18104 – 95th avenue edmonton, alberta · to a 120 unit walk-up apartment complex located at...

Cowan & Associates

NARRATIVE APPRAISAL WINDSOR ESTATES 120 UNIT WALK UP APARTMENT COMPLEX 18104 – 95TH AVENUE EDMONTON, ALBERTA for

Prestigious Properties 912 Railway Avenue

Canmore, AB T1W 1P2 by Pawel Martyniak B. Comm., AACI Licensed Real Estate Appraiser November 2014

Cowan & Associates

WINDSOR ESTATES

18104 – 95th Avenue LaPerle

Edmonton, Alberta

OUR FILE: A-8022-14 November 10th, 2014 Prestigious Properties 912 Railway Avenue Canmore, Alberta T1W 1P2 Attention: Mr. Mike Hammerlindl Dear Sir: Re: Valuation Analysis Windsor Estates, 120 Suite Walk-Up Apartment Complex In accordance with your instructions, I herewith submit a valuation analysis pertaining to a 120 unit walk-up apartment complex located at located at 18104 – 95th Avenue, Edmonton, Alberta, and legally described as: LOT 1A BLOCK 42 PLAN 812 3043 LA PERLE EXCEPTING THEREOUT ALL MINES AND MINERALS

The purpose in undertaking this analysis is to provide an estimate of the market value

of the above noted property to aid in obtaining mortgage financing. The subject property was inspected on September 22nd, 2014. This involved a complete exterior inspection as well as an interior inspection of common areas and 25 suites.

The Effective Date of the analysis coincides with the Date of Inspection. The rights of the “Fee Simple Estate” are being appraised. This represents an amended appraisal report with minor alterations made to the expense analysis with no changes made to market value conclusions.

Cowan & Associates

The subject property entails a 120 suite, four building low rise apartment complex developed on a single site and operated as one project. The property was constructed in 1978 indicating a chronological age of 36 years. The inspection completed by the writer would confirm that overall the property is in generally average condition.

The subject has historically been operated as an investment (rental) property. Given the property type and the nature of operation, the Income and Direct Comparison Approaches to value will be completed within this report. The Appraisal Institute of Canada has a Mandatory Recertification Program for designated members. As at the date of this report, Pawel Martyniak, B. Comm., AACI has fulfilled the requirements of the Recertification Program. I hereby certify that I have personally inspected the property described herein. To the best of my knowledge, the statements contained in this report are true and correct, subject to the Fundamental Assumptions and Limiting Conditions set forth.

As a result of my investigations, I have formulated the opinion that the following value estimate applies to the property described herein, effective September 22nd, 2014:

$13,800,000.00 (THIRTEEN MILLION, EIGHT HUNDRED THOUSAND DOLLARS)

Respectfully submitted, Pawel Martyniak, B. Comm., AACI Licensed Real Estate Appraiser Date: November 10th, 2014 PM/kp

Cowan & Associates

TABLE OF CONTENTS Title Page ......................................................................................................................... i Splash Page ...................................................................................................................... ii Letter of Transmittal ........................................................................................................ iii Table of Contents ............................................................................................................. iv PREAMBLE PAGE Executive Summary ......................................................................................................... 1 Definition of the Appraisal Problem ................................................................................ 5 PROPERTY DESCRIPTION City of Edmonton Map .................................................................................................... 8 Neighbourhood Location Map ......................................................................................... 9 Neighbourhood Aerial Photograph .................................................................................. 10 Neighbourhood Analysis ................................................................................................. 11 Description and Analysis of Subject Site ......................................................................... 14 Site Map ........................................................................................................................... 17 Land Use Classification ................................................................................................... 18 Land Use Map .................................................................................................................. 19 Description and Analysis of Subject Improvements ......................................................... 20 Aerial Photograph ............................................................................................................ 24 Highest & Best Use .......................................................................................................... 25 PROPERTY VALUATION Appraisal Methodology .................................................................................................... 27 Income Approach .............................................................................................................. 28 Base Year Income and Expense Proforma ........................................................................ 36 Capitalization Techniques ................................................................................................. 37 Direct Comparison Approach ........................................................................................... 50 Reconciliation of Value Indicators and Final Estimate Value .......................................... 53 Certificate of Appraiser ..................................................................................................... 54 ADDENDA EXHIBIT Fundamental Assumptions and Limiting Conditions ...................................................... A Photographs of Subject Property ..................................................................................... B Certificate of Title ............................................................................................................ C Land Use Bylaw Excerpt ................................................................................................. D Rent Rolls.......................................................................................................................... E Apartment Rent/Vacancy Survey ..................................................................................... F

- 1 -

Cowan & Associates

EXECUTIVE SUMMARY PURPOSE OF APPRAISAL: To estimate the market value of the herein described real

property, as of the date specified, to aid in obtaining mortgage financing.

PROPERTY NAME: Windsor Estates PROPERTY TYPE: 120 suite low rise apartment complex. PROPERTY LOCATION: 18104 – 95th Avenue La Perle Edmonton, Alberta LEGAL DESCRIPTION: Lot 1A, Block 42, Plan 812 3043 SITE AREA: 3.29 acres LAND USE CLASSIFICATION: RA7, Low Rise Apartment Zone IMPROVEMENT DESCRIPTION: - The site has been improved with a 120 unit, four

building low rise apartment complex. The building was constructed in 1978, indicating a chronological age of 36 years. - The suite mix and average suite sizes are detailed as follows (As measured by the writer. The writer is not a surveyor however the average sizes are reasonable and assumed correct):

Suite Type No. of Units Suite Size

Bachelor 56

4

430 sq. ft.

510 sq. ft.

One Bedroom 20

40

620 sq. ft.

675 sq. ft.

- The buildings are of wood frame construction developed over a poured concrete grade beam and floor slab. Exterior finish involves primarily wood siding as well as stucco. - The roofs are of a flat design assumed to be finished with built-up tar and gravel.

- 2 -

Cowan & Associates

- The inspection completed by the writer would confirm that overall the property is in generally average to good condition featuring some upgrades completed to a small number of suites including upgraded paint, flooring and newer appliances. - At the Inspection Date the writer observed some deferred maintenance pertaining to damaged and stained common area carpet flooring. Discussions with the property management indicated that a work order has been submitted for flooring replacement which is expected to be completed in the Fall of 2014. - The roofs were not inspected by the writer and are assumed to be in good working condition. - In addition, the property exhibits upgraded hot water tanks and various newer windows. - Overall, an Effective Age of approximately 30 years is considered appropriate, resulting in a remaining economic lifespan estimated at approximately 35 years. This assumes that major structural items will be maintained and replaced as needed as the property ages.

- Site improvements are basic and would include mature landscaping, paved parking, shed, light poles, and concrete walks.

HIGHEST & BEST USE: Existing Use DATE OF INSPECTION: September 22nd, 2014 EFFECTIVE DATE OF VALUATION: September 22nd, 2014 FINANCIAL/INCOME BACKGROUND: - The subject property has been operated as an investment

property since the original construction. - The writer has been provided with a Rent Roll which details the rent for each suite for the month of September 2014. The current rents are outlined as follows:

- 3 -

Cowan & Associates

Current Rent Chart

Bachelor $785.00 - $900.00 per month

One Bedroom $900.00 - $1,050.00 per month

- The stabilized market level rents for subject units are as follows:

Suite

Type

# of

Units

Stabilized Monthly Rent

Range

Bachelor 60 $875.00 - $925.00

One Bedroom 60 $1,000.00 - $1,050.00

Total: 120

- Based on the above analysis the writer has concluded that the majority of actual September 2014 rents within the subject property are deemed to fall in line with current market levels with some rents considered to fall toward the lower end of market.

- In utilizing the actual September 2014 rents for the subject property as detailed in this section in conjunction with utilizing a stabilized market level rent for the office unit, the Base Year Net Operating Income has been estimated at $800,368.00, representing $6,670.00 per unit. This has included a 2.5% Vacancy and Collection Loss allowance. Operating expenses have been estimated at $4,176.00 per suite, which represents an expense ratio of 38.50% of the Effective Gross Income. - As at the Effective Date, the subject exhibited one vacant suite. Discussions with the on-site management indicated that this unit was already rented with the new tenant moving in the following week.

- 4 -

Cowan & Associates

ESTIMATE OF VALUE BY: • INCOME APPROACH: - DIRECT CAPITALIZATION: $13,800,000.00 - GROSS INCOME MULTIPLIER: $14,000,000.00 • DIRECT COMPARISON APPROACH: - SALE PRICE PER SUITE: $13,800,000.00 FINAL ESTIMATED VALUE: $13,800,000.00 DATE OF REPORT: November 10th, 2014

- 5 -

Cowan & Associates

DEFINITION OF THE APPRAISAL PROBLEM SCOPE OF APPRAISAL The basic purpose in undertaking this valuation analysis is to provide an estimate of the market value of the herein described real property, as of the date specified. The basic function in completing the report is to provide an estimate of value which can be utilized to aid in obtaining mortgage financing. Pawel Martyniak, B. Comm., AACI is the author of this report, with the property being inspected by Pawel Martyniak on the date specified. LEGAL DESCRIPTION The property under analysis is legally described as follows: LOT 1A BLOCK 42 PLAN 812 3043 LA PERLE EXCEPTING THEREOUT ALL MINES AND MINERALS The property is municipally located 18104 – 95th Avenue, Edmonton, Alberta. PROPERTY RIGHTS APPRAISED Property rights are generally considered under three common types although there are others:

• Fee Simple Estate - The most complete interest in real property, subject to the powers reserved to the state (taxation, escheat, eminent domain, and police power). This would be the situation for most owner occupied properties.

• Leased Fee Estate - This is simply the fee simple interest encumbered by a lease. This can be referred to as the Lessor’s or Landlord’s interest. If the lease is at market rent, then the leased fee interest and the fee simple interest are equal. However, if the tenant pays more or less than a market rent, the residual owned by the leased fee holder, plus the market value of the tenancy, may be more or less than the fee simple interest or value.

• Leasehold Estate - The interest held by a tenant. If the tenant pays market rent, then the leasehold has no market value. However, if the tenant pays less than market, the difference between the present value of what is paid and the present value of market rents would be a positive leasehold value.

- 6 -

Cowan & Associates

The property rights being appraised within this analysis are those of the “Fee Simple Estate”. EFFECTIVE DATE OF APPRAISAL The Effective Date of the analysis coincides with the Date of Inspection, that being September 22nd, 2014. APPRAISAL DEVELOPMENT & REPORTING PROCESS In conducting the valuation analysis for the subject, the property was physically inspected upon the date noted. This involved a complete exterior inspection as well as an interior inspection of all common areas and 25 suites. A current Rent Roll detailing rents for September 2014 was provided. Financial statements detailing revenues and expenses for the subject property for 2012, 2013 and for a 12 month period ending August 31st, 2014 were also provided. A current copy of the Certificate of Title was obtained from Alberta Land Titles. Assessment and tax information was provided by the City of Edmonton. A rent/vacancy survey in the subject neighborhood was also completed by the writer. The following document has been prepared in accordance with the Codes of Ethics and Standards of Professional Practice of the Appraisal Institute of Canada and the Uniform Standards of Professional Appraisal Practice (CUSPAP). According to the Standards, this appraisal has been prepared in the Narrative Reporting Format. No Departures from the Standards were invoked.

This represents an amended appraisal report with minor alterations made to the expense analysis with no changes made to market value conclusions. MARKET VALUE DEFINED

For the purposes of this report, the term “market value” is defined as follows:

“The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.”*

* The Appraisal of Real Estate. 2nd Canadian Edition. Vancouver: University of British Columbia Real Estate Division, 2002. p.2.3

- 7 -

Cowan & Associates

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 each acting in what they

consider their best interests; 3. A reasonable time is allowed for exposure in the open market; 4. Payment is made in terms of cash in Canadian dollars or in terms of financial

arrangement comparable thereto; 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.

EXPOSURE TIME A reasonable sale period for the subject property is estimated at six months. It is assumed that the subject property is exposed to the market for this period of time prior to the Effective Date.

Cowan & Associates

CITY OF EDMONTON MAP

Subject

Cowan & Associates

NEIGHBOURHOOD LOCATION MAP

Subject

Cowan & Associates

NEIGHBOURHOOD AERIAL PHOTOGRAPH

Subject

- 11 -

Cowan & Associates

NEIGHBOURHOOD ANALYSIS

To aid in visualizing the locale of the subject, the reader is referred to the Neighbourhood Location Map and Neighbourhood Aerial Photograph preceding this section. The pertinent characteristics of the subject neighbourhood can be summarized as follows: • Mature residential neighbourhood referred to as “La Perle”. • La Perle is located within west Edmonton with neighbourhood boundaries

as follows:

Transportation Utility Corridor, west 100th Avenue, north 178th Street, east 95th Avenue, south

• Statistical information regarding the La Perle neighbourhood statistics taken from City of Edmonton 2014 Municipal Census is presented as follows: LaPerle Edmonton

- 12 -

Cowan & Associates

LaPerle Edmonton

• Reference to the above charts confirms a number of key factors, which are summarized as follows:

Of the approximate 2,025 private dwellings in La Perle, approximately

49% represent single detached housing in comparison to the City average of 50%. 22% represent apartments, primarily low rise of less than five storeys which mirrors the City average of 23%.

Approximately 64% of dwellings are owned with 30% of the population renting. Relative to the City this represents a higher percentage of owners’ verses renters.

The above statistics regarding the La Perle Area Profile confirm a well-

developed district featuring a resident profile which entails similar levels of income relative to the city average and a higher percentage of owners verses renters.

Located in west Edmonton, just south of Stony Plain Road, the La Perle neighbourhood is an even mix of single and multi-unit dwellings, and

- 13 -

Cowan & Associates

features several large parks, a shopping centre and easy access to the many commercial and entertainment services at nearby West Edmonton Mall.

• Single family dwellings represent the dominant development form. Of note, the neighbourhood also features fairly extensive multi-family development, including townhouses and walk-up apartments. La Perle Community League is oriented on the west portion of the neighbourhood

• Institutional land uses includes one educational facility, La Perle Elementary, oriented within the neighbourhood. Shopping is provided along 170th Street and 178th Street including West Edmonton Mall.

• The neighbourhood is provided excellent access via 170th Street, 178th Street and 95th Avenue which represent arterial roadways. These roadways also provide direct access throughout the westerly areas of the city and to central Edmonton.

• The neighbourhood is essentially built out, with the exception of a large recreational open space located around La Perle’s elementary school and community league.

• Properties in La Perle are provided full municipal servicing with the cost of servicing generally fully paid.

In summary, the subject property is well located within a mature, primarily residential

district referred to as La Perle in west Edmonton. The writers are of the opinion that the neighbourhood exhibits the following features:

Good accessibility from adjoining collector and arterial thoroughfares providing ready access to employment shopping, educational and professional services.

La Perle is deemed a good residential location on the basis of resident profile, nature of construction, access, amenities, etc.

- 14 -

Cowan & Associates

DESCRIPTION AND ANALYSIS OF SUBJECT SITE To aid in visualizing the site, reference is made to the photographs of the subject property included in the Addenda and to the Site Map following this section. The subject site is legally described as follows: LOT 1A BLOCK 42 PLAN 812 3043 LA PERLE EXCEPTING THEREOUT ALL MINES AND MINERALS SITE DESCRIPTION Location • Situated: - NE corner of 182nd Street and 95th

Avenue intersection. • Exposure: - Direct exposure to 182nd Street (collector

roadway), to 181st Street (interior roadway), to 96th Avenue (interior roadway) and to 95th Avenue (collector roadway).

Area/Shape • Shape: - Irregular • Area: - 3.29 acres • Frontage: - Approximately 370 feet to 96th Avenue - Approximately 335 feet to 95th Avenue - Approximately 350 feet to 182nd Street - Approximately 280 feet to 181st Street

• Development Constraints: - None • Title Exceptions: - All mines and minerals Topography/Soils • Topography: - Level • Drainage Problems: - None observed • The completion of an environmental audit has not formed a component of

this analysis. Glen Cowan & Associates Real Property Appraisals Ltd. are not environmental experts and therefore, the assumption is made that no

- 15 -

Cowan & Associates

environmental problems are evident on site. In the event that an environmental audit did confirm that there were problems evident with the property, the value estimate provided within the context of this analysis could alter.

Servicing • Level: - Full municipal and street servicing as

detailed in the preceding Neighbourhood Analysis.

• Prepaid/Amortized: - Pre-paid. Access/Parking

• Access Points: - Direct access from 181st and 182nd Streets and from 95th and 96th Avenues.

• On-site Parking: - Paved parking area throughout the centre

of the site, approximately 126 stalls, six of which are designated for visitor use (stall count provided by the on-site management).

Title/Encumbrances • History of Ownership: Current Titleholder: - Prestprop West Edmonton Inc. (See Exhibit A in Addenda) Date Title Created: - December 15th, 2004 Consideration/Reasoning: - Transfer of land. Consideration of

$5,050,000.00 Current Status - The writer is not aware of any listing or

pending sale of the subject property. • Encumbrances/Title Registrations

• A review of the title indicates a number of charges pertaining to mortgage financing and leasing. The financial encumbrances will have no impact on this analysis since the intent of this document is to obtain new mortgage financing.

• In addition, the title indicates an encumbrance pertaining to a Utility Right-of-Way. The writer reviewed the above stated document and is of the opinion that it will not impact the valuation being completed.

- 16 -

Cowan & Associates

Assessment/Taxes

2014 Assessment

Total Assessment $ 12,583,000.00

2014 Tax Levy $ 111,280.26

Local Improvement Charge $ 0.00

Total 2014 Tax Levy $ 111,280.26

Year Built: 1978 ANALYSIS The subject site is located within a mature and established residential district. Typical site characteristics. No physical constraints are evident and adequate access is available to the site.

Cowan & Associates

SITE MAP

Subject

- 18 -

Cowan & Associates

LAND USE CLASSIFICATION

Reference to the City of Edmonton’s Land Use Bylaw confirms that the subject property is designated as an RA7, Low Rise Apartment District. The reader is referred to Exhibit D in the Addenda of this report which involves an excerpt from the City’s Land Use Bylaw pertaining to this particular district and for reference purposes, included at the end of this section is an excerpt from the City’s Land Use Map.

THE RA7 DISTRICT • To provide an area for low rise apartment districts. • The subject property represents a permitted use under the bylaw.

• Development regulations would include a maximum density is 50.6 units per acre. Based on a 3.29 acre site, the subject site exhibits a maximum allowable density of approximately 166.5 units. The existing development of 120 units is within the maximum allowable.

The subject improvements appear to represent a conforming use of the site. For an in-depth review of the bylaw in place, the reader is referred to Exhibit D in the Addenda of this report which contains an excerpt from the RA7 Land Use Bylaw.

Cowan & Associates

LAND USE MAP

Subject

- 20 -

Cowan & Associates

DESCRIPTION AND ANALYSIS OF SUBJECT IMPROVEMENTS The following description and analysis of the subject improvements is based on a personal inspection completed on September 22nd, 2014. This involved a complete exterior inspection as well as an interior inspection of common areas and 25 suites. To aid in visualizing the improvements, the reader is referred to the photographs of the subject property included in the Addenda. GENERAL PROJECT DESCRIPTION • 120 unit, four building walk-up apartment complex. • Three storey design. Two buildings exhibit 36 suites each with the other two

exhibiting 24 suites each. • The subject exhibits the following suite mix and average suite sizes (As

measured by the writer. The writer is not a surveyor however the average sizes are reasonable and assumed correct):

Suite Type No. of Units Suite Size

Bachelor 56

4

430 sq. ft.

510 sq. ft.

One Bedroom 20

40

620 sq. ft.

675 sq. ft.

• In general, suites within the subject are deemed average in size in the area. Of

note, the subject property is located within west Edmonton suburban neighbourhood. Typically, apartment buildings located within suburban neighbourhoods tend to target couples and families and therefore feature larger suites involving primarily one, two or three bedroom suites. Lesser demand is typically evident for bachelor suites in suburban areas relative to central locations. Given the suite mix in place involving 50% bachelor suites, the subject property represents a unique investment, which may provide some level of risk. It is noted however that the subject is currently fully occupied and represents the only complex in the area exhibiting suite mix involving large number of bachelor units. Furthermore, given the location in close proximity to West Edmonton Mall, the bachelor suites represent an affordable and attractive accommodation type for mall employees.

• All units feature two appliances (stove and fridge). • The upper floor one bedroom suites within the subject exhibit heated enclosed

sunrooms which are a part of the suite and the building (not a balcony).

- 21 -

Cowan & Associates

• The subject property exhibits three laundry rooms in each of the two 36 unit buildings and two laundry rooms in each of the two 24 unit buildings, each containing card operated washer and dryer, which are leased by the building.

• In addition, 1 bachelor suite within the subject is currently utilized as an office for the building’s on-site management though is functional and could be readily rented to a separate tenant.

CONSTRUCTION DETAIL

• Foundation: Poured concrete basement assumed to be supported by appropriate concrete pilings.

• Construction: Wood frame • Exterior Finish: Wood siding and stucco. • Roof: Flat, wood decks assumed to be finished with built-

up tar and gravel. • Windows: Aluminum frame.

• Balconies: None. Main floor units exhibit patios. INTERIOR LAYOUT/FINISH • Suite Layout: Basic, functional • Washrooms: Four piece in all suites

• Closets: All feature large storage room/closet. • Flooring: Carpet, linoleum, and laminate. • Demising Walls: Painted drywall, typical • Appliances: Stove, fridge. • Cabinetry: Standard, original. • Common Corridors: Carpet, painted walls and ceiling (textured).

MECHANICAL SYSTEMS

• Heating: “Super Hot” boiler in each building. • Domestic Hot Water: Adequate capacity commercial hot water tanks

in each building. • Hallway Pressurization: “Flame Master” forced air furnace in each building. • Air Conditioning: Portable window unit in all suites. • Electrical Service: Appears standard/adequate. Separate meters. • Plumbing Service: Appears standard/adequate. • Intercom: Yes. • Laundry: Two or three rooms in each building, each

containing one washer and one dryer, leased.

- 22 -

Cowan & Associates

SITE IMPROVEMENTS • Parking: Located throughout the centre portion of the site.

Paved, approximately 126 stalls, 6 of which are designated for visitor use (stall count provided by the on-site management).

• Concrete: Front walk • Landscaping: Basic lawn, mature trees, shrubbery • Other: Shed, light poles. AGE/CONDITION • Year Built/ Chronological Age: 1978/36 years

• Condition: - The inspection completed by the writer would confirm that overall the property is in generally average to good condition featuring some upgrades completed to a small number of suites including upgraded paint, flooring and newer appliances. - At the Inspection Date the writer observed some deferred maintenance pertaining to damaged and stained common area carpet flooring. Discussions with the property management indicated that a work order has been submitted for flooring replacement which is expected to be completed in the Fall of 2014. - The roofs were not inspected by the writer and are assumed to be in good working condition. - In addition, the property exhibits upgraded hot water tanks and various newer windows.

• Effective Age: Approximately 30 years • Remaining Economic Lifespan: For the subject property, it is the opinion of the

writer, that a remaining economic lifespan of approximately 35 years is reasonable. This assumes that major structural items will be maintained and replaced as needed as the property ages.

- 23 -

Cowan & Associates

ANALYSIS Overall, the subject property represents a unique, larger scale walk-up apartment

complex. The property is deemed in average condition having been reasonably well maintained with a regular maintenance program clearly evident.

Furthermore, as previously discussed the subject property involves large number of bachelor units. The specific design of the subject property pertaining to investment risk will be recognized later within this report.

Cowan & Associates

AERIAL PHOTOGRAPH

Subject

- 25 -

Cowan & Associates

HIGHEST AND BEST USE The concept of “Highest and Best Use” was defined in the 1975 edition of the publication “Real Estate Appraisal Terminology” as follows: “That reasonable and probable use which will support the highest present

value, as defined, as of the Effective Date of the appraisal.” “Alternatively, that use, from among reasonably probable and legal

alternative uses, found to be physically possible, appropriately supported, financially feasible, and which results in the highest value.”

The definition immediately above applies specifically to the highest and best use of land. It is to be recognized that in cases where a site has existing improvements on it, the highest and best use may very well be determined to be different from the existing use. The existing use will continue however, unless and until land value in its highest and best use exceeds the total value of the property in its existing use. Implied within these definitions is recognition of the contribution that a specific use has to community environment or to community development goals in addition to wealth maximization of individual property owners. Also implied is that the determination of highest and best use results from the appraiser’s judgment and analytical skill, i.e. that the use determined from analysis represents an opinion, not a fact to be found. In appraisal practice, the concept of highest and best use represents the premise upon which value is based. In a context of most probable selling price (market value) another appropriate term to reflect highest and best use would be most probable use. In the context of investment value an alternative term would be “most profitable use”. In the confines of any study regarding highest and best use, it is to be emphasized that at all times it is the “market” which determines the use to which a property will be ultimately employed. Any analysis of highest and best use will therefore focus on the analyst’s interpretations or predictions as to how the market will respond to any one property. Under typical circumstances, the analysis of highest and best use commences with the review of the site as if vacant however, in this instance, the development is obviously of significant contributory value and it would be an academic exercise at best to disregard these improvements. As such, the analysis of highest and best use will focus on the property as developed. • The subject property is located in a mature residential district in west

Edmonton known as La Perle. Due to the maturity of the neighbourhood, all amenities regarding educational, shopping and employment opportunities as well as convenient access to these amenities are provided to neighbourhood residents. Conformity to existing land use patterns is noted.

• The current use is permitted under the existing bylaw.

- 26 -

Cowan & Associates

• The subject property represents a 120 unit, four low rise apartment building complex developed on a single site and operated as one complex. As detailed in the Improvements Description section, the subject property exhibits a basic/conventional design, is deemed in average condition overall as at the current date.

• Land values are not to the point where any redevelopment of the site would be contemplated over the foreseeable future.

• In the event that the subject site was vacant, an optimum use would represent a development site appropriate for a low density multi-family project which would conform to the bylaw and to land use patterns in the area. No significant holding period would be evident.

The analysis conducted confirms that a continuation of the existing program of utilization as a multi-family project would be representative of the highest and best use to which the property could be put.

- 27 -

Cowan & Associates

APPRAISAL METHODOLOGY The appraisal process is an orderly program in which the data used to estimate the value of the subject property is acquired, classified, analyzed and presented. The first step of the process is to define the appraisal problem. Once this has been accomplished, the assembly and analysis of those factors that will have a bearing on the market value of the subject property can be undertaken. Generally, there are three basic approaches to value which can be applied, these being the Cost Approach, Income Approach and Direct Comparison Approach. The Cost Approach will not be developed within the context of this report. Cost and value are not necessarily synonymous and this becomes particularly evident when one gives consideration of the variance between the cost to produce a project for rental purposes and the market rents which can be obtained. As such, the Cost Approach would not provide a meaningful indication of value. The subject property has historically been operated to generate investment income. Accordingly, the Income Approach represents a key valuation technique and will be developed in detail within this report. Both the Direct Capitalization Approach and a Gross Income Multiplier technique will be applied to arrive at a value by means of the Income Approach. The Direct Comparison Approach will be completed primarily as a reference technique keying on the per suite value which can be accorded the subject property. Interrelated with this figure is the average net rent created by the asset and whether or not this income is considered to have the potential of altering over the foreseeable future. Direct Comparison, in regards to the multi-family market, does tend to be a rough “rule of thumb” check, though substantiation is provided to the value estimate derived by means of the Income Approach. In summary, two approaches to value will be completed, commencing with the Income Approach.

- 28 -

Cowan & Associates

INCOME APPROACH The basic theory of the Income Approach to value is that the value of a given property is the present worth of all the net income that the property will produce for each year of its remaining useful life. While income by itself does not constitute value, it does serve as a measure of value. The basic steps to follow in the Income Approach are detailed as follows: 1. Estimate the total annual gross income that the property is capable of

producing less allowances for future vacancies and bad debts. 2. Estimate the total annual operating expenses. 3. Calculate the net annual operating income. 4. Utilizing a suitable procedure, convert the anticipated net annual income

stream into an indication of the capital value of the property. The subject property has historically been operated as an investment vehicle and a continuation of this use coincides with the highest and best use of the property. Accordingly, the Income Approach represents a key indicator of value. Development of the approach involves two basic steps, the first of which represents the projection of an accurate and well supported estimate of income. The second step involves a process of discounting the income expectancies to a present worth estimate, being referred to as “Direct Capitalization” and “Gross Income Multiplier Analysis”. The approach will commence with the development of a “Base Year” projection of income and expenses for the property as at the Date of Inspection. This will essentially involve a one year period commencing with the Effective Date of this report. ESTIMATE OF GROSS INCOME The majority of revenues generated within the subject property relate to suite rental revenue. Additional income is also provided via laundry facilities leased by the building. Basically, a two part analysis will be undertaken to estimate the gross annual income producing capabilities of the subject property. Initially consideration will be given to current rents as well as rents being achieved in competing, projects in the immediate vicinity.

Residential Rents The writer has been provided September 2014 Rent Roll for the subject property. The reader is referred to the Rent Roll, identified as Exhibit E in the Addenda. The current rents are summarized as follows:

- 29 -

Cowan & Associates

Suite Type No. of Units Monthly Rent

Studio

2

20

9

28

1

$785.00 - $795.00

$800.00 - $825.00

$850.00 - $875.00

$895.00 - $900.00

Office

One Bedroom

10

14

28

8

$900.00 - $925.00

$950.00 - $975.00

$995.00 - $1,000.00

$1,025.00 - $1,050.00

• As at the Effective Date, the subject exhibited one vacant suite. Discussions with

the on-site management indicated that this unit was already rented with the new tenant moving in the following week.

• Typical to the market, rents are inclusive of heat and water. • One energized parking stall per suite is also provided as a component of the rent.

Rental Market Overview

To aid in ascertaining whether the current rents within the subject are in line with market trends, a survey of similar quality low rise apartment projects in vicinity of the subject property has been completed. Initially, the writer surveyed buildings located in the vicinity of the subject property, west of 170th Street. However, a limited number of buildings located west of 170th Street feature bachelor suites. Hence, the writer expanded the survey to include buildings located east of 170th Street, within neighbourhoods historically deemed less desirable (older construction, lower average net income) relative to the subject location. The reader is referred to Exhibit F in the Addenda of this report which includes the results of the survey completed in September 2014. The results are summarized as follows:

Survey Range Majority Subject

Bachelor $750.00 - $1,039.00 $895.00 – $1,039.00 $785.00 - $900.00

One Bedroom $900.00 - $1,225.00 $950.00 – $1,159.00 $900.00 - $1,050.00

One Bedroom Suites The subject property features 60 one bedroom suites which exhibit a basic and

functional floor plan and an average size varying between 620 square feet and 675 square feet which is considered average below average in the area.

As noted, suites in the subject are deemed in generally average condition featuring some upgrades completed to a small number of units including fresh paint, newer appliances, flooring, and some bathroom upgrades, etc.

- 30 -

Cowan & Associates

One bedroom suites in the subject property are currently achieving rents of $900.00 to $1,050.00 per month. In addition, the current asking rents for subject one bedroom suites are $1,050.00 per month.

The writer’s survey has indicated a wide range in one bedroom rents being achieved in competing buildings within surrounding neighbourhoods, varying from $900.00 to $1,225.00 per month with the majority varying between $950.00 and $1,159.00 per month. Of note, these represent new asking rents for the surveyed properties and likely do not reflect all existing rental rates being achieved within these projects.

The upper end of the range has been set by larger scale projects featuring renovated larger size units, three appliances per suite, balconies/patios, and common area amenities including pools, fitness rooms, recreation rooms, etc., factors which place upward pressure on the achievable rental rates.

Furthermore, reference is also drawn to the Second Quarter Edmonton Multi-family Market View completed by CB Richard Ellis. The report indicates average one bedroom rents in West Jasper Place Area, in which the subject is located, at approximately $1,183.00 per month

Overall, given the size and condition of the subject one bedroom suites rents toward the median of the range indicated by the surveyed buildings are deemed appropriate, varying between approximately $1,000.00 and $1,050.00 per month.

Relative to the market, the majority of existing one bedroom rents in the subject are considered to fall in line with current market levels with a number of rents falling toward the lower end of market.

Bachelor Suites

The subject property features 60 bachelor suites which exhibit a basic and functional floor plan and an average size of approximately 430 to 510 square feet which is deemed average to below average in the area.

Reference to the subject Rent Roll indicates that the subject bachelor units are achieving rents effective September 2014 of $785.00 to $900.00 per month. In addition, the current asking rents for subject bachelor suites are $895.00 to $925.00 per month.

As previously discussed, the survey completed by the writer indicated a limited number of buildings featuring bachelor suites in the vicinity of the subject. Accordingly, the writer expanded the survey to include buildings located east of 170th Street, within neighbourhoods historically less desirable (older construction, lower average net income) relative to the subject location.

- 31 -

Cowan & Associates

The writer’s survey has indicated bachelor rents varying from $750.00 to $1,039.00 per month, with the majority varying between approximately $900.00 and $1,039.00 per month.

Much of the discussion regarding one bedroom rents for the subject property and the buildings surveyed is applicable for the bachelor rents as well.

The upper end of the range has been set by Indicators #4 and #6. These properties are located in the vicinity of the subject, west of 170th Street, exhibit larger size units, three appliances per suite and common area amenities. Lower rental rates for the subject units would apply.

Furthermore, reference is again drawn to the Second Quarter Edmonton Multi-family Market View completed by CB Richard Ellis. The report indicates average bachelor rents in West Jasper Place Area, in which the subject is located, at approximately $984.00 per month.

Overall, the size and condition of subject bachelor units would suggest rental rates toward the median of the range indicated by the surveyed bachelor suites, varying between approximately $875.00 and $925.00 per month.

Relative to the market, approximately half of existing bachelor rents in the subject are considered to fall in line with the current market levels with rents for the remaining units falling toward the lower end of market.

Conclusions

The writer has estimated the following market rents:

Suite

Type

# of

Units

Stabilized Monthly Rent

Range

Bachelor 60 $875.00 - $925.00

One Bedroom 60 $1,000.00 - $1,050.00

Total: 120

Based on the above analysis the writer has concluded that the majority of actual rents

within the subject property are deemed to fall generally in line with current market levels with some rents considered to fall toward the lower end of market. Within this analysis, the writer will utilize the actual September 2014 rents within the subject though an adjustment will be made, later within this report, when choosing an appropriate capitalization rate, in order to recognize the potential to increase the lower end rents. Overall, based on the actual September 2014 rents for the subject property as detailed in this section in conjunction with utilizing a stabilized market level rent for the office suite; the

- 32 -

Cowan & Associates

Base Year Gross Rental Revenue for the subject is projected at $110,280.00 per month, $1,323,360.00 per annum. Laundry Revenue

As discussed, the subject property exhibits leased laundry machines. Financial statements provided to the writer indicate historic net laundry revenues varying between approximately $5.25 and $8.68 per unit per month. The typical range for net laundry revenue in projects, similar to the subject and with leased machines, is between $10.00 and $25.00 per suite per month. The actual revenue falls below typical. In recognizing the suite mix in place, actual revenues and the leased machines, a stabilized figure of approximately $8.00 per suite per month will be utilized in this analysis, resulting in the Base Year laundry revenue estimated at $11,520.00. VACANCY AND COLLECTION LOSS ANALYSIS Allowances for vacancy and collection loss relate to periodic vacancies within the complex, potential rental abatements, collection loss problems, etc. Typically, this is expressed as a percentage of gross income. Relative to the situation at hand, the writer is developing a “Base Year” Income and Expense Proforma. Accordingly, the allowance to be selected for vacancy and collection loss would be considered representative of the projected vacancies and actual bad debt problems that will occur during the same time frame.

• As at the Effective Date, the subject exhibited one vacant suite. Discussions with the on-site management indicated that this unit was already rented with the new tenant moving in the following week.

Reference is made to the CMHC Apartment Vacancy Survey. This represents an annual survey completed which is referenced widely in the industry. The most recent survey was completed in October of 2013 and is considered dated. The results of the survey relative the subject property is as follows:

All Units Bachelor 1 Bedroom 2 Bedroom 3 Bedroom +

2012 2013 Chg. 2012 2013 Chg. 2012 2013 Chg. 2012 2013 Chg. 2012 2013 Chg.

Edmonton

CMA 1.7 1.4 -0.3 1.4 1.2 0.1 2.0 1.6 -0.4 1.4 1.3 -0.1 1.1 1.2 0.1

Zone 06 0.6 1.1 .05 3.0 1.1 -1.9 0.6 0.8 0.2 0.5 1.4 0.9 0.3 0.3 0.0 ** Data Suppressed N/A – Not Available N/U – Not in Universe Canada Mortgage and Housing Corporation (CMHC)

- 33 -

Cowan & Associates

The October 2013 survey has indicated a decrease in the city-wide vacancy level to 1.4% from 1.7% in 2012 and 3.3%in 2011. The vacancy in Zone 6, in which the subject is located, was 1.1%, up from the previous year of 0.6%.

In addition, CMHC has also completed a less detailed survey in spring 2014 which indicates a decrease in the Edmonton Metropolitan Area vacancy level to 1.4%.

Furthermore, reference is also drawn to the Second Quarter Edmonton Multi-family Market View completed by CB Richard Ellis. The report indicates vacancy level in West Japer Park Area, in which the subject is located, at 0.8%.

Reference is also made to the writer’s survey of competing properties discussed previously in the Rental Market Overview section of this report and also included for the readers review in Addenda Exhibit F. The survey indicated a limited number of vacant units.

Based on the preceding analysis, the writer has concluded that a stabilized Vacancy and Collection Loss allowance for the Base Year of 2.5% is appropriate. This is higher than evident for the property though is appropriate. This also reflects the potential for fluctuations in the local economy over an investment horizon. EXPENSE ANALYSIS

Operating expenses refer to those costs necessary to maintain a continuing flow of gross income and primarily relate to the maintenance of the land, the improvements, equipment, as well as labor, services and management fees. The basic premise of the valuation is to assume a sale of the subject property on the open market as at the Effective Date. Two general types of purchasers are evident in the market for this property type involving larger investors seeking to add the subject property to a substantial portfolio and alternatively a mid to smaller scale investment group seeking to operate the project alone or in conjunction with a smaller number of properties. Larger scale investors operating substantial portfolios will benefit from various economies of scale with regard to management costs, repairs and maintenance, advertising, insurance, etc. These economies of scale are not necessarily available to those operators which are not managing a substantial number of apartment suites. For the purposes of the analysis it is the operating expenses incurred by a “typical” purchaser which will be projected for the Base Year, rather than the reduced expenses which may result from the inclusion of the subject property in a larger portfolio. The nature of the expenses projected however, must be recognized in the selection of an appropriate capitalization rate for conversion of the Base Year, Net Operating Income into an expression of market value.

- 34 -

Cowan & Associates

Historical

Performance

2012

Historical

Performance

2013

Historical

Performance

Sept 2013 –

Aug 2014

Industry

Average

Base Year

Estimate

Property Tax $92,488.00 $97,441.00 $103,705.00 - $111,280.00

Insurance/Unit $156.00 $166.00 $189.00 $150.00 - $350.00 $ 175.00

Utilities/Unit $1,095.00 $1,135.00 $1,210.00 $1,000.00 - $1,400.00 $1,150.00

Repairs &

Maintenance/Unit $1,020.00 $637.00 $766.00 $600.00 - $1,000.00 $ 850.00

On-Site

Administration/Unit/Mo. $68.00* $53.00* $59.00* $30.00 - $50.00 $45.00

Management (% of EGI) 4.0% 3.7% 3.7% 3% - 5% 4.0%

Advertising/Miscellaneous/

Unit $213.00 $144.00 $127.00 $50.00 - $200.00 $100.00

*Includes janitorial wages.

In projecting operating expenses for the subject property through the Base Year, the writer has made reference to the financial statements detailing revenues and expenses for the subject property for 2012 and 2013 as well as for a 12 month period ending August 31st, 2014, industry standards as well as the writer’s experience in analyzing actual revenue and expense statements on similar properties, the expense items will be discussed on a separate basis below: • The 2014 actual property tax levy is approximately $111,280.00. It is

reasonable to project this figure for the analysis being completed. • The industry wide average for insurance costs tends to fall between $150.00

and $350.00 per unit per annum. Overall, in referencing actual and typical insurance costs, a figure towards the lower end of the typical range, or $175.00 per unit, will be applied.

• The industry wide average for utility expense tends to fall between $1,000.00 and $1,400.00 per unit per year. Reference to the financial statements indicates utility costs varying between approximately $1,095.00 and $1,210.00 per unit per annum. The historic utility costs fall in line with the typical range. In recognizing the suite mix in place and condition of the subject property, as well as the actual costs, a stabilized utilities expense of approximately $1,150.00 per unit will be projected.

• The subject improvements are deemed in generally average condition having been reasonably well maintained. The research completed by the writer, which includes a review of actual costs for numerous projects and discussions with real estate management companies, indicated industry wide average for repairs and maintenance expense for similar property types varying between approximately $600.00 and $1,000.00 per unit per annum. Of note, repairs and

- 35 -

Cowan & Associates

maintenance costs tend to fluctuate every year depending on repairs and replacements incurred in a given year. Overall, given the age, design and condition of the property, an expense toward the median to upper end of the typical range or $850.00 per unit has been projected.

• On-site administration relates to the expenses incurred in order to operate a project of this magnitude. This includes the showing of suites, dealing with tenant concerns, reporting to management, etc. For the purposes of this review, and in recognizing the number of suites, a figure toward the median to upper end of the typical range of $45.00 per suite per month will be utilized.

• Management costs are based on a percentage of the Effective Gross Income. The size and scale of the subject development, the revenues being achieved and finally the nature of the property management industry all suggests that a median level management allowance be incorporated into the calculations. A 4.0% allowance is therefore being utilized which recognizes the medium size of the project.

• Advertising and miscellaneous costs have been based on typical ratios given the size and scale of the project. Given current occupancy of the subject property, the large size of the project and the location characteristics, an advertising and miscellaneous expense of approximately $100.00 per suite per annum has been incorporated.

• Total annual expenses are therefore indicated at $4,176.00 per unit or 38.50% of the Effective Gross Income based on the actual rents in place detailed previously. Overall, the projected expenses are considered to fall in line with typical expenses in the market.

The Base Year Income and Expense Proforma is presented as follows:

- 36 -

Cowan & Associates

Gross Annual Income EstimateUnits120

Gross Monthly Rental Revenue as per the September 2014 Rent Roll 110,280.00$ *

Gross Rental Revenue 1,323,360.00$

Add: Laundry Revenue 11,520.00$ Gross Revenue 1,334,880.00$

Less:Vacancy & Collection Loss @ 2.50% (33,372.00)$ Effective Gross Income 1,301,508.00$

Less: Operating Expenses- Property Taxes @ 111,280.00$ - Insurance @ 175.00$ /unit 21,000.00$ - Utilities @ 1,150.00$ /unit 138,000.00$ - Repairs & Maintenance @ 850.00$ /unit 102,000.00$ - On Site Administration @ 45.00$ /unit/month 64,800.00$ - Management @ 4.00% of EGI 52,060.32$ - Advertising & Miscellaneous 100.00$ /unit 12,000.00$ Total Expenses (501,140.32)$ Expenses per Unit: $4,176.17Expenses as a % 38.50%of EGI:

Net Annual Operating Income 800,367.68$ Income per Suite $6,669.73

*Stabilized market level rent utilized for office suite.

EDMONTON, ALBERTA18104 - 95TH AVENUE

BASE YEARINCOME & EXPENSE PRO FORMA

UTILIZING ACTUAL SEPTEMBER 2014 RENTSWINDSOR ESTATES

- 37 -

Cowan & Associates

CAPITALIZATION TECHNIQUES The process of discounting income expectancies to a present worth estimate is referred to as “capitalization”. This present worth estimate, the result of the capitalization process, is the amount that a prudent, typically informed investor would be willing to pay at a fixed point in time for the right to receive the income stream produced by a particular property. Appraisal methodology has several techniques available to measure the relationship between income and value. The most logical purchaser for a property the nature of the subject would involve a locally based investor. A review of the investment criteria typically applied by such investors’ highlights that a majority of properties are being acquired on the basis of an analysis of capitalization rates in conjunction with cash flow yields. That is, investors are acquiring properties based on capitalization rates that are in line with alternate buying behavior within market, provided that this rate will allow the investor to maintain an adequate cash flow yield. This in turn will form the basis for analysis of the subject property. The basis of Capitalization Rate Analysis involves the extracting of ratios between the Net Operating Income which a property was producing as at the date of sale to the market selling price. This technique is one of the most basic forms of capitalization and is a derivative of the Comparative Method or, Direct Sales Comparison Approach. Typically, the resulting ratio which is extracted is referred to as a “current earnings ratio”. Traditionally, capitalization rates have represented the relationship between the current net operating income of a property and its market value. This relationship does not imply that the current net earnings are expected to remain the same throughout the tenure of ownership, for the fact of the matter is that they could very likely rise or fall in the same way that gross earnings fluctuate with changing market conditions. What is significant about current earnings ratios is that it is the current earnings that are being utilized as the unit of comparison simply because they are known and can be estimated with relative certainty. If the future performance of a property is expected to rise or fall below the norm, the capitalization rate will be modified accordingly, and when applied to the amount of current earnings, will provide an appropriate indication of value. This analysis will concentrate on “Going In” Capitalization Rates. A “Going In” Capitalization Rate is simply derived by contrasting the income which the property is capable of producing for the initial year of ownership to the sale price. In selecting sales data for comparison with the subject, consideration has been given to the most recent transactions having occurred in the market as well as those sales reflecting similarity on the basis of scale of investment and positive location or physical characteristics. At this point, the sales selected for analysis will be presented:

Purchaser

Sale Terms

[ %]

Vendor

Zoning Class:

Legal Description:

Zone

Transfer Number:

Land

Building

Payout

Operating Expenses

Net Operating Income

Cash Flow

Gross Income Multiplier

Sale Price

Overall Capitalization Rate

Cash Flow/Equity Yield

Comments

Net Income/Unit

Property Number

Site Area:

Sale Price:

Sale Date:

Total

Tax

LIC

Improvements Description

%

%

Subdivision:

Assessments and Taxes

Address

Income Analysis

All opinions, estimates, data, and statistics furnished by other sources is believed to be reliable; however, we cannot guarantee its validity or accuracy. Possession of this report or copies thereof does not carry with it the right of publication.

Year Built:

Site Improvements

Property Type:

Multi-Family Investment Building Sale3

Walk-upIndex 1

16425 - 109 Street

Lorelei

1-74/9022195

RA7

2.67 Acres

12,000,000

Jun 19, 2013

132182607

1976

Cash to mortgage 0 0.00

0 0.00

0.00

Pallisades Manor Inc. Oneka Land Company Ltd.

Four storey wood frame construction, 1 bach, 22 - 1 bed (666-682 sq. ft.), 36 - 2 bed (885-926 sq. ft.), 16 - 3 bed (1132-1139 sq. ft.). Elevator access.

Paved energized parking

1,032,000 11.87

20,640 160,000.00

327,954 5.70

683,406 0.00

9,112

124486

Number of Suites: 75

0

Gross Annual Income

Vacancy 2.0 /Suite

Known as Palisades Manor. The bachelor unit is non-permitted. Deemed in good condition featuring upgraded suites and common areas. Newer windows, upgraded balconies. Elevator access. Three appliances per suite. Two bathrooms in all three bedroom units. Actual rents in place are considered to fall in line with market levels. Expense ratio is estimated at approximately 32.43%.

Prepared by Glen Cowan on Oct 1, 2014

Purchaser

Sale Terms

[ %]

Vendor

Zoning Class:

Legal Description:

Zone

Transfer Number:

Land

Building

Payout

Operating Expenses


Cash Flow


Sale Price



Comments

Net Income/Unit

Property Number

Site Area:

Sale Price:

Sale Date:

Total

Tax

LIC


%

%

Subdivision:


Address

Income Analysis


Year Built:

Site Improvements

Property Type:


Walk-upIndex 2

10403 - 158th Avenue

Beaumaris

7821797/59/7

RA7

2.64 Acres

10,650,000

Oct 10, 2013

132327278

1980

Cash and mortgage 0 0.00

0 0.00

0.00

F. Tonn Construction Co. Ltd. Prestigious Properties King Castle GP Inc.

Four storey wood frame construction. Elevator access. 1 - bach, 3 - 1 bed & 67 - 2 bed.

Paved energized surface parking, approximately 80 stalls

811,752 13.39

16,235 150,000.00

314,001 4.52

481,516 0.00

6,781

124821


0

Gross Annual Income

Vacancy 2.0 /Suite

Known as Castle Harbour apartments. Reported in average condition. Elevator access. Some suites have dishwashers. Actual rents in placed are deemed to fall well below market levels. Expense ratio on actual rents is estimated at approximately 39.47%. Based on stabilized market level rents the NOI is estimated at approx. $642,122, cap rate of 6.03%, GIM of 11.06, expense ratio of 33.31%.


Purchaser

Sale Terms

[ %]

Vendor

Zoning Class:

Legal Description:

Zone

Transfer Number:

Land

Building

Payout

Operating Expenses


Cash Flow


Sale Price



Comments

Net Income/Unit

Property Number

Site Area:

Sale Price:

Sale Date:

Total

Tax

LIC


%

%

Subdivision:


Address

Income Analysis


Year Built:

Site Improvements

Property Type:


Walk-upIndex 3

2203 118 St

Skyrattler

Units 1-156/8320662

RA7

4.20 Acres

25,740,000

Oct 25, 2013

132346571

1980

$3,781,900 cash to $14,815,000 VTB @ 3.1643% to Dec. 2018 & 7,143,100 to The Great-West Life Assurance Company @ 3.1643% to July 2023

0 0.00

0 0.00

0.00

627604 Alberta LtdDirector: Alan Skelley4240 - 91A St., Edmonton, AB T6E 5V2

Har-Par Investments LtdShareholder: Harvinder Saran6204 - 124 St., Edmonton, AB T6H 3V2

2 building complex. 4 storey, wood frame construction. Balconies, patios, outdoor pool, recreation centre with sauna & whirlpool. Elevators. 24-studio (495 sq. ft.), 64-1 bdr (618 sq. ft.), 22 - 1 bed + loft (810 sq. ft.), 34-2 bdr (796-825 sq. ft.) and 12 2 bed + loft (940 -

Paved parking, energized plug-ins. Mature landscaping. Outdoor pool.

1,877,083 14.03

42,732 165,000.00

672,218 4.52

1,162,133 0.00

7,449

27167


0

Gross Annual Income

Vacancy 2.3 /Suite

Known as Pine Ridge. Previously sold May/95 for $5,850,000. Reported in good condition. Actual rents in place deemed to fall toward the lower end of market. Expense ratio estimated at approx. 36.65%.Based on stabilized market level rents the NOI is estimated at approximately $1,444,864, cap rate of 5.61%, GIM of 12.1 and expense ratio of 32.08%.


Purchaser

Sale Terms

[ %]

Vendor

Zoning Class:

Legal Description:

Zone

Transfer Number:

Land

Building

Payout

Operating Expenses


Cash Flow


Sale Price



Comments

Net Income/Unit

Property Number

Site Area:

Sale Price:

Sale Date:

Total

Tax

LIC


%

%

Subdivision:


Address

Income Analysis


Year Built:

Site Improvements

Property Type:

*


Walk-upIndex 4

10633/45 116 St

Queen Mary Park

Pt 164,166,167/15/B4

RA8/RA7

67,276.00 Sq Ft

10,192,000

Mar 7, 2014

142070150

1966

Cash to assumption of mortgages 0 0.00

0 0.00

0.00

1325349 Alberta LtdDirector:Gordon White19 Willow Way, Edmonton, AB T5T 1C9

Mainstreet Equity CorpDirector:Navjeet Dhillon2304 State Road SW, Calgary, AB T3C 3M6

10645 - 116 St. - 22 suites (13-1 bdr & 9-2 bdr), built 1966; 10633 - 116 St. - 21 suites (17-1 bdr & 4-2 bdr), built 1971; 11820 - 102 St. - 15 suites (7 bach, 3-1 bdr & 5-2 bdr), built 1968; 11903 - 106 St. - 21 suites (3 bach, 12-1 bdr & 6-2 bdr), built 1971; 11110 - 127 St. - 12

Paved parking areas, perimeter landscaping.

958,500 10.96

28,755 112,000.00

367,170 5.52

562,575 0.00

6,182

27766


0

Gross Annual Income

Vacancy 3.0 /Suite

Legal also includes Pt. 1,2/3/RN60 (11110 - 127 St.); Pt. 11-13/5/RN52 (11903 - 106 St.) and 66,67/2/RN52 (11820 - 102 St.). 5 building complex sold as a portfolio. All wood frame construction, 2 1/2 - 3 1/2 stories. Overall suite mix is 10 bach, 52 - 1 bdr and 29 - 2 bdr. Modest upside potential evident to existing rents. Expense ratio is estimated at approximately 39.49%. The trasaction involved an intervening purchaser.


Purchaser

Sale Terms

[ %]

Vendor

Zoning Class:

Legal Description:

Zone

Transfer Number:

Land

Building

Payout

Operating Expenses


Cash Flow


Sale Price



Comments

Net Income/Unit

Property Number

Site Area:

Sale Price:

Sale Date:

Total

Tax

LIC


%

%

Subdivision:


Address

Income Analysis


Year Built:

Site Improvements

Property Type:


Walk-upIndex 5

8103/8107/8111/8115/8119 - 29 Avenue

Tipaskan

4/21/7621725

RA7

2.70 Acres

12,950,000

Jun 26, 2014

142197507

1978

Cash & mortgage 0 0.00

0 0.00

0.00

339878 Alberta Ltd. Har Par Investments Ltd.

Three Storey Wood Frame. 5 Building complex. 15 Bach (475 SF), 55 1-Bed (590 SF), 18 2-Bed (795 SF), 3 3-Bed (1,020 SF).

Paved parking areas

1,141,572 11.58

22,831 142,308.00

386,370 5.66

732,371 0.00

8,048

125211


0

Gross Annual Income

Vacancy 2.0 /Suite

Known as Amblewood Terrace. Reported in average to good condition. Some of the interior suites are dated. All units have three appliances. Majority of actual rents are generally in line with current market levels, though toward the lower end. Modest upside potential evident. Expense ratio on actual rents is 34.54%.


Purchaser

Sale Terms

[ %]

Vendor

Zoning Class:

Legal Description:

Zone

Transfer Number:

Land

Building

Payout

Operating Expenses


Cash Flow


Sale Price



Comments

Net Income/Unit

Property Number

Site Area:

Sale Price:

Sale Date:

Total

Tax

LIC


%

%

Subdivision:


Address

Income Analysis


Year Built:

Site Improvements

Property Type:


Walk-upIndex 6

4240 - 106 St

Rideau Park

Units 1 to 91/CDE Plan 9023730

RA7

2.86 Acres

14,450,000

Sep 5, 2014

142292528

1973

Cash and new mortgage 0 0.00

0 0.00

0.00

Can-West Properties and Investments Ltd. Har-Par Investments Ltd.

Four storey wood frame construction. 13 bach (420-527 sq. ft.), 40 - 1 bed (700-861 sq. ft.), 26 - 2bed (850-1044 sq. ft.), 12 - 3 bed (1098-1152 sq. ft.)

Paved surface and covered parking

1,009,260 14.61

20,185 158,791.00

412,416 3.99

576,659 0.00

6,336

125364


0

Gross Annual Income

Vacancy 2.0 /Suite

Known as Southbury House. Deemed in average to good condition. Well maintained. Some upgrades completed to a small number of units. Elevator access. Actual rents in place deemed to fall well below market. Expense ratio on actual rents is at approximately 41.70%.

Based on stabilized market rents NOI is estimated at approximately $9,179 per unit, cap rate of approx. 5.78%, GIM of 11.48 and expense ratio of 33.63%.


- 44 -

Cowan & Associates

ANALYSIS AND CONCLUSIONS Six sales have been selected for the comparison process, with details of the transactions

being summarized as follows:

Index

#

Sale

Date

No.

of Units Location

Year

Built

Capitalization Rate

Stabilized NOI Actual NOI

1 06/13 75 Lorelei 1976 5.70%

2 10/13 71 Beaumaris 1980 6.03% 4.52%

3 10/13 156 Skyrattler 1980 5.61% 4.52%

4 03/14 91 NC Edmonton 1966+ - 5.52%

5 06/14 91 Tipaskan 1978 5.66%

6 09/14 91 Rideau Park 1973 5.78% 3.99%

Research by the writer has focused on acquisitions of larger scale low rise

apartment complexes located in similar rental areas as the subject. The comparable sales involve properties constructed between 1966 and 1980; the subject building was constructed in 1978.

In the following section, various adjustments required to equate the comparable sales with the subject site will be detailed including the sale date, location, age, condition, etc.

The comparable sales have indicated a narrow range in capitalization rates varying from 5.61% to 6.03% based on stabilized rents. The comparable sales are being analyzed on a stabilized basis (involving stabilized market level rents based on local area rental market surveys) to allow for direct comparison with the subject which is being analyzed based on actual September 2014 rents, majority of which are deemed to fall in line with current market with some rents considered to fall toward the lower end of market.

The variance between the capitalization rates based on actual versus stabilized net income reflects the magnitude, if any, of the perceived potential to increase actual rents to market levels. The lower the actual rents the greater the upside potential and therefore the greater the variance between the 2 capitalization rates calculated for any given sale. When actual rents are deemed in line with market levels, the 2 capitalization rates are the same. Based on actual rents in place the comparables sales have indicated a range in capitalization rates varying from 3.99% to 5.70%.

The subject property was built in 1978 and is deemed in generally average condition having been reasonably well maintained with a regular maintenance

- 45 -

Cowan & Associates

program clearly evident. A review of the comparable sales indicates that majority are considered in similar or superior condition relative to the subject.

Indices #1 and #2 with capitalization rates of 5.70% and 6.03%, on stabilized rents, 5.70% and 4.52% on actual, represent sales of medium to larger scale (71 and 75 units) low rise apartment projects located in north Edmonton, within similar areas as the subject location. These properties were built in 1976 and 1980, exhibit wood frame construction, elevator access, a mixture of one, two and three bedroom units and were deemed in generally average to good condition as of their respective sale dates.

Index #3 with a capitalization rate based on stabilized rents of 5.61%, 4.52% on actual rents, represents the sale of a 156 unit low rise apartment complex located in southwest Edmonton, an area deemed more desirable and attractive relative to the subject location. The property was built in 1980, exhibits a mixture of one and two bedroom units, surface parking, and extensive common area amenities including a recreation centre, sauna, elevators, and an outdoor pool. Of note, discussions with the purchaser indicated that favourable vendor take back financing has placed downward pressure on the achievable capitalization. Overall, a higher capitalization rate for the subject property would apply.

Index #4 involves the sale of a 5 building portfolio located throughout north central Edmonton neighbourhoods. The individual buildings exhibit 1960’s and 70’s construction and are reported in generally average to good condition. Modest upside potential is evident to the existing rents resulting in a capitalization rate of 5.52%.

Index #5 with a capitalization rate of 5.66% on actual/stabilized rents, represents the recent sale of a larger scale (91 units) apartment complex located in south east Edmonton, within a similar profile area as the subject location. The property was built in 1978, exhibits primarily one bedroom units, and is deemed in generally average to good condition. Actual rents in place within this property are considered generally in line with market with some modest upside potential evident.

Index #6 with a capitalization rate of 5.78% on stabilized rents, 3.99% on actual, represents the recent sale of a larger scale (91 units) apartment complex located in south west Edmonton, within a more attractive area relative to the subject location. The property was built in 1973, exhibits bachelor, one, two and three bedroom units, and was deemed in generally average to good condition as of the sale date.

In concluding as to an appropriate capitalization rate for application to the Base Year Net Operating Income, the following factors have been consideration:

- 46 -

Cowan & Associates

• The subject property exhibits a good residential location within west Edmonton, enjoying adequate access to numerous employment areas throughout the City of Edmonton and to shopping, education and recreation amenities in the surrounding district.

• The subject property was built in 1978 and is deemed in generally average condition having been well maintained. As discussed, the property is located within west Edmonton suburban neighbourhood. Typically, apartment buildings located within suburban neighbourhoods tend to target couples and families and therefore feature larger suites involving at least one, two or three bedroom suites. Given the suite mix in place involving 50% bachelor suites, the subject property represents a unique investment, which may provide some level of risk. It is noted however, that the subject is currently fully occupied and represents the only complex in the area exhibiting suite mix involving large number of bachelor units.

• The majority of September 2014 rents within the subject are considered to fall in line with current market levels with some rents considered to fall toward the lower end of market. Within this analysis, actual September 2014 rents have been utilized with a downward adjustment to the capitalization rate applied in order to recognize the potential to increase the lower end rents.

Based on the analysis completed, taking into account current market conditions as well

as the age, location, design and condition of the subject property, the writer is of the opinion that an appropriate capitalization rate for the subject, when actual September 2014 rents are utilized, varying between approximately 5.75% and 6.00% would apply, resulting in the following estimate of value: 5.75% Market Value = Net Operating Income ÷ Capitalization Rate Market Value = $800,368.00 ÷ .0575 Market Value = $13,919,443.00 6.00% Market Value = Net Operating Income ÷ Capitalization Rate Market Value = $800,368.00 ÷ .060 Market Value = $13,339,467.00

- 47 -

Cowan & Associates

A correlation of the value estimates above results in the following final estimate of value for the subject via Direct Capitalization:

$13,800,000.00

(THIRTEEN MILLION, EIGHT HUNDRED THOUSAND DOLLARS) CASH FLOW ANALYSIS

In the event that the subject property was acquired on an all cash basis, the resulting cash flow dividend would be approximately 5.80%.

In order to confirm that the subject property would provide an adequate return when recognizing typical mortgage financing, a projection of cash flows on this basis will be undertaken. Through discussions with the various lending institutions, a conventional financing package for the subject property, as at the current date, has been estimated to involve a 70% loan to value ratio at an interest rate of 3.75% with a 25 year amortization term, reflective of the remaining economic lifespan estimate.

In addition, at the current date, financing at higher loan to value ratios and lower interest rates is available through CMHC and as a result, CMHC financing has become the most common financing option evident in the market for multi-family properties. As such, a cash flow dividend calculation based on a projected CMHC financing will be also presented.

It is emphasized that these do not represent actual financing available to the subject property rather, have been projected for analysis purposes. Based on the preceding terms, the cash flow analyses are detailed as follows:

Conventional CMHCFinancing Financing

Purchase Price $13,800,000 $13,800,000Mortgage $9,660,000 $9,660,000Equity $4,140,000 $4,140,000

Amortization (yrs) 25 25Interest Rate 3.75 3.00

NOI $800,368 $800,368Debt Service $594,155 $548,586Cash Flow $206,213 $251,781Cash Flow % 4.98% 6.08%DS ratio 1.35 1.46

- 48 -

Cowan & Associates

Conventional Financing At 4.98%, the subject property is considered to provide some return to the investor and

recognizes the positive attributes of the property though also reflects that debt service requirements can be met. A debt coverage ratio was also developed within the analysis. Overall, at 1.35, the subject is able to support a mortgage at the rate indicated providing additional support for the capitalization rate selected.

CMHC Financing At 6.08%, the subject property is considered to provide a more attractive return to the

investor and recognizes the financing terms currently offered by CMHC for multi-family investment properties. In addition, at a 1.46 debt coverage ratio, the subject is able to support a mortgage at the rate indicated providing additional support for the capitalization rate selected. SENSITIVITY ANALYSIS (Based on CMHC financing) As a further test of the relative risk of the market rental rates and vacancy rates selected, a Sensitivity Analysis will be completed which reviews the ability of the subject property to meet debt service requirements and provide a return to an investor in assuming lower performance levels than projected in the Base Year. The assumption will therefore be made that rents are reduced by 10%, approximately $92.00 per month on average. The results of this change would affect the financial performance of the subject property by lowering the Net Operating Income to $676,501.00 per annum or $5,638.00 per unit on average. This would also have the effect of lowering the cash flow dividend rate to 3.09 and the debt coverage ratio to 1.23. Furthermore, rents could decline from the Base Year average of $919.00 by approximately $187.00, or approximately 20.3%, to $732.00, and debt service obligations could be met. This would basically represent the “break-even” point. GROSS INCOME MULTIPLIER

The Gross Income Multipliers (GIM’s) reflected by the sales transactions are outlined as follows:

Index

#

Sale

Date

Expense Ratio GIM

Stab. Actual Stab. Actual

1 06/13 32.43% 11.87

2 10/13 33.31% 39.47% 11.06 13.39

3 10/13 32.08% 36.65% 12.10 14.03

4 03/14 - 39.49% - 10.96

5 06/14 34.54% 11.58

6 09/14 33.63% 41.70% 11.48 14.61

Subject 38.50%

- 49 -

Cowan & Associates

The comparable sales have indicated a range in Gross Income Multipliers varying from

approximately 11.0 to 14.0 based on actual rents and between approximately 11.1 and 12.1 based on stabilized rents. The various factors which would influence the risk and return of the subject property have been discussed in detail within the previous income analysis. The same factors would also impact the selection of a Gross Income Multiplier for the subject. Factors such as the average condition, 1978 construction, design, and the actual rents, location and suite mix are influential.

A key factor within the Gross Income Multiplier analysis is the nature of the expenses projected for the subject property relative to the comparable sales. As discussed previously in this report, expenses for the Base Year which have resulted in an expense ratio based on actual rents of 38.50% which rises above the range indicated by the comparable sales, resulting from the suite mix in place involving 50% of bachelor units. In isolation, an expense ratio at this level would suggest a Gross Income Multiplier below the range indicated by the comparable sales.

Furthermore, within the Gross Income Multiplier analysis it is also important to recognize all of the necessary adjustments including the time adjustment, location, age and condition, etc. The reader is referred back to the detailed discussion regarding all comparable sales within the previous income analysis. Downward adjustments are warranted for Indices #3 and #6, both located within more desirable areas relative to the subject location. This would suggest a Gross Income Multiplier toward the lower end of the range indicated by the majority of comparables.

Overall, based on all factors, in particular the age, location and condition of the subject property, a Gross Income Multiplier slightly below the range set by the comparable sales varying from approximately 10.50 to 11.00 would be appropriate for the subject property. In emphasizing the median of this range, 10.75, the valuation of the subject property is as follows: Market Value = Effective Gross Income x Gross Income Multiplier Market Value = $1,301,508.00 x 10.75 Market Value = $13,991,211.00 Rounded to:

$14,000,000.00 (FOURTEEN MILLION DOLLARS)

- 50 -

Cowan & Associates

DIRECT COMPARISON APPROACH The Direct Comparison Approach involves the gathering, analyzing and comparing of data on similar properties which have sold, on which offers have been made, or which are available for sale. Basically, the approach implies the “Principle of Substitution”, which states that a prudent purchaser will pay no more for a given property than the cost to acquire a substitute of equal utility. Assuming in the appraisal of a property that a sufficient number of comparables can be found, the Direct Comparison provides a good test of value, as nothing is more basic to the appraisal of real estate than the study of the actions of buyers and sellers in the marketplace. In applying the approach to multi-family complexes, the most common unit of comparison represents the “sale price per suite”. To lend support to the Income Approach, this unit of comparison will be analyzed relative to the sales presented earlier in this report. SALE PRICE PER SUITE ANALYSIS The following chart will summarize the key information extracted from the sales presented within the preceding section:

Index #

Suite Mix

Property Type

Year Built

Sale Date

Income/Suite Sale Price/ Suite

NIM

Stabilized Actual Stab. Act.

1

1 Bachelor 22 One Bedroom 36 Two Bedroom 16 Three Bedroom

Low Rise

1976 06/13 $9,112.00 $160,000.00 17.56

2 1 Bachelor

3 One Bedroom 67 Two Bedroom

Low Rise

1980 10/13 $9,044.00 $6,781.00 $150,000.00 16.59 22.12

3 24 Studio


Low Rise

1980 10/13 $9,262.00 $7,449.00 $165,000.00 17.81 22.15

4 10 Bachelor


Low Rise

1966+ 03/14 - $6,182.00 $112,000.00 - 18.12

5


Low Rise

1978 06/14 $8,048.00 $142,308.00 17.68

6


Low Rise

1973 09/14 $9,179.00 $6,336.00 $158,791.00 17.30 25.06

Sub 60 Bachelor

60 One Bedroom Low Rise

1978 - $6,670.00 - -

- 51 -

Cowan & Associates

The subject property features 60 bachelor and 60 one bedroom units. The property is deemed in average condition having been well maintained with a regular maintenance program clearly evident.

As discussed, the subject property is located within west Edmonton suburban neighbourhood. Typically, apartment buildings located within suburban neighbourhoods tend to target couples and families and therefore feature larger suites involving primarily one, two or three bedroom suites. Lesser demand is typically evident for bachelor suites in suburban areas relative to central locations. Given the suite mix in place involving 50% of bachelor suites, the subject property represents a unique investment, which may provide some level of risk.

Actual rents have been utilized in this analysis. A key aspect in analyzing multi-family properties on the basis of a sale price per suite is the net income per suite generated. At $6,595.00 per suite, the net income for the subject falls below the range set by the comparable sales arising from the suite mix of only bachelor and one bedroom suites.

Comparable Sales A review of the comparable sales indicates unit values ranging from approximately

$112,000.00 and $165,000.00. Given the age, condition, size, design, suite mix, and location of the subject property a unit value toward the lower end of this range would be expected.

Relative to the comparables, the net income per suite for the subject is most similar to that indicated by Index #4 on actual rents. Index #4 hah achieved a sale price per suite of $112,000.00 and involves the sale of a 5 building portfolio located throughout north central Edmonton neighbourhoods. The individual buildings exhibit 1960’s and 70’s construction and are reported in generally average to good condition. Of note, modest upside potential was evident to the existing rents within Index #4.

Furthermore, the net income per suite for the subject is approximately 18% below that indicated by Index #5 which has achieved a sale price per suite of approximately $142,000.00. As noted, Index #5 involves represents the sale of a larger scale (91 units) low rise apartment project located in southeast Edmonton suburban neighbourhood, within a similar profile area as the subject location. The property was built in 1978, exhibits wood frame construction, a mixture of bachelor, one, two, and three bedroom units and was deemed in generally average to good condition as of the sale date. In recognizing the approximate 18% downward adjustment to Index #5 a unit value of approximately $117,000.00 for the subject property would be expected.

Net Income Multiplier Reference is also made to the Net Income Multipliers indicated by the comparable

sales. The Net Income Multiplier contrasts the net income per suite to the sale price per unit and allows comparisons to be drawn between sales exhibiting different net incomes per suite as the subject and comparable sales. The comparable sales have indicated a range in Net Income

- 52 -

Cowan & Associates

Multipliers varying between approximately 16.6 and 17.8 based on stabilized rents. In recognizing current market conditions, the actual rents, age, design, condition, and location of the subject property, a Net Income Multiplier toward the lower end of the range set by the majority of the comparable sales varying from approximately 17.00 to 17.50 would be appropriate for the subject property. Accordingly, based on the above range in Net Income Multipliers, a range in per unit values varying from approximately $113,500.00 to $117,000.00 would be expected.

There is clearly a correlation between the sale price per suite and the average net income per suite and this relationship holds true for all forms of investment real estate. Stated simply the higher the net income per suite, the greater the sale price per unit. In acknowledging that such properties are generally acquired based on income potential, it becomes difficult to adjust the sales beyond recognizing where the overall range for the subject property should be placed and potentially applying general adjustments for basic factors.

Conclusion In recognizing the various characteristics of the subject property as detailed throughout

this analysis and in giving consideration to the Net Operating Income per suite which falls toward the lower end of the range indicated by the comparable sales, a unit value for the subject varying from approximately $112,000.00 to $117,000.00 per unit is considered most appropriate. In emphasizing the approximate median of this range, $115,000.00 per unit will be applied within this analysis. This represents a net income multiplier of 17.24. Accordingly, the valuation of the subject property is as follows: Market Value = Number of Suites x Price per Suite Market Value = 120 Suites x $115,000.00 Market Value = $13,800,000.00


- 53 -

Cowan & Associates

RECONCILIATION OF VALUE INDICATIONS AND FINAL ESTIMATE OF VALUE

Two approaches to value were developed within the context of this report and the

following value estimates yielded: Income Approach: • Direct Capitalization: $ 13,800,000.00 • Gross Income Multiplier Analysis: $ 14,000,000.00 Direct Comparison Approach: • Sale Price Per Suite Analysis: $ 13,800,000.00 The valuation of Windsor Estates has resulted in a narrow range in value estimates by application of the appropriate techniques. The subject property represents a conventionally designed, larger scale rental apartment complex located in a good rental location. The property is deemed in average condition overall. As a rental property, the Direct Capitalization Approach represents the key valuation technique and is most commonly utilized by investors in the local market. Both the Gross Income Multiplier and Sale Price per Suite Analysis tend to be more “rule of thumb” valuation techniques intended to support the value estimate derived by means of Direct Capitalization. As such, emphasis would be placed on the value derived via Direct Capitalization, in arriving at a final estimate of value.

The subject property is currently operated as an investment property and therefore the estimate of value derived via the Income Approach represents key valuation technique. Overall, the following value estimate applies to the subject property, effective September 22nd, 2014:


Cowan & Associates

CERTIFICATE OF APPRAISER I certify to the best of my knowledge and belief that: • 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 are 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 and compensation for this assignment were not contingent upon

developing or reporting predetermined results, the amount of the value estimate, or a conclusion favouring the client.

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

in conformity with the Canadian Uniform Standards. • I have the knowledge and experience to complete the assignment competently. • No one provided significant professional assistance to the person signing this report. • As of the date of this report the undersigned has fulfilled the requirements of The Appraisal

Institute of Canada Continuing Professional Development Program for members. • The undersigned is a member in good standing of the Appraisal Institute of Canada • I, Pawel Martyniak, B. Comm., AACI, being a representative of Glen Cowan & Associates

Real Property Appraisals Ltd., made a personal inspection of the property legally described as Lot 1A, Block 42, Plan 812 3043, and municipally located at 18104 – 95th Avenue, Edmonton, Alberta.

Cowan & Associates

• Based on the inspection of the subject property conducted on September 22nd, 2014, the preceding data, analyses and conclusions enables me to formulate the opinion that the following value estimate has been derived for the property described herein, effective September 22nd, 2014:


Respectfully submitted, Pawel Martyniak, B. Comm., AACI Licensed Real Estate Appraiser Dated: November 10th, 2014

Cowan & Associates

EXHIBIT A FUNDAMENTAL ASSUMPTIONS AND LIMITING CONDITIONS

Cowan & Associates

FUNDAMENTAL ASSUMPTIONS AND LIMITING CONDITIONS

The date of value to which the opinions expressed in this report apply is set forth in the Letter of Transmittal. The appraisers assume no responsibility for economic or physical factors occurring at some later date which may affect the opinions herein stated. No opinion is expressed regarding legal matters that require specialized investigation or knowledge beyond that ordinarily employed by real estate appraisers. This report has been prepared for the named recipient in the letter of transmission located at the beginning of the report. It is not intended that this report be relied upon by any other person without the written authorization from Glen Cowan and Associates Real Property Appraisers Ltd. No opinion as to title is rendered. Data regarding ownership and legal description were obtained from sources considered reliable and the title is assumed to be marketable and free and clear of all liens and encumbrances, easements and restrictions except those specifically discussed in the report. No engineering survey has been made by the appraisers. Except as specifically stated, data relative to size and area were taken from sources considered reliable, and no encroachment of real property improvements is assumed to exist other than specified. All maps, plans and exhibits included herein are for illustration only, as an aid in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any purpose. The appraiser has personally inspected the subject property and finds no obvious evidence of concern on the condition of the land except as stated in the report; however, no responsibility for hidden defects or conformity to specific government requirements, can be assumed without provision of specific professional or governmental inspections. The appraiser is not qualified to comment on environmental issues that may affect the market value of the property appraised, including but not limited to pollution or contamination of land, buildings, water, groundwater or air. Unless expressly stated, the property is assumed to be free and clear of pollutants and contaminants, including but not limited to moulds or mildews or the conditions that might give rise to either, and in compliance with all regulatory environmental requirements, government or otherwise, and free of any environmental condition, past, present or future, that might affect the market value of the property appraised. If the party relying on this report requires information about environmental issues that party is cautioned to retain an expert qualified in such issues. We expressly deny any legal liability relating to the effect of environmental issues on the market value of the property appraised. All opinions, estimates, data and statistics furnished by other sources is believed to be reliable, however, we cannot guarantee its validity or accuracy. Possession of this report or copy thereof does not carry with it the right of publication, nor may it be used for purposes by other than the applicant without previous written consent of the appraisers or client.

Cowan & Associates

This appraisal report has been specified as having been completed for mortgage lending purposes, where the appraisal report is used as part of a prudent mortgage lending transaction involving a mortgage lender utilizing proper mortgage lending techniques and underwriting and all due diligence to lenders who are both creditworthy and have been assessed as having reasonable wherewithal to repay any loan advanced to them on real property and secured by mortgage. Personal Information Protection and Electronic Documents Act (PIPEDA) This report conforms to the requirement of the “Personal Information Protection and Electronic Documents Act” (PIPEDA).

Cowan & Associates

EXHIBIT B PHOTOGRAPHS OF SUBJECT PROPERTY

Cowan & Associates

Exterior Views of Subject Complex

Cowan & Associates

Views of Typical Kitchen Areas

Cowan & Associates

Views of Typical Living Areas

Cowan & Associates

Views of Typical Bathroom Areas

Cowan & Associates

Views of Common Typical Laundry Machines

Cowan & Associates

Views of Common Areas

Cowan & Associates

Views of Typical Mechanicals

Cowan & Associates

Neighbourhood View East Along 95th Avenue

Neighbourhood View West Along 95th Avenue

Cowan & Associates

EXHIBIT C CERTIFICATE OF TITLE

Cowan & Associates

EXHIBIT D LAND USE BYLAW EXCERPT

Cowan & Associates

Edmonton Zoning Bylaw 12800

210 (RA7) Low Rise Apartment Zone

210.1 General Purpose

To provide a Zone for Low Rise Apartments.

210.2 Permitted Uses Bylaw 15998 August 27, 2012

1. Apartment Housing

2. Boarding and Lodging Houses

3. Limited Group Homes

4. Minor Home Based Business

5. Row Housing

6. Stacked Row Housing

7. Fascia On-premises Signs

8. Projecting On-premises Signs

210.3 Discretionary Uses Bylaw 15998 August 27, 2012

1. Child Care Services

2. Convenience Retail Stores

3. Conversion of Single Detached , Semi-detached and Duplex Dwellings to Professional, Financial and Office Support Services

4. Duplex Housing

5. Fraternity and Sorority Housing Bylaw 14750 December 12, 2007

6. Garage Suites Bylaw 15036 February 2, 2009

7. Garden Suites

8. Group Homes

http://webdocs.edmonton.ca/zoningbylaw/ZoningBylaw/Part1/Interpretive/7_2(2)_Duplex_Housing.htm

Cowan & Associates

9. Health Services

10. Major Home Based Business

11. Personal Service Shops

12. Religious Assembly

13. Residential Sales Centre

14. Secondary Suites

15. Semi-detached Housing

16. Single Detached Housing

17. Freestanding On-premises Signs

18. Temporary On-premises Signs

210.4 Development Regulations for Permitted and Discretionary Uses

1. The maximum Density shall be 125 Dwellings/ha.

2. The minimum Site Area shall be 800 m2.

3. The minimum Site Width shall be 20.0 m . Bylaw 13117 July 8, 2002

4. The maximum Height shall not exceed 14.0 m nor 4 Storeys. Floor Area may be developed in attic areas as additional space to a Dwelling, and not counted as a Storey, provided the additional Floor Area creates architectural interest to the design of the building and the development is within the maximum allowable Height. In cases where dormers or other windows are proposed, the development shall be considered a Discretionary Development.

5. The maximum Floor Area Ratio shall be 1.3. The maximum Floor Area Ratio may be increased to 1.4 when underground parking is provided. In such a case, the application will be a Discretionary Development.

Bylaw 15735 June 20, 2011

6. The minimum Front Setback shall be 6.0 m . Bylaw 15735 June 20, 2011

7. The minimum Rear Setback shall be 7.5 m . Bylaw 15735 June 20, 2011

8. The minimum Side Setback shall be 1.0 m for each Storey or partial Storey, except that a total of at least 2.0 m shall be provided in all cases. A Side Setback

Cowan & Associates

shall be not less than 4.5 m when it abuts a flanking public roadway other than a Lane.

Bylaw 14750 December 12, 2007 Bylaw 15036 February 2, 2009 Bylaw 15998 August 27, 2012

9. Separation Space shall be provided in accordance with Section 48 of this Bylaw, except that it shall not be required where side walls of abutting buildings face each other and habitable windows are not located directly opposite each other, such that privacy is not impacted and:

a. in the case of buildings on separate Sites, each development complies with the Setback requirements for the building;

b. in the case of buildings on the same Site, the separation distance between buildings is at least equal to the total of the minimum Side Setback requirements for both buildings

10. in the case of buildings on separate Sites, each development complies with the Setback requirements for the building.

11. A minimum Amenity Area of 7.5 m2 per Dwelling shall be provided. Bylaw 15359 March 23, 2010

12. Notwithstanding the other regulations of this Zone, where any building exceeds 10.0 m or 2 ½ Storeys in height, or is a Multi-unit Project Development, and abuts a Site zoned to allow Single Detached Housing as a Permitted Use, or the RF5 Row Housing Zone, the following regulations shall apply along the said property line:

Bylaw 15735 June 20, 2011

a. a minimum Setback of 7.5 m shall be required except that:

i. where a building exceeds 10.0 m or 2 ½ Storeys in height, the portion of the building exceeding the said height shall have a minimum 10.0 m Stepback from the property line;

ii. the Development Officer may reduce this Setback to a minimum of 1.0 m per Storey or partial Storey only where the proposed façade is a flanking or end wall, and an acceptable landscaped buffer is provided. In no case, shall the Setback be less than 3.0 m , nor shall the Setback be reduced where the proposed building abuts the south property line of a neighbouring site;

iii. where a Stepback is provided, it shall be a minimum of 2.5 m ;

b. The Development Officer may reduce the minimum Stepback where:

Cowan & Associates

i. a sun shadow study, prepared by a qualified, registered Professional Engineer or Architect, demonstrates the shadow impact is minimal, using March 21 and September 21 as the benchmark; or

ii. variations in Setbacks and Stepbacks, recessed balconies, or other design techniques minimize building massing and/or shadow impacts, and provide architectural interest, complimentary to the surrounding development;

c. no outdoor parking, garbage collection, common amenity areas, or outdoor storage areas shall be developed within 3.0 m ;

d. a solid screen fence, 1.83 m in height, shall be installed, except along common flanking Front Yard boundaries;

e. design techniques including, but not limited to, the use of sloped roofs, variations in building setbacks and articulation of building façades, shall be employed in order to minimize the perception of massing of the building when viewed from adjacent residential areas and roadways;

f. building finishes shall be compatible with the exterior finishing materials and colours typical of adjacent development; and

g. the Development Officer may require information regarding the location of windows and Amenity Areas on adjacent properties to ensure the windows or Amenity Areas of the proposed development are placed to minimize overlook into adjacent properties.

13. Signs shall comply with the regulations found in Schedule 59B. Bylaw 15998 August 27,2012

14. Apartment Housing, Boarding and Lodging Houses, Row Housing and Stacked Row Housing shall be located on Sites of 1.4 ha or less. The Development Officer may exercise discretion in those cases in which Apartment Housing, Boarding and Lodging Houses, Row Housing and Stacked Row Housing would be located on Sites greater than 1.4 ha , having regard for Site design, building massing and scale.

15. Apartment Housing, Boarding and Lodging Houses, Row Housing and Stacked Row Housing shall not isolate another Site within this Zone of less than 800 m2 . The Development Officer may exercise discretion in those cases which would isolate another Site within this Zone of less than 800 m2 , having regard to the location, age and nature of the Use or Uses on the Site that would be isolated

210.5 Additional Development Regulations for Discretionary Uses Bylaw 14750 December 12, 2007 Bylaw 15036 February 2, 2009

http://webdocs.edmonton.ca/zoningbylaw/ZoningBylaw/Schedule/Schedule_59B.htm

Cowan & Associates

1. Notwithstanding subsection 210.4, Single Detached, Semi-detached Duplex Housing, Secondary Suites, Garage Suites and Garden Suites in this Zone shall be developed in accordance with the provisions of the RF4 Zone.

Bylaw 15998 August 27,2012

2. The following regulations shall apply to Personal Service Shops, Convenience Retail Stores and Health Services:

a. the total Floor Area of these Uses on any Site shall not exceed 275 m2 ; and

b. these Uses shall not be permitted in any freestanding structure separate from a structure containing Residential Uses. Their principal entrance shall be a separate, outside entrance.

3. Conversion of Single Detached, Semi-detached and Duplex Dwellings to Professional, Financial and Office Support Services shall be in accordance with Section 77 of this Bylaw.

http://webdocs.edmonton.ca/zoningbylaw/ZoningBylaw/Part2/Residential/150_(RF4)_Semi-detached_Residential_Zone.htm

http://webdocs.edmonton.ca/zoningbylaw/ZoningBylaw/Part1/Special_Land/77__Conversion_of_Single_Detached.htm

Cowan & Associates

EXHIBIT E RENT ROLLS

Suite Suite Suite Sep-14 Rent/# Type Size Monthly Rent Sq. Ft.

A101 B 430 $795.00 1.85$

A102 1 620 $995.00 1.60$

A103 B 430 $900.00 2.09$

A104 1 620 $925.00 1.49$

A105 1 620 $900.00 1.45$

A106 B 430 $825.00 1.92$

A107 B 430 $895.00 2.08$

A108 1 620 $995.00 1.60$

A109 B 430 $800.00 1.86$

A110 1 420 $1,025.00 2.44$

A111 1 420 $995.00 2.37$

A112* B 430 $900.00 2.09$

A201 B 430 $895.00 2.08$

A202 1 675 $995.00 1.47$

A203 B 430 $800.00 1.86$

A204 1 675 $925.00 1.37$

A205 1 675 $900.00 1.33$

A206 B 430 $800.00 1.86$

A207 B 510 $875.00 1.72$

A208 1 675 $995.00 1.47$

A209 B 430 $800.00 1.86$

A210 1 675 $995.00 1.47$

A211 1 675 $995.00 1.47$

A212 B 430 $800.00 1.86$

A301 B 430 $800.00 1.86$

A302 1 675 $900.00 1.33$

A303 B 430 $850.00 1.98$

A304 1 675 $975.00 1.44$

A305 1 675 $995.00 1.47$

A306 B 430 $900.00 2.09$

A307 B 510 $900.00 1.76$

A308 1 675 $995.00 1.47$

A309 B 430 $800.00 1.86$

A310 1 675 $925.00 1.37$

Windsor CourtRent Roll

18104 - 95th AvenueEdmonton, Alberta


A311 1 675 $1,050.00 1.56$

A312 B 430 $900.00 2.09$

B101 B 430 $900.00 2.09$

B102 1 620 $1,050.00 1.69$

B103 1 620 $970.00 1.56$

B104 B 430 $850.00 1.98$

B105 B 430 $810.00 1.88$

B106 1 620 $1,050.00 1.69$

B107 1 620 $950.00 1.53$

B108 B 430 $895.00 2.08$

B201 B 430 $875.00 2.03$

B202 1 675 $950.00 1.41$

B203 1 675 $1,050.00 1.56$

B204 B 430 $875.00 2.03$

B205 B 430 $900.00 2.09$

B206 1 675 $995.00 1.47$

B207 1 675 $1,000.00 1.48$

B208 B 430 $895.00 2.08$

B301 B 430 $900.00 2.09$

B302 1 675 $1,050.00 1.56$

B303 1 675 $995.00 1.47$

B304 B 430 $800.00 1.86$

B305 B 430 $900.00 2.09$

B306 1 675 $950.00 1.41$

B307 1 675 $995.00 1.47$

B308 B 430 $900.00 2.09$

C101 B 430 $800.00 1.86$

C102 1 620 $995.00 1.60$

C103 1 620 $995.00 1.60$

C104 B 430 $895.00 2.08$

C105 B 430 $800.00 1.86$

C106 1 620 $995.00 1.60$

C107 1 620 $925.00 1.49$

C108 B 430 $800.00 1.86$

C201 B 430 $900.00 2.09$

C202 1 675 $975.00 1.44$

C203 1 675 $1,050.00 1.56$

C204 B 430 $900.00 2.09$


C205 B 430 $800.00 1.86$

C206 1 675 $975.00 1.44$

C207 1 675 $995.00 1.47$

C208 B 430 $875.00 2.03$

C301 B 430 $800.00 1.86$

C302 1 675 $995.00 1.47$

C303 1 675 $900.00 1.33$

C304 B 430 $900.00 2.09$

C305 B 430 $850.00 1.98$

C306 1 675 $995.00 1.47$

C307 1 675 $950.00 1.41$

C308 B 430 $785.00 1.83$

D101 B 430 $900.00 2.09$

D102 1 620 $995.00 1.60$

D103 B 430 $810.00 1.88$

D104 1 620 $995.00 1.60$

D105 1 620 $920.00 1.48$

D106 B 430 $820.00 2.08$

D107 B 430 $895.00 2.31$

D108 1 620 $995.00 1.29$

D109 B 430 $800.00 2.21$

D110 1 620 $950.00 1.53$

D111 1 620 $950.00 1.45$

D112 B 430 $900.00 1.91$

D201 B 430 $820.00 2.21$

D202 1 675 $950.00 1.19$

D203 B 430 $800.00 2.31$

D204 1 675 $995.00 1.47$

D205 1 675 $995.00 1.33$

D206 B 430 $895.00 2.09$

D207 B 510 $900.00 1.96$

D208 1 675 $1,000.00 1.33$

D209 B 430 $895.00 2.33$

D210 1 675 $1,000.00 1.44$

D211 1 675 $975.00 1.33$

D212 B 430 $900.00 1.98$

D301 B 430 $850.00 2.31$

D302 1 675 $995.00 1.33$


D303 B 430 $895.00 2.33$

D304 1 675 $1,000.00 1.48$

D305 1 675 $1,050.00 1.56$

D306 B 430 $895.00 2.08$

D307 B 510 $900.00 1.76$

D308 1 675 $900.00 1.33$

D309 B 430 $850.00 1.98$

D310 1 675 $970.00 1.44$

D311 1 675 $950.00 1.41$

D312 B 430 $900.00 2.09$

Total: 110,280.00$

* Stabilized market level rents applied for the office unit.

Cowan & Associates

EXHIBIT F APARTMENT RENT/VACANCY SURVEYS

Cowan & Associates

RENT VACANCY SURVEY Monthly Rents

# Name/

Location # of

Suites Suite Sizes

(Sq. Ft.) Bach.

One Bdrm.

Two Bdrm.

Three Bdrm.

Vacancy Renovations

1 Parkwood 18240 – 84 Avenue

22 Units 2 ½ Storeys

1 Bdrm: $975 - 0

Renovated in 2009.

Comments

Rent includes heat, water, surface parking stall, dishwasher, fridge and stove.

2 Belmead Manor East 18204 – 93 Ave

44 Units 4Storeys

1B - 736 $950 - 0 As needed.

Comments

Rent includes heat, water, surface parking stall, fridge and stove.

3 West Edmonton Ct 8905 – 184 St

81 Units 4 Storeys

1B - 787

$1159 - $1209

- - 0 Renovated as

needed

Comments

Rent includes heat, water, surface parking stall, dishwasher, fridge and stove. Extra parking available $25/mo for non-energized, $35/mo for energized. Some units renovated as needed included upgraded flooring.

Cowan & Associates

Monthly Rents

# Name/

Location # of

Suites Suite Sizes

(Sq. Ft.) Bach.

One Bdrm.

Two Bdrm.

Three Bdrm.

Vacancy Renovations

4 Primrose Lane Apts 18236 – 86 Ave

153 Units 2 ½ Storeys

Bach – 500 1B - 730

$989-$1039 $1149 - $1199

- 0 Renovated as

needed.

Comments

Rent includes heat, water, surface parking stall, dishwasher, fridge and stove.

5 Morningside Estates 17119 – 64 Ave

220 Units 2 & 3 Storeys

1B - 636

$1099 - $1149

- 0 As needed.

Comments

Rent includes heat, water, surface parking stall, insuite storage, dishwasher, fridge and stove.

6 Westridge Estates B 7611 – 172 St

90 Units 4 Storeys

Bach – 450 1B – 600

$979-$1029 $1,099 - $1,149

- 0 Good condition,

regular renovations.

Comments

Rent includes heat, water, surface parking stall, fridge, stove, storage, and dishwasher. Swimming pool on site, recreation room and jacuzzi.

# Name/

Location

7

Callingwood

17116 – 64th

Ave

Comments

8

Amelia

Meadows

16410–95th A

Comments

9

Westgate

Manor

9560-163rd S

Comments

n # of

Suite

d h

236 Sui

3 Store

Ave

52 Suit

2 ½ Stor

St

40 Suit

2 ½ Stor

fs

Suite S(Sq. F

ites

eys

Bach –

592

1B – 56

tes

reys -

tes

reys

Bach –

1B - 5

2B –

Sizes Ft.)

Bac

– 487-

2

65-673

$895

Rent include

$79

Rent includes

– 435

580

850

$75

Rent include

out the windo

M

h. One

Bdrm

5+ $1025

s heat, water, frid

95 $950-$

s heat, water, balc

50 $900

s heat, water, bal

ows in 2011/2012

Monthly Rents

e m.

TwoBdrm

5+ -

dge, stove, balcon

$995 -

conies and parkin

0 -

conies and parkin

2, two building pr

o m.

ThreeBdrm

nies and parking.

-

ng. Parking is surf

-

ng. Parking is sur

roperty. 1, 2B va

Cowan

e m.

Vacancy

N/A

0 Vacant

face paved and en

1 Vacant

rface paved and e

acancy

n & Associates

y Renovation

Upgraded suit

and common

areas.

t As needed

nergized.

t Good conditio

energized. Chang

ns

tes

on

ed

Cowan & Associates

10 Baker Court

10315-156 St

21 Suites

2 ½ Storeys

B-480

1-600

2-720

3-1000

$900 $1000 - - N/A Renovations as

needed.

Comments

Heat, water, parking stall, fridge and stove included in rent.

11

Westlawn

Village

95 Ave/165 St

144 Suites

2 ½ Storeys

Bach - 632

1B - 696

2B - 909

$900-$995 $1150-$1225 - 3 Vacant

Upgraded suites

and common

areas.

Comments

Rent includes heat, water, fridge, stove and dishwasher, balconies and parking. Parking is surface

paved and energized. Renovated in 2005 and 2009. Suites are also renovated on turnover.