Agellan

Overview of structure

The REIT will invest directly or indirectly in a mix of Canadian and US industrial and commercial (plus one retail) rental properties, having a gross purchase price of $421.1M. Its Ontario and Quebec properties (representing 41% and 2% respectively of NOI) will be held by it directly. Its US properties will be held in a Delaware subsidiary LP of a US corporate subsidiary (Agellan US) which, in turn, will be held by a Canadian corporate subsidiary of the REIT (Agellan Canada). Agellan Capital Partners Inc. ("AGPI") will be the asset manager (and was previously the asset manager for 22 of the 23 properties).

Offering

13.4M REIT units for gross proceeds of $134.6M.

Structuring

On the day of closing of the offering or the day after:

• The REIT will acquire interests in the Canadian properties in consideration for the issuance of 9.226M REIT units ("Units") to and for the assumption of mortgages
• The REIT will acquire additional interests in the Canadian properties with $3.571M of the proceeds of the offering and also in consideration for the issuance of 0.148M additional Units and the assumption of mortgage debt; $68.55M of the issue proceeds also will be used to redeem the 9.226M Units referred to above
• The REIT will lend U.S.$30M and U.S.$33.5M on an interest-bearing basis to Agellan Canada and Agellan US, respectively
• The REIT will use the remaining net proceeds of the offering, and the proceeds of Units issued to the US LP to subscribe for common shares of Agellan Canada
• Agellan Canada will apply such proceeds to subscribe for common shares of Agellan US
• Agellan US, in turn, will subscribe for Class A units of the US LP
• The US LP will use such proceeds to subscribe for 2.642M Units
• The US LP will use such Units and U.S.$63.81M of the balance of the proceeds to acquire the US properties (and also will assume mortgage on such acquisition)

The partnership agreement for the US LP contemplates that in future US asset acquisitions it may issue Class B units which are economically identical to (REIT) Units and are exchangeable into Units.

Vendor interests/ Special Rights

The Vendors in respect of the Units they retain are referred to as the "CarVal Retained Interest Holders" (respecting 18.9% of the REIT units if the over-allotment option is exercised) and the "ACPI Retained Interest Holders" (0.4%). They will be contractually obliged to retain such Units for 18 months and to pledge them to secure certain of their obligations as vendors. The CarVal Retained Interest Holders are entities managed by CarVal Investors, LLC. They have a "Piggyback Registration Right" (respecting future REIT offerings) and a "Demand Registration Right" 9re qualifying their Units for distributions).

There is a Unitholders' Rights Plan.

Distributions

Monthly of $0.06458 representing approximating 90% of AFFO. A DRIP with 3% bonus distributions.

Canadian tax consequences

REIT. The REIT is anticipated to qualify as a REIT under both the current and proposed REIT-qualification rules.

Agellan Canada

Agellan Canada will deduct the interest on the note owing by it to the REIT. It is expected that income earned by Agellan US including income allocated to it by the US LP will be foreign accrual property income (fapi). Dividends paid by Agellan US to Agellan Canada out of its fapi generally will not result in further income inclusions. The adjusted cost base of the shares of Agellan US will be reduced to the extent they are paid out of pre-acquisition surplus.

Non-investor US tax consequences

Anti-inversion rules. The REIT will be a foreign corporation. The anti-inversion rules in Code s. 7874 are not expected to apply as the REIT will have substantial business activities in Canada and because the number of Units issued in connection with the US property acquisitions is not expected to exceed 60% of the total Units issued in connection with all the property acquisitions.

Internal leverage

The REIT should be eligible for Treaty benefits as long as its Units are primarily and regularly traded on a Canadian stock exchange (the TSX). The interest-bearing note owing by Agellan US to the REIT will be treated as debt and the interest thereon on that basis will be exempt from withholding.

Agellan US's debt-to-equity ratio is expected to exceed 1.5 to 1 and it is expected that s. 163(j) initially will apply to limit its interest deductions.