Parkbridge Steady Growth - Company Name

					Parkbridge Lifestyle Communities Inc.
PRK-T: $5.50                                                                       May 15, 2008



TARGET: $6.50                                                                      Mark Rothschild – 416.687.5428
                                                                                   mark.rothschild@genuitycm.com
RECOMMENDATION: BUY
                                                                                   Jenny Ma, CFA – 416.687.5411
RISK RATING: AVERAGE                                                               jenny.ma@genuitycm.com


Steady growth should continue                                                      (all figures in C$, unless noted)

Price (5/14/2008)                          $5.50    Investment thesis
Dividend per share                         $0.00
Dividend yield                              0.0%
                                                    •   Parkbridge Lifestyle Communities reported fiscal Q2/08 results
Total return to target                    18.2%
Shares O/S (mm)                              61.8
                                                        which were in line with our expectations. FFO per share was
Market cap ($mm)                          $339.8        $0.07, growth of 6% from the year-ago period.
Market float ($mm)                        $224.2
                                                    •   During fiscal Q2/08, Parkbridge acquired one seasonal resort
Net debt ($mm)                            $263.1
Fiscal year end                           30-Sep
                                                        property and one land parcel for a total of $13.3 million,
Last quarter reported                      Q2/08        bringing the year-to-date total to $26 million. The resort
Controlling shareholders              Widely held       contains 242 sites while the development land would
                                                        accommodate an additional 278 sites. Subsequent to quarter
NAV per share                              $6.11        end, the company acquired several additional properties for a
Utilized cap rate                         7.50%
                                                        total of $21.5 million (one community, two resort properties,
Prem/(disc) to NAV                       -10.0%
                                                        and one parcel of land). With $47 million of acquisitions already
                           Previous      Current        completed, Parkbridge should exceed our forecast which
FFO per share                                           assumes acquisitions totaling $50 million.
   2007                                    $0.36
   2008E                     $0.42         $0.42    •   Our estimates for Parkbridge remain essentially unchanged
   2009E                     $0.48         $0.47        following fiscal Q2/08 results. We are forecasting FFO per share
                                                        of $0.42 for 2008 and $0.47 for 2009. Though YoY per share
AFFO per share                                          cash flow growth is expected to decelerate, we highlight that
   2007                                    $0.33        growth is forecast to remain in the double-digits and amongst
   2008E                     $0.40         $0.40
                                                        the highest within our coverage universe.
   2009E                     $0.46         $0.44
                                                    •   Parkbridge’s share price has rallied 16% since we upgraded the
Share price / FFO                                       stock one month ago. However, we continue to believe that the
   2007                                    15.5x
                                                        company’s shares are undervalued relative to its U.S. peers,
   2008E                                   13.0x
   2009E                                   11.8x        notwithstanding better fundamentals for MHC owners in Canada
                                                        than in the U.S. Furthermore, Parkbridge has proven that it can
Share price / AFFO                                      consistently grow FFO per share over time without requiring
   2007                                    16.5x        additional equity capital. Therefore, we continue to rate its
   2008E                                   13.8x        shares a BUY.
   2009E                                   12.5x




                                                        See last page for disclosure and share classification information.
FFO per share in line with expectations
                          Parkbridge Lifestyle Communities reported fiscal Q2/08 results which were in
                          line with our expectations. Funds from operations (FFO) per share was
                          $0.07, growth of 6% from the year-ago period. Of note, several acquisitions
                          and a redevelopment project did not contribute to revenue (due to the
                          seasonal nature of the operations) but did incur operating expenses. We
                          believe that absent these expenses, FFO per share would have been $0.074
                          per share, or YoY growth of 9%. Compared to fiscal Q2/07, higher G&A
                          expense was offset by higher brokerage income.


                          Exhibit 1: Q2/08 results compared to year-ago period and Genuity’s
                          forecast
                                               Q2/07         Q2/08          Q2/08            Actual YoY
                          (Diluted)            Actual       Forecast        Actual             Change
                          FFO per share        $0.068        $0.072         $0.072               6%
                          AFFO per share       $0.063        $0.066         $0.066               5%
                          Source: Parkbridge Lifestyle Properties, Genuity Capital Markets


                          In fiscal Q2/08, operating margins for both communities and resorts were
                          essentially unchanged from the year-ago period; overall, the net operating
                          income (NOI) margin during Q2/08 was 60.1%, compared to 61.3% in
                          Q2/07 (Exhibit 2).
                          •    In the manufactured home communities (MHC) portfolio, Parkbridge has
                               passed on rent increases at most of its properties and higher operating
                               margins were realized for newly developed sites; however, the positive
                               impact from these items was negated by higher snow removal costs.
                          •    In the resort portfolio, Parkbridge has also implemented rent increases
                               which, combined with the lease-up of newly developed sites, positively
                               contributed to operating margins. However, these items were offset by
                               lower revenue attributed to the redevelopment of Melody Bay (a resort
                               property in Ontario), and lower margins realized on a recently acquired
                               marina property.




Genuity Capital Markets                                                                            www.genuitycm.com
416.603.6000                                                                                                       2
Exhibit 2: NOI margins by asset type

 80.0%


               66.9%           68.1% 67.5%
                       63.0%                                                            63.4%
                                                                                                           61.3% 60.1%
 60.0%
                                                 54.0%
                                                                                                   52.0%
                                                                  46.7% 46.9%


 40.0%
                                                          33.4%




 20.0%
                       Communities                          Resorts                                   Total

                                         Q2/05           Q2/06        Q2/07           Q2/08

Source: Parkbridge Lifestyle Communities, Genuity Capital Markets


                                        During Q2/08, Parkbridge completed the sale of 48 manufactured homes
                                        (concurrently entering into 47 leases) compared to 50 home sales completed
                                        in the same quarter last year. Management noted that a colder than usual
                                        winter delayed many home sales into the latter half of 2008. An additional 21
                                        home sales have been completed to date in fiscal Q3/08, while there are 192
                                        under contract which should close in the next few months.


Exhibit 3: Home sales per quarter
                                                                                                                            192
 200




 150

                                                                      111

 100
                                                                                              73
                                57      65        54
                                                             50                                            48
  50                                                                             37
          19           23                                                                                         21

    0
         Q1/06    Q2/06        Q3/06   Q4/06     Q1/07     Q2/07      Q3/07     Q4/07     Q1/08        Q2/08      Q3/08    Under
                                                                                                                (to date) contract

Source: Parkbridge Lifestyle Communities, Genuity Capital Markets




Genuity Capital Markets                                                                                                  www.genuitycm.com
416.603.6000                                                                                                                             3
$13.3 million of acquisitions completed during quarter
                           During fiscal Q2/08, Parkbridge acquired one seasonal resort property and
                           one land parcel for a total of $13.3 million, bringing the year-to-date total to
                           $26 million. The resort contains 242 sites while the development land would
                           accommodate an additional 278 sites. Subsequent to quarter end, the
                           company acquired several additional properties for a total of $21.5 million
                           (one community, two resort properties, and one parcel of land). Due to the
                           fragmented ownership of MHC properties, we expect that most of the
                           company’s acquisitions will be of one-off properties in the $5-10 million
                           range. With $47 million of acquisitions already completed, Parkbridge should
                           exceed our forecast which assumes acquisitions totaling $50 million.
                           Reflecting the completed development and acquisitions, the company’s
                           portfolio continues to grow at a steady pace. As of March 31, 2008,
                           Parkbridge owned 15,021 developed sites (53% community and 47% resort)
                           and 4,140 expansion sites (72% community and 28% resort).
                           Though Parkbridge reports same-property metrics, we note that these
                           figures integrate newly developed expansion sites, which distorts the true
                           operating trends within the property.
                           However, we believe that internal growth remains strong for several reasons:
                           •   Parkbridge has not had any difficulty passing through rent increases in
                               2008. In fact, the company expects rental rates to rise by, on average,
                               5% in 2008;
                           •   The occupancy rate for communities remains at 98%, and management
                               noted that demand for new sites and homes is strong; and,
                           •   Within the resort properties, over 96% of seasonal tenants have
                               renewed leases for the 2008 season.

Estimates essentially unchanged
                           Our estimates for Parkbridge remain essentially unchanged following fiscal
                           Q2/08 results. We are forecasting FFO per share of $0.42 for 2008 and $0.47
                           for 2009. Though YoY per share cash flow growth is expected to decelerate,
                           we highlight that growth is forecast to remain in the double-digits and
                           amongst the highest within our coverage universe.


                           Exhibit 4: Genuity’s estimates for Parkbridge Lifestyle Communities
                                                                 2006           2007           2008E       2009E

                           FFO per share - prior                                                $0.42       $0.48
                           FFO per share                          $0.26          $0.35          $0.42       $0.47

                           AFFO per share - prior                                               $0.40       $0.46
                           AFFO per share                         $0.24          $0.33          $0.40       $0.44

                           FFO per share growth                   25.5%          37.9%          18.8%       10.4%
                           AFFO per share growth                  38.8%          37.7%          19.3%       10.7%
                           Source: Parkbridge Lifestyle Communities, Genuity Capital Markets




Genuity Capital Markets                                                                             www.genuitycm.com
416.603.6000                                                                                                        4
Net asset value
                                       We continue to use a cap rate of 7.50% to value Parkbridge’s portfolio.
                                       Following fiscal Q2/08 results, our estimate of net asset value (NAV) per
                                       share for Parkbridge is $6.11, up slightly from $6.00.


Target price and recommendation
                                       Parkbridge’s share price has rallied 16% since we upgraded the stock one
                                       month ago. However, we continue to believe that the company’s shares are
                                       materially undervalued relative to its U.S. peers, notwithstanding better
                                       fundamentals for MHC owners in Canada than in the U.S. Furthermore,
                                       Parkbridge has proven that it can consistently grow FFO per share over time
                                       without requiring additional equity capital. Therefore, we continue to rate its
                                       shares a BUY.


                                       Exhibit 5: 2009E AFFO multiples

                                         20.0x
                                                                                                                            18.1x

                                                                                                            16.0x
                                                                         14.2x           14.7x
                                         15.0x
                                                      12.5x


                                         10.0x




                                            5.0x




                                            0.0x
                                                   Parkbridge         U.S. MHC          Killam             CAP REIT    Boardwalk REIT
                                                                        REITs         Properties

                                       Source: Bloomberg, Genuity Capital Markets



Exhibit 6: Quarterly estimates for Parkbridge Lifestyle Communities
(Diluted)                          Q1*             Q2*              Q3           Q4          Full Year
2008E
            FFO per share           $0.08          $0.07            $0.14        $0.14             $0.42
            AFFO per share          $0.07          $0.07            $0.13        $0.13             $0.40

2009E
            FFO per share           $0.08          $0.09            $0.14        $0.16             $0.47
            AFFO per share          $0.08          $0.08            $0.13        $0.15             $0.44
*Q1/08 and Q2/08 figures are actual.


Source: Parkbridge Lifestyle Communities, Genuity Capital Markets




Genuity Capital Markets                                                                                               www.genuitycm.com
416.603.6000                                                                                                                          5
                      Member of the Investment Dealers Association of Canada and the Canadian Investor Protection Fund
                           Participating Organization of the Toronto Stock Exchange and Toronto Venture Exchange

Genuity Capital Markets has acted as an underwriter in a distribution for Killam Properties Inc. in the last 12 months.

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I, Mark Rothschild, hereby certify that the views expressed in this report accurately reflect my personal views about the subject
securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange
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Genuity Capital Markets                                                                                                   www.genuitycm.com
416.603.6000                                                                                                                              6
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Genuity Capital Markets                                                                                         www.genuitycm.com
416.603.6000                                                                                                                    7

				
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