COLLIERS REAL ESTATE REVIEW

COLLIERS REAL ESTATE REVIEW

EDMONTON INVESTMENT

Transaction Volumes: National ( > $10 Million) 25.0 Rolling 12-mo. Total Quarterly Vol. 36% Drop 20.0 Total Volume (Billions) 15.0 10.0 5.0 0.0 Q1 '07 Q1 '08 Q1 '09 Q1 '10 Q1 '11 Q1 '12 Q1 '13 Q1 '14

2014 Investment Highlights: Edmonton Demand Supply Available Debt Sales Volume Capitalization Rates

Greater Edmonton Capitalization Rates 11.00% 10.00% 9.00% 8.00% 7.00% Industrial Suburban Office Downtown Office Retail 6.00% 5.00% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 F

Total Investment Sales: Edmonton (Sales > $1M) $4.5 $4.0 $3.96 $3.5 $3.35 Total Value (Billions) $3.0 $2.5 $2.0 $1.83 $1.81 $2.35 $2.53 $2.69 $2.44 Sobeys Retail $1.5 $1.0 $0.86 $0.83 $1.00 $1.22 $0.98 Office ING Industrial $0.5 $0.45 Land $0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Investment Sales: Office (Sales > $1M) $ Value Avg. $/SF $1,200 $350 Total Value (millions) $1,000 $800 $600 $400 23 34 32 16 $300 $250 $200 $150 $100 $200 $50 $0 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 26 Average Price Per Square Foot ($/SF) 14

Investment Sales: Retail (Sales > $1M) $ Value Sobeys Avg. $/SF $800 $450 $700 $600 $500 $400 $300 $200 $100 $400 $350 $300 $250 $200 $150 $100 $50 $0 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total Value (millions) Average Price Per Square Foot ($/SF)

Investment Sales: Industrial (Sales > $1M) $ Value ING Avg. $/SF $1,200 $180 $1,000 $800 $600 $400 $200 $160 $140 $120 $100 $80 $60 $40 $20 $0 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total Value (millions) Average Price Per Square Foot ($/SF)

Greater Edmonton Land Sales (Sales > $1M) Total Value Avg. $/acre $2,000 $160 $1,800 $140 Total Value (Millions) $1,600 $1,400 $1,200 $1,000 $800 157 254 280 276 $120 $100 $80 $60 Average Price Per Acre (Thousands) $600 $400 99 132 $40 $200 $20 $- 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $-

Market Indicators: Office Property Name Property Address Twin Atria Building 4999 98 Avenue Leasable Area (SF) 356,066 Year Constructed 1982 Sale Price $94,000,000 Unit Value (PSF) $264.00 Sale Date Vendor Purchaser 6-Dec-14 Twin Equities Inc. PFS Office One Inc. Capitalization Rate 7.53%

Market Indicators: Retail Property Name Property Address Century Park 2303 111 Street Leasable Area (SF) 86,429 Year Constructed 2003 Sale Price $43,200,000 Unit Value (PSF) $499.83 Sale Date Vendor Purchaser 26-Sep-14 Century Park Holdings Ltd. I.G. Investment Management Capitalization Rate 5.37%

Market Indicators: Industrial Property Name Property Address Edmonton Light Industrial Portfolio 11641 151 Street; 14760 116 Avenue; 11606 149 Street; 15004 116 Avenue; 11615 149 Street; 9409 41 Avenue Leasable Area (SF) 343,928 Year Constructed 1973 Sale Price $46,775,000 Unit Value (PSF) $136.00 Sale Date Vendor Purchaser 20-Nov-14 No. 352 Cathedral Ventures Ltd. Edmonton Light Industrial Portfolio Inc. Capitalization Rate 6.63%

Market Indicators: Land Property Name Keswick Lands Property Address 1304 170 Street SW Area 80 Acres Sale Price $24,800,000 Unit Value $310,000 per acre Sale Date 9-Jun-14 Vendor Judicial Sale Purchaser Beaverbrook Developments Inc.

The Future: Predictions Did you know: Economists have predicted NINE out of the last five recessions?

The Future: Predictions Demand Supply Available Debt Sales Volume Capitalization Rates

Outlook: Predictions Historical price of oil since the creation of OPEC adjusted for inflation

Outlook: Predictions 14.0% 10-Year Government of Canada Bond Yield 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

85 and older 80 to 84 75 to 79 70 to 74 65 to 69 60 to 64 55 to 59 50 to 54 45 to 49 40 to 44 35 to 39 30 to 34 Edmonton (36) Alberta (36) Canada (40.1) US (37.3) 25 to 29 20 to 24 15 to 19 10 to 14 5 to 9 0 to 4 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

EDMONTON MULTIFAMILY

The Pearl 36 Stories 128Units Fox Towers 66 Stories 311 Units Ultima 32 Stories 199 Units Jasper House 36 Stories 260 Units Symphony 27 Stories 143 Units Edgewater 56 Stories 420 Units J22 13 Stories 207 Units Mayfair North 16 Stories 237 Units Hendrix 29 Stories 260 Units Condo Rental

Multifamily Vacancy 5% 4% 4.5% 4.2% 3.3% 3% 2.4% 2% 1.5% 1.7% 1.4% 1.7% 1% 0% 2007 2008 2009 2010 2011 2012 2013 2014 Source: CMHC

In-Migration 100 Thousands 90 80 70 60 50 40 81,195 Edmonton In-Migration 46.2% International 41.7% Interprovincial 30 20 10 32,507 12.1% Intraprovincial 0 2010 2011 2012 2013 2014 Total Net Migration Edmonton Total Net Migration Alberta

Multifamily Rental Rates $1,200 $1,131 Top 6 - Rate Growth $1,000 $936 $943 $958 $990 $1,053 7.8% Edmonton Calgary 7.8% 7.1% Regina 5.3% $800 Saskatoon 4.7% Winnipeg 4.5% $600 Toronto 3.1% $400 2009 2010 2011 2012 2013 2014

Multifamily Unit Price $160.00 $140.00 $135k Thousands $120.00 $100.00 $80.00 $116k Previous High NEW Record $60.00 $40.00 $20.00 $0.00 2007 2008 2009 2010 2011 2012 2013 2014

Multifamily Sales Volume $400 Millions $364 Million BUILDINGS $200 $364 $26 Million RA7 LAND $0 $26 2010 2011 2012 2013 2014

Multifamily CAP Rates High-Rise 5.00% - 5.50% Low Rise New 5.45% - 5.65% Low Rise Existing 5.25% - 6.25%

Notable Transactions Nevada Place 34 Nevada Place St. Albert 173 Units 5.45% Cap Rate Vantage at Callaghan North 2332 Bowen Wynd, SW Edmonton 69 Units 5.5% Cap Rate $15,500,000 ($224,782/Unit) Windermere Village 3715 Whitelaw Lane, SW Edmonton 126 Units 5.66% Cap Rate $28,500,000 ($226,190/Unit) Blue Quill Point 11615 28Ave, NW Edmonton 156 Units $23,244,000 ($149,000/Unit)

Multifamily 2015 Vacancy Will inevitably increase Rental rates Rates will likely pull back slightly for newer product going forward Incentives Apartment Starts Proposed developments will slow, smaller infill projects Potentially lower construction costs as the market cools Condo Starts Several units coming in Urban and Suburban markets Volume Demand will stay strong due to the incredibly low interest rates Legislation changes to height of wood frame construction Cap Rates Upward pressure on cap rates, new developments

88/Barrel

EDMONTON OFFICE

National Vacancy 12% 10% 10.43% 8.72% 8% 6% 4% 2% 0% Vancouver Edmonton Calgary Toronto Ottawa Montreal Canada

Market Highlights: 2014 Q1 Q2 Q3 Q4 Vacancy Net Absorption New Construction Rental Rates

Vacancy Rate: Edmonton 14% 12.6% 12% 10% 10.4% 9.5% 8.8% 8% 6% 4% 2% 0% '11 '12 13' 14' '11 '12 13' 14' '11 '12 13' 14' '11 '12 13' 14' Overall Edmonton 26,665,203 SF Financial DT 11,448,396 SF Government DT 5,808,163 SF Suburban 9,408,644 SF

Rental Rates: Financial Class A Average Rental Rates Average Operating Costs & Taxes $50 $40 $30 $20 $10 $18.50 $22.00 $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Vacancy Rate: Suburban 28% 24% 22.91% 20% 16% 16.63% 13.86% 17.53% 16.0% 12% 10.56% 8% 4% 4.64% 6.15% 0% '11 '12 13 14 '11 '12 13 14 '11 '12 13 14 '11 '12 13 14 '11 '12 13 14 '11 '12 13 14 '11 '12 13 14 '11 '12 13 14 118 Avenue 124 Street 149 Street Eastgate Southside and South Henday Whyte Avenue West End Sherwood Park

Rental Rates: Suburban Class A Average Rental Rates Average Operating Costs & Taxes $50 $40 $30 $20 $10 $18.50 $22.00 $11.95 $24.50 $- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Significant Transactions: Downtown Area Leased (SF) Type 33,369 New 400,000 New 15,177 New 11,123 New 430,000 New 27,650 New 60,000 New/ Announced for 2016 480,000 New

Significant Transactions: Suburban Area Leased (SF) Type Submarket 70,000± New West End 40,000± New Southside 28,000± New West End 25,000± New 124 th Street 17,000± New Southside 83,000± New Southside 19,000± Expansion Eastgate 25,000± New West End 50,000± Expansion Eastgate 22,000± New South Henday

Edmonton Market: Oil Oil Price Effect is Indirect Revenues of architectural, engineering, construction, etc. industries supported by oil sands investment Oil sands investment reduces with lower oil prices $140.00 $130.00 $120.00 $110.00 WTI Price, End of Quarter Quarterly Absorption 600,000 400,000 200,000 Oil Prices not Historically Correlated with Absorption Job growth is most important factor for absorption Job growth is driven by demand for professional services, business investment, GDP growth, consumer spending, etc. $100.00 $90.00 $80.00 $70.00 $60.00 $50.00 $40.00 Q4-05 Q4-06 Q4-07 Q4-08 Q4-09 Q4-10 Q4-11 Q4-12 Q4-13 0 (200,000) (400,000) (600,000) (800,000)

Edmonton Market: Oil Prolonged Low Prices Could be Problematic Revenues & job growth reduced in oil-related industries But Current Oil Price Environment may not Persist Global demand for oil will eventually rebound High cost oil production will likely decrease Geopolitical factors and price speculation also at play

Edmonton Skyline: Changes

New Product: Suburban Increased Supply Higher Parking Ratios Efficient Op. Cost Better Access

Flight to Quality Older Buildings Vacancy 30.00% New Buildings Vacancy 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2007 2008 2009 2010 2011 2012 2013 2014 Impending Addition of High Quality Inventory 60 acres of south side land purchases dedicated to development Developments are contractually obligated to commence in 2015 Long Term Shift to Quality Employee demands, operating cost savings, declining rent

Building Improvements Higher Class A Standards Not just Aesthetic but efficient upgrades Retain Tenants Tenant Experience

Office Outlook: 2015 DOWNTOWN Vacancy Rates Absorption Supply SUBURBAN Vacancy Rates Absorption Supply

EDMONTON INDUSTRIAL

2014 Market Highlights: National 12% 10% 8% Vacancy Rate 6% 4% National Vacancy Rate 4.0% 2% 0% 11.6% 5.4% 3.8% 5.1% 4.0% 3.9% 3.9% 3.0% 3.8% Halifax Ottawa Calgary Saskatoon Montréal Toronto Vancouver Edmonton Winnipeg

2014 Market Highlights: Greater Edmonton Q1 Q2 Q3 Q4 Vacancy Net Absorption New Construction Rental Rates

Historical Performance: Edmonton 4 6% 3 5% New Construction / Absorption Millions (SF) 2 1 0-1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 4% 3% 2% Vacancy (%) -2 1% -3 0% New Construction (SF) Absorption (SF) Vacancy Rate

Vacancy Rate: Edmonton 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 2.82% Northwest Southeast Northeast Central 2010 4.54% 3.98% 2.32% 1.29% 2011 4.92% 2.07% 0.79% 1.81% 2012 4.16% 2.49% 3.46% 1.92% 2013 3.64% 3.31% 4.33% 2.08% 2014 2.82% 4.35% 8.94% 0.15% 4.35% 8.94% 0.15%

Vacancy Rate: Surrounding Markets 5% 4% 3% 2% 1% 1.74% 0.80% 0.65% 1.20% 0% Leduc/Nisku St. Albert Sherwood Park Acheson 2010 1.83% 1.07% 1.48% 1.92% 2011 2.56% 0.99% 1.96% 1.83% 2012 3.92% 0.77% 1.81% 3.49% 2013 4.59% 0.61% 0.66% 0.30% 2014 1.74% 0.80% 0.65% 1.20%

Building Sales: Greater Edmonton Building Sales (Millions) ING Portfolio $1,200 $1,000 Total Value Millions $800 $600 $582 $400 $200 $0 $333 $334 $626 $334 $404 $474 $599 $515 $913 $646 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Land Sales: Greater Edmonton 1,400 Industrial Land $400 1,200 $350 1,000 $300 Area (acres) 800 600 400 $250 $200 $150 $100 Value (millions) 200 $50 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Area (Acres) 693 1,024 816 1,170 401 192 445 531 595 581 816 Value (Millions) $80 $147 $217 $321 $188 $68 $192 $211 $285 $274 $357 $0

Notable Leases: Greater Edmonton Tenant Area (SF) Type Submarket Shell 242,000 Office/Warehouse Southeast Edmonton 149,800 & 120,400 Warehouse/Distribution Northwest Edmonton 111,920 Office/Warehouse Northwest Edmonton 58,393 Shop Southeast Edmonton 44,248 Office/Warehouse Acheson 23,400 Shop Leduc

2014 New Developments: Edmonton Project Developer Buildings Area (SF) Horizon Business Park Building C 178,250 Northport Business Park Buildings A & B 392,700 Northwest Business Park Building 5 169,400 Commerce West Business Park Building 1 49,600 Fourell Business Park Building 1 35,600 McKenzie IV McKenzie Holdings Building 1 134,020 Cornerstone Business Park Building B 166,040 TOTAL 1.13 Million

2015 New Developments: Edmonton Project Developer Buildings Area (SF) Cityview Business Park Buildings 8, 10 & 12 292,500 Cornerstone Business Park Building C 179,430 Pylypow Crossroads Centre Building 1 65,200 Horizon Business Park Buildings B & D 450,049 Northport Business Park Buildings A & B 406,980 Yellowhead Crossing Phase II Buildings 4 & 5 406,725 Northwest Business Park Buildings 7A & 7B 395,450 Sunwapta Business Centre Buildings A, B & C 407,000 Henday Industrial Park Buildings 1, 2 & 3 614,900 Southport Crossing Buildings 1 & 2 238,250 TOTAL 3.22 Million

Notable Land Sales: Submarket Zoning Subdivision Site Area (Acres) Sale Price Unit Price ($/Acre) Sale Date Northwest IB/IM Sunwapta Industrial 21.97 Acres $ 12,000,000 $546,199 January 2014 Northeast IM Clover Bar 30.79 Acres $12,000,000 $389,737 February 2014 Nisku BP Nisku 21.77 Acres $11,672,100 $536,155 August 2014 Southeast IB Davies Industrial East 2.86 Acres $2,700,000 $944,055 June 2014 Southeast EIB Summerside 2.99 Acres $2,272,400 $760,000 September 2014 Northwest IB Wilson Industrial 2.00 Acres $1,950,000 $975,000 August 2014 Southeast IM Davies Industrial East 1.65 Acres $1,850,000 $1,121,212 October 2014 Northwest IM Edmiston Industrial 1.23 Acres $1,180,800 $960,000 January 2014

Notable Building Sales: 1. 9421 17 Avenue, Edmonton (Owner/User) Warehouse Zoned IB Subdivision: Research & Development Park Vendor: RVI Research Ventures Inc. Purchaser: Syncrude Canada Ltd. Building Area: 78,795 SF on 6.57 Acres Sale Price: $18,766,666 ($238.17 PSF) Sale Date: August 10, 2014 2. 9412 51 Avenue, Edmonton (Investment) Single Tenant Warehouse Zoned IB Subdivision: Coronet Industrial Vendor: Arnico Holdings (Alberta) Inc. Purchaser: Majestic Realty Ltd. Building Area: 23,044 SF on 2.51 Acres Sale Price: $3,825,000 ($165.98 PSF) Sale Date: March 6, 2014

Notable Building Sales: 3. 703/05 21 Avenue, Nisku (Owner/User) Warehouse Zoned IND Vendor: P & O Assets Ltd. Purchaser: Alco Energy Industries Ltd. Building Area: 44,732 SF on 7.17 Acres Sale Price: $8,500,000 ($190.02 PSF) Sale Date: March 15, 2014 4. 7009 45 Street, Leduc (Owner/User) Single Tenant Shop/Warehouse Zoned M1 Vendor: Nabors Drilling Ltd. Purchaser: Fiegel Investments Ltd. Building Area: 23,400 SF on 9.59 Acres Sale Price: $8,000,000 ($341.88 PSF) Sale Date: July 22, 2014

Notable Building Sales: 5. 5830 87A Street, Edmonton (Owner/User) Warehouse Zoned IH/IM Subdivision: Davies West Industrial Vendor: Falvo Electrical Supply Ltd. Purchaser: 1388133 Alberta Inc. Building Area: 33,680 SF on 2.58 Acres Sale Price: $5,200,000 ($154.39 PSF) Sale Date: June 5, 2014 6. 7030 51 Avenue, Edmonton (Owner/User) Shop/Warehouse Zoned IM Subdivision: Roper Industrial Vendor: Aluma Systems Inc. Purchaser: Alco Energy Industries Ltd. Building Area: 14,200 SF on 5.21 Acres Sale Price: $4,000,000 ($281.69 PSF) Sale Date: August 6, 2014

Energy Headlines (March 2015, Source: Edmonton Journal) (September 2014, Source: Edmonton Journal) (March, 2015, Source: Financial Times) oilpatch (January 26, 2015, Source: Calgary Herald) (February 10, 2015, Source: Edmonton Journal) Newalta (February 17, 2015, Source: Edmonton Journal) (March 2015, Source: Financial Post) oilsands mine (February 25, 2015, Source: Edmonton Journal) (March 14, 2015, Source: Edmonton Journal) (March 10, 2015, Source: Edmonton Journal) (March 2015, Source: Financial Times)

Announcements: Major Players 1,000 jobs cut and 2015 capital expenditures budget down $1 billion to $6.2-6.8 billion from $7.2-7.8 billion. Moving ahead with Foster Creek and Christina Lake developments but cutting $2.5 billion from their 2015 budget which is now adjusted to $1.8 - $2 billion. Deferred $1.45 billion Kirby North project and slashed 2015 budget from $8.6 billion to $6.2 billion a decrease of $2.4 billion. Approved $2 billion capital expenditure budget. Reduced 2015 budget by 75% from $1.2 billion down to $305 million. Capital expenditures budget down $1 billion from $3.4 billion to $2.4 billion. Cut 2015 operating and development costs by $400 million in addition to a 20% reduction in capital expenditures budget for the year.

Total US Oil Production:

US Crude Inventories:

US Shale Oil Production:

West Texas Intermediate $43.88 (USD) Western Canadian Select $30.15 (USD)

The Future: Predictions Vacancy Rental Rates Absorption New Supply

COLLIERS REAL ESTATE REVIEW