Semi-Annual Industrial Market Updates, 2023

Unite Capital Partners

Preface

Welcome to the world of commercial real estate. Whether you are a seasoned investor or new to the game, we’re here to help you navigate the complex and ever-changing landscape of investing and leasing commercial properties.

As one of the fastest-growing private REITs on the west coast, we have the experience and expertise to guide you through every step of the process to secure your investment.

From sourcing value-add properties all the way to negotiating purchase terms, financing lease structuring, and asset management, we are committed to helping you succeed.

In our annual forecast booklet, you’ll find a wealth of market intelligence, economic information and factors that drive the market. With a lens on the commercial real estate market - in particular, industrial assets.

We hope this resource will serve as a valuable tool as you embark on your commercial real estate journey.

Disclaimer

Certain information in this presentation by Unite Capital Partners Corp. and any of its affiliated funds or entities (collectively the “Company,” “we,” “us,” “our“) may constitute “forward-looking statements”. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, and include statements regarding the Company’s competitive strengths, goals, expansion, growth, future success, operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies, and outlook. In some cases, forward-looking statements can be identified by terms such as “believes,” “expects,” “anticipates,” “plans,” “estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof, or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.

These statements are based on our expectations, estimates, forecasts and projections. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. The risks and uncertainties related to the Company and/or the investment management are discussed in applicable regulatory filings or in applicable offering documents. Although we believe that the anticipated future results, performance, or achievements expressed or implied by the forward-looking statements are based upon reasonable assumptions and expectations in light of information available at the time such statement is or was made, no reliance should be placed on forwardlooking statements because they involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements to differ materially. Except as required by law, we undertake no obligation to update or revise statements or information in this presentation, whether as a result of new information, future developments, or otherwise.

With respect to performance, note that past performance is not necessarily indicative of future results and there can be no assurance that comparable results will be achieved. Any target returns disclosed in this presentation are for illustrative and informational purposes only and no assurance, representation, or warranty is made by any person that the target return will be achieved.

This presentation is provided “as is” and “as available” without any representation, warranty or condition of any kind, including but not limited to any implied warranties or conditions of merchantable quality, fitness for a particular purpose, and noninfringement of third-party rights. Without limiting the generality of the foregoing, the Company does not warrant that this presentation, including any projections, predictions, forecasts or other forward-looking statements relating to the Company’s performance, will be accurate, complete or up-to-date, or that defects, inaccuracies or errors in this presentation will be identified or remedied. No reliance should be placed on any information or forward-looking statements in this presentation. Investors are urged to conduct their own due diligence and should discuss with their own registered financial advisor regarding investment needs and objectives, the risks associated with them, and any other matter of possible concern.

Global Economic Outlook

The year 2022 came to an end with shifting the global economic outlook in a way we haven’t seen before. We face unprecedented challenges as the world tries to move past the COVID phase. The path policymakers and business owners chose over the last year will undoubtedly define our economic turnout over 2023.

With the shadows of recessions dangling over the head of the global economy, understanding the fundamentals of market climate would require us to observe some crucial indicators.

The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic weigh heavily on the global economic outlook.

Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the weakest growth profile since 2001, except for the global financial crisis and the acute phase of the COVID-19 pandemic. Inflation above 40-year highs across much of the industrialized world, the war in Europe and tensions in South China sea has only compounded the lingering effects of a global pandemic.

GDP growth prediction for major economies

Source: OECD Economic Outlook (Editioon 2022/2)

As the world enters 2023, economic growth is predicted to slow down in almost all major economies. Tighter monetary policy and higher interest rates, persistently high energy prices, weak real household income growth and declining confidence are the main contributing factors to this prediction.

Inflation is predicted to decline in major economies in the year 2023. The higher price of energy triggered price increases across a broad basket of goods and services, impacting the higher inflation rates we are experiencing now.

Tighter monetary policies and decelerating growth will help to achieve a moderate inflation rate eventually.

Projected inflation in %

Source: OECD Economic Outlook (Editioon 2022/2)

Hedge Your Investment in 2023

Amid all of the doom and gloom outlooks for 2023, we believe there are certain investment vehicles that not only can hedge your wealth against most of the uncertainties ahead of us but also provide the setting for outperforming results in a post-recession period - for example, core commercial income assets.

Within Canada and globally, commercial assets have withheld several economic turbulences successfully. The following graph shows rental price index changes of commercial properties.

Source: Statistics Canada

Canada Commercial Rent Services Price Index

Real Estate vs Stocks

Real estate offers a stable and reliable investment choice, especially in a highly volatile economic climate. Historically real estate has proven to provide reliable profits for investors.

S&P/TXS composite Total Return vs. Selected Canadian Real Estate Markets

A review of history shows that real estate has consistently remained strong and stable during major crises compared to the stock market. During major economic crises, the stock return has soared below the real estate returns within Canada.

Why Commercial Income Real Estate?

Commercial Real Estate (CRE) demand has generally held up well in the face of interest rate increases and high inflation. While not totally unscathed, performance has been stable in most areas.

Even within lagging sectors like office space, pockets of solid performance abound. Supply across property types remains mostly in check outside of some submarkets.

Source:

Canadian Economic Outlook

Canadian economy faced a turbulent climate during the year 2022. By the end of 2022, we were certain the country would go through a mild and short-lived recession.

Depending largely on international talent, Canada has created a highly developed and diversified market-oriented economy. The country’s well-developed social welfare system and high living standards have attracted many opportunities for investors.

It is anticipated that Canada’s current immigration policies will significantly increase the country’s population growth in the future.

Source: United Nations Department of Economic and Social Affairs

Canada Population Growth and Projection

One significant challenge and opportunity in the Canadian market is catering to the needs of its growing population. This unique condition has made Canada an attractive investment market.

Where The Demand Is

In recent years, British Columbia has seen a significant influx of interprovincial and international migrants. Many are drawn to the province’s diverse and thriving economy, stunning natural beauty, and high quality of life. This influx has helped to drive economic growth and contribute to the cultural vibrancy of the province.

Interprovincial Migration Trends - 2018/2019

Source: Statistics Canada, Centre for Demography

Metro Vancouver and the lower Fraser Valley region have been the most attractive areas for migrating populations looking for new opportunities. Companies of various sizes have flocked to this area to fulfill the increasing demands of this population.

This chain effect has caused organic demand for industrial and warehouse spaces in the Metro Vancouver area.

Interest Rates & Policy

Prime Interest Rates are another indicator of the Canadian Economy. Bank of Canada’s recent attempts to reduce the inflation rate in the market has also cooled down the real estate market. We anticipate significant price adjustments in 2023, bringing optimism to investors, buyers, and sellers.

Canada Prime Interest Rate Fluctuation

Source: Bank of Canada, Satistics Canada

Canada and Real

Estate

Real estate is significant component of the Canadian economy and investment market.

There are several reasons why real estate investments may be a popular choice among Canadian investors. The potential for long-term stability, appreciation in value over time, and the ability to provide a tangible asset compared to stocks and bonds are some of those significant reasons.

Source:

Industrial Market

The industrial real estate market has traditionally been a strong performer out of other asset classes, as it is closely tied to the overall health of the economy. During times of economic growth, demand for industrial space increases as businesses expands and need additional space for production and distribution.

Although one might argue that a downturn in the economy could lead to a decrease in demand for industrial space, history proves that even through the past downturns, the adjustment to the demand in commercial space has been fairly mild with a quick rebound.

The need for warehousing across the globe has fueled the demand for industrial real estate, creating more stable and consistent income for investors over the long term.

Historical Industrial Cap Rates

Source: CBRE Q3 2022 Canadian Cap Rates & Investment Insights

Industrial Market - Metro Vancouver

The industrial market in Metro Vancouver is known for its strength and resilience. High market demand coupled with limited supply has created a plethora of investment opportunities.

Currently, the market vacancy rate is at an all-time low of 0.1%, making it the tightest market in Canada. Additionally, its asking net rental rate of $19.19 per square foot is notably higher than the next closest Canadian market, Toronto.

With a year-over-year rental growth rate of 22.5%,likely, that the average asking rent will soon exceed $20 per square foot . As of now, there are no recorded industrial spaces available over 100,000 square feet, and only two spaces over 25,000 square feet are currently vacant.

Quarterly

Source: JLL Market Reports

Vancouver continues to be the top market to watch for both its investment and development prospects, according to a survey conducted by PwC.

The Conference Board of Canada (CBoC) predicts healthy economic growth of 3.3 percent in 2023.

Overall Real Estate Prospects

Source: PwC, Emerging Trends in Real Estate, 2023

Fundamentals Driving Vancouver Industrial Market

Surrounded by the Pacific Ocean to the west and the Coast Mountains to the North, Vancouver creates a unique location on the Canadian map. Mild winters and breezy summers attract thousands of local and international immigrants each year.

In 2017, Vancouver’s GDP was $135.6 billion, majorly contributed by Finance, Insurance and Real Estate (FIRE).

GDP by Industry in 2017, Q4

Source: Conference Board of Canada

Scarcity of Land

Limited land supply in the region has positively impacted the growth of the industrial market in the region. The space supply is predicted to decrease drastically during the next decade. Yet, the demand for industrial space is increasing.

This imbalance of supply and demand has affected the value of properties to increase through the past years and is predicted to continue its upward trend in the future.

The Metro Vancouver industrial market has maintained a competitive edge throughout Canada. In 2022, the asking net rent reached close to the $20 mark, making it one of North America’s tightest and most competitive markets.

Amazon Effect & Last Mile Deliveries

For many years, the retail sector was able to plan and fulfill its consumers’ needs seasonally. This method of managing the supply chains and product shipping is being drastically altered by e-commerce. Distributors are keeping more ready-to-ship items in warehouses and distribution centres to reduce delivery times and prevent delays, increasing demand for industrial real estate.

Companies, such as Amazon, capitalize on these trends in the market. Their latest investment in the city, a 7.8-acre last-mile delivery warehouse at the Victoria International Airport, will contribute majorly towards the region’s development for the years to come.

115,000SF Amazon Last-Mile Delivery Facility near Victoria Airport

Who We Are

We are Unite Capital Partners. With our trusted partners, we provide real estate solutions for business owners, investors and communities we engage.

Our team members have been active real estate developers, investors, and managers of investment funds since 2010. With over 20 years of combined experience, our team brings tremendous value to each acquisition, rezoning, development and partnership we participate in.

We invest in real estate fundamentals. While fostering long-term growth through our risk-averse approach, we continuously seek meaningful opportunities to unlock significant upsides through reading market trends and positioning ourselves ahead of the crowd.

The shift from retail to industrial assets is getting stronger yearly due to new generations and lifestyle shifts. The industrial market has been rapidly changing over the recent years, and we are seeing a growth in demand for industrial space. Industrial properties have always been a safe investment, but now it is also starting to become more attractive with the volatile economic conditions.

Our Strategies

Core Holdings

We strategically invest in core commercial income producing assets with focus on stable yields while preserving and growing capital over long term. Our expertise in engineering diverse portfolio of income properties minimizes investment risks while enhancing the long-term return.

Value-Add Holdings Development

One of our strengths is to identify underperforming properties, restructure their leases and improve their income stream. Our hands-on property management approach, along with experience in optimizing operational costs are the main differentiators of our operation in maximizing return on investment.

With focus on solution-based real estate, we identify potential development opportunities in supply-constrained markets, acquire the land, design and develop it to what market needs.

Opportunistic

We strive to form strategic partnerships with medium to large-scale firms with the common goal of adding value through planned acquisition, financing, securing entitlement and construction.

Our Investment Journey

As owners, asset managers and real estate developers, we strategically pursue investments with preserving bottom lines in mind. Our team is well-versed in evaluating the potential of properties to generate future cash flow. With a keen eye for what makes a property attractive to investors and developers, our strategies have generated significant turnover for our investors.

Our Projects

14100 Entertainment Blvd, Richmond.

The approximately 167,000 square feet property is nestled in Riverport Business Park area of Richmond. The property is fully leased to strong local and national tenants.

39449, Queens Way, Squamish.

The approximately 15,000 square feet state-of-the-art warehouse development property is nestled in the heart of Squamish Industrial neighbbourhood. The project is currently in progress and expected to complete by fall 2023.

5900 Kingsway, Burnaby.

The approximately 27,600 square retail asset is located at corner of Kingsway and Buller Avenue. The property is strategically located in proximity to Metrotown, Royal Oak and Edmonds neighbourhoods, providing ample exposure opportunity. This asset was acquired in early 2021 and is now fully leased including a mix of well established local tenants.

691 Allandale Road, Victoria.

Sitting on 3.96 acres, this property is located in the growing Allandale community. The asset is recently improved with three building warehouses of approximately 81000 sf, leased to Seaspan shipyard Victoria.

2909 15 Avenue, Wainwright, Alberta.

Located in one of the robust networks of transportation in East Central Alberta, our service station development in Wainwright is uniquely positioned to service local and interprovincial traffic. The build-to-suit project is designed with our national tenants need in mind. The project is currently under construction with completion anticipated by mid 2023.

13090 Lilley Drive, Maple Ridge.

Located east of 25th Street and North of Dewdney (within the Kanaka Business Park), our Maple Ridge property offers unparalleled access to key distribution nodes as well as the Lougheed Highway connecting to the Golden Ears bridge. This 43,037 sf industrial property features four grade loading doors, a full HVAC office, radiant tube heating and 19′ high ceiling clearance.