Industry Insights

Equity Research December 21, 2016

Real Estate Canadian Real Estate 2017 Outlook Sam Damiani, CFA 416 983 9640 Looking for Total Returns of 15%-20% [email protected] 2016 in Review Jonathan Kelcher, CFA 416 307 9931 Year-to-date, the S&P/TSX Capped REIT Index generated a total return of [email protected] 14.8%, underperforming the S&P/TSX Composite at 20.3%, while outperforming Michelle Garrett, CA,CBV,(Associate) 416 308 3842 the MSCI U.S. REIT index at 8.0% and the NAREIT Global REIT index at 4.1%. [email protected] This follows four years of underperformance versus U.S. REITs that aggregated Lorne Kalmar, CPA, CA (Associate) to ~36% (even before the negative impact of the decline in the Canadian dollar). 416 983 4406 Since 2002, the Canadian REIT sector has delivered an average return of ~13%, [email protected] which compares favourably with the ~9% generated by the TSX. 2016 included strong performance through July, partly reflecting the creation of an 11th GICS sector for real estate in September, and also the 10-year GOC bond yield falling below 1%. This was followed by a selloff in August as overall weak Q2 earnings results were accompanied by bond yields rising. The majority of the large-cap REITs had total returns that averaged 15% (Exhibit 2). Outside of InnVest REIT being acquired and some mean reversion, there were no significant overall themes driving performance in 2016. Outlook for 2017 Looking ahead, we see 6 potential key themes for Canadian REITs in 2017: 1. Inflation and Interest Rates; 2. Fundamentals; 3. Geographic Exposure; 4. Acquisitions and Development; 5. Attractive Valuations; and 6. M&A. Overall, we expect 2017 total returns of 15–20% for our coverage universe, including 5–7% cash yields, 4% AFFO growth, and some modest multiple expansion by the end of 2017. Target Price Revisions We have revised some of our target prices (reduction of ~2% on average), with emphasis on names with more "bond-like" cash flow streams and/or have low AFFO growth over our forecast period (refer to Exhibit 1). The revisions largely reflect the changing interest rate environment following the U.S. election. We have not made any changes to our ratings or estimates. Market Weight Sector Stance Given the volatility in the broader markets and the potential for further sharp moves in commodity prices, interest rates, and other key economic indicators, we are maintaining our Market Weight sector stance.

Please see the final pages of this document for important disclosure information. Page 1 of 16 December 21, 2016

Exhibit 1. Target Price Revisions

Previous Revised Risk Target Target Target Target Target Ticker Rating Rating Price Yield % Price Price Change Return P/AFFO1 P/NAV Analyst Retail RioCan REIT REI-UN BUY MED. $26.16 5.4% $31.00 $30.00 -3% 20% 19.2x 112% SD SmartREIT SRU-UN HOLD MED. $31.66 5.4% $35.00 $34.00 -3% 13% 16.6x 111% SD First Capital Realty Inc. FCR BUY MED. $20.52 4.2% $25.00 $24.00 -4% 21% 21.2x 105% SD Crombie REIT CRR-UN HOLD MED. $13.57 6.6% $14.50 $14.50 0% 13% 14.2x 93% SD Choice Properties REIT CHP-UN HOLD MED. $13.38 5.3% $14.00 $14.00 0% 10% 15.4x 109% SD CT REIT CRT-UN HOLD MED. $15.27 4.5% $16.00 $16.00 0% 9% 16.0x 115% SD OneREIT ONR-UN BUY MED. $3.54 8.5% $4.75 $4.50 -5% 36% 11.3x 88% SD Automotive Properties REIT APR-UN BUY MED. $10.45 7.7% $12.00 $12.00 0% 22% 11.3x 116% JK Total / Average -2% 18% 15.7x 106% Office Allied Properties REIT AP-UN BUY MED. $34.97 4.4% $42.00 $40.00 -5% 19% 17.6x 117% JK Dream Office REIT D-UN HOLD HIGH $19.16 7.8% $17.50 $17.50 0% -1% 11.1x 87% SD Dream Global REIT DRG-UN BUY MED. $9.34 8.6% $11.00 $10.50 -5% 21% 12.7x 100% SD Brookfield Canada Office Prop. BOX-UN HOLD MED. $26.05 5.0% $29.00 $29.00 0% 16% 21.3x 89% SD Slate Office REIT SOT-UN BUY MED. $7.74 9.7% $9.50 $9.00 -5% 26% 9.5x 100% JK Total / Average -3% 16% 14.4x 99% Diversified / Industrial H&R REIT HR-UN BUY MED. $21.98 6.3% $25.00 $24.00 -4% 15% 13.3x 95% SD Canadian REIT REF-UN BUY MED. $45.23 4.0% $53.00 $51.00 -4% 17% 17.2x 113% SD Cominar REIT CUF-UN HOLD MED. $14.42 10.2% $15.50 $15.00 -3% 14% 10.1x 89% JK Granite REIT GRT-UN HOLD MED. $44.27 5.9% $45.00 $45.00 0% 7% 13.2x 98% SD Artis REIT AX-UN BUY MED. $12.32 8.8% $14.50 $14.00 -3% 22% 10.8x 95% JK Morguard REIT MRT-UN ---Restricted--- $14.31 ------Restricted------JK Dream Industrial REIT DIR-UN HOLD MED. $8.34 8.4% $8.00 $8.00 0% 4% 11.3x 85% SD Total / Average -2% 13% 12.6x 96% Apartments CAP REIT CAR-UN BUY MED. $30.48 4.1% $36.00 $35.00 -3% 19% 21.1x 115% JK Boardwalk REIT BEI-UN HOLD MED. $47.20 4.8% $50.00 $50.00 0% 11% 20.2x 91% JK Milestone Apartment REIT MST-UN BUY MED. $18.79 4.3% $22.00 $22.00 0% 20% 15.5x 106% JK Northview Apartment REIT NVU-UN HOLD MED. $19.43 8.4% $21.00 $20.00 -5% 11% 10.6x 90% JK Killam Apartment REIT KMP-UN BUY MED. $11.91 5.0% $15.00 $14.50 -3% 27% 17.7x 112% JK Morguard NA Residential REIT MRG-UN ---Restricted--- $13.52 ------Restricted------JK InterRent REIT IIP-UN HOLD MED. $7.29 3.3% $8.00 $8.00 0% 13% 20.0x 107% JK Mainstreet Equity Corp. MEQ HOLD MED. $32.70 0.0% $38.00 $38.00 0% 16% 15.9x 88% JK Total / Average -2% 17% 17.3x 101% Seniors Housing Chartwell Retirement Resid. CSH-UN BUY MED. $14.47 3.9% $17.50 $17.00 -3% 21% 17.3x 113% JK Extendicare Inc. EXE HOLD MED. $9.91 4.8% $9.50 $9.50 0% 1% 14.2x 103% JK Sienna Senior Living Inc. SIA BUY MED. $16.25 5.5% $18.50 $18.50 0% 19% 12.4x 112% JK Total / Average -1% 14% 14.6x 109%

Hotels American Hotel Income Prop. HOT-UN ---Restricted--- $10.19 ------Restricted------JK

Other Real Estate Companies Tricon Capital Group Inc. TCN BUY MED. $9.68 2.7% $12.50 $12.50 0% 32% 13.8x 93% JK Dream Unlimited Corp. DRM HOLD HIGH $6.60 0.0% $9.00 $9.00 0% 36% 14.5x 75% SD Firm Capital MIC FC ---Restricted--- $14.14 ------Restricted------SD Irish Residential Prop. REIT plc IRES BUY MED. €1.17 2.7% € 1.35 € 1.35 0% 19% 18.2x 121% JK Gazit-Globe Ltd. GZT BUY MED. ILS 32.80 4.3% ILS 47.00 ILS 47.00 0% 48% 12.4x 106% SD

1. AFFO represents adjusted f.d. EPS for TCN [TCN adjusted f.d. EPS is in US$, thus P/E multiples have been adjusted to CAD$], f.d. EPS for DRM, f.d. EPS for FC, adjusted f.d. EPRA EPS for IRES, f.d. FFO based on management's approach (Adjusted EPRA Earnings) for GZT.

Source: TD Securities Inc. estimates

Page 2 of 16 December 21, 2016

Exhibit 2. Year-to-date 2016 Total Returns

InnVest REIT 46.0% Morguard NA Residential REIT 32.5% Automotive Properties REIT 32.5% Pure Industrial REIT 31.5% Morguard Corp. 31.3% Milestone REIT 29.6% Dream Industrial REIT 25.9% Granite REIT 23.3% Northwest Healthcare Prop. REIT 22.7% CT REIT 22.5% Slate Office REIT 19.8% Dream Office REIT 19.5% Northview Apartment REIT 19.3% Choice Properties REIT 18.9% Firm Capital Mortgage Inv. Corp. 18.9% Killam Apartment REIT 18.7% Chartwell Retirement Residences 18.0% CAP REIT 17.9% Dream Global REIT 17.2% H&R REIT 16.7% RioCan REIT 15.8% OneREIT 15.3% First Capital Realty Inc. 15.2% Allied Properties REIT 15.1% InterRent REIT 14.3% Crombie REIT 12.3% Morguard REIT 12.1% Canadian REIT 11.5% Brookfield Canada Office Properties 10.2% SmartREIT 9.7% Mainstreet Equity Corp. 9.5% Tricon Capital Group 9.2% Extendicare Inc. 7.9% Cominar REIT 7.6% Sienna Senior Living Inc. 5.8% Artis REIT 4.1% Boardwalk REIT 3.6% American Hotel Income Properties 3.2% Brookfield Property Partners L.P. -3.8% Dream Unlimited Corp. -9.2% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Source: Bloomberg

Our Top Picks . Core: RioCan REIT (REI.UN), Canadian Apartment Properties REIT (CAR.UN), and Canadian REIT (REF.UN). . Growth: First Capital Realty Inc. (FCR), Allied Properties REIT (AP.UN), Chartwell Retirement Residences (CSH.UN), Milestone Apartment REIT (MST.UN), and Killam Apartment REIT (KMP.UN). . Value: Artis REIT (AX.UN), Dream Global REIT (DRG.UN), and OneREIT (ONR.UN).

Page 3 of 16 December 21, 2016

Interest Rates Post-U.S. Election Since the U.S. election, interest rates have risen dramatically, with the 10-year GoC increasing ~55bps since November 8. The rising interest rates initially resulted in a selloff for the REIT sector, with the S&P/TSX Capped REIT Index ("REIT Index") down ~5% (price only) in the week following the election. However, in the month and a half since the U.S. election, the REIT Index has recovered and is now up 3% (price only) from its pre-election level, despite the fact that the 10-year GoC yield has increased by ~55bps, over the same period. We attribute part of this to the REIT market's 10% selloff from July, which in our view over- compensated for the ~30bps rise in the 10-year GoC leading up to the U.S. election. The post-U.S. election 20%-plus rise in the WTI oil price also lifted expectations for improved fundamentals in western Canada. Following the U.S. election, the best performing names in our universe (price only) include Dream Office REIT, Dream Industrial REIT, Artis REIT, Extendicare Inc., Sienna Senior Living Inc., Tricon Capital Group Inc., and Choice Properties REIT. The worst performing names (price only) include Slate Office REIT, H&R REIT, Northview Apartment REIT, and Killam Apartment REIT. In our view, Q3 results reported subsequent to the U.S. election drove the performance of some of these names, while those with large U.S. exposure benefited from renewed optimism surrounding the U.S. economy. However, with the 20%+ rise in WTI oil since the U.S. election, we believe that there has been a modest, initial return of optimism in many of the energy sector-focused REITs. Exhibit 3. Bloomberg REIT Index versus 10-year GoC Yield (Inverted)

0.00% 250 During the 2013 "Taper Tantrum", movements in the S&P/TSX Capped REIT 1.00% Index were tightly correlated to movements

in the 10-year GoC. 210 Index 1997 Base = 100 = Base 1997 Index 2.00%

170 3.00%

4.00% In 2016, REIT 130 prices began 5.00% declining ~2-3 months before the 10- 90 year bond 6.00% yield began rising.

7.00% 50

Jun-98 Jun-02 Jun-03 Jun-07 Jun-08 Jun-09 Jun-13 Jun-14 Jun-99 Jun-00 Jun-01 Jun-04 Jun-05 Jun-06 Jun-10 Jun-11 Jun-12 Jun-15 Jun-16

Mar-00 Mar-01 Mar-05 Mar-06 Mar-10 Mar-11 Mar-12 Mar-16 Mar-98 Mar-99 Mar-02 Mar-03 Mar-04 Mar-07 Mar-08 Mar-09 Mar-13 Mar-14 Mar-15

Dec-97 Dec-98 Sep-99 Sep-00 Sep-01 Dec-02 Dec-03 Sep-05 Sep-06 Dec-07 Dec-08 Sep-10 Sep-11 Dec-13 Dec-14 Sep-15 Sep-16 Sep-98 Dec-99 Dec-00 Dec-01 Sep-02 Sep-03 Sep-04 Dec-04 Dec-05 Dec-06 Sep-07 Sep-08 Sep-09 Dec-09 Dec-10 Dec-11 Sep-12 Dec-12 Sep-13 Sep-14 Dec-15 Dec-16

GOC 10-Yr Bond Yield (Inverted) [lhs] Bloomberg Canadian REIT Index [rhs]

Source: Bloomberg, TD Securities Inc.

Although the 10-year GoC has only risen ~55bps from where we set most of our earnings estimates, we have assessed the impact that a 100bps increase in the renewal rates/new debt that we are currently

Page 4 of 16 December 21, 2016 using for 2017/18, as well as a 50bps increase on credit facilities, would have on AFFO estimates. Generally speaking, the REITs with higher leverage and a greater amount of near-term maturities would be most at risk. Given that most REITs have been conservatively managing their mortgage debt maturity profiles, the overall impact is minimal – averaging 1%-3%. At the low end are a handful of REITs with no near- term maturities including American Hotel Income Properties REIT, CT REIT, and Automotive Properties REIT. Names with the most potential exposure include InterRent REIT, Slate Office REIT, and RioCan REIT. For our full analysis of the impact of rising interest rates on both our earnings and NAV estimates, please see our November 21 publication "A Look at the Impact of Rising Rates on Earnings and NAVs."

Real Estate as a Hedge Against Inflation? Real estate has long been considered to be a hedge against inflation. While we do not fundamentally disagree, we believe that this is most true in markets where supply/demand fundamentals are in balance. If construction exceeds demand, regardless of inflationary pressures, rents will face pressure shifting the negotiating powers from owners to tenants. As such, we believe the health of local markets (i.e. Toronto versus Calgary) will play a bigger role in determining growth in rents and asset values. While rising interest rates can lead to lower property values, improved economic conditions should drive up NOI, offsetting the impact of rising interest rates. Intuitively, spreads between interest rates and cap rates should also compress in an inflationary environment as purchasers factor in longer-term NOI growth. Generally speaking, rents on shorter-term leases are likely to catch up to inflation more quickly, than longer-term leases (generally this would be positive for asset classes with typically shorter-term leases such as retail, apartments, and seniors). While in practice real estate may or may not act as a near-term inflation hedge depending on local market fundamentals, we do not dismiss the impact of the perception of real estate as an inflation hedge. With the incoming White House administration's economic initiatives stoking discussions around rising inflation, particularly as the U.S. economy continues to perform well across most major metrics (unemployment, PMI, etc.), we expect the concerns surrounding rising inflation to favour the REIT sector in the long-term (as commercial real estate functions as a good hedge for inflation, as landlords can adjust rents to keep pace with inflation). In our view, the appeal of real estate as a hedge against rising inflation should largely offset a rise in interest rates that occurs at a measured pace. Sector Fundamentals We recommend names with what we consider higher asset quality, above average AFFO/unit growth profiles, and/or meaningful relative undervaluation. Here are our high-level views by sector: Office: We are overall cautious on the Canadian office market. . Downtown Toronto's occupancy levels are peaking, although we see limited downside even if the next new development proceeds 'on spec';

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. With 'class A' vacancy at only 4%, we would argue at least one new development can be expected; . Despite the recent rise in energy prices, we expect weakness in Alberta to persist well beyond our 2018 forecast period, with vacancy rates potentially reaching as high as 30% and 18% in the Calgary and Edmonton CBD markets, respectively; . The recent bounce in energy prices has sparked some hope for increased office space demand. However, we believe excess supply will take many years to be absorbed. On the flipside, valuations of high quality, long-term leased office buildings have proven to be relatively unscathed even in downtown Calgary; . Total construction as a percentage of inventory is at 2.9% nationally (down from 4.0% in Q3/15), led by Edmonton at 5.8% and Calgary at 4.5%. Toronto is at 2.1% and Vancouver is at 3.5%, but both cities have generated positive year-to-date absorption of 1.5% and 0.8%, respectively. Shopping centres: We expect overall stable and steadily growing operating results. . The successful lease-up of 2015 vacancies (e.g. Target) will boost 2017-2018 AFFO growth for select REITs (primarily H&R and RioCan); . New construction has been at a measured pace overall (fully pre- leased in most cases), thereby avoiding the prospect of materially rising vacancy rates in areas of softening demand growth (e.g. Alberta). In 2016, 9mm sf of retail developments/expansions are expected to come online, increasing nationwide inventory by ~1.5%; . National retail vacancy compressed 30bps from year-end 2015 to 4.4% at mid-year 2016, with western Canada sub-3% (Vancouver, Calgary, and Edmonton) and eastern Canada above 5%; . We believe that the low dollar will help keep retail spending in Canada. Despite the low dollar, we expect continued expansion by U.S. and international retailers in Canada; . We expect e-commerce will continue to grow its share of retail sales, although still at a slower pace versus in the U.S; . We expect many retailers to continue expanding their presence where the population growth is the fastest: in major urban markets in central locations and near major transportation infrastructure; . Value upside from higher-density residential and mixed-use development is expected to continue. Industrial/warehouse: We expect overall stable performance from the industrial sector. . In our view, demand growth (driven in part by distribution/logistics, aided by e-commerce activity and the low Canadian dollar) is largely in line with new supply growth; . We remain cautious on the industrial markets in Calgary and Edmonton (where rents have fallen to the lowest on record since 2005 and 2012, respectively), and also Halifax; . New construction has slowed to a trickle in Calgary, Ottawa, and Montreal, but remains active in Vancouver, Edmonton, and Toronto;

Page 6 of 16 December 21, 2016

. National construction as a percentage of inventory sits at 0.7%, largely unchanged from Q3/15. All major markets are reporting positive year-to-date absorption, with the exception of Calgary (- 0.7%); . Toronto and Vancouver's sub-4% vacancy rates are in contrast to Montreal (8.0%), Calgary (9.6%), and Edmonton (8.8%). Apartments: We believe that overall industry fundamentals remain sound. . We expect steady, low-single digit, same-property NOI growth for the apartment REITs/REOCs (outside of Alberta); . CMHC reported in its 2016 Rental Market Report that the nation-wide average vacancy rate was 3.4%, +10bps versus 2015 and +40bps above its 25-year long-term average; . Energy-related markets, such as Calgary and Edmonton, continue to see increasing vacancy rates. Vacancy rates in Calgary (7.0%) now represent a record high while vacancy rates in Edmonton (7.1%) are the highest since 1996; . Average rents continue to increase, growing nationally by 2.0% in 2016, with declines in Calgary (-7.5%) and Edmonton (-3.5%), partially offsetting strong growth in Vancouver (+5.7%) and Toronto (+3.1%); . 2016 saw approximately 2.1% added to the national supply, which now stands at approximately 2.0 million units. While most markets were able to absorb the new supply, the 3.7% and 4.3% added to Calgary and Edmonton markets, respectively, helped contribute to the large vacancy increases; . Purpose built rentals under construction as a percentage of inventory is currently ~1.8% across Canada's six largest markets. Seniors housing: The seniors housing fundamentals are largely in balance. . We expect same-property NOI growth in the sector to be largely driven by occupancy gains in retirement home portfolios (versus LTC); . We see meaningful earnings growth if occupancy increases above the ~90% level where it currently trends; . According to the CMHC, vacancy rates declined by 70bps in 2016 to 7.4% with declines in British Columbia (-190bps), Ontario (-80bps), and Quebec (-50bps), being partially offset by increases in Alberta (+130bps) and Saskatchewan (+50bps); . Average rents rose 5% to $2,210/month, nationally, led by Ontario (+6%); . New supply has moderated over the past 1-2 years – in 2016, the 3.6% increase in seniors housing inventory was outpaced by the 4.5% increase in seniors housing residents. This should lead to solid occupancy and rental rate growth in the coming year, in our view. Geographic Exposure While we believe the fundamentals for the Canadian market as a whole are sound, we remain cautious on the Alberta market, which following a

Page 7 of 16 December 21, 2016

period of prolonged economic weakness, is experiencing one of its softest markets in decades. According to TD Economics, the recent uptick in oil prices to above US$50 per barrel – spurred by a coordinated production-cut agreement between OPEC and some non-OPEC members – bodes well for Alberta. While a WTI price below US$60 per barrel is alone unlikely to stimulate a surge in investment in the sector, there have been some encouraging signs that an upswing is taking hold. Two expansion projects in Alberta that had been shelved when oil prices initially plunged are set to be revived, citing lower costs as the main reason for the reversals. Hence, productivity gains and lower costs could lead to higher capital spending, which would benefit the province. The two announced pipeline approvals earlier this month also pose some upside potential for investment, production, and overall economic growth down the road, but commencement on these projects would likely only begin towards the end of next year at the earliest. Either way, further declines in investment are unlikely following the massive cutbacks seen over the last two years, and even stabilization at current levels would be supportive of growth. Moreover, a bounce back from the wildfire-induced shutdowns in Alberta, as well as new oil projects coming online in this year and next point to increased oil production throughout the forecast period. Overall, after a two-year recession, whereby the economy shrank by approximately 6%, TD Economics expects growth to come back with the economy expanding by 2.1% and 2.3% in 2017 and 2018, respectively, which is expected to be the highest growth rate amongst all provinces and territories. Below, we have highlighted names in our coverage universe with the greatest Alberta exposure. We continue to believe the Calgary office sector will be the weakest performer, with the effects of the economic slowdown being magnified by the large inventory of new supply (~3.0 million sf) expected to come online by the end of 2018. On the residential side, we believe that there are at least two-to-three more quarters where the impact of new supply will be felt in earnings results. Despite the prolonged weakness in Alberta, some of the REIT's with the highest Alberta exposure have outperformed in 2016, having rebounded from valuations in 2015 that were too heavily discounted, in our view. Exhibit 4. REITs/REOCs with Alberta Exposure

Total Return Alberta Exposure Overall WALT 2016 Geographic Exposure Sector 2015 2016 YTD Total Office-only (Years) Mainstreet Equity Corp. Apartments -21% 10% 61% n/a Boardwalk REIT Apartments -18% 4% 60% n/a Canadian REIT Diversified -4% 12% 38% 9% 5.1 Brookfield Canada Office Properties Office 1% 10% 32% 32% 8.0 Dream Industrial REIT Industrial -6% 26% 32% 4.0 Morguard REIT Diversified -20% 12% 31% 24% 5.9 Artis REIT Diversified -2% 4% 29% 13% 4.2 H&R REIT Diversified -2% 17% 28% 16% 9.8 Dream Office REIT Office -22% 19% 27% 27% 4.7 First Capital Realty Inc. Retail 3% 15% 23% 5.1 Crombie REIT Retail 6% 12% 21% 13.5 Automotive Properties REIT 1 Retail -12% 32% 19% 13.4 Northview Apartment REIT Apartments -19% 19% 17% n/a Extendicare Inc. Seniors' Housing 55% 8% 16% n/a

1: 2015 only reflects a partial year - IPO completed in July 2015 2: Ordered by exposure to Alberta Source: Company reports, Bloomberg, TD Securities Inc.

Page 8 of 16 December 21, 2016

Looking south of the border, U.S. economic growth has been solid in 2016, despite slower-than-forecasted growth in the first half of the year. According to TD Economics, GDP growth for the year is forecasted to come in at 1.6%, and is expected to tick up to 2.0% over the next two years, before giving consideration of the impact of policies to be enacted by the new U.S. administration. Below, we have highlighted names in our coverage with the largest U.S. exposure (Exhibit 5). Exhibit 5. REITs/REOCs with the Largest U.S. Exposure

REIT/REOC Sector U.S. Exposure1 Milestone Apartment REIT Apartments 100% American Hotel Income Prop. Hotels 100% Tricon Capital Group Inc.2 Other 93% Morguard NA REIT3 Apartments 61% Artis REIT1 Diversified 36% H&R REIT Diversified 29% Granite REIT4 Industrial 27%

1 Exposure by NOI 2 Based on AUM 3 U.S. exposure by suite count 4 Based on annualized lease payments Source: Company reports, TD Securities Inc.

Acquisitions and Development In 2017, we expect cap rates to remain at their current levels, which are among historic lows across many Canadian markets and asset classes. As a result of the low cap rate environment, it is becoming increasingly difficult for larger-cap REIT's to source acquisitions that both improve portfolio quality and are accretive to earnings. We are also expecting the cost of capital to remain at current levels in 2017, as improvements in equity valuations are largely offset by an uptick in interest rates. We expect low cap rates, coupled with the high cost of capital, will result in a higher reliance on developments by the larger cap REIT's to high-grade portfolios in an accretive manner. We expect the smaller cap REIT's to remain relatively active on the acquisition front in 2017. On average, current developments account for less than 5% of the total asset value of our coverage universe. Compelling Valuations The FFO yield at 8.5% is near the sector's 11-year high of 9.2%1 reached almost a year ago. The current FFO Yield Spread of 6.7% is in the upper-end of the 2%-9% historical range1 and is ~180 bps above the 4.9% long-term average1. The valuation gap between Canadian and U.S. REITs, as measured by FFO yields, remains close to the all-time high1 at ~330bps, and well above its long-term average of 250bps. We believe that today’s valuations imply either a dramatic ~180bps jump in the 10- year GoC bond yield to ~3.6% (from the current ~1.8%), a ~15% drop in earnings, or some combination of the two (both of which we view as unlikely). Canadian REITs are trading at an average 9% discount to NAV versus the historical average of a modest premium. 1 Excluding the Global Financial Crisis

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Exhibit 6. Overall Cost of Capital for REIT's has Risen

Minimum Accretive Cap Rate ("Commerical REITs") 15.0% 15%

FFO Yield - Commerical REITs (inverted P/FFO)

Minimum Accretive Cap Rate 13% 12.4% 10-yr Mortgage Rate

11%

9.6% 9.3%

9% 8.5% 7.9% 7.0% 7.3% 7.0%

7% 6.5% 6.3% 5.4% 5.1% 5%

3.8% 3.6%

3%

1994 (yr avg) (yr 1994 avg) (yr 1995 avg) (yr 1996 avg) (yr 1997 avg) (yr 1998 avg) (yr 1999 avg) (yr 2000 avg) (yr 2001 avg) (yr 2002 avg) (yr 2003 avg) (yr 2004 avg) (yr 2005 avg) (yr 2006 avg) (yr 2007 avg) (yr 2008 avg) (yr 2009 avg) (yr 2010 avg) (yr 2011 avg) (yr 2012 avg) (yr 2013 avg) (yr 2014 avg) (yr 2015 avg) (yr 2016 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Jan-12 Mar-12 Jun-12 Nov-12 Jan-13 Mar-13 May-13 Sep-13 Nov-13 Jan-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16

Source: CBRE Limited, TD Securities Inc.

Exhibit 7. REIT Sector Valuation versus 10-year GoC

16.0% 16.0% 15.0% 15.0% 14.0% Historical Average FFO Yield = 9.4% 14.0% 13.0% FFO Yield Spread = 6.7% 13.0% 12.0% 12.0% 11.0% Last time the absolute 11.0% FFO yield was this high, 10.0% excluding the GFC 10.0% 9.0% 9.0% 8.0% 8.0% 7.0% 7.0% 6.0% 6.0% 5.0% 5.0% 4.0% 4.0% 3.0% 3.0% 2.0% 2.0% 1.0% Historical Average Spread = 5.4% (4.9% excluding GFC + Tech Bubble periods) 1.0%

0.0% 0.0%

Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16

Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16

Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16

Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16

Spread FFO Yield vs GOC 10-yr 10-yr Bond Yield FFO Yield (i.e. inverted P/FFO)

Source: TD Securities Inc., Bloomberg, Thomson One

Page 10 of 16 December 21, 2016

Exhibit 8. Canadian and U.S. Valuation Gaps (FFO Yields)

18%

16%

14%

12%

10% 8.5% 8%

6% 5.2%

4% 330 bps 2%

0%

Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16

Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16

Sep-05 Dec-05 Sep-06 Dec-06 Sep-07 Dec-07 Sep-08 Dec-08 Sep-09 Dec-09 Sep-10 Dec-10 Sep-11 Dec-11 Sep-12 Dec-12 Sep-13 Dec-13 Sep-14 Dec-14 Sep-15 Dec-15 Sep-16 Dec-16

FFO Spread: Canada vs. U.S. Canadian FFO Yield U.S. FFO Yield* *Based on SNL US REIT Equity Index. Source: TD Securities Inc., Capital IQ, SNL Financial.

M&A Although difficult to predict, we expect to see M&A activity continue in 2017, given the attractive valuations for Canadian REITs, and weak Canadian dollar. With publicly traded REITs challenged by a high cost of equity, we believe that private capital is more likely to drive M&A in 2017. We believe that the mid-sized Canadian pension plans that are underweight on real estate represent a significant opportunity for M&A in 2017. Given the excessive NAV discounts of many REITs currently, 2017 should present ample opportunities for private players to capitalize on the current market conditions and increase their Canadian real estate holdings. Despite the recent rise in the 10-year GoC, the current spreads between cap rates and the 10-year GoC bond yield remain ~60bps above the historic spread of 350bps. While cap rates typically lag behind the 10- year GoC, since 2013 cap rates have held relatively steady as bond yields trended lower, offering a wider investment spread.

Page 11 of 16 December 21, 2016

Exhibit 9. Cap Rates versus 10-year GoC Bond Yield

12.0% Long-term average spread is ~350bps

9.0% 439 bps

424 bps

6.0%

493bps 412bps

3.0%

0.0%

1997 1999 2001 2003 2005 2007 2009 2011 1990 1991 1992 1993 1994 1995 1996 1998 2000 2002 2004 2006 2008 2010 2012

Q1/13 Q3/13 Q1/14 Q3/14 Q1/15 Q2/13 Q4/13 Q2/14 Q4/14 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 20-Dec

10-Yr GoC Bond Yield National Average Cap Rates (excluding hotel)

Source: CBRE, Bloomberg, TD Securities Source: CBRE Limited, Bloomberg, TD Securities Inc.

Page 12 of 16 December 21, 2016

Exhibit 10. Justification of and Key Risks to Target Prices

Company Name Target Rating Risk Justification of Target Price Key Risks to Target Price and Ticker Price Rating Allied Properties REIT $40.00 BUY MED. Our $40.00 target price is based on an 17.5x-18.0x multiple to our 2018E Allied is subject to risks common to commercial real estate investing. Key risks to its target price include (AP.UN-T) AFFO/unit, which is slightly above where the units are trading on 2017 local and general economic conditions; competition for tenants; tenant credit risk; new supply; changes estimates. Our target price represents a ~17% premium to our NAV/unit in interest rates; and availability of long-term mortgage funds. In addition, future growth potential could estimate. be curtailed by risks relating to Allied’s development pipeline, including construction delays, cost over- runs, and failure to achieve targeted financial projections. Artis REIT $14.00 BUY MED. Our $14.00 target price is based on a 10.5x–11.0x multiple to our 2018E A key risk to our target price is a more severe-than-expected downturn in Western Canada and, in (AX.UN-T) AFFO/unit. This multiple is at the lower end of the multiple range that we particular, the Calgary office market. Other key risks include local real estate markets; competitive use to derive the target prices of Artis’ peers in our coverage universe, supply; demand swings; general economic conditions; foreign exchange; interest rate fluctuations; which we believe is justified given the REIT’s ~30% exposure to Alberta. inability to maintain occupancy levels; an inability to recover operating costs from tenants; tenant credit risk; losses from any uninsurable risks; environment matters; and loss of key management personnel. CAPREIT $35.00 BUY MED. Our $35.00 target price is based on our 21.0x-21.5x multiple to our Key risks to our target price include slowing rent growth; higher vacancies; local real estate markets; (CAR.UN-T) 2018E AFFO/unit. This target multiple is at the high end of the range we interest rates; adverse rental legislation; significant increases in utility costs; competition from other use for apartment REITs, which we believe is justified due to CAPREITs landlords; and the ability to source acquisitions accretively. size, liquidity, and stable earnings profile. Our target represents a 15% premium to our $30.50 NAV/unit estimate. Canadian REIT $51.00 BUY MED. We derive our $51.00 target price using a 17.0x–17.5x 2018E P/AFFO The REIT is subject to the risks common to commercial real estate investing, including general (REF.UN-T) multiple, compared with the 14.7x current peer-group average on 2017E. economic conditions (including interest rates, unemployment levels, and the availability of long-term It also translates into ~13% premium to our $45.30 NAV/unit estimate. mortgage funds); local real estate markets (above-average exposure to Alberta); excessive competitive supply; space demand; and tenant credit risk. Chartwell Retirement $17.00 BUY MED. Our $17.00 target price is based on a 17.0x–17.5x multiple range to our Key risks to target price include local real estate market supply and demand fundamentals in markets Residences 2018E AFFO/unit. It equates to a 13% premium to our $15.00 NAV. where Chartwell’s communities are located; rent levels; cost pressures; interest rates; tenant liability (CSH.UN-T) claims; and access to capital. Cominar REIT $15.00 HOLD MED. Our target price of $15.00 is based on a 10.0x-10.5x multiple to our A key risk for the REIT is geographical concentration, with a large proportion of NOI generated within (CUF.UN-T) 2018E AFFO/unit, which is roughly in line with where the units are trading the province of Quebec. Other key risks include risks common to real estate investing, which include on our 2017 estimates. It is at the low end of the range we use for (but are not limited to) access to both debt and equity capital; local real estate markets; supply/demand Cominar's peers owing to the REIT's lower near-term earnings growth fundamentals; acquisitions that fail to add value; interest rate fluctuations; and tenant credit risk. profile and higher-than-average leverage. Dream Global REIT $10.50 BUY MED. Our $10.50 target price is based off a 12.5x–13.0x multiple on our 2018E Key risks to our target price include asset concentration risk and currency risk, with nearly all of its (DRG.UN-T) AFFO, and in-line with our NAV/unit estimate. properties located in Germany and 20.5% of revenue being derived from Deutsche Post; potential for conflict of interest related to the REIT’s external asset management by Dream Unlimited Corp.; a material change in relationship with Dream Unlimited Corp. (which owns 2.8-million REIT units plus ~1- million deferred units) could result in the revaluation of the units; general economic conditions (e.g., interest rates and unemployment levels) and the availability of financing; changes in the supply and demand of space for lease; general tenant credit risk; and, the potential for acquisitions to fail to add value. First Capital Realty Inc. $24.00 BUY MED. We derive our $24.00 target price by using a 21.0x–21.5x 2018E P/AFFO Key risks include: general economic conditions (including, but not limited to, interest rates, (FCR-T) multiple, compared with the 16.4x average on 2017E for the peer group. unemployment levels, and the availability of long-term mortgage funds); local real estate markets; excessive competitive supply; demand for space; tenant credit risk; and significant influence of control by Gazit Globe Ltd. (owns ~36.5% of common shares). H&R REIT $24.00 BUY MED. We derive our $24.00 target price by using a 13.0x–13.5x AFFO multiple Key risks to our target price include: general economic conditions (including interest rates, (HR.UN-T) on our 2018E compared with the 14.7x average 2017E AFFO multiple for unemployment levels, and the availability of long-term mortgage funds); local real estate markets; H&R’s peer group. Our target price implies a slight discount to our excessive competitive supply; demand for space; tenant credit risk; risks related to the U.S. assets and NAV/unit estimate. operations (i.e., potential taxation on U.S. income); foreign exchange fluctuations; above-average exposure to Western Canada; and a decrease in the U.S. book value because of economic conditions. Killam Apartment REIT $14.50 BUY MED. Our target price of $14.50 is based on an 17.5x–18.0x multiple on our Key risks include slowing rent growth or higher vacancies; local real estate markets; interest rates; (KMP.UN-T) 2018E AFFO/unit estimate. It is in the upper half of the 10.5x-21.5x of the adverse rental legislation; utility costs variability; competition from other landlords; general development valuation range we use for the Canadian apartment sector but slightly risks, and the ability to source acquisitions on an accretive basis. below the 20.5x average multiple we use for Killam's closest peers (CAPREIT, Boardwalk, InterRent). Our target price reflects a 12% premium to our $13.00 NAV estimate. Northview Apartment $20.00 HOLD MED. Our $20.00 target price is based on a 10.5x-11.0x multiple to our 2018E Key risks to our target price include the ability of management to integrate the newly acquired True REIT AFFO/unit estimate. The multiple remains at the low end of the North and Starlight portfolios; a prolonged slowdown in Western Canada; slowing rent growth or higher (NVU.UN-T) 10.5x–21.5x average multiple we use for apartment companies in our vacancies; local real estate markets; interest rates; adverse rental legislation; significant increase in coverage universe, owing to the greater concentration of assets in utility costs; competition from other landlords; ability to complete new developments on time and within smaller markets. forecasted financial parameters. OneREIT $4.50 BUY MED. Our $4.50 target price is based on a 75%/25% blend of our fundamental Company-specific risks include geographic concentration risk in Ontario and Saskatchewan; higher (ONR.UN-T) valuation (11.0x 2018E AFFO) and our M&A valuation (NAV/unit leverage vs. its peers; a material change in relationship between OneREIT and Mitchell Goldhar, the estimate), compared with the peer group average of 15.1x AFFO for SC/MRR Group, and Penguin Investments Inc. (18% combined ownership) could result in revaluation of 2017E. Our lower fundamental target valuation attempts to reflect the units; and the ability of Mitchell Goldhar/SC/MRR Group to influence the affairs of the REIT. Other OneREIT's higher relative financial leverage, focus on secondary and key current risks include: local real estate markets; competitive supply; demand swings; general tertiary markets, and small relative market cap. economic conditions; interest rate fluctuations; potential inability to lease up properties; tenant credit risk; loss of key management personnel; and default by or other risks associated with partnering with a co-owner; and failure to identify or execute on strategic alternatives. RioCan REIT $30.00 BUY MED. We derive our $30.00 target price by using a multiple of 19.0x–19.5x on Key risks to our target price include local real estate markets; excessive competitive supply; general (REI.UN-T) our 2018E AFFO versus the current 16.4x peer group average on 2017E. economic conditions and demand for space; fluctuations in interest rates; and tenant credit risk. We believe a higher multiple is warranted given the relatively low leverage and refocused portfolio on higher-quality properties in Canada.

Slate Office REIT $9.00 BUY MED. Our $9.00 target price is based on our 9.25x-9.75x multiple to our 2018E Key risks to our target price include local real estate markets; competitive supply; demand swings; (SOT.UN-T) AFFO/unit. Slate's target multiple is at the low-end of the multiples we general economic conditions; environmental matters; interest rate fluctuations; inability to maintain use to value its peers. The lower multiple is a reflection of Slate’s higher- occupancy levels; and the loss of key management personnel. In addition, there could be potential than-average leverage, smaller public float and trading liquidity, as well conflicts of interest with the external manager, Slate Asset Management. as its external management structure. SmartREIT $34.00 HOLD MED. Our $34.00 target price is derived by using a 16.5x–17.0x AFFO multiple Key risks to our target price include the following: local real estate markets; general economic (SRU.UN-T) on our 2018E, compared with the current 16.4x average 2017E multiple conditions; interest rate fluctuations; tenant credit risk; narrowing investment spreads; a material change for the peers. in relationship between SmartREIT and Mitchell Goldhar (directly and indirectly holds ~23% interest of SmartREIT) could result in revaluation of the units; and the ability of Mitchell Goldhar to influence the affairs of the REIT. Source: TD Securities Inc. estimates

Page 13 of 16 December 21, 2016

Exhibit 11. Trading Comparables — Coverage Universe Payout P / AFFO AFFO NAV Implied Net Debt / Net Debt / 1 2 Ticker Price Mkt Cap Yield '17E AFFO 2016E 2017E 2018E CAGR NAV Cap Rate P / NAV Cap Rate GAV EBITDA Name of REIT or REOC ($mm) Incl. conv. Incl. conv. Retail RioCan REIT REI-UN $26.16 $8,533 5.4% 95% 17.8x 17.6x 16.8x 5% 3 $26.70 5.7% 98% 5.7% 40% 7.8x SmartREIT SRU-UN $31.66 $4,895 5.4% 86% 16.7x 16.1x 15.4x 3% $30.50 6.0% 104% 5.8% 45% 8.5x First Capital Realty Inc. FCR $20.52 $4,988 4.2% 81% 20.5x 19.4x 18.2x 7% $22.80 5.3% 90% 5.7% 42% 9.2x Crombie REIT CRR-UN $13.57 $2,007 6.6% 89% 14.0x 13.6x 13.3x 3% $15.60 6.1% 87% 6.6% 51% 9.0x Choice Properties REIT CHP-UN $13.38 $5,475 5.3% 83% 16.3x 15.6x 14.7x 5% $12.90 6.1% 104% 5.9% 45% 7.8x CT REIT CRT-UN $15.27 $3,158 4.5% 72% 17.8x 16.2x 15.3x 7% $13.90 6.1% 110% 5.8% 44% 7.3x OneREIT ONR-UN $3.54 $309 8.5% 79% 10.4x 9.3x 8.8x 6% $5.10 6.8% 69% 7.7% 62% 9.2x Automotive Properties REIT APR-UN $10.45 $229 7.7% 83% 11.6x 10.9x 9.9x 9% 4 $10.35 6.5% 101% 6.5% 47% 7.9x Total / Average $29,594 5.9% 84% 15.6x 14.8x 14.0x 5% 6.1% 95% 6.2% 47% 8.3x

Office Allied Properties REIT AP-UN $34.97 $2,962 4.4% 74% 19.6x 17.0x 15.4x 8% $34.10 5.9% 103% 5.8% 38% 7.7x Dream Office REIT D-UN $19.16 $2,184 7.8% 85% 9.4x 10.8x 12.2x -12% $20.20 7.3% 95% 7.5% 56% 7.5x Dream Global REIT DRG-UN $9.34 $1,168 8.6% 96% 12.8x 11.3x 11.3x 9% $10.50 5.7% 89% 6.0% 54% 11.7x Brookfield Canada Office Prop. BOX-UN $26.05 $2,436 5.0% 100% 20.2x 19.9x 19.2x 2% $32.50 5.0% 80% 5.6% 47% 11.6x Slate Office REIT SOT-UN $7.74 $356 9.7% 82% 8.9x 8.5x 8.1x 5% $9.00 7.0% 86% 7.4% 59% 8.9x Total / Average $9,106 7.1% 88% 14.2x 13.5x 13.2x 2% 6.2% 91% 6.4% 51% 9.5x

Diversified / Industrial H&R REIT HR-UN $21.98 $6,623 6.3% 78% 13.1x 12.5x 12.1x 3% $25.20 6.1% 87% 6.6% 47% 7.9x Canadian REIT REF-UN $45.23 $3,311 4.0% 64% 16.3x 15.8x 15.2x 2% $45.30 6.2% 100% 6.2% 39% 6.8x Cominar REIT CUF-UN $14.42 $2,610 10.2% 105% 10.4x 10.3x 9.7x -1% $16.90 6.6% 85% 7.0% 58% 9.3x Granite REIT GRT-UN $44.27 $2,085 5.9% 78% 13.8x 13.3x 13.0x 3% $45.70 8.3% 97% 8.5% 15% 2.3x Artis REIT AX-UN $12.32 $1,846 8.8% 88% 10.2x 10.0x 9.5x 0% $14.75 6.9% 84% 7.4% 61% 9.3x Morguard REIT MRT-UN $14.31 ------Restricted------Dream Industrial REIT DIR-UN $8.34 $649 8.4% 96% 10.8x 11.4x 11.7x -4% $9.40 7.0% 89% 7.3% 55% 8.2x Total / Average $17,123 7.3% 85% 12.4x 12.2x 11.9x 0% 6.8% 90% 7.2% 46% 7.3x

Apartments CAP REIT CAR-UN $30.48 $4,081 4.1% 79% 20.1x 19.2x 18.4x 4% $30.50 4.8% 100% 4.8% 46% 9.6x Boardwalk REIT BEI-UN $47.20 $2,393 4.8% 95% 18.7x 20.0x 19.1x -8% $55.00 5.3% 86% 5.7% 45% 10.7x Milestone Apartment REIT MST-UN $18.79 $1,655 4.3% 60% 15.7x 13.8x 13.2x 7% $20.80 6.3% 90% 6.7% 41% 7.9x Northview Apartment REIT NVU-UN $19.43 $1,084 8.4% 88% 10.3x 10.5x 10.3x -4% $22.25 6.4% 87% 6.8% 58% 10.2x Killam Apartment REIT KMP-UN $11.91 $850 5.0% 78% 16.8x 15.5x 14.5x 10% $13.00 5.4% 92% 5.6% 54% 10.6x Morguard NA Residential REIT MRG-UN $13.52 ------Restricted------InterRent REIT IIP-UN $7.29 $526 3.3% 68% 23.5x 20.2x 18.2x 11% $7.50 5.0% 97% 5.1% 57% 13.9x Mainstreet Equity Corp. MEQ $32.70 $291 0.0% 0% 15.6x 15.5x 13.7x 2% $43.25 5.6% 76% 6.1% 67% 13.8x Total / Average $10,881 4.3% 67% 17.3x 16.4x 15.3x 3% 5.5% 90% 5.8% 53% 11.0x

Seniors Housing Chartwell Retirement Resid. CSH-UN $14.47 $2,804 3.9% 62% 17.0x 16.1x 14.8x 9% $15.00 6.1% 96% 6.2% 37% 7.3x Extendicare Inc. EXE $9.91 $876 4.8% 76% 15.7x 15.7x 14.8x 13% $9.25 8.0% 107% 7.7% 34% 4.7x Sienna Senior Living Inc. SIA $16.25 $748 5.5% 63% 12.0x 11.4x 10.9x 5% $16.50 7.8% 98% 7.9% 49% 7.9x Total / Average $4,428 4.8% 67% 14.9x 14.4x 13.5x 9% 7.3% 101% 7.3% 40% 6.6x

Hotels American Hotel Income Prop.5 HOT-UN $10.19 ------Restricted------

Other Real Estate Companies P/E6 EPS6 2016E 2017E 2018E CAGR1 Tricon Capital Group Inc. TCN $9.68 $1,086 2.7% 30% 13.5x 11.3x 10.7x 6% $13.50 nmf 72% nmf 16% 1.3x Dream Unlimited Corp. DRM $6.60 $742 0.0% 0% 10.2x 15.0x 10.6x -25% $12.00 nmf 55% nmf 25% 7.5x Firm Capital MIC FC $14.14 ------Restricted------Irish Residential Prop. REIT plc IRES-DB € 1.17 € 489.97 2.7% 48% 24.8x 17.8x 15.9x 34% € 1.12 5.0% 105% 4.8% 29% 8.1x Gazit-Globe Ltd. GZT ILS 32.80 ILS 6,412 4.3% 42% 11.3x 9.8x 8.7x 3% ILS 44.50 nmf 74% nmf 64% 11.3x Notes: 1. Compound annual growth rate (CAGR) over a three-year period ('15A to '18E); 2. Net Debt/EBITDA calculated as 2017 average Net Debt / 2017 EBITDA (DRM reflects EBT, in place of EBITDA); 3. REI.UN - CAGR is after the U.S. portfolio sold in May 2016; 4. APR.UN - CAGR shown is only for a two year period ('16E vs.18E), as IPO was completed in July 2015; 5. Current distribution is in US$; 6. EPS represents adjusted f.d. EPS for TCN [TCN adjusted f.d. EPS is in US$, thus P/E multiples have been adjusted to CAD$], f.d. EPS for DRM, f.d. EPS for FC, adjusted f.d. EPRA EPS for IRES, f.d. FFO based on management's approach (Adjusted EPRA Earnings) for GZT.

Source: Company reports, Thomson One, TD Securities Inc. estimates

Page 14 of 16 Industry Insights Equity Research December 21, 2016

TD Securities Equity Research Disclosures

Distribution of Research Ratings^ Investment Services Provided*

75% 66.01% REDUCE - 1.7%

BUY - 58.6% 50%

33%

25%

HOLD - 39.7%

0.99% 0% BUY HOLD REDUCE

Definition of Research Ratings ACTION LIST BUY: The stock's total return is expected to exceed a minimum of 15%, on a risk-adjusted basis, over the next 12 months and it is a top pick in the Analyst's sector. BUY: The stock’s total return is expected to exceed a minimum of 15%, on a risk-adjusted basis, over the next 12 months. SPECULATIVE BUY: The stock's total return is expected to exceed 30% over the next 12 months; however, there is material event risk associated with the investment that could result in significant loss. HOLD: The stock’s total return is expected to be between 0% and 15%, on a risk-adjusted basis, over the next 12 months. TENDER: Investors are advised to tender their shares to a specific offer for the company's securities or to support a proposed combination reflecting our view that a superior offer is not forthcoming. REDUCE: The stock’s total return is expected to be negative over the next 12 months. Overall Risk Rating in order of increasing risk: Low (7.9% of coverage universe), Medium (35.4%), High (44.2%), Speculative (12.6%) Research Dissemination Policy TD Securities makes its research products available in electronic and/or printed formats and as soon as practicable distributes them to its institutional clients who are entitled to receive them. The Action Notes are distributed by email, and are available in PDFform on Thomson Reuters, Bloomberg, S&P Capital IQ and FactSet. Research Reports are distributed by email; they are also printed and distributed by courier to our entitled clients. PDFs of Reports are available on Thomson Reuters, Bloomberg, S&P Capital IQ and FactSet. All research is available by password to entitled institutional clients at https://www.tdsresearch.com/equities

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Disclaimer This material is for general informational purposes only and is not investment advice nor does it constitute an offer, recommendation or solicitation to buy or sell a particular financial instrument. It does not have regard to the specific investment objectives, financial situation, risk profile or the particular needs of any specific person who may receive this material. No representation is made that the information contained herein is accurate in all material respects, complete or up to date, nor that it has been independently verified by TD Securities. Recipients of this analysis or report are to contact the representative in their local jurisdiction with regards to any matters or questions arising from, or in connection with, the analysis or report. Historic information regarding performance is not indicative of future results and investors should understand that statements regarding future prospects may not be realized. All investments entail risk, including potential loss of principal invested. Performance analysis is based on certain assumptions, the results of which may vary significantly depending on the modelling inputs assumed. This material, including all opinions, estimates and other information, constitute TD Securities’ judgment as of the date hereof and is subject to change without notice. The price, value of and income from any of the securities mentioned in this material can fall as well as rise. Any market valuations contained herein are indicative values as of the time and date indicated. Such market valuations are believed to be reliable, but TD Securities does not warrant their completeness or accuracy. Different prices and/or valuations may be available elsewhere and TD Securities suggests that valuations from other sources be obtained for comparison purposes. Any price or valuation constitutes TD Securities’ judgment and is subject to change without notice. Actual quotations could differ subject to market conditions and other factors. TD Securities disclaims any and all liability relating to the information herein, including without limitation any express or implied representations or warranties for, statements contained in, and omissions from, the information. TD Securities is not liable for any errors or omissions in such information or for any loss or damage suffered, directly or indirectly, from the use of this information. TD Securities may have effected or may effect transactions for its own account in the securities described herein. No proposed customer or counterparty relationship is intended or implied between TD Securities and a recipient of this document. TD Securities makes no representation as to any tax, accounting, legal or regulatory issues. Investors should seek their own legal, financial and tax advice regarding the appropriateness of investing in any securities or pursuing any strategies discussed herein. Investors should also carefully consider any risks involved. Any transaction entered into is in reliance only upon the investor’s judgment as to financial, suitability and risk criteria. TD Securities does not hold itself out to be an advisor in these circumstances, nor do any of its representatives have the authority to do so. The information contained herein is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would be contrary to applicable law or regulation or which would subject TD Securities to additional licensing or registration requirements. It may not be copied, reproduced, posted, transmitted or redistributed in any without the prior written consent of TD Securities.

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Insofar as the information in this report is issued in the U.K. and Europe, it has been issued with the prior approval of TD Securities Limited. United States: U.S. clients wishing to effect transactions in any security discussed herein must do so through a registered representative of TD Securities (USA) LLC. TD Securities is a trademark of TD Bank and represents TD Securities Inc., TD Securities (USA) LLC and TD Securities Limited and certain investment and corporate banking activities of TD Bank and its subsidiaries. © Copyright 2016 The Toronto-Dominion Bank. All rights reserved. Full disclosures for all companies covered by TD Securities can be viewed at https://www.tdsresearch.com/equities/welcome.important.disclosure.action

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