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GWL Realty Advisors is a leading Canadian real estate investment advisor providing comprehensive asset management, property management, development and specialized real estate services to pension funds and institutional clients.
With on-the-ground, in-depth expertise in core Canadian markets, GWL Realty Advisors is the trusted source for real estate advice and services. A strong fiduciary, the company’s mission is to deliver stable, long-term returns for its clients.
GWL Realty Advisors is a wholly-owned subsidiary of The Great-West Life Assurance Company.
2011YEAR IN REVIEW
For further information, visit our website at www.gwlra.com
Shown on front cover: 180 Queen St. West, Toronto, ON
In 2011, Canadian commercial real estate market fundamentals were stronger than the previous year. This market stability led to a continued return of investor confidence as evidenced by investment activity which rebounded to 2008 levels. GWL Realty Advisors’ total real estate assets under management increased from $11.4 billion in 2010 to $12.6 billion in 2011and our clients received double-digit returns.
GWL Realty Advisors concluded a disciplined sales and financing program to rebuild liquidity in the London Life Real Estate Fund (LLREF) and the Canadian Real Estate Investment Fund No. 1 (CREIF) and both Funds returned to business as usual in 2011 while at the same time delivering Fund returns of 18% and 17% respectively.
We continued to add value across all asset classes through capital upgrades and new development. 2011 saw an unprecedented amount of development activity; the company is currently directing 11 projects—with a total value in excess of $1.0 billion—that are either under way or about to begin construction.
Our portfolio experienced strong leasing activity across the country, especially in Western Canada. By the end of the year over five million square feet of new and renewal transactions were concluded resulting in an overall vacancy rate of 6.2%. Leasing for multi-residential assets also yielded positive results, achieving a stabilized vacancy of 1.5%.
By all measures, 2011 was a strong year for GWL Realty Advisors. We were fortunate to support and advance the objectives of our clients and their stakeholders. We thank our clients for their trust and continued confidence in our ability to serve their real estate investment needs.
PRESIDENT’S MESSAGE
Paul FinkbeinerPresident
CONTENTS:
• GWL Realty Advisors 2011 At A Glance
• Dispositions
• Acquisitions
• Development Services
• Multi-Residential Services
• Commercial Services
• Property Management
• Sustainability & Corporate Responsibility
• In the Community
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GWL REALTY ADVISORS 2011 AT A GLANCE
2010 2011
Pension Fund Advisory Services 5,420 6,564Canadian Real Estate Investment Fund No. 1 3,142 3,007London Life Real Estate Fund 1,553 1,591Great-West Life / London Life / Canada Life General Accounts 1,279 1,411Other 22 25
Total assets ($ millions) 11,416 12,598Total square feet (millions) 60.7 59.0Total number of assets 308 292
NUMBER OF ASSETS BY LOCATIONTOTAL REAL ESTATE ASSETS UNDER MANAGEMENT
PORTFOLIO RATES OF RETURN as at December 31, 2011 (IPD Basis - Non Leveraged)
45BRITISH COLUMBIA
60ALBERTA
7SASKATCHEWAN/MANITOBA
149ONTARIO
18QUEBEC
13ATLANTIC CANADA
British Columbia 17% or $2.1 billion
Alberta 30% or $3.8 billion
Saskatchewan/Manitoba 1% or $0.2 billion
Ontario 46% or $5.7 billion
Quebec 3% or $0.4 billion
Atlantic Canada 3% or $0.4 billion
ASSET ALLOCATIONOCCUPANCY %British Columbia 92
Alberta 96
Saskatchewan/Manitoba 97
Ontario 93
Quebec 95
Atlantic Canada 96
BY REGION
BY TYPE
Office 58% or $7.3 billion
Multi-Residential 22% or $2.7 billion
Industrial 11% or $1.4 billion
Miscellaneous 6% or $0.8 billion
Retail 3% or $0.4 billion
ASSET ALLOCATIONOCCUPANCY %Retail 98
Office 93
Industrial 90
Residential 98
15.9%
9.2%
10.1%
1 Year
5 Year
10 Year
Income Return
Capital Return
Total Return
6.1% 9.8%
6.3% 2.9%
6.9% 3.2%
Westmount Corporate Campus, Building 4, Calgary, AB First Canadian Centre, Calgary, AB
Sussex House, Ottawa, ON
Habitat for Humanity - In Toronto, staff took part in several build days. BOMA Calgary recognized the Calgary Team with many awards.
5140 Yonge Street, Toronto, ONGlenmore Gardens Tower 3, Calgary, AB
Stock Exchange Tower, Calgary, AB
Commerce Court, Richmond, BC
1188 West Georgia St., Vancouver, BC
Redefining service, ONE customer at a time.
We provide a proactive, personal management service for our tenants, and an exceptional experience that is founded on open communications and responsive, professional, friendly service.
Ryan Giesbrecht and Jillian Mann accept the TOBY Award of Excellence (1188 West Georgia St.).
4 COLOURPROCESS
34"w x 11"h
BTA 01 01
GWL1099
April 9, 2012
GWL1099_YearInReview2011_FNL.pdf
8.5"w x 11"h
DISPOSITIONSThe disposition of assets continued to be a key activity in rebuilding the cash balance of the segregated real estate funds. The company acted prudently in the selection of non-core assets slated for disposition and ensured the Funds’ diversification was maintained by type and region, while maximizing asset sale value.
In 2011, Canadian Real Estate Investment Fund No. 1 (CREIF) sold 21 properties, with total net cash proceeds of $367.3 million. London Life Real Estate Fund (LLREF) sold 10 properties, with net cash proceeds of $110.9 million.
ACQUISITIONSA number of successful acquisitions was completed in 2011. Assets were selected based on client diversification objectives, asset quality and financial underwriting.
The company successfully purchased the inaugural portfolio consisting of seven buildings for a new client. Other assets acquired in 2011 include:
• The Calgary Airfreight & Logistics Centre is a multi-tenant industrial complex consisting of 502,350 square feet on 33.03 acres adjacent to the Calgary International Airport.
• Sussex House is a 5-storey, 85-suite luxury rental property. Located in a quiet nook of ByWard Market in Ottawa, Sussex House is close to the Parliament Buildings, the U.S. Embassy, the Department of National Defense and Canadian Forces Headquarters and is steps away from the world-class National Gallery of Canada.
DEVELOPMENT SERVICESDuring 2011, the company continued to help its clients achieve their return and diversification objectives by developing high-quality properties to add to their portfolios. Since 1998, the company, on behalf of its clients, has completed nearly 60 development projects ranging in size from 26,000 square feet to over one million square feet. The company is currently directing 11 projects—with a total value in excess of $1.0 billion—that are either under way or about to begin construction. Current projects include downtown office buildings in Toronto and Ottawa, suburban office buildings in Calgary, a high-rise apartment building in Calgary, an industrial building in North Vancouver, and a four-star hotel in downtown Toronto.
Southcore Financial Centre, Toronto, ONSouthcore Financial Centre (SFC) is a complex that consists of two office towers and a hotel. The first phase, a 26-storey, 650,000 square foot office tower located at 18 York Street, was completed in Q3 2011. The building is currently 97% leased and the first tenants moved into the building during September. The second phase, located on Bremner Street, includes a 30-storey office tower with 700,000 square feet of rentable space, as well as a flagship 45-storey Delta Toronto hotel. The SFC complex is being built to a high level of sustainability with the two office towers targeting LEED® Gold certification. The entire complex is scheduled for completion in 2015.
90 Elgin Street, Ottawa, ON90 Elgin Street, a high-profile office tower in downtown Ottawa, broke ground in Q2 2011. This contract was awarded through competitive tender by the Government of Canada. As a public-private partnership project (the land is publicly owned), the Federal Government is fully committed to leasing 97% of the rentable space for 25 years. The building will be 17 storeys, with 600,000 square feet of rentable space. Full completion and occupancy for the Federal Government is scheduled for late 2014. The building is targeting LEED® Gold certification.
WestMount Corporate Campus, Calgary, ABWestMount is a 25-acre office campus designed to accommodate up to 750,000 square feet of office space in six buildings. Construction of the fourth building, a six-storey, 155,000 square foot office tower, started in Q3 2011 with completion scheduled for the end of 2012. LEED® Silver certification is expected. Construction of WestMount Court, a 30,000 square foot medical office and retail building, is set to commence in spring 2012 with completion scheduled for early 2013.
Glenmore Gardens Tower 3, Calgary, ABMunicipal approval was received in September 2011 for development of a third tower at Glenmore Gardens. The new 17-storey, 130-unit rental property is being added to an existing rental complex and will take advantage of surplus density and amenities within the existing property. Construction is scheduled to begin in Q1 2012, with completion scheduled for late 2013.
Northwoods Business Park, North Vancouver, BCConstruction on the fourth phase of Northwoods, two flex-space industrial buildings totaling 79,000 square feet, started during Q4 2011. The Park’s first three phases encompassing 275,000 square feet are 100% leased.
MULTI-RESIDENTIAL SERVICESIn 2011 the multi-residential asset class continued to be an important part of a balanced real estate portfolio. As of December 31, 2011, the company managed a multi-residential portfolio of 16,980 suites across Canada representing 22% of the company’s total assets under management. During 2011, this portfolio generated strong performance for our investor clients with 9.6% year-over-year net operating income.
Early in the year, the company completed acquisition of Sussex House in Ottawa, further expanding the company’s presence in that region and adding another Class A asset to the Ottawa portfolio. The new Vivere development (65 Lillian Street, Toronto), which was completed in Q1 2010, achieved stabilized occupancy after 12 months of lease up and has been fully occupied since June 2011.
Vertica Resident Services, the company’s multi-residential property management subsidiary, expanded its operations in the Greater Toronto Area by adding two new properties to its portfolio. With the inclusion of these properties, Vertica reported a year-end closing total of 7,802 suites under management.
COMMERCIAL SERVICESAfter stabilizing in 2010, Canadian office, industrial and retail markets were strong in 2011. In most major markets, especially Calgary, economic recovery yielded strong absorption and higher rental rates. Across the country, this allowed for five million square feet in new and renewal transactions.
In Western Canada, which represents 55% of the company’s managed commercial portfolio, the leasing team completed 230 transactions totaling 3 million square feet. In Alberta, the Calgary leasing team completed over 100 lease transactions totaling in excess of 2.25 million square feet, including: 50,000 square feet of non-contiguous low-rise space at Stock Exchange Tower; 118,000 square feet at First Canadian Centre; and an aggressive leasing strategy at Gulf Canada Square and Fifth and Fifth resulted in these buildings being fully leased at the close of 2011. In British Columbia, particularly within the Greater Vancouver market, leasing activity included: 100,000 square feet at Commerce Court in Richmond; 78,000 square feet at Knightsbridge Business Park; and 42,000 square feet at Crestwood Corporate Centre.
In Eastern Canada, which represents the remaining 45% of the company’s managed commercial portfolio, the leasing team completed transactions representing 2 million square feet. In Ontario, the Toronto leasing team completed over 100 transactions totaling 1.3 million square feet, including: two transactions of 175,800 and 93,500 square feet at 5140 Yonge Street; and the completion of a new development, 18 York Street at Southcore Financial Centre (SFC), which achieved a 96% pre-lease rate prior to opening in the fall of 2011. The company has an active leasing program underway to secure tenants for the second office tower at SFC, currently under construction.
Favourable market conditions that resulted in robust leasing activity across the country were enhanced by our strategy to implement capital upgrade projects designed to reduce operating expenses and improve building amenities. Priority was given to those projects that will improve returns to investors and customer satisfaction.
Significant capital upgrade projects that were either started or completed in 2011 include a revitalization project at Commerce Court in Toronto. This major multi-year project will focus on modernizing vacant space and strategic initiatives aimed at reducing operating costs while maintaining a building standard commensurate with its history and stature. Upgrades include a state-of-the-art HVAC system, lighting upgrades, and complex-wide retro commissioning of major building systems to enhance overall building performance.
Another major capital project under development in Toronto is an expanded food court at North York Centre. The new food court, now located on the main floor will feature a mix of traditional offerings along with other healthy food options.
PROPERTY MANAGEMENTOn behalf of its clients, GWL Realty Advisors property manages a portfolio of 40 million square feet of commercial space across Canada. Through the company’s signature customer service brand OneServe, continued focus on superior service was recognized with highly respected industry awards in 2011. GWL Realty Advisors received, on behalf of its clients, 61 BOMA BESt certifications as well as several awards of excellence regionally, including a TOBY Award of Excellence for Outstanding Building of the Year in the 100,000 to 250,000 square foot category (1188 West Georgia, Vancouver, BC) and BOMA Calgary Building of the Year Award in the 100,000 square foot category (Western Canadian Place, Calgary, AB). These awards are considered the “best of the best” in the commercial real estate industry in every facet of property management, from customer service to building operations.
The property management teams worked to control operating costs, ensure smooth building operation, and manage various capital projects. Across the country, property management teams managed $153 million in budgeted capital upgrade projects.
GWL Realty Advisors continued to increase the skill set of staff through personal development and training. A strong proponent of continuing education, the company developed and delivered numerous best-in-class programs including 27 in-house training sessions for property management staff. These sessions were developed to equip property staff with the knowledge to enhance the tenant experience through customer service that is proactive, open and personalized.
SUSTAINABILITY & CORPORATE RESPONSIBILITYOver the past year, the company’s continued focus on reducing operating costs and increasing the operational predictability of assets under management yielded positive results for building owners, tenants and residents. The company attributes success in this area to real estate owners who invest consistently and prudently in their assets and tenants and residents who actively participate in these programs.
To demonstrate its commitment to partner with and support tenants’ efforts to reduce energy, the company participates in various industry sustainability initiatives including CivicAction Alliance’s Toronto Race to Reduce program—targeting to reduce electricity and gas consumption annually by 2.5 percent from 2011 to 2014 for its Greater Toronto Area commercial portfolio of over eight million square feet. Further demonstrating a dedication to sustainability, the company expanded this program concept to all of its commercial properties across Canada and branded it the National Race to Reduce Challenge.
Examples of other notable initiatives and results in 2011 include:• Four multi-residential buildings received BOMA BESt certification
under a newly developed standard for multi-unit residential buildings. The efficiencies achieved from BOMA BESt certified buildings have a positive effect on the environment, financial returns for building owners and occupancy costs for residents.
• From 2007 to 2011 the company’s managed office portfolio recorded a 16.3% decrease in greenhouse gas emissions, while the multi-residential portfolio recorded a 20.9% reduction.
IN THE COMMUNITYAs an organization, GWL Realty Advisors continued to make a lasting social impact by inspiring positive change in the communities where employees live and work.
Habitat for HumanitySince 2004, the company has been committed to helping address the issue of affordable and environmentally responsible housing. As a result of the generosity of Great-West Life’s Key to Giving™ program and network of real estate suppliers, contractors and brokers, the company sponsored numerous build days and its eighth townhouse in Toronto. Similar programs were implemented across the country including participation for the first time from Montreal and Halifax offices. By the end of 2011, over 140 GWL Realty Advisors’ staff and suppliers had volunteered close to 850 hours.
United WayIn 2011, the company continued its long-standing support of the United Way and helped support a wide range of health and social services in communities across Canada. For a second consecutive year, GWL Realty Advisors’ President, Paul Finkbeiner chaired the Canada Life Campus Campaign in Toronto.
Community SupportThrough the generosity of Great-West Life’s Community Partners Support™ program, GWL Realty Advisors supported several community-based programs in key cities where its employees live and work, including: Covenant House Vancouver, Interval House, Juvenile Diabetes Research Foundation, Prostate Cancer Foundation, Ronald McDonald House, The Credit Valley Hospital Foundation and The Hospital for Sick Children Foundation.
Westmount Corporate Campus, Building 4, Calgary, AB First Canadian Centre, Calgary, AB
Sussex House, Ottawa, ON
Habitat for Humanity - In Toronto, staff took part in several build days. BOMA Calgary recognized the Calgary Team with many awards.
5140 Yonge Street, Toronto, ONGlenmore Gardens Tower 3, Calgary, AB
Stock Exchange Tower, Calgary, AB
Commerce Court, Richmond, BC
1188 West Georgia St., Vancouver, BC
Redefining service, ONE customer at a time.
We provide a proactive, personal management service for our tenants, and an exceptional experience that is founded on open communications and responsive, professional, friendly service.
Ryan Giesbrecht and Jillian Mann accept the TOBY Award of Excellence (1188 West Georgia St.).
4 COLOURPROCESS
34"w x 11"h
BTA 01 01
GWL1099
April 9, 2012
GWL1099_YearInReview2011_FNL.pdf
8.5"w x 11"h
DISPOSITIONSThe disposition of assets continued to be a key activity in rebuilding the cash balance of the segregated real estate funds. The company acted prudently in the selection of non-core assets slated for disposition and ensured the Funds’ diversification was maintained by type and region, while maximizing asset sale value.
In 2011, Canadian Real Estate Investment Fund No. 1 (CREIF) sold 21 properties, with total net cash proceeds of $367.3 million. London Life Real Estate Fund (LLREF) sold 10 properties, with net cash proceeds of $110.9 million.
ACQUISITIONSA number of successful acquisitions was completed in 2011. Assets were selected based on client diversification objectives, asset quality and financial underwriting.
The company successfully purchased the inaugural portfolio consisting of seven buildings for a new client. Other assets acquired in 2011 include:
• The Calgary Airfreight & Logistics Centre is a multi-tenant industrial complex consisting of 502,350 square feet on 33.03 acres adjacent to the Calgary International Airport.
• Sussex House is a 5-storey, 85-suite luxury rental property. Located in a quiet nook of ByWard Market in Ottawa, Sussex House is close to the Parliament Buildings, the U.S. Embassy, the Department of National Defense and Canadian Forces Headquarters and is steps away from the world-class National Gallery of Canada.
DEVELOPMENT SERVICESDuring 2011, the company continued to help its clients achieve their return and diversification objectives by developing high-quality properties to add to their portfolios. Since 1998, the company, on behalf of its clients, has completed nearly 60 development projects ranging in size from 26,000 square feet to over one million square feet. The company is currently directing 11 projects—with a total value in excess of $1.0 billion—that are either under way or about to begin construction. Current projects include downtown office buildings in Toronto and Ottawa, suburban office buildings in Calgary, a high-rise apartment building in Calgary, an industrial building in North Vancouver, and a four-star hotel in downtown Toronto.
Southcore Financial Centre, Toronto, ONSouthcore Financial Centre (SFC) is a complex that consists of two office towers and a hotel. The first phase, a 26-storey, 650,000 square foot office tower located at 18 York Street, was completed in Q3 2011. The building is currently 97% leased and the first tenants moved into the building during September. The second phase, located on Bremner Street, includes a 30-storey office tower with 700,000 square feet of rentable space, as well as a flagship 45-storey Delta Toronto hotel. The SFC complex is being built to a high level of sustainability with the two office towers targeting LEED® Gold certification. The entire complex is scheduled for completion in 2015.
90 Elgin Street, Ottawa, ON90 Elgin Street, a high-profile office tower in downtown Ottawa, broke ground in Q2 2011. This contract was awarded through competitive tender by the Government of Canada. As a public-private partnership project (the land is publicly owned), the Federal Government is fully committed to leasing 97% of the rentable space for 25 years. The building will be 17 storeys, with 600,000 square feet of rentable space. Full completion and occupancy for the Federal Government is scheduled for late 2014. The building is targeting LEED® Gold certification.
WestMount Corporate Campus, Calgary, ABWestMount is a 25-acre office campus designed to accommodate up to 750,000 square feet of office space in six buildings. Construction of the fourth building, a six-storey, 155,000 square foot office tower, started in Q3 2011 with completion scheduled for the end of 2012. LEED® Silver certification is expected. Construction of WestMount Court, a 30,000 square foot medical office and retail building, is set to commence in spring 2012 with completion scheduled for early 2013.
Glenmore Gardens Tower 3, Calgary, ABMunicipal approval was received in September 2011 for development of a third tower at Glenmore Gardens. The new 17-storey, 130-unit rental property is being added to an existing rental complex and will take advantage of surplus density and amenities within the existing property. Construction is scheduled to begin in Q1 2012, with completion scheduled for late 2013.
Northwoods Business Park, North Vancouver, BCConstruction on the fourth phase of Northwoods, two flex-space industrial buildings totaling 79,000 square feet, started during Q4 2011. The Park’s first three phases encompassing 275,000 square feet are 100% leased.
MULTI-RESIDENTIAL SERVICESIn 2011 the multi-residential asset class continued to be an important part of a balanced real estate portfolio. As of December 31, 2011, the company managed a multi-residential portfolio of 16,980 suites across Canada representing 22% of the company’s total assets under management. During 2011, this portfolio generated strong performance for our investor clients with 9.6% year-over-year net operating income.
Early in the year, the company completed acquisition of Sussex House in Ottawa, further expanding the company’s presence in that region and adding another Class A asset to the Ottawa portfolio. The new Vivere development (65 Lillian Street, Toronto), which was completed in Q1 2010, achieved stabilized occupancy after 12 months of lease up and has been fully occupied since June 2011.
Vertica Resident Services, the company’s multi-residential property management subsidiary, expanded its operations in the Greater Toronto Area by adding two new properties to its portfolio. With the inclusion of these properties, Vertica reported a year-end closing total of 7,802 suites under management.
COMMERCIAL SERVICESAfter stabilizing in 2010, Canadian office, industrial and retail markets were strong in 2011. In most major markets, especially Calgary, economic recovery yielded strong absorption and higher rental rates. Across the country, this allowed for five million square feet in new and renewal transactions.
In Western Canada, which represents 55% of the company’s managed commercial portfolio, the leasing team completed 230 transactions totaling 3 million square feet. In Alberta, the Calgary leasing team completed over 100 lease transactions totaling in excess of 2.25 million square feet, including: 50,000 square feet of non-contiguous low-rise space at Stock Exchange Tower; 118,000 square feet at First Canadian Centre; and an aggressive leasing strategy at Gulf Canada Square and Fifth and Fifth resulted in these buildings being fully leased at the close of 2011. In British Columbia, particularly within the Greater Vancouver market, leasing activity included: 100,000 square feet at Commerce Court in Richmond; 78,000 square feet at Knightsbridge Business Park; and 42,000 square feet at Crestwood Corporate Centre.
In Eastern Canada, which represents the remaining 45% of the company’s managed commercial portfolio, the leasing team completed transactions representing 2 million square feet. In Ontario, the Toronto leasing team completed over 100 transactions totaling 1.3 million square feet, including: two transactions of 175,800 and 93,500 square feet at 5140 Yonge Street; and the completion of a new development, 18 York Street at Southcore Financial Centre (SFC), which achieved a 96% pre-lease rate prior to opening in the fall of 2011. The company has an active leasing program underway to secure tenants for the second office tower at SFC, currently under construction.
Favourable market conditions that resulted in robust leasing activity across the country were enhanced by our strategy to implement capital upgrade projects designed to reduce operating expenses and improve building amenities. Priority was given to those projects that will improve returns to investors and customer satisfaction.
Significant capital upgrade projects that were either started or completed in 2011 include a revitalization project at Commerce Court in Toronto. This major multi-year project will focus on modernizing vacant space and strategic initiatives aimed at reducing operating costs while maintaining a building standard commensurate with its history and stature. Upgrades include a state-of-the-art HVAC system, lighting upgrades, and complex-wide retro commissioning of major building systems to enhance overall building performance.
Another major capital project under development in Toronto is an expanded food court at North York Centre. The new food court, now located on the main floor will feature a mix of traditional offerings along with other healthy food options.
PROPERTY MANAGEMENTOn behalf of its clients, GWL Realty Advisors property manages a portfolio of 40 million square feet of commercial space across Canada. Through the company’s signature customer service brand OneServe, continued focus on superior service was recognized with highly respected industry awards in 2011. GWL Realty Advisors received, on behalf of its clients, 61 BOMA BESt certifications as well as several awards of excellence regionally, including a TOBY Award of Excellence for Outstanding Building of the Year in the 100,000 to 250,000 square foot category (1188 West Georgia, Vancouver, BC) and BOMA Calgary Building of the Year Award in the 100,000 square foot category (Western Canadian Place, Calgary, AB). These awards are considered the “best of the best” in the commercial real estate industry in every facet of property management, from customer service to building operations.
The property management teams worked to control operating costs, ensure smooth building operation, and manage various capital projects. Across the country, property management teams managed $153 million in budgeted capital upgrade projects.
GWL Realty Advisors continued to increase the skill set of staff through personal development and training. A strong proponent of continuing education, the company developed and delivered numerous best-in-class programs including 27 in-house training sessions for property management staff. These sessions were developed to equip property staff with the knowledge to enhance the tenant experience through customer service that is proactive, open and personalized.
SUSTAINABILITY & CORPORATE RESPONSIBILITYOver the past year, the company’s continued focus on reducing operating costs and increasing the operational predictability of assets under management yielded positive results for building owners, tenants and residents. The company attributes success in this area to real estate owners who invest consistently and prudently in their assets and tenants and residents who actively participate in these programs.
To demonstrate its commitment to partner with and support tenants’ efforts to reduce energy, the company participates in various industry sustainability initiatives including CivicAction Alliance’s Toronto Race to Reduce program—targeting to reduce electricity and gas consumption annually by 2.5 percent from 2011 to 2014 for its Greater Toronto Area commercial portfolio of over eight million square feet. Further demonstrating a dedication to sustainability, the company expanded this program concept to all of its commercial properties across Canada and branded it the National Race to Reduce Challenge.
Examples of other notable initiatives and results in 2011 include:• Four multi-residential buildings received BOMA BESt certification
under a newly developed standard for multi-unit residential buildings. The efficiencies achieved from BOMA BESt certified buildings have a positive effect on the environment, financial returns for building owners and occupancy costs for residents.
• From 2007 to 2011 the company’s managed office portfolio recorded a 16.3% decrease in greenhouse gas emissions, while the multi-residential portfolio recorded a 20.9% reduction.
IN THE COMMUNITYAs an organization, GWL Realty Advisors continued to make a lasting social impact by inspiring positive change in the communities where employees live and work.
Habitat for HumanitySince 2004, the company has been committed to helping address the issue of affordable and environmentally responsible housing. As a result of the generosity of Great-West Life’s Key to Giving™ program and network of real estate suppliers, contractors and brokers, the company sponsored numerous build days and its eighth townhouse in Toronto. Similar programs were implemented across the country including participation for the first time from Montreal and Halifax offices. By the end of 2011, over 140 GWL Realty Advisors’ staff and suppliers had volunteered close to 850 hours.
United WayIn 2011, the company continued its long-standing support of the United Way and helped support a wide range of health and social services in communities across Canada. For a second consecutive year, GWL Realty Advisors’ President, Paul Finkbeiner chaired the Canada Life Campus Campaign in Toronto.
Community SupportThrough the generosity of Great-West Life’s Community Partners Support™ program, GWL Realty Advisors supported several community-based programs in key cities where its employees live and work, including: Covenant House Vancouver, Interval House, Juvenile Diabetes Research Foundation, Prostate Cancer Foundation, Ronald McDonald House, The Credit Valley Hospital Foundation and The Hospital for Sick Children Foundation.
Westmount Corporate Campus, Building 4, Calgary, AB First Canadian Centre, Calgary, AB
Sussex House, Ottawa, ON
Habitat for Humanity - In Toronto, staff took part in several build days. BOMA Calgary recognized the Calgary Team with many awards.
5140 Yonge Street, Toronto, ONGlenmore Gardens Tower 3, Calgary, AB
Stock Exchange Tower, Calgary, AB
Commerce Court, Richmond, BC
1188 West Georgia St., Vancouver, BC
Redefining service, ONE customer at a time.
We provide a proactive, personal management service for our tenants, and an exceptional experience that is founded on open communications and responsive, professional, friendly service.
Ryan Giesbrecht and Jillian Mann accept the TOBY Award of Excellence (1188 West Georgia St.).
4 COLOURPROCESS
34"w x 11"h
BTA 01 01
GWL1099
April 9, 2012
GWL1099_YearInReview2011_FNL.pdf
8.5"w x 11"h
DISPOSITIONSThe disposition of assets continued to be a key activity in rebuilding the cash balance of the segregated real estate funds. The company acted prudently in the selection of non-core assets slated for disposition and ensured the Funds’ diversification was maintained by type and region, while maximizing asset sale value.
In 2011, Canadian Real Estate Investment Fund No. 1 (CREIF) sold 21 properties, with total net cash proceeds of $367.3 million. London Life Real Estate Fund (LLREF) sold 10 properties, with net cash proceeds of $110.9 million.
ACQUISITIONSA number of successful acquisitions was completed in 2011. Assets were selected based on client diversification objectives, asset quality and financial underwriting.
The company successfully purchased the inaugural portfolio consisting of seven buildings for a new client. Other assets acquired in 2011 include:
• The Calgary Airfreight & Logistics Centre is a multi-tenant industrial complex consisting of 502,350 square feet on 33.03 acres adjacent to the Calgary International Airport.
• Sussex House is a 5-storey, 85-suite luxury rental property. Located in a quiet nook of ByWard Market in Ottawa, Sussex House is close to the Parliament Buildings, the U.S. Embassy, the Department of National Defense and Canadian Forces Headquarters and is steps away from the world-class National Gallery of Canada.
DEVELOPMENT SERVICESDuring 2011, the company continued to help its clients achieve their return and diversification objectives by developing high-quality properties to add to their portfolios. Since 1998, the company, on behalf of its clients, has completed nearly 60 development projects ranging in size from 26,000 square feet to over one million square feet. The company is currently directing 11 projects—with a total value in excess of $1.0 billion—that are either under way or about to begin construction. Current projects include downtown office buildings in Toronto and Ottawa, suburban office buildings in Calgary, a high-rise apartment building in Calgary, an industrial building in North Vancouver, and a four-star hotel in downtown Toronto.
Southcore Financial Centre, Toronto, ONSouthcore Financial Centre (SFC) is a complex that consists of two office towers and a hotel. The first phase, a 26-storey, 650,000 square foot office tower located at 18 York Street, was completed in Q3 2011. The building is currently 97% leased and the first tenants moved into the building during September. The second phase, located on Bremner Street, includes a 30-storey office tower with 700,000 square feet of rentable space, as well as a flagship 45-storey Delta Toronto hotel. The SFC complex is being built to a high level of sustainability with the two office towers targeting LEED® Gold certification. The entire complex is scheduled for completion in 2015.
90 Elgin Street, Ottawa, ON90 Elgin Street, a high-profile office tower in downtown Ottawa, broke ground in Q2 2011. This contract was awarded through competitive tender by the Government of Canada. As a public-private partnership project (the land is publicly owned), the Federal Government is fully committed to leasing 97% of the rentable space for 25 years. The building will be 17 storeys, with 600,000 square feet of rentable space. Full completion and occupancy for the Federal Government is scheduled for late 2014. The building is targeting LEED® Gold certification.
WestMount Corporate Campus, Calgary, ABWestMount is a 25-acre office campus designed to accommodate up to 750,000 square feet of office space in six buildings. Construction of the fourth building, a six-storey, 155,000 square foot office tower, started in Q3 2011 with completion scheduled for the end of 2012. LEED® Silver certification is expected. Construction of WestMount Court, a 30,000 square foot medical office and retail building, is set to commence in spring 2012 with completion scheduled for early 2013.
Glenmore Gardens Tower 3, Calgary, ABMunicipal approval was received in September 2011 for development of a third tower at Glenmore Gardens. The new 17-storey, 130-unit rental property is being added to an existing rental complex and will take advantage of surplus density and amenities within the existing property. Construction is scheduled to begin in Q1 2012, with completion scheduled for late 2013.
Northwoods Business Park, North Vancouver, BCConstruction on the fourth phase of Northwoods, two flex-space industrial buildings totaling 79,000 square feet, started during Q4 2011. The Park’s first three phases encompassing 275,000 square feet are 100% leased.
MULTI-RESIDENTIAL SERVICESIn 2011 the multi-residential asset class continued to be an important part of a balanced real estate portfolio. As of December 31, 2011, the company managed a multi-residential portfolio of 16,980 suites across Canada representing 22% of the company’s total assets under management. During 2011, this portfolio generated strong performance for our investor clients with 9.6% year-over-year net operating income.
Early in the year, the company completed acquisition of Sussex House in Ottawa, further expanding the company’s presence in that region and adding another Class A asset to the Ottawa portfolio. The new Vivere development (65 Lillian Street, Toronto), which was completed in Q1 2010, achieved stabilized occupancy after 12 months of lease up and has been fully occupied since June 2011.
Vertica Resident Services, the company’s multi-residential property management subsidiary, expanded its operations in the Greater Toronto Area by adding two new properties to its portfolio. With the inclusion of these properties, Vertica reported a year-end closing total of 7,802 suites under management.
COMMERCIAL SERVICESAfter stabilizing in 2010, Canadian office, industrial and retail markets were strong in 2011. In most major markets, especially Calgary, economic recovery yielded strong absorption and higher rental rates. Across the country, this allowed for five million square feet in new and renewal transactions.
In Western Canada, which represents 55% of the company’s managed commercial portfolio, the leasing team completed 230 transactions totaling 3 million square feet. In Alberta, the Calgary leasing team completed over 100 lease transactions totaling in excess of 2.25 million square feet, including: 50,000 square feet of non-contiguous low-rise space at Stock Exchange Tower; 118,000 square feet at First Canadian Centre; and an aggressive leasing strategy at Gulf Canada Square and Fifth and Fifth resulted in these buildings being fully leased at the close of 2011. In British Columbia, particularly within the Greater Vancouver market, leasing activity included: 100,000 square feet at Commerce Court in Richmond; 78,000 square feet at Knightsbridge Business Park; and 42,000 square feet at Crestwood Corporate Centre.
In Eastern Canada, which represents the remaining 45% of the company’s managed commercial portfolio, the leasing team completed transactions representing 2 million square feet. In Ontario, the Toronto leasing team completed over 100 transactions totaling 1.3 million square feet, including: two transactions of 175,800 and 93,500 square feet at 5140 Yonge Street; and the completion of a new development, 18 York Street at Southcore Financial Centre (SFC), which achieved a 96% pre-lease rate prior to opening in the fall of 2011. The company has an active leasing program underway to secure tenants for the second office tower at SFC, currently under construction.
Favourable market conditions that resulted in robust leasing activity across the country were enhanced by our strategy to implement capital upgrade projects designed to reduce operating expenses and improve building amenities. Priority was given to those projects that will improve returns to investors and customer satisfaction.
Significant capital upgrade projects that were either started or completed in 2011 include a revitalization project at Commerce Court in Toronto. This major multi-year project will focus on modernizing vacant space and strategic initiatives aimed at reducing operating costs while maintaining a building standard commensurate with its history and stature. Upgrades include a state-of-the-art HVAC system, lighting upgrades, and complex-wide retro commissioning of major building systems to enhance overall building performance.
Another major capital project under development in Toronto is an expanded food court at North York Centre. The new food court, now located on the main floor will feature a mix of traditional offerings along with other healthy food options.
PROPERTY MANAGEMENTOn behalf of its clients, GWL Realty Advisors property manages a portfolio of 40 million square feet of commercial space across Canada. Through the company’s signature customer service brand OneServe, continued focus on superior service was recognized with highly respected industry awards in 2011. GWL Realty Advisors received, on behalf of its clients, 61 BOMA BESt certifications as well as several awards of excellence regionally, including a TOBY Award of Excellence for Outstanding Building of the Year in the 100,000 to 250,000 square foot category (1188 West Georgia, Vancouver, BC) and BOMA Calgary Building of the Year Award in the 100,000 square foot category (Western Canadian Place, Calgary, AB). These awards are considered the “best of the best” in the commercial real estate industry in every facet of property management, from customer service to building operations.
The property management teams worked to control operating costs, ensure smooth building operation, and manage various capital projects. Across the country, property management teams managed $153 million in budgeted capital upgrade projects.
GWL Realty Advisors continued to increase the skill set of staff through personal development and training. A strong proponent of continuing education, the company developed and delivered numerous best-in-class programs including 27 in-house training sessions for property management staff. These sessions were developed to equip property staff with the knowledge to enhance the tenant experience through customer service that is proactive, open and personalized.
SUSTAINABILITY & CORPORATE RESPONSIBILITYOver the past year, the company’s continued focus on reducing operating costs and increasing the operational predictability of assets under management yielded positive results for building owners, tenants and residents. The company attributes success in this area to real estate owners who invest consistently and prudently in their assets and tenants and residents who actively participate in these programs.
To demonstrate its commitment to partner with and support tenants’ efforts to reduce energy, the company participates in various industry sustainability initiatives including CivicAction Alliance’s Toronto Race to Reduce program—targeting to reduce electricity and gas consumption annually by 2.5 percent from 2011 to 2014 for its Greater Toronto Area commercial portfolio of over eight million square feet. Further demonstrating a dedication to sustainability, the company expanded this program concept to all of its commercial properties across Canada and branded it the National Race to Reduce Challenge.
Examples of other notable initiatives and results in 2011 include:• Four multi-residential buildings received BOMA BESt certification
under a newly developed standard for multi-unit residential buildings. The efficiencies achieved from BOMA BESt certified buildings have a positive effect on the environment, financial returns for building owners and occupancy costs for residents.
• From 2007 to 2011 the company’s managed office portfolio recorded a 16.3% decrease in greenhouse gas emissions, while the multi-residential portfolio recorded a 20.9% reduction.
IN THE COMMUNITYAs an organization, GWL Realty Advisors continued to make a lasting social impact by inspiring positive change in the communities where employees live and work.
Habitat for HumanitySince 2004, the company has been committed to helping address the issue of affordable and environmentally responsible housing. As a result of the generosity of Great-West Life’s Key to Giving™ program and network of real estate suppliers, contractors and brokers, the company sponsored numerous build days and its eighth townhouse in Toronto. Similar programs were implemented across the country including participation for the first time from Montreal and Halifax offices. By the end of 2011, over 140 GWL Realty Advisors’ staff and suppliers had volunteered close to 850 hours.
United WayIn 2011, the company continued its long-standing support of the United Way and helped support a wide range of health and social services in communities across Canada. For a second consecutive year, GWL Realty Advisors’ President, Paul Finkbeiner chaired the Canada Life Campus Campaign in Toronto.
Community SupportThrough the generosity of Great-West Life’s Community Partners Support™ program, GWL Realty Advisors supported several community-based programs in key cities where its employees live and work, including: Covenant House Vancouver, Interval House, Juvenile Diabetes Research Foundation, Prostate Cancer Foundation, Ronald McDonald House, The Credit Valley Hospital Foundation and The Hospital for Sick Children Foundation.
GWL Realty Advisors is a leading Canadian real estate investment advisor providing comprehensive asset management, property management, development and specialized real estate services to pension funds and institutional clients.
With on-the-ground, in-depth expertise in core Canadian markets, GWL Realty Advisors is the trusted source for real estate advice and services. A strong fiduciary, the company’s mission is to deliver stable, long-term returns for its clients.
GWL Realty Advisors is a wholly-owned subsidiary of The Great-West Life Assurance Company.
2011YEAR IN REVIEW
For further information, visit our website at www.gwlra.com
Shown on front cover: 180 Queen St. West, Toronto, ON
In 2011, Canadian commercial real estate market fundamentals were stronger than the previous year. This market stability led to a continued return of investor confidence as evidenced by investment activity which rebounded to 2008 levels. GWL Realty Advisors’ total real estate assets under management increased from $11.4 billion in 2010 to $12.6 billion in 2011and our clients received double-digit returns.
GWL Realty Advisors concluded a disciplined sales and financing program to rebuild liquidity in the London Life Real Estate Fund (LLREF) and the Canadian Real Estate Investment Fund No. 1 (CREIF) and both Funds returned to business as usual in 2011 while at the same time delivering Fund returns of 18% and 17% respectively.
We continued to add value across all asset classes through capital upgrades and new development. 2011 saw an unprecedented amount of development activity; the company is currently directing 11 projects—with a total value in excess of $1.0 billion—that are either under way or about to begin construction.
Our portfolio experienced strong leasing activity across the country, especially in Western Canada. By the end of the year over five million square feet of new and renewal transactions were concluded resulting in an overall vacancy rate of 6.2%. Leasing for multi-residential assets also yielded positive results, achieving a stabilized vacancy of 1.5%.
By all measures, 2011 was a strong year for GWL Realty Advisors. We were fortunate to support and advance the objectives of our clients and their stakeholders. We thank our clients for their trust and continued confidence in our ability to serve their real estate investment needs.
PRESIDENT’S MESSAGE
Paul FinkbeinerPresident
CONTENTS:
• GWL Realty Advisors 2011 At A Glance
• Dispositions
• Acquisitions
• Development Services
• Multi-Residential Services
• Commercial Services
• Property Management
• Sustainability & Corporate Responsibility
• In the Community
4 COLOURPROCESS
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GWL REALTY ADVISORS 2011 AT A GLANCE
2010 2011
Pension Fund Advisory Services 5,420 6,564Canadian Real Estate Investment Fund No. 1 3,142 3,007London Life Real Estate Fund 1,553 1,591Great-West Life / London Life / Canada Life General Accounts 1,279 1,411Other 22 25
Total assets ($ millions) 11,416 12,598Total square feet (millions) 60.7 59.0Total number of assets 308 292
NUMBER OF ASSETS BY LOCATIONTOTAL REAL ESTATE ASSETS UNDER MANAGEMENT
PORTFOLIO RATES OF RETURN as at December 31, 2011 (IPD Basis - Non Leveraged)
45BRITISH COLUMBIA
60ALBERTA
7SASKATCHEWAN/MANITOBA
149ONTARIO
18QUEBEC
13ATLANTIC CANADA
British Columbia 17% or $2.1 billion
Alberta 30% or $3.8 billion
Saskatchewan/Manitoba 1% or $0.2 billion
Ontario 46% or $5.7 billion
Quebec 3% or $0.4 billion
Atlantic Canada 3% or $0.4 billion
ASSET ALLOCATIONOCCUPANCY %British Columbia 92
Alberta 96
Saskatchewan/Manitoba 97
Ontario 93
Quebec 95
Atlantic Canada 96
BY REGION
BY TYPE
Office 58% or $7.3 billion
Multi-Residential 22% or $2.7 billion
Industrial 11% or $1.4 billion
Miscellaneous 6% or $0.8 billion
Retail 3% or $0.4 billion
ASSET ALLOCATIONOCCUPANCY %Retail 98
Office 93
Industrial 90
Residential 98
15.9%
9.2%
10.1%
1 Year
5 Year
10 Year
Income Return
Capital Return
Total Return
6.1% 9.8%
6.3% 2.9%
6.9% 3.2%
