Act on Principle QUEBEC TRANSACTIONS > $10 MM Million $900 - - PowerPoint PPT Presentation

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

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$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

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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

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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

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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

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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

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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

0 sf sf 52.6 mil illion ion square are fe feet (Including Fed Owned)

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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

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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

VANCOUVER MARKET OVERVIEW

PREPARED FOR:

PRESENTED BY:

Tony ny Quat attrin trin Executive Vice President National Investment Team CBRE Limited November 29, 2012

Toronto Real Estate Forum

Vanco couver uver remai mains ns one e of the most

• st sought

ught after r inves estment tment market rkets s in Canada, da, with investmen estments s posing sing a lo lower er risk k profi

• file

e comp mpar ared d to other her Canadian adian marke rkets. ts. VANCOUVER SUN:

“VANCOUVER ONCE AGAIN THE WORLD’S THIRD MOST LIVABLE CITY”

B.C. P Popul pulatio ation n Change ge

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

n 40,000 – 60,000 net new migrants nts settle in BC each year

Source: BC Stats 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000

1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Net Migration Total Population

Total Population Net Migration Forecast (2013-2034)

LOCAL AL AND ND GLOB OBAL AL INFLU FLUENCE ENCE

• Forei

eign gn & Domest estic ic Investo estors

• Increased

eased activit ivity from m a varie iety of buyer er grou

• ups

ps

CONT NTINUED ED CAP RATE TE COMPRE PRESSIO SION

• Demand for “hard

assets”

• Limited

ited quali lity supply pply

• Steady

eady leas asing ing fundamen damentals als

RECO CORD D LOW INTE TEREST T RATES ES

• Fueli

ling g con

• nsum

umer er confidence

• nfidence
• Great

eat finan ancing ing availabl lable

• Favor
• rable

able purchas asing ing condition ditions

INCREA CREASE SE IN INV NVESTME TMENT T ACTIVITY IVITY

• Continu

inued ed deman and d for local l propert

• perty
• Little

le supply, pply, stron

• ng

g deman and

• Unique

que and d surpr urpris ising ing deals ls in 2012

Investm tment nt Trends ds 20 2012 12

Debt Capital l Marke kets ts

• Mortgag

age e spread ads s have generall ally y held the line e at 180 180 - 190 190 bps for “A-quality” product

• BoC likel

ely to hold ld rates es for the forese seeable eable future

5-Year r Comm mmercia rcial l Mortga tgage ge Rates (190 bps spread): ad): 3.24 5-Year r Governm rnment t of Canada da Benchmark rk Bond Yield: d: 1.34

Typic ical l terms ms: LTV 55 - 65% 25 year amortiz tizatio tion 5 year term m 50 bps arrang ngeme ment nt 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 Week ekly ly Benchma hmark k Bond Yiel elds ds & Mortga tgage ge Rates es Januar ary 2002 to Novem ember ber 2012

Source: CBRE Limited, Bank of Canada

Purchase haser r Profile file

High h interest rest from

• m all buyer

r groups

• ups today
• REITS

TS

• Pen

ensi sion

• n Funds
• Forei

eign gn Inve vestors stors

• Syndicat

dicators s

• De

Deve velopers pers

• Privat

vate e Buye uyers

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

Downt ntown

• wn Cl

Class s A A Ca 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

200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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

Downt ntown

• wn Su

Supply ly & Demand d – All Classe ses

Forecasted asted  Total al Marke ket t Size: : 21.9 .9 Milli lion n SF Q3 2012 Vacan cancy cy 3.4% Potent ential ial Marke ket t Size e in 2016: : 23.5 .5 Million llion SF SF

Last wave e of new builds ds (2001 2001-20 2004) ) 1.35m SF = 6.7% of total market et Current rent wave e of new builds s (2014 2014-2015 015) ) 1.59m SF = 7.0% of f total market et

Source: CBRE Limited

AAA/A Class Vacancy: ancy: 1.7%

745 Thurlow low Bentall tall Kennedy edy MNP P Tower er Oxfor

• rd

d Properties erties 800 Griffit iffiths Aquil ilini ini Grou

• up

TELU LUS S Garde den TELUS/ LUS/Westba estbank nk

745 Thurlow low Bentall tall Kennedy edy MNP P Tower er Oxfor

• rd

d Properties erties TELUS S Garden den TELUS/ S/Wes estbank tbank

N

Downt ntown

• wn Offi

fice ce Develop

• pme

ments nts

Source: CBRE Limited

Pacific ific Centre e Expans nsio ion Cadillac llac Fairvi view ew Pacific ific Centre e Expans nsio ion Cadillac llac Fairvi view ew 800 Griffit iffiths Aquil ilini ini Grou

• up

Downt ntown

• wn Offi

fice ce Develop

• pme

ments nts 2014 2014 – 2017 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 ific Centre tre Expansion nsion MNP Tower er 800 800 Griffith fiths s Way 745 745 Thurlow

• w

TELUS US Garden den

Source: CBRE Limited

Despite Positive Indicators…………..

• Propo

roposed sed interest erest rate hike ke

• Global

l econom nomic ic uncert certai aint nty

• Impending

pending fiscal cal cliff

• Upcom
• ming

ing provi

• vincial

ncial electio ions s in BC

• Over

er 1.5 million

• n SF of planned

ned futur ture e office fice supply ply in Downt ntown

• wn Vancou

couver ver

Th Ther ere e are e clouds uds on the e horizon izon

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

Fore recas aste ted 

Challenges Just Around the Corner…

Source ce: Bank of Canada and TD Bank of Canada

Interest erest Rate tes Expec pecte ted d to Rise (But But Not Yet)

• Concerns about the “fiscal cliff”

“All for one and one for all.”

Currency y Crisis is

Alexandre Dumas

Fiscal l Cliff f – Will They Jump?

Provinc incia ial l Election ions s in B.C.

Angus Reid Poll and Forum Research Inc. (Oct 2012) BC NDP – 49% 49% BC Liberal – 26% BC Conservatives – 16% BC Greens – 7% Other – 2%

Source: CBRE Limited, Angus Reid

Shifting ing Fundame amentals als

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 $60

2004 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

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• 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

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37% 40% 24% 41% 41% 42% 45% 36% 36% 45% 40% 48% 45% 42% 42% 40% 42% 0% 10% 20% 30% 40% 50% 60% 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

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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

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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