First Nations National Land Governance and Economic Development Conference

October 13, 2016

Property DevelopmentAnthem Properties Group Ltd.

Anthem Properties Group• Established 25 years ago in Vancouver.• A real estate development, investment and management

company that operates in Alberta, British Columbia and California.

• A dedicated team of approximately 200 people • Has been involved in more than 150 projects, amounting to a

cumulative value of $4 billion. • Current portfolio is comprised of four million square feet of

commercial space, more than 7,000 homes in various stages of design and development, and 60 acres of land held for future development

• Anthem’s sister company, United Communities, has operated in Alberta for more than 28 years.

Westbank, BC

• On “the other side” of Lake Okanagan from Kelowna• District (City) of West Kelowna (123.5 square kilometres =

30,518 acres; 35,000 residents;• Westbank First Nation (6,000 acres; 10,000 residents; 800

members; 1.35 million square feet of commercial space)• District of Peachland (5,200 residents; 3,900 acres)

Relative Land Holdings

Land Holdings

West KelownaWFNPeachland

WFN IRs and Community Land vs. Locatees

WFN Land Use

Why did Anthem develop on WFN Land?

• Adjacent to Highway 97 with great frontage• Major national retailers wanted to be there• Residential growth in immediate area• Locational challenges on the area’s freehold lands• Existence of the First Nations Land Management Act, WFN

Self-Government Agreement and Land Code

What were the challenges?

• Ignorance of how things work• Accepting the inviolability of the pre-paid 99 year lease• Over-abundance of retail development at the same time• 2008 “financial crisis”• Volatility of the $Cdn• Being in the shadow of Kelowna

What were the pleasant/unexpected surprises?

• Land registration system is simple• Development process is straightforward• Commercial lenders are comfortable• (most) Retail tenants are comfortable• “On reserve” conduct of business is almost the same

as it is on freehold land• Often almost seamless relationship between

properties on WFN land and West Kelowna

Who are our partners?

• Governors Landing: Crestpoint Real Estate Investments Ltd.

• Governors Market: N/A

• Snyatan: Westbank First Nation

What we developed?

• Governors Landing:– 140,000 sq. ft. retail and office space– Real Canadian Superstore– Liquor Depot– Original Joe’s– Value Village– Benjamin Moore– Many local independent retailers

Governors LandingAerial

What we developed (continued)

• Governors Market– 28,700 sq. ft. of retail space– Rexall Drugs– Starbucks– Medical, dental & fitness – Independent local retailers

Governors MarketAerial

Governors MarketRexall

Governors MarketStrip

What we developed (continued)

• Snyatan– Two phases, one of which has been completed– 94,150 sq. ft. of retail space (Phase 1 only)– Wholesale Sports– Winners– Bulk Barn– Peace Hills Trust– Bosley’s Pet store– Five Guys– National, regional and local retailers

How did Snyatan happen?

• WFN held title to one strip of land parallel to the highway• Anthem had 99 year lease with a locatee of a similarly shaped

strip between the highway and the WFN strip.• Two strips combined were much more easily and efficiently

developable together than separately.• WFN could participate in potential increase in values and long

term cash flow from a development.• Anthem could act as developer and enjoy the same benefits

as WFN as “owner”

How did Snyatan happen (continued)?

• Anthem and WFN entered into agreement in principle, subject to community approvals

• WFN council obtained community approvals• WFN and Anthem entered into:– Limited Partnership Agreement– Long term lease between WFN and the Limited

Partnership for the WFN strip and an assignment of the Anthem strip lease to the Limited Partnership

– Management agreements between the Limited Partnership and Anthem

How did Snyatan happen (continued)?

• WFN and Anthem have representatives on a board that meets regularly and makes all decisions on behalf of the Limited Partnership

• The board reviewed and approved all design, development, construction, leasing and financing arrangements for the project.

• The board reviews, monitors and adjusts as necessary the development and operational plans for the development.

• Anthem, as manager, prepares and makes recommendations, through a systematic process that includes a vision, 5 year strategic plan, annual business plan and detailed budget for the property

How did Snyatan happen (continued)?

• WFN contributed its land to the Limited Partnership.• Anthem contributed its land to the Limited Partnership• Anthem provides whatever additional capital is necessary to

complete or sustain the project.• The Limited Partnership can borrow as much debt as is

available subject to the condition that WFN is not required to contribute any additional capital or provide and sort of financial guarantee

How did Snyatan happen (continued)?

• The Limited Partnership obtained lease commitments sufficient to satisfy lenders who would put up construction financing for Phase 1

• Construction financing for Phase 1 was obtained from a Schedule 1 bank on market terms

• Appropriate development approvals were obtained from WFN and other regulatory authorities (BC Dept. of Transportation, MOE, DFO, etc.)

• Phase 1 was completed.

SnyatanRider and Horse by Smoker Marchand

SnyatanPad Building

Who are our tenants and why?

• National anchors and national retailers• Local entrepreneurs and franchisees• Location• Site layout• Catchment area• Belief in the future of the area• The bridge

SnyatanWinners Opening

SnyatanWholesale Sports

Looking down Highway 97

SnyatanPad Building

What were the unpleasant/unexpected surprises?

• 2008 “financial crisis” had a big impact on the area– Many tenant failures at Governors Landing, among others– Overbuilt retail sector that anticipated population growth

that did not materialize– Best Buy/Future Shop store closures– Kelowna-centric retail bias among some operators

Snyatan LED Lighting

What works and what needs work from our perspective?

Land registration system Development approval process Governance structure and operations CommunicationsX Locatee leases need work (almost there now)X Employment opportunities (works sporadically but needs to be explored more systematically from both sides)

Horse and Rider well seasoned

The 99 year Lease• Locatee on Designated Land eliminates the developer dealing

with the Federal Government• The Lease has to work for the developer, its lenders and its

sub-tenants (retailers, office tenants, industrial tenants, others) as well as the Locatee

• The Lease has to be assignable without commercially unreasonable complications or steps

• Defaults under the Lease need to be absolutely minimal• The Lease needs to provide for operational flexibility• What happens near and at the end?

Employment Opportunities

• Public policy objective is sound and reasonable• Business objectives of the developer/operator• Supply/demand realities, particularly in the development

stages of any project• Rigid vs. flexible solutions• More thought/dialogue

Conclusions

• Real estate really is about location and demand.• Development on WFN lands is not materially different from

development in freehold based municipalities.• Partnership with WFN is consistent with other similar

arrangements other than the limitation on capital contributions.

• Opportunities to differentiate FN projects can and should be a plus.

• Play to your strengths.• No unresolved issues to date.• A good relationship.

WFN Highway 97 Retail Hub