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Executives

Michael Cooper - Vice Chairman & Chief Executive Officer

Mario Barrafato - Senior Vice President & Chief Financial Officer

Ana Radic - Chief Operating Officer

Bruce Traversy - Senior Vice President, Investments and Asset Management

Analysts

Sam Damiani - TD Newcrest

Dundee Real Estate Investment Trust (OTC:DRETF) Q2 2013 Earnings Conference Call August 9, 2013 9:00 AM ET

Operator

Good morning ladies and gentlemen. Welcome to the Dundee REIT, second quarter 2013 conference call for Friday, August 9, 2013.

During this call management of Dundee REIT may make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dundee REIT’s control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information.

Additional information about these assumptions and risks and uncertainties is contained in Dundee REIT’s filings with the securities regulators, including its latest annual information form and MD&A. These filings are also available on Dundee REIT’s website at www.dundeereit.com.

Your host for today will be Mr. Michael Cooper, Vice Chairman and CEO of Dundee REIT. Mr. Cooper, please go ahead.

Michael Cooper

Good morning and welcome to our second quarter conference call. Today I’m here with Mario Barrafato and Ana Radic. Ana will go over our operations and Mario will address our financial statements. But first, I would like to make a few comments.

The second quarter presented an important moment in the real-estate cycle. With the interest rates moving up and the consensus view to we are in a global recovery, albeit slower than usual, we are now in a new state of the cycle.

Since 2009 investors have valued REIT by their ability to turn property cash flow into retirement income. There was great investment disappointment in many other industries over the years and real estate and yields were very attractive to investors.

Canada outperformed most other markets for many years and global investors had increased their waiting in Canadian real estate. Now investors are more interested in growth opportunities and safety and Canada seems to be lagging with many other countries in the current recovery.

International investors say they see better opportunities in other countries and some Canadian investors invested in other industries. In addition we have had many IPOs and Loblaw’s and others announced that they would create new REITs to hold their real estate and then Sobeys securitizing newly acquired assets in Crombie. Altogether investors have a lot of supply REIT units at a time when they had already been selling, so it’s been a very tough market.

I think that Dundee REIT has been well positioned for the change in the environment. We have a continuance with the right portfolio with high quality acquisitions and the sale of assets that no longer fit our strategy.

Another significant repositioning is the reduction of our debt level from 52% last year to 46% this year. Our AFFO is increasing slowly, but this reduction of debt reduced our AFFO by $0.07 or $0.08 as a trade-off in making the company even stronger financially.

In this environment we believe that although there will continually be opportunities to grow profitably from time-to-time, we cannot expect to have acquisition prices, debt costs and equity line up for extended periods where external growth increasing AFFO portfolio quality are always available.

The last few years actually have been very exceptional. As a result, the internal growth is becoming more valuable. I’m very happy with our portfolio and it’s the best quality we’ve ever had.

This year we’ve acquired four properties in downtown Toronto, increasing our downtown portfolio to over five million square feet. We are able to manage just about any of our tenants needs, whether it’s at the end of the lease or during their lease. We have highly concentrated portfolios around the Toronto airport, downtown Edmonton, Saskatoon, Regina, Yellowknife and Calgary.

We believe that our ability to meet tenants needs in our portfolio, our relationships and our contracts with the tenants will help us outperform whatever benchmarks may be applicable.

Ana leads our property team and this has brought all the management under Ana. We are looking at all of our properties and focusing on increasing their value to tenants and their owners. We’ve had a success lease in downtown Toronto, ground floor space to new tenants and higher rent with as many buildings as we have in the core and as much space as we have from the concourse of the second floor.

We believe that there is unrealized value and retail tenants want more space downtown. We believe that we can increase our property income from focusing on the retail component. We are looking at ways that we can increase our income from spending capital on our buildings and we are having some success.

We are working with our tenets to make improvements to the building that they want, such as the agreement for the university, increasing the aesthetic appeal of some of our buildings that we acquired and finding additional leasable space. We believe that with our scale and dedicated management team, we will continue to generate increased and new sources of income.

Currently Dundee REIT has generated a 7.4% yield and an 8% AFFO yield. It is conservatively financed. We have assets that are very scarce and will continue growing competitive growth and AFFO growth in the range of 2% to 3%. The AFFO yield at 8% plus 2% to 3% growth amounts to a 10% or 11% overall return, which seems to me to be a very compelling investment.

Ana, will you address our operations?

Ana Radic

Certainly. Thank you Michael and good morning. Demand was weaker across Canadian office markets this quarter with all major centers with the exception of London posting occupancy declines. The national vacancy rate increased 40 basis points to 8.9% as markets posted 830,000 square feet of negative absorption and 700,000 square feet of new construction was delivered to the market.

With respect to Dundee’s portfolio, we made gains this quarter as we increased our committed occupancy rate by 20 basis points to 94.9%. Increases were primarily driven by leasing in our downtown Calgary, downtown Toronto and suburban Edmonton portfolios. Tour activity continues to be slower in Vancouver, Edmonton and suburban Calgary.

Demand for our suburban Toronto assets has improved with several 10,000 to 20,000 square foot tenants looking for space in Mississauga and on the Highway 427 corridor. In Toronto we continue to benefit from the incredible synergies provided by our 5.4 million square foot downtown Toronto office portfolio and it worked with multiple tenants to move them within it, and by doing so have secured long-term commitments.

I will now speak to our activity in our key markets. Dundee’s downtown Toronto office portfolio grew by over 650,000 square feet this quarter, with the addition of 20 Toronto Street, 74 Victoria Street, 212 King Street West and 100 Yonge. The average occupancy of these assets is 99% and all are in excellent locations, directly in or just outside the financial core, increasing our already strong market share within the A and B asset classes.

100 Yonge is internally linked to Scotia Plaza and was built almost concurrently in 1989. It enjoys direct path access and is scheduled to receive legal certification shortly.

We continue to see rental rates grow in downtown Toronto, as evidenced by 32,000 square feet of renewals being completed at rental rates 5% higher than expiring rent. We are also seeing activity from small to mid-sized tenants and has completed over 35,000 square foot of new leases and expansions. Subsequent to the end of the quarter we finalized a full floor transaction at 350 Bay Street and we anticipate two further floors leasing by the end of the third quarter.

We’ve also been focused on securing longer-term commitments from tenants expiring beyond 2014. This quarter we negotiated an early surrender of a 9,000 square foot tenant to accommodate the expansion of a technology company at 36 Toronto. This strategic negotiation locked in a now 30,000 square foot tenant until 2020 that had the opportunity to take their tenancy to the market. We also expanded and extended the lease of a 10,000 square foot law firm at Adelaide Place, originally expiring in 2015 until 2025.

In Q3 and Q4, we anticipate marginal occupancy decreases due to tenant downsizing at Scotia Plaza, Adelaide place and 215 Dundas Street West. This occupancy drop will be mitigated by contracted rent steps and future leasing commitments.

The pipeline for activity across our downtown portfolio remains strong, with growing tenants in all asset classes. We are seeing demand for additional space in our A and AAA class buildings, from the finance sector, including Canadian Bank in our B class assets from legal firms. This activity should result in occupancy lift in the first half of 2014.

In anticipation of Borden Ladner Gervais 200,000 square foot expiring at Scotia Plaza, we have initiated marketing efforts to ensure we are prepared to address future large tenant requirements.

Figure 3, one of the country’s premier commercial strategic planning groups was engaged to perform an efficiency study of the Scotia Plaza floor place, as compared to other AAA new-builds and existing competition. On a very positive note, the professional opinion of the planners was that our floor place were every bit as efficient as the new build and offer virtually the same people per square foot ratios and a better flow for personal services firms.

The quarter window adapted national plans for both an ideal ratio of private offices to support personnel and provide increased levels of natural light. These findings will be a critical part of the marketing program going forward, as we dispel the myths of the Plaza and re-launch it as one of the country’s premier business locations.

Occupancy across the suburban Toronto region was stable this quarter, benefiting from 62,000 square feet of new leasing and 150,000 feet of renewals. In the West we completed a 70,000 square foot lease extension and expansion of Parmalat at 405 The West Mal, as well as the 17,000 square foot renewal at SNC Lavalin at West Metro Corporate Centre. In our Eastern GTO portfolio we expanded and extended BDO Dunwoody at 30,000 square feet until 2020. This tenant lease naturally expired in 2015.

We are forecasting occupancy and NOI in our suburban West portfolio to decline over the next three quarters and stabilize by the end of the coming year as future vacancy at Airway Centre and Valhalla Executive Center impact occupancy.

We strongly believe that the central location of the suburban assets continue to hold appeal with tenants and has engaged a third party marketing firm to explore re-branding as we complete physical improvement and offer new amenities, including a shuttle-bus service to the subway, as well as improved food offerings.

The increase in sublet supply and further deceleration of leasing activity in Calgary’s downtown office market continue to this quarter, resulting in negative absorption of 100,000 square feet and a 30 basis point increase and the vacancy rate to 6%. Of the total available space 48.5% comprised of sublet options, a 50 basis point increase from the previous quarter, but more notably four fold from the previous year.

As the oil and gas sector anxiously awaits regulatory decisions on the proposed pipelines, most energy companies are exercising the restraint with regards to capital expenditures and space growth.

Although the sublet availability continues to bloom, it should be noted that there is still a relative shortage of contiguous space in the downtown core of Calgary. As such the pipeline for new construction continues with the commencement of three new buildings being announced this quarter, Telisky, Manulife House and the East Tower of Brookfield Place, Calgary.

The Telisky project and Brookfield place will not likely impact Telus Tower in the near term. Telus currently had leases 550,000 square feet, occupying 265,000 square feet and subleasing the balance to Encana. With Telisky not expected to be ready for occupancy until early 2017, Telus will likely require an extension for the space it occupies. Synovus personnel have advised us that the 170,000 square feet at Rocky Mount Plaza will remain dedicated to their IT function long-term and their lease is in place until 2030.

Our downtown Calgary portfolio is currently 96% occupied and committed, up 50 basis points from the previous quarter. Several new lease deals were done at Mount Royal place, 510 Fifth Avenue, 4415 and the Rosslyn building where Chevron leased 14,000 square feet.

The exposure we had at 4447 Avenue has mitigated the leasing of 54,000 square feet to Trident Exploration and Alberta Infrastructure. Both transactions were concluded at rental rates well in excess of the previous expiring rent.

During the quarter we finalize the five-year renewal with Alberta Infrastructure and McFarlane Tower for 40,000 square feet effective February of next year at a net rental rate 75% above the expiring rents. Overall leasing activity with 1,000 to 5,000 square foot tenants increase this quarter at 14 transactions were completed.

We are pleased to report that there was little or no damage sustained across the majority of our Calgary portfolio as a result of the massive flooding that occurred in June with insurance proceeds mitigating any costs we could occur.

Our Calgary property management and operation team work tirelessly and in many cases around the clock to minimize the impact of the flooding on our buildings, as well as staff from Edmonton delivered large pumps to assist with removing water from our parking garages. We are very proud of the dedication, professionalism and teamwork exhibited by our Alberta staff during this crisis.

Our downtown Edmonton portfolio ended the quarter with in-place and committed occupancy at 89.4% up 90 basis points, with new leasing done at Baker Center and HSBC Place.

Demand from large uses of space was flat, which was reflected in the overall performance of the market. Demand in our 1.1 million square foot suburban Edmonton portfolio remains strong, with in-place and committed occupancy increasing from 94.3% to 95.1% as 13,000 square feet of new transactions were completed this quarter, at rental rates above expiring rent. An additional 15,000 square feet of new lease deals were also completed subsequent to the end of the quarter.

The Southwestern region and our portfolio throughout this region continued to display stability with no single market experiencing significant activity or absorption. At the end of Q2, occupancy in our Kitchener Waterloo portfolio remained in line with the overall market at 89.08%.

In London and Windsor we have embarked on a multifaceted marketing program to source tenants from the surrounding community. There is a renewed interest from both office and retail users and we are optimistic that we will be able to reduce our vacancy in the coming months. The downtown Montreal market experienced negative absorption of 150,000 square feet in the second quarter of the year, resulting in an occupancy level of 92.4%.

Our Montreal portfolio continues to be extremely well occupied at 96.4% and at this quarter at 8550 Newman we completed a two-year 46,000 square foot lease extension with a medical clinic at rents 22% above the forecasted SIP market rent and 5% above the tenants expiring rent.

Our downtown Ottawa portfolio remains virtually full, with occupancy at 99.2%. We have completed just over 17,000 square feet of lease renewals in downtown Ottawa at or above in-place rents.

In Canada we are confident that we will shortly conclude a transaction to lease our largest single vacancy consisting of 22,000 square feet. We have also commenced renewal discussions with the federal government for 174,000 square foot lease expiring in 2015.

Regina and Saskatoon continue to have some of the lowest vacancy rates in Canada, both below 5%. New developments will add upward pressure to the overall vacancy in these markets. Occupancy in our Regina and Saskatoon portfolio decreased by 40 basis points to 97.5%, due to just under 10,000 square feet of negative absorption. Subsequent to the quarter we were successful in backfilling a portion of this space.

Rental rates have remained healthy and will continue to grow net operating income as we renew tenants at above expiring rents. During the quarter we completed a 10,000 square foot renewal at TD Tower at an average rental rate 30% above the expiring rent.

In summary, we have completed 280,000 square feet of new lease transactions commencing this quarter and 258,000 square feet of future leasing. We are forecasting our overall occupancy to dip in the third and fourth quarters as approximately 200,000 square feet of expiring tenants will not be renewing their leases or have exercised options to terminate.

Transactions commencing in the coming quarters in Calgary, notably the deal with Synovus Energy for 140,000 at Rocky Mount Plaza and the one-year extension with the National Energy Board for 100,000 square feet at Berkeley Center in addition to positive absorption and renal rate growth in Toronto and Saskatoon, will enable us to grow NOI in the remaining two quarters of the year.

Although we expect to continue to see comparative property growth, we know that we will have a challenging period ahead of us as we work to release these larger blocks of upcoming vacant space and fight to retain every tenant in every market. The downtime of releasing the space may create a drag on our results in 2014. However, the overall quality of our portfolio is the best it has ever been and in most markets we will be able to increase rent upon lease rollover.

We will continue to improve the performance of our portfolio by investing in our building, to ensure that they will appeal to tenants and as always we will stay close to our tenants, to ensure our assets are meeting their needs.

We’ve also strengthened and realigned our management team this year. Kevin Hardy has resumed his responsibility for our Eastern Canadian office portfolio since joining Dundee in July of 2011. After 10-plus years in leasing and finance at Oxford Properties, Kevin has successfully directed our leasing efforts in various markets across Eastern Canada.

Responsibility for our Western Canadian office portfolio has been assumed by Paul Skeans. Paul is based in our Calgary office and joined Dundee from GWL Realty Advisors, where he was Senior Director of Asset Management, directly responsible for a 5 million square foot commercial real estate portfolio in Western Canada. Paul brings with him over 17 years of experience in acquisitions, asset management and leasing. Kevin and Paul lead a dedicated sales and creative team of leasing professionals across the country.

Our exceptional team, national scale and local expertise remain a competitive advantage that will enable us to deliver stable cash flow.

I will now turn the call over to Mario to speak to our financial results.

Mario Barrafato

Thank you Ana. Good morning everyone. This has been a very active quarter in all areas of the business, operations, finance and investment. We’ve been able to further improve the scale and quality of our portfolio and strengthen our balance sheet, while delivering strong operating results.

We closed on five acquisitions in the quarter at the cost of $360 million; the assets are 99.5% occupied and have a weighted average lease term just under six years. These acquisitions increased our investment in major Canadian markets and our CBD presence especially in downtown Toronto.

Post quarter end we’ll close on two more acquisitions. First we’ll acquire our partner’s two-thirds interest in the IBM building in Calgary. We’ll acquire the two-thirds interest for $124.5 million representing a year-one cap rate of 6%. The building is 98% occupied, with a weighted average lease term of five years.

In conjunction with the acquisition, the mortgage will be paid in full, including our existing 33% interest. In total we’ll pay $124.5 million for the building and $26 million from our share of the mortgage.

We will also acquire a 39,000 square foot building in suburban Regina for $15.3 million at a cap rate of 6.4%. The building is 100% occupied with a 10-year lease term. We’ll close these two acquisitions using our credit facility and then seek permanent financing post closing.

There were no dispositions in the quarter. We are selling our 25% interest in four properties in Western Canada for proceeds of proximally $21 million. Net of debt the proceeds will be $16 million. The dispositions are expected to close in Q3 and will offset some of the NOI increases from acquisitions.

The quarter also saw strength in our balance sheet and improved our debt profile. We issued 230 million in equity financing at a unit price of $36.20 per unit, allowing us to grow without increasing our overall leverage. We also completed our first unsecured debenture offering with the issuance of 175 million unsecured debenture for a five-year term and a rate of 3.424%. The rate reflects the spread of 190 basis points.

The unsecured market provides us with a new source of capital that allows us to build up our pool of unencumbered assets and better manage cash flow with interest-only payments. We are pleased with how our offering was received by fixed-income investors and impressed with the depth of the fixed income market.

We also completed the refinancing of four mortgages in the quarter. Mortgages with a maturing balance of $91 million at a 6% interest rate were refinanced with proceeds of $133 million at an average rate of 3.8%. The new mortgages had an average spread of 203 basis points and an average term of 8.3 years. In total, we are saving about $2 million a year at $0.02 per unit as a result of the refinancing.

We’re also in the process of refinancing the mortgage on our head office here at 30 Adelaide. The current mortgage has a maturing balance of $52 million, at a rate of 7.2%. We presently have a commitment with one lender for $105 million for a term of 10 years with a spread of 200 basis points. This results in a slightly higher interest [cost] [ph] on double the loan amount.

The loan reflects a [65%] [ph] loan-to-value and will effectively use some of the incremental proceeds from this mortgage to repay the outstanding mortgage on the IBM building, which has a maturing balance of $26 million at a rate of 2.3%.

Overall the mortgage market is very accessible with many lenders able to do large loans for longer-terms at competitive rates, and instead of the extra cost for our bottom line, our view has always been to take the longest term at a reasonable rate, so we can better manage our debt maturity larder. Ten-year mortgages are not always available, so we are pleased we got to finance the majority of our 2013 maturities with the ten year debt.

Overall we’ve been able to improve our capital structure and our debt metrics since Q1. Our debt ratio decreased to 46.4% from 47.3% and our weighted average interest cost decreased to 4.35% from 4.5%. Our variable debt as a percentage of total debt decreased to 3.3% from 5.4% in Q1, as we paid amounts on our credit facility with permanent financing. Our interest coverage ratio and debt to EBITDA ratios remain solid at 2.9 times and 8 times respectively.

We ended the quarter with $25 million in cash, $265 million of unused credit facility and $225 million of potential borrowing capacity on unencumbered properties, such that the core rental is between $105 million to fund our committed acquisitions.

For the quarter our FFO and AFFO for the period was $0.72 per unit and $0.61 per unit respectively. These prudent amounts are equal to those reported in the same period last year; however, our leverage was approximately 5% lower in 2013. Our FFO and AFFO include one-time items totaling $256,000 compared to $512,000 last quarter.

From an operational perspective our fundamentals are solid this quarter. Our overall occupancy increased to 94.9% due to acquisitions, with comparable property occupancy stable at 94. 7%. We saw strong leasing volume of 693,000 square feet of leasing taking effect in the quarter. Of this 412, 000 or 50% were renewals and 281,000 were new tenants.

The leasing spread on renewals was approximately 4% in the quarter, overall due to the mix expiring space and new leasing. The combined leasing spread for the quarter was only 1%.

Our overall in-place rent increased due to leases rolling over at higher rents and the average GI and leasing costs for the leasing quarter was only $7.05, which is lower relative to all our prior quarters.

When you look to year-to-date leasing, our committed renewals and new leasing totaled 75% of our 2013 expirees and overall rents that exceeded expiring rent by 8.5%. On renewals alone we have a 10% positive leasing spread. As Ana mentioned in her report rents are still strong; the challenge is maintaining occupancy.

We reported comparable property NOI growth of 1.2% this quarter, up from 27% in the prior quarter, while the next two quarters we’ll see some large new leases taking effect. The downtime arising from pending vacancies and lease terminations will negate some of that growth and keep comparative property growth for the next two quarters at the 1% level.

The IFRS valuation of our properties increased by $54.8 million in the quarter, the largest increases were in Toronto at $33.4 million, in Calgary at $17 million, primarily due to cap rate compression. Overall our cap rate went to 6.2% from 6.3% in Q1.

I’d now like to turn the call back to Michael.

Michael Cooper

Thank you Mario. We’d be happy to answer your questions now.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question comes from Sam Damiani. Please go ahead.

Sam Damiani - TD Newcrest

Thanks and good morning.

Michael Cooper

Sam, is this a pity question?

Sam Damiani - TD Newcrest

Well, pardon me? Pity, I have no pity. Not today anyway. Now I just wanted to talk about the occupancy and you gave a lot of information on the call, which is greatly appreciated, but when we look at the big picture your occupancy level is at a sort of a historic low. I think the last time I checked it was an eight-year low, yet the portfolio quality is quite high and you are seeing some challenges maintaining occupancy in the next little while.

Where do you see the goal posts for occupancy over the next one year and over the next four years? And just if you could maybe provide some color as too why the occupancy isn’t perhaps 100 to 200 basis points higher today?

Ana Radic

Hi Sam, it’s Ana. So with respect to our kind of near-term occupancy, as I mentioned in the call, we are anticipating a dip next quarter, in the fourth quarter of the year, with pick-up by the end of 2014, with our forecast getting us back up over 95%, where we historically have been.

And I think the biggest drivers for us are going to be our suburban locations, both in Toronto and Calgary and in Ottawa and actually our location at 700 De la Gauchetière in Montreal, those are markets where there is some demand that we are seeing and we have some bigger blocks of space that we can offer, that are still for the most part less available in the market. So those few wins can increase our occupancy fairly dramatically.

Sam Damiani - TD Newcrest

So do you think the portfolio has the potential to operate in the 96% to 97% level over the next few years or is that something perhaps too hard to achieve?

Ana Radic

I mean I think we can get up around close to 96%. I think we’ve been buying great assets in the central business districts that have in some cases a smaller average tenant size, and with that you do get more role, so you have more of an opportunity to capitalize on market increases, and as a result though you are also subject to other forces in the market.

So, that’s where I sort of – I think if you look at our historical portfolio, we probably had longer term leases, single tenant, maybe less desirable locations, where now I think we may have a little more churn. So you are subject to slight dips as 100% tenant retention just is never achievable.

Michael Cooper

So I think that we’re going through a bit of a transition right now, but there’s no reason why we can’t have the same kind of occupancy we’ve had in the past.

Sam Damiani - TD Newcrest

Okay, and then just another question on the acquisition market. Are you seeing anything today that would be accretive given your current cost of capital?

Mario Barrafato

We haven’t seen a big difference in pricing in properties at all and we haven’t been thinking about issuing equity at all, so we don’t really measure that. We are looking at what trades to make to better our portfolio.

But as I said before, it’s normal that from time to time you have access to capital where you can make accretive transactions. It’s just been amazing that since the middle of 2009 we’ve had access to every single day. So we’ll find opportunities to grow in the future and just maybe not the way it’s been every year.

Sam Damiani - TD Newcrest

Are there transactions that you’d say in the last month or so that demonstrate a lack of cap rate decompression?

Bruce Traversy

Bruce here Sam, hi. There certainly are transaction and if I just follow the lack of cap rates though, that cap rates are still very strong. They are certainly transactions to demonstrate that. I think 110 Yonge downtown here in Toronto and we’ve seen really good demand for good assets and we have a lot of good assets. So that’s what we are looking to buy. The market is very, very solid. There is a lot of pent-up demand certainly that offset any maybe temporary shortfall.

Michael Cooper

There still demand out there.

Sam Damiani - TD Newcrest

On the 110 Yonge what were the metrics that you heard on that transaction?

Michael Cooper

You know what, there’s another public company that would have all the information, but I understood that 50% of it was sold [deposit] [ph] interest and that was pretty attractive pricing for [Creek] [ph].

Sam Damiani - TD Newcrest

Great, thank you.

Operator

(Operator Instructions). And we have no further questions in queue.

Michael Cooper

Maybe that was a pity question. Since we started Dundee REIT we’ve adapted to the environment we find ourselves in at all times. The environment changed many times and we’ve adjusted our strategy many times.

The financial crisis in 2008 created an incredible opportunity to grow our business on very attractive terms. We have been able to create an irreplaceable portfolio, while continually increasing our AFFO.

Into 2008 we had about 63% of our net operating income derived from Calgary office, which was one of the worst performing markets at that time. By identifying the changes early after the beginning of the financial crisis, we have transformed our business into a national high-quality office portfolio. Today the environment is different and will present many new opportunities.

Your management team is focused on managing the portfolio to get the best operating results possible and enhance the long-term value of our portfolio. We’re also watching the market very closely to see where the next opportunities may be found.

Once again, I would like to thank you for spending your time on our business and taking interest in what we’re doing. Thank you very much.

Operator

Ladies and gentlemen, we thank you for your time and attention. This webcast is now concluded.

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