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Executives

Edward Sonshine – President and CEO

Rags Davloor – Chief Financial Officer

Fred Waks – Chief Operating Officer

Analysts

Michael Smith – Macquarie Capital

Sam Damiani – TD Newcrest

Mandy Samols – Raymond James

Karine MacIndoe – BMO Capital Markets

Alex Avery – CIBC

Pammi Bir – Scotia Capital

Michael Missaghie – Sentry Investments

Mark Rothschild – Canaccord Genuity

Jeff Roberts – Desjardins Securities

RioCan Real Estate Investment Trust (OTCPK:RIOCF) Q2 2010 Earnings Call July 29, 1969 10:00 AM ET

Operator

Good morning. And welcome to the RioCan Real Estate Investment Trust Second Quarter 2010 Earnings Conference Call for July 29th. Your host for today will be Mr. Edward Sonshine. Mr. Sonshine, please go ahead.

Edward Sonshine

Thank you and good morning to everyone. And welcome to our second quarter conference call -- so RioCan’s second quarter conference call -- hopefully my tongue will start working a little better as we get into this. Before I turn the floor over to Rags Davloor and Fred Waks, I just – I’m required to read a warning that our lawyers make me do, so let me do that without further ado.

In talking about our financial and operating performance, and in responding to your questions, we may make forward-looking statements, including statements concerning RioCan’s objectives and strategies to achieve those objectives, as well as statements with respective to management’s beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance, or expectations that are not historical facts.

These statements are based on our current estimates and assumptions, and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements. Additional information on the material risks that could impact our actual results, and the estimates and assumptions we applied in making these statements, can be found in the unaudited interim financial statements for the period ended June 30, 2010, and Management’s Discussion and Analysis related thereto, together with RioCan’s current annual information form that are all available on our website and at www.sedar.com.

So with that out of the way, I’m going to turn it over to Mr. Davloor to talk about our results.

Rags Davloor

Okay. Thanks, Ed, and good morning, everyone. In the second quarter, our financial results show continuing strengthening that reflects the impact of the acquisitions that were contributed in 2009, holding on our cash balances and improving operating metrics. We’re seeing continued health in both Canada and the U.S., and we expect this momentum to continue into the second half of the year.

In the second quarter, RioCan completed three acquisitions in Canada and three in the U.S. at an aggregate purchase price of $86.4 million as RioCan’s interests with a weighted average cap rate of 7.9%. RioCan currently has $233 million in those acquisitions in Canada and the U.S. where we have completed due diligence and buoyed conditions, they will be acquired at a weighted average cap rate of approximately 7.6%.

Included in this amount are the eight properties that we will be acquiring from Inland Western, one property with Cedar in the Northeastern U.S. and four in Canada. We expect to complete these acquisitions during the third and fourth quarters of this year.

RioCan reported FFO for the second quarter of $92.8 million, an increase of $24.9 million or 37%, compared to FFO of $67.9 million for the same period in ‘09. On a per unit basis, FFO increased by 27% from $0.30 per unit in Q2 ‘09 to $0.38 per unit in Q2 2010.

The $24.9 million increase in FFO was primarily driven by the following factors. Increased NOI from renting properties at $20.4 million, which is due to acquisitions, same store growth of $2.1 million or 1.9%, the completion of the Greenfield developments, intensification of existing properties and increased lease cancellation fees of approximately $5 million. We had increased transaction gains of $7.4 million and increased fees and other income of $2.8 million. These amounts were offset by increased interest expense of $4 million and increased G&A expense of $1.4 million.

Same store NOI increased by $2.1 million or 1.9% for the second quarter as compared to the same periods in ‘09 primarily due to the following. New and renewal leasing and fixed rent steps, which positively impacted NOI by $2.1 million, reduced bad debt expense of $0.7 million and these items were offset by reduced NOI due to vacant space carrying of approximately $2.1 million. On a sequential basis, same property NOI increased by $0.6 million over the first quarter with the same store NOI also increasing by the same amount.

Same store NOI increased by $5.2 million or 2.4% for the six months ended June 30, 2010, as compared to the same period in ‘09 primarily as a result of the following. New and renewal leasing and fixed rent steps positively impacted NOI by $4 million, reduced bad expense of $1.5 million, which were offset by reduced NOI due to vacant space carry incurred approximately $3.8 million.

Looking ahead to the second half of this year, there are a number of factors which we will expect to positively impact our results. The NOI run rate of Q2 2010, excluding any lease buyouts is approximately $134 million. And we expect to see growth from acquisitions, completion of developments and same store rent growth. Same store rent growth for the year is expected to come in at between 2.5% to 3%, a number of RioCan’s Greenfield developments are scheduled to also come online in 2010.

Occupancy is expected to increase by 20 to 30 basis points by the end of the third quarter and by 50 basis points by the end of the year.

Property and asset management fees are expected to run at approximately $3 million per quarter. Interest income for the remainder of the year expected to be in the range of $3.6 to $3.8 million per quarter and the dividend from Cedar’s shares is expected to track $850,000 per quarter as expected.

We expect G&A to be between $6.5 to $7 million in the third quarter and close to $10 million in the fourth quarter which basically reflects the bonus accruals at year-end. The G&A number does exclude costs related to IFRS and SIFT restructuring, which are budgeted to be between $3 to $4 million for the year.

Now turning to our capital management and liquidity position, during the quarter, RioCan successfully secured $112 million of mortgage financing at an average rate of 5.3%, generating net proceeds of $34, sorry, $38.9 million. For the balance of the year, we’ve approximately $162.5 million of principal maturities and amortization at a weighted average interest rate of 7.2%.

We’re currently securing our debt financing well below 5%, which will lead to substantial interest savings. Next week we’ll be repaying 12 mortgages with a principal amount of approximately $100 million that carries a rate of 7.33%. We are currently looking to place new financing on only three of these assets at rates below 5%. As a result, this will add substantial amount to RioCan’s unencumbered pool of assets, which currently numbers 60 properties with a book value of $500 million to close to 70 properties with a book value of over $600 million.

During the quarter, we renegotiated our two primary lines of credits with two banks to increase the maximum that can be borrowed by $80 million to an aggregate of $300 million and have expanded their term to three years. Also in July we converted the $78 million term loan facility into a revolving credit facility with a two-year term. Also, in connection with the Cedar joint venture we’ve arranged a US$50 million acquisition line at the joint venture level.

Our interest coverage ratio in the second quarter was close to 2.6 times and debt service coverage was at 1.94 times. RioCan’s debt to aggregate asset ratio was 57% as compared to 55.6% at December 31, ‘09. Net of cash, debt to aggregate assets is approximately 56.6%.

As previously indicated, our portfolio is performing well and our operating metrics continue to improve and are strong, which Fred will now speak to.

Fred Waks

Thank you very much, Rags. In terms of operations, the six months ending June 2010, we’ve got 179 new lease deals as compared to 154 at an average rate of $15.95, as compared to $15.40, of those 87 were national tenancies as compared to 38 the previous year.

In terms of lease renewals we have done 361 with an aggregate of 1.9 -- almost 1.9 million square feet as compared to 257 of 1.460 million square feet to previous year. Adverse renewals increases for non-anchored and non-fixed were $2.02 as compared to the previous year the $1.68.

On year-to-date unbudgeted vacancies are at 0.72 or 5.7 million as compared to 10.1 million the previous year of 1.37. Our year-to-date vacancies budgeted are or 463 -- 483,000 as compared to 573 and I will talk to what’s happening with the majority of that space as I go on.

Our actual occupancy at June 30th is 97% as compared to 97.1%, and that’s includes the property vacant space we’ve taken on with the Rona lease buyouts. Our top tenants are (inaudible) with Famous, Metro, Walmart, Canadian Tire, Winners and Loblaws being in our top 10.

In terms of the news on renewals basically non-fixed as I said were $2.02, at 11.4% increase over the previous year and Marshalls, which was announced, we had announcing six deals. We have done three of them with four deals that are presently where paper is going back and forth. We are not at liberty to discuss the exact locations at this point based on Marshalls request.

In terms of the large vacancies, the certain RioCan Hall we are presently dealing with Winners and Michael’s in terms of that entire space. The old Metro store at Bell Front in Belleville has been completely released to Bath, Bed & Beyond. The Solutions store in Brampton 25,000 square feet was leased to SportChek, Heart Lake area office has been leased to the region of Peel and La-Z-Boy has been released to Dollarama and (inaudible).

In terms of what’s going on in the market with leasing in general, there is certainly getting stronger as compared to the previous quarter and previous year, with strong desire in major urban markets. To show the buoyancy and ferocity that the tenants are looking at in some of our more difficult centers, such as Neufchatel, Mille-Iles and Markington, we are making tremendous strides.

Neufchatel, for example, we are -- which is an enclosed mall, we have -- we’re going to unclose it and it’s going to be anchored by Staples, Winners, Dollarama and L’Aubainerie. Mille-Iles, where we had a mini mall in the center of the property that is in Rosemere, Montreal, we had just done a 48,000 square-foot deal with Leon’s.

Markington, where we had a Zellers and a temporary Sears, we have done a Liquidation World and Gold’s Gym. Festival Hall, as I talked before we are dealing with three national retailers now and we expect that to be in place by the next quarter.

In conjunction with our finalization of the development that we built adjacent at Eglinton & Warden, Rona and ourselves have been in discussions over the past several years. And we felt that basically with the tenant interest that we have, which includes a national grocery store and several North American big-box retailers, it was time for us to take what was a dormant building where we were not receiving rent but was vacant that it would be better for the overall property, even though we had very little left to lease that it was time to take that property and finalize the development.

In terms of RioCan’s occupancy, as I said it was 97% but our economic occupancy tenants that are basically open -- are not open but are paying rent is 95.7%. That equates to over the next 12 months 475,000 square feet and a new gross annual proceeds of $11.6 million to be coming in.

In terms of the U.S. market, we are doing extremely well in the acquisitions that we have closed. Our occupancy in the properties in the States is running at 96.2%. Average renewal rates are up $1.34, average rental rates are up from $19.23 to $22 and our top 10 is a Who’s Who, Royal Ahold, Old Navy, Shaws, TJX, PetSmart, which approximate 45% of the portfolio’s revenue is generated by grocery anchoring.

Upon closing of the next phase of deals that we’re doing at our firm, our top five will be Royal Ahold, HEB, Safeway, Lowe’s and PetSmart. So that probably speaks very well to the type of property that we’ve been buying and the occupancy and the increased rates.

That is basically a snapshot of what is going on.

Edward Sonshine

Okay. Thanks, Fred. And by the way, I compliment you, Royal Ahold is difficult to pronounce without causing laughter and for those who don’t know, it’s a probably one of the largest supermarket chains in the world based in the Netherlands and they operate primarily in our portfolio under the name Giant Foods.

Anyway, I’m going to try to do something that is very difficult for me and I’ll try to keep my remarks short, so as to allow as much time as possible for questions. But after hearing Rags’ and Fred’s presentations, I think you have a pretty good idea of the optimism and then I say it excitement that is permeating RioCan these days. I actually have to go back to 2001 or as I prefer to say, the beginning of this century, to find a time when the stars were aligning for us, as well as they seem to be now.

Essentially, the consensus medium-term economic future in North America is as best as we can determine, modest if not extremely low growth, low or no inflation and very low interest rates as a result, at least for the next few years. That actually provides a great backdrop for our business. While at our size it takes a lot to move the needle, it is again our size and relative low leverage that gives us the significant growth opportunities that we see ahead.

First on the operating front, cautious optimism has returned to many retailers. This is evidenced not only by the large number of leases signed for existing space, as Fred talked about, but by the growth in rents we are seeing in renewals and new leasing. The influx of new retailers that we expect to see in Canada, in addition to the already announced Marshalls, will only enhance the growth in our operating metrics. By the way, even the American markets we are in are starting to see positive absorption and with an almost complete absence of new development, we expect this to accelerate in 2011.

Second is the acquisition opportunities we’re continuing to see. In addition to the deals already announced that Rags mentioned, we are in active negotiations or to the point of finalizing paper on a raft of excellent properties. In Canada, these opportunities could total over 1,400,000 square feet at a total cost of $270 million and in the United States, primarily through our Cedar joint venture, in excess of 3 million square feet with a cost to RioCan of about $290 million at our 80% interest.

Not all of these transactions will come together and in fact, there is no assurance that any of them will. But they would all represent quality additions to our portfolio and at a cap rate of about seven and three quarters average in the United States and 7 niche in Canada they would be materially accretive, particularly in light of today’s very low interest rate environment. In fact, on the interest rate environment for us, we set a new record of doing -- locking in a five-year deal at 4.22% a couple of weeks ago and we think the rates aren’t going to move that much from that area.

But, third, we forecast growth not only from completion of our development program in 2011 but we also see the strong likelihood of a revival of specific development opportunities as we move into 2011 and ‘12, as we see existing retailers restart expansion and new to Canada retailers begin to establish their footprint. With our financial strength and I should note, that all our current development projects are unencumbered, and our proven development expertise, there are very few competitors for us in this area.

If I come across as quite optimistic, it’s actually because I am, perhaps because of the difficulties of 2009 and 2008 before that. But mainly because for RioCan these are such -- there are such good grounds for optimism. The problems that seemed so large just over a year ago have largely dissipated and been replaced by opportunities. Even matters like IFRS transition and Bill C-52 rule changes, which seemed so imposing a year ago, are well in hand here at RioCan due to the great efforts of our team at RioCan.

So, I promised to be short and that is it. And at this point, I will just open it up for questions and we look forward to trying to solve some answers. Thomas?

Question-and-Answer Session

Operator

(Operator Instructions) First question is from Michael Smith from Macquarie Capital. Please go ahead.

Michael Smith – Macquarie Capital

Thank you and good morning.

Edward Sonshine

Good morning.

Michael Smith – Macquarie Capital

Just a question on the financing, you did a five-year fixed-rate financing of 4.22% a little while back?

Edward Sonshine

A couple of weeks ago.

Michael Smith – Macquarie Capital

Tell me, what was the loan-to-value and what was the spread and was it on -- what kind of property was it on?

Edward Sonshine

Well, it was actually not on one of our best properties that it wasn’t in one of the primary markets. It’s a great property, let me add, but it wasn’t in one of the six high growth markets. The spread if I recall correctly was about 175 to 180. I can’t, unfortunately, Michael, we do so many deals, I’d like to be more specific and did I answer your question yet?

Rags Davloor

LTV was probably about…

Edward Sonshine

LTV.

Rags Davloor

Right.

Edward Sonshine

Yeah. Somewhere 60 or a little bit less.

Michael Smith – Macquarie Capital

And with bond rates where they are, so you think you could do something similar today or…

Edward Sonshine

Yeah. I mean, as of this morning, I think, a five-year bond rate was around 2.4% and spreads on secured debt have come down to that 175, 180 range with quite a good availability. So yeah, we’re looking at 4.25% for five years, 10 years, quite frankly, on new deals today is probably around 5% or even a little bit less. We locked in one 10-year deal albeit a small one, during that same week a couple of weeks ago at 4.9%.

Michael Smith – Macquarie Capital

So with rates this low, are you tending to try and extend a little bit?

Edward Sonshine

Well, you know what? We don’t look at it on a one-by-one basis. We spent a long time creating what we call our ladder of maturities and when you look at our maturities out over a 10-year period, you’ll typically see 10% to 11% or no more than 10% to 11% due in any one year.

So we do our aim and that was originally done for reasons of risk management but it does, so that we don’t get slammed by a period of high interest rates. But similarly by having that ladder we get to take greater advantage of a period of low interest rates that we’re currently in. So while we don’t take everything out all the time, we were just going to keep to that discipline of doing a ladder and slotting them in, in that five to 10-year range, so as to keep the integrity of that financing ladder that we created.

Michael Smith – Macquarie Capital

Great. Thank you. And just one final question, in your letter to shareholders and obviously, on the call and in your reporting, it sounds like you’re very pleased with your results. In your letter you said that you set out some clear objectives for material growth in FFO in ‘10 and ‘11, and that you consider that you’re on track?

Edward Sonshine

Correct.

Michael Smith – Macquarie Capital

And so just to take that one step further, I think you said in previous calls that by the end of this year you’re going to be at or close to covering your distribution on an annualized basis. Is that still the case?

Edward Sonshine

Yeah.

Michael Smith – Macquarie Capital

Thank you.

Operator

Thank you. The next question is from Sam Damiani from TD Newcrest. Please go ahead.

Sam Damiani – TD Newcrest

Thanks. Just on the acquisition front, I didn’t seem there was a whole lot new disclosed in today’s reporting. When do you see next being able to announce going firm on a sizable acquisition?

Edward Sonshine

You mean beyond Inland?

Sam Damiani – TD Newcrest

Beyond Inland, exactly, yeah.

Edward Sonshine

Yeah. Beyond Inland, I would -- it could be, as things move slowly in the acquisition side, particularly in today’s world. We find it moves even more slowly in the United States for actually some very good reasons. But, Sam, without being trying to be a serious predictor, it could be as early as the next 10 days to two weeks or it could be as long as a month. But I would be disappointed if certainly by Labor Day we hadn’t been able to make some more announcements.

Sam Damiani – TD Newcrest

Okay. And just on the leverage and I think, we’ve talked about this every quarter for the last year or so. But once IFRS kicks in can you talk about how you view your leverage targets this time next year under IFRS?

Edward Sonshine

Yeah. I really can’t go in it that at length for a couple of reasons. Number one, we can’t talk about what the number is going to be. We’re still in the middle of that process of what the lease is going to be, other than, I think, I’ve said in the past it will be material. And what the leverage ratios should be on a go-forward basis is something that we’re going to address with our Board in the fall and when I’m satisfied that we’ve settled it, then you guys will know it but at the moment we haven’t settled that.

But again, and I without taking away from those leverage numbers, which clearly are important because they are in our declaration of Trust and obviously, even with the bump we’re not going to be even approaching 60 anymore or even get close to it. But, I think, what will become much more important are the coverage ratios rather than the leverage ratios as we move forward. And that’s why, I think, we’ve included reporting on those coverage ratios even in our press release because what, they’re very good right now and we want to keep them that way.

Sam Damiani – TD Newcrest

So what we’re going to on an apples-to-apples basis using a constant metric today versus next year. Do you see yourself having a similar sort of view on leverage or on a debt-to-EBITDA or interest coverage basis maybe you’re becoming a little more aggressive on the leverage side?

Edward Sonshine

Yeah. You know what it has served us well over the last couple of years, I mean, so it’s funny, everybody has forgotten that mid 2008 to mid 2009 was a time of balance sheet focus. We are not going to sacrifice our balance sheet focus for the sake of growth. We intend to remain considerably conservatively debt-financed. The definition of conservative may change very slightly depending on the results that we’re seeing over the next six months. Sorry I can’t be more specific.

Sam Damiani – TD Newcrest

No problem. That Rona lease buyout, that was the $5 million?

Edward Sonshine

That’s correct.

Sam Damiani – TD Newcrest

Correct. And what property was that, if you don’t mind me asking, what plans do you have for the space?

Edward Sonshine

It was at Eglinton and Warden, we’re building a new development at the -- in front of, so to speak, of that Rona building. The Rona building was one we purchased quite some time ago, probably have owned it for eight or nine or 10 years. Rona has been dark, I think for at least three years there and so often they come and make us an offer.

Two things happened. The amount of the offer they gave us for the buyout had gotten to the point where it was interesting to us. But more important we, as Fred said, we thought it was more important for the overall integrity of the development not to have this 100,000-foot-plus building vacant. And even more important we got -- we received substantial interest from other retailers, which I would be hope over the next six months we’ll be able to tell you exactly how we have released that and hopefully at higher rents.

Sam Damiani – TD Newcrest

So when was the last month you collected rent on that space?

Edward Sonshine

June.

Sam Damiani – TD Newcrest

Through June?

Edward Sonshine

June, yeah. It became effect July 1st.

Sam Damiani – TD Newcrest

Okay. Thank you very much.

Edward Sonshine

Thank you.

Operator

Thank you. The next question is from Mandy Samols from Raymond James. Please go ahead.

Mandy Samols – Raymond James

Hi. Good morning.

Edward Sonshine

Good morning.

Rags Davloor

Good morning.

Mandy Samols – Raymond James

If you had to issue unsecured debt today, what kind of rate do you think you would be able to achieve?

Edward Sonshine

If it was five-year, my best guess would be about 4.5%, about a spread of something over 200 bps, probably in the 210, 215. So I don’t know what the benchmark rates are today, but it would be plus or minus 4.5%.

Mandy Samols – Raymond James

Okay. So, and have you put any thought into and issuing unsecured debentures before 2011 to take care of the maturing debentures to take advantage of lower rates or how are you viewing that?

Edward Sonshine

We don’t have any debentures maturing this year. Our first -- our next maturity is 2011, March, if I’m not mistaken and we’ll see. So far in the past we’ve never been able to actually roll unsecured, so the markets have never been there when we have. We have several arrows in our quiver to deal with that. As Rags mentioned, we’ll have close to 70 properties unencumbered and that doesn’t even count our development properties that we’re building for cash as I mentioned. So we have the luxury, Mandy, of choosing whichever market suits us best at the time we need the funds. So I have no specific plans to do anything right now.

Rags Davloor

I think, Mandy, we have talked last year where we sort of pre-funded some of these maturities, given the economic environment, we don’t feel we need to do that at this point.

Edward Sonshine

Yeah. And just to add to that, Mandy, because Rags point is well taken, is of course, that is also one of the reasons that we rebid our bank facilities, so that we’re now sitting with a gross amount of, even after outstanding letters of credit we could draw $250 million on our bank facilities that carry a three-year term, should we need to do some funding. So that will eliminate that necessity of pre-funding and with the resultant dilution that comes from it.

Mandy Samols – Raymond James

Okay. And then you’ve got a decent sized line up of acquisitions in Canada. Could you give any color on who the sellers would be, pension funds or is it private individuals?

Edward Sonshine

No. I really can’t, because we’re just in the process of negotiations and there is nothing faster to queer negotiations than talking too much about it.

Mandy Samols – Raymond James

Okay. That’s great. And just a quick question for Rags. Rags, you said that $3 to $4 million in G&A this year would be for IFRS, does that…

Rags Davloor

And Bill C…

Edward Sonshine

52.

Mandy Samols – Raymond James

Sorry?

Edward Sonshine

And Bill C-52.

Mandy Samols – Raymond James

Okay. Does that include what has been incurred to date?

Rags Davloor

Yeah.

Edward Sonshine

Yeah. That’s a gross number.

Mandy Samols – Raymond James

Okay. That’s great. Thank you.

Edward Sonshine

Thank you.

Operator

Thank you. The next question is from Karine MacIndoe from BMO Capital Markets. Please go ahead.

Karine MacIndoe – BMO Capital Markets

Hi. Thanks. Other than working with Cedar and Inland, are there other potential partners that you’re currently in discussions within the U.S.?

Edward Sonshine

We’re considered as a wonderful buyer in the U.S. and I got to tell you there are always discussions going on with at least two or three companies at one time. And quite frankly, we’ve been in discussions with Kimco for quite some time looking at opportunities together as opposed to them selling out, selling to us any of their stuff. But so we constantly look at opportunities together and I clicked on any, but there’s few on the radar screen. And we have been approached by other public and private entities over the last few months.

But we don’t want to, quite frankly, albeit we’re proceeding on that very cautiously, as we’re proceeding generously -- generally cautiously in the United States. We don’t want to have a multiplicity of partners, because it just or even a multiplicity of geographies because it starts to get a little too complicated.

But the United States is a place where even though, as I mentioned, at least in the parts of it that we’re operating currently, things are starting to get better on the ground from the point of view of the retailers. It’s happening very slowly and there are still a large number of real estate owners both private and public that are seriously over-levered and are starting to wrestle with those issues in figuring out what to do with them. That’s the opportunity for us.

Karine MacIndoe – BMO Capital Markets

And have you tossed the idea maybe it doesn’t make sense quite yet, but taking a look at some of these opportunities solo and at what point do you think it might make sense to do that?

Edward Sonshine

Well, you know what, we’re tossing around a lot of things, in fact, we’re going to an offsite here in the early fall to try to evolve our strategy in the United States to figure out what we want to do when we grow up down there. So, yeah, no, I mean, right now we have not considered taking ownership of 100% of properties because that would obviously necessitate us setting up our own operating platform down there and we have not come to any conclusion as to whether or we wish to do that or not.

You also have to appreciate right now the percentage of our revenue as of June 30th coming from the U.S., I think is again over 3%. We also have to wrestle with, as part of this strategic sort of review, where do we want that to go? We obviously don’t want it to go too high. We want to remain a Canadian REIT with some North American exposure. But there’s a lot of facets of that decision-making process which we haven’t wrestled to the ground yet.

Karine MacIndoe – BMO Capital Markets

Okay. And then in terms of the deal flow, are you starting to see a change in types of product being offered that would cause you to kind of expand the type of product you’d look at in the States?

Edward Sonshine

Little bit, we’re seeing more, I guess what they’ll call down there power centers, new format retail that we might them to call it. We’re seeing a lot of those, because -- partly because that’s primarily the most distressed part with Linens ‘N’ Things and Circuit City had, Circuit City having gone down the other year. But those properties where, that are good enough, that the large spaces from Circuit City and Linens have been replaced are starting to be interesting. But there are still a lot of issues there, I mean, so we’re proceeding very cautiously.

The whole bookstore world is a big issue down there, obviously, the video rental business is a big issue. So we’re starting to cast our eyes a little wider but very, very slowly and very cautiously. And I think, assuming we do succeed in finalizing some of the deals we’re working on, they are largely and significantly exactly what we have been buying so far, which is grocery-anchored strips.

Karine MacIndoe – BMO Capital Markets

Okay. Thanks.

Edward Sonshine

Thank you.

Operator

Thank you. The next question is from Alex Avery from CIBC. Please go ahead.

Alex Avery – CIBC

Thank you. Just wanted to talk a little bit about the fees and gains on transactions. You announced a pretty good number this quarter, year-to-date you’re at $14.2 million. Can you give us an idea of to the extent that you have visibility, what we can expect in the second half and perhaps, I guess, implicitly what the full year is going to look like or what we can expect?

Rags Davloor

Sure. I mean what we have clear visibility on, which is trying to finalize the rolling process, is there is a gain that we’re looking to crystallize in additional proceeds coming out of East Hills development and on that sort of re-rolling that final piece, there’s about $1.8 million that should hopefully flow through in Q3. It’s tight, maybe it will slip into Q4 but I’ll expect it -- expectation is we’ll be able to trigger that gain in Q3.

There are a variety of things, it is kind of tough to talk about it because they are deals that we’re dealing with and we’re dealing with potential buyers. And part of it is just sort of working through the central planning and also in some cases it makes sense to monetize out. And so we think that number could be an additional, call, it $3 to $5 million, hopefully at the higher end but to get into the details would be tricky at this point given the status of our negotiations.

Alex Avery – CIBC

Sorry, when you referenced the $3 to $5 million, would that include your $1.8 million from the East Hills?

Rags Davloor

No.

Alex Avery – CIBC

Okay.

Edward Sonshine

Sorry, I mean, to, Alex, certainly, we wouldn’t expect them to exceed $7 million in the second half of the year. Is that fair, Rags?

Rags Davloor

Yeah.

Alex Avery – CIBC

Okay. And then just jumping back to Inland, you’ve made some pretty descriptive comments about the U.S. and the, I guess, evolving strategy there. Can you just talk a little bit more specifically about the Texas markets and Inland as a partner?

Edward Sonshine

Yeah. I mean, everything we’ve seen about Inland so far is quite impressive. They have their issues as unlisted REIT, which is an interesting vehicle. They are probably sitting a little bit over levered and well, I know they’re sitting a little bit over levered, so they have to do something. That is no secret. We haven’t gotten to the point where they’re actually reporting to us but our asset management people have met with theirs and certainly from the point of view of reporting capability and operating capability, so far they look terrific.

They have a lot of square footage in the Texas market, before this sale, I think in the area of about 10 million square feet. The markets in Texas have been, like the Northeast, they have not been as badly affected by this downturn. So their -- the cap rates have moved in large extent in line with the whole capital situation. But the tenancy situation down there is pretty good.

As I think I said at the annual meeting, population growth continues in Texas. They have a hugely diversified economy, everybody thinks oil and gas, but they’ve got a lot more going for them down there than just that. And they actually have several major markets just within Texas. As compared to the six we have in Canada there’s probably four, ranging Houston, Dallas, San Antonio and Austin, that exist in that state. So it’s one we’d like to expand in.

Alex Avery – CIBC

Okay. And then presumably the hold period or the intended hold period is longer-term?

Edward Sonshine

Yeah. Everything we’re buying in the United States we expect to hold long-term.

Alex Avery – CIBC

Okay. And are there any, I guess, specific challenges or opportunities in that market that you see?

Edward Sonshine

No. I think there’s terrific opportunities, the only challenge quite frankly is that we’re not the only people that have noticed that Texas is a very good market. There was one grocery anchored, it was actually HEB anchored and HEB, for those who don’t know it is probably considered, they are a dominant supermarket retailer in Texas. I think they have about 300 stores in Texas and in the northern part of Mexico as well. And they are considered one of the foremost grocers really in North America and that we heard from some of our Canadian supermarket tenants, that they actually go down to Texas to learn from HEB.

But there was an HEB anchored center that came up for sale in Austin, another part of Austin from where we’ve already acquired from Inland and we looked at it together within Inland and it ended up there were like 23 offers on it, and it ended up going for a sub-seven cap. So to the point of view of a challenge, the only challenge is there’s more competition in Texas than there are in other parts of the United States.

Alex Avery – CIBC

That sounds a lot like Canada. You had mentioned that you don’t want to talk about the stuff that you have under negotiation at this point. But can you just -- that was my last question. Can you just comment on the Canadian market and the availability of property?

Edward Sonshine

Sure. Availability of property continues to be difficult, but for unique reasons to individual sellers it becomes available. I mean, again, when you can finance at the kind of rates that we’re talking about, it takes a -- there is nobody under pressure to sell in this market. So you have to just have a unique situation related to the seller’s own circumstances for whatever reason and so that tends to keep availability down. On quality product, of the kind of things that we would like to buy, I would say cap rates today are certainly sub-seven.

Alex Avery – CIBC

That’s great. Thank you very much.

Edward Sonshine

Thank you.

Operator

Thank you. The next question is from Pammi Bir from Scotia Capital. Please go ahead.

Pammi Bir – Scotia Capital

Thanks. Good morning.

Edward Sonshine

Good morning, Pammi.

Pammi Bir – Scotia Capital

Just on your last comments there, Ed, given where rates are and the level of competition you’re seeing, do you get the sense that cap rates are likely going to head lower or pretty flat with where you’re seeing them today?

Edward Sonshine

You know what, there is a possibility they may head lower, again, we’re not always the greatest predictors. But I think there is more money out there for acquisition here in Canada than there is product. So that typically, when you label it together with very low secured debt, interest rates and quite good availability, there is no shortage of secured debt funding or unsecured for that matter.

When you put those two factors together and starting to see you rent grow, starting to see take-up in vacant space, all that it would tend to lead me to believe that you will see, as long as those things continue to apply, you will see cap rates head lower.

Pammi Bir – Scotia Capital

And then just on the, I guess, the acquisitions that you’re looking at in both Canada and the U.S., the $270 million and I think, it was $290 million with Cedar?

Edward Sonshine

Right.

Pammi Bir – Scotia Capital

Can you -- are the Cedar transactions within sort of that the geographic framework that you laid out in the JV?

Edward Sonshine

Yeah.

Pammi Bir – Scotia Capital

And in Canada, would these be in markets that you’re already in or not already in, but I guess, consistent with the overall strategy of your six…

Edward Sonshine

By and large, I mean, obviously, we will continue, I think, we’ve got about two-thirds of our revenue in Canada coming from those six major markets. It is a goal of ours to see that continue to increase up into the 70, but we haven’t abandoned the other markets of Canada. There are still people living in those and lots of them have, so, but they will be primarily in the six major markets, yeah.

Pammi Bir – Scotia Capital

Okay. And then just I think your comments earlier with respect to the development side?

Edward Sonshine

Yeah.

Pammi Bir – Scotia Capital

What should we be expecting for development completions, I haven’t had a chance yet to get through your…

Edward Sonshine

Yeah. That’s okay. That’s okay. Completions in ‘11 really relate to the stuff, I guess we talked about in the last quarter’s conference call. There’s two centers in Ottawa that we’re doing with Vaughan that with Trinity Developments that are getting close to completion and should be fully done by 2011.

There is the development in Okotoks outside of Calgary that should be completed next year and of course, there’s the two urban developments here in Toronto, the Avenue Road site and for -- if there’s anybody on the phone that objected to our rezoning there, the brick facing is going on. And pardon some pride, I think it’s going to be a wonderful addition to the street, if anybody wants to drive by. And of course the Queen and Portland, where we have about 100,000 square feet will come on-stream in 2011 as well.

So there is significant new income coming on-stream in 2011 and I believe that we will be in a position to do some new starts in 2011 that will start to see us build that pipeline again for the next several years, whereas otherwise it was pretty well going to run dry by the end of 2011.

Pammi Bir – Scotia Capital

And so on that, where are you seeing the, which retailers are sort of indicating that they’re ready to for now with new deals, new sites in Canada?

Edward Sonshine

Well, Walmart continues to do fill-in, we’ve got a couple of deals we’re looking at new build with them, primarily on a land lease basis, essentially on a land lease basis. The supermarkets are continuing to -- I won’t so much call it expand as reposition. Lowe’s is still continuing ahead to build. And would you add anybody to that other than the American ones that we expect to be coming over the next couple years.

Rags Davloor

Home Depot as well as with Costco.

Edward Sonshine

Yeah. Home Depot is doing new business. That’s correct. Costco, we’ve got a new deal with. So the guys you would expect to be generally it is, at the end of the day you need some anchors before you’re going to do anything new. The medium boxes, the people ranging from Winners to Michaels and others of that 20 to 30,000 foot range, they are in expansion mode again. Then you go down to the smaller users from 5 to 10,000 feet, from Dollarama and across the board, they are in expansive mode.

And we think that and I couldn’t tell you who they are even if I knew. But the noises we are hearing is that there is going to be a few new retailers from both America and Europe coming into the market that are into that 5 to 10,000 square foot box size, which will be great and will help rental growth over the next couple years. Canada has become a great brand as a result of this crisis. And the work -- the phenomenon that we’re seeing is retailers from almost around the world are looking and saying, hey, this is a great market, why aren’t we in it? So I think RioCan over the next several years is going to be a primary beneficiary of that trend.

Pammi Bir – Scotia Capital

Okay. And just sorry two quick last ones. Can you give us some background on, I understand obviously that the sale of the participation rates for Avenue and the Queen and Portland for the SIFT legislation. But can you just give us some color as to, I guess, the quantum or how those were determined? And as well as, the, I think there was a small $2 million gain recorded in your disposition dependent fees categories, so just some color on that, please?

Edward Sonshine

Okay. On the participation it was SIFT directed. I would have quite frankly preferred to keep it and when you look at those buildings I think you will see why. But how we determined the price was really very simple. We did that we have the budgets, we know what the sales are, we did a calculation and then it was a negotiation as to how much we’re going to discount that number for taking away all risk and the time value of money. So that’s how that price came out. I think the, there was the other disposition Rags that Pammi is talking about the Whitehall?

Rags Davloor

Castle.

Edward Sonshine

Whitecastle. That was -- we have an interest in the Whitecastle Urban Fund, Steve Diamond development. We’re in there for a couple reasons. Number one, because it seems like a great investment for us but also we have first call on any retail opportunities that come through the various redevelopments that he is doing in that fund. And that was simply the sale of a property, I think at Yonge and St. Joseph, and was the first sale of that fund.

Rags Davloor

Yeah. It was just basically the distribution on the fund because we do account for it on a cost basis. Our ownership interest is around 15%.

Pammi Bir – Scotia Capital

Okay.

Edward Sonshine

Does that answer your questions, Pammi?

Pammi Bir – Scotia Capital

Yeah. It does. Thanks.

Edward Sonshine

Thank you.

Operator

Thank you. The next question is from Michael Missaghie from Sentry Investments. Please go ahead.

Michael Missaghie – Sentry Investments

Thanks. Good morning, guys.

Edward Sonshine

Good morning.

Rags Davloor

Good morning.

Michael Missaghie – Sentry Investments

Just a follow-up on Alex’s questions regarding the gains and fee income. On the gains side, can we expect it to come in at the $20 million or were you saying $3 to $5 million above that range?

Edward Sonshine

No. It will probably be around $20 million for the full year at least that’s where we are hopeful it is, if everything clicks in.

Michael Missaghie – Sentry Investments

Okay. And then on the fee side you’re running ahead of what we have for guidance on there as well?

Edward Sonshine

Why is that, Rags? Well, I know the fee business is a great business and obviously those are all third-party fees. But part of it may be connected to the leasing fees we’re getting from our joint venture partners as some of these spaces that went vacant last year lease up, I don’t know.

Rags Davloor

Yeah. I mean, a steady state would be $2.7, $2.8 million but there are some leasing fees that we’re realizing. But we’d still expect that number to continue to grow as some of our development pipeline comes on-stream. Because realize that when it comes out of the -- during the development phase it’s really Trinity that manages it and is our development partner and is making the development fees. When they come online then we take over at that point and we’re the manager. So those fee streams you would expect to continue to grow.

Edward Sonshine

And when we get started with the three joint venture developments with CPPIB, the first one probably being in St. Clair and Weston road, we are actually the development manager on those and we’ll earn development fees as we go forward. So, I think that you will continue to see those that fee income line grow as we move into 2011.

Michael Missaghie – Sentry Investments

Okay. But for 2010 you would still expect it to come in the $12 million range?

Edward Sonshine

Yeah.

Rags Davloor

Yeah.

Michael Missaghie – Sentry Investments

Okay. Rags, you mentioned an NOI run rate for Q2 of $134 million. Do you have that run rate including what you’ve closed so far, towards I guess the end of Q2 and what you closed subsequent?

Rags Davloor

It doesn’t include subsequent. It just includes what we have closed to date. So it is really a Q2, sort of assuming all the acquisitions were pro forma as of the first day of the month.

Michael Missaghie – Sentry Investments

Okay.

Rags Davloor

That’s how we define that run rate.

Michael Missaghie – Sentry Investments

Okay. So it includes the full NOI for the quarter from the acquisitions even if they were included at the end of the quarter?

Rags Davloor

Yeah.

Michael Missaghie – Sentry Investments

Okay.

Rags Davloor

The number is meant to help you and then you can just build from that number the acquisitions and same store growth.

Michael Missaghie – Sentry Investments

Got it. Thank you. And just finally, Ed, you’ve given some good color on the acquisitions going forward and what you have in the pipe. But could you give me a number that you would be happy with if we were at the end of the year and we could ask you what you would like to have completed?

Edward Sonshine

Going forward from here?

Michael Missaghie – Sentry Investments

Right.

Edward Sonshine

I’d be happy with about $300 million in total in the third and fourth quarter…

Rags Davloor

(Inaudible)

Edward Sonshine

… will that get us close to our target?

Rags Davloor

Yeah. I think we are -- I guess we have to distinguish between closings and what we hope to have under contract.

Edward Sonshine

No. I’d say hope to close those.

Rags Davloor

Right.

Edward Sonshine

So we have…

Rags Davloor

Under contract probably over $500 million.

Edward Sonshine

Exactly.

Rags Davloor

I mean what we are realizing is closing these deals in the U.S. takes a long time, especially when there is assumed debt. Because more often than not we’re dealing with conduits and dealing with these services is painful.

Michael Missaghie – Sentry Investments

Okay. Thanks, guys.

Edward Sonshine

Thank you.

Operator

Thank you. (Operator Instructions) The next question is from Mark Rothschild from Canaccord Genuity. Please go ahead.

Mark Rothschild – Canaccord Genuity

Hi. Thanks.

Edward Sonshine

Hi, Mark.

Mark Rothschild – Canaccord Genuity

Ed, you said in looking at a number of deals in the U.S. and you acknowledge that the percentage of your revenue now from the U.S. properties is relatively small. I’ve seen articles in the press over the past year or so where I’m not sure it’s been sales or speculated that RioCan can take their U.S. exposure up to 20%. Are those numbers just exaggerations or how would you reconcile that?

Edward Sonshine

You know what? Those numbers are, I’m not sure where those came from. But we would certainly be comfortable in the 10% to 15% range. As I said we’re going to have an offsite really gauge our own temperature on that and gauge our Board’s temperature in the fall. But my thinking is 10% to 15% would be a number I’d be very comfortable with and if over time it edged up higher to close to 20% I don’t think I’d be sad.

What I want to do is really emphasize because I think some people think otherwise, is the, Fred touched on the type of tenant revenue we’re getting down there. Our and I think in the future, as that portfolio builds a little higher, we’ll probably start reporting our top 10 exposures in the United States separately and Canada separately, right now it is too small to do that. But the quality of the revenue we’re getting down there is superb.

The quality of the real estate we are buying, while different from what we’re buying in Canada because we haven’t focused on grocery anchored strips in Canada, whereas that is our focus down there, so it’s a little bit different. But the quality of them from the point of view of the rent levels on a lot of the ancillary tenants, the growth potential from those rent levels and the growth potential from the, quite frankly, just straight fill-up of the existing vacancy over the years, where you don’t pay for vacancy, I think, it can be material. So owning the stuff in the United States so far I see as a huge positive. Where we’ll end up as far as a percentage of our overall revenue I don’t know right now.

Mark Rothschild – Canaccord Genuity

Okay. My only other question. You’re pushing us to look a little bit more at the interest coverage as opposed to leverage ratios and you say you don’t want to think about or talk about where your target is going to be on a debt to gross book value basis, but…

Edward Sonshine

I’m thinking about it. But I just don’t want to talk about it.

Mark Rothschild – Canaccord Genuity

Okay. Could you actually talk about where you think you should be or would like to be on an interest coverage ratio basis?

Edward Sonshine

Yeah. I think we should be not too different from where we are now. I think the second quarter annualized was around 2.5 on interest coverage basis, Rags?

Rags Davloor

Yeah. Just north of that.

Edward Sonshine

So this, so, it’s an area sort of that 2.25 to 2.5 area on an interest coverage I think is an area that we’re very comfortable with, I think the rating agencies are very comfortable with. Obviously the only limitation on that is in our secureds, where the covenant there is 1.65. So but in that 2.25 to 2.5 range is, I think is an area that I think that we would like to see RioCan continue to be.

Mark Rothschild – Canaccord Genuity

Okay. Very good. Thank you very much.

Edward Sonshine

Thank you.

Operator

Thank you. The next question is from Jeff Roberts from Desjardins Securities. Please go ahead.

Jeff Roberts – Desjardins Securities

Hi. Good morning. Could you please give us a little more color? Who are the unanticipated tenant bankruptcies year-to-date? What type of tenants were they small, clothing stores and?

Edward Sonshine

I would say, Fred is just looking up some papers on that, but they’re really small shop and some office tenants.

Fred Waks

Basically they were smaller tenancies, non-nationals and nobody of any…

Edward Sonshine

Yeah. Nobody you ever would have heard of.

Jeff Roberts – Desjardins Securities

Okay. And are you concerned about any larger ones going forward?

Fred Waks

No.

Edward Sonshine

Well, with the exception perhaps of blockbuster but that has been in the news sufficiently. We have a pretty modest exposure to blockbuster and quite frankly, in Canada they’re still making money, so that story is unfolding actually much slower than I ever would have expected. But we have pretty good contingency plans in place for every space they are in.

Other than them, I agree with Fred. The tenants are, the ones who didn’t get hurt and didn’t get drop down dead over the course of that quite ugly 12 months from like I say mid ‘08 to mid ‘09, they’re doing just fine now.

Fred Waks

Jeff, we still meet every Monday and right now there is nobody asking for any deferrals or abatements in our entire portfolio.

Jeff Roberts – Desjardins Securities

Okay. Good. And then second question, correct me if I’m wrong, but a few years ago, didn’t RioCan sell Halton Hills.

Edward Sonshine

Yeah.

Jeff Roberts – Desjardins Securities

And, four or five years ago? Could you tell me what you sold it for, if that’s the case and why you bought it back?

Edward Sonshine

Yeah. You know what, very, very good, Jeff. I’m impressed. I’m impressed. I didn’t think anybody would notice. There has actually been two properties that we originally sold that we bought back over the last year. One was in Brampton. What was the location, Fred? I can’t remember the name of the street.

Fred Waks

Harold 10…

Edward Sonshine

Yeah. And anyway, it doesn’t matter. We bought it back in Brampton and we bought this one back both for roughly the same reasons. I mean, essentially, I think this one we bought back for probably about the same or a little bit less than we sold it for. Brampton we bought back for I’d say materially less than we sold it for. But the reason we bought them back was the same. The reasons we sold them was that either they were -- that we felt they were going to go through a rough operating patch over the next few years for different reasons.

The Brampton property because it was brand new, and we felt that for the next few years it was as good as it was going to get. We had developed it together with Trinity and Kimco, actually and that was number one, and we were right. When you look at the turnover over the last five years there was a lot. But the property had now reached a stabilized point again and there had been a lot of growth in the immediate area. So that together with the opportunity led us to do it.

And essentially in Halton Hills what was happening there, there was a -- we knew about a big new shopping center that was being built right across the street. So we thought it was an opportune time to sell it and in fact again, it did go through some upheavals over the next two or three years. But the opportunity came up. The property, in our opinion, was now stable.

So to add another supermarket anchored, well, both of them are supermarket anchored strip shopping centers in a much more mature area, because its five years down the road and both of which started in the larger [DTA] at good prices was something we felt we couldn’t avoid. Notwithstanding, we figured somebody when I spoke, well, you sold it and now you’re buying it back, what’s up? So thank you for asking.

Jeff Roberts – Desjardins Securities

Okay. Thanks.

Operator

Thank you. The next question is from Sam Damiani from TD Newcrest. Please go ahead.

Sam Damiani – TD Newcrest

Thanks. Just a couple follow ups here. You dropped one of the properties in the Inland portfolio there, one of them in Texas. What was the reason you dropped that property?

Edward Sonshine

That was just one store actually. I don’t think it was a whole…

Fred Waks

Yeah. We didn’t drop the property…

Edward Sonshine

Yeah. And the main reason for that was as we got into it and I think Inland didn’t know themselves, for whatever reason it was a separate parcel within a larger property. And they had included it in part of a cross collateralized pool and we said well, we really don’t want to get involved in that and they agreed.

Sam Damiani – TD Newcrest

Sorry, who was the tenant there?

Edward Sonshine

It was a local tenant called Gander Mountain. It was I think a 60,000 foot store. Gander Mountain, which is…

Fred Waks

A local tenant like every store.

Edward Sonshine

Yeah. So they are basically an outdoor store, of course, in Texas that means they primarily sell guns and hunting paraphernalia.

Fred Waks

I can send you a picture.

Edward Sonshine

No, no, you won’t send him a picture. That was of me trying on some of their merchandise. But that, don’t take anything from that. That was just something that happened.

Sam Damiani – TD Newcrest

Of course. And then just a last question. What is your sense on the trends in the credit markets in the U.S.?

Edward Sonshine

They’re opening up.

Sam Damiani – TD Newcrest

Are you seeing cap rate compression happening now?

Edward Sonshine

The U.S. banks and investors are flush with cash, but they have a shortage of creditworthy people to give the money to even though I think it’s a very different system down there, because everything is non-recourse, including all the deals we are doing down there, of course. So it’s a bit of a different system. So rather than my saying creditworthiness, I will say low loan-to-value borrowers such as us.

But the CMBS market has started to move again. I know Morgan Stanley and Goldman’s have done deals. We’re actually considering one presented to us for one acquisition that we are negotiating. Cedar has already gone out and gotten a, I will call it a proposal at this moment from one of the large investment banks to do a CMBS deal.

And so things are starting to unplug. The main problem that most landlords have is they are already over levered. I mean, what ends up happening when the value of things have gone down by 20%, which is basically what has happened in the United States, it’s hard to, everything changes from state-to-state and market-to-market. But when you have a 20% drop in value and you’re 60% levered at the beginning of that, you’re in really bad shape because the debt stays the same of course. So you’ve got a lot of landlords that are just over levered and the reopening of the credit markets, which is occurring down there, it is too late for them. It doesn’t help them because they have to come up with too much equity to cover the difference for the new LTV.

Sam Damiani – TD Newcrest

Right.

Rags Davloor

But just picking up on what Ed was saying, I mean, the light colors have clearly reemerged in the U.S.

Edward Sonshine

Okay.

Rags Davloor

I’m not sure the banks are really back in a significant way unless you’re a real special client relationship type thing but I don’t think the banks have thrown any money around of note. But there is no question that the CMBS market is reemerging.

Sam Damiani – TD Newcrest

So…

Rags Davloor

At lower LTVs and then the people are buying it on book and taking the risk that they can then turn around and syndicate it.

Edward Sonshine

Yeah. We’re seeing bought deal proposals on CMBS transactions.

Sam Damiani – TD Newcrest

So if you could do a 10-year secured mortgage on a property, what sort of loan-to-value and coupon are you looking at in the U.S.?

Edward Sonshine

Actually we just did one I think, a 10-year deal.

Rags Davloor

Just five. It was five-year at 5%.

Edward Sonshine

No, no, there was one at 5.3% and loan-to-value at about 55 and that was 10 years.

Rags Davloor

We’re keeping it below 60. We kind of believe that sort of 50 to 55 is a bit of a sweet spot.

Sam Damiani – TD Newcrest

That’s not bad financing.

Edward Sonshine

No, no. When you are looking at cap rates in the 7.75%, 10-year at 5.3% is pretty damned good. It’s more expensive than the United than Canada, but it is pretty damned good.

Sam Damiani – TD Newcrest

Yeah.

Edward Sonshine

It is also non-recourse, so you expect to pay a little more.

Sam Damiani – TD Newcrest

Okay. Thank you.

Operator

Thank you. There are no further questions registered at this time. I would now like to return the meeting over to Mr. Sonshine.

Edward Sonshine

That’s perfect. I had a feeling there were no further. Sam got two in. Let me thank you all very much. I’m glad we were able to take all the questions in the time allocated. And you know what, if we don’t see you in between or talk to you in between, we will talk to you then I guess around the end of October. Thanks very much. Bye-bye.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.

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