Dundee
International
REIT
2013 Annual Report
Dream 2013 Annual Report
1
Better Communities to Work In
We’d like to take the opportunity to thank
all our stakeholders for being part of our
continued success. Because of all the hard
work and dedication to keep doing things
better, 2013 was another strong year for us.
Dundee International reit has been around
since 2011, and we’ve been de di cated to
building a diversified, growth-oriented
portfolio of commercial properties outside
of Canada. This is so we can generate stable
and growing cash flows for our investors.
And now we’re happy to an nounce that we
are moving into a new and exciting time
in our bu si ness. We want to let everyone
know that starting May 12, 2014, Dundee
International reit’s name will be Dream
Global reit.
This change is exciting for us because we
are now bringing more clarity to our sto ry
and aligning all our efforts around one
core belief — creating better communities
to work in — which will result in a better
investment for our unit holders. This sums
up what we do and why we do it, and we
think it’s a bet ter articulation of who we
are, which has been such an inte gral part of
our cul ture, our work and our company’s
ob jectives since the beginning.
Starting May 12, 2014,
Dundee International
reit’s new name will be
Dream Global reit.
Stock Exchange Listing
On or about May 15, 2014,
Dream Global REIT’s ticker symbols
on the Toronto Stock Exchange will
change to:
REIT Units:
DRG.UN
5.5% Convertible Debentures:
DRG.DB
60,000 people
working in our
European office
buildings
Letter to unitholders
Dundee International REIT had a transformational year in 2013.
The opportunity to grow our business was exceptional and
resulted in the addition of over $1.0 billion of high-quality real
estate in the best locations in Germany. These acquisitions were
accretive to the adjusted funds from operations (“AFFO”) and
represented a focus on the seven largest (“Big 7”) office markets
in Germany. On average, our office buildings were acquired
at a capitalization rate of 6.7% and an average borrowing rate
and term of 2.6% and 6.6 years, respectively. We have made
significant improvements in the quality of our cash flow by
focusing on newer properties with a broad tenant mix. We now
have two-thirds of our asset value, and 60% of our gross rental
income (“GRI”), in the Big 7 office markets in Germany.
We ended 2013 with an increase in overall occupancy to 86.4%
from 83.2% at the end of 2012. Continued improvements in the
Trust’s tenant retention with over 350,000 square feet of renewals
contributed to this increase. Year-over-year in-place rents increased
to $12.40 (€8.46) in Q4 2013 from $8.20 (€6.25) per square foot in
Q4 2012, reflecting the higher quality of the acquired properties.
With respect to our operations, our focus will continue to be on
increasing occupancy and tenant retention to enhance the value of
our portfolio. As a result of the growth of the overall portfolio, we
have made good progress in diversifying our tenant base. During
the year we reduced the percentage of Dundee International’s GRI
received from Deutsche Post, the REIT’s largest tenant, from 65% at
the end of 2012, to 37% at the end of 2013. At the same time, we
focused on improving the retention rate of this tenant in the space
they are currently leasing. Together with Postbank, they renewed
approximately 50% of the space, and 53% of the GRI, they were
eligible to terminate in June 2014 – an over 300% improvement
in retention from their last termination right in June 2012. Unlike
in 2012 when the termination decision was already made prior to
Dundee International’s acquisition of the portfolio, this time we
were able to work closely with the tenant to proactively address
their space needs and find solutions that worked for both parties.
Our leasing team in Germany continues its focus on leasing the
balance of the terminated space, and with robust leasing volume
in the first quarter, feels confident about the leasing prospects.
We continue to find opportunities in the initial portfolio to
enhance value through rezoning or repositioning assets. We are
also identifying for severance and sale, land which is excess to our
office properties’ needs which can be sold for other uses not core
to our business. We continue to improve the quality of the portfolio
through dispositions and recycling capital. In 2013 we disposed of
15 properties from the initial portfolio for an aggregate sales price
of approximately $23.9 million, which represents 102% of book
value for those assets. We will continue our disposition program in
2014, redeploying the proceeds into high-quality office buildings.
Over the course of 2013, we further strengthened our relationships
with the European lending community. We added additional
financial institutions to our pool of mostly German lenders and now
have 12 potential lenders for future acquisition financings.
We have continued to improve the management platform through
the addition of skilled professionals to our leasing, capital enhancement
and sales teams, contributing to our drive to maximize value from
our buildings.
The strengthening euro had a favourable impact on our
December 31, 2013 book equity, adding $109 million, or 18%,
compared to December 31, 2012.
The economy in Germany has continued to improve, an important
factor in the overall occupancy of office properties. Germany’s
registered unemployment rate remains near a 25-year low at 6.7%
at the end of 2013, driving strong user demand across all key office
markets. The aggregate vacancy rate in the Big 7 office markets
is at its lowest level since 2002 and has been declining year-over-
year from 8.8% at the end of 2012 to 8.3% at the end of 2013.
In addition, mortgage rates in Germany are among the lowest
in the Trust’s history, as increased competition in the German
lending market has put pressure on credit spreads.
2013 was a year of progress and transformation of our business
through the addition of high-quality assets in the best markets in
Germany, strong overall leasing and our active management of
the portfolio. This transformation will continue in 2014 to further
improve the quality of the long-term cash flow and supports our
key objective of providing predictable and sustainable distributions
to our investors.
In May, we will be introducing our new platform-wide branding
and the renaming of our Trust to Dream Global REIT. For a preview,
please refer to the insert in the inside front cover of the printed
annual report, or visit our website at www.dundeeinternational.com.
As we approach the third anniversary of the formation of our Trust,
we are no longer a newcomer, but a well regarded and highly
recognized participant in the European real estate market. On
behalf of our management team and our Board of Trustees,
I’d like to thank you for your continued support.
P. Jane Gavan
President and Chief Executive Officer
March 15, 2014
Dream 2013 Annual Report
1
At-a-glance
December 31, 2013
15.7
area of ProPerties
across GermaNy
(millions of square feet)
60%+
PreseNce iN “biG 7”
office markets iN GermaNy
(% of gross rental income)
$2.4B
total assets
$1.0B
2.6%
33
strateGic acquisitioNs iN 2013
averaGe mortGaGe iNterest
rate for 2013 acquisitioNs
Number of dedicated real
estate ProfessioNals iN euroPe
Dundee International REIT is an owner and operator of 15.7 million square feet of
office and mixed use space in Germany and provides a unique opportunity to gain
exposure to the German real estate market through an established Canadian platform.
Geographic Diversification
Tenant Diversification
City
Total GLA (sq. ft.)
Total gross rental
income (%)
Tenant composition
Total annualized
GRI (%)
Berlin
Cologne
Düsseldorf
Frankfurt
Hamburg
Hannover
Munich
Nuremberg
Stuttgart
Other
total
674,362
783,967
1,815,847
1,205,885
1,291,504
959,452
633,304
640,567
729,182
6,971,355
5
6
15
10
13
4
8
5
5
29
15,705,425
100
Deutsche Post
Freshfields Bruckhaus Deringer
ERGO Direkt
Imtech
Google Germany GmbH
AIG Europe Limited
BNP Paribas Fortis SA/NV
Freistaat Bayern (TU München)
Maersk Deutschland A/S & Co. KG
Jobcenter Berlin Mitte – Federal Employment Agency
Other third-party tenants
37.3
3.2
3.0
2.4
2.1
2.1
2.0
1.7
1.4
1.4
43.4
total
100.0
2
Dream 2013 Annual Report
296
ProPerties
Geographic Diversification
Gross rental income (%)
13%
HAMBURG
4%
HANNOVER
GERMANY
5%
BERLIN
15%
DÜSSELDORF
6%
COLOGNE
10%
FRANKFURT
5%
STUTTGART
5%
NUREMBERG
8%
MUNICH
Manageable Lease Expiries
% of GRI expiring (Q4/13)
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2014
2015
2016
2017
Photos (left to right, top to bottom):
Z-UP, Stuttgart; K26, Frankfurt; Cäcilienkloster
2,6,8,10, Cologne; Werfthaus, Frankfurt;
Feldmühleplatz 1 + 15, Düsseldorf;
ABC Bogen, Hamburg
Tenant Diversification
Tenant composition
Deutsche Post
Freshfields Bruckhaus Deringer
ERGO Direkt
Imtech
Google Germany GmbH
AIG Europe Limited
BNP Paribas Fortis SA/NV
Freistaat Bayern (TU München)
Maersk Deutschland A/S & Co. KG
Jobcenter Berlin Mitte – Federal Employment Agency
Other third-party tenants
total
Total annualized
GRI (%)
37.3
3.2
3.0
2.4
2.1
2.1
2.0
1.7
1.4
1.4
43.4
100.0
Dream 2013 Annual Report
3
Table of contents
Management’s discussion
and analysis
Management’s responsibility
for financial statements
Independent auditor’s report
Consolidated financial
statements
Notes to the consolidated
financial statements
Trustees and officers
Corporate information
1
37
38
39
43
IBC
IBC
4
Dream 2013 Annual Report
Photos (top to bottom):
Karl-Martell-Strasse 60, Nuremberg;
Oasis III, Stuttgart; Löwenkontor, Berlin
Management’s
Discussion
and
Analysis
All
dollar
amounts
in
our
tables
are
presented
in
thousands
of
Canadian
dollars,
except
rental
rates,
unit
and
per
unit
amounts.
SECTION
I
–
OVERVIEW
AND
FINANCIAL
HIGHLIGHTS
• Acquired
an
office
building
in
Düsseldorf,
Germany
for
approximately
$107.7
million,
the
REIT’s
largest
single
asset
transaction
since
its
inception,
which
had
a
7.6%
capitalization
rate
(“cap
rate”)
and
a
mortgage
interest
rate
of
2.3%;
• Total
assets
acquired
in
2013
exceeded
$1.0
billion
and
had
an
average
cap
rate
of
6.7%
and
an
average
borrowing
rate
of
2.6%;
• Diversified
tenant
profile
with
our
largest
tenant,
Deutsche
Post,
contributing
37%
to
the
overall
gross
rental
income
(“GRI”)
at
the
end
of
2013,
down
from
65%
at
the
end
of
2012;
• Active
leasing
resulted
in
positive
absorption
of
approximately
10,800
square
feet
of
space
in
Q4,
increasing
2013
total
absorption
to
approximately
180,100
square
feet;
• Occupancy
rate
increased
to
86.4%
at
the
end
of
2013
from
83.2%
at
the
end
of
2012.
Three
months
ended
December
31,
(1)
(1)
2013
2012
Years
ended
December
31,
(1)
(1)
2012
2013
Operations
Occupancy
rate
(period-‐end)
In-‐place
rent
per
square
foot
(euros)
Operating
results
Investment
properties
revenue
Net
rental
income
Net
rental
income
–
Initial
Properties
Net
rental
income
–
Acquisition
Properties
Funds
from
operations
(“FFO”)(2)
Adjusted
funds
from
operations
(“AFFO”)(3)
Net
rental
income
–
Acquisition
Properties
(Pro
forma
estimate)(4)
€
$
86.4%
8.46
€
83.2%
6.25
$
62,528
41,872
20,033
21,839
24,235
22,259
$
35,926
22,057
19,262
2,795
12,348
11,887
$
220,220
144,853
79,126
65,727
84,422
78,007
138,661
85,439
78,646
6,793
48,320
46,164
90,000
18,000
Distributions
Declared
distributions
and
interest
on
Exchangeable
Notes
Distributions
paid
and
payable
in
cash
(including
interest
on
Exchangeable
Notes)(5)
$
22,005
$
12,953
$
80,156
$
46,064
18,249
11,888
69,205
44,095
Financing
Weighted
average
interest
rate
(period-‐end)
Interest
coverage
ratio
("ICR")(6)
Per
unit
amounts
Basic:(7)
FFO(2)
AFFO(3)
Distribution
rate
Basic
(excluding
impact
of
undeployed
cash):
FFO(2)
AFFO(3)
3.37%
3.41
times
3.98%
3.23
times
3.37%
3.40
times
3.98%
3.03
times
$
$
0.22
0.20
0.20
0.24
0.22
$
0.19
0.19
0.20
0.24
0.24
$
0.85
0.79
0.80
0.94
0.88
0.84
0.80
0.80
0.98
0.94
Weighted
average
number
of
units
outstanding
57,379,400
FFO,
AFFO
and
weighted
average
interest
rate
are
key
measures
of
performance
used
by
real
estate
operating
companies;
however,
they
are
not
defined
under
International
Financial
Reporting
Standards
(“IFRS”),
do
not
have
standard
meanings
and
may
not
be
comparable
with
other
industries
or
income
trusts.
(1) Results
from
operations
were
converted
into
Canadian
dollars
from
euros
using
the
average
exchange
rates
found
on
page
24.
(2) FFO
–
The
reconciliation
of
FFO
to
net
income
can
be
found
on
page
25.
(3) AFFO
–
The
reconciliation
of
AFFO
to
FFO
and
net
income
can
be
found
on
page
25.
The
reconciliation
to
operating
cash
flows
can
be
found
on
page
27.
(4) Pro
forma
estimate
assumes
that
the
acquisitions
were
effective
as
at
January
1
of
the
respective
periods.
(5) Includes
interest
on
Exchangeable
Notes
which
were
fully
exchanged
in
April
and
September
2012.
(6) Interest
coverage
ratio
–
The
calculation
of
ICR
reconciled
to
IFRS
measures
can
be
found
on
page
29.
(7) A
description
of
the
determination
of
basic
and
diluted
amounts
per
unit
can
be
found
on
page
25.
109,482,435
99,335,779
64,064,093
Dundee
International
2013
Annual
Report
|
1
BASIS
OF
PRESENTATION
Our
discussion
and
analysis
of
the
financial
position
and
results
of
operations
of
Dundee
International
Real
Estate
Investment
Trust
(“Dundee
International
REIT”,
the
“REIT”
or
the
“Trust”)
should
be
read
in
conjunction
with
the
audited
consolidated
financial
statements
of
the
Trust
for
the
year
ended
December
31,
2013.
The
Trust’s
basis
of
financial
reporting
is
International
Financial
Reporting
Standards
(“IFRS”).
This
management’s
discussion
and
analysis
has
been
dated
as
at
February
26,
2014,
except
where
otherwise
noted.
For
simplicity,
throughout
this
discussion,
we
may
make
reference
to
the
following:
• “Debentures”,
meaning
the
5.5%
convertible
unsecured
subordinated
debentures
of
the
Trust
due
July
31,
2018;
• “Exchangeable
Notes”,
meaning
the
Exchangeable
Notes,
Series
A
and
the
Exchangeable
Notes,
Series
B
issued
by
a
subsidiary
of
Dundee
International
REIT;
• “GLA”,
meaning
gross
leasable
area;
• “GRI”,
meaning
gross
rental
income;
• “Initial
Properties”,
meaning
the
income-‐producing
properties
we
acquired
on
August
3,
2011;
• “Acquisition
Properties”,
meaning
the
income-‐producing
properties
acquired
subsequent
to
the
Trust’s
initial
public
offering
on
August
3,
2011;
and
• “Units”,
meaning
the
Units
of
the
Trust.
Certain
information
has
been
obtained
from
CB
Richard
Ellis
Germany
(“CBRE”),
a
commercial
firm
that
provides
information
relating
to
the
German
real
estate
industry.
Although
we
believe
this
information
is
reliable,
the
accuracy
and
completeness
of
this
information
is
not
guaranteed.
We
have
not
independently
verified
this
information
and
make
no
representation
as
to
its
accuracy.
When
we
use
the
terms
such
as
“we”,
“us”
and
“our”,
we
are
referring
to
the
REIT
and
its
subsidiaries.
When
we
refer
to
Deutsche
Post
as
being
the
lessee
or
the
tenant
of
the
Initial
Properties,
we
are
referring
to
Deutsche
Post
Immobilien
GmbH
(“DPI”),
which
is
a
wholly
owned
subsidiary
of
Deutsche
Post.
Deutsche
Post
has
provided
a
letter
of
support
with
respect
to
DPI
and
its
ability
to
carry
out
its
obligations
under
leases
for
the
Initial
Properties.
In
addition,
certain
disclosure
incorporated
by
reference
into
this
report
includes
information
regarding
our
largest
tenants
that
has
been
obtained
from
publicly
available
information.
We
have
not
independently
verified
any
such
information.
Certain
information
herein
contains
or
incorporates
comments
that
constitute
forward-‐looking
information
within
the
meaning
of
applicable
securities
legislation.
Forward-‐looking
information
is
based
upon
a
number
of
assumptions
and
is
subject
to
a
number
of
risks
and
uncertainties,
many
of
which
are
beyond
Dundee
International
REIT’s
control,
which
could
cause
actual
results
to
differ
materially
from
those
that
are
disclosed
in
or
implied
by
such
forward-‐looking
information.
These
risks
and
uncertainties
include,
but
are
not
limited
to,
global
and
local
economic,
business
and
government
conditions;
the
financial
condition
of
tenants;
concentration
of
our
tenants;
our
ability
to
refinance
maturing
debt;
leasing
risks,
including
those
associated
with
the
ability
to
lease
vacant
space
and
the
timing
of
lease
terminations;
our
ability
to
source
and
complete
accretive
acquisitions;
changes
in
tax
and
other
laws
or
the
application
thereof;
and
interest
and
currency
rate
fluctuations.
Although
the
forward-‐looking
statements
contained
in
this
management’s
discussion
and
analysis
are
based
upon
what
we
believe
are
reasonable
assumptions,
there
can
be
no
assurance
that
actual
results
will
be
consistent
with
these
forward-‐looking
statements.
Factors
that
could
cause
actual
results
to
differ
materially
from
those
set
forth
in
the
forward-‐looking
statements
and
information
include,
but
are
not
limited
to,
general
economic
conditions;
local
real
estate
conditions,
including
the
development
of
properties
in
close
proximity
to
the
Trust’s
properties;
timely
leasing
of
vacant
space
and
re-‐leasing
of
occupied
space
upon
expiration;
dependence
on
tenants’
financial
condition;
the
uncertainties
of
acquisition
activity;
the
ability
to
effectively
integrate
acquisitions;
interest
rates;
availability
of
equity
and
debt
financing;
the
Trust’s
continued
exemption
from
the
specified
investment
flow-‐through
trust
(“SIFT”)
rules
under
the
Income
Tax
Act
(Canada);
and
other
risks
and
factors
described
from
time
to
time
in
the
documents
filed
by
the
Trust
with
securities
regulators.
All
forward-‐looking
information
is
as
of
February
26,
2014,
except
where
otherwise
noted.
Dundee
International
REIT
does
not
undertake
to
update
any
such
forward-‐looking
information
whether
as
a
result
of
new
information,
future
events
or
otherwise.
Dundee
International
2013
Annual
Report
|
2
Additional
information
about
these
assumptions
and
risks
and
uncertainties
is
contained
in
our
filings
with
securities
regulators.
These
filings
are
also
available
on
our
web
site
at
www.dundeeinternational.com.
BACKGROUND
Dundee
International
REIT
is
an
unincorporated,
open-‐ended
real
estate
investment
trust
that
was
formed
to
provide
investors
with
the
opportunity
to
invest
in
real
estate
exclusively
outside
of
Canada.
Dundee
International
REIT
was
founded
by
DREAM
Asset
Management
Corporation
(“DAM”),
formerly
called
Dundee
Realty
Corporation
or
“DRC”,
a
subsidiary
of
DREAM
Unlimited
Corp.
(TSX:
DRM),
which
is
our
asset
manager.
Our
Units
are
listed
on
the
Toronto
Stock
Exchange
under
the
trading
symbol
DI.UN.
As
at
December
31,
2013,
our
portfolio
consisted
of
296
properties,
comprising
approximately
15.7
million
square
feet
of
GLA
located
in
Germany.
We
will
be
exempt
from
the
SIFT
rules,
taking
into
account
all
proposed
amendments
to
such
rules,
as
long
as
we
comply
at
all
times
with
our
investment
guidelines
which,
among
other
things,
only
permit
us
to
invest
in
properties
or
assets
located
outside
of
Canada.
We
do
not
rely
on
the
REIT
exception
under
the
Income
Tax
Act
(Canada)
in
order
to
be
exempt
from
the
SIFT
rules.
As
a
result,
we
are
not
subject
to
the
same
restrictions
on
our
activities
as
those
that
apply
to
Canadian
real
estate
investment
trusts
that
do
rely
on
the
REIT
exception.
This
gives
us
flexibility
in
terms
of
the
nature
and
scope
of
our
investments
and
other
activities.
Because
we
do
not
own
taxable
Canadian
property,
as
defined
in
the
Income
Tax
Act
(Canada),
we
are
not
subject
to
restrictions
on
our
ownership
by
non-‐Canadian
investors.
OUR
OBJECTIVES
We
are
committed
to:
• managing
our
investments
to
provide
stable,
sustainable
and
growing
cash
flows
through
investments
in
commercial
real
estate
located
outside
of
Canada;
• building
a
diversified,
growth-‐oriented
portfolio
of
commercial
properties
in
Germany;
• capitalizing
on
internal
growth
and
seeking
accretive
acquisition
opportunities
in
our
target
markets;
• growing
the
value
of
our
assets
and
maximizing
the
long-‐term
value
of
our
Units
through
the
active
and
efficient
management
of
our
assets;
and
• providing
predictable
and
growing
cash
distributions
per
unit,
on
a
tax-‐efficient
basis.
Distributions
We
currently
pay
monthly
distributions
to
unitholders
of
6.667
cents
per
unit,
or
80
cents
per
unit
on
an
annual
basis.
At
December
31,
2013,
approximately
17.4%
of
our
total
Units
were
enrolled
in
the
Distribution
Reinvestment
and
Unit
Purchase
Plan
(“DRIP”).
Annualized
distribution
rate
Monthly
distribution
rate
Period-‐end
closing
unit
price
Annualized
distribution
yield
on
$
$
$
December
31,
2012
0.80
$
0.0667
$
10.93
$
2013
0.80
$
0.0667
$
8.42
$
September
30,
2012
0.80
$
0.0667
$
11.00
$
2013
0.80
$
0.0667
$
9.41
$
2013
0.80
$
0.0667
$
9.85
$
June
30,
2012
0.80
$
0.0667
$
9.94
$
2013
0.80
$
0.0667
$
10.64
$
March
31,
2012
0.80
0.0667
10.11
closing
unit
price
(%)
9.50%
7.32%
8.50%
7.27%
8.12%
8.05%
7.52%
7.91%
Dundee
International
2013
Annual
Report
|
3
OUR
STRATEGY
Our
core
strategy
is
to
invest
in
income-‐producing
properties
outside
of
Canada
that
provide
stable,
sustainable
and
growing
cash
flows.
Our
methodology
to
execute
our
strategy
and
meet
our
objectives
includes:
Optimizing
the
performance,
value
and
long-‐term
cash
flow
of
our
properties
We
manage
our
properties
to
optimize
their
performance,
value
and
long-‐term
cash
flow.
We
seek
to
do
this
by
achieving
high
occupancy
and
rental
rates.
Together
with
our
management
team
in
Canada,
we
also
have
an
established
management
team
in
Germany
and
Luxembourg,
bringing
a
history
with
our
Initial
Properties,
deep
market
knowledge
and
established
relationships
with
other
market
participants.
Leasing,
capital
expenditure
and
construction
initiatives
are
either
internally
managed
or
overseen
by
us,
while
property
management
services,
including
general
maintenance,
rent
collection
and
administration
of
operating
expenses
and
tenant
leases,
are
carried
out
by
third-‐party
service
providers.
Diversifying
our
portfolio
to
mitigate
risk
We
continuously
seek
to
diversify
our
portfolio
to
increase
value
on
a
per
unit
basis,
further
improve
the
sustainability
of
our
distributions
and
strengthen
our
tenant
profile.
Our
profile
in
Europe,
our
relationships,
our
management
team
in
Germany
and
Luxembourg,
and
the
expertise
of
our
Board
members
and
senior
management
team
are
providing
us
with
opportunities
to
take
advantage
of
real
estate
transactions
available
in
Germany
to
date.
Investing
in
stable
income-‐producing
properties
outside
of
Canada
When
considering
acquisition
opportunities,
we
look
for
properties
with
quality
tenancies
and
strong
occupancy,
and
assess
how
acquisition
opportunities
complement
our
properties
and
have
the
potential
to
create
additional
value.
We
pursue
acquisition
opportunities
independently
as
well
as
by
partnering
with
existing
local
operators
and
by
growing
with
Canadian
groups
as
they
expand
their
reach
outside
of
Canada.
In
considering
future
acquisitions,
we
intend
to
focus
on
countries
with
a
stable
business
and
operating
environment,
a
liquid
market
for
real
estate
investments,
a
legal
framework
that
provides
adequate
rights
and
protections
for
owners
of
property,
and
a
manageable
foreign
investment
regime.
We
will
consider
investment
opportunities
in
income-‐producing
properties
that
are
accretive,
provide
stable,
sustainable
and
growing
cash
flows,
and
enable
us
to
realize
synergies
within
our
portfolio
of
properties.
The
execution
of
this
strategy
will
be
consistently
reviewed
and
will
also
include
dispositions
of
properties
and
optimizing
our
capital
structure.
Maintaining
and
strengthening
a
conservative
financial
profile
We
operate
our
investments
in
a
disciplined
manner,
with
a
focus
on
financial
analysis
and
balance
sheet
management
to
ensure
we
maintain
a
prudent
capital
structure
and
conservative
financial
profile.
We
intend
to
generate
stable
cash
flows
sufficient
to
fund
our
distributions
while
maintaining
a
conservative
debt
ratio.
Our
preference
will
be
to
stagger
our
debt
maturities
to
mitigate
our
interest
rate
risk
and
limit
refinancing
exposure
in
any
particular
period.
We
have
also
implemented
a
foreign
exchange
hedging
strategy
to
provide
greater
certainty
regarding
the
payment
of
distributions
to
unitholders
and
interest
to
debenture
holders.
OUR
ASSETS
Throughout
this
document,
we
make
reference
to
the
following
two
asset
categories:
Initial
Properties
As
at
December
31,
2013,
this
category
included
272
national
and
regional
administration
offices,
mixed
use
retail,
banking
and
distribution
properties
and
regional
logistics
headquarters
of
Deutsche
Post.
The
properties
are
generally
strategically
located
near
central
train
stations
and
main
retail
areas
and
are
easily
accessible
by
public
transportation.
Acquisition
Properties
As
at
December
31,
2013,
this
category
included
24
office
properties
acquired
in
2012
and
2013.
These
properties
are
high-‐
quality
office
buildings
located
in
Germany’s
largest
office
markets
and
are
generally
newer
or
recently
refurbished
buildings.
Dundee
International
2013
Annual
Report
|
4
The
majority
of
our
portfolio
is
concentrated
in
Germany’s
largest
office
markets:
City
Berlin
Cologne
Düsseldorf
Frankfurt
Hamburg
Hannover
Munich
Nuremberg
Stuttgart
Other
Total
Total
GLA
(sq.
ft.)
674,362
783,967
1,815,847
1,205,885
1,291,504
959,452
633,304
640,567
729,182
6,971,355
15,705,425
Total
GLA
(%)
4
5
12
8
8
6
4
4
5
44
100
Total
GRI
(%)
5
6
15
10
13
4
8
5
5
29
100
TENANTS
Through
an
active
acquisitions
and
dispositions
program
that
commenced
in
2012,
the
Trust
continued
with
the
diversification
of
its
tenant
base.
The
table
below
highlights
the
diversification
away
from
the
single-‐tenant
nature
of
the
initial
portfolio.
At
the
end
of
2013,
Deutsche
Post’s
GRI
was
further
reduced
to
approximately
37%
of
the
Trust’s
overall
GRI
compared
to
over
65%
at
the
end
of
2012.
Tenant
composition
Deutsche
Post
Freshfields
Bruckhaus
Deringer
ERGO
Direkt
Imtech
Google
Germany
GmbH
AIG
Europe
Limited
BNP
Paribas
Fortis
SA/NV
Freistaat
Bayern
(TU
München)
Maersk
Deutschland
A/S
&
Co.
KG
Jobcenter
Berlin
Mitte
–
Federal
Employment
Agency
Other
third-‐party
tenants
Total
Total
annualized
GRI
(%)
37.3
3.2
3.0
2.4
2.1
2.1
2.0
1.7
1.4
1.4
43.4
100.0
Deutsche
Post
Deutsche
Post
is
an
integral
part
of
the
German
economy
and
continues
to
be
an
important
part
of
day-‐to-‐day
life
in
Germany.
Through
its
acquisition
of
DHL
in
2002,
Deutsche
Post
DHL
has
become
a
global
logistics
market
leader.
It
employs
approximately
475,000
people
in
more
than
220
countries
and
territories
and
generated
revenue
of
over
€27
billion
in
the
first
six
months
of
2013
alone.(1)
As
the
only
provider
of
universal
postal
services
in
Germany,
Deutsche
Post
must
provide
certain
minimum
levels
of
service
to
German
residents.
Some
of
the
space
leased
to
Deutsche
Post
is
occupied
by
Postbank,
a
public
company
controlled
by
Deutsche
Bank
and
integral
to
its
retail
banking
business.
Postbank
offers
retail
financial
services
in
its
branches
within
Deutsche
Post’s
network,
which
generates
increased
traffic
through
the
postal
services
offered
in
those
branches.
As
at
December
31,
2013,
our
portfolio
featured
approximately
188
Postbank
branches,
allowing
for
the
delivery
of
integrated
financial
and
postal
services.
Leases
for
14
Postbank
branches
are
direct
leases
and
not
included
in
the
leases
with
Deutsche
Post.
Subsequent
to
year-‐end,
we
entered
into
37
additional
direct
lease
contracts
with
Postbank
for
approximately
166,000
square
feet
of
space
that
Deutsche
Post
has
terminated
in
connection
with
its
2014
termination
rights.
Postbank
branches
are
typically
located
at
ground
level
with
a
view
to
attracting
a
high
volume
of
retail
and
business
customers
seeking
financial
or
postal
services.
(1) As
disclosed
at
Deutsche
Post
DHL’s
web
site
at
www.dp.dhl.com
Dundee
International
2013
Annual
Report
|
5
Freshfields
Bruckhaus
Deringer
(“Freshfields”)
Freshfields
is
the
second
largest
tenant
in
our
portfolio
as
measured
by
GRI.
Freshfields
is
an
international
law
firm
with
offices
in
Europe,
Asia,
North
America
and
the
Middle
East.(2)
Freshfields
occupies
71%
of
the
space
in
our
property
located
at
Feldmühleplatz
1
+
15
and
generated
approximately
3.2%
of
the
REIT’s
overall
GRI
as
at
December
31,
2013.
ERGO
Direkt
Lebensversicherungs
AG
(“ERGO”)
ERGO
is
the
third
largest
tenant
in
our
portfolio
as
measured
by
GRI.
With
approximately
48,000
employees
in
over
30
countries,
ERGO
is
one
of
the
largest
insurance
companies
in
Germany.(3)
ERGO,
which
belongs
to
the
Munich
RE
group
of
companies,
occupies
the
entire
space
in
our
property
located
at
Karl-‐Martell-‐Strasse
60
in
Nuremberg,
and
generated
approximately
3.0%
of
the
REIT’s
overall
GRI
as
at
December
31,
2013.
Imtech
Imtech
Germany
&
Eastern
Europe
is
a
leader
in
the
energy
and
technical
building
equipment
sector
in
Germany,
Poland,
Austria,
Hungary,
Romania,
Russia
and
Switzerland.
Imtech
Germany
&
Eastern
Europe
employs
approximately
5,800
people
and
is
part
of
the
Royal
Imtech
N.V.
Group,
which
is
based
in
the
Netherlands
and
employs
approximately
29,000
people.(4)
This
tenant
occupies
the
entire
space
in
our
property
located
at
Hammer
Strasse
30–34
in
Hamburg,
which
is
Imtech’s
German
head
office,
and
contributed
approximately
2.4%
to
the
REIT’s
overall
GRI
as
at
December
31,
2013.
Google
Germany
GmbH
(“Google”)
Google
is
an
American
multinational
corporation
specializing
in
internet-‐related
services
and
products
and
employs
over
30,000
people
worldwide.(5)
Google
Hamburg
is
the
company’s
commercial
headquarters
for
Germany,
Austria,
Switzerland
and
the
Nordics
and
occupies
approximately
59%
of
the
GLA
in
ABC
Bogen,
our
property
located
in
the
heart
of
Hamburg
at
ABC
Strasse
19.
Google
generated
approximately
2.2%
of
the
REIT’s
overall
GRI
as
at
December
31,
2013.
AIG
Europe
Limited
(“AIG”)
AIG
Europe
Limited
is
a
part
of
AIG,
a
leading
international
insurance
company
focused
on
property
casualty
insurance,
life
insurance
and
retirement
services,
mortgage
insurance
and
aircraft
leasing.
AIG
has
clients
in
over
130
countries
and
employs
approximately
63,000
people.(6)
AIG
occupies
approximately
60%
of
the
space
in
Werfthaus,
our
property
located
at
Speicherstrasse
55
in
Frankfurt,
and
generated
approximately
2.1%
of
the
REIT’s
overall
GRI
as
at
December
31,
2013.
BNP
Paribas
Fortis
BNP
Paribas
Fortis
is
a
financial
services
provider,
offering
services
to
private
and
professional
clients,
corporate
clients
and
public
entities
through
a
number
of
networks.
The
company
is
owned
approximately
75%
by
the
BNP
Paribas
Group
and
25%
by
the
Belgian
State.(7)
BNP
Paribas
Fortis
occupies
approximately
55%
of
the
space
in
Cäcilienkloster
in
Cologne
as
well
as
8%
in
Z-‐UP
in
Stuttgart
and
generated
approximately
2.0%
of
the
REIT’s
overall
GRI
as
at
December
31,
2013.
State
of
Bavaria/Technische
Universität
München
The
Technische
Universität
München
(“TUM”)
is
one
of
Europe’s
top
universities.
TUM
comprises
13
faculties
which
focus
on
engineering,
medicine,
natural
and
life
sciences,
business
and
education.
Approximately
32,500
students
are
currently
enrolled
at
TUM.(8)
TUM’s
School
of
Education
occupies
approximately
48%
of
the
GLA
in
our
property
located
at
Marsstrasse
20–22
in
the
city
centre
of
Munich.
TUM
generated
approximately
1.7%
of
the
REIT’s
overall
GRI
as
at
December
31,
2013.
Maersk
Deutschland
A/S
&
Co.
KG
(“Maersk”)
Maersk
is
the
world’s
largest
ocean
carrier
and
operates
mainly
in
two
industries:
shipping
and
oil
and
gas.
Through
its
various
divisions,
the
group
employs
approximately
121,000
people
and
generated
over
US$59
billion
in
revenues
in
2012.(9)
Maersk
occupies
approximately
70%
of
the
GLA
in
Humboldt
House,
our
property
located
at
Am
Sandtorkai
37
in
Hamburg.
Maersk
generated
approximately
1.5%
of
the
REIT’s
overall
GRI
as
at
December
31,
2013.
(2) As
disclosed
at
Freshfields’
web
site
at
www.freshfields.com
(3) As
disclosed
at
ERGO’s
web
site
at
www.ergo.com
(4) As
disclosed
at
Imtech’s
web
site
at
www.imtech.de
(5) As
disclosed
at
Google’s
web
site
at
www.google.com
and
www.google.ca/about/jobs/locations/hamburg
(6) As
disclosed
at
AIG’s
web
site
at
www.aig.com
(7) As
disclosed
at
BNP
Paribas’
web
site
at
www.bnpparibas.com
(8) As
disclosed
at
Technische
Universität
München’s
web
site
at
www.tum.de/en/homepage
(9) As
disclosed
at
Maersk’s
web
site
at
www.maersk.com
Dundee
International
2013
Annual
Report
|
6
Jobcenter
Berlin
Mitte
Jobcenter
Berlin
Mitte
is
part
of
the
Federal
Employment
Agency,
the
largest
provider
of
labour
market
services
in
Germany.
The
Federal
Employment
Agency
has
a
network
of
more
than
700
agencies
and
branch
offices
nationwide.(10)
Jobcenter
Berlin
Mitte
occupies
approximately
51%
of
the
GLA
in
Löwenkontor,
our
property
located
at
Beuthstrasse
6–8
and
Seydelstrasse
2–5
in
Berlin.
Jobcenter
Berlin
Mitte
generated
approximately
1.4%
of
the
REIT’s
overall
GRI
as
at
December
31,
2013.
(10) As
disclosed
at
Jobcenter
Berlin
Mitte’s
web
site
at
www.arbeitsagentur.de
MARKET
OVERVIEW
–
GERMANY
German
economy
The
German
economy
has
long
been
a
driver
as
well
as
a
beneficiary
of
a
globalized
economy.
Germany
has
established
itself
as
a
key
location
for
production
sites
and
is
a
country
with
a
favourable
business
environment.
Similar
to
Canada,
Germany
is
a
country
with
a
history
of
political,
legal
and
financial
stability
and
provides
an
attractive
climate
for
long-‐term
investment.
Recent
developments
Overall,
the
German
economy
continues
to
be
the
main
driving
force
of
Europe.
Germany’s
labour
market
is
very
robust
and
its
registered
unemployment
rate
at
6.7%(1)
at
the
end
of
December
2013
remains
near
all-‐time
lows
since
Germany’s
reunification
in
1989.
In
addition,
the
Ifo
Business
Climate
Index
improved
for
the
third
month
in
a
row
in
January
2014
and
reached
its
highest
level
since
June
of
2012,
an
indicator
of
satisfaction
with
the
current
business
situation
in
Germany.(2)
Economic
impact
on
the
German
real
estate
sector
Germany
is
one
of
the
most
highly
sought-‐after
real
estate
investment
markets
in
Europe,
benefiting
from
strong
domestic
and
international
investor
demand.
A
positive
economic
outlook
and
a
strong
labour
market
are
key
factors
for
the
continued
demand
in
this
market.
In
2013,
the
total
investment
volume
for
commercial
real
estate
reached
over
€30
billion.
The
office
sector
remains
the
dominant
asset
class
for
investments,
with
over
50%
of
all
transactions
during
2013
taking
place
in
this
category.
In
total,
over
€15
billion(3)
was
invested
in
German
office
properties
in
2013.
The
five
largest
real
estate
markets
in
Germany
continue
to
account
for
the
majority
of
the
overall
investment
volume,
with
more
than
half
of
all
the
transactions
taking
place
in
Berlin,
Düsseldorf,
Frankfurt,
Hamburg
and
Munich.(3)
The
underlying
fundamentals
in
the
office
sector
remain
strong.
The
stability
in
the
office
market
is
supported
by
a
relatively
moderate
degree
of
new
space
coming
to
market
and
take-‐up
for
the
redevelopment
of
vacant
office
space
for
alternative
use.
Overall
office
vacancies
in
the
seven
largest
markets
declined
year-‐over-‐year
from
8.8%
at
December
31,
2012
to
8.3%
as
at
December
31,
2013.(4)
(1) Destatis,
Germany’s
Federal
Statistical
Office
(2) Ifo
Business
Survey
for
January
2014
(3) CBRE
MarketView,
Germany
Investment
Quarterly
Q4
2013
(4) Jones
Lang
LaSalle
Dundee
International
2013
Annual
Report
|
7
FINANCIAL
OVERVIEW
Our
results
for
the
fourth
quarter
were
solid
with
FFO
and
AFFO
increasing
to
$24.2
million
and
$22.3
million,
respectively,
reflecting
the
impact
from
positive
absorption
of
space
as
well
as
completed
acquisitions.
On
a
per
unit
basis,
FFO
and
AFFO
were
22
cents
and
20
cents,
respectively.
Over
the
course
of
the
quarter,
we
had
on
average
approximately
$79
million
of
excess
undeployed
cash.
Excluding
the
impact
of
undeployed
cash,
FFO
and
AFFO
per
unit
would
have
been
24
cents
and
22
cents,
respectively.
During
Q4
2013,
we
continued
to
make
progress
in
transforming
our
portfolio.
The
Trust’s
focus
on
asset
management
through
its
local
operations
team
in
Europe
is
highlighted
by
continued
occupancy
improvements
during
the
quarter.
We
recorded
positive
absorption
of
approximately
10,800
square
feet
in
Q4,
increasing
our
year-‐to-‐date
total
absorption
to
approximately
180,100
square
feet.
Overall
occupancy
increased
to
86.4%
at
December
31,
2013
from
83.2%
at
the
beginning
of
the
year,
due
to
positive
absorption
in
our
Initial
Properties
as
well
as
higher
in-‐place
occupancy
rates
in
our
Acquisition
Properties.
Year-‐over-‐year,
in-‐place
rents
increased
from
$8.20
(€6.25)
per
square
foot
to
$12.40
(€8.46)
in
Q4
2013,
largely
due
to
high-‐
quality
acquisitions.
At
$12.68
per
square
foot,
average
market
rents
in
our
portfolio
remain
approximately
2.3%
above
in-‐place
rents.
On
a
year-‐over-‐year
basis,
our
FFO
and
AFFO
on
a
per
unit
basis
were
85
cents
and
79
cents,
respectively,
for
2013,
compared
to
84
cents
and
80
cents
for
2012.
The
FFO
and
AFFO
numbers,
which
are
comparable
to
the
prior
year,
reflect
the
impact
from
dilution
and
the
increase
in
the
number
of
units
outstanding.
The
full
impact
from
the
completed
2013
acquisitions
will
not
be
reflected
until
2014.
The
Trust
continued
to
be
active
on
the
financing
front,
leading
to
further
decreases
in
the
Trust’s
average
interest
rate
to
3.37%
at
the
end
of
2013,
from
3.98%
at
the
end
of
2012.
The
average
term
to
maturity
of
the
Trust’s
debt
increased
to
4.6
years
at
December
31,
2013
from
4.4
years
at
December
31,
2012,
and
its
interest
coverage
ratio
increased
from
3.0
times
at
the
end
of
2012
to
3.4
times
at
the
end
of
2013,
mainly
reflecting
lower
interest
rates
on
new
mortgages.
Our
leverage
stood
at
54%
(net
of
cash)
at
December
31,
2013,
an
increase
from
45%
(net
of
cash)
at
the
end
of
2012.
The
increase
in
our
leverage
ratio
is
largely
due
to
new
mortgage
financings
placed
on
acquisitions
completed
in
2013
at
higher
debt-‐to-‐book
value
than
our
portfolio
at
the
beginning
of
the
year.
We
operate
in
the
range
of
50%
to
60%
debt-‐to-‐book
value
and
target
55%
(net
of
cash).
On
an
overall
basis,
the
Trust
performed
in
line
with
management’s
expectations
for
the
quarter.
OUTLOOK
With
the
completion
of
the
acquisition
of
Feldmühleplatz
1
+
15
in
Q4,
our
acquisitions
for
2013
exceeded
$1
billion,
making
the
Trust
one
of
the
most
active
investors
in
office
properties
in
Germany
in
2013.
Since
our
IPO,
we
have
acquired
high-‐quality
properties
totalling
$1.3
billion.
With
these
acquisitions,
we
have
made
significant
improvements
in
the
quality
of
our
cash
flow
by
focusing
on
newer
properties
with
a
broader
tenant
mix
in
the
seven
largest
office
markets
(“Big
7”)
in
Germany.
On
average,
the
properties
we
acquired
since
the
IPO
are
12
years
old,
have
a
weighted
average
lease
term
of
6.3
years
and
an
average
occupancy
rate
of
95%
and
account
for
approximately
53%
of
our
annual
GRI.
Further,
we
now
have
two-‐thirds
of
our
asset
value
and
60%
of
our
GRI
in
the
Big
7
office
markets
in
Germany.
We
are
pleased
with
the
outcome
of
our
discussions
with
Deutsche
Post
in
2013.
Together
with
Postbank,
they
renewed
approximately
50%
of
the
space
and
53%
of
the
GRI
they
were
eligible
to
terminate
for
a
lease
term
of
ten
years
at
rates
that
are
approximately
19%
higher
than
the
current
rates.
Our
leasing
team
in
Germany
is
focused
on
leasing
the
balance
of
the
terminated
space.
We
enter
2014
with
strong
leasing
momentum
as
the
economic
metrics
in
Germany
remain
positive.
Our
focus
will
continue
to
be
on
tenant
retention
as
well
as
new
leasing
to
enhance
value.
We
will
continue
to
explore
redevelopment
and
intensification
opportunities
within
our
Initial
Properties.
At
the
same
time,
we
will
be
opportunistic
in
disposing
of
non-‐core
assets
and
recycling
the
capital
to
further
enhance
the
quality
of
our
cash
flows.
Dundee
International
2013
Annual
Report
|
8
SECTION
II
–
EXECUTING
THE
STRATEGY
OUR
OPERATIONS
Occupancy
Overall
occupancy
rates
increased
from
83.2%
at
the
end
of
2012
to
86.4%
at
the
end
of
2013.
On
average,
Acquisition
Properties
have
higher
occupancy
rates
compared
to
our
Initial
Properties.
Due
to
our
leasing
efforts
throughout
2013,
the
occupancy
in
our
Initial
Properties
increased
from
82.1%
at
the
end
of
2012
to
83.2%
at
the
end
of
2013.
The
table
below
details
the
percentage
of
occupied
and
committed
space
for
the
total
portfolio
as
well
as
the
comparative
portfolio.
The
comparative
portfolio
comprises
properties
owned
by
the
Trust
at
December
31,
2012
and
December
31,
2013,
and
excludes
properties
that
were
acquired
or
sold
during
2013.
(percent)
Initial
Properties
Acquisition
Properties
Total
December
31,
2013(1)
83.2
96.3
86.4
Total
portfolio
December
31,
2012(1)
82.1
94.5
83.2
December
31,
2013(1)
Comparative
portfolio
December
31,
2012(1)
83.2
96.7
84.4
82.4
94.5
83.4
(1)
Space
for
which
the
Trust
receives
head
lease
payments
is
reflected
as
vacant
space.
Vacancy
schedule
The
tables
below
highlight
our
leasing
activity
for
the
three-‐month
and
twelve-‐month
periods
ended
December
31,
2013.
During
2013,
our
overall
space
available
for
lease
decreased
by
117,397
square
feet
to
2,128,127
square
feet.
The
Trust
recorded
positive
absorption
of
10,796
square
feet
during
the
quarter,
increasing
absorption
for
the
full
year
2013
to
180,128
square
feet.
The
primary
drivers
of
the
positive
absorption
results
were
our
continued
focus
on
tenant
retention
as
well
as
leasing.
For
the
three
months
ended
December
31,
2013
(in
square
feet)
Available
for
lease
–
October
1,
2013
Change
in
vacancy
due
to
dispositions
Remeasurements
Subtotal
–
Available
for
lease
Expiries
Early
termination
and
bankruptcies
New
leases
Renewals
Future
leases
Available
for
lease
–
December
31,
2013
Initial
Properties
Acquisition
Properties
1,984,395
(5,562)
3,250
1,982,083
65,792
2,489
(30,474)
(15,584)
(20,121)
1,984,185
156,449
-‐
391
156,840
102,962
-‐
(4,811)
(100,330)
(10,719)
143,942
Total
2,140,844
(5,562)
3,641
2,138,923
168,754
2,489
(35,285)
(115,914)
(30,840)
2,128,127
Dundee
International
2013
Annual
Report
|
9
(in
square
feet)
Available
for
lease
–
January
1,
2013
Change
in
vacancy
due
to
acquisitions
Change
in
vacancy
due
to
dispositions
Remeasurements
Subtotal
–
Available
for
lease
Expiries
Early
termination
and
bankruptcies
New
leases
Renewals
Future
leases
Available
for
lease
–
December
31,
2013
For
the
year
ended
December
31,
2013
Initial
Properties
Acquisition
Properties
2,182,694
-‐
(90,657)
16,021
2,108,058
354,602
27,030
(131,852)
(195,097)
(178,556)
1,984,185
62,830
148,771
-‐
(11,404)
200,197
170,042
5,454
(33,312)
(149,784)
(48,655)
143,942
Total
2,245,524
148,771
(90,657)
4,617
2,308,255
524,644
32,484
(165,164)
(344,881)
(227,211)
2,128,127
In-‐place
rental
rates
The
following
table
provides
a
comparison
between
in-‐place
rents
and
market
rents
in
our
portfolio
as
at
December
31,
2013.
Market
rents
are
management’s
estimates
of
rental
rates
that
could
be
achieved
for
space
in
our
properties.
In-‐place
rents
have
increased
from
approximately
$8.20
per
square
foot/year
at
the
end
of
2012
to
approximately
$12.40
at
December
31,
2013,
largely
due
to
acquisitions
completed
in
2013.
The
majority
of
the
leases
in
the
Acquisition
Properties
include
rent
adjustment
clauses
linked
to
an
increase
in
the
consumer
price
index
(“CPI”).
Overall,
average
market
rents
for
our
portfolio
remain
approximately
2.3%
above
in-‐place
rents
at
December
31,
2013.
The
2.3%
difference
between
in-‐place
rents
and
market
rents
at
December
31,
2013
is
lower
than
the
3.4%
reported
in
Q3,
2013,
primarily
as
a
result
of
the
acquisition
of
Feldmühleplatz
1
+
15
in
Q4.
This
particular
property
has
above-‐market
rents,
which
were
taken
into
consideration
in
arriving
at
the
purchase
price
at
the
time
of
the
acquisition.
For
acquisitions
completed
in
2012
and
2013,
where
in-‐place
rents
exceeded
market
rents,
the
purchase
price
was
adjusted
at
the
time
of
underwriting
these
acquisitions
to
reflect
such
above-‐market
rents.
(per
square
foot/year)
Initial
Properties
–
Deutsche
Post
Initial
Properties
–
Third
party
Total
Initial
Properties
Acquisition
Properties
Overall
In-‐place
vs.
market
rents
at
December
31,
2013
In-‐place
rent
$
8.17
8.08
8.15
23.59
$
12.40
Market
rent
$
8.97
9.33
9.04
22.28
$
12.68
In-‐place
rent
€
5.57
5.51
5.56
16.10
€
8.46
Market
rent
€
6.12
6.37
6.17
15.20
€
8.65
At
December
31,
2013,
the
weighted
average
remaining
lease
term
(“WALT”)
of
all
leases
was
approximately
4.8
years.
The
WALT
of
the
Acquisition
Properties
was
6.0
years.
The
decrease
in
the
WALT
of
the
Initial
Properties
reflects
the
Deutsche
Post
termination
notices,
which
are
effective
July
1,
2014.
(years)
Initial
Properties
–
Deutsche
Post
Initial
Properties
–
Third
party
Total
Initial
Properties
Acquisition
Properties
Overall
(1)
WALT
at
December
31,
2013
WALT
at
December
31,
2012
4.1
(1)
5.1
4.3
6.0
4.8
5.6
4.3
5.3
7.4
5.5
WALT
at
December
31,
2013
reflects
a
shortened
lease
term
for
properties
for
which
the
Trust
received
termination
notices
in
connection
with
Deutsche
Post’s
2014
termination
rights.
Dundee
International
2013
Annual
Report
|
10
Leasing
and
tenant
profile
Lease
rollover
profile
The
following
table
outlines
our
lease
maturity
profile
by
asset
type
as
at
December
31,
2013.
Current
vacancy
1,984,185
143,
942
2,128,127
Month-‐to-‐
month
345,112
16,137
361,249
2014
1,299,762
127,495
1,427,257
2015
252,025
335,590
587,615
2016
141,214
507,411
648,625
2017
192,973
389,812
582,785
2018
to
2039
7,590,211
2,379,556
9,969,767
Total
11,805,481
3,899,944
15,705,425
(in
square
feet)
Initial
Properties
Acquisition
Properties
Total
Deutsche
Post
leases
The
leases
with
Deutsche
Post,
which
generally
expire
on
June
30,
2018
(many
of
which
provide
Deutsche
Post
with
an
option
to
extend
the
term
until
June
30,
2023),
comprise
approximately
50%
of
the
portfolio’s
GLA
and
account
for
37%
of
the
portfolio’s
GRI.
Rent
adjustment
The
rents
under
the
Deutsche
Post
leases
are
subject
to
automatic
adjustments
(up
or
down)
in
relation
to
the
CPI
for
Germany.
If
the
consumer
price
index
for
Germany
changes
by
more
than
4.7
index
points
as
compared
to
the
index
at
the
commencement
of
the
applicable
lease
or
the
previous
rent
adjustment,
the
rent
payable
under
the
Deutsche
Post
leases
is
automatically
adjusted
by
100%
of
the
index
change
of
4.7
points,
with
effect
as
of
the
time
of
the
index
change.
Based
on
the
index
at
the
last
CPI
adjustment
date,
the
index
will
have
to
reach
107.6
index
points
before
the
next
adjustment
will
become
effective.
CPI
numbers
from
December
2013
indicate
that
the
CPI
has
reached
106.5
index
points.
Termination
rights
and
head
lease
In
general,
the
Deutsche
Post
leases
have
a
fixed
term
of
ten
years,
expiring
on
June
30,
2018.
Certain
leases
entitle
Deutsche
Post
to
terminate
space
in
2012,
2014
and
2016,
subject
to
certain
limitations
and
requirements.
The
rights
of
Deutsche
Post
to
terminate
a
Deutsche
Post
lease
is
limited
by
various
tests
which
apply
collectively
to
the
Deutsche
Post
leases
and
the
leases
in
respect
of
the
remaining
properties
forming
the
portfolio
that
the
vendor
acquired
from
Deutsche
Post
in
July
2008
(the
“Caroline
DP
Leases”),
considered
as
a
whole.
Deutsche
Post
exercised
their
termination
rights
with
respect
to
2012
and
2014.
Deutsche
Post
may
terminate
Deutsche
Post
leases
and
Caroline
DP
Leases
aggregating
no
more
than
10%
of
the
total
annual
Reference
Rent
payable
under
all
of
the
Deutsche
Post
leases
and
Caroline
DP
Leases
on
June
30,
2016.
The
“Reference
Rent”
for
a
lease
is
an
amount
set
out
in
a
specified
notarial
deed
and
may
differ
from
the
actual
rent
payable
under
the
lease.
To
the
extent
that
Deutsche
Post
does
not
exercise
all
of
its
available
early
termination
rights
with
respect
to
any
particular
effective
termination
date,
the
unused
portion
may
be
carried
forward,
provided
that
Deutsche
Post
cannot
terminate
Deutsche
Post
leases
and
Caroline
DP
Leases
aggregating
more
than
20%
of
the
total
Reference
Rent
of
all
Deutsche
Post
leases
and
Caroline
DP
Leases,
considered
as
a
whole,
during
any
lease
year.
Deutsche
Post’s
2014
termination
rights
comprised
approximately
1.9
million
square
feet,
or
8.8%
of
the
REIT’s
current
GRI.
The
tenant
exercised
such
right
in
respect
of
1.1
million
square
feet,
or
approximately
5.1%
of
the
REIT’s
current
GRI
and
committed
to
remain
in
approximately
0.8
million
square
feet
of
space.
Of
this
space,
leases
for
over
0.6
million
square
feet
were
amended
by
extending
the
term
for
five
years
commencing
July
1,
2014,
and
the
termination
rights
were
waived
with
respect
to
the
balance
of
the
space
of
approximately
0.2
million
square
feet.
As
part
of
the
lease
extensions,
we
agreed
to
provide
Deutsche
Post
with
an
annual
rent
reduction
of
€1.7
million
per
year,
effective
as
of
July
1,
2014.
Based
on
recent
inflation
rates
in
Germany,
we
anticipate
that
at
some
point
during
2014,
this
reduction
in
annual
rent
will
be
substantially
offset
by
CPI
rent
adjustments
provided
in
the
terms
of
the
Deutsche
Post
leases.
In
addition,
the
REIT
will
reimburse
Deutsche
Post
up
to
€1.45
million
to
be
used
to
improve
the
buildings
and
the
tenant’s
space.
Dundee
International
2013
Annual
Report
|
11
OUR
RESOURCES
AND
FINANCIAL
CONDITION
Investment
properties
Balance
at
beginning
of
year
Additions
Acquisitions
Building
improvements
Lease
incentives
and
initial
direct
leasing
costs
Amortization
of
lease
incentives
Disposals
Reclassified
to
assets
held
for
sale
Fair
value
adjustments
Foreign
currency
translation
Balance
at
end
of
year
For
the
year
ended
December
31,
2013
1,182,757
$
For
the
year
ended
December
31,
2012
941,442
1,075,558
5,821
8,246
(616)
(23,943)
(21,147)
(59,223)
222,791
2,390,244
$
270,661
2,391
1,011
(17)
(7,415)
-‐
(23,349)
(1,967)
1,182,757
$
$
The
fair
value
of
our
investment
property
portfolio
at
December
31,
2013
was
$2.4
billion.
Since
December
31,
2012,
the
value
of
our
investment
properties
increased
by
$1.2
billion.
The
largest
item
contributing
to
the
increase
in
the
value
is
the
acquisition
of
18
properties
for
$1.1
billion
(including
transaction
costs).
During
the
year
ended
December
31,
2013,
we
also
invested
$14.1
million
in
building
improvements,
lease
incentive
and
initial
direct
leasing
costs.
During
the
same
period,
we
disposed
of
15
properties
which
had
a
fair
value
of
$23.9
million
and
have
entered
into
agreements
to
dispose
of
six
more
properties,
all
considered
to
be
non-‐core
holdings
with
a
total
fair
value
of
$21.1
million.
As
at
December
31,
2013,
these
six
properties
have
been
reclassified
as
assets
held
for
sale
on
the
balance
sheet
and
excluded
from
the
value
of
investment
properties,
as
the
REIT
had
committed
to
a
plan
for
sale
for
these
properties.
The
change
in
fair
value
of
investment
properties
comprises
of
the
following:
Increase
in
fair
value
as
a
result
of
valuation
update
Building
expenditures
capitalized
during
the
year
Leasing
expenditures
capitalized
during
the
year
Transaction
costs
capitalized
on
acquisition
Straight-‐line
rent,
amortization
of
lease
incentives
and
other
Total
14,436
$
(5,562)
(8,246)
(59,126)
(725)
(59,223)
$
$
$
Initial
Properties
4,841
$
(5,015)
(6,543)
-‐
(286)
(7,003)
$
Acquisition
Properties
9,595
(547)
(1,703)
(59,126)
(439)
(52,220)
The
fair
value
of
the
Initial
Properties
increased
by
$4.8
million
based
on
external
appraisals
obtained
from
an
independent
third-‐party
appraisal
firm.
The
increase
is
mainly
attributable
to
leasing
in
these
properties.
The
Acquisition
Properties
increased
by
$9.6
million
based
on
internal
appraisals
and
reflect
a
slight
cap
rate
compression
for
these
properties.
We
incurred
$59.1
million
of
transaction
costs
relating
to
properties
acquired
during
the
year,
which
were
subsequently
written
off
under
the
fair
value
model
used
for
investment
properties.
Similarly,
we
incurred
$5.6
million
of
building
expenditures
and
$8.2
million
of
leasing
costs,
primarily
related
to
the
Initial
Properties
that
were
written
off
under
the
fair
value
model.
As
a
result
of
the
increase
in
value
of
the
euro,
the
investment
properties
increased
in
value
by
$222.8
million
in
2013.
Dundee
International
2013
Annual
Report
|
12
The
table
below
highlights
the
impact
of
our
acquisitions
and
dispositions
on
our
portfolio:
Initial
Properties
2012
Acquisitions
Comparative
properties(1)
2013
Acquisitions
Dispositions
Properties
held
for
sale
Total
portfolio
(1)
Comparative
properties
are
properties
owned
by
the
Trust
at
December
31,
2013
and
December
31,
2012.
$
$
December
31,
2013
1,006,359
304,956
1,311,315
1,100,076
-‐
(21,147)
2,390,244
December
31,
2012
896,987
262,943
1,159,930
-‐
22,827
-‐
1,182,757
$
$
Change
109,372
42,013
151,385
1,100,076
(22,827)
(21,147)
1,207,487
$
$
The
REIT’s
management
is
responsible
for
determining
fair
value
measurements
included
in
the
financial
statements,
including
fair
values
of
investment
properties,
which
are
valued
on
a
highest
and
best
use
basis.
Fair
values
for
investment
properties
are
calculated
using
both
the
direct
income
capitalization
and
discounted
cash
flow
(“DCF”)
methods.
A
description
of
the
critical
accounting
judgments
relating
to
the
valuation
of
investment
properties
can
be
found
in
Note
4
to
the
audited
consolidated
financial
statements.
A
description
of
valuation
techniques
underlying
management’s
estimates
of
fair
value
and
the
valuation
processes
can
be
found
in
Note
7
to
the
audited
consolidated
financial
statements.
Acquisitions
During
2013,
we
completed
18
office
property
acquisitions
for
approximately
$1.0
billion
(excluding
transaction
costs),
comprising
2.8
million
square
feet
of
office
space.
Office
property
Hammer
Strasse
30–34,
Hamburg
Neue
Mainzer
Strasse
28
(K26),
Frankfurt
Dillwächterstrasse
5
and
Tübinger
Strasse
11,
Munich
Schlossstrasse
8a–8g,
Hamburg
ABC-‐Strasse
19
(ABC
Bogen),
Hamburg
Moskauer
Strasse
25,
27,
Düsseldorf
Cäcilienkloster
2,
6,
8,
10,
Cologne
Vordernbergstrasse
6/Heilbronner
Strasse
35
(Z-‐UP),
Stuttgart
Bertoldstrasse
48,
50/Sedanstrasse
7,
Freiburg
Lörracher
Strasse
16–16a,
Freiburg
Westendstrasse
160,
162/Barthstrasse
24,
26,
Munich
Am
Stadtpark
2/Bayreuther
Str.
33
(Parcside),
Nuremberg
Speicherstrasse
55
(Werfthaus),
Frankfurt
Reichskanzler-‐Müller-‐Strasse
21,
23,
25,
Mannheim
Löwenkontor,
Berlin
Marsstrasse
20–22,
Munich
Leitzstrasse
45
(Oasis
lll),
Stuttgart
Feldmühleplatz
1
+
15,
Düsseldorf
Total
(1)
Excludes
transaction
costs.
Acquired
GLA
(sq.
ft.)
172,300
123,300
81,900
165,200
158,400
217,200
200,900
88,600
121,100
56,000
122,200
94,600
151,800
100,500
258,000
238,700
170,000
246,000
2,766,700
Occupancy
at
acquisition
(%)
100
90
99
85
96
95
100
84
100
100
82
99
100
95
95
95
100
100
96
$
Purchase
price(1)
56,328
82,351
24,579
42,885
93,585
62,350
95,820
38,354
40,251
10,699
30,619
33,308
81,113
29,984
54,960
86,296
43,430
107,710
$
1,014,622
Date
acquired
January
31,
2013
February
15,
2013
March
2,
2013
March
12,
2013
March
12,
2013
March
12,
2013
March
12,
2013
March
13,
2013
March
13,
2013
March
13,
2013
March
13,
2013
March
13,
2013
March
14,
2013
March
14,
2013
April
30,
2013
June
28,
2013
September
30,
2013
November
29,
2013
On
February
14,
2014,
the
Trust
acquired
an
office
building,
located
at
Werner-‐Eckert-‐Straße
8,
10,
12
in
München,
Germany,
for
approximately
$22.1
million.
On
February
11,
2014,
the
Trust
entered
into
a
purchase
and
sale
agreement
for
a
fully
leased
multi-‐tenant
office
property
located
in
a
desirable
location
in
Hamburg,
Germany,
for
an
approximate
purchase
price
of
€60.5
million
($[91.1]
million).
Dundee
International
2013
Annual
Report
|
13
Dispositions
The
REIT
completed
the
sale
of
15
properties
in
2013,
for
an
aggregate
sales
price
of
approximately
$23.9
million,
which
represented
102%
of
their
book
value.
Part
of
the
net
proceeds
of
$14.0
million
was
used
to
reduce
our
term
loan
credit
facility.
As
at
December
31,
2013,
the
REIT
had
committed
to
a
plan
of
disposition
for
properties
and
thereby
reclassified
six
properties
from
the
Initial
Properties
with
a
total
fair
value
of
$21.1
million
as
assets
held
for
sale.
Building
improvements
Building
improvements
represent
investments
made
in
our
rental
properties
to
ensure
our
buildings
are
operating
at
an
optimal
level.
During
the
three
and
twelve
months
ended
December
31,
2013,
we
spent
$2.1
million
and
$5.8
million,
respectively,
in
building
improvements.
In
general,
building
improvements
are
non-‐recoverable
from
the
tenants
unless
specifically
provided
for
in
the
lease
agreement.
Initial
direct
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
and
cash
allowances.
Initial
direct
leasing
costs
and
lease
incentives
are
dependent
on
asset
type,
lease
terminations
and
expiries,
the
mix
of
new
leasing
activity
compared
to
renewals,
portfolio
growth
and
general
market
conditions.
Short-‐term
leases
generally
have
lower
costs
than
long-‐term
leases.
During
the
three
and
twelve
months
ended
December
31,
2013,
we
incurred
$1.8
million
and
$4.6
million,
respectively,
of
lease
incentives
and
$1.2
million
and
$3.6
million,
respectively,
of
initial
direct
leasing
costs.
Included
in
the
initial
direct
leasing
costs,
$0.7
million
and
$2.2
million
represented
internal
leasing
staff
costs
capitalized,
for
the
three
and
twelve
months
ended
December
31,
2013,
respectively.
As
at
December
31,
2013,
we
had
outstanding
leasing
cost
commitments
of
$5.8
million.
Commitments
and
contingencies
We
are
contingently
liable
with
respect
to
litigation
and
claims
that
may
arise
from
time
to
time.
In
the
opinion
of
management,
any
liability
that
may
arise
from
such
contingencies
would
not
have
a
material
adverse
effect
on
our
consolidated
financial
statements.
As
at
December
31,
2013,
the
REIT’s
future
minimum
commitments
under
operating
leases
are
as
follows:
Less
than
1
year
1–5
years
Longer
than
5
years
Total
$
Operating
lease
payments
762
1,722
0
2,484
$
During
the
three-‐
and
twelve-‐month
periods
ended
December
31,
2013,
the
Trust
paid
$0.2
million
and
$0.7
million
in
minimum
lease
payments,
respectively,
which
have
been
included
in
comprehensive
income
for
the
period.
OUR
CAPITAL
Liquidity
and
capital
resources
Dundee
International
REIT’s
primary
sources
of
capital
are
cash
generated
from
operating
activities,
credit
facilities
and
equity
and
debt
issues.
Our
primary
uses
of
capital
include
the
payment
of
distributions,
costs
of
attracting
and
retaining
tenants,
recurring
property
maintenance,
major
property
improvements,
debt
interest
payments
and
property
acquisitions.
We
expect
to
meet
all
of
our
ongoing
obligations
through
current
cash
and
cash
equivalents,
cash
flows
from
operations,
debt
refinancings
and,
as
growth
requires
and
when
appropriate,
new
equity
or
debt
issues.
As
at
December
31,
2013,
we
had
$106.3
million
of
cash
on
hand.
After
reserving
for
current
payables
and
operating
requirements,
approximately
$80
million
is
available
for
general
purposes.
Our
debt-‐to-‐book
value
at
December
31,
2013
is
56%.
Excluding
our
convertible
debentures,
our
debt-‐to-‐book
value
is
48%.
Dundee
International
2013
Annual
Report
|
14
Financing
activities
We
finance
our
ownership
of
assets
using
equity
as
well
as
conventional
mortgage
financing,
term
debt,
floating
rate
credit
facilities
and
convertible
debentures.
Equity
issues
On
March
5,
2013,
we
completed
a
public
offering
of
23,230,000
Units,
including
an
over-‐allotment
option,
at
a
price
of
$10.90
per
unit.
On
June
6,
2013,
we
completed
a
public
offering
of
11,700,000
Units
at
a
price
of
$10.70
per
unit.
On
June
24,
2013,
the
Trust
issued
an
additional
1,445,000
Units
at
a
price
of
$10.70
per
unit
pursuant
to
the
exercise
by
the
underwriters
of
a
portion
of
their
over-‐allotment
option.
New
debt
During
the
year
ended
December
31,
2013,
we
obtained
the
following
new
mortgages:
Property
Mortgage
($000s)
Mortgage
(€000s)
Face
rate
Date
of
funding
Date
of
maturity
Hammer
Strasse
30–34,
Hamburg
$
33,797
€
Neue
Mainzer
Strasse
28
(K26),
Frankfurt
Dillwächterstrasse
5
and
Tübinger
Strasse
11,
Munich
Schlossstrasse
8
and
ABC
Bogen
Moskauer
Strasse
25,
27
and
Cäcilienkloster
2,
6,
8,
10
Werfthaus
and
Reichskanzler-‐Müller-‐Strasse
21,
23,
25
Z-‐UP,
Bertoldstrasse
48,
50,
Lörracher
Strasse
16,
Westendstrasse
160,
162
and
Parcside
Löwenkontor,
Berlin
Marsstrasse
20–22,
Munich
Leitzstrasse
45
(Oasis
lll),
Stuttgart
Feldmühleplatz
1
+
15,
Düsseldorf
Total
50,725
14,693
80,373
98,597
68,455
95,109
36,611
53,409
26,502
67,546
24,900
37,700
11,000
60,200
73,850
51,400
71,500
27,600
38,000
18,800
46,500
2.41%
2.92%
2.68%
2.32%
2.08%
3.32%
2.63%
2.37%
2.69%
2.73%
2.32%
January
31,
2013
January
31,
2018
February
15,
2013
December
31,
2022
March
2,
2013
February
29,
2020
March
12,
2013
March
12,
2018
March
12,
2013
March
7,
2018
March
14,
2013
March
14,
2023
March
13,
2013
March
31,
2021
April
30,
2013
March
29,
2018
August
26,
2013
June
30,
2020
November
15,
2013
October
31,
2018
December
23,
2013
November
26,
2018
$
625,817
€
461,450
On
November
15,
2013,
the
Trust
drew
down
a
mortgage
with
a
principal
balance
of
€18.8
million
($26.5
million)
at
a
fixed
interest
rate
of
2.73%
per
annum
for
a
term
of
five
years
in
connection
with
its
acquisition
of
Oasis
III
in
Stuttgart.
The
Trust
used
cash
on
hand
at
September
30,
2013
to
close
the
acquisition.
On
November
29,
2013,
the
Trust
finalized
the
terms
of
a
mortgage
agreement
with
a
principal
balance
of
€46.5
million
($67.5
million)
at
a
fixed
interest
rate
of
2.32%
per
annum
for
a
term
of
five
years
in
connection
with
its
acquisition
of
Feldmühleplatz
1
+
15
in
Düsseldorf.
Debt
Debt
strategy
Our
debt
strategy
is
to
obtain
secured
mortgage
financing
on
a
fixed
rate
basis,
with
a
term
to
maturity
that
is
appropriate
in
relation
to
the
lease
maturity
profile
of
our
portfolio.
Our
preference
is
to
have
staggered
debt
maturities
to
mitigate
interest
rate
risk
and
limit
refinancing
exposure
in
any
particular
period.
We
also
intend
to
enter
into
long-‐term
loans
at
fixed
rates
when
borrowing
conditions
are
favourable.
This
strategy
will
be
complemented
with
the
use
of
unsecured
convertible
debentures
and
floating
rate
credit
facilities.
We
operate
within
a
debt-‐to-‐book
value
range
of
50%
to
60%
and
target
55%
(net
of
cash).
Dundee
International
2013
Annual
Report
|
15
The
key
performance
indicators
in
the
management
of
our
debt
are:
December
31,
December
31,
2013
2012
Financing
activities
Weighted
average
interest
rate(1)
Level
of
debt
(debt-‐to-‐book
value,
net
of
cash,
net
of
convertible
debentures)(2)
Level
of
debt
(debt-‐to-‐book
value,
net
of
cash)(2)
Interest
coverage
ratio(2)
Debt-‐to-‐EBITDFV
(years)(2)(3)
Proportion
of
total
debt
due
in
current
year
Debt
–
average
term
to
maturity
(years)
Variable
rate
debt
as
percentage
of
total
debt
(1) Average
interest
rate
(face
rate)
is
calculated
as
the
weighted
average
interest
rate
of
all
interest
bearing
debt.
(2) Level
of
debt,
interest
coverage
ratio
and
debt-‐to-‐EBITDFV
are
non-‐GAAP
measures.
Calculations
for
each
reconciled
to
IFRS
balances
can
be
found
3.37%
48%
54%
3.40
times
8.7
1.4%
4.6
5%
3.98%
33%
45%
3.03
times
8.5
0.4%
4.4
11%
commencing
on
page
29.
(3) Calculated
as
total
debt
divided
by
adjusted
EBITDFV.
The
higher
debt-‐to-‐book
value
ratio
at
December
31,
2013
reflects
the
increase
in
mortgages
in
2013
related
to
acquisitions,
as
well
as
a
lower
level
of
cash
on
hand
compared
to
December
31,
2012.
We
currently
use
cash
flow
performance
and
debt
level
indicators
to
assess
our
ability
to
meet
our
financing
obligations.
Our
current
interest
coverage
ratio
for
the
year
is
3.4
times
and
reflects
our
ability
to
cover
interest
expense
requirements.
We
also
monitor
our
debt-‐to-‐EBITDFV
ratio
to
gauge
our
ability
to
pay
off
existing
debt.
Our
current
debt-‐to-‐EBITDFV
ratio
is
8.7
years
and
reflects
the
approximate
amount
of
time
to
pay
off
all
debt.
Term
loan
credit
facility(2)
Mortgage
debt(2)
Debentures(2)
Total
$
$
Variable
64,368
-‐
-‐
64,368
$
$
Fixed
384,604
(1)
$
825,014
150,326
1,359,944
December
31,
2013
Total
448,972
825,014
150,326
1,424,312
$
$
$
Variable
82,512
-‐
-‐
82,512
$
$
Fixed
344,028
(1)
$
151,862
148,428
644,318
December
31,
2012
Total
426,540
151,862
148,428
726,830
$
Percentage
100%
(1)
As
at
December
31,
2013,
86%
of
the
term
loan
credit
facility
is
subject
to
an
interest
rate
swap
in
place
until
August
3,
2016
pursuant
to
the
term
loan
credit
100%
95%
89%
11%
5%
facility
agreement
and
has
been
presented
as
fixed
rate
debt.
(2)
Balance
shown
is
net
of
deferred
financing
costs
and
mark-‐to-‐market
adjustments.
Amounts
recorded
as
at
December
31,
2013
for
the
Debentures
are
net
of
$5.8
million
of
premiums
allocated
to
their
conversion
features
on
issuance.
The
premiums
are
amortized
to
interest
expense
over
the
term
to
maturity
of
the
related
debt
using
the
effective
interest
rate
method.
Term
loan
credit
facility
Concurrent
with
the
closing
of
our
initial
public
offering,
we
obtained
a
term
loan
credit
facility
(the
“Facility”)
from
a
syndicate
of
German
and
French
banks
for
gross
proceeds
of
€328.5
million
($448.4
million).
During
the
year
ended
December
31,
2013,
we
repaid
$16.8
million
(€12.1
million),
consisting
of
$14.0
million
(€10.1
million)
in
connection
with
the
disposition
of
15
properties
and
a
lump
sum
repayment
of
$2.8
million
(€2.0
million)
in
August
2013.
As
at
December
31,
2013,
the
remaining
principal
balance
on
the
term
loan
credit
facility
was
$459.8
million
(€313.7
million),
of
which
$10.1
million
(€6.9
million)
has
been
allocated
to
assets
held
for
sale.
The
initial
term
of
the
Facility
is
five
years
with
a
two-‐year
renewal
option.
Variable
rate
interest
is
payable
quarterly
under
the
Facility
at
a
rate
equal
to
the
three-‐month
EURIBOR,
plus
a
margin
of
200
basis
points
and
agency
fees
of
10
basis
points.
Pursuant
to
the
requirements
of
the
Facility,
we
entered
into
an
interest
rate
swap
to
fix
80%
of
the
interest
payments
at
1.89%
plus
margin
and
agency
fees,
and
purchased
an
instrument
to
cap
10%
of
the
Facility,
such
that
the
interest
rate
does
not
exceed
5%
on
that
portion.
As
at
December
31,
2013,
as
a
result
of
the
REIT’s
commitment
to
dispose
of
six
properties
from
the
Initial
Properties
and
thereby
reclassifying
those
properties
to
assets
held
for
sale,
the
related
portions
of
the
Facility
secured
by
these
six
properties,
valued
at
$10.1
million
(€6.9
million),
were
also
reclassified
as
liabilities
related
to
assets
held
for
sale.
Dundee
International
2013
Annual
Report
|
16
As
at
December
31,
2013,
the
weighted
average
rate
of
the
Facility
was
4.09%.
Including
financing
costs,
the
effective
interest
rate
under
the
Facility
was
4.13%.
At
December
31,
2012,
the
weighted
average
rate
was
3.91%
and
the
effective
rate
was
3.98%.
The
Facility
requires
that
at
each
interest
rate
payment
date
the
debt
service
coverage
ratio
is
equal
to
or
above
145%
and
that
the
loan-‐to-‐value
ratio
does
not
exceed
59%
during
the
first
three
years
the
loan
is
outstanding
and
54%
during
the
final
two
years.
As
at
December
31,
2013,
we
were
in
compliance
with
these
covenants.
Under
the
terms
of
the
Facility,
we
are
required
to
pay
additional
interest
of
1%
per
annum
beginning
on
August
3,
2013
on
€100
million
plus
a
15%
prepayment
amount,
less
any
amounts
repaid.
Mandatory
repayments
of
between
110%
and
125%
(with
the
average
being
115%)
of
the
principal
allocated
to
a
particular
Initial
Property
are
required
for
any
Initial
Property
sold
or
refinanced
by
the
Trust.
Since
the
initial
public
offering,
the
Trust
has
repaid
$20.2
million
(€14.8
million)
in
principal
payments
including
prepayment
amounts
on
various
property
dispositions.
Opportunities
to
repay
the
balance
of
€100.2
million
will
come
from
maximizing
the
leverage
on
new
acquisitions
and
from
additional
dispositions
of
non-‐core
properties.
Revolving
credit
facility
On
October
9,
2013,
the
Trust
entered
into
an
agreement
with
a
Canadian
bank.
Under
the
agreement,
the
revolving
credit
facility
stands
at
€25
million.
The
interest
rate
on
Canadian
dollar
advances
is
prime
plus
200
basis
points
and/or
bankers’
acceptance
rates
plus
300
basis
points.
The
interest
rate
for
euro
advances
is
300
basis
points
over
the
three-‐month
EURIBOR
rate.
The
revolving
credit
facility
has
a
term
of
two
years.
Convertible
debentures
As
at
December
31,
2013,
the
total
principal
amount
of
Debentures
outstanding
was
$161
million,
convertible
into
an
aggregate
of
12,384,619
Units.
The
Debentures
bear
interest
at
5.5%
per
annum,
are
payable
semi-‐annually
on
July
31
and
January
31
each
year,
and
mature
on
July
31,
2018.
Each
$1,000
principal
amount
of
the
Debentures
is
convertible
at
any
time
by
the
holder
into
76.9231
Units,
representing
a
conversion
price
of
$13.00
per
unit.
On
or
after
August
31,
2014,
and
prior
to
August
31,
2016,
the
Debentures
may
be
redeemed
by
the
Trust,
in
whole
or
in
part,
at
a
price
equal
to
the
principal
amount
plus
accrued
and
unpaid
interest
on
not
more
than
60
days’
and
not
less
than
30
days’
prior
written
notice,
provided
the
weighted
average
trading
price
for
the
Units
for
the
20
consecutive
trading
days,
ending
on
the
fifth
trading
day
immediately
preceding
the
date
on
which
notice
of
redemption
is
given,
is
not
less
than
125%
of
the
conversion
price.
On
or
after
August
31,
2016,
and
prior
to
July
31,
2018,
the
maturity
date,
the
Debentures
may
be
redeemed
by
the
Trust
at
a
price
equal
to
the
principal
amount
plus
accrued
and
unpaid
interest.
The
conversion
feature
of
the
Debentures
is
remeasured
in
each
reporting
period
to
fair
value,
with
changes
in
fair
value
recorded
in
comprehensive
income.
During
the
three-‐
and
twelve-‐month
periods
ended
December
31,
2013,
the
fair
value
attributed
to
the
conversion
feature
increased
by
$0.4
million
and
decreased
by
$3.8
million,
respectively.
The
table
below
highlights
our
debt
maturity
profile:
€
Scheduled
principal
repayments
on
non-‐matured
debt
13,890
17,880
14,747
10,833
6,151
13,573
77,074
€
Total
13,890
32,216
309,027
72,840
344,381
214,226
986,580
€
€
2014
2015
2016
2017
2018
2019
and
thereafter
Total
€
Debt
maturities
-‐
14,336
294,280
62,007
338,230
200,653
909,506
€
Dundee
International
2013
Annual
Report
|
17
Equity
The
table
below
highlights
our
outstanding
equity:
Units
Units
December
31,
2013
Unitholders’
equity
December
31,
2012
Number
of
Units
109,698,977
$
Amount
1,034,005
Number
of
Units
72,232,494
$
Amount
596,078
Our
Declaration
of
Trust
authorizes
the
issuance
of
an
unlimited
number
of
two
classes
of
units:
Units
and
Special
Trust
Units.
The
Special
Trust
Units
may
only
be
issued
to
holders
of
securities
exchangeable
for
Units,
are
not
transferable
and
are
used
to
provide
holders
of
such
securities
with
voting
rights
with
respect
to
Dundee
International
REIT.
Each
Unit
and
Special
Trust
Unit
entitles
the
holder
thereof
to
one
vote
for
each
Unit
at
all
meetings
of
unitholders
of
the
Trust.
The
Trust
has
a
Deferred
Unit
Incentive
Plan
(“DUIP”)
that
provides
for
the
grant
of
deferred
trust
units
and
income
deferred
units
to
trustees,
officers,
employees,
affiliates
and
their
service
providers,
including
DAM,
our
asset
manager.
The
following
table
summarizes
the
changes
in
our
outstanding
equity:
Total
Units
outstanding
on
December
31,
2012
Units
issued
pursuant
to
public
offerings
Units
issued
pursuant
to
the
DUIP
Units
issued
pursuant
to
the
DRIP(1)
Total
units
outstanding
on
December
31,
2013
Units
issued
pursuant
to
the
DRIP
on
January
15,
2014
Total
units
outstanding
on
January
31,
2014
(1)
Distribution
Reinvestment
and
Unit
Purchase
Plan.
Units
72,232,494
36,375,000
17,632
1,073,851
109,698,977
151,411
109,850,388
On
March
5,
2013,
the
Trust
completed
a
public
offering
of
Units
pursuant
to
which
the
Trust
issued
23,230,000
Units
at
a
price
of
$10.90
per
unit
for
total
gross
proceeds
of
$253.2
million.
On
June
6,
2013,
the
Trust
completed
a
public
offering
of
11,700,000
Units
at
a
price
of
$10.70
per
unit.
On
June
24,
2013,
the
Trust
issued
an
additional
1,445,000
Units
at
a
price
of
$10.70
per
unit
pursuant
to
the
exercise
by
the
underwriters
of
a
portion
of
their
over-‐allotment
option.
Total
gross
proceeds
amounted
to
$140.7
million.
For
the
year
ended
December
31,
2013,
17,632
Units
were
issued
pursuant
to
the
Deferred
Unit
Incentive
Plan
(December
31,
2012
–
12,875
Units)
to
senior
management.
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.
Amounts
retained
in
excess
of
the
declared
distributions
are
used
to
fund
leasing
costs
and
capital
expenditure
requirements.
Given
that
working
capital
tends
to
fluctuate
over
time
and
should
not
affect
our
distribution
policy,
we
disregard
it
when
determining
our
distributions.
We
also
exclude
the
impact
of
leasing
costs,
which
fluctuate
with
lease
maturities,
renewal
terms
and
the
type
of
asset
being
leased.
We
evaluate
the
impact
of
leasing
activity
based
on
averages
for
our
portfolio
over
a
two-‐
to
three-‐year
time
frame.
We
exclude
the
impact
of
transaction
costs
expensed
on
business
combinations
as
these
are
considered
to
be
non-‐recurring.
In
order
to
manage
the
exposure
to
currency
risk
of
unitholders
and
holders
of
Debentures,
the
Trust
has
entered
into
foreign
exchange
forward
contracts.
For
the
quarter
ended
December
31,
2013,
distributions
declared
amounted
to
$21.9
million.
Of
this
amount,
$3.7
million
was
reinvested
in
additional
Units
pursuant
to
the
DRIP,
resulting
in
a
cash
payout
ratio
of
83.3%.
Distributions
declared
for
the
year
ended
December
31,
2013
were
$79.8
million.
Of
this
amount,
$10.6
million
was
reinvested
in
additional
Units
pursuant
to
the
DRIP,
resulting
in
a
cash
payout
ratio
of
86.7%.
Dundee
International
2013
Annual
Report
|
18
2013
distributions
Paid
in
cash
or
reinvested
in
Units
Payable
at
December
31,
2013
Total
distributions
2013
reinvestment
Reinvested
to
December
31,
2013
Reinvested
on
January
15,
2013
Total
distributions
reinvested
Distributions
paid
in
cash
Reinvestment
to
distribution
ratio
Cash
payout
ratio
Three
months
ended
December
31,
2013
Year
ended
December
31,
2013
Declared
amounts
4%
bonus
distribution
95
-‐
95
95
51
146
$
$
$
$
$
$
$
$
$
$
$
$
$
14,596
7,314
21,910
2,388
1,273
3,661
18,249
16.7%
83.3%
Total
14,691
7,314
22,005
2,483
1,324
3,807
$
$
$
$
$
Declared
amounts
4%
bonus
distribution
372
-‐
372
372
51
423
$
$
$
$
$
$
$
$
72,470
7,314
79,784
9,306
1,273
10,579
69,205
13.3%
86.7%
Total
72,842
7,314
80,156
9,678
1,324
11,002
We
currently
pay
monthly
distributions
to
unitholders
of
$0.06667
per
unit,
or
$0.80
per
unit
on
an
annual
basis.
At
December
31,
2013,
approximately
17.4%
of
our
total
Units
were
enrolled
in
the
DRIP.
Foreign
currency
contracts
At
December
31,
2013,
we
had
various
currency
forward
contracts
in
place
to
sell
euros
for
Canadian
dollars
for
the
next
30
months.
On
settlement
of
a
contract,
we
realize
a
gain
or
loss
on
the
difference
between
the
forward
rate
and
the
spot
rate.
We
also
mark
the
contracts
to
market
quarterly
and
recorded
an
unrealized
loss
of
$8.0
million
and
$16.0
million
for
the
three-‐
and
twelve-‐month
periods
ended
December
31,
2013,
respectively.
The
Trust
currently
has
foreign
exchange
forward
contracts
to
sell
€5.6
million
each
month
from
January
2014
to
June
2014,
€5.2
million
each
month
from
July
2014
to
May
2015,
€3.9
million
in
June
2015,
€2.4
million
each
month
from
July
2015
to
September
2015,
€2.1
million
each
month
from
October
2015
to
May
2016,
and
€1.8
million
in
June
2016,
at
an
average
exchange
rate
of
$1.334
per
euro.
Other
As
required
by
National
Policy
41-‐201,
“Income
Trusts
and
Other
Indirect
Offerings”,
the
following
table
outlines
the
differences
between
cash
flow
from
operating
activities
and
cash
distributions,
as
well
as
the
differences
between
net
income
and
cash
distributions,
in
accordance
with
the
guidelines.
Net
income
(loss)
Cash
flow
from
operating
activities
Distributions
paid
and
payable
Surplus
of
cash
flow
from
operating
activities
over
distributions
$
paid
and
payable
Shortfall
of
net
income
(loss)
over
distributions
paid
and
payable
Three
months
ended
December
31,
2012
(8,687)
16,712
12,953
2013
15,230
29,798
21,910
$
$
Years
ended
December
31,
2012
2013
10,916
22,765
52,320
85,228
46,064
79,784
$
7,888
(6,680)
3,759
(21,640)
5,444
(57,019)
6,256
(35,148)
Cash
flow
from
operations
exceeded
distributions
paid
and
payable
by
$5.4
million
for
the
year
ended
December
31,
2013,
and
distributions
paid
and
payable
exceeded
net
income
by
$57.0
million
for
the
same
period.
This
compares
to
a
surplus
of
$6.3
million
of
cash
flow
from
operations
over
distributions
paid
and
payable
and
a
shortfall
of
$35.1
million
of
net
income
over
distributions
paid
and
payable
for
the
respective
period
in
2012.
The
increase
in
cash
flow
from
operating
activities
in
2013,
both
for
the
quarter
and
the
year,
reflects
the
acquisitions
completed
in
2012
and
2013.
The
shortfall
of
net
income
for
each
period
reflects
fair
value
adjustments
to
financial
instruments
and
investment
properties.
These
adjustments
are
non-‐cash
items
and
are
not
considered
in
our
distribution
policy.
Dundee
International
2013
Annual
Report
|
19
Cash
flow
from
operating
activities
exceeded
distributions
paid
and
payable
for
the
three
months
ended
December
31,
2013
by
$7.9
million
and
distributions
paid
and
payable
exceeded
net
income
by
$6.7
million
for
the
same
period.
This
compares
to
a
surplus
of
$3.8
million
of
cash
flow
from
operations
over
distributions
paid
and
payable
for
the
three
months
ended
December
31,
2012
and
a
shortfall
of
$21.6
million
of
net
income
over
distributions
paid
and
payable
for
the
same
period
in
2012.
The
shortfall
in
net
income
for
each
period
reflects
fair
value
adjustments
to
financial
instruments
and
investment
properties.
These
non-‐cash
items
do
not
impact
cash
flows
and
are
not
considered
in
our
distribution
policy.
In
establishing
distribution
payments,
we
do
not
take
fluctuations
in
working
capital
into
consideration
and
we
use
a
normalized
amount
as
a
proxy
for
leasing
and
building
improvement
costs.
Asset
management
fee
On
August
3,
2011,
DAM
elected
to
receive
the
base
asset
management
fees
payable
on
the
Initial
Properties
acquired
on
August
3,
2011
by
way
of
deferred
trust
units
under
the
Asset
Management
Agreement
for
up
to
$3.5
million
per
year
for
the
next
five
years.
These
deferred
trust
units
vest
20%
annually,
commencing
on
the
fifth
anniversary
date
of
being
granted.
On
termination
of
the
Asset
Management
Agreement,
unvested
trust
units
will
vest
immediately.
During
the
three-‐
and
twelve-‐month
periods
ended
December
31,
2013,
asset
management
expenses
pertaining
to
the
Initial
Properties
were
$0.5
million
and
$2.1
million,
respectively.
A
total
of
83,665
and
373,160
deferred
units
were
granted
during
the
respective
periods
as
compensation
for
the
fees.
An
additional
34,031
deferred
units
were
granted
on
January
1,
2014
pertaining
to
the
asset
management
fee
for
the
month
of
December
2013.
As
at
January
1,
2014,
912,078
unvested
deferred
and
income
deferred
units
were
outstanding
with
respect
to
the
Asset
Management
Agreement.
The
asset
management
fees
were
recorded
based
on
the
fair
value
of
the
deferred
units
issued,
with
an
appropriate
discount
applied
to
reflect
the
restricted
period
of
exercise.
In
addition,
the
Trust
paid
an
asset
management
fee
of
$1.1
million
and
$3.3
million,
respectively,
for
the
three-‐
and
twelve-‐
month
periods
ended
December
31,
2013,
for
properties
acquired
since
the
acquisition
of
our
Initial
Properties.
It
further
paid
a
financing
fee
of
$0.3
million
and
$0.5
million
related
to
new
equity
offerings
in
each
of
the
three-‐
and
twelve-‐month
periods,
and
acquisition
fees
of
$0.9
million
and
$5.9
million
related
to
properties
acquired
during
the
three-‐
and
twelve-‐month
periods,
respectively.
Dundee
International
2013
Annual
Report
|
20
OUR
RESULTS
OF
OPERATIONS
Three
months
ended
December
31,
2012(1)
35,926
13,869
22,057
2013(1)
62,528
20,656
41,872
$
Years
ended
December
31,
2012(1)
138,661
53,222
85,439
2013(1)
220,220
75,367
144,853
$
$
$
Investment
properties
revenue
Investment
properties
operating
expenses
Net
rental
income
Other
income
and
expenses
Portfolio
management
General
and
administrative
Fair
value
adjustments
to
investment
properties
Depreciation
and
amortization
Loss
on
sale
of
investment
properties
Share
of
income
from
equity
accounted
investment
Interest
and
other
income
Interest
expense
Fair
value
adjustments
to
financial
instruments
Income
(loss)
before
income
taxes
Income
taxes
Current
income
taxes
(recovery)
Deferred
income
taxes
(recovery)
Provision
for
(recovery)
of
income
taxes
Net
income
(loss)
Foreign
currency
translation
adjustment
$
Comprehensive
income
(1)
Results
from
operations
were
converted
into
Canadian
dollars
from
euros
using
the
following
average
exchange
rates:
the
three-‐month
and
twelve-‐month
(3,173)
(12,226)
(59,223)
(88)
(1,142)
28
1,547
(38,506)
(11,450)
20,620
(409)
(3,332)
212
(16)
(550)
10
352
(11,288)
(9,460)
17,391
(1,019)
(1,638)
(16,870)
(7)
(258)
11
289
(6,100)
(6,736)
(10,271)
689
(2,834)
(2,145)
22,765
109,133
131,898
84
(1,668)
(1,584)
(8,687)
20,758
12,071
142
2,019
2,161
15,230
57,950
73,180
(4,201)
(6,579)
(23,349)
(53)
(320)
21
503
(27,379)
(15,214)
8,868
226
(2,274)
(2,048)
10,916
(4,388)
6,528
$
$
$
periods
ended
December
31,
2013
were
converted
at
$1.4296:€1
and
$1.3688:€1,
respectively;
for
2012,
the
three-‐month
and
twelve-‐month
periods
ended
December
31,
2012
were
converted
at
$1.2861:€1
and
$1.285:€1,
respectively.
Statement
of
comprehensive
income
results
Net
rental
income
Initial
Properties
Acquisition
Properties
Net
rental
income
$
$
Three
months
ended
December
31,
2012
19,262
2,795
22,057
2013
20,033
21,839
41,872
$
$
$
$
Years
ended
December
31,
2013
2012
78,646
79,126
6,793
65,727
85,439
144,853
$
$
For
the
three
months
ended
December
31,
2013,
net
rental
income
was
$41.9
million,
representing
an
increase
of
$19.8
million
compared
to
the
same
quarter
in
2012.
Excluding
the
$4.2
million
positive
impact
of
a
stronger
euro,
net
rental
income
increased
by
$15.6
million
compared
to
the
same
quarter
last
year,
of
which
$16.9
million
is
attributable
to
properties
acquired
since
October
2012,
partially
offset
by
a
$1.2
million
decrease
related
to
property
dispositions
pertaining
to
the
Initial
Properties.
For
the
year
ended
December
31,
2013,
net
rental
income
was
$144.9
million,
representing
an
increase
of
$59.4
million
compared
to
2012.
Excluding
the
$8.9
million
positive
impact
of
a
stronger
euro,
net
rental
income
increased
by
$50.5
million
compared
to
the
same
quarter
last
year,
of
which
$54.9
million
is
attributable
to
properties
acquired
since
January
2012,
partially
offset
by
a
$4.4
million
decrease
related
to
property
dispositions
pertaining
to
the
Initial
Properties.
The
table
below
summarizes
our
revenue
and
operating
expenses
in
euros:
Investment
properties
revenue
Investment
properties
operating
expenses
Net
rental
income
Three
months
ended
December
31,
2012
27,934
10,784
17,150
2013
43,738
€
14,449
29,289
€
€
€
€
€
Dundee
International
2013
Annual
Report
|
21
Years
ended
December
31,
2012
2013
107,907
160,885
€
41,418
66,489
105,824
€
55,061
Portfolio
management
Our
portfolio
management
team
comprises
the
employees
of
our
advisory
subsidiaries
in
Germany
and
Luxembourg
who
are
responsible
for
providing
asset
management
services
for
the
investment
properties,
including
asset
strategy
and
leasing
activities.
Portfolio
management
expense
was
$0.4
million
for
the
three-‐month
period
ended
December
31,
2013,
a
decrease
of
approximately
$0.6
million
compared
to
the
same
period
in
2012.
For
the
year
ended
December
31,
2013,
an
expense
of
$3.2
million
was
recorded,
representing
a
decrease
of
approximately
$1.0
million
compared
to
2012.
A
total
of
$1.1
million
and
$2.6
million
of
leasing
staff
costs
incurred
during
the
three-‐month
and
twelve-‐month
periods
ended
December
31,
2013,
respectively,
have
been
capitalized
as
initial
leasing
costs
of
the
respective
properties
to
be
consistent
with
our
accounting
policies
to
capitalize
internal
leasing
costs.
No
leasing
staff
costs
were
capitalized
during
the
three-‐month
and
twelve-‐month
periods
in
2012
as
the
REIT
mostly
engaged
external
brokers
for
new
leasing.
Excluding
the
impact
of
leasing
costs
capitalized
in
2013,
portfolio
management
expense
increased
by
$0.5
million
and
$1.6
million,
reflecting
increases
in
asset
management
and
leasing
staff
necessary
to
support
the
growth
of
our
business.
General
and
administrative
General
and
administrative
expenses
totalled
$3.3
million
and
$12.2
million
for
the
three
and
twelve
months
ended
December
31,
2013,
respectively,
representing
increases
of
$1.7
million
and
$5.6
million
over
the
same
periods
last
year.
The
increases
resulted
from
asset
management
fees
increasing
by
$0.9
million
and
$3.2
million
for
the
three
and
twelve
months
ended
December
31,
2013,
respectively,
and
higher
regulatory
and
corporate
compliance
costs
associated
with
the
new
acquisitions.
Fair
value
adjustment
to
investment
properties
For
the
three-‐month
period
ended
December
31,
2013,
a
gain
of
$0.2
million
was
recognized
compared
to
a
loss
of
$16.9
million
in
the
comparative
quarter
last
year.
For
the
year
ended
December
31,
2013,
a
loss
of
$59.2
million
was
recognized
compared
to
a
loss
of
$23.3
million
in
2012.
The
increase
in
2013
over
2012
is
primarily
due
to
the
write-‐off
of
transaction
costs
capitalized
on
completed
acquisitions.
The
following
table
summarizes
the
components
of
the
fair
value
adjustment
to
investment
properties
for
the
years
ended
December
31,
2013
and
2012:
Increase
(decrease)
in
fair
value
as
a
result
of
valuation
updates
Write-‐off
of
building
expenditures
capitalized
Write-‐off
of
leasing
expenditures
capitalized
Write-‐off
of
transaction
costs
capitalized
on
acquisition
Straight-‐line
rent,
amortization
of
lease
incentives
and
other
For
the
year
ended
December
31,
2013
14,436
$
(5,562)
(8,246)
(59,126)
(725)
(59,223)
$
For
the
year
ended
December
31,
2012
(8,365)
(2,391)
(1,011)
(11,582)
-‐
(23,349)
$
$
Dundee
International
2013
Annual
Report
|
22
Interest
expense
Interest
expense
was
$11.3
million
for
the
three-‐month
period
ended
December
31,
2013,
an
increase
of
$5.2
million
compared
to
the
same
quarter
last
year.
Excluding
the
unfavourable
exchange
rate
impact
of
$0.8
million,
interest
expense
increased
by
$4.3
million
as
a
result
of
new
mortgage
debt
placed
on
properties
we
acquired
in
2012
and
2013.
In
addition,
included
in
interest
is
increased
interest
expense
related
to
the
term
credit
facility
reflecting
the
additional
1%
interest
payable
on
$100
million
principal
effective
August
2013
offset
by
lower
floating
rate
interest.
Interest
expense
was
$38.5
million
for
the
year
ended
December
31,
2013,
an
increase
of
$11.1
million
compared
to
the
same
period
last
year.
Excluding
the
unfavourable
exchange
rate
impact
of
$1.8
million,
interest
expense
increased
by
$9.3
million,
of
which
$13.6
million
was
a
result
of
new
mortgage
debt
placed
on
properties
we
acquired
in
2012
and
2013.
Offsetting
this
was
a
decrease
in
interest
payable
on
Exchangeable
Notes
to
$nil
in
the
current
year,
compared
to
$2.6
million
in
the
prior
year.
In
addition,
interest
on
our
term
credit
facility
decreased
by
$2.3
million
as
the
underlying
three-‐month
EURIBOR
rates
dropped
to
an
average
of
0.210%
in
2013
from
0.762%
in
2012.
We
currently
have
interest
rate
swaps
in
place
that
fix
the
interest
rate
payable
on
€262.8
million
at
a
rate
of
1.89%.
The
REIT
does
not
apply
hedge
accounting
in
relation
to
these
swaps
and,
as
a
result,
their
impact
is
not
included
in
interest
expense
but
accounted
for
through
the
fair
value
adjustments
as
described
below.
During
the
quarter,
$1.6
million
of
swap
settlements
were
settled
compared
to
$1.7
million
in
the
same
quarter
last
year,
reflecting
the
reduction
in
the
underlying
interest
rates.
During
the
year
ended
December
31,
2013,
$6.2
million
of
interest
swap
settlements
were
settled
compared
to
$4.3
million
in
the
prior
year,
reflecting
the
reduction
in
the
underlying
interest
rates.
Including
the
swaps
and
the
additional
1%
on
the
Facility,
the
actual
weighted
average
interest
rate
on
the
Facility
as
at
December
31,
2013
is
4.09%.
On
an
effective
interest
rate
basis,
the
rate
is
4.13%.
Any
adjustments
arising
from
the
interest
rate
swaps
are
reflected
in
the
fair
value
adjustments
to
financial
instruments
and
not
in
interest
expense.
Fair
value
adjustment
to
financial
instruments
For
the
three
months
ended
December
31,
2013,
we
incurred
an
unrealized
loss
in
the
fair
value
of
financial
instruments
of
$9.5
million
compared
to
a
loss
of
$6.7
million
in
the
comparative
period.
The
fair
value
adjustments
in
the
quarter
mainly
comprise
the
following
components:
• a
$1.1
million
loss
recognized
on
the
fair
value
change
in
the
interest
rate
swaps
and
cap
as
a
result
of
the
settlement
of
one
contract
in
the
quarter
for
$1.6
million
and
a
decrease
in
the
forward
price
of
interest
rates.
A
$2.0
million
loss
was
recognized
in
the
comparative
quarter
last
year
due
to
a
decrease
in
the
forward
price
of
interest
rates;
• a
$0.4
million
fair
value
loss
recognized
on
the
conversion
feature
of
the
convertible
debentures
mainly
reflecting
an
increase
in
the
market
price
of
our
Units,
compared
to
a
loss
of
$0.7
million
in
the
same
period
in
2012;
• an
unrealized
loss
of
$8.0
million
was
recognized
related
to
our
foreign
currency
forward
contracts
due
to
an
appreciation
of
the
euro
compared
to
the
Canadian
dollar,
versus
a
$4.0
million
unrealized
loss
during
the
comparative
quarter
due
to
an
appreciation
of
the
euro
compared
to
the
Canadian
dollar;
and
• a
$0.1
million
loss
was
recognized
related
to
our
DUIP
mainly
reflecting
an
increase
in
the
market
price
of
our
Units,
compared
to
a
loss
of
$0.1
million
in
the
same
period
in
2012.
For
the
year
ended
December
31,
2013,
we
incurred
an
unrealized
loss
in
the
fair
value
of
financial
instruments
of
$11.5
million
compared
to
an
unrealized
loss
of
$15.2
million
in
2012.
The
fair
value
adjustments
in
the
year
mainly
comprise
the
following
components:
• a
$0.2
million
gain
recognized
on
the
fair
value
change
in
the
interest
rate
swaps
and
cap
as
a
result
of
the
settlement
of
four
contracts
in
the
period
for
$6.2
million
and
an
increase
in
the
forward
price
of
interest
rates.
A
$15.5
million
loss
was
recognized
in
the
prior
year
due
to
a
decrease
in
the
forward
price
of
interest
rates;
• a
$3.8
million
fair
value
gain
recognized
on
the
conversion
feature
of
the
convertible
debentures
mainly
reflecting
a
decline
in
the
market
price
of
our
Units,
compared
to
a
gain
of
$2.4
million
in
2012;
• an
unrealized
loss
of
$16.0
million
was
recognized
related
to
our
foreign
currency
forward
contracts
due
to
an
appreciation
of
the
euro
compared
to
the
Canadian
dollar,
versus
a
$0.5
million
unrealized
gain
during
the
comparative
period
due
to
a
depreciation
of
the
euro
compared
to
the
Canadian
dollar;
Dundee
International
2013
Annual
Report
|
23
• a
$0.6
million
gain
was
recognized
related
to
our
DUIP
mainly
reflecting
a
decrease
in
the
market
price
of
our
Units,
compared
to
a
loss
of
$0.3
million
in
the
same
period
in
2012
reflecting
an
increase
in
the
market
price
of
our
Units;
and
• a
$2.3
million
loss
in
the
prior
year
on
the
fair
value
adjustment
on
the
Exchangeable
Notes,
which
were
fully
settled
in
September
2012.
Income
taxes
We
recognized
a
current
income
tax
expense
of
$0.1
million
and
$0.7
million,
respectively,
for
the
three-‐
and
twelve-‐month
periods
ended
December
31,
2013,
compared
to
current
income
tax
expenses
of
$0.1
million
and
$0.2
million,
respectively,
for
the
comparative
periods
in
2012.
The
increase
in
2013
is
mainly
a
result
of
current
income
taxes
related
to
new
acquisitions.
We
also
recognized
a
deferred
income
tax
expense
of
$2.0
million
and
a
deferred
income
tax
recovery
of
$2.8
million,
respectively,
for
the
three-‐
and
twelve-‐month
periods
ended
December
31,
2013,
compared
to
deferred
income
tax
recoveries
of
$1.7
million
and
$2.3
million,
respectively,
for
the
comparative
periods
in
2012.
The
differences
are
mainly
a
result
of
the
deferred
income
tax
impact
associated
with
the
loss
carry-‐forwards,
fair
value
adjustments
related
to
investment
properties
net
of
tax
depreciation,
and
fair
value
changes
related
to
financial
instruments.
Impact
of
foreign
exchange
Exchange
rate
fluctuations
between
the
Canadian
dollar
and
the
euro
impact
the
Trust’s
reported
revenues,
expenses,
income,
cash
flows,
assets
and
liabilities.
The
table
below
summarizes
changes
in
the
exchange
rates.
Average
exchange
rate
(Cdn
dollars
to
one
euro)
Exchange
rate
at
period-‐end
(Cdn
dollars
to
one
euro)
Three
months
ended
December
31,
Change
2012
2013
2013
Year
ended
December
31,
Change
2012
1.430
1.286
11.2%
1.369
1.285
6.5%
1.466
1.312
11.7%
1.466
1.312
11.7%
Comprehensive
income
was
impacted
by
a
foreign
currency
translation
gain
of
$58.0
million
and
$109.1
million,
respectively,
for
the
three-‐
and
twelve-‐month
periods
ended
December
31,
2013.
The
exchange
rates
increased
from
$1.3118:€1
as
at
December
31,
2012
to
$1.4655:€1
as
at
December
31,
2013.
The
quarterly
results
of
our
euro-‐denominated
operations
included
in
net
income
were
translated
at
an
average
exchange
rate
of
$1.4296:€1
compared
to
$1.2861:€1
in
the
same
quarter
last
year.
For
the
year
ended
December
31,
2013,
results
were
translated
at
an
average
exchange
rate
of
$1.3688:€1
compared
to
$1.2850:€1
in
the
prior
year.
Dundee
International
2013
Annual
Report
|
24
Funds
from
operations
and
adjusted
funds
from
operations
Net
income
Add
(deduct):
Depreciation
of
fixtures
and
computer
equipment
Share
of
net
losses
from
equity
accounted
investments
Amortization
of
lease
incentives
Interest
expense
on
Exchangeable
Notes
Loss
on
sale
of
investment
property
Tax
on
gains
on
sale
of
investment
property
Deferred
income
taxes
Term
debt
swap
settlement
Gain
on
settlement
of
foreign
currency
contracts
Fair
value
adjustments
to
investment
properties
Fair
value
adjustments
to
financial
instruments
FFO
Add
(deduct):
Amortization
of
financing
costs
Accretion
of
debenture
conversion
feature
Amortization
of
fair
value
adjustment
of
assumed
debt
Deferred
unit
compensation
expense
Deferred
asset
management
fees
Straight-‐line
rent
Deduct:
Normalized
leasing
costs
and
tenant
incentives
Normalized
non-‐recoverable
recurring
capital
expenditures
AFFO
$
$
$
$
Three
months
ended
December
31,
2012
(8,687)
2013
15,230
$
Years
ended
December
31,
2013
2012
10,916
22,765
$
$
-‐
3
259
-‐
550
(33)
2,019
(1,585)
(1,456)
(212)
9,460
24,235
794
260
(92)
313
539
(440)
25,609
$
$
(1,884)
(1,466)
22,259
$
9
-‐
9
-‐
258
-‐
(1,668)
(1,660)
481
16,870
6,736
12,348
366
240
(26)
138
502
(56)
13,512
(1,025)
(600)
11,887
-‐
3
616
-‐
1,142
62
(2,834)
(6,179)
(1,826)
59,223
11,450
84,422
2,651
1,008
(402)
1,313
2,113
(1,510)
89,595
$
$
$
$
(6,518)
(5,070)
78,007
$
$
69
-‐
17
2,558
320
-‐
(2,274)
(4,255)
2,406
23,349
15,214
48,320
1,183
930
(206)
628
1,907
(98)
52,664
(4,100)
(2,400)
46,164
Funds
from
operations
and
adjusted
funds
from
operations
per
unit
amounts
The
basic
weighted
average
number
of
Units
outstanding
used
in
the
FFO
and
AFFO
calculations
includes
all
Units.
For
the
three-‐
and
twelve-‐month
periods
ended
December
31,
2012,
the
outstanding
Units
also
include
the
aggregate
number
of
Units
issuable
upon
the
exchange
of
Exchangeable
Notes.
All
Exchangeable
Notes
were
exchanged
in
2012.
The
diluted
weighted
average
number
of
Units
assumes
the
conversion
of
the
Debentures
and
incremental
unvested
deferred
trust
units
related
to
the
Deferred
Unit
Incentive
Plan
represented
by
the
potential
Units
that
would
have
to
be
purchased
in
the
open
market
to
fund
the
unvested
obligation.
The
weighted
average
number
of
Units
outstanding
for
basic
and
diluted
FFO
and
AFFO
calculations
for
the
three
and
twelve
months
ended
December
31,
2013
are
noted
in
the
table
below.
Diluted
FFO
and
AFFO
includes
interest
and
amortization
adjustments
related
to
the
Debentures
of
$2.7
million
and
$10.8
million
for
the
three
and
twelve
months
ended
December
31,
2013,
respectively.
Weighted
average
Units
outstanding
for
basic
per
unit
amounts
Weighted
average
Units
outstanding
for
diluted
per
unit
amounts
Three
months
ended
December
31,
2012
64,064,093
77,017,591
2013
109,482,435
123,028,441
Years
ended
December
31,
2012
2013
57,379,400
99,335,779
70,201,374
112,691,725
Over
the
course
of
the
quarter,
the
REIT
had
approximately
$79.4
million
on
average
of
excess
undeployed
cash
available
for
acquisitions.
Over
the
course
of
the
year,
the
REIT
had
approximately
$91.1
million
of
cash
available
for
acquisitions.
We
estimate
that
these
funds,
if
invested,
would
generate
a
return
on
equity
of
approximately
10.0%,
which
is
consistent
with
historic
returns
for
acquired
investment
properties,
and
would
have
contributed
$2.0
million
for
the
quarter
and
$9.1
million
for
the
year
ended
December
31,
2013,
respectively,
to
FFO
and
AFFO.
Dundee
International
2013
Annual
Report
|
25
Funds
from
operations
Management
believes
FFO
is
an
important
measure
of
our
operating
performance.
This
non-‐IFRS
measurement
is
a
commonly
used
measure
of
performance
of
real
estate
operations;
however,
it
does
not
represent
net
income
or
cash
flow
from
operating
activities
as
defined
by
IFRS
and
is
not
necessarily
indicative
of
cash
available
to
fund
Dundee
International
REIT’s
needs.
FFO
FFO
per
unit
–
basic
FFO
per
unit
–
diluted
Excluding
the
impact
of
undeployed
cash:
FFO
per
unit
–
basic
FFO
per
unit
–
diluted
$
$
$
$
$
Three
months
ended
December
31,
2012
12,348
0.19
0.19
2013
24,235
0.22
0.22
$
$
$
Years
ended
December
31,
2013
2012
48,320
84,422
0.84
0.85
0.84
0.84
$
$
$
$
$
$
0.24
0.24
$
$
0.24
0.24
$
$
0.94
0.93
$
$
0.98
0.95
Total
FFO
for
the
quarter
was
$24.2
million,
an
increase
of
$11.9
million
or
96.3%
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
$84.4
million,
an
increase
of
$36.1
million
or
74.7%
over
the
prior
year),
reflecting
the
impact
of
acquisitions
completed
in
2012
and
2013.
FFO
on
a
per
unit
basis
increased
to
$0.22
per
unit
from
$0.19
per
unit
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
an
increase
from
$0.84
per
unit
to
$0.85
per
unit
over
the
prior
year).
Diluted
FFO
on
a
per
unit
basis
increased
to
$0.22
per
unit
from
$0.19
per
unit
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
remained
consistent
with
the
prior
year
at
$0.84
per
unit).
Assuming
this
excess
cash
had
been
invested,
diluted
FFO
per
unit
would
have
been
$0.24
per
unit
for
the
quarter
and
$0.93
per
unit
for
the
year.
Adjusted
funds
from
operations
AFFO
is
an
important
measure
of
our
economic
performance
and
is
indicative
of
our
ability
to
pay
distributions.
This
non-‐IFRS
measurement
is
commonly
used
for
assessing
real
estate
performance;
however,
it
does
not
represent
cash
flow
from
operating
activities
as
defined
by
IFRS
and
is
not
necessarily
indicative
of
cash
available
to
fund
Dundee
International
REIT’s
needs.
AFFO
AFFO
per
unit
–
basic
Excluding
the
impact
of
undeployed
cash:
AFFO
per
unit
–
basic
$
$
$
Three
months
ended
December
31,
2012
11,887
2013
22,259
$
$
0.20
$
$
0.19
Years
ended
December
31,
2013
2012
46,164
78,007
$
$
0.79
0.80
0.22
$
0.24
$
0.88
$
0.94
Total
AFFO
for
the
quarter
was
$22.3
million,
an
increase
of
$10.4
million
or
87.3%
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
$78.0
million,
an
increase
of
$31.8
million
or
69.0%
over
the
prior
year),
reflecting
the
impact
of
acquisitions
completed
in
2012
and
2013.
AFFO
on
a
per
unit
basis
increased
to
$0.20
per
unit
from
$0.19
per
unit
(year
ended
December
30,
2013
–
a
decrease
from
$0.80
per
unit
to
$0.79
per
unit
over
the
prior
year).
Assuming
this
excess
cash
had
been
invested,
AFFO
per
unit
would
have
been
$0.22
per
unit
for
the
quarter
and
$0.88
per
unit
for
the
year.
Our
calculation
of
AFFO
includes
an
estimated
amount
of
normalized
non-‐recoverable
capital
expenditures,
as
well
as
initial
direct
leasing
costs
and
tenant
incentives
that
we
expect
to
incur
based
on
our
current
portfolio
and
expected
average
leasing
activity.
Our
estimates
of
initial
direct
leasing
costs
and
lease
incentives
are
based
on
the
average
of
our
expected
leasing
activity
over
the
next
two
to
three
years
multiplied
by
the
average
cost
per
square
foot
that
we
expect
to
incur.
Our
estimates
of
normalized
non-‐recoverable
capital
expenditures
are
based
on
our
expected
average
expenditures
for
our
current
property
portfolio.
This
estimate
will
differ
from
actual
experience
due
to
the
timing
of
expenditures
and
any
growth
in
our
business
resulting
from
property
acquisitions.
Dundee
International
2013
Annual
Report
|
26
FFO
and
AFFO
are
not
defined
by
IFRS
and
therefore
may
not
be
comparable
to
similar
measures
presented
by
other
real
estate
investment
trusts.
In
compliance
with
the
Canadian
Securities
Administrators
Staff
Notice
52-‐306
(Revised),
“Non-‐GAAP
Financial
Measures”,
the
table
below
reconciles
AFFO
to
cash
generated
from
operating
activities.
Cash
generated
from
operating
activities
Add
(deduct):
Change
in
non-‐cash
working
capital
Share
of
general
and
administrative
expenses
from
equity
accounted
investments
Unrealized
loss
on
settlement
of
foreign
exchange
contracts
Tax
on
gains
on
sale
of
investment
property
Investment
in
lease
incentives
and
initial
direct
leasing
costs
Normalized
leasing
costs
and
tenant
incentives
Normalized
non-‐recoverable
recurring
capital
expenditures
AFFO
$
$
Three
months
ended
December
31,
2012
16,712
2013
29,798
$
Years
ended
December
31,
2012
2013
52,320
85,228
$
$
(6,704)
(3,488)
(2,568)
(287)
(3)
(519)
(33)
3,070
(1,884)
(1,466)
22,259
$
13
(248)
-‐
523
(1,025)
(600)
11,887
$
(57)
(1,316)
62
8,246
(6,518)
(5,070)
78,007
$
37
(417)
-‐
1,011
(4,100)
(2,400)
46,164
SELECTED
ANNUAL
INFORMATION
The
following
table
provides
selected
information
for
the
past
three
years:
Revenues
Net
income
(loss)
Total
assets
Debt
Distributions
declared
REIT
Units
Exchangeable
Notes
For
the
year
ended
December
31,
2013
220,220
$
22,765
2,558,674
1,424,312
$
80,173
$
109,698,977
-‐
For
the
year
ended
December
31,
2012
138,661
$
10,916
1,400,269
726,830
$
43,568
$
72,232,494
-‐
For
the
period
August
3,
2011
to
December
31,
2011
54,274
(23,201)
1,039,340
579,006
14,441
43,872,316
8,000,000
$
$
$
Dundee
International
2013
Annual
Report
|
27
QUARTERLY
INFORMATION
The
following
tables
show
quarterly
information
since
January
1,
2012:
REVENUES
Investment
properties
revenue
Investment
properties
operating
expenses
NET
RENTAL
INCOME
OTHER
INCOME
AND
EXPENSES
Portfolio
management
General
and
administrative
Fair
value
adjustments
to
investment
properties
Amortization
and
depreciation
Loss
on
sale
of
investment
property
Share
of
net
losses
from
equity
accounted
investments
Acquisition
related
gain,
net
Interest
and
other
income
Interest
expense
Fair
value
adjustments
to
financial
instruments
Income
(loss)
before
taxes
Current
income
taxes
Deferred
income
taxes
NET
INCOME
(LOSS)
Add
(deduct):
Depreciation
of
property
and
equipment
Share
of
net
losses
from
equity
accounted
investments
Amortization
of
lease
incentives
Interest
on
Exchangeable
Notes
Acquisition
related
gain,
net
Loss
on
sale
of
investment
property
Tax
on
gains
on
sale
of
investment
property
Deferred
income
taxes
Term
debt
swap
settlement
Deferred
gain/loss
on
settlement
of
Forex
contracts
Fair
value
adjustments
to
investment
properties
Fair
value
adjustments
to
financial
instruments
FFO
FFO
per
unit
–
basic
FFO
per
unit
–
diluted
Funds
from
operations
Add
(deduct):
Amortization
of
financing
costs
Accretion
of
debenture
conversion
feature
Amortization
of
FV
adjustment
of
debt
Deferred
compensation
expense
Deferred
asset
management
expense
Straight-‐line
rent
Deduct:
Normalized
leasing
costs
and
tenant
incentives
Normalized
non-‐recoverable
recurring
capital
expenditures
AFFO
AFFO
per
unit
–
basic
AFFO
per
unit
–
diluted
Weighted
average
number
of
Units:
Basic
Diluted
Quarterly
average
exchange
rate
($:€1)
Q4
2013
Q3
2013
Q2
2013
Q1
2013
Q4
2012
Q3
2012
Q2
2012
Q1
2012
$
62,528
$
20,656
41,872
56,915
$
17,436
39,479
54,413
$
18,222
36,191
46,364
$
19,053
27,311
35,926
$
13,869
22,057
33,765
$
12,024
21,741
34,896
$
13,992
20,904
(409)
(3,332)
212
(16)
(550)
10
0
352
(11,288)
(9,460)
17,391
142
2,019
15,230
$
(1,006)
(3,399)
(4,487)
(33)
(79)
(2)
0
351
(10,441)
(1,808)
18,575
(100)
983
17,692
$
(882)
(3,045)
(8,726)
(24)
(252)
13
0
446
(9,700)
(4,570)
9,451
316
128
9,007
$
(876)
(2,450)
(46,222)
(15)
(261)
7
0
398
(7,077)
4,388
(24,797)
331
(5,964)
(19,164)
$
(1,019)
(1,638)
(16,870)
(7)
(258)
11
0
289
(6,100)
(6,736)
(10,271)
84
(1,668)
(8,687)
$
(1,096)
(1,856)
(2,574)
(35)
(62)
(13)
0
59
(6,531)
(5,950)
3,683
77
(57)
3,663
$
(1,051)
(1,598)
(3,010)
(11)
0
12
0
63
(6,629)
130
8,810
29
(334)
9,115
$
$
34,074
13,337
20,737
(1,035)
(1,487)
(895)
0
0
11
0
92
(8,119)
(2,658)
6,646
36
(215)
6,825
0
0
0
0
9
38
16
6
3
259
0
0
550
(33)
2,019
(1,585)
(1,456)
(212)
9,460
0
108
0
0
79
(126)
983
(1,574)
(456)
4,487
1,808
$
$
$
24,235
$
0.22
$
0.22
24,235
$
23,001
$
0.21
$
0.21
23,001
$
794
260
(92)
313
539
(440)
25,609
744
254
(88)
356
529
(268)
24,528
0
112
0
0
252
79
128
(1,533)
52
8,726
4,570
21,393
$
0.22
$
0.21
21,393
$
666
250
(84)
378
523
(623)
22,503
0
137
0
0
261
142
(5,964)
(1,487)
34
46,222
(4,388)
15,793
$
0.20
$
0.20
15,793
$
447
244
(138)
266
522
(179)
16,955
0
9
0
0
258
0
(1,668)
(1,660)
481
16,870
6,736
0
8
406
0
62
0
(57)
(1,155)
954
2,574
5,950
12,348
$
0.19
$
0.19
12,348
$
12,443
$
0.22
$
0.21
12,443
$
366
240
(26)
138
502
(56)
13,512
279
235
(76)
180
504
(78)
13,487
0
0
632
0
0
0
(334)
(1,038)
496
3,010
(130)
11,767
$
0.21
$
0.21
11,767
$
273
230
(78)
158
488
18
12,856
0
0
1,520
0
0
0
(215)
(402)
475
895
2,658
11,762
0.23
0.22
11,762
265
225
(26)
152
413
18
12,809
(1,884)
(1,776)
(1,629)
(1,229)
(1,025)
(1,025)
(1,025)
(1,025)
$
$
(1,466)
22,259
$
0.20
$
0.20
(1,381)
21,371
$
0.20
$
0.20
(1,267)
19,607
$
0.20
$
0.20
(956)
14,770
$
0.19
$
0.19
(600)
11,887
$
0.19
$
0.19
(600)
11,862
$
0.21
$
0.21
(600)
11,231
$
0.20
$
0.20
(600)
11,184
0.22
0.21
109,482,435
123,028,441
1.430
109,116,985
122,552,770
1.376
99,037,061
112,358,396
79,267,113
92,382,159
64,064,093
77,017,591
57,795,412
70,666,219
1.337
1.332
1.286
1.245
55,697,600
68,474,767
1.296
51,882,467
64,565,100
1.313
Dundee
International
2013
Annual
Report
|
28
NON-‐GAAP
MEASURES
The
following
additional
non-‐GAAP
measures
are
important
measures
used
by
management
in
evaluating
the
Trust’s
underlying
operating
performance
and
debt
management.
These
non-‐GAAP
measures
are
not
defined
by
IFRS,
do
not
have
a
standardized
meaning
and
may
not
be
comparable
with
similar
measures
presented
by
other
income
trusts.
Level
of
debt
(debt-‐to-‐gross
book
value)
Management
believes
this
non-‐GAAP
measurement
is
an
important
measure
in
the
management
of
our
debt
levels.
Level
of
debt
as
shown
below
is
determined
as
total
debt,
divided
by
total
assets.
$
Non-‐current
debt(1)
Current
debt
Total
debt
Unamortized
discount
component
of
convertible
debentures
Total
adjusted
debt
Less
cash
Total
adjusted
debt,
net
of
cash
Total
assets
Less
cash
Total
assets,
net
of
cash
Debt-‐to-‐gross
book
value
Debt-‐to-‐gross
book
value,
net
of
cash
Debt-‐to-‐gross
book
value,
net
of
cash,
net
of
convertible
debentures
(1)
Non-‐current
debt
includes
convertible
debentures
valued
at
$150,326
and
$148,428
at
December
31,
2013
and
2012,
respectively.
$
December
31,
2013
1,403,956
$
20,356
1,424,312
5,803
1,430,115
106,292
1,323,823
2,558,674
106,292
2,452,382
$
56%
54%
48%
December
31,
2012
724,119
2,711
726,830
6,810
733,640
181,619
552,021
1,400,269
181,619
1,218,650
52%
45%
33%
Interest
coverage
ratio
Management
believes
this
non-‐GAAP
measurement
is
an
important
measure
in
determining
our
ability
to
cover
interest
expense
based
on
our
operating
performance.
Interest
coverage
ratio
as
shown
below
is
calculated
as
net
rental
income
plus
interest
and
fee
income,
less
general
and
administrative
expenses
and
portfolio
management
expenses,
all
divided
by
interest
expense
on
total
debt.
Net
rental
income
Add:
Interest
and
other
income
Less:
General
and
administrative
expenses
Less:
Portfolio
management
expenses
Interest
expense
Less:
Interest
on
Exchangeable
Notes
Total
adjusted
interest
expense
Interest
coverage
ratio
$
December
31,
2013
144,853
$
1,547
12,226
3,173
131,001
38,506
-‐
38,506
3.40
December
31,
2012
85,439
503
6,579
4,201
75,162
27,379
2,558
24,821
3.03
Dundee
International
2013
Annual
Report
|
29
Debt-‐to-‐EBITDFV
Management
believes
this
non-‐GAAP
measurement
is
an
important
measure
in
determining
the
time
it
takes
the
Trust,
based
on
its
operating
performance,
to
repay
our
debt.
Debt-‐to-‐EBITDFV
as
shown
below
is
calculated
as
total
debt
divided
by
the
sum
of
net
income
for
the
quarter
adjusted
for
fair
value
adjustments
to
investment
properties
and
financial
instruments,
gain/loss
on
sale
of
investment
properties,
interest
expense,
depreciation
and
income
taxes.
A
further
adjustment
is
made
for
properties
acquired
during
the
quarter
to
reflect
net
rental
income
as
if
the
properties
were
held
for
the
full
quarter.
Non-‐current
debt
Current
debt
Total
debt
Net
income
(loss)
for
the
quarter
Fair
value
adjustments
to
investment
properties
Fair
value
adjustments
to
financial
instruments
Loss
on
sale
of
investment
property
Depreciation
and
amortization
Interest
expense
Provision
for
income
taxes
Adjusted
net
rental
income
of
properties
acquired
in
the
quarter
EBITDFV
EBITDFV
–
adjusted
for
foreign
exchange
Debt-‐to-‐EBITDFV
(three
months
ended)
Debt-‐to-‐EBITDFV
(years)
annualized
$
December
31,
2013
1,403,956
$
20,356
1,424,312
15,230
(212)
9,460
550
16
11,288
2,161
1,296
39,789
40,788
34.9
8.7
December
31,
2012
724,119
2,711
726,830
(8,687)
16,870
6,736
258
7
6,100
(1,584)
1,185
20,885
21,302
34.1
8.5
Dundee
International
2013
Annual
Report
|
30
SECTION
III
–
DISCLOSURE
CONTROLS
AND
PROCEDURES
AND
INTERNAL
CONTROLS
OVER
FINANCIAL
REPORTING
For
the
December
31,
2013
financial
year-‐end,
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
Dundee
International
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
Dundee
International
REIT
and
its
consolidated
subsidiary
entities,
within
the
required
time
periods.
Dundee
International
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
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles
(“GAAP”).
Using
the
framework
established
in
“Risk
Management
and
Governance:
Guidance
on
Control
(COCO
Framework)”,
published
by
The
Canadian
Institute
of
Chartered
Accountants,
the
Certifying
Officers,
together
with
other
members
of
management,
have
evaluated
the
design
and
operation
of
Dundee
International
REIT’s
internal
control
over
financial
reporting.
Based
on
that
evaluation,
the
Certifying
Officers
have
concluded
that
Dundee
International
REIT’s
internal
control
over
financial
reporting
was
effective
as
at
December
31,
2013.
There
were
no
changes
in
Dundee
International
REIT’s
internal
control
over
financial
reporting
during
the
financial
year
ended
December
31,
2013
that
have
materially
affected,
or
are
reasonably
likely
to
materially
affect,
Dundee
International
REIT’s
internal
control
over
financial
reporting.
SECTION
IV
–
RISKS
AND
OUR
STRATEGY
TO
MANAGE
We
are
exposed
to
various
risks
and
uncertainties,
many
of
which
are
beyond
our
control.
For
a
full
list
and
explanation
of
our
risks
and
uncertainties,
please
refer
to
our
2012
Annual
Report
or
our
Annual
Information
Form
dated
April
1,
2013,
filed
on
SEDAR
(www.sedar.com).
Real
estate
ownership
Real
estate
ownership
is
generally
subject
to
numerous
factors
and
risks,
including
changes
in
general
economic
conditions
(such
as
the
availability,
terms
and
cost
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),
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
for
operations
and
for
making
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,
which
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.
Dundee
International
2013
Annual
Report
|
31
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,
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.
The
majority
of
the
Deutsche
Post
leases
expire
in
2018.
Deutsche
Post
has
early
termination
rights
entitling
it
to
terminate
certain
leases
prior
to
their
expiry
upon
12
months’
prior
notice.
As
of
the
date
hereof,
these
termination
rights
pertain
to
approximately
21%
of
the
Trust’s
GLA
at
December
31,
2013.
Concentration
of
properties
and
tenants
Currently,
all
of
our
properties
are
located
in
Germany
and
as
a
result
are
impacted
by
economic
and
other
factors
specifically
affecting
the
real
estate
markets
in
Germany.
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
Germany
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.
We
derive
a
significant
portion
of
our
rental
income
from
Deutsche
Post.
Consequently,
these
revenues
are
dependent
on
the
ability
of
Deutsche
Post
to
meet
its
rent
obligations
and
our
ability
to
collect
rent
from
Deutsche
Post.
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;
the
market’s
perception
of
our
growth
potential;
our
current
and
expected
future
earnings;
our
cash
flow
and
cash
distributions;
cash
interest
payments;
and
the
market
price
of
our
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
for
our
operations.
A
high
level
of
debt
will:
reduce
the
amount
of
funds
available
for
the
payment
of
distributions
to
unitholders
and
interest
payments
on
our
Debentures;
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
then
outstanding
borrowings;
and
impair
our
ability
to
obtain
additional
financing
in
the
future
for
working
capital,
capital
expenditures,
acquisitions,
general
trust
or
other
purposes.
Dundee
International
2013
Annual
Report
|
32
Tax
matters
Although
we
have
been
structured
with
the
objective
of
maximizing
after-‐tax
distributions,
tax
charges
and
withholding
taxes
in
various
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
Germany.
As
a
result
of
legislation
passed
on
November
29,
2013,
certain
of
our
subsidiaries
are
subject
to
German
corporate
income
tax
on
their
net
rental
income
and
capital
gains
from
the
sale
of
properties.
Although
we
have
previously
structured
our
tax
affairs
on
the
assumption
that
those
subsidiaries
will
be
subject
to
German
corporate
income
tax
(with
a
view
to
minimizing,
to
the
extent
possible,
the
amount
of
taxable
income
from
operations
in
Germany),
there
is
no
certainty
that
we
will
not
pay
German
corporate
income
tax.
In
addition,
German
real
estate
transfer
tax
(“RETT”)
is
triggered
when
among
other
things
there
is
a
transfer
of
legal
title
of
properties
from
one
legal
person
to
another.
In
the
case
of
the
initial
reallocation
of
our
properties,
legal
title
was
not
transferred
and,
consequently,
no
RETT
should
be
payable
in
connection
therewith.
However,
if,
unexpectedly,
RETT
does
become
payable
as
a
result
of
the
reallocation
of
our
properties,
we
will
be
required
to
pay
50%
of
such
RETT.
Our
debt
financing
agreements
with
third
parties
and
affiliates
require
us
to
pay
principal
and
interest.
Several
rules
in
German
tax
laws
restrict
the
tax
deductibility
of
interest
expenses
for
corporate
income
and
municipal
trade
tax
purposes.
Such
rules
have
been
changed
considerably
on
several
occasions
in
the
recent
past.
As
a
result,
major
uncertainties
exist
as
to
the
interpretation
and
application
of
such
rules,
which
are
not
yet
clarified
by
the
tax
authorities
and
the
tax
courts.
Accordingly,
there
is
a
risk
of
additional
taxes
being
triggered
on
the
rental
income
and
capital
gains
in
the
event
the
tax
authorities
or
the
tax
courts
adopt
deviating
views
on
such
rules.
We
have
structured
our
affairs
to
ensure
that
none
of
the
Luxembourg
entities
through
which
we
hold
our
real
property
investment
in
Germany
(our
“FCPs”)
has
a
permanent
establishment
in
Germany,
which
is
relevant
for
determining
whether
they
would
also
be
liable
to
municipal
trade
tax.
If
it
is
determined
that
any
of
our
subsidiaries
does
have
a
permanent
establishment
in
one
or
more
German
municipalities,
the
overall
rate
of
German
income
tax
applicable
to
taxable
income
could
materially
increase.
Changes
in
law
We
are
subject
to
applicable
federal,
state,
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.
Foreign
exchange
rate
fluctuations
Substantially
all
of
our
investments
and
operations
will
be
conducted
in
currencies
other
than
Canadian
dollars;
however,
we
pay
distributions
to
unitholders
and
interest
payments
on
our
Debentures
in
Canadian
dollars.
We
also
raise
funds
primarily
in
Canada
from
the
sale
of
securities
in
Canadian
dollars
and
invest
such
funds
indirectly
through
our
subsidiaries
in
currencies
other
than
Canadian
dollars.
As
a
result,
fluctuations
in
such
foreign
currencies
against
the
Canadian
dollar
could
have
a
material
adverse
effect
on
our
financial
results,
which
will
be
denominated
and
reported
in
Canadian
dollars,
and
on
our
ability
to
pay
cash
distributions
to
unitholders
and
cash
interest
payments
on
our
Debentures.
We
have
implemented
active
hedging
programs
in
order
to
offset
the
risk
of
revenue
losses
and
to
provide
more
certainty
regarding
the
payment
of
distributions
to
unitholders
and
interest
payments
on
our
Debentures
if
the
Canadian
dollar
increases
in
value
compared
to
foreign
currencies.
However,
to
the
extent
that
we
fail
to
adequately
manage
these
risks,
including
if
any
such
hedging
arrangements
do
not
effectively
or
completely
hedge
changes
in
foreign
currency
rates,
our
financial
results,
and
our
ability
to
pay
distributions
to
unitholders
and
cash
interest
payments
on
our
Debentures,
may
be
negatively
impacted.
Hedging
transactions
involve
the
risk
that
counterparties,
which
are
generally
financial
institutions,
may
be
unable
to
satisfy
their
obligations.
If
any
counterparties
default
on
their
obligations
under
the
hedging
contracts
or
seek
bankruptcy
protection,
it
could
have
an
adverse
effect
on
our
ability
to
fund
planned
activities
and
could
result
in
a
larger
percentage
of
future
revenue
being
subject
to
currency
changes.
Dundee
International
2013
Annual
Report
|
33
Interest
rates
When
entering
into
financing
agreements
or
extending
such
agreements,
we
depend
on
our
ability
to
agree
on
terms
for
interest
payments
that
will
not
impair
our
desired
profit
and
on
amortization
schedules
that
do
not
restrict
our
ability
to
pay
distributions
on
our
Units
and
interest
payments
on
our
Debentures.
In
addition
to
existing
variable
rate
portions
of
our
financing
agreements,
we
may
enter
into
future
financing
agreements
with
variable
interest
rates.
An
increase
in
interest
rates
could
result
in
a
significant
increase
in
the
amount
paid
by
us
to
service
debt,
which
could
limit
our
ability
to
pay
distributions
to
unitholders
and
could
impact
the
market
price
of
the
Units
and/or
the
Debentures.
We
have
implemented
an
active
hedging
program
in
order
to
offset
the
risk
of
revenue
losses
and
to
provide
more
certainty
regarding
the
payment
of
distributions
to
unitholders
and
cash
interest
payments
under
the
Debentures
should
current
variable
interest
rates
increase.
However,
to
the
extent
that
we
fail
to
adequately
manage
these
risks,
including
if
any
such
hedging
arrangements
do
not
effectively
or
completely
hedge
increases
in
variable
interest
rates,
our
financial
results,
and
our
ability
to
pay
distributions
to
unitholders
and
cash
interest
payments
under
our
financing
arrangements,
the
Debentures
and
future
financings
may
be
negatively
affected.
Hedging
transactions
involve
inherent
risks.
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
significant
negative
effect
on
our
ability
to
sell
any
of
our
properties.
See
“Foreign
exchange
rate
fluctuations”
above.
Environmental
risk
We
are
subject
to
various
laws
relating
to
environmental
matters.
Our
properties
may
contain
ground
contamination,
hazardous
substances,
wartime
relics
or
other
residual
pollution
and
environmental
risks.
Buildings
and
their
fixtures
might
contain
asbestos
or
other
hazardous
substances
above
the
allowable
or
recommended
thresholds,
or
the
buildings
could
bear
other
environmental
risks.
Actual
and
contingent
liabilities
may
be
imposed
on
us
under
applicable
environmental
laws
to
assess
and,
if
required,
undertake
remedial
action
on
contaminated
sites
and
in
contaminated
buildings.
These
obligations
may
relate
to
sites
we
currently
own
or
operate,
sites
we
formerly
owned
or
operated,
or
sites
where
waste
from
our
operations
has
been
deposited.
Furthermore,
actions
for
damages
or
remediation
measures
may
be
brought
against
us,
including
under
the
German
Federal
Soil
Protection
Act
(Bundesbodenschutzgesetz).
According
to
this
Act,
not
only
the
polluter
but
also
its
legal
successor,
the
owner
of
the
contaminated
site
and
certain
previous
owners
may
be
held
liable
for
soil
contamination.
The
costs
of
any
removal,
investigation
or
remediation
of
any
residual
pollution
on
such
sites
or
in
such
buildings,
as
well
as
costs
related
to
legal
proceedings,
including
potential
damages,
regarding
such
matters,
may
be
substantial,
and
it
may
be
impossible,
for
a
number
of
reasons,
for
us
to
have
recourse
against
a
polluter
and/or
former
seller
of
a
contaminated
site
or
building
or
the
party
that
may
otherwise
be
responsible
for
the
contamination.
Furthermore,
the
discovery
of
any
residual
pollution
on
the
sites
and/or
in
the
buildings,
particularly
in
connection
with
the
lease
or
sale
of
properties
or
borrowing
using
the
real
estate
as
security,
could
trigger
claims
for
rent
reductions
or
termination
of
leases
for
cause,
for
damages
or
other
breach
of
warranty
claims
against
us.
Environmental
laws
may
also
impose
liability
on
us
for
the
release
of
certain
materials
into
the
air
or
water
from
a
property,
including
asbestos,
and
such
release
could
form
the
basis
for
liability
to
third
persons
for
personal
injury
or
other
damages.
Organizational
structure
We
hold
a
50%
equity
interest
in
Lorac,
which
is
the
manager
of
our
FCPs
and
the
registered
owner
on
title
to
our
Initial
Properties.
Lorac
is
also
the
manager
of
another
fund
and
the
registered
owner
on
title
to
a
portfolio
of
properties
on
behalf
of
that
other
fund.
We
and
the
owner
of
the
remaining
Lorac
shares
have
entered
into
a
shareholders’
agreement,
which
provides
us
with
the
right
to
appoint
three
of
the
six
directors
of
Lorac.
In
addition,
the
directors
of
Lorac
have
adopted
governance
rules
pursuant
to
which,
subject
to
applicable
law,
our
appointed
directors
generally
have
responsibility
for
matters
relating
to
our
properties,
and
the
other
three
directors,
who
are
nominated
by
the
other
owner
of
the
Lorac
shares,
generally
have
responsibility
for
matters
affecting
other
properties
of
which
Lorac
is
the
registered
owner
on
title.
Pursuant
to
such
shareholders’
agreement
and
the
governance
rules,
certain
matters
such
as
filing
tax
returns
and
shared
employee
matters
will
require
the
approval
of
a
majority
of
the
directors.
Each
of
the
directors
has
a
fiduciary
duty
to
act
in
the
best
interests
of
Lorac
and
Lorac
has
a
duty
to
manage
our
FCPs
and
the
other
fund
in
the
best
interests
of
the
respective
unitholders.
However,
it
is
possible
that
we
will
need
the
approval
of
a
majority
of
the
directors
of
Lorac
with
respect
to
certain
matters
involving
our
properties
and
there
can
be
no
assurance
that
such
matters
will
be
approved
at
all
or
on
the
terms
requested.
Any
matter
with
respect
to
which
our
appointed
directors
and
those
appointed
by
the
other
owner
of
the
Lorac
shares
cannot
agree
will
be
submitted
to
the
Lorac
shareholders.
However,
since
we
have
only
50%
of
the
voting
shares
of
Lorac,
there
can
be
no
assurance
that
any
such
matter
will
be
approved
in
the
manner
in
which
we
would
hope.
Such
dispute
could
have
a
material
and
adverse
effect
on
our
cash
flows,
financial
condition
and
results
of
operations,
and
on
our
ability
to
make
distributions
on
the
Units
or
cash
interest
payments
on
the
Debentures.
Dundee
International
2013
Annual
Report
|
34
As
manager
of
the
other
fund
since
2008,
Lorac
has
incurred
and
will
continue
to
incur
liabilities
as
a
result
of
managing
that
other
fund
and
its
assets.
To
the
extent
that
the
other
fund
is
unable
to
satisfy
such
liabilities,
a
third
party
could
seek
recourse
against
Lorac.
If
Lorac
is
unable
to
satisfy
such
liabilities,
Lorac
could
be
required
to
seek
protection
from
creditors
under
applicable
bankruptcy
or
insolvency
legislation.
Taking
such
steps
could
result
in
Lorac
being
replaced
as
the
manager
of
our
FCPs
with
the
result
that
legal
title
to
our
properties
would
be
required
to
be
transferred
to
a
new
manager.
This
would
result
in
the
payment
of
RETT
in
Germany.
The
amount
of
such
taxes
could
have
a
material
and
adverse
effect
on
our
cash
flows,
financial
condition
and
results
of
operations.
We
have
negotiated
certain
limited
indemnities
from
the
other
fund
in
connection
with
any
prior
existing
liabilities
of
the
other
fund
and
with
those
that
may
arise
as
a
result
of
actions
or
omissions
of
the
other
fund.
In
addition
to
the
foregoing,
we
have
been
advised
by
our
Luxembourg
counsel
that
creditors
of
the
other
fund
could
only
seek
recourse
against
the
assets
of
the
other
fund
and
could
not
seek
recourse
against
the
assets
of
our
FCPs
regardless
of
the
fact
that
Lorac
may
have
entered
into
the
contract
on
behalf
of
the
other
fund
or
our
FCPs
creating
such
right
to
a
claim.
New
properties
acquired
by
the
Trust
are
held
through
Luxembourg
limited
liability
entities
outside
of
the
Lorac
arrangement.
Competition
The
real
estate
market
in
Germany
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
operating
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
better
located,
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
stronger
financially,
they
will
be
better
able
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.
Insurance
We
carry
general
liability,
umbrella
liability
and
excess
liability
insurance
with
limits
that
are
typically
obtained
for
similar
real
estate
portfolios
in
Germany
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
partially
self-‐insure
against
terrorism
risk
for
our
entire
portfolio.
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
do
not
carry
title
insurance
on
our
properties.
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.
Dundee
International
2013
Annual
Report
|
35
SECTION
V
–
CRITICAL
ACCOUNTING
POLICIES
CRITICAL
ACCOUNTING
JUDGMENTS,
ESTIMATES
AND
ASSUMPTIONS
IN
APPLYING
ACCOUNTING
POLICIES
Preparing
the
consolidated
financial
statements
requires
management
to
make
judgments,
estimates
and
assumptions
that
affect
the
reported
amounts
of
assets,
liabilities,
revenue
and
expenses,
and
the
disclosures
of
contingent
liabilities.
Management
bases
its
judgments
and
estimates
on
historical
experience
and
other
factors
it
believes
to
be
reasonable
under
the
circumstances,
but
that
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
in
the
future
to
the
carrying
amounts
of
the
asset
or
liability
affected.
Dundee
International
REIT’s
critical
accounting
judgments,
estimates
and
assumptions
in
applying
accounting
policies
are
described
in
Note
4
to
the
consolidated
financial
statements.
CHANGES
IN
ACCOUNTING
ESTIMATES
AND
CHANGES
IN
ACCOUNTING
POLICIES
Accounting
policy
changes
Dundee
International
REIT’s
future
accounting
policy
changes
are
described
in
Note
5
to
the
audited
consolidated
financial
statements.
Additional
information
relating
to
Dundee
International
REIT,
including
our
Annual
Information
Form
dated
April
1,
2013,
is
available
on
SEDAR
at
www.sedar.com.
Dundee
International
2013
Annual
Report
|
36
Management’s
responsibility
for
financial
statements
The
accompanying
consolidated
financial
statements,
the
notes
thereto
and
other
financial
information
contained
in
this
Annual
Report
have
been
prepared
by,
and
are
the
responsibility
of,
the
management
of
Dundee
International
Real
Estate
Investment
Trust.
These
financial
statements
have
been
prepared
in
accordance
with
International
Financial
Reporting
Standards,
using
management’s
best
estimates
and
judgments
when
appropriate.
The
Board
of
Trustees
is
responsible
for
ensuring
that
management
fulfills
its
responsibility
for
financial
reporting
and
internal
control.
The
audit
committee,
which
comprises
trustees,
meets
with
management
as
well
as
the
external
auditors
to
satisfy
itself
that
management
is
properly
discharging
its
financial
responsibilities
and
to
review
its
consolidated
financial
statements
and
the
report
of
the
auditors.
The
audit
committee
reports
its
findings
to
the
Board
of
Trustees,
which
approves
the
consolidated
financial
statements.
PricewaterhouseCoopers
LLP,
the
independent
auditors,
have
audited
the
consolidated
financial
statements
in
accordance
with
Canadian
generally
accepted
auditing
standards.
The
auditors
have
full
and
unrestricted
access
to
the
audit
committee,
with
or
without
management
present.
P.
Jane
Gavan
President
and
Chief
Executive
Officer
Toronto,
Ontario,
February
26,
2014
Rene
D.
Gulliver
Chief
Financial
Officer
Dundee
International
2013
Annual
Report
|
37
Independent
auditor’s
report
TO
THE
UNITHOLDERS
OF
DUNDEE
INTERNATIONAL
REAL
ESTATE
INVESTMENT
TRUST
We
have
audited
the
accompanying
consolidated
financial
statements
of
Dundee
International
Real
Estate
Investment
Trust
and
its
subsidiaries,
which
comprise
the
consolidated
balance
sheets
as
at
December
31,
2013
and
December
31,
2012
and
the
consolidated
statements
of
net
income
and
comprehensive
income,
changes
in
equity
and
cash
flows
for
the
years
ended
December
31,
2013
and
December
31,
2012,
and
the
related
notes,
which
comprise
a
summary
of
significant
accounting
policies
and
other
explanatory
information.
MANAGEMENT’S
RESPONSIBILITY
FOR
THE
CONSOLIDATED
FINANCIAL
STATEMENTS
Management
is
responsible
for
the
preparation
and
fair
presentation
of
these
consolidated
financial
statements
in
accordance
with
International
Financial
Reporting
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.
AUDITOR’S
RESPONSIBILITY
Our
responsibility
is
to
express
an
opinion
on
these
consolidated
financial
statements
based
on
our
audits.
We
conducted
our
audits
in
accordance
with
Canadian
generally
accepted
auditing
standards.
Those
standards
require
that
we
comply
with
ethical
requirements
and
plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
the
consolidated
financial
statements
are
free
from
material
misstatement.
An
audit
involves
performing
procedures
to
obtain
audit
evidence
about
the
amounts
and
disclosures
in
the
consolidated
financial
statements.
The
procedures
selected
depend
on
the
auditor’s
judgment,
including
the
assessment
of
the
risks
of
material
misstatement
of
the
consolidated
financial
statements,
whether
due
to
fraud
or
error.
In
making
those
risk
assessments,
the
auditor
considers
internal
control
relevant
to
the
entity’s
preparation
and
fair
presentation
of
the
consolidated
financial
statements
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
entity’s
internal
control.
An
audit
also
includes
evaluating
the
appropriateness
of
accounting
policies
used
and
the
reasonableness
of
accounting
estimates
made
by
management,
as
well
as
evaluating
the
overall
presentation
of
the
consolidated
financial
statements.
We
believe
that
the
audit
evidence
we
have
obtained
in
our
audits
is
sufficient
and
appropriate
to
provide
a
basis
for
our
audit
opinion.
OPINION
In
our
opinion,
the
consolidated
financial
statements
present
fairly,
in
all
material
respects,
the
financial
position
of
Dundee
International
Real
Estate
Investment
Trust
and
its
subsidiaries,
as
at
December
31,
2013
and
December
31,
2012,
and
their
financial
performance
and
their
cash
flows
for
the
years
ended
December
31,
2013
and
December
31,
2012
in
accordance
with
International
Financial
Reporting
Standards.
Chartered
Professional
Accountants,
Licensed
Public
Accountants
Toronto,
Ontario,
February
26,
2014
Dundee
International
2013
Annual
Report
|
38
Consolidated
balance
sheets
(in
thousands
of
Canadian
dollars)
Assets
NON-‐CURRENT
ASSETS
Investment
properties
Amount
in
escrow
Deferred
income
tax
assets
Other
non-‐current
assets
CURRENT
ASSETS
Amounts
receivable
Prepaid
expenses
Amount
in
escrow
Cash
Assets
held
for
sale
Total
assets
Liabilities
NON-‐CURRENT
LIABILITIES
Debt
Deferred
rent
Deposits
Derivative
financial
instruments
Deferred
Unit
Incentive
Plan
CURRENT
LIABILITIES
Debt
Amounts
payable
and
accrued
liabilities
Income
tax
payable
Deferred
rent
Derivative
financial
instruments
Distributions
payable
Liabilities
related
to
assets
held
for
sale
Total
liabilities
Equity
Unitholders’
equity
Deficit
Accumulated
other
comprehensive
income
(loss)
Total
equity
Total
liabilities
and
equity
December
31,
December
31,
Note
2013
2012
$
$
$
7
8
20
9
10
8
17
11
8
12
13
11
14
8
12
15
17
16
$
2,390,244
-‐
12,313
2,288
2,404,845
18,149
1,962
6,220
106,292
132,623
21,206
2,558,674
1,403,956
-‐
1,900
16,299
6,306
1,428,461
20,356
32,940
523
6,220
13,772
7,314
81,125
15,083
1,524,669
1,075,520
(127,702)
86,187
1,034,005
2,558,674
$
$
$
1,182,757
5,568
8,491
548
1,197,364
4,822
4,354
12,110
181,619
202,905
-‐
1,400,269
724,119
5,568
895
18,635
3,629
752,846
2,711
26,863
404
12,110
4,441
4,816
51,345
-‐
804,191
689,318
(70,294)
(22,946)
596,078
1,400,269
$
See
accompanying
notes
to
the
consolidated
financial
statements.
On
behalf
of
the
Board
of
Trustees
of
Dundee
International
Real
Estate
Investment
Trust:
MICHAEL
J.
COOPER
Trustee
P.
JANE
GAVAN
Trustee
Dundee
International
2013
Annual
Report
|
39
Consolidated
statements
of
net
income
and
comprehensive
income
(in
thousands
of
Canadian
dollars)
Investment
properties
revenue
Investment
properties
operating
expenses
Net
rental
income
Other
income
and
expenses
Portfolio
management
General
and
administrative
Fair
value
adjustments
to
investment
properties
Depreciation
and
amortization
Loss
on
sale
of
investment
properties
Share
of
income
from
equity
accounted
investment
Interest
and
other
income
Interest
expense
Fair
value
adjustments
to
financial
instruments
Income
before
income
taxes
Current
income
taxes
Deferred
income
taxes
recovery
Recovery
of
income
taxes
Net
income
Foreign
currency
translation
adjustment
Comprehensive
income
See
accompanying
notes
to
the
consolidated
financial
statements.
Note
$
Years
ended
December
31,
2012
2013
138,661
220,220
$
53,222
75,367
85,439
144,853
(3,173)
(12,226)
(59,223)
(88)
(1,142)
28
1,547
(38,506)
(11,450)
20,620
689
(2,834)
(2,145)
22,765
109,133
131,898
$
(4,201)
(6,579)
(23,349)
(53)
(320)
21
503
(27,379)
(15,214)
8,868
226
(2,274)
(2,048)
10,916
(4,388)
6,528
7
7
18
19
20
$
Dundee
International
2013
Annual
Report
|
40
Consolidated
statements
of
changes
in
equity
Attributable
to
unitholders
of
the
Trust
(in
thousands
of
Canadian
dollars,
except
number
of
Units)
Balance
at
January
1,
2013
Net
income
for
the
year
Distributions
paid
Distributions
payable
Public
offering
of
Units
Distribution
Reinvestment
Plan
Unit
Purchase
Plan
Deferred
Unit
Incentive
Plan
Issue
costs
Foreign
currency
translation
adjustment
Balance
at
December
31,
2013
(in
thousands
of
Canadian
dollars,
except
number
of
Units)
Balance
at
January
1,
2012
Net
income
for
the
year
Distributions
paid
Distributions
payable
Public
offering
of
Units
Distribution
Reinvestment
Plan
Unit
Purchase
Plan
Deferred
Unit
Incentive
Plan
Issue
costs
Foreign
currency
translation
adjustment
Balance
at
December
31,
2012
Note
15
15
16
16
16
16
Note
15
15
16
16
16
Number
of
Units
72,232,494
-‐
-‐
-‐
36,375,000
1,066,792
7,059
17,632
-‐
-‐
109,698,977
Unitholders’
equity
689,318
-‐
-‐
-‐
393,859
10,145
72
164
(18,038)
-‐
1,075,520
$
$
Number
of
Units
43,872,316
-‐
-‐
-‐
28,186,500
157,432
3,371
12,875
-‐
$
Unitholders’
equity
407,009
-‐
-‐
-‐
290,436
1,644
36
138
(9,945)
-‐
$
$
$
$
Accumulated
other
comprehensive
income
(loss)
(22,946)
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
109,133
86,187
$
Deficit
(70,294)
22,765
(72,859)
(7,314)
-‐
-‐
-‐
-‐
-‐
-‐
(127,702)
Total
596,078
22,765
(72,859)
(7,314)
393,859
10,145
72
164
(18,038)
109,133
1,034,005
$
$
Attributable
to
unitholders
of
the
Trust
$
$
Accumulated
other
comprehensive
loss
(18,558)
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
(4,388)
Deficit
(37,642)
10,916
(38,752)
(4,816)
-‐
-‐
-‐
-‐
-‐
-‐
Total
350,809
10,916
(38,752)
(4,816)
290,436
1,644
36
138
(9,945)
(4,388)
72,232,494
$
689,318
$
(70,294)
$
(22,946)
$
596,078
See
accompanying
notes
to
the
consolidated
financial
statements.
Dundee
International
2013
Annual
Report
|
41
Consolidated
statements
of
cash
flows
(in
thousands
of
Canadian
dollars)
Generated
from
(utilized
in)
operating
activities
Net
income
Non-‐cash
items:
Share
of
income
from
equity
accounted
investment
Deferred
income
taxes
recovery
Amortization
of
lease
incentives
Amortization
of
financing
costs
Amortization
of
fair
value
adjustment
on
acquired
debt
Amortization
of
initial
discount
on
convertible
debentures
Loss
on
sale
of
investment
properties
Depreciation
and
amortization
Deferred
unit
compensation
expense
and
asset
management
fees
Straight-‐line
rent
adjustment
Fair
value
adjustments
to
financial
instruments
Fair
value
adjustments
to
investment
properties
Cash
settlement
on
foreign
exchange
contracts
Interest
on
Exchangeable
Notes
Cash
settlement
on
interest
rate
swap
Lease
incentives
and
initial
direct
leasing
costs
Change
in
non-‐cash
working
capital
Generated
from
(utilized
in)
investing
activities
Investment
in
building
improvements
Acquisition
of
investment
properties
Prepaid
transaction
costs
on
investment
properties
Proceeds
from
disposal
of
investment
properties
Generated
from
(utilized
in)
financing
activities
Mortgages
placed
Financing
costs
on
debts
placed
Mortgage
principal
repayments
Lump
sum
repayment
Draw
on
revolving
credit
facility
Revolving
credit
facility
repayments
Units
issued
for
cash
Unit
issue
costs
Distributions
paid
on
Units
Interest
on
Exchangeable
Notes
Increase
(decrease)
in
cash
Effect
of
exchange
rate
changes
on
cash
Cash,
beginning
of
period
Cash,
end
of
period
See
accompanying
notes
to
the
consolidated
financial
statements.
Note
Years
ended
December
31,
2012
2013
$
22,765
$
10,916
(28)
(2,834)
616
2,651
(402)
1,008
1,142
88
3,426
(1,510)
11,450
59,223
(510)
-‐
(6,179)
(8,246)
2,568
85,228
(5,821)
(1,080,279)
-‐
22,801
(1,063,299)
625,817
(9,305)
(11,197)
(16,779)
35,925
(36,810)
393,931
(18,604)
(67,530)
-‐
895,448
(82,623)
7,296
181,619
106,292
$
$
(21)
(2,274)
17
1,183
(206)
930
320
53
2,535
(98)
15,214
23,349
2,822
2,558
(4,255)
(1,010)
287
52,320
(2,391)
(241,032)
(2,969)
7,095
(239,297)
130,889
(2,330)
(908)
(3,426)
-‐
-‐
208,142
(8,961)
(40,033)
(2,558)
280,815
93,838
(126)
87,907
181,619
13
19
18
7
22
7
6
15
18
Dundee
International
2013
Annual
Report
|
42
Notes
to
the
consolidated
financial
statements
(All
dollar
amounts
in
thousands
of
Canadian
dollars,
except
unit
or
per
unit
amounts)
Note
1
ORGANIZATION
Dundee
International
Real
Estate
Investment
Trust
(the
“REIT”
or
the
“Trust”)
is
an
open-‐ended
investment
trust
created
pursuant
to
a
Declaration
of
Trust
dated
April
21,
2011,
under
the
laws
of
the
Province
of
Ontario,
and
is
domiciled
in
Ontario.
The
consolidated
financial
statements
of
the
REIT
include
the
accounts
of
the
REIT
and
its
consolidated
subsidiaries.
The
REIT’s
portfolio
comprises
office,
industrial
and
mixed
use
properties
located
in
Germany.
The
address
of
the
Trust’s
registered
office
is
30
Adelaide
Street
East,
Suite
1600,
Toronto,
Ontario,
Canada
M5C
3H1.
The
Trust
is
listed
on
the
Toronto
Stock
Exchange
under
the
symbol
DI.UN.
The
Trust’s
consolidated
financial
statements
for
the
year
ended
December
31,
2013
were
authorized
for
issue
by
the
Board
of
Trustees
on
February
26,
2014,
after
which
date
the
consolidated
financial
statements
may
only
be
amended
with
Board
approval.
Note
2
SUMMARY
OF
SIGNIFICANT
ACCOUNTING
POLICIES
Statement
of
compliance
These
consolidated
financial
statements
have
been
prepared
in
accordance
with
International
Financial
Reporting
Standards
(“IFRS”)
as
issued
by
the
International
Accounting
Standards
Board
(“IASB”).
Basis
of
presentation
The
consolidated
financial
statements
are
prepared
on
a
going
concern
basis
and
have
been
presented
in
Canadian
dollars,
which
is
also
the
Trust’s
functional
currency.
All
financial
information
has
been
rounded
to
the
nearest
thousand
except
when
otherwise
indicated.
The
accounting
policies
set
out
below
have
been
applied
consistently
in
all
material
respects.
Certain
new
accounting
standards
and
guidelines
relevant
to
the
Trust
that
were
issued
at
the
date
of
approval
of
the
financial
statements
but
not
yet
effective
for
the
current
accounting
period
are
described
in
Note
5.
The
consolidated
financial
statements
have
been
prepared
on
the
historical
cost
basis
except
for
investment
properties,
the
conversion
feature
of
the
convertible
debentures,
financial
derivatives,
which
are
measured
at
fair
value,
and
the
Deferred
Unit
Incentive
Plan,
which
is
measured
at
amortized
cost
impacted
by
the
fair
value
of
the
Trust’s
units.
Basis
of
consolidation
The
consolidated
financial
statements
comprise
the
financial
statements
of
the
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
that
such
control
ceases.
Control
exists
when
the
Trust
has
the
power
over
the
entity,
has
exposure
to
variable
returns
from
its
involvement
with
the
entity
and
has
the
ability
to
use
its
power
over
the
investee
to
affect
its
returns.
All
intercompany
balances,
income
and
expenses,
and
unrealized
gains
and
losses
resulting
from
intercompany
transactions
are
eliminated
in
full.
Equity
accounted
investments
Equity
accounted
investments
are
investments
over
which
the
Trust
has
significant
influence,
but
not
control.
Generally,
the
Trust
is
considered
to
exert
significant
influence
when
it
holds
more
than
a
20%
interest
in
an
entity.
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
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
through
contractual
agreements.
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
net
earnings
from
equity
accounted
investments
in
the
consolidated
statements
of
comprehensive
income.
Dundee
International
2013
Annual
Report
|
43
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.
Where
the
Trust
transacts
with
its
equity
accounted
investments,
unrealized
profits
and
losses
are
eliminated
to
the
extent
of
the
Trust’s
interest
in
the
investment.
Balances
outstanding
between
the
Trust
and
equity
accounted
investments
in
which
it
has
an
interest
are
not
eliminated
in
the
consolidated
balance
sheets.
Joint
arrangements
The
Trust
enters
into
joint
arrangements
via
joint
operations
and
joint
ventures.
A
joint
arrangement
with
a
contractual
arrangement
pursuant
to
which
the
Trust
and
other
parties
undertake
an
economic
activity
that
is
subject
to
joint
control
whereby
the
strategic
financial
and
operating
policy
decisions
relating
to
the
activities
of
the
joint
arrangement
require
the
unanimous
consent
of
the
parties
sharing
control
is
referred
to
as
a
joint
operation.
Joint
arrangements
that
involve
the
establishment
of
a
separate
entity
in
which
each
venture
has
rights
to
the
net
assets
of
the
arrangements
are
referred
to
as
joint
ventures.
In
a
co-‐ownership
arrangement
the
Trust
owns
jointly
one
or
more
investment
properties
with
another
party
and
has
direct
rights
to
the
investment
property,
and
obligations
for
the
liabilities
relating
to
the
co-‐ownership.
The
Trust
reports
its
interests
in
joint
ventures
using
the
equity
method
of
accounting
as
described
under
“Equity
accounted
investments”
above.
The
Trust
reports
its
interests
in
co-‐ownerships
by
accounting
for
its
share
of
the
assets,
liabilities,
revenues
and
expenses.
Under
this
method,
the
Trust’s
consolidated
financial
statements
reflect
only
the
Trust’s
proportionate
share
of
the
assets,
its
share
of
any
liabilities
incurred
jointly
with
the
other
venturers
as
well
as
any
liabilities
incurred
directly,
its
share
of
any
revenues
earned
or
expenses
incurred
by
the
joint
venture
and
any
expenses
incurred
directly.
Note
3
ACCOUNTING
POLICIES
SELECTED
AND
APPLIED
FOR
SIGNIFICANT
TRANSACTIONS
AND
EVENTS
The
significant
accounting
policies
used
in
the
preparation
of
these
consolidated
financial
statements
are
described
below:
Investment
properties
Investment
properties
are
initially
recorded
at
cost
including
related
transaction
costs
in
connection
with
asset
acquisitions,
except
if
acquired
in
a
business
combination,
in
which
case
they
are
initially
recorded
at
fair
value,
and
include
primarily
office
properties
held
to
earn
rental
income
and/or
for
capital
appreciation.
Investment
properties
are
subsequently
measured
at
fair
value,
determined
based
on
available
market
evidence,
at
the
consolidated
balance
sheet
date.
Related
fair
value
gains
and
losses
are
recorded
in
comprehensive
income
in
the
period
in
which
they
arise.
The
fair
value
of
each
investment
property
is
based
on,
among
other
things,
rental
income
from
current
leases
and
assumptions
about
rental
income
from
future
leases
reflecting
market
conditions
at
the
consolidated
balance
sheet
date,
less
future
estimated
cash
outflows
in
respect
of
such
properties.
To
determine
fair
value,
the
Trust
first
considers
whether
it
can
use
current
prices
in
an
active
market
for
a
similar
property
in
the
same
location
and
condition,
and
subject
to
similar
leases
and
other
contracts.
The
Trust
has
concluded
there
is
insufficient
market
evidence
on
which
to
base
investment
property
valuation
using
this
approach
and
has
therefore
determined
to
use
the
income
approach.
The
income
approach
is
one
in
which
the
fair
value
is
estimated
by
capitalizing
the
net
operating
income
that
the
property
can
reasonably
be
expected
to
produce
over
its
remaining
economic
life.
The
income
approach
is
derived
from
two
methods:
the
overall
capitalization
rate
method
whereby
the
net
operating
income
is
capitalized
at
the
requisite
overall
capitalization
rate;
and/or
the
discounted
cash
flow
method
in
which
the
income
and
expenses
are
projected
over
the
anticipated
term
of
the
investment
plus
a
terminal
value
discounted
using
an
appropriate
discount
rate.
Valuations
of
investment
properties
are
most
sensitive
to
changes
in
discount
rates
and
capitalization
rates.
Initial
direct
leasing
costs
incurred
in
negotiating
and
arranging
tenant
leases
are
added
to
the
carrying
amount
of
investment
properties.
Lease
incentives,
which
include
costs
incurred
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
of
investment
properties
revenue.
Dundee
International
2013
Annual
Report
|
44
Fair
value
hierarchy
Fair
value
measurements
recognized
in
the
statement
of
financial
position
or
disclosed
in
the
Trust’s
financial
statements
for
financial
or
non-‐financial
assets
and
liabilities
are
categorized
by
level
in
accordance
with
the
significance
of
the
observable
market
inputs
used
in
making
the
measurements,
as
follows:
• Level
1
–
quoted
prices
(unadjusted)
in
active
markets
for
identical
assets
or
liabilities
that
the
entity
can
access
at
the
measurement
date;
• Level
2
–
use
of
a
model
with
inputs
(other
than
quoted
prices
included
in
Level
1)
that
are
directly
or
indirectly
observable
market
data;
and
• Level
3
–
use
of
a
model
with
inputs
that
are
not
based
on
observable
market
data.
Non-‐controlling
interest
Non-‐controlling
interest
represents
equity
interests
in
subsidiaries
owned
by
outside
parties.
The
share
of
net
assets,
net
earnings
and
other
comprehensive
income
of
subsidiaries
attributable
to
non-‐controlling
interest
is
determined
to
be
insignificant.
Assets
held
for
sale
Assets
and
liabilities
are
classified
as
held
for
sale
when
their
carrying
amount
is
to
be
recovered
principally
through
a
sale
transaction
and
a
sale
is
considered
highly
probable.
Investment
properties
and
assets
held
for
sale
continue
to
be
measured
at
fair
value.
Segment
reporting
The
Trust
owns
and
operates
investment
properties
located
in
Germany.
In
measuring
performance,
the
Trust
does
not
distinguish
or
group
its
operations
on
a
geographic
or
any
other
basis
and,
accordingly,
has
a
single
reportable
segment
for
disclosure
purposes.
The
Trust’s
major
tenant
is
Deutsche
Post,
accounting
for
approximately
37%
of
the
gross
rental
income
generated
by
the
Trust’s
properties
for
the
year
ended
December
31,
2013
(December
31,
2012
–
65%).
Foreign
currency
translation
Functional
and
presentation
currency
Items
included
in
the
financial
statements
of
each
of
the
group’s
entities
are
measured
using
the
currency
of
the
primary
economic
environment
in
which
the
entity
operates
(“the
functional
currency”).
The
functional
currency
of
the
REIT’s
operating
subsidiaries
is
euros.
The
consolidated
financial
statements
are
presented
in
Canadian
dollars,
which
is
the
group’s
presentation
currency.
Transactions
and
balances
Foreign
currency
transactions
are
translated
into
the
functional
currency
using
the
exchange
rates
prevailing
at
the
dates
of
the
transactions
or
valuation
where
items
are
remeasured.
Foreign
exchange
gains
and
losses
resulting
from
the
settlement
of
such
transactions,
and
from
the
translation
at
period-‐end
exchange
rates
of
monetary
assets
and
liabilities
denominated
in
foreign
currencies,
are
recognized
in
the
statements
of
comprehensive
income
except
when
deferred
in
other
comprehensive
income
as
qualifying
cash
flow
hedges
and
qualifying
net
investment
hedges.
Foreign
exchange
gains
and
losses
are
presented
in
the
consolidated
statements
of
comprehensive
income.
Group
companies
The
results
and
financial
position
of
all
the
group
entities
that
have
a
functional
currency
different
from
the
presentation
currency
are
translated
into
the
presentation
currency
as
follows:
(i)
(ii)
assets
and
liabilities
for
each
balance
sheet
presented
are
translated
at
the
closing
rate
at
the
date
of
that
balance
sheet;
income
and
expenses
for
each
statement
of
comprehensive
income
are
translated
at
average
exchange
rates
(unless
this
average
is
not
a
reasonable
approximation
of
the
cumulative
effect
of
the
rates
prevailing
on
the
transaction
dates,
in
which
case
income
and
expenses
are
translated
at
the
rate
on
the
dates
of
the
transactions);
and
all
resulting
exchange
differences
are
recognized
in
other
comprehensive
income.
(iii)
On
consolidation,
exchange
differences
arising
from
the
translation
of
the
net
investment
in
foreign
operations,
and
of
borrowings
and
other
currency
instruments
designated
as
hedges
of
such
investments,
are
taken
to
other
comprehensive
income.
When
a
foreign
operation
is
partially
disposed
of
or
sold,
exchange
differences
that
were
recorded
in
equity
are
recognized
in
the
consolidated
statements
of
income
as
part
of
the
gain
or
loss
on
sale.
Dundee
International
2013
Annual
Report
|
45
Fair
value
adjustments
arising
on
the
acquisition
of
a
foreign
entity
are
treated
as
assets
and
liabilities
of
the
foreign
entity
and
translated
at
the
closing
rate.
Other
non-‐current
assets
Other
non-‐current
assets
include
equity
accounted
investments,
office
furniture
and
computer
equipment,
and
straight-‐line
rent
receivables.
Office
furniture
and
computer
equipment
are
stated
at
cost
less
accumulated
depreciation
and
impairment
losses.
Depreciation
of
office
furniture
and
computer
equipment
is
calculated
using
the
straight-‐line
method
to
allocate
their
cost,
net
of
their
residual
values,
over
their
expected
useful
lives
of
three
to
ten
years.
The
residual
values
and
useful
lives
of
all
assets
are
reviewed
and
adjusted,
if
appropriate,
at
least
at
each
financial
year-‐end.
Cost
includes
expenditures
that
are
directly
attributable
to
the
acquisition
and
expenditures
for
replacing
part
of
the
office
furniture
and
computer
equipment
when
that
cost
is
incurred,
if
the
recognition
criteria
are
met.
Subsequent
costs
are
included
in
the
asset’s
carrying
amount
or
recognized
as
a
separate
asset,
as
appropriate,
only
when
it
is
probable
that
future
economic
benefits
associated
with
the
item
will
flow
to
the
Trust
and
the
cost
of
the
item
can
be
measured
reliably.
All
other
repairs
and
maintenance
are
charged
to
comprehensive
income
during
the
financial
period
in
which
they
are
incurred.
Other
non-‐current
assets
are
derecognized
upon
disposal
or
when
no
future
economic
benefits
are
expected
from
their
use
or
disposal.
Any
gain
or
loss
arising
on
derecognition
of
an
asset
(calculated
as
the
difference
between
the
net
disposal
proceeds
and
the
carrying
amount
of
the
asset)
is
included
in
comprehensive
income
in
the
year
the
asset
is
derecognized.
Provisions
Provisions
for
legal
claims
are
recognized
when
the
Trust
has
a
present
legal
or
constructive
obligation
as
a
result
of
past
events,
it
is
probable
that
an
outflow
of
resources
will
be
required
to
settle
the
obligation,
and
the
amount
has
been
reliably
estimated.
Provisions
are
not
recognized
for
future
operating
losses.
Provisions
are
measured
at
the
present
value
of
the
expenditures
expected
to
be
required
to
settle
the
obligation
using
a
rate
that
reflects
current
market
assessments
of
the
time
value
of
money
and
the
risk
specific
to
the
obligation.
The
increase
in
the
provision
due
to
passage
of
time
is
recognized
as
interest
expense.
Revenue
recognition
The
Trust
accounts
for
leases
with
tenants
as
operating
leases,
as
it
has
retained
substantially
all
of
the
risks
and
benefits
of
ownership
of
its
investment
properties.
Revenues
from
investment
properties
include
base
rents,
recoveries
of
operating
expenses
including
property
taxes,
lease
termination
fees,
parking
income
and
incidental
income.
Revenue
recognition
under
a
lease
commences
when
the
tenant
has
a
right
to
use
the
leased
asset.
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
other
non-‐current
assets,
is
recorded
for
the
difference
between
the
rental
revenue
recognized
and
the
contractual
amount
received.
Recoveries
from
tenants
are
recognized
as
revenues
in
the
period
in
which
the
corresponding
costs
are
incurred
and
collectability
reasonably
assured.
Other
revenues
are
recorded
as
earned.
Business
combinations
The
purchase
method
of
accounting
is
used
for
acquisitions
meeting
the
definition
of
a
business.
The
cost
of
an
acquisition
is
measured
as
the
fair
value
of
the
assets
given,
equity
instruments
issued,
and
liabilities
incurred
or
assumed
at
the
date
of
exchange.
Identifiable
assets
acquired
and
liabilities
and
contingent
liabilities
assumed
in
a
business
combination
are
measured
initially
at
their
acquisition
date
fair
values
irrespective
of
the
extent
of
any
minority
interest.
The
excess
of
the
cost
of
acquisition
over
the
fair
value
of
the
Trust’s
share
of
the
identifiable
net
assets
acquired
is
recorded
as
goodwill.
If
the
cost
of
acquisition
is
less
than
the
fair
value
of
the
Trust’s
share
of
the
net
assets
acquired,
the
difference
is
recognized
directly
in
comprehensive
income
for
the
year
as
an
acquisition
gain.
Any
transaction
costs
incurred
with
respect
to
the
business
combination
are
expensed
in
the
period
incurred.
Distributions
Distributions
to
unitholders
are
recognized
as
a
liability
in
the
period
in
which
the
distributions
are
approved
by
the
Board
of
Trustees
and
are
recorded
as
an
increase
to
the
deficit.
Dundee
International
2013
Annual
Report
|
46
Income
taxes
The
REIT
is
taxed
as
a
mutual
fund
trust
under
the
Income
Tax
Act
(Canada).
The
REIT
is
not
a
specified
investment
flow-‐through
trust
(“SIFT”),
and
will
not
be,
provided
that
the
REIT
complies
at
all
times
with
its
investment
restrictions
which
preclude
the
REIT
from
investing
in
any
entity
other
than
a
portfolio
investment
entity
or
from
holding
any
non-‐portfolio
property.
The
Trust
intends
to
distribute
all
taxable
income
directly
earned
by
the
REIT
to
unitholders
and
to
deduct
such
distributions
for
income
tax
purposes.
The
tax
deductibility
of
the
REIT’s
distributions
to
unitholders
represents,
in
substance,
an
exception
from
current
Canadian
tax,
and
from
deferred
tax
relating
to
temporary
differences
in
the
REIT,
so
long
as
the
REIT
continues
to
expect
to
distribute
all
of
its
taxable
income
and
taxable
capital
gains
to
its
unitholders.
Accordingly,
no
net
current
Canadian
income
tax
expense
or
deferred
income
tax
assets
or
liabilities
have
been
recorded
in
these
consolidated
financial
statements.
The
tax
expense
related
to
non-‐Canadian
taxable
subsidiaries
for
the
year
comprises
current
and
deferred
taxes.
The
current
income
tax
charge
is
calculated
on
the
basis
of
the
tax
laws
enacted
or
substantively
enacted
at
the
balance
sheet
date
where
the
subsidiaries
operate
and
generate
taxable
income.
Management
periodically
evaluates
positions
taken
in
tax
returns
with
respect
to
situations
in
which
applicable
tax
regulation
is
subject
to
interpretation.
It
establishes
provisions
where
appropriate
on
the
basis
of
amounts
expected
to
be
paid
to
the
tax
authorities.
Deferred
income
tax
is
recognized,
using
the
asset
and
liability
method,
on
temporary
differences
arising
between
the
tax
bases
of
assets
and
liabilities
and
their
carrying
amounts
in
the
consolidated
financial
statements.
Deferred
income
tax
is
determined
using
tax
rates
(and
laws)
that
have
been
enacted
or
substantively
enacted
by
the
balance
sheet
date,
and
are
expected
to
apply
when
the
related
deferred
income
tax
asset
is
realized
or
the
deferred
income
tax
liability
is
settled.
Deferred
income
tax
assets
are
recognized
only
to
the
extent
that
it
is
probable
that
future
taxable
profit
will
be
available
against
which
the
temporary
differences
can
be
utilized.
Unit-‐based
compensation
plan
The
Trust
has
a
Deferred
Unit
Incentive
Plan
(“DUIP”),
as
described
in
Note
16,
that
provides
for
the
grant
of
deferred
trust
units
and
income
deferred
trust
units
to
trustees,
officers,
employees,
affiliates
and
their
service
providers
(including
the
asset
manager).
Unvested
deferred
trust
units
are
recorded
as
a
liability
and
compensation
expense
and,
where
applicable,
asset
management
expense.
Grants
to
trustees,
officers
and
employees
are
recognized
as
compensation
expense
and
included
in
general
and
administrative
expense.
They
are
recognized
over
the
vesting
period
at
the
amortized
cost
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
units,
with
changes
in
fair
value
being
recognized
in
comprehensive
income,
as
a
fair
value
adjustment
to
financial
instruments.
Deferred
units
granted
to
DREAM
Asset
Management
Corporation
(“DAM”),
formerly
called
Dundee
Realty
Corporation
or
“DRC”,
for
payment
of
asset
management
fees
are
included
in
general
and
administrative
expense
during
the
period
for
accounting
purposes
as
they
relate
to
services
provided
during
the
period
and
the
units
and
fees
are
initially
measured
by
applying
a
discount
to
the
fair
value
of
the
corresponding
units.
The
discount
is
estimated
by
applying
the
Black
Scholes
model,
taking
into
consideration
the
volatility
of
the
Canadian
REIT
equity
market
and
the
German
real
estate
industry.
Once
recognized,
the
liability
is
remeasured
at
each
reporting
date
at
a
discount
to
the
fair
values
of
the
corresponding
units,
with
the
change
being
recognized
in
comprehensive
income
as
fair
value
adjustment
to
financial
instruments.
Dundee
International
2013
Annual
Report
|
47
Cash
Cash
excludes
cash
subject
to
restrictions
that
prevent
its
use
for
current
purposes.
Excluded
from
cash
are
amounts
held
for
repayment
of
tenant
security
deposits
as
required
by
various
lending
agreements.
Financial
instruments
Designation
of
financial
instruments
The
following
summarizes
the
Trust’s
classification
and
measurement
of
financial
assets,
liabilities
and
financial
derivatives:
Financial
assets
Amounts
receivable
Cash
Financial
liabilities
Mortgage
debt
Term
loan
credit
facility
Convertible
debentures
–
host
instrument
Deposits
Deferred
Unit
Incentive
Plan
Amounts
payable
and
accrued
liabilities
Distributions
payable
Income
taxes
payable
Classification
Measurement
Loans
and
receivables
Loans
and
receivables
Amortized
cost
Amortized
cost
Other
liabilities
Other
liabilities
Other
liabilities
Other
liabilities
Other
liabilities
Other
liabilities
Other
liabilities
Other
liabilities
Amortized
cost
Amortized
cost
Amortized
cost
Amortized
cost
Amortized
cost
Amortized
cost
Amortized
cost
Amortized
cost
Financial
derivatives
Derivative
assets
Derivative
liabilities
Conversion
feature
of
the
convertible
debentures
Fair
value
through
profit
and
loss
Fair
value
through
profit
and
loss
Fair
value
through
profit
and
loss
Fair
value
Fair
value
Fair
value
Financial
assets
The
Trust
classifies
its
financial
assets
upon
initial
recognition
as
loans
and
receivables.
All
financial
assets
are
initially
measured
at
fair
value,
less
any
related
transaction
costs.
Subsequently,
financial
assets
are
measured
at
amortized
cost.
Amounts
receivable
are
initially
measured
at
fair
value
and
are
subsequently
measured
at
amortized
cost
less
provision
for
impairment.
A
provision
for
impairment
is
established
when
there
is
objective
evidence
that
collection
will
not
be
possible
under
the
original
terms
of
the
contract.
Indicators
of
impairment
include
delinquency
of
payment
and
significant
financial
difficulty
of
the
tenant.
The
carrying
amount
of
the
asset
is
reduced
through
an
allowance
account,
and
the
amount
of
the
loss
is
recognized
in
the
consolidated
statements
of
comprehensive
income
within
investment
property
operating
expenses.
Bad
debt
write-‐offs
occur
when
the
Trust
determines
collection
is
not
possible.
Any
subsequent
recoveries
of
amounts
previously
written
off
are
credited
against
investment
property
operating
expenses
in
the
consolidated
statements
of
comprehensive
income.
Trade
receivables
that
are
less
than
three
months
past
due
are
not
considered
impaired
unless
there
is
evidence
that
collection
is
not
possible.
If
in
a
subsequent
period
the
amount
of
the
impairment
loss
decreases
and
the
decrease
can
be
related
objectively
to
an
event
occurring
after
the
impairment
was
recognized,
the
previously
recognized
impairment
loss
is
reversed,
to
the
extent
that
the
carrying
value
of
the
asset
does
not
exceed
its
amortized
cost
at
the
reversal
date.
Any
subsequent
reversal
of
an
impairment
loss
is
recognized
in
the
statement
of
net
income
and
comprehensive
income.
Financial
assets
are
derecognized
only
when
the
contractual
rights
to
the
cash
flows
from
the
financial
asset
expire
or
the
Trust
transfers
substantially
all
risks
and
rewards
of
ownership.
Financial
liabilities
The
Trust
classifies
its
financial
liabilities
upon
initial
recognition
as
either
fair
value
through
profit
and
loss
or
other
liabilities
measured
at
amortized
cost.
Financial
liabilities
classified
as
other
liabilities
are
initially
recognized
at
fair
value
(net
of
transaction
costs)
and
are
subsequently
measured
at
amortized
cost
using
the
effective
interest
rate
method.
Under
the
effective
interest
rate
method,
any
transaction
fees,
costs,
discounts
and
premiums
directly
related
to
the
financial
liabilities
are
recognized
in
comprehensive
income
over
the
expected
life
of
the
debt.
Dundee
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2013
Annual
Report
|
48
Term
loans
are
initially
recognized
at
fair
value
less
attributable
transaction
costs,
or
at
fair
value
when
assumed
in
a
business
or
asset
acquisition.
Subsequent
to
initial
recognition,
term
loans
are
recognized
at
amortized
cost.
Upon
issuance,
convertible
debentures
are
separated
into
two
financial
liability
components:
the
host
instrument
and
the
conversion
feature.
This
presentation
is
required
because
the
conversion
feature
permits
the
holder
to
convert
the
debenture
into
Units
that,
except
for
the
available
exemption
under
IAS
32,
“Financial
Instruments:
Presentation”
(“IAS
32”),
would
normally
be
presented
as
a
liability
because
of
the
redemption
feature
attached
to
the
Units.
Both
components
are
measured
based
on
their
respective
estimated
fair
values
at
the
date
of
issuance.
The
fair
value
of
the
host
instrument
is
net
of
any
related
transaction
costs.
The
fair
value
of
the
host
instrument
is
estimated
based
on
the
present
value
of
future
interest
and
principal
payments
due
under
the
terms
of
the
debenture
using
a
discount
rate
for
similar
debt
instruments
without
a
conversion
feature.
Subsequent
to
initial
recognition,
the
host
instrument
is
accounted
for
at
amortized
cost.
The
conversion
feature
is
accounted
for
at
fair
value
with
changes
in
fair
value
recognized
in
comprehensive
income
each
period.
When
the
holder
of
a
convertible
debenture
converts
its
interest
into
Units,
the
host
instrument
and
conversion
feature
are
reclassified
to
unitholders’
equity
in
proportion
to
the
units
converted
over
the
total
equivalent
units
outstanding.
The
DUIP
is
measured
at
amortized
cost
because
it
is
settled
in
Units,
which
in
accordance
with
IAS
32
are
liabilities.
Consequently,
the
DUIP
is
remeasured
each
period
based
on
the
fair
value
of
Units,
with
changes
in
the
liabilities
recorded
in
comprehensive
income.
The
Trust
considers
interest
expense
on
the
Exchangeable
Notes
to
be
a
financing
activity
in
the
statements
of
cash
flows.
A
financial
liability
is
derecognized
when
the
obligation
under
the
liability
is
discharged,
cancelled
or
expired.
Financial
derivatives
Derivatives
are
initially
recognized
at
fair
value
on
the
date
a
derivative
contract
is
entered
into
and
are
subsequently
remeasured
at
their
fair
value.
The
method
of
recognizing
the
resulting
gain
or
loss
depends
on
whether
the
derivative
is
designated
as
a
hedging
instrument
and,
if
so,
the
nature
of
the
item
being
hedged.
Derivative
instruments
are
recorded
in
the
consolidated
balance
sheet
at
fair
value.
Changes
in
fair
value
of
derivative
instruments
that
are
not
designated
as
hedges
for
accounting
purposes
are
recognized
in
fair
value
adjustments
to
financial
instruments.
The
Trust
has
not
designated
any
derivatives
as
hedges
for
accounting
purposes.
Interest
Interest
on
debt
includes
coupon
interest
on
term
loans
and
mortgage
debt,
amortization
of
premiums
allocated
to
the
conversion
features
of
the
convertible
debentures,
amortization
of
ancillary
costs
incurred
in
connection
with
the
arrangement
of
borrowings,
and
net
settlement
of
financial
interest
rate
derivatives
and
interest
on
Exchangeable
Notes.
Finance
costs
are
amortized
to
interest
expense
unless
they
relate
to
a
qualifying
asset.
Equity
The
Trust
classifies
the
Units
as
equity,
notwithstanding
the
fact
that
the
Trust’s
Units
meet
the
definition
of
a
financial
liability.
Under
IAS
32,
the
Units
are
considered
a
puttable
financial
instrument
because
of
the
holder’s
option
to
redeem
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
or
100%
of
the
closing
market
price
on
the
redemption
date.
The
total
amount
payable
by
the
REIT
in
any
calendar
month
shall
not
exceed
$50
unless
waived
by
the
REIT’s
trustees
at
their
sole
discretion.
The
Trust
has
determined
that
the
Units
can
be
presented
as
equity
and
not
financial
liabilities
because
the
Units
have
the
following
features,
as
defined
in
IAS
32
(hereinafter
referred
to
as
the
“puttable
exemption”):
• Units
entitle
the
holder
to
a
pro
rata
share
of
the
Trust’s
net
assets
in
the
event
of
the
Trust’s
liquidation.
The
Trust’s
net
assets
are
those
assets
that
remain
after
deducting
all
other
claims
on
its
assets.
• Units
are
the
class
of
instruments
that
are
subordinate
to
all
other
classes
of
instruments
because
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
are
subordinate
to
all
other
classes
of
instruments
have
identical
features.
Dundee
International
2013
Annual
Report
|
49
• Apart
from
the
contractual
obligation
for
the
Trust
to
redeem
the
Units
for
cash
or
another
financial
asset,
the
Units
do
not
include
any
contractual
obligation
to
deliver
cash
or
another
financial
asset
to
another
entity,
or
to
exchange
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
Units
over
their
life
are
based
substantially
on
the
profit
or
loss,
the
change
in
the
recognized
net
assets
and
unrecognized
net
assets
of
the
Trust
over
the
life
of
the
Units.
In
addition
to
the
Units
meeting
all
of
the
above
criteria,
the
REIT
has
determined
it
has
no
other
financial
instrument
or
contract
that
has
total
cash
flows
based
substantially
on
the
profit
or
loss,
the
change
in
the
recognized
assets,
or
the
change
in
the
fair
value
of
the
recognized
and
unrecognized
net
assets
of
the
REIT.
The
REIT
also
has
no
other
financial
instrument
or
contract
that
has
the
effect
of
substantially
restricting
or
fixing
the
residual
return
to
unitholders.
Units
are
initially
recognized
at
the
fair
value
of
the
consideration
received
by
the
Trust.
Any
transaction
costs
arising
on
the
issue
of
Units
are
recognized
directly
in
unitholders’
equity
as
a
reduction
of
the
proceeds
received.
Note
4
CRITICAL
ACCOUNTING
JUDGMENTS,
ESTIMATES
AND
ASSUMPTIONS
IN
APPLYING
ACCOUNTING
POLICIES
The
preparation
of
the
consolidated
financial
statements
requires
management
to
make
judgments,
estimates
and
assumptions
that
affect
the
amounts
reported.
Management
bases
its
judgments
and
estimates
on
experience
in
the
industry
and
other
various
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
values
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
asset
or
liability
affected
in
the
future.
Critical
accounting
judgments
The
following
are
the
critical
judgments
made
in
applying
the
Trust’s
accounting
policies
that
have
the
most
significant
effect
on
the
amounts
in
the
consolidated
financial
statements:
Valuation
of
investment
properties
Critical
judgments
are
made
by
the
Trust
in
respect
of
the
fair
values
of
investment
properties.
The
fair
value
of
these
investments
is
reviewed
regularly
by
management
with
reference
to
independent
property
valuations
and
market
conditions
existing
at
the
reporting
date,
using
generally
accepted
market
practices.
Judgment
is
also
applied
in
determining
the
extent
and
frequency
of
independent
appraisals.
The
determination
of
fair
values
requires
management
to
make
estimates
and
assumptions
that
affect
the
values
presented,
such
that
actual
values
in
sales
transactions
may
differ
from
those
presented.
The
Trust’s
critical
assumptions
relating
to
the
estimates
of
fair
values
of
investment
properties
include
the
receipt
of
contractual
rents,
expected
future
market
rents,
renewal
rates,
maintenance
requirements,
discount
rates
that
reflect
current
market
uncertainties,
capitalization
rates,
and
current
and
recent
property
investment
prices.
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
REIT
determines
the
fair
value
of
an
investment
property
at
the
end
of
each
reporting
period
using
the
following
methods:
• External
appraisals
–
by
an
independent
appraisal
firm,
according
to
professional
appraisal
standards
and
IFRS.
•
Internal
valuation
–
performed
by
management
using
the
income
approach
and
primarily
consisting
of
reviewing
the
key
assumptions
from
previous
appraisals
and
updating
the
value
for
changes
in
the
property
cash
flow,
physical
condition
and
changes
in
market
conditions.
In
applying
the
income
approach
to
valuation,
management
may
use
the
direct
income
capitalization
method
or
the
discounted
cash
flow
method,
both
of
which
are
consistent
with
professional
appraisal
standards
and
IFRS.
The
selection
of
the
method
for
each
property
is
made
based
upon
the
following
criteria:
• Regulatory
requirements
–
the
Initial
Properties
are
held
indirectly
through
regulated
entities
that
require
an
external
appraisal
annually.
• Property
type
–
this
includes
an
evaluation
of
a
property's
complexity,
time
since
acquisition,
and
other
specific
opportunities
or
risks
with
properties.
Recently
acquired
properties
will
generally
receive
a
value
update.
Dundee
International
2013
Annual
Report
|
50
• Market
risks
–
specific
risks
in
a
region
may
warrant
a
full
external
appraisal
for
certain
properties.
• Changes
in
overall
economic
conditions
–
significant
changes
in
overall
economic
conditions
may
increase
the
number
of
external
appraisals
performed.
• Business
needs
–
financings
or
acquisitions
and
dispositions
may
require
an
external
appraisal.
In
general,
properties
are
selected
for
external
appraisal,
taking
into
account
factors
such
as
property
size,
local
market
conditions
and
geography.
The
Initial
Properties
are
subject
to
regulatory
requirements
that
require
an
external
appraisal
annually.
Investment
properties
acquired
during
2012
were
subject
to
an
internal
valuation
in
response
to
property
and
market
changes
since
acquisition.
For
investment
properties
acquired
in
2013,
management
assessed
whether
any
of
the
criteria
above
had
changed
significantly
since
acquisition
and
determined
that
the
valuations
completed
at
the
dates
of
acquisition
remained
valid.
The
REIT
makes
no
adjustments
for
portfolio
premiums
and
discounts,
nor
for
any
value
attributable
to
the
REIT's
management
platform.
Investment
properties
are
appraised
at
highest
and
best
use,
primarily
based
on
stabilized
cash
flows
from
tenancies,
since
purchasers
typically
focus
on
expected
income.
External
appraisals
conduct
and
place
reliance
on
both
the
direct
capitalization
method
and
the
discounted
cash
flow
method
(including
the
estimated
proceeds
from
a
potential
future
disposition).
Internal
valuations
for
investment
properties
acquired
in
2012
use
the
direct
capitalization
method.
Judgment
is
also
applied
in
determining
whether
certain
costs
are
additions
to
the
carrying
amount
of
the
investment
property
or
are
of
a
repair
and
maintenance
nature.
Income
tax
treatment
The
REIT
indirectly
owns
a
majority
of
its
properties
through
fifteen
FCPs
(fonds
communs
de
placement).
The
income
tax
treatment
of
non-‐German
residents,
such
as
the
FCP
unitholders
indirectly
owned
by
the
REIT,
is
not
entirely
clear
and
is
subject
to
significant
judgment,
and
accordingly
it
is
not
currently
possible
to
determine
with
certainty
whether
the
FCP
unitholders
will
or
will
not
be
taxable
in
Germany
on
their
net
rental
income
and
capital
gains.
In
light
of
this
uncertainty,
the
REIT
has
structured
its
affairs
assuming
that
the
FCP
unitholders
would
be
subject
to
corporate
income
tax
in
Germany,
and
has
prepared
these
consolidated
financial
statements
on
that
basis.
On
November
29,
2013,
the
German
federal
government
approved
an
Investment
Tax
Act
reform
bill.
Based
on
the
bill,
foreign
investment
funds
such
as
the
FCPs
or
the
FCP
unitholders
will
become
subject
to
corporate
income
tax
in
Germany.
Further,
the
REIT
believes
that
the
consequences
of
the
bill
would
be
the
same
from
a
German
corporate
tax
perspective
irrespective
of
whether
it
is
the
FCPs
or
the
FCP
unitholders
that
are
determined
to
be
the
taxpayer.
The
Trust
computes
current
and
deferred
income
taxes
included
in
the
consolidated
financial
statements
based
on
the
following:
• The
rate
of
corporate
tax
payable
on
German
taxable
income
is
15.825%,
including
a
5.5%
solidarity
surcharge;
• Taxable
income
for
German
corporate
income
tax
purposes
is
determined
by
deducting
certain
expenses
incurred
in
connection
with
the
acquisition
and
ownership
of
real
property
as
well
as
certain
operating
expenses,
provided
that
the
costs
are
incurred
under
arm’s
length
terms;
• Buildings
can
generally
be
amortized
on
a
straight-‐line
basis
at
a
rate
of
2%
to
3%
depending
on
the
age
of
the
property;
and
• The
deduction
of
interest
expense,
which
must
reflect
arm’s
length
terms,
is
generally
restricted
by
the
so-‐called
“interest
capping
rules”.
These
rules
apply
to
limit
the
deduction
of
all
interest
expense
incurred
up
to
a
maximum
of
30%
of
the
taxable
earnings
before
interest,
tax,
depreciation
and
amortization.
However,
an
exception
is
available
when
annual
interest
expense
is
less
than
€3,000
for
each
taxpayer.
Dundee
International
2013
Annual
Report
|
51
Business
combinations
Accounting
for
business
combinations
under
IFRS
3,
“Business
Combinations”
(“IFRS
3”),
only
applies
if
it
is
considered
that
a
business
has
been
acquired.
Under
IFRS
3,
a
business
is
defined
as
an
integrated
set
of
activities
and
assets
conducted
and
managed
for
the
purpose
of
providing
a
return
to
investors
or
lower
costs
or
other
economic
benefits
directly
and
proportionately
to
the
Trust.
A
business
generally
consists
of
inputs,
processes
applied
to
those
inputs,
and
resulting
outputs
that
are,
or
will
be,
used
to
generate
revenues.
In
the
absence
of
such
criteria,
a
group
of
assets
is
deemed
to
have
been
acquired.
If
goodwill
is
present
in
a
transferred
set
of
activities
and
assets,
the
transferred
set
is
presumed
to
be
a
business.
The
Trust
applies
judgment
in
determining
whether
property
acquisitions
qualify
as
a
business
combination
in
accordance
with
IFRS
3
or
as
an
asset
acquisition.
When
determining
whether
the
acquisition
of
an
investment
property
or
a
portfolio
of
investment
properties
is
a
business
combination
or
an
asset
acquisition,
the
Trust
applies
judgment
when
considering
the
following:
• whether
the
investment
property
or
properties
are
capable
of
producing
outputs
• whether
the
market
participant
could
produce
outputs
if
missing
elements
exist
In
particular,
the
Trust
considers
the
following:
• whether
employees
were
assumed
in
the
acquisition
• whether
an
operating
platform
has
been
acquired
Currently,
when
the
Trust
acquires
properties
or
a
portfolio
of
properties
and
does
not
take
on
or
assume
employees
or
does
not
acquire
an
operating
platform,
it
classifies
the
acquisition
as
an
asset
acquisition.
Impairment
The
Trust
assesses
the
possibility
and
amount
of
any
impairment
loss
or
write-‐down
as
it
relates
to
amounts
receivable
and
other
assets.
Estimates
and
assumptions
The
Trust
makes
estimates
and
assumptions
that
affect
carrying
amounts
of
assets
and
liabilities,
disclosure
of
contingent
assets
and
liabilities,
and
the
reported
amount
of
other
comprehensive
income
for
the
period.
Actual
results
could
differ
from
estimates.
The
estimates
and
assumptions
critical
to
the
determination
of
the
amounts
reported
in
the
consolidated
financial
statements
relate
to
the
following:
Valuation
of
financial
instruments
The
Trust
makes
estimates
and
assumptions
relating
to
the
fair
value
measurement
of
the
Deferred
Unit
Incentive
Plan,
the
convertible
debenture
conversion
feature,
derivative
instruments,
and
the
fair
value
disclosure
of
the
convertible
debentures,
mortgages
and
term
loans.
The
critical
assumptions
underlying
the
fair
value
measurements
and
disclosures
include
the
market
price
of
Units,
market
interest
rates
for
debt
and
interest
rate
derivatives,
unsecured
debentures
and
foreign
currency
derivatives.
Note
5
FUTURE
ACCOUNTING
POLICY
CHANGES
The
following
are
future
accounting
policy
changes
to
be
implemented
by
the
Trust
in
future
years:
Financial
instruments
IFRS
9,
“Financial
Instruments”
(“IFRS
9”),
was
issued
by
the
IASB
on
November
12,
2009,
and
upon
adoption
will
replace
IAS
39,
“Financial
Instruments:
Recognition
and
Measurement”
(“IAS
39”).
IFRS
9
provides
guidance
on
the
classification
and
measurement
of
financial
assets
and
financial
liabilities
and
the
derecognition
of
financial
instruments.
The
Trust
is
currently
assessing
the
impact
on
the
consolidated
financial
statements
upon
the
adoption
of
IFRS
9.
Financial
instruments:
presentation
IAS
32,
“Financial
Instruments:
Presentation”
(“IAS
32”),
has
been
amended
to
clarify
requirements
for
offsetting
financial
assets
and
financial
liabilities.
The
Trust
will
start
the
application
of
this
amendment
on
January
1,
2014,
and
will
report
the
required
disclosures
on
the
consolidated
financial
statements.
Dundee
International
2013
Annual
Report
|
52
Impairment
of
assets
(limited
scope
amendments
to
disclosure
requirements)
IAS
36,
“Impairment
of
assets”,
has
been
amended
to
change
the
disclosure
requirements
when
the
recoverable
amount
is
determined
based
on
fair
value
less
costs
of
disposal.
The
amendment
is
effective
for
annual
periods
beginning
on
or
after
January
1,
2014
and
should
be
applied
retrospectively.
Accounting
for
levies
imposed
by
governments
IFRIC
21,
“Levies”,
addresses
the
accounting
for
a
liability
to
pay
a
levy
recognized
in
accordance
with
IAS
37,
“Provisions”,
and
the
liability
to
pay
a
levy
whose
timing
and
amount
is
certain.
IFRIC
21
clarifies
that
the
obligating
event
giving
rise
to
a
liability
to
pay
a
levy
is
the
event
identified
in
the
relevant
legislation
that
triggers
the
obligation
to
pay
the
levy.
IFRIC
21
is
effective
for
annual
periods
beginning
on
or
after
January
1,
2014
and
should
be
applied
retrospectively.
The
Trust
is
currently
assessing
the
impact
on
the
consolidated
financial
statements.
Note
6
PROPERTY
ACQUISITIONS
Detailed
below
are
the
acquisitions
completed
during
the
year
ended
December
31,
2013:
For
the
year
ended
December
31,
2013
Hammer
Strasse
30–34,
Hamburg
Neue
Mainzer
Strasse
28
(K26),
Frankfurt
Dillwächterstrasse
5
and
Tübinger
Strasse
11,
Munich
Schlossstrasse
8a–8g,
Hamburg
ABC-‐Strasse
19
(ABC
Bogen),
Hamburg
Moskauer
Strasse
25,
27,
Düsseldorf
Cäcilienkloster
2,
6,
8,
10,
Cologne
Vordernbergstrasse
6/Heilbronner
Strasse
35
(Z-‐UP),
Stuttgart
Bertoldstrasse
48,
50/Sedanstrasse
7,
Freiburg
Lörracher
Strasse
16–16a,
Freiburg
Westendstrasse
160,
162/Barthstrasse
24,
26,
Munich
Am
Stadtpark
2/Bayreuther
Str.
33
(Parcside),
Nuremberg
Speicherstrasse
55
(Werfthaus),
Frankfurt
Reichskanzler-‐Müller-‐Strasse
21,
23,
25,
Mannheim
Löwenkontor,
Berlin
Marsstrasse
20–22,
Munich
Leitzstrasse
45
(Oasis
lll),
Stuttgart
Feldmühleplatz
1
+
15,
Düsseldorf
Greifswalder
Str.
154–156
and
Erich-‐Weinert-‐Str.
145
(Goldpunkt-‐Haus),
Berlin
–
additional
purchase
price
adjustment
Other
prior
year
acquisitions
cost
adjustments
Total
(1)
Includes
transaction
costs.
Property
type
office
office
office
office
office
office
office
office
office
office
office
office
office
office
office
office
office
office
office
office
Interest
acquired
100%
$
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
95%
Purchase
price(1)
59,788
86,298
25,920
45,606
99,479
66,705
102,527
40,998
43,015
11,516
32,301
35,175
86,778
32,101
58,258
90,331
46,509
109,632
Date
acquired
January
31,
2013
February
15,
2013
March
2,
2013
March
12,
2013
March
12,
2013
March
12,
2013
March
12,
2013
March
13,
2013
March
13,
2013
March
13,
2013
March
13,
2013
March
13,
2013
March
14,
2013
March
14,
2013
April
30,
2013
June
28,
2013
September
30,
2013
November
29,
2013
100%
100%
$
2,074
547
1,075,558
On
January
31,
2013,
the
REIT
acquired
Hammer
Strasse
30–34,
an
office
property
located
in
Hamburg,
Germany,
for
$59,788.
The
acquisition
was
partially
financed
by
a
new
mortgage
of
$33,069,
net
of
financing
costs
of
$728.
On
February
15,
2013,
the
REIT
acquired
Neue
Mainzer
Strasse
28,
an
office
property
located
in
Frankfurt,
Germany,
for
$86,298.
The
acquisition
was
partially
financed
by
a
new
mortgage
of
$49,892,
net
of
financing
costs
of
$833.
On
March
2,
2013,
the
REIT
acquired
Dillwächterstrasse
5
and
Tübinger
Strasse
11,
an
office
property
located
in
Munich,
Germany,
for
$25,920.
The
acquisition
was
partially
financed
by
a
new
mortgage
of
$14,489,
net
of
financing
costs
of
$204.
From
March
12
to
March
14,
2013,
the
REIT
acquired
the
SEB
Portfolio,
comprising
11
office
properties,
located
in
various
major
cities
in
Germany,
for
$596,201.
The
acquisition
was
partially
financed
by
11
new
mortgages
totalling
$337,901,
net
of
financing
costs
of
$4,633.
Dundee
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2013
Annual
Report
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53
On
April
30,
2013,
the
REIT
acquired
Löwenkontor,
an
office
property
located
in
Berlin,
Germany,
for
$58,258.
The
acquisition
was
partially
financed
by
a
new
mortgage
of
$35,933,
net
of
financing
costs
of
$678.
On
June
28,
2013,
the
REIT
acquired
Marsstrasse
20–22,
an
office
property
located
in
Munich,
Germany,
for
$90,331.
The
acquisition
was
partially
financed
by
a
new
mortgage
of
$52,735,
net
of
financing
costs
of
$674.
The
REIT
drew
on
the
new
mortgage
on
August
27,
2013,
before
any
commitment
fee
became
payable.
On
September
30,
2013,
the
REIT
acquired
Oasis
III,
an
office
property
located
in
Stuttgart,
Germany,
for
$46,509.
The
acquisition
was
partially
financed
by
a
new
mortgage
of
$26,024,
net
of
financing
costs
of
$478.
The
REIT
drew
down
the
mortgage
on
November
15,
2013.
On
November
29,
2013,
the
REIT
acquired
a
94.9%
interest
in
Feldmühleplatz
1
+
15,
an
office
property
located
in
Düsseldorf,
Germany.
The
acquisition
cost
for
the
property
was
$109,632.
The
acquisition
was
partially
financed
by
a
new
mortgage
of
$66,675,
net
of
financing
costs
of
$871.
The
REIT
drew
down
the
mortgage
on
December
23,
2013.
Pursuant
to
the
terms
of
the
purchase
and
sale
agreement
related
to
the
acquisition
of
Greifswalder
Str.
154–156
and
Erich-‐
Weinert-‐Str.
145
(Goldpunkt-‐Haus),
Berlin
on
December
7,
2012,
the
REIT
was
obligated
to
pay
purchase
price
adjustments
contingent
upon
successful
leasing
of
vacant
space
by
the
vendor
over
a
two-‐year
period.
On
December
7,
2013,
the
REIT
paid
$2,074
for
leasing
completed
during
the
first
year.
Subject
to
additional
new
leasing
completed
by
the
vendor
by
December
7,
2014,
the
REIT
may
be
obligated
to
an
additional
contingent
payment
up
to
a
maximum
of
$1,972.
Detailed
below
are
the
acquisitions
during
the
year
ended
December
31,
2012:
For
the
year
ended
December
31,
2012
Grammophon
Büropark,
Hannover
Karl-‐Martell-‐Strasse
60,
Nuremberg
Derendorfer
Allee
4–4a
(doubleU),
Düsseldorf
Greifswalder
Str.
154–156
and
Erich-‐Weinert-‐Str.
145
(Goldpunkt-‐Haus),
Berlin
Am
Sandtorkai
37
(Humboldt-‐Haus),
Hamburg
Leopoldstrasse
252,
252a
and
252b
(Leo252),
Munich
Total
(1)
Includes
transaction
costs.
Property
type
office
office
office
office
office
office
Interest
acquired
100%
100%
100%
100%
100%
100%
Purchase
price(1)
35,632
65,935
56,620
39,570
37,074
35,830
270,661
$
$
Date
acquired
February
29,
2012
April
26,
2012
July
19,
2012
December
7,
2012
December
31,
2012
December
31,
2012
The
assets
acquired
and
liabilities
assumed
in
the
transactions
were
allocated
as
follows:
For
the
year
For
the
year
ended
ended
December
31,
December
31,
2013
$
$
1,075,558
1,075,558
$
$
2012
270,661
270,661
$
$
1,080,279
763
-‐
(5,484)
1,075,558
$
$
241,032
812
21,803
7,014
270,661
Investment
properties(1)
Total
purchase
price
The
consideration
paid
consists
of:
Cash
Working
capital
adjustments
Fair
value
of
mortgage
debt
assumed
Net
transaction
costs
Total
consideration
(1)
Includes
transaction
costs.
Dundee
International
2013
Annual
Report
|
54
Note
7
INVESTMENT
PROPERTIES
Balance
at
beginning
of
year
Additions:
Acquisitions
Building
improvements
Lease
incentives
and
initial
direct
leasing
costs
Amortization
of
lease
incentives
Disposals
Reclassified
to
assets
held
for
sale
Fair
value
adjustments
Foreign
currency
translation
Balance
at
end
of
year
For
the
year
ended
December
31,
2013
1,182,757
$
For
the
year
ended
December
31,
2012
941,442
$
1,075,558
5,821
8,246
(616)
(23,943)
(21,147)
(59,223)
222,791
2,390,244
$
270,661
2,391
1,011
(17)
(7,415)
-‐
(23,349)
(1,967)
1,182,757
$
The
REIT
has
determined
that
it
has
two
asset
classes
of
investment
properties
reflecting
their
distinct
nature,
characteristics
and
risks.
Initial
Properties
The
Initial
Properties
consist
of
the
properties
that
were
acquired
on
August
3,
2011.
These
properties
consist
of
national
and
regional
administration
offices,
mixed
use
retail,
banking
and
distribution
properties
and
regional
logistics
headquarters
of
Deutsche
Post.
The
properties
are
generally
situated
in
city
centres
and
geographically
dispersed
throughout
Germany
and
are
smaller
and
older
than
the
properties
acquired
in
2012
and
2013.
Acquisition
Properties
These
investment
properties
were
acquired
during
2012
and
2013
and
consist
of
high-‐quality
office
buildings
located
in
Germany’s
largest
office
markets
and
are
generally
newer
or
recently
refurbished
buildings.
Balance
as
at
January
1,
2013
Purchase
of
investment
properties:
Acquisitions
of
properties
Subsequent
expenditure
on
investment
property
Lease
incentives
and
initial
direct
leasing
costs
Total
additions
to
investment
properties
Disposals
of
investment
properties:
Sales
of
investment
properties
Transfers
to
disposal
groups
classified
as
held
for
sale
Total
disposals
of
investment
properties
Gains
and
losses
included
in
net
income:
Change
in
fair
value
of
investment
properties
Amortization
of
initial
direct
leasing
costs
Total
losses
included
in
net
income
Gains
and
losses
included
in
other
comprehensive
income:
Foreign
currency
translation
gain
Total
gains
included
in
other
comprehensive
income
Balance
as
at
December
31,
2013
Changes
in
unrealized
losses
included
in
net
income
for
the
year
ended
December
31,
2013:
Change
in
fair
value
of
investment
properties
$
$
Dundee
International
2013
Annual
Report
|
55
Total
1,182,757
$
$
Initial
Properties
919,814
$
Acquisition
Properties
262,943
1,075,558
5,821
8,246
1,089,625
(23,943)
(21,147)
(45,090)
(59,223)
(616)
(59,839)
-‐
5,057
6,543
11,600
(23,943)
(21,147)
(45,090)
(7,003)
(530)
(7,533)
1,075,558
764
1,703
1,078,025
-‐
-‐
-‐
(52,220)
(86)
(52,306)
222,791
222,791
2,390,244
$
106,421
106,421
985,212
$
116,370
116,370
1,405,032
(59,365)
$
(7,145)
$
(52,220)
Straight-‐line
rent
receivable,
which
resulted
from
free
rents
and
rent
step-‐ups
accrued
to
rental
revenue,
of
$1,896
(December
31,
2012
–
$278),
has
been
included
in
other
non-‐current
assets.
During
the
year
ended
December
31,
2013,
18
investment
properties
were
acquired
for
$1,075,558
(including
transaction
costs);
refer
to
Note
6
for
details
of
the
acquisitions.
During
the
year
ended
December
31,
2013,
the
REIT
disposed
of
15
investment
properties
valued
at
$23,943.
These
properties
were
acquired
in
2011
as
part
of
the
Initial
Properties.
Net
proceeds
of
$22,801
(December
31,
2012
–
$7,070)
were
received
on
these
sales
and
a
loss
of
$1,142
(December
31,
2012
–
$320)
was
recorded
in
connection
with
transaction
costs.
As
at
December
31,
2013,
273
of
the
Initial
Properties
were
valued
by
external
appraisers
using
the
discounted
cash
flow
method,
representing
42%
of
the
fair
value
of
investment
properties.
In
relation
to
the
Acquisition
Properties,
management
has
reviewed
key
assumptions
and
circumstances
underlying
the
appraisals
at
the
date
of
acquisition.
As
a
result,
the
six
properties
that
were
acquired
in
2012
were
subject
to
a
valuation
performed
by
management
internally
using
the
direct
capitalization
method,
representing
13%
of
the
fair
value
of
the
portfolio
at
the
end
of
2013.
The
key
assumptions
and
circumstances
relating
to
properties
acquired
during
2013
were
determined
to
be
valid
and
no
changes
were
made
to
the
values
on
acquisition.
The
change
in
fair
value
of
investment
properties
comprises
the
following:
Increase
in
fair
value
as
a
result
of
valuation
update
Building
expenditures
capitalized
during
the
year
Leasing
expenditures
capitalized
during
the
year
Transaction
costs
capitalized
on
acquisition
Straight-‐line
rent,
amortization
of
lease
incentives
and
other
Total
14,436
$
(5,562)
(8,246)
(59,126)
(725)
(59,223)
$
$
$
Initial
Properties
4,841
$
(5,015)
(6,543)
-‐
(286)
(7,003)
$
Acquisition
Properties
9,595
(547)
(1,703)
(59,126)
(439)
(52,220)
As
at
December
31,
2013,
the
REIT
has
entered
into
binding
purchase
and
sale
agreements
to
sell
six
properties
valued
at
$21,842.
After
adjusting
for
costs
to
sell
of
$695,
$21,147
has
been
classified
as
assets
held
for
sale
(Note
17).
Future
minimum
contractual
rent
(excluding
service
charges)
under
current
operating
leases
is
as
follows:
Less
than
1
year
1–5
years
Longer
than
5
years
Total
(1)
Includes
income
from
head
lease.
December
31,
2013(1)
174,549
498,837
205,825
879,211
$
$
Dundee
International
2013
Annual
Report
|
56
Fair
value
hierarchy
Investment
properties
measured
at
fair
value
in
the
statement
of
financial
position
are
categorized
by
level
according
to
the
significance
of
the
inputs
used
in
making
the
measurements.
Recurring
measurements
Investment
properties
Initial
Acquisitions
Acquisition
Properties
Total
Non-‐recurring
measurements
Properties
reclassified
to
assets
held
for
sale
Quoted
prices
in
active
markets
for
identical
instruments
(Level
1)
Significant
other
observable
inputs
(Level
2)
Significant
unobservable
inputs
(Level
3)
-‐
$
-‐
-‐
-‐
$
-‐
$
-‐
-‐
985,212
1,405,032
2,390,244
-‐
$
21,842
December
31,
2013
$
985,212
$
1,405,032
2,390,244
$
21,147
$
The
REIT’s
policy
is
to
recognize
transfers
into
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
in
or
out
of
Level
3
fair
value
measurements
for
investment
properties
during
the
period.
Valuation
techniques
underlying
management’s
estimates
of
fair
value
Fair
values
for
investment
properties
are
calculated
using
both
the
direct
income
capitalization
and
discounted
cash
flow
method,
which
results
in
these
measurements
being
classified
as
Level
3
in
the
fair
value
hierarchy.
The
REIT’s
management
is
responsible
for
determining
fair
value
measurements
included
in
the
financial
statements,
including
Level
3
fair
value
of
investment
properties.
Investment
properties
are
valued
on
a
highest
and
best
use
basis.
For
all
of
the
REIT’s
investment
properties,
the
current
use
is
considered
to
be
the
highest
and
best
use.
Investment
properties
with
a
fair
value
of
$1,405,032
(Acquisition
Properties)
have
been
valued
using
the
direct
income
capitalization
method.
In
applying
this
method,
the
stabilized
net
operating
income
(“NOI”)
of
each
property
is
divided
by
an
appropriate
capitalization
rate.
The
following
are
the
significant
assumptions
used
in
determining
the
value:
Capitalization
rate
based
on
actual
location,
size
and
quality
of
the
property
and
taking
into
account
any
available
market
data
at
the
valuation
date.
Stabilized
NOI
revenue
less
property
operating
expenses
adjusted
for
items
such
as
new
leasing,
average
lease
up
costs,
long-‐term
vacancy
rates,
non-‐recoverable
capital
expenditures,
management
fees,
straight-‐line
rents
and
other
non-‐recurring
items.
Generally,
an
increase
in
stabilized
NOI
will
result
in
an
increase
in
the
fair
value
of
an
investment
property.
An
increase
in
the
capitalization
rate
will
result
in
a
decrease
in
the
fair
value
of
an
investment
property.
The
capitalization
rate
magnifies
the
effect
of
a
change
in
stabilized
NOI,
with
a
lower
capitalization
rate
resulting
in
a
greater
impact
of
a
change
in
stabilized
NOI
than
a
higher
capitalization
rate.
Investment
properties
with
a
value
of
$985,212
(Initial
Properties)
were
valued
using
the
discounted
cash
flow
(“DCF”)
method.
In
applying
this
method,
the
income
and
expenditures
of
a
specific
property
are
projected
assuming
a
10-‐year
hold
period
plus
the
forecasted
net
proceeds
from
the
re-‐sale
of
the
property
at
the
end
of
the
hold
period
using
a
discount
rate
reflecting
the
risks
of
the
property
being
valued.
The
most
significant
assumptions
incorporated
into
the
DCF
analysis
include
growth
rates,
exit
capitalization
rates
and
discount
rates:
Discount
rate
reflects
the
internal
rate
of
return
of
a
specific
property.
The
discount
rate
is
determined
by
analyzing
sales
of
similar
properties
and
yields
of
alternative
investments.
Consideration
is
given
to
10-‐year
bond
yields
and
yields
of
high-‐quality
corporate
bonds
to
which
an
upward
adjustment
is
made
to
reflect
the
increased
risk
associated
with
real
estate
investments
and
the
specific
risk
associated
with
each
asset.
Dundee
International
2013
Annual
Report
|
57
Exit
capitalization
rate
based
on
the
initial
rate
of
return
applicable
to
a
property
adjusted
slightly
upward
to
reflect
the
risk
in
negotiating
new
leases,
older
building
age
and
the
risk
associated
with
a
future
sale.
Growth
rate
based
on
the
average
increase
in
the
consumer
price
index
for
Germany
over
the
past
three
years
and
ranges
from
1.5%
to
2.1%.
The
weighted
average
growth
rate
used
for
the
Initial
Properties
is
2.0%.
Valuation
processes
Initial
Properties
At
December
31,
2013
and
2012,
the
REIT
obtained
external
valuations
for
the
Initial
Properties
including
assets
held
for
sale,
representing
approximately
42%
of
the
investment
property
portfolio.
In
2013,
properties
with
a
value
of
$1,006,359
(€686,700)
were
valued
externally
(2012
–
$919,814
(€701,185)).
The
external
valuations
are
prepared
by
independent
professionally
qualified
appraisers
who
hold
a
recognized,
relevant
professional
qualification
and
have
recent
experience
in
the
location
and
category
of
the
respective
property.
For
properties
subject
to
an
independent
valuation
report,
the
management
team
verifies
all
major
inputs
to
the
valuation
and
reviews
the
results
with
the
independent
appraisers.
Significant
unobservable
inputs
in
Level
3
valuations
related
to
the
Initial
Properties
including
assets
held
for
sale
are
as
follows:
Valuation
method
Discounted
cash
flow
Input
Discount
rate
Exit
capitalization
rate
Cash
flow
Range
5.9%–10.8%
5.1%–9.3%
n/a
December
31,
2013
Average
8.3%
7.2%
$67,414
If
both
the
discount
rate
and
exit
capitalization
rate
were
to
increase
by
25
bps,
the
value
of
the
Initial
Properties
would
decrease
by
$19,109.
If
both
the
discount
rate
and
exit
capitalization
rate
were
to
decrease
by
25
bps,
the
value
of
the
Initial
Properties
would
increase
by
$19,562.
Acquisition
Properties
At
December
31,
2013
and
2012,
the
REIT
performed
internal
valuations
for
the
Acquisition
Properties.
In
2013,
properties
with
a
value
of
$1,405,032
(€958,739)
were
subject
to
internal
valuations
(2012
–
$262,943
(€200,444)).
The
valuations
are
prepared
by
management
with
inputs
based
on
market
observations
and
corroborated,
in
specific
cases,
through
discussions
with
professionally
qualified
appraisers.
Significant
unobservable
inputs
in
Level
3
valuations
related
to
the
Acquisition
Properties
are
as
follows:
Valuation
method
Direct
income
capitalization
Input
Capitalization
rate
Stabilized
NOI
Range
5.8%–8.3%
n/a
December
31,
2013
Weighted
average
6.7%
$94,480
If
the
capitalization
rate
were
to
increase
by
25
bps,
the
value
of
Acquisition
Properties
would
decrease
by
$50,800.
If
the
capitalization
rate
were
to
decrease
by
25
bps,
the
value
of
Acquisition
Properties
would
increase
by
$54,786.
Note
8
AMOUNT
IN
ESCROW
AND
DEFERRED
RENT
Amount
in
escrow
Less:
Current
portion
Non-‐current
portion
Deferred
rent
Less:
Current
portion
Non-‐current
portion
Dundee
International
2013
Annual
Report
|
58
December
31,
December
31,
2013
6,220
6,220
-‐
6,220
6,220
-‐
$
$
$
$
2012
17,678
12,110
5,568
17,678
12,110
5,568
$
$
$
$
On
July
1,
2012,
Deutsche
Post
terminated
17
leases
with
respect
to
its
2012
termination
rights.
In
light
of
these
terminations,
the
vendor
of
the
properties
entered
into
a
lease
agreement
with
the
Trust
for
the
space
and
has
paid
an
amount
of
$22,372
(€17,329)
plus
all
interest
accrued
thereon
for
the
rent
covering
the
period
commencing
on
July
1,
2012
to,
and
including,
June
30,
2014.
This
amount
was
set
aside
by
the
vendor
in
a
bank
account
out
of
which
the
REIT
has
been
and
will
be
paid
on
a
monthly
basis,
since
July
1,
2012,
amounts
representing
the
net
rent
payable
for
two
years
plus
prepayments
of
operating
costs.
On
July
1,
2013,
Deutsche
Post
terminated
one
additional
lease,
pursuant
to
its
2012
termination
rights.
This
termination,
for
which
the
Trust
received
an
additional
payment
from
the
vendor
of
approximately
$218
(€169),
became
effective
as
at
July
1,
2013.
During
the
year
ended
December
31,
2013,
the
Trust
has
received
$12,614
out
of
escrow.
Note
9
OTHER
NON-‐CURRENT
ASSETS
Equity
accounted
investment
Fixtures
and
computer
equipment
Straight-‐line
rent
receivable
Total
December
31,
2013
240
152
1,896
2,288
$
$
$
December
31,
2012
192
78
278
548
$
Equity
accounted
investment
The
Trust
participates
in
a
jointly
controlled
corporate
entity
(the
“joint
venture”)
with
other
parties
and
accounts
for
its
interests
using
the
equity
accounting
method.
Details
of
the
Trust’s
joint
venture
are
as
follows:
Name
Lorac
Investment
Management
S.à
r.l.
Note
10
AMOUNTS
RECEIVABLE
Trade
receivables
Less:
Provision
for
impairment
of
trade
receivables
Trade
receivables,
net
Other
amounts
receivable
Total
Principal
activity
Investment
management
Location
Luxembourg
Ownership
interest
at
December
31,
2013
50%
$
December
31,
2013
8,071
(655)
7,416
10,733
$
$
18,149
$
December
31,
2012
247
(239)
8
4,814
4,822
As
at
December
31,
2013,
other
amounts
receivable
include
amounts
receivable
from
tenants
regarding
operating
cost
recoveries
of
$7,358.
The
carrying
amount
of
amounts
receivable
approximates
fair
value
due
to
their
current
nature.
As
at
December
31,
2013,
trade
receivables
of
approximately
$916
(December
31,
2012
–
$nil)
were
past
due
but
not
considered
impaired
as
the
Trust
has
ongoing
relationships
with
these
tenants
and
the
aging
of
these
trade
receivables
is
not
indicative
of
expected
default.
Dundee
International
2013
Annual
Report
|
59
Note
11
DEBT
Mortgage
debt
Convertible
debentures
Term
loan
credit
facility
Total
Less:
Current
portion
Non-‐current
debt
December
31,
December
31,
$
$
2013
825,014
150,326
448,972
1,424,312
20,356
2012
151,862
148,428
426,540
726,830
2,711
$
1,403,956
$
724,119
First-‐ranking
mortgages
on
all
of
the
investment
properties
have
been
provided
as
security
for
either
the
mortgage
debt
or
the
term
loan
credit
facility.
Mortgage
debt
On
January
31,
2013,
the
Trust
obtained
a
mortgage
with
a
principal
balance
of
€24,900
($33,797)
at
a
fixed
interest
rate
of
2.41%
per
annum,
maturing
on
January
31,
2018,
in
connection
with
the
acquisition
of
Hammer
Strasse
30–34,
Hamburg.
The
mortgage
requires
quarterly
repayments
with
a
principal
amortization
of
2.0%
per
annum
of
the
initial
loan
amount.
On
February
15,
2013,
the
Trust
obtained
a
mortgage
with
a
principal
balance
of
€37,700
($50,725)
at
a
fixed
interest
rate
of
2.92%
per
annum,
maturing
December
31,
2022,
on
the
newly
acquired
property,
Neue
Mainzer
Strasse
28
(K26),
Frankfurt.
The
mortgage
requires
quarterly
repayments
with
principal
amortization
of
1.7%
based
on
an
annuity
payment
plan.
On
March
2,
2013,
the
Trust
obtained
a
mortgage
with
a
principal
balance
of
€11,000
($14,693)
at
a
fixed
interest
rate
of
2.68%
per
annum,
maturing
February
29,
2020,
on
the
newly
acquired
property,
Dillwächterstrasse
5
and
Tübinger
Strasse
11,
Munich.
The
mortgage
requires
monthly
repayments
with
principal
amortization
of
2.5%
per
annum
throughout
the
term.
From
March
12
to
March
14,
2013,
the
Trust
obtained
11
mortgages
with
a
total
principal
balance
of
€256,950
($342,534)
at
a
weighted
average
fixed
rate
of
2.54%
per
annum,
maturing
from
March
7,
2018
to
March
14,
2023,
on
acquisition
of
the
SEB
Portfolio
of
properties.
The
mortgage
requires
quarterly
payments
with
principal
repayments
of
1.5%
to
2.5%
per
annum
of
the
initial
loan
amount.
On
April
30,
2013,
the
Trust
obtained
a
mortgage
with
a
principal
balance
of
€27,600
($36,611)
at
a
fixed
rate
of
2.37%
per
annum,
maturing
March
29,
2018,
on
the
newly
acquired
property,
Löwenkontor,
Berlin.
The
mortgage
requires
quarterly
repayments
with
principal
amortization
of
2.0%
per
annum
on
the
initial
loan
amount.
On
August
26,
2013,
the
Trust
drew
on
a
mortgage
with
a
principal
balance
of
€38,000
($53,409)
at
a
fixed
rate
of
2.69%
per
annum,
maturing
on
June
30,
2020,
in
connection
with
the
acquisition
of
Marsstrasse
20–22,
Munich.
The
mortgage
requires
quarterly
repayments
with
principal
amortization
of
2%
per
annum
throughout
the
term.
On
November
15,
2013,
the
Trust
drew
on
a
mortgage
with
a
principal
balance
of
€18,800
($26,502)
at
a
fixed
rate
of
2.73%
per
annum,
maturing
on
October
31,
2018,
in
connection
with
the
acquisition
of
Leitzstrasse
45
(Oasis
III),
Stuttgart.
The
mortgage
requires
quarterly
repayments
with
principal
amortization
of
2%
per
annum
throughout
the
term.
On
December
23,
2013,
the
Trust
drew
on
a
mortgage
with
a
principal
balance
of
€46,500
($67,546)
at
a
fixed
rate
of
2.32%
per
annum,
maturing
on
November
26,
2018,
in
connection
with
the
acquisition
of
Feldmühleplatz,
Düsseldorf.
The
mortgage
requires
quarterly
repayments
with
principal
amortization
of
1.5%
per
annum
throughout
the
term.
Dundee
International
2013
Annual
Report
|
60
Convertible
debentures
On
August
3,
2011,
the
Trust
issued
a
$140,000
principal
amount
of
convertible
unsecured
subordinated
debentures
(the
“Debentures”).
On
August
29,
2011,
the
Trust
issued
an
additional
$21,000
principal
amount
of
Debentures.
The
Debentures
bear
interest
at
5.5%
per
annum,
payable
semi-‐annually
on
July
31
and
January
31
each
year,
and
mature
on
July
31,
2018.
Each
Debenture
is
convertible
at
any
time
by
the
debenture
holder
into
76.9231
Units
per
one
thousand
dollars
of
face
value,
representing
a
conversion
price
of
$13.00
per
REIT
Unit.
On
or
after
August
31,
2014,
and
prior
to
August
31,
2016,
the
Debentures
may
be
redeemed
by
the
Trust,
in
whole
or
in
part,
at
a
price
equal
to
the
principal
amount
plus
accrued
and
unpaid
interest
on
not
more
than
60
days’
and
not
less
than
30
days’
prior
written
notice,
provided
the
weighted
average
trading
price
for
the
Trust’s
Units
for
the
20
consecutive
trading
days,
ending
on
the
fifth
trading
day
immediately
preceding
the
date
on
which
notice
of
redemption
is
given,
is
not
less
than
125%
of
the
conversion
price.
On
or
after
August
31,
2016,
and
prior
to
July
31,
2018,
the
maturity
date,
the
Debentures
may
be
redeemed
by
the
Trust
at
a
price
equal
to
the
principal
amount
plus
accrued
and
unpaid
interest.
The
Debentures
were
initially
recorded
on
the
consolidated
balance
sheet
as
debt
of
$152,894
less
costs
of
$6,931.
In
addition,
the
Trust
allocated
$8,106
to
the
conversion
feature
upon
initial
recognition,
which
was
deducted
from
the
principal
balance
and
will
be
accreted
to
the
principal
amount
of
the
Debenture
over
its
term.
As
at
December
31,
2013,
the
outstanding
principal
amount
is
$161,000
(December
31,
2012
–
$161,000).
Term
loan
credit
facility
On
August
3,
2011,
the
Trust
obtained
a
term
loan
credit
facility
(the
“Facility”)
for
gross
proceeds
of
€328,500
($448,395).
Costs
relating
to
the
Facility
were
$10,896.
These
costs
were
reduced
by
proceeds
of
$9,555
received
from
the
vendor
to
compensate
the
Trust
for
higher
than
expected
financing
costs.
The
Facility
initially
had
a
term
of
five
years,
which
could
be
extended
for
a
further
two
years,
subject
to
the
satisfaction
of
certain
conditions
precedent
at
the
time
of
the
extension.
Variable
rate
interest
is
calculated
and
payable
quarterly
under
the
Facility
at
a
rate
equal
to
the
aggregate
of
the
three-‐month
EURIBOR
plus
a
margin
of
200
basis
points
(the
“margin”)
and
an
agency
fee
of
10
basis
points.
Pursuant
to
the
Facility,
the
Trust
was
required
to
enter
into
an
interest
rate
swap
that
fixed
80%
of
the
variable
interest
rate
payable
under
the
Facility
(the
“Fixed
Rate
Portion”)
at
a
fixed
interest
rate
not
to
exceed
3.5%,
excluding
the
margin,
and
was
required
to
purchase
a
cap
instrument
to
cover
10%
of
the
variable
rate
interest
payable
so
that
such
interest
rate
does
not
exceed
5%
(excluding
the
margin).
The
remaining
10%
of
interest
payable
would
continue
to
be
calculated
quarterly
on
a
variable
rate
basis.
To
comply
with
the
Facility’s
requirement,
on
the
day
of
closing
the
Trust
entered
into
an
interest
rate
swap
to
pay
a
fixed
rate
of
4.05%
on
80%
of
the
Facility
and
an
interest
rate
cap
of
5.00%
on
10%
of
the
Facility
at
a
cost
of
$9,986.
As
at
December
31,
2013,
the
Trust
paid
a
rate
of
4.24%
(December
31,
2012
–
4.05%)
on
the
fixed
portion
of
the
Facility
and
a
rate
of
3.37%
(December
31,
2012
–
3.37%)
on
the
variable
portion
of
the
Facility,
resulting
in
a
blended
rate
of
4.09%
as
at
December
31,
2013
(December
31,
2012
–
3.91%).
No
amortization
of
principal
under
the
Facility
is
required
during
the
first
three
years
of
the
Facility
term.
Thereafter,
interest
together
with
amortization
of
principal
equal
to
2%
per
annum
of
the
initial
loan
amount
will
be
payable
on
a
quarterly
basis
(including
the
extension
term,
if
any).
Effective
August
3,
2013,
the
Trust
is
required
to
pay
the
additional
interest
of
1%
on
the
portion
of
the
€100,000
plus
a
15%
prepayment
amount,
less
any
amounts
repaid.
The
applicable
prepayment
fee
decreases
to
0.6%
for
repayments
made
prior
to
August
3,
2014,
0.25%
for
repayments
made
prior
to
August
3,
2015
and
no
repayment
fee
for
repayments
made
in
the
final
year
of
the
Facility.
During
the
year
ended
December
31,
2013,
the
Trust
repaid
€10,115
($14,007)
in
connection
with
the
disposition
of
15
properties
including
prepayment
amounts,
in
accordance
with
the
terms
of
the
Facility.
In
addition,
on
August
16,
2013,
the
Trust
made
a
lump
sum
repayment
of
€2,000
($2,772).
For
the
year
ended
December
31,
2012,
the
Trust
repaid
€2,665
($3,426)
in
connection
with
the
disposition
of
five
properties.
As
a
result
of
these
dispositions,
the
€100,000
plus
15%
prepayment
portion
has
been
reduced
to
€100,221
as
at
December
31,
2013,
of
which
€49,300
($72,249)
was
allocated
to
the
Fixed
Rate
Portion
of
the
Facility
and
the
remainder
was
allocated
to
the
variable
rate
portion
of
the
debt.
Factoring
the
additional
1%
the
Trust
has
to
pay
on
the
€100,221
($146,874),
the
Trust
paid
a
rate
of
4.24%
on
the
fixed
rate
portion
of
€262,800
and
a
rate
of
3.37%
on
the
€50,921
variable
portion
of
the
Facility
as
at
December
31,
2013.
As
at
December
31,
2013,
€6,908
($10,123)
of
the
variable
rate
portion
of
the
Facility
(net
of
deferred
financing
costs
–
€6,896
($10,106))
has
been
allocated
to
liabilities
related
to
assets
held
for
sale.
The
REIT
had
identified
six
properties
as
held
for
sale,
thereby
the
allocated
amounts
of
the
Facility
secured
by
those
properties
were
reclassified
as
liabilities
related
to
assets
held
for
sale
(Note
17).
The
Facility
requires
certain
bank
accounts
to
be
pledged,
and
that
all
net
rental
income
from
the
Initial
Properties
be
paid
into
a
rent
collections
account
established
by
the
Trust,
to
be
released
only
after
budgeted
non-‐recoverable
operating
expenses
(including
an
agreed
property
and
asset
management
fee)
are
paid.
Dundee
International
2013
Annual
Report
|
61
The
Facility
includes
default
and
cash
trap
covenants
requiring
the
Trust
to
maintain
certain
loan-‐to-‐value
and
debt
service
coverage
ratios,
each
of
which
are
calculated
on
a
quarterly
basis.
The
Facility
agreement
requires
the
debt
service
coverage
ratio
to
be
equal
to
or
above
145%
at
each
interest
payment
date.
If
these
ratios
are
not
met
at
any
time,
the
lenders
may
withhold
50%
of
the
excess
cash
flow
on
a
monthly
basis
as
additional
security
for
the
Facility
until
the
ratios
are
once
again
satisfied.
Upon
satisfaction
of
the
relevant
ratio,
the
excess
cash
flow
may
again
be
distributed
to
the
Trust;
however,
any
cash
previously
trapped
will
not
be
released
and
will
be
used
at
the
time
of
each
future
quarterly
testing
date
until
the
ratio
is
satisfied
for
two
consecutive
quarters.
As
at
December
31,
2013,
the
Trust
was
in
compliance
with
its
loan
covenants.
In
addition,
the
Facility
requires
that
DAM
and
Dundee
Corporation
combined
maintain
at
least
$120,000
of
equity
in
the
REIT
for
a
two-‐year
period
from
closing
and
at
least
$48,000
of
equity
for
the
remainder
of
the
term
of
the
Facility.
As
at
December
31,
2013,
the
Trust
is
in
compliance
with
the
requirements.
Revolving
credit
facility
On
October
10,
2013,
the
REIT
entered
into
an
agreement
with
a
Canadian
bank.
Under
the
agreement,
the
revolving
credit
facility
stands
at
€25,000.
The
interest
rate
on
any
Canadian
dollar
advances
is
prime
plus
200
basis
points
and/or
bankers’
acceptance
rates
plus
300
basis
points.
For
euro
advances,
the
rate
is
300
basis
points
over
the
three-‐month
EURIBOR
rate.
Total
financing
costs
incurred
amounted
to
$543
as
at
December
31,
2013.
The
revolving
credit
facility
agreement
requires
the
Trust
to
maintain
a
debt-‐to-‐book
value
rating
not
to
exceed
0.6:1;
a
minimum
interest
coverage
ratio
of
2:1;
and
a
minimum
net
worth
of
$700,000.
The
agreement
also
required
the
REIT
to
provide
a
pledge
of
10%
of
outstanding
equity
of
a
subsidiary
as
collateral.
The
revolving
credit
facility
has
a
term
of
two
years,
expiring
September
25,
2015.
As
at
December
31,
2013,
the
outstanding
balance
of
the
credit
facility
was
$nil
and
the
Trust
is
in
compliance
with
the
covenants
of
the
revolving
credit
facility.
The
weighted
average
interest
rates
for
the
fixed
and
floating
components
of
debt
are
as
follows:
Face
interest
rates
Weighted
average
effective
interest
rate
December
31,
December
31,
2012
2013
December
31,
December
31,
2012
2013
Maturity
dates
December
31,
2013
Debt
amount
December
31,
2012
Fixed
rate
Mortgage
debt
Term
loan
credit
facility(1)
Convertible
debentures
Total
fixed
rate
debt
Variable
rate
82,512
Term
loan
credit
facility
82,512
Total
variable
rate
debt
726,830
Total
debt
(1)
As
at
December
31,
2013,
86%
of
the
term
loan
credit
facility
is
subject
to
an
interest
rate
swap
in
place
until
August
3,
2016,
pursuant
to
the
term
loan
credit
825,014
$
384,604
150,326
1,359,944
64,368
64,368
1,424,312
$
151,862
344,028
148,428
644,318
2015–2023
2016
2018
2.84%
4.28%
7.31%
3.74%
2.57%
4.24%
5.50%
3.37%
2.69%
4.12%
7.31%
4.52%
2.66%
4.05%
5.50%
4.05%
3.40%
3.40%
3.72%
3.37%
3.37%
3.37%
3.37%
3.37%
3.98%
3.43%
3.43%
4.39%
2016
$
$
facility
agreement,
and
has
been
presented
as
fixed
rate
debt.
The
scheduled
principal
repayments
and
debt
maturities
are
as
follows:
2014
2015
2016
2017
2018
2019
and
thereafter
Acquisition
date
fair
value
adjustments
Transaction
costs
Mortgages
16,431
37,584
16,797
106,747
343,690
313,948
835,197
$
$
$
$
Term
debt
3,925
9,628
436,081
-‐
-‐
-‐
449,634
$
$
Convertible
debentures
-‐
-‐
-‐
-‐
161,000
-‐
161,000
Total
20,356
47,212
452,878
106,747
504,690
313,948
1,445,831
(5,387)
(16,132)
1,424,312
$
$
$
Dundee
International
2013
Annual
Report
|
62
Note
12
DERIVATIVE
FINANCIAL
INSTRUMENTS
Interest
rate
swaps
(Note
25)
Interest
rate
cap
(Note
25)
Foreign
exchange
forward
contracts
(Note
25)
Conversion
feature
of
the
Debentures
(Notes
11
and
25)
Total
Less:
Current
portion
Non-‐current
portion
The
movement
in
the
conversion
feature
on
the
convertible
debentures
was
as
follows:
Balance
at
beginning
of
period
Remeasurement
of
conversion
feature
Balance
at
end
of
period
December
31,
2013
December
31,
2012
$
13,764
$
18,513
(18)
15,941
384
30,071
13,772
16,299
$
(11)
429
4,145
23,076
4,441
18,635
$
For
the
year
ended
December
31,
2013
$
$
4,145
(3,761)
384
The
Trust
currently
has
foreign
exchange
forward
contracts
to
sell
€5,622
each
month
from
January
2014
to
June
2014,
€5,222
each
month
from
July
2014
to
May
2015,
€3,922
in
June
2015,
€2,372
each
month
from
July
2015
to
September
2015,
€2,050
each
month
from
October
2015
to
May
2016
and
€1,800
in
June
2016,
at
an
average
exchange
rate
of
$1.334
per
euro.
Note
13
DEFERRED
UNIT
INCENTIVE
PLAN
The
movement
in
the
Deferred
Unit
Incentive
Plan
balance
(see
Note
16)
was
as
follows:
As
at
January
1,
2012
Compensation
during
the
period
Asset
management
fees
during
the
period
Issue
of
deferred
units
Remeasurements
of
carrying
value
As
at
December
31,
2012
Compensation
during
the
period
Asset
management
fees
during
the
period
Issue
of
deferred
units
Remeasurements
of
carrying
value
As
at
December
31,
2013
$
$
945
628
1,907
(138)
287
3,629
1,313
2,113
(164)
(585)
6,306
On
August
3,
2011,
DAM
elected
to
receive
the
first
$3,500
of
the
base
asset
management
fees
payable
on
the
properties
acquired
on
August
3,
2011
by
way
of
deferred
trust
units
under
the
Asset
Management
Agreement
in
each
year
for
the
next
five
years.
The
deferred
trust
units
granted
to
DAM
vest
annually
over
five
years,
commencing
on
the
fifth
anniversary
date
of
the
units
being
granted.
On
termination
of
the
Asset
Management
Agreement,
unvested
trust
units
granted
to
DAM
vest
immediately.
Dundee
International
2013
Annual
Report
|
63
Deferred
units
granted
to
DAM
for
payment
of
asset
management
fees
are
initially
measured,
and
subsequently
remeasured
at
each
reporting
date,
at
fair
value.
The
deferred
units
are
considered
to
be
restricted
stock,
and
the
fair
value
is
estimated
by
applying
a
discount
to
the
market
price
of
the
corresponding
Units.
The
discount
is
estimated
based
on
a
hypothetical
put-‐call
option,
valued
using
a
Black
Scholes
option
pricing
model,
which
takes
into
consideration
the
volatility
of
the
Canadian
REIT
and
the
German
real
estate
equity
markets,
the
respective
holding
period
of
the
deferred
units,
and
the
risk-‐free
interest
rate.
The
carrying
value
of
the
deferred
units
granted
to
DAM
is
most
sensitive
to
changes
in
volatility
and
the
relative
weighting
of
the
put
option
and
call
option
values.
During
the
year
ended
December
31,
2013,
$2,113
of
asset
management
fees
were
recorded
(December
31,
2012
–
$1,907)
based
on
the
fair
value
of
the
deferred
units
issued,
with
an
appropriate
discount
to
reflect
the
restricted
period
of
exercise,
and
are
included
in
general
and
administrative
expenses.
The
fees
were
settled
by
the
grant
of
373,160
deferred
trust
units
during
the
period
(December
31,
2012
–
330,423)
and
34,031
deferred
trust
units
granted
on
January
1,
2014
(January
1,
2013
–
26,747).
As
at
January
1,
2014,
912,078
unvested
deferred
trust
units
and
income
deferred
units
(January
1,
2013
–
504,887)
were
outstanding
with
respect
to
the
asset
management
fee.
Compensation
expense
of
$1,313
for
the
period
(December
31,
2012
–
$628)
was
also
included
in
general
and
administrative
expenses.
On
November
8,
2011
and
December
8,
2011,
87,000
and
33,784
deferred
trust
units
were
granted
to
senior
management
and
trustees,
respectively.
Of
the
87,000
units
granted,
63,000
relate
to
trustees
and
key
management
personnel.
The
33,784
deferred
trust
units
were
granted
to
trustees
who
elected
to
receive
their
2011
and
2012
annual
retainer
in
the
form
of
deferred
trust
units
rather
than
cash.
The
grant
date
values
for
the
deferred
units
of
the
two
grants
were
$9.65
and
$9.84,
respectively.
On
February
21,
2013,
174,500
deferred
trust
units
were
granted
to
senior
management
and
trustees.
Of
the
174,500
units
granted,
102,000
relate
to
trustees
and
key
management
personnel.
The
grant
date
value
for
the
deferred
trust
units
of
the
grant
was
$11.04.
On
May
9,
2013,
25,347
deferred
trust
units
were
granted
to
trustees
who
elected
to
receive
their
2013
annual
retainer
in
the
form
of
deferred
units
rather
than
cash.
Note
14
AMOUNTS
PAYABLE
AND
ACCRUED
LIABILITIES
Trade
payables
Accrued
liabilities
and
other
payables
Accrued
interest
Total
Note
15
DISTRIBUTIONS
The
following
table
breaks
down
distribution
payments
for
the
year
ended
December
31:
Paid
in
cash
Paid
by
way
of
reinvestment
in
Units
Less:
Payable
at
December
31,
2012
(December
31,
2011)
Plus:
Payable
at
December
31,
2013
(December
31,
2012)
Total
$
$
$
December
31,
December
31,
2013
9,447
19,589
3,904
32,940
$
$
2012
7,398
15,551
3,914
26,863
$
2013
67,530
10,145
(4,816)
7,314
$
80,173
$
2012
40,033
1,644
(2,925)
4,816
43,568
The
distribution
for
the
month
of
December
2013
in
the
amount
of
$0.0667
per
unit,
declared
on
December
18,
2013
and
payable
on
January
15,
2014,
amounted
to
$7,314.
The
amount
payable
as
at
December
31,
2013
was
satisfied
on
January
15,
2014
by
$6,041
cash
and
$1,273
through
the
issuance
of
145,291
Units.
The
distribution
for
the
month
of
January
2014
was
declared
in
the
amount
of
$0.0667
per
unit,
payable
on
February
15,
2014.
The
Trust
declared
distributions
of
$0.0667
per
unit
per
month
for
the
months
from
January
2013
to
December
2013.
Dundee
International
2013
Annual
Report
|
64
Note
16
EQUITY
Total
December
31,
2013
December
31,
2012
Number
of
Units
109,698,977
$
Amount
1,034,005
Number
of
Units
72,232,494
$
Amount
596,078
REIT
Units
The
REIT
is
authorized
to
issue
an
unlimited
number
of
Units
and
an
unlimited
number
of
Special
Trust
Units.
The
Special
Trust
Units
may
only
be
issued
to
holders
of
Exchangeable
Notes.
Public
offering
of
REIT
Units
On
March
5,
2013,
the
REIT
completed
a
public
offering
of
23,230,000
Units,
including
an
over-‐allotment
option,
at
a
price
of
$10.90
per
unit.
The
Trust
received
gross
proceeds
of
$253,207.
Costs
related
to
the
offering
totalled
$11,218
and
were
charged
directly
to
unitholders’
equity.
On
June
6,
2013,
the
Trust
completed
a
public
offering
of
11,700,000
Units
at
a
price
of
$10.70
per
unit.
On
June
24,
2013,
the
Trust
issued
an
additional
1,445,000
Units
at
a
price
of
$10.70
per
unit
pursuant
to
the
exercise
by
the
underwriters
of
a
portion
of
their
over-‐allotment
option.
The
Trust
received
gross
proceeds
of
$140,652.
Costs
related
to
the
offering
totalling
$6,648
were
charged
directly
to
unitholders’
equity.
Distribution
Reinvestment
and
Unit
Purchase
Plan
The
Distribution
Reinvestment
Plan
(“DRIP”)
allows
holders
of
Units,
other
than
unitholders
who
are
resident
of
or
present
in
the
United
States
of
America,
to
elect
to
have
all
cash
distributions
from
the
REIT
reinvested
in
additional
Units.
Unitholders
who
participate
in
the
DRIP
receive
an
additional
distribution
of
Units
equal
to
4%
of
each
cash
distribution
that
was
reinvested.
The
price
per
unit
is
calculated
by
reference
to
a
five-‐day
weighted
average
closing
price
of
the
Units
on
the
Toronto
Stock
Exchange
preceding
the
relevant
distribution
date,
which
is
typically
on
or
about
the
15th
day
of
the
month
following
the
declaration.
For
the
year
ended
December
31,
2013,
1,066,792
Units
were
issued
pursuant
to
the
DRIP
for
$10,145
(December
31,
2012
–
157,432
Units
for
$1,644).
The
Unit
Purchase
Plan
feature
of
the
DRIP
facilitates
the
purchase
of
additional
Units
by
existing
unitholders.
Participation
in
the
Unit
Purchase
Plan
is
optional
and
subject
to
certain
limitations
on
the
maximum
number
of
additional
Units
that
may
be
acquired.
The
price
per
unit
is
calculated
in
a
similar
manner
to
the
DRIP.
No
commission,
service
charges
or
brokerage
fees
are
payable
by
participants
in
connection
with
either
the
reinvestment
or
purchase
features
of
the
DRIP.
For
the
year
ended
December
31,
2013,
7,059
Units
were
issued
under
the
Unit
Purchase
Plan
for
$72
(December
31,
2012
–
3,371
Units
for
$36).
Deferred
Unit
Incentive
Plan
The
Deferred
Unit
Incentive
Plan
(“DUIP”)
provides
for
the
grant
of
deferred
trust
units
to
trustees,
officers
and
employees
as
well
as
affiliates
and
their
service
providers,
including
the
asset
manager.
Deferred
trust
units
are
granted
at
the
discretion
of
the
trustees
and
earn
income
deferred
trust
units
based
on
the
payment
of
distributions.
Once
issued,
each
deferred
trust
unit
and
the
related
distribution
of
income
deferred
trust
units
vest
evenly
over
a
three-‐
or
five-‐year
period
on
the
anniversary
date
of
the
grant
except
for
certain
deferred
trust
units
granted
to
DAM
under
the
Asset
Management
Agreement.
Subject
to
an
election
option
available
for
certain
participants
to
postpone
receipt
of
Units,
such
Units
will
be
issued
immediately
upon
vesting.
Up
to
a
maximum
of
2,074,000
deferred
trust
units
are
issuable
under
the
Deferred
Unit
Incentive
Plan.
For
the
year
ended
December
31,
2013,
17,632
Units
were
issued
to
officers
and
employees
pursuant
to
the
Deferred
Unit
Incentive
Plan
for
$164
(December
31,
2012
–
12,875
Units
for
$138).
Dundee
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Annual
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65
Note
17
ASSETS
HELD
FOR
SALE
As
at
December
31,
2013,
the
Trust
classified
six
properties
as
held
for
sale.
As
at
December
31,
2013,
management
had
committed
to
a
plan
of
sale,
and
therefore
the
properties
have
been
reclassified
as
current
assets
held
for
sale.
Investment
properties
Other
non-‐current
assets
Prepaid
expenses
and
other
assets
Assets
held
for
sale
Debt
Amounts
payable
and
accrued
liabilities
Liabilities
related
to
assets
held
for
sale
Net
assets
Note
18
INTEREST
EXPENSE
Interest
on
debt
Interest
on
debt
incurred
and
charged
to
comprehensive
income
is
recorded
as
follows:
Interest
on
term
loan
credit
facility
Interest
on
convertible
debentures
Interest
on
mortgage
debt
Interest
on
bank
indebtedness
Amortization
of
financing
costs,
discounts
and
fair
value
adjustments
on
acquired
debt
Interest
on
Exchangeable
Notes
Interest
expense
Note
19
FAIR
VALUE
ADJUSTMENTS
TO
FINANCIAL
INSTRUMENTS
Fair
value
gain
(loss)
on
interest
rate
swaps
and
cap
Fair
value
gain
on
conversion
feature
of
convertible
debentures
Fair
value
gain
(loss)
on
Deferred
Unit
Incentive
Plan
Fair
value
loss
on
Exchangeable
Notes
Fair
value
gain
(loss)
on
foreign
exchange
forward
contracts
December
31,
2013
21,147
13
46
21,206
(10,106)
(4,977)
(15,083)
6,123
$
$
$
$
$
Years
ended
December
31,
2013
10,940
8,862
15,114
333
3,257
-‐
38,506
$
$
2012
12,348
8,887
1,551
128
1,907
2,558
27,379
Years
ended
December
31,
$
2013
226
3,761
585
-‐
(16,022)
2012
(15,493)
2,444
(287)
(2,330)
452
$
(11,450)
$
(15,214)
Dundee
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2013
Annual
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66
Note
20
INCOME
TAXES
Reconciliation
of
tax
expense
Income
before
income
taxes
Tax
calculated
at
the
German
corporate
tax
rate
of
15.825%
Increase
(decrease)
resulting
from:
Expenses
not
deductible
for
tax
Effect
of
different
tax
rates
in
countries
in
which
the
group
operates
Income
distributed
and
taxable
to
unitholders
Tax
benefits
not
previously
recognized
Other
items
Recovery
of
taxes
Deferred
income
tax
assets
consist
of
the
following:
Deferred
tax
asset
related
to
difference
in
tax
and
book
basis
of
investment
properties
Deferred
tax
asset
related
to
difference
in
tax
and
book
basis
of
financial
instruments
Deferred
tax
asset
related
to
tax
loss
carry-‐forwards
Deferred
tax
asset
related
to
differences
in
tax
and
book
basis
of
financing
costs
Total
deferred
income
tax
assets
$
$
$
$
$
Years
ended
December
31,
2013
2012
8,868
20,620
1,403
3,263
-‐
-‐
424
369
(119)
(546)
(3,473)
(5,286)
(220)
(33)
33
(8)
(2,048)
(2,145)
$
December
31,
December
31,
2013
1,813
3,001
6,744
755
12,313
$
$
2012
1,812
4,045
1,603
1,031
8,491
Note
21
RELATED
PARTY
TRANSACTIONS
AND
ARRANGEMENTS
The
REIT
entered
into
an
asset
management
agreement
with
DAM
(“Asset
Management
Agreement”)
pursuant
to
which
DAM
provides
certain
asset
management
services
to
the
REIT
and
its
subsidiaries.
The
Asset
Management
Agreement
provides
for
a
broad
range
of
asset
management
services
for
the
following
fees:
•
•
•
•
•
base
annual
management
fee
calculated
and
payable
on
a
monthly
basis,
equal
to
0.35%
of
the
historical
purchase
price
of
the
properties;
incentive
fee
equal
to
15%
of
the
REIT’s
adjusted
funds
from
operations
per
unit
in
excess
of
$0.93
per
unit;
increasing
annually
by
50%
of
the
increase
in
the
weighted
average
consumer
price
index
(or
other
similar
metric
as
determined
by
the
trustees)
of
the
jurisdictions
in
which
the
properties
are
located;
capital
expenditures
fee
equal
to
5%
of
all
hard
construction
costs
incurred
on
each
capital
project
with
costs
in
excess
of
$1,000,
excluding
work
done
on
behalf
of
tenants
or
any
maintenance
capital
expenditures;
acquisition
fee
equal
to:
(a)
1.0%
of
the
purchase
price
of
a
property,
on
the
first
$100,000
of
properties
in
each
fiscal
year;
(b)
0.75%
of
the
purchase
price
of
a
property
on
the
next
$100,000
of
properties
acquired
in
each
fiscal
year;
and
(c)
0.50%
of
the
purchase
price
on
properties
in
excess
of
$200,000
in
each
fiscal
year.
DAM
did
not
receive
an
acquisition
fee
in
respect
of
the
acquisition
of
the
Initial
Properties;
and
financing
fee
equal
to
0.25%
of
the
debt
and
equity
of
all
financing
transactions
completed
on
behalf
of
the
REIT
to
a
maximum
of
actual
expenses
incurred
by
DAM
in
supplying
services
relating
to
financing
transactions.
DAM
did
not
receive
a
financing
fee
in
respect
of
the
acquisition
of
the
Initial
Properties.
Dundee
International
2013
Annual
Report
|
67
Pursuant
to
the
Asset
Management
Agreement,
DAM
may
elect
to
receive
all
or
part
of
the
fees
payable
to
it
for
its
asset
management
services
in
deferred
trust
units
under
the
Deferred
Unit
Incentive
Plan.
The
number
of
deferred
trust
units
issued
to
DAM
will
be
calculated
by
dividing
the
fees
payable
to
DAM
by
the
fair
value
for
this
purpose
on
the
relevant
payment
date
of
the
Units.
Fair
value
for
this
purpose
is
the
weighted
average
closing
price
of
the
Units
on
the
principal
market
on
which
the
Units
are
quoted
for
trading
for
the
five
trading
days
immediately
preceding
the
relevant
payment
date.
The
deferred
trust
units
will
vest
on
a
five-‐year
schedule,
pursuant
to
which
one-‐fifth
of
the
deferred
trust
units
will
vest,
starting
on
the
sixth
anniversary
date
of
the
grant
date
for
deferred
trust
units
granted
during
the
first
five
years
of
the
Asset
Management
Agreement
and
starting
on
the
first
anniversary
date
of
the
grant
date
thereafter.
Income
deferred
trust
units
will
be
credited
to
DAM
based
on
distributions
paid
by
the
Trust
on
the
Units
and
such
income
deferred
trust
units
will
vest
on
the
same
five-‐year
schedule
as
their
corresponding
deferred
trust
units.
For
accounting
purposes,
the
deferred
units
relate
to
services
provided
during
the
period
and
the
corresponding
expense
is
recognized
during
the
period.
DAM
has
irrevocably
elected
to
receive
the
first
$3,500
of
the
fees
payable
to
it
in
each
year
for
the
first
five
years
for
its
asset
management
services
in
deferred
trust
units.
Deferred
units
granted
to
DAM
for
payment
of
asset
management
fees
are
included
in
general
and
administrative
expense
during
the
period
for
accounting
purposes
as
they
relate
to
services
provided
during
the
period,
and
the
units
and
fees
are
initially
measured
by
applying
a
discount
to
the
fair
value
of
the
corresponding
Units.
The
discount
is
estimated
by
applying
the
Black
Scholes
model,
taking
into
consideration
the
volatility
of
the
Canadian
REIT
equity
market
and
the
German
real
estate
industry.
Once
recognized,
the
liability
is
remeasured
at
each
reporting
date
at
a
discount
to
the
fair
values
of
the
corresponding
Units,
with
the
change
being
recognized
in
comprehensive
income
as
a
fair
value
adjustment
to
financial
instruments.
During
the
year
ended
December
31,
2013,
the
REIT
recognized
$5,438
(year
ended
December
31,
2012
–
$2,251)
in
relation
to
asset
management
fees
under
the
Asset
Management
Agreement
with
DAM,
which
is
included
in
general
and
administrative
expenses.
Of
this
total,
$2,113
(year
ended
December
31,
2012
–
$1,907)
was
payable
in
deferred
trust
units
and
$3,325
(year
ended
December
31,
2012
–
$344)
was
payable
in
cash.
As
at
January
1,
2014,
912,077
(January
1,
2013
–
504,887)
deferred
trust
units
and
income
deferred
trust
units
were
granted
under
this
agreement
and
remained
unvested.
The
REIT
also
paid
$5,892
for
asset
acquisition
fees
incurred
on
acquisitions
completed
in
the
year
ended
December
31,
2013
(year
ended
December
31,
2012
–
$2,430),
which
were
capitalized
as
acquisition
costs
and
then
written
off
on
remeasurement
of
the
investment
properties.
The
REIT
also
incurred
$518
in
financing
fees
related
to
the
March
and
June
2013
equity
offerings
(year
ended
December
31,
2012
–
$358).
The
fees
were
charged
to
equity
as
equity
issue
costs.
The
REIT
also
reimbursed
DAM
acquisition
related
travel
and
legal
costs,
equity
issue
costs
and
general
and
administrative
expenses
in
the
amount
of
$480
for
the
year
ended
December
31,
2013.
Included
in
amounts
payable
as
at
December
31,
2013,
is
$2,523
(December
31,
2012
–
$490)
related
to
the
Asset
Management
Agreement
with
DAM.
Shared
Services
and
Cost
Sharing
Agreement
The
Trust
entered
into
a
shared
services
and
cost
sharing
agreement
with
DAM
on
December
1,
2013.
The
agreement
is
for
a
one-‐year
term
and
will
be
automatically
renewed
for
further
one-‐year
terms
unless
and
until
the
agreement
is
terminated
in
accordance
with
its
terms
or
by
mutual
agreement
of
the
parties.
Pursuant
to
the
agreement,
DAM
will
be
providing
additional
administrative
and
support
services
in
order
to
expand
and
improve
DAM’s
service
capability
in
connection
with
the
provision
of
its
asset
management
services.
DAM
will
receive
an
annual
fee
sufficient
to
reimburse
it
for
all
the
expenses
incurred
in
providing
these
additional
administrative
and
support
services.
Additionally,
the
Trust
will
also
reimburse
DAM
in
each
calendar
year
for
its
share
of
costs
incurred
in
connection
with
certain
business
transformation
services
provided
by
DAM.
During
the
year
ended
December
31,
2013,
the
Trust
paid
$nil
to
DAM
pursuant
to
the
shared
services
and
cost
sharing
agreement.
There
are
no
amounts
due
to
DAM
as
at
December
31,
2013
pertaining
to
this
agreement.
The
Trust’s
future
commitment
under
the
Shared
Services
and
Cost
Sharing
Agreement
over
the
next
seven
years
is
$1,400.
Dundee
International
2013
Annual
Report
|
68
Note
22
SUPPLEMENTARY
CASH
FLOW
INFORMATION
Increase
in
amounts
receivable
Decrease
(increase)
in
prepaid
expenses
and
other
assets
Increase
in
amounts
payable
and
accrued
liabilities
Increase
in
tenant
deposits
Change
in
non-‐cash
working
capital
The
following
amounts
were
paid
on
account
of
interest:
Debt
Exchangeable
Notes
$
$
$
$
Years
ended
December
31,
2012
2013
(2,622)
(1,701)
(440)
2,365
3,057
899
292
1,005
287
2,568
$
Years
ended
December
31,
2012
2013
35,306
-‐
$
22,663
3,084
Note
23
COMMITMENTS
AND
CONTINGENCIES
The
REIT
and
its
operating
subsidiaries
are
contingently
liable
under
guarantees
that
are
issued
in
the
normal
course
of
business
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
adverse
effect
on
the
consolidated
financial
statements
of
the
REIT.
As
at
December
31,
2013,
the
REIT’s
future
minimum
commitments
under
operating
leases
are
as
follows:
Less
than
1
year
1–5
years
Longer
than
5
years
Total
Operating
lease
payments
$
$
762
1,722
-‐
2,484
During
the
period,
the
Trust
paid
$654
in
minimum
lease
payments,
which
have
been
included
in
comprehensive
income
for
the
period.
The
REIT
also
has
commitments
for
lease
incentives
and
initial
direct
leasing
costs
of
approximately
$5,781.
Note
24
CAPITAL
MANAGEMENT
The
primary
objective
of
the
Trust’s
capital
management
is
to
ensure
that
it
remains
within
its
quantitative
banking
covenants.
At
December
31,
2013,
the
Trust’s
capital
consists
of
debt
and
unitholders’
equity.
The
Trust’s
objectives
in
managing
capital
are
to
ensure
adequate
operating
funds
are
available
to
maintain
consistent
and
sustainable
unitholder
distributions
and
to
fund
leasing
costs
and
capital
expenditure
requirements.
Various
debt,
equity
and
earnings
distribution
ratios
are
used
to
ensure
capital
adequacy
and
monitor
capital
requirements.
The
primary
ratios
used
for
assessing
capital
management
are
the
interest
coverage
and
debt-‐to-‐book
value
ratios.
Other
significant
indicators
include
weighted
average
interest
rate,
average
term
to
maturity
of
debt,
and
variable
debt
as
a
portion
of
total
debt.
These
indicators
assist
the
Trust
in
assessing
that
the
debt
level
maintained
is
sufficient
to
provide
adequate
cash
flows
for
unitholder
distributions
and
capital
expenditures,
and
for
evaluating
the
need
to
raise
funds
for
further
expansion.
Dundee
International
2013
Annual
Report
|
69
The
Trust’s
equity
consists
of
Units,
in
which
the
carrying
value
is
impacted
by
earnings
and
unitholder
distributions.
The
Trust
endeavours
to
make
annual
distributions
of
$0.80
per
unit.
Amounts
retained
in
excess
of
the
distributions
are
used
to
fund
leasing
costs,
capital
expenditures
and
working
capital
requirements.
Management
monitors
distributions
through
various
ratios
to
ensure
adequate
resources
are
available.
These
include
the
proportion
of
distributions
paid
in
cash,
DRIP
participation
ratio,
total
distributions
as
a
percentage
of
distributable
income
and
distributable
income
per
unit.
The
Trust
monitors
capital
primarily
using
a
debt-‐to-‐book
value
ratio,
which
is
calculated
as
the
amount
of
outstanding
debt
divided
by
total
assets.
During
the
period,
the
Trust
did
not
breach
any
of
its
loan
covenants,
nor
did
it
default
on
any
other
of
its
obligations
under
its
loan
agreements.
The
term
loan
credit
facility
agreement
requires
the
debt
service
coverage
ratio
to
be
equal
to
or
above
145%
at
each
interest
rate
payment
date.
For
the
year
ended
December
31,
2013,
the
REIT’s
debt
service
coverage
ratio
was
303%
and
therefore
in
compliance
with
the
term
loan
credit
facility’s
requirement.
Note
25
FINANCIAL
INSTRUMENTS
Risk
management
IFRS
7,
“Presentation
of
Financial
Statements”
(“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
risk.
Market
risk
is
the
risk
that
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,
currency
risk
and
other
market
price
risk.
The
Trust
has
exposure
to
interest
rate
risk
primarily
as
a
result
of
its
term
loan
credit
facility,
which
has
a
variable
rate
of
interest.
In
order
to
manage
exposure
to
interest
rate
risk,
the
Trust
endeavours
to
maintain
an
appropriate
mix
of
fixed
and
floating
rate
debt,
manage
maturities
of
fixed
rate
debt
and
match
the
nature
of
the
debt
with
the
cash
flow
characteristics
of
the
underlying
asset.
Additionally,
the
Trust
has
entered
into
interest
rate
swaps
and
caps
to
economically
hedge
the
variable
rate
debt.
The
Trust
entered
into
foreign
exchange
forward
contracts
to
manage
its
currency
risk
from
paying
distributions
and
debt
servicing
in
Canadian
dollars.
The
Trust
is
also
exposed
to
interest
rate
risk
on
its
derivatives.
The
following
interest
rate
sensitivity
table
outlines
the
potential
impact
of
a
1%
change
in
the
interest
rate
on
variable
rate
assets
and
liabilities
for
a
12-‐month
period.
A
1%
change
is
considered
a
reasonable
level
of
fluctuation
on
variable
rate
assets
and
debts.
Financial
assets
Cash(1)
Amount
in
escrow
Financial
liabilities
Term
loan
credit
facility
Carrying
amount
Income
-‐1%
Equity
Income
106,292
6,220
$
(1,063)
(62)
$
(1,063)
(62)
$
$
1,063
62
1%
Equity
1,063
62
Interest
rate
risk
64,368
$
644
$
644
$
(644)
$
(644)
$
$
(1)
Cash
excludes
cash
subject
to
restrictions
that
prevent
its
use
for
current
purposes.
These
balances
generally
receive
interest
income
at
bank
prime
less
1.85%.
Cash
and
cash
equivalents
are
short-‐term
in
nature
and
the
current
balance
may
not
be
representative
of
the
balance
for
the
rest
of
the
year.
The
Trust
is
exposed
to
currency
risk.
The
Trust’s
functional
and
presentation
currency
is
Canadian
dollars.
The
Trust’s
operating
subsidiaries’
functional
currency
is
the
euro;
accordingly,
the
assets
and
liabilities
are
translated
at
the
prevailing
rate
at
period
end,
and
comprehensive
income
is
translated
at
the
average
rate
for
the
period.
In
order
to
manage
the
exposure
to
currency
risk
of
unitholders
and
holders
of
Debentures,
the
Trust
has
entered
into
foreign
exchange
forward
contracts.
The
Trust
currently
has
foreign
exchange
forward
contracts
to
sell
€5,622
each
month
from
January
2014
to
June
2014,
€5,222
each
month
from
July
2014
to
May
2015,
€3,922
in
June
2015,
€2,372
each
month
from
July
2015
to
September
2015,
€2,050
each
month
from
October
2015
to
May
2016
and
€1,800
in
June
2016,
at
an
average
exchange
rate
of
$1.334
per
euro.
Dundee
International
2013
Annual
Report
|
70
The
Trust
is
exposed
to
credit
risk
from
its
leasing
activities
and
from
its
financing
activities
and
derivatives.
The
Trust
manages
credit
risk
by
requiring
tenants
to
pay
rents
in
advance
and
by
monitoring
the
credit
quality
of
the
tenants
on
a
regular
basis.
The
Trust
monitors
tenant
payment
patterns
and
discusses
potential
tenant
issues
with
property
managers
on
a
regular
basis.
Credit
risk
with
respect
to
financing
activities
and
derivatives
is
managed
by
entering
into
arrangements
with
highly
reputable
institutions.
The
Trust
does
not
use
derivatives
for
speculative
purposes.
Liquidity
risk
is
the
risk
that
the
Trust
will
encounter
difficulty
in
meeting
obligations
associated
with
the
maturity
of
financial
obligations.
The
Trust
manages
maturities
of
its
debts,
and
monitors
the
repayment
dates
to
ensure
sufficient
capital
will
be
available
to
cover
obligations.
Interest
rate
derivatives
The
following
table
provides
details
on
interest
rate
derivatives
outstanding
as
at
December
31,
2013:
Interest
rate
swaps
Interest
rate
cap
Notional
385,133
48,142
433,275
$
$
Rate
4.05%
5.00%
Maturity
2016
2016
Carrying
value
13,764
(18)
13,746
$
$
Foreign
currency
derivatives
The
following
table
provides
details
on
foreign
currency
forward
contracts
outstanding
as
at
December
31,
2013
and
December
31,
2012:
Hedging
currency
Euro
Notional
amount
of
future
contracts
Blended
exchange
rate
Forward
contracts
start
date
Forward
contracts
end
date
Carrying
value
120,412
1.334
January
15,
2014
June
15,
2016
$
(15,941)
For
the
year
ended
December
31,
2013
Hedging
currency
future
contracts
Blended
exchange
rate
Notional
amount
of
For
the
year
ended
December
31,
2012
Forward
contracts
start
date
Forward
contracts
end
date
Carrying
value
Euro
106,800
1.327
January
12,
2013
December
15,
2015
$
(429)
Fair
value
measurements
The
following
tables
summarize
fair
value
measurements
recognized
in
the
statement
of
financial
position
or
disclosed
in
the
Trust’s
financial
statements
by
class
of
asset
or
liability
and
categorized
by
level
according
to
the
significance
of
the
inputs
used
in
making
the
measurements.
Recurring
measurements
Financial
liabilities
Interest
rate
derivatives
Foreign
currency
derivatives
Conversion
feature
on
the
convertible
debentures
Fair
values
disclosed
Mortgage
debt
Convertible
debenture
excluding
conversion
feature
Carrying
value
as
at
December
31,
2013
Level
1
Fair
value
as
at
December
31,
2013
Level
3
Level
2
$
$
$
(13,746)
(15,941)
(384)
(825,014)
(150,326)
$
-‐
-‐
-‐
-‐
-‐
$
$
$
(13,746)
(15,941)
-‐
-‐
-‐
(384)
-‐
-‐
$
(827,471)
(158,201)
Dundee
International
2013
Annual
Report
|
71
Recurring
measurements
Financial
liabilities
Interest
rate
derivatives
Foreign
currency
derivatives
Conversion
feature
on
the
convertible
debentures
Fair
values
disclosed
Mortgage
debt
Convertible
debenture
excluding
conversion
feature
Carrying
value
as
at
December
31,
2012
Level
1
Fair
value
as
at
December
31,
2012
Level
3
Level
2
$
$
$
(18,502)
(429)
(4,145)
(151,862)
(148,428)
$
-‐
-‐
-‐
-‐
-‐
$
$
$
(18,502)
(429)
-‐
-‐
-‐
(4,145)
-‐
-‐
$
(152,012)
(161,573)
Amounts
receivable,
cash,
the
Deferred
Unit
Incentive
Plan,
deposits,
amounts
payable
and
accrued
liabilities,
and
distributions
payable
are
carried
at
amortized
cost,
which
approximates
fair
value
due
to
their
short-‐term
nature.
The
carrying
value
of
the
term
loan
credit
facility
approximates
fair
value
due
to
the
short-‐term
nature
of
its
rates,
which
are
reset
every
three
months.
Transfers
between
levels
in
the
fair
value
hierarchy
are
recognized
as
of
the
date
of
the
event
or
change
in
circumstances
that
resulted
in
the
transfer.
There
were
no
transfers
in
or
out
of
Level
3
fair
value
measurements
during
the
period.
Valuation
processes
The
REIT’s
management
is
responsible
for
determining
fair
value
measurements
included
in
the
financial
statements,
including
Level
3
fair
values.
The
inputs,
processes
and
results
for
recurring
measurements,
including
those
valuations
calculated
by
an
independent
consultant,
are
reviewed
each
quarter
by
senior
management
to
ensure
conformity
with
IFRS.
The
Trust
uses
the
following
techniques
to
determine
the
fair
value
measurements
categorized
in
Level
2:
Interest
rate
derivatives
The
fair
value
of
interest
rate
derivatives
was
calculated
as
the
present
value
of
the
estimated
future
cash
flows
based
on
observable
yield
curves.
Foreign
currency
derivatives
The
fair
value
of
foreign
currency
derivatives
was
determined
using
forward
exchange
rates
at
the
measurement
date,
with
the
resulting
value
discounted
back
to
present
value.
The
Trust
uses
the
following
techniques
to
determine
the
fair
value
measurements
categorized
in
Level
3:
Convertible
debentures
The
convertible
debentures
have
two
components
of
value
–
a
conventional
bond
and
a
call
on
the
equity
of
the
Trust
through
conversion.
Based
on
its
terms,
the
conversion
feature
is
an
embedded
derivative
and
has
been
separated
from
the
host
contract
and
classified
as
a
financial
liability
through
profit
and
loss.
Effective
April
1,
2013,
the
Trust
has
utilized
a
valuation
technique
based
on
the
paper
by
K.
Tsiveriotis
and
C.
Fernandes
to
determine
the
fair
value
of
the
conversion
feature.
This
model
uses
significant
unobservable
inputs;
therefore
the
resulting
valuation
is
classified
as
Level
3.
In
this
model,
a
convertible
bond
consists
of
two
components,
an
equity
component
and
a
debt
component,
and
these
components
have
different
default
risks.
The
equity
component
is
discounted
at
the
risk-‐free
interest
rate.
The
equity
component
has
no
default
risk
since
the
Trust
can
always
issue
its
own
units.
The
debt
component
is
discounted
at
the
risk-‐free
interest
rate
plus
a
credit
spread.
The
fair
value
measurement
of
the
interest
rate
swaps
was
valued
by
a
qualified
independent
valuation
professional.
The
fair
value
measurement
of
the
conversion
feature
of
the
convertible
debentures
was
valued
by
a
qualified
independent
valuation
consultant.
Dundee
International
2013
Annual
Report
|
72
The
significant
unobservable
inputs
used
in
the
fair
value
measurement
of
the
conversion
feature
of
the
convertible
debentures
as
at
December
31,
2013
are
the
following:
• Volatility:
Expected
volatility
as
at
December
31,
2013
was
derived
from
the
historical
prices
of
Dundee
International
REIT.
Historical
prices
were
not
available
for
a
term
equal
to
the
term
to
maturity
of
the
debenture;
as
such,
the
consultant
used
the
entire
historical
data
up
until
December
31,
2013.
The
volatility
used
was
17.455%.
• Credit
spread:
The
credit
spread
of
the
convertible
debentures
was
imputed
from
the
traded
price
of
the
convertible
debenture
as
at
December
31,
2013.
The
credit
spread
used
was
3.8440%.
A
higher
volatility
will
increase
the
value
of
the
conversion
feature.
A
lower
credit
spread
will
decrease
the
value
of
the
conversion
feature.
The
following
table
shows
the
changes
in
fair
value
of
the
conversion
feature
of
the
convertible
debentures
from
a
5%
increase
or
decrease
in
volatility
and
a
1%
increase
or
decrease
in
credit
spread,
all
other
inputs
being
constant:
Increase/decrease
in
fair
value
as
at
December
31,
2013
$
1,034
$
(358)
$
Impact
of
change
to
volatility
Decrease
-‐5%
Increase
+5%
Increase
+1%
Impact
of
change
in
credit
spread
Decrease
-‐1%
(1,452)
121
$
The
Trust
also
used
the
following
techniques
in
determining
the
fair
values
disclosed
for
the
following
financial
liabilities
classified
as
Level
3:
Mortgage
debt
The
fair
value
of
the
mortgage
debt
as
at
December
31,
2013
has
been
calculated
by
discounting
the
expected
cash
flows
of
each
debt,
using
discount
rates
ranging
from
1.284%
to
3.829%.
The
discount
rates
are
determined
using
the
vdp
Mortgage
Pfandbrief
curve
for
instruments
of
similar
maturity
adjusted
for
the
REIT’s
specific
credit
risk.
In
determining
the
adjustment
for
credit
risk,
the
REIT
considers
market
conditions,
the
value
of
the
properties
that
the
mortgages
are
secured
by
and
other
indicators
of
the
REIT’s
creditworthiness.
Note
26
SUBSEQUENT
EVENTS
On
February
14,
2014,
the
REIT
acquired
an
office
building,
located
at
Werner-‐Eckert-‐Straße
8,
10,
12
in
Munich,
Germany,
for
$22,120
(€14,715).
Dundee
International
2013
Annual
Report
|
73
Appendix
(unaudited)
Address
Acquisition Properties
Karl-Martell-Straße 60
Beuthstraße 6–8/Seydelstraße 2–5
Feldmühleplatz 1+15
Greifswalder Str. 154–156
Marsstraße 20–22
Moskauer Str. 25–27
Podbielskistraße 158–168
Cäcilienkloster 2, 6, 8, 10
Hammer Str. 30–34
Oasis III
Schlossstr. 8
ABC-Str. 19
Leopoldstr. 252
Speicherstr. 55
Derendorfer Allee 4
Neue Mainzer Str. 28
Westendstr. 160–162/Barthstr. 24–26
Bertoldstr. 48/Sedanstr. 7
Am Sandtorkai 37
Reichskanzler-Müller-Str. 21–25
Am Stadtpark 2
Vordernbergstr. 6/Heilbronner Str. 35
Dillwächterstr. 5/Tübinger Str. 11
Lörracher Str. 16/16a
total acquisition properties
Initial Properties
Grüne Str. 6–8/Kurfürstenstr. 2
Am Hauptbahnhof 16–18
Poststr. 4–6,Göbelstr. 30, Bismarckstr
Bahnhofstr. 16
H-v-Stephan-Str. 1–15/W-Brandt-Pl. 13
Kurfürstenallee 130
Gradestr. 22
Karlstal 1–21/Werftstr. 201
Franz-Zebisch-Str. 15
Überseering 17/Mexikoring 22
Am Neumarkt 40/Luetkensallee 49
Bahnhofstr. 82–86
E.-Kamieth-Str. 2b
Czernyring 15
Marienstr. 80
Rüppurrer Str. 81, 87, 89/Ettlinger 67
Gerokstr. 14–20
Zimmermannstr. 2/Eisenstr.
Hindenburgstr. 9/Heeserstr. 5
Saalburgallee 19
Friedrich-Karl-Str. 1–7
Blücherstr. 12
Kaiserstr. 24
Klubgartenstr. 10
Bahnhofsplatz 2, 3, 4, Pepperworth 7
Pausaer Str. 1–3
Am Hauptbahnhof 2
Bahnhofstr. 33
Kapellenstr. 44
Berliner Platz 35–37
Husemannstr. 1
Kommandantenstr.43–51
Stresemannstr. 15
Bahnhofsring 2
Heinrich-von-Bibra-Platz 5–9
Bahnhofplatz 10
City
Nürnberg
Berlin
Düsseldorf
Berlin
München
Düsseldorf
Hannover
Köln
Hamburg
Stuttgart
Hamburg
Hamburg
München
Frankfurt
Düsseldorf
Frankfurt
München
Freiburg
Hamburg
Mannheim
Nürnberg
Stuttgart
München
Freiburg
Dortmund
Saarbrücken
Darmstadt
Regensburg
Mannheim
Bremen
Hannover
Kiel
Weiden
Hamburg
Hamburg
Gießen
Halle
Heidelberg
State
Bavaria
Berlin
Nordrhein-Westfalen
Berlin
Bavaria
Nordrhein-Westfalen
Niedersachsen
Nordrhein-Westfalen
Hamburg
Baden-Württemberg
Hamburg
Hamburg
Bavaria
Hessen
Nordrhein-Westfalen
Hessen
Bavaria
Baden-Württemberg
Hamburg
Baden-Württemberg
Bavaria
Baden-Württemberg
Bavaria
Baden-Württemberg
Nordrhein-Westfalen
Saarland
Hessen
Bavaria
Baden-Württemberg
Bremen
Niedersachsen
Schleswig-Holstein
Bavaria
Hamburg
Hamburg
Hessen
Sachsen-Anhalt
Baden-Württemberg
Offenbach am Main
Hessen
Karlsruhe
Dresden
Marburg
Siegen
Baden-Württemberg
Sachsen
Hessen
Nordrhein-Westfalen
Frankfurt am Main
Hessen
Oberhausen
Koblenz
Gütersloh
Goslar
Hildesheim
Plauen
Mülheim
Böblingen
Einbeck
Münster
Gelsenkirchen
Duisburg
Wuppertal
Leer
Fulda
Fürth
Nordrhein-Westfalen
Rheinland-Pfalz
Nordrhein-Westfalen
Niedersachsen
Niedersachsen
Sachsen
Nordrhein-Westfalen
Baden-Württemberg
Niedersachsen
Nordrhein-Westfalen
Nordrhein-Westfalen
Nordrhein-Westfalen
Nordrhein-Westfalen
Niedersachsen
Hessen
Bavaria
Dundee International 2013 Annual Report | 74
GLa (sq. ft.)
OCCupanCy at DeCember 31, 2013
268,936
257,369
246,376
241,972
238,724
217,282
211,870
200,915
172,306
170,105
165,224
158,434
154,678
151,822
142,227
123,288
122,156
121,135
113,391
100,501
94,652
88,633
81,907
56,041
3,899,944
299,567
290,901
230,874
230,602
227,298
200,102
195,783
180,837
166,601
160,785
160,397
156,378
152,824
133,909
114,114
111,778
110,434
99,751
100,773
98,224
97,606
94,569
94,488
87,460
87,150
85,443
84,303
82,628
81,206
80,975
80,591
80,122
79,215
78,259
77,606
78,856
100%
99%
100%
94%
95%
96%
90%
100%
100%
100%
85%
96%
99%
95%
100%
95%
87%
100%
99%
95%
99%
84%
99%
100%
96.3%
100%
92%
52%
85%
96%
84%
4%
96%
100%
93%
89%
77%
12%
90%
96%
97%
87%
98%
91%
96%
74%
68%
61%
51%
23%
76%
81%
100%
67%
92%
94%
100%
100%
80%
100%
53%
Address
Kaiser-Karl-Ring 59–63/Dorotheenstr
Bürgerreuther Str. 1
77er Str. 54
Logenstr. 37
Wiener Str. 43
Bahnhofsplatz 1
Bahnhofstr. 9
Rathausplatz 2
Auhofstr. 21
Joachim-Campe-Str. 1.3/5/7, Postho
Bahnhofstr. 40
Niemeyerstr. 1
Möhringer Landstr. 2/Emilienstr. 30
Heinrich-von-Stephan-Str. 8–10
Am Bahnhof 5
Friedrich-Ebert-Str. 28
Paulinenstr. 52
Postplatz 3
Poststr. 2 U 3
Ostbahnstr. 5
Poststr. 5–7
Bahnhofsplatz 9
Mayenner Str. 63
Kavalierstr. 30–32
Friedrich-Ebert-Str. 75–79
Hainstr. 5A
Baarstr. 5
Europaplatz 17
Rathausplatz 4
Marktstr. 9
Zuffenhäuser Kelterplatz 1
Unter den Zwicken 1–3
Stadtparkstr. 2
Schützenstr. 17, 19
Willy-Brandt-Str. 6
Bahnhofstr. 2
Theodor-Heuss-Platz 13
Stembergstr. 27–29
Poststr. 14
Bahnhofplatz 3, 5
Poststr. 2
Königstr. 12
Möllner Landstr. 47–49/Reclamstr 20
Lutherplatz 5
Lippertor 6
Münchener Str. 1
Martinistr. 19
Bahnhofstr. 169
Vegesacker Heerstr. 111
Palleskestr. 38
Südbrede 1–5
Koblenzer Str. 67
Kardinal-Galen-Ring 84/86
Kalkumer Str. 70
Ehrenfeldgürtel 125
Robert-Wahl-Str. 7/7a
Poststr. 2
Falkenbergstr. 17–23
Balhornstr. 15, 17/B.Köthenbürger-Str
August-Bebel-Str. 6
Cavaillonstr. 2
Steinerother Str. 1 U 1a
Hauptstr. 279/Hommelstr. 2
Stuttgarter Str. 5, 7
City
Bonn
Bayreuth
Celle
Kaiserslautern
Stuttgart
Schweinfurt
Ingolstadt
Wilhelmshaven
Aschaffenburg
Salzgitter
Flensburg
Hannover
Stuttgart
Leverkusen
Zwickau
Pinneberg
Detmold
Bautzen
Helmstedt
Landau
Heide
Emden
Waiblingen
Dessau
Bremerhaven
Bad Hersfeld
Iserlohn
Bad Kreuznach
Lüdenscheid
Völklingen
Stuttgart
Halberstadt
Schwabach
Peine
Auerbach
Cham
Neuss
Arnsberg
Rastatt
Heidenheim
Gummersbach
Rottweil
Hamburg
Nordhausen
Lippstadt
Bad Kissingen
Recklinghausen
Bietigheim-Bissingen
Bremen
Frankfurt am Main
Ahlen
Bonn
Rheine
Düsseldorf
Köln
Balingen
Deggendorf
Norderstedt
Paderborn
Torgau
Weinheim
Betzdorf
Idar-Oberstein
Fellbach
State
GLa (sq. ft.)
OCCupanCy at DeCember 31, 2013
Nordrhein-Westfalen
Bavaria
Niedersachsen
Rheinland-Pfalz
Baden-Württemberg
Bavaria
Bavaria
Niedersachsen
Bavaria
Niedersachsen
Schleswig-Holstein
Niedersachsen
Baden-Württemberg
Nordrhein-Westfalen
Sachsen
Schleswig-Holstein
Nordrhein-Westfalen
Sachsen
Niedersachsen
Rheinland-Pfalz
Schleswig-Holstein
Niedersachsen
Baden-Württemberg
Sachsen-Anhalt
Bremen
Hessen
Nordrhein-Westfalen
Rheinland-Pfalz
Nordrhein-Westfalen
Saarland
Baden-Württemberg
Sachsen-Anhalt
Bavaria
Niedersachsen
Sachsen
Bavaria
Nordrhein-Westfalen
Nordrhein-Westfalen
Baden-Württemberg
Baden-Württemberg
Nordrhein-Westfalen
Baden-Württemberg
Hamburg
Thüringen
Nordrhein-Westfalen
Bavaria
Nordrhein-Westfalen
Baden-Württemberg
Bremen
Hessen
Nordrhein-Westfalen
Nordrhein-Westfalen
Nordrhein-Westfalen
Nordrhein-Westfalen
Nordrhein-Westfalen
Baden-Württemberg
Bavaria
Schleswig-Holstein
Nordrhein-Westfalen
Sachsen
Baden-Württemberg
Rheinland-Pfalz
Rheinland-Pfalz
Baden-Württemberg
75,815
75,534
73,942
72,198
72,192
67,503
67,432
64,970
64,264
61,887
61,826
61,692
61,194
61,011
60,738
59,218
57,614
57,571
53,468
53,401
53,363
53,327
53,220
52,206
51,781
51,207
51,027
50,635
50,050
49,577
47,552
47,145
46,877
46,801
46,512
46,129
46,128
45,820
45,659
45,656
45,558
45,494
45,371
44,699
44,341
43,971
43,807
43,620
43,484
43,409
44,130
42,774
42,191
41,781
41,645
41,487
41,378
41,249
40,927
40,745
40,540
39,972
39,041
38,288
100%
100%
78%
6%
92%
87%
100%
97%
96%
63%
98%
74%
93%
89%
64%
100%
77%
73%
52%
94%
92%
98%
100%
83%
98%
100%
86%
38%
42%
9%
82%
76%
80%
91%
56%
61%
95%
99%
92%
83%
98%
88%
90%
82%
93%
74%
93%
99%
90%
64%
91%
100%
91%
52%
99%
94%
97%
98%
93%
86%
91%
89%
10%
96%
Dundee International 2013 Annual Report | 75
Address
Bismarckstr. 21–23
Heinrich-von-Stephan-Platz 6
Hindenburgstr. 8/Hohenstauf 9, 17, 19
Mühlenstr. 5–7
Alsenberger Str 61
Lübecker Str. 23–25
Apostelweg 4–6
Brückenstr. 21
Lönsstr. 20–22
Friedrich-Wilhelm-Str. 52 U. 54
Verdener Str. 9
Kurt-Schumacher-Str. 5
Lilienstr. 3
Stadtring 3–5
Ölmühlweg 12
Heinzelmannstr. 1/Hauberrisserstr.
Bahnhofsplatz 10, 12, 14
Goethestr. 2–6
Im Bungert 6–8
Gerstenstr. 5
Gustav-König-Str. 42
Kieler Str. 501
Große Str. 29–33
Worthingtonstr. 15
Zwieseler Str. 27–29
Hellersdorfer Str. 78
Markendorfer Str. 10
Kreuzstr. 20–24
Bahnhofstr. 6/Luisenstr. 4–5
Poststr. 30
Tunnelweg 1
Volksdorfer Str. 5/Wohld. Str. 6
Waschgrabenallee 3–5
Poststr. 26
Von-Lassaulx-Str. 14–18
Bahnhofsplatz 2
König-Heinrich-Str. 11
Poststr. 24–26
Konrad-Adenauer-Str. 49–51
Feldschlößchenstr./Kunadstr. o. Nr.
Ludwigsplatz 1
Bahnhofstr. 29
Poststr. 12
Petristr. 26
Dr.-Friedrich-Uhde-Str. 18
Augsburger Str. 380
Gartenstr. 29/30
Wilhelm-Weber-Str. 1
Poststr. 1–3
Poststr. 48
Ruthenstr. 19/21
Bahnhofstr. 2
Bahnhofanlage 2–4
Königswiese 1
Saßstr. 12
Wilhelmstr. 11/Kamperdickstr. 29
Kaiserstr. 140
Goldbacher Str. 74
Klosterstr. 6–10
In der Trift 10/12
Bahnhofstr. 6
Zwickauer Str. 438
Asselheimer Str. 26/Mörikestr. 1–3
Alleestr. 6
State
GLa (sq. ft.)
OCCupanCy at DeCember 31, 2013
City
Bünde
Naumburg
Bocholt
Delmenhorst
Hof
Bad Oldesloe
Hamburg
Neunkirchen
Castrop-Rauxel
Eschwege
Nienburg
Lünen
Leipzig
Nordhorn
Königstein
Kaufbeuren
Kleve
Duisburg
Bergisch Gladbach
Neubrandenburg
Sonneberg
Hamburg
Rotenburg
Crailsheim
Regen
Berlin
Nordrhein-Westfalen
Sachsen-Anhalt
Nordrhein-Westfalen
Niedersachsen
Bavaria
Schleswig-Holstein
Hamburg
Saarland
Nordrhein-Westfalen
Hessen
Niedersachsen
Nordrhein-Westfalen
Sachsen
Niedersachsen
Hessen
Bavaria
Nordrhein-Westfalen
Nordrhein-Westfalen
Nordrhein-Westfalen
Mecklenburg-Vorpommern
Thüringen
Hamburg
Niedersachsen
Baden-Württemberg
Bavaria
Berlin
Frankfurt an der Oder
Brandenburg
Bonn
Villingen-Schwenningen
Albstadt
Husum
Hamburg
Neustadt
Meißen
Remagen
Herborn
Merseburg
Ratingen
Tübingen
Dresden
Alsfeld
Meppen
Lehrte
Heilbad Heiligenstadt
Einbeck
Stuttgart
Pirna
Wittenberg
Korbach
St Ingbert
Hameln
Gifhorn
Schwetzingen
Gelsenkirchen
Leipzig
Kamp-Lintfort
Radevormwald
Aschaffenburg
Annaberg-Buchholz
Olpe
Quakenbrück
Chemnitz
Grünstadt
Neustadt
Nordrhein-Westfalen
Baden-Württemberg
Baden-Württemberg
Schleswig-Holstein
Hamburg
Schleswig-Holstein
Sachsen
Rheinland-Pfalz
Hessen
Sachsen-Anhalt
Nordrhein-Westfalen
Baden-Württemberg
Sachsen
Hessen
Niedersachsen
Niedersachsen
Thüringen
Niedersachsen
Baden-Württemberg
Sachsen
Sachsen-Anhalt
Hessen
Saarland
Niedersachsen
Niedersachsen
Baden-Württemberg
Nordrhein-Westfalen
Sachsen
Nordrhein-Westfalen
Nordrhein-Westfalen
Bavaria
Sachsen
Nordrhein-Westfalen
Niedersachsen
Sachsen
Rheinland-Pfalz
Bavaria
Dundee International 2013 Annual Report | 76
38,276
37,612
37,512
37,266
36,687
36,290
36,273
35,971
35,795
35,433
35,313
35,290
35,234
35,189
34,984
34,894
34,871
34,839
34,737
34,347
33,959
33,511
33,240
33,136
32,676
32,296
32,330
32,253
32,191
31,263
31,116
31,068
30,188
30,101
29,819
29,746
29,472
29,445
29,341
29,236
29,125
29,056
28,764
28,205
27,793
27,775
27,771
27,658
27,502
27,051
26,895
26,894
26,658
26,468
26,214
25,973
25,653
25,153
25,084
24,894
24,446
23,640
23,560
23,495
96%
91%
93%
99%
16%
15%
97%
100%
90%
53%
79%
100%
97%
77%
100%
90%
100%
88%
100%
100%
46%
81%
94%
100%
89%
75%
97%
99%
97%
14%
89%
91%
94%
78%
76%
91%
83%
100%
98%
100%
74%
94%
93%
70%
80%
93%
67%
78%
100%
96%
93%
86%
100%
100%
79%
94%
74%
95%
85%
98%
97%
77%
66%
100%
Address
Uferstr. 2
Lindenstr. 11
Bahnhofsplatz 8
Bahnhofstr. 32
Bahnhofstr. 46
Stadtgraben 13
Poststr. 19–23
Bahnhofsplatz o. Nr.
Breitestr. 62–66
Bahnhofstr. 27
Brückenstr. 26
Ringstr. 22/Dr. Bachl-Str.
Lindenstr. 15
Lindenstr. 42
Hörder Semerteichstr. 175
Am Plärrer 11
Innungsstr. 57–59
Wilhelmstr. 5
Am Stadtpark 5
Geistmarkt 17
Lyoner Passage 14
Moltkestr. 6
Martin-Pöhlmann-Str 5/Friedrich-e
Am Markt 4–5
Steinstr. 6
Leistikowstr. 19
Saarbrücker Str. 292–294
Poststr. 12
Neugr. Bahnhofstr. 26/Scheideholzw.
Speckweg 24–26
Marktplatz 5
Kasseler Str. 1–7
Poststr. 5
Bahnhofstr. 58/Giselbertstr. 6
Lindauer Str. 34
Lübecker Str./Wedringer Str. o. Nr.
Ooser Karlstr. 21/23/25
Güterstr. 2–4
Eisenbahnstr. 15
Konrad-Adenauer-Str. 10
Poststr. 6
Bismarckstr. 12/Fr.Hoffmann-Str.
Lagerstr. 1
Bahnhofstr. 3
Bahnhofstr. 43
Bahnhofstr. 33 U. 33 A
Friedrichstr. 2
Königstr. 20
Kornmarkt 15
Marktstr. 51
Bahnhofstr. 18a
Übacher Weg 4
Trierer Str. 4–6
Niederwall 3
Hochstr. 31/Postgasse 5
Sattigstr. 33
Robert-Koch-Str. 3
Kaiserstr. 35
Poststr. 28
Bahnhofstr. 33
Bahnhofstr. 8–10
Am Bahnhof 2
Melanchthonstr. 96
Hauptstr. 141
State
GLa (sq. ft.)
OCCupanCy at DeCember 31, 2013
City
Höxter
Bitterfeld
Nordrhein-Westfalen
Sachsen-Anhalt
Marktredwitz
Sulzbach-Rosenberg
Bavaria
Bavaria
Unna
Pfaffenhofen
Hilden
Oranienburg
Andernach
Öhringen
Miltenberg
Pfarrkirchen
Landstuhl
Grevenbroich
Dortmund
Lauf
Berlin
Ibbenbüren
Papenburg
Emmerich
Köln
Hattingen
Selb
Norden
Pulheim
Fürstenwalde
Saarbrücken
Schmölln
Hamburg
Mannheim
Nordenham
Warburg
Walsrode
Buxtehude
Wangen
Magdeburg
Baden-Baden
Bitburg
Tuttlingen
Langenhagen
Beckum
Steinfurt
Meschede
Osterburken
Riesa
Stendal
Monheim
Brilon
Osterode
Essen
Wedel
Alsdorf
Heusweiler
Lübbecke
Bochum
Görlitz
Laatzen
Minden
Hemer
Sulz
Borken
Meldorf
Bretten
Rheda-Wiedenbrück
Nordrhein-Westfalen
Bavaria
Nordrhein-Westfalen
Brandenburg
Rheinland-Pfalz
Baden-Württemberg
Bavaria
Bavaria
Rheinland-Pfalz
Nordrhein-Westfalen
Nordrhein-Westfalen
Bavaria
Berlin
Nordrhein-Westfalen
Niedersachsen
Nordrhein-Westfalen
Nordrhein-Westfalen
Nordrhein-Westfalen
Bavaria
Niedersachsen
Nordrhein-Westfalen
Brandenburg
Saarland
Thüringen
Hamburg
Baden-Württemberg
Niedersachsen
Nordrhein-Westfalen
Niedersachsen
Niedersachsen
Baden-Württemberg
Sachsen-Anhalt
Baden-Württemberg
Rheinland-Pfalz
Baden-Württemberg
Niedersachsen
Nordrhein-Westfalen
Nordrhein-Westfalen
Nordrhein-Westfalen
Baden-Württemberg
Sachsen
Sachsen-Anhalt
Nordrhein-Westfalen
Nordrhein-Westfalen
Niedersachsen
Nordrhein-Westfalen
Schleswig-Holstein
Nordrhein-Westfalen
Saarland
Nordrhein-Westfalen
Nordrhein-Westfalen
Sachsen
Niedersachsen
Nordrhein-Westfalen
Nordrhein-Westfalen
Baden-Württemberg
Nordrhein-Westfalen
Schleswig-Holstein
Baden-Württemberg
Nordrhein-Westfalen
Dundee International 2013 Annual Report | 77
23,240
23,183
22,710
22,634
22,627
22,513
22,454
22,153
22,119
22,027
22,017
21,980
21,709
21,668
21,659
21,603
21,187
21,031
20,950
20,942
20,742
20,681
20,681
20,668
20,517
20,437
20,433
20,403
20,213
20,128
20,109
19,985
19,967
19,800
19,510
19,454
19,444
19,340
19,047
18,892
18,831
18,800
18,683
18,498
18,275
18,200
18,156
17,733
17,690
17,661
17,020
16,991
16,867
16,563
16,359
16,279
16,126
16,043
15,782
15,774
15,893
15,549
15,501
15,178
79%
86%
99%
76%
100%
88%
87%
76%
88%
95%
89%
88%
99%
71%
96%
100%
100%
100%
88%
100%
100%
100%
78%
81%
91%
59%
92%
88%
81%
90%
100%
86%
94%
96%
97%
100%
93%
99%
97%
100%
100%
100%
100%
100%
90%
93%
100%
76%
100%
100%
94%
100%
92%
100%
100%
100%
100%
82%
100%
82%
98%
97%
90%
100%
Address
Republikstr. 34
Poststr. 1/2
Im Kusterfeld 1
Herrlichkeit 7
Grenzstr. 24
Mercedesstr. 5
Am Buchhorst 35
Bahnhofstr. 41
Berliner Str. 4
Kolpingstr. 4
Münchner Str. 50
Schönbornstr. 1
Potsdamer Str. 9
Langener Landstr. 237–239
Löbauer Str. 63
Fritz-Brandt-Str. 25
Dahmestr. 17
Bünder Str. 36
Berliner Freiheit 8
Albert-Steiner-Str. 10
Poststr. 1
Heidering 23
Gorsemannstr. 22
Bahnhofstr. 11
Märkische Str. 58
Mönchenstr. 15–18
Poststr. 3–5
Prochaskaplatz 7
Kürbsweg 9
Bahnhofstr. 49/49a
Gutachstr. 56
Unterstr. 14
Am Markt 4
Hauptstr. 40
Sandstr. 4
Rensefelder Str. 2
Langfuhren 9
Weinbergstr. 50
De-Lenoncourt-Str. 2
Rosenstr. 1/Fünfhausenstr. 19/21
Elisabeth-Anna-Str. 11
Melcherstätte 8
Alte Amberger Str. 28
Wetterstr. 20/Poststr. 2
total initial properties
total portfolio
State
GLa (sq. ft.)
OCCupanCy at DeCember 31, 2013
14,985
14,763
14,634
14,560
14,533
14,504
14,042
13,936
13,816
13,725
13,326
13,117
12,885
12,803
12,686
12,654
12,631
12,625
12,553
12,667
12,498
12,494
12,379
12,112
11,997
11,731
11,597
11,334
11,175
11,050
10,813
10,732
10,324
10,315
10,132
9,777
9,717
9,023
8,995
8,881
8,382
8,196
7,980
7,702
11,805,481
15,705,425
71%
80%
99%
94%
100%
100%
100%
100%
92%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
79%
100%
94%
100%
100%
100%
100%
100%
95%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
83.2%
86.4%
City
Schönebeck
Spremberg
Backnang
Syke
Halle
Hannover
Potsdam
Eberbach
Albstadt
Georgsmarienhütte
Fürstenfeldbruck
Geisenheim
Ludwigsfelde
Bremerhaven
Bautzen
Zerbst
Mittenwalde
Löhne
Bremen
Herzogenrath
Erftstadt
Hannover
Bremen
Alpirsbach
Düsseldorf
Jüterbog
Barsinghausen
Dannenberg
Seevetal
Aalen
Titisee-Neustadt
Bochum
St. Georgen
Porta Westfalica
Germersheim
Bad Schwartau
Bad Säckingen
Sachsen-Anhalt
Brandenburg
Baden-Württemberg
Niedersachsen
Sachsen-Anhalt
Niedersachsen
Brandenburg
Baden-Württemberg
Baden-Württemberg
Niedersachsen
Bavaria
Hessen
Brandenburg
Bremen
Sachsen
Sachsen-Anhalt
Brandenburg
Nordrhein-Westfalen
Bremen
Nordrhein-Westfalen
Nordrhein-Westfalen
Niedersachsen
Bremen
Baden-Württemberg
Nordrhein-Westfalen
Brandenburg
Niedersachsen
Niedersachsen
Niedersachsen
Baden-Württemberg
Baden-Württemberg
Nordrhein-Westfalen
Baden-Württemberg
Nordrhein-Westfalen
Rheinland-Pfalz
Schleswig-Holstein
Baden-Württemberg
Bad Neuenahr-Ahrweiler
Rheinland-Pfalz
Dillingen
Springe
Wangerooge
Stuhr
Grafenwöhr
Herdecke
Saarland
Niedersachsen
Niedersachsen
Niedersachsen
Bavaria
Nordrhein-Westfalen
Dundee International 2013 Annual Report | 78
Trustees
Detlef Bierbaum 1, 2, 5
Köln, Germany
Corporate Director
Michael J. Cooper 2
Toronto, Ontario
Vice Chairman,
Dundee International REIT
Brydon Cruise 1, 3, 4
Toronto, Ontario
President and Managing Partner,
Brookfield Financial
P. Jane Gavan 2
Utah, United States of America
President and Chief Executive Officer,
Dundee International REIT
Corporate information
Head office
duNdee iNterNatioNal
real estate iNvestmeNt trust
State Street Financial Centre
30 Adelaide Street East, Suite 1600
Toronto, Ontario M5C 3H1
Phone: (416) 365-3535
Fax: (416) 365-6565
Investor relations
Phone: (416) 365-3538
Toll free: 1 877 365-3535
From Germany: 0 800 189-0344
E-mail: info@dundeeinternational.com
Web site: www.dundeeinternational.com
Transfer agent
(for change of address, registration
or other unitholder enquiries)
comPutersHare trust
comPaNy of caNada
100 University Avenue, 9th Floor
Toronto, Ontario M5J 2Y1
Phone: (514) 982-7555 or
1 800 564-6253
Fax: (416) 263-9394 or
1 888 453-0330
E-mail: service@computershare.com
Duncan Jackman 1, 3, 4
Toronto, Ontario
Chairman, President and CEO,
E-L Financial Corporation Limited
Johann koss
Toronto, Ontario
Chief Executive Officer,
Right to Play
John sullivan
Toronto, Ontario
President and Chief Executive Officer,
Cadillac Fairview Corporation Limited
Auditors
PriceWaterHousecooPers llP
PwC Tower, 18 York Street, Suite 2600
Toronto, Ontario M5J 0B2
Corporate counsel
osler, HoskiN & Harcourt llP
Box 50, 1 First Canadian Place, Suite 6100
Toronto, Ontario M5X 1B8
Taxation of distributions
Distributions paid to unitholders in respect
of the tax year ended December 31, 2013
are taxed as follows:
Foreign business income: 47.6%
Return of capital: 52.4%
Management estimates that 45%–55% of
the distributions to be made by the REIT in
2014 will be tax-deferred. The actual deferral
rate is heavily dependent on the euro/CAD
exchange rates.
Stock exchange listing
tHe toroNto stock eXcHaNGe
Listing symbols:
REIT Units: DI.UN
5.5% Convertible Debentures: DI.DB
Annual meeting of
unitholders
Wednesday, May 7, 2014 at 4:00 pm (EST)
St. Andrew’s Club and Conference Centre
Main Dining Room
150 King Street West
Toronto, Ontario, Canada
Officers
Detlef Bierbaum
Chairman
Michael J. Cooper
Vice Chairman
P. Jane Gavan
President and Chief Executive Officer
rene d. Gulliver
Chief Financial Officer
1 Member of the Audit Committee
2 Member of the Executive Committee
3 Member of the Compensation Committee
4 Member of the Governance and
Environmental Committee
5 Chairman of the Board of Trustees
Distribution Reinvestment
and Unit Purchase Plan
The purpose of our Distribution Reinvestment
and Unit Purchase Plan (“DRIP”) is to provide
unitholders with a convenient way of
investing in additional units without incurring
transaction costs such as commissions,
service charges or brokerage fees. By
participating in the Plan, you may invest in
additional units in two ways:
Distribution reinvestment: Unitholders
will have cash distributions from
Dundee International REIT reinvested
in additional units as and when cash
distributions are made.
Cash purchase: Unitholders may invest in
additional units by making cash purchases.
If you register in the DRIP you will also
receive a “bonus” distribution of units
equal to 4% of the amount of your cash
distribution reinvested pursuant to the
Plan. In other words, for every $1.00 of cash
distributions reinvested by you under the
Plan, $1.04 worth of units will be purchased.
For more information please visit
5
Dream 2013 Annual Report
www.dundeeinternational.com
1
Dream 2013 Annual Report