EX-99.(A)1 3 o12233a3exv99wxay1.htm NOTICE OF SPECIAL MEETING Notice of Special Meeting
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NOTICE OF SPECIAL MEETING

OF SHAREHOLDERS AND OPTIONHOLDERS OF

BOARDWALK EQUITIES INC.

to be held on        l       , 2004

- and -

NOTICE OF PETITION

- and -

MANAGEMENT INFORMATION CIRCULAR

with respect to a proposed acquisition and

plan of arrangement involving

BOARDWALK EQUITIES INC.

- and its -

SECURITYHOLDERS

and the transfer of assets to

BOARDWALK REAL ESTATE INVESTMENT TRUST

       l       , 2004

The Board of Directors, on the recommendation of the Special Committee,

has concluded that the proposed Acquisition and
Arrangement are in the best interests of
Boardwalk Equities Inc. and fair to its public shareholders and
optionholders and recommends that public shareholders and
optionholders vote in favour of the Acquisition and Arrangement.

Neither the United States Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Management Information Circular. Any representation to the contrary is a criminal offense.

 


LETTER TO SECURITYHOLDERS
NOTICE OF MEETING
NOTICE OF PETITION
INFORMATION FOR ALL SECURITYHOLDERS
FORWARD LOOKING STATEMENTS
DISTRIBUTABLE INCOME
SUMMARY TERM SHEET
INFORMATION FOR UNITED STATES SHAREHOLDERS
QUESTIONS AND ANSWERS ABOUT THE ACQUISITION AND THE ARRANGEMENT
SUMMARY
SPECIAL FACTORS
GLOSSARY OF TERMS AND EXPRESSIONS
THE MEETING
DESCRIPTION OF THE ACQUISITION AND THE ARRANGEMENT
PROCEDURE FOR SURRENDER OF COMMON SHARES
INFORMATION CONCERNING BOARDWALK REIT
MANAGEMENT OF BOARDWALK REIT
INVESTMENT GUIDELINES AND OPERATING POLICIES OF BOARDWALK REIT
DECLARATION OF TRUST AND DESCRIPTION OF REIT UNITS
DISTRIBUTION POLICY
INFORMATION CONCERNING OPERATING TRUST
INFORMATION CONCERNING THE PARTNERSHIP
INFORMATION CONCERNING NEWCO
INFORMATION CONCERNING THE CORPORATION
MATERIAL CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
RISK FACTORS
RIGHTS OF DISSENT
INTEREST OF CERTAIN PERSONS IN THE ACQUISITION AND INTENTIONS OF SUCH PERSONS
EXPENSES OF THE ACQUISITION AND THE ARRANGEMENT
LEGAL MATTERS
ELIGIBILITY FOR INVESTMENT
OTHER MEETING BUSINESS
APPROVAL OF DIRECTORS
APPENDIX A — ACQUISITION AND ARRANGEMENT RESOLUTION
APPENDIX B — ACQUISITION AND ARRANGEMENT AGREEMENT
APPENDIX C — INTERIM ORDER
APPENDIX D — FINANCIAL STATEMENTS
APPENDIX E — FAIRNESS OPINION
APPENDIX F — SECTION 191 OF THE BUSINESS CORPORATIONS ACT (ALBERTA)
APPENDIX G — RIGHTS PLAN RESOLUTION
APPENDIX H — SUPPLEMENTAL INFORMATION CONCERNING THE CORPORATION,
APPENDIX H SUPPLEMENTAL INFORMATION CONCERNING THE CORPORATION, BPCL AND THEIR RESPECTIVE DIRECTORS AND EXECUTIVE OFFICERS
Notice of Special Meeting


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       l       , 2004

Dear Boardwalk Equities Inc. Securityholder:

      The Board of Directors cordially invites you to attend the special meeting (the “Meeting”) of holders of common shares (“Shareholders”) and holders of options to acquire common shares (“Optionholders” and together with the Shareholders, the “Securityholders”) of Boardwalk Equities Inc. (the “Corporation”) to be held at 10:00 a.m. (Calgary time) on        l       , 2004 at the Calgary Petroleum Club, 319 — 5th Avenue S.W., Calgary, Alberta. At the Meeting, Securityholders will be asked to approve the proposed acquisition (the “Acquisition”) of the Corporation by means of a statutory plan of arrangement, the transfer of all of the Corporation’s assets to a new real estate investment trust and related matters (the “Arrangement”).

      The Acquisition and the Arrangement broadly contemplate the transfer of all of the assets and undertakings of the Corporation to a new real estate investment trust named “Boardwalk Real Estate Investment Trust” (“Boardwalk REIT”) and the exchange by public Shareholders of their common shares for units (“Units”) of Boardwalk REIT on a one-for-one basis.

      For the Acquisition and the Arrangement to proceed, the special resolution (the “Acquisition and Arrangement Resolution”) relating to the Acquisition and the Arrangement must be approved by at least 66 2/3% of the votes cast at the Meeting by Shareholders and Optionholders, voting together as a single class. In addition, the Acquisition and Arrangement Resolution must be approved by a simple majority of the votes cast at the Meeting by “minority shareholders”, as determined in accordance with applicable law. The Acquisition and the Arrangement are also subject to certain other conditions, including the receipt of all necessary regulatory approvals and court approval. The completion of the Acquisition and the Arrangement will occur as soon as practicable following the satisfaction of all of the required conditions to completion of the Acquisition and the Arrangement, including regulatory and court approvals.

      As announced on November 6, 2003, the Board of Directors of the Corporation appointed a special committee of independent directors (the “Special Committee”) to consider the Acquisition and the Arrangement. The Special Committee carefully considered the Acquisition and the Arrangement and received an opinion from RBC Capital Markets, its financial advisor, that the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Corporation’s public Shareholders.

      The Board of Directors, on the recommendation of the Special Committee, and based upon its own investigations, concluded that the Acquisition and the Arrangement are in the best interests of the Corporation and fair to the public Shareholders, unaffiliated Shareholders and Optionholders and recommends that public Shareholders and Optionholders vote in favour of the Acquisition and Arrangement Resolution.

      Included with this letter are a Notice of Special Meeting, the Management Information Circular (the “Circular”), a Form of Proxy for Shareholders (blue form), a Form of Proxy for Optionholders (yellow form) and a Letter of Transmittal (green form) relating to the Meeting. The Circular is lengthy because of the complexity of the structure of the Acquisition and the Arrangement and the need to comply with certain legal requirements. A summary of certain information in the Circular concerning the Acquisition and the Arrangement begins on page 18 of the Circular. We urge you to consider carefully all the information in the Circular. If you require assistance, please consult your financial, legal or other professional advisors.

      It is important that your securities be represented at the Meeting. Whether or not you are able to attend the Meeting in person, if you are a registered Shareholder or an Optionholder, please complete, sign and date the enclosed Form of Proxy for common shares or options, as applicable, and return it in the envelope provided as soon as possible. If you are not a registered Shareholder and you hold common shares through an investment dealer, bank, trust company or other intermediary, you should read their instructions to you regarding how to provide voting instructions with respect to your shares. You may also wish to contact that intermediary for information about how to vote your shares.

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      On behalf of the Corporation, I would like to thank all Securityholders for their ongoing support as we undertake this important event for the Corporation. We are committed to a successful transaction and believe that it will better position us to meet the evolving needs of our business, Securityholders and customers.

  Yours very truly,
 
  Sam Kolias
  President and Chief Executive Officer

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BOARDWALK EQUITIES INC.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND OPTIONHOLDERS

TO BE HELD ON          l         , 2004

       NOTICE IS HEREBY GIVEN that a special meeting (the “Meeting”) of the shareholders and optionholders of Boardwalk Equities Inc. (the “Corporation”) will be held at 10:00 a.m. (Calgary time) on        l       , 2004 at the Calgary Petroleum Club, 319 — 5th Avenue S.W., Calgary, Alberta for the following purposes:

        1. to consider and, if thought fit, to pass, with or without variation, a special resolution (the “Acquisition and Arrangement Resolution”) in the form attached as Appendix A to the management information circular of the Corporation dated        l       , 2004 (the “Circular”), authorizing and approving:

        (a) the transfer of all of the Corporation’s assets and undertakings to Top Hat Real Estate Limited Partnership, an indirect subsidiary of Boardwalk Real Estate Investment Trust (“Boardwalk REIT”); and
 
        (b) a plan of arrangement under Section 193 of the Business Corporations Act (Alberta),
 
        all as more particularly described in the accompanying Circular;

        2. if the Acquisition and Arrangement Resolution is passed, to consider and, if thought fit, to pass, with or without variation, an ordinary resolution authorizing and approving the adoption of a unitholder rights plan for Boardwalk REIT in the form attached as Appendix G to the Circular; and
 
        3. to transact such other business as may properly be brought before the Meeting or any adjournment(s) or postponement(s) thereof.

      The specific details of the matters proposed to be put before the Meeting are set forth in the accompanying Circular.

      Each person who is a shareholder or optionholder of the Corporation of record at the close of business on        l       , 2004 will be entitled to notice of, and to attend and vote at the Meeting, provided that, to the extent a shareholder transfers the ownership of any common shares of the Corporation subsequent to that date and the transferee of those common shares establishes ownership of such common shares and demands, not later than 10 days before the Meeting, that the transferee’s name be included in the list of shareholders entitled to vote at the Meeting, such transferee will be entitled to vote such shares at the Meeting.

      Securityholders of the Corporation who are unable to attend the Meeting in person are requested to date and sign the enclosed Form of Proxy for Shareholders (blue form) or Form of Proxy for Optionholders (yellow form), as applicable, and to mail it to or deposit it at Computershare Trust Company of Canada at 100 University Avenue, 9th Floor, Toronto, Ontario M5J 2Y1 Attention: Proxy Department. In order to be valid and acted upon at the Meeting, instruments of proxy must be returned to the aforesaid address not less than forty-eight (48) hours, excluding Saturdays, Sundays and holidays, preceding the time appointed for the Meeting or any adjournment(s) or postponement(s) thereof.

      DATED at Calgary, Alberta this  l  day of        l       , 2004.

  BY ORDER OF THE BOARD OF DIRECTORS
  OF BOARDWALK EQUITIES INC.
 
  Stuart M. Olley
  Corporate Secretary

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IN THE COURT OF QUEEN’S BENCH OF ALBERTA
  JUDICIAL DISTRICT OF CALGARY  
 
  IN THE MATTER OF SECTION 193 OF THE BUSINESS CORPORATIONS ACT, R.S.A. 2000, c. B.9, AS AMENDED  
 
  AND IN THE MATTER OF A PROPOSED PLAN OF ARRANGEMENT INVOLVING BOARDWALK EQUITIES INC., ITS SECURITYHOLDERS, BOARDWALK PROPERTIES COMPANY LIMITED, TOP HAT REAL ESTATE LIMITED PARTNERSHIP, TOP HAT OPERATING TRUST AND BOARDWALK REAL ESTATE INVESTMENT TRUST  

NOTICE OF PETITION

      NOTICE IS HEREBY GIVEN that a petition (the “Petition”) has been filed with the Court of Queen’s Bench of Alberta, Judicial District of Calgary (the “Court”) on behalf of Boardwalk Equities Inc. (the “Corporation”) with respect to a proposed plan of arrangement (the “Plan of Arrangement”) under section 193 of the Business Corporations Act, R.S.A. 2000, c. B-9, as amended (the “ABCA”), involving the Corporation, Boardwalk Properties Company Limited, Top Hat Real Estate Limited Partnership, Top Hat Operating Trust, Boardwalk Real Estate Investment Trust and the holders of common shares (“Common Shares”) and options (“Options”) of the Corporation (collectively, the “Securityholders”), which Plan of Arrangement is described in greater detail in the Management Information Circular of BEI dated        l       , 2004, accompanying this Notice of Petition. At the hearing of the Petition, the Corporation intends to seek:

        (a) a declaration that the terms and conditions of the Plan of Arrangement are fair to Securityholders;
 
        (b) an order approving the Plan of Arrangement pursuant to the provisions of section 193 of the ABCA;
 
        (c) a declaration that the Plan of Arrangement will, upon the filing of the Articles of Arrangement pursuant to the provisions of section 193 of the ABCA, become effective in accordance with its terms and will be binding on and after the Effective Date as defined in the Plan of Arrangement; and
 
        (d) such other and further orders, declarations and directions as the Court may deem just.

      The Court has been advised that its order approving the Plan of Arrangement, if granted, will constitute the basis for an exemption from the registration requirements of the Securities Act of 1933, as amended, of the United States of America with respect to the securities to be issued pursuant to the Plan of Arrangement.

      AND NOTICE IS FURTHER GIVEN that the said Petition was directed to be heard before the Honourable Justice        l       at the Court of Queen’s Bench of Alberta, 611 — 4th Street S.W., Calgary, Alberta, on the  l  day of        l       , 2004 at  l .m. (Calgary time), or as soon thereafter as counsel may be heard. Any Securityholders or any other interested party desiring to support or oppose the Petition, may appear at the time of hearing in person or by counsel for that purpose. Any Securityholder or any other interested party desiring to appear at the hearing is required to file with the Court of Queen’s Bench of Alberta, Judicial District of Calgary, and serve upon the Corporation on or before noon (Calgary time) on        l       , 2004, a notice of intention to appear, including an address for service in the Province of Alberta together with any evidence or materials which are to be presented to the Court. Service on the Corporation is to be effected by delivery to the solicitors for the Corporation at the address below. If any Securityholder or any other interested party does not attend, either in person or by counsel, at that time, the Court may approve the Plan of Arrangement as presented, or may approve it subject to such terms and conditions as the Court shall deem fit, without any further notice.

      AND NOTICE IS FURTHER GIVEN that no further notice of the Petition will be given by the Corporation and that in the event the hearing of the Petition is adjourned only those persons who have appeared before the Court for the application at the hearing shall be served with notice of the adjourned date.

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      AND NOTICE IS FURTHER GIVEN that the Court, by Order dated        l       , 2004, has given directions as to the calling of a meeting of Securityholders for the purpose of such holders voting upon resolutions to approve the Plan of Arrangement and has directed that for registered holders of Common Shares and Options the right to dissent with respect to the Plan of Arrangement under the provisions of section 191 of the ABCA, as amended by such Order, shall be applicable.

      AND NOTICE IS FURTHER GIVEN that a copy of the said Petition and other documents in the proceedings will be furnished to any Securityholder or other interested party requesting the same by the under mentioned solicitors for the Corporation upon written request delivered to such solicitors as follows:

  Stikeman Elliott LLP
  4300, 888 — 3rd Street S.W.
  Calgary, Alberta T2P 5C5
 
  Attention: Luigi A. Cusano

      DATED at the City of Calgary, in the Province of Alberta, this  l  day of        l       , 2004.

  BY ORDER OF THE BOARD OF DIRECTORS OF
  BOARDWALK EQUITIES INC.
 
  Stuart M. Olley
  Corporate Secretary

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INFORMATION FOR ALL SECURITYHOLDERS

      This Circular does not constitute an offer to sell, or a solicitation of an offer to purchase, any securities, or the solicitation of a proxy, by any person in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such an offer or solicitation of an offer or solicitation of a proxy. Neither the delivery of this Circular nor any distribution of the securities referred to in this Circular will, under any circumstances, create an implication that there has been no change in the information set forth herein since the date as of which such information is given in this Circular.

      No person has been authorized to give any information or make any representation in connection with the matters proposed to be considered at the Meeting other than those contained in or incorporated by reference into this Circular and, if given or made, any such information or representation must not be relied upon as having been authorized.

      Boardwalk REIT will not be a trust company and will not be registered under applicable legislation governing trust companies as it will neither carry on nor intend to carry on the business of a trust company. The REIT Units will not be “deposits” within the meaning of the Canada Deposit Insurance Corporations Act (Canada) and will not be insured under the provisions of that Act or any other legislation.

      Unless otherwise noted, the information provided in this Circular is given as of December 31, 2003.

FORWARD LOOKING STATEMENTS

      This Circular contains, or incorporates by reference documents that contain, forward looking statements. These statements relate, but are not limited to, the Corporation’s expectations, intentions, plans and beliefs. In some cases, you can identify forward-looking statements by the use of words such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue” or the negative of these terms or other comparable terminology, and by discussions of strategies that involve risks and uncertainties. You should be aware that these statements are subject to known and unknown risks, uncertainties and other factors, including the risks discussed under the heading “Risk Factors” in this Circular. Actual events or results may differ materially from those suggested by any forward-looking statements. You should not place undue reliance on any forward-looking statements contained, or incorporated by reference, in this Circular.

      By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Although management of the Corporation believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that future results, levels of activity, performance or achievements will occur as anticipated. None of the Corporation, Boardwalk REIT nor any other Person assumes responsibility for the accuracy and completeness of any forward-looking statements, and no one has any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or such other factors which affect this information, except as required by law.

DISTRIBUTABLE INCOME

      Distributable Income is not a measure recognized under GAAP and does not have a standardized meaning prescribed by GAAP. Distributable Income is presented in this Circular as management believes this non-GAAP measure is a relevant measure of the ability of Boardwalk REIT to earn and distribute cash returns to Unitholders. Distributable Income as computed by Boardwalk REIT may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to distributable income as reported by such organizations. Distributable Income is calculated by reference to net income of Boardwalk REIT on a consolidated basis, as determined in accordance with GAAP, subject to certain adjustments as set out in the Declaration of Trust.

      For a more complete definition and description of Distributable Income see the definition thereof in the “Glossary of Terms and Expressions” and the section entitled “Distribution Policy” herein.

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SUMMARY TERM SHEET

      In accordance with the rules of the SEC, the following is a brief outline of the most material terms of the Acquisition and the Arrangement.

      The purpose of the Acquisition and the Arrangement is for BPCL to acquire the Corporation and for the assets of the Corporation to be transferred to a real estate investment trust. Upon completion of the Acquisition and the Arrangement:

  •  BPCL will acquire the Common Shares, and the Corporation will continue as an indirect, wholly-owned subsidiary of BPCL.
 
  •  All of the assets and undertakings of the Corporation will be transferred to the Partnership, and the Corporation will effectively receive the LP Class B Units and LP Class C Units as partial consideration therefor.
 
  •  Public Shareholders will receive REIT Units in exchange for their Common Shares.
 
  •  Boardwalk REIT will indirectly hold, through its indirect interest in the LP Class A Units, an approximately 92% interest in the Partnership (after the preferred partnership distribution and other entitlements of the LP Class C Units). The Partnership will own, directly or indirectly, all of the Contributed Assets previously comprising the business of the Corporation.
 
  •  The remaining approximately 8% interest in the Partnership (after the preferred partnership distribution and other entitlements of the LP Class C Units indirectly held by BPCL) will be indirectly held by BPCL through its indirect interest in the LP Class B Units (the economic and voting equivalent of REIT Units).
 
  •  BPCL will also own REIT Units to the extent that it has not sold all of the Common Shares which it intends to sell in the Secondary Offering (BPCL intends to sell, pursuant to the Secondary Offering, not less than 20% of the outstanding Common Shares of the Corporation, but may not sell due to market conditions or other reasons).
 
  •  The Common Shares will be delisted from the TSX. (The TSX has granted conditional approval for listing the REIT Units.) The Common Shares were delisted from the NYSE effective February 23, 2004.

      The Acquisition and the Arrangement are subject to approval by the Court and certain regulators and, to become effective, must be approved by at least 66 2/3% of the votes cast at the Meeting by Shareholders and Optionholders, voting together as a single class. In addition, the Acquisition and Arrangement Resolution must be approved by a simple majority of the votes cast at the Meeting by Minority Shareholders.

      More detailed information about the Acquisition and the Arrangement can be found under the following captions “Special Factors”, “Summary”, “Description of the Acquisition and the Arrangement” and “Information Concerning the Partnership — Distributions”.

INFORMATION FOR UNITED STATES SHAREHOLDERS

      The REIT Units and other securities to be issued to Shareholders pursuant to the Acquisition and the Arrangement have not been registered under the 1933 Act, and are being issued in reliance on an exemption from the registration requirements of the 1933 Act. The solicitation of proxies made pursuant to this Circular is not subject to the requirements of Section 14(a) of the 1934 Act. Accordingly, except for certain disclosures required by Section 13(e) of the 1934 Act and Rule 13e-3 thereunder, this Circular has been prepared in accordance with disclosure requirements applicable in Canada. Shareholders in the United States should be aware that such requirements are different from those of the United States applicable to registration statements under the 1933 Act and to proxy statements under the 1934 Act. The financial statements of the Corporation and the pro forma financial statements of Boardwalk REIT included or incorporated by reference in this Circular have been prepared in accordance with GAAP and thus are not comparable in all respects to financial statements of United States companies. The 1933 Act imposes limitations on resales of REIT Units issued pursuant to the Arrangement to persons who were “affiliates” of the Corporation, Newco, Boardwalk REIT, BPCL, BEI Subco,

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the General Partner, the Partnership or the Operating Trust before the Acquisition and the Arrangement and who will be “affiliates” of Boardwalk REIT after the Acquisition and the Arrangement. See “Procedure for Surrender of Common Shares — Resale of REIT Units”.

      Unless expressly noted, information concerning the operations of the Corporation and Boardwalk REIT contained herein has been prepared in accordance with Canadian standards and is not comparable in all respects to similar information for United States companies.

      Except as otherwise indicated, all dollar amounts indicated in this Circular are expressed in Canadian dollars. The following tables set forth (i) the rates of exchange for Canadian dollars, expressed in United States dollars, in effect at the end of each of the periods indicated; (ii) the average of exchange rates in effect on the last day of each month during such periods; and (iii) the high and low exchange rates during each such periods, in each case based on the noon buying rate in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York.

                                         
Year ended December 31,

2003 2002 2001 2000 1999





Rate at end of period
  $ 0.7738     $ 0.6329     $ 0.6279     $ 0.6669     $ 0.6925  
Average rate during period
    0.7205       0.6368       0.6444       0.6725       0.6745  
High
    0.7738       0.6612       0.6697       0.6969       0.6925  
Low
    0.6350       0.6209       0.6241       0.6410       0.6535  

      The rate at the end of the period, the average rate during the period, the high and the low for the last three months of 2003 were $0.7738, $0.7675, $0.7738 and $0.7418, respectively. On        l       , 2004 the noon buying rate for $1.00 Canadian was $       l       United States.

      The enforcement by Shareholders of civil liabilities under United States securities laws may be affected adversely by the fact that the Corporation, Boardwalk REIT and the other parties involved in the Acquisition and the Arrangement are organized or settled, as applicable, under the laws of a jurisdiction other than the United States, that most of their respective officers, directors and trustees are residents of countries other than the United States, that the experts named in this Circular are residents of countries other than the United States, and that a majority of the assets of the Corporation, Boardwalk REIT and such persons are located outside of the United States.

      There is a limitation on the percentage of outstanding REIT Units that may be beneficially owned by Non-Residents. The Declaration of Trust will contain provisions permitting the Trustees to take actions to prevent this limit being exceeded and to reduce beneficial ownership of REIT Units by Non-Residents to an appropriate level. Such actions may include requiring beneficial owners who are Non-Residents to sell some or all of their REIT Units. See “Declaration of Trust and Description of REIT Units — Limitations on Non-Resident Ownership”.

      None of the Acquisition, the Arrangement, this Circular or the REIT Units has been approved or disapproved by the United States Securities and Exchange Commission, any state securities commission, or other regulatory authority, nor have any of the foregoing authorities or any Canadian securities commission passed upon or endorsed the merits of the Arrangement. Any representation to the contrary is a criminal offence.

Notice to Residents of the State of New York.

      The Corporation is engaged primarily in and, after the Acquisition and the Arrangement, Boardwalk REIT will be engaged primarily in the ownership of real estate. New York law regulates the issuance and sale of certain real estate related securities in New York. Boardwalk REIT does not intend to file a written statement regarding the REIT Units with the New York Department of Law or otherwise comply with the applicable New York laws regulating the issuance and sale of the REIT Units. Therefore, the Corporation will direct that the REIT Units which would otherwise be issued and delivered to any person who is, or who appears to be, or who the Corporation or the Depositary have reason to believe is, a resident of the State of New York will instead be delivered to the Depositary which will sell such REIT Units through the

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TSX or otherwise and remit the proceeds of sale, in Canadian dollars and net of commissions, pro rata to the persons entitled thereto. The Depositary will sell all such REIT Units as soon as practicable, and in any event no later than five Business Days after the Effective Date. In effecting the sales of REIT Units, the Depositary will exercise its sole judgment as to the timing and manner of sale and will not be obligated to seek or obtain a minimum price. It is intended that the REIT Units will begin to trade on the TSX as soon as practicable after the completion of the Acquisition and the Arrangement and satisfaction of all listing formalities. There can be no assurance, however, that the Depositary will be able to sell such REIT Units immediately. Furthermore, because there is no established trading market for the REIT Units, there can be no prediction regarding what the net proceeds of sale will be. None of the Corporation, the Depositary or Boardwalk REIT will be liable for any loss arising out of the sale of such REIT Units relating to the manner or timing of such sales, the prices at which REIT Units are sold, or otherwise. The price at which REIT Units are sold on behalf of affected Shareholders will fluctuate with the market for the REIT Units and no assurance can be given that any particular price will be received upon such sale. Affected Shareholders who do not wish to have uncertainty as to the amount of the proceeds of sale, may wish to consult their advisors regarding a sale of their Common Shares in the open market prior to consummation of the Acquisition and the Arrangement. If you are not a resident of the State of New York, but you are concerned that you might appear to be and that your REIT Units may be sold pursuant to the foregoing provisions, you may contact the Corporation or the Depositary prior to the Effective Date.

Notice to Residents of the State of New Hampshire.

       Neither the fact that a registration statement or an application for a license has been filed under Chapter 421-B of the New Hampshire Revised Statutes Annotated (“RSA 421-B”) with the State of New Hampshire nor the fact that a security is effectively registered or a person is licensed in the State of New Hampshire constitutes a finding by the Secretary of State that any document filed under RSA 421-B is true, complete and not misleading. Neither any such fact nor the fact that an exemption or exception is available for a security or a transaction means that the Secretary of State has passed in any way upon the merits or qualifications of, or recommended or given approval to, any person, security or transaction. It is unlawful to make, or cause to be made, to any prospective purchaser, customer, or client any representation inconsistent with the provisions of this paragraph.

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TABLE OF CONTENTS

         
Page No.

LETTER TO SECURITYHOLDERS
    2  
NOTICE OF MEETING
    4  
NOTICE OF PETITION
    5  
INFORMATION FOR ALL SECURITYHOLDERS
    7  
FORWARD LOOKING STATEMENTS
    7  
DISTRIBUTABLE INCOME
    7  
SUMMARY TERM SHEET
    8  
INFORMATION FOR UNITED STATES SHAREHOLDERS
    8  
QUESTIONS AND ANSWERS ABOUT THE ACQUISITION AND THE ARRANGEMENT
    13  
SUMMARY
    19  
SPECIAL FACTORS
    30  
GLOSSARY OF TERMS AND EXPRESSIONS
    44  
THE MEETING
    51  
DESCRIPTION OF THE ACQUISITION AND THE ARRANGEMENT
    53  
PROCEDURE FOR SURRENDER OF COMMON SHARES
    78  
INFORMATION CONCERNING BOARDWALK REIT
    81  
MANAGEMENT OF BOARDWALK REIT
    93  
INVESTMENT GUIDELINES AND OPERATING POLICIES OF BOARDWALK REIT
    100  
DECLARATION OF TRUST AND DESCRIPTION OF REIT UNITS
    104  
DISTRIBUTION POLICY
    111  
INFORMATION CONCERNING OPERATING TRUST
    113  
INFORMATION CONCERNING THE PARTNERSHIP
    118  
INFORMATION CONCERNING NEWCO 
    127  
INFORMATION CONCERNING THE CORPORATION
    128  
MATERIAL CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
    163  
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
    172  
RISK FACTORS
    179  
RIGHTS OF DISSENT
    186  
INTEREST OF CERTAIN PERSONS IN THE ACQUISITION AND INTENTIONS OF SUCH PERSONS
    188  
EXPENSES OF THE ACQUISITION AND THE ARRANGEMENT
    191  
LEGAL MATTERS
    191  
ELIGIBILITY FOR INVESTMENT
    191  
OTHER MEETING BUSINESS
    192  
APPROVAL OF DIRECTORS
    195  

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Page No.

APPENDICES
A — Acquisition and Arrangement Resolution
    A-1  
B — Acquisition and Arrangement Agreement
    B-1  
C — Interim Order
    C-1  
D — Financial Statements
    D-1  
E — Fairness Opinion
    E-2  
F — Section 191 of the Business Corporations Act (Alberta)
    F-1  
G — Rights Plan Resolution
    G-1  
H — Supplemental Information Concerning the Corporation, BPCL and their Respective Directors and Executive Officers
    H-1  
ENCLOSURES
       
Form of Proxy (for registered shareholders only)
       
Form of Proxy (for optionholders only)
       
Letter of Transmittal
       
Return Envelope
       

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QUESTIONS AND ANSWERS ABOUT THE ACQUISITION AND THE ARRANGEMENT

      The following questions and answers are to help Securityholders understand the proposed Acquisition and Arrangement and the other matters described in this Circular. However, these questions and answers do not describe everything that Securityholders should consider before voting on the matters at the Meeting. Accordingly, Securityholders are encouraged to read this Circular and the Appendices hereto in their entirety. For an explanation of certain defined terms used in these questions and answers, please refer to the “Glossary of Terms and Expressions”.

 
Q1.  What are the Acquisition and the Arrangement?

      The Acquisition and the Arrangement broadly contemplate the indirect transfer of all of the assets and undertakings of the Corporation to a new real estate investment trust to be named “Boardwalk Real Estate Investment Trust”, and the indirect acquisition of the Corporation by BPCL through the exchange by Public Shareholders of their Common Shares for REIT Units on a one-for-one basis.

      For more information, see “Description of the Acquisition and the Arrangement — Overview of the Arrangement”.

 
Q2.  What is Boardwalk REIT?

      Boardwalk REIT is an open-ended real estate investment trust formed to acquire all of the Corporation’s assets and undertakings. Boardwalk REIT’s principal objectives are to provide its unitholders with monthly cash distributions, partially on a Canadian income tax-deferred basis and to increase the value of its units through the effective management of its residential multi-family revenue producing properties and the acquisition of additional properties.

      For more information, see “Information Concerning Boardwalk REIT”.

 
Q3.  Why are the Acquisition and the Arrangement being proposed at this time?

      The Board of Directors believes that shareholder value will be significantly enhanced by the ownership and management of the Corporation’s assets and undertakings through a real estate investment trust rather than a corporate structure, having regard to the attendant tax and commercial efficiencies of the real estate investment trust structure and other market considerations.

      For more information, see “Description of the Acquisition and the Arrangement — Background to and Reasons for the Acquisition and the Arrangement”.

 
Q4.  If the Acquisition and the Arrangement are completed, what will Public Shareholders receive for their Common Shares?

      Public Shareholders will receive one REIT Unit for each Common Share held. Each REIT Unit will give the holder an undivided beneficial interest in Boardwalk REIT and entitlement, pro rata, to distributions made by Boardwalk REIT.

      For more information, see “Description of the Acquisition and the Arrangement — The Plan of Arrangement” and “Declaration of Trust and Description of REIT Units”.

 
Q5.  Will BPCL continue to be the largest single holder of REIT Units after the Acquisition and the Arrangement?

      BPCL is currently, as the owner of approximately 28% of the outstanding Common Shares on a fully diluted basis, the largest single holder of Common Shares. If BPCL were not to sell any of its Common Shares prior to the closing of the Acquisition and the Arrangement, it is anticipated that immediately after the Acquisition and the Arrangement it would be (as the recipient of REIT Units in exchange for such shares) the largest single holder of REIT Units. BPCL has, however, indicated that, subject to market conditions and terms satisfactory to BPCL, it intends, prior to the Effective Time, to sell a significant portion of its Common Shares in the Secondary

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Offering and, to that extent, its percentage ownership of Boardwalk REIT will be less than its percentage ownership of the Corporation.

      The Secondary Offering is expected to result in a substantive change in the indirect ownership of the Contributed Assets. Accordingly, it is expected that because of the Secondary Offering, Boardwalk REIT’s financial statements will reflect the acquisition of the Contributed Assets at their fair market value rather than their carrying amount to the Corporation. This treatment is consistent with that taken recently by several other income trusts and real estate investment trusts that purchased assets in a transaction that included a substantive change in the ownership of such assets, as is the case in substance here.

      Irrespective of the number of Common Shares sold by BPCL in the Secondary Offering, BPCL will receive in connection with the Acquisition and the Arrangement, LP Class B Units representing an effective interest of approximately 8% in Boardwalk REIT (after the preferred partnership distribution and other entitlements of the LP C Units which BPCL will also receive).

      For more information, see “Description of the Acquisition and the Arrangement — Overview of the Acquisition and the Arrangement” and “— Arrangements with BPCL”.

 
Q6.  Why will BPCL not receive REIT Units for all of its Common Shares?

      Subject to market conditions (including the prevailing price for Common Shares) and terms satisfactory to BPCL (including underwriting fees negotiated with the underwriting syndicate involved in the Secondary Offering), BPCL intends, prior to the Effective Time, to sell for cash in the Secondary Offering approximately two-thirds of the Common Shares currently held by it. If the Secondary Offering is not completed in its entirety, BPCL and its affiliates will receive one REIT Unit for each Common Share held by it at the Effective Time, other than Common Shares in a number equal to approximately 8% of the total outstanding Common Shares that BPCL will continue to own. In accordance with Canadian securities laws, BPCL will issue a press release announcing the terms of any Secondary Offering once it has entered into an underwriting agreement in that regard. Alternatively, if BPCL makes a determination not to proceed with the Secondary Offering, it will issue a press release announcing such determination. Any such press release will be made prior to the Meeting.

      In order to effect the Acquisition and the Arrangement for the benefit of all Shareholders, BPCL will indirectly acquire the Corporation and LP Class B Units and LP Class C Units. If the Secondary Offering is completed in its entirety, BPCL will indirectly own LP Class B Units and LP Class C Units, but no REIT Units. The LP Class B Units have been designed to be, as nearly as possible, the economic and voting equivalent of REIT Units (such LP Class B Units being exchangeable, on a one-for-one basis, into REIT Units). The LP Class C Units will provide the Corporation with partnership distributions in amounts that should be sufficient to permit the Corporation to pay certain liabilities that it will retain in relation to assets transferred to the Partnership. While BPCL will obtain a deferral on the income tax that would otherwise be payable on the exchange of its Common Shares, it will be subject indirectly, to significantly greater tax payable upon any subsequent disposition of its LP Class B Units. As well, capital tax will be payable indirectly by BPCL in respect of the LP Class B Units.

      For more information, see “Description of the Acquisition and the Arrangement — Arrangements with BPCL” and “Information Concerning the Partnership — LP Units”.

 
Q7.  Will I be able to trade the REIT Units that I receive for my Common Shares?

      Yes. The REIT Units which Shareholders will receive in exchange for their Common Shares have been conditionally approved for listing on the TSX and, subject to the satisfaction of all of the requirements of the TSX, will be listed on the TSX under the symbol “BEI.UN”. The REIT Units will not be listed on the NYSE.

      For more information, see “Description of the Acquisition and the Arrangement — Regulatory Approvals — Stock Exchange Listing” and “Procedure for Surrender of Common Shares — Resale of REIT Units”.

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Q8.  On what am I being asked to vote at the Meeting?

      At the Meeting, Securityholders will be asked to vote on a resolution approving certain transactions that are part of the Acquisition and the Arrangement. If the Acquisition and Arrangement Resolution is approved by the requisite majority of Securityholders, Shareholders will also be asked to vote on a resolution approving the adoption of the Rights Plan.

 
Q9.  How should I vote in respect of the Acquisition and Arrangement Resolution?

      The Board of Directors, on the recommendation of the Special Committee, and based on its own investigations, has determined that the Acquisition and the Arrangement are in the best interests of the Corporation and fair to Public Shareholders, Unaffiliated Shareholders and Optionholders and recommends that Public Shareholders and Optionholders vote in favour of the Acquisition and Arrangement Resolution. However, Securityholders should carefully review and consider the Acquisition and the Arrangement and reach their own conclusion as to whether to vote for the Acquisition and Arrangement Resolution.

      For more information, see “Description of the Acquisition and the Arrangement — Background to and Reasons for the Acquisition and the Arrangement”.

 
Q10.  What votes are required to approve the Acquisition and Arrangement Resolution and the resolution approving the adoption of the Rights Plan?

      The Acquisition and Arrangement Resolution must be approved by at least 66 2/3% of the votes cast by all Shareholders and Optionholders who are represented at the Meeting, voting together as a single class. In addition, the Acquisition and Arrangement Resolution must be approved by a simple majority of the votes cast by all “Minority Shareholders” represented at the Meeting. The term “Minority Shareholders” excludes Shareholders such as BPCL, its affiliates and the directors and senior officers of the Corporation and BPCL.

      As required by the TSX, the resolution approving the adoption of the Rights Plan must be approved by: (i) a majority of votes cast by Shareholders; and (ii) a majority of votes cast by Shareholders, other than those owned by any holder of Common Shares holding in excess of 20% of the outstanding Common Shares and their associates, affiliates and insiders. Accordingly, in respect of the second vote, the votes of Shareholders such as BPCL, its associates, affiliates and insiders will be excluded for the purposes of authorizing and approving this resolution.

 
Q11.  When do you expect the Acquisition and the Arrangement to be completed?

      The completion of the Acquisition and the Arrangement will occur as soon as practicable following the satisfaction of all of the required conditions to completion of the Acquisition and the Arrangement, including regulatory and court approvals. In addition to the approval of Securityholders at the Meeting, the Plan of Arrangement must be approved by the Court. The completion of the Acquisition and the Arrangement is also conditional upon various other conditions, including the receipt of certain other regulatory approvals and third party consents. Although we are working to satisfy all conditions to the completion of the Acquisition and the Arrangement, we cannot assure you that all such conditions will be satisfied.

      If all conditions to the Acquisition and the Arrangement are satisfied or waived, the Corporation expects the Effective Date to be on or about        l       , 2004.

      For more information, see “Description of the Acquisition and the Arrangement — Acquisition and Arrangement Agreement” and the full text of the Acquisition and Arrangement Agreement attached to this Circular as Appendix B.

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Q12.  What if all of the conditions to the Acquisition and the Arrangement are not satisfied?

      If the conditions to which the Acquisition and the Arrangement are subject are not satisfied or waived, the Acquisition and the Arrangement will not be completed and the Corporation will continue to carry on its business as presently conducted.

 
Q13.  What should I do now? How can I vote?

      You should read and carefully consider the information contained in this Circular. You should also determine whether you hold Common Shares directly in your name or through an investment dealer, bank, trust company or other intermediary, since this will determine the procedures that you must follow in order to vote with respect to matters at the Meeting. If you determine that you are a registered Shareholder, you should either attend the Meeting or follow the instructions for completing and returning the enclosed Form of Proxy for Shareholders (blue form) described in this Circular and on the Form of Proxy for Shareholders. If you determine that you are a non-registered Shareholder, you should read the instructions of your intermediary to you regarding how to provide voting instructions with respect to your Common Shares. You may also wish to contact the intermediary through which you hold Common Shares in order to obtain information about how to vote your Common Shares.

      If you are an Optionholder you should either attend the Meeting or follow the instructions for completing and returning the enclosed Form of Proxy for Optionholders (yellow form) described in this Circular and on the Form of Proxy for Optionholders.

      For more information, see “The Meeting”.

 
Q14.  Is my vote important?

      Yes. For this reason, you are urged to carefully consider and vote with respect to the matters described in this Circular.

 
Q15.  If my Common Shares are held through an intermediary such as my investment dealer or bank, will my investment dealer or bank vote my Common Shares for me without my instructions?

      No. If your Common Shares are held through an intermediary, such as an investment dealer, bank or trust company, your intermediary is prohibited from voting your Common Shares without instructions from you. As every investment dealer or other intermediary has its own procedures for obtaining voting instructions from Shareholders, you should carefully review and follow those procedures to ensure that your Common Shares are voted at the Meeting.

      For more information, see “The Meeting — Advice to Beneficial Shareholders”.

 
Q16.  What happens if I don’t indicate how to vote on my form of proxy?

      If you are a registered Shareholder or an Optionholder and you sign and deliver your proxy, but do not include instructions on how to vote, your Common Shares and Options will be voted FOR each matter referred to in the form of proxy.

      For more information, see “The Meeting — Voting of Proxies”.

 
Q17.  If I have share certificates evidencing Common Shares, should I deliver them now?

      While you are not required to deliver the share certificates representing your Common Shares at this time, if you have share certificates, you must deliver them together with your completed Letter of Transmittal and all other required documents in order to receive the certificates representing the REIT Units to which you will be entitled upon the successful completion of the Acquisition and the Arrangement.

      If you are a registered Shareholder, certificates representing the REIT Units, will, as soon as practicable after the successful completion of the Acquisition and the Arrangement, be forwarded to you at the address specified in

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your Letter of Transmittal by insured first class mail or will be available for you to pick-up at the offices of Computershare Trust Company of Canada at the address set forth in the Letter of Transmittal, if requested in your Letter of Transmittal. However, no certificates for REIT Units will be delivered to, or for the account of, any Shareholder who is a resident of the State of New York. See “Information for United States Shareholders — Notice to the residents of the State of New York”.

      If you are a registered Shareholder and the share certificate representing your Common Shares has been lost or destroyed, you should complete the Letter of Transmittal as fully as possible and forward it, together with a letter describing the loss, to Computershare Trust Company of Canada. Computershare Trust Company of Canada will respond with the replacement requirements, which must be properly completed and returned prior to effecting the exchange.

      If you are a non-registered Shareholder, you may not have to complete a Letter of Transmittal in order to obtain your REIT Units upon the successful completion of the Acquisition and the Arrangement. However, you should read your intermediary’s instructions to you regarding the procedures for obtaining those units and also consider contacting your intermediary if you have any questions regarding this process.

      For more information, see “Procedure for Surrender of Common Shares”.

 
Q18.  What are the income tax consequences to me of the Arrangement?

      A Shareholder resident in Canada will generally realize a capital gain (or sustain a capital loss) on the disposition of the Shareholder’s Common Shares equal to the amount by which the total of the fair market value of the REIT Units received by the Shareholder exceeds (or is exceeded by) the adjusted cost base of the Shareholder’s Common Shares, net of any reasonable costs of making the disposition. One-half of any such capital gain must be included in income and one-half of any such capital loss may be utilized to offset taxable capital gains in accordance with the provisions of the Income Tax Act (Canada).

      The transactions under the Acquisition and the Arrangement will generally not give rise to any tax being payable under the Income Tax Act (Canada) by Shareholders (other than Dissenting Shareholders) who are non-residents.

      The U.S. federal income tax consequences of the transactions comprising the Acquisition and Arrangement are not certain. If they constitute a tax-free reorganization, then an exchange of Common Shares for REIT Units pursuant to the Acquisition and the Arrangement would not be taxable.

      For more information, see “Material Canadian Federal Income Tax Considerations” and “Material United States Federal Income Tax Considerations”.

 
Q19.  Are there risks I should consider in deciding whether to vote for the Acquisition and the Arrangement?

      Yes. There are a number of risk factors that you should consider in connection with the Acquisition and the Arrangement and with respect to the ownership of REIT Units which are described in this Circular in the section entitled “Risk Factors”.

 
Q20.  Where can more information about the Corporation be found?

      As required by applicable securities legislation and regulatory requirements, the Corporation periodically files information with various securities regulatory authorities in Canada. This information can be viewed at or copied from the System for Electronic Document Analysis and Retrieval (SEDAR) website at www.sedar.com or the Corporation’s website at www.bwalk.com. Until February 23, 2004, the Corporation also filed reports with the SEC, which can be reviewed and copied at that agency’s Public Reference Room in Washington D.C. Prior reports and other information about the Corporation are also available on the EDGAR Database on the SEC’s Internet site at www.sec.gov, and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing to the SEC’s Public

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Reference Section, Washington D.C. 20549-0102. The Corporation ceased to file reports with the SEC upon the delisting of the Common Shares from the NYSE.
 
Q21.  Who should I contact with questions regarding the Acquisition and the Arrangement?

      You may call Paul Moon, Director of Corporate Communications of the Corporation, at (403) 206-6808. Alternatively, you may fax the Corporation at (403) 261-9269 or e-mail the Corporation at investor@bwalk.com.

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SUMMARY

      The following is a summary of certain information contained elsewhere in this Circular, including the Appendices hereto, and is qualified in its entirety by reference to the more detailed information contained or referred to elsewhere in this Circular or in the Appendices hereto. You should read this Circular and the Appendices hereto in their entirety. For an explanation of certain defined terms used in this Summary and in this Circular, please refer to the “Glossary of Terms and Expressions”.

The Meeting

      The Meeting will be held on        l       ,        l       , 2004 at 10:00 a.m. (Calgary time) at the Calgary Petroleum Club, 319 — 5th Avenue S.W., Calgary, Alberta for the purposes set forth in the accompanying Notice of Meeting. The business of the Meeting will be (i) to consider and vote upon the Acquisition and the Arrangement and (ii) to approve the Rights Plan.

The Acquisition and the Arrangement

      The Acquisition and the Arrangement are multi-step transactions that will result in (i) the indirect acquisition by Boardwalk REIT of all of the Contributed Assets; (ii) the indirect acquisition of the Corporation by BPCL by the acquisition of all of the outstanding Common Shares; (iii) the indirect interest of the Public Shareholders in approximately 92% of the Contributed Assets through the ownership of the outstanding REIT Units; and (iv) the indirect interest of BPCL in approximately 8% of the Contributed Assets. This result is subject to completion by BPCL of the Secondary Offering and various priority distributions described herein.

      After giving effect to the Acquisition and the Arrangement, and assuming the maximum size of the Secondary Offering is completed:

  •  BPCL will acquire the Corporation and the Corporation will be an indirect, wholly-owned subsidiary of BPCL and the Common Shares will be delisted from the TSX;
 
  •  Public Shareholders will own all of the outstanding REIT Units, which have been conditionally listed for trading on the TSX;
 
  •  Boardwalk REIT will indirectly hold, through its indirect interest in the LP Class A Units, an approximately 92% interest in the Partnership (after the preferred partnership distribution and other entitlements of the LP Class C Units; see “Information Concerning the Partnership — Distributions”), which will hold, directly or indirectly, all of the Contributed Assets previously comprising the business of the Corporation;
 
  •  the remaining approximately 8% interest in the Partnership (after the preferred partnership distribution and other entitlements of the LP Class C Units indirectly held by BPCL) will be indirectly held by BPCL through its indirect interest in the LP Class B Units.

The LP Class B Units will have equivalent voting and distribution entitlements to the REIT Units into which they are exchangeable. The Common Shares were delisted from the NYSE as of February 23, 2004.

      See “Description of the Acquisition and the Arrangement”.

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Post-Arrangement Organizational Structure

      The following diagram sets out the simplified organizational structure of the Corporation, Boardwalk REIT and the entities participating in the Acquisition and the Arrangement following the Effective Time:

(ORGANIZATIONAL STRUCTURE DIAGRAM)


Notes:

(1)  BPCL intends to sell approximately two-thirds of the Common Shares it owns (representing approximately 20% of the outstanding Common Shares) prior to the Effective Time for cash pursuant to the Secondary Offering, but may exchange such Common Shares for REIT Units under the Plan of Arrangement on the same basis as the Public Shareholders. The remaining Common Shares held by BPCL will be sold to Newco in exchange for Newco common shares. See “Description of the Acquisition and the Arrangement — Pre-Arrangement Reorganization and Secondary Offering”.
 
(2)  Following the Effective Time, Newco and the Corporation will be amalgamated and continue under the name “Boardwalk Equities Inc.”

Background to and Reasons for the Acquisition and the Arrangement

      Since the Common Shares began trading on the Alberta Stock Exchange in January 1994, the Board of Directors has implemented various measures to enhance shareholder value, including share splits, listing the Common Shares on the NYSE and most recently the introduction of a dividend. Periodically management has considered whether the reorganization of the Corporation into another business entity such as a real estate

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investment trust would create additional shareholder value. Historically, such a reorganization was not felt to be appropriate. However, management has more recently come to believe that a number of factors, which were not previously present, now indicated that reorganization into a REIT is desirable. These factors include the increasing demand for tax efficient yield securities in the Canadian marketplace, the superior access to capital enjoyed by Canadian real estate investment trusts, the competitive tax advantage enjoyed by Canadian real estate investment trusts when making acquisitions, the current market expectation that distribution yields are at historical lows and the market’s acceptance of more complex structures.

      Commencing in August 2003 through October 2003, management and BPCL, with the assistance of professional advisors, including CIBC World Markets Inc. acting as financial advisor to the Corporation, explored potential transactions to reorganize the Corporation into a real estate investment trust as part of an acquisition of the Corporation by BPCL. Together with its advisors, management and BPCL developed a model that would effectively reorganize the business of the Corporation into a real estate investment trust. A reorganization such as this is generally designed to achieve commercial and tax efficiencies not available to a corporation. Such tax efficiencies result from the fact that under Canadian income tax law a Canadian resident trust, although it is a taxable entity, is generally entitled to deduct, in computing its taxable income for a taxation year, the portion thereof that is paid or becomes payable in that year to beneficiaries. Therefore, a trust that distributes all or substantially all of its income currently to beneficiaries generally will not be liable for any material amount of Canadian tax. By comparison, corporations cannot deduct dividends paid to their shareholders. Therefore, under a corporate structure there is an element of “double taxation”, with the income being subject to tax in the corporation and dividends generally being taxable to shareholders.

      On November 5, 2003, the Board of Directors considered management’s and BPCL’s proposal for BPCL to acquire the Corporation and to reorganize the business of the Corporation into a real estate investment trust. The Board of Directors discussed the proposed Acquisition and Arrangement including BPCL’s acquisition of the Corporation. The Board of Directors considered, among others, the following factors in its review and discussion of the proposal:

        (a) monthly cash distributions were anticipated to provide an attractive return to Unitholders without impairing the Corporation’s ability to finance capital expenditures and to meet external debt payments;
 
        (b) the Corporation has characteristics that are suited to a real estate investment trust structure, in particular the Corporation’s diversified portfolio of multi-family residential properties which provide a relatively stable cash flow;
 
        (c) the new trust structure would result in a higher level of cash distributions than would be available under the existing corporate structure of the Corporation;
 
        (d) a significant portion of Boardwalk REIT’s distributions to Unitholders would be tax-deferred;
 
        (e) the anticipated improved access that Boardwalk REIT would have to the public capital markets to fund growth initiatives than is or would be available to the Corporation under current market conditions and given its existing corporate structure;
 
        (f) Boardwalk REIT would be the largest and most geographically diverse publicly traded multi-family residential trust in Canada; and
 
        (g) employees and executives of the Corporation will become employees and executives of the Partnership or its subsidiaries. No significant changes in management are contemplated as a result of the Transaction.

 
Formation and Organization of Special Committee

      On November 5, 2003, following their review and discussion of management’s and BPCL’s proposal for BPCL to acquire the Corporation and to reorganize the business of the Corporation into a real estate investment trust, the Board of Directors resolved to appoint a special committee of directors independent of BPCL and management of the Corporation to consider the proposed Acquisition and Arrangement. The members of the Special Committee are Ernest Kapitza, Al Mawani and David Richards.

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Recommendation of the Special Committee

      The Special Committee retained RBC as its financial advisor to provide its opinion as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders.

      On December 10, 2003, RBC delivered to the Special Committee its preliminary views as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders. At this meeting, RBC described the material factors upon which its assessment of fairness is based and the methodologies and procedures followed by it in carrying out its work.

      On December 10, 2003, the Special Committee reported to the Board of Directors that, on the basis of the preliminary views of RBC as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders and other factors, including those referred to above under “Background to and Reasons for the Acquisition and the Arrangement”, the Special Committee unanimously concluded that the Acquisition and the Arrangement are in the best interests of the Corporation and, based on the preliminary views of RBC, the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders. The Special Committee resolved, subject to the Corporation obtaining all necessary third party consents, the satisfaction of other conditions, including the satisfactory negotiation of the final terms of the Acquisition and Arrangement Agreement and the receipt by the Special Committee of a signed Fairness Opinion confirming RBC’s preliminary view that the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders, to recommend that the Board of Directors:

        (a) authorize the Corporation to enter into the Acquisition and Arrangement Agreement;
 
        (b) submit the Acquisition and Arrangement Resolution to a vote of the Securityholders at the Meeting; and
 
        (c) recommend that Public Shareholders vote in favour of the Acquisition and Arrangement Resolution.

      On January 5, 2004, RBC confirmed that its preliminary views as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders were unchanged. The Special Committee met again on January 5, 2004 and confirmed its recommendation made on December 10, 2003 subject to the same conditions upon which such recommendation was made including receipt by the Special Committee of a signed fairness opinion confirming RBC’s preliminary view that the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders. On January 8, 2004, RBC delivered the Fairness Opinion to the Special Committee. The Fairness Opinion states that RBC is of the opinion that, as of the date of the Fairness Opinion, the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders.

 
Recommendation of the Board of Directors

      On December 10, 2003, the Board of Directors authorized the Corporation to enter into the Acquisition and Arrangement Agreement, conditional on the satisfactory negotiation of the final terms of the Acquisition and Arrangement Agreement and delivery of the Fairness Opinion. The Board of Directors met again on January 8, 2004 to receive the Fairness Opinion and authorize the filing of the Information Circular and Schedule 13E-3 with the SEC. The negotiation of the final terms of the Acquisition and Arrangement Agreement was concluded, and the Acquisition and Arrangement Agreement was signed effective January 9, 2004.

      The Board of Directors, on the recommendation of the Special Committee, and based on its own investigations has concluded that the Acquisition and the Arrangement are in the best interests of the Corporation and fair to the Public Shareholders, Unaffiliated Shareholders and Optionholders and recommends that Public Shareholders and Optionholders vote in favour of the Acquisition and Arrangement Resolution. Messrs. Sam Kolias and Van Kolias declared their interest in the Transaction and abstained from voting on this matter. All directors who voted, voted in favour of this matter.

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      In aggregate, the directors and senior officers of the Corporation own or exercise control or direction over approximately 17,518,496 Common Shares (on a fully diluted basis). All of the directors and officers have indicated to the Corporation an intention to vote all of the Common Shares and Options owned by them, or over which control or direction is exercised, in favour of the Acquisition and Arrangement Resolution. In addition, the Acquisition and Arrangement Resolution must be approved by a simple majority of the votes cast by all Minority Shareholders represented at the Meeting.

Boardwalk REIT

      Boardwalk REIT is an unincorporated, open-ended real estate investment trust. The objectives of Boardwalk REIT are to: (i) provide Unitholders with stable and growing cash distributions, payable monthly and, to the extent reasonably possible, on a Canadian income tax-deferred basis, from investments in the Contributed Assets and any additional revenue producing multi-family residential properties or interests acquired by Boardwalk REIT; and (ii) increase REIT Unit value through the effective management of the Contributed Assets and the acquisition of additional revenue producing multi-family residential properties or interests therein. See “Information Concerning Boardwalk REIT”.

      Pursuant to the Acquisition and the Arrangement, Boardwalk REIT will indirectly hold, through its indirect interest in the LP Class A Units, an approximately 92% interest in the Contributed Assets (after the preferred distribution and other entitlements of the LP Class C Units indirectly held by BPCL) (the remaining approximately 8% interest in the Contributed Assets (after the preferred distribution and other entitlements of the LP Class C Units indirectly held by BPCL) will be indirectly held by BPCL through its indirect interest in the LP Class B Units). As at September 30, 2003, the Contributed Assets consisted of direct and indirect interests in approximately 31,200 residential units in Alberta, Saskatchewan, Ontario and Quebec, representing approximately 26 million net rentable square feet of revenue producing multi-family residential real estate assets. The Contributed Assets represent a well-balanced portfolio of residential real estate, both from the stand-point of geographic diversification and mix of asset type, consisting of mid-sized suburban and downtown apartment buildings and regional, mid-sized community and neighbourhood residential centres located in urban markets. As at September 30, 2003, the Contributed Assets had an average occupancy rate of approximately 96%. See “Information Concerning Boardwalk REIT — The Residential Revenue Producing Contributed Assets”.

      Following the Acquisition and the Arrangement, it is currently the intention for Boardwalk REIT to make cash distributions to holders of REIT Units on each monthly Distribution Date in the range of 85% of Distributable Income on an annual basis but in no event will distributions for the year be less than Boardwalk REIT’s taxable income. See “Distribution Policy” and “Information Concerning the Partnership”.

The Operating Trust

      The Operating Trust is a limited purpose open-ended trust and its activities are restricted to, among other things, investing in cash and certain securities, including those issued by the Partnership, Boardwalk REIT and the General Partner. See “Information Concerning Operating Trust”.

The Partnership

      The Partnership is a limited partnership which, in connection with the Acquisition and the Arrangement, will acquire all of the Corporation’s direct and indirect interests in the Contributed Assets. Following the Acquisition and the Arrangement, the Partnership will own and operate the business previously owned and operated by the Corporation. The Partnership will be indirectly beneficially owned, as to approximately 92% (after the preferred distribution and other entitlements of the LP Class C Units indirectly held by BPCL) by Boardwalk REIT, through its indirect interest in the LP Class A Units, and as to the remaining approximately 8% (after the preferred distribution and other entitlements of the LP Class C Units, which it will also own) by BPCL through its indirect interest in the LP Class B Units.

      The LP Class A Units indirectly held by Boardwalk REIT will rank on parity with the LP Class B Units indirectly held by BPCL with respect to distributions of distributable cash of the Partnership. However, except in certain specified circumstances as set out in the Limited Partnership Agreement and as required by law, the LP

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Class B Units will not be entitled to vote at meetings of the limited partners of the Partnership. Rather, one Special Voting Unit of Boardwalk REIT will be issued and trade with each associated LP Class B Unit and will entitle the holder to an equal number of votes at all meetings of Unitholders. Accordingly, the LP Class B Units have been designed to be, as nearly as possible, the economic and voting equivalent of REIT Units (each such LP Class B Unit being exchangeable, on a one-for-one basis into REIT Units). The LP Class C Units that will be indirectly owned by BPCL have been designed to provide it with an interest in the Partnership that will entitle BPCL to distributions in priority to distributions on the LP Class A Units and LP Class B Units in an amount that, if paid, should be sufficient to permit the Corporation to satisfy amounts payable under the Retained Debt and in respect of certain associated tax liabilities, if any. The LP Class C Units will not be issued Special Voting Units and hence holders thereof will not be entitled to notice of or to attend or vote at meetings of Unitholders. Rather, holders of LP Class C Units will be entitled to receive notice of and to attend and to vote (on the basis of one vote for every 1,000 LP Class C Units held) at all meetings of limited partners of the Partnership.

      See “Description of the Acquisition and the Arrangement — Arrangements with BPCL” and “Information Concerning the Partnership”.

Business of the Corporation Following the Acquisition and the Arrangement

      Following completion of the Acquisition and the Arrangement, the Corporation will be indirectly owned by BPCL and the Corporation will retain an interest in the Partnership as a limited partner. The Corporation will retain an approximate 8% equity interest (after the preferred distribution and other entitlements of the LP Class C Units, which it will also hold) in the Partnership and thereby in the Contributed Assets transferred to the Partnership through its indirect interest in the LP Class B Units.

      In order to effect the Acquisition and the Arrangement for the benefit of all Shareholders, the Corporation will retain legal title to certain real properties that will be beneficially transferred to the Partnership pursuant to the Master Asset Contribution Agreement and the Corporation will remain liable for the associated Retained Debt. The LP Class C Units held by the Corporation will provide preferred distributions to the Corporation that, if paid, are expected to be sufficient to permit the Corporation to meet its obligations under the Retained Debt as such obligations become due and payable. In addition, the Corporation will enter into certain arrangements with the Partnership in connection with the Corporation’s continuing obligations with respect to these properties and the associated Retained Debt.

      See “Description of the Acquisition and the Arrangement — Arrangements with BPCL” and “Information Concerning the Corporation — Business of the Corporation Following the Acquisition and the Arrangement”.

The Acquisition and Arrangement Agreement

      The Acquisition and Arrangement Agreement sets out the terms and conditions on which the Acquisition and the Arrangement will be carried out, the text of the Plan of Arrangement and the conditions precedent to the completion of the Acquisition and the Arrangement. The Acquisition and Arrangement Agreement also contains customary representations and warranties by each of the parties concerning corporate, legal and other matters relating to their respective affairs. The Acquisition and Arrangement Agreement also includes covenants by each of the parties to take certain actions in furtherance of the Acquisition and the Arrangement, to use its reasonable best efforts to satisfy the conditions to the Acquisition and the Arrangement and to take, or cause to be taken, all other actions and to do, or to cause to be done, all other things necessary, proper or advisable under applicable laws to complete the Acquisition and the Arrangement. See Appendix B of this Circular for the full text of the Acquisition and Arrangement Agreement.

      See “Description of the Acquisition and the Arrangement — the Acquisition and Arrangement Agreement”.

Securityholder Approvals

      The Interim Order provides that, for the Plan of Arrangement to be implemented, the Acquisition and Arrangement Resolution must be passed, with or without variation, by (i) at least a 66 2/3% majority of all of the votes cast by Shareholders and Optionholders voting together as a single class at the Meeting in person or by

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proxy; and (ii) a simple majority of the votes cast by Minority Shareholders voting at the Meeting in person or by proxy.

      Each Shareholder of record on        l       , 2004 will be entitled to one vote for each Common Share held as of such date. Similarly, each Optionholder will be entitled to one vote for each Common Share into which the Options held by such holder are exercisable.

      BPCL has agreed with the Corporation in the Acquisition and Arrangement Agreement that it will vote, and will cause each of its affiliates which holds Common Shares to vote, all of the Common Shares beneficially owned by it or over which it exercises control or direction (15,150,000 Common Shares, representing, in aggregate, approximately 28% of the outstanding Common Shares on a fully diluted basis), in favour of the Acquisition and Arrangement Resolution. In addition, each of the directors and officers of the Corporation has indicated to the Corporation that he or she intends to vote all of the Common Shares and Common Shares issuable on exercise of Options beneficially owned by him or her or over which he or she exercises control or direction in favour of the Acquisition and Arrangement Resolution.

      Assuming all Securityholders eligible to vote at the Meeting cast votes in respect of all of the Common Shares and Options held either in person or by proxy and based on the number of Common Shares and Options currently outstanding, the 66 2/3% majority of Shareholders and Optionholders would require 35,513,074 votes in order to be obtained and the simple majority of Shareholders would require 25,484,928 votes to be obtained. Directors and officers of the Corporation and BPCL who in aggregate hold 17,518,496 Common Shares (on a fully diluted basis) as at the date hereof, have expressed an intention to vote such shares in favour of the resolution requiring 66 2/3% majority. BPCL is not entitled to vote on the resolution requiring a simple majority of Minority Shareholders. However, directors and officers of the Corporation, who hold 700,130 Common Shares as at December 31, 2003, have expressed an intention to vote such shares in favour of such resolution. Securityholders should be aware that, generally, not all Securityholders vote or submit a proxy providing voting instructions. Since the majorities necessary to pass the resolutions proposed for the meeting are determined based on Common Shares and Options actually represented at the Meeting in person or by proxy, the actual number of Common Shares and Options necessary to carry the proposed resolutions may be substantially lower than the numbers set out above.

      See “Description of the Acquisition and the Arrangement — Securityholder Approvals”.

Court Approval

      The Plan of Arrangement requires Court approval under the ABCA. On        l       , 2004, the Court granted the Interim Order providing for the calling and holding of the Meeting and certain other procedural matters. Subject to the terms of the Acquisition and Arrangement Agreement, and if the Acquisition and Arrangement Resolution is approved by Securityholders in the manner required by the Interim Order, the Corporation will make the application to the Court for the Final Order. At the hearing for the Final Order, the Court will consider, among other things, the fairness, both from a substantive and procedural point of view, of the Plan of Arrangement.

      See “Description of the Acquisition and the Arrangement — Court Approval”.

Securities Regulatory Approvals

      Discretionary exemptions must be obtained from certain Canadian securities regulatory authorities in respect of the issuance of certain securities contemplated by the Acquisition and the Arrangement. The Corporation will apply for exemptions from all such authorities. However, there can be no assurance that the necessary exemptions from such authorities will be obtained on a timely basis or on terms and conditions satisfactory to the Corporation.

      Notice of the proposed Acquisition and Arrangement will be submitted on behalf of the Corporation and Boardwalk REIT to the Commission des valeurs mobilières du Québec. Completion of the Acquisition and the

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Arrangement is subject to the approval of, or the failure to raise any objection by, the Commission des valeurs mobilières du Québec.

      See “Description of the Acquisition and the Arrangement — Securities Regulatory Approvals”.

Competition Act (Canada) Approval

      The Competition Act (Canada) requires pre-merger notification to the Commissioner of Competition (“Commissioner”) of transactions which exceed certain financial thresholds and, in the case of share acquisitions, that exceed an additional voting interest threshold. The Acquisition and the Arrangement meet and exceed these thresholds. A transaction is exempt from such notification requirement, however, if the Commissioner issues an advance ruling certificate (“ARC”) certifying that he does not have sufficient grounds to oppose the transactions. The Corporation has received an ARC with respect to the Acquisition and the Arrangement.

      See “Description of the Acquisition and the Arrangement — Regulatory Approvals”.

Stock Exchange Listings

      The TSX has conditionally approved the listing of the REIT Units, subject to the satisfaction of all of the requirements of the TSX. The REIT Units will not be listed on the NYSE or elsewhere in the United States and will not be registered under the 1934 Act.

      The Corporation has applied to delist the Common Shares from the TSX to be effective shortly after the Effective Date, subject to the completion of the Acquisition and the Arrangement. The Common Shares were delisted from the NYSE effective February 23, 2004. Simultaneously with such delisting from the NYSE, the Corporation ceased to be registered under the 1934 Act and to file reports with the SEC.

      See “Description of the Acquisition and the Arrangement — Regulatory Approvals”.

Third Party Notices and Approvals

      Certain of the transactions contemplated by the Acquisition and the Arrangement require the consent of lenders, co-owners and other third parties, including CMHC. CMHC has indicated that it will consent to the transactions outlined herein provided Boardwalk REIT executes the Large Borrower Agreement. In other cases, only notice is required to be sent to third parties. Prior to the Effective Date, the Corporation will send notices to and request the consent of various third parties with respect to the Acquisition and the Arrangement. However, there can be no assurance that the necessary consents from these third parties will be obtained on a timely basis or on terms and conditions satisfactory to the Corporation and BPCL. Failure to obtain these consents will give BPCL or the Corporation the right not to complete the Acquisition and the Arrangement.

      See “Description of the Acquisition and the Arrangement — Third Party Notices and Approvals”.

Timing

      If the Meeting is held as scheduled and is not adjourned and the other necessary conditions of the Acquisition and the Arrangement are satisfied or waived, the Corporation will apply to the Court for the Final Order approving the Plan of Arrangement. If the Final Order is obtained on        l       , 2004 in form and substance satisfactory to the Corporation and all other conditions specified are satisfied or waived, the Corporation expects the Effective Date to be on or about        l       , 2004.

      See “Procedure for Surrender of Common Shares — Timing”.

Other Meeting Business

      If the Acquisition and Arrangement Resolution is passed by the requisite majority of Securityholders at the Meeting, Shareholders are also being asked to consider and, if thought fit, pass an ordinary resolution authorizing and approving the adoption of a unitholder rights plan for Boardwalk REIT. As required by the TSX, the

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resolution approving the adoption of the Rights Plan must be approved by: (i) a majority of votes cast by Shareholders; and (ii) a majority of votes cast by Shareholders, other than those owned by any holder of Common Shares holding in excess of 20% of the outstanding Common Shares and their associates, affiliates and insiders. Accordingly, in respect of the second vote, the votes of Shareholders such as BPCL, its associates, affiliates and insiders will be excluded for the purposes of authorizing and approving this resolution.

      See “Other Meeting Business — Rights Plan”.

Material Canadian Federal Income Tax Considerations

      The following is a summary of the detailed description set forth under the heading “Material Canadian Federal Income Tax Considerations” for a Public Shareholder who deals at arm’s length with and is not affiliated with any of Boardwalk REIT, the Corporation and BPCL, and who holds Common Shares and will hold REIT Units as capital property.

 
Shareholders Resident in Canada

      A Shareholder will generally realize a capital gain (or a capital loss) on the disposition of the Shareholder’s Common Shares under the Acquisition and the Arrangement equal to the amount by which the total fair market value of the REIT Units received by the Shareholder exceeds (or is exceeded by) the adjusted cost base of the Shareholder’s Common Shares, net of any reasonable costs of making the disposition. One-half of any such capital gain must be included in income and one-half of any such capital loss may be utilized to offset taxable capital gains in accordance with the provisions of the Tax Act.

 
Shareholders Not Resident in Canada

      The transactions under the Acquisition and the Arrangement will generally not give rise to any tax being payable under the Tax Act by Shareholders (other than Dissenting Shareholders) who are Non-Residents.

 
Unitholders Resident in Canada

      A Unitholder will generally be required to include in computing income for a particular taxation year the Unitholder’s proportionate share of the income of Boardwalk REIT, including net realized taxable capital gains, that is paid or payable to the Unitholder in that year, whether such amount is distributed to the Unitholder in cash, REIT Units or otherwise.

      Any amount distributed to a Unitholder in excess of such Unitholder’s share of income of Boardwalk REIT will generally constitute a reduction in the adjusted cost base of the Unitholder’s REIT Units for the purposes of computing any capital gain or capital loss thereon.

      Provided that appropriate designations are made by Boardwalk REIT, taxable capital gains and taxable dividends paid by taxable Canadian corporations, if any, that are or are deemed to be paid or payable to a Unitholder will effectively retain their character and be treated as such in the hands of the Unitholder for purposes of the Tax Act.

 
Unitholders Not Resident in Canada

      A Unitholder who is a Non-Resident will be subject to Canadian withholding tax on distributions of income (other than amounts designated as taxable capital gains) from Boardwalk REIT at a rate of 25% unless that rate is reduced under the provisions of a tax treaty between Canada and the Unitholder’s jurisdiction of residence. For example, residents of the United States generally will be entitled to have the rate of withholding reduced to 15% of the amount of any income distribution.

 
Other Tax Considerations

      Based on the assumptions set forth under “Certain Canadian Federal Income Tax Considerations”, the REIT Units will be qualified investments on the Effective Date for trusts governed by certain tax exempt plans, such as

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registered retirement savings plans and registered retirement income funds, and if issued on the Effective Date, the REIT Units will not constitute foreign property for such plans on that date.

      In order for Boardwalk REIT to maintain its status as a mutual fund trust under the Tax Act, Boardwalk REIT must not be established or maintained primarily for the benefit of Non-Residents. Accordingly, the Declaration of Trust will provide that at no time may Non-Residents be the beneficial owners of a majority of either the REIT Units or Special Voting Units.

      See “Material Canadian Federal Income Tax Consequences”.

Material United States Federal Income Tax Considerations

      The U.S. federal income tax consequences of the transactions described in this Circular are not certain. The transactions comprising the Acquisition and the Arrangement may constitute a tax-free reorganization. If so, then an exchange of Common Shares for REIT Units pursuant to the Acquisition and the Arrangement would not be taxable. Distributions paid with respect to REIT Units (to the extent paid out of current or accumulated earnings and profits of Boardwalk REIT) should, assuming that Boardwalk REIT is not a “passive foreign investment company,” be eligible for the 15% tax rate applicable to “qualified dividend income” of non-corporate taxpayers through 2008.

      See “Material United States Federal Income Tax Considerations”.

Rights of Dissent

      Under the Interim Order, a registered Shareholder or Optionholder is entitled, in addition to any other rights he or she may have, to dissent and to be paid by the Corporation the fair value of the Common Shares and Options, as the case may be, held by him or her in respect of which he or she dissents, determined as of the close of business on the last Business Day before the Meeting. The Interim Order provides that the Partnership and Boardwalk REIT may discharge any obligations arising pursuant to Dissent Rights on behalf of the Corporation. A Shareholder or Optionholder may dissent only with respect to all of the Common Shares or Options, as applicable, held by him or her or on behalf of any one beneficial owner and registered in the Dissenting Securityholder’s name. Persons who are beneficial owners of Common Shares registered in the name of a broker, custodian, nominee or other intermediary who wish to dissent, should be aware that only the registered owner of such Common Shares is entitled to dissent. Accordingly, a beneficial owner of Common Shares desiring to exercise its right of dissent must make arrangements for the Common Shares it beneficially owns to be registered in its name prior to the time the written objection to the Acquisition and Arrangement Resolution is required to be received by the Corporation or, alternatively, make arrangements for the registered holder of such Common Shares to dissent on its behalf.

      See “Rights of Dissent”.

Risk Factors

      In deciding whether to approve the Acquisition and Arrangement Resolution, Securityholders should consider the risk factors relating to the Acquisition and the Arrangement and an investment in REIT Units.

      See “Risk Factors”.

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Key Dates and Information

      Please note the following key dates and information:

 
Meeting date:        l       , 2004 at 10:00 a.m. (Calgary time).
 
Meeting location: Calgary Petroleum Club,
319 — 5th Avenue S.W.
Calgary, Alberta
 
Record date:        l       , 2004
 
Voting procedure: If you are a registered Shareholder or an Optionholder, proxies may be voted by completing, signing and delivering such proxies to Computershare Trust Company of Canada at 100 University Avenue, 9th Floor, Toronto, Ontario M5J 2Y1, Attention: Proxy Department. If you are not a registered Shareholder, you should contact your broker or dealer for instructions.
 
Deadline for return of proxies: Not later than 10:00 a.m. (Calgary time) on        l       , 2004 or such earlier date as is specified in your voting instruction form.
 
Deadline for exercise of right to dissent:
A Securityholder who wishes to dissent must provide to the Corporation on the Business Day prior to the Meeting a written objection to the Acquisition and Arrangement Resolution.
 
Anticipated hearing date in respect of the Final Order:
       l       , 2004.
 
Anticipated Effective Date of the Acquisition and the Arrangement:
If all conditions to the Acquisition and the Arrangement are satisfied or waived, the Corporation expects the Effective Date to be on or about        l       , 2004.

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      The following section, entitled “Special Factors” is provided for US Shareholders pursuant to disclosure obligations imposed by the SEC. Much of the information contained herein is provided elsewhere in this Circular in response to Canadian disclosure requirements.

SPECIAL FACTORS

Background to and Reasons for the Acquisition and the Arrangement

      Since the Common Shares began trading on the Alberta Stock Exchange in January 1994, the Board of Directors has implemented various measures to enhance shareholder value, including share splits, listing the Common Shares on the NYSE, and most recently the introduction of a dividend. Periodically management has considered whether the reorganization of the Corporation into another business entity such as a real estate investment trust would create additional shareholder value. Historically, management did not feel that such a reorganization would be appropriate. However, management has more recently come to believe that a number of factors, which were not previously present, now indicated that reorganization into a REIT is desirable. These factors include the increasing demand for tax efficient yield securities in the Canadian marketplace, the superior access to capital enjoyed by Canadian real estate investment trusts, the competitive tax advantage enjoyed by Canadian real estate investment trusts when making acquisitions, the current market expectation that distribution yields are at historical lows, and the market’s acceptance of more complex structures.

      From August through October of 2003, management and BPCL, with the assistance of professional advisors, including CIBC World Markets Inc. acting as financial advisor to the Corporation, explored potential transactions to reorganize the Corporation into a real estate investment trust. Together with these advisors, management and BPCL developed a model that would effectively reorganize the business of the Corporation into a real estate investment trust as part of an acquisition of the Corporation by BPCL. A reorganization such as this is generally designed to achieve commercial and tax efficiencies not available to a corporation. Such tax efficiencies result from the fact that under Canadian income tax law a Canadian resident trust, although it is a taxable entity, is generally entitled to deduct, in computing its taxable income for a taxation year, the portion thereof that is paid or becomes payable in that year to beneficiaries. Therefore, a trust that distributes all or substantially all of its income currently to beneficiaries generally will not be liable for any material amount of Canadian tax. By comparison, corporations cannot deduct dividends paid to their shareholders. Therefore, under a corporate structure there is an element of “double taxation”, with the income being subject to tax in the corporation and dividends generally being taxable to shareholders.

      BPCL was incorporated in 1984. Prior to the Corporation becoming a public company, certain real estate assets were held by BPCL. Since the transfer of such assets to the Corporation in the fiscal years ended 1994, 1995 and 1996, BPCL has been a holding company.

      On November 5, 2003, the Board of Directors considered management’s and BPCL’s proposal for BPCL to acquire the Corporation and to reorganize the business of the Corporation into a real estate investment trust. The Board of Directors discussed the proposed Acquisition and Arrangement including BPCL’s acquisition of the Corporation. The Board of Directors considered, among others, the following factors in its review and discussion of the proposal:

        (a) monthly cash distributions were anticipated to provide an attractive return to Unitholders without impairing the Corporation’s ability to finance capital expenditures and to meet external debt payments;
 
        (b) the Corporation has characteristics that are suited to a real estate investment trust structure, in particular the Corporation’s diversified portfolio of multi-family residential properties which provide a relatively stable cash flow;
 
        (c) the new trust structure would result in a higher level of cash distributions than would be available under the existing corporate structure of the Corporation;
 
        (d) a significant portion of Boardwalk REIT’s distributions to Unitholders would be tax-deferred;

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        (e) the anticipated improved access that Boardwalk REIT would have to the public capital markets to fund growth initiatives than is or would be available to the Corporation under current market conditions and given its existing corporate structure;
 
        (f) Boardwalk REIT would be the largest and most geographically diverse publicly traded multi-family residential trust in Canada; and
 
        (g) employees and executives of the Corporation will become employees and executives of the Partnership or its subsidiaries. No significant changes in management are contemplated as a result of the Transaction.

      The Board of Directors also considered factors with respect to the proposed Acquisition and Arrangement that had potentially negative consequences to the Corporation or its Shareholders. These factors included:

        (a) the significant transaction costs associated with the Acquisition and the Arrangement;
 
        (b) the increased organizational complexity presented by the trust structure; and
 
        (c) the tax consequences for individual Shareholders since the Acquisition and the Arrangement would represent a taxable transaction to the Public Shareholders.

      On November 5, 2003, following their review and discussion of management’s and BPCL’s proposal for BPCL to acquire the Corporation and to reorganize the business of the Corporation into a real estate investment trust, the Board of Directors resolved to appoint a special committee of directors independent of BPCL and management of the Corporation to consider the proposed Acquisition and Arrangement. The members of the Special Committee are Ernest Kapitza, Al Mawani and David Richards.

      The Special Committee retained McCarthy Tétrault LLP as its independent legal counsel and RBC as its independent financial advisor, to assist the Special Committee in its consideration of the proposed Acquisition and Arrangement. In retaining RBC, the Special Committee, based in part on representations made to it by RBC, concluded that RBC was independent of BPCL and qualified to provide a fairness opinion in connection with the Acquisition and the Arrangement. In determining to retain RBC, the Special Committee requested written proposals from and met with two financial advisors. The Special Committee considered each potential advisor’s experience with similar transactions, familiarity with the Corporation and ability to complete the necessary work within the time frame desired by the Corporation.

      Between November 5, 2003 and January 8, 2004, the Special Committee met nine times. The members of the Special Committee reviewed and discussed the terms of and reasons for the proposed Acquisition and Arrangement and for this purpose met with the Corporation, BPCL and their advisors. The Special Committee and its advisors considered all aspects of the proposed Acquisition and Arrangement, including the various agreements and ancillary transactions to be entered into in connection therewith.

      In order to permit RBC to properly assess the fairness of the consideration under the Transaction, from a financial point of view, to the Public Shareholders, RBC was provided access to various non-public information regarding the Corporation. This information was furnished directly to RBC by management of the Corporation and was not separately reviewed by the Board of Directors. This information included historical cash flows on a building by building basis, budgets for capital improvements to various buildings, forecasts of future cash flows for the portfolio on a building by building basis and estimates of cash flows assuming completion of the Transaction. The Corporation does not make this information publicly available because to do so would put it at a significant competitive disadvantage. Moreover, Canadian securities laws provide significant limitations on the publication of future oriented financial information. Financial statements of the Corporation that summarize the material historical information furnished to RBC can be found in the section entitled “Information Concerning the Corporation — Management’s Discussion & Analysis” and in both the consolidated statements of earnings of the Corporation and the segmented financial information by province of the Corporation for the nine months ended September 30, 2003 and 2002, the 12 months ended December 31, 2002 and 2001 and May 31, 2000 and the seven months ended December 31, 2000, attached hereto as Appendix D.

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      The non-public financial information reviewed by RBC was comprised of management of the Corporation’s current business plan and five year strategy and current operational budgets including the proposed capital improvement program. The five year strategy is developed based on favourable estimates of the current environment in which the Corporation currently operates. For example, the strategy assumes a continued low interest rate environment where the Corporation enjoys continued access to financing, an ability to acquire a modest number of additional units each year at rates of return consistent with those experienced currently and consistent administration costs at the site level with increasing efficiencies realized in head office administration as a result of portfolio growth. Based on these assumptions the current strategic plan suggests a stable, single digit increase in funds from operations (a non-GAAP measure) over the five year term of the plan. Sensitivity analysis performed by management of the Corporation demonstrates that the results obtained under the business plan depend heavily on interest rates, operating margins and vacancy levels. Adverse changes in any of these areas will have an adverse effect on the economic performance of the Corporation which effect may be significant. See “Risk Factors”.

      On December 10, 2003, RBC delivered to the Special Committee its preliminary views as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders. At this meeting, RBC described the material factors upon which its assessment of fairness is based and the methodologies and procedures followed by it in carrying out its work. See “Special Factors — Opinion of RBC — Approach to Fairness”.

      On December 10, 2003, the Special Committee reported to the Board of Directors that, on the basis of the preliminary views of RBC as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders and other factors, including those referred to above and those referred to below under “Factors Considered in Determining the Fairness of the Acquisition and the Arrangement”, the Special Committee unanimously concluded that the Acquisition and the Arrangement are in the best interests of the Corporation and, based on the preliminary views of RBC, the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders. The Special Committee resolved, subject to the Corporation obtaining all necessary third party consents, the satisfaction of other conditions, including the satisfactory negotiation of the final terms of the Acquisition and Arrangement Agreement and the receipt by the Special Committee of a signed Fairness Opinion confirming RBC’s preliminary view that the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders, to recommend that the Board of Directors:

        (a) authorize the Corporation to enter into the Acquisition and Arrangement Agreement;
 
        (b) submit the Acquisition and Arrangement Resolution to a vote of the Securityholders at the Meeting; and
 
        (c) recommend that Public Shareholders vote in favour of the Acquisition and Arrangement Resolution.

      On January 5, 2004, RBC confirmed that its preliminary views as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders were unchanged. The Special Committee met again on January 5, 2004 and confirmed its recommendation made on December 10, 2003 subject to the same conditions upon which such recommendation was made including receipt by the Special Committee of a signed fairness opinion confirming RBC’s preliminary view that the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders. On January 8, 2004, RBC delivered the Fairness Opinion to the Special Committee. The Fairness Opinion states that RBC is of the opinion that, as of the date of the Fairness Opinion, the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders. A copy of the Fairness Opinion, which is dated January 8, 2004, is attached as Appendix E to this Circular. Securityholders should carefully review and consider the Fairness Opinion in its entirety. The Fairness Opinion is subject to the assumptions and limitations contained therein. See also “Description of the Acquisition and the Arrangement — Fairness Opinion”.

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      On December 10, 2003, the Board of Directors authorized the Corporation to enter into the Acquisition and Arrangement Agreement, conditional on the satisfactory negotiation of the final terms of the Acquisition and Arrangement Agreement and delivery of the Fairness Opinion. The Board of Directors met again on January 8, 2004 to receive the Fairness Opinion and authorize the filing of the Information Circular and Schedule 13E-3 with the SEC. The negotiation of the final terms of the Acquisition and Arrangement Agreement was concluded, and the Acquisition and Arrangement Agreement was signed on January 9, 2004.

      The Board of Directors (a majority of whom are not employees of the Corporation or BPCL), on the recommendation of the Special Committee, and based on its own investigations has concluded that the Acquisition and the Arrangement are in the best interests of the Corporation and fair to the Public Shareholders, Unaffiliated Shareholders and Optionholders and recommends that Public Shareholders and Optionholders vote in favour of the Acquisition and Arrangement Resolution. Messrs. Sam Kolias and Van Kolias declared their interest in the Transaction and abstained from voting on this matter. All directors who voted, voted in favour of this matter.

      In aggregate, the directors and executive officers (including senior officers) of the Corporation own or exercise control or direction over approximately 17,518,496 Common Shares (approximately 32.9% of the Common Shares on a fully diluted basis). All of the directors and officers have indicated to the Corporation an intention to vote all of the Common Shares and Options, owned by them or over which control or direction is exercised in favour of the Acquisition and Arrangement Resolution. In addition, the Acquisition and Arrangement Resolution must be approved by a simple majority of the votes cast by all Minority Shareholders represented at the Meeting.

      Based on the deliberations of the Board of Directors and the fact that a fairness opinion was obtained by the Special Committee, and adopting the analysis of the Board of Directors discussed below, BPCL has determined that the Acquisition and the Arrangement are fair to the Public Shareholders, including Shareholders who are not affiliates of the Corporation for purposes of United States securities laws, and recommends that Public Shareholders vote in favour of the Acquisition and the Arrangement.

      No provision has been made to permit holders of Common Shares who are not affiliates of either the Corporation or BPCL to access the corporate files of either the Corporation or BPCL or to obtain counsel or appraisal services at the expense of the Corporation or BPCL.

Factors Considered in Determining the Fairness of the Acquisition and the Arrangement

      In determining fairness of the Acquisition and the Arrangement the Board of Directors considered and adopted the factors considered by the Special Committee and considered the advice of management regarding the emergence of the REIT as the preferred vehicle to hold real estate in Canada and the advice of professional advisors regarding the tax efficiencies of trusts under Canadian tax law.

      The factors considered by the Special Committee and adopted by the Board of Directors, together with the weight assigned to such factor and the reasons for such factor are set out below.

(i)     The recommendation of the Special Committee to the Board of Directors, including the receipt of the Fairness Opinion by the Special Committee (30%).

      The Special Committee was strongly influenced as to the fairness of the Transaction by the fact that an independent investment banking firm reviewed the Acquisition and the Arrangement and provided an opinion that the consideration under the Acquisition and the Arrangement was fair, from a financial point of view, to the Public Shareholders. The Special Committee adopted the analysis that RBC used to provide the Fairness Opinion. The Fairness Opinion is subject to various qualifications and limitations and is attached hereto as Appendix E. Shareholders are encouraged to read the Fairness Opinion in it entirety.

(ii)     Advice received from the Corporation’s tax and financial advisors (25%)

      Both the Special Committee and the Board of Directors were influenced by advice from tax advisors that trust structures are currently better suited to distribute cash to unitholders than corporations, since under current

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Canadian tax law trust structures, when they make distributions to unitholders, avoid an element of “double taxation” that occurs when corporations pay dividends to shareholders.

      Similarly, the financial advisors to the Corporation have expressed the view that publicly traded trusts currently enjoy a lower cost of capital than publicly traded corporations. However, there can be no assurance that this preference will continue in the future.

  (iii)     Consideration of alternative transactions designed to achieve an increase in shareholder value (15%).

      In determining to proceed with the Acquisition and the Arrangement, the Board of Directors considered alternative transactions to maximize shareholder value. Among the alternatives considered were the sale of the Corporation as a corporate entity to a third party, the sale of corporate assets to a third party and maintaining the current corporate structure.

      Although the mandate of the Special Committee did not specifically include consideration of all possible alternative transactions, both the Board of Directors and the Special Committee considered the fact that the Corporation has not received any unsolicited offers to acquire the Corporation. Although third party sales often realize a premium, both the Board of Directors and the Special Committee concluded that, if the Transaction is consummated, the Unitholders would have materially the same opportunity to benefit from any such premium as they presently have as Shareholders, and that therefore the possibility of an unsolicited offer from a third party does not diminish the fairness of the Transaction to the Public Shareholders and Unaffiliated Shareholders. In addition, the Declaration of Trust contains provisions which afford, to any bidder who obtains tenders of at least 90% of the REIT Units, substantially the same rights as a bidder who obtains tenders of at least 90% of the equity of a corporation under corporate law.

  (iv)     The current and expected market prices of the stock following announcement and completion of the Transaction (15%)

      Immediately following a press release announcing that the Corporation was considering restructuring as a REIT the shares of the Corporation began trading at prices more than 10% higher than prior to the announcement. Based on an analysis of the trading prices of comparable trusts both the Board of Directors and the Special Committee felt that this new price level was appropriate following completion of the reorganization. Although no assurance as to future trading prices of REIT Units can be given, both the Special Committee and the Board of Directors were encouraged by the increase in the prevailing share price and accordingly assigned expected market price some weight in their deliberation.

  (v)     The approval of Securityholders required for the Transaction (15%)

      Although the Board of Directors and the Special Committee have formed the view that the reorganization is fair from a financial point of view to the Public Shareholders, the fact that the structure of the Acquisition and the Arrangement will afford these shareholders an opportunity to vote on the reorganization was also a factor in the considerations of the Board of Directors and the Special Committee.

      See also “Special Factors — Background to and Reasons for the Acquisition and the Arrangement” and “Description of the Acquisition and the Arrangement — Background to and Reasons for the Acquisition and the Arrangement”.

      Neither the Special Committee nor the Board of Directors considered numerical measures of the value of the Corporation, such as net book value, going concern value and liquidation value. Such measures would not meaningfully advance the fairness determination, since those measures would be the same for Boardwalk REIT immediately after the Transaction and Unitholders will have the same proportionate participation immediately after the Transaction as they had as Shareholders immediately before the Transaction.

      Similarly, although the Corporation has made open market purchases of Common Shares at various prices during the past two years (see “Information Concerning the Corporation — Prior Stock Purchases”), and those purchases could be used to estimate a value of the Corporation, neither the Special Committee nor the Board of Directors considered such purchases in their fairness determination, since the estimated value would be the same

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for Boardwalk REIT immediately after the Transaction and Unitholders will have the same proportionate participation immediately after the Transaction as they had as Shareholders immediately before the Transaction.

Alternatives Considered

      In determining to proceed with the Acquisition and the Arrangement, the Board of Directors considered alternative transactions to maximize shareholder value. Among the alternatives considered were the sale of the Corporation as a corporate entity to a third party, the sale of corporate assets to a third party and maintaining the current corporate structure. The Corporation is not aware of any unsolicited offers to acquire shares of the Corporation. Since the proposed Transaction allows Shareholders to continue to participate as unitholders of the new entity the Board of Directors concluded that the Transaction did not preclude a potential bidder from offering to acquire the Trust on a cash basis in the future nor did the Transaction obviate other future transactions such as asset sales or joint ventures.

      As an alternative to maintaining the current structure, the Board of Directors felt that the reorganization would create additional shareholder value without precluding other future transactions. The structure of the Transaction was determined by considerations that included applicable Canadian tax law.

Effects of the Acquisition, the Arrangement and Related Transactions

      The Acquisition and the Arrangement are multi-step transactions that will result in (i) the indirect acquisition by Boardwalk REIT of all of the Contributed Assets; (ii) the indirect acquisition of the Corporation by BPCL by the acquisition of all of the outstanding Common Shares; and (iii) after taking into account the preferred partnership distribution and other entitlements of the LP Class C Units held by BPCL through the Corporation, the indirect interest of the Public Shareholders in approximately 92% of the Contributed Assets through the ownership of the outstanding REIT Units and the indirect interest of BPCL in approximately 8% of the Contributed Assets. This result is subject to completion by BPCL of the Secondary Offering and various priority distributions described herein.

      After giving effect to the Acquisition and the Arrangement, and assuming the maximum size of the Secondary Offering is completed:

  •  BPCL will acquire the Corporation and the Corporation will be an indirect, wholly-owned subsidiary of BPCL and the Common Shares will be delisted from the TSX;
 
  •  Public Shareholders will own all of the outstanding REIT Units, which have been conditionally listed for trading on the TSX;
 
  •  Boardwalk REIT will indirectly hold, through its indirect interest in the LP Class A Units, an approximately 92% interest in the Partnership (after the preferred partnership distribution and other entitlements of the LP Class C Units held indirectly by BPCL; see “Information Concerning the Partnership — Distributions”), which will hold, directly or indirectly, all of the Contributed Assets previously comprising the business of the Corporation;
 
  •  the remaining approximately 8% interest in the Partnership (after the preferred partnership distribution and other entitlements of the LP Class C Units indirectly held by BPCL) will be indirectly held by BPCL through its indirect interest in the LP Class B Units.

The LP Class B Units will have equivalent voting and distribution entitlements to the REIT Units into which they are exchangeable. The Common Shares were delisted from the NYSE effective February 23, 2004.

      Following the completion of the Acquisition and the Arrangement:

        (a) BPCL, through Newco, will acquire the Corporation and will own all of the issued and outstanding Common Shares;
 
        (b) the Public Shareholders will own REIT Units, which (after the preferred distribution and other entitlements of the LP Class C Units held indirectly by BPCL) will represent an equity interest in Boardwalk REIT of approximately 92% assuming completion of the Secondary Offering (or approximately 72% assuming that the Secondary Offering does not occur);

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        (c) BPCL will indirectly own LP Class B Units, which will effectively represent an approximately 8% interest in Boardwalk REIT (after the preferred distribution and other entitlements of the LP Class C Units, which it also will own indirectly) and, if the Secondary Offering is not completed, REIT Units, which will represent an additional equity interest in Boardwalk REIT of approximately 20% (after the preferred distribution and other entitlements of the LP Class C Units, which it will also own indirectly);
 
        (d) Boardwalk REIT will directly or indirectly own all of the issued and outstanding common shares of the General Partner, the Operating Trust Notes and the Operating Trust Units;
 
        (e) the Operating Trust will own all of the issued and outstanding LP Class A Units, representing an approximately 92% interest in the Partnership (after the preferred distribution and other entitlements of the LP Class C Units held indirectly by BPCL);
 
        (f) the Corporation will remain liable for the Retained Debt and will directly and indirectly, through BEI Subco, own all of the LP Class B Units (and the associated Special Voting Units), representing an approximately 8% equity interest in the Partnership (after the preferred distribution and other entitlements of the LP Class C Units, which it also will own indirectly); and
 
        (g) the Partnership will directly and indirectly own the Contributed Assets.

      BPCL currently has a 28.41% interest in the net book value and net income of the Corporation (on a fully diluted basis), by reason of its ownership of Common Shares. Immediately after the Effective Date, BPCL would own 100% of the Common Shares. In the event that no Common Shares are sold in the Secondary Offering, BPCL’s effective interest in Boardwalk REIT (by reason of its ownership of the Common Shares and of REIT Units) would be 28.41% representing $77,008,779 of the net assets of the Corporation at September 30, 2003 and $1,147,634 of the net income for the nine months then ended, calculated in accordance with U.S. GAAP. Based upon the assumptions set forth in the pro forma financial statements of Boardwalk REIT and assuming the completion of the entire Secondary Offering, BPCL’s interest in Boardwalk REIT (by reason of its ownership of the Common Shares) would be 8.40% of the net assets and net income of Boardwalk REIT representing $22,762,067 of net assets at September 30, 2003 and $339,215 of the net income for the nine months then ended, calculated in accordance with U.S. GAAP.

Accounting Treatment of the Transaction

      In the Transaction, the anticipated sale of Common Shares by BPCL pursuant to the Secondary Offering along with the Acquisition and the Arrangement will result in the creation of a new entity, Boardwalk REIT, and a substantive change in the ownership interest (defined under GAAP as being greater than 20%) of the Corporation through the transfer of the ownership of 92% of the interest in the business to Boardwalk REIT. The Secondary Offering is expected to include the sale of not less than a 20% interest in the Common Shares and, ultimately, a 21.8% equity interest in Boardwalk REIT. Under GAAP, if a related party transaction not in the normal course of business results in a substantive change in ownership and there is independent evidence of value, the assets and liabilities acquired and assumed pursuant to the transaction, under specific conditions, should be recorded for accounting purposes at their exchange amounts (approximating fair market values for the purposes of the Transaction). The favourable accounting treatment of the Transaction if the Secondary Offering is completed was not one of the factors considered by the Special Committee or the Board of Directors in assessing the fairness of the Acquisition and the Arrangement.

      The Transaction is expected to satisfy the conditions necessary for exchange value accounting treatment to be applied and Boardwalk REIT would record the Contributed Assets at their exchange values on the Effective Date. It should be noted, however, that if the Secondary Offering is not completed as contemplated in the Transaction, or does not result in a substantive change in ownership interest to meet the 20% requirement for use of exchange amounts, neither the Contributed Assets nor liabilities assumed will be recorded at their exchange values on the Effective Date, but rather will be recorded at the Corporation’s carrying values for such assets and liabilities when recorded by Boardwalk REIT.

      The pro forma financial statements of Boardwalk REIT set forth in Appendix D present the financial results under exchange value assumptions as described above. If the Secondary Offering is not completed or it is determined that insufficient Common Shares have been sold to evidence a substantive change in equity ownership

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interest, then the exchange value adjustments noted in the pro forma financial statements will not apply and only those adjustments made prior to the exchange value adjustments will be applicable.

Material Canadian Federal Income Tax Considerations

      The following is a summary of the detailed description set forth under the heading “Material Canadian Federal Income Tax Considerations” for a Public Shareholder who deals at arm’s length with and is not affiliated with any of Boardwalk REIT, the Corporation and BPCL, and who holds Common Shares and will hold REIT Units as capital property.

 
Shareholders Resident in Canada

      A Shareholder will generally realize a capital gain (or a capital loss) on the disposition of the Shareholder’s Common Shares under the Acquisition and the Arrangement equal to the amount by which the total fair market value of the REIT Units received by the Shareholder exceeds (or is exceeded by) the adjusted cost base of the Shareholder’s Common Shares, net of any reasonable costs of making the disposition. One-half of any such capital gain must be included in income and one-half of any such capital loss may be utilized to offset taxable capital gains in accordance with the provisions of the Tax Act.

 
Shareholders Not Resident in Canada

      The transactions under the Acquisition and the Arrangement will generally not give rise to any tax being payable under the Tax Act by Shareholders (other than Dissenting Shareholders) who are Non-Residents.

 
Unitholders Resident in Canada

      A Unitholder will generally be required to include in computing income for a particular taxation year the Unitholder’s proportionate share of the income of Boardwalk REIT, including net realized taxable capital gains, that is paid or payable to the Unitholder in that year, whether such amount is distributed to the Unitholder in cash, REIT Units or otherwise.

      Any amount distributed to a Unitholder in excess of such Unitholder’s share of income of Boardwalk REIT will generally constitute a reduction in the adjusted cost base of the Unitholder’s REIT Units for the purposes of computing any capital gain or capital loss thereon.

      Provided that appropriate designations are made by Boardwalk REIT, taxable capital gains and taxable dividends paid by taxable Canadian corporations, if any, that are or are deemed to be paid or payable to a Unitholder will effectively retain their character and be treated as such in the hands of the Unitholder for purposes of the Tax Act.

 
Unitholders Not Resident in Canada

      A Unitholder who is a Non-Resident will be subject to Canadian withholding tax on distributions of income (other than amounts designated as taxable capital gains) from Boardwalk REIT at a rate of 25% unless that rate is reduced under the provisions of a tax treaty between Canada and the Unitholder’s jurisdiction of residence. For example, residents of the United States generally will be entitled to have the rate of withholding reduced to 15% of the amount of any income distribution.

 
Other Tax Considerations

      Based on the assumptions set forth under “Material Canadian Federal Income Tax Considerations”, the REIT Units will be qualified investments on the Effective Date for trusts governed by certain tax exempt plans, such as registered retirement savings plans and registered retirement income funds, and if issued on the Effective Date, the REIT Units will not constitute foreign property for such plans on that date.

      In order for Boardwalk REIT to maintain its status as a mutual fund trust under the Tax Act, Boardwalk REIT must not be established or maintained primarily for the benefit of Non-Residents. Accordingly, the

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Declaration of Trust will provide that at no time may Non-Residents be the beneficial owners of a majority of either the REIT Units or Special Voting Units.

      See “Material Canadian Federal Income Tax Consequences”.

Material United States Federal Income Tax Considerations

      The U.S. federal income tax consequences of the transactions described in this Circular are not certain. The transactions comprising the Acquisition and the Arrangement may constitute a tax-free reorganization. If so, then an exchange of Common Shares for REIT Units pursuant to the Acquisition and the Arrangement would not be taxable. Distributions paid with respect to REIT Units (to the extent paid out of current or accumulated earnings and profits of Boardwalk REIT) should, assuming that Boardwalk REIT is not a “passive foreign investment company,” be eligible for the 15% tax rate applicable to “qualified dividend income” of non-corporate taxpayers through 2008.

      See “Material United States Federal Income Tax Considerations”.

Securityholder Approvals

      The Interim Order provides that, for the Plan of Arrangement to be implemented, the Acquisition and Arrangement Resolution must be passed, with or without variation, by (i) a 66 2/3% majority of all of the votes cast by Shareholders and Optionholders voting together as a single class at the Meeting in person or by proxy; and (ii) a simple majority of the votes cast by Minority Shareholders voting at the Meeting in person or by proxy.

      BPCL has agreed with the Corporation in the Acquisition and Arrangement Agreement that it will vote, and will cause each of its affiliates which hold Common Shares to vote, the Common Shares beneficially owned by it or over which it exercises control or direction (representing, in aggregate, approximately 28% of the outstanding Common Shares on a fully diluted basis), in favour of the Acquisition and Arrangement Resolution. In addition, each of the directors and senior officers of the Corporation has indicated to the Corporation that he or she intends to vote all of the Common Shares and Common Shares issuable on exercise of Options beneficially owned by him or her or over which he or she exercises control or direction in favour of the Acquisition and Arrangement Resolution.

      Each Shareholder of record on        l       , 2004 will be entitled to one vote for each Common Share held as of such date. Similarly, each Optionholder will be entitled to one vote for each Common Share into which the Options held by such holder is exercisable.

Opinion of RBC

      A copy of the Fairness Opinion, which is dated January 8, 2004, is attached as Appendix E to this Circular. Securityholders should carefully review and consider the Fairness Opinion in its entirety. The Fairness Opinion is subject to the assumptions and limitations contained therein. The Fairness Opinion is available for inspection and copying at the principal executive offices of the Corporation during regular business hours by any interested Shareholder or representative who has been so designated in writing.

      RBC has expressly consented to the inclusion in this Circular of the text of the Fairness Opinion (attached as Appendix E to this Circular) and of this summary. The Fairness Opinion is not, and should not be construed as, a recommendation to any Securityholder as to whether to vote in favour of the Acquisition and the Arrangement.

      The following section summarizes the Fairness Opinion, describing, among other things, the scope of review undertaken and the relevant factors and the key assumptions on which the Fairness Opinion is based. The following summary is qualified in its entirety by, and should be read in conjunction with, the Fairness Opinion.

 
Engagement of RBC

      RBC was engaged by the Special Committee through an agreement between the Corporation and RBC (the “Engagement Agreement”) dated November 17, 2003. The terms of the Engagement Agreement provide that RBC is to be paid $325,000 for the Fairness Opinion. In addition, RBC is to be reimbursed for its reasonable out-

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of-pocket expenses and to be indemnified by the Corporation in certain circumstances. The compensation of RBC under the Engagement Agreement does not depend in whole or in part on the conclusions reached in the Fairness Opinion or the successful outcome of the Acquisition and the Arrangement.
 
Credentials of RBC and Relationship of RBC with Interested Parties

      RBC is one of Canada’s largest investment banking firms, with operations in all facets of corporate and government finance, corporate banking, mergers and acquisitions, equity and fixed income sales and trading and investment research. Neither RBC, nor any of its affiliates is an insider, associate or affiliate (as those terms are defined in the Securities Act (Alberta)) of the Corporation, BPCL or any of their respective associates or affiliates. Other than the services provided under the Engagement Agreement, RBC has not been engaged to provide any financial advisory services nor has it participated in any financing involving the Corporation, BPCL or any of their respective associates or affiliates within the past two years. There are no understandings, agreements or commitments between RBC and the Corporation, BPCL or any of their respective associates or affiliates with respect to any future business dealings. RBC may, in the future, in the ordinary course of its business, perform financial advisory or investment banking services for the Corporation, BPCL, Boardwalk REIT or any of their respective associates or affiliates. A Canadian chartered bank, of which RBC is a wholly-owned subsidiary, provides banking services to the Corporation and certain of its associates and affiliates in the normal course of business.

      RBC acts as a trader and dealer, both as principal and agent, in major financial markets and, as such, may have had and may in the future have positions in the securities of the Corporation, Boardwalk REIT or any of their respective associates or affiliates and, from time to time, may have executed or may execute transactions on behalf of such companies or clients for which it received or may receive compensation. As an investment dealer, RBC conducts research on securities and may, in the ordinary course of its business, provide research reports and investment advice to its clients on investment matters, including with respect to the Corporation, Boardwalk REIT or the Acquisition and the Arrangement.

 
Scope of Review

      In preparing the Fairness Opinion, RBC held discussions with the Special Committee and its legal counsel, members of senior management of the Corporation and the Corporation’s auditors, tax advisors and legal counsel; reviewed certain public and non-public information relating to the Corporation; reviewed drafts of the principal documents relating to the Acquisition and the Arrangement; reviewed public information relating to the Corporation and other selected public entities, transactions of a comparable nature, the real estate industry generally and multi-family residential property entities in particular; and reviewed and relied upon such other corporate, industry and financial market information, investigations and analyses as RBC considered necessary or appropriate in the circumstances.

 
Assumptions and Limitations

      With the Special Committee’s approval and as provided for in the Engagement Agreement, RBC has relied upon the completeness, accuracy and fair presentation of all of the financial and other information, data, advice, opinions or representations obtained by it from public sources, senior management of the Corporation, and their consultants and advisors (collectively, the “Information”). The Fairness Opinion is conditional upon such completeness, accuracy and fair presentation of such Information. Subject to the exercise of professional judgment and except as expressly described in the Fairness Opinion, RBC has not attempted to verify independently the completeness, accuracy or fair presentation of any of the Information. RBC has not, to the best of its knowledge been denied access by the Corporation to any information requested by RBC.

      In preparing the Fairness Opinion, RBC has made several assumptions, including that all of the conditions required to implement the Acquisition and the Arrangement will be met and that the disclosure provided or incorporated by reference in the draft Circular with respect to the Corporation, its subsidiaries and affiliates and the Acquisition and the Arrangement is accurate in all material respects.

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      The Fairness Opinion is rendered on the basis of securities markets, economic, financial and general business conditions prevailing as at the date of the Fairness Opinion and the condition and prospects, financial and otherwise, of the Corporation and its subsidiaries and affiliates, as they were reflected in the Information and as they have been represented to RBC in discussions with management of the Corporation. In its analyses and in preparing the Fairness Opinion, RBC made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of RBC or any party involved in the Acquisition and the Arrangement.

      RBC believes that its analyses must be considered as a whole and that selecting portions of the analyses or the factors considered by it, without considering all factors and analyses together, could create a misleading view of the process underlying the Fairness Opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Any attempt to do so could lead to undue emphasis on any particular factor or analysis. The Fairness Opinion is not to be construed as a recommendation to any holder of Common Shares or Options as to whether to vote in favour of the Acquisition and the Arrangement.

     Approach to Fairness

      RBC proceeded by identifying factors that RBC determined were material to a determination of the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders, analyzing each of those factors, and then evaluating all of those factors together. RBC identified the following material factors: (i) the expected trading characteristics of the REIT Units compared to the trading characteristics of the Common Shares prior to the Corporation’s announcement (the “Announcement”) of the Acquisition and the Arrangement; (ii) the financial attributes of Boardwalk REIT compared to the Corporation; (iii) the potential short and long-term financial impact resulting from the Acquisition and the Arrangement compared to the continuation of the status quo; and (iv) the financial attributes of the REIT Units, the LP Class A Units, the LP Class B Units and the LP Class C Units.

      In assessing the expected trading characteristics of the REIT Units compared to the trading characteristics of the Common Shares prior to the Announcement, RBC determined that the most appropriate entities to which to compare Boardwalk REIT were Canadian Apartment Properties REIT (“CAP REIT”) and Residential Equities REIT (“RES REIT”, and, together with CAP REIT, the “Peers”), which are the two existing REITs in Canada that are most purely comprised of multi-family residential properties. As more particularly described below, RBC reviewed and considered the Peers’:

  •  trading multiples based on funds from operations (“FFO”) and recurring distributable income (“RDI”);
 
  •  trading prices compared to net asset value (“NAV”);
 
  •  current and expected yields based on distributions;
 
  •  payout ratios of distributable income;
 
  •  tax deferred component of distributions;
 
  •  leverage;
 
  •  business strategy;
 
  •  governance;
 
  •  management organization; and
 
  •  trading liquidity.

      RBC also determined that, when considering the expected trading characteristics of the REIT Units with reference to the trading characteristics of the Peers, the relevant comparison benchmark with respect to the trading characteristics of the Common Shares prior to the Announcement was the price of the Common Shares prior to the Announcement (the “Pre-Announcement Price”) adjusted to reflect the change in market value of the Peers from the date of the Announcement (the “Adjusted Pre-Announcement Price”). RBC determined that the Pre-Announcement Price was $15.59 per Common Share, which was the closing price of the Common Shares on

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the TSX on November 5, 2003, the day immediately prior to the Announcement. RBC noted that, from November 5, 2003 to January 7, 2004, the day immediately prior to the date of the Fairness Opinion, the market value of the Peers decreased by approximately 3.4%. Applying this percentage change to the Pre-Announcement Price, RBC calculated the Adjusted Pre-Announcement Price to be $15.06 per Common Share.

      RBC calculated the yields, payout ratios and trading multiples of estimated 2004 FFO and RDI for the Peers as follows:

                                                                 
Payout
2004E FFO 2004E RDI as % of
Unit

Current 2004E
Price(1) Per Unit(2) Multiple Per Unit(2) Multiple Distribution Yield RDI








CAP REIT
  $ 15.35     $ 1.31       11.7x     $ 1.31       11.7x     $ 1.08       7.0 %     82 %
RES REIT
  $ 14.95     $ 1.34       11.2x     $ 1.34       11.2x     $ 1.08       7.2 %     81 %
                     
             
             
     
 
Average
                    11.4x               11.4x               7.1 %     82 %
                     
             
             
     
 


Notes:

(1)  Closing price on January 7, 2004.
 
(2)  Source: RBC research.

RBC noted that the Peers, on average, traded at a multiple of approximately 11.4x estimated 2004 FFO and RDI and a current yield of approximately 7.1%. RBC calculated that, at the Adjusted Pre-Announcement Price, the REIT Units would trade at multiples of approximately 10.5x and 10.1x Boardwalk REIT’s estimated FFO and RDI, respectively, per REIT Unit for 2004 and a yield of approximately 8.2% based on Boardwalk REIT’s expected distributions per REIT Unit. RBC observed that such trading levels would represent significant discounts to the trading levels of the Peers. RBC concluded that it had no reason to believe that the REIT Units would attract such discounts relative to the units of the Peers. RBC noted, among other things, that (i) Boardwalk REIT will be the largest multi-family residential REIT in Canada; (ii) it will be internally managed, which is the management organization structure preferred by investors in the Canadian REIT sector; and (iii) a majority of Boardwalk REIT’s properties will be located in Alberta, an unregulated rental market.

      In conducting its analysis of trading multiples and expected yields, RBC also performed various sensitivity analyses and considered various potential scenarios. In the least favourable (to Boardwalk REIT) of the scenarios considered by RBC, Boardwalk REIT’s estimated FFO, RDI and distributions for 2004 each would be reduced by approximately 8% compared to the projections prepared by management of the Corporation. Under this scenario RBC calculated that, at the Adjusted Pre-Announcement Price, the REIT Units would trade at multiples of approximately 11.4x FFO, 11.0x RDI, and a yield of approximately 7.5%. RBC observed that such trading levels would represent discounts to the trading levels of the Peers and, as noted above, RBC concluded that it had no reason to believe that the REIT Units would attract such discounts. RBC notes that it has not independently assessed the probability of any particular scenario considered by RBC in the context of its sensitivity analyses and the Fairness Opinion should not be construed as being any such assessment.

      RBC also reviewed equity research analysts’ published estimates of the Corporation’s NAV and calculated that the average of such estimates was $17.94 per Common Share. RBC then surveyed the estimated NAVs of 20 Canadian REITs in the multi-family residential, commercial, lodging and long-term care sub-sectors, compared the trading price of the units of each of these REITs to its estimated NAV per unit, and calculated the trading premium or discount relative to NAV as follows:

                         
Premium/
Estimated NAV (Discount) to
Unit Price(1) per Unit(2) Estimated NAV



Multi-Family Residential
                       
CAP REIT
  $ 15.35     $ 13.85       10.8 %
RES REIT
  $ 14.95     $ 14.55       2.7 %
                     
 
Average
                    6.8 %
                     
 

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Premium/
Estimated NAV (Discount) to
Unit Price(1) per Unit(2) Estimated NAV



Commercial Property / Diversified
                       
Alexis Nihon REIT
  $ 12.91     $ 9.76       32.3 %
Allied Properties REIT
  $ 12.50     $ 10.19       22.7 %
Calloway REIT
  $ 13.91     $ 9.65       44.1 %
Cominar REIT
  $ 14.71     $ 11.75       25.2 %
Canadian REIT
  $ 16.30     $ 11.90       37.0 %
H&R REIT
  $ 15.72     $ 13.00       20.9 %
IPC US Income Commercial REIT (US$)
  $ 8.37     $ 6.65       25.9 %
Morguard REIT
  $ 9.35     $ 7.60       23.0 %
Northern Property REIT
  $ 15.10     $ 10.70       41.1 %
O&Y REIT
  $ 12.00     $ 10.20       17.6 %
RioCan REIT
  $ 15.19     $ 11.20       35.6 %
Summit REIT
  $ 17.95     $ 13.50       33.0 %
TGS North American REIT (US$)
  $ 7.53     $ 6.25       20.5 %
Lodging
                       
Canadian Hotel Income Properties REIT
  $ 9.71     $ 8.50       14.2 %
InnVest REIT
  $ 11.15     $ 9.50       17.4 %
Legacy Hotels REIT
  $ 7.12     $ 6.70       6.3 %
Royal Host REIT
  $ 5.05     $ 4.50       12.2 %
Long-Term Care
                       
Retirement Residences REIT
  $ 12.70     $ 8.95       41.9 %
24.2%
Overall Average
                       
                     
 


Notes:

(1)  Closing price on January 7, 2004.
 
(2)  Source: RBC research.

RBC noted that all of the REITs surveyed traded at premiums to their estimated NAVs and that the Peers traded, on average, at a premium of approximately 6.8% to estimated NAV. RBC calculated that, at the Adjusted Pre-Announcement Price, the REIT Units would trade at a discount of approximately 16.1% to the average of equity research analysts’ estimates of the Corporation’s NAV per Common Share. RBC observed that such a trading level would represent a discount to the trading levels of the Peers and, as noted above, RBC concluded that it had no reason to believe that the REIT Units would attract such a discount.

      RBC concluded that the REIT Units are expected to trade at levels at or above the Adjusted Pre-Announcement Price.

      RBC considered certain financial attributes of Boardwalk REIT, compared to the Corporation, and the potential short and long-term impact resulting from the Acquisition and the Arrangement on:

  •  the Corporation’s ability to raise equity and debt financing on competitive terms;
 
  •  entity level taxation and the efficiency of income distribution; and
 
  •  general, administrative or other costs.

RBC noted, among other things, that (i) the majority of capital raised for real estate entities in Canadian public equity markets over the past three years has been in the form of REIT units; (ii) management of the Corporation, based on discussions with CMHC, believes that Boardwalk REIT’s mortgages will continue to be CHMC insured; (iii) the REIT structure enables a real estate business to distribute its income from operations to investors more efficiently by allowing it to deduct those distributions in computing its taxable income; (iv) the Corporation is not expected to incur any tax in connection with the Acquisition and the Arrangement; and (v) the general and administrative (“G&A”) expenses of Boardwalk REIT are not expected to exceed the actual G&A expenses of

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the Corporation. RBC concluded that the REIT structure is favoured by the capital markets and that Boardwalk REIT is expected to be able to raise equity and debt financing on terms at least as favourable as the Corporation while not incurring any material ongoing additional costs.

      In assessing the financial attributes of the REIT Units, the LP Class A Units, the LP Class B Units and the LP Class C Units, RBC noted that:

  •  for each REIT Unit outstanding Boardwalk REIT will indirectly own one LP Class A Unit;
 
  •  each LP Class B Unit will be exchangeable for one REIT Unit;
 
  •  each LP Class B Unit will have identical voting rights as one REIT Unit;
 
  •  each LP Class B Unit will have identical entitlements as one LP Class A Unit with respect to distributions, allocation of taxable income and upon liquidation, dissolution or winding up of the Partnership;
 
  •  the LP Class C Units will have priority entitlement to distributions equal to all the costs associated with the Retained Debt;
 
  •  the Partnership will indemnify the Corporation for all claims and losses relating to the historic business of the Corporation such that any realized contingencies in connection therewith will be effectively shared pro rata by the holders of LP Class A Units and LP Class B Units, therefore indirectly all holders of Common Shares; and
 
  •  under the Acquisition and the Arrangement, all holders of Common Shares will receive, on a one-for-one basis, either REIT Units or LP Class B Units that are economically equivalent to and exchangeable for REIT Units.

RBC observed that upon completion of the Transaction each Shareholder will hold an indirect interest in the Partnership, which will directly or indirectly own all of the Corporation’s properties, pro rata to its interest in the Corporation immediately prior to the completion of the Transaction. RBC noted that BPCL will defer capital gains tax in respect of approximately one-third of its Common Shares (those represented by LP Class B Units rather than REIT Units) and will have the right to appoint one Trustee so long as it owns at least a 5% fully-diluted equity interest in Boardwalk REIT.

     Fairness Conclusion

      Based upon and subject to the foregoing, RBC is of the opinion that, as of the date of the Fairness Opinion, the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders.

      Further information with respect to RBC’s conclusions and the methodologies RBC performed in reaching them is contained in RBC’s presentation to the Special Committee, dated December 10, 2003 (provided in connection with RBC’s preliminary views as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders, which preliminary views were subsequently confirmed in the Fairness Opinion), as supplemented by RBC’s supplemental material presented to the Special Committee on January 8, 2004, in connection with the delivery of the Fairness Opinion. That presentation, as so supplemented, has been filed as an exhibit to the Schedule 13E-3 (as amended) filed with the United States Securities and Exchange Commission in connection with the Transaction.

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GLOSSARY OF TERMS AND EXPRESSIONS

      The following terms shall have the meanings set forth below when used in this Circular, including the Summary hereof. These defined terms are not always used in the financial statements included in this Circular or in the documents incorporated by reference herein and may not conform exactly to the defined terms used in the appendices to this Circular or any agreements referred to herein.

“ABCA” means the Business Corporations Act (Alberta), R.S.A. 2000, c. B-9, as amended, including the regulations promulgated thereunder;

“Acquisition” means the acquisition of the Corporation by BPCL;

“Acquisition and Arrangement Agreement” means the acquisition and arrangement agreement dated as of January 9, 2004 between the Corporation and BPCL, including Appendix I to such agreement, and all amendments and restatements thereto, setting out the terms and conditions upon which the parties will implement the Acquisition and the Arrangement;

“Acquisition and Arrangement Resolution” means the special resolution of Securityholders to approve the Acquisition and the Arrangement in substantially the form attached as Appendix A to this Circular to be considered and voted upon by the Securityholders at the Meeting;

“Adjusted Unitholders’ Equity” means, at any time, the aggregate of: (i) the amount of Unitholders’ equity; and (ii) the amount of accumulated depreciation and amortization recorded on the books and records of each of Boardwalk REIT and its subsidiaries in respect of its properties, in each case calculated in accordance with GAAP and if applicable, if, after the Effective Date, Boardwalk REIT is required to record the value of the Contributed Assets at their carrying values, instead of their exchange values, on its consolidated balance sheet, then Adjusted Unitholders’ Equity shall be calculated as in (i) above together as of the Effective Date with a one time addition equal to the difference between the Entity Value and the net book value of the assets of the Corporation and its subsidiaries, as shown on its then most recent publicly-issued consolidated balance sheet as of the Effective Date;

“affiliate” means a Person considered to be an affiliated entity of another Person within the meaning of Ontario Securities Commission Rule 45-501 — Exempt Distributions;

“Amalgamation” means the short form amalgamation of the Corporation and certain of the BEI Subsidiaries in accordance with Section 184 of the ABCA;

“AMF Policy Q-27” means Policy Q-27 of the Autorité des marchés financiers;

“Arrangement” means an arrangement under the provisions of Section 193 of ABCA, on the terms and conditions set forth in the Plan of Arrangement;

“Articles of Amalgamation” means the articles of amalgamation of the Corporation and certain of the BEI Subsidiaries in respect of the Amalgamation that are required by the ABCA to be sent to the Registrar to give effect to the Amalgamation;

“Articles of Arrangement” means the articles of arrangement in respect of the Plan of Arrangement required under subsection 193(10) of the ABCA to be filed with the Registrar after the Final Order has been made giving effect to the Plan of Arrangement;

“associate” has the meaning given thereto in the Securities Act (Alberta), as amended from time to time;

“BEI Subco” means a corporation to be incorporated immediately prior to the Effective Date pursuant to the laws of Alberta as a wholly-owned subsidiary of the Corporation;

“BEI Subsidiaries” means, collectively, Boardwalk Equities (Ontario) Inc., 1365355 Ontario Inc., Avon Apartments Inc., Belgravia Square Apartments Inc., Boardwalk Equities (Sask) Inc., Carlton Tower Apartments A Inc., Carlton Apartments Inc., Cavendish Estates A Inc., Cavendish Estates Inc., Centennial South Condos Inc., Centennial West Condos Inc., Dorchester Tower Apartments Inc., Evergreen Apartments Inc., Grace Manor Apartments Inc., Green B Apartments Inc., Hastings Place Apartments Inc., Heritage Point Apartments Inc.,

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Kleisinger Apartments Inc., Kumar Apartments Inc., Lockwood Apartments Inc., Meadow Apartments A Inc., Meadow Apartments Inc., Normanview Condos Inc., Palace Gates Apartments A Inc., Palace Gates Apartments Inc., Penthouse Apartments Inc., QI and QII Condos Inc., QIII Condos Inc., Queen City Apartments A Inc., Queen City Apartments Inc., Regal Tower I Apartments Inc., Regal Tower II Apartments Inc., Southpointe Plaza Inc., St. Charles Apartments Inc., Stonebridge Apartments A Inc., Stonebridge Apartments Inc., UpperCourt Apartments Inc., Wascana Park I Apartments Inc., Wascana Park II Apartments Inc., Wascana Park III Apartments Inc., Wedgewood Apartments Inc., Wildwood Ways Condos Inc., Boardwalk Equities (Québec) Inc., Metropolitan Structures Inc., 882274 Alberta Ltd., Suite Systems Inc., 9108-4749 Quebec Inc. and Boardwalk Realty Ltd.;

“Board of Directors” or “Board” means the board of directors of the Corporation;

“Boardwalk REIT” means Boardwalk Real Estate Investment Trust, an open-ended real estate investment trust formed under the laws of Alberta of which the Corporation is the initial Unitholder;

“Boardwalk REIT Administrative Services Agreement” means the administrative services agreement to be dated the Effective Date between Boardwalk REIT, the General Partner and the Operating Trust;

“BPCL” means Boardwalk Properties Company Limited, a corporation incorporated in 1984 pursuant to the laws of Alberta and indirectly controlled by Sam Kolias and Van Kolias, and, in the context of the Secondary Offering, includes any charity or other Person to whom BPCL may donate or otherwise transfer Common Shares prior thereto;

“BPCL Number” means the number of Common Shares held by BPCL at the Effective Time, if any, other than the Newco Number;

“Business Day” means a day, other than a Saturday or Sunday, on which Schedule I Canadian chartered banks are open for business in Calgary, Alberta; Toronto, Ontario and Vancouver, British Columbia;

“Certificate of Arrangement” means the certificate or certificates or other confirmation of filing to be issued by the Registrar, pursuant to subsection 193(11) of the ABCA giving effect to the Plan of Arrangement;

“Circular” means this management information circular and all appendices hereto;

“Closing” means the completion of the Arrangement;

“CMHC” means Canada Mortgage and Housing Corporation;

“CMHC Rental Properties” means real properties of Boardwalk REIT, its subsidiaries or joint venture entities, or of the Corporation and that are associated with the Retained Debt, in each case that are insured by CMHC;

“Common Shares” means the common shares in the capital of the Corporation;

“Contributed Assets” means all of the assets of the Corporation including, without limitation, the revenue producing properties of the Corporation, the beneficial interests in various trusts, the beneficial interests in various real property (including those held by its affiliates) listed under “Information Concerning Boardwalk REIT” and including the shares of affiliates of the Corporation which hold the revenue producing properties to be transferred, assigned, conveyed and set over to the Partnership pursuant to the Master Asset Contribution Agreement;

“Corporation” means Boardwalk Equities Inc., a corporation incorporated pursuant to the laws of Alberta and effective upon the Amalgamation means the corporation continuing from such Amalgamation;

“Court” means the Court of Queen’s Bench of Alberta;

“Declaration of Trust” means the declaration of trust dated January 9, 2004 establishing Boardwalk REIT, as it will be amended or restated on or prior to the Effective Date;

“Deferred Bonus Unit Plan” means the deferred bonus unit plan to be adopted by Boardwalk REIT following completion of the Arrangement;

“Depositary” means Computershare Trust Company of Canada;

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“Dissent Rights” means the right of a Securityholder pursuant to Section 191 of the ABCA and the Interim Order to dissent to the Acquisition and Arrangement Resolution and to be paid the fair value of the securities in respect of which the holder dissents, all in accordance with Section 191 of the ABCA and the Interim Order;

“Dissenting Securityholder” means a registered Securityholder who validly exercises its Dissent Rights;

“Dissenting Shareholder” means a registered Shareholder who validly exercises its Dissent Rights;

“Distributable Income” means, for any period, the net income of Boardwalk REIT and its applicable consolidated subsidiaries for such period set out in its consolidated financial statements as determined in accordance with GAAP, subject to certain adjustments, including: (a) adding back the following items: depreciation, amortization (except for amortization of deferred financing costs incurred after the Effective Date), future income tax expense, losses on dispositions of assets and amortization of any net discount on long-term debt assumed from vendors of properties at rates of interest less than fair value incurred after the Effective Date; and (b) deducting the following items: future income tax credits, interest on convertible debentures to the extent not already deducted in computing net income, gains on dispositions of assets and amortization of any net premium on long-term debt assumed from vendors of properties at rates of interest greater than fair value incurred after the Effective Date and any other adjustments determined by the Trustees in their discretion;

“Distribution Date” means with respect to a distribution by Boardwalk REIT, a Business Day determined by the Trustees for any calendar month to be on or about the 15th day of the following month;

“Distribution Record Date” means, until otherwise determined by the Trustees, the last Business Day of each month of each year, except for the month of December where the Distribution Record Date shall be December 31;

“Distribution Reinvestment Plan” or “DRIP” means the distribution reinvestment plan that Boardwalk REIT intends to adopt, subject to regulatory approval, pursuant to which holders of REIT Units will be entitled to elect to have cash distributions in respect of such units automatically reinvested in additional REIT Units;

“Effective Date” means the date shown on the Certificate of Arrangement;

“Effective Time” means 12:05 a.m. on the Effective Date, subject to such adjustment as may be agreed to among the parties to the Acquisition and Arrangement Agreement;

“Entity Value” means the amount determined by multiplying the total number of REIT Units issued and outstanding (on a fully-diluted basis, including without limitation REIT Units issuable on the exchange of LP Class B Units) by the 10 day weighted average trading price of the REIT Units on the TSX for the 10 trading days immediately following the Effective Date;

“Exchange and Support Agreement” means the exchange and support agreement to be dated the Effective Date between Boardwalk REIT, the Operating Trust, the Partnership, the Corporation and BEI Subco;

“Fairness Opinion” means the written report of RBC dated January 8, 2004 containing RBC’s opinion as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders, a copy of which is attached as Appendix E to this Circular;

“Final Order” means the final order of the Court to be applied for following the Meeting and to be granted pursuant to the provisions of subsection 193(9) of the ABCA approving the Plan of Arrangement, as such order may be affirmed, amended or modified by the Court at any time prior to the Effective Date;

“GAAP” means, as at any date of determination, generally accepted accounting principles in Canada including, among other things, Recommended Accounting Practices for Real Estate Investment and Development Companies issued by the Canadian Institute of Public and Private Real Estate Companies;

“General Partner” means Boardwalk Real Estate Management Ltd., a corporation incorporated pursuant to the laws of Alberta as a wholly-owned subsidiary of the Corporation, or any successor thereof and the general partner of the Partnership;

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“Gross Book Value” means, at any time, (A)(i) the book value of the assets of Boardwalk REIT and its subsidiaries, shown on its then most recent publicly-issued consolidated balance sheet, plus the amount of accumulated depreciation and amortization shown thereon or the notes thereto; plus (ii) if, after the Effective Date, Boardwalk REIT is required to record the value of the Contributed Assets at their carrying values, instead of their exchange values, on its consolidated balance sheet, then Gross Book Value shall be calculated as in (i) above together with a one time addition equal to the difference between the Entity Value and the net book value of the assets of the Corporation and its subsidiaries, as shown on its then most recent publicly-issued consolidated balance sheet as of the Effective Date, plus the amount of deferred taxes shown thereon or in the notes thereto; or (B) if approved by a majority of the Trustees, the appraised value of the assets of Boardwalk REIT and its subsidiaries;

“Holding Trust” means a trust to be formed under the laws of Alberta, all the beneficial interest in which will be held by the Partnership;

“Independent Trustee” means a Trustee who is an “unrelated Trustee” (as defined in the TSX Guidelines on Corporate Governance);

“Initial REIT Unit” means the initial REIT Unit issued to the Corporation pursuant to the terms of the Declaration of Trust;

“Interim Order” means the order of the Court dated        l       , 2004 under subsection 193(4) of the ABCA, as it may be amended, with respect to the Plan of Arrangement, a copy of which is attached as Appendix C to this Circular;

“Large Borrower Agreement” means the proposed agreement between, among others, CMHC and Boardwalk REIT providing various information requirements and debt covenants for the benefit of CMHC and lenders of CMHC insured debt;

“Limited Partnership Agreement” means the limited partnership agreement dated January 9, 2004 creating the Partnership, as it will be amended, supplemented or restated on or prior to the Effective Date;

“LP Class A Unit” means a unit of partnership interest in the Partnership designated as a LP Class A Unit and having the rights and attributes described in the Limited Partnership Agreement;

“LP Class B Unit” means a unit of partnership interest in the Partnership designated as a LP Class B Unit and having the rights and attributes described in the Limited Partnership Agreement;

“LP Class C Unit” means a unit of partnership interest in the Partnership designated as a LP Class C Unit and having the rights and attributes described in the Limited Partnership Agreement;

“LP Note” means the interest bearing note to be issued by the Partnership to the Corporation under the Master Asset Contribution Agreement;

“LP Units” means, collectively or respectively as the context requires, the LP Class A Units, LP Class B Units, LP Class C Units and any other units of partnership interest in the Partnership authorized, created and issued from time to time;

“Master Asset Contribution Agreement” means an agreement to be made between the Corporation and the Partnership setting out the terms and conditions upon which the Corporation will transfer, assign, convey and set over or cause to be transferred, assigned, conveyed and set over, to the Partnership the Contributed Assets in consideration for the assumption of certain liabilities of the Corporation by the Partnership, the issuance by the Partnership to the Corporation of the LP Note and a credit by the Partnership to the capital account in respect of each of the Corporation’s LP Class B Units and LP Class C Units;

“Meeting” means the special meeting of Securityholders to be held on        l       , 2004, and any adjournments or postponements thereof;

“Minority Shareholders” means all registered Shareholders other than BPCL and its affiliates, officers and directors of the Corporation and other persons not eligible to vote in connection with the minority approval of the Acquisition and Arrangement Resolution by Shareholders as provided in the Policies;

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“Newco” means a corporation to be incorporated immediately prior to the Effective Date pursuant to the laws of Alberta as a wholly-owned subsidiary of BPCL;

“Newco Number” means the number of Common Shares to be sold by BPCL to Newco under the Acquisition and the Arrangement, which shall be at least 8% of the outstanding Common Shares, determined at the Effective Time;

“Non-Resident” means a non-resident of Canada within the meaning of the Tax Act;

“Notice of Meeting” means the notice to the Securityholders of the Meeting, which accompanies this Circular;

“Notice of Petition” means the notice of petition by the Corporation to the Court for the Final Order, which accompanies this Circular;

“NYSE” means the New York Stock Exchange, Inc.;

“Operating Trust” means Top Hat Operating Trust, an open-ended unit trust formed under the laws of the Province of British Columbia, all of the units of which are and will be owned by Boardwalk REIT;

“Operating Trust Declaration of Trust” means the declaration of trust dated January 9, 2004 establishing the Operating Trust, as it will be amended, supplemented or restated on or prior to the Effective Date;

“Operating Trust Note Indenture” means the trust indenture to be dated the Effective Date providing for the issuance of the Operating Trust Notes and made between the Operating Trust and the Operating Trust Note Trustee;

“Operating Trust Note Trustee” means the trustee under the Operating Trust Note Indenture;

“Operating Trust Notes” means the Series 1 Notes and the Series 2 Notes;

“Operating Trust Unit” means a unit of interest in the Operating Trust;

“Optionholder” means a holder of Options;

“Options” means the outstanding unexercised options to purchase Common Shares under the Corporation’s stock option plan;

“OSC Rule 61-501” means Ontario Securities Commission Rule 61-501 — Insider Bids, Issuer Bids, Going Private Transactions and Related Party Transactions, as such rule may be amended from time to time (and including any successor rule or policy thereto);

“Partnership” means Top Hat Real Estate Limited Partnership, a limited partnership formed under the laws of the Province of British Columbia of which the General Partner is the sole general partner and the Corporation is the initial limited partner;

“Partnership Income” or “Partnership Loss” mean the net income or loss of the Partnership for a fiscal year determined in accordance with the provisions of the Tax Act, subject to any adjustments in respect of such fiscal year that the General Partner determines appropriate;

“Partnership Tax Income” or “Partnership Tax Loss” mean, in respect of any fiscal year, income or loss of the Partnership for that fiscal year, including any taxable capital gain or allowable capital loss, determined in accordance with the provisions of the Tax Act;

“Person” means an individual, partnership, limited partnership, corporation, unlimited liability company, trust, unincorporated organization, association, government or any department or agency thereof and the successors and assigns thereof or the heirs, executors, administrators or other legal representatives of an individual thereof, or any other entity recognized by law;

“Plan of Arrangement” means the plan of arrangement under the provisions of Section 193 of the ABCA, substantially in the form attached as Appendix I to the Acquisition and Arrangement Agreement, which is attached as Appendix B to this Circular, and any amendment or variation thereto in accordance with Section 6.3 of such Agreement and Section 6.1 of the Plan of Arrangement;

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“Policies” means, collectively, OSC Rule 61-501 and AMF Policy Q-27;

“Public Number” means the number of Common Shares less the Newco Number and the BPCL Number, if any, determined at the Effective Time;

“Public Shareholders” means the Shareholders, other than BPCL and its affiliates;

“RBC” means RBC Dominion Securities Inc., a member company of RBC Capital Markets, financial advisor to the Special Committee;

“REIT Unit” means a unit of beneficial interest in Boardwalk REIT (other than a Special Voting Unit) authorized and issued under the Declaration of Trust;

“Registrar” means the Registrar appointed under Section 263 of the ABCA;

“Related Party” means, with respect to any Person, a Person who is a “related party”, as that term is defined in OSC Rule 61-501;

“Retained Debt” means the indebtedness of the Corporation that relates to and is secured by a charge of certain real property of the Corporation to be beneficially transferred, assigned, conveyed and set over by the Corporation to the Partnership pursuant to the Master Asset Contribution Agreement, which indebtedness will not be assumed by the Partnership on such transfer, assignment, conveyance and set over and will remain indebtedness of the Corporation in respect of which the Corporation is and will remain the primary obligor to make principal, interest and other payments in respect of such indebtedness as such amounts become due and payable, as set out more particularly therein;

“Rights Plan” means the unitholder rights plan of Boardwalk REIT, as more particularly described in this Circular under the heading “Other Meeting Business — Rights Plan”;

“SEC” means the United States Securities and Exchange Commission;

“Secondary Offering” means the sale by BPCL, subject to market conditions and terms satisfactory to BPCL, of approximately two-thirds of the Common Shares owned by BPCL prior to the Effective Time;

“Securityholders” means collectively, Shareholders and Optionholders;

“Series 1 Notes” means the Series 1 Notes to be issued by the Operating Trust exclusively to Boardwalk REIT;

“Series 2 Notes” means the Series 2 Notes to be issued by the Operating Trust exclusively as full or partial payment of the Series 1 Notes and Operating Trust Units;

“Shareholders” means the holders of Common Shares;

“Special Committee” means the special committee of independent directors of the Board of Directors formed on November 5, 2003 to consider the Arrangement;

“Special Voting Unit” means a unit of interest in Boardwalk REIT to be issued to the holders of LP Class B Units providing rights to vote as a Unitholder;

“subsidiary” means, with respect to any Person (other than an individual), any other Person the financial results of which would be required to be consolidated with those of the first Person’s in the preparation of the first Person’s consolidated financial statements if prepared in accordance with GAAP;

“Tax Act” means the Income Tax Act (Canada), R.S.C. 1985 (5th Supplement), c.1, as amended, including the regulations promulgated thereunder;

“Transaction” means the Amalgamation, the Acquisition, the Arrangement, the transfer of the Contributed Assets pursuant to the Master Asset Contribution Agreement and the Secondary Offering (noting that the Secondary Offering, for market conditions or other reasons, may not be undertaken in whole or in part);

“Trustees” means the trustees of Boardwalk REIT and “Trustee” means any one of them;

“TSX” means the Toronto Stock Exchange;

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“Unitholder” means a holder of REIT Units;

“Unaffiliated Shareholders” means Shareholders who are not affiliates of the Corporation for purposes of United States securities laws;

“U.S. GAAP” means, as at any date of determination, accounting principles generally accepted in the United States;

“1933 Act” means the United States Securities Act of 1933, as amended; and

“1934 Act” means the United States Securities Exchange Act of 1934, as amended.

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BOARDWALK EQUITIES INC.

Suite 200, 1501 — First Street S.W.
Calgary, Alberta T2R 0W1

Management Information Circular for the

Special Meeting of Shareholders and Optionholders to be held on        l       , 2004

THE MEETING

      Shareholders who do not hold their shares in their own name as registered Shareholders should read “Advice to Beneficial Shareholders” within for an explanation of their rights.

Date, Time and Place of the Meeting

      This Circular is provided in connection with the solicitation of proxies by management of the Corporation for use at the Meeting to be held at the Calgary Petroleum Club, 319 — 5th Avenue S.W., Calgary, Alberta on        l       , the  l  day of        l       , 2004 at 10:00 a.m. (Calgary Time) and at any adjournment or adjournments thereof.

Record Date

      The Corporation will prepare a list of Shareholders and Optionholders of record at the close of business on        l       , 2004 (the “Record Date”). A Shareholder or Optionholder named on that list will be entitled to vote the Common Shares or Options, as applicable, then registered in such holder’s name, except in the case of Shareholders, to the extent that (a) the holder has transferred the ownership of any of his Common Shares after that date, and (b) the transferee of those Common Shares produces a properly endorsed share certificate, or otherwise establishes that he or she owns the Common Shares, and demands not later than the close of business, 10 days before the Meeting, that his or her name be included in the list of persons entitled to vote at the Meeting, in which case the transferee will be entitled to vote his or her Common Shares at the Meeting, and, except in the case of Optionholders, to the extent that the holder of the options has exercised such options prior to the Meeting.

      Holders of Common Shares are entitled to one vote at the Meeting for each Common Share held, except as otherwise provided herein. Holders of Options are entitled to one vote at the Meeting for each Common Share issuable on exercise of Options held, except as otherwise provided herein.

Solicitation of Proxies

      This Circular is furnished in connection with the solicitation of proxies by and on behalf of the management of the Corporation for use at the Meeting. Securityholder votes regarding the Acquisition and the Arrangement may be solicited by officers, directors and employees of the Corporation, who will not receive additional compensation for these services. The Corporation may pay investment dealers or other persons holding Common Shares of the Corporation in their own names, or in the names of nominees, for their reasonable expenses for sending the form of proxy and this Circular to beneficial owners of Common Shares and Options and obtaining proxies therefrom. The cost of the solicitation will be borne by the Corporation.

Appointment and Revocation of Proxies

      The persons named in the enclosed Forms of Proxy are officers of the Corporation. A Securityholder has the right to appoint a nominee (who need not be a Securityholder) to represent him or her at the Meeting, other than the persons designated in the enclosed Forms of Proxy, by inserting the name of his or her chosen nominee in the space provided for that purpose on the form and striking therefrom the names of the management nominees, or by completing another proper Form of Proxy. Such Securityholder should notify the nominee of his or her appointment, obtain his or her consent to act as proxy and should instruct him or her on how the Securityholder’s securities are to be voted. In any case, the Form of Proxy should be dated and executed by the Securityholder or his or her attorney authorized in writing, with proof of such authorization attached, where an attorney executed the proxy form.

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      A Form of Proxy will not be valid for the Meeting or any adjournment thereof unless it is completed, signed and delivered to Computershare Trust Company of Canada at 100 University Avenue, 9th Floor, Toronto, Ontario M5J 2Y1 at least forty-eight (48) hours, excluding Saturdays, Sundays and holidays, before the time of the Meeting or any adjournment thereof. If the Securityholder is a corporation, the form of proxy must be signed under its corporate seal and executed by a duly authorized officer or attorney of such corporation.

      In addition to revocation in any other manner permitted by law, a Securityholder who has given a proxy may revoke it, at any time before it is exercised, by instrument in writing executed by the Securityholder or by his or her attorney authorized in writing and deposited either at the offices of Computershare Trust Company of Canada at the aforesaid address at any time up to and including the last business day preceding the day of the Meeting, or any adjournment thereof, at which the proxy is to be used, or with the chairman of the Meeting on the day of the Meeting or any adjournment thereof.

Advice to Beneficial Shareholders

      Shareholders who do not hold their shares in their own name (referred to herein as “Beneficial Shareholders”) are advised that only proxies from Shareholders of record can be recognized and voted upon at the Meeting. Beneficial Shareholders who complete and return a proxy must indicate thereon the person (usually a brokerage house) who holds their shares as registered Shareholder. Every intermediary (broker) has its own mailing procedure, and provides its own return instructions, which should be carefully followed. The form of proxy supplied to Beneficial Shareholders is identical to that provided to registered Shareholders. However, its purpose is limited to instructing the registered Shareholder on how to vote on behalf of the Beneficial Shareholder. The Corporation will not accept instructions from Beneficial Shareholders and bears no responsibility for advising registered Shareholders of voting instructions received from Beneficial Shareholders.

      Where documents are stated to be available for review or inspection, such items will be shown upon request to registered Shareholders who produce proof of their identity.

Voting of Proxies

      The persons named in the enclosed Forms of Proxy have been selected by the directors of the Corporation and have indicated their willingness to represent as proxy the Securityholder who appointed them. Each Securityholder may instruct his or her proxy how to vote his or her securities by completing the blanks on the proxy form.

      Securities represented by properly executed proxy forms in favour of the person designated on the enclosed form will be voted or withheld from voting in accordance with the instructions given on the proxy forms. IN THE ABSENCE OF SUCH INSTRUCTIONS, SUCH SECURITIES WILL BE VOTED “FOR” THE ACQUISITION AND ARRANGEMENT RESOLUTION AND, IF THE ACQUISITION AND ARRANGEMENT RESOLUTION IS PASSED, “FOR” THE ADOPTION OF THE RIGHTS PLAN.

      The enclosed Forms of Proxy confer discretionary authority upon the persons named therein with respect to amendments and variations to matters identified in the Notice of Meeting and with respect to any other matters which may properly come before the Meeting. As of the date of the Circular, the management of the Corporation knows of no such amendments, variations or other matters to come before the Meeting.

      The Acquisition and Arrangement Resolution must be approved by at least 66 2/3% of the votes cast by Shareholders and Optionholders, present in person or by proxy at the Meeting, voting together as a single class. In addition, as the Acquisition and the Arrangement collectively constitute both a “going private transaction” and a “related party transaction” pursuant to the Policies, the Acquisition and Arrangement Resolution must also be approved by a simple majority of the Minority Shareholders, present in person or represented by proxy at the Meeting. If the Acquisition and Arrangement Resolution is passed, only Shareholders will be entitled to vote on the resolution for the adoption of the Rights Plan.

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Voting Securities and Principal Holders Thereof

 
Description of Share Capital

      The Corporation has an authorized capital consisting of an unlimited number of Common Shares without nominal or par value, of which 50,868,119 Common Shares are issued and outstanding and 2,398,828 Common Shares are reserved for issuance on the exercise of outstanding Options, as at December 31, 2003. In addition, the Corporation is authorized to issue an unlimited number of preferred shares (“Preferred Shares”), of which the Corporation has issued 5,604,956 Preferred Shares, Series I, and 3,340,199, Series II, in connection with certain property acquisitions in the fiscal years ended May 31, 2000 and December 31, 2001, respectively. The Preferred Shares are non-voting, are not entitled to receive dividends and are offset by non-interest bearing notes receivable from the holders of the Preferred Shares for the equivalent amount. Both the Preferred Shares and the notes receivable are retractable at either party’s option and may legally be offset against each other. It is the Corporation’s intent that prior to the Effective Date the Preferred Shares and notes receivable will be retracted by the respective parties in accordance with their terms.

 
Principal Shareholders

      The following table lists those persons and companies who own of record or are known to the Corporation to own beneficially, directly or indirectly, more than 10% of the issued and outstanding Common Shares of the Corporation as at December 31, 2003.

                         
Percentage of
Type of Number of Outstanding
Name and Municipality of Residence Ownership Shares Common Shares




Boardwalk Properties Company Limited (BPCL)
    of record       15,150,000       29.8%  
Calgary, Alberta
                       

      BPCL is a real estate holding company. It is owned 50% by Boardwalk Investment Limited (owned by Sam Kolias, President, Chief Executive Office and a director of the Corporation) and 50% by Park Place Holdings Ltd. (owned by Van Kolias, Senior Vice-President, Quality Control, Assistant Corporate Secretary and a director of the Corporation).

DESCRIPTION OF THE ACQUISITION AND THE ARRANGEMENT

      The description of the Acquisition and the Arrangement set forth in this section entitled “Description of the Acquisition and the Arrangement” is qualified in its entirety by reference to the full text of the Acquisition and Arrangement Agreement and the Plan of Arrangement set forth in Appendix B to this Circular.

Background to and Reasons for the Acquisition and the Arrangement

      Since the Corporation began trading on the Alberta Stock Exchange in January 1994, the Board of Directors has implemented various measures to enhance shareholder value, including share splits, listing the Common Shares on the NYSE and most recently the introduction of a dividend. Periodically management has considered whether the reorganization of the Corporation into another business entity such as a real estate investment trust would create additional shareholder value. Historically, such a reorganization was not felt to be appropriate. However, management has more recently come to believe that a number of factors, which were not previously present, now indicated that reorganization into a REIT is desirable. These factors include the increasing demand for tax efficient yield securities in the Canadian marketplace, the superior access to capital enjoyed by Canadian real estate investment trusts, the competitive tax advantage enjoyed by Canadian real estate investment trusts when making acquisitions, the current market expectation that distribution yields are at historical lows and the market’s acceptance of more complex structures.

      Commencing in August 2003 through October 2003, management and BPCL, with the assistance of professional advisors, including CIBC World Markets Inc. acting as financial advisor to the Corporation, explored potential transactions to reorganize the Corporation into a real estate investment trust. Together with its advisors, management and BPCL developed a model that would effectively reorganize the business of the Corporation into

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a real estate investment trust as part of an acquisition of the Corporation by BPCL. A reorganization such as this is generally designed to achieve commercial and tax efficiencies not available to a corporation. Such tax efficiencies result from the fact that under Canadian income tax law a Canadian resident trust, although it is a taxable entity, is generally entitled to deduct, in computing its taxable income for a taxation year, the portion thereof that is paid or becomes payable in that year to beneficiaries. Therefore, a trust that distributes all or substantially all of its income currently to beneficiaries generally will not be liable for any material amount of Canadian tax. By comparison, corporations cannot deduct dividends paid to their shareholders. Therefore, under a corporate structure there is an element of “double taxation”, with the income being subject to tax in the corporation and dividends generally being taxable to shareholders.

      On November 5, 2003, the Board of Directors considered management’s and BPCL’s proposal for BPCL to acquire the Corporation and to reorganize the business of the Corporation into a real estate investment trust. The Board of Directors discussed the proposed Acquisition and Arrangement including BPCL’s acquisition of the Corporation. The Board of Directors considered, among others, the following factors in its review and discussion of the proposal:

        (a) monthly cash distributions were anticipated to provide an attractive return to Unitholders without impairing the Corporation’s ability to finance capital expenditures and to meet external debt payments;
 
        (b) the Corporation has characteristics that are suited to a real estate investment trust structure, in particular the Corporation’s diversified portfolio of multi-family residential properties which provide a relatively stable cash flow;
 
        (c) the new trust structure would result in a higher level of cash distributions than would be available under the existing corporate structure of the Corporation;
 
        (d) a significant portion of Boardwalk REIT’s distributions to Unitholders would be tax-deferred;
 
        (e) the anticipated improved access that Boardwalk REIT would have to the public capital markets to fund growth initiatives than is or would be available to the Corporation under current market conditions and given its existing corporate structure;
 
        (f) Boardwalk REIT would be the largest and most geographically diverse publicly traded multi-family residential trust in Canada; and
 
        (g) employees and executives of the Corporation will become employees and executives of the Partnership or its subsidiaries. No significant changes in management are contemplated as a result of the Transaction.

 
Formation and Organization of Special Committee

      On November 5, 2003, following their review and discussion of management’s and BPCL’s proposal for BPCL to acquire the Corporation and to reorganize the business of the Corporation into a real estate investment trust, the Board of Directors resolved to appoint a special committee of directors independent of BPCL and management of the Corporation to consider the proposed Acquisition and Arrangement. The members of the Special Committee are Ernest Kapitza, Al Mawani and David Richards.

 
Proceedings and Deliberations of the Special Committee

      The Special Committee retained McCarthy Tétrault LLP as its independent legal counsel and RBC as its independent financial advisor, to assist the Special Committee in its consideration of the proposed Acquisition and Arrangement. In retaining RBC, the Special Committee, based in part on representations made to it by RBC, concluded that RBC was independent of BPCL and qualified to provide a fairness opinion in connection with the Acquisition and the Arrangement. In determining to retain RBC, the Special Committee requested written proposals from and met with two financial advisors. The Special Committee considered each potential advisor’s experience with similar transactions, familiarity with the Corporation and ability to complete the necessary work within the time frame desired by the Corporation.

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      Between November 5, 2003 and January 8, 2004, the Special Committee met nine times. The members of the Special Committee reviewed and discussed the terms of and reasons for the proposed Acquisition and Arrangement and for this purpose met with the Corporation, BPCL and their advisors. The Special Committee and its advisors considered all aspects of the proposed Acquisition and Arrangement, including the various agreements and ancillary transactions to be entered into in connection therewith.

      On December 10, 2003, RBC delivered to the Special Committee its preliminary views as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders. At this meeting, RBC described the material factors upon which its assessment of fairness is based and the methodologies and procedures followed by it in carrying out its work.

 
Recommendation of the Special Committee

      On December 10, 2003, the Special Committee reported to the Board of Directors that, on the basis of the preliminary views of RBC as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders and other factors, including those referred to above under “Background to and Reasons for the Acquisition and the Arrangement”, the Special Committee unanimously concluded that the Acquisition and the Arrangement are in the best interests of the Corporation and, based on the preliminary views of RBC, the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders. The Special Committee resolved, subject to the Corporation obtaining all necessary third party consents, the satisfaction of other conditions, including the satisfactory negotiation of the final terms of the Acquisition and Arrangement Agreement and the receipt by the Special Committee of a signed Fairness Opinion confirming RBC’s preliminary view that the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders, to recommend that the Board of Directors:

        (a) authorize the Corporation to enter into the Acquisition and Arrangement Agreement;
 
        (b) submit the Acquisition and Arrangement Resolution to a vote of the Securityholders at the Meeting; and
 
        (c) recommend that Public Shareholders vote in favour of the Acquisition and Arrangement Resolution.

      On January 5, 2004, RBC confirmed that its preliminary views as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders were unchanged. The Special Committee met again on January 5, 2004 and confirmed its recommendation made on December 10, 2003 subject to the same conditions upon which such recommendation was made including receipt by the Special Committee of a signed fairness opinion confirming RBC’s preliminary view that the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders. On January 8, 2004, RBC delivered the Fairness Opinion to the Special Committee. The Fairness Opinion states that RBC is of the opinion that, as of the date of the Fairness Opinion, the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders. A copy of the Fairness Opinion, which is dated January 8, 2004 is attached as Appendix E to this Circular. Securityholders should carefully review and consider the Fairness Opinion in its entirety. The Fairness Opinion is subject to the assumptions and limitations contained therein. See also “Description of the Acquisition and the Arrangement — Fairness Opinion”.

 
Recommendation of the Board of Directors

      On December 10, 2003, the Board of Directors authorized the Corporation to enter into the Acquisition and Arrangement Agreement, conditional on the satisfactory negotiation of the final terms of the Acquisition and Arrangement Agreement and delivery of the Fairness Opinion. The Board of Directors met again on January 8, 2004 to receive the Fairness Opinion and authorize the filing of the Information Circular and Schedule 13E-3 with the SEC. The negotiation of the final terms of the Acquisition and Arrangement Agreement was concluded, and the Acquisition and Arrangement Agreement was signed on January 9, 2004.

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      The Board of Directors, on the recommendation of the Special Committee, and based on its own investigations has concluded that the Acquisition and the Arrangement are in the best interests of the Corporation and fair to the Public Shareholders, Unaffiliated Shareholders and Optionholders and recommends that Public Shareholders and Optionholders vote in favour of the Acquisition and Arrangement Resolution. Messrs. Sam Kolias and Van Kolias declared their interest in the Transaction and abstained from voting on this matter. All directors who voted, voted in favour of this matter.

      In aggregate, the directors and senior officers of the Corporation own or exercise control or direction over approximately 17,518,496 Common Shares (on a fully diluted basis). All of the directors and officers have indicated to the Corporation an intention to vote all of the Common Shares and Options owned by them, or over which control or direction is exercised, in favour of the Acquisition and Arrangement Resolution. In addition, the Acquisition and Arrangement Resolution must be approved by a simple majority of the votes cast by all Minority Shareholders represented at the Meeting.

Fairness Opinion

      A copy of the Fairness Opinion, which is dated January 8, 2004 is attached as Appendix E to this Circular. Securityholders should carefully review and consider the Fairness Opinion in its entirety. The Fairness Opinion is subject to the assumptions and limitations contained therein.

      The following section summarizes the Fairness Opinion, describing the scope of review undertaken and the relevant factors and the key assumptions on which the Fairness Opinion is based. The following summary is qualified in its entirety by, and should be read in conjunction with, the Fairness Opinion.

 
Engagement of RBC

      RBC was engaged by the Special Committee through an agreement between the Corporation and RBC (the “Engagement Agreement”) dated November 17, 2003. The terms of the Engagement Agreement provide that RBC is to be paid $325,000 for the Fairness Opinion. In addition, RBC is to be reimbursed for its reasonable out-of-pocket expenses and to be indemnified by the Corporation in certain circumstances. The compensation of RBC under the Engagement Agreement does not depend in whole or in part on the conclusions reached in the Fairness Opinion or the successful outcome of the Acquisition and the Arrangement.

 
Credentials of RBC and Relationship of RBC with Interested Parties

      RBC is one of Canada’s largest investment banking firms, with operations in all facets of corporate and government finance, corporate banking, mergers and acquisitions, equity and fixed income sales and trading and investment research. Neither RBC, nor any of its affiliates is an insider, associate or affiliate (as those terms are defined in the Securities Act (Alberta)) of the Corporation, BPCL or any of their respective associates or affiliates. Other than the services provided under the Engagement Agreement, RBC has not been engaged to provide any financial advisory services nor has it participated in any financing involving the Corporation, BPCL or any of their respective associates or affiliates within the past two years. There are no understandings, agreements or commitments between RBC and the Corporation, BPCL or any of their respective associates or affiliates with respect to any future business dealings. RBC may, in the future, in the ordinary course of its business, perform financial advisory or investment banking services for the Corporation, BPCL, Boardwalk REIT or any of their respective associates or affiliates. A Canadian chartered bank, of which RBC is a wholly-owned subsidiary, provides banking services to the Corporation and certain of its associates and affiliates in the normal course of business.

      RBC acts as a trader and dealer, both as principal and agent, in major financial markets and, as such, may have had and may in the future have positions in the securities of the Corporation, Boardwalk REIT or any of their respective associates or affiliates and, from time to time, may have executed or may execute transactions on behalf of such companies or clients for which it received or may receive compensation. As an investment dealer, RBC conducts research on securities and may, in the ordinary course of its business, provide research reports and investment advice to its clients on investment matters, including with respect to the Corporation, Boardwalk REIT or the Acquisition and the Arrangement.

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Scope of Review

      In preparing the Fairness Opinion, RBC held discussions with the Special Committee and its legal counsel, members of senior management of the Corporation and the Corporation’s auditors, tax advisors and legal counsel; reviewed certain public and non-public information relating to the Corporation; reviewed drafts of the principal documents relating to the Acquisition and the Arrangement; reviewed public information relating to the Corporation and other selected public entities, transactions of a comparable nature, the real estate industry generally and multi-family residential property entities in particular; and reviewed and relied upon such other corporate, industry and financial market information, investigations and analyses as RBC considered necessary or appropriate in the circumstances.

 
Assumptions and Limitations

      With the Special Committee’s approval and as provided for in the Engagement Agreement, RBC has relied upon the completeness, accuracy and fair presentation of all of the financial and other information, data, advice, opinions or representations obtained by it from public sources, senior management of the Corporation, and their consultants and advisors (collectively, the “Information”). The Fairness Opinion is conditional upon such completeness, accuracy and fair presentation of such Information. Subject to the exercise of professional judgment and except as expressly described in the Fairness Opinion, RBC has not attempted to verify independently the completeness, accuracy or fair presentation of any of the Information. RBC has not, to the best of its knowledge been denied access by the Corporation to any information requested by RBC.

      In preparing the Fairness Opinion, RBC has made several assumptions, including that all of the conditions required to implement the Acquisition and the Arrangement will be met and that the disclosure provided or incorporated by reference in the draft Circular with respect to the Corporation, its subsidiaries and affiliates and the Arrangement is accurate in all material respects.

      The Fairness Opinion is rendered on the basis of securities markets, economic, financial and general business conditions prevailing as at the date of the Fairness Opinion and the condition and prospects, financial and otherwise, of the Corporation and its subsidiaries and affiliates, as they were reflected in the Information and as they have been represented to RBC in discussions with management of the Corporation. In its analyses and in preparing the Fairness Opinion, RBC made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of RBC or any party involved in the Acquisition and the Arrangement.

      RBC believes that its analyses must be considered as a whole and that selecting portions of the analyses or the factors considered by it, without considering all factors and analyses together, could create a misleading view of the process underlying the Fairness Opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Any attempt to do so could lead to undue emphasis on any particular factor or analysis. The Fairness Opinion is not to be construed as a recommendation to any holder of Common Shares or Options as to whether to vote in favour of the Acquisition and the Arrangement.

     Approach to Fairness

      RBC proceeded by identifying factors that RBC determined were material to a determination of the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders, analyzing each of those factors, and then evaluating all of those factors together. RBC identified the following material factors: (i) the expected trading characteristics of the REIT Units compared to the trading characteristics of the Common Shares prior to the Corporation’s announcement (the “Announcement”) of the Acquisition and the Arrangement; (ii) the financial attributes of Boardwalk REIT compared to the Corporation; (iii) the potential short and long-term financial impact resulting from the Acquisition and the Arrangement compared to the continuation of the status quo; and (iv) the financial attributes of the REIT Units, the LP Class A Units, the LP Class B Units and the LP Class C Units.

      In assessing the expected trading characteristics of the REIT Units compared to the trading characteristics of the Common Shares prior to the Announcement, RBC determined that the most appropriate entities to which to

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compare Boardwalk REIT were Canadian Apartment Properties REIT (“CAP REIT”) and Residential Equities REIT (“RES REIT”, and, together with CAP REIT, the “Peers”), which are the two existing REITs in Canada that are most purely comprised of multi-family residential properties. As more particularly described below, RBC reviewed and considered the Peers’:

  •  trading multiples based on funds from operations (“FFO”) and recurring distributable income (“RDI”);
 
  •  trading prices compared to net asset value (“NAV”);
 
  •  current and expected yields based on distributions;
 
  •  payout ratios of distributable income;
 
  •  tax deferred component of distributions;
 
  •  leverage;
 
  •  business strategy;
 
  •  governance;
 
  •  management organization; and
 
  •  trading liquidity.

      RBC also determined that, when considering the expected trading characteristics of the REIT Units with reference to the trading characteristics of the Peers, the relevant comparison benchmark with respect to the trading characteristics of the Common Shares prior to the Announcement was the price of the Common Shares prior to the Announcement (the “Pre-Announcement Price”) adjusted to reflect the change in market value of the Peers from the date of the Announcement (the “Adjusted Pre-Announcement Price”). RBC determined that the Pre-Announcement Price was $15.59 per Common Share, which was the closing price of the Common Shares on the TSX on November 5, 2003, the day immediately prior to the Announcement. RBC noted that, from November 5, 2003 to January 7, 2004, the day immediately prior to the date of the Fairness Opinion, the market value of the Peers decreased by approximately 3.4%. Applying this percentage change to the Pre-Announcement Price, RBC calculated the Adjusted Pre-Announcement Price to be $15.06 per Common Share.

      RBC calculated the yields, payout ratios and trading multiples of estimated 2004 FFO and RDI for the Peers as follows:

                                                                 
Payout
2004E FFO 2004E RDI as % of
Unit

Current 2004E
Price(1) Per Unit(2) Multiple Per Unit(2) Multiple Distribution Yield RDI








CAP REIT
  $ 15.35     $ 1.31       11.7x     $ 1.31       11.7x     $ 1.08       7.0 %     82 %
RES REIT
  $ 14.95     $ 1.34       11.2x     $ 1.34       11.2x     $ 1.08       7.2 %     81 %
                     
             
             
     
 
Average
                    11.4x               11.4x               7.1 %     82 %
                     
             
             
     
 


Notes:

(1)  Closing price on January 7, 2004.
 
(2)  Source: RBC research.

RBC noted that the Peers, on average, traded at a multiple of approximately 11.4x estimated 2004 FFO and RDI and a current yield of approximately 7.1%. RBC calculated that, at the Adjusted Pre-Announcement Price, the REIT Units would trade at multiples of approximately 10.5x and 10.1x Boardwalk REIT’s estimated FFO and RDI, respectively, per REIT Unit for 2004 and a yield of approximately 8.2% based on Boardwalk REIT’s expected distributions per REIT Unit. RBC observed that such trading levels would represent significant discounts to the trading levels of the Peers. RBC concluded that it had no reason to believe that the REIT Units would attract such discounts relative to the units of the Peers. RBC noted, among other things, that (i) Boardwalk REIT will be the largest multi-family residential REIT in Canada; (ii) it will be internally managed, which is the

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management organization structure preferred by investors in the Canadian REIT sector; and (iii) a majority of Boardwalk REIT’s properties will be located in Alberta, an unregulated rental market.

      In conducting its analysis of trading multiples and expected yields, RBC also performed various sensitivity analyses and considered various potential scenarios. In the least favourable (to Boardwalk REIT) of the scenarios considered by RBC, Boardwalk REIT’s estimated FFO, RDI and distributions for 2004 each would be reduced by approximately 8% compared to the projections prepared by management of the Corporation. Under this scenario RBC calculated that, at the Adjusted Pre-Announcement Price, the REIT Units would trade at multiples of approximately 11.4x FFO, 11.0x RDI, and a yield of approximately 7.5%. RBC observed that such trading levels would represent discounts to the trading levels of the Peers and, as noted above, RBC concluded that it had no reason to believe that the REIT Units would attract such discounts. RBC notes that it has not independently assessed the probability of any particular scenario considered by RBC in the context of its sensitivity analyses and the Fairness Opinion should not be construed as being any such assessment.

      RBC also reviewed equity research analysts’ published estimates of the Corporation’s NAV and calculated that the average of such estimates was $17.94 per Common Share. RBC then surveyed the estimated NAVs of 20 Canadian REITs in the multi-family residential, commercial, lodging and long-term care sub-sectors, compared the trading price of the units of each of these REITs to its estimated NAV per unit, and calculated the trading premium or discount relative to NAV as follows:

                         
Premium/
Estimated NAV (Discount) to
Unit Price(1) per Unit(2) Estimated NAV



Multi-Family Residential
                       
CAP REIT
  $ 15.35     $ 13.85       10.8 %
RES REIT
  $ 14.95     $ 14.55       2.7 %
                     
 
Average
                    6.8 %
                     
 
Commercial Property / Diversified
                       
Alexis Nihon REIT
  $ 12.91     $ 9.76       32.3 %
Allied Properties REIT
  $ 12.50     $ 10.19       22.7 %
Calloway REIT
  $ 13.91     $ 9.65       44.1 %
Cominar REIT
  $ 14.71     $ 11.75       25.2 %
Canadian REIT
  $ 16.30     $ 11.90       37.0 %
H&R REIT
  $ 15.72     $ 13.00       20.9 %
IPC US Income Commercial REIT (US$)
  $ 8.37     $ 6.65       25.9 %
Morguard REIT
  $ 9.35     $ 7.60       23.0 %
Northern Property REIT
  $ 15.10     $ 10.70       41.1 %
O&Y REIT
  $ 12.00     $ 10.20       17.6 %
RioCan REIT
  $ 15.19     $ 11.20       35.6 %
Summit REIT
  $ 17.95     $ 13.50       33.0 %
TGS North American REIT (US$)
  $ 7.53     $ 6.25       20.5 %
Lodging
                       
Canadian Hotel Income Properties REIT
  $ 9.71     $ 8.50       14.2 %
InnVest REIT
  $ 11.15     $ 9.50       17.4 %
Legacy Hotels REIT
  $ 7.12     $ 6.70       6.3 %
Royal Host REIT
  $ 5.05     $ 4.50       12.2 %
Long-Term Care
                       
Retirement Residences REIT
  $ 12.70     $ 8.95       41.9 %
                     
 
Overall Average
                    24.2 %
                     
 


Notes:

(1)  Closing price on January 7, 2004.
 
(2)  Source: RBC research.

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RBC noted that all of the REITs surveyed traded at premiums to their estimated NAVs and that the Peers traded, on average, at a premium of approximately 6.8% to estimated NAV. RBC calculated that, at the Adjusted Pre-Announcement Price, the REIT Units would trade at a discount of approximately 16.1% to the average of equity research analysts’ estimates of the Corporation’s NAV per Common Share. RBC observed that such a trading level would represent a discount to the trading levels of the Peers and, as noted above, RBC concluded that it had no reason to believe that the REIT Units would attract such a discount.

      RBC concluded that the REIT Units are expected to trade at levels at or above the Adjusted Pre-Announcement Price.

      RBC considered certain financial attributes of Boardwalk REIT, compared to the Corporation, and the potential short and long-term impact resulting from the Acquisition and the Arrangement on:

  •  the Corporation’s ability to raise equity and debt financing on competitive terms;
 
  •  entity level taxation and the efficiency of income distribution; and
 
  •  general, administrative or other costs.

RBC noted, among other things, that (i) the majority of capital raised for real estate entities in Canadian public equity markets over the past three years has been in the form of REIT units; (ii) management of the Corporation, based on discussions with CMHC, believes that Boardwalk REIT’s mortgages will continue to be CHMC insured; (iii) the REIT structure enables a real estate business to distribute its income from operations to investors more efficiently by allowing it to deduct those distributions in computing its taxable income; (iv) the Corporation is not expected to incur any tax in connection with the Acquisition and the Arrangement; and (v) the general and administrative (“G&A”) expenses of Boardwalk REIT are not expected to exceed the actual G&A expenses of the Corporation. RBC concluded that the REIT structure is favoured by the capital markets and that Boardwalk REIT is expected to be able to raise equity and debt financing on terms at least as favourable as the Corporation while not incurring any material ongoing additional costs.

      In assessing the financial attributes of the REIT Units, the LP Class A Units, the LP Class B Units and the LP Class C Units, RBC noted that:

  •  for each REIT Unit outstanding Boardwalk REIT will indirectly own one LP Class A Unit;
 
  •  each LP Class B Unit will be exchangeable for one REIT Unit;
 
  •  each LP Class B Unit will have identical voting rights as one REIT Unit;
 
  •  each LP Class B Unit will have identical entitlements as one LP Class A Unit with respect to distributions, allocation of taxable income and upon liquidation, dissolution or winding up of the Partnership;
 
  •  the LP Class C Units will have priority entitlement to distributions equal to all the costs associated with the Retained Debt;
 
  •  the Partnership will indemnify the Corporation for all claims and losses relating to the historic business of the Corporation such that any realized contingencies in connection therewith will be effectively shared pro rata by the holders of LP Class A Units and LP Class B Units, therefore indirectly all holders of Common Shares; and
 
  •  under the Acquisition and the Arrangement, all holders of Common Shares will receive, on a one-for-one basis, either REIT Units or LP Class B Units that are economically equivalent to and exchangeable for REIT Units.

RBC observed that upon completion of the Transaction each Shareholder will hold an indirect interest in the Partnership, which will directly or indirectly own all of the Corporation’s properties, pro rata to its interest in the Corporation immediately prior to the completion of the Transaction. RBC noted that BPCL will defer capital gains tax in respect of approximately one-third of its Common Shares (those represented by LP Class B Units rather than REIT Units) and will have the right to appoint one Trustee so long as it owns at least a 5% fully-diluted equity interest in Boardwalk REIT.

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     Fairness Conclusion

      Based upon and subject to the foregoing, RBC is of the opinion that, as of the date of the Fairness Opinion, the consideration under the Acquisition and the Arrangement is fair from a financial point of view to the Public Shareholders.

      Further information with respect to RBC’s conclusions and the methodologies RBC performed in reaching them is contained in RBC’s presentation to the Special Committee, dated December 10, 2003 (provided in connection with RBC’s preliminary views as to the fairness of the consideration under the Acquisition and the Arrangement, from a financial point of view, to the Public Shareholders, which preliminary views were subsequently confirmed in the Fairness Opinion), as supplemented by RBC’s supplemental material presented to the Special Committee on January 8, 2004, in connection with the delivery of the Fairness Opinion. That presentation, as so supplemented, has been filed as an exhibit to the Schedule 13E-3 (as amended) filed with the United States Securities and Exchange Commission in connection with the Transaction.

Overview of the Acquisition and the Arrangement

      The Acquisition and the Arrangement are multi-step transactions that will result in (i) the indirect acquisition by Boardwalk REIT of all of the Contributed Assets; (ii) the indirect acquisition of the Corporation by BPCL by the acquisition of all of the outstanding Common Shares; and (iii) after taking into account the preferred partnership distribution and other entitlements of the LP Class C Units held indirectly by BPCL through the Corporation, the indirect interest of the Public Shareholders in approximately 92% of the Contributed Assets through the ownership of the outstanding REIT Units and the indirect interest of BPCL in approximately 8% of the Contributed Assets. This result is subject to completion by BPCL of the Secondary Offering and various priority distributions described herein.

      After giving effect to the Acquisition and the Arrangement, and assuming the maximum size of the Secondary Offering is completed:

  •  BPCL will acquire the Corporation and the Corporation will be an indirect, wholly-owned subsidiary of BPCL and the Common Shares will be delisted from the TSX;
 
  •  Public Shareholders will own all of the outstanding REIT Units, which have been conditionally listed for trading on the TSX;
 
  •  Boardwalk REIT will indirectly hold, through its indirect interest in the LP Class A Units, an approximately 92% interest in the Partnership (after the preferred partnership distribution and other entitlements of the LP Class C Units; see “Information Concerning the Partnership — Distributions”), which will hold, directly or indirectly, all of the Contributed Assets previously comprising the business of the Corporation;
 
  •  the remaining approximately 8% interest in the Partnership (after the preferred partnership distribution and other entitlements of the LP Class C Units indirectly held by BPCL) will be indirectly held by BPCL through its indirect interest in the LP Class B Units.

      The LP Class B Units will have equivalent voting and distribution entitlements to the REIT Units into which they are exchangeable. The Common Shares were delisted from the NYSE effective February 23, 2004.

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Organizational Structure Prior to the Acquisition and the Arrangement

      The following diagram sets out the simplified organizational structure of the Corporation, Boardwalk REIT and the other entities that will participate in the Acquisition and the Arrangement.

(SIMPLIFIED ORGANIZATIONAL STRUCTURE DIAGRAM)

Pre-Arrangement Reorganization and Secondary Offering

      Immediately prior to the Effective Time, the Corporation and certain of the BEI Subsidiaries will effect a series of transactions to facilitate the transfer of the Contributed Assets to the Partnership. On the Effective Date, as part of such series, the Corporation will be amalgamated with certain of the BEI Subsidiaries to continue under the name “Boardwalk Equities Inc.” In accordance with applicable law, the outstanding shares of each amalgamating BEI Subsidiary will be cancelled without the payment of any consideration. All of the assets, rights and obligations of each of the Corporation and the amalgamating BEI Subsidiaries will become the assets, rights and obligations of the amalgamated Boardwalk Equities Inc. References in this Circular to the “Corporation” after the time of the Amalgamation are to the corporation formed upon the Amalgamation and references to “Common Shares” after the time of the Amalgamation refer to the common shares of such amalgamated corporation.

      As well, prior to the Effective Date, the Preferred Shares and notes receivable will be retracted by the respective parties in accordance with their terms. In addition, prior to the transfer of the Contributed Assets pursuant to the Master Asset Contribution Agreement, the Secondary Offering may be completed such that BPCL will sell approximately two-thirds of its Common Shares. Any decision of BPCL to undertake the Secondary Offering will be made based on market conditions and the proposed terms of any such offering prior to the Effective Time.

      Following the Amalgamation but prior to the transfer of the Contributed Assets, the Corporation will subscribe for the Newco Number of LP Class B Units and approximately 430 million LP Class C Units, both for nominal consideration. Following this subscription and immediately prior to the commencement of the Plan of Arrangement on the Effective Date, the Corporation will transfer the Contributed Assets, or cause the Contributed Assets to be transferred, to the Partnership at fair market value for an aggregate purchase price of approximately $2.4 billion, all pursuant to the Master Asset Contribution Agreement.

      The consideration to be paid by the Partnership for the Contributed Assets will consist of the assumption of approximately $975 million in mortgage financing and other indebtedness of the Corporation, the issuance by the

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Partnership of the LP Note in the principal amount of approximately $855 million, and an addition to the capital accounts in respect of the LP Class B Units and LP Class C Units of approximately $80 million and $430 million respectively. The Retained Debt will not be assumed by the Partnership and will remain as indebtedness of the Corporation following the transfer of the Contributed Assets. The aggregate amounts of the consideration to be paid by the Partnership for the Contributed Assets are subject to adjustment in accordance with the terms and conditions of the Master Asset Contribution Agreement since calculation of certain values, such as Entity Value, depends upon the trading price of the Units. Those adjustments will affect the amount of Retained Debt.

      If any required consent to transfer any of the Contributed Assets is not obtained on or before the Effective Date, the parties may elect to postpone completion of the sale of such Contributed Asset in which case the Partnership will not reduce the amount of the LP Note to be issued on Closing and instead, the Corporation will deliver to the Partnership on Closing such assurances and agreements as the parties may determine to provide the Partnership with substantially similar economic equivalents to having received a transfer of such Contributed Asset on Closing. Alternatively, the parties may agree to transfer such Contributed Asset to the Partnership with such mutual indemnities as are appropriate to ensure that if the necessary consents are not obtained the parties are made whole.

      Pursuant to the Master Asset Contribution Agreement, beneficial ownership of all of the Contributed Assets will be transferred to the Partnership, including in respect of Contributed Assets to which the Retained Debt relates. The Retained Debt will not be assumed by the Partnership and will remain as indebtedness of the Corporation and the Corporation will be obligated to make interest payments and principal repayments on a periodic basis in respect of the Retained Debt. Partnership distributions on the LP Class C Units held by the Corporation will, if paid, be in amounts at least sufficient to make such payments. The Partnership will agree to provide the Corporation’s creditors with a guarantee in respect of the Retained Debt to ensure the lenders are not prejudiced in their ability to collect from the Corporation in the event that payments in respect of the Retained Debt are not made by BPCL as expected and Boardwalk REIT will provide a guarantee of the Partnership’s obligations. The Corporation will indemnify the Partnership for any losses suffered by the Partnership in the event payments on the Retained Debt are not made as required, provided such losses are not attributable to any action or failure to act on the part of the Partnership. Also, as the Partnership is acquiring the Contributed Assets, which comprise all of the historic business of the Corporation, the Partnership will indemnify the Corporation for all claims and losses relating to the Contributed Assets except if the claim or loss is a result of gross negligence or wilful misconduct of the Corporation after the Effective Date. See “Description of the Acquisition and the Arrangement — Ancillary Agreements in Connection with the Acquisition and the Arrangement — Master Asset Contribution Agreement”.

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      The following diagram sets out the simplified organizational structure of the Corporation, Boardwalk REIT and the other entities that will participate in the Acquisition and the Arrangement, immediately prior to the Effective Time and assuming completion of the maximum size of the Secondary Offering.

(SIMPLIFIED ORGANIZATIONAL STRUCTURE DIAGRAM)


Note:

(1)  BPCL intends to sell approximately two-thirds of the Common Shares it owns (representing approximately 20% of the outstanding Common Shares) prior to the Effective Time for cash pursuant to the Secondary Offering, but may exchange such Common Shares for REIT Units under the Plan of Arrangement on the same basis as the Public Shareholders. The remaining Common Shares held by BPCL will be sold to Newco in exchange for Newco common shares.

The Plan of Arrangement

      The Plan of Arrangement will become effective on the Effective Date. On such date, commencing at the Effective Time of the Plan of Arrangement, each of the events listed below will occur and will be deemed to occur, except as otherwise noted, one minute apart and in the following sequence without further act or formality:

        (a) the Corporation will transfer the LP Class B Units to BEI Subco in exchange for common shares of BEI Subco;
 
        (b) the Corporation will transfer the LP Note to Boardwalk REIT in exchange for the aggregate of the Public Number and the BPCL Number, if any, of REIT Units with an aggregate value equal to the principal amount of the LP Note;
 
        (c) the Corporation will transfer the shares of the General Partner to Boardwalk REIT for nominal cash consideration;
 
        (d) the Corporation will redeem the Initial REIT Unit for nominal consideration;

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        (e) the Corporation will purchase 15,000 REIT Units for cash and will distribute 100 REIT Units to each of 150 employees of the Corporation for the purposes of qualifying Boardwalk REIT as a “mutual fund trust” under the Tax Act;
 
        (f) Boardwalk REIT will transfer the LP Note and the cash received in step (e) above to the Operating Trust in exchange for a combination of Operating Trust Notes and Operating Trust Units;
 
        (g) the Operating Trust will transfer the LP Note and cash received in step (f) above to the Partnership in exchange for the aggregate of 15,000 and the Public Number and the BPCL Number, if any, of LP Class A Units;
 
        (h) the Corporation will sell the aggregate of the Public Number and the BPCL Number of REIT Units to Newco for an interest-bearing note;
 
        (i) the Newco Number of Common Shares held by BPCL will be acquired by Newco in consideration for the issuance of one common share of Newco for each Common Share;
 
        (j) each outstanding Common Share held by a Public Shareholder and all remaining Common Shares held by BPCL, if any, will be acquired by Newco in consideration for the issuance of one REIT Unit for each Common Share (other than Public Shareholders resident in the State of New York or of any other jurisdiction wherein the issuance of REIT Units to such Person would be contrary to such laws, who will receive the proceeds, net of commissions from the sale of such REIT Units; see “Information for United States Shareholders — Notice to the residents of the State of New York”); and
 
        (k) each Option not exercised prior to the Effective Time will be terminated.

      All Common Shares and Options held by Dissenting Securityholders who exercise their right to dissent will, if the Dissenting Securityholder is ultimately entitled to be paid the fair value, be deemed to be transferred to the Corporation on the Effective Date in exchange for such fair value. If a Dissenting Securityholder ultimately is not entitled to be paid the fair value for their Common Shares or Options, as the case may be, determined in accordance with Section 191 of the ABCA, the Dissenting Securityholder will be deemed to have participated in the Plan of Arrangement as a non-dissenting Securityholder and will, in the case of a Shareholder, be entitled to receive one REIT Unit for each Common Share held at the Effective Time. The Interim Order provides that the Partnership and Boardwalk REIT may discharge any obligations arising pursuant to Dissent Rights on behalf of the Corporation.

Effects of the Acquisition, the Arrangement and Related Transactions

      Following the completion of the Acquisition and the Arrangement:

        (a) BPCL, through Newco, will acquire the Corporation and will own all of the issued and outstanding Common Shares;
 
        (b) the Public Shareholders will own REIT Units, which (after the preferred distribution and other entitlements of the LP Class C Units indirectly held by BPCL) will represent an equity interest in Boardwalk REIT of approximately 92% assuming completion of the Secondary Offering (or approximately 72% if the Secondary Offering were not to occur);
 
        (c) BPCL will indirectly hold LP Class B Units, which will effectively represent an approximately 8% interest in Boardwalk REIT (after the preferred distribution and other entitlements of the LP Class C Units, which it also will indirectly hold) and, if the Secondary Offering is not completed, REIT Units, which will represent an additional equity interest in Boardwalk REIT of approximately 20% (after the preferred distribution and other entitlements of the LP Class C Units, which it will also indirectly hold);
 
        (d) Boardwalk REIT will directly or indirectly own all of the issued and outstanding common shares of the General Partner, the Operating Trust Notes and the Operating Trust Units;

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        (e) the Operating Trust will own all of the issued and outstanding LP Class A Units, representing an approximately 92% interest in the Partnership (after the preferred distribution and other entitlements of the LP Class C Units);
 
        (f) the Corporation will remain liable for the Retained Debt and will directly and indirectly, through BEI Subco, own all of the LP Class B Units (and the associated Special Voting Units), representing an approximately 8% equity interest in the Partnership (after the preferred distribution and other entitlements of the LP Class C Units, which it also will indirectly hold); and
 
        (g) the Partnership will directly and indirectly hold the Contributed Assets.

      The following diagram sets out the simplified organizational structure of the Corporation, Boardwalk REIT and the entities participating in the Arrangement following the Effective Time of the Arrangement:

(SIMPLIFIED ORGANIZATIONAL STRUCTURE DIAGRAM)


Notes:

(1)  BPCL intends to sell approximately two-thirds of the Common Shares it owns (representing approximately 20% of the outstanding Common Shares) prior to the Effective Time for cash pursuant to the Secondary Offering, but may exchange such Common Shares for REIT Units under the Plan of Arrangement on the same basis as the Public Shareholders. The remaining Common Shares held by BPCL will be sold to Newco in exchange for Newco common shares. See “Description of the Acquisition and the Arrangement — Pre-Arrangement Reorganization and Secondary Offering”.
 
(2)  Following the Effective Time, Newco and the Corporation will be amalgamated and continue under the name “Boardwalk Equities Inc.”

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      See “Information Concerning Boardwalk REIT”, “Information Concerning Operating Trust” and “Information Concerning the Partnership”.

Ancillary Agreements in Connection with the Acquisition and the Arrangement

 
Exchange and Support Agreement

      On the Effective Date, Boardwalk REIT, the Operating Trust, the Partnership, the Corporation and BEI Subco will enter into the Exchange and Support Agreement to create certain support obligations with respect to the LP Class B Units. Under the Exchange and Support Agreement, Boardwalk REIT and/or the General Partner, as applicable, will agree to take such actions as are reasonably necessary to ensure that the distributions on the LP Class B Units will be of the same nature and amount, on a per unit basis, as the corresponding distribution on the REIT Units (except to the extent that the holder of the LP Class B Units has elected to receive distributions in the form of LP Class B Units and/or REIT Units pursuant to the Limited Partnership Agreement).

      The Exchange and Support Agreement will also provide that Boardwalk REIT will not, subject to certain exceptions, issue or distribute REIT Units (or securities exchangeable for or convertible into or carrying rights to acquire REIT Units) to the holders of all or substantially all of the then outstanding REIT Units; issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding REIT Units entitling them to subscribe for or to purchase REIT Units (or securities exchangeable for or convertible into or carrying rights to acquire REIT Units); or issue or distribute to the holders of all or substantially all of the then outstanding REIT Units evidences of indebtedness of Boardwalk REIT or assets of Boardwalk REIT except in accordance with the provisions of the REIT Units; unless the economic equivalent on a per unit basis of such rights, options, securities, units, evidences of indebtedness or other assets is issued or distributed simultaneously to the holder of LP Class B Units. In addition, Boardwalk REIT will not, subject to certain exceptions, subdivide, redivide or change the then outstanding REIT Units into a greater number of REIT Units; reduce, combine, consolidate or change the then outstanding REIT Units into a lesser number of REIT Units; or reclassify, amend the terms of, or otherwise change the REIT Units or effect an amalgamation, merger, reorganization or other transaction affecting the REIT Units; unless the same or an economically equivalent change is made simultaneously to, or in the rights of the holders of LP Class B Units.

      Pursuant to the Exchange and Support Agreement, upon notice from the Partnership that a holder of LP Class B Units has (i) surrendered LP Class B Units for withdrawal in accordance with the terms of the LP Class B Units, or (ii) elected pursuant to the Limited Partnership Agreement to receive REIT Units from the Partnership in lieu of cash distributions from the Partnership to which such holder is entitled, Boardwalk REIT will issue and deliver or cause to be issued and delivered to the Partnership the requisite number of REIT Units to be received by, and issued to or to the order of, the holder of LP Class B Units.

 
Master Asset Contribution Agreement

      On the Effective Date, the Corporation and the Partnership will enter into the Master Asset Contribution Agreement pursuant to which the Corporation will transfer, or cause to be transferred to the Partnership, the Contributed Assets. The Contributed Assets include the revenue producing properties of the Corporation, some of which are pledged to lenders in connection with the Retained Debt. In the case of properties which secure the Retained Debt, the entire beneficial interest will be sold to the Partnership but legal title will remain with the Corporation. Following the Effective Date, the Partnership intends to register a caveat against each of such properties disclosing its beneficial interest. In the case of other revenue producing properties, legal title to such properties will be transferred into the name of a nominee holding company.

      Various other Contributed Assets include the Corporation’s interest in various trusts which hold revenue producing properties, intellectual property including certain software developed by the Corporation for the management of its business and trademarks and logos used by the Corporation. New employment contracts will be entered into by the General Partner on behalf of the Partnership or subsidiary entities of the Partnership.

      Due to the nature of the Transaction, no closing adjustments are contemplated. Money received by the Corporation from the historic operation of its business will be delivered to the Partnership in accordance with the

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Master Asset Contribution Agreement. Similarly, the Partnership will, as part of the Master Asset Contribution Agreement, indemnify the Corporation for any losses, claims or demands associated with the Corporation’s operation and transfer of the Contributed Assets. As of the date of this Circular, management of the Corporation is not aware of any material claims related to the Contributed Assets. See “Description of the Acquisition and the Arrangement — Arrangements with BPCL”.

      In order to effect the Acquisition and the Arrangement for the benefit of all Shareholders, the Corporation will remain liable, as principal obligor, for the Retained Debt. The Partnership will however be the beneficial owner of the Contributed Assets associated with the Retained Debt and accordingly could suffer impairment of these assets if the Corporation fails to discharge its obligations pursuant to the Retained Debt. Accordingly, the Corporation will indemnify the Partnership for losses caused by the Corporation’s failure to discharge obligations pursuant to the Retained Debt. Certain obligations under the Retained Debt such as adequate insurance and repairs and maintenance will be the responsibility of the Partnership and as a result, such indemnification will not extend to defaults outside the scope of responsibility of the Corporation.

 
Guarantee

      Currently, lenders to the Corporation generally have a mortgage charge over a specific building in respect of a specific debt. The mortgage provides the lender with various specific remedies against the mortgaged property, but lenders also have recourse to the other assets of the Corporation in the event of a mortgage default. The Corporation, as part of the Acquisition and the Arrangement, will transfer all of its assets to the Partnership. As a result, the right of lenders to claim against the Contributed Assets other than the specifically mortgaged property is compromised. Accordingly, as a condition to obtaining the lender acknowledgements and consents for the transfer of the Contributed Assets and the continuation of the CMHC insurance on such mortgages, the Partnership will provide a guarantee of the Corporation’s obligations under the Retained Debt in favour of the lender of such indebtedness and Boardwalk REIT will provide a guarantee of the Partnership’s obligations.

 
Lender Acknowledgement and Consent

      It is a condition to the Acquisition and the Arrangement that lenders of indebtedness of the Corporation acknowledge and consent to the transfer of the beneficial interest in the Contributed Assets and the change of control of the Corporation. Such lenders and the Corporation will acknowledge that the Corporation will remain the principal obligor of the Retained Debt and that such indebtedness will not be assumed by the Partnership and the Corporation will covenant in favour of the lenders that it will not incur any new debt.

 
Call Feature

      The LP Class B Units contain a call feature which provides that in the event a third party offeror acquires at least 90% of the REIT Units (on a fully diluted basis), such offeror will be entitled to acquire and the holders of LP Class B Units will be obligated to sell to the offeror any outstanding LP Class B Units for a per unit consideration equal to that paid by the offeror for each REIT Unit, provided that the offer is also made for LP Class B Units on the same terms and contemporaneously with the offer for REIT Units. A holder of LP Class B Units may satisfy this call obligation by delivering the outstanding shares of a single purpose holding company, holding only LP Units and that has no other assets or liabilities other than those associated with the Retained Debt.

The Acquisition and Arrangement Agreement

      The following is a summary only of the Acquisition and Arrangement Agreement and is qualified in its entirety by the full text of the Acquisition and Arrangement Agreement set forth in Appendix B of this Circular.

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Certain Covenants

      Pursuant to the Acquisition and Arrangement Agreement, the Corporation has agreed that it will, among other things:

        (a) take all actions necessary to give effect to the transactions contemplated by the Acquisition and Arrangement Agreement and the Plan of Arrangement;
 
        (b) apply for the Interim Order and, after making such application, proceed with and diligently seek the Interim Order;
 
        (c) solicit proxies to be voted at the Meeting in favour of the Acquisition and Arrangement Resolution;
 
        (d) convene and hold the Meeting for the purpose of considering the Acquisition and Arrangement Resolution (and for any other purpose as may be set out in the notice for such meeting) in accordance with the Interim Order and as otherwise required by applicable law;
 
        (e) subject to obtaining the approvals required by the Interim Order, proceed with and diligently pursue the application to the Court for the Final Order;
 
        (f) incorporate BEI Subco under the laws of Alberta as a wholly-owned subsidiary;
 
        (g) subject to obtaining the Final Order and the satisfaction or waiver of each of the other conditions in the Acquisition and Arrangement Agreement in favour of any party, other than certain conditions set out therein and prior to completion of the transactions set forth in subsections (h) and (i) below:

        (i) file with the Registrar the Articles of Amalgamation and such other documents as may be required under the ABCA to give effect to the Amalgamation; and
 
        (ii) following the Amalgamation complete the subscription by the Corporation for LP Class B Units and LP Class C Units contemplated by such agreement;

        (h) subject to obtaining the Final Order and the satisfaction or waiver of each of the other conditions in the Acquisition and Arrangement Agreement in favour of any party to such agreement, other than certain conditions set out therein, and prior to the completion of the transactions set out in subsection (i) below, execute and deliver the Master Asset Contribution Agreement and complete the transactions contemplated by such agreement; and
 
        (i) subject to obtaining the Final Order and the satisfaction or waiver of the other conditions in the Acquisition and Arrangement Agreement in favour of any party to such agreement:

        (i) file with the Registrar the Articles of Arrangement and such other documents as may be required under the ABCA to give effect to the Plan of Arrangement; and
 
        (ii) execute and deliver the Exchange and Support Agreement.

 
Conditions to the Arrangement
 
Mutual Conditions

      The obligations of each of the parties to the Acquisition and Arrangement Agreement to complete the Acquisition and the Arrangement are subject to the fulfilment or mutual waiver by each such party on or before the Effective Time of a number of conditions, including the following:

        (a) the Interim Order shall have been obtained in form and on terms satisfactory to each of the Corporation and BPCL, acting reasonably, and shall not have been set aside or modified in a manner unacceptable to such parties on appeal or otherwise;
 
        (b) the Acquisition and Arrangement Resolution shall have been approved at the Meeting in accordance with the Interim Order;

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        (c) the Final Order shall have been obtained in form and on terms satisfactory to each of the Corporation and BPCL, acting reasonably, and shall not have been set aside or modified in a manner unacceptable to such parties on appeal or otherwise;
 
        (d) the Amalgamation shall have become effective;
 
        (e) the transfer of Contributed Assets by the Corporation to the Partnership shall have been completed in accordance with the Master Asset Contribution Agreement, in form and substance satisfactory to the Corporation and BPCL, acting reasonably;
 
        (f) the form of guarantee and indemnity described in “Description of the Acquisition and the Arrangement — Arrangements with BPCL”, in form and substance satisfactory to the Corporation and BPCL acting reasonably, shall have been entered into;
 
        (g) there shall not have occurred any actual or threatened (including any proposal by the Minister of Finance (Canada)) change or amendment to the Tax Act or to any applicable provincial tax legislation or to the regulations thereunder or any publicly stated administrative position or practice in relation thereto which, directly or indirectly, has or may have any material adverse significance with respect to the Arrangement including, without limitation, the consideration payable to the Shareholders under the Plan of Arrangement and the tax treatment of Unitholders;
 
        (h) all regulatory approvals shall have been obtained on terms and conditions satisfactory to the Corporation and BPCL, acting reasonably;
 
        (i) all requisite consents to the completion of the transactions contemplated by the Acquisition and Arrangement Agreement by lenders to or co-owners with the Corporation or its subsidiaries shall have been obtained on terms and conditions satisfactory to the Corporation and BPCL, acting reasonably;
 
        (j) the TSX shall have granted conditional listing approval to the listing of the REIT Units;
 
        (k) no order or decree of any court, tribunal, governmental agency or other regulatory authority or administrative agency, board or commission, and no law, regulation, policy, directive or order shall have been enacted, promulgated, made, issued or applied to cease trade, enjoin, prohibit or impose material limitations on, the Acquisition, the Arrangement or the transactions contemplated thereby;
 
        (l) the Corporation and BPCL shall each be satisfied that neither the Corporation nor Newco will be liable to pay tax under the Tax Act or any provincial income tax legislation in respect of the distribution or transfer of REIT Units on the Plan of Arrangement;
 
        (m) all documentation relating to the completion of the Acquisition and the Arrangement in accordance with the terms of the Acquisition and Arrangement Agreement, including the final form of the Master Asset Contribution Agreement, Boardwalk REIT Administrative Services Agreement, Exchange and Support Agreement, subscription agreement for LP Class B Units and LP Class C Units and any amendments to the constating documents of Boardwalk REIT, the Partnership and the Operating Trust requested by a party shall be satisfactory to the parties thereto, acting reasonably;
 
        (n) Securityholders holding no more than 1% of the Common Shares (on a fully diluted basis) shall have exercised their Dissent Rights;
 
        (o) there shall not exist any prohibition at law against the completion of the Acquisition and the Arrangement; and
 
        (p) the Acquisition and Arrangement Agreement shall not have been terminated in accordance with the terms thereof.

 
Conditions in Favour of BPCL

      In addition to the mutual conditions described above, the obligation of BPCL to complete the Acquisition and the Arrangement is also subject to certain other conditions, each of which is for BPCL’s exclusive benefit and

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may be asserted or waived by it in its sole discretion at any time on or before the Effective Time, in whole or in part. These include the following:

        (a) the Corporation shall have performed each covenant or obligation to be performed by it under the Acquisition and Arrangement Agreement in favour of BPCL at or prior to the Effective Time; and
 
        (b) the representations and warranties of the Corporation set out in the Acquisition and Arrangement Agreement shall be true and correct on and as of the Effective Date as if made on and as of such date, except as affected by transactions contemplated or permitted by the Acquisition and Arrangement Agreement and BPCL shall have received a certificate from the Corporation addressed to BPCL and dated the Effective Date, signed on behalf of the Corporation by two senior executive officers of the Corporation (on the Corporation’s behalf without personal liability), confirming the same as at the Effective Date.

 
Conditions in Favour of the Corporation

      In addition to the mutual conditions described above, the obligation of the Corporation to complete the Arrangement is also subject to certain other conditions, each of which is for the exclusive benefit of the Corporation and may be asserted or waived by it in its sole discretion at any time on or before the Effective Time, in whole or in part. These include the following:

        (a) BPCL shall have performed each covenant or obligation to be performed by it under the Acquisition and Arrangement Agreement in favour of the Corporation on or prior to the Effective Date; and
 
        (b) the representations and warranties of BPCL set out in the Acquisition and Arrangement Agreement shall be true and correct on and as of the Effective Date as if made on and as of such date, except as affected by transactions contemplated or permitted by the Acquisition and Arrangement Agreement and the Corporation shall have received a certificate from BPCL addressed to the Corporation dated the Effective Date, signed on behalf of BPCL by one senior executive officer of BPCL (on BPCL’s behalf without personal liability), confirming the same as at the Effective Date.

      There can be no assurance that the foregoing conditions will be satisfied or waived on a timely basis.

 
Termination and Amendment

      The Acquisition and Arrangement Agreement shall be terminated in each of the following circumstances:

        (a) by agreement in writing executed by each of the parties thereto; and
 
        (b) on June 30, 2004 if, by that date, the Certificate of Arrangement has not been issued, unless such date is otherwise extended by agreements among all of the parties thereto.

      Subject as provided below, the Acquisition and Arrangement Agreement may, at any time and from time to time before and after the Meeting but not later than the Effective Date, be amended by written agreement of the parties thereto (or, in the case of a waiver, by written instrument of the party giving the waiver) without, subject to applicable law, further notice to or authorization on the part of the Securityholders or Court approval. Without limiting the generality of the foregoing, any such amendment may:

        (a) change the time for performance of any of the obligations or acts of the parties thereto;
 
        (b) waive any inaccuracies or modify any representation or warranty contained in the Acquisition and Arrangement Agreement or in any document to be delivered pursuant to the Acquisition and Arrangement Agreement; or
 
        (c) waive compliance with or modify any of the covenants in the Acquisition and Arrangement Agreement or waive or modify performance of any of the obligations of the parties to the Acquisition and Arrangement Agreement.

      Notwithstanding the foregoing, the terms of the Plan of Arrangement and the Acquisition and Arrangement Agreement may not be amended in a manner prejudicial to the Securityholders without the approval of the

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Securityholders given in the same manner as required by law for the approval of the Arrangement or as may be ordered by the Court.

      The Acquisition and Arrangement Agreement may be amended in accordance with the Final Order by written agreement of the parties thereto.

 
Other Terms of the Acquisition and Arrangement Agreement

      The Acquisition and Arrangement Agreement sets out the terms and conditions on which the Acquisition and the Arrangement will be carried out, the text of the Plan of Arrangement and the conditions precedent to the completion of the Acquisition and the Arrangement. The Acquisition and Arrangement Agreement also contains customary representations and warranties by each of the parties concerning corporate, legal and other matters relating to their respective affairs. The Acquisition and Arrangement Agreement also includes covenants by each of the parties to take certain actions in furtherance of the Acquisition and the Arrangement, use its reasonable best efforts to satisfy the conditions to the Acquisition and the Arrangement and to take, or cause to be taken, all other action and to do, or to cause to be done, all other things necessary, proper or advisable under applicable laws to complete the Acquisition and the Arrangement.

Arrangements with BPCL

      As part of the Acquisition and the Arrangement, BPCL has agreed to take certain steps in order to effect the proposed transactions. Specifically, BPCL will (i) acquire control of the Corporation; (ii) indirectly hold unlisted LP Class B Units and LP Class C Units, (iii) indirectly retain the Retained Debt as its indebtedness, (iv) potentially divest a significant portion of its Common Share holdings pursuant to the Secondary Offering, and (v) enter into certain agreements providing for ongoing arrangements with Boardwalk REIT and the Partnership in order to facilitate the foregoing.

      These steps are, in part, intended to ensure that Boardwalk REIT is in an advantageous position with respect to its peer group following completion of the Acquisition and the Arrangement. As a consequence of these steps however, various commercial arrangements between the Partnership, the Corporation and BPCL are necessary. Among these arrangements are the following:

        (a) pursuant to the Master Asset Contribution Agreement, although the Partnership will acquire the beneficial interest in the Contributed Assets associated with the Retained Debt, the Retained Debt will not be assumed by the Partnership and will remain indebtedness of the Corporation. As such, the Corporation will continue to be liable as principal obligor to pay all principal, interest and other amounts under the Retained Debt as such amounts become due and payable and the Corporation will indemnify the Partnership for any losses as a result of the Corporation’s failure to meet its obligations, provided such losses are not attributable to any action or failure to act on the part of the Partnership;
 
        (b) since the Master Asset Contribution Agreement represents a transfer of the existing business of the Corporation, the Partnership will indemnify the Corporation for all claims and losses relating to the Contributed Assets except if the claim or loss is a result of gross negligence or wilful misconduct of the Corporation after the Effective Date;
 
        (c) as the beneficial owner of the Contributed Assets associated with the Retained Debt, the Partnership will indemnify the Corporation for losses resulting from the Partnership’s failure to manage such Contributed Assets in a safe and prudent manner where such failure results in a claim against the Corporation;
 
        (d) since the legal title to the Contributed Assets associated with the Retained Debt will remain with the Corporation but all beneficial interest in such Contributed Assets as well as all other Contributed Assets will be transferred to the Partnership, the Partnership will provide a guarantee of the Corporation’s obligations under the Retained Debt in favour of the lenders of such indebtedness and Boardwalk REIT will provide a guarantee of the Partnership’s obligations.

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      These arrangements are designed to protect the respective interests of the Partnership, Boardwalk REIT, BPCL and the Corporation. These arrangements are, in the opinion of management of the Corporation, appropriate in light of the significant benefits realized by the Public Shareholders as a result of the Transaction.

      See “Description of the Acquisition and the Arrangement — Overview of the Acquisition and the Arrangement” and “— Ancillary Agreements in Connection with the Acquisition and the Arrangement” and “Information Concerning the Corporation — Business of the Corporation Following the Acquisition and the Arrangement” and “Other Meeting Business — Rights Plan”.

Accounting Treatment of the Transaction

      In the Transaction, the anticipated sale of Common Shares by BPCL pursuant to the Secondary Offering along with the Acquisition and the Arrangement will result in the creation of a new entity, Boardwalk REIT, and a substantive change in the ownership interest (defined under GAAP as being greater than 20%) of the Corporation through the transfer of the ownership of 92% of the interest in the business to Boardwalk REIT. The Secondary Offering is expected to include the sale of not less than a 20% interest in the Common Shares and, ultimately, a 21.8% equity interest in Boardwalk REIT. Under GAAP, if a related party transaction not in the normal course of business results in a substantive change in ownership and there is independent evidence of value, the assets and liabilities acquired and assumed pursuant to the transaction, under specific conditions, should be recorded for accounting purposes at their exchange amounts (approximating fair market values for the purposes of the Transaction). The favourable accounting treatment of the Transaction if the Secondary Offering is completed was not one of the factors considered by the Special Committee or the Board of Directors in assessing the fairness of the Acquisition and the Arrangement.

      The Transaction is expected to satisfy the conditions necessary for exchange value accounting treatment to be applied and Boardwalk REIT would record the Contributed Assets at their exchange values on the Effective Date. It should be noted, however, that if the Secondary Offering is not completed as contemplated in the Transaction, or does not result in a substantive change in ownership interest to meet the 20% requirement for use of exchange amounts, neither the Contributed Assets nor liabilities assumed will be recorded at their exchange values on the Effective Date, but rather will be recorded at the Corporation’s carrying values for such assets and liabilities when recorded by Boardwalk REIT.

      The pro forma financial statements of Boardwalk REIT set forth in Appendix D present the financial results under exchange value assumptions as described above. If the Secondary Offering is not completed or it is determined that insufficient Common Shares have been sold to evidence a substantive change in equity ownership interest, then the exchange value adjustments noted in the pro forma financial statements will not apply and only those adjustments made prior to the exchange value adjustments will be applicable.

Comparison of Current Rights of Shareholders and Proposed Rights of Unitholders

      The following section describes the differences between the current rights of holders of Common Shares and the proposed rights of holders of REIT Units after the completion of the Transaction that are material to a Securityholder in deciding whether to vote in favour of the Acquisition and the Arrangement. The following section also summarizes certain provisions of the ABCA and common law (“Alberta law”), the articles of incorporation, as amended, of the Corporation (the “Boardwalk Articles”), the amended and restated bylaws of the Corporation (the “Boardwalk Bylaws”), and the Declaration of Trust. This summary may not contain all the information that is important to you. We encourage you to obtain and read carefully the Boardwalk Articles and the Declaration of Trust. Copies of the Boardwalk Articles, the Boardwalk Bylaws and Declaration of Trust may be obtained by contacting Paul Moon, Director of Corporate Communications of the Corporation, at (403) 206-6808.

General

      If the Transaction, including the Secondary Offering, is completed, all Shareholders other than BPCL will receive one REIT Unit in exchange for each Common Share currently held. In the event the Secondary Offering is not completed, BPCL will indirectly receive REIT Units and will indirectly hold LP Class B Units and LP Class C Units. Shareholder’s rights are currently governed by Alberta law, the Boardwalk Articles and the

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Boardwalk Bylaws. If the Transaction is completed, a Unitholder’s rights will be governed by Alberta law (other than the ABCA) and the Declaration of Trust. Generally, the Declaration of Trust is designed to provide Unitholders with the same rights and entitlements as they previously enjoyed as Shareholders. However the rights and obligations of Unitholders differ in some significant ways from the rights and obligations of Shareholders.

      In general, shareholders of a corporation enjoy “limited liability”; this means that shareholders cannot be sued for obligations or liabilities of the corporation. Unitholders in a trust, by contrast, may face unlimited liability for obligations of the trust. Most trusts deal with this issue in several ways, first, through adequate insurance to ensure that any potential losses are adequately covered and second by obtaining contractual agreements with creditors and counterparties to ensure that such persons will not sue unitholders even when they have a claim against the trust. Although some jurisdictions in Canada have considered legislation to create limited liability for unitholders of a trust, such legislation is not currently in force in any Canadian jurisdiction. Boardwalk REIT intends to obtain prudent levels of insurance and will seek to limit recourse under all of its material contracts to the assets of Boardwalk REIT. See “Risk Factors — Unitholder Limited Liability”.

Right to Dividends

      Holders of Common Shares are entitled to dividends, if, as and when declared by the Board of Directors. Although the Corporation currently pays a dividend quarterly, this is entirely within the discretion of the Board of Directors. Provisions of Alberta law prohibit the payment of dividends in certain circumstances, including if the Corporation is insolvent. The Declaration of Trust provides that distributions may be paid at the discretion of the Trustees. The ability of the trust to pay distributions however is subject to the trust first paying any obligations having priority to Unitholder distributions, for example interest payments on debts of Boardwalk REIT.

Right to Vote

      Shareholders have the right to one vote for each Common Share held, which right may be exercised either in person or by proxy. Similarly the Declaration of Trust provides that Unitholders shall have one vote, exerciseable either in person or by proxy, in respect of each REIT Unit held.

      Corporate law also entitles Shareholders to requisition a shareholders’ meeting provided certain conditions are met. Similarly the Declaration of Trust entitles Unitholders to requisition a meeting, again provided certain conditions precedent are met.

Rights to Assets on Liquidation

      Shareholders are entitled to share pro-rata based on the number of Common Shares held, in any distribution of assets of the Corporation upon dissolution after all liabilities have been satisfied. Similarly, the Declaration of Trust entitles Unitholders to share pro-rata in assets of Boardwalk REIT, available for distribution upon termination of Boardwalk REIT.

Redemption Rights

      The Common Shares are not redeemable, whereas the REIT Units are redeemable at any time, at the option of the Unitholder, as described in “Declaration of Trust and Description of Trust Units — REIT Unit Redemption Rights”.

Limitation on Non-Resident Ownership

      There are no limitations on the ownership of Common Shares. The Declaration of Trust provides that no more than 49% of the REIT Units may be held by Non-Residents of Canada. See “Declaration of Trust and Description of Trust Units — Limitation on Non-Resident Ownership”.

Conversion Rights and Pre-emptive Rights

      Neither the Common Shares nor the REIT Units are convertible into another security or have pre-emptive rights to subscribe for another security.

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Miscellaneous

      In other respects Unitholders will have similar rights as they did as Shareholders. They will be entitled to vote for the appointment of Trustees and the appointment of the auditors of Boardwalk REIT on an annual basis; and they will receive the same reporting information including financial statements, delivered in compliance with Canadian securities laws. In other respects the rights of Unitholders may be different from Shareholders. For example, considerable case law exists surrounding the rights of Shareholders and what corporate conduct may be considered oppressive. No such case law exists with respect to trusts and it is unclear that case law developed for corporations would be applicable.

      The Corporation does not have a classified Board of Directors and Boardwalk REIT will not elect its Trustees in classes. In addition, the Boardwalk Articles do not include, and the Declaration of Trust will not include, any provisions that would discriminate against a person who becomes a controlling Shareholder or Unitholder, respectively. Notwithstanding the foregoing, the Corporation currently has a shareholder rights plan in place and, subject to Shareholder approval at the Meeting, it is anticipated that Boardwalk REIT will implement a unitholder rights plan with substantially similar provisions as the shareholder rights plan following the Effective Time. See “Information Concerning the Corporation — Rights Plan” and “Other Meeting Business — Rights Plan”.

      The foregoing summary compares some of the rights of Shareholders with rights of Unitholders however it is not intended to be, nor should it be construed as, an exhaustive comparison. Shareholders who have questions in this regard are encouraged to consult their own professional advisors.

      See also “Risk Factors — Legal Rights Normally Associated with the Ownership of Shares of a Corporation; and — Unitholders Limited Liability”.

Securityholder Approvals

      The Interim Order provides that, for the Plan of Arrangement to be implemented, the Acquisition and Arrangement Resolution must be passed, with or without variation, by (i) a 66 2/3% majority of all of the votes cast by Shareholders and Optionholders voting together as a single class at the Meeting in person or by proxy; and (ii) a simple majority of the votes cast by Minority Shareholders voting at the Meeting in person or by proxy.

      BPCL has agreed with the Corporation in the Acquisition and Arrangement Agreement that it will vote, and will cause each of its affiliates which hold Common Shares to vote, the Common Shares beneficially owned by it or over which it exercises control or direction (15,150 Common Shares, representing, in aggregate, approximately 28% of the outstanding Common Shares on a fully diluted basis), in favour of the Acquisition and Arrangement Resolution. In addition, each of the directors and senior officers of the Corporation has indicated to the Corporation that he or she intends to vote all of the Common Shares and Common Shares issuable on exercise of Options beneficially owned by him or her or over which he or she exercises control or direction in favour of the Acquisition and Arrangement Resolution.

      Each Shareholder of record on        l       , 2004 will be entitled to one vote for each Common Share held as of such date. Similarly, each Optionholder will be entitled to one vote for each Common Share into which the Options held by such holder is exercisable.

      Assuming all Securityholders eligible to vote at the Meeting cast votes in respect of all of the Common Shares and Options held either in person or by proxy and based on the number of Common Shares and Options currently outstanding, the 66 2/3% majority of Shareholders and Optionholders would require 35,513,074 votes in order to be obtained and the simple majority of Shareholders would require 25,484,928 votes to be obtained. Directors and officers of the Corporation and BPCL who in aggregate hold 17,518,496 Common Shares (on a fully diluted basis) as at the date hereof, have expressed an intention to vote such shares in favour of the resolution requiring 66 2/3% majority. BPCL is not entitled to vote on the resolution requiring a simple majority of Minority Shareholders. However, directors and officers of the Corporation, who hold 700,130 Common Shares as at December 31, 2003, have expressed an intention to vote such shares in favour of such resolution. Securityholders should be aware that, generally, not all Securityholders vote or submit a proxy providing voting instructions. Since the majorities necessary to pass the resolutions proposed for the meeting are determined based

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on Common Shares and Options actually represented at the Meeting in person or by proxy, the actual number of Common Shares and Options necessary to carry the proposed resolutions may be substantially lower than the numbers set out above.

Court Approval

 
Interim Order

      On        l       , 2004, the Court granted the Interim Order providing for the calling and holding of the Meeting and certain other procedural matters. The Interim Order is attached as Appendix C to this Circular.

 
Final Order

      The ABCA provides that an arrangement requires Court approval. Subject to the terms of the Acquisition and Arrangement Agreement, and if the Acquisition and Arrangement Resolution is approved by Shareholders at the Meeting in the manner required by the Interim Order, the Corporation will make the application to the Court for the Final Order.

      The application for the Final Order approving the Arrangement is scheduled for        l       , 2004 at        l       .m. (Calgary time), or as soon thereafter as counsel may be heard, at The Court House, 611 — 4th Street S.W., Calgary, Alberta. At the hearing, any Securityholder and any other interested party who wishes to participate or to be represented or to present evidence or argument may do so, subject to filing with the Court and serving upon the Corporation a Notice of Intention to Appear together with any evidence or materials which such party intends to present to the Court on or before noon (Calgary time) on        l       , 2004. Service of such notice shall be effected by service upon the solicitors for the Corporation: Stikeman Elliott LLP, 4300, 888 — 3rd Street S.W., Calgary, Alberta, T2P 5C5, Attention: Luigi A. Cusano. See “Notice of Petition”.

      The REIT Units to be issued pursuant to the Plan of Arrangement will not be registered under the 1933 Act, but will be issued in reliance upon the exemption from registration provided by section 3(a)(10) thereof. The Court will be advised prior to the hearing of the application for the Final Order that if the terms and conditions of the Plan of Arrangement are approved by the Court, the securities issued pursuant to the Arrangement will not require registration under the 1933 Act.

      The Corporation has been advised by its counsel, Stikeman Elliott LLP, that the Court has broad discretion under the ABCA when making orders with respect to the Plan of Arrangement and that the Court will consider, among other things, the fairness and reasonableness of the Plan of Arrangement, both from a substantive and a procedural point of view. The Court may approve the Plan of Arrangement either as proposed or as amended in any manner the Court may direct, subject to compliance with such terms and conditions, if any, as the Court thinks fit. Depending upon the nature of any required amendments, the Corporation, Boardwalk REIT or BPCL may determine not to proceed with the Arrangement.

Regulatory Approvals

 
Securities Regulatory Approvals

      Discretionary exemptions must be obtained from certain Canadian securities regulatory authorities in respect of the issuance of certain securities contemplated by the Acquisition and the Arrangement. The Corporation will apply for exemptions from all such authorities. However, there can be no assurance that the necessary exemptions from such authorities will be obtained on a timely basis or on terms and conditions satisfactory to the Corporation and BPCL.

      Notice of the proposed Acquisition and Arrangement will be submitted on behalf of the Corporation and Boardwalk REIT to the Commission des valeurs mobilières du Québec. Completion of the Acquisition and the Arrangement is subject to the approval of, or the failure to raise any objection by, the Commission des valeurs mobilières du Québec.

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Related Party and Going Private Transaction Requirements

      Collectively, the Acquisition and the Arrangement are both a “related party transaction” and a “going private transaction” within the meaning of the Policies. Pursuant to the Policies, a corporation proposing to carry out a related party transaction or a going private transaction is required to obtain a valuation from a qualified and independent valuator of the affected securities that are the subject of the transaction and any non-cash consideration being offered in or forming part of the transaction and provide to the holders of its securities a summary of the valuation, subject to certain exceptions. The Corporation has received a discretionary exemption from the Ontario Securities Commission and the Commission des valeurs mobilières du Québec from the requirement to obtain a valuation.

      To the knowledge of the Corporation, there are no “prior valuations” (as that term is used in the Policies) of the Corporation or any of its material assets or securities which were prepared by or for the Corporation within the 24 months preceding the date of this Circular. In addition, the Corporation did not receive any bona fide prior offer that relates to the subject matter of or is otherwise relevant to the Acquisition and the Arrangement within the 24 months preceding the date on which the proposal for the Arrangement was publicly announced.

      The Policies also provide that a going private transaction such as the Acquisition and the Arrangement must be approved by not less than a simple majority of the votes cast by the Minority Shareholders.

 
Competition Act (Canada) Approval

      The Competition Act (Canada) requires pre-merger notification to the Commissioner of Competition (the “Commissioner”) for transactions that exceed certain financial thresholds and, in the case of share acquisitions, that exceed an additional voting interest threshold. If a transaction is subject to pre-merger notification, a pre-merger filing must be submitted to the Commissioner and a waiting period of either 14 or 42 days must expire or be terminated or waived by the Commissioner before the proposed transaction may be completed. The Commissioner’s review of the transaction may extend beyond the statutory waiting period depending upon the complexity of the transaction.

      Upon request, the Commissioner may issue an advance ruling certificate (“ARC”) where he is satisfied that he would not have sufficient grounds on which to apply to the Competition Tribunal under the merger provisions of the Competition Act (Canada). If the Commissioner issues an ARC in respect of a proposed transaction, that transaction is exempt from the pre-merger notification provisions. Alternatively, the Commissioner may issue a “no action” letter following a pre-merger notification or an application for an ARC, indicating that he is of the view that grounds do not then exist to initiate proceedings before the Competition Tribunal under the merger provisions of the Competition Act (Canada) with respect to the proposed transaction, while preserving for a period of three years following completion of the proposed transaction his authority to initiate proceedings should circumstances change.

      The Acquisition and the Arrangement require pre-merger notification to the Commissioner and would be a “merger” for the purposes of the merger provisions of the Competition Act (Canada). The Corporation has received an ARC with respect to the Acquisition and the Arrangement.

 
Stock Exchange Listings

      The TSX has conditionally approved the listing of the REIT Units in substitution of the Common Shares, subject to the satisfaction of all of the requirements of the TSX. The REIT Units will not be listed on the NYSE or elsewhere in the United States and will not be registered under the 1934 Act.

      The Corporation has applied to delist the Common Shares from the TSX to be effective shortly after the Effective Date, subject to the completion of the Acquisition and the Arrangement. The Common Shares were delisted from the NYSE effective February 23, 2004 and the Corporation ceased to be registered under the 1934 Act and to file reports with the SEC.

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Third Party Notices and Approvals

      Certain of the transactions contemplated by the Acquisition and the Arrangement require the consent of lenders, co-owners and other third parties, including CMHC. CMHC has indicated that it will consent to the transactions outlined herein provided Boardwalk REIT executes the Large Borrower Agreement. In other cases, only notice is required to be sent to third parties. Prior to the Effective Date, the Corporation will send notices to and request the consent of various third parties with respect to the Acquisition and the Arrangement. However, there can be no assurance that the necessary consents from these third parties will be obtained on a timely basis or on terms and conditions satisfactory to the Corporation and BPCL. Failure to obtain these consents will give BPCL or the Corporation the right not to complete the Acquisition and the Arrangement.

PROCEDURE FOR SURRENDER OF COMMON SHARES

      If your Common Shares are held through an intermediary such as an investment dealer, bank or trust company, you should follow the instructions of your intermediary regarding how to deliver those Common Shares.

      On the Effective Date, registered Public Shareholders (other than those who have properly exercised their right to dissent and who are ultimately entitled to be paid the fair value of their Common Shares) shall be deemed to be the holders of the REIT Units to which they are entitled pursuant to the Acquisition and the Arrangement and BPCL and certain of its affiliates shall become holders of the securities to which they are entitled pursuant to the Acquisition and the Arrangement. In each case, such Shareholders shall be deemed to be the holders of the relevant securities without regard to the date or dates on which certificates representing Common Shares are physically surrendered. See “Description of the Acquisition and the Arrangement — Plan of Arrangement”.

      Enclosed with this Information Circular is a Letter of Transmittal which is being delivered to registered Shareholders. The Letter of Transmittal, when properly completed and duly executed and returned together with a certificate or certificates for Common Shares and all other required documents, will enable each registered Shareholder to obtain the certificates for the REIT Units to which they are entitled. The Letter of Transmittal, certificates for Common Shares and all other required documents must be returned by registered Shareholders to the Depositary in accordance with the instructions set out in the Letter of Transmittal. However, no certificates for REIT Units will be delivered to, or for the account of, any Shareholder who is or appears to be, or who the Corporation or the Depositary have reason to believe is, a resident of the state of New York. See “Information for United States Shareholders — Notice to Residents of the State of New York”.

      Transmission by mail of a certificate for Common Shares and a related Letter of Transmittal is at the risk of the registered Shareholder. If these documents are mailed, it is recommended that registered mail, with return receipt requested, properly insured, be used.

      Certificates representing the appropriate number of REIT Units issuable to a former registered Shareholder who has complied with the procedures set out above and in the Letter of Transmittal will, as soon as practicable after the Effective Date:

        (a) be forwarded to the former registered Shareholder at the address specified in the Letter of Transmittal by insured first class mail; or
 
        (b) be made available for pick up by the former registered Shareholder as requested by the former registered Shareholder in the Letter of Transmittal at the offices of the Depositary at the address set out on the last page of the Letter of Transmittal.

      Additional copies of the Letter of Transmittal will be sent to any Shareholder (other than Shareholders who have properly exercised their right to dissent and who are ultimately entitled to be paid the fair value of their Common Shares) of record on the Effective Date who did not receive a Letter of Transmittal. In addition, further copies of the Letter of Transmittal will be available at the offices of the Depositary in Calgary and Toronto.

      If the share certificate representing Common Shares has been lost or destroyed, registered Shareholders should complete the Letter of Transmittal as fully as possible and forward it, together with a letter describing the

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loss, to Computershare Trust Company of Canada. Computershare Trust Company of Canada will respond with the replacement requirements, which must be properly completed and returned prior to effecting the exchange.

      If certificates formerly representing Common Shares have not been surrendered to the Depositary on or before the sixth anniversary of the Effective Date, those certificates shall cease to represent a right or claim of any kind or nature and the right of the Shareholder previously represented thereby to receive REIT Units shall be deemed to be surrendered to Newco together with all interest or distributions thereon held for such holder.

Treatment of Options in Connection with the Acquisition and the Arrangement

      Options to acquire 2,398,828 Common Shares are outstanding as of December 31, 2003 under the Corporation’s stock option plan. The stock option plan permits, upon a change of control, all persons holding Options who may do so under applicable law to exercise their Options on an accelerated vesting basis, within 90 days following notice by the Corporation of a change of control. In addition to the foregoing, the Board of Directors may resolve to permit holders of Options to, in lieu of exercising the Options, require the Corporation to pay to the holder, in respect of each Common Share under Option, the amount by which the weighted average trading price of the Common Shares for the 20 trading days ending on the last trading day prior to the date of the Meeting exceeds the exercise price per Common Share under such Option prior to the Effective Date.

      In accordance with the Acquisition and Arrangement Agreement, the Board of Directors has resolved to encourage all persons holding Options to exercise their Options prior to the Effective Time. The Corporation has agreed in the Acquisition and Arrangement Agreement, subject to the receipt of any necessary regulatory approvals, to arrange for all Common Shares that are fully paid upon the valid exercise of Options to be distributed to those persons entitled thereto so as to be able to be acquired by Newco pursuant to the Acquisition and the Arrangement.

      Any Options not exercised prior to the Effective Time will be terminated pursuant to the Plan of Arrangement. See “Description of the Acquisition and the Arrangement — The Plan of Arrangement”.

      All of the directors and senior officers of the Corporation have advised the Corporation that they intend to elect to exercise Options to acquire 1,668,366 Common Shares and vote such Common Shares in favour of the Acquisition and Arrangement Resolution.

Resale of REIT Units

     Canada

      The REIT Units that Shareholders will receive pursuant to the Acquisition and the Arrangement will be issued in reliance on exemptions from the prospectus and registration requirements of applicable Canadian securities legislation or on discretionary exemptions from such requirements to be obtained from applicable securities regulatory authorities in Canada. The REIT Units will be “freely tradable”, subject to any “control block” restrictions on dispositions and subject to customary qualifications imposed under applicable securities laws of the provinces of Canada relating to the resale of such securities.

     United States

      The REIT Units to be issued pursuant to the Acquisition and the Arrangement have not been registered under the 1933 Act but will be issued in reliance upon an exemption from the registration requirements of the 1933 Act. REIT Units issued to a person who was not an “affiliate” of the Corporation, Newco, Boardwalk REIT, BPCL, BEI Subco, the General Partner, the Partnership or the Operating Trust before the Acquisition and the Arrangement and is not an affiliate of Boardwalk REIT after the Acquisition and the Arrangement may be resold without restriction under the 1933 Act. REIT Units issued to any other person pursuant to the Acquisition and the Arrangement may not be resold in the United States in the absence of registration or an available exemption from the registration requirements of the 1933 Act and may be resold outside the United States only pursuant to such an exemption or pursuant to the provisions of Regulation S under the 1933 Act. For the purposes of the 1933 Act, an “affiliate” of a person is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such other person.

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     Other Jurisdictions

      Shareholders residing outside of Canada or the United States are urged to consult their legal advisors to determine the extent of all of the provisions and restrictions applicable to the resale of REIT Units in these jurisdictions.

Timing

      If the Meeting is held as scheduled and is not adjourned and the other necessary conditions of the Acquisition and the Arrangement are satisfied or waived, the Corporation will apply to the Court for the Final Order approving the Plan of Arrangement. If the Final Order is obtained on        l       , 2004 in form and substance satisfactory to the Corporation and all other conditions specified are satisfied or waived, the Corporation expects the Effective Date to be on or about        l       , 2004.

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INFORMATION CONCERNING BOARDWALK REIT

Overview

      Boardwalk REIT is an unincorporated, open-ended real estate investment trust created by the Declaration of Trust and governed by the laws of Alberta. See “Declaration of Trust and Description of REIT Units”. The head office of Boardwalk REIT is located at Suite 200, 1501 — First Street S.W., Calgary, Alberta, T2R 0W1. Although Boardwalk REIT is expected to qualify on Closing as a “mutual fund trust” as defined in the Tax Act, Boardwalk REIT will not be a “mutual fund” as defined in applicable securities legislation. Boardwalk REIT will not be a trust company and will not be registered under applicable legislation governing trust companies as it will neither carry on nor intend to carry on the business of a trust company. The REIT Units will not be “deposits” within the meaning of the Canada Deposit Insurance Corporations Act (Canada) and will not be insured under the provisions of that Act or any other legislation.

      Following the Effective Time, Boardwalk REIT will only own the beneficial interest in, and notes of, the Operating Trust and the Operating Trust will only own LP Class A Units. As a result, the activities described below will be those of the Partnership and its subsidiaries.

Objectives of Boardwalk REIT

      The objectives of Boardwalk REIT are to: (i) provide Unitholders with stable and growing cash distributions, payable monthly and, to the extent reasonably possible, on a Canadian income tax-deferred basis, from investments in the Contributed Assets and any additional revenue producing multi-family residential properties or interests acquired by Boardwalk REIT; and (ii) increase REIT Unit value through the effective management of the Contributed Assets and the acquisition of additional residential revenue producing properties or interests therein.

Strategy of Boardwalk REIT

      The strategy of Boardwalk REIT is to provide Unitholders with a stable and growing return on their investment through participation in distributions of cash flow from a revenue producing real property portfolio that is diversified by geographic location. Boardwalk REIT can best achieve its goal by strategically:

        (a) maximizing customer satisfaction by providing an above-average level of service and product;
 
        (b) acquiring selected multi-family residential properties throughout Canada;
 
        (c) selling properties classified as held for resale and reinvesting the sale proceeds back into new and existing properties;
 
        (d) enhancing property values through pro-active management and capital improvements;
 
        (e) managing capital prudently while maintaining a conservative financial structure; and
 
        (f) pursuing opportunities to form selective partnerships or joint ventures.

     Maximizing Customer Satisfaction

      Boardwalk REIT will seek to increase long-term unitholder value by providing its customers with an above average level of service and a high quality product and, in return to receive a competitive market rent. Boardwalk REIT will offer its customers 24 hour on call maintenance service as well as on-site managers, in addition to a 24-hour, seven days a week toll-free call centre. The Contributed Assets are of high quality and, in most cases, recently renovated. Boardwalk REIT will continue to review its existing portfolio and, where appropriate, review and budget the required funds for selective value added upgrades.

     Acquiring Selected Multi-Family Residential Properties

      Boardwalk REIT will seek to expand its property portfolio by acquiring multi-family residential properties within Canada. Future real property acquisitions will be subject to specific investment guidelines and the

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operation of Boardwalk REIT and its subsidiaries will be subject to specific operating policies, as described elsewhere in this Circular. The Trustees will be responsible for the general control, direction and management of Boardwalk REIT.

      Boardwalk REIT will invest in properties which it believes provide the opportunity to apply its project management, operating, leasing and financing expertise to obtain superior returns on investment. In addition, Boardwalk REIT will seek to capitalize on economies of scale derived from its substantial presence in Western Canada, as well as a growing presence in Eastern Canada.

      Boardwalk REIT will target well located, multi-family properties offering accretive yields where, with the implementation of its operating, leasing and financing capabilities, will enhance the long-term value and cashflow of the selected property, resulting in an accretive acquisition under stabilization. Boardwalk REIT will also focus on quality acquisitions which are immediately accretive to the REIT’s distributable income.

     Selling of Properties

      An integral part of Boardwalk REIT’s operations will consist of the sale of selective properties. Boardwalk REIT will seek to dispose of properties identified as “mature” because it believes that these properties present limited opportunity for additional capital appreciation or income growth in comparison to other investment opportunities in properties which have higher vacancy rates or the opportunity to increase value through renovations. Once a property has reached the mature stage and is targeted for sale, it may be sold either on a condominium basis, where individual units are sold, or as a “bulk sale”, where an entire project is sold.

     Enhancing Property Values

      Boardwalk REIT will enhance the value of its properties through effective leasing and property management and by strictly controlling operating expenses and capital expenditures. Management expects this combination of factors to result in lower vacancy levels and the maximization of effective rental rates as expiring leases are renewed or new leases are signed. Boardwalk REIT’s strategic innovations will be designed to maximize cash flow and include portfolio-wide centralization of purchasing of materials and services to take advantage of economies of scale as well as a retail specialization leasing program.

      Boardwalk REIT will strive to acquire, develop or retain assets in those markets that demonstrate positive economic prospects. Boardwalk REIT will focus on markets that are typified by strong economic outlook and relatively low vacancy rates.

      With aggressive leasing efforts and a diversified portfolio, management believes that Boardwalk REIT is well positioned to continue to expand to other Canadian regions in the future. A significant portion of the Corporation’s rentable portfolio is located in the province of Alberta, with 55% of its total units. Alberta has led Canada’s economic and job growth over the past five years, and economists are projecting that Alberta will continue to show one of the highest GDP and population growth rates over the next several years. The Conference Board of Canada is projecting that Calgary and Edmonton, Boardwalk REIT’s two largest markets, will continue to rank among the top cities for economic growth in the country through to 2007. These positive developments bode well for the Alberta economy and, as a result, Boardwalk REIT views these and other markets as providing long-term strategic opportunities.

     Managing Capital

      Boardwalk REIT will finance its real properties and activities with a combination of long term fixed rate debt financing and drawings under lines of credit.

      Boardwalk REIT’s operating strategy must be complemented by a capital strategy designed to maximize return on shareholder’s equity. Boardwalk REIT’s objective will be to ensure in advance that there are ample capital resources to allow it to exploit opportunities quickly, rather than securing funding for each specific

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investment on a case-by-case basis. Boardwalk REIT believes that this approach will provide it a competitive advantage in negotiations for acquisitions and developments. Boardwalk REIT’s capital strategy will be to:

        (a) establish a working capital and acquisition line of capital to ensure liquidity to fund growth;
 
        (b) employ an appropriate degree of leverage during the broad based recovery in the real estate industry;
 
        (c) actively manage its exposure to interest rate volatility through the use of fixed long-term rate debt; and
 
        (d) to the extent that the Trustees determine to seek additional capital, raise such capital through public offerings of equity or debt.

Pro Forma Capitalization of Boardwalk REIT

      The following table sets forth the pro forma capitalization of Boardwalk REIT as at September 30, 2003 assuming (i) the completion of the Acquisition, the Arrangement and the Secondary Offering; and (ii) the completion of the Acquisition and the Arrangement without completion of the Secondary Offering, and should be read in conjunction with the unaudited pro forma condensed consolidated financial statements included in Appendix D to this Circular.

                   
As at As at
September 30, 2003 September 30, 2003
with Secondary without Secondary
Offering Offering
(Pro Forma) (Pro Forma)


(In Thousands) (In Thousands)
Indebtedness:
               
 
Mortgages and long-term debt
    1,437,283       1,386,849  
Unitholders’ Equity:
    949,316       373,080  
     
     
 
      2,386,599       1,759,929  
     
     
 

      Boardwalk REIT anticipates that it will make arrangements with a Canadian financial institution following the completion of the Acquisition and the Arrangement to establish a credit facility to be used for general working capital purposes.

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Selected Financial Information of the Corporation

      The following selected financial information should be read in conjunction with “Management’s Discussion and Analysis” and the audited consolidated financial statements of the Corporation and accompanying notes, included in Appendix D to this Circular.

      The statement of net income information and balance sheet information set forth in the following tables has been derived from the audited consolidated financial statements referred to above and the unaudited consolidated financial statements of the Corporation for various quarterly interim periods.

     Annual Comparative

                                                   
December 31, December 31, December 31, May 31, May 31, May 31,
2002 2001 2000 2000 1999 1998(3)
Period Ended (12 Months) (12 Months) (7 Months) (12 Months) (12 Months) (12 Months)







CDN$ Thousands, except per share amount
Total revenue(1)
    249,394       227,269       147,082       217,971       185,972       108,175  
Net earnings (loss)
    11,576       (12,802 )     15,565       10,445       14,485       7,987  
Add back
                                               
 
Income taxes (recovery)
    5,420       (12,678 )     (8,652 )     6,306       10,221       5,693  
 
Amortization
    46,748       53,584       27,401       36,842       25,110       11,169  
 
Gain on debt settlement
    (692 )                              
 
Provision for loss on technology investment
          29,837                          
Funds from operations(2)
    63,052       57,941       34,314       53,593       49,816       24,849  
Net earnings (loss) per share
                                               
 
Basic
    0.23       (0.26 )     0.32       0.21       0.31       0.20  
 
Diluted
    0.23       (0.26 )     0.31       0.21       0.31       0.20  
Add back
                                               
 
Income taxes (recovery)
    0.11       (0.25 )     (0.18 )     0.13       0.22       0.15  
 
Amortization
    0.94       1.07       0.56       0.75       0.55       0.28  
 
Gain on debt settlement
    (0.01 )                              
 
Provision for loss on technology investment
          0.60                          
Funds from operations per share
                                               
 
Basic
    1.27       1.16       0.70       1.09       1.08       0.63  
 
Diluted
    1.26       1.15       0.69       1.09       1.07       0.63  
Reconciliation of Number of Shares
                                               
 
Denominator for basic per share calculations (000)
    49,717       50,015       49,253       48,948       46,088       39,522  
 
Effect of dilutive securities (000)
    525       287       410       32       607        
 
Denominator for diluted per share calculations (000)
    50,242       50,302       49,663       48,980       46,695       39,522  
Mortgage payable
    1,307,177       1,108,406       1,034,444       1,009,526       867,757       645,652  
Total contributed assets
    1,708,490       1,489,291       1,443,834       1,398,028       1,200,800       929,886  
Number of apartment units
    29,326       25,889       24,856       25,070       22,467       19,507  
Rentable square feet (000)
    24,970       21,590       20,721       20,762       18,810       16,500  

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     Quarterly Comparative

                                                                   
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
Three Month Ended 2003 2003 2003 2002 2002 2002 2002 2001









CDN$ Thousands, except per share amount
Total revenue(1)
    68,717       66,675       65,707       63,927       63,641       67,064       54,762       57,221  
Net earnings (loss)
    5,145       2,555       1,518       2,213       3,443       3,986       1,934       (3,294 )
Add Back
                                                               
 
Earnings from discontinued operations
                (751 )                              
 
Income taxes (recovery)
    1,614       2,085       1,470       (796 )     2,383       2,412       1,421       (1,989 )
 
Amortization
    12,973       12,442       12,175       12,747       11,487       11,608       10,906       14,973  
 
Gain on debt settlement
                      (692 )                        
 
Provision for loss on technology investment
                                              2,322  
Funds from operations(2)
    19,732       17,082       14,412       13,472       17,313       18,006       14,261       12,012  
Net earnings (loss) per share
                                                               
 
Basic
    0.10       0.05       0.03       0.04       0.07       0.08       0.04       (0.08 )
 
Diluted
    0.10       0.05       0.03       0.04       0.07       0.08       0.04       (0.08 )
Add Back
                                                               
 
Earnings from discontinued operations
                (0.01 )                              
 
Income taxes (recovery)
    0.03       0.04       0.03       (0.02 )     0.05       0.05       0.03       (0.04 )
 
Amortization
    0.26       0.25       0.24       0.26       0.23       0.23       0.22       0.30  
 
Gain on debt settlement
                      (0.01 )                        
 
Provision for loss on technology investment
                                              0.05  
Funds from operations per share
                                                               
 
Basic
    0.39       0.34       0.29       0.27       0.35       0.36       0.29       0.24  
 
Diluted
    0.39       0.34       0.29       0.27       0.34       0.36       0.29       0.23  
Reconciliation of Number of Shares
                                                               
 
Denominator for basic per share calculations (000)
    50,458       50,356       50,098       50,067       49,879       49,554       49,370       49,964  
 
Effect of dilutive securities (000)
    598       542       536       637       662       646       305       211  
 
Denominator for diluted per share calculations (000)
    51,056       50,898       50,634       50,704       50,541       50,200       49,675       50,175  


Notes:

(1)  For periods prior to January 1, 2003, total revenue have not been restated to reflect the adoption of the new CICA Handbook Section 3475, Disposal of Long-Lived Assets and Discontinued Operations, for disposals on or after January 1, 2003.
 
(2)  Prior to changes in non-cash working capital and properties held for resale. Funds from operations after December 31, 2002 reflect continuing operations only.
 
(3)  Amounts reported have not been adjusted to reflect the change in accounting for future income taxes, adoption of the “treasury method” for fully diluted share computation (previous method was ‘inputted earnings’) and adoption of funds from operations calculation.

The Residential Revenue Producing Contributed Assets

      Boardwalk REIT will indirectly own, through the Partnership, an interest in the Contributed Assets. As at September 30, 2003, the Contributed Assets consisted of direct and indirect interests in approximately 31,200 residential units in Alberta, Saskatchewan, Ontario and Quebec, representing approximately 26 million net rentable square feet of revenue producing multi-family residential apartment units. The Contributed Assets represent a well-balanced portfolio of residential real estate, both from the standpoint of geographic diversification and mix of asset type, which consists of mid-sized suburban and downtown apartment buildings

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and regional, mid-sized community and neighbourhood residential centres located in urban markets. The Contributed Assets represent a diversified portfolio of multi-family rental properties. As at September 30, 2003, the Contributed Assets had an average occupancy rate of approximately 96%.

      The Contributed Assets residential portfolio is comprised of over 31,200 multi-family residential units totalling approximately 26 million net rentable square feet, of which Boardwalk REIT will have a 100% undivided interest. All of the residential properties in the Contributed Assets portfolio are located in Canada. The residential properties in the Contributed Assets portfolio are currently located in Montreal and Quebec City, Quebec; London, Kitchener and Windsor, Ontario; Saskatoon and Regina, Saskatchewan; and Edmonton, Fort McMurray, Grand Prairie, Banff, Airdrie and Calgary, Alberta.

      The following tables detail the city and property summaries of Boardwalk REIT’s residential portfolio as at September 30, 2003. As stated above, attention should be drawn to the fact that Boardwalk REIT will have an undivided interest in all of the noted properties.

                                         
By City

Number of Net Rentable % of Average
Core cities Units % of Units Square Footage Square Footage Unit Size






Edmonton, AB
    10,553       33.8 %     9,140,423       34.7 %     866  
Calgary, AB
    4,648       14.9 %     3,774,685       14.3 %     812  
Regina, SK
    2,672       8.6 %     2,163,015       8.2 %     810  
Saskatoon, SK
    1,988       6.3 %     1,692,643       6.4 %     851  
London, ON
    2,256       7.2 %     1,867,146       7.1 %     828  
Windsor, ON
    1,551       5.0 %     1,170,129       4.4 %     754  
Montreal, QC
    4,086       13.1 %     3,789,644       14.4 %     927  
Quebec City, QC
    992       3.2 %     796,163       3.0 %     803  
Gatineau, QC
    321       1.0 %     204,055       0.8 %     636  
other-AB
    1,843       5.9 %     1,491,621       5.7 %     809  
other-ON
    329       1.0 %     263,020       1.0 %     799  
     
     
     
     
     
 
Total
    31,239       100.0 %     26,352,544       100.0 %     844  
     
     
     
     
     
 
 
The Corporation’s Portfolio
                                     
Number of Net Rentable Average
City/Province Property Name Building Type(1) Units Square Footage Unit Size






Edmonton, AB
                                   
   
Alexander Plaza
    Garden       252       203,740       808  
   
Aspen Court
    Garden       80       68,680       859  
   
Boardwalk Arms A & B
    Garden       78       64,340       825  
   
Boardwalk Centre
    Highrise       597       471,871       790  
   
Boardwalk Village I, II & III
    Townhouse       255       258,150       1,012  
   
Breton Manor
    Garden       66       57,760       875  
   
Briarwynd Court
    Townhouse       172       144,896       842  
   
Brookside Terrace
    Garden       131       196,779       1,502  
   
Cambrian Place
    Garden       105       105,008       1,000  
   
Camelot
    Garden       64       54,625       854  
   
Capital View Towers
    Highrise       115       71,281       620  
   
Carmen
    Garden       64       54,625       854  
   
Castle Court
    Garden       89       93,950       1,056  
   
Castleridge Estates
    Townhouse       108       124,524       1,153  
   
Cedarville
    Garden       144       122,120       848  
   
Christopher Arms
    Garden       45       29,900       664  
   
Corian Apartments
    Garden       153       167,400       1,094  
   
Deville Apartments
    Highrise       66       47,700       723  
   
Ermineskin Place
    Highrise       226       181,788       804  

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Number of Net Rentable Average
City/Province Property Name Building Type(1) Units Square Footage Unit Size






   
Fairmont Village
    Garden       424       362,184       854  
   
Fontana
    Highrise       62       40,820       658  
   
Fort Garry House
    Highrise       93       70,950       763  
   
Galbraith House
    Highrise       163       110,400       677  
   
Garden Oaks
    Garden       56       47,250       844  
   
Granville
    Townhouse       48       53,376       1,112  
   
Greentree Village
    Garden       192       156,000       813  
   
Habitat Village
    Townhouse       151       129,256       856  
   
Imperial Tower
    Highrise       138       112,050       812  
   
Kew Place
    Townhouse       108       105,776       979  
   
Lansdowne Park
    Highrise       62       48,473       782  
   
Leawood
    Garden       142       129,375       911  
   
Lord Byron I, II & III
    Highrise       158       133,994       848  
   
Lord Byron Townhomes
    Townhouse       144       170,969       1,187  
   
Lorelei House
    Garden       78       65,870       844  
   
Maple Gardens
    Garden       181       163,840       905  
   
Marlborough Manor
    Garden       56       49,582       885  
   
Maureen Manor
    Highrise       91       64,918       713  
   
Meadowside Estates
    Garden       148       104,036       703  
   
Meadowview Manor
    Garden       348       284,490       818  
   
Monterey Pointe
    Garden       104       83,548       803  
   
Morningside
    Garden       220       165,562       753  
   
Northridge Estates
    Garden       180       103,270       574  
   
Oak Tower
    Highrise       70       51,852       741  
   
Parkside Towers
    Highrise       179       162,049       905  
   
Parkview Estates
    Townhouse       104       88,432       850  
   
Pembroke Estates
    Garden       198       198,360       1,002  
   
Pinetree Village
    Garden       142       106,740       752  
   
Pointe West Townhouses
    Townhouse       69       72,810       1,055  
   
Primrose Lane Apartment
    Garden       153       151,310       989  
   
Prominence Place
    Highrise       91       73,310       806  
   
Redwood Court
    Garden       116       107,680       928  
   
Riverview Manor
    Garden       81       62,092       767  
   
Royal Heights
    Highrise       74       41,550       561  
   
Sandstone Pointe
    Garden       81       83,800       1,035  
   
Sir William Place
    Garden       220       126,940       577  
   
Solano House
    Highrise       91       79,325       872  
   
Southgate Tower
    Highrise       170       153,385       902  
   
Summerlea Place
    Garden       39       43,297       1,110  
   
Suncourt Place
    Garden       62       55,144       889  
   
Tamarack East and West
    Townhouse       132       212,486       1,610  
   
Terrace Gardens
    Garden       114       101,980       895  
   
Terrace Towers
    Highrise       84       66,000       786  
   
The Palisades
    Highrise       94       77,200       821  
   
The Westmount
    Highrise       133       124,825       939  
   
Tower Hill Apartments
    Highrise       82       46,360       565  
   
Tower on the Hill
    Highrise       100       85,008       850  
   
Valley Ridge Tower
    Highrise       49       30,546       623  
   
Victorian Arms
    Garden       96       91,524       953  
   
Viking Arms
    Highrise       240       257,410       1,073  
   
Village Acres
    Garden       186       156,464       841  

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Number of Net Rentable Average
City/Province Property Name Building Type(1) Units Square Footage Unit Size






   
Village Plaza
    Townhouse       68       65,280       960  
   
Warwick Apartments
    Garden       60       49,092       818  
   
West Edmonton Court
    Garden       82       73,209       893  
   
Westborough Court
    Garden       60       50,250       838  
   
Westbrook Estates
    Garden       172       148,616       864  
   
Westmoreland Apartments
    Garden       56       45,865       819  
   
Westpark Ridge
    Garden       102       99,280       973  
   
Westridge Estates B
    Garden       91       56,950       626  
   
Westridge Estates C
    Garden       90       56,950       633  
   
Westridge Manor
    Townhouse       64       69,038       1,079  
   
Westwinds of Summerlea
    Garden       48       53,872       1,122  
   
Willow Glen Apartments
    Garden       88       71,800       816  
   
Wimbledon
    Highrise       165       117,216       710  
                 
     
     
 
                  10,553       9,140,423       866  
Calgary, AB
                                   
   
Boardwalk Heights
    Highrise       202       160,894       797  
   
Boardwalk Plaza
    Highrise       115       80,424       699  
   
Brentview Towers
    Highrise       239       151,440       634  
   
Cedar Court Gardens
    Townhouse       65       58,560       901  
   
Centre Point West
    Highrise       123       110,611       899  
   
Century Towers
    Highrise       90       73,411       816  
   
Chateau Apartments
    Highrise       145       110,545       762  
   
Elbow Towers
    Highrise       158       108,280       685  
   
Flintridge Place
    Highrise       68       55,023       809  
   
Glamis Green
    Townhouse       156       173,881       1,115  
   
Glamorgan Manor
    Garden       86       63,510       738  
   
Heritage Gardens
    Highrise       91       64,250       706  
   
Hillside Estates
    Garden       76       58,900       775  
   
Lakeside Estates
    Garden       89       77,732       873  
   
Leighton House
    Highrise       38       27,352       720  
   
Lynnridge Village
    Townhouse       160       151,080       944  
   
McKinnon Court
    Garden       48       36,540       761  
   
McKinnon Manor
    Garden       60       43,740       729  
   
Northwest Pointe
    Garden       150       102,750       685  
   
Oakhill
    Townhouse       240       236,040       984  
   
O’Neil Towers
    Highrise       187       131,281       702  
   
Patrician Village
    Garden       392       295,600       754  
   
Pineridge Apartments
    Garden       76       52,275       688  
   
Prominence Place
    Garden       75       55,920       746  
   
Radisson I
    Townhouse       124       108,269       873  
   
Radisson II
    Townhouse       124       108,015       871  
   
Radisson III
    Townhouse       118       124,379       1,054  
   
Royal Park Plaza
    Highrise       86       66,137       769  
   
Russet Court
    Townhouse       206       213,264       1,035  
   
Skygate Tower
    Highrise       142       113,350       798  
   
Spruce Ridge Estates
    Garden       284       196,464       692  
   
Travois Apartments
    Garden       89       61,350       689  
   
Vista Gardens
    Garden       100       121,040       1,210  

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Number of Net Rentable Average
City/Province Property Name Building Type(1) Units Square Footage Unit Size






   
Westwinds Village
    Garden       180       137,815       766  
   
Willow Park Gardens
    Garden       66       44,563       675  
                 
     
     
 
                  4,648       3,774,685       812  
Regina, SK
                                   
   
Ashok Portfolio
    Garden       164       95,000       579  
   
Boardwalk Estates
    Garden       687       467,696       681  
   
Boardwalk Manor
    Garden       72       60,360       838  
   
Centennial South
    Townhouse       170       129,080       759  
   
Centennial West
    Garden       60       46,032       767  
   
Eastside Estates
    Townhouse       150       167,550       1,117  
   
Evergreen Estates
    Garden       150       125,660       838  
   
Grace Manor
    Townhouse       72       69,120       960  
   
Greenbriar Apts
    Garden       72       57,600       800  
   
Lockwood Arms
    Garden       96       69,000       719  
   
Meadows, The
    Townhouse       52       57,824       1,112  
   
Pines of Normanview
    Townhouse       133       115,973       872  
   
Qu’appelle Village I & II
    Garden       154       133,200       865  
   
Qu’appelle Village III
    Garden       180       144,160       801  
   
Southpointe Plaza
    Highrise       140       117,560       840  
   
Wascana Park Estates
    Townhouse       320       307,200       960  
                 
     
     
 
                  2,672       2,163,015       810  
Saskatoon, SK
                                   
   
Carleton Towers
    Highrise       158       155,138       982  
   
Chancellor Gate
    Garden       138       126,396       916  
   
Dorchester Towers
    Highrise       52       48,608       935  
   
Heritage Pointe Estates
    Townhouse       104       99,840       960  
   
Lawson Village
    Garden       96       75,441       786  
   
Meadow Parc Estates
    Townhouse       200       192,000       960  
   
Palace Gate
    Garden       206       142,525       692  
   
Penthouse Apartments
    Highrise       82       61,550       751  
   
Regal Tower 1 & 2
    Highrise       161       122,384       760  
   
St. Charles Place
    Garden       156       123,000       788  
   
St. James Place
    Garden       140       105,750       755  
   
Stonebridge Apartments
    Garden       162       131,864       814  
   
Stonebridge Townhomes I & II
    Townhouse       100       135,486       1,355  
   
Westhaven Place
    Garden       179       128,700       719  
   
Wildwood Ways B
    Garden       54       43,961       814  
                 
     
     
 
                  1,988       1,692,643       851  
London, ON
                                   
   
Abbey Estates
    Townhouse       53       59,794       1,128  
   
Castlegrove Estates
    Highrise       144       126,420       878  
   
Forest City Estates
    Highrise       272       221,000       813  
   
Heritage Square
    Garden/ Highrise       359       270,828       754  
   
Landmark Tower
    Highrise       213       173,400       814  
   
Maple Ridge On The Parc
    Highrise       257       247,166       962  
   
Meadow Crest Apts
    Garden       162       110,835       684  
   
Noel Meadows
    Garden       105       72,600       691  
   
Ridgewood Estates
    Townhouse       29       31,020       1,070  
   
Sanford Apts
    Highrise       96       77,594       808  
   
The Bristol
    Highrise       138       109,059       790  

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Number of Net Rentable Average
City/Province Property Name Building Type(1) Units Square Footage Unit Size






   
Topping Lane Towers
    Highrise       189       177,880       941  
   
Villages of Hyde Park
    Townhouse       60       57,850       964  
   
Westmount Ridge
    Highrise       179       131,700       736  
                 
     
     
 
                  2,256       1,867,146       828  
Windsor, ON
                                   
   
Anchorage Apartments
    Highrise       135       110,245       817  
   
Askin Tower
    Highrise       60       39,675       661  
   
Buckingham Towers
    Highrise       34       30,805       906  
   
Caron Towers
    Highrise       47       36,947       786  
   
Empress
    Garden       40       28,250       706  
   
Frances Tower Apartments
    Highrise       53       43,906       828  
   
Glenwood Apartments
    Highrise       33       25,619       776  
   
Janisse Tower
    Highrise       75       45,000       600  
   
Karita Tower
    Highrise       41       28,950       706  
   
Lauzon Towers
    Highrise       178       137,784       774  
   
Marine Court
    Highrise       68       49,206       724  
   
Randal Court
    Garden       47       38,775       825  
   
Regency Colonade
    Highrise       133       113,205       851  
   
Riverdale Manor
    Townhouse       97       77,850       803  
   
Rivershore Tower Apts
    Highrise       96       63,300       659  
   
Sandilands Tower
    Highrise       47       38,775       825  
   
Sanwich Tower
    Highrise       66       40,650       616  
   
Seaway Tower
    Highrise       152       112,037       737  
   
Sun Crest Tower
    Highrise       58       43,100       743  
   
Sun Ray Manor
    Highrise       41       29,950       730  
   
University Towers
    Highrise       50       36,100       722  
                 
     
     
 
                  1,551       1,170,129       754  
Montreal, QC
                                   
   
Cote-Vertu (St. Laurent, QC)
    Midrise       88       67,750       770  
   
Domaine d’Iberville Apts (Longueuil, QC)
    Highrise       720       560,880       779  
   
Les Jardins Bourassa
    Midrise       178       85,874       482  
   
Nun’s Island Portfolio
    Various       3,100       3,075,140       992  
                 
     
     
 
                  4,086       3,789,644       927  
Quebec City, QC
                                   
   
Le Laurier
    Highrise       104       74,995       721  
   
Les Appartments du Verdier
    Garden       195       152,645       783  
   
Les Jardins de Merici
    Highrise       346       300,000       867  
   
Place Charlesbourg
    Midrise       105       82,624       787  
   
Place du Parc
    Highrise       111       81,746       736  
   
Place Samuel de Champlain
    Highrise       131       104,153       795  
                 
     
     
 
                  992       796,163       803  
Fort McMurray, AB
                                   
   
Birchwood Manor
    Garden       24       18,120       755  
   
Chanteclair
    Garden       79       68,138       863  
   
Edelweiss Terrace Apts
    Garden       32       27,226       851  
   
Heatherton
    Garden       23       16,750       728  
   
Hillside Manor
    Garden       30       21,248       708  
   
Mallard Arms
    Garden       36       30,497       847  
   
McMurray Manor
    Garden       44       30,350       690  

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Number of Net Rentable Average
City/Province Property Name Building Type(1) Units Square Footage Unit Size






   
The Granada
    Garden       44       35,775       813  
   
The Valencia
    Garden       40       33,850       846  
                 
     
     
 
                  352       281,954       801  
 
Red Deer, AB
                                   
   
Canyon Pointe Apartments
    Garden       163       114,039       700  
   
Inglewood Terrace
    Garden       68       42,407       624  
   
Riverbend Village Apartments
    Garden       150       114,750       765  
   
Rivercrest Manor
    Highrise       120       102,225       852  
   
Saratoga
    Highrise       48       53,762       1,120  
   
Taylor Heights Apartments
    Garden       140       103,512       739  
   
Watson
    Highrise       50       43,988       880  
   
Westridge Estates
    Townhouse       112       113,664       1,015  
                 
     
     
 
                  851       688,347       809  
 
Other
                                   
   
Boardwalk Park Estates 2
  (Grande Prairie, AB)
    Townhouse       32       30,210       944  
   
Kings Tower (Kitchener, ON)
    Highrise       226       171,100       757  
   
Northwoods Manor (Banff, AB)
    Garden       76       53,340       702  
   
Parc de la Montagne
    Highrise       321       204,055       636  
   
Parkview Portfolio (Grande Prairie, AB)
    Garden       369       306,850       832  
   
Tower Lane I & II (Airdrie, AB)
    Garden       163       130,920       803  
   
Westheights Place (Kitchener, ON)
    Highrise       103       91,920       892  
                 
     
     
 
                  1,290       988,395       763  
                 
     
     
 
          Total       31,239       26,352,544       844  
                 
     
     
 


(1)  Highrise — A multi-storey (usually six or more) residential building, typically with an elevator
    Midrise — A multi-storey (usually between five and 7 storey) residential building, typically with an elevator
    Townhouse — One of several single family homes (sometimes called rowhouses) joined by common walls
    Garden — A walk-up or lowrise (usually between three and 5 storey) apartment building, typically without an elevator

      A description of the residential properties in the Contributed Assets portfolio in which revenue will account for 10 percent or more of the combined reportable revenue of Boardwalk REIT is set out below.

 
Quebec

      Nuns’ Island — Montreal — In the second quarter of 2002, the Corporation completed the acquisition of a 3,100-unit portfolio located on Nuns’ Island at a total cost of approximately $200 million. Nuns’ Island is a unique, high-end community, located immediately south of Montreal’s downtown core. Nuns’ Island is noted for its natural setting and amenities, including parks and bike trails. It is an extremely popular location for people attracted to the lifestyle aspects of living on the island, yet still being very close to downtown.

      The portfolio consists of 59 apartment buildings and 260 townhouse units, all within an 80-acre land parcel. The clustered nature of the properties provides for significant operating and administrative efficiencies. The portfolio includes high-rise, mid-rise and townhouse-style rental buildings, with a total of 3.1 million rental square feet and an average unit size of approximately 1,000 square feet.

      On Nuns’ Island, the Corporation operates under the Structures Metropolitaines banner, a well-recognized name in the local market that had been associated with the high-quality Nuns’ Island property since development of the project started in the 1960s. With the acquisition, the Corporation was able to bring on board over 60 dedicated and talented associates who, together with the addition of two local managers, will oversee Boardwalk REIT’s operations in Montreal.

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Rights Plan

      The Trustees propose to adopt the Rights Plan which reflects the “current generation” of rights plans designed to meet the proxy voting guidelines of institutional investors. The Rights Plan will become effective on the Effective Date. For additional information in respect of the Rights Plan, see “Other Meeting Business — Rights Plan”.

Relationship with the Corporation Following the Acquisition and the Arrangement

      Following completion of the Acquisition and the Arrangement, the Corporation will be indirectly held by BPCL. BPCL will indirectly hold LP Class B Units, which will effectively represent an approximate 8% equity interest (after the preferred distribution and other entitlements of the LP Class C Units, which it will also hold) in Boardwalk REIT. If the Secondary Offering is not completed, BPCL will also own REIT Units representing an approximate 20% equity interest in Boardwalk REIT.

      See “Description of the Acquisition and the Arrangement — Overview of the Arrangement” and “— Arrangements with BPCL”.

Auditors, Transfer Agent and Registrar

      The auditors of Boardwalk REIT will be Deloitte & Touche LLP, chartered accountants, at its offices in Calgary, Alberta.

      The transfer agent and registrar of the REIT Units will be Computershare Trust Company of Canada at its principal offices in Calgary, Alberta and Toronto, Ontario.

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MANAGEMENT OF BOARDWALK REIT

      The overall operations and affairs of Boardwalk REIT are subject to the control of the Trustees, while the day-to-day activities of Boardwalk REIT are under the direction of Boardwalk REIT’s senior management team.

Board of Trustees

      The Declaration of Trust provides that the assets and operations of Boardwalk REIT are subject to the control and authority of a board of a minimum of five Trustees and a maximum of 12 Trustees, a majority of whom shall be Independent Trustees. Initially, there are seven Trustees. Pursuant to the Declaration of Trust, BPCL is entitled to appoint one Trustee to serve on the board provided that BPCL and its affiliates continue to beneficially own, in the aggregate, a number of REIT Units and/or LP Class B Units that, upon surrender or exchange of the LP Class B Units would equal at least 5% of the outstanding REIT Units (on a fully-diluted basis). The remaining Trustees will be elected by Unitholders in the manner provided below. Any Trustee appointed by BPCL may be changed by BPCL at any time. The number of Trustees may be changed by the Unitholders or, if authorized by the Unitholders, by the Trustees, provided that the Trustees may not, between meetings of Unitholders, unless otherwise approved by a majority of the Independent Trustees, appoint an additional Trustee if, after such appointment, the total number of Trustees would increase by more than one-third the number of Trustees in office immediately following the last annual meeting of Unitholders. A vacancy occurring among the Trustees, other than among the appointee of BPCL, may be filled by resolution of the remaining Trustees, so long as they constitute a quorum, or by the Unitholders at a meeting of the Unitholders. A vacancy occurring among the Trustees resulting from the resignation or removal of the appointee of BPCL may be filled only by an appointment by BPCL.

      The Trustees on the Effective Date, other than the appointee of BPCL, hold office for a term expiring at the close of the first annual meeting of the Unitholders or until their respective successors are elected or appointed and shall be eligible for re-election. Thereafter, Trustees, other than the appointee of BPCL, will be elected at each annual meeting of Boardwalk REIT and will be elected for a term expiring at the conclusion of the next annual meeting or until their successors are elected or appointed and will be eligible for re-election. BPCL will appoint its Trustee at each annual meeting of Boardwalk REIT for a term expiring at the next annual meeting unless removed prior to such meeting at the direction of BPCL. A Trustee appointed by the Trustees between meetings of Unitholders or to fill a vacancy will be appointed for a term expiring at the conclusion of the next annual meeting of Boardwalk REIT or until his or her successor is elected or appointed and will be eligible for election or re-election.

      The Declaration of Trust provides that a Trustee may resign at any time upon written notice delivered to the Chair or, if there is no Chair, the President of Boardwalk REIT and a Trustee (other than an appointee of BPCL) may be removed with or without cause by a majority of the votes cast at a meeting of Unitholders or with cause by two-thirds of the remaining Trustees.

      Each Trustee is required to exercise the powers and discharge the duties of his or her office honestly and in good faith with a view to the best interests of Boardwalk REIT and the Unitholders and, in connection therewith, to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

      The following table sets forth the name, municipality of residence, office held with Boardwalk REIT and principal occupation of each of the initial Trustees of Boardwalk REIT:

           
Name and Municipality
of Residence Position Held Principal Occupation



Paul J. Hill(1)
  Chairman and Trustee   President, Harvard Developments Inc.,
 
Regina, Saskatchewan
      a Hill Company
 
Ernest Kapitza(1)(2)
  Trustee   Consultant
 
Calgary, Alberta
       
 
Sam Kolias(3)
  President, Chief Executive Officer   Executive of the Corporation
 
Calgary, Alberta
  and Trustee    

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Name and Municipality
of Residence Position Held Principal Occupation



 
Jon E. Love(2)
  Trustee   Managing Partner, KingStreet Capital
 
Toronto, Ontario
      Partners
 
Al W. Mawani(1)
  Trustee   President, Exponent Capital
 
Thornhill, Ontario
      Partners Inc.
 
David V. Richards(1)
  Trustee   President, Network Capital Inc.
 
Calgary, Alberta
       
 
Michael D. Young(2)
  Trustee   President
 
Dallas, Texas, Quadrant Capital Partners, Inc.
       


Notes:

(1)  Will be a member of the Audit Committee.
 
(2)  Will be a member of the Compensation and Governance Committee.
 
(3)  Nominee of BPCL.

      Biographical information regarding each of the Trustees of Boardwalk REIT is provided below.

 
Paul J. Hill

      Mr. Paul J. Hill was appointed Chairman of the Corporation’s Board of Directors on February 28, 2002 and has been a director of the Corporation since October 6, 1994. Paul Hill is President of The Hill Companies and Harvard Developments Inc. He is an Ivey School of Business MBA and has over 26 years of experience in the real estate industry as well as 7 years in the investment banking industry. He serves as Chairman of Crown Life and Chairman and director of several other Canadian and U.S. private and public companies. He also serves on the board of the Investment Dealers’ Association, the Fraser Institute, the C.D. Howe Institute, the Conference Board of Canada, the Canadian Council for Aboriginal Business, the Ivey School of Business, the Georgetown University School of Business (Washington, D.C.), the Athol Murray College of Notre Dame, the Saskatchewan Roughrider Football Club and the Canadian Olympic Foundation (Governor). In addition, he is an active member of the Chief Executive Organization, the World Presidents Organization, and the Canadian Council of Chief Executives.

 
Sam Kolias

      Mr. Sam Kolias is the President, Chief Executive Officer and a director of the Corporation, positions he has had since incorporation in July 1993. Prior to that time, Mr. Kolias’ principal occupation was as President of Boardwalk Properties Company Limited, a private real estate holding company owned 50% by Mr. Kolias (through his 100% ownership of Boardwalk Investment Limited), and 50% by Mr. Van Kolias (through his 100% ownership of Park Place Holdings Ltd.).

 
Ernest Kapitza

      Mr. Ernest Kapitza is an independent business consultant and has been a director of the Corporation since March 1, 2001. Mr. Kapitza has a strong business background, having had a 32-year career with the T.D. Financial Group. Before retiring from the T.D. Financial Group, Mr. Kapitza served as a Vice-President/ Regional Manager of Commercial Services in Calgary. Mr. Kapitza is a Fellow of the Institute of Canadian Bankers, a Personal Financial Planner and completed the program for Management Development from Harvard Business School in 1980. Mr. Kapitza sits on the boards of other public companies and community entities.

 
Jon E. Love

      Mr. Love has been a director of the Corporation since February 19, 2002. Mr. Love is currently the Managing Partner of KingStreet Capital Partners. Prior thereto, Mr. Love was President and Chief Executive Officer of Oxford Properties Group Inc., one of Canada’s largest real estate companies, for nine years. Mr. Love holds an Honours Business Degree from the Ivey Business School at the University of Western Ontario.

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Al W. Mawani

      Mr. Mawani has been a director of the Corporation since April 30, 2002. Mr. Mawani is currently President of Exponent Capital Partners Inc., a private equity firm. Prior to January 31, 2004, Mr. Mawani was a Vice-President of IPS Industrial Promotion Services Ltd., a private equity firm. Prior thereto, Mr. Mawani was Executive Vice-President of Business Development for one year and Senior Vice-President and Chief Financial Officer at Oxford Properties Group Inc., one of Canada’s largest real estate companies, for 10 years.

      Mr. Mawani is a chartered accountant and has a MBA from the University of Toronto. He is a member of the Financial Executives Institute and is a trustee of IPC US Income Commercial REIT (TSX) with assets in excess of US$750 million.

 
David V. Richards

      Mr. Richards has been a director of the Corporation since June 22, 1995. He is currently the President of Network Capital Inc., a private investment company, a position he has held since May 1997. Prior thereto, Mr. Richards was President of Burin Capital Corporation from April 1995 to May 1997. Prior thereto, Mr. Richards was a partner with Arthur Anderson, from September 1993 to April 1995.

 
Michael D. Young

      Mr. Young has been a director of the Corporation since September 18, 1997. In November 2003, Mr. Young formed Quadrant Capital Partners, Inc., a private real estate firm with offices in Toronto and Dallas. From 1994 through October 2003, he worked for CIBC World Markets, joining as Managing Director and Head of Real Estate Investment Banking and becoming Global Head of Real Estate in 1997.

      Mr. Young was a founding partner of Gordon Capital in 1970. In 1976 he moved to Dallas to form his own real estate brokerage, investment and consulting firm. He subsequently re-established his relationship with Gordon Capital in 1987 through a joint venture company, Gordon & Young.

      Mr. Young is a graduate of the University of Western Ontario. He is a member of Canada’s Sports Hall of Fame and has served as Chairman of the Corporate Committee of the Dallas Museum of Art. Mr. Young also serves as a trustee of IPC US Income Commercial REIT (TSX) and Calloway Real Estate Investment Trust (TSX) and as a director of Brookfield Homes Corporation (NYSE).

 
Conflict of Interest Restrictions and Provisions

      The Declaration of Trust contains “conflict of interest” provisions similar to those applicable to corporations under Section 120 of the ABCA which serves to protect Unitholders without creating undue limitations on Boardwalk REIT. Given that the Trustees and the officers of Boardwalk REIT are engaged in a wide range of real estate and other business activities, the Declaration of Trust requires each Trustee or officer of Boardwalk REIT to disclose to Boardwalk REIT if he or she is a party to a material contract or transaction or proposed material contract or transaction with Boardwalk REIT or its subsidiaries or the fact that such person is a director or officer of or otherwise has a material interest in any Person who is a party to a material contract or transaction or proposed material contract or transaction with Boardwalk REIT or its subsidiaries. Such disclosure is required to be made by a Trustee at the first meeting at which a proposed contract or transaction is considered, at the first meeting after a Trustee becomes interested in a proposed or pending contract or transaction or at the first meeting after an interested party becomes a Trustee. Disclosure is required to be made by an officer of Boardwalk REIT as soon as the officer becomes aware that a contract or transaction or proposed contract or transaction is to be, or has been, considered by the Trustees, as soon as the officer becomes aware of his or her interest in a contract or transaction or, if not currently an officer of Boardwalk REIT, as soon as such person becomes an officer of Boardwalk REIT. In the event that a material contract or transaction or proposed material contract or transaction is one that in the ordinary course would not require approval by the Trustees, a Trustee or officer of Boardwalk REIT is required to disclose in writing to Boardwalk REIT or request to have entered into the minutes of the meeting of the Trustees the nature and extent of his or her interest forthwith after the Trustee or officer of Boardwalk REIT becomes aware of the contract or transaction or proposed contract or transaction. In

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any case, a Trustee who has made disclosure to the foregoing effect is not entitled to vote on any resolution to approve the contract or transaction unless the contract or transaction is one relating primarily to his or her remuneration as a Trustee, officer, employee or agent of Boardwalk REIT or one for indemnity under the indemnity provisions of the Declaration of Trust or the purchase of liability insurance.

      The Declaration of Trust contains provisions to address potential conflicts of interest arising between Boardwalk REIT and any Related Party. In particular, following the Effective Date, Boardwalk REIT will obtain a valuation in respect of any real property that the Partnership intends to purchase from or sell to a Related Party prepared by a valuator engaged by, and prepared under the supervision of, a committee of two or more Independent Trustees who have no interest in such transaction. In addition, Boardwalk REIT will not permit the Partnership to effect a transaction with a Related Party unless the transaction is determined to be on commercially reasonable terms by, and is approved by, a majority of Boardwalk REIT’s Independent Trustees who have no interest in such transaction.

 
Independent Trustee Matters

      In addition to requiring the approval of a majority of the Trustees, the following matters require the approval of at least a majority of disinterested Independent Trustees to become effective:

  •  making a material change to the Plan of Arrangement;
 
  •  entering into any agreement or transaction in which any Related Party has a material interest or making a material change to any such agreement or transaction;
 
  •  any matter relating to a claim by or against any Related Party;
 
  •  any matter relating to a claim in which the interests of a Related Party differ from the interests of Boardwalk REIT;
 
  •  permitting the Partnership to acquire any real or other property in which a Related Party has an interest or to sell any interest in any real or other property to a Related Party;
 
  •  granting REIT Units under any unit incentive or unit compensation plan approved by the Trustees and, if required, by the Unitholders or awarding any right to acquire or other right or interest in REIT Units or securities convertible into or exchangeable for REIT Units under any plan approved by the Trustees and, if required, by the Unitholders;
 
  •  approving or enforcing any agreement entered into by Boardwalk REIT or its subsidiaries with a Trustee who is not an Independent Trustee or an associate thereof, with a Related Party;
 
  •  recommending to the holders of REIT Units to increase the number of Trustees serving on the board of Trustees or authorizing the Trustees to change the number of Trustees from time to time; and
 
  •  changing the compensation of any officer or employee of Boardwalk REIT.

 
General Powers of the Board of Trustees

      The board of Trustees of Boardwalk REIT, subject to certain specific limitations contained in the Declaration of Trust, have, without further or other authorization and free from any control or direction on the part of Unitholders, full, absolute and exclusive power, control and authority over the assets and affairs of Boardwalk REIT to the same extent as if the Trustees were the sole owners of such assets in their own right, to do all such acts and things as they in their sole judgment and discretion are necessary or incidental to, or desirable for, the carrying out of any of the purposes of Boardwalk REIT or conducting the affairs of Boardwalk REIT.

 
Relationship Between the Board of Trustees and Management

      The board of Trustees initially is composed of seven Trustees, one of whom is also an officer of Boardwalk REIT.

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      The limits of management’s responsibilities are clearly defined by the board of Trustees of Boardwalk REIT. This is accomplished both by specifically identifying the role and responsibilities of the Chief Executive Officer of Boardwalk REIT and by specifying that all material decisions relating to the business and operations of Boardwalk REIT are to be made by the board of Trustees or a committee thereof.

Committees

      On or before the Effective Date, the board of Trustees of Boardwalk REIT will establish two committees: the Audit Committee and the Compensation and Governance Committee and may establish an Investment Committee as well as such additional committees as the Trustees, in their discretion, determine to be necessary or desirable for the purposes of properly governing the affairs of Boardwalk REIT.

 
Audit Committee

      The Trustees shall appoint an audit committee consisting of at least three Trustees, all of whom shall be Independent Trustees. The Chair of the Audit Committee shall be selected from the group of Independent Trustees appointed to serve on such Committee. The Audit Committee shall: (i) review Boardwalk REIT’s procedures for internal control with the Auditors and Chief Financial Officer of Boardwalk REIT; (ii) review the engagement of the Auditors; (iii) review and recommend to the Trustees for their approval annual and quarterly financial statements and management’s discussion and analyses of financial condition and results of operation; (iv) assess Boardwalk REIT’s financial and accounting personnel; and (v) review any significant transactions outside Boardwalk REIT’s ordinary activities and all pending litigation involving Boardwalk REIT.

 
Compensation and Governance Committee

      The Trustees shall appoint a Compensation and Governance Committee consisting of at least three Trustees, all of such Trustees shall be Independent Trustees. The Chair of the Compensation and Governance Committee shall be selected from the group of Independent Trustees appointed to serve on such Committee. The duties of the Compensation and Governance Committee shall be to review the compensation of the Trustees and the officers of Boardwalk REIT. The Compensation and Governance Committee shall be generally responsible for Boardwalk REIT’s human resources, compensation and governance policies and will have primary responsibility for: (i) administering Boardwalk REIT’s unit incentive plans; (ii) assessing the performance of the Chief Executive Officer; (iii) reviewing and approving the compensation of senior management and consultants of Boardwalk REIT; (iv) reviewing and making recommendations to the Trustees concerning the level and nature of compensation payable to the Trustees; and (v) reviewing the governance policies of Boardwalk REIT, including being responsible for (a) assessing the effectiveness of the board of Trustees and each of its committees; (b) considering questions of management succession; (c) participating along with management in the recruitment and selection of candidates for Trustees; and (d) considering and approving proposals by the Trustees to engage outside advisors on behalf of the board of Trustees as a whole or on behalf of the Independent Trustees.

 
Investment Committee

      In furtherance of and without limiting their authority to appoint such additional committees pursuant to the Declaration of Trust, the Trustees may, as they, in their discretion, determine necessary or desirable, appoint an investment committee to consider, authorize and approve the proposed acquisition, disposition, financing, refinancing and such other proposed transactions for and on behalf of Boardwalk REIT; provided however that in the absence of any such appointment and delegation of authority, subject to certain provisions of the Declaration of Trust, the responsibility for such determinations shall be that of all of the Trustees who together may from time to time, in the exercise of such discretion, and subject always to the Investment Guidelines and Operating Policies of Boardwalk REIT, approve an investment plan for Boardwalk REIT and delegate to any one or more Trustees, officers or employees of Boardwalk REIT the authority to consider, authorize and approve the proposed acquisition, disposition, financing, refinancing and such other proposed transactions for and on behalf of Boardwalk REIT as they, in their discretion determine necessary or desirable, within the parameters of such investment plan. In the event that the Trustees approve any investment plan or plans for Boardwalk REIT, it shall

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be within their authority and discretion to amend, modify, supplement or revoke such plan or plans from time to time as they, in their discretion determine necessary or desirable.

Remuneration of Trustees

      The Trustees are entitled to compensation for their services as trustees of Boardwalk REIT. The initial compensation for the Trustees, other than Trustees who are also employees of Boardwalk REIT or any of its subsidiaries, is a retainer of $20,000 per year plus a meeting fee of $1,000 per day ($500 if attending via video or teleconference) for each meeting of the board of Trustees and reimbursement for their out-of-pocket expenses incurred in acting as Trustee. The chairman of the board of Trustees, if not an employee of Boardwalk REIT or any of its subsidiaries, receives an annual fee of $50,000, but does not receive any other fees for board or committee meetings attended. Each Trustee who is a member of one of Boardwalk REIT’s committees is compensated with an additional annual retainer of $3,000 and related meeting fees of $1,000 per meeting attended. Boardwalk REIT will fund its payment of such expenses through its indirect receipt of the LP Class A Preferred Distribution on the LP Class A Units indirectly owned by Boardwalk REIT. See “Information Concerning the Partnership — Distributions”.

Senior Management

      The senior officers of Boardwalk REIT consist of Sam Kolias, President and Chief Executive Officer; Roberto A. Geremia, Chief Financial Officer; and R. Douglas Biggs, Secretary. These individuals also serve as officers of the General Partner. The senior officers have extensive experience in acquiring, refurbishing and profitably managing multi-family residential properties. Additional officers or personnel may be employed by Boardwalk REIT to support management in fulfilling its duties. Boardwalk REIT may also outsource other services necessary to its operations to third parties, subject to approval of the Trustees as necessary. See “Information Concerning the Partnership — Management” for further information on such officers.

Deferred Bonus Unit Plan

      Following completion of the Acquisition and the Arrangement, Boardwalk REIT intends to adopt the Deferred Bonus Unit Plan. The purpose of the Deferred Bonus Unit Plan will be to provide deferred incentive bonus compensation to Trustees, officers and senior employees of Boardwalk REIT (“Participants”), thereby rewarding their efforts in the year of grant and providing additional incentive for their continued efforts in promoting the growth and success of the business of Boardwalk REIT, as well as assisting Boardwalk REIT in attracting and retaining senior management personnel and the board of Trustees.

      The incentive bonus compensation contemplated under the Deferred Bonus Unit Plan will be granted in the form of deferred REIT Units. Following the determination of a Participant’s bonus, the board of Trustees will direct that the bonus compensation otherwise owing to a Participant be paid to a plan administrator for the purpose of purchasing in the open market or pursuant to private transactions with third parties (other than from Boardwalk REIT) a number of REIT Units equal to the amount of the incentive bonus compensation divided by the market value of the REIT Units at the time of acquisition.

      No REIT Units may be granted to any Participant if the total number of REIT Units purchased on behalf of such Participant under the Deferred Bonus Unit Plan, together with any REIT Units reserved for issuance to such Participant under options to purchase REIT Units for services or any other security compensation arrangement of Boardwalk REIT, would exceed 5% of the aggregate issued and outstanding REIT Units.

Boardwalk REIT Administrative Services Agreement

 
Management and General Administrative Services

      The Boardwalk REIT Administrative Services Agreement will set out the terms and conditions pursuant to which the General Partner or its subsidiaries will provide certain management and general administrative services to Boardwalk REIT and the Operating Trust, including (i) undertaking any matters required to be performed by the trustees of Boardwalk REIT and the Operating Trust not otherwise delegated under the respective declarations

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of trust or the Boardwalk REIT Administrative Services Agreement; (ii) keeping and maintaining books and records; (iii) preparing returns, filings and documents and making determinations necessary for the discharge of the obligations of the trustees of Boardwalk REIT and the Operating Trust; (iv) providing Unitholders with annual audited and interim financial statements and relevant tax information; (v) preparing and filing income tax returns and filings; (vi) ensuring compliance by Boardwalk REIT with all applicable securities legislation and stock exchange requirements including, without limitation, continuous disclosure obligations; (vii) preparing and approving on behalf of Boardwalk REIT any circular or other disclosure document required under applicable securities legislation in response to an offer to purchase REIT Units; (viii) providing investor relations services to Boardwalk REIT; (ix) calling and holding annual and/or special meetings in respect of Boardwalk REIT and the Operating Trust and preparing, approving and arranging for the distribution of meeting materials; (x) preparing and providing to Unitholders information such as monthly and annual reports, notices, financial reports and tax information relating to Boardwalk REIT; (xi) attending to administrative and other matters arising in connection with redemptions of REIT Units; (xii) ensuring that Boardwalk REIT elects to be a “mutual fund trust” from the date it is established and a “registered investment” within the meaning of the Tax Act and monitoring Boardwalk REIT’s status as such; (xiii) monitoring the investments of Boardwalk REIT to ensure that the foreign property of Boardwalk REIT does not exceed the limits prescribed in the Tax Act; (xiv) determining the amount of Distributable Income, net realized capital gains and net realized income of Boardwalk REIT and the Operating Trust and arranging for distributions to be paid to Unitholders; (xv) promptly notifying Boardwalk REIT and the Operating Trust of any event that might reasonably be expected to have a material adverse effect on their respective affairs; and (xvi) generally providing all other services as may be necessary or requested by Boardwalk REIT and the Operating Trust.
 
Administrative and Support Services

      Pursuant to the Boardwalk REIT Administrative Services Agreement, the General Partner will also agree to provide or cause its subsidiaries to provide certain administrative and support services to Boardwalk REIT and the Operating Trust. The administrative and support services provided by the General Partner will include providing office space, office equipment and communications services and computer systems, providing secretarial support personnel and reception and telephone answering services, installing and maintaining signage and promotional materials and providing such other administrative and secretarial support services as may be reasonably required from time to time.

      The Boardwalk REIT Administrative Services Agreement will provide for the payment to the General Partner or its subsidiaries by the Operating Trust or its subsidiaries of an amount sufficient to reimburse the General Partner or its subsidiaries for the expenses incurred by it in providing services under the Boardwalk REIT Administrative Services Agreement as long as the expenses are identified in the current annual budget for the Contributed Assets or are otherwise approved in writing by Boardwalk REIT and the Operating Trust prior to being incurred by the General Partner. Each of Boardwalk REIT and the Operating Trust will fund its payments to the General Partner or its subsidiaries through their direct or indirect receipt of the LP Class A Preferred Distribution on the LP Class A Units owned by the Operating Trust. See “Information Concerning the Partnership — Distributions”.

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INVESTMENT GUIDELINES AND OPERATING POLICIES OF BOARDWALK REIT

Investment Guidelines

      Pursuant to the Declaration of Trust, following the Effective Date, and notwithstanding anything contained in the Declaration of Trust to the contrary, the assets of Boardwalk REIT may be invested only and Boardwalk REIT shall not permit the assets of any subsidiary to be invested otherwise than in accordance with the following investment guidelines:

        (a) Boardwalk REIT will focus its activities primarily on the acquisition, holding, maintaining, improving, leasing or managing of multi-unit residential revenue producing properties, and ancillary real estate ventures (“focus activities”);
 
        (b) notwithstanding anything contained in the Declaration of Trust to the contrary, no investment will be made that would result in:

        (i) REIT Units being disqualified for investment by registered retirement savings plans, registered retirement income funds, registered education savings plans or deferred profit-sharing plans;
 
        (ii) Boardwalk REIT being liable under the Tax Act to pay a tax imposed under Part XI of the Tax Act, including, without limitation, as a result of holdings by Boardwalk REIT of “foreign property” as defined in the Tax Act;
 
        (iii) REIT Units being “foreign property” for the purpose of the Tax Act or any other plan referred to in (i) above (other than registered education savings plans); or
 
        (iv) Boardwalk REIT ceasing to qualify as a “mutual fund trust” or a “registered investment” for purposes of the Tax Act;

        (c) no single asset (other than Operating Trust Units, Operating Trust Notes and units of the Partnership) shall be acquired if the cost of such acquisition (net of the amount of debt secured by such asset) will exceed 15% of Gross Book Value, provided that where such asset is the securities of or an interest in an entity, the foregoing tests shall be applied individually to each asset of such entity;
 
        (d) investments may be made in a joint venture arrangement only if:

        (i) the arrangement is in connection with a focus activity;
 
        (ii) the arrangement is with others (“joint venturers”) either directly or through the ownership of securities of or an interest in an entity (“joint venture entity”);
 
        (iii) the interest in the joint venture entity is an interest of not less than 25% and is not subject to any restriction on transfer other than a right of first refusal or right of first offer, if any, in favour of the joint venturers;
 
        (iv) Boardwalk REIT or an entity controlled by it has a right of first offer or a right of first refusal to buy the interests of the joint venturers in the joint venture entity;
 
        (v) Boardwalk REIT has the ability to provide input in the management decisions of the joint venture entity;
 
        (vi) the joint venture entity provides an appropriate buy-sell mechanism; and
 
        (vii) without limitation, any joint venture arrangement with a Related Party for the purposes of the related party provisions of the Declaration of Trust has been entered into in accordance with such provisions,

             provided that, notwithstanding the foregoing, the interest of another Person in any existing joint venture arrangement which does not comply with any of subparagraphs (ii), (iii), (iv) or (v) above may be acquired if the Trustees determine that the investment is desirable and is otherwise in compliance with the

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  Declaration of Trust and the operating policies established in accordance with the Declaration of Trust and in effect at such time;

        (e) unless otherwise permitted in the provisions of the Declaration of Trust setting out Boardwalk REIT’s Investment Guidelines and except for temporary investments held in cash, deposits with a Canadian or U.S. chartered bank or trust company registered under the laws of a province of Canada, short-term government debt securities or in money market instruments of, or guaranteed by, a Schedule I Canadian chartered bank maturing prior to one year from the date of issue, Boardwalk REIT, directly or indirectly, may not hold securities other than (i) currency or interest rate futures contracts for hedging purposes to the extent that such hedging activity complies with the Canadian Securities Administrator’s National Instrument 81-102 or any successor instrument or rule; (ii) securities of a joint venture entity, or any entity formed and operated solely for the purpose of carrying on ancillary activities to any real estate owned, directly or indirectly, by Boardwalk REIT, or an entity wholly-owned, directly or indirectly, by Boardwalk REIT formed and operated solely for the purpose of holding a particular real property or real properties; and (iii) securities of another issuer provided either (A) such securities derive their value, directly or indirectly, principally from real property, or (B) the principal business of the issuer of the securities is the ownership or operation, directly or indirectly, of real property, and provided in either case the entity whose securities are being acquired are engaged in a focus activity;
 
        (f) no investment will be made in a real property located in the United States unless Boardwalk REIT has obtained an opinion from legal counsel to the effect that the making of the investment (i) should not result in interest paid by any U.S. entity in which Boardwalk REIT, directly or indirectly, owns an interest to any affiliate of Boardwalk REIT ceasing to be deductible for U.S. federal income tax purposes or becoming subject to U.S. withholding tax and (ii) would not cause the REIT Units or Special Voting Units, as the case may be, to be subject to tax under Part XI or cause the REIT Units or Special Voting Units, as the case may be, to be “foreign property” for the purposes of the Tax Act;
 
        (g) no investment will be made, directly or indirectly, in operating businesses unless such investment is incidental to a transaction:

        (i) where revenue will be derived, directly or indirectly, principally from a focus activity; or
 
        (ii) which principally involves the ownership, maintenance, improvement, leasing or management, directly or indirectly, of real property;

        (h) notwithstanding any other provisions of the Declaration of Trust setting out Boardwalk REIT’s Investment Guidelines, the securities of a reporting issuer in Canada may be acquired provided that:

        (i) the activities of the issuer are focused on focus activities; and
 
        (ii) in the case of any proposed investment or acquisition which would result in the beneficial ownership of more than 10% of the outstanding units of the securities issuer (the “acquired issuer”), the investment is made for the purpose of subsequently effecting the merger or combination of the business and assets of Boardwalk REIT and the acquired issuer or for otherwise ensuring that Boardwalk REIT will control the business and operations of the acquired issuer;

        (i) no investments will be made in rights to or interests in mineral or other natural resources, including oil or gas, except as incidental to an investment in real property;
 
        (j) no investments will be made in a mortgage, mortgage bonds, notes (other than Operating Trust Notes) or debentures (“Debt Instruments”) (including participating or convertible) unless:

        (i) the real property which is security therefor is real property which otherwise meets the provisions of the Declaration of Trust setting out Boardwalk REIT’s Investment Guidelines;
 
        (ii) the security therefore includes a mortgage registered on title to the real property which is security therefor;

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        (iii) the amount of the investment (not including mortgage insurance fees) does not exceed 75% of the appraised value of the real property which is the security therefor; and
 
        (iv) the aggregate value of the investments of Boardwalk REIT in Debt Instruments, after giving effect to the proposed investment, will not exceed 15% of the Gross Book Value,

             provided that, notwithstanding the foregoing, an investment may be made in a Debt Instrument if the sole intention is to use such investment as a method of acquiring control of a revenue producing real property which would otherwise be a permitted investment pursuant to Section 4.1 of the Declaration of Trust and provided that the aggregate value of the investments in such Debt Instruments will not exceed 15% of Adjusted Unitholders’ Equity;

        (k) notwithstanding paragraph (j) above, Boardwalk REIT may also invest in mortgages where:

        (i) the mortgage is a “vendor take-back” mortgage granted to Boardwalk REIT in connection with the sale by it of existing real property and as a means of financing the purchaser’s acquisition of such property from Boardwalk REIT;
 
        (ii) the mortgage is interest bearing;
 
        (iii) the mortgage is registered on title to the real property which is security therefore;
 
        (iv) the mortgage has a maturity not exceeding five years;
 
        (v) the amount of the mortgage loan is not in excess of 85% of the selling price of the property securing the mortgage; and
 
        (vi) the aggregate value of these mortgages (including mortgages and mortgage bonds in which Boardwalk REIT is permitted to invest by virtue of paragraph (j) above, after giving effect to the proposed investment, will not exceed 15% of Gross Book Value calculated at the time of such investment;

        (l) no investment shall be made in raw land (except for the acquisition of properties adjacent to existing properties of Boardwalk REIT for the purpose of renovation or expansion of existing facilities where the total cost of all such investments does not exceed 5% of Gross Book Value); and
 
        (m) notwithstanding any other provisions of the Declaration of Trust, investments may be made which do not comply with the investment policy provisions of the Declaration of Trust provided (i) the aggregate cost thereof (which, in the case of an amount invested to acquire real property, is the purchase price less the amount of any indebtedness assumed or incurred in connection with the acquisition and secured by a mortgage on such property) does not exceed 15% of the Adjusted Unitholders’ Equity and (ii) the making of such investment would not contravene paragraph (b) above.

      Pursuant to the Declaration of Trust, following the Effective Date, the investment guidelines set forth above may only be amended with the approval of at least 66 2/3% of the votes cast at a meeting of Unitholders called for that purpose.

Operating Policies

      The Declaration of Trust will provide that, following the Effective Date, the operations and affairs of Boardwalk REIT will be conducted in accordance with the following policies and that Boardwalk REIT will not permit any subsidiary to conduct its operations and affairs other than in accordance with the following policies:

        (a) the construction or development of real property may be engaged in order to maintain its real properties in good repair or to enhance the revenue-producing potential of real properties in which it has an interest;
 
        (b) except for properties encumbered by the Retained Debt, title to each real property shall be held by and registered in the name of the Partnership, the General Partner or a corporation or other entity wholly-owned indirectly by Boardwalk REIT or jointly owned indirectly by Boardwalk REIT with joint venturers;

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  provided, that where land tenure will not provide fee simple title, the Partnership, the General Partner or a corporation or other entity wholly-owned, directly or indirectly by the Partnership or jointly owned, directly or indirectly, by Boardwalk REIT with joint venturers shall hold a land lease as appropriate under the land tenure system in the relevant jurisdiction;
 
        (c) no indebtedness shall be incurred or assumed if, after giving effect to the incurring or assumption thereof of the indebtedness, the total indebtedness as a percentage of Gross Book Value would be more than 70% for indebtedness, including amounts drawn under the acquisition facility;
 
        (d) except for any indebtedness existing on the Effective Date, no new indebtedness (otherwise than by the assumption of existing indebtedness) will be incurred or renewed or refinanced or secured by a mortgage on any of the real property of Boardwalk REIT unless, at the date of the proposed incurring of the indebtedness, the aggregate of (i) the amount of all indebtedness secured by such real property, and (ii) the amount of additional indebtedness proposed to be incurred, does not exceed 75% of the market value of such real property, in either case not including mortgage insurance fees incurred in connection with the incurrence or assumption of such indebtedness, which amount shall be added to the amount of the permitted indebtedness;
 
        (e) except for guarantees existing on the date of the Declaration of Trust (including without limitation guarantees given in relation to the Retained Debt liability), Boardwalk REIT shall not, directly or indirectly, guarantee any indebtedness or liabilities of any kind of a third party, except (A) indebtedness, liabilities or other obligations of (i) any subsidiary of Boardwalk REIT or other entity wholly-owned by Boardwalk REIT, or (ii) other entity jointly owned by Boardwalk REIT with joint venturers and operated solely for the purpose of holding a particular property or properties where such indebtedness, liabilities or other obligation, if granted, incurred or assumed by Boardwalk REIT directly, would not cause Boardwalk REIT to otherwise contravene the restrictions set out in the Investment Guidelines provisions of the Declaration of Trust and, where such indebtedness, liabilities or other obligation is granted, incurred or assumed by a joint venture entity, subject to a joint venturer being required to give up its interest in a property owned by the joint venture entity as a result of another joint venturer’s failure to honour its proportionate share of the obligations relating to such property, and, except with the prior approval of the Trustees and subject always to (b) under the Investment Guidelines above, the liability of Boardwalk REIT is limited strictly to the proportion of the indebtedness, liabilities or other obligation equal to Boardwalk REIT’s proportionate ownership interest in the joint venture entity, or (iii) with the prior approval of the Trustees and subject always to (b) under the “Investment Guidelines” above, the indebtedness, liabilities or other obligations of joint venturers in circumstances where any such guarantee may also be given in respect of the associated joint venture entity; and (B) in relation to the Retained Debt. In addition, Boardwalk REIT will not directly or indirectly guarantee any indebtedness, liabilities or other obligations of any Person if doing so would contravene (b) under the “Investment Guidelines” above;
 
        (f) except for the Contributed Assets acquired pursuant to the Master Asset Contribution Agreement, an engineering survey or physical review by an experienced third party consultant will be obtained for each real property intended to be acquired with respect to the physical condition thereof;
 
        (g) at all times insurance coverage will be obtained and maintained in respect of potential liabilities of Boardwalk REIT and the accidental loss of value of the assets of Boardwalk REIT from risks, in amounts and with such insurers, in each case as the Trustees consider appropriate, taking into account all relevant factors including the practices of owners of comparable properties;
 
        (h) except for the Contributed Assets acquired pursuant to the Master Asset Contribution Agreement, a Phase I environmental audit shall be conducted for each real property to be acquired and, if the Phase I environmental audit report recommends that further environmental audits be conducted, such further environmental audits shall be conducted, in each case by an independent and experienced environmental consultant; and
 
        (i) at least 8.5% of gross consolidated annual rental revenues generated from properties where the associated mortgage financing is insured by CMHC (“insured properties”) as determined pursuant to

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  GAAP shall be expended annually on sustaining capital expenditures, repairs and maintenance, all determined on a portfolio basis for all insured properties. For this purpose, capital expenditures and repairs and maintenance include all onsite labour costs and other expenses and items associated with such capital expenditures, repairs and maintenance.

      Pursuant to the Declaration of Trust, the operating policies set forth above may only be amended with the approval of a majority of the votes cast at a meeting of Unitholders called for that purpose.

DECLARATION OF TRUST AND DESCRIPTION OF REIT UNITS

      Boardwalk REIT has been established under the Declaration of Trust for an indeterminate term. The following is a summary, which does not purport to be complete, of certain terms of the Declaration of Trust and the REIT Units. After the completion of the Acquisition and the Arrangement, a copy of the Declaration of Trust may be accessed on SEDAR (www.sedar.com).

      The Declaration of Trust authorizes the issuance of an unlimited number of two classes of units of Boardwalk REIT: REIT Units and Special Voting Units. The Special Voting Units may only be issued to holders of, and are not transferable separately from, LP Class B Units to which they relate.

REIT Units

      Each REIT Unit represents an undivided beneficial interest in Boardwalk REIT and in distributions made by Boardwalk REIT, whether of net income, net realized capital gains or other amounts and, in the event of liquidation, winding-up or other termination of Boardwalk REIT, in the net assets of Boardwalk REIT remaining after the satisfaction of all liabilities. No REIT Unit has preference or priority over any other.

      The REIT Units will be issued as fully paid and non-assessable and are freely transferable, subject to applicable securities regulatory requirements. Each REIT Unit entitles the holder thereof to one vote for each whole REIT Unit held at all meetings of Unitholders.

      Except as set out under “Issuance of REIT Units” and “REIT Unit Redemption Right” below, the REIT Units have no conversion, retraction, redemption or pre-emptive rights. Issued and outstanding REIT Units may be subdivided or consolidated from time to time by the Trustees with the approval of a majority of the Unitholders. Unitholder approval will not be required for an automatic consolidation as described in “Distribution Policy”.

      No certificates will be issued for fractional REIT Units and fractional REIT Units will not entitle the holders thereof to vote at, receive notice of or attend meetings of Unitholders, except to the extent such fractional REIT Units represent in the aggregate one or more whole REIT Units. The REIT Units are not “deposits” within the meaning of the Deposit Insurance Corporation Act (Canada) and are not insured under the provisions of such act or any other legislation.

      Furthermore, Boardwalk REIT is not a trust company and, accordingly, is not registered under any trust and loan company legislation as it does not carry on nor intend to carry on the business of a trust company.

Special Voting Units

      The Declaration of Trust provides for the issuance of an unlimited number of Special Voting Units that will be used to provide voting rights with respect to Boardwalk REIT to Persons holding LP Class B Units or other securities that are, directly or indirectly, exchangeable for REIT Units. Pursuant to the Arrangement, one Special Voting Unit will be issued by Boardwalk REIT to the Corporation in conjunction with its subscription for LP Class B Units of the Partnership.

      The Special Voting Units are not transferable separately from the LP Class B Units to which they relate. The Special Voting Units will automatically be transferred upon a transfer of the corresponding LP Class B Units. In addition, as LP Class B Units are surrendered for REIT Units and are no longer outstanding, the corresponding

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Special Voting Units will be automatically redeemed by Boardwalk REIT for $0.0000001 per each Special Voting Unit cancelled and shall no longer be outstanding.

      Each Special Voting Unit entitles the registered holder thereof to the number of votes at any meeting of Unitholders or in respect of any written resolution of Unitholders which is equal to the number of REIT Units which may be obtained upon the surrender of the LP Class B Unit to which the Special Voting Unit relates. The Special Voting Units do not entitle or give any rights to the holders thereof to receive distributions or any amount upon liquidation, dissolution or winding-up of Boardwalk REIT. Holders of Special Voting Units are not entitled to receive a certificate or other written instrument evidencing ownership of such units.

Issuance of REIT Units

      The Trustees may allot and issue REIT Units at such time or times and in such manner (including pursuant to any distribution reinvestment plan of Boardwalk REIT) and to such Person, Persons or class of Persons as the Trustees in their sole discretion shall determine. The price or the value of the consideration for which REIT Units may be issued and the terms and conditions of issuance of the REIT Units shall be determined by the Trustees in their sole discretion, generally (but not necessarily) in consultation with investment dealers or brokers who may act as underwriters in connection with offerings of REIT Units. In the event that REIT Units are issued in whole or in part for a consideration other than money, the resolution of the Trustees allotting and issuing such REIT Units shall express the fair equivalent in money of the other consideration received.

      Boardwalk REIT may create and issue rights, warrants or options to subscribe for fully paid REIT Units which rights, warrants or options may be exercisable at such subscription price or prices and at such time or times as the Trustees may determine. The rights, warrants or options so created may be issued for such consideration or for no consideration, all as the Trustees may determine. A right, warrant or option shall not be a REIT Unit and a holder thereof shall not be a Unitholder.

Purchase of REIT Units

      Boardwalk REIT may at any time or from time to time purchase for cancellation all or part of the outstanding REIT Units at a price per REIT Unit and on a basis determined by the Trustees in accordance with applicable securities legislation and the applicable rules of the stock exchange(s) on which the REIT Units are listed.

REIT Unit Redemption Right

      REIT Units are redeemable at any time, in whole or in part, on demand by the holders thereof by sending a notice to Boardwalk REIT at its head office in a form approved by the Trustees and completed and executed in a manner satisfactory to the Trustees, who may require supporting documentation as to identity, capacity or authority. A Unitholder not otherwise holding a fully registered REIT Unit certificate who wishes to exercise the redemption right will be required to obtain a redemption notice from his or her investment dealer or other intermediary who will be required to deliver the completed redemption form to Boardwalk REIT. Upon receipt by Boardwalk REIT of a written redemption notice and other documents that may be required, all in a manner satisfactory to the Trustees, a holder of REIT Units shall cease to have any rights with respect to the tendered REIT Units (other than to receive the redemption payment therefor), including any right to receive any distributions thereon which are declared payable to the Unitholders of record on a date which is subsequent to the day of receipt of the redemption notice by Boardwalk REIT and the holder thereof shall be entitled to receive a price per REIT Unit (the “Redemption Price”) equal to the lesser of:

        (a) 90% of the “market price” of the REIT Units on the principal market on which the REIT Units are quoted for trading on the trading day prior to the day on which the REIT Units were surrendered to Boardwalk REIT for redemption (the “Redemption Date”); and
 
        (b) 100% of the “closing market price” of the REIT Units on the principal market on which the REIT Units are quoted for trading on the Redemption Date.

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      For the purposes of this calculation, “market price” in respect of REIT Units will be an amount equal to the 20-day daily volume weighted average of the closing price of the REIT Units for each of the trading days on which there was a closing price; provided that if the applicable exchange or market does not provide a closing price, but only provides the highest and lowest prices of the REIT Units traded on a particular day, the “market price” shall be an amount equal to the average of the highest and lowest prices for each of the trading days on which there was a trade; and provided further that if there was trading on the applicable exchange or market for fewer than five of the 20 trading days, the “market price” shall be the average of the following prices established for each of the 20 trading days: (i) the average of the last bid and last asking prices of the REIT Units for each day on which there was no trading; (ii) the closing price of the REIT Units for each day on which there was trading if the exchange or market provides a closing price; and (iii) the average of the highest and lowest prices of the REIT Units for each day that there was trading if the exchange or market does not provide a closing price but provides only the highest and lowest prices of the REIT Units traded on a particular day.

      The “closing market price” in respect of REIT Units shall be (i) an amount equal to the closing price of the REIT Units if there was a trade on the date and the exchange or market provides a closing price; (ii) an amount equal to the average of the highest and lowest prices of the REIT Units if there was trading and the exchange or other market does not provide a closing price but provides only the highest and lowest trading prices of the REIT Units traded on a particular day; or (iii) the average of the last bid and last asking prices of the REIT Units if there was no trading on that date.

      If a Unitholder is not entitled to receive cash upon redemption of REIT Units as a result of the limitations in (b) and (c) below, the Redemption Price will be equal to the fair market value of the REIT Units as determined by the Trustees.

      The aggregate Redemption Price payable by Boardwalk REIT in respect of any REIT Uni