Boardwalk Real Estate

BOARDWALK REAL ESTATE INVESTMENT TRUST RENEWAL ANNUAL INFORMATION FORM DATE February 13, 2009 -1BOARDWALK REAL ESTATE INVESTMENT TRUST ANNUAL INFORMATION FORM TABLE OF CONTENTS NOTE REGARDING FORWARD LOOKING STATEMENTS ...........................................................4 CORPORATE STRUCTURE ....................................................................................................................4 OVERVIEW OF THE ACQUISITION AND THE ARRANGEMENT REPLACING THE CORPORATION AS A PUBLIC ENTITY WITH BOARDWALK REIT ...........................................5 PRE-ARRANGEMENT REORGANIZATION ...................................................................................................6 ANCILLARY AGREEMENTS IN CONNECTION WITH THE ACQUISITION AND THE ARRANGEMENT .............7 ARRANGEMENTS WITH BPCL ...................................................................................................................8 SUBSIDIARIES...........................................................................................................................................9 OVERVIEW ..............................................................................................................................................11 OBJECTIVES OF BOARDWALK REIT ..............................................................................................11 MANAGEMENT OF BOARDWALK REIT..........................................................................................11 BOARD OF TRUSTEES ..............................................................................................................................11 COMMITTEES ...........................................................................................................................................14 AUDIT AND RISK MANAGEMENT COMMITTEE ............................................................................................14 COMPENSATION, GOVERNANCE & NOMINATIONS COMMITTEE .................................................................16 SENIOR MANAGEMENT ...........................................................................................................................16 BOARDWALK REIT ADMINISTRATIVE SERVICES AGREEMENT ..............................................................17 BUSINESS AND PROPERTIES OF BOARDWALK REIT ................................................................18 STRATEGY FOR GROWTH..................................................................................................................26 MAXIMIZING CUSTOMER SATISFACTION ................................................................................................26 ACQUIRING SELECTED MULTI-FAMILY RESIDENTIAL PROPERTIES .......................................................27 SALE OF PROPERTIES...............................................................................................................................27 ENHANCING PROPERTY VALUES .............................................................................................................28 PORTFOLIO VACANCY RATES .................................................................................................................28 NEW APARTMENT DEVELOPMENT ..........................................................................................................29 NORMAL COURSE ISSUER BID.................................................................................................................29 MANAGING CAPITAL ...............................................................................................................................29 BOARDWALK REIT'S DEBT MATURITY CHART ......................................................................................31 INVESTMENT GUIDELINES AND OPERATING POLICIES OF BOARDWALK REIT ............32 INVESTMENT GUIDELINES .......................................................................................................................32 OPERATING POLICIES ..............................................................................................................................35 DECLARATION OF TRUST AND DESCRIPTION OF REIT UNITS .............................................36 REIT UNITS .............................................................................................................................................36 SPECIAL VOTING UNITS ..........................................................................................................................36 ISSUANCE OF REIT UNITS .......................................................................................................................37 PURCHASE OF REIT UNITS......................................................................................................................37 REIT UNIT REDEMPTION RIGHT .............................................................................................................37 MEETINGS OF UNITHOLDERS ..................................................................................................................39 LIMITATION ON NON-RESIDENT OWNERSHIP .........................................................................................40 AMENDMENTS TO THE DECLARATION OF TRUST AND OTHER DOCUMENTS ..........................................40 -2STOCK EXCHANGE LISTINGS, PRICE RANGE AND TRADING VOLUME OF REIT UNITS ..........................42 DESCRIPTION OF OTHER SECURITIES AND RATINGS .............................................................42 SENIOR UNSECURED DEBENTURES .........................................................................................................42 CREDIT RATING .......................................................................................................................................50 STABILITY RATING ..................................................................................................................................50 CHALLENGES AND RISKS...................................................................................................................50 RISKS DUE TO INVESTMENT IN REAL ESTATE ........................................................................................51 MULTI-FAMILY RESIDENTIAL SECTOR RISK ..........................................................................................52 ENVIRONMENTAL RISKS .........................................................................................................................52 GROUND LEASE RISK ..............................................................................................................................53 COMPETITION RISK .................................................................................................................................53 GENERAL UNINSURED LOSSES ................................................................................................................53 CREDIT RISK............................................................................................................................................53 MARKET RISK .........................................................................................................................................54 SUPPLY RISK ...........................................................................................................................................54 INTEREST RISK ........................................................................................................................................55 DEVELOPMENT RISK ...............................................................................................................................56 RENT CONTROL RISK ..............................................................................................................................56 UTILITY AND PROPERTY TAX RISK .........................................................................................................58 RISKS DUE TO REAL ESTATE FINANCING ...............................................................................................58 OUTSTANDING INDEBTEDNESS ...............................................................................................................59 ACQUISITION PERFORMANCE RISK .........................................................................................................60 OPERATIONAL RISK.................................................................................................................................60 DEPENDENCE ON THE OPERATING TRUST AND THE PARTNERSHIP ........................................................61 FLUCTUATIONS OF CASH DISTRIBUTIONS...............................................................................................61 WORKFORCE AVAILABILITY ...................................................................................................................61 MARKET PRICE OF REIT UNITS ..............................................................................................................61 LEGAL RIGHTS NORMALLY ASSOCIATED WITH THE OWNERSHIP OF SHARES OF A CORPORATION .......62 ABILITY OF UNITHOLDERS TO REDEEM REIT UNITS .............................................................................62 REGULATORY APPROVALS MAY BE REQUIRED IN CONNECTION WITH A DISTRIBUTION OF SECURITIES ON A REDEMPTION OF REIT UNITS OR THE TERMINATION OF BOARDWALK REIT............62 AN INVESTMENT IN REIT UNITS ARE SUBJECT TO CERTAIN TAX RISKS ...............................................62 RISKS ASSOCIATED WITH DISCLOSURE CONTROLS AND PROCEDURES ON INTERNAL CONTROL OVER FINANCIAL REPORTING .................................................................................................................65 UNITHOLDERS LIMITED LIABILITY .........................................................................................................65 CREDIT RATINGS .....................................................................................................................................66 STRUCTURAL SUBORDINATION OF DEBENTURES ...................................................................................67 MARKET VALUE FLUCTUATION ..............................................................................................................67 STATUTORY REMEDIES ...........................................................................................................................67 NEW ALBERTA ROYALTY FRAMEWORK .................................................................................................67 DISTRIBUTION POLICY .......................................................................................................................67 GENERAL .................................................................................................................................................68 DISTRIBUTION REINVESTMENT PLAN .....................................................................................................69 INFORMATION CONCERNING THE OPERATING TRUST..........................................................71 GENERAL .................................................................................................................................................71 TRUSTEES AND OFFICERS........................................................................................................................72 OPERATING TRUST UNITS .......................................................................................................................72 -3AMENDMENTS TO OPERATING TRUST DECLARATION OF TRUST ...........................................................72 REDEMPTION RIGHT ................................................................................................................................73 CASH DISTRIBUTIONS .............................................................................................................................74 OPERATING TRUST NOTES ......................................................................................................................74 REGISTRATION AND TRANSFERS OF OPERATING TRUST UNITS .............................................................75 INFORMATION CONCERNING THE PARTNERSHIP....................................................................76 GENERAL .................................................................................................................................................76 THE GENERAL PARTNER .........................................................................................................................76 LP UNITS .................................................................................................................................................76 INVESTMENT GUIDELINES AND OPERATING POLICIES............................................................................78 AMENDMENTS TO LIMITED PARTNERSHIP AGREEMENT .........................................................................78 DISTRIBUTIONS .......................................................................................................................................79 ALLOCATION OF PARTNERSHIP INCOME AND PARTNERSHIP LOSSES .....................................................80 ALLOCATION OF PARTNERSHIP TAX INCOME AND PARTNERSHIP TAX LOSS .........................................81 FUNCTIONS AND POWERS OF THE GENERAL PARTNER ...........................................................................82 RESTRICTIONS ON THE AUTHORITY OF THE GENERAL PARTNER ...........................................................82 REIMBURSEMENT OF THE GENERAL PARTNER .......................................................................................83 LIMITED LIABILITY .................................................................................................................................83 MANAGEMENT ........................................................................................................................................83 INFORMATION CONCERNING THE CORPORATION..................................................................84 HISTORY ..................................................................................................................................................84 BUSINESS OF THE CORPORATION FOLLOWING THE ACQUISITION AND THE ARRANGEMENT .................85 LEGAL PROCEEDINGS.........................................................................................................................85 AUDITORS, TRANSFER AGENT AND REGISTRAR .......................................................................86 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ...................86 INTERESTS OF EXPERTS.....................................................................................................................86 MATERIAL CONTRACTS .....................................................................................................................86 RIGHTS PLAN..........................................................................................................................................87 ADDITIONAL INFORMATION ............................................................................................................89 -4BOARDWALK REAL ESTATE INVESTMENT TRUST RENEWAL ANNUAL INFORMATION FORM NOTE REGARDING FORWARD LOOKING STATEMENTS This Annual Information Form ("AIF") contains, or incorporates by reference documents that contain, forward looking statements. These statements relate, but are not limited to, Boardwalk REIT's (as defined herein) expectations, intentions, plans and beliefs. In some cases, you can identify forward-looking statements by the use of words such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue" or the negative of these terms or other comparable terminology, and by discussions of strategies that involve risks and uncertainties. You should be aware that these statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those anticipated or implied, or those suggested by any forward looking statements, including: competition within each of Boardwalk REIT's business segments, competition for real estate investments, financing and interest rates, governmental regulations, environmental regulations, the effective international, national and regional economic conditions and the availability of capital to fund further investments in Boardwalk REIT's business, as well as those described under the heading "Challenges and Risks" in this AIF. Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements contained, or incorporated by reference, in this AIF and readers should not rely on the forward-looking information contained in this AIF as of any date other than as noted on the cover page. By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Although management of Boardwalk REIT believes that the expectations reflected in the forward-looking statements are reasonable, as of the date of this AIF, these assumptions may prove to be incorrect and there can be no assurance that future results, levels of activity, performance or achievements will occur as anticipated. Actual results may differ materially from what is currently expected. None of the Corporation (as defined herein), Boardwalk REIT nor any other person assumes responsibility for the accuracy and completeness of any forward-looking statements, and no one has any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, circumstances or such other factors which affect this information, except as required by law. The following should also be read in conjunction with Boardwalk REIT's December 31, 2008 Financial Statements and the Notes thereto, along with other posted information concerning the Corporation and Boardwalk REIT, including Management's Discussion and Analysis for the year ended December 31, 2008. All of these documents are available in written and electronic versions either from the Trust on request, or at www.sedar.com or www.boardwalkreit.com. CORPORATE STRUCTURE In this Annual Information Form, unless the context indicates otherwise, a reference to "Boardwalk REIT" or the "Trust" means Boardwalk Real Estate Investment Trust. A reference to the "Corporation" means Boardwalk Equities Inc. (now called BPCL Holdings Inc.) Boardwalk REIT is an unincorporated, open ended real estate investment trust created by a declaration of trust, dated January 9, 2004, as amended and restated on May 3, 2004, May 10, 2006, May 10, 2007 and May 13, 2008 (the "Declaration of Trust"), and governed by the laws of Alberta. The Trust's principal office is located at Suite 200, 1501 First Street S.W., Calgary, Alberta, T2R 0W1. Its registered office is located at 4300 Bankers Hall West, 888 – 3rd Street S.W., Calgary, Alberta, T2P 5C5. -5All financial information presented in this AIF and in the documents incorporated by reference thereto, including the Trust’s audited consolidated financial statements, has been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). Boardwalk REIT, following May 3, 2004, now owns all of the assets formerly owned by the Corporation. The business of Boardwalk REIT is a continuation of the business previously operated by the Corporation. In this AIF, unless the context indicates otherwise, a reference to "business day" means a day, other than a Saturday or Sunday, on which Schedule 1 Canadian chartered banks are open for business in Calgary, Alberta, Toronto, Ontario and Vancouver, British Columbia; and a reference to "person" means an individual, partnership, limited partnership, corporation, unlimited liability company, trust, unincorporated organization, association, government or any department or agency thereof and the successors and assigns thereof or the heirs, executors, administrators or other legal representatives of an individual thereof, or any other entity recognized by law. OVERVIEW OF THE ACQUISITION AND THE ARRANGEMENT REPLACING THE CORPORATION AS A PUBLIC ENTITY WITH BOARDWALK REIT On May 3, 2004, the effective date of the Acquisition and Arrangement (the "Effective Date") Boardwalk REIT acquired substantially all of the assets of the Corporation (the "Contributed Assets") pursuant to a plan of arrangement under section 193 of the Business Corporations Act (Alberta) (the "Acquisition and the Arrangement"). The Acquisition and the Arrangement were multi-step transactions that resulted in: (i) the indirect acquisition by Boardwalk REIT of all of the Contributed Assets; (ii) the indirect acquisition of the Corporation by Boardwalk Properties Company Limited ("BPCL"), a corporation incorporated in 1984 pursuant to the laws of Alberta and indirectly controlled by Sam Kolias and Van Kolias, itself a control block holder of trust units of Boardwalk REIT ("REIT Units" or “Units”) by the acquisition of all of the outstanding common shares of the Corporation ("Common Shares"); and (iii) after taking into account the preferred partnership distribution and other entitlements of the units of interest in Boardwalk REIT Limited Partnership (the "Partnership") designated as "LP Class C Units" held indirectly by BPCL through the Corporation, the indirect interest of the public holders of Common Shares ("Public Shareholders") in approximately 73% of the Contributed Assets through the ownership of the outstanding REIT Units and the indirect interest of BPCL in approximately 27% of the Contributed Assets. After giving effect to the Acquisition and the Arrangement: (a) BPCL acquired the Corporation and the Corporation is now an indirect, wholly-owned subsidiary of BPCL; (b) the former holders of Common Shares ("Shareholders") were the initial owners of all of the outstanding REIT Units, which are listed for trading on the Toronto Stock Exchange (the “TSX”); (c) Boardwalk REIT indirectly holds, through its indirect interest in the units of the Partnership designated as "LP Class A Units", an approximately 92% interest in the Partnership (after the preferred partnership distribution and other entitlements of the LP Class C Units; see "Information Concerning the Partnership — Distributions"), which holds, directly or indirectly, all of the Contributed Assets previously comprising the business of the Corporation; and (d) the remaining approximately 8% interest in the Partnership (after the preferred partnership distribution and other entitlements of the LP Class C Units indirectly held by BPCL) are indirectly held by BPCL through its indirect interest in units of the Partnership designated as "LP Class B Units." The LP Class B Units have equivalent voting and distribution entitlements to the REIT Units into which they are exchangeable. -6Pre-Arrangement Reorganization Immediately prior to the effective time of the Acquisition and the Arrangement (the "Effective Time"), the Corporation and certain of its BEI Subsidiaries1 effected a series of transactions to facilitate the transfer of the Contributed Assets to the Partnership. On the Effective Date, as part of such series, the Corporation amalgamated with certain of the BEI Subsidiaries to continue under the name "Boardwalk Equities Inc." (the "Amalgamation"). References in this AIF to the "Corporation" after the time of the Amalgamation are to the corporation formed upon the Amalgamation and references to "Common Shares" after the time of the Amalgamation refer to the common shares of such amalgamated corporation. Following the Amalgamation, but prior to the transfer of the Contributed Assets, the Corporation subscribed for the Newco Number2 of LP Class B Units and 334,168,959 LP Class C Units, both for nominal consideration. Following this subscription and immediately prior to the commencement of the Plan of Arrangement3 on the Effective Date, the Corporation caused the Contributed Assets to be transferred to the Partnership at fair market value for an aggregate purchase price of approximately $2.3 billion, all pursuant to the Master Asset Contribution Agreement4. The consideration paid by the Partnership for the Contributed Assets consisted of the assumption of approximately $1.1 billion in mortgage financing and other indebtedness of the Corporation, the issuance by the Partnership of the LP Note in the principal amount of $777,375,470, and an addition to the capital accounts in respect of the LP Class B Units and LP Class C Units of $71,376,250 and $334,168,959, respectively. The Retained Debt5 was not assumed by the Partnership and remains as indebtedness of the Corporation following the transfer of the Contributed Assets. ''BEI Subsidiaries'' means, collectively, Boardwalk Equities (Ontario) Inc., 1365355 Ontario Inc., Avon Apartments Inc., Belgravia Square Apartments Inc., Boardwalk Equities (Sask) Inc., Carlton Tower Apartments A Inc., Carlton Apartments Inc., Cavendish Estates A Inc., Cavendish Estates Inc., Centennial South Condos Inc., Centennial West Condos Inc., Dorchester Tower Apartments Inc., Evergreen Apartments Inc., Grace Manor Apartments Inc., Green B Apartments Inc., Hastings Place Apartments Inc., Heritage Point Apartments Inc., Kleisinger Apartments Inc., Kumar Apartments Inc., Lockwood Apartments Inc., Meadow Apartments A Inc., Meadow Apartments Inc., Normanview Condos Inc., Palace Gates Apartments A Inc., Palace Gates Apartments Inc., Penthouse Apartments Inc., QI and QII Condos Inc., QIII Condos Inc., Queen City Apartments A Inc., Queen City Apartments Inc., Regal Tower I Apartments Inc., Regal Tower II Apartments Inc., Southpointe Plaza Inc., St. Charles Apartments Inc., Stonebridge Apartments A Inc., Stonebridge Apartments Inc., UpperCourt Apartments Inc., Wascana Park I Apartments Inc., Wascana Park II Apartments Inc., Wascana Park III Apartments Inc., Wedgewood Apartments Inc., Wildwood Ways Condos Inc., Boardwalk Equities (Quebec) Inc., Metropolitan Structures Inc., 882274 Alberta Ltd., Suite Systems Inc., 9108-4749 Quebec Inc. and Boardwalk Realty Ltd. 2 ''Newco Number'' means the number of Common Shares sold by BPCL to 1098369 Alberta Ltd. ("Newco", a whollyowned subsidiary of BPCL) under the Acquisition and the Arrangement, which was 4,475,000 Common Shares, or approximately 8% of the outstanding Common Shares at the Effective Time. 3 ''Plan of Arrangement'' means the plan of arrangement under the provisions of Section 193 of the Business Corporations Act (Alberta) (the "ABCA") in connection with the Acquisition and the Arrangement. 4 ''Master Asset Contribution Agreement'' means an agreement made between the Corporation and the Partnership setting out the terms and conditions upon which the Corporation caused to be transferred, assigned, conveyed and set over, to the Partnership the Contributed Assets in consideration for the assumption of certain liabilities of the Corporation by the Partnership, the issuance by the Partnership to the Corporation of the "LP Note" and a credit by the Partnership to the capital account in respect of each of the Corporation's LP Class B Units and LP Class C Units. ''LP Note'' means the interest bearing note issued by the Partnership to the Corporation under the Master Asset Contribution Agreement; 5 ''Retained Debt'' means the indebtedness of the Corporation that relates to and is secured by a charge of certain real property of the Corporation beneficially transferred, assigned, conveyed and set over by the Corporation to the Partnership pursuant to the Master Asset Contribution Agreement, which indebtedness was not assumed by the Partnership on such transfer, assignment, conveyance and set over and remains indebtedness of the Corporation in respect of which the Corporation is and will remain the primary obligor to make principal, interest and other payments in respect of such indebtedness as such amounts become due and payable, as set out more particularly therein. 1 -7Pursuant to the Master Asset Contribution Agreement, beneficial ownership of all of the Contributed Assets was transferred to the Partnership, including in respect of Contributed Assets to which the Retained Debt relates. The Retained Debt was not assumed by the Partnership and remains as indebtedness of the Corporation and the Corporation is obligated to make interest payments and principal repayments on a periodic basis in respect of the Retained Debt. Partnership distributions on the LP Class C Units held by the Corporation will, if paid, be in amounts at least sufficient to make such payments. The Partnership has provided the Corporation's creditors with a guarantee in respect of the Retained Debt to ensure the lenders are not prejudiced in their ability to collect from the Corporation in the event that payments in respect of the Retained Debt are not made by BPCL as expected and Boardwalk REIT has provided a guarantee of the Partnership's obligations. The Corporation has indemnified the Partnership for any losses suffered by the Partnership in the event payments on the Retained Debt are not made as required, provided such losses are not attributable to any action or failure to act on the part of the Partnership. Also, as the Partnership acquired the Contributed Assets, which comprise all of the historic business of the Corporation, the Partnership indemnified the Corporation for all claims and losses relating to the Contributed Assets except if the claim or loss is a result of gross negligence or wilful misconduct of the Corporation after the Effective Date. See "Overview of the Acquisition and the Arrangement Replacing the Corporation as a Public Entity with Boardwalk REIT— Ancillary Agreements in Connection with the Acquisition and the Arrangement — Master Asset Contribution Agreement". Ancillary Agreements in Connection with the Acquisition and the Arrangement Exchange and Support Agreement On the Effective Date, Boardwalk REIT, Top Hat Operating Trust6 (the "Operating Trust), the Partnership, the Corporation and 1103891 Alberta Ltd.7 ("BEI Subco") entered into an exchange and support agreement (the "Exchange and Support Agreement") to create certain support obligations with respect to the LP Class B Units. Under the Exchange and Support Agreement, Boardwalk REIT and/or Boardwalk Real Estate Management Ltd.8 (the "General Partner"), as applicable, agreed to take such actions as are reasonably necessary to ensure that the distributions on the LP Class B Units will be of the same nature and amount, on a per unit basis, as the corresponding distribution on the REIT Units (except to the extent that the holder of the LP Class B Units has elected to receive distributions in the form of LP Class B Units and/or REIT Units pursuant to the Limited Partnership Agreement9). The Exchange and Support Agreement also provides that Boardwalk REIT will not, subject to certain exceptions, issue or distribute REIT Units (or securities exchangeable for or convertible into or carrying rights to acquire REIT Units) to the holders of all or substantially all of the then outstanding REIT Units; issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding REIT Units entitling them to subscribe for or to purchase REIT Units (or securities exchangeable for or convertible into or carrying rights to acquire REIT Units); or issue or distribute to the holders of all or substantially all of the then outstanding REIT Units evidences of indebtedness of Boardwalk REIT or assets of Boardwalk REIT except in accordance with the provisions of the REIT Units; unless the economic equivalent on a per unit basis of such rights, options, securities, units, evidences of indebtedness or other assets is issued or distributed simultaneously to the holder of LP Class B Units. In addition, Boardwalk REIT will not, subject to certain exceptions, subdivide, redivide or change the then outstanding REIT Units into a greater number of REIT Units; reduce, combine, consolidate or An open-ended unit trust formed under the laws of the Province of British Columbia, all of the units of which are owned by Boardwalk REIT. 7 A corporation incorporated immediately prior to the Effective Date pursuant to the laws of Alberta as a wholly-owned subsidiary of the Corporation. 8 A corporation incorporated pursuant to the laws of Alberta and the general partner of the Partnership. 9 ''Limited Partnership Agreement'' means the limited partnership agreement dated January 9, 2004, as amended and restated on May 3, 2004, creating the Partnership. 6 -8change the then outstanding REIT Units into a lesser number of REIT Units; or reclassify, amend the terms of, or otherwise change the REIT Units or effect an amalgamation, merger, reorganization or other transaction affecting the REIT Units; unless the same or an economically equivalent change is made simultaneously to, or in the rights of the holders of LP Class B Units. Pursuant to the Exchange and Support Agreement, upon notice from the Partnership that a holder of LP Class B Units has (i) surrendered LP Class B Units for withdrawal in accordance with the terms of the LP Class B Units, or (ii) elected pursuant to the Limited Partnership Agreement to receive REIT Units from the Partnership in lieu of cash distributions from the Partnership to which such holder is entitled, Boardwalk REIT will issue and deliver or cause to be issued and delivered to the Partnership the requisite number of REIT Units to be received by, and issued to or to the order of, the holder of LP Class B Units. Master Asset Contribution Agreement On the Effective Date, the Corporation and the Partnership entered into the Master Asset Contribution Agreement pursuant to which the Corporation caused the Contributed Assets to be transferred to the Partnership. The Contributed Assets included the revenue producing properties of the Corporation, some of which were pledged to lenders in connection with the Retained Debt. In the case of properties which secure the Retained Debt, the entire beneficial interest was sold to the Partnership but legal title remained with the Corporation. Following the Effective Date, the Partnership registered a caveat against each of such properties disclosing its beneficial interest. In the case of other revenue producing properties, legal title to such properties was transferred into the name of a nominee holding company. Money received by the Corporation from the historic operation of its business was delivered to the Partnership in accordance with the Master Asset Contribution Agreement. Similarly, the Partnership, as part of the Master Asset Contribution Agreement, indemnified the Corporation for any losses, claims or demands associated with the Corporation's operation and transfer of the Contributed Assets. As of the date of this AIF, management of Boardwalk REIT is not aware of any material claims related to the Contributed Assets. See "Overview of the Acquisition and the Arrangement Replacing the Corporation as a Public Entity with Boardwalk REIT— Arrangements with BPCL". In order to effect the Acquisition and the Arrangement for the benefit of all Shareholders, the Corporation remains liable, as principal obligor, for the Retained Debt. The Partnership is, however, the beneficial owner of the Contributed Assets associated with the Retained Debt and accordingly could suffer impairment of these assets if the Corporation fails to discharge its obligations pursuant to the Retained Debt. Accordingly, the Corporation has indemnified the Partnership for losses caused by the Corporation's failure to discharge obligations pursuant to the Retained Debt. Certain obligations under the Retained Debt such as adequate insurance and repairs and maintenance are the responsibility of the Partnership and as a result, such indemnification does not extend to defaults outside the scope of responsibility of the Corporation. Arrangements with BPCL As part of the Acquisition and the Arrangement, BPCL agreed to take certain steps in order to effect the transactions. Specifically, BPCL: (i) acquired control of the Corporation; (ii) indirectly holds unlisted LP Class B Units and LP Class C Units; (iii) indirectly retains the Retained Debt as its indebtedness; and (iv) entered into certain agreements providing for ongoing arrangements with Boardwalk REIT and the Partnership in order to facilitate the foregoing. These steps were, in part, intended to ensure that Boardwalk REIT be put in a commercially advantageous position with respect to its peer group following completion of the Acquisition and the Arrangement. As a consequence of these steps, however, various commercial arrangements between the Partnership, the Corporation and BPCL were necessary. Among these arrangements are the following: -9(a) pursuant to the Master Asset Contribution Agreement, although the Partnership acquired the beneficial interest in the Contributed Assets associated with the Retained Debt, the Retained Debt was not assumed by the Partnership and remains indebtedness of the Corporation. As such, the Corporation continues to be liable as principal obligor to pay all principal, interest and other amounts under the Retained Debt as such amounts become due and payable and the Corporation has indemnified the Partnership for any losses as a result of the Corporation's failure to meet its obligations, provided such losses are not attributable to any action or failure to act on the part of the Partnership; (b) since the Master Asset Contribution Agreement represented a transfer of the existing business of the Corporation, the Partnership indemnified the Corporation for all claims and losses relating to the Contributed Assets except if the claim or loss is a result of gross negligence or willful misconduct of the Corporation after the Effective Date; (c) as the beneficial owner of the Contributed Assets associated with the Retained Debt, the Partnership indemnified the Corporation for losses resulting from the Partnership's failure to manage such Contributed Assets in a safe and prudent manner where such failure results in a claim against the Corporation; and (d) since the legal title to the Contributed Assets associated with the Retained Debt remains with the Corporation but all beneficial interest in such Contributed Assets as well as all other Contributed Assets was transferred to the Partnership, the Partnership has provided guarantees of the Corporation's obligations under the Retained Debt in favour of the lenders of such indebtedness and Boardwalk REIT has provided a guarantee of the Partnership's obligations. These arrangements are designed to protect the respective interests of the Partnership, Boardwalk REIT, BPCL and the Corporation. These arrangements are, in the opinion of management of Boardwalk REIT, appropriate in light of the significant benefits realized by the Public Shareholders as a result of the Amalgamation, the Acquisition and the Arrangement and the transfer of the Contributed Assets pursuant to the Master Asset Contribution Agreement (collectively, the "Transaction"). See "Overview of the Acquisition and the Arrangement Replacing the Corporation as a Public Entity with Boardwalk REIT— Ancillary Agreements in Connection with the Acquisition and the Arrangement", "Information Concerning the Corporation — Business of the Corporation Following the Acquisition and the Arrangement" and "Rights Plan". SUBSIDIARIES The following sets forth the principal subsidiaries of the Trust and their jurisdictions of incorporation or formation, as applicable. All of such subsidiaries are directly or indirectly owned by the Trust: - 10 - B O A R D W A L K R E IT S T R U C T U R E Board w alk R eal Estate In v estm en t T ru st 100% 100% Bo ard w alk R eal Estate M an agem en t Ltd. (G en eral P artn er) BP C L H o ldin gs In c . (form erly B oard w alk Eq uities Inc.) T o p H at O p eratin g T ru st 100% (LP C lass B U nits and LP C lass C U nits) 1 (Lim ited P artn er) $10.00 C ontrib utio n 100% (C lass A U nits) 100% Bo ard w alk R EIT P rop erties H oldin gs (A lberta) Ltd. Board w alk R EIT Q u ebec In c. 100% Board w alk R EIT Lim ite d P artn ersh ip (Lim ited P artn er) Lim ite d P artn ersh ip 100% 100% 882274 A lberta In c. 100% 100% 100% 100% 100% 1265086 A lberta Ltd. (G en eral P artn er) 100% 100% Q u ebec T ru st 9165-57 95 Q u ebec In c. (G en eral P artner) (Lim ited P artn er) 6222285 C an a da In c. Bo ard w alk G P H o ldin g T ru st (P artn er) 1265086 A lberta LP 100% 100% N u n's Islan d T ru st 1 N u n 's Islan d T ru st 2 9108-47 49 Q u ebec In c. Bo ard w alk StLau ren t L im ited P artn ersh ip 99.99% Board w alk G en eral P artn ersh ip 0.01% Board w alk G P O p eratin g T ru st (M an agin g P artn er) 100% M etrop o litan Stru ctu res (M SI) Inc. 100% Board w alk R EIT P ro p erties H oldin gs L td. 100% B oardw a lk Eq uities (B .C .) Inc. 2044760 O n tario In c. * Boardw alk R E IT Q u ebec In c./FP I Boadw alk Q u ebec In c. 100% S urrey V illa ge H o ld ings Ltd. 100% H o rizo n Tow ers H o ld ings Ltd. (1) T h ro u gh B EI Su bco w h o lly ow n ed su bsidiary o f BP C L H oldings In c.) - 11 OVERVIEW Boardwalk REIT is a customer-oriented real estate investment trust specializing in the acquisition, refurbishment, management and ownership of multi-family residential communities within Canada. As of December 31, 2008, the Trust owned 36,785 (December 31, 2007 – 36,487) residential units within the Provinces of Alberta, British Columbia, Saskatchewan, Ontario and Quebec, representing over 31 million (December 31, 2007 – 30 million) net rentable square feet. During the year ended to December 31, 2008, Boardwalk REIT acquired an additional 298 units in the Province of Alberta, and sold 39 units in the Province of Alberta as part of a property located in Calgary that was developed into condominium units for sale in 2007. Boardwalk REIT currently has in excess of 1,200 employees working in over 20 different cities across Canada. Boardwalk REIT focuses on maximizing internal growth combined with an aggressive but disciplined acquisition program. The Trust looks to acquire, own and manage quality rental communities concentrated in attractive markets characterized by high barriers to new supply. Due to Boardwalk REIT's size and relationship with various commercial lenders and Canada Mortgage and Housing Corporation ("CMHC"), financing for such acquisitions can often be negotiated on favourable terms. Boardwalk REIT is committed to being the industry leader in Canada's multi-family rental industry and in growing its operations into a truly national platform. Boardwalk REIT only owns the beneficial interest in, and notes of, the Operating Trust, and the Operating Trust owns LP Class A Units. As a result, the activities described below will be those of the Partnership and its subsidiaries. OBJECTIVES OF BOARDWALK REIT The objectives of Boardwalk REIT are to: (i) provide Unitholders with stable and growing monthly cash distributions, partially on a Canadian income tax-deferred basis, from investments in its assets (collectively, the "Contributed Assets") and any additional revenue producing multi-family residential properties or interests acquired by Boardwalk REIT; and (ii) increase REIT Unit value through the effective management of its residential, multi-family revenue producing properties and the acquisition of additional, accretive properties or interests therein. MANAGEMENT OF BOARDWALK REIT The overall operations and affairs of Boardwalk REIT are subject to the control of the trustees of Boardwalk REIT (the "Trustees"), while the day-to-day activities of Boardwalk REIT are under the direction of Boardwalk REIT's senior management team. Board of Trustees The Declaration of Trust provides that the assets and operations of Boardwalk REIT are subject to the control and authority of a board of a minimum of five Trustees and a maximum of 12 Trustees, a majority of whom shall be "independent trustees", as such term is defined in National Policy 58-201, entitled "Corporate Governance Guidelines" ("Independent Trustees"). Currently, there are six Trustees. Pursuant to the Declaration of Trust, BPCL is entitled to appoint one Trustee to serve on the board provided that BPCL and its affiliates continue to beneficially own, in the aggregate, a number of REIT Units and/or LP Class B Units that, upon surrender or exchange of the LP Class B Units would equal at least 5% of the outstanding REIT Units (on a fully-diluted basis). The remaining Trustees will be elected by holders of REIT Units ("Unitholders") in the manner provided below. Any Trustee appointed by BPCL may be changed by BPCL at any time. BPCL has not exercised the right since the Effective Date. The number of Trustees may be changed by the Unitholders or, if authorized by the Unitholders, by the Trustees, provided that the Trustees may not, between meetings of Unitholders, unless otherwise approved by a majority of the Independent Trustees, appoint an additional Trustee if, after such appointment, the total number of Trustees would increase by more than one-third the number of 381376 v2 - 12 Trustees in office immediately following the last annual meeting of Unitholders. A vacancy occurring among the Trustees, other than the appointee of BPCL, may be filled by resolution of the remaining Trustees, so long as they constitute a quorum, or by the Unitholders at a meeting of the Unitholders. A vacancy occurring among the Trustees resulting from the resignation or removal of the appointee of BPCL may be filled only by an appointment by BPCL. The Trustees, other than the appointee of BPCL, hold office for a term expiring at the next annual meeting of the Unitholders or until their respective successors are elected or appointed and are eligible for reelection. BPCL will, if it exercises its right to, appoint its Trustee at each annual meeting of Boardwalk REIT for a term expiring at the next annual meeting unless removed prior to such meeting at the direction of BPCL. A Trustee appointed by the Trustees between meetings of Unitholders or to fill a vacancy will be appointed for a term expiring at the conclusion of the next annual meeting of Boardwalk REIT or until his or her successor is elected or appointed and will be eligible for election or re-election. The Declaration of Trust provides that a Trustee may resign at any time upon written notice delivered to the Chair or, if there is no Chair, the President of Boardwalk REIT and a Trustee (other than an appointee of BPCL) may be removed with or without cause by a majority of the votes cast at a meeting of Unitholders or with cause by two-thirds of the remaining Trustees. Each Trustee is required to exercise the powers and discharge the duties of his or her office honestly and in good faith with a view to the best interests of Boardwalk REIT and the Unitholders and, in connection therewith, to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. The following table sets forth the name, province or state and country of residence, office held with Boardwalk REIT and principal occupation of each of the Trustees of Boardwalk REIT: Name, Position and Municipality of Residence Arthur L. Havener, Jr.(1)(2) Missouri, USA Director of Corporation or Trustee Since Position Held Trustee Principal Occupation President, Stampede Capital, LLC, from May 10, 2007 April 2007 to the present. Prior thereto, Mr. Havener was a Vice President and Head of Real Estate research of A.G. Edwards and Sons Inc. from June, 1989 until March, 2007 Independent Businessman from January March 1, 2001 2001 to the present; prior thereto, Vice President of Toronto Dominion Bank from May 1990 until December 2000 Executive of the Trust since the Effective Incorporation Date; prior thereto, from August 1993 until (July 1993) the Effective Date, President of the Corporation President, Exponent Capital Partners Inc. April 30, 2002 from February 2002 to the present; prior thereto, from June 2001 until January 2002, Vice President, IPS Promotion Services Ltd; and prior thereto, from 1995 until February 2001, a Senior Executive and Chief Financial Officer of Oxford Properties Group Inc. Ernest Kapitza(2) Alberta, Canada Trustee Sam Kolias Alberta, Canada Chairman of the Board, Chief Executive Officer and Trustee Trustee Al W. Mawani(1) Ontario, Canada 381376 v2 - 13 Director of Corporation or Trustee Since Name, Position and Municipality of Residence David V. Richards(2) Alberta, Canada James R. Dewald(1) Alberta, Canada Position Held Trustee Lead Trustee Principal Occupation President, Network Capital Inc. from May June 22, 1995 1997 to the present Assistant Professor of Strategy and Global May 10, 2005 Management, Haskayne School of Business, University of Calgary (2006 to present), and Managing Partner, PetersDewald Land Company Inc. (2001 to present). Prior thereto, President, Stormpilots Inc. (2001 to 2006), President & CEO of Stonecreek Properties Inc. (2004), President, Director & COO, 411HomeNet Group Inc. (1999 to 2001), and President & CEO of Hopewell Residential Communities Inc. (1996 to 2000) Notes: (1) Member of the Audit and Risk Management Committee. (2) Member of the Compensation, Governance and Nominations Committee. As of December 31, 2008, the Trustees and senior officers of Boardwalk REIT as a group beneficially own, directly or indirectly, or exercise control or direction over, REIT Units, representing approximately 18.92% of the outstanding REIT Units. BPCL, indirectly wholly-owned by Sam Kolias, Chairman, Chief Executive Officer and a Trustee of Boardwalk REIT, and Van Kolias, Senior Vice President, Quality Control of the General Partner, owns a further 4,475,000 LP Class B Units, which, if exchanged into REIT Units, would give them an additional 6.79% of the outstanding REIT Units. Conflict of Interest Restrictions and Provisions The Declaration of Trust contains "conflict of interest" provisions similar to those applicable to corporations under Section 120 of the ABCA, which serves to protect Unitholders without creating undue limitations on Boardwalk REIT. Given that the Trustees and the officers of Boardwalk REIT are engaged in a wide range of real estate and other business activities, the Declaration of Trust requires each Trustee or officer of Boardwalk REIT to disclose to Boardwalk REIT if he or she is a party to a material contract or transaction or proposed material contract or transaction with Boardwalk REIT or its subsidiaries 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 Boardwalk REIT or its subsidiaries. Such disclosure is required to be made by a Trustee at the first meeting at which a proposed contract or transaction is considered, at the first meeting after a Trustee becomes interested in a proposed or pending contract or transaction or at the first meeting after an interested party becomes a Trustee. Disclosure is required to be made by an officer of Boardwalk REIT as soon as the officer becomes aware that a contract or transaction or proposed contract or transaction is to be, or has been, considered by the Trustees, as soon as the officer becomes aware of his or her interest in a contract or transaction or, if not currently an officer of Boardwalk REIT, as soon as such person becomes an officer of Boardwalk REIT. 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, a Trustee or officer of Boardwalk REIT is required to disclose in writing to Boardwalk REIT or request to have entered into the minutes of the meeting of the Trustees the nature and extent of his or her interest forthwith after the Trustee or officer of Boardwalk REIT 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 381376 v2 - 14 transaction is one relating primarily to his or her remuneration as a Trustee, officer, employee or agent of Boardwalk REIT or one for indemnity under the indemnity provisions of the Declaration of Trust or the purchase of liability insurance. The Declaration of Trust contains provisions to address potential conflicts of interest arising between Boardwalk REIT and any "Related Party" (as such term is defined in Ontario Securities Commission Rule 61101 - Protection of Minority Security Holders in Special Transactions). In particular, Boardwalk REIT will obtain a valuation in respect of any real property that the Partnership intends to purchase from or sell to a Related Party prepared by a valuator engaged by, and prepared under the supervision of, a committee of two or more Independent Trustees who have no interest in such transaction. In addition, Boardwalk REIT will not permit the Partnership to effect a transaction with a Related Party unless the transaction is determined to be on commercially reasonable terms by, and is approved by, a majority of Boardwalk REIT's Independent Trustees who have no interest in such transaction. Independent Trustee Matters In addition to requiring the approval of a majority of the Trustees, the following matters require the approval of at least a majority of disinterested Independent Trustees to become effective: (a) entering into any agreement or transaction in which any Related Party has a material interest or making a material change to any such agreement or transaction; (b) any matter relating to a claim by or against any Related Party; (c) any matter relating to a claim in which the interests of a Related Party differ from the interests of Boardwalk REIT; (d) permitting the Partnership to acquire any real or other property in which a Related Party has an interest or to sell any interest in any real or other property to a Related Party; (e) granting REIT Units under any unit incentive or unit compensation plan approved by the Trustees and, if required, by the Unitholders or awarding any right to acquire or other right or interest in REIT Units or securities convertible into or exchangeable for REIT Units under any plan approved by the Trustees and, if required, by the Unitholders; (f) approving or enforcing any agreement entered into by Boardwalk REIT or its subsidiaries with a Trustee who is not an Independent Trustee or an associate thereof, with a Related Party; (g) recommending to the holders of REIT Units to increase the number of Trustees serving on the board of Trustees or authorizing the Trustees to change the number of Trustees from time to time; and (h) changing the compensation of any officer or employee of Boardwalk REIT. Committees The Board of Trustees has established two committees: the Audit and Risk Management Committee and the Compensation, Governance and Nominations Committee. Audit and Risk Management Committee The Trustees have appointed an Audit and Risk Management Committee (the "Audit Committee") consisting of three Trustees, all of whom are Independent Trustees. The Chair of the Audit Committee, Al W. Mawani, was selected from the group of Independent Trustees appointed to serve on such Committee. The Audit Committee is required to: (i) review Boardwalk REIT's procedures for internal control with the Auditors and Chief Financial Officer of Boardwalk REIT; (ii) review the engagement and approve the fees of the Auditors and other professional advisors; (iii) review and recommend to the Trustees for their approval annual and quarterly financial statements, as well as management's discussion and analysis of financial condition and results of 381376 v2 - 15 operation; (iv) assess Boardwalk REIT's financial and accounting personnel; (v) review and approve the public disclosure documents of Boardwalk REIT, including press releases; and (vi) review any significant transactions outside Boardwalk REIT's ordinary activities and all pending litigation involving Boardwalk REIT. The Audit Committee meets a minimum of four times per year and at least annually with each of the external auditors and management in separate sessions. Each member of the Audit Committee is required to be financially literate, meaning that the member has the ability to read and understand a set of financial statements that present a breadth and level of complexity of the issues that can be expected to be raised by the Trust's financial statements, and at least one member of the committee is required to have accounting or related financial experience, meaning that such member has the ability to analyze and interpret a full set of financial statements, including the notes attached thereto, in accordance with Canadian generally accepted accounting principles. The Audit Committee currently has three members, James R. Dewald, Al W. Mawani and Arthur L. Havener, Jr., none of whom has a direct or indirect material relationship with the Trust and each of whom is financially literate (as defined above). The following is a brief summary of the education and experience of each member of the Audit Committee that is relevant to the performance of his responsibilities as a member of the Audit Committee, including any education or experience that has provided the member with an understanding of the accounting principles used by the Trust to prepare its annual and interim financial statements: Name of Audit Committee Member James R. Dewald Relevant Education and Experience Dr. Dewald has been a Trustee since May 10, 2005. He is currently an Assistant Professor of Strategy and Global Management at the University of Calgary’s Haskayne School of Business, and Managing Partner of Peters-Dewald Land Company Inc., positions he has held since 2006 and 2001, respectively. Dr. Dewald was President of Stormpilots Inc. from 2001 to 2006. Prior thereto, Dr. Dewald was a President, Director and Chief Operating Officer of 411 HomeNet Group Inc. (1999 to 2001) and President & CEO of Hopewell Residential Communities Inc. (1996 to 2000). Dr. Dewald has been a professional engineer since 1981, and obtained his Ph.D. in Management (specializing in strategy and global management) from the University of Calgary in 2006. Dr. Dewald obtained a Masters of Business Administration from the University of Alberta in 1984, and a Bachelor of Sciences degree in Engineering from the University of Alberta in 1979. Mr. Havener is the President of Stampede Capital, LLC (since April 2007), a firm designed to provide real estate consulting and support to publicly-traded real estate investment trusts and institutional investors, as well as certain private equity investment opportunities. Mr. Havener has been a Trustee since May 10, 2007. Mr. Havener has a strong business background, having had an 18-year career with A.G. Edwards. Before retiring from A.G. Edwards, Mr. Havener served as a Vice President and Head of Real Estate Research in St. Louis, Missouri from 1988 until March 2007. Mr. Havener also serves as a trustee of a North American real estate private equity firm. Mr. Havener obtained a Masters of Business Administration from Webster University in St. Louis, Missouri in 1992. Mr. Mawani has been a director of the Corporation and (following the Effective Date) a Trustee since April 30, 2002. Mr. Mawani is currently President of Exponent Capital Partners Inc., a private equity firm. Prior to January 31, 2004, Mr. Mawani was a Vice President of IPS Industrial Promotion Services Ltd., a private equity firm. Prior thereto, Mr. Mawani was Executive Vice President of Business Development for one year and Senior Vice President and Chief Financial Officer at Oxford Properties Group Inc., one of Canada's largest real estate companies, for 10 years. Mr. Mawani is a Arthur L. Havener, Jr. Al W. Mawani 381376 v2 - 16 chartered accountant and has an MBA from the University of Toronto and an LLM from York University. He is a board member of two other TSX listed entities. A text of the Audit Committee's charter is attached to this AIF as Schedule "A". Auditors' Fees The table below provides disclosure of the services provided by the Trust's external auditors in fiscal 2007 and fiscal 2006, dividing the services into the categories of work performed. Type of Work Audit Fees(1) Audit Related Fees Review of interim financial statements and MD&A Tax Fees(1) Tax compliance services for the Trust and partnerships Other(1) Translation of MD&A and Financial Statements Other(2) Total(1) 2008 - Fees $428,505 $60,102 $60,102 $23,270 $23,270 $18,863 $0 $18,863 $530,740 2008 – Percentage 80.75% 11.32% 11.32% 4.38% 4.38% 3.55% -% 3.55% 100% 2007 - Fees $205,000 $51,000 $51,000 $71,810 $71,810 $67,258 $53,000 $14,258 $395,068 2007 – Percentage 51.89% 12.91% 12.91% 18.18% 18.18% 17.02% 13.42% 3.60% 100% Notes: (1) Includes GST. (2) Consists of review of review of implementation of certain CICA Handbook Sections ($11,686) and other miscellaneous charges ($7,177). Compensation, Governance & Nominations Committee The Trustees have appointed a compensation, governance and nominations committee (the "Compensation Committee") consisting of three Trustees, all of whom are Independent Trustees. The Chair of the Compensation Committee, Mr. Arthur L. Havener, Jr., was selected from the group of Independent Trustees appointed to serve on such Committee. Mr. Ernie Kapitza and Mr. David Richards are also members of the Compensation Committee. The duties of the Compensation Committee are to review the compensation of the Trustees and the officers of Boardwalk REIT. The Compensation Committee is generally responsible for Boardwalk REIT's human resources, compensation and governance policies and has primary responsibility for: (i) administering Boardwalk REIT's unit incentive plans; (ii) assessing the performance of the Chief Executive Officer; (iii) reviewing and approving the compensation of senior management and consultants of Boardwalk REIT; (iv) reviewing and making recommendations to the Trustees concerning the level and nature of compensation payable to the Trustees; and (v) reviewing the governance policies of Boardwalk REIT, including being responsible for: (a) assessing the effectiveness of the Board of Trustees and each of its committees; (b) assessing the performance of the chair and/or lead Trustee of the Board of Trustees; (c) considering questions of management succession; (d) the recruitment and selection of candidates for Trustees; and (e) considering and approving proposals by the Trustees to engage outside advisors on behalf of the Board of Trustees as a whole or on behalf of the Independent Trustees. Senior Management The executive officers of Boardwalk REIT consist of Sam Kolias, Chairman and Chief Executive Officer; Roberto A. Geremia, President; William Wong, Chief Financial Officer and Dean Burns, Vice President, General Counsel & Secretary. These individuals also serve as officers of the General Partner. The senior officers have extensive experience in acquiring, refurbishing and profitably managing multi-family residential properties. Additional officers or personnel may be employed by Boardwalk REIT to support management in fulfilling its duties. Boardwalk REIT may also outsource other services necessary to its operations to third parties, subject to 381376 v2 - 17 approval of the Trustees as necessary. See "Information Concerning the Partnership — Management" for further information on such officers. Boardwalk REIT Administrative Services Agreement Management and General Administrative Services Boardwalk REIT, the General Partner and the Operating Trust have entered into an administrative services agreement, dated the Effective Date (the "Boardwalk REIT Administrative Services Agreement"). The Boardwalk REIT Administrative Services Agreement sets out the terms and conditions pursuant to which the General Partner or its subsidiaries provide certain management and general administrative services to Boardwalk REIT and the Operating Trust, including: (i) undertaking any matters required to be performed by the Trustees and the Operating Trust not otherwise delegated under the respective declarations of trust or the Boardwalk REIT Administrative Services Agreement; (ii) keeping and maintaining books and records; (iii) preparing returns, filings and documents and making determinations necessary for the discharge of the obligations of the trustees of Boardwalk REIT and the Operating Trust; (iv) providing Unitholders with annual audited and interim financial statements and relevant tax information; (v) preparing and filing income tax returns and filings; (vi) ensuring compliance by Boardwalk REIT with all applicable securities legislation and stock exchange requirements including, without limitation, continuous disclosure obligations; (vii) preparing and approving on behalf of Boardwalk REIT any circular or other disclosure document required under applicable securities legislation in response to an offer to purchase REIT Units; (viii) providing investor relations services to Boardwalk REIT; (ix) calling and holding annual and/or special meetings in respect of Boardwalk REIT and the Operating Trust and preparing, approving and arranging for the distribution of meeting materials; (x) preparing and providing to Unitholders information such as monthly and annual reports, notices, financial reports and tax information relating to Boardwalk REIT; (xi) attending to administrative and other matters arising in connection with redemptions of REIT Units; (xii) ensuring that Boardwalk REIT elects to be a "mutual fund trust" from the date it is established and a "registered investment" within the meaning of the Income Tax Act (Canada) (the "Tax Act") and monitoring Boardwalk REIT's status as such; (xiii) monitoring the investments of Boardwalk REIT to ensure that the foreign property of Boardwalk REIT does not exceed the limits prescribed in the Tax Act; (xiv) determining the amount of "Distributable Income"10, net realized capital gains and net realized income of Boardwalk REIT and the Operating Trust and arranging for distributions to be paid to Unitholders; (xv) promptly notifying Boardwalk REIT and the Operating Trust of any event that might reasonably be expected to have a material adverse effect on their respective affairs; and (xvi) generally providing all other services as may be necessary or requested by Boardwalk REIT and the Operating Trust. Administrative and Support Services Pursuant to the Boardwalk REIT Administrative Services Agreement, the General Partner has also agreed to provide or cause its subsidiaries to provide certain administrative and support services to Boardwalk REIT and the Operating Trust. The administrative and support services provided by the General Partner will include providing office space, office equipment, communications services, computer systems, providing secretarial support personnel, reception, telephone answering services, installing and maintaining signage, promotional ''Distributable Income'' means, for any period, the net income of Boardwalk REIT and its applicable consolidated subsidiaries for such period set out in its consolidated financial statements as determined in accordance with GAAP, subject to certain adjustments, including: (a) adding back the following items: depreciation, amortization (except for amortization of deferred financing costs incurred after the Effective Date), future income tax expense, losses on dispositions of assets and amortization of any net discount on long-term debt assumed from vendors of properties at rates of interest less than fair value incurred after the Effective Date; and (b) deducting the following items: future income tax credits, interest on convertible debentures to the extent not already deducted in computing net income, gains on dispositions of assets and amortization of any net premium on long-term debt assumed from vendors of properties at rates of interest greater than fair value incurred after the Effective Date and any other adjustments determined by the Trustees in their discretion. (See disclosure regarding non-GAAP measures under the heading "Distribution Policy - Distribution Reinvestment Plan".) 10 381376 v2 - 18 materials and providing such other administrative and secretarial support services as may be reasonably required from time to time. The Boardwalk REIT Administrative Services Agreement provides for the payment to the General Partner or its subsidiaries by the Operating Trust or its subsidiaries of an amount sufficient to reimburse the General Partner or its subsidiaries for the expenses incurred by it in providing services under the Boardwalk REIT Administrative Services Agreement as long as the expenses are identified in the current annual budget for Boardwalk REIT or are otherwise approved in writing by Boardwalk REIT and the Operating Trust prior to being incurred by the General Partner. The General Partner and its subsidiaries are only reimbursed for expenses incurred by them in providing services under the Boardwalk REIT Administrative Services Agreement and are not paid a separate management fee or any other compensation under such agreement. Each of Boardwalk REIT and the Operating Trust will fund its payments to the General Partner or its subsidiaries through their direct or indirect receipt of the "LP Class A Preferred Distribution" on the LP Class A Units owned by the Operating Trust. See "Information Concerning the Partnership — Distributions". BUSINESS AND PROPERTIES OF BOARDWALK REIT Boardwalk REIT indirectly owns, through the Partnership, an interest in the Contributed Assets. As at December 31, 2008, the Contributed Assets consisted of direct and indirect interests in 36,785 residential units in Alberta, British Columbia, Saskatchewan, Ontario and Quebec, representing approximately 31 million net rentable square feet of revenue producing multi-family residential apartment units. During the year ended December 31, 2008, Boardwalk REIT acquired an additional 298 residential units in Alberta, and sold 39 units in the Province of Alberta, in a 90-unit property located in Calgary that was developed into condominium units for sale. The Contributed Assets represent a well-balanced portfolio of residential real estate, both from the standpoint of geographic diversification and mix of asset type, which consists of mid-sized suburban and downtown apartment buildings, and regional, mid-sized community and neighbourhood residential centres located in urban markets. The Contributed Assets represent a diversified portfolio of multi-family rental properties. As at December 31, 2008, the Contributed Assets had an average occupancy rate of approximately 95%. Boardwalk REIT has a 100% undivided interest in the Contributed Assets. All of the residential properties in the portfolio are located in Canada. The residential properties in the portfolio are currently located in Montreal, Gatineau and Quebec City, Quebec; London, Kitchener and Windsor, Ontario; Saskatoon and Regina, Saskatchewan; Victoria and Vancouver, British Columbia; and Edmonton, Fort McMurray, Grande Prairie, Banff, Red Deer and Calgary, Alberta. The following tables detail the city and property summaries of Boardwalk REIT's residential portfolio at December 31, 2008. As stated above, attention should be drawn to the fact that the Trust has a 100% undivided interest in all of the noted properties: By City Core cities Calgary, AB Edmonton, AB Spruce Grove, AB Fort McMurray, AB Grande Prairie, AB Red Deer, AB Other-AB Coquitlam, BC Vancouver, BC Victoria, BC Number of Units 5,227 12,144 160 352 676 939 519 41 789 257 % of Units 14.2% 33.0% 0.4% 1.0% 1.8% 2.6% 1.4% 0.1% 2.1% 0.7% Net Rentable Square Footage 4,197,659 10,669,014 122,640 281,954 565,652 775,615 469,213 25,980 627,476 226,945 % of Square Footage 13.5% 34.3% 0.4% 0.9% 1.8% 2.5% 1.5% 0.1% 2.0% 0.7% Average Unit Size 803 879 767 801 837 826 904 634 795 883 381376 v2 - 19 - By City Core cities Regina, SK Saskatoon, SK Gatineau, QC Montreal, QC Quebec City, QC Kitchener, ON London, ON Windsor, ON Total Number of Units 2,672 1,988 321 4,947 1,488 329 2,256 1,680 36,785 % of Units 7.3% 5.4% 0.9% 13.4% 4.0% 0.9% 6.1% 4.6% 100% Net Rentable Square Footage 2,163,015 1,692,643 204,055 4,426,068 1,235,457 263,020 1,867,146 1,280,485 31,094,037 % of Square Footage 7.0% 5.4% 0.7% 14.2% 4.0% 0.8% 6.0% 4.1% 100% Average Unit Size 810 851 636 895 830 799 828 762 845 * Excluded in the total is a 90-unit property converted to condominiums. Boardwalk Portfolio City/Province Property Name Building Type Number of Units Net Rentable Square Average Unit Footage Size Unit Breakdown by City Kitchener, ON 0.9% London, ON 6.1% Windsor, ON 4.6% Quebec City, QC 4.0% Calgary, AB 14.2% Montreal, QC 13.4% Gatineau, QC 0.9% Saskatoon, SK 5.4% Regina, SK 7.3% Victoria, BC 0.7% other-AB 1.4% Vancouver, BC 2.1% Coquitlam, BC 0.1% Red Deer, AB 2.6% Edmonton, AB 33.0% Spruce Grove, AB 0.4% Fort McMurray, AB 1.0% Grande Prairie, AB 1.8% 381376 v2 - 20 - The Boardwalk Portfolio Number of Units Net Rentable Square Footage Average Unit Size City/Province Property Name Building Type Calgary, AB Beltline Towers Boardwalk Heights Brentview Towers Cedar Court Gardens Centre Pointe West Chateau Apartments Elbow Towers Flintridge Place Glamorgan Manor Heritage Gardens Hillside Estates Lakeside Estates Lakeview Apartments McKinnon Court Apartments McKinnon Manor Apartments Northwest Pointe Oakhill Estates O'Neil Towers Patrician Village Pineridge Apartments Prominence Place Apartments Radisson I Radisson II Radisson III Ridgeview Gardens Royal Park Plaza Russet Court Sarcee Trail Place Skygate Tower Spruce Ridge Estates Travois Apartments Varsity Place Apartments Varsity Square Apartments Vista Gardens Westwinds Village Willow Park Gardens Edmonton, AB Alexander Plaza Aspen Court Boardwalk Arms A & B Boardwalk Centre Garden Garden Garden Highrise 252 80 78 597 203,740 68,680 64,340 471,871 808 859 825 790 Highrise Highrise Highrise Townhouse Highrise Highrise Highrise Highrise Garden Highrise Garden Garden Walkup Garden Garden Garden Townhouse Highrise Garden Garden Garden Townhouse Townhouse Townhouse Townhouse Highrise Townhouse Highrise/Midrise Highrise Garden Garden Walk-up Midrise/Lowrise Garden Garden Garden 115 202 239 65 123 145 158 68 86 91 76 89 120 48 60 150 240 187 392 76 75 124 124 118 160 86 206 376 142 284 89 70 297 100 180 66 5,227 80,424 160,894 151,440 58,560 110,611 110,545 108,280 55,023 63,510 64,250 58,900 77,732 107,680 36,540 43,740 102,750 236,040 131,281 295,600 52,275 55,920 108,269 108,015 124,379 151,080 66,137 213,264 301,720 113,350 196,464 61,350 47,090 241,128 121,040 137,815 44,563 4,197,659 699 797 634 901 899 762 685 809 738 706 775 873 897 761 729 685 984 702 754 688 746 873 871 1,054 944 769 1,035 802 798 692 689 673 812 1,210 766 675 803 381376 v2 - 21 - The Boardwalk Portfolio Number of Units Net Rentable Square Footage Average Unit Size City/Province Property Name Building Type Boardwalk Village I II & III Breton Manor Briarwynd Court Brookside Terrace Cambrian Place Camelot Capital View Towers Carmen Castle Court Castleridge Estates Cedarville Apartments Christopher Arms Corian Apartments Deville Apartments Ermineskin Place Fairmont Village Fontana Place Fort Garry House Galbraith House Garden Oaks Granville Square Greentree Village Habitat Village Imperial Tower Kew Place Lansdowne Park Leewood Village Lord Byron I II & III Lord Byron Townhouses Lorelei House Maple Gardens Marlborough Manor Maureen Manor Meadowside Estates Meadowview Manor Monterey Pointe Morningside Estates Northridge Estates Oak Tower Parkside Towers Parkview Estates Pembroke Estates Pinetree Village Pointe West Townhouses Primrose Lane Apartments Townhouse Garden Townhouse Garden Garden Garden Highrise Garden Garden Townhouse Garden Garden Garden Highrise Highrise Garden Highrise Highrise Highrise Garden Townhouse Garden Townhouse Highrise Townhouse Highrise Garden Highrise Townhouse Garden Garden Garden Highrise Garden Garden Garden Garden Garden Highrise Highrise Townhouse Garden Garden Townhouse Garden 255 66 172 131 105 64 115 64 89 108 144 45 153 66 226 424 62 93 163 56 48 192 151 138 108 62 142 158 146 78 181 56 91 148 348 104 221 180 70 179 104 198 142 69 153 258,150 57,760 144,896 196,779 105,008 54,625 71,281 54,625 93,950 124,524 122,120 29,900 167,400 47,700 181,788 362,184 40,820 70,950 110,400 47,250 53,376 156,000 129,256 112,050 105,776 48,473 129,375 133,994 170,969 65,870 163,840 49,582 64,918 104,036 284,490 83,548 166,315 103,270 51,852 162,049 88,432 198,360 106,740 72,810 151,310 1,012 875 842 1,502 1,000 854 620 854 1,056 1,153 848 664 1,094 723 804 854 658 763 677 844 1,112 813 856 812 979 782 911 848 1,171 844 905 885 713 703 818 803 753 574 741 905 850 1,002 752 1,055 989 381376 v2 - 22 - The Boardwalk Portfolio Number of Units Net Rentable Square Footage Average Unit Size City/Province Property Name Building Type Prominence Place Redwood Court Riverview Manor Royal Heights Sandstone Pointe Sir William Place Solano House Southgate Tower Summerlea Place Suncourt Place Tamarack East and West Terrace Garden Estates Terrace Tower The Palisades The Westmount Tower Hill Tower on the Hill Valley Ridge Tower Victorian Arms Viking Arms Village Plaza Warwick Apartments West Edmonton Court West Edmonton Village Westborough Court Westbrook Estates Westmoreland Apartments Westpark Ridge Westridge Estates B Westridge Estates C Westridge Manor Westwinds of Summerlea Whitehall Square Willow Glen Apartments Wimbledon Fort McMurray, AB Highrise Garden Garden Highrise Garden Garden Highrise Highrise Garden Garden Townhouse Garden Highrise Highrise Highrise Highrise Highrise Highrise Garden Highrise Townhouse Garden Garden Various Garden Garden Garden Garden Garden Garden Townhouse Garden Highrise/Walkup Garden Highrise 91 116 81 74 81 220 91 170 39 62 132 114 84 94 133 82 100 49 96 240 68 60 82 1,176 60 172 56 102 91 90 64 48 598 88 165 12,144 24 79 32 23 30 36 44 44 73,310 107,680 62,092 41,550 83,800 126,940 79,325 153,385 43,297 55,144 212,486 101,980 66,000 77,200 124,825 46,360 85,008 30,546 91,524 257,410 65,280 49,092 73,209 1,138,368 50,250 148,616 45,865 99,280 56,950 56,950 69,038 53,872 545,934 71,800 117,216 10,669,014 18,120 68,138 27,226 16,750 21,248 30,497 30,350 35,775 806 928 767 561 1,035 577 872 902 1,110 889 1,610 895 786 821 939 565 850 623 953 1,073 960 818 893 968 838 864 819 973 626 633 1,079 1,122 913 816 710 879 755 863 851 728 708 847 690 813 Birchwood Manor Chanteclair Apartments Edelweiss Terrace Heatherton Apartments Hillside Manor Mallard Arms McMurray Manor The Granada Garden Garden Garden Garden Garden Garden Garden Garden 381376 v2 - 23 - The Boardwalk Portfolio Number of Units Net Rentable Square Footage Average Unit Size City/Province Property Name Building Type The Valencia London, ON Abbey Estates Castlegrove Estates Forest City Estates Heritage Square Landmark Towers Maple Ridge On The Parc Meadow Crest Apartments Noel Meadows Ridgewood Estates Sandford Apartments The Bristol Topping Lane Terrace Villages of Hyde Park Westmount Ridge Montreal, QC Cote-Vertu (St. Laurent, QC) Domaine d’Iberville Appartements (Longueuil, QC) Le Bienville (Brossard, QC) Les Jardins Bourassa Les Jardins Viva (Longueuil, QC) Nuns' Island Portfolio Complexe Deguire (St. Laurent, QC) Residence le Quatre Cent (Laval, QC) Quebec City, QC Complexe Laudance (Sainte-Foy, QC) Domaine du Rocher (Levis, QC) Le Laurier Les Appartements Du Verdier (Sainte-Foy, QC) Les Jardins de Merici Place Charlesbourg Place du Parc Place Samuel de Champlain Place Chamonix Red Deer, AB Canyon Pointe Apartments Cloverhill Terrace Garden 40 352 53 144 272 359 213 257 162 105 29 96 138 189 60 179 2,256 88 720 168 178 112 3,100 322 259 4,947 183 64 105 195 346 108 111 130 246 1,488 163 120 33,850 281,954 59,794 126,420 221,000 270,828 173,400 247,166 110,835 72,600 31,020 77,594 109,059 177,880 57,850 131,700 1,867,146 67,750 560,880 115,600 85,874 91,000 3,075,140 276,324 153,500 4,426,068 134,480 68,184 74,995 152,645 300,000 82,624 81,746 104,153 236,630 1,235,457 114,039 102,225 846 801 1,128 878 813 754 814 962 684 691 1,070 808 790 941 964 736 828 770 779 688 482 813 992 858 593 895 735 1,065 714 783 867 765 736 801 962 830 700 852 Townhouse Highrise Highrise Garden/Highrise Highrise Highrise Garden Garden Townhouse Highrise Highrise Highrise Townhouse Highrise Midrise Highrise Walk-up Midrise Walk-up Garden/Highrise/ Townhouse Highrise Highrise Midrise Walk-up Highrise Garden Highrise Midrise Highrise Highrise Townhouse Garden Highrise 381376 v2 - 24 - The Boardwalk Portfolio Number of Units Net Rentable Square Footage Average Unit Size City/Province Property Name Building Type Inglewood Terrace Apartments Parke Avenue Square Riverbend Village Apartments Saratoga Tower Taylor Heights Apartments Watson Tower Westridge Estates Regina, SK Ashok Portfolio Boardwalk Estates Boardwalk Manor Centennial South Centennial West Eastside Estates Evergreen Estates Grace Manor Greenbriar Apts Lockwood Arms Apartments Pines of Normanview Qu'appelle Village I & II Qu'appelle Village III Southpointe Plaza The Meadows Wascana Park Estates Saskatoon, SK Carleton Tower Chancellor Gate Dorchester Towers Heritage Pointe Estates Lawson Village Meadow Park Estates Palace Gates Penthouse Apartments Regal Tower I & II Reid Park Estates St. Charles Place St. James Place Stonebridge Apartments Stonebridge Townhomes I & II Wildwood Ways B Garden Walk-up Garden Highrise Garden Highrise Townhouse 68 88 150 48 140 50 112 939 164 687 72 170 60 150 150 72 72 96 133 154 180 140 52 320 2,672 158 138 52 104 96 200 206 82 161 179 156 140 162 100 54 1,988 42,407 87,268 114,750 53,762 103,512 43,988 113,664 775,615 95,000 467,696 60,360 129,080 46,032 167,550 125,660 69,120 57,600 69,000 115,973 133,200 144,160 117,560 57,824 307,200 2,163,015 155,138 126,396 48,608 99,840 75,441 192,000 142,525 61,550 122,384 128,700 123,000 105,750 131,864 135,486 43,961 1,692,643 624 992 765 1,120 739 880 1,015 826 579 681 838 759 767 1,117 838 960 800 719 872 865 801 840 1,112 960 810 982 916 935 960 786 960 692 751 760 719 788 755 814 1,355 814 851 Garden Garden Garden Townhouse Garden Townhouse Garden Townhouse Garden Garden Townhouse Garden Garden Highrise Townhouse Townhouse Highrise Garden Highrise Townhouse Garden Townhouse Garden Highrise Highrise Garden Garden Garden Garden Townhouse Garden 381376 v2 - 25 - The Boardwalk Portfolio Number of Units Net Rentable Square Footage Average Unit Size City/Province Property Name Building Type Vancouver, BC Braemar Court Apartments (Coquitlam, BC) California Gardens (Burnaby, BC) Gateway Place (Surrey, BC) Horizon Towers (Burnaby, BC) Surrey Village (Surrey, BC) Windsor, ON Anchorage Apartments Anchorage on the Park Askin Tower Buckingham Tower Caron Tower Empress Court Apartments Frances Tower Glenwood Apartments Janisse Tower Karita Tower Lauzon Towers Marine Court Randal Court Regency Colonade Riverdale Manor Rivershore Tower Apts Sandilands Tower Sandwich Tower Seaway Tower Sun Crest Tower Sun Ray Manor Tecumseh Eastview Apts. (Tecumseh, ON) University Tower Other Boardwalk Park Estates 2 (Grande Prairie, AB) Parkview Portfolio (Grande Prairie, AB) Prairie Sunrise Portfolio (Grande Prairie, AB) Elk Valley Estates (Banff, AB) Tower Lane I & II (Airdrie, AB) Springwood Place Apartments (Spruce Grove, AB) Sturgeon Point Villas (St. Albert, AB) Townhouse Garden Walk-up/Highrise Garden Garden Low Rise Walk-up 32 369 275 76 163 160 280 30,210 306,850 228,592 53,340 130,920 122,640 284,953 944 832 831 702 803 767 1,018 Highrise Townhouse Highrise Highrise Highrise Garden Highrise Highrise Highrise Highrise Highrise Highrise Garden Highrise Townhouse Highrise Highrise Highrise Highrise Highrise Highrise Highrise Highrise 135 31 60 34 47 40 53 33 75 41 178 68 47 133 97 96 47 66 152 58 41 98 50 1,680 110,245 38,750 39,675 30,805 36,947 28,250 43,906 25,619 45,000 28,950 137,784 49,206 38,775 113,205 77,850 63,300 38,775 40,650 112,037 43,100 29,950 71,606 36,100 1,280,485 817 1,250 661 906 786 706 828 776 600 706 774 724 825 851 803 659 825 616 737 743 730 731 722 762 Townhouse Walk-up Townhouse Highrise Highrise 105 79 133 206 266 789 106,350 82,670 136,925 139,160 162,371 627,476 1,013 1,046 1,030 676 610 795 381376 v2 - 26 - The Boardwalk Portfolio Number of Units Net Rentable Square Footage Average Unit Size City/Province Property Name Building Type Christie Point Apartments (Victoria, BC) Parkwest Apartments (Victoria, BC) Ridgemont Apartments (Coquitlam, BC) Kings Tower (Kitchener, ON) Westheights Place (Kitchener, ON) Habitat du Lac Leamy (Gatineau, QC) Townhouse/Walk-up Low Rise Low Rise Highrise Highrise Highrise 161 96 41 226 103 321 2,303 36,785 155,405 71,540 25,980 171,100 91,920 204,055 1,877,505 31,094,037 965 745 634 757 892 636 815 845 Total - As at Dec 31, 2008 * * Excludes the 90 unit property in Calgary, Alberta, that was converted into condominiums for sale. 1 Highrise – A multi-storey (usually ten or more) residential building, typically with an elevator Midrise – A multi-storey (usually six to nine) residential building, typically with an elevator Townhouse – One of several single family homes (sometimes called rowhouses) joined by common walls Garden – A walk-up or lowrise (usually between three and 5 storey) apartment building, typically without an elevator None of the residential properties in the Contributed Assets' portfolio accounts for 10 percent or more of the combined reportable revenue of Boardwalk REIT. STRATEGY FOR GROWTH The strategy of Boardwalk REIT is to provide Unitholders with a stable and growing return on their investment through participation in distributions of cash flow from a revenue producing real property portfolio that is diversified by geographic location. Boardwalk REIT can best achieve its goal by strategically: 1. 2. 3. 4. 5. 6. 7. 8. 9. Maximizing customer satisfaction by providing an above-average level of service and product; Acquiring selected multi-family residential properties; Selling properties with lower future growth prospects or condominium converting properties and the reinvesting of these funds back into other accretive opportunities or Trust Units on the open market; Purchasing Trust Units on the open market; Enhancing property values, operating returns and cash flows through pro-active management, stabilization and capital improvements; Review and consideration of the development of new selective multi-family projects on excess density currently existing on the Trust's properties, if the economics warrant; Managing capital prudently while maintaining a conservative financial structure; Pursuing opportunities to form selective partnerships or joint ventures; and Reinvestment of released equity from asset sales back into the Trust's portfolio to create additional value added opportunities. Maximizing Customer Satisfaction Boardwalk REIT feels the best way to increase long-term Unitholder value is to provide its customers with an above average level of service and a high quality product and, in return, to receive a competitive market 381376 v2 - 27 rent. Boardwalk REIT offers its tenants 24 hour on call maintenance service as well as on-site managers, in addition to a 24-hour, seven day a week toll-free call centre. Boardwalk REIT's properties are of high quality and, in most cases, recently renovated. During the 12 months ended December 31, 2008, Boardwalk REIT spent an aggregate of approximately $88.3 million (during the fiscal year ended December 31, 2007 - $71.5 million) for renovations to its existing building portfolio. Boardwalk REIT continues to review its existing portfolio and, where appropriate, reviews and budgets the required funds for selective value added upgrades. Boardwalk REIT has also begun the process of developing strategic partnerships with key vendors designed to provide additional value added services to Boardwalk REIT customers. Acquiring Selected Multi-Family Residential Properties Boardwalk REIT seeks to expand its property portfolio by continuing to acquire multi-family residential properties within Canada. Future real property acquisitions will be subject to specific investment guidelines and the operation of Boardwalk REIT and its subsidiaries is subject to specific operating policies, as described elsewhere in this AIF. The Trustees are responsible for the general control, direction and management of Boardwalk REIT and have determined that in evaluating a potential acquisition the Trust’s investment priorities should be based on the following;. 1. the target asset must be located in Canada; 2. the target asset must be an Apartment; 3. the overall all anticipated return from the target asset must be Risk Adjusted; 4. the target asset must be located in a Major Market; 5. the Apartment must be Well Located; and 6. the Apartment must be of a Better Quality. To further assist in the interpretation of the above noted investment criteria the following enhanced interpretations are provided. Apartment - a structure that has a roof and walls that stands permanently in one place; Risk Adjusted – a focus on investments where anticipated returns are justified given the risk associated with the investment... The Risk Adjusted rate is adjusted internally on an ongoing basis. Major Centres – Markets that have a solid growth economy and have sufficient apartment stock to develop economies of scale of a minimum of 1000 apartment units. Well Located – in areas of Major Centres that command higher than average rents. Better Quality Assets – The asset has no functional obsolescence, (i.e. a good unit mix, good common areas, strong construction specifications) During the 12 months ended December 31, 2008, the Trust acquired 298 (during the fiscal year ended December 31, 2007 – 2,421) residential property units. These acquisitions helped increase the Trust's overall portfolio diversification, thus lowering its overall exposure to economic risk. Through these and prior acquisitions, Boardwalk REIT has established a significant presence in over 20 major cities across Canada. Sale of Properties A part of the Trust's operations consists of the sale of selective properties. The number and type of property sales will be driven by a number of sale criteria that include but are not limited to: • The property or a market is determined to be “mature” with continued limited upside as compared to other investment opportunities. 381376 v2 - 28 • • Market forces, in some economic environments, which create an opportunity to sell assets at values in excess of the existing value of the Trusts overall implied market value On a selective basis, the Trust may determine that, rather then the outright sale of a selective property, it may be in its best interest to convert an existing property, subject to the requirements of applicable law, including applicable tax law governing income trusts, to individual condominium units and, subsequently, sell these units on an individual basis. Joint Venture opportunities where the Trust contributes management services and selected assets in exchange for cash and a reduced ownership. • As part of this strategy, equity released by these sales would be channelled to more accretive opportunities such as, but not limited to, the acquisition of other apartment units, the continued capital upgrade of the remaining property portfolio or the acquisition of the Trust’s REIT Units or other securities trading in the public market. The Trust is currently in the final stages of converting and selling one of its properties consisting of 90 apartment units in Calgary known as Century Towers. As of December 31, 2008, the Trust has sold 89 of such units for total gross proceeds of $29.2 million. Enhancing Property Values Boardwalk REIT enhances the value of its properties through effective leasing and property management and by strictly controlling operating expenses and capital expenditures. This combination of factors results in lower vacancy levels and the maximization of effective rental rates as expiring leases are renewed or new leases are signed. Average vacancy rate for the year ended December 31, 2008 of the Trust's existing rentable properties was 4.91% (December 31, 2007 – 4.29%). Boardwalk REIT's strategic innovations are designed to maximize cash flow and include portfolio-wide centralization of purchasing of materials and services to take advantage of economies of scale as well as a retail specialization leasing program. Portfolio Vacancy Rates Annual Comparative Q4 2008 Calgary Edmonton Kitchener London Other Alberta Regina Saskatoon Windsor Montreal Quebec City Gatineau Vancouver Verdun Victoria Total 5.06% 4.74% 1.32% 4.79% 7.61% 2.23% 5.76% 10.11% 3.34% 1.46% 2.19% 3.05% 3.53% 3.37% 4.68% Q3 2008 3.12% 5.18% 4.05% 4.66% 9.57% 4.19% 2.10% 9.38% 3.61% 2.22% 4.06% 2.85% 3.04% 4.02% 4.58% Q2 2008 4.10% 6.08% 3.14% 4.10% 7.49% 3.19% 1.39% 7.89% 4.37% 3.05% 4.27% 3.94% 2.53% 2.72% 4.74% Q1 2008 6.32% 7.02% 2.03% 4.16% 6.04% 5.42% 1.64% 7.95% 5.72% 3.82% 1.67% 4.34% 3.55% 2.98% 5.65% TOTAL 4.63% 5.75% 2.63% 4.43% 7.68% 3.76% 2.72% 8.83% 4.26% 2.64% 3.05% 3.54% 3.16% 3.27% 4.91% Q4 2007 5.58% 4.78% 1.52% 4.26% 6.60% 3.77% 1.19% 7.50% 5.65% 3.70% 1.88% 4.70% 3.82% 2.72% 4.68% Q3 2007 3.34% 3.24% 3.14% 4.98% 8.01% 3.33% 0.97% 8.05% 4.96% 3.68% 4.79% 4.30% 3.60% 4.93% 3.93% Q2 2007 3.14% 3.36% 3.14% 3.77% 7.25% 3.88% 2.58% 8.15% 4.26% 4.56% 7.60% 4.90% 5.04% 6.61% 4.16% Q1 2007 4.03% 3.54% 3.75% 4.47% 4.50% 3.29% 1.21% 7.95% 4.92% 5.68% 10.00% 5.18% 6.55% 5.84% 4.39% TOTAL 4.03% 3.75% 2.89% 4.37% 6.64% 3.57% 1.49% 7.91% 4.95% 4.40% 6.07% 4.77% 4.75% 5.03% 4.29% 381376 v2 - 29 Boardwalk REIT strives to acquire, develop or retain assets in those markets that demonstrate positive economic prospects. Boardwalk REIT continues to focus on markets that are typified by strong economic outlook and relatively low vacancy rates. In the multi-family residential sector, the markets in which Boardwalk REIT operates have experienced little new construction in recent years. With aggressive leasing efforts and a diversified portfolio, management believes that Boardwalk REIT is well-positioned to continue to expand to other Canadian regions in the future. A significant portion of the Trust's rentable portfolio is located in the Province of Alberta, with 54% of its total units as at December 31, 2008. Alberta has led Canada's economic and job growth over the past five years, and economists are projecting that Alberta, along with British Columbia and Saskatchewan, will continue to show one of the highest GDP and population growth rates over the next several years. The Conference Board of Canada is projecting that Calgary and Edmonton, Boardwalk REIT's two largest markets, along with Saskatoon, another important market for Boardwalk REIT, will continue to rank among the top cities for economic growth in the country through 2009. These positive developments bode well for the Western Canadian economy and, as a result, Boardwalk REIT views these and other markets as providing long-term strategic opportunities. New Apartment Development Boardwalk REIT continues to explore the possibility of developing new multi-family product in select markets in cities where its existing portfolios exist. . At this time, the Trust is focusing on selected properties that feature excess density in Calgary and Edmonton. Boardwalk REIT continues to explore this opportunity. However, given the current underlying economic conditions in these markets, the development of new multi family rental projects are not warranted on a risk adjusted basis. The Trust continues on a selective basis to explore density intensification and financial feasibility, as well as design and permitting. Though Boardwalk REIT is optimistic about this potential, it is important to note that to obtain the estimated maximum density, it will be necessary to demolish existing rental units. It is the Trust's belief that the key to this development is to find the optimal trade-off between maximizing density and retaining as much of the existing rental stock as possible. Normal Course Issuer Bid In the third quarter of fiscal 2008, Boardwalk REIT filed an application to renew its Normal Course Issuer Bid (the "Bid"), which received regulatory approval from the Toronto Stock Exchange on August 18, 2008. The Bid allows Boardwalk REIT to purchase and cancel up to 4,040,192 REIT Units, representing 10% of the public float of its REIT Units at the time of the TSX approval. The Bid will terminate on the earlier of one year from the date of renewal of the Bid on August 19, 2009, or at such time as purchases under the Bid are complete. Under the Bid, the Trust purchased and cancelled 646,000 REIT Units between August 20, and December 31, 2008, at an average price of $31.15 per REIT Unit, representing a total purchase cost of approximately $20.1 million. From August 17, 2007 to August 16, 2008, the Trust purchased and cancelled 2,522,447 REIT Units, at an average price of $41.18 per REIT Unit, representing a total purchase cost of approximately $103.9 million. From August 17, 2007 until December 31, 2008, Boardwalk REIT cumulatively purchased and cancelled 3,168,447 REIT Units at an average price of $39.13 per Unit, representing a total purchase cost of approximately $124.0 million. Boardwalk REIT continues to believe that one of the best investments it can make is to purchase its REIT Units at current levels. Managing Capital Boardwalk REIT finances its real properties and activities with a combination of long-term fixed rate debt financing, both secured and unsecured, cash flow generated from continuing operations, and the selective sale of properties and drawings under lines of credit. 381376 v2 - 30 Boardwalk REIT's operating strategy must be complemented by a capital strategy designed to maximize return on Unitholder's equity. Boardwalk REIT's objective is to ensure in advance that there are ample capital resources to allow it to exploit opportunities quickly, rather than securing funding for each specific investment on a case-by-case basis. Boardwalk REIT believes that this approach provides it with a competitive advantage in negotiations for acquisitions and developments. Boardwalk REIT's capital strategy is: (a) (b) (c) to establish a working capital and acquisition line of capital to ensure liquidity to fund growth; to employ an appropriate degree of leverage during the broad based recovery in the real estate industry; to actively manage its exposure to interest rate volatility through the use of fixed long-term rate debt the majority of which is insured with National Housing Act (Canada) ("NHA") insurance managed by CMHC; and to the extent that the Trustees determine to seek additional capital, to raise such capital through public offerings of equity or debt. (d) To facilitate acquisitions, the Corporation arranged a demand facility with a major financial institution in May of 1998. This Committed revolving credit facility was in the form of an operating and acquisition line up to a maximum of $100 million. Effective January 26, 2007, Boardwalk REIT completed negotiations to set up a new committed revolving credit facility with the same financial institution on substantially similar terms to the one arranged by the Corporation as described above, with the exception that such facility is an operating and acquisition line for up to a maximum of $200 million. Under such facility, the Trust has pledged assets sufficient to obtain an existing facility of $200 million. Security for this facility consists of first and second charges on a pool of property assets. The facility carries two levels of interest ranging from the lending institution's prime rate of interest ("Prime"), to prime plus 1.0% and all outstanding operating line amounts will have to be repaid on or before the contractual term maturity date, which is July 29, 2009. To assist in the managing of the Trust's exposure to interest rate volatility, Boardwalk REIT's management is constantly reviewing its existing mortgage debt portfolio. The purpose of this review is to ensure that Boardwalk REIT has varying maturity dates for its debts so as to lower the Trust's exposure to the interest rate fluctuations in any particular period. In addition, the Trust is constantly monitoring existing market facilities in order to determine whether existing demand facilities should be converted to longer-term fixed rate mortgages. In the first half of fiscal 2007 and the latter half of fiscal 2008, the Trust was successful in taking advantage of the lower interest rate environment. Since August 2007, the subprime crisis in the Unites States resulted in an extremely volatile borrowing environment, with bond yields fluctuating dramatically, and interest spreads increasing due to the lack of liquidity. For the most part, however, the Trust's cost of borrowing remained accretive during this period when compared to the existing maturing interest rates. Due to the size and diversity of its existing debt portfolio, the Corporation had elected, prior to the Acquisition and the Arrangement, to typically refinance maturing loans for terms of one to five years. These terms balance well with the maturity dates of the other mortgages, and as such lower Boardwalk REIT's overall interest rate risk during any one particular year. 2008 marked the first year the Trust entered into forward hedging strategies with respect to its upcoming mortgage interest obligations. The strategy consisted of hedging, or locking in, the interest rates on the underlying bonds used to set mortgage interest rates while layering an interest rate swap on top of this to reduce overall interest rates and variability in cash flows from fluctuating interest rates. To date, the Trust has found that, due to existing credit conditions in the market, this appears to be the strategy that results in lower overall interest rates. In the beginning of 2008, the Trust entered into a forward bond transaction (the “Transaction”) with a major Canadian financial institution. In total, the Transaction, which is comprised of bond forward contracts on specific mortgages set to mature and to be renewed in 2008, was for a total nominal amount of $101.6 million 381376 v2 - 31 with a weighted average term and interest rate of 7.2 years and 3.63%, respectively. Subsequent to entering into this Transaction, the Trust initiated changes to the terms of one of the contracts, with a nominal amount of approximately $21.8 million, and negotiated a settlement loss of $100 thousand related to these changes. Boardwalk REIT assessed this one particular bond forward contract as no longer being an effective hedge and payment of this $100 thousand settlement loss was included as part of the financing costs in the quarter ended March 31, 2008. During the second quarter ended June 30, 2008, the remaining bond forward contracts in the transaction were settled. Except for one of the contracts, all remaining contracts were assessed to be ineffective hedges and the net settlement loss of $168 thousand was included in financing costs for the quarter. The bond forward contract assessed to be an effective hedge was settled for a loss of $284 thousand, which will be amortized over the term of the new financing. During the first quarter of 2008, Boardwalk REIT entered into an interest rate swap agreement on the mortgages of specific properties within its portfolio in an effort to hedge the variability in cash flows attributed to fluctuating interest rates. These interest rate swap agreements were designated as cash flow hedges on March 11, 2008. The effective date of the hedges was May 1, 2008, and will continue to be designated as such until the date of maturity on May 1, 2015. Boardwalk REIT has determined that there is no ineffectiveness in the hedging of its interest rate exposure. The effectiveness of the hedging relationship will be reviewed on a quarterly basis and measured at fair value. Any gains or losses which arise as a result of the “effectiveness” of the hedge will be recognized in Other Comprehensive Income (“OCI”). The ineffective portion of the hedging gain or loss on the swap transaction will be recognized immediately in net earnings. On recognition of the financial liability of the hedged item on the balance sheet, the associated gains or losses that were recognized in OCI will be reclassified into net earnings in the same period or periods during which the interest payments of the hedged item affect net earning. However, if all or a portion of the net loss recognized in OCI will not be recovered in one or more future periods, this amount will be immediately reclassified into net earnings. Settlements on both the fixed and variable portion of the interest rate swaps will occur on a monthly basis. The fixed interest rate has been set at 4.15%, plus a stamping fee of 0.25%, while the total amount of mortgage debt subject to the interest rate swaps is $91.5 million. As at December 31, 2008, the interest rate swap agreement was assessed to be an effective hedge and, consistent with the previous quarter, any gains or losses on the interest rate swap agreement were recognized in earnings in the periods during which the interest payments on the hedged items were recognized. Boardwalk REIT's Debt Maturity Chart Principal Outstanding as December 31, 2008 295,426,113 407,162,812 212,832,524 814,666,782 272,459,623 15,968,437 184,369,241 25,033,444 6,507,534 10,674,161 3,482,477 2,248,583,148 Year 2009 2010 2011 2012 2013 2014 2015 2016 2018 2019 2020 Total Principal Outstanding Weighted Average Interest Rate by Maturity 5.22% % of Total 13.14% 18.11% 9.47% 36.23% 12.12% 0.71% 8.20% 1.11% 0.29% 0.47% 0.15% 4.77% 5.67% 4.78% 4.56% 4.81% 4.52% 5.34% 6.18% 5.99% 7.24% 4.83% 100.00% 381376 v2 - 32 Pursuing Partnerships or Joint Ventures As part of the Trust's overall growth strategy, Boardwalk REIT is reviewing the possibility of forming joint venture partnerships with a select group of investors, whereby Boardwalk REIT would manage the assets as well as have an equity interest in any opportunity. Any joint venture partnerships of Boardwalk REIT are limited by the investment guidelines in the Declaration of Trust. See "Investment Guidelines and Operating Policies of Boardwalk REIT – Investment Guidelines" below. INVESTMENT GUIDELINES AND OPERATING POLICIES OF BOARDWALK REIT Investment Guidelines Pursuant to the Declaration of Trust, and notwithstanding anything contained in the Declaration of Trust to the contrary, the assets of Boardwalk REIT may be invested only, and Boardwalk REIT shall not permit the assets of any subsidiary to be invested otherwise than in accordance with the following investment guidelines (the "Investment Guidelines"): (a) Boardwalk REIT will focus its activities primarily on the acquisition, holding, maintaining, improving, leasing or managing of multi-unit residential revenue producing properties, and ancillary real estate ventures, including, but not limited to, condominium conversions and sales of properties in which the Trust has (or will have) an interest, as well as, subject to subparagraph (l) below, the development of raw land (including the financing thereof) for the purpose of carrying out the above noted activities ("focus activities"); (b) notwithstanding anything contained in the Declaration of Trust to the contrary, no investment will be made that would result in: (i) REIT Units being disqualified for investment by registered retirement savings plans, registered retirement income funds, registered education savings plans or deferred profit-sharing plans; (ii) Boardwalk REIT ceasing to qualify as a "mutual fund trust" or a "registered investment" for purposes of the Tax Act; or (iii) the Trust not qualifying as a "real estate investment trust", as defined in subsection 122.1(1) of the Tax Act, if as a consequence of the trust not so qualifying, the trust would be subject to tax on its taxable "specified investment flow-through" ("SIFT") trust distributions. (c) the Trust may, directly or indirectly, invest in a joint venture arrangement for the purposes of owning interests or investments otherwise permitted to be held by the Trust, provided that such joint venture arrangement contains terms and conditions which, in the opinion of the Trustees, are commercially reasonable, including without limitation such terms and conditions relating to restrictions on transfer and the acquisition and sale of the Trust's and any joint venturer's interest in the joint venture arrangement, provisions to provide liquidity to the Trust, such as buy-sell mechanisms, provisions that limit the liability of the Trust to third parties, and provisions that provide for the participation of the Trust in the management of the joint venture arrangement. For purposes of this provision, a joint venture arrangement is an arrangement between the Trust and one or more other persons ("joint venturers") pursuant to which the Trust, directly or indirectly, conducts an undertaking for one or more of the purposes set out above and in respect of which the Trust may hold its interest jointly or in common or in another manner with others either directly or through the ownership of securities of a corporation or other entity (a "joint venture entity"), including without limitation a general partnership, limited partnership or limited liability company; (d) unless otherwise permitted in the provisions of the Declaration of Trust setting out Boardwalk REIT's Investment Guidelines and except for temporary investments held in cash, deposits with a Canadian or U.S. chartered bank or trust company registered under the laws of a province of Canada, short-term 381376 v2 - 33 government debt securities or in money market instruments of, or guaranteed by, a Schedule I Canadian chartered bank maturing prior to one year from the date of issue, Boardwalk REIT, directly or indirectly, may not hold securities other than (i) currency or interest rate futures contracts for hedging purposes to the extent that such hedging activity complies with the Canadian Securities Administrator's National Instrument 81-102 or any successor instrument or rule; (ii) securities of a joint venture entity, or any entity formed and operated solely for the purpose of carrying on ancillary activities to any real estate owned (or to be owned) or developed (or to be developed), directly or indirectly, by Boardwalk REIT, or an entity wholly-owned (or to be wholly-owned), directly or indirectly, by Boardwalk REIT formed and operated solely for the purpose of holding and/or developing a particular real property or real properties; and (iii) securities of another issuer, including, but not limited to, a real estate investment trust, provided either (A) such securities derive their value, directly or indirectly, principally from real property, or (B) the principal business of the issuer of the securities is the ownership, development or operation, directly or indirectly, of real property, and provided in either case the entity whose securities are being acquired are engaged in a focus activity; (e) no investment will be made in a real property located in the United States unless Boardwalk REIT has obtained an opinion from legal counsel to the effect that the making of the investment (i) should not result in interest paid by any U.S. entity in which Boardwalk REIT, directly or indirectly, owns an interest to any affiliate of Boardwalk REIT ceasing to be deductible for U.S. federal income tax purposes or becoming subject to U.S. withholding tax and (ii) would not cause the REIT Units or Special Voting Units11, as the case may be, to be subject to tax under Part XI or cause the REIT Units or Special Voting Units, as the case may be, to be "foreign property" for the purposes of the Tax Act; (f) no investment will be made, directly or indirectly, in operating businesses unless such investment is through a corporation, limited partnership or trust; (g) notwithstanding any other provisions of the Declaration of Trust setting out Boardwalk REIT's Investment Guidelines, the securities of a reporting issuer in Canada may be acquired provided that: (i) the activities of the issuer are focused on focus activities; and (ii) in the case of any proposed investment or acquisition which would result in the beneficial ownership of more than 10% of the outstanding units of the securities issuer (the "acquired issuer"), the investment is made for the purpose of subsequently effecting the merger or combination of the business and assets of Boardwalk REIT and the acquired issuer or for otherwise ensuring that Boardwalk REIT will control the business and operations of the acquired issuer; (h) no investments will be made in rights to or interests in mineral or other natural resources, including oil or gas, except as incidental to an investment in real property; (i) the Trust may not invest in mortgages, mortgage bonds, Notes12 (other than Operating Trust Notes13) or debentures ("Debt Instruments") (including participating or convertible) unless the real property which is security therefore is real property which otherwise meets the Investment Guidelines, including, but not limited to, subparagraph (b) above, provided that, notwithstanding the foregoing, an investment may be made in Debt Instruments if the primary intention is to use such investment as ''Special Voting Unit'' means a unit of interest in Boardwalk REIT to be issued to the holders of LP Class B Units providing rights to vote as a Unitholder. 12 "Notes" means the promissory notes, bonds, debentures, debt securities or similar evidence of indebtedness issued by a person. 13 ''Operating Trust Notes'' means the Series 1 Notes and the Series 2 Notes. ''Series 1 Notes'' means the Series 1 Notes issued by the Operating Trust exclusively to Boardwalk REIT on May 3, 2004 in the principal amount of $640 million ''Series 2 Notes'' means the Series 2 Notes to be issued by the Operating Trust exclusively as full or partial payment of the Series 1 Notes and Operating Trust Units. 11 381376 v2 - 34 a method of acquiring control of a revenue producing real property which would otherwise be a permitted investment pursuant to the Investment Guidelines, including, but not limited to, subsection subparagraph (b) above; (j) notwithstanding paragraph (i) above, Boardwalk REIT may also invest in mortgages where: (i) the mortgage is a "vendor take-back" mortgage granted to Boardwalk REIT in connection with the sale by it of existing real property and as a means of financing the purchaser's acquisition of such property from Boardwalk REIT; (ii) the mortgage is interest bearing; (iii) the mortgage is registered on title to the real property which is security therefore; (iv) the mortgage has a maturity not exceeding five years; (v) the amount of the mortgage loan is not in excess of 85% of the selling price of the property securing the mortgage; and (vi) the aggregate value of these mortgages (including mortgages and mortgage bonds in which Boardwalk REIT is permitted to invest by virtue of paragraph (i) above, (after giving effect to the proposed investment, will not exceed 15% of Gross Book14 Value) calculated at the time of such investment); (k) subject to subparagraph (b) above, the Trust may invest directly in raw land for development provided such investment is through a corporation, limited partnership or trust established for the purpose of (i) the renovation or expansion of existing facilities that are capital property of the Trust, or (ii) the development of new facilities which will be capital property of the Trust; and (l) notwithstanding any other provisions of the Declaration of Trust, investments may be made which do not comply with the investment policy provisions of the Declaration of Trust provided (i) the aggregate cost thereof (which, in the case of an amount invested to acquire real property, is the purchase price less the amount of any indebtedness assumed or incurred in connection with the acquisition and secured by a mortgage on such property) does not exceed 15% of the Adjusted Unitholders' Equity15 and (ii) the making of such investment would not contravene subparagraph (b) above. Pursuant to the Declaration of Trust, the investment guidelines set forth above may only be amended with the approval of at least 66 2/3% of the votes cast at a meeting of Unitholders called for that purpose. ''Gross Book Value'' means, at any time, (A)(i) the book value of the assets of Boardwalk REIT and its subsidiaries, shown on its then most recent publicly-issued consolidated balance sheet, plus the amount of accumulated depreciation and amortization shown thereon or the notes thereto; plus (ii) an additional amount of $410 million; plus (iii) if Boardwalk REIT is required to record the value of the Contributed Assets at their carrying values, instead of their exchange values, on its consolidated balance sheet, then Gross Book Value shall be calculated as in (i) above together with a one time addition equal to the difference between the Entity Value and the net book value of the assets of the Corporation and its subsidiaries, as shown on its then most recent publicly-issued consolidated balance sheet as of the Effective Date (which is equal to $231 million), plus the amount of deferred taxes shown thereon or in the notes thereto, plus an additional amount of $410 million; or (B) if approved by a majority of the Trustees, the appraised value of the assets of Boardwalk REIT and its subsidiaries. ''Entity Value'' means the amount determined by multiplying the total number of REIT Units issued and outstanding (on a fully-diluted basis, including without limitation REIT Units issuable on the exchange of LP Class B Units) by the 10 day weighted average trading price of the REIT Units on the TSX for the 10 trading days immediately following the Effective Date, which amount was $15.95 per Unit for a total of $849 million. 15 For a definition of "Adjusted Unitholder's Equity", please see the definition under the heading "Description of Other Securities and Ratings –Senior Unsecured Debentures – Definitions – "Adjusted Unitholder's Equity". 14 381376 v2 - 35 Operating Policies The Declaration of Trust provides that the operations and affairs of Boardwalk REIT will be conducted in accordance with the following policies and that Boardwalk REIT will not permit any subsidiary to conduct its operations and affairs other than in accordance with the following policies: (a) the construction and/or development of real property (including the financing thereof) may be engaged in order to maintain its real properties in good repair or to enhance the revenue-producing potential of real properties in which it has, or will have, an interest; (b) except for properties encumbered by the Retained Debt, title to each real property shall be held by and registered in the name of the Partnership, the General Partner or a corporation or other entity wholly-owned indirectly by Boardwalk REIT or jointly owned indirectly by Boardwalk REIT with joint venturers; provided, that where land tenure will not provide fee simple title, the Partnership, the General Partner or a corporation or other entity wholly-owned, directly or indirectly by the Partnership or jointly owned, directly or indirectly, by Boardwalk REIT with joint venturers shall hold a land lease as appropriate under the land tenure system in the relevant jurisdiction; (c) no indebtedness shall be incurred or assumed if, after giving effect to the incurring or assumption thereof of the indebtedness, the total indebtedness as a percentage of Gross Book Value would be more than 70% for indebtedness, including amounts drawn under the acquisition facility; (d) the Trust may, directly or indirectly, guarantee indebtedness or liabilities of a third party, provided that such guarantee is related to the direct or indirect ownership or acquisition by the Trust of real property that would otherwise comply with the investment restrictions and operating guidelines set out in the Declaration of Trust; (e) except for the Contributed Assets acquired pursuant to the Master Asset Contribution Agreement, an engineering survey or physical review by an experienced third party consultant will be obtained for each real property intended to be acquired with respect to the physical condition thereof; (f) at all times insurance coverage will be obtained and maintained in respect of potential liabilities of Boardwalk REIT and the accidental loss of value of the assets of Boardwalk REIT from risks, in amounts and with such insurers, in each case as the Trustees consider appropriate, taking into account all relevant factors including the practices of owners of comparable properties; (g) except for the Contributed Assets acquired pursuant to the Master Asset Contribution Agreement, a Phase I environmental audit shall be conducted for each real property to be acquired and, if the Phase I environmental audit report recommends that further environmental audits be conducted, such further environmental audits shall be conducted, in each case by an independent and experienced environmental consultant; and (h) at least 8.5% of gross consolidated annual rental revenues generated from properties where the associated mortgage financing is insured by CMHC ("insured properties") as determined pursuant to GAAP shall be expended annually on sustaining capital expenditures, repairs and maintenance, all determined on a portfolio basis for all insured properties. For this purpose, capital expenditures and repairs and maintenance include all onsite labour costs and other expenses and items associated with such capital expenditures, repairs and maintenance. Pursuant to the Declaration of Trust, the operating policies set forth above may only be amended with the approval of a majority of the votes cast at a meeting of Unitholders called for that purpose. 381376 v2 - 36 DECLARATION OF TRUST AND DESCRIPTION OF REIT UNITS Boardwalk REIT has been established under the Declaration of Trust for an indeterminate term. The following is a summary, which does not purport to be complete, of certain terms of the Declaration of Trust and the REIT Units. A copy of the Declaration of Trust may be accessed on SEDAR (www.sedar.com). The Declaration of Trust authorizes the issuance of an unlimited number of two classes of units of Boardwalk REIT: REIT Units and Special Voting Units. The Special Voting Units may only be issued to holders of, and are not transferable separately from, the LP Class B Units to which they relate. REIT Units Each REIT Unit represents an undivided beneficial interest in Boardwalk REIT and in distributions made by Boardwalk REIT, whether of net income, net realized capital gains or other amounts and, in the event of liquidation, winding-up or other termination of Boardwalk REIT, in the net assets of Boardwalk REIT remaining after the satisfaction of all liabilities. No REIT Unit has preference or priority over any other. The REIT Units are issued as fully paid and non-assessable and are freely transferable, subject to applicable securities regulatory requirements. Each REIT Unit entitles the holder thereof to one vote for each whole REIT Unit held at all meetings of Unitholders. Except as set out under the sub-headings "Issuance of REIT Units" and "REIT Unit Redemption Right" below, the REIT Units have no conversion, retraction, redemption or pre-emptive rights. Issued and outstanding REIT Units may be subdivided or consolidated from time to time by the Trustees with the approval of a majority of the Unitholders. Unitholder approval will not be required for an automatic consolidation as described in the section entitled "Distribution Policy" below. No certificates will be issued for fractional REIT Units and fractional REIT Units will not entitle the holders thereof to vote at, receive notice of or attend meetings of Unitholders, except to the extent such fractional REIT Units represent in the aggregate one or more whole REIT Units. The REIT Units are not "deposits" within the meaning of the Deposit Insurance Corporation Act (Canada) and are not insured under the provisions of such Act or any other legislation. Furthermore, Boardwalk REIT is not a trust company and, accordingly, is not registered under any trust and loan company legislation as it does not carry on nor intend to carry on the business of a trust company. Special Voting Units The Declaration of Trust provides for the issuance of an unlimited number of Special Voting Units that will be used to provide voting rights with respect to Boardwalk REIT to persons holding LP Class B Units or other securities that are, directly or indirectly, exchangeable for REIT Units. BEI Subco is currently the owner, through its direct ownership of all of the issued and outstanding LP Class B Units, of all of the issued and outstanding Special Voting Units. The Special Voting Units are not transferable separately from the LP Class B Units to which they relate. The Special Voting Units will automatically be transferred upon a transfer of the corresponding LP Class B Units. In addition, as LP Class B Units are surrendered for REIT Units and are no longer outstanding, the corresponding Special Voting Units will be automatically redeemed by Boardwalk REIT for $0.0000001 per each Special Voting Unit cancelled and shall no longer be outstanding. Each Special Voting Unit entitles the registered holder thereof to the number of votes at any meeting of Unitholders or in respect of any written resolution of Unitholders which is equal to the number of REIT Units which may be obtained upon the surrender of the LP Class B Unit to which the Special Voting Unit relates. The Special Voting Units do not entitle or give any rights to the holders thereof to receive distributions or any amount upon liquidation, dissolution or winding-up of Boardwalk REIT. Holders of Special Voting Units are not entitled to receive a certificate or other written instrument evidencing ownership of such units. 381376 v2 - 37 Issuance of REIT Units The Trustees may allot and issue REIT Units at such time or times and in such manner (including pursuant to any distribution reinvestment plan of Boardwalk REIT) and to such person, persons or class of persons as the Trustees in their sole discretion shall determine. The price or the value of the consideration for which REIT Units may be issued and the terms and conditions of issuance of the REIT Units shall be determined by the Trustees in their sole discretion, generally (but not necessarily) in consultation with investment dealers or brokers who may act as underwriters in connection with offerings of REIT Units. In the event that REIT Units are issued in whole or in part for a consideration other than money, the resolution of the Trustees allotting and issuing such REIT Units shall express the fair equivalent in money of the other consideration received. Boardwalk REIT may create and issue rights, warrants or options to subscribe for fully-paid REIT Units which rights, warrants or options may be exercisable at such subscription price or prices and at such time or times as the Trustees may determine. The rights, warrants or options so created may be issued for such consideration or for no consideration, all as the Trustees may determine. A right, warrant or option shall not be a REIT Unit and a holder thereof shall not be a Unitholder. Purchase of REIT Units Boardwalk REIT may at any time or from time to time purchase for cancellation all or part of the outstanding REIT Units at a price per REIT Unit and on a basis determined by the Trustees in accordance with applicable securities legislation and the applicable rules of the stock exchange(s) on which the REIT Units are listed. REIT Unit Redemption Right REIT Units are redeemable at any time, in whole or in part, on demand by the holders thereof by sending a notice to Boardwalk REIT at its head office in a form approved by the Trustees and completed and executed in a manner satisfactory to the Trustees, who may require supporting documentation as to identity, capacity or authority. A Unitholder not otherwise holding a fully registered REIT Unit certificate who wishes to exercise the redemption right will be required to obtain a redemption notice from his or her investment dealer or other intermediary who will be required to deliver the completed redemption form to Boardwalk REIT. Upon receipt by Boardwalk REIT of a written redemption notice and other documents that may be required, all in a manner satisfactory to the Trustees, a holder of REIT Units shall cease to have any rights with respect to the tendered REIT Units (other than to receive the redemption payment therefor), including any right to receive any distributions thereon which are declared payable to the Unitholders of record on a date which is subsequent to the day of receipt of the redemption notice by Boardwalk REIT and the holder thereof shall be entitled to receive a price per REIT Unit (the "Redemption Price") equal to the lesser of: (a) 90% of the "market price" of the REIT Units on the principal market on which the REIT Units are quoted for trading on the trading day prior to the day on which the REIT Units were surrendered to Boardwalk REIT for redemption (the "Redemption Date"); and (b) 100% of the "closing market price" of the REIT Units on the principal market on which the REIT Units are quoted for trading on the Redemption Date. For the purposes of this calculation, "market price" in respect of REIT Units will be an amount equal to the 20-day daily volume weighted average of the closing price of the REIT Units for each of the trading days on which there was a closing price; provided that if the applicable exchange or market does not provide a closing price, but only provides the highest and lowest prices of the REIT Units traded on a particular day, the "market price" shall be an amount equal to the average of the highest and lowest prices for each of the trading days on which there was a trade; and provided further that if there was trading on the applicable exchange or market for fewer than five of the 20 trading days, the "market price" shall be the average of the following prices established for each of the 20 trading days: (i) the average of the last bid and last asking prices of the REIT Units for each day on which there was no trading; (ii) the closing price of the REIT Units for each day on which there was trading if 381376 v2 - 38 the exchange or market provides a closing price; and (iii) the average of the highest and lowest prices of the REIT Units for each day that there was trading if the exchange or market does not provide a closing price but provides only the highest and lowest prices of the REIT Units traded on a particular day. The "closing market price" in respect of REIT Units shall be (i) an amount equal to the closing price of the REIT Units if there was a trade on the date and the exchange or market provides a closing price; (ii) an amount equal to the average of the highest and lowest prices of the REIT Units if there was trading and the exchange or other market does not provide a closing price but provides only the highest and lowest trading prices of the REIT Units traded on a particular day; or (iii) the average of the last bid and last asking prices of the REIT Units if there was no trading on that date. If a Unitholder is not entitled to receive cash upon redemption of REIT Units as a result of the limitations in sub-paragraphs (b) and (c) below, the Redemption Price will be equal to the fair market value of the REIT Units as determined by the Trustees. The aggregate Redemption Price payable by Boardwalk REIT in respect of any REIT Units tendered for redemption during any calendar month shall be satisfied by way of a cheque drawn on a Canadian chartered bank or a trust company in Canadian funds, payable no later than the last day of the calendar month following the month in which the REIT Units were tendered for redemption, provided that the entitlement of Unitholders to receive cash upon the redemption of their REIT Units is subject to the limitations that: (a) the total amount payable by Boardwalk REIT in respect of such REIT Units and all other REIT Units tendered for redemption in the same calendar month shall not exceed $50,000, provided that the Trustees may, in their sole discretion, waive such limitation in respect of all REIT Units tendered for redemption in any particular calendar month; (b) at the time such REIT Units are tendered for redemption, the outstanding REIT Units shall be listed for trading or quoted on a stock exchange or market which the Trustees consider, in their sole discretion, provides representative fair market value prices for the REIT Units; and (c) the normal trading of outstanding REIT Units is not suspended or halted on any stock exchange on which the REIT Units are listed for trading or, if not so listed, on any market on which the REIT Units are quoted for trading, on the Redemption Date for the REIT Units or for more than five trading days during the ten day trading period commencing immediately after the Redemption Date for the REIT Units. If a Unitholder is not entitled to receive cash upon the redemption of REIT Units as a result of the foregoing limitations in sub-paragraphs (b) and (c) above, then each REIT Unit tendered for redemption shall, subject to obtaining all applicable regulatory approvals, be redeemed by way of a distribution in specie of Series 2 Notes. The aggregate principal amount of such Series 2 Notes would be equal to the product of (i) the Redemption Price per unit of the REIT Units tendered for redemption; and (ii) the number of REIT Units tendered by such Unitholder for redemption. No Series 2 Notes in a principal amount of less than $100 will be transferred and, where the principal amount of Series 2 Notes to be received by the former Unitholder upon redemption, in specie, would otherwise include a principal amount of less than a multiple of $100, such principal amount will be rounded down to the next lowest multiple of $100 and the excess shall be paid in cash. The term of such notes will be 10 years, less a day, subject to earlier repayment at the option of Boardwalk REIT, and they would bear interest at a market rate determined by the trustees of the Operating Trust at the time of issuance thereof, payable on the 30th day of each calendar month that such Series 2 Notes are outstanding. In such circumstances, Series 1 Notes and Operating Trust Units will be redeemed. The Series 2 Notes issued by the Operating Trust will then be distributed in satisfaction of the Redemption Price of REIT Units. 381376 v2 - 39 If a Unitholder is not entitled to receive cash upon the redemption of REIT Units as a result of the limitation in sub-paragraph (a) above, the holder will receive a combination of cash and subject to obtaining all applicable regulatory approvals, Series 2 Notes, determined in accordance with the Declaration of Trust. It is anticipated that the redemption right described above will not be the primary mechanism for holders of REIT Units to dispose of their REIT Units. Operating Trust Notes which may be distributed to Unitholders in specie in connection with a redemption will not be listed on any stock exchange, no market is expected to develop and such securities may be subject to an indefinite "hold period" or other resale restrictions under applicable securities laws. The Operating Trust Notes so distributed may not be qualified investments for registered retirement savings plans ("RRSPs"), registered retirement income funds ("RRIFs"), registered education savings plans ("RESPs") or deferred profit sharing plans ("DPSPs"), depending upon the circumstances at the time. Special Voting Units will be cancelled for nominal consideration in the event of the surrender, exchange or sale to Boardwalk REIT of the related LP Class B Units. Meetings of Unitholders The Declaration of Trust provides that annual meetings of Unitholders shall be called and held at any place in Canada determined by the Trustees for the election of Trustees (other than the BPCL appointee), the appointment or changing of the auditors of Boardwalk REIT, the Operating Trust and the Partnership, and transacting such other business as the Trustees may determine or as may properly be brought before the meeting. The Trustees shall call and hold special meetings for the approval of amendments to the Declaration of Trust (except as described below under "Declaration of Trust and Description of REIT Units — Amendments to the Declaration of Trust and other Documents"), the sale of the assets of Boardwalk REIT as an entirety or substantially as an entirety (other than as part of an internal reorganization of the assets of Boardwalk REIT as approved by the Trustees) or the termination of Boardwalk REIT. The Trustees may submit to a vote of Unitholders any matter which they deem appropriate. Except with respect to the above-noted matters, or a vote to terminate Boardwalk REIT or such other matters submitted to a vote of Unitholders by the Trustees, no vote of the Unitholders will bind Boardwalk REIT or the Trustees in any way. Meetings of Unitholders will be called and held annually within 180 days after the end of the fiscal year of Boardwalk REIT for the election of the Trustees (except for the BPCL appointee) and appointment of auditors of Boardwalk REIT, the Operating Trust and the Partnership. The first annual meeting of Unitholders was held on May 10, 2005. The last annual meeting of Unitholders was on May 10, 2007. The Trustees have the power at any time to call special meetings of Unitholders at such time and place in Canada as the Trustees determine. Unitholders holding in the aggregate not less than five percent (5%) of the votes attaching to all outstanding REIT Units (on a fully diluted basis) may requisition the Trustees in writing to call a special meeting of Unitholders and the Trustees shall, subject to certain limitations, call a meeting of Unitholders for the purposes stated in the Unitholder 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 ABCA. Unitholders may attend and vote at all meetings of the Unitholders either in person or by proxy and a proxy holder need not be a Unitholder. Two persons present in person or represented by proxy and representing in the aggregate at least 10% of the votes attaching to all outstanding REIT Units (on a fully diluted basis) shall constitute a quorum for the transaction of business at all such meetings, provided that if Boardwalk REIT has only one Unitholder, such Unitholder present in person or by proxy constitutes a meeting and a quorum for such meeting. If no quorum is present at any meeting of Unitholders within 30 minutes after the time fixed for holding the meeting, the meeting, if convened on the requisition of Unitholders, will be dissolved and otherwise will be adjourned for not less than ten (10) days, and at the adjourned meeting, the Unitholders then present in person or represented by proxy will form the necessary quorum. 381376 v2 - 40 The Declaration of Trust contains provisions as to the notice required and other procedures with respect to the calling and holding of meetings of Unitholders. Limitation on Non-Resident Ownership In order for Boardwalk REIT to maintain its status as a mutual fund trust under the Tax Act, Boardwalk REIT must not be established or maintained primarily for the benefit of non-residents of Canada within the meaning of the Tax Act ("Non-Residents"). Accordingly, the Declaration of Trust provides that, notwithstanding any provision of the Declaration of Trust to the contrary, at no time may Non-Residents be the beneficial owners of more than 49% of the REIT Units or the Special Voting Units then outstanding. The Trustees may require declarations as to the jurisdictions in which beneficial owners of REIT Units are resident or declarations from Unitholders or holders of Special Voting Units as to whether such REIT Units or Special Voting Units, as the case may be, are held for the benefit of Non-Residents. If the Trustees become aware that the beneficial owners of 49% of the REIT Units or the Special Voting Units then outstanding are, or may be, Non-Residents or that such a situation is imminent, the Trustees may make a public announcement thereof and shall not accept a subscription for REIT Units or Special Voting Units, as the case may be, from or issue or register a transfer of REIT Units or Special Voting Units, as the case may be, to a person unless the person provides a declaration that he or she is not a Non-Resident and does not hold his or her REIT Units or Special Voting Units, as the case may be, for the benefit of a Non-Resident. If, notwithstanding the foregoing, the Trustees determine that 49% of the REIT Units or Special Voting Units then outstanding are beneficially owned by Non-Residents, the Trustees may send a notice to Non-Resident registered and beneficial holders of REIT Units or Special Voting Units, as the case may be, chosen in inverse order to the order of acquisition or registration or in such other manner as the Trustees may consider equitable and practicable, requiring them to sell or redeem their REIT Units or Special Voting Units, as the case may be, or a portion thereof within a specified period of not more than 60 days (unless the Canada Revenue Agency (the "CRA") has confirmed in writing that a longer period is acceptable). If the holders of REIT Units or Special Voting Units, as the case may be, receiving such notice have not sold or redeemed the specified number of REIT Units or Special Voting Units, as the case may be, or provided the Trustees with satisfactory evidence that they are not NonResidents and do not hold their REIT Units or Special Voting Units, as the case may be, for the benefit of a NonResident within such period, the Trustees may sell or redeem such REIT Units or Special Voting Units, as the case may be, on behalf of such Non-Resident holder of REIT Units or Special Voting Units, as the case may be, (and the Trustees shall have the power of attorney of such holders to do so) and, in the interim, the voting and distribution rights, if any, attached to such REIT Units or Special Voting Units, if any, as the case may be shall be suspended. Upon such sale, the affected holders shall cease to be holders of the REIT Units or Special Voting Units, as the case may be, and their rights shall be limited to receiving the net proceeds of sale upon surrender of such REIT Units or Special Voting Units, as the case may be. Amendments to the Declaration of Trust and Other Documents The Declaration of Trust may be amended or altered from time to time. Certain amendments (including the termination of Boardwalk REIT, an exchange, reclassification or cancellation of all or part of the REIT Units or Special Voting Units and the creation of new rights or privileges attaching to the REIT Units and Special Voting Units) require approval by at least 66 2/3% of the votes cast at a meeting of Unitholders called for such purpose. Other amendments to the Declaration of Trust require approval by a majority of the votes cast at a meeting of the Unitholders called for such purpose. The following amendments require the approval of at least 66 2/3% of the votes cast by all Unitholders entitled to vote thereon at a meeting called for that purpose: (a) an exchange, reclassification or cancellation of all or part of the REIT Units; 381376 v2 - 41 (b) the addition, change or removal of the rights, privileges, restrictions or conditions attached to the REIT Units, including, without limiting the generality of the foregoing, (i) the removal or change of rights to distributions; or (ii) the addition or removal of or change to conversion privileges, redemption privileges, voting, transfer or pre-emptive rights; (c) the creation of new rights or privileges attaching to certain of the REIT Units and Special Voting Units; and (d) any change to the existing constraints on the issue, transfer or ownership of the REIT Units and Special Voting Units. In addition, the Declaration of Trust provides that Boardwalk REIT will not agree to or approve any material change to the Limited Partnership Agreement, the Operating Trust Declaration of Trust16or the Exchange and Support Agreement without the approval of at least 66 2/3% of the votes cast at a meeting of Unitholders called for such purpose. However, no Unitholder approval is required to approve any change to the Limited Partnership Agreement for the purposes of providing a distribution reinvestment entitlement to holders of LP Class B Units that is substantially equivalent to that provided by the distribution reinvestment plan that Boardwalk REIT has adopted pursuant to which holders of REIT Units will be entitled to elect to have cash distributions in respect of such units automatically reinvested in additional REIT Units (the "Distribution Reinvestment Plan" or "DRIP") to holders of REIT Units. Furthermore, Boardwalk REIT may not agree to or approve any change to the provisions of the Declaration of Trust governing distributions on the REIT Units or Special Voting Units, or the rights and attributes of the LP Class A Units, LP Class B Units or LP Class C Units without the approval of at least 66 2/3% of the votes cast at any meeting of holders of REIT Units or Special Voting Units, as the case may be, called for that purpose. A majority of all Trustees, including a majority of the Independent Trustees, may, without the approval of the Unitholders, make certain amendments to the Declaration of Trust, including amendments: (a) for the purpose of ensuring continuing compliance with applicable laws (including the Tax Act), regulations, requirements or policies of any governmental authority having jurisdiction over (i) the Trustees or Boardwalk REIT; (ii) the status of Boardwalk REIT as a "mutual fund trust", "unit trust" and a "registered investment" under the Tax Act; or (iii) the distribution of REIT Units; (b) which, in the opinion of the Trustees, acting reasonably, are necessary to maintain the rights of the Unitholders set out in the Declaration of Trust; (c) to remove any conflicts or inconsistencies in the Declaration of Trust or to make minor corrections which are, in the opinion of the Trustees, necessary or desirable and not prejudicial to the Unitholders; (d) which, in the opinion of the Trustees, are necessary or desirable as a result of changes in taxation or other laws or the administration or enforcement thereof; (e) for any purpose (except one in respect of which a Unitholder vote is specifically otherwise required) which, in the opinion of the Trustees, is not prejudicial to Unitholders and is necessary or desirable; (f) deemed necessary or desirable to ensure that Boardwalk REIT has not been established nor maintained primarily for the benefit of persons who are not resident Canadians; and (g) to implement a distribution reinvestment plan or any amendments to such plan. 16 ''Operating Trust Declaration of Trust'' means the declaration of trust dated January 9, 2004, as amended and restated on May 3, 2004, establishing the Operating Trust. 381376 v2 - 42 In no event may the Trustees amend the Declaration of Trust if such amendment would (i) amend the provisions of the Declaration of Trust governing amendments to same; (ii) amend the Unitholders' voting rights; or (iii) cause Boardwalk REIT to fail or cease to qualify as a "mutual fund trust" or "registered investment" under the Tax Act or to be subject to tax under Part XI of the Tax Act or cause the REIT Units to constitute "foreign property" under the Tax Act. Stock Exchange Listings, Price Range and Trading Volume of REIT Units As at December 31, 2008, there were 49,002,042 REIT Units outstanding and 4,475,000 LP Class B Units issued and outstanding for a fully diluted REIT Unit capital of 53,477,042 REIT Units. The principal market for the Common Shares was, and for the REIT Units is, the TSX. The REIT Units are listed on the TSX under the symbol "BEI.UN." The REIT Units are not listed on the NYSE or elsewhere in the United States and are not registered under the United States Securities Exchange Act of 1934, as amended. The market price range and trading volume of the REIT Units on the TSX for the periods indicated are set forth in the following table: TSX Price per Common Share/ REIT Unit High Year ending December 31, 2008 January February March April May June July August September October November December Year ending December 31, 2009 January February (through February 13) $46.96 $40.97 $38.94 $41.83 $42.90 $42.54 $40.22 $39.84 $39.00 $35.38 $27.50 $25.82 $29.00 $28.59 $34.20 $36.00 $33.12 $37.15 $39.00 $36.85 $35.83 $35.75 $33.12 $22.58 $19.76 $21.00 $23.01 $25.91 3,086,259 4,401,709 3,845,551 3,659,917 2,858,333 3,562,105 3,141,932 2,110,087 3,071,028 5,104,877 4,617,682 3,347,658 2,798,560 998,504 Low Volume The closing price of the REIT Units on the TSX on February 13, 2009 was Cdn. $27.19. DESCRIPTION OF OTHER SECURITIES AND RATINGS Senior Unsecured Debentures On January 21, 2005, Boardwalk REIT completed an issuance of senior unsecured debentures (the "Debentures") in the principal amount of $120 million (the "Debenture Offering"). The Debentures were issued under, and qualified for resale by, Boardwalk REIT's short form prospectus dated January 14, 2005 (the "Prospectus"). The Debentures are rated "BBB" with a stable trend by Dominion Bond Rating Services and, since July 30, 2008, carry a coupon rate of 5.61%. The Debentures will mature on January 23, 2012. Prior to July 30, 2008, the Debentures carried a coupon rate of 5.31%. The interest rate on the Debentures was increased 381376 v2 - 43 effective July 30, 2008 as part of a series of amendments to the terms and conditions governing the Debentures effective the same date. The other amendments to such terms and conditions are summarized below: (a) an amendment to the definition of “Adjusted Gross Book Value” (defined below) to increase that amount by an aggregate of $410 million until Boardwalk REIT is required or elects to report the fair value of its and its subsidiaries’ assets on its publicly issued consolidated balance sheet in accordance with International Financial Reporting Standards (“IFRS”), which date will be on or before January 1, 2011, and, after such time, the definition of “Adjusted Gross Book Value” will mean the fair value of the assets of Boardwalk REIT and its subsidiaries as shown on the Trust’s then most recently publicly-issued consolidated balance sheet; amendments to increase the ratio of Consolidated EBITDA to Consolidated Interest Expense (both terms defined below) to 1.75 to 1 from the prior 1.50 to 1; and an amendment to decrease the Indebtedness Percentage (defined below) to 60% from the current 70% when Boardwalk REIT is required or elects to report the fair value of its and its subsidiaries’ assets on its publicly issued consolidated balance sheet in accordance with IFRS. (b) (c) The amendments to the terms and conditions governing the Debentures consisted of changing the definition of “Adjusted Gross Book Value” to increase that amount by an aggregate of approximately 31.54% of the difference between Boardwalk’s enterprise value of $4.11 billion and its book value of $2.81 billion, as of March 31, 2008, (not including the $231 million one time adjustment before amortization calculated using the prior (unamended) definition of Adjusted Gross Book Value). As of March 31, 2008, management calculates that Boardwalk’s Adjusted Gross Book Value equalled approximately $3.04 billion, 26.03% (or $1.07 billion) less than the enterprise value of the Trust as at March 31, 2008. This contrasts with an Adjusted Gross Book Value of $2.34 billion as of June 30, 2004, soon after the Effective Date of the Acquisition and Arrangement, and an enterprise value of $2.25 billion as of the same date. Accordingly, while enterprise value increased by 82.67% between June 30, 2004 and March 31, 2008, Adjusted Gross Book Value only increased by 29.91% between June 30, 2004 and March 31, 2008. The significant increase in enterprise value from $2.25 billion to $4.11 billion between June 30, 2004 and March 31, 2008 consisted of an increase in indebtedness from $1.41 billion on June 30, 2004 to $2.01 billion as of March 31, 2008, and a 171% increase in the market value of the Trust from $842 million to $2.10 billion between June 30, 2004 and March 31, 2008. Pursuant to the trust indenture governing the Debentures prior to the above noted amendments, Boardwalk REIT was limited to an indebtedness equal to 70% of Adjusted Gross Book Value, or indebtedness of $2.13 billion, based on an Adjusted Gross Book Value of $3.04 billion as of March 31, 2008. Boardwalk REIT’s current debt to Adjusted Gross Book Value was 66%, and 49% of enterprise value, as of March 31, 2008. The amendments approved by Debentureholders on July 30, 2008 decreased the Trust’s debt to Adjusted Gross Book Value to approximately 59% as of March 31, 2008, as Adjusted Gross Book Value increased to approximately $3.45 billion. Over this same period, vendor expectations have become far more aggressive and cap-rates have decreased significantly, which has led to a much more competitive acquisition environment than was the case on June 30, 2004. In addition to this and as previously disclosed herein, Boardwalk currently has a REIT Unit buy back program under way, which permits the Trust to purchase 10% of its public float of Units as of August 20, 2008, or approximately 4 million Units. As of December 31, 2008, Boardwalk has purchased 3,183,447 Units at an average price of $39.04 for gross proceeds of $124.28 million. For more information on the REIT Unit buy back program, please see the information under the heading “Business and Properties of Boardwalk REIT – Normal Course Issuer Bid” above. Without the adoption of the amendments, Boardwalk REIT did not believe it would have the flexibility to fully implement its strategic plan, which includes, but is not limited to, the purchase of accretive multi-family assets in the current competitive acquisition environment and, at the same time, maintain its accretive REIT Unit buy-back program. Finally, management is concerned that Boardwalk REIT may not be able to refinance much of its portfolio in 2008 and beyond without reaching the 70% to (unamended) Adjusted Gross Book Value limit, a result which would hinder or prevent Boardwalk REIT from executing its strategy. 381376 v2 - 44 In 2011, under IFRS, Boardwalk will be permitted to disclose its financial results showing the appraised value of its assets (as opposed to current rules which mandate reporting those assets at book value, a value which is based on reported historical cost). It is management’s current intent to adopt such reporting standards on January 1, 2011. Accordingly, under the prior (unamended) definition, Boardwalk REIT’s Adjusted Gross Book Value will automatically change to an estimated fair value of its portfolio of assets effective January 1, 2011, an amount which Boardwalk REIT estimates is well above existing Adjusted Gross Book Value, as well as Adjusted Gross Book Value following the approved $410 million increase. In order to prepare the market for this change to IFRS, Boardwalk REIT believed it was prudent to make this interim adjustment to the Adjusted Gross Book Value of the Trust to smooth the transition to proposed fair value reporting. Dominion Bond Rating Service Ltd. (“DBRS”) advised Boardwalk REIT at the time that the amendment to the definition of Adjusted Gross Book Value was proposed that it would not affect the BBB-credit rating for the Debentures, or Boardwalk REIT’s stability rating of STA-3 (high). DBRS has published these rating confirmations on its website at www.dbrs.com. For more information on such ratings, please see the information below under the subheading “– Credit Rating” and “– Stability Rating”. For more information on Boardwalk’s Adjusted Gross Book Value, indebtedness and enterprise value please see the information in Boardwalk REIT’s December 31, 2008 Financial Statements and the Notes thereto, along with other posted information concerning Boardwalk REIT, including Management's Discussion and Analysis for the year ended December 31, 2008. For more information on the above noted amendments to the terms and conditions governing the Debentures, please see the information in Boardwalk REIT’s Information and Proxy Circular, dated July 7, 2008 and mailed to Debentureholders in connection with the meeting of held on July 30, 2008 to approve the above noted amendments. All of these documents are available in written and electronic versions either from the Trust on request, or at www.sedar.com or the Trust’s investor website at www.boardwalkreit.com. See “Additional Information”. The following is a summary of the material attributes and characteristics of the Debentures after giving effect to the above noted amendments of July 30, 2008. The Debentures have been issued pursuant to the provisions of an indenture dated as of January 21, 2005, as amended and restated by a supplemental trust indenture dated as of July 30, 2008 between the Trust and Computershare Trust Company of Canada (the “Indenture Trustee”), as trustee (collectively, the "Debenture Indenture"). The following summary does not purport to be complete and is qualified in its entirety by reference to the provisions in the Debenture Indenture. Definitions For the purpose of the following discussion of certain provisions of the Debenture Indenture, the following terms have the meanings set out below: "Adjusted Consolidated Indebtedness" as at any date means the consolidated Indebtedness of Boardwalk REIT as at such date determined, except as otherwise expressly provided in the Debenture Indenture, in accordance with GAAP, plus a one time adjustment calculated to adjust for the difference between the carrying value of Boardwalk REIT's debt and the unamortized portion of the fair market value adjustment of Boardwalk REIT's debt at the time of the Acquisition and the Arrangement (on the Effective Date this adjustment was $48 million). "Adjusted Gross Book Value" means, at any time, until the Trust elects or is required to report the fair market value of its and its Subsidiaries’ (defined below) assets on its publicly issued consolidated balance sheet in accordance with generally accepted accounting principles: (a) the book value of the assets of Boardwalk REIT and its Subsidiaries, shown on Boardwalk REIT's then most recent publicly-issued consolidated balance sheet, plus; (b) the amount of accumulated depreciation and amortization in respect of its properties, including accumulated amortization of the fair value of tangible and intangible assets recorded on the acquisition of properties, shown thereon or in the notes thereto, plus; (c) a one time adjustment to the carrying value of Boardwalk REIT's assets of $641 million (consisting of an adjustment of $410 million, plus the original adjustment of $231 million to the carrying value of the Trust’s assets determined at the time of the Acquisition 381376 v2 - 45 and the Arrangement (this adjustment was based on the difference between the Entity Value and the net book value of Boardwalk REIT and its Subsidiaries and is equal to $231 million)). "Adjusted Unitholders' Equity" of Boardwalk REIT, at any time, means the aggregate of: (i) the amount of unitholders' equity of Boardwalk REIT; and (ii) the amount of accumulated depreciation and amortization recorded on the books and records of each of Boardwalk REIT and its Subsidiaries in respect of its properties, including accumulated amortization of the fair value of tangible and intangible assets recorded on the acquisition of properties, in each case calculated in accordance with GAAP, plus a one time adjustment calculated to adjust for the difference between the carrying value of Boardwalk REIT's net assets and the Entity Value at the time of the Acquisition and the Arrangement (this adjustment was based on the difference between the Entity Value and the net book value of Boardwalk REIT and its Subsidiaries and is equal to $183 million). "Capital Lease Obligation" of any person means the obligation of such person, as lessee, to pay rent or other payment amounts under a lease of real or personal property which is required to be classified and accounted for as a capital lease or a liability on a consolidated balance sheet of such person in accordance with GAAP. "Change of Control" means the acquisition by a person, or group of persons acting jointly or in concert, of Units (and/or securities convertible into Units) representing (on a diluted basis, but only giving effect to the conversion or exercise of convertible securities held by such person or group of persons) greater than 50% of the Units. "Consolidated EBITDA" of Boardwalk REIT for any period means Consolidated Net Income increased by the sum of (i) Consolidated Interest Expense, excluding interest that has been capitalized on projects that are under development or held for future development, for such period, (ii) tax expense of Boardwalk REIT for such period (including both income tax and large corporations tax other than income taxes, either positive or negative, attributable to extraordinary or non-recurring gains or losses) determined on a consolidated basis in accordance with GAAP, (iii) amortization of income properties (including provisions for diminution of income properties) for such period, determined on a consolidated basis in accordance with GAAP, (iv) amortization of deferred expenses of Boardwalk REIT for such period, determined on a consolidated basis in accordance with GAAP, and (v) other non-cash items reducing Consolidated Net Income resulting from a change in accounting principles in determining Consolidated Net Income for such period. "Consolidated Interest Expense" of Boardwalk REIT for any period means the aggregate amount of interest expense of Boardwalk REIT in respect of Indebtedness, Capital Lease Obligations, the original issue discount of any Indebtedness issued at a price less than the face amount thereof paid, accrued or scheduled to be paid or accrued by Boardwalk REIT during such period and, to the extent interest has been capitalized on projects that are under development or held for future development during the period, the amount of interest so capitalized, all as determined on a consolidated basis in accordance with GAAP (provided that, notwithstanding its presentation under GAAP, all interest expense of Boardwalk REIT in respect of convertible debt Indebtedness will be included (without duplication) and all amortized deferred financing charges will be excluded in determining Consolidated Interest Expense). "Consolidated Net Income" of Boardwalk REIT for any period means the net income (loss) of Boardwalk REIT for such period determined on a consolidated basis in accordance with GAAP, excluding (i) any gain or loss (net of any tax impact) attributable to the sale or other disposition of any asset of Boardwalk REIT, other than the sale or disposition of income properties held for resale, (ii) any extraordinary gains and losses of Boardwalk REIT, determined on a consolidated basis in accordance with GAAP and (iii) other nonrecurring items. "Debt Securities" means unsecured debt securities of Boardwalk REIT issued from time to time pursuant to the Debenture Indenture. "Entity Value" means the amount determined by multiplying the total number of Units issued and outstanding (on a fully diluted basis, including, without limitation, Units issuable on the exchange of units of interest in the Partnership designated as "LP Class B Units") by the 10 day weighted average trading price of the Units on the TSX for the 10 trading days immediately following the effective date of the Acquisition and Arrangement, which was $15.95 per Unit for a total of $849 million; 381376 v2 - 46 "Extraordinary Resolution" means, for any series of Debt Securities, instruments in writing signed by the holders of not less than 66 2/3% (or 75% in certain events as described under "Modification and Waiver") of the aggregate outstanding principal amount of such series of Debt Securities or a resolution passed as an Extraordinary Resolution by the affirmative vote of the holders of not less than 66 2/3% (or 75% in certain events as described under "Modification and Waiver") of the aggregate outstanding principal amount of such series of Debt Securities represented and voting at a meeting of holders of such series of Debt Securities duly convened and held in accordance with the Debenture Indenture, all upon compliance with the procedures specified in the Debenture Indenture. "Indebtedness" of any person means (without duplication), on a consolidated basis, (i) any obligation of such person for borrowed money (including, for greater certainty, the full principal amount of convertible debt, notwithstanding its presentation under GAAP), (ii) any obligation of such person incurred in connection with the acquisition of property, assets or businesses, (iii) any obligation of such person issued or assumed as the deferred purchase price of property, (iv) any Capital Lease Obligation of such person, and (v) any obligations of the type referred to in clauses (i) through (iv) of another person, the payment of which such person has guaranteed or for which such person is responsible or liable; provided that, for the purpose of clauses (i) through (v) (except in respect of convertible debt, as described above), an obligation will constitute Indebtedness only to the extent that it would appear as a liability on the consolidated balance sheet of such person in accordance with GAAP. Obligations referred to in clauses (i) through (iii) exclude (i) trade accounts payable, (ii) distributions payable to Unitholders, (iii) accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith, (iv) indebtedness with respect to the unpaid balance of instalment receipts, where such indebtedness has a term not in excess of 12 months, (v) intangible liabilities and (vi) deferred revenues, all of which will be deemed not to be Indebtedness for the purposes of this definition. "Material Subsidiary" means, at any date, any Subsidiary which constitutes more than 5% of the Adjusted Unitholders' Equity calculated as at such date. "Non-Recourse Indebtedness" means any Indebtedness of a Subsidiary of Boardwalk REIT which is a single purpose entity or whose principal assets and business are constituted by a particular project and pursuant to the terms of which Indebtedness payment is to be made from the revenues arising out of such project with recourse for such payment being available only to the revenues or the assets of such single purpose entity or the project. "Subsidiary" means, with respect to any person (other than an individual), any other person (other than an individual) the financial results of which would be required to be consolidated with those of the first person's in the preparation of the first person's consolidated financial statements if prepared in accordance with GAAP. "Units" means units of the REIT outstanding from time to time, including both REIT Units and special voting units. Guarantee All current and future subsidiaries of the Trust which own material assets have provided a guarantee of the Debentures. In the case of default by Boardwalk REIT, the Indenture Trustee will, subject to the Debenture Indenture, seek redress from such subsidiaries for the guaranteed indebtedness. These guarantees are intended to eliminate structural subordination which arises as a consequence of Boardwalk REIT's assets being held in various subsidiaries. See "Risk Factors – Structural Subordination of Debentures". Rank The Debentures are direct senior unsecured obligations of Boardwalk REIT and rank equally and rateably with one another and with all other unsecured and unsubordinated Indebtedness of Boardwalk REIT except for sinking fund provisions (if any) applicable to different series of Debt Securities or other obligations of Boardwalk REIT, except to the extent prescribed by law. 381376 v2 - 47 Redemption by Boardwalk REIT At its option, Boardwalk REIT may redeem the Debentures, in whole or in part, at any time and from time to time, on payment of a redemption price equal to the greater of (i) the Canada Yield Price and (ii) par, together in each case with accrued and unpaid interest to the date fixed for redemption. Boardwalk REIT will give notice of redemption at least 30 days but not more than 60 days before the date fixed for redemption. Where less than all of the Debentures are to be redeemed pursuant to their terms, the Debentures to be so redeemed will be redeemed on a pro rata basis according to the principal amount of Debentures registered in the respective name of each holder of Debentures or in such other manner as the Indenture Trustee may consider equitable. For the purposes of the foregoing provisions, the following terms are defined in the Debenture Indenture substantially as follows: "Canada Yield Price" means a price equal to the price of the Debentures calculated to provide a yield to maturity, compounded semi-annually and calculated in accordance with generally accepted financial practice, equal to the Government of Canada Yield on the business day preceding the date on which Boardwalk REIT gives notice of redemption of the Debentures pursuant to the Debenture Indenture plus 0.32%. "Government of Canada Yield" on any date means the yield to maturity on such date, compounded semiannually and calculated in accordance with generally accepted financial practice, which a non-callable Government of Canada bond would carry if issued, in Canadian dollars in Canada, at 100% of its principal amount on such date with a term to maturity equal to the remaining term to maturity of the Debentures, calculated as of the redemption date of the Debentures, such yield to maturity being the average of the yields provided by two major Canadian investment dealers selected by Boardwalk REIT. Purchase of Debt Securities Provided no Event of Default (as defined below) has occurred and is continuing, Boardwalk REIT may at any time and from time to time purchase Debentures in the market (which includes purchases from or through an investment dealer or a firm holding membership on a recognized stock exchange) or by tender or private contract at any price. Debentures that are so purchased will be cancelled and will not be reissued or resold. Certain Debenture Indenture Covenants The Debenture Indenture contains covenants substantially to the following effect in favour of holders of the Debentures: Maintenance of Properties Boardwalk REIT will maintain and keep or cause to be maintained and kept in good condition, repair and working order all of the properties owned by it or any of its Subsidiaries used in its business or in the business of any of its Subsidiaries. Boardwalk REIT will make or cause to be made all necessary repairs and renewals to and replacements and improvements of these properties as in its sole discretion may be necessary to carry on its business properly and prudently. Notwithstanding the foregoing, Boardwalk REIT and its Subsidiaries will not be prohibited from selling or transferring their properties in the ordinary course of business: Insurance Boardwalk REIT will maintain and will cause its Subsidiaries to maintain such property and liability insurance as would be maintained by a prudent owner; Restrictions on Consolidations and Mergers Boardwalk REIT may not consolidate with, amalgamate or merge with or into or sell, assign, transfer or lease all or substantially all of its properties and assets unless: 381376 v2 - 48 (a) the entity formed by such consolidation or amalgamation or into which Boardwalk REIT is merged or the entity which acquires by operation of law or by conveyance or by transfer the assets of Boardwalk REIT substantially as an entirety is a corporation or unincorporated organization organized or existing under the laws of Canada or any province or territory thereof and (except where such assumption is deemed to have occurred solely by the operation of law) such entity assumes under a supplemental indenture all the obligations of Boardwalk REIT under the Debenture Indenture, any supplemental indenture and the Debt Securities and such transaction to the satisfaction of the Indenture Trustee and in the opinion of counsel will be on such terms to preserve and not impair any of the rights and powers of the Indenture Trustee and the holders of Debt Securities; (b) immediately before and immediately after giving effect to such transaction, no Event of Default has occurred and is continuing; and (c) immediately after giving effect to such transaction, the surviving entity could incur at least $1.00 of additional Indebtedness; Consolidated EBITDA to Consolidated Interest Expense Ratio From and as of July 30, 2008, Boardwalk REIT will maintain a ratio of Consolidated EBITDA to Consolidated Interest Expense of not less than 1.75 to 1; Restrictions on Additional Indebtedness Boardwalk REIT will not incur or assume, or permit any Subsidiary to incur or assume, any Indebtedness (other than the renewal or refinancing of Indebtedness outstanding from time to time) unless the quotient (expressed as a percentage) obtained by dividing the Adjusted Consolidated Indebtedness by Adjusted Gross Book Value, calculated on a pro forma basis as described below (the "Indebtedness Percentage"), would be: (a) prior to the date when the Trust elects or is required to report the fair value of its and its Subsidiaries’ assets on its publicly issued consolidated balance sheet in accordance with IFRS, less than or equal to 70%; or (b) on or following the date on which the Trust elects or is required to report the fair value of its and its Subsidiaries’ assets on its publicly issued consolidated balance sheet in accordance with IFRS, less than or equal to 60%. The Debenture Indenture provides that the Indebtedness Percentage be calculated on a pro forma basis as at the date of Boardwalk REIT's most recently published balance sheet (the "Balance Sheet Date") giving effect to the incurrence of the Indebtedness to be incurred or assumed and the application of the proceeds therefrom and to any other event that has increased or decreased Adjusted Consolidated Indebtedness or Adjusted Gross Book Value since the Balance Sheet Date to the date of calculation; and Equity Maintenance Boardwalk REIT will maintain at all times, an Adjusted Unitholders' Equity of at least $300 million. Events of Default The Debenture Indenture provides that each of the following events will constitute an event of default (each, an "Event of Default") in respect of the Debentures: (a) default in payment of principal when due; (b) default in payment of amounts owing pursuant to a Change of Control when due; (c) default in payment of any interest when due where such default continues for a period of three business days after the relevant interest payment date; 381376 v2 - 49 (d) a breach of or default in the performance of any other covenant of Boardwalk REIT under the Debenture Indenture, the Debentures or a supplemental indenture in connection with that series of Debt Securities where such default or breach continues for a period of 30 days after the Indenture Trustee has given notice in writing to Boardwalk REIT specifying the nature of such breach or default, and requiring that it be remedied unless the Indenture Trustee (having regard to the subject matter of such breach or default) agrees to a longer period, and in such event within the period agreed to by the Indenture Trustee; (e) certain events of bankruptcy, insolvency, winding up or dissolution related to Boardwalk REIT or a Material Subsidiary as set out in the Debenture Indenture; (f) the rendering of a final judgment or judgments (not subject to appeal) against Boardwalk REIT or any Material Subsidiary in an aggregate amount in excess of $25 million by a court or courts of competent jurisdiction, which remains or remain undischarged and unstayed for a period of 60 days after the date on which the right to appeal has expired; and (g) default by Boardwalk REIT or any Material Subsidiary under the terms of any Indebtedness (other than any Non-Recourse Indebtedness) where that default results in the acceleration of that Indebtedness (after expiration of any applicable grace period) unless such acceleration is waived or rescinded; provided that the aggregate of all such Indebtedness which is accelerated exceeds $25 million. If an Event of Default (other than an Event of Default described in paragraph (d) above) occurs and is continuing, either the Indenture Trustee or the holders of at least 25% in aggregate principal amount of the outstanding Debentures may accelerate the maturity of all Debentures; provided that, notwithstanding any other provisions of the Debenture Indenture, any supplemental indenture or any Debt Securities, after such acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of outstanding Debentures may rescind and annul such acceleration in certain circumstances described in the Debenture Indenture. See "Modification and Waiver" below. If an Event of Default specified in paragraph (d) above occurs, the outstanding Debentures will become immediately due and payable without any declaration or other act on the part of the Indenture Trustee or any holder of Debentures. If the maturity of the Debentures has been accelerated, legal action against Boardwalk REIT may be authorized by an Extraordinary Resolution of the holders of the Debentures. Change of Control In the event of a Change of Control, the holders of Debentures will have the right to require Boardwalk REIT to repurchase their Debentures, in whole or in part, at a price of (i) 101% of the principal amount of such Debentures plus; and (ii) all accrued interest to the date of repurchase. Defeasance The Debenture Indenture contains provisions requiring the Indenture Trustee to release Boardwalk REIT from its obligations under the Debenture Indenture provided that, among other things, Boardwalk REIT satisfies the Indenture Trustee that it has deposited funds or made due provision for the payment of (i) the expenses of the Indenture Trustee and (ii) all principal, premium (if any), interest and other amounts due or to become due in respect of the Debentures. Modification and Waiver The rights of the holders of Debentures may be modified if authorized by Extraordinary Resolution. The approval threshold for an Extraordinary Resolution will generally be 66 2/3 % but will be 75% for the following: (a) to change the stated maturity of the principal or redemption price of or any premium or instalment of interest on, the Debentures, (b) to reduce the principal amount of, or interest or premium (if any) on, the 381376 v2 - 50 Debentures, (c) to change the place or currency of payment of the principal of, premium (if any) on redemption price of or interest on, the Debentures or (d) to amend the percentage of Debentures necessary to approve an Extraordinary Resolution. Subject to certain rights of the Indenture Trustee as provided in the Debenture Indenture, the holders of a majority of the outstanding principal amount of the Debentures, on behalf of all holders of Debentures, may waive certain Events of Default under the Debenture Indenture with respect to the Debentures. Financial Information Boardwalk has covenanted in the Debenture Indenture to deliver to the Indenture Trustee its audited annual financial statements and unaudited interim financial statements at such time as such statements are delivered to Canadian securities regulators. Credit Rating DBRS provides credit ratings of debt securities for commercial entities. A credit rating generally provides an indication of the risk that the borrower will not fulfill its full obligations in a timely manner with respect to both interest and principal commitments. Rating categories range from highest credit quality (generally AAA) to very highly speculative (generally C). DBRS has provided Boardwalk REIT with a credit rating of BBB with a stable trend relating to the Debentures. A credit rating in the BBB category is generally an indication of adequate credit and investment quality as defined by DBRS. A rating outlook, expressed as a positive, stable or negative trend, provides an opinion regarding the likely direction of any medium term rating actions. The credit rating accorded to the Debentures is not a recommendation to purchase, hold or sell the Debentures. There can be no assurance that any rating will remain in effect for any given period of time or that any rating will not be withdrawn or revised by DBRS at any time. Accordingly, the reader should not place undue reliance on the credit rating and should not rely on the credit rating as of any date other than as noted on the cover page of this AIF. Stability Rating DBRS provides stability ratings for real estate investment trusts. DBRS has assigned a stability rating of STA-3 (high) to the Trust. This stability rating is based on a rating scale developed by DBRS that provides an indication of both the stability and sustainability of a real estate investment trust's distributions per unit. Rating categories range from STA-1 to STA-7, with STA-1 being the highest. DBRS further separates the ratings into high, middle and low to indicate where within the ratings category they fall. Ratings take into consideration seven main factors of (i) operating and industry characteristics; (ii) asset quality; (iii) financial flexibility; (iv) diversification; (v) size and market position; (vi) sponsorship/governance; and (vii) growth. In addition, consideration is given to specific structural or contractual elements that may eliminate or mitigate risks or other potential negative factors. Income funds rated STA-3 (high) are considered by DBRS to be investment quality and have good stability and sustainability of distributions per unit. A stability rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal by DBRS at any time. Accordingly, the reader should not place undue reliance on a stability rating and should not rely on the Trust's stability rating as of any date other than as noted on the cover page of this AIF. CHALLENGES AND RISKS This section includes an analysis of Boardwalk REIT's financial liquidity and identifies the risk factors and the management of such risks relating to Boardwalk REIT and its business. There are other risk factors to an investment in REIT Units not associated with investments in Common Shares that include, but are not limited to the following: Boardwalk REIT, like most real estate rental entities, is exposed to a variety of risk areas. These areas are categorized between general and specific risks. General risks are the risks associated with general conditions in 381376 v2 - 51 the real estate sector, and consist mainly of commonly exposed risks that affect the real estate industry. Specific risks focus more on risks uniquely identified with the Trust, such as credit, market, liquidity and operational risks. The following will address each of these risks. In addition, this section should be read in conjunction with the Trust's management discussion and analysis of financial condition and results of operations for the year ended December 31, 2008. See "Additional Information". Risks Due to Investment in Real Estate Real property investments are subject to varying degrees of risk depending on the nature of the Property. The yields available from investments in real estate depend upon the amount of revenues generated and expenses incurred. These risks include changes in general economic conditions (such as the availability and cost of mortgage funds), local conditions (such as an oversupply of space or a reduction in demand for real estate in the area), government regulations (such as new or revised residential tenancy legislation), the attractiveness of the properties to tenants, competition from others with available space and the ability of the owner to provide adequate maintenance at an economic cost. If properties do not generate revenues sufficient to meet operating expenses, including debt service and capital expenditures, Boardwalk REIT's results from operations and ability to make distributions to its Unitholders will be adversely affected. The performance of the economy in each of the areas in which the properties are located affects occupancy, market rental rates and expenses. These factors consequently can have an impact on revenues from the properties and their underlying values. The financial results and labour decisions of major local employers may also have an impact on the revenues from and value of certain properties. Other factors may further adversely affect revenues from and values of our properties. These factors include the general economic climate, local conditions in the areas in which properties are located, such as an oversupply of apartment units or a reduction in the demand for apartment units, the attractiveness of the properties to residents, competition from other multifamily communities and our ability to provide adequate facilities maintenance, services and amenities. Our revenues would also be adversely affected if residents were unable to pay rent or we were unable to rent apartments on favorable terms. If we were unable to promptly relet or renew the leases for a significant number of apartment units, or if the rental rates upon renewal or reletting were significantly lower than expected rates, then our funds from operations would, and our ability to make expected distributions to our Unitholders and to pay amounts due on our debt may, be adversely affected. There is also a risk that as leases on the properties expire, residents will vacate or enter into new leases on terms that are less favorable to us. Operating costs, including real estate taxes, insurance and maintenance costs, and mortgage payments, if any, do not, in general, decline when circumstances cause a reduction in income from a property. We could sustain a loss as a result of foreclosure on the property, if a property is mortgaged to secure payment of indebtedness and we were unable to meet our mortgage payments. In addition, applicable laws, including tax laws, interest rate levels and the availability of financing also affect revenues from properties and real estate values. Currently, we operate in Canada, in the provinces of British Columbia, Alberta, Saskatchewan, Ontario and Quebec. Neither of Alberta and Saskatchewan is subject to rent control legislation; however, under Alberta legislation a landlord is only entitled to increase rents once every six months. See "Challenges and Risks – Rent Control Risks". Certain significant expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and related charges, must be made regardless of whether or not a property is producing sufficient income to service these expenses. The Trust's properties are subject to mortgages, which require significant debt service payments. If the Trust were unable or unwilling to meet mortgage payments on any property, losses could be sustained as a result of the mortgagee's exercise of its rights of foreclosure or of sale. Real estate is relatively illiquid. Such illiquidity will tend to limit the Trust's ability to vary its portfolio promptly in response to changing economic or investment 381376 v2 - 52 conditions. In addition, financial difficulties of other property owners resulting in distress sales may depress real estate values in the markets in which the Trust operates. Illiquidity of Real Estate and Reinvestment Risk may Reduce Economic Returns to Investors. Real estate investments are relatively illiquid and, therefore, tend to limit our ability to adjust our portfolio in response to changes in economic or other conditions. To affect our current operating strategy, we have in the past raised, and will seek to continue to raise additional funds, both through outside financing and through the orderly disposition of assets that no longer meet our investment criteria. Depending upon interest rates, current development and acquisition opportunities and other factors, generally we will reinvest the proceeds in additional multifamily properties, although such funds may be employed in other uses. In the markets we have targeted for future acquisition of multifamily properties, there is considerable buying competition from other real estate companies, some of which may have greater resources, experience or expertise than we. In many cases, this competition for acquisition properties has resulted in an increase in property prices and a decrease in property yields. Adverse Changes in Laws may Affect our Potential Liability Relating to our Properties and our Operations. Increases in real estate taxes and income, service and transfer taxes cannot always be passed through to residents or users in the form of higher rents, and may adversely affect our cash available for distribution and our ability to make distributions to our Unitholders and to pay amounts due on our debt. Similarly, changes or interpretations of existing laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions, as well as changes in laws affecting development, construction and safety requirements, may result in significant unanticipated expenditures, which could have a material adverse effect on us and our ability to make distributions to our shareholders and pay amounts due on our debt. In addition, future enactment of rent control or rent stabilization laws or other laws regulating multifamily housing may reduce rental revenues or increase operating costs. Multi-Family Residential Sector Risk Income producing properties generate income through rent payments made by tenants of the properties. Upon the expiry of any lease, there can be no assurance that the lease will be renewed or the tenant replaced. The terms of any subsequent lease may be less favourable to the Trust than the existing lease. To mitigate this risk, the Trust does not have any one or small group of significant tenants. Each operating lease signed is for a period of twelve months or less. The Trust is dependent on leasing markets to ensure vacant residential space is leased, expiring leases are renewed and new tenants are found to fill vacancies. While it is not expected that markets will significantly change in the near future, a disruption in the economy could have a significant impact on how much space tenants will lease and the rental rates paid by tenants. This would affect the income produced by the Trust's properties as a result of downward pressure on rents. Environmental Risks As an owner and manager of real property, the Trust is subject to various Canadian federal, provincial, and municipal laws relating to environmental matters. These laws could encumber the Trust with liability for the costs of removal and remediation of certain hazardous substances or wastes released or deposited on or in its properties or disposed of at other locations. The failure to remove or remediate such substances, if any, could adversely affect the Trust's ability to sell its real estate, or to borrow using real estate as collateral, and could potentially also result in claims or other proceedings against the Trust. Although the Trust is not aware of any material non-compliance with environmental laws at any of its properties nor is it aware of any pending or threatened investigations or actions by environmental regulatory authorities in connection with any of its properties or any material pending or threatened claims 381376 v2 - 53 relating to environmental conditions at its properties, no assurance can be given that environmental laws will not result in significant liability to the Trust in the future or otherwise adversely affect the Trust's business, financial condition or results of operations. The Trust has formal policies and procedures to review and monitor environmental exposure. The Trust has made, and will continue to make, the necessary capital expenditures for compliance with environmental laws and regulations. Environmental laws and regulations can change rapidly and may become subject to more stringent environmental laws and regulations in the future. Compliance with more stringent environmental laws and regulations could have a material adverse effect on the Trust's business, financial condition or results of operation. Ground Lease Risk Five of the Trust's properties located in Calgary (1), Edmonton (1) and Montreal (3) are subject to longterm ground leases and similar arrangements in which the underlying land is owned by a third party and leased to the Trust. Under the terms of a typical ground lease, the lessee must pay rent for the use of the land and is generally responsible for all costs and expenses associated with the building and improvements. Unless the lease term is extended, the land together with all improvements made will revert to the owner of the land upon the expiration of the lease term. These leases are set to expire between 2028 and 2096. The ground lease for the largest Montreal property, the Nun's Island portfolio, is also subject to a rent revision clause, which commenced in 2008 (with a valuation date of March 16, 2008). It is phased in on a property-by-property basis through to 2015, and is based on 75% of the land value in its current use. After that revision, the land rent will remain constant thereafter through to 2064. An event of default by the Trust under the terms of a ground lease could also result in a loss of the property subject to such ground lease should the default not be rectified in a reasonable period of time. The Trust is not aware of any default under the terms of its ground leases. Competition Risk Each segment of the real estate business is competitive. Numerous other residential developers and apartment owners compete in seeking tenants. Although the Trust's strategy is to own multi-family properties in premier locations in each market in which it operates, some of the apartments of the Trust's competitors may be newer, better located or better capitalized. The existence of alternative housing could have a material adverse effect on the Trust's ability to lease space in its properties and on the rents charged or concessions granted, and could adversely affect The Trust's revenues and its ability to meet its obligations. General Uninsured Losses The Trust carries 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 war or environmental contamination), which are either uninsurable or not economically insurable. The Trust currently has 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 Trust could lose its investment in, and anticipated profits and cash flows from, one or more of its properties, and would continue to be obligated to repay any recourse mortgage indebtedness on such properties. Credit Risk Credit risk is the risk of loss due to failure of a contracted customer to fulfill the obligation of required payments. The key credit risk to the Trust is the possibility that its customers will be unable or unwilling to fulfill 381376 v2 - 54 their lease term commitments. Due to the very nature of the business of renting multi – family residential apartment units, credit risk is not deemed to be very high. The Trust currently has approximately 36,785 rental apartment units each of which has a separate lease. To further mitigate this risk, the Trust continues to diversify its portfolio to various major centers across Canada. Further, each of the Trust's rental units has its own individual lease agreement, thus the Trust has no material financial exposure to any particular customer or group of customers. The Trust continues to utilize extensive screening processes for all potential customers including, but not limited to, detailed credit checks. Market Risk Market Risk is the risk that the Trust could be adversely affected due to market changes in product supply, interest rates and regional rent controls. The Trust's principal exposures to market risk are in the areas of new multi-family housing supply, changes to rent controls, utility price increases, property tax increases, higher interest rates and mortgage renewal risk. Supply Risk Supply Risk is the risk that the Trust would be negatively affected by the new supply of, and demand for, multi-family residential units in its major market areas. Key drivers of demand include employment levels, population growth, demographic trends and consumer confidence. Any significant amount of new construction will typically result in an imbalance in supply and cause downward price pressure on rents. There are currently no signs of significant new rental construction in any of the Trust's existing markets. Studies have shown that in order to economically justify new rental construction in Boardwalk REIT's major markets, an increase in existing rental rates of hundreds of dollars will be necessary. However, in certain market areas such as Calgary, Alberta there has been a significant increase in the number of new condominiums constructed over the past few years. While these normally are earmarked as owner-occupied properties, a significant number of these condominium units have been, or may be, converted to rental stock. Our performance will always be affected by the supply and demand for multi-family rental real estate in Canada. The potential for reduced rental revenue exists in the event that Boardwalk REIT is not able to maintain its properties at a high level of occupancy, or in the event of a downturn in the economy, which could result in lower rents or higher vacancy rates. Boardwalk REIT has minimized these risks by: Increasing customer satisfaction; Diversifying its portfolio across Canada, particularly with the expansion into the eastern market and, more recently, British Columbia, thus lowering its exposure to regional economic swings; Acquiring properties only in desirable locations, where vacancy rates for properties are higher than citywide averages but can be reduced by repositioning the properties through better management and selective upgrades; Holding a balanced portfolio which includes a variety of multi-family building types including high-rise, townhouse, garden and walk-ups, each with its own market niche; Maintaining a wide variety of suite mix, including bachelor suites, one, two, three and four-bedroom units; Building a broad and varied customer base, thereby avoiding economic dependence on larger-scale tenants; Focusing on affordable multi-family housing, which is considered a stable commodity; Developing a specific rental program characterized by rental adjustments that are the result of enhanced service and superior product; and Developing regional management teams with significant experience in the local marketplace, and combining this experience with our existing operations and management expertise. 381376 v2 - 55 Interest Risk Interest risk is the combined risk that the Trust would experience a loss as a result of its exposure to a higher interest rate environment (interest rate risk) and the possibility that at the term end of a mortgage the Trust would be unable to renew the maturing debt either with the existing or an additional lender (renewal risk) Interest risk is the one area where, over the 2008 fiscal year, Boardwalk has seen the highest increase in exposure. With the current world economic and financial crisis, there is a heightened risk that not only will existing maturing mortgages be subject to increased interest rate charges, but the distinct possibility also exists that maturing mortgages will themselves not be able to be renewed or, if they are, at significantly lower loan to value ratios. The Trust manages its interest rate risk by maintaining a balanced maturing portfolio with no significant amount coming due in any one particular period. In addition, the majority of the Trust's debt is insured with NHA insurance. This insurance allows the Trust to increase the overall credit quality of the mortgage and, as such, enable the Trust to obtain preferential interest rates. The majority of the Trust's mortgage debt is financed for periods ranging between 3 and 7 years. The use of NHA insurance also assists the Trust in managing its renewal risk. Given the increased credit quality of such debt, the probability of the Trust being unable to renew the maturing debt or transfer this debt to another accredited lending institution is significantly reduced. However, there can be no assurance that the renewal of debt will be on as favourable terms as the Trust's existing debt. To date, the Trust has had no problem obtaining renewals on maturing mortgages and, in addition, where requested, additional funds continue to be available to the Trust on these properties. Although the Trust has seen a significant increase in the quoted interest spread over the corresponding bench mark bonds, the all in quoted rates, due to the significant decrease in the benchmark bonds, continue to be at levels well below the existing interest rates and, as such, are accretive to the Trust as a whole. The Trust continues to monitor this situation on a daily basis and may adjust its strategy given the market conditions. The Trust also manages its interest rate risk by, on a selective basis, forward contracting with a major financial institution to hedge the Trust's exposure to Canadian bond yield fluctuations. When the Trust finances its secured mortgage portfolio, the new interest rate is based on the market yield of the corresponding Government of Canada Bond plus what is referred to as a "spread". Although the market spread on these transactions will vary, the one constant is the specific bond that the Trust will be using as the underlying basis. In total, the transaction, which was comprised of bond forward contracts on specific mortgages set to mature and to be renewed in 2008, was for a total nominal amount of $101.6 million with a weighted average term and interest rate of 7.2 years and 3.63%, respectively. Subsequent to entering into this transaction, the Trust initiated changes to the terms of one of the contracts, with a nominal amount of approximately $21.8 million, and negotiated a settlement loss of $100 thousand related to these changes. Boardwalk REIT assessed this one particular bond forward contract as no longer being an effective hedge and payment of this $100 thousand settlement loss was included as part of the financing costs in the quarter ended March 31, 2008. During the second quarter ended June 30, 2008, the remaining bond forward contracts in the transaction were settled. Except for one of the contracts, all remaining contracts were assessed to be ineffective hedges and the net settlement loss of $168 thousand was included in financing costs for the quarter. The bond forward contract assessed to be an effective hedge was settled for a loss of $284 thousand, which will be amortized over the term of the new financing. During the first quarter of 2008, Boardwalk REIT entered into an interest rate swap agreement on the mortgages of specific properties within its portfolio in an effort to hedge the variability in cash flows attributed to fluctuating interest rates. These interest rate swap agreements were designated as cash flow hedges on March 11, 381376 v2 - 56 2008. The effective date of the hedges was May 1, 2008, and will continue to be designated as such until the date of maturity on May 1, 2015. Boardwalk REIT has determined that there is no ineffectiveness in the hedging of its interest rate exposure. The effectiveness of the hedging relationship will be reviewed on a quarterly basis and measured at fair value. Any gains or losses which arise as a result of the “effectiveness” of the hedge will be recognized in Other Comprehensive Income (“OCI”). The ineffective portion of the hedging gain or loss on the swap transaction will be recognized immediately in net earnings. On recognition of the financial liability of the hedged item on the balance sheet, the associated gains or losses that were recognized in OCI will be reclassified into net earnings in the same period or periods during which the interest payments of the hedged item affect net earning. However, if all or a portion of the net loss recognized in OCI will not be recovered in one or more future periods, this amount will be immediately reclassified into net earnings. Settlements on both the fixed and variable portion of the interest rate swaps will occur on a monthly basis. The fixed interest rate has been set at 4.15%, plus a stamping fee of 0.25%, while the total amount of mortgage debt subject to the interest rate swaps is $91.5 million. As at December 31, 2008, the interest rate swap agreement was assessed to be an effective hedge and, consistent with the previous quarter, any gains or losses on the interest rate swap agreement were recognized in earnings in the periods during which the interest payments on the hedged items were recognized. In addition, the Trust also maintains a reasonable level of liquidity to assist in the implementation of its strategy, as well as to provide a contingency for any unforeseen circumstances. At December 31, 2008 the Trust’s Liquidity position, defined as “Cash Available”, coupled with any unused revolving credit facilities, totaled over $320 million. Development Risk As previously noted under the heading "Strategy for Growth", the Trust is reviewing and considering development of new selective multi-family or condominium projects on its excess density. Although this review and consideration is in a very preliminary stage, any development commitments made by the Trust will be subject to those risks usually attributable to development projects, which include: (i) (ii) (iii) (iv) construction or other unforeseeable delays; cost overruns; poor market for sales; and/or the failure of tenants to occupy and pay rent. Such risks are minimized through the provisions of the Declaration of Trust, which have the effect of limiting direct and indirect investments (net of related mortgage debt) in non-income producing properties to no more than 15% of the Adjusted Unitholders' Equity. Such developments will also likely be undertaken with established developers either on a co-ownership basis or, less likely, by providing them with mezzanine financing. With some exceptions, from time to time, especially in high growth markets, generally we will not acquire or fund significant expenditures for undeveloped land unless it is zoned and an acceptable level of space has been presold. An advantage of new format multi-family or condominiums is that they lend themselves to phased construction keyed to vacancy rates and/or sales levels, respectively, which avoids the creation of meaningful amounts of vacant space. Rent Control Risk Rent Control Risk is the risk of the implementation or amendment of new or existing legislative rent controls in the markets the Trust operates, which may have an adverse impact on the Trust's operations. Ontario, 381376 v2 - 57 British Columbia and Quebec, all of which currently have rent control legislation, are three markets in which the Trust operates. Under Ontario's rent control legislation, commonly known as "rent de-control", a landlord is entitled to increase the rent for existing tenants once every twelve months by no more than the "guideline amount" established by regulation. For the calendar year 2009, the guideline amount has been established at 1.8% (1.4% for 2008). This adjustment is meant to take into account the income of the building and the municipal and school taxes, the insurance bills, the energy costs, maintenance and service costs. Landlords may apply to the Ontario Rental Housing Tribunal for an increase above the guideline amounts if annual costs for heat, hydro, water or municipal taxes have increased significantly or if building security costs have increased. When a unit is vacated, however, the landlord is entitled to lease the unit to a new tenant at any rental amount, after which annual increases are limited to the applicable guideline amount. The landlord may also be entitled to a greater increase in rent for a unit under certain circumstances, including, for example, where extra expenses have been incurred as a result of a renovation of that unit. British Columbia has a similar rent control regime to Ontario's, with the exception that the guideline amount established there is two percent (2%) over annual inflation, which amounted to an aggregate of 4.6 2008 and 3.7% for 2009. Under Quebec's rent control legislation, a landlord is entitled to increase the rent for existing tenants once a year for the rent period starting after April 1st of the current year but before April 1st of the following year. There is no fixed rate increase specified by regulation. Rent increases also take into account a return on capital expenditures (for 2009 this return was 4% compared to 4.3% for 2008), if such expenditures were incurred, and an indexing of the net income of the building. Average rent increase estimates for the period starting after April 1, 2009 and before April 2, 2010, before any consideration for increases to municipal and school taxes and capital expenditures, are: 0.8% for electricity heated dwellings, 1.8% for gas heated dwellings, 5.1% for oil heated dwellings and 0.6% for non-heated dwellings. To manage this risk, prior to entering a market where rent controls are in place, an extensive amount of time is spent researching the existing rules and, where possible, the Trust will ensure it employs people who are experienced in working in these controlled environments. In addition, the Trust adjusts forecast assumption on new acquisitions to ensure they are reasonable given the rent control environment. Effective April 24, 2007, the Government of Alberta amended its residential tenancies legislation. The most significant changes to the legislation focused on two key areas, the first being the number of rental increases that an owner could issue to a renter on an annual basis and the second being the notice period required if an owner is contemplating a significant renovation or condominium conversion. Rental increases limited to once per year – the legislation stipulates that an owner may increase existing tenant rents not more than one time per year; previously, owners were able to increase rents once every six months, or twice per year. It should be noted that in this legislation, there is no limitation placed on the amount rents can increase. Notice for extensive renovations or condominium conversion - the legislation introduced limitations on an owner that wishes to convert an existing rental property to a condominium. Under the legislation, an owner is required to give the existing tenants a notice of one year and, during that one year notice period, the owner will not be able to increase rents at any time. Previous legislation required only a notice period of six months and there was no limitation on the number of rental increases other than the twice per year limit referred to in the immediately preceding paragraph. It should be emphasized that there have been no changes or limitations as to the market rents charged in Alberta. Accordingly, there are no new limitations placed on the amount which can be charged to new renters by Boardwalk REIT. 381376 v2 - 58 Impact on Boardwalk REIT - Boardwalk REIT currently has over 50% of its rental portfolio in Alberta and, as such, any change to existing legislation needs to be reviewed, and any potential impact needs to be considered, carefully. It is currently Boardwalk REIT's internal policy to increase the rents of existing customers by no more than $150 over a one-year period; as noted above, the same limitation does not apply to new customers, who will be charged market rents. The Trust's previous policy was to split the $150 annual maximum into two equal instalments of $75 every six months. The legislation now limits Boardwalk REIT to one increase per year and, accordingly, the Trust has amended its previous practice by increasing the in-place rents by a maximum of $150 once per year. The Trust also now offers existing customers a fixed twelve-month lease with the $150 rental increase in place. Presently, rent control legislation does not exist in, and is not planned for Saskatchewan. Utility and Property Tax Risk Utility and Property Tax Risk relates to the potential loss the Trust may experience as a result of higher resource prices and well as its exposure to signify cant increases in property taxes. Over the past few years, property taxes have increased as a result of re-valuations of municipal properties and their adherent tax rates. For the Trust, these re-valuations have resulted in significant increases in some property assessments due to enhancements, which are not represented on the Trust's balance sheet (as such representations are contrary to existing GAAP reporting standards). In 2005, property taxes for Calgary and Edmonton increased significantly due to higher tax rates imposed. To address this risk, Boardwalk REIT has compiled a specialized team of property reviewers who, with the assistance of outside authorities, constantly review property tax assessments and, where warranted, appeal them. Utility expenses, mainly consisting of natural gas and electricity service charges, have been subject to considerable price fluctuations over the past several years. Any significant increase in these resource costs that the Trust cannot pass on to the customer may have a negative material impact on the Trust. To mitigate this risk, the Trust (and its predecessor) has begun to play a more active role in controlling the fluctuation and predictability of this risk. Through the combined use of financial instruments and resource contracts with varying maturity dates, exposure to these fluctuations has reduced. In addition, the Trust has implemented the following steps: (a) where possible, economical electrical sub-metering devices are being installed, passing on the responsibility for electricity charges to the end customer, and (b) in other cases, rents have been, or will be, adjusted upward to cover these increased costs. Risks Due to Real Estate Financing We anticipate that future acquisitions will be financed, in whole or in part, under various lines of credit, and other forms of secured or unsecured financing or through the issuance of additional debt or equity by us. We expect periodically to review our financing options regarding the appropriate mix of debt and equity financing. Equity, rather than debt, financing of future developments or acquisitions could have a dilutive effect on the interests of our existing Unitholders. Similarly, there are certain risks involved with financing future developments and acquisitions with debt, including those described below. In addition, if new developments are financed through construction loans, there is a risk that, upon completion of construction, permanent financing for such properties may not be available or may be available only on disadvantageous terms, or that the cash flow from new properties will be insufficient to cover debt service. If a newly developed or acquired property is unsuccessful, our losses may exceed our investment in the property. Any of the foregoing could have a material adverse effect on us and our ability to make distributions to our Unitholders and to pay amounts due on our debt. We may be Unable to Renew, Repay or Refinance our Outstanding Debt. We are subject to the normal risks associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest, the risk that indebtedness on our properties, or unsecured indebtedness, will not be able to be renewed, repaid or refinanced when due or that the 381376 v2 - 59 terms of any renewal or refinancing will not be as favourable as the existing terms of such indebtedness. If we were unable to refinance our indebtedness on acceptable terms, or at all, we might be forced to dispose of one or more of the properties on disadvantageous terms, which might result in losses to us. Such losses could have a material adverse effect on us and our ability to make distributions to our Unitholders and pay amounts due on our debt. Furthermore, if a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments, the mortgagee could foreclose upon the property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies, all with a consequent loss of our revenues and asset value. Foreclosures could also create taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements of applicable tax legislation. Our Degree of Leverage Could Limit Our Ability to Obtain Additional Financing Our consolidated debt-to-Gross Book Value was 61% as of December 31, 2008. Our degree of leverage could have important consequences to Unitholders. For example, the degree of leverage could affect our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, development or other general corporate purposes, making us more vulnerable to a downturn in business or the economy in general. Under our current Declaration of Trust, the maximum the Trust can leverage is 70% of its reported Gross Book Value. Insurance Policy Deductibles and Exclusions In order to partially mitigate the substantial increase in insurance costs in recent years, management has determined to gradually increase deductible and self-insured retention amounts. As of December 31, 2008, the Trust's property insurance policy provides for a per occurrence deductible of $100,000 with any excess losses being covered by insurance. As a result of the terrorist attacks of September 11, 2001, property insurance carriers have created exclusions for losses from terrorism from our "all risk" property insurance policies. While separate terrorism insurance coverage is available in certain instances, premiums for such coverage are generally very expensive and deductibles are very high and, in many cases, unavailable. Additionally, the terrorism insurance coverage that is available typically excludes coverage for losses from nuclear, biological and chemical attacks. At the present time, the Trust has determined that it is not economically prudent to obtain property terrorism insurance for its entire portfolio to the extent otherwise available, especially given the significant risks that are not covered by such insurance. As of December 31, 2008, the Trust carried a total liability insurance policy of $50 million per occurrence. Outstanding Indebtedness The ability of Boardwalk REIT to make cash distributions to Unitholders or to make other payments are subject to applicable law and contractual restrictions contained in instruments governing Boardwalk REIT's indebtedness. Although Boardwalk REIT is not currently in default under any existing loan agreements or guarantee agreements, any future default could have significant consequences for Unitholders. Further, the amount of Boardwalk REIT's indebtedness could have significant consequences to holders of Units, including that the ability of Boardwalk REIT to obtain additional financing for working capital, capital expenditures or future acquisitions may be limited; and that a significant portion of Boardwalk REIT's cash flow from operations may be dedicated to the payment of principal and interest on its indebtedness, thereby reducing funds available for future operations and distributions. Additionally, some of Boardwalk REIT's debt may be at variable rates of interest or may be renewed at higher rates of interest, which may affect cash flow from operations available for distributions. Also, in the event of a significant economic downturn, there can be no assurance that Boardwalk REIT will generate sufficient cash flow from operations to meet required interest and principal payments. Boardwalk REIT is subject to the risk that it may not be able to refinance existing indebtedness upon maturity or that the terms of such refinancing may be onerous. These factors may adversely affect Boardwalk REIT's cash distributions. In addition to mortgages associated with the majority of the properties owned by Boardwalk REIT, Boardwalk REIT, through the Partnership, has an outstanding credit facility of $200 million (the "Facility"). See 381376 v2 - 60 "Strategy for Growth – Managing Capital". Certain properties have a first or second charge registered against them as security for the Facility. The interest rate charged under the Facility varies depending on the charged properties but will be a blend of the prime rate established by the lender for Canadian dollar loans made in Canada (the "Prime Rate") and Prime Rate plus 1%. The Facility also has various other fees including an arrangement fee, a commitment fee, an administration fee and a renewal fee which in the aggregate are not material to Boardwalk REIT. In addition to the charge on specific properties (the "Secured Properties"), the Facility provides for an assignment of rents, an assignment of insurance proceeds in the event of loss of any of the Secured Properties and guarantees from various subsidiary entities. The Partnership and other entities which have guaranteed the Facility are prohibited from paying distributions in the event that any mortgage on real property owned by or for the benefit of the REIT is in default in payment, unless a specific reserve in respect of such mortgage is retained. In the event that Boardwalk REIT defaults in payment of any mortgage and is unable or unwilling to establish an appropriate reserve, distributions to Unitholders would be prohibited. In addition, the Facility has certain operational covenants, including that the debt service coverage ratio is to be maintained at not less than 1.20:1, the debt service coverage ratio specific to the Secured Properties is to be maintained at not less than 115% and the total indebtedness of Boardwalk REIT will not exceed 70% of the Gross Book Value of the properties owned by Boardwalk REIT calculated in accordance with the Declaration of Trust. Boardwalk has issued an aggregate of $120,000,000 worth of Series A Senior Unsecured Debentures (the "Debentures"), which, as of July 30, 2008, bear an interest rate of 5.61% and which are more particularly described in this AIF under the heading "Description of Other Securities and Ratings - Senior Unsecured Debentures". Although the trust indenture governing the Debentures does not directly limit Boardwalk REIT's ability to pay distributions on the Units, the Debenture trust indenture does contain certain financial covenants which, if breached, entitle the holders of Debentures to accelerate the debt and demand payment. In such circumstances, Boardwalk REIT's ability to continue to pay cash distributions on the Units could be affected. Boardwalk has entered into a large borrower agreement which was amended and restated on January 19, 2005 and April 25, 2006 (the "LBA") with CMHC. CMHC, under a program generally available to Canadian homeowners, guarantees mortgage debt. Approximately 98% of Boardwalk REIT's mortgage debt is insured by CMHC and, in accordance with CMHC's normal practice for large borrowers, Boardwalk REIT was required to enter into the LBA. CMHC is not a lender to Boardwalk REIT but, under the LBA, Boardwalk REIT is required to provide periodic operating and performance information to CMHC. The LBA also contains various financial performance covenants. If Boardwalk REIT fails to meet such performance covenants for four consecutive fiscal quarters and is unable or unwilling to pay into a reserve account an amount sufficient to remedy such performance covenants or to pay out the offending mortgages, then CMHC can prohibit Boardwalk REIT from making cash distributions on the Units. Acquisition Performance Risk Boardwalk REIT's strategy includes, in part, the ability of the Trust to acquire additional rental properties. The acquisitions of these properties are based on predetermined financial operational and financing strategies that, once fully implemented, will result in an acceptable return for the Trust as a whole. It is possible that the actual performance of these acquisitions may be materially different from the assumptions made in purchasing same, resulting in a negative outcome for the Trust as a whole. Operational Risk Operational Risk is the risk that a direct or indirect loss may result from an inadequate or failed technology, from a human process or from external events. The impact of this loss may be financial loss, loss of reputation or legal and regulatory proceedings. The Trust endeavours to minimize losses in this area by ensuring 381376 v2 - 61 that effective infrastructure and controls exist. These controls are constantly reviewed and improvements are implemented, if deemed necessary. Dependence on the Operating Trust and the Partnership Boardwalk REIT is entirely dependent on the business of the Partnership through its ownership of the Operating Trust and, indirectly, LP Class A Units. The cash distributions to Unitholders are dependent on the ability of the Operating Trust to pay distributions in respect of the Operating Trust Units and interest on the Operating Trust Notes and the ability of the Partnership to pay distributions on the LP Class A Units, LP Class B Units and LP Class C Units. The ability of the Partnership to pay distributions or make other payments or advances to the Operating Trust may be subject to contractual restrictions contained in any instruments governing the indebtedness of the Partnership. The ability of the Partnership to pay distributions or make other payments or advances will also be dependent on the ability of the Partnership's subsidiaries to pay distributions or make other payments or advances to the Partnership. Fluctuations of Cash Distributions Although Boardwalk REIT intends to distribute its Distributable Income, the actual amount of Distributable Income distributed in respect of the REIT Units will depend upon numerous factors, including, but not limited to, the amount of principal repayments, tenant allowances, leasing commissions, capital expenditures and REIT Unit redemptions and other factors that may be beyond the control of Boardwalk REIT. The distribution policy of Boardwalk REIT is established by the Trustees and is subject to change at the discretion of the Trustees. The recourse of Unitholders who disagree with any change in policy is limited and could require such Unitholders to seek to replace the Trustees. Distributable Income may exceed actual cash available to Boardwalk REIT from time to time because of items such as principal repayments, tenant allowances, leasing commissions, capital expenditures and redemption of REIT Units, if any. Boardwalk REIT may be required to use part of its debt capacity or to reduce distributions in order to accommodate such items. Boardwalk REIT may temporarily fund such items, if necessary, through an operating line of credit in expectation of refinancing long-term debt on its maturity. Workforce Availability Boardwalk's ability to provide services to its existing customers is somewhat dependant on the availability of well-trained associates and contractors to service our customers as well as to complete required maintenance and capital upgrades on our buildings The Trust must also balance requirements to maintaining adequate staffing levels while balancing the overall cost to the Trust. Within Boardwalk, our most experienced associates are employed full-time while supplementing these with additional part time employees as well as contracting out specific services. We are constantly reviewing existing overall market factors to ensure that our existing compensation program is in-line with existing levels of responsibilities and if warranted adjusting the program accordingly. We also encourage associate feedback in these areas to ensure the existing programs are meeting their personal needs. Market Price of REIT Units One of the factors that may influence the market price of the REIT Units is the annual yield thereon. Accordingly, an increase in market interest rates may lead purchasers of REIT Units to expect a higher annual yield which could adversely affect the market price of the REIT Units. In addition, the market price for the REIT Units may be affected by changes in general market conditions, fluctuations in the markets for equity securities, short-term supply and demand factors for real estate investment trusts and numerous other factors beyond the control of Boardwalk REIT. 381376 v2 - 62 The Trust has no obligation to distribute to Unitholders any fixed amount, and reductions in, or suspensions of, cash distributions may occur that would reduce yield based on the offering price. Legal Rights Normally Associated with the Ownership of Shares of a Corporation As holders of REIT Units, Unitholders do not have all of the statutory rights normally associated with ownership of shares of a company including, for example, the right to bring "oppression" or "derivative" actions against Boardwalk REIT. The REIT Units are not "deposits" within the meaning of the Canada Deposit Insurance Corporation Act (Canada) and are not insured under the provisions of that Act or any other legislation. Furthermore, Boardwalk REIT is not a trust company and, accordingly, is not registered under any trust and loan company legislation as it does not carry on or intend to carry on the business of a trust company. Ability of Unitholders to Redeem REIT Units It is anticipated that the redemption right attached to the REIT Units will not be the primary mechanism by which holders of such REIT Units liquidate their investments. The entitlement of holders of REIT Units to receive cash upon the redemption of their REIT Units is subject to the limitations that: (i) the total amount payable by Boardwalk REIT in respect of such REIT Units and all other REIT Units, other than Special Voting Units, tendered for redemption in the same calendar month shall not exceed $50,000 (provided that such limitation may be waived at the discretion of the Trustees); (ii) at the time such REIT Units are tendered for redemption, the outstanding REIT Units shall be listed for trading on a stock exchange or traded or quoted on another market which the Trustees consider, in their sole discretion, provides representative fair market value prices for such REIT Units; and (iii) the normal trading of the REIT Units is not suspended or halted on any stock exchange on which such REIT Units are listed (or, if not listed on a stock exchange, on any market on which such REIT Units are quoted for trading) on the redemption date or for more than five trading days during the 20-day trading period commencing immediately after the redemption date. Regulatory Approvals May be Required in Connection with a Distribution of Securities on a Redemption of REIT Units or the Termination of Boardwalk REIT Upon redemption of REIT Units or termination of Boardwalk REIT, the Trustees may distribute securities directly to the Unitholders, subject to obtaining any required regulatory approvals. No established market may exist for the securities so distributed at the time of the distribution and no market may ever develop. In addition, the securities so distributed may not be qualified investments for RRSPs, RRIFs, DPSPs or RESPs, depending upon the circumstances at the time. An Investment in REIT Units are Subject to Certain Tax Risks There can be no assurance that Canadian federal income tax laws respecting the treatment of mutual fund trusts will not be changed in a manner which adversely affects the holders of REIT Units. Boardwalk REIT currently qualifies as a "mutual fund trust" for income tax purposes. Boardwalk REIT is required by its Declaration of Trust to annually distribute all of its taxable income to REIT Unitholders and thus is generally not subject to tax on such amount. In order to maintain its current mutual fund trust status, Boardwalk REIT is required to comply with specific restrictions regarding its activities and the investments held by it. If Boardwalk REIT was to cease to qualify as a mutual fund trust, the consequences could be adverse. If Boardwalk REIT were to cease to qualify as a "mutual fund trust" and were also to cease to be a "registered investment" under the Tax Act, the REIT Units would cease to be qualified investments for trusts governed by registered retirement savings plans, registered retirement income funds, registered education savings plans, deferred profit sharing plans and registered disability savings plans (collectively, "Plans") effective January in the second calendar year following the year in which Boardwalk REIT ceases to be a registered investment. The Tax Act imposes penalties for the acquisition or holding by Plans of non-qualified investments. Boardwalk 381376 v2 - 63 REIT will endeavour to ensure that the REIT Units continue to be qualified investments for Plans; however, there can be no assurance that this will be so. Other consequences of Boardwalk REIT ceasing to be a mutual fund trust would be as follows: (a) REIT Units held by non-resident Unitholders would immediately become taxable Canadian property. Non-resident Unitholders would be subject to Canadian income tax and reporting requirements on any gains realized on a disposition of REIT Units held by them; (b) Boardwalk REIT would, aside from the Proposals, be taxed on certain types of income distributed to Unitholders. Payment of this tax may have adverse consequences for some Unitholders, particularly Unitholders that are not residents of Canada and residents of Canada that are otherwise exempt from Canadian income tax; (c) Boardwalk REIT would cease to be eligible for the capital gains refund mechanism available under Canadian tax laws to mutual fund trusts; and (d) Boardwalk REIT would no longer be exempt from the application of the alternative minimum tax provisions of the Tax Act. On June 22, 2007, amendments to the Tax Act relating to the federal income taxation of publicly traded trusts, partnerships and their unitholders received royal assent. Under those rules (hereinafter the “SIFT Rules”, and which, for greater certainty, include all proposed amendments to said rules publicly amended by or on behalf of the Department of Finance (Canada) prior to the date hereof on the assumption such proposed amendments will be executed substantially in the form proposed) a trust that is a "SIFT trust" will be subject to tax at the prevailing federal corporate income tax rate, plus an additional provincial tax factor, on certain income that is distributed to its unitholders, and such distributions will be treated as taxable dividends paid by a taxable Canadian corporation. The SIFT Rules generally will not apply to a trust that qualified as a SIFT trust on October 31, 2006, until January 1, 2011. The definition of a "SIFT trust" specifically excludes a trust that is a "real estate investment trust" for the taxation year, which is defined under the SIFT Rules as a trust that is resident in Canada and that satisfies all of the following criteria: (a) the trust at no time in the taxation year holds any non-portfolio property other than qualified REIT properties; (b) not less than 95% of the trust's revenues for the taxation year are derived from one or more of the following: (i) rent from real or immovable properties, (ii) interest, (iii) capital gains from dispositions of real or immovable properties, (iv) dividends, and (v) royalties; (c) not less than 75% of the trust's revenues for the taxation year are derived from one or more of the following: (i) rent from real or immovable properties; (ii) interest from mortgages, or hypothecs, on real or immovable properties; (iii) capital gains from dispositions of real or immovable properties situated in Canada"; and (d) at each time in the taxation year an amount, that is equal to 75% or more of the equity value of the trust at that time, is the amount that is the total fair market value of all properties held by the trust, 381376 v2 - 64 each of which is real or immovable property, indebtedness of a Canadian corporation represented by a bankers’ acceptance, a deposit with a credit union, money, bank deposits, and debt of or guaranteed by the Government of Canada or a province or other political subdivision. For this purpose, and as the SIFT Rules are proposed to be amended: “Qualified REIT property” of the trust includes (i) real or immovable property, (ii) a security of another entity (corporate, trust or partnership) resident in Canada if that other entity derives all or substantially all of its revenues from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the trust or of an entity of which the trust holds a share or an interest, or if that other entity holds no property other than (A) legal title to real or immovable property of the trust or of another entity all of the securities of which are held by the trust or (B) property ancillary to the earning by the trust of rent from real or immovable properties or capital gains from dispositions of real or immovable properties, and (iii) property that is ancillary to the earning by the trust of rent from real or immovable properties or capital gains from dispositions of real or immovable properties; “Real or immovable property” includes a security of any trust, corporation or partnership that itself satisfies the criteria to be a “real estate investment trust” (or that would satisfy them if it were a trust), but does not include any depreciable property other than property included in Classes 1, 3 or 31 (or property ancillary thereto); and “Rent from real or immovable property” includes payments for services ancillary to, and customarily provided in connection with, the rental of real or immovable properties, and income from a trust that was derived from rent from real or immovable properties. If Boardwalk REIT, or any other trust, does not qualify under these new rules as a real estate investment trust commencing January 1, 2011, it will no longer be able to deduct for tax purposes its taxable distributions and, as such, will be required to pay tax on this amount prior to distribution. Any amount distributed that is determined to be a return of capital would not be subject to this tax. It is the current belief of management that if these amendments are enacted substantially in the form proposed, Boardwalk REIT, with its current structure, would qualify as a real estate investment trust under the SIFT Rules. The Declaration of Trust of Boardwalk REIT provides that a sufficient amount of Boardwalk REIT's net income and net realized capital gains will be distributed each year to Unitholders, in cash or otherwise, in order to eliminate Boardwalk REIT's liability for tax under Part I of the Tax Act. Where such amount of net income and net realized capital gains of Boardwalk REIT in a taxation year exceeds the cash available for distribution in the year, such excess net income and net realized capital gains will be distributed to Unitholders in the form of additional REIT Units. Unitholders will generally be required to include an amount equal to the fair market value of those REIT Units in their taxable income, in circumstances where they do not directly receive a cash distribution. Although Boardwalk REIT is of the view that all expenses to be claimed by Boardwalk REIT, the Operating Trust and the Partnership will be reasonable and deductible, that the cost amount and capital cost allowance claims of entities indirectly owned by Boardwalk REIT will have been correctly determined and that the allocation of the Partnership's income for purposes of the Tax Act among its partners is reasonable, there can be no assurance that the Tax Act or the interpretation of the Tax Act will not change, or that the CRA will agree. If the CRA successfully challenges the deductibility of such expenses or the allocation of such income, the Partnership's allocation of income to the Operating Trust, and indirectly the taxable income of Boardwalk REIT and the Unitholders, may be adversely affected. The extent to which distributions will be tax-deferred in the future will depend in part on the extent to which entities indirectly owned by Boardwalk REIT are able to deduct capital cost allowance relating to the Contributed Assets held by them. 381376 v2 - 65 Since the Partnership acquired the relevant properties on a tax-deferred basis, its tax cost in certain properties may be less than their fair market value. Accordingly, if one or more properties are disposed of, the gain recognized by the Partnership may be in excess of that which it would have realized if it had acquired the properties at their fair market values. Immediately prior to the Plan of Arrangement becoming effective, the Corporation transferred the Contributed Assets to the Partnership and received, as consideration therefor, (i) an assumption of all of the indebtedness of the Corporation associated with the Contributed Assets (other than the Retained Debt), (ii) the LP Note, and (iii) a credit to the capital accounts in respect of each of the LP Class B Units and the LP Class C Units, all of which were owned at that time by the Corporation. See "Overview of the Acquisition and the Arrangement Replacing the Corporation as a Public Entity with Boardwalk REIT — Pre-Arrangement Reorganization." The transfer and contribution were effected as a "rollover" under subsection 97(2) of the Tax Act, and the Corporation, based on the advice of legal counsel, is of the view that there is no income tax payable in connection therewith. There can be no assurance that the CRA will not take a contrary view; however, the Corporation has been advised by counsel that, in such event, the CRA would not be successful. If, contrary to this, the CRA successfully challenges the rollover, income tax may be payable by the Corporation in connection with the transfer and contribution of the Contributed Assets at the applicable tax rate on the value of the capital contribution in respect of the LP Class C Units. The Partnership has agreed to indemnify the Corporation for all liabilities incurred by it in connection with the Acquisition and the Arrangement, including the transfer and contribution of the Contributed Assets to the Partnership and any associated tax that might be payable by the Corporation in respect thereof. See "Overview of the Acquisition and the Arrangement replacing the Corporation as a Public Entity with Boardwalk REIT — Ancillary Agreements in Connection with the Arrangement". The amount of such indemnification would be significant and have a material adverse effect on the amount of distributable cash of the Partnership and, consequently, on the Distributable Income of Boardwalk REIT. Risks Associated with Disclosure Controls and Procedures on Internal Control Over Financial Reporting Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over financial reporting. The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations. While management continues to review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we can not assure you that our disclosure controls and procedures or internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, particularly material weaknesses, in internal control over financial reporting which may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in our trust unit price, or otherwise materially adversely affect our business, reputation, results of operation, financial condition or liquidity. The design of our disclosure controls and procedures and internal control over financial reporting has been limited to exclude controls, policies and procedures of: (i) a proportionately consolidated entity which we have an interest; (ii) a variable interest entity in which we have an interest; or (iii) a business that we have acquired note more than 365 days before our financial year end. Unitholders Limited Liability Recourse for any liability of Boardwalk REIT is intended to be limited to the assets of Boardwalk REIT. The Declaration 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 Boardwalk REIT or of the Trustees. Because of uncertainties in the law relating to investment trusts, there is a risk (which is considered by counsel to be remote in the circumstances) that a Unitholder or annuitant could be held personally liable for 381376 v2 - 66 obligations of Boardwalk REIT (to the extent that claims are not satisfied by Boardwalk REIT) in respect of contracts which Boardwalk REIT enters into and for certain liabilities arising other than out of contract including claims in tort, claims for taxes and possibly certain other statutory liabilities. Boardwalk REIT will seek to limit recourse under all of its material contracts to the assets of Boardwalk REIT. However, in conducting its affairs, Boardwalk REIT will be indirectly acquiring real property investments, including its interest in the Contributed Assets, subject to existing contractual obligations, including obligations under mortgages and leases. The Trustees will use all reasonable efforts to have any such obligations under mortgages on the Contributed Assets and material contracts, other than leases, modified so as not to have such obligations binding upon any of the Unitholders or annuitants personally. However, Boardwalk REIT may not be able to obtain such modification in all cases. To the extent that claims are not satisfied by Boardwalk REIT, there is a risk that a Unitholder or annuitant will be held personally liable for obligations of Boardwalk REIT where the liability is not disavowed as described above. In the opinion of Stikeman Elliott LLP, counsel to the Corporation, the likelihood of any personal liability attaching to Unitholders or annuitants under the laws of Alberta for contract claims where the liability is not so disavowed is remote. On July 1, 2004, Bill 34, the Income Trusts Liability Act (Alberta), came into force. Such legislation limits the liability of unitholders of income trusts governed by the laws of the Province of Alberta, including Unitholders, for any acts, defaults, obligations or liabilities of the trustees of an income trust committed after the Act came into force. A trust is considered governed by the laws of Alberta if its declaration of trust or other constating instrument contains the customary provision to that effect. The Declaration of Trust contains such a provision. Accordingly, Boardwalk REIT is governed by the laws of Alberta and its Unitholders are protected by the Income Trusts Liability Act. Ontario has enacted similar legislation intended to remove uncertainty about the liability of unitholders of publicly traded trusts. The Trust Beneficiaries' Liability Act, 2004, implemented on January 1, 2005, is a clear legislative statement that the unitholders of a trust that is a reporting issuer and governed by the laws of Ontario will not be personally liable for the obligations and liabilities of the trust or any of its trustees that arise after the Act came into force, which the Act states was December 16, 2004. As in Alberta, a trust will be considered to be governed by the laws of Ontario if its declaration of trust or other constating instrument contains the customary provision to that effect. Unitholders of income trusts, including REIT's, organized as trusts pursuant to the laws of Ontario, are all be able to gain the protection that this Act provides. Since Boardwalk REIT is governed by the laws of Alberta, Alberta's Income Trust Liability Act is the legislation that provides Unitholders with limited liability. These legislative initiatives are significant for all investors, both retail and institutional, as well as for publicly traded trusts and those who sponsor, manage or distribute them. Boardwalk REIT will seek to obtain prudent levels of insurance, where available and appropriate. However, the amounts and types of insurance obtained may not be sufficient to provide full coverage. Credit Ratings Credit ratings are intended to provide investors with an independent measure of credit quality of an issue of securities on a specific date. The credit ratings accorded to the Debentures are not a recommendation to purchase, hold or sell the Debentures inasmuch as such ratings do not comment as to market price or suitability for a particular investor and, accordingly, undue reliance should not be placed on them. There is no assurance that these ratings will remain in effect for any given period of time or that these ratings will not be revised or withdrawn entirely by DBRS in the future if in its judgment circumstances are so warranted. Accordingly, these ratings should not be relied on as of any date other than the date on the cover page of this AIF. Real or anticipated changes in credit ratings on the Debentures may affect the market value of the Debentures. In addition, real or anticipated changes in credit ratings can affect the cost at which Boardwalk can access the debenture market. 381376 v2 - 67 Structural Subordination of Debentures Liabilities of a parent entity with assets held by various subsidiaries may result in the structural subordination of the lenders to the parent entity. The parent entity is entitled only to the residual equity of its subsidiaries after all debt obligations of its subsidiaries are discharged. In the event of a bankruptcy, liquidation or reorganization of Boardwalk REIT, holders of indebtedness of Boardwalk REIT (including holders of Debentures) may become subordinate to lenders to the subsidiaries of Boardwalk REIT. Certain of the subsidiaries of Boardwalk REIT have provided a form of guarantee pursuant to which the Indenture Trustee is, subject to the Debenture Indenture, entitled to seek redress from such subsidiaries for the guaranteed indebtedness. These guarantees are intended to eliminate structural subordination which arises as a consequence of Boardwalk REIT's assets being held in various subsidiaries. Although all subsidiaries which own material assets have provided a guarantee, not all subsidiaries of Boardwalk REIT have provided such a guarantee. In addition, there can be no assurance that the Indenture Trustee will, or will be able to, effectively enforce the guarantee. Market Value Fluctuation Prevailing interest rates will affect the market value of the Debentures, as they carry a fixed interest rate. Assuming all other factors remain unchanged, the market value of the Debentures, which carry a fixed interest rate, will decline as prevailing interest rates for comparable debt instruments rise, and increase as prevailing interest rates for comparable debt instruments decline. Statutory Remedies Boardwalk REIT is not a legally recognized entity within the relevant definitions of the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act and in some cases, the Winding Up and Restructuring Act. As a result, in the event a restructuring of Boardwalk REIT were necessary, Boardwalk REIT would not be able to access the remedies available thereunder. In the event of a restructuring, a holder of Debentures may be in a different position than a holder of secured indebtedness of a corporation. New Alberta Royalty Framework The Alberta Government’s new policy with respect to the royalties on oil and gas production in the Province of Alberta became effective January 1, 2009. The new policy increases the royalties charged on oil and gas using a sliding scale based on the price of the related commodity. The new scale will now increase to approximately 50%, from 35%, on natural gas and conventional oil with additional royalties charged on production from the Alberta Oil Sands. For more details on this policy, we refer you to the following link http://www.energy.gov.ab.ca/Org/Publications/royalty_Oct25.pdf. Impact on Boardwalk REIT - Although Boardwalk REIT is not a direct investor in the oil and gas market, it has been a delayed and indirect beneficiary of the continued investment in the Oil and Gas Industry in Alberta. Investment in this area has spearheaded continued economic growth for the province and is a major contributor to the increased net migration the province has experienced over the past few years. The increased migration has helped Boardwalk REIT, as it has resulted in increased demand for rental apartments. Although it is still too early to predict the longer term impact of this new policy and potential decrease in the amount of direct investment in the Province of Alberta, the Trust will be monitoring the situation on an ongoing basis and alter existing policies to minimize the financial impact. DISTRIBUTION POLICY The following outlines the distribution policy of Boardwalk REIT as contained in the Declaration of Trust. The distribution policy may be amended only with the approval of a majority of the votes cast at a meeting of Unitholders. 381376 v2 - 68 General Boardwalk REIT may distribute to holders of REIT Units on or about each Distribution Date17 respectively such percentage of the Distributable Income for the calendar month then ended as the Trustees determine in their discretion, but, in no event, will distributions for the year be less than Boardwalk REIT's taxable income. Holders of LP Class B Units may surrender such units in exchange for REIT Units in accordance with the Limited Partnership Agreement. Prior to such surrender, holders of LP Class B Units will be entitled to receive distributions from the Partnership pro rata with distributions made by Boardwalk REIT on REIT Units. Boardwalk REIT cannot pay distributions on REIT Units unless an equivalent distribution per REIT Unit is paid on the LP Class B Units. Distributions in respect of a month will be paid on or about each Distribution Date to such Unitholders of record as at the close of business on each Distribution Record Date18. In addition, the Trustees may declare to be payable and make distributions, from time to time, out of income of Boardwalk REIT, net realized capital gains of Boardwalk REIT, the net recapture income of Boardwalk REIT, the capital of Boardwalk REIT or otherwise, in any year, in such amount or amounts, and on such dates on or before December 31 of that year as the Trustees may determine, to the extent such income, capital gains and capital has not already been paid, allocated or distributed to the Unitholders of REIT Units that are Unitholders at the record date for such distribution payable and make distributions, from time to time, out of income of Boardwalk REIT. The payment of such amounts shall be made on or before the following January 15th. There will be no distributions in respect of the Special Voting Units. Where the Trustees determine that Boardwalk REIT does not have available cash in an amount sufficient to make payment of the full amount of any distribution which has been declared to be payable pursuant to the provisions of the Declaration of Trust on the due date for such payment, the payment may, at the option of the Trustees, include the issuance of additional REIT Units, or fractions of such REIT Units, if necessary, having a fair market value as determined by the Trustees equal to the difference between the amount of such distribution and the amount of cash which has been determined by the Trustees to be available for the payment of such distribution in the case of REIT Units. Unless the Trustees determine otherwise, immediately after any pro rata distribution of additional REIT Units to all holders of REIT Units in the circumstances described in the immediately preceding paragraph, the number of the outstanding REIT Units will automatically be consolidated such that each of such holders will hold after the consolidation the same number of REIT Units as such holder held before the distribution of additional REIT Units. In this case, each REIT Unit certificate representing the number of units prior to the distribution of additional REIT Units will be deemed to represent the same number of REIT Units after the non-cash distribution of additional REIT Units and the consolidation. Notwithstanding the foregoing, where tax is required to be withheld from a Unitholder's share of the distribution, the consolidation will result in such Unitholder holding that number of units equal to (i) the number of units held by such Unitholder prior to the distribution plus the number of REIT Units received by such Unitholder in connection with the distribution (net of the number of whole and part REIT Units withheld on account of withholding taxes) multiplied by (ii) the fraction obtained by dividing the aggregate number of REIT Units outstanding prior to the distribution by the aggregate number of REIT Units that would be outstanding following the distribution and before the consolidation if no withholding were required in respect of any part of the distribution payable to any Unitholder. Such Unitholder will be required to surrender the REIT Unit 17 ''Distribution Date'' means with respect to a distribution by Boardwalk REIT, a business day determined by the Trustees for any calendar month to be on or about the 15th day of the following month. 18 ''Distribution Record Date'' means, until otherwise determined by the Trustees, the last business day of each month of each year, except for the month of December where the Distribution Record Date shall be December 31. 381376 v2 - 69 certificates, if any, representing such Unitholder's original REIT Units, in exchange for a unit certificate representing such Unitholder's post-consolidation units. Boardwalk REIT commenced monthly distributions on June 15, 2004 to holders of REIT Units on May 31, 2004. The amount of the distribution on that date was $0.103 for each REIT Unit and LP Class B Unit held, or $1.24 per REIT Unit and LP Class B Unit on an annualized basis. The amount of the distribution for each REIT Unit and LP Class B Unit held was increased to $0.105 per month, or $1.26 per REIT Unit and LP Class B Unit on an annualized basis, in December 2004, and was further increased to $0.1233 per month, or $1.48 per REIT Unit and LP Class B Unit on an annualized basis, in November 2006; $0.1333 per month, or $1.60 on an annualized basis, in June 2007; and $0.15 per month, or $1.80 on an annualized basis, in December 2007. Since the year ended December 31, 2007, Boardwalk REIT has paid the following monthly distributions on its REIT Units: Amount $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 $0.15 Record Date January 31, 2008 February 29, 2008 March 31, 2008 April 30, 2008 May 30, 2008 June 30, 2008 July 31, 2008 August 29, 2008 September 30, 2008 October 31, 2008 November 28, 2008 December 31, 2008 Payment Date February 15, 2008 March 17, 2008 April 15, 2008 May 15, 2008 June 16, 2008 July 15, 2008 August 15, 2008 September 15, 2008 October 15, 2008 November 17, 2008 December 15, 2008 January 15, 2009 LP Class B Units are entitled to an equivalent distribution as REIT Units. Distribution Reinvestment Plan Effective June 1, 2004, Boardwalk REIT adopted the Distribution Reinvestment Plan pursuant to which holders of REIT Units are entitled to elect to have all cash distributions of Boardwalk REIT automatically reinvested in additional REIT Units at a price per REIT Unit calculated by reference to a weighted average trading price for REIT Units on the TSX preceding the relevant Distribution Date. No brokerage commissions are payable in connection with the purchase of REIT Units under the Distribution Reinvestment Plan and all administrative costs are borne by Boardwalk REIT. Proceeds received by Boardwalk REIT upon the issuance of additional REIT Units under the Distribution Reinvestment Plan will be used by Boardwalk REIT for future property acquisitions, capital improvements and working capital. The Distribution Reinvestment Plan prohibits residents of the United States from participating in such plan. Residents of any other jurisdiction outside of Canada may participate in the Distribution Reinvestment Plan if permitted by the laws of the jurisdiction in which they reside, subject to certain restrictions. The terms of such plan are as follows: (a) Following enrolment in the DRIP by a Unitholder or holder of LP Class B Units (a "Class B Unitholder" and, collectively with a Unitholder, each a "DRIP Participant"), distributions due to DRIP Participants will be automatically paid to Computershare Trust Company of Canada in its capacity as agent under the DRIP (in such capacity, the "DRIP Agent") and applied to the purchase of additional REIT Units ("DRIP Units") directly from Boardwalk REIT, or in the case of Class B Unitholders, to the purchase of additional LP Class B Units ("DRIP B Units", the DRIP Units and DRIP B Units collectively referred to as the "Plan Units") directly from the Partnership. (b) Distributions due to DRIP Participants are automatically reinvested in Plan Units at a price per Plan Unit to be determined by Boardwalk REIT calculated by reference to the weighted average closing price of REIT Units on the TSX preceding the relevant Distribution Date. 381376 v2 - 70 (c) No commissions, service charges or brokerage fees will be payable by DRIP Participants in connection with the DRIP. The DRIP Agent's fees for administering the DRIP are paid by Boardwalk REIT out of its assets. (d) DRIP Participants may terminate their participation in the DRIP by providing written notice to the DRIP Agent no later than the business day immediately preceding the applicable record date. Such notice, if actually received no later than the business day immediately preceding the applicable record date, will have effect for the distribution associated with that record date, and if not so received will have effect for the next following distribution. After such termination is processed, distributions by Boardwalk REIT or the Partnership, as the case may be, are thereafter payable to such Unitholder or Class B Unitholder, as the case may be, in cash or otherwise in the form declared by Boardwalk REIT or the Partnership, as the case may be. (e) Boardwalk REIT reserves the right to amend, suspend or terminate the DRIP at any time in its sole discretion, in which case DRIP Participants and the DRIP Agent will be sent written notice thereof in accordance with the DRIP. Details and enrolment documents regarding the Distribution Reinvestment Plan were forwarded to registered holders of REIT Units on June 24, 2004. The issue of REIT Units under the Distribution Reinvestment Plan is exempt from the registration and prospectus requirements of relevant securities legislation in certain provinces of Canada. In addition, the REIT Units issued under the Distribution Reinvestment Plan are freely tradable under the provisions of such legislation. Boardwalk REIT made applications for discretionary relief from the applicable securities regulatory authorities in order to permit such REIT Units to be issued and to be freely tradable and received an order to that effect from such securities regulatory authorities on July 14, 2004. The Partnership has adopted a similar plan such that holders of LP Class B Units are entitled to elect to have all cash distributions on the LP Class B Units automatically reinvested in additional LP Class B Units on the same basis as a Unitholder pursuant to the Distribution Reinvestment Plan. Distributable Income is not a measure recognized under GAAP and does not have a standardized meaning prescribed by GAAP. Distributable Income is presented in this AIF as management believes this non-GAAP measure is a relevant measure of the ability of Boardwalk REIT to earn and distribute cash returns to Unitholders. Distributable Income as computed by Boardwalk 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 is calculated by reference to net income of Boardwalk REIT on a consolidated basis, as determined in accordance with GAAP, subject to certain adjustments as set out in the Declaration of Trust. The Trust suspended its DRIP effective February 29, 2008. Notification to that effect was mailed to DRIP participants on February 22, 2008. The DRIP provided efficient and cost-effective equity to support the Trust's financing strategy. However, with its current liquidity and Normal Course Issuer Bid, the Trust no longer requires this source of funding. The Trust may reinstate the DRIP in the future if required to fund new investing activities. For more information on the Normal Course Issuer Bid, please see the information under the heading "Strategy for Growth-Normal Course Issuer Bid". The suspension of the DRIP does not affect regular distributions and Unitholders will continue to receive the regular distribution as declared. 381376 v2 - 71 Canadian Federal Tax considerations for DRIP participants Electing distribution reinvestment option Unitholders must consider the tax consequences of their past participation in the DRIP. Generally, where Participants elect to accumulate additional Units under the distribution reinvestment plan, the Participants reinvest their distributions in additional Units at approximately 97% of the Average Market Price. (A copy of the DRIP can be found on the Trust's website at http://boardwalkreit.com/BoardwalkDRIP-June2004.pdf for a description of the Plan.) The Canada Revenue Agency (the "CRA") generally takes the position that under a DRIP where the fair market value of the Units acquired exceeds the purchase price, the difference is a benefit and must be included in the Participant's income for tax purposes. The cost of the Units acquired under the DRIP is the amount reinvested plus the amount of the benefit. The units acquired under the DRIP must be averaged with the cost of all other Units the Participant holds for the purpose of determining the adjusted cost base of all the Participant's Units. Capital gains or losses arising on a disposition of the Participant's Units will be measured by reference to the adjusted cost base of all the Participant's Units. (A copy of the Unit cost of the DRIP can be found on the Trust’s website at http://boardwalkreit.com/DRIP/). INFORMATION CONCERNING THE OPERATING TRUST The Operating Trust has been established under the Operating Trust Declaration of Trust for an indeterminate term. The following is a summary, which does not purport to be complete, of certain terms of the Operating Trust Declaration of Trust. General The Operating Trust is an unincorporated open-ended trust established under the laws of the Province of British Columbia pursuant to the Operating Trust Declaration of Trust. The Operating Trust qualifies as a "unit trust" pursuant to the Tax Act on the basis that its units are redeemable on demand by the holder thereof. The Operating Trust is a limited purpose trust and its activities are restricted to, among other things, (i) investing in units and notes or other indebtedness of Boardwalk REIT and/or the Partnership and shares of the General Partner, amounts receivable in respect of such units, notes and other indebtedness and shares and in cash and similar deposits in a Canadian chartered bank or trust company; (ii) issuing Operating Trust Units; (iii) issuing debt securities, including the Series 1 Notes and Series 2 Notes; (iv) redeeming Operating Trust Units; (v) guaranteeing the obligations of any of its subsidiaries (for greater certainty the Operating Trust will not guarantee the obligations of Boardwalk REIT) pursuant to any good faith debt for borrowed money incurred by such subsidiary and pledging securities held by the Operating Trust as security for such guarantee; (vi) satisfying the obligations, liabilities or other indebtedness of the Operating Trust; and (vii) fulfilling its obligations under the Exchange and Support Agreement. The Operating Trust may also carry on such other activities as may be reasonably incidental to the foregoing or necessary in connection with the performance by the trustees of the Operating Trust of their obligations under any agreement to which they are or may become a party for such purposes or in connection with such activities. It is the intention of the foregoing that the Operating Trust carry on its business and activities only indirectly through the Partnership. The Operating Trust cannot engage, directly or indirectly, in any activity other than those described above. The registered office of the Operating Trust is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, British Columbia V6C 2X8 and the principal office and centre of administration of the Operating Trust is at Suite 200, 1501 First Street S.W., Calgary, Alberta T2R 0W1. 381376 v2 - 72 Trustees and Officers The Operating Trust Declaration of Trust provides that there shall be no fewer than one and no more than seven trustees of the Operating Trust. The Operating Trust has two trustees, Sam Kolias and Roberto Geremia. A vacancy occurring among the trustees of the Operating Trust shall be filled by appointment by the unitholder of the Operating Trust, Boardwalk REIT. The trustees of the Operating Trust shall hold term until such time as removed by the unitholder of the Operating Trust, Boardwalk REIT, or a trustee of the Operating Trust resigns in accordance with the Operating Trust Declaration of Trust. Operating Trust Units The Operating Trust may issue an unlimited number of Operating Trust Units. The issued and outstanding units of the Operating Trust may be subdivided or consolidated from time to time by the trustees of the Operating Trust without unitholder approval. Boardwalk REIT is and will be the sole unitholder of the Operating Trust at all times. Each Operating Trust Unit represents an equal undivided beneficial interest in the Operating Trust and in any distributions by the Operating Trust, whether of net income, net realized capital gains or other amounts, and, in the event of termination or winding up of the Operating Trust, in the net assets of the Operating Trust remaining after satisfaction of all liabilities, and no Operating Trust Unit shall have preference or priority over any other. Each Operating Trust Unit entitles the holder of record thereof to one vote at all meetings of unitholders of the Operating Trust or in respect of any written resolution of unitholders of the Operating Trust. Amendments to Operating Trust Declaration of Trust Pursuant to the Operating Trust Declaration of Trust, the trustees of the Operating Trust may, from time to time, amend or alter the provisions of the Operating Trust Declaration of Trust as follows: (a) to the extent deemed by the trustees of the Operating Trust in good faith to be necessary to remove any conflicts or other inconsistencies which may exist between any of the terms of the Operating Trust Declaration of Trust and the provisions of any applicable law; (b) to the extent deemed by the trustees of the Operating Trust in good faith to be necessary to make any change or correction in the Operating Trust Declaration of Trust which is a typographical change or correction or which the trustees of the Operating Trust have been advised by legal counsel is required for the purpose of curing any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error contained in the Operating Trust Declaration of Trust; (c) to ensure continuing compliance with applicable laws (including the Tax Act), regulations, requirements or policies of any governmental authority having jurisdiction over: (i) the trustees of the Operating Trust or the Operating Trust itself; or (ii) the distribution of Operating Trust Units; (d) to ensure that the Operating Trust continues to qualify as a "unit trust" pursuant to paragraph 108(2)(a) of the Tax Act; (e) which, in the opinion of the trustees of the Operating Trust, are necessary or desirable as a result of changes, in taxation or other laws or the administration or enforcement thereof; and (f) as otherwise deemed by the trustees of the Operating Trust in good faith to be necessary or desirable. Other than as set forth above, the trustees of the Operating Trust may not amend the Operating Trust Declaration of Trust without the approval of at least 66 and 2/3% of the unitholders of the Operating Trust. 381376 v2 - 73 Redemption Right The Operating Trust Declaration of Trust provides that the Operating Trust Units are redeemable, in whole or in part, at any time on demand by the holder thereof upon delivery to Operating Trust of a duly completed and properly executed notice requiring the Operating Trust to redeem the Operating Trust Units, in form, manner of completion or execution reasonably acceptable to the trustees of the Operating Trust, together with the certificates representing the Operating Trust Units to be redeemed and written instructions as to the number of Operating Trust Units to be redeemed, as well as any further evidence the trustees of the Operating Trust may reasonably require with respect to the identity, capacity or authority of the Person giving such notice. Upon tender of the Operating Trust Units by a holder thereof for redemption, the holder of the Operating Trust Units tendered for redemption will no longer have any rights with respect to such tendered Operating Trust Units (other than the right to receive the redemption price for such Operating Trust Units) including the right to receive distributions thereon which are declared payable to unitholders of record on a date which is subsequent to the day of receipt by the Operating Trust of the redemption notice. The redemption price for each of the Operating Trust Units tendered for redemption will be equal to: (A x B) – C D Where: A = the redemption price per REIT Unit calculated as of the close of business on the date the Operating Trust Units were so tendered for redemption by the holder thereof; B = the aggregate number of REIT Units outstanding as of the close of business on the date the Operating Trust Units were so tendered for redemption by the holder thereof; C = (i) the aggregate unpaid principal amount and accrued interest thereon of the Operating Trust Notes held by or owed to Boardwalk REIT and the fair market value of any other assets or investments held by Boardwalk REIT (other than Operating Trust Units) as of the close of business on the date the Operating Trust Units were so tendered for redemption by a holder thereof minus (ii) the aggregate unpaid principal of any indebtedness and any accrued liabilities owed by Boardwalk REIT; and D = the aggregate number of Operating Trust Units outstanding held by Boardwalk REIT as of the close of business on the date the Operating Trust Units were so tendered for redemption by the holder thereof. The trustees of the Operating Trust are also entitled to call for redemption, at any time, all or part of the outstanding Operating Trust Units registered in the name of Boardwalk REIT or any other holder of Operating Trust Units at the same redemption price as described above for each Operating Trust Unit called for redemption, calculated with reference to the date the trustees of the Operating Trust approved the redemption of the Operating Trust Units. Subject to certain exemptions contained in the Operating Trust Declaration of Trust, the aggregate redemption price payable by the Operating Trust in respect of any Operating Trust Units tendered for redemption by the holders thereof during any month will be satisfied, at the option of the trustees of the Operating Trust, in immediately available funds by cheque or by such other manner of payment approved by the trustees of the Operating Trust from time to time. In certain circumstances, the Operating Trust may satisfy the redemption price in respect of the Operating Trust Units by issuing Series 2 Notes with an aggregate value equal (as determined by the trustees of the Operating Trust) to the aggregate redemption price of Operating Trust Units to be redeemed. 381376 v2 - 74 Cash Distributions The Operating Trust will distribute to Boardwalk REIT, to the extent possible, and Boardwalk REIT will have the right to receive, all of the distributable income of the Operating Trust. Such distributions will be made on or about the tenth business day following each calendar month end and are intended to be received by Boardwalk REIT prior to its related cash distribution to Unitholders. If the trustees of the Operating Trust determine that it would be in the best interests of the Operating Trust, they may reduce for any period the percentage of distributable income to be distributed to Boardwalk REIT and may choose to repay principal on the Series 1 Notes in lieu of making distributions. In addition, on December 31 of each year, the Operating Trust will make payable to its unitholder, and its unitholder will have an enforceable right to payment on such date of, a distribution of sufficient net realized capital gains, net income, and net recapture income for the taxation year ending on that date, net of any capital losses or non capital losses recognized on or before the end of such year such that the Operating Trust will not be liable for ordinary income taxes for such year, net of tax refunds. The payment of such amounts shall be made on or before the following January 10th. Notwithstanding the foregoing, if the trustees of the Operating Trust determine that the Operating Trust does not have cash in an amount sufficient to make payment of the full amount of any distribution, the payment may include the issuance of additional Operating Trust Units and/or Series 1 Notes if necessary, having a value equal to the difference between the amount of such distribution and the amount of cash which has been determined by the trustees of the Operating Trust to be available for the payment of such distribution. The value of each Operating Trust Unit so issued will be the redemption price thereof such that the issuance will not result in Boardwalk REIT being liable under the Tax Act to pay a tax imposed under Part XI of the Tax Act. Any Operating Trust Units transferred to Unitholders pursuant to a distribution in specie may be subject to resale and transfer restrictions under applicable securities laws. Operating Trust Notes The Operating Trust Notes issuable by the Operating Trust are issuable in series in Canadian currency. The Operating Trust Notes are issuable in denominations of $100.00 and integral multiples of $100.00. No fractional Operating Trust Notes will be issued and where the number of Operating Trust Notes to be received by a noteholder includes a fraction, such number shall be rounded to the next lowest $100.00 denomination. Series 1 Notes are issued to Boardwalk REIT in the principal amount of $640 million. Series 2 Notes are reserved by the Operating Trust to be issued exclusively as full or partial payment of the redemption price of the Series 1 Notes and the Operating Trust Units in the event of a redemption of REIT Units. Interest and Maturity Series 1 Notes were issued at the Effective Date in the aggregate amount of $640 million to Boardwalk REIT and are payable on demand, but have a maximum term of ten years, less a day. Such notes are non-interest bearing prior to demand, and bear interest after demand at a rate of 6% per annum. Each Series 2 Note will have a term not to exceed 25 years from the date of its issue and will bear interest at a market rate to be determined by the Operating Trust, at the time of issuance thereof, payable on the 30th day of each calendar month that each Series 2 Note is outstanding. Payment on Maturity On maturity, the Operating Trust will repay its Series 2 Notes by paying to Computershare Trust Company of Canada, as trustee of the Operating Trust Notes (the "Operating Trust Note Trustee") under the trust indenture dated May 3, 2004 providing for the issuance of the Operating Trust Notes made between the Operating Trust and Operating Trust Note Trustee (the "Operating Trust Note Indenture"), in cash, an amount 381376 v2 - 75 equal to the principal amount of the outstanding Series 2 Notes which have then matured, together with accrued and unpaid interest thereon. Redemption The Operating Trust Notes are redeemable at the option of the Operating Trust prior to maturity. Subordination / Security Payment of the principal amount and interest on the Operating Trust Notes is subordinated in right of payment to the prior payment in full of the principal of, and accrued and unpaid interest on, all other amounts owing in respect of all senior indebtedness, which is defined as all indebtedness, liabilities and obligations of the Operating Trust which, by the terms of the instrument creating or evidencing the same, will be expressed to rank in right of payment in priority to the indebtedness evidenced by the Operating Trust Note Indenture. The Operating Trust Note Indenture provides that upon any distribution of the assets of the Operating Trust in the event of any dissolution, liquidation, reorganization or other similar proceedings relative to the Operating Trust, the holders of all such senior indebtedness will be entitled to receive payment in full before the holders of the Operating Trust Notes are entitled to receive any payment. Default The Operating Trust Note Indenture provides that any of the following shall constitute an event of default: (a) default in payment of the principal of the Operating Trust Notes when the same becomes due and the continuation of such default for a period of ten business days; (b) default in payment of any interest due on any Operating Trust Notes and continuation of such default for a period of ten business days; (c) default in the observance or performance of any other covenant or condition of the Operating Trust Note Indenture and continuance of such default for a period of 30 days after notice in writing has been given by the Operating Trust Note Trustee specifying such default and requiring the Operating Trust to rectify the same; and (d) certain events of dissolution, liquidation, reorganization or other similar proceedings relative to the Operating Trust. The provisions governing an event of default under the Operating Trust Note Indenture and remedies available thereunder do not provide protection to the holders of Operating Trust Notes which would be comparable to the provisions generally found in debt securities issued to the public. Subordination Agreements Pursuant to the terms of the Operating Trust Note Indenture, the Operating Trust Note Trustee may enter into subordination agreements with the holders of certain senior indebtedness under which the Operating Trust Note Trustee, on behalf of the holders of Operating Trust Notes, may agree directly with a holder of senior indebtedness in implementation of and/or in addition to the subordination terms described under the sub-heading "Subordination/Security" above. The Operating Trust Note Trustee may give a holder of senior indebtedness a power of attorney to be exercised in any creditor proceedings to enforce the terms thereof. The Operating Trust Note Trustee may also agree to ensure any transferee of Operating Trust Notes (or other securities of the Operating Trust) agrees to be bound by the provisions of the subordination agreements. Registration and Transfers of Operating Trust Units As the Operating Trust Units are not likely to be issued to or held by any person other than Boardwalk REIT, registration of interests in, and transfers of, the Operating Trust Units will not be made through the book 381376 v2 - 76 entry only system administered by Canadian Depository for Securities Limited. Rather, holders of the Operating Trust Units will be entitled to receive certificates therefor. INFORMATION CONCERNING THE PARTNERSHIP General The Partnership is a limited partnership formed under the laws of the Province of British Columbia. As a result of the Acquisition and the Arrangement, the Partnership holds all of the direct and indirect interests in the Contributed Assets. The registered office of the Partnership is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, British Columbia V6C 2X8 and the principal place of business of the Partnership is located at Suite 200-1501 First Street S.W., Calgary, Alberta T2R 0W1. The General Partner Boardwalk Real Estate Management Ltd. (the "General Partner") is the general partner of the Partnership. The General Partner is a wholly owned subsidiary of Boardwalk REIT. LP Units The Partnership is authorized to issue an unlimited number of LP Class A Units, an unlimited number of LP Class B Units and an unlimited number of LP Class C Units (collectively, "LP Units"), and, subject to certain restrictions, such other classes of partnership interests as the General Partner may decide from time to time. All of the LP Class A Units are held by the Operating Trust, the LP Class C Units are held by the Corporation and the LP Class B Units are held by BEI Subco. The LP Class B Units, together with the accompanying Special Voting Units, except as otherwise noted, have economic and voting rights equivalent in all material respects to the REIT Units. In particular, subject to certain limitations contained in the Limited Partnership Agreement and the Exchange and Support Agreement, each LP Class B Unit entitles the holder thereof to receive and, subject to applicable law, the Partnership will declare, a distribution on each LP Class B Unit equal to the amount of a distribution declared by Boardwalk REIT on each REIT Unit on the date of such distribution's declaration. Additional principal terms of the LP Class B Units are as follows: (i) the LP Class B Units may be surrendered, on a one-for-one basis (subject to customary anti-dilution provisions) for REIT Units at the option of the holder, at any time unless this would jeopardize Boardwalk REIT's status as a "unit trust", "mutual fund trust" or "registered investment" under the Tax Act; (ii) each LP Class B Unit is accompanied by a Special Voting Unit which will entitle the holder thereof to receive notice of, to attend and to vote at all meetings of Unitholders (except in respect of LP Class B Units previously surrendered); and (iii) except as required by law and in certain specified circumstances where the rights of a holder of LP Class B Units are affected, holders of the LP Class B Units are not entitled to vote at any meeting of the limited partners of the Partnership. The Partnership, the Operating Trust, Boardwalk REIT, the Corporation, BEI Subco and the holders of LP Class B Units have and will enter into any agreements necessary to give effect to the foregoing terms of the LP Class B Units, including the Exchange and Support Agreement. Pursuant to a letter agreement, dated effective January 6, 2005, Messrs. Sam and Van Kolias, the sole owners, indirectly through their 100 % ownership interest in the Corporation (following the Effective Date) and its wholly-owned subsidiary, BEI Subco, of all of the issued and outstanding LP Class B Units, have agreed that, as long as they control BEI Subco, they will ensure that the LP Class B Units are not sold to a third party without the consent of Boardwalk REIT. Such agreement does not limit the right of the Koliases or any related or controlled entity to use the LP Class B Units as collateral for any liability or obligation, corporate or otherwise. The agreement also allows the Koliases the freedom to deal with the LP Class B Units in response to a business 381376 v2 - 77 combination proposal involving Boardwalk REIT without the consent of the Trust, whether in connection with a lock-up agreement, voting agreement or commitment to tender, to sell or any other obligation. In addition, the agreement provides that the Koliases are able, at any time during the course of the agreement, to exchange all or a portion of the LP Class B Units for REIT Units, as well as sell any and/or all of the issued and outstanding securities of the Corporation and/or BEI Subco, without restriction. The agreement was entered into by Boardwalk REIT and the Koliases in response to the Canadian Institute of Chartered Accounts' Emerging Issues Committee Abstract 151, dated January 19, 2005 and entitled "Exchangeable Securities Issued by Subsidiaries of Income Trusts", which provides that if there are no restrictions on the transferability of the exchangeable securities of an income trust, such as LP Class B Units, such exchangeable securities must be accounted for as a minority interest on the income trust's balance sheet and not as equity. Boardwalk REIT determined that accounting for the LP Class B Units as a minority interest on its balance sheet and not equity would not accurately reflect the true nature of such securities, which are, as described herein, the economic equivalent, in all material respects, with REIT Units, and that accounting for such LP Class B Units as a minority interest and not as equity would run counter to Canadian Securities Administrators' National Policy 41-201, entitled "Income Trusts and Other Indirect Offerings", section 3.2 of which requires business entities like the Corporation that have transferred their assets to an income trust in a transaction similar to the Acquisition and Arrangement, to maintain a continuity of interest in their reporting of financial results. Accordingly, in the interests of allowing Boardwalk REIT to prepare and file financial statements on a comparative basis for periods prior to the Effective Date, the Koliases have agreed to the restrictions on transferability of the LP Class B Units as set out in the agreement. Pursuant to the Declaration of Trust and the Exchange and Support Agreement, if an offer, issuer bid (other than an exempt issuer bid), take-over bid (other than an exempt take-over bid) or similar transaction with respect to the REIT Units is proposed by Boardwalk REIT or is proposed to Boardwalk REIT or holders of REIT Units, and is recommended by the Board of Trustees, or is otherwise effected or to be effected with or without the consent or approval of the Trustees, and the LP Class B Units are not withdrawn in accordance with their terms or surrendered for REIT Units in accordance with the Exchange and Support Agreement, Boardwalk REIT will, to the extent possible in the circumstances, expeditiously and in good faith, take all such actions and do all such things as are necessary or desirable to enable and permit holders of those LP Class B Units to participate in such offer to the same extent and on an economically equivalent basis as the holders of REIT Units, without discrimination. Without limiting the generality of the foregoing, Boardwalk REIT will, to the extent possible in the circumstances, expeditiously and in good faith, use commercially reasonable efforts to ensure that holders of LP Class B Units may participate in all such offers without being required to surrender such units for withdrawal or exercise their right to exchange such units (or, if so required, to ensure that any such surrender or exchange will be effective only upon, and will be conditional upon, the successful closing of the offer and only to the extent necessary to tender to or deposit under the offer). In the event of the liquidation, dissolution or winding-up of the Partnership or any other distribution of the assets of the Partnership among the holders of the units of the Partnership for the purpose of winding up its affairs, a holder of LP Class B Units will be entitled, subject to applicable law, to receive in respect of each LP Class B Unit held by such holder on the effective date of such liquidation, dissolution or winding-up, one REIT Unit for each LP Class B Unit. As long as any of the LP Class B Units are outstanding, the Partnership will not at any time without, but may at any time with, the approval of the holders of the LP Class B Units: (a) pay any distribution on the LP Class A Units unless distributions payable on the LP Class B Units have been paid; (b) offer to redeem or purchase or make any capital distribution in respect of the LP Class A Units, unless the Partnership makes a contemporaneous offer to redeem or purchase a proportionate number of LP Class B Units on the same terms and conditions and for identical consideration per unit of the Partnership or makes an equivalent capital distribution per unit of the Partnership in respect of the LP Class B Units; or (c) issue any additional LP Class A Units unless Boardwalk REIT has issued the same number of REIT Units. The LP Class B Units may be issued in respect of other transactions involving the Partnership from time to time. 381376 v2 - 78 The LP Class A Units, all of which are owned by the Operating Trust, have terms similar to those attached to the LP Class B Units, except that the holders of LP Class A Units (i) are not entitled to receive REIT Units in the event of a full or partial surrender of the LP Class A Units or upon the liquidation, dissolution or winding up of the Partnership; (ii) are entitled to receive a distribution on the LP Class A Units in an amount sufficient to allow Boardwalk REIT and the Operating Trust to pay their expenses but will not be entitled to receive a distribution equal to the distribution on REIT Units; and (iii) are entitled to receive notice of, to attend and vote at all meetings of the partners of the Partnership, but will not be entitled to receive notice of, to attend or vote at meetings of the Unitholders. The LP Class C Units are entitled to preferred partnership distributions in amounts at least sufficient to permit the Corporation, as the holder of such units, to meets its obligations to make all payments due and payable by the Corporation on the Retained Debt. See "Information Concerning the Partnership — Distributions". As long as any of the LP Class C Units are outstanding, the Partnership will not at any time without, but may at any time with, the approval of the holders of the LP Class C Units: (a) pay any distribution on the LP Class A Units or LP Class B Units unless distributions payable on the LP Class C Units have been paid; (b) offer to accept the withdrawal of the LP Class A Units or LP Class B Units; or (c) issue any additional LP Class C Units. In the event of the liquidation, dissolution or winding-up of the Partnership or any other distribution of the assets of the Partnership among the holders of the LP Units for the purpose of winding up its affairs, a holder of LP Class C Units will be entitled, subject to applicable law, and in priority to any distribution to the holders of LP Class A Units or LP Class B Units, to receive in respect of each LP Class C Unit held by such holder on the effective date of such liquidation, dissolution or winding-up, an amount equal to the LP Class C Preferred Liquidation Entitlement (defined below) divided by the outstanding LP Class C Units. For purposes hereof, the "LP Class C Preferred Liquidation Entitlement" means the aggregate of each amount that is (i) the principal amount of the Retained Debt that is outstanding on the liquidation date, all accrued and unpaid interest on such principal amount up to and including the liquidation date and any other amount outstanding in respect of the Retained Debt on the liquidation date, (ii) an amount of either tax that is due and payable under Part I.3 of the Tax Act or capital tax that is due and payable under any relevant provincial or territorial legislation that is reasonably attributable to the Retained Debt, and any interest or penalties thereon, and (iii) in respect of the amount of tax that is due and payable under the Tax Act or any similar provincial or territorial statute that is reasonably attributable to the foregoing distributions and any disposition whether by redemption or otherwise of any LP Class C Unit, and any interest or penalties thereon, and for greater certainty each amount under (i), (ii) and (iii) above shall be determined without duplication. The holders of LP Class C Units are entitled to receive notice of, to attend and to vote (on the basis of one vote for every 1,000 LP Class C Units held) at all meetings of holders of LP Units. Investment Guidelines and Operating Policies The operations and affairs of the Partnership are and will be conducted in accordance with the investment guidelines and operating policies contained in the Declaration of Trust. See "Investment Guidelines and Operating Policies of Boardwalk REIT." Amendments to Limited Partnership Agreement Pursuant to the Limited Partnership Agreement, the General Partner may amend the Limited Partnership Agreement without notice to or consent of any other partners, to reflect the admission, resignation or withdrawal of any partner, or the assignment by any partner of the whole or any part of such partner's interest in accordance with the Limited Partnership Agreement. The General Partner will also be entitled to make any reasonable decisions, designations or determinations not inconsistent with law or with the Limited Partnership Agreement which it may determine are necessary or desirable in interpreting, applying or administering the Limited Partnership Agreement or in administering, managing or operating the Partnership. 381376 v2 - 79 The Limited Partnership Agreement may also be amended by the General Partner with the approval of the limited partners holding more than 66 2/3% of the limited partnership units provided that: (i) except as contemplated in Article 11 and Article 12 of the Limited Partnership Agreement, any material change which affects the rights or interests of the General Partner must be approved by the General Partner; (ii) any material change which affects the rights or interests of the holders of the LP Class A Units, LP Class B Units or LP Class C Units must have special approval of the holders of such partnership units, as applicable; and (iii) any material change which affects any limited partner in a manner that is different from the effects on other limited partners shall be valid only with the consent of such limited partner. The Limited Partnership Agreement may not be amended if such amendment would change the amendment section of the Limited Partnership Agreement or cause Boardwalk REIT to fail or cease to qualify as a "mutual fund trust" or "registered investment" under the Tax Act or cause the REIT Units to constitute "foreign property" under the Tax Act or cause Boardwalk REIT to be liable for tax under Part XI of the Tax Act. Further, notwithstanding any other provision to the contrary in the Limited Partnership Agreement, no amendments may be made which in any manner would allow any limited partner to take part in the management or the administration of the business of the Partnership, reduce the interest in the Partnership of any limited partner, allow any limited partner to exercise control over the business of the Partnership, change the right of a limited partner to vote at any meeting or change the Partnership from a limited partnership to a general partnership. Distributions The Partnership will distribute to the General Partner and to the limited partners holding LP Class A Units, LP Class B Units and LP Class C Units their pro rata portions of distributable cash as set out below. Distributions will be made forthwith after the General Partner determines the distributable cash of the Partnership and determines the amount of all expenses incurred by it for acting as general partner (the "Reimbursement Distribution Amount"), which shall take place no later than the 10th day of each month. Distributable cash will represent, in general, all of the Partnership's cash on hand that is derived from any source (other than amounts received in connection with the subscription for additional interests in the Partnership) and that is determined by the General Partner not to be required in connection with the business of the Partnership. Such amount will be determined by the General Partner in a manner analogous to the manner in which Boardwalk REIT calculates Distributable Income (without reference to the "LP Class A Preferred Distribution", defined below, or the "LP Class C Preferred Distribution", defined below). Following such determination, the distributable cash will be distributed to the limited partners of the Partnership as follows: (a) to the Corporation, as holder of LP Class C Units of the amount of distributable cash of the Partnership that is equal to the aggregate of (A) 0.5% of distributable cash to a maximum of $100,000 in each fiscal year, and (B) each amount due and payable by the Corporation (i) in respect of principal, interest or any other amount under the Retained Debt; (ii) in respect of the amount of either tax that is due and payable under Part I.3 of the Tax Act or capital tax that is due and payable under any provincial or territorial statute all of which is reasonably attributable to the Retained Debt, and any interest or penalties thereon; and (iii) in respect of the amount of tax that is due and payable under either the Tax Act or any similar provincial or territorial statute that is reasonably attributable to any distributions on the LP Class C Units, including any disposition whether by redemption or otherwise of any LP Class C Unit, and any interest or penalties thereon, and for greater certainty each amount under (i), (ii) and (iii) above shall be determined without duplication; excluding, in each case, any amount arising from the default by the holder of the LP Class C Units to satisfy its obligation under or in connection with the Retained Debt, unless such default can reasonably be attributed to the conduct of the Partnership (the "LP Class C Preferred Distribution"); (b) the Reimbursement Distribution Amount to the General Partner; (c) an amount to the holders of LP Class A Units sufficient to allow Boardwalk REIT and the Operating Trust to pay their expenses (including, without limitation, any fees or commissions payable to agents or underwriters in connection with the sale of securities by Boardwalk REIT or the Operating Trust) on a timely basis (the "LP Class A Preferred 381376 v2 - 80 Distribution"); (d) an amount to the General Partner equal to 0.001% of the balance of the distributable cash of the Partnership; and (e) an amount equal to the balance of the distributable income of the Partnership to the holders of LP Class A Units and LP Class B Units in accordance with their entitlements as holders of LP Class A Units and LP Class B Units, as the case may be. However, holders of LP Class B Units are entitled to receive distributions on each such unit equal to the amount of the distribution declared on each REIT Unit. The record date and the payment date for any distribution declared on the LP Class B Units will be the same as those for the REIT Units. The holder of any LP Unit will be entitled to elect to (a) reinvest all or any portion (the "Elected Amount") of any distribution declared by the Partnership to be payable to such holder of such LP Unit provided that the election is in writing, specifies the Elected Amount and whether such distribution shall be made by the issuance of further LP Units of the same class, or in the case of LP Class B Units, REIT Units and is received by the Partnership before the payment date for such distribution. Where the election is duly made by the holder, the Elected Amount will be deemed for all purposes of the Limited Partnership Agreement (i) to be paid to and received by such holder on the payment date for such distribution, and (ii) to be reinvested by such holder as the subscription price of that number of LP units of the particular class calculated by the formula: A B Where: A = the Elected Amount, and B = the 20-day daily-volume weighted average trading price of REIT Units determined as of the payment date for such distribution; or (b) in lieu of receiving all or a portion (the "Selected Amount") of the distribution declared by the Partnership, choose to be loaned an amount from the Partnership equal to the Selected Amount, and to have the distribution of the Selected Amount made to it on the first business day following the end of the fiscal year in which such distribution would otherwise have been made. Each such loan made in a fiscal year will not bear interest and will be due and payable in full on the first business day following the end of the fiscal year during which the loan was made. Allocation of Partnership Income and Partnership Losses The aggregate Partnership Income or Partnership Loss19 for a fiscal year will be allocated as follows at the end of each fiscal year: (a) the limited partners (other than the holder of the LP Class C Units) will be allocated all Partnership Income or Partnership Loss resulting after giving effect to the amounts of Partnership Income or Partnership Loss allocated pursuant to sub-paragraphs (b), (c) and (d) below, and, subject to the elections described above, such Partnership Income or Partnership Loss allocated to the limited partners will be allocated to each person who was a limited partner at any time in such fiscal year in an amount calculated by the formula: AxC B ''Partnership Income'' or ''Partnership Loss'' mean the net income or loss of the Partnership for a fiscal year determined in accordance with the provisions of the Tax Act, subject to any adjustments in respect of such fiscal year that the General Partner determines appropriate. 19 381376 v2 - 81 Where: A = the aggregate amount of the distributions of distributable cash paid or payable to such limited partner with respect to such fiscal year as set forth above in sub-paragraph (e) under the subheading entitled "Distributions"; B = the aggregate amount of the distributions of distributable cash paid or payable to all limited partners (other than the holder of the LP Class C Units) with respect to such fiscal year as set forth above in sub-paragraph (e) under the sub-heading entitled "Distributions"; and C = such Partnership Income or Partnership Loss allocated to all limited partners (other than the holder of the LP Class C Units) with respect to such fiscal year; and (b) the General Partner will be allocated Partnership Income equal to the aggregate of (i) all Reimbursement Distribution Amounts that are paid to it (whether in such fiscal year or within 30 days thereafter) in respect of expenses incurred by it in the fiscal year; and (ii) all amounts distributed in such period to the holder of the LP Class A Units set forth above in the sub-paragraph entitled "Distributions" to the extent not taken into account in the determination of the allocation of Partnership Income; (c) the holder of LP Class C Units will be allocated Partnership Income or Partnership Loss (which Partnership Loss is not to exceed $1,000), as applicable, equal to the amount that the General Partner determines is reasonable in respect of such fiscal year; (d) the holder of LP Class A Units will be allocated Partnership Income equal to the aggregate amount of LP Class A Preferred Distributions paid or payable to such holder with respect to such fiscal year; (e) in respect of each fiscal year of the Partnership, the General Partner will credit (or debit) the current account of each class of LP Units held by a partner by the amount of the Partnership Income (or Partnership Loss) of such fiscal year that is allocated to the partner under this sub-paragraph or the following sub-paragraph in respect of such class of LP Units; and (f) in respect of each distribution that is made by the Partnership to a limited partner in respect of a class of LP Units, whether a distribution of distributable cash or otherwise the General Partner will (i) determine the portion of such distribution, if any, that is a distribution of the Partnership Income for such fiscal year and will debit the current account of the limited partner in respect of such class of LP Units by an amount equal to the amount of such portion, and (ii) determine the portion of such distribution, if any, that is a distribution or return of the capital of the Partnership and will debit the capital account of the limited partner in respect of such class of LP Units by an amount equal to the amount of such portion. Allocation of Partnership Tax Income and Partnership Tax Loss The Partnership Tax Income or Partnership Tax Loss20 for a fiscal year will be allocated to the General Partner and to each person who was a limited partner of the Partnership in that year in the manner provided below. At the end of each fiscal year, the General Partner will be allocated Partnership Tax Income in an amount equal to the aggregate of (i) all Reimbursement Distribution Amounts that are paid to the General Partner; and (ii) all other amounts distributed to the General Partner. The holder of the LP Class A Units will be allocated Partnership Tax Income for a fiscal year equal to its LP Class A Preferred Distributions for such fiscal year. The holder of LP Class C Units will be allocated Partnership Tax Income or Partnership Tax Loss (which Partnership Tax Loss is not to exceed $1,000), as applicable, equal to the amount that the General Partner determines is 20 ''Partnership Tax Income'' or ''Partnership Tax Loss'' mean, in respect of any fiscal year, income or loss of the Partnership for that fiscal year, including any taxable capital gain or allowable capital loss, determined in accordance with the provisions of the Tax Act. 381376 v2 - 82 reasonable for such fiscal year. After giving effect to such allocation to the General Partner, to the holder of LP Class A Units and to the holder of LP Class C Units, each person who was a limited partner of the Partnership (other than the older of LP Class C Units) at any point during that year will be allocated all Partnership Tax Income or Partnership Tax Loss, as determined in accordance with the Tax Act, calculated by the formula: AxC B Where: A = the aggregate amount of the cash distributions paid or payable to such limited partner with respect to such fiscal year as set forth above in sub-paragraph (e) under the sub-heading entitled "Distributions"; B = the aggregate amount of the cash distributions paid or payable to all limited partners (other than the holder of the LP Class C Units) with respect to such fiscal year as set forth above in sub-paragraph (e) under the sub-heading entitled "Distributions"; and C = such Partnership Tax Income or Partnership Tax Loss allocated to all limited partners (other than the holder of the LP Class C Units) with respect to such fiscal year. If, with respect to a given fiscal year, no cash distribution is made by the Partnership to its limited partners, the Partnership Tax Income or Partnership Tax Loss, as the case may be, for that fiscal year will be allocated to each person who was a limited partner at any time in such fiscal year in the proportion determined by the General Partner, reduced by the amount, if any, of the Partnership Tax Income allocated to the General Partner, as described in the immediately preceding paragraph. Functions and Powers of the General Partner Subject to the provisions of the Limited Partnership Agreement, the General Partner has all the obligations, rights or authority granted by applicable law. The Limited Partnership Agreement provides that the General Partner is authorized to carry out the business of the Partnership with the full power and exclusive authority to administer, manage, control and operate the operations and affairs of the Partnership and the business of the Partnership and to bind the Partnership. In addition, the General Partner has, except as otherwise provided in the Limited Partnership Agreement, all of the power and authority for and on behalf of, and in the name of, the Partnership to do or cause to be done any act, take any proceeding, make any decision and execute and deliver or cause to be delivered any instrument, deed, agreement or document on behalf of the Partnership permitted by the Limited Partnership Agreement and involving matters or transactions which are necessary for or incidental to carrying on the business of the Partnership. The General Partner is required to exercise its powers and discharge its duties honestly, in good faith and in the best interests of the Partnership and to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances and as would the director of a corporation in comparable circumstances. The General Partner is not entitled to dissolve the Partnership, wind up its affairs or effect a sale of all or substantially all of the Partnership's assets except in accordance with the provisions of the Limited Partnership Agreement. The Limited Partnership Agreement provides that all material transactions and agreements involving the Partnership must be approved by the General Partner's board of directors. Restrictions on the Authority of the General Partner The authority of the General Partner is limited in certain respects by the Limited Partnership Agreement. For example, the General Partner is prohibited, without the prior approval of the limited partners given by special resolution, from selling or otherwise disposing of all or substantially all of the assets of the Partnership. 381376 v2 - 83 Reimbursement of the General Partner The Partnership will reimburse the General Partner for all expenses incurred by the General Partner in the performance of its duties as general partner under the Limited Partnership Agreement on behalf of the Partnership. Limited Liability The General Partner will operate and carry on the business of the Partnership and conduct the affairs of the Partnership in a manner so as to ensure to the greatest extent possible the limited liability of its limited partners. However, limited partners may lose their limited liability in certain circumstances. If a limited partner loses its limited liability as a result of the negligence of the General Partner in performing its duties under the Limited Partnership Agreement, such limited partner will be indemnified by the General Partner for any costs, expenses, damages or liabilities incurred or suffered as a result of losing such limited liability. Management The executive officers of the General Partner consist of Sam Kolias, Chairman and Chief Executive Officer; Van Kolias, Senior Vice President, Quality Control; Roberto A. Geremia, President,; Kevin Screpnechuk, Senior Vice President, Rental Operations; William Chidley, Senior Vice President, Corporate Development; Jean Denis, Vice President, Acquisitions Eastern Canada; Michael Guyette, Chief Information Officer and Vice President, Technology; Helen Mix, Vice President, Human Resources; Ian Dingle, Vice President, Purchasing; Lisa Russell, Vice President, Acquisitions, Western Canada; Kelly Mahajan, Vice President, Customer Services and Process Design; Dean Burns, Vice President, General Counsel & Secretary; Lizaine Wheeler, Vice President, Operations – British Columbia, Southern Alberta and Saskatchewan; Jonathan Brimmell, Vice President, Operations – Ontario and Quebec; and William Wong, Chief Financial Officer. The executive officers have extensive experience in acquiring, refurbishing and profitably managing multi-family residential properties. Additional officers or personnel may be employed by Boardwalk REIT or provided under the Boardwalk REIT Administrative Services Agreement to support management in fulfilling its duties. In addition to the services it obtains under the Boardwalk REIT Administrative Services Agreement, Boardwalk REIT may also outsource other services necessary to its operations to third parties, subject to approval of the Trustees as necessary. The following table sets forth the name, province and county of residence, current office held with the General Partner and the principal occupation during the last five years of each of the executive officers of the General Partner: Name and Municipality of Residence Sam Kolias(1) Alberta, Canada Van Kolias Alberta, Canada Roberto A. Geremia Alberta, Canada William Chidley Alberta, Canada Kevin P. Screpnechuk Alberta, Canada Position Held Chief Executive Officer Senior Vice President, Quality Control President Senior Vice President, Corporate Development Senior Vice President, Rental Operations Principal Occupation Executive of General Partner since May 3, 2004 and, prior thereto, Executive of the Corporation. Executive of General Partner since May 3, 2004 and, prior thereto, Executive of the Corporation. Executive of General Partner since May 3, 2004 and, prior thereto, Executive of the Corporation. Executive of General Partner since May 3, 2004 and, prior thereto, Executive of the Corporation. Executive of General Partner since May 3, 2004 and, prior thereto, Executive of the Corporation. 381376 v2 - 84 Name and Municipality of Residence Jean Denis Quebec, Canada Michael Guyette Alberta, Canada Helen Mix Alberta, Canada Position Held Vice President, Acquisitions, Eastern Canada Chief Information Officer and Vice President, Technology Vice President, Human Resources Principal Occupation Executive of General Partner since May 3, 2004 and, prior thereto, Executive of the Corporation since December 2002. Executive of General Partner since May 3, 2004 and, prior thereto, Executive of the Corporation since October 2000. Executive of General Partner since May 3, 2004 and, prior thereto, Executive of the Corporation since January 2003. Prior thereto, Ms. Mix held various human resources and payroll positions with the Corporation since July 1999. Executive of General Partner since June 1, 2006 and, prior thereto, Director of Purchasing and Contracts since 1999. Executive of General Partner since May 3, 2004 and, prior thereto, Executive of the Corporation since March 2003. Prior thereto, Ms. Russell held various operations and acquisitions positions with the Corporation since September 1995. Executive of General Partner since May 3, 2004 and, prior thereto, Executive of the Corporation since December 2002. Executive of General Partner since December 15, 2004 and prior thereto, Director of Taxation and Financial Reporting of the Corporation since October 2002. Executive of the General Partner since November 1, 2004 and, prior thereto, Director of Legal Affairs of the General Partner since May 25, 2004. Prior thereto, Mr. Burns was a barrister and solicitor, and prior thereto, a student-at-law, with the law firm of Stikeman Elliott LLP in Calgary, Alberta, from August 1999 to May 15, 2004. Executive of the General Partner since March 1, 2006 and, prior thereto, Director, Operations, B.C. and Southern AB, since March, 2000. Executive of the General Partner since March 1, 2006 and, prior thereto, Regional Director, Operations, Ontario, since March, 2001. Ian Dingle Alberta, Canada Lisa Russell Alberta, Canada Vice President, Purchasing & Contracts Vice President, Acquisitions, Western Canada Kelly Mahajan Alberta, Canada William Wong Alberta, Canada Dean Burns Alberta, Canada Vice President, Customer Services and Process Design Chief Financial Officer Vice President, General Counsel and Secretary Lizaine Wheeler Alberta, Canada Jonathan Brimmell Ontario, Canada Vice President, Operations – B.C., Southern AB & Sask. Vice President, Operations – Ontario & Quebec Note: (1) Also a director of the General Partner. The directors of the General Partner are the Trustees. INFORMATION CONCERNING THE CORPORATION History The Corporation was incorporated under the ABCA on July 14, 1993. On August 15, 1994, the Corporation filed Articles of Amendment under the ABCA to effect a two for one common share split. On September 28, 1998, the Articles of the Corporation were amended and restated to create preferred shares ("Preferred Shares"), Series I and on March 2, 1999, the Articles of the Corporation were further amended and restated to increase the number of Series I Preferred Shares from 4,624,997 to 5,604,956. On March 7, 2001, the Articles of the Corporation were amended and restated to create Preferred Shares, Series II and to authorize the issuance of up to 3,399,810 Series II Preferred Shares of the Corporation. The Preferred Shares of the 381376 v2 - 85 Corporation, Series I and II, were created in connection with certain property acquisitions made by the Corporation in the fiscal years ended May 31, 1999 and December 31, 2001 respectively. Such Preferred Shares were non-voting, not entitled to a dividend and redeemable at the option of the Corporation for a redemption price of $1.00 per share. All of the issued and outstanding Preferred Shares were redeemed by the Corporation on March 25, 2004. The Articles of the Corporation were further amended and restated on November 11, 2003 to allow the Corporation to hold shareholder meetings outside of the Province of Alberta. Effective August 15, 1994, the Common Shares of the Corporation were split on a two for one basis. Effective December 1, 1997, the Corporation paid a stock dividend of one common share for each common share held. Effective December 30, 2004, the Corporation was amalgamated pursuant to the provisions of the ABCA with Newco to form a corporation also known as "BPCL Holdings Inc." Such amalgamation was effected to increase the adjusted cost base of the LP Class C Units by an amount equal to the principal amount of the Retained Debt. References hereinafter to the "Corporation" include, where appropriate and required, the amalgamated successor to the Corporation and Newco. The Corporation's principal office is located at Suite 200, 1501 First Street S.W., Calgary, Alberta, T2R 0W1. Its registered office is located at 908 Riverdale Avenue SW, Calgary, Alberta, T2S 0Y6. The Corporation was incorporated in 1993 for the purpose of making a public offering pursuant to the junior capital program in Alberta. The Corporation's major transaction pursuant to the requirements of that program was the acquisition of seven multi-family residential projects located in Calgary and Edmonton from BPCL. The transaction closed effective April 15, 1994, although pursuant to a management agreement, BPCL continued to manage the properties. The Corporation, since completing its major transaction and prior to the Effective Date, continued to acquire new properties and sold selected properties. The management agreement with BPCL was terminated effective May 31, 1996, at which time the Corporation took over management of all its properties, until the transfer of such properties to the Partnership on the Effective Date. Business of the Corporation Following the Acquisition and the Arrangement On successful completion of the Acquisition and the Arrangement, the Corporation became owned by BPCL and the Corporation retains an interest in the Partnership as a limited partner. The Corporation retains an approximate 8% equity interest (after the preferred distribution and other entitlements of the LP Class C Units, which it also holds) in the Partnership and thereby in the Contributed Assets transferred to the Partnership through its indirect interest in the LP Class B Units. In order to effect the Acquisition and the Arrangement for the benefit of all Shareholders, the Corporation retained legal title to certain real properties that were beneficially transferred to the Partnership pursuant to the Master Asset Contribution Agreement and the Corporation remains liable for the associated Retained Debt. The LP Class C Units held by the Corporation will provide preferred distributions to the Corporation that, if paid, are expected to be sufficient to permit the Corporation to meet its obligations under the Retained Debt as such obligations become due and payable. In addition, the Corporation will enter into certain arrangements with the Partnership in connection with the Corporation's continuing obligations with respect to these properties and the associated Retained Debt. The Corporation has two directors, Messrs. Sam Kolias and Van Kolias and two officers, Mr. Sam Kolias as President and Mr. Van Kolias as Secretary. See "Overview of the Acquisition and the Arrangement Replacing the Corporation as a Public Entity with Boardwalk REIT - Arrangements with BPCL". LEGAL PROCEEDINGS Neither the Corporation nor Boardwalk REIT are currently parties to any material legal proceedings, nor are any legal proceedings currently being contemplated by the Corporation or the Trust which are material to their 381376 v2 - 86 business. Management of the Corporation and Boardwalk REIT are currently not aware of any legal proceedings contemplated against the Corporation or the Trust, respectively. AUDITORS, TRANSFER AGENT AND REGISTRAR The auditors of the Trust are Deloitte & Touche LLP, chartered accountants, at its offices in Calgary, Alberta. The transfer agent and registrar of the Trust Units is Computershare Trust Company of Canada at its principal offices in Calgary, Alberta and Toronto, Ontario. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS Except as otherwise disclosed in this AIF, no transaction has been entered into since January 1, 2002 or is proposed to be entered into by the Trust or Corporation involving a senior officer or director of the Corporation, a senior officer or trustee of Boardwalk REIT, the principal shareholder of the Corporation, the principal Unitholder of the Trust, or any associate or affiliates of any of such persons or companies which has materially affected or would materially affect the Corporation, Boardwalk REIT or any affiliates thereof. INTERESTS OF EXPERTS Deloitte & Touche LLP is the auditor of the Trust and is independent within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Alberta. MATERIAL CONTRACTS The Corporation, Boardwalk REIT, the Partnership, the Operating Trust and the General Partner, as applicable, have entered into the following Material Contracts within the three most recently completed financial years or which contract is still in effect: (a) the Acquisition and Arrangement Agreement. See "Overview of the Acquisition and the Arrangement Replacing the Corporation as a Public Entity with Boardwalk REIT — The Acquisition and Arrangement Agreement". (b) the Limited Partnership Agreement. See "Information Concerning the Partnership"; (c) the Declaration of Trust. See "Declaration of Trust and Description of REIT Units"; (d) the Operating Trust Declaration of Trust. See "Information Concerning Operating Trust"; (e) the Exchange and Support Agreement. See "Overview of the Acquisition and the Arrangement Replacing the Corporation as a Public Entity with Boardwalk REIT — Ancillary Agreements in Connection with the Acquisition and the Arrangement —Exchange and Support Agreement" and "Information Concerning Operating Trust"; (f) the Master Asset Contribution Agreement and ancillary contracts entered into in connection therewith. See "Overview of the Acquisition and the Arrangement Replacing the Corporation as a Public Entity with Boardwalk REIT — Arrangements with BPCL" and "— Ancillary Agreements in Connection with the Acquisition and the Arrangement"; (g) the Boardwalk REIT Administrative Services Agreement. See "Management of Boardwalk REIT — Boardwalk REIT Administrative Services Agreement"; (h) the LBA. See "Challenges and Risks – Outstanding Indebtedness"; 381376 v2 - 87 (i) the Underwriting Agreement dated January 14, 2005 between the Trust and the National Bank Financial Inc. and RBC Dominion Securities Inc. relating to the issuance of the Debentures. See "Description of other Securities and Ratings – 5.31% Senior Unsecured Debentures; (j) the agreement between Toronto Dominion Bank and the Partnership establishing the Facility, dated January 18, 2005, as amended and restated on January 26, 2007 and December 17, 2007. See "Strategy for Growth – Managing Capital" and "Challenges and Risks – Outstanding Indebtedness"; (k) the Underwriting Agreement dated March 13, 2006 between the Trust and the National Bank Financial Inc., RBC Dominion Securities Inc. and various other underwriters relating to the Prospectus Offering. See "Management of Boardwalk REIT – Committees – Auditors' Fees"; (l) the Rights Plan. See "Rights Plan"; (m) the Debenture Indenture. See "Description of Other Securities and Ratings - Senior Unsecured Debentures"; and (n) forward interest rate lock agreements between Boardwalk REIT, the Corporation (for Retained Debt properties only) and National Bank Financial Inc., dated January 23, 2008. See "Strategy for Growth – Managing Capital". A copy of these agreements is available on SEDAR (www.sedar.com). RIGHTS PLAN A Unitholder rights plan was adopted for Boardwalk REIT at the Special Meeting and, in accordance with the Rules of the TSX, was re-adopted at an annual and special meeting of the Unitholders on May 10, 2007 (the "Rights Plan"). The Rights Plan became effective on May 3, 2004. The Rights Plan utilizes the mechanism of a "Permitted Bid" (as hereinafter described) to ensure that a person seeking control of Boardwalk REIT gives Unitholders and the Trustees sufficient time to evaluate the bid, negotiate with the initial bidder and encourage competing bids to emerge. The purpose of the Rights Plan is to protect Unitholders by requiring all potential bidders to comply with the conditions specified in the Permitted Bid provisions or risk being subject to the dilutive features of the Rights Plan. Generally, to qualify as a Permitted Bid, a bid must be made to all Unitholders and must be open for 60 days after the bid is made. If more than 50% of the REIT Units held by "Independent Unitholders" (as hereinafter defined) are deposited or tendered to the bid and not withdrawn, the bidder may take up and pay for such REIT Units. The take-over bid must then be extended for a further period of ten days on the same terms to allow those Unitholders who did not initially tender their REIT Units to tender to the take-over bid if they so choose. Thus, there is no coercion to tender during the initial 60-day period because the bid must be open for acceptance for at least ten days after the expiry of the initial tender period. The Rights Plan is designed to make it impractical for any person to acquire more than 20% of the outstanding REIT Units without the approval of the Trustees except pursuant to the Permitted Bid procedures or pursuant to certain other exemptions outlined below. Management believes that the Rights Plan taken as a whole should not be an unreasonable obstacle to a serious bidder willing to make a bona fide and financially fair offer open to all Unitholders. The provisions of the Rights Plan relating to portfolio managers are designed to prevent the triggering of the Rights Plan by virtue of the customary activities of such persons. See "Rights Plan — Portfolio Managers" below. The Rights Plan will expire ten years following May 3, 2004, subject to re-confirmation by Unitholders every three years. The following is a summary of the principal terms of the Rights Plan, which is qualified in its entirely by reference to the text of the Rights Plan, a copy of which may be obtained upon request made to the Secretary of Boardwalk REIT. 381376 v2 - 88 (a) Issue of Rights On May 3, 2004, one right (a "Right") was issued and attached to each outstanding REIT Unit. One Right will also attach to any subsequently issued REIT Units. The initial exercise price of each Right is $100 (the "Exercise Price"), subject to appropriate anti-dilution adjustments. (b) Rights Exercise Privilege The Rights will separate from the REIT Units to which they are attached and will become exercisable at (the "Separation Time") the close of business on the 10th trading day after the earlier of (A) the first date of public announcement by Boardwalk REIT or an "Acquiring Person" (as hereinafter defined) of facts indicating that a person has become an Acquiring Person (the "Voting Unit Acquisition Date"), and (B) the date of the commencement of, or first public announcement of, the intent of any person (other than Boardwalk REIT or any subsidiary of Boardwalk REIT) to commence, a take-over bid (other than a Permitted Bid or "Competing Permitted Bid" (as described below)), or two days following the date on which a Permitted Bid ceases to qualify as such, or, in either case, such later date as may be determined by the Trustees. The acquisition by a person (an "Acquiring Person"), including persons acting in concert, of 20% or more of the REIT Units, other than by way of a Permitted Bid in certain circumstances, is referred to as a "Flip-in Event". Any Rights held by an Acquiring Person on or after the earlier of the Separation Time or the first date of public announcement by Boardwalk REIT or by an Acquiring Person that an Acquiring Person has become such, will become void upon the occurrence of a Flip-in Event. Ten trading days after the occurrence of the Flip-in Event, the Rights (other than those held by the Acquiring Person) will permit the holder to purchase, for example, REIT Units with a total market value of $200, on payment of $100 (i.e., at a 50% discount). The issue of the Rights is not initially dilutive. Upon a Flip-in Event occurring and the Rights separating from the attached REIT Units, reported earnings per REIT Unit on a fully diluted or non-diluted basis may be affected. Holders of Rights who do not exercise their Rights upon the occurrence of a Flip-in Event may suffer substantial dilution. (c) Certificates and Transferability Prior to the Separation Time, the Rights will be evidenced by a legend imprinted on certificates for REIT Units and will not be transferable separately from the attached REIT Units. From and after the Separation Time, the Rights will be evidenced by Rights certificates, which will be transferable and traded separately from the REIT Units. (d) Permitted Bid Requirements i. The requirements of a Permitted Bid include the following: ii. the take-over bid must be made by way of a take-over bid circular; iii. the take-over bid must be made to all holders of REIT Units and holders of LP Class B Units, other than the bidder and must provide that LP Class B Units can be tendered through delivering the outstanding shares of a single purpose holding company, holding only LP Units and that has no other assets or liabilities other than those associated with Retained Debt; iv. the take-over bid must not permit REIT Units tendered pursuant to the take-over bid to be taken up prior to the expiry of a period of not less than 60 days from the date of the bid and then only if at such time more than 50% of the REIT Units held by Unitholders other than the bidder, its affiliates and persons acting jointly or in concert with the bidder (the "Independent Unitholders") have been tendered pursuant to the take-over bid and not withdrawn; and 381376 v2 - 89 v. if more than 50% of the REIT Units held by Independent Unitholders are tendered to the take-over bid within the 60-day period, the bidder must make a public announcement of that fact and the take-over bid must remain open for deposits of REIT Units for an additional 10 business days from the date of such public announcement. The Rights Plan allows a competing Permitted Bid (a "Competing Permitted Bid") to be made while a Permitted Bid is in existence. A Competing Permitted Bid must satisfy all the requirements of a Permitted Bid except that, provided it is outstanding for a minimum period of 35 days, it may expire on the same date as the Permitted Bid. (e) Waiver and Redemption The Trustees may, prior to a Flip-in Event, and in certain circumstances without the approval of Unitholders, waive the dilutive effects of the Rights Plan in respect of a particular Flip-in Event. At any time prior to the occurrence of a Flip-in Event, and in certain circumstances without the approval of Rights holders, the Trustees may redeem all, but not less than all, of the outstanding Rights at a price of $0.00001 each. (f) Waiver of Inadvertent Flip-in Event The Trustees may, prior to the close of business on the tenth day after a person has become an Acquiring Person, waive the application of the Rights Plan to an inadvertent Flip-in Event, on the condition that such person reduces its beneficial ownership of REIT Units such that it is not an Acquiring Person within 14 days of the determination of the Trustees. (g) Portfolio Managers The provisions of the Rights Plan relating to portfolio managers are designed to prevent the occurrence of a Flip-in Event solely by virtue of the customary activities of such managers, including trust companies and other persons, where a substantial portion of the ordinary business of such person is the management of funds for unaffiliated investors, so long as any such person does not propose to make a take-over bid either alone or jointly with others. (h) Supplement and Amendments The Trustees are authorized to make amendments to the Rights Plan to correct any clerical or typographical error or to maintain the validity of the Rights Plan as a result of changes in law or regulation. (i) Eligibility for Investment in Canada Provided that Boardwalk REIT remains a mutual fund trust for purposes of the Tax Act at all times, the Rights will each be qualified investments under the Tax Act for registered retirement savings plans, registered retirement income funds, deferred profit sharing plans and registered educational savings plans. The issue of Rights will not affect the status under the Tax Act of the REIT Units for such purposes, nor will it affect the eligibility of the REIT Units as investments for investors governed by certain Canadian federal and provincial legislation governing insurance companies, trust companies, loan companies and pension plans. (j) General Until a Right is exercised, the holder thereof, as such, will have no rights as a Unitholder. ADDITIONAL INFORMATION Additional information relating to Boardwalk REIT, including information as to directors' and officers' remuneration and indebtedness, principal holders of Boardwalk REIT's securities and securities authorized for issuance under equity compensation plans, where applicable, is set out in the Trust's Management Information and Proxy Circular dated March 31, 2008 mailed to Unitholders in connection with the annual meeting of such Unitholders (the "Annual Meeting"), held on May 13, 2008 (the "Management Information Circular"). 381376 v2 - 90 Additional financial information is provided in Boardwalk REIT's financial statements and management's discussion and analysis of financial condition and results of operations for the year ended December 31, 2008. Additional information relating to the Debentures is provided in Boardwalk REIT’s information and proxy circular, dated July 7, 2008, mailed in connection with the meeting of Debentureholders held on July 30, 2008. Additional information relating to Boardwalk REIT may also be found on SEDAR at www.sedar.com. 381376 v2 - 91 - SCHEDULE "A" AUDIT AND RISK MANAGEMENT COMMITTEE CHARTER Policy Statement It is the policy of Boardwalk Real Estate Investment Trust and its subsidiary entities (the "REIT") to establish and maintain an audit and risk management committee (the "Audit Committee"), composed entirely of independent trustees, to assist the Board of Trustees (the "Board") in carrying out its oversight responsibility for the REIT's internal controls, financial reporting and risk management processes. The Audit Committee will be provided with resources commensurate with the duties and responsibilities assigned to it by the Board including administrative support. If determined necessary by the Audit Committee, it will have the discretion to institute investigations of improprieties, or suspected improprieties within the scope of its responsibilities, including the authority to retain independent advisors. Composition of the Committee 1. The Audit Committee shall consist of at least three trustees. The Board shall appoint the members of the Audit Committee and the Chair of the Audit Committee. 2. Each trustee appointed to the Audit Committee by the Board shall be an independent trustee who is unrelated. An unrelated trustee is a trustee who is independent of management and is free from any interest, any business or other relationship which, in the view of the Board, could, or could reasonably be perceived, to materially interfere with the trustee's ability to act with a view to the best interests of the REIT. Although unitholding may be a factor in such determination, unitholding alone will not lead to a conclusion that there is a lack of independence. In determining whether a trustee is independent of management, the Board shall make reference to the then current legislation, rules, policies and instruments of applicable regulatory authorities. 3. Each member of the Audit Committee shall be "financially literate". In order to be financially literate, a trustee must be, at a minimum, able to read and understand financial statements of the complexity of those of the REIT and the accounting principles used in their preparation, as well as an understanding of internal controls and procedures for financial reporting. 4. A trustee appointed by the Board to the Audit Committee shall be a member of the Audit Committee until replaced by the Board or until his or her resignation. Meetings of the Committee 1. The Audit Committee shall convene a minimum of four times each year at such times and places as may be designated by the Chair of the Audit Committee and whenever a meeting is requested by the Board, a member of the Audit Committee, the auditors, or a senior officer of the REIT. Meetings of the Audit Committee shall correspond with the review of the quarterly and annual financial statements and management discussion and analysis. 2. Notice of each meeting of the Audit Committee shall be given to each member of the Audit Committee. 3. Notice of a meeting of the Audit Committee shall: (a) be in writing; (b) state the nature of the business to be transacted at the meeting in reasonable detail; (c) to the extent practicable, be accompanied by copies of documentation to be considered at the meeting; and 381376 v2 - 92 (d) be given at least five business days prior to the time stipulated for the meeting or such shorter period as the members of the Audit Committee may permit. 4. A quorum for the transaction of business at a meeting of the Audit Committee shall consist of at least half of the members of the Audit Committee. 5. A member or members of the Audit Committee may participate in a meeting of the Audit Committee by means of such telephonic, electronic or other communication facilities, as permits all persons participating in the meeting to communicate adequately with each other. A member participating in such a meeting by any such means is deemed to be present at the meeting. 6. In the absence of the Chair of the Audit Committee, the members of the Audit Committee shall choose one of the members present to be Chair of the meeting. In addition, the members of the Audit Committee may invite the Secretary of the REIT or such other person, who need not be a member of the Committee, as they may choose to be Secretary of the meeting. 7. Senior management of the REIT and other parties may attend meetings of the Audit Committee at the Audit Committee's invitation; however, the Audit Committee: (i) shall meet with the external auditors independent of management; and (ii) may meet separately with management. 8. Minutes shall be kept of all meetings of the Audit Committee and shall be signed by the Chair and the Secretary of the meeting. Duties and Responsibilities of the Committee 1. The Audit Committee's primary duties and responsibilities are to: (a) identify and monitor the management of the principal risks that could impact the financial reporting of the REIT; (b) monitor the integrity of the REIT's financial reporting process and system of internal controls regarding financial reporting and accounting compliance; (c) monitor the independence and performance of the REIT's external auditors; (d) deal directly with the external auditors to approve external audit plans, other services (if any) and fees; (e) directly oversee the external audit process and results (in addition to items described in Section 4 below); (f) provide an avenue of communication among the external auditors, management and the Board; and (g) ensure that an effective anonymous "whistle blowing" procedure exists to permit stakeholders to express concerns regarding accounting or financial matters to an appropriately independent individual. 2. The Audit Committee shall have the authority to: (a) inspect any and all of the books and records of the REIT, its subsidiaries and affiliates; (b) discuss with the management of the REIT, its subsidiaries and affiliates and senior staff of the REIT, any affected party and the external auditors, such accounts, records and other matters as any member of the Audit Committee considers necessary and appropriate; (c) engage independent counsel and other advisors as it determines necessary to carry out its duties; and (d) set and pay the compensation for any advisors employed by the Audit Committee. 381376 v2 - 93 3. The Audit Committee shall, at the earliest opportunity after each meeting, report to the Board the results of its activities and any reviews undertaken and make recommendations to the Board as deemed appropriate. 4. The Audit Committee shall: (a) review the audit plan with the REIT's external auditors and with management; (b) discuss with management and the external auditors any proposed changes in major accounting policies or principles, the presentation and impact of significant risks and uncertainties and key estimates and judgments of management that may be material to financial reporting; (c) review with management and with the external auditors significant financial reporting issues arising during the most recent fiscal period and the resolution or proposed resolution of such issues; (d) review any problems experienced or concerns expressed by the external auditors in performing an audit, including any restrictions imposed by management or significant accounting issues on which there was a disagreement with management; (e) review with senior management the process of identifying, monitoring and reporting the principal risks affecting financial reporting; (f) review audited annual financial statements and related documents in conjunction with the report of the external auditors and obtain an explanation from management of all significant variances between comparative reporting periods; (g) consider and review with management, the internal control memorandum or management letter containing the recommendations of the external auditors and management's response, if any, including an evaluation of the adequacy and effectiveness of the internal financial controls of the REIT and subsequent follow-up to any identified weaknesses; (h) review with financial management and the external auditors the quarterly unaudited financial statements and management discussion and analysis before release to the public; and (i) before release, review and if appropriate, recommend for approval by the Board, all public disclosure documents containing audited or unaudited financial information, including any prospectuses, annual reports, annual information forms, management discussion and analysis and press releases. 5. The Audit Committee shall: (a) evaluate the independence and performance of the external auditors and annually recommend to the Board the appointment of the external auditor or the discharge of the external auditor when circumstances are warranted and the compensation of the external auditor; (b) pre-approve all non-audit services to be provided to the REIT or its subsidiary entities by the REIT's external auditors; (c) approve the engagement letter for non-audit services to be provided by the external auditors or affiliates, together with estimated fees, considering the potential impact of such services on the independence of the external auditors; (d) when there is to be a change of external auditors, review all issues and provide documentation related to the change, including the information to be included in the Notice of Change of Auditors and documentation required pursuant to National Policy 31 (or any successor legislation) of the Canadian Securities Administrators and the planned steps for an orderly transition period; and 381376 v2 - 94 (e) review all reportable events as determined on the advice of counsel, including disagreements, unresolved issues and consultations, as defined by applicable securities policies, on a routine basis, whether or not there is to be a change of external auditors. 6. The Audit Committee shall: (a) evaluate the REIT's policies with respect to ensuring compliance with environmental regulations applicable to the REIT's assets and shall periodically obtain assurance from management that such policies have been applied; (b) evaluate the REIT's policies with respect to derivative trading and hedge transactions and periodically obtain assurance from management that such policies have been adhered to; (c) evaluate the REIT's policies with respect to disaster recovery, including policies and programs for computer systems and buildings; (d) annually review the amount and terms of any insurance to be obtained or maintained by the REIT with respect to risks inherent in its operations and potential liabilities incurred by the trustees or officers in the discharge of their duties and responsibilities; and (e) evaluate risks related to fraud in financial reporting and provide recommendations to management of procedures to manage such risks. 7. The Audit Committee shall annually review the amount and terms of any insurance to be obtained or maintained by the REIT with respect to risks inherent in its operations and potential liabilities incurred by the trustees or officers in the discharge of their duties and responsibilities. 8. The Audit Committee shall provide advice to the board regarding the appointments of the Chief Financial Officer. 9. The Audit Committee shall enquire into and determine the appropriate resolution of any conflict of interest in respect of audit or financial matters, which are directed to the Audit Committee by any member of the Board, a unitholder of the REIT, the external auditors, or senior management. 10. The Audit Committee shall annually review with management the need for an internal audit function. 11. The Audit Committee shall establish and maintain procedures for: (a) the receipt, retention and treatment of complaints received by the REIT regarding accounting controls, or auditing matters; and (b) the confidential, anonymous submission by employees of the REIT on concerns regarding questionable accounting or auditing matters. 12. The Audit Committee shall review and approve the REIT's hiring policies regarding employees and former employees of the present and former external auditors or auditing matters. 13. The Audit Committee shall review with the Trust's internal legal counsel as required but at least annually, any legal matter that could have a significant impact on the REIT's financial statements, and any enquiries received from regulators, or government agencies. 14. The Audit Committee shall assess, on an annual basis, the adequacy of this Charter and the performance of the Audit Committee. 15. In contributing to the Audit Committee's discharging of its duties under this Charter, each Member shall be entitled to rely in good faith upon: (a) accounting information of the Trust represented to him by an officer of the Trust or in a written report of the auditors; and 381376 v2 - 95 (b) any report of a lawyer, accountant, engineer, appraiser or other person whose profession lends credibility to a statement made by any such person. 16. In contributing to the Audit Committee's discharging of its duties under this Charter, each Member shall be obliged only to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Nothing in this Charter is intended, or may be construed, to impose on any Member a standard of care or diligence that is in any way more onerous or extensive than the standard to which all Board Members are subject. The essence of the Audit Committee's duties is the monitoring and reviewing to gain reasonable assurance (but not to ensure) that the Trust's business activities are being conducted effectively and that the financial reporting objectives are being met and to enable the Audit Committee to report thereon to the Board. 381376 v2