          8,806            6,093            2,606              1,989         19,494
      Net operating income                     8,326            7,003            4,050              1,687         21,066


                                                                           December 31, 2001

                                                                               Industrial       Multi-family
                                               Office             Retail     and mixed-use      Residential        Total
                                                 $                  $              $                 $              $
      Revenues from rental operations         23,722           17,809           9,033              4,907          55,471
      Rental property operating costs         11,996            8,513           3,317              2,732          26,558
      Net operating income                    11,726            9,296           5,716              2,175          28,913
      Income-producing properties             95,624           78,194          37,223             30,469         241,510




                                                           F-31
                                      ALEXIS NIHON PROPERTIES
                            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             information as at September 30, 2002 and for the nine months
                                   ended September 30, 2002 and 2001 is unaudited)
                          (all amounts are in thousands of dollars unless otherwise specified)




15.     Segmented Information (Cont’d)


                                                                         December 31, 2000

                                                                             Industrial      Multi-family
                                              Office            Retail     and mixed-use     Residential          Total
                                                $                 $              $                $                $
      Revenues from rental operations        23,085          16,169            8,620              4,830       52,704
      Rental property operating costs        12,407           8,403            3,205              2,587       26,602
      Net rental income                      10,678           7,766            5,415              2,243       26,102
      Income-producing properties            97,144          79,303           37,760             31,099      245,306



                                                                         December 31, 1999

                                                                             Industrial      Multi-family
                                             Office           Retail       and mixed-use     Residential          Total
                                               $                $                $                $                $
      Revenues from rental operations        21,284          14,336            8,182             4,702        48,504
      Rental property operating costs         9,489             7,685          3,308             2,476        22,958
      Net rental income                      11,795             6,651          4,874             2,226        25,546

16.     Subsequent Event

        The income -producing properties are expected to be acquired by the REIT on or about December 20, 2002.




                                                         F-32
                                 CERTIFICATE OF THE REIT AND THE PROMOTER

Dated: December 13, 2002

          The foregoing constitutes full, true and plain disclosure of all material facts relating to the securities offered by this
prospectus as required by Part 9 of the Securities Act (British Columbia), by Part 8 of the Securities Act (Alberta), by Part XI
of The Securities Act (Saskatchewan), by Part VII of The Securities Act (Manitoba), by Part XV of the Securities Act
(Ontario), by Section 63 of the Securities Act (Nova Scotia), by Section 13 of the Security Frauds Prevention Act (New
Brunswick), by Part II of the Securities Act (Prince Edward Island), by Part XIV of The Securities Act, 1990
(Newfoundland), and the respective regulations thereunder. This prospectus does not contain any misrepresentation likely to
affect the value or the market price of the securities to be distributed within the meaning of the Securities Act (Québec) and
the regulations thereunder.



                                  ALEXIS NIHON REAL ESTATE INVESTMENT TRUST




             By: (Signed) PAUL J. M ASSICOTTE                                       By: (Signed) RENÉ FORTIN
            President and Chief Executive Officer                                       Vice President and
                                                                                      Chief Financial Officer



                                                    On behalf of the Trustees




                By: (Signed) RICHARD GUAY                                          By: (Signed) PHILIP O’BRIEN
                          Trustee                                                            Trustee




                                              ALEXIS NIHON INC., as Promoter




                                               By: (Signed) PAUL J. M ASSICOTTE




                                                               C-1
                                      CERTIFICATE OF THE UNDERWRITERS

Dated: December 13, 2002

         To the best of our knowledge, information and belief, the foregoing constitutes full, true and plain disclosure of all
material facts relating to the securities offered by this prospectus as required by Part 9 of the Securities Act (British
Columbia), by Part 8 of the Securities Act (Alberta), by Part XI of The Securities Act (Saskatchewan), by Part VII of The
Securities Act (Manitoba), by Part XV of the Securities Act (Ontario), by Section 64 of the Securities Act (Nova Scotia), by
Section 13 of the Security Frauds Prevention Act (New Brunswick), by Part II of the Securities Act (Prince Edward Island),
by Part XIV of The Securities Act, 1990 (Newfoundland), and the respective regulations thereunder. To the best of our
knowledge, this prospectus does not contain any misrepresentation likely to affect the value or the market price of the
securities to be distributed within the meaning of the Securities Act (Québec) and the regulations thereunder.




               NATIONAL BANK FINANCIAL INC.                                    CIBC W ORLD M ARKETS INC.




               By: (Signed) CRAIG J. SHANNON                                By: (Signed) A LLAN S. KIMBERLEY




                  BMO NESBITT BURNS INC.                                      RBC DOMINION SECURITIES INC.




              By: (Signed) JAMES P. BOWLAND                                By: (Signed) JEAN-CHARLES A NGERS




                                                DESJARDINS SECURITIES INC.




                                              By: (Signed) ÉRIC DÉSORMEAUX




                                                             C-2

				
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