2009guides.ivanhoecambridge.com/documents/file/publications/...Moreover, in the fall of 2009, the...

2009 Activity Report and Social Responsibility Report

values

Cover page: Fairmont Le Château Frontenac, a prominent Québec City landmark.

efficiency + innovation + integrity + quality of service + social responsibility + teamwork + vision +

missionSITQ’s main focus is to meet the expectations of:

shareholders, by offering them an organization, resources and products of top quality designed for developing and managing real estate vehicles that are competitive, diversified and profitable

tenants and occupants of its properties, by offering them workplaces that are conducive to the growth of their business and choice living and lodging environments

employees, by providing them with a stimulating, healthy work environment and rewarding professional challenges

FinanCiaL highLights :oFFiCe*

Cash flow from operations 2009 2008

total assets (fair market value) 2009 2008

acquisitions/contributions 2009 2008

Disposals/distributions 2009 2008

Capital investment in the 2009 portfolio and development 2008

Current rate of return 2009 2008

overall yield 2009 2008

87-1

758247

286137

2,316313

0

0

-35.3 %

1.7 %0.0 %

-13.0 %

10,86811,099

2,5

00

5,0

00

7,5

00

10

,00

0

12

,50

0

15

,00

0

FinanCiaL highLights : hoteLs, apartments, retirement housing anD reaL estate investment FunDs*

Cash flow from operations 2009 2008

total assets (fair market value) 2009 2008

acquisitions 2009 2008

Disposals 2009 2008

Capital investment in the 2009 portfolio and development 2008

Current rate of return 2009 2008

overall yield 2009 2008

283262

1,197367

305213

24410

0

-15.0 %

4.2 %5.1 %

-13.2 %

15,32811,861

0 2,5

00

5,0

00

7,5

00

10

,00

0

12

,50

0

15

,00

0

* In

mill

ions

of d

olla

rs.

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PROFILe

Since 1984, SITQ has upheld a tradition of excellence that has made it a leader in the North American and Western European real estate industries. Founded by the Caisse de dépôt et placement du Québec with $9 million in invested capital, SITQ today holds a $17.8-billion portfolio. Assets include prestigious office buildings, business parks, hotels, apartments and retirement residences in major cities in Canada, the United States, France, the United Kingdom, Germany and India, as well as interests in several real estate funds that invest in various markets around the world.

SITQ is a diversified and fully integrated real estate company that offers a multi-region, multi-product, multi-structure and multi-strategy approach. Backed by its team of nearly 450 employees, the Company owes its success to its solid investment and asset management know-how, its proven insight into the real estate development sector and the rigour and quality of its property management.

SITQ’s Office Division draws strength and stability from its shareholders, namely, the Caisse de dépôt et placement du Québec (which owns a 91.7% interest), the Régime de rentes du Mouvement Desjardins, Alcan (Canada) Master Trust, the Association de bienfaisance et de retraite des policiers et policières de la Ville de Montréal, the Fonds commun de placement des régimes de retraite de l’Université Laval, the Régime de retraite de la Société de transport (1992) and Régime de retraite de la Société de transport de Montréal (Syndicat de transport de Montréal - CSN). The Hotels, Apartments and Retirement Housing Division and the Real Estate Investment Funds Division are wholly owned by the Caisse.

SITQ has its head office at the Centre CDP Capital in Montréal, a business office in Calgary and a Canada-wide presence through its interest in Bentall Capital Limited Partnership (Bentall). It also has offices in Québec City (Canada), Paris (France), Brussels (Belgium), Luxembourg, New Delhi (India), Shanghai (China) and Ebene (Mauritius).

TABLe OF cOnTenTs

Presidents’ Message 02 Financial Profile 06 Office 08 Hotels, Apartments and Retirement Housing 16 Real Estate Investment Funds 22 Corporate Management 24 Special Events in 2009 26 Board of Directors and Management Team 28

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In 2009, for the second year in a row, SITQ faced a very challenging global economic climate that had an impact on every market to one degree or another. The Company therefore continued to diligently pursue its strategy by minimizing investments in real estate development, maximizing operating revenue by leasing vacant space, retaining existing tenants and generating new liquidity via well-timed sales and lucrative financing deals.

Moreover, in the fall of 2009, the assets and teams of Cadim were integrated into SITQ’s operations, creating a vast real estate firm specializing in three areas: office buildings, hotels/apartments/retirement housing and real estate investment funds.

All in all, we took advantage of the lull in transaction activity caused by the economic downturn to make strategic plans, streamline our processes, optimize the tax position of our portfolios and proceed with the internal restructuring necessary to integrate our new teams and activities. As a result, 2009 was a year that allowed us to enhance our operational efficiency, something that will have positive repercussions on our organization for years to come.

An eveR-FRAgILe gLOBAL ecOnOmy, desPITe sIgns OF RecOveRyThe year began on a lacklustre note, with most of the major world economies officially in a recession. The crisis, which had continued to build since 2008, had severe impacts on all of the sectors of the economy, most markedly in developed countries. In an attempt to mitigate the effects, billions of dollars were injected by various national governments, through recovery programs aimed at a number of sectors. Central banks also reacted by cutting their interest rates.

As a result of these initiatives, signs of recovery began to emerge in the second quarter in many areas of the world: the manufacturing sector showed slight improvement, the job market stabilized and major market indexes rebounded – the latter usually being a gauge of economic health. However, the foundations of these improvements remain precarious. In the United States, for example, consumers are still feeling a great deal of pressure, plagued by job insecurity and high levels of personal debt. As government incentive programs wind down and interest rates threaten to rise, the economy might once again falter, hence the need to keep a close eye on the situation and continue to practice caution.

PResIdenTs’ messAge

Our teams were particularly active in 2009 and met tremendous challenges with great tenacity.

A diversified portfolio and ample liquidity: Solid foundations for future growth

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In the real estate sector, economic conditions and limited access to credit have had negative effects across the board. Investor interest has plummeted, capitalization rates have shot upward and property values have dropped – in some markets more than others.

Canada, for the most part, has fared well, thanks to a large extent to the discipline and stability of its financial and banking infrastructure. Although real estate markets in some areas have been harder hit than others – the severest blows having been dealt to Ontario and Alberta – the downturn has generally been less pronounced than in the United States and Europe.

Of all of the properties that make up the SITQ portfolio, hotels have been the most affected by the crisis. As soon as the economy began to slow down, business and leisure tourism followed suit, bringing hotel occupancy rates and operating revenue with them. In the office sector, prestigious properties remained resilient for a good part of the year, but we are starting to see a drop in rental and occupancy rates in various markets.

negATIve ReTuRns, BuT exceLLenT OPeRATIng ResuLTs

Despite the diversification and quality of the assets in the SITQ portfolio, the economic conditions in 2009 did leave their mark. The decline in market values, although unrealized, meant significant depreciation for all asset classes, resulting in an overall annual yield of -13.2% for the Office Division and -13.0% for the Hotels, Apartments and Retirement Housing Division and the Real Estate Investment Funds Division combined. However, the Company continued to offer very good medium- and long-term returns for its shareholders, with 12.0% (for the Office Division) and 6.9% (for the Hotels, Apartments and Retirement Housing Division and the Real Estate Investment Funds Division) over five years and 10.6% and 13.6%, respectively, over ten years.

In terms of operations, results were exceptional under the circumstances. Despite an increasingly challenging rental market, SITQ teams succeeded in leasing some 3.3 million square feet (0.3 million square metres) for the Office portfolio, thus avoiding a major hike in its overall vacancy rate, which stood at 6.6% as of December 31, 2009. Operating revenue also remained stable at $1.1 billion for the Office Division and fell to $0.8 billion for the Hotels, Apartments and Retirement Housing Division and the Real Estate Investment Funds Division.

A decIsIve sTRATegy FOR BOOsTIng LIquIdITy

In 2007, SITQ management implemented a strategy designed to face a recession. A number of assets were sold before property values fell, and most of the development projects under way were finalized, while a limited number were initiated – in properties that were already tenanted or located in markets where conditions will have rebounded by the time the work is complete. This approach, which has proven to be a well-advised one, continued to be the priority in 2009, with the objective being to maintain or increase the Company’s liquidity and focus on optimizing revenue generated by properties in the portfolio.

During the course of the year, two major sales were made, one in Vancouver and one in Paris. In addition, the Company took advantage of its strong financial position to refinance a few of its properties, issue shares to its main shareholder and execute key financing deals to spread its debt over a longer term. Consequently, it added new capital to its cash reserves.

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1. President and Chairman:

Paul Campbell and René Tremblay

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A Busy yeAR FROm An OPeRATIOnAL PeRsPecTIve

Although transaction volume was practically flat in 2009, the year was a very full one in terms of operations. In economic times such as the ones we have seen, it is important to focus on what can be controlled. As such, SITQ teams stepped up their efforts to limit operating expenses and maximize leasing. They also performed an in-depth analysis of all capital needs and carefully monitored the few development projects that did go ahead, as the budgets for these initiatives had been rationalized.

Furthermore, environmental and sustainability priorities, which reverberate throughout the Company’s property and asset management operations as well as its development activities, continued to show results. As proof, SITQ and its properties received a number of prominent awards and certifications throughout the year, both in Canada and in the United States.

Finally, during the last months of 2009, numerous efforts were deployed to integrate the new activities and teams into the Company. The transition represented an intense workload for many SITQ departments, who accomplished a great deal in this regard in a record amount of time.

WeLL POIsed TO cAPITALIze On RecOveRy

Thanks to the thorough application of its strategy to cope with the recession from 2007 onward, SITQ is now in an excellent position to face the future. Backed by solid financing and generous cash reserves, SITQ is poised to take advantage of the business opportunities that will come with a stronger economy.

Moreover, the events of recent months have contributed to reinforcing its strategic position. SITQ now ranks as of the 20 largest real estate companies on the planet, managing various types of assets located in some of the world’s biggest cities, with independently operating teams in Montréal, Paris and New Delhi, and numerous other business offices. It invests directly and indirectly in various products and maintains partnerships with leading industry players. More than ever, SITQ can rely on its active management strategy to make the most of the asynchronous development of different real estate products and markets.

Given that an increase in transaction volume is not on the horizon for 2010, SITQ will continue to focus its energies on the internal transition. It will also invest in the renovation of some of the hotel properties in its portfolio in order to optimize their appeal and thus increase their revenue when the economy picks up. Its teams will monitor all markets closely so they can be ready to make acquisitions and sales when the timing is right.

Furthermore, over the longer term, SITQ plans to sell some of its hotels and reduce its stake in certain real estate funds in order to reinvest the capital in the residential sector. In geographical terms, it plans to increase its presence in Canada and the United States and focus on a few emerging markets, chief among them India and Brazil. It will also maintain special relations with real estate platforms in which it holds an interest.

PResIdenTs’ messAge

Today, sITq is a multi-product, multi-region, multi-strategy and multi-structure company better positioned than ever for success.

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sTROng, cOmmITTed TeAms

All of SITQ’s teams were particularly active in 2009. They overcame several hurdles related to the recession and difficult market conditions, as well as the considerable challenge involved in the integration process. Undaunted by the gloom of the economic situation, SITQ employees forged ahead with unwavering professionalism and commitment and worked even harder to bring the Company’s strategy to fruition. Thanks to their efforts, operating results were outstanding and the integration process was a success. We would therefore like to extend our heartfelt thanks to the entire SITQ team for their truly remarkable work.

We would also like to express our gratitude to our shareholders for their continued trust and our Board of Directors for their vital support. In addition, we thank Jean Cartier, who retired from the Board this year, for his contributions as well as Fernand Perreault, outgoing Chairman and former President and Chief Executive Officer, for his many years of esteemed service and outstanding leadership. Our posthumous thanks go to Léopold Gagnon, who served as a director for many years and who passed away in August. Lastly, we are pleased to welcome Michel Toupin to the Board.

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Paul CampbellPRESIDENT AND CHIEF ExECUTIVE OFFICER

René TremblayCHAIRMAN OF THE BOARD OF DIRECTORS

FeRnAnd PeRReAuLT: neARLy 23 yeARs WITh sITq

At the end of 2009, Fernand Perreault left the Caisse de dépôt et placement du Québec to take a well-deserved retirement. A law graduate from the University of Ottawa, Mr. Perreault began his career with the Canada Mortgage and Housing Corporation (CMHC), where he held several positions. He was appointed to the head of the then up-and-coming SITQ in February 1987. He led the Company for eight years, often through uncharted waters, transforming it into a Québec industry leader and establishing its presence on the international scene – all with his trademark vision and modesty.

In March 1995, Mr. Perreault accepted the position of Executive Vice-President, Real Estate, with the Caisse. This did not signal his departure, however, as he was appointed Chairman of the Board of Directors of SITQ. Over the years, he has therefore been a strong advocate of the growth strategies of the firm he helped shape and for which he has always had the highest ambitions.

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FIscAL yeAR

As at December 31 2009 2008 2007 2006 2005

Real estate income 816 1,026 872 569 370 (in millions of dollars)

Cash flow from operations (before taxes and interest) 246 352 300 161 112

Cash flow from operations (after taxes and interest) -1 87 103 81 22

mARkeT vALue

As at December 31 2009 2008 2007 2006 2005

Total assets 11,099 10,868 10,239 6,741 4,794 (in millions of dollars)

Real estate assets 4,675 5,790 5,298 2,652 1,346

Real estate investment funds and shares 3,460 4,282 3,587 3,222 2,544

Third-party debts 5,938 5,727 3,725 2,017 1,383

Shareholders’ equity in the Company 4,630 3,931 5,307 3,929 2,874

Immobilizations

Acquisitions/contributions 313 2,316 4,196 1,948 2,189

Disposals/distributions 247 758 1,361 928 2,280

Capital investment in the portfolio and development 137 286 102 90 25

Yields

Current rate of return (cash flow from operations on shareholders’ equity at market value)**

0.0% 1.7% 2.5% 2.9% 1.1%

Overall yield (current rate of return plus capital appreciation yield)**

-13.0% -35.3% 14.3% 27.9% 70.2%

FIscAL yeARAs at December 31 2009 2008 2007 2006 2005

Real estate income 1,052 1,039 1,075 893 768 (in millions of dollars)


Cash flow from operations (after taxes and interest) 262 283 269 233 204

FInAncIAL PROFILe: OFFIce*

5.8

6.6

8.6

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HO

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122 buildings1 626 tenants

Rest ofCanada 17%

Québec13%

United States 35%

11.9

0 4 82 6 10

2009

2008

2007

2006

2005

Europe35%

6.6

* Figures based on SITQ’s historical transactions. ** After taxes and interest.

mARkeT vALue

As at December 31 2009 2008 2007 2006 2005



Real estate investment funds and shares 252 327 431 660 673



Immobilizations

Acquisitions 10 244 1,615 3,356 740

Disposals 367 1,197 878 1,281 200


Yields


5.1% 4.2% 5.0% 6.2% 7.2%


-13.2% -15.0% 25.5% 33.4% 27.3%

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Emerging countries11%

Québec 4%

Asia 8%

Rest ofCanada

16%

Europe 19%

United States 42%

FIscAL yeAR

As at December 31 2009 2008 2007 2006 2005

Real estate income 816 1,026 872 569 370 (in millions of dollars)


Cash flow from operations (after taxes and interest) -1 87 103 81 22

FInAncIAL PROFILe: hOTeLs, APARTmenTs, ReTIRemenT hOusIng And ReAL esTATe InvesTmenT Funds*

HO

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As at December 31 2009 2008 2007 2006 2005



Real estate investment funds and shares 3,460 4,282 3,587 3,222 2,544



Immobilizations

Acquisitions/contributions 313 2,316 4,196 1,948 2,189

Disposals/distributions 247 758 1,361 928 2,280


Yields


0.0% 1.7% 2.5% 2.9% 1.1%


-13.0% -35.3% 14.3% 27.9% 70.2%

* Figures based on Cadim’s historical transactions. ** After taxes and interest.

FIscAL yeARAs at December 31 2009 2008 2007 2006 2005

Real estate income 1,052 1,039 1,075 893 768 (in millions of dollars)


Cash flow from operations (after taxes and interest) 262 283 269 233 204

mARkeT vALue

As at December 31 2009 2008 2007 2006 2005



Real estate investment funds and shares 252 327 431 660 673



Immobilizations

Acquisitions 10 244 1,615 3,356 740

Disposals 367 1,197 878 1,281 200


Yields


5.1% 4.2% 5.0% 6.2% 7.2%


-13.2% -15.0% 25.5% 33.4% 27.3%

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RIgOROus mAnAgemenT

The Office Division maintains strategic partnerships with several leading firms around the world, including SL Green, Tishman Speyer, TIAA-CREF, VEF, USAA, the Caisse des Dépôts et Consignations, GIC of Singapore, GWL Realty Advisors, AIMCo and bcIMC.

dIscIPLIned execuTIOn OF The InvesTmenT And FInAncIng sTRATegy In 2009, the Office Division continued to limit its investments and increase its liquid assets through opportunistic sales and financing/refinancing transactions.

Despite the difficult market conditions, two major sales were made: Bentall 5 of the Bentall Centre complex in Vancouver, which SITQ had erected in two phases, and the Tour Diamant, in the La Défense district of Paris. Since the beginning of 2008, the rigorous application of this disposition strategy and the conclusion of several financing deals – including those for SITQ’s properties in Germany, Tour T1 and Immeuble B in 2008, and 151 Buckingham Palace

Road in 2009 – have generated over $3.2 billion in liquidity and extended the terms of some loans by five years on average. This was the case for 1515 Broadway and 498 7th Avenue in New York. By December 31, 2009, the average term for all debts in the Office portfolio was five years, compared with the average three-year term a year earlier.

Moreover, in 2009, the Company invested more than $140 million in development projects, representing a drop compared with 2008. Three projects are currently under way in Canada and the United States. Accordingly, construction began on Two Newport in the Newport Corporate Center in Seattle and should be ongoing until 2011. The building is pre-certified LEED-CS Silver and, in 2008, a lease was signed with T-Mobile for the entire leasable area of the new building.

OFFIce

The Office team manages a $9.4-billion portfolio, the assets of which are located in major cities in Canada, the United States, France, Germany and the United Kingdom. The 122 properties in this portfolio together account for 38.8 million square feet (3.6 million square metres).

cAPITALIzIng On exPeRTIse TO mInImIze The ImPAcTs OF The chALLengIng ecOnOmIc cLImATe

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1. London:

A financing deal was concluded for 151 Buckingham Palace in 2009.

2. Seattle:

The US Bank Center won its second Energy Star award in 2009.

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In Canada, two projects also progressed in Calgary. The redevelopment of the Calgary Eaton Centre and TD Square (renamed CORE TD Square / Holt Renfrew) is proceeding well and should wrap up in 2011. By year-end, 76% of the retail space had been leased, and the Holt Renfrew store – the biggest in the chain – had opened for business. Construction work on the first tower of Eighth Avenue Place also began as planned, as SITQ feels that the market will have bounced back by the time the building is available for occupancy. The new property, pre-certified LEED-CS Gold, will cover 1.1 million square feet (more than 100,000 square metres) over 48 floors and is poised to become a one of Calgary’s premier business addresses.

SITQ also owns two other Canadian lots ready for development: 45 Bay Street, in downtown Toronto, and 900 De Maisonneuve Ouest, in the heart of Montréal. The projects will go ahead once market conditions are more favourable.

InTense LeAsIng AcTIvITy

During the course of the year, the Office team devoted extensive effort to renewing leases and tenanting vacant space. As a result, 3.3 million square feet (0.3 million square metres) was leased on a portfolio-wide basis.* Among the highlights in this regard were:

the renewal of Sun Life’s lease at the Sun Life Building in •Montréal for a total of 280,000 square feet (26,000 square metres)

the renewal of the leases of Lavery (Place Ville Marie) and •Borden Ladner Gervais (1000 De La Gauchetière), covering an expanded space in both case, for a total of 179,000 square feet (16,600 square metres)

the signing of 34 new retail leases at the Calgary Eaton •Centre and TD Square in Calgary, in the midst of a recession, representing a total of 142,000 square feet (13,200 square metres)

OFFIce

1. Calgary:

CORE TD Square / Holt Renfrew, where a redevelopment project is currently under way, is overarched by an immense 700-foot-long glass canopy.

2. Calgary:

The TD Square building boasts an exceptional downtown location.

3. Washington, D.C.:

The Bond Building features a modern, state-of-the-art environment within a historically and architecturally significant structure.

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the early renewal of Mellon Bank’s lease at One Boston Place, •for a total of 370,000 square feet (34,400 square metres)

the renewal of the lease for the Department of Justice and the •singing of new leases in various buildings in Washington, D.C., for a total of 252,000 square feet (23,400 square metres)

the renewal of Vivendi’s lease at 42 avenue de Friedland, in •Paris’s 8th arrondissement, for a total of 114,000 square feet (10,600 square metres).

As a result of these activities and the quality of the tenants that occupy SITQ’s properties, the overall vacancy rate of the Office portfolio was 6.6% at year-end, up slightly from the figures posted at the close of 2008. Considering the challenges faced in rental markets around the world, however, this performance was nothing less than excellent.

sTABILIzATIOn AheAd In 2010

In 2010, the Office team will continue to concentrate on optimizing occupancy rates within the portfolio, closing financing and refinancing deals for certain properties and selling assets that no longer correspond to its investment criteria or that have achieved their full potential. Efforts will also be made to streamline operating costs in order to maximize the impact of net leases on returns.

All of the capital generated as a result of these initiatives will then be available to reinvest in the acquisition of new properties or in development initiatives when conditions are more amenable and recovery is solidly under way. In this respect, the group will stay on the lookout for promising opportunities in its markets and will have access to the necessary liquidity to act swiftly when the timing is right.

Our rigour and discipline have served us well during the crisis.

* Leasing figures are presented as is, i.e., not proportionate to SITQ’s ownership interest. Vacancy rates, however, have been adjusted proportionately

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envIROnmenTAL ceRTIFIcATIOns And AWARds

Protecting the environment and ensuring sustainable development are priorities for SITQ and as such are integrated into its management activities. In 2009, various SITQ properties and initiatives were presented with leading environmental certifications and awards, including:

the Centre CDP Capital in Montréal, which became the •second building in Québec to become LEED-EB Gold-certified

One Boston Place, the first building in the world to be LEED •EB:O&M Gold-certified

33 Arch Street in Boston, which received the prestigious •Energy Star Award

the SITQ Green Committee, which was honoured with the •Pinnacle Award for Innovation by BOMA Québec

all of the properties managed by SITQ in Québec as well as •several other buildings in the Canadian portfolio, which were BOMA BESt-certified.

OFFIce

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1. BOMA Québec’s Pinnacle Award for Innovation: Linda Plante, Property Manager, World Trade Centre Montréal; Paul Roland, Partner, Samson Bélair/Deloitte & Touche; and Sylvain Houde, Environment Coordinator, SITQ.

2. Boston:

33 Arch Street, in downtown Boston, won Energy Star awards in 2008 and 2009 and is one of the most energy-efficient buildings in the United States.

3. Boston:

One Boston Place is the first building in the world to be LEED EB:O&M Gold-certified.

4. Sacramento:

The Renaissance Tower (formerly 801 K Street), in downtown Sacramento, California, took home Energy Star awards in 2008 and 2009.

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OFFIce BuILdIngs Location Share %Leasable area

in sq. ft.

Leasable area in m2

CANADAWorld Trade Center Montréal Montréal 100 566,000 53,000 Sun Life Building Montréal 50 949,000 88,000 Place Ville Marie Montréal 50 2,577,000 239,000 1000 De La Gauchetière Ouest Montréal 100 917,000 85,000 Centre CDP Capital Montréal 100 570,000 53,000 455 Saint-Antoine Ouest (formerly Montreal Herald)

Montréal 100 82,000 8,000

415 Saint-Antoine (formerly MECO) Montréal 100 50,000 5,000 Édifice Mérici Québec City 100 128,000 12,000 505 Parc Technologique (formerly RD Tech Olympus)

Québec City 100 99,000 9,000

Place Hauteville Québec City 100 266,000 25,000 Édifice Price Québec City 100 57,000 5,000 Total Québec 6,261,000 582,000

55 University Toronto 100 264,000 25,000 York Mills Centre Toronto 100 538,000 50,000 Steeles Tech Campus (4) Toronto 100 634,000 59,000 Cirvek–150 Bloor Toronto 45 271,000 25,000 College Square I Mississauga 100 88,000 8,000 College Square II Mississauga 100 155,000 14,000 9273–9283 Airport Road Brampton 100 1,118,000 104,000 Total Ontario 3,068,000 285,000

Bentall Tower I Vancouver 60 257,000 24,000 Bentall Tower II Vancouver 60 175,000 16,000 Bentall Tower III Vancouver 60 475,000 44,000 Bentall Tower IV Vancouver 75 545,000 51,000 1075 West Georgia Vancouver 25 349,000 32,000 Calgary Eaton Centre (TD Canada Trust) Calgary 50 766,000 71,000 TD Square (Home Tower and Dome Tower) Calgary 50 1,091,000 101,000 Holt Renfrew Calgary 50 207,000 19,000 Versacold portfolio (20) Western Canada 30 2,764,000 257,000 Total Western Canada 6,629,000 615,000

TOTAL CANADA 15,958,000 1,482,000

UNITeD sTATesAtlanta Office Atlanta 85.6 366,000 34,000US Bank Center Seattle 50 944,000 88,000 Newport Corporate Center (5) Bellevue 100 895,000 83,000 The Summit (2) Bellevue 100 524,000 49,000 Cherry Creek Corporate Center Denver 100 238,000 22,000 Campus at Cherry Creek (3) Denver 100 356,000 33,000 Daltex (10) Dallas 100 813,000 76,000 Wachovia Center Tampa 49.99 387,000 36,000 388–390 Greenwich (2) New York 49.40 2,635,000 245,000 1515 Broadway New York 45.00 1,623,000 151,000 498 7th Avenue New York 49.90 858,000 80,000 1745 Broadway New York 43.13 637,000 59,000 One Boston Place Boston 49.75 788,000 73,000 33 Arch Street Boston 48.50 604,000 56,000 1919 Pennsylvania Avenue Washington, D.C. 14.36 261,000 24,000 1730 Pennsylvania Avenue Washington, D.C. 29.78 244,000 23,000 1717 Pennsylvania Avenue Washington, D.C. 29.78 198,000 18,000 1747 Pennsylvania Avenue Washington, D.C. 29.78 158,000 15,000 1825 E St.–International Square Washington, D.C. 29.78 373,000 34,000 1850 K St.–International Square Washington, D.C. 29.78 419,000 39,000 1875 E St.–International Square Washington, D.C. 29.78 283,000 26,000 2025 M Street Washington, D.C. 14.36 183,000 17,000 900 19th Street (Presidential Plaza) Washington, D.C. 29.78 105,000 10,000 1255 23rd Street (Floyd D. Akers Building) Washington, D.C. 29.78 313,000 29,000

dIveRsIFIed PORTFOLIO

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OFFIce BuILdIngs Location Share %Leasable area

in sq. ft.

Leasable area in m2

2550 M Street Washington, D.C. 29.78 192,000 18,000575 7th Street (Terrel Place) Washington, D.C. 29.78 398,000 37,0001201 F Street Washington, D.C. 29.78 225,000 21,000 700 14th Street (Commercial National Bank) Washington, D.C. 29.78 204,000 19,000 1400 New York Avenue (Bond Building) Washington, D.C. 29.78 161,000 15,000 Other buildings in the Tishman portfolio Virginia 29.78 2,123,000 197,000 The Renaissance Tower (formerly 801 K Street) Sacramento 49 339,000 31,000 Perimeter Center Richmond 49 169,000 16,000

TOTAL UNITeD sTATes 18,016,000 1,674,000

FrANCeTour Pacific Paris 42.01 542,000 50,000 Tour Prisma Paris 42.01 260,000 24,000 42 de Friedland Paris 42.01 108,000 10,000 33 Lafayette Paris 42.01 295,000 27,000 Tour T1 Paris 100 698,000 65,000 Immeuble B Paris 100 221,000 21,000

TOTAL FrANCe 2,124,000 197,000

GerMANYIBC Complex

Building A Frankfurt 99.73 90,000 8,000 Building B Frankfurt 99.73 386,000 36,000 Building C Frankfurt 100 383,000 35,000

ThyssenKrupp Trade Center Düsseldorf 100 367,000 34,000 Theresienhöhe (Theresie) Munich 100 632,000 59,000 Sossenheim (Europark) Frankfurt 100 377,000 35,000 Kistlerhofstrasse (Tech Data) Munich 100 277,000 26,000

TOTAL GerMANY 2,512,000 233,000

UNITeD kINGDOM

151 Buckingham Palace Road London 100 194,000 18,000

TOTAL UNITeD kINGDOM 194,000 18,000

TOTAL OFFICe POrTFOLIO Leasable area in sq. ft.

Leasable area in m2

Canada 15,958,000 1,482,000 United States 18,016,000 1,674,000Europe 4,830,000 448,000Total Office Portfolio 38,804,000 3,604,000

MAIN PrOPerTIesIN DeveLOPMeNT (INvesTMeNTs OF Over $100 MILLION)

Location Share (%)

Leasable area in sq. ft.

Leasable area in m2

Eighth Avenue Place, phase 1 Calgary 33.33 1,100,000 102,000

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sTRATegIc InsIghT

The 97 properties in this portfolio are co-owned with a number of solid operators, including Westmont Hospitality Group, Starwood Capital Group, Stonehenge Partners, Senior Resource Group and Williams Realty Group.

FOcus On InTegRATIOn

The year saw a decline in transaction volume within this group, owing to the economic climate. The hotel sector, which represents a significant proportion of this portfolio, was the first to feel the impacts of the economic crisis. The drop in tourism and corporate travel drove occupancy and room rates downward, and along with them revenues per available room. Several hotel renovation projects were therefore put on hold. A few investments were nevertheless made in SITQ’s hotel portfolio in 2009 to enhance the quality of the properties and optimize their value in preparation for economic recovery, among them:*

Westin Calgary – renovation of roughly 80% of the 525 •rooms ($9.9 million)

Westin Vancouver – ongoing renovation of rooms in the •Tower Building ($9.4 million in 2008 and 2009)

Westin Ottawa – renovation of 496 rooms ($12 million)•

Westin Harbour Castle in Toronto – fully revamped front •entrance ($1.9 million)

Hôtel Beauchamps de Paris – transformation into a boutique •hotel (6.2 million)

Crowne Plaza Paris-République – completion of the •conversion from a Holiday Inn to a Crowne Plaza.

Furthermore, the end of 2009 was devoted to the integration of the activities and members of this group into the SITQ framework. This involved an extensive strategic analysis to identify key issues and priorities in order to ensure a smooth transition and optimize the medium- and long-term performance of the portfolio.

hOTeLs, APARTmenTs And ReTIRemenT hOusIng

The Hotels, Apartments and Retirement Housing team oversees a $4.7-billion portfolio, with assets across Canada, the United States, Europe, the Caribbean and India.

mAkIng The mOsT OF AnALysIs TO OPTImIze LOng-TeRm ResuLTs

* These figures are presented as is, i.e., not proportionate to SITQ’s ownership interest.

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1. Paris:

Hôtel Jules is located on Rue La Fayette, in the 9th arrondissement, near several key attractions, including the Opera Garnier and popular department stores.

2. New York:

Ritz Plaza is a prestigious residential building located in the heart of Manhattan’s Times Square/Theatre District.

3. Ottawa:

The Fairmont Château Laurier, a landmark hotel in downtown Ottawa.

4. Atlanta:

The Hilton Atlanta, the third largest hotel in Georgia’s capital city, has undergone major renovations in recent years.

5. Vancouver:

The Fairmont Waterfront in Vancouver offers stunning views of Coal Harbour and the North Shore Mountains.

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sTROng PARTneRshIPs

Investments in the Hotel, Apartments and Retirement Housing portfolio are made in conjunction with solid partners, known for their operating expertise.

Accordingly, in the hotel sector, SITQ owns 55 properties jointly with the Westmont Hospitality Group, which operate under some 15 different banners, including Hilton, Red Roof Inn, Crowne Plaza, Holiday Inn and Fairmont. Five Westin hotels are also co-owned with Starwood Capital Group.

On the apartments end, a winning partnership was formed in 1995 with Stonehenge Partners, through which 16 properties are co-owned in Manhattan, for a total of 2,368 apartments.

SITQ also owns eight retirement homes in three U.S. states in conjunction with Senior Resource Group.

IndIA: A PROmIsIng mARkeT

The Indian market has been growing steadily for several years and was spared the worst effects of the recession, compared with other countries. Although its GDP growth recently fell, it remained above the 6% mark in 2008 and 2009. Needs are significant in the residential real estate sector, with an estimated shortage of around 20 million housing units. In the hotel industry, despite the temporary slump in business travel, demand still greatly exceeds supply. The long-term outlook for this niche is therefore very positive, and SITQ plans to pursue its business development efforts in this regard.

chALLenges FOR 2010

During the first half of 2010, the Hotels, Apartments and Retirement Housing team does not expect to see any substantial changes in the economic climate. It will therefore continue to monitor market developments in order to be able to seize opportunities as they unfold. Overall, the group plans to decrease its percentage of hotel assets and increase its holdings in the apartment sector. Moreover, investments will be made in the renovation and repositioning of several hotels in the portfolio to add value and optimize revenue when economic recovery takes hold.

hOTeLs, APARTmenTs And ReTIRemenT hOusIng

In 2009, we analyzed and revised our assets and strategies, so now we’re ready for the rebound!

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hOTeLs, APARTmenTs And ReTIRemenT hOusIng Location Share % Units

CANADAHotelsFairmont The Queen Elizabeth Montréal 94.2 1,039W Montréal Montréal 51 152Fairmont Le Château Frontenac Québec City 94.2 618Fairmont Château Laurier Ottawa 94.2 429Westin Ottawa Ottawa 48.5 496Delta Toronto East Toronto 94.2 368Fairmont Royal York Toronto 94.2 1,365Westin Harbour Castle Toronto 48.5 977Hilton Toronto Toronto 84.7 601Hilton Toronto Airport Hotel and Suites Toronto 84.7 413Westin Calgary Calgary 48.5 525Westin Edmonton Edmonton 48.5 416Fairmont Empress Victoria 94.2 477Fairmont Waterfront Vancouver 94.2 489Westin Bayshore Vancouver 48.5 511Fairmont Hotel Vancouver Vancouver 94.2 556Fairmont Winnipeg Winnipeg 94.2 340

ApartmentsJardins Mérici Québec City 100 4Golden Gate 1-5 North York 97.5 686

UNITeD sTATesHotelsInTown Suites (138 properties) USA 19.1 17,966Red Roof Inn (210 properties, 136 franchises) USA 18 36,680Hilton Atlanta Atlanta 85.6 1,242Fairmont Olympic Hotel Seattle 94.2 450Fairmont Washington, D.C. Washington, D.C. 94.2 415Crowne Plaza Columbus North Columbus 41.5 300Embassy Suites Detroit Southfield Detroit 41.5 239Doubletree Guest Suites Melbourne Beach Melbourne 41.5 207Hilton Melbourne Beach Oceanfront Melbourne 41.5 200Best Western High Point High Point 41.5 252Doubletree Berkeley Marina Berkeley 41.5 378Holiday Inn Raleigh Crabtree Raleigh 41.5 176Doubletree Portland Portland 41.5 477Doubletree Sacramento Sacremento 41.5 448Doubletree Omaha Downtown Omaha 41.5 414Doubletree Boise Riverside Boise 41.5 303Doubletree Colorado Springs World Arena Colorado Springs 41.5 299Doubletree San Antonio Airport San Antonio 41.5 290Doubletree Modesto Modesto 41.5 258Doubletree Guest Suites Houston by the Galleria Houston 28.8 380


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Apartments10 Downing Street New York 47.5 11420 Park Avenue New York 47.5 10041 Park Avenue New York 47.5 113167 East 82nd Street New York 47.5 388 Gramercy Park New York 47.5 54141 East 33rd Street New York 47.5 120360 East 65th Street New York 47.5 158Stonehenge Village New York 47.5 418347–351 East 58th Street New York 47.5 30322–334 East 63rd Street New York 47.5 89The Olivia New York 47.5 333The Ritz Plaza New York 60 479108 West 15th Street New York 50 556 West 107th Street New York 50 21401 West 56th Street New York 50.5 95210 West 89th Street New York 70 151Vinings Corner Atlanta 47.5 360Ashford Park Atlanta 47.5 408Lake Cameron Apartments Apex 47.5 328Matthews Reserve Matthews 47.5 212McNeil Ranch Apartments Austin 47.5 192St.Marin Coppell 47.5 600Mission Gate Plano 47.5 434City West Orlando 47.5 300Central Park Orlando 47.5 360Grand Reserve Orlando 100 195

Retirement housingMaravilla Santa Barbara 47.5 363La Vida Real San Diego 47.5 343Village at Sherman Oaks Los Angeles 47.5 239SpringRidge Campus Portland 47.5 262Village at Ocotillo Phoenix 47.5 120Silver Springs Tucson 47.5 107Amber Lights Tucson 47.5 120Hawthorn Court Phoenix 47.5 44

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eUrOPeHotelsHoliday Inn Express

Düsseldorf-North 84.7 150Munich Messe 84.7 120

Cologne Muelheim 84.7 107Cologne Troisdorf 84.7 110Frankfurt Airport 84.7 186Frankfurt Messe 84.7 175

Dortmund 84.7 107Berlin City Centre 84.7 256

Alicante 84.7 120Valencia-San Luis 84.7 125

Holiday InnFlorence 84.7 92

Vienna-South 84.7 174Munich City Centre 84.7 582

Amsterdam 84.7 256Crowne Plaza

Brussel Airport 84.7 315Hamburg 84.7 285

Heidelberg 84.7 232Amsterdam-Schiphol 84.7 243

Paris Republique 84.7 319Hôtel Jules Paris 84.7 101Hôtel Beauchamps Paris 84.7 89Holiday Inn Terminus Est Paris 84.7 200Mercure Terminus Nord Paris 84.7 236

OThersFairmont Royal Pavilion Barbados 84.7 75

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sTROng PARTneRshIPs

sOLId TIes WITh esTABLIshed PARTneRs

In 2009, the Real Estate Investment Funds group disbursed more than $300 million to honour SITQ’s commitments in several real estate investment funds. These funds were relatively selective during the year, authorizing new investments only when they were made at a significant discount, given the market situation. A number of investments will be disbursed in 2010, all within a rigorous liquidity management framework.

The Company’s investments in this sector during the year will be conducive to generating solid future returns, since they were made during the market downturn, which promises to bounce back over the medium term. Over the years, SITQ has forged strong relations with established partners in their respective fields, including:

Lone Star, a long-standing partner that successfully invests •in real estate holdings around the world, in particular through opportunistic debt transactions

The Praedium Group, whose U.S. investments consist •primarily of residential properties in the most populated states (New York, California and Florida) that are smaller than SITQ’s own residential holdings

Warburg Pincus, whose extensive presence in Asia is a •considerable source of expertise and connections for SITQ

Maestro Group, which owns, manages and operates the •largest network of retirement residences in Québec and the third largest in Canada, with properties in Québec, Ontario, Alberta and British Columbia.

In 2010 and 2011, several funds in the SITQ portfolio will distribute capital gains to their investors. The Company will be able to reinvest these amounts in funds that have made a name for themselves for their rigorous, disciplined approach during the crisis.

ReAL esTATe InvesTmenT Funds

The Real Estate Investment Funds team manages a $3.7-billion portfolio, which consists of investments in some 50 funds focusing on real estate equity and debt products in North America, Europe and Asia. This type of investment enables SITQ to diversify its portfolio, both by product and by region.

InvesTIng In TOP Funds FOR IncReAsed PORTFOLIO dIveRsIFIcATIOn

The best fund managers will come out of the crisis stronger than ever. And that’s who we want to work with!

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ReAL esTATe InvesTmenT Funds Location Share % Units

FUNDsLone Star Funds Global 13.4–23.8 6Blackstone Real Estate Partners Global 1.7–3.5 2Carlyle Realty Partners North America 12.3 1Maestro Canada 23.6–55.0 7Bentall Canada 7.4–33.3 5Kingsett Real Estate Growth Canada 21.4–22.7 3MCAP Commercial LP Canada 75 1Praedium United States 14.6–50 8Lazard et Frères United States 3.3 1Williams Opportunity Fund United States 29.1 1Cherokee Investment Partners United States 10 1LLFC Enhanced Fund I United States 43.7 1Colyzeo Investors Western Europe 4.4–5 2Chiswick Park Unit United Kingdom 19.6 1Gresham United Kingdom 20–39 2Asian Property Partners Asia 17.4 1Schroders Asian Property Asia 8.1 1Warburg Pincus China 8.3–18.4 2Canada China Property Investment China 42.5 1DaVinci Japan 7.2–40.4 2India Property Fund India 45 2


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An Immense InTegRATIOn And ReALIgnmenT OPeRATIOn

SITQ, which until recently specialized in the office building sector alone, added several complementary products to its portfolio and members to its team in fall 2009. A full-scale strategic analysis was therefore necessary to define the new corporate structure, which is now based on three major lines of business.

Obviously, such changes have had a tremendous administrative impact. In the space of a few short months, a transparency-oriented change management process was developed and rolled out and has already yielded decisive results.

Our Treasury, Accounting and Taxation teams also had a number of significant challenges to cope with to integrate the necessary information pertaining to a portfolio that has practically doubled in size.

In keeping with the restructuring process, SITQ decided to merge its Communication and Public Affairs department with the Marketing team. The creation of the new group will make it possible to strengthen the Company’s corporate marketing and brand awareness initiatives, which are now broader in scope than ever.

There are new challenges on the horizon for the various teams in 2010, including the integration of various computer systems. An analysis was conducted in 2009 in this respect, and the implementation of the action plan began in 2009. Business practices and processes will also be studied, with the goal of retaining the most efficient among them and putting them into practice throughout the organization. This approach will further strengthen corporate culture and employee engagement in addition to improving productivity. Finally, SITQ will continue to promote its competency development program in order to foster internal mobility and to empower the leaders of tomorrow.

RIsk mAnAgemenT FROnT And cenTRe

In addition to being present in many regions throughout the world, SITQ is now involved in several different types of real estate products. This increased complexity has been taken into account in its risk management operations, in order to retain and systematize best practices in this regard. Accordingly, the three key investment groups report to senior managers whose roles and responsibilities are clearly defined. Furthermore, the entire decision-making structure is undergoing a review and will be optimized in 2010.

A neW ReAL esTATe FInAncIng TeAm

A team has been set up specifically to oversee direct financing for the entire SITQ portfolio. It works in synergy with the Company’s other divisions and its Treasury Department, and its mandate is to manage the financing of the properties in the SITQ portfolio in conjunction with various financial institutions.

cORPORATe mAnAgemenT

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By aligning our business practices and processes, we will be building an organization that is stronger and even more effective.

1. A few members of the Hotels, Apartments and Retirement Housing team: Aditya Bhargava, Managing Director, India; Louise N. Pelletier, Senior Director, Legal Affairs; Ezio Sicurella, Senior Director, Investments; Yves-André Godon, Managing Director, Hotels, Apartments and Retirement Housing; and Sylvain Fortier, Vice President, Asset Management – United States.

2. A few members of the Real Estate Investment Funds and Financing team: Éric Santoire, Vice President, Real Estate Investment Funds; Marc Lemaire, Senior Vice President, Real Estate Investment Funds and Financing; and Denis Auclair, Senior Director, Real Estate Financing.

3. A few members of the Office team: Guy Brault, Vice President, Global Leasing; Rita-Rose Gagné, Vice President, Legal Affairs; Marc Doré, Managing Director, Office; Méka Brunel, Managing Director, Europe; Daniel Hudon, Vice President, Investments, North America; and Michel Cyr, Senior Vice President, Development.

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sPecIAL evenTs In 2009

1. Celebrating the book launch: René Tremblay, Executive Vice President, Real Estate, and President, Real Estate group, Caisse de dépôt et placement du Québec; Fernand Perreault, then Strategic Adviser to the President of the Caisse; Paul Campbell, President and Chief Executive Officer of SITQ; and Michael Sabia, President and Chief Executive Officer of the Caisse.

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2. Leather-bound copies of the book were presented to special guests at the launch.

sITq’s 25Th AnnIveRsARy: A mILesTOne TO Be RememBeRedOn October 22, 2009, SITQ held a book launch for Investir, construire et habiter le monde, les 25 ans de SITQ, histoire et perspectives, which features highlights from SITQ’s 25-year history. Attending the event were co-authors Sarah Marchand and Paul-André Linteau, as well as many of the people who have contributed to SITQ’s founding, development and ongoing success over the years.

Published by Les Éditions du Boréal, the book begins with an overview of the history of real estate and major periods of its development, from about the mid-19th century onward. It then recounts the turning points in SITQ’s own history: the lead-up to its creation, its rapid growth in Québec from 1984 to 1992, the

addition of foreign investment operations in 1993 and its focus on quality office buildings in major cities from 2000 on. The book concludes with a look at SITQ’s future and what lies ahead for the real estate company of tomorrow.

Investir, construire et habiter le monde, les 25 ans de SITQ, histoire et perspectives is a fitting tribute to SITQ’s 25th anniversary and offers those who have shaped the Company’s history the opportunity to discover or rediscover some of the key milestones of its first quarter-century of existence.

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3. The book signing with the two authors of Investir, construire et habiter le monde, les 25 ans de SITQ, histoire et perspectives during the launch enjoyed an impressive turnout.

4. Paul Campbell, President and Chief Executive Officer, took advantage of the opportunity to thank SITQ’s teams for playing a pivotal role in the Company’s success.

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executive Officers1. Paul CampbellPresident and Chief Executive Officer

4. Louiselle PaquinChief Financial Officer

2. Marc DoréManaging Director, Office

5. Pierre LefebvreSenior Vice President, Human Resources and Shared Services

3. Yves-André GodonManaging Director, Hotels, Apartments and Retirement Housing

6. Marc LemaireSenior Vice President, Real Estate Investment Funds and Financing

Paul Campbell President and Chief Executive OfficerSITQ

Frédérick CastonguayManager, Pension Investments Rio Tinto Alcan

Claude Caty Senior Manager, Investments Fiducie globale des Régimes de retraite de la Société de transport de Montréal

Claude Dalphond Corporate Director

Sylvain GareauExecutive Director – Régime de rentes du Mouvement DesjardinsFédération des caisses Desjardins

Francine Harel-Giasson Corporate Director

Karen LaflammeSenior Vice-President, Real EstateReal Estate GroupCaisse de dépôt et placement du Québec

Alain LapointeCorporate Director

Louis Monette President and General Managerand Chairman of the BoardAssociation de bienfaisance et de retraite des policiers et policières de la Ville de Montréal

Ghislain ParentExecutive Vice-President and Chief Financial Officer Caisse de dépôt et placement du Québec

Fernand PerreaultStrategic Adviser to the President* Caisse de dépôt et placement du Québec*Until December 1, 2009

Jean Pinard Corporate Director

Michel Sanschagrin Corporate Director

Michel ToupinManaging DirectorFonds communs de placement des régimes de retraite de l’Université Laval

René TremblayChairman of the Board, SITQ Executive Vice-President, Real Estate, and President of the Real Estate group Caisse de dépôt et placement du Québec

Board of Directors

Management Team

BOARd OF dIRecTORs And mAnAgemenT TeAm

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Francesco Alessi Vice President, Taxation, Insurance and Environment Aditya Bhargava Managing Director, India Michel Borduas Vice President, Treasury Guy Brault Vice President, Global Leasing

Méka Brunel Managing Director, Europe Pierre-François Chapleau Vice President, Development Michel Cyr Senior Vice President, Development Denis Epoh Senior Vice President, Investments

Jean-François Fournier Vice President, Asset Management, Hotels, Apartments and Retirement Housing Sylvain Fortier Vice President, Asset Management, United States Rita-Rose Gagné Vice President, Legal Affairs Nathalie Gravel Vice President, Financial Services

Daniel Hudon Vice President, Investments Jacqueline Kost Managing Director, Luxembourg Guy Lamarre Vice President, Quebec Jean-Paul Mouzin President and Managing Director SITQ Europe SA

Serge Pard Vice President, Taxation Denis Perreault Vice President, Asset Management Éric Santoire Vice President, Real Estate Investment Funds Tony Roy Vice President, Portfolio Management

Jean-Charles Viard Vice President, Asset Management, Europe

2009 Social Responsibility Report

OUR SOCIAL RESPONSIBILITY STATEMENT

At SITQ, social responsibility is one of our core values. We are firmly committed to doing more than simply meeting our requirements in such areas as working conditions, environmental protection and community involvement. As this report shows, we have implemented a wide range of initiatives and continue to come up with innovative ways to make a meaningful contribution to society and social development.

TO THE ECONOMY THROUgH:

major purchases and investments •

the numerous jobs we maintain or create •

initiatives aimed at fostering the success of our tenants •

returns that benefit our Québec shareholders •

transparent, efficient governance•

TO OUR PEOPLE THROUgH:

dynamic employee engagement programs •

ongoing talent development efforts •

employee benefit and wellness programs•

TO THE ENVIRONMENT THROUgH:

efficient, creative resources and tools •

reuse, recycling and reduction programs •

initatives to promote eco-friendly transportation•

TO THE COMMUNITY THROUgH:

dedication to children's causes and Centraide•

support for real estate heritage initiatives•

financial and in-kind donations •

commitment of our employees to raise funds and volunteer •for numerous causes

TO THE EXPANSION OF KNOWLEDgE THROUgH:

ongoing partnership with two university real estate programs•

support for university students and their activities •

various internship and summer employment opportunities •

involvement of our experts at conferences, conventions, •seminars and other events

AT SITQ, THIS RESPONSIBILITY MEANS gIVINg BACK

PROFILE

Since 1984, SITQ has upheld a tradition of excellence that has made it a leader in the North American and Western European real estate industries. Founded by the Caisse de dépôt et placement du Québec with $9 million in invested capital, SITQ today holds a $17.8-billion portfolio. Assets include prestigious office buildings, business parks, hotels, apartments and retirement residences in major cities in Canada, the United States, France, the United Kingdom, Germany and India, as well as interests in several real estate funds that invest in various markets around the world.

SITQ is a diversified and fully integrated real estate company that offers a multi-region, multi-product, multi-structure and multi-strategy approach. Backed by its team of nearly 450 employees, the Company owes its success to its solid investment and asset management know-how, its proven insight into the real estate development sector and the rigour and quality of its property management.

SITQ’s Office Division draws strength and stability from its shareholders, namely, the Caisse de dépôt et placement du Québec (which owns a 91.7% interest), the Régime de rentes du Mouvement Desjardins, Alcan (Canada) Master Trust, the Association de bienfaisance et de retraite des policiers et policières de la Ville de Montréal, the Fonds commun de placement des régimes de retraite de l’Université Laval, the Régime de retraite de la Société de transport (1992) and Régime de retraite de la Société de transport de Montréal (Syndicat de transport de Montréal - CSN). The Hotels, Apartments and Retirement Housing Division and the Real Estate Investment Funds Division are wholly owned by the Caisse.

SITQ has its head office at the Centre CDP Capital in Montréal, a business office in Calgary and a Canada-wide presence through its interest in Bentall Capital Limited Partnership (Bentall). It also has offices in Québec City (Canada), Paris (France), Brussels (Belgium), Luxembourg, New Delhi (India), Shanghai (China) and Ebene (Mauritius).

TABLE OF CONTENTS

Message from the President 02

GIVING BACK to our economy 04

GIVING BACK to our employees 08

GIVING BACK to the environment 12

GIVING BACK to the community 24

GIVING BACK knowledge 28

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As we all know, 2009 was marked notably by an economic crisis and a recession. Under these circumstances, and given the weaker financial performances posted by many companies, there is a risk of corporate social responsibility initiatives falling by the wayside. But not at SITQ. We continued our efforts in this regard throughout our 25th anniversary year, and we are very proud of all that we have accomplished.

However, in this fourth consecutive social responsibility report, we have analyzed our social responsibility achievements from the perspective of the challenges the year brought, both here in Québec and around the world.

Despite the underlying economic context, our business opportunities expanded in 2009 with the integration of Cadim’s teams and operations, formerly a division of the Caisse de dépôt et placement du Québec, in August 2009. Our social responsibility platform has therefore been enriched by the contributions of experienced professionals who came to us from Cadim and by the initiatives undertaken at the properties we acquired as a result.

It is important to note that all of these new real estate assets, as well as those that were already a part of the SITQ portfolio outside of Québec, are managed by a third party. This means our involvement in social responsibility issues in these properties is indirect and thus limited. That being said, the fact that our portfolio and partnership network are bigger than ever gives us a degree of influence over the introduction of best practices used in these properties.

As this report shows, the number of SITQ buildings that have been recognized under prominent environmental certification programs increased in 2009. The Centre CDP Capital, one of our flagship properties, was even certified LEED-EB Gold during the year. Furthermore, our environmental programs – especially those geared toward reducing, recycling and reusing, as well as our endeavours aimed at supporting our human resources, the communities where we operate and the development of knowledge, were either maintained or expanded.

This year also saw the introduction of a brand-new program we care deeply about: Giving Back Day. On August 28, participating employees were given a paid day off so they could lend a helping hand to various non-profit organizations that had been pre-selected by SITQ.

In the end, nearly 200 staff members took part in Giving Back Day in Montréal, Québec City, Calgary and even New Delhi, India. Our volunteers spent the day doing good deeds, from painting and cleaning to entertaining children and planting trees.

These contributions meant a great deal to the ten organizations on the receiving end of our efforts and to our volunteers themselves, who came away richer from the experience. Because Giving Back Day 2009 was such a success, we have decided to make it an annual affair – and use the theme as the inspiration for this year's social responsibility report. In the following pages, you will therefore be able to enjoy pictures of some of our employees in full "giving back" mode and read their comments about their volunteering experiences.

Message from the presidentGiving back to society: More vital than ever

MESSAgE FROM THE PRESIDENT

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These various commitments prove that, despite the difficult global situation, we at SITQ are as serious as ever about social responsibility. Our employees can declare, "Mission accomplished!" in this respect, and I thank them all most sincerely for their dedication throughout the year. My gratitude also goes out to our tenants and partners for their enthusiastic support. All of them, in one way or another, have contributed to the success of our social responsibility program. I encourage them all to keep up the good work so that, together, we can do our part to build a better world.

Paul Campbell PRESIDENT AND CHIEF ExECUTIVE OFFICER

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MORE JOBS, BIggER PURCHASES

In Québec, which is home to 10 of our office buildings and 323 of our tenants, SITQ is a major employer and buyer. We provide direct jobs to 410 people. In addition, our repeat purchases, outsourcing and service contracts – which extend to numerous sectors related to the management of our properties as well as a variety of professional services – represent several tens of millions of dollars and generate more than 400 indirect jobs related to the management of our office properties. Finally, SITQ's global influence grew in 2009, following the integration of the properties formerly held by Cadim into the SITQ portfolio.

In our other markets, our contributions to local economies are very diversified. We help to maintain indirect jobs through our dealings with experts in a wide range of fields (tax experts, lawyers, appraisers, etc.) and the personnel required to manage our office, hotel, apartment and retirement housing properties. Moreover, we provide direct employment to 34 staff members outside of Québec in our offices in Calgary, France, India and China.

RETURNS THAT BENEFIT OUR QUÉBEC SHAREHOLDERS OF OUR OFFICE DIVISION

SITQ's main shareholder is the Caisse de dépôt et placement du Québec, which holds a 91,7% interest in the company (100% interest in hotels, multi-residentials buildings, retirement housing and real estate investment funds). The remaining shares are owned by five other Québec pension fund managers. All Québecers who contribute to these funds benefit from our performance.

gIVINg BACK TO OUR ECONOMY

With the integration of Cadim, SITQ's real estate portfolio and economic impact are more far-reaching than ever. As of December 31, 2009, the SITQ portfolio consisted of 122 office properties and 97 hotels, apartments and retirement homes. Our assets are located throughout Canada, the United States, Europe and Asia.

Tabl

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SITQ

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EMPL

OyM

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AND

PU

RCH

ASIN

G A

CTIV

ITy*

Direct jobs:• 410

Total payroll: $32,7 million•

Total amount disbursed to suppliers: •$108,6 million

Indirect jobs (through outsourcing – •office properties): 416

*As at December 31, 2009

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There is no question that SITQ

contributes to the economy through

its purchasing and wages, but also

by committing human, material and

financial resources to the social

economy. I think this is an essential

investment in the world today. It's a

question of building human values.

DANIEL gAgNONDirector, Construction – Volunteer at Héritage Laurentien during Giving Back Day.

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gIVINg BACK TO OUR ECONOMY

CONTRIBUTINg TO THE PROSPERITY OF OUR TENANTS

At SITQ, the tenants of our properties are more than our clients: they are our partners. We are proud to offer them a working and living environment that fosters their well-being and prosperity. We strive to provide them with state-of-the-art facilities adapted to their realities in addition to delivering outstanding-quality service. To do this, we must anticipate their needs and offer them activities that are in line with their business or that make their daily routine more enjoyable.

Personalized, prompt and proactive: The three Ps of service quality

At SITQ, we are proud of the very high satisfaction ratings we receive from our tenants. The latest survey, conducted in 2008, places overall satisfaction at 98%. But we are not happy to sit on our laurels. We are constantly on the lookout for ways to take our service to the next level and ensure our continuous improvement. Accordingly, in each of the office properties we manage in Québec, we have introduced various initiatives over the years, with three goals: pinpoint the needs of our clients, respond rapidly to them and make any necessary adjustments to improve the situation. In 2009, this translated into the following:

Our Customer Service Centre. • Occupants in each of our buildings can contact an agent assigned specifically to their property, and their enquiry will be given priority treatment. The average number of enquiries received per day in 2009 was 257, and 94.5% of calls were answered in less than 10 seconds – an improvement over the performance results in 2008.

Our performance indicator table.• This tool allows us to ascertain where improvements can be made and take swift action to carry them out.

Our • CliKinfo newsletter. In 2008, we transformed CliKinfo into a more customized tool to better accommodate the realities of each property. As a result, CliKinfo now provides information on our property-specific activities, particularly as they pertain to work in progress or planned in future, as well as security and sustainable development issues.

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Entertainment, education and information

The occupants of SITQ's properties are invited to enjoy a distinctive array of complimentary activities intended to enrich and enlighten, at both the individual and the corporate level. The main focus of our awareness efforts is to help employers and employees make their best practices even better – especially those related to sustainability.

Concerts and exhibitions. The following are long-standing traditions in our Québec properties:

Les Concerts midi du Quartier international• , a series of midday musical performances in downtown Montréal during the summer

Un air d’été• , performances presented indoors or on outdoor patios of four of our Montréal-based properties

Holiday choral concerts•

In addition, three exhibitions were held during the year in our Montréal properties. Place Ville Marie hosted an intriguing look back at its own history (Quand Montréal s’éleva). The World Trade Centre Montréal was the backdrop for Les divas se dévoilent, showcasing the Vespa, Italy's legendary motor scooter. And Cent ans de hockey, featuring a series of paintings by Benoit Desfossés, toured four of our properties.

Awareness initiatives. For the third year in a row, our éco-événement program made the rounds in our Montréal and Québec City properties. Its goal is to encourage tenants and occupants to work toward a greener workplace. In 2009, SITQ collected more than 2,700 kilograms of electronic equipment, including monitors, keyboards, printers, fax machines, batteries and telephones.

This year, the information provided during the event was delivered using a new approach, namely four interactive stations on various environmental themes related to SITQ and, specifically, to each of the properties visited. Occupants were therefore able to learn more about the sustainability-oriented activities under way in their building. Representatives of SITQ's Green Committee were also on hand to answer questions.

EFFICIENT AND TRANSPARENT gOVERNANCE

SITQ is well known and respected for its commitment and adherence to the industry-leading governance rules, structures and practices, which extend beyond its regulatory obligations.

Our Board of Directors• is supported by a number of committees, including an Audit Committee, which provides our shareholders with the highest level of assurance.

Our Code of Ethics and Professional Conduct • applies to all our employees. Every year, they receive in-depth training on its principles and application, following which they must formally renew their pledge to abide by its provisions.

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gIVINg BACK TO OUR EMPLOYEES

CULTIVATINg EMPLOYEE ENgAgEMENT

Rewarding excellence

At SITQ, we place high priority on recognizing individual excellence. This starts with competitive compensation programs and opportunities to explore new challenges for employees who prove themselves. In 2009, 35 of our staff members were selected for promotion, lateral transfer or temporary assignments.

For the past ten years, we have been presenting the annual Quality Awards to highlight the achievements of employees who have pushed the envelope in terms of quality improvement and performance excellence. In 2009, however, the situation was not conducive to holding the awards, in particular because of the integration of Cadim employees, who would not have had enough time to submit their nominations. But the program will be back in 2010, with a new-and-improved format.

Embracing volunteer and professional commitments

Every year, we are delighted to see many of our employees devote their time and talent to a professional association or non-profit organization. We feel it is important to help them honour such commitments. Depending on the circumstances, our support can be in the form of a donation, sponsorship, flexible work hours, free access to meeting facilities and other initiatives to back their efforts.

PROVEN PROFESSIONAL DEVELOPMENT TOOLS

Ongoing investments in training

In 2009, we invested 1.5% of our payroll budget in training, through various internal programs and external courses taken by employees to support their current and future career ambitions. Individuals who choose to study at outside institutions are entitled to full reimbursement of their tuition and cost of the course materials. And SITQ covers 100% of the cost of all internal courses, which are open to all employees, regardless of the position they hold within the organization.

Revamped internal training modules

Last year, in response to the findings of a survey conducted in 2007, we reworked our training modules to expand their content and align them more closely with the professional needs of our managers and other employees. These programs zero in on several specific themes identified in the survey results – from communication between employees and supervisors to stress management – so that our employees can update their professional skills and knowledge. In 2009, five training modules were presented to a total of 137 participants. The next training session is slated for winter 2010.

Our most valuable asset:Our highly skilled team of driven professionals We are proud of the talent we have among our ranks and the level of dedication our people show in their work, day in and day out. In order to retain the professionals we have and to attract the best and brightest new candidates, we have implemented a number of measures designed to promote quality of life and a culture of success.

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I'm in an excellent position to enjoy

an interesting career, but I know that

many people haven't had the same

good fortune. A little support is often

all it takes to make a big difference

and help others get ahead!

JOSÉE SIgOUINAccountant, Billing – Volunteer at La Maison des enfants during Giving Back Day

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gIVINg BACK TO OUR EMPLOYEES

Personalized competency development plans

In addition to offering a number of highly relevant courses to our employees, we also have a human resources expert available on request to coach employees on their career plans with SITQ and work with them to establish a competency development plan.

A new knowledge capture project

According to the latest human resources studies, only 20% of the knowledge related to a company is explicit and easily accessible. A full 80% is tacit, i.e., carried around in the heads of employees. If this tacit knowledge is not captured by an organization before key staff members retire or change jobs, it is lost forever. It is therefore critical that this information be collected so it can be leveraged and, most importantly, used to guide the next generation of employees. That is why, in 2009, we launched a knowledge capture pilot project.

The ultimate goal of this project, which entails a series of interviews and modelling activities in order to document and disseminate hidden knowledge, is to ensure new employees are able to make this information their own. As a result, they will integrate more easily into the organization and make better decisions.

EMPHASIS ON EMPLOYEE WELLNESS

A full range of benefits

Employee benefits at SITQ are among the most competitive in the industry. The programs we offer are not only attractive to new talent, they are also instrumental in retaining and motivating the people who are already on our team.

Our work-life balance initiatives are particularly popular. They include a flextime option with core hours, shorter work weeks, summer hours (via the redistribution of hours worked per week), priority access to daycare facilities and personal leave for important matters. All of this helps foster a pleasant, dynamic working environment. We also provide a very competitive group insurance and pension plan.

Promoting mental health and well-being

We offer psychological assistance services to employees and their families. This kind of support can provide a sense of balance and peace of mind that allows employees to be more focused, positive and productive on the job.

Our personnel and members of their families can therefore obtain specialized counselling at any time of the day or night in order to find short-term solutions to personal problems. In addition, 2009 marked the second year we offered our staff members access to Visavie, a counselling service that helps people find housing for aging parents who are no longer able to maintain an independent lifestyle.

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Healthy body, healthy mind

Every year, SITQ provides its employees with several opportunities to stay fit and have fun.

Vital program. Launched in January 2009 for an initial two-year period, Vital is aimed at encouraging employees to take better care of their health. Staff were invited to complete a detailed questionnaire on their exercise habits, stress levels, sleep patterns, alcohol consumption and other lifestyle factors in order to create a personalized health profile. Based on the feedback received, participants were directed to articles, activities and services focusing on prevention, physical activity, nutrition, stress and mental health.

Access to exercise facilities. Three years into its operation, our fitness centre at head office is more popular than ever and continues to expand its line-up of services. Our employees can consult with fitness specialists and make use of exercise equipment and programs to get and stay in shape.

SITQ employees working at other buildings in Montréal can take advantage of special arrangements that have been made through our Social Club with nearby workout centres. And our employees in Québec City can enjoy access to the on-site exercise facilities at édifice Price.

H1N1 prevention efforts. As soon as this new pandemic was declared in spring 2009, we established a committee to keep a close eye on the situation and to take proactive steps to protect the health of our employees. The committee adopted several preventive measures and kept staff informed of the latest developments so they could act accordingly and take the necessary precautions to fight the virus.

Lunchtime health and wellness presentations. Once again this year, SITQ arranged a series of six talks on themes that our employees had expressed interest in exploring. Held at the Centre CDP Capital, the series brought in experts from a variety of backgrounds, including hockey commentator Jacques Demers, nutritionist Isabelle Huot and business speaker Lise Cardinal. The topics covered included team motivation, the secrets to maintaining a healthy body weight, networking, climate change and workplace satisfaction.

Smoking cessation support. We refund a portion of the treatment costs of SITQ employees who wish to quit smoking.

Celebrations and outings. We hold a number of employee- and family-oriented events throughout the year, including the children's Christmas party and our holiday reception. This year also saw a series of activities to commemorate our 25th anniversary, including a cake-cutting ceremony, a special riddle rally and barbecue and the launch of a book on the history of SITQ.

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gIVINg BACK TO THE ENVIRONMENT

ACTION-ORIENTED STRUCTURES AND TOOLS

Environment Committee

This multidisciplinary group of employees was formed 13 years ago with a mission to:

ensure our environmental policy is followed in all SITQ •properties

encourage all our business partners to adopt a similar policy, •if they have not already done so, and share it with us

make sure that SITQ and our property management partners •outside Québec comply with all applicable environmental legislation in the administration of our properties

The Environment Committee has also drafted a new sustainable development policy, which is currently being studied by senior management and which, once approved, will replace the current environmental policy.

Environment Coordinator

Appointed four years ago, the Environment Coordinator oversees the workings of the Green Committee. His responsibilities also include developing and implementing sustainable development projects and acting as internal consultant on environmental issues.

Green Committee

The Green Committee, which was also set up four years ago, continued throughout the year to pursue its mission to find new ways of enhancing our practices to improve our environmental performance on an ongoing basis. This includes the implementation of programs aimed at our employees and our tenants.

Among the achievements realized by the Green Committee in 2009 was the formation of sustainable development committees in each of the properties we manage in Québec, in order to keep our tenants better informed of our initiatives in this respect. These committees meet a real need by providing our occupants with a way to be actively involved in our various environmental programs.

Each sustainable development committee consists of one representative of every business tenant interested in taking part in our social responsibility initiatives, a member of our Green Committee who works in the building and our Environment Coordinator. This approach helps us promote interaction between occupants and SITQ so that we have better understanding of our tenants' priorities and can encourage them to play an active role in certain programs.

Finally, there are green committees in place at three of the hotels in our portfolio, namely The Westin Ottawa, The Westin Harbour Castle and The Fairmont Hotel Vancouver.

Toward a greener future: Environmentally responsible buildings and practices In the past few years, our employees, tenants and occupants have striven to constantly improve our business practices and the environmental performance of our properties. Accordingly, in 2009, we pursued our efforts in this respect and introduced some new initiatives that will enable us to continue to be a leader in sustainable development for the real estate industry.

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To protect the environment, we can

no longer focus exclusively on our

own backyard. Recycling at home

and at the office – that's great.

But there's more to it. From the banks

of the St. Lawrence River to or our

own neighbourhood streets, we all

have to do our part – individuals and

organizations alike.

SIMON POIRIERRisk Manager, Treasury – Volunteer at Héritage Laurentien during Giving Back Day.

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gIVINg BACK TO THE ENVIRONMENT

Guide to a Greener Office

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