MORGUARD CORPORATION
SUSTAINABILITY REPORT 2017
DETAILED RESULTS OF SUSTAINABLE MORGUARD MORGUARD 2017 SUSTAINABILITY REPORT
TABLE OF CONTENTS
EXECUTIVE STATEMENT ...... 1 PROFILE ...... 2 OUR SUSTAINABILITY STRATEGY ...... 4 OUR 2035 LONG-TERM OBJECTIVES ...... 5 OUR VOICE – ADVOCATING FOR SUSTAINABLE REAL ESTATE ...... 6 OUR STAKEHOLDERS AND MATERIALITY ...... 6 COMMITMENT TO EXTERNAL INITIATIVES ...... 8 RESPONSIBLE PROPERTY INVESTMENT – SUSTAINABILITY ADVISER TO OUR CLIENTS ...... 9 REACHING NET ZERO – PARTNERING TO ACHIEVE SUSTAINABLE BUILDINGS ...... 10 GREEN BUILDING CERTIFICATIONS ...... 11 INNOVATION – BENCHMARKING AND RENEWABLES ...... 14 ENERGY CONSUMPTION – CANADIAN OFFICE AND RETAIL PROPERTIES ...... 17 GREENHOUSE GASES AND CARBON EMISSIONS – CANADIAN OFFICE AND RETAIL PROPERTIES ...... 18 WATER CONSUMPTION – CANADIAN OFFICE AND RETAIL PROPERTIES ...... 21 WASTE PERFORMANCE – CANADIAN OFFICE AND RETAIL PROPERTIES...... 22 SUSTAINABLE DEVELOPMENT – BUILDING AND SUPPORTING OUR COMMUNITIES ...... 25 CHARITY PROGRAMS – SUPPORTING OUR COMMUNITIES ...... 28 RESPONSIBLE EMPLOYER – EMPOWERING OUR PEOPLE ...... 30 CODE OF CONDUCT, EQUAL OPPORTUNITY AND DISCRIMINATION ...... 30 EMPLOYMENT COMPENSATION AND BENEFITS ...... 35 COLLECTIVE AGREEMENTS ...... 35 TRAINING AND PROFESSIONAL DEVELOPMENT ...... 38 TRAINING...... 39 PERFORMANCE REVIEWS ...... 40 OUR SUSTAINABLE HOUSE – LEADING BY EXAMPLE ...... 41 GREENING OUR OFFICES ...... 41 ENVIRONMENTAL POLICIES AND PROCEDURES – ENVIROLINK ...... 41 LAND CONTAMINATION, REMEDIATION, AND COMPLIANCE ...... 42 RESPONSIBLE GOVERNANCE ...... 43 APPENDIX A – GLOSSARY...... 44 APPENDIX B – BUILDING PERFORMANCE – WEATHER AND OCCUPANCY MODEL ...... 45 APPENDIX C – GRI CONTENT INDEX ...... 46
MORGUARD.COM MORGUARD 2017 SUSTAINABILITY REPORT
EXECUTIVE STATEMENT
As the guardian of millions of square feet of commercial real estate across North America, Morguard recognizes our responsibility to ensure that sustainability gets ingrained at the ground floor. By integrating the principles of sustainability into our real estate business, we not only drive long-term value for our shareholders, clients, tenants and employees – we create better places for people to work, shop and live.
In 2017, Sustainable Morguard, our company-wide sustainability program, delivered significant improvements across key environmental, social and governance indicators. This continued progress was a direct result of collaborative engagement between Morguard and our stakeholders – clients, employees, shareholders, tenants and members of our communities.
We continued to see direct, positive results of our actions in 2017, with meaningful reductions in energy, water and waste at our properties. Our employees continued to exceed expectations and make major contributions to the communities in which we operate. And Morguard continued to earn recognition for its achievements, including the quality of its buildings and the health and safety record of the Company.
We regularly review Sustainable Morguard to ensure that it is on track. In early 2017, we completed a new materiality assessment and the recommendations, along with the continuing feedback from our stakeholders, will continue to guide our future sustainability initiatives.
On behalf of our Directors, I thank all those involved in Sustainable Morguard for their commitment and energy. I look forward to continuing our progress in the years ahead.
Sincerely,
K. RAI SAHI
Chairman and Chief Executive Officer Morguard Corporation
MORGUARD.COM MORGUARD 2017 SUSTAINABILITY REPORT
PROFILE
Morguard Corporation (“Morguard”) is a fully integrated North American real estate organization, with 1,465 employees and total real estate assets owned and under management valued at $15.4 billion. As a real estate owner, manager and developer, we recognize our responsibility to help build a sustainable future and strive to have a positive impact on the environment, the communities where we operate and the long term value of our properties.
REPORT SCOPE AND BOUNDARY
Morguard’s 2017 Annual Sustainability Report provides transparent information on activities and management strategies for owned and managed real estate assets in Canada and in the United States. Property performance metrics are focused on our office and retail properties where we have the most significant operational control. Although we acquired and disposed of assets during the reporting period, property performance metrics in this report only reflect the properties that were operational during the entire reporting period.
This report was prepared in accordance with the Core option of the 2016 Global Reporting Initiative (“GRI”) Standard sustainability reporting guidelines, including the Construction and Real Estate Sector Supplement (“CRESS”). External quality assurance of our building performance data is provided by a third party, however formal assurance of the contents of this report was not sought.
Morguard also publishes a separate 2017 Sustainability Highlights report that summarizes achievements and profiles specific initiatives and properties. This report, once issued, can be found at morguard.com.
All information is presented as at December 31, 2017, unless otherwise indicated. ORGANIZATIONAL PROFILE
Morguard is primarily a real estate investment company whose principal activities include the acquisition, development and ownership of multi-suite residential, commercial and hotel properties. Morguard is also one of Canada’s premier real estate investment advisers and management companies, representing major institutional and private investors. The Company’s common shares are publicly traded and listed on the Toronto Stock Exchange (“TSX”) under the symbol “MRC”. The Company’s goal is to accumulate a portfolio of high-quality real estate assets and then deliver the benefits of such real estate ownership to its stakeholders.
Morguard’s real estate strategy is to acquire a diversified portfolio of real estate assets both for its own accounts and for its institutional clients. The Company’s cash flows are well diversified given the revenue earned from its management and advisory services platform, the Company’s corporately owned assets, and the distributions received from its investment in Morguard Real Estate Investment Trust, Morguard North American Residential Real Estate Investment Trust and Temple Hotels Inc. Diversification of the portfolio, by both asset type and geographic location, serves to reduce investment risk. The Company will divest itself of non-core assets when proceeds can be reinvested to improve returns. A primary element of the Company’s business strategy is to generate stable and increasing cash flow and asset value by improving the performance of its real estate investment portfolio and by acquiring or developing real estate properties in sound economic markets.
The Company, through its wholly owned subsidiary, Morguard Investments Limited (“MIL”), provides real estate management services to Canadian institutional investors. Services include acquisitions, development, dispositions, leasing, performance measurement, and asset and property management. For over 40 years,
MORGUARD.COM 2 MORGUARD 2017 SUSTAINABILITY REPORT
MIL has established itself as one of Canada’s leading providers of real estate asset and property management services.
In addition to real estate, Morguard’s 60% ownership interest in Lincluden Investment Management Limited (“Lincluden”) offers institutional clients and private investors a broad range of global investment products across equity, fixed income and balanced portfolios.
Morguard operates in Canada and the United States. The Company’s head office is in Mississauga, Ontario, Canada.
For more information about Morguard’s organizational structure and financial performance, please see the Morguard Corporation Annual Information Form and other continuous disclosure materials available at sedar.com and at morguard.com
We welcome report feedback or inquiries. Please contact [email protected]
Beverley G. Flynn Vice President, General Counsel and Secretary
Ken Cowan Vice President, National Programs
Christine Wickett Manager, Corporate Sustainability and Responsibility
55 City Centre Drive, Suite 1000 Mississauga, ON L5B 1M3 Canada T 905-281-3800 morguard.com
MORGUARD.COM 3 MORGUARD 2017 SUSTAINABILITY REPORT
OUR SUSTAINABILITY STRATEGY
Sustainability is a strategic priority for Morguard. Sustainability encompasses the risks and organizational responsibilities surrounding our environmental, social and governance (“ESG”) impacts. Given the scale and extent of its ESG impacts, sustainability is of particular concern to the real estate sector, including key stakeholders such as shareholders, clients, tenants and employees.
At a fundamental level, real estate organizations contribute to society through the development and management of shelter. People will always need buildings in which to live and work. Our sustainability challenge starts from this foundation. We strive to identify and implement innovative initiatives that ensure that our business models and properties will contribute to a sustainable society.
Sustainable Morguard, our company-wide sustainability program, helps us structure our efforts and act on ESG risks and opportunities that are most important to our stakeholders. These major areas of focus are: decreasing energy and water use, reducing waste and emissions, creating excellence in energy and environmental management that results in green building certifications, collecting consistent data that tracks and validates our performance towards our objectives, reporting transparency, engaging investors and tenants to support our initiatives, and driving new sustainability ideas and policies that align with our focus areas.
SUSTAINABILITY PROGRAM MANAGEMENT
Sustainable Morguard is sponsored by our Senior Vice President, Finance, and Chief Financial Officer of Morguard Investments Limited, Pamela McLean and our Vice President, General Counsel and Secretary, Beverley G. Flynn. The steering committee that oversees the program meets regularly to review strategic initiatives.
Sustainability initiatives are developed throughout the Company and driven by senior management through a number of sustainability mandates. These mandates establish cross-functional working groups to implement specific initiatives aimed at mitigating environmental impacts, reducing costs, building employee engagement and more. The working groups bring sustainability to life – they engage people at all levels of the organization, accelerate innovation and drive performance improvements.
MORGUARD.COM 4 MORGUARD 2017 SUSTAINABILITY REPORT
OUR 2035 LONG-TERM OBJECTIVES
As part of the Sustainable Morguard program, we have established six long-term targets for 2035. For energy-related objectives at the portfolio level, we originally measured our performance against a 2010 base year. We have since updated our base year to 2015. The base year for energy-related objectives is updated every five years to ensure an accurate representation of our real estate portfolio.
Our Voice: Advocating for Sustainable Real Estate
We will communicate our sustainability journey with passion, integrity, transparency and pride. In doing so, we will not only inspire others to join us but assure our stakeholders’ support on our continued journey.
Responsible Property Investment: Sustainability Adviser to Our Clients
We will provide the best strategic advice to our clients on both ESG factors and financial factors. We will create new investment strategies and opportunities that align with our sustainability principles while managing risk effectively and creating lasting, real returns.
Reaching Net Zero: Partnering to Achieve Sustainable Buildings
We will operate our buildings in alignment with our sustainability principles, neutralizing our environmental impacts. We will achieve this by partnering with our tenants and clients and systematically applying innovative building solutions to reduce our combined environmental footprint.
Sustainable Development: Building and Supporting Our Communities We will support the communities in which we operate through the construction of sustainable real estate and localized philanthropy. As a real estate developer, we have a significant impact on communities and therefore have a unique responsibility to contribute to their sustainability.
Responsible Employer: Empowering Our People We will create a culture of respect, inclusion, health, safety and equal opportunity by removing barriers to employees meeting their needs. We will empower employees to ensure that Morguard retains, engages and attracts innovative talent that will contribute to the success of our sustainability journey.
Our Sustainable House: Leading by Example We will set an example in our corporate offices and through our business practices – inspiring our stakeholders to follow our lead. As both a landlord and a tenant, we have a unique ability to demonstrate our commitment to sustainability in our properties. As a corporation, we will demonstrate best practices in responsible governance company-wide.
MORGUARD.COM 5 MORGUARD 2017 SUSTAINABILITY REPORT
OUR VOICE – ADVOCATING FOR SUSTAINABLE REAL ESTATE
Morguard will use its voice to advocate for sustainable business practices in the real estate industry. In doing so, we will support our industry partners, promote our sustainability successes and create positive change.
We strive to communicate with passion, integrity, transparency and pride. We will work to continually improve the materiality of our reporting and maintain a presence in the sustainability dialogue of the commercial real estate industry.
OUR STAKEHOLDERS AND MATERIALITY
Our engagement with stakeholders on sustainability includes consultations with employees, management, key clients and tenants, and panel discussions with external sustainability experts.
In early 2017, we went through a rigorous process to refresh our formal materiality assessment and gather insight from our stakeholders on the relative importance of specific environmental, social and governance issues. Regularly updating our materiality assessment ensures that we stay abreast of changing stakeholder interests and are able to balance them with impacts as a business.
This assessment resulted in an updated materiality map that identified the top areas of concern for our key stakeholders. The environmental impacts of the properties we manage (e.g. energy, water, carbon, and waste management) was identified as the most important issue, with tenant and employee care also highlighted. This assessment helped guide our initiatives for 2017.
MORGUARD.COM 6 MORGUARD 2017 SUSTAINABILITY REPORT
MATERIALITY ASSESSMENT
• Tenant engagement • Energy, water and waste • Development and land • Green building design and certification management • Environmental regulatory compliance • Renewable energy •
Workplace health and safety • Climate change risk and mitigation • Employee engagement and • Labour practices in supply chain satisfaction • Greenhouse gas emissions • Ethics and transparency
HIGHLY MATERIAL • Board governance and oversight • Responsible property investing
• Development impacts on • Employee recruitment and retention communities • Indoor air quality • Responsible material sourcing and • Senior management succession supply chain planning and development • Employee diversity •
SIGNIFICANCE TO STAKEHOLDERS Community investment MATERIAL
MATERIAL HIGHLY MATERIAL SIGNIFICANCE TO BUSINESS
Sustainability impacts that are of high interest to our stakeholders and have a high impact on our business viability (the top right quadrant of the map) are the most material and therefore require greater transparency and increased resources. These impacts also have the greatest potential to drive business and provide value to our stakeholders.
MORGUARD.COM 7 MORGUARD 2017 SUSTAINABILITY REPORT
COMMITMENT TO EXTERNAL INITIATIVES
Morguard regularly engages with organizations that specialize in sustainability issues. Energy Advantage, Deloitte LLP, Quinn & Partners, Risk Check Environmental Ltd., and the Shareholder Association for Research & Education (SHARE) have all helped to focus and shape Sustainable Morguard.
We are also committed to engaging with industry associations on initiatives that drive sustainable change. These engagements promote innovative strategies that increase efficiency and decrease costs in our properties, while encouraging responsible business practices industry-wide.
Real Property Association of Canada (“REALPAC”) – Morguard is an active member of REALPAC and holds memberships in multiple committees, including the Corporate Responsibility & Sustainability, Human Resources and Energy committees.
Canadian Green Building Council (“CaGBC”) – Active member.
Building Owners and Managers Association (“BOMA”) – Canada – Active member.
United States Green Building Council (“USGBC”) – Active member
Greening Greater Toronto – Morguard is a Commercial Building Energy Initiative Leadership Council member.
MORGUARD.COM 8 MORGUARD 2017 SUSTAINABILITY REPORT
RESPONSIBLE PROPERTY INVESTMENT – SUSTAINABILITY ADVISER TO OUR CLIENTS
MANAGEMENT APPROACH
A strategic and responsible approach to sustainability is essential to maintaining the long-term value of Morguard’s assets under management. Morguard aims to provide the best strategic advice to clients on ESG and financial factors, recognizing that sustainability can both mitigate significant risks and increase value.
Our focus on responsible property investment (“RPI”) and ESG matters has penetrated many areas of our business and advisory services. When we investigate a potential property acquisition, a team is assembled to carry out an in-depth financial, physical and environmental analysis. This analysis includes a range of environmental indicators that could contribute to risk, efficiency, returns and value. It is through processes such as this that we look to improve our environmental risk analysis and add value to our clients’ assets.
Our investment approach identifies and addresses ESG risks and opportunities associated with owning and managing real property. Morguard, with leadership from our in-house Sustainability department, has developed tools such as this corporate sustainability report and introduced new processes in our property business planning that increase client and shareholder disclosure on sustainability performance and ESG matters. We also work with clients to ensure compatibility with their responsible investing and sustainability programs.
Property business plans and capital plans are the primary methods in which we engage with our clients, and we have committed to greater disclosure on sustainability in these documents. Business plans for all Canadian enclosed shopping centres and office properties over 100,000 square feet, include the following:
• An overview of our proprietary GREEN LINK program (which targets resource efficiency, waste reduction, interior environment quality and value creation) and detailed insights from property management on planned sustainability initiatives;
• Increased asset management commentary on the property’s sustainability strengths and any changes in the local green building market;
• Detailed property performance charts and metrics including energy and water use, energy intensity, GHG emissions and waste diversion;
• Green building awards, certifications and audits (energy, water, waste, air);
• Leasing insights including tenant engagement efforts and feedback on sustainability initiatives; and
We have expanded the program to include sustainability reporting on a quarterly basis to investor clients, meeting our RPI objective to develop and implement greater sustainability disclosure across our Canadian enclosed shopping centre and office portfolio.
We will continue to develop the program by further integrating ESG factors into all applicable decision- making processes and ensuring our investment strategies and opportunities align with our sustainability principles. This will help ensure that the value of our assets under management is preserved and enhanced while providing excellent risk metrics to our shareholders and clients.
MORGUARD.COM 9 MORGUARD 2017 SUSTAINABILITY REPORT
REACHING NET ZERO – PARTNERING TO ACHIEVE SUSTAINABLE BUILDINGS
MANAGEMENT APPROACH
Morguard’s role as an owner and adviser is to add value to its real estate portfolio by identifying, recommending and implementing cost-saving sustainability initiatives that deliver positive returns and protect or enhance asset value. This means we manage our properties efficiently and professionally. One of our long- term objectives is to operate our buildings – in partnership with our stakeholders – in alignment with our sustainability principles. Our tenants are at various stages of their own sustainability journeys, ranging from industrial businesses that effectively control most of their own environmental impacts to small office tenants for whom we manage most building functions – from lighting to recycling. We work to meet these tenants “where they are at” and partner with them to apply innovative building solutions that lower costs and reduce our combined environmental footprint.
GREEN LINK AND TENANT ENGAGEMENT
Most of our commercial properties are subject to our proprietary GREEN LINK program, which targets resource efficiency, waste reduction, interior environment quality and value creation in preparation for additional external green building certification. GREEN LINK requires energy, waste and water audits and presents cost-saving initiatives such as lighting retrofits and water use reductions. GREEN LINK also ensures that properties implement best practices that result in long-term cost and risk reductions and enhanced tenant engagement and communication.
Leasing is also a critical point of engagement with tenants. The standard Morguard lease includes a number of green provisions that start a dialogue with tenants about our shared efficiency objectives. We look to increase our use of green provisions to align with evolving industry best practices and to meet the needs of our tenants and Sustainable Morguard.
Innovative tenant engagement means providing new, more effective ways to engage tenants on current and future sustainability issues. One of the methods that Morguard uses to engage tenants is property-level tenant satisfaction surveys that incorporate sustainability topics. These surveys are conducted on a three year rotation in conjunction with our BOMA BEST certification program.
The results of these satisfaction surveys provide us with greater insight into the needs of our tenants on sustainability. Our results confirm that tenants desire and expect a rigorous sustainability program from a leading property manager, and that tenants view Morguard as an environmentally responsible company and property manager.
MORGUARD.COM 10 MORGUARD 2017 SUSTAINABILITY REPORT
GREEN BUILDING CERTIFICATIONS
Green building certifications and award programs have become industry best practices in many asset classes. There are several benefits to these programs:
• They demonstrate leadership in the real estate industry, bolstering our management platform; • They assist in attracting and retaining tenants by validating operating efficiencies; • They ensure rigour when implementing cost-saving and efficiency initiatives; • They meet the needs of tenants looking for space in certified buildings to attract and retain their workers, differentiate their offerings, improve their image, reduce costs and satisfy their own stakeholder demands; and • They provide an opportunity for learning and improvement by allowing for the benchmarking of results, highlighting areas for potential enhancement, including; emission reductions, increases in occupancy and rent premiums and ultimately value creation.
BOMA BEST CERTIFICATIONS Morguard participates in numerous industry awards and building certification programs. Most significantly, we obtain certification of our Canadian office properties and enclosed shopping centres through BOMA’s Building Environmental Standards (“BOMA BEST”) program, a national initiative that sets industry standards for the energy and environmental performance of buildings. We target BOMA BEST certification for all Canadian office properties over 100,000 square feet and all large, enclosed shopping centres, unless already certified through another program such as Leadership in Energy and Environmental Design (“LEED”).
In 2017, Morguard certified two new properties and re-certified 13 properties during the year. In total, Morguard manages 60 properties currently certified through the BOMA BEST program. Our five retail properties not certified are currently progressing through the certification process.
OFFICE PORTFOLIO Level Number of Properties SF Level 4 / Platinum 10 1,872,288 Level 3 / Gold 11 2,893,617 Level 2 / Silver 24 3,860,600 Level 1 / Bronze 0 0 Certified 0 0 45/60 of Canadian office properties over 100,000 SF: Office properties totalling 8,626,505 SF/11,090,882 SF = 78%
RETAIL PORTFOLIO Level Number of Properties SF Level 4 / Platinum 2 1,386,537 Level 3 / Gold 5 3,366,706 Level 2 / Silver 2 719,892 Level 1 / Bronze 2 732,939 Certified 4 2,071,619 15/20 properties of Canadian enclosed shopping centres: Retail properties totalling 8,277,693 SF/10,960,415 SF = 76%
MORGUARD.COM 11 MORGUARD 2017 SUSTAINABILITY REPORT
LEED CERTIFICATIONS
Morguard targets CaGBC, United States Green Building Counsel (“USGBC”) or LEED certification as a minimum standard on all new development projects. LEED provides a concise framework for identifying and implementing practical and measurable green-building initiatives, including rating systems for the design, construction and operation of high-performance green buildings and neighbourhoods. All development projects targeting LEED certification establish individual efficiency goals according to the desired LEED certification level. Life cycle analysis tools are used in all LEED projects.
We added one new LEED-designated property in 2017 through acquisition. As at December 31, 2017, Morguard managed 11 certified properties, with six additional projects underway that are targeting LEED designation.
LEED CERTIFIED BUILDINGS IN OPERATION
Province/ Level of Property City State Certification Type of Certification Performance Court Ottawa ON Gold New Construction 215 Slater Ottawa ON Gold New Construction Maple Leaf Foods Dist. Centre Puslinch ON Gold New Construction 77 Bloor St. W. Toronto ON Gold Existing Building Archives of Ontario Toronto ON Gold New Construction Alta at K Station Chicago IL Gold New Construction 11th Avenue Place Calgary AB Gold New Construction Quinte Courthouse Belleville ON Silver New Construction York University Research Tower Toronto ON Silver New Construction Coast at Lakeshore East Chicago IL Silver New Construction Quarry Park Central Calgary AB Certified New Construction
TARGETED CERTIFICATIONS IN PROGRESS IN 2017
Province/ Level of Property City State Certification Type of Certification The Heathview North Tower Toronto ON Gold New Construction The Heathview South Tower Toronto ON Silver New Construction Etobicoke Wellness Centre Etobicoke ON Silver New Construction Global Transportation Hub Regina SK Silver Commercial Interior Translink Logistics Centre Regina SK Silver New Construction Northgate at Falls Church Falls Church VA Silver New Construction
MORGUARD.COM 12 MORGUARD 2017 SUSTAINABILITY REPORT
GREEN KEY GLOBAL
Green Key Global is a leading international environmental certification body whose industry standard programs and resources have been designed specifically for the lodgings and meetings industries. Green Key Eco- Ratings Programs help members leverage corporate sustainability and responsibility activities to support property-level sustainable initiatives and improve overall fiscal performance and community relations. Morguard currently owns 31 hotels, representing 5,387 rooms, with a Green Key Eco-Rating. This represents 82% of our hotel properties.
GREEN BUILDING AWARDS
Beyond industry certifications, Morguard properties and employees have been recognized by clients and industry partners for green initiatives. The table below outlines the awards Morguard received in 2017.
Asset Property/Employee City Province Award Organization Class
Coquitlam Centre Retail Coquitlam BC Sustainability Healthcare of Ontario Innovator: Technology Pension Plan Award (HOOPP)
New Sudbury Centre Retail Sudbury ON Tenant Leader: Retail HOOPP Award
Esther McConaghy Office Ottawa ON Sustainability HOOPP Champion Award
Bramalea City Centre Retail Brampton ON Earth Award BOMA BEST
Morguard believes green building certifications and awards communicate to our stakeholders that we are among the leaders in the industry, take pride in our properties and work hard to manage our facilities with efficiency in mind. Certifications and awards help to validate sustainability initiatives that enhance property value, reduce emissions and operating costs and have the potential to attract and retain tenants.
MORGUARD.COM 13 MORGUARD 2017 SUSTAINABILITY REPORT
INNOVATION – BENCHMARKING AND RENEWABLES
OFFICE BENCHMARKING - ENERGY STAR PORTFOLIO MANAGER
Energy Star enables benchmarking of properties against a national standard to help prioritize necessary capital upgrades and operational improvements. In 2015, we successfully piloted a program with our Canadian office properties and recognized the value the benchmarking tool. In 2016, we committed to setup energy profiles for all of our managed Canadian office, retail, industrial and multi-residential properties in Natural Resources Canada’s Energy Star Portfolio Manager over the next two years. As of 2017, we have over 130 of our managed Canadian office, retail, and industrial properties participating in the Energy Star Portfolio Manager program.
ONTARIO ELECTRICITY INDUSTRIAL CONSERVATION INITIATIVE
The Ontario Industrial Conservation Initiative (“ICI”) is a form of demand response that allows participating customers to manage their global adjustment (“GA”) costs by reducing demand during peak periods. Customers who participate in the ICI pay GA based on their percentage contribution to the top five peak Ontario demand hours (i.e. peak demand factor) over a 12-month base period. By reducing demand during peak periods, ICI participants can both reduce their global adjustment costs and help defer the need for investments in new provincial electricity infrastructure.
Morguard identified and implemented the program at four properties for which the ICI program looked favourable. From program inception on July 1, 2017, those locations have reduced their electricity costs by a combined total of $347,393.
Property City Province Savings in 2017 MCC 33 City Centre Mississauga ON $43,742 Standard Life Ottawa ON $139,383 Albert and Bank Ottawa ON $77,908 Bramalea City Centre Brampton ON $86,360 Total $347,393
ENCLOSED SHOPPING CENTRES BENCHMARKING - ICSC
In 2017, we continued a program to measure and analyse the common area energy use of all of our Canadian enclosed shopping centres. The program uses an innovative method that accurately isolates and benchmarks common area consumption versus tenant consumption. This data is critical in managing and reducing energy use at our properties. To support industry standards, Morguard provided test data to the International Council of Shopping Centers (“ICSC”) for their scorecard benchmarking tool.
MORGUARD.COM 14 MORGUARD 2017 SUSTAINABILITY REPORT
RENEWABLES - SOLAR
Solar panels require minimal maintenance and operate silently, making solar energy a clean and safe method of power generation. The rooftop installations, which can be up to 80,000 square feet in size, can produce 500 kilowatts of power on average. The Province of Ontario also offers feed-in tariff incentive programs for delivering renewable power into the electricity grid during hours of peak demand.
Morguard’s participation in the solar power generation program was reduced in 2017 due to the disposition of a number of industrial properties in Ontario with solar installations.
PROPERTIES WITH SOLAR POWER INSTALLATION IN OPERATION
Property City Province KW 1205 Corporate Dr. Burlington ON 500
RENEWABLES - CREDITS
In 2017, we continued programs that support renewable energy generation. We purchased Renewable Energy Certificates (“RECs”) - tradable, non-tangible energy commodities that represent proof that an amount of electricity (MWh) was generated from an eligible renewable energy resource and fed into the energy grid on behalf of the certificate owner.
Morguard partners with Bullfrog Power to purchase renewable energy credits, particularly for developments targeting LEED certification. In 2017, we purchased total of 362MWh of green electricity from Bullfrog Power, displacing 122 tonnes of CO2e (GHG emissions) for the following properties:
Property City Province
11th Avenue Place Calgary AB
Performance Court Ottawa ON
MORGUARD.COM 15 MORGUARD 2017 SUSTAINABILITY REPORT
BUILDING PERFORMANCE DATA – MONITORING OUR PROPERTIES
We are pleased to report significant reductions in energy, water and waste across our managed assets in 2017 as compared to our baseline year of 2015. This is significant not only from a sustainability perspective, but also resulted in significant cost savings across our portfolio.
In 2016, our baseline year was updated to 2015 from 2010. The updated baseline allows Morguard to focus on recent performance of our current building portfolio. Moving forward our plan is to update our baseline every five years, consistent with industry best practices. We have included both current and historical benchmarks for reference.
Morguard Reductions since 2015 baseline 4.0% less energy usage 5.1% less greenhouse gas emissions 4.5% less water usage
Morguard Historical Reductions in our first 5 years (2015 from a 2010 baseline) 14% less energy usage 24% less greenhouse gas emissions 19% less water usage
WEATHER ADJUSTMENT AND NORMALIZATION
In 2017, we continued to utilize a more rigorous weather adjustment modelling for the Canadian office and enclosed shopping centre portfolios. This utilized a regression analysis of energy and water performance versus weather data specific to the nearest weather station of each individual property. This allows current and future energy and water performance to be measured against a weather adjusted 2015 baseline. Details of our normalization process are outlined in Appendix B – Building Performance – Weather and Occupancy Model.
EXPANDED REPORTING
Energy and water data for the Canadian multi-suite residential portfolio is included in our reporting for the second year. The Canadian residential data does not include weather or occupancy adjustment.
For the first time, U.S. residential electricity data is included in the report. The U.S. residential and retail results are based upon a non-weather-adjusted comparison of 2017 versus 2016 results.
REPORTING BOUNDARY
Monthly environmental performance measurement for energy, emissions and water is operational for 100% of our enclosed shopping centre and office properties. This report provides a comparison of 2017 performance to 2015 as a baseline year. Only those buildings that were fully operational over the entire respective reporting period are included in the data. Utilities are generally paid directly by tenants in industrial properties; therefore, data is unavailable for measurement and is out of our reporting scope and boundary. Newly acquired and newly developed buildings and buildings sold during the period are excluded from this analysis, as are some properties where there were inconsistencies or anomalies in the data. The total percentage of the portfolio analyzed may differ among energy, emissions, water and waste reporting (specifics are outlined in the respective sections below). We use a third-party provider to track all utility bills, which includes a separate quality assurance system.
MORGUARD.COM 16 MORGUARD 2017 SUSTAINABILITY REPORT
ENERGY AND GHG PERFORMANCE
The energy performance data in this section is based on actual metered energy use as obtained from electricity, natural gas, and water utility bills. The associated energy-related greenhouse gas emissions are derived using the most recent (2015) emissions factors as provided by Environment Canada, Greenhouse Gas Division, and National Inventory Report. This energy and greenhouse gases (“GHG”) data represents approximately 97.1% (23.7 million square feet) of current square footage of our owned and managed Canadian office and enclosed shopping centre properties, based on gross leasable area (“GLA”). Properties which were not operational over the entire reporting period were excluded from the performance results.
ENERGY CONSUMPTION – CANADIAN OFFICE AND RETAIL PROPERTIES
The table below provides a summary of actual (i.e. absolute) energy use in 2015, 2016 and 2017. It also provides a weather-adjusted and occupancy-adjusted comparison of 2017 versus 2015. For office and enclosed shopping centre properties combined, actual electricity and natural gas use is 4.5% lower in 2017 versus 2015. With weather and occupancy adjustments considered, combined use is 4.0% lower compared to our 2015 baseline. We reduced annual usage by more than 21 million ekWh of energy since 2015 – a significant cost savings and enough energy to power 1,880 homes for a year. When these weather and occupancy adjusted results are considered as abated costs, the energy savings associated with electricity and natural gas are approximately $2.6 million in annual operating cost savings for our tenants.
ANNUAL ENERGY CONSUMPTION (ekWh) Abated Actual 2017 versus Weather and Energy Actual Occupancy Adjusted 2015 Costs
2015 2016 2017 2015 2017 Change Change (ekWh) (ekWh) (ekWh) (ekWh) (ekWh) (%) ($ CAN)
ELECTRICITY
Office 231,526,083 223,217,742 217,694,489 228,593,779 217,694,489 -4.8% (1,170,272)
Retail 153,958,695 144,195,261 140,770,539 152,966,535 140,770,539 -8.0% (1,485,442)
Total 385,484,778 367,413,004 358,465,029 381,560,315 358,465,029 -6.1% $ (2,655,714)
NATURAL GAS and STEAM
Office 106,377,024 103,575,746 109,904,755 105,221,981 109,904,755 4.5% 128,158
Retail 45,958,141 41,909,591 45,475,162 48,245,535 45,475,162 -5.7% (88,862)
Total 152,335,165 145,485,338 155,379,916 153,467,516 155,379,916 1.2% $ 39,296
COMBINED ENERGY
Office 337,903,107 326,793,489 327,599,244 333,815,760 327,599,244 -1.9% (1,042,114)
Retail 199,916,836 186,104,853 186,245,701 201,212,070 186,245,701 -7.4% (1,574,304)
Total 537,819,943 512,898,341 513,844,945 535,027,830 513,844,945 -4.0% $ (2,616,417)
MORGUARD.COM 17 MORGUARD 2017 SUSTAINABILITY REPORT
GREENHOUSE GASES AND CARBON EMISSIONS – CANADIAN OFFICE AND RETAIL PROPERTIES
The table below provides a summary of energy, water and waste-related greenhouse gas emissions for 2015, 2016 and 2017. It also provides a weather and occupancy adjusted comparison for 2017 vs. 2015. With weather and occupancy adjustments considered, emissions decreased by 5.1%. We reduced emissions by over 5,500 metric tonnes in 2017 versus 2015, which is equivalent to eliminating the annual GHG emissions from over 1,010 passenger vehicles.
ENERGY, WATER and WASTE RELATED GREENHOUSE GAS EMISSIONS (tCO2e)
Actual 2017 versus Weather and Actual Occupancy Adjusted 2015
2015 2016 2017 2015 2017 Change (tCO2e) (tCO2e) (tCO2e) (tCO2e) (tCO2e) (%)
ELECTRICITY Office 40,621 38,411 37,289 39,647 37,289 -5.9% Retail 26,125 24,782 23,268 25,898 23,268 -10.2% Total 66,745 63,193 60,557 65,546 60,557 -7.6%
NATURAL GAS and STEAM Office 19,911 19,394 20,578 19,741 20,578 4.2% Retail 8,482 7,733 8,392 8,912 8,392 -5.8% Total 28,393 27,127 28,970 28,653 28,970 1.1%
WATER Office 179 173 179 177 179 0.7% Retail 195 193 186 195 186 -4.6% Total 375 367 365 372 365 -2.1%
WASTE Office 4,079 4,139 4,180 4,079 4,180 2.5% Retail 9,539 8,895 8,612 9,539 8,612 -9.7% Total 13,618 13,034 12,792 13,618 12,792 -6.1%
COMBINED ENERGY, WATER, and WASTE Office 64,790 62,118 62,226 63,645 62,226 -2.2% Retail 44,341 41,603 40,458 44,544 40,458 -9.2% Total 109,131 103,721 102,684 108,190 102,684 -5.1%
MORGUARD.COM 18 MORGUARD 2017 SUSTAINABILITY REPORT
Proportions based on Total Adjusted Energy, Water, Waste Related Emissions in 2017 (tCO2e)
Waste 13% Water 0%
Electricity Natural Gas and 59% Steam 28%
ENERGY INTENSITY – CANADIAN OFFICE AND RETAIL PROPERTIES
The table below provides a comparison of energy use (electricity and natural gas) per square foot based on GLA. In 2017, overall energy intensity for office and enclosed shopping centre properties was 21.7 ekWh per square foot. This represents a reduction of 4.0% per square foot versus 2015 adjusted for weather and occupancy.
ENERGY INTENSITY BY ASSET TYPE (ekWh/SF/yr)
Weather and Occupancy Adjusted 2015 2017 Change (%) Office 31.3 30.7 -1.9% Retail 15.5 14.3 -7.4% Overall 22.6 21.7 -4.0%
GHG INTENSITY – CANADIAN OFFICE AND RETAIL PROPERTIES
The table below provides a comparison of GHG intensity per thousand square feet for the office and enclosed shopping centre portfolio and shows that overall 2017 GHG intensity was 4.3 tCO2e per thousand square feet. This represents a reduction of 5.1% versus 2015 adjusted for weather and occupancy.
GHG INTENSITY BY ASSET TYPE (tCO2e/1000SF/yr)
Weather and Occupancy Adjusted 2015 2017 Change (%) Office 6.0 5.8 -2.2% Retail 3.4 3.1 -9.2% Overall 4.6 4.3 -5.1%
MORGUARD.COM 19 MORGUARD 2017 SUSTAINABILITY REPORT
ELECTRICITY PERFORMANCE – U.S. RETAIL AND RESIDENTIAL PROPERTIES
For the first time, U.S. residential electricity usage is included in the report. The U.S. multi-suite residential and enclosed shopping centre results are based upon a non-weather-adjusted comparison of 2017 versus 2016 results.
The table below provides a comparison of actual electricity use. Retail electricity use is up 3.3% versus 2016, while U.S. residential electricity is down 11.8%. Overall electricity use is down 6.7%.
ANNUAL ELECTRICITY CONSUMPTION UNITED STATES RETAIL AND RESIDENTIAL (kWh)
Actual 2017 versus Actual 2016 2016 2017 Change ELECTRICITY (kWh) (kWh) (%)
U.S. Retail 6,193,900 6,400,282 3.3% U.S. Residential 12,092,777 10,661,630 -11.8% Total 18,286,677 17,061,912 -6.7%
MORGUARD.COM 20 MORGUARD 2017 SUSTAINABILITY REPORT
WATER PERFORMANCE
The water performance analysis represents approximately 87% (21.3 million square feet) of the GLA of Morguard’s Canadian office and enclosed shopping centre properties.
Water performance includes a subset of buildings that were operational over the entire period from 2015 through 2017, and for which we receive bills directly. Newly acquired and newly developed buildings and buildings sold during the period are excluded. The data also provides a weather-adjusted comparison of 2017 to our 2015 baseline.
WATER CONSUMPTION – CANADIAN OFFICE AND RETAIL PROPERTIES
The table below provides a summary of actual water use in 2015, 2016 and 2017 and a weather-adjusted comparison. Weather and occupancy adjusted data for the office and enclosed shopping centre portfolio showed a decrease in water consumption of 4.5% in 2017.
The 2017 results saw a reduction of more than 80,000 m3 over 2015 – the equivalent of 30 Olympic swimming pools.
ANNUAL WATER CONSUMPTION Actual 2017 versus Weather and Actual Occupancy Adjusted 2015 2015 2016 2017 2015 2017 Change (m3) (m3) (m3) (m3) (m3) (%) Office 651,752 639,119 599,950 642,532 599,950 -6.6% Retail 1,157,618 1,093,080 1,121,353 1,159,053 1,121,353 -3.3% Total 1,809,369 1,732,199 1,721,303 1,801,585 1,721,303 -4.5%
WATER INTENSITY – CANADIAN OFFICE AND RETAIL PROPERTIES
The table below provides a comparison of water use per square foot based upon GLA. Overall, water intensity for office and enclosed shopping centre properties in 2017 was 72.8 m3 per square foot per year, a decrease of 4.5% versus 2015 adjusted for weather and occupancy.
WATER INTENSITY BY ASSET TYPE (L/SF/YR)
Weather and Occupancy Adjusted
2015 2017 Change (%) Office 60.2 56.2 -6.6% Retail 89.3 86.4 -3.3% Total 76.2 72.8 -4.5%
MORGUARD.COM 21 MORGUARD 2017 SUSTAINABILITY REPORT
WASTE PERFORMANCE
Consistently tracking waste presents many challenges due to a lack of uniform reporting from hauling contractors and an absence of national standardization agencies. We have designed a unique waste-tracking template that has been piloted across our portfolio in an effort to obtain the most reliable data. In 2017 we captured waste data on 82 properties, a significant increase from our 2010 tracking of 60 properties.
WASTE PERFORMANCE – CANADIAN OFFICE AND RETAIL PROPERTIES
The tables below summarize the waste performance for the combined Canadian office and enclosed shopping centre portfolio, the office portfolio, and the enclosed shopping centre portfolio, for 2015, 2016 and 2017 respectively.
The percentage of waste recycled for the combined Canadian office and enclosed shopping centre portfolio was 53.7% in 2017 versus 51.5% in 2015.
WASTE PERFORMANCE (tonnes) OFFICE AND RETAIL PORTFOLIO 2015 2016 2017
Properties Represented 80 85 82 Total Waste Generated 14,317 14,217 13,716 Total Recycled 7,378 7,612 7,359 Waste to Landfill 6,939 6,603 6,361 % of Total Waste Recycled 51.5% 53.5% 53.7%
WASTE PERFORMANCE (tonnes) OFFICE PORTFOLIO 2015 2016 2017
Properties Represented 56 58 57 Total Waste Generated 4,408 4,327 4,216 Total Recycled 2,367 2,246 2,199 Waste to Landfill 2,042 2,079 2,017 % of Total Waste Recycled 53.7% 51.9% 52.2%
WASTE PERFORMANCE (tonnes) RETAIL PORTFOLIO 2015 2016 2017
Properties Represented 24 27 25 Total Waste Generated 9,909 9,891 9,499 Total Recycled 5,011 5,367 5,159 Waste to Landfill 4,898 4,524 4,344 % of Total Waste Recycled 50.6% 54.3% 54.3%
MORGUARD.COM 22 MORGUARD 2017 SUSTAINABILITY REPORT
CANADIAN RESIDENTIAL PROPERTIES
As of the 2016 report we have expanded our disclosure to include whole building energy and water data related to our Canadian Residential portfolio.
ENERGY CONSUMPTION – CANADIAN RESIDENTIAL
The tables below provide a summary of actual energy and water usage as well as energy and water related greenhouse gas emissions for 2015, 2016 and 2017. In 2017, energy use was down 7.6%, water use was up 3.4% and energy and water related GHG emissions were down 9.0% from our 2015 baseline.
ANNUAL ENERGY CONSUMPTION (ekWh) Actual 2015 2016 2017 Change (ekWh) (ekWh) (ekWh) (%)
Electricity 57,656,529 58,076,059 56,848,553 -1.4% Natural Gas 149,892,610 135,267,039 134,968,534 -10.0% Total 207,549,139 193,343,098 191,817,087 -7.6%
GREENHOUSE GAS EMISSIONS – CANADIAN RESIDENTIAL
ENERGY AND WATER RELATED GHG Actual 2015 2016 2017 Change (tCO2e) (tCO2e) (tCO2e) (%)
Electricity 5,917 5,793 5,652 -4.5% Natural Gas 27,595 24,891 24,827 -10.0% Water 129 135 141 8.6% Total 33,641 30,824 30,620 -9.0%
WATER CONSUMPTION – CANADIAN RESIDENTIAL
ANNUAL WATER CONSUMPTION (m3)
Actual 2015 2016 2017 Change (m3) (m3) (m3) (%) Water 1,594,777 1,651,186 1,649,653 3.4%
MORGUARD.COM 23 MORGUARD 2017 SUSTAINABILITY REPORT
ENERGY INTENSITY – CANADIAN RESIDENTIAL
The table below provides a summary of actual energy intensity in 2015, 2016 and 2017. Energy intensity for Canadian residential in 2017 was 33.8 ekWh per square foot per year, a decrease of 7.6% versus 2015.
ENERGY INTENSITY (ekWh/SF/yr) Actual 2015 2016 2017 Change %
Electricity 10.2 10.2 10.0 -1.4% Natural Gas 26.4 23.9 23.8 -10.0%
Total 36.6 34.1 33.8 -7.6%
WATER INTENSITY – CANADIAN RESIDENTIAL
The table below provides a summary of actual water intensity in 2015, 2016 and 2017. Water intensity for Canadian residential in 2017 was 295.1 litres per square foot per year, an increase of 3.4% versus 2015.
WATER INTENSITY (l/SF/yr) Actual 2015 2016 2017 Change
Water 285.3 295.4 295.1 3.4%
MORGUARD.COM 24 MORGUARD 2017 SUSTAINABILITY REPORT
SUSTAINABLE DEVELOPMENT – BUILDING AND SUPPORTING OUR COMMUNITIES
MANAGEMENT APPROACH
The United Nations Environmental Programme (UNEP) reports that buildings use about 40% of global energy, 25% of global water and 40% of global resources and emit approximately 1/3 of GHG emissions. Morguard’s Development activity is committed to reducing our impact. All new development is built to LEED standards and delivers meaningful amenities and services to surrounding communities. Development activity also focuses on enhancing the performance and competitiveness of our existing portfolio with green retrofit programs and leveraging relationships with Municipal and Provincial authorities to incorporate and encourage transit-oriented projects across the country.
However, at Morguard, Sustainable Development initiatives mean more than building to LEED Standards and providing amenities to communities. They are defined by overcoming a complex set of challenges in order to deliver best-in-class real estate solutions and create value for our portfolio. The following case studies highlight key projects and initiatives that took place in 2017. While the social benefits and impact of these projects are clear, the projects have returned immense value to Morguard shareholders and clients, creating a portfolio that is socially conscious and financially sound.
CASE STUDY: ENHANCING ASSET PERFORMANCE IN MIDTOWN TORONTO In 2009 two office towers at the corner of Bay and Bloor Streets in midtown Toronto were acquired (60 and 77 Bloor Street West). This is an important intersection where arterial roads and transit lines converge. It acts as the gateway to downtown Toronto and is home to Canada’s most prominent street retail—the Mink Mile. Despite the location, the Class B 1970s-era buildings were struggling to retain tenants and compete with newer office product emerging in Toronto’s downtown core.
At acquisition, 77 Bloor’s operating costs were $1.30/SF higher than those of competing comparable buildings. Its anchor tenant, TD Bank who occupies 50% of the building, had a major lease renewal coming up and was looking for newer space. To enhance the building’s competitive advantage, Morguard began a two-stage retrofit program that brought the building to a Class A LEED Gold: EB Standard, lowered the building’s energy and greenhouse gas emissions by 39%, water consumption levels by 40%, and operating costs for the tenants by $1.40/SF. Indoor air quality improved, with a 100% improvement to thermal comfort, and the building’s Energy Star Rating went from the 39th percentile to the 70th.
Upgrading the mechanical equipment freed up 21,269 SF of leasable office space in what was previously mechanical plenum space on the top floor of the building. The program also enhanced the pedestrian realm with a new aesthetic canopy with LED lighting; and created significant value for the building’s owners. Its financial success catalyzed Phase II, a major lobby and grade-level retail retrofit program that concluded in the second quarter of 2017. Phase II further enhanced the pedestrian realm along the west side of the building by amalgamating two struggling retail units with staggered store fronts into one cohesive unit that is now leased to Sephora for a 10-year term at a higher rental rate, reflective of the improved building condition.. The project was complicated: it required a zoning variance for added density, removal of asbestos, replacement of windows, and removal and replacement of major HVAC equipment—all while the building was fully operational and occupied. The building is now truly optimized and sustainable from both an environmental and business perspective. The program has secured a promising future for 77 Bloor Street West with extraordinary outcomes: a struggling office building is now competitive, environmentally sustainable, maximizing its potential for office and retail tenants and enhancing the streetscape at a major intersection. The building’s performance has been optimized, and so has the landlords’ investment. The successful program has inspired a similar project at 60 Bloor Street West, which will commence in early 2018.
MORGUARD.COM 25 MORGUARD 2017 SUSTAINABILITY REPORT
CASE STUDY: USING REAL ESTATE EXPERTISE TO FINANCE INFRASTRUCTURE AT THE ETOBICOKE WELLNESS CENTRE
In November 2017 the Etobicoke Wellness Centre (“EWC”), which is targeting LEED Gold, reached substantial completion.
In January 2016, after a rigorous 2-year bidding process, the William Osler Health System (“WOHS”) selected a Morguard-led consortium to design, build, finance and manage a 156,000 SF medical office building for a 40-year period as the gateway project for a major campus redevelopment at the Etobicoke General Hospital in Rexdale, ON. The Etobicoke Wellness Centre sits at the foot of the campus, welcoming visitors at street level and connecting them to the Hospital via an interior corridor/“street” and a bridge. The $52.4 million 6- storey hospital/office hybrid defines a new model for delivering healthcare by relocating less capital-intensive, non-critical programs from the hospital environment into a cost-effective office building, making the patient experience less intimidating. It also uses an alternative financing model to reallocate financial, construction and operating risk to the private sector. Morguard’s commitment to sustainable development has enabled the project to surpass WOHS’s initial requirement of LEED Silver. This project is to be celebrated not only for creating a cost-effective model for delivering healthcare on a patient-friendly scale, but also for overcoming a unique set of challenges that pushed the industry to innovate and use commercial real estate expertise to serve the public. Challenges involved negotiating a complex deal structure that almost made the project financially unviable; adhering to tight time lines on a shared construction site; and delivering a best-in-class office building that revitalizes the Rexdale campus and streetscape along Humber College Boulevard.
Morguard has developed an impressive building, but also an investment solution that satisfies the requirements of a diverse group of stakeholders: WOHS and the surrounding Rexdale community received a beautiful and rejuvenating upgrade to the Humber College Blvd. streetscape and the Hospital Campus, as well as much needed Class A, LEED Gold, medical office infrastructure at an affordable cost without taking on construction or lifecycle risk and without having to provide a public sector guarantee. Morguard and its joint venture partner invested in a vehicle with the features of an inflation indexed bond with no interest rate risk for a 40-year period. Through a fixed rate 40-year mortgage, the Morguard team created an investment structure that delivered a positive cost/return arbitrage driven by an inflation linked rent. The bond-like quality of the investment and its quasi-government covenant provide compelling fundamentals while allowing our health care system to deliver services in a friendlier and more cost effective manner.
CASE STUDY: CREATING TRANSIT ORIENTED MIXED-USE COMMUNITIES This decade has ushered in a proliferation of transit projects as municipalities and provincial authorities across the country invest in urban growth. Population growth, increased urban density and skyrocketing housing prices in cities like Vancouver and Toronto require expanded transit networks that service the suburbs and neighbouring municipalities if they are to remain sustainable hubs with global cachet. Morguard has not only been a partner to transit authorities in accommodating at least five Light-Rail Transit (LRT) stations on properties in different municipalities across the country, but is also establishing a track record of repositioning tired retail assets into intensified, transit oriented mixed-use communities.
In 2005 Morguard began a three-phased project to reposition a tired strip centre, owned by one of Morguard’s pension fund clients, outside of Victoria in Saanich, BC. Today ‘Uptown’ is an award winning, 830,000 SF mixed-use development and a primary transit hub for Southern Vancouver Island. Phase I opened in 2010, Phase II in 2012 and Phase III began in March 2015. Uptown has set a new standard for sustainable commercial development in Canada as the first project to be designed to LEED Gold Neighbourhood Development standards and has become a major commercial hub for Southern Vancouver Island. The project involved demolishing a 225,000 SF strip mall and replacing it with a state-of-the-art mixed-use urban neighbourhood. The phased construction has allowed continuous operation of existing retailers throughout the redevelopment process. Phases I and II delivered 258,000 square feet of Class A, LEED Gold Office space in a mixed-use streetscape format with 572,000 square feet of retail. Redeveloping Uptown involved creating a unified mixed-use urban-style campus while a major existing tenant (Wal-Mart) remained open
MORGUARD.COM 26 MORGUARD 2017 SUSTAINABILITY REPORT
without compromising the project’s budget or schedule. Phase III is anchored by a 40,000 SF Whole Foods Market which opened in the fall of 2016. Uptown has been a catalyst for the emerging urban core of Saanich and regional infrastructure development: after construction began on Uptown, the local regional transit authority purchased several adjacent sites on which it is planning to construct the primary transit hub for Southern Vancouver Island.
Similar initiatives are in place in the Metro Vancouver and Metro Toronto Areas. The Coquitlam Centre is a 1.2 million SF shopping centre in Coquitlam, BC. Since the mid-1990s Morguard has been working with TransLink for the Lower Mainland, BC Government, City of Coquitlam to create a station on the Evergreen Line at the shopping centre that opened in 2017, connecting it to the regional transit network and downtown Vancouver. As a Transit Oriented Development (“TOD”) site, work is underway to rezone the Centre for increased density and mixed-use. In Ontario, the Morguard-managed and co-owned Bramalea City Centre has been identified as a prime location intensification and mixed-use development. Already in the heart of Brampton and serviced by multiple bus routes, the 1.4 million SF shopping centre is in the process of being rezoned to accommodate 14 million SF of added mixed-use density.
In Edmonton, Morguard is working on a rezoning initiative at Bonnie Doon Shopping Centre. Construction for an LRT station at the corner of Whyte Avenue and 83rd Street is underway, which will link the site with the downtown via the Valley Line by 2021. Morguard is actively working with the City to make the site a transit Hub where the Valley Line could connect with Centre Line. Work is underway to rezone 600,000 SF of retail mall into a 4.8 million SF mixed-use development.
MORGUARD.COM 27 MORGUARD 2017 SUSTAINABILITY REPORT
CHARITY PROGRAMS – SUPPORTING OUR COMMUNITIES
Morguard is committed to being a supportive partner in the communities in which we operate. We strive to have a lasting, positive impact through responsible development and property management, supporting community initiatives and encouraging employee volunteerism.
To help our communities prosper, Morguard supports a broad range of social causes through partnerships with established charitable organizations. When it comes to our people, we focus efforts on teamwork and education. We allow the passions of Morguard’s employees to motivate them to help make our communities better places to live and do business.
Using Morguard’s national presence, we champion issues at the local, regional and national level that have an impact on the built environment. Our goal is to ensure both socially and physically sustainable communities for generations to come.
Our efforts to strengthen the communities in which we operate include both direct charitable giving and providing support to social cause marketing campaigns. Once again, in 2017 Morguard employees, tenants and other business partners came together to raise funds and awareness for a wide variety of charitable causes. Among them:
• “BeYou” Campaign – In partnership with Big Brother Big Sisters of Canada, Morguard’s annual BeYou campaign helps young women across Canada increase their self-esteem, personal growth and self-worth. Local ambassadors, free interactive workshops and events that catered specifically to young women in the community were held at each of Morguard’s owned and managed Canadian enclosed shopping centres. The 2017 BeYou Campaign garnered over 114 million impressions in print, television, radio and online.
• Morguard Charity Golf Classic – In 2017, the Morguard Annual Charity Golf Classic raised $150,000, bringing the cumulative total to over $1,000,000. Past recipients include LOFT Community Services, Trillium Heath Partners Foundation, Habitat for Humanity Mississauga, the Mississauga Foodbanks and the Centre for Addiction and Mental Health (CAMH).
• Easter Seals Drop Zone – Since 2011, Morguard has been the host and presenting sponsor of Easter Seals Drop Zone Ottawa in support of families of children with physical disabilities. The Drop Zone event features a 20-storey rappel down the outside of a Morguard office building. Morguard has hosted and been the main sponsor of the event for seven years, raising over $700,000 in total, including $90,000 in 2017.
• Local programs with national participation – Morguard offices and properties across the country participated in local community initiatives including food bank drives, toy drives, winter coat drives, Christmas Hampers, the Shoebox Project and National Denim Day. The chart below outlines our direct financial charitable donations. These figures include donations to charitable organizations and corporate sponsorships.
MORGUARD.COM 28 MORGUARD 2017 SUSTAINABILITY REPORT
MORGUARD'S CHARITABLE DONATIONS
The chart below outlines our direct financial charitable donations as a percentage of earnings. These figures include donations to charitable organizations and corporate sponsorships.
2015 2016 2017
Q1 Total $11,572 59,146 34,830 Q2 Total $41,992 20,362 49,747 Q3 Total $87,749 99,109 26,906 Q4 Total $70,918 43,776 87,227
Total net charitable contributions and sponsorships $212,231 $222,394 $198,710
Earnings before income taxes & $269,551,000 $369,123,000 $259,839,000 Market value adjustment Charitable giving as percentage of earnings before income 0.08% 0.06% 0.08% taxes
Striving to improve the communities in which we operate, either by reducing the impacts of our developments or through localized philanthropy, is not only our responsibility – it is also good business. It enhances public relations efforts, mitigates related risks, reduces costs and, ultimately, ensures that our properties are valuable to the communities of which they are a part. Engaging employees in such community-building activities improves satisfaction and retention, while positively contributing to society.
MORGUARD.COM 29 MORGUARD 2017 SUSTAINABILITY REPORT
RESPONSIBLE EMPLOYER – EMPOWERING OUR PEOPLE
MANAGEMENT APPROACH
Sustainability is about more than just properties and the environment – it’s also about people. We strive to create a workplace culture of respect, inclusion, health, safety and equal opportunity. By empowering our people, we aim to attract, retain and engage the high-quality talent needed to drive business success and ultimately lead to a sustainable company.
In 2017, Morguard was recognized as one of Canada’s Safest Employers for the fifth year in a row in the Retail and Services category for our Canadian commercial portfolio. This unprecedented recognition demonstrates strong employee and tenant engagement with our Occupational Health and Safety (OH&S) strategy is indicative of our commitment to ensuring the highest safety standards at our owned and managed portfolio.
CODE OF CONDUCT, EQUAL OPPORTUNITY AND DISCRIMINATION
Our Code of Business Conduct (“Code”) addresses matters of equal opportunity and workplace harassment. A concern for personal dignity and the individual worth of each person is an indispensable element of the standards established under our Code. Morguard provides equal employment opportunity to all qualified persons.
When joining Morguard, all employees sign and agree to abide by our Code and to maintain a workplace free of harassing or discriminating behaviour, particularly with respect to race, colour, gender, age, faith, national or ethnic origin, sexual orientation, gender identity, or disability. We define harassment to include a variety of unacceptable conduct, including violence, unwelcome sexual advances, gestures, jokes, slurs, bullying and verbal or physical conduct that upsets the work performance of another. Violation of our Code can result in a range of disciplinary actions, including termination of employment.
MORGUARD.COM 30 MORGUARD 2017 SUSTAINABILITY REPORT
OUR PEOPLE
In 2017, Morguard employed 1,465 people (1,211 in Canada and 254 in the U.S.). This number includes employees on a leave of absence (maternity, long-term disability and an unpaid inactive leave) but excludes employees of our Hotel portfolio as they fall under the management practices of the individual hotel management company.
Employees by Employment Contract - Canada
2016 % 2017 % Permanent Full-Time Canada 1,005 79% 963 80% Permanent Part-Time Canada 143 11% 130 11% Temporary Full-Time Canada 56 4% 69 6% Temporary Part-Time Canada 65 5% 49 4%
Total Employees Canada 1,269 1,211
Employees by Employment Contract – U.S.
2016 % 2017 % Permanent Full-Time U.S. 256 99% 244 96% Permanent Part-Time U.S. 2 1% 10 4% Temporary Full-Time U.S. 0 - 0 - Temporary Part-Time U.S. 0 - 0 -
Total Employees U.S. 258 254
Employees by Employment Type - Canada
2016 % 2017 % Administrative/Operations Canada 829 65% 777 64% Professional/Technical Canada 227 18% 229 19% Middle Management Canada 105 8% 98 8% Senior Management Canada 89 7% 88 7% Executives Canada 19 2% 19 2%
Employees by Employment Type – U.S.
2016 % 2017 % Administrative/Operations U.S. 142 55% 148 58% Professional/Technical U.S. 67 26% 57 22% Middle Management U.S. 38 15% 39 15% Senior Management U.S. 9 4% 9 4% Executives U.S. 2 <1% 1 <1%
MORGUARD.COM 31 MORGUARD 2017 SUSTAINABILITY REPORT
DIVERSITY BY GENDER AND EMPLOYMENT TYPE
Employment by Gender and Type – Canada 2016 % 2017 %
Males Canada 563 44% 541 45% Females Canada 706 56% 670 55%
MALES Administrative/Operations Canada 346 42% 335 43% Professional/Technical Canada 93 41% 90 39% Middle Management Canada 53 50% 50 51% Senior Management Canada 56 63% 51 58% Executive Canada 15 79% 15 79%
FEMALES Administrative/Operations Canada 483 58% 442 57% Professional/Technical Canada 134 59% 139 61% Middle Management Canada 52 50% 48 49% Senior Management Canada 33 37% 37 42% Executive Canada 4 21% 4 21%
Employment by Gender and Type – U.S. 2016 % 2017 %
Males U.S. 126 49% 116 46% Females U.S. 132 51% 138 54%
MALES Administrative/Operations U.S. 92 65% 87 59% Professional/Technical U.S. 19 28% 16 28% Middle Management U.S. 7 18% 5 13% Senior Management U.S. 7 78% 7 78% Executive U.S. 1 50% 1 100%
FEMALES Administrative/Operations U.S. 50 35% 61 41% Professional/Technical U.S. 48 72% 41 72% Middle Management U.S. 31 82% 34 87% Senior Management U.S. 2 22% 2 22% Executive U.S. 1 50% 0 -
MORGUARD.COM 32 MORGUARD 2017 SUSTAINABILITY REPORT
Diversity by Age and Gender - Canada 2016 % 2017 %
BY AGE Under 30 Canada 236 19% 218 18% 30–50 Canada 551 43% 522 43% 50+ Canada 482 38% 471 39%
MALES BY AGE 78 33% 35% Under 30 Canada 76 239 43% 44% 30–50 Canada 229 246 51% 51% 50+ Canada 239
FEMALES BY AGE 158 67% 142 65% Under 30 Canada 312 57% 56% 30–50 Canada 294 236 49% 49% 50+ Canada 234
Diversity by Age and Gender – U.S. 2016 % 2017 %
BY AGE 54 21% 21% Under 30 U.S. 54 123 48% 48% 30–50 U.S. 122 81 31% 31% 50+ U.S. 78
MALES BY AGE
Under 30 U.S. 26 48% 22 41%
30–50 U.S. 55 45% 57 47%
50+ U.S. 45 56% 37 47%
FEMALES BY AGE
Under 30 U.S. 28 52% 32 59%
30–50 U.S. 68 55% 65 53%
50+ U.S. 36 44% 41 53%
MORGUARD.COM 33 MORGUARD 2017 SUSTAINABILITY REPORT
Employee Turnover - Canada
2016 % 2017 % Employee Turnover Canada* 261 21% 257 21% BY GENDER Males Canada 94 36% 109 42% Females Canada 167 64% 148 58%
BY AGE Under 30 Canada 101 39% 95 37% 30–50 Canada 95 36% 90 35% 50+ Canada 65 25% 72 28%
Employee Turnover – U.S.
2016 % 2017 % Employee Turnover U.S. 102 40% 98 39% BY GENDER Males U.S. 43 42% 52 53% Females U.S. 59 58% 46 47%
BY AGE Under 30 U.S. 33 32% 18 18% 30–50 U.S. 53 52% 57 58% 50+ U.S. 16 16% 23 24%
MORGUARD.COM 34 MORGUARD 2017 SUSTAINABILITY REPORT
EMPLOYMENT COMPENSATION AND BENEFITS
Our compensation and benefits program is intended to attract, motivate and retain high-quality employees. Base salary and bonus programs reward performance and responsibility. Each year, we review third-party employment surveys to ensure that our compensation and benefits plans are competitive with those of our peers in the real estate industry.
In Canada, Morguard provides health, dental, life insurance, parental leave, and short and long-term disability programs for all eligible employees, paying 100% of the associated premiums with the exception of long-term disability. Long-term disability premiums are 100% employee paid. We also provide a non-contributory, defined-contribution pension plan program to eligible employees.
EMPLOYMENT COMPENSATION AND BENEFITS
Employment Vacation Group Life Insurance, Short-Term Long-Term Morguard Extended Health Care, Disability Disability Pension Plan Employee Assistance, and Coverage Coverage Travel Assistance
Canada Paid vacation Yes, based on a minimum 20 Yes – Full-time and Salary or hourly Salaried Permanent allowance; 15 hours of work per week part-time (working employees (working employees days per annum, more than 20 more than 20 eligible up to sixth year; hours/week) salaried hours/week), except increases employees those employees thereafter receiving lodging benefits Hourly paid employees or those working fewer than 20 hours/week through Canada Employment Insurance Program
U.S. One to five years’ Employer paid 1X annual salary Accrued time in Full time only (35+ 401k plan; Permanent, service: 80 hours life with AD&D; employer shares catastrophic illness hours); salary or employer Full time paid, up to sixth cost of medical; employee pays bank hourly employee matches up to year; increases 100% of dental and vision pays 100% of LTD 5% of thereafter coverage premium compensation if employee participates
Canada 4% of earnings n/a Canada n/a n/a Temporary Employment Insurance Program
COLLECTIVE AGREEMENTS
Less than 2% of our workforce is unionized. Four employees in Canada are governed by a collective agreement between Morguard and the International Union of Operating Engineers (Local 772). Seventeen employees in Canada are governed by a collective agreement between Morguard and the Universal Workers Union L.I.U.N.A. (Local 183).
All employees are treated with dignity and respect, and annual reviews are undertaken to ensure that compensation and benefits programs are competitive within the relative markets. Further, Morguard respects the applicable employment legislation in any jurisdiction in which it operates including abiding by Employment Standards Acts and provincial Ministries of Labour regarding minimum notice periods.
MORGUARD.COM 35 MORGUARD 2017 SUSTAINABILITY REPORT
HEALTH AND SAFETY PROGRAMS
Our employees record over three million work hours annually (including overtime) in various environments, including construction sites and facility maintenance. We are committed to providing them with a clean, safe and healthy work environment.
To achieve this goal, we all must:
• recognize a shared responsibility; • follow all safety rules and practices; • co-operate with the government officials who enforce safety legislation; • take necessary steps to protect ourselves and fellow employees; • attend required safety training; and • immediately report all accidents, injuries and unsafe practices or conditions.
Our Health and Safety group works to identify, prevent and mitigate the risks of workplace accident, injury or illness and to provide us with the required tools to comply with the requisite health and safety legislation. To that end, the department manages the Morguard health and safety policy and procedures, as well as the Morguard emergency and evacuation procedures. In addition, our workforce is represented at all levels of the company on a formal Health and Safety committee, which oversees employee concerns.
The main components of our health and safety initiatives include:
• employee and expert consulting; • training; • record-keeping; • communication; and • monitoring of relevant legislation and industry best practices.
The Morguard Contractor Management Program (“CMP”) is a key component of our health and safety management program. As a part of our stringent pre-qualification process, each contractor is required to sign the Morguard Contractor Safety Manual as well as provide copies of their Occupational Health & Safety (“OHS”) policy, employee records of training and evidence of their safety programs. Contractors that are non- compliant are not permitted to work at Morguard properties. The CMP is electronically maintained and continuously monitored for compliance.
In 2017, Morguard enhanced the Morguard OHS Management System. The OHS is an online tool that promotes engagement of all sites and houses all of our OHS programs/documentation, including all contractor documentation. It is an open system to which all employees have access. All properties can see information on the full portfolio (but can only manipulate data on their own site). The tool has enabled Morguard to monitor and track the program across the company for compliance with increased rigour.
In 2017 our total Canadian reportable workplace injuries increased to 15, still below industry standards for companies in the Real Estate industry. We witnessed an increase in incident frequency and severity results compared to 2016. Some injuries reported were more serious in nature and consequently led to an increase in lost work days. These accidents were mainly due to falls on staircases, strains and sprains. Four injury occurrences account for 75% of the lost time incurred.
With respect to highlights, this year 28 team members received industry recognized certification training for health and safety (Joint Health and Safety Committees, Ontario). In 2018, Morguard’s OHS strategy will focus on programs aimed at eliminating the greatest risks to worker health and safety and the early and safe return to work (modified and transitional work) to reduce lost days and injury severity. There will be a continued
MORGUARD.COM 36 MORGUARD 2017 SUSTAINABILITY REPORT
emphasis on robust reporting of incidents, finding new ways to communicate front line safety awareness and share the knowledge and best practices across Morguard.
Looking ahead, our business and workplace is changing and the focus on our core business operations needs to continue to build on and include comprehensive safety programs and safe work practices.
OCCUPATIONAL HEALTH AND SAFETY1
LOST-TIME INJURY RATES2 2016 2017 Lost-time injury rate per 100 employees (Canada & U.S.) 0.9 1.5 Lost-time injury rate per 100 employees (Canada) 0.6 1.2 Lost-time injury rate per 100 employees (U.S.) 2.3 2.8
LOST WORK DAYS 2016 2017 Total number of lost work days (Canada & U.S.) 75 386 Total number of lost work days (Canada) 48 336 Total number of lost work days (US) 27 50
REPORTED WORKPLACE INJURIES 2016 2017 Total reported workplace injuries that involve lost employee time (Canada & U.S.) 14 22 Total reported workplace injuries that involve lost employee time (Canada) 8 15 Total reported workplace injuries that involve lost employee time (U.S.) 6 7
WORKPLACE FATALITIES 2016 2017 Workplace Fatalities (Canada & U.S.) 0 0
1The number of employees used for OH&S calculations is based on total employees. Excludes hoteling division.
2 For calculating injury rates, the 200,000 figure represents the total number of hours worked by 100 employees in one year, based on 50 work weeks at 40 hours per 2,000 total hours per employee
MORGUARD.COM 37 MORGUARD 2017 SUSTAINABILITY REPORT
TRAINING AND PROFESSIONAL DEVELOPMENT
Our learning management system (“LMS”), called Path, is a key content delivery platform of Morguard’s training and development program. It offers a library of on-demand resources with over 4,700 eLearning courses, videos, sessions and materials on topics that align to Morguard’s specific requirements including core competencies, company’s processes and tools, compliance, desktop productivity and other soft and technical skills. These offerings allow for knowledge transfer, course upgrades and assist in career goal setting for our employees.
In 2017, the focus across the organization was on the implementation of Yardi 7S, a new property management and accounting platform. The training associated with the Yardi 7S implementation was tracked and contained using Path. In doing so, we were able to leverage Path to schedule instructor-led training and track employee’s status of training.
The Yardi 7S implementation increased the number of training hours in 2017, most notably due to changes in various purchasing processes at Morguard. The efforts to establish this training included creation of 41 new learning resources, mainly materials and sessions. The changes in purchasing processes contributed to 651 hours in training with remaining training contributing 9,391 hours to the total training hours reported in Canada. In the U.S., 23 employees participated in Yardi 7S training for a total of 296 hours.
We provided an additional 623 and 1,237 training resources (e.g. videos, tests, e-learning, events, etc.) in 2016 and 2017 respectively. Included were 41 Yardi 7S specific resources in 2017.
MORGUARD.COM 38 MORGUARD 2017 SUSTAINABILITY REPORT
TRAINING
2016 2017
Non- Non-
Management Management Total Management Management Total
Total Employees eligible for training1 876 266 1,142 909 261 1,170
Training hours by employee category
Total training hours per employee category 5,746 1,435 7,181 12,772 4,438 17,210 Training hours per user 6.56 5.39 6.29 14.05 17.00 14.71
Total training hours by training type e-learning 2,515 582 3,097 2,069 545 2,614
Self-learning (user documentation and videos) 1,000 351 1,351 966 328 1,294
Class/WebEx-powered sessions 462 181 643 7,168 3,258 10,426 External 1,769 321 2,090 2,569 307 2,876
Total training hours by subject
Morguard processes and tools 562 167 729 7,931 3,482 11,413 Compliance 1,711 371 2,082 1,906 571 2,477 Desktop productivity 337 110 447 186 31 217
Other soft and technical skills 3,136 787 3,923 2,749 354 3,103
1 Represents an average number of employees in Canada who are eligible for access to the Morguard Learning Management System. (Those excluded are a group within our Canadian Residential division (superintendent level and below) and temporary employees who are with us on a term less than six months).
MORGUARD.COM 39 MORGUARD 2017 SUSTAINABILITY REPORT
PERFORMANCE REVIEWS
By ensuring that all eligible employees receive an annual performance review, we foster a culture of responsibility and recognition for the contributions that employees make toward achieving business goals. This initiative is a critical tool for engaging employees in the organization’s strategic priorities and providing effective feedback and opportunities for professional development.
We track performance review matters separately in Canada and the U.S. In Canada, temporary or new permanent employees with fewer than three months of service, and employees on leave for the entire performance review period, are ineligible for annual reviews. In the U.S., temporary or new permanent employees with fewer than six months of service are ineligible for annual reviews.
Annual Employee Performance Reviews (Canada)
2017 Performance reviews completed 811
Eligible employees 1,006
Percent coverage 81%
Annual Employee Performance Reviews (U.S.) 2017 Performance reviews completed 174 Eligible employees 189 Percent coverage 92%
People are the means through which any organization takes action to improve its performance. We strongly believe that an engaged and motivated workforce is our greatest asset in enhancing stakeholder value and, ultimately, leading to a sustainable company.
MORGUARD.COM 40 MORGUARD 2017 SUSTAINABILITY REPORT
OUR SUSTAINABLE HOUSE – LEADING BY EXAMPLE
MANAGEMENT APPROACH
As both a landlord and a tenant, we strive to “walk the walk” in our corporate offices first, inspiring our stakeholders to join us. We regularly pilot innovative sustainability initiatives in our own offices before applying them in tenant spaces.
As a corporation, we also demonstrate our commitment to sustainability through compliance in environmental affairs and implementation of responsible governance practices.
GREENING OUR OFFICES
Morguard is actively working to reduce the environmental impacts of operations at our 11 corporate offices across Canada and the U.S. Our strategy is to engage our employees in doing their part and, in turn, use the lessons learned to engage our tenants in improving their spaces. Office representatives follow an internal best-practice information guide on reducing our offices’ environmental footprints and addressing opportunities such as consumable supplies, kitchen and cleaning materials, catering and composting.
ENVIRONMENTAL POLICIES AND PROCEDURES – ENVIROLINK
Morguard monitors the compliance of all Morguard properties with relevant environmental legislation, identify potential risks, and implement environmental policies and procedures using our environmental management system (“EMS”).
Our EMS incorporates policies, procedures and reporting related to environmental legislative compliance, best practices and employee training. It is applied to remediations and assessments during all stages of the property cycle, including acquisition, development and daily property management. It is tailored to issues surrounding PCBs, asbestos, CFCs, mould and storage tanks, as well as tenant relations and incident reporting.
A key component of our EMS is EnviroLink – a web-based portal that is used to track all work and assessments completed at every Morguard property by property management, our Environmental Affairs group and third-party consultants.
MORGUARD.COM 41 MORGUARD 2017 SUSTAINABILITY REPORT
LAND CONTAMINATION, REMEDIATION, AND COMPLIANCE
We are committed to environmental compliance and best practices in safe land remediation, the removal or treatment of toxic materials/hazardous waste and the restoration of natural environments.
Morguard applies significant resources to ensure that environmental matters meet legislative compliance and the needs of our tenants, clients and community. In 2017, the operating budget for our internal environmental team was approximately $1 million. Project costs and resources go toward environmental matters ranging from Phase 1 environmental site assessments (“ESA”) and annual asbestos inspections to full-scale soil and groundwater remediation.
In 2017, Morguard’s environmental team tracked 25 minor spills on managed properties with an approximate volume of 810 L. This represents a reduction of 10 spills and 183 L compared to last year. Tracking includes even very minor spills such as a fuel leak from a customer’s vehicle in a shopping centre parking area. Morguard was not fined or sanctioned for non-compliance with environmental laws and regulations in 2017.
As part of Morguard’s continued effort to improve the environmental health of our managed properties, our Asbestos Management Program takes a proactive approach to the removal of asbestos containing materials. The removal of asbestos not only creates a healthier and risk-free environment for our tenants and occupants, but it alleviates future regulatory expenditures for these materials and facilitates stronger lease deals. In 2017, over $0.66 million was spent on the removal of asbestos across our portfolios.
Along with our EMS and sustainability principles, we have applied tools such as the “precautionary approach” to our sustainability activities. The precautionary approach states that where there are threats of serious or irreversible damage, a lack of full scientific certainty will not be used as a reason for postponing cost-effective measures to prevent environmental degradation or public harm.
We believe that taking responsibility for identifying and managing the environmental impacts of our business is a vital step toward achieving sustainability. It adds value to our properties, ensures that employees and tenants are safe, reduces legal and public relations risks and demonstrates a commitment to being a leading property manager.
Our commitment to lead by example, from the greening of Morguard’s offices to the utilizing of first-class environmental management systems, is intended to inspire others to join us on our sustainability journey.
MORGUARD.COM 42 MORGUARD 2017 SUSTAINABILITY REPORT
RESPONSIBLE GOVERNANCE
MANAGEMENT APPROACH
Morguard is committed to excellence in corporate governance and recognizes that it is essential to the well- being of any corporation.
For full disclosure of Morguard’s governance practices, including executive compensation, please see Morguard Corporation’s most recent Management Information Circular and Annual Information Form, which are posted to SEDAR and accessible from the Investor Relations section of morguard.com.
Our Board of Directors and its four subcommittees regularly review and update governance practices in keeping with their fiduciary duties and our strategic vision. The Board receives routine information from management on all aspects of the Morguard operation, including sustainability risks and opportunities, and is involved in a yearly corporate planning process that culminates in an annual strategic plan. The annual strategic plan forms the basis on which the Board evaluates the performance of management, both in executing the plan and in identifying corporate risks and opportunities. The Corporate Governance and Nominating Committee of the Board provides review, guidance, and approval of our sustainability report and in so doing ensures that ESG performance indicators are reviewed at least annually.
BUSINESS CONDUCT
Our commitment to high ethical standards and corporate responsibility is reflected in our Code of Conduct, which applies to all directors, officers and employees. The Human Resources Committee of the Board monitors compliance and ensures that all employees review and formally acknowledge their compliance with our Code every two years.
We strive to maintain positive, professional and appropriate relationships with public officials and government agencies and strictly forbid any inappropriate lobbying activities. Our Code of Conduct provides specific guidance with respect to customer and government relationships, gifts and entertainment, bribery, money laundering and the avoidance of conflicts of interest. It specifically forbids the giving, offering, authorizing, or taking of bribes of any kind, including, but not limited to, money, favours, unusual gifts or entertainment, or the like.
Known or suspected violations of our Code must be immediately reported to a supervisor or other senior authority within the company. Our Whistleblower Policy ensures that nobody who, in good faith, reports such a violation will suffer any negative consequences. Detailed procedures are available to all staff and include a confidential Ethics Hotline.
RESPONSIBLE CONTRACTING
We require contractors and suppliers to maintain rigorous operational and ethical standards. Pre-qualification guidelines incorporate strong standards for the hiring of building service contractors, including maintenance, security, and cleaning staff. These guidelines serve to reduce public relations risk, increase goodwill and ensure that contractors provide professional service to Morguard’s properties and tenants while respecting their own employees. They have been externally reviewed and ranked as leading practices among Canadian commercial real estate companies.
MORGUARD.COM 43 MORGUARD 2017 SUSTAINABILITY REPORT
APPENDIX A – GLOSSARY
BOMA Building Owners and Managers Association BOMA BEST BOMA Building Environmental Standards CaGBC Canadian Green Building Council CDD cooling degree days CRB Certified Rental Building CRESS construction and real estate sector supplement CSR corporate sustainability and responsibility ekWh equivalent kilowatt hours EMS environmental management system ESG environment, social, and governance GHG greenhouse gas GLA gross leasable area GREEN LINK Morguard’s proprietary green building program GRI Global Reporting Initiative HDD heating degree days ICSC International Council of Shopping Centers KW kilowatts LEED Leadership in Energy and Environmental Design PJ petajoule REALpac Real Property Association of Canada REC Renewable Energy Credit RPI responsible property investment SF square feet tC02e tonnes of carbon dioxide equivalent USGBC United States Green Building Council
MORGUARD.COM 44 MORGUARD 2017 SUSTAINABILITY REPORT
APPENDIX B – BUILDING PERFORMANCE – WEATHER AND OCCUPANCY MODEL
In 2016, in addition to updating our baseline, we also implemented a more rigorous weather adjustment modelling for the Canadian office property and enclosed shopping centre portfolios. This involved completing a regression analysis of energy and water performance versus weather data specific to the nearest weather station of each individual property. This allows current and future energy and water performance to be measured against a weather adjusted 2015 baseline. We continued to apply this approach in 2017.
The weather modelling is on a utility account basis. For each utility account, an equation is developed based upon statistical analysis, which relates energy and water use to the heating and cooling-degree days specific to a facility’s weather conditions, and heating and cooling balance points specific to the property. The set of equations represent the weather model. Weather data from multiple weather stations is collected daily, and applied on a monthly basis to derive the weather-adjusted baseline.
An occupancy adjustment of 10 kWh per square foot of vacant space was applied to electricity use. The adjustment is based upon an assumed portion of 62% of electricity use being related to occupancy. An increase in occupancy would result in an expected increase in electricity of 10 kWh per year per change in occupied square footage. Occupancy data was collected by property on a monthly basis. The change in occupied space was averaged over the year, and a corresponding adjustment was then made to the 2015 baseline.
OCCUPANCY ADJUSTMENT MODEL Electricity End-Use % Share Office Equipment 4% Computers 10% Lighting 17% Occupancy Related HVAC 31% Total 62%
Whole building electricity use (kWh/ft2) 16.0 Assumed reduction for vacant space (kWh/ft2) 10.0
MORGUARD.COM 45 MORGUARD 2017 SUSTAINABILITY REPORT
APPENDIX C – GRI CONTENT INDEX
This report was prepared in “accordance with” the “Core” option of the 2016 Global Reporting Initiative (“GRI”) Standard sustainability reporting guidelines, including the Construction and Real Estate Sector Supplement (“CRESS”).
AIF = Available within the Annual Information Form and other continuous disclosure materials at morguard.com.
Page Omission number GRI Standard Disclosure (s) and/or Part Omitted Reason Explanation URL(s) Organizational profile 102-1 Name of the organization 2
102-2 Activities, brands, products, and 2 To the best of our knowledge at the time of reporting, none of services our products of services are banned or the subject of public debate. All of our developments include a stakeholder engagement process to respond to questions.
102-3 Location of headquarters 3
102-4 Location of operations 3
102-5 Ownership and legal form AIF
102-6 Markets served 2-3
102-7 Scale of the organization 2-3
102-8 Information on employees and 30-34 other workers 102-9 Supply chain 7 Morguard uses a large number of suppliers, including property cleaning, maintenance, security and professional services firms. A full accounting of these organizations is beyond the scope of this report. 102-10 Significant changes to the 7 There are no significant changes to our supply chain to report. organization and its supply chain
102-11 Precautionary Principle or 42 approach 102-12 External initiatives 8
102-13 Membership of associations 8
Strategy 102-14 Statement from senior decision- 1 maker Ethics and integrity 102-16 Values, principles, standards, 4, 5, 9, and norms of behavior 41 & 43 Governance 102-18 Governance structure 43
102-19 Delegating authority 4, 43
102-20 Executive-level responsibility for 4, 43 economic, environmental, and social topics
MORGUARD.COM 46 MORGUARD 2017 SUSTAINABILITY REPORT
102-21 Consulting stakeholders on 4, 6, 43 economic, environmental, and social topics 102-22 Composition of the highest AIF vi. membership of under- Information Specific governance body and its committees represented social groups; unavailable information on vii. competencies relating to 102-22 vi, vii, & economic, environmental, vii was and social topics; unavailable at viii. stakeholder the time of representation publication
102-23 Chair of the highest governance AIF body 102-24 Nominating and selecting the AIF Criteria used for nominating Information Specific highest governance body and selecting highest unavailable information on governance body members, 102-24 vi was including whether unavailable at and how; the time of iv. expertise and experience publication relating to economic, environmental, and social topics are considered.
102-25 Conflicts of interest AIF
102-26 Role of highest governance body 4, 43, in setting purpose, values, and strategy AIF
102-27 Collective knowledge of highest 43 governance body 102-28 Evaluating the highest Whole indicator Information Process not governance body's performance unavailable implemented specifically for ESG 102-29 Identifying and managing 6, 9, 43 economic, environmental, and social impacts 102-30 Effectiveness of risk 43 management processes 102-31 Review of economic, 43 environmental, and social topics
102-32 Highest governance body's role 43 in sustainability reporting
102-33 Communicating critical concerns 43
102-34 Nature and total number of Whole indicator Information Total number critical concerns unavailable and nature of critical concerns are not currently tracked and are deemed confidential to internal management 102-35 Remuneration policies AIF
MORGUARD.COM 47 MORGUARD 2017 SUSTAINABILITY REPORT
102-36 Process for determining AIF remuneration 102-37 Stakeholders involvement in Whole indicator Information Process not remuneration unavailable implemented specifically for external stakeholders 102-38 Annual total compensation ratio Whole indicator Information Process not unavailable implemented specifically for total compensation ratio calculation 102-39 Percentage increase in annual Whole indicator Information Process not total compensation ratio unavailable implemented specifically for total compensation ratio calculation Stakeholder engagement 102-40 List of stakeholder groups 6
102-41 Collective bargaining 35 agreements 102-42 Identifying and selecting 6 stakeholders 102-43 Approach to stakeholder 6 engagement 102-44 Key topics and concerns raised 6
Reporting practice 102-45 Entities included in the 2, AIF consolidated financial statements
102-46 Defining report content and topic 2, 16 Boundaries 102-47 List of material topics 6
102-48 Restatements of information 2, 16
102-49 Changes in reporting 2, 16
102-50 Reporting period Jan 1 to Dec 31, 2017 102-51 Date of most recent report 24-Apr- 2018 102-52 Reporting cycle Annual, 2 102-53 Contact point for questions 3 regarding the report 102-54 Claims of reporting in accordance with the GRI Standards 2 102-55 GRI content index 46 102-56 External assurance 2 GRI 103: Management Approach 103-1 Explanation of the material topic 9,10, , Our management approach on key material topics is included in and its Boundary 25, 30, the opening of the following sections: “Responsible Property 41, 43 Investing” - pg 9, “Net Zero” - pg 10, “Sustainable Development”
MORGUARD.COM 48 MORGUARD 2017 SUSTAINABILITY REPORT
– pg 25, “Responsible Employer” – pg 30, “Our Sustainable House” – pg 41, and “Responsible Governance” – pg 43 103-2 The management approach and 9,10, , Morguard has strived to include information pertaining to our its components 25, 30, “management approach” throughout the report. Morguard has 41, 43 partially included insights into our management approach and its components, to the best of our ability at the time of disclosure. 103-3 Evaluation of the management - Morguard has omitted insights into the evaluation of our approach management approach as formal and consistent processes are not implemented at the time of disclosure on all material topics.
Page number(s) or GRI Standard Disclosure clarifications
Material Topics GRI 200 Economic Standard Series Economic Performance 201-1 Direct economic value generated and AIF GRI 201: Economic Performance 2016 distributed
Indirect Economic Impacts 203-1 Infrastructure investments and 25 GRI 203: Indirect Economic Impacts services supported 2016
Anti-corruption 205-2 Communication and training about 43 GRI 205: Anti-corruption 2016 anti-corruption policies and procedures
Anti-competitive Behavior 206-1 Legal actions for anti-competitive There was no legal behavior, anti-trust, and monopoly practices actions against Morguard GRI 206: Anti-competitive Behavior in 2017 regarding anti- 2016 competitive behavior, anti- trust, or monopoly practices GRI 300 Environmental Standards Series Energy 302-1 Energy consumption within the 17 organization
302-2 Energy consumption outside of the 17 organization
302-3 Energy intensity 17 GRI 302: Energy 2016 302-4 Reduction of energy consumption 17
302-5 Reductions in energy requirements of 17 products and services
Biodiversity
MORGUARD.COM 49 MORGUARD 2017 SUSTAINABILITY REPORT
304-1 Operational sites owned, leased, managed in, or adjacent to, protected areas GRI 304: Biodiversity 2016 25 and areas of high biodiversity value outside protected areas
Emissions 305-1 Direct (Scope 1) GHG emissions 18
305-2 Energy indirect (Scope 2) GHG 18 emissions
GRI 305: Emissions 2016 305-3 Other indirect (Scope 3) GHG 18 emissions
305-4 GHG emissions intensity 18 305-5 Reduction of GHG emissions 18
Effluents and Waste
306-2 Waste by type and disposal method 22 GRI 306: Effluents and Waste 2016 306-3 Significant spills 42 Environmental Compliance
There were no legal actions against Morguard GRI 307: Environmental Compliance 307-1 Non-compliance with environmental in 2017 regarding 2016 laws and regulations environmental laws or regulations
GRI 400 Social Standards Series Employment 401-1 New employee hires and employee 31-34 turnover
401-2 Benefits provided to full-time 35 employees that are not provided to GRI 401: Employment 2016 temporary or part-time employees
401-3 Parental leave 35
Labor/Management Relations
GRI 402: Labor/Management Relations 402-1 Minimum notice periods regarding 35 2016 operational changes
Occupational Health and Safety
MORGUARD.COM 50 MORGUARD 2017 SUSTAINABILITY REPORT
403-1 Workers representation in formal joint 35 management-worker health and safety committees
GRI 403: Occupational Health and 403-2 Types of injury and rates of injury, 36 Safety 2016 occupational diseases, lost days, and absenteeism, and number of work-related fatalities
Training and Education 404-1 Average hours of training per year per 39 employee
404-2 Programs for upgrading employee 38, 39 skills and transition assistance programs
GRI 404: Training and Education 2016 404-3 Percentage of employees receiving 40 regular performance and career development reviews
Local Communities
413-1 Operations with local community GRI 413: Local Communities 2016 engagement, impact assessments, and 25 development programs
Construction and Real Estate Sector Disclosures Page number(s) or GRI CRES Aspect Indicators clarifications CRE1 Energy Building energy intensity 17
CRE2 Water Building water intensity 21
CRE3 Emissions Greenhouse gas intensity from building 18 energy
CRE4 Emissions Greenhouse gas emissions intensity from At the time of reporting new construction and redevelopment activity emissions for our construction or redevelopments or developments are not separately tracked
CRE5 Land Degradation, Land remediated and in need of remediation Due to confidentiality constraints Contamination, and for the existing or intended land use, we are unable to publish specific Remediation according to applicable legal designations data on our remediation’s
MORGUARD.COM 51 MORGUARD 2017 SUSTAINABILITY REPORT
CRE6 Occupational Percentage of the organization operating in Morguard uses an internally Health and Safety verified compliance with an internationally developed award winning recognised health and safety management H&SMS, however at the time of system reporting it is not externally verified for compliance to international standardization
CRE7 Local Communities Number of persons voluntarily and There were no displacements involuntarily displaced and/or resettled by due to our developments in 2017 development broken down by project
CRE8 Product and Type and number of sustainability 11 Service Labeling certification, rating, and labeling schemes for new construction, management, occupation and redevelopment
MORGUARD.COM 52