APPRAISAL REPORT
Édifice 1155 University 1155 Robert-Bourassa Boulevard Montréal, Québec
CBRE File No.: A16.139
Effective Date: December 31, 2015
Prepared for: Demenic Reonegrao, CPA, CA Chief Financial Officer 4010205 Canada Inc. 1155 Robert Bourassa Boulevard, Suite 701 Montréal, Québec, H3B 3A7
CBRE Limited Valuation & Advisory Services 333 Décarie Blvd., Suite 100 Montréal, QC, H4N 3M9 514.374.2100 Tel 514.875.5410 Fax www.cbre.ca
CBRE File No.: A16.139
March 2, 2016
Demenic Reonegrao, CPA, CA Chief Financial Officer 4010205 Canada Inc. 1155 Robert Bourassa Boulevard, Suite 701 Montréal, Québec, H3B 3A7
RE:Édifice 1155 University, 1155 Robert-Bourassa Boulevard, Montréal, Québec Dear Mr. Reonegrao, CPA, CA:
At your request and authorization, CBRE Limited has completed an investigation and analysis of the above reference property and is pleased to submit this current narrative appraisal report.
This appraisal report is prepared for the purpose of providing an estimate of market value of the 100% leased fee interest in 1155 Robert-Bourassa Boulevard based on an effective date of December 31, 2015. We understand this report will be used by the intended user and any other intended users noted herein for International Financial Reporting (IFRS) purposes according to IAS 40.
The market value reported herein is subject to the Extraordinary Assumptions and Limiting Conditions noted within this report on page 6 which are an integral part of this report and are inseparable from this letter. The analyses, opinions and conclusions utilized in this report were developed based on our interpretation of the standards set forth in the Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP) and Ordre des évaluateurs agrees du Québec.
Based on the analysis contained in this report, the market value of the subject property as at December 31, 2015 is: Fifty Nine Million Dollars $59,000,000 It has been a pleasure to assist you in this assignment. If you have any questions concerning the analysis, or if CBRE Limited can be of further service, please contact us. Respectfully submitted, CBRE LIMITED
Jean-Francois Rioux É.A., AACI, P.App Director Valuation & Advisory Services Phone: 514.375.2502
TABLE OF CONTENTS
Executive Summary ...... 1 Investment Summary 3 Investment Characteristics 4 Extraordinary Assumptions and Limiting Conditions 6
Property Overview ...... 7 Tenure 9 Location Description 9 Site Description 11 Zoning and Planning 11 Assessment and Taxes 12 Building Overview 13
Market Overview ...... 15 Canadian Economic Overview 17 Québec Economic Overview 19 Montréal Economic Overview 21 Montréal Office MarketView 23
Highest and Best Use ...... 29
Valuation Methodology ...... 33
Income Approach ...... 37 Discounted Cash Flow Method 39 Comparable Investment Market Transactions 50 Discounted Cash Flow Conclusion 53 Sensitivity Analysis 54 Direct Capitalization Method 55
Direct Comparison Approach ...... 57
Reconciliation of Value ...... 61
Certification ...... 65
ADDENDA
Addendum “A” Terms of Reference Assumptions and Limiting Conditions Addendum “B” Market Rent Rationale Addendum “C” Tenant Rent Roll Lease Expiry Schedule Projected Cash Flow Addendum “D” Photos Addendum “E” Comparable Sales
Édifice 1155 University VII Effective Date: December 31, 2015
1155 Robert-Bourassa Boulevard, Montréal, Québec
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1155 University Summary: Executive Édifice
Executive Summary Investment Summary Investment Characteristics Extraordinary Assumptions and Limiting Conditions
Édifice 1155 University EXECUTIVE SUMMARY 3 Effective Date: December 31, 2015
INVESTMENT SUMMARY
Property Name: Édifice 1155 University Year Built/Renovated: 1966/2000-2009 Property Address: 5 Robert-Bourassa Boulevard Storeys: 14 Interest Appraised: Leased Fee Parking Ratio: 0.68/1000 SF Effective Date: December 31, 2015 Land Area (acres): 0.52 Product Type: Downtown Class ''B'' Green Rating: N/A NRA: 195,231 SF
TENANCY
Lease Expiry Profile Top Tenants % of 45,000 80.00% Base 40,000 70.00% Tenant Area (SF) Rent Expiry 35,000 60.00% Cologix Montréal 27,429 20.71% 8/33 30,000 50.00% 25,000 Keops Technologie 13,698 7.01% 11/18 40.00% 20,000 SQI 11,079 2.17% 2/17 15,000Square Feet 30.00% 10,000 20.00% Osisoft Canda ULC 8,953 4.17% 9/20 5,000 10.00% Bank of Nova Scot 8,983 8.73% 12/20 0 0.00% Occupancy Rate: 87.97%
Area (SF) % of NRA
INCOME ANALYSIS
Contract vs. Market Rent NOI vs. Cash Flow
$35.00 $5,000,000 $30.00 $4,000,000 $25.00 $20.00 $3,000,000 $15.00PSF $2,000,000 $10.00 $1,000,000 $5.00 $0.00 $0
Contract Market NOI CF Year 1 Contract Rent $27.17 Year 1 NOI $3,596,808 Year 1 Market Rent $26.50 Year 1 CF $2,703,794
VALUATION SUMMARY Final Value Conclusion $59,000,000 Value PSF $302 Investment ParametersIncome Yields NOI CF IRR 7.25%Year 1 6.00% 4.51% TCR 6.75%Years 1-5 6.70% 5.55% OCR 6.50%Years 6-10 7.52% 6.49%
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Édifice 1155 University 4 EXECUTIVE SUMMARY Effective Date: December 31, 2015
INVESTMENT CHARACTERISTICS
Location
Strengths Situated within Downtown Montréal Central Business District (CBD). Situated at the corner of Robert-Bourassa Boulevard and René-Lévesque Boulevard West. Good availability of amenities within the CBD. Public transportation is provided to the area through bus lines 61, 150, 168, 350, 355, 358, 364, 410, 420, 427, 430, 435 and metro station Square-Victoria – OACI is located nearby through the Montréal underground RESO.
Weaknesses Difficulties of ingress/egress during rush hour traffic period.
Physical
Strengths Good quality Class “B” downtown office building. The layout is functional and in line with office building design. 132 interior parking spaces. The site is flat and level. Good availability of natural light throughout the floor plate.
Weaknesses Limited on-site parking, although there is a good availability of street metered parking and parking lots in the immediate area.
The property needs capital investments.
Income
Strengths Good mix of tenants from legal, financial and IT industries. Restaurant is leased on a net basis.
Weaknesses Short term leases. 26.13% of current leased space is expiring by year 2.
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Édifice 1155 University EXECUTIVE SUMMARY 5 Effective Date: December 31, 2015
Office leases are mostly on a gross basis, where operating expenses are not all recoverable by landlord.
Leasing Market
Strengths The weakness of the Canadian dollar vs US dollar should benefit the economy of the Province of Québec.
Renewals continue to comprise a significant proportion of market activity, many tenants find it to be the most cost-effective alternative.
Weaknesses According to the CBRE Q4 2015 Montréal Office MarketView: The GMA is now in a phase where the economy is somewhat flat, yet the demand for office space is lower than it has been for a very long time. There are several factors impacting the market, including downsizing, additional competition from loft space and new supply.
The GMA vacancy rate increased to 13.8% in Q4 2015, which is the highest rate recorded since Q2 2003. The CBD vacancy rose to 11.2% on 163,017 sq. ft. of negative net absorption.
There was no new supply delivered in Q4 2015, however there remains more than 2.6 million sq. ft. in the construction pipeline and major deliveries are expected in the next 12-18 months
The annual absorption level for 2015 was negative 523,277 sq. ft., the fourth year in a row with negative growth.
There were very negligible declines in occupancy costs for both the CBD and the suburban submarkets in Q4 2015. The Central Core and Downtown South submarkets remain the most expensive, both exceeding $40.00 per sq. ft. while all the suburban markets hovered between $24.60 and $26.50 per sq. ft.
Corporate and even smaller tenants are looking to modernize their operations and part of that involves reduced square footage for individual workstations, working from home and increased collaborative space, all of which is tending to lead to smaller footprints.
Investment Market
Strengths Despite early year consensus that cap rates couldn’t get much lower, we have witnessed evidence of further tightening of cap rates for select asset classes, most notably: CBD office, grocery- anchored retail and multi-family.
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Édifice 1155 University 6 EXECUTIVE SUMMARY Effective Date: December 31, 2015
Against a backdrop of economic volatility, purchasers are clearly prepared to pay a premium for perceived safety and security. This applies both to domestic buyers and, increasingly, foreign capital entering Canada. As expected, deal flow in Alberta has been sharply curtailed however outside of the Office sector, liquidity is arguably better than most think. Overall REIT performance in 2015 has been lackluster and even though REIT’s are in good shape by most measures, they remain a somewhat diminished buying force. Private buyers, pension funds and private equity all remain hungry and active. Strong recent job growth in the US. Consensus is strong US economic growth for the balance of 2015. 10 Year Canada Bond yields remain close to record lows. Based on the Q4 2015 CBRE Canadian Cap Rate Survey, the mean capitalization rate for a Downtown Montréal Class B office investment has remained stable for the last few quarters, holding at 6.00% to 6.75%.
Weaknesses Liquidity for secondary assets or for assets displaying leasing risk has been reduced since mid- 2013. The sharp slowdown in the oil and gas sector has had a negative impact on overall Canadian growth with Western Canada and Newfoundland the most directly impacted. Fallout from lower oil prices is expected to be felt most in the office sector but contagion to other sectors remains a risk. Economic growth forecast for Canada in 2015/16 is expected to be modest. Continued concerns surrounding the global economy including the slowdown in China, Russia, Europe, the BRICS nations and continued instability in the Middle East.
EXTRAORDINARY ASSUMPTIONS AND LIMITING CONDITIONS The Assumptions and Limiting Conditions for this reported have been included in Addendum “A”.
Title Search A full title search was not completed for this assignment. Title is assumed to be good and clear.
Capital Expenditures No property condition report was made available to the appraisers and this appraisal does not consider capital expenditures other than an amount of $388,000.
Should the property require capital expenditures in excess of the $388,000, the value would be affected accordingly.
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Property Overview: Édifice 1155 University
Property Overview Tenure Location Description Site Description Zoning and Planning Assessment and Taxes Building Overview
Édifice 1155 University PROPERTY OVERVIEW 9 Effective Date: December 31, 2015
TENURE Leased Fee interest is defined as follows:
100% leased fee interest
LOCATION DESCRIPTION The subject property is located in the Ville-Marie Borough, on the North-East corner of Robert-Bourassa Boulevard and René-Lévesque Boulevard West. The subject property is located in the financial core sector of downtown Montréal. The immediate vicinity is mostly office oriented, and some retail can be found along Robert- Bourassa Boulevard and René-Lévesque Boulevard West and further down on Sainte-Catherine Street West. The property is facing one of the more prestigious office towers and retail complex in Montréal known as Place Ville- Marie. Highway 720 is accessible through René-Lévesque Boulevard West and Lucien-L’Allier Street.
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Édifice 1155 University 10 PROPERTY OVERVIEW Effective Date: December 31, 2015
Land Use Current uses in the immediate vicinity of the subject include:
North Office and commercial uses.
South Office and commercial uses.
East Office and commercial uses.
West Office and commercial uses.
Access
Regional Accessible by Highway 720 and Bonaventure Boulevard.
Local Vehicular access is provided by Robert-Bourassa Boulevard and René-Lévesque Boulevard West.
Public Transit Metro stations Square-Victoria – OACI, McGill and Bonaventure are all located within 700m of the property. STM bus service is accessible in front of the subject property at the corner of Robert- Bourassa Boulevard and René-Lévesque Boulevard West.
Conclusion Overall, the location is considered very good for office uses.
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Édifice 1155 University PROPERTY OVERVIEW 11 Effective Date: December 31, 2015
SITE DESCRIPTION
Position Corner
Site Area 0.52 ac
Site Density 12.0x
Configuration Regular
Topography Level Primary access point from Robert-Bourassa Boulevard and René- Access Lévesque Boulevard West.
Services Fully serviced
Conclusion The site appears to support the existing use.
ZONING AND PLANNING
Official Plan City of Montréal Office Plan
Zoning M.7C
Permitted Uses Mixed zoned permitting mid intensive businesses and services.
Height: 16 to 44m
Density: 12x
Limitations For the purposes of this appraisal, CBRE has assumed the information obtained is correct and that the subject property is a conforming or at least a legal non-conforming use.
Conclusion A review of the applicable zoning By-Law and Official Plan designations confirmed that the existing office use is permitted within the applicable Zoning By-Law and Official Plan.
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Édifice 1155 University 12 PROPERTY OVERVIEW Effective Date: December 31, 2015
ASSESSMENT AND TAXES
Civic Address 1155 Robert-Bourassa Boulevard City Montréal Legal Description 5,290,230, 5,290,231 Assessment Roll No. 9940-52-1094-1-003-0001 Taxation Year 2015 Taxation Roll 2014 - 2016 Municipal Assessment $43,534,400 Municipal Realty Tax (2015) $1,592,967 School Tax (2015-2016) $82,014 Realty Taxes - 2015 $1,674,981
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Édifice 1155 University PROPERTY OVERVIEW 13 Effective Date: December 31, 2015
BUILDING OVERVIEW The following information is based on our inspection of the subject property along with data provided by the property manager. The information is assumed to be accurate; however, for greater certainty engineering, architectural and structural surveys are recommended.
Date of Inspection February 19, 2016
Type Downtown Class “B”
Year Built 1966
Number of Storeys 14
Typical Floor Plate Approximately 13,200 SF
Net Rentable Area Area Type Rentable Area Percent of NRA Office 181,938 SF 93.19% Re ta i l 13,293 SF 6.81% Net Rentable Area 195,231 SF 100.00%
Parking 132 interior parking.
Exterior Cladding Concrete, Brick and Glass.
Common Areas Standard.
Office Areas Office finishes have been built out to a good quality standard.
Washroom Facilities Standard.
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Édifice 1155 University 14 PROPERTY OVERVIEW Effective Date: December 31, 2015
Elevators Six Passenger Elevators.
HVAC Cooling is provided by rooftop units. Heating is provided by electric baseboards.
Functional Utility The office space design is functional.
Condition Based on our inspection and discussion with the property manager, the building appears to be in good condition. No property condition report was made available to the appraisers and this appraisal does not consider capital expenditures other than an amount of $388,000.
Conclusion Overall, the subject is an attractive Class “B” office building.
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University 1155 Édifice Market Overview:
Market Overview Canadian Economic Overview Québec Economic Overview Montréal Economic Overview Canadian Investment Overview Montréal Investment Market Overview Canadian Office Market Overview Montréal Office MarketView
Édifice 1155 University MARKET OVERVIEW 17 Effective Date: December 31, 2015
CANADIAN ECONOMIC OVERVIEW
CANADA ECONOMIC INDICATORS
2012 2013 2014 2015F 2016F 2017F 2018F 2019F
Real GDP Growth at Basic Price ($2007) 1.9% 2.0% 2.4% 1.6% 2.1% 2.2% 2.2% 2.0%
Population (Thousands) 34,699 35,100 35,492 35,850 36,253 36,664 37,081 37,496
Annual % Change 1.2% 1.2% 1.1% 1.0% 1.1% 1.1% 1.1% 1.1%
Employment (Thousands) 17,444 17,868 17,796 17,947 18,139 18,378 18,597 18,805
Annual % Change 1.3% 1.4% 0.6% 0.8% 1.1% 1.3% 1.2% 1.1%
Unemployment Rate 7.3% 7.1% 6.9% 6.9% 6.9% 6.7% 6.3% 6.0%
Personal Income Per Capita ($) $39,382 $40,446 $41,424 $42,474 $43,463 $44,630 $45,885 $47,180
Retail Sales ($ millions) $468,127 $482,998 $505,008 $516,342 $535,785 $550,720 $567,593 $584,795
Annual % Change 2.5% 3.2% 4.6% 2.2% 3.8% 2.8% 3.1% 3.0%
CPI (Annual Change) 1.5%0.9%1.9%1.5%2.3%2.1%2.1%2.1% Source: Conference Board of Canada, Autumn 2015 Notable highlights regarding Canada’s economic environment are provided below and have been sourced from the Conference Board of Canada, Autumn 2015 Outlook:
Canada’s provincial economic outlook can best be characterized by a national bifurcation between oil producers and oil consumers. Economic data since the oil plunge of mid-2014 has confirmed the severe impact the lowered commodity price would have on energy-centric markets in Alberta, Saskatchewan, Newfoundland, and Labrador. By corollary, these same market conditions in addition to a weak domestic currency and strengthening U.S. economy have opened up prospects for growth, albeit at a slower pace than anticipated, in energy consuming and export-dependent provinces of Ontario, Manitoba, Québec, and British Columbia.
Canada’s weak start to the year evidenced by contracting real GDP throughout the first 5 months of 2015 can be largely attributed to the chain reaction initiated by the oil price plunge and further exacerbated by external market turbulence within the global economy, such as the Greek debt Crisis and recent volatility in the Chinese stock market. As a result, real GDP growth is forecast to reach just 1.6% in 2015, representing the country’s worst economic performance since 2009.
Business investment will likely be hardest hit as a result of the sustained oil price embargo and represents the weakest part of the Canadian economic forecast set to decline by 7% in 2015, with uplift in 2016 forecast at a mere 0.9% articulating continued anticipated hesitation within capital and investment markets. Specifically, investment in Canadian energy structures and exploration are expected to drop by a whopping 30% over 2015, clearly representing the foci for cuts within the larger business investment landscape.
While savings at the pump and Federal tax cuts were expected to generate increases in consumer spending and thus in part offset large investment declines, a soft labor market characterized by fairly weak employment and wage growth, in addition to high levels of household debt have served rather to
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ease household consumption which is set to decrease 2.1% in 2015 down from 2.7% in 2014. For similar reasons, household demand is also expected to decrease from189,300 housing starts in 2014 down to 182,100 and 177,800 unit starts in 2015 and 2016 respectively. Despite the fall in housing demand, residential investment is slated to grow by 3.1% this year before falling to 2.8% in 2016.
The squeeze resulting from low oil prices on provincial and federal budgets combined with weaker than expected growth further slashing alternative revenue streams means another round of spending cuts is anticipated in order to keep rising deficits under control. The outlook for real public consumption and investment spending can be characterized by one of fiscal restraint, set to grow by less than 1% in 2015 and 2016 respectively.
Despite some larger than expected bumps on the road in 2015, the outlook is not entirely negative with the trade sector representing the bright spot in the Canadian Economy. While trade numbers were delayed in terms of hitting anticipated targets during the first half of 2015 underperforming in relation to the offsetting gains that were expected in oil-consuming provinces manufacturing sectors, the strengthening US economy in tandem with the weaker Canadian dollar has bode well for Canada’s trade performance over the last half of the year. In sum, the trade sector is expected to actualize solid growth at 3.1% in 2015, up to 3.6% in 2016.
Overall, the Canadian economy is expected to grow by 1.6% in 2015. This is the 4th consecutive year where growth has been less than 2.5%.
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Édifice 1155 University MARKET OVERVIEW 19 Effective Date: December 31, 2015
QUÉBEC ECONOMIC OVERVIEW Q U EBEC EC O N O M I C I N D I C A TO RS 2012 2013 2014 2015F 2016F 2017F 2018F 2019F Real GDP Growth at Basic Price ($2007) 1.3% 1.1% 1.4% 1.9% 2.0% 2.4% 2.1% 1.6% Population (Thousands) 8,073 8,143 8,205 8,258 8,329 8,401 8,473 8,542 Annual % Change 1.0% 0.9% 0.8% 0.6% 0.9% 0.9% 0.9% 0.8% Employment (Thousands) 4,010 4,059 4,056 4,102 4,143 4,196 4,238 4,269 Annual % Change 0.8% 1.2% -0.1% 1.1% 1.0% 1.3% 1.0% 0.7% Unemployment Rate 7.7% 7.6% 7.8% 7.8% 8.0% 7.6% 7.3% 7.0% Personal Income Per Capita ($) $35,902 $36,387 $37,027 $37,979 $38,919 $39,961 $41,057 $42,129 Retail Sales ($ millions) $103,753 $106,301 $108,137 $110,022 $114,131 $118,121 $121,941 $125,390 Annual % Change 1.2% 2.5% 1.7% 1.7% 3.7% 3.5% 3.2% 2.8% CPI (Annual Change) 2.1% 0.8% 1.4% 1.3% 2.2% 2.1% 2.1% 2.1% Source: Conference Board of Canada, Autumn 2015 Notable highlights regarding Québec’s economic environment are provided below and have been sourced from the Conference Board of Canada, Autumn 2015 Outlook:
Despite a unforeseen slowdown in its trade sector during the first quarter of 2015, attributed largely to a temporary weakening in U.S. demand, the Québec economy is expected to grow by 1.9% this year, up from 1.4% in 2014. The recovery is expected to accelerate into 2016 and 2017 with forecasts pegging growth at 2.0% and 2.4% respectively following a sustained four year period of sub 2% growth.
Québec’s trade sector has acted as a siphon on the province’s economy for over a decade – a drag that began to show glimmers of a potential turnaround beginning in 2013 when the provincial trade deficit began to shrink. Heading into 2015, there were high hopes the strengthening export sector would generate a revenue uplift in an otherwise challenging economic environment. Unfortunately, lower than anticipated demand from U.S. businesses and consumers in the first quarter of 2015 resulted in an unexpected detour, ultimately tarnishing the growth outlook on trade reducing growth expectations from 3.6% as at spring of 2015, down to a meagre, albeit still buoyant, 0.8% as at Autumn of 2015. Nonetheless, the outlook for 2016 remains positive with momentum expected to pick up as a result of a definitively stronger US economy and attractively low domestic currency.
Consumer spending will continue to be a major driver of economic growth this year, accounting for roughly half of the 1.9% of real GDP growth characteristic of 2014. Last year, the provincial savings rate fell to a 9-year low of 1.9% as consumers continued to spend despite weak growth in household disposable income and a meagre 0.1% increase in employment as measured from one year prior. The 2015 outlook is improved with the job market predicted to expand by 1.1% this year marking a significant departure from the sub-zero growth witnessed the year previous. From 2016 to 2019, real GDP and employment growth are forecast to average 2% and 1% per year, respectively. The growth in the labor market in general, and boost in disposable household income in particular, should bolster wholesale and retail trade sectors over the medium term.
The government is determined to balance its budget in fiscal 2015-2016. Hence, it has committed to reducing government spending growth to 1.2% in fiscal 2015-2016, down from 2.1% in fiscal 2014-2015.
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A series of cost cutting measures have been installed adding a potential downside risk to the outlook should any public sector strikes or other disruptive labor union activity hamper economic performance.
Overall, Québec’s 2015 real GDP growth rate of 1.9% is expected to exceed the national rate (forecast to reach just 1.6% in 2015) for the first time in 7 years.
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Édifice 1155 University MARKET OVERVIEW 21 Effective Date: December 31, 2015
MONTRÉAL ECONOMIC OVERVIEW
MONTREAL ECONOMIC INDICATORS 2012 2013 2014 2015F 2016F 2017F 2018F 2019F Real GDP Growth at Basic Price ($2007) 1.6% 1.5% 1.7% 2.1% 2.3% 2.4% 2.2% 2.0% Population (Thousands) 3,937 3,984 4,027 4,067 4,112 4,159 4,207 4,252 Annual % Change 1.3% 1.2% 1.1% 1.0% 1.1% 1.2% 1.1% 1.1% Employment (Thousands) 1,973 2,030 2,019 2,041 2,075 2,107 2,134 2,159 Annual % Change 1.3% 2.9% -0.5% 1.1% 1.7% 1.5% 1.3% 1.2% Unemployment Rate 8.4% 8.0% 8.2% 8.4% 8.2% 8.0% 7.8% 7.7% Personal Income Per Capita ($) $36,922 $37,337 $38,460 $39,561 $40,725 $41,825 $42,931 $44,130 Retail Sales ($ millions) $46,166 $48,367 $49,576 $50,946 $52,994 $54,851 $56,716 $58,502 Annual % Change 1.8% 4.8% 2.5% 2.8% 4.0% 3.5% 3.4% 3.1% CPI (Annual Change) 2.0% 0.8% 1.5% 1.8% 2.3% 2.1% 2.1% 2.1% Source: Conference Board of Canada, Autumn 2015 Notable highlights regarding Montréal’s economic environment are provided below and have been sourced from the Conference Board of Canada, Autumn 2015 Outlook:
After contracting by 0.5% in 2014, the job market is expected to recover by 1.1% this year and 1.7% in 2016. This growth is driven predominantly by the manufacturing sectors ongoing recovery which is expected to see output expand by 2.3% this year. Montréal represents a traditional landing spot for international migrants settling in the Canada. As a result, the city traditionally bears a higher than average unemployment rate which is expected to be pushed down by recent labor market productivity dropping from 8.4% this year to 8.2% by 2016. Montréal’s population growth forecast remains steady, on target to grow in line with the national average at a rate of around 1.1% this year.
The manufacturing sector is expected to grow by 2.3% in 2015, representing a positive however decreased outlook from previous forecasts pegging growth at 3.7% as at Q1 2015. While the manufacturing sector is on track to recover through 2016, the sector hit several snags stagnating its trajectory in early 2015 resulting from a combination of harsh weather conditions as well as a temporary dip in global and U.S. business and consumer demand. Looking forward, the U.S. economy is on a growth trajectory, and this in tandem with a below par Canadian dollar bodes well for Montréal’s trade sector. Accordingly, manufacturing employment is expected to expand by 5.5% this year.
Although a cheap Canadian dollar makes importing equipment and machinery more expensive, it also inflates revenue as sales are often realized in USD. The outlook for the aerospace industry is bright thanks to low interest rates, cheap oil, a generally stronger global economy and the rise of emerging countries. However, Bomardier has yet again delayed the delivery of its C Series jets to 2016. The outlook for the life sciences industry is bright due to an aging population, chronic and lifestyle disease/treatment and technology advances. However, it is facing stronger pressure from institutional clients who seek to reduce costs, maximize value and improve outcomes. Major news from the sector is Valeant Pharmaceuticals’ $10 B USD acquisition of Salix announced in February.
Due to an oversupplied market, housing starts are expected to drop dramatically by 24% to 14,800 units this year due to a pullback in multiple starts. Single starts are expected to remain healthy. Overall,
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Édifice 1155 University 22 MARKET OVERVIEW Effective Date: December 31, 2015
construction output is expected to recede by 1.8% in 2015, marking the third consecutive annual decline. Work on major infrastructure projects including the $4.2 B replacement of the Champlain Bridge (ETA 2018) and the $3.7-B Turcot Interchange (ETA 2020) are expected to pick up in the coming years boding well for the sector outlook. The outlook in sum remains positive for the construction sector over the medium term, expected to rebound in 2016 with construction output forecast to grow by 1.5%.
The services-producing sector is pegged to grow steadily in 2015, projected to increase by 2.3% up from 1.8% last year. Public administration output will be limited to 1.2%, cut by almost half from 2.1% in 2014, due to the province’s commitment to balancing its books in fiscal 2015-2016. As such, growth in non- commercial services (educational and health care services) and public administration will be tempered; however, the metropolis is still expected to witness an across the board industry expansion in finance, insurance, and real estate, personal services, and wholesale and retail trade sectors. In fact, each of these sectors is forecast to post gains of upwards of 3% respectively this year which should by virtue enable the services sector to post gains of approximately 2% for each corresponding forecast period.
Overall, Montréal’s economy is expected to strengthen going into 2016 with real GDP growth set to accelerate from 1.7% in 2014 to 2.1% this year. This trend is expected to continue into the medium term with real GDP growth forecast to average at an elevated 2.2% from 2016- 2019. Montréal Office MarketView
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Édifice 1155 University MARKET OVERVIEW 23 Effective Date: December 31, 2015
MONTRÉAL OFFICE MARKETVIEW
Promising Economic Outlook for Office-Using Industries The Conference Board of Canada’s Autumn 2015 Metropolitan Outlook forecasts positive economic growth for the Greater Montréal Area (GMA) for the next four years. Particularly, the service-producing industries are expected to expand, such as Finance, Insurance and Real Estate. These industries comprise a significant amount of the office-space occupants in the GMA and this growth should turn into further job creation, all of which should have a positive impact on demand for office space over the next few years. Q3 2015 recorded the second consecutive quarter of positive absorption, albeit less than 100,000 sq. ft. per quarter. Hopefully the market has reached its peak in terms of vacant space and a turn-around is forthcoming.
The GMA vacancy rate fell slightly this quarter to 13.2%, which is still well above historical averages. The CBD stayed at 10.8% vacancy on less than 4,000 sq. ft. of positive net absorption. The suburban vacancy rate declined to 17.0%, down 20 basis points from Q2 2015. There was no new supply delivered this quarter, however there remains more than 1.8 million sq. ft. in the construction pipeline. While some larger tenants are relocating due to a change of space requirements, many of the smaller tenants are choosing to renew. The cost of relocation is very expensive and it is worthwhile only if they are able to achieve a competitive deal in this tenants’ market. Non-traditional business centers are growing in Montréal.
Office-using Industries Employment Forecast Employment by Industry (000s) 600
500
400
300
200
100
0 Q2 2008 Q2 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015* Q2 2016* Q2 2017* Q2 2018* Business Services FIRE Information and Cultural Industries Source: Conference Board of Canada, Autumn 2015.
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Market Fundamentals Net Absorption & New Supply (000’s sq. ft.) Vacancy Rate (%)
1,500 15
1,000 10
500 5
0 0
(500) (5)
(1,000) (10) 2009 2010 2011 2012 2013 2014 Q1 2015 Q2 2015 Q3 2015
Net Absorption New Supply Vacancy Rate Source: CBRE Research, Q3 2015.
Market Activity Non-traditional business centers are becoming a growing industry in the GMA, specifically in the downtown market. Companies such as WeWork and Breather are offering contemporary office space, meeting rooms and business services to smaller enterprises that may need space on a short or medium term basis. These spaces boast not only modern, open, interesting spaces, but the opportunity to collaborate with other small businesses and increase business development. Montréal is a market with an abundance of small and medium enterprises and these locations are serving their business needs.
Market activity has been pretty quiet this quarter, and this has lead to very stiff competition between the downtown landlords. Tenants are taking advantage of this period of reduced demand and maximizing the value they can achieve if they choose to relocate. Extensive free rent periods and healthy TI packages are some of the ways landlords are attracting tenants. At some point the economy will turn around and the tenants that have realized these incredible bargains will get a bit of a reality check, as rental packages return to more typical levels. Though our office stock is aging, forward-thinking landlords are investing in the maintenance of their properties, and these costs will have to be recouped eventually.
New Supply and Under Construction There was no new office supply delivered this quarter in the GMA. However, there is still more than 1.8 million sq. ft. under construction across the market, and an additional 371,000 sq.ft. in loft space under renovation.
Three projects are still active in the Central Business District; Manulife Tower, L’Avenue and the Desjardins building on de Maisonneuve West. These three developments are all expected to be delivered in early 2017 to 2018. There has not been any further pre-leasing in any of the developments since they were launched.
In the suburbs, there are five major projects underway; the largest being a new campus in Saint-Laurent for a large telecommunications company. Three of these projects are in the South Shore submarket; the SSQ Tower, the
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Édifice 1155 University MARKET OVERVIEW 25 Effective Date: December 31, 2015
Agropur new head office and the speculative space at Jonxion Phase 3 in Brossard. All three projects are to be delivered in 2016.
There were no new announcements this quarter about new projects being launched, perhaps developers and major tenants considering a new-build, are all taking a break for the moment, to see if some positive momentum can be realized in the office market.
Net Absorption by Submarket (000’s sq. ft.)
400
200
0
(200)
(400)
(600)
(800) Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
CBD Midtown West Island Laval East End South Shore Source: CBRE Research, Q3 2015.
Net Absorption Q3 2015 recorded a modest level of leasing activity, with the majority being in the suburban markets. The CBD recorded 3,787 sq. ft. of net absorption this quarter, while the suburbs had 67,018 sq. ft. There was positive activity in Midtown that mainly supported activity in the suburbs. The East End saw activity at 7151 Jean Talon Street East, where an entire floor was leased out. Overall year-to-date absorption is negative 144,400 sq. ft. The year could optimistically end with zero net absorption if these trends continue.
Occupancy Costs While the vacancy rate decreased by 10 basis points quarter-over-quarter, this did not have a significant impact on occupancy costs. However, Class A asking net rents did increase by 4.6% this quarter, based on elevated levels in the CBD submarkets. This increase is in part related to better quality buildings with higher rents bringing more space to market. With recent transactions coming down to very tight net effective rents, the higher asking rent may offset some of the allowances provided.
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Édifice 1155 University 26 MARKET OVERVIEW Effective Date: December 31, 2015
Gross Operating Expenses ($ per sq. ft.)
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
CBD Net Asking Rate CBD Additional Rent Suburban Net Asking Rate Suburban Additional Rent
Source: CBRE Research, Q3 2015.
Vacancy Rate (%)
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
Sublet Direct
Source: CBRE Research, Q3 2015.
Construction Activity (000’s sq.ft.)
2,500
2,000
1,500
1,000
500
0 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
Completed Source: CBRE Research, Q3 2015.
News
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Édifice 1155 University MARKET OVERVIEW 27 Effective Date: December 31, 2015
Oxford Properties Group sold 600 de Maisonneuve West, including the retail component, to Bentall Kennedy for $183 million. Ubisoft expands at 5455 de Gaspé Avenue, taking another half-floor. ABB has just announced the development of a 300,000 sq. ft. corporate headquarters in the Technoparc Montréal in Saint-Laurent. The facility will consolidate six locations in the GMA and is expected to be delivered in the Spring of 2017.
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University 1155 Best Use: Édifice and Highest
Highest and Best Use
Édifice 1155 University HIGHEST AND BEST USE 31 Effective Date: December 31, 2015
HIGHEST AND BEST USE The term "Highest and Best Use" is generally considered to be that use which will result in the greatest net return over a given period of time. The "Highest and Best Use" is also known as the optimal use. A thorough Highest and Best Use analysis involves assessing the subject both as vacant and as improved and was beyond the scope of this mandate. In valuation practice, the concept of highest and best use represents the premise upon which value is based.
The four criteria the Highest and Best Use must meet are:
legal permissibility; physical possibility; financial feasibility; and maximum profitability.
As Vacant The subject site is zoned M.7C - commercial. The surrounding neighbourhood is characterized predominantly by office uses. The subject property is located within the Downtown Montréal Central Core Area, considered to be one of the premier office locations in Montréal.
Based on the above, it is concluded that the Highest and Best Use of the subject site, "As Vacant" is an office development.
As Improved The subject property is improved with a 14-storey office building and has a total net rentable area of 195,231 SF. This use complies with the existing zoning by-law.
The property was constructed in 1966 and renovated between 2000 and 2009.
Based on the above, it is concluded that the Highest and Best Use of the subject site, as improved, is for its existing use as a multi-tenant office building. It is important to note that a detailed Highest and Best Use study that would consider any possible development scenario(s) was beyond the scope of this assignment and was not carried out.
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University 1155 Édifice Valuation Methodology:
Valuation Methodology
Édifice 1155 University VALUATION METHODOLOGY 35 Effective Date: December 31, 2015
VALUATION METHODOLOGY There are three basic approaches to value:
The Income Approach The Direct Comparison Approach The Cost Approach In practice, an approach to value is included or omitted based on its applicability to the property type being valued and the quality and quantity of information available.
Income Approach The Income Approach reflects the subject’s income-producing capabilities. This approach is based on the assumption that value is created by expected income. Since the investment is expected to be acquired by an investor who would be willing to pay to receive an income stream plus reversion value from a property over a period of time, the Income Approach is used as the primary approach to value. The two common valuation techniques are the Discounted Cash Flow (DCF) Method and the Direct Capitalization Method.
Discounted Cash Flow Method Using this valuation method, future cash flows forecasted over an investment horizon, together with the proceeds of a deemed disposition at the end of the holding period. This method allows for modeling any uneven revenues or costs associated with lease up, rental growth, vacancies, leasing commissions, tenant inducements and vacant space costs. These future financial benefits are discounted to a present value at an appropriate discount rate based on market transactions.
Direct Capitalization Method This method involves capitalizing a fully leased net operating income estimate by an appropriate yield. This approach is best utilized with stabilized assets, where there is little volatility in the net income and the growth prospects are also stable. It is most commonly used with single tenant investments or stabilized investments.
Investors typically use both income approaches; however, for most large scale income producing properties reliance on the DCF method is more heavily weighted due to the particular characteristics of the asset. Due to the single tenant nature of this asset, the Direct Capitalization method has been selected as the primary approach to value.
Direct Comparison Approach The Direct Comparison Approach utilizes sales of comparable properties, adjusting for differences to estimate a value for the subject property. This approach is developed in a simplified method to establish a range of unit prices for market comparable sales. This method is typically developed to support the Income Approach rather than to conclude on a value.
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Édifice 1155 University 36 VALUATION METHODOLOGY Effective Date: December 31, 2015
Cost Approach The Cost Approach is based upon the proposition the informed purchaser would pay no more for the subject than the cost to produce a substitute property with equivalent utility. This approach is particularly applicable when the property being appraised involves relatively new improvements, which represent the Highest and Best Use of the land, or when relatively unique or specialized improvements are located on the site and for which there exist few sales or leases of comparable properties. The Cost Approach was not used in this appraisal as a potential purchaser would not rely on this approach.
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University 1155 Édifice Approach: V Income
Income Approach Discounted Cash Flow Method Comparable Investment Market Transactions Discounted Cash Flow Conclusion Sensitivity Analysis Direct Capitalization Method
Édifice 1155 University INCOME APPROACH 39 Effective Date: December 31, 2015
INCOME APPROACH As previously mentioned the Income Approach reflects the subject’s income-producing capabilities. This approach is based on the assumption that value is created by the expectation of benefits to be derived in the future. Specifically estimated is the amount an investor would be willing to pay to receive an income stream plus reversion value from a property over a period of time. The following section details the assumptions used to create the cash flow used to estimate market value.
DISCOUNTED CASH FLOW METHOD The basic premise of the Discounted Cash Flow Method is that the market value is equal to the present value of future cash flows forecasted over an investment horizon, together with the present value of the proceeds of a deemed disposition at the end of the holding period.
The following section outlines our projection of cash flows and includes an analysis of income, vacancy and bad debt, operating expenses and capital expenditures. This is the foundation of the Discounted Cash Flow Method.
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Édifice 1155 University 40 INCOME APPROACH Effective Date: December 31, 2015
CASH FLOW Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 For the Years Ending Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021 Dec-2022 Dec-2023 Dec-2024 Dec-2025 Dec-2026 Potential Gross Revenue Base Rental Revenue $5,202,156 $5,538,955 $5,637,970 $5,758,266 $5,800,567 $5,896,479 $5,977,124 $6,073,616 $6,180,014 $6,199,563 $6,253,036 Absorption & Turnover Vacancy ($357,734) ($257,159) ($120,582) ($124,393) ($78,070) ($205,359) ($166,772) ($100,199) ($151,413) ($51,882) $0 Base Rent Abatements ($9,185) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Scheduled Base Rental Revenue $4,835,237 $5,281,796 $5,517,388 $5,633,873 $5,722,497 $5,691,120 $5,810,352 $5,973,417 $6,065,354 $6,189,992 $6,362,763
Expense Reimbursement Revenue Operating Cost Recovery $509,630 $507,910 $555,352 $581,503 $610,981 $619,889 $642,934 $685,460 $717,350 $761,871 $798,796 Realty Tax Recovery $952,461 $1,061,608 $1,124,783 $1,158,106 $1,204,021 $1,209,316 $1,246,546 $1,298,937 $1,338,244 $1,393,233 $1,441,796 Amortization Recovery $37,820 $34,433 $41,842 $44,953 $48,808 $49,030 $52,154 $58,146 $62,612 $67,976 $73,361 Admin Fee Recovery $7,554 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Insurance Recovery $10,991 $9,672 $11,565 $12,416 $13,466 $13,744 $14,485 $16,081 $17,240 $18,790 $20,142
Total Reimbursement Revenue $1,518,456 $1,613,623 $1,733,542 $1,796,978 $1,877,276 $1,891,979 $1,956,119 $2,058,624 $2,135,446 $2,241,870 $2,334,095
Parking Revenue $420,000 $428,400 $436,968 $445,707 $454,622 $463,714 $472,988 $482,448 $492,097 $501,939 $511,978 Miscellaneous Revenue $162,625 $165,878 $169,195 $172,579 $176,031 $179,551 $183,142 $186,805 $190,541 $194,352 $198,239
Total Potential Gross Revenue $6,936,318 $7,489,697 $7,857,093 $8,049,137 $8,230,426 $8,226,364 $8,422,601 $8,701,294 $8,883,438 $9,128,153 $9,407,075 General Vacancy ($53,953) ($227,947) ($326,701) ($364,435) ($386,379) ($348,242) ($313,260) ($393,336) ($373,014) ($481,024) ($527,408)
Effective Gross Revenue $6,882,365 $7,261,750 $7,530,392 $7,684,702 $7,844,047 $7,878,122 $8,109,341 $8,307,958 $8,510,424 $8,647,129 $8,879,667
Operating Expenses Operating Cost Expense $1,353,400 $1,380,468 $1,408,078 $1,436,237 $1,464,965 $1,494,262 $1,524,148 $1,554,631 $1,585,724 $1,617,441 $1,649,788 Realty Taxes $1,708,480 $1,742,650 $1,777,503 $1,813,053 $1,849,314 $1,886,300 $1,924,026 $1,962,506 $2,001,757 $2,041,792 $2,082,628 Management Fee $206,471 $217,852 $225,912 $230,541 $235,321 $236,344 $243,280 $249,239 $255,313 $259,414 $266,390 N/R Other Costs $17,206 $18,154 $18,826 $19,212 $19,610 $19,695 $20,273 $20,770 $21,276 $21,618 $22,199
Total Operating Expenses $3,285,557 $3,359,124 $3,430,319 $3,499,043 $3,569,210 $3,636,601 $3,711,727 $3,787,146 $3,864,070 $3,940,265 $4,021,005
Net Operating Income $3,596,808 $3,902,626 $4,100,073 $4,185,659 $4,274,837 $4,241,521 $4,397,614 $4,520,812 $4,646,354 $4,706,864 $4,858,662
Leasing & Capital Costs Tenant Improvements $377,622 $549,412 $210,839 $493,406 $145,085 $463,272 $428,563 $278,709 $310,518 $140,230 $448,717 Leasing Commissions $127,392 $220,242 $95,493 $262,612 $102,511 $340,876 $191,466 $128,175 $125,787 $57,211 $172,621 Rec. Capital Expenditures $388,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Structural Allowance $0 $108,926 $112,956 $115,271 $117,661 $118,172 $121,640 $124,619 $127,656 $129,707 $133,195
Total Leasing & Capital Costs $893,014 $878,580 $419,288 $871,289 $365,257 $922,320 $741,669 $531,503 $563,961 $327,148 $754,533 Cash Flow Before Debt Service $2,703,794 $3,024,046 $3,680,785 $3,314,370 $3,909,580 $3,319,201 $3,655,945 $3,989,309 $4,082,393 $4,379,716 $4,104,129
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Édifice 1155 University INCOME APPROACH 41 Effective Date: December 31, 2015
SUMMARY OF ASSUMPTIONS Analysis Period 10 Years Analysis Start Date January 1, 2016 Si ze (SF) 195,231
M a r k et Ren t s (PSF) N ew Ren ew Office 5 Year $22.50 $22.50 Office 5 Year $26.50 $26.50 Retail 5 Year $22.50 $22.50
Tenant Inducements (PSF) New Renew Office 5 Year $18.00 $9.00 Retail 5 Year $15.00 $5.00
Leasing Commissions (PSF) New Renew 5.0% years 1 to 3 Office 5 Year 2.5% years 1 to 5 2.5% years 4 and 5
Growth Rates Revenues 2.00% Expenses 2.00% Leasing Costs 2.00% Market Rents 2.00%
Vacancy and Bad Debt Allowance 8% of All Rental Revenue (excluding investment grade tenants)
Absorption and Turnover Vacancy 9 Months Absorption and Turnover Vacancy
Retention Ratio 75%
Other Assumptions Structural Allowance 1.50% of Effective Gross Revenue Lea se Ter m 60 Months Management Fee 3.00% of Effective Gross Revenue
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Édifice 1155 University INCOME APPROACH 43 Effective Date: December 31, 2015
Base Rental Revenue This line item shows the potential base rental income at full occupancy having regard to existing tenancies and speculative tenancies.
Tenant Profile % of Net Year 1 Base S& P Tenant Re n t a b l e Re v e n u e Exp i r y Tenant Industry Ra t i n g Si ze (SF) Area (PSF) Date Cologix Montréal Data centre Not Rated 27,429 14.05% $36.51 8/33 Keops Technologies Digital Manufacturing Not Rated 13,698 7.02% $24.75 11/18 SQI Government Aa2 11,079 5.67% $9.47 2/17 Osisoft Canda ULC Computer Technology Not Rated 8,953 4.59% $22.50 9/20 Bank of Nova Scotia Banking A+ 8,983 4.60% $47.00 12/20 Subtotal 70,142 35.93% $29.50 Remaining Office Tenants 88,315 45.24% Retail Tenants 13,293 6.81% Total Leased 171,750 87.97%
Vacancy Office Vacancy 23,481 12.03% Retail Vacancy 0 0.00% Total Vacancy 23,481 12.03%
Net Rentable Area 195,231 100.00%
The subject has a modest tenant profile with a few covenant tenants such as Cologix Montréal, Keops Technologies, SQI, Osisoft Canada and Bank of Nova Scotia. The top five tenants occupy 35.93% of the NRA and contribute 42.79% of the scheduled base rental revenue. Furthermore, some tenants have recently renewed their leases at the property thereby providing income security on a medium term basis.
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Édifice 1155 University 44 INCOME APPROACH Effective Date: December 31, 2015
Lease Expiry The average year 1-5 lease rollover is low at 13.0% per annum.
45,000 25.00%
40,000
35,000 20.00%
30,000
15.00% c Per 25,000 entage quar e Feet S 20,000 10.00% 15,000
10,000 5.00% 5,000
0 0.00% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Area ( SF) 10,572 40,441 33,181 15,329 27, 851 34,494 32,869 16,705 31,106 5,535 % of NRA 5.42% 20.71% 17.00% 7. 85% 14.27% 17.67% 16. 84% 8.56% 15.93% 2. 84%
Existing Vacancy There are currently 23,481 SF (12.03% of the subject’s NRA) of vacant space. Our leasing forecast for the vacant office space is detailed as follows:
Vacant Space Suite Size (SF) Term Leasing Periods Market Rent Office Space Vacant 1011 920 60 Months 7 months $22.50 Vacant 1400 3,874 60 Months 7 months $22.50 Vacant 1414 2,242 60 Months 7 months $22.50 Vacant 201 2,243 60 Months 9 months $22.50 Vacant 500 2,207 60 Months 9 months $22.50 Vacant 502 2,661 60 Months 9 months $22.50 Vacant 505 1,270 60 Months 9 months $22.50 Vacant 508 1,284 60 Months 13 months $22.50 Vacant 510 2,320 60 Months 7 months $22.50 Vacant 812 2,747 60 Months 7 months $22.50 Vacant 906 1,713 60 Months 13 months $22.50 Total Office 23,481 Total 23,481
Pending Vacancy Based on our interview with the leasing manager and property manager, no tenant is forecast to vacate upon expiry.
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Édifice 1155 University INCOME APPROACH 45 Effective Date: December 31, 2015
Special Provisions
Sublease Tenants
Based on information provided, there are some tenants subleasing their space.
Termination Options
Based on information provided by property management there are no tenants with options to terminate.
Favourable Renewal Options
Based on information provided by property management, there are no tenants with favourable renewal options.
Market Rent Analysis
A detailed discussion on market rental rates is provided in Addendum “D” while a summary of our rental rate forecast for a 5-year lease deal is provided below:
Market Rental Rates Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 For the Years Ending Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2025 New Tenant Face Rate $26.50 $27.03 $27.57 $28.12 $28.68 $31.67 Renewal Tenant Face Rate $26.50 $27.03 $27.57 $28.12 $28.68 $31.67 Blended Face Rate $26.50 $27.03 $27.57 $28.12 $28.68 $31.67 % Change (y/ y) - 2.00% 2.00% 1.99% 1.99% 2.00% % Change (over 10 Year) 19.51%
Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 For the Years Ending Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2025 New Tenant Face Rate $22.50 $22.95 $23.41 $23.88 $24.35 $26.89 Renewal Tenant Face Rate $22.50 $22.95 $23.41 $23.88 $24.35 $26.89 Blended Face Rate $22.50 $22.95 $23.41 $23.88 $24.35 $26.89 % Change (y/ y) - 2.00% 2.00% 2.01% 1.97% 2.01% % Change (over 10 Year) 19.51%
Rents escalate by 2.00% per annum commencing in year two, in line with investors active in the marketplace.
Absorption & Turnover Vacancy
This line reveals the income shortfall attributable to vacancy during the lease-up period and to lag vacancy due to expiries.
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Édifice 1155 University 46 INCOME APPROACH Effective Date: December 31, 2015
Tenant Recovery Analysis
Operating costs and realty taxes at 100% occupancy are recharged to tenants as follows: Current Year Operating Cost Recoveries Standard Office Operating Cost Recovery $1.92 Realty Tax Recovery $4.85 Amortization Recovery $0.04 Admin Fee Recovery $0.19 Total $7.00
The tenant Cologix has a special utility recovery in order to account for its extra electricity consumption. This recovery represents $144,000 per year inflated by 2.0% per year.
Office leases are mostly on a semi-gross basis, with realty tax and operating costs increases over a base year and business taxes fully recoverable. We have modeled recoveries in-line with pre-billings established by management. Retail leases are on a net basis with recoverable amounts in-line with management billings.
Supplemental Revenue Analysis Based on the current budget provided, supplemental revenue at the subject includes:
Parking Revenue: $420,000 Miscellaneous Income: $162,625
Supplemental Revenues are estimated as per the Business Plan for the first 5 years of the projection and inflated at 2.0% per annum thereafter.
Vacancy Allowance Forecast We estimate the stabilized vacancy and bad debt allowance at 8% of all rental revenue. The Central Core vacancy rate is presently 11.2% for Q4 2015 CBRE Survey. Presently, the subject property has superior vacancy at 12.03%. The difference between normalized vacancy of 8% and actual vacancy of 12.03% has been treated as excess vacancy and we have deducted the equivalent cost to lease-up this space for our value conclusion.
Recoverable Operating Expenses As per the current budget, general operating costs and realty taxes at full occupancy are as shown below.
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Édifice 1155 University INCOME APPROACH 47 Effective Date: December 31, 2015
Current Year Operating Cost Expenses Office Operating Cost Expense $8.18 Realty Taxes $17.50 Management Fee $1.03 N/R Revenue $0.36 Total $27.07 Operating Expenses have been adopted in line with management budget.
We have excluded or normalized certain expense items due to their one-time or variable nature.
All other expenses have been retained in-line with the 2016 Budget.
Expenses are inflated at 2.00% per annum.
We forecast management fees at 3.00% of effective gross revenue (EGR).
Net Operating Income Forecast at $3,596,808 for Year 1.
Tenant Inducements & Leasing Commissions Tenant inducements and leasing commissions are summarized as follows:
Leasing Costs Office Retail 5 5 Years Years Tenant Inducements New Tenant Inducement $18.00 $18.00 Renewal Tenant Inducement $9.00 $9.00 Blended Tenant Inducement $11.25 $11.25
Leasing Commissions
New Commission 5.0% years 1 to 3 0.0% 2.5% years 4 and 5 0.0% Renewal Commission 2.5% years 1 to 5 Tenant inducements are inflated at 2.00% per annum throughout the investment horizon while leasing commissions have been left flat.
Base Building Expense There are no base building expenses to be incurred at the property.
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Édifice 1155 University 48 INCOME APPROACH Effective Date: December 31, 2015
Capital Expenditures & Structural Allowance No capital plan was provided by property management; consequently, no capital items have been incorporated into this appraisal other than $388,000. We have utilized a structural allowance equal to 1.50% of EGR commencing in year one of the investment horizon.
Budget Reconciliation The following chart provides a comparison between the 2016 budget and the year one NOI projection as sourced from the appraisal: Client Budget CBRE Forecast Variance to Year Ending Dec-16 Dec-16 Budget Revenue Base Rental Revenue $5,082,347 $4,835,237 ($247,110) 1 Operating Costs Recoveries $737,665 $565,995 ($171,670) 1 Realty Tax Recoveries $922,729 $952,461 $29,732 1 Parking Revenue $420,000 $420,000 $0 Storage Revenue $0 $0 Miscellaneous Revenue $125,000 $162,625 $37,625 Total Gross Revenue $7,287,741 $6,936,318 ($351,423) Vacancy & Bad Debt Allowance $0 ($53,953) ($53,953) 2 Effective Gross Revenue $7,287,741 $6,882,365 ($405,376) Operating Expenses Operating Costs $1,348,650 $1,353,400 $4,750 Realty Taxes $1,674,980 $1,708,480 $33,500 Management Fee $145,755 $206,471 $60,716 3 N/R Miscellaneous Costs $17,206 $17,206 4 Total Operating Expenses $3,169,385 $3,285,557 $116,172 Net Operating Income $4,118,356 $3,596,808 ($521,548) 1 CBRE forecast includes recent leasing activity as well as different leasing assumptions. 2 CBRE forecasts a general vacancy of 8.0% of EGR excluding investment grade tenants. 3 CBRE forecast is based on a mark et management fee equal to 3% of EGR. 4 CBRE forecast utilizes a N/R miscellaneous market cost equal to 0.25% of EGR.
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Édifice 1155 University INCOME APPROACH 49 Effective Date: December 31, 2015
RATIONALE OF INTERNAL RATE OF RETURN AND TERMINAL CAPITALIZATION RATE In order to rationale the selection of the Internal Rate of Return (IRR) and Terminal Capitalization Rate (TCR) for the subject property, we have reviewed the following factors to provide perspective on the investment market:
investment yields of 10 year Canada bonds and CBRE investment market survey
recent investment market transactions
investment calibre of the subject property
Investment Yields of 10 Year Canada Bond & CBRE Investment Market Survey The investment yields selected for the subject property can be benchmarked against the average yields indicated by 10 year Canada Bonds. For perspective, these yields along with the average capitalization rates for a downtown Class “B” office buildings are shown in the graph below for the last five years. As displayed by the graph, bond yields and capitalization rates have steadily declined over this time period with the 10 year Canada bond declining from 3.09% in Q1 2011 to 1.39% as of December 31, 2015. In contrast, capitalization rates increased by 50 – 100 bps beginning in Q1 2008 as a result of the global financial crisis and uncertainty to the global economy. Once rates plateaued in 2009, significant declines were evident in the capitalization rates within the last three years as uncertainty within the market declined and access to debt became readily available.
It is important to note that while capitalization rates for high quality investments are similar or slightly lower to the rates seen in 2007, there is a significant difference on the 10 year Canada bond yields for these two time periods. Notwithstanding any adjustments to lending spreads, the spread between the capitalization rate and 10 Canada bond today is 499 bps versus 188 bps in Q2 2007.
10 Year G overnment of Canada Bond vs. CBRE Montreal O FFICE - Downtown B - Cap Rate
8.00% 7.50% 7.00% 6.50% 6.00% 5.50% 4.41%
5.00% 4.68% 4.50% 4.00% 4.99% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
10 Year Government of Canada Bond CBRE Montreal OFFICE - Downtown B - Cap Rate
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Édifice 1155 University 50 INCOME APPROACH Effective Date: December 31, 2015
COMPARABLE INVESTMENT MARKET TRANSACTIONS When comparable investment market transactions are available in the marketplace, more reliance should be placed on the investment metrics derived from these sales given they reflect the yields acceptable from investors active in the market.
Our primary support in rationalizing an IRR and TCR for the subject property is provided through our review of the sales of office investment transactions in the Montreal CBD market but also to similar sales in other Canadian markets such as Toronto and Winnipeg, which have been summarized in the chart on the following page. A detailed analysis of each sale is provided in Addendum “E”.
Comparable Investment Market Transactions Index Address Closing Date Class Size (SF) GER Yr 1 Contract NOI CF IRR No. City Price (100%) Year Built Vacancy (%) T&O Yr 1 Face Rate Yr 1 Yr 1 TCR Province Parking Ratio Yr 1-5 Rollover (%) NER Yrs 1-5 Yrs 1-5 OCR Yrs 6-10 Yrs 6-10 Price PSF 1 Westmount Square October-15 B 327,999 $28.75 $13.81 4.82% 1.35% 7.75% 1 Westmount Square Confidential 1966 24.07% $19.50 $16.63 6.92% 5.08% 7.00%
Westmount 2.8 / 1,000 SF 10.98% $9.25 8.55% 6.93% 6.75% Québec $0 2 KPMG Tower & Promenades de la September-15 AA 648,868 $33.00 $19.58 5.93% 5.40% 6.75% Cathédrale 600 de Maisonneuve West $180,885,103 1987-1988 16.17% $23.75 $17.00 6.32% 4.87% 6.25% Montréal 0.7 / 1,000 SF 8.44% $9.25 7.07% 6.28% 6.25% Québec $279 3 Sun Life Building September-14 A 959,749 $37.98 $0.00 6.39% 5.60% 6.75% 1155 Metcalfe Street $276,200,000 1918-1933 3.40% $21.00 $23.00 6.83% 5.87% 6.25% Montréal 0.2 / 1,000 SF 4.71% $16.98 7.07% 5.65% N/A Québec $288 Subject Édifice 1155 University December-15 B 195,231 $47.15 $27.17 6.12% 4.60% 7.50% 1155 Robert-Bourassa Boulevard $59,000,000 1966 12.03% $7.00 $26.50 6.82% 5.66% 6.75% Montréal 0.68 / 1,000 SF 13.05% $40.15 7.66% 6.61% 6.50% Québec $302
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Édifice 1155 University INCOME APPROACH 51 Effective Date: December 31, 2015
IRR Rationale The IRRs shown in the chart on the previous page represent IRRs for recent suburban office buildings in the GTA. Based on the IRRs from these transactions, the recent trend of acceptable income yields appears to be stabilizing.
Westmount Square – October 1, 2015 The first sale was concluded in October 2015. This building is located at the intersection of Sainte-Catherine Street West and Greene Street, directly connected to the Atwater metro station. The property was built in 1966 and consists of 4 sections, two office towers (Westmount Square 1 and 4), a shopping centre and parking. Tower #1 comprises 193,794 square feet over 20 storeys. The anchor tenant is RBC (3.8% of NRA). The parking ratio is 2.81 spaces per 1,000 square feet. The property was sold with an occupancy rate of 75.9%. The short term rental of risk is average with 9.75% of NRA expiring in the first and second year. The building was sold with an overall capitalization rate of 6.75 and an Internal Rate of Return of 7.75%.
KPMG Tower & Promenades de la Cathédrale –September 1, 2015 The second sale was concluded in September 2015. This building is located at the intersection of De Maisonneuve Boulevard West and Robert-Bourassa Boulevard (formerly University Street). This 33-storey building comprises 516,785 square feet of leasable area which is complemented by the Promenades de la Cathédrale, an underground shopping mall comprising 132,083 square feet. The anchor tenant is KPMG (30.2% of NRA). The parking ratio is 0.68 space per 1,000 square feet. The property was sold with an occupancy rate 83.8%. The Tenant Blakes (50,000 sq.ft.) has advised that it would not renew its lease in 2016. The building is also under long-term leases with two emphyteutic leases. The building was sold with an overall capitalization rate of 6.25% and an Internal Rate of Return of 6.75%.
Sun Life Building – September 1, 20154 The third sale was concluded in September 2014. This property is located on the North side of René-Lévesque Boulevard West, between Metcalfe and Mansfield Streets. This building was built in several phases between 1918 and 1933 and comprises 960,379 sq.ft. over 23 storeys. The anchor tenants are Sun Life and National Bank Financial. The parking ratio is 0.20 space per 1,000 square feet. The property was sold with an occupancy rate of 96.6%. Short term rental risk is practically nil with 0.89% of NRA expiring in the first year. The building was sold with an Internal Rate of Return of 6.75%.
Based on the above discussion, it is our opinion that an IRR of 7.50% is appropriate for the subject property.
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Édifice 1155 University 52 INCOME APPROACH Effective Date: December 31, 2015
TCR Rationale Our rationale for the TCR is primarily supported through our review of the stabilized NOI yields from the recent investment market activity shown on page 48. Based on our survey of market participants, TCRs tend to be slightly higher than the stabilized yields to account for projected rental growth and capital requirements throughout the investment horizon.
The recent market activity shown on page 48 provides an indication of estimated TCRs for downtown office investments with rates ranging from 6.25%00% to 7.00%.
Based on the above discussion, it is our opinion that a TCR of 6.75% is appropriate for the subject property.
Adjustments to Reversion
Disposition Costs In accordance with International Valuation Standards, we have excluded any disposition costs in our appraisal.
Leasing Costs We have deducted all tenant inducements and leasing commissions incurred in the 11th year as we anticipate these costs will need to be spent in order to achieve the NOI at full occupancy in reversion.
Unamortized Capital Revenue We have added the present value of the outstanding balance of all unamortized capital revenue commencing in the reversion year.
11th Year NOI $4,858,662 Terminal Capitalization Rate 6.75% Unadjusted Reversion Value $71,980,178 Less: Reversion Leasing Costs ($621,338) Add: PV of Amortization Recovery $0
Net Reversion Value $71,358,840
Estimate of Market Value Based on an IRR of 7.25% and TCR of 6.75%, we estimate the subject property’s value using the Discounted Cash Flow Method to be $59,900,000.
Our market value conclusion derived from our Discounted Cash Flow Method is summarized on the following page:
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Édifice 1155 University INCOME APPROACH 53 Effective Date: December 31, 2015
DISCOUNTED CASH FLOW CONCLUSION
Internal Rate of Retur 7.25% Year Capitalized 11 Terminal Cap Rate 6.75% Rounding Places 5 Net Rentable Area 195,231
Net Operating Year Year Ending Income NOI Yield Cash Flow CF Yield Present Value Year 1 Dec-16 $3,596,808 6.00% $2,703,794 4.51% $2,521,020 Year 2 Dec-17 $3,902,626 6.52% $3,024,046 5.05% $2,629,019 Year 3 Dec-18 $4,100,073 6.84% $3,680,785 6.14% $2,983,655 Year 4 Dec-19 $4,185,659 6.99% $3,314,370 5.53% $2,505,023 Year 5 Dec-20 $4,274,837 7.14% $3,909,580 6.53% $2,755,140 Year 6 Dec-21 $4,241,521 7.08% $3,319,201 5.54% $2,180,970 Year 7 Dec-22 $4,397,614 7.34% $3,655,945 6.10% $2,239,848 Year 8 Dec-23 $4,520,812 7.55% $3,989,309 6.66% $2,278,869 Year 9 Dec-24 $4,646,354 7.76% $4,082,393 6.82% $2,174,398 ###### Dec-25 $4,706,864 7.86% $4,379,716 7.31% $2,175,069
Net Reversion Value $71,358,840 $35,438,454
Final Estimate of Market Value $59,900,000 Price per Square Foot $307
Forecast Income Yields Yield $ Annual PSF
NOI Year 1 6.00% $3,596,808 $18.42 Years 1 - 5 (avg) 6.70% $4,012,001 $20.55 Years 6 - 10 (avg) 7.52% $4,502,633 $23.06
Cash Flow Year 1 4.51% $2,703,794 $13.85 Years 1 - 5 (avg) 5.55% $3,326,515 $17.04 Years 6 - 10 (avg) 6.49% $3,885,313 $19.90
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Édifice 1155 University 54 INCOME APPROACH Effective Date: December 31, 2015
SENSITIVITY ANALYSIS The chart below provides an indication of the estimated change in value when IRR and TCR are adjusted by +/- 25 bps.
Value Matrix Discount Rate 6.75% 7.00% 7.25% 7.50% 7.75% Terminal 6.50% 63,600,000 62,400,000 61,300,000 60,100,000 59,000,000 Cap Rate 6.75% 62,200,000 61,000,000 59,900,000 58,800,000 57,700,000 7.00% 60,900,000 59,700,000 58,600,000 57,500,000 56,500,000
Value PSF Matrix Discount Rate 6.75% 7.00% 7.25% 7.50% 7.75% Terminal 6.50% $326 $320 $314 $308 $302 Cap Rate 6.75% $319 $312 $307 $301 $296 7.00% $312 $306 $300 $295 $289
Year 1 NOI Yield Matrix Discount Rate 6.75% 7.00% 7.25% 7.50% 7.75% Terminal 6.50% 5.66% 5.76% 5.87% 5.98% 6.10% Cap Rate 6.75% 5.78% 5.90% 6.00% 6.12% 6.23% 7.00% 5.91% 6.02% 6.14% 6.26% 6.37%
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Édifice 1155 University INCOME APPROACH 55 Effective Date: December 31, 2015
DIRECT CAPITALIZATION METHOD Direct capitalization involves capitalizing a fully leased single-year net income estimate by an appropriate yield. With regards to office properties, this method is considered less reliable due to the fluctuations in income (tenancy, contractual rents, rollover, capital, market rents, etc.) over the investment horizon. This approach is best utilized with stabilized assets, where there is little volatility in the net income and the growth prospects are also stable. It is most commonly used in single tenanted or stabilized properties.
Capitalization Rate Selection The OCRs indicated on the chart on page 48 indicate OCR’s in the range of 6.25% to 6.75%.
OCR’s are based on benchmark sale activity and survey responses and have been estimated after consideration to the subject’s specific investment profile, notably the following primary criteria;
Location – overall market and specific locational attributes
Physical – age and quality of the improvements, functionality, capex requirements
Tenant Profile / NOI Stability – security of income, percentage of high covenant tenancy, lease rollovers, potential for income upside or downside, etc.
Market Conditions – availability and cost of debt, investment demand, interest rate environment, overall liquidity
Based on the above discussion, it is our opinion that an OCR of 6.50% is appropriate for the subject property.
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Édifice 1155 University 56 INCOME APPROACH Effective Date: December 31, 2015
Direct Capitalization Method Value Conclusion
Revenue Year 1 Fully Leased Base Rental Revenue $5,202,154 Plus: Below Market Rent $265,881 Plus: Year 1 Reimbursement Revenue $1,609,686 Total Rent and Reimbursement Revenue $7,077,721
Plus: Other Income $582,625 Total Potential Gross Revenue $7,660,346
Less: General Vacancy and Credit Allowance @8.00% $441,022 Effective Gross Revenue $7,219,323
Expenses Less: Total Operating Expenses $3,302,200 Fully Leased NOI $3,917,123 Overall Cap Rate 6.50% Fully Leased Value $60,263,434
Adjustments Less: Tenant Inducements $390,687 Less: Leasing Commissions $129,338 Less: Lost Scheduled Base Revenue $315,610 Less: NPV of Total Rent Abatements $0 Less: Lost Reimbursement Revenue $100,663 Less: NPV of Total Capital Expenditures $361,772 Adjusted Value $58,965,366
Plus: NPV of Amortized Capital Revenue $7,043 Less: PV of Below Market Rent ($2,971,710) Final Value (Rounded) $56,000,000
Estimate of Market Value Based on an OCR of 6.50% we estimate the subject property’s value using the Direct Capitalization Method to be $56,000,000.
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Direct Comparison Approach: Édifice 1155 University University 1155 Édifice Approach: Comparison Direct
Direct Comparison Approach
Édifice 1155 University DIRECT COMPARISON APPROACH 59 Effective Date: December 31, 2015
DIRECT COMPARISON APPROACH The Direct Comparison Approach is applied using the price PSF of rentable area as the basis of comparison. In this approach, both qualitative and quantitative adjustments are considered in order to reflect the following factors:
Property Rights Financing Motivation Market Conditions Location Physical Tenant Profile Given the recent investment market activity within major Canadian cities, market conditions for high calibre, well located office investments are considered strong.
The Direct Comparison Approach incorporates qualitative adjustments to reflect variances between the subject property and the market transactions with respect to location, physical condition and tenant profile. These elements have been primarily reflected within the net operating income for each market transaction. The best basis for comparison is the net operating income per square foot between the subject property and the comparable market transactions.
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Édifice 1155 University 60 DIRECT COMPARISON APPROACH Effective Date: December 31, 2015
SUMMARY OF ADJUSTMENTS
Subject123 KPMG Tower & Édifice 1155 Westmount Promenades de Sun Life Building University Sq u a r e la Cathédrale Sale Details Date of Sale Dec-15 Oct-15 Sep-15 Sep-14 Sale Price (100% Interest) Confidential $180,885,103 $276,200,000 Price PSF N/A $279 $288
Property Details Year Bui l t 1966 1966 1987-1988 1918-1933 Class B BAAA Property Rights Le a se d Fe e Leased Fee Leased Fee Leased Fee Building Size 195,231 327,999 648,868 959,749 Occupancy Rate 87.97% 75.93% 83.83% 96.60%
Initial Adjustments Property Rights Nil Nil Nil Financing Nil Nil Nil Special Motivation Nil Nil Nil Timing Nil Nil Nil
Adjusted Price PSF - $279 $288
Overall Comparison Inferior Superior Superior
NOI Adjustment NOI PSF1 $18.42 $16.52 $18.39 NOI Adjustment 11.5% 0.2%
NOI Adjusted Price PSF - $311 $288
1 Year 1 NOI The unadjusted unit values indicate a range of $279 to $288 psf. After adjusting the sales for the existing NOI psf, the range tightens to $288 to $311 psf. Based on the above discussion the subject’s unit value should fall within the indicated range. Based on a unit value of $302, we estimate the subject property’s value using the Direct Comparison Method to be $59,000,000.
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University 1155 Édifice of Value: Reconciliation
Reconciliation of Value
Édifice 1155 University RECONCILIATION OF VALUE 63 Effective Date: December 31, 2015
RECONCILIATION OF VALUE The Income Approach is the primary method of valuation used by investors for income-producing properties. In this case, the Discounted Cash Flow Method, using an IRR of 7.25% and TCR of 6.75% was considered to be appropriate indicating a market value of $59,900,000.
The Direct Capitalization Method using an OCR of 6.50% was considered to be appropriate indicating a market value of $56,000,000.
Although the Direct Comparison Approach is somewhat crude, it provides additional support for a unit value of $302 PSF or $59,000,000 for the subject property.
As noted previously, the Cost Approach is not considered to be an appropriate indicator of value for income- producing properties of this nature and is rarely used by market participants. Accordingly, it has not been used as part of this appraisal.
Our valuation for the subject property is as follows:
Market Value Summary Market Value Conclusion $59,000,000 Value PSF $302
Internal Rate of Return 7.25% Terminal Capitalization Rate 6.75% Overall Capitalization Rate 6.50%
Income Yields1 NOI CF Year 1 6.00% 4.51% Years 1-5 6.70% 5.55% Years 6-10 7.52% 6.49%
1 Income Yields are based on the DCF Value Conclusion. Based on the information contained within this appraisal, it is our professional opinion that the market value of the 100% leased fee interest in the subject property, subject to the extraordinary assumptions and limiting conditions noted on page 6, as at December 31, 2015 is:
Fifty Nine Million Dollars
$59,000,000
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University 1155 Édifice Certification:
Certification
Édifice 1155 University CERTIFICATION 65 Effective Date: December 31, 2015
CERTIFICATION OF THE APPRAISAL
1155 Robert-Bourassa Boulevard, Montréal, Québec We certify to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions and represents our personal, unbiased professional analyses, opinions, and conclusions. 3. We have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. 4. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favours the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event, such as the approval of a loan. 5. This appraisal assignment was not based upon a requested minimum valuation, a specific valuation or the approval of a loan. 6. Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Canadian Uniform Standards of Professional Appraisal Practice of The Appraisal Institute of Canada and the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice 7. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 8. Jean-Francois Rioux É.A., AACI, P. App. has completed the requirements of the continuing education program of the Appraisal Institute. 9. Jean-Francois Rioux É.A.É.A., AACI, P.App made a personal inspection of the property on February 19, 2016. The inspection was considered to be sufficient to describe the subject property, develop an opinion of highest and best use and compare the subject property with recent market leasing and investment data. We note that a detailed inspection to comment on building condition has not been performed. 10. No one has provided professional assistance to the persons signing this report. 11. Jean-Francois Rioux É.A., AACI, P.App has extensive experience in the appraisal of similar property types. 12. Jean-Francois Rioux É.A., AACI, P.App is currently certified in the Province where the subject is located. 13. Valuation and Advisory Services Group operates as an independent economic entity within CBRE Limited. Although other employees of CBRE Limited divisions may be contacted as a part of our routine market research investigations, absolute client confidentiality and privacy are maintained at all times with regard to this assignment without conflict of interest.
Édifice 1155 University 66 CERTIFICATION Effective Date: December 31, 2015
It is our professional opinion that the market value of the 100% leased fee interest in the subject property, subject to the extraordinary assumptions and limiting conditions noted on page 6, as at December 31, 2015 is: $59,000,000.
Jean-Francois Rioux É.A., AACI, P.App Director Valuation & Advisory Services Phone: 514.375.2502 March 8, 2016
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ice 1155 University
Addendum “A”: Édif
Addendum “A” Terms of Reference Assumptions and Limiting Conditions
Édifice 1155 University ADDENDUM “A” A1 Effective Date: December 31, 2015
TERMS OF REFERENCE
Property Identification The subject is a 14-storey Class “B” downtown office building located at 1155 Robert-Bourassa Boulevard, Montréal, Québec. The measurements based on the current recovery from leases total 195,231 SF, which is based on 100% of the net rentable area.
The subject is legally described as 5,290,230, 5,290,231.
The subject is more fully described, legally and physically, within the enclosed report.
Ownership and Property History The current ownership is held by 4003195 Canada Inc. According to Registre Foncier du Québec, the subject property has not been sold within the last three years and is currently not listed for sale.
Purpose of the Appraisal The appraisal estimates the current Market Value of the subject property, subject to the Critical Assumptions included herein. The report is a Narrative Appraisal and has been prepared in accordance with the standards set forth by the Appraisal Institute of Canada.
Definition of Market Value Market value is defined as follows:
The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
1. buyer and seller are typically motivated; 2. both parties are well informed or well advised, and acting in what they consider their own best interests; 3. a reasonable time is allowed for exposure in the open market; 4. payment is made in terms of cash in Canadian dollars or in terms of financial arrangements comparable thereto; and 5. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale
Intended Use and User of Report The appraisal report, including the market value conclusion therein, will be used by 4003195 Canada Inc. (c/o Iscanco Inc.) for International Financial Reporting (IFRS) purposes according to IAS 40.
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Édifice 1155 University A2 ADDENDUM “A” Effective Date: December 31, 2015
Scope of Work The following steps were completed by CBRE Limited for this assignment:
Inspected major tenant units to provide a comparison to similar properties Location analysis Review of surrounding land uses Land use regulation review Review of rent roll Review of major tenant leases Review of leasing transactions completed in the last 12 months Termination rights review Favourable renewal rights review Miscellaneous revenue review Capital expenditure forecast Interviewed leasing manager with respect to leasing at the subject property and recent lease deal history Net operating income and cash flow forecast generated
Survey Work Rental survey of comparable buildings Comparable sales transaction analysis
Report Format Narrative report format
CRITICAL ASSUMPTIONS Current market value as at December 31, 2015.
The rent roll and financial information provided by the client was relied upon to be accurate.
A soil analysis for the site has not been provided for the preparation of this opinion. In the absence of a soil report, it is a specific assumption that the site has adequate soils to support the highest and best use.
A formal title search was beyond the scope of this assignment. Except as described herein, CBRE Limited has no knowledge of any easements or encroachments. It is recommended that the client/reader obtain a detailed title search outlining all easements and encroachments on the property, if any, prior to making a business decision.
To our knowledge, there are no known covenants, conditions and restrictions impacting the site, which are considered to affect the marketability or highest and best use, other than zoning restrictions.
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Édifice 1155 University ADDENDUM “A” A3 Effective Date: December 31, 2015
CBRE Limited, or the consultant(s), has not observed, yet is not qualified to detect, the existence of potentially hazardous material or underground storage tanks, which may be present on or near the site. It should also be noted that the existence of hazardous materials or underground storage tanks might have an effect on the value of the property.
CBRE Limited has not observed, yet is not qualified to detect, the existence of any potentially hazardous materials such as lead paint, asbestos, urea formaldehyde foam insulation, or other potentially hazardous construction materials on or in the improvements. The existence of such substances may have an effect on the value of the property. For the purpose of this assignment, we have specifically assumed that the subject is not affected by any hazardous materials, which would cause a loss in value.
It should be noted that neither CBRE Limited nor the valuation consultant are qualified to determine the structural integrity of the building. Finally, CBRE and the valuation consultant make no representations or warranties as the condition or suitability of the electrical system, HVAC system or roof membrane.
Exposure Time Exposure time is not intended to be a prediction of a date of sale. Instead, it is an integral part of the opinion analysis and is based on one or more of the following:
Statistical information about days on the market Information gathered through sales verification Interviews with market participants The reasonable exposure time is a function of price, time, and use. It is not an isolated estimate of time alone. Exposure time is different for various types of real estate and under various market conditions.
Exposure time is the estimated length of time the property would have been offered prior to a hypothetical market value sale on the effective date of opinion. It is a retrospective estimate based on an analysis of recent past events, assuming a competitive and open market. It assumes not only adequate, sufficient, and reasonable time but also adequate, sufficient, and reasonable marketing effort. Exposure and marketing time is therefore interrelated with opinion conclusion of value.
Based on the foregoing analysis, an exposure time of three - six months is reasonable. CBRE Limited assumes the subject would have been competitively priced and aggressively promoted nationally and internationally.
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Édifice 1155 University A4 ADDENDUM “A” Effective Date: December 31, 2015
ASSUMPTIONS AND LIMITING CONDITIONS
1. Unless otherwise specifically noted in the body of the report, it is assumed that title to the property or properties appraised is clear and marketable and that there are no recorded or unrecorded matters or exceptions to total that would adversely affect marketability or value. CBRE Limited is not aware of any title defects nor has it been advised of any unless such is specifically noted in the report. CBRE Limited, however, has not examined title and makes no representations relative to the condition thereof. Documents dealing with liens, encumbrances, easements, deed restrictions, clouds and other conditions that may affect the quality of title have not been reviewed. Insurance against financial loss resulting in claims that may arise out of defects in the subject property’s title should be sought from a qualified title company that issues or insures title to real property. 2. Unless otherwise specifically noted in the body of this report, it is assumed: that the existing improvements on the property or properties being appraised are structurally sound, seismically safe and code conforming; that all building systems (mechanical/electrical, HVAC, elevator, plumbing, etc.) are in good working order with no major deferred maintenance or repair required; that the roof and exterior are in good condition and free from intrusion by the elements; that the property or properties have been engineered in such a manner that the improvements, as currently constituted, conform to all applicable local, provincial, and federal building codes and ordinances. CBRE Limited professionals are not engineers and are not competent to judge matters of an engineering nature. CBRE Limited has not retained independent structural, mechanical, electrical, or civil engineers in connection with this opinion and, therefore, makes no representations relative to the condition of improvements. Unless otherwise specifically noted in the body of the report: no problems were brought to the attention of CBRE Limited by ownership or management; CBRE Limited inspected less than 100% of the entire interior and exterior portions of the improvements; and CBRE Limited was not furnished any engineering studies by the owners or by the party requesting this opinion. If questions in these areas are critical to the decision process of the reader, the advice of competent engineering consultants should be obtained and relied upon. It is specifically assumed that any knowledgeable and prudent purchaser would, as a precondition to closing a sale, obtain a satisfactory engineering report relative to the structural integrity of the property and the integrity of building systems. Structural problems and/or building system problems may not be visually detectable. If engineering consultants retained should report negative factors of a material nature, or if such are later discovered, relative to the condition of improvements, such information could have a substantial negative impact on the conclusions reported in this opinion. Accordingly, if negative findings are reported by engineering consultants, CBRE Limited reserves the right to amend the opinion conclusions reported herein. 3. Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property, was not observed by the appraisers. CBRE Limited has no knowledge of the existence of such materials on or in the property. CBRE Limited, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea formaldehyde foam insulation, contaminated groundwater or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired. We have inspected, as thoroughly as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representation is made as to these matters unless specifically considered in the opinion. 4. All furnishings, equipment and business operations, except as specifically stated and typically considered as part of real property, have been disregarded with only real property being considered in the report unless otherwise stated. Any existing or proposed improvements, on or off-site, as well as any alterations or repairs considered, are assumed to be completed in a workmanlike manner according to standard practices based upon the information submitted to CBRE Limited. This report may be subject to amendment upon re-inspection of the subject property subsequent to repairs, modifications, alterations and completed new construction. Any estimate of Market Value is as of the date indicated; based upon the information, conditions and projected levels of operation. 5. It is assumed that all factual data furnished by the client, property owner, owner’s representative, or persons designated by the client or owner to supply said data are accurate and correct unless otherwise specifically noted in the opinion report. Unless otherwise specifically noted in the opinion report, CBRE Limited has no reason to believe that any of the data furnished contain any material error. Information and data referred to in this paragraph include, without being limited to, numerical street addresses, lot and block numbers, land dimensions, square footage area of the land, dimensions of the improvements, gross building areas, net rentable areas, usable areas, unit count, room count, rent schedules, income data, historical
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Édifice 1155 University ADDENDUM “A” A5 Effective Date: December 31, 2015
operating expenses, budgets, and related data. Any material error in any of the above data could have a substantial impact on the conclusions reported. Thus, CBRE Limited reserves the right to amend conclusions reported if made aware of any such error. Accordingly, the client-addressee should carefully review all assumptions, data, relevant calculations, and conclusions within 30 days after the date of delivery of this report and should immediately notify CBRE Limited of any questions or errors.
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Édifice 1155 University A6 ADDENDUM “A” Effective Date: December 31, 2015
6. The date of value to which any of the conclusions and opinions expressed in this report apply, is set forth in the Letter of Transmittal. Further, that the dollar amount of any value opinion herein rendered is based upon the purchasing power of the Canadian Dollar on that date. This opinion is based on market conditions existing as of the date of this opinion. Under the terms of the engagement, we will have no obligation to revise this report to reflect events or conditions which occur subsequent to the date of the opinion. However, CBRE Limited will be available to discuss the necessity for revision resulting from changes in economic or market factors affecting the subject. 7. CBRE Limited assumes no private deed restrictions, limiting the use of the subject property in any way. 8. Unless otherwise noted in the body of the report, it is assumed that there are no mineral deposit or subsurface rights of value involved in this opinion, whether they be gas, liquid, or solid. Nor are the rights associated with extraction or exploration of such elements considered unless otherwise stated in this opinion report. Unless otherwise stated it is also assumed that there are no air or development rights of value that may be transferred. 9. CBRE Limited is not aware of any contemplated public initiatives, governmental development controls, or rent controls that would significantly affect the value of the subject. 10. The estimate of Market Value, which may be defined within the body of this report, is subject to change with market fluctuations over time. Market value is highly related to exposure, time promotion effort, terms, motivation, and conclusions surrounding the offering. The value estimate(s) consider the productivity and relative attractiveness of the property, both physically and economically, on the open market. 11. Any cash flows included in the analysis are forecasts of estimated future operating characteristics are predicated on the information and assumptions contained within the report. Any projections of income, expenses and economic conditions utilized in this report are not predictions of the future. Rather, they are estimates of current market expectations of future income and expenses. The achievement of the financial projections will be affected by fluctuating economic conditions and is dependent upon other future occurrences that cannot be assured. Actual results may vary from the projections considered herein. CBRE Limited does not warrant these forecasts will occur. Projections may be affected by circumstances beyond the current realm of knowledge or control of CBRE Limited 12. Unless specifically set forth in the body of the report, nothing contained herein shall be construed to represent any direct or indirect recommendation of CBRE Limited to buy, sell, or hold the properties at the value stated. Such decisions involve substantial investment strategy questions and must be specifically addressed in consultation form. 13. Also, unless otherwise noted in the body of this report, it is assumed that no changes in the present zoning ordinances or regulations governing use, density, or shape are being considered. The property is appraised assuming that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, provincial, nor national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report is based, unless otherwise stated. 14. This study may not be duplicated in whole or in part without the specific written consent of CBRE Limited nor may this report or copies hereof be transmitted to third parties without said consent, which consent CBRE Limited reserves the right to deny. Exempt from this restriction is duplication for the internal use of the client-addressee and/or transmission to attorneys, accountants, or advisors of the client-addressee. Also exempt from this restriction is transmission of the report to any court, governmental authority, or regulatory agency having jurisdiction over the party/parties for whom this opinion was prepared, provided that this report and/or its contents shall not be published, in whole or in part, in any public document without the express written consent of CBRE Limited which consent CBRE Limited reserves the right to deny. Finally, this report shall not be advertised to the public or otherwise used to induce a third party to purchase the property or to make a “sale” or “offer for sale” of any “security”. Any third party, not covered by the exemptions herein, who may possess this report, is advised that they should rely on their own independently secured advice for any decision in connection with this property. CBRE Limited shall have no accountability or responsibility to any such third party. This entire paragraph is subject to the points noted in the Intended Use of Report section. 15. Any value estimate provided in the report applies to the entire property, and any pro ration or division of the title into fractional interests will invalidate the value estimate, unless such pro ration or division of interests has been set forth in the report. 16. The distribution of the total valuation in this report between land and improvements applies only under the existing program of utilization. Component values for land and/or buildings are not intended to be used in conjunction with any other property or opinion and are invalid if so used.
VALUATION & ADVISORY SERVICES
Édifice 1155 University ADDENDUM “A” A7 Effective Date: December 31, 2015
17. The maps, plats, sketches, graphs, photographs and exhibits included in this report are for illustration purposes only and are to be utilized only to assist in visualizing matters discussed within this report. Except as specifically stated, data relative to size or area of the subject and comparable properties has been obtained from sources deemed accurate and reliable. None of the exhibits are to be removed, reproduced, or used apart from this report.
VALUATION & ADVISORY SERVICES
Édifice 1155 University A8 ADDENDUM “A” Effective Date: December 31, 2015
18. No opinion is intended to be expressed on matters which may require legal expertise or specialized investigation or knowledge beyond that customarily employed by real estate appraisers. Values and opinions expressed presume that environmental and other governmental restrictions/conditions by applicable agencies have been met, including but not limited to seismic hazards, flight patterns, decibel levels/noise envelopes, fire hazards, hillside ordinances, density, allowable uses, building codes, permits, licenses, etc. No survey, engineering study or architectural analysis has been made known to CBRE Limited unless otherwise stated within the body of this report. If the Consultant has not been supplied with a termite inspection, survey or occupancy permit, no responsibility or representation is assumed or made for any costs associated with obtaining same or for any deficiencies discovered before or after they are obtained. No representation or warranty is made concerning obtaining these items. CBRE Limited assumes no responsibility for any costs or consequences arising due to the need, or the lack of need, for flood hazard insurance. 19. Acceptance and/or use of this report constitutes full acceptance of the Contingent and Limiting Conditions and special assumptions set forth in this report. It is the responsibility of the Client, or client’s designees, to read in full, comprehend and thus become aware of the aforementioned contingencies and limiting conditions. Neither the Appraiser nor CBRE Limited assumes responsibility for any situation arising out of the Client’s failure to become familiar with and understand the same. The Client is advised to retain experts in areas that fall outside the scope of the real estate opinion/consulting profession if so desired. 20. CBRE Limited assumes that the subject property analyzed herein will be under prudent and competent management and ownership; neither inefficient nor super-efficient. 21. It is assumed that there is full compliance with all applicable federal, provincial, and local environmental regulations and laws unless noncompliance is stated, defined and considered in the opinion report. 22. No survey of the boundaries of the property was undertaken. All areas and dimensions furnished are presumed to be correct. It is further assumed that no encroachments to the realty exist. 23. Client shall not indemnify Appraiser or hold Appraiser harmless unless and only to the extent that the Client misrepresents, distorts, or provides incomplete or inaccurate opinion results to others, which acts of the Client proximately result in damage to Appraiser. The Client shall indemnify and hold Appraiser harmless from any claims, expenses, judgments or other items or costs arising as a result of the Client’s failure or the failure of any of the Client’s agents to provide a complete copy of the opinion report to any third party. In the event of any litigation between the parties, the prevailing party to such litigation shall be entitled to recover from the other reasonable attorney fees and costs.
VALUATION & ADVISORY SERVICES
University 1155 Édifice “B”: Addendum
Addendum “B” Market Rent Rationale
Édifice 1155 University ADDENDUM “B” B1 Effective Date: December 31, 2015
MARKET RENT RATIONALE We have completed a review of the Downtown Montréal Central Business District leasing market in order to ascertain which buildings provide the most competition from a leasing perspective to the subject property. The chart below provides specific property information for each building within the survey including an asking net rent for vacant space. The rental survey is presented in the chart below:
MARKET RENT SURVEY
1968
$20.58
$19.50
43,166
17,245
10.85%
26.48%
37.32%
148,527
105,361
397,931
1 per2,000 1
Street West Street
1010 De La1010 De
Gauchetiere Gauchetiere
2017
availablein February
*some space*some will be
*
0
1962
0.00%
Marie
$26.04
$18.75
18,963
18,963
11,570
75,091
25.25%
25.25%
1 per3,000 1
4 Place Ville Ville 4 Place
and2016 May
availablein April
*some space*some will be
0
1930
0.00%
8.15%
8.15%
$23.27
22,380
22,380
32,505
274,618
Catherine Catherine
9.99-17.00
1 per1,500 1
Street West Street
1010 Sainte-
*
N/A
N/A
1962
Marie
$26.04
58,092
24,975
33,117
33,656
11.02%
14.61%
25.63%
226,696
2-3 Place Ville Ville 2-3 Place
2017
availablein January
*some space*some will be
1981
Steet
2,876
1.76%
9.28%
$17.60
$14.50
18,040
15,164
19,800
11.04%
163,355
2000 Peel 2000 Peel
1 per2,000 1
0
N/A
1935
0.00%
9.74%
9.74%
$14.00
21,000
21,000
21,553
215,536
Peel Street Peel
1450-1478
12.00-14.00
0
N/A
1974
6,177
6,177
0.00%
2.46%
2.46%
$22.31
12,256
Avenue
College College
251,392
1 per3,500 1
1200 McGill 1200 McGill
0
N/A
1981
0.00%
$14.50
43,495
43,495
16,000
505 de 505 de
18.05%
18.05%
241,000
1 per2,250 1
Boulevard W Boulevard
Maisonneuve Maisonneuve
Year Built/RenovatedYear
ParkingRatio
AdditionalRent
NetRent
% Available% Sublet
% Available% Direct
Available%
Total AvailableTotal (SF)
Available(SF) Sublet
AvailableDirect (SF) Typical Floor PlateTypical Floor (SF) Total Area(SF) Total The most comparable buildings to the subject property indicate net rents ranging from $10.00 to $19.50 PSF or gross rents ranging from $25.00 to $45.00 PSF.
VALUATION & ADVISORY SERVICES
Édifice 1155 University B2 ADDENDUM “B” Effective Date: December 31, 2015
A summary of the office lease deals completed in 2012 and 2015 with lease terms greater than 60 months is shown in the chart below:
Year Renovated Built
Year
Costs Leasing
Tax Operating
Base Average Term
201420152014 592015 12 $12.252015 24 $11.252014 60 $15.97 $14.502012 60 $14.70 $4.44 $11.25 72 $14.50 $0.65 $17.00 132 $15.76 1967 $4.00 $11.00 $14.03 1961 $10.50 $5.40 2001 $21.23 1929 $6.21 $20.71 2001 1972 $20.00 1980 $21.62 1927 1937 1937 ‐ ‐ ‐ ‐ ‐ ‐ ‐ Date Q3 Q1 Q4 Q4 Q4 Q1 Q2 Commencement
(Mon)(Mon) 4,000 (Mon) 3,000 (Mon) 10,000 (Mon) 11,000 (Mon) 27,000 (Mon) 1,686 26,147
Name Area_SF
Core Core Core Core Core Core Core
Market
Type Contract
Class Building City Montreal B Renewal Central MontrealMontreal BMontreal BMontreal Extension BMontreal Central B NewMontreal Renewal B Central Renewal Central B Central New New Central Central
Overall, we have relied on our survey of comparable properties as well as lease deals from our internal database to provide additional support in our determination of the office market rents.
For retail market rates, we mostly relied on rent achieved in the property. We are of the opinion that the best comparable rents for retail spaces are the deals done within the subject property.
VALUATION & ADVISORY SERVICES
University 1155 Édifice “C”: Addendum
Addendum “C” Tenant Rent Roll Lease Expiry Schedule Projected Cash Flow
VALUATION & ADVISORY SERVICES
The Prudential Assurance Bldg Software : ARGUS Ver. 15.0.1.26 1155-1185 Robert-Bourassa Blvd File : DCF_1155 Robert-Bourassa_2016 Montréal (Ville-Marie Borough), QC Property Type : Office/Industrial Portfolio : Date : 3/2/16 Time : 7:26 am Ref# : BPH Page : 1 Presentation Rent Roll & Current Term Tenant Summary As of Jan-2016 for 195,231 Square Feet
Tenant Name Floor Rate & Amount CPI & Current Months Pcnt Description of Imprvmnts Commssns Assumption about Type & Suite Number SqFt per Year Changes Changes Porters' Wage to to Operating Expense Rate Rate subsequent terms Lease Dates & Term Bldg Share per Month on to Miscellaneous Abate Abate Reimbursements Amount Amount for this tenant
1 3915671 Canada inc. $32.00 Sep-2014 $33.25 - - - See method: - - Market Office, Suite: 1308 792 $25,344 Sep-2015 $34.50 3915671 Canada See assumption: Sep-2012 to Aug-2016 0.41% $2.67 Market $26.50 48 Months $2,112
2 9266-7922 Quebec Inc. $23.55 - - - - - See method: 9266 - - Market Office, Suite: 1009 2,362 $55,625 -7922 Quebec See assumption: May-2011 to Dec-2016 1.21% $1.96 Office $22.50 68 Months $4,635
3 Bank of Nova Scotia $0.00 Jan-2011 $43.00 - - - See method: - - Market Retail, Suite: 104 8,983 $0 Jan-2016 $47.00 Scotiabank See assumption: Jan-2006 to Dec-2020 4.60% $0.00 Jan-2018 $48.00 Scotiabank 180 Months $0 Jan-2019 $49.00
4 Barbara Shore $32.40 - - - - - See method: - - Market Office, Suite: 514 968 $31,363 Barbara Shore See assumption: Jun-2015 to May-2017 0.50% $2.70 Market $26.50 24 Months $2,614
5 Bell Canada $19.00 Oct-2014 $21.00 - - - See method: Bell - - Market Office, Suite: 210 2,083 $39,577 See assumption: Oct-2000 to Sep-2019 1.07% $1.58 Office $22.50 228 Months $3,298
6 Bell Canada $19.00 Oct-2014 $21.00 - - - See method: Bell - - Market Office, Suite: 214 5,902 $112,138 See assumption: Oct-1999 to Sep-2019 3.02% $1.58 Office $22.50 240 Months $9,345
7 Blani International L $33.00 Apr-2002 $35.00 - - - See method: Blani - - Market Retail, Suite: 102 1,300 $42,900 Apr-2005 $37.00 See assumption: Apr-1999 to Mar-2019 0.67% $2.75 Apr-2007 $40.00 Blani $50 240 Months $3,575 Apr-2009 $42.00 Apr-2011 $43.00 Apr-2013 $45.00 Apr-2014 $51.40
8 Bureau du Comté de Ch $21.61 - - - - - Full Service: - - Market Office, Suite: 1312 1,302 $28,140 Pays no expense See assumption: Dec-2005 to May-2017 0.67% $1.80 reimbursement. Office $22.50 138 Months $2,345
9 Centre for Study of I $24.00 - - - - - See method: - - Market Office, Suite: 1305 1,337 $32,088 Centre Study See assumption: Nov-2004 to Oct-2017 0.68% $2.00 Insurance Market $26.50 156 Months $2,674
(continued on next page) The Prudential Assurance Bldg Software : ARGUS Ver. 15.0.1.26 1155-1185 Robert-Bourassa Blvd File : DCF_1155 Robert-Bourassa_2016 Montréal (Ville-Marie Borough), QC Property Type : Office/Industrial Portfolio : Date : 3/2/16 Time : 7:26 am Ref# : BPH Page : 2 Presentation Rent Roll & Current Term Tenant Summary As of Jan-2016 for 195,231 Square Feet (continued from previous page)
Tenant Name Floor Rate & Amount CPI & Current Months Pcnt Description of Imprvmnts Commssns Assumption about Type & Suite Number SqFt per Year Changes Changes Porters' Wage to to Operating Expense Rate Rate subsequent terms Lease Dates & Term Bldg Share per Month on to Miscellaneous Abate Abate Reimbursements Amount Amount for this tenant
10 Cologix Montreal $36.00 Sep-2018 $39.00 - - - See method: - - Market Office, Suite: 300 13,453 $484,308 Sep-2023 $42.00 Cologix See assumption: Sep-2013 to Aug-2033 6.89% $3.00 Sep-2028 $45.00 Market $26.50 240 Months $40,359
11 Cologix Montreal $37.00 Sep-2018 $40.00 - - - See method: - - Market Office, Suite: 400 13,976 $517,112 Sep-2023 $43.00 Cologix See assumption: Jan-2014 to Aug-2033 7.16% $3.08 Sep-2028 $46.00 Market $26.50 236 Months $43,093
12 Condominium Tom Inc. $60.00 - - - - - Full Service: - - Vacate Retail, Suite: 106 893 $53,580 Pays no expense See assumption: Feb-2014 to Jan-2017 0.46% $5.00 reimbursement. Retail $50 36 Months $4,465
13 Cooper Industries $30.00 Dec-2020 $33.00 - - - See method: - - Market Office, Suite: 1215 6,956 $208,680 Cooper Industries See assumption: Dec-2015 to Sep-2024 3.56% $2.50 Market $26.50 106 Months $17,390
14 Dragados Canada $32.50 - - - - - See method: - - Market Office, Suite: 1303 2,586 $84,045 Dragados See assumption: Aug-2014 to Jul-2017 1.32% $2.71 Market $26.50 36 Months $7,004
15 Elfiq Inc. $24.50 - - - - - See method: Elfiq - - Market Office, Suite: 707 1,810 $44,345 See assumption: Mar-2013 to Oct-2016 0.93% $2.04 Market $26.50 44 Months $3,695
16 Elfiq Inc. $24.50 - - - - - See method: Elfiq - - Market Office, Suite: 712 3,084 $75,558 See assumption: Nov-2004 to Oct-2016 1.58% $2.04 Market $26.50 144 Months $6,297
17 Elfiq Inc. $24.50 - - - - - See method: Elfiq - - Market Office, Suite: 714 750 $18,375 See assumption: May-2005 to Oct-2016 0.38% $2.04 Market $26.50 138 Months $1,531
18 Gestion A.V.T. $26.00 - - - - - See method: - - Market Office, Suite: 800 4,160 $108,160 Gestion AVT See assumption: Jun-2014 to May-2019 2.13% $2.17 Market $26.50 60 Months $9,013
(continued on next page) The Prudential Assurance Bldg Software : ARGUS Ver. 15.0.1.26 1155-1185 Robert-Bourassa Blvd File : DCF_1155 Robert-Bourassa_2016 Montréal (Ville-Marie Borough), QC Property Type : Office/Industrial Portfolio : Date : 3/2/16 Time : 7:26 am Ref# : BPH Page : 3 Presentation Rent Roll & Current Term Tenant Summary As of Jan-2016 for 195,231 Square Feet (continued from previous page)
Tenant Name Floor Rate & Amount CPI & Current Months Pcnt Description of Imprvmnts Commssns Assumption about Type & Suite Number SqFt per Year Changes Changes Porters' Wage to to Operating Expense Rate Rate subsequent terms Lease Dates & Term Bldg Share per Month on to Miscellaneous Abate Abate Reimbursements Amount Amount for this tenant
19 Hydro One telecom Inc $13.50 - - - - - See method: Net - - Market Office, Suite: 814 1,023 $13,811 Net See assumption: Aug-2002 to Jun-2017 0.52% $1.13 Office $22.50 179 Months $1,151
20 Iscanco Inc. $22.50 - - - - - See method: - - Market Office, Suite: 701 2,830 $63,675 Vacant Base Year See assumption: Expires Dec-2020 1.45% $1.88 Office $22.50 $5,306 @ 100% of Mkt
21 James O'Reilly $15.00 - - - - - See method: Net - - Market Office, Suite: 1007 5,531 $82,965 Net (-) Mort See assumption: Jun-2005 to May-2017 2.83% $1.25 Office $22.50 144 Months $6,914
22 Keops Techno $24.75 - - - - - See method: Keops - - Market Office, Suite: 1100 8,103 $200,549 See assumption: Dec-1998 to Nov-2018 4.15% $2.06 $26.50 10 Years 240 Months $16,712
23 Keops Techno $24.75 - - - - - See method: Keops - - Market Office, Suite: 1110 3,095 $76,601 See assumption: Dec-2008 to Nov-2018 1.59% $2.06 $26.50 10 Years 120 Months $6,383
24 Keops Techno $24.75 - - - - - See method: Keops - - Market Office, Suite: 1115 2,500 $61,875 See assumption: Dec-2013 to Nov-2018 1.28% $2.06 $26.50 10 Years 60 Months $5,156
25 Marquest Asset Manage $0.00 Oct-2012 $24.75 - - - See method: - - Renew Office, Suite: 905 1,396 $0 Oct-2016 $25.25 Marquest See assumption: Oct-2007 to Sep-2017 0.72% $0.00 Market $26.50 120 Months $0
26 Me Andrew Heft $24.00 - - - - - See method: Heft - - Market Office, Suite: 802 538 $12,912 See assumption: Jul-2014 to Jun-2019 0.28% $2.00 Market $26.50 60 Months $1,076
27 Media St-Joseph $27.00 - - - - - See method: Media - - Market Office, Suite: 1301 1,923 $51,921 St-Joseph See assumption: Aug-2013 to Jul-2018 0.98% $2.25 Market $26.50 60 Months $4,327
(continued on next page) The Prudential Assurance Bldg Software : ARGUS Ver. 15.0.1.26 1155-1185 Robert-Bourassa Blvd File : DCF_1155 Robert-Bourassa_2016 Montréal (Ville-Marie Borough), QC Property Type : Office/Industrial Portfolio : Date : 3/2/16 Time : 7:26 am Ref# : BPH Page : 4 Presentation Rent Roll & Current Term Tenant Summary As of Jan-2016 for 195,231 Square Feet (continued from previous page)
Tenant Name Floor Rate & Amount CPI & Current Months Pcnt Description of Imprvmnts Commssns Assumption about Type & Suite Number SqFt per Year Changes Changes Porters' Wage to to Operating Expense Rate Rate subsequent terms Lease Dates & Term Bldg Share per Month on to Miscellaneous Abate Abate Reimbursements Amount Amount for this tenant
28 Metropolitan Credit A $24.00 - - - - - See method: - - Market Office, Suite: 600 2,564 $61,536 Metropolitan See assumption: May-2008 to Apr-2018 1.31% $2.00 Credit Market $26.50 120 Months $5,128
29 Me-Andrew Heft $24.00 - - - - - See method: Heft - - Market Office, Suite: 806 1,346 $32,304 See assumption: Jul-2009 to Jun-2019 0.69% $2.00 Market $26.50 120 Months $2,692
30 Modis Canada Inc. $30.05 - - - - - See method: Modis - - Market Office, Suite: 1410 4,686 $140,814 Canada See assumption: Mar-1998 to May-2017 2.40% $2.50 Market $26.50 231 Months $11,735
31 Montreal Business Ctr $32.25 - - - - - See method: - - Market Office, Suite: 908 2,969 $95,750 Montreal Business See assumption: Sep-2016 to Dec-2022 1.52% $2.69 Diamond Market $26.50 76 Months $7,979
32 Notre Dame Capital In $23.50 Apr-2016 $31.25 - - - See method: Notre - - Market @75% Office, Suite: 1310 2,058 $48,363 Dame Capital See assumption: Apr-2011 to Mar-2018 1.05% $1.96 Market $26.50 84 Months $4,030
33 Office National Touri $22.50 Sep-2014 $25.00 - - - See method: - - Market Office, Suite: 1014 1,222 $27,495 Sep-2015 $24.50 Office Tourisme See assumption: Sep-2008 to Aug-2017 0.63% $1.88 Market $26.50 108 Months $2,291
34 Ordre des Hygiénistes $23.96 Sep-2015 $24.96 - - - See method: Ordre - - Market Office, Suite: 1212 6,376 $152,769 Hygiénistes See assumption: Sep-2008 to Nov-2018 3.27% $2.00 Market $26.50 123 Months $12,731
35 Osisoft Canda ULC $22.50 - - - - - See method: - - Market Office, Suite: 606 1,332 $29,970 Osisoft See assumption: Oct-2013 to Sep-2020 0.68% $1.88 $22.50 10 years 84 Months $2,498
36 Osisoft Canda ULC $22.50 - - - - - See method: - - Market Office, Suite: 608 750 $16,875 Osisoft See assumption: Dec-2003 to Sep-2020 0.38% $1.88 $22.50 10 years 202 Months $1,406
(continued on next page) The Prudential Assurance Bldg Software : ARGUS Ver. 15.0.1.26 1155-1185 Robert-Bourassa Blvd File : DCF_1155 Robert-Bourassa_2016 Montréal (Ville-Marie Borough), QC Property Type : Office/Industrial Portfolio : Date : 3/2/16 Time : 7:26 am Ref# : BPH Page : 5 Presentation Rent Roll & Current Term Tenant Summary As of Jan-2016 for 195,231 Square Feet (continued from previous page)
Tenant Name Floor Rate & Amount CPI & Current Months Pcnt Description of Imprvmnts Commssns Assumption about Type & Suite Number SqFt per Year Changes Changes Porters' Wage to to Operating Expense Rate Rate subsequent terms Lease Dates & Term Bldg Share per Month on to Miscellaneous Abate Abate Reimbursements Amount Amount for this tenant
37 Osisoft Canda ULC $22.50 - - - - - See method: - - Market Office, Suite: 612 4,751 $106,898 Osisoft See assumption: Jan-2003 to Sep-2020 2.43% $1.88 $22.50 10 years 213 Months $8,908
38 Osisoft Canda ULC $22.50 - - - - - See method: - - Market Office, Suite: 614 2,120 $47,700 Osisoft See assumption: Oct-2008 to Sep-2020 1.09% $1.88 $22.50 10 years 144 Months $3,975
39 Osisoft EXPANSION $32.50 - - - - - See method: - - Market Office, Suite: 602 1,550 $50,375 Osisoft New See assumption: Oct-2015 to Sep-2020 0.79% $2.71 $22.50 10 years 60 Months $4,198
40 Prompt Quebec $25.00 Apr-2015 $26.00 - - - See method: - - Vacate Office, Suite: 903 2,054 $51,350 Prompt See assumption: Apr-2010 to Mar-2017 1.05% $2.08 Market $26.50 84 Months $4,279
41 Quest Rare Minerals L $32.50 - - - - - See method: Quest - - Market Office, Suite: 901 3,418 $111,085 See assumption: Nov-2015 to Oct-2020 1.75% $2.71 Market $26.50 60 Months $9,257
42 Restaurant Le Leman I $41.00 Sep-2014 $42.00 - - - See method: Le - - Market Retail, Suite: 105 2,117 $86,797 Sep-2015 $43.00 Cirque See assumption: Sep-2010 to Aug-2020 1.08% $3.42 Sep-2017 $44.00 Retail $50 120 Months $7,233 Sep-2019 $45.00
43 Service Dentaires Bed $32.50 Jan-2020 $36.00 - - - See method: - - Market Office, Suite: 1405 2,445 $79,463 Service Dentaire See assumption: Jan-2015 to Dec-2024 1.25% $2.71 Market $26.50 120 Months $6,622
44 Societe International $26.50 - - - - - See method: - - Market Office, Suite: 1012 3,247 $86,046 Société See assumption: Jun-2013 to May-2018 1.66% $2.21 d'Urologie Market $26.50 60 Months $7,170
45 SQI $9.47 - - - - - See method: SQI - - Market Office, Suite: 200 11,079 $104,918 See assumption: Feb-2003 to Feb-2017 5.67% $0.79 $25 - 10 years 169 Months $8,743
(continued on next page) The Prudential Assurance Bldg Software : ARGUS Ver. 15.0.1.26 1155-1185 Robert-Bourassa Blvd File : DCF_1155 Robert-Bourassa_2016 Montréal (Ville-Marie Borough), QC Property Type : Office/Industrial Portfolio : Date : 3/2/16 Time : 7:26 am Ref# : BPH Page : 6 Presentation Rent Roll & Current Term Tenant Summary As of Jan-2016 for 195,231 Square Feet (continued from previous page)
Tenant Name Floor Rate & Amount CPI & Current Months Pcnt Description of Imprvmnts Commssns Assumption about Type & Suite Number SqFt per Year Changes Changes Porters' Wage to to Operating Expense Rate Rate subsequent terms Lease Dates & Term Bldg Share per Month on to Miscellaneous Abate Abate Reimbursements Amount Amount for this tenant
46 TOM Condo Inc. $33.75 - - - - - Full Service: - - Vacate Office, Suite: 915 1,774 $59,873 Pays no expense See assumption: Jun-2015 to Dec-2016 0.91% $2.81 reimbursement. Market $26.50 19 Months $4,989
47 Trangesco $24.00 - - - - - See method: - - Market Office, Suite: 805 1,795 $43,080 Trangesco See assumption: May-2009 to Dec-2017 0.92% $2.00 Market $26.50 104 Months $3,590
48 Trangesco $24.00 - - - - - See method: - - Market Office, Suite: 810 1,803 $43,272 Trangesco See assumption: Jan-2008 to Dec-2017 0.92% $2.00 Market $26.50 120 Months $3,606
49 Translatec $22.50 - - - - - See method: - - Market Office, Suite: 512 2,766 $62,235 Translatec See assumption: Feb-2002 to Jan-2017 1.42% $1.88 Office $22.50 180 Months $5,186
50 T.E.C.H. Consulting S $32.50 - - - - - See method: - - Market Office, Suite: 708 2,210 $71,825 T.E.C.H. See assumption: Oct-2016 to Jan-2021 1.13% $2.71 Market $26.50 52 Months $5,985
51 T.E.C.H. Consulting S ease starts $32.50 - - - - - See method: - - Market Office, Suite: 709 1,367 $44,428 T.E.C.H. See assumption: Oct-2016 to Jan-2021 0.70% $2.71 Market $26.50 52 Months $3,702
52 T.E.C.H. Consulting S $32.50 - - - - - See method: - - Market Office, Suite: 710 1,000 $32,500 T.E.C.H. See assumption: Oct-2016 to Jan-2021 0.51% $2.71 Market $26.50 52 Months $2,708
53 VACANT $22.50 - - - - - See method: $18.00 $6.05 Market Office, Suite: 1011 920 $20,700 Vacant Base Year 5.38% See assumption: Jul-2016 to Jun-2021 0.47% $1.88 $16,560 $5,564 Office $22.50 60 Months $1,725 @ 100% of Mkt
54 9330-7973 Québec Inc. $33.25 - - - 1-3 100% Full Service: - - Market Office, Suite: 1314 3,315 $110,224 Pays no expense See assumption: Nov-2015 to Oct-2018 1.70% $2.77 reimbursement. Office $22.50 36 Months $9,185
(continued on next page) The Prudential Assurance Bldg Software : ARGUS Ver. 15.0.1.26 1155-1185 Robert-Bourassa Blvd File : DCF_1155 Robert-Bourassa_2016 Montréal (Ville-Marie Borough), QC Property Type : Office/Industrial Portfolio : Date : 3/2/16 Time : 7:26 am Ref# : BPH Page : 7 Presentation Rent Roll & Current Term Tenant Summary As of Jan-2016 for 195,231 Square Feet (continued from previous page)
Tenant Name Floor Rate & Amount CPI & Current Months Pcnt Description of Imprvmnts Commssns Assumption about Type & Suite Number SqFt per Year Changes Changes Porters' Wage to to Operating Expense Rate Rate subsequent terms Lease Dates & Term Bldg Share per Month on to Miscellaneous Abate Abate Reimbursements Amount Amount for this tenant
55 VACANT $22.50 - - - - - See method: $18.00 $6.05 Market Office, Suite: 1400 3,874 $87,165 Vacant Base Year 5.38% See assumption: Jul-2016 to Jun-2021 1.98% $1.88 $69,732 $23,430 Office $22.50 60 Months $7,264 @ 100% of Mkt
56 VACANT $22.50 - - - - - See method: $18.00 $6.05 Market Office, Suite: 1414 2,242 $50,445 Vacant Base Year 5.38% See assumption: Jul-2016 to Jun-2021 1.15% $1.88 $40,356 $13,559 Office $22.50 60 Months $4,204 @ 100% of Mkt
57 VACANT $22.50 - - - - - See method: $18.00 $6.06 Market Office, Suite: 201 2,243 $50,468 Vacant Base Year 5.38% See assumption: Sep-2016 to Aug-2021 1.15% $1.88 $40,374 $13,588 Office $22.50 60 Months $4,206 @ 100% of Mkt
58 VACANT $22.50 - - - - - See method: $18.00 $6.06 Market Office, Suite: 500 2,207 $49,658 Vacant Base Year 5.38% See assumption: Sep-2016 to Aug-2021 1.13% $1.88 $39,726 $13,370 Office $22.50 60 Months $4,138 @ 100% of Mkt
59 VACANT $22.50 - - - - - See method: $18.00 $6.06 Market Office, Suite: 502 2,661 $59,873 Vacant Base Year 5.38% See assumption: Sep-2016 to Aug-2021 1.36% $1.88 $47,898 $16,120 Office $22.50 60 Months $4,989 @ 100% of Mkt
60 VACANT $22.50 - - - - - See method: $18.00 $6.06 Market Office, Suite: 505 1,270 $28,575 Vacant Base Year 5.38% See assumption: Sep-2016 to Aug-2021 0.65% $1.88 $22,860 $7,694 Office $22.50 60 Months $2,381 @ 100% of Mkt
61 VACANT $22.95 - - - - - See method: $18.36 $6.18 Market Office, Suite: 508 1,284 $29,468 Vacant Base Year 5.39% See assumption: Jan-2017 to Dec-2021 0.66% $1.91 $23,574 $7,937 Office $22.50 60 Months $2,456 @ 100% of Mkt
62 VACANT $22.50 - - - - - See method: $18.00 $6.05 Market Office, Suite: 510 2,320 $52,200 Vacant Base Year 5.38% See assumption: Jul-2016 to Jun-2021 1.19% $1.88 $41,760 $14,031 Office $22.50 60 Months $4,350 @ 100% of Mkt
63 VACANT $22.50 - - - - - See method: $18.00 $6.05 Market Office, Suite: 812 2,747 $61,808 Vacant Base Year 5.38% See assumption: Jul-2016 to Jun-2021 1.41% $1.88 $49,446 $16,614 Office $22.50 60 Months $5,151 @ 100% of Mkt
(continued on next page) The Prudential Assurance Bldg Software : ARGUS Ver. 15.0.1.26 1155-1185 Robert-Bourassa Blvd File : DCF_1155 Robert-Bourassa_2016 Montréal (Ville-Marie Borough), QC Property Type : Office/Industrial Portfolio : Date : 3/2/16 Time : 7:26 am Ref# : BPH Page : 8 Presentation Rent Roll & Current Term Tenant Summary As of Jan-2016 for 195,231 Square Feet (continued from previous page)
Tenant Name Floor Rate & Amount CPI & Current Months Pcnt Description of Imprvmnts Commssns Assumption about Type & Suite Number SqFt per Year Changes Changes Porters' Wage to to Operating Expense Rate Rate subsequent terms Lease Dates & Term Bldg Share per Month on to Miscellaneous Abate Abate Reimbursements Amount Amount for this tenant
64 VACANT $22.95 - - - - - See method: $18.36 $6.18 Market Office, Suite: 906 1,713 $39,313 Vacant Base Year 5.39% See assumption: Jan-2017 to Dec-2021 0.88% $1.91 $31,451 $10,588 Office $22.50 60 Months $3,276 @ 100% of Mkt
Total Occupied SqFt 164,204 Total Available SqFt 31,027 The Prudential Assurance Bldg Software : ARGUS Ver. 15.0.1.26 1155-1185 Robert-Bourassa Blvd File : DCF_1155 Robert-Bourassa_2016 Montréal (Ville-Marie Borough), QC Property Type : Office/Industrial Portfolio : Date : 3/2/16 Time : 7:26 am Ref# : BPH Page : 1 Supporting Schedule -- Square Feet Expiring -- (All Terms)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 For the Years Ending Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021 Dec-2022 Dec-2023 Dec-2024 Dec-2025 Dec-2026 Tenant Suite 3915671 Canada inc. 1308 792 0 0 0 0 792 0 0 0 0 792 Elfiq Inc. 707 1,810 0 0 0 0 1,810 0 0 0 0 0 Elfiq Inc. 712 3,084 0 0 0 0 3,084 0 0 0 0 0 Elfiq Inc. 714 750 0 0 0 0 750 0 0 0 0 0 9266-7922 Quebec Inc. 1009 2,362 0 0 0 0 0 2,362 0 0 0 0 TOM Condo Inc. 915 1,774 0 0 0 0 0 1,774 0 0 0 0 Condominium Tom Inc. 106 0 893 0 0 0 0 893 0 0 0 0 Translatec 512 0 2,766 0 0 0 0 2,766 0 0 0 0 SQI 200 0 11,079 0 0 0 0 0 0 0 0 0 Prompt Quebec 903 0 2,054 0 0 0 0 2,054 0 0 0 0 Barbara Shore 514 0 968 0 0 0 0 968 0 0 0 0 Bureau du Comté de Chagnon 1312 0 1,302 0 0 0 0 1,302 0 0 0 0 James O'Reilly 1007 0 5,531 0 0 0 0 5,531 0 0 0 0 Modis Canada Inc. 1410 0 4,686 0 0 0 0 4,686 0 0 0 0 Hydro One telecom Inc. 814 0 1,023 0 0 0 0 1,023 0 0 0 0 Dragados Canada 1303 0 2,586 0 0 0 0 2,586 0 0 0 0 Office National Tourisme T 1014 0 1,222 0 0 0 0 1,222 0 0 0 0 Marquest Asset Management 905 0 1,396 0 0 0 0 1,396 0 0 0 0 Centre for Study of Insura 1305 0 1,337 0 0 0 0 1,337 0 0 0 0 Trangesco 805 0 1,795 0 0 0 0 0 1,795 0 0 0 Trangesco 810 0 1,803 0 0 0 0 0 1,803 0 0 0 Notre Dame Capital Inc. 1310 0 0 2,058 0 0 0 0 2,058 0 0 0 Metropolitan Credit Adjust 600 0 0 2,564 0 0 0 0 2,564 0 0 0 Societe International d'Ur 1012 0 0 3,247 0 0 0 0 3,247 0 0 0 Media St-Joseph 1301 0 0 1,923 0 0 0 0 1,923 0 0 0 9330-7973 Québec Inc. 1314 0 0 3,315 0 0 0 0 3,315 0 0 0 Keops Techno 1100 0 0 8,103 0 0 0 0 0 0 0 0 Keops Techno 1110 0 0 3,095 0 0 0 0 0 0 0 0 Keops Techno 1115 0 0 2,500 0 0 0 0 0 0 0 0 Ordre des Hygiénistes Dent 1212 0 0 6,376 0 0 0 0 0 6,376 0 0 Blani International Ltd 102 0 0 0 1,300 0 0 0 0 1,300 0 0 Gestion A.V.T. 800 0 0 0 4,160 0 0 0 0 4,160 0 0 Me Andrew Heft 802 0 0 0 538 0 0 0 0 538 0 0 Me-Andrew Heft 806 0 0 0 1,346 0 0 0 0 1,346 0 0 Bell Canada 210 0 0 0 2,083 0 0 0 0 2,083 0 0 Bell Canada 214 0 0 0 5,902 0 0 0 0 5,902 0 0 Restaurant Le Leman Inc. 105 0 0 0 0 2,117 0 0 0 0 2,117 0 Osisoft Canda ULC 606 0 0 0 0 1,332 0 0 0 0 0 0 Osisoft Canda ULC 608 0 0 0 0 750 0 0 0 0 0 0 Osisoft Canda ULC 612 0 0 0 0 4,751 0 0 0 0 0 0 Osisoft Canda ULC 614 0 0 0 0 2,120 0 0 0 0 0 0 Osisoft EXPANSION 602 0 0 0 0 1,550 0 0 0 0 0 0 Quest Rare Minerals Ltd. 901 0 0 0 0 3,418 0 0 0 0 3,418 0 Bank of Nova Scotia 104 0 0 0 0 8,983 0 0 0 0 0 0 Iscanco Inc. 701 0 0 0 0 2,830 0 0 0 0 0 2,830 T.E.C.H. Consulting Servic 708 0 0 0 0 0 2,210 0 0 0 0 2,210 T.E.C.H. Consulting Servic 709 0 0 0 0 0 1,367 0 0 0 0 1,367 T.E.C.H. Consulting Servic 710 0 0 0 0 0 1,000 0 0 0 0 1,000 VACANT 1011 0 0 0 0 0 920 0 0 0 0 920 VACANT 1400 0 0 0 0 0 3,874 0 0 0 0 3,874 VACANT 1414 0 0 0 0 0 2,242 0 0 0 0 2,242 VACANT 510 0 0 0 0 0 2,320 0 0 0 0 2,320 VACANT 812 0 0 0 0 0 2,747 0 0 0 0 2,747 VACANT 201 0 0 0 0 0 2,243 0 0 0 0 2,243 VACANT 500 0 0 0 0 0 2,207 0 0 0 0 2,207 VACANT 502 0 0 0 0 0 2,661 0 0 0 0 2,661 VACANT 505 0 0 0 0 0 1,270 0 0 0 0 1,270 VACANT 508 0 0 0 0 0 1,284 0 0 0 0 0 VACANT 906 0 0 0 0 0 1,713 0 0 0 0 0 Montreal Business Ctr Diam 908 0 0 0 0 0 0 2,969 0 0 0 0 Cooper Industries 1215 0 0 0 0 0 0 0 0 6,956 0 0 (continued on next page) The Prudential Assurance Bldg Software : ARGUS Ver. 15.0.1.26 1155-1185 Robert-Bourassa Blvd File : DCF_1155 Robert-Bourassa_2016 Montréal (Ville-Marie Borough), QC Property Type : Office/Industrial Portfolio : Date : 3/2/16 Time : 7:26 am Ref# : BPH Page : 2 Supporting Schedule -- Square Feet Expiring -- (All Terms)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 For the Years Ending Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021 Dec-2022 Dec-2023 Dec-2024 Dec-2025 Dec-2026 Tenant Suite Service Dentaires Bedemous 1405 0 0 0 0 0 0 0 0 2,445 0 0 Total SqFt Expiring 10,572 40,441 33,181 15,329 27,851 34,494 32,869 16,705 31,106 5,535 28,683 ======Percent Of Total Expiring 5.4% 20.7% 17.0% 7.9% 14.3% 17.7% 16.8% 8.6% 15.9% 2.8% 14.7% The Prudential Assurance Bldg Software : ARGUS Ver. 15.0.1.26 1155-1185 Robert-Bourassa Blvd File : DCF_1155 Robert-Bourassa_2016 Montréal (Ville-Marie Borough), QC Property Type : Office/Industrial Portfolio : Date : 3/2/16 Time : 7:26 am Ref# : BPH Page : 1 Schedule Of Prospective Cash Flow In Inflated Dollars for the Fiscal Year Beginning 1/1/2016
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 For the Years Ending Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021 Dec-2022 Dec-2023 Dec-2024 Dec-2025 Dec-2026 Potential Gross Revenue Base Rental Revenue $5,202,156 $5,538,955 $5,637,970 $5,758,266 $5,800,567 $5,896,479 $5,977,124 $6,073,616 $6,180,014 $6,199,563 $6,253,036 Absorption & Turnover Vacancy (357,734) (257,159) (120,582) (124,393) (78,070) (205,359) (166,772) (100,199) (151,413) (51,882) 0 Base Rent Abatements (9,185) 0 0 0 0 0 0 0 0 0 0 Scheduled Base Rental Revenue 4,835,237 5,281,796 5,517,388 5,633,873 5,722,497 5,691,120 5,810,352 5,973,417 6,028,601 6,147,681 6,253,036 CPI & Other Adjustment Revenue 0 0 0 0 0 0 0 0 36,753 42,311 109,727
Expense Reimbursement Revenue Operating Cost Recovery 365,630 361,030 405,534 428,689 455,111 460,901 480,767 520,049 548,631 589,778 623,261 Realty Tax Recovery 952,461 1,061,608 1,124,783 1,158,106 1,204,021 1,209,316 1,246,546 1,298,937 1,338,244 1,393,233 1,441,796 Amortization Recovery 7,554 0 0 0 0 0 0 0 0 0 0 Admin Fee Recovery 37,820 34,433 41,842 44,953 48,808 49,030 52,154 58,146 62,612 67,976 73,361 Insurance Recovery 10,991 9,672 11,565 12,416 13,466 13,744 14,485 16,081 17,240 18,790 20,142 Total Reimbursement Revenue 1,374,456 1,466,743 1,583,724 1,644,164 1,721,406 1,732,991 1,793,952 1,893,213 1,966,727 2,069,777 2,158,560
Parking Revenue 420,000 428,400 436,968 445,707 454,622 463,714 472,988 482,448 492,097 501,939 511,978 Miscellaneous Revenue 162,625 165,878 169,195 172,579 176,031 179,551 183,142 186,805 190,541 194,352 198,239 Other Revenue - Cologix 144,000 146,880 149,818 152,814 155,870 158,988 162,167 165,411 168,719 172,093 175,535 Total Potential Gross Revenue 6,936,318 7,489,697 7,857,093 8,049,137 8,230,426 8,226,364 8,422,601 8,701,294 8,883,438 9,128,153 9,407,075 General Vacancy (53,953) (227,947) (326,701) (364,435) (386,379) (348,242) (313,260) (393,336) (373,014) (481,024) (527,408) Effective Gross Revenue 6,882,365 7,261,750 7,530,392 7,684,702 7,844,047 7,878,122 8,109,341 8,307,958 8,510,424 8,647,129 8,879,667 Operating Expenses Operating Cost Expense 1,353,400 1,380,468 1,408,078 1,436,237 1,464,965 1,494,262 1,524,148 1,554,631 1,585,724 1,617,441 1,649,788 Realty Taxes 1,708,480 1,742,650 1,777,503 1,813,053 1,849,314 1,886,300 1,924,026 1,962,506 2,001,757 2,041,792 2,082,628 Management Fee 206,471 217,852 225,912 230,541 235,321 236,344 243,280 249,239 255,313 259,414 266,390 N/R Other Costs 17,206 18,154 18,826 19,212 19,610 19,695 20,273 20,770 21,276 21,618 22,199 Total Operating Expenses 3,285,557 3,359,124 3,430,319 3,499,043 3,569,210 3,636,601 3,711,727 3,787,146 3,864,070 3,940,265 4,021,005 Net Operating Income 3,596,808 3,902,626 4,100,073 4,185,659 4,274,837 4,241,521 4,397,614 4,520,812 4,646,354 4,706,864 4,858,662 Leasing & Capital Costs Tenant Improvements 377,622 549,412 210,839 493,406 145,085 463,272 428,563 278,709 310,518 140,230 448,717 Leasing Commissions 127,392 220,242 95,493 262,612 102,511 340,876 191,466 128,175 125,787 57,211 172,621 Structural allowance 0 108,926 112,956 115,271 117,661 118,172 121,640 124,619 127,656 129,707 133,195 Rec. Capital Expenditures 388,000 0 0 0 0 0 0 0 0 0 0 Total Leasing & Capital Costs 893,014 878,580 419,288 871,289 365,257 922,320 741,669 531,503 563,961 327,148 754,533 Cash Flow Before Debt Service $2,703,794 $3,024,046 $3,680,785 $3,314,370 $3,909,580 $3,319,201 $3,655,945 $3,989,309 $4,082,393 $4,379,716 $4,104,129 & Taxes ======
University 1155 Édifice “D”: Addendum
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Édifice 1155 University ADDENDUM “C” C1 Effective Date: December 31, 2015
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Édifice 1155 University B2 ADDENDUM “B” Effective Date: December 31, 2015
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Édifice 1155 University ADDENDUM “C” C3 Effective Date: December 31, 2015
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Addendum “E”: Édif
Addendum “E” Comparable Sales
Office Transaction Reference Number OS_010314_0001 Westmount Square 1 Westmount Square, Westmount, Quebec
Sale Details Sale PriceConfidential Interest 100% Adj. Sale PriceConfidential Tenure Leased Fee Adj. Sale Price PSF Firm Date N/A Closing Date October-2015 INSERT PHOTO Vendor 9218-6147 Québec Inc Purchaser Creccal Investments Ltd. Broker JLL
Yield Analysis IRR 7.75% NOI CF TCR 7.00% Year 1 4.82% 1.35% CR 6.75% Years 1-5 6.92% 5.08% Bond Yield (10 Year) 2.36% Years 6-10 8.55% 6.93%
Property Description Tenant Profile Market Leasing Assumptions ($PSF) Class B Tenant Area (SF) % of NRA Blended Face Blended NER Year Built 1966 Royal Bank of Canada 12,424 3.8% Year 1 $16.63 $12.25 Parking Ratio 2.81/1,000 SF Investors Group 11,891 3.6% Year 2 $16.63 $12.25 Site Area 1.68 ac Gestion Sandanna Inc 10,201 3.1% Year 3 $17.47 $13.09 Year Renovated 0 MNP LLP 10,200 3.1% Year 4 $18.34 $13.96 Storeys 20 - 2 Consulate General of Israe 6,700 2.0% Year 5 $19.23 $14.78 Floor Plate 10,200 SF Total 51,416 15.7% GER $9.25 Rentable Area (SF) Other Tenants 197,619 60.2% T&O $0.00 Office Area 247,660 Vacancy 78,964 24.1% NER $9.25 Retail Area 80,339 Other Area - Lease Rollover DCF Assumptions Net Rentable Area 327,999 Year 1 9.75% General Inflation 2.00% Year 2 10.47% Renewal Probability 75.00% Storage Area - Year 3 14.99% Vacancy Allowance 5.00% Year 4 8.91% Structural Allowance 1.00% Year 5 10.79% Average 1-5 10.98%
Sale Commentary Location The Property is situated at the corner of Sainte-Catherine Street West and Greene Street, directly connected to the Atwater station and in the heart of the City of Westmount at the western limits of the Montreal Central Business District.
Physical
Westmount Square is composed of 4 sections, 2 office towers (Westmount Square 1 & 4), a shopping centre and a parking. Tower #1 is 20 storeys and 193,794 SF.
Income INSERT MAP
Leasing profile with an average roster of tenants with limited investment grade tenants. The property was 24% vacant at the time of the sale.
Market
The investment market condition is reported to be very strong with recent transactions indicating strong pricing, particularly for well leased and well located assets. The leasing market is very active with strong leasing fundamentals.
General Comment 0.0% Office Transaction Reference Number OS_090115_0001 KPMG Tower & Promenades de la Cathédrale 600 de Maisonneuve West, Montreal, Quebec
Sale Details
100% Sale Price$183,000,000 Interest Adj. Sale Price$180,885,103 Tenure Leasehold Adj. Sale Price PSF $278.77 Firm Date N/A Closing Date September 1, 2015 Oxford Properties & Canada Pension INSERT PHOTO Vendor Plan Investment Board Purchaser Bentall Kennedy Broker CBRE & RBC
Yield Analysis Reported CR 6.25% Bond Yield (10 Year) 1.44%
IRR 6.75% NOI CF TCR 6.25% Year 1 5.93% 5.40% CR 6.25% Years 1-5 6.32% 4.87% Bond Yield (10 Year) 1.44% Years 6-10 7.07% 6.28%
Property Description Tenant Profile Market Leasing Assumptions ($PSF) Class AA Tenant Area (SF) % of NRA Blended Face Blended NER Year Built 1987-1988 KPMG 155,835 24.0% Year 1 $17.00 $11.68 Parking Ratio 0.68/1,000 SF Gildan Activewear 52,616 8.1% Year 2 $17.00 $11.68 Site Area 3.14 ac CIBC 34,657 5.3% Year 3 $17.00 $11.68 Year Renovated 0 Oracle Canada 33,916 5.2% Year 4 $17.50 $12.18 Storeys 33 Westcliff Management 22,605 3.5% Year 5 $18.50 $13.18 Floor Plate 16,000 SF Total 299,629 46.2% GER $33.00 Rentable Area (SF) Other Tenants 244,307 37.7% T&O $23.75 Office Area 516,785 Vacancy 104,932 16.2% NER $9.25 Retail Area 132,083 Other Area - Lease Rollover DCF Assumptions Net Rentable Area 648,868 Year 1 12.42% General Inflation 2.00% Year 2 9.18% Renewal Probability 75.00% Storage Area - Year 3 8.67% Vacancy Allowance 5.00% Year 4 5.89% Structural Allowance 0.05% Year 5 6.04% Average 1-5 8.44%
Sale Commentary Location Tour KPMG is situated at the intersection of Boulevard de Maisonneuve Ouest and Boulevard Robert-Bourassa (formerly University Street). The Property’s corner location is considered one of the best locations in Montréal’s Central Business District (“CBD”) given its close proximity to numerous amenities, direct access to the McGill Metro Station and underground pedestrian path system.
Physical
Completed in 1987, Tour KPMG is recognized for its distinctive architectural features on Montréal’s skyline. Tour KPMG stands 33 storeys and is Class AA, totaling 516,785 sq. ft. of rentable area and is complemented by Promenades Cathédrale, an underground retail mall totaling 132,083 sq. ft. The Property includes a 441 stall underground parking garage. The Mall has been recently renovated and features excellent amenities.
Income INSERT MAP
The Office Tower’s in-place tenants provide 9.6 years of stable leased income, anchored by KPMG who occupies 156,000 sq. ft. (30.2% of NRA) under a long-term lease through 2031.
Market The investment market condition is reported to be very strong with recent transactions indicating strong pricing, particularly for well leased and well located assets. The leasing market is very active with strong leasing fundamentals.
General Comment The Property is subject to long-term ground leases with the Anglican Church of Canada (2084) and the City of Montréal (2063), which have specified rental payments that are not subject to resets. the vendor provided income supplements of approximately $2.1 million to account for KPMG rent gap up, free rent supplement and adjustments for other two smaller tenants. The unadjusted Year 1 NOI (i.e. in-place NOI excluding vendor supplements) yield is estimated to be approximately 5.4%. 2IILFH7UDQVDFWLRQ 5HIHUHQFH1XPEHU 26B B 6XQ/LIH%XLOGLQJ 0HWFDOIH6WUHHW0RQWUHDO4XHEHF
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