2026 Letter to Our Stakeholders

Last year I wrote to you about a turbid world, and I told you Anthem was looking for a reset: a return to fundamentals in our businesses, our partnerships and our own organization. This year I want to report honestly on how that went. The short version is that the world got murkier, not clearer. Parts of our business were hit hard and other parts excelled. The company coming out the other side is leaner, more focused on liquidity and more determined than the one that went in.

The world around us: still turbid, now tighter

The United States

I had hoped 2026 would give the sediment a chance to settle. It did not.

The US administration doubled down on tariffs, and the cost of nearly everything we build or buy went up with them. It continued to disregard the institutions that have anchored North American stability for generations. That instability is expensive, because it makes every plan harder to make and every dollar harder to commit.

Then, at the end of February, the US went to war with Iran with no clear exit plan. Iran answered where it could do the most damage: the Strait of Hormuz, the narrow passage that carries about a fifth of the world’s oil. It was surely an inadvertent outcome for Washington, but a costly one for everyone. Eight months later, traffic through the Strait is still choked and, at the time of writing, oil is above US$110 a barrel. Households across North America are paying for it at the gas pump and the checkout.

Last year we said inflation was “sort of” under control. It isn’t anymore. The Federal Reserve began raising rates again in September, and the bond market moved ahead of it. Long-term Treasury yields climbed to levels we haven’t seen in decades, and, at the time of writing, US mortgage rates are back above 7%. Major forecasters such as Fannie Mae expect them to stay there through 2027.

Canada

In Canada, the same oil shock and the same tariffs hit an economy that was already flat. In October the Bank of Canada raised its rate for the first time since 2023 and warned that inflation will end the year well above target. High taxes and a slow-growing economy remain the backdrop.

We also continue to be held back by our own policy machinery: reforms that move slowly, and the leftovers of a decade of over-regulation that still weigh on every project. To be fair, the direction is improving. The federal government under Prime Minister Carney has moved from promises to action. In March, Ottawa finally delivered the GST relief for first-time buyers of new homes that we wrote about last year. It came a year late and is narrower than it should be, but it is real. And instead of alluding to big projects, the government is now announcing them, fast-tracking a list of nation-building projects in energy, resources and infrastructure. Housing has yet to see a major initiative of that kind. In British Columbia, voters decisively ended nine years of NDP government in October and elected a Conservative majority, the party’s first provincial win since 1928. We’re encouraged, and we’ll judge both governments by what they deliver.

For housing, the biggest issue is people. Between 2022 and 2024, Ottawa admitted far more temporary residents than the country could absorb. It then reversed course abruptly. Permits went unrenewed and temporary residents left in large numbers. Call it the great kickout. Canada’s population has all but stopped growing, and we expect it to stay that way through to late 2027. You can’t have a healthy housing market without household formation, and in Vancouver and Toronto, Canada’s two largest markets, conditions have gone from bad to worse.

Alberta is the exception, the lone wolf of hope. It is getting more than its share of whatever immigration and interprovincial migration there is. It led all provinces in population growth this year, and its market has stayed more or less normal.

What it means for capital

On both sides of the border, capital hasn’t disappeared, but it is cautious and deliberate. Investors are choosing assets one at a time, on their own merits, rather than committing to a strategy or a program. That favours partners who know each other, know the asset and can move with conviction when the right opportunity comes along.

That was the field we played on in 2026. Here is how Anthem played it.

Our businesses in 2026

Vertical development: closing well, selling hard, launching anyway

We kept completing projects with strong condo closing rates. Buyers who committed, closed.

The challenge was the units left over. Historically, the last unsold units in a building sold at higher prices, and delivered the profit needed to strengthen our returns. In today’s Vancouver, with virtually no condo market, those units have become a sandbag. Finished units take longer to sell, at lower prices. That means higher carrying costs, less revenue and thinner profits spread over a longer period, which is hard on internal rates of return and hard on liquidity.

Even so, we sold more than our fair share in each of our submarkets through creative marketing and aggressive selling.

We also kept building for the future. In 2026 we launched four purpose-built rental projects in Metro Vancouver and one in Calgary, along with a business park and a food-anchored shopping centre in Calgary. We are launching rentals into a soft rental market deliberately. These buildings will complete from late 2028 through 2030, when we expect the current wave of new supply to have been largely absorbed and the rental market to be stronger.

Today we have 814,000 SF of retail, industrial and workspace actively under construction, along with 4,130 homes: 3,182 units in concrete high-rise and 948 units in wood-frame low-rise, most of them rental. Those projects moved through 2026 more or less on time and on budget.

Land and housebuilding: continued success

Our land and housebuilding group in Canada had another strong year, selling more than 1,500 single-family lots and nearly 600 homes. The management teams in these business units continued to grow, get better and get things done with vigour.

In the US, our Sacramento land and housebuilding business had an okay year in a difficult market. Today’s high mortgage rates, compared with the ultra-low rates of the COVID years, have kept many American homeowners stuck where they are. They don’t want to give up the mortgage they signed in 2020 or 2021. Fewer people move, fewer homes come to market, and the whole chain slows down. The ghost of COVID lingers.

Income property: performing and eager to grow

Our income property group did well. We bought new industrial properties in Alberta and continued aggressive lease-ups across the portfolio. Our growing multifamily rental portfolio now stands at 2,500 units, plus 570 units of non-market rental. As in the condo market, the lack of household formation, combined with new purpose-built rentals coming out of the development pipeline, has edged vacancy up, and rental revenue growth came in below forecast. Even so, the group is eager to grow.

How we responded

We dealt with all of this the way a diversified company should.

Liquidity first. To carry our Vancouver condo inventory through a slow market, we issued corporate debt and sold some income properties. Those sales also helped us rationalize the portfolio. Over the year we renewed $1.4 billion of existing debt and originated $1.45 billion of new debt, $2.85 billion in all, and organized $94 million of new project equity.

Diversification working as designed. We relied on our income property portfolio and the strength of our land and housebuilding business and used their profits to support the parts of the company under pressure. This is exactly why Anthem has always been more than one business.

A leaner team. Given the reality of our markets, we end the year with nearly 100 fewer people than our 2025 high of about 850. Most of that came through natural attrition, by not replacing people who left or retired, with only modest layoffs rather than mass cuts. These decisions are never easy. I thank everyone affected, and everyone who stepped up to carry more.

Growing in quality, not just size. As we said last year, we try to grow in quality: improving our culture, our operating processes and our use of technology. We see a great opportunity in artificial intelligence, which will speed up our ability to create knowledge and manage process across every part of the business.

New depth in leadership. We are delighted to have added a new President, David Pearson, who has taken on the bulk of my direct reports and adds depth and continuity to our senior leadership team. David brings great experience from senior executive positions with Beedie Group and Deloitte. It is refreshing to have a new, objective perspective to counterbalance the 35 years of Eric so deeply embedded in the way we do things. It adds to my sense of hope and optimism.

Managing capital, not just real estate. As Anthem continues to evolve, it is clear that we must act like we are managing capital as much as we are managing real estate portfolios. That means keeping our partners informed and respecting their interests, especially while the Vancouver residential market is under strain.

Being better partners

Partnerships have always been central to how Anthem works, and in a market where capital moves one asset at a time, they matter more than ever. This year we kept working at being better partners: more responsive to our partners’ needs, and better at communication and collaboration.

We have also learned that we need to listen more and be more empathetic, and to understand what our partners are dealing with before we tell them what we think. The partners who have stood with us through these years deserve that, and so do the new partners we hope to earn.

AESG: ESG, the Anthem Way

Last year I said we would take on ESG our way. Now it has a name: AESG, or AnthemESG.

AESG respects the basic intent of ESG, which is being good people and good corporate citizens. We add a pinch of authenticity and leave out the virtue signalling. Anthem has always tried to make the world a better place, through the communities we build, the homes we provide and the way we treat people. In 2026 we completed and sold 250 units of inclusionary housing to BC Housing and the Connective Housing Society, all of which are leased to qualified tenants.

We’re fine with measuring what we do. We’re uncomfortable with being told what to do. It’s who we are.

Our strategy for the road ahead

Our strategy is straightforward:

• Manage our way through our portfolios, market by market, with our eyes wide open.
• Grow where we can, alongside fellow contrarian, discerning partners who see opportunity while others are more comfortable waiting.
• Sell selected assets for liquidity and to sharpen the portfolio.
• Keep improving our ability to execute.

Tying it all together

Right now we are working diligently to sell our finished inventory, lease our apartments and commercial spaces, rigorously manage our costs and deliver our construction projects on time. We are doubling down on communication with our lenders and partners, nurturing our people into better leaders and managers, and adding to our processes, tools and technologies, including AI, so we can do the best work we can. There are lots of challenges, and lots of opportunities to do better.

Who we are

Underneath all of this is character.

Anthem is a team of smart, experienced and passionate people. We look at real estate with X-ray vision. We see what a property is, what it could be and what it will take to make it the best it can be. We are a force of nature. We are steely in our determination to weather the storms, to grow when the sun comes out, and to help each member of our team become the best they can be.

Looking ahead to 2027

I’ll be candid: the reset has taken longer than we hoped. The great kickout ran on with no change in immigration policy, and the chaos we thought was behind us after 2025 escalated instead.

We have been through several hard years. 2027 will start off as more of the same, but it is already looking better. Chaos is giving way to thoughtfulness. Canada will continue to regain a sense of stability and reason. The US will course correct. It always does. Reason shall prevail.

I expect that by the end of 2027 Anthem will have largely completed its reset, the green shoots will be visible to those watching closely, and the world will be better than it is now.

I encourage all our stakeholders, inside and outside Anthem, to dig deep, recognize who you are and what you can do, and come out hard in 2027, determined to be the best you can be. Anthem will be right there with you, providing the platform to make it real.

Enough already. Let’s make it happen.