Keeping You Informed - Q4 2024

To our Investors and Partners,

We are pleased to share our Q4 2024 financial reports, highlighting our achievements and providing insights into evolving market conditions.

Market Overview
The Bank of Canada has reduced its policy interest rate by a total of 2% since summer 2024.  With a moderate growth outlook and shift toward economic stabilization, monetary policy is likely to adopt a more gradual approach.  This lower interest rate environment is increasingly favourable for real estate investment, alleviating refinancing pressures and improving liquidity in capital markets.  

Office Market Trends
The office market has shown increased confidence and improved demand.  According to Crown’s annual tenant survey conducted this quarter, 91% of decision-makers stated that their organizations are stable or in growth-mode.  Additionally, the survey confirms that return-to-office is no longer a topic of debate, with most tenants in our portfolio working from the office three days a week, typically Tuesday to Thursday, with 75-80% of employees on site during these days.   Crown’s leasing momentum this year reflects this positive market sentiment and shift in conditions.

The “flight to quality” and “bifurcation of the market” were prominent themes in 2024, indicating occupiers’ preference for high-quality, amenitized and environmentally sustainable buildings. Our experience also highlights a “flight to professionalism,” particularly benefitting our suburban leasing portfolio, as several institutional owners have exited the suburbs.  Consequently, tenants and their leasing brokers have limited options for buildings with operators who can deliver the level of service they demand.  Crown has effectively filled this gap on behalf of its fund investments.  With no new office supply and the potential removal of office inventory in many submarkets, Crown’s portfolio of repositioned and professionally managed assets is well-positioned to address the under-supply of quality spaces that are well-maintained, well-managed and investor grade.

Key Achievements Year-to-Date

• Completed just under 1 million sq. ft. of leasing on behalf of our Funds, meeting or exceeding in-place rents in 83% of these transactions  
• Renewed 88% of our expiring leases, including those with the following major tenants
  • Infrastructure Ontario - 202,000 sq. ft., Toronto
  • Kuehn & Nagel - 72,000 sq. ft., Mississauga
  • Ingram Micro - 72,000 sq. ft., Mississauga
  • PSSPC - 50,000 sq. ft., Ottawa
• Completed 352,000 sq. ft. of new leasing across our portfolio
• Completed over $150 million of dispositions/acquisitions
• Invested over $30 million in property upgrades, enhancing tenant satisfaction and building performance
• Worked to maximize value through zoning approvals and severing land from existing sites (secured approvals for over 2 million sq. ft. of residential density and the severance of two parcels of land and identified two additional parcels for severance opportunities)
• Developed or progressed decarbonization and energy management plans for 1.3 million sq. ft. of our portfolio to ensure they are future ready
• Achieved recognition as a 5-star manager with GRESB for the 6^th consecutive year
• Acknowledged as one of Canada’s Greenest Employers, in addition to achieving Canada’s top Small & Medium Employer for the second consecutive year.

Outlook
As we enter 2025, the anticipated stabilization of interest rates, coupled with improving economic indicators, support a positive outlook for both investment and operational performance.  This environment is more favorable for future asset dispositions on behalf of our funds preparing for near-term dispositions.  Conversely, our fund that is actively investing, CR V LP, is strategically positioned to capitalize on market opportunities, as historically, funds deploying capital during market rebounds often yield the strongest returns.  We remain committed to leveraging our market expertise and strategic position as an operating platform to deliver attractive returns for our investors.

We invite you to review our detailed reports and we thank you for your continued trust and partnership.  We look forward to our ongoing collaboration in the year ahead. 

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