Cushman & Wakefield Ltd. · 2013. 3. 13. · Avro industrial portfolio of 62 industrial properties (3.4M sq ft) across Canada listed by RBC (23 properties or 1.75M sq ft in Montreal)

Cushman & Wakefield Ltd. 33 Yonge Street, Suite 1000

Toronto, ON M6E 1S9

(514) 862 0611 Tel

(514) 359 2613 Fax

www.cushmanwakefield.com

Argentina • Australia • Austria • Belgium • Brazil • Canada • Channel Islands • Chile • China • Czech Republic • Denmark • England • Finland • France • Germany • Greece • Hong Kong •

Hungary • India • Ireland • Israel • Italy • Japan • Korea • Kuwait • Latvia • Lebanon • Lithuania • Luxembourg • Malaysia • Mexico • The Netherlands • New Zealand • Northern Ireland •

Norway • Poland • Portugal • Romania • Russia • Scotland • Singapore • Slovakia • South Africa • Spain • Sweden • Switzerland • Thailand • Turkey • United Arab Emirates • United States

March 13, 2013

Elad Canada Inc.

5001 Yonge Street Suite 1405, PO Box 150 Toronto, Ontario M2N 6P6

RE: Appraisal of Real Properties in 2 Appraisal Reports at December 31, 2012

1. 1, 3, 4 Westmount Square (Commercial), Westmount QC - C&W File ID 12-614-900030-B and

2. Update Appraisal for le Nordelec, 1751 Richardson Street, 1655 Richardson Street, 1301-1303 de

Montmorency and 1260-1280 de Conde, Montreal, QC – C&W File ID 13-614-900026

This letter is to confirm that the above noted appraisal reports were prepared at the request of Elad Canada Inc.

for the purpose of financial reporting under IFRS and to assist in internal matters. We hereby agree and consent

to the quoting of, referring to and/or including this appraisal report in Elad Canada Inc.'s annual report for the

period ended December 31, 2012, as such annual report may be amended from time to time.

Please note that the reports are subject to the Assumptions and Limiting Conditions, in addition to any in the

reports. Also, the value opinions reported are qualified by certain assumptions, limiting conditions, certifications,

and definitions, which are set forth in the reports.

Respectfully submitted,

CUSHMAN & WAKEFIELD LTD.

Rocco Vecera, E.A., AACI, B. Comm.

Vice President Valuation & Advisory - Quebec [email protected] Phone Office Direct 514.841.3952 Fax 514.841.3955

APPRAISAL OF

1, 3, 4 Westmount Square (Commercial)

Westmount, QC

As at December 31, 2012

Prepared For:

Elad Canada Operations Inc.

5001 Yonge Street, Suite 1405

Toronto, ON M2N 6P6

Prepared By:

Cushman & Wakefield Ltd.

Valuation & Advisory

1001 de Maisonneuve Blvd. West, Suite 900

Montreal, QC H3A 3C8

C&W File ID: 12-614-900030-B

CONFIDENTIAL


VALUATION & ADVISORY

1001 DE MAISONNEUVE BLVD. WEST, SUITE 900

MONTREAL, QC H3A 3C8

1, 3, 4 Westmount Square (Commercial) Westmount, QC

Cushman & Wakefield Ltd. 1001 de Maisonneuve Blvd. West, Suite 900


(514) 841 3940 Tel

(514) 841 3955 Fax


March 7, 2013

Mr. Oren Barak Elad Canada Operations Inc. 5001 Yonge Street Suite 1405, PO Box 150 Toronto, Ontario M2N 6P6

Re: Appraisal of Real Property in a Short Narrative Format Report

1, 3, 4 Westmount Square (Commercial), Westmount, QC

C&W File ID: 12-614-900030-B

Dear Mr. Barak:

Cushman & Wakefield Ltd. is pleased to transmit this Update Appraisal in a Short Narrative Format Report,

estimating the current market value of the above referenced subject property.

This report has been prepared at the request of Elad Canada Operations Inc. for the purpose of issuing financial

statements under the International Accounting Standards (IAS) and International Financial Reporting Standards

(IFRS).

The value opinions reported are qualified by certain assumptions, limiting conditions, certifications, and

definitions, which are set forth in the report. We particularly call your attention to the following extraordinary

assumptions and hypothetical conditions:

Extraordinary Assumptions : It is considered an extraordinary assumption in this report that select interior

inspections were carried out between March 2011 and March 2013. It is noted that

both interior and exterior building inspections for the residential properties were

also carried out by Cushman & Wakefield Ltd. personnel and or representative

thereof during the months of November to December 2010 and previously in 2009,

2008 and during March and April 2007 (as per the original appraisal report - C & W

File No. 07-2219). It is understood from representatives of the owner that both the

building conditions and features (including size) have not materially changed during

this time period. Therefore, it is an inherent assumption in forming our opinion of

value for the subject properties that the building conditions or features have not

materially changed since the date of original inspection. Based on our previous

inspections and more recently, the select interior inspections were considered

sufficient to describe the real estate, develop an opinion of highest and best use,

and make meaningful comparisons with other market data. Detailed inspections to

report building condition has not been carried out. Based on the foregoing, this

appraisal includes certain extraordinary assumptions.

Hypothetical Conditions : This appraisal does not employ any hypothetical conditions.


VALUATION & ADVISORY

1001 DE MAISONNEUVE BLVD. WEST, SUITE 900

MONTREAL, QC H3A 3C8

The subject property is an income producing commercial property. The most likely buyer for this asset on either a

single asset basis or portfolio basis would be investors, either pension funds, privately held or publicly traded

corporations (incl. REITs). This appraisal employs the Income Approach and the Discounted Cash Flow (DCF)

approach as the primary valuation methodologies. The Cost Approach and Direct Sales Comparison Approaches

were not used as they are not considered relevant for this type of property.

MMMMARKET ARKET ARKET ARKET VVVVALUEALUEALUEALUE

As a result of this analysis, the current market value of the subject property, subject to the assumptions, limiting

conditions, certifications and definitions contained herein, as at December 31, 2012, is estimated as follows:

S E V E N T Y - O N E M I L L I O N F I V E H U N D R E D T H O U S A N D D O L L A R S

$ 7 1 , 5 0 0 , 0 0 0

This letter is invalid as an opinion of value if detached from the report, which contains the text, exhibits, and

Addenda.



Rocco Vecera, B.Comm., E.A., AACI

Vice President

[email protected]

(514) 841-3952 Office Direct

(514) 841-3955 Fax

1, 3, 4 WESTMOUNT SQUARE, WESTMOUNT, QC TABLE OF CONTENTS I

TABLETABLETABLETABLE OFOFOFOF CONTENTSCONTENTSCONTENTSCONTENTS TABLE OF CONTENTSTABLE OF CONTENTSTABLE OF CONTENTSTABLE OF CONTENTS -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- IIII INVESTMENT OVERVIEWINVESTMENT OVERVIEWINVESTMENT OVERVIEWINVESTMENT OVERVIEW ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 2222

GENERAL MARKET CONDITIONS ---------------------------------------------------------------------------------------------------- 2

INTRODUCTIONINTRODUCTIONINTRODUCTIONINTRODUCTION ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ 6666

PURPOSE AND INTENDED USE OF THIS APPRAISAL ------------------------------------------------------------------------- 6

MARKET ANALYSISMARKET ANALYSISMARKET ANALYSISMARKET ANALYSIS ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 10101010

CANADA - ECONOMIC OVERVIEW -------------------------------------------------------------------------------------------------- 10

MONTREAL OVERVIEW AND REAL ESTATE MARKETS ---------------------------------------------------------------------- 14

HIGHEST AND BEST USEHIGHEST AND BEST USEHIGHEST AND BEST USEHIGHEST AND BEST USE -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 17171717

INTRODUCTION --------------------------------------------------------------------------------------------------------------------------- 17

SUMMARY AND CONCLUSION ------------------------------------------------------------------------------------------------------- 17

PROPERTY VALUATIONPROPERTY VALUATIONPROPERTY VALUATIONPROPERTY VALUATION ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 18181818

ADDENDA CONTENTSADDENDA CONTENTSADDENDA CONTENTSADDENDA CONTENTS ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ 32323232

ADDENDUM A: ASSUMPTIONS AND LIMITING CONDITIONS ------------------------------------------------------------ 33

ADDENDUM B: CERTIFICATION -------------------------------------------------------------------------------------------------- 36

ADDENDUM C: GLOSSARY OF TERMS AND DEFINITIONS -------------------------------------------------------------- 38

ADDENDUM D: LAND BUILDING VALUE SPLITS DECEMBER 31, 2012 ----------------------------------------------- 40

1, 3, 4 WESTMOUNT SQUARE, WESTMOUNT, QC INTRODUCTION 2

IIIIN VES TMEN T N VES TMEN T N VES TMEN T N VES TMEN T OOOOV ERVIE WV ERVIE WV ERVIE WV ERVIE W

G E N E R A L M A R K E T C O N D I T I O N S

CAP RATE COMPRESSION

Cap rates compressed further in 2012 (albeit at a slower pace) as compared to 2011 and are expected to stabilize into 2013

Altus InSite 4Q 2012 Survey

Downtown AA Office Montreal – 5.80% Midtown A Office Montreal – 6.60% Multi-Res Suburban Montreal – 5.30% Multi-Tenant Industrial Montreal – 6.80%

Colliers 4Q 2012 Cap Rate Report

Downtown A Office Montreal – 5.75% – 6.50% Multi-Family High Rise Montreal – 5.00% - 6.00% Multi-Tenant Industrial Montreal Class B – 7.00% - 7.75% CBRE 3Q 2012 Canadian Cap Rate Survey

Downtown Office Montreal Class A – 5.50% – 6.00% Apartment Montreal High Rise A – 4.75% - 5.75% Apartment Montreal High Rise B – 5.75% - 6.00% Apartment Montreal Low Rise A – 6.00% - 6.50% Industrial Montreal Class B – 7.50% - 8.75% Industrial Montreal Class A – 6.25% - 6.75%


CONTINUED RECORD ACTIVITY IN ALL ASSET CLASSES

2012 was another record year

Ivanhoe-Cambridge purchases 50% interest in 4 regional malls from Commerz for

$508M (Place Ste-Foy and Galeries Rive Nord in Quebec for $224.5M)

Olympic Village apartment and office complex sold by Elad to Cap REIT for $176.5M

La Cite apartment complex sold to Oxford for $231.8M

Cominar REIT acquires 68 office and industrial properties in Ontario and Quebec

from GE for $697M (Quebec portion was 53 properties for $304M)

1600-1616 Rene-Levesque West sold by Standard Life to Bentall for $76M (3 other

properties across Canada were also sold by Standard Life)

Technoparc St-Laurent office portfolio sold by GE to LaSalle Investment

Management for $55M

Promenades de l’Outaouais shopping centre sold by Canpro to Oxford for $220M

Hart distribution centre in Laval sold to HOOPP for $14M

Colabar warehouse and food storage facility sold on a sale-leaseback basis to

Novaho pension fund for $33M

5445 de Gaspe loft industrial building acquired by Allied REIT for $34.5M

Prestige industrial portfolio of 4 properties acquired by Bentall for $$24M

Hotel de la Montagne downtown acquired for assembly and redevelopment for $39M


RECENT INDICATIONS SUGGEST RECORD ACTIVITY WILL CONTINUE IN ALL ASSET CLASSES THROUGHOUT 2013 BUT AT A SLOWER PACE

Dundee REIT to acquired KingSett Canada wide industrial portfolio of 5.3M sq ft for

$498.5M (Quebec accounts for 1.4M sq ft)

Avro industrial portfolio of 62 industrial properties (3.4M sq ft) across Canada listed

by RBC (23 properties or 1.75M sq ft in Montreal)

Pure Industrial REIT to acquire 7 properties across Canada of 1.5M sq ft for $169.2M

(one property in Quebec City)

St-Laurent industrial park of 25 properties listed by CBRE for Elad in the $50M’s

price range

Pending sales of two Econo-Malls retail properties in Quebec City listed by Brookfield

– Galeries Charlesbourg (254,415 sq ft) for $33M and Galeries de la Carnardiere

(178,675 sq ft)

Pending acquisition by RioCan and Tanger of two outlet retail centres in Bromont

and St-Saveur for $94.7M

New hotel and condo project to be built by Broccolini/Karttera for sale by CBRE

across from the Bell Centre

Announced acquisition to close Feb. 2013 by Partners REIT of 5 new retail

properties in Montreal totalling 286,500 sq ft at a price of $78.5M


MARKETS FUNDAMENTALS ARE EITHER STABLE OR IMPROVING

Office

Market

There are several new downtown projects under construction and firmly proposed – Altoria

(condos and office) of 230,000 sf, Deloitte office tower of 514,000 sf and Rio Tinto Alcan project

of 660,000 sf. In addition, there are at least 5 other office projects downtown that can be built to

accommodate a major lead tenant.

MONTREAL Total City - Office Statistics

All Classes

Q4 2010 Q4 2011

Year End

2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

Total Vacant Space (in Sq.Ft.) 7,585,313 6,518,157 6,518,157 6,636,015 6,428,054 6,289,334 6,370,184

Overall Vacancy Rate (in %) 9.2% 7.9% 7.9% 8.0% 7.8% 7.6% 7.7%

New Supply (in Sq.Ft.) 83,500 0 110,000 0 0 195,258 0

Current Sq.Ft. Under Construction 0 0 0 0 200,381 330,000 330,000

Direct Vacancy Rate 8.3% 7.3% 7.3% 7.4% 6.9% 6.6% 6.7%

Average Net Asking Rent ($ per Sq.Ft.) $13.86 $14.42 $14.42 $14.27 $14.42 $14.56 n.a.

Total Gross Rent ($ per Sq.Ft.) $27.17 $27.73 $27.73 $27.58 $27.73 $27.87 n.a.

Retail

Market

Vacancy rates in the regional malls are generally at very low levels (1%-3%). Community centres,

big box/new format and grocery anchored strip centres are typically in the 2% - 7% range.

Downtown vacancy rates in the enclosed malls have not fluctuated significantly in the last year.

Condo

Market

Downtown and midtown markets are healthy – most condos are priced in the $350 - $500 psf

range with more upscale/luxury projects (i.e. Le Roc Fleuri, Ritz Carlton, Altitude, Altoria at

between $600 and $1,000 psf). More moderate priced condo projects (under $350 psf) are selling

out more quickly.


IIIIN TRODUC TIONN TRODUC TIONN TRODUC TIONN TRODUC TION

P U R P O S E A N D I N T E N D E D U S E O F T H I S A P P R A I S A L The purpose of this appraisal is to estimate the market value of the subject property as at December 31, 2012. It

is our understanding that the intended use of the appraisal is for issuing financial statements under the

International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS).

PPPPROPERTY ROPERTY ROPERTY ROPERTY IIIINDENTIFICATIONNDENTIFICATIONNDENTIFICATIONNDENTIFICATION

The subject property is municipally addressed and legally described as follows:

MUNICIPAL ADDRESS CITY LEGAL DESCRIPTION

1,3,4 Westmount Square Westmount Exclusive lots 3069538, 3069541, 3069543, 3069544, 3069547, 3069549 &

3090286, & part of Common lots 3069537, 3069545, 3069548, Cadastre of Quebec

OOOOWNERSHIPWNERSHIPWNERSHIPWNERSHIP

Acquired by 9093-8119 Quebec Inc. (c/o Elad) in March 2001 for a price of $85,350,000.

EEEEXTRAORDINARY XTRAORDINARY XTRAORDINARY XTRAORDINARY AAAASSUMPTIONS AND SSUMPTIONS AND SSUMPTIONS AND SSUMPTIONS AND LLLL IMITING IMITING IMITING IMITING CCCCONDITIONSONDITIONSONDITIONSONDITIONS

A review of available tenant roll, budgets and income and expense lease documents with respect to the existing

tenancies was carried out in conjunction with this report. In addition, financial information has been provided with

respect to realty taxes and operating costs for 2009-12 and forecast 2013 operating budgets. The valuation

assumes that each of the tenants was paying rent in accordance with this information, as set out in the report.

With respect to building condition, we have reported market value on the basis that the properties represent a

good condition (“Good Condition”) such that there are no major near term repairs required beyond a one year

time horizon. As such, we have allowed for budgeted capital costs and major repairs required over the one year

period following the respective valuation dates. Typically, a purchaser will deduct these capital expenditures from

value, but we have reported the Appraisal conclusion on the basis of a Good Condition. There is existing debt

mortgaging for some or the entire portfolio, but the Appraisal has been made on the basis that the debt has been

repaid and that the properties are free and clear of debt.

The report is also subject to the Assumptions and Limiting Conditions contained in the Appendix, in addition to

specific assumptions that may be stated in the body of the report.

EEEEFFECTIVE FFECTIVE FFECTIVE FFECTIVE DDDDATE OF ATE OF ATE OF ATE OF AAAAPPRAISALPPRAISALPPRAISALPPRAISAL

The effective date of the appraisal is December 31, 2012.

PPPPROPERTY ROPERTY ROPERTY ROPERTY RRRR IGHTS IGHTS IGHTS IGHTS AAAAPPRAISEDPPRAISEDPPRAISEDPPRAISED

The legal interest appraised is the fee simple estate, subject to existing leases - defined as absolute ownership

unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental

powers of taxation, eminent domain, police power and escheat.


DDDDEFINITION OF EFINITION OF EFINITION OF EFINITION OF MMMMARKET ARKET ARKET ARKET VVVVALUEALUEALUEALUE

The Canadian Uniform Standards of Professional Appraisal Practice (The Standards) adopted by the Appraisal

Institute of Canada define Market Value as:

The most probable price which a property should bring in a competitive and open market

under all conditions requisite to a fair sale, the buyer and seller each acting prudently and

knowledgeably, and assuming the price is not affected by undue stimulus.

Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller

to buyer under conditions whereby:

Buyer and seller are typically motivated;

Both parties are well informed or well advised and acting in their own best interests;

A reasonable time is allowed for exposure in the market;

Payment is made in cash in Canadian dollars or in terms of financial arrangements comparable thereto; and

The price represents the normal consideration for the property sold, unaffected by special or creative

financing or sales concessions granted by anyone associated with the sale.

PPPPORTFOLIO ORTFOLIO ORTFOLIO ORTFOLIO VVVVALUEALUEALUEALUE

Market Value of a Portfolio assumed to sell to a single entity.

EEEEXPOSURE XPOSURE XPOSURE XPOSURE TTTT IMEIMEIMEIME

Exposure time is always presumed to precede the effective date of the appraisal. It may be defined as:

The estimated length of time the property interest being appraised would have been offered on the

market prior to the hypothetical consummation of a sale at market value on the effective date of the

appraisal. It is a retrospective estimate based upon an analysis of past events assuming a

competitive and open market.

Based on discussions with various investors and real estate brokers familiar with assets such as the subject, and

based on an analysis of the comparable sales utilized in this valuation, it is our estimate that the subject would

require a six to twelve month exposure period.


SSSS COPE OF THE COPE OF THE COPE OF THE COPE OF THE AAAAPPRAISALPPRAISALPPRAISALPPRAISAL

In forming our opinion as to the market value of the subjects as of the valuation date, we have relied on

information which is detailed in this report, to the extent deemed appropriate, and carried out the following specific

functions:

Although interior and exterior building inspections of the property was carried out by Cushman and Wakefield

personnel and for representative thereof during the months of November 2010 and December 2010, and

previously in 2009, 2008 and 2007, select interior inspections were carried out between March 2011 and

January 2013. It is an inherent assumption in forming our opinion of value for the subject properties that the

building conditions have not materially changed since the date of original inspection. The inspections were

considered sufficient to describe the real estate, develop an opinion of highest and best use, and make

meaningful comparisons with other market data. A detailed inspection to report building condition has not

been carried out.

Observed and unqualified remaining outstanding deficiencies have not been discussed within the report.

However, since we are not qualified to comment on the structural integrity of the building, we have merely

assumed for valuation purposes that the property offers a good condition. Cost of remedy, over and above

those deducted herein (i.e. as budgeted one year forward), should be deducted from the value conclusions.

The portfolio is managed by Cogir Management Inc. (Cogir). Relevant documents and reports were made

available from this source.

We have reviewed rent rolls as at October 1, 2012. We have relied on this information as the basis of our

appraisal.

Our vacancy rate forecasts are based on typical market expectations approximating the current vacancy level

but tempered by performance at particular nodes and the subject properties’ historical vacancies.

Operating costs are normally based on a historical review of costs for the properties. We have reviewed

historical income statements that were provided to us by Metcap and Cogir. Actuals for 2008-2011 and

Forecasts / Budgets for 2012 and 2013 were available from Cogir.

Excluded from our estimate of operating costs or any unusual elements that relate to the owner / investor and

which may vary indiscriminately from building to building, including:

• Capital expenses

• Head office administration, etc.

Repairs and maintenance are estimated on the basis that the buildings are in a good condition.

We have carried out a survey of the local markets to discover and analyze sales data involving apartment

buildings, so that a perspective of relative capitalization rates can be applied.

We have analyzed and interpreted the particular investment characteristics and have applied an appropriate

rate of capitalization based on this analysis, coupled with the supporting and comparative analysis of the

sales data.

The appraisal is based on the subject property being in good condition where the standard of the condition is

able to maintain the current cash flow.


We have based our income forecast on the grounds of a typical investor’s attitude and consider it to be

appropriate.

We have analyzed the potential gross revenue in terms of market rates, legal rents and existing contracts

based on sourced documents mentioned herein.

Operating cost elements are based on sourced documents provided by Cogir and tempered by our

experience.

While we have checked for reasonability, further checks of an accounting nature are required for certainty.

Considered information with respect to sales, listings and leases, at or about the valuation date, of properties

considered similar to the subjects, where we have significant knowledge of such sales, listings and leases to

assess them as being relevant to our opinion, as set out herein. While we believe our review to be reasonably

complete, we cannot warrant that we have:

i) Uncovered and assessed every real property transaction at or about the valuation date that might be

said to bear on the determination of the market value of the subjects, or

ii) fully discerned the motives behind the sales, listings and lease information considered in our analysis,

such that our weighting of said information is without subjectivity.

Viewed the comparable properties used in this valuation.

Reviewed land use regulations, in particular the Official Plan, as amended, and the Zoning By-Law, as

amended, applicable to the subject properties.

Examined the possibility of making any significant changes to the subject in terms of existing uses, land

severance and/or additional development of the sites.

Ascertained the highest and best use of the property, and

• Examined market conditions and analyzed their potential effect on the property.

1, 3, 4 WESTMOUNT SQUARE, WESTMOUNT, QC MARKET ANALYSIS 10

CANADIAN ECONOMIC INDICATORS

Q4f

2012 Q/Q

Change

GDP 1.2%

Unemployment 7.3%

Employment Growth

1.9%

Retail Sales Growth

3.3%

Housing Starts (000’s)

198

MMMM A RKE T A RKE T A RKE T A RKE T AAAAN AL YS ISN AL YS ISN AL YS ISN AL YS IS

C A N A D A - E C O N O M I C O V E R V I E W

THE THE THE THE CCCCANADIAN ANADIAN ANADIAN ANADIAN EEEECONOMYCONOMYCONOMYCONOMY

With a population of 34.7 million and an annual population growth rate estimated at 0.9 percent, the Canadian economy is the 8th largest in the world. Geographically, Canada is the second largest country in the world at almost 10.0 million km2 (or 3.9 million square miles) and has the longest coastline and longest border with another country, the United States.

Known to be rich in natural resources, Canada has vast stores of iron ore, nickel, zinc, copper, gold, lead, diamonds, silver, coal, petroleum, natural gas, and is a leading producer of hydropower. Notably, with 180.0 billion barrels of proven oil reserves, Canada has the second largest reserve in the world, next to Saudi Arabia.

OOOOVERALL VERALL VERALL VERALL TTTTRENDS RENDS RENDS RENDS

The Canadian economy stood stronger than expected in the first quarter of 2011, driven by sentiments of an improved U.S. outlook, an increased global appetite for Canadian commodities, as well as an improvement in the rate of unemployment. While economic growth forecasts in the first quarter were raised to reflect the initial positive outlook, the economy has since shifted gears from a recovery to a mature expansion phase. The adjustment is due to, in part, by the effects of fiscal restraint combined with the weight of the strong Canadian dollar exerted on export-heavy regions. Consequently, national forecasts by TD and BMO have since revised Canada’s economic growth forecast in the second quarter, dropping it from 3.0% to 2.8% to account for the new projections.

Focusing on real estate, investment volume was robust and leasing markets were healthy in the second quarter of 2011. With confidence levels high, investment activity held strong in all sectors, and is on track to reach beyond 2010 total sales volume of $18.9 Billion. What’s more, the CMHC reported that the country’s rental market risk for purpose-built inventory is forecasted to remain below average due to a healthy demand for rental accommodation combined with tight supply conditions.

FFFFUTURE UTURE UTURE UTURE CCCCONSIDERATIONSONSIDERATIONSONSIDERATIONSONSIDERATIONS

Increase in business spending on capital goods and non-residential construction is expected to be the main

growth driver for Canadian economy in 2013. In addition, as the U.S. economy strengthens and an eventual

recovery of the European market, Canadian exports are expected to pick up by the end of 2013. However, the

housing market is expected to moderate in 2013, due to an anticipated higher interest rate and tighter mortgage

insurance rules in the second half of 2013.


• After growing by 2.6 percent in 2011, the Canadian

economy is expected to cool down with a GDP

growth rate of 2.1 percent in 2012 and 1.8 percent in

2013, given a more challenging external

environment. A better economic outlook is

anticipated for 2014, as demand for global export

strengthens.

• Western Canada is anticipated to remain as the

growth driver for the Canadian economy over the

next two years, thanks to an elevated demand in

the commodity market and solid capital

investments in the natural resources sector.

• The Seasonally Adjusted Annualized Rate (SAAR) is

estimated at 198,000 units in the fourth quarter,

down from 222,000 units in the third quarter, while

lowering 2012 average annual housing starts to

215,000 units. Moreover, given the prospect of rising

interest rates in the second half of 2013, total

housing starts in Canada are expected to decline to

190,000 units in 2013 and to 180,000 units in 2014.

• The decline in housing starts can be viewed as

beneficial to moderating potential risks of over-

supply in the Canadian housing market, especially

in the multi-unit segment.

• Despite the headwinds from Europe and the U.S.,

the Canadian labour market continued to generate

jobs in 2012, albeit at a slower pace at 1.1 percent.

BMO Capital Markets forecasts employment growth

in Canada to further slow down to 1.0 percent in

2013, while improve to 1.2 percent in 2014.

• Based on the most recent Statistics Canada Labor

Force Survey, employment in natural resources,

health care and transportation/warehousing sectors

are expected to experience significant growth over

the next two years.

• Canadian retail sales rose for a fourth consecutive

month in October, up by 0.7 percent over September

to $39.4 billion, according to Statistics Canada. The

growth was primarily driven by increasing sales of

clothing and clothing accessories (+1.8 percent) and

motor vehicles and parts (+1.6 percent).

• TD Economics estimates retail sales growth to

average 3.3 percent in 2012, down from 4.1 percent

in 2011, primarily due to a record high household

debt level. With better job prospects in 2013 and

2014, retail sales are expected to improve.

-4%

-2%

0%

2%

4%

6%

2002 2004 2006 2008 2010 2012f 2014f

Canada USA

Real GDP Comparison

Source: Statistics Canada *Forecasts – BMO Capital Markets

0

50

100

150

200

250

2002 2004 2006 2008 2010 2012f 2014f

Canada Housing Starts

Source: Conference Board of Canada *Forecasts – BMO Capital Markets

(000’s)

0%

2%

4%

6%

8%

10%

-2%

-1%

0%

1%

2%

3%

2002 2004 2006 2008 2010 2012f 2014f

Employment Growth

Unemployment Rate

Labour Market – Employment & Unemployment Rate


-4%

-2%

0%

2%

4%

6%

8%

2002 2004 2006 2008 2010 2012f 2014f

Retail Sales Growth

Source: Statistics Canada

*Forecasts – TD Economics


QUEBEC ECONOMIC INDICATORS

2012f Y/Y

Change

GDP 1.3 %

Unemployment 7.9 %

Employment Growth

0.4 %

Retail Sales

0.9 %

Housing Starts (000’s)

46.5

Q U E B E C – E C O N O M I C O V E R V I E W

TTTTHE HE HE HE QQQQUEBEC UEBEC UEBEC UEBEC EEEECONOMYCONOMYCONOMYCONOMY

While the largest in surface area, Quebec

ranks second to Ontario in terms of

population. In 2011, Quebec’s population

reached 7.9 million, but was estimated to

grow to 8.1 million by year-end 2013

according to FP Markets. Over the last few

decades, the focus of the Quebec

economy has shifted from natural

resources to the services sector. High-tech

industries have become increasingly predominant as Montreal ranks third

among major cities in North America in terms of number of high-tech jobs

per capita. Over 80.0 percent of animation and special effects software

produced in the world is designed by companies in Montreal. In addition,

Quebec ranks 6th in the world in aerospace output, and one in 200

Quebecers works in the industry.

OOOOVERALL VERALL VERALL VERALL TTTTRENDSRENDSRENDSRENDS

The latest stats by Institut de la statistique du Quebec shows that monthly real GDP in Quebec had declined for

four of the first five months of 2012. Several disruptions contributed Quebec’s weakness so far this year, including

Rio Tinto’s six-month long labor disruption, renewed global uncertainties, and the tuition protest that has disrupted

an entire academic term in most of the province’s universities. As a result, BMO Capital Market forecasts annual

GDP growth in Quebec to slow to 1.3 percent for 2012, down from 1.7 percent last year. Nevertheless, there were

some modest job gains over the first three quarters of 2012, as year-over-year (y/y) employment growth in

September was at 0.8 percent. The information, culture and recreation sector experienced the largest job gains,

up by 19.7 percent y/y, offset by contractions in the utilities sector (-18.5 percent y/y) and in the forestry and

mining sector (-16.8 percent y/y). The unemployment rate in September was 8.0 percent, but is expected to drop

to 7.9 percent by the end of the year.

Retail sales in Quebec rose by 1.4 percent in August on a year-over-year basis, which was 130 bps lower than

the national average, according to Statistics Canada. The housing starts were trending at 42,500 units in

September (monthly SAAR1). Hence, based on the current pace of construction and the recent takeover of the

resale market, total annual starts in 2012 are projected at 46,500 units, down by 3.6 percent over last year’s total

starts. Moreover, housing starts in Quebec will likely decline by another 10.7 percent to 42,000 units in 2013

given the expected interest rise, based on BMO Capital Markets October forecast.

FFFFUTURE UTURE UTURE UTURE CCCCONSIDERATIONSONSIDERATIONSONSIDERATIONSONSIDERATIONS

The Quebec government is expected to have a budgetary surplus for fiscal 2013-2014, given higher mining

royalties and higher income taxes on top earners. In addition, the aerospace industry will remain strong over the

next few years with the recent order of Bombardier Aeronautics. Moreover, The Plan Nord (or Northern Plan) to

exploit the north’s resources (particularly mining) over the next 25 years is expected to drive considerable export

growth in the upcoming years.

1 Seasonally Adjusted Annual Rate

Source: BMO Capital Markets, TD Economics


-4%

-2%

0%

2%

4%

2001 2003 2005 2007 2009 2011 2013f

Canada Quebec

Real GDP Comparison


*Forecasts – BMO Capital Markets

0

9

18

27

36

45

54

63

2001 2003 2005 2007 2009 2011 2013f

Housing Starts


*Forecasts – BMO Capital Markets

• GDP growth in Quebec is projected to slow down to

1.3 percent this year, partly due to Rio Tinto’s labor

disruption that affected the province’s export activity.

In addition, months of student protests, headwinds of

a strong Canadian dollar and the uncertain political

environment all contributed to this year’s weakness.

• Modest improvement is expected in 2013, with GDP

growing at 1.4 percent. Greater advancement is

anticipated in 2014, given recoveries in export activity

and in the manufacturing sector.

• Quebec’ housing starts totaled 3,662 units in

September, down by 21.0 percent compared to the

same month last year. It was also the first monthly y/y

decrease since the start of 2012, primarily due to

decreases in Montreal (-29.0 percent y/y) and in

Trois-Rivieres (-62.0 percent y/y).

• Given global uncertainties and the slow economic

growth, housing starts in Quebec are expected to

decline by 3.6 percent over last year to 46,500 units

in 2012, and by another 10.7 percent to 42,000 units

in 2013.

• Quebec’s unemployment rate dropped slightly in

2011, but is forecast to rebound to 7.9 percent in

2012 and to 8.0 percent in 2013, due to recent

corporate announcements on layoffs and plant

closures across the province.

• Besides the pharmaceutical sector, job loss was also

severe in the manufacturing industry. Manufacturing

jobs in Quebec had shrunk by a quarter between

2004 and 2011, and continuous layoffs in the

manufacturing sector are going to take place later this

year and in 2013.

• Weak job growth and high household debt continued

to shatter consumer confidence in Quebec. The latest

retail trade data by Statistics Canada showed only

0.2 percent monthly growth in August and 1.4 percent

on a year-over-year basis.

• Given slow growth in the first three quarters of 2012,

retail sales in Quebec are forecast to grow by a

minimal 0.9 percent in 2012. However, with general

economic improvements expected in 2013, Quebec’s

retail sales growth may rise to 2.4 percent.

5%

6%

7%

8%

9%

10%

11%

-1%

0%

1%

2%

3%

4%

5%

2001 2003 2005 2007 2009 2011 2013f

Employment G rowth

Unemployment Rate

Labour Market – Employment & Unemployment Rate


-2%

0%

2%

4%

6%

8%

2001 2003 2005 2007 2009 2011 2013f

Retail Sales Growth

Source: Statistics Canada *TD Economics


M O N T R E A L O V E R V I E W A N D R E A L E S T A T E M A R K E T S

IIIINTRODUCTIONNTRODUCTIONNTRODUCTIONNTRODUCTION

Montreal is the largest city in the province of Quebec, the second-largest city in Canada and the seventh largest

in North America. This international city offers a diverse economic base and is known for its leadership within the

aerospace, technology and pharmaceutical manufacturing sectors. Montreal offers employers and residents a low

cost of living, top-quality public and private education, affordable housing and one of the safest living

environments in North America.

• Montreal’s Central Business District is the second most important commercial centre in Canada.

• Montreal is home to over 70 international governmental and non-governmental organizations, more than all

other Canadian cities combined.

• With 87 international financial centers, Montreal is one of the major locations of choice for international

organizations.

• According to a 2002 study published by KPMG, Montreal ranks first in the world among cities with 2 million

inhabitants or more in terms of the cost of setting up a business.

• Montreal’s cost of living ranks 25th out of 58 world-class cities.

• The Port of Montreal ranks first in Canada and second on the East Coast of North America for container

transport between Europe and North America.

Montreal has the highest location ranking in Canada for the clothing, aircraft, textiles, pharmaceuticals and

communication equipment manufacturing sectors.

MMMMONTREALONTREALONTREALONTREAL ’’’’S S S S LLLLOCATIONOCATIONOCATIONOCATION

Montreal is an international city that is easily accessible from anywhere in the world. Two airports serve Montreal:

Pierre-Elliott-Trudeau international and Mirabel (used almost exclusively for cargo flights).The border of the State

of New York is 20 miles from Montreal.

The Port of Montreal is a multipurpose port that provides for break-bulk, dry and liquid bulk cargo. This port is one

of the busiest inland ports in the world and a key transfer point for transatlantic cargo, handling 26 tonnes of

Cargo annually. Additionally, an efficient network of railways and first-rate highways lead to all parts of North

America. Montreal’s combined intermodal transport system is unmatched.


Travel Distance to Montreal

City Distance (Miles)

Albany 222

Baltimore 569

Boston 309

Buffalo 396

Chicago 847

Detroit 559

New York 379

Philadelphia 474

Toronto 337

Washington DC 602

MMMMONTREALONTREALONTREALONTREAL ’’’’S S S S EEEECONOMIC CONOMIC CONOMIC CONOMIC BBBBASEASEASEASE

The province of Quebec has a diverse economy and is among the world leaders within specialized industries

such as pharmaceutical, biotechnology, aerospace, and several high-tech sectors. On a continental level,

Montreal is the second largest in per capita employment in aerospace, third largest in biopharmaceuticals, and

fourth largest in information technology. Montreal is ranked number one in absolute employment in aircraft engine

manufacturing/maintenance and biopharmaceutical contract research.

Major industrial employers within the Metropolitan Montreal region are outlined in the table below:

Company # of Employees Industry

Mouvement Desjardins 36,436 Financial Services Hydro-Québec 19,416 Electric Utility Quebecor 14,752 Communications Bombardier 13,000 Aerospace CGI 13,000 Information Technology Abitibi Consolidated 12,500 Pulp & Paper City of Montreal 11,687 Government Government of Quebec 11,559 Government BCE / Bell Canada 10,101 Communications McGill University Health Centre 9,933 Health Care CHUM 9,930 Health Care CSDM 9,409 Education Government of Canada 9,306 Government University of Montreal 8,875 Education Air Canada 8,400 Transportation National Bank of Canada 8,243 Financial Services Alcan 8,000 Mining & Metals Coop Fédérée 7,590 Food Processing STCUM 7,255 Public Transportation Transcontinental 6,434 Communications IBM Canada 6,300 Information Technology CAE 6,000 Aerospace Loto-Québec 6,000 Gaming Pratt & Whitney 5,500 Aerospace UQAM 4,710 Education Source: Montreal International, 2003 and City of Montreal 2000-01


The strong base of employers in the aerospace, life sciences, telecommunication, information technology,

multimedia, e-commerce, transportation and logistics industries have created a sound foundation for Montreal’s

economy. Low operating costs, world-class infrastructure for new economy industries, favourable R&D tax

treatment, and the highest concentration of venture capital available in Canada are several reasons why

corporations choose Montreal as their location of choice.

PPPPOPULATION OPULATION OPULATION OPULATION FFFFORECASTORECASTORECASTORECAST

Montreal is Canada’s second largest city, behind Toronto. Montreal is ranked 15th among North American cities

by population. The estimated metropolitan area population is nearly 3.9 million representing a 12% increase over

the census 2001 population and is projected to grow to 4,165,000 by 2016 according to FP Markets – Canadian

Demographics 2011.

The population of Montreal is well educated. According to a study conducted by McGill University, greater

Montreal has the highest proportion of university students per capita in North America. The population in greater

Montreal ranks among the most educated in the world, with nearly one out of four workers holding a university

degree. Concordia University, McGill University, University of Montreal and the University of Quebec are just a

few of the many academic institutions located in Montreal.

The international aspects of Montreal create a bilingual workforce, while the presence of four world-class

universities and over 400 research centers provides an abundance of skilled workers. By joining forces, Greater

Montreal universities and private companies contribute to each other’s growth. Universities provide a young,

highly skilled workforce that is trained in the most recent technological advances, while companies provide funds

supporting testing grounds for new ideas.

RRRRECENT ECENT ECENT ECENT EEEEVENTSVENTSVENTSVENTS

The Canadian economy contracted for the first time in the second quarter of the year since the recession ended

in the middle of 2009 (GDP declined by 0.4%). This weakness is mainly due to the evolution of external trade.

The US credit rating downgrade and the European sovereign debt crisis combined with the fear of a recession in

the US and Europe has deteriorated the short term economic outlook. TD still forecasts a positive GDP growth for

the upcoming years (2.2% in 2011 and 1.9% in 2012).

The risks threatening this scenario are external factors. If the American and European authorities don’t manage to

overcome their financial issues, the world economy could be weaker than expected.

1, 3, 4 WESTMOUNT SQUARE, WESTMOUNT, QC HIGHEST AND BEST USE 17

HHHH IGHE ST AN D IGHE ST AN D IGHE ST AN D IGHE ST AN D BBBBES T ES T ES T ES T UUUUSESESESE

I N T R O D U C T I O N Fundamental to the concept of value is the principle of highest and best use which may be defined as that use of

land which is most likely to produce the greatest net return to land over a given period of time. Interpretation of

the foregoing includes the realization that, in addition to the property being physically adaptable for a specific use,

there must be a demand and such use must be legally permissible through government land use regulations.

The valuation for each of the subject properties is dependent upon the Highest and Best Use. We have included

our opinions of Highest and Best Use within each subject property valuation, as contained in this report. The

foundation of market value rests on the optimum or highest and best use. The optimum use estimate is a critical

element in the valuation process, as the highest value may not always be reflected in the existing use.

The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial

feasibility, and maximum profitability.

LLLLEGALEGALEGALEGAL

• The subject is a downtown Montreal retail and office property and is zoned and classified for existing uses.

PPPPHYSICAL HYSICAL HYSICAL HYSICAL AAAASPECTSSPECTSSPECTSSPECTS

• Overall, the property is considered to have good characteristics for a wide variety of uses.

• The property is constructed of steel and concrete.

• The subject property appears to have been well maintained.

• The subject property offers very good appeal.

FFFF INANCIAL INANCIAL INANCIAL INANCIAL FFFFEASIBILITYEASIBILITYEASIBILITYEASIBILITY

• Despite being in good condition, the subject property contractual income appears to be at about market rent

levels. The property appears well leased and benefits from high occupancy rates according to financial data

supplied to us. This data revealed consistent performance relative to the market. More specifically most of

the income analyzed appears consistent over the effective valuation dates when the rental market was

generally exhibiting signs of weakening, with lowering rents and increasing vacancy.

• Mortgage and financing debt is available at low cost, and product type is in scarce supply, especially on a

portfolio basis. There would appear to be upside for the portfolio as there appear to be upside to the

contractual rates.

S U M M A R Y A N D C O N C L U S I O N After consideration of the foregoing analysis regarding existing land use regulations and market conditions, we

have determined that the highest and best use of the property is its existing use. In addition the highest and best

use as if vacant would be its development as a mixed-use commercial and residential complex as permitted by

zoning and planning constraints.

1, 3, 4 WESTMOUNT SQUARE, WESTMOUNT, QC WESTMOUNT SQUARE, WESTMOUNT 18

PPPPR OPER T YR OPER T YR OPER T YR OPER T Y VVVV ALALALAL U ATI ONU ATI ONU ATI ONU ATI ON

WESTMOUNT SQUARE - Commercial

1, 3, 4 Westmount Square Westmount, Quebec


P R O P E R T Y D E S C R I P T I O N

General Property Data

Site Information

Building Description

&

M A R K E T O V E R V I E W

City Overview

Trade Area Characteristics (Retail)

and

Market Overview (Office)


GEN ER AL PR OP ER T Y D AT A

Address : 1,3,4 Westmount Square, Westmount, Quebec H3Z 2S6

Ownership : 100% owned by 9093-8119 Québec Inc. Acquired in March 2001 for $85,350,000 however this price included the two residential towers containing 225 apartments which are not the subject of this appraisal.

Tenure : Fee Simple estate subject to leasehold interest of occupational tenants.

Type : Mixed-use multi-storey suburban office & retail complex located on Westmount Square.

Legal Description : Exclusive lot numbers 3069538, 3069541, 3069543, 3069544, 3069545, 3069547, 3069548, 3069549 & 3090286, and part of Common lot 3069537, Cadastre of Quebec.

S I T E IN F OR M AT I ON

Area : Irregular site encompassing 73,292 square feet (6,808.98 square metres). Subject is part of larger site of 14,487.2 square metres which is shared with the two residential towers.

Parking : 550 parking stalls (1.7 spaces per 1,000 sq.ft. of GLA).

Access : Excellent – entrances to complex along Ste-Catherine, Woods, Greene Ave and de Maisonneuve Boulevard West. Also, the complex is internally connected to the underground tunnel network and the metro system (Atwater Metro station) as well as to the Place Alexis Nihon office, retail and apartment complex.

Visibility : Excellent visibility from adjoining roadways.

Expansion Potential : Fully developed, no expansion potential.

Zoning : Multiple uses.

BU IL D IN G DE SC R IPT IO N

Gross Leaseable Area : Component Area (sf) Base Rent (per annum)

Tower 1 (office) 195,013 $2,541,395

Tower 4 (office) 53,838 $870,870

Retail mall 80,268 $1,572,660

Parking Garage 550 stalls $817,712

Total 329,119 $5,802,637

Development History : Built in 1965, expanded and renovated in 1969, 1990 & 1993.

Physical Condition : Good condition, property appears well maintained. Capital expenditures are forecast to complete the parking garage repairs and common area upgrades.

Functional Layout : There are no significant functional problems associated with the facility.

Environmental Issues : Management indicated there were no significant environmental issues.

Highest and Best Use : As developed.

Comments : The property is a well maintained and functional office and retail complex supported by the two residential towers.


C I T Y OVER VI EW

The City of Westmount (which has de-merged from the new Montreal Mega-City) is encircled by the City of Montreal and lies

immediately west of the Downtown Core and just southwest of Mount Royal Mountain. The City of Westmount is a

predominantly residential community, with strategically located and very active commercial uses along arteries such as Ste-

Catherine St. West, Greene Avenue, Victoria Avenue and Sherbrooke St. West. Westmount is considered one of the most

exclusive residential communities on the Island of Montreal. According to the Financial Post-Canadian Demographics 2012,

the average household income in Westmont was $229,160, 199% higher than the average of $76,559 for the Census

Metropolitan Area of Montreal.

The City of Westmount is close to totally built-up and its growth is constrained by the City of Montreal limits. Many higher

density residential projects (mostly condominiums) were built in the mid to late 1980’s. However, the population of

Westmount itself remains virtually unchanged at approximated 22,148 (2012 estimate). The population of Westmount is

projected to remain stable over the next 3-5 year period.

Comments : Westmount is an exclusive and high-income residential community that is virtually fully built-up and in close proximity to Montreal’s financial core.

M AR K ET ST AT IST I C S

T R AD E AR E A C H AR AC T ER IC T IC S OF F IC E M AR K ET – Q 4 20 12

Population Westmount % Change Quebec Growth

% Change

2006 Estimate 20,494

2012 Estimate 22,148 6.96 6.02

2014 Projected 22,670 2.36 2.42

2017 Forecast 23,456 3.47 3.55

Westmount Quebec Canada

Households 9,317 3,468,691 13,987,134

Household Income $229,160 $71,152 $85,792

University Education Degree

71.9% 24.1% 26.0%

Dwellings Owned 50.5% 60.6% 68.9%

Mother Tongue French

19.4% 80.9% 20.5%

Source: Financial Post – Canadian Demographics 2012

Vacancy Rates Central

Area

Downtown

West

4Q 2012 6.3% 8.8%

4Q 2011 6.4% 7.6%

4Q 2010 8.0% 8.0%

4Q 2009 8.0% 8.7%

Office Market Barometers

Central

Area

Downtown

West

Average Class A Net Rental Rates - psf

$20.63 (up $1.00 psf)

$16.69 (down $0.18 psf)

Absorption 2012 Negative 83,000 sf

New Supply (2013-15) 744,000 sf (2 projects)

Source: Cushman & Wakefield - Office Leasing Group

Comments : The subject property enjoys a prestigious Westmount address and is in close proximity of all amenities associated with a central location. Market conditions which, had deteriorated in 2009, and have improving as there will be no new construction until 2013-15.


C A S H F L O W A N AL Y S I S

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CASH FL O W AS SU M PT I O N S

Revenue

Base Rent - As per lease contracts – reflects 1.5% growth per annum.

Market Rent - Ranges from $13.00 for Tower 1, $16.00-$17.00 for Tower 4 and $12.00 to $40.00 for retail mall.

Growth Factor - 2.0% per annum.

Tenant Term - 5-10 years except anchor tenants.

Recoveries - Recapture reflecting 111% for CAM and 99% for taxes – at full occupancy.

- Cam recharges also includes 15% administration fee.

- Similar to budget which estimates fees at 97% and 90% - after vacancy.

Vacancy - Based on 5% throughout term – plus 0.5% bad debt.

- Current overall vacancy is 6%.

Miscellaneous - Consist of only a nominal amount associated with the temporary leasing as well as sundry income.

Expenses

Rechargeable - Operating Costs CAM rate equates to $13.48 psf, up from $13.07 psf in 2012.

- Tax rate equates to $6.52 psf, up from $6.44 psf in 2012.

- Both rates deemed reasonable.

Management Fees - Based on 2.5%-3.0% of Effective Gross Income.

Other Non-Recoverable - Applied a 0.5% factor to offset any unforeseen costs going forward.

Tenant Allowance - Based on $15.00-$30.00 for new office tenants and $5.00-$10.00 for office renewals. Retail tenants were applied at rates of $10.00 for new tenants and $2.50 for renewals.

Leasing Commissions - Based on $4.00-$7.50 for new tenants and $1.00-$2.00 for renewals.

Tenant Retention - 75% renewal rate.

Lag Time - 2-4 months (office) and 3 months (retail).

5 yr 10 yr

Average NOI Growth per annum 0.8% 1.6%

Average CF Growth per annum 0.5% 3.3%

Comments : Market rates and occupancy costs are in line with comparable properties surveyed.


V AL U AT I O N

Yield Rate Analysis

Investment Features

Discounted Cash Flow Approach

Direct Capitalization Method

Final Value


Introduction

This section will give a broad based discussion of the investment market, particularly as it pertains to anticipated yield rates

both a National and local market. Thereafter, it will set out a list of comparables.

SALE NO. 1 2 3 4

1600 - 1616 Rene-Levesque W,

Montreal

7450 Galeries d'Anjou

Montreal


Montreal

8200 Decarie

Montreal

Date Sold Dec-12 Sep-12 Sep-12 Sep-12

Building Size (sf) 372,604 65,843 115,919 60,488

Total Price $76,000,000 $11,400,000 $17,980,000 $12,220,000

Interest Purchased 100% 100% 100% 100%

Price psf $204 $173 $155 $202

OCR 5.55% 6.37% 7.15% 6.40%

IRR 7.65% 6.50% 7.50% 5.00%

TCR 6.75% 6.25% 7.00% 6.00%

Purchaser Bentall Kennedy Cominar REIT Cominar REIT Cominar REIT

Comments

A two building Class B property sold by

Standard Life in addition to 3 other

properties across Canada. 99% leased with

Genivar as largest tenant.

Po rtfolio sale by GE to Cominar of 68

properties in Quebec and Ottawa. Pro perty

is 1985 built, 14% vacant.

Po rtfo lio sale by GE to Cominar of 68

properties in Quebec and Ottawa. Property

is 1987 built, 2% vacancy.

Portfolio sale by GE to Co minar o f 68

properties in Quebec and Ottawa. Pro perty


SALE NO. 5 6 7

8250 Decarie

Montreal

Technoparc St-Laurent

Montreal

615 Rene-Levesque West

Montreal

Date Sold Sep-12 Jul-12 Jan-12

Building Size (sf) 83,535 341,024 81,255

Total Price $20,130,000 $55,000,000 $13,700,000

Interest Purchased 100% 100% 100%

Price psf $241 $161 $169

OCR 4.75% 7.70% 6.85%

IRR 5.50% 8.25% 8.25%

TCR 5.00% 7.75% 7.75%

Purchaser Cominar REIT LaSalle Investment Management Alf id Group

CommentsPortfolio sale by GE to Co minar o f 68

pro perties in Quebec and Ottawa. Property

is 1988 built, 96.5% leased.

Portfo lio o f 11 R&D buildings (87% leased)

near the PE Trudeau airport. High quality

o ffice and lab buildings built between 1997

and 2002. Going in yield is 5.4%.

Class B building 1961 built 15 storeys with

ground floor retail - downtown southeast

lo cation, 97% leased to smaller tenants.

Market Findings

The comparable sales indicate IRR’s of between 5.50% and 8.25%. The best comparable is considered to be the recent

Dec 2012 sale of 1600-1616 René-Lévesque West, a Class B office building, at an IRR of 7.65%.


IN VE ST M EN T F E AT U R E S

Ownership Structure : The property tenure is a Fee Simple (Freehold) Interest, subject to the leasehold occupation of the tenants.

Current ownership is 100% of the asset, however it shares ownership of the complex with two residential towers.

We have assumed free and clear title.

Physical Characteristics

: Major office / retail asset serving Westmount.

Two office towers and a single level retail mall.

Substantial on-site parking underground.

Structurally in good physical condition.

Functionally considered a reasonably good design.

No expansion potential.

Locational Feature

: Downtown West office market.

Strong local economy.

Located in upscale and well established community.

Limited new competition coming on stream.

Tenant Structure

: Secure long term tenants.

Primarily service tenants.

Small food court performs well.

Local high end fashion tenancy.

Cash Flow

: Average rents at or slightly below market levels.

Vacancy at about 6 percent.

NOI growth is considered reasonable at 1.6% per annum over 10 years.

Retail/Investment Market Fundamentals

: Current market volatile.

More real estate trades occurring.

General view that market have improved.


VAL U E BY T H E D I SC OU N T ED CAS H FL O W APP R O AC H

Ranking Liquidity/Risk Ownership Physical Location Cash Flow/

Tenant Issue

AAA Excellent Liquidity with Very Limited Risk

AA Very Good Liquidity with Very Limited Risk

Well located and connected.

A Good Liquidity with Limited Risk

Landmark mixed use complex in good condition.

Low growth, little Cash Flow risk.

B Good Liquidity but with Some Risk

100% ownership but shared ownership.

C Fair Liquidity with Risk

D Limited Liquidity with Extensive Risk

E Almost no Liquidity due to Significant Risk

DCF VAL U E M AT R I X

6.00%

7.50% $29,218,599

6.50% $42,171,600

10 $71,390,199

0.00%

$71,390,199

VALUATION MATRIX

Discount Rate

7.00% 7.25% 7.50% 7.75% 8.00%

6.00% $77,854,226 $76,389,868 $74,959,946 $73,563,546 $72,199,781

6.25% $75,909,369 $74,489,873 $73,103,678 $71,749,899 $70,427,682

6.50% $74,114,116 $72,736,032 $71,390,199 $70,075,764 $68,791,899

6.75% $72,451,845 $71,112,105 $69,803,645 $68,525,639 $67,277,285

7.00% $70,908,308 $69,604,172 $68,330,416 $67,086,237 $65,870,857

PRICE PER SQ.FT. MATRIX

Discount Rate GLA 329,119 sq,ft,

7.00% 7.25% 7.50% 7.75% 8.00%

6.00% $237 $232 $228 $224 $219

6.25% $231 $226 $222 $218 $214

6.50% $225 $221 $217 $213 $209

6.75% $220 $216 $212 $208 $204

7.00% $215 $211 $208 $204 $200

Year 1 Year 2 Year 3 Year 4 Year 5

6.9% 7.1% 7.0% 7.2% 7.2%

5.8% 5.2% 5.1% 6.0% 6.5%

DCF Value

CASHFLOW YIELD

Terminal Cap.

Rate

Terminal Cap. Rate

Hold (years)

Disposition Cost

Value Conclusion

NOI YIELD

Terminal Cap.

Rate

Overall Capitalization Rate

PV of Cashflow

DISCOUNTED CASH FLOW METHOD

PV of Reversion

Discount Rate

Findings

In conclusion, it is our opinion assuming an 7.50% Discount Rate and 6.50% Reversionary Capitalization Rate the market value of the subject property as of the effective date was $71,390,199.

Rounded to $71,400,000

Features Analyzed

Ownership Property ownership structure, freehold/leasehold title, (can never be ranked above “A”).

Physical Type of asset & quality, condition and capital requirements.

Location Macro and Micro locational characteristic.

Cash Flow/ Tenant Issues

Security of income – nature of revenue, expiries and tenant structure.

Base Rate (2012) 7.00% to 8.00%

Adjustment -

Ownership +25

Physical -

Location -25

Cash Flow/Tenant Issues -

Indicated Rate 7.00% to 8.00%

Say 7.50%


VAL U E BY T H E D IR EC T CAP IT AL IZ AT I ON M ET H OD

BENCHMARK COMPARISON Capitalization Rate Range 6.00% to 7.00%

Characteristics Benchmark Asset Ranking Comments

AAA AA+ AA A+ A B+

Ownership Structure Wholly owned freehold development

with no financing or other

ownerships encumbrances.

Inferior, shares site and ownership

with residential towers. B C+ C D+ D E

AAA AA+ AA A+ A B+

Physical

Characteristics

Modern A quality Suburban facility

offering tenants similar amenities as

major competitors.

Class ‘A’ facility offering above

average amenities. Mixed use office

and retail with parking.

B C+ C D+ D E

AAA AA+ AA A+ A B+

Market & Locational

Attributes

Located in business district with

fundamentals that display a sound

supply and demand balance.

Well situated in Central Business

District. B C+ C D+ D E

AAA AA+ AA A+ A B+

Tenant Profile & Cash

Flow Characteristics

Good tenant profile with market level

vacancy, reasonable expiries and

rents at market.

Moderate growth potential due to uplift

in cash flow. B C+ C D+ D E

AAA AA+ AA A+ A B+

NOI Growth NOI growth reflects stability at

inflationary rate.

Steady growth over term. B C+ C D+ D E

2012 Base Rate 6.00% to 7.00% Comments

Ownership +25 Shares complex

Physical -25 Good condition, landmark property.

Locational -25 Well located.

Performance & Cash Flow -25 No tenant issue, well leased.

Cash Flow Growth - Good growth.

Indicated Range 5.50% to 6.50%

Indicated Capitalization Rate

Based on the various characteristics

set out above we are of the opinion

that the appropriate capitalization rate

to be applied to the stabilized income

is 6.00%


NOR M AL IZ ED ST AT EM E N T OF OPER AT I ON S – YE AR ON E

POTENTIAL GROSS REVENUE

Base Rental Revenue $4,955,167

Percentage Rent $182,812

Recoveries

Realty Taxes $2,124,346

C.A.M. Costs (excluding amortization) $3,787,802

Total Recoveries $5,912,148

Miscellaneous Income $949,141

Total Vacancy Allowance and Credit Loss ($652,438)

Effective Rental Income $11,346,830

Operating Expenses

Operating Costs $3,793,920


Non Recoverables $621,530

Management Fees $303,623

Total Operating Expenses $6,860,820

Net Operating Income $4,486,010

Overall Capitalization Rate 6.00%

Capitalized Value $74,766,833

($3,135,423)

Indicated Value $71,631,411

ROUNDED TO $71,600,000

Less: Present Value of Future leasing costs,

capital expenditures less amortization benefit


F IN AL VAL U E

Two methods of value indicated the following rounded results.

Discounted Cash Flow Method $71,400,000

Direct Capitalization Method $71,600,000

The Discounted Cash Flow Analysis serves as a valid approach when estimating market value, particularly in cases

where sharp or unusual change is expected to occur in the earnings ability of the property. It also has a capacity to take

into consideration any abnormal vacancy factors, lease renewals or anticipated changes in the economy. This approach

also displayed a number of strengths and weakness. Probably the biggest area of concern is the number of assumptions

necessary, although if these assumptions are reasonable, this approach enables us to determine the probable

performance of the property over the years.

While the use of Direct Capitalization might appear to be rather simplistic, this method is often preferred and is quite

often relied upon in the final decision process. Real estate continues to trade within a very narrow band of capitalization

rates to the point where sale prices can be fairly well predicted if all major factors influencing value are properly

accounted for in the selection of the rate.

For the purpose of this report we have used the Direct Capitalization Method to support the value derived from the

Discounted Cash Flow Method.

The difference in the values indicated by the two approaches is negligible. Therefore, based on all factors which come

to bear on the future performance of the property, more particularly those examined in this report, it is our considered

opinion that the prospective market value of Westmount Square Commercial as of December 31, 2012 is:

Seventy One Million Five Hundred Thousand Dollars

$71,500,000

1, 3, 4 WESTMOUNT SQUARE, WESTMOUNT, QC ADDENDA 32

A D D E N D A C O N T E N T S

ADDENDUM A:ADDENDUM A:ADDENDUM A:ADDENDUM A: ASSUMPTIONS AND LIMIASSUMPTIONS AND LIMIASSUMPTIONS AND LIMIASSUMPTIONS AND LIMITING CONDITIONSTING CONDITIONSTING CONDITIONSTING CONDITIONS

ADDENDUM B:ADDENDUM B:ADDENDUM B:ADDENDUM B: CERTIFICATIONCERTIFICATIONCERTIFICATIONCERTIFICATION

ADDENDUM C:ADDENDUM C:ADDENDUM C:ADDENDUM C: GLOSSARY OF GLOSSARY OF GLOSSARY OF GLOSSARY OF TERMS AND DEFINITIONTERMS AND DEFINITIONTERMS AND DEFINITIONTERMS AND DEFINITIONSSSS

ADDENDUM D:ADDENDUM D:ADDENDUM D:ADDENDUM D: LAND BUILDING VALUE LAND BUILDING VALUE LAND BUILDING VALUE LAND BUILDING VALUE SPLITS DECEMBER 31, SPLITS DECEMBER 31, SPLITS DECEMBER 31, SPLITS DECEMBER 31, 2012201220122012


A D D E N D U M A : A S S U M P T I O N S A N D L I M I T I N G C O N D I T I O N S

"Report" means the appraisal report and conclusions stated therein, to which these Assumptions and Limiting

Conditions are annexed.

"Property" means the subject of the Report.

"C&W Ltd." means Cushman & Wakefield Ltd. or its subsidiary that issued the Report.

"Appraiser(s)" means the employee(s) of C&W Ltd. who prepared and signed the Report.

The Report has been made subject to the following assumptions and limiting conditions:

This report has been prepared at the request of The Elad Canada Operations Inc. for the purpose of issuing

financial statements under the International Accounting Standards (IAS) and International Financial Reporting

Standards (IFRS). The report may also be referred to or quoted in a prospectus for the sale or exchange of

securities; however this requires our prior written consent on the extent and disclosure that will be made on the

report and its conclusions to third parties.

The purpose of this appraisal is to estimate the current market value of the subject properties. It is our

understanding that the intended use of the appraisal is for year-end financial reporting.

This report has been prepared at the request of The Elad Canada Operations Inc. and for the exclusive (and

confidential) use of the recipient as named herein and for the specific purpose and function as stated herein. All

copyright is reserved to the author and this report is considered confidential by the author and the client.

Possession of this report, or a copy thereof, does not carry with it the right to reproduction or publication in any

manner, in whole or in part, nor may it be disclosed, quoted from or referred to in any manner, in whole or in part,

without the prior written consent and approval of the author as to the purpose, form and content of any such

disclosure, quotation or reference.

Without limiting the generality of the foregoing, neither all nor any part of the contents of this report shall be

disseminated or otherwise conveyed to the public in any manner whatsoever or through any media whatsoever or

disclosed, quoted from or referred to in any report, financial statement, prospectus, or offering memorandum of

the client, or in any documents filed with any governmental agency without the prior written consent and approval

of the author as to the purpose, form and content of such dissemination, disclosure, quotation or reference.

The estimated current market value of the real property which is appraised in this report pertains to the value of

the fee simple interest in the real estate. The property rights appraised herein exclude mineral rights, if any.

The estimate of value contained in this report is founded upon a thorough and diligent examination and analysis

of information gathered and obtained from numerous sources. Certain information has been accepted at face

value; especially if there was no reason to doubt its accuracy. Other empirical data required interpretative

analysis pursuant to the objective of this appraisal. Certain inquiries were outside the scope of this mandate. For

these reasons, the analyses, opinions and conclusions contained in this report are subject to all of the

assumptions and limiting conditions.

The property has been valued on the basis that title to the real property herein appraised is good and marketable.


The author of this report cannot accept responsibility for legal matters, questions of survey, opinions of title,

hidden or unapparent conditions of the property, toxic wastes or contaminated materials, soil or sub-soil

conditions, environmental, engineering or other technical matters, which might render this property more or less

valuable than as stated herein. If it came to our attention as the result of our investigation and analysis that

certain problems may exist, a cautionary note has been entered in the body of the report.

The legal description of the property and the area of the site were obtained from the Assessment Office. Further,

the plans and sketches contained in this report are included solely to aid the recipient in visualizing the location of

the property, the configuration and boundaries of the site and the relative position of the improvements on the

said lands.

The property has been valued on the basis that the real property is free and clear of all value influencing

encumbrances, encroachments, restrictions or covenants except as may be noted in this report and that there are

no pledges, charges, lien or social assessments outstanding against the property other than as stated and

described herein.

The property has been valued on the basis that there are no outstanding liabilities except as expressly noted

herein, pursuant to any agreement with a municipal or other government authority, pursuant to any contract or

agreement pertaining to the ownership and operation of the real estate or pursuant to any lease or agreement to

lease, which may affect the stated value or saleability of the subject property or any portion thereof.

The interpretation of the contractual agreements, pertaining to the operation and ownership of the property, as

expressed herein, is solely the opinion of the author and should not be construed as a legal interpretation.

Further, the summary of these contractual agreements is presented for the sole purpose of giving the reader an

overview of the salient facts thereof.

The property has been valued on the basis that the real estate complies in all material respects with any

restrictive covenants affecting the site and has been built and is occupied and being operated, in all material

respects, in full compliance with all requirements of law, including all zoning, land use classification, building,

planning, fire and health by-laws, rules, regulations, orders and codes of all federal, provincial, regional and

municipal governmental authorities having jurisdiction with respect thereto. (It is recognized there may be work

orders or other notices of violation of law outstanding with respect to the real estate and that there may be certain

requirements of law preventing occupancy of the real estate as described in this report. However, such possible

circumstances have not been accounted for in the appraisal process.).

Investigations have been undertaken in respect of matters, which regulate the use of land. However, no inquiries

have been placed with the fire department, the building inspector, the health department or any other government

regulatory agency, unless such investigations are expressly represented to have been made in this report. The

subject property must comply with such regulations and, if it does not comply, its non-compliance may affect the

market value of this property. To be certain of such compliance, further investigations may be necessary.

The data and statistical information contained herein were gathered from reliable sources and are believed to be

correct. However, these data are not guaranteed for accuracy, even though every attempt has been made to

verify the authenticity of this information as much as possible.


The estimated market value of the property does not necessarily represent the value of the underlying shares, if

the asset is so held, as the value of the shares could be affected by other considerations. Further, the estimated

market value does not include consideration of any extraordinary market value of the property, unless the effects

of such special conditions, and the extent of any special value that may arise therefrom, have been described and

measured in this report.

Should title to the real property presently be held (or changed to a holding) by a partnership, in a joint venture,

through a co-tenancy arrangement or by any other form of divisional ownership, the value of any fractional

interest associated therewith may be more or less than the percentage of ownership appearing in the contractual

agreement pertaining to the structure of such divisional ownership.

In the event of syndication, the aggregate value of the limited partnership interests may be greater than the value

of the freehold or fee simple interest in the real estate, by reason of the possible contributory value of non-realty

interests or benefits such as provision for tax shelter, potential for capital appreciation, special investment

privileges, particular occupancy and income guarantees, special financing or extraordinary agreements for

management services.

Should the author of this report be required to give testimony or appear in court or at any administrative

proceeding relating to this appraisal, prior arrangements shall be made therefore, including provisions for

additional compensation to permit adequate time for preparation and for any appearances, which may be

required. However, neither this nor any other of these assumptions nor limiting conditions is an attempt to limit

the use that might be made of this report should it properly become evidence in a judicial proceeding. In such a

case, it is acknowledged that it is the judicial body that will decide the use of this report, which best serves, the

administration of justice.

Because market conditions, including economic, social and political factors, change rapidly and, on occasion,

without notice or warning, the estimate of market value expressed herein, as of the effective date of this appraisal,

cannot necessarily be relied upon as any other date without subsequent advice of the author of this report.

The co-signing appraiser has not necessarily inspected the subject property or any other property referred to in

the report. The function of the co-signer's review was to check the reasonableness of the analysis.

The value expressed herein is in Canadian dollars.

This report is only valid if it bears the original signature of the author.


A D D E N D U M B : C E R T I F I C A T I O N

We certify that, to the best of our knowledge and belief:

• The statements of fact contained in this report are true and correct.

• The reported analyses, opinions and conclusions are limited only by the reported assumptions and

limiting conditions, and is our personal, unbiased professional analyses, opinions and conclusions.

• We have no present or prospective interest in the property that is the subject of this report, and we have

no personal interest or bias with respect to the parties involved.

• Our compensation is not contingent upon the reporting of a predetermined value or direction in value that

favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or

the occurrence of a subsequent event.

• Our analyses, opinions and conclusions were developed, and this report has been prepared, in

conformity with the Canadian Uniform Standards of Professional Appraisal Practice and with the

requirements of the Code of Professional Ethics and Standards of Professional Practice of the Appraisal

Institute of Canada.

• The Appraisal Institute of Canada reserves the right to review this report.

• I, Rocco Vecera, AACI (AIC Certification No. 239060) last visited the property that is the subject of this

report on March 7, 2013.

• The value estimate contained in this report applies as of December 31, 2012. This date may be referred

to as the effective date of valuation.

• The Appraisal Institute of Canada has a Mandatory Recertification Program for designated members. As

of the date of this report, I, Rocco Vecera, have fulfilled the requirements of the program.


FFFF INAL INAL INAL INAL EEEESTIMATE OFSTIMATE OFSTIMATE OFSTIMATE OF VVVVALUEALUEALUEALUE

As a result of this analysis, the current market value of the fee simple estate - subject to existing leases - and

subject to the assumptions, limiting conditions, certifications and definitions contained herein, as at December 31,

2012, is estimated as follows:

S E V E N T Y - O N E M I L L I O N F I V E H U N D R E D T H O U S A N D D O L L A R S

$ 7 1 , 5 0 0 , 0 0 0

March 7, 2013 Rocco Vecera, E.A., AACI, B. Comm.

Vice President Date


A D D E N D U M C : G L O S S A R Y O F T E R M S A N D D E F I N I T I O N S

Definitions of Value, Interest Appraised and Other Terms

Market Value

The Canadian Uniform Standards of Professional Appraisal Practice (The Standards) adopted by the Appraisal Institute of Canada define Market Value as:

“The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each

acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.”

Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

1. Buyer and seller are typically motivated;

2. Both parties are well informed or well advised and acting in their own best interests;

3. A reasonable time is allowed for exposure in the market;

4. Payment is made in cash in Canadian dollars or in terms of financial arrangements comparable thereto; and

5. The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions

granted by anyone associated with the sale.

Market Rent

The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the specified lease agreement

including term, rental adjustment and revaluation, permitted uses, use restrictions, and expense obligations; the lessee and lessor each acting prudently and

knowledgeably, and assuming consummation of a lease contract as of a specified date and the passing of the leasehold from lessor to lessee under conditions

whereby:

1. Lessee and lessor are typically motivated.

2. Both parties are well informed or well advised, and acting in what they consider their best interests.

3. A reasonable time is allowed for exposure in the open market.

4. The rent payment is made in terms of cash in Canadian dollars, and is expressed as an amount per time period consistent with the payment schedule of the

lease contract.

5. The rental amount represents the normal consideration for the property lease unaffected by special fees or concessions granted by anyone associated with

the transaction.

Condominium Interest

An estate in real property consisting of an individual interest in a condominium unit, together with an undivided common interest in the common areas such as the

land, parking areas, elevators, stairways, and the like.

Value As Is

The value of specific ownership rights to an identified parcel of real estate as of the effective date of the appraisal; relates to what physically exists and is legally

permissible and excludes all assumptions concerning hypothetical market conditions or possible rezoning.

Cash Equivalence

A price expressed in terms of cash, as distinguished from a price expressed totally or partly in terms of the face amounts of notes or other securities that cannot be

sold at their face amounts. Calculating the cash-equivalent price requires an appraiser to compare transactions involving atypical financing to transactions

involving comparable properties financed at typical market terms.

Exposure Time and Marketing Time

Exposure Time

Under Paragraph 3 of the Definition of Market Value, the value opinion presumes that a reasonable time is allowed for exposure in the open market. Exposure

time is defined as: “The length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a

sale at the market value on the effective date of the appraisal.” Exposure time is presumed to precede the effective date of the appraisal.

The reasonable exposure period is a function of price, time and use. It is not an isolated opinion of time alone. Exposure time is different for various types of

property and under various market conditions. It is a retrospective opinion based on an analysis of past events, assuming a competitive and open market. It

assumes not only adequate, sufficient and reasonable time but adequate, sufficient and a reasonable marketing effort. Exposure time and conclusion of value are

therefore interrelated.

Based on our review of investor surveys, discussions with market participants and information gathered during the sales verification process, a reasonable

exposure time for the subject property at the value concluded within this report would have been six (6) to twelve (12) months. This assumes the current owner

would have employed an active and professional marketing plan.


Marketing Time

Marketing time is an opinion of the time that might be required to sell a real property interest at the concluded market value level. Marketing time is presumed to

start during the period immediately after the effective date of an appraisal. (Marketing time is subsequent to the effective date of the appraisal and exposure time is

presumed to precede the effective date of the appraisal). The opinion of marketing time uses some of the same data analyzed in the process of developing a

reasonable exposure time opinion as part of the appraisal process and it is not intended to be a prediction of a date of sale or a one-line statement.

We believe, based on the assumptions employed in our analysis and our selection of investment parameters for the subject, that our value conclusion represents

a price achievable within six (6) to twelve (12) months.

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UPDATE APPRAISAL FOR

Le Nordelec

1751 Richardson Street

1655 Richardson Street

1301-1303 de Montmorency and

1260-1280 de Conde

Montreal, QC

IN AN UPDATE REPORT FORMAT

Current Effective Date: December 31, 2012

Original Report: October 1, 2012

Prepared For:

Elad Canada Inc.


Toronto, Ontario M2N 6P6

Prepared By:

Cushman & Wakefield Ltd.

Valuation & Advisory

1001 de Maisonneuve Blvd. West, Suite 900


C&W File ID: 13-614-900026

CONFIDENTIAL

Cushman & Wakefield Ltd. 1001 de Maisonneuve Blvd. West, Suite 900


(514) 841 3940 Tel

(514) 841 3955 Fax


February 15, 2013

Mr. Waldemar Halek, VP Finance

Elad Canada Inc.


Toronto, Ontario M2N 6P6

Re: Update Valuation of Nordelec Complex as of December 31, 2012

1751 Richardson Street et al

Montreal, QC

C&W File ID: 13-614-900026

Dear Mr. Halek:

As requested, we have carried out an investigation and valuation analysis of the above described property and

submit herein our estimate of value.

As this report is an update of a previous report and not a full narrative report, the estimate of value contained

herein together with the observations, comments and opinions appearing in the synopsis should be interpreted in

conjunction with, and form an extension of, our original full narrative appraisal report (the “original report”). This

update appraisal report is subject to the same terms of reference, assumptions and limiting conditions as outlined

in the original report. This appraisal update may not be fully understood without reference to the original report

based on an effective date of October 1, 2012 (our file no. 12-614-900027).

The Standards of the Appraisal Institute of Canada require that an appraisal update involve the same

appraiser/firm and client, that the real estate has undergone no significant change since the original appraisal and

that the effective time between the previous appraisal and the update is not unreasonably long for the type of real

estate involved. We consider that these conditions have been satisfied.

After careful consideration of all information available, it is our opinion that the market value of the subject

property, as at December 31, 2012, amounts to:

Final Value Estimate : $77,500,000

MR. WALDEMAR HALEK ELAD CANADA OPERATIONS INC. FEBRUARY 15, 2013 PAGE 2

CUSHMAN & WAKEFIELD LTD

The update appraisal considered herein, reflects changes that have occurred at the subject property since the last

update report, which was prepared with an effective date of December 31, 2012. The following is a summary of

some of the changes that have been reflected in the update appraisal.

The effective date of this appraisal update is December 31, 2012, and we have thus applied a start date in

the Discounted Cash Flow analysis of January 1, 2013.

The property’s GLA has decreased as a result of a conversion of a portion of the building from commercial to

residential (i.e. east conversion). The total GLA of the Nordelec property was previously 921,382 sq ft

however we are only valuing the income producing portion (IPP) of the property which has a total GLA of

843,169 sq ft. We have excluded the conversion of a portion of the Nordelec building which is being

converted to residential use (Floors 6, 7, 8 being East 500 – GLA of 76,272 sq ft) however the possible future

conversions on Floors 6, 7, 8 (West 200 and Centre 300, 400 conversions – GLA of approx. 147,600 sq ft)

have been retained in the current IPP valuation contained in this report. It is an implicit assumption that legal

severance of the East conversion area will be made from the existing property and that no costs or delays as

a result of this severance.

We have also been provided a 2013 Operating Budget for the property and an update capital expenditure

budget for the next 9 year period (totaling $12.5M). We have thus updated our analysis based on this new

information.

The following summarizes the recent office leasing activity in the property The recent office leasing activity in

the property and the market suggests that similar market office rent of $13.00 per sq ft is still appropriate for

the current analysis.

No Tenant Name Suite # Start Date Area (SF) Term (yrs)Average

Rent PSFComment

UPGRADED OFFICE SPACE

1 Relo Montreal 3115 Sep-12 1,214 1 $15.50 new tenant

2 H31 4311 Jan-13 1,210 1 $12.50 renewal

3 Zip Ville Marie 6118 Feb-13 1,240 2 $15.00 new tenant

4 Hexavest 3521 Jan-13 1,195 1 $12.50 renewal

5 Babel Games 8400 Jan-13 18,167 10 $15.20 relocation

Minimum 1,195 1 $12.50

Maximum 18,167 10 $15.50

Median 1,214 1 $15.00

Average 4,605 3 $14.14

RECENT LEASING AT SUBJECT PROPERTY

Le Nordelec, Montreal, Qc



RRRREVIEW OF EVIEW OF EVIEW OF EVIEW OF OOOOFFICE FFICE FFICE FFICE MMMMARKET ARKET ARKET ARKET CCCCONDITIONSONDITIONSONDITIONSONDITIONS

Office market conditions in Montreal have improved slightly over the last 12 months as a result of good

absorption levels and lower vacancies. The latest December 2012 C&W office statistics indicate that the

overall vacancy rate (direct space) for the Central Area (downtown Montreal) has increased slightly from 5.1%

as of Sept. 2012 to 5.3% currently (as of December 2012). Although only one new office project has started

construction (i.e. the Kevric mixed use office and condo project called Altoria – at Beaver Hall Hill and Viger

with approximately 230,000 sq ft of office space by 2014 - a major tenant Aimia has pre-leased 43%) there

are at least 5 major downtown projects totaling 3 million sq ft that are planned by several other Montreal

developers (i.e. Cadillac Fairview, SITQ, Canderel, Westcliff and Magil-Laurentienne), 3 of which are noted

below.

The Deloitte Tower of 514,000 sf is to be built on land acquired by Cadillac Fairview in 2007 between the

Bell Centre and Windsor Station (along St-Antoine Street). Deloitte is to occupy 160,000 sq ft (31%) of this

privately initiated project that is expected to be completed by June 2015. Construction of this LEED’s platinum

building is to start October 2012 and is to include a 32 foot high lobby facing the historic Windsor Court, a

skating rink, public seating and a park area. The Place de la Cité Internationale project (660,000 sq ft) by

Westcliff is to be located at Victoria Square in the International Quarter, with potential tenants such as the

mining giant Rio Tinto Alcan. It was announced last April that Rio Tinto had put its headquarters (at 1172,

1176 and 1188 Sherbrooke Street West, and 2085 Drummond Street) on sale, and intended to reduce its

current area by one-third through more efficient use of the new office space. The 900 de Maisonneuve West

Tower, proposed by SITQ, will be located in the heart of Montreal’s business district, with only one block west

of McGill College Avenue. It will feature twenty floors of office space (472,000 sq ft) and six floors of

aboveground parking space and will have a direct entrance to underground Montreal.

As such, one can expect the currently favourable market conditions to be maintained as a result of limited

new supply in downtown Montreal. However, it is expected that the vacancy rate may increase if one or more

of the above noted projects are added to the supply in the next few years.



HHHH ISTORICAL ISTORICAL ISTORICAL ISTORICAL PPPPERFORMANCEERFORMANCEERFORMANCEERFORMANCE ,,,, PPPPROJECTED AND ROJECTED AND ROJECTED AND ROJECTED AND SSSSTABILIZED TABILIZED TABILIZED TABILIZED AAAAMOUNTSMOUNTSMOUNTSMOUNTS (R(R(R(REVISEDEVISEDEVISEDEVISED ))))

2010 2011 2012 2013 C & W C & W

Actual Forecast Actual Budget As Is (yr 1) Stabilized (yr 5)

REVENUE

Base Rents (after free rent/downtime) $5,795,186 $6,357,972 $6,109,659 $5,918,136 $5,608,303 $10,080,717

Realty Tax Recoveries $1,079,295 $1,307,253 $1,556,660 $1,565,301 $1,494,993 $2,510,907

Operating Cost Recoveries $2,768,324 $2,989,815 $2,765,708 $2,814,482 $2,624,757 $4,408,398

Parking Income $396,676 $427,474 $403,393 $405,000 $405,000 $438,385

Other Income $95,567 $49,925 $54,421 $96,300 $96,300 $104,238

Vacancy Bad Debt Allowance $0 $0 $0 $0 $0 -$1,198,022

TOTAL REVENUE $10,135,048 $11,132,439 $10,889,841 $10,799,219 $10,229,353 $16,344,623

EXPENSES (C&W pro-rated yr 1 and 5 based on 96% of 2013 Budget)

Realty Taxes $1,945,401 $2,174,032 $2,473,216 $2,493,807 $2,394,055 $2,591,402

Insurance $87,070 $138,258 $112,754 $120,280 $115,469 $124,987

Energy $1,732,203 $1,755,943 $1,527,495 $1,517,292 $1,456,600 $1,576,671

Security $346,639 $354,035 $377,848 $367,750 $353,040 $382,142

Administration $697,081 $661,580 $635,899 $751,940 $721,862 $781,367

Maintenance and Repairs $738,429 $904,327 $728,954 $939,618 $782,972 $847,514

Cleaning, Garbage, Pest $362,178 $379,709 $356,562 $380,500 $365,280 $395,391

Exterior Expenses $158,047 $196,087 $184,482 $149,000 $143,040 $154,831

Operating Costs $4,121,647 $4,389,939 $3,923,994 $4,226,380 $3,938,263 $4,262,903

Total Recoverable Taxes & Costs $6,067,048 $6,563,971 $6,397,210 $6,720,187 $6,332,318 $6,854,305

Non-Recoverables $200,950 $158,227 $280,566 $159,300 $102,294 $163,446

Bad Debts $28,554 $115,000 $67,508 $4,800 $0 $0

Management Fees $244,246 $275,112 $374,063 $273,439 $255,734 $408,616

TOTAL EXPENSES $6,540,798 $7,112,310 $7,119,347 $7,157,726 $6,690,346 $7,426,367

NET OPERATING INCOME $3,594,250 $4,020,129 $3,770,494 $3,641,493 $3,539,007 $8,918,256

Le NordelecBudget versus Actual Results and Projected Statements



RRRREVIEW OF EVIEW OF EVIEW OF EVIEW OF IIIINVESTMENT NVESTMENT NVESTMENT NVESTMENT PPPPARAMETERSARAMETERSARAMETERSARAMETERS

The following table summarizes recent transactional data in Montreal as well as other major Quebec

metropolitan areas (sales 2-10 inclusive are part of the portfolio sale by GE to Cominar):

SALE NO. 1 2 3 4 5

1600 - 1616 Rene-Levesque W,

Montreal


Montreal


Montreal

9975-9995 de Catania

Brossard

8200 Decarie

Montreal

Date Sold Dec-12 Sep-12 Sep-12 Sep-12 Sep-12

Building Size (sf) 372,604 65,843 115,919 124,243 60,488

Total Price $76,000,000 $11,400,000 $17,980,000 $18,800,000 $12,220,000

Interest Purchased 100% 100% 100% 100% 100%

Price psf $204 $173 $155 $151 $202

OCR 5.55% 6.37% 7.15% 6.50% 6.40%

IRR 7.65% 6.50% 7.50% 7.25% 5.00%

TCR 6.75% 6.25% 7.00% 7.00% 6.00%

Purchaser Bentall Kennedy Cominar REIT Cominar REIT Cominar REIT Cominar REIT

Comments

A two building Class B property so ld by

Standard Life in addition to 3 other

propert ies across Canada. 99% leased with

Genivar as largest tenant.

Portfo lio sale by GE to Cominar of 68


is 1985 built, 14% vacant.




Portfo lio sale by GE to Cominar o f 68




properties in Quebec and Ottawa.

Property is 1982 built, 25% vacancy.

SALE NO. 6 7 8 9 10

8250 Decarie

Montreal

1000 St-Jean

Pointe Claire

1400 Rive Sud

Quebec City

400-480 Arm and Frappier

Laval

1-11 Place du Commerce

Montreal

Date Sold Sep-12 Sep-12 Sep-12 Sep-12 Sep-12

Building Size (sf) 83,535 110,008 77,078 197,774 197,732

Total Price $20,130,000 $24,240,000 $14,790,000 $27,940,000 $23,110,000

Interest Purchased 100% 100% 100% 100% 100%

Price psf $241 $220 $192 $141 $117

OCR 4.75% 6.15% 5.00% 9.00% 8.02%

IRR 5.50% 6.50% 6.25% 8.25% 8.45%

TCR 5.00% 6.75% 5.75% 8.50% 7.25%

Purchaser Cominar REIT Cominar REIT Cominar REIT Cominar REIT Cominar REIT

CommentsPortfo lio sale by GE to Cominar o f 68

propert ies in Quebec and Ottawa. Property

is 1988 built, 96.5% leased.



is 1988-90 built, 84% leased - includes a

strip retail centre.


properties in Quebec and Ottawa. 2004

built, 100% leased to SIQ until Aug-15.

Portfo lio sale by GE to Cominar o f 68


is composed o f 4 buildings 1990 built , 18.6%

vacancy.


properties in Quebec and Ottawa.

Property o f 6 buildings - 1978-81 built ,

19.5% vacancy.

Transactional data (see above) as well as real estate investment surveys (Insite survey for Montreal office

buildings) and current market conditions have confirmed that similar or only slightly lower levels of

capitalization rates and discount factors are appropriate as compared to our last report.



InSite

Overall

Capitalization Rate

Internal Rate

of Return

Terminal

Capitalization Rate $ SPSF

Q4 2012 6.6% 7.7% 7.0% 236.06$

Q3 2012 6.7% 7.7% 7.1% 223.50$

Q2 2012 6.9% 8.0% 7.4% 242.65$

Q1 2012 6.8% 7.9% 7.2% 252.65$

Q4 2011 7.0% 8.4% 7.3% 221.46$

Q3 2011 7.1% 8.2% 7.5% 219.50$

Q2 2011 7.2% 8.6% 7.5% 224.69$

Q1 2011 7.3% 8.7% 7.6% 214.62$

Q4 2010 7.4% 8.6% 7.7% 219.56$

Q3 2010 7.8% 9.0% 8.2% 210.42$

Q2 2010 7.8% 9.0% 8.1% 197.50$

Q1 2010 7.8% 9.0% 8.1% 202.22$

Q4 2009 8.3% 9.4% 8.6% 192.86$

Midtown Class "A" Office - Montreal

MMMMARKET ARKET ARKET ARKET VVVVALUE ALUE ALUE ALUE EEEESTIMATE STIMATE STIMATE STIMATE

We have therefore applied the same rates (overall cap rate, IRR and TCR) as the October 1, 2012 valuation.

Although rates have compressed slightly over the last quarter (by between 0 and 10 bps), we are also recognizing

a slight increase in property income since the October 1, 2012 valuation. Our revised approaches to value are

included in the appendix to this letter and result in the following value conclusions as at December 31, 2012:

Income Approach : $77,400,000

D.C.F. Approach : $77,500,000

Direct Sales Comparison Approach : $73,800,000

Final Value Estimate : $77,500,000

MMMMARKET ARKET ARKET ARKET VVVVALUE ALUE ALUE ALUE EEEESTIMATE STIMATE STIMATE STIMATE AAAAPPORTIPPORTIPPORTIPPORTIONMENT ONMENT ONMENT ONMENT –––– AAAALLOCATIONSLLOCATIONSLLOCATIONSLLOCATIONS

Nordelec - December 31, 2012

Allocation of Final Value Estimate between Existing Income Producing Property

Final Value Estimate of Property $77,500,000

Total GLA 843,169 sq ft

Per Sq Ft $92 per sq f t

Building Value

Allocation of Value to Components Area (sq ft) per sq ft

Block A - Commercial ground floor 60,000 $600,000 $10

Income Producing Property 783,169 $76,900,000 $98

Totals 843,169 $77,500,000 $92



MMMMARKET ARKET ARKET ARKET VVVVALUE ALUE ALUE ALUE EEEESTIMATE STIMATE STIMATE STIMATE AAAAPPORTIONMENT PPORTIONMENT PPORTIONMENT PPORTIONMENT –––– LLLLAND AND AND AND AND AND AND AND BBBBUILDING UILDING UILDING UILDING SSSSPLITSPLITSPLITSPLITS Nordelec - December 31, 2012

Allocation of Final Value Estimate between Land and Buildings

Total

Allocation of Value to Components Valuation Land Building

Block A - Commercial ground floor $600,000 $88,260 $511,740

Income Producing Property $76,900,000 $11,223,694 $65,676,306

Totals $77,500,000 $11,311,954 $66,188,046

We thank you for this opportunity to be of service to you. Should you require further information on this or any

other matter, please communicate with the undersigned.



Rocco Vecera, B.Comm., E.A., AACI

Vice President

[email protected]

(514) 841-3952 Office Direct

(514) 841-3955 Fax



I N C O M E A P P R O A C H

POTENTIAL GROSS REVENUE Year 5

Base Rental Revenue $10,303,967

Recoveries


C.A.M. Costs (excluding amortization) $4,280,251

Total Recoveries $6,791,158

Miscellaneous Income $542,623

Total Vacancy Allowance and Credit Loss ($1,411,020)

Effective Rental Income $16,226,728

Operating Expenses

Operating Costs $4,262,903


Non Recoverables $162,267

Management Fees $405,668

Total Operating Expenses $7,422,240

Net Operating Income $8,804,488

Overall Capitalization Rate 7.50%

Capitalized Value $117,393,169

Less: PV of Future leasing costs and capital

expenditures over 10 years ($32,502,875)

Less: PV of Income Shortfalls over next 5 years ($8,192,209)

Add: PV of amortization benefit over 10 years $707,809

Total Adjustment ($39,987,275)

Indicated Value $77,405,894

ROUNDED TO $77,400,000



D I S C O U N T E D C A S H F L O W V A L U E M A T R I X

7.50%

8.50% $20,011,240

7.75% $57,430,721

10 $77,441,961

($1,968,916)

$77,441,961

VALUATION MATRIX

Discount Rate

8.00% 8.25% 8.50% 8.75% 9.00%

7.25% $85,207,086 $83,312,168 $81,462,757 $79,657,648 $77,895,669

7.50% $83,031,470 $81,186,278 $79,385,346 $77,627,502 $75,911,609

7.75% $80,996,216 $79,197,542 $77,441,961 $75,728,333 $74,055,552

8.00% $79,088,165 $77,333,102 $75,620,038 $73,947,863 $72,315,499

8.25% $77,295,754 $75,581,659 $73,908,534 $72,275,299 $70,680,904

PRICE PER SQ.FT. MATRIX

Discount Rate GLA 843,169 sq,ft,

8.00% 8.25% 8.50% 8.75% 9.00%

7.25% $101 $99 $97 $94 $92

7.50% $98 $96 $94 $92 $90

7.75% $96 $94 $92 $90 $88

8.00% $94 $92 $90 $88 $86

8.25% $92 $90 $88 $86 $84

Year 1 Year 2 Year 3 Year 4 Year 5

4.6% 8.1% 10.0% 11.4% 11.5%

-4.7% -6.0% -0.3% 6.4% 9.5%CASHFLOW YIELD

Terminal Cap.

Rate

Terminal Cap. Rate

Hold (years)

Value Conclusion

NOI YIELD

Terminal Cap.

Rate

Overall Capitalization Rate

PV of Cashflow

DCF Value

DISCOUNTED CASH FLOW METHOD

PV of Reversion

Discount Rate

Nordelec

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Deduction from Reversionary value

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CUSHMAN & WAKEFIELD OF ILLINOIS, INC. 6133 N. RIVER ROAD, SUITE 1000 ROSEMONT, IL 60018 USA Tel: +1 847-518-3214 www.cushmanwakefield.com/valuation

March 12, 2013

Mr. Rafael Lazer Chief Financial Officer Elad Canada, Inc. 5001 Yonge Street, Suite 1405 Toronto, Ontario, Canada M2N 6P6

Re: Appraisal of Real Property In a Restricted Use Report (C&W File ID: 13-21002-900026-001)

Sullivan Center 1 S. State Street Chicago, Cook County, IL 60603

Dear Mr. Lazer:

This letter is to confirm that the above noted appraisal report was prepared at the request of Elad Canada Inc. for the purposes of financial reporting under IFRS and to assist in internal matters. We hereby agree and consent to the quoting of, referring to and/or including this appraisal report in Elad Canada Inc.’s Yearly report for the year ended December 31, 2012, as such yearly report may be amended from time to time.

Please note that the report is subject to the Assumptions and Limiting Conditions stated within the appraisal report. Also, the value opinions reported in the appraisal are qualified by certain assumptions, limiting conditions, certifications, and definitions, which are set forth in the report.


CUSHMAN & WAKEFIELD OF ILLINOIS, INC.

John Mackris, MAI, MRICS Senior Director IL Certified General Appraiser License No. 553.001360 [email protected] 847-518-3214 Office Direct 847-518-9116 Fax

CUSHMAN & WAKEFIELD OF ILLINOIS, INC. 6133 N. RIVER ROAD, SUITE 1000 ROSEMONT, IL 60018 USA Tel: +1 847-518-3214 www.cushmanwakefield.com/valuation

March 12, 2013


Re: Appraisal of Real Property In a Restricted Use Report (C&W File ID: 13-21002-900026-001)


Dear Mr. Lazer:

This letter is to confirm that the above noted appraisal report was prepared at the request of WRT-Elad One South State Equity LP and WRT-Elad One South State Lender LP (the “Client”) for the purposes of financial reporting under IFRS and to assist in internal matters. We hereby agree and consent to the quoting of, referring to and/or including this appraisal report in the Client’s Yearly report for the period ended November 30, 2012, as such yearly report may be amended from time to time.

Please note that the report is subject to the Assumptions and Limiting Conditions stated within the appraisal report. Also, the value opinions reported in the appraisal are qualified by certain assumptions, limiting conditions, certifications, and definitions, which are set forth in the report.



John Mackris, MAI, MRICS Senior Director IL Certified General Appraiser License No. 553.001360 [email protected] 847-518-3214 Office Direct 847-518-9116 Fax

APPRAISAL OF REAL PROPERTY

Sullivan Center 1 S. State Street Chicago, Cook County, IL 60603 IN A RESTRICTED USE APPRAISAL REPORT As of November 30, 2012 Prepared For: Elad Canada, Inc. 5001 Yonge Street, Suite 1405 Toronto, Ontario, Canada M2N 6P6 Prepared By: Cushman & Wakefield of Illinois, Inc. Valuation & Advisory 6133 North River Road, Suite 1000 Rosemont, IL 60018 C&W File ID: 13-21002-900026-001

CUSHMAN & WAKEFIELD OF ILLINOIS, INC. 6133 NORTH RIVER ROAD, SUITE 1000 ROSEMONT, IL 60018


6133 NORTH RIVER ROAD, SUITE 1000 ROSEMONT, IL 60018

January 11, 2013


Re: Appraisal of Real Property In a Restricted Use Report


C&W File ID: 13-21002-900026-001

Dear Mr. Lazer:

In fulfillment of our agreement as outlined in the Letter of Engagement, we are pleased to transmit our appraisal of the above property in a Restricted Use Report which is intended to comply with the reporting requirements set forth under Standards Rule 2-2(c) of the Uniform Standards of Professional Appraisal Practice (USPAP). In accordance with USPAP, the use of this report is restricted to the client only.

The report presents limited discussions of the data, reasoning, and analyses used in the appraisal process to develop the appraiser’s opinion of value. It may not be understood without additional information in the appraiser’s work file. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated in the following pages.

Client Contact: Mr. Rafael Lazer


Toronto, Ontario, Canada M2N 6P6

Client - Intended User: In compliance with USPAP, the Client is the only Intended User. The Client is specifically identified as:

WRT – Elad One South State Equity, L.P., WRT – Elad One South State Center L.P. and their parent and related companies.

MR. RAFAEL LAZER ELAD CANADA, INC. JANUARY 11, 2013 PAGE 2


Intended Use: In connection with IFRS reporting matters. The proposal is intended to provide for inclusion of reference to valuations in financial statements and regulatory filings of the Client and for attachment of the report to the regulatory filings of the Client.

Identification of the Real Estate: Sullivan Center

1 S. State Street

Chicago, IL 60603

Current Use: The subject, commonly known as The Sullivan Center, is comprised of a four to 15-story building complex that was previously anchored by Carson Pirie Scott (a department store retailer), which vacated the building in 2007. Subsequently, the department store space was redeveloped and reconfigured to allow for multi-tenancy. Recently, a significant portion of this space was leased to Target Corporation, which opened its first “CityTarget” store in the nation on July 29, 2012. Further, over the past several years, the office space located on Floors 7 through 15 has undergone significant renovations and several new tenants now occupy the majority of the existing office space.

The subject property comprises 942,384 square feet of rentable area (or 919,745 square feet excluding lower level Target storage space). The property is currently 82.25 percent occupied.

Highest and Best Use (As If Vacant):

It is our opinion that the Highest and Best Use of the subject site as if vacant is an office building with ground floor retail built to its maximum feasible building area, at that point in time when demand is sufficient to financially warrant development.

Highest and Best Use (As Improved):

It is our opinion that the Highest and Best Use of the subject property as improved is a mixed-use office and retail building as it is currently improved.

Type of Value: Market Value (defined later in this report)

Real Property Interest Valued: Leased Fee

Current Ownership: One South State Street, LLC

Sales History: To the best of our knowledge, the property has not transferred within the past three years.

Date of Inspection: July 18, 2012

Effective Date of Value: November 30, 2012

Date of Report: January 11, 2013

Extraordinary Assumptions: This appraisal does not employ any extraordinary assumptions.



Hypothetical Conditions: This appraisal does not employ any hypothetical conditions.

Opinions of Value:

$216,000,000 (Market Value As-Is on November 30, 2012)

$248,000,000 (Prospective Value Upon Stabilization as of December 1, 2014)

Exposure Time: 9 months

M A R K E T V A L U E D E F I N I T I O N The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

Buyer and seller are typically motivated; Both parties are well informed or well advised, and acting in what they consider their best interests; A reasonable time is allowed for exposure in the open market; Payment is made in terms of cash in United States dollars or in terms of financial arrangements

comparable thereto; and The price represents the normal consideration for the property sold unaffected by special or creative

financing or sales concessions granted by anyone associated with the sale.

1. Source: (12 C.F.R. Part 34.42(g) Federal Register 34696, August 24, 1990, as amended at 57 Federal Register 12202, April 9, 1992; 59 Federal Register 29499, June 7, 1994)

S C O P E O F W O R K We prepared this independent and impartial appraisal of the property in conformance with the requirements of USPAP. The report includes only the appraiser’s conclusion and cannot be properly understood without reference to the appraiser’s file, which is maintained within our work file. The level of detail and depth of the analysis is considered to be commensurate with the complexity of the property type and market conditions.

Cushman & Wakefield of Illinois, Inc. has an internal Quality Control Oversight Program. This Program mandates a “second read” of all appraisals. Assignments prepared and signed solely by designated members (MAIs) are read by another MAI who is not participating in the assignment. Assignments prepared, in whole or in part, by non-designated appraisers require MAI participation, Quality Control Oversight, and signature.

For this assignment, Quality Control Oversight was provided by Thomas S. Helm, MAI, MRICS.

As part of this appraisal, a number of independent investigations and analyses were required. The agreed upon Scope of Work included the following:

Inspected the subject property and comparable data on July 18, 2012 Collected primary and secondary data related to the subject Investigated the general trends in the regional economy and local area Investigated sales in the subject’s market and analyzed rental data where appropriate Used generally accepted market-derived methods and procedures appropriate to the assignment



Set forth all assumptions and limiting conditions that affect the analyses, opinion and conclusions, as stated in this report

Provided a signed certification in accordance with Standards Rule 2-3 of USPAP Sufficient data, due diligence, and analysis are combined in this valuation to produce a reliable market value conclusion that serves the needs of the client.

A P P R A I S A L M E T H O D O L O G Y There are three generally accepted approaches to developing an opinion of value: Cost, Sales Comparison and Income Capitalization. In appraisal practice, an approach to value is included or eliminated based on its applicability to the property type being valued and the quality of information available. The reliability of each approach depends on the availability and comparability of market data as well as the motivation and thinking of purchasers.

This appraisal employs the Sales Comparison Approach and the Income Capitalization Approach. Based on our analysis and knowledge of the subject property type and relevant investor profiles, it is our opinion that these approaches would be considered applicable and/or necessary for market participants. Typical purchasers do not generally rely on the Cost Approach when purchasing a property such as the subject of this report. Therefore, we have not utilized the Cost Approach to develop an opinion of market value.

SULLIVAN CENTER ASSUMPTIONS AND LIMITING CONDITIONS 5

A S S U M P T I O N S A N D L I M I T I N G C O N D I T I O N S "Report" means the appraisal or consulting report and conclusions stated therein, to which these Assumptions and Limiting Conditions are annexed.

"Property" means the subject of the Report.

"C&W" means Cushman & Wakefield, Inc. or its subsidiary that issued the Report.

"Appraiser(s)" means the employee(s) of C&W who prepared and signed the Report.

The Report has been made subject to the following assumptions and limiting conditions:

No opinion is intended to be expressed and no responsibility is assumed for the legal description or for any matters that are legal in nature or require legal expertise or specialized knowledge beyond that of a real estate appraiser. Title to the Property is assumed to be good and marketable and the Property is assumed to be free and clear of all liens unless otherwise stated. No survey of the Property was undertaken.

The information contained in the Report or upon which the Report is based has been gathered from sources the Appraiser assumes to be reliable and accurate. The owner of the Property may have provided some of such information. Neither the Appraiser nor C&W shall be responsible for the accuracy or completeness of such information, including the correctness of estimates, opinions, dimensions, sketches, exhibits and factual matters. Any authorized user of the Report is obligated to bring to the attention of C&W any inaccuracies or errors that it believes are contained in the Report.

The opinions are only as of the date stated in the Report. Changes since that date in external and market factors or in the Property itself can significantly affect the conclusions in the Report.

The Report is to be used in whole and not in part. No part of the Report shall be used in conjunction with any other analyses. Publication of the Report or any portion thereof without the prior written consent of C&W is prohibited. Reference to the Appraisal Institute or to the MAI designation is prohibited. Except as may be otherwise stated in the letter of engagement, the Report may not be used by any person(s) other than the party(ies) to whom it is addressed or for purposes other than that for which it was prepared. No part of the Report shall be conveyed to the public through advertising, or used in any sales, promotion, offering or SEC material without C&W's prior written consent. Any authorized user(s) of this Report who provides a copy to, or permits reliance thereon by, any person or entity not authorized by C&W in writing to use or rely thereon, hereby agrees to indemnify and hold C&W, its affiliates and their respective shareholders, directors, officers and employees, harmless from and against all damages, expenses, claims and costs, including attorneys' fees, incurred in investigating and defending any claim arising from or in any way connected to the use of, or reliance upon, the Report by any such unauthorized person(s) or entity(ies).

Except as may be otherwise stated in the letter of engagement, the Appraiser shall not be required to give testimony in any court or administrative proceeding relating to the Property or the Appraisal.

The Report assumes (a) responsible ownership and competent management of the Property; (b) there are no hidden or unapparent conditions of the Property, subsoil or structures that render the Property more or less valuable (no responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them); (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws, unless noncompliance is stated, defined and considered in the Report; and (d) all required licenses, certificates of occupancy and other governmental consents have been or can be obtained and renewed for any use on which the value opinion contained in the Report is based.

The physical condition of the improvements considered by the Report is based on visual inspection by the Appraiser or other person identified in the Report. C&W assumes no responsibility for the soundness of structural components or for the condition of mechanical equipment, plumbing or electrical components.

The forecasted potential gross income referred to in the Report may be based on lease summaries provided by the owner or third parties. The Report assumes no responsibility for the authenticity or completeness of lease information provided by others. C&W recommends that legal advice be obtained regarding the interpretation of lease provisions and the contractual rights of parties.

SULLIVAN CENTER ASSUMPTIONS AND LIMITING CONDITIONS 6

The forecasts of income and expenses are not predictions of the future. Rather, they are the Appraiser's best opinions of current market thinking on future income and expenses. The Appraiser and C&W make no warranty or representation that these forecasts will materialize. The real estate market is constantly fluctuating and changing. It is not the Appraiser's task to predict or in any way warrant the conditions of a future real estate market; the Appraiser can only reflect what the investment community, as of the date of the Report, envisages for the future in terms of rental rates, expenses, and supply and demand.

Unless otherwise stated in the Report, the existence of potentially hazardous or toxic materials that may have been used in the construction or maintenance of the improvements or may be located at or about the Property was not considered in arriving at the opinion of value. These materials (such as formaldehyde foam insulation, asbestos insulation and other potentially hazardous materials) may adversely affect the value of the Property. The Appraisers are not qualified to detect such substances. C&W recommends that an environmental expert be employed to determine the impact of these matters on the opinion of value.

Unless otherwise stated in the Report, compliance with the requirements of the Americans with Disabilities Act of 1990 (ADA) has not been considered in arriving at the opinion of value. Failure to comply with the requirements of the ADA may adversely affect the value of the Property. C&W recommends that an expert in this field be employed to determine the compliance of the Property with the requirements of the ADA and the impact of these matters on the opinion of value.

If the Report is submitted to a lender or investor with the prior approval of C&W, such party should consider this Report as only one factor, together with its independent investment considerations and underwriting criteria, in its overall investment decision. Such lender or investor is specifically cautioned to understand all Extraordinary Assumptions and Hypothetical Conditions and the Assumptions and Limiting Conditions incorporated in this Report.

In the event of a claim against C&W or its affiliates or their respective officers or employees or the Appraisers in connection with or in any way relating to this Report or this engagement, the maximum damages recoverable shall be the amount of the monies actually collected by C&W or its affiliates for this Report and under no circumstances shall any claim for consequential damages be made.

If the Report is referred to or included in any offering material or prospectus, the Report shall be deemed referred to or included for informational purposes only and C&W, its employees and the Appraiser have no liability to such recipients. C&W disclaims any and all liability to any party other than the party that retained C&W to prepare the Report.

Any estimate of insurable value, if included within the agreed upon scope of work and presented within this report, is based upon figures derived from a national cost estimating service and is developed consistent with industry practices. However, actual local and regional construction costs may vary significantly from our estimate and individual insurance policies and underwriters have varied specifications, exclusions, and non-insurable items. As such, we strongly recommend that the Client obtain estimates from professionals experienced in establishing insurance coverage for replacing any structure. This analysis should not be relied upon to determine insurance coverage. Furthermore, we make no warranties regarding the accuracy of this estimate.

By use of this Report each party that uses this Report agrees to be bound by all of the Assumptions and Limiting Conditions, Hypothetical Conditions and Extraordinary Assumptions stated herein.

SULLIVAN CENTER CERTIFICATION OF APPRAISAL 7

C E R T I F I C A T I O N O F A P P R A I S A L I certify that, to the best of my knowledge and belief:

The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions,

and is my personal, impartial, and unbiased professional analyses, opinions, and conclusions. I have no present or prospective interest in the property that is the subject of this report, and no personal interest with

respect to the parties involved. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. My engagement in this assignment was not contingent upon developing or reporting predetermined results. My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined

value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

The reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice.

The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives.

John Mackris, MAI, MRICS did make a personal inspection of the property that is the subject of this report on July 18, 2012.

We have performed prior services involving the subject property within the three-year period immediately preceding the acceptance of the assignment.

The services include three previous appraisals within the prior three-year period immediately preceding the acceptance of the assignment.

No one provided significant real property appraisal assistance to the persons signing this report. As of the date of this report, John Mackris, MAI, MRICS has completed the continuing education program of the Appraisal

Institute.

John Mackris, MAI, MRICS Senior Director IL Certified General Appraiser License No. 553.001360, exp. 9/30/13 [email protected] 847-518-3214 Office Direct 847-518-9116 Fax

SULLIVAN CENTER ADDENDA CONTENTS

A D D E N D A C O N T E N T S ADDENDUM A: CLIENT SATISFACTION SURVEY ADDENDUM B: ENGAGEMENT LETTER ADDENDUM C: VALUATION ADDENDUM ADDENDUM D: QUALIFICATION OF THE APPRAISERS


A D D E N D U M C : V A L U A T I O N A D D E N D U M

E X E C U T I V E S U M M A R Y

BASIC INFORMATIONCommon Property Name: Sullivan CenterAddress: 1 S. State Street

Chicago, IL - 60603County: CookProperty Ownership Entity: One South State Street, LLC

SITE INFORMATIONSquare Feet Acres

Land Area: 91,573 2.10

Site Shape: GoodSite Topography: L-shapedFrontage: GoodSite Utility: Good

Flood Zone Status:Flood Zone: XFlood Map Number: 17031C0419FFlood Map Date: 11/6/00

BUILDING INFORMATIONType of Property: Mixed-use building

Building AreaGross Building Area: 942,384 SFNet Rentable Area: 919,745 SF (excludes Target LL storage)Land to Building Ratio: 0.10:1

Number of Buildings: NineNumber of Stories: 15Actual Age: 48 YearsQuality: Good

Year Built: 1865 - 1961Year Renovated: 2008 - 2009Condition: Good

MUNICIPAL INFORMATIONAssessment Information:

Assessing Authority Cook CountyAssessor's Parcel IdentificationCurrent Tax Year 2011/2012Are taxes current? Taxes are currentIs a grievance underway? Not to our knowledgeSubject's assessment is Below market levels

Zoning Information:Municipality Governing Zoning City of ChicagoCurrent Zoning DX-16, Downtown Mixed-Use

DistrictIs current use permitted? YesCurrent Use Compliance Complying useZoning Change Pending NoZoning Variance Applied For Not applicable

HIGHEST & BEST USEAs Though Vacant:

As Improved:

An office building with ground floor retail built to its maximum feasible building area, at that point in time when demand is sufficient to financially warrant development

A mixed-use office and retail building as it is currently improved

17-15-100-001 thru –014, -017, and -020 thru -024

VALUATION INDICESMarket Value

As-IsProspective Market Value

Upon StabilizationVALUE DATE 11/30/2012 12/1/2014SALES COMPARISON APPROACHIndicated Value: $218,000,000 $248,000,000Per Square Foot (NRA): $237.02 $269.64

INCOME CAPITALIZATION APPROACHYield Capitalization

Projection Period: 11 Years 9 YearsHolding Period: 10 Years 8 YearsTerminal Capitalization Rate: 7.25% 7.25%Internal Rate of Return: 8.50% 8.25%Indicated Value: $214,000,000 $248,000,000Per Square Foot (NRA): $232.67 $269.64

Direct CapitalizationNet Operating Income (stabilized): $17,349,400 $17,349,400Capitalization Rate: 7.00% 7.00%Preliminary Value: $247,848,571 N/AValue (Rounded): $248,000,000 N/ALESS FV-PV Spread ($30,848,571) N/AIndicated Value: $217,151,429 $247,848,571Indicated Value Rounded: $217,000,000 $248,000,000Per Square Foot (NRA): $235.93 $269.64

Income Capitalization ApproachIndicated Value: $216,000,000 $248,000,000Per Square Foot (NRA): $234.85 $269.64

FINAL VALUE CONCLUSIONReal Property Interest: Leased Fee Leased FeeConcluded Value: $216,000,000 $248,000,000Per Square Foot (NRA): $234.85 $269.64Implied Capitalization Rate: N/A 7.00%

INSURABLE VALUEConclusion: $211,000,000 N/A

EXPOSURE AND MARKETING TIMEExposure Time: 9 MonthsMarketing Time: 9 Months

H I S T O R I C A L A N D P R O J E C T E D I N C O M E A N D E X P E N S E S

REVENUE AND EXPENSE ANALYSIS Year 1 Year 3

REVENUE Total PSF Total PSF Total PSF Total PSF Total PSF Total PSFBase Rental Revenue $11,253,731 $12.24 $12,847,205 $13.97 $13,896,161 $15.11 $20,404,478 $22.18 $19,967,576 $21.71 $25,647,403 $27.89Subtotal $11,253,731 $12.24 $12,847,205 $13.97 $13,896,161 $15.11 $20,404,478 $22.18 $19,967,576 $21.71 $25,647,403 $27.89

Reimbursement Revenue

Common Area Maintenance $7,119 $0.01 $147,894 $0.16 $130,638 $0.14 $1,058,658 $1.15 $974,930 $1.06 $1,385,843 $1.51Real Estate Taxes 16,855 0.02 283,034 0.31 281,929 0.31 1,274,244 1.39 1,165,622 1.27 1,669,066 1.81

Subtotal $23,974 $0.03 $430,928 $0.47 $412,567 $0.45 $2,332,902 $2.54 $2,140,552 $2.33 $3,054,909 $3.32

Other Revenue $187,310 $0.20 $365,157 $0.40 $337,248 $0.37 $107,010 $0.12 $102,750 $0.11 $109,006 $0.12POTENTIAL GROSS REVENUE $11,465,015 $12.47 $13,643,290 $14.83 $14,645,976 $15.92 $22,844,390 $24.84 $22,210,878 $24.15 $28,811,318 $31.33

Vacancy and Collection Loss 0 0.00 0 0.00 (2,904,711) (3.16) (114,222) (0.12) (27,333) (0.03) (770,728) (0.84)EFFECTIVE GROSS REVENUE $11,465,015 $12.47 $13,643,290 $14.83 $11,741,265 $12.77 $22,730,168 $24.71 $22,183,545 $24.12 $28,040,590 $30.49

OPERATING EXPENSESLicenses $141,792 $0.15 $141,361 $0.15 $131,065 $0.14 $213,978 $0.23 $219,860 $0.24 $233,252 $0.25Property Insurance 132,058 0.14 104,741 0.11 109,894 0.12 342,712 0.37 349,350 0.38 370,625 0.40Management Fees 1,111,835 1.21 825,391 0.90 1,460,707 1.59 571,110 0.62 665,506 0.72 841,218 0.91Administrative Fees 68,084 0.07 12,758 0.01 15,320 0.02 113,120 0.12 102,750 0.11 109,006 0.12 Other Utilities 804,058 0.87 571,769 0.62 639,969 0.70 755,152 0.82 781,595 0.85 850,958 0.93Total Utilities 804,058 0.87 571,769 0.62 639,969 0.70 755,152 0.82 781,595 0.85 850,958 0.93Repairs and Maintenance 1,658,513 1.80 1,886,349 2.05 2,001,398 2.18 2,496,172 2.71 2,494,102 2.71 2,766,919 3.01Advertising and Promotion 71,086 0.08 52,518 0.06 6,893 0.01 37,000 0.04 25,689 0.03 27,253 0.03Payroll 430,536 0.47 361,484 0.39 622,453 0.68 1,061,232 1.15 1,027,500 1.12 1,090,076 1.19Non-Reimbursable 219,635 0.24 224,010 0.24 163,330 0.18 184,400 0.20 184,950 0.20 196,213 0.21Total Operating Expenses $4,637,597 $5.04 $4,180,381 $4.55 $5,151,029 $5.60 $5,774,876 $6.28 $5,851,302 $6.36 $6,485,520 $7.05

Real Estate Taxes 1,120,007 1.22 2,102,942 2.29 1,775,354 1.93 3,750,399 4.08 3,555,389 3.87 4,205,670 4.57TOTAL EXPENSES $5,757,604 $6.26 $6,283,323 $6.83 $6,926,383 $7.53 $9,525,275 $10.36 $9,406,691 $10.23 $10,691,190 $11.62NET OPERATING INCOME $5,707,411 $6.21 $7,359,967 $8.00 $4,814,882 $5.24 $13,204,893 $14.36 $12,776,854 $13.89 $17,349,400 $18.86

(1) Fiscal Year Beginning: 12/01/2012 **2009, 2010 and 2011 do not include any HTC TI Overage (2) CY 2011 includes $2,904,711 in bad debt expense related to the space reductions

Fiscal Year Ending: 11/30/2013 revenue. of Freed and City Year.Compiled by Cushman & Wakefield of Illinois, Inc.

2009 Actual 2010 Actual 2011 Actual 2013 Budget C&W Year One (1) C&W Forecast (1)

D I S C O U N T E D C A S H F L O W A N A L Y S I S

CASH FLOW ASSUMPTIONS (AS IS):

DISCOUNTED CASH FLOW MODELING ASSUMPTIONSVALUATION SCENARIO: Market Value As-IsGENERAL CASH FLOW ASSUMPTIONS GROWTH RATES

Cash Flow Software: ARGUS - Version 15 Market Rent: 3.00%Cash Flow Start Date: 6/1/2012 Consumer Price Index (CPI): 3.00%Calendar or Fiscal Analysis: Fiscal Expenses: 3.00%Investment Holding Period: 10 Years Tenant Improvements: 3.00%Analysis Projection Period: 11 Years Real Estate Taxes: 3.00%

na na

VACANCY & COLLECTION LOSS RATES OF RETURNGlobal Vacancy - Office: 10.00% Internal Rate of Return: (Cash Flow) 8.50%Global Vacancy - Retail: 5.00% Internal Rate of Return: (Reversion) 8.50%Global Collection Loss: 0.50% Terminal Capitalization Rate: 7.25%

Reversionary Sales Cost: 1.00%Credit Tenant Overide Rate (Vacancy): 0.00% Basis Point Spread (OARout vs. OARin) 25 ptsCredit Tenant Overide Rate (Collection Loss): 0.00%

VALUATIONCAPITAL EXPENDITURES Market Value As-Is $214,372,591

Reserves for Replacement ($/SF): $0.25 LESS Curable Depreciation $0Other Deductions ($) $500,489 Adjusted Value $214,372,591

Rounded to nearest $1,000,000 $214,000,000Value $/SF $232.67

Compiled by Cushman & Wakefield of Illinois, Inc.

CASH FLOW ASSUMPTIONS (AS STABILIZED):

DISCOUNTED CASH FLOW MODELING ASSUMPTIONSVALUATION SCENARIO: Prospective Market Value Upon StabilizationADDITIONAL ASSUMPTIONS VALUATION

Holding Period: 8 Years Prospective Market Value Upon Stabiliz $248,247,857Projection Period: 9 Years LESS Curable Depreciation $0Start Date: 12/1/2014 Adjusted Value $248,247,857Internal Rate of Return: (Cash Flow) 8.25% Rounded to nearest $1,000,000 $248,000,000Internal Rate of Return: (Reversion) 8.25% Value $/SF $269.64Terminal Capitalization Rate: 7.25%Reversionary Sales Cost: 1.00%


DISCOUNTED CASH FLOW SUMMARY:

ANNUAL CASH FLOW REPORT Annual AnnualSullivan Center Stabilized Growth Growth

1 2 3 4 5 6 7 8 9 10 11 Year 1 - Year 3 - For the Years Beginning Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22For the Years Ending Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 Nov-20 Nov-21 Nov-22 Nov-23 Year 10 Year 10

Base Rental Revenue $22,749,243 $25,301,393 $25,796,156 $26,312,291 $26,841,757 $27,565,104 $28,225,306 $29,335,756 $30,437,382 $31,139,341 $32,169,870 3.55% 2.73%Absorption & Turnover Vacancy (2,738,326) (2,244,304) 0 (50,076) (23,669) (86,775) (441,215) (775,159) (58,052) (282,336) (1,039,250) -22.31%Base Rent Abatements (43,341) (798,088) (148,753) 0 0 0 0 0 0 0 0 -100.00% -100.00%Scheduled Base Rental Revenue $19,967,576 $22,259,001 $25,647,403 $26,262,215 $26,818,088 $27,478,329 $27,784,091 $28,560,597 $30,379,330 $30,857,005 $31,130,620 4.96% 2.68%

Common Area Maintenance 974,930 1,117,494 1,385,843 1,531,775 1,693,726 1,843,381 2,011,547 1,940,692 1,858,666 1,828,793 1,682,390 7.24% 4.04%Real Estate Taxes 1,165,622 1,527,925 1,669,066 1,778,930 1,895,601 2,010,619 1,969,010 1,824,300 1,713,058 1,830,137 1,701,103 5.14% 1.32%Total Reimbursement Revenue $2,140,552 $2,645,419 $3,054,909 $3,310,705 $3,589,327 $3,854,000 $3,980,557 $3,764,992 $3,571,724 $3,658,930 $3,383,493 6.14% 2.61%

Other Revenue $102,750 $105,834 $109,006 $112,278 $115,647 $119,114 $122,690 $126,368 $130,161 $134,065 $138,088 3.00% 3.00%

TOTAL GROSS REVENUE $22,210,878 $25,010,254 $28,811,318 $29,685,198 $30,523,062 $31,451,443 $31,887,338 $32,451,957 $34,081,215 $34,650,000 $34,652,201 5.07% 2.67%

General Vacancy 0 (135,036) (725,166) (750,862) (790,654) (804,693) (473,842) (841,409) (851,784) (725,387) (566,365) 0.00%Collection Loss (27,333) (34,959) (45,562) (47,400) (48,872) (50,255) (49,175) (52,524) (54,190) (54,434) (54,556) 7.95% 2.57%EFFECTIVE GROSS REVENUE $22,183,545 $24,840,259 $28,040,590 $28,886,936 $29,683,536 $30,596,495 $31,364,321 $31,558,024 $33,175,241 $33,870,179 $34,031,280 4.81% 2.74%

Real Estate Taxes 3,555,389 4,052,454 4,205,670 4,331,840 4,461,794 4,595,649 4,733,518 4,875,523 5,021,790 5,172,443 5,327,615 4.25% 3.00%Licenses 219,860 226,458 233,252 240,251 247,457 254,880 262,527 270,404 278,515 286,870 295,478 3.00% 3.00%Property Insurance 349,350 359,832 370,625 381,743 393,197 404,992 417,142 429,658 442,546 455,822 469,498 3.00% 3.00%Management Fee 665,506 745,208 841,218 866,609 890,506 917,894 940,929 946,742 995,258 1,016,104 1,020,939 4.81% 2.74%Administrative Fees 102,750 105,834 109,006 112,278 115,647 119,114 122,690 126,368 130,161 134,065 138,088 3.00% 3.00%Utilities 781,595 819,934 850,958 875,067 902,725 929,653 948,930 984,549 1,014,443 1,041,802 1,074,622 3.24% 2.93%Repairs and Maintenance 2,494,102 2,551,552 2,766,919 2,846,840 2,933,969 3,020,793 3,334,792 3,480,137 3,580,963 3,424,720 3,469,588 3.59% 3.09%Advertising and Promotion 25,689 26,457 27,253 28,069 28,911 29,780 30,671 31,593 32,540 33,517 34,522 3.00% 3.00%Payroll 1,027,500 1,058,325 1,090,076 1,122,776 1,156,460 1,191,154 1,226,889 1,263,695 1,301,607 1,340,654 1,380,875 3.00% 3.00%Non-Reimbursable 184,950 190,499 196,213 202,100 208,163 214,408 220,839 227,466 234,289 241,318 248,557 3.00% 3.00%TOTAL OPERATING EXPENSES 9,406,691$ 10,136,553$ 10,691,190$ 11,007,573$ 11,338,829$ 11,678,317$ 12,238,927$ 12,636,135$ 13,032,112$ 13,147,315$ 13,459,782$ 3.79% 3.00%

NET OPERATING INCOME $12,776,854 $14,703,706 $17,349,400 $17,879,363 $18,344,707 $18,918,178 $19,125,394 $18,921,889 $20,143,129 $20,722,864 $20,571,498 5.52% 2.57%

Reserve Allow ance 236,260 243,347 250,647 258,168 265,911 273,891 282,105 290,570 299,286 308,265 317,514 3.00% 3.00%Costs to Complete 500,489 0 0 0 0 0 0 0 0 0 0 -100.00%Tenant Improvements 3,510,065 9,330,167 0 122,635 57,964 212,780 1,130,073 2,115,489 142,168 234,996 1,559,602 -25.95%Leasing Commissions 386,334 6,186,839 0 97,740 46,197 169,586 1,448,157 2,766,403 113,308 541,934 1,892,215 3.83%TOTAL LEASING & CAPITAL COSTS $4,633,148 $15,760,353 $250,647 $478,543 $370,072 $656,257 $2,860,335 $5,172,462 $554,762 $1,085,195 $3,769,331 -14.89% 23.29%

CASH FLOW BEFORE DEBT SERVICE $8,143,706 ($1,056,647) $17,098,753 $17,400,820 $17,974,635 $18,261,921 $16,265,059 $13,749,427 $19,588,367 $19,637,669 $16,802,167 10.27% 2.00%

Implied Overall Rate 5.96% 6.86% 8.09% 8.34% 8.56% 8.82% 8.92% 8.83% 9.40% 9.67%Cash on Cash Return 3.80% -0.49% 7.98% 8.12% 8.38% 8.52% 7.59% 6.41% 9.14% 9.16%

DISCOUNTED CASH FLOW RESULTS (AS IS AND AS STABILIZED):

($5,000,000)

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

1 2 3 4 5 6 7 8 9 10 11

Net Operating Income Cash Flow Before Debt Service

T erminalC ap R ates 8.00% 8.25% 8.50% 8.75% 9.00%

6.75% 232,306,128$ 227,889,746$ 223,575,645$ 219,361,150$ 215,243,667$

7.00% 227,314,965$ 223,012,662$ 218,809,778$ 214,703,717$ 210,691,959$

7.25% 222,668,020$ 218,471,929$ 214,372,591$ 210,367,486$ 206,454,163$

7.50% 218,330,872$ 214,233,911$ 210,231,217$ 206,320,337$ 202,498,886$

7.75% 214,273,539$ 210,269,313$ 206,357,028$ 202,534,294$ 198,798,789$ IR R

R eversio n 8.00% 8.25% 8.50% 8.75% 9.00%

Cost o f Sale at Reversion: 1.00%Percent Residual: 57.96%

$ 214,000,000 $ 232.67

T erminalC ap R ates 7.75% 8.00% 8.25% 8.50% 8.75%

6.75% 267,240,060$ 263,223,312$ 259,283,714$ 255,419,564$ 251,629,202$

7.00% 261,309,427$ 257,401,620$ 253,568,717$ 249,809,066$ 246,121,059$

7.25% 255,787,803$ 251,981,423$ 248,247,857$ 244,585,499$ 240,992,788$

7.50% 250,634,287$ 246,922,573$ 243,281,721$ 239,710,170$ 236,206,402$

7.75% 245,813,256$ 242,190,101$ 238,635,980$ 235,149,378$ 231,728,815$ IR R

R eversio n 7.75% 8.00% 8.25% 8.50% 8.75%

Cost o f Sale at Reversion: 1.00%

Percent Residual: 60.01%

$ 248,000,000 $ 269.64

PRICING MATRIX - Prospective Market Value Upon StabilizationD isco unt R ate ( IR R ) fo r C ash F lo w

R o unded to nearest $ 1,000,000

PRICING MATRIX - Market Value As-IsD isco unt R ate ( IR R ) fo r C ash F lo w

R o unded to nearest $ 1,000,000

D I R E C T C A P I T A L I Z A T I O N A N A L Y S I S

PRO FORMA STABILIZED INCOME AND EXPENSES (YEAR 4)

SUMMARY OF REVENUE AND EXPENSESStabilized Year For Direct Capitalization: Year ThreeREVENUE Annual $/SF % of EGI

Base Rental Revenue $25,647,403 $27.89Subtotal $25,647,403 $27.89

Reimbursement RevenueCommon Area Maintenance $1,385,843 $1.51Real Estate Taxes 1,669,066 1.81

Subtotal $3,054,909 $3.32

Other Revenue 109,006 0.12POTENTIAL GROSS REVENUE $28,811,318 $31.33

Vacancy and Collection Loss (770,728) (0.84)EFFECTIVE GROSS REVENUE $28,040,590 $30.49 100.00%

OPERATING EXPENSESLicenses $233,252 $0.25 0.83%Property Insurance 370,625 0.40 1.32%Management Fees 841,218 0.91 3.00%Administrative Fees 109,006 0.12 0.39%Total Utilities 850,958 0.93 3.03%Repairs and Maintenance 2,766,919 3.01 9.87%Advertising and Promotion 27,253 0.03 0.10%Payroll 1,090,076 1.19 3.89%Non-Reimbursable 196,213 0.21 0.70%

Total Operating Expenses $6,485,520 $7.05 23.13%Real Estate Taxes $4,205,670 $4.57 15.00%TOTAL EXPENSES $10,691,190 $11.62 38.13%NET OPERATING INCOME $17,349,400 $18.86 61.87%Compiled by Cushman & Wakefield of Illinois, Inc.

DIRECT CAPITALIZATION RESULTS (AS IS AND AS STABILIZED)

DIRECT CAPITALIZATION METHOD

NET OPERATING INCOME $17,349,400 $18.86Sensitivity Analysis (0.25% OAR Spread) Value $/SF NRABased on Low-Range of 6.75% $257,028,148 $279.46Based on Most Probable Range of 7.00% $247,848,571 $269.48Based on High-Range of 7.25% $239,302,069 $260.18Preliminary Value $247,848,571 $269.48Rounded to nearest $1,000,000 $248,000,000 $269.64

$247,848,571ADJUSTMENTS TO PRELIMINARY VALUE

LESS FV-PV Spread ($30,848,571) ($33.54)LESS Curable Depreciation $0 $0.00Indicated Value $217,000,000 $235.93

Rounded to nearest $1,000,000 $217,000,000 $235.93Compiled by Cushman & Wakefield of Illinois, Inc.

Prospective Market Value Upon Stabilization

PRESENT VALUE CALCULATIONProspective Value (indicated by the Income Approach) $247,848,571Absorption Period (years) 2.00 Discount Rate 8.50%

Number of Periods

Cash Flow Amount

Discount Factor

Discounted Value

Year 1 Cash Flow 1 $8,143,706 0.92166 $7,505,720Year 2 Cash Flow 2 ($1,056,647) 0.84946 ($897,574)

$6,608,145

$210,536,279

$6,608,145

Total $217,144,425$217,000,000


Present value of estimated Prospective Market Value Upon Stabilization discounted @ 8.5% over a 2-year holding period.

Plus: The present value of interim cash flows, including all costs, over the 2-year holding period discounted annually @ 8.5% discount rate.

Rounded to nearest $1,000,000

Market Value As-Is

INCOME APPROACH RECONCILIATION

INCOME CAPITALIZATION APPROACH CONCLUSION

MethodologyMarket Value

As-Is PSFProspective Market Value

Upon Stabilization PSFYield Capitalization $214,000,000 $232.67 $248,000,000 $269.64Direct Capitalization $217,000,000 $235.93 $248,000,000 $269.64

Income Approach Conclusion $216,000,000 $234.85 $248,000,000 $269.64Compiled by Cushman & Wakefield of Illinois, Inc.

S A L E S C O M P A R I S O N A P P R O A C H

SUMMARY CHART

PROPERTY INFORMATION TRANSACTION INFORMATION

No.Property NameAddress, City, State Land (SF)

Building NRA

Year Built Stories Class Grantor Grantee

Sale Date Sale Price $/SF NOI/SF OAR Occup. Comments

1 River Center 111 North Canal Street Chicago, IL

57,300 824,783 1916 19 B River Center, LLC

Sterling Interest, LLC

12/12 $100,000,000 $121.24 $6.78 5.59% 63% The property encompasses an entire city block betw een Randolph and Washington Streets. The improvements w ere originally constructed in 1916 to 1918 and w ere originally built as a manufacturing building that w as converted to office use in the 1990s. The buyer plans on an $8.0 renovation for updating the main lobby, modernizing elevator cabs, and improving common corridors and restrooms on multi-tenant f loors creating unique off ice space as w ell as to construct an outdoor balcony and roof deck amenities.

2 300 West Adams Street Chicago, IL

29,919 252,857 1928 12 B 300 West Adams LLC

Terra Funding - Midw est LLC

9/12 $51,000,000 $201.70 $11.86 5.88% 98% This is the sale of a Chicago CBD off ice building. The property w as constructed in 1928 as a 12-story office building w ith street level retail, combined the office and retail space consists of 252,857 net rentable square feet. The building is currently 98.2 percent economically occupied and 93.6 percent physically occupied, w ith 37.8 percent of the space (95,551 square feet) leased to four tenants under mid-to-long term leases.

3 Civic Opera 20 North Wacker Drive Chicago, IL

43,560 915,052 1929 44 B Civic Opera LP (Tishman Speyers)

SL Civic Wacker LLC

1/12 $126,000,000 $137.70 $10.05 7.30% 75% This comparable is located in the West Loop. The w estern portion of the property offers view s of the Chicago River. The property is w ithin blocks from Union Station and Northw estern Station. The tw o largest tenants include: Cassiday Schade (68,202 SF) and Rockw ood Company (33,110 SF). This w as an off market transaction to a high net w orth buyer, SL Civic Wacker LLC (Berkley Properties).

4 600 West Chicago Avenue Chicago, IL

608,533 1,571,386 1908 8 B 600 West Chicago

Associates, LLC

CW 600 West Chicago LLC

8/11 $390,000,000 $248.19 $17.37 7.00% 94% This comparable represents the sale of a 1,571,386 square foot building in Chicago`s River North submarket. The building w as 94.2 percent occupied at the time of sale. The listing broker indicated the buyer assumed 265 million in f inancing at undisclosed terms. The building w as redeveloped in 2001 w ith a 165 million dollar renovation, and is anchored by internet coupon company, Groupon Inc.

5 200 South Wacker Drive 200 South Wacker Drive Chicago, IL

30,000 754,751 1981 40 B Behringer Harvard REIT I,

Inc.

Equity Group Investment,

LLC

6/11 $106,111,111 $140.59 $10.26 7.30% 71% As part of a recapitalization, the grantor sold a 90% stake in the property to the grantee for $95,500,000. The grantor w ill retain a 10% ow nership in the property. The sale price reported ref lects an adjusted gross up 100 percent intertest price. Reportedly, this w as a distressed sale. The grantor w ill reportedly spend $40 million to upgrade the property. Main tenants include HQ Global, University of Illinois, and BC Zeigler.

6 The Heritage Shops At Millennium Park 55 East Randolph Drive Chicago, IL

- 105,449 2004 4 A Heritage at Millennium Park

Commercial

Acadia Heritage Shops

LLC

4/11 $31,600,000 $299.67 $23.67 7.90% 95% This is the 4-level retail and office component of a 57-story, 356-unit residential condo tow er in the Chicago CBD adjacent to Millennium Park and the Theater District. The property includes 25,253 SF of pedw ay retail, 26,271 SF of street retail, 33,371 SF of 2nd level health club space and 20,544 SF of 3rd f loor office. LA Fitness had 14 years of term remaining and McDonald`s had 33 years of term. Retail tenants include Lane Bryant, Ann Taylor Loft, Subw ay and Fifth Third Bank. Total occupancy w as 75%; how ever, the retail component w as 95% leased and the remaining vacancy w as 3rd f loor office. The buyer did not attribute value to the vacant off ice space.

STATISTICSLow 29,919 105,449 1908 4 4/11 $31,600,000 $121.24 $6.78 5.59% 63%High 608,533 1,571,386 2004 44 12/12 $390,000,000 $299.67 $23.67 7.90% 98%Average 153,862 737,380 1944 21 12/11 $134,118,519 $191.51 $13.33 6.83% 83%


SUMMARY OF IMPROVED SALES

SALES COMPARISON ANALYSIS SUMMARY

IMPROVED SALE ADJUSTMENT GRID ECONOMIC ADJUSTMENTS (CUMULATIVE)

No.Price PSF &

Date

PropertyRights

ConveyedConditions

of Sale FinancingMarket (1)

Conditions Subtotal Economics Other

Adj.PricePSF Overall

1 $121.24 Leased Fee Arm's-Length None Inferior $124.28 Inferior Similar $248.55 Inferior12/12 0.0% 0.0% 0.0% 2.5% 2.5% 100.0% 0.0% 100.0%





6 $299.67 Leased Fee Arm's-Length None Inferior $312.26 Superior Similar $249.81 Superior4/11 0.0% 0.0% 0.0% 4.2% 4.2% -20.0% 0.0% -20.0%

STATISTICS $121.24 - Low Low - $248.55$299.67 - High High - $331.75$191.51 - Average Average - $273.48

Compiled by Cushman & Wakefield of Illinois, Inc.(1) Market Conditions AdjustmentCompound annual change in market conditions: 1.00%Date of Value (for adjustment calculations): 6/1/15

SALES COMPARISON APPROACH CONCLUSION Note - We have concluded slightly below the average per square foot indication in light of the subject age, and the associated risk with capital costs going forward relative to the some of newer sales.

Indicated Value per Square Foot NRA $270.00Net Rentable Area in Square Feet x 919,745Preliminary Value $248,331,150

$248,000,000Per square foot $269.64

$248,331,150

Market Value As IsProspective Market Value Upon Stabilization $248,000,000

LESS FV-PV Spread ($30,331,150)

LESS Curable Depreciation $0Indicated Value $218,000,000

$218,000,000Per square foot $237.02


APPLICATION TO SUBJECT


Prospective Market Value Upon Stabilization


APPLICATION TO SUBJECT

PRESENT VALUE CALCULATIONProspective Value (indicated by the Sales Approach) $248,331,150Absorption Period (years) 2.00 Discount Rate 8.50%

Number of Periods

Cash Flow Amount

Discount Factor

Discounted Value

Year 1 Cash Flow 1 $8,143,706 0.92166 $7,505,720Year 2 Cash Flow 2 ($1,056,647) 0.84946 ($897,574)

$6,608,145

$210,946,208

$6,608,145

Total $217,554,354$218,000,000


Market Value As-IsPresent value of estimated Prospective Market Value Upon Stabilization discounted @ 8.5% over a 2-year holding period.

Plus: The present value of interim cash flows, including all costs, over the 2-year holding period discounted annually @ 8.5% discount rate.


F I N A L R E C O N C I L I A T I O N We gave most weight to the Income Capitalization Approach because this mirrors the methodology used by purchasers of this property type.

FINAL VALUE RECONCILIATIONMarket Value

As-Is PSFProspective Market Value

Upon Stabilization PSFDate of Value January 4, 2012 January 1, 2015Sales Comparison Approach Percentage Adjustment Method $218,000,000 $237.02 $248,000,000 $269.64Conclusion $218,000,000 $237.02 $248,000,000 $269.64

Income Capitalization Approach Yield Capitalization $214,000,000 $232.67 $248,000,000 $269.64 Direct Capitalization $217,000,000 $235.93 $248,000,000 $269.64Conclusion $216,000,000 $234.85 $248,000,000 $269.64

Final Value Conclusion $216,000,000 $234.85 $248,000,000 $269.64Compiled by Cushman & Wakefield of Illinois, Inc.


A D D E N D U M D : Q U A L I F I C A T I O N O F T H E A P P R A I S E R S

PROFESSIONAL QUALIFICATIONS John Mackris, MAI, MRICS, Senior Director Valuation & Advisory Senior Director, Cushman & Wakefield of Illinois, Inc., Valuation & Advisory, a full service real estate organization specializing in appraisal and consultation. Mr. Mackris is part of Cushman & Wakefield’s National Retail Industry Group. Mr. Mackris has been active in the appraisal of real estate since 1996 as an appraiser with Terzo & Bologna, Inc., a Midwest regional appraisal and consulting firm in Detroit, Michigan (1996 - 1998) and Cushman & Wakefield of Illinois, Inc. since 1998. Experience Appraisal experience includes the valuation of income-producing real estate on a national basis. The types of properties appraised include: land, general and medical office, restaurants, retail shopping centers, regional malls, lifestyle centers, multi-family residential, industrial, residential subdivision developments, and data centers. Additional real estate experience includes the acquisition, renovation, and liquidation of income producing residential properties. Education Post-graduate work in Urban Planning, 1998 Wayne State University, Detroit, Michigan Bachelor of Arts in Economics, 1996 University of Michigan, Ann Arbor, Michigan Appraisal Education Appraisal Principles - 110 Real Estate Appraisal Procedures - 120 Residential Case Study - 210 Basic Income Capitalization - 310 General Applications - 320 Standards of Professional Practice Part A – 410 Advanced Income Capitalization - 510 Highest and Best Use and Market Analysis - 520 Report Writing and Valuation Analysis – 540 Advanced Applications – 550 Memberships and Professional Affiliations • Member of the Appraisal Institute (MAI) No. 12478 • Member of the Royal Institute of Chartered Surveyors (RICS) • Member of the Chicago Real Estate Council • Member of the International Council of Shopping Centers (ICSC) Licenses • Illinois State Certified Real Estate Appraiser No. 553.001360

PROFESSIONAL QUALIFICATIONS John Mackris, MAI, MRICS

• Indiana State Certified Real Estate Appraiser No. CG40300530 • Iowa State Certified Real Estate Appraiser No. CG02467 • Kentucky State Certified Real Estate Appraiser No. 004288 • Louisiana State Certified Real Estate Appraiser No. G2809 • Michigan State Certified Real Estate Appraiser No. 1201068266 • Minnesota State Certified Real Estate Appraiser No. AP-20403549 • Missouri State Certified Real Estate Appraiser No. 2003007946 • Wisconsin State Certified Real Estate Appraiser No. 1509-010 In addition, Mr. Mackris acted as a guest presenter in 2009 for RELA (Real Estate Lenders Association) regarding the State of the Chicago Retail Market.

Documents

Cushman & Wakefield Ltd. · 2013. 3. 13. · Avro industrial portfolio of 62 industrial properties (3.4M sq ft) across Canada listed by RBC (23 properties or 1.75M sq ft in Montreal)