Trends Facing Capital and Debt Markets in 2016 1 Real Estate Forum - - PowerPoint PPT Presentation

Trends Facing Capital and Debt Markets in 2016

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

(10%) (8%) (6%) (4%) (2%) 0% 2% 4% 6% 8% 1 3 1 3 1 3 1 3 1 3 1 3 1 3 1 3 1 3 1 3 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Actual Projected

2011 2012 2013 2014E 2015E 2016E Canada Real GDP ($2007 Bn) 3.0 1.9 2.0 2.4 1.1 2.1 Core CPI (Y/Y) 1.7 1.7 1.2 1.8 2.2 2.1 Unemployment Rate (%) 7.5 7.3 7.1 6.9 6.9 6.8

1

Source: Bloomberg.

Canadian Economic Prospects

Quarterly Real GDP Growth CIBC Economic Forecast

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

2

Canadian Inflation, Interest Rate Targets and Foreign Exchange

Historical and Forecast Monetary Policy Historical and Forecast Core Inflation Historical and Forecast C$/U.S.$ Exchange Rate

0.70 0.80 0.90 1.00 1.10 Mar-07 Mar-09 Mar-11 Mar-13 Mar-15 FX Rate FX Rate - Projected Parity 0.0% 1.0% 2.0% 3.0% Mar-07 Mar-09 Mar-11 Mar-13 Mar-15 Actual Projected 0% 2% 4% 6% Mar-07 Mar-09 Mar-11 Mar-13 Mar-15 BoC Overnight Rate - Actual BoC Overnight Rate - Projected

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

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2015 is on pace to surpass 2014, which is the busiest year on record Substantial bank market capacity exists for strong borrowers and well structured transactions Market volume continues to be dominated by refinancing activity4 Bank Debt Market Activity1 (2010 – Q3 2015) Bank Debt Market Activity by Segment2 (YTD Q3: 2013, 2014, 2015) Bank Debt Market Activity by Purpose3 (YTD Q3 2015)

$106 $166 $191 $210 $240 $143 $161 $199 2010 2011 2012 2013 2014 2013 YTD 2014 YTD 2015 YTD Volume (C$ Billions) Refinancing 90.7% M&A 7.1% Project Finance 1.2% Other 0.7% LBO 0.2% $3 $13 $21 $24 $81 $4 $14 $19 $29 $96 $8 $18 $24 $38 $110 < $100 Million $100 - $250 Million $250 - $500 Million $500 Million - $1 Billion > $1 Billion Volume (C$ Billions) 2013 2014 2015

1 Source: CIBC internal database. Deals closed from January 1, 2010 to September 30, 2015. 2 Source: CIBC internal database. Deals closed during YTD Q3 from January 1, 2013 to September 30, 2015. 3 Source: Bloomberg. January 1, 2015 to September 30, 2015. 4Refinancing activity includes new money not categorized into M&A, Project Finance, Other, or LBO.

Corporate Lending

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

4

Source: Bloomberg.

10-Year Government of Canada Bond Yield

Last 20 Years Last 24 Months

1.0% 1.5% 2.0% 2.5% 3.0% Nov-13 May-14 Nov-14 May-15

• 2.0%

4.0% 6.0% 8.0% 10.0% 1995 1999 2003 2007 2011 2015

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

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Mortgage Spreads

Commercial Mortgage Spreads Commercial Mortgage Coupons Near All- Time Lows

Mortgage Spread (LHS) BBB Spread (LHS) Mortgage Spread Over BBB (RHS) Mortgage Spread (LHS) Mortgage Coupon (RHS) Spread as a % of Coupon (LHS)

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

6

Source: CIBC Internal Database.

Real Estate Unsecured Debt Offerings (C$ Billions)

$1.2 $1.0 $0.3 $0.7 $1.2 $0.9 $2.2 $4.2 $5.5 $5.3 $2.9 9 7 3 5 11 6 15 25 24 23 15 5 10 15 20 25 30 0.0 1.0 2.0 3.0 4.0 5.0 6.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2014 YTD 2015 YTD (# of Transactions) Issuance Volume (C$ BN)

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

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Real Estate Sector – Unsecured Debt Maturity Profile

765 1,500 2,525 2,300 2,300 1,675 1,850 1,150 1,050 660 500 1,000 1,500 2,000 2,500 3,000 3,500 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Amount Oustandning (C$MM)

Allied Properties REIT Artis REIT Brookfield Office Properties Brookfield Residential Properties Inc Canadian REIT Choice Properties LP Choice Properties REIT Cominar REIT Crombie REIT CT REIT Dream Office REIT First Capital Realty Granite REIT H&R REIT Kimco Realty Morguard Corp RioCan REIT SmartREIT Ventas Canada Finance

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

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2015 CMBS and First Mortgage Bond Activity (C$ Millions)

CMBS Issuance First Mortgage Bonds

CMBS Issuance

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

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Interest Rate Forecasts

GoC Yield Curve Bank Interest Rate Forecasts — GoC Yields

Interest Rate Forecasts - End of 2015 2-year 5-year 10-year 30-year BMO 0.67% 1.03% 1.70% 2.39% CIBC 0.55% 0.90% 1.60% 2.35% RBC 0.65% 1.00% 1.75% 2.45% BNS 0.75% 1.10% 1.75% 2.40% TD 0.50% 0.85% 1.55% 2.25% Average 0.62% 0.98% 1.67% 2.37% Interest Rate Forecasts - End of 2016 2-year 5-year 10-year 30-year BMO 1.02% 1.37% 2.02% 2.62% CIBC 1.10% 1.55% 2.45% 2.75% RBC 1.60% 2.10% 2.60% 3.05% BNS 1.60% 2.10% 2.35% 2.80% TD 0.90% 1.50% 2.05% 2.70% Average 1.24% 1.72% 2.29% 2.78% 0.65% 1.03% 1.31% 1.71% 2.34% 2.39% 0.0 1.0 2.0 3.0 4.0

• 5

10 15 20 25 30 Yield (%) Term to Maturity (years) Current (November 12, 2015) 1-Year Ago (November 13, 2014) Average Forecast - End of Calendar 2015 Average Forecast - End of Calendar 2016

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

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Real Estate Market Cycles

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Public Markets Property Markets for Portfolios

Valuation Levels

IPOs

Asset Migration

IPOS IPOS IPOS Privatizations Privatizations Privatizations

Privatiz.

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

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Source: FactSet.

REIT Sector Relative Performance

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 20.0x 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

12

Source: CIBC Equity Research.

Price-to-AFFO Trends

Low: 7.0x Post Credit Crisis High: 17.1x

12.7x

High 18.8x Low 7.0x

• Avg. 13.4x

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

(40%) (30%) (20%) (10%) 0% 10% 20% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

13

Source: CIBC Equity Research.

Premium/(Discount)-to-NAV Trends

Low: (35.5%) Post Credit Crisis High: 9.2%

Current: (12.3%) Year End 2014: (10.1%)

• Avg. (2.2%)

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

14

Source: Bloomberg, CBRE.

Relative Pricing (Cap Rate vs Bond Yield) at Quarter End: 2006 – 2014

Widest Spread: 4.76% Bottom = GoC 10 Yr. Bond Yield Top = National Cap Rate

• 2.0%

4.0% 6.0% 8.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Tightest Spread: 1.81% 2015 Q3 Spread: 4.48%

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

$2,523 $3,789 $3,422 $1,028 $3,229 $4,695 $5,574 $7,186 $5,029 $2,691 $1,833

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015

15

Source: CIBC Internal Database.

Real Estate Equity Offerings by Year (C$ millions)

Common Equity Preferred Shares Convertible Debentures To

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

16

Source: CIBC Internal Database.

Historical Real Estate Transaction Volumes (C$ Billions)

$0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 $14.0 $16.0 2008 2009 2010 2011 2012 2013 2014 2015 YTD Public Private Institutional Other

$10.5 B $4.2 B $9.1 B $10.4 B $16.7 B $14.4 B $14.1 B $8.1 B

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

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Source: CBRE.

Commercial Real Estate Cap Rate Trends

5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2007 2008 2009 2010 2011 2012 2013 2014 2015 Toronto Montreal Ottawa Calgary Vancouver Halifax

Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016

18

Source: CIBC Internal Database.

YTD 2015 Trades by Purchaser Type YTD 2015 Trades by Product Type

Office 35% Industrial 12% Retail 20% Multi-Family 28% Hotel 5% Public 49% Private 21% Advisor 7% Institution 23%