## 8. Debentures payable (continued): 

On redemption or maturity of the 2020 Convertible Debentures, the REIT may, at its option and subject to certain conditions, elect to satisfy its obligation to repay all or any portion of the principal amount of the 2020 Convertible Debentures that are to be redeemed or that are to mature through the issuance of Stapled Units by way of issuing (or causing to be issued) a variable number of Stapled Units equal to the principal amount of the 2020 Convertible Debentures that are to be redeemed or that are to mature divided by 95% of the then fair market value of the Stapled Units. The 2020 Convertible Debentures may not be redeemed by the REIT on or before June 30, 2014. Thereafter, but prior to June 30, 2016, the 2020 Convertible Debentures may be redeemed, in whole or in part, only if the current market price of a Stapled Unit is at least 125% of the conversion price. On or after June 30, 2016 and prior to the maturity date, the 2020 Convertible Debentures may be redeemed by the REIT, in whole or in part, at a price equal to the principal amount plus accrued interest. Upon a change in control, the holders of the 2020 Convertible Debentures have the right to require the REIT to purchase the 2020 Convertible Debentures at 101% of the principal amount plus accrued and unpaid interest. 

The REIT accounted for the 2020 Convertible Debentures by discounting the stream of future payments of interest and principal at the prevailing market rate for a similar liability and classifying such value as debt. The remaining value of the 2020 Convertible Debentures is classified as equity. 

On issuance, the REIT recorded a liability of $88,893, net of issue costs of $4,223, and equity, which represents the holders’ option to convert the 2020 Convertible Debentures into Stapled Units, of $6,572, net of issue costs of $312. Interest expense is recorded as a charge to income and is calculated at an effective rate with the difference between the coupon rate and the effective rate being credited to the debt component of the 2020 Convertible Debentures such that, at maturity, the debt component is equal to the face value of the then outstanding 2020 Convertible Debentures. 

## (e) Series A Senior Debentures, Series B Senior Debentures and Series C Senior Debentures: 

In February 2010, the REIT issued $115,000 Series A unsecured senior debentures (the “Series A Senior Debentures”), bearing interest at the annual contractual rate of 5.20% and an effective interest rate of 5.40%. The Series A Senior Debentures mature on February 3, 2015, and interest is paid semi-annually on February 3 and August 3. On issuance, the REIT recorded a liability of $113,981, net of issue costs of $1,019. 

In February 2010, the REIT issued $115,000 Series B unsecured senior debentures (the “Series B Senior Debentures”), bearing interest at the annual contractual rate of 5.90% and an effective interest rate of 6.06%. The Series B Senior Debentures mature on February 3, 2017, and interest is paid semi-annually on February 3 and August 3. On issuance, the REIT recorded a liability of $113,953, net of issue costs of $1,047. 

In September 2010, the REIT issued $125,000 Series C unsecured senior debentures (the “Series C Senior Debentures”), bearing interest at the annual contractual rate of 5.00% and an effective interest rate of 5.30%. The Series C Senior Debentures mature on December 1, 2018, and interest is paid semi-annually on June 1 and December 1. On issuance, the REIT recorded a liability of $122,525, net of issue costs of $2,475. 

Interest expense is recorded as a charge to income and is calculated at an effective interest rate with the difference between the coupon rate and the effective rate being credited to the carrying value such that, at maturity, the carrying value is equal to the face value of the then outstanding Series A Senior Debentures, Series B Senior Debentures and Series C Senior Debentures, (collectively “Senior Debentures”). 

