Montreal Investment Market Overview November 29Th 2012

Can Investment Activity Become Any Stronger in the Canadian Market or Has it Peaked? Montreal Investment Market Overview November 29th 2012

Michal Kuzmicki Managing Partner, Montreal

Act on Principle QUEBEC TRANSACTIONS > $10 MM

Million $900 Industrial $1,445 MM $800 Multi-Res $700 Office Retail $600 $1,320 MM

$500

$400 $892 MM $300

$200 $510 MM

$100

$0 2009 2010 2011 2012

2 2012 QUEBEC RETAIL TRANSACTIONS

Promenades de l’Outaouais Les Factoreries & Carrefour Champêtre Gatineau St-Sauveur & Bromont $220.3 million $94.7 million 840,435 sf 278,000 sf Enclosed Regional Outlet Centres Vendor: Canpro Investments Vendor: Private & Devimco Purchaser: Oxford Properties & Purchaser: Riocan & Tanger Montez Corporporation Top Tenants: Tommy Hilfiger, Top Tenants: Costco, La Baie Nike, Guess

Galeries Charlesbourg Centre Le Village & Elgar Place Quebec City Montreal $33.0 million $21.9 million 254,415 sf 105,956 sf Enclosed Food Anchored Enclosed Food Anchored Vendor: Econo-Malls Vendor: Sandalwood Purchaser: First Capital Purchaser: Partners REIT Top Tenants: IGA, Hart, Top Tenants: Loblaws, SAQ, RBC Dollarama

3 2012 QUEBEC RETAIL TRANSACTIONS

Place des Quatres-Bourgeois Place de la Colline & Marché Jonquière Quebec City Place des Cormiers Jonquière $31.0 million Chicoutimi & Sept-Îles $13.8 million 242,774 sf $14.4 million 66,189 sf Enclosed Food Anchored 125,160 sf Unenclosed Food Anchored Vendor: Bayfield & Sunstone Unenclosed Food Anchored Vendor: Brookline Purchaser: First Capital Vendor: First Capital Purchaser: Canmarc REIT Top Tenants: IGA, Winners, Jean Coutu Purchaser: Private Top Tenants: IGA, Jean Coutu, Top Tenants: Maxi, Uniprix, Provigo Desjardins

4 2012 MAJOR QUEBEC MULTI-RESIDENTIAL TRANSACTIONS

Norgate & Renaissance Olympic Village La Cité Montreal, Qc Montreal, Qc Montreal, Qc

$121 million $176.5 million $231.8 million 1,528 Units 980 Units 1,351 Units $/Unit: $79,188 $/Unit: $108,102 $/Unit: $171,577

Vendor: Private Consortium Vendor: El Ad Vendor: Private Investors Purchaser: True North Purchaser: CAPREIT Purchaser: Oxford Properties Apartment REIT

5 Highlights - Ottawa Office Market 6 As of November 20th 2012

• Overall Vacancy - 7.3% (Up from 7.0% in Q3 2011)

• CBD Class A Vacancy - 5.6% (Up from 4.5% in Q3 2011)

• Leasing Activity (All Sectors) - 1.9 mil sq. ft.

• Absorption (All Sectors) - 440,000 sq. ft.

• Investment Volume - $2.0 Billion New Record ($1.8 Billion 2007) The Ottawa Office Market 7 Federal Government Presence in the Ottawa Market

Downsizing or Renewal?

Nortel Campus: 2,200,000 sf

Gatineau: 1,600,000 sf

Ogilvy Road: 800,000 sf

90 Elgin Street: 646,000 sf

Tremblay Road: 250,000 sf 5,500,000 sf

52.6 million square feet (Including Fed Owned) Ottawa Market Overview 8

Institutional Grade Office Yeilds- Ottawa Q4 2009-Q3 2012 9.0%

8.5%

8.0%

7.5%

7.0%

6.5%

6.0%

5.5%

5.0%

4.5%

4.0% Dec-09 Apr-10 Aug-10 Sep-12 Nov-10 Dec-10 Jan-11 Jun-11 Aug-11 Dec-11 Jan-12 Aug-12 Local Case Study – Record Setting Yield 9 200 Kent Street & 77 Metcalfe Street, Ottawa, ON

$143,400,000 $45,000,000

200 Kent Street 77 Metcalfe Street Cap Rate: 5.25% Cap Rate: 5.20% Value Drivers: Value Drivers: Credit, Rent, & Term Credit, Rent, & Term

PREPARED FOR: VANCOUVER MARKET OVERVIEW Toronto Real 0 Estate Forum

PRESENTED BY:

Tony Quattrin Executive Vice President National Investment Team CBRE Limited

November 29, 2012 Vancouver remains one of the most sought after investment markets in Canada, with investments posing a lower risk profile compared to other Canadian markets.

VANCOUVER SUN: “VANCOUVER ONCE AGAIN THE WORLD’S THIRD MOST LIVABLE CITY” B.C. Population Change

•International migration accounts for 77.4% of BC’s population gain •Between 40,000 – 60,000 net new migrants settle in BC each year

Total Population Net Migration

7,000,000 90,000 Net Migration Forecast (2013-2034) Total Population 80,000 6,000,000

70,000 5,000,000 60,000

4,000,000 50,000

3,000,000 40,000

30,000 2,000,000 20,000

1,000,000 10,000

0 0

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Source: BC Stats Investment Trends 2012

CONTINUED CAP LOCAL AND GLOBAL RECORD LOW INCREASE IN RATE COMPRESSION INFLUENCE INTEREST RATES INVESTMENT ACTIVITY • Demand for “hard • Foreign & Domestic • Fueling consumer • Continued demand for local assets” Investors confidence property • Great financing • Little supply, strong • Limited quality supply • Increased activity from a available demand • Steady leasing variety of buyer groups • Favorable purchasing • Unique and surprising deals fundamentals conditions in 2012 Debt Capital Markets

• Mortgage spreads have generally held the line at 180 - 190 bps for “A-quality” product • BoC likely to hold rates for the foreseeable future Typical terms: 5-Year Commercial Mortgage Rates (190 bps spread): 3.24 LTV 55 - 65% 25 year amortization 5-Year Government of Canada Benchmark Bond Yield: 1.34 5 year term 50 bps arrangement fees 9 8.5 8 7.5 7 6.5 6 5.5 5 4.5 4 3.5 3 2.5 2 1.5 1 Weekly Benchmark Bond Yields & Mortgage Rates January 2002 to November 2012

Source: CBRE Limited, Bank of Canada Purchaser Profile

. REITS

. Pension Funds . Foreign Investors . Syndicators . Developers . Private Buyers

High interest from all buyer groups today Downtown Class A Cap Rates

11.00%

10.00%

9.00% Vancouver Calgary 8.00% Edmonton Toronto

7.00% Ottawa Montreal

6.00% Halifax National

5.00%

4.00% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q1 2012 Q2 2012 Q32012

Source: CBRE Limited Downtown Supply & Demand – All Classes

Forecasted  Total Market Size: 21.9 Million SF

1,600,000 16% 1,400,000 14% Q3 2012 1,200,000 Vacancy 12% 1,000,000 3.4% 10% 800,000 8% 600,000 6% 400,000 4% 200,000 2% 0 0% -200,000 Potential Market Size in -2% -400,000 2016: 23.5 Million SF -4% -600,000 -6% -800,000 -8% -1,000,000 -10%

-1,200,000 -12%

2006 2001 2002 2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

New Supply (SF) Absorption (SF) Vacancy (%)

AAA/A Class Vacancy: 1.7%

Last wave of new builds (2001-2004) 1.35m SF = 6.7% of total market Current wave of new builds (2014-2015) 1.59m SF = 7.0% of total market

Source: CBRE Limited Downtown Office Developments

MNP Tower Oxford Properties

745 Thurlow N Bentall Kennedy

Pacific Centre Expansion Cadillac Fairview

TELUS Garden TELUS/Westbank

800 Griffiths Aquilini Group

MNP Tower 745 Thurlow TELUS Garden 800 Griffiths Pacific Centre Expansion Oxford Properties Bentall Kennedy TELUS/Westbank Aquilini Group Cadillac Fairview Source: CBRE Limited Downtown Office Developments 2014 – 2017

Pacific Centre Expansion MNP Tower 800 Griffiths Way 745 Thurlow TELUS Garden

Cadillac Fairview Oxford Properties Aquilini Group Bentall Kennedy TELUS/Westbank 300,000 SF 270,000 SF 213,000 SF 365,000 SF 448,000 SF Average Floor Plate: 75,000 SF 8,000 SF 14,000 SF 16,500 SF 22,000 SF Under Construction Under Construction Under Construction Under Construction Under Construction (West Tower – 180,000 SF) 2014 Completion 2014 Completion 2014 Completion 2015 Completion 2015 Completion - 44.0% Preleased - 51.0% Preleased 60.0% Preleased • No Pre-Leasing To Date • Vertex One (8,000 SF) • No Pre-Leasing To Date • SNC-Lavalin (100,000 SF) • TELUS (200,000 SF) • MNP LLP (72,000 SF) • McCarthy Tetrault (85,000 SF) • Bull Housser LLP •CBRE Ltd. (24,000 SF) (67,000 SF) Source: CBRE Limited •Regus (16,000 SF) Despite Positive Indicators…………..

There are clouds on the horizon

• Proposed interest rate hike • Global economic uncertainty • Impending fiscal cliff • Upcoming provincial elections in BC • Over 1.5 million SF of planned future office supply in Downtown Vancouver Challenges Just Around the Corner…

Interest Rates Expected to Rise (But Not Yet)

Forecasted  5

4.5

3.5

2.5 • Geo-Political Events in Europe = Euro zone 2 jobless rate at record 11.6% 1.5 • Greek austerity measures and tax increases in

1 Portugal to keep European joblessness high • Super storm Sandy to slow economic growth in 0.5 US in Q4 0 • Concerns about the “fiscal cliff” • Chinese government change in leadership

Source: Bank of Canada and TD Bank of Canada

Currency Crisis

“All for one and one for all.” Alexandre Dumas Fiscal Cliff – Will They Jump? Provincial Elections in B.C.

Angus Reid Poll and Forum Research Inc. (Oct 2012)

BC NDP – 49% BC Liberal – 26% BC Conservatives – 16% BC Greens – 7% Other – 2%

Source: CBRE Limited, Angus Reid Shifting Fundamentals Thank You!

This disclaimer shall apply to CBRE Limited, Brokerage, and to all other divisions of the Corporation (“CBRE”). The information set out herein (the “Information”) has not been verified by CBRE, and CBRE does not represent, warrant or guarantee the accuracy, correctness and completeness of the Information. CBRE does not accept or assume any responsibility or liability, direct or consequential, for the Information or the recipient’s reliance upon the Information. The recipient of the Information should take such steps as the recipient may deem necessary to verify the Information prior to placing any reliance upon the Information. The Information may change and any property described in the Information may be withdrawn from the market at any time without notice or obligation to the recipient from CBRE.

Calgary has been the Most Active Office Market in Canada

• Downtown Calgary has an inventory of 38.6 million square feet

• 7.4 million square feet of new supply in last 6 years

• 11 buildings, representing a 24% increase in inventory

• Global Financial Crisis and plunging oil prices resulted in 1.2 million square feet of negative absorption in 2009

• Vacancy rate had been anticipated to approach 20%

• Record absorption of 2.8 square feet in 2011 and 1.6 million YTD in 2012 saved the day

• ‘A’ and ‘AA’ office market is now at sub 2% vacancy

• No large blocks of contiguous space in the downtown core Calgary Downtown Office – Class AA Net Rental Rate

$60

$55

$50 $50 $50 $50

$45 $45 $45 $45

$40 $40 $40 $40

$36 $35 $34

$30 $30 $28 $28

$25

$20

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Under-writing Office Investments in Calgary is Challenging

• Calgary has experienced extreme volatility in lease rates

• Class ‘AA’ buildings will range from $26 to $52 per square foot

• In order to “win the bid”, buyers must under-write acquisitions with aggressive growth rate assumptions in 2013 and 2014

• They will then assume that lease rates will moderate as new supply comes on stream in 2015, 2016 and 2017

• 2015 – Eighth Avenue Place West – Ivanhoe / AIMCo (841k)

• 2016 – Calgary City Centre, Cadillac (820k)

• Impact of Imperial Oil (850k) and CP Rail (460k) leaving downtown

Can Investment Activity Get Any Stronger?

• The answer is dependant on the number of willing vendors

Who Will the Vendors Be?

• Institutions developing new projects and improving their portfolio quality (AIMCo, Oxford and Brookfield are examples from 2012)

• Investors that bought at the peak in 2007 (closed end funds)

• German investors that can still “get out whole” Calgary Place Sale Transaction

Date: May 2012

Vendor: Oxford / AIMCo

Purchaser: CREIT / KingSett

Price: $312 million

Area: 573,000 square feet

Cap Rate: 6.5%

Price per Foot: $544

Competitive sale process with six bids

Under-written with aggressive growth rate assumptions

A good example of vendors that were willing to sell because they are actively developing new projects and improving their overall portfolio quality Top 10 Purchasers by Source of Capital

USA

Global

Canada $17.4 Billion $14.4 Billion Germany

Japan

China

Singapore

France

South Korea

- 10 20 30 40 50 60 70 80 90 100 YTD 2012 YTD 2011 US$ bn

Source: Jones Lang LaSalle, Global Capital Flows, Q3 2012

21 Global Cross Border Transactional Volumes, Q3 2008 – Q3 2012

US$ bn 140 60%

120 50% 48% 45% 45% 45% 100 41% 42% 42% 42% 40% 41% 40% 40% 40% 42% 37% 36% 36% 80 30% 60 24% 20% 40

20 10%

0 0% Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312 Domestic Intra-regional Inter-regional Cross Border as % of total

Source: Jones Lang LaSalle, Global Capital Flows, Q3 2012

22 Noteworthy Cross-Border Deals in Q3 2012

Sale Price Purchaser Source of Property Name Location Sector ($ US m) Purchaser Capital Barangaroo Sydney Office 1,039 CPPIB Canada Plaza Hotel New York Hotel 570 Sahara Group India

Festival Place Basingstoke Retail 474 TIAA-CREF USA

Broadgate West London Office 458 Hines/HSBC Global

Grand Hyatt Washington D.C. Hotel 400 Host Hotels Global

90 Boulevard Pasteur Paris Office 315 ADIA Abu Dhabi

Barangaroo Waterfront: Sydney, Australia

Source: Jones Lang LaSalle, Global Capital Flows, Q3 2012

23 10 Largest Markets in Q3 2012

USA

Germany

France

Australia

Canada 1.65 2.18 $3.83 Billion Japan

South Korea

Hong Kong

China

- 5 10 15 20 25 Domestic Cross-Border US$ bn

Source: Jones Lang LaSalle, Global Capital Flows, Q3 2012