Fishman Portfolio Woodbine Centre 500 Rexdale Blvd , Toronto, Ontario
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Fishman Portfolio Woodbine Centre 500 Rexdale Blvd , Toronto, Ontario Prepared For: Mr. Daniel Mendel Fishman Holdings North America Inc. Report Prepared by: ALTUS GROUP Date: December 31, 2011 Street Smart. World Wise. January 31, 2012 Mr. Daniel Mendel Fishman Holdings North America Inc. 1200 Sheppard Avenue East, Suite 401 Toronto, Ontario M2K 2S5 Dear Mr. Mendel: Re: Woodbine Centre In accordance with instructions from Fishman Holdings North America Inc., we have completed a valuation of the Woodbine Centre. The purpose of the appraisal is to estimate the Fair Value of the property as of December 31, 2011. No portfolio effect has been considered. The intended use of the report is for annual financial reporting purposes. The appraisals comply with the Fair Value (FV) model described in the International Accounting Standard 40 Investment property (i.e. IAS 40) and the International Valuation Standard. Our report conforms to the Canadian Uniform Standards of Professional Appraisal Practices (CUSPAP) and to the code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute of Canada. The reported analysis, opinions and conclusions are limited only by the Assumptions and Limiting Conditions defined herein, and are our personal unbiased professional analysis, opinions and conclusions. Based upon our inspection of the property and the data contained herein, it is our considered opinion that the fair value as at December 31, 2011 is in the order of: One Hundred and Seventeen Million Dollars $117,000,000 Given current real estate market conditions, we believe that a reasonable exposure period for the sale of the subject property is four to six months If you have any questions, Tim MacLeod would be pleased to discuss the valuation further. Respectfully submitted, ALTUS GROUP LIMITED Research, Valuation & Advisory Cost Consulting & Project Management Realty Tax Consulting Geomatics 33 Yonge Street, Suite 500, Toronto, ON M5E 1G4 Canada T 416.641.9500 F 416.641.9501 altusgroup.com Fishman Portfolio Woodbine Centre December 31, 2011 WOODBINE CENTRE, 500 REXDALE BOULEVARD,TORONTO,ONTARIO 1. A review and reconciliation of the data and analysis leading to the conclusion and final estimate of value is as follows: Conclusions December 31, December 31, December 31, December 31, Regional Mall 2008 2009 2010 2011 Retail Market Value $120,000,000 $94,100,000 $93,000,000 $117,000,000 Rate Analysis IRR 8.00% 8.75% 8.50% 8.00% Rate Per s.f. $175 $138 $136 $149 TCR 7.25% 8.00% 7.75% 7.25% OCR 7.25% 7,75% 7.75% 7.25% Cash Flow (DCF) Year 1 1.72% 5.65% 5.33% 5.13% Years 1 5 6.64% 7.65% 7.37% 5.64% Years 6 10 7.87% 8.29% 7.86% 7.79% Net Income (DCF) Year 1 5.60% 7.37% 6.55% 5.70% Years 1 5 7.75% 8.67% 8.45% 7.76% Years 6 10 8.41% 8.87% 8.46% 8.58% Market Value (Land) Market Value (Rounded) $50.400,000 $45,600,000 $45,600,000 $45,600,000 Market Value Per Acre $1,050,000 $950,000 $950,000 $950,000 Market Rental Rate Range < 500 s.f. $35.00 $65.00 $35.00 $75.00 $35.00 $75.00 $35.00 $75.00 501 999 s.f. $25.00 $50.00 $25.00 $45.00 $25.00 $45.00 $25.00 $72.00 1,000 3,000 s.f. $20.00 $40.00 $15.00 $40.00 $15.00 $40.00 $10.00 $40.00 3,001 5,500 s.f. $15.00 $35.00 $10.00 $20.00 $10.00 $30.00 $5.00 $30.00 Kiosks $100.00 $500.00 $150.00 $525.00 $150.00 $525.00 $150.00 $525.00 Anchors $10.00 $10.00 $10.00 $8.00 $10.00 Cinema $6.00 $8.00 $8.00 $8.00 Food Court $75.00 $120.00 $80.00 $125.00 $80.00 $125.00 $110.00 $120.00 2 Fishman Portfolio Woodbine Centre December 31, 2011 Inducements New $15.00 $15.00 $15.00 $20.00 Renewals $5.00 $0.00 $5.00 $5.00 Realty Commissions New $2.00 $4.00 $4.00 $4.00 Renewals $1.00 $2.00 $2.00 $2.00 Growth Rates Market Rent & Sales Growth Year 2 1.00% 0.00% 0.00% 1.00% Year 3 1.00% 1.00% 1.00% 1.00% Year 4 2.00% 2.25% 2.25% 2.00% Long Term 2.25% 2.25% 2.25% 2.25% Expense Growth (LT) 2.25% 2.25% 2.25% 2.25% Reserves Vacancy & Bad Debt 7.00% 7.50% 7.50% 7.50% Allowance 1 Lag Vacancy in Months 4 8 8 8 Management Fee 2 3.00% 3.00% 3.00% 3.00% Structural Reserve 2 1.00% 1.00% 1.00% 1.00% Leasing Assumptions Renewal Probability 75.00% 75.00% 75.00% 75.00% 1 Based upon a percentage of PGI Less Anchors 2 Based upon percentage of EGR 2. A reasonable exposure time is estimated to be 6 months. 3. The location and physical character of the property is addressed as follows: The property lies at the intersection of Highway 27 and Rexdale Boulevard. The character of the district is dominated to the south by Woodbine Racetrack and a series of industrial uses. To the north lie several large, low density residential communities. The interest appraised is the Leased Fee, Freehold subject to leases. The character of the building is described as an enclosed regional mall. 3 Fishman Portfolio Woodbine Centre December 31, 2011 The total leaseable area of the building upon completion of the Target expansion is 786,599 square feet. The total parking stalls is 3,580 at a ratio of 4.55 spaces per 1,000 square feet. The total site area is 48.0 acres. 4. The Land Use Controls are 1. CPR Commercial Planned Regional. 2. Major uses permitted are Retail/Commercial. 5. The existing use of the subject property is an enclosed regional mall. This is the use reflected in the appraisal. 6. Highest and Best use is estimated to be its current use. As vacant land the highest and best use is estimated to be a retail use, likely in the form of an open format strip development or a power centre for big boxes. In addition, part of the site holds good appeal for high density residential uses. 7. This appraisal has considered the possible effect on value of an assemblage and for the subject property there is considered to be none. There is no effect on value of any anticipated public or private improvements unless specifically noted herein. 8. There is no planned re development for this property. 9. As far as we are aware there is no current agreement for sale, option or listing of the property for sale. 10. History of subject property market activity indicates that the property is not currently listed for sale and under contract. A review at the local Land Registry Office revealed that the property last traded in March 2005 at a price of $109,250,000. The details of the sale are summarized as follows: 4 Fishman Portfolio Woodbine Centre December 31, 2011 5 Fishman Portfolio Woodbine Centre December 31, 2011 11. For the December 31, 2011 valuation, for the Discounted Cash Flow Analysis, the most relevant ales are: Sal Database Sale e Reference No. Address or Name IRR TCR Date No. 1 32512 Southgate Mall, Edmonton, Alberta 6.25% 5.25% Dec 2011 2 29157 Oakville Place, Oakville, Ontario 6.94% 6.00% Jun 2011 3 28997 Hillcrest Mall, Richmond Hill, Ontario 7.85% 6.75% Apr 2011 12. For the December 31, 2011 valuation, for the Direct Capitalization Approach, the most relevant sales are: Sale Database Sale No. Reference No. Address or Name OCR Date 1 32512 Southgate Mall, Edmonton, Alberta 5.00% Dec 2011 2 29157 Oakville Place, Oakville, Ontario 5.75% Jun 2011 3 28997 Hillcrest Mall, Richmond Hill, Ontario 6.50% Apr 2011 13. For the December 31, 2011 valuation, for the Land Valuation, based on the highest and best use, and as if vacant, the most relevant sales are: Sale Database Sale Rate ($) No. Reference No. Address or Name Per Acre Date 1 33056 Ivandale Drive, Mississauga, Ontario $884,889 Dec 2011 2 33059 5067 Dixie Road, Mississauga, Ontario $993,049 Sep 2011 3 33054 1016 Eglinton Ave, Mississauga Ontario $1,046,255 Feb 2011 6 Fishman Portfolio Woodbine Centre December 31, 2011 14. The value differential from the previous appraisal is detailed as follows Estimated Market Value December 31, 2011 $117,000,000 Estimated Market Value December 31, 2010 $93,000,000 Change in Market Value $24,000,000 Parameter Approximate Impact on Value Rate of Return $8,000,000 Growth rates (Sales & Rents) $0 Leasing Costs ($1,000,000) Specific Items Percentage Rent $600,000 Miscellaneous Income ($700,000) Non Recoverable Expenses $700,000 Non Recoverable Capital Expenditures $800,000 Target/Grocery Store/Winners expansion (includes leasing costs) $5,500,000 Other $10,100,000 Total Variance $24,000,000 7 ARGUS CASH FLOW PROJECTION DECEMBER 31, 2011 Fishman Portfolio Woodbine Centre December 31, 2011 Discounted Cash Flow Conclusions Woodbine Centre SUMMARY OF DISCOUNTED CASH FLOW ANALYSIS ANALYSIS DATE Jan 12 Discount Rate (IRR) 8.00% Year Capitalized 11 Terminal Cap Rate 7.25% Rounding Places 6 Net Rentable Floor Area (excluding storage) 786,599 sq. ft. Selling Costs 0.00% . Hold Net Operating Net Discount Net Present NOI / CF / Year Income Cashflow Factor Value Value Value 1 12/12 $6,667,556 $5,997,459 0.925925926 $5,553,203 5.69% 5.12% 2 12/13 $8,685,213 $6,307,685 0.857338820 $5,407,823 7.41% 5.38% 3 12/14 $9,810,140 $5,354,455 0.793832241 $4,250,539 8.37% 4.57% 4 12/15 $10,494,279 $6,212,279 0.735029853 $4,566,211 8.95% 5.30% 5 12/16 $9,716,686 $9,129,954 0.680583197 $6,213,693 8.29% 7.79% 6 12/17 $9,785,789 $9,239,605 0.630169627 $5,822,518 8.35% 7.88% 7 12/18 $9,689,463 $8,391,033 0.583490395 $4,896,087 8.26% 7.16% 8 12/19 $9,924,981 $8,763,205 0.540268885 $4,734,487 8.47% 7.47% 9 12/20 $10,166,674 $9,143,220 $4,573,886 8.67% 7.80% 10 12/21 $10,655,113 $10,038,238 0.463193488 $4,649,646 9.09% 8.56% Reversion $143,734,113 0.463193488 $66,576,705 PV of Cash Flow and Reversion $117,244,799 REVERSION CALCULATION FINANCIAL INDICATORS 11th Year NOI $10,464,374 NOI Cash Flow Terminal Capitalization Rate 7.25% Initial Yield 5.70% 5.13% Unadjusted Reversion Value $144,336,193