Act on Principle

Can Investment Activity Become Any Stronger

in the Canadian Market or Has it Peaked? Montreal Investment Market Overview November 29th 2012

Michal Kuzmicki

Managing Partner, Montreal

2

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

2009 2010 2011 2012

Industrial

Multi-Res

Office

Retail

$510 MM

$892 MM

$1,320 MM

$1,445 MM

QUEBEC TRANSACTIONS > $10 MM

Million

3

2012 QUEBEC RETAIL TRANSACTIONS

Galeries Charlesbourg

Quebec City

$33.0 million

254,415 sf

Enclosed Food Anchored

Vendor: Econo-Malls

Purchaser: First Capital

Top Tenants: IGA, Hart,

Dollarama

Les Factoreries &

Carrefour Champêtre

St-Sauveur & Bromont

$94.7 million

278,000 sf

Outlet Centres

Vendor: Private & Devimco

Purchaser: Riocan & Tanger

Top Tenants: Tommy Hilfiger,

Nike, Guess

Centre Le Village &

Elgar Place

Montreal

$21.9 million

105,956 sf

Enclosed Food Anchored

Vendor: Sandalwood

Purchaser: Partners REIT

Top Tenants: Loblaws, SAQ, RBC

Promenades de l’Outaouais

Gatineau

$220.3 million

840,435 sf

Enclosed Regional

Vendor: Canpro Investments

Purchaser: Oxford Properties &

Montez Corporporation

Top Tenants: Costco, La Baie

4

2012 QUEBEC RETAIL TRANSACTIONS

Place des Quatres-Bourgeois

Quebec City

$31.0 million

242,774 sf

Enclosed Food Anchored

Vendor: Bayfield & Sunstone

Purchaser: First Capital

Top Tenants: IGA, Winners, Jean Coutu

Place de la Colline &

Place des Cormiers

Chicoutimi & Sept-Îles

$14.4 million

125,160 sf

Unenclosed Food Anchored

Vendor: First Capital

Purchaser: Private

Top Tenants: Maxi, Uniprix, Provigo

Marché Jonquière

Jonquière

$13.8 million

66,189 sf

Unenclosed Food Anchored

Vendor: Brookline

Purchaser: Canmarc REIT

Top Tenants: IGA, Jean Coutu,

Desjardins

5

2012 MAJOR QUEBEC MULTI-RESIDENTIAL TRANSACTIONS

Norgate & Renaissance

Montreal, Qc

$121 million 1,528 Units

$/Unit: $79,188

Vendor: Private Consortium Purchaser: True North

Apartment REIT

Olympic Village

Montreal, Qc

$176.5 million 980 Units

$/Unit: $108,102

Vendor: El Ad Purchaser: CAPREIT

La Cité

Montreal, Qc

$231.8 million 1,351 Units

$/Unit: $171,577

Vendor: Private Investors Purchaser: Oxford Properties

6 Highlights - Ottawa Office Market

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

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

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

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

• Investment Volume - $2.0 Billion New Record ($1.8 Billion 2007)

As of November 20th 2012

7 The Ottawa Office Market

Federal Government Presence in the Ottawa Market

Downsizing or Renewal?

Nortel Campus: 2,200,000 sf

Gatineau: 1,600,000 sf

Ogilvy Road: 800,000 sf

90 Elgin Street: 646,000 sf

Tremblay Road: 250,000 sf

5,500,000 sf

52.6 million square feet

(Including Fed Owned)

8

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

Dec-09 Apr-10 Aug-10 Sep-12 Nov-10 Dec-10 Jan-11 Jun-11 Aug-11 Dec-11 Jan-12 Aug-12

Institutional Grade Office Yeilds- Ottawa Q4 2009-Q3 2012

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

Dec-09 Apr-10 Aug-10 Sep-12 Nov-10 Dec-10 Jan-11 Jun-11 Aug-11 Dec-11 Jan-12 Aug-12

Institutional Grade Office Yeilds- Ottawa Q4 2009-Q3 2012

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

Dec-09 Apr-10 Aug-10 Sep-12 Nov-10 Dec-10 Jan-11 Jun-11 Aug-11 Dec-11 Jan-12 Aug-12

Institutional Grade Office Yeilds- Ottawa Q4 2009-Q3 2012

Ottawa Market Overview

9 Local Case Study – Record Setting Yield

200 Kent Street & 77 Metcalfe Street, Ottawa, ON

200 Kent Street 77 Metcalfe Street

Cap Rate: 5.25%

Value Drivers:

Credit, Rent, & Term

Cap Rate: 5.20%

Value Drivers:

Credit, Rent, & Term

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

0

VANCOUVER

MARKET

OVERVIEW

PREPARED FOR:

PRESENTED BY:

Tony Quattrin

Executive Vice President

National Investment Team

CBRE Limited

November 29, 2012

Toronto Real

Estate Forum

Vancouver remains one of the most sought after investment markets in Canada, with

investments posing a lower risk profile compared to other Canadian markets.

VANCOUVER SUN:

“VANCOUVER ONCE AGAIN THE WORLD’S THIRD MOST

LIVABLE CITY”

B.C. Population Change

•International migration accounts for 77.4% of BC’s population gain

•Between 40,000 – 60,000 net new migrants settle in BC each year

Source: BC Stats

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

19

71

19

73

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

20

19

20

21

20

23

20

25

20

27

20

29

20

31

20

33

20

35

Net Migration

Total Population

Total Population Net Migration

Forecast (2013-2034)

LOCAL AND GLOBAL

INFLUENCE

• Foreign & Domestic

Investors

• Increased activity from a

variety of buyer groups

CONTINUED CAP

RATE COMPRESSION

• Demand for “hard

assets”

• Limited quality supply

• Steady leasing

fundamentals

RECORD LOW

INTEREST RATES

• Fueling consumer

confidence

• Great financing

available

• Favorable purchasing

conditions

INCREASE IN

INVESTMENT ACTIVITY

• Continued demand for local

property

• Little supply, strong

demand

• Unique and surprising deals

in 2012

Investment Trends 2012

Debt Capital Markets

• Mortgage spreads have generally held the line at 180 - 190 bps for “A-quality” product

• BoC likely to hold rates for the foreseeable future

5-Year Commercial Mortgage Rates (190 bps spread): 3.24

5-Year Government of Canada Benchmark Bond Yield: 1.34

Typical terms:

LTV 55 - 65% 25 year amortization

5 year term 50 bps arrangement fees

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6

6.5

7

7.5

8

8.5

9

Weekly Benchmark Bond Yields & Mortgage Rates

January 2002 to November 2012

Source: CBRE Limited, Bank of Canada

Purchaser Profile

High interest from all buyer groups today

REITS

Pension Funds

Foreign Investors

Syndicators

Developers

Private Buyers

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

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

Vancouver

Calgary

Edmonton

Toronto

Ottawa

Montreal

Halifax

National

Downtown Class A Cap Rates

Source: CBRE Limited

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

-1,200,000

-1,000,000

-800,000

-600,000

-400,000

-200,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

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

Downtown Supply & Demand – All Classes

Forecasted Total Market Size: 21.9 Million SF

Q3 2012

Vacancy

3.4%

Potential Market Size in

2016: 23.5 Million SF

Last wave of new builds (2001-2004) 1.35m SF = 6.7% of total market

Current wave of new builds (2014-2015) 1.59m SF = 7.0% of total market

Source: CBRE Limited

AAA/A Class Vacancy: 1.7%

745 Thurlow

Bentall Kennedy

MNP Tower

Oxford Properties

800 Griffiths

Aquilini Group

TELUS Garden

TELUS/Westbank

745 Thurlow

Bentall Kennedy

MNP Tower

Oxford Properties

TELUS Garden

TELUS/Westbank

N

Downtown Office Developments

Source: CBRE Limited

Pacific Centre Expansion

Cadillac Fairview

Pacific Centre Expansion

Cadillac Fairview

800 Griffiths

Aquilini Group

Downtown Office Developments 2014 – 2017

Cadillac Fairview Oxford Properties Aquilini Group Bentall Kennedy TELUS/Westbank

300,000 SF 270,000 SF 213,000 SF 365,000 SF 448,000 SF

Average Floor Plate:

75,000 SF 8,000 SF 14,000 SF 16,500 SF 22,000 SF

Under Construction Under Construction Under Construction

(West Tower – 180,000 SF)

Under Construction Under Construction

2014 Completion 2014 Completion 2014 Completion 2015 Completion 2015 Completion

- 44.0% Preleased - 51.0% Preleased 60.0% Preleased

• No Pre-Leasing To Date • Vertex One (8,000 SF)

• MNP LLP (72,000 SF)

•CBRE Ltd. (24,000 SF)

•Regus (16,000 SF)

• No Pre-Leasing To Date

• SNC-Lavalin (100,000 SF)

• McCarthy Tetrault (85,000 SF)

• TELUS (200,000 SF)

• Bull Housser LLP

(67,000 SF)

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

Source: CBRE Limited

Despite Positive Indicators…………..

• Proposed interest rate hike

• Global economic uncertainty

• Impending fiscal cliff

• Upcoming provincial elections in BC

• Over 1.5 million SF of planned future office supply in

Downtown Vancouver

There are clouds on the horizon

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5Forecasted

Challenges Just Around the Corner…

Source: Bank of Canada and TD Bank of Canada

Interest Rates Expected to Rise (But Not Yet)

• Geo-Political Events in Europe = Euro zone

jobless rate at record 11.6%

• Greek austerity measures and tax increases in

Portugal to keep European joblessness high

• Super storm Sandy to slow economic growth in

US in Q4

• Concerns about the “fiscal cliff”

• Chinese government change in leadership

“All for one and one for all.”

Currency Crisis

Alexandre Dumas

Fiscal Cliff – Will They Jump?

Provincial Elections in B.C.

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

BC NDP – 49% BC Liberal – 26%

BC Conservatives – 16% BC Greens – 7%

Other – 2%

Source: CBRE Limited, Angus Reid

Shifting Fundamentals

Thank You!

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

Calgary has been the Most Active Office Market in Canada

• Downtown Calgary has an inventory of 38.6 million square feet

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

• 11 buildings, representing a 24% increase in inventory

• Global Financial Crisis and plunging oil prices resulted in 1.2

million square feet of negative absorption in 2009

• Vacancy rate had been anticipated to approach 20%

• Record absorption of 2.8 square feet in 2011 and 1.6 million YTD in

2012 saved the day

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

• No large blocks of contiguous space in the downtown core

Calgary Downtown Office – Class AA Net Rental Rate

$20

$25

$30

$35

$40

$45

$50

$55

$602004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

$28

$30

$40

$50

$45

$34

$28

$36

$45

$50 $50

$45

$40 $40

Under-writing Office Investments in Calgary is Challenging

• Calgary has experienced extreme volatility in lease rates

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

• In order to “win the bid”, buyers must under-write acquisitions

with aggressive growth rate assumptions in 2013 and 2014

• They will then assume that lease rates will moderate as new

supply comes on stream in 2015, 2016 and 2017

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

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

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

Can Investment Activity Get Any Stronger?

• The answer is dependant on the number of willing vendors

Who Will the Vendors Be?

• Institutions developing new projects and improving their portfolio

quality (AIMCo, Oxford and Brookfield are examples from 2012)

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

• German investors that can still “get out whole”

Calgary Place Sale Transaction

Date: May 2012

Vendor: Oxford / AIMCo

Purchaser: CREIT / KingSett

Price: $312 million

Area: 573,000 square feet

Cap Rate: 6.5%

Price per Foot: $544

Competitive sale process with six bids

Under-written with aggressive growth rate assumptions

A good example of vendors that were willing to sell because they are actively developing new projects and improving their overall portfolio quality

21

- 10 20 30 40 50 60 70 80 90 100

South Korea

France

Singapore

China

Japan

Germany

Canada

UK

Global

USA

US$ bn YTD 2012 YTD 2011

$17.4 Billion $14.4 Billion

Top 10 Purchasers by Source of Capital

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

22

37% 40%

24%

41% 41% 42%

45%

36% 36%

45%

40%

48% 45%

42% 42%

40% 42%

0%

10%

20%

30%

40%

50%

60%

0

20

40

60

80

100

120

140

Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312

US$ bn

Domestic Intra-regional Inter-regional Cross Border as % of total

Global Cross Border Transactional Volumes, Q3 2008 – Q3 2012

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

23

Property Name Location Sector

Sale Price

($ US m) Purchaser

Purchaser Source of

Capital

Barangaroo Sydney Office 1,039 CPPIB Canada

Plaza Hotel New York Hotel 570 Sahara Group India

Festival Place Basingstoke Retail 474 TIAA-CREF USA

Broadgate West London Office 458 Hines/HSBC Global

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

90 Boulevard Pasteur Paris Office 315 ADIA Abu Dhabi

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

Noteworthy Cross-Border Deals in Q3 2012

Barangaroo Waterfront:

Sydney, Australia

24

2.18

1.65

- 5 10 15 20 25

China

Hong Kong

South Korea

Japan

Canada

Australia

France

Germany

UK

USA

US$ bn Domestic Cross-Border

$3.83 Billion

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

10 Largest Markets in Q3 2012