GTA Office Investment Report Q Calculated real estate insight for the informed GTA office investor.

Transcription

1 GTA Office Investment Report Q Calculated real estate insight for the informed GTA office investor.

2 Executive Summary Market activity was noticeably slower in Q versus the previous quarter, with total investment volumes declining by 77.. Average cap rates notched upwards by 6 basis points and the average price per square foot dropped by to $259 psf. A disconnect in pricing expectations has started to develop between buyers and sellers following a record setting trade volume in the fourth quarter in Lack of available investment product and ferocious investor demand has caused upward pressure on pricing such that it has likely reached an equilibrium point. Buyers are now becoming more discerning and paying closer attention to factors that could erode their returns if they chose to transact in the current environment. An example of such risk factors are capital expenditure requirements and large leasing renewals in local markets. For the first time in recent years, not all assets that come to market will trade if underwriting assumptions are overly aggressive and unrealistic. The market recently witnessed the delisting of a significant institutional portfolio in West Toronto for the aforementioned reasons. The leasing market in the suburbs has softened with the outlook not expected to change until the end of the year. Both the West and North regions experienced an increase in vacancy to 13. and 6.3%, respectively. Suburban Class A buildings finished the quarter with 10. vacancy. Most notably, the engineering and mining sectors are suffering which is leading support sectors downward. Despite looming vacancies, most of the new construction continues to occur in the West as a result of large corporate consolidations and major renewals from the financial crises that are maturing. Almost 1.3 million square feet of new construction is currently underway with 81,000 square feet having been completed in Q1. West Metro Toronto Downtown Toronto North East Sources: RealNet, Altus, Real Capital Analytics, JLL Research

3 GTA Office Investment Market Clock* Metro North Toronto Oakville Peaking market Falling market Peaking market Falling market North York Burlington Rising market Bottoming market Markham Rising market Bottoming market West East Scarborough Mississauga Brampton Etobicoke Note: *based on price per square foot for observed transactions Trailing 12 Months Sales Volume by Municipality Q Sales Volume by Municipality $1,000 $2,000 $3,000 $20 $40 $60 $80 Toronto Mississauga Scarborough $ $ $2, Mississauga Toronto $31.68 $98.89 North York Markham $ $ Burlington $30.24 Etobicoke $45.32 Etobicoke $20.75 Oakville Burlington $32.00 $31.74 Markham $18.21 Brampton $27.86 Scarborough $18.04 East York Vaughan $19.56 $17.45 Brampton $12.60 Newmarket Ajax $10.54 $4.25 North York $5.41 Richmond Hill $4.05 Vaughan $2.33 York King $3.95 $2.78 York $1.55 Oshawa $1.55 Richmond Hill $1.47 Milton Whitby $1.53 $1.45 Whitby $1.45 East Gwillimbury $1.06 East Gwillimbury $1.06

4 Overview Entire GTA Sales Volumes 245M 1,070M $5,000 $4,500 $4,000 GTA Office Investments Volumes and Avg Cap Rates Average Cap Rates Total SF Transacted 1,109K 3,303K $3,500 $3,000 $2,500 $2,000 $1,500 Average $PSF $259 $306 $1,000 0 Number of Transactions Cap Rate Spread vs. CBD 115 bps 200 bps GTA Sales Volumes GTA Avg Cap Rates $PSF Spread vs. CBD -$85 -$155 GTA Office Area Transacted and Avg $ PSF 20 Total office investment volumes for Q were 77% lower than the previous quarter as a result of the lack of trading of institutional, CBD-located trophy assets There were only 7 buildings in the GTA that transacted at sales prices above $10M and 3 above $15M (Erindale Corporate Centre - $71M, 2901 Sheppard East - $18M and 295 The West Mall - $16M) GTA Total Area Transacted GTA Average $ PSF CBD and Suburban cap rate spreads have widened considerably since converging in 2006 and are now at a 115 basis point differential. This spread has decreased over the past quarter by 85 bps to 115 bps, signaling that investors may be increasing their interest in non-core assets due to favourable pricing. We expect that this trend will continue and rates will eventually re-converge in approximately 5-10 years, which is within a standard holding period for owners. Historical Cap Rates: CBD vs. Suburban Q1 investment volumes for suburban assets outpaced CBD assets at $216.3M as compared to $28.7M. We predict a reversal of comparative volumes in the coming 9 months as continued global economic uncertainty, a low interest rate environment and inflated valuations will motivate institutions to trade more significant CBD assets. From a top level view, the average square footage per transaction deceased to 32,000 SF in Q1 from 98,000 SF in Q4. There was also a notable rise in the sale of strata office, which increased from 3 to 8 units (or total square footage transacted from 11,000 SF to 39,000 SF). Billions $ CBD Office Cap Rates Suburban Office Cap Rates CBD vs. Suburban Office: Historical Investment Volumes CBD Investment Volumes Annually Suburban Investment Volumes Annually

5 Overview Office Class and Sub-Category Quick Stats Q By Asset Class GTA Class A Office Investments Volumes and Avg Cap Rates A B C Sales Volumes 112M 90M 41M Average Cap Rates Total SF Transacted 533K 390K 184K Average $PSF $269 $243 $271 Number of Transactions $1,600 $1,400 $1,200 $1,000 $800 $600 Pricing expectations resulting from a highly active Q4 have caused a disconnect between buyers and sellers, which has led to more cautious buying behavior and the slowing of investment volumes in the Class A & B segments. Cap rates have further compressed from Q4 and bidding wars are becoming much more prevalent causing investors to seek off-market opportunities. We are aware of a significant portfolio (north of M and including Class A & B buildings) that was listed in the West market and subsequently removed due to aggressive pricing expectations. As a result of the expectations gap, we believe that low gross cost alternatives will perform better than Class A assets as occupiers stay focused on minimizing their overhead and overall risk. The investor profile has shifted from a heavy REIT and institutional weighting in Q4 (49% of all trades) to substantially less in Q1 (). Private investors and user groups accounted for 9 of the transactions in the last quarter. Medical office sales were on the rise at $46M, which was substantially higher than the trailing 12 month rolling average of $28M. Flex office sales have been flat quarter over quarter likely due to persistent vacancy issues in new inventory that has come to market. Quick Stats Q By Office Subcategory Medical Flex Sales Volumes 46M 17.37M Average Cap Rates - - Total SF Transacted 115K 107K Average $PSF $299 $174 Number of Transactions 7 3 GTA Sales Volumes Class A GTA Avg Cap Rates Class A GTA Class B Office Investments Volumes and Avg Cap Rates GTA Total Investment Volumes Class B GTA Avg Cap Rates Class B GTA Class C Office Investments Volumes and Avg Cap Rates $45 $40 $35 $30 $25 $20 $15 $10 $5 GTA Total Investment Volumes Class C GTA Avg Cap Rates Class C Investor Profile User Public REIT Private Investor Institution Developer

6 Toronto Sales Volumes $31.68M $982M Average Cap Rates Total SF Transacted 81.65K 2,656K Average $PSF $356 $428 Number of Transactions 8 14 Cap Rate Spread (vs. CBD) 0 bps -10 bps $PSF Spread (vs. CBD) $12 -$33 Market Perspective Q showed a sharp decline in the number of trades of institutional trophy assets. The previous quarter had a record number of high dollar transactions, including: Brookfield Place ($453M), 121 King West ($306M), 700 Bay ($112M) and 333 King East ($69M). There may be a consensus in the market that pricing has reached peak levels, as demonstrated by Brookfield Place selling at $750 per SF which is in the range of high-end residential pricing. There is no shortage of interested buyers who are looking for grade A downtown product. With no substantial new supply being introduced to the market until Q3 2013, we expect vacancy rates to remain stagnant and pricing to be sustained at peak levels. Redevelopment and value add strategies are becoming the most viable option for investors in downtown Toronto considering the scarcity of available product. Access to this market is limited to well capitalized buyers with an appetite for increased risk. Cap Rates and Transaction Volume $PSF and Total Area Transacted $3,500 $3,000 $2,500 $2,000 $1,500 $1, Over 100 M Toronto Avg Cap Rates CBD Office Cap Rates 9% 7% 5% 3% 1% - Office Inventory Snapshot Leasing Nodes Included: Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Toronto Office Average $ PSF CBD Office Avg $ PSF 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 ,190,222 SF Under Construction 7 4,420,025 SF % Increase from Existing Stock 5.13% Pre-Leasing 11 4,781,631 SF % Increase from Existing Stock 5.55% New Office Supply Building 1 Building 2 Building 3 Building 4 Building King West 545 King West 600 Sherbourne 600 Sherbourne 1376 Bayview 1376 Bayview 832 Bay, Units 203, 205, 206, 209 & Bay, Units 203, 205, 206, 209 & College 540 College 60 Atlantic MaRS Discovery Centre Phase II RBC Waterpark Place Southcore Financial Centre Bremner Tower Queen Richmond Centre West Phase 1 Class C Medical C A Medical Date Jan 10/13 Jan 4/13 Mar 19/13 Feb 15/13 Jan 16/13 Price $11.50M $7.00M $2.99M $2.90M $2.86M 60 Atlantic 661 University 88 Queens Quay West 120 Bremner Boulevard 134 Peter GLA (SF) 25, , , , ,460 Size (SF) 47,000 Undisclosed 7,224 5,136 15,666 $PSF $245 - $414 $565 $183 Cap Rate (%) Class B A A A A Leasing Node King & Dufferin Downtown North Downtown South Downtown South Downtown West Seller H&R Sterling Textiles Limited Maureen Dev. Private Investor H&R REIT Ontario Limited Developer Hullmark Alexandria Oxford bcimc Allied REIT Delivery Date Q Q Q Q Q Buyer Hullmark Dev. J&K Rosedale Management Corporation Ontario Corporation Lanterra Dev. Parallax Investment Corporation

7 Mississauga Cap Rates and Transaction Volume Sales Volumes $98.9M $9.51M Average Cap Rates % Total SF Transacted K K Average $PSF $166 $117 Number of Transactions 5 3 Cap Rate Spread (vs. CBD) 150 bps 135 bps $PSF Spread (vs. CBD) -$178 -$343 $600 0 Market Perspective Mississauga remains the most active market in the GTA outside of the City of Toronto. Quarter over quarter, sales volumes increased tenfold but have normalized to levels comparable to Q ($184M), Q ($57M) and Q ($67M). With upward pressure on pricing in Toronto, Mississauga is a favourable alternative for investors as yields are approximately 1.5% higher than CBD assets. The introduction of the Bus Rapid Transit system (running from Mississauga City Centre to Highway 427) is expected to increase the attractiveness of the Airport Corporate Centre as evidenced by HOOPP s decision to build up to 1 million square feet at Spectrum Square. Major tenancies are demonstrating a flight to quality as consolidations and large renewals take place. We expect favourable shifts in the Airport Corporate Centre, and Highway 10 Corridor nodes and unfavourable shifts in the Airport Strip (approximately 461,000 SF of rollovers are anticipated by significant tenants in this node). $PSF and Total Area Transacted Over 100 M Mississauga Avg Cap Rates CBD Office Cap Rates Office Inventory Snapshot Leasing Nodes Included: Airport Corporate Centre Airport East Airport North Airport West Cooksville Dixie & Eglington Heartland Meadowvale Mississauga City Centre Sheridan Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Mississauga Office Average $ PSF CBD Office Avg $ PSF Recent Transactions Development Statistics # of Buildings SF Current Inventory ,511,511 SF Under Construction 7 748,692 SF % Increase from Existing Stock 2.8 Pre-Leasing 28 4,039,576 SF % Increase from Existing Stock 15.2 Erindale Corporate Centre 6355 Viscount Britannia East Matheson Boulevard East 3141 Cawthra New Office Supply Available for lease through JLL Building 1 Building 2 Building 3 Building 4 Building , 1290 & 1300 Central Parkway West 6355 Viscount Britannia East Matheson Boulevard East 3141 Cawthra 2240 Argentia Parkside Village 255 Longside 5875 Explorer Winners East & West Towers Class A B B B Medical Date Mar 28/13 Mar 27/13 Mar 27/13 Mar 1/13 Jan 17/13 Price $71.1M $14M $9.26M $6.94M $1.55M 2240 Argentia 4080 Confederation Parkway 255 Longside 5875 Explorer 60 Standish Court GLA (SF) 45,778 60,000 65,980 51, ,000 Size (SF) 338,162 75,852 57,909 43,001 1,770 $PSF $210 $132 $160 $161 $132 Cap Rate (%) Class Flex A Flex A A Leasing Node Meadowvale Mississauga City Centre Heartland Airport Corporate Centre Heartland Seller Desjardins Life Assurance Sobeys Capital EPIC Realty Partners EPIC Realty Partners Private Investor Developer EDEV Amacon Mantoria Delivery Date Bentall Kennedy Orlando Corporation Q Q Q Q /2015 Buyer Redbourne Realty Advisors Canderel Crown Realty Advisors Crown Realty Advisors I.D. Gangam Medicine

8 Burlington Sales Volumes $30M - 0 Average Cap Rates 6.25% - - Total SF Transacted K - 0 Average $PSF $ Number of Transactions 5-0 Cap Rate Spread (vs. CBD) 75 bps - - $PSF Spread (vs. CBD) -$ Market Perspective While it appears that Burlington experienced a significant gain in positive momentum in the first quarter of 2013, 6 of the transactions were to non-arms length parties of the vendors. Approximately $11.63 million traded independently at cap rates in the range of 6.25%. To put this in perspective, $2.76 million was traded in 2012 and $36.8 million was traded in Q showed a slight decrease in the average cap rate from the last verifiable quarter (Q4 2011) at 6.8. Municipal cap rate spreads have narrowed from 125 basis points to 75 basis points indicating investor tolerance for lower yields. 10 of the transactions involved private investors who were not owner-users on the buyside. No ICI land sales occurred during the quarter for property zoned for office use. Burlington remains a bifurcated market consisting mostly of Class A and C assets. Class B and Flex office inventory are significantly underrepresented. The construction of 325,000 square feet of new supply between three Class A buildings will further polarize the market and sustain vacancy issues for older Class A competitive assets. Cap Rates and Transaction Volume $PSF and Total Area Transacted $180 $160 $140 $120 $80 $60 $40 $20 Over 100 M Burlington Avg Cap Rates CBD Office Cap Rates Office Inventory Snapshot Leasing Nodes Included: Burlington Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Burlington Office Average $ PSF CBD Office Avg $ PSF Recent Transactions Development Statistics # of Buildings SF Current Inventory 54 3,408,261 SF Under Construction 0 0 SF % Increase from Existing Stock Pre-Leasing 3 326,066 SF % Increase from Existing Stock 9.57% 1001 Champlain 880 Laurentian 4145 North Service 4125 Upper Middle 3190 Harvester, Unit 102 New Office Supply Building 1 Building 2 Building 3 Building 4 Building Champlain 880 Laurentian 4145 North Service 4125 Upper Middle 3190 Harvester, Unit 102 Westbury Business Park Phase III Emery-Alton Corporate Centre 5091 Fairview - - Class A B A C B Date Feb 1/13 Jan 31/13 Feb 1/13 Feb 28/13 Feb 15/13 Price $9.56M $9.15M $9.05M $1.30M $1.18M International Blvd. and Burloak Dr Palladium Way 5091 Fairview - - GLA (SF) 132, ,000 63, Size (SF) 61,273 52,145 61,273 6,623 5,811 $PSF $156 $175 $148 $196 $202 Cap Rate (%) % - Class A A A - - Leasing Node Burlington Burlington Burlington - - Seller Lisgar Dev. Gross Capital Corp. Lisgar Dev. Skillington Construction Ontario Inc. Developer Delivery Date Westbury Development Emery Investments Pre-Leasing Pre-Leasing Pre-Leasing - - Buyer 1001 Champlain Inc. Children s Financial Group 4145 North Service Inc Ontario Inc Ontario Inc.

9 Etobicoke Cap Rates and Transaction Volume Sales Volumes $21M $18.94M Average Cap Rates Total SF Transacted K K Average $PSF $181 $155 Number of Transactions 2 3 Cap Rate Spread (vs. CBD) 160 bps 280 bps $PSF Spread (vs. CBD) -$163 -$303 Market Perspective Transaction levels mirrored the previous quarter with approximately 2 less square footage changing hands at pricing that was 17% higher. All sales occurred in the $5-20 million category with the trade of 295 The West Mall accounting for 75% of the volume. Cap rates for Etobicoke vs. CBD assets moved closer to converging, demonstrating that investors are willing to increase their risk tolerance in order to place capital in the face of product scarcity. Over 100 M Etobicoke Avg Cap Rates CBD Office Cap Rates $PSF and Total Area Transacted 1.4 With limited new developments coming online in the near future and continued economic uncertainty, we expect that tenants along the 427 corridor will seek to reduce their corporate overhead by moving north to the Airport Strip upon lease expiries. In effect, this will cause cannibalization of the portfolios that are held by a small number of investors in these leasing nodes. Although Etobicoke is relatively close to the downtown core, it continues to be challenged by aging inventory, poor access from public transit and a lack of parking space. We expect that leasing rates will remain flat while tenant incentives will be on the rise Office Inventory Snapshot Leasing Nodes Included: Bloor & Islington Etobicoke North Etobicoke South Highway 427 Corridor Recent Transactions Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Etobicoke Office Average $ PSF CBD Office Avg $ PSF 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 295 The West Mall 400 Carlingview The Queensway 908 The East Mall 200 Ronson % Increase from Existing Stock 5.29% New Office Supply Building 1 Building 2 Building 3 Building 4 Building The West Mall 400 Carlingview The Queensway 908 The East Mall 200 Ronson Westmetro Corporate Centre Phase Class C B C C B Date Mar 19/13 Feb 2/13 Dec 14/12 Nov 1/12 Oct 11/12 Price $15.5M $5.25M $2.3M $1.04M $17.90M 181 The West Mall Size (SF) 93,600 26,754 14,000 6, ,326 $PSF $166 $196 $164 $173 $136 GLA (SF) 249, Cap Rate (%) 7.1% % Class A Leasing Node Highway 427 Corridor Seller H&R REIT Transglobe Jornew Holdings, Queensway Holdings, Shonrew Holdings Ontario Limited Blackwood Partners Developer Starlite Delivery Date Pre-Leasing Buyer Rose and Thistle Group True North Commercial REIT Chartwell Queens Inc. International Development and Relief Fund Gross Capital Group

10 Markham Cap Rates and Transaction Volume Sales Volumes $18M $1.36 Average Cap Rates Total SF Transacted 54.63K 3.55K Average $PSF $347 $383 Number of Transactions 5 1 Cap Rate Spread (vs. CBD) 146 bps - - $PSF Spread (vs. CBD) $3 -$78 $180 $160 $140 $120 $80 $60 $40 $20 Market Perspective Of the 5 trades that closed during the quarter, 4 hovered around the $1M mark and were for strata office units and small non-conventional office space, equally divided between private investors and users. The largest trade at $13.9M occurred for a fully occupied building tenanted by a technology firm, which was bought by the not-for-profit organization CAA South Central Ontario. Cadillac Fairview recently announced the Buttonville Airport redevelopment plan that is projected to introduce 2.6 to 4.6 million square feet of office space to the market using a multi-year approach. Phase 1 is scheduled to begin in 2013 and Cadillac has announced that 1 million square feet of head-office style buildings will be delivered. We are skeptical that such an aggressive timeline will be followed, considering the softening leasing market emerging in the suburbs. As Buttonville is a planned mixed-use community, we predict that the majority of development will occur in the residential and retail segments unless commitments from large anchor office tenants are secured. The steep increase in downtown residential pricing and slow down of construction of detached housing projects should fuel demand for the aforementioned sectors. $PSF and Total Area Transacted Over 100 M Markham Avg Cap Rates CBD Office Cap Rates Office Inventory Snapshot Leasing Nodes Included: Highway 404 & Highway 407 Richmond Hill Highway 404 & Steeles Recent Transactions Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Markham Office Average $ PSF CBD Office Avg $ PSF 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 10 Commerce Valley East 7130 Warden, Units Main 7130 Warden, Units Highway No. 7 East, Units % Increase from Existing Stock 15.8 New Office Supply Available for lease through JLL Building 1 Building 2 Building 3 Building 4 Building 5 10 Commerce Valley East 7130 Warden, Units Main 7130 Warden, Units Highway No. 7 East, Units Cochrane Phase 1 & 2 Liberty One Offices at Uptown Markham 80 Minthorn Boulevard 103 Commerce Valley East Class A A C A A Date Mar 12/13 Feb 15/13 Mar 28/13 Feb 4/13 Mar 7/13 Price $13.90M $1.18M $1.05M $1.05M $1.04M 775 Cochrane Phase 1 & 2 1 Steelcase West Walden 80 Minthorn Boulevard 103 Commerce Valley East GLA (SF) 436, , , , ,000 Size (SF) 43,000 2,752 2,700 2,935 3,242 $PSF $323 $428 $389 $356 $320 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 ATI Technologies Alderland Group Private Investor Alderland Group Liberty Dev. Developer Delivery Date GWL Realty Advisors Liberty Dev. Times Group Wemat Four Limited Triovest Pre-Leasing Pre-Leasing Pre-Leasing Pre-Leasing Pre-Leasing Buyer CAA South Central Ontario Royal Natural Products Co. Group Canada Grasshopper Realty Inc. Royal Natural Products Co. Group Canada Flato Dev. Inc.

11 Scarborough Cap Rates and Transaction Volume Sales Volumes $18M - 0 Average Cap Rates Total SF Transacted 28.97K - 0 Average $PSF $ Number of Transactions 1-0 Cap Rate Spread (vs. CBD) 178 bps - - $PSF Spread (vs. CBD) $ % 7% 5% 3% 1% Market Perspective The Scarborough market remains very inactive with only 8 trades occurring over the past 24 months, with 5 being significant transactions above $10M. The Q1 average cap rate was the highest of the main 8 municipalities, observed at 7.2. While pricing was substantially higher than the GTA average on a cost per square foot basis, we consider this to be an anomaly and a result of the sole trade occurring between non-arms length parties. At the moment, no new office supply has been announced over a 5 year horizon as a result of landlords inability to increase face rates and achieve reasonable returns. With a total lack of leasing velocity, landlords are having to be very aggressive with incentives for tenants. JLL is aware of some owners offering one year abatements and $40 per SF tenant inducements to secure long term leases. $PSF and Total Area Transacted Over 100 M Scarborough Avg Cap Rates CBD Office Cap Rates $700 $600 0 Office Inventory Snapshot Leasing Nodes Included: Scarborough 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 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 Inc. Developer Delivery Date Buyer 1600 Dev. Worldeal Investments Ltd. Kevric Real Estate Jain Society of Toronto Yuyang International Investments Group Inc.

12 North York Cap Rates and Transaction Volume Sales Volumes $5M $33.99M Average Cap Rates Total SF Transacted 18.91K K Average $PSF $235 Number of Transactions 3 6 Cap Rate Spread (vs. CBD) 150 bps 370 bps $PSF Spread (vs. CBD) -$95 -$226 0 $450 Market Perspective North York experienced a significant slow down of investment activity quarter over quarter with volumes dropping 85% and total area transacted by 9. The average square footage per deal decreased significantly which yields a misleading rise in the average pricing on a per square foot basis. Over 100 M North York Avg Cap Rates CBD Office Cap Rates $PSF and Total Area Transacted While there are six buildings currently pre-leasing, we expect that development will be deferred for most assets not located on the Yonge corridor. Much like Etobicoke, North York is plagued with the issues of poor transit and limited/expensive parking options for tenants. Suburban buildings often offer lower net rental rates and better parking ratios. Hence, if buildings are not located on the Yonge or University subway lines, they have to compete with non-core product. To secure tenants, landlords may have to provide incentives such as off-site parking and shuttle bus service to their buildings. We expect that the completion of the University subway line extension will spur office development activity in the path of construction Office Inventory Snapshot Leasing Nodes Included: Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Downsview Dufferin & Finch Yorkdale North Yonge Duncan Mill Consumers Don Mills & Eglington Highway 404 & Steeles Recent Transactions Development Statistics # of Buildings SF Current Inventory ,497,037 SF Under Construction 0 0 SF % Increase from Existing Stock Pre-Leasing 6 1,629,497 SF 4640 Jane 18 Wynford, Units Shepperd East 2655 Bayview 28 Hendon % Increase from Existing Stock 7.2 New Office Supply Building 1 Building 2 Building 3 Building 4 Building Jane 18 Wynford, Units Shepperd East 2655 Bayview 28 Hendon Downsview Corporate Centre 4050 Yonge Steeles Technology Campus Building Gordon Baker Morneau Sobeco Centre Class B A C C C Date Mar 15/13 Feb 4/13 Jan 30/13 Dec 21/12 Nov 30/12 Price $2.50M $1.56M $1.35M $1.70M $1.60M 1035 Sheppard West 4050 Yonge 3377 Steeles East 101 Gordon Baker 895 Don Mills GLA (SF) 400, , , , ,000 Size (SF) 7,410 9,600 1,903 9,700 1,500 $PSF $337 $162 $709 $175 $1,065 Cap Rate (%) Class A A A A A Leasing Node Downsview North Yonge Highway 404 & Steeles Highway 404 & Steeles Don Mills & Eglinton Seller FITPAC Office Management Inc. Rose and Thistle Group Cobob Holdings Ltd. Lawrence Park Animal Hospital Professional Corporation Private Investor Developer Build Toronto Build Toronto Delivery Date Bentall Kennedy - Fana Group Pre-Leasing Pre-Leasing Pre-Leasing Pre-Leasing Pre-Leasing Buyer Jane Shoreham Medical Centre Inc. ivedha Inc. Romanovsky Associates LLP Private Investor The Trustees Of Fifth Church or Christ

13 Oakville Sales Volumes 0 - $2.05M Cap Rates and Transaction Volume $90 1 Average Cap Rates Total SF Transacted K $80 $70 $60 Average $PSF - - $288 Number of Transactions 0-1 Cap Rate Spread (vs. CBD) $PSF Spread (vs. CBD) - - -$173 $40 $30 $20 $10 Market Perspective Investment activity has substantially slowed in Oakville over the past six months with only one trade occurring in Q for a small strata unit that was purchased by a private investor. While Oakville has traditionally been a fairly quiet market, the average sales volume per quarter over the past 24 months has been approximately $14M. It is unusual to witness two consecutive quarters with almost no volume: Q ($23M), Q ($7M), Q ($46M), Q ($18M) and Q1 ($19M). Over 100 M Oakville Avg Cap Rates CBD Office Cap Rates $PSF and Total Area Transacted 0.35 $450 While there is considerable activity around new office construction and development announcements, the total square footage actually leased in each category is not material. 27% of new construction has been tenanted and there have been no confirmations on pre-leased space. Engineering firms currently dominate the Oakville market; however, a downturn in this sector is expected to lead to near term spikes in availability rates. The wave of new supply compounded with the existing 19% overall vacancy rates will likely complicate investment decisions going forward. We expect that development of the many preleasing projects will be deferred Office Inventory Snapshot Leasing Nodes Included: Oakville Recent Transactions Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Oakville Office Average $ PSF CBD Office Avg $ PSF Development Statistics # of Buildings SF Current Inventory 46 3,336,639 SF Under Construction 2 97,660 SF % Increase from Existing Stock 2.93% Pre-Leasing 11 1,004,674 SF 1384 Cornwall, Units Cornwall, Units 7&8 Winston Office Centre 295 Robinson 239 Church % Increase from Existing Stock 30.11% New Office Supply Building 1 Building 2 Building 3 Building 4 Building Cornwall, Units Cornwall, Units 7&8 2381, 2401 & 2421 Bristol Circle 295 Robinson 239 Church Great Lakes Business Park Phase II 2727 Portland 1395 North Service West 1405 North Service West Ennisclare Corporate Centre Class C C B C C Date Nov 1/12 Aug 31/12 Aug 14/12 Jul 5/12 Jun 15/12 Price $2.05M $1.18M $20M $1.60M $1.69M 3430 Superior Court 2727 Portland 1395 North Service West 1405 North Service West 1295 North Service GLA (SF) 64,085 33, , , ,499 Size (SF) 7,100 4, ,629 13,032 5,385 $PSF $288 $272 $170 $122 $313 Cap Rate (%) % - - Class Flex A A A A Leasing Node Oakville Oakville Oakville Oakville Oakville Seller Ontario Limited Axiom Real Time Metrics Churchill International Property Corporation 295 Robinson Inc. Randvest Inc. Developer Delivery Date Paul s Property Corp Stellar Construction Westbury Development Westbury Development Bentall Kennedy Q Q Pre-Leasing Pre-Leasing Pre-Leasing Buyer Ontario Inc Ontario Inc. CTL Group Cassique Management Inc. Private Investor

14 Metro Area Toronto, Etobicoke, York, North York, East York, Scarborough Metro Office Sales Volumes and Avg Cap Rates Metro Office Total Area Transacted and Avg $ PSF $4, $3,500 $3,000 $2,500 $2,000 $1,500 $1, % 7% 5% 3% 1% Over 100 M Metro Avg Cap Rates GTA Avg Cap Rates Sales Volumes $77M $1,034M Average Cap Rates Total SF Transacted K 2,975.20K Average $PSF $314 $362 Number of Transactions Cap Rate Spread vs. GTA 12 bps 0 bps $PSF Spread vs. GTA -$30 -$99 West Area Mississauga, Oakville, Burlington, Brampton, Halton Hills, Milton, Caledon Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft Metro Average $ PSF GTA Average $ PSF The Toronto Metro area includes million SF of office space. Even with 5.4 million SF of new development being delivered by 2017, vacancy rates are expected to continue to trend downward and remain below. As space becomes more limited, pricing is expected to increase, causing a healthy increase in NOIs for owners. This will make these assets more attractive, which may cause further cap rate compression if interest rates hold. In 2012, 7 of total sales were for buildings valued over M. Of the $2.92B traded in this segment, public REIT s were the predominant purchasers, accounting for $1.6B in volume. Conversely, private investors have been the most active year to date in 2013 with 57% ($44M) of total deal volume. West Office Sales Volumes and Avg Cap Rates West Office Total Area Transacted and Avg $ PSF $700 $ Over 100 M West Avg Cap Rates GTA Avg Cap Rates Sales Volumes $143M $19.25M Average Cap Rates % Total SF Transacted K K Average $PSF $170 $215 Number of Transactions 12 6 Cap Rate Spread vs. GTA 8 bps 39 bps $PSF Spread vs. GTA -$175 -$246 Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft West Average $ PSF GTA Average $ PSF The Toronto West market includes 40.4 million SF of inventory and is expected to deliver 900,000 SF in Although it has the highest overall vacancy rate at 13%, the West remains the most active and attractive suburban office market due to the younger age of inventory and ease of transportation options (Hwy 407, GO Transit, Bus Rapid Transit line). In 2012, the $1-20M segment was the most active pricing category with $134.7M transacted, which accounted for 3 of total deal volume. Private capital held the lion s share of this volume at $103.4M invested. This trend has continued thus far in 2013; 9 of the $72M that has been traded has had private investor backing.

15 North Area Vaughan, Markham, Richmond Hill, King, Aurora, Newmarket, Whitchurch-Stouffville, East Gwillimbury, Georgina North Office Sales Volumes and Avg Cap Rates Over 100 M North Avg Cap Rates GTA Avg Cap Rates North Office Total Area Transacted and Avg $ PSF Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft North Average $ PSF GTA Average $ PSF Sales Volumes $23M $12.03M Average Cap Rates Total SF Transacted 71.02K 72.82K Average $PSF $319 $248 Number of Transactions 9 4 Cap Rate Spread vs. GTA 8 bps 24 bps $PSF Spread vs. GTA -$25 -$213 East Area Pickering, Ajax, Whitby, Oshawa, Clarington, Uxbridge, Scugog, Brock East Office Sales Volumes and Avg Cap Rates The North Toronto market has softened over the past 15 months and showed no sign of strengthening in Q While 2012 sale volumes were $194M, approximately $130M of these transactions were to nonarms length parties involved in the transfer of three South Creek Corporate Centre buildings. Of the remaining $64M that was transacted, all buildings were valued in the $1-20M range and private investors comprised $37M of the total. Of the 9 transactions that occurred in Q1 2013, 8 of the trades fell into the aforementioned $1-20M range. These sales totaled $9.1M and were to end-user purchasers. The ninth transaction was a Markham, Class A, multi-tenant building that sold for $13.9M to a private investor. East Office Total Area Transacted and Avg $ PSF $ $25 $20 $15 $10 $ Over 100 M East Avg Cap Rates GTA Avg Cap Rates Up to 20K Sq Ft 20-50K Sq Ft K Sq Ft Over 100k Sq Ft East Average $ PSF GTA Average $ PSF Sales Volumes $1.45M $4.25M Average Cap Rates Total SF Transacted 5.70K 42.44K Average $PSF $254 Number of Transactions 1 1 Cap Rate Spread vs. GTA $PSF Spread vs. GTA -$90 -$361 Toronto East is the most dormant market in the GTA with no new construction scheduled over the next 5 years. An oversupply and lack of demand is resulting in the inability of landlords to achieve growth in net asking rents. The combined average base rent for all office classes is currently $12.78 psf vs. the GTA average of $15.32 psf. The East region has only seen transactions ranging from $1-20M with the buildings generally being between 20,000 to 50,000 SF. Purchasers in this region have predominantly been end users, as evidenced in 2012 by this category representing the substantial majority of trades at $5.8M. One transaction occurred in Q for a Class C, singletenant medical office building located in Whitby.

16 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 $47.7 billion of real estate assets under management. For further information, visit For more information, please contact: JLL GTA Office Investment Team Andy Baines 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 Jr. Broker Trainee & Analyst Tel: AmitJ.Kumar@am.jll.com Jones Lang LaSalle 199 Bay Suite 4610, Box 407 Toronto, Ontario M5L 1G3 Tel: Fax: Jones Lang LaSalle IP, Inc. 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 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.