Trends Facing Capital and Debt Markets in 2016 1 Real Estate Forum - PowerPoint PPT Presentation

Trends Facing Capital and Debt Markets in 2016

1 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Canadian Economic Prospects Quarterly Real GDP Growth CIBC Economic Forecast 2011 2012 2013 2014E 2015E 2016E 8% Canada 6% Real GDP ($2007 Bn) 3.0 1.9 2.0 2.4 1.1 2.1 Core CPI (Y/Y) 1.7 1.7 1.2 1.8 2.2 2.1 4% Unemployment Rate (%) 7.5 7.3 7.1 6.9 6.9 6.8 2% 0% (2%) (4%) (6%) (8%) (10%) 1 3 1 3 1 3 1 3 1 3 1 3 1 3 1 3 1 3 1 3 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Bloomberg. Actual Projected

2 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Canadian Inflation, Interest Rate Targets and Foreign Exchange Historical and Forecast Core Inflation Historical and Forecast Monetary Policy 6% 3.0% 4% 2.0% 2% 1.0% 0% 0.0% Mar-07 Mar-09 Mar-11 Mar-13 Mar-15 Mar-07 Mar-09 Mar-11 Mar-13 Mar-15 Actual Projected BoC Overnight Rate - Actual BoC Overnight Rate - Projected Historical and Forecast C$/U.S.$ Exchange Rate 1.10 1.00 0.90 0.80 0.70 Mar-07 Mar-09 Mar-11 Mar-13 Mar-15 FX Rate FX Rate - Projected Parity

3 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Corporate Lending Bank Debt Market Activity by Bank Debt Market Activity by Bank Debt Market Activity 1 Segment 2 Purpose 3 (2010 – Q3 2015) (YTD Q3: 2013, 2014, 2015) (YTD Q3 2015) $240 $199 $110 Project $210 Other $96 Volume (C$ Billions) Volume (C$ Billions) $161 $191 Finance LBO 0.7% $143 $81 1.2% 0.2% $166 M&A 7.1% $106 $38 $29 $24 $24 $21 $18 $19 $14 $13 $8 $4 $3 < $100 $100 - $250 $250 - $500 $500 Million - > $1 Billion 2010 2011 2012 2013 2014 2013 2014 2015 Refinancing Million Million Million $1 Billion YTD YTD YTD 90.7% 2013 2014 2015 2015 is on pace to surpass 2014, Substantial bank market capacity Market volume continues to be which is the busiest year on exists for strong borrowers and dominated by refinancing activity 4 record well structured transactions 1 Source: CIBC internal database. Deals closed from January 1, 2010 to September 30, 2015. 2 Source: CIBC internal database. Deals closed during YTD Q3 from January 1, 2013 to September 30, 2015. 3 Source: Bloomberg. January 1, 2015 to September 30, 2015. 4 Refinancing activity includes new money not categorized into M&A, Project Finance, Other, or LBO.

4 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 10-Year Government of Canada Bond Yield Last 20 Years Last 24 Months 3.0% 10.0% 8.0% 2.5% 6.0% 2.0% 4.0% 1.5% 2.0% 1.0% - Nov-13 May-14 Nov-14 May-15 1995 1999 2003 2007 2011 2015 Source: Bloomberg.

5 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Mortgage Spreads Commercial Mortgage Coupons Near All- Commercial Mortgage Spreads Time Lows Mortgage Spread (LHS) Spread as a % of Coupon (LHS) Mortgage Spread (LHS) BBB Spread (LHS) Mortgage Coupon (RHS) Mortgage Spread Over BBB (RHS)

6 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Real Estate Unsecured Debt Offerings (C$ Billions) 6.0 30 25 24 5.0 23 25 Issuance Volume (C$ BN) (# of Transactions) 4.0 20 15 15 3.0 15 11 9 2.0 10 7 6 5 1.0 3 5 $1.2 $1.0 $0.3 0 $0.7 $1.2 $0.9 $2.2 $4.2 $5.5 $5.3 $2.9 0.0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2014 YTD 2015 YTD Source: CIBC Internal Database.

7 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Real Estate Sector – Unsecured Debt Maturity Profile Allied Properties REIT Artis REIT 3,500 Brookfield Office Properties Brookfield Residential Properties Inc Canadian REIT Choice Properties LP Choice Properties REIT Cominar REIT 3,000 Crombie REIT CT REIT Dream Office REIT First Capital Realty Amount Oustandning (C$MM) 2,525 Granite REIT H&R REIT Kimco Realty Morguard Corp 2,300 2,300 2,500 RioCan REIT SmartREIT Ventas Canada Finance 1,850 2,000 1,675 1,500 1,500 1,150 1,050 1,000 765 660 500 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

8 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 2015 CMBS and First Mortgage Bond Activity (C$ Millions) CMBS Issuance First Mortgage Bonds CMBS Issuance

9 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Interest Rate Forecasts Bank Interest Rate Forecasts — GoC Yields GoC Yield Curve Interest Rate Forecasts - End of 2015 4.0 2-year 5-year 10-year 30-year Current (November 12, 2015) BMO 0.67% 1.03% 1.70% 2.39% 1-Year Ago (November 13, 2014) CIBC 0.55% 0.90% 1.60% 2.35% Average Forecast - End of Calendar 2015 3.0 RBC 0.65% 1.00% 1.75% 2.45% Average Forecast - End of Calendar 2016 BNS 0.75% 1.10% 1.75% 2.40% TD 0.50% 0.85% 1.55% 2.25% Yield (%) Average 0.62% 0.98% 1.67% 2.37% 2.39% 2.0 2.34% Interest Rate Forecasts - End of 2016 1.71% 2-year 5-year 10-year 30-year 1.31% 1.0 BMO 1.02% 1.37% 2.02% 2.62% 1.03% CIBC 1.10% 1.55% 2.45% 2.75% 0.65% RBC 1.60% 2.10% 2.60% 3.05% BNS 1.60% 2.10% 2.35% 2.80% 0.0 - 5 10 15 20 25 30 TD 0.90% 1.50% 2.05% 2.70% Term to Maturity (years) Average 1.24% 1.72% 2.29% 2.78%

10 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Real Estate Market Cycles IPOS Privatizations Privatizations Privatizations IPOS IPOS Privatiz. Valuation Levels Public Markets Property Markets for Portfolios IPOs 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Asset Migration

11 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 REIT Sector Relative Performance Source: FactSet.

12 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Price-to-AFFO Trends 20.0x High 18.8x Post Credit Crisis 18.0x High: 17.1x 16.0x 14.0x Avg. 13.4x 12.7x 12.0x 10.0x 8.0x Low: 7.0x Low 7.0x 6.0x 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: CIBC Equity Research.

13 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Premium/(Discount)-to-NAV Trends 20% Post Credit Crisis High: 9.2% 10% 0% Current: Avg. (2.2%) (12.3%) (10%) (20%) Year End 2014: (10.1%) (30%) Low: (35.5%) (40%) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: CIBC Equity Research.

14 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Relative Pricing (Cap Rate vs Bond Yield) at Quarter End: 2006 – 2014 Top = National Cap Rate Widest Spread: Tightest 2015 Q3 4.76% Spread: Spread: 1.81% 8.0% 4.48% 6.0% 4.0% 2.0% Bottom = GoC 10 Yr. Bond Yield - 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bloomberg, CBRE.

15 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Real Estate Equity Offerings by Year (C$ millions) $7,186 $5,574 $5,029 $4,695 $3,789 $3,422 $3,229 $2,523 $2,691 $1,833 $1,028 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 2015 Common Equity Preferred Shares Convertible Debentures To Source: CIBC Internal Database.

16 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Historical Real Estate Transaction Volumes (C$ Billions) $16.7 B $16.0 $14.4 B $14.1 B $14.0 $12.0 $10.5 B $10.4 B $9.1 B $10.0 $8.1 B $8.0 $6.0 $4.2 B $4.0 $2.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 YTD Public Private Institutional Other Source: CIBC Internal Database.

17 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 Commercial Real Estate Cap Rate Trends 8.5% 8.5% 8.0% 8.0% 7.5% 7.5% 7.0% 7.0% 6.5% 6.5% 6.0% 6.0% 5.5% 5.5% 5.0% 5.0% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 2007 2008 2009 2010 2011 2012 2013 2014 2015 Toronto Montreal Ottawa Calgary Vancouver Halifax Source: CBRE.

18 Real Estate Forum Session B4 Trends Facing Capital and Debt Markets in 2016 YTD 2015 Trades by Purchaser Type YTD 2015 Trades by Product Type Institution Multi-Family 23% 28% Retail 20% Hotel 5% Advisor Public 7% 49% Industrial 12% Private Office 21% 35% Source: CIBC Internal Database.