## 8. Debentures payable (continued): 

(a) 2013 Convertible Debentures: 

In June 2008, the REIT completed a public offering of $115,000 convertible unsecured subordinated debentures (the “2013 Convertible Debentures”), bearing interest at the annual contractual rate of 6.65% and an effective interest rate of 9.10% (2009 - 9.10%). The 2013 Convertible Debentures mature on June 30, 2013, and interest is payable semi- annually on June 30 and December 31. Each 2013 Convertible Debenture is convertible into freely tradeable Stapled Units at the holder’s option at (i) any time prior to the maturity date and (ii) the business day immediately preceding the date specified by the REIT for redemption of the 2013 Convertible Debentures, at a conversion price of $23.11 per Stapled Unit, being a conversion rate of approximately 43.2713 Stapled Units per $1 principal amount, subject to adjustment upon the occurrence of certain events in accordance with the indenture governing the 2013 Convertible Debentures. 

On redemption or maturity of the 2013 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 2013 Convertible Debentures that are to be redeemed or that are to mature through the issuance of Stapled Units by way of issuing (or causing it to be issued) a variable number of Stapled Units equal to the principal amount of the 2013 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 2013 Convertible Debentures may not be redeemed by the REIT on or before June 30, 2011. Thereafter, but prior to June 30, 2012, the 2013 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, 2012 and prior to the maturity date, the 2013 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 of control, the holders of 2013 Convertible Debentures have the right to require the REIT to purchase the 2013 Convertible Debentures at 101% of the principal amount plus accrued and unpaid interest. 

The REIT accounted for the 2013 Convertible Debentures by valuing the holders’ option to convert into Stapled Units and classifying such value as equity. The remaining value of the 2013 Convertible Debentures is classified as debt. 

On issuance, the REIT recorded a liability of $103,717, net of issue costs of $4,239, and equity, which represents the holders’ option to convert the 2013 Convertible Debentures into Stapled Units, of $6,767, net of issue costs of $277. 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 2013 Convertible Debentures such that, at maturity, the debt component is equal to the face value of the then outstanding 2013 Convertible Debentures. 

(b) 2014 Convertible Debentures: 

In July 2009, the REIT completed a public offering of $150,000 Series B convertible unsecured subordinated debentures (the “2014 Convertible Debentures”), bearing interest at the annual contractual rate of 6.75% and an effective interest rate of 12.30% (2009 - 12.30%). The 2014 Convertible Debentures mature on December 31, 2014, and interest is payable semi-annually on June 30 and December 31. Each 2014 Convertible Debenture is convertible into freely tradeable Stapled Units at the holder’s option at (i) any time prior to the maturity date and (ii) the business day immediately preceding the date specified by the REIT for redemption of the 2014 Convertible Debentures, at a conversion price of $14.00 per Stapled Unit, being a conversion rate of approximately 71.4286 Stapled Units per $1 principal amount, subject to adjustment upon the occurrence of certain events in accordance with the indenture governing the 2014 Convertible Debentures. 

