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CANADIAN REAL ESTATEINVESTMENT FUND No.12012 ANNUAL REPORT
CANAD IAN REAL ES TATE INVES TMENT FUND NO.1
The Canadian Real Estate Investment Fund No. 1 is one of Canada’s largest open-ended, segregated real estate funds. The Fund’s core objective is to provide secure, growing cash flow, a hedge against inflation, low volatility, diversification and the potential for capital appreciation.
TABLE OF CONTENTS
1 Portfolio Manager’s Report
2 Portfolio Diversification
3 Portfolio & Tenant Diversification
6 2012 Performance & Activity
13 Multi-Family Effective Age Calculator
14 2013 Portfolio Business Plan
18 Independent Auditor’s Statement
19 Audited Financial Statements
23 Statement of Investment Portfolio
31 Notes to Statement of Investment Portfolio
34 Notes to Financial Statements
39 Senior Management
40 Office Locations
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Any statements in this report concerning future financial performance of the Fund are subject to, among other things, risks, uncertainties and assumptions about the Fund, economic factors and real estate markets generally. They are not guarantees of future performance, and actual events and results may differ materially from those expressed or implied by forward-looking statements included in this report.
2012 ANNUAL REPORT
P O R T F O L I O M A N A G E R ’ S R E P O R T
It would be inappropriate to begin this report without a loud
pronouncement that the 2012 total gross return for the Fund was
a record setting 19.7%. However, as we have emphasized over
the years, it is not the one-year return that is the focus of Fund
management. The design, strategy and philosophy of this fund
has always taken a long-term view. The five-year, ten-year and
historical (32 year) annualized gross returns of the Fund are 8.1%,
10.3% and 8.7% respectively. The Fund’s real estate portfolio is
designed to both withstand the challenging periods, as it did in
2009 and 2010, and benefit from stronger economic conditions
as in 2011 and 2012. It achieves these stable results by investing
in high quality assets, occupied by financially strong tenants and
diversified both by property type and city.
The 2012 annual gross return is made up of 6.4% income return
on the real estate which, after adjusting for cash, results in an
income return of 5.2%, consistent with recent performance. The
remainder of the total return is made up of a very healthy capital
return of 14.2% and 0.3% adjustment for marking mortgages
and bond investments to market. All property types accounted
for the strong capital return this year, but Calgary office, Toronto
office and the Fund’s apartment buildings were the largest three
contributors. The continuing strong demand for good quality real
estate of all property types pushed capitalization rates down,
resulting in strong value increases.
The Fund acquired four new assets for an initial investment of
$228.8 million. The new additions to the portfolio included two
Walmart anchored shopping centres, one in Ontario and one in
Saskatchewan, as well as an office building in Ottawa, 100%
leased to the federal government. The fourth transaction was
a forward purchase of an industrial development project in
Edmonton. The Fund also sold its 50% interest in a Calgary
office building for $50.5 million. Further details on these
trades are provided on pages 11 and 12.
The leasing teams across the country had a very active year.
Highlights included a 35,000 square foot expansion with
Snamprogetti at Watermark Tower in downtown Calgary; the
leasing of an entire building of 245,000 square feet at 7070
Mississauga Road in Mississauga, Ontario, to Hoffman La Roche
Pharmaceuticals; a lease renewal for three full floors (about
37,000 square feet) to the law firm HGE Management Company
Limited at 650 West Georgia in Vancouver; and an 85,200 square
foot renewal of the Toronto Transit Commission at 5140
Yonge Street in Toronto. Details of these lease transactions
are provided on pages 9 and 10.
Looking forward, Fund management will continue to selectively
sell non-core properties and add new properties to further
strengthen the portfolio in terms of diversification and quality.
In addition, the planning of three potential developments will
pick up momentum in 2013. The projects are an office building in
Vancouver, an apartment complex in Toronto and an office tower
in Calgary. Planning will include market and financial analysis,
assembling the development team, sourcing lead tenants for the
office projects and working through the approval process with
each city. Cash management; keeping a low loan-to-value ratio;
executing property level business plans; continuing best-in-class
property management standards and maintaining GWL Realty’s
many well established green initiatives are all important parts of
the 2013 portfolio business plan.
Canadian real estate fundamentals were very strong in 2012.
Good supply/demand balance in most markets, improving
employment and a strengthening economy resulted in improving
occupancy levels and increasing rents. Abundant and inexpensive
debt and capital, along with more investors appreciating the sound
investment rationale for owning direct real estate, helped increase
demand for quality real estate, pushing up prices.
There remain many global market and geopolitical challenges and
uncertainties heading into 2013. The Fund, like Canada, is well
positioned, on a relative basis, to meet these challenges. Canada’s
resource wealth, strong banking system, stable government and
improving employment numbers will sustain modest growth. The
Fund – with its institutional quality assets, excellent diversification
in four property types, largely in Canada’s major cities, with long-
term leases to financially strong tenants – will benefit from this
positive backdrop and result in good leasing activity and stable
operating incomes, consistent with recent performance.
David N. Rose
Vice President, Portfolio Management
January 2013
1
P O R T F O L I O D I V E R S I F I C A T I O N
Total gross market value: $3.64 billion Total number of properties: 117 ($ in millions)
United States 0.6% $20.7 (3)
British Columbia14.8% $538.1 (14)
Alberta 25.5% $926.1 (18)
Ontario 53.0% $1,929.1 (69)
Atlantic 1.8% $64.3 (2)
Quebec 3.1% $114.5 (10)
The Fund owns 34 office properties across Canada. 20 are located in the central business districts (CBD) of major Canadian urban centres and 14 are located in established business parks in suburban settings. The CBD office holdings are worth $1.6 billion or approximately 85.5% of the office allocation, and the suburban office properties are valued at $364.4 million, approximately 18.5% of the office allocation.
The Fund owns 12 retail properties, concentrated in British Columbia, Saskatchewan, Ontario and Quebec. The centres are open format, typically anchored by a supermarket, drug store or other nationally recognized retailer.
OFFICE PROPERTIES RETAIL PROPERTIES MULTI-FAMILY PROPERTIES INDUSTRIAL PROPERTIES
The Fund owns 18 institutional-quality apartment complexes comprised of 28 separate buildings, concentrated in Ontario, with a few in Alberta and British Columbia. Most of the apartment buildings are concrete construction and are located near major public transit infrastructure.
The Fund owns 42 industrial properties largely located in Ontario, with other properties in British Columbia, Alberta and Quebec. The Fund owns a mixture of manufacturing, distribution and flex-industrial facilities. Most of the Fund’s industrial buildings have more than one tenant to maximize stability of cash flow.
Prairies 1.2% $45.3 (1)
BY REGIONat December 31, 2012
Retail 9.7% $353.1 (12)
Office 54.3% $1,975.1 (34)
Other 1.5% $54.2 (11)
Residential 22.8% $829.6 (18)
Industrial 11.7% $426.02 (42)
BY TYPEat December 31, 2012
CANAD IAN REAL ES TATE INVES TMENT FUND NO.12
P O R T F O L I O & T E N A N T D I V E R S I F I C A T I O N
PORTFOLIO DIVERSIFICATION – CORE PROPERTIESCBD Office ($ in millions)
# of Properties Value % of Real Estate
Vancouver 2 $ 109.7 3.0%
Calgary 5 $ 605.0 16.6%
Edmonton 2 $ 53.9 1.5%
Toronto 6 $ 506.2 13.9%
Ottawa 3 $ 271.6 7.5%
Halifax 2 $ 64.3 1.8%
Total 20 $ 1,610.7 44.3%
Multi-Family ($ in millions)
# of Properties Value % of Real Estate
Vancouver 1 $ 20.9 0.6%
Calgary 1 $ 42.3 1.2%
Edmonton 2 $ 63.1 1.7%
Toronto*
Central 7 $ 500.5 13.8%
West 4 $ 130.6 3.6%
Ottawa 3 $ 72.5 2.0%
Total 18 $ 829.7 22.8%
*Several are multiple building complexes
300 5TH AVENUE SW, CALGARY, AB 400 WALMER ROAD, TORONTO, ON
32012 ANNUAL REPORT
CANAD IAN REAL ES TATE INVES TMENT FUND NO.1
P O R T F O L I O & T E N A N T D I V E R S I F I C A T I O N
TOP FIVE TENANTS BY BASE REVENUE at December 31, 2012
Office Tenant Annual Base Rent at Ownership % of Total Fund Revenue
Government (Federal & Provincial) $ 20,546,488 10.5%
Conoco Phillips Canada $ 3,322,293 1.7%
Ritchie Brothers Auctioneers $ 2,806,800 1.4%
Invesco Canada Ltd. $ 2,724,218 1.4%
Trans Mountain Pipeline L.P. $ 2,047,928 1.0%
Total $ 31,447,727 16.1%
• The diversity in the Fund’s office tenant base is highlighted in the tables above and on page 5, with the top five tenancies accounting
for only 9.6% of the total Fund area and 16.1% of total Fund revenue.
• While the largest exposure is to the federal and provincial governments, the Fund is protected by both the long-term nature of the
contractual leases and the diversification of the government rental revenue over twelve different leases in five different cities.
Industrial Tenant Annual Base Rent at Ownership % of Total Fund Revenue
Minister of National Defense $ 2,145,000 1.1%
The Proctor & Gamble Company $ 1,100,647 0.6%
Kodiak Group Holdings Inc. $ 910,000 0.5%
Dover Corporation (Canada) Ltd. $ 815,304 0.4%
Smiths Detection Montreal Inc. $ 572,894 0.3%
Total $ 5,543,845 2.8%
• The top industrial tenancies are located across the country and given their superior financial covenant, provide secure,
long-term cash flow.
• The top five tenancies account for approximately five percent of the Fund’s total area and nearly three percent of its total revenue.
Retail Tenant Annual Base Rent at Ownership % of Total Fund Revenue
Walmart Canada Corporation $ 3,835,560 2.0%
Home Depot of Canada Inc. $ 968,995 0.5%
Michaels of Canada, ULC $ 493,211 0.3%
Future Shop $ 445,178 0.2%
Mark’s Work Warehouse Ltd. $ 419,243 0.2%
Total $ 6,162,186 3.2%
• The top retail tenancies by area and rent are well-recognized national and international retailers, with a history of being excellent
long-term tenants.
• The Fund’s largest exposure on the retail front is to Walmart, which accounts for both two percent of the total Fund area and
total Fund revenue.
4
2012 ANNUAL REPORT
• The Fund’s office properties are leased to an array of different firms, with the government, professional and technical services and financial services firms occupying close to 60% of the office area.
• Many of the nation’s leading banks, accounting and law firms have a presence in the Fund’s buildings.
• The Fund’s industrial properties feature a larger allocation to the three largest NAICS classifications, with manufacturing, transportation and warehousing and wholesale trade occupying over 75% of the industrial area.
• Although manufacturing accounts for over 40% of the occupied industrial area, for the most part this represents manufacturing companies that lease warehouse space in the Fund’s industrial buildings.
Note: Numbers may add up to more than 100% due to rounding.
1 North American Industry Classification System (NAICS) is an industry classification system developed by the statistical agencies of Canada, Mexico and the United States. It is
designed to provide common definitions of the industrial structure of the three countries and a common statistical framework to facilitate the analysis of the three economies.
P O R T F O L I O & T E N A N T D I V E R S I F I C A T I O N
TOP FIVE TENANTS BY OCCUPIED AREA at December 31, 2012
Office (Total 5,909,609 Sq. Ft.)
Tenant Occupied Area at Ownership (Sq. Ft.) % of Total Office Area % of Total Fund Area
Government (Federal & Provincial) 962,851 16.3% 6.0%
Invesco Canada Ltd. 175,756 3.0% 1.1%
Canadian Pacific Railway Co. 129,742 2.2% 0.8%
Conoco Phillips Canada 128,845 2.2% 0.8%
MDA Systems Ltd. 127,112 2.2% 0.8%
Total 1,524,305 25.8% 9.6%
Industrial (Total 5,150,930 Sq. Ft.)
Tenant Occupied Area at Ownership (Sq. Ft.) % of Total Industrial Area % of Total Fund Area
The Proctor & Gamble Company 268,596 5.2% 1.7%
Kodiak Group Holdings Inc. 140,000 2.7% 0.9%
Minister of National Defense 135,000 2.6% 0.8%
Tubular Conduits Industries of Canada Ltd. 129,045 2.5% 0.8%
Sears Canada Inc. 104,560 2.0% 0.7%
Total 777,201 15.1% 4.9%
Retail (Total 1,329,737 Sq. Ft.)
Tenant Occupied Area at Ownership (Sq. Ft.) % of Total Retail Area % of Total Fund Area
Walmart Canada Corporation 326,309 24.5% 2.0%
Home Depot of Canada Inc 69,214 5.2% 0.4%
Michaels of Canada, ULC 32,619 2.5% 0.2%
Big Lots Canada, Inc. 26,720 2.0% 0.2%
Hudson’s Bay Company 24,084 1.8% 0.2%
Total 478,945 36.0% 3.0%
CREIF OFFICE TENANT NAICS DIVERSIFICATION BY OCCUPIED AREA
Mining/Oil & Gas Extraction 8.6%
Transportation & Warehousing 6.3%
Finance & Insurance 19.9%
CREIF INDUSTRIAL TENANT NAICS DIVERSIFICATION BY OCCUPIED AREA
Other 25.3%Professional, Scientific and Technical Services 16.3%
Public Administration 23.7%
Other 22.5%
Wholesale Trade 16.5%
Transportation & Warehousing 20.5%
Manufacturing 40.6%
5
2 0 1 2 P E R F O R M A N C E & A C T I V I T Y
RETURNS
It was a record-breaking year for the Fund, producing a
total return of 19.7%, the highest return in Fund history.
The strong market demand for real estate investments
resulted in compressed capitalization rates and increasing
asset values as seen in the 14.5% capital return. The
capital return was observed at 14.2% before considering
the 0.3% adjustment for marking mortgages and bond
investments to market. Comparably, the net income
return held steady relative to previous years at 5.2%,
which includes the Fund’s cash holdings and 6.4%,
which excludes the impact of the Fund’s cash balance.
• The 19.7% gross return for 2012 comprises an income return of 5.2% and capital return of 14.5%
• Considering the recent financial crisis, the five-year gross return, before fees, held up well at 8.1%
• Long-term investors were rewarded with a 10-year gross return, before fees, of 10.3%.
GROSS ANNUALIZED RETURNS (%)
GROSS MARKET VALUE OF REAL ESTATE ASSETS ($ millions)
ANNUAL REAL ESTATE NET OPERATING INCOME ($ millions)
COMMERCIAL LEASE EXPIRY PROFILE (Sq. Ft. in 000s) Total 12,119 Sq. Ft.
FIFTH & FIFTH, CALGARY, AB
1Yr 2Yr 3Yr 4Yr 5Yr 10Yr 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2013 2014 2015 2016 2018
• In 2012, strong value appreciation and four new acquisitions increased the Fund’s asset values to 2008 levels, which was the prior peak for Fund assets under management
• Notable value increases were witnessed in the multi-family holdings across Canada and within the industrial and office holdings in Alberta. Sustained economic growth in Alberta buoyed demand for office and industrial space, serving to increase rental income and asset values.
• Year-over-year, net operating income (NOI) declined by 3.0% to $195 million from the previous year
• NOI decline resulted from net dispositions in prior years. The acquisitions made in Q3 2012 will have a favourable NOI impact going forward
• Aside from the total portfolio NOI decline, multi-family assets continued to generate growing rental income with a year-over-year NOI increase of 7.1%. The retail and office acquisitions in 2012 added $6.4 million to portfolio NOI.
• The five-year average annual expiry of 10.7% is very manageable and warrants steady future cash flow to the Fund’s unit holders.
2012 ANNUAL REPORT6
1
9.7
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1
8.1
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1
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10
.4%
8.1
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1
0.3
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$
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$
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$
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$
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1,2
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1
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7 (
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1,2
18
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CANAD IAN REAL ES TATE INVES TMENT FUND NO.1
2012 ANNUAL REPORT
2 0 1 2 P E R F O R M A N C E & A T T R I B U T I O N
2012 PERFORMANCE BY ASSET CLASSBy Type Return (%)
Retail 20.7%
Office 24.1%
Industrial 9.4%
Residential 30.7%
Miscellaneous 10.2%
Similar to 2011, the multi-family sector was the best- performing
asset class again in 2012. The total return comprises a net income
return of 7.1% and a capital return of 23.6% for a total return
of 30.7%. Office and retail round out the top three asset class
performers with total returns of 24.1% and 20.7%, respectively.
2012 PERFORMANCE BY REGIONBy Region Return (%)
British Columbia 12.6%
Alberta 31.4%
Prairies 0.0%
Ontario 22.2%
Quebec 12.8%
Atlantic 15.4%
United States 11.2%
Alberta was once again the top-performing region in 2012 with a
return of 31.4%. The total return is comprised of a 7.0% net income
return and a 24.4% capital return. Ontario and Atlantic Canada
followed with total returns of 22.2% and 15.4%, respectively.
2012 ATTRIBUTION BY ASSET CLASSSector % Income Attribution % Capital Attribution % Total Attribution % of Gross Market Value
Retail 9.9% 7.9% 8.5% 9.7%
Office 56.9% 61.6% 60.2% 54.3%
Industrial 12.5% 3.0% 5.7% 11.7%
Residential 20.1% 26.5% 24.7% 22.8%
Miscellaneous 0.6% 1.0% 0.9% 1.5%
Total 100.0% 100.0% 100.0% 100.0%
Assets in both office and multi-family sectors were strong contributors to the Fund’s record breaking return in 2012. The 22.8%
portfolio weighting to multi-family contributed to 26.5% of the Fund’s total return, 54.3% of the portfolio allocation to office
commanded 60.2% of the Fund’s total return performance of 19.7%.
2012 ATTRIBUTION BY REGIONSector % Income Attribution % Capital Attribution % Total Attribution % of Gross Market Value
British Columbia 12.6% 6.7% 8.4% 14.8%
Alberta 30.0% 41.9% 38.5% 25.5%
Prairies 1.4% 0.0% 0.4% 1.2%
Ontario 49.5% 48.6% 48.9% 53.0%
Quebec 3.3% 1.6% 2.1% 3.1%
Atlantic 2.1% 1.0% 1.4% 1.8%
United States 1.0% 0.1% 0.4% 0.6%
Total 100.0% 100.0% 100.0% 100.0%
The Fund’s total return is 87.4% attributed to the holdings in Alberta and Ontario. Comprising 25.5% of portfolio holdings, Alberta
commanded an impressive 38.5% towards the Fund’s total return. And at 53.0% of the Fund’s weighting, Ontario contributed 48.9%
to the Fund’s total return.
7
CANAD IAN REAL ES TATE INVES TMENT FUND NO.1
2012 PORTFOLIO VACANCY Net Rentable Area Vacant Area at Vacant % at Vacant % at at Ownership (Sq. Ft.) Dec. 31/12 (Sq. Ft.) Dec. 31/12 (Sq. Ft.) Dec. 31/11 (Sq. Ft.)
British Columbia 1,955,242 306,699 15.7% 15.5%
Alberta 2,609,172 72,935 2.8% 6.3%
Prairies 165,168 - 0.0% -
Ontario 9,317,722 467,810 5.0% 5.3%
Quebec 1,417,206 512,522 36.2% 5.2%
Atlantic 231,637 25,112 10.8% 6.2%
United States 226,514 - 0.0% 0.0%
Total 15,922,660 1,385,078 8.7% 6.7%
Retail 1,329,737 36,888 3.6% 2.3%
Office 5,909,609 389,901 6.6% 7.6%
Industrial 5,150,930 898,229 17.4% 10.1%
Residential 3,532,384 60,060 1.7% 1.6%
Total 15,922,660 1,385,078 8.7% 6.7%
Occupancy in the portfolio increased during the second and third quarters of the year and only in the final quarter of 2012 did it witness a sig-
nificant decline. A large industrial lease expiry that occurred in Montéal, QC, at the end of October was the catalyst for the increase in vacancy
during 2012. Without the lease expiry, vacancy would have declined year-over-year to 6.1% from the 6.7% reported at year end 2011.
MONTHLY VACANCY RATE IN 2012Fund Vacancy %
Asset Type 2012 Absorption 2012 Y/E Occupancy (%) (Sq. Ft.)
Retail (12,852) 97.2%
Office 36,399 93.4%
Industrial (382,622) 82.6%
Residential (2,914) 98.3%
Total (361,989) 91.3%
The office asset class witnessed strong leasing velocity, with over
36,000 square feet of absorption in 2012. In particular, it was
the Calgary CBD office buildings that witnessed the bulk of the
activity with over 87,000 square feet of positive absorption. The
national vacancy rate for the Fund’s office properties declined
from 7.6% at the start of the year to close the year at 6.6%,
a decline of 100 basis points. As discussed earlier, the overall
increase in vacancy for the Fund is largely attributed to the lease
expiry of one large tenant. Removing the effect of this tenancy,
the industrial holdings actually experienced positive absorption
of 28,600 square feet. While the departure of this industrial
tenancy does skew the occupancy results, it is more of an
aberration than a trend and Fund management will work
to reduce vacancy during 2013.
2 0 1 2 P E R F O R M A N C E & A C T I V I T Y
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VACANCY
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2012 ANNUAL REPORT
2 0 1 2 P E R F O R M A N C E & A C T I V I T Y
VANCOUVER CENTRE, VANCOUVER, BC WATERMARK TOWER, CALGARY, AB
HARPER GREY LLP LEASE RENEWAL VANCOUVER CENTRE, VANCOUVER, BC
Harper Grey LLP is a mid-sized, Vancouver focused law firm that
has been a long-term tenant at the Vancouver Centre office
complex. In 2012, GWL Realty Advisors was able to complete
a lease renewal with this tenant for approximately 37,000
square feet to secure their occupancy in the building until 2024.
Harper Grey occupies the top three floors of the building and is
afforded commanding views of the Burrard Inlet and downtown
Vancouver. The tenant had last renewed their lease sometime
ago and market rents had increased appreciably since then.
With its premises somewhat dated and facing a much higher
renewal rate, the tenant was exploring other options outside of
Vancouver Centre. However, GWL Realty Advisors was able to
retain their tenancy by offering the tenant additional premises
to carry on business while they undertook renovations in their
existing space. The flexibility to grow into additional office space
as was required by the tenant helped solidify their decision to
renew for another ten years at market leading rental rates in
Vancouver Centre.
SNAMPROGETTI LEASE EXPANSION WATERMARK TOWER, CALGARY, AB
Watermark Tower is a 405,000 square foot office tower in
Calgary’s central business district. The building has benefited
from a very high occupancy level. Sometimes that can be an
issue if there are tenants that need to expand. In 2012, a
rare 35,000 square foot vacancy became available upon a
lease expiry. Through the efforts of our leasing team and their
excellent relationship with the tenant, this space was almost
immediately taken up by the existing tenant, Snamprogetti, an
international engineering firm that already occupied 78,000
square feet. A 5-year 7-month lease deal was struck at market
rents. This transaction brings the building to full occupancy,
ensures continued cash flow, improves the lease expiry profile
of the building and enhances the asset’s valuation.
LEASING
9
CANAD IAN REAL ES TATE INVES TMENT FUND NO.1
2 0 1 2 P E R F O R M A N C E & A C T I V I T Y
7070 MISSISSAUGA ROAD, MISSISSAUGA, ON 5140/5150/5160 YONGE STREET, TORONTO, ON
HOFFMANN-LA ROCHE CANADA LEASE 7070 MISSISSAUGA ROAD, MISSISSAUGA, ON
In the summer of 2012, long-time tenant DuPont vacated
7070 Mississauga Road upon expiry of their lease, leaving the
building vacant. Built in 1987, 7070 Mississauga Road was
constructed as a single-tenant head office building for DuPont
and did not lend itself well to being leased to several different
users. Fund management was concerned with the potential
down-time associated with finding a new tenant that could truly
appreciate the unique attributes of the building. Some features
of the building include a garden cafeteria, an atrium that runs
throughout the centre of the building and an onsite fitness
facility. However, in relatively short order GWL Realty Advisors
was able to re-let the building on a 100% basis to Hoffmann-
La Roche Canada (Roche), a Switzerland-based pharmaceutical
company. This transaction secured a strong covenant tenant, at
market leading rental rates, for a 15-year term. Roche and the
Fund are making a significant capital investment in the building
with a focus on sustainability and energy management, targeting
a minimum LEED EB Silver certification. The Roche transaction will
provide unitholders with secure cash flow well into the future.
TORONTO TRANSIT COMMISSION LEASE RENEWAL NORTH YORK CITY CENTRE, TORONTO, ON
The Toronto Transit Commission (TTC) had been a tenant
in 5140 and 5150/5160 Yonge Street since 2008. The
two Yonge Street buildings form part of the GTA North
office market which, at the time the lease was concluded in
September, featured a vacancy rate of only 4.5% for Class ‘A’
product. However, despite the low vacancy in the market node,
there was over 380,000 square feet of contiguous long-term
sublet space in neighbouring properties that was well suited to
the needs of the TTC. GWL Realty Advisors leveraged its long-
standing relationship with the tenant, and renewed the TTC for
a lease term of 5 years on 85,200 square feet. The renewal
featured a limited capital investment on behalf of the Fund,
served as a strong rental rate benchmark for future leasing
activity and helped to maintain occupancy at close to 100%
for both buildings.
10
LEASING
2012 ANNUAL REPORT
2 0 1 2 P E R F O R M A N C E & A C T I V I T Y
200 KENT STREET, OTTAWA, ON
BOWMANVILLE RETAIL, CENTRE, BOWMANVILLE, ON
ACQUISITIONS The Fund purchased four assets in 2012 for an initial capital
outlay of $228.8 million. A forward purchase of an industrial
development in Edmonton, Alberta, was concluded. At completion,
the complex will feature 377,400 square feet of Class ‘A’
industrial product spread over four buildings. Two retail properties
were purchased in strong residential growth nodes; one located in
Saskatoon, Saskatchewan and the other in Bowmanville, Ontario,
which is 75 kilometres east of Toronto. Both retail centres feature
Walmart as an anchor tenant and a strong roster of national
tenants that complement Walmart. Both shopping centres have
ongoing expansion programs that will add new tenants, increasing
cash flow and value. The Fund’s final purchase was a 387,000
square foot office building in downtown Ottawa, Ontario. At the
time of acquisition, it was 100% leased to the federal government
with a remaining lease term of twelve years.
DEVELOPMENTAs mentioned in the acquisitions section, the Fund has an
ongoing industrial development in Edmonton, which is expected
to be completed in 2013. This development is in line with
Fund management’s business plan of owning modern, highly
functional, industrial product in what is widely considered
to be a strong growth market.
At the two Walmart retail centres, there is an additional
201,800 square feet to be built in the near term. The bulk of the
construction will take place in Saskatoon, and will feature a Lowe’s,
Staples, Dollarama and other retail tenants, for a total of 159,600
square feet upon completion. At the Bowmanville location, an
additional 42,200 square feet will be completed and includes
a Liquor Control Board of Ontario (LCBO) store. These centres
feature long-term leases to nationally recognized retailers and
will provide unitholders with stable cash flow over the long term.
SOUTH CENTRAL BUSINESS PARK, EDMONTON, AB
11
CANAD IAN REAL ES TATE INVES TMENT FUND NO.1
2 0 1 2 P E R F O R M A N C E & A C T I V I T Y
CORPORATE SOCIAL RESPONSIBILITY
Management is committed to lowering the carbon footprint of
the assets held within the Fund. One recent initiative involves
the sub-metering of apartment units in the Fund’s multi-family
buildings. Upon lease turnover, units that used to have electricity
included in the rent have been sub-metered so that the incoming
tenant pays electricity directly. There is no cost for the Fund
to have the unit sub-metered and, on average, net operating
income (NOI) has increased annually by $480 per unit. Across
the portfolio, that generates an annual NOI gain of $230,400.
Fund analytics indicate that, on average, electricity consumption
has declined by 36% at units that have undergone sub-metering.
This program will be extended to more apartment units in
Fund assets as opportunities arise.
Fund management strives to achieve best practices in property
management standards. Examples include Leadership in Energy
and Environmental Design (LEED) certification for newly
constructed buildings and LEED Existing Building (EB) certification
for existing buildings. To obtain LEED certification, a building
must achieve certain thresholds for five areas of human and
environmental health, which include: water and energy efficiency;
sustainable site development; materials selection; and indoor
environmental quality. At present, the Fund has three buildings
that have obtained LEED certification and several others are
undergoing LEED EB certification.
Over 40 of the Fund’s buildings have achieved at least one level
of BOMA BESt certification. BOMA BESt is a standard set by
the Building Owners and Managers Association (BOMA) and
addresses six areas of buildings performance, namely: energy,
water, waste reduction, emissions, indoor environment and
environmental management system. An onsite inspection of the
building is completed for all buildings seeking certification to
ensure the rating system retains its integrity.
12
PURDY’S WHARF I & II, HALIFAX, NS
SIGNIFICANT CAPITAL PROJECTSThe Fund spent $39.4 million on capital upgrades to its buildings
in 2012. Examples of large capital projects include garage
and balcony upgrades at the multi-family holdings, new roof
and repaving projects at the industrial assets and elevator
modernizations and lobby upgrades for the office properties.
Construction was finalized in 2012 on a food court amenity
in an underutilized area of the retail concourse at 5140 and
5150/5160 Yonge Street. The total cost of the project was $2.7
million and initial feedback from tenants has been quite favourable.
This new addition to the complex is expected to increase the
appeal of the two buildings to existing and future tenancies.
DISPOSITIONSTwo assets were disposed of in 2012. The first sale was a portion
of industrial development lands the Fund holds in the GTA. The land
was sold at above market pricing to an adjacent user that required
additional outdoor storage space. The second asset was a Class ‘B’
office tower located on the fringe of the downtown core in Calgary,
Alberta. In accordance with the portfolio business plan with regard
to managing regional weightings, Fund management had been
targeting to dispose of this asset during a period of market strength
and the pricing received for the building was above expectations.
FINANCINGThe Fund paid down over $9.9 million of mortgages in 2012. Three
mortgages were extinguished for a total of $20.7 million, while
Fund management renewed two mortgages for $10.8 million. The
weighted average interest rate for the Fund declined to 4.7% from
4.8% at the commencement of the year. The loan-to-value (LTV)
ratio for the Fund declined to 23.0% from 27.7% at the start of
the year. Rising asset values and the Fund’s ample cash position, in
addition to the retirement of three of the Fund’s mortgages, were
catalysts for the decline. The Fund’s modest LTV is well within the
Investment Policy guideline maximum of 35% and provides Fund
management with significant flexibility moving forward.
FIRST CANADIAN CENTRE, CALGARY, AB
2012 ANNUAL REPORT
M U L T I - F A M I L Y E F F E C T I V E A G E C A L C U L A T O R
As noted in the building capital section of the business plan on
page 16, the multi-family asset management team has developed
the concept of effective age calculator, a very useful management
tool. The Effective Age model determines an existing building’s
effective age based on building structure, maintenance level,
historical capital spending and the useful life of various
building components.
The calculations are based on fixed and variable building
components. Fixed components are weighted based on the
existing structure condition and maintenance level of the
property, based on 1% per year up to 40%. The total variable
component is then calculated by subtracting the calculated
fixed weighting from 100%.
After a complete analysis of the Fund’s multi-family portfolio
and applying the Effective Age Calculator methodology, it was
determined that those buildings in the portfolio that were more
than 40 years old, had an average age of 45 years and Effective
Age of only 31 years.
BENEFITS OF EFFECTIVE AGEThe detailed analysis involved in making the Effective Age
calculation allows the Investment team to better underwrite new
acquisitions and assist in determining the initial capital program
that forms part of the initial business plan of the property.
Similarly, it assists in the update of the capital spending
section of each asset’s annual business plan and helps prioritize
capital spending. The analysis will also allow for more efficient
maintenance and building capital planning and costing when
new developments are under consideration. In addition, the
information provided by the calculation will be useful to Lenders
when doing their loan analysis, and will be beneficial with regards
to potentially increasing the loan amount and giving leverage
to interest rate negotiations. Appraisers will also find the
information useful and will bolster valuations in terms of investment
parameters applied to the property’s cash flow. Finally, the Effective
Age data will be helpful in increasing the liquidity of the property if
it is ever for sale, in that a prospective purchaser can understand
that, for example, the building may be 45 years old, but has an
effective age of only 31 years.
13
BAYVIEW VILLAGE,TORONTO, ON 1541/1551 RIVERSIDE DRIVE, OTTAWA, ON
CANAD IAN REAL ES TATE INVES TMENT FUND NO.1
9500 GLENLYON PARKWAY, BURNABY, BC
2 0 1 3 P O R T F O L I O B U S I N E S S P L A N
ACQUISITIONS AND DISPOSITIONSAn important target in 2013 is to increase the Fund’s weighting
in the retail sector. With the Fund owning good retail assets in the
Vancouver and Montreal areas, priority will be given to properties
in Calgary, Edmonton, Toronto and Ottawa. Some important
criteria for shopping centres include: a high percentage by area
and revenue should come from national or strong regional tenants;
tenants should include grocery, drug and/or a major anchor (e.g.,
Walmart, Canadian Tire, etc.); the centre should be dominant or
second in its local market; and there should be ample parking,
good access and high traffic count.
Notwithstanding that the Fund is currently heavily weighted in
the office sector, if a potential office property on the market was
deemed to enhance the quality of the portfolio and improve long-
term returns, it would be considered for acquisition. The closing
of such a transaction might then lead to the sale of a non-core
property from the portfolio. Priority will be given to Class ‘A’ office
towers in downtown Toronto and Vancouver for new acquisitions.
A strong roster of tenants, a lease expiry profile with limited
short-term risk, a location with good access to transportation
and amenities, and a conventional floor plate are all important
underwriting considerations for an office property.
Industrial properties in most major cities will be considered that have
the following characteristics: new construction, high clear heights,
ample loading doors, a sufficient truck turning radius and satisfactory
parking. Another important requirement is that industrial buildings
have excellent access to major transportation routes.
For multi-family acquisitions, priority will be given to properties
in Calgary, Edmonton and Ottawa. Desirable characteristics
of apartment buildings would include newer and preferably
concrete construction, over 100 suites in size, and proximity
to transit and amenities.
During any year, select non-core assets or properties whose
business plans have been fully executed, may be sold. In 2013,
a portfolio of non-core Ontario industrial buildings will be put
up for sale. Proceeds will be re-deployed into the development
of industrial buildings in Edmonton.
With respect to future dispositions, Fund management will
continue to selectively sell non-core assets on an opportunistic
basis. These may include older industrial properties and select
suburban office assets. Any asset sales should result in the
redeployment of the proceeds into higher quality, strategic
acquisitions that strengthen the portfolio.
THE MANDATE OF THE FUND, AS IN PAST YEARS, IS TO PROVIDE INVESTORS, OVER THE LONG TERM, WITH A STABLE AND GROWING INCOME RETURN AND THE POTENTIAL FOR CAPITAL APPRECIATION. THIS IS ACHIEVED BY INVESTING IN FOUR CATEGORIES OF HIGH-QUALITY PROPERTIES IN CANADA’S MAJOR CITIES. BEYOND THE OBJECTIVE OF STRONG, RELIABLE RETURNS, INVESTING IN DIRECT REAL ESTATE ADDS DIVERSIFICATION, ACTS AS A HEDGE AGAINST INFLATION AND REDUCES VOLATILITY TO INVESTORS’ OVERALL PORTFOLIOS.
14
2012 ANNUAL REPORT
2 0 1 3 P O R T F O L I O B U S I N E S S P L A N
15
LEASINGLeasing is arguably the most important day-to-day operating
function in managing a real estate portfolio. Each property’s
annual business plan details the leasing strategy with respect to
renewals, vacant space and improving the market position of the
property. Subject to market conditions, intelligence we have on
certain tenants and in an effort to better manage the lease expiry
profile of a building, leasing strategies may include early renewals,
terminations, relocations, expansions and/or space reductions.
The leasing team, working with asset and property management,
has an excellent record of maintaining a high tenant retention
ratio on lease roll-over and attracting new tenants. There is
1.8 million square feet or about 15% of the commercial space
expiring in 2013. Much of this has already been renewed or had
new lease transactions struck. However, as in most years, there
are some specific challenges in a large portfolio. These include
a large industrial building in Montreal that was 100% vacated
at the end of a 15 year term, a vacancy of 10% in the Purdy’s
Wharf office complex in Halifax and more than 20% vacancy in
the Crestwood Business Park located in Richmond, BC. In each
case, these properties are well located and meet the standard
high quality criteria required of assets in the portfolio and
will be re-leased.
DEVELOPMENTAs the Fund grows in size and matures in terms of quality and
diversification of the properties in the portfolio, development of
new assets takes on a more material role. Development allows
Fund management to build what, where and to the quality it
wants and to earn risk-adjusted returns. New construction also
reduces future year capital expenditures. The Fund has always
had modest development activity and the current portfolio has a
material weighting of about 9% of assets that have been internally
developed. In 2012, an industrial development in Edmonton
commenced, and retail acquisitions made in 2012 include a
development component. Both of these are discussed on page
11 of this report. Planning began or continued on several major
potential developments and this process will continue into 2013.
The development strategy of the Fund is to give priority to
those sites already in the Fund that have development potential
through intensification of the site. For example, management is in
a position to apply for a building permit to construct a 600,000
square foot office building on land owned by the Fund adjacent
to a downtown Calgary building owned by the Fund. Such a large
scale project would only commence once a significant portion
of the building was pre-leased to a tenant of superior financial
covenant. In Toronto, planning is well underway for the potential
development of two apartment towers on land where the Fund
owns two buildings. Planning will include market and financial
analysis, assembling the development team, sourcing lead
tenants for the office projects and working through the approval
process with the city. Preliminary planning has also begun for the
development of a downtown Vancouver office building, again
on land owned by the Fund adjacent to an office building also
in the Fund. There are several other examples of development
opportunities within Fund held assets and these will be acted
upon subject to market conditions. Development projects,
especially the larger ones, can take a long time to plan and
longer to build, but in the end they enhance the quality,
diversification and cash flow of the Fund.
CRESTWOOD CORPORATE CENTRE, RICHMOND, BC
CANAD IAN REAL ES TATE INVES TMENT FUND NO.1
2 0 1 3 P O R T F O L I O B U S I N E S S P L A N
BUILDING CAPITALExcluding the ongoing industrial development program in
Edmonton and the build-out of the two new shopping centres
acquired in 2012, the 2013 building capital budget is $63.2
million. These funds that are re-invested in the properties range
from mandatory to discretionary. Mandatory funds address
matters like boilers that have reached the end of their useful life;
underground garages or balconies that require major rehabilitation;
roof and window replacements; elevator enhancements; and
various code related requirements. Discretionary items may
include apartment suite upgrades, lobby renovations, re-cladding
building exteriors, re-designed office building entrances, major
new signage at shopping centres, etc. Capital expenditures also
include projects that will result in energy/utility savings and/or
efficiencies. Each property’s business plan includes a five-year
capital program that is designed to maintain/improve the physical
integrity of the asset and preserve or enhance building value.
An important analysis performed by the multi-family asset team
showed that, given the level of building capital investment over
the years in this aging portfolio, the buildings with an average age
of 45 years had an “effective age” of only 31 years. This analysis
will help our team better manage capital spending going forward,
will help in underwriting new acquisitions and will be beneficial to
financing and valuations. You can read more about this analysis on
page 13 of this report.
CASH MANAGEMENT AND FINANCINGFund management has the challenge of, firstly, having sufficient
cash on hand to invest in new acquisitions, fund investor
withdrawals and support property level operations, including
spending on leasing and building capital; and secondly, not having
too much cash on hand for too long, such that there is a material
drag on the return of the Fund. Cash as a percent of equity at the
start of 2013 is 15.2%, somewhat higher than the long-term
average of about 10%, which positions the Fund well to transact
on some larger quality acquisitions. Financing is one tool that
Fund management can use to assist in cash management. If cash
is high, maturing debt can be repaid. If cash is low, financing can
be used to assist in acquiring assets. Strategic positive leverage
can also materially enhance property returns. Thus, most of
the Fund’s multi-family assets have financing since lenders
provide more funding at lower interest rates than on commercial
properties, thereby increasing yields. In all cases, lenders have
recourse only to the property financed. Specifically in 2013, there
are seven maturing loans: three are smaller commercial loans
that will be paid off at maturity, three are loans on apartment
buildings that will be refinanced, and one is related to a property
on a land lease that will be paid out and then refinanced once
the new land lease rent is established. 2013 begins with a
loan-to-value ratio of 23.0%, well within the Investment
Policy’s conservative guideline maximum of 35%.
16
33 YONGE STREET, TORONTO, ON
2012 ANNUAL REPORT
2 0 1 3 P O R T F O L I O B U S I N E S S P L A N
RISK MANAGEMENTThere are many strategies by which portfolio return risk is
managed. Several of these have been discussed – diversification
by type and region, quality of assets, checking the financial
strength of tenants, pre-leasing for development, the five-
year capital program in each property’s business plan, very
conservative loan-to-value ratio and non-recourse financing.
Another key strategy is the appropriate management of both
lease and debt expiries such that short-term risk is limited.
Risk is further managed by:
• maintaining best-in-class property management operations
and industry leading professional staff
• leading standards in terms of energy saving and
other green initiatives
• ongoing staff training
• excellent communication and relations with tenants
• conducting tenant surveys – commercial and residential
• securing in-depth market intelligence from real estate
participants, including leasing and investment brokers
as well as competing landlords
From a fiduciary perspective, risk is managed by having
appropriate financial controls at the property operating level and
with regard to a transparent investment process, all with written
procedures that are reviewed by internal and external auditors as
well as corporate senior management.
LOOKING FORWARDNotwithstanding the global economic and geopolitical challenges
and uncertainties all investors face in any given year, the Fund
remains well positioned, by virtue of its excellent diversification
and high quality properties, to once again deliver a solid income
return in 2013 with the potential for capital appreciation. With its
32 year track record of growth and solid returns, management
expects new investment dollars from both institutional and retail
investors. These investments, along with the Fund’s own cash
flow, will finance the Fund’s growth by selectively adding new
properties by both acquisition and development.
17
5150/5160 YONGE STREET, TORONTO, ON6505 TRANS CANADA HIGHWAY, ST. LAURENT, QC
CANAD IAN REAL ES TATE INVES TMENT FUND NO.118
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
To the Policyholders of The Great-West Life Assurance Company - Canadian Real Estate Investment Fund No. 1
We have audited the accompanying financial statements of The Great-West Life Assurance Company - Canadian Real Estate Investment
Fund No. 1, which comprise the statements of net assets as at December 31, 2012 and 2011, the statements of operations and
changes in net assets for the years then ended, the statement of investment portfolio as at December 31, 2012 and a summary
of significant accounting policies and notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with Part V of
the Canadian generally accepted accounting principles and the requirements of Part XII of the Canadian Life and Health Insurance
Association Guideline G2, and for such internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance
with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of The Great-West Life Assurance
Company - Canadian Real Estate Investment Fund No. 1, as at December 31, 2012 and 2011, and the results of its operations and
changes in net assets for the years then ended and its statement of investment portfolio as at December 31, 2012 in accordance
with Part V of the Canadian generally accepted accounting principles and the requirements of Part XII of the Canadian Life and Health
Insurance Association Guideline G2.
Chartered Accountants
Winnipeg, Manitoba
March 15, 2013
Deloitte LLP360 Main StreetSuite 2300Winnipeg MB R3C 3Z3Canada
Tel: 204-942-0051Fax: 204-947-9390www.deloitte.ca
2012 ANNUAL REPORT 19
F I N A N C I A L S T A T E M E N T S
STATEMENT OF NET ASSETS
At December 31 (in $ thousands, except per unit amounts) 2012 2011
Investments
Bonds 25,301 24,526
Stocks – –
Real Estate 3,612,913 3,006,623
Mortgages and sales agreements – –
Other – –
Investment fund units – –
Total investments 3,638,214 3,031,149
Cash, short-term deposits and (overdrafts) 476,898 564,431
Investment income due and accrued 660 640
Due from (to) The Great-West Life Company (Note 9) 113,802 (1,005)
Due from (to) brokers – –
Due from (to) outside parties (173,002) (50,083)
Mortgages on real estate (Note 3) (934,980) (981,641)
Net assets 3,121,592 2,563,491
Adjustment from bid market prices to last traded market prices (Note 6) – –
Net assets representing policyholder equity (at last traded market prices) 3,121,592 2,563,491
MANAGEMENT EXPENSE RATIO (NOTE 7)
Year 2012 2011 2010 2009 2008
No Load 3.24 3.20 3.15 3.12 3.11
Back-End Load 3.01 2.98 2.94 2.91 2.90
Managed Money 1.84 1.82 1.77 1.75 1.75
75/75 guarantee policy 3.00 2.90 2.80 2.91 –
75/100 guarantee policy 3.16 3.08 3.04 3.00 –
100/100 guarantee policy 3.79 3.69 3.49 – –
CANAD IAN REAL ES TATE INVES TMENT FUND NO.120
STATEMENT OF OPERATIONS
For the years ended December 31 2012 2011
Investment income
Bond interest 2,645 1,368
Dividends – –
Mortgage interest – –
Real estate income 349,550 361,153
Interest on short-term investments and miscellaneous income (loss) 5,096 4,552
Total investment income 357,291 367,073
Expenses
Management fees (Note 9) 22,045 20,502
Real estate expenses 210,408 218,948
Other 1,049 963
Total expenses 233,502 240,413
Net investment income 123,789 126,660
Realized gain (loss) 30,322 39,167
Unrealized gain (loss) 332,500 210,976
Transaction costs – –
Net realized and unrealized gain (loss) from investments and foreign exchange 362,822 250,143
Net increase (decrease) in net assets resulting from operations 486,611 376,803
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31 2012 2011
Net assets - beginning of year 2,563,491 2,679,355
Policyholder deposits 490,474 182,325
Policyholder withdrawals (418,984) (674,992)
Increase (decrease) from operations: 486,611 376,803
Change in net assets 558,101 (115,864)
Net assets - end of year 3,121,592 2,563,491
F I N A N C I A L S T A T E M E N T S
2012 ANNUAL REPORT 21
F I N A N C I A L S T A T E M E N T S
UNIT VALUES (NOTE 6)
Investment Individual Individual 75/75 75/100 100/100 For the years ended Investment Investment Only Group No-Load Back-End Managed guar. guar. guar. December 31 Only (A) Only (AI) (AC/AL) RRSP/DCP (IA) Load (IB) Money (IC) policy policy policy
2012 # Units outstanding 982,240 415,849 1,770,084 – 1,690,804 1,173,443 96,810 1,627,264 1,071,604 148,396 Net asset value
per unit 1538.13 547.79 206.46 – 266.28 276.47 519.26 13.14 13.06 12.81 Earnings per unit 252.81 65.61 33.98 – 36.76 38.70 77.68 1.84 1.81 1.71
2011 # Units outstanding 1,050,701 239,939 1,706,469 – 1,552,484 1,102,470 94,635 240,364 162,907 26,891 Net asset value
per unit 1285.32 482.18 172.48 – 229.52 237.77 441.58 11.30 11.25 11.10 Earnings per unit 183.02 44.51 24.59 – 26.57 27.99 56.26 1.33 1.30 1.22
2010 # Units outstanding 1,040,311 354,997 2,804,558 – 2,105,755 1,668,525 126,214 27,167 10,402 858 Net asset value
per unit 1102.30 437.67 147.89 – 202.95 209.78 385.32 9.97 9.95 9.88 Earnings per unit 50.40 (4.73) 6.79 – 3.40 3.93 11.41 0.18 0.17 0.12
2009 # Units outstanding 923,359 500,057 3,527,188 122,061 3,139,486 2,455,615 201,472 793 1,537 – Net asset value
per unit 1051.90 442.40 141.10 57.11-64.91 199.55 205.85 373.91 9.79 9.78 – Earnings per unit 16.62 (20.80) 2.24 – (2.74) (2.41) (0.21) 0.02 0.03 –
2008 # Units outstanding 864,028 473,808 3,542,166 181,689 3,232,844 2,516,584 208,358 – – – Net asset value
per unit 1035.28 463.20 138.86 57.24-64.58 202.29 208.26 374.12 – – – Earnings per unit (5.09) (27.40) (0.67) – (6.94) (6.79) (7.95) – – –
NET ASSET VALUE BY CATEGORY
For the years ended Investment Individual Individual 75/75 75/100 100/100 December 31 Investment Investment Only Group No-Load Back-End Managed guar. guar. guar. (in $ thousands) Only (A) Only (AI) (AC/AL) RRSP/DCP (IA) Load (IB) Money (IC) policy policy policy
2012 Net Asset Value 1,510,812 227,800 365,455 – 450,223 324,419 50,270 21,377 13,995 1,900
2011 Net Asset Value 1,350,492 115,694 294,336 – 356,321 262,129 41,789 2,716 1,833 299
2010 Net Asset Value 1,146,735 155,372 414,766 – 427,363 350,023 48,633 271 103 8
2009 Net Asset Value 971,281 221,225 497,686 – 626,484 505,488 75,332 8 15 –
2008 Net Asset Value 894,511 219,468 491,865 – 653,972 524,104 77,951 – – –
PORTFOLIO TURNOVER RATE (UNAUDITED) (NOTE 8)
For the years ended Portfolio Turnover December 31 Rate (%)
2012 4.88
2011 2.72
2010 2.42
2009 –
2008 8.32
CANAD IAN REAL ES TATE INVES TMENT FUND NO.1
F I N A N C I A L S T A T E M E N T S
STATEMENT OF INVESTMENT PORTFOLIO
No. of Units, Shares Average Cost Fair Value As at December 31, 2012 or Par Value ($ 000) ($ 000)
Canadian Bonds
Corporate – Non Convertible Ontario Ltd. 801611 10.40% 10-31-2013 4,691,557 4,692 7,166 Ontario Ltd. 801611 5.00% 10-31-2013 4,209,117 4,209 5,509 Ontario Ltd. 801611 6.82% 10-31-2013 5,735,582 5,736 6,727 Ontario Ltd. 801611 9.36% 10-03-2014 3,773,382 3,773 5,899
Total Corporate – Non Convertible 18,410 25,301
Total Canadian Bonds 18,410 25,301
Total Bonds 18,410 25,301
22
2012 ANNUAL REPORT
S T A T E M E N T O F I N V E S T M E N T P O R T F O L I O
As at December 31, 2012 (in thousands of dollars)
Real Estate
Mortgages Building Name Property Date of Total Fair Date of N.R.A on Real 2012 and Address Type Purchase Cost Value Last Appraisal (S.F.) Leased Estate NOI
British Columbia
840 Howe Street Office 1-Mar-97 19,348 44,350 1-Dec-12 210,492 100.00% - 1,584 Vancouver, British Columbia
650 West Georgia Street Office 12-Dec-01 33,740 65,375 1-Dec-12 473,865 94.73% (11,106) 3,134 Vancouver, British Columbia
4750 Arbutus Street Residential 10-Jan-02 11,443 20,935 1-Mar-12 79,457 94.00% (8,392) 910 Vancouver, British Columbia
13211–13231, 13251, Industrial 3-Sep-02 14,710 18,350 1-Oct-12 256,693 76.38% - 663 13155, 13140, 13200, and 13260 Delf Place Richmond, British Columbia
4600 Jacombs Road Office 18-Sep-02 6,921 8,675 1-Oct-12 85,689 81.13% - 513 Richmond, British Columbia
800 Carleton Court Industrial 3-Mar-03 12,708 10,500 1-Feb-12 92,564 22.58% - (285) Delta, British Columbia
13811 and 13911 Wireless Way Office 1-Jun-06 26,402 25,315 1-Apr-12 150,164 97.30% - 2,356 Richmond, British Columbia
14815 – 108th Avenue Retail 1-Jun-06 12,620 5,594 1-Oct-12 118,822 93.61% - 757 Surrey, British Columbia
3200 Island Highway Retail 1-Jun-06 52,511 52,028 1-Jul-12 289,166 96.20% (22,099) 1,181 Nanaimo, British Columbia
2401 Millstream Road Retail 2-Aug-07 68,448 60,830 1-Aug-12 264,350 96.24% (33,312) 3,451 Victoria, British Columbia
7488 King George Highway Retail 16-Apr-08 30,146 33,950 1-Apr-12 145,315 88.91% (12,722) 1,844 Surrey, British Columbia
9500 Glenlyon Parkway Office 12-Aug-08 45,823 45,500 1-Jun-12 164,580 100.00% (25,447) 3,643 Burnaby, British Columbia
13700 and 13711 International Place, Office 12-Aug-08 152,802 109,900 1-Sep-12 756,972 70.95% (5,190) 5,410 13511, 13551, 13571, 13575, 13775, 13777 and 13800 Commerce Parkway Richmond, British Columbia
1500 and 1575 Banks Road Retail 3-Nov-08 34,625 36,820 1-Aug-12 150,697 100.00% (16,035) 2,267 Kelowna, British Columbia
Alberta
4637 Macleod Trail SW Residential 1-Nov-96 14,440 42,300 1-Sep-12 172,851 98.47% (18,491) 2,118 Calgary, Alberta
300 5th Avenue SE Office 17-Dec-96 24,415 112,805 1-Dec-12 386,005 95.86% - 6,414 Calgary, Alberta
23
CANAD IAN REAL ES TATE INVES TMENT FUND NO.124
S T A T E M E N T O F I N V E S T M E N T P O R T F O L I O
As at December 31, 2012 (in thousands of dollars)
Real Estate
Mortgages Building Name Property Date of Total Fair Date of N.R.A on Real 2012 and Address Type Purchase Cost Value Last Appraisal (S.F.) Leased Estate NOI
Alberta (continued)
11012 Jasper Avenue Residential 30-Jun-97 18,485 41,600 1-Sep-12 182,820 98.73% - 2,228 Edmonton, Alberta
10145 - 121 Street Residential 18-Apr-98 11,434 21,490 1-Apr-12 101,533 100.00% (9,952) 1,077 Edmonton, Alberta
605 - 5th Ave. S.W. Office 12-Jun-00 24,908 61,750 1-Dec-12 469,704 100.00% (19,699) 3,099 Calgary, Alberta
530 - 8th Ave. S.W. Office 10-Jul-00 69,299 171,000 1-Dec-12 405,206 98.85% (50,481) 9,538 Calgary, Alberta
8403 Roper Road Industrial 28-Dec-97 18,595 21,500 1-Mar-12 135,000 100.00% (9,092) 1,672 Edmonton, Alberta
300 and 350 7th Avenue SW Office 23-Sep-05 78,282 109,594 1-Dec-12 508,495 96.48% - 5,842 Calgary, Alberta
9940 - 106th Street NW Office 21-Jun-06 18,500 26,853 1-Mar-12 177,305 100.00% - 1,009 Edmonton, Alberta
9942 - 108th Street NW Office 21-Jun-06 16,733 27,007 1-Oct-12 164,892 100.00% (10,223) 999 Edmonton, Alberta
1816 & 1824 Crowchild Trail NW Office 21-Jun-06 25,687 30,350 1-Jun-12 125,650 98.25% (6,746) 1,707 Calgary, Alberta
6703 68 Avenue Industrial 15-Aug-07 57,372 55,671 1-Feb-12 563,437 89.35% - 3,264 Edmonton, Alberta
3603 - 53 Avenue NW Land 28-Feb-03 3,830 5,849 1-Nov-12 n/a n/a - (150)Edmonton, Alberta
4035 - 53rd Avenue NW Industrial 28-Feb-03 13,561 14,050 1-Nov-12 189,670 100.00% - 957 Edmonton, Alberta
3603 - 53 Avenue NW Development 28-Feb-03 1,919 2,569 1-Nov-11 n/a n/a - - Edmonton, Alberta
3604 - 51 Avenue NW Development 28-Feb-03 769 1,029 1-Nov-11 n/a n/a - - Edmonton, Alberta
401 - 9th Avenue SW Office 13-Dec-07 141,361 149,800 1-Dec-12 1,074,043 98.55% (52,834) 7,591 Calgary, Alberta
75th Street and 68th Avenue Development 4-May-12 30,903 30,903 Purchase n/a n/a - 825 Edmonton, Alberta
Saskatchewan
Saskatoon West Retail Centre Retail 24-Jul-12 45,296 45,307 Purchase 235,954 100.00% - 1,015 Saskatoon, Saskatchewan
2012 ANNUAL REPORT 25
S T A T E M E N T O F I N V E S T M E N T P O R T F O L I O
As at December 31, 2012 (in thousands of dollars)
Real Estate
Mortgages Building Name Property Date of Total Fair Date of N.R.A on Real 2012 and Address Type Purchase Cost Value Last Appraisal (S.F.) Leased Estate NOI
Ontario
0 Enfield Place Land 13-Jul-87 1,037 1,984 1-Dec-12 n/a n/a - 38 Mississauga, Ontario
2160 Lakeshore Road Residential 15-Jan-97 22,757 29,803 1-Sep-12 163,045 98.13% (10,165) 1,514 Burlington, Ontario
50 Prince Arthur Ave. Residential 15-Jul-97 37,629 51,700 1-Aug-12 166,000 98.67% (26,411) 2,579 Toronto, Ontario
255 Albert Street Office 16-Jan-98 31,157 62,100 1-Jan-12 210,305 95.81% (37,566) 3,229 Ottawa, Ontario
6 Silver Maple Court Residential 30-Apr-98 37,429 51,800 1-Oct-12 311,805 98.82% (25,891) 2,536 Brampton, Ontario
88 Redpath Avenue Residential 5-Aug-98 22,332 33,600 1-Jul-12 117,600 100.00% (13,882) 1,600 Toronto, Ontario
35, 65, and 95 Residential 1-Mar-99 106,368 159,141 1-Mar-12 1,191,665 98.04% (98,239) 8,754 High Park Ave., 66 & 111 Pacific Ave., 255 Glenlake Ave. and 66 Oakmount Rd. Toronto, Ontario
1551 Riverside Drive Residential 9-Apr-99 24,272 33,980 1-Apr-12 192,328 98.06% (17,670) 1,882 Ottawa, Ontario
5140 Yonge Street Office 30-Aug-99 88,451 151,200 1-Jul-12 546,974 96.96% (70,564) 8,590 Toronto, Ontario
400 Walmer Road Residential 27-Dec-00 60,717 61,750 1-May-12 548,923 96.34% (19,821) 4,270 Toronto, Ontario
200 University Ave Office 30-Nov-00 15,521 21,465 1-May-12 145,063 90.14% - 874 Toronto, Ontario
2020 Walkley Rd Industrial 2-Jan-01 3,563 4,530 1-Sep-12 107,567 65.59% - 221 Ottawa, Ontario
5166-5170 Lakeshore Road Residential 15-Jan-97 34,077 34,748 1-Sep-12 213,102 99.01% (13,347) 1,633 Burlington, Ontario
2220 Marine Drive Residential 26-Aug-02 10,833 14,000 1-Sep-12 148,363 99.33% (6,562) 665 Oakville, Ontario
269 Laurier Avenue West Office 1-Jan-03 37,933 64,800 1-Oct-12 360,148 100.00% (33,221) 3,484 Ottawa, Ontario
65 Lillian Street Residential 5-Aug-98 36,957 49,100 1-Nov-12 89,950 98.58% - 2,153 Toronto, Ontario
CANAD IAN REAL ES TATE INVES TMENT FUND NO.1
S T A T E M E N T O F I N V E S T M E N T P O R T F O L I O
As at December 31, 2012 (in thousands of dollars)
Real Estate
Mortgages Building Name Property Date of Total Fair Date of N.R.A on Real 2012 and Address Type Purchase Cost Value Last Appraisal (S.F.) Leased Estate NOI
Ontario (continued)
40 & 52-66 High Park Avenue Residential 25-Mar-03 70,847 83,423 1-Oct-12 413,415 99.26% (32,379) 4,143 and 51-65 & 77 Quebec Ave. Toronto, Ontario
640,642,644 Sheppard Ave. E. Residential 25-Mar-03 46,908 61,778 1-May-12 368,214 97.38% (30,834) 2,903 Toronto, Ontario
2260 Argentia Road Industrial 1-Jun-03 5,946 6,900 1-May-12 131,259 100.00% - 804 Mississauga, Ontario
6665,6675-6685 Millcreek Road Industrial 1-Jun-03 5,857 5,650 1-May-12 119,789 86.28% - 254 Mississauga, Ontario
6695 & 6705 Millcreek Road Industrial 1-Jun-03 5,974 7,350 1-May-12 110,530 81.98% - 776 Mississauga, Ontario
6715 & 6725 Millcreek Road Industrial 1-Jun-03 4,724 6,050 1-May-12 94,598 61.26% - 944 Mississauga, Ontario
33 Yonge Street Office 1-Jul-03 73,497 107,400 1-Jun-12 516,530 98.23% - 4,918 Toronto, Ontario
2250 Argentia Road Industrial 1-Jun-03 2,469 3,420 1-May-12 31,910 100.00% - 195 Mississauga, Ontario
7070 Mississauga Road Office 7-Aug-03 12,694 17,050 1-Dec-12 244,128 100.00% - 831 Mississauga, Ontario
55 - 425 Superior Blvd Industrial 11-Oct-01 20,144 25,060 1-Aug-12 777,471 94.88% (11,507) 1,382 Mississauga, Ontario
1-2, 4-5 & 7 Paget, 2,4,6,8 & 14 Industrial 11-Oct-01 26,837 30,310 1-Mar-12 1,013,008 98.83% (10,435) 1,987 Kenview, 2 Castleview and 7925 & 7965 Goreway Brampton, Ontario
3485 Steeles Ave Industrial 11-Oct-01 5,026 5,180 1-Mar-12 175,270 100.00% - 326 Brampton, Ontario
3495 Steeles Ave Land 11-Oct-01 1,804 1,974 1-Mar-12 n/a n/a - (22)Brampton, Ontario
3389 Steeles Ave E Land 11-Oct-01 491 343 1-Mar-12 n/a n/a - (6)Brampton, Ontario
2679 - 2831 Bristol Circle Industrial 11-Oct-01 17,462 21,131 1-Aug-12 660,617 88.58% (8,670) 1,030 Oakville, Ontario
1541 Riverside Drive Residential 7-Aug-02 15,986 19,250 1-Apr-12 244,125 100.00% (8,626) 1,119 Ottawa, Ontario
1 Van Der Graaf Court Industrial 16-Feb-04 4,379 3,138 1-Jun-12 102,205 0.00% - 246 Brampton, Ontario
26
2012 ANNUAL REPORT
S T A T E M E N T O F I N V E S T M E N T P O R T F O L I O
As at December 31, 2012 (in thousands of dollars)
Real Estate
Mortgages Building Name Property Date of Total Fair Date of N.R.A on Real 2012 and Address Type Purchase Cost Value Last Appraisal (S.F.) Leased Estate NOI
Ontario (continued)
1 Woodslea Road Industrial 16-Feb-04 3,988 2,300 1-Jun-12 110,148 0.00% - (148)Brampton, Ontario
1075 Clark Blvd. Industrial 16-Feb-04 1,510 1,625 1-Jun-12 35,842 100.00% - 121 Brampton, Ontario
161 Orenda Road Industrial 16-Feb-04 9,906 8,950 1-Jun-12 319,077 75.79% - 540 Brampton, Ontario
165 Orenda Road Industrial 16-Feb-04 2,074 1,950 1-Jun-12 57,055 100.00% - 127 Brampton, Ontario
292-294 Walker Dr. Industrial 16-Feb-04 3,575 3,475 1-Jun-12 74,583 74.77% - 181 Brampton, Ontario
300 Walker Dr. Industrial 16-Feb-04 3,712 3,350 1-Jun-12 102,972 100.00% - 272 Brampton, Ontario
40 Summerlea Rd. Industrial 16-Feb-04 5,543 4,450 1-Jun-12 121,138 100.00% - 162 Brampton, Ontario
5 Intermodal Dr. Industrial 28-May-04 3,376 3,350 1-Jun-12 87,108 100.00% - 237 Brampton, Ontario
6 Shaftsbury Lane Industrial 16-Feb-04 4,664 3,400 1-Jun-12 125,871 100.00% - 318 Brampton, Ontario
8705 Torbram Rd. Industrial 16-Feb-04 9,500 8,000 1-Jun-12 296,469 76.25% - 140 Brampton, Ontario
2844 Bristol Circle Industrial 31-Jan-05 3,339 4,235 1-Aug-12 132,500 100.00% (1,797) 268 Oakville, Ontario
7030 Century Avenue Industrial 18-Feb-05 7,696 8,525 1-Feb-12 83,246 100.00% - 528 Mississauga, Ontario
415 - 419 Milner Avenue Industrial 7-Dec-84 5,181 6,400 1-Feb-12 95,763 100.00% - 436 Scarborough, Ontario
445 Milner Avenue Industrial 7-Dec-84 2,107 2,900 1-Feb-12 41,822 100.00% - 154 Scarborough, Ontario
455 Milner Avenue Industrial 7-Dec-84 2,163 3,250 1-Feb-12 46,312 100.00% - 256 Scarborough, Ontario
465 Milner Avenue Industrial 7-Dec-84 2,056 2,700 1-Feb-12 57,106 93.03% - 163 Scarborough, Ontario
50 - 70 Nably Court Industrial 7-Dec-84 2,209 2,750 1-Feb-12 41,468 100.00% - 196 Scarborough, Ontario
20-24 York Street Residential 27-Sep-05 16,128 19,280 1-Jan-12 93,047 95.83% (7,032) 972 Ottawa, Ontario
27
CANAD IAN REAL ES TATE INVES TMENT FUND NO.128
S T A T E M E N T O F I N V E S T M E N T P O R T F O L I O
As at December 31, 2012 (in thousands of dollars)
Real Estate
Mortgages Building Name Property Date of Total Fair Date of N.R.A on Real 2012 and Address Type Purchase Cost Value Last Appraisal (S.F.) Leased Estate NOI
Ontario (continued)
Part of Lot 6, Concession 6, Albion, Land 11-May-07 2,514 2,785 1-Sep-12 n/a n/a - (23) Designated as Parts 1 & 2 on Reference Plan 43R-1253, S ave and Except Parts 17 & 17 on Reference Plan 43R-30557, Town of Caledon, Regional Municipality of Peel Bolton, Ontario
One City Centre Drive Office 17-Aug-07 33,973 33,720 1-Mar-12 287,867 89.42% - 1,850 Mississauga, Ontario
One City Centre Drive Land 17-Aug-07 3,838 4,416 1-Mar-12 n/a n/a - - Mississauga, Ontario
99 Savannah Oaks Drive Industrial 21-Dec-07 19,538 16,940 1-Nov-12 527,915 100.00% - 762 Brantford, Ontario
1549 Yorkton Court Industrial 21-Dec-07 6,016 5,075 1-Oct-12 80,925 91.35% - 238 Burlington, Ontario
8400 - 8450 Lawson Road Industrial 21-Dec-07 19,354 16,030 1-Nov-12 236,149 89.23% - 880 Burlington, Ontario
800 - 900 Main Street East Retail 14-Mar-08 27,761 25,900 1-Apr-12 97,144 91.70% - 1,446 Milton, Ontario
7025 Langer Drive Land 22-Sep-06 1,766 1,813 1-Aug-12 n/a n/a - (44)Mississauga, Ontario
2100 Derry Road Office 22-Sep-06 15,076 17,350 1-Aug-12 106,773 100.00% - 1,194 Mississauga, Ontario
2050 Derry Road Office 22-Sep-06 16,592 19,200 1-Aug-12 125,163 85.59% - 792 Mississauga, Ontario
415 Thompson Drive Industrial 8-Feb-08 14,560 13,320 1-Jan-12 140,000 100.00% (6,730) 1,102 Cambridge, Ontario
4 King Street West Office 14-Mar-08 65,664 63,000 1-Feb-12 291,237 95.27% (30,711) 3,292 Toronto, Ontario
155 University Ave Office 14-Mar-08 34,577 32,981 1-Mar-12 186,226 83.07% (14,582) 1,807 Toronto, Ontario
1141 Kennedy Road Retail 19-Oct-06 6,399 7,665 1-Oct-12 34,284 100.00% (2,003) 430 Scarborough, Ontario
145 - 167 Bell Blvd Retail 4-Jan-07 9,499 10,780 1-Jan-12 66,987 100.00% (4,277) 560 Scarborough, Ontario
5150 - 5160 Yonge St Office 17-Oct-08 123,406 130,172 1-Oct-12 620,218 93.85% (56,287) 6,885 Toronto, Ontario
2012 ANNUAL REPORT 29
S T A T E M E N T O F I N V E S T M E N T P O R T F O L I O
As at December 31, 2012 (in thousands of dollars)
Real Estate
Mortgages Building Name Property Date of Total Fair Date of N.R.A on Real 2012 and Address Type Purchase Cost Value Last Appraisal (S.F.) Leased Estate NOI
Ontario (continued)
Bowmanville Retail Centre Retail 24-Jul-12 35,916 35,923 Purchase 191,417 100.00% - 828 Bowmanville, Ontario
200 Kent Street Office 8-Aug-12 144,695 144,695 Purchase 387,015 100.00% - 3,761 Ottawa, Ontario
Quebec
6505 Trans-Canada Highway Office 19-Jun-98 10,979 13,400 1-Feb-12 110,931 59.45% - 14 St. Laurent, Quebec
555 Frederik-Philips Office 24-Sep-99 11,207 13,300 1-Nov-12 80,355 92.55% - 665 St. Laurent, Quebec
4600 Poirer Blvd. Industrial 14-Mar-02 6,092 6,550 1-Mar-12 104,560 100.00% - 436 St. Laurent, Quebec
9415-9495 Trans-Canada Highway Industrial 14-Mar-02 4,676 4,760 1-Mar-12 88,921 86.97% - 288 St. Laurent, Quebec
9305-9405 Trans-Canada Highway Industrial 14-Mar-02 6,768 6,840 1-Mar-12 113,256 83.92% - 405 St. Laurent, Quebec
9600-9800 Trans-Canada Highway Industrial 14-Mar-02 3,752 3,910 1-Mar-12 69,673 100.00% - 263 St. Laurent, Quebec
6520-6620 Abrams Street Industrial 14-Mar-02 10,758 11,200 1-Mar-12 224,403 90.87% - 685 St. Laurent, Quebec
2200 Trans-Canada Highway Industrial 14-Mar-02 17,526 16,200 1-Mar-12 411,265 0.00% - 1,088 Pointe - Claire, Quebec
43 - 55 Cite Des Jeunes Blvd. Retail 21-Jul-06 20,068 21,910 1-Jan-12 131,217 100.00% (6,920) 1,278 Vaudreuil - Dorion, Quebec
224 Joseph-Casavant Ave. Retail 11-Jun-08 14,262 16,450 1-Aug-12 174,271 100.00% (6,896) 1,013 Beauport, Quebec
Atlantic
1959 Upper Water Street Office 14-Jun-83 19,941 31,464 1-Dec-12 327,061 87.73% (4,763) 1,931 Halifax, Nova Scotia
1969 Upper Water Street Office 31-Dec-93 16,654 32,863 1-Dec-12 367,919 90.43% (5,371) 2,149 Halifax, Nova Scotia
Purdy’s Wharf-The Wharf Miscellaneous 30-Jun-90 183 - Dec-12 n/a n/a - - Upper Water Stree Halifax, Nova Scotia
CANAD IAN REAL ES TATE INVES TMENT FUND NO.130
S T A T E M E N T O F I N V E S T M E N T P O R T F O L I O
As at December 31, 2012 (in thousands of dollars)
Real Estate
Mortgages Building Name Property Date of Total Fair Date of N.R.A on Real 2012 and Address Type Purchase Cost Value Last Appraisal (S.F.) Leased Estate NOI
United States
396 West Greens Road Office 21-Jun-06 18,344 8,009 1-Nov-12 186,791 100.00% - 917 Houston, Texas
396 West Greens Road Land 21-Jun-06 439 557 1-Nov-12 n/a n/a - - Houston, Texas
8101 Sam Houston Parkway Office 21-Jun-06 14,895 12,188 1-Nov-12 136,800 100.00% - 939 Houston, Texas
Current and prior year(s) sold property - - - - 1,463
Real Estate - subtotal 2,876,529 3,612,913 25,475,568 (934,980) 186,702
less: encumbrances (884,704) (934,980)
Capitalization of loss on assumed mortgages (4,949) -
Total Real Estate 1,986,876 2,677,933
Total Investments 2,005,286 2,703,234
2012 ANNUAL REPORT 31
N O T E S T O T H E S T A T E M E N T O F I N V E S T M E N T P O R T F O L I O
At December 31, 2012
A. RISK MANAGEMENT
The Fund’s investment activities expose it to a variety of financial risks. The Statement of Investments presents the securities held by
the Fund as at December 31, 2012, and groups the securities by asset type, geographic region and/or market segment. Significant
risks that are relevant to the Fund are discussed below.
B. LIQUIDITY RISK
As investments in real property are not actively traded, the Fund is exposed to liquidity risk due to the redemption of redeemable
units. To a lesser extent, mortgage liabilities also expose the Fund to liquidity risk. To manage liquidity, the Fund has the ability to incur
additional mortgage indebtedness as long as the total borrowings do not exceed 35% of the total asset value of the Fund, and provided
the value of each mortgage assumed is not greater than 75% of the related property’s value.
C. INTEREST RATE RISK
Interest rate risk arises on interest-bearing financial instruments such as bonds. The Fund is exposed to the risk that the value of
interest-bearing financial instruments will fluctuate due to changes in the prevailing levels of market interest rates. The table below
summarizes the Fund’s exposure to interest rate risks by remaining term to maturity.
2012
($000) Less than 1 year 1 – 5 years 5 – 10 years > 10 years Total
Bonds 19,402 5,899 – – 25,301
2011
($000) Less than 1 year 1 – 5 years 5 – 10 years > 10 years Total
Bonds – 24,526 – – 24,526
As at December 31, 2012, had prevailing interest rates raised or lowered by 1% assuming a parallel shift in the yield curve, with all
other variables held constant, net assets would have decreased or increased, respectively, by approximately $236 (2011 - $463) or
approximately 0.0% (2011 - 0.0%) of total net assets. The Fund’s sensitivity to interest rate changes was estimated using the weighted
average duration of the bond portfolio. In practice, the actual results may differ and the difference could be material.
D. CREDIT RISK
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has
entered into with the Fund. The Fund’s greatest concentration of credit risk is in debt securities, such as bonds. The fair value of debt
instruments includes consideration of the credit worthiness of the debt issuer. The carrying amount of debt instruments represents
the maximum credit risk exposure as at December 31, 2012. The amount of credit risk to any one issuer may be determined from the
information reported in the Statement of Investment.
All transactions in listed securities are settled / paid for upon delivery using approved brokers. The risk of default is considered minimal,
as delivery of securities sold is only made once the broker has received payment. Payment is made on a purchase once the securities
have been received by the broker.
As of December 31, debt securities by credit rating are as follows:
2012 2011
Percent of Percent of Percent of Percent of Total Bonds Total Net Total Bonds Total Net (%) Assets (%) (%) Assets (%)
NR * 100.0 0.8 100.0 1.0
* bonds rated NR are mortgage backed securities or privately placed bonds or bonds that have not been rated by a rating agency
CANAD IAN REAL ES TATE INVES TMENT FUND NO.132
E. FAIR VALUE CLASSIFICATION
The following table presents information about the Fund’s financial assets and liabilities measured at fair value on a recurring basis as of
December 31, 2012, and indicates the fair value hierarchy of the valuation techniques utilized by the Fund to determine such fair value:
Financial Assets and Liabilities Measured at Fair Value
($000’s) 2012
Financial assets measured at fair value Level 1 Level 2 Level 3 Total
Bonds – – 25,301 25,301
Stocks – – – –
Mortgages and sales agreements – – – –
Other – – – –
Investment Fund Units – – – –
Total assets measured at fair value – – 25,301 25,301
Financial liabilities measured at fair value
Mortgages on real estate – 934,980 - 934,980
Net financial assets and liabilities measured at fair value – (934,980) 25,301 (909,679)
Financial Assets and Liabilities Measured at Fair Value
($000’s) 2011
Financial assets measured at fair value Level 1 Level 2 Level 3 Total
Bonds – – 24,526 24,526
Stocks – – – –
Mortgages and sales agreements – – – –
Other – – – –
Investment Fund Units – – – –
Total assets measured at fair value – – 24,526 24,526
Financial liabilities measured at fair value
Mortgages on real estate – 981,641 – 981,641
Net financial assets and liabilities measured at fair value – (981,641) 24,526 (957,115)
There have not been any significant transfers in or out of Level 1 or 2 during the period.
N O T E S T O T H E S T A T E M E N T O F I N V E S T M E N T P O R T F O L I O
2012 ANNUAL REPORT 33
N O T E S T O T H E S T A T E M E N T O F I N V E S T M E N T P O R T F O L I O
E. FAIR VALUE CLASSIFICATION (continued)
The following table presents additional information about assets measured at fair value on a recurring basis and for which the Fund has
utilized Level 3 inputs to determine fair value for the year ended December 31:
Level 3 Financial Assets
2012 2011
Bonds Stocks Bonds Stocks
Balance, January 1 24,526 – 21,036 –
Total gains/(losses) included in net income 775 – 3,490 –
Purchases – – – –
Sales – – – –
Issuances – – – –
Settlements – – – –
Transfers in to Level 3 – – – –
Transfers out of Level 3 – – – –
Balance, December 31 $ 25,301 $ – $ 24,526 $ –
Total gains/(losses) for the year included in net income for assets held at December 31 775 – 3,490 –
CANAD IAN REAL ES TATE INVES TMENT FUND NO.134
December 31, 2012 (In thousands of dollars)
1. THE FUND
The following Fund is offered by The Great-West Life
Assurance Company:
Canadian Real Estate Investment Fund No. 1
The Great-West Life Assurance Company is the sole issuer of
the insurance contracts providing for investment in this Fund. The
assets of the Fund are owned by The Great-West Life Assurance
Company and are segregated from other assets. The Fund is not
a separate legal entity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Fund have been prepared in
accordance with Canadian generally accepted accounting
principles (GAAP). The significant accounting policies used in the
preparation of these financial statements are summarized below.
a) Use of Estimates The preparation of financial statements in accordance with
Canadian generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amount of assets and liabilities at the reporting
date and the reported amount of revenues and expenses during
the reporting period. The valuation of investments is the most
significant component of the financial statements subject to
estimates; actual results could differ from these estimates.
b) Future Accounting Policies International Financial Reporting Standards (IFRS) The
Canadian Accounting Standards Board (AcSB) has mandated
that all Canadian publicly accountable entities are required
to transition from Canadian generally accepted accounting
principles (GAAP) to IFRS. The AcSB has formally delayed its
IFRS changeover date for investment funds from the original
date of January 1, 2011 to January 1, 2014. The deferral
of the IFRS adoption by the AcSB applies to investment
companies applying Accounting Guideline - 18 and would
allow these companies to continue to apply the current
accounting standards while the International Accounting
Standards Board (IASB) finalizes its proposed IFRS Investment
Entities standard. Consequently, the Fund plans to adopt IFRS
in their semi-annual and annual financial statements starting
with the June 30, 2014 interim financial statements and will
provide corresponding comparative information for 2013.
The Company continues to evaluate the financial statement
impact of transitioning from Canadian GAAP to IFRS and the
related effect on its information systems and processes. Until
this effort is complete, the final impact of adopting IFRS and the
related effects on the financial statements of the Fund cannot
be reasonably determined.
c) Financial Instruments Fair Value Classification In accordance with the Canadian Institute of Chartered
Accountants (CICA) Handbook Section 3862, Financial
Instruments - Disclosures, the fair value of financial assets
and liabilities have been categorized based upon the
following fair value hierarchy:
Level 1 – determined by reference to quoted prices in
active markets for identical assets and liabilities;
Level 2 – determined using inputs other than the quoted
prices that are observable for the asset or liability, either
directly or indirectly; and
Level 3 – determined using inputs that are not based on
observable market data.
d) Bonds
Bonds are recorded at fair value determined with reference
to quoted market bid prices primarily provided by third party
independent pricing sources. Fair values are determined
on the basis of the closing bid price for a security on the
recognized exchange on which it is principally traded. Bonds
and Mortgage Backed Securities are recorded at fair value,
established using the closing bid price on the over-the-
counter market.
The fair value of unlisted securities is established using
quotations determined by a major dealer in a particular security.
Should the quoted value for a security, in the opinion of the
manager, be inaccurate, unreliable, or not readily available, the
value of the security is estimated using valuation techniques.
e) Cash, Short-term Deposits and Overdrafts
Cash, short-term deposits and overdrafts are comprised of
cash on deposit, overdrafts and short-term deposits with
terms to maturity of less than one year at acquisition. Cash,
overdrafts and short-term deposits are held at cost, which
approximates fair value.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
2012 ANNUAL REPORT 35
f) Real Estate Investments The cost of real estate investments is acquisition cost plus the
cost of capital improvements.
Real estate investments are recorded at cost from the date
of acquisition until receipt of the first appraisal; thereafter,
they are recorded at their most recent external or internal
appraised value. Real estate investments of the Funds are
appraised annually by qualified external real estate appraisers.
Fund Management may adjust individual property values
periodically due to changing market conditions.
For real property investments, the capitalization rate (cap
rate) is a measure of a property’s value to its income and is a
key metric in the valuations prepared by real estate appraisers.
Cap rates are influenced by factors in the overall real estate
market in Canada, which is in turn influenced by supply and
demand factors as well as the domestic economy.
Real estate investments are subject to a degree of risk.
They are affected by various factors including changes in
both general and local market conditions, credit markets,
competition in the environment, stability and credit-
worthiness of tenants, and various other factors.
Properties under development include interest on both
specific and general debt, property taxes and general and
administrative expenses incurred directly in connection with
the acquisition and development of properties.
Mortgages on real estate investments are recorded at fair
value. Fair value of mortgages has been determined using
future payments of principal and interest of the actual
outstanding mortgages, discounted at the current market
interest rates available to the Fund.
g) Recognition of Investments and Income Investment purchases and sales are recorded on a trade
date basis. The accrual basis of accounting is used to
record all types of investment income earned and
expenses incurred by the Fund.
Realized gains (losses) on investments are recorded
upon the sale or maturity of an asset. Gains are calculated
as the excess of the net proceeds from sale over the
average cost of the investment.
Unrealized appreciation (depreciation) of investments is
calculated as the in-year change in the excess of fair value
over the original cost of the asset.
Foreign currency translations are calculated using the
exchange rate in effect when the transaction occurred. The
gains or losses generated by foreign exchange are recorded in
the Statement of Operations as miscellaneous income (loss).
h) Other Expenses
Other expenses consist primarily of securities handling
charges. All these expenses are paid to third parties.
i) Income Allocation
Net investment income (loss) of the Fund accrues to each
participant through the appreciation (depreciation) of the
net asset value per unit, with the exception of category
A units of specific clients. The net investment income of
this category is allocated to the participants in the form
of additional units.
Realized and unrealized capital appreciation or depreciation
of the Fund’s investments accrues to participants through
an increase or decrease in the net asset value per unit.
j) Issue and Redemption of Units
Units are issued and redeemed at their net asset value per unit
established as noted in the information folder of the Fund.
k) Transaction Costs
Transaction costs, such as brokerage commissions, incurred in
the purchase and sale of securities by the Fund are charged to
net income in the period.
Transaction costs, such as brokerage commissions, legal
fees and land transfer taxincurred in the purchase and sale
of real estate by the Fund are added to the cost of the asset
in the period.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
CANAD IAN REAL ES TATE INVES TMENT FUND NO.136
3. MORTGAGE ON REAL ESTATE
Mortgages on Real Estate are comprised of term mortgages
which bear contractual interest rates ranging from 2.46% to
7.12% (2011 - 3.24% to 7.36%), and a weighted average
contractual interest rate of 4.69% (2011 - 4.84%). Mortgages
are secured by the real property investment and an assignment
of leases and amounts due from property rentals. The terms of
the mortgages are subject to renegotiations from 2013 to 2023.
As at December 31, 2012, had prevailing interest rates raised or
lowered by 1%, assuming a parallel shift in the yield curve, with all
other variables held constant, net assets would have decreased
or increased, respectively, by approximately $32.9 million (2011
- approximately $37.2 million) and approximately 1.06% of net
fund value (2011 - approximately 1.45% of net fund value).
As at December 31, 2012, the approximate principal payments
due in the next five years are as follows:
Principal payments Year ended due ($000)
December 31, 2013 $ 103,926
December 31, 2014 139,669
December 31, 2015 72,751
December 31, 2016 169,945
December 31, 2017 77,414
Thereafter 321,000
Fair value adjustment 50,275
Total $ 934,980
4. DESCRIPTION OF UNITS
The capital of the Fund is divided into four categories of units
as follows:
Investment Only units are available to Canadian Group
Registered and Non-Registered Plans.
Group RRSP/DCP units are available to Group Registered
Retirement Savings Plans, Deferred Profit Sharing Plans
and certain Money Purchase Plans. Category B units are
available at ten levels representing different management
fee structures.
Individual units are available to individuals for investment
in Registered Retirement Savings Plans, Registered Savings
Plans, and Non-Registered Savings Plans through the
purchase of the Flexible Accumulation Annuity and the
Flexible Income Fund. Category I units are available under
three different options. Option A is a no load Investment
Fund option, Option B is a back end load investment option
and Option C is for high net worth investors. In addition
to the Individual units, units are available for Option S1R
75/75 guarantee policy, Option S1HB Preferred Series
1 (PS1) 75/75 guarantee policy, Option S1HU Preferred
Series 2 (PS2) 75/75 guarantee policy, Option S2R
75/100 guarantee policy, Option S2HB PS1 75/100
guarantee policy, Option S2HU PS2 75/100 guarantee
policy, Option S3R 100/100 guarantee policy, Option
S3HB PS1 100/100 guarantee policy, and Option S3HU
PS2 100/100 guarantee policy.
Portfolio units are those units owned by the Portfolio
Investment Funds. There are nine different Portfolio
funds each represented by a separate category.
The four categories of units, Investment Only, Group RRSP/
DCP, Indiviudal, and Portfolio, and the various levels within each,
are accounted for separately and any increases or decreases in
participants’ equity during the year are allocated proportionately
to each category.
5. INCOME TAXES
The Fund is deemed to be an inter-vivos trust under the provisions
of the Income Tax Act (Canada). Income of a segregated fund
is deemed to be payable to the policyholders and therefore the
segregated fund will not have taxable income. In addition, capital
gains and losses are deemed to be those of the policyholders
and not of the trusts. Realized gains or losses may be reduced
by the amount of gains or losses realized by policyholders on
the redemption of their investment. As a result, no provision of
income tax is required in the financial statements of the Fund.
6. UNIT VALUE CATEGORY DETAIL
The presentation of unit values is broken down by
participant category.
The unit values presented in these financial statements reflect
the Canadian Securities Administrators (“CSA”) amendment
to its regulations effective September 8, 2008, such that the
daily Net Asset Value (“NAV”) of an investment fund may be
calculated without reference to GAAP. The difference reported
in the financial statements between NAV and Net Assets is due
to the valuation of securities at bid price for financial statement
purposes versus the NAV which is typically represented using
the closing price to determine fair value. There is no difference
between the NAV and the Net Assets of the Funds for those
funds that invest entirely in the underlying funds. For asset based
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
2012 ANNUAL REPORT 37
funds, the difference between the NAV and the Net Assets of
the Funds will be presented on the financial statement with an
adjustment for bid market prices to last traded market prices.
Earnings per unit represents the change in net asset value
per unit between the prior year and the current year.
In addition to the categories represented on the Financial
Statement, the unit value category detail for the fund with
preferred series 1 and preferred series 2 guarantee policy
categories is as follows (in $ thousands, except per unit amounts):
PS1 guarantee policy
75/75 75/100 100/100
Canadian Real Estate Investment Fund No. 1
# Units outstanding 293,144 57,083 -
Net asset value per unit 1 0.93 1 0.92 -
Earnings per unit 0.70 0.91 -
Net asset value 3,203 623 -
PS2 guarantee policy
75/75 75/100 100/100
Canadian Real Estate Investment Fund No. 1
# Units outstanding 398,605 258,819 -
Net asset value per unit 11.10 11.10 -
Earnings per unit 1.06 1.06 -
Net asset value 4,426 2,874 -
7. MANAGEMENT EXPENSE RATIO
The management expense ratio has been calculated as the
aggregate of all fees, taxes, charges and other expenses incurred
during the year divided by the average daily net asset value of
the segregated fund attributable to the particular fee option.
All ratios shown are on an annual basis. In circumstances where
the particular fund or fee option did not have twelve months’
exposure the ratios have been annualized. Management expense
ratios are calculated for Individual Retirement and Investment
Services clients only. No management expense ratio is calculated
for the preferred series 2 guarantee policy option as such fees
are charged directly to the policyholder.
In addition to the management expense ratios represented
on the Financial Statement, the management expense ratio
category detail for the fund with preferred series 1 guarantee
policy category is as follows:
PS1 guarantee policy
75/75 75/100 100/100
Canadian Real Estate Investment Fund No. 1 2.56 2.72 -
8. PORTFOLIO TURNOVER RATE
The portfolio turnover rate presented in the financial statement
reflects the Canadian Life and Health Insurance Association Inc.
(CLHIA) Guideline G2, Individual Variable Insurance Contracts
Relating to Segregated Funds 12.2(f)(iv)(3).
The portfolio turnover rate indicates how actively the portfolio
investments have been bought or sold throughout the year.
A portfolio turnover rate of 100% is equivalent to the Fund
buying and selling all of the securities in its portfolio once in
the course of the year.
9. RELATED PARTY TRANSACTIONS
a) The Great-West Life Assurance Company provides
property and asset management services to the
Canadian Real Estate Investment Fund No. 1 in the
normal course of business at competitive market rates.
b) The Great-West Life Assurance Company provides
management, advisory and administrative services to the
Fund. In respect of these services, the Fund is charged
management and other fees. Management and other fees
for Preferred Series 2 categories are charged directly to
the policyholder by redeeming units from their policy.
For Managed Money AMS fees are charged directly to
the policyholder by redeeming units from their policy,
management and other fees are calculated at set rates
applied against the net assets at each valuation date.
Management fees and other fees charged to other
categories are calculated at set rates applied against the
net assets of the specific category at each valuation date.
c) A separate investment management fee is charged
directly to the transaction account of the participant
by The Great-West Life Assurance Company. Accordingly
such fees are not included as an expense in these
financial statements.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
CANAD IAN REAL ES TATE INVES TMENT FUND NO.138
d) The amounts shown as “Due from (to) The Great-West
Life Company” represent outstanding management fees,
un-cleared deposits/withdrawals and investment activity
from the December 31st valuation.
e) The Canadian Real Estate Investment Fund No. 1 holds
bonds issued by 801611 Ontario Ltd., a wholly owned
subsidiary of The Great-West Life Assurance Company,
with a fair value as at December 31, 2012 of $24,304
($24,526 in 2011).
f) The suspension on withdrawals and transfers from the
Canadian Real Estate Investment Fund No. 1, effective
the close of business December 15, 2008, was lifted on
October 17, 2011. During this suspension, payments
of certain redemption requests were arranged. In order
to settle these approved post-suspension redemption
requests the general fund of The Great-West Life
Assurance Company paid out the value of the notional
units that were redeemed and received the applicable
notional units in return.
As at December 31, 2012, The Great-West
Life Assurance Company held 72,729 units
(2011 – 149,033 units) with a value of $111.9 million
(2011 - $191.6 million).
g) Certain funds invest in assets or underlying funds
managed by GLC Asset Management Group Ltd.,
which is a wholly owned subsidiary of The Great-West
Life Assurance Company. All investment transactions
with the corresponding underlying fund are at quoted
market prices.
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
2012 ANNUAL REPORT 39
S E N I O R M A N A G E M E N T
Paul Finkbeiner President
Ralf Dost Executive Vice President & Chief Operating Officer
James Midwinter Executive Vice President Development
Susan MacLaurin Executive Vice President Portfolio Management
Tanyss Price Senior Vice President & Chief Financial Officer
Don Harrison Senior Vice President Asset Management
Mike Snell Senior Vice President Asset Management
Tom Sullivan Senior Vice President Portfolio Management & Finance
Scott Taylor Senior Vice President Asset Management
David Rose Vice President Portfolio Management
Michele Walkau Vice President Corporate Resources
CANAD IAN REAL ES TATE INVES TMENT FUND NO.1
O F F I C E L O C A T I O N S
Vancouver 650 West Georgia Street Suite 3000 Vancouver, BC V6B 4N7 Main Line: (604) 713-6450 Main Fax: (604) 683-3264
Calgary 700 9th Avenue SW Suite 2700 Calgary, AB T2P 3V4 Main Line: (403) 777-0410 Main Fax: (403) 269-3266
Edmonton 10155 -102 Street Suite 208 Edmonton, AB T5J 4G8 Main Line: (780) 944-1222 Main Fax: (780) 428-4047
Winnipeg 433 Main Street Suites 800 & 900 Winnipeg, MB R3B 1B3 Main Line: (204) 946-7363 Main Fax: (204) 946-8849
Mississauga One City Centre Drive Suite 300 Mississauga, ON L5B 1M2 Main Line: (905) 275-6600 Main Fax: (905) 615-8128
Toronto 330 University Avenue Suite 300 Toronto, ON M5G 1R8 Main Line: (416) 552-5959 Main Fax: (416) 552-5111
Markham 15 Allstate Parkway Suite 103 Markham, ON L3R 5B4 Main Line: (905) 475-1995 Main Fax: (905) 475-3676
Ottawa 255 Albert Street Suite 502 Ottawa, ON K1P 6A9 Main Line: (613) 238-2333 Main Fax: (613) 238-2006
Montréal 2001 University Street Suite 1820 Montreal, QC H3A 2A6 Main Line: (514) 350-7940 Main Fax: (514) 350-7954
Halifax 1949 Upper Water Street Suite 220 Halifax, NS B3J 3N3 Main Line: (902) 421-1122 Main Fax: (902) 423-1894
DES
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2012 ANNUAL REPORT
“This document may contain third-party trademarks, graphics, or logos. All such trade-marks, graphics or logos mentioned in this document are the property of their respective owners. The inclusion of any third-party trademarks, graphics, or logos is intended to be representative only and does not imply any endorsement by the owners of such trademarks. The names of tenants of specific properties are provided solely for informational purposes and for no other reason.”
GWL Realty Advisors is a leading Canadian real estate investment advisor providing comprehensive asset management, property management, development and specialized real estate services to pension funds and institutional clients.
With in-depth local expertise in major Canadian markets, GWL Realty Advisors is the trusted source for real estate advice and services. A strong experienced fiduciary, the company delivers stable, long-term returns for its clients.
GWL Realty Advisors is a wholly-owned subsidiary of The Great-West Life Assurance Company. For further information, visit our website at www.gwlra.com
www.gwlra.com
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