Mr. Philip Fraser reports

KILLAM PROPERTIES INC. ANNOUNCES OTTAWA ACQUISITION AND JOINT VENTURE WITH KINGSETT CAPITAL AND ALBERTA INVESTMENT MANAGEMENT CORPORATION

Killam Properties Inc. has agreed to acquire a 50-per-cent interest in Kanata Lakes Apartments II, a newly constructed, 152-unit apartment building in Ottawa, Ont., in a joint venture with affiliates of KingSett Capital Inc. and AIMCo Realty Investors LP, a limited partnership managed by Alberta Investment Management Corp. on behalf of certain of its clients. The property, located at 1025 Canadian Shield Ave., Kanata, is the second of a five-building complex having a shared clubhouse.

Construction of the building was completed in December, 2013, and it is completing its lease-up phase. The purchase agreement includes a revenue guarantee of 90 per cent for the next year. The building includes 129 one-bedroom units and 23 two-bedroom units. The average rent is $1,785, and the average unit size is approximately 950 square feet. The units have condo-quality features, including stainless steel appliances, granite countertops and in-suite laundry. The building also includes 196 underground parking stalls and its proportionate interest in a shared, two-storey, 18,000-square-foot clubhouse and fitness facility.

The purchase price for Kanata Lakes Apartments II is $48.7-million ($320,000 per suite), with Killam's 50-per-cent ownership interest being $24.4-million. The purchase price will be satisfied with a new 10-year CMHC-insured mortgage of $28.5-million and cash. The acquisition is expected to close by the end of September.

The property will be owned in a joint venture between Killam and affiliates of KingSett and AIMCo. In connection with the acquisition, Killam has agreed to issue common shares of Killam to the KingSett and AIMCo joint venture with a total value of $7.0-million based on the five-day volume-weighted average price of Killam common shares preceding this announcement, less 3 per cent. Proceeds from the private placement will be used by Killam to partially finance its proportionate share of the Kanata Lakes acquisition.

Following the completion of the private placement, the KingSett and AIMCo joint venture will, collectively, beneficially own common shares of Killam representing approximately 10.8 per cent of Killam's common shares outstanding. In connection with the private placement, the KingSett and AIMCo joint venture has agreed to certain customary standstill provisions with respect to Killam's common shares.

"We welcome both KingSett, one of Canada's most successful private equity investors in real estate, and AIMCo, one of the largest institutional investment managers in Canada, as JV partners and strategic shareholders," noted Philip Fraser, Killam's president and chief executive officer. "This relationship will enable us to increase our ownership interest in the Kanata Lakes development from a 25-per-cent interest in Kanata Lakes I to 50 per cent for Kanata Lakes II. We look forward to exploring future growth opportunities with KingSett and AIMCo."

Jon Love, managing partner of KingSett Capital, said, "We are pleased to enter into this strategic capital relationship with Killam and AIMCo and look forward to the opportunity to work together to further grow our respective businesses."

"As a long-term investor in high-quality real estate assets, we are pleased to be making this amicable joint-venture investment alongside two highly experienced real estate companies," said Micheal Dal Bello, senior vice-president, real estate, for AIMCo.

Killam acquired a 25-per-cent interest in the Kanata Lakes Apartments I in May, 2012, through a joint venture with Kuwait Finance House. KFH advised Killam that it is not adding to its Canadian holdings and that it intends to exit the Canadian rental market, including unwinding its ownership interest in the existing joint venture with Killam. The timing for KFH's exit is being assessed, and Killam is considering its options regarding its interest in the joint venture.

About KingSett

KingSett Capital is Canada's leading private equity real estate investment business co-investing with pension fund and high-net-worth individual clients. KingSett Capital invests through a series of growth funds, mortgage funds and a core strategy income fund, each with its own risk/return strategy. KingSett Capital has over $5-billion of assets under management.

About AIMCo

Alberta Investment Management is one of Canada's largest and most diversified institutional investment fund managers, managing an investment portfolio of approximately $80-billion and having significant direct and indirect North American real estate experience. AIMCo was established in 2008 to invest for superior long-term investment results for its 27 pension, endowment and government clients in Alberta, including the Alberta Heritage Savings Trust Fund.

We seek Safe Harbor.