DBRS Confirms Summit Real Estate Investment Trust BBB (low)

Dominion Bond Rating Service (“DBRS”) has today confirmed the rating of Summit Real Estate Investment Trust (“Summit” or the “Trust”) as indicated above at BBB (low).

Summit continues to perform with firm operating parameters supported by a stable portfolio comprising mainly light industrial properties in Canada.

The confirmation takes into consideration the following:

(1) Summit has transformed itself into the largest light industrial landlord in Canada with significant acquisitions totalling over 24 million leaseable square feet (sq. ft.) of industrial space located in mature urban Canadian markets. Its large industrial portfolio [which accounts for 84% of net operating income (NOI)] comprises 29.2 million leaseable sq. ft. and provides economies of scale and property diversification.

(2) The Trust has benefited by focusing on light industrial properties in Canada. Its Canadian industrial portfolio has achieved relatively stable rent levels and maintained reasonably high occupancy levels in the mid-90% range over the past five years. The combination of high occupancy and stable rental rates should provide for continued stability in cash flow. However, annual industrial lease maturities of at least 14% during the period of 2005-2007 could expose the Trust to potential downward pressure in market rents and occupancy. In particular, new supply in Ontario, where its properties represent 49% of NOI, and the full impact of a strengthening Canadian dollar could weaken industrial real estate fundamentals over this period.

(3) Summit continues to exhibit financial strength with growth in EBITDA of approximately 100% over the past five years from a considerable acquisition program, stable occupancy levels and, to a lesser extent, increases in net rental rates. While its U.S. portfolio and non-core assets have put some pressure on leasing costs in recent years, the Trust continues to improve its tenant retention ratio (74%), which should control costs and support occupancy levels in 2005.

(4) Summit has reasonable leverage at 54.4% on a debt-to-gross book value basis with solid financial and coverage ratios. These credit metrics compare well with other DBRS-rated real estate investment trusts and provide support to the current rating level. In addition, debt refinancing has benefited the Trust by lowering the average interest rate to 6.23% from 6.58%. DBRS expects coverage ratios will remain above 2.50 times and the Trust to operate its balance sheet with a debt-to-gross book value ratio in the 55% range. Overall, the Trust will continue to dispose of its non-core assets on a selective basis and focus on growing its industrial portfolio and on a development program through mezzanine financing. This will be increasingly important to its growth profile as DBRS expects the Trust’s acquisitions to slow in 2005 compared with prior years, in response to higher priced assets and compression of capitalizations rates in a competitive real estate market.