Multi-Residential Market and Investment Trends

Canadian Apartment Investment Conference I 2017 Multi-Residential Market and Investment Trends CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 1

Rental Market Universe Total Rental Units, October 2016 700,000 600,000 500,000 Condo Rental Purpose-Built Rental 400,000 300,000 200,000 100,000 0 Vancouver Edmonton Calgary Toronto Ottawa Montreal Source: CMHC CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 2

Condominium Rental Market Universe Rental Condo Units as Share of Total Condo Units, October 2016 35% 30% 25% 25.4% 32.1% 31.1% 32.6% 28.7% 20% 15% 15.7% 10% 5% 0% Vancouver Edmonton Calgary Toronto Ottawa Montreal Source: CMHC CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 3

Housing Starts By Tenure and Type, Canada 100% 90% 80% 70% 60% 50% 42% Share that are multiples Share that are purpose-built rental 45% 42% 37% 39% 56% 49% 61% 65% 63% 65% 40% 30% 20% 10% 26% 15% 5% 10% 13% 20% 20% 15% 0% 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Source: CMHC CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 4

Rental Market Performance Average Vacancy, 2015-2016 8.0% 7.0% 7.1% 7.0% 6.0% 5.3% 2015 2016 5.0% 4.0% 3.0% 4.2% 3.4% 3.0% 4.0% 3.9% 3.7% 3.5% 2.0% 1.0% 0.8% 0.7% 1.6% 1.3% 0.0% Vancouver Edmonton Calgary Toronto Ottawa Montreal Canada Source: CMHC CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 5

Rental Market Performance Annual Average Rent Growth, 2 Bdrm, 2015-2016 8.0% 6.0% 4.0% 2.0% 4.3% 6.0% 2.6% 0.8% 3.0% 3.0% 3.7% 2.3% 4.1% 2.8% 3.5% 3.7% 0.0% -2.0% -4.0% -6.0% -8.0% -2.4% -5.6% 2015 2016 Vancouver Edmonton Calgary Toronto Ottawa Montreal Canada Source: CMHC CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 6

Property Returns by Asset Type 12-Month Return for Standing Investments, Canada 18% 16% 14% 12% Retail Office Industrial Residential 10% 8% 6% 4% 8.3% 6.9% 6.0% 4.9% 2% 0% 2010 2011 2012 2013 2014 2015 2016 Jun-17 Source: MSCI REALpac/IPD Canada CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 7

Multi-Residential Property Returns 12-Month Return, Capital vs. Income Growth, Canada 20% 15% Income Growth Capital Growth 10% 5% 0% -5% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jun-17 Source: MSCI REALpac/IPD Canada CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 8

Capitalization Rates Toronto 8% 7% 6% Class AA Office Single Tenant Industrial 5% 4% 3% 2% 1% 10-Yr Bond Regional Mall Apartment 3.9% 0% Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Source: Altus Investment Survey and Bank of Canada CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 9

Capitalization Rates Colliers Cap Rate Survey, 2017 Q2 Source: Colliers International CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 10

Rental Apartment Development Rough Proforma Project Specs Land Area (Acres) 1.48 1.48 1.48 Density (FAR) 7 7 7 Gross Building Area (GBA SF) 450,275 450,275 450,275 Net Rentable Area (SF) 382,734 382,734 382,734 Potential Revenues Gross Potential Rental Revenue/SF $2.50 $2.75 $3.00 Gross Potential Rental Revenue $11,482,013 $12,630,214 $13,778,415 Less 30% operating expenses -$3,444,604 -$3,789,064 -$4,133,525 Net Operating Income $8,037,409 $8,841,150 $9,644,891 Potential Value Creation Cap Rate 4.50% 4.50% 4.50% Potential End Value $178,609,083 $196,469,992 $214,330,900 Development Costs Total Hard Costs (PSF) $270.00 $270.00 $270.00 Soft Costs inc Financing (PSF) $54.00 $54.00 $54.00 Total Development Costs $145,889,100 $145,889,100 $145,889,100 Land Residual Land Residual Before Profit $32,719,983 $50,580,892 $68,441,800 Developer Profit (12%) $17,506,692 $17,506,692 $17,506,692 Net Land Residual $15,213,291 $33,074,200 $50,935,108 PSF Buildable $34 $73 $113 CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 11

Condo Apartment Rents Average Toronto (through MLS) $2.90 $2.80 $2.70 $2.60 $2.50 $2.40 $2.30 $2.20 $2.10 $2.00 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q1 2017 Source: Urbanation and TREB CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 12

Multi-Residential Transaction Volume Canada ($ Billions) $5.0 $4.5 $4.0 $4.13 $4.40 $3.86 $3.63 $3.73 $4.41 $4.13 $3.5 $3.0 $2.5 $2.55 $2.29 $2.0 $1.5 $1.0 $0.5 $1.67 $1.87 $0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD Source: Real Capital Analytics CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 13

Purchaser Profile Apartment Transactions, Canada 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 23% 6% 24% 31% 8% 17% 19% 20% 7% 9% 17% 34% 26% 10% 11% Institutional Cross-Border REITs/REOCs 40.0% 30.0% 52% 53% Private 20.0% 46% 44% 40% 10.0% 0.0% 1% 0% 0% 2% 0% 2013 2014 2015 2016 2017 YTD User/Other Source: Real Capital Analytics CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 14

Purchaser Profile Top 10 Buyers, Past 24 Months, Canada Buyer Acquisitions Over 24 Months ($millions) Average Acquisition ($millions) 1 CAPREIT (Canada) $786 $14 2 Starlight Investments $650 $20 3 Northview Apartment REIT $414 $11 4 Skyline Apartment REIT $395 $9 5 Timbercreek Asset Management $224 $22 6 Killam Apartment REIT $176 $18 7 Akelius Residential AB $166 $17 8 Minto Group $157 $10 9 Greystone $145 $145 10 InterRent REIT $133 $22 Source: Real Capital Analytics CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 15

Select Transactions Western Canada Name/Address: Barafield Apartments Buyer: Hollyburn Properties Market: Vancouver Price: $42,000,000 Units: 109 Price/Unit: $385,321 Year Built: 1958 Date Sold: Apr-2017 Name/Address: Edgewater on Jasper Buyer: Greystone Market: Edmonton Price: $191,000,000 Units: 694 Price/Unit: $275,216 Year Built: 2013 Date Sold: Oct-2016 Name/Address: Parkview Village Buyer: Private Market: Calgary (Midnapore) Price: $35,700,000 Units: 204 Price/Unit: $175,000 Year Built: 1982 Date Sold: Jun-2017 Source: Real Capital Analytics and RealNet CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 16

Select Transactions Eastern Canada Name/Address: Regency Suites Buyer: Starlight Investments Market: Hamilton Price: $80,692,478 Units: 321 Price/Unit: $251,378 Year Built: 2017 Date Sold: Apr-2017 Name/Address: 180-190 Clark Buyer: Realstar Group Market: Brampton Price: $121,950,500 Units: 415 Price/Unit: $293,857 Year Built: 2014 and older Date Sold: Jul-2017 Name/Address: 5999 Monkland Buyer: GWL Realty Market: Montreal Price: $46,400,000 Units: 170 Price/Unit: $272,941 Year Built: 1966 Date Sold: May-2017 Source: Real Capital Analytics and RealNet CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 17

Trending Demographics 50 45 40 35 25-64 yrs 30 25 20 14 yrs and under 65-79 yrs 15 10 5 15-24 yrs 80+ yrs 55-64 yrs 0 1923 1933 1943 1953 1963 1973 1983 1993 2003 2013 2023 2033 2043 2053 2063 14 and Under 15-24 25-54 55-64 65-79 80+ Source: Statistics Canada CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 18

Trending Rising Urban Land Costs 215 Lakeshore Blvd E 3.85 acres $166 million $43 million / acre Sunnybrook Plaza 2.89 acres $26.3 million (50%) $18.2 million / acre $150 PSF GFA Yonge & College 0.45 acres $67 million (50%) $149 million / acre $191 PSF GFA Source: RealNet CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 19

Trending Interest Rates, GOC Bond Yields 3.0% 2.5% 2.0% 10-Year 1.5% 5-Year 1.0% 0.5% 0.0% Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Source: Bank of Canada CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 20

Trending Secondary Markets Sales Volume 2011-2016 All Other Markets 26% VECTOM* 74% Source: Real Capital Analytics * VECTOM = Vancouver, Edmonton, Calgary, Toronto, Ottawa and Montreal CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 21

Trending The Apartment as Saviour The Ice District Edmonton The Windsor Beltline, Calgary Corktown Plaza Hamilton CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 22

Trending Legislative Changes Expanding Rent Control to All Units Capping Rent Guideline Increase Changes to the OMB Non-Resident Speculation Tax Fair Apartment Taxation Capital Gains Inclusion Rate Increase? CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 23

Strong Outlook Remains The Few Headwinds Are Relative CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 24

CANADIAN APARTMENT INVESTMENT CONFERENCE 2017 Scott Chandler, Colliers International 25