Last Document Review Date: September 29, 2014

Office Last Document Review Date: September 29, 2014 TABLE OF CONTENTS Executive Summary... 2 Compliance Checklist... 3 Processing Office Properties... 4 General... 4 Practices and Procedures... 5 Appendix A: Frequently Asked s... 13 General FAQs... 13 BOMA Rentable Area FAQs Link to BOMA... 14 Appendix B: Occupancy Descriptions... 23 Foreword... 23 Assessment Practices and Procedures Office 1

EXECUTIVE SUMMARY The following properties, identified by actual use, are within scope: o 203 Stores and/or Offices with Apartments o 204 Store(s) and Offices o 208 Office Building (Primary Use) Office properties often hold non-office components, such as apartment, retail, or parking that have to be valued separately from the office property itself. Assessment Practices and Procedures Office 2

COMPLIANCE CHECKLIST The following is a list of items that must be completed in order to be considered compliant with this document: 1. Where they are determined to be the highest and best use (HBU), office properties as defined in this document are to be be valued using a capitalized NOI except: a. A cost or DCA approach may be used in rural/remote areas only when information to support an income valuation is not available. b. A cost approach may be used for properties determined not to be at HBU. 2. Offices will be Class 6 business and other except for any component determined to be used for other non-office purposes. 3. Improvements will be based on an improvement residual unless the property is an air space parcel or designated heritage building, where a land residual will be used. 4. Office properties with additional components will use a separate model for each significant non-office use (De Minimus rule applies). 5. Market support must accompany any adjustments to the base rate or model for market influencing characteristics (attributes) at the model level. For example, adjustments to income, expense, vacancy, land, quality, view, etc., that varies from the base rate or model for the competitive market set. 6. Do not record individual expense amounts. 7. Do not record an occupancy for each office tenant. Instead, summarize all tenants within the same occupancy into one spreadsheet entry. Assessment Practices and Procedures Office 3

PROCESSING OFFICE PROPERTIES General 1. Valuation method(s): a. Capitalized NOI primary method. b. Cost or DCA methods in rural and remote (unincorporated) areas only when information to support an income valuation is not available. c. Units of measure are dollar per square foot of gross leasable area or GLA for multi-tenant and single tenant office properties. d. GLA will be based on reported space and be consistently determined for all properties linked to a model. CAUTION: Some office owners do not include vacant space and as such, their reported information may be understated. TIP e. A building residual approach will be used to determine the improvement value. Inability to obtain information in a local market should not be the deciding factor in selecting the cost or DCA methods. Market information for competitive properties in similar communities within the region should first be investigated. EXCEPTIONS: o The cost method will be used for properties for which the current use is not the HBU. o The land residual method will be used for value apportionment in the case of air-space parcels and designated heritage buildings. o Regions will develop a DCA value as a backup only when the market trades on this basis. A business case, approved by the Executive will be required for GIM backup models. Assessment Practices and Procedures Office 4

Practices and Procedures 1. Attach the necessary documents to the viewers as needed, refer to Attachments (valuebc). 2. When completing the mandatory fields in the IncomeDCA Model viewer/keypane, keep the following in mind: Office properties with one or more non-office component(s) will be valued through application of a separate model and income record for each significant non-office use within the building. The De Minimus rule will be applied to determine whether space devoted to non-office use is significant enough to require creation of one or more additional income records (drawing rates from another model). CAUTION: Be careful when applying the De Minimus rule, for example when a large office has a small area of storage or limited parking, this area is included in order to reflect what is on the rent roll. o Model Creation: a model should be designed to encompass the largest number of relatively similar properties, within the geographically broadest possible competitive market set. valuebc provides considerable flexibility to account for the diversity of buildings within a specific model (e.g., income quality, size or suite mix, variable adjustments). The starting point for development of office models will be occupancy and region. o Method: select CAP Direct Capitalization o Model Type: select OFF Office o Primary Model Use: select applicable occupancy (1800, 1801, 1802, 1803). o Model Description: The model description will be based on the following naming convention, in the following order: Occupancy Short Description Geographic Area that model applies Region, Jur or NBHD or smaller area (if necessary) Physical Attributes that further define model (if necessary) Sub-Markets included (if any) Assessment Practices and Procedures Office 5

TIP - The Model Description will apply to space with similar office rental amenities in mixed-use properties. - Examples: Offices with Elevator North Fraser Region Office Blg C Class Victoria Pre 1960 Office Blg C Class Vancouver CBD 1 Sub- Market Indus Flex Warehse Vancouver Isl Region Small Towns and Rural Strata Res Low Rise Downtown Poco to Pitt River Rd Strata Res High Rise Vancouver Nr Joyce St Sky Train o Additional information documenting the Model should be placed in: - Income-DCA Model viewer/notes tab/category: 08 General. While it is not strictly necessary to identify the occupancy and geographic application of the model in the model name, addition of this information improves clarity when multiple models are open at the same time. 3. When completing the mandatory fields in the Income DCA Model viewer/occupancies and Adjustments tab, keep the following in mind: Enter a spreadsheet row for each required combination of Quality and Unit of Measure by Unit of Measure order (e.g., Q1 GLA, Q2 GLA, Q3 GLA, etc.). Size adjustment curve, general vacancy, non-variable adjustment, all model attribute adjustments, CAP rates and adjustments, and effective age adjustments must have market support. o On the Occupancy spreadsheet: Occupancy: select appropriate occupancy refer to occupancy definitions in Appendix B: - 1800 Class D Office - 1801 Class C Office - 1802 Class B Office Assessment Practices and Procedures Office 6

- 1803 Class A Office Quality: select appropriate. - Establish quality classes based on the properties within the geographic competitive set. - Determine an average quality property from this competitive set. - Determine the range of qualities required to encompass the competitive set, (sub markets may be required if there is a rate differential between areas for similar qualities of property. - The variance between qualities for additional occupancy entries (new rows) should be significant, representing a differential of at least five percent in net operating income. - In many cases, only two to three qualities may be necessary to encompass a specific rental office competitive set. Economic Rate: enter economic rate associated with occupancy and quality. - The economic rate for an occupancy, unit of measure, and quality will be recorded to the nearest 25 cents per annualized period (annual). - The economic rate will be determined from analysis of net lease information for the specific competitive market set. The lease type will be based on the amount of expenses being passed through and the industry standard associated with the competitive market set. - Record the basis for economic rates (e.g. type of net lease) in the Income DCA Model viewer/notes tab. - The economic rate for an occupancy and quality may be adjusted at the model and incomedca record level to reflect non-typical obligations of the building owner or tenants within the competitive market set. Unit of Measure: select GLA. Annualization: select An Annual Size Adjustment Curve: select Size Adjustment Curve if associated with the office model. Size curve, if used, must have market support. Assessment Practices and Procedures Office 7

o On the General Vacancy/Occupancy field, enter general vacancy as percentage of potential gross income directly (do not use detailed Vacancy). A vacancy entry in the occupancy spreadsheet will override the general vacancy field entry use general vacancy only. o The General Expense field is a non-editable field that shows the amount totals from the Expense and Adjustment tab. o On the Non-Variable Adjustments spreadsheet: - Record a non-variable adjustment only if the feature is not captured in the economic rate for a specific occupancy and quality. Adjustment Type: select Rev or Vac (Revenue or Vacancy). - Do not select Expense Adjustment Type at the model level. If an expense adjustment is required for anomalies in the competitive set, apply the adjustment at the income record level. Ensure you are not adjusting for a landlord s poor or superior management (value to owner). - Vacancy adjustments will be expressed as percent of potential gross rental income. Attribute: select appropriate. - Ensure that attribute is not included in economic rate for the specific model occupancy and quality to avoid double adjusting. Value: enter appropriate value, e.g., Y for presence or N for absence of most attributes, (other attributes, such as basement, require "Finished" or "Unfinished", etc.) Dollar Value/Percent: enter dollar/percent amount adjustment to economic rate. - Use dollar adjustments to apply lump-sum adjustments only for market attributes (expressed in dollars) which are relatively stable over several years. It will still be necessary to review dollar adjustments on an annual basis along with associated economic-market rates. Examples of Assessment Practices and Procedures Office 8

dollar adjustments to economic rates may be heat not included or parking. - Use percent adjustments to apply relationship adjustments only for market attributes which are potentially unstable over the long-term (actual dollar amounts will fluctuate). Examples of percent adjustments may be location or view. Percentage adjustments will not likely require review as frequently as dollar adjustments. - Dollar and percent adjustments will be applied consistently for all ICI models in a region on a property specific basis. See Appendix A. o On the Variable Adjustments spreadsheet: - Extreme caution should be applied when adding variable adjustments. Adjustment Type: select Revenue, Vacancy or Expense. - Vacancy and expense adjustments will be expressed as a percent. Attribute: select appropriate - A sub-market attribute should only be selected for a significant number of properties in the competitive set, which share a similar range of non-typical rents or vacancies (e.g., greater than 10). Otherwise, adjustments for anomalous situations should be made at the income record or property specific level. To From Values: enter From/To Values associated with attribute (e.g., total GLA of building, ceiling height, number of floors, etc.). - When applying these adjustments consider the impact on other model variables such as expenses, vacancy, and OCR. Basic Range $/% Adj per unit: enter dollar amount or percent adjustment. Add Range $/% Adj per unit Cumulative: enter dollar amount or percent amount for ramp-up of adjustment (e.g., on basis of building floor level). Assessment Practices and Procedures Office 9

o On the CAP/GIM tab: NOTE - A CAP adjustment for a variety of attributes should be made at the incomedca model level, See CAP/GIM User Guide. Make sure to add a model-level CAP/GIM attribute to all qualities. A corresponding attribute must be added to the IncomeDCA Valuation viewer to reflect the model-level adjustment on the income record. - Surplus or excess land can also be valued through one or more additional land component (refer to Highest and Best Use Interim Use). Quality: select appropriate quality - Range of qualities selected should be consistent with range of occupancy qualities recorded in model. From Eff Year to Eff Year: CAUTION: use only in exceptional circumstances due to potential for double adjustment (e.g., effective age already accounted for in quality of economic rate, CAP, and other adjustments). CAP/GIM tab: enter CAP rate for each quality required. - CAP rates should be rounded to nearest 0.25%. 4. When completing the mandatory fields in the Income DCA Model viewer/expenses tab, keep the following in mind: o Expense: select overall expense category. No new expense items will be added to available expense categories. The total of all expenses will sum directly to the Income and Vacancy tab\general Expenses field. o Rate: enter percentage of effective gross income. 5. When completing the mandatory fields in the Income DCA Valuation viewer/keypane, keep the following in mind: Create one or more additional income records for mixeduse properties where it is necessary to draw rates from a non-office model (e.g., retail tenancies on first floor, apartments, parking, etc.). Assessment Practices and Procedures Office 10

o Model Name: enter Model Name (e.g. OFF 150) if known or query Income-DCA Model viewer to identify appropriate model based on Model Type, Area, Jur, and Neighbourhood. o Model Type: select OFF Office. o Primary Model Use: select office. o Building Name: enter if applicable. o CAP/GIM Adjustment: enter percent adjustment (plus or minus) only for building size, FSR or site coverage differences relative to the typical property for a specific occupancy and quality (competitive set). If there are multiple income records contributing to the value of the property, a Folio CAP/GIM adjustment may be required. Use the Property viewer/commercial Building tab to enter the predominant income record and an overall CAP adjustment (only if required) in the CAP/GIM Adjustment field. Adjustments must have market support. 6. When completing the mandatory fields in the Income DCA Valuation viewer/valuation tab, keep the following in mind: Do not record an occupancy for each office tenant. All tenants within the same occupancy will be summarized into one spreadsheet entry. o On the Occupancy spreadsheet: Tenant Description: enter Office Occupancy: select occupancy associated with appropriate model. - Add occupancies entries (new rows) for multiple floors when: A building is not uniform in rentable floor area for each floor Economic rates vary significant with numbered storeys Some floors are not built-out A floor adjustment (variable) is required to account for impact of floor height on economic rates. Quality: select quality that will apply to all space associated with the selected office occupancy and unit of measure. Assessment Practices and Procedures Office 11

Unit of Measure: GLA Gross Leasable Area. Num Units: GLA units expressed as square feet. o On the Attributes/Adjustments spreadsheet: Attribute: select attribute(s) from model or apply a manual adjustment. - Do not enter manual attribute adjustments if the adjustment is already present in the model this will result in a double adjustment. - Adjustments for the present value of capital cost to cure items should be made in the Commercial Building viewer/incomedca Summary tab/non Assessable spreadsheet (cost to cure capital, TI build-out required). Key reason for deduction in Notes tab. Value: enter value consistent with attribute selected from model (e.g., ceiling height, GLA size, submarket number, etc.) Rate Adj $/%: enter dollar/percent value only if a manual adjustment is recorded. - If a value is entered for a model adjustment, the total adjustment applied will be equal to model adjustment plus the amount entered in the Value field. Vac/Exp Adj %: enter percent only if anomalous situation with property. o On the Distribution spreadsheet: Property Class: select property class 6. Exempt Tax Code: select 00 fully taxable. Exempt Percent: key 100% (e.g., 100 percent of value associated with income record). Assessment Practices and Procedures Office 12

APPENDIX A: FREQUENTLY ASKED QUESTIONS General FAQs 1. Answer General FAQs BOMA Rentable Area FAQs How should reported area be treated for recording GLA units of measure in valuebc? First, determine the standard for space measurement in the competitive market set. For example, in some suburban or rural markets, most owners and property managers may report rentable area equivalent to NLA (essentially space occupied by the tenant, exclusive of common areas). Second, review each property linked to a model to ensure that the standard for space measurement has been applied this may require an adjustment to rentable area recorded for some properties. For example, if most buildings are reported on an NLA basis but several are reported on a GLA or other basis, it will be necessary to convert the non-nla buildings to the NLA standard. This is a critical step since the economic rates applied to properties linked to the model will have been determined on the basis of the space standard for the model, in this example NLA. 2. Answer The rentable area for assessment purposes for all office properties will be recorded as GLA units of measure in valuebc. How should buildings, which are leased on a single tenant basis, be valued and recorded in valuebc? While property owners or managers of single tenant buildings may quote rentable areas on the basis of gross building area (GBA), the property will be valued as a conventional multitenanted property based on the space standard that applies Assessment Practices and Procedures Office 13

to the applicable office model (e.g., GLA). This approach is necessary since BC Assessment (BCA) is not valuing the landlord or tenant s interest but the sum of all interests. Economic rates, vacancy, expenses, etc. will be applied to the building in the same fashion as all other properties in the model. It will be necessary to apply an efficiency factor to the GBA reported space to determine the rentable area for assessment purpose. BOMA Rentable Area FAQs Link to BOMA Is atrium space measured by the standard? 3. Answer Atrium space above the main lobby floor does not constitute rentable area. It is empty space and is treated, in effect, as a major vertical penetration. The base of the atrium, however (i.e., the finished floor) is measured. How are enclosing walls defined in conjunction with major vertical penetrations? What about the floor of the stair tower or the elevator pits of the elevator shaft? 4. Answer The term enclosing walls refers to those walls required by building code, and not to the architectural or decorative treatments of those walls. The floor of a stair tower and the pits of the elevator shaft, when found inside the enclosing walls, are part of the major vertical penetration. However, if an area is not within the enclosing walls (such as a storage room under the stair tower), the area is part of the rentable area. NOTE If the elevator starts at the parking level, the floor area of the elevator is not included. Assessment Practices and Procedures Office 14

5. Answer 6. Answer 7. Answer 8. Answer Are areas outside the fire resistance enclosure of a major vertical penetration considered part of that penetration? For example, plumbing chases behind restrooms? No. Walls enclosing the major vertical penetration, which are required by building codes, are part of the penetration. Additional walls outside these enclosing walls are not considered part of the penetration and are not deducted from rentable area. Are areas of refuge (mainly a feature of Canadian buildings) deducted as major vertical penetrations? If the area of refuge is not isolated from the stairwell, then it is part of the major vertical penetration and is deducted as such. If the area of refuge is isolated from the stairwell with its own set of doors, then it is part of floor rentable area and is distributed to each office area through the application of the R/U ratio. Can a mechanical room serving tenants on an aboveground floor be part of building common area? Yes, if it is not already part of a floor common area. On an aboveground floor, can a corridor that is ordinarily floor common area be assessed to a particular tenant if it provides the only access to their space? Similarly, can a portion of a ground floor lobby that is ordinarily part of building common area be assessed to a particular tenant if it provides the only access to their space? Corridors by their nature typically provide the only access to an office or store, even when the corridor is required primarily for fire egress. Page 16 of the standard states that: Assessment Practices and Procedures Office 15

9. Answer 10. Answer "where alcoves, recessed entrances or similar deviation from the corridor line are present Usable Area shall be computed as if the deviation were not present." You should first determine whether the suite entrance could be positioned to incorporate the area in question without obstructing other occupants, fire egress, or other building services, before deciding that the area belongs to the usable area of an office or store. Remember that no area can be accounted for more than once. If an area belongs to the usable area of an office or store, it must be excluded from floor common area, building common area, or the usable area of any other office or store. Is storage space part of building common area in a multitenant building? Is storage space usable area if it is for the express use of a given tenant? Areas that are used for storage, whether above or below grade, are measured just like an office (or store in the cases of street frontage), because these spaces could house tenants personnel, furniture, files or supplies. If the space is a common storage area available for use by all tenants at no additional charge, than it would be calculated under building common area. If it is for the express use of a given tenant, the storage space would have both a usable and rentable measurement. Is a courtyard included in building common area if it is enclosed by four sides but not a roof? Fully enclosed refers to an enclosed space where environmental conditions are maintained by a heating, ventilating and air conditioning system. Therefore, there must be a roof in order for the courtyard to be fully enclosed. The standard states that building common areas are considered to be part of floor usable area. Can this possibly mean that the building common areas on a ground-level floor are to be measured twice? Assessment Practices and Procedures Office 16

11. Answer No, the standard does not allow the same space to be measured twice. 12. Answer 13. Answer The intent of the standard is for building common area to be part of the floor usable area. Building common area needs to take part of the floor common area allocation on the floor(s) on which the building common area is located. Building common area, just like store area and office area, benefits from the circulation corridors and other floor common area. This allocation is necessary in order to fairly distribute the floor common area to the users. If the allocation were not made, occupants on floors with building common area would receive an unfair higher allocation of floor common area. Are the exercise club and restaurant part of building common area if they serve the entire building? No; these areas represent rent-paying tenants; so while they do provide a service to the entire building (indeed to any paying customer); they are store area rather than building common area. However, if these areas were a building amenity that all tenants could use as part of their lease, then they would be considered building common area instead. In an office complex, would mechanical areas located in one building, but which serve others as well, be considered building common area? What about underground corridors that link one building with another? Although the standard does not deal specifically with building complexes, it would be a reasonable adaptation to consider the entire project as one building and to allocate the common corridors and building mechanical area as allowed through building common area. On a single tenant floor, are the elevator lobby and restrooms considered usable areas? Assessment Practices and Procedures Office 17

14. Answer 15. Answer 16. Answer The BOMA standard defines usable area as space that tenants can actually occupy and use and may allocate to house personnel and furniture. Thus, if an elevator lobby is under the tenant s control and could be put to use (as a reception area, for instance), it is usable area. However, if the tenant cannot use that space because of fire code or other restrictions, it is not usable area. Restrooms are not considered usable area under the standard, although they are part of rentable area. If a private stairway is built between two floors occupied by one tenant, is that stairway part of rentable area? Is it part of the usable area? Yes and yes. The standard states specifically that vertical penetrations built for the private use of a tenant occupying office areas on more than one floor are counted as rentable. The stairway would also be part of the usable area of the tenant. If a tenant expands its rentable area, does the floor R/U ratio and building R/U ratio change as a result meaning that each tenant s rentable area would change? Tenant expansion and new tenant activity may indeed affect the floor R/U ratio and/or building R/U ratio. If tenant expansion or new tenant activity occurs in part or all of an existing store area or office area, the ratios remain unchanged. However, if tenant expansion or new tenant activity incorporates what had been floor common area or building common area into the newly created store or office area, or creates additional floor common area or building common area from what was previously store or office area then one or both ratios will be affected. The floor R/U ratio will change if floor common area is increased or decreased (e.g., by changing the configuration of floor circulation corridors or enlarging a restroom). The building R/U ratio will change if building common area is increased or decreased (e.g., by leasing an exercise room) or Assessment Practices and Procedures Office 18

if the floor R/U ratio is adjusted on a floor containing building common area. Changes to the floor R/U ratio and building R/U ratio will affect the rentable area of all the offices or stores located on that floor or in the building. For purposes of stability, adjustments to existing leases based on changes to rentable area are typically not made, although the new ratios are used in future lease transactions. 17. Answer 18. Answer 19. Answer Is parking ever counted as rentable area? No, the standard excludes parking space. Are major vertical penetrations included in store area? No. Major vertical penetrations are excluded when calculating store area. Rentable area itself excludes major vertical penetrations and, since store area is less than or equal to floor rentable area on the floor where the store is located, store area likewise will exclude major vertical penetrations. If a store area is on a corner, is the measurement taken to the building line on both sides? Does it matter whether entrances to the space are located on both sides? Store area requires a street frontage and a ground level. It is possible for a square building to meet these conditions on every one of its sides. In that situation and on that level, the dominant portion would be the building line on each side. However, the sides do not have to be at the same level. A building can have street frontage and ground level on one side (e.g., Floor 1) and street frontage and ground level on another side (e.g., on Floor 3). Each of those two floors would be considered store area, and the dominant portion would be the building line. Having a separate street entrance for the space is not a requirement in determining street frontage for a store area. Assessment Practices and Procedures Office 19

20. Answer 21. Answer 22. Answer How is building line defined where the ground floor building face is set back further than the upper floors from the street frontage? The standard is intended to measure space that is fully enclosed. Therefore the building line, as used in the standard to determine store area, is the outside face of the column line (or the exterior building surface if columns are not present) of the ground floor on the street frontage exposure. Deviations to the building line, including projections or recesses, are ignored unless they are part of the permanent building exterior of the ground floor. Should ground floor spaces that have separate entrances and have no access to ground floor lobbies still receive a gross-up for those areas? Yes, all tenant spaces within a building should be treated equally. Therefore, tenant spaces with separate entrances and no access to ground floor lobbies are treated in the same manner as tenants who do have access to the ground floor lobby. Regarding dominant portion where a wall meets a column a bite appears to be taken out of the column as the measurement line shifts. If the column is not square, how are the dimensions of the bite determined? Columns are not considered in the standard. Therefore, where a column interrupts the dominant portion, the dominant portion that exists on each side of the column continues through one-half of the horizontal distance of the column. Where a column interrupts a dominant portion that is the same on both sides, the dominant portion continues through the column as if the column did not exist. Where a column interrupts a dominant portion that is different on each side, the dominant portion on one side continues for one-half the horizontal distance and then either steps in or out to meet the dominant portion from the other side. Assessment Practices and Procedures Office 20

23. Answer 24. Answer 25. Answer 26. Answer Is the measurement taken to the centre line of partitions between adjoining tenant spaces and to the centre line of partitions between tenant spaces and building common areas? Yes, the measurement is taken to the centre line of partitions between adjoining office area(s) or store area(s), building common area(s) and the building common area being measured. Building common area is measured just like office or store area in determining usable area. Are mezzanines measured by the standard? All floor space in a building is measured, including mezzanines. The purpose of the standard is to measure the actual square feet contained in the building. The usefulness of a particular space is not addressed by the standard, and is better left for lease negotiations between landlord and tenant. Varying lease rates are common in the market using such criteria as location on the floor, proximity to the elevator lobby, windows, views, heights in the building, and the usefulness of a particular space. Does the standard measure space in belowground floors? Yes, except for those areas specifically excluded by the standard, such as parking areas. Is gross building area an appropriate way to measure a single occupant building? The standard is a systematic method for measuring office buildings, and should be used in its entirety for each building. Its purpose is to provide a common and agreed-upon basis for comparing lease rates, building efficiencies, operating costs and other relevant data. For example, gross building area is used within the industry primarily to determine Assessment Practices and Procedures Office 21

construction costs or building value. Usable area is often used to determine cleaning costs and space efficiencies. 27. Answer 28. Answer 29. Answer Single occupant buildings will often need to be compared to multi-occupant buildings and, in these cases, building rentable area is the recommended measurement to use. Gross building area would be an appropriate method in determining lease rate only if the parties agree. Each part of the standard has its own use and needs to be applied regardless of the number of occupants. Does the standard provide for the measurement of warehouse or industrial space? Does it cover a shopping centre or strip mall? No, the standard is intended to apply specifically to the measurement of office buildings. A method for measuring store area in office buildings is contained in the standard. No provision is currently made for measuring any other types of buildings. Does BOMA certify space measurement firms or instruments? Neither BOMA nor the American National Standards Institute (ANSI) certifies, approves, or endorses any space measurement firm or measurement device. Is it appropriate to treat Corporation Capital Tax (CCT) as an expense when calculating the net operating income to the real estate? The CCT is a tax on the corporation, not on the real estate owned by the corporation. CCT varies widely depending on the corporation, its investments and its financing structure. Because the CCT is unique to the corporation, it would not be appropriate to treat it as an expense in calculating the net operating income to the real estate. Assessment Practices and Procedures Office 22

APPENDIX B: OCCUPANCY DESCRIPTIONS Foreword Determination of office building occupancies according to class of building or space within a mixed-use property with similar amenities is subjective since buildings in each class will exhibit a number of the characteristics but not necessarily all. It will be important to ensure that the approach taken to determine the occupancy for office properties within regions is consistently applied for the competitive market set. Code Size Age Building Systems 1800 Class D Office Average one to two storeys Varies considerably but most are older properties. No elevator HVAC and utilities do not meet modern standards. Design and Materials Example Typically wood frame or concrete block construction Poor to average quality finishing. Limited or no entrance lobby or reception area. Assessment Practices and Procedures Office 23

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Code Size Age Building Systems Design and Materials Example 1801 Class C Office Varies from 1 to 10 storeys. Rentable area of most buildings varies from 10,000 square feet to 100,000 square feet. Varies, but typically older buildings in urban centres Elevator access, HVAC Good quality design, common foyer area, tenant improvements are functional and are not often upgraded in older buildings Assessment Practices and Procedures Office 25

Code 1802 Class B Office Size Average 15 floors, 110,000 square feet Age Average age 1965 Building Systems Mechanical, HVAC and utilities meet current tenant requirements Design and Materials High quality design; more use of brick and concrete and less glass Tenant improvements are mid to high quality and are updated regularly. Assessment Practices and Procedures Office 26

Example Code 1803 Class A Office Size Average 25 floors, 275,000 square feet Age Average age 1981 Building Systems Mechanical, HVAC and utilities meet current and anticipated future tenant requirements Assessment Practices and Procedures Office 27

Design and Materials Example (e.g. telecomm infrastructure) High quality design and materials; extensive use of glass Tenant improvements are high quality and updated regularly. Older buildings remain competitive with newer product Assessment Practices and Procedures Office 28

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