Dream Office REIT
Annual Report 2024
Dream Office REIT
Title
212 King Street W
Toronto, ON
Dream Office REIT is an unincorporated,
open-ended real estate investment trust.
Dream Office REIT is a premier office landlord in
downtown Toronto with over 3.5 million square feet
owned and managed. We have carefully curated an
investment portfolio of high-quality assets in irreplaceable
locations in one of the finest office markets in the world.
Dream Office REIT
Letter to Unitholders
While 2024 proved to be another challenging year for office
landlords, Dream Office REIT has shown resilience in our
annual financial performance. Amid economic uncertainties
and new challenges resulting from macroeconomic
volatility, we successfully executed several key refinancing,
disposition, and redevelopment goals during the year
to reduce the risk in our business and improve liquidity.
Since before COVID, we decided to upgrade our downtown
Toronto portfolio, renovate the buildings, amenitize them,
and make them environmentally friendly so that our boutique
office buildings would be in high demand and very valuable.
After all these years our capital program is substantially
complete and the buildings are revitalized. We have not
only reduced our carbon footprint but also fully leased
out our retail space to leading restaurants across our
portfolio, including Milos, Daphne, Sushi Yugen, and Adrak.
In addition, our work at 366 Bay St. has attracted a global
institution to lease the entire building for a term of 15
years. This lease was recognized as the first Platinum
Team Transaction in Canada by the Institute for Market
Transformation and Better Buildings and was awarded
“Office Lease of the Year” at the 22nd Annual REX Awards.
We look forward to furthering our redevelopment
strategies in 2025 with the completion of 67 Richmond
in Toronto and advancing the redevelopment of 606 4th
Ave. in Calgary, where we intend to convert the existing
126,000 square foot office building into a brand new
166-unit, purpose-built rental residential apartment.
We are in the advanced stages of securing a grant from
the City of Calgary, ten-year government financing at
attractive rates and a partner for this project. This will
not only provide for an economically attractive project
to the REIT but also improve our value and income profile.
We recently announced the disposition of 438 University
for $105.6 million which secured an additional $20
million of incremental value through tenant relocations
to our other buildings and maintaining a property
management agreement with the purchaser to generate
additional income. We intend to use the proceeds
to repay the existing mortgage and reduce the
amount owing on our revolving credit facility, thereby
reducing leverage and improving liquidity for the REIT.
We have made substantial progress over the past 12
months in refinancing our mortgages and loans to
eliminate near-term refinancing risk for the REIT. Notably,
we closed a $225 million mortgage for Adelaide Place
and secured refinancings across multiple assets. We
have also obtained conditional credit approval for an
extension of our $375 million credit facility with our
existing syndicate of lenders. This addresses substantially
all of our $744 million debt maturities for 2025, and we
have only $165 million of mortgage maturities in 2026,
which we believe we will be able to refinance at or
above the expiring loan amount based on the quality
of the assets and relatively low loan to value on expiry.
Since the beginning of the year, conversations around the
office sector have become increasingly more constructive.
Our leasing team has seen an increase in tours, and we are
optimistic that the work we have put into our space will attract
tenants to our buildings. Looking ahead, the management
team will remain focused on navigating the complexities of
the economy and adopting flexible and creative strategies
to improve our occupancy and the value of the business.
We are very pleased with the improvements that we have
already made to our buildings and expect that they will
require lower capital in the future. We are making great
progress renewing our expiring mortgages and we are
pleased with our asset dispositions to date. While the
leasing market has been stubbornly soft, with more people
back to work we anticipate improved occupancy in 2025 or
2026 and as our occupancy and net operating increase,
we believe the company is positioned to do very well.
Thank you for your continued support and trust in Dream
Office REIT.
Sincerely,
“Michael J. Cooper”
Michael J. Cooper
Chief Executive Officer
February 20, 2025
366 Bay Street
Toronto, ON
Dream Office REIT
At a Glance(1)
Dream Office REIT owns well-located, high-quality central business district
office properties in major urban centres across Canada, with a focus on
downtown Toronto.
4.8 million
square feet of gross leasable area(2)
26
investment properties(2)
$2.6 billion
in total assets
438 University
Toronto, ON
81.1%
in-place and committed occupancy(3)
(1) All figures as at December 31, 2024.
(2) Excluding assets held for sale.
(3) Excluding assets held for sale and properties under development.
$59.47
NAV per unit
Dream Office REIT
At a Glance
30 Adelaide Street E
Toronto, ON
(1) This chart illustrates the fair value of investment properties by region, excluding properties held for sale and investments in joint ventures, as at December 31, 2024.
(2) Other includes Saskatchewan and U.S., based on investment property fair value.
(3) As at December 31, 2024. Credit ratings are obtained from Standard & Poor’s Rating Services Inc. and may reflect the parent’s or guarantor’s credit rating. N/R – not rated.
(4) This chart illustrates comparative properties NOI by region for the year ended December 31, 2024, excluding sold properties, properties held for sale, completed properties under development, properties under
development and investments in joint ventures that are equity accounted.
(5) This chart illustrates the gross leasable area of investment properties by region, excluding properties under development, properties held for sale and investments in joint ventures that are equity accounted as at
December 31, 2024.
Top Ten Tenants with a Weighted Average Lease Term of 6.1 Years
Tenant
Gross rental
revenue (%)
Owned area
(thousands of sf)
Owned
area (%)
Credit Rating(3)
Government of Canada
5.9
179
3.9
AAA/A-1+
Government of Ontario
2.0
73
1.6
AA-/A-1+
International Financial Data Services
3.9
137
3.0
N/R
International Language Academy of Canada
4.0
132
2.9
N/R
State Street Trust Company
3.1
82
1.8
AA-/A/A-1+
Co-operators Life Insurance
2.8
119
2.6
A-
U.S. Bank National Association
3.0
185
4.0
A+/A-1
Medcan Health Management Inc.
2.7
69
1.5
N/R
WeWork
2.0
65
1.4
N/R
ICICI Bank Canada
1.6
40
0.9
BBB-/A-3
Total
31.6
1,081
23.6
CALGARY
3 PROPERTIES
OTHER(2)
3 PROPERTIES
GREATER
TORONTO AREA
2 PROPERTIES
TORONTO
DOWNTOWN
18 PROPERTIES
82%
6%
3%
9%
76+24 76%
Toronto Downtown
24%
Other Markets
63+37 63%
Toronto Downtown
37%
Other Markets
Gross Leasable Area by Region(5)
Comparative Properties NOI by Region(4)
Geographic Diversification(1)
36 Toronto Street
Toronto, ON
Dream Office REIT
Table of Contents
Section V
Disclosure Controls and
Procedures
42
Section VI
Risks and Our Strategy to Manage
42
Section VII
Critical Accounting Judgments
49
Changes in Accounting Policies
50
Future Accounting Policies
51
Additional Information
51
Section VIII
Asset Listing
52
Consolidated Financial
Statements
Independent Auditor’s Report
53
Consolidated Balance Sheets
58
Consolidated Statements of
Comprehensive Loss
59
Consolidated Statements of
Changes in Equity
60
Consolidated Statements of
Cash Flows
61
Notes to the Consolidated
Financial Statements
62
Trustees and Management Team
IBC
Corporate Information
IBC
Section I
Key Performance Indicators
at a Glance
1
Basis of Presentation
2
Unit Consolidation
2
Forward-looking Disclaimer
3
Our Objectives
4
Operational Update
4
Financing and Liquidity Update
7
Section II
Our Properties
8
Our Operations
9
Our Results of Operations
17
Section III
Investment Properties
22
Investment in Dream Industrial REIT
24
Our Financing
25
Our Equity
28
Section IV
Non-GAAP Financial Measures
and Ratios
33
Supplementary Financial Measures
and Other Disclosures
38
Selected Annual Information
38
Quarterly Information
39
36 Toronto Street
Toronto, ON
Dream Office REIT 2024 Annual Report | 1
Management’s discussion and analysis
(All dollar amounts in our tables are presented in thousands of Canadian dollars, except for rental rates and per unit amounts, or unless otherwise stated)
SECTION I
KEY PERFORMANCE INDICATORS AT A GLANCE
Performance is measured by these and other key indicators:
As at
December 31,
September 30,
December 31,
2024
2024
2023
Total properties(1)
Number of active properties
24
26
26
Number of properties under development
2
1
2
Gross leasable area (“GLA”) (in millions of square feet)
4.8
5.1
5.1
Investment properties value
$
2,175,015
$
2,303,308
$
2,342,374
Total portfolio(2)
Occupancy rate – including committed (period-end)
81.1%
84.5%
84.4%
Occupancy rate – in-place (period-end)
77.5%
80.9%
82.0%
Average in-place and committed net rent per square foot (period-end)
$
27.20
$
26.37
$
26.35
Weighted average lease term (years)
5.5
5.2
5.2
Three months ended
Year ended
December 31,
December 31,
December 31,
December 31,
2024
2023
2024
2023
Operating results
Net loss
$
(19,101)
$
(42,424)
$
(104,934)
$
(77,196)
Funds from operations (“FFO”)(3)
14,104
14,588
58,058
64,518
Net rental income
27,286
25,760
106,133
102,335
Comparative properties net operating income (“NOI”)(3)(4)
24,742
24,756
100,488
98,449
Per unit amounts
Diluted FFO per unit (3)(5)(6)
$
0.72
$
0.75
$
2.98
$
2.88
Distribution rate per Unit(6)
0.25
0.50
1.08
2.00
As at
December 31,
December 31,
2024
2023
Financing
Weighted average face rate of interest on debt (period-end)(7)
4.75%
4.53%
Interest coverage ratio (times)(3)
1.8
2.0
Total debt
$
1,307,614
$
1,339,461
Total assets
$
2,584,927
$
2,668,330
Net total debt-to-normalized adjusted EBITDAFV ratio (years)(3)
12.1
11.5
Level of debt (net total debt-to-net total assets)(3)
52.9%
50.0%
Average term to maturity on debt (years)
3.4
3.3
Undrawn credit facilities, available liquidity and unencumbered assets
Undrawn credit facilities
$
119,700
$
173,955
Available liquidity(3)
$
137,968
$
187,228
Unencumbered assets(3)
$
2,276
$
17,117
Capital (period-end)
Total number of REIT A Units and subsidiary redeemable units (in millions)(6)(8)
19.0
18.9
Equity per consolidated financial statements
$
1,080,523
$
1,200,311
Net asset value (“NAV”) per unit(3)(6)
$
59.47
$
66.31
(1)
Total properties excludes properties held for sale and investments in joint ventures that are equity accounted at the end of each period.
(2)
Total portfolio excludes properties held for sale, properties under development and investments in joint ventures that are equity accounted at the end of
each period.
Dream Office REIT 2024 Annual Report | 2
(3)
FFO, comparative properties NOI and available liquidity are non-GAAP financial measures. Diluted FFO per unit, interest coverage ratio (times), net total
debt-to-normalized adjusted EBITDAFV ratio (years), level of debt (net total debt-to-net total assets) and NAV per unit are non-GAAP ratios. These non-
GAAP financial measures and non-GAAP ratios are not standardized financial measures under IFRS Accounting Standards and might not be comparable to
similar measures disclosed by other issuers. Unencumbered assets is a supplementary financial measure. Please refer to the sections “Non-GAAP Financial
Measures and Ratios” and “Supplementary Financial Measures and Other Disclosures” for details of these measures.
(4)
Current and comparative period excludes acquired properties, properties sold and held for sale, properties under development, completed properties
under development and joint ventures that are equity accounted as at December 31, 2024. Properties acquired and properties under development
completed subsequent to January 1, 2023, along with properties under development, are excluded from comparative properties NOI.
(5)
Diluted weighted average number of units is used in the calculation of diluted FFO per unit. Diluted weighted average number of units is defined in the
“Supplementary Financial Measures and Other Disclosures” section under the heading “Weighted average number of units”.
(6)
On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All per unit amounts disclosed reflect the
post-Unit Consolidation units for all periods presented.
(7)
Weighted average face rate of interest on debt is calculated as the weighted average contractual face rate of all interest-bearing debt balances, excluding
debt in joint ventures that are equity accounted.
(8)
Total number of REIT A Units and subsidiary redeemable units includes 2.6 million subsidiary redeemable units that are classified as a liability under IFRS
Accounting Standards.
BASIS OF PRESENTATION
Our discussion and analysis of the financial position and results of operations of Dream Office Real Estate Investment Trust
(“Dream Office REIT” or the “Trust”) should be read in conjunction with the audited consolidated financial statements of Dream
Office REIT and the accompanying notes for the year ended December 31, 2024. Such consolidated financial statements have
been prepared in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board (IFRS
Accounting Standards). The Canadian dollar is the functional and reporting currency for the purposes of preparing the
consolidated financial statements.
This management’s discussion and analysis (this “MD&A”) is dated February 20, 2025.
For simplicity, throughout this discussion, we may make reference to the following:
•
“REIT A Units”, meaning the REIT Units, Series A of the Trust;
•
“REIT B Units”, meaning the REIT Units, Series B of the Trust;
•
“REIT Units”, meaning the REIT A Units and REIT B Units, collectively;
•
“Units”, meaning the REIT Units and Special Trust Units, collectively; and
•
“subsidiary redeemable units”, meaning the LP Class B, Series 1 limited partnership units of Dream Office LP (a subsidiary of
the Trust).
When we use terms such as “we”, “us” and “our”, we are referring to Dream Office REIT and its subsidiaries.
Certain figures in this document are presented on a comparative portfolio basis. Comparative portfolio figures represent the
results of investment properties that the Trust has owned in all periods presented. Properties acquired and properties under
development completed subsequent to January 1, 2023, along with properties under development and assets held for sale, are
excluded from comparative portfolio figures. Except as specifically noted, the results of investments that are equity accounted
are excluded from disclosures in this document.
Market rents disclosed throughout this MD&A are management’s estimates as at December 31, 2024 and are subject to change
based on future market conditions.
In addition, certain disclosures incorporated by reference into this MD&A include information regarding our largest tenants that
has been obtained from available public information. We have not verified any such information independently.
UNIT CONSOLIDATION
Effective February 22, 2024, the Trust completed a unit consolidation of all the issued and outstanding Units on the basis of one
(1) post-consolidation Unit for every two (2) pre-consolidation Units (the “Unit Consolidation”). Upon completion of the Unit
Consolidation, the number of REIT A Units as of February 22, 2024 was consolidated from 32,626,435 to 16,313,022. There were
no REIT B Units outstanding.
The general partner of Dream Office LP also took steps to effect a consolidation of the LP Class A Units and LP Class B Units of
Dream Office LP on a proportionate basis effective as of February 22, 2024 (“the effective date”). As a result, the subsidiary
redeemable units were also consolidated on the basis of one (1) post-consolidation subsidiary redeemable unit for every two (2)
pre-consolidation subsidiary redeemable units on the effective date. Upon completion of the Unit Consolidation, the number of
subsidiary redeemable units, as of February 22, 2024, was consolidated from 5,233,823 to 2,616,911.
Dream Office REIT 2024 Annual Report | 3
All unit, per unit and unit-related amounts disclosed herein reflect the post-Unit Consolidation units for all periods presented,
unless otherwise noted.
FORWARD-LOOKING DISCLAIMER
Certain information herein contains or incorporates comments that constitute forward-looking information within the meaning
of applicable securities legislation, including but not limited to statements relating to the Trust’s objectives, strategies to achieve
those objectives, the Trust’s beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated
future events, future growth, stability of NOI at our properties, results of operations, performance, business prospects and
opportunities, acquisitions or divestitures, tenant base, rent collection, future maintenance and development plans and costs,
capital investments, financing, the availability of financing sources, income taxes, vacancy, renewal and leasing assumptions,
future leasing costs and lease incentives, litigation and the real estate industry in general; as well as specific statements
regarding our distributions and net income, including but not limited to statements regarding the Trust’s annualized distribution
rate, its annualized distribution amount, the retainment and investment of funds; and the effect on occupancy and liquidity; our
committed future occupancy, net rents and weighted average lease term; our ability to renew the VTB mortgage and loan facility
at terms agreeable to the Trust; our strategies to reduce risk and improve the value of individual assets within the portfolio; our
development, redevelopment, renovation and intensification plans and timelines, including in respect of type and number of
units; expectations regarding occupancy levels in our portfolio and in certain locations, occupancy commitments and related
timelines; our expectations regarding tenant requirement trends in respect of workspace preferences and upgrades;
expectations and plans for repositioning certain properties; our modernization, engineer-certified decarbonization and retrofit
plans for certain properties, including 67 Richmond Street West, 606-4th Building & Barclay Parkade, and 74 Victoria; our
expectation to secure government financing and grants to fund development projects; our plans to bid for a construction
management contract; the profitability and value of contemplated development projects; the expected disposition of 438
University Avenue and property management services to be provided for a period of three years, including expected increase in
net operating income, profit and value of our purpose-built rental development site, incremental benefits, use of proceeds and
the effect on the Trust’s leverage and liquidity, and disposition timeline; expected capital requirements, commitment amounts,
and cost to complete development projects; the potential to find joint venture partners for contemplated developments and the
effect of such joint ventures on construction and balance sheet risk; timing of project completion, including in respect of
modernization and renovation projects; the effect of building improvements and redevelopments on tenant experience, building
quality, performance, reduction of operating costs and higher rents; our ability to attract and retain tenants, including in respect
of ongoing prospective tenant negotiations and ongoing construction to attract future high-quality potential tenants at the
highest possible rents; our acquisition, disposition and leasing pipeline; leasing velocity, square footage expected to be leased,
property operating costs and rates on future leasing; expected progress on leasing, including with respect to 74 Victoria; our
ability to relocate tenants within our portfolio and the benefits thereof, including the effect of such relocations on occupancy,
net operating income and the operational and financial risk of our buildings; increasing our occupancy, enhancing the value of
our assets, and improving our financial metrics; our conviction that the quality and location of our assets will result in certain
benefits; our ability to increase building performance and achieve energy efficiency and greenhouse gas reduction goals,
including in respect of retrofits made in connection with the CIB Facility; our expectation that operating cash flows less cash
interest paid may be less than total distributions; the expectation that net income will vary from total distributions; the
expectation that there could be timing differences on distributions as a result of intensification and redevelopment projects; the
future composition of our portfolio; our ability and strategy to mitigate and manage certain risks; expected tax obligations; our
capital commitments in respect of certain investment properties; future cash flows, debt levels, liquidity and leverage; including
any extensions on mortgages and discussions to renew or refinance mortgages or credit facilities and anticipated timing thereof;
our ability to refinance our debt; the use of proceeds from disposition and the effects of those uses on leverage and liquidity,
including the use of proceeds from the disposition of 438 University Avenue; our estimates of market rents; our ability to meet
obligations with current cash and cash equivalents on hand, cash flows generated from operations, revolving credit facilities and
conventional mortgage refinancing; our ability to address commitments and contingencies; our ability to make normal course
issuer bid under the renewed bid; our internal control over financial reporting; our future capital requirements and ability to
meet those requirements; anticipated changes in accounting policies; and our overall financial performance, profitability and
liquidity for future periods and years. Forward-looking statements generally can be identified by words such as “outlook”,
“objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “could”, “likely”, “plan”,
“project”, “budget”, “continue” or similar expressions suggesting future outcomes or events.
Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of
which are beyond Dream Office REIT’s control, which could cause actual results to differ materially from those disclosed in or
implied by such forward-looking information. These assumptions include, but are not limited to: that no unforeseen changes in
the legislative and operating framework for our business will occur, including unforeseen changes to tax laws; that we will meet
our future objectives and priorities; that we will have access to adequate capital to fund our future projects and plans; that our
future projects and plans will proceed as anticipated; that duties, tariffs and other trade restrictions, if any, will not materially
impact the ability of our tenants to meet their obligations under their leases with us; that inflation and interest rates will not
materially increase beyond current market expectations; that we will have the ability to refinance our debts as they mature; and
that future market and economic conditions will develop as expected. Risks and uncertainties include, but are not limited to,
Dream Office REIT 2024 Annual Report | 4
general and local economic and business conditions, including in respect of real estate; our ability to sell investment properties
at a price that reflects fair value; our ability to source and complete accretive acquisitions; the ability to effectively integrate
acquisitions; risks related to a potential economic slowdown in certain of the jurisdictions in which we operate and the effect
inflation and any such economic slowdown may have on market conditions and lease rates; inflation; employment levels;
political conditions; risks associated with unexpected or ongoing geopolitical events, including disputes between nations, war,
terrorism or other acts of violence; risks related to the imposition of duties, tariffs and other trade restrictions and their impacts;
consumer confidence; leasing risks, including those associated with the ability to lease vacant space and rental rates on future
leases; the financial condition of tenants and borrowers; development risks, including construction costs, project timings and the
availability of labour; NOI from development properties on completion; the uncertainties around the availability, timing and
amount of future equity and debt financings; mortgage and interest rates and regulations; cyber security risks; tax risks,
including our continued compliance with the real estate investment trust (“REIT”) exception under the specified investment
flow-through trust (“SIFT”) legislation; changes in laws or regulations; regulatory risks; insurance risks; public health crises,
pandemics and epidemics; the effect of government restrictions on leasing and building traffic; environmental risks; reliance on
Dream Asset Management Corporation for management services; risks associated with jointly controlled entities and co-
ownerships; foreign exchange rates; and other risks and factors described from time to time in the documents filed by the Trust
with securities regulators.
Although the forward-looking statements contained in this MD&A are based on what we believe are reasonable assumptions,
there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking
information is disclosed in this MD&A as part of the sections “Our Objectives”, “Business Update” and “Comparative Properties
NOI”.
All forward-looking information is as of February 20, 2025. Dream Office REIT does not undertake to update any such forward-
looking information whether as a result of new information, future events or otherwise, except as required by applicable law.
Additional information about these assumptions, risks and uncertainties is contained in our filings with securities regulators,
including our latest Annual Report and Annual Information Form available on the System for Electronic Document Analysis and
Retrieval+ (“SEDAR+”) at www.sedarplus.com. Certain filings are also available on our website at www.dreamofficereit.ca.
OUR OBJECTIVES
We have been and remain committed to:
•
Managing our business and assets to provide both yield and growth over the longer term;
•
Driving superior risk-adjusted returns and growth in our net asset value by investing in our assets through upgrades,
intensification and redevelopment, and selectively disposing of assets with lower long-term return potential;
•
Building and maintaining a strong, flexible and resilient balance sheet; and
•
Maintaining a REIT status that satisfies the REIT exception under the SIFT legislation.
OPERATIONAL UPDATE
In the midst of significant macro-economic uncertainties and continuing challenges in the Canadian office real estate sector, the
Trust remains focused on delivering stable operational and financial performance in 2025 and beyond.
We believe our portfolio is well located, difficult to replace and uniquely positioned to outperform over the long term. Through
our plan to invest capital in our best buildings over the past six years, the renovations across our best assets are substantially
complete and we have created a uniquely competitive portfolio that is well positioned to attract high-quality tenants
Relative to Q3 2024, our in-place occupancy decreased from 80.9% to 77.5% and our in-place and committed occupancy rate
decreased from 84.5% to 81.1%. The quarter-over-quarter decrease of 3.4% of total portfolio in-place occupancy was
attributable to the reclassification of 438 University Avenue to properties held for sale (-1.2%), 23,000 square feet of negative
absorption in Other markets (-0.5%) partially offset by the reclassification of 606-4th Building & Barclay Parkade to properties
under development (+0.5%), and 142,000 square feet of net negative absorption at 74 Victoria Street for a previously known and
announced lease expiry during Q4 2024 (-3.1%). Despite this lease expiry, occupancy in Toronto downtown only decreased by
98,000 square feet as the Trust had positive absorption totalling 43,000 square feet over the remainder of the region quarter-
over-quarter (+0.9%). Subsequent to the quarter, the Trust signed a conditional lease for approximately 54,000 square feet at
74 Victoria Street for a term of 5 years at approximately $28.50 net rent per square foot to increase the committed occupancy at
74 Victoria from 46% to 67%. The Trust is also in negotiations with prospective tenants for up to an additional 50,000 square
feet. As part of the leasing strategy at 74 Victoria, the Trust is undergoing a renovation program to modernize the lobby and is
constructing built-out space on certain floors to help attract future potential tenants.
Dream Office REIT 2024 Annual Report | 5
Year-over-year, total portfolio in-place occupancy decreased from 82.0% in Q4 2023 to 77.5% in Q4 2024 and our in-place and
committed occupancy declined from 84.4% in Q4 2023 to 81.1% in Q4 2024. In-place occupancy declined year-over-year due to
negative absorption in both regions due to the reasons mentioned above. Excluding the effect of the lease expiry at 74 Victoria,
Toronto downtown experienced overall net positive absorption of 0.9% in the remainder of its properties in the region
compared to the prior year.
The Trust has 164,000 square feet of vacancy committed for future occupancy. In Toronto downtown, 95,000 square feet, or
3.3% of the region’s total gross leasable area, is scheduled to commence in 2025 at net rents 1.6% above prior net rents on the
same space with a weighted average lease term of 8.2 years and 9,000 square feet in 2026 at 15.4% higher net rents than prior
net rents on the same space with a weighted average lease term of 15.0 years.
In the Other markets region, 60,000 square feet, or 3.5% of the region’s total gross leasable area, is scheduled to commence in
2025 at 21.1% below prior net rents on the same space with a weighted average lease term of 12.6 years.
During Q4 2024, the Trust executed leases totalling approximately 122,000 square feet across its portfolio. In Toronto downtown,
the Trust executed 43,000 square feet of leases at a weighted average initial net rent of $33.45 per square foot, or 5.5% higher
compared to the weighted average prior net rent per square foot on the same space, with a weighted average lease term of 5.0
years. In the Other markets region, comprising the Trust’s properties located in Calgary, Saskatoon, Regina, Mississauga,
Scarborough and the United States (“U.S.”), the Trust executed leases totalling 79,000 square feet at a weighted average initial
net rent of $16.99 per square foot, or 16.4% lower than the weighted average prior net rent per square foot on the same space,
with a weighted average lease term of 7.8 years. Subsequent to December 31, 2024, the Trust executed a further 76,000 square
feet of leases in Toronto downtown at a weighted average initial net rent of $29.42 per square foot.
Since the beginning of the year to today’s date, the Trust has executed leases totalling approximately 710,000 square feet across
its portfolio. In Toronto downtown, the Trust has executed 411,000 square feet of leases at a weighted average initial net rent of
$33.84 per square foot, or 8.1% higher than the weighted average prior net rent per square foot on the same space, with a
weighted average lease term of 5.8 years. In the Other markets region, the Trust has executed leases totalling 299,000 square
feet at a weighted average initial net rent per square foot of $16.49, or 3.0% lower than the weighted average prior net rents on
the same space, with a weighted average lease term of 7.3 years.
2025 REVOLVING CREDIT FACILITY AND MORTGAGE REFINANCING UPDATE
Subsequent to the quarter, the Trust obtained conditional credit approval for an extension of its $375 million credit facility from
its existing syndicate of lenders. Prior to the Trust's refinancing efforts during the year, the Trust's 2025 debt maturities, including
commitments, totalled $741 million of debt, or 53.0% of its total debt stack. Since the beginning of 2024 to today’s date, the
Trust has refinanced or received credit approval for a total of $711 million of maturing 2025 debt without paydown and at terms
attractive to the Trust, which has eliminated all the Trust’s near-term refinancing risk.
The Trust is in advanced negotiations for its remaining $30 million mortgage maturity and anticipates the refinancing will be
complete by Q2 2025.
The Trust’s 2026 debt maturities total $165.5 million across six mortgages. The Trust anticipates that it will be able to
successfully address all of its 2026 debt expiries at or before maturity.
DISPOSITION OF 438 UNIVERSITY AVENUE
On January 24, 2025, subsequent to the quarter, the Trust announced that it entered into a binding agreement to sell 438
University Avenue in Toronto, Ontario, for gross proceeds before transaction costs of approximately $105.6 million or
approximately $327 per square foot.
As part of the transaction, the Trust secured the benefit of relocating approximately 17,000 square feet of tenants from 438
University Avenue to other downtown Toronto buildings within the Trust’s portfolio which will increase net operating income in
those buildings by over $1 million on an annual basis. In addition, the Trust also received a relocation right to move one of the
last tenants at 250 Dundas St. W. so that the building is fully unencumbered which would reduce costs significantly in the
development, thereby improving the profit and value of our purpose-built rental development site.
The Trust and the purchaser have also entered into a property management agreement at market terms for the Trust to continue
to manage the property for the purchaser for a period of three years.
We believe the transaction is attractive to the Trust as we estimate that these combined incremental benefits represent a value
of over $20 million or $62 per square foot to the Trust. The Trust intends to use the proceeds to repay the $68.9 million property
mortgage outstanding and use the balance of the proceeds to pay down its corporate credit facility to reduce leverage and
improve liquidity. The transaction is expected to close in the first quarter of 2025, subject to customary closing conditions.
Dream Office REIT 2024 Annual Report | 6
As at December 31, 2024, the Trust classified 438 University Avenue as an asset held for sale totalling $105.6 million, or
approximately $327 per square foot and associated liabilities totalling $68.9 million.
REDEVELOPMENT OF 606-4th BUILDING & BARCLAY PARKADE
Since the end of 2014, the Trust has sold 64 buildings spanning 7.1 million of owned square feet in Western Canada for $1.3
billion or approximately $177 per square foot which the Trust believes is attractive pricing relative to private market valuations in
today’s market.
The Calgary Office market has remained very challenging with vacancy elevated at 27%(1) over the trailing ten-year average. The
Trust’s remaining three assets in the city, spanning approximately 464,000 square feet, are well located and in good condition
with a weighted average occupancy of 84.9%, well above Downtown Calgary’s office occupancy of approximately 70%(2) as at Q4
2024. The Trust continually explores strategies to reduce risk and improve the value of individual assets within the portfolio.
Over the past year, the Trust has been working on the design, approvals and strategic partnerships to create a financially viable
redevelopment model. The redevelopment opportunity will convert the existing 126,000 square foot office building into a brand
new 166-unit, purpose-built rental residential apartment. Concurrently, the Trust is working to relocate the office tenants within
606-4th Building to the adjacent 444-7th Building. At a 4.6%(3) apartment market vacancy and 30%(2) office vacancy in Calgary,
this pivot in strategy derisks the portfolio while unlocking value. In addition, this strategy will allow the Trust to improve the
occupancy of 444-7th while creating a new residential rental building in downtown Calgary, thereby reducing the operational
and financial risk of both buildings.
The Trust is in advanced stages of negotiations for a grant of up to $11 million from the City of Calgary for residential conversion
at 606-4th Building & Barclay Parkade as part of their Calgary Downtown Development Strategy Incentive Program. The Trust is
also in the process of securing government financing for a ten-year loan at an interest rate lower than that of conventional
development and mortgage loans. The Trust is currently in the process of finalizing a construction management contract
following a market bid process and is also in discussions to potentially bring in a joint venture partner on the project to further
reduce construction and balance sheet risk.
With considerations of the above milestones that were achieved on the project during the quarter, the Trust has reclassified
606-4th Building & Barclay Parkade to properties under development.
67 RICHMOND STREET WEST – REDEVELOPMENT PROJECTS UPDATE
The development project at 67 Richmond Street West comprises full modernizations of the property, including technical
systems, interior lighting and elevators, along with enhanced common areas and larger floorplates.
To date, we have spent $9.6 million on the project at 67 Richmond Street West, $6.3 million of which has been funded by the CIB
Facility. As a result of the redevelopment, the Trust attracted Daphne restaurant, which has been awarded Best Upscale
Restaurant by Hospitality Design, for the entire ground floor retail space for a term of ten years. Including a 6,500 square foot
office lease signed during the quarter at net rents of $21.05 per square foot, the Trust has leased 18,600 square feet of the
51,000 square foot building and is currently in active discussions with prospective tenants for the remainder of the space in the
building. During the quarter, the scope of the project at 67 Richmond Street West was expanded to include building out model
suites for the remainder of the vacant space at the property to meet the current market demand for move-in ready space and
reduce lease-up time.
During the year, the Trust implemented a model suite program investing capital in identified spaces across our portfolio to create
move-in ready spaces. The program was implemented for nine suites, representing 56,000 square feet across four of its buildings
and has since executed deals on all of the four completed suite spaces. The Trust anticipates replicating this strategy at 67
Richmond Street West will attract high-quality tenants to this building. With the expansion in project scope, 67 Richmond Street
West is expected to be completed at the end of Q2 2025.
(1) CBRE Canada Calgary Office Figures (Q1 2015 - Q4 2024 ten-year average)
(2) CBRE Canada Office Figures Q4 2024
(3) CMHC Rental Market Survey
Dream Office REIT 2024 Annual Report | 7
FINANCING AND LIQUIDITY UPDATE
As at December 31, 2024, the Trust had $2.6 billion of total assets, including $2.2 billion of investment properties and $1.3
billion of total debt.
During the quarter, the Trust closed on its $225.0 million maturity mortgage loan at Adelaide Place with a syndicate of global and
Canadian financial institutions for a term of five years at a floating interest rate based on the daily Canadian Overnight Repo Rate
Average (“CORRA”) plus 2.40%. In connection with the refinancing, the Trust entered into a fixed-for-variable swap to fix the
interest rate on the mortgage at 5.479%.
On December 17, 2024, the Trust negotiated a one-year extension to December 7, 2026 for a $66.5 million interest-only
mortgage secured by a property in Scarborough, Ontario, bearing interest at daily CORRA plus 2.245%. The Trust has previously
entered into a fixed-for-variable interest rate swap relating to this mortgage, fixing the interest rate at approximately 6.44%.
As at December 31, 2024, the Trust had approximately $138.0 million of available liquidity(1), comprising $18.3 million of cash,
undrawn revolving credit facilities totalling $38.2 million, undrawn amounts on our non-revolving term loan facility pertaining to
the 15-year lease at 366 Bay Street totalling $0.4 million and undrawn amounts on our CIB Facility of $81.0 million, which
provides low-cost, fixed-rate financing solely for the purpose of commercial property retrofits to achieve certain energy
efficiency savings and greenhouse gas (“GHG”) emission reductions. Subsequent to the quarter, the Trust announced the sale of
438 University Avenue which is expected to close in Q1 of 2025. The Trust intends to use the proceeds to repay the property
mortgage outstanding and use the balance of the proceeds to pay down its corporate credit facility to reduce leverage and
improve liquidity.
During Q4 2024, the Trust drew $3.5 million against the CIB Facility. In total, we have drawn $31.8 million against the CIB Facility
since 2022. These draws represent 80% of the costs to date for capital retrofits at 13 properties in Toronto downtown for
projects to reduce the operational carbon emissions in these buildings by an estimated 3,241 tonnes of carbon dioxide (“CO2”),
or 57.5%, per year on project completion. Of the $31.8 million drawn on the CIB facility, $8.8 million was used to fund the full
building retrofit of 366 Bay Street to secure a full building lease for a term of 15 years. A further $6.3 million has been used for
the redevelopment of 67 Richmond Street West.
(1) Available liquidity is a non-GAAP financial measure. Please refer to the section “Non-GAAP Financial Measures and Ratios” for details of this measure.
Dream Office REIT 2024 Annual Report | 8
SECTION II
OUR PROPERTIES
At December 31, 2024, our ownership interests included 5.1 million square feet of GLA across 27 properties, which comprise 24
active office properties (4.6 million square feet), two properties under development (0.2 million square feet) and one property
held for sale (0.3 million square feet). In addition, we have a 50% interest in a joint venture arrangement that owns 220 King
Street West, Toronto (11,000 square feet at our share). We have excluded this equity accounted joint venture from all our
metrics throughout this MD&A.
Total portfolio owned gross leasable area and fair value by region
The following pie charts illustrate the Trust’s total GLA and the fair value of investment properties by region, excluding a
property held for sale, properties under development and investments in joint ventures that are equity accounted as at
December 31, 2024.
Top ten tenants
Our external tenant base includes provincial and federal governments as well as a wide range of large, high-quality international
corporations, including large financial institutions and small to medium-sized businesses across Canada. With just under 380
tenants and an average tenant size of approximately 11,000 square feet in our portfolio, excluding a property held for sale,
investment properties under development and investments in joint ventures that are equity accounted, our risk exposure to any
single large lease or tenant is mitigated.
The following table outlines the contributions to total annualized gross rental revenue of our ten largest external tenants in our
properties as at December 31, 2024. Our top ten tenants have a weighted average lease term of 6.1 years.
Gross rental
Owned area
Tenant
revenue (%)
(thousands of sq. ft.)
Owned area (%)
Credit rating(1)
1
Government of Canada
5.9
179
3.9
AAA/A-1+
2
International Financial Data Services
4.5
137
3.0
N/R
3
International Language Academy of Canada
4.0
132
2.9
N/R
4
State Street Trust Company
3.1
82
1.8
AA-/A/A-1+
5
U.S. Bank National Association
3.0
185
4.0
A+/A-1
6
Co-operators Life Insurance
2.8
119
2.6
A-
7
Medcan Health Management Inc.
2.7
69
1.5
N/R
8
Government of Ontario
2.0
73
1.6
AA-/A-1+
9
WeWork
2.0
65
1.4
N/R
10
ICICI Bank Canada
1.6
40
0.9
BBB-/A-3
Total
31.6
1,081
23.6
(1) As at December 31, 2024. Credit ratings are obtained from Standard & Poor’s Rating Services Inc. and may reflect the parent’s or guarantor’s credit rating.
N/R – not rated
Our top ten tenants make up approximately 32% of gross rental revenue, and 50% of our top ten tenants have credit ratings of
A- or higher.
Dream Office REIT 2024 Annual Report | 9
The following chart profiles the industries in which our tenants operate, based on estimated annualized gross rental revenue. As
illustrated in the chart, the Trust has a diversified and stable tenant mix.
OUR OPERATIONS
The following key performance indicators related to our operations influence the cash flows generated from operating activities.
Performance indicators
December 31, 2024
September 30, 2024
December 31, 2023
Total portfolio(1)
Occupancy rate – including committed (period-end)
81.1%
84.5%
84.4%
Occupancy rate – in-place (period-end)
77.5%
80.9%
82.0%
Average in-place and committed net rent per square foot (period-end)
$
27.20
$
26.37
$
26.35
Weighted average lease term (years)
5.5
5.2
5.2
(1) Total portfolio excludes properties held for sale, properties under development and investments in joint ventures that are equity accounted at the end of
each period.
Occupancy
The following table details our in-place and committed occupancy and in-place occupancy rates, by geographical area, excluding
a property held for sale, properties under development and investments in joint ventures that are equity accounted at
December 31, 2024, September 30, 2024 and December 31, 2023. Our in-place and committed occupancy rates include lease
commitments for space that is currently being readied for occupancy but for which rent is not yet being recognized.
In-place and committed occupancy rate
In-place occupancy rate
December 31,
September 30,
December 31,
December 31,
September 30,
December 31,
Occupancy rate (percentage)
2024
2024
2023
2024
2024
2023
Toronto downtown
83.8
88.0
89.0
80.2
84.5
85.4
Other markets
76.6
78.6
76.6
73.1
74.7
76.2
Total portfolio(1)
81.1
84.5
84.4
77.5
80.9
82.0
(1) Total portfolio excludes properties held for sale, properties under development and investments in joint ventures that are equity accounted at the end of
each period.
Total portfolio in-place occupancy on a quarter-over-quarter basis decreased by 3.4% relative to Q3 2024. In Toronto downtown,
in-place occupancy decreased by 4.3% relative to Q3 2024 as 356,000 square feet of expiries were partially offset by 209,000
square feet of renewals and 49,000 square feet of new lease commencements. The major driver of the 4.3% decrease in in-place
Dream Office REIT 2024 Annual Report | 10
occupancy in Toronto downtown was 142,000 square feet of net negative absorption at 74 Victoria (-4.9%) for a previously
known and announced lease expiry during Q4 2024. Despite this lease expiry, occupancy in Toronto downtown only decreased
by 98,000 square feet as the Trust had positive absorption totalling 43,000 square feet over the remainder of the region (+1.5%).
The reclassification of 438 University Avenue to assets held for sale also led to a slight decrease in in-place occupancy in the
region (-0.9%).
Subsequent to the quarter, the Trust entered into a binding agreement to sell 438 University Avenue and as part of the
transaction, the Trust secured the benefit of relocating approximately 17,000 square feet from the sold property to other
Toronto downtown buildings within its portfolio, representing approximately 0.6% of the region's total gross leasable area.
At 74 Victoria, the Trust renewed 64,000 square feet of the 206,000 square foot lease expiry during the quarter and is in
negotiations with prospective tenants for up to an additional 50,000 square feet and continues to execute on its strategy to lease
up the remainder of space. As part of the strategy at 74 Victoria, the Trust is undergoing construction to modernize the lobby
and is constructing built-out space on certain floors to help attract future potential tenants. Subsequent to the quarter, the Trust
signed a conditional lease for approximately 54,000 square feet at 74 Victoria for a term of five years at $28.50 net rent per
square foot to increase the committed occupancy of 74 Victoria from 46% to 67%, this represents 1.9% of the region’s total gross
leasable area.
In the Other markets region, in-place occupancy decreased by 1.6% relative to Q3 2024 driven by net negative absorption
(-1.3%) as 84,000 square feet of expiries were partially offset by 46,000 square feet of renewals and 15,000 square feet of new
lease commencements and the reclassification of 606-4th Building & Barclay Parkade to properties under development (-0.3%).
Total portfolio in-place occupancy on a year-over-year basis decreased from 82.0% in Q4 2023 to 77.5% this quarter, driven by
the lease expiry at 74 Victoria Street in Toronto downtown, negative absorption in Other markets, along with the
aforementioned negative effects of 438 University Avenue classified as held for sale in Toronto downtown and the
reclassification of 606-4th Building & Barclay Parkade to properties under development in Q4 2024.
In-place and committed occupancy decreased by 3.4% quarter-over-quarter, primarily driven by negative absorption in both
regions for the same reasons mentioned above. Year-over-year, in-place and committed occupancy decreased by 3.3% as the
lease expiry at 74 Victoria Street and the negative effects of property reclassifications in both regions were partially offset by net
positive leasing in the remainder of Toronto downtown buildings and in Other markets, year-over-year.
At quarter-end, the Trust has 164,000 square feet of vacancy committed for future occupancy. In Toronto downtown, 95,000
square feet, or 3.3% of the region’s total gross leasable area, is scheduled to commence in 2025 at net rents 1.6% above prior
net rents on the same space with a weighted average lease term of 8.2 years and 9,000 square feet in 2026 at 15.4% higher net
rents than previous with a weighted average lease term of 15.0 years.
In the Other markets region, 60,000 square feet, or 3.5% of the region’s total gross leasable area, is scheduled to commence in
2025 at 21.1% below prior net rents on the same space with a weighted average lease term of 12.6 years.
Dream Office REIT 2024 Annual Report | 11
The following table details the change in total portfolio in-place and committed occupancy for the three months and year ended
December 31, 2024:
Three months ended December 31, 2024
Year ended December 31, 2024
Weighted
As a
Weighted
As a
average
percentage
average
percentage
net rents
Thousands
of total
net rents
Thousands
of total
per sq. ft.
of sq. ft.
GLA
per sq. ft.
of sq. ft.
GLA
Total portfolio occupancy (in-place and committed) at
beginning of period(1)
4,273
84.5%
4,235
84.4%
Vacancy committed for future occupancy(1)
(183)
(3.6%)
(121)
(2.4%)
Total portfolio occupancy (in-place) at beginning of
period(1)
4,090
80.9%
4,114
82.0%
Occupancy related to a sold property
—
(5)
Occupancy related to properties held for sale
(298)
(298)
Reclassifications to properties under development
(99)
(99)
Reclassifications of completed properties under
development
—
$
38.00
40
Remeasurements
—
1
Total portfolio occupancy (in-place) at beginning of
period – adjusted
3,693
80.1%
3,753
81.4%
Natural expiries and relocations
$
(29.39)
(434)
(9.4%)
$
(26.98)
(707)
(15.3%)
Early terminations and bankruptcies
(12.00)
(6)
(0.1%)
(23.10)
(97)
(2.1%)
Temporary lease expiries
—
—
—
—
(1)
0.0%
Temporary leasing
12.00
1
0.0%
2.14
11
0.2%
New leases
29.12
64
1.4%
27.25
240
5.2%
Renewals and relocations
32.25
254
5.5%
31.39
373
8.1%
Total portfolio occupancy (in-place) at end of period(1)
3,572
77.5%
3,572
77.5%
Vacancy committed for future occupancy(1)
164
3.6%
164
3.6%
Total portfolio occupancy (in-place and committed)
at end of period(1)
3,736
81.1%
3,736
81.1%
(1) Excludes properties held for sale, properties under development and investments in joint ventures that are equity accounted.
For the three months ended December 31, 2024, excluding temporary leasing, 258,000 square feet of leases commenced in
Toronto downtown at net rents of $34.48 per square foot, or 15.4% higher compared to the previous rent on the same space
with a weighted average lease term of 6.1 years. In the Other markets region, 60,000 square feet of leases commenced at $19.39
per square foot, or 3.1% lower than the previous rent on the same space as current rates rolled down to market with a weighted
average lease term of 4.5 years.
For the year ended December 31, 2024, excluding temporary leasing, 439,000 square feet of leases commenced in Toronto
downtown at net rents of $34.89 per square foot, or 10.7% higher than the previous rent on the same space with a weighted
average lease term of 6.0 years. In the Other markets region, 174,000 square feet of leases commenced at $16.79 per square
foot, or 13.7% higher than previous rents on the same space with a weighted average lease term of 4.8 years.
Dream Office REIT 2024 Annual Report | 12
The table below summarizes the total portfolio retention ratio with a comparison between the renewal and relocation rate and
expiring rate on retained tenant space for the three months and year ended December 31, 2024. As a result of the timing of
lease executions, the renewal rates shown below are based on commitments signed in previous periods and may not be
reflective of the renewal rates of leases executed during the quarter for future occupancy. For the three months and year ended
December 31, 2024, our tenant retention ratio was 58.5% and 52.8%, respectively, which included a previously known and
announced 206,000 square foot lease expiry at 74 Victoria Street during Q4 2024. Excluding the large expiry at 74 Victoria, our
tenant retention ratio on the remainder of our portfolio was 83.3% and 61.7%, for the three months and year ended
December 31, 2024, respectively.
Three months ended
Year ended
December 31, 2024(1)
December 31, 2024(1)
Tenant retention ratio
58.5%
52.8%
Renewal and relocation rate(per sq. ft.)
$
32.25
$
31.39
Expiring rate on retained tenant space(per sq. ft.)
28.48
28.19
Renewal and relocation rate to expiring rate spread (per sq. ft.)
3.77
3.20
Renewal and relocation rate to expiring rate spread
13.2%
11.4%
(1) Excludes properties held for sale, properties under development and investments in joint ventures that are equity accounted.
Total portfolio in-place and committed net rent
Total portfolio in-place and committed net rents represent contractual annual net rental rates per leased square foot, excluding
percentage rents, for binding leases with current and future tenants as at December 31, 2024, September 30, 2024 and
December 31, 2023.
Average in-place and committed net rents across our total portfolio were $27.20 per square foot at December 31, 2024, an
increase when compared to $26.37 per square foot at September 30, 2024 and an increase relative to $26.35 per square foot at
December 31, 2023.
In Toronto downtown, average in-place and committed net rents increased slightly by 3.7% quarter-over-quarter driven by the
reclassification of 438 University Avenue to assets held for sale which previously carried net rents lower than the regional
average (+2.9%) and higher rates in the region from new leases, renewals, rent step-ups and transacted deals completed during
the quarter (+1.3%), partially offset by reduced rents at 74 Victoria Street for the lease expiry in Q4 2024 rolling off at higher
rates than the regional average (-0.5%). In the Other markets region, net rents increased by 4.7% relative to Q3 2024, primarily
due to the effect of the reclassification of 606-4th Building & Barclay Parkade to properties under development, which
previously carried net rents lower than the regional average (+3.3%) and higher rates compared to the regional average on new
leases and renewals commenced and expiries rolling off at below the regional averages during the quarter (+1.4%).
The increase in total portfolio in-place net rents on a year-over-year basis was primarily driven by an increase in net rents of
3.8% in Toronto downtown and an increase in net rents of 4.5% in Other markets. The increase in net rents in Toronto downtown
was primarily driven by the reasons noted above. In Other markets, the increase in net rents was primarily driven by the effect
of the reclassification of 606-4th Building & Barclay Parkade to properties under development, which previously carried net rents
lower than the regional average.
The following table details the average in-place and committed net rental rates in our total portfolio as at December 31, 2024,
September 30, 2024 and December 31, 2023:
Average in-place and committed net rent (per sq. ft.)(1)
December 31, 2024
September 30, 2024
December 31, 2023
Toronto downtown
$
32.43
$
31.28
$
31.23
Other markets
17.54
16.75
16.79
Total portfolio(2)
$
27.20
$
26.37
$
26.35
(1) Excludes percentage rents.
(2) Total portfolio excludes assets held for sale, properties under development and investments in joint ventures that are equity accounted at the end of each
period.
Market rents represent base rents only and do not include the impact of lease incentives. Market rents reflect management’s
best estimates with reference to recent leasing activity and external market data, which do not include allowances for increases
in future years. The market rents presented in the next table are based on the best available information as at the current period
and may vary significantly from period-to-period as a result of changes in economic conditions and market trends.
As a result of when leases are executed, there is typically a lag between leasing spreads on current period lease
commencements relative to our estimates of the spreads on estimated market rents compared to average in-place and
committed net rental rates as at December 31, 2024.
Dream Office REIT 2024 Annual Report | 13
The following table compares market rents in our total portfolio to the average in-place and committed net rent as at
December 31, 2024.
As at December 31, 2024
Market rent(1)
(per sq. ft.)
Average in-place and
committed net rent
(per sq. ft.)(2)
Market rent/
average in-place and
committed net rent
Toronto downtown
$
33.94
$
32.43
4.7%
Other markets
17.66
17.54
0.7%
Total portfolio(3)
$
27.84
$
27.20
2.4%
(1) Market rents include office and retail space.
(2) Excludes percentage rents.
(3) Total portfolio excludes assets held for sale, properties under development and investments in joint ventures that are equity accounted.
Total portfolio leasing costs and lease incentives
Initial direct leasing costs include leasing fees and related costs and broker commissions incurred in negotiating and arranging
tenant leases. Lease incentives include costs incurred to make leasehold improvements to tenant spaces, cash allowances and
other tenant incentives. Initial direct leasing costs and lease incentives are dependent upon asset type, location, the mix of new
leasing activity compared to renewals, portfolio growth and general market conditions.
Initial direct leasing costs shown in the table below include costs attributable to leases that commenced in the respective
periods. Due to the timing of the signing of lease agreements, certain costs, such as broker commissions, may be incurred in
advance of the lease commencement.
For the three months and year ended December 31, 2024, our total portfolio average initial direct leasing costs and lease
incentives were $2.09 per square foot per year and $5.18 per square foot per year, respectively, representing a decrease of $3.83
per square foot per year over the prior year comparative quarter and a decrease of $3.16 per square foot per year over the prior
year. Leasing costs for leases commencing in a given period are subject to a number of variables, including the location, type of
real estate, condition of space, term of lease and tenant profile. As we continue to invest in our buildings to improve occupancy
and enhance the value of our assets, leasing costs are currently higher than historical norms.
Three months ended December 31,
Year ended December 31,
Performance indicators
2024(1)
2023(1)
2024(1)
2023(1)
Leases that commenced during the period
Thousands of square feet
318
438
613
768
Average lease term (years)
5.8
5.3
5.7
5.6
Initial direct leasing costs and lease incentives
Thousands of dollars
$
3,853 $
13,753
$
18,051 $
35,916
Per square foot
12.12
31.40
29.45
46.77
Per square foot per year
2.09
5.92
5.18
8.34
(1) Current and comparative period excludes temporary leases. Total portfolio excludes properties under development and investments in joint ventures that
are equity accounted at the end of each period.
Dream Office REIT 2024 Annual Report | 14
Total portfolio lease maturity profile, lease commitments and expiring net rental rates
The following table details our in-place lease maturity profile, lease commitments and expiring net rental rates by geographical
region and by year, assets held for sale, properties under development and investments in joint ventures that are equity
accounted as at December 31, 2024:
Temporary
(in thousands of square feet)
leases
2025
2026
2027
2028
2029
2030+
Toronto downtown
Expiries
(54)
(277)
(255)
(559)
(143)
(227)
(795)
Expiring net rents at maturity
$
16.59 $ 33.26 $ 31.70 $ 29.62
$ 30.68
$ 35.76
$ 39.57
Commencements
n/a
205
35
52
1
27
28
Commencements as a percentage of expiries
n/a
74%
14%
9%
1%
12%
4%
Other markets
Expiries
(79)
(237)
(113)
(160)
(106)
(149)
(419)
Expiring net rents at maturity
$
11.38 $ 18.69
$
21.06
$ 17.94 $ 17.11
$ 18.18
$ 21.19
Commencements
n/a
60
14
56
—
—
30
Commencements as a percentage of expiries
n/a
25%
12%
35%
—
—
7%
Total portfolio
Expiries
(133)
(514)
(368)
(719)
(249)
(376)
(1,214)
Expiring net rents at maturity
$
13.49 $ 26.54 $
28.42
$ 27.02 $ 24.88
$ 28.80
$ 32.92
Commencements
n/a
265
49
108
1
27
58
Commencements as a percentage of expiries
n/a
52%
13%
15%
0%
7%
5%
n/a – not applicable
Due to the timing of when leases are executed, there may be a lag between changes in market rents and the commencement of
leases negotiated at market rents.
Committed net rents on 2025 commencements are $34.82 per square foot in Toronto downtown and $14.54 per square foot in
Other markets. In 2026, committed net rents on commencements are $35.78 per square foot in Toronto downtown and $22.00
per square foot in Other markets.
Included in lease expiries for Other markets in 2025 is the lease for all of the building at 12800 Foster Street, Overland Park,
Kansas which expires on November 30, 2025. This 185,000 square foot lease expiry represents 78% of the Trust’s maturities in
Other markets for 2025. The Trust is currently in discussions with the existing tenant and prospective new tenants on leases for
the space.
Dream Office REIT 2024 Annual Report | 15
Net rental income
Net rental income in the Trust’s financial statements is total investment property revenue, which includes property management
and other service fees, less investment property operating expenses. Property management and other service fees comprise
property management fees earned from properties owned by Dream Asset Management Corporation (“DAM”) and properties
owned by, or co-owned with, Dream Impact Trust, and fees earned from managing tenant construction projects and other
tenant services. Fees earned from managing tenant construction projects and tenant services are not necessarily of a recurring
nature and the amounts may vary year-over-year.
For a detailed discussion about investment properties revenue and expenses for the three months and year ended December 31,
2024, refer to the “Our Results of Operations” section in this MD&A.
Comparative properties NOI
Comparative properties NOI is a non-GAAP financial measure used by management in evaluating the performance of properties
owned by the Trust in the current and comparative periods presented. When the Trust compares comparative properties NOI on
a year-over-year basis for the three months and years ended December 31, 2024 and December 31, 2023, the Trust excludes
properties under development completed subsequent to January 1, 2023 and assets held for sale or properties sold as at or
prior to the current period. Comparative properties NOI also excludes NOI from properties under development; property
management and other service fees; lease termination fees; one-time property adjustments, if any; provisions; straight-line rent;
amortization of lease incentives; and NOI from sold properties. This measure is not a standardized financial measure under IFRS
Accounting Standards and might not be comparable to similar financial measures disclosed by other issuers. See “Non-GAAP
Financial Measures and Ratios” for a description of this non-GAAP financial measure.
Three months ended
Change in
weighted average
occupancy %
Change in
in-place
net rents %
December 31,
December 31,
Change
2024
2023
Amount
%
Toronto downtown
$
18,880
$
18,486
$
394
2.1
(1.7)
3.7
Other markets
5,862
6,270
(408)
(6.5)
(2.6)
1.9
Comparative properties NOI
24,742
24,756
(14)
(0.1)
(2.0)
3.4
366 Bay Street, Toronto
(60)
(6)
(54)
Properties under development
782
723
59
Property management and other service fees
568
480
88
Other income
776
349
427
Change in provisions
(23)
(621)
598
Straight-line rent
951
702
249
Amortization of lease incentives
(2,996)
(3,023)
27
Properties held for sale
1,911
2,237
(326)
Sold properties
635
163
472
Net rental income
$
27,286
$
25,760
$
1,526
5.9
Year ended
Change in
weighted average
occupancy %
Change in
in-place
net rents %
December 31,
December 31,
Change
2024
2023
Amount
%
Toronto downtown
$
76,693
$
73,630
$
3,063
4.2
0.9
2.8
Other markets
23,795
24,819
(1,024)
(4.1)
(3.6)
3.8
Comparative properties NOI
100,488
98,449
2,039
2.1
(0.8)
3.8
366 Bay Street, Toronto
(250)
2
(252)
Properties under development
2,959
2,815
144
Property management and other service fees
2,084
1,830
254
Other income
1,202
592
610
Change in provisions
(230)
(858)
628
Straight-line rent
3,253
1,421
1,832
Amortization of lease incentives
(12,375)
(11,818)
(557)
Properties held for sale
8,110
8,907
(797)
Sold properties
892
995
(103)
Net rental income
$
106,133
$
102,335
$
3,798
3.7
For the three months ended December 31, 2024, comparative properties NOI decreased slightly by 0.1%, or $14 thousand, over
the prior year comparative quarter, as higher in-place rents in Toronto downtown and Other markets from rent step-ups, higher
Dream Office REIT 2024 Annual Report | 16
rates on new leases and renewals and free rent expiries were offset by lower weighted average occupancy in both regions due to
lease expiries. For the three months ended December 31, 2024, net rental income increased by 5.9%, or $1.5 million, over the
prior year comparative quarter, due to an overall reduction in provisions, income from sold properties for post-closing
adjustments relating to properties sold in prior periods and other income comprising a write-off of provisions which are no
longer required and year-end billing adjustments.
For the three months ended December 31, 2024, comparative properties NOI in Toronto downtown increased by 2.1%, or
$0.4 million, over the prior year comparative quarter, primarily due to higher in-place rents from rent step-ups, higher rates on
renewals and new leases and free rent periods rolling off, partially offset by lower weighted average occupancy in the region
primarily driven by the 206,000 square foot lease expiry at 74 Victoria in October 2024. In Other markets, comparative
properties NOI decreased by 6.5%, or $0.4 million, over the prior year comparative quarter, primarily driven by lower weighted
average occupancy from lease expiries primarily in the Greater Toronto Area, partially offset by higher rents from a free rent
period expiry in Saskatoon and rent step-ups in the region.
For the year ended December 31, 2024, comparative properties NOI increased by 2.1%, or $2.0 million, over the prior year,
driven by higher comparative properties NOI in Toronto downtown of 4.2%, or $3.1 million, partially offset by lower comparative
properties NOI in Other markets of 4.1%, or $1.0 million, primarily driven by the same reasons noted above. For the year ended
December 31, 2024, net rental income increased by 3.7%, or $3.8 million, over the prior year, primarily due to higher
comparative properties NOI along with higher straight-line rent from short-term rent-free periods and the reasons noted above,
partially offset by lower income attributed to a sold property in Q1 2023 as well as lower income relating to a property classified
as held for sale this quarter.
Straight-line rent for the three months and year ended December 31, 2024, was $1.0 million and $3.3 million, respectively.
Straight-line rent for the quarter primarily relates to 366 Bay Street for early occupancy in the prior quarter upon the property’s
completion ahead of schedule as well as a period of reduced base rent for one tenant that commenced in Q2 2024. Straight-line
rent for the year primarily relates to the effect of the aforementioned early occupancy of the tenant at 366 Bay Street in advance
of rental payments commencing in December. Also driving higher straight-line rent for the year were short-term rent-free
periods for two large tenants on renewal that ended in Q2 2024 along with the effect of reduced base rent for one tenant that
commenced in Q2 2024.
The Trust currently has two properties under development: 67 Richmond Street West in Toronto downtown and 606-4th Building
& Barclay Parkade in Calgary.
For the three months and year ended December 31, 2024, change in provisions was an expense of $23.0 thousand and $0.2
million, respectively, representing a net decrease of $0.6 million over the prior year comparative quarter and year due to
reduced provisions from strong collections.
Dream Office REIT 2024 Annual Report | 17
OUR RESULTS OF OPERATIONS
Consolidated statement of comprehensive income (loss)
Three months ended December 31,
Year ended December 31,
(in thousands of Canadian dollars)
2024
2023
2024
2023
Investment properties revenue
$
50,146
$
47,675
$
196,114
$
190,448
Investment properties operating expenses
(22,860)
(21,915)
(89,981)
(88,113)
Net rental income
27,286
25,760
106,133
102,335
Other income (loss)
Net income (loss) from investment in Dream Industrial REIT
3,369
169
10,425
(30,674)
Share of net income (loss) from investment in joint ventures
4
(319)
336
(812)
Interest and other income
509
530
1,565
2,885
3,882
380
12,326
(28,601)
Other expenses
General and administrative
(2,765)
(2,505)
(10,545)
(10,692)
Interest:
Debt
(17,319)
(15,865)
(65,051)
(58,978)
Subsidiary redeemable units
(654)
(1,309)
(2,835)
(5,234)
Depreciation on property and equipment
(1)
(36)
(121)
(162)
(20,739)
(19,715)
(78,552)
(75,066)
Fair value adjustments, leasing costs, impairment and net losses on
transactions
Fair value adjustments to investment properties
(38,903)
(28,823)
(114,589)
(96,406)
Fair value adjustments to financial instruments
12,278
(19,282)
(221)
22,509
Internal leasing costs and net losses on transactions
(773)
(565)
(3,122)
(1,920)
Impairment of VTB mortgage receivables
(4,294)
—
(29,199)
—
(31,692)
(48,670)
(147,131)
(75,817)
Loss before income taxes
(21,263)
(42,245)
(107,224)
(77,149)
Current and deferred income taxes recovery (expense), net
2,162
(179)
2,290
(47)
Net loss
(19,101)
(42,424)
(104,934)
(77,196)
Other comprehensive income (loss)
2,437
(1,589)
2,528
(6,598)
Comprehensive loss
$
(16,664) $
(44,013) $
(102,406) $
(83,794)
Investment properties revenue
Investment properties revenue includes base rent from investment properties, recoveries of operating costs and property taxes
from tenants, parking services revenue, the impact of straight-line rent adjustments, lease termination fees and other
adjustments, as well as fees earned from property management and other services, including leasing and construction. Leasing,
construction and lease termination fees and other adjustments are not necessarily of a recurring nature and the amounts may
vary year-over-year. Investment properties revenue for the three months and year ended December 31, 2024, was $50.1 million
and $196.1 million, respectively, compared to $47.7 million and $190.4 million, respectively, in the prior year comparative
quarter and year.
The increase over the prior year comparative quarter was primarily due to an overall reduction in provisions, income from sold
properties, other items comprising a write-off of provisions which are no longer required and year-end billing adjustments,
partially offset by lower weighted average occupancy in both regions. The increase over the prior year was primarily due to
higher in-place net rents due to higher rates on renewals and new leasing in Toronto downtown, higher straight-line rent from
short-term rent-free periods ending in Q3 2024 and the reasons noted above, partially offset by lower weighted average
occupancy in Other markets.
Investment properties operating expenses
Investment properties operating expenses comprise operating costs and property taxes as well as certain expenses that are not
recoverable from tenants. Operating expenses fluctuate with changes in occupancy levels, expenses that are seasonal in nature
and the level of repairs and maintenance incurred in any given period.
Investment properties operating expenses for the three months and year ended December 31, 2024 were $22.9 million and
$90.0 million, respectively, compared to $21.9 million and $88.1 million, respectively, in the prior year comparative quarter and
year. The increase in investment properties operating expenses over the prior year comparative quarter was primarily driven by
higher utilities, heating, ventilation and air conditioning and cleaning expenses due to higher property utilization. The increase in
Dream Office REIT 2024 Annual Report | 18
investment properties operating expenses over the prior year was primarily due to higher cleaning and heating, ventilation and
air conditioning on higher utilization, partially offset by utility savings and a decrease in tenant provisions.
Net income (loss) from investment in Dream Industrial REIT
Net income from our investment in Dream Industrial REIT includes our share of the entity’s net income, net of adjustments
related to our ownership of Dream Industrial REIT’s subsidiary redeemable units. Net income from our investment in Dream
Industrial REIT is not necessarily of a recurring nature and the amounts may vary year-over-year due to fluctuations in the net
income of Dream Industrial REIT and changes in our ownership levels. Net dilution gains and losses occur as a result of equity
issuances by Dream Industrial REIT from public offerings and Dream Industrial REIT’s deferred unit incentive and dividend
reinvestment plans and vary from period-to-period based on the dilutive effect of the issuances on our share of the equity from
Dream Industrial REIT relative to our share of the proceeds received from the equity issuances. Included in net income from our
investment in Dream Industrial REIT are transactional losses on the sale of Dream Industrial REIT units.
The following table summarizes the net income from investment in Dream Industrial REIT:
Three months ended December 31,
Year ended December 31,
2024
2023
2024
2023
Share of income
$
3,581
$
400
$
11,258
$
11,292
Dilution loss
(212)
(231)
(833)
(734)
Loss on the sale of Dream Industrial REIT units
—
—
—
(45,027)
Transaction costs on sale of Dream Industrial REIT units
—
—
—
(295)
Reclassification of accumulated other comprehensive income
to net income due to sale of units
—
—
—
4,090
Net income (loss) from investment in Dream Industrial REIT
$
3,369
$
169
$
10,425
$
(30,674)
Our share of income from our investment in Dream Industrial REIT before dilution adjustments and transactional losses on the
sale of Dream Industrial REIT units increased by $3.2 million and decreased by $34 thousand, respectively, over the prior year
comparative quarter and year. The increase over the prior year comparative quarter was primarily due to a reduction in fair
value losses to investment properties and gains on equity accounted investments. The slight decrease over the prior year was
primarily due to a reduction in our ownership percentage due to the sale of Dream Industrial REIT units in Q1 2023 and Q2 2023,
offset by similar reasons noted above.
Share of net income (loss) from investment in joint ventures
Our investment in joint ventures includes the Trust’s 50% interest in a partnership that acquired 220 King Street West in Toronto
during Q3 2019, the Trust’s investment in Alate, a venture focused on the property technology market in which we have invested
jointly with DAM, the Trust’s 50% interest in a partnership with CentreCourt for the mixed-use development of Block 2 at 2200–
2206 Eglinton Avenue East and 1020 Birchmount Road in Scarborough, Ontario, and the Trust’s 50% interest in a partnership
with INK Entertainment for the premium restaurant Daphne in the Bay Street corridor.
For the three months and year ended December 31, 2024, the Trust’s share of net income (loss) from investment in joint
ventures amounted to income of $4 thousand and $0.3 million, respectively, compared to losses of $0.3 million and $0.8 million,
respectively, in the prior year comparative quarter and year. The increase over the prior year comparative quarter was primarily
due to lower negative fair value adjustments in 220 King Street West and higher income generated from our restaurant
partnership. The increase over the prior year was primarily due to income tax recoveries from our investment in Alate, lower
negative fair value adjustments in 220 King Street West and an increase in income generated from our restaurant partnership as
the prior year included one-time expenses associated with start-up costs.
Interest and other income
Interest and other income mainly comprise interest earned on vendor take-back mortgage (“VTB mortgage”) receivables and a
loan facility committed as part of the sale of a property in 2018, cash on hand and miscellaneous income. The interest earned on
cash on hand and miscellaneous income are not necessarily of a recurring nature and may vary year-over-year, depending on the
amount of cash on hand and miscellaneous income in any given period.
For the three months and year ended December 31, 2024, interest and other income was $0.5 million and $1.6 million,
respectively, compared to $0.5 million and $2.9 million, respectively, in the prior year comparative quarter and year. The slight
decrease over the prior year comparative quarter was primarily due to lower interest income on the VTB mortgage receivables,
offset by higher interest income on cash balances. The decrease over the prior year was primarily due to lower interest income
on the VTB mortgage receivables and a VTB extension fee in the prior year.
Dream Office REIT 2024 Annual Report | 19
General and administrative expenses
The following table summarizes the nature of expenses included in G&A expenses:
Three months ended December 31,
Year ended December 31,
2024
2023
2024
2023
Salaries and benefits
$
(747)
$
(912)
$
(3,427)
$
(4,021)
Deferred compensation expense
(424)
(273)
(1,716)
(1,862)
Professional services fees, public reporting, overhead-related
costs and other
(1,594)
(1,320)
(5,402)
(4,809)
General and administrative expenses
$
(2,765)
$
(2,505)
$
(10,545)
$
(10,692)
Interest expense – debt
For the three months and year ended December 31, 2024, interest expense on debt was $17.3 million and $65.1 million,
respectively, relative to $15.9 million and $59.0 million, respectively, in the prior year comparative quarter and year. The increase
in interest expense on debt over the prior year comparative quarter was primarily due to higher interest rates on mortgages
refinanced during the year. The increase in interest expense on debt over the prior year was primarily due to higher rates on
mortgages refinanced during the current year and prior year as well as higher drawings and interest rates on variable debt.
Interest expense – subsidiary redeemable units
The interest expense on subsidiary redeemable units represents distributions paid and payable on the 2.6 million post-Unit
Consolidation subsidiary redeemable units (December 31, 2023 – 2.6 million post-Unit Consolidation subsidiary redeemable
units) owned by DAM.
Interest expense on subsidiary redeemable units for the three months and year ended December 31, 2024 was $0.7 million and
$2.8 million, respectively, compared to $1.3 million and $5.2 million, respectively, in the prior year comparative quarter and year.
The decrease in interest expense on subsidiary redeemable units was due to lower distributions as a result of the Unit
Consolidation.
Fair value adjustments to investment properties
Refer to the heading “Fair value adjustments to investment properties” in the “Investment Properties” section for a discussion of
fair value adjustments to investment properties for the three months and year ended December 31, 2024.
Fair value adjustments to financial instruments
Fair value adjustments to financial instruments include remeasurements of the carrying value of subsidiary redeemable units
and deferred trust units (“DTUs”), which are carried as unit-settled liabilities under IFRS Accounting Standards as a result of
changes in the Trust’s REIT A Unit trading price and derivative contract remeasurements. The fair value of the derivative
contracts is calculated internally using external data provided by qualified professionals based on the present value of the
estimated future cash flows determined using observable yield curves. Fair value adjustments to financial instruments may vary
significantly from period-to-period as a result of movements in the Trust’s REIT A Unit trading price and market yield curves.
For the three months and year ended December 31, 2024, the Trust recorded fair value gains of $12.3 million and fair value
losses of $0.2 million, respectively. Fair value gains in the current quarter consisted of $12.7 million in gains on the carrying value
of subsidiary redeemable units and $2.1 million of fair value gains on the remeasurements of DTUs as a result of a decrease in
the Trust’s unit price relative to September 30, 2024, partially offset by remeasurements on rate swap contracts resulting in a fair
value loss of $2.5 million. Fair value losses for the year ended were primarily due to remeasurements on rate swap contracts of
$9.1 million as a result of decreasing market yield curves, offset by fair value gains from the remeasurement of the carrying
value of subsidiary redeemable units and DTUs of $8.1 million and $0.8 million, respectively, as a result of a decrease in the
Trust’s unit price relative to December 31, 2023.
Internal leasing costs and net losses on transactions
The following table summarizes the nature of expenses included in internal leasing costs and net losses on transactions:
Three months ended December 31,
Year ended December 31,
2024
2023
2024
2023
Internal leasing costs
$
(494)
$
(408)
$
(1,931)
$
(1,700)
Costs attributable to sale of investment properties
(279)
(157)
(1,191)
(203)
Debt settlement costs
—
—
—
(17)
Internal leasing costs and net losses on transactions
$
(773)
$
(565)
$
(3,122)
$
(1,920)
Dream Office REIT 2024 Annual Report | 20
Impairment of VTB mortgage receivables
As part of the sale of a separate property in Calgary, Alberta, in 2018, the Trust received partial consideration in the form of a
VTB mortgage receivable of $34.1 million and committed to a loan facility of up to $12.5 million (together, the “Loans”). The
Loans bear interest at 2.5%, matured on July 10, 2024 and are secured by the property. As at December 31, 2024, the Trust had
funded $11.0 million (December 31, 2023 – $10.5 million) under the loan facility. On September 12, 2024, due to a borrower
default, the Trust exercised its rights to a letter of credit held as collateral and has collected $3.3 million which can be applied to
interest and principal repayments. The Trust continues its negotiations with the borrower on renewing the Loans at terms
agreeable to the Trust, but there can be no assurance that an agreement will be reached.
During the quarter, the Trust continued to assess the probability of default and expected cash flows under the expected credit
loss model. As a result of these assessments, the Trust has recorded impairment totalling $4.3 million on the Loans during the
quarter. For the year ended December 31, 2024, the Trust has recorded impairment totalling $25.7 million on the Loans. As at
December 31, 2024, the carrying value of the Loans was $19.4 million.
On November 23, 2018, the trust sold a property in Calgary, Alberta, and took back a second-ranking VTB mortgage receivable
for $3.8 million, of which $0.3 million was subsequently repaid. Since the inception of the VTB mortgage, the borrower has paid
$2.4 million in interest. On August 28, 2024, the purchaser of the property went into receivership at the request of the primary
lienholder of the property. During the year, The Trust has assessed the probability of recovering the remaining principal on the
VTB mortgage as unlikely and fully impaired the $3.5 million mortgage on the date the borrower entered receivership.
Current and deferred income taxes recovery (expense), net
Current and deferred income taxes are not necessarily of a recurring nature and the amounts may vary from period-to-period
due to changes in tax legislation and the performance of our U.S. subsidiary.
For the three months and year ended December 31, 2024, the Trust recorded net current and deferred taxes recoveries of $2.2
million and $2.3 million, respectively, relating to our sole investment property in the U.S.
Other comprehensive income (loss)
Other comprehensive income (loss) is not necessarily of a recurring nature and the amounts may vary from period-to-period
primarily due to changes in exchange rates. Other comprehensive income (loss) comprises amortization of an unrealized loss on
a historical interest rate hedging arrangement, unrealized foreign currency translation gain (loss) related to the investment
property located in the U.S., the Trust’s share of Dream Industrial REIT’s other comprehensive income and share of other
comprehensive loss from an investment in a joint venture.
For the three months and year ended December 31, 2024, other comprehensive income (loss) amounted to income of $2.4
million and $2.5 million, respectively, compared to losses of $1.6 million and $6.6 million, respectively, for the three months and
year ended December 31, 2023. The change in other comprehensive income (loss) over the prior year comparative quarter was
primarily driven by foreign currency translation adjustments on our U.S. property. The change over the prior year was largely
driven by the reclassification of prior period accumulated other comprehensive income to net income on the sale of 12,500,000
units of Dream Industrial REIT in Q2 2023, partially offset by foreign currency translation gains on our U.S. property.
Funds from operations
FFO is a non-GAAP financial measure and diluted FFO per unit is a non-GAAP ratio. Diluted FFO per unit is calculated as FFO (a
non-GAAP financial measure) divided by the diluted weighted average number of units. Management believes that FFO
(including diluted FFO per unit) is an important measure of our operating performance. This non-GAAP financial measure is a
commonly used measure of performance of real estate operations. However, it is not a standardized financial measure under
IFRS Accounting Standards and it might not be comparable to similar financial measures disclosed by other issuers. It does not
represent net income or cash flows generated from (utilized in) operating activities, as defined by IFRS Accounting Standards,
and is not necessarily indicative of cash available to fund Dream Office REIT’s needs. FFO has been further defined and
reconciled with net income in the “Non-GAAP Financial Measures and Ratios” section under the heading “Funds from operations
and diluted FFO per unit”. Diluted weighted average number of units is defined in the section “Supplementary Financial
Measures and Other Disclosures” under the heading “Weighted average number of units”.
Dream Office REIT 2024 Annual Report | 21
The following table summarizes FFO and diluted FFO per unit:
Three months ended December 31,
Year ended December 31,
2024
2023
2024
2023
FFO for the period
$
14,104
$
14,588
$
58,058
$
64,518
Diluted weighted average number of units(1)(2)
19,500
19,359
19,464
22,410
Diluted FFO per unit(2)
$
0.72
$
0.75
$
2.98
$
2.88
(1) Diluted weighted average number of units includes the weighted average of all REIT A Units, subsidiary redeemable units, vested but unissued and unvested
DTUs and associated income DTUs. Please refer to the “Supplementary Financial Measures and Other Disclosures” section under the heading “Weighted
average number of units” for details of this measure.
(2) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All unit and per unit amounts disclosed
reflect the post-Unit Consolidation units for all periods presented.
For the three months ended December 31, 2024, diluted FFO per unit decreased by $0.03 per unit to $0.72 per unit relative to
$0.75 per unit in Q4 2023, driven by higher interest expense (-$0.07) and lower NOI from 438 University Avenue due to lower
occupancy (-$0.02), partially offset by lower tenant provisions (+$0.03), higher income relating to properties sold in prior periods
for post-closing adjustments (+$0.02) and higher FFO from Dream Industrial REIT (+$0.01). Included in FFO for the three months
ended December 31, 2024, are year-end cash adjustments that are included in other income and income arising from properties
sold in prior periods totalling $0.07 per unit, the amounts of which could vary from period-to-period. Excluding these items,
diluted FFO per unit for the three months ended December 31, 2024 would have been $0.65 per unit.
For the year ended December 31, 2024, diluted FFO (adjusted) per unit increased by $0.10 per unit to $2.98 per unit relative to
$2.88 per unit in Q4 2023, driven by the accretive effect of repurchases under the NCIB and SIB, net of reduced FFO from Dream
Industrial REIT as a result of selling units to facilitate the buyback of REIT A Units under the SIB in Q2 2023 and interest from
drawing on credit facilities (+$0.15), higher comparative properties NOI (+$0.10), higher straight-line rent (+$0.09), higher other
income (+$0.05) comprising a write-off of provisions relating to sold properties which are no longer required and year-end billing
adjustments, higher income from joint ventures due to start-up costs relating to the Daphne restaurant included in the prior year
(+$0.02) and income tax refunds received in the current year in Alate (+$0.02), lower tenant provisions (+$0.03) and lower G&A
(+$0.02), partially offset by higher interest expense (-$0.26), reduced interest and fee income due to lower income and
extension fee from VTB mortgages (-$0.07), reduced net rental income from 438 University due to lower occupancy (-$0.04) and
lost net rental income from the sale of 720 Bay Street and 234 – 1st Avenue South in Saskatoon, net of income from post-closing
adjustments relating to properties sold in prior periods (-$0.01).
Related party transactions
From time to time, Dream Office REIT and its subsidiaries enter into transactions with related parties that are generally
conducted on a cost recovery basis or under normal commercial terms.
Related party transactions with Dream Asset Management Corporation
The following is a summary of costs processed by DAM and the Trust for the three months and years ended December 31, 2024
and December 31, 2023:
Three months ended December 31,
Year ended December 31,
2024
2023
2024
2023
Property management services fee charged by the Trust
$
179
$
135
$
547
$
426
Expenditures processed by the Trust on behalf of DAM (on a
cost recovery basis)
3,699
3,265
13,082
12,055
Development fees charged by DAM
(370)
(359)
(704)
(1,795)
Expenditures processed by DAM on behalf of the Trust (on a
cost recovery basis)
(555)
(539)
(2,232)
(1,867)
Net fees and reimbursements from DAM
$
2,953
$
2,502
$
10,693
$
8,819
For the three months and year ended December 31, 2024, total distributions and subsidiary redeemable interest paid and
payable to DAM were $1.5 million and $6.4 million, respectively (for the three months and year ended December 31, 2023 –
$2.9 million and $14.4 million, respectively).
Dream Office REIT 2024 Annual Report | 22
Related party transactions with Dream Impact Trust
The following is a summary of the amounts that were charged to Dream Impact Trust for the three months and years ended
December 31, 2024 and December 31, 2023:
Three months ended December 31,
Year ended December 31,
2024
2023
2024
2023
Property management and construction fees related to co-
owned and managed properties
$
219
$
219
$
950
$
925
Costs processed on behalf of Dream Impact Trust related to
co-owned and managed properties
317
414
1,477
1,626
Amounts charged to Dream Impact Trust under the services
agreement
267
231
1,027
939
Total cost recoveries from Dream Impact Trust
$
803
$
864
$
3,454
$
3,490
Related party transactions with Dream Industrial REIT
The following is a summary of the cost recoveries from Dream Industrial REIT for the three months and years ended December
31, 2024 and December 31, 2023:
Three months ended December 31,
Year ended December 31,
2024
2023
2024
2023
Total cost recoveries from Dream Industrial REIT
$
2,115
$
2,172
$
8,233
$
8,238
SECTION III
INVESTMENT PROPERTIES
Investment properties continuity
Changes in the value of our investment properties by region, excluding an investment property owned through an investment in
a joint venture that is equity accounted, for the three months and year ended December 31, 2024 are summarized in the
following table:
Three months ended
Building
improvements,
initial direct
leasing costs and
lease incentives
Amortization of
lease incentives,
foreign exchange
and other
adjustments(1)
Transfers to
properties under
development and
assets held for
sale
October 1,
Fair value
adjustments
December 31,
2024
2024
Toronto downtown
$
1,871,674 $
12,379 $
(27,176) $
(920) $
(105,600) $
1,750,357
Other markets
395,595
2,098
(10,794)
1,484
(16,037)
372,346
Active properties
2,267,269
14,477
(37,970)
564
(121,637)
2,122,703
Add:
Properties under development
36,039
1,321
(933)
(152)
16,037
52,312
Total amounts included in
consolidated financial statements
$
2,303,308 $
15,798 $
(38,903) $
412 $
(105,600) $
2,175,015
Assets held for sale
$
— $
— $
— $
— $
105,600 $
105,600
(1) Included in Other markets is a foreign currency translation adjustment totalling $2,474 related to a property located in the U.S. during the quarter.
Dream Office REIT 2024 Annual Report | 23
Year ended
Building
improvements,
initial direct
leasing costs and
lease incentives
Amortization of
lease incentives,
foreign exchange
and other
adjustments(1)
Transfers to
properties under
development and
assets for sale
January 1,
Fair value
adjustments
December 31,
2024
2024
Toronto downtown
$
1,862,997 $
47,628 $
(81,385) $
(4,332) $
(74,551) $
1,750,357
Other markets
415,073
8,064
(24,475)
(1,679)
(24,637)
372,346
Active properties
2,278,070
55,692
(105,860)
(6,011)
(99,188)
2,122,703
Add:
Properties under development
64,304
12,138
(8,729)
(389)
(15,012)
52,312
Total amounts included in
consolidated financial statements
$
2,342,374 $
67,830 $
(114,589) $
(6,400) $
(114,200) $
2,175,015
Assets held for sale
$
— $
— $
— $
— $
105,600 $
105,600
(1) Included in Other markets is a foreign currency translation adjustment totalling $3,375 related to a property located in the U.S. during the period.
Properties under development
As certain milestones on the residential conversion project at 606-4th Building & Barclay Parkade were achieved during the
quarter the Trust has reclassified 606-4th Building & Barclay Parkade to properties under development on October 1, 2024.
During the quarter, the Trust also expanded the scope of the project at 67 Richmond Street West to include building out model
suites for the remainder of the vacant space at the property to meet the current market demand for move-in ready space and
reduce lease-up time. With the expansion in project scope, 67 Richmond Street West is expected to be completed at the end of
Q2 2025.
As of December 31, 2024, the Trust has two properties under development: 606-4th Building & Barclay Parkade in Calgary and
67 Richmond Street West in Toronto downtown.
Valuations of externally appraised properties
The following table summarizes the investment properties valued by qualified external valuation professionals for the year
ended December 31, 2024 and year ended December 31, 2023 by fair values:
December 31,
December 31,
2024
2023
Investment properties valued by qualified external valuation professionals (in millions)
$
894 $
694
Number of investment properties valued by qualified external valuation professionals
8
4
Percentage of the total investment properties valued by qualified external valuation professionals
41 %
30 %
Fair value adjustments to investment properties
The valuation of investment properties relies on certain assumptions, which include, but are not limited to, market rents, leasing
costs, vacancy rates, discount rates and capitalization rates (“cap rates”). The Trust monitors the effects of market trends and
changes in the economic environment on the valuation of its investment properties. If there are changes in the critical and key
assumptions used in valuing the investment properties or in regional, national or international economic conditions, the fair
value of investment properties may change materially.
For the three months ended December 31, 2024, the Trust recorded a fair value loss totalling $38.9 million, comprising fair value
losses of $27.2 million in Toronto downtown, $10.8 million in Other markets and $0.9 million in our properties under
development. Fair value losses in Toronto downtown were primarily driven by write-downs at a few properties due to changes in
valuation assumptions and write-offs of maintenance capital spend and leasing costs across the region. Fair value losses in the
Other markets region were primarily driven by a write-down at one property resulting from expansions in weighted average cap
rates and write-offs of maintenance capital spend and leasing costs across the region. Fair value losses in our property under
development were primarily driven by revised leasing timelines.
For the year ended December 31, 2024, the Trust recorded a fair value loss totalling $114.6 million, comprising fair value losses
of $81.4 million in Toronto downtown, $24.5 million in Other markets and $8.7 million in our properties under development. Fair
value losses in Toronto downtown were primarily driven by similar reasons noted above, partially offset by fair value gains on
three properties valued by a qualified external valuation professional during Q2 and Q3 2024. Fair value losses in Other markets
were primarily driven by similar reasons noted above, along with fair value losses on two properties valued by a qualified
external valuation professional during Q1 and Q2 2024. Fair value losses in our properties under development were primarily
driven by revised leasing timelines.
Dream Office REIT 2024 Annual Report | 24
Assumptions used in the valuation of investment properties
Refer to Note 4 of the consolidated financial statements for details of the assumptions used in the Trust’s investment property
valuations, which are incorporated by reference into this MD&A.
Building improvements
Building improvements represent investments made in our investment properties to ensure optimal building performance; to
improve the experience of, and attractiveness to, our tenants; and to reduce operating costs. In order to retain desirable
rentable space and maintain or increase revenue over the long term, we must maintain or, in some cases, improve each
property’s condition to meet market demand.
Our strategy is to invest in capital projects that enhance our highest quality and best-located assets in order to attract quality
tenants at the highest possible rents. In addition to making our properties more desirable, our capital program enhances
property efficiency and reduces future maintenance and operating costs.
The table below summarizes the building improvements incurred for the three months and years ended December 31, 2024 and
December 31, 2023:
Three months ended December 31,
Year ended December 31,
Building improvements
2024
2023
2024
2023
Recoverable
$
1,764
$
2,800
$
5,641
$
14,422
Value-add
8,836
3,197
25,249
6,555
Value-add additions to properties in the Bay Street corridor
—
94
—
1,397
Non-recoverable
798
677
1,396
2,377
Active properties
11,398
6,768
32,286
24,751
Add:
Properties under development
1,086
3,138
7,496
7,272
Interest capitalized to properties under development
196
143
871
680
Sold property
—
—
—
150
Total
$
12,680
$
10,049
$
40,653
$
32,853
Less: Interest capitalized to properties under development
(196)
(143)
(871)
(680)
Less: Sold property
—
—
—
(150)
Total amounts included in consolidated financial statements
$
12,484
$
9,906
$
39,782
$
32,023
For the three months and year ended December 31, 2024, we incurred $11.4 million and $32.3 million, respectively, in
expenditures related to building improvements in our active portfolio.
Recoverable building improvements are capital expenditures on investment properties required to maintain current net rental
rates for new leases that are recoverable from tenants. For the three months and year ended December 31, 2024, recoverable
building improvements were $1.8 million and $5.6 million, respectively, and included safety enhancements, heating, ventilation
and air conditioning upgrades, elevator modernization, roofing replacements, and recoverable lobby and common area
upgrades.
Value-add building improvements are building capital expenditures that are made with the aim of enhancing building quality in
order to increase net rents on future leases or pre-development costs for contemplated future developments. For the three
months and year ended December 31, 2024, value-add building improvements were $8.8 million and $25.2 million, respectively.
INVESTMENT IN DREAM INDUSTRIAL REIT
Dream Industrial REIT is an unincorporated, open-ended real estate investment trust listed on the Toronto Stock Exchange
(“TSX”) under the symbol “DIR.UN”.
The table below summarizes the Trust’s ownership of Dream Industrial REIT:
As at
December 31,
December 31,
2024
2023
Dream Industrial REIT units held, end of year
192,735
192,735
Dream Industrial LP Class B limited partnership units held, end of year
13,346,572
13,346,572
Total units held, end of year
13,539,307
13,539,307
Total Dream Industrial REIT units (including LP B Units) outstanding, end of year
291,166,556
286,589,921
Ownership at year-end
4.7%
4.7%
Dream Office REIT 2024 Annual Report | 25
OUR FINANCING
Debt summary
The key performance indicators in the management of our debt are as follows:
December 31,
December 31,
Financing and liquidity metrics
2024
2023
Weighted average face rate of interest on debt (period-end)(1)
4.75%
4.53%
Interest coverage ratio (times)(2)
1.8
2.0
Net total debt-to-normalized adjusted EBITDAFV ratio (years)(2)
12.1
11.5
Level of debt (net total debt-to-net total assets)(2)
52.9%
50.0%
Average term to maturity on debt (years)
3.4
3.3
Variable rate debt as percentage of total debt(3)
13.0%
6.7%
Undrawn credit facilities
$
119,700
$
173,955
Available liquidity(2)
$
137,968
$
187,228
Unencumbered assets(2)
$
2,276
$
17,117
(1) Weighted average face rate of interest on debt is calculated as the weighted average contractual face rate of all interest-bearing debt balances, excluding
debt in joint ventures that are equity accounted.
(2) Interest coverage ratio (times), net total debt-to-normalized adjusted EBITDAFV ratio and level of debt (net total debt-to-net total assets) are non-GAAP
ratios. Available liquidity is a non-GAAP financial measure. Unencumbered assets is a supplemental financial measure. Please refer to the “Non-GAAP
Financial Measures and Ratios” and the “Supplementary Financial Measures and Other Disclosures” sections of this MD&A for additional information on
these specified financial measures.
(3) Variable rate debt excludes debt with variable interest rates where the interest rate has been fixed by way of an economically effective hedge.
Net total debt-to-normalized adjusted EBITDAFV ratio increased to 12.1 years at December 31, 2024 compared to 11.5 years at
December 31, 2023 due to higher net debt balances resulting from higher credit facility drawings.
The net total debt-to-net total assets ratio increased to 52.9% at December 31, 2024 primarily due to higher net debt balances
resulting from higher drawings on the revolving credit facilities, non-revolving term loan facility and CIB Facility, as well as a
reduction in total assets primarily resulting from fair value losses recognized on investment properties.
As at December 31, 2024, our available liquidity of $138.0 million comprises $18.3 million of cash and cash equivalents on hand,
undrawn revolving credit facilities totalling $38.2 million, availability on our CIB Facility totalling $81.0 million, which provides
low-cost, fixed-rate financing solely for the purpose of commercial property retrofits to achieve certain energy efficiency savings
and GHG emission reductions, and availability on our non-revolving term loan facility totalling $0.4 million. The decrease of
$49.3 million compared to December 31, 2023 is primarily due to higher credit facility drawings.
Liquidity and capital resources
Dream Office REIT’s primary sources of capital are cash generated from operating activities, net proceeds from investment
property dispositions, credit facilities, and mortgage financing and refinancing. Our primary uses of capital include the payment
of distributions, costs of attracting and retaining tenants, recurring property maintenance, development projects, major
property improvements, and debt principal and interest payments.
As at December 31, 2024, our current liabilities exceeded our current assets by $366.7 million. Typically, real estate entities seek
to address liquidity needs by having a balanced debt maturity schedule and undrawn revolving credit facilities. We are able to
use our revolving credit facilities on short notice, which eliminates the need to hold significant amounts of cash and cash
equivalents on hand. Working capital balances can fluctuate significantly from period-to-period depending on the timing of
receipts and payments. The Trust’s credit facility availability may fluctuate from time to time due to the effect of interest rates,
collateralized property performance and collateralized asset values, including units of Dream Industrial REIT pledged as
collateral. Liquidity risk may be enhanced if the credit facility availability were to be significantly reduced. Debt obligations that
are due within one year include maturing credit facilities totalling $312.6 million. The Trust received credit approval for the $375
million credit facility which is scheduled to mature in September 2025. We typically refinance maturing debt with mortgages of
terms between five and ten years unless our strategy for the asset or preferential loan terms dictate otherwise, or with our
undrawn revolving credit facilities. Amounts payable and accrued liabilities balances outstanding at the end of any reporting
period depend primarily on the timing of leasing costs and capital expenditures incurred, as well as the impact of transaction
costs incurred on acquisitions and dispositions, if any.
In order to meet ongoing operational and interest requirements, the Trust relies on cash flows generated from operations.
Where, due to the timing of leasing cost payments, cash flows generated from operations are insufficient to cover immediate
operational and leasing cost requirements, the Trust makes use of its revolving credit facilities. As of December 31, 2024, the
Trust has $138.0 million of available liquidity, comprising $18.3 million of cash and cash equivalents on hand, undrawn revolving
Dream Office REIT 2024 Annual Report | 26
credit facilities totalling $38.2 million, availability on our CIB Facility totalling $81.0 million, which provides low-cost, fixed-rate
financing solely for the purpose of commercial property retrofits to achieve certain energy efficiency savings and GHG emission
reductions, and availability on our non-revolving term facility for restricted use to meet tenant obligations totalling $0.4 million.
In addition, the Trust has unencumbered assets totalling $2.3 million that could be pledged as security for further borrowings.
The Trust may also consider, from time to time, opportunistic asset sales at prices in line with fair values to enhance long-term
financial flexibility. Subsequent to year-end, the Trust announced that it entered into a binding agreement to sell 438 University
Avenue in Toronto, Ontario, for gross proceeds before transaction costs of approximately $105.6 million, before paying down the
$68.9 million mortgage pledged against the property. The sale is expected to provide approximately $36.7 million of incremental
liquidity to the Trust.
We continue to maintain sufficient liquidity for capital expenditures to improve the quality of our properties.
Mortgage refinancing
On November 5, 2024, the Trust closed on its $225.0 million maturity mortgage loan at Adelaide Place with a syndicate of global
and Canadian financial institutions for a term of five years at a floating interest rate based on the daily CORRA plus 2.40%. In
connection with the refinancing, the Trust entered into a fixed-for-variable swap to fix the interest rate on the mortgage at
5.479%.
On December 17, 2024, the Trust negotiated a one-year extension for a $66.5 million interest-only mortgage secured by a
property in Scarborough, Ontario, bearing interest at daily CORRA plus 2.245%. The Trust has previously entered into a fixed-for-
variable interest rate swap relating to this mortgage fixing the interest rate at approximately 6.44%.
Credit facilities
On April 30, 2024, the Trust amended and extended its $10 million revolving credit facility to a new maturity date of March 31,
2027. The amended facility bears interest at the unadjusted one-month term CORRA plus 2.895% or at the bank’s prime rate
plus 0.950%.
The amounts available and drawn under the credit facilities as at December 31, 2024 are summarized in the table below:
December 31, 2024
Facility
Maturity date
Interest rates
on drawings(6)
Face
interest
rate(7)
Borrowing
capacity
Drawings
Letters of
credit
Amount
available
Formula-based maximum not to
exceed $375,000(1)
September 30, 2025
CORRA + 1.945% or
prime + 0.650%
5.39% $ 325,909 $ (312,567) $
(1,232) $
12,110
Formula-based maximum not to
exceed $10,000(2)
March 31, 2027
CORRA + 2.895% or
prime + 0.950% n/a
9,088
—
—
9,088
Formula-based maximum not to
exceed $20,000(3)
Due on demand
CORRA + 2.595% or
prime + 0.500% n/a
17,045
—
—
17,045
Canada Infrastructure Bank credit
facility
March 31, 2027(4)
2.15 %
2.15%
112,870
(31,841)
—
81,029
Non-revolving term loan facility(5)
November 30, 2028
6.75 %
6.75%
8,200
(7,772)
—
428
Total
5.13% $
473,112 $ (352,180) $
(1,232) $
119,700
(1) The $375,000 revolving credit facility is secured by five investment properties and 11,916,572 Dream Industrial LP Class B limited partnership units.
(2) The $10,000 revolving credit facility is secured by 1,430,000 Dream Industrial LP Class B limited partnership units.
(3) The $20,000 demand revolving credit facility is secured by one investment property.
(4) The maturity date of the CIB Facility represents the non-revolving availability period. Subsequent to the availability period, this non-revolving credit facility
will convert to a 20-year amortizing term credit facility. The CIB Facility may be used solely for the purpose of commercial property retrofits to achieve
certain energy efficiency savings and GHG emission reductions.
(5) The non-revolving term loan facility is restricted for use towards meeting a tenant’s construction allowance requirements in connection with a lease
negotiated with a commercial banking tenant.
(6) CORRA borrowing pricing is based on the unadjusted one-month term CORRA tenor.
(7) Face interest rate includes the effect of applicable interest rate swaps.
n/a – not applicable
As at December 31, 2024, drawings on the CIB Facility represent 80% of the costs to date for the capital retrofits at certain
Toronto downtown properties in connection with projects to reduce the operational carbon emissions in these buildings by an
estimated 3,241 tonnes of CO2, or 57.5%, per year on project completion.
Dream Office REIT 2024 Annual Report | 27
Discontinuation of CDOR
On June 28, 2024, the Canadian Dollar Offered Rate (“CDOR”), the index used to price bankers’ acceptances, was discontinued.
CORRA has been introduced to replace the prior index to enhance the reliability and transparency of borrowing rates.
Consequently, substantially all of the Trust’s financial instruments that previously referenced CDOR have been amended to
reference CORRA. In addition, the Trust’s CDOR-indexed interest rate swaps have been amended from CDOR to CORRA. As
CORRA is a risk-free rate, CORRA reference rates are lower than historical BA averages, and so the pricing spreads over the new
reference rate have increased in order to maintain parity with pricing of the borrowings under CDOR.
Debt maturity profile
The following table summarizes our debt maturity profile, excluding debt in joint ventures that are equity accounted, as at
December 31, 2024:
Mortgages
Credit facilities
Total
Outstanding
Weighted
Outstanding
Weighted
Outstanding
Weighted
balance
average
balance
average
balance
average
due at
interest
due at
interest
due at
interest
Debt maturities
maturity
rate
maturity
rate
maturity
rate
2025
$
30,000
6.50% $
312,567
5.36% $
342,567
5.46%
2026
165,506
4.80%
—
—
165,506
4.80%
2027
240,389
4.60%
—
—
240,389
4.60%
2028
—
—
7,772
6.75%
7,772
6.75%
2029
418,436
4.56%
—
—
418,436
4.56%
2030
141,800
6.14%
—
—
141,800
6.14%
2047
—
—
31,841
2.15%
31,841
2.15%
Subtotal before undernoted items
$
996,131
4.89% $
352,180
5.10% $ 1,348,311
4.95%
Scheduled principal repayments on non-matured
debt (2025–2027)
32,543
—
—
—
32,543
—
Subtotal before undernoted items
$ 1,028,674
4.64% $
352,180
5.10% $ 1,380,854
4.75%
Unamortized financing costs
(3,883)
(470)
(4,353)
Subtotal before undernoted items
$ 1,024,791
4.88% $
351,710
5.23% $ 1,376,501
4.97%
Less:
Debt related to assets held for sale
(68,887)
3.75 %
—
(68,887)
3.75 %
Debt per consolidated financial statements
$
955,904
4.96% $
351,710
5.23% $ 1,307,614
5.03%
Commitments and contingencies
Dream Office REIT and its operating subsidiaries are contingently liable under guarantees that are issued in the normal course of
business, on certain debt assumed by purchasers of investment properties, and with respect to litigation and claims that arise
from time to time. In the opinion of management, any liability that may arise from such contingencies would not have a material
and adverse effect on the consolidated financial statements of the Trust as at December 31, 2024.
The Trust is contingently liable under a guarantee that was issued on debt assumed by a purchaser of an investment property
totalling $46.5 million (December 31, 2023 – $48.2 million) with a term to maturity of 1.6 years (December 31, 2023 – 2.6 years).
The guaranteed debt is secured by a property in British Columbia.
In 2015, a subsidiary of the Trust received notices of reassessment from both the Canada Revenue Agency and the Alberta
Minister of Finance with respect to its 2007, 2008 and 2010 taxation years. These reassessments relate to the deductibility of
certain tax losses claimed by the subsidiary prior to its acquisition by the Trust. These federal and provincial reassessments,
including interest and penalties, total $17.1 million. There has been no change to total current taxes payable by the Trust as no
cash payment is expected to be made unless it is ultimately established that the Trust has an obligation to make one.
Management does not expect any payment with respect to the reassessments will ultimately be made by the Trust or any of its
subsidiaries. For this reason, no amounts have been recorded in the consolidated financial statements as at December 31, 2024
relating to these reassessments.
Dream Office REIT 2024 Annual Report | 28
At December 31, 2024, Dream Office REIT’s future minimum commitments are as follows:
Minimum payments due
Within 1 year
1–5 years
> 5 years
Total
Operating commitments
$
3,014
$
3,447
$
—
$
6,461
Fixed price contracts
1,444
5,776
5,806
13,026
Total
$
4,458
$
9,223
$
5,806
$
19,487
Since 2018, the Trust has invested US$8.4 million (December 31, 2023 – US$7.8 million) towards real estate technologies
through a joint venture. As at December 31, 2024, the Trust has a remaining commitment totalling US$3.2 million to the fund.
In the event that a contemplated property development project proceeds, the Trust has committed to contribute one of its
investment properties with a fair value of $44.9 million to the development project.
In the event that the mixed-use development of Block 2 at 2200–2206 Eglinton Avenue East and 1020 Birchmount Road in
Scarborough, Ontario proceeds, the Trust has committed up to a maximum of $80 million.
OUR EQUITY
Total equity
Our discussion of equity includes the subsidiary redeemable units, which are economically equivalent to REIT Units. Pursuant to
IFRS Accounting Standards, the subsidiary redeemable units are classified as a liability in our consolidated financial statements.
Unitholders’ equity
December 31, 2024
December 31, 2023
Number of units(1)
Amount
Number of units(1)
Amount
Unitholders’ equity
16,337,348
$
1,837,446
16,313,022
$
1,837,138
Deficit
—
(764,786)
—
(642,162)
Accumulated other comprehensive income
—
7,863
—
5,335
Equity per consolidated financial statements
16,337,348
1,080,523
16,313,022
1,200,311
Add: Subsidiary redeemable units
2,616,911
46,738
2,616,911
54,850
Total equity (including subsidiary redeemable units)(2)
18,954,259
$
1,127,261
18,929,933
$
1,255,161
NAV per unit(1)(3)
$
59.47
$
66.31
(1) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All unit and per unit amounts disclosed
reflect the post-Unit Consolidation units for all periods presented.
(2) Total equity (including subsidiary redeemable units) is a non-GAAP financial measure. Total equity (including subsidiary redeemable units) is not a
standardized financial measure under IFRS Accounting Standards and might not be comparable to similar measures disclosed by other issuers. Please refer to
the section “Non-GAAP Financial Measures and Ratios” under the heading “Total equity (including subsidiary redeemable units)” for additional information
on this non-GAAP financial measure.
(3) NAV per unit is a non-GAAP ratio. It is defined in this section under the heading “NAV per unit” and in the section “Non-GAAP Financial Measures and
Ratios” under the heading “NAV per unit”.
The amended and restated Declaration of Trust of Dream Office REIT dated June 6, 2023 (as amended, restated, amended and
restated, or otherwise revised from time to time, the “Declaration of Trust”) authorizes the issuance of an unlimited number of
the following classes of units: REIT Units, issuable in one or more series, Transition Fund Units and Special Trust Units. The
Special Trust Units may be issued only to holders of subsidiary redeemable units, are not transferable separately from these
units and are used to provide voting rights with respect to Dream Office REIT to persons holding subsidiary redeemable units.
The subsidiary redeemable units are held by DAM, a related party to Dream Office REIT, and DAM holds an equivalent number of
Special Trust Units. Both the REIT Units and Special Trust Units entitle the holder to one vote for each unit at all meetings of the
unitholders. The subsidiary redeemable units are exchangeable on a one-for-one basis for REIT B Units at the option of the
holder, which can then be converted into REIT A Units. The subsidiary redeemable units and corresponding Special Trust Units
together have economic and voting rights equivalent in all material respects to REIT A Units. The REIT A Units and REIT B Units
have economic and voting rights equivalent in all material respects to each other. There are no Transition Fund Units
outstanding.
As at December 31, 2024, DAM held 3,314,226 REIT A Units and 2,616,911 subsidiary redeemable units for a total ownership
interest of approximately 31.3%.
Dream Office REIT 2024 Annual Report | 29
NAV per unit
NAV per unit is calculated as total equity (including subsidiary redeemable units) (a non-GAAP financial measure) divided by the
total number of REIT A Units and subsidiary redeemable units. This non-GAAP ratio is a useful measure to investors as it reflects
management’s view of the intrinsic value of the Trust and enables investors to determine if the Trust’s REIT Unit price is trading
at a discount or premium relative to the NAV per unit at each reporting period. However, NAV per unit is not a standardized
financial measure under IFRS Accounting Standards and might not be comparable to similar financial measures disclosed by
other issuers.
As at December 31, 2024, our NAV per unit decreased to $59.47 compared to $66.31 at December 31, 2023. The decrease in
NAV per unit relative to December 31, 2023 is driven by fair value losses on investment properties primarily due to changes in
assumptions and maintenance capital and leasing costs write-offs in both regions, impairment recognized on VTB mortgage
receivables, as well as fair value losses on interest rate swap contracts, partially offset by cash flow retention (FFO net of
distributions). As at December 31, 2024, equity per the consolidated financial statements was $1.1 billion.
The table below reconciles the major components of NAV per unit to total equity per the consolidated financial statements:
Total
Per unit
GLA
(in millions
of sq. ft.)
Occupancy –
in-place and
committed
Weighted
average lease
term
(years)
Investment properties
Toronto downtown
$
1,750,357 $
92.35
2.9
83.8%
5.4
Other markets
372,346
19.64
1.7
76.6%
5.7
Active investment properties
2,122,703
111.99
4.6
81.1%
5.5
Mortgages secured by active investment properties
(939,062)
(49.54)
Active investment properties, net of mortgages
1,183,641
62.45
Properties under development, net of mortgages
35,470
1.87
Investment in Dream Industrial REIT
227,320
11.99
Asset held for sale, net of mortgages
36,713
1.94
Investments in joint ventures
27,738
1.46
Cash and cash equivalents
18,268
0.96
Credit facilities
(351,710)
(18.56)
Other items
(50,179)
(2.64)
Net asset value
$
1,127,261 $
59.47
Less: Subsidiary redeemable units
(46,738)
Total equity per consolidated financial statements
$
1,080,523
Outstanding equity
The following table summarizes the changes in our outstanding equity:
For the three months ended December 31, 2024
REIT A Units
Subsidiary
redeemable
units
Total
Total units issued and outstanding at October 1, 2024
16,332,563
2,616,911
18,949,474
REIT A Units issued pursuant to Deferred Unit Incentive Plan (“DUIP”)
1,785
—
1,785
Total units issued and outstanding at December 31, 2024
16,334,348
2,616,911
18,951,259
Percentage of all units
86.2%
13.8%
100.0%
For the year ended December 31, 2024 and subsequent to the quarter
REIT A Units(1)
Subsidiary
redeemable
units(1)
Total(1)
Total units issued and outstanding at January 1, 2024
16,313,022
2,616,911
18,929,933
REIT A Units issued pursuant to Deferred Unit Incentive Plan (“DUIP”)
24,326
—
24,326
Total units issued and outstanding at December 31, 2024 and February 20, 2025
16,337,348
2,616,911
18,954,259
Percentage of all units
86.2%
13.8%
100.0%
(1) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All unit amounts disclosed reflect the post-
Unit Consolidation units for all periods presented.
Dream Office REIT 2024 Annual Report | 30
The DUIP provides for the grant of DTUs to trustees of the Trust, officers and employees, as well as affiliates. DTUs are granted at
the discretion of the Board of Trustees of the Trust, and participants are also credited with income DTUs based on distributions
as they are declared and paid by the Trust. Distributions on the unvested DTUs are paid in the form of units converted at market
price of the units of the Trust on the date of distribution. As at December 31, 2024, there were 549,909 DTUs and income DTUs
outstanding (December 31, 2023 – 435,734) under the DUIP.
Normal course issuer bid
On August 19, 2024, the TSX accepted a notice filed by the Trust to renew its prior NCIB for a one year period. Under the bid, the
Trust will have the ability to purchase for cancellation up to a maximum of 862,071 of its REIT A Units (representing 10% of the
Trust’s public float of 8,620,718 REIT A Units as of August 12, 2024) through the facilities of the TSX. The renewed bid
commenced on August 12, 2024 and will remain in effect until the earlier of August 20, 2025 or the date on which the Trust has
purchased the maximum number of REIT A Units permitted under the bid. Daily repurchases are limited to 15,752 REIT A Units,
representing 25% of the average daily trading volume during the prior six calendar months (being 63,011 REIT A Units per day),
other than purchases pursuant to applicable block purchase exceptions.
In connection with the NCIB renewal, the Trust entered into an automatic securities repurchase plan (the “Plan”) with its
designated broker in order to facilitate purchases of its REIT A Units under the NCIB. The Plan allows for purchases by Dream
Office REIT of REIT A Units at any time including, without limitation, when the Trust would ordinarily not be permitted to make
purchases due to regulatory restrictions or self-imposed blackout periods. Purchases will be made by the Trust’s broker based
upon the parameters prescribed by the TSX and the terms of the parties’ written agreement. Outside of such restricted or
blackout periods, the REIT A Units may also be purchased in accordance with management’s discretion. The Plan will terminate
on August 20, 2025.
For the three months and year ended December 31, 2024, there were no REIT A Units purchased for cancellation under the NCIB
program (for the year ended December 31, 2023 – 727,306 REIT A Units were purchased for cancellation at a cost of $22.2
million).
Weighted average number of units
The following table outlines the basic and diluted weighted average number of units for the three months and years ended
December 31, 2024 and December 31, 2023:
Three months ended December 31,
Year ended December 31,
Weighted average number of units(1) (in thousands)
2024
2023(2)
2024
2023(2)
Basic
19,299
19,202
19,273
22,260
Diluted
19,500
19,359
19,464
22,410
(1) Weighted average number of units is defined in the section “Supplementary Financial Measures and Ratios and Other Disclosures” under the heading
“Weighted average number of units”.
(2) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All unit amounts disclosed reflect the post-
Unit Consolidation units for all periods presented.
Distribution policy
Our Declaration of Trust provides our trustees with the discretion to determine the percentage payout of income that would be
in the best interest of the Trust. For the three months ended December 31, 2024 and December 31, 2023, the Trust declared
monthly distributions totalling $0.25 per unit and $0.50 per unit ($0.25 per pre-Unit Consolidation unit), respectively. For the
year ended December 31, 2024 and December 31, 2023, the Trust declared distributions totalling $1.08 per unit and $2.00 per
unit (or $1.00 per pre-Unit Consolidation unit), respectively. Following the Unit Consolidation on February 22, 2024, the monthly
distributions of the Trust were not proportionately increased and adjusted. As a result, based on the change in unit count, the
Trust has reduced its distributions paid and payable on the REIT A Units and subsidiary redeemable units by 50%. The reduction
in distributions paid and payable as a result of the Unit Consolidation took effect commencing with the February 2024
distribution paid on March 15, 2024.
Based on the change in unit count, the reduction in distributions paid and payable will allow the Trust to retain approximately
$18.9 million of cash on an annualized basis to reinvest in improving occupancy and enhancing liquidity in the business.
Dream Office REIT 2024 Annual Report | 31
The following table summarizes our total distributions paid and payable (a non-GAAP financial measure) for the three months
and years ended December 31, 2024 and December 31, 2023:
Three months ended December 31,
Year ended December 31,
2024
2023
2024
2023
Total distributions paid and payable on REIT A Units
$
4,084 $
8,156 $
17,690 $
37,912
Add: Interest on subsidiary redeemable units
654
1,309
2,835
5,234
Total distributions paid and payable(1)
$
4,738 $
9,465 $
20,525 $
43,146
(1) Total distributions paid and payable is a non-GAAP financial measure. Total distributions paid and payable is not a standardized financial measure under IFRS
Accounting Standards and might not be comparable to similar measures disclosed by other issuers. Please refer to the “Non-GAAP Financial Measures and
Ratios” section under the heading “Total distributions paid and payable” for additional information on this non-GAAP financial measure.
The decrease in total distributions paid and payable on a year-over-year basis for the three months and year ended December
31, 2024 was due to the cancellation of REIT A Units under the SIB and NCIB programs in the prior year and the effective
reduction in distributions as a result of the Unit Consolidation in the current period.
The following table summarizes our monthly distributions paid and payable subsequent to quarter-end:
Date distribution
announced
Month of distribution
Date distribution was
paid or is payable
Distribution per
Unit
Total distributions
paid or payable on
REIT A Units
Interest on
subsidiary
redeemable units
Total distributions
paid or payable
December 18, 2024
December 2024
January 15, 2025
$
0.08333 $
1,361 $
218 $
1,579
January 22, 2025
January 2025
February 14, 2025
0.08333
1,361
218
1,579
Cash flows from operating activities less cash interest paid on debt, net income and distributions declared
In any given period, actual cash flows generated from (utilized in) operating activities less cash interest paid on debt may differ
from total distributions paid and payable (a non-GAAP financial measure), primarily due to fluctuations in non-cash working
capital and the impact of leasing costs, which fluctuate with lease maturities, renewal terms, the type of asset being leased and
when tenants fulfill the terms of their respective lease agreements. Capital requirements can fluctuate seasonally, and the
timing of when leasing costs are incurred is unpredictable; such costs are funded with our cash and cash equivalents on hand
and, if necessary, with our existing revolving credit facilities. As a result of these factors, the Trust anticipates that in certain
future periods, cash flows generated from (utilized in) operating activities less cash interest paid on debt may be less than total
distributions paid and payable.
To the extent that there are shortfalls in cash flows generated from (utilized in) operating activities less interest paid on debt
when compared to total distributions paid and payable, the Trust will fund the shortfalls with cash and cash equivalents on hand
and with our existing revolving credit facilities. The Trust funded the current year shortfall using its revolving credit facilities. The
use of the revolving credit facilities may involve risks compared with using cash and cash equivalents on hand as a source of
funding, such as the risk that interest rates may rise in the future, which may make it more expensive for the Trust to borrow
under the revolving credit facilities; the risk that credit facilities may not be renewed at maturity or may be renewed on
unfavourable terms; and the risk associated with increasing the overall indebtedness of the Trust. The Trust determines the
distribution rate by, among other considerations, its assessment of cash flows generated from (utilized in) operating activities
less interest paid on debt. Management reviews the estimated annual distributable cash flows with the Board of Trustees
periodically to assist the Board in determining the targeted distribution rate.
In any given period, the Trust anticipates that net income will continue to vary from total distributions paid and payable as net
income includes non-cash items such as fair value adjustments to investment properties and financial instruments and costs
related to dispositions such as debt settlement costs and costs attributable to sales of investment properties. Accordingly, the
Trust does not use net income as a proxy for determining distributions.
The following table summarizes net income, cash flows generated from (utilized in) operating activities, cash interest paid on
debt, and total distributions paid and payable for the three months and years ended December 31, 2024 and December 31,
2023:
Three months ended December 31,
Year ended December 31,
2024
2023
2024
2023
Net loss for the period
$
(19,101)
$
(42,424)
$
(104,934)
$
(77,196)
Cash flows generated from (utilized in) operating activities
17,128
20,262
72,393
70,725
Cash interest paid on debt
(15,841)
(13,208)
(60,407)
(55,708)
Total distributions paid and payable(1) for the period
(4,738)
(9,465)
(20,525)
(43,146)
(1) Total distributions paid and payable (a non-GAAP financial measure) is defined in the section “Non-GAAP Financial Measures and Ratios” under the heading
“Total distributions paid and payable”.
Dream Office REIT 2024 Annual Report | 32
As required by National Policy 41-201, “Income Trusts and Other Indirect Offerings”, the following table outlines the difference
between net income and total distributions paid and payable (a non-GAAP financial measure), as well as the difference between
cash flows generated from (utilized in) operating activities less cash interest paid on debt and total distributions paid and
payable, in accordance with the guidelines:
Three months ended December 31,
Year ended December 31,
2024
2023
2024
2023
Shortfall of net income (loss) over total distributions paid and
payable (1)(2)
$
(23,839)
$
(51,889)
$
(125,459)
$
(120,342)
Shortfall of cash flows generated from (utilized in) operating
activities less cash interest paid on debt over total distributions
paid and payable(2)(3)
(3,451)
(2,411)
(8,539)
(28,129)
(1) Shortfall of net income over total distributions paid and payable is calculated as net income (loss) less total distributions paid and payable.
(2) Total distributions paid and payable (a non-GAAP financial measure) is defined in the section “Non-GAAP Financial Measures and Ratios” under the heading
“Total distributions paid and payable”.
(3) Shortfall of cash flows generated from (utilized in) operating activities less cash interest paid on debt over total distributions paid and payable is calculated as
cash flows generated from (utilized in) operating activities less cash interest paid on debt less total distributions paid and payable.
For the three and nine months ended December 31, 2024, total distributions paid and payable exceeded net income by $23.8
million and $125.5 million, respectively, primarily due to the effect of fair value losses on investment properties that are non-
cash in nature.
For the three months and year ended December 31, 2024, total distributions paid and payable exceeded cash flows generated
from (utilized in) operating activities less cash interest paid on debt by $3.5 million and $8.5 million, respectively (for the three
months and year ended December 31, 2023 – $2.4 million and $28.1 million, respectively) due to leasing costs.
While the cash distributions received from Dream Industrial REIT have been included as part of cash flows generated from
(utilized in) investing activities in the consolidated financial statements, management is of the view that such distributions are
operating in nature and could be used to mitigate any shortfalls of cash flows generated from (utilized in) operating activities less
interest paid on debt over total distributions paid and payable. For the three months and year ended December 31, 2024, the
Trust received distributions from Dream Industrial REIT totalling $2.4 million and $9.5 million, respectively (for the three months
and year ended December 31, 2023 – $2.4 million and $13.2 million, respectively).
Dream Office REIT 2024 Annual Report | 33
SECTION IV
NON-GAAP FINANCIAL MEASURES AND RATIOS
Included in this section are reconciliations of non-GAAP financial measures presented throughout this MD&A to the most
directly comparable financial measure. These measures are not standardized financial measures under IFRS Accounting
Standards and might not be comparable to similar financial measures disclosed by other issuers.
Available liquidity
Available liquidity is defined as the sum of cash and cash equivalents and undrawn credit facilities at period-end, excluding cash
held in joint ventures that are equity accounted. Management believes that available liquidity, a non-GAAP financial measure, is
an important measure for investors to assess our resources available to meet all our ongoing obligations and future
commitments.
The table below reconciles available liquidity to undrawn credit facilities (the most directly comparable financial measure) as at
December 31, 2024 and December 31, 2023:
As at
December 31,
December 31,
2024
2023
Cash and cash equivalents
$
18,268 $
13,273
Undrawn revolving credit facilities
38,243
73,394
Undrawn CIB Facility
81,029
92,361
Undrawn non-revolving term loan facility
428
8,200
Available liquidity
$
137,968 $
187,228
The undrawn CIB Facility may be used solely for the purpose of commercial property retrofits to achieve certain energy
efficiency savings and GHG emission reductions.
The undrawn non-revolving term loan facility is restricted for use towards meeting a tenant’s construction allowance
requirements in connection with a lease negotiated with a commercial banking tenant.
Total equity (including subsidiary redeemable units)
One of the components used to determine the Trust’s NAV per unit (a non-GAAP ratio) is total equity (including subsidiary
redeemable units), a non-GAAP financial measure. Total equity (including subsidiary redeemable units) is calculated as the sum
of the equity amount per consolidated financial statements and the subsidiary redeemable units’ amount. Management believes
it is important to include the subsidiary redeemable units’ amount for the purpose of determining the Trust’s capital
management. Management does not consider the subsidiary redeemable units to be debt or borrowings of the Trust, but rather
a component of the Trust’s equity.
On February 22, 2024, the Trust implemented a Unit Consolidation of all the issued and outstanding REIT A Units, REIT B Units
and Special Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. As
such, effective January 1, 2024, the Trust has restated its total equity (including subsidiary redeemable units) for comparative
periods to conform to the current period presentation.
The table within the section “Our Equity” under the heading “Total equity” reconciles total equity (including subsidiary
redeemable units) to total equity per the consolidated financial statements (the most directly comparable financial measure).
Total distributions paid and payable
Total distributions paid and payable is a non-GAAP financial measure calculated as the sum of the distributions paid and payable
on REIT A Units and interest expense on subsidiary redeemable units per consolidated financial statements. Because
management considers the subsidiary redeemable units to be a component of the Trust’s equity, management considers the
interest paid on the subsidiary redeemable units to be a component of total distributions paid to unitholders.
The table within the section “Our Equity” under the heading “Distribution policy” reconciles total distributions paid and payable
to total distributions paid and payable on REIT A Units (the most directly comparable financial measure) for the three months
and years ended December 31, 2024 and December 31, 2023.
NAV per unit
NAV per unit is a non-GAAP ratio calculated as total equity (including subsidiary redeemable units) (a non-GAAP financial
measure) divided by the total number of REIT A Units and subsidiary redeemable units. This non-GAAP ratio is an important
Dream Office REIT 2024 Annual Report | 34
measure used by the Trust, as it reflects management’s view of the intrinsic value of the Trust and enables investors to
determine if the Trust’s REIT Unit price is trading at a discount or premium relative to the NAV per unit at each reporting period.
As a result of the Unit Consolidation implemented on February 22, 2024, all the issued and outstanding REIT A Units, REIT B
Units and Special Trust Units of the REIT were consolidated on the basis of one (1) post-consolidation Unit for every two (2) pre-
consolidation Units. As such, effective January 1, 2024, the Trust has restated its NAV per unit calculation for comparative
periods to conform to the current period presentation.
The table within the section “Our Equity” under the heading “Total equity” reconciles NAV per unit to equity per the
consolidated financial statements (the most directly comparable financial measure) as at December 31, 2024 and December 31,
2023.
Funds from operations and diluted FFO per unit
Management believes FFO, a non-GAAP financial measure, and diluted FFO per unit, a non-GAAP ratio, provide our investors
with additional relevant information on our operating performance. Fair value adjustments to investment properties and
financial instruments, including fair value adjustments to interest rate swaps constituting economically effective hedges for
which the Trust elects not to apply hedge accounting under IFRS Accounting Standards, gains or losses on disposal of investment
properties, debt settlement costs due to the disposal of investment properties, and other items detailed in the following table
do not necessarily provide an accurate picture of the Trust’s past or recurring operating performance. FFO and diluted FFO per
unit are commonly used measures of performance of real estate operations; however, they do not represent net income or cash
flows generated from (utilized in) operating activities, as defined by IFRS Accounting Standards, and are not necessarily
indicative of cash available to fund Dream Office REIT’s needs.
In January 2022, REALPAC issued guidance on determining FFO and adjusted funds from operations for IFRS Accounting
Standards. The Trust has reviewed the REALPAC FFO guidance, and the Trust’s determination of FFO substantially aligns with the
REALPAC FFO guidelines, with the exception of the treatment of debt settlement costs due to disposals of investment properties
and impairment of VTB mortgage receivables. Debt settlement costs are primarily funded from net proceeds from dispositions
rather than from investment property operations. Thus, the Trust is of the view that debt settlement costs due to disposals of
investment properties should not be included in the determination of FFO. Similarly, as the Trust’s VTB mortgage receivables
represent a component of proceeds on the sale of investment properties, the Trust does not consider impairment of these
receivables to be an operating item. Consequently, the Trust has adjusted for the effect of VTB mortgage receivable impairment
in deriving these measures. The Trust is currently undergoing an enterprise resource planning systems upgrade and
modernization with a cloud migration component. IFRS Accounting Standards prohibit the capitalization of costs incurred in
implementing cloud systems. The Trust considers these one-time costs that are not reflective of the operations of the Trust and
so has adjusted for these costs in its determination of FFO.
As a result of the Unit Consolidation implemented on February 22, 2024, all the issued and outstanding REIT A Units, REIT B
Units and Special Trust Units of the REIT were consolidated on the basis of one (1) post-consolidation Unit for every two (2) pre-
consolidation Units. As such, effective January 1, 2024, the Trust has restated its diluted weighted average number of units and
the FFO per unit calculation for comparative periods to conform to the current period presentation.
FFO is reconciled to net income (the most directly comparable financial measure) in the table below for the three months and
years ended December 31, 2024 and December 31, 2023. Diluted FFO per unit is a non-GAAP ratio calculated as FFO (a non-
GAAP financial measure) divided by the weighted average number of units.
Dream Office REIT 2024 Annual Report | 35
The table below summarizes the components used to calculate diluted FFO per unit for the three months and years ended
December 31, 2024 and December 31, 2023:
Three months ended December 31,
Year ended December 31,
2024
2023
2024
2023
Net loss for the period
$
(19,101)
$
(42,424)
$
(104,934)
$
(77,196)
Add (deduct):
Net loss (income) from investment in Dream Industrial REIT
(3,369)
(169)
(10,425)
30,674
Share of FFO from investment in Dream Industrial REIT
3,472
3,280
13,537
17,973
Depreciation and amortization
3,011
3,711
12,735
12,390
Costs attributable to sale of investment properties
279
157
1,191
203
Interest expense on subsidiary redeemable units
654
1,309
2,835
5,234
Fair value adjustments to investment properties
38,903
28,823
114,589
96,406
Fair value adjustments to investment properties held in joint
ventures
34
355
174
495
Fair value adjustments to financial instruments and DUIP included
in G&A expenses
(12,379)
18,985
(347)
(23,342)
Internal leasing costs
494
408
1,931
1,700
Principal repayments on finance lease liabilities
(14)
(14)
(57)
(54)
Enterprise resource planning software upgrade costs included in
G&A expenses
14
—
14
—
Deferred income taxes expense (recovery)
(2,188)
167
(2,384)
35
Impairment of VTB mortgage receivables
4,294
—
29,199
—
FFO for the period
$
14,104
$
14,588
$
58,058
$
64,518
Diluted weighted average number of units(1)
19,500
19,359
19,464
22,410
Diluted FFO per unit(1)
$
0.72
$
0.75
$
2.98
$
2.88
(1) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All unit and per unit amounts disclosed
reflect the post-Unit Consolidation units for all periods presented.
Comparative properties NOI
Comparative properties NOI is a non-GAAP financial measure used by management in evaluating the operating performance of
properties owned by the Trust in the current and comparative periods presented. Comparative properties NOI enables investors
to evaluate our current and future operating performance, especially to assess the effectiveness of our management of
properties generating NOI growth from existing properties in the respective regions.
When the Trust compares comparative properties NOI on a year-over-year basis for the three months and years ended
December 31, 2024 and December 31, 2023, the Trust excludes investment properties acquired and properties under
development completed after January 1, 2023 and assets held for sale or disposed of prior to or during the current period.
Comparative properties NOI also excludes NOI from properties under development; property management and other service
fees; lease termination fees; one-time property adjustments, if any; provisions; straight-line rent; and amortization of lease
incentives.
Comparative properties NOI for the respective periods has been reconciled to net rental income (the most directly comparable
measure) within the section “Our Operations” under the heading “Comparative properties NOI”.
Adjusted earnings before interest, taxes, depreciation, amortization and fair value adjustments
(“adjusted EBITDAFV”)
Adjusted EBITDAFV is a non-GAAP financial measure defined by the Trust as net income for the period adjusted for change in
provisions, lease termination fees, one-time property adjustments, non-cash items included in investment properties revenue,
fair value adjustments to investment properties and financial instruments, share of income from investment in Dream Industrial
REIT, share of net loss from investment in joint ventures, distributions received from Dream Industrial REIT, interest expense on
debt and subsidiary redeemable units, depreciation on property and equipment, impairment, net losses on transactions and
other items, and net current and deferred income tax expense (recovery). The aforementioned adjustments included in net
income do not necessarily provide an accurate picture of the Trust’s past or recurring operating performance. Management
believes adjusted EBITDAFV provides our investors with additional relevant information on our operating performance, excluding
any non-cash items and extraneous factors. Adjusted EBITDAFV is a commonly used measure of performance of real estate
operations; however, it does not represent net income or cash flows generated from (utilized in) operating activities, as defined
by IFRS Accounting Standards, and is not necessarily indicative of cash available to fund the Trust’s needs.
Dream Office REIT 2024 Annual Report | 36
Adjusted EBITDAFV has been reconciled to net income (the most directly comparable financial measure) for the three months
and years ended December 31, 2024 and December 31, 2023 in the table below:
Three months ended
Year ended
December 31,
December 31,
December 31,
December 31,
2024
2023
2024
2023
Net loss for the period
$
(19,101) $
(42,424) $
(104,934)
$
(77,196)
Add (deduct):
Interest – debt
17,319
15,865
65,051
58,978
Interest – subsidiary redeemable units
654
1,309
2,835
5,234
Current and deferred income taxes expense (recovery), net
(2,162)
179
(2,290)
47
Depreciation on property and equipment
1
36
121
162
Fair value adjustments to investment properties
38,903
28,823
114,589
96,406
Fair value adjustments to financial instruments
(12,278)
19,282
221
(22,509)
Net loss (income) from investment in Dream Industrial REIT
(3,369)
(169)
(10,425)
30,674
Distributions earned from Dream Industrial REIT
2,369
2,369
9,477
12,459
Share of net loss (income) from investment in joint ventures
(4)
319
(336)
812
Non-cash items included in investment properties revenue(1)
2,045
2,321
9,122
10,397
Change in provisions
23
621
230
858
Other income
(776)
(349)
(1,202)
(592)
Impairment of VTB mortgage receivables
4,294
—
29,199
—
Internal leasing costs and net losses on transactions
773
565
3,122
1,920
Adjusted EBITDAFV for the period
$
28,691
$
28,747
$
114,780
$
117,650
(1) Includes adjustments for straight-line rent and amortization of lease incentives.
Interest coverage ratio (times)
Management believes that interest coverage ratio, a non-GAAP ratio, is an important measure that assists investors in
determining our ability to cover interest expense based on our operating performance. Interest coverage ratio is calculated as
the ratio between trailing 12-month adjusted EBITDAFV and trailing 12-month interest expense on debt, both of which are non-
GAAP financial measures. The Trust uses trailing 12-month figures to assist investors in identifying longer-term trends in property
operating performance and the cost of the Trust’s debt.
The following table calculates the interest coverage ratio for the trailing 12-month periods ended December 31, 2024 and
December 31, 2023:
For the trailing 12-month period ended
December 31,
December 31,
2024
2023
Trailing 12-month adjusted EBITDAFV
$
114,780 $
117,650
Trailing 12-month interest expense on debt
$
65,051 $
58,978
Interest coverage ratio (times)
1.8
2.0
Net total debt-to-normalized adjusted EBITDAFV ratio (years)
Management believes that net total debt-to-normalized adjusted EBITDAFV ratio (years), a non-GAAP ratio, is an important
measure that assists our investors in determining the time it takes the Trust, on a go forward basis, based on its normalized
operating performance, to repay our debt.
Net total debt (a non-GAAP measure) is calculated as the sum of current and non-current debt less cash on hand. Cash on hand
excludes cash and cash equivalents held in co-owned properties and joint ventures that are equity accounted and which cannot
be used at the Trust’s sole discretion. Net total debt is a component in the calculation of net total debt-to-normalized adjusted
EBITDAFV ratio (years). Management believes net total debt is an important financial measure that investors may use to monitor
the principal amount of debt outstanding after factoring in cash on hand, and as a component of investors’ assessment of the
Trust’s ability to take on additional debt and its ability to manage overall balance sheet risk levels.
Net total debt-to-normalized adjusted EBITDAFV ratio (years) as shown below is calculated as net total debt (a non-GAAP
financial measure), which includes debt related to assets held for sale, divided by normalized adjusted EBITDAFV – annualized (a
non-GAAP financial measure). Normalized adjusted EBITDAFV – annualized is calculated as the quarterly adjusted EBITDAFV (a
non-GAAP measure) less the NOI of disposed properties for the quarter plus the normalized NOI of properties acquired in the
quarter. Management believes that normalized adjusted EBITDAFV – annualized (a non-GAAP financial measure) provides
Dream Office REIT 2024 Annual Report | 37
investors with additional relevant information based on our normalized operating performance. Adjusted EBITDAFV (a non-GAAP
financial measure) is defined under the heading “Adjusted earnings before interest, taxes, depreciation, amortization and fair
value adjustments (“adjusted EBITDAFV”)” within this section.
The following table calculates the annualized net total debt-to-normalized adjusted EBITDAFV ratio (years) as at December 31,
2024 and December 31, 2023:
December 31,
December 31,
2024
2023
Non-current debt
$
956,076 $
1,254,090
Current debt
351,538
85,371
Total debt
1,307,614
1,339,461
Add: Debt related to assets held for sale
68,887
—
Less: Cash on hand(1)
(17,545)
(11,908)
Net total debt
$
1,358,956 $
1,327,553
Adjusted EBITDAFV(2) – quarterly
28,691
28,747
Less: NOI of disposed properties for the quarter
(635)
2
Normalized adjusted EBITDAFV – quarterly
$
28,056 $
28,749
Normalized adjusted EBITDAFV – annualized
$
112,224 $
114,996
Net total debt-to-normalized adjusted EBITDAFV ratio (years)
12.1
11.5
(1) Cash on hand represents cash on hand at period-end, excluding cash held in co-owned properties and joint ventures that are equity accounted.
(2) Adjusted EBITDAFV (a non-GAAP financial measure) has been reconciled to net income under the heading “Adjusted earnings before interest, taxes,
depreciation, amortization and fair value adjustments (“adjusted EBITDAFV”)” within this section.
Level of debt (net total debt-to-net total assets)
Net total debt (a non-GAAP measure) is a component in the calculation of net total debt-to-net total assets. Net total debt (a
non-GAAP financial measure) is defined under the heading “Net total debt-to-normalized adjusted EBITDAFV ratio (years)”
within this section.
Net total assets is a non-GAAP measure calculated as the sum of total assets less cash on hand. Cash on hand excludes cash and
cash equivalents held in co-owned properties and joint ventures that are equity accounted that cannot be used at the Trust’s
sole discretion. Net total assets is a component in the calculation of net total debt-to-net total assets. Management believes net
total assets is an important financial measure used as a component in investors’ assessment of the Trust’s ability to take on
additional debt and its ability to manage overall balance sheet risk levels.
Level of debt (net total debt-to-net total assets), a non-GAAP ratio, is calculated as net total debt (a non-GAAP financial measure)
divided by net total assets (a non-GAAP financial measure). Management believes this measure is an important measure to
assist investors in assessing the Trust’s leverage.
The following table reconciles net total debt to non-current debt (the most comparable financial measure) and net total assets
to total assets (the most directly comparable financial measure) as at December 31, 2024 and December 31, 2023:
Amounts included in consolidated financial
statements
December 31,
December 31,
2024
2023
Non-current debt
$ 956,076
$ 1,254,090
Current debt
351,538
85,371
Total debt
1,307,614
1,339,461
Add: Debt related to assets held for sale
68,887
—
Less: Cash on hand(1)
(17,545)
(11,908)
Net total debt
$ 1,358,956
$ 1,327,553
Total assets
2,584,927
2,668,330
Less: Cash on hand(1)
(17,545)
(11,908)
Net total assets
$ 2,567,382
$ 2,656,422
Net total debt-to-net total assets
52.9%
50.0%
(1) Cash on hand represents cash on hand at period-end, excluding cash held in co-owned properties and joint ventures that are equity accounted.
Dream Office REIT 2024 Annual Report | 38
SUPPLEMENTARY FINANCIAL MEASURES AND OTHER DISCLOSURES
Unencumbered assets
Unencumbered assets represent the value of investment properties, excluding properties held for sale or investment properties
in joint ventures that are equity accounted, which have not been pledged as collateral for the Trust’s secured credit facilities or
mortgages, plus the fair value of unpledged Dream Industrial REIT units. This measure is used by management in assessing the
borrowing capacity available to the Trust.
The table below presents the components of unencumbered assets as at December 31, 2024 and December 31, 2023:
As at
December 31,
December 31,
2024
2023
Investment properties not pledged as security for debt
$
— $
14,426
Fair value of unpledged Dream Industrial REIT units(1)
2,276
2,691
Unencumbered assets
$
2,276 $
17,117
(1) Fair value of unpledged Dream Industrial REIT units is determined as the closing price of the Dream Industrial REIT units at the end of each period multiplied
by the number of units not pledged as security for the revolving credit facilities.
Weighted average number of units
The basic weighted average number of units comprises the weighted average of all REIT Units, subsidiary redeemable units and
vested but unissued DTUs and income DTUs. The diluted weighted average number of units outstanding used in the FFO per unit
(a non-GAAP ratio) calculation includes the basic weighted average number of units, unvested DTUs and associated income
DTUs.
As a result of the Unit Consolidation implemented on February 22, 2024, all the issued and outstanding REIT A Units, REIT B
Units and Special Trust Units of the REIT were consolidated on the basis of one (1) post-consolidation Unit for every two (2) pre-
consolidation Units. As such, effective January 1, 2024, the Trust has restated its basic and diluted weighted average number of
units for comparative periods to conform to the current period presentation.
SELECTED ANNUAL INFORMATION
The following table provides selected financial information for the past three years:
2024
2023
2022
Investment properties revenue
$
196,114 $
190,448 $
196,273
Net income (loss)
(104,934)
(77,196)
63,641
Total assets
2,584,927
2,668,330
3,066,925
Non-current debt
956,076
1,254,090
1,106,816
Total debt
1,307,614
1,339,461
1,372,783
Total distributions paid and payable(1)
20,525
43,146
52,051
Distribution rate (per unit)
$
1.08 $
2.00 $
2.00
Units outstanding(2):
REIT Units, Series A
16,337,348
16,313,022
23,055,101
LP Class B Units, Series 1
2,616,911
2,616,911
2,616,911
(1) Total distributions paid and payable (a non-GAAP financial measure) is defined in the section “Non-GAAP Financial Measures and Ratios” under the heading
“Total distributions paid and payable”.
(2) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All per unit amounts disclosed reflect the
post-Unit Consolidation units for all periods presented.
Dream Office REIT 2024 Annual Report | 39
QUARTERLY INFORMATION
The following tables show quarterly information since January 1, 2023.
Key portfolio, leasing, financing and other capital information
2024
2023
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Portfolio(1)
Number of properties
26
27
27
28
28
28
28
28
GLA (millions of sq. ft.)
4.8
5.1
5.1
5.1
5.1
5.1
5.1
5.1
Leasing – total portfolio(2)
In-place and committed occupancy
81.1%
84.5%
84.3%
83.5%
84.4%
84.3%
83.9%
84.0%
In-place occupancy
77.5%
80.9%
79.2%
79.3%
82.0%
80.8%
80.9%
80.2%
Tenant retention ratio
58.5%
76.0%
43.6%
31.0%
85.7%
56.1%
46.1%
44.0%
Average in-place and committed net rent
per square foot (period-end)
$27.20
$26.37
$26.33
$26.78
$26.35
$25.47
$25.33
$25.13
Financing
Weighted average face rate of interest on
debt (period-end)(3)
4.75%
4.73%
4.69%
4.54%
4.53%
4.59%
4.40%
4.24%
Interest coverage ratio (times)(4)
1.8
1.8
1.8
1.9
2.0
2.1
2.2
2.3
Net total debt-to-normalized adjusted
EBITDAFV ratio (years)(4)
12.1
11.7
11.8
11.6
11.5
11.6
10.9
10.3
Total debt (in billions)
$1.3
$1.4
$1.4
$1.3
$1.3
$1.3
$1.3
$1.3
Level of debt (net total debt-to-net total
assets)(4)
52.9%
51.9%
50.9%
50.4%
50.0%
48.8%
48.3%
43.0%
Capital
Total number of REIT A Units and
subsidiary redeemable units (in
millions)(5)(6)
19.0
19.0
18.9
18.9
18.9
18.9
18.9
25.1
NAV per unit(4)(6)
$59.47
$61.24
$64.82
$65.92
$66.31
$68.83
$69.43
$63.00
(1) Excludes properties held for sale and investments in joint ventures that are equity accounted at the end of each period, as applicable.
(2) Excludes properties under development, properties held for sale and investment in joint ventures that are equity accounted at the end of each period, as
applicable.
(3) Weighted average face rate of interest on debt is calculated as the weighted average contractual face rate of all interest-bearing debt balances excluding
debt in joint ventures that are equity accounted.
(4) For additional information on the following non-GAAP ratios – interest coverage ratio (times), net total debt-to-normalized adjusted EBITDAFV ratio (years),
level of debt (net total debt-to-net total assets) and NAV per unit – see the “Non-GAAP Financial Measures and Ratios” section of the MD&A.
(5) Total number of REIT A Units and subsidiary redeemable units includes 2.6 million subsidiary redeemable units, which are classified as a liability under IFRS
Accounting Standards.
(6) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All unit and per unit amounts disclosed
reflect the post-Unit Consolidation units for all periods presented.
Dream Office REIT 2024 Annual Report | 40
Results of operations
2024
2023
(in thousands of Canadian dollars)
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Investment properties revenue
$
50,146 $
48,790 $
48,683 $
48,495 $
47,675 $
47,545 $
47,019 $
48,209
Investment properties operating
expenses
(22,860)
(22,697)
(21,382)
(23,042)
(21,915)
(22,438)
(21,723)
(22,037)
Net rental income
27,286
26,093
27,301
25,453
25,760
25,107
25,296
26,172
Other income (loss)
3,882
2,463
2,634
3,347
380
455
(32,286)
2,850
Other expenses
(20,739)
(19,498)
(19,761)
(18,554)
(19,715)
(19,010)
(18,166)
(18,175)
Fair value adjustments, internal
leasing costs, impairment and net
gains (losses) on transactions
(31,692)
(84,590)
(32,626)
1,777
(48,670)
7,195
(24,665)
(9,677)
Income (loss) before income taxes
(21,263)
(75,532)
(22,452)
12,023
(42,245)
13,747
(49,821)
1,170
Current and deferred income
taxes recovery (expense), net
2,162
(226)
511
(157)
(179)
(191)
115
208
Net income (loss) for the period
(19,101)
(75,758)
(21,941)
11,866
(42,424)
13,556
(49,706)
1,378
Other comprehensive income (loss)
2,437
92
577
(578)
(1,589)
700
(7,773)
2,064
Comprehensive income (loss) for
the period
$ (16,664) $ (75,666) $ (21,364) $ 11,288 $ (44,013) $ 14,256 $ (57,479) $
3,442
Our results of operations may vary significantly from period-to-period as a result of fair value adjustments to investment
properties, fair value adjustments to financial instruments, net gains or losses on transactions, and other activities. The decrease
in our net rental income between Q1 2023 and Q1 2024 is primarily due to the sale of properties during 2022 and 2023 and the
residual effects of the COVID-19 pandemic on our portfolio occupancy.
Dream Office REIT 2024 Annual Report | 41
Reconciliation of net income (loss) to funds from operations
(in thousands of Canadian dollars except for unit and per unit amounts)
2024
2023
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Net income (loss) for the period
$ (19,101)
$ (75,758)
$ (21,941)
$ 11,866
$ (42,424)
$ 13,556
$ (49,706)
$ 1,378
Add (deduct):
Net loss (income) from
investment in Dream Industrial
REIT
(3,369)
(1,611)
(2,391)
(3,054)
(169)
(449)
33,725
(2,433)
Share of FFO from investment in
Dream Industrial REIT
3,472
3,462
3,335
3,268
3,280
3,327
4,839
6,527
Depreciation and amortization
3,011
3,459
3,227
3,038
3,711
2,960
2,972
2,747
Costs (recovery) attributable to
sale of investment properties(1)
279
347
535
30
157
—
(3)
49
Interest expense on subsidiary
redeemable units
654
655
654
872
1,309
1,308
1,309
1,308
Fair value adjustments to
investment properties
38,903
33,799
24,594
17,293
28,823
16,649
38,866
12,068
Fair value adjustments to
investment properties held in
joint ventures
34
128
23
(11)
355
84
27
29
Fair value adjustments to
financial instruments and DUIP
included in G&A expenses
(12,379)
24,981
6,941
(19,890)
18,985
(24,452)
(14,885)
(2,990)
Internal leasing costs
494
437
426
574
408
405
492
395
Principal repayments on finance
lease liabilities
(14)
(15)
(14)
(14)
(14)
(13)
(14)
(13)
Enterprise resource planning
software upgrade costs included
in G&A expenses
14
—
—
—
—
—
—
—
Deferred income taxes expense
(recovery)
(2,188)
201
(531)
134
167
191
(115)
(208)
Impairment of VTB mortgage
receivables
4,294
24,905
—
—
—
—
—
—
FFO for the period(2)
$ 14,104
$ 14,990
$ 14,858
$ 14,106
$ 14,588
$ 13,566
$ 17,507
$ 18,857
Diluted weighted average number
of units(3)(4)
19,500
19,492
19,479
19,410
19,359
19,347
24,941
26,091
Diluted FFO per unit(4)(5)
$
0.72
$
0.77
$
0.76
$
0.73
$
0.75
$
0.70
$
0.70
$
0.72
(1) Includes both continuing and discontinued operations.
(2) FFO is a non-GAAP financial measure. Refer to the section “Non-GAAP Financial Measures and Ratios” under the heading “Funds from operations and
diluted FFO per unit” for further details.
(3) A description of the determination of diluted weighted average number of units can be found in the section “Supplementary Financial Measures and Other
Disclosures”.
(4) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All unit and per unit amounts disclosed
reflect the post-Unit Consolidation units for all periods presented.
(5) Diluted FFO per unit is a non-GAAP ratio. Refer to the section “Non-GAAP Financial Measures and Ratios” under the heading “Funds from operations and
diluted FFO per unit” for further details.
Dream Office REIT 2024 Annual Report | 42
SECTION V
DISCLOSURE CONTROLS AND PROCEDURES
For the year ended December 31, 2024, the Chief Executive Officer and the Chief Financial Officer (the “Certifying Officers”),
together with other members of management, have evaluated the design and operational effectiveness of Dream Office REIT’s
disclosure controls and procedures, as defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and
Interim Filings (“NI 52-109”). The Certifying Officers have concluded that the disclosure controls and procedures are adequate
and effective in order to provide reasonable assurance that material information has been accumulated and communicated to
management, to allow timely decisions of required disclosures by Dream Office REIT and its consolidated subsidiary entities,
within the required time periods.
Dream Office REIT’s internal control over financial reporting (as defined in NI 52-109) is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external
purposes in accordance with IFRS Accounting Standards. Using the framework established in “2013 Committee of Sponsoring
Organizations (COSO) Internal Control Framework”, published by the Committee of Sponsoring Organizations of the Treadway
Commission, the Certifying Officers, together with other members of management, have evaluated the design and operation of
Dream Office REIT’s internal control over financial reporting. Based on that evaluation, the Certifying Officers have concluded
that Dream Office REIT’s internal control over financial reporting was effective for the year ended December 31, 2024.
There were no changes in Dream Office REIT’s internal control over financial reporting during the financial year ended
December 31, 2024 that have materially affected, or are reasonably likely to materially affect, Dream Office REIT’s internal
control over financial reporting.
SECTION VI
RISKS AND OUR STRATEGY TO MANAGE
In addition to the specific risks discussed in this MD&A, we are exposed to various risks and uncertainties, many of which are
beyond our control and could have an impact on our business, financial condition, operating results and prospects. Unitholders
should consider these risks and uncertainties when assessing our outlook in terms of investment potential. For a further
discussion of the risks and uncertainties identified by Dream Office REIT, please refer to our latest Annual Report and Annual
Information Form filed on the System for Electronic Document Analysis and Retrieval+ (“SEDAR+”) (www.sedarplus.com).
REAL ESTATE OWNERSHIP
Real estate ownership is generally subject to numerous factors and risks, including changes in general economic conditions
(including market interest rates and the availability of mortgage financings and other types of credit), local economic conditions
(such as an oversupply of office and other commercial properties or a reduction in demand for real estate in the area), changes
in government policy, the attractiveness of properties to potential tenants or purchasers, competition with other landlords with
similar available space, and the ability of the owner to provide adequate maintenance at competitive costs.
An investment in real estate is relatively illiquid. Such illiquidity will tend to limit our ability to vary our portfolio promptly in
response to changing economic or investment conditions. In recessionary times, it may be difficult to dispose of certain types of
real estate. The costs of holding real estate are considerable, and during an economic recession, we may be faced with ongoing
expenditures with a declining prospect of incoming receipts. In such circumstances, it may be necessary for us to dispose of
properties at lower prices in order to generate sufficient cash from operations and make distributions and interest payments.
Certain significant expenditures (e.g., property taxes, maintenance costs, mortgage payments, insurance costs and related
charges) must be made throughout the period of ownership of real property, regardless of whether the property is producing
sufficient income to pay such expenses. In order to retain desirable rentable space and to generate adequate revenue over the
long term, we must maintain or, in some cases, improve each property’s condition to meet market demand. Maintaining a rental
property in accordance with market standards can entail significant costs that we may not be able to pass on to our tenants.
Numerous factors, including the age of the relevant building structure, the material and substances used at the time of
construction, or currently unknown building code violations, could result in substantial unbudgeted costs for refurbishment or
modernization. In the course of acquiring a property, undisclosed defects in design or construction or other risks might not have
been recognized or correctly evaluated during the pre-acquisition due diligence process. These circumstances could lead to
additional costs and could have an adverse effect on our proceeds from sales and rental income of the relevant properties.
ECONOMIC ENVIRONMENT
Uncertainty over whether the economy will be adversely affected by inflation or stagflation, and the systemic impact of volatile
energy costs and geopolitical issues, may contribute to increased market volatility. Such economic uncertainties and market
Dream Office REIT 2024 Annual Report | 43
challenges, which may result from a continued or exacerbated general economic slowdown of the Canadian economy and other
economies elsewhere, including as a result of the imposition of duties, tariffs and other trade protection measures and their
effects could materially and adversely affect the Trust’s ability to generate revenues, thereby increasing operating costs and
reducing its operating income and earnings. A difficult operating environment could also have a material adverse effect on the
ability of the Trust to maintain occupancy rates at its properties, which could harm the Trust’s financial condition. Under such
economic conditions, the Trust’s tenants may be unable to meet their rental payments and other obligations due to the Trust,
which could have a material adverse effect on the Trust’s financial position.
Further increases to inflation or prolonged inflation above central banks’ targets could lead to further increases to interest rates
by central banks, which could have a more pronounced negative impact on any variable rate debt the Trust is subject to or incurs
in the future and on its results of operations. Similarly, during periods of high inflation, annual rent increases may be less than
the rate of inflation on a continual basis. Substantial inflationary pressures and increased costs may have an adverse impact on
the Trust’s tenants if increases in their operating expenses exceed increases in revenue. This may adversely affect the tenants’
ability to pay rent, which could negatively affect the Trust’s financial condition.
The Trust is also subject to the risk that if the real estate market ceases to attract the same level of capital investment in the
future that it attracts at the time of its real estate purchases, or the number of investors seeking to acquire properties decreases,
the value of the Trust’s investments may not appreciate or may depreciate. Accordingly, the Trust’s operations and financial
condition could be materially and adversely affected to the extent that an economic slowdown or downturn occurs, is prolonged
or becomes more severe.
FINANCING
We require access to capital to maintain our properties as well as to fund our growth strategy and significant capital
expenditures. There is no assurance that capital will be available when needed or on favourable terms. Our access to third-party
financing will be subject to a number of factors, including general market conditions; government policies; the market’s
perception of our growth potential; our current and expected future earnings; our cash flow and cash distributions, and cash
interest payments; and the market price of our REIT A Units.
A significant portion of our financing is debt. Accordingly, we are subject to the risks associated with debt financing, including
the risk that our cash flows will be insufficient to meet required payments of principal and interest, and that, on maturities of
such debt, we may not be able to refinance the outstanding principal under such debt or that the terms of such refinancing will
be more onerous than those of the existing debt. If we are unable to refinance debt at maturity on terms acceptable to us or at
all, we may be forced to dispose of one or more of our properties on disadvantageous terms, which may result in losses and
could alter our debt-to-equity ratio or be dilutive to unitholders. Such losses could have a material adverse effect on our financial
position or cash flows.
The degree to which we are leveraged could have important consequences to our operations. A high level of debt will reduce the
amount of funds available for the payment of distributions to unitholders; limit our flexibility in planning for and reacting to
changes in the economy and in the industry, and increase our vulnerability to general adverse economic and industry conditions;
limit our ability to borrow additional funds, dispose of assets, encumber our assets and make potential investments; place us at
a competitive disadvantage compared to other owners of similar real estate assets that are less leveraged and, therefore, may
be able to take advantage of opportunities that our indebtedness would prevent us from pursuing; make it more likely that a
reduction in our borrowing base following a periodic valuation (or redetermination) could require us to repay a portion of the
outstanding borrowings; and impair our ability to obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general trust or other purposes.
LIQUIDITY
Our ability to meet our financial obligations as they become due represents our exposure to liquidity risk. Our principal liquidity
needs arise from the payment of distributions, costs of attracting and retaining tenants, recurring property maintenance,
development projects, major property improvements, costs of refinancing maturing debt, debt principal repayments and
interest payments. As at December 31, 2024, current liabilities totalled $521.2 million, including debt related to assets held for
sale, exceeding current assets of $154.5 million which includes assets held for sale, resulting in a working capital deficiency of
$366.7 million. Our net working capital deficiencies are currently funded using cash on hand, cash flows from operations and
from the Trust’s credit facilities.
Our ability to meet our future obligations may be impacted by the liquidity risk associated with receiving tenant rent payments
and loans receivable and realization of fair value on any full or partial disposition of real property.
Dream Office REIT 2024 Annual Report | 44
Real property investments tend to be relatively illiquid, with the degree of liquidity generally fluctuating in relation to demand
for and the perceived desirability of such investments. Such illiquidity may limit our ability to vary our portfolio promptly in
response to changing economic or investment conditions. If we are required to liquidate our real property investments, the
proceeds to us might be significantly less than the aggregate carrying value of our properties.
The Trust’s credit facilities contain covenants, certain of which require it to maintain certain financial ratios and a minimum level
of equity. In addition, certain of the Trust’s mortgages have covenants tied to the performance of the mortgaged properties. The
mortgages generally have cure mechanisms in the case of a failure to meet a property level covenant. If a property covenant is
breached and not cured, or if the Trust fails to meet the covenants on its credit facilities, the related debt may become due and
payable immediately which would have significant impacts on the Trust’s liquidity and ability to meet its obligations.
Management manages liquidity risk by monitoring actual and projected cash flows and liquidity requirements of the Trust.
Management seeks to ensure that it has sufficient cash to meet operational needs by maintaining sufficient cash, ensuring
availability under its credit facility and its ability to lease out vacant space. The Trust mitigates its liquidity risk by staggering the
maturity dates of its borrowing, maintaining borrowing relationships with different lenders and maintaining sufficient availability
on its credit facilities. In the next 12 months, debt and scheduled principal repayments of $40.5 million will mature and will need
to be settled by means of renewal or payment. The Trust manages the risk of refinancings to liquidity by proactively engaging
lenders in advance of maturity to renew or otherwise refinance mortgages as they come due.
The failure of the Trust to adequately manage its liquidity risk could have an adverse effect on our financial condition and results
of operation and decrease the amount of cash available for distribution to unitholders and cause the price of our units to
decrease.
INTEREST RATES
We require extensive financial resources to implement our strategy. When concluding financing agreements or extending such
agreements, we depend on our ability to agree on terms and interest payments that will not impair our desired profit, and on
amortization schedules that do not restrict our ability to pay distributions. In addition to existing variable rate portions of our
financing agreements, we may enter into future financing agreements with variable interest rates. There is a risk that interest
rates will increase. A further increase in interest rates could result in a significant increase in the amount paid by us and our
subsidiaries to service debt, resulting in a decrease in distributions to unitholders, and could materially adversely affect the
trading price of the applicable Units. Increases in interest rates generally cause a decrease in demand for properties. Higher
interest rates and more stringent borrowing requirements, whether mandated by law or required by banks, could have a
material adverse effect on our ability to sell any of our properties. In addition, increasing interest rates may put competitive
pressure on the levels of distributable income paid by us to unitholders, increasing the level of competition for capital faced by
us, which could have a material adverse effect on the trading price of the applicable Units. The Trust is also subject to interest
rate risk on its drawings on its CIB Facility whereby the interest rate on the facility will be adjusted at the end of the non-
revolving availability period to a rate between 1% and 3% depending on whether it meets, or fails to meet, specified
decarbonization goals.
ADVERSE GLOBAL MARKET, ECONOMIC AND POLITICAL CONDITIONS
Adverse Canadian, European, U.S. and global market, economic and political conditions, including dislocations and volatility in
the credit markets and general global economic uncertainty, unexpected or ongoing geopolitical events, including disputes
between nations, war, terrorism or other acts of violence, and international sanctions, could have a material adverse effect on
our business, results of operations and financial condition with the potential to impact, among others: (i) the value of our
properties; (ii) the availability or the terms of financing that we have or may anticipate utilizing; (iii) our ability to make principal
and interest payments on, or refinance, any outstanding debt when due; (iv) the occupancy rates in our properties; and (v) the
ability of our tenants to enter into new leasing transactions or to satisfy rental payments under existing leases.
The imposition of duties, tariffs and other trade restrictions (including any retaliation to such measures) could result in increased
costs of supplies, slow economic growth and could materially impact the business of our tenants and their ability to make lease
payments and renew leases. A trade war could also increase the likelihood and intensity of other risks discussed in this Annual
Report and our Annual Information Form. These risks could have a material adverse effect on our business, results of operations
and financial condition.
DEMAND FOR COMMERCIAL REAL ESTATE
Changes to work dynamics, including changes from on-site work to off-site or work-from-home arrangements, and a reduction in
visitor traffic in the downtown areas in the regions where our properties are located, have had a negative impact in the demand
by tenants for commercial real estate. These factors have also negatively affected certain of our revenue streams, including
Dream Office REIT 2024 Annual Report | 45
parking revenues. The duration and scope of these factors will depend on future developments, which are highly uncertain and
cannot be predicted, including the effects of any pandemic or epidemic, the stability of the Canadian economy, and other
factors. It is uncertain whether tenant demand for commercial real estate and visitor traffic in downtown areas where we
operate will recover to, or surpass, pre-COVID-19 levels.
ROLLOVER OF LEASES
Upon the expiry of any lease, there can be no assurance that the lease will be renewed or the tenant replaced. Furthermore, the
terms of any subsequent lease may be less favourable than those of the existing lease. Our cash flows and financial position
would be adversely affected if our tenants were to become unable to meet their obligations under their leases or if a significant
amount of available space in our properties could not be leased on economically favourable lease terms. In the event of default
by a tenant, we may experience delays or limitations in enforcing our rights as lessor and incur substantial costs in protecting our
investment. Furthermore, at any time, a tenant may seek the protection of bankruptcy, creditor protection, insolvency or similar
laws, which could result in the rejection and termination of the lease of the tenant and thereby cause a reduction in the cash
flows available to us.
COMPETITION
The real estate market in Canada is highly competitive and fragmented, and we compete for real property acquisitions with
individuals, corporations, institutions and other entities that may seek real property investments similar to those we desire. An
increase in the availability of investment funds or an increase in interest in real property investments may increase competition
for real property investments, thereby increasing purchase prices and reducing the yield on them. If competing properties of a
similar type are built in the area where one of our properties is located or if similar properties located in the vicinity of one of
our properties are substantially refurbished, the net rental income derived from and the value of such property could be
reduced.
Numerous other developers, managers and owners of properties will compete with us in seeking tenants. To the extent that our
competitors own properties that are in better locations, of better quality or less leveraged than the properties owned by us, they
may be in a better position to attract tenants who might otherwise lease space in our properties. To the extent that our
competitors are better capitalized or financially stronger, they would be in a better position to withstand an economic downturn.
The existence of competition for tenants could have an adverse effect on our ability to lease space in our properties and on the
rents charged or concessions granted, and could materially and adversely affect our cash flows, operating results and financial
condition.
CONCENTRATION OF PROPERTIES AND TENANTS
Currently, principally all of our properties are located in Canada, with a concentration in Toronto, Ontario and, as a result, are
impacted by economic and other factors specifically affecting the real estate markets in Toronto, Ontario and the rest of Canada.
These factors may differ from those affecting the real estate markets in other regions. Due to the concentrated nature of our
properties, a number of our properties could experience any of the same conditions at the same time. If real estate conditions in
Toronto, Ontario and the rest of Canada decline relative to real estate conditions in other regions, our cash flows and financial
condition may be more adversely affected than those of companies that have more geographically diversified portfolios of
properties.
DEVELOPMENT RISK
The Trust’s current, prospective and future development projects are subject to development risks. These risks include delays
and cost overruns arising from permitting delays, changing engineering and design requirements, the performance of
contractors, labour disruptions, adverse weather conditions, the availability of financing and other factors. Other development
risks include the failure of prospective tenants to occupy their space upon project completion and the inability to achieve
forecasted rates of return.
CYBER SECURITY RISKS
As we continue to increase our dependence on information technologies to conduct our operations, the risks associated with
cyber security also increase. We rely on management information systems and computer control systems. Business disruptions,
utility outages and information technology system and network disruptions due to cyber-attacks could seriously harm our
operations and materially adversely affect our operating results. Cyber security risks include attacks on information technology
and infrastructure by hackers, damage or loss of information due to viruses, the unintended disclosure of confidential
information, the misuse of or loss of control over computer control systems, and breaches due to employee error. Our exposure
to cyber security risks includes exposure through third parties on whose systems we place significant reliance for the conduct of
our business. We have implemented security procedures and measures in order to protect our systems and information from
Dream Office REIT 2024 Annual Report | 46
being vulnerable to cyber-attacks. However, we may not have the resources or technical sophistication to anticipate, prevent or
recover from rapidly evolving types of cyber-attacks. Compromises to our information and control systems could have severe
financial and other business implications.
TAX CONSIDERATIONS
We intend to continue to qualify as a “unit trust” and a “mutual fund trust” for purposes of the Income Tax Act (Canada). There
can be no assurance that Canadian federal income tax laws and the administrative policies and assessing practices of the Canada
Revenue Agency respecting the treatment of mutual fund trusts will not be changed in a manner that adversely affects the
unitholders. If we cease to qualify as a “mutual fund trust” under the Income Tax Act (Canada), the income tax considerations
applicable to us would be materially and adversely different in certain respects, including that the REIT A Units may cease to be
qualified investments for registered plans under the Income Tax Act (Canada).
Although we have been structured with the objective of maximizing after-tax distributions, tax charges and withholding taxes in
foreign jurisdictions in which we invest will affect the level of distributions made to us by our subsidiaries. No assurance can be
given as to the level of taxation suffered by us or our subsidiaries. Currently, our revenues are derived from our investments
located in Canada and one investment property in the U.S., which will subject us to legal and political risks specific to those
countries, any of which could adversely impact our investments, cash flows, operating results or financial condition, our ability to
make distributions on the Units and our ability to implement our strategy. The taxable income portion of our distributions is
affected by a variety of factors, including the amount of foreign accrual property income that we recognize annually, gains and
losses, if any, from the disposition of properties and the results of our operations. These components will change each year and,
therefore, the taxable income allocated to our unitholders each year will also change accordingly.
CHANGES IN LAW
We are subject to applicable federal, provincial, municipal, local and common laws and regulations governing the ownership and
leasing of real property, employment standards, environmental matters, taxes and other matters. It is possible that future
changes in such laws or regulations, or changes in their application, enforcement or regulatory interpretation, could result in
changes in the legal requirements affecting us (including with retroactive effect). In addition, the political conditions in the
jurisdictions in which we operate are also subject to change. Any changes in investment policies or shifts in political attitudes
may adversely affect our investments. Any changes in the laws to which we are subject in the jurisdictions in which we operate
could materially affect our rights and title in and to the properties and the revenues we are able to generate from our
investments.
INSURANCE
We carry general liability, umbrella liability and excess liability insurance with limits that are typically obtained for similar real
estate portfolios in Canada and otherwise acceptable to our trustees. For the property risks, we carry “All Risks” property
insurance including, but not limited to, flood, earthquake and loss of rental income insurance (with at least a 24-month
indemnity period). We also carry boiler and machinery insurance covering all boilers, pressure vessels, HVAC systems and
equipment breakdown. However, certain types of risks (generally of a catastrophic nature such as from war or nuclear accident)
are uninsurable under any insurance policy. Furthermore, there are other risks that are not economically viable to insure at this
time. We have insurance for earthquake risks, subject to certain policy limits, deductibles and self-insurance arrangements.
Should an uninsured or underinsured loss occur, we could lose our investment in, and anticipated profits and cash flows from,
one or more of our properties, but we would continue to be obligated to repay any recourse mortgage indebtedness on such
properties. We may carry, or may cause to be carried, title insurance on certain of our real estate assets but will not necessarily
insure all titles. If a loss occurs resulting from a title defect with respect to a property where there is no title insurance or the loss
is in excess of insured limits, we could lose all or part of our investment in, and anticipated profits and cash flows from, such
property.
PUBLIC HEALTH RISK
Public health crises, pandemics and epidemics could adversely impact our and our customers’ businesses, and thereby our and
our customers’ ability to meet payment obligations, by disrupting supply chains and transactional activities, causing reduced
traffic at our properties, leading to mobility restrictions and other quarantine measures, precipitating increased government
regulation and negatively impacting local, national or global economies. Public health crises, pandemics and epidemics may also
increase the volatility in financial markets and impact debt and equity markets, which could affect our ability to access capital.
All of these factors may have a material adverse effect on our business, results of operations and our ability to make cash
distributions to unitholders. The extent to which public health crises, disease, epidemic or a pandemic impacts business activity
Dream Office REIT 2024 Annual Report | 47
or financial results, and the duration of any such negative impact, will depend on future developments, which are highly
uncertain.
RELIANCE ON DAM FOR CERTAIN MANAGEMENT SERVICES
We rely on DAM for certain management services, as requested. DAM has the right, upon 180 days’ notice, to terminate our
Shared Services Agreement for any reason at any time. Our Shared Services Agreement may also be terminated in other
circumstances, such as in the event of default or insolvency of DAM within the meaning of such agreement. Accordingly, there
can be no assurance that DAM will continue to provide management services. If DAM should cease for whatever reason to
provide such services, this may adversely impact our ability to meet our objectives and execute our strategy.
ENVIRONMENTAL AND CLIMATE CHANGE-RELATED RISK
As an owner of real property, we are subject to various federal, provincial and municipal laws relating to environmental matters.
Such laws provide a range of potential liability, including potentially significant penalties, and potential liability for the costs of
removal or remediation of certain hazardous substances. The presence of such substances, if any, could adversely affect our
ability to sell or redevelop such real estate or to borrow using such real estate as collateral and, potentially, could also result in
civil claims against us. We have insurance and other policies and procedures in place to review and monitor environmental
exposure, which we believe mitigates these risks to an acceptable level. In order to obtain financing for the purchase of a new
property through traditional channels, we may be requested to arrange for an environmental audit to be conducted. Although
such an audit provides us and our lenders with some assurance, we may become subject to liability for undetected pollution or
other environmental hazards on our properties against which we cannot insure, or against which we may elect not to insure
where premium costs are disproportionate to our perception of relative risk.
We have formal policies and procedures to review and monitor environmental exposure. These policies include the requirement
to obtain a Phase I Environmental Site Assessment, conducted by an independent and qualified environmental consultant,
before acquiring any real property or any interest therein.
Climate change continues to attract the focus of governments and the general public as an important threat, given that
greenhouse gas emissions and other activities continue to negatively impact the planet. We face the risk that our properties will
be subject to government initiatives aimed at countering climate change, such as a reduction of GHG emissions, which could
impose constraints on our operational flexibility or cause us to incur financial costs to comply with various reforms. Any failure to
adhere and adapt to climate change reform could result in fines or adversely affect our reputation, operations or financial
performance. Furthermore, our properties may be exposed to the impact of events caused by climate change, such as natural
disasters and increasingly frequent and severe weather conditions. Such events could interrupt our operations and activities or
damage our properties, and may potentially decrease our property values or require us to incur additional expenses, including
an increase in insurance costs to insure our properties against natural disasters and severe weather.
On June 20, 2024, the Canadian federal government enacted Bill C-59, which contains anti-greenwashing amendments to the
Competition Act to regulate misleading environmental claims. In addition, Bill C-59 provides third parties with a private right of
action, with leave from the Competition Tribunal, as of June 20, 2025, for environmental claims that are alleged to have violated
the misleading advertising provisions of the Act. Significant administrative monetary penalties may be imposed if are
presentation made in the Trust’s marketing or promotional materials regarding the environmental impact of the Trust’s business
activities is challenged for not having adequate and proper substantiation in accordance with internationally recognized
methodologies
JOINT ARRANGEMENTS
We may be, from time to time, a participant in jointly controlled entities and co-ownerships (combined “joint arrangements”)
with third parties. A joint arrangement involves certain additional risks, including:
(i)
the possibility that such third parties may at any time have economic or business interests or goals that will be
inconsistent with ours, or take actions contrary to our instructions or requests or to our policies or objectives with
respect to our real estate investments;
(ii)
the risk that such third parties could experience financial difficulties or seek the protection of bankruptcy, insolvency or
other laws, which could result in additional financial demands on us to maintain and operate such properties or repay
the third parties’ share of property debt guaranteed by us or for which we will be liable, and/or result in our suffering or
incurring delays, expenses and other problems associated with obtaining court approval of the joint arrangement;
(iii)
the risk that such third parties may, through their activities on behalf of or in the name of the joint arrangements,
expose or subject us to liability; and
Dream Office REIT 2024 Annual Report | 48
(iv)
the need to obtain third parties’ consent with respect to certain major decisions, including the decision to distribute
cash generated from such properties or to refinance or sell a property. In addition, the sale or transfer of interests in
certain of the joint arrangements may be subject to rights of first refusal or first offer, and certain of the joint venture
and partnership agreements may provide for buy–sell or similar arrangements. Such rights may be triggered at a time
when we may not desire to sell but may be forced to do so because we do not have the cash to purchase the other
party’s interests. Such rights may also inhibit our ability to sell an interest in a property or a joint arrangement within
the time frame or otherwise on the basis we desire.
Our investment in properties through joint arrangements is subject to the investment guidelines set out in our Declaration of
Trust.
Dream Office REIT 2024 Annual Report | 49
SECTION VII
CRITICAL ACCOUNTING JUDGMENTS
Preparing the consolidated financial statements requires management to make judgments, estimates and assumptions that
affect the amounts reported. Management bases its judgments and estimates on historical experience and other factors it
believes to be reasonable under the circumstances, but which are inherently uncertain and unpredictable, the result of which
forms the basis of the carrying amounts of assets and liabilities. However, uncertainty about these assumptions and estimates
could result in outcomes that could require a material adjustment to the carrying amount of the affected asset or liability in
the future.
The following are the critical accounting judgments used in applying the Trust’s accounting policies that have the most significant
effect on the amounts in the consolidated financial statements:
Investment properties
Critical judgments are made in respect of the fair values of investment properties. The fair values of these investments are
reviewed at least quarterly by management with reference to independent property appraisals and market conditions existing at
the reporting date, using generally accepted market practices. The independent appraisers are experienced, nationally
recognized and qualified in the professional valuation of investment properties in their respective geographic areas. Judgment is
also applied in determining the extent and frequency of obtaining independent appraisals. At each reporting period, a select
number of properties, determined on a rotational basis, are valued by independent appraisers. For properties not subject to
independent appraisals, valuations are prepared internally during each reporting period.
Critical assumptions used in estimating the fair values of investment properties include capitalization rates, discount rates that
reflect current market uncertainties, terminal cap rates and market rents. Other key assumptions relating to the estimates of fair
values of investment properties include components of stabilized NOI, leasing costs and vacancy rates. The Trust examines the
critical and key assumptions at the end of each reporting period and updates these assumptions based on recent leasing activity
and external market data available at that time. If there is any change in these assumptions or regional, national or international
economic conditions, the fair value of investment properties may change materially.
The Trust makes judgments with respect to whether lease incentives provided in connection with a lease enhance the value of
the leased space, which determines whether or not such amounts are treated as tenant improvements and added to investment
properties. Lease incentives, such as cash, rent-free periods and lessee or lessor owned improvements, may be provided to
lessees to enter into an operating lease. Lease incentives that do not provide benefits beyond the initial lease term are included
in the carrying amount of investment properties and are amortized as a reduction of rental revenue on a straight-line basis over
the term of the lease.
Judgment is also applied in determining whether certain costs are additions to the carrying amount of the investment property.
For properties under development, the Trust exercises judgment in determining when development activities have commenced,
when and how much borrowing costs are to be capitalized to the development project, and the point of practical completion.
Impairment
The Trust assesses the possibility and amount of any impairment loss or write-down as it relates to equity accounted
investments.
IAS 36, “Impairment of Assets” (“IAS 36”), requires management to use judgment in determining the recoverable amount of
equity accounted investments that are tested for impairment. Judgment is also involved in estimating the value-in-use of the
equity accounted investments, including estimates of future cash flows, discount rates, terminal cap rates and associate income
and distribution payout ratios. The values assigned to these key assumptions reflect past experience and are consistent with
external sources of information.
Estimates in applying the expected credit loss (“ECL”) model to VTB mortgage receivables
Applying the ECL model to VTB mortgages receivable requires management to make certain estimates. The expected credit loss
is a multi-part model whereby management is required to assess possible scenarios for the settlement of a financial asset, the
probability of each scenario occurring and the financial implications to the Trust of each scenario. Where there have been no
significant changes in the creditworthiness of the counterparty since the inception of the VTB mortgage receivable, the Trust
assesses the possible outcomes over the 12 months following the reporting date. Where there has been a significant change in
the creditworthiness of the counterparty, the Trust assesses the full range of outcomes over the lifetime of the loan. The Trust is
then required to perform a probability-weighted expected value calculation across all scenarios to determine the appropriate
expected credit loss provision. In performing this analysis, management is required to make estimates as to the possible
scenarios, the probability of each scenario occurring and the financial outcome of each scenario. Changes in these assumptions
could cause the assessment of the amount of the ECL provision to change materially.
Dream Office REIT 2024 Annual Report | 50
In performing the ECL analysis for VTB mortgages receivable, the Trust considers indication of the counterparty’s ability and
willingness to service the debt, the cash flows of the secured asset and the status of negotiations, if any, with the counterparty.
These factors affect both the assessment of whether there has been a significant change in the creditworthiness of the
counterparty as well as the possible outcomes used in the expected value model. Consequently, changes in the circumstances of
the counterparty or the status of negotiations could cause the expected value to change materially due to changes in the
assessment of possible outcome and the probability assigned to each outcome.
CHANGES IN ACCOUNTING POLICIES
Amendments to IAS 1
Effective January 1, 2024, the Trust has adopted amendments to IAS 1, “Presentation of Financial Statements” (“IAS 1”), relating
to the classification of liabilities as current or non-current liabilities. The Trust may be required to settle liabilities relating to
subsidiary redeemable units classified as liabilities and fully vested DUIP units on demand by the holders and does not have the
right to defer settlement of such liabilities for a period of more than 12 months from the reporting date. As a result, the Trust
has classified these liabilities where there is no right to defer settlement as current liabilities. The amendments have been
applied retrospectively for all periods presented in accordance with the transitional provisions of IAS 1.
As a result of these amendments, the following reclassifications have been made to the presentation of the current and
comparative consolidated balance sheets:
December 31, 2024
Before
amendments
to IAS 1
Adjustments
After
amendments
to IAS 1
Liabilities
NON-CURRENT LIABILITIES
Subsidiary redeemable units
$
46,738
$
(46,738) $
—
Deferred Unit Incentive Plan
8,456
(8,456)
—
Other non-current and derivative liabilities
23,997
3,111
27,108
79,191
(52,083)
27,108
CURRENT LIABILITIES
Subsidiary redeemable units
—
46,738
46,738
Amounts payable and accrued liabilities
48,712
5,345
54,057
48,712
52,083
100,795
Total
$
127,903
$
— $
127,903
December 31, 2023
January 1, 2023
Previously
reported
Adjustments
Restated
Previously
reported
Adjustments
Restated
Liabilities
NON-CURRENT LIABILITIES
Subsidiary redeemable units
$
54,850
$ (54,850) $
—
$
78,193
$ (78,193) $
—
Deferred Unit Incentive Plan
7,932
(7,932)
—
15,103
(15,103)
—
Other non-current and derivative liabilities
15,120
2,894
18,014
11,018
3,675
14,693
77,902
(59,888)
18,014
104,314
(89,621)
14,693
CURRENT LIABILITIES
Subsidiary redeemable units
—
54,850
54,850
—
78,193
78,193
Amounts payable and accrued liabilities
48,695
5,038
53,733
55,680
11,428
67,108
48,695
59,888
108,583
55,680
89,621
145,301
Total
$
126,597
$
—
$
126,597
$
159,994
$
— $
159,994
There is no impact on the measurement or recognition of any item in the Trust’s consolidated financial statements, debt
covenants based on the terms and definitions of the covenant calculations and debt agreements, liquidity risks, non-GAAP
financial measures, non-GAAP ratios or supplementary financial measures, and there is no change to the consolidated
statements of comprehensive income, consolidated statements of changes in equity, and consolidated statements of cash flows.
Dream Office REIT 2024 Annual Report | 51
FUTURE CHANGES IN ACCOUNTING POLICIES
IFRS 18, “Presentation and Disclosure in Financial Statements”
Effective for annual periods beginning on or after January 1, 2027, IFRS 18 will replace IAS 1, “Presentation of Financial
Statements” (“IAS 1”), introducing new requirements that are intended to help achieve comparability of the financial
performance of similar entities and provide more relevant information and transparency to users. Even though IFRS 18 will not
impact the recognition or measurement of items in the financial statements, its impacts on presentation and disclosure are
expected to be pervasive, in particular those related to the statement of financial performance and providing management-
defined performance measures within the financial statements.
Management is currently assessing the detailed implications of applying the new standard on the Trust’s consolidated financial
statements.
IFRS 9, “Financial Instruments“ and IFRS 7, “Financial Instruments: Disclosures“
In May 2024, amendments to IFRS 9, "Financial Instruments" and IFRS 7, "Financial Instruments: Disclosures" were issued. The
amendments clarify the timing of recognition and derecognition for a financial asset or financial liability, including clarifying that
a financial liability is derecognized on the settlement date. Further, the amendments introduce an accounting policy choice to
derecognize financial liabilities settled using an electronic payment system before the settlement date, if specific conditions are
met. The amendments also require additional disclosures for financial instruments with contingent features and investments in
equity instruments classified at fair value through other comprehensive income. These amendments are effective for annual
reporting periods beginning on or after January 1, 2026. Early adoption is permitted, with an option to early adopt only the
amendments related to the classification of financial assets. The Trust is in the process of assessing the impact of these new
standards.
ADDITIONAL INFORMATION
Additional information relating to Dream Office REIT, including the latest Annual Information Form of Dream Office REIT, is
available on SEDAR+ at www.sedarplus.com.
Dream Office REIT 2024 Annual Report | 52
SECTION VIII
ASSET LISTING
The following table includes supplementary information on our portfolio as at December 31, 2024:
Property
Ownership
Owned share of
total GLA (in
thousands of
sq. ft.)
Number of
tenants
(in-place and
committed)
Average tenant
size (in
thousands of
sq. ft.)
Average
remaining
lease term
(in years)
In-place and
committed
occupancy
Adelaide Place, Toronto
100.0%
666
58
10
5.6
85.3%
30 Adelaide Street East, Toronto
100.0%
416
11
38
5.0
99.9%
655 Bay Street, Toronto
100.0%
308
18
17
6.4
98.7%
74 Victoria Street/137 Yonge Street, Toronto
100.0%
266
5
25
3.9
46.4%
36 Toronto Street, Toronto
100.0%
214
30
5
4.3
70.7%
330 Bay Street, Toronto
100.0%
168
32
4
5.2
77.6%
20 Toronto Street/33 Victoria Street, Toronto
100.0%
159
14
11
5.4
97.9%
250 Dundas Street West, Toronto
100.0%
121
19
5
2.6
77.7%
80 Richmond Street West, Toronto
100.0%
102
25
3
4.6
65.7%
425 Bloor Street East, Toronto(1)
100.0%
83
6
13
6.3
96.2%
212 King Street West, Toronto
100.0%
73
8
8
1.5
91.5%
357 Bay Street, Toronto
100.0%
65
1
65
10.8
100.0%
360 Bay Street, Toronto
100.0%
59
9
4
3.7
65.0%
6 Adelaide Street East, Toronto
100.0%
55
12
4
4.4
90.3%
350 Bay Street, Toronto
100.0%
53
7
4
4.9
58.6%
366 Bay Street, Toronto(2)
100.0%
40
1
40
14.9
100.0%
56 Temperance Street, Toronto
100.0%
33
8
4
4.2
100.0%
Toronto downtown
2,881
264
9
5.4
83.8%
50 & 90 Burnhamthorpe Road West, Mississauga
(Sussex Centre)(3)
49.9%
327
56
8
4.8
69.8%
2200-2206 Eglinton Avenue East & 1020 Birchmount Road,
Scarborough
100.0%
442
15
20
5.6
69.2%
444 – 7th Building, Calgary
100.0%
261
10
22
6.4
84.9%
Vendasta Square, Saskatoon
100.0%
229
10
14
7.8
62.7%
Co-operators Place, Regina
100.0%
206
4
43
10.2
83.0%
12800 Foster Street, Overland Park, Kansas, U.S.
100.0%
185
1
185
0.9
100.0%
Kensington House, Calgary
100.0%
77
16
4
3.7
87.6%
Other markets
1,727
112
14
5.7
76.6%
Total portfolio
4,608
376
11
5.5
81.1%
606 – 4th Building & Barclay Parkade, Calgary(4)
100.0%
126
11
10
2.2
83.2%
67 Richmond Street West, Toronto(5)
100.0%
51
3
6
7.3
36.5%
Total properties under development
177
14
9
3.0
69.8%
Total portfolio including properties under development
4,785
390
10
5.4
80.7%
438 University Avenue, Toronto(6)
100.0%
323
14
21
3.5
92.1%
Total properties held for sale
323
14
21
3.5
92.1%
Total portfolio including properties under development
and held for sale
5,108
404
11
5.3
81.4%
220 King Street West, Toronto(7)
50.0%
11
6
4
1.0
100.0%
(1) Property subject to a ground lease.
(2) This property was reclassified from properties under development to Toronto downtown on July 1, 2024.
(3) The Trust owns 49.9% of this property through a co-ownership with Dream Impact Trust, a related party to the Trust.
(4) This property was reclassified from Other markets to properties under development on October 1, 2024.
(5) This property was reclassified from Toronto downtown to properties under development on May 1, 2022.
(6) This property was reclassified from Toronto downtown to properties held for sale as of December 31, 2024.
(7) The Trust owns 50% of this property through a joint venture arrangement that is equity accounted.
PricewaterhouseCoopers LLP
PwC Tower, 18 York Street, Suite 2500, Toronto, Ontario, Canada M5J 0B2
T.: +1 416 863 1133, F.: +1 416 365 8215, Fax to mail: ca_toronto_18_york_fax@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Independent auditor’s report
To the Unitholders of Dream Office Real Estate Investment Trust
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Dream Office Real Estate Investment Trust and its subsidiaries (together, the
Trust) as at December 31, 2024 and 2023 and January 1, 2023, and its financial performance and its cash
flows for the years ended December 31, 2024 and 2023 in accordance with IFRS Accounting Standards
as issued by the International Accounting Standards Board (IFRS Accounting Standards).
What we have audited
The Trust’s consolidated financial statements comprise:
•
the consolidated balance sheets as at December 31, 2024 and 2023 and January 1, 2023;
•
the consolidated statements of comprehensive loss for the years ended December 31, 2024 and 2023;
•
the consolidated statements of changes in equity for the years ended December 31, 2024 and 2023;
•
the consolidated statements of cash flows for the years ended December 31, 2024 and 2023; and
•
the notes to the consolidated financial statements, comprising material accounting policy information
and other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Trust in accordance with the ethical requirements that are relevant to our audit
of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in
accordance with these requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2024. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of active properties included in
investment properties
Refer to note 2 – Summary of material accounting
policy information, note 4 – Investment properties
and note 31 – Fair value measurement to the
consolidated financial statements.
The Trust measures its active properties, which
are included in investment properties, at fair value
and these assets were valued at $2,123 million as
at December 31, 2024. The fair values of these
active properties are reviewed by management
with reference to independent property
appraisals, if obtained, and market conditions
existing at the reporting date, using generally
accepted market practices. The Trust values its
active properties using the capitalization rate (cap
rate) method or the direct comparison approach.
For the cap rate method, the critical and key
assumptions include cap rates and stabilized net
operating income (stabilized NOI). Twenty-one
properties were valued using the cap rate method
and three properties with redevelopment
potential, which are included in active properties,
were valued using the direct comparison
approach. Critical judgments are made by
management in respect of the fair values of active
properties.
We considered this a key audit matter due to i)
the significant audit effort required in testing the
fair values of active properties; ii) critical
judgments made by management when
determining the fair values, including the
development of the critical and key assumptions;
and iii) a high degree of complexity in assessing
audit evidence to support the critical and key
Our approach to addressing the matter included the
following procedures, among others:
•
Developed an independent point estimate of
the fair value of each individual active property,
excluding those with redevelopment potential,
using external market data and compared each
independent point estimate to the fair value
estimate determined by management to
evaluate the reasonableness of management’s
fair value estimate.
•
For the fair values determined by management
that fell outside of a reasonable range
established from the independent point
estimate or that met certain judgment factors,
tested how management determined the fair
value estimate of the property, which included
the following:
–
Evaluated the appropriateness of the
valuation method.
–
Evaluated the reasonableness of stabilized
NOI and cap rates used in the cap rate
method by benchmarking them to the
underlying accounting records and external
market data, as appropriate, and, for
certain properties, were assisted by
professionals with specialized skill and
knowledge in the field of real estate
valuations.
•
For each property with redevelopment
potential, included in active properties, valued
using the direct comparison approach, tested
the underlying data and professionals with
specialized skill and knowledge in the field of
real estate valuations assisted in developing an
independent point estimate of the fair value
Key audit matter
How our audit addressed the key audit matter
assumptions made by management. In addition,
the audit effort involved the use of professionals
with specialized skill and knowledge in the field of
real estate valuations
based on recent comparable market
transactions, and compared each independent
point estimate to the fair value estimate
determined by management to evaluate the
reasonableness of management’s fair value
estimate.
Other information
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis and the information, other than the consolidated financial statements and our
auditor’s report thereon, included in the annual report.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Trust’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either intends to liquidate the Trust or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Trust’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Trust’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Trust to cease to continue as a
going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
•
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business units within the Trust as a basis for forming an opinion on the
consolidated financial statements. We are responsible for the direction, supervision and review of the
audit work performed for purposes of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Carly Stallwood.
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
February 20, 2025
/s/PricewaterhouseCoopers LLP
Dream Office REIT 2024 Annual Report | 58
Consolidated balance sheets
(in thousands of Canadian dollars)
December 31,
January 1,
December 31,
2023
2023
Note
2024
(Note 3)
(Note 3)
Assets
NON-CURRENT ASSETS
Investment properties
4
$
2,175,015
$
2,342,374
$
2,382,883
Investment in Dream Industrial REIT
5
227,320
224,888
451,476
Investments in joint ventures
6
27,738
31,987
28,150
Deferred tax assets, net
12
321
—
—
Other non-current and derivative assets
7
47
45,460
44,327
2,430,441
2,644,709
2,906,836
CURRENT ASSETS
Amounts receivable
8
10,327
5,913
12,265
Prepaid expenses and other assets
885
4,435
4,806
Vendor take-back mortgage receivable
22
19,406
—
—
Cash and cash equivalents
18,268
13,273
8,018
48,886
23,621
25,089
Assets held for sale
23
105,600
—
135,000
Total assets
$
2,584,927
$
2,668,330
$
3,066,925
Liabilities
NON-CURRENT LIABILITIES
Debt
9
$
956,076
$
1,254,090
$
1,106,816
Deferred tax liabilities, net
12
—
1,961
1,974
Other non-current and derivative liabilities
13
27,108
18,014
14,693
983,184
1,274,065
1,123,483
CURRENT LIABILITIES
Debt
9
351,538
85,371
265,967
Subsidiary redeemable units
10
46,738
54,850
78,193
Amounts payable and accrued liabilities
14
54,057
53,733
67,108
452,333
193,954
411,268
Debt related to assets held for sale
23
68,887
—
—
Total liabilities
1,504,404
1,468,019
1,534,751
Equity
Unitholders’ equity
15
1,837,446
1,837,138
1,842,010
Deficit
15
(764,786)
(642,162)
(321,769)
Accumulated other comprehensive income
16
7,863
5,335
11,933
Total equity
1,080,523
1,200,311
1,532,174
Total liabilities and equity
$
2,584,927
$
2,668,330
$
3,066,925
See accompanying notes to the consolidated financial statements.
On behalf of the Board of Trustees of Dream Office Real Estate Investment Trust:
“Qi Tang”
“Michael J. Cooper”
QI TANG
MICHAEL J. COOPER
Trustee
Trustee
Dream Office REIT 2024 Annual Report | 59
Consolidated statements of comprehensive loss
(in thousands of Canadian dollars)
Year ended December 31,
Note
2024
2023
Investment properties revenue
17 $
196,114
$
190,448
Investment properties operating expenses
(89,981)
(88,113)
Net rental income
106,133
102,335
Other income (loss)
Net income (loss) from investment in Dream Industrial REIT
5
10,425
(30,674)
Share of net income (loss) from investment in joint ventures
6
336
(812)
Interest and other income
1,565
2,885
12,326
(28,601)
Other expenses
General and administrative
18
(10,545)
(10,692)
Interest:
Debt
19
(65,051)
(58,978)
Subsidiary redeemable units
10
(2,835)
(5,234)
Depreciation on property and equipment
(121)
(162)
(78,552)
(75,066)
Fair value adjustments, leasing costs, impairment and net losses on transactions
Fair value adjustments to investment properties
4
(114,589)
(96,406)
Fair value adjustments to financial instruments
20
(221)
22,509
Internal leasing costs and net losses on transactions
21
(3,122)
(1,920)
Impairment of VTB mortgage receivables
22
(29,199)
—
(147,131)
(75,817)
Loss before income taxes
(107,224)
(77,149)
Current and deferred income taxes recovery (expense), net
12
2,290
(47)
Net loss
(104,934)
(77,196)
Other comprehensive income (loss)
Items that will be reclassified subsequently to net income (loss):
Amortization of historical interest rate hedging arrangement
16
40
37
Unrealized gain (loss) on foreign currency translation
16
3,910
(1,157)
Other comprehensive income (loss) from investment in Dream Industrial REIT
5, 16
1,484
(5,050)
Items that will not be reclassified subsequently to net income (loss):
Share of other comprehensive income (loss) from investment in joint ventures
16
(2,906)
(428)
Other comprehensive income (loss)
2,528
(6,598)
Comprehensive loss
$
(102,406) $
(83,794)
See accompanying notes to the consolidated financial statements.
Dream Office REIT 2024 Annual Report | 60
Consolidated statements of changes in equity
(all dollar amounts in thousands of Canadian dollars)
Attributable to unitholders of the Trust
Accumulated
Number of
other
REIT A Units
Unitholders’
comprehensive
Year ended December 31, 2024
Note
(Note 2)
equity
Deficit
income
Total equity
Balance at January 1, 2024
16,313,022 $
1,837,138 $
(642,162) $
5,335 $
1,200,311
Net loss for the year
—
—
(104,934)
—
(104,934)
Distributions paid and payable
15
—
—
(17,690)
—
(17,690)
Deferred trust units exchanged for REIT A Units
11
24,326
407
—
—
407
Unit cancellation costs
—
(99)
—
—
(99)
Other comprehensive income
—
—
—
2,528
2,528
Balance at December 31, 2024
16,337,348 $
1,837,446 $
(764,786) $
7,863 $
1,080,523
Attributable to unitholders of the Trust
Accumulated
Number of
other
REIT A Units
Unitholders’
comprehensive
Year ended December 31, 2023(1)
Note
(Note 2)
equity
Deficit
income
Total equity
Balance at January 1, 2023
23,055,101 $
1,842,010 $
(321,769) $
11,933 $
1,532,174
Net loss for the year
—
—
(77,196)
—
(77,196)
Distributions paid and payable
15
—
—
(37,912)
—
(37,912)
Deferred trust units exchanged for REIT A Units
11
235,227
6,388
—
—
6,388
Cancellation of REIT A Units under NCIB
15
(727,306)
(22,216)
—
—
(22,216)
Cancellation of REIT A Units under SIB
15 (6,250,000)
(193,750)
—
—
(193,750)
Unit cancellation costs
—
(544)
—
—
(544)
Special distribution
15
—
—
(205,285)
—
(205,285)
Issuance of REIT A Units pursuant to special
distribution
15
6,850,805
205,250
—
—
205,250
Consolidation of REIT A Units issued pursuant to
special distribution
15 (6,850,805)
—
—
—
—
Other comprehensive loss
—
—
—
(6,598)
(6,598)
Balance at December 31, 2023
16,313,022 $
1,837,138 $
(642,162) $
5,335 $
1,200,311
(1) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All per unit amounts disclosed reflect the
post-Unit Consolidation units for all periods presented. Refer to Note 15 for further details.
See accompanying notes to the consolidated financial statements.
Dream Office REIT 2024 Annual Report | 61
Consolidated statements of cash flows
(in thousands of Canadian dollars)
Year ended December 31,
Note
2024
2023
Generated from (utilized in) operating activities
Net loss for the year
$
(104,934)
$
(77,196)
Non-cash items:
Net income (loss) from investment in Dream Industrial REIT
5
(10,425)
30,674
Fair value adjustments to investment properties
4
114,589
96,406
Fair value adjustments to financial instruments
20
221
(22,509)
Amortization and depreciation
25
12,762
12,434
Impairment of VTB mortgage receivables
22
29,199
—
Other adjustments
25
(2,678)
1,831
Interest expense on debt
65,051
58,978
Interest expense on subsidiary redeemable units
2,835
5,234
Change in non-cash working capital
25
(3,346)
(657)
Investment in lease incentives and initial direct leasing costs
(30,881)
(34,470)
72,393
70,725
Generated from (utilized in) investing activities
Investment in building improvements
(30,787)
(25,110)
Investment in properties under development
(8,357)
(8,246)
Contributions to joint ventures
(1,110)
(5,077)
Distributions from joint ventures
2,789
—
Distributions from investment in Dream Industrial REIT
9,477
13,221
Net cash proceeds from sale of Dream Industrial REIT units
—
178,405
Net proceeds from disposal of investment properties
7,394
134,386
Advances on loan facility
(475)
(1,458)
(21,069)
286,121
Generated from (utilized in) financing activities
Borrowings
9
350,997
366,422
Scheduled principal repayments
9
(13,187)
(16,237)
Lump sum repayments
9
(300,438)
(383,213)
Financing cost additions
9
(1,855)
(1,787)
Interest paid on debt
(60,407)
(55,708)
Interest paid on subsidiary redeemable units
(3,053)
(5,234)
Distributions paid on REIT A Units(1)
15
(19,048)
(39,070)
Cancellation of REIT A Units under NCIB and unit transaction costs
15
(99)
(22,231)
Debt settlement costs paid
—
(17)
Cancellation of REIT A Units under the SIB including transaction costs
15
—
(194,279)
Principal repayments on finance lease liabilities
(57)
(54)
(47,147)
(351,408)
Change in cash and cash equivalents
4,177
5,438
Foreign exchange gain (loss) on cash held in foreign currency
818
(183)
Cash and cash equivalents, beginning of year
13,273
8,018
Cash and cash equivalents, end of year
$
18,268
$
13,273
(1) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All per unit amounts disclosed reflect the
post-Unit Consolidation units for all periods presented. Refer to Note 15 for further details.
See accompanying notes to the consolidated financial statements.
Dream Office REIT 2024 Annual Report | 62
Notes to the consolidated financial statements
(all dollar amounts in thousands of Canadian dollars, except for per unit or per square foot amounts)
Note 1
ORGANIZATION
Dream Office Real Estate Investment Trust (“Dream Office REIT” or the “Trust”) is an open-ended investment trust created
pursuant to a Declaration of Trust, as amended and restated, under the laws of the Province of Ontario. The consolidated
financial statements of Dream Office REIT include the accounts of Dream Office REIT and its subsidiaries. Dream Office REIT
indirectly owns office properties through its subsidiaries primarily in downtown Toronto. A subsidiary of Dream Office REIT
performs the property management function.
The principal office and centre of administration of the Trust is 30 Adelaide Street East, Suite 301, Toronto, Ontario, M5C 3H1.
The Trust is listed on the Toronto Stock Exchange (“TSX”) under the symbol “D.UN”. Dream Office REIT’s consolidated financial
statements for the year ended December 31, 2024 were authorized for issuance by the Board of Trustees on February 20, 2025,
after which they may be amended only with the Board of Trustees’ approval.
For simplicity, throughout the Notes, reference is made to the units of the Trust as follows:
• “REIT A Units”, meaning the REIT Units, Series A;
• “REIT B Units”, meaning the REIT Units, Series B;
• “REIT Units”, meaning the REIT A Units and REIT B Units, collectively;
• “Units”, meaning the REIT Units and Special Trust Units, collectively; and
• “subsidiary redeemable units”, meaning the LP Class B Units, Series 1, limited partnership units of Dream Office LP, a
subsidiary of Dream Office REIT.
Note 2
SUMMARY OF MATERIAL ACCOUNTING POLICY INFORMATION
Material accounting policy information used in the preparation of these consolidated financial statements is described below:
Basis of presentation and statement of compliance
The consolidated financial statements have been prepared in accordance with IFRS Accounting Standards as issued by the
International Accounting Standards Board (IFRS Accounting Standards). The consolidated financial statements are presented in
Canadian dollars, which is the functional currency of the Trust and the presentation currency for the consolidated financial
statements.
Effective February 22, 2024, the Trust completed a unit consolidation of all the issued and outstanding Units on the basis of one
(1) post-consolidation Unit for every two (2) pre-consolidation Units (the “Unit Consolidation”). Upon completion of the Unit
Consolidation, the number of REIT A Units as of February 22, 2024 was consolidated from 32,626,435 to 16,313,022. There were
no REIT B Units outstanding.
The general partner of Dream Office LP also took steps to effect a consolidation of the LP Class A Units and LP Class B Units of
Dream Office LP on a proportionate basis effective as of February 22, 2024 (“the effective date”). As a result, the subsidiary
redeemable units were also consolidated on the basis of one (1) post-consolidation subsidiary redeemable unit for every two (2)
pre-consolidation subsidiary redeemable units on the effective date. Upon completion of the Unit Consolidation, the number of
subsidiary redeemable units as of February 22, 2024 was consolidated from 5,233,823 to 2,616,911.
All unit, per unit and unit-related amounts disclosed herein reflect the post-Unit Consolidation units for all periods presented,
unless otherwise noted.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Dream Office REIT and its subsidiaries. Subsidiaries
are fully consolidated from the date of acquisition, which is the date on which the Trust obtains control, and continue to be
consolidated until the date such control ceases. Control exists when the Trust is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity. All
intercompany balances, income and expenses, and unrealized gains and losses resulting from intercompany transactions are
eliminated in full.
Dream Office REIT 2024 Annual Report | 63
Equity accounted investments
Equity accounted investments are investments over which the Trust has significant influence, but not control and joint ventures
over which the Trust has joint control. Generally, the Trust is considered to exert significant influence when it holds more than a
20% interest in an entity or partnership. However, determining significant influence is a matter of judgment and specific
circumstances and, from time to time, the Trust may hold an interest of more than 20% in an entity or partnership without
exerting significant influence. Conversely, the Trust may hold an interest of less than 20% and exert significant influence through
representation on the Board of Trustees, direction of management or contractual agreements, as in the case of the Trust’s
investment in Dream Industrial REIT.
The financial results of the Trust’s equity accounted investments are included in the Trust’s consolidated financial statements
using the equity method, whereby the investment is carried on the consolidated balance sheets at cost, adjusted for the Trust’s
proportionate share of post-acquisition profits and losses and for post-acquisition changes in excess of the Trust’s carrying
amount of its investment over the net assets of the equity accounted investments, less any identified impairment loss. The
Trust’s share of profits and losses is recognized in the share of income from equity accounted investments in the consolidated
statements of comprehensive income. Dilution/accretion gains or losses arising from changes in the Trust’s interest in equity
accounted investments are recognized in earnings. If the Trust’s investment is reduced to zero, additional losses are not provided
for, and a liability is not recognized, unless the Trust has incurred legal or constructive obligations, or made payments on behalf
of the equity accounted investment.
At each reporting date, the Trust evaluates whether there is objective evidence that its interest in an equity accounted
investment is impaired. The entire carrying amount of the equity accounted investment is compared to the recoverable amount,
which is the higher of the value-in-use or fair value less costs to sell. The recoverable amount of each investment is considered
separately.
IAS 28, “Investments in Associates and Joint Ventures” (“IAS 28”), requires management to use judgment in determining the
recoverable amount of equity accounted investments and investments in joint ventures that are tested for impairment.
Judgment is also involved in estimating the value-in-use of the investment, including estimates of future cash flows, discount
rates, terminal cap rates and associate income and distribution payout ratios. The values assigned to these key assumptions
reflect past experience and are consistent with external sources of information.
Investment properties
Investment properties are initially recorded at cost, including transaction costs incurred in connection with asset acquisitions,
and include investment properties held to earn rental income and/or for capital appreciation and properties that are being
constructed or developed for future use as investment properties. Subsequent to initial recognition, investment properties are
accounted for at fair value. At the end of each reporting period, the Trust determines the fair value of investment properties by:
1)
considering current contracted sales prices for properties that are available for sale;
2)
obtaining appraisals from qualified external professionals on a rotational basis for select properties; and
3)
using internally prepared valuations.
Generally, the Trust values its investment properties using an income approach. The Trust uses two methods under the income
approach: the capitalization rate (“cap rate”) method and the discounted cash flow method. In applying the cap rate method, the
stabilized net operating income (“stabilized NOI”) of each property is divided by an appropriate cap rate with adjustments for
items such as average lease-up costs, vacancy rates, non-recoverable capital expenditures, management fees, straight-line rents,
property capital requirements and other non-recurring items. On a quarterly basis, the Trust generally uses the cap rate method
to value investment properties that are considered to have more stable net cash flow streams and uses the discounted cash flow
method on an annual basis to validate the cap rate value and reasonability of assumptions on such properties. Properties under
development and properties with redevelopment potential and other properties that do not have a stabilized cash flow stream
are measured using the discounted cash flow method, net of costs to complete, if any, as of the consolidated balance sheet
dates. In applying the discounted cash flow method, the Trust models the income and expenses of the property over the
anticipated term of the investment and combined with a terminal value, all of which is discounted using an appropriate discount
rate.
Where comparable recent market transactions indicate what a market participant would be willing to pay for an investment
property is not fully captured in the values derived under an income approach using the current highest and best use for the
property, the Trust applies a comparable sales approach to determine the fair value for that investment property.
Dream Office REIT 2024 Annual Report | 64
Building improvements are added to the carrying amount of investment properties only when it is probable that future
economic benefits associated with the expenditure will flow to the Trust and the cost of the item can be measured reliably.
Repairs and maintenance costs are recorded in investment properties operating expenses when incurred.
Initial direct leasing costs incurred in negotiating and arranging tenant leases are added to the carrying amount of investment
properties. Lease incentives, which include committed costs on commenced leases, costs incurred prior to lease commencement
to make leasehold improvements to tenants’ space and cash allowances provided to tenants, are added to the carrying amount
of investment properties and are amortized on a straight-line basis over the term of the lease as a reduction to investment
properties revenue. Internal leasing costs are expensed in the period that they are incurred.
Borrowing costs associated with direct expenditures on properties under development are capitalized during the period of active
development. The amount of capitalized borrowing costs is determined first by reference to project-specific borrowings, where
applicable, and otherwise by applying a weighted average cost of borrowings to eligible expenditures after adjusting for
borrowings associated with other specific developments. Where borrowings are associated with specific developments, the
amount capitalized is the gross cost incurred on those borrowings less any investment income arising on their temporary
investment. Borrowing costs are capitalized from the commencement of active construction until the date of practical
completion when the property is substantially ready for its intended use. The capitalization of borrowing costs is suspended if
there are prolonged periods when development activity is interrupted. Practical completion is when the property is capable of
operating in the manner intended by management. Generally, this occurs on completion of construction and receipt of all
necessary occupancy and other material permits. If the Trust has pre-leased space at or prior to the start of the development,
practical completion is considered to occur on the lease commencement date when the tenant takes possession of the space.
Investment properties, including investment properties held for sale, are derecognized on transfer of control. Any transaction
costs arising on derecognition of an investment property are included in the consolidated statements of comprehensive income
during the reporting period the asset is derecognized.
Straight-line rent receivables are included in the carrying amount of investment properties.
Other non-current and derivative assets
Other non-current and derivative assets include a vendor takeback (“VTB”) mortgage receivable, derivative assets, property and
equipment and deposits. The VTB mortgage receivable was originally recorded at the fair value of the consideration received at
inception and is subsequently measured at amortized cost, including the expected credit loss (“ECL”) model for impairment.
Derivative assets are recorded at fair value through profit and loss.
Cash and cash equivalents
Cash and cash equivalents include all short-term investments with an original maturity of three months or less, and exclude cash
subject to restrictions that prevent its use for current purposes.
Dream Office REIT 2024 Annual Report | 65
Financial instruments
Classification and measurement of financial instruments
The following summarizes the Trust’s classification and measurement of financial assets and financial liabilities in accordance
with IFRS 9, “Financial Instruments” (“IFRS 9”):
Classification and measurement
Financial assets
VTB mortgage receivable(1)
Financial asset at amortized cost
Deposits(2)
Financial asset at amortized cost
Amounts receivable
Financial asset at amortized cost
Cash and cash equivalents
Financial asset at amortized cost
Financial liabilities
Mortgages(3)
Financial liability at amortized cost
Credit facilities(3)
Financial liability at amortized cost
Subsidiary redeemable units
Financial liability at amortized cost
Deferred Unit Incentive Plan(4)
Financial liability at amortized cost
Tenant security deposits(5)
Financial liability at amortized cost
Amounts payable and accrued liabilities
Financial liability at amortized cost
Financial assets/financial liabilities
Derivative instruments not designated as hedges(6)
Fair value through profit and loss
(1) Included within other non-current and derivative assets in the consolidated balance sheets in the prior year.
(2) Included within other non-current and derivative assets in the consolidated balance sheets.
(3) Included within debt in the consolidated balance sheets.
(4) Included within amounts payable and accrued liabilities and other non-current liabilities in the consolidated balance sheets.
(5) Included within other non-current liabilities in the consolidated balance sheets.
(6) Included within other non-current and derivative assets or non-current and derivative liabilities as applicable in the consolidated balance sheets.
Impairment
The Trust recognizes an allowance for ECLs for all financial assets not held at fair value. For amounts receivable, the Trust applies
the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized upon initial recognition of
the receivables. To measure the ECLs, the Trust has established a provision matrix that is based on its historical credit loss
experience based on days past due, adjusted for forward-looking factors specific to the tenant and the economic environment.
The Trust will usually consider a financial asset in default when a contractual payment is over 90 days past due but will also
consider other factors such as alternate repayment arrangements negotiated with tenants. However, in certain cases, the Trust
may also consider a financial asset to be in default when internal or external information indicates that it is unlikely to receive
the outstanding contractual amounts in full.
Equity
The Trust presents REIT Units as equity, notwithstanding the fact that the Trust’s REIT Units meet the definition of a financial
liability. Under IAS 32, “Financial instruments: presentation” (“IAS 32”), the REIT Units are considered a puttable financial
instrument because of the holder’s option to redeem REIT Units, generally at any time, subject to certain restrictions, at a
redemption price per unit equal to the lesser of 90% of a 20-day weighted average closing price prior to the redemption date
and 100% of the closing market price on the redemption date. The total amount payable by Dream Office REIT in any calendar
month will not exceed $50 unless waived by Dream Office REIT’s Board of Trustees at their sole discretion. The Trust has
determined the REIT Units can be presented as equity and not as financial liabilities because the REIT Units have all of the
following features as defined in IAS 32 (hereinafter referred to as the “puttable exemption”):
•
REIT Units entitle the holder to a pro rata share of the Trust’s net assets in the event of its liquidation; net assets are those
assets that remain after deducting all other claims on the assets;
•
REIT Units are the class of instruments that is subordinate to all other classes of instruments as they have no priority over
other claims to the assets of the Trust on liquidation, and do not need to be converted into another instrument before they
are in the class of instruments that is subordinate to all other classes of instruments;
•
All instruments in the class of instruments that is subordinate to all other classes of instruments have identical features;
•
Apart from the contractual obligation for the Trust to redeem the REIT Units for cash or another financial asset, the REIT
Units do not include any contractual obligation to deliver cash or another financial asset to another entity, or to exchange
Dream Office REIT 2024 Annual Report | 66
financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Trust, and
it is not a contract that will or may be settled in the Trust’s own instruments;
•
The total expected cash flows attributable to the REIT Units over their lives are based substantially on the profit or loss, and
the change in the recognized net assets and unrecognized net assets of the Trust over the life of the REIT Units; and
•
REIT Units are initially recognized at the fair value of the consideration received by the Trust. Any transaction costs arising on
the issuance of REIT Units are recognized directly in unitholders’ equity as a reduction of the proceeds received.
Unit-based compensation plan
As described in Note 11, the Trust has a Deferred Unit Incentive Plan (“DUIP”) that provides for the granting of deferred trust
units and income deferred trust units to trustees, officers, employees and employees of affiliates.
Over the vesting period, deferred trust units are recorded as a liability, and compensation expense is recognized based on the
fair value of the units. Once vested, the liability is remeasured at each reporting date at amortized cost, based on the fair value
of the corresponding REIT A Units, with changes in fair value recognized in the consolidated statements of comprehensive
income as a fair value adjustment to financial instruments. Deferred trust units and income deferred units are usually settled in
REIT A Units.
Revenue recognition
Rental income
IFRS 16, “Leases” (“IFRS 16”) applies to revenues derived from leases. The Trust accounts for tenant leases as operating leases
given that it has retained substantially all of the risks and rewards of ownership of its investment properties. Lease revenue from
investment properties includes base rents, recoveries of property taxes, percentage participation rents and lease termination
fees. Revenue recognition under a lease commences when the tenant has a right to use the leased premises. The total amount
of contractual rent to be received from operating leases is recognized on a straight-line basis over the term of the lease. A
straight-line rent receivable, which is included in investment properties, is recorded for the difference between the rental
revenue recognized and the contractual amount received. Property tax recoveries are recognized as revenues in the period in
which the variability resolves and collectability is reasonably assured. Percentage participation rents are recognized on an
accrual basis once tenant sales revenues exceed contractual thresholds.
Revenue from contracts with customers
The Trust has obligations to provide ongoing services related to its leases which are contract revenues within the scope of IFRS
15, “Revenue from contracts with customers” (“IFRS 15”). These services include common area maintenance services, utilities
and other services at its properties (collectively “CAM services”). The Trust’s performance obligations on CAM services are
satisfied over time as services are provided during the period in which tenants occupy the premises. When providing CAM
services, the Trust is entitled to recoveries from tenants to the extent of costs incurred to provide such services. The Trust
recognizes revenue as the CAM services are provided over time, at the best estimate of the amounts earned for those services,
which reflects actual costs incurred. Tenants are billed monthly based on estimates. To the extent that costs exceed billings, a
receivable is recognized; if the billings exceed costs, a payable is recognized. These current assets or liabilities are settled with
tenants annually.
The Trust provides parking services to its properties’ tenants and visitors. Tenant parking revenue is recognized evenly over the
terms of the related contract. Transient parking revenue is recognized as the parking service is rendered.
The consideration received from tenants under rental arrangements is allocated between the leased premises, CAM services and
parking services, as applicable, based on relative stand-alone selling prices.
Pursuant to certain agreements, the Trust has an obligation to provide property management services to properties directly or
indirectly owned by Dream Asset Management Corporation (“DAM”) and Dream Impact Trust, related parties of the Trust and
third parties. The Trust recognizes revenue over time as it provides property management services calculated as a percentage of
the related property revenues for that period.
Pursuant to the Shared Services Agreement with DAM and the Services Agreements with Dream Industrial REIT and Dream
Impact Trust (see Note 27), the Trust arranges for administrative and support services to be provided to these related parties on
a cost recovery basis. The Trust has determined that it is acting as an agent for these services and the fees are netted against the
related expenses with the exception of fees related to the occupation of office space. In providing office space to related parties,
the Trust is acting as the principal in the arrangement, and the revenues and related expenses are presented separately in the
consolidated statements of comprehensive income. The Trust recognizes revenues for office space monthly in accordance with
the terms of the agreements.
Dream Office REIT 2024 Annual Report | 67
Significant judgments in applying IFRS 15
The application of IFRS 15 requires the Trust to make the following significant judgments:
Estimation of transaction prices
The Trust exercises judgment in estimating the transaction price for revenues from contracts with customers. The Trust exercises
judgment with regards to the amount and timing of the revenue recognized for CAM service contracts, which are satisfied over
time. The amount of revenue recognized for CAM services with variable consideration is constrained by the actual costs incurred
and any restrictions in lease agreements. The revenues related to these obligations are recorded over time as the obligation of
the Trust is to provide the CAM services on an as-needed basis throughout the contract period. The Trust considers this to be a
faithful depiction of the transfer of services.
Scoping of revenues
The Trust exercises judgment in determining which of its revenue streams that arise from lease agreements are in scope of IFRS
15 and which are not. Specifically, the Trust considers whether a revenue stream related to a lease agreement is for the lease of
an asset or is for the provision of a distinct service. Revenues of the latter type are determined to be in scope of IFRS 15, while
the former are in scope of IFRS 16.
Principal versus agent determination
The Trust exercises judgment in determining whether it is acting as a principal or an agent in providing services under the Shared
Services Agreement with DAM and the services agreements with Dream Industrial REIT and Dream Impact Trust. In making this
determination, the Trust considers which party controls the service and the nature of the obligation that the Trust has to DAM,
Dream Industrial REIT and Dream Impact Trust. In making this determination, the Trust considers whether it is primarily
responsible for fulfilling the promise to provide the service; whether it bears inventory risk; and whether it has discretion to set
the price for the service.
Income taxes
Dream Office REIT is taxed as a mutual fund trust for Canadian income tax purposes. The Trust expects to distribute all of its
taxable income to its unitholders, which enables the Trust to deduct such distributions for income tax purposes. As the income
tax obligations relating to the distributions are those of the individual unitholder, no provision for income taxes is required on
such amounts. The Trust expects to continue to distribute its taxable income and to qualify as a real estate investment trust for
the foreseeable future. The Trust has a subsidiary in the United States (“U.S.”) for which income taxes are accounted for using
the asset and liability method.
Provisions
Provisions are recognized when the Trust has a present legal or constructive obligation as a result of past events, it is probable an
outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.
Critical accounting judgments, estimates and assumptions
Preparing the consolidated financial statements requires management to make judgments, estimates and assumptions that
affect the amounts reported. Management bases its judgments, estimates and assumptions on historical experience and other
factors it believes to be reasonable under the circumstances, but which are inherently uncertain and unpredictable, the result of
which form the basis of the carrying amounts of assets and liabilities. However, uncertainty about these judgments, estimates
and assumptions could result in outcomes that could require a material adjustment to the carrying amount of the affected asset
or liability in the future.
Critical accounting estimates
The following are the critical accounting estimates used in applying the Trust’s accounting policies that have the most significant
effect on the amounts in the consolidated financial statements.
Investment properties
Critical judgments are made in respect of the fair values of investment properties. The fair values of these investments are
reviewed at least quarterly by management with reference to independent property appraisals and market conditions existing at
the reporting date using generally accepted market practices. The independent appraisers are experienced, nationally
recognized and qualified in the professional valuation of investment properties in their respective geographic areas. Judgment is
applied in determining the extent and frequency of obtaining independent appraisals. At each reporting period, a select number
of properties, determined on a rotational basis, are valued by independent appraisers. For properties not subject to independent
appraisals, valuations are prepared internally during each reporting period.
Critical assumptions used in estimating the fair values of investment properties include cap rates, discount rates that reflect
current market uncertainties, terminal cap rates, market rents and vacancy rates. Other key assumptions relating to the
estimates of fair values of investment properties include components of stabilized NOI and leasing costs. The Trust examines the
Dream Office REIT 2024 Annual Report | 68
critical and key assumptions at the end of each reporting period and updates these assumptions based on recent leasing activity
and external market data available at that time. If there is any change in these assumptions or in regional, national or
international economic conditions, the fair value of investment properties may change materially.
The Trust makes judgments with respect to whether lease incentives provided in connection with a lease enhance the value of
the leased space, which determines whether or not such amounts are treated as tenant improvements and added to investment
properties. Lease incentives, such as cash, rent-free periods and lessee- or lessor-owned improvements, may be provided to
lessees to enter into an operating lease. Lease incentives that do not provide benefits beyond the initial lease term are included
in the carrying amount of investment properties and are amortized as a reduction of rental revenue on a straight-line basis over
the term of the lease.
Judgment is also applied in determining whether certain costs are additions to the carrying amount of the investment property.
For properties under development, the Trust exercises judgment in determining when development activities have commenced,
when and how much borrowing costs are to be capitalized to the development project, and the point of practical completion.
Impairment
The Trust assesses the possibility and amount of any impairment loss or write-down as it relates to equity accounted
investments.
IAS 36, “Impairment of Assets” (“IAS 36”), requires management to use judgment in determining the recoverable amount of
equity accounted investments that are tested for impairment. Judgment is also involved in estimating the value-in-use of the
equity accounted investments, including estimates of future cash flows, discount rates and terminal cap rates. The values
assigned to these key assumptions reflect past experience and are consistent with external sources of information.
Estimates in applying the expected credit loss (“ECL”) model to VTB mortgage receivables
Applying the ECL model to VTB mortgages receivable requires management to make certain estimates. The expected credit loss
is a multi-part model whereby management is required to assess possible scenarios for the settlement of a financial asset, the
probability of each scenario occurring and the financial implications to the Trust of each scenario. Where there have been no
significant changes in the creditworthiness of the counterparty since the inception of the VTB mortgage receivable, the Trust
assesses the possible outcomes over the 12 months following the reporting date. Where there has been a significant change in
the creditworthiness of the counterparty, the Trust assesses the full range of outcomes over the lifetime of the loan. The Trust is
then required to perform a probability-weighted expected value calculation across all scenarios to determine the appropriate
expected credit loss provision. In performing this analysis, management is required to make estimates as to the possible
scenarios, the probability of each scenario occurring and the financial outcome of each scenario. Changes in these assumptions
could cause the assessment of the amount of the ECL provision to change materially.
In performing the ECL analysis for VTB mortgages receivable, the Trust considers indication of the counterparty’s ability and
willingness to service the debt, the cash flows of the secured asset and the status of negotiations, if any, with the counterparty.
These factors affect both the assessment of whether there has been a significant change in the creditworthiness of the
counterparty as well as the possible outcomes used in the expected value model. Consequently, changes in the circumstances of
the counterparty or the status of negotiations could cause the expected value to change materially due to changes in the
assessment of possible outcome and the probability assigned to each outcome.
Note 3
CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES AND FUTURE ACCOUNTING POLICIES
Changes in accounting policies and disclosures
Amendments to IAS 1
On January 1, 2024, the Trust has adopted amendments to IAS 1, “Presentation of Financial Statements” (“IAS 1”), relating to the
classification of liabilities as current or non-current liabilities. The Trust may be required to settle liabilities relating to subsidiary
redeemable units classified as liabilities and fully vested Deferred Unit Incentive Plan (“DUIP”) units on demand by the holders
and does not have the right to defer settlement of such liabilities for a period of more than 12 months from the reporting date.
As a result, the Trust has classified these liabilities where there is no right to defer settlement as current liabilities. Deferred trust
units and income deferred units are usually settled in REIT A Units. The amendments have been applied retrospectively for all
periods presented in accordance with the transitional provisions of IAS 1.
Dream Office REIT 2024 Annual Report | 69
As a result of these amendments, the following reclassifications have been made to the presentation of the current and
comparative consolidated balance sheets:
December 31, 2024
Before
amendments
to IAS 1
Adjustments
After
amendments
to IAS 1
Liabilities
NON-CURRENT LIABILITIES
Subsidiary redeemable units
$
46,738
$
(46,738) $
—
Deferred Unit Incentive Plan
8,456
(8,456)
—
Other non-current and derivative liabilities (Note 13)
23,997
3,111
27,108
79,191
(52,083)
27,108
CURRENT LIABILITIES
Subsidiary redeemable units
—
46,738
46,738
Amounts payable and accrued liabilities (Note 14)
48,712
5,345
54,057
48,712
52,083
100,795
Total
$
127,903
$
— $
127,903
December 31, 2023
January 1, 2023
Previously
reported
Adjustments
Restated
Previously
reported
Adjustments
Restated
Liabilities
NON-CURRENT LIABILITIES
Subsidiary redeemable units
$
54,850
$ (54,850) $
—
$
78,193
$ (78,193) $
—
Deferred Unit Incentive Plan
7,932
(7,932)
—
15,103
(15,103)
—
Other non-current and derivative liabilities
(Note 13)
15,120
2,894
18,014
11,018
3,675
14,693
77,902
(59,888)
18,014
104,314
(89,621)
14,693
CURRENT LIABILITIES
Subsidiary redeemable units
—
54,850
54,850
—
78,193
78,193
Amounts payable and accrued liabilities
(Note 14)
48,695
5,038
53,733
55,680
11,428
67,108
48,695
59,888
108,583
55,680
89,621
145,301
Total
$
126,597
$
—
$
126,597
$
159,994
$
— $
159,994
There is no impact on the measurement or recognition of any item in the Trust’s consolidated financial statements, debt
covenants based on the terms and definitions of the covenant calculations and debt agreements, or liquidity risks, and there is
no change to the consolidated statements of comprehensive income, consolidated statements of changes in equity, and
consolidated statements of cash flows.
Amendments to IFRS 8
In July 2024, the IFRS Interpretations Committee (“IFRIC”) published clarification on segment disclosure requirements in
accordance with IFRS 8, “Operating Segments” (“IFRS 8”), with application if necessary to commence for annual reports dated as
at December 31, 2024. Under the existing IFRS 8 guidance, entities are required to disclose certain specified income and expense
items that are part of the profit measures provided to the Chief Operating Decision Maker (“CODM”). The details disclosed are
not limited by whether material items are unusual or non-recurring. The IFRIC agenda decision requires entities to consider their
existing processes and controls in determining segment disclosures and whether more disclosure is required. The Trust assessed
the impact and noted no changes would be required as at December 31, 2024.
Future changes in accounting policies
IFRS 18, “Presentation and Disclosure in Financial Statements”
Effective for annual periods beginning on or after January 1, 2027, IFRS 18 will replace IAS 1, “Presentation of Financial
Statements”, introducing new requirements that are intended to help achieve comparability of the financial performance of
similar entities and provide more relevant information and transparency to users. Even though IFRS 18 will not impact the
recognition or measurement of items in the financial statements, its impacts on presentation and disclosure are expected to be
Dream Office REIT 2024 Annual Report | 70
pervasive, in particular those related to the statement of financial performance and providing management-defined
performance measures within the financial statements.
Management is currently assessing the detailed implications of applying the new standard on the Trust’s consolidated financial
statements.
IFRS 9, “Financial Instruments“ and IFRS 7, “Financial Instruments: Disclosures“
In May 2024, amendments to IFRS 9, "Financial Instruments" and IFRS 7, "Financial Instruments: Disclosures" were issued. The
amendments clarify the timing of recognition and derecognition for a financial asset or financial liability, including clarifying that
a financial liability is derecognized on the settlement date. Further, the amendments introduce an accounting policy choice to
derecognize financial liabilities settled using an electronic payment system before the settlement date, if specific conditions are
met. The amendments also require additional disclosures for financial instruments with contingent features and investments in
equity instruments classified at fair value through other comprehensive income. These amendments are effective for annual
reporting periods beginning on or after January 1, 2026. Early adoption is permitted, with an option to early adopt only the
amendments related to the classification of financial assets. The Trust is in the process of assessing the impact of these new
standards.
Dream Office REIT 2024 Annual Report | 71
Note 4
INVESTMENT PROPERTIES
Year ended December 31, 2024
Year ended December 31, 2023
Note
Active
properties
Properties
under
development
Investment
properties
Active
properties
Properties
under
development
Investment
properties
Balance, beginning of year
$ 2,278,070
$
64,304
$ 2,342,374
$ 2,318,074
$
64,809 $ 2,382,883
Additions:
Building improvements
32,286
7,496
39,782
24,751
7,272
32,023
Lease incentives and initial direct
leasing costs
23,406
3,771
27,177
31,973
3,308
35,281
Capitalized interest
—
871
871
—
680
680
Total additions to investment properties
55,692
12,138
67,830
56,724
11,260
67,984
Transfers, dispositions, assets classified as
held for sale and other:
Properties under development
transferred to active properties
during the year
31,049
(31,049)
—
—
—
—
Active properties transferred to
properties under development
during the year
(16,037)
16,037
—
—
—
—
Investment properties classified as
held for sale during the year
23
(114,200)
—
(114,200)
—
—
—
Total transferred, disposed, classified as
held for sale and other
(99,188)
(15,012)
(114,200)
—
—
—
Changes included in net income (loss):
Fair value adjustments to investment
properties
(105,860)
(8,729)
(114,589)
(84,515)
(11,741)
(96,256)
Change in straight-line rent
2,854
11
2,865
1,111
(13)
1,098
Amortization and write-off of lease
incentives
(12,241)
(400)
(12,641)
(12,261)
(11)
(12,272)
Total changes included in net income
(115,247)
(9,118)
(124,365)
(95,665)
(11,765)
(107,430)
Change included in other comprehensive
income (loss):
Foreign currency translation
3,376
—
3,376
(1,063)
—
(1,063)
Total change included in other
comprehensive income (loss)
3,376
—
3,376
(1,063)
—
(1,063)
Balance, end of year
$ 2,122,703
$
52,312
$ 2,175,015
$ 2,278,070
$
64,304 $ 2,342,374
Change in unrealized income included in
net income (loss) for the period
Unrealized change in fair value of
investment properties
$ (105,860) $
(8,729)
$ (114,589)
$
(84,515) $ (11,741) $
(96,256)
Investment properties include $16,809 (December 31, 2023 – $13,957) related to straight-line rent receivables.
As of December 31, 2024 and December 31, 2023, all of the Trust's investment properties were pledged as security for debt.
Valuations of externally appraised properties
The following table summarizes the investment properties valued by qualified external valuation professionals for the years
ended December 31, 2024 and year ended December 31, 2023 by fair values:
Year ended
Year ended
December 31, 2024
December 31, 2023
Investment properties valued by qualified external valuation professionals
$
893,997 $
694,239
Number of investment properties valued by qualified external valuation professionals
8
4
Percentage of the total investment properties valued by qualified external valuation professionals
41%
30%
Dream Office REIT 2024 Annual Report | 72
Fair value adjustments to investment properties
When performing fair value assessments for its investment properties, the Trust incorporates a number of factors, including
recent market transactions, recent leasing activity, market vacancy, leasing costs and other information obtained from market
research and recently completed leases. The fair value of the investment properties as at December 31, 2024 and December 31,
2023 represents the Trust’s best estimate based on internally and externally available information as at the end of each
reporting period.
Management’s valuation process relies on certain assumptions, which include, but are not limited to, market rents, leasing costs,
vacancy rates, discount rates and capitalization (“cap”) rates. The Trust monitors market trends and changes in the economic
environment on the valuation of its investment properties. If there are changes in the critical and key assumptions used in
valuing the investment properties, in regional, national or international economic conditions, or if there are significant residual
effects of the novel coronavirus (“COVID-19”) pandemic, the fair value of investment properties may change materially. The
significant and unobservable Level 3 valuation metrics used in the valuation methods are set out in the tables below.
As at December 31, 2024, the Trust valued 21 properties using the cap rate method, two properties under development using
the discounted cash flow method, and three properties with redevelopment potential using the direct comparison approach
(December 31, 2023 – 22 properties were valued using the cap rate method, three properties using the discounted cash flow
method, two properties using the direct comparison approach and one property valued using a scenario-weighted discounted
cash flow model).
Assumptions used in the valuation of investment properties using the cap rate method
The critical valuation metrics by segment for properties valued using the cap rate method as at December 31, 2024 and
December 31, 2023 are set out below:
December 31, 2024
December 31, 2023
Range (%)
Weighted
average cap
rates (%)
Range (%)
Weighted
average cap
rates (%)
Toronto downtown
5.25–6.00
5.37
5.13–6.25
5.38
Other markets
7.25–10.00
8.01
7.25–8.75
7.83
Total portfolio
5.25–10.00
5.73
5.13–8.75
5.75
Sensitivities on assumptions
Generally, an increase in stabilized NOI will result in an increase to the fair value of an investment property. An increase in the
cap rate will result in a decrease to the fair value of an investment property. The cap rate magnifies the effect of a change in
stabilized NOI, with a lower rate resulting in a greater impact on the fair value of an investment property than a higher rate.
The following sensitivity table outlines the potential impact on the fair value of investment properties (excluding two investment
properties under development and three properties with redevelopment potential), for a range of changes to the weighted
average cap rate as at December 31, 2024:
Impact of change to
weighted average cap rates
+100 bps
+50 bps
+25 bps
–25 bps
–50 bps
–100 bps
Increase (decrease) in value
$
(294,750) $
(159,540) $
(83,200) $
91,110
$
191,280
$
424,920
Assumptions used in the valuation of office properties under development using the discounted cash flow method
As at December 31, 2024, one office investment property under development was valued using the discounted cash flow
method. As at December 31, 2023, two office investment properties under development, an office property with redevelopment
potential and an office property where there had been a change in the quality of the tenant’s covenant were valued using the
discounted cash flow method.
Dream Office REIT 2024 Annual Report | 73
The critical valuation metrics as at December 31, 2024 and December 31, 2023 are set out below:
December 31, 2024
December 31, 2023
Rates
Range (%)
Weighted
average
Discount rates (%)
6.00
5.75–6.50
6.15
Terminal cap rates (%)
5.50
4.25–5.50
4.88
Market rental rates (in dollars per square foot)(1)
$
35.00
$
35.00–47.00
$
42.02
(1) Market rental rates represent year-one rates following project completion in the discounted cash flow model. Market rental rates include only office space
and exclude retail space.
In addition to the assumptions noted above, as at December 31, 2024, leasing cost assumptions for new and renewed leasing
were within the range of $4.00 to $14.00 per square foot per year (December 31, 2023 – $2.00 to $14.00 per square foot per
year).
Sensitivities on assumptions of office properties under development
Generally, an increase in market rents will result in an increase to the fair value of an investment property. An increase in the
terminal cap rate or discount rate will result in a decrease to the fair value of an investment property. The terminal cap and
discount rates magnify the effect of a change in market rents, with lower rates resulting in a greater impact on the fair value of
an investment property than a higher rate. An increase in leasing costs per square foot will result in a decrease in the fair value
of an investment property.
The following sensitivity table outlines the potential impact on the fair value of the one office property under development
valued under the discounted cash flow method, for a range of changes in the weighted average discount rates and terminal cap
rates as at December 31, 2024.
Increase (decrease) in value ($)
Impact of change to
discount rates
Impact of change to
terminal cap rates
+100 bps
+50 bps
+25 bps
Mid-point rate
(6.00%)
–25 bps
–50 bps
–100 bps
–100 bps
3,149
4,640
5,415
6,210
7,026
7,864
9,606
–50 bps
40
1,381
2,079
2,795
3,529
4,283
5,851
–25 bps
(1,293)
(15)
649
1,331
2,030
2,748
4,242
Mid-point rate (5.50%)
(2,505)
(1,285)
(651)
—
668
1,353
2,779
+25 bps
(3,611)
(2,444)
(1,837)
(1,215)
(576)
79
1,443
+50 bps
(4,625)
(3,506)
(2,925)
(2,329)
(1,717)
(1,089)
218
+100 bps
(6,419)
(5,386)
(4,850)
(4,299)
(3,734)
(3,154)
(1,948)
The following sensitivity table outlines the potential impact on the fair value of the one office property under development
valued under the discounted cash flow method, assuming the market rental rates were to change by $1.00 per square foot and
the leasing costs were to change by $5.00 per square foot as at December 31, 2024.
Impact of change to
market rental rates
Impact of change to
leasing costs per square foot
+$1.00
–$1.00
+$5.00
–$5.00
Increase (decrease) in value
$
692
$
(692)
$
(7)
$
7
Generally, a decrease in vacancy rate assumptions will result in an increase to the fair value of a property valued under the
discounted cash flow method, while an increase in vacancy rate assumptions will result in a decrease to the fair value of a
property valued under the discounted cash flow method.
Assumptions used in the valuation of residential investment properties under development using the discounted
cash flow method
Over the past year, the Trust has been working on the design, approvals and strategic partnerships to create a financially viable
redevelopment model. The redevelopment opportunity will convert the existing 126,000 square foot office building into a brand
new 166-unit, purpose-built rental residential apartment. Concurrently, the Trust is working to relocate the office tenants within
606-4th Building to the adjacent 444-7th Building.
Dream Office REIT 2024 Annual Report | 74
As certain milestones on the project were achieved during the quarter, the Trust has reclassified 606-4th Building & Barclay
Parkade to properties under development.
As at December 31, 2024, one residential investment property under development was valued using the discounted cash flow
method.
December 31, 2024
Rates
Discount rates (%)
6.00
Terminal cap rates (%)
5.25
Market rental rates (in dollars per square foot per month)(1)
$
3.48
(1) Market rental rates represent year-one rates following project completion in the discounted cash flow model. Market rental rates include only residential
space and exclude retail space.
Sensitivities on assumptions of residential investment properties under development
Generally, an increase in market rents will result in an increase to the fair value of an investment property. An increase in the
terminal cap rate or discount rate will result in a decrease to the fair value of an investment property. The terminal cap and
discount rates magnify the effect of a change in market rents, with lower rates resulting in a greater impact on the fair value of
an investment property than a higher rate. An increase in leasing costs per square foot will result in a decrease in the fair value
of an investment property.
The following sensitivity table outlines the potential impact on the fair value of the one residential development property valued
under the discounted cash flow method, for a range of changes in the weighted average discount rates and terminal cap rates as
at December 31, 2024.
Increase (decrease) in value ($)
Impact of change to
discount rates
Impact of change to
terminal cap rates
+100 bps
+50 bps
+25 bps
Mid-point rate
(6.00%)
–25 bps
–50 bps
–100 bps
–100 bps
3,421
6,435
8,017
9,653
11,343
13,090
16,762
–50 bps
(1,345)
1,393
2,832
4,318
5,856
7,444
10,785
–25 bps
(3,370)
(750)
628
2,051
3,523
5,045
8,244
Mid-point rate (5.25%)
(5,203)
(2,688)
(1,367)
—
1,413
2,874
5,946
+25 bps
(6,869)
(4,451)
(3,179)
(1,865)
(505)
900
3,856
+50 bps
(8,390)
(6,060)
(4,835)
(3,567)
(2,257)
(902)
1,949
+100 bps
(11,068)
(8,892)
(7,748)
(6,564)
(5,340)
(4,073)
(1,409)
The following sensitivity table outlines the potential impact on the fair value of the one residential development property valued
under the discounted cash flow method, assuming the market rental rates were to change by $0.0833 per square foot per month
as at December 31, 2024.
Impact of change to
market rental rates per month
+$0.0833
–$0.0833
Increase (decrease) in value
$
1,476
$
(1,476)
Generally, a decrease in vacancy rate assumptions will result in an increase to the fair value of a property valued under the
discounted cash flow method, while an increase in vacancy rate assumptions will result in a decrease to the fair value of a
property valued under the discounted cash flow method.
Dream Office REIT 2024 Annual Report | 75
Note 5
INVESTMENT IN DREAM INDUSTRIAL REIT
Dream Industrial Real Estate Investment Trust (“Dream Industrial REIT”) is an unincorporated, open-ended real estate
investment trust listed on the Toronto Stock Exchange under the symbol “DIR.UN”.
Year ended
Year ended
December 31, 2024
December 31, 2023
Balance, beginning of year
$
224,888 $
451,476
Share of income
11,258
11,292
Share of other comprehensive income (loss)
1,484
(960)
Dilution loss
(833)
(734)
Distributions earned
(9,477)
(12,459)
Net proceeds on the sale of Dream Industrial REIT units
—
(178,700)
Loss on the sale of Dream Industrial REIT units
—
(45,027)
Balance, end of year
$
227,320 $
224,888
Dream Industrial REIT units held, end of year
192,735
192,735
Dream Industrial LP Class B limited partnership units held, end of year(1)(2)
13,346,572
13,346,572
Total units held, end of year
13,539,307
13,539,307
Ownership as a percentage of total units outstanding, end of year
4.7%
4.7%
(1) 1,430,000 Dream Industrial LP Class B limited partnership units are pledged as security for the $10,000 revolving credit facility as at December 31, 2024 and
December 31, 2023.
(2) 11,916,572 Dream Industrial LP Class B limited partnership units are pledged as security for the $375,000 revolving credit facility as at December 31, 2024
and December 31, 2023.
The table below reconciles the components of net income from investment in Dream Industrial REIT for the years ended
December 31, 2024 and December 31, 2023.
Year ended December 31,
2024
2023
Share of income
$
11,258
$
11,292
Dilution loss
(833)
(734)
Loss on the sale of Dream Industrial REIT units
—
(45,027)
Transaction costs on the sale of Dream Industrial REIT units
—
(295)
Reclassification of accumulated other comprehensive income to net income (loss) from sale of units
—
4,090
Net income (loss) from investment in Dream Industrial REIT
$
10,425
$
(30,674)
The fair value of the Trust’s interest in Dream Industrial REIT of $159,899 (December 31, 2023 – $189,009) was determined using
the Dream Industrial REIT closing unit price of $11.81 per unit (December 31, 2023 – $13.96 per unit) at period-end multiplied
by the number of units held by the Trust as at December 31, 2024.
On March 1, 2023, the Trust sold 565,000 Dream Industrial REIT units for net proceeds of $8,300. As a result of this sale, the
Trust recorded a loss totalling $1,317 for the difference between the net proceeds and the carrying value of the investment.
On May 16, 2023, the Trust sold 12,500,000 units of Dream Industrial REIT, on a bought-deal basis, for net proceeds of $170,400.
As a result of the sale, the Trust recorded a loss totalling $43,710 for the difference between the net proceeds and the carrying
value of the investment. The Trust incurred $295 in transaction costs on the secondary offering. As a result of the sale,
accumulated other comprehensive income previously recorded relating to the reduction in ownership interest was reclassified to
net income (loss) from investment in Dream Industrial REIT.
Dream Office REIT 2024 Annual Report | 76
The following amounts represent the Trust’s ownership interest in the assets, liabilities, revenues and expenses of Dream
Industrial REIT:
At 100%
At % ownership interest
December 31,
December 31,
2024
2023
2024
2023
Non-current assets
$ 7,953,223
$
7,770,857
$
369,818
$
367,043
Current assets
169,331
87,483
7,874
4,132
Total assets
8,122,554
7,858,340
377,692
371,175
Non-current liabilities
2,223,472
2,656,786
103,389
125,212
Current liabilities
1,168,009
626,657
204,606
207,393
Total liabilities
3,391,481
3,283,443
307,995
332,605
Net assets
$
4,731,073
$
4,574,897
$
69,697
$
38,570
Add-back:
Subsidiary redeemable units
157,623
186,318
Investment in Dream Industrial REIT
$
227,320
$
224,888
At 100 %
At % ownership interest
Year ended December 31,
Year ended December 31,
2024
2023
2024
2023
Net rental income
$
355,432
$
334,180
$
16,661
$
26,398
Other revenue and expenses, fair value adjustments and
other items
(95,821)
(229,881)
13,948
(69,129)
Net income (loss) for the period
259,611
104,299
30,609
(42,731)
Other comprehensive income (loss)
31,548
(27,533)
1,484
(960)
Comprehensive income (loss) before the undernoted
adjustments
$
291,159
$
76,766
$
32,093
$
(43,691)
Add:
Interest on subsidiary redeemable units
9,344
10,557
Fair value adjustments to subsidiary redeemable units
(28,695)
43,466
Share of comprehensive income from investment in
Dream Industrial REIT
$
12,742
$
10,332
Add (deduct):
Share of other comprehensive loss (income) from
investment in Dream Industrial REIT
(1,484)
960
Share of income from investment in Dream Industrial REIT
$
11,258
$
11,292
Add (deduct):
Net dilution loss
(833)
(734)
Loss on the sale of Dream Industrial REIT units
—
(45,027)
Transaction costs on sale of Dream Industrial REIT units
—
(295)
Reclassification of accumulated other comprehensive
income to net income (loss) from sale of units
—
4,090
Share of net income (loss) from investment in Dream
Industrial REIT
$
10,425
$
(30,674)
Note 6
JOINT ARRANGEMENTS
Joint ventures
As at December 31, 2024, the Trust holds four joint arrangements accounted for as joint ventures, including a 50% interest in a
partnership formed for the purpose of holding an investment property at 220 King Street West in downtown Toronto, a 50%
interest in a partnership for the mixed-use development of Block 2 at 2200–2206 Eglinton Avenue East and 1020 Birchmount
Road in Scarborough, Ontario, a 50% interest in a partnership for a premium restaurant at 67 Richmond Street West in
downtown Toronto and an investment in Alate.
Dream Office REIT 2024 Annual Report | 77
In 2018, the Trust took a 25% stake in Alate, a vehicle specializing in real estate technology investments. As at December 31,
2024, the Trust had funded $11,058 since inception into the joint investment (December 31, 2023 – $10,245). As at
December 31, 2024, the Trust has a remaining commitment for up to US$3,189 to the fund.
The following amounts represent the Trust’s ownership interest in the assets, liabilities, revenues and expenses of its investment
in joint ventures:
Net assets at ownership interest
December 31,
December 31,
2024
2023
Non-current assets
$
25,941
$
28,962
Current assets
6,091
7,690
Total assets
32,032
36,652
Non-current liabilities
3,633
3,733
Current liabilities
661
932
Total liabilities
4,294
4,665
Net assets
$
27,738
$
31,987
Share of comprehensive income
(loss) at ownership interest
for the year ended December 31,
2024
2023
Net rental income
$
345
$
312
Other income, expenses and fair value adjustments
(9)
(1,124)
Share of net income (loss) from investment in joint ventures
336
(812)
Other comprehensive loss from investment in joint ventures
(2,906)
(428)
Share of comprehensive loss from investment in joint ventures
$
(2,570)
$
(1,240)
Co-owned investment properties
The Trust’s interest in co-owned investment properties is accounted for based on the Trust’s share of interest in the assets,
liabilities, revenues and expenses of the investment properties.
Ownership interest (%)
December 31,
December 31,
Property
Location
2024
2023
50 & 90 Burnhamthorpe Road West (Sussex Centre)(1)
Mississauga, Ontario
49.9
49.9
(1) The Trust co-owns this investment property with Dream Impact Trust, a related party of the Trust (see Note 27).
The following amounts represent the Trust’s ownership interest in the assets, liabilities, revenues and expenses of the co-owned
property in which the Trust participated during 2023 and 2024.
Net assets at ownership interest
December 31,
December 31,
2024
2023
Non-current assets
$
74,631
$
76,212
Current assets
326
825
Total assets
74,957
77,037
Non-current liabilities
65,203
65,174
Current liabilities
1,948
802
Total liabilities
67,151
65,976
Net assets
$
7,806
$
11,061
Share of net income
at ownership interest
for the year ended December 31,
2024
2023
Net rental income
$
3,345
$
4,275
Other income, expenses and fair value adjustments
(6,001)
(13,152)
Share of net loss from co-owned properties
$
(2,656)
$
(8,877)
Dream Office REIT 2024 Annual Report | 78
Note 7
OTHER NON-CURRENT AND DERIVATIVE ASSETS
December 31,
December 31,
January 1,
Note
2024
2023
2023
VTB mortgage receivable
22 $
—
$
44,630
$
43,172
Derivative assets
24
—
662
835
Property and equipment, net of accumulated depreciation
—
121
281
Deposits
47
47
39
Total
$
47
$
45,460
$
44,327
Property and equipment primarily includes leasehold improvements, information and technology hardware, and furniture and
fixtures. Deposits comprise refundable utility deposits.
Note 8
AMOUNTS RECEIVABLE
December 31,
December 31,
2024
2023
Trade receivables
$
8,387
$
4,422
Less: Provision for impairment of trade receivables
(3,103)
(4,345)
Trade receivables, net
5,284
77
Other amounts receivable
5,043
5,836
Total
$
10,327
$
5,913
The movement in the provision for impairment of trade receivables for the years ended December 31, 2024 and December 31,
2023 were as follows:
Year ended December 31,
2024
2023
Balance, beginning of year
$
4,345
$
3,914
Change in ECL provision
230
858
Receivables written off during the year as uncollectible
(1,472)
(427)
Balance, end of year
$
3,103
$
4,345
The carrying value of amounts receivable approximates fair value due to their current nature. Amounts receivable are written off
on contractual forgiveness or when it is ultimately determined that the probability of collection is remote based on lease terms,
the tenant’s financial condition and other factors.
The Trust leases office properties to tenants under operating leases. The following table summarizes the minimum net rents
receivable for lease agreements that had been committed at December 31, 2024 over the remaining terms of those leases.
December 31, 2024
2025
$
102,631
2026
94,443
2027
84,418
2028
69,416
2029
61,451
2030+
241,950
Total
$
654,309
Dream Office REIT 2024 Annual Report | 79
Note 9
DEBT
December 31,
December 31,
January 1,
2024
2023
2023
Mortgages(1)(2)
$
955,904
$
1,038,993
$
1,053,998
Credit facilities(2)(3)(4)
351,710
300,468
318,785
Total debt
1,307,614
1,339,461
1,372,783
Less: Current portion
(351,538)
(85,371)
(265,967)
Non-current debt
$
956,076
$
1,254,090
$
1,106,816
(1) Net of financing costs of $3,883 (December 31, 2023 – $3,117, January 1, 2023 – $2,819).
(2) Secured by charges on specific investment properties.
(3) Secured by Dream Industrial LP Class B limited partnership units.
(4) Net of financing costs of $470 (December 31, 2023 – $907, January 1, 2023 – $911).
Continuity of debt
The following tables provide a continuity of debt for the years ended December 31, 2024 and year ended December 31, 2023:
Year ended December 31, 2024
Mortgages
Credit facilities
Total
Balance as at January 1, 2024
$ 1,038,993
$
300,468
$ 1,339,461
Cash items:
Borrowings
269,325
81,672
350,997
Scheduled principal repayments
(13,187)
—
(13,187)
Lump sum repayments
(269,574)
(30,864)
(300,438)
Financing costs additions
(1,830)
(25)
(1,855)
Non-cash items:
Debt classified as liabilities related to assets held for sale
(68,887)
—
(68,887)
Amortization of financing costs
1,064
459
1,523
Balance as at December 31, 2024
$
955,904
$
351,710
$ 1,307,614
Year ended December 31, 2023
Mortgages
Credit facilities
Total
Balance as at January 1, 2023
$ 1,053,998
$
318,785
$ 1,372,783
Cash items:
Borrowings
141,800
224,622
366,422
Scheduled principal repayments
(16,237)
—
(16,237)
Lump sum repayments
(140,270)
(242,943)
(383,213)
Financing costs additions
(1,384)
(403)
(1,787)
Non-cash items:
Amortization of financing costs
1,086
407
1,493
Balance as at December 31, 2023
$ 1,038,993
$
300,468
$ 1,339,461
Mortgage refinancing
On March 13, 2024, the Trust secured a one-year extension for a $30,000 interest-only mortgage maturing April 1, 2025, secured
by a property in Toronto, Ontario, bearing variable interest at the unadjusted three-month Canadian Overnight Repo Rate
Average (“CORRA”) plus 2.921%.
On May 31, 2024, the Trust refinanced a $26,097 mortgage secured by a property in Calgary. The refinanced mortgage totals
$26,325 with a new maturity date of May 31, 2027, bearing fixed interest at 6.65%.
On August 19, 2024, the Trust extended a maturity of a $44,264 mortgage secured by a property in Toronto downtown to a new
maturity date of May 31, 2027, bearing variable interest at the daily CORRA plus 2.245%.
On September 26, 2024, the Trust refinanced a $17,152 mortgage secured by a property in Toronto downtown. The refinanced
interest-only mortgage totals $18,000 with a new maturity date of October 1, 2026. The open mortgage on a contemplated
development site bears interest at the bank’s prime rate plus 2.00% subject to a minimum interest rate of 7.50%.
On November 5, 2024, the Trust closed on its $225,000 maturity mortgage loan at Adelaide Place with a syndicate of global and
Canadian financial institutions for a term of five years at a floating interest rate based on the daily CORRA plus 2.40%. In
Dream Office REIT 2024 Annual Report | 80
connection with the refinancing, the Trust entered into a fixed-for-variable swap to fix the interest rate on the mortgage at
5.479%.
On December 17, 2024, the Trust negotiated a one-year extension for a $66,500 interest-only mortgage secured by a property in
Scarborough, Ontario, bearing interest at the daily CORRA plus 2.245%. The Trust has previously entered into a fixed-for-variable
interest rate swap relating to this mortgage fixing the interest rate at approximately 6.44%.
Credit facilities
The Trust has five credit facilities: (i) a $375,000 revolving credit facility, (ii) a $10,000 revolving credit facility, (iii) a $20,000
demand revolving credit facility, (iv) a $112,870 non-revolving credit facility and (v) an $8,200 non-revolving term loan facility.
The details of each credit facility are specified in the tables below.
On April 30, 2024, the Trust amended and extended its $10,000 revolving credit facility to a new maturity date of March 31,
2027. The amended facility bears interest at the unadjusted one-month term CORRA plus 2.895% or at the bank’s prime rate
plus 0.950%.
Subsequent to December 31, 2024, the Trust obtained conditional credit approval for an extension of its $375,000 credit facility
from its existing syndicate of lenders.
The amounts available and drawn under the credit facilities as at December 31, 2024 and December 31, 2023 are summarized in
the tables below:
December 31, 2024
Facility
Maturity date
Interest rates
on drawings(6)
Face
interest
rate(7)
Borrowing
capacity
Drawings
Letters of
credit
Amount
available
Formula-based maximum not to
exceed $375,000(1)
September 30, 2025
CORRA + 1.945% or
prime + 0.650%
5.39% $ 325,909 $ (312,567) $
(1,232) $
12,110
Formula-based maximum not to
exceed $10,000(2)
March 31, 2027
CORRA + 2.895% or
prime + 0.950% n/a
9,088
—
—
9,088
Formula-based maximum not to
exceed $20,000(3)
Due on demand
CORRA + 2.595% or
prime + 0.500% n/a
17,045
—
—
17,045
Canada Infrastructure Bank credit
facility
March 31, 2027(4)
2.15%
2.15%
112,870
(31,841)
—
81,029
Non-revolving term loan facility(5)
November 30, 2028
6.75%
6.75%
8,200
(7,772)
—
428
5.13% $ 473,112 $ (352,180) $
(1,232) $ 119,700
(1) The $375,000 revolving credit facility is secured by five investment properties and 11,916,572 Dream Industrial LP Class B limited partnership units.
(2) The $10,000 revolving credit facility is secured by 1,430,000 Dream Industrial LP Class B limited partnership units.
(3) The $20,000 demand revolving credit facility is secured by one investment property.
(4) The maturity date of the Canada Infrastructure Bank credit facility represents the non-revolving availability period. Subsequent to the availability period, this
non-revolving credit facility will convert to a 20-year amortizing term credit facility. The Canada Infrastructure Bank credit facility may be used solely for the
purpose of commercial property retrofits to achieve certain energy efficiency savings and GHG emission reductions.
(5) The non-revolving term loan facility is restricted for use towards meeting a tenant’s construction allowance requirements in connection with a lease
negotiated with a commercial banking tenant.
(6) CORRA borrowing pricing is based on the unadjusted one-month term CORRA tenor.
(7) Face interest rate includes the effect of applicable interest rate swaps.
n/a – not applicable
Dream Office REIT 2024 Annual Report | 81
December 31, 2023
Facility
Maturity date
Interest rates
on drawings
Face
interest
rate(6)
Borrowing
capacity
Drawings
Letters of
credit
Amount
available
Formula-based maximum not to
exceed $375,000(1)
September 30, 2025
BA + 1.675% or
prime + 0.675%
6.01% $ 335,192 $ (280,866) $
(132) $
54,194
Formula-based maximum not to
exceed $10,000(2)
March 31, 2025
BA + 1.975% or
prime + 0.825%
n/a
10,000
—
—
10,000
Formula-based maximum not to
exceed $20,000(3)
Due on demand
BA + 2.00% or
prime + 0.500%
n/a
9,200
—
—
9,200
Canada Infrastructure Bank credit
facility
March 31, 2027(4)
2.15%
2.15%
112,870
(20,509)
—
92,361
Non-revolving term loan facility(5)
November 30, 2028
6.75%
6.75%
8,200
—
—
8,200
5.75% $ 475,462 $ (301,375) $
(132) $ 173,955
(1) The $375,000 revolving credit facility is secured by five investment properties and 11,916,572 Dream Industrial LP Class B limited partnership units.
(2) The $10,000 revolving credit facility is secured by 1,430,000 Dream Industrial LP Class B limited partnership units.
(3) The $20,000 demand revolving credit facility is secured by one investment property.
(4) The maturity date of the Canada Infrastructure Bank credit facility represents the non-revolving availability period. Subsequent to the availability period, this
non-revolving credit facility will convert to a 20-year amortizing term credit facility. The Canada Infrastructure Bank credit facility may be used solely for the
purpose of commercial property retrofits to achieve certain energy efficiency savings and GHG emission reductions.
(5) The non-revolving term loan facility is restricted for use towards meeting a tenant’s construction allowance requirements in connection with a lease
negotiated with a commercial banking tenant.
(6) Face interest rate includes the effect of applicable interest rate swaps.
n/a – not applicable
Discontinuation of CDOR
On June 28 2024, the Canadian Dollar Offered Rate (“CDOR”), the index used to price bankers’ acceptances (“BA”), was
discontinued. CORRA has been introduced to replace the prior index to enhance the reliability and transparency of borrowing
rates. Consequently, substantially all of the Trust’s financial instruments that previously referenced CDOR have been amended to
reference CORRA. In addition, the Trust’s CDOR-indexed interest rate swaps have been amended from CDOR to CORRA. As
CORRA is a risk-free rate, CORRA reference rates are lower than historical BA averages, and so the pricing spreads over the
reference rate have increased in order to maintain parity with pricing of the borrowings under CDOR.
Debt weighted average effective interest rates and maturities
Weighted average
effective interest rates(2)
Debt amount
December 31,
December 31,
Maturity
December 31,
December 31,
2024
2023
dates(3)
2024
2023
Fixed rate(1)
Mortgages
5.01%
4.34%
2025–2030
$
908,118
$
1,038,993
Credit facilities
4.96%
5.05%
2025–2047
229,510
210,380
Total fixed rate debt
5.19%
4.46%
1,137,628
1,249,373
Variable rate
Mortgages
7.29%
—%
2025–2026
47,786
—
Credit facilities
5.73%
7.48%
2025–2027
122,200
90,088
Total variable rate debt
6.17%
7.48%
169,986
90,088
Total debt
5.32%
4.66%
$ 1,307,614
$
1,339,461
(1) Fixed rate debt comprises debt with contractually fixed interest rates and debt with economically effective swaps.
(2) The effective interest rate method includes the impact of financing costs and fair value adjustments on assumed debt. The fixed rate on credit facilities
includes the Canada Infrastructure Bank credit facility rate for which the non-revolving availability period matures in 2027. Subsequent to the availability
period, this non-revolving credit facility will convert to a 20-year amortizing term credit facility.
(3) As at December 31, 2024.
Dream Office REIT 2024 Annual Report | 82
The following table summarizes the aggregate of the Trust’s obligations for debt, including debt related to assets held for sale:
Mortgage
balances due at
maturity
Scheduled
principal
repayments on
mortgages
Total principal
obligation for
mortgages
Credit facilities
Contractual
interest
payments
Total debt service
requirements
2025
$
30,000
$
10,471
$
40,471
$
312,567
$
48,315
$
401,353
2026
165,506
9,554
175,060
—
46,696
221,756
2027
240,389
5,166
245,555
—
34,719
280,274
2028
—
3,577
3,577
7,772
28,178
39,527
2029
418,436
3,775
422,211
—
20,321
442,532
2030
141,800
—
141,800
—
8,584
150,384
2047
—
—
—
31,841
—
31,841
$
996,131
$
32,543
$
1,028,674
$
352,180
$
186,813
$
1,567,667
Less: Contractual interest payments
—
—
(186,813)
(186,813)
Plus: Unamortized financing costs
(3,883)
(470)
—
(4,353)
Less: Debt related to assets held for sale
(68,887)
—
—
(68,887)
Total debt
$
955,904
$
351,710
$
—
$
1,307,614
Financial covenants
The Trust’s debt agreements contain a number of covenants with which the Trust must comply. The Trust’s $375,000 credit
facility sets out three main financial covenants which are tested quarterly following each reporting date. These covenants are:
•
Debt Service Coverage Ratio – the Trust is required to maintain a minimum specified ratio of EBITDA, as defined in the
agreement, to total interest and principal payments required under the Trust’s consolidated debt obligations.
•
Tangible Net Worth – the Trust is required to maintain a minimum amount of equity, as defined in the agreement.
•
Debt to Assets – the Trust is required to maintain a maximum specified ratio of its total debt obligations and its total
assets, each as defined in the agreement.
The majority of the Trust’s remaining debt with covenants references, or is consistent with, these corporate covenants in the
respective agreements. However, certain of the Trust’s mortgage debts totalling $438,641 also contain interest coverage tests
which require the Trust to maintain a specified minimum ratio between property net operating income, as defined in the
agreement, and the interest on the debts secured by the property. These interest coverage ratios are generally tested annually
based on the results up to the reporting date prior to the covenant test.
Should the Trust fail to meet a property-level interest coverage test, the Trust generally has the right to post a letter of credit or
other collateral in order to bring the Trust in compliance with the test. As a result, a failure to meet a property-level test would
not constitute an event of default unless the Trust fails to post the required collateral.
The carrying amount of the Trust’s debt (excluding debt related to assets held for sale) subject to periodic compliance with
financial covenants as at December 31, 2024 is $1,209,947.
Note 10
SUBSIDIARY REDEEMABLE UNITS
The Trust has the following subsidiary redeemable units outstanding:
Year ended December 31, 2024
Year ended December 31, 2023
Number of units
Number of units
Note
issued and outstanding
Amount
issued and outstanding
Amount
Balance, beginning of year
2,616,911
$
54,850
2,616,911
$
78,193
Remeasurement of carrying value of
subsidiary redeemable units
20
—
(8,112)
—
(23,343)
Balance, end of year
2,616,911
$
46,738
2,616,911
$
54,850
During the year ended December 31, 2024, the Trust incurred $2,835 (December 31, 2023 – $5,234) in distributions on the
subsidiary redeemable units, which have been included as interest expense in the consolidated statements of comprehensive
income.
Dream Office REIT 2024 Annual Report | 83
Effective February 22, 2024, the Trust completed a unit consolidation of all the issued and outstanding Units on the basis of one
(1) post-consolidation Unit for every two (2) pre-consolidation Units (the “Unit Consolidation”). The general partner of Dream
Office LP also took steps to effect a consolidation of the LP Class A Units and LP Class B Units of Dream Office LP on a
proportionate basis effective as of February 22, 2024. As a result, the subsidiary redeemable units were also consolidated on the
basis of one (1) post-consolidation subsidiary redeemable unit for every two (2) pre-consolidation subsidiary redeemable units
on the effective date. Upon completion of the Unit Consolidation, the number of subsidiary redeemable units as of February 22,
2024 was consolidated from 5,233,823 to 2,616,911.
Dream Office LP, a subsidiary of Dream Office REIT, is authorized to issue an unlimited number of LP Class B limited partnership
units. These units have been issued in two series: LP Class B Units, Series 1 (subsidiary redeemable units) and LP Class B Units,
Series 2. The subsidiary redeemable units, together with the accompanying Special Trust Units, have economic and voting rights
equivalent in all material respects to REIT A Units. Generally, each subsidiary redeemable unit entitles the holder to a
distribution equal to distributions declared on REIT Units, Series B, or if no such distribution is declared, on REIT Units, Series A.
Subsidiary redeemable units may be surrendered or indirectly exchanged on a one-for-one basis at the option of the holder,
generally at any time subject to certain restrictions, for REIT Units, Series B.
Holders of the LP Class B Units, Series 2 are entitled to vote at meetings of the limited partners of Dream Office LP and each unit
entitles the holder to a distribution equal to distributions on the subsidiary redeemable units. As at December 31, 2024 and
December 31, 2023, all issued and outstanding LP Class B Units, Series 2 are owned indirectly by the Trust and have been
eliminated in the consolidated balance sheets.
Special Trust Units are issued in connection with subsidiary redeemable units. The Special Trust Units are not transferable
separately from the subsidiary redeemable units to which they relate and will be automatically redeemed for a nominal amount
and cancelled on surrender or exchange of such subsidiary redeemable units. Each Special Trust Unit entitles the holder to the
number of votes at any meeting of unitholders that is equal to the number of REIT B Units that may be obtained on the
surrender or exchange of the subsidiary redeemable units to which they relate.
As at December 31, 2024 and December 31, 2023, 2,616,911 Special Trust Units were issued and outstanding.
Note 11
DEFERRED UNIT INCENTIVE PLAN
The DUIP provides for the grant of deferred trust units to trustees, officers and employees as well as employees of affiliates.
Deferred trust units are granted at the discretion of the trustees and earn income deferred trust units based on the payment of
distributions. Once granted, each deferred trust unit and the related distribution of income deferred trust units vest immediately
for the Board of Trustees and evenly over five- and three-year periods on the anniversary date of the grant for officers and the
remaining participants, respectively. Subject to an election option available for certain participants to postpone receipt of REIT A
Units, such units will be issued immediately on vesting. As at December 31, 2024, up to a maximum of 1,775,000 deferred trust
units are issuable under the DUIP (December 31, 2023 – 1,775,000 deferred trust units).
The following tables provide a continuity of the DUIP activity for the years ended December 31, 2024 and December 31, 2023:
Year ended December 31,
Note
2024
2023
Balance, beginning of year
$
7,932
$
15,103
Deferred compensation expense
18
1,716
1,862
REIT A Units issued for vested deferred trust units(1)
(407)
(6,388)
Remeasurement of carrying value of deferred trust units
20
(785)
(2,621)
Cash settlement of deferred trust units
—
(24)
Balance, end of year
$
8,456
$
7,932
(1) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All per unit amounts disclosed reflect the
post-Unit Consolidation units for all periods presented. Refer to Note 15 for further details.
Dream Office REIT 2024 Annual Report | 84
Year ended December 31,
2024
2023
Outstanding and payable at beginning of year
435,734
555,985
Granted
110,921
77,852
Income deferred trust units
30,847
38,689
REIT A Units issued(1)
(24,326)
(235,227)
Deferred trust units settled in cash
—
(805)
Forfeited
(3,267)
(760)
Outstanding and payable at end of year(2)
549,909
435,734
(1) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All per unit amounts disclosed reflect the
post-Unit Consolidation units for all periods presented. Refer to Note 15 for further details.
(2) Includes 347,613 of vested but not issued deferred trust units as at December 31, 2024 (December 31, 2023 – 276,767).
The following table summarizes the deferred trust units granted for the years ended December 31, 2024 and December 31,
2023:
December 31, 2024
December 31, 2023
Grant price
range
Number
of units
granted(1)
Grant price
range
Number
of units
granted(1)
Deferred trust units granted
$
15.86–22.51
110,921
$
19.94–33.00
77,852
(1) Includes 79,988 deferred trust units granted to key management personnel and trustees for the year ended December 31, 2024 (December 31, 2023 –
59,594).
Note 12
INCOME TAXES
The Trust is subject to taxation in the U.S. on the taxable income earned by its investment property located in the U.S. at a
combined state and federal tax rate of approximately 26.5% as at December 31, 2024 and December 31, 2023. Deferred tax
assets arise from timing differences in the U.S. subsidiaries, and are recognized only to the extent that they are realizable.
Deferred tax liabilities arise from the temporary differences between the carrying value and the tax basis of the net assets of the
U.S. subsidiaries.
The tax effects of the temporary differences that give rise to the recognition of deferred tax assets and liabilities are presented
below:
December 31,
December 31,
2024
2023
Deferred tax assets
Tax loss carry-forwards
$
378
$
703
378
703
Deferred tax liabilities
Investment property
(57)
(2,664)
Deferred tax assets (liabilities), net
$
321
$
(1,961)
A reconciliation between the expected income taxes based upon the 2024 and 2023 statutory rates and the income tax expense
recognized during the years ended December 31, 2024 and December 31, 2023 is as follows:
December 31,
December 31,
2024
2023
Income taxes computed at the statutory rate of 0% that is applicable to the Trust
$
—
$
—
Current income taxes expense on a U.S. subsidiary
(94)
(12)
Deferred income taxes recovery (expense) on a U.S. subsidiary
2,384
(35)
Current and deferred income taxes recovery (expense), net
$
2,290
$
(47)
Dream Office REIT 2024 Annual Report | 85
Note 13
OTHER NON-CURRENT AND DERIVATIVE LIABILITIES
December 31,
December 31,
January 1,
Note
2024
2023
2023
Deferred Unit Incentive Plan
11 $ 3,111
$
2,894
$
3,675
Tenant security deposits
8,282
7,804
6,928
Finance lease liabilities
3,946
4,003
4,057
Derivative liabilities
24
11,769
3,313
33
Total
$
27,108
$
18,014
$
14,693
Finance leases
As at December 31, 2024, subsidiaries of the Trust have long-term agreements in place at two of its investment properties,
which meet the definition of a lease under IFRS 16. One of these leases is a ground lease and the other is for an outdoor area at
an investment property. These lease agreements have terms expiring in 2046 and 2079, respectively. The ground lease has a
33‑year extension option.
The following table summarizes the movements in the Trust’s finance lease liabilities for the years ended December 31, 2024
and December 31, 2023:
December 31,
December 31,
2024
2023
Balance, beginning of year
$
4,003
$
4,057
Principal repayments on finance lease liabilities
(57)
(54)
Balance, end of year
$
3,946
$
4,003
During the year ended December 31, 2024, the Trust incurred $200 of interest expense on finance lease liabilities (December 31,
2023 – $203).
The following table summarizes the undiscounted maturity of the Trust’s finance lease obligations included in other non-current
liabilities as at December 31, 2024:
Due within one year
$
258
Due within one to five years
1,030
Due after five years
7,558
Total undiscounted finance lease obligations
8,846
Less: Effect of discounting finance lease obligations
(4,900)
Finance lease liabilities
$
3,946
Note 14
AMOUNTS PAYABLE AND ACCRUED LIABILITIES
December 31,
December 31,
January 1,
Note
2024
2023
2023
Trade payables
$
3,655
$
4,113
$
5,150
Building improvement and leasing cost accruals
12,671
14,866
14,558
Investment properties expense and other accruals
20,785
20,681
26,244
Accrued interest
6,818
4,749
3,228
Rent and interest received in advance
3,422
1,567
2,658
Deferred Unit Incentive Plan(1)
5,345
5,038
11,428
Distributions payable
15
1,361
2,719
3,842
Total
$
54,057
$
53,733
$
67,108
(1) Current portion of Deferred Unit Incentive Plan comprises vested but not yet issued units under the Deferred Unit Incentive Plan.
Dream Office REIT 2024 Annual Report | 86
Note 15
EQUITY
December 31, 2024
December 31, 2023
Number of
Number of
Note
REIT A Units(1)
Amount
REIT A Units(1)
Amount
Unitholders’ equity
16,337,348
$
1,837,446
16,313,022
$
1,837,138
Deficit
—
(764,786)
—
(642,162)
Accumulated other comprehensive income
16
—
7,863
—
5,335
Total
16,337,348
$
1,080,523
16,313,022
$
1,200,311
(1) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All unit and per unit amounts disclosed
reflect the post-Unit Consolidation units for all periods presented.
Dream Office REIT Units
Dream Office REIT is authorized to issue an unlimited number of REIT Units and an unlimited number of Special Trust Units. The
REIT Units are divided into and issuable in two series: REIT A Units and REIT B Units. The Special Trust Units may be issued only
to holders of subsidiary redeemable units (see Note 10).
REIT A Units and REIT B Units represent an undivided beneficial interest in Dream Office REIT and in distributions made by
Dream Office REIT. No REIT A Unit or REIT B Unit has preference or priority over any other. Each REIT A Unit and REIT B Unit
entitles the holder to one vote at all meetings of unitholders.
Unit Consolidation
On February 15, 2024, the Trust implemented the previously approved consolidation of all the issued and outstanding REIT Units
on the basis of one (1) post-consolidation REIT Unit for every two (2) pre-consolidation REIT Units. The Unit Consolidation was
authorized by the unitholders of the Trust at the annual meeting of the Trust held on June 6, 2023. The Unit Consolidation took
effect on February 22, 2024. Monthly distributions were not proportionately increased and adjusted following the Unit
Consolidation. The Trust’s annual distribution following the Unit Consolidation is $1.00 per post-consolidation unit, representing
a decrease in annualized distributions of 50% on REIT A Units as a result of the change in units outstanding. All unit, per unit and
unit-related amounts disclosed herein reflect the post-Unit Consolidation units for all periods presented, unless otherwise
noted.
Distributions
Dream Office REIT’s Declaration of Trust, as amended and restated, endeavours to maintain monthly distribution payments to
unitholders payable on or about the 15th day of the following month. For the year ended December 31, 2024 and December 31,
2023, the Trust declared distributions totalling $1.08 per post-consolidation unit and $2.00 per post-consolidation unit (or $1.00
per pre-consolidation unit), respectively.
Following the Unit Consolidation on February 22, 2024, the Trust has effectively reduced its annualized distributions paid and
payable on the post-consolidation REIT A Units by 50% from $2.00 per post-consolidation unit (or $1.00 per pre-consolidation
unit) to $1.00 per post-consolidation unit, on an annualized basis. The reduction in distributions paid and payable as a result of
the Unit Consolidation took effect commencing with the February 2024 distribution paid on March 15, 2024.
The following table summarizes distribution payments for the years ended December 31, 2024 and December 31, 2023:
Year ended December 31,
2024
2023
Paid in cash
$
(19,048)
$
(39,035)
Add: Payable at December 31, 2023 (December 31, 2022)
2,719
3,842
Deduct: Payable at December 31, 2024 (December 31, 2023)
(1,361)
(2,719)
Total distributions paid and payable(1)
$
(17,690)
$ (37,912)
(1) On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special
Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All unit and per unit amounts disclosed
reflect the post-Unit Consolidation units for all periods presented.
The following table summarizes our monthly distributions paid and payable subsequent to year-end:
Date distribution announced
Month of distribution
Date distribution was paid or is payable
Distribution per
REIT A Unit
Total distribution
paid or payable
December 18, 2024
December 2024
January 15, 2025
$
0.08333 $
1,361
January 22, 2025
January 2025
February 14, 2025
0.08333
1,361
Dream Office REIT 2024 Annual Report | 87
Normal course issuer bid (“NCIB”)
On August 19, 2024, the TSX accepted a notice filed by the Trust to renew its prior NCIB for a one year period. Under the bid, the
Trust will have the ability to purchase for cancellation up to a maximum of 862,071 of its REIT A Units (representing 10% of the
Trust’s public float of 8,620,718 REIT A Units as of August 12, 2024) through the facilities of the TSX. The renewed bid
commenced on August 21, 2024 and will remain in effect until the earlier of August 20, 2025 or the date on which the Trust has
purchased the maximum number of REIT A Units permitted under the bid. Daily repurchases are limited to 15,752 REIT A Units,
representing 25% of the average daily trading volume during the prior six calendar months (being 63,011 REIT A Units per day),
other than purchases pursuant to applicable block purchase exceptions.
In connection with the NCIB renewal, the Trust entered into an automatic securities repurchase plan (the “Plan”) with its
designated broker in order to facilitate purchases of its REIT A Units under the NCIB. The Plan allows for purchases by Dream
Office REIT of REIT A Units at any time including, without limitation, when the Trust would ordinarily not be permitted to make
purchases due to regulatory restrictions or self-imposed blackout periods. Purchases will be made by the Trust’s broker based
upon the parameters prescribed by the TSX and the terms of the parties’ written agreement. Outside of such restricted or
blackout periods, the REIT A Units may also be purchased in accordance with management’s discretion. The Plan will terminate
on August 20, 2025.
For the year ended December 31, 2024, there were no REIT A Units purchased for cancellation under the NCIB program (for the
year ended December 31, 2023 – 727,306 post-consolidation REIT A Units cancelled for $22,216).
Substantial issuer bid (“SIB”)
On May 4, 2023, the Trust announced the offer to purchase for cancellation up to 6,250,000 of its outstanding REIT A Units at a
purchase price of $31.00 per post-consolidation REIT A Unit.
On June 22, 2023, the Trust took up and paid for 6,250,000 REIT A Units at a price of $31.00 per post-consolidation REIT A Unit
for an aggregate cost of $193,750, excluding fees and expenses relating to the SIB. The Trust incurred transaction costs of $529
in connection with the SIB.
Special Distribution of REIT A Units and consolidation of REIT A Units
On May 16, 2023, the Trust declared a special distribution (the “Special Distribution”) of $9.10 per post-consolidation REIT A
Unit, payable on June 16, 2023 to unitholders of record on June 16, 2023. The Special Distribution was paid and substantially
satisfied by issuance of additional REIT A Units and was made to distribute to unitholders all or a portion of the capital gain
realized by the Trust from certain transactions completed during the fiscal year.
On June 16, 2023, 6,850,805 REIT A Units were issued at a price of $29.96 per post-consolidation REIT A Unit, for an aggregate
value of $205,250. Immediately following the issuance of these REIT A Units, the REIT A Units were consolidated such that each
unitholder held the same number of REIT A Units after the consolidation of the REIT A Units as each unitholder held prior to the
Special Distribution.
Note 16
ACCUMULATED OTHER COMPREHENSIVE INCOME
Year ended December 31, 2024
Opening balance
Net change
Closing balance
January 1
during the year
December 31
Unrealized loss on historical interest rate hedging arrangement
$
(40) $
40
$
—
Unrealized gain on foreign currency translation
4,572
3,910
8,482
Share of other comprehensive income from investment in Dream Industrial REIT
2,705
1,484
4,189
Share of other comprehensive loss from investment in joint ventures
(1,902)
(2,906)
(4,808)
Accumulated other comprehensive income
$
5,335
$
2,528
$
7,863
Year ended December 31, 2023
Opening balance
Net change
Closing balance
January 1
during the year
December 31
Unrealized loss on historical interest rate hedging arrangement
$
(77)
$
37
$
(40)
Unrealized gain (loss) on foreign currency translation
5,729
(1,157)
4,572
Share of other comprehensive income from investment in Dream Industrial REIT
7,755
(5,050)
2,705
Share of other comprehensive loss from investment in joint ventures
(1,474)
(428)
(1,902)
Accumulated other comprehensive income
$
11,933
$
(6,598) $
5,335
Dream Office REIT 2024 Annual Report | 88
Note 17
INVESTMENT PROPERTIES REVENUE
Year ended December 31,
2024
2023
Rental revenue
$
119,605
$
115,345
Common area maintenance and parking services revenue
74,425
73,273
Property management and other service fees
2,084
1,830
Total
$
196,114
$
190,448
Note 18
GENERAL AND ADMINISTRATIVE EXPENSES
Year ended December 31,
Note
2024
2023
Salaries and benefits
$
(3,427)
$
(4,021)
Deferred compensation expense
11
(1,716)
(1,862)
Professional service fees, public reporting, overhead-related costs and other
(5,402)
(4,809)
Total
$
(10,545)
$
(10,692)
Note 19
INTEREST
Interest on debt
Interest on debt incurred and charged to the consolidated statements of comprehensive income is recorded as follows:
Year ended December 31,
Note
2024
2023
Interest expense incurred, at contractual rate of debt
$
(64,399)
$
(58,166)
Amortization of financing costs
(1,523)
(1,492)
Capitalized interest(1)
4
871
680
Interest expense on debt
$
(65,051)
$
(58,978)
Add (deduct):
Amortization of financing costs
1,523
1,492
Change in accrued interest
3,121
1,778
Cash interest paid
$
(60,407)
$
(55,708)
(1) For the year ended December 31, 2024, interest was capitalized to properties under development at a weighted average effective interest rate of 4.05% (for
the year ended December 31, 2023 – 3.63%).
Dream Office REIT 2024 Annual Report | 89
Note 20
FAIR VALUE ADJUSTMENTS TO FINANCIAL INSTRUMENTS
Year ended December 31,
Note
2024
2023
Remeasurement of carrying value of subsidiary redeemable units
10 $
8,112
$
23,343
Remeasurement of carrying value of deferred trust units
11
785
2,621
Remeasurement of derivative contracts
24
(9,118)
(3,455)
Total
$
(221)
$
22,509
Note 21
INTERNAL LEASING COSTS AND NET LOSSES ON TRANSACTIONS
Year ended December 31,
2024
2023
Internal leasing costs
$
(1,931)
$
(1,700)
Costs attributable to sale of investment properties, net(1)
(1,191)
(203)
Debt settlement costs
—
(17)
Total
$
(3,122)
$
(1,920)
(1) Consists of commissions and other expenses incurred in relation to the disposal of investment properties.
Note 22
IMPAIRMENT OF VTB MORTGAGES RECEIVABLE
On November 23, 2018, the Trust sold a property in Calgary, Alberta and took back a second-ranking vendor take-back mortgage
(“VTB mortgage”) receivable for $3,800, of which $300 was subsequently repaid. Since the inception of the VTB mortgage, the
borrower has paid $2,438 in interest. On August 28, 2024, the purchaser of the property went into receivership at the request of
the primary lienholder of the property. The Trust has assessed the probability of recovering the remaining principal on the VTB
mortgage as unlikely and fully impaired the $3,500 mortgage on the date the borrower entered receivership.
As part of the sale of another property in Calgary in 2018, the Trust received partial consideration in the form of a VTB mortgage
receivable of $34,100 and committed to a loan facility of up to $12,500 (the “Loans”). The Loans bear interest at 2.5% and
matured on July 10, 2024 and are secured by the property. As at December 31, 2024, the Trust had funded $11,005
(December 31, 2023 – $10,530) under the loan facility. On September 12, 2024, due to a borrower default, the Trust exercised its
rights to a letter of credit held as collateral and collected $3,250 which can be applied to interest and principal repayments. As a
result of the borrower default, the Trust assessed that there had been a significant change in the creditworthiness of the
counterparty and transitioned from the 12-month ECL model to a lifetime ECL model.
The Trust continues its negotiations with the borrower on renewing the Loans at terms agreeable to the Trust, but there can be
no assurance that an agreement will be reached.
During the quarter, the Trust continued to assess the probability of default and expected cash flows under the expected credit
loss model. For the year ended December 31, 2024, the Trust has recorded impairment totalling $25,699 (December 31, 2023 –
$nil) on the Loans. As at December 31, 2024, the carrying value of the Loans was $19,406.
Note 23
ASSETS HELD FOR SALE AND DISPOSITIONS
Assets held for sale
As at December 31, 2024, the Trust classified an investment property located in Toronto downtown as assets held for sale
totalling $105,600 and associated liabilities totalling $68,887. On January 24, 2025, subsequent to the quarter, the Trust entered
into a binding agreement to sell 438 University Avenue in Toronto, Ontario, for gross proceeds before transaction costs of
approximately $105,600.
Dream Office REIT 2024 Annual Report | 90
Continuity of investment properties held for sale
The table below summarizes the activity of investment properties classified as assets held for sale and the associated debt for
the year ended December 31, 2024 and year ended December 31, 2023.
Year ended
Year ended
December 31, 2024
December 31, 2023
Balance, beginning of year
$
—
$
135,000
Add (deduct):
Building improvements
—
150
Investment properties classified as held for sale during the year
114,200
—
Investment properties disposed of during the year
(8,600)
(135,000)
Fair value adjustment to investment properties
—
(150)
Balance, end of year
$
105,600
$
—
Debt related to assets held for sale
Note
Year ended December
31, 2024
Year ended
December 31, 2023
Balance, beginning of year
$
—
$
—
Debt related to assets held for sale
9
68,887
—
Balance, end of year
$
68,887
$
—
Dispositions
On July 2, 2024, the Trust completed the sale of 234 – 1st Avenue South in Saskatoon for total gross proceeds before
adjustments and transaction costs of $8,600.
On January 30, 2023, the Trust completed the sale of one investment property located in Toronto downtown for total gross
proceeds before adjustments and transaction costs of $135,000.
Note 24
DERIVATIVE CONTRACTS
The Trust is exposed to interest rate risk through its variable debt obligations. In order to manage the interest rate risk on certain
variable rate debt, the Trust has entered into interest rate swaps. The following table outlines the interest rate swaps
outstanding and included in Other non-current assets and Other non-current liabilities as at December 31, 2024:
December 31,
December 31,
January 1,
2024
2023
2023
Debt hedged
Inception date
Maturity date
Notional
amount
Interest
rate(1)
Fair value of
derivative
assets
(liabilities)
Fair value of
derivative
assets
(liabilities)
Fair value of
derivative
assets
(liabilities)
Mortgage
July 2022
July 2027
$ 32,435
5.31% $
(293) $
342 $
593
Mortgage
November 2022 July 2027
32,435
5.78%
(657)
(152)
(33)
$375,000 revolving credit facility October 2022
October 2027
84,000
5.35%
(1,513)
(146)
136
$375,000 revolving credit facility October 2022
October 2027
66,000
5.34%
(1,194)
(135)
106
Mortgage
March 2023
March 2028
44,264
5.03%
(471)
320
—
$375,000 revolving credit facility December 2023
December 2028
40,000
5.42%
(1,151)
(565)
—
Mortgage
December 2023
December 2028
66,500
6.14%
(3,044)
(2,315)
—
Mortgage
November 2024 October 2029
225,000
5.48%
(3,446)
—
—
Total
$
590,634
5.49% $
(11,769) $
(2,651) $
802
(1) Interest rates include loan-specific borrowing spreads over the swapped index ranging from 1.68% to 1.95%.
The Trust measures its derivative contracts at fair value on a recurring basis. The fair value measurement of the derivative
contract is calculated internally using external data provided by qualified professionals based on the present value of the future
cash flows determined using observable yield curves. These measurements are classified as Level 3 in the fair value hierarchy.
Dream Office REIT 2024 Annual Report | 91
Note 25
SUPPLEMENTARY CASH FLOW INFORMATION
The following table summarizes the components of amortization and depreciation under operating activities:
Year ended December 31,
Note
2024
2023
Amortization and write-off of lease incentives
4
$
12,641
$
12,272
Depreciation of property and equipment
121
162
Total amortization and depreciation
$
12,762
$
12,434
The following table summarizes the components of other adjustments under operating activities:
Year ended December 31,
Note
2024
2023
Deferred unit compensation expense
$
1,716
$
1,862
Amortization and write-off of straight-line rent
(2,865)
(1,098)
Deferred income taxes recovery
(2,384)
35
Costs (recoveries) attributable to sale of investment properties, net
21
1,191
203
Share of net income (loss) from investments in joint ventures
(336)
812
Debt settlement costs
—
17
Total other adjustments
$
(2,678)
$
1,831
The following table summarizes the components of changes in non-cash working capital:
Year ended December 31,
2024
2023
Decrease (increase) in amounts receivable
$
(4,469)
$
5,609
Decrease (increase) in prepaid expenses and other assets
(805)
510
Increase in other non-current assets
—
(40)
Increase (decrease) in amounts payable and accrued liabilities
1,439
(7,612)
Increase in other non-current liabilities
488
876
Change in non-cash working capital
$
(3,347)
$
(657)
Note 26
SEGMENTED INFORMATION
For the years ended December 31, 2024 and December 31, 2023, the Trust’s reportable operating segments of its investment
properties and results of operations were segmented geographically, namely Toronto downtown and Other markets. Following a
change in the composition of its reportable segments, the Trust restates comparative periods to reflect the current period
presentation. The chief operating decision-maker, determined to be the Chief Executive Officer of the Trust, measures and
evaluates the performance of the Trust based on NOI, on a comparative portfolio basis, as presented by geographical location
below, with the performance of assets held for sale, properties under development and sold properties evaluated separately. In
addition, properties acquired and properties under development completed subsequent to January 1, 2023 are also considered
separately in order to enhance regional comparability between periods. Accordingly, revenue and expenses for those properties
have been reclassified to “Not segmented” for segment disclosure along with property management and other service fees,
lease termination fees, ECLs on trade receivables, straight-line rent adjustments and amortization of lease incentives.
The chief operating decision-maker also evaluates the changes in fair value adjustments to investment properties, capital
expenditures and investment properties balances on an active portfolio basis, as presented by geographical location below.
Accordingly, properties under development, held for sale or sold are included in “Not segmented” for segment disclosure.
The Trust does not allocate interest expense to its segments since leverage is viewed as a corporate function. The decision as to
where to incur debt is largely based on minimizing the overall cost of debt and is not specifically related to the segments.
Similarly, other income, other expenses, fair value adjustments to financial instruments, leasing, transaction and debt settlement
costs, and income taxes are not allocated to the segments.
Dream Office REIT 2024 Annual Report | 92
Year ended December 31, 2024
Toronto downtown
Other markets
Segment total
Not segmented(1)
Total
Operations
Investment properties revenue
$
134,690 $
46,426 $
181,116 $
14,998 $
196,114
Investment properties operating expenses
(57,997)
(22,631)
(80,628)
(9,353)
(89,981)
Net rental income (segment income)
$
76,693 $
23,795 $
100,488 $
5,645 $
106,133
(1) Includes revenue and expenses related to properties held for sale, properties under development and completed properties under development, acquired
properties and sold properties at year-end, property management and other service fees, lease termination fees, ECLs on trade receivables, straight-line rent
adjustments and amortization of lease incentives during the year.
Year ended December 31, 2023
Toronto downtown
Other markets
Segment total
Not segmented(1)
Total
Operations
Investment properties revenue
$
130,123 $
47,181 $
177,304 $
13,144 $
190,448
Investment properties operating expenses
(56,493)
(22,362)
(78,855)
(9,258)
(88,113)
Net rental income (segment income)
$
73,630 $
24,819 $
98,449 $
3,886 $
102,335
(1) Includes revenue and expenses related to properties held for sale, properties under development and completed properties under development, acquired
properties and sold properties at year-end, property management and other service fees, lease termination fees, ECLs on trade receivables, straight-line rent
adjustments and amortization of lease incentives during the year.
Year ended December 31, 2024
Toronto downtown
Other markets
Segment total
Not segmented(1)
Total
Capital expenditures(2)
$
47,628 $
8,064 $
55,692 $
12,138 $
67,830
Fair value adjustments to investment
properties
(81,385)
(24,475)
(105,860)
(8,729)
(114,589)
Investment properties
1,750,357
372,346
2,122,703
52,312
2,175,015
(1) Includes activity of properties under development and sold properties.
(2) Includes building improvements and initial direct leasing costs and lease incentives during the year.
Year ended December 31, 2023
Toronto downtown
Other markets
Segment total
Not segmented(1)
Total
Capital expenditures(2)
$
48,813 $
5,232 $
54,045 $
14,089 $
68,134
Fair value adjustments to investment
properties
(74,047)
(8,922)
(82,969)
(13,437)
(96,406)
Investment properties
1,722,667
384,492
2,107,159
235,215
2,342,374
(1) Includes activity of properties under development, assets held for sale and sold properties, based on current period presentation.
(2) Includes building improvements and initial direct leasing costs and lease incentives during the year.
Note 27
RELATED PARTY TRANSACTIONS AND ARRANGEMENTS
From time to time, Dream Office REIT and its subsidiaries enter into transactions with related parties that are generally
conducted on a cost recovery basis or under normal commercial terms.
The Trust and DAM, a subsidiary of Dream Unlimited Corp., are parties to a Shared Services Agreement. Under the Shared
Services Agreement, the Trust acts as the property manager for DAM’s investment properties in Canada and DAM acts as the
development manager for the Trust’s properties with redevelopment potential. In order to take advantage of economies of
scale, the Shared Services Agreement includes certain resource-sharing arrangements between the Trust and DAM, such as
information technology, human resources, office services and insurance, among other services as requested, on a cost allocation
basis.
Under the Shared Services Agreement, in connection with each development project, DAM earns a development fee equal to
3.75% of the total net revenues of the development project or, for rental properties, 3.75% of the fair value upon completion,
without any promote or other incentive fees. In connection with the property management services provided by the Trust to
DAM, the Trust generally earns a fee equal to 3.5% of gross revenue of the managed income properties.
Dream Office REIT 2024 Annual Report | 93
Related party transactions with Dream Asset Management Corporation (“DAM”)
The following table summarizes expenditures processed by DAM and the Trust for the years ended December 31, 2024 and
December 31, 2023:
Year ended December 31,
2024
2023
Property management services fee charged by the Trust
$
547
$
426
Expenditures processed by the Trust on behalf of DAM (on a cost recovery basis)
13,082
12,055
Development fees charged by DAM
(704)
(1,795)
Expenditures processed by DAM on behalf of the Trust (on a cost recovery basis)
(2,232)
(1,867)
Net fees and reimbursements from DAM
$
10,693
$
8,819
The following table summarizes the amounts due from (to) DAM as at December 31, 2024 and December 31, 2023:
December 31,
December 31,
2024
2023
Amounts due from DAM
$
1,378
$
1,307
Amounts due to DAM
(925)
(897)
Net amounts due from DAM
$
453
$
410
Related party transactions with Dream Impact Trust
Dream Office Management Corp. (“DOMC”) provides property management services to an investment property co-owned with
Dream Impact Trust, which is accounted for as a joint operation (see Note 6).
DOMC and Dream Impact Trust are parties to a Services Agreement in which the Trust provides certain services to Dream Impact
Trust on a cost recovery basis.
The following table summarizes the cost recoveries from Dream Impact Trust for the years ended December 31, 2024 and
December 31, 2023:
Year ended December 31,
2024
2023
Property management and construction fees related to co-owned and managed properties
$
950
$
925
Costs processed on behalf of Dream Impact Trust related to co-owned and managed properties
1,477
1,626
Amounts charged to Dream Impact Trust under the services agreement
1,027
939
Total cost recoveries from Dream Impact Trust
$
3,454
$
3,490
Amounts due from Dream Impact Trust as of December 31, 2024 were $179 (December 31, 2023 – $6).
Related party transactions with Dream Industrial REIT
DOMC and Dream Industrial REIT are parties to a services agreement, pursuant to which the Trust provides certain services to
Dream Industrial REIT on a cost recovery basis.
The following table summarizes the cost recoveries from Dream Industrial REIT for the years ended December 31, 2024 and
December 31, 2023:
Year ended December 31,
2024
2023
Total cost recoveries from Dream Industrial REIT
$
8,233
$
8,238
Amounts due from Dream Industrial REIT as of December 31, 2024 were $795 (December 31, 2023 – $873).
Dream Office REIT 2024 Annual Report | 94
Distributions and interest receivable from (payable to) related parties
December 31,
December 31,
2024
2023
Distributions receivable from Dream Industrial REIT(1)
$
790
$
790
Distributions payable to DAM(2)
(276)
(521)
Subsidiary redeemable interest payable to DAM(3)
(218)
(436)
(1) Distributions receivable from Dream Industrial REIT are in relation to the 192,735 Dream Industrial REIT units and 13,346,572 Dream Industrial LP Class B
limited partnership units held by the Trust as at December 31, 2024 and December 31, 2023.
(2) Distributions payable to DAM are in relation to the 3,314,226 REIT A Units held by DAM as at December 31, 2024 (December 31, 2023 – 3,123,726 post-
consolidation REIT A Units).
(3) Subsidiary redeemable interest payable to DAM is in relation to the 2,616,911 post-consolidation subsidiary redeemable units held by DAM as at
December 31, 2024 (December 31, 2023 – 2,616,911 post-consolidation subsidiary redeemable units).
For the year ended December 31, 2024, total distributions and subsidiary redeemable interest paid and payable to DAM were
$6,362 (for the year ended December 31, 2023 – $14,391).
As at December 31, 2024, DAM held 3,314,226 REIT A Units and 2,616,911 subsidiary redeemable units (December 31, 2023 –
3,123,726 post-consolidation REIT A Units and 2,616,911 post-consolidation subsidiary redeemable units), representing an
ownership interest of approximately 31.3% (December 31, 2023 – 30.3%).
Compensation of key management personnel and trustees
Compensation of key management personnel and trustees for the years ended December 31, 2024 and December 31, 2023 is as
follows:
Year ended December 31,
2024
2023
Compensation and benefits
$
2,390
$
2,648
Unit-based awards(1)
1,472
1,842
Total
$
3,862
$
4,490
(1) Deferred trust units granted to officers vest over a five-year period with one-fifth of the deferred trust units vesting each year. Deferred trust units granted to
trustees vest immediately. Amounts are determined based on the grant date fair value of deferred trust units multiplied by the number of deferred trust
units granted in the year.
Note 28
COMMITMENTS AND CONTINGENCIES
Dream Office REIT and its operating subsidiaries are contingently liable under guarantees that are issued in the normal course of
business, on a mortgage by purchasers of a disposed investment property, and with respect to litigation and claims that arise
from time to time. In the opinion of management, any liability that may arise from such contingencies would not have a material
and adverse effect on the consolidated financial statements as at December 31, 2024.
The Trust is contingently liable under a guarantee that was issued on debt assumed by a purchaser of an investment property
totalling $46,483 (December 31, 2023 – $48,186) with a term to maturity of 1.6 years (December 31, 2023 – 2.6 years). The
guaranteed debt is secured by a property in British Columbia.
In 2015, a subsidiary of the Trust received notices of reassessment from both the Canada Revenue Agency and the Alberta
Minister of Finance with respect to its 2007, 2008 and 2010 taxation years. These reassessments relate to the deductibility of
certain tax losses claimed by the subsidiary prior to its acquisition by the Trust. These federal and provincial reassessments,
including interest and penalties, total $17,095. There has been no change to total current taxes payable by the Trust as no cash
payment is expected to be made unless it is ultimately established that the Trust has an obligation to make one. Management
does not expect any payment with respect to the reassessments will ultimately be made by the Trust or any of its subsidiaries.
For this reason, no amounts have been recorded in the consolidated financial statements as at December 31, 2024 relating to
these reassessments.
Dream Office REIT 2024 Annual Report | 95
At December 31, 2024, Dream Office REIT’s future minimum commitments are as follows:
Minimum payments due
Within 1 year
1–5 years
> 5 years
Total
Operating commitments
$
3,014
$
3,447
$
—
$
6,461
Fixed price contracts
1,444
5,776
5,806
13,026
Total
$
4,458
$
9,223
$
5,806
$
19,487
In the event that a contemplated property development project proceeds, the Trust has committed to contribute one of its
investment properties with a fair value of $44,850 to the development project.
In the event that the mixed-use development of Block 2 at 2200–2206 Eglinton Avenue East and 1020 Birchmount Road in
Scarborough, Ontario proceeds, the Trust has committed up to a maximum of $80,000.
Note 29
CAPITAL MANAGEMENT
The Trust’s capital consists of debt, including mortgages, credit facilities, subsidiary redeemable units and unitholders’ equity.
The Trust’s primary objectives in managing capital are to ensure adequate operating funds are available to maintain consistent
and sustainable unitholder distributions, service debt obligations and fund leasing costs and capital expenditure requirements.
Various debt ratios and cash flow metrics are used to ensure capital adequacy and to monitor capital requirements. The primary
ratios used for assessing capital management are the interest coverage ratio and net total debt-to-net total assets. Other
significant indicators include unpledged assets, weighted average interest rate, average term to maturity of debt and variable
rate debt as a portion of total debt. These indicators assist the Trust in assessing whether the debt level maintained is sufficient
to provide adequate cash flows for leasing costs and building and development capital requirements, and for evaluating the
need to raise funds for further expansion.
The Trust’s equity consists of REIT A Units, in which the carrying value is impacted by earnings and unitholder distributions.
Amounts retained in excess of the distributions are used to service debt obligations and fund leasing costs, capital expenditures
and working capital requirements. Management monitors distributions to ensure adequate resources are available by comparing
total distributions (considered by the Trust to be the sum of distributions on REIT Units and interest on subsidiary redeemable
units) to, among other considerations, its assessment of cash flows generated from (utilized in) operating activities.
Note 30
RISK MANAGEMENT
Risks arising from financial instruments
IFRS 7, “Financial Instruments: Disclosures” (“IFRS 7”), places emphasis on disclosures about the nature and extent of risks
arising from financial instruments and how the Trust manages those risks, including market, credit and liquidity risks.
Market risk
Market risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
prices. Market risk consists of interest rate risk, foreign currency risk and other market price risk. The Trust has exposure to
interest rate risk primarily as a result of its variable rate debt. In addition, there is interest rate risk associated with the Trust’s
fixed rate debt due to the expected requirement to refinance such debts in the year of maturity. The Trust is exposed to
variability in market interest rates and credit spreads on maturing debt to be renewed. Variable rate debt net of the effect of
interest rate swap arrangements at December 31, 2024 was 13% of the Trust’s total debt (December 31, 2023 – 7%). In order to
manage exposure to interest rate risk, the Trust endeavours to maintain an appropriate mix of fixed and variable rate debt,
manage maturities of fixed rate debt and match the nature of the debt with the cash flow characteristics of the underlying asset.
From time to time, the Trust may also enter into interest rate swaps to manage interest rate risk.
Dream Office REIT 2024 Annual Report | 96
The following interest rate sensitivity table outlines the potential impact of a 25-bps change in the interest rate on variable rate
financial assets and liabilities for the prospective 12-month period.
Interest rate risk
Amounts as at
–25 bps
+25 bps
December 31, 2024
Income
Equity
Income
Equity
Financial assets
Cash and cash equivalents(1)
$
18,268
$
(46)
$
(46)
$
46
$
46
Financial liabilities
Fixed rate debt due to mature in 2025
and total variable debt
$
360,019
$
900
$
900
$
(900)
$
(900)
(1) Cash and cash equivalents are short-term investments with an original maturity of three months or less, and exclude cash subject to restrictions that prevent
the Trustʼs use for current purposes. These balances generally receive interest income at the bankʼs prime rate less 1.85–2.00%. Cash and cash equivalents as
at December 31, 2024 are short term in nature and may not be representative of the balance during the year.
Liquidity risk
Liquidity risk is the risk the Trust will encounter difficulty in meeting obligations associated with the maturity of financial
obligations. As at December 31, 2024, current liabilities, including debt related to assets held for sale, exceeded current assets by
$366,734 (December 31, 2023 – current liabilities exceeded current assets by $110,445) primarily due to the current portion of
debt totalling $420,425, which includes debt related to assets held for sale. The main debt classified as current is the Trust’s
$375,000 credit facility which matures on September 30, 2025. The Trust typically refinances for three-year periods in the
normal course of its operations. Subsequent to December 31, 2024, the Trust obtained conditional credit approval for an
extension of its $375,000 credit facility from its existing syndicate of lenders. The Trust’s main sources of liquidity are its cash and
cash equivalents on hand and revolving credit facilities. The Trust is able to use its revolving credit facilities on short notice,
which eliminates the need to hold a significant amount of cash and cash equivalents on hand. Working capital balances fluctuate
significantly from period-to-period depending on the timing of receipts and payments. The Trust manages maturities of fixed
term debts, monitors the repayment dates and maintains adequate cash and cash equivalents on hand and availability on the
revolving credit facilities to ensure sufficient capital will be available to cover obligations as they become due. The Trust also
enters into interest rate swaps from time to time to enhance the predictability of cash flows.
The table in Note 9 details the Trust’s total debt service requirements. In order to meet ongoing operational and interest
requirements the Trust relies on cash flows from operations. Where, due to the timing of leasing costs, cash flows from
operations are insufficient to cover immediate operational and leasing cost requirements, the Trust makes use of its revolving
credit facilities. The Trust’s credit facility availability may fluctuate from time to time due to the effect of interest rates,
collateralized property performance and collateralized asset values, including units of Dream Industrial REIT pledged as
collateral. Liquidity risk may be enhanced if the credit facility availability were to be significantly reduced. As of December 31,
2024, the Trust has $18,268 of cash on hand and $119,700 available on its credit facilities of which $81,029 relates to a non-
revolving credit facility which can only be used for the purpose of commercial property retrofits to achieve certain energy
efficiency savings and greenhouse gas emission reductions and is not available to fund operational cash needs (see note 9). The
Trust may also consider, from time to time, opportunistic asset sales at prices in line with fair values to enhance long-term
financial flexibility.
Credit risk
The Trust’s assets mainly consist of investment properties. Credit risk arises from the possibility that tenants in investment
properties or counterparties to financial instruments may not fulfill their lease or contractual obligations. The Trust mitigates its
credit risks by attracting tenants of sound financial standing and by diversifying its mix of tenants. As at December 31, 2024, no
tenants account for more than 10% of the Trust’s annual gross rental revenue. The Trust also monitors tenant payment patterns
and discusses potential tenant issues with property managers on a regular basis. The Trust manages its credit risk on VTB
mortgage receivables by lending to reputable purchasers of properties, retaining security interests in the sold investment
properties, monitoring compliance with repayment schedules, and evaluating the progress and estimated rates of return of
financed projects. The Trust manages its credit risk on debt guarantees of assumed debt by reputable purchasers of properties
through monitoring the debtors’ compliance with repayment schedules and loan covenants, and obtaining indemnities from
parties with strong covenants. When assessing the credit risk of outstanding trade receivables, the Trust classifies the
receivables by type. The Trust’s maximum credit exposure is equal to its trade receivables and the outstanding balances on the
VTB mortgage receivable as at December 31, 2024 and December 31, 2023.
A deterioration in the economy may impact the ability of tenants to meet their obligations under their leases or contracts. The
Trust continues to assess the effect of economic conditions on the creditworthiness of our tenants and counterparties. As part of
Dream Office REIT 2024 Annual Report | 97
this assessment, the Trust reviews the risk profiles of its tenant base to assess which tenants are likely to continue meeting their
obligations under their leases and which tenants are at a greater risk of default.
For the year ended December 31, 2024, the Trust has recorded ECL provisions totalling $230 (December 31, 2023 – ECL
provisions totalling $858) which are included in investment properties operating expenses within the consolidated statements of
comprehensive income. This provisions balance represents an estimate of potential credit losses on our trade receivables for all
uncollected rent as at December 31, 2024.
As at December 31, 2024, the Trust has assessed the ECLs associated with its VTB mortgage receivable by evaluating the credit
quality of the borrower, whether the counterparty is fulfilling their obligations under the terms of the agreements and the value
of the collateral and loan guarantees relative to the balance of the respective receivable. As the borrower defaulted on the loan
during the year ended December 31, 2024, the Trust assessed that there had been a significant change in the creditworthiness
of the counterparty and transitioned from the 12-month ECL model to a lifetime ECL model during the year. The Trust continues
its negotiations with the borrower on renewing the Loans at terms agreeable to the Trust, but there can be no assurance that an
agreement will be reached. As a result of these assessments, the Trust has recorded impairment totalling $25,699 on the Loans.
As at December 31, 2024, the carrying value of the Loans was $19,406.
Foreign currency risk
The Trust is not exposed to significant foreign currency risk.
Residual value risk
The Trust is exposed to changes in the residual value of properties at the end of current lease agreements. The residual value risk
borne by the Trust is mitigated by active management of its property portfolio with the objective of optimizing tenant mix in
order to achieve the longest weighted average lease term possible, minimize vacancy rates across all properties, and minimize
the turnover of tenants with high-quality credit ratings.
Note 31
FAIR VALUE MEASUREMENT
Quoted market prices represent a Level 1 valuation. When quoted market prices are not available, the Trust maximizes the use
of observable inputs. When all significant inputs are observable, the valuation is classified as Level 2. Valuations that require the
significant use of unobservable inputs are considered Level 3. The Trust’s policy is to recognize transfers in and transfers out of
fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. There were no
transfers between Levels 1, 2 and 3 for the years ended December 31, 2024 and December 31, 2023.
The following section summarizes the fair value measurements recognized in the consolidated financial statements by class of
asset or liability and categorized by level according to the significance of the inputs used in making the measurements.
Investment properties
The Trust’s accounting policy as indicated in Note 2 is applied in determining the fair value of investment properties by using
either the income approach or the direct comparison approach. Both of these methods rely upon significant unobservable
inputs and so these measurements are classified as Level 3 in the fair value hierarchy as summarized in the tables below.
Investment properties classified as held for sale are marked to contractual sale prices and so are classified as Level 2 in the fair
value hierarchy.
Carrying value as at
Fair value as at December 31, 2024
Note
December 31, 2024
Level 1
Level 2
Level 3
Investment properties
4 $
2,175,015
$
—
$
—
$ 2,175,015
Investment properties classified as held for sale
4
105,600
—
105,600
—
Carrying value as at
Fair value as at December 31, 2023
Note
December 31, 2023
Level 1
Level 2
Level 3
Investment properties
4 $
2,342,374
$
—
$
—
$ 2,342,374
Valuations of investment properties are most sensitive to changes in discount rates and cap rates. In applying the overall cap rate
method, the stabilized NOI of each property is divided by an appropriate cap rate.
Dream Office REIT 2024 Annual Report | 98
The critical and key assumptions in the valuation of investment properties are as follows:
Cap rate method
•
Cap rates – based on actual location, size and quality of the properties and taking into account any available market data at
the valuation date.
•
Stabilized NOI – normalized property operating revenues less property operating expenses.
Discounted cash flow method
•
Discount and terminal cap rates – reflecting current market assessments of the return expectations.
•
Market rents, leasing costs and vacancy rates – reflecting management’s best estimates with reference to recent leasing
activity and external market data.
•
Capital expenditures – reflecting management’s best estimates of costs to complete capital projects.
Investment properties are valued on a highest-and-best-use basis. One property with redevelopment potential is currently an
income-producing property while its highest and best use is as a multi-use development. For the remainder of the Trust’s
investment properties, the current use is considered the highest and best use.
Investment properties valuation process
The Trust is responsible for determining the fair value measurements included in the consolidated financial statements. At the
end of each reporting period, the Trust determines the fair value of investment properties by:
1)
considering current contracted sales prices for properties that are available for sale;
2)
obtaining appraisals from qualified external professionals on a rotational basis for select properties; and
3)
using internally prepared valuations applying either the income approach or the comparable sales approach.
The fair values of these investment properties are reviewed at least quarterly by management with reference to independent
property appraisals and market conditions existing at the reporting date, using generally accepted market practices. Judgment is
also applied in determining the extent and frequency of obtaining independent property appraisals. At each reporting period, a
select number of properties, determined on a rotational basis, are valued by independent appraisers. The independent
appraisers hold recognized relevant professional qualifications and have recent experience in the locations and categories of the
investment properties being appraised. For properties not subject to independent appraisals, valuations are prepared internally
during each reporting period.
Elevated estimation uncertainty as a result of the current economic environment
The Trust monitors market trends and changes in the economic environment on the valuation of its investment properties. If
there are changes in the critical and key assumptions used in valuing the investment properties, in regional, national or
international economic conditions, including but not limited to heightened inflation, rising interest rates, general economic
slowdown or significant residual effects of the COVID-19 pandemic, the fair value of investment properties may
change materially.
The amounts recorded in these consolidated financial statements are based on the latest reliable information available to
management at the time the consolidated financial statements were prepared where that information reflects conditions at the
date of the consolidated financial statements. However, uncertainty about these assumptions and estimates could result in
outcomes that could require a material adjustment to the carrying amount of the affected asset or liability in the future.
Financial instruments
Financial instruments carried at amortized cost or accounted for as investments in associates where the carrying value does not
approximate fair value are noted below:
Carrying value as at
Fair value as at December 31, 2024
Note
December 31, 2024
Level 1
Level 2
Level 3
Investment in Dream Industrial REIT
5 $
227,320
$
2,276
$
157,624
$
—
Mortgages
9
955,904
—
—
950,668
Mortgages related to assets held for sale
23
68,887
—
—
67,025
Revolving credit facilities
9
312,206
—
—
312,567
Non-revolving credit facilities
9
39,504
—
—
36,842
Dream Office REIT 2024 Annual Report | 99
Carrying value as at
Fair value as at December 31, 2023
Note
December 31, 2023
Level 1
Level 2
Level 3
Investment in Dream Industrial REIT
5 $
224,888
$
2,691
$
186,318
$
—
Non-current VTB mortgage receivable and loan facility
44,630
—
—
41,374
Mortgages
9
1,038,993
—
—
1,009,395
Revolving credit facilities
9
279,959
—
—
280,996
Non-revolving credit facilities
9
20,509
—
—
18,142
Deposits, amounts receivable, cash and cash equivalents, tenant security deposits, and amounts payable and accrued liabilities
are carried at amortized cost, which approximates fair value due to their short-term nature. As at December 31, 2024, the Loans
are carried at their expected value under the ECL model, which approximates fair value as it represents the likely realizable value
of the Loans. Subsidiary redeemable units and the DUIP are carried at amortized cost, which approximates fair value as they are
readily redeemable financial instruments. The Trust measures its derivative contract at fair value on a recurring basis. The fair
value measurement of the derivative contract is calculated internally using external data provided by qualified professionals
based on the present value of the future cash flows determined using observable yield curves.
The Trust uses the following techniques in determining the fair value disclosed for the following financial instruments classified
as Level 1, 2 and 3.
Investment in Dream Industrial REIT
The Trust’s investment in Dream Industrial REIT is accounted for as an investment in associate using the equity method. The
Trust’s ownership of Dream Industrial REIT is composed of its holdings of Dream Industrial REIT units and Dream Industrial LP
Class B units. The Trust determines the fair value of the Dream Industrial REIT units using the units’ trading price on or about
December 31, 2024 and December 31, 2023, respectively. The Dream Industrial LP Class B units are economically equivalent to
the Dream Industrial REIT units, but are not publicly traded. The Trust determines the fair value of the LP B units by reference to
the trading price of Dream Industrial REIT units. Consequently, the fair values of the Dream Industrial REIT units and Dream
Industrial LP Class B units are Level 1 and Level 2 measurements in the fair value hierarchy, respectively.
Non-current VTB mortgage receivable
The fair value of the non-current VTB mortgage receivable as at December 31, 2023 was determined by discounting the
expected cash flows of the VTB mortgage receivable using market discount rates. The discount rates are determined using the
Government of Canada benchmark bond yield for instruments of similar maturity adjusted for the counterparty’s specific credit
risk. In determining the adjustment for credit risk, the Trust considers market conditions and indicators of the counterparty’s
creditworthiness. As a result, these measurements are classified as Level 3 in the fair value hierarchy.
Mortgages
The fair value of mortgages as at December 31, 2024 and December 31, 2023 is determined by discounting the expected cash
flows of each mortgage using market discount rates. The discount rates are determined using the Government of Canada
benchmark bond yield for instruments of similar maturity adjusted for the Trust’s specific credit risk. In determining the
adjustment for credit risk, the Trust considers market conditions, the fair value of the investment properties that secure the
mortgages and other indicators of the Trust’s creditworthiness. As a result, these measurements are classified as Level 3 in the
fair value hierarchy.
Revolving credit facilities
The revolving credit facilities are priced at prevailing market interest rates plus a Trust-specific credit spread. Because the
interest rate on the variable component of the revolving credit facilities fluctuates with changes in market rates, the fair value of
the revolving credit facilities is equivalent to amounts drawn on the facilities. Because the applicable interest rate is a
combination of market rates plus a Trust-specific spread, these are Level 3 measurements in the fair value hierarchy.
Non-revolving credit facilities
Non-revolving credit facilities are fixed rate debt. The fair value of the non-revolving credit facilities is determined by using
market rates at the Government of Canada’s benchmark bond yield for instruments of similar maturity adjusted for the Trust’s
specific credit risk. In determining the adjustment for credit risk, the Trust considers market conditions and other indicators of
the Trust’s creditworthiness. As a result, these measurements are classified as Level 3 in the fair value hierarchy.
Dream Office REIT
Title
Trustees
Management Team
Amar BhallaInd.,2
Toronto, Ontario
President
Capit Investment Corp.
Donald K. CharterInd.,1,2,3,5
Toronto, Ontario
Corporate Director
Michael J. Cooper4
Toronto, Ontario
President & Chief Responsible Officer
Dream Unlimited Corp.
P. Jane Gavan
Toronto, Ontario
President, Asset Management
Dream Unlimited Corp.
Dr. Kellie LeitchInd.,2,3
Madison, Mississippi
Associate Professor;
Chief, Pediatric Orthopaedic Surgery
The University of Mississippi
Karine MacIndoeInd.,1,3
Toronto, Ontario
Corporate Director
Qi TangInd.,1
Toronto, Ontario
Chief Financial Officer
Skyservice Business Aviation Inc.
Legend:
Ind. Independent
1.
Member of the Audit Committee
2.
Member of the Governance,
Environmental and Nominating
Committee
3.
Member of the Compensation,
Health and Safety Committee
4.
Chair of the Board of Trustees
5.
Independent Lead Trustee
Michael J. Cooper
Chairman &
Chief Executive Officer
Jay Jiang
Chief Financial Officer
Gordon Wadley
Chief Operating Officer
Corporate Information
HEAD OFFICE
Dream Office Real Estate
Investment Trust
30 Adelaide Street East, Suite 301
Toronto, Ontario M5C 3H1
Phone: (416) 365-3535
Fax: (416) 365-6565
INVESTOR RELATIONS
Phone: (416) 365-3535
Toll free: 1 877 365-3535
Email: officeinfo@dream.ca
Website: www.dreamofficereit.ca
TRANSFER AGENT
(for change of address, registration
or other unitholder enquiries)
Computershare Trust
Company of Canada
100 University Avenue, 8th Floor
Toronto, Ontario M5J 2Y1
Phone: (514) 982-7555 or 1 800 564-6253
Fax: (416) 263-9394 or 1 888 453-0330
Website: www.computershare.com
Email: service@computershare.com
AUDITOR
PricewaterhouseCoopers LLP
PwC Tower, 18 York Street, Suite 2500
Toronto, Ontario M5J 0B2
CORPORATE COUNSEL
Osler, Hoskin & Harcourt LLP
Box 50, 1 First Canadian Place, Suite 6200
Toronto, Ontario M5X 1B8
STOCK EXCHANGE LISTING
The Toronto Stock Exchange
Listing Symbol: REIT Units, Series A: D.UN
For more information, please visit
dreamofficereit.ca
30 Adelaide Street East
Toronto,ON
Corporate Office
30 Adelaide Street East, Suite 301
Toronto, Ontario M5C 3H1
Phone: 416.365.3535
Fax: 416.365.6565
Website: www.dreamofficereit.ca
Email: officeinfo@dream.ca