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Executives

Armin Martens – President, CEO, Trustee

James Green – Chief Financial Officer

Kirsty Stevens – Senior Vice-President Administration/Investor Relations

Analysts

Pam Evier – BMO Markets

Shant Poladiam – Cannaccord Adams

Guy Bieber – Bieber Securities

Jeff Roberts – Desjardins Securities

Alex Avery – CIBC World Markets

Jimmy Shan – National Bank Financial

Mario Saric – Scotia Capital

Artis Real Estate Investment Trust (AX.UN) F4Q08 Earnings Call March 24, 2008 1:00 PM ET

Operator

Good afternoon and welcome to Artis REIT’s 2008 Q4 and annual results conference call and webcast. I would now like to turn the meeting over to Mr. Armin Martens please go ahead Mr. Martens.

Armin Martens

Thank you and greetings everyone and welcome to our inaugural conference call. As mentioned, my name is Armin Martens; I am the Chief Executive Officer of Artis REIT, with me on this call are Jim Green our Chief Financial Officer as well as Kirsty Stevens our Senior Vice President.

To begin with, I would like to advise all listeners that during this call we may at times be making forward-looking statements and therefore seek safe harbor. These statements are based on our estimates and assumptions that are subject to risk and uncertainties that could cause our results to differ materially from the conclusion in these forward-looking statements. Please refer to our website as well as our filings such as the financial statements for MD&A and annual information form the year ended December 31, ’07 for full disclaimers as well as information on material risk pertaining to all of our estimates and assumptions.

Again, thank you for joining us and to begin with, I will turn the floor over to Jim Green our CFO to review our financial highlights. Thereafter, I will give a brief commentary again, some of my perspectives on Artis REIT, the market conditions and then we will open the lines for questions, Jim.

Jim Green

Good afternoon everyone, 2007 has been a year of tremendous growth for Artis REIT. We have grown from a total asset base of approximately 493 million at December 31, 2006 to almost 1.2 billion at the end of 2007.

Our gross revenues were 99.3 million up 86% from the prior year driven by the acquisitions we made during the year as well as growth in our existing portfolio revenues.

We did three equity offerings during the course of the year raising a total of $257 million in new equity. Our payout ratios have improved substantially with a FFO figure reaching $1.41 for the year ended December 31, 2007, which is a growth of 21.6% from the prior year and brings the payout ratio of FFO down to 74.5%. It declined in each quarter, during 2007 from the start at 93% in Q1 down to 66.7% in Q4.

Looking at the same properties owned by Artis REIT, we looked at the properties we owned for the entire calendar year 2006 and 2007; they show a growth in same property operating results of 8.5% when the straight-line rents and market rent adjustments are backed out of the figures and including those numbers there was a growth of 5%.

Our debt to GBV has come down steadily. At the end of 2007, our mortgages to gross book value were 49.2% and total that including our convertible debentures were 53.4%.

On the mortgage maturities, Artis has only two mortgages maturing in late 2008, approximately 2% of our total debt and we have approximately 4% maturing in 2009. Very low mortgage risk and we anticipate no problem in renewing or replacing these mortgages as they mature.

Weighted average interest rate on our outstanding debt is down from 5.51% in December 31, 2006 to 5.42% December 31, 2007. We have done some acquisitions subsequent to year-end and then new mortgages that have been arranged for the subsequent acquisitions have been at or below this weighted average interest rate.

We issued one new convertible debenture during 2007 specifically tied to a real estate acquisition. It was done at a 5% coupon rate with a conversion price of $17.75 per unit.

During 2007, 7.1 million of our outstanding debentures were converted to equity.

Looking at covered ratios, our interest coverage ratio even factoring in the changes to GAAP whereby deferred financing costs are now included in interest was 2.2 times in 2007 versus 1.8 in 2006, where those deferred financing costs are not included.

Looking at balance sheet capacity, as I mentioned, our current mortgages to gross book value are approximately 49.2%. Our declaration of trust limits mortgage debt to 70% of gross book value and to go to maximum leverage, we could buy out almost 866 million of new properties. That being said, we are very comfortable with our existing debt level and have no current plans to move them far from where they sit today.

Cash on hand, REIT had $29.4 million of cash at the end of 2007; it was all in bank accounts and GICs and none of it was invested in asset-backed commercial paper.

We see participation in our DRIP Program grow steadily during the course of 2007 and our current rate of participation is approximately 15%.

On the tax status of the REIT, REIT is currently unable to confirm that it had met the REIT exemption; however, 100% of our distributions for return of capital in 2007 and a high percentage is also anticipated to return of capital in 2008, which will mitigate any tax should the rate be subject to tax. Management believes that we will be able to meet the rate exemption either during 2008 or during 2009 and when there is certainty that we’ve met the rate exemption then the provision for taxes currently on our financial statements will be reversed.

Acquisitions during the year, we acquired 45 new properties approximately $567 million of value. Subsequent to year-end, we have closed additional acquisitions of approximately $46 million to date.

Units outstanding December 31, 2007 were 31.2 million units and that is up to approximately $31.8 million as of March 19 a large percentage of that due to some further conversion of outstanding debentures as well as participation in our DRIP Program and exercise of options.

We are very pleased to note, on one of our latest acquisitions one of the vendors took units in Artis REIT still valuing them at $17.75 a unit.

Armin, I will turn it back to you.

Armin Martens

Thank you Jim, I will continue with commentary, again some key fundamentals that define Artis REIT. Our geographic focus as you know Western Canada only primarily in Alberta. To be clear, we operate in all major markets in Western Canada. In Manitoba, we are in the City of Winnipeg, the largest marketplace in the province, in Saskatchewan, we are in the cities of Regina and Saskatoon and in Alberta, we are in Calgary and Edmonton and in B.C., British Columbia, we are in the GVRDs, the Greater Vancouver Regional District.

We are also growing secondary market particularly in Alberta and British Columbia. In Alberta, we are in Fort McMurray as well in the Big Wig. We are in Grand Prairie; we are in Red Deer; we are in Medicine Hat and in British Columbia, we are also in Kamloops an interior city on the Trans-Canada Highway as well as the city of Nanaimo on Vancouver Island.

That said, our geographic focus, our product focus commercial real estate only but diverse, we are investing in retail properties, industrial and office properties. This diverse spec product mix has serves us well and continues to provide our shareholders with both diversification and opportunities.

A little more data on them, in terms of GLA, 43% of our properties are office 31% would be retained and 26% industrial.

In terms of NOI 54% will be derived from office properties across Western Canada, 36% from retail and 10% from industrial.

Portfolio vacancies are just 2.6%. If you review our supplemental information package in terms of contribution, you will note that this breaks out as follow:

.37% contribute from industrial

.54% from retail

1.69% from office

Those three figures add up to the 2.6% portfolio vacancy. Our vacancy rates by asset class are

1.4% Industrial

1.8% Retail

1.9% office

Our province basis, our total portfolio vacancy rates are:

1% British Columbia

1.35% Alberta

3.6% Saskatchewan

4.8% Manitoba

Now a note about Calgary, 20% of our total portfolio GLA is office properties in Calgary, which continue to perform very well for us. These properties are well distributed; we like to note the greater Calgary market and continue to experience positive velocity. We continue to experience positive velocity in our leasing activity and occupancy levels.

At December 2007, our Calgary office vacancy was 1.7% and continued to shrink based on recent leasing activity. From our perspective and I am sure all of you watched my interview with Ann Robell on DNN last week and I was able to give some commentary. Last year, we witnessed an abnormally, if you will, of natural gas prices dislocating from oil prices and falling to low levels in the range and on top of that we had the royalty tax redeem take place. But, when we got royalty tax redeem certainty at the end of Q3 and as natural gas price started rising, we did experience significant increase in leasing activity and it continues right now. Its pause of velocity, it is not as high as it was a year and a half ago; but, still positive and continues to improve. We are grateful for that.

As Jim mentioned, we enjoy a healthy and improving balance sheet with low debts to GBV. I would suggest a debt to market value would be closer to the 40% level. Healthy and improving payout ratio 75%; we are targeting, as you can see by analyst report 65% by ;the end of ’08 and of course an excellent mortgage profile, with just 2% of our mortgages coming up for renewal this year and 4% next year little or no refinancing or liquidity issues.

More importantly, I suppose, on a go forward basis, we enjoy strong embedded growth profile. On a per unit basis, Artis REIT portfolio continues to enjoy a significant gap between in place rent and market rent, among the largest of all Canadian REITs.

We feel we have excellent visibility in achieving this projected 2008 annualized per unit growth. You will note, January 31, 2008, we did issue press release indicating about 55% of our ’08 leasing program was already complete and we feel that we have good visibility in successfully completing that internal growth this year. We are already working on some of our ’09 lease renewals.

We are on track to achieving significant and internal organic growth this year, in particular.

As Jim mentioned, we have a set Artis REIT as 75 million credits that still will be available for general purposes and future acquisitions enabling us to capitalize on special opportunities.

At this point, given that some that two to one closings and obligations, 65 million in the line of credit is unused and we have net of 17 million of cash, net of closings and probably three closings to one available. Seventeen million cash on hand; $65 million line of credit available. We feel we have the ability to capitalize in good opportunities as they may arise. Again, needless to say, this year and next in particular, Artis will be focusing on executing its internal growth plan with minimal external growth plan and minimal shareholder dilution.

The market commentary on market conditions, we see affecting Western Canada, economic fundamentals and demographics remain strong in our markets. This is the key to real estate valuation. Oil and gas up, gas being up more significantly. Precious metals commodities, agriculture products, edible grains continue to perform well up in Western Canada continue to out perform virtually all sub markets in North America.

The standing market fluctuations, it is our view this is a long-term structural trend. Government driven interest rates are low and are falling the money supplying interbank liquidity is high and rising. Record highs, some people are saying. In addition, Federal Banks are offering a bail out of unprecedented scale. Two types of bail outs; good Federal Bank assets are being swapped for sub prime assets of commercial banks an indication, as we all know, firms like Barnes Stearns and are and apparently will continue to bailed out of insolvency should it occur.

With respect to government driven interest rates, we are in fact in a falling interest rate environment. Important to note, not withstanding rising spread, mortgage rates today are still at about the same level they were last year and the year before.

Sooner or later, increased liquidity in the financial markets, we feel will filter down to the private sector causing mortgage rates to fall instead of staying level and it is my view that this in turn should lead to new round of CAP rates compress ants. Eventually, as a result of the strong growth and money supply, I am also expecting another round of real inflation and rental increases in real estate.

We are seeing some CAP rate creep last year, in Q2 and Q3 or .07, we did not actually see any in Q4 of ’07 or Q1 or ’08. In the meantime, there is dislocation of market place in the sense that D REIT are cheaper than the real estate and normally capital markets are leading indicators. Normally, that would suggest that real estate has to get cheaper; but, it is my view that that will not happen given the interest rate and the environment we are in combined with the growth and money supply and the election year and so on. In my view that REIT along with financials will be increasing in price in the near future by the second half of the year in contrast to real estate getting cheaper.

On the second half of .07, we also witnessed the extinction of the conduit lender, as sad event for us all because we did a good job of keeping the mortgage lenders and banks honest with their interest rates. This has caused mortgage spreads to increase across North America; but, relatively less in Western Canada. An example, our last mortgage that we did officially close December 20, 2007, for retail property in Grand Prairie was at a spread of 125 points over a five year government of Canada bond. This gave us a mortgage of 5.25%. Today’s spreads are higher; but total mortgage rates are still in that same loan 5% range just as they have for the past two years.

Industrial and retail property markets continue to experience relatively low banking rates from Western Canada especially on the Western side of the border. Office vacancy rates also are low and continue to fall in all our major markets.

In Calgary, the vacancy rates have been low for a while the last three years we have seen rental rates double or triple and vacancy rates to the 2% to 3% level. The recent increase in new construction is causing vacancy rates to level off. The expectation is that vacancy rates will gradually increase from the current 3% level to about 8% in 2011. But, four years from now, depending on when the new Incana Building, the bowl is completed along with a significant project. It is our view, if vacancy rates do, in fact, increase over the next four years, it does not indicate a weakness in the market but simply a temporary excess of amount of inventory.

Again, economic fundamentals and demographics thriving Alberta economy are in our view still very strong and will make it relatively easy for us to manage our way through market fluctuation should they occur.

The capital market is still somewhat weak, we are noticing rates in companies raising capital and that is great to see that the capital is still there; but the market is somewhat weak and cause many REITs to trade at values below their net asset value. This is not a concern to us, this year in particular, as we have no capital needs or liquidity issues. This year in particular, I have mentioned, we will focus primarily if not exclusively on achieving strong internal growth with minimal dilution of our shareholder equity base. In 2009, it will likely be more of the same.

That’s enough for commentary and information from Jim and Kirsty and I. I will now ask our Moderator Donna to open the lines for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first call is from the line of Pam Evier from BMO Capital Markets please proceed.

Pam Evier – BMO Capital Markets

Thanks, and good afternoon, I just wanted to clarify your comments regarding the impact of new supply. You have touched on it a little bit; but the comments from the press release about the slow down in velocity of leasing and the expected moderating affect on rent rate growth. Can you give us a little color there in respect to the rent rates and are you getting some push back in terms of the increase you are trying to put through? Are rents actually sliding but down or is it just taking a bit longer to make decisions?

Armin Martens

It’s hard to be specific, if you remember that Calgary real estate forum last fall, I was on the panel there and I found myself saying on the last three years we have seen the rental rate double and triple in the Calgary office market. We have seen vacancy rates shrink to 2% level. Looking ahead, we are not expecting rates to double and triple in the next three years and we are not expecting vacancies to stay at the 2% level. We are still experiencing positive velocity and incremental demand for space and we are shrinking our vacancy rate, which given the news that is out there. Looking ahead, a lot of reports get written about Calgary office market and dynamic and every building that could get build, does get built and vacancy rates could be ex’d or the variety of buildings don’t get built or might not get built; vacancy rates can be wide.

We have seen a spike in rates, I think in our case we have also done some $40 rates and we are not doing $40 anymore in our downtown property. We are not experiencing a slide in leasing rates yet; nor are we expecting it right now. Now that natural gas has moved up to a more respectable level and the outlook appears to be good. We are still expecting positive velocity in rates to be more on the level side versus negative. Will we increase a little bit over time, we will see. In the long term trend is very good. As I mentioned, we are not expecting the same rate of increase the next three years as we have gotten in the past year.

Pam Evier – BMO Capital Markets

Jim, this is a question for you. In terms of the below market lease amortization run rate, is Q4 is that higher than what we will probably see going forward through 2008, especially with the recently seen activity that you gave us an update on back in January?

Jim Green

Yes, as leases roll over the amortization do start to come down over time. As we roll through our 2008 lease profile and the maturities ended in 2008, it will begin to reduce the amortization that’s being recorded on a quarterly basis.

Pam Evier – BMO Capital Markets

I guess more specifically, it was the Jacobs Engineering lease that was the big one, right?

Jim Green

That’s the big lease that we have in the Heritage Square Building and it matures at the end of June 2008. The tenant has been replaced with a lease commencement date of July 1, 2008. So, you are correct. All the amortization that was sitting on the previous tenant, Jacob’s Engineering, will cease to be recorded at the end of June 2008.

Pam Evier – BMO Capital Markets

Then how much higher was the rent that you have realized…you have been able to get from the new tenant? How much higher was that than what you already have been recording in your below market lease amortization or is that already included in your revenues? Do you have that number?

Jim Green

I think it was recorded at $18 and the new lease, on a straight-line basis, is $24.

Pam Evier – BMO Capital Markets

Then just to your comments regarding the acquisition for ’08 and ’09, it sounds like it is going to be a quiet year, I guess maybe beyond what you have already announced for ’08. Then, ’09 is relatively more cautious, do you have some idea in terms of your total dollar value of what you expect to accomplish in ’08 and ’09 for acquisitions?

Jim Green

I think, we are on a slower train. If we are in a recession, we have to look at official confirmation in April because in a recession, we keep changing the definition. But, if we are in a recession, I think it is appears to be consumer lead and there are some challenges we have ahead of us for both banks and the consumers out to re-plan their balance sheet will be in for a small drama recovery which may be a good thing.

I am not expecting us to be missing many opportunities as a result of my crystal ball. This year we are being very selective and most of my positions have always been off market. We are still doing that; we have some very good off market opportunities on our radar screen now. We are filling the needs now of ’06 and mostly anywhere from 50 to 109 this year. We will see; in the second half, we will have a better idea about ’09.

Pam Evier – BMO Capital Markets

When you say 50 to 100 that’s is beyond what you have already announced closing in Q1?

Jim Green

Yes.

Pam Evier – BMO Capital Markets

So, in total 100 to 150.

Jim Green

That is right.

Pam Evier – BMO Capital Markets

Great, thanks.

Operator

Your next call is from the line of Shant Poladian of Cannaccord Adams please proceed.

Shant Poladian – Cannaccord Adams

Good afternoon everyone, on the acquisitions that you have already announced so far, what are the CAP rates averaging for those and if you could just comment a little bit about what the organic growth opportunities are in those assets.

Armin Martens

The ones for two one?

Shant Poladian – Cannaccord Adams

Yes.

Armin Martens

We have a retail property then in a GBRD with national retail tenants such as Wingers and Mark’s Work Warehouse in there. Eighty two thousand square feet, $18 million worth of purchase price, 6.8% was the CAP rate; the mortgage that we assumed on that loan was 5.25% interest rate. I don’t have the data on embedded growth there; but, there is embedded growth in that one as well in terms of the market to market and the rent.

Through Sobeys in Saskatchewan, the price there was 14.65 million, the CAP rate was 7.8%, there we assumed the mortgage of 6.8%; but, 2.19 of the equity was in Artis units. It should have 15.75 a unit and the mortgage amount was 8.69 there.

The brand new format shopper’s retail mall in Edmonton, Alberta, small town shoppers and liquor store basically two tenths with a pad and in negotiations with a Tim Horton’s for that pad. The price was 5.2 million; CAP rate was 7.2% that will move closer to 8% once we get the pad done, the mortgage interest rate is 5.72%. I hope that gives you some color.

Shant Poladian – Cannaccord Adams

What would be average terms on those mortgages? Will they be five year or ten year?

Armin Martens

I would have been five years and maybe three are left go on that. We will have to get you that information offline.

Shant Poladian – Cannaccord Adams

Given the strength of the FFO per unit, have you looked at the prospects for the distribution increase?

Armin Martens

Absolutely, as you know, our history is such that we start as the micro CAP with the CPC with the payout ratio of over 100%. We have grown that down to 75% still trend the same lines. We are fully committed to being known as the REIT that does increase distribution. We want to be known as REIT that does it on an annual basis. We are looking forward to increasing distributions and when we do, we want to feel in our heart of hearts that it will be one of many consecutive annual increases.

Not in the announcement today; but, as you can see by our payout ratios, our payout ratios are improving, right?

Shant Poladian – Cannaccord Adams

Right, have you given any further thought to the internalization?

Armin Martens

Jim would best comment on that.

Jim Green

Yes, it would be when we review that at the end of Q3 in ’07, the decision taken by the committee at that point in time was to continue to monitor it every six months. They did not feel it was accretive at the present time to internalize however, we are close to that and the committee is monitoring it on a semi-annual basis. Is it going to happen in ’08, I can’t commit to that, yet. I can tell you it is being closely watched.

Shant Poladian – Cannaccord Adams

Two more questions, the expenses being incurred for the SISF legislation, should we expect to see some more in Q1 than Q2?

Jim Green

If they publish another one of these backgrounders.

Shant Poladian – Cannaccord Adams

For now, not.

What would be the interest rate on the maturing debt in ’08 and ’09? Just what the weighted average would be.

Kirsty Stevens

Shant, it would be just above 6% on the ’08 expiree and around 5.4% on the ’09 expiree.

Shant Poladian – Cannaccord Adams

Okay, thanks very much.

Operator

Your next call is from the line of Mario Saric from Scotia Capital please proceed.

Mario Saric – Scotia Capital

Good morning, Armin, you mentioned that there is potentially a slowing acquisition profile going forward; but, you do have two development projects underway at this point. I was wondering if you could provide an update on interplex two and three, if there is any since last quarter.

Armin Martens

We might even have three. In Red Deer, the Millennium Centre we have commenced construction on the 40,000 square foot addition and we will have that complete by the fall. We have very good leasing prospects there. It is not leased yet; but we expect that to be leased by the end of the year.

Interplex two then as you recall is a forward purchase. We have no development or leased up risk that we will be paying. There is some actual NOI on the date of closing and if there is any vacant space, the cost of that vacant space can be deducted from the NOI calculation. We are expecting that construction progressing well at the Upper Drive on Barlow Trail toward down time we will see it. There is still at or about 70% leased there. They are not ready to trigger the closing; they can delay closing by up to a year. It is my guesstimate right now, it will close sometime in the first half of ’09. It will be about $85 million transaction based on the NOI and the CAP reformate.

Interplex three, we have a 50% interest in the land and that will be a straight eyeball to eyeball joint venture. We will benefit from all upside there plus we are sharing the development risks as well, that is the way it works. Performa CAP rate indicates a non-levered GL over 8% but we are in the pre-leasing business right now. It is a 220,000 square foot building. We will need a good chunk of that pre leased before we commence and we get the leasing reports every month from our friends at Office. We do not have enough leasing activity yet to give you visibility on when we will commence on that project.

Mario Saric – Scotia Capital

Has Goldar decided to take on additional space at this point?

Armin Martens

That is the rumor we hear that they will be needing more space. We are yet to be advised if they have taken more. That is what we are hearing will happen.

Mario Saric – Scotia Capital

Based on your experience in Alberta, what would you say in your opinion is, as far as office vacancy rates in Calgary, what would you say the vacancy rate that swings the pendulum from a strong landlord’s market to a tenant’s market?

Armin Martens

It is a very large and dynamic market and also the downtown environment is changed in the sense that parking gets tighter every time a building gets built, it will cost you as much now to park a Mercedes as it does to lease it downtown plus its accessibility. We are seeing tenants like Golder and now Van Canda leave downtown to go to suburbs. It will depend and the suburbs the big advantage is lower rates and significant amount of parking closer to LRP stations and takes getting on an LRP to go downtown. It will be a bit different, what vacancy rates the leasing group tell me anywhere from 4 to 5% is still a healthy vacancy rate and you get past 6%, it might become more of a tenants market; but, it will depend and then where that 6% rate is, is in the northeast, northwest, southeast or is it downtown or outlying. Outlying also enjoys better parking ratio. We’ve got a ratio of one stall for 3,000 downtown and one for 1500 in the beltline and you get anywhere from two to four stalls per 4,000 in the suburbs depending on the nature of the building.

Mario Saric – Scotia Capital

This trend of tenants slowly migrating out into the suburbs, is it visible enough at this stage to provide you comfort at least over the next couple of years that the suburban markets from Calgary will perform at least as well as the downtown market?

Armin Martens

In my view that they will, yes.

Mario Saric – Scotia Capital

Great, thank you.

Operator

Your next call is from the line of Jimmy Shan from National Bank Financial please proceed.

Jimmy Shan – National Bank Financial

What are you budgeting for TIs and leasing costs for ’08 and ’09 as well?

Armin Martens

Maybe I do your model for you.

Jim Green

We are still seeing the Alberta market in particular requires very little to begin and I have no way of turning improvements. We still do the majority of our leases through the brokerage community and we do pay commissions on it. We are not spending much on tenant improvements.

You will have noted, looking at ’07 that our total tenant improvement costs in ’07 were somewhat comparable to ’06; but, the increase in the portfolio, I think on a square foot basis based on the rules, it was about $250 per square foot in 02-04-07. I think on an average basis that would be somewhat comparable to that in ’08.

Jimmy Shan – National Bank Financial

That would include the Heritage Square space at 250, would that be an indicator of ’08 as well or would ’08 be a bit of a blip?

Jim Green

I would say ’08 would be a bit of a blip. I think we have two types of leasing and you may be aware, Jimmy, one is the lease renewals and here we do historically enjoyed a strong retention ratio and we hardly repainting the walls for the tenants on renewal. Then there is new incremental leasing. The Heritage Square building when we bought it, we knew we were up for a challenge; we knew that Jacobs was leaving and then we had to re-lease that space. New incremental leasing, we have to give out some GIs and some incentive but you will also recall in the case of Heritage Square, with the common areas space, we were able to take advantage of the new VOLMA rules and added 16,000 square feet of GLA to that lease without changing the size of the building. We have that extra bonus of that lease and we get that same bonus on the other leases as they come up.

Incremental leasing is still different. If you go to the OPUS project in Complex two, they will give you a tenant improvement allowance of $25 per square foot there as well. Then they will want their $25 net rent.

Jimmy Shan – National Bank Financial

Suffice to say 250 were not for the Heritage space it would have been a good number to use for ’08?

Jim Green

Excluding Heritage space, yes I would say so.

Jimmy Shan – National Bank Financial

Armin, I think you mentioned that you are already working on the ’09 leases; can you tell us more in terms of progress made and what are you seeing?

Armin Martens

No progress made but we have had discussions with contacting; we know what our lease profile looks like. We know who our significant renewals for ’09 and we are just letting them know that they are want it through discussions earlier, we are willing to. You can’t push them but none of them are indicating that they are looking to move. That has been good news in that part. It is not unusual for these things to come to focus only within six months of lease expiring.

Jimmy Shan – National Bank Financial

Is there a big lease that is coming due, or is it a bunch of small deals?

Armin Martens

Variety of small deals; I think there are three relatively larger ones in the 60,000 square foot range; there are two or three. Those always catch our attention.

Jimmy Shan – National Bank Financial

Finally, you said that there $17 million of cash after the acquisition in Q1, is that cash being earmarked for something. You have drawn on the credit facility and I was wondering why aren’t you drawing on the cash?

Armin Martens

Some of it is being earmarked to finish the two-story addition to the Millennium Centre in Red Deer, Alberta and then we have some landlord’s work to finish in the Grain Exchange. Remember that press release, we start our last vacant floor in the Grain Exchange, we have some landlord’s work there. We are keeping our powder dry, we do have some other opportunities on our radar screen, some (inaudible) opportunities and we need some of that money for that.

Jimmy Shan – National Bank Financial

Between the Grain Exchange and the Millennium that total was approximately how much?

Armin Martens

Ten plus two.

Jimmy Shan – National Bank Financial

Perfect, thanks guys.

Operator

Your next call is from the line of Alex Avery from CIBC World Mart please proceed.

Alex Avery – CIBC World Market

I just wanted to talk a bit of retail. You have been talking a lot about Calvary and Alberta office markets, it seems like the retail market in Alberta is also very strong. Can you tell us about what you are seeing in term of new supply and tenant demands for available space?

Armin Martens

The good thing about retail normally is that it is driven by demographic demand and as new neighborhoods and new subdivisions get opened up, we are seeing new retail developments take place. Where we are, our regional properties ranging from Winnipeg, Calgary, Edmonton, Vancouver, we are located in large retail nodes not just single intersection driven. Generally power centre, big box retail, our four-anchor retail, strip retail. We don’t see any cannibalization taking place. We see expansion of retail and growing markets further away from our geographic nodes.

Right now we feel very comfortable with our retail portfolio, very low vacancy rate. A high tenant retention when we are able to continue to increase our rent with these tenants.

Alex Avery – CIBC World Market

Your overall, for instance in your Alberta portfolio, you indicated that market rents are about 50% higher than your in place rents for all years of expiree. Do you see anything on the horizon, new supply or otherwise that might lead to some moderating of that rental rate or do you think you will be in a good position after that good lease expirees in ’09, ’10 and ’11?

Armin Martens

We feel very comfortable with retail portfolio and able to achieve those rental increases. It is very purpose driven the retail tenants and in that sense you have tenants that are doing well and you will get the highest retention ratio compared to industrial tenants who can sometimes move almost anywhere and often tenants have sects built in to move. The retail tenants are there for a reason and they are staying if they are doing well. We feel very comfortable with all of that and as I mentioned, I know of new mega malls being planned but new geographic areas with driven by increased demographics demand. There is so much disposable income in Alberta but for the highest per capita in Canada. They don’t have the sales tax. With being a debt free province ongoing upward pressure on the G.

Alex Avery – CIBC World Market

Complex two again, you said the leasing was about 70% right now and that the total purchase price might be in the $85 million range; but you also mentioned the possibility of having a delayed closing?

Armin Martens

Yes, they can trigger a closing when they are substantially complete and the tenant is paying rent. But, there is also the option of delaying it by another 12 months based on lease up and I would expect them to delay it until they are substantially leased up. They will get more money out of us then.

Alex Avery – CIBC World Market

There should be an abundance of tenants.

Armin Martens

I am expecting they will fill that and looking ahead my guesstimate, I expect Gold to take more of that space yet. They will top it off.

Alex Avery – CIBC World Market

It may still be June 30; it may be sometime in the summer; but, we should expect it in the next couple of quarters?

Armin Martens

It will be the first half of ’09. The construction complete will just be 02-03 of this year slash two four and if they are fully leased they could close as early as 02-04 this year, if they are fully leased. We are keeping our finger on the pulse of that. We are even having some preliminary discussion with perspective mortgage lenders in advance and we are monitoring that situation quite closely.

Alex Avery – CIBC World Market

Great, thank you.

Operator

(Operator Instructions)

Your next call is from the line of Guy Bieber from Bieber Securities please proceed.

Guy Bieber – Bieber Securities

Just two questions for you Armin. Number one with respect with REIT’s trading less and their net asset value, have you and will you continue to use the issuer bid and the second question is, I think Jim mentioned that there is a 15% participation in the DRIP Program, what percentage would be your maximum participation you would want to see in that program before you would halt it, if at all?

Armin Martens

I don’t know what the maximum would be. We’ve seen some Income Trust’s actually suspend the DRIP because it was out there trading too low. I don’t think it would be fair to do that to loyal investor’s participating in the DRIP. We haven’t thought about a maximum and the first question again.

Guy Bieber – Bieber Securities

It was on the issue or bid.

Armin Martens

Every 30 days we are required to file and we do file our NCIB participation. You still just participating in these levels; but we are not press releasing anything more than that.

Guy Bieber – Bieber Securities

Okay, how much have you bought back then so far?

Armin Martens

We have bought about 45,000 units back so far.

Guy Bieber – Bieber Securities

What is the trigger point as far as being enthusiastic on the buy side. At the beginning of the call, you mentioned that the REIT were trading much less than were the CAP rates are in terms of what you can buy new properties. Is it in the $15 range; is it the $14 range or is it ad hoc? How do you decide when you want to trigger some buying?

Armin Martens

Somewhat ad hoc, we are watching the market and see where it goes. We still think the units are a good value and we will continue to buy some back. That being said, given the value, the interest rate that we can arrange on leveraging, it’s still a better use of the substantial portion of our cash to buy real estate as is to buy units.

Guy Bieber – Bieber Securities

Okay, thank you.

Operator

Your next call is from the line of Jeff Roberts from Desjardins Securities please proceed.

Jeff Roberts - Desjardins Securities

Good afternoon gentlemen, could you please comment on the Winnipeg Office Market. I know that wasn’t discussed yet. What the prospects are for leasing in your portfolio?

Armin Martens

Winnipeg has been stable and steady for years; but there has in the office market and the Class A’s market a 10% vacancy for years.

Recently, we saw the new development the large Manta Hydro head office building take place down town and that caused some trailing space that needed to be filled and we saw UGG get bought up and moved and they vacated about 70,000 square feet. The good news is the trailing space for the Manta Hydro Space as well as UGG has now been excelled up and gone. In addition to that the trend is looking very good right now and as we mention in the press release, we have leased up to last vacant floor in the Grain Exchange building. The Grain Exchange what we call the BSG Building a location with an underground connection to the main concourse and to the Fairmont hotel and all the other buildings and we have a good run from there.

We also are 38% owners of Winnipeg Square, Class A building. We’ve seen the vacancy rate shrink here also and incremental leasing take place to under about 5% vacancy rate in this building.

Our outlook is that very bullish toward the Class A downtown office market. There really isn’t that much of it and you want to be connected and you want to be (inaudible). I am expecting real rental increases. We could see at least a good $5 per square foot in rental rates over the next year or two in Winnipeg.

Jeff Roberts - Desjardins Securities

Who are the tenants mostly, mostly government that is expanding?

Armin Martens

In both cases, private sector. That is also a good question; but, that is good news. Private sector expansion in terms of the two trailing spaces that I just mentioned.

Jeff Roberts - Desjardins Securities

What sort of TIs are landlord’s giving in Winnipeg?

Jim Green

It is generally going to be somewhere in the $15 rent; it depends a bit on the condition of the space and whether it is somewhat moving into space that is virtually ready to move in versus space that has to be demolished.

Jeff Roberts - Desjardins Securities

Okay, thank you very much.

Operator

Your next call is from the line of Shant Polavian from Canaccord Adams please proceed.

Shant Polavian – Canaccord Adams

Could you comment on the availability and willingness of lenders to transact and when you do look at putting a new mortgage on a property, roughly how many lenders are coming to the table?

Armin Martens

As I mentioned, extinction of the species called the condor lender, there is less. They are all still out there and there was a time when annualized said we are not in the business but they currently back in the business but spreads are very spotty. You are looking at insurance companies are still there and banks are still there. It is just that they know that their biggest competitor put lender pressure on spreads are gone. I suggest to you that the spreads are going to be closer to the 200 point range today versus they might have been 150 points in two four. The compensating factor was that government driver interest rates are down and the total mortgage rates are still about the same as they have been for a couple of years now. We might only have two lenders that are running instead of four on a given deal. What I say, in the running that give us a spread that we can live with and there will be four to six that we contact.

Shant Polavian – Canaccord Adams

As far as appetite for floating rate debt lines, et cetera, are you seeing better demand there than for longer term fixed rate, or the same, or less?

Armin Martens

Right now, we have all of our debt on fixed rate basis and no real plans to moving into the floating type of debt at the moment.

Shant Polavian – Canaccord Adams

Okay, thanks.

Operator

There are no further questions at this time, Mr. Martens.

Armin Martens

Thank you very much and again we want to thank all of our participants and listeners and shareholders for their support. We look forward to talking to everyone again at our next conference call. Good day.

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