Q1 2026 Fund Commentary

Commentary and opinions are provided by GWL Realty Advisors Inc..

Market commentary

Canadian real estate investment volumes remained muted in 2025 relative to historic levels, totalling $47.0 billion for the year – a 6.3% increase compared to 2024. Investment in the office and retail segments rose by 51.1% and 16.4%, respectively, during 2025 compared to the prior year.

Office market fundamentals continued to improve, driven by stronger leasing activity, stabilizing vacancy rates and heightened tenant demand across key Canadian markets, including the Greater Toronto Area (GTA). This momentum was reflected in the execution of several large-scale lease agreements tied to mandates from major Canadian banks in late 2025 and early 2026.

Industrial and retail segments demonstrated continued resiliency, benefiting from necessity-based demand, favourable tenant fundamentals and limited high-quality supply in key locations. Multifamily segment fundamentals remained under pressure, reflecting the impacts of population declines observed during 2025 and the condominium shadow market, which weighed modestly on rental growth and absorption despite long-term structural demand drivers remaining intact.

Performance

GTA leasing traction in mid-to-late 2025 resulted in large lease transactions that began being reflected in asset valuations in the first quarter of 2026, resulting in capital appreciation in the Toronto office segment. The retail sector also contributed to the Fund’s performance, underpinned by constrained supply and robust demand in the grocery-anchored segment.

1 Adelaide Street contributed to the Fund’s performance. New leasing brought the asset to 99% committed occupancy, and updated cash flows were reflected in the valuation model. The property also benefited from a lobby revitalization completed in 2024.

33 Yonge Street (Berczy Square) also contributed to performance. New leasing brought committed occupancy to 94%, with cash flows reflected in the valuation model. The asset was improved with a new tenant gym in 2025, a lobby revitalization and exterior renovations in 2026.

150 Slater Street, a downtown Ottawa office asset anchored by Export Development Canada detracted from the Fund’s performance as it traded under constrained market conditions, including limited financing availability and still-developing return-to-office mandates, which negatively influenced pricing and extended the closing timeline. Pricing was set 12–18 months prior to closing in a market that was still largely impaired. Limited existing supply of Class A downtown Ottawa office led to this sale being a relevant data point for valuations of assets in that market.

Despite the overall resiliency of the West GTA industrial market, the Milton sub-node also detracted from performance as it saw elevated vacancy and supply pressure, reflecting higher concentrations of competing product compared to the broader GTA industrial market.

200 Kent Street detracted from the Fund’s performance because of the comparable sale dynamics noted above in the downtown Ottawa office market.

8350 Lawson Road also detracted from performance because of reductions in market rents and other leasing assumption changes.

Portfolio activity

The sub-advisor increased the Fund’s exposure to Ontario residential through the transition of Livmore Westboro to income-producing status, strengthening the Fund’s residential allocation and income profile.

The sub-advisor sold a newly constructed Varennes industrial building in Quebec to a user group at a value above prior valuation, reducing the Fund’s industrial exposure in that market.

Outlook

In the sub-advisor’s view, the Fund’s outlook remains cautiously constructive, with an increasingly positive tone relative to prior quarters, supported by improved performance trends and strengthening fundamentals in the office segment. Continued emphasis on high-quality, income-producing assets, combined with disciplined capital recycling, may position the Fund’s portfolio to benefit from ongoing stabilization across core property types. While select challenges persist at the macro and sector level, the portfolio’s diversified exposure, already realized capital adjustments and active property-level strategies support resiliency and long-term value creation.