Management’s Discussion and Analysis Dollar amounts are in thousands of Canadian dollars (except as noted) 2013 Dispositions ‑ Investment Properties On November 30, 2013, Killam sold a portfolio of ten MHCs in New Brunswick. Killam had invested $44.2 million to acquire and enhance  this portfolio over the last ten years. The sale price of $69.0 million resulted in net cash proceeds of $42.6 million. The sale allowed Killam to  crystallize the increased value of its New Brunswick MHC portfolio at current attractive cap‑rates and use the funds to continue to geographically  diversify and accretively grow the apartment portfolio. In addition, the transaction will further enhance FFO accretion as apartments acquired  are expected to qualify for CMHC insured debt, resulting in mortgage rates 120 ‑ 180 bps lower than conventional mortgages on MHC properties.  The properties that were sold of are as follows: Property  Location Disposal Date Sites Acres mHcs Burton estates Burton, nB 29‑Nov‑13 91 32 crown & currie estates Fredericton, nB 29‑Nov‑13 176 140 Kent & Bayview Bathurst & Beresford, nB 29‑Nov‑13 148 123 milford estates saint John, nB 29‑Nov‑13 152 22 Park P’tiso estates edmundston, nB 29‑Nov‑13 79 18 Pine tree Village moncton, nB 29‑Nov‑13 828 260 Parkside estates Quispamis, NB 29‑Nov‑13 94 15 river east estates moncton, nB 29‑Nov‑13 109 72 tamarack estates Fredericton, nB 29‑Nov‑13 419 75 White Frost estates moncton, nB 29‑Nov‑13 212 51 Investment Properties Under Construction For the years ended December 31, 2013  2012 Balance, beginning of year $57,941 $11,574 Capital expenditures 28,356 47,284 interest capitalized 1,097 1,063 Land acquisitions 7,294 ‑ Transfers to investment properties (70,315) ‑ Fair value gains (losses) ‑ (1,980) Balance, end of year $24,373 $57,941 During 2013, Killam completed four development projects in the first half of the year; adding a total of 282 units to the Company’s apartment  portfolio in key operating markets in Atlantic Canada. Total development costs were $69.6 million and the properties generated $0.9 million  in NOI during the year. Brighton House, located in Charlottetown, was completed in February 2013 and was fully leased by the end of the first  quarter. Bennett House, located in St. John’s, was completed in May 2013 and was fully leased within three months of opening. S2 located  in Halifax and The Plaza located in Fredericton were both completed in May 2013 and are currently 62% and 61% leased. Management has  developed specific advertising and marketing strategies for these two buildings and expects the buildings to be substantially leased by mid‑2014.  Management is anticipating a year‑one stabilized all‑cash yield of approximately 5% on these developments, and minimal capital requirements  for the next 10 to 15 years. Management believes that building and buying new apartments has the opportunity to generate more stable cash flows and improved returns  on investments over time compared to buying older buildings. Management acknowledges that there was a dilutive impact on FFO per share  growth during the period of construction but believes the short‑term impact is more than offset by the 10‑15 years of nominal maintenance  costs provided by a newly built project. Older buildings typically require a much higher capital spend per year, estimated at least $1,200 per  unit per year, versus an estimated $300 per unit for new construction. Assuming similar NOI growth between an old and new building, the  lower capital spend on the new build is expected to result in a higher return on the total investment in the property in the first 10 – 15 years of  ownership. Management expects to provide disclosure regarding capital spend associated with its new development projects over the next few  years to provide support for this theory and show the Company’s ability to grow the return on investments of the new developments over time. Killam ProPerties inc | 2013  49