Christian Green - Director, Investor Relations Edward Sonshine - CEO Cynthia Devine - Senior Vice President, Chief Financial Officer Rags Davloor - President, COO & Interim CFO

Heather Kirk - BMO Capital Markets Michael Smith - RBC Capital Markets Alex Avery - CIBC Pammi Bir - Scotia Capital

Good morning. I am Christian Green, Director, Investor Relations for RioCan.

Thank you all for taking the time to dial-in or log-in as the case maybe this morning. Today's presenters are Edward Sonshine, RioCan's Chief Executive Officer; Rags Davloor.

RioCan's President and Chief Operating Officer; and Cynthia Devine, Executive Vice President and Chief Financial Officer for RioCan. Before turning the call to Ed for his opening remarks, I am required to read the following cautionary statement.

In talking to you about our financial and operating performance and in responding to your questions, we may make forward-looking statements including statements concerning RioCan’s objectives, its strategies to achieve those objectives, and as well as statements with respect to management’s beliefs, plans, estimates, and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements.

In discussing our financial performance and operating performance and in responding to your questions, we will also be referencing certain financial measures that are not Generally Accepted Accounting Principle measures, GAAP, under IFRS. These measures do not have any standardized definitions prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers.

Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows and profitability. RioCan’s management uses these measures to aid in assessing the Trust’s underlying core performance and provides these additional measures so that investors may do the same.

Additional information on the material risks that could impact our actual results and estimates and assumptions we applied in making these forward-looking statements, together with our details on our use of non-GAAP financial measures can be found in the financial statements for the period ending June 30, 2015, and management’s discussion and analysis related thereto as applicable, together with RioCan’s current Annual Information Form that are all available on our website and at www.sedar.com. With that said, I will now turn the call over to Ed.

Thank you Christian and thank you for relieving me of the duty of reading that. I think soon that will form the largest part of our conference call as the lawyers continuously expand it.

So having said all that, I think that the theme of RioCan's second quarter and probably the rest of 2015 can be summed up in two words. Those words are challenging and resilient.

RioCan's business, the general state of the economy together with population growth and movement are the most influential factors. They ultimately guide us in our allocation of capital and they have the largest impact on our success.

By way of understatement, which maybe unusual for me, the general state of the Canadian economy could be better. But there is another side of the coin of economic weakness and that is usually low interest rates.

A good news which for some reasons seems to escape many, is that interest rates will only go up when the economy improves. We have seen that connection clearly with the Bank of Canada reducing rates this year while the American Federal Reserve keeps collecting to be ready to increase rates.

There is no doubt that current economic conditions form the largest part of the challenging side of our business. And when you add to that Target's sudden exit from Canada at the beginning of this year putting almost 15 million square feet of retail space up for grabs, the challenging side of the equation seems to be quite imposing.

However, as I mentioned, the other key word applicable to RioCan is resiliency, and that is exactly what we are displaying in the face of these challenging conditions. Our numbers for the second quarter are quite satisfactory and I fully expect them to remain as quite satisfactory for the remainder of this year.

We were able to achieve this notwithstanding Target's disclaimer of what ultimately turned out to be 19 stores aggregating a 100% interest about 2 million square feet but also because we have been acting for over a decade in response to the other key business factor I mentioned, namely population growth and movement. We have done this by concentrating our capital in Canada's primary markets and in particular those where there is material population growth.

And of course a large part of our resilience also comes simply by having grown to be sufficiently large and diverse so as to best be able to weather any type of storm. Our resilience will most certainly overcome the challenges and just to name a few of the items that make me confident that we are going to do that.

One, our ongoing development program on which we have also been working at for almost a decade. While everyone is somewhat concerned about what is going on in Alberta, our Sage Hill shopping center there is 82% pre-leased.

And by the time it all comes on stream over the course of the next 12 months, I expect that number to be a lot closer to a 100%. In our East Hills Power Center, also in Calgary, the first three phases aggregating 533,000 square feet, over 95% committed and already well into construction.

For those lease first three phases expected to be completed by year end 2016. Finally our East Village project adjacent to the Central Business District of Calgary is expected to commence construction by year end with the second floor of retail occupied by Loblaws and Shoppers Drug Mart and a firm contract in hand for the sale of approximately 0.5 million square feet of residential density which will sit above the retail.

I would refer you to the appropriate sections of our press release and our MD&A for details of the many projects we have here in Toronto. And by the way there is a flip side to the weakness in Alberta which is quite simply the ongoing reductions we are starting to see in construction costs.

Our residential intensification program is proceeding satisfactorily and according to schedule. And finally, interest rates continue to be a source of bottom-line growth with our average cost of debt falling to 3.94% this past quarter and with ongoing refinancing opportunities in the future as a result of our laddered approach to debt.

Let me simply sum up by saying that I expect to see satisfactory growth in RioCan in 2015 and 2016. I look for that growth to accelerate in 2017 as development projects are completed and come fully on stream and as the disclaimed Target stores become occupied by new tenants Let me end with a comment on the last bullet point of our quarter end release of this morning which is that we are undertaking a strategic review of our U.S.

operations. Those words, strategic review mean exactly what they say.

We will be exploring all possible alternatives with respect to our U.S. portfolio selecting which course of action or inaction is the best for RioCan and its unitholders over the long-term.

With that preamble, I am happy to turn reporting over to Cynthia Devine.

Thanks Ed and good morning everyone. We are pleased to review RioCan's 2015 second quarter results that were released earlier this morning.

While the operating environment continues to be challenging, the resilience of the Trust operations together with income provided, from development and acquisitions and the benefit of a stronger U.S. dollar has enabled RioCan to generate consistent operating FFO growth again this quarter.

Operating FFO for the second quarter was 136 million compared to 127 million for the same period in 2014 representing an increase of 9 million or 6.9%. On a per unit basis, operating FFO increased in the quarter by 2.4% or $0.01 per unit to $0.43.

The 9 million increase in the second quarter operating FFO is primarily due to an overall increase in NOI from rental properties of 8 million despite lower Canadian same-store NOI, largely driven by acquisitions, net of dispositions that have been completed over the last 12 months, additional income property NOA resulting from the completion of development projects, a $4.8 million higher foreign gains from U.S. operations and finally higher fees and other income of 3.8 million.

Now these gains were partly offset by an increase in interest expense of 1.7 million due to lower amounts of capitalized interest in part related to the implementation of the Trust's ERP project in 2014 and the unfavorable foreign exchange impact of U.S. dollar denominated debt, partially offset by inter-savings through the refinancing of maturing mortgages and debentures at lower interest rates, and higher G&A expenses of 0.8 million largely due to the timing of recognition of variable compensation expenses.

RioCan expects the timing impact to reverse in the second half of 2015 primarily in the fourth quarter. As indicated in the first quarter, on a full year basis, we expect G&A costs to be up modestly in the range of 3% to 4% compared to 2014.

For the first six months ended June 30th, operating FFO was 274 million, up nearly 8% versus 2014. The factors effecting year-to-date operating FFO growth are substantially the same as those highlighted for the quarter.

On a per unit basis, operating FFO increased by 3.6% or $0.03 per unit from $0.83 to $0.86 on a year-to-date basis. Same-store NOI in Canada was down 1.4% in the second quarter and down 0.7% on a year-to-date basis as compared to same periods in the prior year due in large part to higher year-to-date vacancies.

As previously mentioned, the decline in Canadian same-store NOI was more than offset by new development, acquisitions and favorable foreign exchange gains demonstrating the strength and diversity of RioCan's business. In the U.S., same-store growth was solid, up 2% both for the quarter and the six months ended June 30th driven by new leasing and renewals.

RioCan's committed occupancy of 93.9% as of June 30th reflects the impact of 18 Target leases that were disclaimed before the quarter end as a result of Target Canada CCAA project. The situation concerning Target continues to evolve.

RioCan and Target have begun discussions concerning the indemnity agreement provided by Target Corporation for which no payments have been received to-date. Effective July 1, 2015 pursuant to IFRS, RioCan's ceased accruing rental revenues on the disclaimed Target leases.

When RioCan reaches a resolution on the Target Corporation indemnity the related impact will be recognized in the consolidated financial statements at such time. These discussions are in the early stages and we cannot provide additional comments on their status at this time.

Rag will however provide more information on the Target impact from an operational perspective. The interest rate environment continues to be favorable.

RioCan has successfully reduced its overall contractual interest rates on outstanding debt to 3.94% as of June 30, 2015, down from 4.12% as at December 31, 2014. For the remainder of the year, RioCan expects to achieve additional interest savings on maturing mortgages of approximately 320 million as these loans carry a weighted average interest rate of approximately 4.6%, well above the weighted average interest rate of 2.9% on completed borrowings in the second quarter.

This ongoing low rate environment should continue to support RioCan's key debt ratios that have improved on a rolling 12 months basis ended June 30, 2015 as compared to the full year 2014. These key coverage metrics improvements include interest coverage of 3 times compared to 2.89 times.

Debt service coverage improved to 2.3 times compared to 2.2 times and fixed charge coverage which includes preferred and common distribution improved to 1.1 times from 1.08 times. RioCan's debt-to-total asset ratio on a proportionate consolidation basis was 44.5% an increase of 70 basis points from year end but only slightly above the 44.2% ratio in the same period in the prior year.

The DRIP participation rate during the second quarter was 29.8% generating approximately 120 million to 140 million of capital on an annualized basis. Our payout ratio on an AFFO basis was 90.4% for the quarter, an improvement from 95.3% for the same period in 2014.

For the first six months the AFFO payout ratio was also 90.4% as compared to 94% in the first six months of 2014. We are pleased with the progress the Trust has made on reducing the AFFO payout ratio and lowering this ratio will continue to be an area of focus moving forward.

As at quarter end, RioCan had 123 properties that are unencumbered with a fair value of approximately $3 billion. On a percentage basis, this ratio of RioCan's unencumbered assets to unsecured debentures was unchanged from year end 2014 at a 149%.

Now before I wrap up, I want to touch on one final topic. As Ed mentioned in his remarks and as disclosed in the release this morning, the Trust is conducting a strategic review of its operations in the U.S.

RioCan's U.S. portfolio represents approximately 19% of total investment property asset by value and has been an important contributor to RioCan's growth.

The portfolio gains have been a combination of higher assets values as well as favorable currency movements. Having said that, the management team and the Board believe the time is right to explore various strategic alternatives in regards to RioCan's U.S.

operations. We have not established a definitive timeline to complete the review and it's too early to speculate what kind of transaction if any the strategic review might lead to.

However, we expect to be in a position to provide an update on the strategic review by year end or early 2016. While components of the retail landscape have faced some challenges in the first half of 2015, we are pleased with the continued gains in operating FFO during the second quarter demonstrating the strength, diversity and resilience of the RioCan business model.

So with that, I would like to turn the call over to Rag for an update on RioCan's operations.

Thanks Cynthia and good morning everyone. I am pleased to provide operational highlights for the second quarter of 2015.

Our Canadian portfolio metrics continue to be resilient however fundamentals as we previously discussed in the overall Canadian retail market remain challenging. Tenants that source their goods outside of Canada, particularly the mid market fashion segment continue to be under pressure as their margins have been squeezed by weaker Canadian dollar.

Despite difficult market conditions and a number of store closings, there was some recent good news in the Canadian retail landscape with the announcement of closing retailer Jones New York was acquired by Grafton Fraser and Comark, which includes the fashions banners Ricki's, Cleo and Bootlegger was acquired Stern Partners. These transactions which include 17 locations within the RioCan's portfolio signal that apparel retailers continue to see opportunities within the Canadian market.

With regards to renewal leasing in our Canadian portfolio, RioCan retained 89.9% of the 1.2 million square feet of tenants that expired in the second quarter of 2015 with an average rental rate increase of 9.8%. Approximately 63% of the space renewed in the second quarter was at non-fixed options where RioCan achieved average rental rate growth of $2.17 per square foot or 11.8%.

Rental growth for renewals completed on what we consider to be non-anchor space namely any premises under 20,000 square feet was $2.53 per square foot or 12.6%. On a geographic basis, the primary markets continued to spur growth with non-fixed renewal rates increasing by just over $2 or $2.06 per square foot or 11.8%.

The strongest region was Western Canada where we experienced average rental rate growth on leases renewed in British Columbia of $3.31 per square foot or 14.9% and in Alberta of $2.87 per square foot or 13.6%. Excluding the impact of Target which I will cover in greater detail shortly, we continue to see steady demand at our properties.

Our leasing department completed 114 new deals comprising 481,000 square feet at an average rental rate of $23.31 per square foot. This is nearly twice the amount of new leasing completed in the second quarter of 2014 when RioCan completed 90 new deals representing 251,000 square feet at $28.82 per square foot.

The higher GLA lease and the subsequent lower average rental rate achieved as a result of a higher number of leases completed on anchor and large box space. RioCan completed four large box deals in Q2 '15 totaling a 182,000 square feet at an average rental rate of $19.06 per square foot.

Included in these deals is 83,000 square foot lease that was completed with Loblaws to anchor our East Village mixed used development in Calgary, Alberta. Our presence in Canada's six primary markets increased in part due to the Trust's capital recycling program through selected dispositions but also due to the departure Target Canada with 17.4% of annual revenue generated within these high growth markets, up from 73% a year ago.

More than a third of the disclaiming Target Canada leases were located in secondary markets. In the second quarter of 2015 we experienced vacancies in Canada and the U.S.

of 2.2 million square feet of which approximately 2 million square feet relates to Target. This compares to 274,000 square feet that came back to us in the same period last year.

Year-to-date Target was responsible for 2.8% of the 3.1% declined to RioCan's occupancy rate. As a result of these vacancies, our headline committed occupancy declined to 93.9% in Q2 '15 from 97% at year end '14.

With regard to Target, RioCan's leasing team is diligently negotiating with potential retailers to backfill the vacant premises and bring the space back to a productive state in the most efficient and effective manner possible. An example of our backfill efforts can be found in Lawrence Square, an enclosed mall located at Lawrence Avenue and Allen Road in Toronto.

This center included a vacant two storey store Zellers store that Target acquired but did not retrofit or open for business. As Target made it clear they would not operate from the location, RioCan undertook to find a solution for the space and upon Target disclaiming the lease in April have subsequently executed leases with PetSmart and TJX with the HomeSense and Marshalls banners.

RioCan is in the early stages of redeveloping the space and expect these new retailers to open for business in mid 2016. Similar to the example of Lawrence Square, it is likely that no single tenant will utilize entire space of the majority of the disclaiming Target stores.

As such the respective premises will likely require breakup or redevelopment which would require capital expenditures. In addition to potential CapEx time will be required to complete the work entailed in dividing the premises.

We believe it will take an estimated 18 to 24 months for a new tenant to commence paying rent in these reconfigured spaces taking into consideration lease negotiations, construction approvals, construction time and fixturing of the space. At this time we have no estimate as to the potential outcome of the backfill into these disclaiming leases.

Over the long-term we believe that the re-tenanting of the larger Target boxes will result in a more diversified revenue stream and a better job for customers. Of the seven leases that were not disclaimed, six were assigned to Lowe's Canada and one to Canadian Tire representing annualized revenue of 5.8 million of RioCan's interest and GLA of 825,000 square feet.

The new tenants assumed Target leasehold obligations including the payment of the rent effective at the closing date of the respective assignments. Finally, last week Loblaws, RioCan's largest tenant by revenue source contributing 4% of our total annualized rental revenue, announced that they would be closing 52 locations.

At this time we are not aware of any planned closures at our locations as a result of this announcement. With regards to our U.S.

portfolio, RioCan continues to see good results from both our Northeast and Texas properties. The U.S.

portfolio headline occupancy increased to 97.3% at Q2 '15 as compared to 96.7% at Q2 '14 due to the completion of a 131,000 square feet of new leasing over the quarter. A large percentage of the new leasing was completed at Lincoln Square in Arlington, Texas.

RioCan has negotiated a relocation of the existing Stein Mart store into a recently vacated Best Buy box and subsequently leased the forward 45,000 square feet Stein Mart premises to Studio Movie Grill, a national theater chain that pairs first run movies with a unique in-theater dining experience. We consider these deals to be a significant step forward and our asset repositioning strategy of Lincoln Square.

In addition to these completed deals we are in various stages of negotiation on an additional 36 new Letters of Intent aggregating a 158,000. With regards to the expiring leases, RioCan completed 91,000 square feet of renewals over the quarter at an average rental rate of $1.94 -- sorry, average rental rate increase of $1.94 per square foot or 9.7%.

National and anchor tenants accounted for 85.8% of annualized revenues in the U.S. Tenant turnover in the U.S.

portfolio was minimal with four tenants comprising 15,000 square feet vacating into the quarter. We will however be impacted by the announced Chapter 11 filing by A&P.

RioCan has one store comprising 61,000 square feet in Philadelphia that has been slated for closure in the ensuing 60 days. We are actively speaking to a number of U.S.

grocery retailers to backfill the premises. Switching back to Canada, we continue to make good progress in our development pipeline.

During the quarter RioCan received zoning approvals at two projects -- at two of its projects in Toronto, Yonge Sheppard Center and King in Portland and received official plan amendment approval on the well. The expansion at Yonge Eglinton Centre is nearing completion and Winners and Cineplex have taken possession of their space.

Also expected later in 2015 is the delivery of the second phases of our Sage Hill and East Hills developments and the completion of pad additions in the existing sites such as Corbett and Flamborough Centres. RioCan's development pipeline is expected to be a key driver of future NOI growth.

Strong economic and demographic fundamentals arising from growth in certain urban markets are the drivers supporting RioCan's development and intensification of investments. The markets of Toronto, Calgary and Ottawa are a principal focus for our development and intensification efforts.

Looking past the current year, our development pipeline will be a significant contributor to cash flow growth. Those are the operating highlights.

I will now turn the call back over to Ed.

Thank you, Rags. Thank you, Cynthia.

And thank you, Christian. I would like to open up the lines now for any questions that anyone may have.

How much NOI from Target was lost in Q2? Because I wasn't sure whether I understood you are only starting to recognize that as of July, or was there an impact in?

No, there was no impact in the second quarter, and we are starting to recognize the non-payment as of July 1st.

And so what would that total amount be?

The total amount for going forward or in June?

For going -- yes, on a quarterly basis just what we should be considering that?

Quarterly basis, go ahead Cynthia.

Annualized -- the annualized impact of the disclaimed leases is about 18.5 million between rents and -- net rents and maintenance costs and taxes. So for the back half of the year, essentially about just over 9 million.

So it's about 4.5 million a quarter.

And in terms of the strategic review, can you just walk through, clearly you've had big value gains in that portfolio for the reasons that you highlighted. And I'm just wondering how you I guess balance that between the fact that clearly Canada is a softer market right now.

Just some insights in terms of what your thought process is?

Now, I don't want to anticipate the results of the review in any way and it may very well be that we end up keeping it, Heather, we don't know. And this is something we've been looking at and thinking about probably for over a year.

And the simple reason for the review is that it's very difficult to grow down there. And at the same time, we don't have the infrastructure where we can duplicate the type of growth that we achieve up here, i.e., through intensification, redevelopment, additional development.

And nor do we really feel that it's -- that we can ever really properly build that infrastructure in a timely and cost sensitive basis to duplicate what we -- I mean it took us 10 years to get to where we are here. So those growth avenues are very available here in Canada to us but are not available in United States.

And sometimes you make decisions of the moment depending on the economies that like we did quite frankly in 2009, when we just saw a generational opportunity in the huge differential between what was going on in Canada and in the United States. But you can't just make big decisions like this, and we're not going to make it on this basis on, yes, the United States looks good today and Canada doesn't.

By the time we reach the end of the strategic review, let's say hopefully by year-end, that could be changing already. And certainly by the time if we choose to do anything, we did something, that could be changed again we believe in Canada.

And sure it's soft right now but who knows what it will be in three years.

Just on the strategic review. Do you anticipate any tax considerations if you did decide to sell the U.S.

business and repatriate the funds to Canada?

Way too early to really speculate on that because at the end of the day there isn't just two ends of the scale, keep it or sell it. There's a whole bunch of alternatives in between which is why we've retained Morgan Stanley and RBC to explore those.

That I'll call them structured transactions where there's all kinds of ways we can go. I'm not going to get into details, but there's all kinds of things we can do in between.

So it's just way too early to speculate on tax issues. Obviously that will be something we take into account in making a decision.

Sure, now understand. And I guess I know it's early on, but I guess one option would be let's say to sell the Northeast and then double down in Texas.

That's certainly one of many, many options.

Right. Just switching gear to Target.

So the U.S. parent is not paying rent even though it's legally obliged to.

Just wondering …

I wouldn't if I were them either. I mean why give away a negotiating strength?

Right. So is it -- have you started legal proceedings or is it just too early, or you're in negotiations now?

We are already in discussions, and that's why we really can't talk too much about it. But at the risk of being bold, the discussions are really about how much and how as opposed to whether they will pay.

Sure

So there doesn't seem to be much controversy over the issue of liability. But obviously there is a fair amount of room for discussion over how much and when and how to pay.

So that's, those are really what the discussions are going to be aimed at. And hopefully those discussions will be moved forward to a point where quite frankly we don't have to proceed with litigation, but we are certainly absolutely ready to do so if that's the right way to proceed in our opinion.

Sure. That makes sense.

And just, do you have any other examples or any color you can provide on re-leasing besides let's say Lawrence Square which I guess you had a head start on?

We did have a head start and because they never opened so we figured okay, they really didn't want it. I could throw a few names around.

Would you rather I do that, Rags would you like to speak to it?

What we're telling is there for most cases we are dealing with breakups. There are a few sites that we are still talking to people who could take the whole box as it is.

But the majority we are looking at breakup. You're typically looking at three to four tenants and per box in the range of 20,000 to 30,000 square foot users.

It's a variety of uses. They are primarily national tenants, is the nature of the tenancies we're dealing with.

They range from food users, TJX, Ashley's, Canadian Tire, JYSK, Value Village, Dollarama, PetSmart, the gyms, Bed Bath, DSW, Michael's. It's the usual guys that have expressed a fair amount of interest.

But it does -- it is fairly time consuming because you need to reconfigure the boxes and make the layouts work. So that's part of the reason why it is taking time.

And we do believe that in the fullness of time we will work our way through this.

Thanks and. Sorry.

Let me just add to that. There are a lot of things happening but everything takes time.

An interesting thing for you to look at, and I don't have the details in front of me, might be where we were actually going to do a transaction with Target, which is up at our Colossus shopping center where we accepted a surrender from Rona in anticipation of doing a Target deal and now we're about to start construction probably 1.5 years later since we took that surrender of a whole multiplicity of different national tenants including Bed Bath and Beyond. I think Bye-Bye Baby is up there, some restaurant chains.

And at the end of the day and I believe this will be the case with Target, the end of the day being unfortunately maybe a couple of years from now, we're going to have interesting looking shopping centers. But I would say what we will commit to is that we will give periodic updates of our progress because it is a big deal, how we re-tenant those, and we'll keep everybody up-to-date on our progress.

And just last question. Can you give us some color on the enclosed malls.

You had, you did some I guess some interior renovations and that necessitated a write-down. I wonder if you could just give us some color on that?

Yes, it's just some of the properties, property specific kind of adjustments related to as we said some of the enclosed malls that needed to be reflected in the fair value adjustment, because really their valued based on stabilized NOI and from time-to-time you have to do renovations where you don't necessarily change your overall valuation. We believe in the end they are part and parcel to the betterment of the center.

But having said that, it doesn't necessarily result in an increase in your IFRS value. So that is kind of the primary driver of this quarter's decline in fair value from an IFRS standpoint.

Does that help?

Yes, it does.

Just on the Target U.S. Do you have the dollar value of the remaining lease payments.

You said it was 18.5 million of gross rent per year. But would you have a guess the remaining dollar value of rent that would be payable to the first renewal option for the …?

Yes. It's not as simple as that because each of these indemnities, they are all a little different.

They basically were for a term of 10 years from when Zellers left or the natural expiration of the term, so it's not flat. But I can tell you that in total we're looking at a substantial amount that's well over $200 million.

That we believe they could be liable for. But of course, there's the issues of mitigation where we're under a duty to do that.

And as Rags quite thoroughly went through, we are doing it. So it really becomes more of a shortfall guarantee ultimately.

So we're not expecting to get all that because that would mean these premises stay empty for sometimes up to eight years which is certainly not what is in the best interest of the asset.

Yes. So.

It's pretty hard to quantify.

Negotiations back and forth with that $200 million plus puts one parameter on it, and that I think in the history of the …

It is actually more like 250 is the full number.

But that would be way, way beyond what you would expect?

Well I'm not sure I would say way, way beyond. We're, I don't want to pre-anticipate the negotiation.

Well I'll leave it there then. On the U.S.

strategic review, in the past you've talked about unsolicited expressions of interest. Just wondering what the catalyst was for this decision to hire outside advisors at this time?

Well, there was no one single catalyst, like I say this is something that we've been pondering and getting around internally for well over a year as it became clear, probably more like 18 months ago that we just couldn't keep acquiring the way we had been in the past in the United States. And so, now you have this asset which was relatively finite.

We couldn't improve it really as I mentioned we didn't have the infrastructure. We couldn't redevelop where redevelopment was called, so we just sort of sat with it.

And yet at the same time you're quite right we have had all kinds of expressions of interest over the course of those 18 months that involve strategic alliances, partnerships, outright sales of all or part of the transactions. So when you put together a place where there's lots of interest in doing something and we're not sure how we can grow.

At a very minimum you have to go back to the beginning and say, okay, what should we do with this? And that strategic review is a fancy word or phrase, but really we're saying okay, what do we do now with this?

We're hugely opportunistic and successful. Everything has gone the right way for us including foreign exchange.

I mean we went into this deal, I think our average exchange rate was par. So there's some serious numbers we're talking about here.

We have to at least explore where we should go with it. But there was no single catalyst.

And then Rags you mentioned some numbers about the leasing spreads being strongest in Alberta and BC, and obviously Alberta is an interesting part of Canada right now. Can you remind us how the performance was in 2008, '09, '10 in your Alberta portfolio?

'08,' 09, '10 that's Rags was CFO then, not quite sure he'd started yet. But back in '08, '09 and '10 I mean '08 and '09 are actually years that we have blotted from our memory.

But we could probably look that up and get back to you offline.

Just on the, going back to the strategic review again. If you were to sell some or all of the properties, what would be your preferred use for the proceeds?

I know I'm starting to sound like broken record but it really is premature to speculate. At the same time, I won't tell you that we will sort of what you call it game of all of the various alternatives while we're going through this process with the help of our outside bankers.

And we've probably done a little of that, but it's just, it would be inappropriate to speculate other than what we can do with the money is obviously one factor in making the final decision.

And then just maybe going back to some commentary over the last maybe couple years I guess. But would a U.S.

listing of that portfolio also be just one of the options that would be considered?

I have no doubt that Morgan Stanley would might even find that the preferred one for some reason. But for the obvious reason, but I don't want to like I say box us in and it may very well be one of the options.

It certainly wouldn't be the smallest REIT in the United States. We have well over 10 million square feet, I think about 50 shopping centers between Texas and the Northeast and two of the most desirable areas in the United States.

So who knows? Stay tuned.

And then just to, maybe just to double check here, but is the net value of the U.S. assets on your books roughly at about just over CAD1 billion on a net basis?

No, on a net basis? It's a little more than that I think, probably about CAD1.2 billion maybe.

Yes.

Yes, I'm getting nods from some of the people in the room. So about CAD1.2 billion at IFRS values.

Right and of course pre-tax. And just lastly, going back to the Target indemnity.

Two questions on this. How long do you expect this process could continue for based on what you've I guess discussed to-date with them?

And then secondly, you talked about maybe the best case scenario of the 250 million maybe. But…

I am not sure. Yes, that's not a best case necessarily, that's just a number.

Right. But what would you say would be if you had to peg a value, what would be the worst case outcome for RioCan on that?

Well, you know what, I don't believe there will be a worst case outcome. I think the outcome and let me address your first part of your question, timing.

We are going to try, it's quite complex, it's complex because of the 19 properties, I think seven of them include partners. So we really have to approach this notwithstanding I used global numbers before.

We really have to approach this on a property-by-property basis to ensure that each one of our partners is satisfied with their individual treatment on that property. So that's a big complicated factor.

You don’t have one negotiation, you have 19 negotiations on a property-by-property basis which is why it's going to take time. But having said that, I would, and really at the end of the day the purpose of the indemnity is not to make a big cash grab.

It's to put you in a position like they had never gone broke. I'm probably expanding the legal definition of indemnity as I speak.

But that's really what should happen. That you are no worse off by them having gone broke than if they would have stayed.

Now that means a lot of things. It's a lot more than rent.

It's the cost of revamping the premises and so on, which are considerable as Rags mentioned. So from a time point of view, notwithstanding the complexity and the really intensive nature of the negotiation, I certainly hope that we'll have it wrapped up before year end.

You don't want these things to drag. Quite frankly if we are not getting close to a resolution even by the end of the current quarter, then we might just dump it into litigation because we're just not satisfied with progress, in which case it could take two years.

Who knows? Once you get into the court system, it has a timetable of its own.

Thank you very much. You know what, not surprisingly we felt that this would be over by 10:00 to 11:00 because everybody wants to go to the inaugural CREIT Conference Call which I hope you will all enjoy.

It's not bad. They started when we did.

It took them 21 years to get here. So anyway, thank you very much for calling in.

Hopefully, we will be able to be a lot more definitive on a lot of things three months from now. Talk to you then.

Bye, bye.