29FEB201210222095 MORGUARD NORTH AMERICAN …Square 104 10404 104 Avenue Edmonton, Alberta, Canada 2 mid-rise buildings, 277 suites The Elmwoods 30 Elm Drive East Mississauga, Ontario,

29FEB201210222095

No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This prospectus constitutes apublic offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sellsuch securities. These securities may not be offered, sold or delivered, directly or indirectly, in the United States or to, or for the account or benefitof, ‘‘U.S. persons’’ (as defined in Regulation S under the United States Securities Act of 1933, as amended). This prospectus does not constitute anoffer to sell or a solicitation of an offer to buy any of these securities in the United States or to, or for the account or benefit of, U.S. Persons. See‘‘Plan of Distribution’’.

PROSPECTUSInitial Public Offering April 5, 2012

MORGUARD NORTH AMERICAN RESIDENTIALREAL ESTATE INVESTMENT TRUST

$75,000,0007,500,000 Units

This prospectus qualifies the distribution (the ‘‘Offering’’) of 7,500,000 units (the ‘‘Units’’) of Morguard NorthAmerican Residential Real Estate Investment Trust (the ‘‘REIT’’), an unincorporated, open-ended real estateinvestment trust established under, and governed by, the laws of the Province of Ontario.

The REIT has been formed to own multi-unit residential properties in Canada and the United States. Concurrentlywith the completion of the Offering and related transactions (the ‘‘Closing’’), the REIT will indirectly acquire,through a limited partnership (the ‘‘Partnership’’), interests in a portfolio of 14 Canadian multi-unit residentialproperties (the ‘‘Initial Canadian Properties’’) and three U.S. multi-unit residential Low Rise (as defined below)properties (the ‘‘Initial U.S. Properties’’ and, together with the Initial Canadian Properties, the ‘‘Initial Properties’’)currently operated and owned or co-owned by affiliates of Morguard Corporation (‘‘Morguard’’, and where thecontext requires, together with its affiliates). See ‘‘Acquisition of Initial Properties’’. On Closing, it is expected thatMorguard will hold an approximate 69.7% effective interest in the REIT through ownership of all of the Class BLP Units of the Partnership (or an approximate 67.6% effective interest in the REIT if the Over-Allotment Option(as defined below) is exercised in full). The Class B LP Units are economically equivalent to and exchangeable forUnits. In addition, Morguard will hold all of the outstanding Class C LP Units of the Partnership in respect of theRetained Debt (as defined below). See ‘‘Retained Interest’’ and ‘‘Distribution Policy’’.

The objectives of the REIT are to: (i) generate stable and growing cash distributions on a tax-efficient basis;(ii) enhance the value of the REIT’s assets and maximize long-term Unit value through active asset and propertymanagement; and (iii) expand the asset base of the REIT and increase AFFO (as defined below) per Unit primarilythrough acquisitions and improvement of its properties, including the Initial Properties, through targeted andstrategically deployed capital expenditures. See ‘‘The REIT — Establishment and Objectives’’. The REIT initiallyintends to make monthly cash distributions of $0.05 per Unit to holders of Units, which are estimated on an annualbasis to be approximately 95% of AFFO of the REIT (based on the pro forma AFFO of the Initial Properties). See‘‘Non-IFRS and Non-Canadian GAAP Measures’’ and ‘‘Distribution Policy’’.

The Initial Properties consist of interests in 5,439 residential suites that are located in Ontario, Alberta and Louisianaand have been assembled from Morguard’s portfolio of residential properties. See ‘‘Assets of the REIT’’. The REIT’sgrowth strategy will initially be focused on opportunities to acquire additional multi-unit residential propertiesprimarily located in urban centres and major suburban regions in Canada and in the southeastern United States thatsatisfy the REIT’s investment criteria, as well as generating greater cash flow from its properties. The REIT will seekto leverage its relationship with Morguard to access acquisition opportunities that satisfy the REIT’s investmentcriteria. Morguard has advised the REIT that its current intention is to offer to sell to the REIT additional multi-unitresidential properties that it manages and in which it has an ownership interest, including some or all of the RetainedProperties, in one or more transactions over the next few years, subject to market conditions. In that regard,Morguard will provide the REIT with the Right of First Offer to acquire any interests of Morguard in the propertiesthat it owns after Closing that are multi-unit residential properties located in Canada and the United States, includinginterests in any such properties acquired or developed (including such properties under development that aresubstantially complete) after Closing, prior to disposition of any such interest to a third party (other than the sale ofindividual condominium suites) which will be on terms not less favourable to the REIT than those offered by or tosuch third party. See ‘‘The REIT — Growth Strategies’’ and ‘‘Arrangements with Morguard — Right of First Offerand Non-Solicit Agreement’’.

(continued on next page)

A rAre opportunity to invest in A QuAlity portfolio of multi-unit residentiAl properties with growth potentiAl

47 Thorncliffe Park Drive Toronto, Ontario, Canada

1547 Mississauga Valley Blvd. Mississauga, Ontario, Canada


715 Marie Antoinette Street Lafayette, Louisiana, USA

5,439 suites deliver instAnt criticAl mAss in frAgmented industry

pipeline of AcQuisition opportunities, including 5,000-plus retAined suites

The Maplewoods

1477 Mississauga Valley Boulevard Mississauga, Ontario, Canada22-storey building, 300 suites

Tomken Place

935 Dundas Street East Mississauga, Ontario, Canada16-storey building, 142 suites

Rouge Valley Residences

45 Generation Boulevard Toronto, Ontario, Canada33 buildings, 396 suites

The Arista

3665 Arista Way Mississauga, Ontario, Canada19-storey building, 458 suites

Rideau Towers I

35 Thorncliffe Park Drive Toronto, Ontario, Canada18-storey building, 287 suites

Rideau Towers IV


morguArd sponsorship & 36-yeAr trAck record of Asset growth

The Valleywoods


Square 104

10404 104 Avenue Edmonton, Alberta, Canada2 mid-rise buildings, 277 suites

The Elmwoods

30 Elm Drive East Mississauga, Ontario, Canada19-storey building, 321 suites

Meadowvale Gardens

2869 Battleford Road Mississauga, Ontario, Canada24 buildings, 325 suites

The Villages of Williamsburg

3215 Knight Street Shreveport, Louisiana, USA27 buildings, 194 suites

Magnolia Place

1001 East Dale Street New Iberia, Louisiana, USA13 buildings, 148 suites

(continued from cover)

On Closing, Morguard (Canada) GP Limited (‘‘Morguard GP’’), a wholly-owned subsidiary of Morguard, (acting as ageneral partner of the Partnership), will employ Morguard’s experienced multi-unit residential real estate team toexternally administer and operate the Initial Canadian Properties on behalf of the REIT and Morguard ManagementCompany Inc., a wholly-owned subsidiary of Morguard, will externally manage the Initial U.S. Properties. See‘‘Post-Closing Structure’’ and ‘‘Arrangements with Morguard’’.

Morguard is a real estate investment company whose principal activities include the acquisition, development andownership of commercial and multi-unit residential real estate properties. Morguard currently owns interests in adiversified portfolio of 101 office, industrial, retail and multi-unit residential properties (including the InitialProperties) located across Canada and the United States. Morguard is one of Canada’s premier real estate investmentadvisors and management companies, representing major institutional and private investors. As of December 31,2011, Morguard’s owned and managed portfolio of retail, office and industrial properties consisted of approximately54.3 million square feet of gross leasable area and had an estimated market value in excess of $11.4 billion. As ofDecember 31, 2011, Morguard’s owned and managed portfolio of multi-unit residential properties included12,644 suites valued at approximately $1.7 billion. Morguard owns approximately 44.8% of the units of Morguard RealEstate Investment Trust (‘‘Morguard REIT’’), a Canadian closed-end trust listed on the Toronto Stock Exchange thatowns approximately 8.5 million square feet of office and retail properties across Canada valued at over $2.1 billion.Day-to-day property management of all of Morguard REIT’s properties is undertaken by Morguard InvestmentsLimited, a wholly-owned subsidiary of Morguard. As a result of the REIT’s arrangements with Morguard, the REITwill have access to Morguard’s network of relationships and its operating and financing expertise. See ‘‘Arrangementswith Morguard’’.

Price: $10.00 per Unit

Price to the Underwriters’ Net ProceedsPublic(1) Fee(2) to the REIT(3)

Per Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10.00 $0.60 $9.40Total Offering(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $75,000,000 $4,500,000 $70,500,000Notes:

(1) The price of the Units was established by negotiation among the REIT, Morguard and the Underwriters (as defined below).

(2) The Underwriters will receive a fee of $0.60 per Unit in connection with the Offering.

(3) Before deducting the REIT’s expenses of the Offering, estimated at $2,750,000, which, together with the Underwriters’ fee, will be paid fromthe proceeds of the Offering.

(4) The REIT has granted the Underwriters an option (the ‘‘Over-Allotment Option’’), exercisable in whole or in part and at any time up to30 days after Closing, to purchase up to an additional 750,000 Units on the same terms as set forth above solely to cover over-allocations, ifany, and for market stabilization purposes. If the Over-Allotment Option is exercised in full, the total ‘‘Price to the Public’’, ‘‘Underwriters’Fee’’ and ‘‘Net Proceeds to the REIT’’ before deducting the expenses of the Offering will be $82,500,000, $4,950,000 and $77,550,000,respectively. This prospectus also qualifies the grant of the Over-Allotment Option and the Units issuable upon the exercise thereof. Apurchaser who acquires Units forming part of the Underwriters’ over-allocation position acquires such Units under this prospectus, regardlessof whether the over-allocation position is ultimately filled through the exercise of the Over-Allotment Option or secondary market purchases.See ‘‘Plan of Distribution’’.

Maximum Sizeor Number of

Underwriters’ Position Securities Available Exercise Period Exercise Price

Over-Allotment Option . . Option to acquire up to Exercisable for a period $10.00 per Unit750,000 Units of 30 days after Closing

RBC Dominion Securities Inc., TD Securities Inc., CIBC World Markets Inc., BMO Nesbitt Burns Inc., ScotiaCapital Inc., HSBC Securities (Canada) Inc., National Bank Financial Inc., Canaccord Genuity Corp. and DundeeSecurities Ltd. (collectively, the ‘‘Underwriters’’), as principals, conditionally offer the Units qualified under thisprospectus, subject to prior sale, if, as and when issued by the REIT and accepted by the Underwriters in accordancewith the conditions contained in the underwriting agreement between the REIT, Morguard and the Underwritersreferred to under ‘‘Plan of Distribution’’ and subject to the approval of certain legal matters on behalf of the REIT byStikeman Elliott LLP and on behalf of the Underwriters by Torys LLP. See ‘‘Plan of Distribution’’.

In connection with this distribution, the Underwriters have been granted the Over-Allotment Option and may, subjectto applicable law, over-allocate or effect transactions which stabilize or maintain the market price of the Units at

(continued from cover)

levels other than those which otherwise might prevail on the open market. The Underwriters may offer the Units at alower price than stated above. See ‘‘Plan of Distribution’’.

Subscriptions will be received subject to rejection or allocation in whole or in part and the Underwriters reserve theright to close the subscription books at any time without notice. Closing is expected to occur on April 18, 2012, or suchlater date as the REIT and the Underwriters may agree, but in any event no later than May 2, 2012. Other thanpursuant to certain exceptions, registration of interests in and transfers of Units held through CDS Clearing andDepositary Services Inc. (‘‘CDS’’), or its nominee, will be made electronically through the non-certificated inventory(‘‘NCI’’) system of CDS. Units registered in the name of CDS or its nominee will be deposited electronically with CDSon an NCI basis on Closing. A purchaser of Units (subject to certain exceptions) will receive only a customerconfirmation from the registered dealer through which the Units are purchased. See ‘‘Declaration of Trust —Non-Certificated Inventory System’’.

The Toronto Stock Exchange (‘‘TSX’’) has conditionally approved the listing of the Units under the symbol‘‘MRG.UN’’. Listing is subject to the REIT fulfilling all of the original listing requirements of the TSX on or beforeJuly 3, 2012, including distribution of the Units to a minimum number of public securityholders. There is currently nomarket through which the Units may be sold and purchasers may not be able to resell the Units purchased under thisprospectus. This may affect the pricing of the Units in the secondary market, the transparency and availability oftrading prices, the liquidity of the Units, and the extent of issuer regulation. See ‘‘Risk Factors’’.

A return on a purchaser’s investment in Units is not comparable to the return on an investment in a fixed incomesecurity. The recovery of an investor’s initial investment in Units is at risk, and the anticipated return on such aninvestment is based on many performance assumptions. Although the REIT intends to make distributions of availablecash to holders of Units in accordance with its distribution policy, these cash distributions are not guaranteed and maybe reduced or suspended at any time. The ability of the REIT to make distributions and the actual amount distributedto holders of Units will depend on numerous factors, including the financial performance of the REIT’s properties,debt covenants and other contractual obligations, working capital requirements and future capital requirements, all ofwhich are subject to a number of risks. In addition, the market value of Units may decline if the REIT is unable tomeet its cash distribution targets in the future, and that decline may be significant. It is important for a person makingan investment in Units to consider the particular risk factors that may affect the REIT, and therefore the stability ofdistributions to holders of Units. A prospective purchaser should therefore review this document in its entirety andcarefully consider the risk factors described under ‘‘Risk Factors’’ before purchasing Units.

The after-tax return from an investment in Units to an investor subject to Canadian federal income tax will depend, inpart, on the composition for tax purposes of distributions paid by the REIT, portions of which may be fully or partiallytaxable or may constitute tax deferred returns of capital. The REIT estimates that, based on undepreciated capitalcost balances as of April 1, 2012, on a pro forma basis, approximately 66% of the monthly cash distributions during theyear ended December 31, 2011 would have been tax-deferred returns of capital which are non-taxable when received,although these amounts would have reduced a unitholder’s adjusted cost base of its Units, which would have triggereda gain in the unitholder’s hands for the purposes of the Tax Act (as defined below) to the extent such adjusted costbase was otherwise a negative amount. That composition may change over time, thus affecting the after-tax return toholders of Units. See ‘‘Distribution Policy — Tax Deferral on Distributions’’ and ‘‘Certain Canadian Federal IncomeTax Considerations’’.

RBC Dominion Securities Inc., TD Securities Inc. and Scotia Capital Inc. are affiliates of Canadian chartered banksthat have provided mortgage financing and revolving credit lines to Morguard in the aggregate principal amount ofapproximately $757 million, as at December 31, 2011, of which mortgages of approximately $180 million, as atApril 1, 2012, will be assumed or guaranteed by the REIT and approximately $101 million, as at April 1, 2012, willcomprise the Retained Debt at Closing. U.S. dollar denominated debt was converted using the closing spot rate,provided by the Bank of Canada, on December 31, 2011 (US$1.00:Cdn$1.0170). Consequently, the REIT may beconsidered a ‘‘connected issuer’’ of each of RBC Dominion Securities Inc., TD Securities Inc. and Scotia Capital Inc.under applicable Canadian securities laws. See ‘‘Debt Structure’’ and ‘‘Plan of Distribution’’.

The REIT is not a trust company and is not registered under applicable legislation governing trust companies as itdoes not carry on or intend to carry on the business of a trust company. The Units are not ‘‘deposits’’ within themeaning of the Canada Deposit Insurance Corporation Act (Canada) and are not insured under the provisions of thatstatute or any other legislation.

TABLE OF CONTENTS

Page Page

ABOUT THIS PROSPECTUS . . . . . . . . . . 2 DECLARATION OF TRUST . . . . . . . . . . . 107

MEANING OF CERTAIN REFERENCES . 2 THE PARTNERSHIP . . . . . . . . . . . . . . . . . 114

EXCHANGE RATE DATA . . . . . . . . . . . . . 3 DISTRIBUTION REINVESTMENT PLAN . 118

MARKET DATA . . . . . . . . . . . . . . . . . . . . 3 DISTRIBUTION POLICY . . . . . . . . . . . . . 119

FORWARD-LOOKING STATEMENTS . . . 3 CERTAIN CANADIAN FEDERALINCOME TAX CONSIDERATIONS . . . . 120NON-IFRS AND NON-CANADIAN GAAP

MEASURES . . . . . . . . . . . . . . . . . . . . . . 5 PLAN OF DISTRIBUTION . . . . . . . . . . . . 126

ELIGIBILITY FOR INVESTMENT . . . . . . 6PRIOR ISSUANCES . . . . . . . . . . . . . . . . . 129

PROSPECTUS SUMMARY . . . . . . . . . . . . 7USE OF PROCEEDS . . . . . . . . . . . . . . . . . 129

THE REIT . . . . . . . . . . . . . . . . . . . . . . . . . 23RISK FACTORS . . . . . . . . . . . . . . . . . . . . . 129

ASSETS OF THE REIT . . . . . . . . . . . . . . . 34MATERIAL CONTRACTS . . . . . . . . . . . . . 144

ACQUISITION OF INITIAL PROPERTIES 42INTERESTS OF MANAGEMENT AND

ASSESSMENTS AND VALUATION OF OTHERS IN MATERIALTHE INITIAL PROPERTIES . . . . . . . . . 44 TRANSACTIONS . . . . . . . . . . . . . . . . . . 145

MULTI-UNIT RESIDENTIAL REAL PROMOTER . . . . . . . . . . . . . . . . . . . . . . . 145ESTATE SECTOR IN CANADA ANDTHE UNITED STATES . . . . . . . . . . . . . . 46 PRINCIPAL UNITHOLDER . . . . . . . . . . . 145

RESIDENTIAL TENANCY LEGISLATION 52 LEGAL PROCEEDINGS ANDREGULATORY ACTIONS . . . . . . . . . . . 145

DEBT STRUCTURE . . . . . . . . . . . . . . . . . 53LEGAL MATTERS . . . . . . . . . . . . . . . . . . 146

POST-CLOSING STRUCTURE . . . . . . . . . 58

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . 146ARRANGEMENTS WITH MORGUARD . . 59

AUDITORS, TRANSFER AGENT ANDRETAINED INTEREST . . . . . . . . . . . . . . . 73REGISTRAR . . . . . . . . . . . . . . . . . . . . . 146

PRO FORMA CAPITALIZATION OF THEPURCHASERS’ STATUTORY RIGHTS . . . 146REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . 147MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL

INDEX TO FINANCIAL STATEMENTS . . F-1CONDITION AND RESULTS OFOPERATIONS . . . . . . . . . . . . . . . . . . . . 76 APPENDIX A BOARD MANDATE . . . . . . A-1

TRUSTEES AND MANAGEMENT OFAPPENDIX B AUDIT COMMITTEETHE REIT . . . . . . . . . . . . . . . . . . . . . . . 94

MANDATE . . . . . . . . . . . . . . . . . . . . . . . B-1EXECUTIVE COMPENSATION . . . . . . . . 101

CERTIFICATE OF THE REIT ANDMORGUARD . . . . . . . . . . . . . . . . . . . . . C-1REMUNERATION OF TRUSTEES . . . . . . 103

INVESTMENT GUIDELINES AND CERTIFICATE OF THEOPERATING POLICIES . . . . . . . . . . . . . 104 UNDERWRITERS . . . . . . . . . . . . . . . . . C-2

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ABOUT THIS PROSPECTUS

An investor should rely only on the information contained in this prospectus and should not rely on parts ofthe information contained in this prospectus to the exclusion of others. The REIT has not, and the Underwritersand Morguard have not, authorized anyone to provide investors with additional or different information fromthat contained in this prospectus. The REIT is not, and the Underwriters are not, offering to sell these securitiesin any jurisdictions where the offer or sale of these securities is not permitted. Unless otherwise stated, theinformation contained in this prospectus is accurate only as of the date of this prospectus, regardless of the timeof delivery of this prospectus or any sale of the Units. The REIT’s business, financial condition, results ofoperations and prospects may have changed since the date of this prospectus.

For investors outside of Canada, none of the REIT, Morguard nor any of the Underwriters has doneanything that would permit the Offering, possession or distribution of this prospectus in any jurisdiction whereaction for that purpose is required, other than in Canada. Investors are required to inform themselves about,and to observe any restrictions relating to, the Offering and the possession or distribution of this prospectus.

This prospectus includes a summary description of certain material agreements of the REIT (see ‘‘MaterialContracts’’). The summary description discloses all attributes material to an investor in Units but is not completeand is qualified in its entirety by reference to the terms of the material agreements, which will be filed with theCanadian securities regulatory authorities and made available electronically on SEDAR at www.sedar.com.Investors should read the full text of such material agreements.

MEANING OF CERTAIN REFERENCES

Unless otherwise indicated, the disclosure in this prospectus assumes that the transactions described under‘‘Acquisition of Initial Properties’’ have been completed and the Over-Allotment Option is not exercised.

Certain terms used in this prospectus are defined under ‘‘Glossary’’.

Unless the context otherwise requires, all references in this prospectus to the ‘‘REIT’’:

• refer to the REIT and its subsidiary entities, including the Partnership, on a consolidated basis;

• in the case of references to financial information relating to a period or date prior to the date of Closing,refer to the Initial Properties; and

• in the case of references to matters undertaken by a predecessor in interest to the REIT or its subsidiaryentities, include each such predecessor in interest.

Unless otherwise indicated, or unless the context otherwise requires, all figures and data in this prospectusrelating to the Initial Properties, the Initial Canadian Properties or the individual properties that comprise theInitial Canadian Properties, have been calculated based upon Morguard’s or the REIT’s, as the case may be,percentage ownership interest in such property or properties. Morguard currently owns, and upon Closing theREIT will own: (i) a 90% interest in 35 Thorncliffe Park Drive; (ii) a 91% interest in 1423 Mississauga ValleyBoulevard; (iii) an 87% interest in 1477 Mississauga Valley Boulevard; and (iv) an 89% interest in1547 Mississauga Valley Boulevard. Where figures and data are calculated on the assumption that the InitialCanadian Properties or the Initial Properties are wholly-owned by Morguard or the REIT, as the case may be,management does not believe that the interests not owned by Morguard or the REIT in such properties ismaterial to the presentation of such figures and data in respect of the Initial Properties, taken as a whole. TheInitial U.S. Properties are all wholly-owned by Morguard and, upon Closing, the REIT will wholly-own suchproperties.

References to ‘‘management’’ in this prospectus mean the persons acting in the capacities of the REIT’sChief Executive Officer and Chief Financial Officer, as well as the persons who, following Closing, will be theexecutive officers of each of Morguard GP and the U.S. Manager (as defined below) and who are currentlyofficers and/or employees of Morguard. Any statements in this prospectus made by or on behalf of managementare made in such persons’ capacities as officers of the REIT, Morguard GP and/or the U.S. Manager, asapplicable, and not in their personal capacities.

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EXCHANGE RATE DATA

References in this prospectus to ‘‘$’’ or ‘‘Cdn$’’ are to Canadian dollars and references in this prospectus to‘‘US$’’ are to United States dollars. The consolidated financial statements included herein are reported inCanadian dollars.

The following table reflects the low and high rates of exchange in Canadian dollars for one United Statesdollar during the periods noted, the average rate of exchange during such periods and the rates of exchange atthe end of such periods, based on the Bank of Canada’s closing exchange rates for the specified periodsand dates.

12-month period endedDecember 31

2011 2010 2009

(Cdn$) (Cdn$) (Cdn$)

Highest rate during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0549 1.0745 1.2991Lowest rate during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.9428 0.9946 1.0259Average closing spot rate for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.9891 1.0303 1.1420Closing spot rate at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0170 0.9946 1.0510

On April 4, 2012, the Bank of Canada’s closing spot rate of exchange for the purchase of one United Statesdollar using Canadian dollars was $0.9964 ($1.00 = US$1.0036).

MARKET DATA

This prospectus contains statistical data, market research and industry forecasts that were obtained fromgovernment and industry publications and reports (including from CMHC, Statistics Canada, the ConferenceBoard of Canada, The Canadian Real Estate Association’s Multiple Listing Service, the National Council ofReal Estate Investment Fiduciaries, Moody’s Analytics, Altus Group Limited, Chase Commercial Bank,Bloomberg, Reis, Inc., CoreLogic and ICREIM/IPD) or are based on estimates derived from same andmanagement’s knowledge of, and experience in, the markets in which the REIT operates. Government andindustry publications and reports generally indicate that they have obtained their information from sourcesbelieved to be reliable, but do not guarantee the accuracy and completeness of their information. None ofCMHC, Statistics Canada, the Conference Board of Canada, The Canadian Real Estate Association’s MultipleListing Service, the National Council of Real Estate Investment Fiduciaries, Moody’s Analytics, Altus GroupLimited, Chase Commercial Bank, Bloomberg, Reis, Inc., CoreLogic nor ICREIM/IPD has provided any formof consultation, advice or counsel regarding any aspect of, or is in any way whatsoever associated with, thisprospectus or the Offering. Further, certain of these organizations are advisors to participants in the real estateindustry, and they may present information in a manner that is more favourable to that industry than would bepresented by an independent source. Actual outcomes may vary materially from those forecast in suchpublications or reports, and the prospect for material variation can be expected to increase as the length of theforecast period increases. While management believes this data to be reliable, market and industry data issubject to variations and cannot be verified due to limits on the availability and reliability of data inputs andother limitations and uncertainties inherent in any statistical survey. Accordingly, the accuracy, currency andcompleteness of this information cannot be guaranteed. None of the REIT, Morguard nor the Underwriters hasindependently verified any of the data from third party sources referred to in this prospectus or ascertained theunderlying assumptions relied upon by such sources.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking information. Statements other than statements of historical factcontained in this prospectus may be forward-looking information. The words ‘‘plan’’, ‘‘expect’’, ‘‘schedule’’,‘‘estimate’’, ‘‘intent’’, ‘‘anticipate’’, ‘‘project’’, ‘‘believe’’, ‘‘outlook’’ or variations of such words and phrases orstatements to the effect that certain actions, events or results ‘‘may’’, ‘‘will’’, ‘‘could’’, ‘‘would’’, ‘‘should’’,‘‘might’’, ‘‘occur’’, ‘‘be achieved’’ or ‘‘continue’’ and similar expressions generally identify forward-lookingstatements. They include, but are not limited to, statements with respect to expectations, projections or other

3

characterizations of future events or circumstances, and the REIT’s objectives, goals, strategies, beliefs,intentions, plans, estimates, projections and outlook, including statements relating to the plans and objectives ofthe REIT, or estimates or predictions of actions of tenants, suppliers, competitors or regulatory authorities, andstatements regarding the future economic performance of the REIT. The REIT has based these forward-lookingstatements on its current expectations about future events. Some of the specific forward-looking statements inthis prospectus include, but are not limited to, statements with respect to the following:

• the intention of the REIT to pay stable and growing cash distributions to unitholders, on a monthly basis,generated from its investments in multi-unit residential real estate in Canada and the U.S.;

• the ability of the REIT to execute its business and growth strategies (including, by making additionalacquisitions of properties in its target markets and selecting and executing capital expenditure projects);

• the ability of the REIT to qualify for the REIT Exception;

• the expected amount of Indebtedness, mortgage debt and undepreciated capital cost balances as of or atApril 1, 2012;

• the expected level of foreign tax, if any, payable on amounts that give rise to the REIT’s distributableincome;

• the estimated amount of certain income taxes payable by Morguard as reflected in the distributions that itis expected to receive on the Class C LP Units;

• future legislative and regulatory developments which may affect the REIT;

• the REIT’s relationship with Morguard, including in respect of (i) Morguard’s retained interest in theREIT, (ii) the services to be provided to the REIT (whether directly or indirectly) by Morguard, and(iii) expected transactions to be entered into between Morguard and the REIT (including the REIT’sacquisition of certain interests in properties held by Morguard);

• access of the REIT to debt and/or equity markets on acceptable terms;

• expectations, including anticipated trends and challenges, in respect of the multi-unit residential realestate sector in Canada and the U.S.; and

• the expected compensation practices of the REIT, including in respect of the Trustees, management ofthe REIT, Morguard GP and the U.S. Manager.

Forward-looking statements do not take into account the effect of transactions or other items announced oroccurring after the statements are made. For example, they do not include the effect of dispositions, acquisitions,other business transactions, asset write-downs or other charges announced or occurring after the forward-looking statements are made.

Although management of the REIT believes that the expectations reflected in such forward-lookinginformation are reasonable, the REIT can give no assurance that these expectations will prove to have beencorrect, and since forward-looking information inherently involves risks and uncertainties, undue reliance shouldnot be placed on such information. The estimates and assumptions, which may prove to be incorrect, include,but are not limited to, the various assumptions set forth in this prospectus as well as the following: (i) the REITwill be able to obtain financing on acceptable terms from financial institutions; (ii) the REIT’s future level ofindebtedness and its future growth potential will remain consistent with its current expectations; (iii) there willbe no changes to tax laws adversely affecting the REIT’s financing capability, operations, activities, structure ordistributions; (iv) the REIT will be able to retain and attract the services, whether directly or indirectly, ofqualified and knowledgeable personnel as it expands its portfolio and business; (v) the impact of the currenteconomic climate and the current global financial conditions on the operations of the REIT, including theREIT’s financing capability and asset values, will remain consistent with its current expectations; (vi) there willbe no material changes to government and environmental regulations adversely affecting the REIT’s operations;(vii) conditions in the Canadian and U.S. multi-residential real estate market (including, competition foracquisitions, demographic trends and industry trends) will be consistent with the current climate; and(viii) capital markets will provide the REIT with access to equity and/or debt financing on acceptable terms.

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The forward-looking information contained in this prospectus is expressly qualified in its entirety by thesecautionary statements. Unless otherwise stated, all forward-looking information in this prospectus speaks as ofthe date of this prospectus. The REIT does not undertake any obligation to update such forward-lookinginformation, whether as a result of new information, future events or otherwise, except as expressly required byapplicable law. A number of factors could cause actual results to differ materially from the results discussed inthe forward-looking statements, including, but not limited to, the factors discussed under ‘‘Risk Factors’’.Consequently, actual results and events may vary significantly from those included in, contemplated or impliedby, such statements. When relying on forward-looking statements to make decisions, the REIT cautions readersnot to place undue reliance on these statements, as forward-looking statements involve significant risks anduncertainties and should not be read as guarantees of future performance or results, and will not necessarily beaccurate indications of whether or not the times at or by which such performance or results will be achieved.

NON-IFRS AND NON-CANADIAN GAAP MEASURES

In this prospectus, the REIT uses certain non-IFRS or non-Canadian GAAP financial measures, whichinclude NOI, FFO and AFFO. These measures are commonly used by real estate investment trusts as usefulmetrics for measuring performance; however, they do not have any standardized meaning prescribed by eitherIFRS or Canadian GAAP and are not necessarily comparable to similar measures presented by other real estateinvestment trusts.

These non-IFRS and non-Canadian GAAP measures are defined below and reconciled with the closestIFRS or Canadian GAAP measure, as applicable, under the headings ‘‘Management’s Discussion and Analysisof Financial Condition and Results of Operations — Years Ended December 31, 2011 and 2010 — Non IFRSMeasures’’ and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations —Years Ended December 31, 2010 and 2009 — Non-Canadian GAAP Measures’’. These non-IFRS andnon-Canadian GAAP measures should be considered as supplemental in nature and not a substitute for relatedfinancial information prepared in accordance with, respectively, IFRS and Canadian GAAP.

‘‘NOI’’ is used by industry analysts, investors and management to measure operating performance ofCanadian real estate investment trusts. NOI represents rental revenue from properties less property operatingexpenses as presented in the combined statements of income prepared in accordance with IFRS or CanadianGAAP. Accordingly, NOI excludes certain expenses included in the determination of net income such as interestexpense and amortization. NOI is not a recognized measure under Canadian GAAP. NOI is an additionalmeasure under IFRS, though it is a measure that does not necessarily have a standardized meaning under IFRS.Therefore, NOI may not be comparable to similarly titled measures presented by other real estate investmenttrusts.

Income before fair value gains/losses on real estate properties and income taxes is used by industry analysts,investors and management to measure operating results, inclusive of the impact of interest expense andamortization of capital assets. This measure provides an entity’s net income position prior to the impact of fairvalue gains or losses that may be significantly impacted by external market conditions and also represents anon-cash item. The measure is an additional measure under IFRS but is not defined by IFRS and, accordingly,the term does not necessarily have a standardized meaning and may not be comparable to similarly titledmeasures presented by other publically traded entities.

‘‘FFO’’ is an industry standard for evaluating operating performance, but is not indicative of funds availableto meet the REIT’s cash requirements. FFO is computed by the REIT in accordance with the current definitionsof the Real Property Association of Canada (‘‘REALpac’’). FFO is defined as: (i) in respect of IFRS, net incomebefore fair value gains/losses on real estate properties, fair value adjustments on the redeemable Class BLP Units classified as liabilities, distributions on the Class B LP Units, gains/losses on the disposition of realestate properties, deferred income taxes and certain other non-cash adjustments; or (ii) in respect of CanadianGAAP, net income before amortization of real estate properties, gains/losses on the disposition of real estateproperties, future income taxes and certain other non-cash adjustments.

‘‘AFFO’’ is a non-IFRS and non-Canadian GAAP financial measure used by most Canadian real estateinvestment trusts, but should not be considered as an alternative to net income, cash flow from operations or anyother measure prescribed under either Canadian GAAP or IFRS. The Trustees consider AFFO to be a useful

5

measure of cash available for distributions. AFFO is a supplemental measure to net income that is used in thereal estate industry to assess the sustainability of future cash distributions paid to the REIT’s unitholders. AFFOshould not be interpreted as an indicator of cash generated from operating activities as it does not considerchanges in working capital. AFFO is defined as FFO adjusted by (i) adding amortization of deferred financingcosts in place at Closing, amortization of free rent and amortization of cash flow hedges, (ii) deducting reservesfor maintenance capital expenditures, and (iii) making such other adjustments as may be determined by theTrustees in their discretion. Maintenance capital expenditures are estimated by management and representcapital expenditures that are required to maintain the existing earning potential of a property. Significantjudgment is required to classify property capital investments.

ELIGIBILITY FOR INVESTMENT

In the opinion of Stikeman Elliott LLP, counsel to the REIT, and Torys LLP, counsel to the Underwriters,provided that the REIT is a ‘‘mutual fund trust’’ within the meaning of the Income Tax Act (Canada)(the ‘‘Tax Act’’) on the date of Closing or the Units are listed on a designated stock exchange (which currentlyincludes the TSX) on the date of Closing, the Units offered hereby will be, on the date of Closing, qualifiedinvestments under the Tax Act for trusts governed by Plans.

Notwithstanding that Units may be qualified investments for a trust governed by a tax-free savings account(‘‘TFSA’’), registered retirement savings plan (‘‘RRSP’’) or registered retirement income fund (‘‘RRIF’’), theholder of a TFSA or the annuitant of an RRSP or RRIF, as the case may be, will be subject to a penalty tax if theholder or annuitant, does not deal at arm’s length with the REIT for purposes of the Tax Act or if the holder hasa ‘‘significant interest’’ (within the meaning of the Tax Act) in the REIT or in a corporation, partnership or trustwith which the REIT does not deal at arm’s length for purposes of the Tax Act. For these purposes, a holder orannuitant, as the case may be, will have a significant interest in the REIT at a particular time if the holder orannuitant, or the holder or annuitant together with persons or partnerships with which the holder or annuitantdoes not deal at arm’s length, holds at that time interests as a beneficiary under the REIT that have a fairmarket value of 10% or more of the fair market value of the interests of all beneficiaries under the REIT.Unitholders who intend to hold Units in a TFSA, RRSP or RRIF should consult with their own tax advisorsregarding the application of the foregoing having regard to their particular circumstances.

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PROSPECTUS SUMMARY

The following is a summary of the principal features of the Offering and should be read together with the moredetailed information and financial data and statements contained elsewhere in this prospectus. Certain terms used inthis prospectus are defined in the Glossary.

Establishment and Objectives

Morguard North American Residential Real Estate Investment Trust is an unincorporated, open-ended realestate investment trust established pursuant to the Declaration of Trust under, and governed by, the laws of theProvince of Ontario. The principal, registered and head office of the REIT is located at 55 City Centre Drive,Suite 1000, Mississauga, Ontario, L5B 1M3.

The REIT has been formed to own multi-unit residential properties in Canada and the United States. Theobjectives of the REIT are to: (i) generate stable and growing cash distributions on a tax-efficient basis;(ii) enhance the value of the REIT’s assets and maximize long-term Unit value through active asset and propertymanagement; and (iii) expand the asset base of the REIT and increase AFFO per Unit primarily throughacquisitions and improvement of its properties, including the Initial Properties, through targeted andstrategically deployed capital expenditures. See ‘‘Assets of the REIT — Capital Expenditures’’.

Concurrently with the Closing, the REIT will indirectly acquire from Morguard, through the Partnership,interests in a portfolio of 14 Canadian multi-unit residential properties comprising an aggregate of 12 High Rise,3 Mid Rise and 56 Low Rise buildings (collectively, the ‘‘Initial Canadian Properties’’) and three U.S. multi-unitresidential Low Rise properties comprising an aggregate of 52 two-storey buildings (collectively, the ‘‘InitialU.S. Properties’’ and, together with the Initial Canadian Properties, the ‘‘Initial Properties’’) currently operatedand owned or co-owned by affiliates of Morguard. See ‘‘Acquisition of Initial Properties’’. The Initial Propertiesconsist of interests in 5,439 residential suites that are located in Ontario, Alberta and Louisiana and have beenassembled from Morguard’s portfolio of residential properties. See ‘‘Assets of the REIT’’.

On Closing, Morguard (Canada) GP Limited (‘‘Morguard GP’’), a wholly-owned subsidiary of Morguard,(acting as a general partner of the Partnership), will employ Morguard’s experienced residential real estate teamto externally administer and operate the Initial Canadian Properties on behalf of the REIT. MorguardManagement Company Inc. (the ‘‘U.S. Manager’’), a wholly-owned subsidiary of Morguard, will externallymanage the Initial U.S. Properties. See ‘‘Post-Closing Structure’’, ‘‘Arrangements with Morguard — Duties andResponsibilities of Morguard GP’’ and ‘‘Arrangements with Morguard — U.S. Manager’’. Morguard GP, in itscapacity as a general partner of the Partnership, will be responsible for the day-to-day administration andoperation of the REIT’s Canadian properties held through the Partnership, while the U.S. Manager will beresponsible for the day-to-day administration and operation of the REIT’s U.S. properties.

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The following table highlights certain information about the Initial Properties as at January 1, 2012:

Rentable Suites

AverageOwnership Number MonthlyPercentage Total of Occupancy Rent/

Property (approx.) Suites Stories Level Suite

Initial Canadian Properties

Toronto, Ontario35 Thorncliffe Park Drive . . . . . . . . . . . . . . . . . . . . . . . 90% 287 18 98% $1,09443 Thorncliffe Park Drive . . . . . . . . . . . . . . . . . . . . . . . 100% 380 20 97% $1,10947 Thorncliffe Park Drive . . . . . . . . . . . . . . . . . . . . . . . 100% 474 25 97% $1,10849 Thorncliffe Park Drive . . . . . . . . . . . . . . . . . . . . . . . 100% 400 20 97% $1,11045 Generation Boulevard . . . . . . . . . . . . . . . . . . . . . . . 100% 396 3 96% $1,008

Toronto Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97%(2)

Mississauga, Ontario1423 Mississauga Valley Boulevard . . . . . . . . . . . . . . . . 91% 373 16 98% $1,2331477 Mississauga Valley Boulevard . . . . . . . . . . . . . . . . 87% 300 22 97% $1,3071547 Mississauga Valley Boulevard . . . . . . . . . . . . . . . . 89% 300 22 99% $1,276935 Dundas Street East . . . . . . . . . . . . . . . . . . . . . . . . 100% 142 16 99% $1,2262869 Battleford Road . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 325 3/5 98% $1,2463665 Arista Way(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 458 19 98% $1,28230 Elm Drive East . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 321 19 98% $1,236

Mississauga Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 98%(2)

Kitchener, Ontario305-315 Margaret Avenue . . . . . . . . . . . . . . . . . . . . . . . 100% 472 18 98% $1,081

Edmonton, Alberta10404 104 Avenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 277 4/5 97% $1,251

Initial U.S. Properties

Louisiana1001 East Dale Street, New Iberia . . . . . . . . . . . . . . . . . 100% 148 2 93% $ 654715 Marie Antoinette Street, Lafayette . . . . . . . . . . . . . 100% 192 2 91% $ 6623215 Knight Street, Shreveport . . . . . . . . . . . . . . . . . . . 100% 194 2 93% $ 720

U.S. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92%(2)

5,439 97% $1,126

Notes:

(1) 3665 Arista Way will be subject to the Head Lease with Morguard in respect of 90 furnished suites (see ‘‘Arrangements withMorguard — Head Lease’’). Occupancy and average monthly rent shown exclude the 90 suites subject to the Head Lease.

(2) Weighted average occupancy level.

Approximately 76% of the suites within the Initial Properties are, and approximately 78% of NOI isgenerated by Initial Properties, located in Toronto and Mississauga, both of which form part of the greaterToronto area (the ‘‘GTA’’). The GTA is Canada’s most significant economic cluster and contains the largestconcentration of people. According to the Conference Board of Canada, the GTA is home to 5.8 million people.Beyond the suites located in the GTA, management believes that the geographic distribution of the Initial

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Properties serves to add stability to the REIT’s cash flows as it reduces the REIT’s vulnerability to economicfluctuations affecting any particular region. The Initial Properties are regionally distributed as follows:

Geographic Breakdown — Suites Net Operating Income(1)

(by percentage of suites in the Initial Properties) (of the Initial Properties)

Toronto, Ontario35%

Louisiana, U.S.10%

Edmonton,Alberta

5% Kitchener,Ontario

9%

Mississauga,Ontario

41%

Toronto, Ontario27%

Louisiana, U.S.6%

Edmonton,Alberta

7%

Kitchener,Ontario

9%

Mississauga,Ontario

51%

Note:

(1) All figures are in Canadian dollars. NOI is for the period ended December 31, 2011. NOI for the Initial U.S. Properties has beenconverted to Canadian dollars using the average closing spot rate, provided by the Bank of Canada, for the 12-month period endedDecember 31, 2011 (US$1.00:Cdn$0.9891).

Approximately 71% of the suites in the Initial Properties have rental rates that are in excess of $1,000 permonth. The rental rates being achieved are an indication of the high quality and attractiveness of the portfolio toexisting and potential tenants. Management believes that the attractiveness of the portfolio will assist inmaintaining high occupancy rates and stable demand for the rental of suites in the portfolio. For the month ofDecember 2011, the suite distribution of the monthly rent rate paid per suite of the Initial Properties, excludingthe furnished suites at 3665 Arista Way, Mississauga, Ontario (‘‘The Arista’’), is reflected in the chart below:

Monthly Rental Revenue Breakdown(1)

(by percentage of suites in the Initial Properties)

$1101-$120025%

$1001-$110011% $901 - $1000

17%

<=$90012%

>$120035%

Note:

(1) All figures are in Canadian dollars. Rental rates for the Initial U.S. Properties have been converted to Canadian dollars using theclosing spot rate, provided by the Bank of Canada, on December 31, 2011 (US$1.00:Cdn$1.0170).

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The annualized estimated gain-to-lease reflected in the table below represents the difference betweenin-place rent and management’s estimate of corresponding market rent. The gain-to-lease for the InitialProperties, which are set out in the table below, reflects an estimated gain-to-lease of approximately $2.8 millionon an annualized basis, or $0.11 per Unit and Class B LP Unit. Management has estimated market rents on asuite-type basis (i.e., one bedroom suites, two bedrooms suites) for each of the Initial Properties taking intoaccount local market conditions and recent leasing activity.

Monthly Rent Per Suite

Management’s AnnualizedEstimate of Estimated

Total Adjusted In-Place Market Gain-to-LeaseGeographic Region Suites(1) Rent(2) Rent(3) (000’s)(4)

Toronto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,937 $1,064 $1,095 $ 724Mississauga . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,129 $1,260 $1,324 $1,543Kitchener . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472 $1,079 $1,158 $ 452Edmonton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 $1,249 $1,265 $ 52Louisiana(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534 $ 690 $ 700 $ 60

Total/Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,349 $1,116 $1,161 $2,831

Notes:

(1) Excludes 90 suites at The Arista subject to the Head Lease with Morguard (see ‘‘Arrangements with Morguard — Head Lease’’).

(2) The monthly in-place rent per suite represents the average monthly in-place rents for the region for January, 2012, excluding the90 furnished suites subject to the Head Lease. The average monthly rent is calculated as gross potential rent divided by the number ofsuites per building and then averaged for the region to arrive at this number. Vacant suites have been assumed to be filled at marketrents. At January 31, 2012, the vacancy rate for the Initial Properties was 2.8%.

(3) The monthly market rent per suite represents the average monthly market rents for the region for January, 2012, excluding furnishedsuites. The monthly market rent is calculated as total market rent per building, as estimated by management, divided by the number ofsuites and then averaged for the region.

(4) The annualized gain-to-lease is calculated by deducting the monthly in-place rents from management’s estimate of monthly marketrent. The resulting difference is multiplied by the number of suites in the region and then annualized.

(5) The ‘‘Adjusted In-Place Rent’’, ‘‘Management’s Estimate of Market Rent’’ and ‘‘Annualized Estimated Gain-to-Lease’’ for Louisiana,prior to conversion from US$ to Cdn$, is US$679, US$688 and US$59, respectively. All figures have been converted to Canadiandollars using the closing spot rate, provided by the Bank of Canada, on December 31, 2011 (US$1.00:Cdn$1.0170).

Management and Trustees of the REIT

The Declaration of Trust provides that, subject to certain conditions, the Trustees will have full, absoluteand exclusive power, control and authority over the REIT’s assets, affairs and operations, to the same extent asif the Trustees were the sole and absolute legal and beneficial owners of the REIT’s assets. The governancepractices, investment guidelines and operating policies of the REIT will be overseen by a Board consisting of aminimum of three and a maximum of ten Trustees, a majority of whom will be Independent Trustees and amajority of whom will be Canadian residents. At Closing, the REIT will have seven Trustees.

The following table sets forth certain information regarding each of the individuals who will be Trustees ofthe REIT at Closing. As of the date of this prospectus, only Messrs. Sahi, Robertson and Munsters are Trusteesof the REIT. The other individuals designated as Trustees of the REIT are not currently Trustees of the REIT.Each such individual has agreed to become a Trustee of the REIT and it is expected that such individuals will beappointed to the Board on or prior to Closing. As such individuals are not members of the Board at the time of

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this prospectus, the REIT does not believe any of such individuals has any liability for the contents of thisprospectus in such capacity under the applicable securities laws of the provinces and territories of Canada.

Name and Municipality ofResidence Position with the REIT Principal Occupation

K. (RAI) SAHI(3) . . . . . . . . . . . . . Trustee, Chair of the Board and Chair and Chief ExecutiveMississauga, Ontario Chief Executive Officer Officer, Morguard Corporation

FRANK MUNSTERS(2) . . . . . . . . . . Trustee Corporate DirectorMississauga, Ontario

AVTAR T. BAINS(2,3) . . . . . . . . . . . Independent Trustee, Lead Trustee Real Estate Advisor and InvestorVancouver, British Columbia

DINO CHIESA(1,3) . . . . . . . . . . . . . Independent Trustee Principal, Chiesa GroupToronto, Ontario (commercial property investors),

Corporate Director

WILLIAM O. WALLACE(2) . . . . . . . Independent Trustee President, WallaceMilton, Ontario Automotive Inc.

MEL LEIDERMAN(1) . . . . . . . . . . . Independent Trustee Managing Partner, Lipton LLPToronto, Ontario (an accounting firm)

BRUCE K. ROBERTSON(1,3) . . . . . . Independent Trustee Principal, Grandview CapitalToronto, Ontario (a Canadian merchant bank)

Notes:

(1) Member of the Audit Committee.

(2) Member of the C&G Committee.

(3) Member of the Investment Committee.

On Closing, Morguard GP (acting as a general partner of the Partnership) will employ Morguard’sexperienced multi-unit residential real estate team to administer and operate the Initial Canadian Properties onbehalf of the REIT and the U.S. Manager will externally manage the Initial U.S. Properties. See ‘‘Post-ClosingStructure’’ and ‘‘Arrangements with Morguard’’.

The following table sets forth the name, municipality of residence and positions held with the REIT(or functions performed on behalf of the REIT) of each executive officer of the REIT (or each person acting inthe capacity of an executive officer of the REIT) on Closing:

Name and Municipality of Residence Office with the REIT

K. (RAI) SAHI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chair and Chief Executive OfficerMississauga, Ontario

PAUL MIATELLO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chief Financial OfficerToronto, Ontario

BEVERLEY G. FLYNN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secretary and General CounselToronto, Ontario

JOHN TALANO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice PresidentKenner, Louisiana

Growth Strategies

The REIT’s growth strategy will initially be focused on opportunities to acquire additional multi-unitresidential properties primarily located in urban centres and major suburban regions in Canada and in thesoutheastern United States that satisfy the REIT’s investment criteria, as well as generating greater cash flow

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from its properties. The REIT will seek to leverage its relationship with Morguard to access acquisitionopportunities that satisfy the REIT’s investment criteria. Morguard has advised the REIT that its currentintention is to offer to sell to the REIT additional multi-unit residential properties that it manages and in whichit has an ownership interest, including some or all of the Retained Properties, in one or more transactions overthe next few years, subject to market conditions. See ‘‘The REIT — Growth Strategies’’ and ‘‘Arrangements withMorguard — Right of First Offer and Non-Solicit Agreement’’.

Strengths and Investment Highlights of the REIT and the Initial Properties

Management believes that the following describes the key strengths and investment highlights of the REITand the Initial Properties:

• Attractive Yield. The REIT intends to pay stable and growing monthly cash distributions, initiallyexpected to provide unitholders with an annual yield of approximately 6.0% based on an AFFO payoutratio of approximately 95% (based on the pro forma AFFO of the Initial Properties). See ‘‘DistributionPolicy’’ and ‘‘Non-IFRS and Non-Canadian GAAP Measures’’.

• Experienced Management. The REIT will be administered and operated by an experienced team ofresidential real estate professionals from Morguard who have diverse backgrounds in the acquisition,divestiture, development, financing and operation of multi-unit residential real estate in Canada and theUnited States, which will be supervised by the REIT’s Chief Executive Officer and Chief FinancialOfficer. Morguard’s management team has an average of 18 years’ experience in multi-unit residentialmanagement and acquisitions. Morguard has a long history in the real estate sector of the capital marketsof providing its investors with above-average returns. As shown in the table below, investments inMorguard and Morguard REIT have achieved significant capital appreciation which, over the long-term,have exceeded benchmark returns.

Annualized Total Returns

0%

10%

20%

30%

40%

50%

58%

15%

22%

Morguard Corporation

Morguard REIT

S&P/TSX Total Return REIT Index

14%11%

6%

18% 16%13%

60%

70%

1 Year 10 Year5 Year

Source: Bloomberg, Market data as of December 31, 2011.

Given differences in the composition of the assets of the REIT, Morguard and Morguard REIT, returnsof the REIT may not be comparable with those of Morguard or Morguard REIT. The asset composition,class of real estate assets and asset values of the portfolios of Morguard and Morguard REIT areprovided under the heading ‘‘The REIT — Morguard and the REIT’’.

• A Stable and Defensive Portfolio. The REIT will initially own and invest in multi-unit residentialproperties primarily located in urban centres and major suburban regions in Ontario, Alberta andLouisiana. Multi-unit residential properties are viewed by management as stable investments as the

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demand for residential rental accommodation is less affected by general economic conditions and cashflow from such properties is generated by a tenant base that comprises numerous individual households.Management believes multi-unit residential properties provide investors with the lowest variability ofrisk-adjusted returns among all classes of real estate, owing to the necessity-based tenure which istypically not materially impacted by economic slowdowns. The stability of the Initial Properties isdemonstrated by the portfolio’s high occupancy level for the five years ended December 31, 2011 wherethe average occupancy for the Initial Canadian Properties was approximately 97%, and the averageoccupancy for the Initial U.S. Properties was approximately 95%. The stability of the Initial Properties isalso demonstrated by the small amount of bad debts incurred, which averaged $236,000 per year in 2010and 2011, or approximately 0.33% of total revenues. Since 2007, the Initial Properties experienced acompound annual growth rate (‘‘CAGR’’) in NOI of 2.0%. Since 2009, the CAGR in NOI for the InitialProperties was 5.2%. The increase in CAGR achieved during the past three years was the result of costcontainment measures and increased monthly rents.

• Recent Capital Spending. During the past five years, Morguard has invested $31.8 million in sustainingand value enhancing capital expenditures at the Initial Properties. These improvements wereimplemented to make the Initial Properties more appealing to prospective residents through therefurbishment of building interiors, corridors, lobbies, garages and suites. Significant funds have alsobeen expended to ensure that the Initial Properties operate in an energy efficient manner. FollowingClosing, the REIT intends to invest further in the Initial Properties through targeted and strategicallydeployed capital expenditures. Capital expenditures have served to maintain and improve the operatingperformance of the Initial Properties and have also enhanced the value of the Initial Properties byallowing Morguard to charge higher rents or by enabling it to lower operating costs. See ‘‘Assets of theREIT — Capital Expenditures’’.

• Relationship with Morguard. The REIT anticipates that its continuing relationship with Morguard willprovide opportunities to acquire additional multi-unit residential properties. Morguard has advised theREIT that its current intention is to offer to sell to the REIT additional multi-unit residential propertiesthat it manages and in which it has an ownership interest, including some or all of the RetainedProperties, in one or more transactions over the next few years, subject to market conditions. To facilitateand govern sales of such additional properties to the REIT by Morguard, on Closing, Morguard willprovide the REIT with the Right of First Offer. In accordance with Morguard’s acquisition allocationpolicy, future Canadian and U.S. acquisition opportunities for multi-unit residential properties not ownedby Morguard will be offered to the REIT at the same time as they are offered to Morguard’s other clientsand in priority to affiliates of Morguard, including Morguard Related Parties. Morguard’s interests will bewell aligned with holders of Units as, on Closing, it is expected that Morguard will hold an approximate69.7% effective interest in the REIT through ownership of all of the Class B LP Units of the Partnership(or an approximate 67.6% effective interest in the REIT if the Over-Allotment Option is exercised infull). See ‘‘Arrangements with Morguard — Right of First Offer and Non-Solicit Agreement’’ and ‘‘TheREIT — Growth Strategies’’.

• Tax Deferral on Distributions. The REIT estimates that, based on undepreciated capital cost balances asof April 1, 2012, on a pro forma basis, approximately 66% of the monthly cash distributions during theyear ended December 31, 2011 would have been tax-deferred returns of capital which are non-taxablewhen received, although these amounts would have reduced a unitholder’s adjusted cost base of its Units,which would have triggered a gain in the unitholder’s hands for the purposes of the Tax Act to the extentsuch adjusted cost base was otherwise a negative amount.

Strengths and Investment Highlights of the Multi-Unit Residential Real Estate Sector

Management believes that the following describes the key strengths and investment highlights of themulti-unit residential real estate sector in Canada and the United States:

• Attractive Investment Fundamentals. The multi-unit residential real estate sector provides investors withfavourable investment characteristics and attractive risk-adjusted returns in comparison to other major

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real estate asset classes. Additionally, according to ICREIM/IPD, the multi-unit residential real estatesector in Canada has demonstrated the lowest volatility in investment returns among major incomeproducing real estate asset classes over the past twenty years and has also posted the highest annualizedreturn (10.3%) over that same period (ending September 30, 2011). The United States’ multi-unitresidential real estate sector provides investors with similarly favourable investment characteristics.According to the National Council of Real Estate Investment Fiduciaries, the multi-unit residential rentalsector has generated competitive returns over the long-term. The sector has finished first over both20-year and 25-year time horizons, posting annualized returns of 9.3% and 8.6%, respectively, as atDecember 31, 2011.

5 Year Canadian Real Estate Risk Adjusted Total Returns(1)

Residential

Tota

l Ret

urn

to R

isk

Rat

io

Retail Office Industrial

1.5x

1.3x

1.1x

0.8x

1.5x

1.3x

1.0x

0.8x

Note:

(1) Source: IPD data. Total returns (income and capital appreciation). 2011 data is based on the first three quarters of 2011 asfourth quarter data for 2011 was unavailable. Total returns are risk adjusted by dividing them by their respective standarddeviations.

• Compelling Market Fundamentals. The multi-unit residential real estate sector in Canada and theUnited States has demonstrated healthy risk-adjusted rental market performance over the past five years.In Canada, vacancy levels have operated within a narrow bandwidth, ranging from 2.1% to 3.1%according to CMHC. Canadian average rental rates for two-bedroom suites (being the majority of theresidential suites that comprise the Initial Properties) have increased by 12.0% from the end of 2006through to March 2011, according to CMHC. According to Reis, Inc., vacancy rates for the multi-unitresidential sector in the United States are projected to decline over the next couple of years, particularlyin the South Atlantic region of the United States. The vacancy rate in the South Atlantic region was 5.9%as at December 31, 2011 and is projected to decline to 5.3% by 2012 with further declines expectedthereafter. This is a significant drop from the vacancy rate of 9.3% in the South Atlantic region in 2009.In the South Atlantic region, rents declined 0.9% in 2009, while rents increased 1.7% in both 2010 and2011 and Reis, Inc. is projecting rent increases to average 3.5% per year over the next five years.

• Barriers to Additional Supply. In Canada, the REIT will benefit from barriers to the creation of newsupply in the multi-unit residential real estate sector as the costs of building new multi-unit residentialrental buildings are substantially higher than the value of the cash flows that can currently be generatedby such buildings, principally as a result of rent control legislation and market conditions. Managementestimates that the replacement cost of the Initial Properties (excluding land) is approximately$212 million higher than their appraised value, making significant new construction unlikely. CMHCestimates that between October 2005 and October 2011, the total rental stock in Canada decreased by2.7%. In the United States, the REIT expects that as a result of tightening credit markets there will be adecrease in the construction of new revenue-producing properties in the multi-unit residential sector,thereby increasing demand for rental premises in existing properties and leading to increasing occupancyrates.

• Availability of Financing in Canada and the United States. The availability of CMHC-insured financing inCanada is an attractive feature of the multi-unit residential real estate sector. Residential propertyowners who use CMHC insurance on their mortgage debt are able to obtain financing at lower interest

14

rates than non-CMHC insured mortgage debt and to reduce debt renewal risk. In the United States,leverage may be obtained from a variety of sources, including, but not limited to, Fannie Mae, FreddieMac, commercial banks, credit companies, insurance companies, pension funds and other institutionswho wish to provide debt. Multi-unit residential property owners who use Fannie Mae/Freddie Mac areable to obtain financing at advantageous rates when compared to other real estate sectors, and minimizedebt renewal risk, while achieving loans in excess of conventional amounts. In 2011, multi-unit residentialmortgage financings by Fannie Mae and Freddie Mac totalled $24.4 billion and $20.3 billion, respectively.Having a larger number of financial institutions from which to source mortgages results in competitiveinterest rates and terms on such mortgages.

• Rate of Home Ownership. One of the most significant contributors to the projection for demand of rentalsuites is the declining level of home ownership, particularly in the United States. As of December 31,2011, the percentage of United States residents that own their home was 66.0%, down 3.2% from itsall-time high of 69.2% in 2004 and moving toward its long-term historic average of 65.3%. Based onindustry sources, management believes that, while the current economic weakness will probably ease atsome point in the second half of 2012, an increase in the home ownership rate is unlikely for a muchlonger period of time and the current downward trend will continue. Renting provides the tenant withcertainty about rental payments and they are not exposed to changes in the underlying value of the realestate. In addition, tenants are not required to have a mortgage for their rental accommodation, unlikethe situation for home ownership where the value of the mortgage currently exceeds the value of thehome for about 10.7 million United States households, or 22.1% of all mortgaged homes in theUnited States. Housing data firm CoreLogic reported that, at the end of the third quarter of 2011, anadditional 2.4 million borrowers in the United States had less than 5% equity in their homes. Rentingapartment suites is also becoming a more popular option as it provides tenants with greater flexibility andincreased mobility.

Independent Valuations

Morguard retained the Appraisers to provide an independent estimate of the fair market value of each ofthe Initial Properties. Based on the Appraisals and Morguard’s ownership percentage of the various InitialCanadian Properties, the estimated aggregate market value of the Initial Canadian Properties as atDecember 31, 2011 was $672 million and was derived through the application of a weighted averagecapitalization rate of 5.5%. The estimated aggregate market value of the Initial U.S. Properties wasUS$27.5 million (approximately $28.0 million using the closing spot rate, provided by the Bank of Canada, onDecember 31, 2011 of US$1.00:Cdn$1.0170) and was derived through the application of a weighted averagecapitalization rate of 7.5%. The market value of Morguard’s share of the Initial Canadian Properties, including aportfolio premium of 5% in respect of the Initial Properties located in the GTA, was $703 million. No portfoliopremium was applicable to the Initial U.S. Properties. Based on the Appraisals, the estimated aggregate marketvalue of Morguard’s share of the Initial Properties, as at December 31, 2011, was approximately $700 millionexcluding any portfolio premium, and $731 million including the portfolio premium. See ‘‘Assessments andValuation of the Initial Properties — Independent Valuations’’.

Arrangements with Morguard

On Closing, the REIT, the Partnership and certain Morguard entities will enter into certain agreementsgoverning the relationships among such parties following Closing. See ‘‘Retained Interest’’.

Morguard GP

The Partnership will acquire at Closing, directly or indirectly, all of the Initial Properties and the generalpartners of the Partnership will be the REIT GP, a wholly-owned subsidiary of the REIT, and Morguard GP, acorporation incorporated under the laws of Canada that will be a wholly-owned subsidiary of Morguard. Thebusiness and activities of Morguard GP will be restricted to acting as a general partner of the Partnership or anyother limited partnership controlled by the REIT. Morguard GP, acting as a general partner of the Partnership,

15

will employ Morguard’s experienced multi-unit residential real estate team to administer and operate the InitialCanadian Properties on behalf of the REIT.

The duties and responsibilities of Morguard GP as a general partner of the Partnership will be subject tothe oversight of the REIT GP. See ‘‘Arrangements with Morguard — Morguard GP’’.

U.S. Manager

The U.S. Manager will be appointed by U.S. Holdco to externally manage the Initial U.S. Properties.Pursuant to the U.S. Management Agreements, the U.S. Manager will have general responsibility for the overallmanagement and operation of the Initial U.S. Properties. See ‘‘Arrangements with Morguard — U.S. Manager’’.

Services Agreement

Pursuant to the Services Agreement, Morguard will provide Services to the REIT, including advising theREIT on potential acquisitions and dispositions of properties, providing the services of such administrative,management and executive personnel as is reasonably necessary, and advising the REIT GP on strategic mattersrelating to the Partnership’s Canadian properties, dispositions and development of properties and valuemaximization. See ‘‘Arrangements with Morguard — Services Agreement’’.

Right of First Offer and Non-Solicit Agreement

On Closing, Morguard will provide the REIT with the Right of First Offer to acquire any interests ofMorguard in the properties that it owns after Closing that are multi-unit residential properties located in Canadaand the United States, including interests in any such properties acquired or developed (including suchproperties under development that are substantially complete) after Closing, prior to disposition of any suchinterest to a third party (other than the sale of individual condominium suites) which will be on terms not lessfavourable to the REIT than those offered by or to such third party. The Right of First Offer will provide that ifat any time and from time to time following Closing Morguard determines that it desires to sell, or receives anddesires to accept an offer to acquire (directly or indirectly by way of the sale or acquisition of securities), amulti-unit residential rental property, Morguard will, by notice in writing, advise the REIT of such opportunity.The REIT will have up to ten business days to notify Morguard, in the form of an executed non-binding letter ofintent and accompanying refundable deposit, if it intends to acquire the property. See ‘‘Arrangements withMorguard — Right of First Offer and Non-Solicit Agreement’’.

Morguard GP, the U.S. Manager and Morguard will not, and Morguard GP, the U.S. Manager andMorguard will cause their subsidiaries to not, solicit any specific tenant to vacate any REIT property in favour ofa property in which Morguard GP, the U.S. Manager, Morguard or any Morguard Related Parties have anownership or operating interest during the occupancy of such tenant at such REIT property. In addition, none ofMorguard GP, the U.S. Manager, Morguard or any Morguard Related Parties will preferentially marketbuildings in which it has an ownership or operating interest over buildings held directly or indirectly bythe REIT.

License of the Morguard Name and Logo

The Morguard name and trademark and related marks and designs (including the stylized ‘‘M’’ logos) willbe licensed to the REIT by MIL under a non-exclusive, royalty-free trademark license agreement (the ‘‘LicenseAgreement’’) entered into at or prior to Closing. By using the ‘‘Morguard’’ name, the REIT will have the benefitof the goodwill and recognition associated with the ‘‘Morguard’’ name in the real estate sector. MIL mayterminate the license at any time on 30 days’ written notice following the date on which Morguard GP and anyother Morguard entity ceases to be the general partner of the Partnership (or other limited partnershipscontrolled by the REIT) and the U.S. Manager and any other Morguard entity ceases to be the manager of theREIT’s U.S. properties.

16

Liability for Mortgages

Morguard will continue to be liable as a guarantor or otherwise, in all instances and to the same extent asthey were before, under the Assumed CMHC Mortgages and the Assumed Fannie Mae Mortgages as requiredby the mortgagees as a condition of their consent to the assumption by the REIT of such mortgages. ThePartnership will indemnify Morguard in respect of such continuing liability. The right of the REIT to dispose ofan Initial Property in respect of which Morguard is so liable will be subject to the payment and discharge in fullof such liability, the release of Morguard from such liability or Morguard’s consent.

Indemnification

On Closing, Morguard will enter into the Indemnity Agreement pursuant to which Morguard will indemnifythe REIT and the Partnership for any breach of the representations, warranties and covenants provided underthe Acquisition Agreements. The maximum liability of Morguard under its indemnity for any breach of therepresentations, warranties and covenants provided under the Acquisition Agreements will be limited to anamount equal to the net proceeds of the Offering. No claim under such indemnity may be made until theaggregate claims exceed $1 million and thereafter in respect of claims of not less than $50,000. See ‘‘Acquisitionof Initial Properties — Acquisition Agreements’’.

Head Lease

On Closing, the REIT will enter into a head lease (the ‘‘Head Lease’’) with Morguard, as head tenant, inrespect of 90 furnished suites at The Arista. The Head Lease will terminate upon the earlier of (i) the date onwhich The Arista ceases to be owned by the REIT and (ii) 30 days following the date on which the REIT notifiesMorguard in writing that it intends to terminate the Head Lease. Under the Head Lease, Morguard will pay theREIT rent in an amount equal to 85% of gross revenue allocable to the 90 suites subject to the Head Lease,payable quarterly in advance, subject to adjustment at year end based on the actual rent received on such suites.Management estimates that the annual lease payment under the Head Lease will be approximately $1.6 millionin 2012, which represents 2.2% of rental revenues as disclosed in the pro forma statement of income for the yearended December 31, 2011.

Calculation of Pro Forma AFFO for Year Ended December 31, 2011

(In $ thousands)

Net Income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 88,712Adjustments:

Fair value gains on real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82,585)Distributions on Class B LP Units recorded as interest expense(1) . . . . . . . . . . . . . . . . . . . . . . . 10,334Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (151)

Funds From Operations (FFO)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,310FFO per Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.66Amortization of deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,348Maintenance capital expenditures(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,387)Amortization of free rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146Amortization of cash flow hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

Adjusted Funds From Operations (AFFO)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,615

AFFO per Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.63

Notes:

(1) Under IFRS, the Class B LP Units are considered debt and their corresponding distribution amounts are considered interest expense.The REIT believes these distribution payments do not truly represent interest expense, as these amounts are only payable if the REITdeclares distributions on the Units. Therefore, these distributions are excluded from the calculation of FFO, consistent with thetreatment of distributions paid to holders of Class A LP Units.

17

(2) FFO and AFFO are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS. See‘‘Non-IFRS and Non-Canadian GAAP Measures’’.

(3) Based on management’s estimate of $450 per suite multiplied by the number of residential suites owned during the period.

Debt Structure

The REIT will seek to maintain a combination of short, medium and long-term debt maturities that areappropriate for the overall debt level of its portfolio, taking into account the availability of financing and marketconditions, and the financial characteristics of each property. The Declaration of Trust provides that the REITmay not incur or assume any Indebtedness if, after incurring or assuming such Indebtedness, the totalIndebtedness of the REIT would be more than 70% of Gross Book Value. See ‘‘Investment Guidelines andOperating Policies — Operating Policies’’. Currently, management expects, as a matter of internal policy, thatthe REIT will target a total Indebtedness level at or below 60% of Gross Book Value. On April 1, 2012, totalIndebtedness, including the $25 million that will be drawn on the Morguard Facility, and the estimated presentvalue of Morguard’s tax liability that is expected to be paid by the Partnership of $6.6 million, is estimated to beapproximately 57% of Gross Book Value based on the pro forma balance sheet, under IFRS.

The weighted average maturity and the weighted average effective interest rate, as at April 1, 2012, of allIndebtedness of the REIT at Closing are expected to be approximately 4.50 years and 4.36%, respectively.Interest rates and debt maturities will be reviewed regularly by the Trustees to ensure that appropriate debtmanagement strategies are implemented. Given the sensitivity to refinancing debt at maturity, the REIT intends,when appropriate, to arrange for CMHC financing in Canada up to six months in advance of the maturity ofoutstanding indebtedness, for a nominal additional cost, to lock-in interest rates on future indebtedness. TheREIT may also, from time to time, enter into instruments to hedge the amount of interest to be paid by theREIT on future debt and to reduce its exposure to refinancing risks, provided that such hedging will not affectthe REIT’s status as a ‘‘real estate investment trust’’ for purposes of the SIFT Rules.

Retained Debt

Management estimates that as at April 1, 2012, the aggregate Indebtedness of the REIT will beapproximately $357.3 million. As Morguard will retain control of the REIT, the acquisition of the InitialProperties is accounted for as a reorganization and recapitalization. As a result, a mark-to-market adjustment of$21.3 million which would be realized by the REIT had the acquisition been accounted for as an acquisition, isnot realized by the REIT. U.S. dollars are converted to Canadian dollars using the closing spot rate, provided bythe Bank of Canada, on December 31, 2011 (US$1.00:Cdn$1.0170). See ‘‘Pro Forma Capitalization of theREIT’’ and ‘‘Pro Forma Combined Financial Statements’’. Morguard will retain a portion of the debt in anamount of $100.8 million (the ‘‘Retained Debt’’), which excludes a mark-to-market adjustment of $7.9 millionfor the reasons outlined above. The Retained Debt is secured by a charge on certain of the Initial CanadianProperties. The Retained Debt will not be assumed by the Partnership and will remain as indebtedness ofMorguard. In respect of the Retained Debt, Morguard will hold Class C LP Units of the Partnership on which itwill receive priority distributions. Morguard will remain responsible for interest and principal payments on theRetained Debt. Partnership distributions on the Class C LP Units held by Morguard will, if paid, be in amountsexpected to be sufficient to make such payments. The Partnership will agree to provide Morguard’s creditorswith a guarantee in respect of the Retained Debt to ensure the lenders are not prejudiced in their ability tocollect from Morguard in the event that payments on the Class C LP Units (in respect of the Retained Debt) arenot made as expected. Morguard will indemnify the Partnership and the REIT for any losses suffered by thePartnership or the REIT in the event payments on the Retained Debt are not made as required, provided suchlosses are not attributable to any action or failure to act on the part of the Partnership. See ‘‘The Partnership —Distributions — Distributions on Class C LP Units’’ and ‘‘Arrangements with Management — Indemnification’’.

Morguard Facility

On Closing, the Partnership will enter into an unsecured revolving credit facility with Morguard(the ‘‘Morguard Facility’’) which will consist of a $50 million demand facility available for acquisitions and forgeneral business purposes, which can be drawn upon in either Canadian dollars or an equivalent amount in

18

5APR201200305640

United States dollars. Upon Closing, the Partnership intends to draw $25 million from the Morguard Facility tofund a portion of the purchase price of the Initial Properties.

Post-Closing Structure

The following chart sets out the simplified organizational structure of the REIT immediately followingClosing (all figures approximate):

Holders of Units

Common Shares

U.S. Management Agreements



U.S. Manager


REIT

Morguard Residential General

Partnership

Morguard GP

Canada Holdco

REIT GPPartnership

U.S. Holdco

SizelerSteeplechase

LimitedPartnership

SizelerMagnolia Place

Partnership

Spivillages,LLC

Spimag,LLC

MNARInvestors LLC

CANADA

U.S.

Class ALP Units

Class BLP Units

Class CLP

UnitsClass BGP Unit

Class AGP Unit

Special Voting Units

RetainedDebt

100%

100%

100%

100%

100% 100% 100%

100%

99.999%(1)

100%

100%

99%

99% 1% 1%

Note:

(1) Morguard Residential Partnership Trust holds an approximate 0.001% interest in Morguard Residential General Partnership, the solebeneficiary of which is Morguard. Morguard Residential Partnership Trustee Limited, a wholly-owned subsidiary of Morguard, is thetrustee of Morguard Residential Partnership Trust.

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THE OFFERING

Offering: 7,500,000 Units. See ‘‘Plan of Distribution’’.

Amount: $75,000,000

Price: $10.00 per Unit.

Over-Allotment Option: The REIT has granted the Underwriters the Over-Allotment Option, whichis exercisable in whole or in part and at any time up to 30 days after Closing,to purchase up to an additional 750,000 Units on the same terms as set forthabove solely to cover over-allocations, if any, and for market stabilizationpurposes. See ‘‘Plan of Distribution’’.

Use of Proceeds: The net proceeds of the Offering will be approximately $67.8 million, afterdeducting the REIT’s estimated expenses of the Offering and the aggregateUnderwriters’ fee. The REIT will use such net proceeds to indirectly acquireits interest in the Initial Properties. In particular, the REIT will use(i) approximately $62.6 million to purchase 6,987,009 Class A LP Units of thePartnership from Morguard, which will have acquired such Class A LP Unitsas partial consideration for the Initial Canadian Properties and(ii) approximately $5.1 million to subscribe for 512,991 additional Class ALP Units of the Partnership, which will use such proceeds to indirectlyacquire the Initial U.S. Properties. See ‘‘Acquisition of Initial Properties’’.

The net proceeds of the Over-Allotment Option, if exercised in full, will beapproximately $7.1 million, after deducting the aggregate Underwriters’ fee.The REIT intends to use the net proceeds received by it on the exercise ofthe Over-Allotment Option to reduce its outstanding debt under theMorguard Facility and/or for general working capital purposes. See ‘‘Plan ofDistribution’’.

Unit Attributes: The REIT is authorized to issue an unlimited number of Units. Each Unitrepresents a proportionate undivided beneficial ownership interest in theREIT and any distributions from the REIT. Each Unit is transferable andentitles the holder thereof to: (i) an equal participation in distributions of theREIT; and (ii) one vote at all meetings of Unitholders. Special Voting Unitshave no economic entitlement in the REIT or in the distributions or assets ofthe REIT but entitle the holder to one vote per Special Voting Unit at anymeeting of the Unitholders. Special Voting Units may only be issued inconnection with or in relation to securities exchangeable into Units, includingClass B LP Units, for the purpose of providing voting rights with respect tothe REIT to the holders of such securities. Special Voting Units will not betransferable separately from the exchangeable securities to which they areattached and will be automatically transferred upon the transfer of suchexchangeable securities. See ‘‘Declaration of Trust’’.

Retained Interest: On Closing, it is expected that Morguard will hold an approximate 69.7%effective interest in the REIT through ownership of all of the Class BLP Units of the Partnership (or an approximate 67.6% effective interest inthe REIT if the Over-Allotment Option is exercised in full). Each Class BLP Unit will be exchangeable at the option of the holder for one Unit of theREIT (subject to customary anti-dilution adjustments), will be accompaniedby one Special Voting Unit of the REIT (which provides for the same votingrights in the REIT as a Unit), and will receive distributions of cash from thePartnership equal to the distributions that the holder of such Class B LP Unitwould have received if it held a Unit instead of a Class B LP Unit. See

20

‘‘Distribution Policy’’. The transfer of Class B LP Units is subject to anumber of restrictions. See ‘‘The Partnership — Transfer of LP Units’’. Inaddition, Morguard will hold all of the outstanding Class C LP Units of thePartnership. The Class C LP Units have been designed to provide Morguardwith an interest in the Partnership that will entitle Morguard to distributions,in priority to distributions to holders of the Class A LP Units, Class BLP Units, Class A GP Units and Class B GP Units in an amount, if paid,expected to be sufficient (without any additional amounts) to permitMorguard to satisfy amounts payable under the Retained Debt and in respectof certain associated income tax liabilities of Morguard, if any. See ‘‘RetainedInterest’’ and ‘‘The Partnership — Partnership Units’’.

Morguard will also have the right to nominate a certain number of Trusteesto the REIT’s Board depending on the size of the Board and Morguard’seffective interest in the REIT. Subject to certain conditions and restrictions,Morguard will be granted pre-emptive rights to maintain its pro rataownership interest, as well as demand and ‘‘piggy back’’ registration rightswith respect to public offerings by the REIT. See ‘‘Retained Interest’’ and‘‘Trustees and Management of the REIT’’. In addition, Morguard GP (actingas a general partner of the Partnership) will engage Morguard’s experiencedresidential real estate team to administer and operate the Initial CanadianProperties on behalf of the REIT and the U.S. Manager will externallymanage the Initial U.S. Properties. See ‘‘Post-Closing Structure’’,‘‘Arrangements with Morguard — Duties and Responsibilities ofMorguard GP’’ and ‘‘Arrangements with Morguard — U.S. Manager’’.

Distribution Policy: The REIT initially intends to make monthly cash distributions of $0.05 perUnit to holders of Units, which are estimated on an annual basis to beapproximately 95% of AFFO of the REIT (based on the pro forma AFFO ofthe Initial Properties). The Partnership will make corresponding monthlycash distributions to holders of Class B LP Units. The first distribution of theREIT will be for the period from Closing to May 31, 2012 and will be paid onor about June 15, 2012, in the amount of $0.07167 per Unit (assumingClosing occurs on April 18, 2012). Declared distributions will be paid on orabout the 15th day of each month to unitholders of record at the close ofbusiness on the last business day of the immediately preceding month. See‘‘Distribution Policy’’.

DRIP: On or shortly following Closing, the REIT intends to implement, subject toregulatory approval, a distribution reinvestment plan pursuant to whichresident Canadian holders of Units will be entitled to elect to have all orsome of the cash distributions on their Units automatically reinvested inadditional Units at a price per Unit calculated by reference to the weightedaverage of the closing price of Units on the applicable stock exchange for thefive trading days immediately preceding the relevant Distribution Date.

The Partnership intends to adopt a similar plan for the holders of Class BLP Units such that they may elect to have all or some of the cashdistributions on the Class B LP Units automatically reinvested on the samebasis as a unitholder pursuant to the DRIP. See ‘‘Distribution ReinvestmentPlan’’.

Risk Factors: An investment in Units is subject to a number of risk factors that should becarefully considered by a prospective purchaser. Cash distributions by theREIT are not guaranteed and will be based, in part, upon the financial

21

performance of the REIT’s properties, which is susceptible to a number ofrisks. These risks, and other risks associated with an investment in Units,include, but are not limited to, real property ownership and tenant risks,substitutions for residential rental units, competition, government regulation,changes in applicable laws, environmental matters, risk of natural disasters,fixed costs and increased expenses, interest rate risk, geographicconcentration, dependence on the Partnership, acquisitions, operationalrisks, risk of loss not covered by insurance, risk related to insurance renewals,access to capital, financing risk, degree of leverage, taxation matters,derivatives risks, potential conflicts of interest with Trustees, internalcontrols, litigation risks, exchange rate risks, government housing regulationsand subsidies, laws benefitting disabled persons, United States financingrenewal risk, significant ownership by Morguard, retained debt, acquisition offuture properties from Morguard, potential conflicts of interest withMorguard, dependence on Morguard GP, the U.S. Manager and Morguard,assumption of liabilities, no prior public market for Units, volatile marketprice for Units, ability of unitholders to redeem Units, use of appraisals,historical financial information and pro forma financial information, returnon investment not guaranteed, structural subordination of units, dilution,Unitholder liability and the nature of the investment. See ‘‘Risk Factors’’ andthe other information included in this prospectus for a discussion of the risksthat an investor should carefully consider before investing in Units.

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THE REIT

Establishment and Objectives

Morguard North American Residential Real Estate Investment Trust is an unincorporated, open-ended realestate investment trust established pursuant to the Declaration of Trust under, and governed by, the laws of theProvince of Ontario. The principal, registered and head office of the REIT is located at 55 City Centre Drive,Suite 1000, Mississauga, Ontario, L5B 1M3.

The REIT has been formed to own multi-unit residential properties in Canada and the United States. Theobjectives of the REIT are to: (i) generate stable and growing cash distributions on a tax-efficient basis;(ii) enhance the value of the REIT’s assets and maximize long-term Unit value through active asset and propertymanagement; and (iii) expand the asset base of the REIT and increase AFFO per Unit primarily throughacquisitions and improvement of its properties, including the Initial Properties, through targeted andstrategically deployed capital expenditures. See ‘‘Assets of the REIT — Capital Expenditures’’.

Concurrently with the Closing, the REIT will indirectly acquire from Morguard, through the Partnership,interests in a portfolio of 14 Canadian multi-unit residential properties comprising an aggregate of 12 High Rise,3 Mid Rise and 56 Low Rise buildings (collectively, the ‘‘Initial Canadian Properties’’) and three U.S. multi-unitresidential Low Rise properties comprising an aggregate of 52 two-storey buildings (collectively, the ‘‘InitialU.S. Properties’’ and, together with the Initial Canadian Properties, the ‘‘Initial Properties’’) currently operatedand owned or co-owned by affiliates of Morguard. See ‘‘Acquisition of Initial Properties’’. The Initial Propertiesconsist of interests in 5,439 residential suites that are located in Ontario, Alberta and Louisiana and have beenassembled from Morguard’s portfolio of residential properties. See ‘‘Assets of the REIT’’.

On Closing, Morguard (Canada) GP Limited (‘‘Morguard GP’’), a wholly-owned subsidiary of Morguard,(acting as a general partner of the Partnership), will employ Morguard’s experienced residential real estate teamto externally administer and operate the Initial Canadian Properties on behalf of the REIT. MorguardManagement Company Inc. (the ‘‘U.S. Manager’’), a wholly-owned subsidiary of Morguard, will externallymanage the Initial U.S. Properties. See ‘‘Post-Closing Structure’’, ‘‘Arrangements with Morguard — Duties andResponsibilities of Morguard GP’’ and ‘‘Arrangements with Morguard — U.S. Manager’’. Morguard GP, in itscapacity as a general partner of the Partnership, will be responsible for the day-to-day administration andoperation of the REIT’s Canadian properties held through the Partnership, while the U.S. Manager will beresponsible for the day-to-day administration and operation of the REIT’s U.S. properties.

The REIT’s growth strategy will initially be focused on opportunities to acquire additional multi-unitresidential properties primarily located in urban centres and major suburban regions in Canada and in thesoutheastern United States that satisfy the REIT’s investment criteria, as well as generating greater cash flowfrom its properties. The REIT will seek to leverage its relationship with Morguard to access acquisitionopportunities that satisfy the REIT’s investment criteria. Morguard has advised the REIT that its currentintention is to offer to sell to the REIT additional multi-unit residential properties that it manages and in whichit has an ownership interest, including some or all of the Retained Properties, in one or more transactions overthe next few years, subject to market conditions. See ‘‘The REIT — Growth Strategies’’ and ‘‘Arrangements withMorguard — Right of First Offer and Non-Solicit Agreement’’.

On Closing, it is expected that Morguard will hold an approximate 69.7% effective interest in the REITthrough ownership of all of the Class B LP Units of the Partnership (or an approximate 67.6% effective interestin the REIT if the Over-Allotment Option is exercised in full). Each Class B LP Unit will be exchangeable at theoption of the holder for one Unit of the REIT (subject to customary anti-dilution adjustments), will beaccompanied by one Special Voting Unit of the REIT (which provides for the same voting rights in the REIT asa Unit), and will receive distributions of cash from the Partnership equal to the distributions that the holder ofsuch Class B LP Unit would have received if it held a Unit instead of a Class B LP Unit. See ‘‘DistributionPolicy’’. The transfer of Class B LP Units is subject to a number of restrictions. See ‘‘The Partnership — Transferof LP Units’’. In addition, Morguard will hold all of the outstanding Class C LP Units of the Partnership. TheClass C LP Units have been designed to provide Morguard with an interest in the Partnership that will entitleMorguard to distributions, in priority to distributions to holders of the Class A LP Units, Class B LP Units,Class A GP Units and Class B GP Units in an amount, if paid, expected to be sufficient (without any additionalamounts) to permit Morguard to satisfy amounts payable under the Retained Debt and in respect of certain

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associated income tax liabilities of Morguard, if any. See ‘‘Retained Interest’’ and ‘‘The Partnership —Partnership Units’’.

Morguard and the REIT

Morguard is a real estate investment company whose principal activities include the acquisition,development and ownership of commercial and multi-unit residential real estate properties. Morguard is one ofCanada’s premier real estate investment advisors and management companies, representing major institutionaland private investors. Morguard’s common shares are publicly traded and listed on the TSX under the symbol‘‘MRC’’. As of January 31, 2012, Morguard had a market capitalization of approximately $1.1 billion.Morguard’s primary goal is to accumulate a portfolio of high-quality real estate assets and then deliver thebenefits of such real estate ownership to its shareholders.

Morguard is controlled by K. (Rai) Sahi, who has established a well-known and respected reputation in realestate, with additional experience in transportation, product distribution, commercial banking and golf. Mr. Sahicurrently controls public enterprises which together have market capitalizations in excess of $2 billion, and over$12 billion in capital and assets under management. Mr. Sahi has grown Morguard into a nationally recognizedand respected Canadian brand, and over the past five years he has led Morguard’s expansion into theUnited States. Throughout his career, Mr. Sahi has been recognized for his vision in value investing, valuecreation and growth and enterprise building to the benefit of investors, partners and clients.

From an initial investment in Morguard (then Acklands Limited) in 1990, where Mr. Sahi purchased anownership position of approximately 23% at a cost of $5.25 per share, he has grown that investment into anownership position of approximately 51% of Morguard. Morguard’s closing price on the TSX, on January 31,2012, was $86.44 per share. Mr. Sahi has served as Chairman and Chief Executive Officer of Morguard since hisinitial investment in Acklands Limited.

Morguard’s current portfolio of 101 owned multi-unit residential, retail, office and industrial propertieslocated across Canada and in the southeastern United States, began in April 1997 when Morguard acquired a40% equity interest in Goldlist Properties Inc., for approximately $36 million. At the time of Morguard’s initialinvestment, Goldlist Properties Inc. owned 16 multi-unit residential buildings, comprising approximately5,000 suites primarily located in the GTA. Morguard’s portfolio grew through purchases of units of MorguardREIT, and common shares and convertible debentures of Revenue Properties Company Limited. Subsequently,Mr. Sahi purchased Morguard Investments Limited (‘‘MIL’’), which at the time was Canada’s largest real estateinvestment advisory firm for pension funds, with approximately $1.9 billion of real estate assets undermanagement. Most recently, Mr. Sahi expanded into the United States real estate market, privatizing SizelerProperty Investors, Inc. in a US$420 million acquisition.

Under Mr. Sahi’s leadership and guidance, Morguard has grown into a major Canadian real estate andproperty management company. As of December 31, 2011, Morguard’s owned and managed portfolio of retail,office and industrial properties consisted of approximately 54.3 million square feet of gross leasable area andhad an estimated market value in excess of $11.4 billion. As of December 31, 2011, Morguard’s owned andmanaged portfolio of multi-unit residential properties included 12,644 suites valued at approximately$1.7 billion. In addition, Morguard owns approximately 44.8% of the units of Morguard REIT, which ownsapproximately 8.5 million square feet of office and retail properties across Canada valued at over $2.1 billion.

Morguard focuses on three primary businesses:

• Real Property Investments. Morguard currently owns interests in a diversified portfolio of 101 office,industrial, retail and multi-unit residential properties (including the Initial Properties) primarily locatedin urban centres and major suburban regions across Canada and the United States. Morguard hassuccessfully implemented a strategy that has created a focus in the real estate sector, which, including itsinvestment in Morguard REIT and land held for future development, represents over 90% of its totalconsolidated assets. Morguard’s major real estate investments are comprised of land, income-producingproperties and various debt and real estate investments. Headquartered in Mississauga, Ontario,Morguard now employs more than 1,300 people across 12 offices in Canada and the United States. Eachoffice is staffed by an experienced management team with extensive knowledge of the local market.

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• Real Estate Advisory Services. Morguard serves major institutional clients and private investors byproviding a full range of real estate services. These include acquisition, development, asset management,property management, research and valuation services. Morguard, through its wholly-owned subsidiary,MIL, provides real estate management services to Canadian institutional investors. Services includeacquisitions, developments, dispositions, leasing, performance measurement, and asset and propertymanagement. For over 35 years, MIL has positioned itself as one of Canada’s leading providers of realestate portfolio, asset and property management services. MIL has a strong regional presence in ninemajor cities in Canada (Victoria, Vancouver, Edmonton, Calgary, Winnipeg, Toronto, Mississauga,Ottawa and Montreal) and three significant markets in the United States (New York, Louisiana andFlorida). As of December 31, 2011, Morguard’s owned and managed portfolio of retail, office andindustrial properties consisted of approximately 54.3 million square feet of gross leasable area and had anestimated market value in excess of $11.4 billion. As of December 31, 2011, Morguard’s owned andmanaged portfolio of multi-unit residential properties included 12,644 suites valued at approximately$1.7 billion.

Real Estate Sector Value Portfolio Size

Office $ 3.3 billion 14.0 million square feet

Retail $ 4.7 billion 16.2 million square feet

Industrial $ 1.7 billion 24.1 million square feet

Residential $ 1.7 billion 12,644 suites

Total $11.4 billion

• Morguard REIT. Morguard owns approximately 44.8% of the units of Morguard REIT, a TSX-listedCanadian closed-end trust that owns approximately 8.5 million square feet of office and retail propertiesacross Canada valued at over $2.1 billion. MIL provides day-to-day management of all of MorguardREIT’s properties.

Morguard decided to form and transfer its interests in the Initial Properties to the REIT in order to accessalternate sources of capital and growth opportunities for its remaining portfolio, while retaining a majorityownership interest in such properties. Morguard’s objective is for the REIT to be a growth vehicle in themulti-unit residential real estate sector.

The Initial Canadian Properties are located in Toronto, Mississauga, Kitchener and Edmonton, which aremajor business and cultural centres and are regions in which the REIT is expected to benefit from Morguard’sestablished presence. The geographic clusters of the Initial Canadian Properties should allow for managerialsynergies and other operational efficiencies to be realized. The geographic location of the Initial CanadianProperties, relative to the Retained Properties (as defined below), will reduce the risk of conflicts of interestbetween Morguard and the REIT. See ‘‘Risk Factors — Risks Related to the REIT’s Relationship withMorguard — Potential Conflicts of Interest with Morguard’’. Management expects that the REIT will continueto grow in these geographic areas and will also focus on further geographic diversification in Canada by targetingother regions of Canada where Morguard has an established presence. See ‘‘— Target Markets’’.

The Initial U.S. Properties are located in suburban and secondary markets in Louisiana that benefit frombeing located in close proximity to businesses in the oil and gas industry, hospitals and medical facilities,universities or military bases. Management considers the Initial U.S. Properties to be mature and stableproperties. Management expects that the REIT will continue to grow in this geographic area and will also focuson further geographic diversification in certain target markets in the southeastern United States. See ‘‘— TargetMarkets’’.

Morguard expects that the REIT will benefit from its relationship with Morguard and its experienced teamof residential real estate professionals who have diverse backgrounds in the acquisition, divestiture,development, financing and operation of real estate in Canada and the United States. Morguard has advised theREIT that its current intention is to offer to sell to the REIT additional multi-unit residential properties that itmanages and in which it has an ownership interest, including some or all of the Retained Properties, in one ormore transactions over the next few years, subject to market conditions. See ‘‘— Growth Strategies’’. In order to

25

support this intention, on Closing, Morguard will provide the REIT with the Right of First Offer to acquire anyinterests of Morguard in the properties that it owns after Closing that are multi-unit residential propertieslocated in Canada and the United States, including interests in any such properties acquired or developed(including such properties under development that are substantially complete) after Closing, prior to dispositionof any such interest to a third party (other than the sale of individual condominium suites) which will be onterms not less favourable to the REIT than those offered by or to such third party. See ‘‘Arrangements withMorguard — Right of First Offer and Non-Solicit Agreement’’.

Following Closing, Morguard’s remaining Canadian multi-unit residential portfolio will comprise interestsin four High Rise buildings located in Toronto, Ontario, two High Rise buildings located in Mississauga,Ontario, one mixed-use building located in Ottawa, Ontario, two buildings under development located inToronto, Ontario, and its remaining U.S. multi-unit residential portfolio will consist of interests in 15 Low Riseand Mid Rise, garden-style communities, comprising an aggregate of 236 buildings, located in Alabama, Florida,Louisiana and New Jersey (collectively, the ‘‘Retained Properties’’). The Retained Properties represent interestsin 5,066 suites. In determining which properties to retain, Morguard has sought to limit the potential leasingconflicts which could arise as between properties included in the Initial Properties and those included in theRetained Properties.

The following table compares the Retained Properties to the Initial Properties:Initial Properties Retained Properties

Canada U.S. Canada U.S.

Average Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 yrs. 32 yrs. 33 yrs. 30 yrs.Average Occupancy(1) . . . . . . . . . . . . . . . . . . . . . . . 97% 95% 98% 93%Average Monthly Rent(2) . . . . . . . . . . . . . . . . . . . . . $1,173 $681 $1,387 $767Average Tenancy(3) . . . . . . . . . . . . . . . . . . . . . . . . . 47.7 mths. 29.0 mths. 84.5 mths. 25.5 mths.Average Turnover(4) . . . . . . . . . . . . . . . . . . . . . . . . . 28% 56% 20% 55%Total Number of Suites . . . . . . . . . . . . . . . . . . . . . . 4,905 534 1,815 3,251

Notes:(1) Calculated for the 24-month period ended December 31, 2011.

(2) Calculated as at December 31, 2011, including occupied suites only and excluding furnished suites. All figures have been converted toCanadian dollars using the closing spot rate, provided by the Bank of Canada, on December 31, 2011 (US$1.00:Cdn$1.0170).

(3) Calculated as at December 31, 2011, excluding furnished suites.

(4) Calculated for the 24-month period ended December 31, 2011, excluding furnished suites.

The following table highlights certain information about the Retained Properties:Number of Number of Ownership by Number of Average AgeProperties Buildings Morguard Suites (Years)

Mississauga . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 95% 336(2) 32Ottawa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 100% 36 6Toronto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 100% 1,443 34

Retained Canadian Properties . . . . . . . . . . . . . . 6 7 99%(1) 1,815(2) 33

Harahan, Louisiana . . . . . . . . . . . . . . . . . . . . . . 1 4 100% 48 44Slidell, Louisiana . . . . . . . . . . . . . . . . . . . . . . . 1 6 100% 144 7New Orleans, Louisiana . . . . . . . . . . . . . . . . . . 1 1 100% 135 60Gretna, Louisiana . . . . . . . . . . . . . . . . . . . . . . . 1 23 100% 262 45Mobile, Alabama . . . . . . . . . . . . . . . . . . . . . . . 4 140 100% 1,329 38Pensacola, Florida . . . . . . . . . . . . . . . . . . . . . . . 4 44 100% 805 22Lake Worth, Florida . . . . . . . . . . . . . . . . . . . . . 1 10 100% 327 6West Palm Beach, Florida . . . . . . . . . . . . . . . . . 1 7 100% 189 22Weehawken, New Jersey . . . . . . . . . . . . . . . . . . 1 1 51% 12(2) 4Retained U.S. Properties . . . . . . . . . . . . . . . . . . 15 236 100%(1) 3,251(2) 30

Notes:(1) Weighted averages.

(2) Figures calculated assuming the applicable property is wholly-owned by Morguard.

26

Strengths and Investment Highlights of the REIT and the Initial Properties

Management believes that the following describes the key strengths and investment highlights of the REITand the Initial Properties:

• Attractive Yield. The REIT intends to pay stable and growing monthly cash distributions, initiallyexpected to provide unitholders with an annual yield of approximately 6.0% based on an AFFO payoutratio of approximately 95% (based on the pro forma AFFO of the Initial Properties). See ‘‘DistributionPolicy’’ and ‘‘Non-IFRS and Non-Canadian GAAP Measures’’.

• Experienced Management. The REIT will be administered and operated by an experienced team ofresidential real estate professionals from Morguard who have diverse backgrounds in the acquisition,divestiture, development, financing and operation of multi-unit residential real estate in Canada and theUnited States, which will be supervised by the REIT’s Chief Executive Officer and Chief FinancialOfficer. Morguard’s management team has an average of 18 years’ experience in multi-unit residentialmanagement and acquisitions.

• A Stable and Defensive Portfolio. The REIT will initially own and invest in multi-unit residentialproperties primarily located in urban centres and major suburban regions in Ontario, Alberta andLouisiana. Multi-unit residential properties are viewed by management as stable investments as thedemand for residential rental accommodation is less affected by general economic conditions and cashflow from such properties is generated by a tenant base that comprises numerous individual households.Management believes multi-unit residential properties provide investors with the lowest variability ofrisk-adjusted returns among all classes of real estate, owing to the necessity-based tenure which istypically not materially impacted by slowdowns. The stability of the Initial Properties is demonstrated bythe portfolio’s high occupancy level for the five years ended December 31, 2011 where the averageoccupancy for the Initial Canadian Properties was approximately 97%, and the average occupancy for theInitial U.S. Properties was approximately 95%. The stability of the Initial Properties is also demonstratedby the small amount of bad debts incurred, which averaged $236,000 per year in 2010 and 2011, orapproximately 0.33% of total revenues. Since 2007, the Initial Properties experienced a CAGR in NOI of2.0%. Since 2009, the CAGR in NOI for the Initial Properties was 5.2%. The increase in CAGR achievedduring the past three years was the result of cost containment measures and increased monthly rents.

• Recent Capital Spending. During the past five years, Morguard has invested $31.8 million in sustainingand value enhancing capital expenditures at the Initial Properties. These improvements wereimplemented to make the Initial Properties more appealing to prospective residents through therefurbishment of building interiors, corridors, lobbies, garages and suites. Significant funds have alsobeen expended to ensure that the Initial Properties operate in an energy efficient manner. FollowingClosing, the REIT intends to invest further in the Initial Properties through targeted and strategicallydeployed capital expenditures. Capital expenditures have served to maintain and improve the operatingperformance of the Initial Properties and have also enhanced the value of the Initial Properties byallowing Morguard to charge higher rents or by enabling it to lower operating costs. See ‘‘Assets of theREIT — Capital Expenditures’’.

• Relationship with Morguard. The REIT anticipates that its continuing relationship with Morguard willprovide opportunities to acquire additional multi-unit residential properties. Morguard has advised theREIT that its current intention is to offer to sell to the REIT additional multi-unit residential propertiesthat it manages and in which it has an ownership interest, including some or all of the RetainedProperties, in one or more transactions over the next few years, subject to market conditions. To facilitateand govern sales of such additional properties to the REIT by Morguard, on Closing, Morguard willprovide the REIT with the Right of First Offer. In accordance with Morguard’s acquisition allocationpolicy, future Canadian and U.S. acquisition opportunities for multi-unit residential properties not ownedby Morguard will be offered to the REIT at the same time as they are offered to Morguard’s other clientsand in priority to affiliates of Morguard, including Morguard Related Parties. Morguard’s interests will bewell aligned with holders of Units as, on Closing, it is expected that Morguard will hold an approximate69.7% effective interest in the REIT through ownership of all of the Class B LP Units of the Partnership(or an approximate 67.6% effective interest in the REIT if the Over-Allotment Option is exercised in

27

full). See ‘‘Arrangements with Morguard — Right of First Offer and Non-Solicit Agreement’’ and ‘‘TheREIT — Growth Strategies’’.

• Tax Deferral on Distributions. The REIT estimates that, based on undepreciated capital cost balances asof April 1, 2012, on a pro forma basis, approximately 66% of the monthly cash distributions during theyear ended December 31, 2011 would have been tax-deferred returns of capital which are non-taxablewhen received, although these amounts would have reduced a unitholder’s adjusted cost base of its Units,which would have triggered a gain in the unitholder’s hands for the purposes of the Tax Act to the extentsuch adjusted cost base was otherwise a negative amount.

Growth Strategies

Overview

The REIT plans to use the following growth strategies to achieve its objectives:

• Strategic Acquisitions in Target Markets. The REIT’s growth strategy will focus on acquisitions ofmulti-unit residential properties primarily located in urban centres and major suburban regions inCanada and in the southeastern United States where opportunities exist. The REIT will seek to identifypotential property acquisitions using investment criteria that focus on security of cash flow, potential forcapital appreciation, potential for increasing value by improving the assets being acquired through capitalexpenditures and stronger property management and growth in the REIT’s AFFO per Unit. The REITwill also seek opportunities to acquire over-leveraged multi-unit residential properties (or the relatedunderlying debt) in circumstances where property owners are having difficulty meeting current debtservice obligations, or in certain circumstances where property owners are financial institutions orconduits under legal or economic compulsion to sell.

• Relationship with Morguard. The REIT will seek to leverage its relationship with Morguard to access andassess acquisition opportunities that satisfy the above criteria. Morguard has advised the REIT that itscurrent intention is to offer to sell to the REIT additional multi-unit residential properties that itmanages and in which it has an ownership interest, including some or all of the Retained Properties, inone or more transactions over the next few years, subject to market conditions. In this regard, on Closing,Morguard will provide the REIT with the Right of First Offer in respect of Morguard’s multi-unitresidential properties. See ‘‘Arrangements with Morguard — Right of First Offer and Non-SolicitAgreement’’, ‘‘Risk Factors — Risks Related to the REIT’s Relationship with Morguard — Acquisitionof Future Properties from Morguard’’ and ‘‘Risk Factors — Risks Related to the REIT’s Relationshipwith Morguard — Potential Conflicts of Interest with Morguard’’.

• Organic Growth. The REIT’s growth strategy will also focus on maximizing cash flow from its portfolio.The REIT intends to build upon the stable cash flows currently generated by the Initial Properties bymaximizing occupancy and average monthly rent taking into account local conditions in each of itsgeographic markets, effectively and efficiently managing its operating costs as a percentage of totalrevenues, and strengthening its asset base through its building infrastructure improvement and capitalexpenditure programs.

Strategic Acquisitions in Target Markets

Through its relationship with Morguard, the REIT expects to identify and execute strategic acquisitions inits target markets. Morguard has significant expertise in identifying and underwriting attractive acquisitionopportunities, executing transactions and effectively managing assets. In addition to the services that it providesto the REIT, Morguard provides similar services to other third party clients, and will present acquisitionopportunities to all of its clients, including the REIT, in accordance with Morguard’s acquisition allocationpolicy. See ‘‘Arrangements with Morguard — Right of First Offer and Non-Solicit Agreement’’.

The Investment Committee of the REIT, a majority of whose members at Closing will be IndependentTrustees, will assess particular acquisition opportunities based on a variety of factors, including the expectedrisk-adjusted returns, credit fundamentals, liquidity, availability of adequate financing, borrowing costs andmacroeconomic conditions. The Investment Committee may authorize, without board approval, proposed

28

acquisitions, dispositions or borrowings where the value of such transaction does not exceed $25 million. TheInvestment Committee will also recommend to the Board whether to approve or reject proposed transactionswhere the value of such transaction exceeds $25 million; however, such transactions must be approved by theBoard. Each member of the Investment Committee must have at least five years of substantial experience in thereal estate industry.

Management believes there are numerous acquisition opportunities within the REIT’s target markets toacquire multi-unit residential properties that fit within its growth strategy and meet the investment criteriadescribed above. See ‘‘— Overview’’. While capitalization rates have decreased in recent months, interest ratesgenerally remain below capitalization rates, providing an opportunity for the REIT to achieve positive leverage.Management believes its growth strategy is currently supported by generally improving NOI growth trendscombined with opportunities to purchase multi-unit residential properties at prices below replacement cost.

In addition to seeking to acquire properties that fit within the scope of Core Properties, Value AddProperties or Opportunistic Properties (each as defined below), the REIT will generally seek to acquiremulti-unit residential properties which: (i) are comprised of 150 to 600 suites per property, in order to allow forincreased operating efficiency, with target properties outside of this range evaluated and priced appropriately;and (ii) satisfy the investment criteria described above.

The REIT will seek to keep its investment strategy dynamic and flexible, which will enable it to adapt toshifts in economic, real estate and capital market conditions and to exploit opportunities resulting from suchshifts. Consistent with this strategy, the REIT’s investment decisions will depend on prevailing market conditionsand may change over time in response to emerging opportunities. Management believes this approach will allowthe REIT to identify undervalued opportunities in all market cycles in its target markets.

The REIT will seek to acquire multi-unit residential properties that generally fit into the following threecategories:

• Core Properties. Properties which management views as prospective core properties (‘‘Core Properties’’)are generally characterized by the following features: (i) properties located in urban and major suburbanmarkets and typically with significant barriers to entry; (ii) close proximity to transportation, includingpublic transit and highways; (iii) no significant deferred maintenance issues or significant capitalexpenditures would be necessary to maintain market presence; and (iv) well-managed and maintained byits current owners.

• Value Add Properties. Properties which management views as prospective properties to which the REITcould add value (‘‘Value Add Properties’’) are generally characterized by the following features: (i) olderproperties located in urban, suburban and secondary markets; (ii) deferred maintenance issues, capitalexpenditure needs, operational deficiencies (e.g., inadequate on-site management teams) and/oroccupancy deficiencies (e.g., below market occupancy rates) of modest to moderate significance, whichmay require more intensive management efforts than Core Properties; and (iii) capital expenditure needsgenerally not exceeding $10,000 to $20,000 per suite, depending on market conditions and material costs.

• Opportunistic Properties. Properties which management views as opportunistically priced, given theREIT’s financial position and operational expertise (‘‘Opportunistic Properties’’) are generallycharacterized by the following features: (i) older properties located outside of the REIT’s target markets;(ii) deferred maintenance issues, capital expenditure needs, operational deficiencies (e.g., inadequateon-site management teams) and/or occupancy deficiencies (e.g., below market occupancy rates) ofgreater significance, which will require more intensive management efforts than Value Add Properties;(iii) potential issues related to defective construction or inherent building flaws (e.g., aluminum wiring,poor installation of mechanical systems or appliances), or unfavourable floor plans; and (iv) capitalexpenditure needs generally exceeding $20,000 per suite, depending on market conditions andmaterial costs.

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2MAR201211532398

2MAR201211532723

Relationship with MorguardManagement expects the REIT’s relationship with Morguard to provide the REIT with the following

benefits:• Proven Track Record in the Capital Markets. Morguard has a long history in the real estate sector of the

capital markets of providing its investors with above-average returns. As shown in the table below,investments in Morguard and Morguard REIT have achieved significant capital appreciation which, overthe long-term, have exceeded benchmark returns.

Annualized Total Retuns

0%

10%

20%

30%

40%

50%

58%

15%

22%


Morguard REIT

S&P/TSX Total Return REIT Index

14%11%

6%

18% 16%13%

60%

70%

1 Year 10 Year5 Year

Source: Bloomberg, Market data as of December 31, 2011.

Given differences in the composition of the assets of the REIT, Morguard and Morguard REIT, returnsof the REIT may not be comparable with those of Morguard or Morguard REIT. The asset composition,class of real estate assets and asset values of the portfolios of Morguard and Morguard REIT areprovided under the heading ‘‘The REIT — Morguard and the REIT’’.

• Returns Consistently Ahead of the Benchmark. Morguard has achieved long-term returns that consistentlybeat the industry benchmark. The charts below illustrate the 1, 3, 5, 7, 10, 15 and 20 year returns forMorguard’s ‘‘Property Index’’, which includes returns from all asset classes, relative to ICREIM/IPDbenchmarks. Morguard’s active management of the REIT’s properties will assist the REIT in reaching itsperformance objectives, including: (i) generating stable and growing cash distributions; (ii) enhancing thevalue of the REIT’s assets and maximizing long-term Unit value; and (iii) expanding the asset base of theREIT and increasing AFFO per Unit primarily through acquisitions and property improvements.

6.50 6.37 6.57 6.67 6.64 6.54 7.02 6.81 7.53 7.34 7.91 7.80 7.89 7.87

5.66

9.01

0.05

1.90 1.77 2.36

4.23 4.56 3.82 3.58 4.06 3.79

1.93 0.88

1 Year 3 Year 5 Year 7 Year 10 Year 15 Year 20 Year

Morguard Income

Morguard Capital

Morguard Total Return

RCPI/IPD Income

RCPI/IPD Capital

RCPI/IPD Total Return

12.47

15.91

6.64

8.69

11.47 11.66

8.50 9.04

11.56 11.1612.22 11.84

9.908.82

• History of Growth. Morguard has a long and accomplished history of growth within its real estateportfolio. The graph below illustrates Morguard’s growth in assets under management over the past36 years, with notations of significant milestones.

30

27FEB201219483163

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3APR201209011696

$ billion

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$0.0

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$2.0

Morguard InvestmentsLimited Established

Morguard InvestmentsAcquired byMorguard Corporation

• Growth and Stability of the Initial Properties. Morguard has been successful in increasing NOI andmaintaining high occupancy rates within the Initial Properties. Since 2007, the Initial Propertiesexperienced a CAGR in NOI of 2.0%. Since 2009, the CAGR in NOI for the Initial Properties was 5.2%.The increase in CAGR achieved during the past three years was the result of cost containment measuresand increased monthly rents. Morguard has also been successful in maintaining a high level of occupancywithin the Initial Properties. During the last five years, the Initial Properties experienced an averageoccupancy rate of 97%. The average occupancy rate is reflective of the success of Morguard’s leasing andmarketing strategies.

NOI (2007–2011)

($M

M)

$40

$38

$36

$34

$32

$30

$33.6$33.0 $32.9

2007 2008 2009 2010 2011

$34.9

$36.4

2.0%CAGR 5.2%

CAGR

Average Annual Occupancy Rate

100%

95%

90%

95.5%

96.3%

97.3%

96.1%97.0%

2007 2008 2009 2010 2011

96.5%AVG

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Average Monthly Rent

$1,120

$1,090

$1,060

$1,000

$1,030

2007 2008 2009 2010 2011

1.2%CAGR

• Operational Synergies. Morguard will own or manage real estate properties, including those of the REIT,which have an estimated market value of approximately $11.4 billion as of December 31, 2011, taking intoaccount all asset classes. Management expects that the size and range of this combined portfolio willallow the REIT to benefit from operating synergies as a result of Morguard’s administration andoperation of the REIT’s properties. Specifically, management expects that these synergies will likelyresult from the bulk purchase of supplies, contractor services, insurance policies, utilities and lowermarketing and advertising costs. The REIT also expects to benefit from Morguard’s insight into marketconditions and industry developments in major markets across Canada and the United States with respectto economic trends, regulatory matters, operational efficiencies and rental trends, as well as its access toacquisition opportunities.

• Ability to Pursue Acquisitions and Leverage Morguard’s Platform and Expertise. Morguard’s experiencedmanagement team has vast experience in sourcing properties due to extensive contacts and closerelationships with local developers, owners, lenders and the real estate brokerage community.Management expects that Morguard’s presence in major markets across Canada and the United Stateswill provide the REIT with access to acquisition opportunities and the ability to deliver investmentopportunities that would otherwise not be available to it.

• Ability to Acquire Properties Developed by Morguard. Morguard’s development group, in collaborationwith Morguard’s investment team, is well-positioned to identify development opportunities. Oncedeveloped (or upon substantial completion), a multi-unit residential property may be acquired fromMorguard to become part of the REIT’s portfolio. At present, management believes that multi-unitresidential real estate development opportunities are difficult to justify in both Canada and theUnited States. However, management expects there to be development opportunities in theUnited States once the macroeconomic environment and construction finance market improve givengenerally favourable land acquisition and construction costs in the U.S. market. See ‘‘Multi-UnitResidential Real Estate Sector in Canada and the United States — Strengths and Investment Highlightsof the Multi-unit Residential Real Estate Sector — Barriers to Additional Supply’’.

Initial Properties Gain-to-Lease Summary

The annualized estimated gain-to-lease reflected in the table below represents the difference betweenin-place rent and management’s estimate of corresponding market rent. The gain-to-lease for the InitialProperties, which is set out in the table below, reflects an estimated gain-to-lease of approximately $2.8 millionon an annualized basis, or $0.11 per Unit and Class B LP Unit. Management has estimated market rents on a

32

suite-type basis (i.e., one bedroom suites, two bedrooms suites) for each of the Initial Properties taking intoaccount local market conditions and recent leasing activity.

Monthly Rent Per Suite AnnualizedManagement’s Estimated

Total Adjusted In-Place Estimate of Gain-to-LeaseGeographic Region Suites(1) Rent(2) Market Rent(3) (000’s)(4)

Toronto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,937 $1,064 $1,095 $ 724Mississauga . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,129 $1,260 $1,324 $1,543Kitchener . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 472 $1,079 $1,158 $ 452Edmonton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 $1,249 $1,265 $ 52Louisiana(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534 $ 690 $ 700 $ 60

Total/Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,349 $1,116 $1,161 $2,831

Notes:

(1) Excludes 90 suites at The Arista subject to the Head Lease with Morguard (see ‘‘Arrangements with Morguard — Head Lease’’).

(2) The monthly in-place rent per suite represents the average monthly in-place rents for the region for January, 2012, excluding the90 furnished suites subject to the Head Lease. The average monthly rent is calculated as gross potential rent divided by the number ofsuites per building and then averaged for the region to arrive at this number. Vacant suites have been assumed to be filled at marketrents. At January 31, 2012, the vacancy rate for the Initial Properties was 2.8%.

(3) The monthly market rent per suite represents the average monthly market rents for the region for January, 2012, excluding furnishedsuites. The monthly market rent is calculated as total market rent per building, as estimated by management, divided by the number ofsuites and then averaged for the region.

(4) The annualized gain-to-lease is calculated by deducting the monthly in-place rents from management’s estimate of monthly marketrent. The resulting difference is multiplied by the number of suites in the region and then annualized.

(5) The ‘‘Adjusted In-Place Rent’’, ‘‘Management’s Estimate of Market Rent’’ and ‘‘Annualized Estimated Gain-to-Lease’’ for Louisiana,prior to conversion from US$ to Cdn$, is US$679, US$688 and US$59, respectively. All figures have been converted to Canadiandollars using the closing spot rate, provided by the Bank of Canada, on December 31, 2011 (US$1.00:Cdn$1.0170).

Target Markets

The REIT will use a variety of metrics and measures to assist it in determining the appropriateness ofmarkets, sub-markets and individual properties when assessing possible acquisitions. Generally, the REIT willtarget Census Metropolitan Areas (‘‘CMAs’’) in Canada and Metropolitan Statistical Areas (‘‘MSAs’’) in theUnited States with a population in excess of one million people and with favourable economic conditions.

The REIT will also target secondary markets in certain states in the southeastern U.S. including, but notlimited to, Louisiana, Alabama, Florida, Georgia, North Carolina and South Carolina. Management believesthat such markets merit investment consideration due to (i) the availability of opportunities to acquire CoreProperties and Value Add Properties at higher capitalization rates relative to larger MSAs, and (ii) Morguard’sexisting knowledge and expertise of certain of these geographic areas.

The metrics and measures the REIT will consider in assessing the appropriateness of target markets willinclude, but are not limited to: job growth; household income; the supply pipeline of new multi-unit residentialsuites; the supply pipeline of new single family suites; current, historical and forecasted occupancy rates formulti-unit residential properties; current, historical and forecasted rental rate growth for multi-unit residentialproperties; and other relevant market specific statistics.

In addition, the REIT will analyze data from Morguard’s operations to help corroborate and improve thecurrency of certain key assumptions, statistics and findings. Morguard’s operations include third party propertymanagement of 12,644 multi-unit residential suites (including the Initial Properties) and approximately54.3 million square feet of commercial real estate in Canada and the United States. The REIT will also utilizeMorguard’s existing network of industry contacts and relationships to access information about target markets,prospective acquisitions and market conditions.

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Management believes that there are currently a variety of target markets which present significantacquisition opportunities, in addition to the regions where the Initial Properties are located, such as:

• certain Canadian CMAs, including, Calgary, London, Montreal, Ottawa, Vancouver and Winnipeg;

• certain U.S. MSAs with populations in excess of one million, including, Atlanta, Boston, Chicago, Dallas,Houston, Los Angeles, Miami, New York, Orlando, Tampa Bay and Washington, D.C.; and

• certain U.S. secondary markets, including, Austin, Baton Rouge, Birmingham, Charlotte, Jacksonville,Mobile, Montgomery, New Orleans, Pensacola, Raleigh, Shreveport and West Palm Beach.

These target markets have differing characteristics which may lead the REIT to make different acquisitiondecisions in each market depending on, among other things: (i) the type of properties available in the targetmarket; (ii) the particulars of the submarket within the broader target market; and (iii) the REIT’s assessmentof the anticipated performance and pricing of the properties. The target markets specified above are intended toprovide a general and non-exhaustive indication as to the REIT’s current assessment of certain target marketsand the acquisition opportunities present therein. The REIT’s assessment of the attractiveness of a particulartarget market is expected to change as new information becomes available to it.

ASSETS OF THE REIT

General

On Closing, pursuant to the Acquisition Agreements, the REIT will acquire a portfolio of 17 residentialproperties currently operated and owned or co-owned by Morguard, comprising an aggregate of interests in123 Low Rise, Mid Rise and High Rise buildings located in Ontario, Alberta and Louisiana which have beenassembled from Morguard’s portfolio of residential properties.

Management believes that the Initial Canadian Properties exhibit all of the characteristics of CoreProperties. Management also believes that the Initial U.S. Properties have the general characteristics of CoreProperties, except in respect of the geographic location of such properties, which is more consistent with ValueAdd Properties. See ‘‘The REIT — Growth Strategies’’.

The following table highlights certain information about the Initial Properties as at January 1, 2012:

Rentable Suites

AverageTotal Capital Monthly

Ownership Year Expenditures Number Occupancy Rent/Percentage Total One Two Three Built (last 5 years) of Level Suite

Property (approx.) Suites Bachelor Bedroom Bedrooms Bedrooms (approx.) ($000’s)(1)(2) Stories (%) ($)


Toronto, Ontario35 Thorncliffe Park Drive . 90% 287 0 108 147 32 1964 $ 1,952 18 98% $1,09443 Thorncliffe Park Drive . 100% 380 0 128 212 40 1964 $ 1,529 20 97% $1,10947 Thorncliffe Park Drive . 100% 474 0 226 201 47 1965 $ 5,625 25 97% $1,10849 Thorncliffe Park Drive . 100% 400 20 206 136 38 1966 $ 1,754 20 97% $1,11045 Generation Boulevard . 100% 396 0 48 283 65 1978 $ 2,687 3 96% $1,008Toronto, Ontario . . . . . . 97%(4)

Mississauga, Ontario1423 Mississauga Valley

Boulevard . . . . . . . . 91% 373 1 202 155 15 1979 $ 1,354 16 98% $1,2331477 Mississauga Valley

Boulevard . . . . . . . . 87% 300 0 52 204 44 1979 $ 2,134 22 97% $1,3071547 Mississauga Valley

Boulevard . . . . . . . . 89% 300 0 47 208 45 1978 $ 1,439 22 99% $1,276935 Dundas Street East . . 100% 142 0 1 116 25 1979 $ 839 16 99% $1,2262869 Battleford Road . . . 100% 325 0 81 194 50 1977 $ 3,198 3/5 98% $1,2463665 Arista Way(3) . . . . . 100% 458 0 237 185 36 1980 $ 1,626 19 98% $1,28230 Elm Drive East . . . . . 100% 321 1 151 132 37 1984 $ 1,250 19 98% $1,236Mississauga, Ontario . . . 98%(4)

Kitchener, Ontario305-315 Margaret Avenue . 100% 472 0 211 261 0 1990 $ 2,484 18 98% $1,081

Edmonton, Alberta10404 104 Avenue . . . . . 100% 277 0 75 201 1 2004 $ 449 4/5 97% $1,251

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AverageTotal Capital Monthly

Ownership Year Expenditures Number Occupancy Rent/Percentage Total One Two Three Built (last 5 years) of Level Suite

Property (approx.) Suites Bachelor Bedroom Bedrooms Bedrooms (approx.) ($000’s)(1)(2) Stories (%) ($)


Louisiana1001 East Dale Street,

New Iberia . . . . . . . . 100% 148 0 44 96 8 1984 $ 1,019 2 93% 654715 Marie Antoinette

Street, Lafayette . . . . . 100% 192 0 96 96 0 1982 $ 1,272 2 91% 6623215 Knight Street,

Shreveport . . . . . . . . 100% 194 5 101 72 16 1973 $ 1,193 2 93% 720U.S. Properties . . . . . . . 92%(4)

5,439 27 2,014 2,899 499 $31,804 97%(4) $1,126

Notes:

(1) Total capital expenditures (last 5 years) for 35 Thorncliffe Park Drive, 1423 Mississauga Valley Boulevard, 1477 Mississauga ValleyBoulevard and 1547 Mississauga Valley Boulevard, including amounts contributed by co-owners, were (amounts in $000’s) $2,169,$1,488, $2,452 and $1,617, respectively.

(2) All figures are in Canadian dollars. U.S. capital expenditure figures have been converted to Canadian dollars using the average closingspot rate, provided by the Bank of Canada, for each respective year.

(3) 3665 Arista Way will be subject to the Head Lease with Morguard in respect of 90 furnished suites (see ‘‘Arrangements withMorguard — Head Lease’’). Occupancy and average monthly rent shown exclude the 90 suites subject to the Head Lease.

(4) Weighted average occupancy level.

Capital Expenditures

Over the last five years, Morguard has spent $31.8 million ($32.6 million including amounts contributed byco-owners) on a wide variety of capital improvements to the Initial Properties. Specifically, over that period,approximately $16.1 million ($16.7 million including amounts contributed by co-owners) has been spent onbuilding envelope, garage repairs, mechanical upgrades, boilers, chillers, lighting retrofits and landscapingupgrades, in addition to approximately $15.7 million ($15.9 million including amounts contributed by co-owners)has been spent on interior common areas and in-suite upgrades and renovations over that same period. Thesein-suite upgrades include new bathrooms, kitchen cabinets, countertops and appliances. Management believesthese expenditures have served to maintain and improve the operating performance of the Initial Properties andhave also enhanced the value of the Initial Properties by allowing Morguard to charge higher rents or byenabling it to lower operating costs. The capital investments made to the Initial Properties have also increasedresident retention by ensuring that the Initial Properties retain their attractiveness to both existing andprospective tenants. Morguard considers the quality of its residential properties to be a key competitiveadvantage, which it expects will allow the Initial Properties to perform well over the long-term.

Composition of Initial Properties

Geographic Distribution

Approximately 76% of the suites within the Initial Properties are, and approximately 78% of NOI isgenerated by Initial Properties, located in Toronto and Mississauga, both of which form part of the GTA. TheGTA is Canada’s most significant economic cluster and contains the largest concentration of people. Accordingto the Conference Board of Canada, the GTA is home to 5.8 million people. Beyond the suites located in theGTA, management believes that the geographic distribution of the Initial Properties serves to add stability to the

35

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27FEB201213461047

REIT’s cash flows as it reduces the REIT’s vulnerability to economic fluctuations affecting any particular region.The Initial Properties are regionally distributed as follows:

Geographic Breakdown — Suites Net Operating Income(1)

(by percentage of suites in the Initial Properties) (of the Initial Properties)

Toronto, Ontario35%

Louisiana, U.S.10%

Edmonton,Alberta

5% Kitchener,Ontario

9%

Mississauga,Ontario

41%

Toronto, Ontario27%

Louisiana, U.S.6%

Edmonton,Alberta

7%

Kitchener,Ontario

9%

Mississauga,Ontario

51%

Note:

(1) All figures are in Canadian dollars. NOI is for the period ended December 31, 2011. NOI for the Initial U.S. Properties has beenconverted to Canadian dollars using the average closing spot rate, provided by the Bank of Canada, for the 12-month period endedDecember 31, 2011 (US$1.00:Cdn$0.9891).

The geographic breakdown of the total NOI generated by the Initial Properties during the year endedDecember 31, 2011 was 78% in the GTA, 9% in Kitchener, 7% in Edmonton and 6% in Louisiana. The InitialProperties in Louisiana and Toronto comprise 10% and 35%, respectively, of the total suite count of the InitialProperties but account for only 6% and 27% of NOI, respectively. This is due to in-place rents at the InitialProperties in Louisiana and Toronto being comparatively lower than the average in-place rents of the InitialProperties.

Mix of Size of Rental Suites

Approximately 62% of the suites in the Initial Properties contain two or more bedrooms. Managementbelieves that this is an attractive attribute of the portfolio as the Initial Properties have historically experiencedhigher demand for larger suites and it enhances the REIT’s value on a per suite basis compared to portfolioscomprised of predominantly smaller suites. The portfolio distribution of the Initial Properties by size of rentalsuite is as follows:

Size of Suites(by percentage of suites in the Initial Properties)

2 Bedroom53%

1 Bedroom37%

3 Bedroom9%

Bachelor1%

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Distribution of Monthly Rent

Approximately 71% of the suites in the Initial Properties have rental rates that are in excess of $1,000 permonth. The rental rates being achieved are an indication of the high quality and attractiveness of the portfolio toexisting and potential tenants. Management believes that the attractiveness of the portfolio will assist inmaintaining high occupancy rates and stable demand for the rental of suites in the portfolio. For the month ofDecember 2011, the suite distribution of the monthly rent rate paid per suite of the Initial Properties, excludingthe furnished suites at The Arista, is reflected in the chart below:

Monthly Rental Revenue Breakdown(1)

(by percentage of suites in the Initial Properties)

$1101-$120025%

$1001-$110011% $901 - $1000

17%

<=$90012%

>$120035%

Note:

(1) All figures are in Canadian dollars. Rental rates for the Initial U.S. Properties have been converted to Canadian dollars using theclosing spot rate, provided by the Bank of Canada, on December 31, 2011 (US$1.00:Cdn$1.0170).

Description of the Initial Properties

The following is a description of each of the Initial Canadian Properties.

ONTARIO

Toronto, Ontario

35 Thorncliffe Park Drive, Toronto, Ontario (‘‘Rideau Towers I’’)

Rideau Towers is a collection of four High Rise residential apartment buildings situated near theintersection of Thorncliffe Park Drive and Overlea Boulevard, in Toronto, Ontario. The Rideau Towers are inclose proximity to public transit and local retail establishments. This 18-storey building has three elevators, issituated on approximately 3.5 acres of land and contains a total of 287 suites. Rideau Towers I comprises one,two and three bedroom suites with a weighted average size of 918 square feet. The building has laundry facilities,and provides 176 underground parking spaces and 122 surface parking spaces. The building was constructed inthe mid-1960’s and was built of cast-in-place concrete slab floors with a brick exterior veneer construction andunderwent various capital improvements (including corridor renovations) in 2008. Following Closing, the REITwill own an approximate 90% interest in Rideau Towers I.

43 Thorncliffe Park Drive, Toronto, Ontario (‘‘Rideau Towers II’’)

Rideau Towers is a collection of four High Rise residential apartment buildings situated near theintersection of Thorncliffe Park Drive and Overlea Boulevard, in Toronto, Ontario. The Rideau Towers are inclose proximity to public transit and local retail establishments. This 20-storey building has four elevators, issituated on approximately 4.4 acres of land and contains a total of 380 suites. Rideau Towers II comprises one,two and three bedroom suites with a weighted average size of 922 square feet. The building has laundry facilities,

37

and provides 353 underground parking spaces and 114 surface parking spaces. It was constructed in themid-1960’s, is built of cast-in-place concrete slab floors with a brick exterior veneer construction and underwentvarious capital improvements (including corridor renovations) in 2008.

47 Thorncliffe Park Drive, Toronto, Ontario (‘‘Rideau Towers III’’)

Rideau Towers is a collection of four High Rise residential apartment buildings situated near theintersection of Thorncliffe Park Drive and Overlea Boulevard, in Toronto, Ontario. The Rideau Towers are inclose proximity to public transit and local retail establishments. This 25-storey building has five elevators, issituated on approximately 5.5 acres of land and contains a total of 474 suites. Rideau Towers III comprises one,two and three bedroom suites with a weighted average size of 978 square feet. The building has laundry facilities,and provides 521 underground parking spaces and 64 surface parking spaces. It was constructed in themid-1960’s, is built of cast-in-place concrete slab floors with a brick exterior veneer construction and underwentvarious capital improvements (including corridor renovations) in 2008 and the restoration of the undergroundparking garage in 2011.

49 Thorncliffe Park Drive, Toronto, Ontario (‘‘Rideau Towers IV’’)

Rideau Towers is a collection of four High Rise residential apartment buildings situated near theintersection of Thorncliffe Park Drive and Overlea Boulevard, in Toronto, Ontario. The Rideau Towers are inclose proximity to public transit and local retail establishments. This 20-storey building has four elevators, issituated on approximately 4.4 acres of land and contains a total of 400 suites. Rideau Towers IV comprisesbachelor, one, two and three bedroom suites with a weighted average size of 956 square feet. The building haslaundry facilities, and provides 444 underground parking spaces and 51 surface parking spaces. It wasconstructed in the mid 1960’s, is built of cast-in-place concrete slab floors with a brick exterior veneerconstruction and underwent various capital improvements (including corridor renovations) in 2008.

45 Generation Boulevard, Toronto, Ontario (‘‘Rouge Valley Residences’’)

Rouge Valley Residences is a Low Rise Residential complex comprised of 33 buildings which is located justoff Meadowvale Road and Highway 401 in Toronto, Ontario and comprising the municipal addresses of 41-53and 95-115 Generation Boulevard. Rouge Valley Residences is in close proximity to public transit, TheUniversity of Toronto (Scarborough Campus), the Toronto Zoo and the Rouge Valley Conservation Area. The3-storey townhouse style suites of Rouge Valley Residences are situated on 14.8 landscaped acres of land. RougeValley Residences comprises 396 suites, consisting of one, two and three bedroom suites. The buildings includelaundry facilities, an outdoor swimming pool and provide 533 surface parking spaces. Constructed in 1978, thebuildings are built of cast-in-place concrete foundation and conventional wood frame structure. Theseresidences underwent various capital improvements, including common area renovations and in-suite windowreplacement in a significant number of the Rouge Valley Residences’ buildings between 2007 and 2011.

Mississauga, Ontario

1423 Mississauga Valley Boulevard, Mississauga, Ontario (‘‘The Valleywoods’’)

The Valleywoods is a High Rise residential apartment building situated near the intersection ofBurnhamthorpe and Hurontario Street in Mississauga, Ontario. The Valleywoods is in close proximity to publictransport, schools, Square One Shopping Centre, art galleries, Pearson International Airport and is withinwalking distance to many local retail amenities. The 16-storey building has three elevators, is situated onapproximately 8.4 acres of land and contains a total of 373 suites consisting of bachelor, one, two and threebedroom suites. The building includes hospitality suites, an outdoor pool, fitness centre, billiards room, partyroom, indoor bike room, saunas, children’s playground, business centre with internet access, laundry facilitiesand provides 495 underground parking spaces and 69 surface parking spaces. It was constructed in 1979 and isbuilt of cast-in-place foundation with pre-cast concrete walls and floors. Capital improvements in 2010 includedthe replacement of the fire alarm system. Following Closing, the REIT will own an approximate 91% interest inThe Valleywoods.

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1477 Mississauga Valley Boulevard, Mississauga, Ontario (‘‘The Maplewoods’’)

The Maplewoods is a High Rise residential apartment building situated near the intersection ofBurnhamthorpe Road and Hurontario Street in Mississauga, Ontario. The Maplewoods is in close proximity topublic transport, schools, Square One Shopping Centre, art galleries, Pearson International Airport and is withinwalking distance to many local retail amenities. The 22-storey building has three elevators, is situated onapproximately 6.8 acres of land and contains 300 suites consisting of one, two and three bedroom suites. Thebuilding includes hospitality suites, an outdoor pool, fitness centre, party room, business centre with internetaccess, indoor bike room, children’s playground, laundry facilities and provides 450 underground parking spacesand 82 surface parking spaces. It was constructed in 1979 and was built of cast-in-place foundation with pre-castconcrete walls and floors. The building underwent significant capital improvements during 2008 and 2009 in thegarage and visitor parking area, as well as upgrades to the fire protection systems. Capital improvements in 2010included the restoration of the balconies. Following Closing, the REIT will own an approximate 87% interest inThe Maplewoods.

1547 Mississauga Valley Boulevard, Mississauga, Ontario (‘‘The Forestwoods’’)

The Forestwoods is a High Rise residential apartment building situated near the intersection ofBurnhamthorpe Road and Hurontario Street in Mississauga, Ontario. The Forestwoods is located in closeproximity to public transport, schools, Square One Shopping Centre, art galleries, Pearson International Airportand is walking distance to local retail amenities. The 22-storey building has three elevators, is situated onapproximately 6.8 acres of land and contains a total of 300 suites consisting of one, two and three bedroomsuites. The building includes hospitality suites, an outdoor pool, children’s playground, laundry facilities andprovides 450 underground parking spaces and 75 surface parking spaces. It was constructed in 1978 and is builtof cast-in-place foundation with pre-cast concrete walls and floors. Capital improvements in 2010 included therestoration of the underground garage and balconies. Following Closing, the REIT will own an approximate89% interest in The Forestwoods.

935 Dundas Street East, Mississauga, Ontario (‘‘Tomken Place’’)

Tomken Place is a High Rise residential apartment building situated near the intersection of Tomken Roadand Dundas Street in Mississauga, Ontario. Tomken Place is located in close proximity to public transit, localretail establishments and Pearson International Airport. The 16-storey building has two elevators, is situated onapproximately 2.5 acres of land and contains a total of 142 suites consisting of mainly two and three bedroomsuites with 1 one bedroom suite. The building includes laundry facilities, fitness centre, party room, indoor bikeroom, children’s playground, billiards room, saunas, a tennis court and provides 197 underground parking spacesand 34 surface parking spaces. It was constructed in 1979 of cast-in-place foundation with pre-cast concrete wallsand floors. In 2006, the building underwent balcony restoration, painting of the building exterior, andmodernization of the building’s fire safety system.

2869 Battleford Road, Mississauga, Ontario (‘‘Meadowvale Gardens’’)

Meadowvale Gardens is a Low Rise residential complex comprised of 24 buildings, situated east of WinstonChurchill and north of Battleford Road in Mississauga, Ontario. The 23 three-storey garden terrace suites andone Mid Rise building containing five stories are situated on approximately 8.6 acres of land and contain a totalof 325 suites consisting of one, two and three bedroom suites. The buildings include an outdoor pool, fitnesscentre, party room, indoor bike room, children’s playground, tennis and squash courts, saunas, laundry facilitiesand provide a total of 379 underground parking spaces and 169 surface parking spaces. Meadowvale Gardens islocated in close proximity to public transportation, local retail establishments and Pearson International Airportand is directly adjacent to Meadowvale Town Centre. It was constructed in 1977 and is built of cast-in-placeconcrete foundation and conventional wood frame structure with brick facade. The buildings underwentcommon area renovations in 2003. From 2007 to 2011, the buildings underwent further capital improvementsthat included roof replacements, underground garage and balcony restorations and an elevator modernization.

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3665 Arista Way, Mississauga, Ontario (‘‘The Arista’’)

The Arista is a High Rise residential apartment building situated near the intersection of Hurontario Streetand Burnhamthorpe Road in Mississauga, Ontario. The Arista is located in close proximity to publictransportation, schools, Square One Shopping Centre, Pearson International Airport and within walkingdistance to local retail establishments. The building includes an outdoor pool, fitness centre, billiards room,party room, indoor bike room, saunas, laundry facilities, library and business centre with internet access. The19-storey building has five elevators, is situated on approximately 9.7 acres of land and contains a total of458 suites consisting of one, two and three bedroom suites and one commercial suite, which provides an onsiteconvenience store, dry cleaners and video rentals. The building provides 607 underground parking spaces and96 surface parking spaces. It was constructed in 1980 of cast-in-place foundation with pre-cast concrete walls andfloors. The building underwent common area renovations in 2007 and had two new chillers installed in 2006. Thebuilding underwent a new life safety upgrade in 2009, including a new fire alarm panel. The Arista is subject tothe Head Lease to Morguard with respect to 90 furnished suites. See ‘‘Arrangements with Morguard — HeadLease’’.

30 Elm Drive East, Mississauga, Ontario (‘‘The Elmwoods’’)

The Elmwoods is a High Rise residential apartment building situated east of Hurontario Street and south ofElm Drive in Mississauga, Ontario. The Elmwoods is located in close proximity to public transportation, a localhospital, local retail establishments and Pearson International Airport. The 19-storey building has threeelevators, is situated on approximately 4.1 acres of land and contains a total of 321 suites consisting of bachelor,one, two and three bedroom suites. The building includes hospitality suites, a fitness centre, party room, saunas,a tennis court, a nine-hole mini put course, a barbeque and picnic area, laundry facilities and provides425 underground parking spaces and 65 surface parking spaces. The building was constructed in 1984 ofcast-in-place foundation with precast concrete walls and floors. The building had a new chiller installed in 2006and a new life safety upgrade in 2007, including a new fire panel. The Elmwoods also underwent an energysaving lighting retrofit throughout the entire building.

Kitchener, Ontario

305-315 Margaret Avenue, Kitchener, Ontario (‘‘Margaret Place’’)

Margaret Place consists of two High Rise apartment buildings situated near the intersection of VictoriaStreet and Margaret Avenue in Kitchener, Ontario. Margaret Place is located in close proximity to St. JacobsFarm and Craft Market, and the manufacturing hub and local retail establishments. The two 18-storey buildingshave three elevators in each building, and are situated on approximately six acres of lush private parkland andcontain a total of 472 suites consisting of one and two bedroom suites.

Margaret Place includes hospitality suites, an indoor swimming pool and whirlpool, fitness centre, partyroom, saunas, billiards room, indoor bike room, indoor driving range, library, in-suite laundry facilities, andprovides 437 underground parking spaces and 193 surface parking spaces. The two buildings were constructed in1990 of cast-in-place foundation with precast concrete walls and floors. The buildings underwent capitalimprovements in 2007 and 2008 that included the roof replacement of building 305 and underground restorationin both buildings. The fire alarm system was replaced in both buildings in 2009 and 2010.

ALBERTA

Edmonton, Alberta

10404 104 Avenue, Edmonton, Alberta (‘‘Square 104’’)

Square 104 consists of two connecting Mid-Rise apartment buildings situated in downtown Edmonton atthe northeast corner of 105th Street and 104th Avenue, Edmonton, Alberta. Square 104 is located in closeproximity to Grant MacEwan College, restaurants, pubs and downtown offices. The five-storey and four-storeybuildings have elevator service and are situated on approximately 4.2 acres of land. The buildings includein-suite laundry facilities, a fitness centre and provide 285 underground parking spaces and 35 surface parking

40

spaces with access to electrical outlets. The buildings were constructed in 2004 and contain a total of 277 suitesconsisting of one, two and three bedroom suites.

The following is a description of each of the Initial U.S. Properties.

LOUISIANA

New Iberia, Louisiana

1001 East Dale Street, New Iberia, Louisiana (‘‘Magnolia Place’’)

Magnolia Place is a two-storey residential walk-up garden community, comprised of 13 buildings. It islocated just off E. Admiral Doyle Drive in the city of New Iberia, Louisiana. Magnolia Place is in close proximityto Weeks Island Road which is a significant access point for the offshore oil drilling industry. Magnolia Place isin the heart of New Iberia and is minutes away from City Park, Iberia Medical Center, Acadiana RegionalAirport and local shopping. Magnolia Place contains a total of 148 suites consisting of one, two and threebedroom suites situated on seven landscaped acres of land. The property includes a swimming pool, largelandscaped courtyards, in-suite and laundry facilities, fitness centre, car-care centre, barbeque area, welcomecentre and provides 285 surface parking spaces. Constructed in 1984, the buildings are built of concrete slabfoundation and conventional brick veneer and wood siding over a wood frame structure. The buildingsunderwent common area renovations in 2006 and 2007.

Lafayette, Louisiana

715 Marie Antoinette Street, Lafayette, Louisiana (‘‘Steeplechase’’)

Steeplechase is a two-storey residential walk-up garden community, comprised of 12 buildings. It is locatedjust off Dulles Drive near the centre of Lafayette, Louisiana. Steeplechase is in close proximity to University ofLouisiana (Lafayette Campus), Lafayette General Medical Center, Lafayette Regional Airport, public transitand shopping. The one and two bedroom suites are situated on 8.8 landscaped acres of land. Steeplechasecontains a total of 192 suites consisting of one and two bedroom suites. The property includes a resort styleswimming pool, tennis and sand volleyball courts, in-suite and laundry facilities, fitness centre, welcome centre,business centre and provides 384 surface parking spaces. Constructed in 1982, the buildings are built of concreteslab foundation and conventional wood frame structure. The buildings underwent common area renovations in2006 and 2007.

Shreveport, Louisiana

3215 Knight Street, Shreveport, Louisiana (‘‘The Villages of Williamsburg’’)

The Villages of Williamsburg is a two-storey residential walk-up garden community, comprised of27 buildings. It is located just off Clyde Fant Parkway in the city of Shreveport, Louisiana. The Villages ofWilliamsburg is in close proximity to Barksdale Air Force Base, Louisiana State University (ShreveportCampus), public transit and shopping. The buildings are situated on 8.8 landscaped acres of land. The Villagesof Williamsburg comprises 194 suites consisting of bachelor, one, two and three bedroom suites. The propertyincludes two swimming pools, a tennis court, picnic areas, sand volleyball court, in-suite and on-site laundryfacilities, fitness centre, welcome centre and provides 359 surface parking spaces. Constructed in 1973, thebuildings are built of concrete slab foundation and conventional stucco over wood frame structure. The buildingsunderwent common area renovations in 2005 and 2006.

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ACQUISITION OF INITIAL PROPERTIES

The REIT will indirectly acquire interests in the Initial Properties from Morguard for an aggregatepurchase price of approximately $623.3 million in the manner summarized below.

Principal Transaction Steps

Offering of Units by the REIT

1. The REIT will issue 7,500,000 Units pursuant to the Offering for gross proceeds of approximately$75 million.

Acquisition by the Partnership of the Initial Canadian Properties

2. Morguard will transfer its beneficial ownership interests in the Initial Canadian Properties (with theexception of furniture and certain other chattels situated at The Arista) to the Partnership in exchangefor the assumption of debt (excluding the Retained Debt) in the amount of $236.9 million,6,987,009 Class A LP Units, 17,223,090 Class B LP Units (accompanied by an equivalent number ofSpecial Voting Units), Class C LP Units in respect of the Retained Debt, a non-interest bearingdemand promissory note of the Partnership in the amount of approximately $10.2 million(the ‘‘Promissory Note’’) and $25 million from funds borrowed under the Morguard Facility.

3. The Partnership will enter into the Head Lease with Morguard whereby 90 furnished suites at TheArista will be leased by the Partnership to Morguard. See ‘‘Arrangements with Morguard — HeadLease’’.

4. An Ontario general partnership will be formed, Morguard Residential General Partnership, of whichMorguard Corporation will hold an approximate 99.999% interest and a newly formed Ontario trust,Morguard Residential Partnership Trust, will hold the remaining approximate 0.001% interest.

5. Morguard will transfer its Class B LP Units (accompanied by an equivalent number of Special VotingUnits) and its Class A LP Units to Morguard Residential General Partnership on a tax-deferred basis.

6. The Partnership will issue Class C LP Units to Morguard as repayment of the Promissory Note,following which the Promissory Note will be repaid in full.

7. The REIT will acquire from Morguard Residential General Partnership all of the Class A LP Unitsthat were issued to Morguard for $62.6 million from the net proceeds of the Offering.

Indirect Acquisition by the Partnership of the Initial U.S. Properties

8. The REIT will capitalize the Partnership with approximately $5.1 million from the net proceeds of theOffering in consideration for 512,991 additional Class A LP Units issued by the Partnership.

9. The Partnership will contribute the proceeds received for such additional Class A LP Units to a newlyformed Canadian corporation (‘‘Canada Holdco’’) in return for all the issued and outstanding commonshares of Canada Holdco.

10. Canada Holdco will contribute approximately $5.1 million to form Morguard NAR (U.S.)Holdings LLC (‘‘U.S. Holdco’’), a new United States limited liability company subsidiary.

11. U.S. Holdco will indirectly, through the acquisition of all of the interests in certain limited liabilitycompanies and limited partnerships, use the funds from Canada Holdco to acquire the InitialU.S. Properties.

Acquisition of Nominee Companies

12. In addition, pursuant to the Acquisition Agreements, the Partnership will acquire from Morguard all ofthe outstanding shares of the nominee companies holding legal title to the Initial Canadian Propertiesfor nominal consideration.

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The Retained Debt will not be assumed by the Partnership and will remain as indebtedness of Morguardand Morguard will be obligated to make interest payments and principal repayments on a periodic basis inrespect of the Retained Debt and in respect of any associated income tax liabilities of Morguard. Partnershipdistributions on the Class C LP Units held by Morguard will, if paid, expected to be in amounts expected to besufficient to enable Morguard to make such payments. The Partnership will agree to provide Morguard’screditors with a guarantee in respect of the Retained Debt to ensure the lenders are not prejudiced in theirability to collect from Morguard in the event that payments on the Class C LP Units (in respect of the RetainedDebt) are not made as expected. Morguard will indemnify the Partnership and the REIT for any losses sufferedby the Partnership or the REIT in the event payments on the Retained Debt are not made as required, providedsuch losses are not attributable to any action or failure to act on the part of the Partnership. See ‘‘ThePartnership — Partnership Units’’.

The completion of the Offering and the acquisition by the REIT of the Initial Properties will occurconcurrently. The purchase and sale transactions described above will be completed pursuant to the AcquisitionAgreements and will be conditional upon the completion of the Offering, the receipt of all necessary consentsand waivers from all third parties relating to the transactions contemplated herein, including the Retained Debt,the Assumed CMHC Mortgages and the Assumed Fannie Mae Mortgages and the satisfaction of certain othercustomary closing conditions. For an illustration of the corporate structure of the REIT upon completion of theOffering and the above transactions, see ‘‘Post-Closing Structure’’. See also ‘‘Debt Structure — Composition ofIndebtedness’’.

Acquisition Agreements

The REIT will indirectly acquire interests in the Initial Properties from Morguard, pursuant to theAcquisition Agreements, for an aggregate purchase price of approximately $623.3 million. The AcquisitionAgreements will contain representations and warranties typical of those contained in acquisition agreementsnegotiated between sophisticated purchasers and vendors acting at arm’s length, certain of which will bequalified as to knowledge and materiality and subject to reasonable exceptions, relating to Morguard andrelating to the Initial Properties from Morguard in favour of the REIT and the Partnership (including, amongother things, representations and warranties as to organization and status, power and authorization, authorizedand issued capital, compliance with laws, title to the Initial Properties, condition of tangible assets, financialinformation, outstanding indebtedness and guarantees, outstanding liens, absence of undisclosed liabilities,material agreements, accuracy of rent rolls, tax matters, environmental matters and employment matters).Morguard will also provide a representation and warranty that this prospectus contains full, true and plaindisclosure of all material facts relating to the Initial Properties and the Units, subject to an exception forportions of this prospectus purporting to be made on authority of an expert or purporting to be an extract from areport, opinion or statement of an expert. Such representations and warranties will survive for a period of18 months from Closing; provided, however, that representations regarding organization and status, and powerand authorization shall survive indefinitely, representations regarding tax matters and environmental mattersshall survive for the applicable limitation periods, and the prospectus representation shall survive for a period ofthree years from Closing.

Morguard will indemnify the REIT and the Partnership for any breach of such representations andwarranties pursuant to the Indemnity Agreement. The maximum liability of Morguard under such indemnity willbe limited to an amount equal to the net proceeds of the Offering and no claim under such indemnity may bemade until the aggregate losses exceed $1 million and thereafter in respect of claims of not less than $50,000.See ‘‘Arrangements with Morguard — Indemnification’’.

There can be no assurance of recovery by the REIT or the Partnership from Morguard for any breach of therepresentations and warranties provided by it under the Acquisition Agreements or Indemnity Agreement, asthere can be no assurance that its assets will be sufficient to satisfy such obligations. Only the REIT or thePartnership will be entitled to bring a claim or action for misrepresentation or breach of contract under theAcquisition Agreements or Indemnity Agreement and purchasers of Units under this prospectus will not haveany contractual rights under the Acquisition Agreements and Indemnity Agreement. Purchasers will, however,have certain statutory rights of action against the REIT and Morguard, as promoter, under applicable securitieslaws. See ‘‘Retained Interest’’ and ‘‘Purchasers’ Statutory Rights’’.

43

The Acquisition Agreements and Indemnity Agreement are material contracts of the REIT and will beavailable electronically, following Closing under the REIT’s issuer profile at www.sedar.com. A purchaser ofUnits should refer to the terms of the Acquisition Agreements and Indemnity Agreement for a completedescription of the representations, warranties and indemnities being provided in favour of the REIT and thePartnership, and related limitations under the Acquisition Agreements and Indemnity Agreement.

ASSESSMENTS AND VALUATION OF THE INITIAL PROPERTIES

Building Condition Assessments

Building condition assessment reports (‘‘BCA Reports’’) were prepared for each of the Initial Properties byindependent engineering firms for the purpose of assessing and documenting the existing condition of eachbuilding and major building operating components and systems. The assessments of the Initial Properties alsoidentified and quantified any major defects in materials or systems which might significantly affect the value ofany of the Initial Properties or the continued operation thereof. The BCA Reports were completed inDecember 2011, except for the BCA Report of The Villages of Williamsburg which was completed inJanuary 2012. In addition to required regular maintenance on the various components of the buildings, each ofthe BCA Reports assessed both work required to be completed immediately (i.e., within 90 days of theassessment) and work recommended to be completed during the subsequent ten years in order to maintain thebuilding in an appropriate condition.

Based on the BCA Reports, each of the Initial Properties (other than Rideau Towers III) were determinedto be in good condition commensurate with its age and comparable to other similar properties in its respectivemarket. Rideau Towers III was reported to be in fair condition at the time that the BCA Reports were finalized.An approximately $4.0 million capital project in respect of the underground parking garage is currentlyunderway at Rideau Towers III with completion expected in 2012. The remainder of the cost to complete thegarage repairs at Rideau Towers III will be paid for by Morguard, and with the completion of these renovations,management believes that this property will be brought into good condition.

The table below summarizes the capital expenditures recommended in the BCA Reports and the amountsthat Morguard will contribute.

Identified Expenditures

($000’s) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total

From BCA Reports . . . . . . . . . . . . . . 6,389 1,988 1,824 1,674 1,680 1,291 1,269 1,469 1,303 1,246 20,133To be contributed by Morguard by

June 30, 2012 from BCA Reports . . . . (4,000) — — — — — — — — — (4,000)

Total . . . . . . . . . . . . . . . . . . . . . . . 2,389 1,988 1,824 1,674 1,680 1,291 1,269 1,469 1,303 1,246 16,133

Environmental Site Assessments

Each of the Initial Properties is the subject of a Phase I environmental site assessment report or an updateto such a report (collectively, ‘‘Phase I ESA Reports’’) prepared by independent environmental consultants inDecember 2011 and January 2012. The purpose of these Phase I environmental site assessments and updateswas to assess whether evidence of potential or actual environmental contamination exists at the InitialProperties. The Phase I ESA Reports were prepared in general accordance with industry practice for Phase Ienvironmental site assessment reports or updates of such reports. Intrusive sampling and analysis were not partof these Phase I environmental site assessments or updates. Environmental site assessments involving intrusivesoil and/or groundwater sampling and analysis (‘‘Phase II ESAs’’) were carried out at four of the InitialProperties in the last 12 months. The purpose of these Phase II ESAs was to assess the issues of potential oractual environmental concern identified in prior environmental assessments.

An indoor air quality assessment, a screening level human health risk assessment and a qualitativeecological risk assessment (collectively, the ‘‘Risk Assessments’’) were carried out at three of the InitialProperties where Phase II ESAs were undertaken. The purpose of the Risk Assessments was to determine if anyenvironmental conditions at such Initial Properties represent an unacceptable risk to human and ecological

44

receptors in soil and groundwater. For the three Initial Properties at which Risk Assessments were conductedand the other 14 Initial Properties, the independent environmental consultants did not recommend that anyfurther investigation or work be conducted at such time.

Management is not aware of any non-compliance with environmental laws at any of the Initial Propertiesthat management believes would have a material adverse effect on the REIT. Management is not aware of anypending or threatened investigations or actions by environmental regulatory authorities in connection with anyof the Initial Properties that would materially adversely affect the REIT or the values of the Initial Properties,taken as a whole, as determined by the Appraiser. Morguard GP and the U.S. Manager will implement policiesand procedures to assess, manage and monitor environmental conditions at the Initial Properties, and to manageexposure to potential liability. See ‘‘Risk Factors — Risks Related to the Real Estate Industry — EnvironmentalMatters’’.

Independent Valuations

Morguard retained the Appraisers to provide an independent estimate of the fair market value of each ofthe Initial Properties. The Appraisals for the Initial Canadian Properties were prepared in conformity with theCanadian Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Institute of Canada.The Appraisals for the Initial U.S. Properties were prepared in conformity with Standards Rule 2-2(c) of theUniform Standards of Professional Appraisal Practice of the Appraisal Foundation. Both the appraisal institutesgoverning Canadian and U.S. appraisers have adopted a similar definition of market value, which is ‘‘the mostprobable price which a property should bring in a competitive and open market under all conditions requisite toa fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affectedby undue stimulus’’. According to the Appraisal Institutes of Canada and the United States, implicit in thedefinition of market value is the consummation of a sale as of a specified date and the passing of title from sellerto buyer under conditions whereby: (i) buyer and seller are typically motivated; (ii) both parties are wellinformed or well advised, and acting in what they consider their best interests; (iii) a reasonable time is allowedfor exposure in the open market; and (iv) the price represents the normal consideration for the property sold,unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. Inaddition, in the United States, it is presumed that payment is made in terms of cash in United States dollars or interms of financial arrangements comparable thereto.

Based on the Appraisals and Morguard’s ownership percentage of the various Initial Canadian Properties,the estimated aggregate market value of the Initial Canadian Properties as at December 31, 2011 was$672 million and was derived through the application of a weighted average capitalization rate of 5.5%. Theestimated aggregate market value of the Initial U.S. Properties was US$27.5 million (approximately$28.0 million using the closing spot rate, provided by the Bank of Canada, on December 31, 2011, ofUS$1.00:Cdn$1.0170) and was derived through the application of a weighted average capitalization rate of 7.5%.The market value of Morguard’s share of the Initial Canadian Properties, including a portfolio premium of 5%in respect of the Initial Properties located in the GTA, was $703 million. No portfolio premium was applicable tothe Initial U.S. Properties. Based on the Appraisals, the estimated aggregate market value of Morguard’s shareof the Initial Properties, as at December 31, 2011, was approximately $700 million excluding any portfoliopremium, and $731 million including the portfolio premium.

The estimated market value of the Initial Properties was determined by the Appraisers by using an incomevaluation approach (which utilized the direct capitalization approach). The direct comparison approach (whichutilized the gross income multiplier approach and the sale price per suite approach) was used to support theconclusion reached by the income valuation approach for the Initial Canadian Properties. The sales comparisonapproach (which compares the unit sale price of comparable properties with its respective stabilized netoperating income per unit to predict a per unit value) was used to support the conclusion reached by the incomevaluation approach for the Initial U.S. Properties. These valuation methods are methods traditionally used byinvestors when acquiring properties of this nature. The Appraisers gave consideration to a forecast of income foreach property based on market rental rates, growth levels, vacancy rates, tenant roll-overs and operatingexpenses. The Appraisers visited each of the Initial Properties to assess location and general physicalcharacteristics and estimated the highest and best use for each property. Valuation parameters were used, havingdue regard to the income characteristics, current market conditions and prevailing economic and industry

45

information. In appraising the Initial Properties, the Appraisers assumed, among other things, that title to theInitial Properties was good and marketable and did not take into account issues such as, but not limited to,engineering, environmental, zoning, planning or related issues. The Appraisers noted in the Appraisals that theyhad not reviewed capital expenditure budgets or the BCA Reports for the properties, and that any outstandingexpenditures of a capital nature will affect value conclusions.

In determining the approximate market value of the Initial Properties, the Appraisers relied on operatingand financial data provided by Morguard, including rent rolls. For each property, the Appraisers discussed withmanagement of Morguard the property’s history, current tenant status and future prospects, reviewed historicaloperating results and reviewed management revenue and expense estimates for their reasonableness. Based ontheir review, and other relevant facts, the Appraisers considered such data to be reasonable and supportable.

Caution should be exercised in the evaluation and use of appraisal results. An appraisal is an estimate ofmarket value. It is not a precise measure of value but is based on a subjective comparison of related activity takingplace in the real estate market. The Appraisals are based on various assumptions of future expectations and whilethe Appraisers’ internal forecasts of NOI for the Initial Properties is considered to be reasonable at the currenttime, some of the assumptions may not materialize or may differ materially from actual experience in the future.

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

MULTI-UNIT RESIDENTIAL REAL ESTATE SECTOR IN CANADA AND THE UNITED STATES

Multi-unit residential properties differ from commercial real estate investments because of the short-termnature of the suite leases, the larger number of individual leases and the fact that the leases are for householdsand not businesses. These characteristics mitigate the risks of investment in real estate in the following ways:

• residential tenancy agreements generally have terms of less than or equal to one year, providing landlordswith the ability to increase rents more frequently than commercial tenancies and offering inherentpotential for continued revenue growth, although subjecting landlords to increased market volatility;

• cash flow from each property is generated from a diverse group of tenants resulting in little impact as aresult of losing any single tenant;

• demand for residential rental accommodation is more stable than the commercial rental marketplace,reflecting demographic trends and the need for housing, unlike its commercial counterpart which isgoverned to a greater extent by economic business cycles;

• improvement costs necessary to attract and retain tenants are generally lower and more predictable thanin the case of commercial tenants; and

• the value of residential buildings has been less susceptible to economic business cycles than other classesof income producing real estate.

General and economic conditions are an important factor in considering the strength of the multi-unitresidential real estate sector; however, local economics can have a stronger influence and may have significantlydifferent growth rates from each other and the overall economy.

Although economic conditions can have some impact on the multi-unit residential real estate sectorthrough short-term fluctuations, multi-unit residential properties are more stable than other forms of incomeproducing real estate. Much of this can be attributed to the fact that residential properties are occupied byhouseholds and not businesses. According to ICREIM/IPD Canada Annual Property Index for the year endingSeptember 30, 2011, historical total returns show the distribution of three, five, ten and fifteen year annualizedtotal returns to be less volatile than that of all other real estate classes. In the United States, the NationalCouncil of Real Estate Investment Fiduciaries’ real estate returns for the period ending December 31, 2011 alsoconcluded that the multi-unit residential sector exhibits less volatility in its annualized returns than other realestate classes over the same time periods.

There are relatively few luxury rental apartments in Canada and the United States, with condominiumownership largely filling the luxury niche market. As a result, rental suites are often the only low-costaccommodation alternative. This has supported the multi-unit residential real estate sector’s long-term stabilityin occupancy rates through economic downturns and has made this sector more stable than the overallresidential market.

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The availability of CMHC-insured financing in Canada and financing arranged by government-sponsoredenterprises in the United States (principally, Fannie Mae and Freddie Mac) is an attractive feature of themulti-unit residential real estate sector. Multi-unit residential property owners who use CMHC and FannieMae/Freddie Mac are able to obtain financing at advantageous rates when compared to other real estate sectors,and minimize debt renewal risk, while achieving loans in excess of conventional amounts. The availability ofCMHC-insured and Fannie Mae/Freddie Mac financing has allowed the debt market to remain relatively liquidin the multi-unit residential real estate sector during the recent credit crisis.

The costs associated with building new multi-unit residential rental buildings are substantially higher than thecash flows that can currently be generated by such buildings. This is principally as a result of rent control legislationand market conditions. CMHC estimates in its Rental Market Statistics Report that between April 2009 andOctober 2011 the total rental stock (consisting of privately initiated rental apartment structures of three suites ormore) in Ontario increased by less than 0.1%. The significant barriers to entry insulate existing multi-unitresidential rental property owners from the increased competition of new multi-unit residential rental buildings.

In general, the real estate industry is highly competitive, with industry participants competing for properties,tenants and financing. The REIT’s strategies to meet these challenges are discussed under ‘‘The REIT —Growth Strategies’’.

Immigration is also an important factor affecting the multi-unit residential real estate sector. According tothe CMHC’s Rental Market Report — Ontario Highlights Spring 2011, approximately 75% of immigrants optfor rental accommodation upon first arriving in Canada. According to the 2006 Canadian Census, only 71.6% ofimmigrants living in private occupied dwellings lived in a dwelling owned by a household member. Thiscompares to 75.3% for the total Canadian-born population. With immigrants representing the majority of thecountry’s population growth, they also represent a core component of increasing rental demand.

As demonstrated by the chart below, the number of people immigrating to Canada has remained consistentover the past five years, averaging approximately 254,000 immigrants per year over that period of time accordingto Statistics Canada. Immigration is expected to remain stable and increase modestly in the future. CMHCestimates that, under a moderate scenario, the number of people immigrating to Canada will reach 256,000 peryear by 2020. In the United States, as demonstrated by the chart below, since the 1950s, there has been anoverall upward trend in the number people immigrating to the United States and, since 2005, it has beenaveraging over 1.1 million immigrants per year.

Annual Immigration

Immigrants and Immigration Rate, Canada, 1950 to 2010

Canadian ImmigrationAnnual Immigrants & Immigration Rate, 1950–2010

300,000 1.8

1.6

1.41.2

1.0 %0.80.6

0.4

0.2

0.0

250,000

200,000

150,000

100,000

50,000

01950

Number of Immigrants

Pers

ons

Immigration Rate (% of Pop’n)

1960 1970 1980 1990 2000 2010

Source: Citizenship and Immigration Canada

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27FEB201213455900

Immigrants and Immigration Rate, United States, 1950 to 2010

United States ImmigrationAnnual Immigrants & Immigration Rate, 1950–2010

0.8

0.7

0.6

0.5

0.4%

0.3

0.2

0.1

0.0200,000400,000600,000800,000

1,000,0001,200,0001,400,0001,600,0001,800,0002,000,000

01950

Number of Immigrants

Pers

ons

Immigration Rate (% of Pop’n)

1960 1970 1980 1990 2000 2010

Source: Economy.com; U.S. Department of Homeland Security

Age and income level are two additional demographic factors that have a significant impact on themulti-unit residential real estate sector. Home ownership is generally unaffordable for many young people andrenting is often seen as a more feasible housing alternative for people in this segment.

Multi-Unit Residential Real Estate Market Trends, by CMA, Province and State

Unless otherwise noted, figures contained in this section have been sourced from the Conference Board ofCanada, Statistics Canada and CMHC.

TORONTO CMA

Economic Trends 2007 2008 2009 2010 2011

Real GDP Growth(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4% (0.2)% (2.7)% 3.9% 2.3%Unemployment Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8% 6.9% 9.4% 9.1% 8.3%Retail Sales Growth(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4% 5.0% (3.2)% 6.4% 4.6%Population Growth(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9% 1.8% 1.8% 1.9% 1.6%Annual Immigration(1,2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,341 60,917 62,873 61,576 52,150

Notes:

(1) 2011 figures are forecasted estimates as at November 24, 2011.

(2) Sum of net international, net interprovincial and net intercity migration to Toronto CMA.

Rental Market Statistics 2007 2008 2009 2010 2011

Occupancy Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96.8% 98.0% 96.9% 97.9% 98.6%Change in Average Rent (%) . . . . . . . . . . . . . . . . . . . . . . . . (0.6)% 3.1% (0.1)% 2.5% 2.9%

Note:

Survey statistics are as of October of each year, calculated using equivalent vacancy rate data provided by CMHC.

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The GTA’s rental market has shown strength and stability over the past five years. Occupancy rates haveaveraged 97.6% and rental rate averages have increased in three of the past five years. Toronto’s currentoccupancy rate of 98.6% is moderately higher than historic figures. The GTA traditionally receives a significantshare of individuals immigrating to Canada.

Toronto CMA real GDP growth was forecasted to reach approximately 2.3% in 2011. As the economyimproves, management believes that the Toronto CMA residential rental market will further strengthen.

ALBERTA

Economic Trends 2007 2008 2009 2010 2011

Real GDP Growth(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1% 1.2% (4.8)% 3.8% 3.1%Unemployment Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5% 3.6% 6.6% 6.5% 5.5%Retail Sales Growth(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.9% 0.2% (8.3)% 6.0% 4.5%Population Growth(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7% 2.2% 2.3% 1.4% 1.5%Annual Immigration(1,2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,978 56,985 27,864 19,613 43,391

Notes:

(1) 2011 figures are forecasted estimates as at November 24, 2011.

(2) Sum of net international and net interprovincial migration.


Occupancy Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98.4% 97.5% 94.4% 95.4% 96.6%Change in Average Rent (%) . . . . . . . . . . . . . . . . . . . . . . . . 16.9% 6.8% (2.7)% (0.6)% 0.8%

Note:

Only centres with a population of greater than 10,000 are included in the survey. Survey statistics are as of October for each year. Calculatedusing equivalent vacancy rate data provided by CMHC.

With rapidly growing metropolitan areas, increased migration to Alberta and the lowest unemployment ratein Canada, Alberta’s rental and housing markets have changed dramatically over the past several years.According to CMHC, average monthly rent in the province has increased from $781 to $951 in the past fiveyears. This represents a compounded annual growth rate of 4.4%. According to The Canadian Real EstateAssociation’s Multiple Listing Service, the average residential home price has increased from $218,718 to$352,309 between 2005 and October 2011, representing a compounded annual growth rate of 8.3%. While bothaverage rents and home prices in Alberta have increased significantly over the past few years, renting hasremained relatively more affordable. For many Alberta residents, home ownership is unaffordable, leavingrenting as a more economically feasible alternative.

LOUISIANA

Economic Trends 2007 2008 2009 2010 2011

Gross State Product Growth(1) . . . . . . . . . . . . . . . . . . . . . . (3.9)% (1.4)% 4.1% 2.6% 2.2%Unemployment Rate(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8% 4.4% 6.7% 7.5% 7.3%Retail Sales Growth(1,3) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8% 0.3% (5.2)% 5.7% 7.1%Population Growth(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7% 1.4% 1.3% 0.9% 0.9%Annual Immigration(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29,473) 2,452 33,622 31,083 6,318

Notes:

(1) Source: Moody’s Analytics. 2011 figures are current forecast estimates.

(2) Source: Bureau of Labour Statistics.

(3) Source: Moody’s Analytics. 2011 is a year-to-date growth figure as at mid-year 2011.

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(4) Source: U.S. Census Bureau. 2011 growth is based on estimated figure.

(5) Sum of net international and net interstate migration.


Occupancy Rate(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91.2% 89.7% 88.6% 87.5% 88.5%Change in Average Rent (%)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 4.7% 2.4% 0.0% 1.5% 1.8%

Notes:

(1) Source: U.S. Census Bureau. Occupancy rate for 2011 is based on an average of the first three quarters of 2011.

(2) Source: Altus Group Limited. Change in average rent is based on market data for New Orleans, Baton Rouge and Alexandria.

The U.S. Census Bureau found that Louisiana’s population grew by more than 168,600 from July 1, 2007 toJuly 1, 2010, approximately 43 percent faster than the United States’ overall population growth rate over thatsame period. This performance ranks Louisiana as the 14th fastest-growing state in the United States over thepast three years, which can be attributed in large part to Louisiana’s economic performance during the sameperiod. The 2010 U.S. Census also notes that 30% of the residents of Louisiana rent their dwellings. Louisiana’sunemployment rate has remained well below that of other states in the South and the United States as a wholeevery month since December 2007. Louisiana’s unemployment rate was 6.8 percent in December 2011, belowthe 8.4% average in the South and the 8.5% average in the United States. Chase Commercial Bank forecastsLouisiana’s real GDP growth in 2012 to be 4.0%, outperforming its forecasted national figure of 3.1%.

Strengths and Investment Highlights of the Multi-Unit Residential Real Estate Sector

Management believes that the following describes the key strengths and investment highlights of themulti-unit residential real estate sector in Canada and the United States:

• Attractive Investment Fundamentals. The multi-unit residential real estate sector provides investors withfavourable investment characteristics and attractive risk-adjusted returns in comparison to other majorreal estate asset classes. Additionally, according to ICREIM/IPD, the multi-unit residential real estatesector in Canada has demonstrated the lowest volatility in investment returns among major incomeproducing real estate asset classes over the past twenty years and has also posted the highest annualizedreturn (10.3%) over that same period (ending September 30, 2011). The United States’ multi-unitresidential real estate sector provides investors with similarly favourable investment characteristics.According to the National Council of Real Estate Investment Fiduciaries, the multi-unit residential rentalsector has generated competitive returns over the long-term. The sector has finished first over both20-year and 25-year time horizons, posting annualized returns of 9.3% and 8.6%, respectively, as atDecember 31, 2011.

5 Year Canadian Real Estate Risk Adjusted Total Returns(1)

Residential

Tota

l Ret

urn

to R

isk

Rat

io

Retail Office Industrial

1.5x

1.3x

1.1x

0.8x

1.5x

1.3x

1.0x

0.8x

Note:

(1) Source: IPD data. Total returns (income and capital appreciation). 2011 data based on Q3 2011, as fourth quarter data for 2011 wasnot available. Total returns are risk adjusted by dividing them by their respective standard deviations.

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• Compelling Market Fundamentals. The multi-unit residential real estate sector in Canada and theUnited States has demonstrated healthy risk-adjusted rental market performance over the past five years.In Canada, vacancy levels have operated within a narrow bandwidth, ranging from 2.1% to 3.1%according to CMHC. Canadian average rental rates for two-bedroom suites (being the majority of theresidential suites that comprise the Initial Properties) have increased by 12.0% from the end of 2006through to March 2011, according to CMHC. According to Reis, Inc., vacancy rates for the multi-unitresidential sector in the United States are projected to decline over the next couple of years, particularlyin the South Atlantic region of the United States. The vacancy rate in the South Atlantic region was 5.9%as at December 31, 2011 and is projected to decline to 5.3% by 2012 with further declines expectedthereafter. This is a significant drop from the vacancy rate of 9.3% in the South Atlantic region in 2009.In the South Atlantic region, rents declined 0.9% in 2009, while rents increased 1.7% in both 2010 and2011 and Reis, Inc. is projecting rent increases to average 3.5% per year over the next five years.

• Barriers to Additional Supply. In Canada, the REIT will benefit from barriers to the creation of newsupply in the multi-unit residential real estate sector as the costs of building new multi-unit residentialrental buildings are substantially higher than the value of the cash flows that can currently be generatedby such buildings, principally as a result of rent control legislation and market conditions. Managementestimates that the replacement cost of the Initial Properties (excluding land) is approximately$212 million higher than their appraised value, making significant new construction unlikely. CMHCestimates that between October 2005 and October 2011, the total rental stock in Canada decreased by2.7%. In the United States, the REIT expects that as a result of tightening credit markets there will be adecrease in the construction of new revenue-producing properties in the multi-unit residential sector,thereby increasing demand for rental premises in existing properties and leading to increasing occupancyrates.

• Availability of Financing in Canada and the United States. The availability of CMHC-insured financing inCanada is an attractive feature of the multi-unit residential real estate sector. Residential propertyowners who use CMHC insurance on their mortgage debt are able to obtain financing at lower interestrates than non-CMHC insured mortgage debt and to reduce debt renewal risk. In the United States,leverage may be obtained from a variety of sources, including, but not limited to, Fannie Mae, FreddieMac, commercial banks, credit companies, insurance companies, pension funds and other institutionswho wish to provide debt. Multi-unit residential property owners who use Fannie Mae/Freddie Mac areable to obtain financing at advantageous rates when compared to other real estate sectors, and minimizedebt renewal risk, while achieving loans in excess of conventional amounts. In 2011, multi-unit residentialmortgage financings by Fannie Mae and Freddie Mac totalled $24.4 billion and $20.3 billion, respectively.Having a larger number of financial institutions from which to source mortgages results in competitiveinterest rates and terms on such mortgages.

• Rate of Home Ownership. One of the most significant contributors to the projection for demand of rentalsuites is the declining level of home ownership, particularly in the United States. As of December 31,2011, the percentage of United States residents that own their home was 66.0%, down 3.2% from itsall-time high of 69.2% in 2004 and moving toward its long-term historic average of 65.3%. Based onindustry sources, management believes that, while the current economic weakness will probably ease atsome point in the second half of 2012, an increase in the home ownership rate is unlikely for a muchlonger period of time and the current downward trend will continue. Renting provides the tenant withcertainty about rental payments and they are not exposed to changes in the underlying value of the realestate. In addition, tenants are not required to have a mortgage for their rental accommodation, unlikethe situation for home ownership where the value of the mortgage currently exceeds the value of thehome for about 10.7 million United States households, or 22.1% of all mortgaged homes in theUnited States. Housing data firm CoreLogic reported that, at the end of the third quarter of 2011, anadditional 2.4 million borrowers in the United States had less than 5% equity in their homes. Rentingapartment suites is also becoming a more popular option as it provides tenants with greater flexibility andincreased mobility.

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RESIDENTIAL TENANCY LEGISLATION

The Provinces of Ontario and Alberta have each enacted residential tenancy legislation which impose,among other things, rent control guidelines that will limit the REIT’s ability to raise rental rates at its properties.Unlike Ontario, legislation in Alberta does not specifically limit the amount of rent payable or the allowableincrease of rent payable by residential tenants.

The applicable legislation may be subject to further regulations or may be amended, repealed or enforced,or new legislation may be enacted, in a manner which will materially adversely affect the ability of the REIT tomaintain the historical level of earnings at its properties.

CANADA

Ontario

The Residential Tenancies Act, 2006 (Ontario) (the ‘‘ON RTA’’), which came into force January 31, 2007,imposes restrictions upon the ability of a landlord to increase the rent for existing tenants above an annuallyprescribed guideline (the ‘‘guideline amount’’), and requires that the landlord give tenants 90 days’ prior writtennotice of an increase in rent. For the calendar year 2012, the guideline amount has been established at 3.1%(0.7% for 2011, 2.1% for 2010 and 1.8% for 2009). For subsequent years, the guideline amount will be thepercentage change from year to year in the Consumer Price Index for Ontario for prices of goods and servicesreported monthly by Statistics Canada, averaged over the twelve month period that ends at the end of May ofthe previous calendar year. This adjustment is meant to take into account the income of the building, themunicipal and school taxes, the insurance bills, the energy costs and maintenance and service costs. When a suiteis vacated upon the expiry or termination of a residential tenancy, the landlord is entitled to lease the suite to anew tenant at any rental amount. Unless the landlord and tenant mutually agree that the landlord will add aparking space or an additional service, the rental rate of a suite cannot be increased more than once in anytwelve month period, or until at least twelve months after a new tenant has taken occupancy of the suite. Undera proposed amendment to the ON RTA, if passed and when effected by the government, Ontario’s annual rentincrease guideline will be set between 1.0% and 2.5%.

In order to increase rents above the guideline amount, a landlord must make an application to the Landlordand Tenant Board based on an extraordinary increase in the cost for municipal or utility levies and charges,certain eligible capital expenditures incurred with respect to a residential complex or a rental suite therein, oroperating costs related to third party security services provided in respect of a residential complex or building inwhich rental suites are located. A rent increase based on capital expenditures or security services may not bemore than 3% above the prescribed guideline amount for each year, provided that if a landlord can justify alarger increase, such increase may be taken over three years. There is no limit for rent increases based onincreases in the cost for municipal or utility levies.

A landlord’s application to the Landlord and Tenant Board to increase rent can be dismissed in the eventthat the landlord has not completed items in work orders for which the compliance period has expired and whichitems were found by the Landlord and Tenant Board to be related to a serious breach of a health, safety, housingor maintenance standard. A tenant can make an application to the Landlord and Tenant Board on the groundsthat the residential complex or suites therein do not comply with health, safety, housing and maintenancestandards, and in such event, the Landlord and Tenant Board can order, among other things, that the landlordcomplete related items in work orders. As a result, the REIT may, in the future, incur capital expenditures whichmay not be fully recoverable from tenants.

The ON RTA also permits tenants to bring proceedings against the landlord to the Landlord and TenantBoard to reduce rent due to reductions or discontinuances in services or facilities or due to a reduction in theapplicable municipal taxes. The ON RTA also provides for automatic rental reductions upon expiry of prescribedperiods where rent has been increased in connection with eligible capital expenditures or upon reductions inmunicipal taxes or utility costs.

The ON RTA provides tenants of residential properties with a high level of security of tenure and prescribescertain procedures, including mandatory notice periods, which must be followed by a landlord in order toterminate a residential tenancy. As certain proceedings may need to be brought before the Landlord and TenantBoard, it may take several months to terminate a residential lease, even where the tenant’s rent obligations arein arrears.

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Alberta

Landlords in Alberta are generally restricted from increasing rents payable in respect of existing residentialtenancies more than once in a period of at least 365 days (which period commences on the commencement ofthe tenancy or the last increase in rent, whichever is later). There is no restriction on the allowable amount of anincrease. Pursuant to the regulations made under the Residential Tenancies Act (Alberta) (the ‘‘AB RTA’’), alandlord may not increase the rent payable by a tenant under a residential tenancy agreement in respect of afixed term tenancy for a term of one year or more. Further, a landlord may not increase the rent payable by atenant who is occupying the same premises under two or more consecutive residential tenancy agreements inrespect of fixed term tenancies each for a term of less than one year unless at least 365 days have elapsed sincethe later of the commencement of the first of those tenancies or the last increase in rent. Pursuant to theregulations under the AB RTA, if the 365th day occurs during the term of a fixed-term tenancy, the landlord maynot increase the rent until the expiration of that tenancy. Pursuant to the AB RTA, a landlord may not increasethe rent payable under a residential tenancy agreement unless the landlord serves the tenant with a writtennotice of the increase in rent:

• in respect of a weekly tenancy, at least 12 weeks before the effective date of the increase;

• in respect of a monthly tenancy, at least three months before the effective date of the increase; and

• in respect of any other periodic tenancy (as that term is defined in the AB RTA), at least 90 days beforethe effective date of the increase.

If the landlord does not comply with the above notice requirements, the proposed rent increase is void. Aresidential tenancy agreement may require a period of notice longer than the periods specified by the AB RTAand the landlord must comply with such longer period of notice before increasing the rent payable. If a landlordhas served the tenant with a notice to terminate a periodic tenancy for the purposes of selling the property as acondominium suite or as part of a condominium suite, to demolish the building or to make major renovations,the landlord cannot increase the rent.

UNITED STATES

Louisiana

The State of Louisiana has not enacted residential tenancy legislation that impose rent control guidelinesthat could limit the REIT’s ability to raise rental rates at its properties. While rental rates are, in Morguard’sexperience, generally not increased during the term of a lease (which typically ranges from 6 to 12 months),there are no State guidelines restricting the increase of rent payable by residential tenants after the lease termhas expired.

DEBT STRUCTURE

General

The REIT will seek to maintain a combination of short, medium and long-term debt maturities that areappropriate for the overall debt level of its portfolio, taking into account the availability of financing and marketconditions, and the financial characteristics of each property. The Declaration of Trust provides that the REITmay not incur or assume any Indebtedness if, after incurring or assuming such Indebtedness, the totalIndebtedness of the REIT would be more than 70% of Gross Book Value. See ‘‘Investment Guidelines andOperating Policies — Operating Policies’’. Currently, management expects, as a matter of internal policy, thatthe REIT will target a total indebtedness level at or below 60% of Gross Book Value. On April 1, 2012, totalIndebtedness, including the $25 million that will be drawn on the Morguard Facility, and the estimated presentvalue of Morguard’s tax liability that is expected to be paid by the Partnership of $6.6 million, is estimated to beapproximately 57% of Gross Book Value based on the pro forma balance sheet, under IFRS.

The weighted average maturity and the weighted average effective interest rate, as at April 1, 2012, of allIndebtedness of the REIT at Closing, are expected to be approximately 4.50 years and 4.36%, respectively.Interest rates and debt maturities will be reviewed regularly by the Trustees to ensure that appropriate debtmanagement strategies are implemented. Given the sensitivity to refinancing debt at maturity, the REIT intends,

53

when appropriate, to arrange for CMHC financing in Canada up to six months in advance of the maturity ofoutstanding indebtedness, for a nominal additional cost, to lock-in interest rates on future indebtedness. TheREIT may also, from time to time, enter into instruments to hedge the amount of interest to be paid by theREIT on future debt and to reduce its exposure to refinancing risks, provided that such hedging will not affectthe REIT’s status as a ‘‘real estate investment trust’’ for purposes of the SIFT Rules.

Retained Debt

Management estimates that as at April 1, 2012, the aggregate Indebtedness of the REIT will beapproximately $357.3 million. As Morguard will retain control of the REIT, the acquisition of the InitialProperties is accounted for as a reorganization and recapitalization. As a result, a mark-to-market adjustment of$21.3 million which would be realized by the REIT had the acquisition been accounted for as an acquisition, isnot realized by the REIT. U.S. dollars are converted to Canadian dollars using the closing spot rate, provided bythe Bank of Canada, on December 31, 2011 (US$1.00:Cdn$1.0170). See ‘‘Pro Forma Capitalization of theREIT’’ and ‘‘Pro Forma Combined Financial Statements’’. Morguard will retain a portion of the debt in anamount of $100.8 million (the ‘‘Retained Debt’’), which excludes a mark-to-market adjustment of $7.9 millionfor the reasons outlined above. The Retained Debt is secured by a charge on certain of the Initial CanadianProperties. The Retained Debt will not be assumed by the Partnership and will remain as indebtedness ofMorguard. In respect of the Retained Debt, Morguard will hold Class C LP Units of the Partnership on which itwill receive priority distributions. Morguard will remain responsible for interest and principal payments on theRetained Debt. Partnership distributions on the Class C LP Units held by Morguard will, if paid, be in amountsexpected to be sufficient to make such payments. The Partnership will agree to provide Morguard’s creditorswith a guarantee in respect of the Retained Debt to ensure the lenders are not prejudiced in their ability tocollect from Morguard in the event that payments on the Class C LP Units (in respect of the Retained Debt) arenot made as expected. Morguard will indemnify the Partnership and the REIT for any losses suffered by thePartnership or the REIT in the event payments on the Retained Debt are not made as required, provided suchlosses are not attributable to any action or failure to act on the part of the Partnership. See ‘‘The Partnership —Distributions — Distributions on Class C LP Units’’ and ‘‘Arrangements with Management — Indemnification’’.

The acquisition of the Initial Canadian Properties from Morguard and the structure of the Class C LP Unitsprovide Morguard the opportunity to achieve a deferral of certain Canadian income tax consequences. Inrespect of the Retained Debt, the Partnership will make distributions on the Class C LP Units in an amount, ifpaid, expected to be sufficient (without any additional amounts) to permit Morguard to satisfy amounts payableunder the Retained Debt and in respect of certain associated income tax liabilities of Morguard, if any. See ‘‘ThePartnership — Partnership Units’’. It is anticipated that no amount with respect to Morguard’s tax liabilities willbe payable by the Partnership to Morguard until the third quarter of 2015. It is estimated that the amountpayable by the Partnership to Morguard in respect of any tax liabilities in the first 12 months followingSeptember 2015 will be approximately $0.35 million. The estimated present value of Morguard’s tax liability thatis expected to be paid by the Partnership, assuming the Retained Debt remains outstanding, is $6.6 million. Inthe future, it is possible that the REIT will acquire multi-unit residential properties from Morguard using anacquisition structure that possesses similar tax attributes and characteristics including in respect of the RetainedDebt. Assuming the REIT purchases Canadian multi-unit residential properties with similar tax attributes as theInitial Properties, it is Morguard’s current intention to require a portion of the purchase price be satisfiedthrough the issuance of additional Class C LP Units.

The Retained Debt is not expected to limit the REIT’s ability to refinance the properties that are subject tothe Retained Debt. Should the REIT wish to refinance such properties, at the option of the REIT, eitherMorguard will continue to hold the Retained Debt that is to be refinanced, in which case the Partnership wouldbe required to issue further Class C LP Units in an amount equivalent to the amount that the upward refinancedprincipal exceeds the mortgage balance immediately prior to the upward refinancing, or the Class C LP Unitswould be redeemed for an amount equal to the amount to be paid to discharge the Retained Debt from suchproperty including the principal amount of such Retained Debt plus repayment fees or penalties and Morguard’stax liabilities, after which Morguard would discharge the Retained Debt applicable to such property and theREIT would mortgage such property as it would any of its properties not subject to the Retained Debt. Should

54

the REIT wish to refinance the properties subject to the Retained Debt, the increase in principal balanceachieved from such upward refinancing will not be subject to additional associated tax liabilities of Morguard.

Should the REIT wish to dispose of any of its properties that are subject to the Retained Debt, Morguardmay not be able to achieve a deferral of certain Canadian income tax consequences. As such, the REIT mustobtain Morguard’s consent before it is permitted to dispose of any of its properties that are subject to theRetained Debt, provided that no such consent shall be required if the REIT agrees to pay Morguard an amountequal to any income tax payable by Morguard in respect of the Retained Debt arising in connection with the saleof the property subject to the Retained Debt.

On formation of the REIT, the capital account of the Class C LP Units will be equal to the principal balanceof the Retained Debt. The portion of the distributions paid on Class C LP Units that relates to the interestpayable on the Retained Debt and Morguard’s tax liabilities will not affect the capital account of the Class CLP Units, because income will be allocated to the Class C LP Units in an amount equal to the amount of suchinterest payable and tax liabilities payable. The portion of the distributions paid on Class C LP Units that relatesto the principal payable on the Retained Debt will reduce the capital account of the Class C LP Units, and suchbalance will continue to match the principal outstanding on the Retained Debt. If the Retained Debt isultimately paid off in full, the capital account balance of the Class C LP Units will be reduced to nil and theapplicable outstanding Class C LP Units will be cancelled.

Composition of Indebtedness

The REIT intends to finance the acquisition of the Initial Properties and its ongoing operations with acombination of fixed rate secured debt with staggered maturities and floating rate unsecured revolving debt. Thefixed rate debt is expected to be comprised of the Retained Debt, the Assumed CMHC Mortgages and theAssumed Fannie Mae Mortgages. The Retained Debt, Assumed CMHC Mortgages and Assumed Fannie MaeMortgages will have varying maturities ranging from November 2012 through to August 2021. Additionally,floating rate unsecured debt will be incurred pursuant to the Morguard Facility. The REIT will generally beliable, whether as a primary obligor or otherwise, for the Retained Debt, the Assumed CMHC Mortgages, theAssumed Fannie Mae Mortgages and the Morguard Facility. All costs and expenses relating to the assumptionby the REIT of the Assumed CMHC Mortgages and the Assumed Fannie Mae Mortgages will be theresponsibility of Morguard.

Assumed CMHC Mortgages and Retained Debt

In obtaining debt financing, the REIT has the option to use CMHC insurance through which the REIT cannormally obtain lower interest rates on its property financing as compared to other conventional mortgagefinancing alternatives. CMHC, an agency of the Government of Canada, provides residential mortgageinsurance that protects lenders against the risk of borrower default. As a result of this government backing,management believes that financing availability to CMHC insured borrowers has been more consistentthroughout market cycles, including during the recent credit crisis. Additionally, management believes thatrenewal risk is mitigated through CMHC insurance because once insurance is obtained on a mortgage, theinsurance is transferable and follows the mortgage for the complete amortization period which is typicallybetween 25 and 40 years. With the insurance being transferable between approved lenders, it lowers the overallrisk of the REIT not being able to refinance an asset on maturity. As at April 1, 2012, 100% of the mortgages onthe Initial Canadian Properties will be CMHC insured. All of the Retained Debt will also be CMHC insured.

Management estimates that as at April 1, 2012, the aggregate principal amount of the Retained Debt andthe Assumed CMHC Mortgages will be approximately $337.7 million (excluding a mark-to-market adjustment),with a weighted average effective interest rate of 4.29% and a weighted average maturity of approximately4.48 years.

The following table summarizes, for each of the Initial Canadian Properties, the expected outstandingprincipal amount, as at April 1, 2012, of debt secured thereby (including the Retained Debt) on Closing, theinterest rate applicable to such debt and the maturity date of such debt.

55

Assumed CMHC Mortgages and Retained Debt

Principal Amount EffectiveProperty ($000’s) Interest Rate(2) Maturity Date

47 Thorncliffe Park Drive, Toronto . . . . . . . . . . . . . . . . . $ 23,563 6.00% November 20122869 Battleford Road, Mississauga . . . . . . . . . . . . . . . . . $ 25,085 4.10% December 20133665 Arista Way, Mississauga . . . . . . . . . . . . . . . . . . . . . $ 40,503 4.10% December 201330 Elm Drive East, Mississauga . . . . . . . . . . . . . . . . . . . $ 22,741 5.03% January 20141477 Mississauga Valley Blvd., Mississauga . . . . . . . . . . . $ 22,497 4.16% August 20141547 Mississauga Valley Blvd., Mississauga . . . . . . . . . . . $ 22,158 4.16% August 2014305 - 315 Margaret Avenue, Kitchener . . . . . . . . . . . . . . $ 34,500 3.96% September 2014Square 104, Edmonton . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,916 4.29% November 201545 Generation Boulevard, Toronto . . . . . . . . . . . . . . . . . $ 14,200 4.71% March 2016935 Dundas Street East, Mississauga . . . . . . . . . . . . . . . . $ 11,702 4.25% April 202049 Thorncliffe Park Drive, Toronto(1) . . . . . . . . . . . . . . . . $ 26,963 3.97% July 20211423 Mississauga Valley Blvd., Mississauga(1) . . . . . . . . . . $ 31,626 3.97% July 202135 Thorncliffe Park Drive, Toronto(1) . . . . . . . . . . . . . . . . $ 17,323 3.97% August 202143 Thorncliffe Park Drive, Toronto(1) . . . . . . . . . . . . . . . . $ 24,909 3.97% August 2021

Total/Weighted Average . . . . . . . . . . . . . . . . . . . . . . . . . $337,686 4.29% 4.48 years

Notes:

(1) The Retained Debt is comprised of mortgages on these properties. See ‘‘— Retained Debt’’.

(2) Two floating rate mortgages in the amount of $65,588 as at April 1, 2012 are subject to interest rate swap agreements to acquire a fixedrate of interest. The interest rate swap transactions were entered into on December 31, 2008 and mature on December 31, 2013.

Assumed Fannie Mae Mortgages

In obtaining debt financing in the United States, the REIT has the option to use Fannie Mae or FreddieMac, which are government-sponsored enterprises whose objectives are to support liquidity, stability andaffordability in the single family and multi-unit residential secondary mortgage market where existing mortgage-related assets are purchased and sold. Fannie Mae’s and Freddie Mac’s most significant activities includeproviding market liquidity by securitizing mortgage loans originated by lenders in the primary mortgage marketinto mortgage-backed securities, and purchasing mortgage loans and mortgage-related securities in thesecondary market. Fannie Mae and Freddie Mac are the United States’ two largest participants in the multi-unitresidential mortgage financing market. All of the REIT’s Initial U.S. Properties will be subject to FannieMae mortgages.

Management estimates that as at April 1, 2012, the aggregate principal amount of the Assumed Fannie MaeMortgages will be approximately $19.7 million (US$19.3 million) (excluding the mark-to-market adjustment),with a weighted average interest rate of 5.60% and a weighted average maturity of approximately 4.84 years.

The following table summarizes, for each of the Initial U.S. Properties, the expected outstanding principalamount in United States dollars, as at April 1, 2012, of debt secured thereby to be assumed by the REIT onClosing, the interest rate applicable to such debt and the maturity date of such debt.

Assumed Fannie Mae Mortgages

Principal AmountProperty (US$000’s) Interest Rate Maturity Date

1001 East Dale Street, New Iberia, Louisiana . . . . . . . . . . . . $ 4,499 5.60% February 2017715 Marie Antoinette Street, Lafayette, Louisiana . . . . . . . . . $ 7,043 5.60% February 20173215 Knight Street, Shreveport, Louisiana . . . . . . . . . . . . . . . $ 7,786 5.60% February 2017

Total/Weighted Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,328 5.60% 4.84 years

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Revolving Loan with Morguard

On Closing, the Partnership will enter into an unsecured revolving credit facility with Morguard which willconsist of a $50 million demand facility available for acquisitions and for general business purposes, which canbe drawn upon in either Canadian dollars or an equivalent amount in United States dollars. If the Partnershipdraws upon the Morguard Facility in Canadian dollars, interest shall be calculated either at the Canadian primelending rate or at the bankers’ acceptance (‘‘BA’’) rate plus 1.8%. The Partnership will have the right to choosebetween Canadian prime rate and BA rate advances based on available rates and timing requirements. If thePartnership draws upon the Morguard Facility in United States dollars, interest shall be calculated either at theU.S. prime lending rate or at United States dollar LIBOR (the London Interbank Offered Rate) plus 1.7%. ThePartnership must provide Morguard with no less than 48 hours’ prior written notice of any drawdowns orrepayments under the Morguard Facility. Upon Closing, the Partnership intends to draw $25 million from theMorguard Facility to fund a portion of the purchase price of the Initial Properties. The Morguard Facility isunsecured and will rank subordinate to the Assumed CMHC Mortgages, including the Retained Debt, and theAssumed Fannie Mae Mortgages. The Morguard Facility will be subject to renewal by Morguard, in its solediscretion, three years from the date of Closing.

Debt Maturities

The following table sets out the principal installments and maturity balances on the mortgages, includingthe Retained Debt, to be paid over each of the five calendar years following Closing (assuming Closing occurs onApril 1, 2012) and thereafter (assuming such debt is not renewed at maturity). The Assumed Fannie MaeMortgages have been translated into Canadian dollars at the rate of US$1:Cdn$1.0170.

Balance Due on Total DebtPrincipal Payments Maturity Repayments

Year: ($000’s) ($000’s) ($000’s) % of Total

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,102 23,016 30,118 8.62013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,796 62,363 72,159 20.22014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,738 94,886 101,624 28.42015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,142 17,191 22,333 6.22016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,833 10,634 14,467 4.0Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,433 100,209 116,642 32.6

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $49,044 $308,299 $357,343 100%

Weighted average effective interest rate(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.36%Weighted average term to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.50 years

Note:

(1) The weighted average effective interest rate reflects that two floating rate mortgages in the amount of $65,588 as at April 1, 2012 aresubject to interest rate swap agreements to acquire a fixed rate of interest. The interest rate swap transactions were entered into onDecember 31, 2008 and mature on December 31, 2013.

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5APR201200305640

POST-CLOSING STRUCTURE

The following chart sets out the simplified organizational structure of the REIT immediately followingClosing (all figures approximate):

Holders of Units

Common Shares

U.S. Management Agreements



U.S. Manager


REIT

Morguard Residential General

Partnership

Morguard GP

Canada Holdco

REIT GPPartnership

U.S. Holdco

SizelerSteeplechase

LimitedPartnership

SizelerMagnolia Place

Partnership

Spivillages,LLC

Spimag,LLC

MNARInvestors LLC

CANADA

U.S.

Class ALP Units

Class BLP Units

Class CLP

UnitsClass BGP Unit

Class AGP Unit


RetainedDebt

100%

100%

100%

100%

100% 100% 100%

100%

99.999%(1)

100%

100%

99%

99% 1% 1%

Notes:

(1) Morguard Residential Partnership Trust holds an approximate 0.001% interest in Morguard Residential General Partnership, the solebeneficiary of which is Morguard. Morguard Residential Partnership Trustee Limited, a wholly-owned subsidiary of Morguard, is thetrustee of Morguard Residential Partnership Trust.

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ARRANGEMENTS WITH MORGUARD

On Closing, the REIT, the Partnership and certain Morguard entities will enter into certain agreementsgoverning the relationships among such parties following Closing. See also ‘‘Retained Interest’’.

Morguard GP

The Partnership will acquire at Closing, directly or indirectly, all of the Initial Properties and the generalpartners of the Partnership will be the REIT GP, a wholly-owned subsidiary of the REIT, and Morguard GP, acorporation incorporated under the laws of Canada that will be a wholly-owned subsidiary of Morguard.

Duties and Responsibilities of Morguard GP as a General Partner

The business and activities of Morguard GP will be restricted to acting as a general partner of thePartnership or any other limited partnership controlled by the REIT. The duties and responsibilities ofMorguard GP as a general partner of the Partnership will be subject to the oversight of the REIT GP and willinclude the following (the ‘‘Morguard GP Duties’’):

a) providing the Partnership’s senior officers and management team, if required;

b) providing and operating the Partnership’s head office, including providing the office space, equipment,supplies, support services and administrative, clerical and secretarial personnel incidental thereto;

c) managing the day-to-day operations of the Partnership;

d) maintaining the books and financial records of the Partnership’s properties and preparing reports, taxreturns and other disclosure documents based on the maintenance of such books and records;

e) conducting the day-to-day relations with respect to the Partnership’s Canadian properties, on behalf ofthe Partnership, with third parties, including suppliers, brokers, consultants, advisors, accountants,lawyers, insurers and appraisers;

f) supervising Canadian property expansions, capital projects and development projects for thePartnership;

g) managing and operating the Partnership’s Canadian properties, including inspecting the properties,negotiating contracts, ensuring reasonable security, handling tenant requests and negotiations,arranging for such improvements and repairs as may be required and purchasing all materials andservices, and incurring such expenses (with certain exceptions), as it deems necessary in connectiontherewith, all in accordance with an approved budget;

h) collecting all rents and other charges and payments of costs and expenses related to the management ofthe Partnership’s Canadian properties;

i) reporting on the financial condition of the Partnership’s Canadian properties and preparing budgetsand leasing and marketing plans with respect to the Partnership’s Canadian properties on aperiodic basis;

j) supervising and conducting all Canadian leasing operations, including negotiating and executing leasesin accordance with an approved leasing and marketing plan;

k) preparing all reports reasonably requested by the Partnership, including operational reporting such ascash flow by property and by asset type, reports on development costs and executive summaries byasset type describing each of the Partnership’s Canadian properties;

l) providing the REIT with the information on the Partnership’s Canadian properties that the REITrequires for (i) investor relations activities, (ii) regulatory and financial reporting requirements, and(iii) the preparation of all documents, reports, data and analysis required by the REIT for its filingsand documents necessary for its continuous disclosure requirements pursuant to applicable stockexchange rules and securities laws; and

m) establishing and maintaining disclosure controls and procedures and internal controls over financialreporting of the Partnership.

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In performing the Morguard GP Duties, Morguard GP will exercise the degree of care, diligence, judgmentand skill that would be exercised by a professional, prudent and competent person who is experienced inperforming substantially similar duties and responsibilities.

Morguard GP will be responsible for performing the Morguard GP Duties primarily through its dedicatedmanagement team and employees. In performing such duties, Morguard GP may from time to time retain theservices of third parties where it is appropriate to do so, taking into account such factors as the proximity of itsworkforce to the relevant properties, economies of scale and operational efficiencies, provided thatMorguard GP will at all times remain responsible for such functions in accordance with the Limited PartnershipAgreement. Morguard GP will be responsible for all employment matters with respect to its personnel as well asthe costs of any third parties it retains in performing the Morguard GP Duties.

Partnership Distribution Policy and Priority

The REIT GP, on behalf of the Partnership, shall make monthly cash distributions in the manner set outbelow. Except as noted otherwise herein, such distributions will be paid within 15 days following each calendarmonth end. The REIT GP, on behalf of the Partnership, may also make cash distributions at any other time.

The Partnership shall make monthly cash distributions to its partners in the following order of priority:

a) first, to the holders of Class C LP Units (being Morguard), distributions as outlined below at ‘‘ThePartnership — Distributions — Distributions on Class C LP Units’’;

b) second, to the holders of the Class B GP Units (being Morguard GP), distributions as outlined below at‘‘The Partnership — Distributions — Partnership Distributions to Morguard GP’’;

c) third, to the holders of the Class A GP Units (being the REIT GP), distributions as outlined at ‘‘ThePartnership — Distributions — Distributions to REIT GP’’;

d) fourth, to the holders of Class A LP Units (being the REIT), distributions as outlined at ‘‘ThePartnership — Distributions — Distributions on Class A LP Units and Class B LP Units’’; and

e) thereafter, to the holders of the Class A LP Units (being the REIT) and the Class B LP Units (beingMorguard) pro rata in accordance with the Partnership’s aggregate number of units of each class issuedand outstanding, as outlined below at ‘‘The Partnership — Distributions — Distributions on Class ALP Units and Class B LP Units’’.

In the event that the aggregate amount of the GP Distributions to the General Partners in respect of anyfiscal year of the Partnership is greater than Partnership Net Income in excess of the amount allocated to theholder of the Class C LP Units, for that year for the Partnership, the General Partners will be required to repaythat excess (pro rata to the aggregate amount of the distributions received by each of the General Partners inrespect of such fiscal year of the Partnership) within a designated timeframe (the ‘‘GP Distribution RepaymentAmount’’). In the event that in any fiscal quarter of the Partnership, the General Partners shall have paid a GPDistribution Repayment Amount to the Partnership, such amount (the ‘‘Deficiency’’) shall be paid to theGeneral Partners in the next subsequent fiscal quarter in which there is, and to the extent there is, PartnershipNet Income greater than the GP Distributions for that quarter in priority to all distributions other thandistributions to the holders of the Class C LP Units (being Morguard). Any Deficiency which remains unpaid inany fiscal quarter shall continue to be carried forward as a Deficiency in subsequent fiscal quarters.

Distributions made by the Partnership under the Limited Partnership Agreement, including all distributionsto the partners other than distributions to Morguard on the Class C LP Units (in respect of the Retained Debt),shall be made inclusive of applicable taxes (if any), and each of the partners shall agree to take all necessary actsor steps to ensure that such distributions are inclusive of all applicable taxes; provided that amounts required tobe withheld under applicable law on account of income taxes or non-resident withholding taxes shall be withheldand will be deemed to have been paid to the relevant person or distributed to the relevant partner.

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Partnership Distributions to Morguard GP

Morguard GP, as the sole holder of the Class B GP Units, will receive a base annual distribution (the ‘‘BaseAnnual Distribution’’) from the Partnership in respect of its performance of duties and responsibilities as ageneral partner of the Partnership, as follows:

a) 0.25% of Canadian Gross Book Value of the Partnership to be distributed in arrears in equal monthlyinstallments on or about the 15th day of each calendar month based on the immediately precedingcalendar month except for the first fiscal quarter following Closing, it will be the Canadian Gross BookValue as of the Closing;

b) 3.50% of Canadian Gross Property Revenue of the Partnership to be distributed in arrears in equalmonthly installments on or about the 15th day of each calendar month based on the monthly average ofthe Canadian Gross Property Revenue for the immediately preceding fiscal quarter, except for the firstfiscal quarter following Closing, it will be estimated, with reconciliation to actual figures once annualaudited financial statements are available; and

c) an annual distribution, calculated in arrears, in an amount equal to the product of (A) 15% of thePartnership’s FFO per Unit (assuming that all issued and outstanding Class B LP Units have beenexchanged for Units) in excess of $0.66 and (B) the number of issued and outstanding Units (assumingthat all issued and outstanding Class B LP Units have been exchanged for Units), subject toadjustments for certain transactions affecting the Units (including any subdivision, split, combinationor consolidation of the Units).

In addition, the Partnership will be responsible for all costs and expenses relating to its business andoperations and Morguard GP will be reimbursed for all out-of-pocket costs and expenses incurred byMorguard GP, on behalf of the Partnership, in connection with carrying out its duties and obligations under theLimited Partnership Agreement, other than the costs of Morguard GP’s overhead and certain other costs andexpenses, including its office rent, office administrative costs and costs relating to its employees other than inrespect of employees who are on-site at a property (for which the Partnership shall be responsible).

The Base Annual Distribution shall be subject to review by the Trustees on the tenth anniversary of Closingand each subsequent fifth anniversary thereof. In the event that Morguard GP and the Trustees are unable toagree on the Base Annual Distribution on the applicable anniversary for the associated renewal period, the BaseAnnual Distribution shall be determined by binding arbitration. In such event, following the applicableanniversary, the Base Annual Distribution shall continue to be the expiring Base Annual Distribution until afinal determination has been made pursuant to the binding arbitration.

Right of the REIT GP to Remove Morguard GP

At least 12 months prior to the tenth anniversary of Closing and each subsequent fifth anniversary thereof,the Independent Trustees of the REIT will review the performance of Morguard GP and, if a majority of theIndependent Trustees of the REIT are not satisfied with the performance by Morguard GP of the Morguard GPDuties, they may submit the removal of Morguard GP to a vote of Unitholders. If such removal is approved by asimple majority of the votes cast by Unitholders, the REIT GP may remove Morguard GP as a general partnerof the Partnership effective on the forthcoming tenth anniversary of Closing or the subsequent fifth anniversarythereof, as applicable, provided that the REIT provides at least 12 months’ prior written notice or payment inlieu thereof, which payment shall be equal to the Base Annual Distributions over the preceding 12 months, plusthe reimbursement of Morguard GP for Morguard GP Employee Severance Costs (as defined below).

In addition, the REIT GP will have the right to remove Morguard GP as a general partner of thePartnership:

a) upon the occurrence of:

i) an event of insolvency of Morguard GP within the meaning of the Limited PartnershipAgreement;

ii) a material breach by Morguard GP under the Limited Partnership Agreement, if such materialbreach is not cured within 30 days after receipt by Morguard GP of written notice from theREIT GP or the Partnership with respect thereto;

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iii) fraudulent misconduct of, or misappropriation of funds by, Morguard GP;

iv) an act of gross negligence by Morguard GP;

v) a default by a Morguard entity under any U.S. Management Agreement, the Services Agreementor the Right of First Offer and Non-Solicit Agreement, that results in the termination by theapplicable REIT entity of such applicable agreement; or

vi) the termination by a Morguard entity of any U.S. Management Agreement or the ServicesAgreement other than as a result of an event of default or change of control of the applicableREIT entity, provided that such Morguard entity is not being replaced by another Morguardentity,

(each, a ‘‘Morguard GP Event of Default’’); or

b) upon a change of control of Morguard GP, subject to the reimbursement of Morguard GP forMorguard GP Employee Severance Costs.

Under the Limited Partnership Agreement, the Partnership shall be responsible to reimburse Morguard GPfor any and all severance or termination costs and payments (if any) actually incurred by Morguard GP inrespect of employees of Morguard GP arising out of or resulting from the ensuing termination of redundant orsurplus employees as a consequence of (a) the removal (other than as a result of a Morguard GP Event ofDefault, including as a result of the termination of the Services Agreement or any U.S. Management Agreementby Morguard on 90 days’ written notice, as a result of a Servicer Event of Default or a U.S. Manager Event ofDefault), or (b) resignation as a result of a Morguard GP Resignation Event of Default (as defined below), ofMorguard GP as a general partner of the Partnership, in respect of the period after Closing that each suchemployee has worked on Partnership matters and based on the proportion of each such employee’s servicesattributable to Partnership matters, if Morguard GP is removed (other than as a result of a Morguard GP Eventof Default, as a result of the termination of the Services Agreement or any U.S. Management Agreement byMorguard on 90 days’ written notice, as a result of a Servicer Event of Default or a U.S. Manager Event ofDefault), or resigns as a result of a Morguard GP Resignation Event of Default (the ‘‘Morguard GP EmployeeSeverance Costs’’) provided that, notwithstanding the foregoing, in the event that the Partnership or an affiliateof the Partnership employs any employee of Morguard GP within 12 months of Morguard GP’s removal orresignation, as the case may be, for any reason whatsoever, the Partnership or affiliate shall be responsible forany and all severance and termination costs and payments paid or payable by Morguard GP to such employee.

If the REIT GP requests the removal, without cause, of a senior officer of the Partnership, whose serviceswere being provided by Morguard GP, the Partnership will be responsible for reimbursing Morguard GP forseverance and termination costs and payments (if any) actually incurred by Morguard GP for such senior officerin respect of (a) the period after Closing that such senior officer has worked on Partnership matters and (b) theproportion of each such senior officer’s services attributable to Partnership matters.

Right of Morguard GP to Resign

Morguard GP will have the right to resign as a general partner of the Partnership upon the occurrence of(a ‘‘Morguard GP Resignation Event of Default’’) (i) an event of insolvency of the Partnership within themeaning of the Limited Partnership Agreement, or (ii) a material breach by the REIT GP under the LimitedPartnership Agreement, if such material breach is not cured within 30 days after receipt by the REIT GP ofwritten notice from Morguard GP with respect thereto. Upon any such termination, Morguard GP shall beentitled to reimbursement for Morguard GP Employee Severance Costs, which reimbursement will not derogatefrom or in any way affect or preclude any other rights of Morguard GP for damages or otherwise at lawor equity.

Morguard GP will also have a right to resign at any time on 90 days’ written notice, provided that in suchevent (other than by reason of a Morguard GP Resignation Event of Default), Morguard GP will not be entitledto any reimbursement for severance or termination costs or payments incurred by Morguard GP other than inrespect of any employee of Morguard GP employed by the Partnership or its affiliates within 12 monthsimmediately following Morguard GP’s resignation.

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Change of Control Payment

Upon a change of control of the REIT GP, other than a change of control caused by Morguard, and uponMorguard GP resigning as general partner of the Partnership within the 12 months following such change ofcontrol, the Partnership shall pay Morguard GP an amount equal to the Base Annual Distributions over thepreceding 12 months, provided that Morguard will not be entitled to any reimbursement for severance costs orpayments incurred by it other than in respect of any employee of Morguard GP employed by the Partnership orits affiliates within the 12 months following Morguard GP’s resignation.

Non-Solicitation

Upon removal or resignation of Morguard GP as a general partner of the Partnership, the Partnership willnot solicit employees of Morguard GP for a period of 18 months, provided that the Partnership will be entitledto solicit any employee of Morguard GP for whom the Partnership is responsible to reimburse Morguard GP forseverance or termination costs or payments, other than any employee of Morguard GP appointed as a seniorofficer of the Partnership. Notwithstanding the foregoing, in the event that Morguard GP resigns as a result of aMorguard GP Resignation Event of Default, the Partnership shall not be entitled to solicit any employee ofMorguard GP for a period of 18 months.

Disposition of Properties

The REIT may, subject to the terms of the Limited Partnership Agreement, and subject to any requiredconsents, sell, exchange or otherwise dispose of its Canadian properties and the Morguard GP Duties in respectof such Canadian properties shall terminate upon the completion of the applicable sale, exchange or disposition;provided, however, that the sale, exchange or other disposition of all or substantially all of the assets of thePartnership, in a single transaction or a series of related transactions, whether or not as a result of thedissolution, winding-up or distribution of all the assets of the Partnership, except in conjunction with an internalreorganization of the Partnership, shall require the approval, by special resolution, of the holders of Units andthe Special Voting Units in accordance with the terms of the Declaration of Trust.

U.S. Manager

The U.S. Manager will be appointed by U.S. Holdco to manage the U.S. properties. Pursuant to theU.S. Management Agreements, the U.S. Manager will have general responsibility for the overall managementand operation of the U.S. properties of the REIT. Its duties will include the following U.S. Manager Duties:

a) advising U.S. Holdco on strategic matters relating to the U.S. properties, dispositions and developmentof properties, and value maximization;

b) subject to approval by U.S. Holdco, identifying, structuring and negotiating dispositions and othertransactions in respect of the U.S. properties;

c) conducting day-to-day relations with respect to the U.S. properties with third parties, including tenants,suppliers, brokers, consultants, advisors, accountants, lawyers, insurers and appraisers;

d) managing the regulatory compliance in respect of the U.S. properties, including making all requiredfilings;

e) supervising U.S. property expansions, capital projects and development projects;

f) managing the U.S. properties, including inspecting the properties, negotiating contracts, ensuringreasonable security, handling tenant requests and negotiations, arranging for such improvements andrepairs as may be required and purchasing all materials and services, and incurring such expenses (withcertain exceptions), as it deems necessary in connection therewith, all in accordance with an approvedbudget;

g) collecting all rents and other charges and payments of costs and expenses related to the management ofthe U.S. properties;

h) reporting on the financial condition of the U.S. properties and preparing budgets and leasing andmarketing plans with respect to the U.S. properties on a periodic basis;

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i) supervising and conducting all U.S. leasing operations, including negotiating and executing leases inaccordance with an approved leasing and marketing plan;

j) preparing all reports reasonably requested by U.S. Holdco, including operational reporting such ascash flow by property and by asset type, reports on development costs and executive summaries byasset type describing each of the U.S. properties;

k) providing U.S. Holdco with the information on the U.S. properties that the REIT requires for(i) investor relations activities, (ii) regulatory and financial reporting requirements, and (iii) thepreparation of all documents, reports, data and analysis required by the REIT for its filings anddocuments necessary for its continuous disclosure requirements pursuant to applicable stock exchangerules and securities laws;

n) arranging such administrative, executive and management personnel to be provided to U.S. Holdco asis reasonably necessary; and

o) such other responsibilities and services in respect of the U.S. properties as may be required from timeto time.

In performing the U.S. Manager Duties, the U.S. Manager will exercise the degree of care, diligence,judgment and skill that would be exercised by a professional, prudent and competent person who is experiencedin performing substantially similar duties and responsibilities.

At all times, one or more of the special purpose entities owned by U.S. Holdco shall have at leastsix employees.

Initially, all of the U.S. properties will be managed by the U.S. Manager. The U.S. ManagementAgreements will permit the U.S. Manager to retain, where appropriate from time to time, taking into accounteconomies of scale and other relevant factors, other managers to manage a portion of the REIT’sU.S. properties; provided, however, that the other managers are subject to at least the same standard of care asthat of the U.S. Manager and may, for U.S. properties wholly-owned by the REIT, be terminated by the REITon not more than 90 days’ written notice. If the U.S. Manager retains other managers, it will at all times remainresponsible for such functions in accordance with the U.S. Management Agreements, and will be responsible forall employment matters with respect to its personnel as well as the costs of any third parties it retains to performits duties as U.S. Manager. The U.S. Manager will also be responsible for supervising the activities of any suchother managers of the U.S. properties.

The fees under the U.S. Management Agreements shall be subject to review by the Trustees on the tenthanniversary of Closing and each subsequent fifth anniversary thereof. In the event that the U.S. Manager andthe Trustees are unable to agree on the fees payable under the U.S. Management Agreements on the applicableanniversary for the associated renewal period, such fees shall be determined by binding arbitration. In suchevent, following the applicable anniversary, the fees under the U.S. Management Agreements shall continue tobe the fees payable thereunder for the expiring period until a final determination has been made pursuant to thebinding arbitration.

Property Management Fee

The U.S. Manager is the current manager of the Initial U.S. Properties and will continue to manage certainproperties not owned by the REIT, some of which may be in competition with the REIT’s U.S. properties. TheU.S. Manager will be entitled to receive a property management fee equal to 3.50% of the U.S. Gross PropertyRevenue to be paid in arrears on a monthly basis.

Asset Management Fee

The U.S. Manager is the current asset manager of the Initial U.S. Properties and will continue to managecertain properties not owned by the REIT, some of which may be in competition with the REIT’sU.S. Properties. The U.S. Manager will be entitled to receive an asset management fee equal to 0.25% ofU.S. Gross Book Value of the Partnership to be paid in arrears on a monthly basis.

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Acquisition Fee

The U.S. Manager will be entitled to the following fees for its U.S. Manager Duties (other than in respect ofsuch matters occurring at or in conjunction with Closing) in respect of U.S. properties acquired, directly orindirectly, by the REIT, to be paid upon the closing of the purchase of each such property:

a) 0% of the purchase price paid for U.S. properties acquired, directly or indirectly, from Morguard orany party that is affiliated or related to Morguard (including any entity controlled by or controllingMorguard) (collectively, the ‘‘Morguard Related Parties’’);

b) 0.75% of the purchase price paid for U.S. properties acquired in each fiscal year of the REIT fromparties that are not Morguard Related Parties until the aggregate purchase price paid by the REIT forall properties acquired in Canada and the United States, from parties that are not Morguard RelatedParties, is $200 million (using the applicable exchange rate at the time of each such acquisition); and

c) 0.50% of the purchase price paid for U.S. properties acquired in each fiscal year of the REIT fromparties that are not Morguard Related Parties after the aggregate purchase price paid by the REIT forall properties acquired in Canada and the United States, from parties that are not Morguard RelatedParties, exceeds $200 million (using the applicable exchange rate at the time of each such acquisition).

Financing Fee

With respect to Arranging for Financing Services (other than in respect of such matters occurring at or inconjunction with Closing), the U.S. Manager will be entitled to a financing fee in an amount equal to 0.15% ofthe principal amount and associated costs (excluding any Fannie Mae, Freddie Mac or similar premium) of anydebt financing or debt refinancing in respect of U.S. real property held directly or indirectly by the REIT, to bepaid on closing of each such financing.

Development Fee

The U.S. Manager will be entitled to a development fee in an amount equal to 1.00% of the developmentcosts in respect of the U.S. properties held directly or indirectly by the REIT, where such costs exceedUS$1 million per property and are incurred in connection with: (i) the construction, enlargement orreconstruction of any building, erection, plant, equipment or improvement on a property; or (ii) anyrefurbishing, additions, upgrading or restoration of or renovations to existing buildings, erections, plant,equipment or improvements, including redevelopments, other than repair and maintenance in the ordinarycourse of business.

Additional Fees

To the extent that the U.S. Manager or an affiliate of the U.S. Manager performs services for the REIT inaddition to those specifically enumerated under the U.S. Management Agreements, those services will becompensated separately at rates to be agreed upon between the REIT and the U.S. Manager.

Expenses

U.S. Holdco will reimburse the U.S. Manager for all property specific expenses, including on-site expensesand out-of-pocket costs incurred by the U.S. Manager in connection with carrying out its duties and obligationsunder the U.S. Management Agreements, other than the costs of the U.S. Manager’s overhead and employees(excluding employees that are on-site at a property, the costs for which shall be the responsibility ofU.S. Holdco) and certain other costs and expenses, including its office rent or office administrative costs.

Term of the U.S. Management Agreements

Each U.S. Management Agreement has an initial term of ten years and is automatically renewable forfurther terms of five years each. At least 12 months prior to the tenth anniversary of Closing and eachsubsequent fifth anniversary of Closing, the Independent Trustees of the REIT will review the performance ofthe U.S. Manager and, if a majority of the Independent Trustees of the REIT are not satisfied with theperformance by the U.S. Manager of the U.S. Manager Duties, they may submit the termination of theapplicable U.S. Management Agreement to a vote of Unitholders. If such termination is approved by a simple

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majority of the votes cast by Unitholders, the REIT may terminate such U.S. Management Agreement effectiveon the forthcoming tenth anniversary of Closing or the subsequent fifth anniversary thereof, as applicable,provided that the REIT provides at least 12 months’ prior written notice or payment in lieu thereof (whichpayment shall be equal to the gross fees paid to the U.S. Manager over the preceding 12 months), plus thereimbursement of the U.S. Manager Employee Severance Costs (as defined below).

In addition, the REIT will have the right to terminate a U.S. Management Agreement:

a) in the event of:

i) an event of insolvency of the U.S. Manager within the meaning of such U.S. ManagementAgreement;

ii) a material breach by the U.S. Manager under such U.S. Management Agreement, if such materialbreach is not cured within 30 days after receipt by the U.S. Manager of written notice from theREIT or U.S. Holdco with respect thereto;

iii) fraudulent misconduct of, or misappropriation of funds by, the U.S. Manager;

iv) an act of gross negligence by the U.S. Manager within the meaning of such U.S. ManagementAgreement;

v) a default by a Morguard entity under the Limited Partnership Agreement, the otherU.S. Management Agreement, the Services Agreement or the Right of First Offer and Non-SolicitAgreement, that results in the termination by the applicable REIT entity of such applicableagreement, or the removal of the applicable Morguard entity, as applicable;

vi) the resignation by a Morguard entity under the Limited Partnership Agreement or termination bya Morguard entity of the Services Agreement or the other U.S. Management Agreement, in eachcase, other than as a result of an event of default or change of control of the applicable REITentity, provided that such Morguard entity is not being replaced by another Morguard entity;

(each, a ‘‘U.S. Manager Event of Default’’); or

b) upon a change of control of the U.S. Manager, subject to the reimbursement of the U.S. Manager forthe U.S. Manager Employee Severance Costs.

Under each U.S. Management Agreement, U.S. Holdco shall be responsible to reimburse the U.S. Managerfor any and all severance or termination costs and payments (if any) actually incurred by the U.S. Manager inrespect of employees of the U.S. Manager arising out of or resulting from the ensuing termination of redundantor surplus employees as a consequence of the termination of such U.S. Management Agreement (other than as aresult of a U.S. Manager Event of Default, as a result of a termination of a U.S. Management Agreement orServices Agreement by Morguard on 90 days’ written notice, as a result of a Servicer Event of Default or as aresult of the resignation of Morguard GP as a general partner of the Partnership (other than as a result of aMorguard GP Resignation Event of Default)), in respect of the period after Closing that each such employeehas worked on REIT matters and based on the proportion of each such employee’s services attributable to REITmatters, if such U.S. Management Agreement is terminated (other than as a result of a U.S. Manager Event ofDefault, as a result of a termination of a U.S. Management Agreement or Services Agreement by Morguard on90 days’ written notice, as a result of a Servicer Event of Default or as a result of the resignation ofMorguard GP as a general partner of the Partnership (other than as a result of a Morguard GP ResignationEvent of Default)) (collectively, the ‘‘U.S. Manager Employee Severance Costs’’), provided that,notwithstanding the foregoing, in the event that the REIT or an affiliate of the REIT employs any employee ofthe U.S. Manager within 12 months of the termination of such U.S. Management Agreement, for any reasonwhatsoever, U.S. Holdco or affiliate shall be responsible for any and all severance and termination costs andpayments paid or payable by the U.S. Manager to such employee.

Right of the U.S. Manager to Terminate the U.S. Management Agreements

The U.S. Manager will have the right to terminate a U.S. Management Agreement upon the occurrence of(a ‘‘U.S. Manager Resignation Event of Default’’) (i) an event of insolvency of the Partnership within themeaning of such U.S. Management Agreement, or (ii) a material breach by the REIT GP or U.S. Holdco under

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such U.S. Management Agreement, if such material breach is not cured within 30 days after receipt by theREIT GP or U.S. Holdco, as the case may be, of written notice from the U.S. Manager with respect thereto.Upon any such termination, the U.S. Manager shall be entitled to reimbursement of any U.S. ManagerEmployee Severance Costs, which reimbursement will not derogate from or in any way affect or preclude anyother rights of the U.S. Manager for damages or otherwise at law or equity.

The U.S. Manager will also have the right to terminate each U.S. Management Agreement at any time on90 days’ written notice, provided that in such event (other than by reason of a U.S. Manager Resignation Eventof Default), the U.S. Manager will not be entitled to reimbursement for severance or termination costs orpayments incurred by the U.S. Manager other than in respect of any employee of the U.S. Manager employed bythe Partnership or its affiliates within 12 months immediately following the U.S. Manager’s termination of suchU.S. Management Agreement.


Upon a change of control of U.S. Holdco, other than a change of control caused by Morguard, and uponthe U.S. Manager terminating a U.S. Management Agreement within the 12 months following such change ofcontrol, U.S. Holdco shall pay the U.S. Manager an amount equal to the gross fees paid to the U.S. Managerover the preceding 12 months, provided that the U.S. Manager will not be entitled to any reimbursement forseverance costs or payments incurred by it except in respect of any employee of the U.S. Manager employed byU.S. Holdco or its affiliates within the 12 months following resignation.

Non-Solicitation

Upon termination of a U.S. Management Agreement, U.S. Holdco and its affiliates will not solicitemployees of the U.S. Manager for a period of 18 months, provided that U.S. Holdco and its affiliates will beentitled to solicit any employee of the U.S. Manager for whom U.S. Holdco or its affiliates is responsible toreimburse the U.S. Manager for severance or termination costs or payments. Notwithstanding the foregoing, inthe event that a U.S. Management Agreement is terminated as a result of a U.S. Manager Resignation Event ofDefault, U.S. Holdco and its affiliates shall not be entitled to solicit any employee of the U.S. Manager for aperiod of 18 months.

Disposition of Properties

U.S. Holdco and its affiliates may, subject to any required consents, sell, exchange or otherwise dispose ofits U.S. properties and the U.S. Manager Duties in respect of such U.S. properties shall terminate upon thecompletion of the applicable sale, exchange or disposition; provided, however, that the sale, exchange or otherdisposition of all or substantially all of the assets of the Partnership, in a single transaction or a series of relatedtransactions, whether or not as a result of the dissolution, winding-up or distribution of all the assets of thePartnership, except in conjunction with an internal reorganization of the Partnership, shall require the approval,by special resolution, of the holders of Units and the Special Voting Units in accordance with the terms of theDeclaration of Trust.

Services Agreement

Services

Pursuant to the Services Agreement, the Services to be provided by Morguard to the REIT will include thefollowing, subject to the overriding supervision and direction of the Trustees:

a) advising the REIT on potential acquisitions and dispositions of Canadian properties;

b) advising the REIT GP on strategic matters relating to the Partnership’s Canadian properties,dispositions and development or re-development of properties and value maximization;

c) subject to the approval of the REIT GP, identifying, structuring and negotiating dispositions and othertransactions in respect of the Partnership’s Canadian properties;

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d) providing the services of a member of Morguard’s senior management team, such person to beappointed by Morguard (for so long as Morguard GP is a general partner of the Partnership) andacceptable to the REIT, to act as the Chief Executive Officer of the REIT;

e) providing the services of a member of Morguard’s senior management team, such person to beappointed by Morguard (for so long as Morguard GP is a general partner of the Partnership) andacceptable to the REIT, to act as the Chief Financial Officer of the REIT;

f) providing the services of such administrative, management and executive personnel to be provided tothe REIT as is reasonably necessary;

g) assisting the REIT with investor relations activities;

h) managing regulatory compliance in respect of the Partnership’s Canadian properties, including makingall required filings; and

i) assisting the REIT with the preparation of all documents, reports, data and analysis required by theREIT for its filings and documents necessary for its continuous disclosure requirements pursuant toapplicable stock exchange rules and securities laws.

In providing the Services, Morguard will exercise the degree of care, diligence, judgment and skill thatwould be exercised by a professional, prudent and competent person who is experienced in providing servicessubstantially similar to the Services.

The fees under the Services Agreement shall be subject to review by the Trustees on the tenth anniversaryof Closing and each subsequent fifth anniversary thereof. In the event that Morguard and the REIT are unableto agree on the fees payable under the Services Agreement on the applicable anniversary for the associatedrenewal period, such fees shall be determined by binding arbitration. In such event, following the applicableanniversary, the fees under the Services Agreement shall continue to be the fees payable thereunder for theexpiring period until a final determination has been made pursuant to the binding arbitration.

Arranging for Financing Services

Pursuant to the Services Agreement, Morguard will also, subject to the approval of the REIT, provide theArranging for Financing Services to the REIT. In providing the Arranging for Financing Services, Morguard willexercise the degree of care, diligence, judgment and skill that would be exercised by a professional, prudent andcompetent person who is experienced in providing services substantially similar to the Arranging for FinancingServices.

Sub-Contracting

Morguard will be responsible for performing the Services or Arranging for Financing Services primarilythrough its dedicated management team and employees. In performing such duties, Morguard may from time totime retain the services of third parties where it is appropriate to do so, taking into account such factors as theproximity of its workforce to the relevant properties, economies of scale and operational efficiencies, providedthat Morguard will at all times remain responsible for such functions in accordance with the ServicesAgreement. The REIT will not have any employees and Morguard will be responsible for all employmentmatters with respect to its personnel as well as the costs of any third parties it retains. To the extent thatMorguard performs any of its duties and responsibilities through contractual arrangements with other parties,Morguard will bear the related costs and will remain responsible for such functions in accordance with theServices Agreement.

Acquisition Fee

Morguard will be entitled to the following fees for its Services (other than in respect of such mattersoccurring at or in conjunction with Closing) in respect of Canadian properties acquired, directly or indirectly, bythe REIT, to be paid upon the closing of the purchase of each such property:

a) 0% of the purchase price paid for Canadian properties acquired, directly or indirectly, from MorguardRelated Parties;

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b) 0.75% of the purchase price paid for Canadian properties acquired in each fiscal year of the REITfrom parties that are not Morguard Related Parties until the aggregate purchase price paid by theREIT for all properties acquired in Canada and the United States, from parties that are not MorguardRelated Parties, is $200 million (using the applicable exchange rate at the time of each suchacquisition); and

c) 0.50% of the purchase price paid for Canadian properties acquired in each fiscal year of the REITfrom parties that are not Morguard Related Parties after the aggregate purchase price paid by theREIT for all properties acquired in Canada and the United States, from parties that are not MorguardRelated Parties, exceeds $200 million (using the applicable exchange rate at the time of each suchacquisition).

Financing Fee

With respect to Arranging for Financing Services (other than in respect of such matters occurring at or inconjunction with Closing), Morguard will be entitled to a financing fee in an amount equal to 0.15% of theprincipal amount and associated costs (excluding any CMHC or similar premium) of any debt financing or debtrefinancing in respect of Canadian real property held directly or indirectly by the REIT, to be paid on closing ofeach such financing.

Development Fee

Morguard will be entitled to a development fee in an amount equal to 1.00% of the development costs inrespect of the Canadian properties held directly or indirectly by the REIT, where such costs exceed $1 millionper property and are incurred in connection with: (i) the construction, enlargement or reconstruction of anybuilding, erection, plant, equipment or improvement on a property; or (ii) any refurbishing, additions, upgradingor restoration of or renovations to existing buildings, erections, plant, equipment or improvements, includingredevelopments, other than repair and maintenance in the ordinary course of business.

Expenses

In addition, the REIT will reimburse Morguard for all out-of-pocket costs and expenses incurred byMorguard in connection with carrying out its duties and obligations under the Services Agreement. Morguardwill, however, be responsible for its own overhead costs and certain other costs and expenses, including its officerent and costs relating to its employees.

Term of the Services Agreement

The Services Agreement has an initial term of ten years and is automatically renewable for further terms offive years each. At least 12 months prior to the end of the initial term and any renewal term, the IndependentTrustees of the REIT will review the performance of Morguard and, if a majority of independent Trustees arenot satisfied with the performance of the Services by Morguard under the Services Agreement, they may submitthe termination of the Services Agreement to a vote of Unitholders. If such termination is approved by a simplemajority of the votes cast by Unitholders, the REIT may terminate the Services Agreement effective on theforthcoming tenth anniversary of Closing or the subsequent fifth anniversary thereof, as applicable, providedthat the REIT GP provides at least 12 months’ prior written notice or payment in lieu thereof (which paymentshall be equal to the gross fees paid to Morguard over the preceding 12 months) plus reimbursement forServicer Employee Severance Costs (as defined below).

In addition, the REIT will have the right to terminate the Services Agreement:

a) in the event of:

i) an event of insolvency of Morguard within the meaning of the Services Agreement;

ii) a material breach by Morguard under the Services Agreement, if such material breach is not curedwithin 30 days after receipt by Morguard of written notice from the REIT with respect thereto;

iii) fraudulent misconduct of, or misappropriation of funds by, Morguard;

iv) an act of gross negligence by Morguard;

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v) a default by a Morguard entity under the Limited Partnership Agreement, any U.S. ManagementAgreement or the Right of First Offer and Non-Solicit Agreement, that results in the terminationby the applicable REIT entity of such applicable agreement, or removal of the applicableMorguard entity, as applicable; or

vi) the resignation by a Morguard entity under the Limited Partnership Agreement or termination bya Morguard entity of any U.S. Management Agreement, in each case, other than as a result of anevent of default or change of control of the applicable REIT entity, provided that such Morguardentity is not being replaced by another Morguard entity;

(each, a ‘‘Servicer Event of Default’’); or

b) upon a change of control of Morguard, subject to reimbursement of Morguard for Servicer EmployeeSeverance Costs.

If the REIT requests the removal, without cause, of a senior officer of the REIT (including the ChiefExecutive Officer or Chief Financial Officer of the REIT) whose services were being provided by Morguard orits affiliates, the REIT will be responsible for reimbursing Morguard for severance and termination costs andpayments (if any) actually incurred by Morguard or its affiliates for such senior officer in respect of (a) theperiod after Closing that such senior officer has worked on REIT matters and (b) the proportion of such seniorofficer’s services attributable to REIT matters.

For purposes of the Services Agreement, ‘‘Servicer Employee Severance Costs’’ means any and allseverance or termination costs and payments (if any) actually incurred by Morguard or its affiliates in respect ofemployees of Morguard or its affiliates arising out of or resulting from the ensuing termination of redundant orsurplus employees as a consequence of the termination of the Services Agreement (other than as a result of aServicer Event of Default, including as a result of a termination of any U.S. Management Agreement, ortermination of the Services Agreement by Morguard on 90 days’ written notice, as a result of a Morguard GPEvent of Default, as a result of a U.S. Manager Event of Default, or the resignation of Morguard GP as ageneral partner of the Partnership (other than as a result of a Morguard GP Resignation Event of Default)), inrespect of the period after Closing that each such employee has worked on REIT matters and based on theproportion of each such employee’s services attributable to REIT matters, provided that, notwithstanding theforegoing, in the event that the REIT or an affiliate of the REIT employs any employee of Morguard within12 months of termination of the Services Agreement for any reason whatsoever, the REIT or such affiliate shallbe responsible for any and all severance and termination costs and payments paid or payable by Morguard tosuch employee.

Right of Morguard to Terminate the Services Agreement

Morguard will have the right to terminate the Services Agreement upon the occurrence of (a ‘‘REIT Eventof Default’’) (a) an event of insolvency of the REIT, within the meaning of the Services Agreement, or (b) amaterial breach by the REIT under the Services Agreement, if such material breach is not cured within 30 daysafter receipt by the REIT of written notice from Morguard with respect thereto. Upon any such termination,Morguard shall be entitled to reimbursement for Servicer Employee Severance Costs, which reimbursement willnot derogate from or in any way affect or preclude any other rights of Morguard for damages or otherwise at lawor equity.

Morguard will also have the right to terminate the Services Agreement at any time on 90 days’ writtennotice, provided that in such event (other than by reason of a REIT Event of Default), Morguard will not beentitled to reimbursement for severance or termination costs or payments incurred by Morguard other than inrespect of any employee of Morguard employed by the REIT or its affiliates within 12 months of the terminationof the Services Agreement.


Upon a change of control of the REIT, other than a change of control caused by Morguard, and uponMorguard terminating the Services Agreement within the 12 months following such change of control, the REITshall pay Morguard an amount equal to the gross fees paid to Morguard over the preceding 12 months, providedthat Morguard will not be entitled to any reimbursement for severance costs or payments incurred by it except in

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respect of any employee of Morguard employed by the REIT or its affiliates within the 12 months followingresignation.

Non-Solicitation

Upon termination of the Services Agreement, the REIT will not solicit employees of Morguard for a periodof 18 months, provided that the REIT will be entitled to solicit any employee of Morguard for whom the REITis responsible to reimburse Morguard for severance or termination costs, other than the Chief Executive Officerand Chief Financial Officer of the REIT or any other employee of Morguard appointed as a senior officer of theREIT. Notwithstanding the foregoing, if Morguard terminates the Services Agreement as a result of a REITEvent of Default, the REIT shall not be entitled to solicit any employee of Morguard for a period of 18 months.

Right of First Offer and Non-Solicit Agreement

On Closing, Morguard, Morguard GP, the U.S. Manager and the REIT will enter into the Right of FirstOffer and Non-Solicit Agreement, which shall continue in effect until the later of (i) the date that Morguardowns, directly or indirectly, less than 10% of the Units (on a fully diluted basis), and (ii) the date thatMorguard GP (or other Morguard entity) is no longer a general partner of the Partnership.

Non-Solicit

Morguard GP, the U.S. Manager and Morguard will not, and Morguard GP, the U.S. Manager andMorguard will cause their subsidiaries to not, solicit any specific tenant to vacate any REIT property in favour ofa property in which Morguard GP, the U.S. Manager, Morguard or any Morguard Related Parties have anownership or operating interest during the occupancy of such tenant at such REIT property. In addition, none ofMorguard GP, the U.S. Manager, Morguard or any Morguard Related Parties will preferentially marketbuildings in which it has an ownership or operating interest over buildings held directly or indirectly bythe REIT.

In accordance with Morguard’s acquisition allocation policy, future Canadian and U.S. acquisitionopportunities for multi-unit residential properties not owned by Morguard will be offered to the REIT at thesame time as they are offered to Morguard’s other clients and in priority to affiliates of Morguard, includingMorguard Related Parties. Morguard strives to ensure fair and equitable treatment for all its clients through theuse of a clearly defined acquisition allocation policy to manage conflicts among its investors for acquisitionopportunities. Morguard’s acquisition allocation policy provides that, subject to certain exceptions, investmentopportunities are required to be provided to all its clients simultaneously. Upon receipt, clients are required toconfirm their level of interest and identify the terms or conditions to their interest. Each interested client isrequired to provide parameters including in respect of pricing, timing and conditions, upon which Morguard willassess the terms and proceed with the client that has the highest probability of successfully acquiring the subjectproperty. To ensure fairness in specific circumstances, there are exceptions to this process, including where: (a) aclient sources a specific property and approaches Morguard to acquire such property on its behalf; and (b) aproperty is adjacent, or complimentary to, a property currently managed by Morguard and owned by one of itscurrent clients.

Obligations of the REIT

As long as a Morguard entity is performing Services or Arranging for Financing Services for the REIT, theREIT will not engage the services of a party that is not a Morguard entity to provide such Services or Arrangingfor Financing Services in respect of any current or after-acquired properties of the REIT or properties in whichthe REIT has an opportunity to make an investment, provided that such obligation does not apply in respect ofproperties in which the REIT has or would have an ownership interest of 50% or less. Further, so long as aMorguard entity is a general partner of the Partnership, the REIT will not engage the services of a party that isnot a Morguard entity to perform the Services, the Morguard GP Duties or the U.S. Manager Duties in respectof any current or after-acquired properties of the REIT, provided that such obligation does not apply in respectof properties in which the REIT has or would have an ownership interest of 50% or less. The REIT will alsoacquire properties only through the Partnership or through a new limited partnership with Morguard GP actingas a general partner thereof, provided that such obligation does not apply in respect of properties in which the

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REIT has or would have an ownership interest of 50% or less. Furthermore, no such obligation shall apply toany real property in respect of which the applicable Morguard entity has decided not to provide any suchservices or duties.

Right of First Offer

On Closing, Morguard will provide the REIT with the Right of First Offer to acquire any interests ofMorguard in the properties that it owns after Closing that are multi-unit residential properties located in Canadaand the United States, including interests in any such properties acquired or developed (including suchproperties under development that are substantially complete) after Closing, prior to disposition of any suchinterest to a third party (other than the sale of individual condominium suites) which will be on terms notmaterially less favourable to the REIT than those offered by or to such third party. The Right of First Offer willprovide that if at any time and from time to time following Closing Morguard determines that it desires to sell,or receives and desires to accept an offer to acquire (directly or indirectly by way of the sale or acquisition ofsecurities), a multi-unit residential rental property (a ‘‘Proposed Disposition’’), Morguard will, by notice inwriting, advise the REIT of such opportunity. Such a notice must outline all of the material terms and conditionsof the Proposed Disposition and be accompanied by all material information relating to the ProposedDisposition as is in the control or possession of Morguard. The REIT will have up to ten business days to notifyMorguard, in the form of an executed non-binding letter of intent and accompanying refundable deposit, if itintends to acquire the Proposed Disposition. If the REIT reasonably believes that the information contained inthe investment proposal is insufficient for it to make an investment decision, and notifies Morguard of same,Morguard must make reasonable commercial efforts to provide the REIT with such further information as isrequested by the REIT and the REIT will have up to ten business days from receipt of such additionalinformation to notify Morguard, in the form of an executed non-binding letter of intent and accompanyingrefundable deposit, if it intends to acquire the Proposed Disposition. If the REIT is unwilling to acquire theProposed Disposition at the proposed price, the REIT may counter, in the form of an executed non-bindingletter of intent, with a minimum reservation price, below which price Morguard would be unable to sell theProposed Disposition to a third party for a period of 180 days, following which period any sale of the propertywould be considered a new Proposed Disposition. If the REIT notifies Morguard that it does not wish to acquirethe Proposed Disposition, or the applicable period for the REIT providing notice to Morguard lapses, Morguardwill be entitled to complete the sale of the Proposed Disposition within the following 180 days to any third partyon terms not materially more favourable to the third party than those offered to the REIT. In respect ofproperties of Morguard that are co-owned or held in partnership with unrelated parties, the Right of First Offerwill be subject to the terms of contractual arrangements with such unrelated parties. Further, the Right of FirstOffer may be subject to the rights of lenders under certain loan documents securing properties in whichMorguard has an interest.

License of the Morguard Name and Logo

The Morguard name and trademark and related marks and designs (including the stylized ‘‘M’’ logos) willbe licensed to the REIT by MIL under a non-exclusive, royalty-free trademark license agreement (the ‘‘LicenseAgreement’’) entered into at or prior to Closing. By using the ‘‘Morguard’’ name, the REIT will have the benefitof the goodwill and recognition associated with the ‘‘Morguard’’ name in the real estate sector. The REIT will beentitled to terminate the License Agreement at any time without charge. MIL may terminate the license at anytime on 30 days’ written notice following the date on which (i) the REIT is provided written notice of its failureto comply with the License Agreement, provided that the REIT has the right to cure any such failure not laterthan 10 days after receiving notice of such failure, or (ii) Morguard GP and any other Morguard entity ceases tobe the general partner of the Partnership (or other limited partnerships controlled by the REIT) and theU.S. Manager and any other Morguard entity ceases to be the manager of the REIT’s U.S. properties.

Liability for Mortgages

Morguard will continue to be liable as a guarantor or otherwise, in all instances and to the same extent asthey were before, under the Assumed CMHC Mortgages and the Assumed Fannie Mae Mortgages as requiredby the mortgagees as a condition of their consent to the assumption by the REIT of such mortgages. ThePartnership will indemnify Morguard in respect of such continuing liability. The right of the REIT to dispose of

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an Initial Property in respect of which Morguard is so liable will be subject to the payment and discharge in fullof such liability, the release of Morguard from such liability or Morguard’s consent.

Currently, lenders to Morguard generally have a mortgage charge over a specific building in respect of aspecific debt. The mortgage provides the lender with various specific remedies against the mortgaged property,but lenders also have recourse to the other assets of Morguard in the event of a mortgage default. Morguard,pursuant to the Acquisition Agreements, will transfer the Initial Properties to the Partnership. As a result, theright of lenders to claim against the Initial Properties other than the specifically mortgaged property may becompromised. Accordingly, as a condition to obtaining the lender acknowledgements and consents for thetransfer of the Initial Properties and the continuation of the CMHC insurance on such mortgages, thePartnership will provide a guarantee of Morguard’s obligations under the Retained Debt in favour of the lenderof such indebtedness.

Indemnification

On Closing, Morguard will enter into the Indemnity Agreement pursuant to which Morguard will indemnifythe REIT and the Partnership for any breach of the representations, warranties and covenants provided underthe Acquisition Agreements. The maximum liability of Morguard under its indemnity for any breach of therepresentations, warranties and covenants provided under the Acquisition Agreements will be limited to anamount equal to the net proceeds of the Offering. No claim under such indemnity may be made until theaggregate claims exceed $1 million and thereafter in respect of claims of not less than $50,000. See ‘‘Acquisitionof Initial Properties — Acquisition Agreements’’. Morguard will also indemnify the Partnership for any breachof covenants by Morguard GP under the Limited Partnership Agreement for a period ending five years followingMorguard GP (or any other Morguard entity) having ceased to be a general partner of the Partnership. See‘‘Arrangements with Morguard — Morguard GP’’.

Morguard will remain liable, as principal obligor, for the Retained Debt. The Partnership will, however, bethe beneficial owner of the Initial Canadian Properties associated with the Retained Debt and accordingly couldsuffer impairment of these assets if Morguard fails to discharge its obligations pursuant to the Retained Debt.Accordingly, Morguard will indemnify the Partnership and the REIT for losses caused by Morguard’s failure todischarge obligations pursuant to the Retained Debt. Certain obligations under the Retained Debt, such asadequate insurance and repairs and maintenance, will be the responsibility of the Partnership and, as a result,such indemnification will not extend to defaults outside the scope of responsibility of Morguard.

Morguard will continue to be liable as a guarantor or otherwise, in all instances and to the same extent asthey were before, under the Assumed CMHC Mortgages and the Assumed Fannie Mae Mortgages as requiredby the mortgagees as a condition of their consent to the assumption by the REIT of such mortgages. ThePartnership will indemnify Morguard in respect of such continuing liability.

Head Lease

On Closing, the Partnership will enter into a head lease (the ‘‘Head Lease’’) with Morguard, as head tenant,in respect of 90 furnished suites at The Arista. The Head Lease will terminate upon the earlier of (i) the date onwhich The Arista ceases to be owned by the Partnership and (ii) 30 days following the date on which thePartnership notifies Morguard in writing that it intends to terminate the Head Lease. Under the Head Lease,Morguard will pay the Partnership rent in an amount equal to 85% of gross revenue allocable to the 90 suitessubject to the Head Lease, payable quarterly in advance, subject to adjustment at year end based on the actualrent received on such suites. Management estimates that the annual lease payment under the Head Lease will beapproximately $1.6 million in 2012, which represents 2.2% of rental revenues as disclosed in the pro formastatement of income for the year ended December 31, 2011.

RETAINED INTEREST

On Closing, it is expected that Morguard will hold an approximate 69.7% effective interest in the REITthrough ownership of all of the Class B LP Units of the Partnership (or an approximate 67.6% effective interestin the REIT if the Over-Allotment Option is exercised in full). Each Class B LP Unit will be exchangeable at theoption of the holder for one Unit of the REIT (subject to customary anti-dilution adjustments), will beaccompanied by one Special Voting Unit of the REIT (which provides for the same voting rights in the REIT as

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a Unit), and will receive distributions of cash from the Partnership equal to the distributions that the holder ofsuch Class B LP Unit would have received if it held a Unit instead of a Class B LP Unit. See ‘‘DistributionPolicy’’. The transfer of Class B LP Units is subject to a number of restrictions. See ‘‘The Partnership — Transferof LP Units’’. In addition, Morguard will hold all of the outstanding Class C LP Units of the Partnership. TheClass C LP Units have been designed to provide Morguard with an interest in the Partnership that will entitleMorguard to distributions, in priority to distributions to holders of the Class A LP Units, Class B LP Units,Class A GP Units and Class B GP Units in an amount, if paid, expected to be sufficient (without any additionalamounts) to permit Morguard to satisfy amounts payable under the Retained Debt and in respect of certainassociated income tax liabilities of Morguard, if any. Morguard has indicated that in the future, and subject tovaluation and market conditions, it will consider reducing its interest in the REIT to enhance the REIT’s marketliquidity; however, management currently intends to maintain a significant ownership position in the REIT. See‘‘The Partnership — Partnership Units’’ and ‘‘Risk Factors — Risks Related to the REIT’s Relationshipwith Morguard’’.

Exchange Agreement

Exchange Rights

On Closing, the REIT, the Partnership, the REIT GP and each Morguard entity holding Class B LP Unitswill enter into the Exchange Agreement, pursuant to which Morguard will be granted the right to require theREIT to exchange each Class B LP Unit held by Morguard for one Unit, subject to customary anti-dilutionadjustments. Upon an exchange, the corresponding number of Special Voting Units will be cancelled.Collectively, the exchange rights granted by the REIT are referred to as the ‘‘exchange right’’. This prospectusalso qualifies the grant of the exchange right by the REIT in respect of the Class B LP Units.

A holder of a Class B LP Unit will have the right to initiate the exchange procedure at any time so long aseach of the following conditions have been satisfied:

a) the exchange would not cause the REIT to breach the restrictions respecting non-resident ownershipcontained in the Declaration of Trust as described under ‘‘Declaration of Trust — Limitation onNon-Resident Ownership’’ or otherwise cause it to cease to be a ‘‘mutual fund trust’’ or ‘‘real estateinvestment trust’’ trust for purposes of the Tax Act or create a substantial risk of either such cessation;

b) the REIT is legally entitled to issue the Units in connection with the exercise of the exchangerights; and

c) the person receiving the Units upon the exercise of the exchange rights complies with all applicablesecurities laws.

Pre-Emptive Rights

In the event that the REIT, the Partnership or one of their subsidiaries decides to issue equity securities ofthe REIT or the Partnership or securities convertible into or exchangeable for equity securities of the REIT orthe Partnership or an option or other right to acquire any such securities other than to an affiliate thereof(‘‘Issued Securities’’), the Exchange Agreement will provide Morguard, for so long as it continues to hold atleast 10% of the Units (on a fully diluted basis), with pre-emptive rights to purchase Units, Class B LP Units orIssued Securities, to maintain Morguard’s pro rata ownership interest (on a fully diluted basis). The pre-emptiveright will not apply to the issuance of Issued Securities in certain circumstances, including the following: (i) toparticipants in the DRIP or a similar plan of the Partnership, including any ‘‘bonus’’ distribution, (ii) in respectof the exercise of options, warrants, rights or other securities issued under the REIT’s or Partnership’s securitybased compensation arrangements, if any, (iii) the issuance of Units in lieu of cash distributions, (iv), theissuance is full or partial consideration for the purchase of real property by the REIT from Morguard, (v) theexercise by a holder of a conversion, exchange or other similar privilege pursuant to the terms of a security inrespect of which Morguard did not exercise, failed to exercise, or waived, its pre-emptive right or in respect ofwhich the pre-emptive right did not apply, (vi) pursuant to a unitholder rights plan of the REIT, (vii) to theREIT, the Partnership or any subsidiary of the REIT or the Partnership or an Affiliate of any of them, and(viii) the issuance of Units in the Over-Allotment Option, if any, granted to the Underwriters in the Offering.

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Registration Rights

The Exchange Agreement will provide Morguard with the right (the ‘‘Piggy-Back Registration Right’’),among others, to require the REIT to include Units held by Morguard, including Units issuable upon exchangeof Class B LP Units, in any future offering undertaken by the REIT by way of prospectus that it may file withapplicable Canadian securities regulatory authorities (a ‘‘Piggy-Back Distribution’’). The REIT will be requiredto use reasonable commercial efforts to cause to be included in the Piggy-Back Distribution all of the UnitsMorguard requests to be sold, provided that if the Piggy-Back Distribution involves an underwriting and the leadunderwriter determines that the total number of Units to be included in such Piggy-Back Distribution should belimited for certain prescribed reasons, the Units to be included in the Piggy-Back Distribution will be firstallocated to the REIT.

In addition, the Exchange Agreement will provide Morguard with the right (the ‘‘Demand RegistrationRight’’) to require the REIT to use reasonable commercial efforts to file one or more prospectuses withapplicable Canadian securities regulatory authorities, qualifying Units held by Morguard, including Unitsissuable upon the exchange of Class B LP Units, for distribution (a ‘‘Demand Distribution’’). Morguard will beentitled to request a Demand Distribution no more than once in any calendar year and the REIT must take suchsteps as may be reasonably necessary to assist it in making a Demand Distribution, provided that, among otherthings, each request for a Demand Distribution must relate to such number of Units that would reasonably beexpected to result in gross proceeds of at least $20 million and if the Demand Distribution involves anunderwriting and the lead underwriter determines that the total number of Units to be included in such DemandDistribution should be limited for certain prescribed reasons, the Units to be included in the DemandDistribution will be first allocated to Morguard.

Each of the Piggy-Back Registration Right and the Demand Registration Right will be exercisable at anytime from 12 months following Closing, provided that Morguard owns at least 10% of the Units (on a fullydiluted basis) at the time of exercise. The Piggy-Back Registration Right and the Demand Registration Rightwill be subject to various conditions and limitations, and the REIT will be entitled to defer any DemandDistribution in certain circumstances for a period not exceeding 90 days. The expenses in respect of a Piggy-BackDistribution, subject to certain exceptions, will be borne by the REIT, except that any underwriting fee on thesale of Units by Morguard and the fees of Morguard’s external legal counsel will be borne by Morguard. Theexpenses in respect of a Demand Distribution, subject to certain exceptions, will be borne by the REIT andMorguard on a proportionate basis according to the number of Units distributed by each. Pursuant to theExchange Agreement, the REIT will indemnify Morguard for any misrepresentation in a prospectus underwhich Morguard’s Units are distributed (other than in respect of any information provided by Morguard, inrespect of Morguard, for inclusion in the prospectus) and Morguard will indemnify the REIT for anyinformation provided by Morguard, in respect of Morguard, for inclusion in the prospectus.

Tag/Drag Rights

The Exchange Agreement will provide that if Morguard owns at least 10% of the Units (on a fully dilutedbasis), and so requests, the REIT will cause, in respect of the Partnership, a purchaser (other than the REIT oran affiliate of the REIT) of securities of the Partnership owned by the REIT (or any permitted assignee) topurchase a pro rata portion of the securities of the Partnership held by Morguard, on the same terms and subjectto the same conditions as are applicable to the purchase of securities of the Partnership by the purchaser. IfMorguard or any permitted assignee holds in aggregate less than 10% of the Units (on a fully diluted basis), theREIT will be entitled, in connection with the direct or indirect sale of all of its securities of the Partnership, torequire Morguard or any permitted assignee to sell its securities in the Partnership on the same conditions as areapplicable to the REIT’s direct or indirect sale of all other interests in the Partnership, and upon the REITmaking such request and completing such sale, Morguard or any permitted assignee will have no further interestin the Partnership.

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Assignment

The Exchange Agreement is not assignable by Morguard without the REIT’s prior written consent otherthan to a Morguard entity provided such entity remains a Morguard entity. The pre-emptive rights, registrationrights and tag/drag rights described above are personal to Morguard. The transfer of Class B LP Units is subjectto a number of restrictions. See ‘‘The Partnership — Transfer of LP Units’’.

PRO FORMA CAPITALIZATION OF THE REIT

The following table sets forth the pro forma consolidated capitalization of the REIT as at December 31,2011 after giving effect to the Offering and the transactions described under ‘‘Acquisition of Initial Properties’’and ‘‘Debt Structure’’, but without giving effect to the exercise of the Over-Allotment Option. The table shouldbe read in conjunction with the pro forma combined financial statements of the REIT and the notes theretocontained in this prospectus. See ‘‘Index to Financial Statements’’.

As atDecember 31, 2011

(000’s)

IndebtednessAssumed Mortgages net of deferred financing costs of $2,820 . . . . . . . . . . . . . . . . . . . . . . $253,702Class C LP Units net of deferred financing costs of $2,785 and inclusive of present value

estimated tax payment of $6,609 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,645Indebtedness to Morguard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000

Unitholders’ Equity Classified as DebtClass B LP Units issued to Morguard (17,223 Class B LP Units) . . . . . . . . . . . . . . . . . . . . 172,231(1)

Unitholders’ EquityClass A LP Units (7,500 Class A LP Units), net of costs of $7,250 . . . . . . . . . . . . . . . . . . . 67,750

Total Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $623,328

Note:

(1) See notes 3(c) and 4 of the pro forma combined balance sheets of the REIT contained elsewhere in this prospectus.

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

Overview

The following discusses the financial condition and results of operations and changes thereto of thehistorical information relating to Morguard Corporation Residential Properties (the ‘‘Initial Properties’’) andshould be read in conjunction with the Initial Properties’ audited combined financial statements and theaccompanying notes included herein. All amounts are stated in thousands of Canadian dollars and are basedupon Morguard’s percentage ownership of the Initial Properties, unless otherwise noted, under this‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ (‘‘MD&A’’) sectionof this prospectus.

The Initial Properties consist of 14 multi-unit residential rental buildings located in Canada and threemulti-unit residential rental buildings located in the United States (‘‘U.S.’’), that are owned directly or indirectlyby Morguard. Morguard is a real estate investment corporation formed under the laws of Ontario whoseprincipal activities include property ownership (both commercial and residential real estate), development andfully integrated management services.

The 17 revenue-producing properties, together with their related assets and liabilities, are to be acquired bythe REIT upon completion of an initial public offering of units by the REIT.

The objective of this discussion is to provide a prospective purchaser of Units of the REIT with an analysisof the historical assets, liabilities, revenues and operating expenses, including mortgage interest of the Initial

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Properties for the above-mentioned periods. Less emphasis has been placed on analyzing the impact of incometaxes and the historical capital structure of the Initial Properties as the Initial Properties’ audited combinedfinancial statements do not reflect the REIT’s proposed capital structure and income tax status which will besignificantly different. The unaudited ‘‘pro forma’’ combined financial statements of the REIT contained in thisprospectus reflect the impact of financial leverage and income tax status on a going forward basis.

The following discussion includes IFRS results for 2011 and 2010 and Canadian GAAP results for 2010 and2009. The discussion of 2010 and 2009 under Canadian GAAP follows the 2011 and 2010 IFRS discussion.

Years ended December 31, 2011 and 2010 (IFRS)

The Canadian Accounting Standards Board mandated that all publicly accountable profit-orientedenterprises adopt International Financial Reporting Standards (‘‘IFRS’’) effective for interim and annualperiods beginning on or after January 1, 2011. These are the Initial Properties’ first financial statementsprepared under IFRS and include comparative results for the year ended 2010 which have been restated toconform to the accounting policies adopted under IFRS.

Non-IFRS Measures

All financial information has been prepared in accordance with IFRS. However, this MD&A also containscertain non-IFRS financial measures including ‘‘funds from operations’’ and ‘‘adjusted funds from operations’’since these measures are commonly used by entities in the real estate industry as useful metrics for measuringperformance. However, they do not have any standardized meaning prescribed by IFRS and are not necessarilycomparable to similar measures presented by other publically traded entities. These measures should beconsidered as supplemental in nature and not as a substitute for related financial information prepared inaccordance with IFRS.

The Initial Properties use funds from operations (‘‘FFO’’) in addition to net income to report operatingresults. FFO is an industry standard for evaluating operating performance and is defined as net income beforefair value gains/losses on real estate properties, fair value adjustments on the redeemable Class B LP Unitsclassified as liabilities, distributions on the Class B LP Units, gains/losses on the disposition of real estateproperties, deferred income taxes and certain other non-cash adjustments. FFO is not indicative of fundsavailable to meet the Initial Properties’ cash requirements. The Initial Properties compute FFO in accordancewith the current definitions of the Real Property Association of Canada (‘‘REALpac’’).

Adjusted funds from operations (‘‘AFFO’’) is a supplemental measure to net income that is used in the realestate industry to assess the sustainability of future cash distributions paid to the REIT’s. AFFO is defined asFFO adjusted by (i) adding amortization of deferred financing costs in place at Closing, amortization of free rentand amortization of cash flow hedges (ii) deducting reserves for maintenance capital expenditures, and(iii) making such other adjustments as may be determined by the Trustees in their discretion. Maintenancecapital expenditures are estimated by management and represent capital expenditures that are required tomaintain the existing earning potential of a property. Significant judgment is required to classify property capitalinvestments. AFFO should not be interpreted as an indicator of cash generated from operating activities as itdoes not consider changes in working capital.

International Financial Reporting Standards

Effect of Adoption of IFRS

IFRS is based on a conceptual framework similar to Canadian generally accepted accounting principles,‘‘Part V — Pre-changeover accounting standards, of the Canadian Institute of Chartered Accountants’Handbook’’ (‘‘Canadian GAAP’’), however significant differences exist in certain areas of recognition,measurement and disclosure. While the adoption of IFRS did not have a material impact on the InitialProperties’ reported net cash flows, it did have a material impact on the Initial Properties’ combined balancesheets and combined statements of income. In particular, the Initial Properties’ opening balance sheet reflects asignificant increase in the Initial Properties’ assets, and a corresponding increase in divisional surplus, as a resultof the effect of valuing real estate properties at fair value. All the changes to the opening balance sheet also

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required a corresponding deferred tax adjustment to be recorded based on the resultant differences. The impactof these differences on the Initial Properties’ January 1, 2010 opening balance sheet under IFRS compared to itsDecember 31, 2009 balance sheet under Canadian GAAP increased total divisional surplus from $25,177 to$187,702. In addition, the impact of these differences on the Initial Properties’ December 31, 2010 balance sheetunder IFRS compared to the balance sheet under Canadian GAAP resulted in total divisional surplus increasingfrom $17,111 to $198,592.

IFRS 1: First-Time Adoption of IFRS

The adoption of IFRS required the retroactive application of all standards as at the transition date,January 1, 2010. The standard requires that adjustments that arise on the conversion to IFRS from CanadianGAAP be recognized in the opening retained earnings on the transition date. IFRS 1, ‘‘First-Time Adoption ofInternational Financial Reporting Standards’’ (‘‘IFRS 1’’), provides certain mandatory and optional exemptionsthat allow for prospective treatment under certain conditions to certain standards. The following are theoptional exemptions available under IFRS 1 which are significant to the Initial Properties and which the InitialProperties applied in the preparation of its first financial statements under IFRS, and these exemptions areconsistent with those selected by Morguard:

Cumulative translation difference — International Accounting Standard (‘‘IAS’’) 21, ‘‘The Effects ofChanges in Foreign Exchange Rates’’, requires an entity to determine the translation differences in accordancewith IFRS from the date on which a subsidiary was formed or acquired. IFRS allows cumulative translationdifferences for all foreign operations to be deemed zero at the date of transition to IFRS, with future gains orlosses on subsequent disposal of any foreign operations to exclude translation differences arising from periodsprior to the date of transition to IFRS. The Initial Properties have deemed all cumulative translation differencesto be zero on transition to IFRS by adjusting the cumulative amounts through opening retained earnings.

IFRS 1 allows for certain other optional exemptions, however, the Initial Properties deemed theseexemptions not to be significant to its adoption of IFRS.

Impact of IFRS on Combined Balance Sheets

Real Estate Properties

The Initial Properties consider their real estate properties to be investment properties under IAS 40,‘‘Investment Property’’ (‘‘IAS 40’’). Under IFRS, investment property is defined as property that is held to earnrentals or for capital appreciation purposes or both. Similar to Canadian GAAP, investment property is initiallyrecorded at cost, however subsequent to initial recognition, IFRS requires that an entity choose either the costor fair value model to account for its investment property. Under IFRS, the Initial Properties have the choice ofwhether to use the historical cost model or the fair value model. The Initial Properties have elected to adopt thefair value model when preparing its financial statements under IFRS. The Initial Properties have determinedthat the fair value of its real estate properties at January 1, 2010 is $188,406 greater than the carrying valueunder Canadian GAAP.

The fair value of the real estate properties was based upon, among other things, rental income from currentleases and assumptions about rental income from future leases reflecting market conditions at January 1, 2010and December 31, 2010 less future cash outflows in respect of such leases. The Initial Properties were appraisedusing the direct capitalization income method.

Using the direct capitalization income method, the properties were valued using capitalization rates in therange of 6.0% to 8.5% on January 1, 2010 applied to a stabilized net operating income (December 31, 2010 —6.0% to 8.3%) resulting in an overall weighted average capitalization rate of 6.2% on January 1, 2010(December 31, 2010 — 6.2%).

Deferred Income Tax Liability

The Initial Properties’ deferred tax liability under IFRS increased by $24,931 on January 1, 2010(December 31, 2010 — $30,075) primarily as a result of the increase in the carrying value of the InitialProperties’ real estate assets. The deferred tax liability under IFRS has been determined by tax affecting the

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increase in fair value above original tax cost at the capital gains tax rate based on the presumption that themethod of realization will be through the sale of the properties.

Mortgages Payable

Indirect financing fees pertaining to the issue of financial liabilities were previously expensed by the InitialProperties under Canadian GAAP. Under IFRS, these indirect financing costs have been included in thecarrying amount of the related debt and are amortized using the effective interest rate method over the terms ofthe debts to which they relate. This resulted in a change in mortgages payable of $950 at January 1, 2010(December 31, 2010 — $1,148).

Impact of IFRS on Combined Statements of Income and Comprehensive Income

The following paragraphs highlight the significant and recurring differences between Canadian GAAP andIFRS that affect net income and comprehensive income.

Fair Value Changes

As a result of the Initial Properties adopting the fair value model to account for its real estate properties,net income could be greater or less than as determined under Canadian GAAP depending on the fair valueadjustment that is recorded during the reporting period. The impact of fair value changes resulted in an increaseto net income of $9,760 for the year ended December 31, 2010.

Amortization Expense

Under the fair value model, amortization of investment properties is not recorded. The impact of no longerrecording amortization expense on the Initial Properties’ real estate properties has resulted in an increase to netincome of $14,871 for the year ended December 31, 2010.

Interest Expense

As a result of amortizing indirect financing fees over the term of the debt to which they relate, amortizationof financing fees under IFRS will increase by $248 for the year ended December 31, 2010.

Income Taxes

The tax effect of the foregoing differences resulted in a decrease in net income in the amount of $5,278 forthe year ended December 31, 2010.

Impact of IFRS on Funds From Operations

For the Initial Properties, FFO will not be significantly impacted under IFRS, as the only change thatimpacts FFO is the amortization of the indirect financing fees.

Composition of the Initial Properties

The composition of the Initial Properties’ assets as at December 31, 2011 was as follows:

InitialProperties’

Number of Total Share of Real Estate 2011 2010Type Properties Suites(1) Suites(1) Properties NOI NOI

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4,905 4,771 $650,837 $34,280 $32,694U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 534 534 26,107 2,166 2,209

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 5,439 5,305 $676,944 $36,446 $34,903

(1) Represents number of residential suites.

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Review of Selected Financial and Operating Information

The following tables highlight selected financial information for the Initial Properties for the years endedDecember 31, 2011 and 2010. This information has been compiled from the audited combined financialstatements and notes thereto and should be read in conjunction with the IFRS audited combined financialstatements and notes included elsewhere in this prospectus.

Financial Highlights

As at December 31 2011 2010

Real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $676,944 $585,729

Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $360,605 $324,239

Years ended December 31 2011 2010

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,923 $ 69,758Property operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,477 34,855

Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,446 34,903

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,095 17,244Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 34

17,129 17,278

Income before fair value gains on real estate properties and income taxes . . . . . . . . . . 19,317 17,625Fair value gains on real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,585 9,760

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $101,902 $ 27,385

Provision for income taxesCurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,019 1,020Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,080 5,271

15,099 6,291

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,803 $ 21,094

Weighted average occupancy as at December 31(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 98.3% 96.9%

Annual average monthly rent — Canadian properties(1) . . . . . . . . . . . . . . . . . . . . . . . $ 1,128 $ 1,115

Annual average monthly rent — U.S. properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . US $675 US $665

(1) The Arista will be subject to the Head Lease with Morguard in respect of 90 furnished suites. See ‘‘Arrangements with Morguard —Head Lease’’. Occupancy and average monthly rent shown exclude the 90 suites subject to the Head Lease.

Financial Statement Analysis


The fair value of the Initial Properties was determined using the direct capitalization income method. As atDecember 31, 2011, the properties were valued using capitalization rates in the range of 5.5% to 8.5% applied toa stabilized net operating income (December 31, 2010 — 6.0% to 8.3%, January 1, 2010 — 6.0% to 8.5%),resulting in an overall weighted average capitalization rate of 5.7% (December 31, 2010 — 6.2%, January 1,2010 — 6.2%). The average capitalization rates by geographical location are set out in the following table:

December 31, 2011 December 31, 2010 January 1, 2010

Weighted Weighted WeightedMaximum Minimum Average Maximum Minimum Average Maximum Minimum Average

Canada . . . . . . . . . . . . . . 5.8% 5.5% 5.6% 6.3% 6.0% 6.1% 6.3% 6.0% 6.1%U.S. . . . . . . . . . . . . . . . . 8.5% 8.3% 8.3% 8.3% 7.8% 7.9% 8.5% 8.0% 8.1%

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Mortgages

Mortgages payable totaled $360,605 as at December 31, 2011, compared to $324,239 in 2010, representingan increase of $36,366, or 11.2%.

On June 23, 2011 and July 13, 2011, the Initial Properties completed the refinancing of four Canadianproperties, realizing gross proceeds of $102,569. Each of the four mortgages were refinanced for a ten year termat an effective annual interest rate of 3.97%.

The aggregate principal repayments and balances maturing of the mortgages payable on real estate assets inthe next five years and thereafter are as follows:

WeightedPrincipal Average

Installment Balances ContractualRepayments Maturing Total Interest Rate

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,364 $ 23,016 $ 33,380 6.0%2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,796 62,363 72,159 4.1%2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,738 94,886 101,624 4.3%2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,142 17,191 22,333 4.3%2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,833 10,634 14,467 4.7%Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,433 100,209 116,642 4.2%

$360,605 4.4%

Review of Operational Results

Revenue

Years ended December 31 2011 2010 Variance %

Revenue — Canadian properties . . . . . . . . . . . . . . . . . . . . . . . . $ 67,568 $ 65,496 $ 2,073 3.2Revenue — U.S. properties in United States dollars . . . . . . . . . . US 4,402 US 4,137 US 265 6.4Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . (47) 125 (173) —

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,923 $ 69,758 $ 2,165 3.1%

Total revenues increased in 2011 by $2,165, or 3.1%, to $71,923 compared to $69,758 in 2010. The increasewas primarily the result of lower vacancy and higher rental rates achieved by both the Canadian andU.S. properties.

Property Operating Expenses

Property operating expenses consist of property operating costs and realty taxes.


Property operating expenses — Canadian properties . . . . . . . . . . $ 33,288 $ 32,801 487 1.5Property operating expenses — U.S. properties in

United States dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . US 2,213 US 1,993 US 220 11.0Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . (24) 61 (85) —

Property Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,477 $ 34,855 $ 622 1.8%

Total property operating expenses increased in 2011 by $622, or 1.8%, to $35,477 compared to $34,855 in2010. The property operating expenses for the Canadian properties increased by $487 primarily due to higherutility expenses caused by increased utility rates and also due to the implementation of the Harmonized SalesTax in Ontario on July 1, 2010, which negatively impacted expenses by approximately $590. Property operatingexpenses for the U.S. properties increased by US$220 due to a general increase in operating expenses comprised

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of small increases in wages, repairs and maintenance and landscaping. Increased advertising expenses wereincurred pursuant to a marketing initiative which was undertaken during 2011.

Net Operating Income


Net operating income — Canadian Properties . . . . . . . . . . . . . . . $ 34,280 $ 32,694 $1,586 4.9Net operating income — U.S. properties in United States dollars . US 2,189 US 2,144 US 45 2.1Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . . (23) 65 (88) —

Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,446 $ 34,903 $1,543 4.4%

Net operating income (‘‘NOI’’) is an additional IFRS measure used by industry analysts, investors andmanagement to measure operating performance of the Initial Properties. NOI represents rental revenue fromthe properties less property operating expenses as presented in the combined statements of income. NOI is not ameasure defined by IFRS and, accordingly, the term does not necessarily have a standardized meaning and maynot be comparable to similarly titled measures presented by other publically traded entities.

NOI increased by $1,543, or 4.4%, in 2011 to $36,446 compared to $34,903 in 2010. The increase of $2,165in revenues as a result of lower vacancy and higher rental rates achieved in 2011 by both the Canadian andU.S. properties was partially offset by an increase in operating expenses for the Canadian properties as a resultof the increase in utilities expenses and the implementation of the Harmonized Sales Tax in Ontario onJuly 1, 2010.

Interest Expense


Interest expense — Canadian Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,981 $ 16,084Interest expense — U.S. properties in United States dollars . . . . . . . . . . . . . . . . . . . US 1,126 US 1,126Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) 34

Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,095 $ 17,244

Total interest expense decreased in 2011 to $17,095 compared to $17,244 in 2010. The decrease waspredominantly due to a decrease in interest expense for the Canadian properties due to amortizing mortgagerepayments, partially offset by an increase in interest expense as a result of the mortgage refinancings completedin 2011 which were refinanced at lower annual interest rates but the aggregate principal amount refinancedwas increased.

Income before fair value gains on real estate properties and income taxes


Income before fair value gains — Canadian Properties . . . . . . . . . . . . . . . . . . . . . . . $ 18,265 $ 16,579Income before fair value gains — U.S. properties in United States dollars . . . . . . . . . US 1,064 US 1,016Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) 30

Income before fair value gains on real estate properties and income taxes . . . . . . . . $ 19,317 $ 17,625

Income before fair value gains on real estate properties and income taxes is used by management tomeasure the operating results of the Initial Properties, inclusive of the impact of interest expense andamortization of capital assets. This measure provides income of the Initial Properties prior to the impact of fairvalue gains/losses that may be significantly impacted by external market conditions and also represents anon-cash item. The measure is not defined by IFRS and, accordingly, the term does not necessarily have a

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standardized meaning and may not be comparable to similarly titled measures presented by other publicallytraded entities.

Income before fair value gains on real estate properties and income taxes increased by $1,692, or 9.6% in2011 to $19,317 compared to $17,625 in 2010 due to the increase in NOI of $1,543 and the decrease in interestexpense of $149.

Fair value gains (losses) on real estate properties


Fair value gain on real estate properties — Canadian Properties . . . . . . . . . . . . . . . . $ 84,068 $ 8,760Fair value (loss)/gain on real estate properties — U.S. properties in

United States dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . US (1,499) US 971Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 29

Fair value gain on real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,585 $ 9,760

As part of the adoption of IFRS in 2011, the Initial Properties elected to adopt the fair value model toaccount for its real estate properties and recognized a fair value gain of $82,585 in 2011 compared to $9,760 in2010. Fair value adjustments are determined based on the movement of various parameters, including changes instabilized NOI and capitalization rates.

Income Taxes


Current tax expense — Canadian Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,112 $ 911Current tax (recovery)/expense — U.S. Properties in United States dollars . . . . . . . . . . . . (95) 106Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3

Current tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,019 1,020Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,080 5,271

Tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,099 $6,291

For the year ended December 31, 2011, the Initial Properties recorded a total income tax expense of$15,099 compared to $6,291 in 2009. The increase of $8,808 is due to an increase in deferred income taxes of$8,809 resulting from the increase in fair market value of the real estate properties.

Net Income


Net income — Canadian Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,990 $ 19,852Net (loss)/income — U.S. properties in United States dollars . . . . . . . . . . . . . . . . . . . US (188) US 1,207Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 35

Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,803 $ 21,094

Net income increased by $65,709 in 2011 to $86,803 compared to $21,094 in 2010 predominantly due to theincrease in NOI of $1,543 and the increase in the fair value gain on real estate properties of $72,825. These itemswere partially offset by an increase in income tax expenses of $8,808.

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Funds From Operations and Adjusted Funds From Operations

Further to the ‘‘Non-IFRS Measures’’ section above, set out below is a reconciliation of FFO and AFFO forthe years ended December 31, 2011 and 2010:


Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,803 $21,094Items not affecting cash:

Fair value gains on real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82,585) (9,760)Future income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,080 5,271

Funds from Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,298 $16,605Maintenance capital expenditures(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,387) (2,387)Amortization of deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,348 1,326Amortization of free rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 344Amortization of cash flow hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 191

Adjusted Funds from Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,603 $16,079


FFO increased by $1,693, or 10.2%, in 2011 predominantly due to the increase in NOI of $1,543.

Cash Flows

The Initial Properties reported a cash balance of $910 as at December 31, 2011 (2010 — $925). The changesin cash for the years ended December 31 are as follows:


Cash flows provided by (used in):Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,125 $ 17,972Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,039) (12,068)Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,113) (5,923)

$ (27) $ (19)Net effect of foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (18)

Decrease in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (15) $ (37)

Operating Activities for the year ended December 31, 2011 and December 31, 2010

Cash flow from operating activities was $21,125 in 2011 and $17,972 in 2010. The increase of $3,153 wasprimarily due to an increase in net operating income of $1,543 and an improvement in working capital of $1,431.

Financing Activities for the year ended December 31, 2011 and December 31, 2010

Cash used in financing activities was $13,039 in 2011 and $12,068 in 2010. The cash was used for principalrepayments of mortgages of $9,602, payments on maturing mortgages payable of $57,038 and cash distributionsof $45,984. These items were partially offset by proceeds from new mortgages of $102,569.

Investing Activities for the year ended December 31, 2010 and December 31, 2009

Cash used in investing activities was $8,113 in 2011 and $5,923 in 2010. The cash was used to acquirebuilding improvements, equipment and capital assets.

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Liquidity, Capital Resources and Contractual Commitments

The contractual commitments of the Initial Properties to be assumed by the REIT on Closing areas follows:

Total 2012 2013 2014 2015 2016 Thereafter

Mortgages Payable . . . . . . . . . . . . $360,605 $33,380 $72,159 $101,624 $22,333 $14,467 $116,642

Building condition assessment reports (‘‘BCA Reports’’) were prepared for each of the Initial Properties byindependent engineering firms. The BCA Reports identified certain recommended capital expenditures duringthe 10 year period following Closing, totalling approximately $16,133, or $1,246-$2,389 per year, disregarding theportion of the capital expenditures to be contributed by Morguard. The BCA Reports identified the followingsignificant categories of capital expenditures: (a) cost reserves for repair or replacement of verticaltransportation systems (approximately $5,100), (b) cost reserves for roof repair and/or replacement of roofsections (approximately $3,100) and (c) cost reserves for repair to elements of the building frame and/or buildingenvelope (approximately $3,400).

Following Closing, the REIT expects to be able to meet all of its obligations as they become due. The REITexpects to have sufficient liquidity as a result of cash flows from operating activities and financing availablethrough the unsecured revolving credit facility with Morguard (the ‘‘Morguard Facility’’) which will consist of a$50,000 demand facility available for acquisitions and for general business purposes, which can be drawn upon ineither Canadian dollars or an equivalent amount in United States dollars. Upon Closing, the REIT intends todraw $25,000 from the Morguard Facility to fund a portion of the purchase price of the Initial Properties. TheREIT will also seek to maintain a combination of short, medium and long-term debt maturities that areappropriate for the overall debt level of its portfolio, taking into account availability of financing and marketconditions, and the financial characteristics of each property.

Critical Accounting Estimates

Changes in Accounting Policies

The Initial Properties adopted IFRS as the basis of financial reporting effective for the year endedDecember 31, 2011 with restatement of comparative periods, using a transition date of January 1, 2010. Theimpact of the adoption of IFRS on the Initial Properties’ financial position and results of operations is discussedabove under the ‘‘International Financial Reporting Standards’’ section. The significant accounting policiesfollowed on adoption of IFRS are included in Note 2 of the audited combined financial statements for the yearended December 31, 2011, and Note 3 of the combined financial statements includes reconciliations of theInitial Properties’ divisional surplus, net income and comprehensive income as reported under both CanadianGAAP and IFRS.

Future Accounting Policy Changes

Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities

In May 2011, the IASB issued IFRS 10, ‘‘Consolidated Financial Statements’’, IFRS 11, ‘‘JointArrangements’’ and IFRS 12, ‘‘Disclosure of Interests in Other Entities’’. IFRS 10, 11 and 12 are effective forannual periods beginning on or after January 1, 2013; however, earlier adoption is permitted. The InitialProperties do not anticipate IFRS 10, 11 and 12 to have a significant impact on the combined financialstatements and anticipate adopting each of the above standards in the first quarter of 2013.

Financial Instruments

IFRS 9, ‘‘Financial Instruments’’ (‘‘IFRS 9’’) was issued by the IASB on November 12, 2009 and will replaceIAS 39. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost orfair value, replacing the multiple classification options in IAS 39. The approach in IFRS 9 is based on how anentity manages its financial impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on

85

or after January 1, 2015. The Initial Properties do not anticipate IFRS 9 to have a significant impact on thecombined financial statements and anticipate adopting the standard in the first quarter of 2015.

Income Taxes

In December 2010, the IASB made amendments to IAS 12, ‘‘Income Taxes’’ (‘‘IAS 12’’), that are applicableto the measurement of deferred tax assets and liabilities where real estate property is measured using the fairvalue model in IAS 40, ‘‘Investment Property’’. The amendments introduce a rebuttable presumption that, forpurposes of determining deferred tax consequences associated with temporary differences relating to investmentproperties, the carrying amount of the investment property is recovered entirely through the sale of the property.This presumption is rebutted if the investment property is held within a business model whose objective is toconsume substantially all of the economic benefits embodied in the investment property over time, rather thanthrough sale. The amendments to IAS 12 are effective for annual periods beginning on or after January 1, 2012and will have minimal impact on the Initial Properties’ combined financial statements since the Initial Propertieshave applied this approach in calculating deferred income taxes under IFRS and will adopt this standard in thefirst quarter of 2012.

Fair Value Measurement

IFRS 13, ‘‘Fair Value Measurement’’ (‘‘IFRS 13’’), replaces the current guidance on fair value measurementand provides a single source of guidance for fair value measurements when fair value is permitted or required byIFRS. The standard defines fair value, provides guidance on its determination and requires disclosures aboutfair value measurements but does not change the requirements about the items that should be measured anddisclosed at fair value. IFRS 13 is effective for annual periods beginning on or after January 1, 2013, with earlyadoption permitted. The Initial Properties are currently evaluating the impact of IFRS 13 on the consolidatedfinancial statements and anticipate adopting the standard in the first quarter of 2013.

Presentation of Financial Statements

In June 2011, the IASB made amendments to IAS 1, ‘‘Presentation of Financial Statements’’ (‘‘IAS 1’’),which will require items to be presented in Other Comprehensive Income on the basis whether they will or willnot subsequently reclassified to profit or loss. The amended version of IAS 1 is effective for the annual periodsbeginning on or after July 1, 2012, with early adoption permitted. The Initial Properties anticipate theamendment to IAS 1 to have a minimal impact on their combined financial statements and anticipate adoptingthe standard in the first quarter of 2013.

Critical Accounting Policies and Estimates

The Initial Properties’ critical accounting policies are those that management believes are the mostimportant in portraying the Initial Properties’ financial condition and results, and which requires the mostsubjective judgment and estimates on the part of management.


Real estate properties are recorded at fair value, determined based on available market evidence, at thebalance sheet date. The Initial Properties determined the fair value of each real estate property based upon,among other things, rental income from current leases and assumptions about rental income from future leasesreflecting market conditions at the applicable balance sheet dates, less future cash outflow pertaining to therespective leases. The properties are appraised using the direct capitalization income method.

In applying the accounting policies to the Initial Properties’ real estate properties, judgment is required indetermining whether certain costs are additions to the carrying amount of the property, and judgment is alsoapplied in determining the extent and frequency of independent appraisals.

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Income Taxes

Current income tax assets and liabilities are measured at the amount expected to be paid to tax authorities,net of recoveries, based on the tax rates and laws enacted or substantively enacted at the balance sheet date.

In accordance with IFRS, the Initial Properties use the liability method of accounting for income taxes.Under the liability method of tax allocation, current income tax assets and liabilities are based on the amountexpected to be paid to tax authorities, net of recoveries, based on the tax rates and laws enacted or substantivelyenacted at the balance sheet date. Deferred income tax assets and liabilities are determined based on differencesbetween the financial reporting and tax basis of assets and liabilities and are measured using substantivelyenacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assetsare recognized for all deductible temporary differences, carry forward of unused tax credits and unused taxlosses, to the extent that it is probable that deductions, tax credits and tax losses can be utilized. The carryingamount of deferred income tax assets are reviewed at each balance sheet date and reduced to the extent it is nolonger probable that the income tax asset will be recovered.

Fair Value of Financial Instruments

The fair value of financial instruments approximates amounts at which these instruments could beexchanged between knowledgeable and willing parties. The estimated fair value may differ in amount from thatwhich could be realized on an immediate settlement of the instruments. Management estimates the fair value ofmortgages payable by discounting the cash flows of these financial obligations using December 31, 2011 marketrates for debts of similar terms.

Risks and Uncertainties

There are business risks associated with the ownership of the Initial Properties. See ‘‘Risk Factors’’.

Years ended December 31, 2010 and 2009 (Canadian GAAP)

Non-Canadian GAAP Measures

All financial information has been prepared in accordance with Canadian GAAP. However, this MD&Aalso contains certain non-Canadian GAAP financial measures including NOI, FFO and AFFO, since thesemeasures are commonly used by entities in the real estate industry as useful metrics for measuring performance.However, they do not have any standardized meaning prescribed by Canadian GAAP and are not necessarilycomparable to similar measures presented by other publically traded entities. These measures should beconsidered as supplemental in nature and not as a substitute for related financial information prepared inaccordance with Canadian GAAP.

NOI is used by industry analysts, investors and management to measure operating performance of theInitial Properties. NOI represents rental revenue from the properties less property operating expenses aspresented in the combined statements of income. Accordingly, NOI excludes certain expenses included in thedetermination of net income such as interest expense and amortization.

The Initial Properties use FFO in addition to net income to report operating results. FFO is an industrystandard for evaluating operating performance and is defined as net income before amortization of real estateassets, gains/losses on the disposition of real estate properties, future income taxes and certain other non-cashadjustments. FFO is not indicative of funds available to meet the Initial Properties’ cash requirements. TheInitial Properties compute FFO in accordance with the current definitions of REALpac.

AFFO is a supplemental measure to net income that is used in the real estate industry to assess thesustainability of future cash distributions paid to the REIT’s unitholders. AFFO is defined as FFO adjusted by(i) adding amortization of deferred financing costs in place at Closing, amortization of free rent andamortization of cash flow hedges (ii) deducting reserves for maintenance capital expenditures, and (iii) makingsuch other adjustments as may be determined by the Trustees in their discretion. Maintenance capitalexpenditures are estimated by management and represent capital expenditures that are required to maintain theexisting earning potential of a property. Significant judgment is required to classify property capital investments.AFFO should not be interpreted as an indicator of cash generated from operating activities as it does notconsider changes in working capital.

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Composition of the Initial Properties

The composition of the Initial Properties’ assets as at December 31, 2010 was as follows:

InitialProperties’

Number of Number Share of Real Estate 2010 2009Type Properties of Suites(1) Suites(1) Properties NOI NOI

Multi-unit residential-Canada . . . . . . . . . 14 4,905 4,771 $353,258 $32,694 $30,545Multi-unit residential-U.S. . . . . . . . . . . . . 3 534 534 19,922 2,209 2,396

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 5,439 5,305 $373,180 $34,903 $32,941

(1) Represents number of residential suites.

Review of Selected Financial and Operating Information

The following tables highlight selected financial information for the Initial Properties for the years endedDecember 31, 2010 and 2009. This information has been compiled from the audited combined financialstatements and notes thereto and should be read in conjunction with the Canadian GAAP audited combinedfinancial statements and notes included elsewhere in this prospectus.

Financial Highlights


Real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $373,180 $383,130

Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $324,240 $327,551


Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,758 $ 68,421

Property operating costs and realty taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,855 35,480Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,053 17,267Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,906 14,758

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,944 $ 916

Provision for (recovery of) income taxesCurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,020 1,066Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) (7,757)

1,013 (6,691)

Net income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,931 $ 7,607

Weighted average occupancy as at December 31(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 96.9% 95.1%

Annual average monthly rent — Canadian properties(1) . . . . . . . . . . . . . . . . . . . . . . . $ 1,115 $ 1,102

Annual average monthly rent — U.S. properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . US $665 US $652

(1) The Arista will be subject to the Head Lease with Morguard in respect of 90 furnished suites. See ‘‘Arrangements with Morguard —Head Lease’’. Occupancy and average monthly rent shown exclude the 90 suites subject to the Head Lease.

Financial Statement Analysis


Real estate properties decreased by $9,950 at December 31, 2010 to $373,180 compared to $383,130 atDecember 31, 2009, due to amortization expense of $14,872, offset by capital expenditures of $6,047 incurredduring 2010.

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Mortgages

Mortgages payable totaled $324,240 as at December 31, 2010 compared to $327,551 in 2009, representing adecrease of $3,311. On June 1, 2010, the Initial Properties completed the refinancing of a Canadian property,realizing gross proceeds of $12,289 at an effective annual interest rate of 4.25% for a term of ten years. Theseproceeds were offset by repayments of principal and repayments on maturity of $14,508.

The aggregate principal repayments and balances maturing of the mortgages payable on real estate assets inthe five years ending December 31, 2015 and thereafter are as follows:



2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,981 $57,735 $ 65,716 6.18%2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,861 23,016 30,877 6.00%2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,735 62,821 69,556 4.10%2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,031 94,886 98,917 4.29%2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,325 17,191 19,516 4.29%Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 39,339 39,658 4.96%

$324,240 4.82%

Review of Operational Results

Revenue


Revenue — Canadian properties . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65,496 $ 63,760 $1,736 2.7Revenue — U.S. properties in United States dollars . . . . . . . . . . . . US 4,137 US 4,081 56 1.4Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . . . 125 580 (455) —

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 69,758 $ 68,421 $1,337 2.0%

Total revenues increased in 2010 by $1,337, or 2.0%, to $69,758 compared to $68,421 in 2009. The increasewas primarily the result of lower vacancy and higher rental rates achieved predominantly in the Canadianproperties. The increase in revenue in the U.S. properties in U.S. dollars was more than offset by the negativeimpact of the foreign exchange rates in 2010.

Property Operating Expenses

Property operating expenses consist of property operating costs and realty taxes.


Property operating expenses — Canadian properties . . . . . . . . . . . $ 32,801 $ 33,215 $(414) (1.2)Property operating expenses — U.S. properties in United States

dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . US 1,993 US 1,983 10 —Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . 61 282 (221) —

Property Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,855 $ 35,480 $(625) (1.8)%

Total property operating expenses decreased in 2010 by $625 to $34,855 compared to $35,480 in 2009. Theproperty operating expenses for the Canadian properties decreased by $414 and was primarily the result of adecrease in utility expenses due to lower consumption and rate reductions for natural gas, partially offset by anincrease in operating expenditures related to the implementation of the Harmonized Sales Tax in Ontarioimplementation on July 1, 2010. The balance of the decrease in property operating expenses was due to thepositive impact of foreign exchange which accounted for $221 of the decrease.

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Net Operating Income

Further to the ‘‘Non-Canadian GAAP Measures’’ section above, set out below is a reconciliation of NOI forthe years ended December 31, 2010 and 2009:


Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,931 $ 7,607Add (deduct)

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,053 17,267Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,906 14,758Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,013 (6,691)

Net Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,903 $32,941

The allocation of NOI amongst the Initial Properties is as follows:


Net operating income — Canadian Properties . . . . . . . . . . . . . . . . $ 32,694 $ 30,545 $2,149 7.0Net operating income — U.S. properties in United States dollars . . US 2,144 US 2,098 46 2.2Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . . . 65 298 (233) —

Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,903 $ 32,941 $1,962 6.0%

NOI increased by $1,962, or 6.0%, in 2010 to $34,903 compared to $32,941 in 2009. The increase wasprimarily due to the increase in revenues of $1,337 as a result of lower vacancy and higher rental rates achievedin 2010 by the Canadian properties and a decrease in utility expenses for the Canadian properties which werepartially offset by an increase in operating expenditures related to the implementation of the Harmonized SalesTax in Ontario on July 1, 2010.

Interest Expense


Interest expense — Canadian Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,912 $ 16,000Interest expense — U.S. properties in United States dollars . . . . . . . . . . . . . . . . . . . US 1,108 US 1,109Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 158

Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,053 $ 17,267

Total interest expense decreased in 2010 to $17,053 compared to $17,267 in 2009. Interest expense for theCanadian properties decreased due to a decrease in debt transaction costs of $189 in 2010 as compared to 2009as a result of additional mortgage refinancings completed in 2009. The change in foreign exchange also had apositive impact on interest expense of $125.

Amortization Expense


Amortization expense — Canadian Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,065 $13,881Amortization expense — U.S. properties in United States dollars . . . . . . . . . . . . . . . . . . US 816 US 769Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 108

Amortization Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,906 $14,758

Amortization expense increased in 2010 for both the Canadian and U.S. properties due to an increase inamortization expense associated with the additions to building improvements and equipment (2010 — $6,047,2009 — $4,086). The change in foreign exchange also had a marginal impact on amortization expense each year.

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Income Taxes


Current tax expense — Canadian Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 911 $ 950Current tax expense — U.S. Properties in United States dollars . . . . . . . . . . . . . . . . . . . . 106 101Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 15

Current tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,020 1,066Future tax recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) (7,757)

Tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,013 $(6,691)

For the year ended December 31, 2010, the Initial Properties recorded a total income tax expense of $1,013compared to a recovery of taxes of $6,691 in 2009. The increase of $7,704 was mainly due to an increase in futureincome tax due to the Initial Properties having to revalue its future income tax assets and liabilities in 2009 as aresult of reductions in substantively enacted Ontario income tax rates that occurred on November 16, 2009.

Net Income


Net income — Canadian Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,794 $ 7,454Net income — U.S. properties in United States dollars . . . . . . . . . . . . . . . . . . . . . . . . US 133 US 134Exchange amount to Canadian dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 19

Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,931 $ 7,607

Net income decreased by $5,676 in 2010 predominantly due to the increase in income taxes of $7,704, whichwas partially offset by an increase in NOI of $1,962.

Funds From Operations and Adjusted Funds From Operations

Further to the ‘‘Non-Canadian GAAP Measures’’ section above, set out below is a reconciliation of FFOand AFFO for the years ended December 31, 2010 and 2009:


Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,931 $ 7,607Item not affecting cash:

Amortization of real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,872 14,739Future income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) (7,757)

Funds from Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,796 $14,589Maintenance capital expenditures(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,387) (2,387)Amortization of deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,078 1,017Amortization of free rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344 282Amortization of cash flow hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 184

Adjusted Funds from Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,022 $13,685


FFO increased in 2010 by $2,207, or 15.1%, predominantly due to the increase in NOI of $1,962.

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Cash Flows

The Initial Properties reported a cash balance of $925 as at December 31, 2010 (2009 — $962). The changesin cash for the years ended December 31, are as follows:


Cash flows provided by (used in):Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,068 $ 17,283Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,011) (13,119)Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,076) (4,101)

$ (19) $ 63Net effect of foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) (49)

(Decrease) increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (37) $ 14

Operating Activities for the year ended December 31, 2010 and December 31, 2009

Cash flow from operating activities was $18,068 in 2010 and $17,283 in 2009. The increase of $785 wasprimarily due to an increase in net operating income of $1,962 and a decrease in interest expense of $214partially offset by a reduction in working capital of $1,505.

Financing Activities for the year ended December 31, 2010 and December 31, 2009

Cash used in financing activities was $12,011 in 2010 and $13,119 in 2009. The cash was used for principalrepayments of mortgages of $9,339, payments on maturing mortgages payable of $5,169 and cash distributions of$9,442. These items were partially offset by proceeds from new mortgages of $12,289.

Investing Activities for the year ended December 31, 2010 and December 31, 2009

Cash used in investing activities was $6,076 in 2010 and $4,101 in 2009. The cash was used to acquirebuilding improvements, equipment and capital assets.

Contractual Commitments

The contractual commitments of the Initial Properties to be assumed by the REIT on Closing areas follows:

Total 2011 2012 2013 2014 2015 Thereafter

Mortgages Payable . . . . . . . . . . . . . $324,240 $65,716 $30,877 $69,556 $98,917 $19,516 $39,658

Significant Accounting Policies and Changes in Accounting Policies

A summary of the significant accounting policies are described in note 1 to the Morguard CorporationResidential Properties combined financial statements for the years ended December 31, 2010 and 2009. Thepreparation of the financial statements in conformity with Canadian GAAP requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets andliabilities at each financial statement date, and revenues and expenses for the periods indicated. Actual resultscould differ from those estimates.

IFRS

The Canadian Accounting Standards Board has mandated that all publicly accountable profit-orientedenterprises adopt IFRS effective for interim and annual periods beginning on or after January 1, 2011. TheInitial Properties have prepared for the year ended December 31, 2011, along with comparative results for theyear ended December 31, 2010, financial statements in accordance with IFRS. See ‘‘— Years EndedDecember 31, 2011 and 2010’’ for a full discussion of the significant and recurring differences between Canadian

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GAAP and IFRS and the impact of these differences on the combined balance sheets and statements of incomeand comprehensive income.

Critical Accounting Estimates

The financial statements are based on the selection and application of critical accounting policies set forthin the notes to the financial statements, the preparation of which requires management to make significantestimates and assumptions. Management believes that there are four critical areas of judgment in the applicationof accounting policies that affect the financial condition and results of operations of the Initial Properties:valuation of rental properties, amortization, property acquisitions and fair value of financial instruments.

Valuation of Rental Properties

Rental properties, the Initial Properties’ major asset class, are carried at the lower of depreciated cost or netrecoverable amount on the assumption that the properties will be held for the long term. Net recoverableamount represents the estimated future cash flow from the use and residual value of the property on anundiscounted basis. Management relies on assumptions of future rental income and expected future propertyvalues that could be affected by industry performance and prospects as well as the business and economicconditions that are expected to prevail during the holding period. Should the underlying assumptions changematerially, the estimated net recoverable amount could change by a significant amount. These assessments havea direct impact on the Initial Properties’ net income, since impairment writedowns would have an immediatenegative impact on net income.

Amortization

The Initial Properties have adopted the straight-line method of amortization. Under this method,amortization is charged to income on a straight-line basis over the remaining estimated useful life of theproperty. Management is required to make subjective assessments as to the useful life of the Initial Propertiesfor purposes of determining the amount of amortization to reflect on an annual basis. These assessments have adirect impact on net income.

Property Acquisitions

In accordance with Canadian GAAP, the fair value of real estate acquired is allocated to tangible assets andidentified intangible assets and liabilities, consisting of above-market and below-market leases, other value ofin-place leases and the value of tenant relationships, in each case based on their fair values. Debt assumed in anyproperty acquisition is required to be recorded at fair value. The procedures required in the determination offair value are subject to estimation and management’s judgment.

Fair Value of Financial Instruments

The fair value of financial instruments approximates amounts at which these instruments could beexchanged between knowledgeable and willing parties. The estimated fair value may differ in amount from thatwhich could be realized on an immediate settlement of the instruments. Management estimates the fair value ofmortgages payable by discounting the cash flows of these financial obligations using December 31, 2010 marketrates for debts of similar terms.

Risks and Uncertainties

There are business risks associated with the ownership of the Initial Properties. See ‘‘Risk Factors’’.

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TRUSTEES AND MANAGEMENT OF THE REIT

Governance and Board of Trustees

The Declaration of Trust provides that, subject to certain conditions, the Trustees will have full, absoluteand exclusive power, control and authority over the REIT’s assets, affairs and operations, to the same extent asif the Trustees were the sole and absolute legal and beneficial owners of the REIT’s assets. The governancepractices, investment guidelines and operating policies of the REIT will be overseen by a Board consisting of aminimum of three and a maximum of ten Trustees, a majority of whom will be Independent Trustees and amajority of whom (and a majority of Independent Trustees) will be Canadian residents. At Closing, the REITwill have seven Trustees.

The mandate of the Board, which will be discharged directly or through one of the three committees of theBoard, is one of stewardship and oversight of the REIT and its business, and includes responsibility for strategicplanning, review of operations, disclosure and communication policies, oversight of financial and other internalcontrols, corporate governance, Trustee orientation and education, senior management compensation andoversight, and Trustee compensation and assessment. The Board’s written mandate is attached to this prospectusas Appendix A.

The standard of care and duties of the Trustees provided in the Declaration of Trust will be similar to thoseimposed on directors of a corporation governed by the CBCA. Accordingly, each Trustee will be required toexercise the powers and discharge the duties of his or her office honestly, in good faith and in the best interestsof the REIT and the Unitholders and, in connection therewith, to exercise the degree of care, diligence and skillthat a reasonably prudent person would exercise in comparable circumstances. The Declaration of Trustprovides that each Trustee will be entitled to indemnification from the REIT in respect of the exercise of theTrustee’s powers and the discharge of the Trustee’s duties, provided that the Trustee acted honestly and in goodfaith with a view to the best interests of the REIT and the Unitholders or, in the case of a criminal oradministrative action or proceeding that is enforced by a monetary penalty, where the Trustee had reasonablegrounds for believing that his or her conduct was lawful.

Other than Trustees appointed prior to Closing, which Trustees will hold office for a term expiring at theclose of the annual meeting in 2013 or until a successor is appointed, Trustees will be elected at each annualmeeting of Unitholders to hold office for a term expiring at the close of the next annual meeting, or until asuccessor is appointed, and will be eligible for re-election. Nominees will be nominated by Morguard inconnection with its nomination rights described below, or the Compensation and Governance Committee(the ‘‘C&G Committee’’), in each case for election by Unitholders as Trustees in accordance with the provisionsof the Declaration of Trust and will be included in the proxy-related materials to be sent to Unitholders prior toeach annual meeting of Unitholders.

The Unitholders or the Trustees will be entitled to change the number of Trustees comprising the Board. Aquorum of the Trustees, being the majority of the Trustees then holding office (provided a majority of theTrustees comprising such quorum are residents of Canada), will be permitted to fill a vacancy in the Board,except a vacancy resulting from a failure of the Unitholders to elect the required number of Trustees. In theabsence of a quorum of Trustees, or if the vacancy has arisen from a failure of the Unitholders to elect theminimum required number of Trustees, the Trustees will promptly call a special meeting of the Unitholders tofill the vacancy. If the Trustees fail to call that meeting or if there is no Trustee then in office, any Unitholder willbe entitled to call such meeting. Except as otherwise provided in the Declaration of Trust, the Trustees may,between annual meetings of Unitholders, appoint one or more additional Trustees to serve until the next annualmeeting of Unitholders, provided that the number of additional Trustees so appointed will not at any timeexceed one-third of the number of Trustees who held such office at the conclusion of the immediately precedingannual meeting of Unitholders. Any Trustee may resign upon no less than 30 days’ written notice to the REIT,provided that if such resignation would cause the number of remaining Trustees to be less than a quorum, suchresignation will not be effective until a successor is appointed. Any Trustee may be removed by an ordinaryresolution passed by a majority of the votes cast at a meeting of Unitholders called for that purpose.

The Declaration of Trust will grant Morguard the exclusive right to nominate a number of Trustees,proportionate to Morguard’s ownership interest in the REIT (on a fully diluted basis), whether held directly or

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indirectly, rounded down to the nearest whole number, for election by Unitholders provided that, so long asMorguard owns at least a 10% ownership interest in the REIT (on a fully diluted basis), whether held directly orindirectly, Morguard shall have the right to nominate not less than one Trustee. As of Closing, Morguard willhave the right to nominate four Trustees.

The following table sets forth certain information regarding each of the individuals who will be Trustees ofthe REIT at Closing. As of the date of this prospectus, only Messrs. Sahi, Robertson and Munsters are Trusteesof the REIT. The other individuals designated as Trustees of the REIT are not currently Trustees of the REIT.Each such individual has agreed to become a Trustee of the REIT and it is expected that such individuals will beappointed to the Board on or prior to Closing. As such individuals are not members of the Board at the time ofthis prospectus, the REIT does not believe any of such individuals has any liability for the contents of thisprospectus in such capacity under the applicable securities laws of the provinces and territories of Canada.

Name and Municipality ofResidence Position with the REIT Principal Occupation

K. (RAI) SAHI(3) . . . . . . . . . . . . . Trustee, Chair of the Board and Chair and Chief ExecutiveMississauga, Ontario Chief Executive Officer Officer, Morguard Corporation

FRANK MUNSTERS(2) . . . . . . . . . . Trustee Corporate DirectorMississauga, Ontario

AVTAR T. BAINS(2,3) . . . . . . . . . . . Independent Trustee, Lead Trustee Real Estate Advisor and InvestorVancouver, British Columbia

DINO CHIESA(1,3) . . . . . . . . . . . . . Independent Trustee Principal, Chiesa GroupToronto, Ontario (commercial property investors),

Corporate Director

WILLIAM O. WALLACE(2) . . . . . . . Independent Trustee President, WallaceMilton, Ontario Automotive Inc.

MEL LEIDERMAN(1) . . . . . . . . . . . Independent Trustee Managing Partner, Lipton LLPToronto, Ontario (an accounting firm)

BRUCE K. ROBERTSON(1,3) . . . . . . Independent Trustee Principal, Grandview CapitalToronto, Ontario (a Canadian merchant bank)

Notes:

(1) Member of the Audit Committee.

(2) Member of the C&G Committee.

(3) Member of the Investment Committee.

Mr. Sahi, through direct and indirect holdings, owns approximately 51.7% of Morguard. Immediately afterClosing, it is expected that Morguard will hold approximately 69.7% of the Voting Units through ownership ofall of the Class B LP Units (or approximately 67.6% of the Voting Units if the Over-Allotment Option isexercised in full). In addition, the Trustees and executive officers of the REIT (or persons acting in suchcapacity), as a group, will beneficially own, directly or indirectly, or exercise control or direction over,325,000 Voting Units, representing approximately 1.3% of the Voting Units outstanding at that time.

Additional biographical information regarding the seven Trustees of the REIT for the past five years is setout below.

K. (Rai) Sahi is Chairman and Chief Executive Officer of Morguard. Mr. Sahi is a Certified GeneralAccountant Fellow and has over 30 years of business experience in public and private corporations, includingextensive experience in investing, financial reporting, standards, and policy covering a broad range of industriesincluding insurance, commercial banking, manufacturing, transportation and automotive as well as real estate.Mr. Sahi is President and Chief Executive Officer of Morguard Real Estate Investment Trust and Chairman andChief Executive Officer of Morguard Investments Limited and ClubLink Enterprises Limited. Mr. Sahi is aformer member of the board of directors of the Canadian Broadcasting Corporation. Mr. Sahi has received

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many distinctions, including the Certified General Accountants Association of Canada Fellowship Award (2009),Voice Achievement Award (Fellowship in the Indo-Canadian Community over critical enterprises, 2009) andTurnaround Entrepreneur of the Year (1994). In addition, Mr. Sahi is a ranked member of numerous prestigiousbusiness listings, including ‘‘The Top 25 Most Influential Figures in Canadian Golf’’ (The National Post) and oneof ‘‘The Most Influential People in Golf’’ (Golf Inc.).

Frank Munsters has over forty years’ experience in the finance and real estate industries. Mr. Munstersspent much of his career with the Royal Bank of Canada, where he rose to the position of Vice President,Corporate Banking/National Accounts. Mr. Munsters joined Morguard in 1994 and served as Vice President,Credit and Banking from April 1, 1996 until his retirement on July 2, 2010.

Avtar T. Bains is an established real estate professional with a career spanning over 30 years, 22 of whichwere spent with Colliers International, where he retired in 2011 as Executive Vice President, NationalInvestment Team. Mr. Bains brokered the sales of numerous notable properties across Canada, and hemaintains strong relationships in local, national and international real estate markets. Mr. Bains is involved invarious charitable and volunteer endeavors, and is a speaker for a number of organizations across Canada,including the Urban Land Institute, the Vancouver and Toronto Real Estate Forums and the University ofBritish Columbia.

Dino Chiesa was re-appointed as Chair of the Board of Directors of Canada Mortgage and HousingCorporation in 2010; a position he has held since 2005, and a board he has served as a member of since 2001.Mr. Chiesa is Principal, Chiesa Group commercial property investors and Chair of Leisureworld, one ofCanada’s largest owners of long-term care facilities. Prior to this, Mr. Chiesa served as Vice Chair of CanadianApartment Properties Real Estate Investment Trust (CAPREIT) and Chief Executive Officer of ResidentialEquities REIT. He also served as the Assistant Deputy Minister of Ontario’s Ministry of Municipal Affairs andHousing, Chief Executive Officer of the Ontario Housing Corporation, Chief Executive Officer of the OntarioMortgage Corporation and with CMHC from 1975 to 1987. Mr. Chiesa presently serves on the board of theSocial Housing Services Corporation Financial Inc., the founding board of the largest reserve fund for socialhousing in Canada, and chairs Don Mount Court Development Corporation, a City of Toronto public housingredevelopment company. He also participates on the boards of various community-based organizations, is pastChair for Villa Charities Inc., he sits on the Advisory Board for the Schulich School of Business at YorkUniversity, and he sits on the President’s Expert Advisory Committee on Real Estate and Development Strategyfor Ryerson University. Mr. Chiesa holds a Bachelor of Economics degree from McMaster University.

William O. Wallace has been an entrepreneur and business owner for more than 20 years, currently owningfour automotive dealerships in the GTA. Mr. Wallace has acted as a director and as President of the GeneralMotors Dealer Association of Toronto, he was the Chairman of the General Motors Dealer CommunicationsTeam (National Council) and recently completed his term as the Canadian representative on the United StatesChevrolet Car and Truck Advisory Council. Mr. Wallace received his Bachelor of Economics degree fromWilfrid Laurier University and his bachelor of Commerce (Honours) degree from Northwood University(Michigan).

Mel Leiderman is a Chartered Accountant and the managing partner of Lipton LLP, CharteredAccountants. He has over 30 years’ experience specializing in assurance and advisory services, financing, tax,estate and strategic planning. Mr. Leiderman is the lead audit and accounting partner to a broad range of clientsin the real estate sector, including commercial, industrial and residential property owners, property andsubdivision developers, residential and commercial construction companies and property managementcompanies. Mr. Leiderman has completed the Directors Education Program (ICD.D) and is a member of theSociety of Trust and Estate Practitioners, the Accounting Standards Board (CICA) Private Enterprises AdvisoryCommittee and the Professional Conduct Committee of the Ontario Institute of Chartered Accountants. Heserves on the board of directors and audit committee of Agnico-Eagle Mines Limited, a company listed on theTSX and New York Stock Exchange, and on the board of directors and audit and corporate governance andcompensation committees of Colossus Minerals Inc., a company listed on the TSX. Mr. Leiderman is a formermember of the North York General Hospital Foundation Professional Advisory Committee, served on the boardof directors and was Chairman of the audit committee of CVRD/Inco Limited from 2006 to 2007, and was amember of the Discipline Committee of the Ontario Institute of Chartered Accountants from 2002 to 2011.

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Bruce K. Robertson serves as Principal at Grandview Capital, a Canadian merchant bank. Prior to hisinvolvement with Grandview Capital, Mr. Robertson was a senior officer at AbitibiBowater Inc. Mr. Robertsonalso served as Senior Managing Partner of Brookfield Asset Management Inc., a specialty asset managementcompany listed on the New York Stock Exchange and the TSX. He serves on the board of directors of Morguardand on the board of directors of Yellow Media Inc., a company listed on the TSX. Mr. Robertson received hisBachelor of Commerce (Honours) degree from Queen’s University and is a Chartered Accountant.

Position Descriptions

The Chair of the Board and Committee Chairs

K. (Rai) Sahi, the Chair of the Board, is not an Independent Trustee. Avtar T. Bains will act as LeadTrustee. The Board will adopt a written position description for the Chair of the Board which will set out theChair’s key responsibilities, including duties relating to setting agendas for Board meetings, chairing Board andUnitholder meetings, trustee development and communicating with Unitholders and regulators. The Board willalso adopt a written position description for each of the committee Chairs which will set out each of thecommittee Chair’s key responsibilities, including duties relating to setting committee meeting agendas, chairingcommittee meetings and working with the respective committee and management to ensure, to the greatestextent possible, the effective functioning of the committee. These descriptions will be considered by the Boardfor approval annually.

Chief Executive Officer of the REIT

The primary functions of the Chief Executive Officer of the REIT are to lead the management of theREIT’s business and affairs and to lead the implementation of the resolutions and policies of the Board. TheBoard will develop a written position description and mandate for the Chief Executive Officer which will set outthe Chief Executive Officer’s key responsibilities, including duties relating to strategic planning, operationaldirection, Board interaction, succession planning and communication with Unitholders and regulators. TheChief Executive Officer mandate will be considered by the Board for approval annually.

Committees of the Board

Pursuant to the Declaration of Trust, the Board has established three committees: the Audit Committee,the C&G Committee and the Investment Committee. All members of the Audit Committee will be IndependentTrustees and on Closing a majority of the members of each of the C&G Committee and the InvestmentCommittee will be Independent Trustees.

Audit Committee

The Audit Committee will initially consist of Bruce K. Robertson (Chair), Mel Leiderman and Dino Chiesa,each of whom is ‘‘independent’’ and ‘‘financially literate’’ within the meaning of National Instrument 52-110 —Audit Committees. Each of the Audit Committee members has an understanding of the accounting principlesused to prepare the REIT’s financial statements, experience preparing, auditing, analyzing or evaluatingcomparable financial statements and experience as to the general application of relevant accounting principles,as well as an understanding of the internal controls and procedures necessary for financial reporting. For theeducation and experience of each member of the Audit Committee relevant to the performance of his or herduties as a member of the Audit Committee, see ‘‘Trustees and Management of the REIT — Governance andBoard of Trustees’’.

The Board has adopted a written charter for the Audit Committee, which sets out the Audit Committee’sresponsibility in reviewing the financial statements of the REIT and public disclosure documents containingfinancial information and reporting on such review to the Board, ensuring that adequate procedures are in placefor the review of the REIT’s public disclosure documents that contain financial information, overseeing the workand reviewing the independence of the external auditors and reviewing, evaluating and approving the internalcontrol procedures that are implemented and maintained by management. The Audit Committee will also beresponsible for recommending the adoption of an enterprise risk management program and an environmentalmanagement program for the REIT and for supervising the REIT’s compliance with and implementation of therisk and environmental programs. A copy of the Audit Committee charter is attached to this prospectus asAppendix B.

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Compensation and Governance Committee

The C&G Committee will initially consist of Frank Munsters (Chair), Avtar T. Bains and William O.Wallace. The C&G Committee will be charged with reviewing, overseeing and evaluating the governance andnominating policies and the compensation policies of the REIT. In addition, the C&G Committee will beresponsible for: (i) assessing the effectiveness of the Board, each of its committees and individual Trustees;(ii) overseeing the recruitment and selection of candidates as Trustees of the REIT, other than Morguard’snominees; (iii) organizing an orientation and education program for new Trustees and coordinating continuingTrustee development programs; (iv) considering and approving proposals by the Trustees to engage outsideadvisers on behalf of the Board as a whole or on behalf of the Independent Trustees; (v) reviewing and makingrecommendations to the Board concerning any change in the number of Trustees composing the Board;(vi) administering any Unit option or purchase plan of the REIT or any other compensation incentive programs;(vii) assessing the performance of the officers and other members of the executive management team of theREIT; (viii) reviewing and approving the compensation paid by the REIT, if any, to consultants of the REIT; and(ix) reviewing and making recommendations to the Board concerning the level and nature of the compensationpayable, if any, to the Trustees and officers of the REIT.

To ensure the C&G Committee has the expertise to carry out its mandate, it is intended that its memberswill have, or acquire within a reasonable period of time after being appointed, an understanding of relevantissues relating to governance and compensation.

Frank Munsters has gained experience in human resources and compensation matters by serving inexecutive leadership positions in several public companies, including Morguard and ClubLink EnterprisesLimited, and has had responsibilities that included overview and board reporting on benefit, pension andcompensation programs. Avtar T. Bains has similarly gained experience in risk and compensation matters byserving as a senior executive in a major organization, namely Colliers International. William O. Wallace, through20 years of business ownership and his service with international advisory groups and councils, has experienceand knowledge with internal risk management and reporting.

Investment Committee

Pursuant to the Investment Committee charter, each of the Investment Committee members must have atleast five years of substantial experience in the real estate industry. The Investment Committee will initiallyconsist of K. (Rai) Sahi (Chair), Avtar T. Bains, Bruce K. Robertson and Dino Chiesa. The InvestmentCommittee may authorize, without Board approval, proposed acquisitions, dispositions or borrowings where theacquisition, disposition or borrowing, including the assumption or granting of any mortgage but not the renewal,extension or modification of any existing mortgage which can be approved by the REIT GP (if so delegated bythe Board), where the value of such transaction does not exceed $25 million. The Investment Committee willalso recommend to the Board whether to approve or reject proposed transactions, where the value of suchtransaction exceeds $25 million.

Conflicts of Interest

The Declaration of Trust contains ‘‘conflict of interest’’ provisions to protect Unitholders without creatingundue limitations on the REIT. As the Trustees will be engaged in a wide range of real estate and otheractivities, the Declaration of Trust contains provisions, similar to those contained in the CBCA, that will requireeach Trustee to disclose to the REIT, at the first meeting of Trustees or a committee of Trustees at which aproposed contract or transaction is considered, any interest in a contract or transaction or proposed contract ortransaction with the REIT (including a contract or transaction involving the making or disposition of anyinvestment in real property or a joint venture agreement) or the fact that such person is a director or officer of,or otherwise has an interest in, any person who is a party to a contract or transaction or proposed contract ortransaction with the REIT. If a material contract or transaction or proposed material contract or transaction isone that in the ordinary course would not require approval by the Trustees, a Trustee will be required to disclosein writing to the REIT, or request to have entered into the minutes of meetings of Trustees or a committeethereof, the nature and extent of his or her interest forthwith after the Trustee becomes aware of the contract ortransaction or proposed contract or transaction. In any case, a Trustee who has made disclosure to the foregoing

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effect will not be entitled to vote on any resolution to approve the contract or transaction unless the contract ortransaction primarily relates to his or her remuneration or is for indemnity under the provisions of theDeclaration of Trust or the purchase or maintenance of liability insurance.

All decisions of the Board will require the approval of a majority of the Trustees present in person or byphone at a meeting of the Board, except for each of the following matters which will also require the approval ofa majority of the Independent Trustees:

a) an acquisition of a property or an investment in a property, whether by co-investment or otherwise, inwhich Morguard or any related party of the REIT has any direct or indirect interest, whether as owner,operator or manager;

b) a material change to any agreement with Morguard or a related party of the REIT or any renewal,extension or termination thereof or any increase in any fees (including any transaction fees) ordistributions payable thereunder;

c) the entering into of, or the waiver, exercise or enforcement of any rights or remedies under, anyagreement entered into by the REIT, or the making, directly or indirectly, of any co-investment, in eachcase with (i) any Trustee, (ii) any entity directly or indirectly controlled by any Trustee or in which anyTrustee holds a significant interest, or (iii) any entity for which any Trustee acts as a director or othersimilar capacity;

d) the refinancing, increase or renewal of any indebtedness owed by or to (i) any Trustee, (ii) any entitydirectly or indirectly controlled by any Trustee or in which any Trustee holds a significant interest, or(iii) any entity for which any Trustee acts as a director or other similar capacity; or

e) decisions relating to any claims by or against one or more parties to any agreement with Morguard orany related party of the REIT.

In connection with any transaction involving the REIT, including any transaction which requires theapproval of a majority of the Independent Trustees, the Board shall have the authority to retain external legalcounsel, consultants or other advisors to assist it in negotiating and completing such transaction withoutconsulting or obtaining the approval of any officer of the REIT.

It is anticipated that the Independent Trustees will hold in-camera meetings, with members of managementnot in attendance, as part of regularly scheduled Board meetings.

As it is contemplated that the Chair of the Board will not be an Independent Trustee, an IndependentTrustee will be appointed as Lead Trustee in order to ensure appropriate leadership for the IndependentTrustees. It is contemplated that the primary responsibilities of the Lead Trustee will be to: (i) ensure thatappropriate structures and procedures are in place so that the Board may function independently ofmanagement of the REIT; and (ii) lead the process by which the Independent Trustees seek to ensure that theBoard represents and protects the interests of all Unitholders.

Morguard’s continuing businesses may lead to conflicts of interest between Morguard and the REIT. Inaddition, the ongoing relationships between Morguard and each of K. (Rai) Sahi (Trustee, Chair of the Boardand Chief Executive Officer of the REIT), Paul Miatello (Chief Financial Officer of the REIT), Bruce K.Robertson (Independent Trustee of the REIT), Beverley G. Flynn (Secretary and General Counsel of the REIT)and John Talano (Vice President of the REIT) may lead to conflicts of interest between such persons and theREIT. In addition, Frank Munsters was a Vice President at Morguard prior to his retirement from Morguard onJuly 2, 2010.

Orientation and Continuing Education

Following Closing, it is expected that the C&G Committee will put in place an orientation program for newTrustees under which a new Trustee will meet with the Chair of the Board, the Lead Trustee and members of theexecutive management team of the REIT. A new Trustee will be provided with comprehensive orientation andeducation as to the nature and operation of the REIT and its business, as to the role of the Board and itscommittees and the Lead Trustee, and as to the contribution that an individual Trustee is expected to make. The

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C&G Committee will be responsible for coordinating continuing Trustee development programs to enable theTrustees to maintain or enhance their skills and abilities as Trustees as well as ensuring their knowledge andunderstanding of the REIT and its business remains current.

Ethical Business Conduct

The Board has adopted a written code of business conduct and ethics applicable to the Trustees, officersand employees of the REIT and its subsidiaries, as well as to the directors, officers and employees ofMorguard GP. The code sets out the Board’s expectations for the conduct of such persons in their dealings onbehalf of the REIT. The Board will establish confidential reporting procedures in order to encourage individualsto raise concerns regarding matters addressed by the code on a confidential basis free from discrimination,retaliation or harassment. Those who violate the code may face disciplinary actions, including dismissal. Thecode of business conduct and ethics will be filed with the Canadian securities regulatory authorities.

Nomination and Assessment of Trustees

The Board has established a C&G Committee that is responsible for, other than Morguard’s nominees,overseeing the recruitment and selection of such candidates as Trustees of the REIT. The recruitment andselection of such candidates will involve an identification of the qualifications for Trustees that are required tofulfill Board responsibilities and an evaluation of the qualifications that existing Trustees possess. The C&GCommittee is then expected to recommend candidates to the Board for nomination as Trustees to be elected bythe Unitholders.

The C&G Committee is also responsible for assessing the effectiveness of the Board, each of its committeesand individual Trustees. Trustees will be regularly surveyed to form the basis of such assessment and suchassessment will be reviewed by the Chair of the Board, with the exception of the assessment of the Chair of theBoard and the non-Independent Trustees, which will be reviewed by the Lead Trustee.

Senior Management

The following table sets forth the name, municipality of residence and positions held with the REIT(or functions performed on behalf of the REIT) of each executive officer of the REIT (or each person acting inthe capacity of an executive officer of the REIT) on Closing:

Name and Municipality of Residence Office with the REIT

K. (RAI) SAHI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chair and Chief Executive OfficerMississauga, Ontario

PAUL MIATELLO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chief Financial OfficerToronto, Ontario

BEVERLEY G. FLYNN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secretary and General CounselToronto, Ontario

JOHN TALANO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Vice PresidentKenner, Louisiana

The REIT and Morguard estimate that (a) each of Mr. Sahi, Ms. Flynn and Mr. Talano will spendapproximately 20% of their time on matters relating to the REIT, and (b) Mr. Miatello will spend approximately30%-35% of his time on matters relating to the REIT.

Additional biographical information regarding the executive officers of the REIT, except Mr. Sahi, whosebiographical details are provided above, is set out below.

Paul Miatello is a Chartered Accountant with almost 20 years’ experience in the accounting and financeindustry. He is the Chief Financial Officer of Morguard, a position he has held since April 2007. Mr. Miatellojoined the Morguard group of companies in 2000 and has served in various capacities in several related entities,including Vice President, Finance and Chief Financial Officer of Revenue Properties Company Limited and

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Vice President of Morguard Residential Inc. Prior to joining Revenue Properties Company Limited,Mr. Miatello held the position of Controller at Royop Properties Corporation and, previous to that, was aManager at PricewaterhouseCoopers LLP.

Beverley G. Flynn joined Morguard in July 2003 and was appointed General Counsel and Secretary inOctober 2004. Ms. Flynn has a decade of experience in public markets, real estate, finance and corporate andsecurities law. Prior to joining Morguard, Ms. Flynn was an associate with McMillan LLP. Ms. Flynn is memberof the Law Society of Upper Canada and a graduate of Osgoode Hall Law School and Memorial University ofNewfoundland.

John Talano is the Vice President of Morguard Management Company Inc., responsible for Morguard’sU.S. residential and retail portfolio including property management, asset management, operations,acquisitions, development, financing and construction. He has worked in real estate for more than 15 years andjoined Morguard in 2006 through the acquisition of Sizeler Property Investors, Inc. Mr. Talano received hisMaster’s in Business Administration degree from Tulane University and his Bachelor of Science degree fromPurdue University.

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

No Trustee or executive officer of the REIT and, in the case of (B), (C), (D) and (E) below, no Unitholderof the REIT holding a sufficient number of Voting Units to affect materially the control of the REIT, or apersonal holding company of any of the foregoing: (A) is or has been in the last 10 years, a director, trustee,chief executive officer or chief financial officer of any issuer that (i) was subject to a cease trade order or similarorder or an order that denied the issuer access to any exemption under securities legislation, that was in effectfor a period of more than 30 consecutive days, that was issued while the person was acting in the capacity asdirector, trustee, chief executive officer or chief financial officer or (ii) was subject to a cease trade order orsimilar order or an order that denied the issuer access to any exemption under securities legislation, that was ineffect for a period of more than 30 consecutive days, that was issued after the person ceased to be a director,trustee, chief executive officer or chief financial officer and which resulted from an event that occurred whilethat person was acting in the capacity as director, trustee, chief executive officer or chief financial officer;(B) has been subject to any penalties or sanctions imposed by a court relating to securities legislation or by asecurities regulatory authority or has entered into a settlement agreement with a securities regulatory authority;(C) has been subject to any other penalties or sanctions imposed by a court or regulatory body that would likelybe considered important to a reasonable investor in making an investment decision; (D) is or has been in the last10 years, a director or executive officer of any company that, while that person was acting in that capacity, orwithin a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under anylegislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement orcompromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (E) hasin the last 10 years become bankrupt, made a proposal under any legislation relating to bankruptcy orinsolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, orhad a receiver, receiver manager or trustee appointed to hold such person’s assets, except for the following:Mr. Sahi was a director of TCT Logistics Inc., a transportation and supply chain management company, fromJuly 2000 to January 2002 at which time the company was placed into receivership and subsequently ceasedtrading pursuant to cease trade orders issued by certain of the Canadian securities regulators. The cease tradeorders remain in effect as of the date of this prospectus.

EXECUTIVE COMPENSATION

The executive officers of the REIT are employed by Morguard and the REIT does not directly or indirectlypay any compensation to them. Any variability in compensation paid by Morguard to the executive officers ofthe REIT has no impact on the REIT’s financial obligations, including its obligations under the LimitedPartnership Agreement, the U.S. Management Agreements or the Services Agreement. See ‘‘Arrangementswith Morguard’’.

The total compensation received by the executive officers of the REIT is determined by Morguard inaccordance with its executive compensation philosophy. For a detailed discussion of the objectives and elements

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of Morguard’s compensation program, see ‘‘Part Three — Statement of Executive Compensation’’ on page 7 ofthe Management Information Circular of Morguard dated April 5, 2011 (the ‘‘Morguard Circular’’), which maybe accessed electronically under Morguard’s profile on SEDAR at www.sedar.com. As Messrs. Sahi andMiatello will qualify as a ‘‘Named Executive Officer’’, or ‘‘NEO’’, under applicable Canadian securities law,expected compensation information is provided in this section. Ms. Flynn and Mr. Talano are not expected toqualify as NEOs of the REIT in 2012; however, the compensation of both Ms. Flynn and Mr. Talano is expectedto be consistent with the objectives and elements of Morguard’s compensation program as discussed in theMorguard Circular. All references to options, stock appreciation rights, common shares and pensions in thissection are in respect of Morguard.

For greater certainty, information contained on Morguard’s profile on SEDAR, including the MorguardCircular, is not incorporated by reference into this prospectus.

Summary Compensation Table

The following discussion is intended to supplement the information concerning executive compensationthat appears in the table that follows. The executive officers of the REIT are employed by Morguard and theREIT does not determine the amounts payable to the executive officers or, directly or indirectly, pay anycompensation to them. The disclosure below is provided to comply with applicable Canadian securities laws.

Management expects that the REIT’s only NEOs during the year ended December 31, 2012 will be K. (Rai)Sahi (Chief Executive Officer) and Paul Miatello (Chief Financial Officer). The following table sets outinformation concerning the expected fiscal 2012 compensation to be earned by, paid to, or awarded to theNamed Executive Officers of the REIT, based on the amount of time expected to be attributable to the servicesthat the Named Executive Officers provide to the REIT.

Annual Long-term CompensationCompensation Awards

Name and SARs SARs LTIP Pension All Other TotalPrincipal Salary(1) Bonus Granted Granted Payout Value Compensation(2) Compensation(3)

Position Year ($) ($) (#) ($) ($) ($) ($) ($)

K. (RAI) SAHI(4) 2012 200,000 300,000 nil nil nil 6,800 21,300 528,100PAUL MIATELLO(4) 2012 74,648 43,697 nil nil nil 3,732 1,785 123,862

Notes

(1) Represents annualized base salary expected to be paid by Morguard as of Closing. Further, actual salary allocated to the servicesprovided to the REIT for fiscal 2012 will be pro-rated based on the date of Closing, and will therefore be less than this amount andwill vary based on the date of Closing.

(2) None of the Named Executive Officers are entitled to perquisites or other personal benefits which, in the aggregate, are expected tobe worth over $50,000 or over 10% of their base salary.

(3) All compensation for Messrs. Sahi and Miatello will be paid by Morguard, and there is no reimbursement by the REIT for suchcompensation. Messrs. Sahi and Miatello will act in a variety of capacities for Morguard, the REIT and their respective affiliates, andaccordingly, the total compensation that Messrs. Sahi and Miatello are expected to receive from Morguard is not disclosed in thistable, since total compensation will not be solely attributable to the services that such individuals will provide to the REIT. Theallocation of the total compensation disclosed in this table was determined by Morguard solely for the purposes of this table, basedon the time expected to be spent by Messrs. Sahi and Miatello in connection with REIT-related services. The portion of totalcompensation expected to be attributable to the REIT in respect other executive officers, namely Ms. Flynn and Mr. Talano, does notmeet the definition of Named Executive Officer under applicable Canadian securities law.

(4) The Named Executive Officer does not have a target incentive award for 2012 and any incentive awards will be awarded by, and atsole discretion of, Morguard. Amounts included are based on 2011 actuals.

Stock Appreciation Rights

Pursuant to Morguard’s executive compensation plan, a stock appreciation right grants a participant theright to receive, from Morguard, a cash payment per right in an amount equal to the excess, if any, of: (i) the fairmarket value as of the date redeemed of the common shares of Morguard less (ii) the fair market value of thecommon shares of Morguard underlying the rights on the date of the grant and any amount required to bewithheld by applicable law. Fair market value is defined as the closing price of the common shares of Morguardon the TSX for the trading day immediately preceding the applicable date.

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Morguard’s Human Resources, Compensation and Pension Committee (the ‘‘Morguard HR Committee’’)may determine when any stock appreciation right will become vested. However, in the absence of any otherdetermination, vesting occurs: (i) as to one-tenth, on the first anniversary of the date of grant; and (ii) as to anadditional one-tenth, on each of the second through tenth anniversaries of the date of grant. Currently, theMorguard HR Committee is not expected to grant stock appreciation rights to NEOs in connection with theirservices to the REIT in 2012 or on an annual basis.

Pension Plan Benefits

Pursuant to Morguard’s executive compensation plan, Mr. Sahi is accruing benefits under the MorguardCorporation Employees’ Retirement Plan (‘‘MC Plan’’) defined benefit provisions. The defined benefitprovision of the MC Plan provides defined retirement benefits for covered salaried employees and is registeredunder the Tax Act and the Pension Benefit Act (Ontario). Participants in the MC Plan become 100% vested aftercompletion of two years of membership service. Morguard’s retirement plan provides for normal retirementbenefits beginning at age 65 with reduced benefits payable for any participant who elects early retirement. Thenormal annual retirement benefits are equal to 1.8% of the participant’s average of the best 3 of the last 7 years’earnings multiplied by the participant’s years of credited service, less the participant’s Canada Pension Planbenefits multiplied by a ratio (not exceeding 1) of the participant’s years of credited service to 35 years, and notexceeding the maximum amount permitted to be paid under the Tax Act. The 2011 maximum annual benefitpayable to a participant under the MC Plan is $2,552.22 for each year of credited service.

Pursuant to Morguard’s executive compensation plan, Mr. Miatello is accruing benefits under the definedcontribution provision of the MC Plan. The defined contribution provision provides a retirement benefit of anannual pension in the form of payment elected by the member of the MC Plan, in the amount which can bepurchased from an insurer by Morguard on the member’s behalf with the account balance, at the election ofsuch member, at the time of his or her retirement. The normal retirement age is 65. Morguard will contribute tothe company contributions account of each member an amount equal to 5% of each member’s definedcontribution earnings, up to the maximum contribution limit for the year. The 2011 contribution limit for aregistered defined contribution plan is $22,450. Members are not required to contribute, however a member mayelect to contribute a percentage of his or her defined contribution earnings to his or her voluntary contributionsaccount. A member who retires may elect to receive his or her member voluntary contributions account balanceas a cash lump sum payment less any applicable withholding tax.

Compensation Discussion and Analysis

The compensation of Morguard, Morguard GP and the U.S. Manager will be calculated in accordance withthe Services Agreement, the Limited Partnership Agreement and the U.S. Management Agreements,respectively, and is not subject to the general discretion of the Board. Accordingly, compensation received fromMorguard by persons provided by Morguard, as officers of the REIT is not within or subject to the discretion ofthe Board.

REMUNERATION OF TRUSTEES

A person who is employed by and receives a salary from the REIT or Morguard does not receive anyremuneration from the REIT for serving as a Trustee. Trustees who are not employed by the REIT or Morguardshall receive remuneration from the REIT in the amount of $22,000 per year as an annual retainer. Also, eachTrustee or committee member, other than a person employed by the REIT or Morguard, shall receive $1,000 permeeting attended with an additional $10,000 for the audit committee chair, and $2,500 for each other committeechair. The Trustees are entitled to be reimbursed for their reasonable out-of-pocket expenses incurred inconnection with the REIT.

The C&G Committee will review Trustee compensation annually and make recommendations onremuneration to the Board. In reviewing Trustee compensation, it is expected that the C&G Committee willconsider the responsibilities and time commitment of the Trustees and benchmark compensation againstcomparable Canadian real estate investment trusts and others in the real estate industry more generally.

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Trustees’ and Officers’ Liability Insurance

The REIT intends to carry trustees’ and officers’ liability insurance. Under this insurance coverage, theREIT will be reimbursed for insured claims where payments have been made under indemnity provisions onbehalf of its Trustees and officers contained in the Declaration of Trust, subject to a deductible for each loss,which will be paid by the REIT. Individual Trustees and officers of the REIT will also be reimbursed for insuredclaims arising during the performance of their duties for which they are not indemnified by the REIT. Excludedfrom insurance coverage will be illegal acts, acts which result in personal profit and certain other acts. TheDeclaration of Trust provides for the indemnification in certain circumstances of Trustees and officers of theREIT from and against liability and costs in respect of any action or suit against them in respect of the executionof their duties of office. The policy covers claims made against the insured during the policy period with a limitof $25,000,000 during the policy year and a limit of $25,000,000 in respect of each claim. Management expectsthe premium payable by the REIT for this coverage will be approximately $100,000 plus applicable taxes in 2012.

INVESTMENT GUIDELINES AND OPERATING POLICIES

Investment Guidelines

The Declaration of Trust provides certain guidelines on investments that may be made by the REIT. Theassets of the REIT may be invested only in accordance with the following guidelines:

a) the REIT will focus its activities primarily on the acquisition, holding, developing, maintaining,improving, leasing, managing or otherwise dealing with income producing real property exclusively inCanada and the United States which is being utilized or intended to be utilized for one or more of thefollowing purposes: (i) multi-unit rental residential, (ii) rental condominium suites, (iii) town homes,and (iv) other residential purposes determined to be appropriate by the Trustees (collectively, the‘‘Focus Activities’’);

b) notwithstanding anything else contained in the Declaration of Trust, the REIT will not make or holdany investment, take any action or omit to take any action or permit a subsidiary to make or hold anyinvestment, or take any action or omit to take any action that would result in:

i) the REIT not qualifying as a ‘‘mutual fund trust’’ or ‘‘unit trust’’, both within the meaning of theTax Act;

ii) Units not qualifying as qualified investments for investment by trusts governed by registeredretirement savings plans, registered retirement income funds, registered education savings plans,deferred profit sharing plans, registered disability savings plans or tax-free savings accounts; or

iii) the REIT not qualifying as a ‘‘real estate investment trust’’, as defined in subsection 122.1(1) ofthe Tax Act if, as a consequence of the REIT not so qualifying, the REIT would be subject to taxon its ‘‘taxable trust distributions’’ pursuant to section 122 of the Tax Act;

c) the REIT may, directly or indirectly, make such investments, do all such things and carry out all suchactivities as are necessary or desirable in connection with the conduct of its activities provided they arenot otherwise specifically prohibited by the Declaration of Trust;

d) unless otherwise specifically prohibited by the Declaration of Trust, the REIT may invest in freehold,leasehold, or other interests in property (real, personal, moveable or immovable);

e) the REIT shall not purchase any interest in a single real property if, after giving effect to the proposedpurchase, the cost to the REIT of such purchase (net of the amount of debt incurred or assumed inconnection with such purchase) will exceed 20% of Gross Book Value at the time the purchase is made;

f) the REIT may make its investments and conduct its activities, directly or indirectly, through aninvestment in one or more persons on such terms as the Trustees may from time to time determine,including by way of joint ventures, partnerships (general or limited) and limited liability companies;

g) except for temporary investments held in cash, deposits with a Canadian chartered bank or trustcompany registered under the laws of a province or of Canada, short-term government debt securities

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or money market instruments of, or guaranteed by, a Schedule I Canadian chartered bank maturingprior to one year from the date of issue, or except as otherwise permitted by the Declaration of Trust,the REIT may not hold securities other than securities of a person: (i) acquired in connection with thecarrying on, directly or indirectly, of the REIT’s activities or the holding of its assets; or (ii) whichfocuses its activities primarily on Focus Activities, provided in the case of any proposed investment oracquisition which would result in the beneficial ownership of more than 20% of the outstanding unitsof the securities issuer (the ‘‘Acquired Issuer’’), the investment is made for the purpose of subsequentlyeffecting the merger or combination of the business and assets of the REIT and the Acquired Issuer orfor otherwise ensuring that the REIT will control the business and operations of the Acquired Issuer;

h) the REIT will not invest in rights to or interests in mineral or other natural resources, including oil orgas, except as ancillary to an investment in real property;

i) the REIT may only invest in operating businesses indirectly through one or more trusts, partnerships,corporations or other legal entities;

j) the REIT may invest in mortgages and mortgage bonds (including a participating or convertiblemortgage) only where (i) the mortgage or mortgage bond is secured, (ii) the real property which issecurity therefor is real property that constitutes Focus Activities, (iii) the primary intention is to usesuch investment as a method of acquiring control of a real property that would otherwise constituteFocus Activities, and (iv) the aggregate amount of such investments after giving effect to the proposedinvestment, will not exceed 15% of Gross Book Value;

k) the REIT shall not invest in raw land for development, except for (i) existing properties with additionaldevelopment, (ii) the purpose of renovating or expanding existing properties, or (iii) the developmentof new properties that will constitute Focus Activities provided that the aggregate cost of theinvestments of the REIT in raw land, after giving effect to the proposed investment, will not exceed 5%of Gross Book Value; and

l) notwithstanding any other provision of the Declaration of Trust but subject to subparagraph (b) above,the REIT may make investments that do not otherwise comply with one or more of subparagraphs (a),(g) and (j) of the investment guidelines provided the aggregate amount of such investments will notexceed 20% of Gross Book Value.

For the purpose of the foregoing guidelines and restrictions (other than subparagraph (b)), the assets,liabilities and transactions of a corporation or other entity wholly or partially owned by the REIT will be deemedto be those of the REIT on a proportionate consolidated basis. In addition, any references in the foregoing toinvestment in real property will be deemed to include an investment in a joint venture arrangement.

Operating Policies

The Declaration of Trust provides that the operations and affairs of the REIT will be conducted inaccordance with the following policies:

a) the REIT will not purchase, sell, market or trade in currency or interest rate futures contractsotherwise than for hedging purposes to the extent that such hedging activity complies with NationalInstrument 81-102, as amended from time to time, or any successor instrument or rule and providedthat subparagraph (b) of the foregoing investment guidelines is complied with;

b) (i) any written instrument creating an obligation which is or includes the granting by the REIT of amortgage, and (ii) to the extent the Trustees determine to be practicable and consistent with theirfiduciary duty to act in the best interests of Unitholders, any written instrument which is, in thejudgment of the Trustees, a material obligation, shall contain a provision or be subject to anacknowledgement to the effect that the obligation being created is not personally binding upon, andthat resort shall not be had to, nor shall recourse or satisfaction be sought from, the private property ofany of the Trustees, Unitholders, annuitants under a plan of which a Unitholder acts as a trustee orcarrier, or officers, employees or agents of the REIT, but that only property of the REIT or a specificportion shall be bound; the REIT, however, is not required, but shall use all reasonable efforts, to

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comply with this requirement in respect of obligations assumed by the REIT upon the acquisition ofreal property;

c) the REIT shall not incur or assume any Indebtedness if, after giving effect to the incurring orassumption of the Indebtedness, the total Indebtedness of the REIT would be more than 70% of GrossBook Value;

d) at no time shall the REIT incur Indebtedness aggregating more than 20% of Gross Book Value(excluding debt with an original maturity of one year or more falling due in the next 12 months orvariable rate debt for which the REIT has entered into interest rate swap agreements to fix the interestrate for a one year period or more) at floating interest rates or having maturities of less than one year;

e) except in connection with or related to the acquisition of the Initial Properties, the REIT shall notdirectly or indirectly guarantee any Indebtedness or liabilities of any person unless such guarantee:(i) is given in connection with or incidental to an investment that is otherwise permitted under theREIT’s investment guidelines; (ii) has been approved by the Trustees; and (iii) (A) would not disqualifythe REIT as a ‘‘mutual fund trust’’ within the meaning of the Tax Act, and (B) would not result in theREIT losing any other status under the Tax Act that is otherwise beneficial to the REIT and itsUnitholders;

f) title to each real property shall be held by and registered in the name of the REIT, the Trustees or acorporation or other entity wholly-owned, directly or indirectly, by the REIT or jointly owned, directlyor indirectly, by the REIT; provided, that where land tenure will not provide fee simple title, the REIT,the Trustees or a corporation or other entity wholly-owned, directly or indirectly, by the REIT or jointlyowned, directly or indirectly, by the REIT shall hold a land lease as appropriate under the land tenuresystem in the relevant jurisdiction;

g) the REIT shall have obtained an appraisal of each real property that it intends to acquire and anengineering survey with respect to the physical condition thereof, in each case, by an independent andexperienced consultant;

h) the REIT will obtain and maintain at all times insurance coverage in respect of potential liabilities ofthe REIT and the accidental loss of value of the assets of the REIT from risks, in amounts and withsuch insurers, in each case as the Trustees consider appropriate, taking into account all relevant factorsincluding the practices of owners of comparable properties; and

i) the REIT shall either (i) have conducted a Phase I environmental site assessment or (ii) be entitled torely on a Phase I environmental site assessment dated no earlier than six months prior to receipt by theREIT, in respect of each real property that it intends to acquire and, if the Phase I environmental siteassessment report recommends that further environmental site assessments be conducted, the REITshall have conducted such further environmental site assessments, in each case, by an independent andexperienced environmental consultant.

For the purpose of the foregoing policies, the assets, liabilities and transactions of a corporation or otherentity wholly or partially owned by the REIT will be deemed to be those of the REIT on a proportionateconsolidated basis. In addition, any references in the foregoing to investment in real property will be deemed toinclude an investment in a joint venture.

Amendments to Investment Guidelines and Operating Policies

General

Pursuant to the Declaration of Trust, the investment guidelines set forth at ‘‘— Investment Guidelines’’ andthe operating policies set forth in subparagraphs (a), (c), (d), (e), (g), (h) and (i) at ‘‘— Operating Policies’’ maybe amended only with the approval of not less than two-thirds of the votes cast at a meeting of Unitholderscalled for such purpose. The remaining operating policies may be amended with the approval of a majority ofthe votes cast at a meeting of Unitholders called for such purpose.

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Regulatory Conflict

Notwithstanding the foregoing paragraph, if at any time a government or regulatory authority havingjurisdiction over the REIT or any property of the REIT shall enact any law, regulation or requirement which isin conflict with any investment guideline or operating policy of the REIT then in force (other thansubparagraph (b) at ‘‘— Investment Guidelines’’), such investment guideline or operating policy in conflict shall,if the Trustees on the advice of legal counsel to the REIT so resolve, be deemed to have been amended to theextent necessary to resolve any such conflict and, notwithstanding anything to the contrary, any such resolutionof the Trustees shall not require the prior approval of Unitholders.

DECLARATION OF TRUST

General

The REIT is an unincorporated open-ended real estate investment trust established pursuant to theDeclaration of Trust under, and governed by, the laws of the Province of Ontario. Although the REIT isexpected to qualify on Closing as a ‘‘mutual fund trust’’ as defined in the Tax Act, the REIT will not be a ‘‘mutualfund’’ as defined by applicable securities legislation.

The Units are not ‘‘deposits’’ within the meaning of the Canada Deposit Insurance Corporation Act (Canada)and are not insured under the provisions of such Act or any other legislation. Furthermore, the REIT is not atrust company and accordingly, is not registered under any trust and loan company legislation as it does not carryon or intend to carry on the business of a trust company. The Units represent a fractional interest in the REITand do not represent a direct investment in the REIT’s assets and should not be viewed by investors as directsecurities of the REIT’s assets. A holder of a Unit of the REIT does not hold a share of a body corporate. Asholders of Units of the REIT, the holders will not have statutory rights normally associated with ownership ofshares of a corporation including, for example, the right to bring ‘‘oppression’’ or ‘‘derivative’’ actions. The rightsof holders of Units are based primarily on the Declaration of Trust. There is no statute governing the affairs ofthe REIT equivalent to the CBCA which sets out the rights and entitlements of shareholders of corporations invarious circumstances. As well, the REIT may not be a recognized entity under certain existing insolvencylegislation such as the Bankruptcy and Insolvency Act (Canada) and the Companies Creditors’ Arrangement Act(Canada) and thus the treatment of holders of Units upon an insolvency is uncertain.

Units and Special Voting Units

The REIT is authorized to issue an unlimited number of Units and an unlimited number of Special VotingUnits. Issued and outstanding Voting Units may be subdivided or consolidated from time to time by the Trusteeswithout the approval of the holders thereof.

Units

Units will not have preference or priority over one another. No holder of Units will have or be deemed tohave any right of ownership of any of the assets of the REIT. Each Unit will represent a holder’s proportionateundivided beneficial ownership interest in the REIT and will confer the right to one vote at any meeting ofUnitholders and to participate pro rata in any distributions by the REIT, whether of net income, net realizedcapital gains of the REIT or other amounts and, in the event of termination or winding-up of the REIT, in thenet assets of the REIT remaining after satisfaction of all liabilities. Units will be fully paid and non-assessablewhen issued (unless issued on an installment receipt basis) and are transferable. The Units are redeemable atthe holder’s option, as described below under ‘‘— Redemption Right’’ and, except as set out in ‘‘RetainedInterest — Exchange Agreement’’, the Units have no other conversion, retraction, redemption or pre-emptiverights. On any consolidation, fractional Units, if any, will not be issued but rather rounded down to the nearestwhole Unit.


Special Voting Units have no economic entitlement in the REIT or in the distributions or assets of theREIT but entitle the holder to one vote per Special Voting Unit at any meeting of the Unitholders. Special

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Voting Units may only be issued in connection with or in relation to securities exchangeable into Units, includingClass B LP Units, for the purpose of providing voting rights with respect to the REIT to the holders of suchsecurities. The initial Special Voting Units will be issued in conjunction with the Class B LP Units to which theyrelate, and will be evidenced only by the certificates representing such Class B LP Units. Special Voting Unitswill not be transferable separately from the exchangeable securities to which they are attached and will beautomatically transferred upon the transfer of such exchangeable securities. Each Special Voting Unit will entitlethe holder thereof to that number of votes at any meeting of Unitholders that is equal to the number of Unitsthat may be obtained upon the exchange of the exchangeable security to which such Special Voting Unit isattached. Upon the exchange or surrender of a Class B LP Unit for a Unit, the Special Voting Unit attached tosuch Class B LP Unit will automatically be redeemed and cancelled for no consideration without any furtheraction of the Trustees, and the former holder of such Special Voting Unit will cease to have any rights withrespect thereto. See ‘‘The Partnership — Partnership Units’’ and ‘‘Retained Interest — Exchange Agreement’’.

Meetings of Unitholders

The Declaration of Trust provides that meetings of Unitholders will be required to be called and held invarious circumstances, including (i) for the election or removal of Trustees, (ii) the appointment or removal ofthe auditors of the REIT, (iii) the approval of amendments to the Declaration of Trust (except as describedunder ‘‘— Amendments to Declaration of Trust’’), (iv) the sale or transfer of the assets of the REIT as anentirety or substantially as an entirety (other than as part of an internal reorganization of the assets of the REITapproved by the Trustees), (v) the termination of the REIT, (vi) generally, any other matter which requires aresolution of Unitholders, and (vii) for the transaction of any other business as the Trustees may determine or asmay be properly brought before the meeting. Meetings of Unitholders will be called and held annually,commencing in 2013, for the election of the Trustees and the appointment of the auditors of the REIT. Allmeetings of Unitholders must be held in Canada.

A meeting of Unitholders may be convened at any time and for any purpose by the Trustees and must beconvened, except in certain circumstances, if requisitioned in writing by the holders of not less than 10% of theaggregate Voting Units then outstanding. A requisition must state in reasonable detail the business proposed tobe transacted at the meeting. Unitholders have the right to obtain a list of Unitholders to the same extent andupon the same conditions as those which apply to shareholders of a corporation governed by the CBCA.

Unitholders may attend and vote at all meetings of Unitholders either in person or by proxy and aproxyholder need not be a Unitholder. Two or more persons present in person or represented by proxyrepresenting in the aggregate not less than 10% of the total number of outstanding Voting Units on the recorddate for the meeting will constitute a quorum for the transaction of business at all such meetings. At any meetingat which a quorum is not present within one-half hour after the time fixed for the holding of such meeting, themeeting, if convened upon the request of the Unitholders, will be dissolved, but in any other case, the meetingwill stand adjourned to a day not less than seven days later and to a place and time as chosen by the Chair of themeeting, and if at such adjourned meeting a quorum is not present, the Unitholders present either in person orby proxy will be deemed to constitute a quorum.

Holders of Special Voting Units will have an equal right to be notified of, attend and participate in meetingsof Unitholders on the same basis as Unitholders.

Pursuant to the Declaration of Trust, a resolution in writing executed by Unitholders holding a proportionof the outstanding Voting Units (or a class thereof) equal to the proportion required to vote in favour thereof ata meeting of Unitholders to approve that resolution is valid as if it had been passed at a meeting of Unitholders.

Redemption Right

A holder of Units may at any time demand redemption of some or all of its Units by delivering to the REITa duly completed and properly executed notice requiring redemption in a form satisfactory to the Trustees,together with written instructions as to the number of Units to be redeemed. Upon receipt of the redemption

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notice by the REIT, all rights to and under the Units tendered for redemption shall be surrendered and theholder thereof will be entitled to receive a price per Unit (the ‘‘Redemption Price’’) equal to the lesser of:

a) 90% of the Market Price (as defined below) of a Unit calculated as of the date on which the Units weresurrendered for redemption (the ‘‘Redemption Date’’); and

b) 100% of the Closing Market Price (as defined below) on the Redemption Date.

For purposes of this calculation, the market price of a Unit as at a specified date (the ‘‘Market Price’’)will be:

a) an amount equal to the weighted average trading price of a Unit on the principal exchange or marketon which the Units are listed or quoted for trading during the period of ten consecutive trading daysending on such date;

b) an amount equal to the weighted average of the Closing Market Prices of a Unit on the principalexchange or market on which the Units are listed or quoted for trading during the period of tenconsecutive trading days ending on such date, if the applicable exchange or market does not provideinformation necessary to compute a weighted average trading price; or

c) if there was trading on the applicable exchange or market for fewer than five of the ten trading days, anamount equal to the simple average of the following prices established for each of the ten consecutivetrading days ending on such date: the simple average of the last bid and last asking price of the Unitsfor each day on which there was no trading; the closing price of the Units for each day that there wastrading if the exchange or market provides a closing price; and the simple average of the highest andlowest prices of the Units for each day that there was trading, if the market provides only the highestand lowest prices of Units traded on a particular day.

The closing market price of a Unit for the purpose of the foregoing calculations (the ‘‘Closing MarketPrice’’), as at any date, will be:

a) an amount equal to the weighted average trading price of a Unit on the principal exchange or marketon which the Units are listed or quoted for trading on the specified date if the principal exchange ormarket provides information necessary to compute a weighted average trading price of the Units onthe specified date;

b) an amount equal to the closing price of a Unit on the principal market or exchange if there was a tradeon the specified date and the principal exchange or market provides only a closing price of the Units onthe specified date;

c) an amount equal to the simple average of the highest and lowest prices of the Units on the principalmarket or exchange, if there was trading on the specified date and the principal exchange or marketprovides only the highest and lowest trading prices of the Units on the specified date; or

d) the simple average of the last bid and last asking prices of the Units on the principal market orexchange, if there was no trading on the specified date.

If Units are not listed or quoted for trading in a public market, the Redemption Price will be the fair marketvalue of the Units, which will be determined by the Trustees in their sole discretion. The aggregate RedemptionPrice payable by the REIT in respect of any Units surrendered for redemption during any calendar month willbe satisfied by way of a cash payment in Canadian dollars on or before the last day of the calendar monthimmediately following the month in which the Units were tendered for redemption, provided that theentitlement of holders of Units to receive cash upon the redemption of their Units is subject to the limitationsthat: (i) the total amount payable by the REIT in respect of such Units and all other Units tendered forredemption in the same calendar month must not exceed $50,000 (the ‘‘Monthly Limit’’) (provided that suchlimitation may be waived at the discretion of the Trustees in respect of all Units tendered for redemption in suchcalendar month); (ii) at the time such Units are tendered for redemption, the outstanding Units must be listedfor trading on the TSX or traded or quoted on any other stock exchange or market which the Trustees consider,in their sole discretion, provides representative fair market value prices for the Units; and (iii) the normaltrading of Units is not suspended or halted on any stock exchange on which the Units are listed (or, if not listed

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on a stock exchange, in any market where the Units are quoted for trading) on the Redemption Date or formore than five trading days during the ten-day trading period commencing immediately after theRedemption Date.

To the extent a holder of Units is not entitled to receive cash upon the redemption of Units as a result of theMonthly Limit, then the portion of the Redemption Price per Unit equal to the Monthly Limit divided by thenumber of Units tendered for redemption in the month shall be paid and satisfied by way of a cash payment inCanadian dollars and the remainder of the Redemption Price per Unit shall be paid and satisfied by way of adistribution in specie to such holder of Units of Subsidiary Notes having a fair market value equal to the productof (i) the remainder of the Redemption Price per Unit of the Units tendered for redemption and (ii) the numberof Units tendered by such holder for redemption. To the extent a holder of Units is not entitled to receive cashupon the redemption of Units as a result of the limitations described at (ii) or (iii) of the foregoing paragraph,then the Redemption Price per Unit shall be paid and satisfied by way of a distribution in specie of SubsidiaryNotes having a fair market value determined by the Trustees equal to the product of (i) the Redemption Priceper Unit of the Units tendered for redemption and (ii) the number of Units tendered by such holder of Units forredemption. No Subsidiary Notes in integral multiples of less than $100 will be distributed and, where SubsidiaryNotes to be received by a holder of Units includes a multiple less than that number, the number of SubsidiaryNotes shall be rounded to the next lowest integral multiple of $100 and the balance shall be paid in cash. TheRedemption Price payable as described in this paragraph in respect of Units tendered for redemption during anymonth shall be paid by the transfer to or to the order of the holder of Units who exercised the right ofredemption, of the Subsidiary Notes, if any, and the cash payment, if any, on or before the last day of thecalendar month immediately following the month in which the Units were tendered for redemption. Paymentsby the REIT as described in this paragraph are conclusively deemed to have been made upon the mailing ofcertificates representing the Subsidiary Notes, if any, and a cheque, if any, by registered mail in a postageprepaid envelope addressed to the former holder of Units and/or any party having a security interest and, uponsuch payment, the REIT shall be discharged from all liability to such former holder of Units and any partyhaving a security interest in respect of the Units so redeemed. The REIT shall be entitled to all interest paid onthe Subsidiary Notes, if any, on or before the date of distribution in specie as described in the foregoingparagraph. Any issuance of Subsidiary Notes will be subject to receipt of all necessary regulatory approvals,which the REIT shall use reasonable commercial efforts to obtain forthwith.

It is anticipated that the redemption right described above will not be the primary mechanism for holders ofUnits to dispose of their Units. Subsidiary Notes which may be distributed to holders of Units in connection witha redemption will not be listed on any exchange, no market is expected to develop in Subsidiary Notes and suchsecurities may be subject to an indefinite ‘‘hold period’’ or other resale restrictions under applicable securitieslaws. Subsidiary Notes so distributed may not be qualified investments for Plans, depending upon thecircumstances at the time.

Purchases of Units by the REIT

The REIT may from time to time purchase Units in accordance with applicable securities legislation andthe rules prescribed under applicable stock exchange and regulatory policies. Any such purchase will constitutean ‘‘issuer bid’’ under Canadian provincial securities legislation and must be conducted in accordance with theapplicable requirements thereof.

Take-Over Bids

The Declaration of Trust contains provisions to the effect that if a take-over bid or issuer bid is made forUnits within the meaning of the Securities Act (Ontario) and not less than 90% of the Units (other than Unitsheld at the date of the take-over bid by or on behalf of the offeror or associates or affiliates of the offeror) aretaken up and paid for by the offeror, the offeror will be entitled to acquire the Units held by unitholders who donot accept the offer, either on the terms offered by the offeror or, at the option of the holder of the applicableUnits, at the fair value of their Units.

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Issuance of Units

Subject to the pre-emptive right of Morguard set out in the Exchange Agreement, the REIT may issue newUnits from time to time, in such manner, for such consideration and to such person or persons as the Trusteesshall determine. Unitholders will not have any pre-emptive rights whereby additional Voting Units proposed tobe issued would be first offered to existing unitholders, except that for so long as Morguard continues to hold atleast 10% of the Units (on a fully diluted basis), Morguard will have the pre-emptive right to purchase additionalVoting Units issued by the REIT to maintain its pro rata voting interest in the REIT. See ‘‘Retained Interest —Exchange Agreement — Pre-Emptive Rights’’.

If the Trustees determine that the REIT does not have cash in an amount sufficient to make payment of thefull amount of any distribution in respect of Units, the payment may include the issuance of additional Unitshaving a value equal to the difference between the amount of such distribution and the amount of cash whichhas been determined by the Trustees to be available for the payment of such distribution.

The REIT may also issue new Units (i) as consideration for the acquisition of new properties or assets by it,at a price or for the consideration determined by the Trustees, (ii) pursuant to any incentive or option planestablished by the REIT from time to time, (iii) pursuant to a distribution reinvestment plan of the REIT or(iv) pursuant to a unitholder rights plan of the REIT.

The Declaration of Trust also provides that immediately after any pro rata distribution of Units to allholders of Units in satisfaction of any non-cash distribution, the number of outstanding Units will beconsolidated so that each holder of Units will hold, after the consolidation, the same number of Units as theholder held before the non-cash distribution. In this case, each certificate representing a number of Units priorto the non-cash distribution is deemed to represent the same number of Units after the non-cash distributionand the consolidation. Where amounts distributed to non-resident holders are subject to taxes required to bewithheld, such taxes will be deducted from the amounts distributed and the consolidation will not result in suchnon-resident holders of Units holding the same number of Units. Such non-resident holders of Units will berequired to surrender the certificates (if any) representing their original Units in exchange for a certificaterepresenting post-consolidation Units.

Non-Certificated Inventory System

Other than pursuant to certain exceptions, registration of interests in and transfers of Units held throughCDS, or its nominee, will be made electronically through the NCI system of CDS. On Closing, the REIT, via itstransfer agent, will electronically deliver the Units registered to CDS or its nominee. Units held in CDS must bepurchased, transferred and surrendered for redemption through a CDS participant, which includes securitiesbrokers and dealers, banks and trust companies. All rights of unitholders who hold Units in CDS must beexercised through, and all payments or other property to which such unitholders are entitled will be made ordelivered by CDS or the CDS participant through which the unitholder holds such Units. A holder of a Unitparticipating in the NCI system will not be entitled to a certificate or other instrument from the REIT or theREIT’s transfer agent evidencing that person’s interest in or ownership of Units, nor, to the extent applicable,will such unitholder be shown on the records maintained by CDS, except through an agent who is a CDSparticipant.

The ability of a beneficial owner of Units to pledge such Units or otherwise take action with respect to suchunitholder’s interest in such Units (other than through a CDS Participant) may be limited due to the lack of aphysical certificate.

Limitation on Non-Resident Ownership

In order for the REIT to maintain its status as a ‘‘mutual fund trust’’ under the Tax Act, the REIT must notbe established or maintained primarily for the benefit of non-residents of Canada within the meaning of theTax Act. Accordingly, at no time may (i) non-residents of Canada and (ii) partnerships that are not Canadianpartnerships or (iii) a combination of non-residents and such partnerships (all within the meaning of theTax Act) (‘‘Non-Residents’’) be the beneficial owners of more than 49% of the Units and the Trustees will informthe transfer agent of this restriction. The Trustees may require a registered holder of Units to provide the

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Trustees with a declaration as to the jurisdictions in which beneficial owners of the Units registered in suchUnitholder’s name are resident and as to whether such beneficial owners are Non-Residents (or in the case of apartnership, whether the partnership is a Non-Resident). If the Trustees become aware, as a result of acquiringsuch declarations as to beneficial ownership or as a result of any other investigations, that the beneficial ownersof 49% of the Units are, or may be, Non-Residents or that such a situation is imminent, the Trustees may make apublic announcement thereof and shall not accept a subscription for Units from or issue or register a transfer ofUnits to a person or partnership unless the person or partnership provides a declaration in form and contentsatisfactory to the Trustees that the person or partnership, as the case may be, is not a Non-Resident and doesnot hold such Units for the benefit of Non-Residents. If, notwithstanding the foregoing, the Trustees determinethat more than 49% of the Units are held by Non-Residents, the Trustees may send a notice to suchNon-Resident holders of the Units chosen in inverse order to the order of acquisition or registration or in suchother manner as the Trustees may consider equitable and practicable, requiring them to sell their Units or aportion thereof within a specified period of not more than 30 days. If the Unitholders receiving such notice havenot sold the specified number of Units or provided the Trustees with satisfactory evidence that they are notNon-Residents within such period, the Trustees may on behalf of such holders sell such Units and, in the interim,shall suspend the voting and distribution rights attached to such Units (other than the right to receive the netproceeds from the sale). Upon such sale, the affected holders shall cease to be holders of the relevant Units andtheir rights shall be limited to receiving the net proceeds of sale upon surrender of the certificates, if any,representing such Units. The Trustees will have no liability for the amount received provided that they act ingood faith. The REIT may direct its transfer agent to assist the Trustees with respect to any of the foregoing.Class B LP Units, which are economically equivalent to Units, are not permitted to be transferred toNon-Residents. See ‘‘The Partnership — Transfer of LP Units’’.

Notwithstanding the foregoing, the Trustees may determine not to take any of the actions described above ifthe Trustees have been advised by legal counsel that the failure to take any of such actions would not adverselyimpact the status of the REIT as a ‘‘mutual fund trust’’ for purposes of the Tax Act or, alternatively, may takesuch other action or actions as may be necessary to maintain the status of the REIT as a ‘‘mutual fund trust’’ forpurposes of the Tax Act.

Information and Reports

The REIT will furnish to Unitholders such financial statements (including quarterly and annual financialstatements) and other reports as are from time to time required by the Declaration of Trust and by applicablelaw, including prescribed forms needed for the completion of holders’ tax returns under the Tax Act andequivalent provincial legislation. Prior to each meeting of Unitholders, the Trustees will provide the Unitholders(along with notice of such meeting) information similar to that required to be provided to shareholders of apublic corporation governed by the CBCA.

Amendments to Declaration of Trust

The Declaration of Trust may be amended or altered from time to time. Certain amendments requireapproval by not less than two-thirds of the votes cast at a meeting of Unitholders called for such purpose. Otheramendments to the Declaration of Trust require approval by a majority of the votes cast at a meeting ofUnitholders called for such purpose. Additionally, certain amendments to the Declaration of Trust require theapproval of Morguard.

Approval by Special Resolution of Unitholders

The following amendments, among others, require the approval of not less than two-thirds of the votes castby all Unitholders at a meeting (or by written resolution in lieu thereof):

a) an exchange, reclassification or cancellation of all or part of the Voting Units;

b) the addition, change or removal of the rights, privileges, restrictions or conditions attached to theVoting Units, except where such addition, change or removal is made by the Trustees pursuant tosubparagraphs (f), (h) or (i) at ‘‘— Approval by Trustees’’ below;

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c) the constraint of the issue, transfer or ownership of the Voting Units or the change or removal of suchconstraint;

d) the sale or transfer of the assets of any of the REIT or its subsidiaries as an entirety or substantially asan entirety (other than as part of an internal reorganization of the assets of any of the REIT or itssubsidiaries approved by the Trustees);

e) the termination of any of the REIT or its subsidiaries (other than as part of an internal reorganizationas approved by the Trustees);

f) the combination, amalgamation or arrangement of any of the REIT or its subsidiaries with any otherentity that is not the REIT or a subsidiary of the REIT (other than as part of an internal reorganizationas approved by the Trustees); and

g) except as described herein, the amendment of the Investment Guidelines and Operating Policies of theREIT (see ‘‘Investment Guidelines and Operating Policies — Amendments to Investment Guidelinesand Operating Policies’’).

Approval by Trustees

Notwithstanding the foregoing, the Trustees may, without the approval of the Unitholders, make certainamendments to the Declaration of Trust, including amendments:

a) aimed at ensuring continuing compliance with applicable laws, regulations, requirements or policies ofany governmental authority having jurisdiction over: (i) the Trustees; (ii) the REIT; or (iii) thedistribution of Units;

b) which, in the opinion of the Trustees, provide additional protection for the Unitholders;

c) to remove any conflicts or inconsistencies in the Declaration of Trust or to make minor correctionswhich 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 to remove conflicts or inconsistenciesbetween the disclosure in this prospectus and the Declaration of Trust;

e) of a minor or clerical nature or to correct typographical mistakes, ambiguities or manifest omissions orerrors, which amendments, in the opinion of the Trustees, are necessary or desirable and notprejudicial to the Unitholders;

f) which, in the opinion of the Trustees, are necessary or desirable: (i) as a result of changes in accountingstandards from time to time which may affect the REIT or its beneficiaries; or (ii) to ensure the Unitsqualify as equity for purposes of IFRS;

g) which, in the opinion of the Trustees, are necessary or desirable to enable the REIT to implement aUnit option or purchase plan or issue Units for which the purchase price is payable in installments;

h) which, in the opinion of the Trustees, are necessary or desirable and not prejudicial to the Unitholders,(i) to create and issue one or more new classes of preferred equity securities of the REIT (each ofwhich may be comprised of unlimited series) that rank in priority to the Units (in payment ofdistributions and in connection with any termination or winding-up of the REIT), and/or (ii) to removethe redemption right attaching to the Units and convert the REIT into a closed-end limitedpurpose trust;

i) which, in the opinion of the Trustees, are necessary or desirable for the REIT to qualify for a particularstatus under, or as a result of changes in, taxation or other laws, or the interpretation of such laws,including to qualify as a ‘‘mutual fund trust’’, ‘‘unit trust’’ or ‘‘real estate investment trust’’ as thoseterms are defined in the Tax Act or to otherwise prevent the REIT or any of its subsidiaries frombecoming subject to tax under the SIFT Rules;

j) to create one or more additional classes of units solely to provide voting rights to holders of shares,units or other securities that are exchangeable for Units entitling the holder thereof to a number of

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votes not exceeding the number of Units into which the exchangeable shares, units or other securitiesare exchangeable or convertible but that do not otherwise entitle the holder thereof to any rights withrespect to the REIT’s property or income other than a return of capital; and

k) 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.

Approval by Morguard

Provided that Morguard beneficially owns more than 10% of the issued and outstanding Units on a fullydiluted basis, any amendment to the Declaration of Trust that affects the right of Morguard to nominate certainTrustees of the REIT will require the prior written approval of Morguard. See ‘‘Trustees and Management of theREIT — Governance and Board of Trustees’’.

Limitations

Any amendment to the Declaration of Trust (except as noted at ‘‘Investment Guidelines and OperatingPolicies — Amendments to Investment Guidelines and Operating Policies — Legal Conflict’’ or ‘‘— Approval byTrustees’’) which directly or indirectly adds, changes or removes any of the rights, privileges, restrictions orconditions in respect of the Special Voting Units shall require the approval of a majority of the votes cast by allholders of Special Voting Units at a meeting of Unitholders (or by written resolution in lieu thereof).

THE PARTNERSHIP

General

The Partnership is a limited partnership formed under the laws of the Province of Ontario and governed bythe Limited Partnership Agreement. The Partnership will acquire at Closing, directly or indirectly, all of theInitial Properties and following Closing will own, operate and lease real estate assets and property and engage inall activities ancillary and incidental thereto. Upon Closing, the general partners of the Partnership will be theREIT GP and Morguard GP and the limited partners of the Partnership will be the REIT and Morguard.

Partnership Units

Upon Closing, the Partnership will have outstanding Class A GP Units, all of which will be held by theREIT GP, Class B GP Units, all of which will be held by Morguard GP, Class A LP Units, all of which will beheld by the REIT, Class B LP Units, all of which will be held by Morguard and Class C LP Units, all of which willbe held by Morguard. Immediately following Closing, it is expected that the Class A LP Units will representapproximately 30.3% of the limited partnership interests in the Partnership and the Class B LP Units willrepresent approximately 69.7% of the limited partnership interests in the Partnership. See ‘‘Acquisition of InitialProperties — Principal Transaction Steps’’.

The Class B LP Units will, in all material respects, be economically equivalent to the Units on a per unitbasis. Under the Exchange Agreement, the Class B LP Units will be exchangeable on a one-for-one basis forUnits (subject to customary anti-dilution adjustments) at any time at the option of their holder, unless theexchange would jeopardize the REIT’s status as a ‘‘mutual fund trust’’ under the Tax Act and subject tosatisfaction of conditions set out therein.

The Class C LP Units have been designed to provide Morguard with an interest in the Partnership that willentitle Morguard to distributions, in priority to distributions to holders of the Class A LP Units, Class BLP Units, Class A GP Units and Class B GP Units in an amount, if paid, expected to be sufficient (without anyadditional amounts) to permit Morguard to satisfy amounts payable in respect of (i) principal, interest or anyother amount owing under the Retained Debt, and (ii) the amount of income tax that is due and payable byMorguard, if any, under either the Tax Act or any similar provincial or territorial statute that is reasonablyattributable to any distributions on the Class C LP Units, including any disposition whether by redemption orotherwise of any Class C LP Unit or on capital employed by Morguard, and any interest or penalties thereon;excluding, in each case, any amount arising from the default by the holder of the Class C LP Units to satisfy anyobligation under or in connection with the Retained Debt, unless such default can reasonably be attributed to

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the conduct of the Partnership. It is anticipated that no amount with respect to Morguard’s tax liabilities will bepayable by the Partnership to Morguard until the third quarter of 2015. It is estimated that the amount payableby the Partnership to Morguard in respect of any tax liabilities in the first 12 months following September 2015will be approximately $0.35 million. The estimated present value of Morguard’s tax liability that is expected to bepaid by the Partnership, assuming the Retained Debt remains outstanding, is $6.6 million.

So long as any of the Class C LP Units are outstanding, the Partnership will not at any time without, butmay at any time with, the approval of the holders of a majority of the Class C LP Units: (i) pay any distributionon the Class A LP Units, the Class B LP Units, the Class A GP Units or the Class B GP Units unlessdistributions payable on the Class C LP Units have been paid in full; (ii) offer to accept the withdrawal of theClass A LP Units or the Class B LP Units of the Partnership; or (iii) issue any additional Class C LP Units, otherthan to Morguard, in each case, subject to certain limited exceptions, including, in connection with (A) theredemption rights available to unitholders, (B) an exchange of Class B LP Units pursuant to the ExchangeAgreement and (C) the refinancing of the Retained Debt.

Except as required by law or the Limited Partnership Agreement, and in certain specified circumstances inwhich the rights of a holders of Class B LP Units and/or a holders of Class C LP Units are particularly affected,the holders of Class B LP Units and holders of Class C LP Units will not be entitled to vote at any meeting of theholders of LP Units.

Operation

The business and affairs of the Partnership will be managed and controlled by the REIT GP which will bebound by the investment guidelines and operating policies applicable to the REIT. The Limited Partners will notbe entitled to take part in the management or control of the business or affairs of the Partnership. Except asprovided below or under ‘‘Arrangements with Morguard — Morguard GP’’, the Partnership will reimburse theGeneral Partners for all direct costs and expenses incurred by the General Partners in the performance of theirduties as general partners of the Partnership.

The Board shall determine the composition of the REIT GP’s board of directors; provided the REIT GPshall have a majority of directors who are ‘‘independent’’ within the meaning of applicable securities laws.

The Partnership will operate in a manner to ensure, to the greatest extent possible, the limited liability ofthe Limited Partners. The Limited Partners may lose their limited liability in certain circumstances. If the limitedliability of any limited partner of the Partnership is lost by reason of the negligence of either General Partner inperforming its duties and obligations under the Limited Partnership Agreement, such General Partner willindemnify any limited partner of the Partnership against all claims arising from assertions that its liabilities arenot limited as intended by the Limited Partnership Agreement. The General Partners, however, have nosignificant assets or financial resources other than their respective distribution entitlements from thePartnership. Accordingly, this indemnity may only be of nominal value.

Duties and Responsibilities of the General Partners

The REIT GP will be the managing general partner of the Partnership and will manage and control theoperations and affairs of the Partnership and make all decisions regarding the business and activities of thePartnership.

The business and activities of Morguard GP will be restricted to acting as a general partner of thePartnership and any other limited partnership controlled by the REIT. The duties and responsibilities ofMorguard GP as a general partner of the Partnership will be subject to the oversight of the REIT GP and will becomprised of the Morguard GP Duties outlined under ‘‘Arrangements with Morguard — Morguard GP —Duties and Responsibilities of Morguard GP as a General Partner’’.

Distributions

Distribution Policy and Priority

The REIT GP shall, on behalf of the Partnership, distribute cash, subject to the priorities and otherprovisions set out below.

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The REIT GP shall determine on a monthly basis, but in no event later than the 10th day of each month, theamount of cash on hand of the Partnership that is derived from any source and that is determined by theREIT GP not to be required for use in connection with the business of the Partnership.

Distributions on Class C LP Units

The Class C LP Units have been designed to provide Morguard with an interest in the Partnership that willentitle Morguard to distributions, in priority to distributions to holders of the Class A LP Units, Class BLP Units, Class A GP Units and Class B GP Units, in an amount, if paid, expected to be sufficient (without anyadditional amounts) to permit Morguard to satisfy amounts payable (i) in respect of principal, interest or anyother amount owing under the Retained Debt, and (ii) in respect of the amount of income tax that is due andpayable by Morguard, if any, under either the Tax Act or any similar provincial or territorial statute that isreasonably attributable to any distributions on the Class C LP Units, including any disposition whether byredemption or otherwise of any Class C LP Unit or on capital employed by Morguard, and any interest orpenalties thereon; excluding, in each case, any amount arising from the default by the holder of the Class CLP Units to satisfy any obligation under or in connection with the Retained Debt, unless such default canreasonably be attributed to the conduct of the Partnership.

Distributions to Morguard GP

Morguard GP, as the sole holder of the Class B GP Units, will receive distributions from the Partnership asset out under ‘‘Arrangements with Morguard — Morguard GP — Partnership Distributions to Morguard GP’’.Distributions to Morguard GP will be made in priority to distributions to holders of the Class A GP Units, theClass A LP Units and the Class B LP Units, but after the holders of the Class C LP Units have been paid theirdistributions.

Distributions to REIT GP

The REIT GP, as the sole holder of the Class A GP Units, will receive priority distributions from thePartnership equal to 0.001% of distributions made by the REIT GP, on behalf of the Partnership, in priority todistributions to holders of the Class A LP Units and the Class B LP Units, but after holders of the Class CLP Units and the Class B GP Units have been paid their respective distributions.

Distributions on Class A LP Units and Class B LP Units

The REIT GP, on behalf of the Partnership, will make monthly cash distributions to the holder of theClass A LP Units in the amount required to account for expenses incurred directly by the REIT as determinedby the REIT GP. Distributions on the Class A LP Units for expenses incurred by the REIT will be made inpriority to distributions to holders of the Class A LP Units and the Class B LP Units but after the holders of theClass C LP Units, the Class B GP Units and the Class A GP Units have been paid their respective distributions.

In addition, the REIT GP, on behalf of the Partnership, will make monthly cash distributions to holders ofClass A LP Units and to holders of Class B LP Units with reference to the monthly cash distributions payable bythe REIT to holders of Units on a per Unit basis. Distributions to be made on the Class B LP Units will be equalto the distributions that the holders of Class B LP Units would have received if they were holding Units insteadof Class B LP Units. Distributions to the General Partners and holders of Class C LP Units will be made inpriority to distributions to holders of Class A LP Units and to holders of Class B LP Units.

Allocation of Partnership Net Income

Partnership Net Income will be allocated at the end of each fiscal year in the following manner:

a) firstly, an allocation of Partnership Net Income to the holder of the Class C LP Units, generally equalto the interest component of the Retained Debt and any tax liability paid by the Partnership in respectof the Retained Debt payable in the fiscal year;

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b) secondly, an allocation of Partnership Net Income (net of the allocation to the holder of the Class CLP Units) to Morguard GP, as the holder of the Class B GP Units, generally equal to all amountsdistributed to the holder of the Class B GP Units in the fiscal year;

c) thirdly, as to Partnership Net Income (net of the allocation to the holder of the Class C LP Units andthe holder of the Class B GP Units) and as to net loss, 0.001% to the REIT GP, as holder of theClass A GP Units; and

d) the balance, first to the holders of the Class A LP Units, such amount as is necessary to account forexpenses incurred by the REIT as determined by the REIT GP and then any residual amount amongthe holder of the Class A LP Units and the Class B LP Units based on their proportionate share ofdistributions received or receivable for such fiscal year.

Transfer of LP Units

The transfer of Class A LP Units, Class B LP Units and Class C LP Units will be subject to a number ofrestrictions, including: (i) the Class A LP Units, Class B LP Units and Class C LP Units may not be transferredto a person or partnership who is a Non-Resident; (ii) no Class A LP Units, Class B LP Units or Class CLP Units will be transferable in part; and (iii) no transfer of Class A LP Units, Class B LP Units or Class CLP Units will be accepted by the REIT GP unless a transfer form, duly completed and signed by the registeredholder of such Class A LP Units, Class B LP Units or Class C LP Units, as applicable, has been remitted to theregistrar and transfer agent of the Partnership. In addition, a transferee of Class A LP Units, Class B LP Unitsor Class C LP Units must provide to the REIT GP such other instruments and documents as the REIT GP mayrequire, in appropriate form, completed and executed in a manner acceptable to the REIT GP and must pay theadministration fee, if any, required by the REIT GP. A transferee of a unit of the Partnership will not become apartner or be admitted to the Partnership and will not be subject to the obligations and entitled to the rights of apartner under the Limited Partnership Agreement until the foregoing conditions are satisfied and suchtransferee is recorded on the Partnership’s register of partners.

In addition to the above restrictions, the Limited Partnership Agreement also provides that no holder ofClass B LP Units will be permitted to transfer such Class B LP Units, other than for Units in accordance withthe terms of the Exchange Agreement or the Limited Partnership Agreement, unless: (i) the transfer is to anaffiliate of the holder; (ii) such transfer would not require the transferee to make an offer to holders of Units toacquire Units on the same terms and conditions under applicable securities laws if such Class B LP Units, and allother outstanding Class B LP Units, were converted into Units at the then current exchange ratio in effect underthe Exchange Agreement immediately prior to such transfer; or (iii) the offeror acquiring such Class B LP Unitsmakes a contemporaneous identical offer for the Units (in terms of price, timing, proportion of securities soughtto be acquired and conditions) and does not acquire such Class B LP Units unless the offeror also acquires aproportionate number of Units actually tendered to such identical offer. Certain rights affecting Morguard as aholder of the Class B LP Units, as such rights are set forth in the Declaration of Trust and the ExchangeAgreement, are specific to Morguard and are not transferable to a transferee of the Class B LP Units, other thana Morguard entity.

In addition to the above restrictions, the Limited Partnership Agreement also provides that no holder ofClass C LP Units will be permitted to transfer such Class C LP Units without the consent of the Board, unlesssuch transfer is to an affiliate of the holder.

The Class B GP Units will not be transferable by a holder thereof without the consent of the Board, not tobe unreasonably withheld, provided that such consent will not be required for a transfer to an affiliate ofsuch holder.

Resignation or Removal of Morguard GP

For the rights of the REIT GP to remove Morguard GP as a general partner of the Partnership, the right ofMorguard GP to resign as a general partner of the Partnership, and certain consequences resulting from suchremoval or resignation, see ‘‘Arrangements with Morguard — Morguard GP’’.

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Amendments to the Limited Partnership Agreement

The Limited Partnership Agreement may be amended with the prior consent of the holders of at least662⁄3% of the Class A LP Units voted on the amendment at a duly constituted meeting of holders of Class ALP Units or by a written resolution of partners holding more than 662⁄3% of the Class A LP Units entitled to voteat a duly constituted meeting of holders of Class A LP Units, except for certain amendments which requireunanimous approval of holders of Class A LP Units, including: (i) changing the liability of any limited partner;(ii) changing the right of a limited partner to vote at any meeting of holders of Class A LP Units; and(iii) changing the Partnership from a limited partnership to a general partnership. The REIT GP may also makeamendments to the Limited Partnership Agreement without the approval or consent of the Limited Partners toreflect, among other things: (i) a change in the name of the Partnership or the location of the principal place ofbusiness or registered office of the Partnership; (ii) the admission, substitution, withdrawal or removal ofLimited Partners in accordance with the Limited Partnership Agreement; (iii) a change that, as determined bythe General Partners, is reasonable and necessary or appropriate to qualify or continue the qualification of thePartnership as a limited partnership in which the limited partners have limited liability under applicable laws;(iv) a change that, as determined by the General Partners, is reasonable and necessary or appropriate to enablethe Partnership to take advantage of, or not be detrimentally affected by, changes in the Tax Act or othertaxation laws; or (v) a change to amend or add any provision, or to cure any ambiguity or to correct orsupplement any provisions contained in the Limited Partnership Agreement which may be defective orinconsistent with any other provision contained in the Limited Partnership Agreement or which should be madeto make the Limited Partnership Agreement consistent with the disclosure set out in this prospectus.Notwithstanding the foregoing: (i) no amendment which would adversely affect the rights and obligations of anyGeneral Partner, as a general partner, may be made without the consent of the affected General Partner; and(ii) no amendment which would adversely affect the rights and obligations of any other holders of limitedpartnership units or any class of limited partner differently than any other class of limited partner may be madewithout the consent of such holder or class, including with respect to amendments to the restrictions on transferof Class B LP Units or Class C LP Units.

In addition, the Declaration of Trust provides that the REIT will not agree to or approve any materialamendment to the Limited Partnership Agreement without the approval of not less than two-thirds of the votescast at a meeting of Unitholders called for such purpose (or by written resolution in lieu thereof).

DISTRIBUTION REINVESTMENT PLAN

On or shortly following Closing, the REIT intends to implement, subject to regulatory approval, adistribution reinvestment plan (the ‘‘DRIP’’) pursuant to which resident Canadian holders of Units will beentitled to elect to have all or some of the cash distributions on their Units automatically reinvested in additionalUnits at a price per Unit calculated by reference to the weighted average of the closing price of Units on theapplicable stock exchange for the five trading days immediately preceding the relevant Distribution Date.

No brokerage commissions will be payable in connection with the purchase of Units under the DRIP and alladministrative costs will be borne by the REIT. Proceeds received by the REIT upon the issuance of additionalUnits under the DRIP will be used by the REIT for future property acquisitions, capital improvements andworking capital.

Holders of Units resident outside of Canada will not be entitled to participate in the DRIP. Upon ceasing tobe a resident of Canada, a holder of Units must terminate its participation in the DRIP.

The Partnership intends to adopt a similar plan for the holders of Class B LP Units such that they may electto have all or some of the cash distributions on the Class B LP Units automatically reinvested on the same basisas a unitholder pursuant to the DRIP.

Further administrative details, including the date of the first distribution for which such holders of Units willbe entitled to elect to have distributions reinvested under the DRIP, and enrolment documents regarding theDRIP will be forwarded to beneficial owners of Units on implementation of the DRIP.

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DISTRIBUTION POLICY

The following outlines the distribution policy of the REIT as contained in the Declaration of Trust and theLimited Partnership Agreement. Determination as to amounts actually distributed will be made in the solediscretion of the Trustees.

Distribution Policy

The REIT initially intends to make monthly cash distributions of $0.05 per Unit to holders of Units, whichare estimated on an annual basis to be approximately 95% of AFFO of the REIT (based on the pro forma AFFOof the Initial Properties). The Partnership will make corresponding monthly cash distributions to holders ofClass B LP Units. Management of the REIT believes that the 95% payout ratio initially set by the REIT shouldallow the REIT to meet its internal funding needs, while being able to support stable growth in cashdistributions. However, the actual payout ratio will be determined by the Trustees from time to time in theirdiscretion. Pursuant to the Declaration of Trust, the Trustees have full discretion respecting the timing andamounts of distributions. The REIT intends to make distributions to holders of Units at least equal to theamount of net income and net realized capital gains of the REIT as is necessary to ensure that the REIT will notbe liable for ordinary Canadian income taxes, net of capital gains tax refunds, on such income. Any increase orreduction in the percentage of AFFO to be distributed to holders of Units will result in a corresponding increaseor reduction in distributions on Class B LP Units.

Holders of Units of record as at the close of business on the last business day of the month preceding aDistribution Date will have an entitlement on and after that day to receive distributions in respect of that monthon such Distribution Date. Distributions may be adjusted for amounts paid in prior periods if the actual AFFOfor the prior periods is greater than or less than the estimates for the prior periods. Under the Declaration ofTrust and pursuant to the above-described distribution policy of the REIT, where the REIT’s cash is notsufficient to make payment of the full amount of a distribution, such payment will, to the extent necessary, bedistributed in the form of additional Units. See ‘‘Declaration of Trust — Issuance of Units’’ and ‘‘CertainCanadian Federal Income Tax Considerations — Taxation of the REIT’’.

The first distribution of the REIT will be for the period from Closing to May 31, 2012 and will be paid on orabout June 15, 2012, in the amount of $0.07167 per Unit (assuming Closing occurs on April 18, 2012). The REITintends to make subsequent monthly distributions, initially in the estimated amount of $0.05 per Unit,commencing on or about July 15, 2012.

The REIT GP, on behalf of the Partnership, will make monthly cash distributions to holders of Class ALP Units and holders of Class B LP Units by reference to the monthly cash distributions payable by the REIT toholders of Units. Distributions to be made on the Class B LP Units will be equal to the distributions that theholders of Class B LP Units would have received if they were holding Units instead of Class B LP Units.Distributions to holders of Class C LP Units and the General Partners will be made in priority to distributions toholders of Class A LP Units and holders of Class B LP Units. See ‘‘Arrangements with Morguard —Morguard GP — Partnership Distribution Policy and Priority’’ and ‘‘The Partnership — Distributions’’.

Tax Deferral on Distributions

The REIT estimates that, based on undepreciated capital cost balances as of April 1, 2012, on a pro formabasis, approximately 66% of the monthly cash distributions during the year ended December 31, 2011 wouldhave been tax-deferred returns of capital which are non-taxable when received, although these amounts wouldhave reduced a unitholder’s adjusted cost base of its Units, which would have triggered a gain in the unitholder’shands for the purposes of the Tax Act to the extent such adjusted cost base was otherwise a negative amount.Such estimate is based on the facts set out in this prospectus and related assumptions, the provisions of theTax Act in force at the date hereof, current publicly available published administrative policies and assessingpractices of the CRA and all Tax Proposals. The adjusted cost base of Units held by a holder of Units willgenerally be reduced by such non-taxable portion of distributions made to the holder of Units (other than thenon-taxable portion of capital gains). A holder of Units will generally realize a capital gain to the extent that theadjusted cost base of the holder’s Units would otherwise be a negative amount, notwithstanding that the holderof Units has not sold any Units. The composition for tax purposes may change over time, thus affecting the

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after-tax return to a holder of Units. See ‘‘Certain Canadian Federal Income Tax Considerations — Taxation ofUnitholders — Distributions’’ and ‘‘The Partnership — Distributions’’.

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

In the opinion of Stikeman Elliott LLP, counsel to the REIT, and Torys LLP, counsel to the Underwriters,the following summary fairly presents, as of the date hereof, the principal Canadian federal income taxconsiderations generally applicable under the Tax Act to the acquisition, holding and disposition of Units by aUnitholder who acquires Units pursuant to this Offering. This summary is applicable only to a Unitholder who,for purposes of the Tax Act and at all relevant times, is resident in Canada, deals at arm’s length with and is notaffiliated with the REIT or any person that such Unitholder subsequently sells or otherwise transfers Units to.Generally, Units will be considered to be capital property to a Unitholder provided that the Unitholder does nothold the Units in the course of carrying on a business of trading or dealing in securities and has not acquiredthem in one or more transactions considered to be an adventure or concern in the nature of trade. CertainUnitholders who might not otherwise be considered to hold their Units as capital property may, in certaincircumstances, be entitled to make the irrevocable election under subsection 39(4) of the Tax Act to have theirUnits, and every other ‘‘Canadian security’’ (within the meaning of the Tax Act) owned in the taxation year ofthe election and each subsequent taxation year, deemed to be capital property. Such Unitholders should consulttheir own tax advisors regarding whether such election is available and advisable in their particularcircumstances.

This summary is not applicable to a Unitholder: (i) that is a ‘‘financial institution’’ for purposes of the‘‘mark-to-market rules’’ in the Tax Act, (ii) that is a ‘‘specified financial institution’’, (iii) an interest in which is a‘‘tax shelter investment’’, or (iv) that has elected to report its ‘‘Canadian tax results’’ in a currency other thanCanadian currency (as each of those terms is defined in the Tax Act). Any such Unitholders should consult theirown tax advisors with respect to an investment in Units. Further, this summary does not address the taxconsequences to Unitholders who borrow funds in connection with the acquisition of Units.

This summary is based upon the facts set out in this prospectus, certain representations as to factual mattersmade in a certificate signed by an officer of the REIT and provided to counsel (the ‘‘Officer’s Certificate’’), theprovisions of the Tax Act in force at the date hereof and counsel’s understanding of the current publishedadministrative policies and assessing practices of the CRA. This summary takes into account the Tax Proposalsand assumes that the Tax Proposals will be enacted as proposed but no assurances can be given that the TaxProposals will be enacted in their current form or at all. This summary does not otherwise take into account oranticipate any changes in law or in the administrative policies and assessing practices of the CRA, whether bylegislative, governmental or judicial decision or action, and does not take into account any provincial, territorialor foreign tax legislation or considerations, which may differ significantly from those discussed in this prospectus.Modification or amendment of the Tax Act or the Tax Proposals could significantly alter the tax status of theREIT or the tax consequences of investing in Units.

This summary is not exhaustive of all possible Canadian federal income tax considerations applicable to aninvestment in Units. Moreover, the income and other tax consequences of acquiring, holding or disposing of Unitswill vary depending on the Unitholder’s particular circumstances, including the province(s) in which theUnitholder resides or carries on business. Accordingly, this summary is of a general nature only and is notintended to be nor should it be construed to be legal or tax advice or representations to any prospective purchaserof Units. Prospective purchasers should consult their own tax advisors for advice with respect to the taxconsequences to them of an investment in Units based on their particular circumstances.

For the purposes of this summary and the opinion given under the heading ‘‘Eligibility for Investment’’, areference to (i) the ‘‘REIT’’ is a reference to Morguard North American Residential Real Estate InvestmentTrust only and is not a reference to any of its subsidiaries or predecessors, and (ii) a reference to a ‘‘Unitholder’’is a reference to a holder of Units and not a holder of Special Voting Units.

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Status of the REIT

Qualification as a Mutual Fund Trust

This summary assumes that the representations made in the Officer’s Certificate are true and correct,including the representations that the REIT has and will at all times comply with the Declaration of Trust, thatthe REIT will file an election under subsection 132(6.1) of the Tax Act to be deemed to have been a ‘‘mutualfund trust’’ from the time of its establishment, and that the REIT does and will continue to qualify as a ‘‘mutualfund trust’’ under the provisions of the Tax Act while the Units remain outstanding. To qualify as a mutual fundtrust, the REIT must be a ‘‘unit trust’’ as defined by the Tax Act, must not be established or maintained primarilyfor the benefit of non-residents, and must restrict its undertaking to: (i) the investing of its funds in property(other than real property or an interest in real property or an immovable or real right in an immovable), and(ii) the acquiring, holding, maintaining, improving, leasing or managing of any real property (or interest in realproperty or of any immovable or real right in immovables) that is capital property of the REIT, or (iii) anycombination of the activities described in (i) and (ii), and the REIT must comply on a continuous basis withcertain minimum requirements respecting the ownership and dispersal of Units. In the event that the REIT werenot to qualify as a mutual fund trust at any particular time, the Canadian federal income tax consequencesdescribed below would, in some respects, be materially different.

Qualification as a Real Estate Investment Trust

This summary is based on the assumption that the REIT qualifies, and will continue to qualify at allrelevant times as a ‘‘real estate investment trust’’, as defined in the rules applicable to SIFT trusts and SIFTpartnerships in the Tax Act (the ‘‘SIFT Rules’’) and that the Partnership and each direct or indirect subsidiary ofthe REIT qualifies, and will continue to qualify, at all relevant times, as an ‘‘excluded subsidiary entity’’ asdefined for purposes of the SIFT Rules. If any of such assumptions is not accurate, certain of the income taxconsiderations described below would, in some respects, be materially different.

SIFT Rules

The SIFT Rules effectively tax certain income of a publicly-traded trust or partnership that is distributed toits investors on the same basis as would have applied had the income been earned through a taxable corporationand distributed by way of dividend to its shareholders. These rules apply only to ‘‘SIFT trusts’’, ‘‘SIFTpartnerships’’ (each as defined in the Tax Act) and their investors.

Where the SIFT Rules apply, distributions of a SIFT trust’s ‘‘non-portfolio earnings’’ are not deductible incomputing the SIFT trust’s net income. Non-portfolio earnings are generally defined as income attributable to abusiness carried on by the SIFT trust in Canada or to income (other than certain dividends) from, and capitalgains from the disposition of, non-portfolio properties. The SIFT trust is itself liable to pay an income tax on anamount equal to the amount of such non-deductible distributions at a rate that is substantially equivalent to thecombined federal and provincial general tax rate applicable to taxable Canadian corporations. Suchnon-deductible distributions paid to a holder of units of the SIFT trust are generally deemed to be taxabledividends received by the holder of such units from a taxable Canadian corporation. Such deemed dividends willqualify as ‘‘eligible dividends’’ for purposes of the enhanced gross-up and dividend tax credit available under theTax Act to individuals resident in Canada and for purposes of computing a Canadian resident corporation’s‘‘general rate income pool’’ or ‘‘low rate income pool’’, as the case may be (each as defined in the Tax Act).

A trust resident in Canada will generally be a SIFT trust for purposes of the Tax Act if investments in thetrust are listed or traded on a stock exchange or other public market and the trust holds one or more‘‘non-portfolio properties’’ (as defined in the Tax Act). Non-portfolio properties generally include certaininvestments in real properties situated in Canada and certain investments in corporations and trusts resident inCanada and in partnerships with specified connections to Canada. However, a trust will not be considered aSIFT trust for a taxation year if it qualifies as a ‘‘real estate investment trust’’ (as defined in the Tax Act) for theyear (the ‘‘REIT Exception’’) (discussed below).

Distributions that are paid as returns of capital will generally not attract the tax under the SIFT Rules.

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REIT Exception

A trust that satisfies the REIT Exception is excluded from the definition of a SIFT trust and is therefore notsubject to the SIFT Rules. Generally, to qualify for the REIT Exception for a particular taxation year, subject tothe discussion below regarding certain Tax Proposals:

(i) the trust must, at no time in the taxation year, hold ‘‘non-portfolio property’’ (other than ‘‘qualifiedREIT properties’’);

(ii) not less than 95% of the trust’s revenue for the taxation year must be derived from one or more of thefollowing: ‘‘rent from real or immovable properties’’, interest, capital gains from the disposition of‘‘real or immovable properties’’, dividends, and royalties;

(iii) not less than 75% of the trust’s revenue for the taxation year must be derived from one or more of thefollowing: rent from real or immovable properties, interest from mortgages, or hypothecs, on real orimmovable properties, and capital gains from dispositions of real or immovable properties; and

(iv) at no time in the taxation year may the total fair market value of properties comprised of real orimmovable properties, cash, deposits in a bank or credit union, indebtedness of Canadian corporationsrepresented by banker’s acceptances, and debt issued or guaranteed by Governments in Canada be lessthan 75% of the ‘‘equity value’’ of the trust at that time.

Under certain Tax Proposals released by the Minister of Finance (Canada) on December 16, 2010(the ‘‘December 2010 Proposals’’), which apply for taxation years beginning in 2011 (or for earlier years ifelected), the REIT Exception will be modified such that, under (i) above, a trust may hold some non-portfolioproperties which are not qualified REIT properties, provided that at all times in the taxation year at least 90% ofthe total fair market value of all non-portfolio properties held by the trust are qualified REIT properties; under(ii) above, the test will be reduced from 95% to 90%, and gains from dispositions of certain non-capital propertywhich is ‘‘eligible resale property’’ will be added as qualifying revenues for purposes of that test; under both(ii) and (iii) above, the revenues to be measured will be ‘‘gross REIT revenues’’, which will be defined as grossrevenue and will include capital gains; and an additional requirement would be added as follows: (v) thatinvestments in the trust are, at any time in the taxation year, listed or traded on a stock exchange or otherpublic market.

Under the SIFT Rules, ‘‘qualified REIT property’’ of a trust means, generally, a property held by the trustthat is: (i) a real or immovable property; (ii) a security of an entity which derives all or substantially all of itsrevenues from maintaining, improving, leasing or managing real or immovable properties that are capitalproperties of the trust or of an entity of which the trust holds a share or an interest; (iii) a security of an entitythat holds no property other than legal title to real or immovable properties of the trust, or of a wholly-ownedsubsidiary of the trust and property ancillary to the earning by the trust of rents and capital gains from real orimmovable property; or (iv) a property ancillary to the earning by the trust of rents and capital gains from real orimmovable property. The ‘‘equity value’’ of a SIFT trust at any time means the fair market value of all of theincome or capital interests in the trust at that time.

Under the December 2010 Proposals, the definition of ‘‘qualified REIT property’’ will be amended suchthat (i) above will apply only to real or immovable property that is a capital property of the trust; (ii) above willbe expanded to also include revenues from the same qualifying activities in respect of certain non-capitalproperty which is ‘‘eligible resale property’’; the revenues to be measured under (ii) above will be ‘‘gross REITrevenues’’, which, as described above, will be defined as gross revenue and will include capital gains; and(iv) above will be amended to clarify that only tangible personal property, or for civil law purposes corporealmoveable property can qualify as ancillary.

‘‘Real or immovable property’’ includes a security of an entity that is a trust that satisfies or would, assumingit were a trust, satisfy the first four criteria required to qualify for the REIT Exception (both as currently enactedand as proposed to be amended), or certain interests in real property or certain real rights in immovables; butexcludes any depreciable property, other than a depreciable property included (otherwise than by an election) inCCA Class 1, 3 or 31 of the Regulations, a property ancillary to the ownership or utilization of such depreciableproperty, or a lease in, or leasehold interest in respect of, land or such depreciable property.

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‘‘Rent from real or immovable properties’’ includes rent or similar payments for the use of, or right to use,real or immovable properties, payment for services ancillary to the rental of real or immovable properties andcustomarily supplied or rendered in connection therewith, and income from a trust that was derived from rentfrom real or immovable properties; but does not include any other payments for services supplied or rendered,fees for managing or operating such properties, payments for the occupation of, use of, or right to use, a hotelroom or similar lodging, or rent based on profits.

The REIT Exception in the SIFT Rules contains a number of technical tests and the determination as towhether the REIT qualifies for the REIT Exception in any particular taxation year can only be made at the endof that taxation year. Based on the advice of the REIT’s external tax advisor, management of the REIT hasadvised Stikeman Elliott LLP and Torys LLP that the REIT, as currently structured, will qualify for the REITException and that management of the REIT expects the REIT will qualify for the REIT Exception (based bothon the current provisions of the Tax Act and such provisions as they may be amended by the Tax Proposals)throughout 2012 and each subsequent year. However, there is no assurance that subsequent investments oractivities undertaken by the REIT will not result in the REIT failing to qualify for the REIT Exception. If theREIT is subject to the SIFT Rules, certain of the income tax considerations described below would, in somerespects, be materially different. See ‘‘— Application to the REIT’’.

Application to the REIT

The REIT Exception is applied on an annual basis. Accordingly, even if the REIT does not qualify for theREIT Exception in a particular year, it may be able to so qualify in a subsequent year. The REIT intends tocomply with the REIT Exception such that the SIFT Rules will not apply to the REIT in 2012 and subsequentyears. Although, as of the date hereof, management of the REIT believes, based on the advice of its external taxadvisors, that the REIT will be able to meet the requirements of the REIT Exception throughout 2012, there canbe no assurances that the REIT will be able to qualify for the REIT Exception such that the REIT and itsUnitholders will not be subject to the tax imposed by the SIFT Rules in 2012 or in future years.

To the extent that they are applicable to the REIT, the SIFT Rules may, depending on the nature ofdistributions from the REIT, including what portion of its distributions are income and what portion are returnsof capital, have a material adverse effect on the after-tax returns of certain Unitholders. Generally, distributionsthat are characterized as returns of capital are not taxable to Unitholders but serve to reduce the adjusted costbase of a Unitholder’s Units. The REIT estimates that, based on undepreciated capital cost balances as ofApril 1, 2012, on a pro forma basis, approximately 66% of the monthly cash distributions during the year endedDecember 31, 2011 would have been tax-deferred returns of capital which are non-taxable when received,although these amounts would have reduced a unitholder’s adjusted cost base of its Units, which would havetriggered a gain in the unitholder’s hands for the purposes of the Tax Act to the extent such adjusted cost basewas otherwise a negative amount.

The likely effect of the SIFT Rules on the market for Units, and on the REIT’s ability to finance futureacquisitions through the issue of Units or other securities, is unclear. In the event that the SIFT Rules apply tothe REIT, they may adversely affect the after-tax returns of investors, the marketability of the Units and theamount of cash available for distributions.

The remainder of this summary is subject to the SIFT Rules discussed above and assumes that the REIT isat all times eligible for the REIT Exception.

Taxation of the REIT

The taxation year of the REIT is the calendar year. In each taxation year, subject to the SIFT Rules, theREIT will generally be subject to tax under Part I of the Tax Act on its income for the year, including net realizedtaxable capital gains for that year and its allocated share of income of the Partnership for its fiscal period endingon or before the year-end of the REIT, less the portion thereof that the REIT deducts in respect of the amountspaid or payable, or deemed to be paid or payable, in the year to Unitholders. An amount will be considered tobe payable to a Unitholder in a taxation year if it is paid to the Unitholder in the year by the REIT or if theUnitholder is entitled in that year to enforce payment of the amount.

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The REIT will generally also not be subject to tax on any amounts received as distributions from thePartnership. Generally, distributions to the REIT in excess of its allocated share of the income of thePartnership for a fiscal year will result in a reduction of the adjusted cost base of the REIT’s Class A LP Units inthe Partnership by the amount of such excess. If, as a result, the REIT’s adjusted cost base at the end of ataxation year of its Class A LP Units in the Partnership would otherwise be a negative amount, the REIT wouldbe deemed to realize a capital gain in such amount for that year and the REIT’s adjusted cost base at thebeginning of the next taxation year of its Class A LP Units in the Partnership would then be nil.

In computing its income for purposes of the Tax Act, the REIT may deduct reasonable administrative costsand other reasonable expenses incurred by it for the purpose of earning income. The REIT may also deductfrom its income for the year a portion of any reasonable expenses incurred by the REIT to issue Units. Theportion of the issue expenses deductible by the REIT in a taxation year is 20% of the total issue expenses,pro-rated where the REIT’s taxation year is less than 365 days. Any losses incurred by the REIT (includinglosses allocated to the REIT by the Partnership and capable of being deducted by the REIT) may not beallocated to Unitholders, but may generally be carried forward and deducted in computing the taxable income ofthe REIT in future years in accordance with the detailed rules and limitations in the Tax Act (including theOctober 31 Proposals discussed below or any alternative proposal thereto).

On October 31, 2003 the Department of Finance (Canada) announced certain Tax Proposals relating to thedeductibility of losses under the Tax Act (the ‘‘October 31 Proposals’’). Under the October 31 Proposals, ataxpayer will be considered to have a loss from a business or property for a taxation year only if, in that year, it isreasonable to assume that the taxpayer will realize a cumulative profit from the business or property during thetime that the taxpayer has carried on, or can reasonably be expected to carry on, the business or has held, or canreasonably be expected to hold, the property. Profit, for this purpose, does not include capital gains or capitallosses. If the October 31 Proposals were to apply to the REIT, deductions that would otherwise reduce theREIT’s taxable income could be denied, with after-tax returns to the Unitholders reduced as a result. OnFebruary 23, 2005, the Minister of Finance (Canada) announced that an alternative proposal to replace theOctober 31 Proposals would be released for comment. No such alternative proposal has been released to date.There can be no assurance that such alternative proposal will not adversely affect the REIT.

Pursuant to the REIT’s distribution policy, the Trustees currently intend to make distributions in each yearto Unitholders in an amount sufficient to ensure that the REIT will generally not be liable tax under Part I of theTax Act in any year (after taking into account any losses or capital losses that may be carried forward from prioryears). See ‘‘Distribution Policy’’. Income of the REIT which is unavailable for cash distributions will bedistributed to Unitholders in the form of additional Units.

Taxation of the Partnership

The Partnership is expected to qualify as an ‘‘excluded subsidiary entity’’ at all relevant times and, as aresult, will not be subject to tax under the Tax Act (including under the SIFT Rules). Generally, each partner ofthe Partnership, including the REIT, is required to include in computing the partner’s income, the partner’sshare of the income (or loss) of the Partnership for the Partnership’s fiscal year ending in, or coincidentally with,the partner’s taxation year end, whether or not any such income is distributed to the partner in the taxation year.For this purpose, the income or loss of the Partnership will be computed for each fiscal year as if the Partnershipwere a separate person resident in Canada. In computing the income or loss of the Partnership, deductions maygenerally be claimed in respect of its administrative and other expenses (including interest in respect of debt ofthe Partnership) incurred for the purpose of earning income from business or property to the extent they are notcapital in nature and do not exceed a reasonable amount and available capital cost allowances. Losses of thePartnership could be limited by the October 31 Proposals, discussed above, or any alternative proposal thereto.The income or loss of the Partnership for a fiscal year will be allocated to the partners of the Partnership,including the REIT, on the basis of their respective share of such income or loss as provided in the limitedpartnership agreement of the Partnership, subject to the detailed rules in the Tax Act. Generally, distributions topartners in excess of the income of the Partnership for a fiscal year will result in a reduction of the adjusted costbase of the partner’s units in the Partnership by the amount of such excess, as described above.

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Taxation of Unitholders

Distributions

Subject to the application of the SIFT Rules discussed above, a Unitholder will generally be required toinclude in income for a particular taxation year the portion of the net income of the REIT for the taxation yearending on or before the particular taxation year-end of the Unitholder, including net realized taxable capitalgains, that is paid or payable, or deemed to be paid or payable, to the Unitholder in the particular taxation year(and that the REIT deducts in computing its income), whether such portion is received in cash, additional Unitsor otherwise.

Provided that the appropriate designations are made by the REIT, such portion of net taxable capital gainsof the REIT as is paid or payable to a Unitholder will effectively retain its character and be treated as such in thehands of the Unitholder for purposes of the Tax Act. See ‘‘— Capital Gains and Capital Losses’’.

The non-taxable portion of any net capital gains of the REIT that is paid or payable, or deemed to be paidor payable, to a Unitholder in a taxation year will not be included in computing the Unitholder’s income for theyear. Any other amount in excess of the net income and net taxable capital gains of the REIT that is paid orpayable, or deemed to be paid or payable, by the REIT to a Unitholder in a taxation year, including any furtherdistribution reinvested in Units under the Distribution Reinvestment Plan, will not generally be included in theUnitholder’s income for the year. A Unitholder will be required to reduce the adjusted cost base of its Units bythe portion of any amount (other than the non-taxable portion of net realized capital gains of the REIT for theyear, the taxable portion of which was designated by the REIT in respect of the Unitholder) paid or payable tosuch Unitholder that was not included in computing the Unitholder’s income. To the extent that the adjustedcost base of a Unit would otherwise be less than zero, the negative amount will be deemed to be a capital gainrealized by the Unitholder from the disposition of the Unit and will be added to the adjusted cost base of theUnit so that the adjusted cost base will be reset to zero. The composition of distributions paid by the REIT,portions of which may be fully or partially taxable or non-taxable, may change over time, affecting the after-taxreturn to Unitholders.

To the extent that amounts are designated as having been paid to Unitholders out of taxable dividendsreceived or deemed to have been received by the REIT on shares of taxable Canadian corporations, the normalgross-up and dividend tax credit rules, including the enhanced gross-up and dividend tax credit rules in respectof dividends designated by the corporation as ‘‘eligible dividends’’ will apply, and the dividend deduction incomputing taxable income of a Unitholder that is a corporation will generally be available, and the refundabletax under Part IV of the Tax Act will be payable by Unitholders that are private corporations and certain othercorporations controlled directly or indirectly by or for the benefit of an individual or a related groupof individuals.

Purchasers of Units

Since the net income of the REIT will be distributed on a monthly basis, a purchaser of a Unit may becometaxable on a portion of the net income or capital gains of the REIT accrued or realized by the REIT in a monthbefore the time the Unit was purchased but which was not paid or made payable to Unitholders until the end ofthe month and after the time the Unit was purchased. A similar result may apply on an annual basis in respect ofa portion of income or capital gains accrued or realized by the REIT in a year before the time the Unit waspurchased but which is paid or made payable to Unitholders at year end and after the time the Unitwas purchased.

Dispositions of Units

On a disposition or deemed disposition of a Unit (including a redemption), a Unitholder will generallyrealize a capital gain (or sustain a capital loss) equal to the amount by which the Unitholder’s proceeds ofdisposition exceed (or are less than) the aggregate of the adjusted cost base of the Unit and any reasonable costsof disposition.

For the purpose of determining the adjusted cost base to a Unitholder, when a Unit is acquired, the cost ofthe newly-acquired Unit will be averaged with the adjusted cost base of all of the Units owned by the Unitholder

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as capital property immediately before that acquisition. The adjusted cost base of a Unit to a Unitholder willinclude all amounts paid by the Unitholder for the Unit, with certain adjustments. The cost to a Unitholder ofUnits received in lieu of a cash distribution of income of the REIT will be equal to the amount of suchdistribution that is satisfied by the issuance of such Units. The cost of Units acquired on the reinvestment ofdistributions under the Distribution Reinvestment Plan will be the amount of such investment. There will be nonet increase or decrease in the aggregate adjusted cost base of all of a Unitholder’s Units as a result of thereceipt of the further distribution reinvested in Units under the Distribution Reinvestment Plan; however, theadjusted cost base per Unit will be reduced.

A redemption of Units in consideration for cash or other assets of the REIT such as Subsidiary Notes, asthe case may be, will be a disposition of such Units for proceeds of disposition equal to such cash or the fairmarket value of such other assets, as the case may be, less any income or capital gain realized by the REIT inconnection with the redemption of those Units to the extent that such income or capital gain is designated to theredeeming Unitholder. Unitholders exercising the right of redemption will consequently realize a capital gain, orsustain a capital loss, depending upon whether the proceeds of disposition received exceed, or are less than, theadjusted cost base of the Units redeemed. Where income or capital gain realized by the REIT in connectionwith the distribution of property in specie on the redemption of Units has been designated by the REIT to aredeeming Unitholder, the Unitholder will be required to include in income the income or taxable portion of thecapital gain so designated. The cost of any property distributed in specie by the REIT to a Unitholder uponredemption of Units will be equal to the fair market value of that property at the time of the distribution. TheUnitholder will thereafter be required to include in income interest or other income derived from the property,in accordance with the provisions of the Tax Act.

The consolidation of Units of the REIT will not be considered to result in a disposition of Units byUnitholders. The aggregate adjusted cost base to a Unitholder of all of the Unitholder’s Units will not change asa result of a consolidation of Units; however, the adjusted cost base per Unit will increase.

Capital Gains and Capital Losses

One-half of any capital gain (a ‘‘taxable capital gain’’) realized by a Unitholder on a disposition or deemeddisposition of Units and the amount of any net taxable capital gains designated by the REIT in respect of aUnitholder will be included in the Unitholder’s income as a taxable capital gain. One-half of any capital loss(an ‘‘allowable capital loss’’) realized by a Unitholder on a disposition or deemed disposition of Units mustgenerally be deducted from taxable capital gains of the Unitholder in the year of disposition as an allowablecapital loss. Allowable capital losses realized in excess of taxable capital gains in a particular taxation year maygenerally be deducted against taxable capital gains realized in the three preceding taxation years or in anysubsequent taxation year, subject to and in accordance with the provisions of the Tax Act.

A Unitholder that is a Canadian-controlled private corporation (as defined in the Tax Act) may be liable topay an additional refundable tax of 62⁄3% on certain types of income, including taxable capital gains.

Alternative Minimum Tax

In general terms, net income of the REIT paid or payable to a Unitholder who is an individual or a certaintype of trust that is designated as taxable dividends, net taxable capital gains and capital gains realized on thedisposition of Units by such a Unitholder may increase the Unitholder’s liability for alternative minimum tax.

PLAN OF DISTRIBUTION

General

Pursuant to the Underwriting Agreement, the REIT has agreed to sell and the Underwriters have severallyagreed to purchase on Closing an aggregate of 7,500,000 Units at a purchase price of $10.00 per Unit payable incash to the REIT against delivery of the Units. The Closing is expected to take place on April 18, 2012, or suchother date as the REIT and the Underwriters may agree, but in any event not later than May 2, 2012. Theobligations of the Underwriters under the Underwriting Agreement are conditional and may be terminated attheir discretion on the basis of their assessment of the state of the financial markets and may also be terminated

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upon the occurrence of certain stated events. The Underwriters are, however, severally obligated to take up andpay for all of the Units that they have agreed to purchase if any of the Units are purchased under theUnderwriting Agreement.

The TSX has conditionally approved the listing of the Units under the symbol ‘‘MRG.UN’’. Listing issubject to the REIT fulfilling all of the original listing requirements of the TSX on or before July 3, 2012,including distribution of the Units to a minimum number of public securityholders.

The offering price of the Units has been determined by negotiation among the REIT, Morguard and theUnderwriters. In consideration for their services in connection with the Offering, the REIT has agreed to paythe Underwriters a fee equal to $0.60 per Unit, plus applicable taxes (if any). Subscriptions for Units will bereceived subject to rejection or allocation in whole or in part and the right is reserved to close the subscriptionbooks at any time without notice.

The REIT has granted the Underwriters the Over-Allotment Option, which is exercisable in whole or inpart and at any time up to 30 days after Closing, to purchase up to an additional 750,000 Units on the sameterms as set forth above solely to cover over-allocations, if any, and for market stabilization purposes. Thisprospectus also qualifies the grant of the Over-Allotment Option and the distribution of the Units to bedelivered upon the exercise of the Over-Allotment Option. A purchaser who acquires Units forming part of theUnderwriters’ over-allocation position acquires such Units under this prospectus regardless of whether theover-allocation position is ultimately filled through the exercise of the Over-Allotment Option or secondarymarket purchases. The REIT has agreed to pay the Underwriters a fee equal to $0.60 per Unit (plus applicabletaxes, if any) for each Unit purchased pursuant to the exercise of the Over-Allotment Option.

The REIT and Morguard have agreed to indemnify the Underwriters and their directors, officers,employees and agents against certain liabilities, including, without limitation, civil liabilities under Canadiansecurities legislation, and to contribute to any payments the Underwriters may be required to make in respectthereof.

During a period ending 180 days from Closing, the REIT will not offer, sell or issue for sale or resale anyVoting Units or financial instruments or securities convertible into, or exercisable or exchangeable for, VotingUnits, or agree to, or announce, any such offer, sale or issuance, except pursuant to the Over-Allotment Optionor the DRIP (or similar plan of the Partnership) without the prior consent of RBC Dominion Securities Inc., onbehalf of the Underwriters, which consent may not be unreasonably withheld.

In addition, Morguard has agreed with the Underwriters not to directly or indirectly, offer, sell or otherwisedispose of, or agree to, or announce, any such offer, sale or disposition without the prior consent ofRBC Dominion Securities Inc., on behalf of the Underwriters, which consent may not be unreasonably withheld,any Class B LP Units (or Units underlying the Class B LP Units) acquired by Morguard pursuant to theacquisition of the Initial Properties by the REIT (see ‘‘Acquisition of Initial Properties’’), for a period of 180 daysfollowing Closing.

The Units may not be offered, sold or delivered in the United States or to, or for the account or benefit of,U.S. Persons. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of theUnits in the United States or to, or for the account or benefit of, U.S. Persons.

The Underwriters propose to offer the Units initially at the offering price stated on the cover page of thisprospectus. After the Underwriters have made a reasonable effort to sell all of the Units offered by thisprospectus at that price, the initially stated offering price may be decreased, and further changed from time totime, by the Underwriters to an amount not greater than the initially stated offering price and, in such case, thecompensation realized by the Underwriters will be decreased by the amount that the aggregate price paid by thepurchasers for the Units is less than the gross proceeds paid by the Underwriters to the REIT.

Price Stabilization, Short Positions and Passive Market Making

In connection with the Offering, the Underwriters may over-allocate or effect transactions which stabilize ormaintain the market price of the Units at levels other than those which otherwise might prevail on the openmarket, including: stabilizing transactions; short sales; purchases to cover positions created by short sales;imposition of penalty bids; and syndicate covering transactions.

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Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding adecline in the market price of the Units while the Offering is in progress. These transactions may also includemaking short sales of the Units, which involve the sale by the Underwriters of a greater number of Units thanthey are required to purchase in the Offering. Short sales may be ‘‘covered short sales’’, which are short positionsin an amount not greater than the Over-Allotment Option, or may be ‘‘naked short sales’’, which are shortpositions in excess of that amount. The Underwriters may close out any covered short position either byexercising the Over-Allotment Option, in whole or in part, or by purchasing Units in the open market. In makingthis determination, the Underwriters will consider, among other things, the price of Units available for purchasein the open market compared with the price at which they may purchase Units through the Over-AllotmentOption. If, following the closing of the Offering, the market price of the Units decreases, the short positioncreated by the over-allocation position in Units may be filled through purchases in the market, creating upwardpressure on the price of the Units. If, following the closing of the Offering, the market price of Units increases,the over-allocation position in Units may be filled through the exercise of the Over-Allotment Option in respectof Units at the offering price. The Underwriters must close out any naked short position by purchasing Units inthe open market. A naked short position is more likely to be created if the Underwriters are concerned thatthere may be downward pressure on the price of the Units in the open market that could adversely affectinvestors who purchase in the Offering. Any naked short sales will form part of the Underwriters’ over-allocationposition.

In addition, in accordance with rules and policy statements of certain Canadian securities regulators, theUnderwriters may not, at any time during the period of distribution, bid for or purchase Units. The foregoingrestriction is, however, subject to exceptions where the bid or purchase is not made for the purpose of creatingactual or apparent active trading in, or raising the price of, the Units. These exceptions include a bid or purchasepermitted under the by-laws and rules of applicable regulatory authorities and the TSX, including the UniversalMarket Integrity Rules for Canadian Marketplaces, relating to market stabilization and passive market makingactivities and a bid or purchase made for and on behalf of a customer where the order was not solicited duringthe period of distribution.

As a result of these activities, the price of the Units may be higher than the price that otherwise might existin the open market. If these activities are commenced, they may be discontinued by the Underwriters at anytime. The Underwriters may carry out these transactions on any stock exchange on which the Units are listed, inthe over-the-counter market, or otherwise.

Relationship Between the REIT and Certain of the Underwriters

RBC Dominion Securities Inc., TD Securities Inc. and Scotia Capital Inc. are affiliates of Canadianchartered banks that have provided mortgage financing and revolving credit lines to Morguard in the aggregateprincipal amount of approximately $757 million, as at December 31, 2011, of which mortgages of approximately$180 million, as at April 1, 2012, will be assumed or guaranteed by the REIT and approximately $101 million, asat April 1, 2012, will comprise the Retained Debt at Closing. U.S. dollar denominated debt was converted usingthe closing spot rate, provided by the Bank of Canada, on December 31, 2011 (US$1.00:Cdn$1.0170).Consequently, the REIT may be considered a ‘‘connected issuer’’ of each of RBC Dominion Securities Inc.,TD Securities Inc. and Scotia Capital Inc. under applicable Canadian securities laws. The decision to issue theUnits and the determination of the terms of the Offering were made through negotiation between the REIT,Morguard and the Underwriters. The Canadian chartered banks of which such Underwriters are affiliates didnot have any involvement in such decision or determination. As a consequence of the Offering, each of suchUnderwriters will receive its proportionate share of the Underwriters’ fee. See ‘‘Use of Proceeds’’. Morguard hasinformed the REIT that Morguard is and has been in compliance with all material terms and conditions of theforegoing mortgage financing and credit lines, that no waiver of any default has occurred thereunder and thatthere has not been a material change in the value of the security for such mortgage financing and credit linessince their incurrence. Further, Morguard has informed the REIT that Morguard may use a portion of the cashconsideration from the sale of the Initial Properties to repay certain of the foregoing mortgage financing notassumed or guaranteed by the REIT at Closing.

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PRIOR ISSUANCES

During the 12-month period prior to the date of this prospectus, the REIT issued one Unit for a price of$10.00 on March 1, 2012 in connection with the organization of the REIT. This Unit will be repurchased by theREIT on Closing.

USE OF PROCEEDS

The net proceeds of the Offering will be approximately $67.8 million, after deducting the REIT’s estimatedexpenses of the Offering and the aggregate Underwriters’ fee. The REIT will use such net proceeds to indirectlyacquire its interest in the Initial Properties through its 30.3% interest in the Partnership. In particular, the REITwill use (i) approximately $62.6 million to purchase 6,987,009 Class A LP Units of the Partnership fromMorguard, which will have acquired such Class A LP Units as partial consideration for the Initial CanadianProperties and (ii) approximately $5.1 million to subscribe for 512,991 additional Class A LP Units of thePartnership, which will use such proceeds to indirectly acquire the Initial U.S. Properties. See ‘‘Acquisition ofInitial Properties’’.

The net proceeds of the Over-Allotment Option, if exercised in full, will be approximately $7.1 million, afterdeducting the aggregate Underwriters’ fee. The REIT intends to use the net proceeds received by it on theexercise of the Over-Allotment Option to reduce its outstanding debt under the Morguard Facility and/or forgeneral working capital purposes.

RISK FACTORS

An investment in the Units involves significant risks. Investors should carefully consider the risks described belowand the other information contained elsewhere in this prospectus before making a decision to purchase Units. If anyof the following, or other, risks occur, the REIT’s business, prospects, financial condition, results of operations andcash flows could be materially adversely impacted. In that case, the trading price of the Units could decline andinvestors could lose all or part of their investment in the Units. There is no assurance that risk management stepstaken will avoid future loss due to the occurrence of the below described, or other unforeseen, risks.

Risks Related to the Real Estate Industry

Real Property Ownership and Tenant Risks

Real property investments are relatively illiquid. This illiquidity will tend to limit the ability of the REIT torespond to changing economic or investment conditions. If the REIT were to be required to liquidate assetsquickly, there is a risk the proceeds realized from such sale would be less than the book value of the assets or lessthan what could be expected to be realized under normal circumstances. By specializing in a particular type ofreal estate, the REIT is exposed to adverse effects on that segment of the real estate market and does notbenefit from a broader diversification of its portfolio by property class.

All real property investments are subject to elements of risk. The value of real property and anyimprovements thereto depend on the credit and financial stability of tenants and upon the vacancy rates of theproperties. The properties generate revenue through rental payments made by the tenants thereof. The ability torent unleased suites in properties will be affected by many factors, including changes in general economicconditions (such as the availability and cost of mortgage funds), local conditions (such as an oversupply of spaceor a reduction in demand for real estate in the area), government regulations, changing demographics,competition from other available properties, and various other factors. Cash available for distribution will beadversely affected if a significant number of tenants are unable to meet their obligations under their leases or if asignificant amount of available space in the properties becomes vacant and cannot be leased on economicallyfavourable lease terms. If properties do not generate revenues sufficient to meet operating expenses, includingdebt service and capital expenditures, this could have a material adverse effect on the REIT’s business, cashflows, financial condition and results of operations and ability to make distributions to holders of Units.

Historical occupancy rates and revenues are not necessarily an accurate prediction of the future occupancyrates for the Initial Properties or revenues to be derived therefrom. Reported estimates of market rent can beseasonal and the significance of any variations from quarter to quarter would materially affect the REIT’s

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annualized estimated gain-to-lease amount. There can be no assurance that upon the expiry or termination ofexisting leases, the average occupancy rates and revenues will be higher than historical occupancy rates andrevenues and it may take a significant amount of time for market rents to be recognized by the REIT due tointernal and external limitations on its ability to charge these new market-based rents in the short term.

The short-term nature of residential tenant leases exposes the REIT to the effects of declining market rent,which could materially adversely affect the REIT’s results from operations and ability to make distributions toholders of Units. Most of the REIT’s residential tenant leases will be for a term of one year or less. Because theREIT’s residential tenant leases generally permit residents to leave at the end of their lease term without anypenalty, the REIT’s rental revenue may be materially adversely affected by declines in market rents morequickly than if such leases were for longer terms.

Substitutions for Residential Rental Units

Demand for the REIT’s residential rental properties is impacted by and inversely related to the relative costof home ownership. The cost of home ownership depends upon, among other things, interest rates offered byfinancial institutions on mortgages and similar home financing transactions. With the recent global economiccrisis and its impact on the Canadian and U.S. credit markets, interest rates offered by financial institutions forfinancing home ownership have been at historically low levels. If the interest rates offered by financialinstitutions for home ownership financing remain low, demand for rental properties may be adversely affected.Additionally, the southeastern United States continues to experience historically high levels of foreclosures onsingle family homes, which has increased the supply of single family homes available for purchase, and mayadversely affect demand for rental properties. A reduction in the demand for rental properties may have amaterial adverse effect on the REIT’s ability to lease suites in its properties and on the rents charged. This, inturn, may have a material adverse effect on the REIT’s business, cash flows, financial condition and results ofoperations and ability to make distributions to holders of Units.

Competition

The multi-unit residential real estate sector is highly competitive. The REIT faces competition from manysources, including from other multi-unit residential buildings in the immediate vicinity of the various InitialProperties and the broader geographic areas where the REIT’s residential properties are and will be located. Inaddition, overbuilding in the multi-unit residential sector, particularly in the United States, may increase thesupply of multi-unit residential properties, further increasing the level of competition in certain markets. Suchcompetition may reduce occupancy rates and rental revenues of the REIT and could have a material adverseeffect on the REIT’s business, cash flows, financial condition and results of operations and ability to makedistributions to holders of Units.

Furthermore, the multi-unit residential properties that the REIT owns or may acquire compete withnumerous housing alternatives in attracting tenants, including owner occupied single- and multi-family homesavailable to rent or purchase. The relative demand for such alternatives may be increased by declining mortgageinterest rates, government programs which promote home ownership, or other events or initiatives whichincrease the affordability of such alternatives to multi-unit residential rental properties, and could materiallyadversely affect the REIT’s ability to retain tenants, lease suites and increase or maintain rental rates. Suchcompetition may reduce occupancy rates and rental revenues of the REIT, and could have a material adverseeffect on the REIT’s business, cash flows, financial condition and results of operations and ability to makedistributions to holders of Units.

The competition for multi-unit residential properties available for sale may significantly increase the cost ofacquiring such assets, and may result in such assets being acquired by the REIT at prices, or on terms, which arecomparatively less favourable to the REIT or may result in such assets being acquired by competitors of theREIT. In addition, the number of entities seeking to acquire multi-unit residential properties and/or the amountof funds competing for such acquisitions may increase. In addition, single-property acquisitions from taxmotivated individual sellers may only be available for sale at a higher cost to the REIT relative to portfolioacquisitions. Increases in the cost to the REIT of acquiring multi-unit residential properties may materiallyadversely affect the ability of the REIT to acquire such properties on favourable terms, and may otherwise have

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a material adverse effect on the REIT’s business, cash flows, financial condition and results of operations andability to make distributions to holders of Units.

Government Regulation

Certain provinces and territories of Canada have enacted residential tenancy legislation which, among otherthings, imposes rent control guidelines that limit the REIT’s ability to raise rental rates at its properties. Limitson the REIT’s ability to raise rental rates at its properties may materially adversely affect the REIT’s ability toincrease income from its properties.

In addition to limiting the REIT’s ability to raise rental rates, provincial and territorial residential tenancylegislation provides certain rights to tenants, while imposing obligations upon the landlord. Residential tenancylegislation in the Provinces of Alberta and Ontario prescribe certain procedures which must be followed by alandlord in order to terminate a residential tenancy. As certain proceedings may need to be brought before therespective administrative body governing residential tenancies as appointed under a province’s residentialtenancy legislation, it may take several months to terminate a residential lease, even where the tenant’s rent isin arrears.

Under Ontario’s rent control legislation, a landlord is entitled to increase the rent for existing tenants onceevery 12 months by no more than the ‘‘guideline amount’’ established by regulation. For the calendar year 2012,the guideline amount has been established at 3.1% (0.7% for 2011). Under a proposed amendment to theON RTA, if passed and when effected by the government, Ontario’s annual rent increase guideline will be setbetween 1.0% and 2.5%. This adjustment is meant to take into account the income of the building and themunicipal and school taxes, the insurance bills, the energy costs, maintenance and service costs. Landlords mayapply to the Ontario Rental Housing Tribunal for an increase above the guideline amounts if annual costs forheat, hydro, water or municipal taxes have increased significantly or if building security costs have increased.When a suite is vacated, however, the landlord is entitled to lease the suite 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 toa greater increase in rent for a suite under certain circumstances, including, for example, where extra expenseshave been incurred as a result of a renovation of that suite.

Further, residential tenancy legislation in certain provinces and territories provide the tenant with the rightto bring certain claims to the respective administrative body seeking an order to, among other things, compel thelandlord to comply with health, safety, housing and maintenance standards. As a result, the REIT may, in thefuture, incur capital expenditures which may not be fully recoverable from tenants. The inability to fully recoversubstantial capital expenditures from tenants may have a material adverse effect on the REIT’s business, cashflows, financial condition and results of operations and ability to make distributions to holders of Units.

Residential tenancy legislation may be subject to further regulations or may be amended, repealed orenforced, or new legislation may be enacted, in a manner which will materially adversely affect the ability of theREIT to maintain the historical level of earnings of its properties.

Changes in Applicable Laws

The REIT’s operations must comply with numerous federal, provincial, territorial state and local laws andregulations, some of which may conflict with one another or be subject to limited judicial or regulatoryinterpretations. These laws and regulations may include zoning laws, building codes, landlord tenant laws andother laws generally applicable to business operations. Non-compliance with laws could expose the REITto liability.

Lower revenue growth or significant unanticipated expenditures may result from the REIT’s need tocomply with changes in applicable laws, including (i) laws imposing environmental remedial requirements andthe potential liability for environmental conditions existing on properties or the restrictions on discharges orother conditions, (ii) rent control or rent stabilization laws or other residential landlord/tenant laws, or (iii) othergovernmental rules and regulations or enforcement policies affecting the development, use and operation of theREIT’s properties, including changes to building codes and fire and life-safety codes.

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Environmental Matters

The REIT is subject to various requirements (including federal, provincial, territorial, state and municipallaws, as applicable, in Canada and the United States) relating to environmental matters. Such requirementsprovide that the REIT could be, or become, liable for environmental or other harm, damage or costs, includingwith respect to the release of hazardous, toxic or other regulated substances into the environment and/oraffecting persons, and the removal or other remediation of hazardous, toxic or other regulated substances thatmay be present at or under its properties, including lead-based paint, asbestos, polychlorinated biphenyls,petroleum-based fuels, mercury, volatile organic compounds, underground storage tanks, pesticides and othermiscellaneous materials. Such requirements often impose liability without regard to whether the owner oroperator knew of, or was responsible for, the release or presence of such materials. Additional liability may beincurred by the REIT with respect to the release of such substances from the REIT’s properties to propertiesowned by third parties, including properties adjacent to the REIT’s properties or with respect to the exposure ofpersons to regulated substances. The failure to remove or otherwise address such substances may materiallyadversely affect the REIT’s ability to sell such property, maximize the value of such property or borrow usingsuch property as collateral security, and could potentially result in claims or other proceedings against the REIT.

It is the REIT’s operating policy to obtain or be entitled to rely on a Phase I environmental site assessmentprior to acquiring a property. Where a Phase I environmental site assessment warrants further investigation, it isthe REIT’s operating policy to conduct further environmental assessments. Although such environmentalassessments provide the REIT with some level of assurance about the condition of the properties, the REIT maybecome subject to liability for undetected contamination or other environmental conditions of its propertiesagainst which it cannot insure, or against which the REIT may elect not to insure where insurance premiumcosts are considered to be disproportionate to the assessed risk, which could have a material adverse effect onthe REIT’s business, cash flows, financial condition and results of operations and ability to make distributions toholders of Units.

Environmental laws and other requirements can change and the REIT may become subject to morestringent environmental laws and other requirements in the future. Compliance with more stringentenvironmental requirements, the identification of currently unknown environmental issues or an increase in thecosts required to address a currently known condition may have a material adverse effect on the REIT’sbusiness, cash flows, financial condition and results of operations and ability to make distributions to holdersof Units.

Risk of Natural Disasters

Certain of the Initial Properties are located in Louisiana, which have sustained significant storm damage inthe past. While the REIT has insurance to cover a substantial portion of the cost of such events, the REIT’sinsurance includes deductible amounts and certain items may not be covered by insurance. Future hurricanes,floods or other natural disasters may significantly affect the REIT’s operations and properties, and morespecifically, may cause the REIT to experience reduced rental revenue (including from increased vacancy), incurclean-up costs or otherwise incur costs in connection with such events. Any of these events may have a materialadverse effect on the REIT’s business, cash flows, financial condition and results of operations and ability tomake distributions to holders of Units.

Fixed Costs and Increased Expenses

The failure to maintain stable or increasing average monthly rental rates combined with acceptableoccupancy levels would likely have a material adverse effect on the REIT’s business, cash flows, financialcondition and results of operations and ability to make distributions to holders of Units. Certain significantexpenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and relatedcharges, must be made throughout the period of ownership of real property regardless of whether a property isproducing any income. If the REIT (or in the case of the Retained Debt, Morguard) is unable to meet mortgagepayments on any property, losses could be sustained as a result of the mortgagee’s exercise of its rights offoreclosure or sale.

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The REIT is also subject to utility and property tax risk relating to increased costs that the REIT mayexperience as a result of higher resource prices as well as its exposure to significant increases in property taxes.There is a risk that property taxes may be raised as a result of re-valuations of properties and their adherent taxrates. In some instances, enhancements to properties may result in significant increases in property assessmentsfollowing a re-valuation. Additionally, utility expenses, mainly consisting of natural gas and electricity servicecharges, have been subject to considerable price fluctuations over the past several years. Any significant increasein these resource costs that the REIT cannot charge back to the tenant may have a material adverse effect on theREIT’s business, cash flows, financial condition and results of operations and ability to make distributions toholders of Units. Unlike commercial leases, which generally are ‘‘net’’ leases and allow a landlord to recoverexpenditures from tenants, residential leases are generally ‘‘gross’’ leases and the landlord is not able to pass oncosts to its tenants.

The timing and amount of capital expenditures by the REIT will affect the amount of cash available fordistributions to holders of Units. Distributions may be reduced, or even eliminated, at times when the REITdeems it necessary to make significant capital or other expenditures.

Interest Rate Risk

Interest rate risk is the combined risk that the REIT would experience a loss as a result of its exposure to ahigher interest rate environment (interest rate risk) and the possibility that at the end of a mortgage term theREIT would be unable to renew the maturing debt either with the existing or a new lender (renewal risk).

With the current world economic and financial crisis, there is a heightened risk that not only will existingmaturing mortgages be subject to increased interest rates, but the distinct possibility also exists that maturingmortgages will not be renewed or, if they are renewed, they will be renewed at significantly lower loan-to-valueratios.

The REIT will seek to manage its interest rate risk by negotiating, where possible, fixed interest rates on allof its mortgage debt. In respect of the two floating interest rate mortgages held over certain of the InitialCanadian Properties, Morguard has entered into interest rate swap agreements through which it has effectivelyfixed the rate of interest that the REIT will pay on such mortgages.

Risks Related to the REIT and its Business

Geographic Concentration

The Initial Properties are located in the United States and Canada, and within Canada primarily in Ontarioand specifically the GTA. Currently, 76% of the suites comprising the Initial Properties are located in the GTAand 78% of NOI generated by the Initial Properties in 2011 is from suites located in the GTA, making theREIT’s performance particularly sensitive to economic changes in Ontario and, in particular, the GTA. Themarket value of REIT’s properties, the income generated by the REIT and the REIT’s performance areparticularly sensitive to changes in the economic condition and regulatory environment of the GTA and Ontario.Adverse changes in the economic condition or regulatory environment of the GTA or Ontario may have amaterial adverse effect on the REIT’s business, cash flows, financial condition and results of operations andability to make distributions to holders of Units. See ‘‘Assets of the REIT — Composition of Initial Properties —Geographic Distribution’’.

Dependence on the Partnership

The REIT is an unincorporated, open-ended real estate investment trust which will be entirely dependenton the operations and assets of the Partnership through the REIT’s expected ownership of an approximate30.3% limited partnership interest in the Partnership. Cash distributions to holders of Units will be dependenton, among other things, the ability of the Partnership to make cash distributions in respect of the Class ALP Units. See ‘‘Plan of Distribution’’. The Partnership and its subsidiaries are separate and distinct legal entities.The ability of the Partnership to make cash distributions or other payments or advances will depend on thePartnership’s results of operations and may be restricted by, among other things, applicable corporate, tax andother laws and regulations and contractual restrictions contained in the instruments governing any indebtedness

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of the Partnership (including the Retained Debt), any priority distributions contained in the Limited PartnershipAgreement and other agreements governing the Partnership and restrictions contained in the agreementsgoverning the arrangement with the co-owners of certain properties.

Acquisitions

The REIT’s strategy includes growth through identifying suitable acquisition opportunities, pursuing suchopportunities, consummating acquisitions and effectively operating and leasing such properties. If the REIT isunable to manage its growth effectively, it could have a material adverse effect on the REIT’s business, cashflows, financial condition and results of operations and ability to make distributions to holders of Units. Therecan be no assurance as to the pace of growth through property acquisitions or that the REIT will be able toacquire assets on an accretive basis, and, as such, there can be no assurance that distributions to holders of Unitswill increase in the future.

The REIT will rely on Morguard’s expertise in identifying acquisition opportunities, underwriting potentialtransactions, transaction execution and asset management capabilities. Morguard also provides similar servicesto its other clients, and will concurrently present acquisition opportunities to the REIT and to its other clients.The provision by Morguard of similar services to its other clients may increase the cost of acquiring propertiesthat are of interest to the REIT, increase competition for those acquisitions generally or inhibit their acquisitionaltogether.

Operational Risks

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 orlegal and regulatory proceedings. Management endeavours to minimize losses in this area by ensuring thateffective infrastructure and controls exist. These controls are constantly reviewed and if deemed necessaryimprovements are implemented.

Risk of Loss Not Covered By Insurance

The REIT will maintain insurance policies related to its business, including casualty, general liability andother policies covering the REIT’s business operations, employees and assets. However, the REIT will berequired to bear all losses that are not adequately covered by insurance, as well as any insurance deductibles. Inthe event of a substantial property loss, the existing insurance coverage may be insufficient to pay the full currentmarket value or current replacement cost of such property loss. In the event of an uninsured loss, the REITcould lose some or all of its capital investment, cash flow and anticipated profits related to one or moreproperties. Although the REIT believes that its insurance programs are adequate, assurance cannot be providedthat the REIT will not incur losses in excess of insurance coverage or that insurance can be obtained in thefuture at acceptable levels and reasonable cost.

Risk Related to Insurance Renewals

Certain events could make it more difficult and expensive to obtain property and casualty insurance,including coverage for catastrophic risks. When the REIT’s current insurance policies expire, the REIT mayencounter difficulty in obtaining or renewing property or casualty insurance on its properties at the same levelsof coverage and under similar terms. Such insurance may be more limited and, for catastrophic risks(e.g., earthquake, hurricane, flood and terrorism), may not be generally available to fully cover potential losses.Even if the REIT is able to renew its policies at levels and with limitations consistent with its current policies, theREIT cannot be sure that it will be able to obtain such insurance at premiums that are reasonable. If the REIT isunable to obtain adequate insurance on its properties for certain risks, it could cause the REIT to be in defaultunder specific covenants on certain of its indebtedness or other contractual commitments that it has whichrequire the REIT to maintain adequate insurance on its properties to protect against the risk of loss. If this wereto occur, or if the REIT were unable to obtain adequate insurance, and its properties experienced damages thatwould otherwise have been covered by insurance, it could have a material adverse effect on the REIT’s business,cash flows, financial condition and results of operations and ability to make distributions to holders of Units.

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Access to Capital

The real estate industry is highly capital intensive. The REIT will require access to capital to maintain itsproperties, as well as to fund its growth strategy and significant capital expenditures from time to time. Therecan be no assurance that the REIT will have access to sufficient capital or access to capital on terms favourableto the REIT for future property acquisitions, financing or refinancing of properties, funding operating expensesor other purposes. Further, in certain circumstances, the REIT may not be able to borrow funds due to thelimitations set forth in the Declaration of Trust.

In addition, global financial markets have experienced a sharp increase in volatility during recent years. Thishas been, in part, the result of the re-valuation of assets on the balance sheets of international financialinstitutions and related securities. This has contributed to a reduction in liquidity among financial institutionsand has reduced the availability of credit to those institutions and to the issuers who borrow from them. Whilecentral banks as well as governments continue attempts to restore liquidity to the global economy, no assurancecan be given that the combined impact of the significant re-valuations and constraints on the availability of creditwill not continue to materially and adversely affect economies around the world in the near to medium term.These market conditions and unexpected volatility or illiquidity in financial markets may inhibit the REIT’saccess to long-term financing in the Canadian capital markets. As a result, it is possible that financing which theREIT may require in order to grow and expand its operations, upon the expiry of the term of financing, onrefinancing any particular property owned by the REIT or otherwise, may not be available or, if it is available,may not be available on favourable terms to the REIT. Failure by the REIT to access required capital could havea material adverse effect on the REIT’s business, cash flows, financial condition and results of operations andability to make distributions to holders of Units.

Financing Risk

Management estimates that as at April 1, 2012, the REIT’s total Indebtedness will be approximately$357.3 million, excluding a mark-to-market adjustment of $21.3 million, representing approximately 57% ofGross Book Value, including the $25 million that will be drawn on the Morguard Facility, and the estimatedpresent value of Morguard’s tax liability that is expected to be paid by the Partnership of $6.6 million, based onthe pro forma balance sheet, under IFRS. See ‘‘Pro Forma Capitalization of the REIT’’ and ‘‘Debt Structure’’. Aportion of the cash flow generated by the Initial Properties will be devoted to servicing such debt (includingindirectly servicing the Retained Debt by way of distributions to holders of Class C LP Units), and there can beno assurance that the REIT will continue to generate sufficient cash flow from operations to meet requiredinterest and principal payments. If the REIT (or in respect of the Retained Debt, Morguard) is unable to meetinterest or principal payments, it could be required to seek renegotiation of such payments or obtain additionalequity, debt or other financing. The failure of the REIT (or in respect of the Retained Debt, Morguard) to makeor renegotiate interest or principal payments or obtain additional equity, debt or other financing could have amaterial adverse effect on the REIT’s business, cash flows, financial condition and results of operations andability to make distributions to holders of Units.

The REIT will be subject to the risks associated with debt financing, including the risk that the mortgagesand banking facilities, if any, secured by the REIT’s properties will not be able to be refinanced or that the termsof such refinancing will not be as favourable as the terms of existing indebtedness, which may reduce AFFO perUnit. The weighted average term to maturity of the mortgage debt secured by the Initial Properties, includingthe Retained Debt, as at April 1, 2012 will be 4.50 years. See ‘‘Debt Structure — Debt Maturities’’. To the extentthat the REIT utilizes variable rate debt, such debt will result in fluctuations in the REIT’s cost of borrowing asinterest rates change. To the extent that interest rates rise following Closing, there may be a material adverseeffect on the REIT’s business, cash flows, financial condition and results of operations and ability to makedistributions to holders of Units.

The REIT will seek to manage its financing risk by maintaining a balanced maturity profile with nosignificant amounts coming due in one particular period. Management believes that the use of CMHC, FannieMae and Freddie Mac insurance will also assist the REIT in managing its renewal risk. Given the increasedcredit quality of such debt, the probability of the REIT being unable to renew the maturing debt or transfer this

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debt to another accredited lending institution is significantly reduced. However, there can be no assurance thatthe renewal of debt will be on as favourable terms as the REIT’s existing debt.

The REIT’s credit facilities will also contain covenants that require it to maintain certain financial ratios ona consolidated basis. If the REIT does not maintain such ratios, its ability to make distributions will be limited.

Degree of Leverage

The consolidated Indebtedness-to-Gross Book Value, including the $25 million that will be drawn on theMorguard Facility, and the estimated present value of Morguard’s tax liability that is expected to be paid by thePartnership of $6.6 million, is expected to be approximately 57% on Closing. The REIT’s degree of leveragecould have important consequences to Unitholders. For example, the degree of leverage could affect the REIT’sability to obtain additional financing in the future for working capital, capital expenditures, acquisitions,development or other general trust purposes, making the REIT more vulnerable to a downturn in business orthe economy in general. Under the Declaration of Trust, the maximum the REIT can leverage is 70% of itsGross Book Value.

Taxation Matters

Although, as of the date hereof, management of the REIT believes that the REIT will be able to meet therequirements of the REIT Exception throughout 2012, there can be no assurance that the REIT will be able toqualify for the REIT Exception in order for the REIT and the holders of Units not to be subject to the taximposed by the SIFT Rules in future years. Please refer to the discussion under ‘‘Certain Canadian FederalIncome Tax Considerations — SIFT Rules’’.

In the event the SIFT Rules apply to the REIT, the impact to holders of Units will depend on the status ofthe holder and, in part, on the amount of income distributed which would not be deductible by the REIT incomputing its income in a particular year and what portions of the REIT’s distributions constitute‘‘non-portfolio earnings’’, other income and returns of capital.

The SIFT Rules may have an adverse impact on the REIT and the Unitholders, on the value of the Unitsand on the ability of the REIT to undertake financings and acquisitions and if the SIFT Rules were to apply, thedistributable cash of the REIT may be materially reduced. The effect of the SIFT Rules on the market for theUnits is uncertain.

If certain tax proposals released on September 16, 2004 are enacted as proposed (the ‘‘September 16th TaxProposals’’), the REIT would cease to qualify as a ‘‘mutual fund trust’’ for purposes of the Tax Act if, at any timeafter 2004, the fair market value of all Units held by non-residents, partnerships that are not Canadianpartnerships or any combination of the foregoing is more than 50% of the fair market value of all issued andoutstanding Units unless not more than 10% (based on fair market value) of the REIT’s property is at any time‘‘taxable Canadian property’’ within the meaning of the Tax Act and certain other types of specified property.Restrictions on the ownership of Units are intended to limit the number of Units held by non-residents, suchthat non-residents, partnerships that are not Canadian partnerships or any combination of the foregoing may notown Units representing more than 50% of the fair market value of all Units. The September 16th Tax Proposalswere not included in Bill C-52, which received Royal Assent on June 22, 2007.

The CRA has expressed a view that, in certain circumstances, the deductibility of interest on moneyborrowed to invest in an income trust (including a real estate investment trust such as the REIT) may bereduced on a pro rata basis in respect of distributions from the income trust that are a return of capital and thatare not reinvested for an income earning purpose. If the CRA’s view were to apply to a Unitholder whoborrowed money to invest in Units of the REIT, part of the interest payable by such Unitholder in connectionwith money borrowed to acquire such Units could be non-deductible.

Exchange Rate Risk

A portion of the REIT’s real estate investments will be located in the United States. As a result, the REITis exposed to foreign currency exchange rate risk with respect to future cash flows derived from the InitialU.S. Properties and other properties located in the U.S. The REIT’s exposure to exchange rate risk could

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increase if the proportion of income from properties located in the United States increases as a result of futureproperty acquisitions in the United States.

The REIT intends to mitigate its foreign currency exposure by offsetting certain revenues earned inUnited States dollars from its U.S. properties against expenses and liabilities undertaken by the REIT inUnited States dollars.

Derivatives Risks

The REIT invests in and uses derivative instruments, including futures, forwards, options and swaps, tomanage its utility and interest rate risks inherent in its operations. There can be no assurance that the REIT’shedging activities will be effective. Further, these activities, although intended to mitigate price volatility, exposethe REIT to other risks. The REIT is subject to the credit risk that its counterparty (whether a clearingcorporation in the case of exchange traded instruments or another third party in the case of over-the-counterinstruments) may be unable to meet its obligations. In addition, there is a risk of loss by the REIT of margindeposits in the event of the bankruptcy of the dealer with whom the REIT has an open position in an option orfutures or forward contract. In the absence of actively quoted market prices and pricing information fromexternal sources, the valuation of these contracts involves judgment and use of estimates. As a result, changes inthe underlying assumptions or use of alternative valuation methods could affect the reported fair value of thesecontracts. The ability of the REIT to close out its positions may also be affected by exchange imposed dailytrading limits on options and futures contracts. If the REIT is unable to close out a position, it will be unable torealize its profit or limit its losses until such time as the option becomes exercisable or expires or the futures orforward contract terminates, as the case may be. The inability to close out options, futures and forward positionscould also have a material adverse effect on the REIT’s ability to use derivative instruments to effectively hedgeits utility and interest rate risks.

Litigation Risks

In the normal course of the REIT’s operations, whether directly or indirectly, it may become involved in,named as a party to or the subject of, various legal proceedings, including regulatory proceedings, taxproceedings and legal actions relating to personal injuries, property damage, property taxes, land rights, theenvironment and contract disputes. The outcome with respect to outstanding, pending or future proceedingscannot be predicted with certainty and may be determined in a manner adverse to the REIT and as a result,could have a material adverse effect on the REIT’s assets, liabilities, business, financial condition and results ofoperations. Even if the REIT prevails in any such legal proceeding, the proceedings could be costly andtime-consuming and may divert the attention of management and key personnel from the REIT’s businessoperations, which could have a material adverse effect on the REIT’s business, cash flows, financial conditionand results of operations and ability to make distributions to holders of Units.

Laws Benefitting Disabled Persons

Laws benefiting disabled persons may result in unanticipated expenses being incurred by the REIT. Underthe Americans with Disabilities Act of 1990 (the ‘‘ADA’’), all places intended to be used by the public are requiredto meet certain federal requirements related to access and use by disabled persons. The Fair HousingAmendments Act of 1988 (the ‘‘FHAA’’) requires apartment properties first occupied after March 13, 1991 tocomply with design and construction requirements for disabled access. For those projects receiving federalfunds, the Rehabilitation Act of 1973 also has requirements regarding disabled access. These and other federal,state and local laws may require modifications to the REIT’s properties, or affect renovations of the properties.Non-compliance with these laws could result in the imposition of fines or an award of damages to privatelitigants and also could result in an order to correct any non-complying feature, which could result in substantialcapital expenditures. Although the REIT believes that the Initial U.S. Properties are substantially in compliancewith present requirements, the REIT may incur unanticipated expenses to comply with the ADA, the FHAAand the Rehabilitation Act of 1973 in connection with the ongoing operation or redevelopment of the REIT’sproperties.

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United States Financing Renewal Risk — Condition of Fannie Mae or Freddie Mac

In the future, the REIT will seek to manage its financing risk in respect of its U.S. properties by maintaininga balanced maturity profile with no significant amounts coming due in any particular period. Managementbelieves that the use of Fannie Mae or Freddie Mac insured mortgages will assist the REIT in managing itsrenewal risk. Given the increased credit quality of such debt, the probability of the REIT being unable to renewthe 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 REIT’sexisting debt.

The ongoing financial and real estate market disruptions that began in 2007 could adversely affect themulti-unit residential property sector’s ability to obtain financing from Freddie Mac and Fannie Mae, whichcould materially adversely affect the REIT’s U.S. operations. Fannie Mae and Freddie Mac are major sources offinancing for the U.S. multi-unit residential sector, and both Freddie Mac and Fannie Mae have experiencedsignificant losses during the last three years due to credit-related expenses, securities impairments and fair valuelosses. If new U.S. government regulations (i) heighten the underwriting standards of Freddie Mac or FannieMae, (ii) adversely affect interest rates, or (iii) reduce the amount of capital that either Freddie Mac or FannieMae can make available to the multi-unit residential sector, such regulations could reduce or remove entirely avital resource of multi-unit residential financing. Any potential reduction in loans, guarantees and credit-enhancement arrangements from Freddie Mac or Fannie Mae could limit the availability of financing, increasethe cost of financing or otherwise decrease the amount of liquidity and credit available to the multi-unitresidential sector generally and the REIT specifically.

On September 7, 2008, the Federal Housing Finance Agency, or the FHFA, placed Fannie Mae and FreddieMac into conservatorship and, together with the U.S. Treasury, established a program designed to boost investorconfidence in Fannie Mae’s and Freddie Mac’s debt and mortgage-related securities. Although the U.S. Treasuryhas committed capital to Fannie Mae and Freddie Mac, there can be no assurance that these actions will beadequate for their needs. If these actions are inadequate, Fannie Mae and Freddie Mac could continue to sufferlosses and could fail to honour their guarantees and other obligations. The future roles of Fannie Mae andFreddie Mac could be significantly reduced and the nature of their guarantees could be considerably limitedrelative to historical measurements. Any changes to the nature of the guarantees provided by Fannie Mae andFreddie Mac could redefine what constitutes a U.S. government agency mortgage-backed security and couldhave broad adverse market implications. Such market implications could negatively affect the performance andmarket value of the REIT’s U.S. portfolio.

Potential Conflicts of Interest with Trustees

The Trustees will, from time to time, in their individual capacities, deal with parties with whom the REITmay be dealing, or may be seeking investments similar to those desired by the REIT. The interests of thesepersons could conflict with those of the REIT. The Declaration of the Trust contains conflict of interestprovisions requiring the Trustees to disclose their interests in certain contracts and transactions and to refrainfrom voting on those matters. In addition, certain decisions regarding matters that may give rise to a conflict ofinterest must be made by a majority of Independent Trustees only. Conflicts may also exist due to the fact thatcertain Trustees of the REIT will be affiliated with Morguard and will be nominated by Morguard.

Internal Controls

Effective internal controls are necessary for the REIT to provide reliable financial reports and to helpprevent fraud. Although the REIT will undertake a number of procedures and Morguard GP, the U.S. Managerand Morguard will implement a number of safeguards, in each case, in order to help ensure the reliability oftheir respective financial reports, including those imposed on the REIT under Canadian securities law, theREIT cannot be certain that such measures will ensure that the REIT will maintain adequate control overfinancial processes and reporting. Failure to implement required new or improved controls, or difficultiesencountered in their implementation, could harm the REIT’s results of operations or cause it to fail to meet itsreporting obligations. If the REIT or its auditors discovers a material weakness, the disclosure of that fact, even

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if quickly remedied, could reduce the market’s confidence in the REIT’s consolidated financial statements andmaterially adversely affect the trading price of the Units.

Risks Related to the REIT’s Relationship with Morguard

Significant Ownership by Morguard

On Closing, it is expected that Morguard will hold an approximate 69.7% effective interest in the REITthrough ownership of all of the Class B LP Units of the Partnership (or an approximate 67.6% effective interestin the REIT if the Over-Allotment Option is exercised in full), where each Class B LP Unit will be attached to aSpecial Voting Unit of the REIT, providing for voting rights in the REIT. Morguard will also hold all of theClass C LP Units of the Partnership.

The Class C LP Units have been designed to provide Morguard with an interest in the Partnership that willentitle Morguard to distributions, in priority to distributions to holders of the Class A LP Units, Class BLP Units, Class A GP Units and Class B GP Units in an amount, if paid, expected to be sufficient (without anyadditional amounts) to permit Morguard to satisfy amounts payable under the Retained Debt and in respect ofcertain associated income tax liabilities of Morguard, if any. See ‘‘The Partnership — Partnership Units’’.

In addition, the Declaration of Trust will grant Morguard the right to nominate certain Trustees of theREIT based on Morguard’s direct and indirect ownership interest in the REIT. See ‘‘Trustees and Managementof the REIT — Governance and Board of Trustees’’. For so long as Morguard maintains a significant effectiveinterest in the REIT, Morguard will have the ability to exercise certain influence with respect to the affairs of theREIT and significantly affect the outcome of Unitholder votes, and may have the ability to prevent certainfundamental transactions. As a result, Morguard will have the ability to influence many matters affectingthe REIT.

Accordingly, the Units may be less liquid and trade at a relative discount compared to such Units incircumstances where Morguard did not have the ability to influence or determine matters affecting the REIT.Additionally, Morguard’s significant effective interest in the REIT may discourage transactions involving achange of control of the REIT, including transactions in which an investor, as a holder of the Units, mightotherwise receive a premium for its Units over the then-current market price.

Pursuant to the Exchange Agreement, each Class B LP Unit will be exchangeable at the option of theholder for one Unit of the REIT (subject to customary anti-dilution adjustments). If Morguard exchanges someor all of its Class B LP Units for Units and subsequently sells such Units in the public market, the market priceof the Units may decrease. Moreover, the perception in the public market that these sales will occur could alsoproduce such an effect.

Retained Debt

The Retained Debt will not be assumed by the Partnership and will remain as indebtedness of Morguard. Inconsideration of the Retained Debt, Morguard will receive Class C LP Units of the Partnership on which it willreceive priority distributions. Morguard will be obligated to make interest payments and principal repayments ona periodic basis in respect of the Retained Debt. Partnership distributions on the Class C LP Units held byMorguard will, if paid, be in amounts expected to be sufficient to make such payments. The Partnership willagree to provide Morguard’s creditors with a guarantee in respect of the Retained Debt to ensure the lendersare not prejudiced in their ability to collect from Morguard in the event that payments in respect of the RetainedDebt are not made as expected. In the event that Morguard does not make interest payments and principalrepayments as required in respect of the Retained Debt, the creditors of the Retained Debt may seek recoursefrom the Partnership and against certain of its Initial Properties, which could have a material adverse effect onthe REIT’s cash flows, financial condition and ability to make distributions to holders of Units.

Morguard will indemnify the Partnership and the REIT for any losses suffered by the Partnership or theREIT in the event payments on the Retained Debt are not made as required, provided such losses are notattributable to any action or failure to act on the part of the Partnership.

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The REIT must obtain Morguard’s consent before it is permitted to dispose of any of its properties that aresubject to the Retained Debt, subject to certain exceptions. See ‘‘Debt Structure — Retained Debt’’. In the eventthat such consent is required and not provided on terms acceptable to the REIT or is not provided at all, theREIT may be unable to dispose of certain of its properties on commercially acceptable terms, which maymaterially adversely affect the REIT’s general liquidity and ability to allocate capital in an efficient manner.

Acquisition of Future Properties from Morguard

The REIT’s ability to expand its asset base and increase AFFO per Unit through acquisitions is affected bythe REIT’s ability to leverage its relationship with Morguard to access opportunities to acquire additionalmulti-unit residential rental properties that satisfy the REIT’s investment criteria. Morguard has advised theREIT that its current intention is to offer to sell to the REIT additional multi-unit residential properties that itmanages and in which it has an ownership interest, including some or all of the Retained Properties, in one ormore transactions over the next few years, subject to market conditions, although no assurance can be given inthat regard. There can be no assurance that the REIT will be able to access such opportunities and acquireadditional properties or do so on terms favourable to the REIT. In addition, there can be no assurance that theRight of First Offer granted to the REIT by Morguard to acquire Morguard’s interest in certain multi-unitresidential properties will be exercised or that Morguard will dispose of interests in its properties. The inabilityof the REIT to expand its asset base by virtue of its relationship with Morguard or pursuant to the Right of FirstOffer may have a material adverse effect on the REIT’s business, cash flows, financial condition and results ofoperations and ability to make distributions to holders of Units.

Potential Conflicts of Interest with Morguard

Morguard’s continuing businesses may lead to conflicts of interest between Morguard and the REIT. TheREIT may not be able to resolve any such conflicts, and, even if it does, the resolution may be less favourable tothe REIT than if it were dealing with a party that was not a holder of a significant interest in the REIT. Theagreements that the REIT will enter into with Morguard on Closing may be amended upon agreement betweenthe parties, subject to applicable law and approval of the Independent Trustees. Because of Morguard’ssignificant holdings in the REIT, the REIT may not have the leverage to negotiate any required amendments tothese agreements on terms as favourable to the REIT as those the REIT could secure with a party that was not asignificant holders of Units.

Dependence on Morguard GP, the U.S. Manager and Morguard

The REIT is dependent upon Morguard GP, the U.S. Manager and Morguard for operational andadministrative services relating to the REIT’s business. The Limited Partnership Agreement does not have aspecified term or expiry date, and accordingly, may at times in the future not reflect current market terms forduties and responsibilities of Morguard GP, as a general partner of the Partnership or the external structure maybecome uneconomical for the REIT. Each U.S. Management Agreement has a term of 10 years, with automatic5 year renewals, and may at times in the future not reflect current market terms for duties and responsibilities ofthe U.S. Manager or the external structure may become uneconomical for the REIT. The Services Agreementhas a term of 10 years, with automatic 5 year renewals, and may at times in the future not reflect current marketterms for duties and responsibilities of Morguard. There is a risk that, because of the terms of the LimitedPartnership Agreement, the U.S. Management Agreements and the Services Agreement, termination of the U.S.Management Agreements, removal of Morguard GP as a general partner of the Partnership or termination ofthe Services Agreement may be uneconomical for the REIT and accordingly not in the best interest of the REIT.Should the U.S. Manager terminate a U.S. Management Agreement, Morguard GP resign or be removed as ageneral partner of the Partnership or Morguard terminate the Services Agreement, the REIT may be requiredto engage the services of an external asset manager and/or property manager. The REIT may be unable toengage an asset manager and/or property manager on acceptable terms, in which case the REIT’s operationsand cash available for distribution may be materially adversely affected. Alternatively, it may be able to engagean asset manager and/or property manager on acceptable terms or it may elect to internalize its externalstructure, but the process undertaken to engage such manager(s) or to internalize could be costly and

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time-consuming and may divert the attention of management and key personnel away from the REIT’s businessoperations, which could materially adversely affect its financial condition.

Additionally, the Right of First Offer and Non-Solicit Agreement provides that, subject to certainexceptions, the REIT will not engage a party that is not a Morguard entity to perform any of the services to beperformed by Morguard GP, the U.S. Manager or Morguard on Closing, for so long as such service is performedby a Morguard entity. See ‘‘Arrangements with Morguard — Morguard GP’’, ‘‘Arrangements with Morguard —U.S. Manager’’, ‘‘Arrangements with Morguard — Services Agreement’’ and ‘‘Arrangements with Morguard —Right of First Offer and Non-Solicit Agreement’’.

While the REIT GP has oversight responsibility with respect to the duties and responsibilities ofMorguard GP as a general partner of the Partnership and the Trustees have similar oversight responsibility withrespect to the services provided by the U.S. Manager and Morguard pursuant to the U.S. ManagementAgreements and the Services Agreement, respectively, the Morguard GP Duties and the services provided bythe U.S. Manager and Morguard under the U.S. Management Agreements and the Services Agreement will notbe performed by employees of the REIT or the Partnership, but by each of Morguard GP, the U.S. Manager andMorguard directly, and through entities to which each may subcontract their duties. Further, the foregoingarrangements are subject to limited termination rights in favour of the REIT or the Partnership. See‘‘Arrangements with Morguard’’. As a result, Morguard directly, and through entities to which it maysubcontract, will have the ability to influence many matters affecting the REIT and the performance of itsproperties now and in the foreseeable future.

While the Morguard name and trademark and related marks and designs (including the stylized ‘‘M’’ logos)will be licensed to the REIT by MIL under a non-exclusive, royalty-free trademark license agreement, suchlicence will not be on a perpetual basis and may be terminated by Morguard at any time on 30 days’ noticefollowing the date on which the Partnership (or other limited partnership controlled by the REIT) no longer hasMorguard GP (or another Morguard entity) as a general partner and the U.S. Manager (or another Morguardentity) is no longer manager of the REIT’s U.S. properties. Termination of the licence would require the REITto rebrand its business, which could be costly and time-consuming and may divert attention of management andkey personnel from the REIT’s business operations, which could materially adversely affect its financialcondition.

Assumption of Liabilities

The REIT will assume liabilities arising out of or related to the REIT’s business, operations or assets, andwill agree to indemnify the vendors of the Initial Properties for, among other matters, such liabilities. The REITmay assume unknown liabilities that could be significant. The allocation of assets and liabilities between thevendors of the Initial Properties and the REIT may not reflect the allocation that would have been reachedbetween the REIT and a party that was not in a position to exercise significant influence over it. See ‘‘Acquisitionof Initial Properties’’ and ‘‘Arrangements with Morguard’’.

Risks Related to the Offering

No Prior Public Market for Units

Prior to the Offering, no public market existed for the Units. An active and liquid market for the Units maynot develop following the completion of the Offering or, if developed, may not be maintained. If an active publicmarket does not develop or is not maintained, investors may have difficulty selling their Units. The initial publicoffering price of Units was determined by negotiation among the REIT, Morguard and the Underwriters andmay not be indicative of the price at which the Units will trade following the completion of the Offering. TheREIT cannot assure investors that the market price of Units will not materially decline below the initial publicoffering price.

Volatile Market Price for Units

The market price for Units may be volatile and subject to wide fluctuations in response to numerous factors,many of which are beyond the REIT’s control, including the following: (i) actual or anticipated fluctuations in

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the REIT’s quarterly results of operations; (ii) recommendations by securities research analysts; (iii) changes inthe economic performance or market valuations of other issuers that investors deem comparable to the REIT;(iv) addition or departure of the REIT’s executive officers and other key personnel; (v) release or expiration oflock-up or other transfer restrictions on outstanding Units; (vi) sales or perceived sales of additional Units;(vii) significant acquisitions or business combinations, strategic partnerships, joint ventures or capitalcommitments by or involving the REIT or its competitors; and (viii) news reports relating to trends, concerns,technological or competitive developments, regulatory changes and other related issues in the REIT’s industryor target markets.

Financial markets have recently experienced significant price and volume fluctuations that have particularlyaffected the market prices of equity securities of public entities and that have, in many cases, been unrelated tothe operating performance, underlying asset values or prospects of such entities. Accordingly, the market priceof the Units may decline even if the REIT’s operating results, underlying asset values or prospects have notchanged. Additionally, these factors, as well as other related factors, may cause decreases in asset values that aredeemed to be other than temporary, which may result in impairment losses. As well, certain institutionalinvestors may base their investment decisions on consideration of the REIT’s environmental, governance andsocial practices and performance against such institutions’ respective investment guidelines and criteria, andfailure to meet such criteria may result in a limited or no investment in the Units by those institutions, whichcould materially adversely affect the trading price of the Units. There can be no assurance that continuingfluctuations in price and volume will not occur. If such increased levels of volatility and market turmoil continuefor a protracted period of time, the REIT’s operations could be materially adversely impacted and the tradingprice of the Units may be materially adversely affected.

Ability of Unitholders to Redeem Units

It is anticipated that the redemption right attached to the Units will not be the primary mechanism by whichholders of Units liquidate their investments. The entitlement of holders of Units to receive cash upon theredemption of their Units is subject to the limitations that: (i) the total amount payable by the REIT in respectof such Units and all other Units tendered for redemption in the same calendar month must not exceed theMonthly Limit (provided that such limitation may be waived at the discretion of the Trustees in respect of allUnits tendered for redemption in such calendar month); (ii) at the time such Units are tendered for redemption,the outstanding Units must be listed for trading on the TSX or traded or quoted on any other stock exchange ormarket which the Trustees consider, in their sole discretion, provides representative fair market value prices forthe Units; and (iii) the normal trading of Units is not suspended or halted on any stock exchange on which theUnits are listed (or, if not listed on a stock exchange, in any market where the Units are quoted for trading) onthe Redemption Date or for more than five trading days during the ten-day trading period commencingimmediately after the Redemption Date.

Subsidiary Notes which may be distributed to holders of Units in connection with a redemption will not belisted on any exchange, no market is expected to develop in Subsidiary Notes and such securities may be subjectto an indefinite ‘‘hold period’’ or other resale restrictions under applicable securities laws. Subsidiary Notes sodistributed may not be qualified investments for Plans, depending upon the circumstances at the time.

Use of Appraisals

Caution should be exercised in the evaluation and use of appraisals. An appraisal is an estimate of marketvalue. It is not a precise measure of value but is based on a subjective comparison of related activity taking placein the real estate market. The Appraisals are based on various assumptions of future expectations and while theAppraiser’s internal forecasts for the Initial Properties are considered to be reasonable at the current time, someof the assumptions may not materialize or may differ materially from actual experience in the future.

As noted above, a publicly traded real estate investment trust will not necessarily trade at values determinedsolely by reference to the underlying value of its real estate assets. Accordingly, the Units may trade at apremium or a discount to values implied by the Appraisals.

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Historical Financial Information and Pro Forma Financial Information

The historical financial information relating to the Initial Properties included in this prospectus has beenderived from Morguard’s historical accounting records. The REIT believes that the assumptions underlying thecombined financial statements are reasonable. However, the combined financial statements may not reflect whatthe REIT’s financial position, results of operations or cash flows would have been had the REIT been a stand-alone entity during the historical periods presented or what the REIT’s financial position, results of operationsor cash flows will be in the future.

In particular, the historical costs and expenses reflected in the combined financial statements include anallocation for certain corporate functions historically provided by Morguard. These expense allocations werebased on what Morguard considered to be reasonable allocations of the utilization of services provided or thebenefit received by the owners of the Initial Properties. The REIT estimates that general annual trust expenseswill increase when it becomes a stand-alone entity. The REIT has not made adjustments to its historical financialinformation to reflect changes that may occur in its cost structure, financing and operations as a result of itsacquisition of the Initial Properties. In preparing the pro forma financial information in this prospectus, theREIT has given effect to, among other items, the Offering and the Closing. The estimates used in the pro formafinancial information may not be similar to the REIT’s actual experience as a stand-alone public entity.

Return on Investment Not Guaranteed

The Units are equity securities of the REIT and are not traditional fixed income securities. A fundamentalcharacteristic that distinguishes the Units from traditional fixed income securities is that the REIT does not havea fixed obligation to make payments to holders of Units and does not promise to return the initial purchase priceof a Unit on a certain date in the future. The REIT has the ability to reduce or suspend distributions ifcircumstances so warrant. The ability of the REIT to make cash distributions, and the actual amount distributed,will be entirely dependent on the operations and assets of the REIT and its subsidiaries, and will be subject tovarious factors including financial performance, obligations under applicable credit facilities (including thePartnership’s obligation to make distributions to holders of the Class C LP Units), fluctuations in working capitaland capital expenditure requirements. There can be no assurance regarding the amount of income to begenerated by the REIT’s properties. The market value of the Units will deteriorate if the REIT is unable tomeet its distribution targets in the future, and that deterioration may be significant. In addition, unlike interestpayments or an interest-bearing debt security, the REIT’s cash distributions are composed of different types ofpayments (portions of which may be fully or partially taxable or may constitute non-taxable returns of capital).The composition for tax purposes of those distributions may change over time, thus affecting the after-taxreturns to holders of Units. Therefore, the rate of return over a defined period for a holder of Units may not becomparable to the rate of return on a fixed income security that provides a ‘‘return on capital’’ over thesame period.

AFFO may exceed actual cash available to the REIT from time to time because of items such as principalrepayments and capital expenditures in excess of stipulated reserves identified by the REIT in its calculation ofAFFO and redemptions of Units, if any. The REIT may be required to use part of its debt capacity or to reducedistributions in order to accommodate such items.

Structural Subordination of Units

In the event of bankruptcy, liquidation or reorganization of the Partnership or any of its subsidiaries,holders of their indebtedness (including the Retained Debt) and their trade creditors will generally be entitled topayment of their claims from the assets of the Partnership and its subsidiaries before any assets are madeavailable for distribution to the REIT or holders of Units. Upon completion of this Offering, the Units will beeffectively subordinated to the debt and other obligations of the Partnership and its subsidiaries. See ‘‘DebtStructure’’. The Partnership and its subsidiaries will generate all of the REIT’s cash available for distributionand hold substantially all of the REIT’s assets.

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Dilution

The number of Units that the REIT is authorized to issue is unlimited. The REIT may, in its sole discretion,issue additional Units from time to time subject to the rules of any applicable stock exchange on which the Unitsare then listed and applicable securities law. The issuance of any additional Units may have a dilutive effect onthe interests of holders of Units.

Unitholder Liability

The Declaration of Trust provides that no Unitholder will be subject to any liability whatsoever to anyperson in connection with the holding of a Unit. In addition, legislation has been enacted in the Province ofOntario and certain other provinces and territories that is intended to provide Unitholders in those provincesand territories with limited liability. However, there remains a risk, which is considered by the REIT to beremote in the circumstances, that a holder of Units could be held personally liable for the obligations of theREIT to the extent that claims are not satisfied out of the assets of the REIT. It is intended that the affairs of theREIT will be conducted to seek to minimize such risk wherever possible.

Nature of Investment

The Units represent a fractional interest in the REIT and do not represent a direct investment in theREIT’s assets and should not be viewed by investors as direct securities of the REIT’s assets. A holder of a Unitof the REIT does not hold a share of a body corporate. As unitholders of the REIT, the holders will not havestatutory rights normally associated with ownership of shares of a corporation including, for example, the rightto bring ‘‘oppression’’ or ‘‘derivative’’ actions. The rights of unitholders are based primarily on the Declarationof Trust. There is no statute governing the affairs of the REIT equivalent to the CBCA which sets out the rightsand entitlements of shareholders of corporations in various circumstances. As well, the REIT may not be arecognized entity under certain existing insolvency statutes, such as the Bankruptcy and Insolvency Act (Canada)and the Companies Creditors’ Arrangement Act (Canada). Accordingly, the treatment of unitholders upon aninsolvency is uncertain.

MATERIAL CONTRACTS

The following are the only material agreements of the REIT or its subsidiaries that will be in effect onClosing (other than certain contracts entered into in the ordinary course of business):

a) the Acquisition Agreements described under ‘‘Acquisition of Initial Properties — AcquisitionAgreements’’;

b) the Declaration of Trust described under ‘‘Declaration of Trust’’;

c) the Exchange Agreement described under ‘‘Retained Interest — Exchange Agreement’’;

d) the Head Lease described under ‘‘Arrangements with Morguard — Head Lease’’;

e) the Indemnity Agreement described under ‘‘Arrangements with Morguard — Indemnification’’;

f) the Limited Partnership Agreement described under ‘‘The Partnership’’;

g) the U.S. Management Agreements described under ‘‘Arrangements with Morguard — U.S. Manager’’;

h) the Services Agreement described under ‘‘Arrangements with Morguard — Services Agreement’’;

i) the Underwriting Agreement described under ‘‘Plan of Distribution’’; and

j) the Right of First Offer and Non-Solicit Agreement described under ‘‘Arrangements with Morguard —Right of First Offer and Non-Solicit Agreement’’.

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INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

Other than as noted below, there are no material interests, direct or indirect, of any Trustee or executiveofficer of the REIT, any Unitholder that beneficially owns, or controls or directs, (directly or indirectly) morethan 10% of the Units or Special Voting Units of the REIT, or any associate or affiliate of any of the foregoingpersons, in any transaction within the three years before the date thereof that has materially affected or isreasonably expected to materially affect the REIT or any of its subsidiaries.

K. (Rai) Sahi (Trustee, Chair of the Board and Chief Executive Officer of the REIT), Paul Miatello (ChiefFinancial Officer of the REIT), Beverley G. Flynn (Secretary and General Counsel of the REIT) and JohnTalano (Vice President of the REIT) and certain other executive officers of the REIT are employees ofMorguard and have ongoing relationships with Morguard. In addition, Frank Munsters was a Vice President atMorguard prior to his retirement from Morguard on July 2, 2010. On Closing, the REIT will indirectly acquirethe Initial Properties from Morguard and Morguard will enter into certain agreements with the REIT, thePartnership and U.S. Holdco. In addition, Morguard will hold a significant effective interest in the REITfollowing Closing. See ‘‘Acquisition of Initial Properties’’, ‘‘Arrangements with Morguard’’ and ‘‘RetainedInterest’’, together with certain other sections of this prospectus including ‘‘Trustees and Management of theREIT’’, ‘‘Plan of Distribution’’ and ‘‘Risk Factors — Risks Related to the REIT’s Relationship with Morguard’’and ‘‘Promoter’’.

PROMOTER

Morguard has taken the initiative in founding and organizing the REIT and will be providing the MorguardFacility on Closing, and may therefore be considered a promoter of the REIT for the purposes of applicablesecurities legislation. See ‘‘Acquisition of Initial Properties’’, ‘‘Arrangements with Morguard’’, ‘‘RetainedInterest’’ and ‘‘Debt Structure’’, together with certain other sections of this prospectus including ‘‘Trustees andManagement of the REIT’’, ‘‘Plan of Distribution’’, ‘‘Risk Factors — Risks Related to the REIT’s Relationshipwith Morguard’’ and ‘‘Interests of Management and Others in Material Transactions’’.

PRINCIPAL UNITHOLDER

Except as set out below, to the knowledge of the Trustees and management of the REIT, on Closing, noperson or company will beneficially own, control or direct, directly or indirectly, more than 10% of the Units. OnClosing, it is expected that Morguard will hold an approximate 69.7% effective interest in the REIT throughownership of all of the Class B LP Units of the Partnership (or an approximate 67.6% effective interest in theREIT if the Over-Allotment Option is exercised in full). On Closing, Morguard will hold all of the outstandingClass B LP Units, Class C LP Units and Special Voting Units. See ‘‘Retained Interest’’ and ‘‘Plan ofDistribution’’. Paros Enterprises Limited and S.N.A. Management Limited, both being corporations controlledby Mr. K. (Rai) Sahi, a director, Chairman and Chief Executive Officer of Morguard, beneficially own orexercise control or direction over 6,665,499 common shares of Morguard carrying approximately 51.65% of thevotes attached to Morguard’s outstanding common shares as at April 4, 2012.

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

Legal Proceedings

The REIT is not aware of any existing or contemplated legal proceedings to which it is or was a party to, orto which any of its properties (including the Initial Properties) is or was the subject of, since January 1, 2012.

Regulatory Actions

The REIT is not aware of any penalties or sanctions imposed by a court or securities regulatory authority orother regulatory body against the REIT, nor has the REIT entered into any settlement agreements before acourt or with a securities regulatory authority.

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LEGAL MATTERS

The matters referred to under ‘‘Eligibility for Investment’’ and ‘‘Certain Canadian Federal Income TaxConsiderations’’, as well as certain other legal matters relating to the issue and sale of the Units, will be passedupon on behalf of the REIT by Stikeman Elliott LLP and on behalf of the Underwriters by Torys LLP. As at thedate of this prospectus, the partners and associates of Stikeman Elliott LLP beneficially own, directly andindirectly, less than 1% of the outstanding securities or other property of the REIT, its associates or its affiliates.As at the date of this prospectus, the partners and associates of Torys LLP beneficially own, directly andindirectly, less than 1% of the outstanding securities or other property of the REIT, its associates or its affiliates.

EXPERTS

Certain information relating to the Appraisals has been based upon reports prepared by Altus GroupLimited. As at the date of this prospectus, the ‘‘designated professionals’’ of Altus Group Limited beneficiallyown, directly and indirectly, less than 1% of the outstanding securities or other property of the REIT, itsassociates or its affiliates.

The auditors of the REIT, Ernst & Young LLP, have advised that it is independent of the REIT inaccordance with the rules of professional conduct applicable to auditors in Ontario.

AUDITORS, TRANSFER AGENT AND REGISTRAR

The auditors of the REIT are Ernst & Young LLP, Chartered Accountants, located in Toronto, Ontario.The transfer agent and registrar for the Units is Computershare Trust Company of Canada at its principal officein Toronto, Ontario.

PURCHASERS’ STATUTORY RIGHTS

Securities legislation in certain of the provinces and territories of Canada provides a purchaser with theright to withdraw from an agreement to purchase securities. This right may be exercised within two business daysafter receipt or deemed receipt of a prospectus and any amendment. In several of the provinces and territories,the securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions,revisions of the price or damages if the prospectus and any amendment contains a misrepresentation or is notdelivered to the purchaser, provided that the remedies for rescission, revisions of the price or damages areexercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’sprovince or territory. The purchaser should refer to any applicable provisions of the securities legislation of thepurchaser’s province or territory for the particulars of these rights or consult with a legal adviser.

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GLOSSARY

The following terms used in this prospectus have the meanings set forth below:

‘‘AB RTA’’ means the Residential Tenancies Act (Alberta), as amended.

‘‘Acquisition Agreements’’ means the agreements of purchase and sale to be entered into on or before Closingpursuant to which the REIT will indirectly acquire the Initial Properties as described under ‘‘Acquisition ofInitial Properties — Acquisition Agreements’’.

‘‘AFFO’’ means adjusted funds from operations, being FFO adjusted by (i) adding amortization of deferredfinancing costs in place at Closing, amortization of free rent and amortization of cash flow hedges, (ii) deductingreserves for maintenance capital expenditures, and (iii) making such other adjustments as may be determined bythe Trustees in their discretion.

‘‘Appraisals’’ means the estimates of the fair market value of the Initial Properties provided by the Appraisers.

‘‘Appraisers’’ means Altus Group Limited and certain of its subsidiaries.

‘‘Arranging for Financing Services’’ means the services to be provided by Morguard or the U.S. Manager to theREIT in respect of arranging for the direct or indirect financing and refinancing of real property held directly orindirectly by the REIT pursuant to the Services Agreement or the applicable U.S. Management Agreement,as applicable.

‘‘Assumed CMHC Mortgages’’ means those CMHC insured mortgages on certain of the Initial CanadianProperties to be assumed by the REIT as described under ‘‘Debt Structure — Composition of Indebtedness —Assumed CMHC Mortgages’’.

‘‘Assumed Fannie Mae Mortgages’’ means those Fannie Mae insured mortgages on the Initial U.S. Properties tobe assumed by the REIT as described under ‘‘Debt Structure — Composition of Indebtedness — AssumedFannie Mae Mortgages’’.

‘‘Base Annual Distribution’’ means the base annual distribution to be received by Morguard GP from thePartnership in respect of its performance of Morguard GP Duties as a general partner of the Partnership, asdescribed under ‘‘Arrangements with Morguard — Morguard GP — Partnership Distributions toMorguard GP’’.

‘‘BCA Reports’’ means the building condition assessment reports prepared for the Initial Properties, as describedunder ‘‘Assessments and Valuation of the Initial Properties — Building Condition Assessments’’.

‘‘Board’’ means the board of Trustees of the REIT.

‘‘Canadian GAAP’’ means the Canadian generally accepted accounting principles for publically accountableenterprises prescribed by Part 4 of National Instrument 52-107, applicable to financial years beginning beforeJanuary 1, 2011.

‘‘Canadian Gross Book Value’’ means the Gross Book Value attributable to the REIT’s Canadian properties.

‘‘Canadian Gross Property Revenue’’ means the Gross Property Revenue attributable to the REIT’s Canadianproperties.

‘‘CBCA’’ means the Canada Business Corporations Act, as amended.

‘‘CDS’’ means CDS Clearing and Depository Services Inc.

‘‘C&G Committee’’ means the Compensation and Governance Committee of the Board.

‘‘Class A GP Unit’’ means the Class A general partnership units of the Partnership.

‘‘Class A LP Unit’’ means the Class A limited partnership units of the Partnership.

‘‘Class B GP Unit’’ means the Class B general partnership units of the Partnership.

‘‘Class B LP Unit’’ means the Class B limited partnership units of the Partnership.

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‘‘Class C LP Unit’’ means the Class C limited partnership units of the Partnership.

‘‘Closing’’ means the closing of the Offering, the acquisition by the REIT of the Initial Properties and otherrelated transactions, the material terms of which are described in this prospectus.

‘‘CMHC’’ means the Canada Mortgage and Housing Corporation.

‘‘Core Properties’’ means properties generally characterized by the features described under ‘‘The REIT —Growth Strategies’’.

‘‘CRA’’ means the Canada Revenue Agency.

‘‘Declaration of Trust’’ means the declaration of trust of the REIT dated as of March 1, 2012 as it will be amendedand restated as of Closing, all as described under ‘‘Declaration of Trust’’.

‘‘Distribution Date’’ means, in respect of a calendar month, on or about the 15th day of the following calendarmonth or such other dates as the Trustees so determine in their discretion.

‘‘DRIP’’ means the Distribution Reinvestment Plan of the REIT.

‘‘Exchange Agreement’’ means the agreement to be entered into at Closing pursuant to which Morguard will begranted, among other things, the right to require the REIT to exchange each Class B LP Unit held by Morguardfor one Unit as described under ‘‘Retained Interest — Exchange Agreement’’.

‘‘Fannie Mae’’ means the Federal National Mortgage Association.

‘‘FFO’’ means funds from operations, being: (i) in respect of IFRS, net income before fair value gains/losses onreal estate properties, fair value adjustments on the redeemable Class B LP Units classified as liabilities,distributions on the Class B LP Units, gains/losses on the disposition of real estate properties, deferred incometaxes and certain other non-cash adjustments; or (ii) in respect of Canadian GAAP, net income beforeamortization of real estate properties, gains/losses on the disposition of real estate properties, future incometaxes and certain other non-cash adjustments.

‘‘Focus Activities’’ means the activities which the REIT will primarily focus on, as described under ‘‘InvestmentGuidelines and Operating Policies — Investment Guidelines’’.

‘‘Freddie Mac’’ means the Federal Home Loan Mortgage Corporation.

‘‘GAAP’’ means Canadian generally accepted accounting principles for publicly accountable enterprises asdefined by the Accounting Standards Board of The Canadian Institute of Chartered Accountants, as amendedfrom time to time, which for fiscal years beginning on or after January 1, 2011, is IFRS.

‘‘GDP’’ means gross domestic product.

‘‘General Partners’’ means, collectively, the REIT GP and Morguard GP, and ‘‘General Partner’’ means any oneof them.

‘‘GP Distributions’’ means those distributions of the Partnership to the General Partners as described under‘‘Arrangements with Morguard — Morguard GP — Partnership Distribution Policy and Priority’’, which will bemade in priority to the distributions to the Limited Partners, other than distributions to the holders of Class CLP Units.

‘‘Gross Book Value’’ means the acquisition cost of the REIT’s assets plus: (i) fair value adjustments and(ii) accumulated amortization on property, plant and equipment.

‘‘Gross Property Revenue’’ means, in respect of the Partnership, all revenue received or receivable from the realproperties owned directly or indirectly by the Partnership, including (i) payments made pursuant to the HeadLease, related proceeds of business or rental interruption insurance, after deduction for insurance deductiblesand excluding (ii) actual bad debts, gains on sales, and the differential between in-place rents and below orabove market rents, determined in accordance with the applicable accounting principles of the Partnership at thetime of the calculation.

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‘‘Head Lease’’ means the head lease between the Partnership and Morguard to be entered into at Closing, asdescribed under ‘‘Arrangements with Morguard — Head Lease’’.

‘‘High Rise’’ means a building with more than seven storeys.

‘‘ICREIM/IPD’’ means Institute of Canadian Real Estate Investment Managers/Investment Property Databank,publishers of the Canada Annual Property Index.

‘‘IFRS’’ means International Financial Reporting Standards as issued by the International Accounting StandardsBoard and as adopted by the Canadian Institute of Chartered Accountants in Part I of The Canadian Institute ofChartered Accountants Handbook — Accounting, as amended from time to time.

‘‘Indebtedness’’ means (without duplication) on a consolidated basis:

(i) any obligation of the REIT for borrowed money other than the impact of any net discount or premiumon Indebtedness at the time assumed from vendors of properties at rates of interest less or greaterthan, respectively, fair value and any undrawn amounts under any acquisition or operating facility;

(ii) any obligation of the REIT (other than the impact of any net discount or premium on Indebtedness atthe time assumed from vendors of properties at rates of interest less or greater than, respectively, fairvalue and any undrawn amounts under any acquisition or operating facility) incurred in connectionwith the acquisition of property, assets or businesses other than the amount of future income taxliability arising out of indirect acquisitions;

(iii) any obligation of the REIT issued or assumed as the deferred purchase price of property;

(iv) any capital lease obligation of the REIT; and

(v) any obligation of the type referred to in subsections (i) through (iv) of another person, the payment ofwhich the REIT has guaranteed or for which the REIT is responsible for or liable, other than such anobligation in connection with a property that has been disposed of by the REIT for which thepurchaser has assumed such obligation and provided the REIT with an indemnity or similararrangement therefor;

provided that (A) for the purposes of subsections (i) through (iv), an obligation will constitute Indebtedness onlyto the extent that it would appear as a liability on the consolidated balance sheet of the REIT in accordance withIFRS, (B) obligations referred to in subsections (i) through (iii) exclude deferred financing costs, trade accountspayables, tenant deposits, distributions payable to unitholders and accrued liabilities arising in the ordinarycourse of business, (C) amounts payable on the Class C LP Units, including the present value of Morguard’s taxliability that is expected to be paid by the Partnership, assuming the debt remains outstanding, will constituteIndebtedness, (D) Units, Class A LP Units, Class B LP Units and other exchangeable securities will notconstitute Indebtedness and (E) convertible debentures will constitute Indebtedness to the extent of theprincipal amount thereof outstanding.

‘‘Indemnity Agreement’’ means the indemnity agreement between Morguard, the REIT and the Partnership to beentered into at Closing as described under ‘‘Arrangements with Morguard — Indemnification’’.

‘‘Independent Trustee’’ means a Trustee who, in relation to the REIT, is ‘‘independent’’ within the meaning ofNational Instrument 58-101 — Disclosure of Corporate Governance Practices, as replaced or amended from timeto time (including any successor rule or policy thereto).

‘‘Initial Canadian Properties’’ means the portfolio of 14 Canadian residential properties comprising interests inan aggregate of 12 High Rise, 3 Mid Rise and 56 Low Rise buildings, which will be indirectly acquired by theREIT concurrently with Closing, as described under ‘‘Assets of the REIT’’.

‘‘Initial Properties’’ means, collectively, the Initial Canadian Properties and the Initial U.S. Properties.

‘‘Initial U.S. Properties’’ means the portfolio of interests in three U.S. residential walk-up garden communityproperties comprising an aggregate of 52 two-storey buildings, which will be indirectly acquired by the REITconcurrently with Closing, as described under ‘‘Assets of the REIT’’.

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‘‘License Agreement’’ means the license agreement between the REIT and MIL to be entered into at Closing, asdescribed under ‘‘Arrangements with Morguard — License of the Morguard Name and Logo’’.

‘‘Limited Partners’’ means the limited partners of the Partnership, being the REIT and Morguard, and ‘‘LimitedPartner’’ means any one of them.

‘‘Limited Partnership Agreement’’ means the limited partnership agreement of the Partnership.

‘‘Low Rise’’ means a building with fewer than four storeys.

‘‘Mid Rise’’ means a building with no fewer than four storeys and no more than seven storeys.

‘‘Monthly Limit’’ means the monthly limit on the total amount payable in cash by the REIT in respect of Unitstendered for redemption in a calendar month as described under ‘‘Declaration of Trust — Redemption Right’’.

‘‘MIL’’ means Morguard Investments Limited, a corporation incorporated under the Business Corporations Act(Ontario) and a wholly-owned subsidiary of Morguard.

‘‘Morguard’’ means Morguard Corporation, a CBCA corporation, and where the context requires, together withits affiliates.

‘‘Morguard Event of Default’’ means the events of default of Morguard under the Services Agreement, asdescribed under ‘‘Arrangements with Morguard — Services Agreement — Term of the Services Agreement’’.

‘‘Morguard Facility’’ means the unsecured revolving credit facility to be entered into between the Partnership andMorguard on Closing, as described under ‘‘Debt Structure — Composition of Indebtedness — Revolving Loanwith Morguard’’.

‘‘Morguard GP’’ means Morguard (Canada) GP Limited, a corporation incorporated under the Canada BusinessCorporations Act and a wholly-owned subsidiary of Morguard.

‘‘Morguard GP Event of Default’’ means the events of default of Morguard GP under the Limited PartnershipAgreement, as described under ‘‘Arrangements with Morguard — Morguard GP — Right of the REIT GP toRemove Morguard GP’’.

‘‘Morguard GP Duties’’ means those duties and responsibilities of Morguard GP as a general partner of thePartnership, as described under ‘‘Arrangements with Morguard — Morguard GP — Duties and Responsibilitiesof Morguard GP as a General Partner’’.

‘‘Morguard GP Resignation Event of Default’’ means the events of default which will give Morguard GP the rightto resign as a general partner of the Partnership under the Limited Partnership Agreement, as described under‘‘Arrangements with Morguard — Morguard GP — Right of Morguard GP to Resign’’.

‘‘Morguard REIT’’ means Morguard Real Estate Investment Trust, a closed-end trust established pursuant to thelaws of the Province of Ontario.

‘‘Morguard Related Parties’’ means any party affiliated or related to Morguard, including any entity controlled byor controlling Morguard.

‘‘Named Executive Officers’’ or ‘‘NEO’’ means, collectively, the REIT’s Chief Executive Officer and its ChiefFinancial Officer, as described under ‘‘Executive Compensation — Summary Compensation Table’’.

‘‘NCI’’ means the non-certificated inventory system of CDS.

‘‘NOI’’ means net operating income, being rental revenue from properties less property operating expenses aspresented in the combined statements of income prepared in accordance with IFRS or Canadian GAAP.

‘‘Non-Residents’’ means non-residents of Canada, as described under ‘‘Declaration of Trust — Limitation onNon-Resident Ownership’’.

‘‘October 31 Proposals’’ means proposed amendments to the Tax Act released by the Department of Finance onOctober 31, 2003 as described under ‘‘Certain Canadian Federal Income Tax Considerations’’.

‘‘Offering’’ means the offering of Units pursuant to this prospectus.

150

‘‘Opportunistic Properties’’ means properties generally characterized by the features described under ‘‘TheREIT — Growth Strategies’’.

‘‘ON RTA’’ means the Residential Tenancies Act, 2006 (Ontario), as amended.

‘‘Over-Allotment Option’’ means the option granted to the Underwriters by the REIT, exercisable in whole or inpart and at any time up to 30 days after Closing, to purchase up to an additional 750,000 Units on the sameterms as set forth in this prospectus solely to cover over-allocations, if any, and for market stabilization purposes,as described under ‘‘Plan of Distribution — General’’.

‘‘Partnership Net Income’’ means the amount of net income (or loss) of the Partnership before income taxescomputed in accordance with GAAP, adjusted to exclude all fair value adjustments to the carrying-value of assetsand liabilities and to include realized gains and losses on the disposition of assets, computed with reference tothe historical cost of the assets disposed of and to exclude distributions to the General Partners and the LimitedPartners of the Partnership and by any other adjustments as may be determined by the General Partner, actingreasonably.

‘‘Partnership’’ means Morguard NAR Canada Limited Partnership, a limited partnership formed under the lawsof the Province of Ontario.

‘‘Phase I ESA Reports’’ means Phase I environmental site assessment reports, as described under ‘‘Assessmentsand Valuations of the Initial Properties — Environmental Site Assessments’’.

‘‘Phase II ESAs’’ means Phase II environmental site assessments, as described under ‘‘Assessments and Valuationsof the Initial Properties — Environmental Site Assessments’’.

‘‘Plans’’ means, collectively, registered retirement savings plans, registered retirement income funds, deferredprofit sharing plans, registered education savings plans, registered disability savings plans and tax-free savingsaccounts.

‘‘REALpac’’ means the Real Property Association of Canada.

‘‘REIT’’ means Morguard North American Residential Real Estate Investment Trust, and references in thisprospectus to the ‘‘REIT’’ should be interpreted as described under ‘‘Meaning of Certain References’’.

‘‘REIT Event of Default’’ means the events of default of the REIT under the Services Agreement, as describedunder ‘‘Arrangements with Morguard — Services Agreement — Right of Morguard to Terminate the ServicesAgreement’’.

‘‘REIT Exception’’ means the exclusion from the definition of SIFT trust in the Tax Act for a trust qualifying as a‘‘real estate investment trust’’ as defined in subsection 122.1(1) of the Tax Act, as described under ‘‘CertainCanadian Federal Income Tax Considerations — SIFT Rules’’.

‘‘REIT GP’’ means Morguard NAR GP Limited, a corporation incorporated under the Business Corporations Act(Ontario) and a wholly-owned subsidiary of the REIT and a general partner of the Partnership.

‘‘Retained Debt’’ means those mortgages on certain of the Initial Canadian Properties that are being retained byMorguard, as described under ‘‘Debt Structure — Retained Debt’’.

‘‘Retained Properties’’ means the portfolio of multi-unit residential properties comprised of interests in five HighRise buildings located in Toronto, Ontario, two buildings under development located in Toronto, Ontario, andinterests in 15 Low Rise and Mid Rise, garden-style communities located in Alabama, Florida, Louisiana andNew Jersey, representing interests in approximately 5,066 suites, which will continue to be owned by Morguardon Closing.

‘‘Right of First Offer’’ means the right of the REIT to acquire any interest of Morguard in the multi-unitresidential properties that it owns after Closing that are located in Canada and the United States, includinginterests in any such properties acquired or developed (including such properties under development that aresubstantially complete) after Closing, prior to disposition of any such interest to a third party (other than the saleof individual condominium suites) which will be on terms not less favourable to the REIT than those offered by

151

or to such third party, as described under ‘‘Arrangements with Morguard — Right of First Offer and Non-SolicitAgreement’’.

‘‘Servicer Employee Severance Costs’’ means severance or termination costs and payments (if any), subject tocertain limitations, actually incurred by Morguard or its affiliates in respect of employees of Morguard or itsaffiliates arising out of or resulting from the ensuing termination of redundant or surplus employees as aconsequence of the termination of the Services Agreement as described under ‘‘Arrangements with Morguard —Services Agreement — Term of the Services Agreement’’.

‘‘Servicer Event of Default’’ means the events of default of Morguard under the Services Agreement, as describedunder ‘‘Arrangements with Morguard — Services Agreement — Term of the Services Agreement’’.

‘‘Services’’ means the services to be provided by Morguard to the REIT pursuant to the Services Agreement, asdescribed under ‘‘Arrangements with Morguard — Services Agreement — Services’’.

‘‘Services Agreement’’ means the agreement between the REIT and Morguard to be entered into at Closingpursuant to which Morguard will provide the Services and the Arranging for Financing Services, as describedunder ‘‘Arrangements with Morguard — Services Agreement’’.

‘‘SIFT’’ means specified investment flow-through within the meaning of the SIFT Rules.

‘‘SIFT Rules’’ means the rules applicable to SIFT trusts and SIFT partnerships in the Tax Act, as described under‘‘Certain Canadian Federal Income Tax Considerations — Status of the REIT — Qualification as a MutualFund Trust’’.

‘‘South’’ means the geographic area of the United States comprised of the states of Delaware, District ofColumbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia, Alabama,Kentucky, Mississippi, Tennessee, Arkansas, Louisiana, Oklahoma and Texas.

‘‘South Atlantic’’ means the geographic area of the United States comprised of the metropolitan regions of Albany(GA), Asheville (NC), Athens (GA), Augusta (GA), Biloxi (MS), Charlottesville (VA), Columbus (GA),Daytona Beach (FL), Fayetteville (NC), Fort Myers (FL), Fort Pierce (FL), Fort Walton Beach (FL), Gainesville(FL), Greenville (NC), Hattiesburg (MS), Hickory-Morganton (NC), Huntsville (AL), Jackson (MS), Lakeland(FL), Lynchburg (VA), Macon (GA), Melbourne (FL), Mobile (AL), Montgomery (AL), Myrtle Beach (SC),Naples (FL), Pensacola (FL), Roanoke (VA), Sarasota (FL), Savannah (GA), Tallahassee (FL), Wilmington(DE), Wilmington (NC), Atlanta (GA), Baltimore (MD), Birmingham (AL), Charleston (SC), Charlotte (NC),Chattanooga (TN), Columbia (SC), District of Columbia (DC), Fort Lauderdale (FL), Greensboro/Winston-Salem (NC), Greenville (SC), Jacksonville (FL), Knoxville (TN), Lexington (KY), Louisville (KY), Memphis(TN), Miami (FL), Nashville (TN), Norfolk/Hampton Roads (VA), Orlando (FL), Palm Beach (FL), Raleigh-Durham (NC), Richmond (VA), Suburban Maryland (MD), Suburban Virginia (VA) andTampa-St. Petersburg (FL).

‘‘Special Voting Units’’ means special voting units in the capital of the REIT, and ‘‘Special Voting Unit’’ means anyone of them.

‘‘Subsidiary Notes’’ means promissory notes of the Partnership, a trust all of the units of which, or a corporation allof the shares of which, are owned directly or indirectly by the REIT or another entity that would be consolidatedwith the REIT under GAAP, having a maturity date, determined at the time of issuance, of not more than fiveyears, bearing interest at a market rate determined by the Trustees at the time of issuance.

‘‘Tax Act’’ means the Income Tax Act (Canada).

‘‘Tax Proposals’’ means all specific proposals to amend the Tax Act publicly announced by or on behalf of theMinister of Finance (Canada) prior to the date hereof.

‘‘Trustees’’ means the trustees from time to time of the REIT, and ‘‘Trustee’’ means any one of them.

‘‘TSX’’ means the Toronto Stock Exchange.

152

‘‘Underwriters’’ means, collectively, RBC Dominion Securities Inc., TD Securities Inc., CIBC World Markets Inc.,BMO Nesbitt Burns Inc., Scotia Capital Inc., HSBC Securities (Canada) Inc., National Bank Financial Inc.,Canaccord Genuity Corp. and Dundee Securities Ltd.

‘‘Underwriting Agreement’’ means the underwriting agreement dated as of April 5, 2012 between the REIT,Morguard and the Underwriters, as described under ‘‘Plan of Distribution’’.

‘‘Units’’ means trust units in the capital of the REIT, other than Special Voting Units, and ‘‘Unit’’ means any oneof them.

‘‘Unitholders’’ means holders of Voting Units, and ‘‘Unitholder’’ means any one of them.

‘‘U.S. Gross Book Value’’ means the Gross Book Value attributable to the REIT’s U.S. properties.

‘‘U.S. Gross Property Revenue’’ means the Gross Property Revenue attributable to the REIT’s U.S. properties.

‘‘U.S. Holdco’’ means Morguard NAR (U.S.) Holdings LLC, a Delaware limited liability company.

‘‘U.S. Management Agreements’’ means the agreements between U.S. Holdco and the U.S. Manager to be enteredinto at Closing pursuant to which the U.S. Manager will provide property and asset management services toU.S. Holdco, as described under ‘‘Arrangements with Morguard — U.S. Manager’’.

‘‘U.S. Manager’’ means Morguard Management Company Inc., an indirect wholly-owned subsidiary of Morguard.

‘‘U.S. Manager Duties’’ means the duties and responsibilities of the U.S. Manager pursuant to theU.S. Management Agreements, as described under ‘‘Arrangements with Morguard — U.S. Manager’’.

‘‘U.S. Manager Event of Default’’ means the events of default of the U.S. Manager under the U.S. ManagementAgreements, as described under ‘‘Arrangements with Morguard — U.S. Manager — Term of theU.S. Management Agreements’’.

‘‘U.S. Persons’’ has the meaning ascribed thereto in Regulation S under the United States Securities Act of 1933,as amended.

‘‘Value-Add Properties’’ means properties generally characterized by the features described under ‘‘The REIT —Growth Strategies’’.

‘‘Voting Units’’ means, collectively, the Units and the Special Voting Units, and ‘‘Voting Unit’’ means any oneof them. B-2

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INDEX TO FINANCIAL STATEMENTS

Morguard North American Residential Real Estate Investment Trust

Unaudited pro forma combined financial statements for the year ended December 31, 2011 . . . . . . . . F-2

Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11

Audited balance sheet as at March 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12

Morguard North American Residential Real Estate Investment Trust Initial Properties

Audited Combined Financial Statements (IFRS) for the Years Ended December 31, 2011 andDecember 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-15


Audited Combined Financial Statements (Canadian GAAP) for the Years Ended December 31, 2010and December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-35


Auditors’ Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-51

F-1

MORGUARD NORTH AMERICAN RESIDENTIALREAL ESTATE INVESTMENT TRUST

PRO FORMA COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2011

F-2

MORGUARD NORTH AMERICAN RESIDENTIAL REAL ESTATE INVESTMENT TRUST

PRO FORMA COMBINED BALANCE SHEETS

(in thousands of dollars, except for per unit amounts)December 31, 2011 (unaudited)

MorguardNorth

AmericanResidential MorguardReal Estate CorporationInvestment Residential Pro forma

Trust Properties adjustments Notes Total

ASSETSNon-current assetsReal estate properties . . . . . . . . . . . . . . . . . . . . . . $— $676,944 — 3(b) $676,944Capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 13 (13) 3(e) —

— 676,957 (13) 676,944

Current assetsAccounts receivable . . . . . . . . . . . . . . . . . . . . . . . . — 684 (604) 3(e) 80Prepaid expenses and other assets . . . . . . . . . . . . . — 990 (854) 3(e) 136Restricted cash and cash for tenant deposits . . . . . . — 326 5,127 3(e) 5,453Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 910 (886) 3(e) 24

— 2,910 2,783 5,693

$— $679,867 $ 2,770 $682,637

LIABILITIES AND DIVISIONAL SURPLUSNon-current liabilitiesMortgages payable . . . . . . . . . . . . . . . . . . . . . . . . $— $322,760 (98,600) 3(c) 224,160Class C LP Units . . . . . . . . . . . . . . . . . . . . . . . . . — — 95,797 3(c) 102,406

6,609Indebtedness to Morguard Corporation . . . . . . . . . — — 25,000 3(c) 25,000Class B LP Units . . . . . . . . . . . . . . . . . . . . . . . . . — — 172,231 3(c), 4 172,231Deferred income tax liabilities . . . . . . . . . . . . . . . . — 73,473 (73,473) 3(j) —

— 396,233 127,564 523,797

Current liabilitiesMortgages payable . . . . . . . . . . . . . . . . . . . . . . . . — 31,869 (2,327) 3(c) 29,542Class C LP Units . . . . . . . . . . . . . . . . . . . . . . . . . — — 2,239 3(c) 2,239Accounts payable and accrued liabilities . . . . . . . . . — 7,219 (7,025) 3(e) 194Tenant rental deposits . . . . . . . . . . . . . . . . . . . . . . — 5,453 — 3(e) 5,453

— 44,541 (7,113) 37,428

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . — 440,774 120,451 561,225

Divisional surplus . . . . . . . . . . . . . . . . . . . . . . . . . — 239,093 (239,093) —Unitholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . — — 75,000 3(a) 121,412

(7,250) 3(a)53,662 3(b)

— 239,093 (117,681) 121,412

$— $679,867 $ 2,770 $682,637

See accompanying notes to pro forma combined financial statements.

F-3


PRO FORMA COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands of dollars)Year Ended December 31, 2011 (unaudited)

MorguardCorporationResidential Pro formaProperties adjustments Notes Total

REVENUERental revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,923 $ (286) 3(f) $71,637Property operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,477 (244) 3(g) 35,233

Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,446 (42) 36,404

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,095 10,334 3(h) 28,164735 3(h)

Amortization of capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . 34 (34) 3(e) —General and administrative expenses . . . . . . . . . . . . . . . . . . . . . — 650 3(i) 2,357

1,707 3(i)

17,129 13,392 30,521

Income before fair value gains on real estate properties andincome taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,317 (13,434) 5,883

Fair value gains on real estate properties . . . . . . . . . . . . . . . . . . 82,585 — 82,585

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $101,902 $(13,434) $88,468

Provision for income taxesCurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,019 (1,112) 3(j) (93)Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,080 (14,231) 3(j) (151)

15,099 (15,343) (244)

Net income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,803 1,909 88,712

Other comprehensive incomeLoss on interest rate swap agreement . . . . . . . . . . . . . . . . . . . . (753) — (753)Amortization of cash flow hedge . . . . . . . . . . . . . . . . . . . . . . . . 198 — 198Unrealized foreign currency translation gain . . . . . . . . . . . . . . . 98 — 98

Other comprehensive loss before income taxes . . . . . . . . . . . . . . (457) — (457)Deferred income tax recovery . . . . . . . . . . . . . . . . . . . . . . . . . . 139 — 139

Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (318) — (318)

Total comprehensive income for the year . . . . . . . . . . . . . . . . . . $ 86,485 $ 1,909 $88,394

See accompanying notes to pro forma combined financial statements.

F-4


NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS

December 31, 2011(amounts in thousands of Canadian dollars, except per unit amounts and number of units)

1. BASIS OF PRESENTATION

Morguard North American Residential Real Estate Investment Trust (the ‘‘REIT’’) is an unincorporated, open-ended real estateinvestment trust created pursuant to the Declaration of Trust dated March 1, 2012, when one trust unit was issued for $10 cash. TheREIT will issue trust units for cash pursuant to an initial public offering (the ‘‘Offering’’) and as partial consideration for properties tobe acquired. On closing of the transactions contemplated in the prospectus (the ‘‘Closing’’), the REIT will indirectly acquire fromMorguard Corporation (‘‘Morguard’’), 14 multi-unit residential properties located in Canada and three multi-unit residential propertieslocated in the United States (‘‘U.S.’’) (collectively, the ‘‘Initial Properties’’).

These pro forma combined financial statements have been prepared from the audited balance sheet of the REIT as at March 1, 2012and the audited combined balance sheet of Morguard Corporation Residential Properties as at December 31, 2011 and the auditedcombined statement of income of Morguard Corporation Residential Properties for the year ended December 31, 2011. These financialstatements are included elsewhere in the prospectus.

These pro forma combined financial statements have been prepared in accordance with International Financial Reporting Standards.These pro forma combined financial statements incorporate the principal accounting policies used to prepare Morguard CorporationResidential Properties’ December 31, 2011 combined financial statements.

The pro forma combined balance sheet gives effect to the transactions in note 3 as if they had occurred on December 31, 2011, with theexception of the mortgages payable and the Class C LP Units which reflect balances as at April 1, 2012. The pro forma combinedstatement of income gives effect to the transactions in note 3 as if they had occurred on January 1, 2011.

The pro forma combined financial statements are not necessarily indicative of the results that would have actually occurred had thetransactions been consummated at the dates indicated nor are they necessarily indicative of future operating results or the financialposition of the REIT.

2. SIGNIFICANT ACCOUNTING POLICIES


Real estate properties include residential properties held to earn rental income and for capital appreciation. Real estate property that isacquired not as a business combination is recorded initially at cost including transaction costs. Transaction costs include transfer taxesand professional fees for legal services. Subsequent to acquisition capital expenditures are capitalized to the property.

Subsequent to initial recognition, income producing properties are recorded at fair value. The changes in fair value each reportingperiod will be recorded in the combined statements of income. In order to avoid double counting, the carrying value of real estateproperties includes free rent receivables, since these amounts are incorporated in the appraised values of the real estate properties. Fairvalue is based upon external and internal valuations that use the direct capitalization income valuation technique. Recent real estatetransactions with similar characteristics and location to the Initial Properties’ assets are also considered. The direct capitalizationincome method applies a capitalization rate to the property’s stabilized net operating income which incorporates allowances forvacancy, management fees and structural reserves for capital expenditures for the property. The resulting appraised value is furtheradjusted, where appropriate, for non-recurring costs to stabilize the income and non-recoverable capital expenditures.

Co-Ownerships

Certain of the Initial Properties are owned through co-ownership arrangements with one or more additional parties. These propertieshave been reflected in the Initial Properties’ financial statements using the proportionate consolidation method and only include theREIT’s share of the financial position and financial results of the properties.

Revenue Recognition

Rental revenue includes rents from tenants under leases, parking and other sundry revenue derived from operating residentialproperties and is recognized on a monthly basis as services are performed in accordance with the terms of the underlying tenantagreements.

Revenue from real estate properties recorded in the combined statements of income during free rent periods represents future cashreceipts and is reflected in the combined balance sheets in the carrying value of real estate properties and recognized in the combinedstatements of income on a straight-line basis over the initial term of the lease.

F-5


NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS (Continued)


2. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreign Exchange

The operations of the Initial U.S. Properties are in U.S. dollars, which represent the functional currency of the U.S. properties.Accordingly, the assets and liabilities of foreign properties are translated into Canadian dollars at the rates on the combined balancesheet dates. Revenue and expenses are translated at the average rate of exchange for the year. The resulting gains and losses arerecorded as accumulated other comprehensive income.

2011

United States dollar to Canadian dollar exchange rates:— December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.017— Average during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.9891

Income Taxes

Legislation relating to the federal income taxation of a specified investment flow-through (‘‘SIFT’’) trust or partnership was enacted onJune 22, 2007 (the ‘‘SIFT Rules’’). A SIFT includes a publicly listed or traded partnership or trust such as an income trust. Under theSIFT Rules, certain distributions attributable to a SIFT will not be deductible in computing the SIFT’s taxable income and the SIFT willbe subject to tax on such distributions at a rate that is substantially equivalent to the general tax rate applicable to Canadiancorporations. However, distributions paid by a SIFT as returns of capital should generally not be subject to the tax.

Under the SIFT Rules, the new taxation regime will not apply to a real estate investment trust that meets prescribed conditions relatingto the nature of its assets and revenue (the ‘‘REIT Conditions’’).

The REIT is taxed as a mutual fund trust for income tax purposes. If the REIT satisfies the REIT Conditions throughout a taxationyear, it will not be subject to income taxes to the extent that the taxable income of the REIT is distributed to its unitholders during theyear. The REIT’s management has reviewed the SIFT Rules and has assessed their interpretation and application of the REIT’s assetsand revenue. Management intends to ensure that the REIT will meet the REIT Conditions on closing and throughout each taxationyear. The Trustees intend to distribute all taxable income directly earned by the REIT to unitholders and to deduct such distributionsfor income tax purposes. The REIT’s Canadian operations is considered tax-exempt for financial statement purposes and therefore, noprovision for current or deferred income taxes is required for the Canadian operations and its flow-through subsidiaries. However theREIT’s U.S. operations continue to be taxable and therefore provision for current and deferred incomes taxes is required for theU.S. operations.


Recognition and Measurement of Financial Instruments

In addition to the financial instruments accounting policies disclosed in the audited December 31, 2011 combined financial statementsof Morguard Corporation Residential Properties, in accordance with International Accounting Standards (‘‘IAS’’) 32 — FinancialInstruments: Presentation, the Class B LP Units have been classified as financial liabilities at ‘‘fair value through profit or loss’’(‘‘FVTPL’’).

The REIT’s units are puttable at the holders’ option back to the REIT. As a result, the REIT units are liabilities by definition but qualifyfor presentation as equity under certain limited exceptions within IAS 32. The Class B LP Units of the REIT’s limited partnershipsubsidiary which are held by Morguard are economically equivalent to REIT units and receive distributions equal to the distributionspaid on REIT units and are exchangebale at the holder’s option into REIT units. However, the limited IAS 32 exception forpresentation as equity does not extend to the Class B LP Units. One special voting unit in the REIT will also be issued to Morguard foreach Class B LP Unit issued.

In addition, the Class C LP Units of the REIT’s limited partnership (the ‘‘Partnership’’) subsidiary which are held by Morguard andmore fully described in note 3(c) are liabilities under IAS 32 recorded initially at fair value and subsequently measured atamortized cost.

Morguard is entitled to certain distributions from the Partnership on Class B GP Units it holds in return for services as a partner in thePartnership. Such distributions are considered fair consideration for services to be provided and are accounted for as an executorycontract. As a result, distributions thereon are reflected in operating costs and trust expenses as more fully described in notes 3(g)(ii)and 3(i).

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Distributions from the Partnership on Class C LP Units and Class B GP Units each held by Morguard are made in priority to otherdistributions on the REIT’s units and on the Class B LP Units held by Morguard.

Critical Judgments in Applying Accounting Policies

The following are the critical judgments that have been made in applying the Initial Properties’ accounting policies and that have themost significant effect on the amounts in the pro forma combined financial statements:


The Initial Properties’ accounting policies relating to real estate properties are described above. In applying these policies, judgment hasbeen applied in determining whether certain costs are additions to the carrying amount of the property. Judgment is also applied indetermining the extent and frequency of independent appraisals.

Critical Accounting Estimates and Assumptions

The preparation of the pro forma combined financial statements requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the pro forma combinedfinancial statements and reported amounts of revenue and expenses during the reporting periods.

In determining estimates of fair market value for its real estate properties, the assumptions underlying estimated values are limited bythe availability of comparable data and the uncertainty of predictions concerning future events. Should the underlying assumptionschange, actual results could differ from the estimated amounts.

3. PRO FORMA ADJUSTMENTS

The pro forma adjustments to the pro forma combined financial statements have been prepared to account for the impact of thetransactions contemplated by the prospectus as described below. Conditional on completion of the Initial Public Offering, the REIT willacquire the Initial Properties and certain related debts through the Partnership in exchange for cash and the issuance of Class BLP Units and Class C LP Units in the Partnership. Morguard, under the supervision of the REIT, will provide services in exchange forcertain distributions and other payments. As the REIT is a newly formed entity and Morguard will retain control over the REIT, theInitial Public Offering and acquisition transaction by the REIT will be accounted for as a reorganisation and recapitalisation of theMorguard Corporation Residential Properties. As such, the pro forma combined financial statements reflect the Initial Public Offeringat the assumed proceeds net of offering costs, the Initial Properties and mortgages transferred from Morguard each at Morguard’s bookvalues and the cash and various limited partnership unit liabilities issued to Morguard as a distribution. The excess of the Morguardbook values over the distribution to Morguard is reflected as a contribution by Morguard to the REIT.

a) Initial Public Offering

The pro forma combined financial statements assume that the REIT will raise gross proceeds of approximately $75,000 (excludingany over-allotment option) through the issuance of 7,500,000 units at $10 per Unit. Morguard will retain a significant ownershipinterest in the REIT through the acquisition of approximately 17,223,090 Class B LP Units. Please see note 3(c) for furtherdiscussion on the Class B LP Units.

Costs relating to the transactions contemplated by the prospectus, including underwriters’ fees, are expected to be $7,250. Costsrelated to the Initial Public Offering are charged directly to unitholders’ equity.

b) Acquisition

On Closing, it is assumed that subsidiaries of the REIT will indirectly acquire from Morguard its interest in the Initial Properties.

The purchase price is negotiated between the REIT and Morguard and is supported by internal appraisals for the Canadianproperties and external appraisals for the U.S. properties. The REIT will assume mortgages with an outstanding principal balanceon April 1, 2012 of $256,522 and inclusive of deferred financing costs of $2,820 and the Partnership will issue Class B LP Units andClass C LP Units to Morguard, which will result in Morguard holding approximately a 69.7% economic interest in the REIT.

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3. PRO FORMA ADJUSTMENTS (Continued)

The impact of acquiring the net assets of the Initial Properties is as follows:

Real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 676,944Working capital items, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Assumed mortgages, net of deferred financing costs of $2,820 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (253,702)

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 423,288

Distribution to Morguard:Class C LP Units issued to Morguard, net of deferred financing costs of $2,785 and inclusive of present value of

estimated tax payment of $6,609 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,645Class B LP Units issued to Morguard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,231Indebtedness to Morguard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000Cash paid out by the REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,750

369,626

Net contribution by Morguard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,662

The actual net assets acquired by the REIT, the distribution to Morguard and the net contribution by Morguard will be based onthe assets and liabilities assumed at the effective date of the acquisition and other information available at that date. Accordingly,the actual amounts for each of these assets and liabilities will vary from the pro forma amounts and the variation may be material.

c) Debt

On Closing, the REIT is expected to assume the mortgages on 13 of the Initial Properties and the financing costs relating to themortgages. The REIT will assume the outstanding principal balance of these mortgages on April 1, 2012 of $256,522 and deferredfinancing costs of $2,820.

Morguard will retain the debt on the remaining four Initial Properties (the ‘‘Retained Debt’’). The Retained Debt will have anoutstanding principal balance on April 1, 2012 of $100,821 and deferred financing costs of $2,785. These amounts do not includethe present value of the estimated tax payment of $6,609 (as described below). The Retained Debt will continue to be secured by acharge on the properties. Morguard will remain responsible for interest and principal payments on the Retained Debt. Inconsideration of the Retained Debt, Morguard will receive Class C LP Units of the Partnership on which distribution payments willbe made in an amount expected to be sufficient to permit Morguard to satisfy amounts payable in respect of (i) principal andinterest under the Retained Debt, and (ii) the amount of tax that is due and payable that is reasonably attributable to anydistributions on the Class C LP Units. The present value of the tax payment has been estimated to amount to $6,609 on April 1,2012 and has been included in the carrying value of the Class C LP Units and it is anticipated that no amount will be payable inrespect of any tax liabilities until the third quarter of 2015.

Since the Class C LP Units have been issued to Morguard to satisfy amounts payable on the Retained Debt, the units have beenclassified as debt on the pro forma combined balance sheet and a portion of the distribution payments on the Class C LP Units asdescribed above will be classified as interest expense.

The pro forma combined financial statements assume that on Closing, the Partnership will enter into an unsecured, revolving creditfacility with Morguard which will consist of a $50,000 facility available for acquisitions and for general business purposes, which canbe drawn either in Canadian dollars or an equivalent amount in United States dollars. If the Partnership draws upon the creditfacility in Canadian dollars, interest shall be calculated either at the Canadian prime lending rate or at the bankers’ acceptance(‘‘BA’’) rate plus 1.8%. If the Partnership draws upon the credit facility in United States dollars, interest shall be calculated either atthe U.S. prime lending rate or at United States dollar LIBOR (the London Interbank Offered Rate) plus 1.7%. The MorguardFacility will be subject to renewal by Morguard, in its sole discretion, three years from the date of Closing. It is expected that$25,000 will be outstanding on Closing.

The Class B LP Units are non-transferable, except under certain circumstances but are exchangeable, on a one-for-one basis, intoREIT units at any time at the option of the holder. Distributions are made on the exchangeable units in an amount equivalent tothe distributions that would have been made had the units of the REIT been issued. The Class B LP Units have been classified as‘‘fair value through profit and loss’’ financial liabilities. Gains or losses resulting from changes in the fair value of the units at each

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reporting date will be recorded in the combined statement of comprehensive income and distributions made on the Class BLP Units are classified as interest expense in the combined statement of comprehensive income.

d) Sources and uses of cash

The REIT’s sources and uses of cash after the completion of the transactions contemplated in the Offering are as follows:

Sources:Proceeds from the Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,000

Uses:Purchase of Initial Properties (note 3(b)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (67,750)Offering costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,250)

$ —

e) Working Capital and Capital Assets

Cash balances, accounts receivable, prepaid expenses, deposits and other assets and accounts payable and accrued liabilities of theU.S. properties will be transferred on Closing. Tenant rental deposits and adequate restricted cash balances to cover the tenantrental deposits will also be transferred on Closing. An additional amount of cash in the amount of $5,127 will be transferred to theREIT on Closing. The capital assets will not be transferred to the REIT.

f) Rental Revenue

Rental revenue has been adjusted by a net decrease of $286 as a result of the REIT leasing to Morguard under the terms of thehead lease agreement 90 furnished suites located within one of the Initial Properties.

g) Operating Costs

Operating costs have been decreased by $244 for the year ended December 31, 2011 to reflect the impact of the following:

(i) Decrease of $295 reflect expenses pertaining to furnished suites which will be incurred by Morguard as part of the terms of thehead lease agreement discussed in note 3 (f).

(ii) Property operating expenses have been increased by $51 to reflect the actual amount that would have been payable pursuantto agreements to be entered into on Closing between the REIT and affiliates of Morguard (the ‘‘Agreements’’). The REIT’sday-to-day operations will be administered by Morguard’s affiliates and the affiliates will be entitled to partnershipdistributions and other payments based in part on 3.50% of the REIT’s gross property revenue from the revenue-producingproperties, provided, in certain cases, there is net income adequate to pay these distributions. Any amounts unpaid by theREIT in a given year are carried forward to future periods until such time that there is adequate net income available to paythese distributions.

h) Interest Expense

Interest expense has been adjusted to reflect distributions on the Class B LP Units of $10,334 as interest expense consistent withthe classification of the units as financial liabilities on the balance sheet and to reflect interest expense of $735 on the initial $50,000unsecured, revolving, credit facility with Morguard including interest on the $25,000 assumed to be drawn at Closing and additionalborrowings that may be required under the credit facility. The distributions on Class B LP Units of $10,334 assume distributionswill be paid in an amount that will yield 6.0% on the Initial Public Offering price. However, no assurance can be given that actualdistributions will be at this level.

As the Class B LP Units are financial liabilities designated as fair value through profit and loss, they will be adjusted to their fairvalue on an ongoing basis with any fair value adjustments being included in the income statement. As a pro forma assumption ofsuch fair value changes is a prediction rather than an objectively determinable pro forma adjustment, these pro forma combinedfinancial statements assume no change in fair value of the Class B LP Units during the 2011 pro forma statement of income period.However, the actual REIT financial statements will include fair value changes and such changes could be material.

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i) Trust Expenses

Trust expenses of $650 have been reflected for the year ended December 31, 2011 to reflect management’s best estimate of generaland administrative expenses for the REIT. Trust expenses include legal fees, audit fees, trustee fees, annual report costs, transferagent fees, insurance and other miscellaneous costs.

Pursuant to the Agreements, Morguard’s affiliates will provide advisory and support services consisting of accounting and humanresources services, office space and equipment and the necessary clerical and secretarial personnel for the administration of theday-to-day activities of the entities through which the REIT holds its revenue-producing properties. Morguard’s affiliates will beentitled to partnership distributions and other payments based in part on 0.25% of the REIT’s Gross Book Value, provided, incertain cases, there is net income adequate to pay these distributions. Any amounts unpaid in a given year are carried forward tofuture periods until such time that there is adequate net income available to pay these distributions. The distribution included intrust expenses for the year ended December 31, 2011 amounts to $1,707.

Morguard is also entitled to an annual distribution in an amount equal to the product of (A) 15% of the REIT’s limited partnershipsubsidiary’s FFO per REIT unit (assuming that all issued and outstanding Class B LP Units have been exchanged for REIT units)in excess of $0.66 and (B) the number of issued and outstanding REIT units (assuming that all issued and outstanding Class BLP Units have been exchanged for REIT units), subject to adjustments for certain transactions affecting the REIT units. However,the actual REIT financial statements may include an expense related to any such excess that may arise.

j) Income Taxes

The REIT assumes that on Closing and beyond it will meet the REIT Conditions as described in note 2(d) for the CanadianProperties. The U.S. properties will continue to remain taxable however will receive a stepped-up tax basis and therefore no timingdifferences will exist on the U.S. properties on Closing. Therefore, any subsequent fair value gains recorded related to theU.S. properties will result in deferred tax liabilities being recorded. Included in the 2011 fair value gains on real estate propertiesare losses of $1.4 million that relate to the U.S. properties which have resulted in the recognition of a deferred tax recovery of $520.The REIT also assumes that it will distribute all of its taxable income to unitholders.

k) Adjusted Net Income per Unit

The REIT has no ordinary units outstanding for purposes of IAS 33 Earnings Per Share as its REIT Units are liabilities bydefinition but presented as equity by exception under IAS 32. Accordingly, pro forma earnings per unit is not presented on the faceof the pro forma combined statement of income. However, an adjusted pro forma net income per unit has been calculated on thesame basis that would apply if the REIT units and Class B LP Units had been accounted for as equity. Under this adjustedcalculation the denominator includes both the REIT units and the Class B LP Units (as these units receive distributions equivalentto REIT units and are exchangeable into REIT units) and the numerator is net income as reported in the pro forma combinedstatement of income adding back distribution expense of $10,334 and fair value changes of nil related to Class B LP Units. Theadjusted pro form net income per unit for the year ended December 31, 2011 is $4.01. There are no other potentially dilutiveinstruments outstanding and hence this adjusted calculation is both a basic and diluted calculation.

4. UNITHOLDERS’ EQUITY

The REIT is authorized to issue an unlimited number of units. Trust units are ordinary units of the REIT, each of which represents aunitholder’s proportionate undivided beneficial interest and voting rights in the REIT. On Closing, the REIT anticipates issuing24,723,090 units, including 17,223,090 Class B LP Units, issued by the Partnership at $10 per unit for total proceeds of $247,231(see notes 3 (a) and 3 (c)). In addition, on Closing, one special voting unit in the REIT will also be issued to Morguard for each Class BLP Unit issued. The Class B LP Units are classified as liabilities. Costs relating to the transactions contemplated by the prospectus,including underwriters’ fees, are expected to be $7,250.

5. COMMITMENT AND CONTINGENCIES

The REIT has provided a guarantee to Morguard’s creditors in respect of the Retained Debt to ensure the lenders are not prejudiced intheir ability to collect from Morguard in the event that payments on the Class C LP Units are not made as expected. Morguard willindemnify the REIT for any losses suffered by the REIT and 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 REIT.

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INDEPENDENT AUDITORS’ REPORT

To the Trustees of Morguard North American Residential Real Estate Investment Trust

We have audited the balance sheet of Morguard North American Residential Real Estate Investment Trustas at March 1, 2012, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Combined Financial Statements

Management is responsible for the preparation and fair presentation of this financial statement inaccordance with International Financial Reporting Standards, and for such internal control as managementdetermines necessary to enable the preparation of combined financial statements that are free from materialmisstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on this balance sheet based on our audit. We conducted our auditin accordance with Canadian generally accepted auditing standards. Those standards require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assurance about whether thebalance sheet is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thebalance sheet. The procedures selected depend on the auditors’ judgment, including the assessment of the risksof material misstatement of the balance sheet, whether due to fraud or error. In making those risk assessments,the auditors consider internal control relevant to the entity’s preparation and fair presentation of the balancesheet in order to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the balance sheet.

We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide abasis for our audit opinion.

Opinion

In our opinion, the balance sheet presents fairly, in all material respects, the financial position of MorguardNorth American Residential Real Estate Investment Trust as at March 1, 2012, in accordance with InternationalFinancial Reporting Standards.

‘‘Ernst & Young LLP’’

Toronto, Canada Chartered AccountantsApril 5, 2012 Licensed Public Accountants

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BALANCE SHEET

As at March 1, 2012

AssetsCash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10

Unitholder’s Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10

See accompanying note to balance sheet.

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NOTE TO BALANCE SHEET

March 1, 2012

Morguard North American Residential Real Estate Investment Trust (the ‘‘REIT’’) is an unincorporated,open-ended real estate investment trust that was created pursuant to the Declaration of Trust dated March 1,2012 when one trust unit was issued for $10 cash. The amounts reflected in the following notes are denominatedin thousands of Canadian dollars, except number of units and per unit amounts.

1. SUBSEQUENT EVENT

On April 5, 2012, the REIT entered into an underwriting agreement whereby the REIT will raise gross proceeds of $247,231 (excludingan over-allotment option) pursuant to an initial public offering (the ‘‘Offering’’) through the issuance of 24,723,090 units at a price of$10 per Unit. Morguard Corporation (‘‘Morguard’’) will retain a significant ownership interest in the REIT through the acquisition ofapproximately 17,223,090 Class B LP Units. Costs relating to the Offering, including underwriters’ fees, are expected to be $7,250 andwill be charged directly to unitholders’ equity.

The closing (the ‘‘Closing’’) of the transactions contemplated by this prospectus will occur no later than May 2, 2012. On Closing, theREIT will indirectly acquire from Morguard its interest in 14 multi-unit residential properties located in Canada and three multi-unitresidential properties located in the United States (‘‘U.S.’’) (collectively, the ‘‘Initial Properties’’). The purchase price is supported byinternal appraisals for the Canadian properties and external appraisals for the U.S. properties. As the REIT is a newly formed entityand Morguard will retain control over the REIT, the Initial Public Offering and acquisition transaction by the REIT will be accountedfor as a reorganisation and recapitalisation of the Morguard Corporation Residential Properties. As such, the financial statementsreflect the Initial Public Offering as the assumed proceeds net of offering costs, the Initial Properties and mortgages transferred fromMorguard each at Morguard’s book values and the cash and various limited partnership unit liabilities issued to Morguard as adistribution. The excess of the Morguard book values over the distribution to Morguard is reflected as a contribution by Morguard tothe REIT.

(a) Revenue Producing Properties

Revenue-producing propertiesReal estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 676,944Working capital items, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Assumed mortgages, net of deferred financing costs of $2,820 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (253,702)

Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 423,288

Distribution to Morguard:Class C LP Units issued to Morguard, net of deferred financing costs of $2,785 and inclusive of present value of

estimated tax payment of $6,609 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,645Class B LP Units issued to Morguard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,231Indebtedness to Morguard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000Cash paid out by the REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,750

369,626

Net contribution by Morguard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,662

(b) Debt

On Closing, the REIT is expected to assume the mortgages on 13 of the Initial Properties and the financing costs relating to themortgages. The REIT will assume the outstanding principal balance of these mortgages on April 1, 2012 of $256,522 and deferredfinancing costs of $2,820.

Morguard will retain the debt on the remaining four Initial Properties (the ‘‘Retained Debt’’). The Retained Debt will have anoutstanding principal balance on April 1, 2012 of $100,821 and deferred financing costs of $2,785. These amounts do not includethe present value of the estimated tax payment of $6,609 (as described below). The Retained Debt will continue to be secured by acharge on the properties. Morguard will remain responsible for interest and principal payments on the Retained Debt. Inconsideration of the Retained Debt, Morguard will receive Class C LP Units of a subsidiary of the REIT on which distributionpayments will be made in an amount expected to be sufficient to permit Morguard to satisfy amounts payable in respect of(i) principal and interest under the Retained Debt, and (ii) the amount of tax that is due and payable that is reasonably attributableto any distributions on the Class C LP Units. The present value of the tax payment has been estimated to amount to $6,609 onApril 1, 2012 and has been included in the carrying value of the Class C LP Units in note 1(a) and it is anticipated that no amountwill be payable in respect of any tax liabilities until the third quarter of 2015.

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NOTE TO BALANCE SHEET

March 1, 2012

1. SUBSEQUENT EVENT (Continued)

On Closing, a subsidiary of the REIT will enter into an unsecured revolving credit facility with Morguard which will consist of a$50,000 demand facility available for acquisitions and for general business purposes, which can be drawn upon either in Canadiandollars or an equivalent amount in United States dollars. If the REIT’s subsidiary draws upon the credit facility in Canadiandollars, interest shall be calculated either at the Canadian prime lending rate or at the bankers’ acceptance (‘‘BA’’) rate plus 1.8%.If the REIT draws upon the credit facility in United States dollars, interest shall be calculated either at the U.S. prime lending rateor at United States dollar LIBOR (the London Interbank Offered Rate) plus 1.7%. This credit facility will be subject to renewal byMorguard, in its sole discretion, three years from the date of Closing. It is expected that $25,000 will be outstanding on Closing.

The Class B LP Units are non-transferable, except under certain circumstances but are exchangeable, on a one-for-one basis, intoREIT units at any time at the option of the holder. Distributions are made on the exchangeable units in an amount equivalent tothe distributions that would have been made had the units of the REIT been issued.

(c) Sources and uses of cash

The REIT’s sources and uses of cash after the completion of the transactions contemplated in the Offering are as follows:

Sources:Proceeds from the Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 75,000

Uses:Purchase of Initial Properties (note 1(a)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (67,750)Offering costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,250)

$ —

2. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were authorized for issue by the Board of Trustees on April 5, 2012.

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MORGUARD CORPORATION RESIDENTIALPROPERTIES

AUDITED COMBINED FINANCIAL STATEMENTS (IFRS)

FOR THE YEARS ENDED DECEMBER 31, 2011 AND DECEMBER 31, 2010

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To the Directors of Morguard Corporation

We have audited the accompanying combined financial statements of Morguard Corporation ResidentialProperties, which comprise the combined balance sheets as at December 31, 2011 and 2010, and January 1, 2010,and the combined statements of income and comprehensive income, divisional surplus and cash flows for theyears ended December 31, 2011 and 2010, and a summary of significant accounting policies and otherexplanatory information.


Management is responsible for the preparation and fair presentation of these combined financialstatements in accordance with International Financial Reporting Standards, and for such internal control asmanagement determines necessary to enable the preparation of combined financial statements that are freefrom material misstatement, whether due to fraud or error.


Our responsibility is to express an opinion on these combined financial statements based on our audits. Weconducted our audits in accordance with Canadian generally accepted auditing standards. Those standardsrequire that we comply with ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether the combined financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thecombined financial statements. The procedures selected depend on the auditors’ judgment, including theassessment of the risks of material misstatement of the combined financial statements, whether due to fraud orerror. In making those risk assessments, the auditors consider internal control relevant to the entity’spreparation and fair presentation of the combined financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by management, as well as evaluating the overall presentationof the combined financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide abasis for our audit opinion.

Opinion

In our opinion, the combined financial statements present fairly, in all material respects, the financialposition of Morguard Corporation Residential Properties as at December 31, 2011 and 2010, and January 1,2010, and its financial performance and its cash flows for the years ended December 31, 2011 and 2010, inaccordance with International Financial Reporting Standards.



F-16

MORGUARD CORPORATION RESIDENTIAL PROPERTIES

COMBINED BALANCE SHEETS

As at Dec. 31, Dec. 31, Jan. 1,(in thousands of Canadian dollars) Note 2011 2010 2010

ASSETS

Non-current assetsReal estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 $676,944 $585,729 $571,536Capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 10 15

676,957 585,739 571,551

Current assetsAccounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684 948 2,005Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 990 1,737 1,959Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326 301 275Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910 925 962

2,910 3,911 5,201

$679,867 $589,650 $576,752

LIABILITIES AND DIVISIONAL SURPLUS

Non-current liabilitiesMortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 $322,760 $255,378 $309,271Deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 73,473 59,495 54,470

396,233 314,873 363,741

Current liabilitiesMortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 31,869 64,502 12,963Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . 7,219 6,377 7,203Tenant rental deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,453 5,306 5,143

44,541 76,185 25,309

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440,774 391,058 389,050

DIVISIONAL SURPLUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239,093 198,592 187,702

$679,867 $589,650 $576,752

Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

On behalf of the Board:

K. (RAI) SAHI WAYNE M. E. MCLEOD

Director Director

Refer to note 3 for effects of adoption of IFRS.See accompanying notes to the consolidated financial statements.

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COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Years ended December 31,(in thousands of Canadian dollars) Note 2011 2010

REVENUERental revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 71,923 $69,758Property operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 35,477 34,855

Net operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,446 34,903

Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 17,095 17,244Amortization of capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 34

17,129 17,278

Income before fair value gains on real estate properties and income taxes . . . . 19,317 17,625Fair value gains on real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 82,585 9,760

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $101,902 $27,385

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,019 1,020Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,080 5,271

15,099 6,291

Net income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,803 21,094

Other comprehensive incomeLoss on interest rate swap agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (753) (820)Amortization of cash flow hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 191Unrealized foreign currency translation gain (loss) . . . . . . . . . . . . . . . . . . . . . 98 (290)

Other comprehensive loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (457) (919)Deferred income tax recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 157

Other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (318) (762)

Total comprehensive income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,485 $20,332


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COMBINED STATEMENTS OF DIVISIONAL SURPLUS

Accumulated Other Comprehensive Loss

Interest Cash Currency TotalYears ended December 31, Retained Rate Flow Translation Divisional(in thousands of Canadian dollars) Earnings Swap Hedge Adjustment Total Surplus

Divisional surplus, January 1, 2010 . . . . . . . . . . . . $189,144 $ (464) $(978) $ — $(1,442) $ 187,702Changes during the year:Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,094 — — — — 21,094Distributions to Morguard Corporation . . . . . . . . . (9,442) — — — — (9,442)Loss on interest rate swap agreement, net of tax . . — (615) — — (615) (615)Amortization of cash flow hedge, net of tax . . . . . . — — 143 — 143 143Unrealized foreign currency translation adjustment — — — (290) (290) (290)

Divisional Surplus, December 31, 2010 . . . . . . . . . 200,796 (1,079) (835) (290) (2,204) 198,592

Changes during the year:Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,803 — — — — 86,803Distributions to Morguard Corporation . . . . . . . . . (45,984) — — — — (45,984)Loss on interest rate swap agreement, net of tax . . — (565) — — (565) (565)Amortization of cash flow hedge, net of tax . . . . . . — — 149 — 149 149Unrealized foreign currency translation adjustment — — — 98 98 98

Divisional Surplus, December 31, 2011 . . . . . . . . . $241,615 $(1,644) $(686) $(192) $(2,522) $ 239,093

Refer to note 3 for effects of adoption of IFRS.See accompanying notes to the combined financial statements.

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COMBINED STATEMENTS OF CASH FLOWS

Years ended December 31,(in thousands of Canadian dollars) Note 2011 2010

OPERATING ACTIVITIESNet income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,803 $ 21,094Items not affecting cash:

Fair value gains on real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . (82,585) (9,760)Amortization — capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 34Amortization of deferred direct financing costs . . . . . . . . . . . . . . . . . . . . . . . 1,348 1,326Amortization — cash flow hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 191Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,080 5,271

Net change in non-cash operating items and other . . . . . . . . . . . . . . . . . . . . . . 11 1,247 (184)

Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,125 17,972

FINANCING ACTIVITIESProceeds from new mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,569 12,289Financing cost on new mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,959) (381)Repayment of mortgages

Repayments on maturity and early extinguishment . . . . . . . . . . . . . . . . . . . (57,038) (5,169)Principal installment repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,602) (9,339)

Distributions to Morguard Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,984) (9,442)Increase in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25) (26)

Cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,039) (12,068)

INVESTING ACTIVITIESAdditions to real estate properties and capital assets . . . . . . . . . . . . . . . . . . . . . (8,113) (5,923)

Cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,113) (5,923)

Net decrease in cash during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27) (19)Net effect of foreign currency translation on cash balance . . . . . . . . . . . . . . . . . 12 (18)Cash, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925 962

Cash, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 910 $ 925

Supplemental cash flow information:Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,534 $ 15,825


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NOTES TO COMBINED FINANCIAL STATEMENTS

December 31, 2011(amounts in thousands of Canadian dollars)

1. NATURE OF OPERATIONS

Morguard Corporation Residential Properties as presented in these combined financial statements is not a legal entity. These combinedfinancial statements and notes thereto represent the combination of 14 multi-unit residential rental properties located in Canada andthree multi-unit residential rental properties located in the United States (‘‘U.S.’’) (the ‘‘Initial Properties’’), that are owned directly orindirectly by Morguard Corporation (‘‘Morguard’’) and have been owned by Morguard directly or indirectly for all periods presented.Morguard is a real estate investment corporation formed under the laws of Ontario whose principal activities include propertyownership (both commercial and residential real estate), development and fully integrated management services.

The 17 revenue-producing properties, together with their related assets and liabilities, are to be acquired by Morguard North AmericanResidential Real Estate Investment Trust (the ‘‘REIT’’) upon completion of an initial public offering of units by the REIT.


Statement of Compliance

These combined financial statements present the results of operations and cash flow of the Initial Properties for the year endedDecember 31, 2011, along with the comparative results for the year ended December 31, 2010. These combined financial statementshave been prepared in accordance with International Financial Reporting Standards (‘‘IFRS’’) as issued by the InternationalAccounting Standards Board. These are the Initial Properties’ first annual combined financial statements prepared in accordance withIFRS and IFRS 1, ‘‘First-time Adoption of International Financial Reporting Standards (‘‘IFRS 1’’). The Initial Properties adoptedIFRS in accordance with IFRS 1 as discussed in note 3.

The combined financial statements were approved and authorized for issue by the board of directors of Morguard on April 5, 2012.

Basis of Presentation

These combined financial statements present the financial position, results of operations and cash flows of the Initial Properties had theInitial Properties been accounted for on a stand-alone basis, and include the Initial Properties’ proportionate share of the assets,liabilities, revenue and expenses that are expected to be included in the REIT. Management has extracted the information used toprepare these combined financial statements from the financial statements of Morguard.

These combined financial statements are not necessarily indicative of the results that would have been attained if the Initial Propertieshad been operated as a separate legal entity during the periods presented and, therefore, are not necessarily indicative of futureoperating results.

Management believes that the preservation of historic fees and an allocation of other costs to the Initial Properties reflect a reasonablemethod of allocating an appropriate portion of the historic property operating and other costs of Morguard related to the managementof the Initial Properties. Other corporate costs, such as public company and other stewardship costs of Morguard, have not beenallocated to these combined financial statements.

Due to the inherent limitations of carving out activities from larger entities, these combined financial statements may not necessarilyreflect the Initial Properties’ results of operations, financial position and cash flows for future periods, nor do they necessarily reflect theresults of operations, financial position and cash flows that would have been realized had the Initial Properties been a stand-alone entityduring the periods presented.

Real estate properties

Real estate properties include residential properties held to earn rental income and for capital appreciation. Real estate property that isacquired not as a business combination is recorded initially at cost including transaction costs. Transaction costs include transfer taxesand professional fees for legal services. Subsequent to acquisition capital expenditures are capitalized to the property.

Subsequent to initial recognition, income producing properties are recorded at fair value. The changes in fair value each reportingperiod will be recorded in the combined statements of income. In order to avoid double accounting, the carrying value of real estateproperties includes free rent receivables, since these amounts are incorporated in the appraised values of the real estate properties. Fairvalue is based upon external and internal valuations that use the direct capitalization income valuation technique. Recent real estatetransactions with similar characteristics and location to the Initial Properties’ assets are also considered. The direct capitalizationincome method applies a capitalization rate to the property’s stabilized net operating income which incorporates allowances forvacancy, management fees and structural reserves for capital expenditures for the property. The resulting appraised value is furtheradjusted, where appropriate, for non-recurring costs to stabilize the income and non-recoverable capital expenditures.

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NOTES TO COMBINED FINANCIAL STATEMENTS (Continued)



Co-Ownerships

Certain of the Initial Properties are owned through co-ownership arrangements with one or more additional parties. These propertieshave been reflected in the Initial Properties’ financial statements using the proportionate consolidation method and only includeMorguard’s share of the financial position and financial results of the properties.

Capital Assets

Capital assets include computer equipment that is stated at cost less accumulated amortization and is amortized on a straight-line basisover five years.

Revenue Recognition

The Initial Properties retain substantially all of the benefits and risks of ownership of its real estate properties and, therefore, accountsfor its leases with tenants as operating leases.

Rental revenue includes rents from tenants under leases, parking and other sundry revenue derived from operating residentialproperties and is recognized on a monthly basis as services are performed in accordance with the terms of the underlying tenantagreements.

Revenue from real estate properties recorded in the combined statements of income during free rent periods represents future cashreceipts and is reflected in the combined balance sheets in the carrying value of real estate properties and is recognized in the combinedstatements of income on a straight-line basis over the initial term of the lease. Straight line rent receivables are included in the carryingvalue of the real estate properties and are deducted from rental revenue on a straight-line basis over the term of the tenant’s lease.

Foreign Exchange

The operations of the Initial U.S. Properties are in U.S. dollars, which represent the functional currency of the U.S. properties.Accordingly, the assets and liabilities of foreign properties are translated into Canadian dollars at the rates on the combined balancesheet dates. Revenue and expenses are translated at the average rate of exchange for the year. The resulting gains and losses arerecorded as accumulated other comprehensive income.

2011 2010

United States dollar to Canadian dollar exchange rates:— December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.017 $0.9946— Average during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.9891 $1.0303

Comprehensive Income

Comprehensive income is defined as the change in equity from transactions and other events from non-owner sources. Othercomprehensive income (‘‘OCI’’) refers to items recognized in comprehensive income that are excluded from net income. Accordingly,the Initial Properties prepare combined statements of comprehensive income and includes accumulated other comprehensive income asa component of divisional surplus within the combined balance sheets.



Financial assets must be classified into one of the following categories: held for trading, held to maturity, loans and receivables, fairvalue through profit or loss, or available-for-sale assets. Financial liabilities are classified as other financial liabilities. All financialinstruments, including derivatives, are measured in the combined balance sheets at fair value except for loans and receivables and otherfinancial liabilities that are measured at amortized cost using the effective interest rate method.

The Initial Properties designated their cash and restricted cash as held for trading and their accounts receivable as loans andreceivables, which are measured at amortized cost. Mortgages payable, accounts payable and accrued liabilities and tenant rentaldeposits are classified as other financial liabilities, which are measured at amortized cost.

F-22





Derivatives and Embedded Derivatives

All derivative financial instruments, including embedded derivatives, are recorded in the combined balance sheets at fair value unlessexempted from derivative treatment as a normal purchase and sale. All changes in their fair value are recorded in income unless cashflow hedge accounting is used, in which case changes in fair value are recorded in OCI to the extent of hedge effectiveness. Financialguarantees are recorded at their inception date fair value and reversed as the Initial Properties are relieved of their guaranteeobligations.

Hedges

Derivative financial instruments are utilized to reduce interest rate risk on the Initial Properties’ debt. Interest rate swap agreements areused to manage the fixed and floating interest rate mix of the Initial Properties’ total debt portfolio and related overall cost ofborrowing. Such instruments are designated, and are effective, as hedges of certain of the Initial Properties’ interest rate risk exposures.The interest rate swap agreements involve the periodic exchange of payments without the exchange of the notional principal amountupon which the payments are based. The net receipt or payment of interest will be recorded as an adjustment to interest expense ineach period.

Financing Costs

Direct and indirect financing costs that are attributable to the issue of financial liabilities are presented as a reduction from the carryingamount of the related debt and are amortized using the effective interest rate method over the terms of the related debt. These costsinclude interest, amortization of discounts or premiums relating to borrowings, fees and commissions paid to lenders, agents, brokers,advisers and transfer taxes and duties that are incurred in connection with the arrangement of borrowings.

Fair Value

The fair value of a financial instrument is the amount of consideration that could be agreed upon in an arm’s-length transactionbetween knowledgeable, willing parties who are under no compulsion to act. Fair value may be based on other observable currentmarket transactions in the same instrument, without modification or on a valuation technique using market-based inputs. The InitialProperties’ financial assets include cash, restricted cash and accounts receivable. The Initial Properties’ financial liabilities includemortgages payable, accounts payable and accrued liabilities, and tenant rental deposits. Except as noted below, the carrying values ofthe Initial Properties’ financial assets and financial liabilities approximate their fair values because of the short period of time until thereceipt or payment of cash. The fair values of designated hedging derivatives included in accounts payable and accrued liabilities areestimated based on discounted future cash flows using discount rates that reflect current market conditions for instruments with similarterms and risks.

Fair value measurements recognized in the combined balance sheets are categorized using a fair value hierarchy that reflects thesignificance of inputs used in determining the fair values:

Level 1: Quoted prices in active markets for identical assets or liabilities.Level 2: Quoted prices in active markets for similar assets or liabilities or valuation techniques where significant inputs are based

on observable market data.Level 3: Valuation techniques for which any significant input is not based on observable market data.

Each type of fair value is categorized based on the lowest level input that is significant to the fair value measurement in its entirety.

Income Taxes

Since the Initial Properties are currently owned by various taxable entities within Morguard’s organizational structure, current anddeferred incomes taxes are included in the combined financial statements. The Initial Properties use the liability method of accountingfor income taxes. Under the liability method of tax allocation, current income tax assets and liabilities are based on the amount expectedto be paid to tax authorities, net of recoveries, based on the tax rates and laws enacted or substantively enacted at the combined balancesheet date. Deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax basisof assets and liabilities and are measured using substantively enacted tax rates and laws that will be in effect when the differences areexpected to reverse. Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits andunused tax losses, to the extent that it is probable that deductions, tax credits and tax losses can be utilized. The carrying amount ofdeferred income tax assets are reviewed at each combined balance sheet date and reduced to the extent it is no longer probable that theincome tax asset will be recovered. Current tax payables have been treated as a payable to Morguard and included in divisional surplusas Morguard holds the obligation to remit taxes.

F-23





Restricted Cash

Restricted cash represents tenant rent deposits segregated to meet certain provincial statutory requirements and cash held in escrow forfuture capital expenditures.

Divisional Surplus

The Initial Properties are held by a number of related entities that are all managed by Morguard. The properties that are wholly-ownedby Morguard do not maintain their own cash accounts or financing arrangements. Divisional surplus represents the net of all capital andfinancing/cash transactions of the Initial Properties.

Critical Judgments in Applying Accounting Policies

The following are the critical judgments that have been made in applying the Initial Properties’ accounting policies and that have themost significant effect on the amounts in the combined financial statements:


The Initial Properties’ accounting policies relating to real estate properties are described above. In applying these policies, judgment hasbeen applied in determining whether certain costs are additions to the carrying amount of the property. Judgment is also applied indetermining the extent and frequency of independent appraisals. The key assumptions are further defined in note 5.

Critical Accounting Estimates and Assumptions

The preparation of the combined financial statements requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the combined financial statements andreported amounts of revenue and expenses during the reporting periods.

In determining estimates of fair market value for its real estate properties, the assumptions underlying estimated values are limited bythe availability of comparable data and the uncertainty of predictions concerning future events. Should the underlying assumptionschange, actual results could differ from the estimated amounts. The critical estimates and assumptions underlying the valuation of realestate properties are outlined in note 5.

3. TRANSITION TO IFRS

The Initial Properties have adopted IFRS effective January 1, 2010 (the ‘‘transition date’’) and has prepared its opening IFRS balancesheet as at that date. Prior to the adoption of IFRS, the Initial Properties prepared its financial statements in accordance with Canadiangenerally accepted accounting principles (‘‘Canadian GAAP’’).

IFRS 1: First-Time Adoption of IFRS

In preparing these combined financial statements in accordance with IFRS 1, the Initial Properties have applied certain optional andmandatory exemptions from full retrospective application of IFRS and these exemptions are consistent with those selected and appliedby Morguard. The optional exemptions applied are described below.

Business Combinations

The Initial Properties have applied the business combinations exemption in IFRS 1 not to apply IFRS 3, ‘‘Business Combinations’’retrospectively to past business combinations. Accordingly, the Initial Properties have not restated business combinations that tookplace prior to the IFRS transition date.

Cumulative Translation Difference

The Initial Properties have elected to set the cumulative translation account, related to foreign properties with a functional currencyother than the Canadian dollar included in accumulated other comprehensive income, to zero at January 1, 2010. This exemption hasbeen applied to all U.S. properties that are part of the Initial Properties.

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3. TRANSITION TO IFRS (Continued)

Hedge Accounting

Only hedging relationships that satisfied the hedge accounting criteria as of the transition date are reflected as hedges in the InitialProperties’ results under IFRS. All of the Initial Properties’ hedges reported under Canadian GAAP also met the criteria for hedgeaccounting under IFRS.

Estimates

Hindsight was not used to create or revise estimates and accordingly, the estimates previously made by the Initial Properties underCanadian GAAP are consistent with their application under IFRS.

Reconciliation of Divisional Surplus as Reported Under Canadian GAAP and IFRS

The following is a reconciliation of the Initial Properties’ total divisional surplus reported in accordance with Canadian GAAP to itstotal divisional surplus in accordance with IFRS at the transition date:

AccumulatedOther

Divisional ComprehensiveNote Surplus Income Total

As reported under Canadian GAAP — January 1, 2010 . . . . . . . . . . . . . . . . $ 27,083 $(1,906) $ 25,177Differences increasing (decreasing) reported amount:Real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a) 188,406 — 188,406Financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) (950) — (950)Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c) (24,931) — (24,931)Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (d) (464) 464 —

As reported under IFRS — January 1, 2010 . . . . . . . . . . . . . . . . . . . . . . . $189,144 $(1,442) $187,702

The following is a reconciliation of the Initial Properties’ total divisional surplus reported in accordance with Canadian GAAP to itstotal divisional surplus reported in accordance with IFRS at December 31, 2010:

AccumulatedOther

Divisional ComprehensiveNote Surplus Income Total

As reported under Canadian GAAP — December 31, 2010 . . . . . . . . . . . . . . $ 19,572 $(2,461) $ 17,111Differences increasing (decreasing) reported amount:Real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a) 213,044 — 213,044Financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) (1,147) — (1,147)Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c) (30,209) (30,209)Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (d) (464) 257 (207)

As reported under IFRS — December 31, 2010 . . . . . . . . . . . . . . . . . . . . . $200,796 $(2,204) $198,592

Notes for Reconciliations of Equity From Canadian GAAP to IFRS:

(a) Real Estate Properties

The Initial Properties are considered to be investment properties under IAS 40, ‘‘Investment Property’’ (‘‘IAS 40’’). Investmentproperty includes land and buildings held primarily to earn rental income and/or for capital appreciation. Similar to CanadianGAAP, investment property is initially recorded at cost under IAS 40. However, subsequent to initial recognition, IFRS requiresthat an entity choose either the cost or fair value model to account for investment property. The Initial Properties have elected touse the fair value model. This adjustment to retained earnings represents the cumulative unrealized gain in respect of the InitialProperties’ real estate properties, net of the reclassification of straight-line rent receivables.

(b) Financing Costs

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The Initial Properties’ accounting policy under Canadian GAAP was to expense indirect financing costs that are attributable to theissue of financial liabilities: these include fees and commissions paid to agents, brokers, advisers and transfer taxes and duties.Under IFRS, these indirect financing costs are included in the carrying amount of the related debt and are amortized using theeffective interest rate method over the terms of the debts to which they relate.

(c) Deferred Taxes

The increase in deferred income tax liabilities under IFRS compared with Canadian GAAP primarily relates to the increasedcarrying values of the Initial Properties’ real estate properties. The deferred income tax liability under IFRS is determined by taxeffecting the increase in fair value at the capital gains tax rate based on the presumption that the method of realization will bethrough the sale of the property.

(d) Cumulative Translation Adjustment

As described in the section above, ‘‘IFRS 1: First-Time Adoption of IFRS’’, the Initial Properties have elected to set the previousaccumulated cumulative translation account, which is included in accumulated other comprehensive income, to zero at January 1,2010. This has been reflected as a reclassification between accumulated other comprehensive income and divisional surplus andtherefore does not have an impact on total reported equity.

Reconciliation of Net Income as Reported under Canadian GAAP and IFRS

The following is a reconciliation of the Initial Properties’ net income reported in accordance with Canadian GAAP to its net incomereported in accordance with IFRS for the year ended December 31, 2010.

Year endedNote Dec. 31, 2010

Net income as reported under Canadian GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,931Adjustments increasing (decreasing) reported amount:Real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a) 24,631Financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) (190)Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c) (5,278)

Net income as reported under IFRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,094

Notes for Reconciliations of Net Income From Canadian GAAP to IFRS:

(a) Real Estate Properties

In accordance with IFRS and the Initial Properties’ policy choice to adopt the fair value model to account for its real estateproperties, changes in fair value each reporting period will be included in net income. In addition, under the fair value model,amortization of investment properties is no longer recorded.

(b) Financing Costs

As described above, this adjustment relates to the amortization of indirect financing costs that have been capitalized under IFRSwhich were previously expensed under Canadian GAAP in the period the costs were incurred.

(c) Deferred Taxes

The adjustment reflects the change in temporary differences resulting from the impact of the above differences between IFRS andCanadian GAAP.

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Reconciliation of Comprehensive Income as Reported under Canadian GAAP and IFRS

The following is a reconciliation of the Initial Properties’ comprehensive income reported in accordance with Canadian GAAP to itscomprehensive income reported in accordance with IFRS for the years ended December 31, 2011 and the year endedDecember 31, 2010.

Year endedNote Dec. 31, 2010

Total comprehensive income as reported under Canadian GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,376Adjustments increasing reported amount:Differences in net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a) 19,163Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) (207)

Total comprehensive income as reported under IFRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,332

Notes for Reconciliation of Comprehensive Income From Canadian GAAP to IFRS:

(a) Differences in Net Income

This amount reflects the differences in net income under Canadian GAAP and IFRS as described above in ‘‘Reconciliation of NetIncome Reported Under Canadian GAAP and IFRS’’ section.

(b) Foreign Currency Translation Adjustment

This amount reflects the U.S. foreign currency exchange impact of the IFRS adjustments during the respective periods.

4. FUTURE ACCOUNTING POLICY CHANGES

Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities

In May 2011, the IASB issued IFRS 10, ‘‘Consolidated Financial Statements’’, IFRS 11, ‘‘Joint Arrangements’’ and IFRS 12,‘‘Disclosure of Interests in Other Entities’’. IFRS 10, 11 and 12 are effective for annual periods beginning on or after January 1, 2013;however, earlier adoption is permitted. The Initial properties do not anticipate IFRS 10, 11 and 12 to have a significant impact on thecombined financial statements and anticipate adopting each of the above standards in the first quarter of 2013.


IFRS 9, ‘‘Financial Instruments’’ (‘‘IFRS 9’’), was issued by the IASB on November 12, 2009 and will replace IAS 39. IFRS 9 uses asingle approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple classificationoptions in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial impairment methods in IAS 39. IFRS 9 iseffective for annual periods beginning on or after January 1, 2015. The Initial Properties do not anticipate IFRS 9 to have a significantimpact on the combined financial statements and anticipate adopting the standard in the first quarter of 2015.

Income Taxes

In December 2010, the IASB made amendments to IAS 12, ‘‘Income Taxes’’ (‘‘IAS 12’’), that are applicable to the measurement ofdeferred tax assets and liabilities where real estate property is measured using the fair value model in IAS 40, ‘‘Investment Property’’.The amendments introduce a rebuttable presumption that, for purposes of determining deferred tax consequences associated withtemporary differences relating to investment properties, the carrying amount of the investment property is recovered entirely throughthe sale of the property. This presumption is rebutted if the investment property is held within a business model whose objective is toconsume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. Theamendments to IAS 12 are effective for annual periods beginning on or after January 1, 2012 and will have minimal impact on the InitialProperties’ combined financial statements since the Initial Properties have applied this approach in calculating deferred income taxesunder IFRS and will adopt this standard in the first quarter of 2012.

Fair Value Measurement

IFRS 13, ‘‘Fair Value Measurement’’ (‘‘IFRS 13’’), replaces the current guidance on fair value measurement and provides a singlesource of guidance for fair value measurements when fair value is permitted or required by IFRS. The standard defines fair value,

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4. FUTURE ACCOUNTING POLICY CHANGES (Continued)

provides guidance on its determination and requires disclosures about fair value measurements but does not change the requirementsabout the items that should be measured and disclosed at fair value. IFRS 13 is effective for annual periods beginning on or afterJanuary 1, 2013, with early adoption permitted. The Initial Properties are currently evaluating the impact of IFRS 13 on their combinedfinancial statements and anticipate adopting the standard in the first quarter of 2013.

Presentation of Financial Statements

In June 2011, the IASB made amendments to IAS 1, ‘‘Presentation of Financial Statements’’ (‘‘IAS 1’’) which will require items to bepresented in Other Comprehensive Income on the basis whether they will or will not subsequently reclassified to profit or loss. Theamended version of IAS 1 is effective for the annual periods beginning on or after July 1, 2012, with early adoption permitted. TheInitial Properties anticipate the amendment to IAS 1 to have a minimal impact on their combined financial statements and anticipateadopting the standard in the first quarter of 2013.

5. REAL ESTATE PROPERTIES

Reconciliations of the carrying amount for real estate properties at the beginning and end of the current and prior year are setout below:

Year ended Year endedDec. 31, 2011 Dec. 31, 2010

Real estate properties balances at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $585,729 $571,536Capital expenditures and lease incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,075 5,894Fair value gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,585 9,760Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555 (1,461)

Real estate properties balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $676,944 $585,729

For financial reporting periods as at December 31, 2011, December 31, 2010 and January 1, 2010, the Initial Properties had theirCanadian properties internally appraised by the appraisal division of Morguard and the U.S. properties were externally appraised by anindependent national U.S. real estate appraisal firm. As a result, approximately 4.0% of the Initial Properties’ were externally appraisedat December 31, 2011 (December 31, 2010 — 4.5%, January 1, 2010 — 4.7%).

The fair value of the Initial Properties’ was determined using the direct capitalization income method. The properties were valued usingcapitalization rates in the range of 5.5% to 8.5% applied to a stabilized net operating income (December 31, 2010 — 6.0% to 8.3%,January 1, 2010 — 6.0% to 8.5%), resulting in an overall weighted average capitalization rate of 5.7% (December 31, 2010 — 6.2%,January 1, 2010 — 6.2%). The average capitalization rates by geographical location are set out in the following table:


Weighted Weighted WeightedMaximum Minimum Average Maximum Minimum Average Maximum Minimum Average

Canada . . . . 5.8% 5.5% 5.6% 6.3% 6.0% 6.1% 6.3% 6.0% 6.1%U.S. . . . . . . 8.5% 8.3% 8.3% 8.3% 7.8% 7.9% 8.5% 8.0% 8.1%

Values are most sensitive to changes in capitalization rates and timing or variability of cash flows.

Included in real estate properties is $91 (December 31, 2010 — $118) of incentive receivables arising from the recognition of rentalrevenue net of incentives on a straight-line basis over the lease term in accordance with IAS 17, ‘‘Leases’’.

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6. PREPAID EXPENSES

Prepaid expenses consist of the following:

Dec. 31, Dec. 31, Jan. 1,As at 2011 2010 2010

Prepaid realty taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $842 $1,609 $1,774Prepaid other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 128 185

$990 $1,737 $1,959

7. MORTGAGES PAYABLE

Mortgages payable, which are at fixed and floating rates, consist of the following:

Dec. 31, Dec. 31, Jan. 1,As at 2011 2010 2010

Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 360,605 $ 324,240 $ 327,551Financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,976) (4,360) (5,317)

$ 354,629 $ 319,880 $ 322,234

Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,869 64,502 12,963Non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322,760 255,378 309,271

$ 354,629 $ 319,880 $ 322,234

Range of interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0% - 6.0% 4.0% - 6.3% 4.0% - 11.5%Weighted average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4% 4.8% 4.9%Estimated fair value of mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 383,792 $ 327,133 $ 330,991

Floating rate mortgages in the aggregate amount of $66,053 as at December 31, 2011 (December 31, 2010 — $67,867, January 1,2010 — $69,607) are subject to interest rate swap agreements to pay a fixed interest rate (see note 14 for further details).

The aggregate principal repayments and balances maturing of the mortgages payable on real estate assets in the next five years andthereafter are as follows:



2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,364 $ 23,016 $ 33,380 6.0%2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,796 62,363 72,159 4.1%2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,738 94,886 101,624 4.3%2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,142 17,191 22,333 4.3%2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,833 10,634 14,467 4.7%Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,433 100,209 116,642 4.2%

$360,605 4.4%

The Initial Properties’ and their related rental revenues have been pledged as collateral for the mortgages payable.

8. PROPERTY OPERATING EXPENSES

Morguard provides management services to the Initial Properties for an annual fee of 3% to 5% of total revenue, net of vacancies. Thecost of these services of $2,456 (2010 — $2,392) was charged to property operating expenses.

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8. PROPERTY OPERATING EXPENSES (Continued)

Property operating expenses are comprised of the following:

Years ended December 31, 2011 2010

Realty taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,866 $ 9,078Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,663 8,326Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,948 17,451

$35,477 $34,855

9. INTEREST EXPENSE

The components of interest expense are as follows:

Years ended December 31, 2011 2010

Interest on mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,547 $15,721Amortization of deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,348 1,326Amortization of cash flow hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 191Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6

$17,095 $17,244

10. INCOME TAXES

(a) The Initial Properties’ effective income tax rate is derived as follows:

Years endedDecember 31,

2011 2010

Income taxes at statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,723 $ 8,490Impact of rates in different jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58) 170Impact of changes in future tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,615) (2,311)Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 (58)

$ 15,099 $ 6,291

(b) The components of deferred income taxes are as follows:


As at Canada U.S. Total Canada U.S. Total Canada U.S. Total

Real estate assets . . . . . . . . . . $73,533 $1,703 $75,236 $60,153 $1,817 $61,970 $56,231 $1,210 $57,441Others . . . . . . . . . . . . . . . . . (1,763) — (1,763) (2,475) — (2,475) (2,971) — (2,971)

$71,770 $1,703 $73,473 $57,678 $1,817 $59,495 $53,260 $1,210 $54,470

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11. NET CHANGE IN NON-CASH OPERATING ITEMS AND OTHER

For the years ended December 31 2011 2010

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 264 $1,057Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747 222Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 842 (826)Tenant rental deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 163Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (753) (800)

$1,247 $ (184)

12. CO-OWNERSHIP INTERESTS

The following amounts included in these combined financial statements represent the Initial Properties’ proportionate share inco-ownership interests:

As at Dec 31, 2011 Dec. 31, 2010 Jan. 1, 2010

Balance sheet

AssetsNon-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $162,241 $137,915 $135,292Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,018 1,318 1,705

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,259 139,233 136,997

LiabilitiesNon-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,329 44,332 71,327Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,202 29,566 5,836

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,531 73,898 77,163

Divisional surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 68,728 $ 65,335 $ 59,834


Statement of operationsRevenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,601 $15,949Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,163 11,889

Income before fair value changes on real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,438 4,060Fair value gains on real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,411 865

Net income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,849 $ 4,925

13. CAPITAL MANAGEMENT

The Initial Properties define capital as the aggregate of its mortgages payables and divisional surplus, less cash. The Initial Properties’objectives when managing capital are to meet its repayment obligations under its mortgage facilities, to ensure that there are sufficientfunds available to finance operations and to meet capital commitments.

The Initial Properties are subject to risks associated with debt financing, including the possibility that existing mortgages may not berefinanced or may not be refinanced on as favourable terms or with interest rates as favourable as those of the existing debt. The InitialProperties mitigate these risks by their continued efforts to stagger the maturity profile of its long-term debt, enhance the value of itsreal estate properties, maintain high occupancy levels and foster excellent relations with its lenders. The Initial Properties manage theircapital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics of the underlyingassets.

The Initial Properties monitor capital based on an interest coverage ratio and a debt to aggregate asset ratio. The Initial Properties’policy for capital risk management is not externally imposed by lenders but represents objectives targeted by management. The InitialProperties strive to maintain an interest coverage ratio of 1.5 times and a debt to aggregate asset ratio of no greater than 70%.

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13. CAPITAL MANAGEMENT (Continued)

Interest coverage ratio is defined as income before interest expense and amortization over interest expense. Debt to aggregate assetratio is defined as mortgages over total assets of the Initial Properties.

The ratios at December 31, 2011 and December 31, 2010 were as follows:


Interest coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12X 2.02XDebt to aggregate asset ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53% 55%

14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Initial Properties’ financial assets and liabilities are comprised of cash, restricted cash, accounts receivable, accounts payable andaccrued liabilities, tenant rental deposits and mortgages payable. Fair values of financial assets and liabilities and discussion of risksassociated with financial assets and liabilities are presented as follows.

Fair Value of Financial Assets and Liabilities

The fair values of cash, accounts receivable, accounts payable and accrued liabilities and tenant rental deposits approximate theircarrying value due to the short-term maturity of those instruments. Mortgages payable are carried at amortized cost using the effectiveinterest method of amortization. The estimated fair values of long-term borrowings have been determined based on marketinformation, where available, or by discounting future payments of interest and principal at estimated interest rates expected to beavailable to the Initial Properties at period end.

The fair market value of the mortgages payable has been determined by discounting the cash flows of these financial obligations usingDecember 31, 2011 market rates for debts of similar terms (Category Level 2). Based on these assumptions, the fair value as atDecember 31, 2011 of the mortgages payable before deferred financing costs is estimated at $383,792 (December 31, 2010 — $327,133,January 1, 2010 — $330,991) compared with the carrying value of $360,605 (December 31, 2010 — $324,240, January 1, 2010 —$327,551). The fair value of the mortgages payable varies from the carrying value due to fluctuations in interest rates since their issue.

During December 2008, the Initial Properties refinanced two real estate properties with floating rate mortgages. To mitigate the interestrate risk on the refinancing of these mortgages, the Initial Properties entered into two interest rate swap transactions to acquire a fixedrate of interest. The swap transactions have an effective date of December 31, 2008 and mature on December 31, 2013. The outstandingaggregate balance of the floating rate mortgages as at December 31, 2011 was $66,053.

The fair value of the interest rate swaps for the period ended December 31, 2011 is a loss position of $2,192 (December 31, 2010 —$1,439, January 1, 2010 — $619), which is included in accounts payable and accrued liabilities in the combined balance sheet (CategoryLevel 2). Included in other comprehensive income for the year ended December 31, 2011 is a loss of $753 (year ended December 31,2010 — $820), net of future income taxes of $188 (2010 — $205) that relates to the effective portion of the net change in fair value ofthe interest rate swaps.

Risks Associated with Financial Assets and Liabilities

The Initial Properties are exposed to financial risks arising from its financial assets and liabilities. The financial risks include market riskrelating to interest rates and foreign exchange rates, credit risk and liquidity risk. The Initial Properties’ approach to managing theserisks is summarized below.

(a) Market Risk

Market risk is the risk that the fair value or future cash flows of financial assets or liabilities will fluctuate due to movements inmarket prices and comprises the following:

Interest Rate Risk

The Initial Properties are subject to the risks associated with debt financing; including the risk that mortgages and credit facilitieswill not be refinanced on terms as favourable as those of the existing indebtedness. For the year ended December 31, 2011, theincrease or decrease in annual net income for each one percent change in interest rates on mortgages payable amounts to $3,606.

The Initial Properties’ objective of managing interest rate risk is to minimize the volatility of the Initial Properties’ income. As atDecember 31, 2011, interest rate risk has been minimized as all of the Initial Properties’ long-term debt is financed at fixed interest

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14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

rates with maturities scheduled over a number of years, with the exception of two mortgages totaling $66,053 that are subject tofloating interest rates; however, the Initial Properties’ risk has been minimized as the Initial Properties entered into two interestrate swap transactions to acquire a fixed rate in substitution for the floating rates on the three mortgages.

Foreign Exchange Risk

The Initial Properties are exposed to foreign exchange risk as it relates to its U.S. real estate properties due to fluctuations in theexchange rate between the Canadian and U.S. dollars. Changes in the exchange rate may result in a reduction or an increase ofreported earnings and other comprehensive income. For the year ended December 31, 2011, a $0.05 change in the U.S. toCanadian dollar exchange rate would have resulted in a $16 change to net income or loss and a $226 change to comprehensiveincome or loss.

The Initial Properties’ objective of managing foreign exchange risk is to mitigate the exposure from fluctuations in the exchangerate by maintaining U.S. denominated debt against its U.S. assets, which amounted to $19,370 as at December 31, 2011 and 2010.The Initial Properties currently do not hedge their net investment in the U.S. properties.

(b) Credit Risk

Credit risk is the risk that: (i) counterparties to contractual financial obligations will default; and (ii) the possibility that the InitialProperties’ residents may experience financial difficulty and be unable to meet their rental obligations.

The Initial Properties mitigate the risk of credit loss with respect to residents by evaluating the creditworthiness of new residents,obtaining security deposits wherever permitted by legislation, and geographically diversifying their Initial Properties.

The Initial Properties monitor their collection experience on a monthly basis and ensure that a stringent policy is adopted toprovide for all past due amounts. Subsequent recoveries of amounts previously written-off are credited in the combined statementof income and comprehensive income.

The following table sets forth details of trade receivables and the related allowance for doubtful accounts:


Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 688 $ 849Less: Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (312) (364)

Total trade receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 376 $ 485

(c) Liquidity Risk

Liquidity risk is the risk that the Initial Properties may encounter difficulties in accessing capital and refinancing its financialobligations as they come due. All of the Initial Properties’ Canadian mortgages are insured by the Canada Mortgage and HousingCorporation, which reduces the risk of mortgage refinancing. To mitigate the risk associated with the refinancing of maturing debt,the Initial Properties stagger the maturity dates of their mortgage portfolio over a number of years.

The contractual maturities and repayment obligations of the Initial Properties’ financial liabilities as at December 31, 2011 areas follows:

2012 2013 2014 2015 2016 Thereafter

Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . $33,380 $72,159 $101,624 $22,333 $14,467 $116,642Accounts payable and accrued liabilities . . . . . . . . . . . . 9,578 — — — — —Tenant rental deposits . . . . . . . . . . . . . . . . . . . . . . . 5,434 18 1 — — —

15. COMMITMENTS AND CONTINGENCIES

The Initial Properties are contingently liable under guarantees that are issued in the normal course of business and with respect oflitigation and environmental matters that arise from time to time. While the final outcome of these matters cannot be predicted withcertainty, in the opinion of management, any liability that may arise from such contingencies would not have a material adverse effecton the combined financial statements of the Initial Properties.

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15. COMMITMENTS AND CONTINGENCIES (Continued)

In the Province of Ontario, the Initial Properties are subject to, and believes it has complied with, the Residential Tenancies Act, 2006(Ontario). Each year, the Ontario government determines the Province’s residential rent increase for existing tenants. In 2011, therental guideline increase was 0.7% (2010 — 2.1%).

(a) Commitments

Future minimum annual rental receipts on non-cancellable tenant operating leases are as follows:

Dec. 31, Dec. 31,As at 2011 2010

Not later than 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,165 $10,759Later than 1 year and not longer than 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 3,601

$14,218 $14,360

16. SEGMENTED DISCLOSURE

All of the Initial Properties’ assets and liabilities are in, and their revenue derived from, the Canadian and U.S. multi-unit residentialreal estate segment. The Canadian properties are located in the provinces of Ontario and Alberta and the U.S. properties are located inthe state of Louisiana. No single tenant accounts for 10% or more of the Initial Properties’ rental revenue.

The Initial Properties are separated into two operating segments, Canada and the United States. Additional information with respect toeach operating segment is outlined below:

2011 2010

As at December 31 Canada U.S. Total Canada U.S. Total

Real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . $650,837 $26,107 $676,944 $559,232 $26,497 $585,729Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653,520 26,347 679,867 562,932 26,718 589,650Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,906 19,699 360,605 304,975 19,265 324,240Additional to real estate properties and capital assets . . . . . . $ 7,393 $ 538 $ 7,931 $ 5,679 $ 368 $ 6,047

2011 2010

Net NetTotal Operating Total Operating

Years Ended December 31 Revenue Income Revenue Income

Geographic locationCanada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $67,568 $34,280 $65,496 $32,694U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,355 2,166 4,262 2,209

$71,923 $36,446 $69,758 $34,903

17. SUBSEQUENT EVENT

On April 5, 2012, the REIT entered into an underwriting agreement whereby the REIT is expected to raise gross proceeds of$75 million pursuant to an initial public offering (the ‘‘Offering’’) through the issuance of 7,500,000 units at a price of $10 per unit(excluding any over-allotment option). The closing of the Offering and the other transactions contemplated by the prospectus(‘‘Closing’’) is expected to occur no later than May 2, 2012. Upon Closing, the REIT will acquire the Initial Properties.

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MORGUARD CORPORATION RESIDENTIALPROPERTIES

AUDITED COMBINED FINANCIAL STATEMENTS (CANADIAN GAAP)

FOR THE YEARS ENDED DECEMBER 31, 2010 AND DECEMBER 31, 2009

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To the Directors of Morguard Corporation

We have audited the accompanying combined balance sheets of Morguard Corporation ResidentialProperties as at December 31, 2010 and 2009, and the combined statements of income and comprehensiveincome, divisional surplus and cash flows for the years then ended, and a summary of significant accountingpolicies and other explanatory information.


Management is responsible for the preparation and fair presentation of these combined financialstatements in accordance with Canadian generally accepted accounting principles, and for such internal controlas management determines necessary to enable the preparation of combined financial statements that are freefrom material misstatement, whether due to fraud or error.


Our responsibility is to express an opinion on these combined financial statements based on our audits. Weconducted our audits in accordance with Canadian generally accepted auditing standards. Those standardsrequire that we comply with ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether the combined financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thecombined financial statements. The procedures selected depend on the auditors’ judgment, including theassessment of the risks of material misstatement of the combined financial statements, whether due to fraud orerror. In making those risk assessments, the auditors consider internal control relevant to the entity’spreparation and fair presentation of the combined financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by management, as well as evaluating the overall presentationof the combined financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide abasis for our audit opinion.

Opinion

In our opinion, the combined financial statements present fairly, in all material respects, the financialposition of Morguard Corporation Residential Properties as at December 31, 2010 and 2009, and the results ofits operations and its cash flows for the years then ended in accordance with Canadian generally acceptedaccounting principles.



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COMBINED BALANCE SHEETS

As at December 31(In thousands of Canadian dollars) Note 2010 2009

ASSETSReal estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 $373,180 $383,130Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1,747 1,974Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925 962Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301 275Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 793 2,005Future income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 795 819

$377,741 $389,165

LIABILITIES AND DIVISIONAL SURPLUSMortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 $318,732 $321,284Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,377 7,203Tenant rental deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,306 5,143Future income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 30,215 30,358

360,630 363,988

Divisional surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,111 25,177

$377,741 $389,165

Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

On behalf of the Board:

K. (RAI) SAHI WAYNE M. E. MCLEOD

Director Director

See accompanying notes.

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COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Years ended December 31(In thousands of Canadian dollars) Note 2010 2009

REVENUERental revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $69,758 $68,421

EXPENSESProperty operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 34,855 35,480Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 17,053 17,267Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 14,906 14,758

66,814 67,505

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,944 916

Provision for (recovery of) income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,020 1,066Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) (7,757)

1,013 (6,691)

Net income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,931 $ 7,607

OTHER COMPREHENSIVE INCOME (LOSS)Loss on interest rate swap agreement, net of tax(1) . . . . . . . . . . . . . . . . . . . . . . . . (615) (464)Amortization of cash flow hedge, net of tax(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 78Unrealized foreign currency translation loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . (83) (330)

Other comprehensive loss for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (555) (716)

Total comprehensive income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,376 $ 6,891

(1) Net of tax of $205 for the year ended December 31, 2010 (2009 — $155).

(2) Net of tax of $48 for the year ended December 31, 2010 (2009 — $106).


COMBINED STATEMENTS OF DIVISIONAL SURPLUS

Years ended December 31(in thousands of Canadian dollars) Note 2010 2009

Divisional surplusBalance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,083 $ 66,602Net income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,931 7,607Distributions to Morguard Corporation during the year . . . . . . . . . . . . . . . . . . . (9,442) (47,126)

Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,572 27,083

Accumulated other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . 10Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,906) (1,190)Loss on interest rate swap agreement, net of tax . . . . . . . . . . . . . . . . . . . . . . . . 14 (615) (464)Amortization of cash flow hedge, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 78Unrealized foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . (83) (330)

Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,461) (1,906)

Divisional surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,111 $ 25,177

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COMBINED STATEMENTS OF CASH FLOWS

Years ended December 31(In thousands of Canadian dollars) Note 2010 2009

OPERATING ACTIVITIESNet income for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,931 $ 7,607Items not affecting cash

Amortization of real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,872 14,739Amortization of deferred direct financing costs . . . . . . . . . . . . . . . . . . . . . . . 1,078 1,017Amortization — cash flow hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 184Amortization — capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 19Future income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) (7,757)

Net change in non-cash operating items and other . . . . . . . . . . . . . . . . . . . . . . 11 (31) 1,474

Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,068 17,283

FINANCING ACTIVITIESProceeds from new mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,289 84,601Financing costs on new mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (324) (2,227)Repayment of mortgages

Repayments on maturity and early extinguishment . . . . . . . . . . . . . . . . . . . . . (5,169) (39,779)Principal installment repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,339) (8,600)

Distributions to Morguard Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,442) (47,126)(Increase) decrease in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (26) 12

Cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,011) (13,119)

INVESTING ACTIVITIESAdditions to real estate properties and capital assets . . . . . . . . . . . . . . . . . . . . . (6,076) (4,101)

Cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,076) (4,101)

Net (decrease) increase in cash during the year . . . . . . . . . . . . . . . . . . . . . . . . . . (19) 63Net effect of foreign currency translation on cash balance . . . . . . . . . . . . . . . . . . . (18) (49)Cash, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 962 948

Cash, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 925 $ 962

Supplemental cash flow information:Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,825 $ 15,461

F-39


NOTES TO COMBINED FINANCIAL STATEMENTS

December 31, 2010

(amounts in thousands of Canadian dollars)

1. NATURE OF OPERATIONS

Morguard Corporation Residential Properties as presented in these combined financial statements is not a legal entity. These combinedfinancial statements and notes thereto represent the combination of 14 multi-unit residential rental properties located in Canada and3 multi-unit residential rental properties located in the United States (‘‘U.S.’’) (the ‘‘Initial Properties’’) that are owned directly orindirectly by Morguard Corporation (‘‘Morguard’’) and have been owned by Morguard directly or indirectly for all periods presented.Morguard is a real estate investment corporation formed under the laws of Canada whose principal activities include propertyownership (both commercial and residential real estate), development and fully integrated management services.

The 17 revenue-producing properties, together with their related assets and liabilities, are to be acquired by Morguard North AmericanResidential Real Estate Investment Trust (the ‘‘REIT’’) upon completion of an initial public offering of units by the REIT.

Adoption of New Accounting Policies

International Financial Reporting Standards

In February 2008, the Canadian Accounting Standards Board confirmed that Canadian public entities will have to adopt InternationalFinancial Reporting Standards (‘‘IFRS’’) effective for fiscal years beginning on or after January 1, 2011. The Initial Properties haveprepared for the year ended December 31, 2011, along with the comparative results for the year ended December 31, 2010, combinedfinancial statements in accordance with IFRS.


Basis of Presentation

These combined financial statements present the financial position, results of operations and cash flows of the Initial Properties had theInitial Properties been accounted for on a stand-alone basis, and include the Initial Properties’ proportionate share of the assets,liabilities, revenue and expenses that are expected to be included in the REIT. Management has extracted the information used toprepare these combined financial statements from the financial statements of Morguard.

These combined financial statements are not necessarily indicative of the results that would have been attained if the Initial Propertieshad been operated as a separate legal entity during the years presented and, therefore, are not necessarily indicative of future operatingresults.

The combined financial statements of the Initial Properties are prepared in accordance with Canadian generally accepted accountingprinciples (‘‘GAAP’’).

Management believes that the preservation of historic fees and an allocation of other costs to the Initial Properties reflect a reasonablemethod of allocating an appropriate portion of the historic property operating and other costs of Morguard related to the managementof the Initial Properties. Other corporate costs, such as public company and other stewardship costs of Morguard, have not beenallocated to these combined financial statements.

Due to the inherent limitations of carving out activities from larger entities, these combined financial statements may not necessarilyreflect the Initial Properties’ results of operations, financial position and cash flows for future periods, nor do they necessarily reflect theresults of operations, financial position and cash flows that would have been realized had the Initial Properties been a stand-alone entityduring the periods presented.

Use of Estimates

The preparation of financial statements in accordance with Canadian GAAP requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the combinedfinancial statements and reported amounts of revenue and expenses during the reporting periods. In determining estimates of netrecoverable amounts and net realizable values for its real estate assets, the assumptions underlying estimated values are limited by theavailability of comparable data and the uncertainty of predictions concerning future events. Should the underlying assumptions change,actual results could differ from the estimated amounts.


Real estate properties are stated at cost, net of accumulated amortization. Cost includes acquisition costs and, while underdevelopment, interest, realty taxes and other carrying costs, general and administrative expenses including salaries that can be clearly

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December 31, 2010



identified with the development and construction of the property, initial leasing costs and property operating expenses net of rentscharged during the development period.

Under the Canadian Institute of Chartered Accountants (‘‘CICA’’) Handbook Section 3061, ‘‘Property, Plant and Equipment’’,buildings are required to be amortized on a systematic and rational basis over their life expectancy. The Initial Properties amortize thebuilding costs of its real estate properties on a straight-line basis over their estimated useful lives, which do not exceed 40 years.

In addition, real estate properties include building improvements and equipment associated with upgrading the existing facilities, otherthan ordinary repairs and maintenance. Building improvements and equipment are amortized on a straight-line basis over 3 to 20 years.

The purchase price of any property acquired is based on fair value and is allocated to land, building and intangibles (lease originationcosts, the value of above and below-market leases, the value of in-place leases and tenant relationships, if any). Lease origination costsand above and below-market leases are amortized over the remaining initial term of the respective leases and tenant relationships areamortized over the expected term of the relationship.

An impairment loss is recognized when the carrying amount of a long-lived asset exceeds the sum of the undiscounted net cash flowsexpected from its use and anticipated disposal value. The impairment recognized is measured as the amount by which the carryingamount of the asset exceeds its fair value.

Co-Ownerships

Certain of the Initial Properties are owned through co-ownership arrangements with one or more additional parties. These propertieshave been reflected in the Initial Properties’ financial statements using the proportionate consolidation method and only includeMorguard’s share of the financial position and financial results of the properties.

Capital Assets

Capital assets include computer equipment that is stated at cost less accumulated amortization and is amortized on a straight-line basisover five years.

Revenue Recognition

The Initial Properties retain substantially all of the benefits and risks of ownership of its real estate properties and, therefore, accountsfor its leases with tenants as operating leases.

Rental revenue includes rents from tenant under leases, parking and other sundry revenue derived from operating residential propertiesand is recognized on a monthly basis as services are performed in accordance with the terms of the underlying tenant agreements.

Revenue from all leases is recognized on a straight-line basis over the term of the related lease.

Foreign Exchange

The operations of the Initial U.S. Properties are self-sustaining and accordingly, the assets and liabilities of foreign subsidiaries aretranslated into Canadian dollars at the rates on the combined balance sheet dates. Revenue and expenses are translated at the averagerate of exchange for the year. The resulting gains and losses are recorded as accumulated other comprehensive income.

2010 2009

United States dollar to Canadian dollar exchange rates:— December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.9946 $1.0510— Average during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.0303 $1.1420

Comprehensive Income

Comprehensive income is defined as the change in equity from transactions and other events from non-owner sources. Othercomprehensive income (‘‘OCI’’) refers to items recognized in comprehensive income that are excluded from net income calculated inaccordance with Canadian GAAP. Accordingly, the Initial Properties prepare combined statements of comprehensive income andincludes accumulated other comprehensive income as a component of divisional surplus within the combined balance sheets.

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December 31, 2010





Financial instruments must be classified into one of these five categories: held-for-trading, held-to-maturity, loans and receivables,available-for-sale financial assets or other financial liabilities. All financial instruments, including derivatives, are measured in thecombined balance sheets at fair value except for loans and receivables, held-to-maturity investments and other financial liabilities thatare measured at amortized cost using the effective interest method.

The Initial Properties designated their cash and restricted cash as held-for-trading, which is measured at fair value. Amounts receivableare classified as loans and receivables, which are measured at amortized cost. Mortgages payable, accounts payable and accruedliabilities and tenant rental deposits are classified as other financial liabilities, which are measured at amortized cost.

Derivatives and Embedded Derivatives

All derivative financial instruments, including embedded derivatives, are recorded in the combined balance sheets at fair value unlessexempted from derivative treatment as a normal purchase and sale. All changes in their fair value are recorded in income unless cashflow hedge accounting is used, in which case changes in fair value are recorded in other comprehensive income to the extent of hedgeeffectiveness. Financial guarantees are recorded at their inception date fair value and reversed as the Initial Properties are relieved oftheir guarantee obligations.

Hedges

Derivative financial instruments are utilized to reduce interest rate risk on the Initial Properties’ debt. Interest rate swap agreements areused to manage the fixed and floating interest rate mix of the Initial Properties’ total debt portfolio and related overall cost ofborrowing. Such instruments are designated, and are effective, as hedges of certain of the Initial Properties’ interest rate risk exposures.The interest rate swap agreements involve the periodic exchange of payments without the exchange of the notional principal amountupon which the payments are based. The net receipt or payment of interest will be recorded as an adjustment to interest expense ineach period.

Transaction Costs and Direct Financing Costs

Indirect financing costs that are attributable to the issue of financial liabilities are accounted for as an expense at the inception of theliability. Indirect financing costs include fees and commissions paid to agents, brokers and advisers and transfer taxes and duties butexclude debt discounts and premiums and direct financing costs paid to the lender.

Direct financing costs are presented as a reduction from the carrying amount of the related debt and are amortized using the effectiveinterest rate method over the terms of the related debt.

Fair Value

The fair value of a financial instrument is the amount of consideration that could be agreed upon in an arm’s-length transactionbetween knowledgeable, willing parties who are under no compulsion to act. Fair value may be based on other observable currentmarket transactions in the same instrument, without modification or on a valuation technique using market-based inputs. The InitialProperties’ financial assets include cash, restricted cash and accounts receivable. The Initial Properties’ financial liabilities includemortgages payable, accounts payable and accrued liabilities and tenant rental deposits. Except as noted below, the carrying values of theInitial Properties’ financial assets and financial liabilities approximate their fair values because of the short period of time until thereceipt or payment of cash. The fair values of designated hedging derivatives included in accounts payable and accrued liabilities areestimated based on discounted future cash flows using discount rates that reflect current market conditions for instruments with similarterms and risks.

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December 31, 2010



Fair value measurements recognized in the combined balance sheets are categorized using a fair value hierarchy that reflects thesignificance of inputs used in determining the fair values:

Level 1: Quoted prices in active markets for identical assets or liabilities.Level 2: Quoted prices in active markets for similar assets or liabilities or valuation techniques where significant inputs are based

on observable market data.Level 3: Valuation techniques for which any significant input is not based on observable market data.

Each type of fair value is categorized based on the lowest level input that is significant to the fair value measurement in its entirety.

Income Taxes

Since the Initial Properties are currently owned by various taxable entities within Morguard’s organizational structure, current andfuture incomes taxes are included in the combined financial statements. The Initial Properties use the liability method of accounting forincome taxes. Under the liability method of tax allocation, future income tax assets and liabilities are determined based on differencesbetween the financial reporting and tax bases of assets and liabilities and measured using substantively enacted tax rates and laws thatwill be in effect when the differences are expected to reverse. Future tax assets are recognized for all deductible temporary differences,carry forward of unused tax credits and unused tax losses, to the extent that it is probable that deductions, tax credits and tax losses canbe utilized. The carrying amount of future income tax assets are reviewed at each combined balance sheet date and reduced to theextent it is no longer probable that the income tax asset will be recovered. Current tax payables have been treated as a payable toMorguard and included in divisional surplus as Morguard holds the obligation to remit the taxes.

Restricted Cash

Restricted cash represents tenant rent deposits segregated to meet certain provincial statutory requirements and cash held in escrow forfuture capital expenditures.

Divisional Surplus

The Initial Properties are held by a number of related entities that are all managed by Morguard. The properties that are wholly-ownedby Morguard do not maintain their own cash accounts or financing arrangements. Divisional surplus represents the net of all capital andfinancing/cash transactions of the Initial Properties.

3. REAL ESTATE PROPERTIES

Real estate properties consist of the following:

2010

Accumulated Net BookAs at December 31 Cost Amortization Value

Real estate propertiesLand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,937 $ — $100,937Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351,800 (97,306) 254,494Building improvements and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,009 (23,260) 17,749Intangible assetsIn-place lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,123 (2,123) —

$495,869 $(122,689) $373,180

F-43



December 31, 2010


3. REAL ESTATE PROPERTIES (Continued)

2009

Accumulated Net BookAs at December 31 Cost Amortization Value

Real estate propertiesLand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $101,039 $ — $101,039Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349,672 (86,001) 263,671Building improvements and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,264 (19,844) 18,420Intangible assetsIn-place lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,244 (2,244) —

$491,219 $(108,089) $383,130

4. PREPAID EXPENSES AND OTHER ASSETS

Prepaid expenses and other assets consist of the following:


Prepaid realty taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,609 $1,774Prepaid other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 185Capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 15

$1,747 $1,974

5. MORTGAGES PAYABLE

Mortgages payable, which are at fixed and floating rates, consist of the following:


Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 324,240 $ 327,551Deferred direct financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,508) (6,267)

$ 318,732 $ 321,284

Range of interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0%-6.3% 4.0%-11.50%Weighted average interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8% 4.9%Estimated fair market value of mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 327,133 $ 330,991

Floating rate mortgages in the aggregate amount of $67,867 as at December 31, 2010 (2009 — $69,607) are subject to interest rate swapagreements to pay a fixed interest rate (see note 14 for further details).

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December 31, 2010


5. MORTGAGES PAYABLE (Continued)

The aggregate principal repayments and balances maturing of the mortgages payable on real estate assets in the next five years andthereafter are as follows:



2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,981 $57,735 $ 65,716 6.2%2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,861 23,016 30,877 6.0%2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,735 62,821 69,556 4.1%2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,031 94,886 98,917 4.3%2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,325 17,191 19,516 4.3%Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 39,339 39,658 5.0%

$324,240 4.8%

The Initial Properties’ and their related rental revenues have been pledged as collateral for the mortgages payable.

6. PROPERTY OPERATING EXPENSES

Morguard provides management services to the Initial Properties for an annual fee of 3% to 5% of total revenue, net of vacancies. Thecost of these services of $2,392 (2009 — $2,340) was charged to property operating expenses.

7. INTEREST EXPENSE

The components of interest expense are as follows:


Interest on mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,721 $15,819Amortization of deferred direct financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,078 1,017Amortization of cash flow hedge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 184Debt transaction costs and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 247

$17,053 $17,267

8. AMORTIZATION EXPENSE

The components of amortization expense are as follows:


Building and intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11,388 $11,426Building improvements and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,484 3,313Capital assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 19

$14,906 $14,758

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December 31, 2010


9. INCOME TAXES

(a) The Initial Properties’ effective income tax rate is derived as follows:

Years endedDecember 31,

2010 2009

Income taxes at statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 913 $ 299Impact of rates in different jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 19Impact of changes in future tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 (7,010)Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58) 1

$1,013 $(6,691)

(b) The components of future income taxes are as follows:

December 31, 2010 December 31, 2009

As at Canada U.S. Total Canada U.S. Total

Real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,388 $(766) $31,622 $33,070 $(781) $32,289Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,173) (29) (2,202) (2,712) (38) (2,750)

Total net deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . $30,215 $(795) $29,420 $30,358 $(819) $29,539

10. ACCUMULATED OTHER COMPREHENSIVE LOSS


Interest rate swap agreementBalance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (464) $ —Loss for the year, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (615) (464)

Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,079) (464)

Cash flow hedgeBalance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (978) (1,056)Amortization for the year, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 78

Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (835) (978)

Unrealized foreign currency translationBalance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (464) (134)CTA for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (83) (330)

Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (547) (464)

Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(2,461) $(1,906)

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December 31, 2010


11. NET CHANGE IN NON-CASH OPERATING ITEMS AND OTHER


Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,212 $ 425Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 (284)Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (826) 1,316Tenant rental deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 10Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (802) 7

$ (31) $1,474

12. CO-OWNERSHIP INTERESTS

The following amounts included in these combined financial statements represent the Initial Properties’ proportionate share inco-ownership interests:


Balance sheetAssets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $60,470 $62,252Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,923 78,529

Divisional deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,453 $16,277


Statement of operationsRevenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,005 $15,383Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,889 15,338

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,116 $ 45

Statement of cash flowsCash flows resulting from:Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,653 $ 4,023Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,427) (3,557)Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,226) (466)

13. CAPITAL MANAGEMENT

The Initial Properties define capital as the aggregate of its mortgages payable and divisional surplus, less cash. The Initial Properties’objectives when managing capital are to meet its repayment obligations under its mortgage facilities, to ensure that there are sufficientfunds available to finance operations and to meet capital commitments.

The Initial Properties are subject to risks associated with debt financing, including the possibility that existing mortgages may not berefinanced or may not be refinanced on as favourable terms or with interest rates as favourable as those of the existing debt. The InitialProperties mitigate this risk by their continued efforts to stagger the maturity profile of its long-term debt, enhance the value of its realestate properties, maintain high occupancy levels and foster excellent relations with its lenders. The Initial Properties manage theircapital structure and make adjustments to it in light of changes in economic conditions and the risk characteristics of the underlyingassets.

The Initial Properties monitor capital based on an interest coverage ratio and a debt to aggregate asset ratio. The Initial Properties’policy for capital risk management is not externally imposed by lenders but represents objectives targeted by management. The InitialProperties strive to maintain an interest coverage ratio of 1.5 times and a debt to aggregate asset ratio of no greater than 70%.

Interest coverage ratio is defined as income before interest expense and amortization over interest expense. Debt to aggregate assetratio is defined as mortgages over total assets of the Initial Properties plus the amount of accumulated amortization related to realestate properties and other assets.

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December 31, 2010


13. CAPITAL MANAGEMENT (Continued)

The ratios at December 31, 2010 and December 31, 2009 were as follows:


Interest coverage ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05X 1.91XDebt to aggregate asset ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65% 66%

14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Initial Properties’ financial assets and liabilities are comprised of cash, restricted cash, accounts receivable, accounts payable andaccrued liabilities, tenant rental deposits and mortgages payable. Fair values of financial assets and liabilities and discussion of risksassociated with financial assets and liabilities are presented as follows.

Fair Value of Financial Assets and Liabilities

The fair values of cash, accounts receivable, accounts payable and accrued liabilities and tenant rental deposits approximate theircarrying value due to the short-term maturity of those instruments. Mortgages payable are carried at amortized cost using the effectiveinterest method of amortization.

The fair market value of the mortgages payable has been determined by discounting the cash flows of these financial obligations usingDecember 31, 2010 market rates for debts of similar terms (Category Level 2). Based on these assumptions, the fair value as atDecember 31, 2010 of the mortgages payable before deferred financing costs is estimated at $327,133 (December 31, 2009 — $330,991)compared with the carrying value of $324,240 (December 31, 2009 — $327,551). The fair value of the mortgages payable varies from thecarrying value due to fluctuations in interest rates since their issue.

During December 2008, the Initial Properties refinanced two real estate properties with floating rate mortgages. To mitigate the interestrate risk on the refinancing of these mortgages, the Initial Properties entered into two interest rate swap transactions to acquire a fixedrate of interest. The swap transactions have an effective date of December 31, 2008 and mature on December 31, 2013. The outstandingaggregate balance of the floating rate mortgages as at December 31, 2010 was $67,867.

The fair value of the interest rate swaps for the year ended December 31, 2010 is a loss position of $1,439 (2009 — $619), which isincluded in accounts payable and accrued liabilities in the combined balance sheets (Category Level 2). Included in othercomprehensive income for the year ended December 31, 2010 is a loss of $820 (2009 — $619), net of future income taxes of $205(2009 — $155) that relates to the effective portion of the net change in fair value of the interest rate swaps.

Risks Associated With Financial Assets and Liabilities

The Initial Properties are exposed to financial risks arising from its financial assets and liabilities. The financial risks include market riskrelating to interest rates and foreign exchange rates, credit risk and liquidity risk. The Initial Properties’ approach to managing theserisks is summarized below.

(a) Market Risk

Market risk is the risk that the fair value or future cash flows of financial assets or liabilities will fluctuate due to movements inmarket prices and comprises the following:

Interest Rate Risk

The Initial Properties are subject to the risks associated with debt financing; including the risk that mortgages and credit facilitieswill not be refinanced on terms as favourable as those of the existing indebtedness. For the year ended December 31, 2010, theincrease or decrease in annual net income for each one percent change in interest rates on mortgages payable amounts to $3,242.

The Initial Properties’ objective of managing interest rate risk is to minimize the volatility of the Initial Properties’ income. As atDecember 31, 2010, interest rate risk has been minimized as all of the Initial Properties’ long-term debt is financed at fixed interestrates with maturities scheduled over a number of years, with the exception of two mortgages totaling $67,867 that are subject tofloating interest rates; however, the Initial Properties’ risk has been minimized as the Initial Properties entered into two interestrate swap transactions to acquire a fixed rate in substitution for the floating rate.

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December 31, 2010


14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

Foreign Exchange Risk

The Initial Properties are exposed to foreign exchange risk as it relates to its U.S. real estate properties due to fluctuations in theexchange rate between the Canadian and U.S. dollar. Changes in the exchange rate may result in a reduction or an increase ofreported earnings and other comprehensive income. For the year ended December 31, 2010, a $0.05 change in the U.S. toCanadian dollar exchange rate would have resulted in a $7 change to net income or loss and a $66 change to comprehensive incomeor loss.

The Initial Properties’ objective of managing foreign exchange risk is to mitigate the exposure from fluctuations in the exchangerate by maintaining U.S. denominated debt against its U.S. assets, which amounted to $19,370 as at December 31, 2010 and 2009.The Initial Properties currently do not hedge translation exposures.

(b) Credit Risk

Credit risk is the risk that: (i) counterparties to contractual financial obligations will default; and (ii) the possibility that the InitialProperties’ residents may experience financial difficulty and be unable to meet their rental obligations.

The Initial Properties mitigate the risk of credit loss with respect to residents by evaluating the creditworthiness of new residents,obtaining security deposits wherever permitted by legislation, and geographically diversifying their Initial Properties.

The Initial Properties monitor their collection experience on a monthly basis and ensures that a stringent policy is adopted toprovide for all past due amounts. Subsequent recoveries of amounts previously written-off are credited in the combined statementof income and comprehensive income.

The following table sets forth details of trade receivables and the related allowance for doubtful accounts:


Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 849 $ 821Less: Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (364) (436)

Total trade receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 485 $ 385

(c) Liquidity risk

Liquidity risk is the risk that the Initial Properties may encounter difficulties in accessing capital and refinancing its financialobligations as they come due. All of the Initial Properties’ Canadian mortgages are insured by the Canada Housing and MortgageCorporation, which reduces the risk of mortgage refinancing. To mitigate the risk associated with the refinancing of maturing debt,the Initial Properties stagger the maturity dates of their mortgage portfolio over a number of years.

The contractual maturities and repayment obligations of the Initial Properties’ financial liabilities as at December 31, 2010 areas follows:

2011 2012 2013 2014 2015 Thereafter

Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . $65,716 $30,877 $69,556 $98,917 $19,516 $39,658Accounts payable and accrued liabilities . . . . . . . . . . . . . 8,033 — — — — —Tenant rental deposits . . . . . . . . . . . . . . . . . . . . . . . . 4,634 670 1 1 — —

15. COMMITMENTS AND CONTINGENCIES

The Initial Properties are contingently liable under guarantees that are issued in the normal course of business and with respect oflitigation and environmental matters that arise from time to time. While the final outcome of these matters cannot be predicted withcertainty, in the opinion of management, any liability that may arise from such contingencies would not have a material adverse effecton the combined financial statements of the Initial Properties.

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December 31, 2010


15. COMMITMENTS AND CONTINGENCIES (Continued)

In the Province of Ontario, the Initial Properties are subject to, and believes it has complied with, the Residential Tenancies Act, 2006(Ontario). Each year, the Ontario government determines the province’s residential rent increase for existing tenants. In 2010, therental increase was 2.1% (2009 — 1.8%).

16. SEGMENT DISCLOSURE

All of the Initial Properties’ assets and liabilities are in, and their revenue is derived from, the Canadian and U.S. multi-unit residentialreal estate segment. The Canadian properties are located in the provinces of Ontario and Alberta and the U.S. properties are located inthe state of Louisiana. No single tenant accounts for 10% or more of the Initial Properties’ rental revenue.

The Initial Properties are separated into two operating segments, Canada and the United States. Additional information with respect toeach operating segment is outlined below:

2010 2009

As at December 31 Canada U.S. Total Canada U.S. Total

Real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . $353,258 $19,922 $373,180 $361,610 $21,520 $383,130Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356,804 20,937 377,741 366,570 22,595 389,165Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304,975 19,265 324,240 307,193 20,358 327,551Additional to real estate properties and capital assets . . . . . . $ 5,679 $ 368 $ 6,047 $ 3,665 $ 421 $ 4,086

2010 2009

Net Operating Net OperatingYears Ended December 31 Total Revenue Income Total Revenue Income

Geographic locationCanada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $65,496 $32,694 $63,760 $30,545United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,262 2,209 4,661 2,396

$69,758 $34,903 $68,421 $32,941

Net operating income represents income from real estate properties, net of property operating expenses, and is a measure used bymanagement to monitor segment performance.

17. SUBSEQUENT EVENTS

On June 23, 2011, the Initial Properties completed the refinancing of two mortgages for $59,655 at an interest rate of 3.97% for aten-year term.

On July 13, 2011, the Initial Properties completed the refinancing of two mortgages for $42,914 at an interest rate of 3.97% for aten-year term.

On April 5, 2012, the REIT entered into an underwriting agreement whereby the REIT is expected to raise gross proceeds of$75 million pursuant to an initial public offering (the ‘‘Offering’’) through the issuance of 7,500,000 units at a price of $10 per unit(excluding any over-allotment option). The closing of the Offering and the other transactions contemplated by the prospectus(‘‘Closing’’) is expected to occur no later than May 2, 2012. Upon Closing, the REIT will acquire the Initial Properties.

F-50

AUDITORS’ CONSENT

We have read the prospectus dated April 5, 2012 relating to the sale and issue of the units of MorguardNorth American Residential Real Estate Investment Trust (the ‘‘REIT’’). We have complied with Canadiangenerally accepted standards for an auditor’s involvement with offering documents.

We consent to the use in the above-mentioned prospectus of:

i. our report, dated April 5, 2012, to the directors of Morguard Corporation on the combined balancesheets of Morguard Corporation Residential Properties as at December 31, 2011 and 2010 andJanuary 1, 2010, and the combined statements of income and comprehensive income, divisional surplusand cash flows for the years ended December 31, 2011 and 2010, and a summary of significantaccounting policies and other explanatory information;

ii. our report, dated April 5, 2012, to the directors of Morguard Corporation on the combined balancesheets of Morguard Corporation Residential Properties as at December 31, 2010 and 2009, and thecombined statements of income and comprehensive income, divisional surplus and cash flows for theyears then ended, and a summary of significant accounting policies and other explanatoryinformation; and

iii. our report, dated April 5, 2012, to the Trustees of the REIT on the balance sheet of the REIT as atMarch 1, 2012.



F-51

APPENDIX ABOARD MANDATE

Trustees’ Responsibilities

The Trustees are explicitly responsible for the stewardship of the REIT. To discharge this obligation, theTrustees shall:

Strategic Planning Process

• Provide input to management on emerging trends and issues.

• Review and approve management’s strategic plans.

• Review and approve the REIT’s financial objectives, plans and actions, including significant capitalallocations and expenditures.

Monitoring Tactical Progress

• Monitor the REIT’s performance against the strategic and business plans, including assessing operatingresults to evaluate whether the business is being properly managed.

Risk Assessment

• Identify the principal risks of the REIT’s businesses and ensure that appropriate systems are in place tomanage these risks.

Senior Level Staffing

• Select, monitor and evaluate the Chief Executive Officer (‘‘CEO’’) and other senior executives, andensure management succession.

• Approve a position description for the CEO including limits to management’s responsibilities andcorporate objectives which the CEO is responsible for meeting, all upon recommendation from theC&G Committee.

Integrity

• Ensure the integrity of the REIT’s internal control and management information systems.

• Ensure ethical behaviour and compliance with laws and regulations, audit and accounting principles, andthe REIT’s own governing documents.

Material Transactions

• Review and approve material transactions not in the ordinary course of business.

Monitoring Trustees’ Effectiveness

• Assess its own effectiveness in fulfilling the above and Trustees’ responsibilities, including monitoring theeffectiveness of individual Trustees.

Other

• Perform such other functions as prescribed by law or assigned to the Trustees in the REIT’s Declarationof Trust.

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APPENDIX BAUDIT COMMITTEE MANDATE

1. PURPOSE

The overall purpose of the Audit Committee (the ‘‘Committee’’) of the REIT is to monitor the REIT’ssystem of internal financial controls, to evaluate and report on the integrity of the financial statements ofthe REIT, to enhance the independence of the REIT’s external auditors and to oversee the financialreporting process of the REIT.

2. COMPOSITION, PROCEDURES AND ORGANIZATION

2.1 The Committee shall consist of at least three members of the Board of the REIT (the ‘‘Board’’), eachof whom shall be, in the determination of the Board, ‘‘independent’’ as that term is defined byMultilateral Instrument 52-110, as amended from time to time, and the majority of whom shall beresident Canadians. Each member shall complete and return to the REIT annually a questionnaireregarding the member’s independence. The definition of ‘‘independent’’ is set out in Exhibit A hereto.

2.2 All members of the Committee shall be, in the determination of the Board, ‘‘financially literate’’ as thatterm is defined by Multilateral Instrument 52-110, and at least one member of the Committee musthave, in the determination of the Board, ‘‘accounting or related financial expertise’’. The definition of‘‘financially literate’’ is set out in Exhibit A hereto.

2.3 The Board, at its organizational meeting held in conjunction with each annual meeting of unitholders,shall appoint the members of the Committee for the ensuing year. The Board may at any time removeor replace any member of the Committee and may fill any vacancy in the Committee. Any member ofthe Committee ceasing to be a trustee of the REIT shall cease to be a member of the Committee.

2.4 Unless the Board shall have appointed a chair of the Committee, the members of the Committee shallelect a chair from among their number.

2.5 The Committee shall have access to such officers and employees of the REIT and to the REIT’sexternal auditors and its legal counsel, and to such information respecting the REIT as it considers tobe necessary or advisable in order to perform its duties.

2.6 Notice of every meeting shall be given to the external auditors, who shall, at the expense of the REIT,be entitled to attend and to be heard thereat.

2.7 Meetings of the Committee shall be conducted as follows:

(a) the Committee shall meet on a regular basis, at such times and at such locations as the chair of theCommittee shall determine;

(b) the external auditors or any member of the Committee may call a meeting of the Committee;

(c) any trustee of the REIT may request the chair of the Committee to call a meeting of theCommittee and may attend such meeting to inform the Committee of a specific matter of concernto such trustee, and may participate in such meeting to the extent permitted by the chair of theCommittee; and

(d) the external auditors and management employees shall, when required by the Committee, attendany meeting of the Committee.

2.8 The external auditors shall be entitled to communicate directly with the chair of the Committee andmay meet separately with the Committee. The Committee, through its chair, may contact directly anyemployee in the REIT as it deems necessary, and any employee may bring before the Committee anymatter involving questionable, illegal or improper practices or transactions.

2.9 Compensation to members of the Committee shall be limited to trustee’s fees, either in the form ofcash or equity, and members shall not accept consulting, advisory or other compensatory fees from theREIT (other than as members of the Board and Board committee members).

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2.10 The Committee is authorized, at the REIT’s expense, to retain independent counsel and other advisorsas it determines necessary to carry out its duties and to set their compensation.

3. DUTIES

3.1 The overall duties of the Committee shall be to:

(a) assist the Board in the discharge of its duties relating to the REIT’s accounting policies andpractices, reporting practices and internal controls;

(b) establish and maintain a direct line of communication with the REIT’s external auditors andassess their performance;

(c) oversee the co-ordination of the activities of the external auditors;

(d) ensure that the management of the REIT has designed, implemented and is maintaining aneffective system of internal controls;

(e) monitor the credibility and objectivity of the REIT’s financial reports;

(f) report regularly to the Board on the fulfillment of the Committee’s duties;

(g) assist the Board in the discharge of its duties relating to the REIT’s compliance with legal andregulatory requirements; and

(h) assist the Board in the discharge of its duties relating to risk assessment and risk management.

3.2 The Committee shall be directly responsible for overseeing the work of the external auditors engagedfor the purpose of preparing or issuing an audit report or performing other audit, review or attestservices for the REIT, including the resolution of disagreements between management and the externalauditors regarding financial reporting, and in carrying out such oversight the Committee’s dutiesshall include:

(a) recommending to the Board a firm of external auditors to be nominated for the purpose ofpreparing or issuing an audit report or performing other audit, review or attest services forthe REIT;

(b) reviewing, where there is to be a change of external auditors, all issues related to the change,including the information to be included in the notice of change of auditor called for underNational Instrument 51-102 — Continuous Disclosure Obligations or any successor legislation(‘‘NI 51-102’’), and the planned steps for an orderly transition;

(c) reviewing all reportable events, including disagreements, unresolved issues and consultations, asdefined in NI 51-102 or any successor legislation, on a routine basis, whether or not there is to be achange of external auditor;

(d) reviewing the engagement letters of the external auditors, both for audit and non-audit services;

(e) reviewing the performance, including the fee, scope and timing of the audit and other relatedservices and any non-audit services provided by the external auditors; and

(f) reviewing and approving the nature of and fees for any non-audit services performed for the REITby the external auditors and consider whether the nature and extent of such services could detractfrom the firm’s independence in carrying out the audit function.

3.3 The duties of the Committee as they relate to audits and financial reporting shall be to:

(a) review the audit plan with the external auditor and management;

(b) review with the external auditor and management any proposed changes in accounting policies,the presentation of the impact of significant risks and uncertainties, and key estimates andjudgments of management that may in any such case be material to financial reporting;

(c) review the contents of the audit report;

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(d) question the external auditor and management regarding significant financial reporting issuesdiscussed during the fiscal period and the method of resolution;

(e) review the scope and quality of the audit work performed;

(f) review the adequacy of the REIT’s financial and auditing personnel;

(g) review the co-operation received by the external auditor from the REIT’s personnel during theaudit, any problems encountered by the external auditors and any restrictions on the externalauditor’s work;

(h) review the internal resources used;

(i) review the evaluation of internal controls by the internal auditor (or persons performing theinternal audit function) and the external auditors, together with management’s response to therecommendations, including subsequent follow-up of any identified weaknesses;

(j) review the appointments of the chief financial officer, internal auditor (or persons performing theinternal audit function) and any key financial executives involved in the financial reportingprocess;

(k) review and approve the REIT’s annual audited financial statements and those of its subsidiaries inconjunction with the report of the external auditors thereon, and obtain an explanation frommanagement of all significant variances between comparative reporting periods before release tothe public;

(l) review and approve the REIT’s interim unaudited financial statements, and obtain an explanationfrom management of all significant variances between comparative reporting periods beforerelease to the public;

(m) establish a procedure for the receipt, retention and treatment of complaints regarding accounting,internal accounting controls or auditing matters and employees’ confidential anonymoussubmission of concerns regarding accounting and auditing matters; and

(n) review the terms of reference for an internal auditor or internal audit function.

3.4 The duties of the Committee as they relate to accounting and disclosure policies and practices shallbe to:

(a) review changes to accounting principles of the Canadian Institute of Chartered Accountants whichwould have a significant impact on the REIT’s financial reporting as reported to the Committee bymanagement and the external auditors;

(b) review the appropriateness of the accounting policies used in the preparation of the REIT’sfinancial statements and consider recommendations for any material change to such policies;

(c) review the status of material contingent liabilities as reported to the Committee by management;

(d) review the status of income tax returns and potentially significant tax problems as reported to theCommittee by management;

(e) review any errors or omissions in the current or prior year’s financial statements;

(f) review and approve before their release all public disclosure documents containing audited orunaudited financial information, including all earnings, press releases, MD&A, prospectuses,annual reports to unitholders, annual information forms and management’s discussion andanalysis; and

(g) oversee and review all financial information and earnings guidance provided to analysts and ratingagencies.

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3.5 The other duties of the Committee shall include:

(a) reviewing any inquires, investigations or audits of a financial nature by governmental, regulatoryor taxing authorities;

(b) formulating clear hiring policies for employees or former employees of the REIT’s externalauditors;

(c) reviewing annual operating and capital budgets;

(d) reviewing the funding and administration of the REIT’s compensation and pension plans;

(e) reviewing and reporting to the Board on difficulties and problems with regulatory agencies whichare likely to have a significant financial impact;

(f) inquiring of management and the external auditors as to any activities that may be or may appearto be illegal or unethical;

(g) ensuring procedures are in place for the receipt, retention and treatment of complaints andemployee concerns received regarding accounting or auditing matters and the confidential,anonymous submission by employees of the REIT of concerns regarding such; and

(h) any other questions or matters referred to it by the Board.

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EXHIBIT ATO MANDATE OF AUDIT COMMITTEE FOR DEFINITIONS

Definitions.

‘‘Financially Literate’’ means the ability to read and understand a set of financial statements that present abreadth and level of complexity of accounting issues that are generally comparable to the breadth andcomplexity of the issues that can reasonably be expected to be raised by the issuer’s financial statements.

Meaning of ‘‘Independence’’

1. A member of an audit committee is independent if the member has no direct or indirect materialrelationship with the REIT.

2. For the purposes of paragraph 1, a material relationship means a relationship which could, in the view ofthe Board, reasonably interfere with the exercise of a member’s independent judgment.

3. Despite paragraph 2, the following persons are considered to have a material relationship with the REIT:

(a) a person who is, or whose immediate family member is, or at any time during the prescribed period hasbeen, an officer or employee of the REIT, its parent, or of any of its subsidiary entities or affiliatedentities;

(b) a person who is, or has been an affiliated entity of, a partner of, or employed by, a current or formerinternal or external auditor of the REIT, unless the prescribed period has elapsed since the person’srelationship with the internal or external auditor, or the auditing relationship, has ended;

(c) a person whose immediate family member is, or has been, an affiliated entity of, a partner of, oremployed in a professional capacity by, a current or former internal or external auditor of the REIT,unless the prescribed period has elapsed since the person’s relationship with the internal or externalauditor, or the auditing relationship, has ended;

(d) a person who is, or has been, or whose immediate family member is or has been, employed as anexecutive officer of an entity if any of the REIT current executives serve on the entity’s compensationcommittee, unless the prescribed period has elapsed since the end of the service or employment;

(e) a person who accepts, or has accepted at any time during the prescribed period, directly or indirectly,any consulting, advisory or other compensatory fee from the REIT or any subsidiary entity of theREIT, other than as remuneration for acting in his or her capacity as a member of the Committee, theBoard, or any other Board committee; and

(f) a person who is an affiliated entity of the REIT or any of its subsidiary entities.

4. For the purposes of paragraph 3, the prescribed period is the three year period ending immediately prior tothe determination required by paragraph 3.

5. For the purposes of paragraphs 3(b) and 3(c), a partner does not include a limited partner whose interest inthe internal or external auditor is limited to the receipt of fixed amounts of compensation (includingdeferred compensation) for prior service with an internal or external auditor if the compensation is notcontingent in any way or continued service.

6. For the purpose of paragraph 3(e), compensatory fees do not include the receipt of fixed amounts ofcompensation under a retirement plan (including deferred compensation) for prior service with the issuer ifthe compensation is not contingent in any way on continued service.

7. For the purposes of paragraph 3(e), the indirect acceptance by a person of any consulting, advisory or othercompensatory fee includes acceptance of a fee by:

(a) an immediate family member, or

(b) a partner, member or executive officer of, or a person who occupies a similar position with, an entitythat provides accounting, consulting, legal, investment banking or financial advisory services to theREIT or any subsidiary entity of the REIT, other than limited partners, non-managing members andthose occupying similar positions who, in each case, have no active role in providing services tothe REIT.

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CERTIFICATE OF THE REIT AND MORGUARD

Dated: April 5, 2012

This prospectus constitutes full, true and plain disclosure of all material facts relating to the securitiesoffered by this prospectus as required by the securities legislation of each of the provinces and territoriesof Canada.


By: (Signed) K. (Rai) Sahi By: (Signed) Paul MiatelloChief Executive Officer Chief Financial Officer

On behalf of the Board

By: (Signed) Bruce K. Robertson By: (Signed) Frank MunstersTrustee Trustee

MORGUARD CORPORATION(as Promoter)

By: (Signed) K. (Rai) SahiChief Executive Officer

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CERTIFICATE OF THE UNDERWRITERS

Dated: April 5, 2012

To the best of our knowledge, information and belief, this prospectus constitutes full, true and plaindisclosure of all material facts relating to the securities offered by this prospectus as required by the securitieslegislation of each of the provinces and territories of Canada.

RBC DOMINION SECURITIES INC. TD SECURITIES INC.

By: (Signed) William Wong By: (Signed) Andrew G. Phillips

CIBC WORLD MARKETS INC.

By: (Signed) Mark G. Johnson

BMO NESBITT BURNS INC. SCOTIA CAPITAL INC.

By: (Signed) Jonathan Li By: (Signed) Stephen Sender

HSBC SECURITIES (CANADA) INC.

By: (Signed) Nicole Caty

NATIONAL BANK FINANCIAL INC.

By: (Signed) Glen Hirsh

CANACCORD GENUITY CORP. DUNDEE SECURITIES LTD.

By: (Signed) Justin Bosa By: (Signed) Onorio Lucchese

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