GTA Office Investment Report Q Real estate insight for the informed GTA office investor

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1 GTA Office Investment Report Q Real estate insight for the informed GTA office investor

2 Executive Summary After an unusually slow first quarter, investor sentiment shifted in the marketplace and office investment volumes for Q2 exceeded those of Q1 by a factor of 53. GTA average cap rates continued to compress to 6.33% (9 basis points downwards QoQ) and the GTA average price per SF increased by $44 to $265/SF as a result of the sustained trading of numerous CBD trophy assets. Private investors and REITs were the most active buyers capturing 5 and 1 of the market share, respectively; REITs were nearly absent in Q1 comprising only of the buying activity. While pricing remains aggressive, large pools of public capital still view GTA real estate as a relatively low volatility option compared to equities. The most significant news this quarter related to the disposition of GE Capital s Toronto office portfolio (capturing 45% of the sales volume), which was purchased by Slate Properties and Greystone Managed Investments for $686M. Industry sources revealed that GE made a strategic decision to exit their holdings in order to capture peak pricing levels and shift focus to the lending side of the business. With interest rates forecast to correct towards historical norms, the firm is seeking to take advantage of having surplus cash on hand. Deducting the GE portfolio trade as an outlier, the remaining transaction volume in Q2 was still 25 greater than Q1 ($853M in Q2 as compared to $245M in Q1); $535M traded in the CBD region at an average cap rate of 5.37% while $318M changed hands in the suburbs at an average cap rate of 6.3. Cap rate spreads between CBD and suburban assets (including the GE portfolio) widened further from 115 bps to 150 bps demonstrating increased skepticism about non-core assets ability to perform in the current environment. With 5.3M SF of new office supply currently under construction in Metro Toronto, it appears that tenants are favoring newer LEED certified buildings with larger floor plates and access to downtown amenities over those located in the suburbs. Not surprisingly, suburban vacancy rates in Q2 were more than double those of downtown rates at 11. as compared to 5.3% (this spread has increased 11% since last quarter). Going forward, we anticipate that aggressive investors will focus on finding value-added, contrarian opportunities in the suburbs when pricing levels reach those sufficiently more attractive than CBD assets and that undervalue the long term fundamentals of these assets. Specifically, the catalysts for investment will likely be: the development of new transit infrastructure projects; increased cooperation from municipal planning departments in creating or repositioning office nodes to become competitive with CBD nodes; and a shift in the working population s preference for living and working downtown, as the Toronto core becomes more space constricted/expensive and the transportation infrastructure lags behind the pace of development. Sources: RealNet, Altus, Real Capital Analytics, JLL Research

3 Spotlight THE GTA CLASS A FLEX OFFICE LANDSCAPE With trophy assets in limited supply and pricing at peak levels, well capitalized buyers are looking for alternative assets to diversify and deploy their funds. The recent development of multiple Class A flex office buildings in the suburbs may prove to be a viable substitute. After careful analysis of the GTA marketplace, we have identified approximately 4.4M square feet of flex office space with a collective assessed value of $630M (2012). While these buildings might not offer the stature of CBD Class A assets, they are generally well located close to 400 series highways (an average distance of 0.87 km away), have excellent signage exposure, attractive parking ratios and open, spacious environments for tenants. There certainly seems to be momentum behind these assets with increased development and transactions backed by credible institutional and public investors occurring in recent years. The majority of the flex office inventory in the GTA is located in the West (6) with the vast remainder of stock located in the North (3). The Metro region holds of total inventory and not surprisingly, there are no buildings located in East. By assessed value, the three largest municipalities holding stock are: Mississauga ($320M); Vaughan ($103M); and Oakville (M). Of the 59 buildings identified, 4 of the total square footage, or 27 buildings, are owned by private investors. Pension funds are the second largest investor group holding 1 (13 buildings). Developers and institutions (such as life insurance and public trust companies), each own 13% of the available stock (10 and 4 buildings, respectively). Lastly, REITs own 5 buildings and of square footage. While our data suggests that private investors are the most aggressive owner group, a closer look at buildings built after 2009 reveals that the proportion of private ownership for these newer buildings drops to 1. Developers and pension funds combined own 8 of post-2009 buildings. With the exception of one property located in the North, all these buildings are located in the more conventional GTA West region. 9 of flex office building stock is domestically owned. This statistic is not surprising as it appears that most foreign owners prefer centrally located, Class A, CBD assets with minimal vacancy risk. Local/national buyers are seeking opportunities to diversify their portfolios through flex office and chase yield driven opportunities that may not be available in downtown Toronto. WEST: - 39 buildings - 2,638,818 SF - 6 of total square footage - $477M aggregate assessed value - avg. year built = avg. SF/building = 69,443 SF - avg. assessed value/building = $12.5M Ownership by Region NORTH: - 18 buildings - 1,640,300 SF - 3 of total square footage - $139.5M aggregate assessed value - avg. year built = avg. SF/building = 96,448 SF - avg. assessed value/building = $8.7M METRO: - 2 buildings - 94,700 SF - of total square footage - $13.3M aggregate assessed value - avg. year built = avg. SF/ building = 47,350 SF - avg. assessed value/building = $6.7M Since 2005, roughly $305M worth of flex office has traded in 8 separate deals involving 21 buildings. All of these deals involved portfolio trades with the largest occurring in 2008 involving GE Capital s sale of 8 properties to CanPro Investments Ltd. for $98M. The average cap rate recorded over this period was 7% and the average price was $201/SF. As tenants press to maximize their utilization of resources and capital, flex will continue to advance as an asset class. With its enhanced ability to intensify occupancy loads (employee square footage ratios), flex is a competitive option as compared to other types of office space. Flex provides a more pleasant working environment than traditional office buildings having better light penetration through floor-to-ceiling windows, a lack of core building elements (elevator columns, hallways and common areas) and typically 18 foot clear ceilings. Parking ratios are generous (greater than 4.0 spaces per 1000 SF) and lots are located in front of tenants units thereby minimizing the time from parking lot to desk for employees (with no delays from elevators as well). From the landlord s perspective, there are many benefits to owning flex office over and above the returns achievable considering the minimal cost to construct these basic structures and take advantage of strong exit valuations. Flex building systems are less management intensive than regular office buildings; there are no centralized plants or elevators to maintain, minimal HVAC issues and no lobbies to upgrade and clean. Tenant improvements are generally not difficult to perform and flex space tends to attract larger tenancies (minimum 8,000SF 10,000 SF) that are less motivated to move upon lease renewals. Units frequently have warehousing capability that allows owners to attract a range of users from the following areas: engineering, contracting, medical/pharmaceutical laboratories, research and development firms, financial services and disaster recovery sites. While vacancy risk can exist for developers as flex buildings are commonly not pre-leased prior to construction (i.e. build to speculation ), flex office will continue to increase in demand as larger tenants move to the suburbs to reduce costs and seek to maximize their space efficiency.

4 GTA Office Investment Market Clock* Metro Toronto North Peaking market Falling market Peaking market Falling market North York Burlington Rising market Bottoming market Rising market Bottoming market East West Markham Vaughan Mississauga Scarborough Brampton Etobicoke Note: *based on price per square foot for observed transactions Trailing 12 Months Investment Volume by Municipality - 1,000 2,000 3,000 Q Sales Volumes 0 $1,000 $1,500 Toronto $2, Toronto $1, North York Mississauga $ $ North York $ Scarborough Etobicoke $ $87.97 Mississauga $75.70 Markham Burlington $79.32 $54.63 Markham $55.46 Vaughan $35.26 Etobicoke $45.98 Brampton $30.78 Oakville $28.97 Burlington $22.88 East York Milton $17.89 $14.65 Vaughan $20 Richmond Hill Newmarket $14.65 $10.54 Milton $14.65 Ajax $4.25 Richmond Hill $13.18 York $3.95 King $2.78 Oakville $4.16 Whitby East Gwillimbury $1.45 $6 Brampton $4.05

5 Millions SF Millions SF Billions $ Overview Entire GTA GTA Total Sales Volume vs. Avg. Cap Rate Sales Volumes $1,539M $245.02M 5.0 Average Cap Rates 6.33% % Total SF Transacted 5,816K 1,109K 4.0 Average $PSF $265 $ % Number of Transactions Cap Rate Spread (CBD vs. Suburban) $PSF Spread (CBD vs. Suburban) 150bsp 115bsp $135 $176 After a mere $245M changed hands in Q1 2013, business picked up considerably in Q2 with total investment volumes topping $1.5B. The increased activity can be credited to the GE Capital portfolio disposition along with a bevy of significant CBD trades. Most notably, Q2 observed a $220M exchange between the Ontario Pension Board and Canada Pension Plan Investment Board for 1 Queen East. The Madison Centre traded for $133.5M between Redbourne Group and Northam Realty Advisors and Dundee REIT purchased 137 Yonge for $95M from CTL Group. As a whole, the GTA average cap rate for office trades was 6.33%; a marginal downward shift from the 6.4 recorded in Q1. The GTA average $PSF increased by $44 to $265/SF and the total square footage transacted increased by 40 to 5.8M SF (GE accounted for 2.7M SF). CBD and Suburban cap rate spreads continued to widen to 150 bps. Investment volumes for CBD assets significantly outpaced suburban volumes at $1,103M as compared to $436M. Moving forward, the outlook remains unchanged in view of the low interest rate environment and continued volatility in the equity markets (the S&P 500 VIX Market Volatility Index peaked in June at the highest level over the past 6 months); risk averse investors will continue to place capital in safer CBD holdings. However, the threat of potential interest rate hikes will reduce the margin of safety levered investors will take on attaining acceptable yield. RBC Capital Markets predicts a 25 bps hike in the overnight interest rate to occur as early as H This will likely change market confidence and incite more conservative buying behavior $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 12 GTA Sales Volumes GTA Total Area Transacted vs. Avg. $ PSF GTA Avg Cap Rates GTA Total Area Transacted GTA Average $ PSF CBD vs. Suburban Office: Historical Transacted Area 5% 3% 1% 1 Historical Cap Rates: CBD vs. Suburban CBD Office Cap Rates Suburban Office Cap Rates CBD Office Total Area Transacted Suburban Office Total Area Transacted

6 Millions Millions Millions Overview Office Class and Specialty Use Quick Stats Q By Asset Class GTA Class A Office Investments Volumes and Avg Cap Rates A B C $1,600 1 Sales Volumes $894M $555.72M $93.03M Average Cap Rates % 7.4 Total SF Transacted 3,275K 2,100K 441K Average $PSF $272 $265 $211 Number of Transactions The increased sales activity in Q2 was most prevalent with transactions involving Class A and B buildings. Class A and B volumes increased almost seven-fold and five-fold respectively compared to Q1, while Class C volumes nearly doubled. Despite the aggressive pricing of these assets, a flight to quality tendency was evident in the marketplace. $1,400 $1,200 $1,000 $800 $600 Q Q Q Q Q Q GTA Sales Volumes Class A GTA Avg Cap Rates Class A GTA Class B Office Investments Volumes and Avg. Cap Rates The aforementioned trend was supported by cap rate data from the quarter as well. Yields for B and C class properties increased by 13 bps and 110 bps, respectively. Cap rates for Class A buildings further compressed by 14 bps. $ The purchaser profile was dominated by the private investor category with $893M or 5 of total sales. $686M (77%) of this volume was buoyed by the GE portfolio activity. The majority of the remaining private deals occurred in the suburban markets at an avg. cap rate of 6.8. Private investors are expected to remain active in these markets in search of overlooked assets that have repositioning capability. REITs finished the quarter as the second most active buyer group with 1 of all sales. Following a considerable downward slide on the TSX in June (approx. 5%), much speculation occurred about REITs beginning to back off their purchasing activity as dividend yields surpass cap rates. With such market volatility, this buyer group may become less competitive on future bidding. $90 $80 Q Q Q Q Q Q GTA Sales Volumes Class B GTA Avg Cap Rates Class B GTA Class C Office Investments Volumes and Avg. Cap Rates Purchaser Profile $70 $60 $40 $ $20 $10 Q Q Q Q Q Q GTA Sales Volumes Class C GTA Avg Cap Rates Class C Q Q Q Q Q Q REIT Property Company Private Equity Private (UHNW / Other) Pension Fund Insurance Company Corporate (MNC) (see legend at back of report) Quick Stats Q By Office Subcategory Medical Flex Sales Volumes 15M 38M Average Cap Rates Total SF Transacted 46K 141K Average $PSF $321 $270 Number of Transactions 3 3

7 Millions Sq Ft Toronto Sales Volumes $1,102.85M $31.68M Average Cap Rates 5.27% 5.5 Total SF Transacted 3,160K 82K Average $PSF $349 $388 Number of Transactions 21 8 Cap Rate Spread (vs. CBD) -2bps 0bps $PSF Spread (vs. CBD) -$15 $3 Market Perspective After a lackluster showing last quarter, the institutional players returned to the table resulting in numerous high profile trades. The disposition of GE Capital s portfolio gave rise to Greystone Managed Investments purchasing $542M of Toronto assets. Furthermore, the pension funds completed a significant swap at the end of June when CPPIB purchased 1 Queen East & 20 Richmond East for $220M from the Ontario Pension Board. The increased transaction volume indicates demand persists for the highest quality product within Toronto. Behind Q (at $1.49B), Q was the second largest volume quarter in the history of Toronto office building sales. Given the tight pricing conditions one has to wonder if savvy investors will shy away from traditional existing income producing investments in favor of development or value-add opportunities outside of the CBD environment. With nearly 9M square feet (or more than of current supply) under construction or pre-leasing in the Greater Toronto Area, there are indications that many investors have in fact chosen alternative paths to chase yield. Office Inventory Snapshot Leasing Nodes Included: Cap Rates and Transaction Volume $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 0 Over 100 M Toronto Avg Cap Rates CBD Office Cap Rates $PSF and Total Area Transacted Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Toronto Office Avg $ PSF CBD Office Avg $ PSF 9% 7% 5% 3% 1% Financial Core Downtown East Downtown North Downtown South Downtown West King & Dufferin Bloor Eglington St. Clair Recent Transactions Development Statistics # of Buildings SF Current Inventory ,116,520 SF Under Construction 8 5,326,432 SF % Increase from Existing Stock 6.19 % Pre-Leasing 9 3,477,910 SF % Increase from Existing Stock 4.04 % New Office Supply Building 1 Building 2 Building 3 Building 4 Building 5 60 Atlantic 60 Atlantic MaRS Discovery Centre Phase II 661 University RBC Waterpark Place III 88 Queens Quay West Southcore Financial Centre Bremner Tower 120 Bremner Boulevard Queen Richmond Centre West Phase Peter GLA (SF) 25, , , , ,460 Class B A A A A Leasing Node King & Dufferin Downtown North Downtown South Downtown South Downtown West Developer Hullmark Alexandria Oxford bcimc Allied REIT Delivery Date Q Q Q Q Q & 21 St. Clair East, 30 & 55 St. Clair West, 56 Wellesley West 2 & 21 St. Clair East, 30 & 55 St. Clair West, 56 Wellesley West 1 Queen East & 20 Richmond East 1 Queen East & 20 Richmond East 74 Victoria / 137 Yonge 74 Victoria / 137 Yonge 2 & 24 St. Clair West 2 & 24 St. Clair West 100 Yonge 100 Yonge Class A / B A / B B B A Date 15-May Jun-13 4-April May Jun-13 Price $292,683,956 $220,000,000 $95,353,000 $86,323,454 $79,200,000 Size (SF) 913, , , , ,600 $PSF $321 $437 $326 $371 $397 Cap Rate (%) Seller Buyer GE Capital Canada Real Slate Properties (0.75%) and Greystone Managed Investments (99.25%) Ontario Pension Board Canada Pension Plan Investment Board CTL Group Dundee REIT GE Capital Canada Real Slate Properties (0.75%) and Greystone Managed Investments (99.25%) One Hundred Yonge Dev. Dundee REIT

8 Millions SF North York Cap Rates and Transaction Volume Sales Volumes $178.88M $5.41M Average Cap Rates Total SF Transacted 614K 19K Average $PSF $291 $286 Number of Transactions 4 3 Cap Rate Spread (vs. CBD) 81bps 150bps $PSF Spread (vs. CBD) -$73 -$99 Market Perspective After only $5.4M in sales in Q1, volumes in North York soared to nearly $180M this past quarter. In fact, North York was the second most active municipality with respect to dollar volume in the entire GTA. This uptick was partially sparked by Northam Realty Advisors purchase of the Madison Centre for $133.5M in June and FAM REIT s purchase of 4211 Yonge for $42M in May. The Madison Centre was the largest transaction to occur in North York since the sale of the Sheppard Centre in December Cap rates in North York have reached historical lows at just over. Although parts of the city are plagued with limited transit connectivity or lack of parking, average yields are only 81 bps higher than average CBD cap rates. As the Yonge-University-Spadina Subway extension continues, it is expected to see these historically low cap rates continue along with additional development $ M M M Over 100 M North York Avg Cap Rates CBD Office Cap Rates $PSF and Total Area Transacted 1 Office Inventory Snapshot Leasing Nodes Included: Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft North York Office Average $ PSF CBD Office Avg $ PSF Downsview Dufferin & Finch Yorkdale North Yonge Duncan Mill Consumers Don Mills & Eglington Highway 404 & Steeles Recent Transactions Development Statistics # of Buildings SF Current Inventory ,371,005 SF Under Construction 1 60,000 SF % Increase from Existing Stock 0.27 % Pre-Leasing 6 1,629,497 SF Madison Centre 4211 Yonge 142 Sheppard West 167 Sheppard West 4640 Jane % Increase from Existing Stock 7.28 % New Office Supply Building 1 Building 2 Building 3 Building 4 Building Upper Madison and 4950 Yonge 4211 Yonge 142 Sheppard West 167 Sheppard West 4640 Jane Downsview Corporate Centre 4050 Yonge Steeles Technology Campus Building Gordon Baker Morneau Sobeco Centre Class A B C C B Date 18-Jun-13 2-May Apr-13 2-Apr Mar-13 Price $133,500,000 $43,000,000 $1,300,000 $1,080,000 $2,500, Sheppard West 4050 Yonge 3377 Steeles East 101 Gordon Baker 895 Don Mills GLA (SF) 400, , , , ,000 Size (SF) 432, ,861 2,003 2,808 7,410 $PSF $309 $243 $649 $385 $337 Cap Rate (%) Class A A A A A Leasing Node Downsview North Yonge Highway 404 & Steeles Highway 404 & Steeles Don Mills & Eglinton Seller Redbourne Group Crown Realty Partners Norami Investments Ltd. Private Investor FITPAC Office Management Developer Build Toronto Build Toronto Delivery Date Bentall Kennedy Osmington Fana Group Pre-Leasing Pre-Leasing Pre-Leasing Pre-Leasing Pre-Leasing Buyer Northam Realty Advisors FAM REIT Crawford Properties Ontario Jane Shoreham Medical Centre

9 Millions SF Mississauga Sales Volumes $75.70M $98.89M Cap Rates and Transaction Volume $600 1 Average Cap Rates Total SF Transacted 885K 517K Average $PSF $86 $191 Number of Transactions 6 5 Cap Rate Spread (vs. CBD) 371bps 150bps $PSF Spread (vs. CBD) -$279 -$194 Market Perspective Sales volumes in Q2 declined by 23% to $75.7M from $98.9M last quarter. The most notable transactions were Slate Properties purchase of 2285 & 2599 Speakman for $36.7M and Crown s purchase of 1004 Middlegate for $24M. While the data shows a cap rate increase of 200 bps to 9% for the quarter, it s worth noting that this figure is based on two properties included in the GE portfolio trade, both located in Sheridan Business Park. These assets were likely valued below market due to the restrictive covenant issues surrounding the park and the older age of the buildings. Mississauga should continue to be an attractive alternative for traditional investors looking for exposure to the GTA without paying Toronto pricing. New development projects from established entities such as HOOPP, Bentall Kennedy and Orlando Corporation are a vote of confidence for the city s viability as an office destination. Furthermore, the city is investing heavily in transit and infrastructure to support future growth M M M Over 100 M Mississauga Avg Cap Rates CBD Office Cap Rates $PSF and Total Area Transacted Office Inventory Snapshot Leasing Nodes Included: Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Mississauga Office Average $ PSF CBD Office Avg $ PSF Airport Corporate Centre Airport East Airport North Airport West Cooksville Dixie & Eglington Heartland Meadowvale Mississauga City Centre Sheridan Recent Transactions Development Statistics # of Buildings SF Current Inventory ,512,292 SF Under Construction 7 683,804 SF % Increase from Existing Stock 2.5 Pre-Leasing 26 3,744,576 SF 2285 & 2599 Speakman 1004 Middlegate Meadowpine Corporate Centre 5180 Orbitor Unit 201, 2800 Skymark % Increase from Existing Stock % New Office Supply Available for lease through JLL Building 1 Building 2 Building 3 Building 4 Building & 2599 Speakman 1004 Middlegate 2400 & 2430 Meadowpine Boulevard 5180 Orbitor Unit 201, 2800 Skymark 2240 Argentia Spectrum Square Building Longside 5875 Explorer Winners East & West Towers Class C A B B B Date 15-May May May Jun May-13 Price $36.73M $24M $7.02M $5.80M $1.15M 2240 Argentia 5015 Spectrum Way 255 Longside 5875 Explorer 60 Standish Court GLA (SF) 45, ,788 65,980 51, ,000 Size (SF) 237, ,178 59,370 46,020 8,628 $PSF $155 $45 $118 $126 $134 Cap Rate (%) Class Flex A Flex A A Leasing Node Meadowvale Airport Corporate Centre Heartland Airport Corporate Centre Heartland Seller GE Capital Canada Real AstraZeneca Canada GE Capital Canada Real Ontario H&R REIT Developer EDEV HOOPP Mantoria Delivery Date Bentall Kennedy Orlando Corporation Q Q Q Q /2015 Buyer Slate Properties Crown Realty Partners Slate Properties Tel-e Technologies ( Ontario Corporation) A.A. Tech Developments

10 Millions Sq Ft Markham Sales Volumes $55.46M $18.21M Average Cap Rates Total SF Transacted 360K 55K Average $PSF $154 $333 Number of Transactions 2 5 Cap Rate Spread (vs.. CBD) 291bps 146bps $PSF Spread (vs.. CBD) -$210 -$52 Market Perspective The enormity of the GE Capital disposition was observed in Markham with the sale of 7030, 7050 & 7100 Woodbine and 55 & 85 Idema, all being sold for $54.3M. The only other trade that occurred during the quarter was a strata unit sale between private investors. The underlying story in Markham is the amount of planned construction and pre-leasing that is currently underway. Cadillac Fairview s Buttonville development is likely to act as a catalyst for further retail, office and residential development in the area. Between GWL, Times Group and Triovest, 1.1 million SF of office is planned for the Highway 407 and Highway 404 node. With the exception of Toronto, Markham is the only other municipality in the GTA with 3 projects over 350,000 square feet currently pre-leasing. Cap Rates and Transaction Volume $180 $160 $140 $120 $80 $60 $40 $20 $PSF and Total Area Transacted Over 100 M Markham Avg Cap Rates CBD Office Cap Rates Office Inventory Snapshot Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Markham Office Avg $ PSF CBD Office Avg $ PSF Leasing Nodes Included: Highway 404 & Highway 407 Richmond Hill Highway 404 & Steeles Recent Transactions Development Statistics # of Buildings SF Current Inventory ,790,973 SF Under Construction 0 0 SF % Increase from Existing Stock Pre-Leasing 14 2,182,165 SF % Increase from Existing Stock 15.8 New Office Supply Building 1 Building 2 Building 3 Building 4 Building Cochrane Phase 1 & Cochrane Phase 1 & 2 Liberty One 1 Steelcase West Offices at Uptown Markham Walden Available for lease through JLL 103 Commerce Valley East 103 Commerce Valley East Galleria Corporate Centre 0 Highway #7 GLA (SF) 436, , , ,000 97, , 7050 & 7100 Woodbine ; 55 & 85 Idema 7030, 7050 & 7100 Woodbine ; 55 & 85 Idema Units , 28 South Unionville Units , 28 South Unionville 10 Commerce Valley East 10 Commerce Valley East 7130 Warden, Units Warden, Units Main 143 Main Class A A A A C Date 15-May Jun Mar Feb Mar-13 Price $54.29M $1.18M $13.90M $1.18M $5M Size (SF) 360,095 4,295 43,000 2,752 2,700 $PSF $151 $274 $323 $428 $389 Cap Rate (%) Class A A A A A Leasing Node Highway 404 & Highway 407 Highway 404 & Steeles Highway 404 & Highway 407 Highway 404 & Highway 407 Highway 404 & Highway 407 Seller GE Capital Canada Real Mady Development Corporation ATI Technologies Alderland Group Private Investor Developer Delivery Date GWL Realty Advisors Liberty Dev. Times Group Triovest Times Group Pre-Leasing Pre-Leasing Pre-Leasing Pre-Leasing Pre-Leasing Buyer Slate Properties DKW Real Holdings CAA South Central Ontario Cenith Energy Corporation Grasshopper Realty

11 Millions Sq Ft Etobicoke Cap Rates and Transaction Volume Sales Volumes $45.98M $20.75M 1 Average Cap Rates Total SF Transacted 418K 120K Average $PSF $110 $172 Number of Transactions 2 2 Cap Rate Spread (vs. CBD) 361bps 160bps $PSF Spread (vs. CBD) -$254 -$213 Market Perspective While the number of deals transacted remained flat quarter over quarter, sales volumes more than doubled and the amount of square footage traded was 3.5 times that of Q The two transactions that occurred were both Class B buildings and part of the GE Capital disposition. While Etobicoke benefits from its proximity to the downtown core, it appears that investors are still shying away from placing significant capital here (the last M+ transaction was in 2010). This hesitation might be stemming from an aging inventory base coupled with poor transit connectivity that is forcing tenants to consider alternative leasing options. With the leasing issues still lingering on the 427 corridor and all signs pointing to a softening market, it would appear that the majority of transactions in the Etobicoke market will continue to be smaller in nature as investors place larger sums of capital in other municipalities Over 100 M Etobicoke Avg Cap Rates CBD Office Cap Rates $PSF and Total Area Transacted 0.2 Office Inventory Snapshot Leasing Nodes Included: Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Etobicoke Office Avg $ PSF CBD Office Avg $ PSF Bloor & Islington Etobicoke North Etobicoke South Highway 427 Corridor Recent Transactions Development Statistics # of Buildings SF Current Inventory 50 4,715,200 SF Under Construction 0 0 SF % Increase from Existing Stock Pre-Leasing 1 249,200 SF % Increase from Existing Stock 5.29% Centennial Centre 135 Queens Plate & 1 Eva 295 The West Mall 400 Carlingview 200 Ronson New Office Supply Building 1 Building 2 Building 3 Building 4 Building Eglinton West 135 Queens Plate & 1 Eva 295 The West Mall 400 Carlingview 200 Ronson Westmetro Corporate Centre Phase Class B B C B B Date 15-May May Mar-13 2-Feb Oct-12 Price $24.62M $21.35M $15.5M $5.25M $17.90M 181 The West Mall Size (SF) 234, ,237 93,600 26, ,326 $PSF $105 $117 $166 $196 $136 GLA (SF) 249, Class A Cap Rate (%) % Leasing Node Highway 427 Corridor Seller GE Capital Canada Real GE Capital Canada Real H&R REIT Transglobe Blackwood Partners Developer Starlite Delivery Date Pre-Leasing Buyer Slate Properties Slate Properties Rose and Thistle Group True North Commercial REIT Gross Capital Group

12 Millions Sq Ft Burlington Sales Volumes $22.88M $30.24M Average Cap Rates 7.15% 6.25% Total SF Transacted 145K 187K Average $PSF $158 $162 Number of Transactions 4 5 Cap Rate Spread (vs. CBD) 186bps 75bps $PSF Spread (vs. CBD) -$206 -$224 Market Perspective While sales volumes decreased by 2 this quarter, a review of individual transactions indicate an increase in the amount of arms length trades by 97%. Q featured approximately $19M (6) in related party exchanges that occurred for the purpose of tax restructuring. Following the delisting of a large institutional portfolio in East Burlington located on the QEW, a cautious investment sentiment is now surfacing. All deals done this year have been under $20M and the last time a building over 100,000 SF transacted was in The two confirmed cap rates this quarter average 7.15%, which is an increase of 90 basis points from last quarter. Furthermore, the municipal cap rate spread vs. the CBD average regressed to 186 points suggesting a significant risk premium to investing in Burlington. Cap Rates and Transaction Volume 1 $180 $160 $140 $120 $80 $60 $40 $ Over 100 M Burlington Avg Cap Rates CBD Office Cap Rates $PSF and Total Area Transacted With no immediate supply on the horizon, we project the existing inventory base to be challenged with vacancies as well as having to compete against new supply in Oakville and Mississauga Office Inventory Snapshot 2002 Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Burlington Office Avg $ PSF CBD Office Avg $ PSF Leasing Nodes Included: Burlington Recent Transactions Development Statistics # of Buildings SF Current Inventory 55 3,438,750 SF Under Construction 0 0 SF % Increase from Existing Stock Pre-Leasing 2 196,066 SF South Service 3385 Harvester 5353 North Service 855 Brant 1001 Champlain % Increase from Existing Stock 5.70 % New Office Supply Building 1 Building 2 Building 3 Building 4 Building South Service 3385 Harvester 5353 North Service 855 Brant 1001 Champlain Westbury Business Park Phase III 5091 Fairview Class B C B C B Date 21-May May-13 8-May Apr-13 1-Feb-13 Price $10.55M $5.45M $4.26M $2.62M $9.56M International Blvd. and Burloak Dr Fairview GLA (SF) 132,862 63, Size (SF) 77,435 39,664 15,902 11,532 61,273 $PSF $136 $137 $268 $227 $156 Cap Rate (%) Class A A Leasing Node Burlington Burlington Seller CanFirst Capital Management CanFirst Capital Management LimeROUTE Private Investor Lisgar Development Developer Delivery Date Westbury Development Pre-Leasing Pre-Leasing Buyer Ontario Limited Ontario Limited Private Investor Highwater Investments II 1001 Champlain

13 Millions Sq Ft Scarborough Cap Rates and Transaction Volume Sales Volumes 0 $18.04M Average Cap Rates Total SF Transacted 0 29K Average $PSF - - $623 Number of Transactions 0 1 Cap Rate Spread (vs.. CBD) bps $PSF Spread (vs.. CBD) - - $279 Market Perspective The historically quiet Scarborough market was completely dormant this quarter with no trades reported. Since the beginning of 2012, only 4 transactions have occurred with the $182M sale of Consillium Place in July 2012 being the most significant. Although no new development has been proposed over the next 5 years, a transit extension has been discussed extensively and the government of Ontario recently approved $1.4B in funding for a subway extension. The Bloor-Danforth subway line will be extended from Kennedy Station travelling East and North and ending at Sheppard adding a distance of 7.6 km. With the creation of 3 new subway stations, economic growth in this area is expected and value opportunities exist for assets that are currently priced without consideration of future development. Landlords are continuing to be aggressive throughout the region by offering attractive lease abatements and incentives for tenants. Furthermore, many owners are exploring dynamic strategies to improve existing assets. In the case of Consillium Place, efforts are underway to make the centre more amenity friendly with the development of a new foodcourt and creation of easier subway access. Office Inventory Snapshot Leasing Nodes Included: Scarborough M M M Over 100 M Scarborough Avg Cap Rates CBD Office Cap Rates $PSF and Total Area Transacted Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Scarborough Office Average $ PSF CBD Office Avg $ PSF Recent Transactions 9% 7% 5% 3% 1% $700 $600 0 Development Statistics # of Buildings SF Current Inventory 40 4,062,454 SF Under Construction 0 0 SF % Increase from Existing Stock Pre-Leasing 0 0 SF % Increase from Existing Stock 2901 Sheppard East 636 Kennedy 100, 200 & 300 Consillium Place 441 Ellesmere 3420 Finch East New Office Supply Building 1 Building 2 Building 3 Building 4 Building Sheppard East 636 Kennedy 100, 200 & 300 Consillium Place 441 Ellesmere 3420 Finch East Class B B A A C Date Mar 19/13 Sep 1/12 Jul 23/12 Jun 1/12 Dec 19/11 Price $18.04M $2.20M $182.62M $4.80M $13.60M GLA (SF) Class Size (SF) 28,965 7,123 1,036,720 55,000 49,827 $PSF $623 $309 $172 $87 $273 Cap Rate (%) - 6.5% Leasing Node Seller MIG Investments RMC Global Traders Menkes The Greek Community of Toronto Simmtech America Developer Delivery Date Buyer 1600 Dev. Worldeal Investments Ltd. Kevric Real Jain Society of Toronto Yuyang International Investments Group

14 Millions Sq Ft Vaughan Sales Volumes $21M $2.33M Average Cap Rates Total SF Transacted 100K 8K Average $PSF $209 $287 Number of Transactions 1 2 Cap Rate Spread (vs. CBD) 41bps - - $PSF Spread (vs. CBD) -$155 -$99 Market Perspective Vaughan currently features 35 buildings with just over 2.3M square feet of office space. While the city possesses an above average vacancy rate of 9.1%, it benefits from a stock of quality inventory with over 7 of the office space being Class A in nature. The only trade that occurred this quarter involved Artis REIT acquiring the remaining 5 interest of the Cara Foods building at a 5.7% cap rate. In April 2011, Artis had purchased the initial 5 interest from Churchill Investments. The $21M sale represented the largest transaction in Vaughan since the same property sold in May 2010 at a 7. cap rate. Cap Rates and Transaction Volume $80 $70 $60 $40 $30 $20 $ Over 100 M Vaughan Avg Cap Rates CBD Office Cap Rates $PSF and Total Area Transacted 9% 7% 5% 3% 1% Growth plans for the municipality are ambitious considering the planned delivery of the Vaughan Subway station in 2016 coupled with the city s decision to dedicate 442 acres of land for development of the Vaughan Metropolitan Centre (VMC). This attempt to create a downtown core in Vaughan has attracted reputable developers such as Bentall Kennedy LP, SmartCentres/Calloway REIT and First Liberty who all hold land in the area Office Inventory Snapshot - Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Vaughan Office Average $ PSF CBD Office Avg $ PSF Leasing Nodes Included: Vaughan Recent Transactions Development Statistics # of Buildings SF Current Inventory 35 2,307,379 SF Under Construction 3 404,996 SF % Increase from Existing Stock % Pre-Leasing 4 574,319 SF Cara Foods Building 78 Centre Units , 7050 Weston 2200 Rutherford 6800 Highway No. 7 West % Increase from Existing Stock 25 % New Office Supply Building 1 Building 2 Building 3 Building 4 Building Four Valley 78 Centre Units , 7050 Weston 2200 Rutherford 6800 Highway No. 7 West 191 Creditview 9060 Jane KPMG Tower Weston Commerce Tower Milestone Corporate Centre Phase 2 Class A C A C C Date 5-Jun Mar-13 1-Mar Aug Aug-12 Price $21,000,000* $1,150,000 $1,180,000 $8,750,000 $2,100, Creditiview 9060 Jane 0 Millway 1 Century Place 2320 Steeles West Size (SF) 100,398 1,721 6,405 20,750 2,732 $PSF $418 $668 $184 $422 $769 GLA (SF) 62,500 42, , , ,000 Cap Rate (%) Class A A A A A Leasing Node Vaughan Vaughan Vaughan Vaughan Vaughan Seller Churchill Investments Ltd Berkid Investments Limited Scugog Developments Evergreen Lawn Sprinklers Ontario Limited Developer Delivery Date Condor Properties Casertano Development SmartCentres Milestone Group Q Q Q Pre-leasing Pre-leasing Buyer Artis REIT *5 interest transacted Private Investor Avaal Technology Solutions Ontario Limited Punjab Insurance

15 Millions Sq Ft Millions Sq Ft Metro Area Toronto, Etobicoke, York, North York, East York, Scarborough $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 0 Metro Office Sales Volumes and Avg Cap Rates Over 100 M Metro Avg Cap Rates GTA Avg Cap Rates Sales Volumes $1,327.71M $77.42M Average Cap Rates Total SF Transacted 4,192K 260K Average $PSF $317 $298 Number of Transactions Cap Rate Spread vs.. GTA -48bps -12bps $PSF Spread vs.. GTA $52 $77 West Area Mississauga, Oakville, Burlington, Brampton, Halton Hills, Milton, Caledon $700 $600 0 West Office Sales Volumes and Avg Cap Rates 2002 Over 100 M West Avg Cap Rates GTA Avg Cap Rates Sales Volumes $121.44M $143.08M Average Cap Rates Total SF Transacted 1,116K 772K Average $PSF (Volume / Area) $109 $185 Number of Transactions Cap Rate Spread vs. GTA 175bps 8bps $PSF Spread vs. GTA -$156 -$36 9% 7% 5% 3% 1% Metro Office Total Area Transacted and Avg $ PSF After accounting for 31% of all GTA sales volumes in Q1, the Metro area dominated Q2 capturing 8 of total transaction value. While this number was strongly influenced by Slate and Greystone s purchase of the GE Capital portfolio ($588M in Metro area), the residual investment volume of $740M still represents 4 of all trading activity during the quarter. Large public and institutional investors are continuing to bid fiercely for Class A buildings in the Toronto core business district and sellers have been motivated to take advantage of the current stage of the market cycle. We expect investment volume to begin to slow as 5.7M SF of scheduled new supply comes online and cap rates spreads over GoC bond yields begin to tighten further Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Metro Avg $ PSF GTA Average $ PSF West Office Total Area Transacted and Avg $ PSF 2002 Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft West Avg $ PSF GTA Average $ PSF The Toronto West Market slowed considerably this quarter registering just 6.7% of all GTA transaction volume. 41% of the trades related to three GE Capital assets (Meadowpine Corporate Centre, 2285 & 2599 Speakman ). All remaining deals ($77.7M) involved private investors and user groups as the purchasers. The increase in average cap rates QoQ indicates that the market is beginning to place a higher risk premium on suburban trades. Going forward, existing building valuations are likely to be challenged by increased supply as 1.1M SF is currently under construction between 12 buildings. Furthermore, 5.3M SF is in the preleasing phase of development over 43 proposed buildings.

16 Millions Sq Ft Millions Sq Ft North Area Vaughan, Markham, Richmond Hill, King, Aurora, Newmarket, Whitchurch-Stouffville, East Gwillimbury, Georgina North Office Sales Volumes and Avg Cap Rates North Office Total Area Transacted and Avg $ PSF Over 100 M North Avg Cap Rates GTA Avg Cap Rates Sales Volumes $89.64M $23.07M Average Cap Rates 6.95% 6.3 Total SF Transacted 508K 71K Average $PSF $176 $325 Number of Transactions 5 9 Cap Rate Spread vs.. GTA 62bps -12bps $PSF Spread vs.. GTA -$88 $104 East Area Pickering, Ajax, Whitby, Oshawa, Clarington $30 East Office Sales Volumes and Avg Cap Rates Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft North Avg $ PSF GTA Average $ PSF Discounting the $54.2M of GE Capital assets that traded in the North area in Q2 (7030, 7050 & 7100 Woodbine; 55 & 85 Idema ), transaction volumes QoQ increased by $12M or 53%. The largest exchange involved Artis REIT purchasing a 5 interest of the Cara Foods building in Vaughan for $21M leading to full ownership of the asset. With an overall vacancy rate of 5., the North area remains an attractive investment option considering the GTA average vacancy rate is currently 8.5%. However, 0.8M SF of new supply is currently under construction and 3.3M is preleasing between 6 and 22 buildings, respectively. Cadillac Fairview announced the Buttonville Town Centre development plan in Q1 (4.5M SF of office projected), yet no construction is likely to occur in East Office Total Area Transacted and Avg $ PSF $25 $20 $15 $ $ Over 100 M East Avg Cap Rates GTA Avg Cap Rates Sales Volumes 0 $1.45M Average Cap Rates Total SF Transacted 0 6K Average $PSF - - $254 Number of Transactions 0 1 Cap Rate Spread vs.. GTA $PSF Spread vs.. GTA - - $ Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft East Avg $ PSF GTA Average $ PSF Toronto East continued to be a completely dormant market during Q2 with no transactions occurring over the quarter. An aging inventory and poor infrastructure base will continue to challenge the area as no new office construction is scheduled to occur in the foreseeable future. Proposed construction of the Scarborough Light Rail Transit (LRT) line has been halted in face of the City of Toronto s decision to approve the Scarborough Subway Extension (Bloor-Danforth line). Economically, this will benefit for the region and spur future growth. While the provincial government has committed to funding approximately two-thirds ($1.4B) of the subway extension, a definitive timeline for this project has not yet been established.

17 Legend Buyer / Seller Category REIT Corporate (MNC) Insurance Company Pension Fund Private (UHNW/Other) Private Equity Property Company Investor Classification Real estate investment trusts - either listed (public) or non-traded (private). A large corporation that is registered and or has operations in more than one country or province. This term can cover all sectors of industry from retailers, industrialists through to professional services, etc. An insurer, or insurance carrier, life company etc. This classification covers both domestic and international groups investing with their own capital. This classification includes open/closed pension funds and public or private pension funds who may be investing in real estate as an asset class within their portfolio. Ultra high net worth; private investors and or other groups of independent investors in real estate not classified in the other groups. Typically PE Funds (under limited partnership structure), Funds or any group managing third party capital not under a REIT structure. Developers, property companies and property investment managers. About Jones Lang LaSalle Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in Its investment management business, LaSalle Investment Management, has $46.3 billion of real estate assets under management. For further information, visit For more information, please contact: Andy Baines CPA,CA MBA Associate Vice President Tel: Andy.Baines@am.jll.com Alex Dorohoi MBA AACI (candidate) Financial Analyst Tel: Alex.Dorohoi@am.jll.com Amit Kumar MBA Associate Tel: AmitJ.Kumar@am.jll.com Jones Lang LaSalle Toronto Office 199 Bay Suite 4610, Box 407 Toronto, Ontario M5L 1G3 Tel: Fax: Mississauga Office 110 Matheson Blvd. W. Suite 107 Mississauga, ON L5R 4G7 Tel Fax Jones Lang LaSalle IP, All rights reserved. No part of this publication may be reproduced by any means, whether graphically, electronically, mechanically or otherwise howsoever, including without limitation photocopying and recording on magnetic tape, or included in any information store and/or retrieval system without prior written permission of Jones Lang LaSalle. The information contained in this document has been compiled from sources believed to be reliable. Jones Lang LaSalle or any of their affiliates accept no liability or responsibility for the accuracy or completeness of the information contained herein and no reliance should be placed on the information contained in this document.