MULTI-RESIDENTIAL MARKET UPDATE

The apartment building market over the past several years has seen unprecedented growth, and 2004 was no exception. And the spin off from the Toronto market has had a tremendous impact throughout southern Ontario, with Hamilton and district a major recipient of the flow of investors from Toronto.

Today's investors are facing much higher values than past years. For example, in 1998 Toronto experienced an average prices per unit of approximately $58,800, and a cap rate around 9%, in contrast to today's price as high as $80,000 per suite, and a cap rate as low as 6%. During the same period, an average one bedroom suite rental increased from $700.00 to as high as $1,200. per month.

Unlike the real estate boom through the late 80's and subsequent bust (compliment of the NDP Government in early1990's), this real estate cycle, which started in about 1992, has seen a steady and slow increase in demand, with values showing growth in all sectors. This has resulted in reduced availability of apartment buildings, as the inventory is quickly bought up by hungry investors.

The attitude and investor confidence has remained on a high for the several years. The main contributors for that confidence is attributed by historically low interest rates, rising rents, positive changes in rent legislation, as well a high employment and growing economy.

We recently attended a presentation titled "Global Export Forecast" delivered by Mr. Richard Egelton, Senior Vice President of the BMO Financial Group. His message, in summary was that the Canadian economy is in great shape, and that we do lead the group of seven nations in all aspects of our finances. The economic future, subject to all things remaining equal, is all positive.

Our Forecast: Apartment building values are showing signs of stability regardless of higher vacancies, (low interest rates are allowing more people to buy their own home). We expect demand for investment properties to remain strong, thanks to low interest rates and a strong economy. All these factors combined with investors reluctance to invest in the stock market has helped to fuel the steady demand for real estate. The year 2005 is expected to be another strong year for investment properties.