forumfall 2008

vol. 13No 3

a Newsletter from the Caisse de dépôt et plaCemeNt du QuébeC

real estate group

iNdiaN strategy Calls for a loNg-term preseNCe

with a geographiCally diversified portfolio that iNCludes maNy assets iN QuébeC, the real estate group has deCided to iNCrease its iNvestmeNts iN emergiNg markets aNd has set its sights oN iNdia. by iNvestiNg iN CouNtries whose eCoNomiC growth exCeeds QuébeC’s, the group CaN geNerate returNs that help depositors reaCh their objeCtives. early iN 2008, it begaN takiNg steps toward establishiNg a stroNg preseNCe iN that regioN of the world. forum sketChes the broad outliNes of the overall strategy aNd the progress made to date.

2 the iNvestmeNt strategy iN iNdia

4 real estate iNvestmeNts, developmeNt aNd sales

8 appoiNtmeNts aNd strategiC ChaNges

10 CoNNeCtioNs

The Real Estate Group’s approach to India calls for a long-term presence, a strategy that is based on several factors: the country has 1.1 billion inhabitants, one-half of them under the age of 25, a rapid population growth rate of 2% a year, an enormous labour force, low unemployment, a rising middle class and a sustained economic growth rate, with the years from 2002 to 2007 representing a historic peak. Even though India’s economy has been slowing since the start of the year, partially because high oil prices have caused an inflationary spiral, the long-term outlook is attractive. India’s brute strength lies in its grey matter, and the country is still a prime outsourcing destination for foreign companies looking to cut their costs significantly. Moreover, the supply of quality buildings cannot keep pace with demand, so India offers considerable property development potential.

That is why the Real Estate Group has opted to create subsidiaries in India, where its three member companies each have a team in place. The objec-tive is to establish contacts with local partners, so as to diversify the port-folio across various products and cities.

iNdia’sfast-growiNg eCoNomyaNd exCelleNt poteNtial are

aCCeleratiNgimplemeNtatioN of the iNvestmeNt strategy.

iN this

issue

Mumbai Pune

Chandigarh

Ahmedabad Kolkata

Nagpur

Hyderabad

Bangalore Chennai

Indore

Delhi

IndIA

p_ 2

/ hotel project in ahmedabad.

/ green acres residential project in ahmedabad.

In addition to its economic growth, which remains promising in a long term perspective, and its rapid population growth, India offers many advantages to Western investors. The country has a free-market economy, despite certain aspects of government regulation, such as restrictions on direct foreign invest-ment. Moreover, English is the language of business, and property rights are governed by common law.

Moreover, the country has a crying need for property development. In the office building sector, for example, Mumbai has a deficit of several million square feet to make up. Moreover, buildings are held by a multitude of owners, according to a principle similar to that of condominium apartments, and their management does not meet the needs of foreign companies. Throughout the country, the shopping centre market is for all practical purposes embryonic, since it is less than 10 years old and has very few quality properties. The residential sector has a shortage of more than 20 million housing units, despite the intense construction of recent years. Lastly, in the hotel sector, 100,000 rooms will have to be added to accommodate the tourists and business travellers who are flocking to the country.

a promisiNg market that is Not without drawbaCks

The business opportunities could in fact be numerous. Most of India’s large local developers are publicly traded, and the slowdown that began early in the year has pushed their share prices down sharply. Many development projects have been put on ice, which has put the industry further behind in its attempts to meet demand.

Despite a context that could generate many opportunities, patience and caution are vital. In India, it is very difficult to obtain reliable, up-to-date market intelli-gence and information for due diligence. India has no centralized land title registry. Investors are obliged to do their own title searches, conducting a veritable inves-tigation for each deal. Lastly, finding trustworthy local partners who have the right experience and meet the governance criteria of an institutional investor involves much time and effort, especially as part-nership is the cornerstone of the Real Estate Group’s foreign investment strategy.

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a diversified loCal preseNCe

During the summer, the Real Estate Group’s three companies deployed resources in New Delhi. for SITQ, this initiative has involved the creation of SITQ India, which already has a staff of eight (details on page 4). Ivanhoe Cambridge has opened an office in New Delhi and appointed Phil Mcarthur to the position of Senior vice-President, India, in the first quarter of 2008. Claude Lavigne, a former Cadim employee who was based in Montréal, has agreed to take charge of its subsidiary’s operations in India and will soon recruit a team consisting of four to six members.

SITQ is focusing on the business districts in New Delhi and Mumbai for its invest-ments. The neighbourhoods it is looking at in these cities offer excellent diversi-fication – they are home to government bodies, financial services companies, and service and technology companies – ensuring resilience during downturns.

Even though the Group is relatively new to India, several promising deals have already been struck this year. Cadim has formed a partnership with the Indian subsidiary of Pacifica, a U.S. company, and has seven development projects in progress: three hotels, three residential complexes – one of them 95% sold – and a technology park. four new projects are at the due diligence stage and should be added to the others by the end of September.

Cadim has also made a commitment to invest $250 million in the $600-million India Property fund, along with its two partners, vornado Realty Trust, one of the largest property owners and managers in the United States, and The Chatterjee Group, which specializes in property financing, investment and development in India. Three projects are in progress: a multipurpose complex in the New Delhi suburb of Manesar, an office building in Mumbai and a residential complex in Pune.

Lastly, SITQ is concluding the acquisition of a stake in a New Delhi office building whose construction should wrap up in

iNitiatives bear fruit

The Company would like to make its brand by building class-a office buildings that meet the needs of large multinationals. It will retain ownership of them, although it may occasionally sell all or part of certain buildings. In this way, it intends to create a portfolio of quality buildings that it will hold for the long term.

as for Ivanhoe Cambridge, it has set about developing relationships with partners who are well versed in the local markets and publicizing its expertise. The Company intends to have a strong long-term presence in India and will put in place a team with all the requisite shopping centre expertise. The investment strategy calls for property development in several cities, since the country has very few quality centres. Moreover, as a result of the current economic slowdown, about one-half of the country’s 300 shopping centre construction projects have been put on hold. The strategy also calls for investment in existing centres in need

of repositioning. over the long term, the objective is to build a portfolio of quality shopping centres, to manage it actively and to be regarded as a developer of choice by local and foreign retailers.

as for Cadim, it is partial to an investor approach that involves finding credible partners with a solid team in place and then taking significant stakes in their local investments. Two partnerships have been concluded since the start of 2008 and others could be added in the years to come. Since the development projects carried out with existing partners are becoming more numerous, Cadim has decided to set up a local team to ensure careful monitoring of its investments.

october. other transactions are also under study, and one could be concluded by year-end.

In short, the business development initiatives of recent months are bearing fruit, especially since the current slow-down is causing property values to drop and creating a favourable climate for investment. The Real Estate Group’s presence in India has therefore taken off, and the business office it has opened for representatives of the three companies shows it is there for the long term.

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iN brief

real estate iNvestmeNts, developmeNt aNd sales

aCQuisitioN of four shoppiNg CeNtres iN brazil

Ivanhoe Cambridge and Brazil-based ancar have acquired São Marcos Real Estate Enterprises (São Marcos), the co-owner of four high-quality shopping centres in Brazil, a flourishing and promising market. São Marcos owns 51% of Botafogo Praia Shopping (15,600 m2, Rio de Janeiro), 100% of the entertainment area of the Downtown Complex (130,000 m2, Rio de Janeiro), 50% of Shopping Interlagos (105,000 m2, São Paulo) and 50% of Centervale Shopping (45,150 m2, São José dos Campos, State of São Paulo).

Ivanhoe Cambridge also increased its interest in the development and management firm ancar Gestão from 20% to 50%.

This new acquisition positions the joint venture formed by Ivanhoe Cambridge and ancar among the five largest shopping centre companies in Brazil, with interests in and/or management responsibilities for 15 shopping centres in five regions of the country.

/ downtown Complex, rio de janeiro.

the Caisse

/ richard guay

appoiNtmeNt of the Caisse’s New presideNt

on September 5, Pierre Brunet, Chairman of the Caisse, announced the appointment of Richard Guay as President and Chief Executive officer. Mr. Guay had been holding this position on an interim basis since the departure of Henri-Paul Rousseau on May 30.

Mr. Guay joined the Caisse in 1995 and has a full understanding of the institution, its employees and its depositors, as well as solid investment and risk management expertise. He has a Ph.D. in financial Economics and a Master of Economics from Queen’s University, as well as a Master of finance from HEC Montréal. He has held various positions at the Caisse, including Chief Investment officer (2006-2008), Executive vice-President, Risk Management and Depositors’ accounts Management (2002-2006) and vice-President, Depositors’ accounts Management (1998-2002). He has also taught finance, portfolio management and capital markets theory at HEC Montréal.

Mr. Guay, whose five-year mandate is renewable, is also a member of the Caisse’s Board of Directors.

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real estate iNvestmeNts, developmeNt aNd sales

sitQ aCQuires a platform to iNvest iN iNdia

SITQ consolidated its operations in emerging markets in June with the acquisition of an Indian subsidiary known as SITQ India. The Company employees eight people whose mandate is to provide investment advisory services that will contribute to the expansion of the portfolio in the rapidly growing country. The team works in co-operation with the professionals at the other SITQ offices and includes three key managers: Manish Gupta, aditya Bhargava and Rick vogel.

This transaction is part of the new geographic expansion plan announced at the start of the year. It uses a proximity approach to successfully carry out the Company’s strategic plan.

/ from left: daniel fournier, sitQ; Nicolas rancourt, sitQ; aditya bhargava, sitQ india; richard vogel, sitQ india; denis epoh, sitQ; manish gupta, sitQ india.

sale of offiCe buildiNgs aNd distributioN CeNtres

SITQ took advantage of favourable market conditions and the demand for quality real estate with choice locations and high occupancy rates to sell several properties over the past few months:

/ The distribution centres built in partner-ship with verus Partners, namely Milton Crossing, phases I and II in Milton, ontario, and Eastlake Industrial Centre, Deerfoot South Trade Park and foothills Industrial Centre in Calgary, alberta;

/ The IBM Corporate Park complex, which consists of three office buildings in the Beltline district of Calgary;

/ Crestwood Corporate Centre, a complex of nine office buildings in Richmond, British Columbia;

/ an interest in 1250 Broadway, an office building in Midtown Manhattan.

/ rendering of the towers of eighth avenue place, in downtown Calgary.

eighth aveNue plaCe obtaiNs leed-Cs gold preCertifiCatioN

Last December, SITQ and its partners began construction of Eighth avenue Place in Calgary, a 50-story building that will have 93,000 m2 of offices and 5,110 m² of retail space when it is completed in 2011. Even though the underground parking garage was just starting to take shape, the building has already received LEED-CS Gold precertification.

This environmental certification recognizes the undertaking by owners and developers to obtain the credits necessary to earn LEED-CS (Core & Shell) for the base building, independent of the future interior design and fit out. This important feature will enhance the building’s appeal to potential tenants, since environmental concerns are increasingly important and the LEED seal is widely recognized.

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aCQuisitioN of a shoppiNg CeNtre iN russia

Ivanhoe Cambridge has acquired a 60% interest in vremena Goda shopping centre in Moscow, Russia. It owns the high-end centre, which opened its doors in November 2007, in partnership with Europolis, the austrian real estate fund manager that holds the remaining 40%.

Located on the busy Kutuzovskiy Prospekt boulevard, vremena Goda boasts more than 150 retailers occupying 30,000 m2 of gross leasable area. Its unique design gives it a distinctive character in the highly competitive Moscow market.

This initial Russian transaction marks a new step in Ivanhoe Cambridge’s strategy to expand and diversify. It’s also an excellent opportunity to gain a foothold in this market, which is the world’s third most attractive retail market for investors.

/ vremena goda offers many prestigious retailers, such as Chanel, Cartier, lacoste, hermès, montblanc and burberry, as well as a vip cinema complex, a globus gourmet epicurean grocery and trendy restaurants.

CrossiroN mills will opeN to the publiC iN less thaN a year

CrossIron Mills will open to the public in Rocky view, north of Calgary, in august 2009. This new shopping destination, developed, owned and managed by Ivanhoe Cambridge, will require an investment of $400 million.

Based on a unique shopping and entertainment concept, CrossIron Mills will feature brand-name retailers, manufacturer outlets and theme restaurants that will appeal to albertans. already, 77% of the space for 200 specialty stores and 80% of the space for 17 anchor tenants are leased.

CrossIron Mills will also include a Racing Entertainment Centre developed and operated by the United Horsemen of alberta (UHa). The facility will feature a thoroughbred track, a standardbred track and a casino. Ivanhoe Cambridge and UHa own an additional 48.5 hectares that will be developed with a complementary offering that will include retail, service, hotel and office space.

/ Crossiron mills will offer many first-in-alberta stores and is sure to become the shopping destination of choice for many albertans and for tourists visiting the Calgary area.

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islazul opeNs its doors iN madrid

Ivanhoe Cambridge and Grupo Lar celebrated the official opening of Islazul, a shopping centre in the Carabanchel area of Madrid, Spain, on april 23. The Company was actively involved in the development of the 90,000-m2 centre.

Islazul’s exceptional offering includes retail, entertainment and dining establishments that are already appealing to large numbers of Madrilenians – more than a million visitors in the first three months. Islazul’s innovative architecture offers a user-friendly shopping environment and will maintain energy consumption at an unusually low level for this type of structure.

This choice property is the largest shopping centre in the Spanish capital and the fourth-largest in the autonomous Community of Madrid. Islazul consolidates Ivanhoe Cambridge’s presence in Europe and will help create value for its shareholders.

/ islazul offers 180 stores, 20 restaurants and a 13-screen cinema complex.

/ ivanhoe Cambridge is investing $45 million to redevelop and update la place vertu, in greater montréal.

redevelopmeNt of la plaCe vertu attraCts New retailers

La Place vertu, an Ivanhoe Cambridge property in the Montréal Borough of Saint-Laurent, has been undergoing a major facelift since the end of 2007. To date, several key steps in the $45-million development have been completed:

/ The expanded and fully revamped food court has been open to the public since april 1;

/ Marché adonis, a food-store chain selling mainly Middle Eastern foods, will open its fourth and largest store in the centre in December 2008;

/ Several retailers (Winners, Blü, Starbucks Coffee, Claire france, Dans un Jardin, I&f and Urban Planet) are slated to open between fall 2008 and spring 2009, and will further enhance the centre’s retail mix.

The project, which will continue until the spring of 2009, also calls for the expansion of selected establishments and interior and exterior upgrades.

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daNiel fourNier, exeCutive viCe-presideNt aNd Chief iNvestmeNt offiCer of sitQ

In line with its plan for geographic decentralization, SITQ has created a new position to oversee all its investment operations. Daniel fournier joined the Company early in June as Executive vice-President and Chief Investment officer. His mission is to propose an innovative vision that will ensure growth of the Company’s overall portfolio and to optimize its return by acting on business opportunities on the world’s capital markets. His key responsibilities will be to develop and apply the Company’s acquisition, disposition and development strategy in co-operation with the Managing Directors responsible for Canada, the United States and Europe. over the short term, he will also have a mandate to co-ordinate and oversee SITQ’s expansion into emerging markets.

Mr. fournier is a graduate of oxford University and Princeton University and has extensive experience in the Canadian real estate sector. He has applied his talents as a strategist and entrepreneur at companies that include ogilvy and aCNG Capital, where he carried out mandates for major clients. In recent years, he has taken a keen interest in governance excellence. He sits on several boards of directors and is Chairman of Genivar Income fund.

appoiNtmeNts aNd strategiC ChaNges

/ daniel fournier

sitQ leases almost all of tour t1 aNd immeuble b iN paris

a few months before construction wraps up, Tour T1 and Immeuble B, in the La Défense district of Paris, are almost fully leased. Starting January 1, 2009, for 12 years, Groupe Suez will occupy Tour T1 in its entirety (67,380 m2), as well as a major portion of Immeuble B (8,480 m2). This major lease agreement has sealed the success of this enormous development project, which is the sec-ond carried out in La Défense by SITQ and its partners.

/ tour t1 will host its new tenants in 2009.

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appoiNtmeNts at presima

vincent Lépine has been appointed Chief Investment officer and Strategist of Presima, a portfolio management company that is part of the Caisse Real Estate Group and specializes in real estate securities traded on the world’s stock exchanges. He is responsible for managing portfolios of global real estate securities and the related investment strategies.

Mr. Lépine has amassed nearly 20 years of experience in the fields of macroeconomics and international finance. He has held positions that include vice-President, Research, Global asset allocation, at CIBC Global asset Management, and assistant Chief Economist at National Bank financial. He has also held various functions as an econo-mist at the Department of finance in ottawa.

Presima has also retained the services of Michel Bastien as a Management adviser. During his career, Mr. Bastien has held various positions related to portfolio manage-ment as well as several senior management positions at Montrusco Bolton. He has also worked in the same field at the Caisse de dépôt et placement du Québec.

/ vincent lépine

/ peter wong

peter woNg, viCe-presideNt, developmeNt, ChiNa, at ivaNhoe Cambridge

Since the summer, Ivanhoe Cambridge’s Shanghai office has had a vice-President, Development, China: Peter Wong. He will be responsible for development and construction of mixed-use projects now in the planning stage in Beijing, Tianjin and Kunming, as well as redevelopment or completion of properties already acquired.

Mr. Wong was born in Hong Kong and holds a Bachelor of Environmental Sciences from the University of Manitoba, an MBa from the Ivey School of Business at the University of Western ontario and a Master of Science (mechanical engineering) from Brunel University in London. He has extensive experience in the development and construction of mixed-use buildings in Canada, the United States and Hong Kong.

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CoNNeCtioNs

reNé tremblay Completes his maNdate as head of iCsC

René Tremblay completed his mandate as Chairman of the International Council of Shopping Centers (ICSC) in May. His year as the head of a vast organization with members around the world enabled him to see the shopping centre industry from a unique angle and to gain a new understanding of the global nature of its activities. fascinated by the spirit of innovation and enthusiasm of the people he met, Mr. Tremblay believes that the future holds unsuspected opportunities and that the trend to greener shopping centres will have an impact on property development around the world and will dictate how business is conducted in the future.

Cadim’s direCtor of eCoNomiC researCh aNd iNvestmeNt strategy reCeives a prestigious award

The american Real Estate Society (aRES) has awarded first prize, in the category Real Estate Investment / Portfolio Management – International, to a specialized paper by John-John D’argensio, Director, Economic Research and Investment Strategy, at Cadim. Mr. D’argensio co-authored “The real estate risk premium: a developed /emerging country panel data analysis” with frédéric Laurin, a Professor at the International School of Economics at Tbilisi State University in Georgia. The award comes with an invitation from the President of aRES to submit the paper to one of the two most prestigious real estate publications in the United States, the Journal of Real Estate Research and the Journal of Real Estate Portfolio Management.

st. eNoCh CeNtre hoNoured by iCsC iN europe

St. Enoch Centre, a shopping centre owned and managed by Ivanhoe Cambridge and located in Glasgow, Scotland, has won a Solal Marketing Silver award (Community Relations category) from the International Council of Shopping Centers (ICSC) for its Wish Upon A Star holiday project. The Solal awards recognize best practices and outstanding marketing performance in shopping centres across Europe. The extensive redevelopment project in progress at St. Enoch Centre should wrap up by the end of 2009.

/ rené tremblay, president and Chief executive officer of ivanhoe Cambridge, took part in about 20 conferences and travelled 180,000 km during his one-year term as Chairman of iCsC.

/ the objective of john-john d’argensio’s study is to identify the determinants of office capitalization rates for a panel of 52 countries.

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hoNours aNd distiNCtioNs for sitQ aNd its buildiNgs

at the BoMa International awards ceremony held in Denver, Colorado, on June 24, the Centre CDP Capital, a downtown Montréal office building owned and managed by SITQ, captured a coveted prize when it was named The office Building of the Year (ToBY) in the 500,000 to one Million Square feet category. This title is the most prestigious award in the commercial real estate industry in North america. It recognizes excellence in property management, operations, resource conservation and environmental awareness.

In addition, 33 arch Street in Boston recently won a prestigious Energy Star award for 2008. This distinction recognizes the building’s energy performance as being among the best in the United States. Lastly, the Urban Development Institute of Québec gave SITQ an honourable mention for its Go Green program as part of the 2008 awards for Excellence in Real Estate.

New system lights up the édifiCe priCe

To commemorate the 400th anniversary of the founding of Québec City, the Édifice Price, a heritage building belonging to SITQ and located in Québec City’s old town, unveiled its unique energy-efficient lighting system. The new system showcases the outstanding architecture of this art Deco property.

The concept developed by SITQ and its suppliers ensures energy efficiency and facilitates maintenance of the lighting system. It uses three times as many light-emitting-diode (LED) fixtures and projectors (278) as the previous system, but their energy consumption will be only slightly higher. Moreover, the new system provides more abundant illumination and offers an extended life that will minimize maintenance. This use of LED technology for building illumination is a first in Canada.

/ the Centre Cdp Capital is the second office building in Québec to be named the office building of the year in the boma international competition, and the only one in the past 20 years.

/ the new lighting system of the édifice price matches the original colours of the building materials as closely as possible and emphasizes architectural features that are not visible during the day.

portfolio at a glaNCe

metropolis at metrotowNShopping and entertainment complex Burnaby, British Columbia, Canada

area: 157,930 m2

owNer aNd maNager:Ivanhoe Cambridge

www.lacaisse.comTo obtain additional copies of this newsletter, please call 514 982-5658 or visit: www.lacaisse.com/forum

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ISSN 1709-7932 / ISSN online 1710-0313 Legal deposit, 3rd quarter 2008 Bibliothèque et archives nationales du Québec Poste-publications 41061005

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iNformatioN

real estate groupCentre CDP Capital1001, rue du Square-victoria Montréal, Québec H2Z 2a8CanadaTEL. 514 842-3261 1 866 330-3936www.lacaisse.com

65, rue Sainte-anne14e étageQuébec, Québec G1R 3X5CanadaTEL. 418 684-2334

CadimCentre CDP Capital1000, place Jean-Paul-RiopelleBureau a-300Montréal, Québec H2Z 2B6CanadaTEL. 514 875-3360www.lacaisse.com/cadim

sitQCentre CDP Capital1001, rue du Square-victoriaBureau C-200Montréal, Québec H2Z 2B1CanadaTEL. 514 287-1852www.sitq.com

ivaNhoe CambridgeCentre CDP Capital1001, rue du Square-victoriaBureau C-500Montréal, Québec H2Z 2B5CanadaTEL. 514 841-7600www.ivanhoecambridge.com

abroadparis, fraNCeSITQ SaS TEL. (33) 1 56 69 25 30Marc Doré (interim)marc.dore@sitq.com

fraNkfurt, germaNySITQ Deutschland GmbH TEL. (49) 69 299 20 86-0Marc Doré (interim)marc.dore@sitq.com

madrid, spaiNIvanhoe CambridgeTEL. (34) 91 700-5300Claude Dionclaudedion@ivanhoecambridge.com

brussels, belgiumSITQ EuropeTEL. (32) 2 644-4165Jean-Paul Mouzinsitq1000@wanadoo.be

luxembourgIvanhoe CambridgeTEL. (352) 27 62 06 93 41Jacqueline Kostjkost@ivanhoecambridge.com

shaNghai, ChiNaIvanhoe Cambridge TEL. (86) 21 5882-6999Brian Castlebcastle@ivanhoecambridge.com

CDP Real Estate China (Cadim)TEL. (86) 21 5882-6999Stéphane D. Tremblaystremblay@cdprechina.com

New delhi, iNdeCDP Real Estate advisory India Private LimitedTEL. (91) 114 664 1010Claude Lavigneclavigne@cdpreai.com

Ivanhoe CambridgeTEL. (91) 124 435 4256Phil Mcarthurpmcarthur@ivanhoecambridge.com

SITQ IndiaTEL. (91) 114 664 1001Manish Guptamanish.gupta@sitq.com