H&R REIT AND H&R FINANCE TRUST - MD&A - December 31, 2010  The REIT partially funded the acquisition of the above properties with mortgages payable totalling $109,856, bearing interest at an  average contractual rate of 6.06% per annum. These mortgages payable have an average term of 16 years remaining and are non- recourse to the REIT but have recourse to the specific properties to which each mortgage applies. The REIT’s initial levered return  from these acquisitions is expected to be 10.8%.  The portfolio continues to remain in good condition. The average age of the total portfolio from the date built or renovated is 16.9  years at December 31, 2010 (December 31, 2009 - 16.3 years) and the average age of properties by type of asset is as follows:  Legal title to each of the United States properties is held by a separate legal entity which is 100% owned, directly or indirectly, by  H&R REIT (U.S.) Holdings Inc. (“U.S. Holdco”), a subsidiary of the REIT. The assets of each such separate entity are not available  to satisfy the debts or obligations of any other person or entity; each such separate entity maintains separate books and records. The identity of the owner of a particular U.S. property is available from U.S. Holdco. This structure does not prevent distributions to  U.S. Holdco provided there are no conditions of default.  The composition of the net book value of income properties expressed by type of asset and by region is as follows:  Page 19 of 45  Average Age by Type of Asset  December 31, 2010 (years) December 31, 2009 (years)  Office  19.5  18.4  Industrial  17.6  16.9  Retail  12.1  12.1  Total  16.9  16.3  Net Book Value by Type of Asset (millions)  December 31, 2010 December 31, 2009 Office  $1,555  $1,565  Industrial  1,310  1,388  Retail  1,154  1,172  $4,019  $4,125  Net Book Value by Region (millions)  December 31, 2010  December 31, 2009 Ontario  $1,719  $1,763  Alberta  582  595  Other  420  433  Quebec  235  238  Canada  2,956  3,029  United States  1,063  1,096  Total  $4,019  $4,125 