BPO PROPERTIES LTD. 181 Bay Street, Suite 330 Toronto, Ontario M5J 2T3 Te: 416.359.8555 Fax: 416.359.8596 www.bpoproperties.com BPO PROPERTIES 2009 Annual Report BPO Properties Corporate Information HEAD OFFICE 181 Bay Street, Suite 330 Toronto, Ontario M5J 2T3 Tel: 416.359.8555 Fax: 416.359.8596 TRANSFER AGENT CIBC Mellon Trust Company P.O. Box 7010 Adelaide Street Postal Station Toronto, Ontario M5C 2W9 Tel: 416.643.5500 / 800.387.0825 Fax: 416.643.5501 Web site: www.cibcmellon.com E-mail: [email protected] STOCK EXCHANGE LISTING -$ .Ʉ /*&Ʉ4(*'Ʉ 3#)" Ʉ *-Ʉ/ Ʉ 4( )/Ʉ/ Ʉ *((*)Ʉ.#- .Ʉ Ʉ Ʉ $-./Ʉ4Ʉ*!Ʉ -#ƇɄ 0) ƇɄ ./Ʉ0.$) ..Ʉ4Ʉ*!Ʉ -#ƇɄɄ Ʉ Ʉ Ʉ Ʉ +/ ( -Ʉ)Ʉ ( -Ʉ 0) ƇɄ +/ ( -Ʉ)Ʉ ( - -$ .ɄɄ ƆƆɄ Ʉ ./Ʉ0.$) ..Ʉ4Ʉ*!Ʉ )0-4ƇɄ *0-/ )/#Ʉ4Ʉ*!Ʉ -0-4ƇɄɄ Ʉ April, July and October May, August and November -$ .Ʉ Ʉ ƆƆ Ʉ Ʉ ./Ʉ0.$) ..Ʉ4Ʉ*!Ʉ )0-4ƇɄ *0-/ )/#Ʉ4Ʉ*!Ʉ -0-4ƇɄɄ Ʉ April, July and October May, August and November Series K Not listed TSX First business day preceding The day after the third payment date Wednesday of every month -$ .Ʉ Ʉ ƆƆ Ʉ Ʉ ./Ʉ0.$) ..Ʉ4Ʉ*!Ʉ )0-4ƇɄ *0-/ )/#Ʉ4Ʉ*!Ʉ -0-4ƇɄɄ Ʉ April, July and October May, August and November Series N Not listed TSX Six business days preceding The day after the third payment date Wednesday of every month SHAREHOLDER INFORMATION BPO Properties welcomes inquiries from shareholders, analysts, media representatives and other interested parties. Questions relating to investor relations or media inquiries can be directed to Melissa Coley, Vice President, Investor Relations at 416.359.8593 or via e-mail at [email protected]. Inquiries regarding financial results .#*0'Ʉ Ʉ$- / Ʉ/*Ʉ-4)Ʉ1$.ƇɄ )$*-Ʉ$ Ʉ- .$ )/Ʉ)Ʉ#$ !Ʉ$))$'Ʉ!!$ -Ʉ/ɄŶųŸƆŻŷŸƆŷųŹŲɄ*-Ʉ1$Ʉ416.359.8612 Ɲ($'Ʉ/Ʉ [email protected]. Shareholder questions relating to dividends, address changes and share certificates should be directed to the company's Transfer Agent, CIBC Mellon Trust, as listed above. DEAR SHAREHOLDERS: It is my pleasure to report that 2009 was another strong year for BPO Properties. Although we — along with our industry peers, tenants and business partners — were challenged by a difficult economy in 2009, our performance did not suffer, and we made significant accomplishments in line with our objectives. We generated net operating income from commercial properties of $202.6 million, a 4% increase over 2008. Our office portfolio finished the year at 98.6% leased, well above the Canadian national average of 91.5%. As we move into 2010, we are hopeful that the economy is back on the upswing. The fourth quarter of 2009 brought signs of optimism for our industry. Many of our largest tenants — especially our financial services tenants in Toronto — have begun hiring again, which is an encouraging sign for our business. In last year’s letter to shareholders we outlined our primary objectives for the year. I am proud to announce that we have made meaningful strides and reached several notable milestones during 2009: Our major priorities for the year included: Ʉ ƌɄ ) -/$)"Ʉ+$/'Ʉ/#-*0"#Ʉ- Ũ))$)".Ɖ Ʉ ƌɄ .$)"Ʉ0+Ʉ)Ʉ*(+' /$)"Ʉ*0-Ʉ/2*Ʉ/$1 Ʉ 1 '*+( )/Ʉ+-*% /.Ʉ)Ʉ+*.$/$*)$)"Ʉ*0-ɄɄ Ʉ Ʉ +$+ '$) Ʉ.$/ .Ʉ!*-Ʉ!0/0- Ʉ 1 '*+( )/ƉɄ Ʉ ƌɄ ""- ..$1 '4Ʉ+0-.0$)"Ʉ) 2Ʉ' . .Ʉ)Ʉ- ) 2'.Ʉ$)Ʉ1) Ʉ*!Ʉ(/0-$/$ .Ʉ$)Ʉ*- -Ʉ/*ɄɄ Ʉ Ʉ '$($/Ʉ*0-Ʉ1)4Ʉ 3+*.0- Ʉ$)ɄɄ' /#-"$Ʉ/ ))/Ʉ(-& /ƉɄ) Ʉ ƌɄ -*/$1 '4Ʉ()"$)"Ʉ*0-Ʉ.. /.Ʉ/*Ʉ(& Ʉ/# (Ʉ(*- Ʉ1'0' Ʉ)Ʉ.0./$)' Ʉ*1 -ɄɄ the long term. The following are some of our accomplishments. FINANCIAL HIGHLIGHTS All amounts expressed in Canadian dollars unless otherwise noted (Millions, except per share information) 2009 2008 2007 Results of Operations Net income $ 61.5 $ 65.3 $ 138.8 Commercial property net operating income(1) 202.6 195.2 187.4 Funds from operations (2) 117.7 153.7 159.3 Per Common Share(3) Net income $ 0.66 $ 0.60 $ 1.41 Funds from operations(2) 1.32 1.64 1.65 $1$ ).Ʉ+$Ʉ Ʉ ŲƆŵŲɄ Ʉ ŲƆŴŲɄ Ʉ ŲƆŴŲɄ Book value 4.33 5.63 7.71 Closing market price — TSX 19.55 8.00 20.10 Financial Position Total assets $ 2,406.2 $ 2,351.8 $ 2,235.7 Shareholders’ equity 749.9 860.4 1,040.5 (1) Excludes net operating income from discontinued operations (2) Excludes gains (3) Reflects a three-for- one common stock split CAPITAL GENERATION Among our most significant achievements of the ./Ʉ$)Ʉ*-*)/*ƉɄ)ɄɄŨ1 Ɲ4 -Ʉ' . Ʉ- ) 2'Ʉ2$/#Ʉ Ʉ year were the refinancings of Suncor Energy Centre Information Systems for 57,000 square feet at Canadian (formerly Petro-Canada Centre) in Calgary for $370 Western Bank Place in Edmonton. million and First Canadian Place in Toronto for $310 million (both on a 100% basis), which generated net DEVELOPMENT & SUSTAINABILITY proceeds of $90 million to BPO Properties based on By September, we had completed and opened for our ownership interest. The ability to execute these business our final two active development projects, large-scale refinancing deals in the challenging credit Bay Adelaide Centre in Toronto and Bankers Court in environment we experienced in 2009 underscores the Calgary, both of which were completed on schedule and market’s high regard for premier assets like Suncor on budget, and at high pre-leasing levels. Consistent Energy Centre and First Canadian Place. with the company’s commitment to sustainability and environmental friendliness, both buildings were built We also completed the refinancing of Enbridge Tower /*ɄɄ Ʉ*'Ʉ./)-ƆɄ in Edmonton for $25 million on a 100% basis. In September, we announced along with our ownership LEASING partners a project to renovate and reclad First Cana- We leased 1.3 million square feet of office space during dian Place — Canada’s tallest office tower — to make the year, maintaining an occupancy rate of 98.6% in the building more sustainable. Each of the building’s our portfolio, virtually unchanged from last year. More original 45,000 pieces of white marble will be removed, importantly, we have just 5% of our leases expiring recycled and replaced by more efficient and durable in 2010, and our three-year expiry profile stands at a glass spandrel panels. The lobby, ground-level retail manageable 19%. and public areas are also being upgraded and modern- ized. First Canadian Place is being redeveloped to Our leasing teams secured many new large leases and #$ 1 Ʉ Ʉ -/$Ũ/$*)Ʉ0+*)Ʉ$/.Ʉ*(+' /$*)Ʉ$)ɄŴŲųųƆɄ renewals during the year, including a 10-year renewal with The Bay for 209,000 square feet at Hudson’s Bay )Ʉ$/$*)Ʉ/*Ʉ/# . Ʉ Ʉ -/$Ũ/$*)Ʉ Ŧ*-/.ƇɄ Ɩ.Ʉ )/- Ʉ$)Ʉ*-*)/*ƉɄɄ) 2ɄŨ1 Ɲ4 -Ʉ' . Ʉ2$/#Ʉ )) //Ʉ BESt (Building Environmental Standards) certification Jones for 161,000 square feet at Bankers Hall in Cal- was achieved at all of our existing office assets. "-4ƉɄɄ. 1 )Ɲ4 -Ʉ' . Ʉ- ) 2'Ʉ)Ʉ 3+).$*)Ʉ2$/#Ʉ Ʉ CI Investments for 74,000 square feet at 2 Queen St. BPO PROPERTIES VS. MARKET VACANCY MARKETS BY SQUARE FEET Toronto 11.6% 7.1m sq. ft. Calgary 6.9m sq. ft. 6.6% 7.0% 6.9% 5.9% 3.7% 2.5% 1.2% 0.2% 0.1% Edmonton Toronto Calgary Ottawa Edmonton Vancouver Ottawa 0.7m sq. ft. Vancouver 2.8m sq. ft. 0.9m sq. ft. Market BPO Properties STOCK SPLIT & DIVIDEND INCREASE IN CLOSING )Ʉ*1 ( -ƇɄ/# Ʉ*-Ʉ*!Ʉ$- /*-.Ʉ++-*1 ɄɄ With steady operating income, well-occupied build- three-for-one stock split in the form of a stock dividend. ings, and a focus on investing capital into our existing As a result of the split, our shareholders received two assets, we are confident about our future performance additional BPP common shares for each common and the sustainability of our operating platform. share held. On behalf of all BPO Properties employees and our We executed the stock split to ensure our shares remain *-Ʉ*!Ʉ$- /*-.ƇɄ Ʉ/#)&Ʉ4*0Ʉ!*-Ʉ4*0-Ʉ*)/$)0 Ʉ accessible to individual shareholders, and to further support. enhance the liquidity of the company’s shares. Taking advantage of our strong liquidity position, Sincerely, we were pleased to announce a 100% increase to the quarter ly dividend on our common shares commencing in the third quarter of 2009, from $0.05 to $0.10 per share (on a post-split basis). OUTLOOK Thomas F. Farley Moving through 2010 as the economy continues to President & Chief Executive Officer stabilize, our core strategies remain unchanged: the generation of capital, being proactive in our leasing February 26, 2010 efforts to limit vacancy and rollover exposure, the reinvestment of capital into our owned assets, and the continued preparation of our development sites for future construction when office markets call for new inventory. PORTFOLIO BY CITY Ʉ-*+ -/$ .Ʉ /ƆƇɄ*) Ʉ*!Ʉ)Ɩ.Ʉ'-" ./Ʉ*(( -$'Ʉ- 'Ʉ .// Ʉ*(+)$ .ƇɄ*2).ƇɄ 1 '*+.Ʉ)Ʉ()" .Ʉ+- ($ -Ʉ office properties. BPO Properties’ portfolio comprises 28 commercial properties totalling 18.3 million square feet and includes 3.2 million square feet of parking. The development portfolio consists of seven properties totalling over five ($''$*)Ʉ.,0- Ʉ! /Ʉ$)Ʉ/# Ʉ*2)/*2)Ʉ*- .Ʉ*!Ʉ*-*)/*ƇɄ'"-4Ʉ)Ʉ//2ƆɄ )(-&Ʉ+-*+ -/$ .Ʉ$)'0 Ʉ$-./Ʉ)$)Ʉ Place in Toronto and Bankers Hall in Calgary. .' Effective BPO’s Office Retail Area Parking Total Ownership Effective Ʉ Ʉ 0( -Ʉ*!Ʉ . Ʉ ŲŲŲƖ.Ʉ ŲŲŲƖ.Ʉ ŲŲŲƖ.Ʉ ŲŲŲƖ.Ʉ ŲŲŲƖ.Ʉ Ʉ )/ - ./Ʉ )/ - ./ ( -ɄŵųƇɄŴŲŲŻɄ -*+ -/$ .Ʉ ǘɄ ,ƆɄ/ƆɄ ,ƆɄ/ƆɄ ,ƆɄ/ƆɄ ,ƆɄ/ƆɄ ,ƆɄ/ƆɄ ǘɄ ɄŲŲŲƖ.Ʉ,ƆɄ/.