SURREY Financial Forum

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SURREYFinancial Forum

• June 2009

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Blackwood Partners Inc.

• Blackwood Partners Inc. is a real estate
  investment advisory, asset management and
  transactions management services firm advising
  pension funds, open- and closed-ended German
  funds, private investors and both public and
  private sector corporations.
• Blackwood transacts throughout North America to
  help its domestic and international clients
  achieve their commercial real estate objectives.
• Blackwoods extensive experience in acting for
  both owners and users of real estate allows
  Blackwood to offer a unique perspective to its
  clients.
• Blackwood has acquired in excess of 1.5 billion
  of properties, and currently manages in excess of
  1 billion
• Blackwood manages the Central City mixed-use
  complex in Surrey on behalf of a consortium
  Canadian pension funds

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Pension Perspective of Current Economic Climate

• Past few years have witnessed an unwarranted
  compression of yields across a range of quality
  and risk levels
• Recent economic upsets have caused a widening of
  that yield spread to better reflect quality and
  underlying risk (now a 6 to 12 cap rate range
  compared to 5.5 to 8 cap rate range a year
  ago).
• Many pension investors are overweight in real
  estate investment due to denominator effect
  recent stock market recoveries have somewhat
  mitigated this.
• After a protracted sellers market many funds see
  this as finally a buyers market.

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Buying Strategy The Two Extremes

• Flight to quality (Bentall V and Grosvenor
  Building trades earlier this year) we are
  looking for national covenant tenancies.
• Renewed interest in conservative underwriting
  practices.
• Desired product is now one of two categories (1)
  best tenants in high quality buildings in best
  locations, and, (2) opportunistic bargains at
  below replacement cost pricing.
• Luke warm interest in any product between the
  extremes

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Lending Strategy

• Blackwoods fund clients have the ability to
  provide interim and construction financing in
  conjunction with forward purchase and take out
  arrangements (and not generally on a stand-alone
  basis).
• For builder / developers looking for financing,
  our tied financing provides a one-stop solution
  (for example Ontario forward buys of retail
  centres to be constructed).

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Borrowing Strategy

• Past six to eight months have had little in the
  way acquisition activity and little mortgage
  financing available.
• Recent weeks have seen a modest return of
  mortgage lender interest rates (in terms of
  spread over the bond rate) and fees are higher
  than last year, but overall all-in rates are
  still at acceptable levels given the historically
  low bond rates.
• Where we are borrowing, we are looking to lock in
  these current rates before expected increases.
• Special features, such as interest only,
  non-recourse or limited recourse, etc., are much
  more difficult to obtain in the current
  environment