Dream Gobal REIT
Annual Report 2014

Plain-text annual report

Annual Report 2014 Dream Global REIT D R E A M G L O B A L R E I T 2 0 1 4 A N N U A L R E P O R T Letter to Unitholders In 2014, Dream Global accomplished some significant milestones in the continued progress and transformation of our business. We added over $400 million of office properties in some of the best markets in Germany to our portfolio and continued to expand our local management platform. In addition, we were able to realize gains on some of our newer assets and leverage our operating platform through our joint venture with Public Official Benefits Association (“POBA”). Throughout 2014, we continued our strong leasing performance with over one million square feet of new leases and renewals. As a result of our accretive acquisitions and our strong leasing performance, adjusted funds from operations increased by 5% to 83 cents per unit in 2014 from 79 cents in 2013. A key achievement in 2014 was the successful joint venture with POBA. During the fourth quarter of 2014, we closed the sale of a 50% interest in seven properties to POBA for gross proceeds of approximately $315 million. We quickly deployed the sales proceeds into comparable or higher quality assets at more attractive cap rates and lower borrowing rates than the assets we sold. In January 2015, the Trust further expanded its partnership with POBA through the sale of a 50% interest in Officium, one of our office properties located in Stuttgart. This joint venture serves as an endorsement of Dream Global’s strong operating platform in Germany and highlights POBA’s confidence in our ability to source accretive acquisitions. The transaction provided a new source of capital for the Trust to continue to take advantage of the attractive investment environment, and allowed us to leverage our operating platform by generating joint venture management income. Our focus since the initial public offering has been to improve the stability and quality of the underlying cash flows in our portfolio. Throughout 2014, we continued to demonstrate our ability to execute on this strategy through high- quality office property acquisitions on attractive borrowing terms, dispositions and recycling capital. Over the last three years, we have added over $1.8 billion in high-quality assets and have been amongst the top three buyers of German office properties. Over 70% of our assets are now located in the “Big 7” office markets in Germany. Leasing remained a key operational focus in 2014 with the completion of over one million square feet of new leases and renewals. From our initial public offering in August 2011 to the end of 2014, our exposure to Deutsche Post has been reduced from 85% to less than 30% of the REIT’s gross rental income and will further decline as we continue to grow and diversify our portfolio. The German economy continues to perform well with the country’s unemployment rate amongst the lowest in Europe. The German real estate market also performed well, with vacancy in the seven largest office markets reaching its lowest level since 2002 and global investment capital continuing to identify Germany as a key target. In 2014, Dream Global completed the sale of 35 non-core properties for total sales proceeds of approximately $131 million, representing 101% of their book value. As part of our active capital recycling program we sold, or put under contract for sale, over $200 million of assets since 2012. The proceeds from these dispositions were redeployed into newer, high-quality properties. Looking ahead, we will continue to remain committed to our key objective of providing predictable and sustainable distributions to our investors. We have been recognized for establishing an excellent operating platform in Germany and will seek further opportunities to leverage our platform and to grow our asset base. On behalf of our management team and our Board of Trustees, I would like to thank you for your continued support. P. Jane Gavan President and Chief Executive Officer March 15, 2015 Portfolio at-a-Glance DECEMBER 31, 2014 Dream Global REIT is an owner and operator of 14.8 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 and six local offices in Europe. 14% HAMBURG 3% HANNOVER 4% BERLIN 14% DÜSSELDORF 11% COLOGNE GERMANY 10% FRANKFURT 7% STUTTGART 6% NUREMBERG 7% MUNICH Geographic Diversification (% of gross rental income in key markets) Photos: 1. Oasis III, Stuttgart | 2. Cologne Tower, Cologne | 3. My Falkenried, Hamburg | 4. Europahaus, Darmstadt | 5. Officium, Stuttgart | 6. Millerntorplatz 1, Hamburg 1 2 $2.4B TOTAL ASSETS 6 LOCAL OFFICES IN EUROPE 5 266 PROPERTIES Diversified, High-Quality Tenants TENANT COMPOSITION Deutsche Post Freshfields Bruckhaus Deringer ERGO Direkt Lebensversicherungs AG Imtech Deutschland GmbH & Co. KG BNP Paribas Fortis SA/NV Deutsche Postbank AG CinemaxX Entertainment GmbH & Co. KG Maersk Deutschland A/S & Co. KG Google Germany GmbH Grohe AG Other third-party tenants Total In-place Rent (per square foot per year) 10.00€ 9.00€ 8.00€ 7.00€ 6.00€ 5.00€ 4.00€ 3.00€ 2.00€ 1.00€ 0.00€ TOTAL ANNUALIZED GRI (%) 29.5 3.5 3.1 2.4 1.9 1.8 1.6 1.4 1.3 1.3 52.2 100.0 CREDIT RATING BBB+ n/a AA- n/a A+ A+ n/a BBB+ AA n/a n/a 2014 Adjusted Funds from Operations (“AFFO”) (Q4/2014) €8.86 35% INITIAL PROPERTIES 65% NEW ACQUISITIONS 2011 2012 3 2013 2014 4 1M SQUARE FEET OF LEASING IN 2014 69% TENANT RETENTION 6 5% INCREASE IN 2014 AFFO/UNIT $400M+ ACQUISITIONS IN 2014 0.21 0.20 0.19 0.18 0.17 0.16 0.15 Q4-12 Q1-13 2 Table of Contents Management’s discussion and analysis 1 Management’s responsibility for the consolidated financial statements Independent auditor’s report Consolidated financial statements 50 51 52 Notes to the consolidated financial statements 56 Trustees IBC Corporate information IBC 1 3 4 Photos: 1. Feldmuehleplatz, Dusseldorf 2. Z-UP, Stuttgart 3. k26, Frankfurt 4. ABC Bogen, Hamburg 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     KEY  PERFORMANCE  INDICATORS   Portfolio   Number  of  properties(1)   Gross  leasable  area  (“GLA”)  (in  square  feet)(1)   Occupancy  rate  –  including  committed  (period-­‐end)(1)(2)   Occupancy  rate  –  in-­‐place  (period-­‐end)(1)(2)   Average  in-­‐place  net  rent  per  square  foot  (period-­‐end)(1)   Market  rents  above  in-­‐place  net  rents(1)   Operating  results     Investment  properties  revenue(4)   Net  rental  income(5)     Total  portfolio   Initial  Properties     Acquisition  Properties   Funds  from  operations  (“FFO”)(6)   Adjusted  funds  from  operations  (“AFFO”)(7)   Distributions     Declared  distributions     DRIP  participation  ratio  (for  the  period)   Per  unit  amounts(8)     Distribution       Basic:       FFO     AFFO       Diluted:     FFO     AFFO     Payout  ratio:(9)     Distribution/AFFO  (basic)   As  at     December  31,     2014     As  at     September  30,     2014     As  at   December  31,   2013    266      14,839,661     85.3%     84.7%      279      15,839,035     87.1%     85.9%       €   8.86     €   2.9%   8.90     €   2.0%    296    15,705,425   86.4%   85.9%   8.46   2.2%   Three  months  ended  December  31,     2013(3)     2014(3)     Year  ended  December  31,   2013(3)   2014(3)       $    61,690     $    62,528     $    257,725     $    220,220    43,069      16,537      26,532      23,428      22,401      41,872      20,033      21,839      24,235      22,259      179,464      76,202      103,262      97,496      91,370      144,853    79,126    65,727    84,422    78,007     $    22,263     $   16%      21,910     $   17%      88,547     $   16%      79,784   13%     $    0.20     $    0.20     $    0.80     $    0.21      0.20      0.21      0.20      0.22      0.20      0.22      0.20     100%     100%      0.88      0.83      0.87      0.82     96%      0.80    0.85    0.79    0.84    0.79   101%   Dream  Global  REIT  2014  Annual  Report    |    1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Financing     Weighted  average  effective  interest  rate  on       debt  (period-­‐end)(1)   Weighted  average  face  rate  of  interest  on       debt  (period-­‐end)(1)   Interest  coverage  ratio(1)(10)(11)   Debt-­‐to-­‐adjusted  EBITDFV  (years)(1)(10)(11)   Level  of  debt  (net  debt-­‐to-­‐gross  book  value,  net  of  cash)(1)(10)(11)   Debt  –  average  term  to  maturity  (years)(1)(11)(12)   Unsecured  convertible  debentures   As  at   December  31,   2014   As  at     September  30,   2014   As  at     December  31,   2013   3.54%     3.63%     3.72%   3.23%     3.26  times    9.18     51%      4.3      152,365     $   3.28%     3.30  times    9.56     56%      4.1      151,841     $   3.37%   3.40  times    8.80   54%    4.6    150,326     $   (1) Reflects  Owned  Share  of  joint  venture  properties  starting  in  Q4  2014.  Number  of  properties  includes  the  joint  venture  properties.  Joint  venture  properties  are  accounted  for   using  the  equity  method  in  our  consolidated  financial  statements.   (2) Occupancy  rates  as  at  December  31,  2014  and  September  30,  2014  include  space  covered  by  a  head  lease  that  was  classified  as  vacant  space  in  the  prior  year.  The  December  31,   (3) (4) 2013  occupancy  rate  has  not  been  restated.   Results  from  operations  were  converted  into  Canadian  dollars  from  euros  using  the  average  exchange  rates  found  on  page  30.   Investment  properties  revenue  (non-­‐GAAP  measure)  is  defined  as  total  revenue,  including  the  share  of  investment  property  revenue  from  investments  in  joint  ventures  from  the   date  of  closing  of  the  sale  of  the  respective  properties.  The  reconciliation  of  investment  property  revenue  can  be  found  in  the  section  “Non-­‐GAAP  measures  and  other   disclosures”.   (5) Net  rental  income  (non-­‐GAAP  measure)  is  defined  as  total  of  net  rental  income,  including  the  share  of  net  rental  income  from  investment  in  joint  ventures  from  the  date  of   (6) (7) (8) closing  of  the  sale  of  the  respective  properties.  The  reconciliation  of  net  rental  income  can  be  found  in  the  section  “Non-­‐GAAP  measures  and  other  disclosures”.   FFO  (non-­‐GAAP  measure)  –  The  reconciliation  of  FFO  to  net  income  can  be  found  in  the  section  “Our  results  of  operations”  under  the  heading  “Funds  from  operations  and   adjusted  funds  from  operations”.   AFFO  (non-­‐GAAP  measure)  –  The  reconciliation  of  AFFO  cash  flow  from  operations  can  be  found  in  the  section  “Non-­‐GAAP  measures  and  other  disclosures”  under  the  heading   “Cash  generated  from  operating  activities  to  AFFO  reconciliation”.   A  description  of  the  determination  of  basic  and  diluted  amounts  per  unit  can  be  found  in  the  section  “Non-­‐GAAP  measures  and  other  disclosures”  under  the  heading  “Weighted   average  number  of  units”.   Payout  ratio  is  calculated  as  the  ratio  of  the  distribution  rate  divided  by  basic  AFFO  per  unit.   (9) (10) The  calculation  of  the  following  non-­‐GAAP  measures  are  included  in  the  section  “Non-­‐GAAP  measures  and  other  disclosures”  under  the  headings  “Interest  coverage  ratio”,   “Debt-­‐to-­‐adjusted  EBITDFV”  and  “Level  of  debt  (debt-­‐to-­‐gross  book  value)”.   (11) This  metric  includes  the  REIT’s  share  of  the  mortgages  on  the  POBA  properties  starting  in  Q4  2014.   (12) This  metric  excludes  the  revolving  credit  facility.   Dream  Global  REIT  2014  Annual  Report    |    2                                                                                                                                                                                                                                             FINANCIAL  OVERVIEW   The   fourth   quarter   results   were   in   line   with   our   expectations   with   funds   from   operations   (“FFO”)   and   adjusted   funds   from   operations   (“AFFO”)   of   $23.4   million   and   $22.4   million,   respectively,   compared   with   $24.2   million   and   $22.3   million,   respectively,  for  Q4  2013.  The  acquisitions  completed  over  the  course  of  2014  were  able  to  compensate  for  the  impact  from  the   Deutsche  Post  lease  terminations  and  the  Lonestar  guarantee  expiry,  which  were  effective  July  1,  2014.  For  the  year,  FFO  and   AFFO  increased  to  $97.5  million  and  $91.4  million,  respectively,  from  $84.4  million  and  $78.0  million,  respectively,  in  2013.  On  a   per   unit   basis,   basic   FFO   and   basic   AFFO   both   increased   in   2014   to   88   cents   and   83   cents,   respectively,   from   85   cents   and     79  cents,  respectively,  in  2013.  The  increases  in  2014  are  a  result  of  the  acquisitions  we  completed  in  2013  and  2014  as  well  as   the  strong  leasing  activity  in  2014.   In   the   fourth   quarter,   we   completed   the   sale   of   a   50%   interest   in   seven   assets   from   our   Acquired   Properties   portfolio   to   the   Public  Officials  Benefit  Association  (“POBA”)  joint  venture  and  were  able   to  reinvest  over  two-­‐thirds  of  the  net  proceeds  into   new  acquisitions.  The  balance  of  the  proceeds  will  be  invested  in  Q1  2015   with  the  closing  of  the  Millerntorplatz  property  in   Hamburg.   Our   retained   50%   interest   in   the   joint   venture   assets   is   reflected   as   an   investment   in   joint   ventures   on   the   consolidated  balance  sheet  and  is  equity  accounted  for  in  our  consolidated  financial  statements.   Leasing   momentum   and  the  leasing  pipeline   remain  strong  going  into  2015,  despite  negative  leasing  absorption  in  the  fourth   quarter  of  2014.  During  the  fourth  quarter,  the  previously  identified  expiry  of  short-­‐term  lease  extensions  in  connection  with   Deutsche  Post’s  2014  lease  terminations  resulted  in  negative  leasing  absorption  for  the  quarter.  The  sale  of  the  50%  interest  in   the  seven  assets  also  impacted  our  leasing  and  occupancy  metrics  in  that  we  reflect  only  our  50%  share  of  the  properties  we   sold.   Our   overall   in-­‐place   and   committed   occupancy   was   85.3%   at   the   end   of   2014,   a   year-­‐over-­‐year   decrease   of   1.1%   from   86.4%  at  the  end  of  2013.  Contributing  to  the  decline  were  the  Deutsche  Post  terminations  as  well  as  the  sale  of  50%  of  the   joint   venture   assets.   The   overall   effect   of   the   2014   terminations   was   significantly   mitigated   by   strong   leasing   and   renewals   across  our  entire  portfolio  as  well  as  the  acquisitions  we  completed.     Year-­‐over-­‐year,   in-­‐place   rents   increased   from   €8.46   per   square   foot   in   Q4   2013   to   €8.86   in   Q4   2014,   largely   due   to   the   completed  acquisitions,  which  have  a  higher  average  per  square  foot  rent.  At  €9.12  per  square  foot,  average  market  rents  in  our   portfolio  remain  approximately  2.9%  above  in-­‐place  rents  at  the  end  of  Q4  2014.     The   Trust’s   average   face   interest   rate   decreased   to   3.23%   at   the   end   of   Q4   2014,   from   3.37%   at   the   end   of   Q4   2013.   Our   leverage  declined  to  51%  (net  of  cash)  at  the  end  of  Q4  2014  from  54%  at  the  end  of  Q4  2013,  largely  as  a  result  of  the  sale  to   POBA  of  our  50%  interest  in  seven  assets,  which  resulted  in  slightly  higher  cash  balances  at  the  end  of  2014  compared  to  2013.   Also   contributing   to   the   reduction   in   our   leverage   was   the   increase   in   valuations   of   our   investment   properties   in   2014.   Subsequent  to  the  closing  of  the  Millerntorplatz  acquisition  in  Q1  2015,  the  leverage  ratio  will  increase  and  we  will  continue  to   operate  in  the  targeted  range  of  50%  to  60%  debt-­‐to-­‐book  value  (net  of  cash). On  an  overall  basis,  management  was  pleased  with  the  Trust’s  performance  in  Q4  2014. Dream  Global  REIT  2014  Annual  Report    |    3       OUTLOOK   The  fourth  quarter  of  2014  was  an  exciting  quarter  for  the  REIT  with  the  closing  of  the  POBA  joint  venture.  Subsequent  to  year-­‐ end,   we   further   expanded   our   partnership   with   POBA   through   the   sale   of   a   50%   interest   in   Officium,   one   of   our   recent   acquisitions  in  Stuttgart.  With  the  closing  of  the  acquisition  of  Millerntorplatz  1  in  Hamburg  for  $136.1  million  (€95.9  million)  on   February  6,  2015,  the  balance  of  the  proceeds  from  the  sale  to  POBA  is  fully  redeployed.  Our  ability  to  reinvest  the  proceeds   from  these  sales  into  properties  of  equal  or  better  value  will  enable  us  to  continue  to  grow  and  develop  our  platform.   The  Millerntorplatz  office  property  becomes  the  Trust’s  largest  asset  in  Hamburg.  The  multi-­‐tenant  property,  built  in  1997  and   situated  in  a  vibrant  city  centre  location  in  Hamburg,  is  leased  to  a  variety  of  tenants  including  Deutsche  Rentenversicherung,   Germany’s  largest  state  pension  fund,  and  the  City  of  Hamburg.  The  Trust  acquired  the  property  at  a  going-­‐in  cap  rate  of  6.1%   and  has  financed  it  with  a  ten-­‐year  mortgage  at  an  interest  rate  of  1.71%.     We   continued   with   our   dispositions   program   in   Q4   and   sold   14   properties   from   our   Initial   Properties   for   gross   proceeds   of     $69.4   million.   In   total   for   2014,   we   sold   35   properties   for   $130.7   million,   which   represented   101%   of   book   value   for   those   assets.  For  2015,  we  will  continue  to  dispose  of  properties  from  our  Initial  Properties  portfolio  and  redeploy  the  proceeds  into   newer  multi-­‐tenant  properties  located  in  major  German  office  markets.     The  German  economy  continues  to  perform  well  in  a  difficult  global  environment  and  benefits  from  strong  domestic  demand.   The  fundamentals  in  the  office  sector  in  our  key  markets  remain  solid  with  overall  net  absorption  of  office  space  continuing  to   be  positive  across  the  “Big  7”  office  markets  and  a  further  decline  in  the  office  vacancy  rates.     Our   focus   since   the   initial   public   offering   has   been   to   improve   the   stability   and   quality   of   the   underlying   cash   flows   in   our   portfolio.  Throughout  2014,  we  continued  to  execute  on  this  goal  and  for  2015,  this  goal  will  remain  our  focus.   BASIS  OF  PRESENTATION   Our   discussion   and   analysis   of   the   financial   position   and   results   of   operations   of   Dream   Global   Real   Estate   Investment   Trust   (“Dream   Global   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,  2014.     The  Trust’s  basis  of  financial  reporting  is  International  Financial  Reporting  Standards  (“IFRS”).     The  REIT  complies  with  IFRS  11,  Joint  Arrangements,  and  accounts  for  investments  in  joint  ventures  in  its  audited  consolidated   financial   statements   using   the   equity   method   of   accounting.   All   references   herein   to   “consolidated”   refer   to   amounts   as   reported  under  IFRS.  For  the  purpose  of  this  management’s  discussion  and  analysis  (“MD&A”),  all  references  to  “REIT’s  Interest”   or  “Owned  Share”  refer  to  a  non-­‐GAAP  financial  measure  representing  Dream  Global  REIT’s  proportionate  share  of  the  financial   position  and  results  of  operations  of  its  entire  portfolio,  including  equity  accounted  investments,  under  the  assumption  that  all   investments  in  joint  ventures  have  been  proportionately  consolidated.  For  a  reconciliation  of  the  Trust’s  results  of  operations   and   statement   of   financial   position,   please   see   “Non-­‐GAAP   measures   and   other   disclosures”   in   this   MD&A.   Entities   that   are   consolidated  in  our  consolidated  financial  statements  are  included  at  100%  for  the  purpose  of  the  MD&A.   This  MD&A  has  been  dated  as  at  February  18,  2015.  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;   “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;     “Units”,  meaning  the  Units  of  the  Trust;  and   “POBA”,  meaning  Public  Officials  Benefit  Association.   Certain  information  has  been  obtained  from  CB  Richard  Ellis  Germany  (“CBRE”),  Colliers  International  (“Colliers”)  and  Jones  Lang   LaSalle  (“JLL”),  commercial  firms  that  provide  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.   Dream  Global  REIT  2014  Annual  Report    |    4       When  we  use  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.   Market  rents  disclosed  throughout  the  MD&A  are  management’s  estimates  and  are  based  on  current  leasing  fundamentals.  The   current  estimated  market  rents  are  at  a  point  in  time  and  are  subject  to  change  based  on  future  market  conditions.   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  Dream  Global  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   18,   2015,   except   where   otherwise   noted.   Dream   Global   REIT   does   not   undertake  to  update  any  such  forward-­‐looking  information  whether  as  a  result  of  new  information,  future  events  or  otherwise,   except  as  required  by  law.  Additional  information  about  these  assumptions  and  risks  and  uncertainties  is  contained  in  our  filings   with  securities  regulators.  These  filings  are  also  available  on  our  website  at  www.dreamglobalreit.ca.   BACKGROUND   Dream  Global  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.  Dream  Global  REIT  was  founded  by  Dream  Asset  Management   Corporation  (“DAM”),  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  DRG.UN.   As  at  December  31,  2014,  our  portfolio  consisted  of  266  properties  comprising  approximately  14.8  million  square  feet  of  GLA   located   in   Germany,   including   seven   properties   held   within   a   joint   venture   of   which   Dream   Global   REIT   retained   a   50%   ownership  interest.     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.   Dream  Global  REIT  2014  Annual  Report    |    5       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.  To  date,  100%  of  our  portfolio  is  located  in  Germany;   • • • • building  a  diversified  portfolio  of  commercial  properties;     capitalizing  on  internal  growth  and  seeking  accretive  acquisition  opportunities  in  our  target  markets;     increasing   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  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,  2014,  approximately  15.2%  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,     2013     0.80     $   0.0667     $   8.42     $   2014     0.80     $   0.0667     $   8.57     $   September  30,     2013     0.80     $   0.0667     $   9.41     $   2014     0.80     $   0.0667     $   9.08     $   2014     0.80     $   0.0667     $   9.82     $   June  30,       2013     0.80     $   0.0667     $   9.94     $   2014     0.80     $   0.0667     $   9.28     $   March  31,   2013   0.80   0.0667   10.64   closing  unit  price   9.33%     9.50%     8.81%     8.50%     8.15%     8.05%     8.62%     7.52%   OUR  STRATEGY   Our  core  strategy  to  meet  our  objectives  includes  the  following:   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  under  the  oversight  of  our  internal  team.   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.  We  focus  on  adding  high-­‐quality  tenants  in  the  most  desirable  office  markets  in   Germany   in   addition   to   increasing   our   overall   asset   base   in   the   largest   office   markets   in   Germany.   A   key   criterion   when   considering  potential  acquisitions  is  the  multi-­‐tenant  nature  of  a  property.   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.   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   continuously   reviewed   and   will   also   include   dispositions   of   properties   and   optimizing   our   capital  structure.   Dream  Global  REIT  2014  Annual  Report    |    6                                                                                                       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,  2014,  this  category  included  237  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,  2014,  this  category  included  29  office  properties,  which  were  acquired  since  the  beginning  of  2012.  These   properties  are  high-­‐quality,  multi-­‐tenant  office  buildings  located  in  Germany’s  largest  office  markets  and  are  generally  newer  or   recently  refurbished  buildings.  A  50%  interest  in  seven  of  the  29  properties  was  sold  during  the  year  and  these  seven  properties   are  now  jointly  owned  with  POBA,  a  South  Korean  pension  fund.     The  majority  of  our  portfolio  is  concentrated  in  Germany’s  largest  office  markets:     Geographic  composition  of  portfolio(1)   Berlin   Cologne   Düsseldorf   Frankfurt   Hamburg   Hannover   Munich   Nuremberg   Stuttgart   Other   Total   (1)  Reflects  the  REIT’s  Owned  Share  basis.   Total  GLA  (sq.  ft.)    506,436    984,938    1,745,214    1,173,287    1,312,376    810,208    552,157    627,357    752,527    6,375,161    14,839,661   Total  GLA  (%)   3   7   12   8   9   5   4   4   5   43   100   Total  GRI  (%)   4   11   14   10   14   3   7   6   7   24   100   TENANTS   Through   an   active   acquisitions   and   dispositions   program   that   commenced   in   2012,   the   Trust   continues   to   focus   on   the   diversification  of  its  tenant  base.  The  table  below  highlights  the  diversification  away  from  the  single-­‐tenant  nature  of  our  Initial   Properties.  At  the  end  of  Q4  2014,  Deutsche  Post’s  GRI  was  approximately  29.5%  of  the  Trust’s  overall  occupied  and  committed   GRI,  down  from  37.3%  at  the  end  of  2013.       Dream  Global  REIT  2014  Annual  Report    |    7                                                                                                                                           Tenant  composition(1)   Deutsche  Post     Freshfields  Bruckhaus  Deringer     ERGO  Direkt  Lebensversicherungs  AG   Imtech  Deutschland  GmbH  &  Co.  KG   BNP  Paribas  Fortis  SA/NV   Deutsche  Postbank  AG   CinemaxX  Entertainment  GmbH  &  Co.  KG   Maersk  Deutschland  A/S  &  Co.  KG   Google  Germany  GmbH   Grohe  AG   Other  third-­‐party  tenants   Total   (1)  Reflects  the  REIT’s  Owned  Share.     (2)  Source:  Standard  &  Poor’s,  Fitch.   (3)  n/a  means  not  applicable.   Total  annualized   GRI  (%)     29.5   3.5   3.1   2.4   1.9   1.8   1.6   1.4   1.3   1.3   52.2   100.0   Credit  rating(2)(3)   BBB+   n/a   AA-­‐   n/a   A+   A+   n/a   BBB+   AA   n/a   n/a   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  480,000  people  in  more  than  220  countries  and  territories.(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,   2014,   our   portfolio   featured  approximately  165  Postbank  branches,  allowing  for  the  delivery  of  integrated  financial  and  postal  services.  Leases  for   45  Postbank  branches  are  direct  leases.  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.     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  and  generated  approximately  3.5%  of  the  REIT’s  overall  GRI  as  at  December  31,  2014.   ERGO  Direkt  Lebensversicherungs  AG  (“ERGO”)   ERGO   is   the   third   largest   tenant   in   our   portfolio   as   measured   by   GRI.   With   approximately   46,000   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  3.1%  of  the  REIT’s  overall  GRI  as  at  December  31,  2014.   Imtech  Deutschland  GmbH  &  Co.  KG  (“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   5,000   people   and  is  part  of  the  Royal  Imtech  N.V.  Group,  which  is  based  in  the  Netherlands  and  employs  approximately  23,000  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  generated  approximately  2.4%  of  the  REIT’s  overall  GRI  as  at  December  31,  2014.     (1) As  disclosed  at  Deutsche  Post  DHL’s  website  at  www.dpdhl.com   (2) As  disclosed  at  Freshfields’  website  at  www.freshfields.com   (3) As  disclosed  at  ERGO’s  website  at  www.ergo.com   (4) As  disclosed  at  Imtech’s  website  at  www.imtech.de   Dream  Global  REIT  2014  Annual  Report    |    8                                                                                   BNP  Paribas  Fortis  SA/NV  (“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.(5)  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  1.9%  of  the  REIT’s  overall  GRI  as  at  December  31,  2014.   Deutsche  Postbank  AG  (“Postbank”)   Postbank  is  one  of  Germany’s  largest  financial  service  providers  with  approximately  14  million  clients,  14,900  employees  and   total  assets  of  approximately  €158  billion.  Postbank  mainly  focuses  on  private  customers  and  small  to  medium-­‐sized  companies   and   has   the   densest   branch   network   of   any   bank   in   Germany   with   1,100   of   its   own   branches,   4,500   Deutsche   Post   partner   branches  as  well  as  700  Postbank  advisory  centres.(6)  As  at  December  31,  2014,  Postbank  generated  approximately  1.8%  of  the   REIT’s  overall  GRI.     CinemaxX  Entertainment  GmbH  &  Co.  KG  (“CinemaxX”)     CinemaxX   is   a   well-­‐known   cinema   chain   in   Germany   and   Denmark   with   33   cinemas   and   2,000   employees   in   these   two   countries.(7)  CinemaxX  occupies  approximately  62%  of  the  GLA  in  our  property  located  at  Bertoldstrasse  48/Sedanstrasse  7  in   Freiburg  and  generated  approximately  1.6%  of  the  REIT’s  overall  GRI  as  at  December  31,  2014.   Maersk  Deutschland  A/S  &  Co.  KG  (“Maersk”)   Maersk   is   one   of   the   world’s   largest   shipping   companies   and   operates   in   approximately   130   countries.   Through   its   various   divisions,   the   group   employs   approximately   89,000   people   and   generated   over   US$47   billion   in   revenues   in   2013.(8)   Maersk   occupies   approximately   70%   of   the   GLA   in   Humboldt   House,   our   property   located   at   Am   Sandtorkai   37   in   Hamburg.   Maersk   generated  approximately  1.4%  of  the  REIT’s  overall  GRI  as  at  December  31,  2014.   Google  Germany  GmbH  (“Google”)   Google  is  an  American  multinational  corporation  specializing  in  internet-­‐related  services  and  products  and  employs  over  40,000   people   worldwide.(9)   Google   Hamburg   is   the   company’s   commercial   headquarters   for   Germany,   Austria,   Switzerland   and   the   Nordics  and  occupies  approximately  75%  of  the  GLA  in  ABC  Bogen,  our  property  located  in  the  heart  of  Hamburg  at  ABC  Strasse   19.  Google  generated  approximately  1.3%  of  the  REIT’s  overall  GRI  as  at  December  31,  2014.   Grohe  AG  (“Grohe”)   Grohe   AG,   a   subsidiary   of   the   Grohe   Group,   is   Europe’s   largest   provider   of   sanitary   fittings   and   has   a   worldwide   presence   in   more   than   130   countries.   The   Grohe   Group   employs   more   than   9,000   employees   and   had   revenues   of   approximately     €1.45   billion   in   2013.(10)   Grohe   occupies   approximately   29%   of   the   GLA   in   Feldmühleplatz   15   in   Düsseldorf   and   generated   approximately  1.3%  of  the  REIT’s  overall  GRI  as  at  December  31,  2014.   (5) As  disclosed  at  BNP  Paribas’  website  at  www.bnpparibas.com   (6) As  disclosed  at  Deutsche  Postbank  AG’s  website  at  www.postbank.com   (7) As  disclosed  at  CinemaxX’s  website  at  www.cinemaxx.com   (8) As  disclosed  at  Maersk’s  website  at  www.maersk.com   (9) As  disclosed  at  Google’s  website  at  www.google.com  and  www.google.ca/about/jobs/locations/hamburg   (10) As  disclosed  at  Grohe’s  website  at  www.grohe.com   Dream  Global  REIT  2014  Annual  Report    |    9         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   unemployment   rate   at   4.5%(1)   at   the   end   of   December   2014   remains   among   the   lowest   in   the   European   Union.   The   German   government   posted   gross   domestic   product   (“GDP”)   growth   of   1.5%   in   2014,   higher   than   the   GDP   growth   in   the   previous   number  of  years  as  well  as  throughout  the  eurozone.  The  German  economy  performed  well  in  a  difficult  global  environment   and  continued  to  benefit  from  strong  domestic  demand  in  2014.     Economic  impact  on  the  German  real  estate  sector     Germany   remains   one   of   the   most   highly   sought-­‐after   real   estate   investment   markets   in   Europe,   benefiting   from   strong   international   investor   demand.   In   2014,   the   total   investment   volume   for   commercial   real   estate   reached   €39.8   billion(2),   the   best  annual  result  since  2007.     The  office  sector  remains  the  dominant  asset  class,  with  51%(2)  of  all  transactions  in  2014  taking  place  in  this  category.  In  total,   approximately  €20.3  billion(2)  was  invested  in  German  office  properties  during  this  period.  International  investors  contributed   approximately  46%(2)  of  the  total  capital  invested  in  German  office  properties,  a  year-­‐over-­‐year  increase  of  98%,  highlighting  the   global  demand  in  this  market.  The  share  of  investments  in  secondary  markets  continued  to  increase,  reflecting  diversification  of   the  German  economy  and  the  attractiveness  of  risk-­‐return  characteristics  in  these  markets.   The   underlying   fundamentals   in   the   office   sector   remain   strong   with   overall   net   absorption   of   office   space   continuing   to   be   positive  across  the  “Big  7”  office  markets.  Office  vacancies  further  declined  year-­‐over-­‐year  by  60  basis  points  (“bps”)  to  7.6%(3)   at  December  31,  2014,  the  lowest  level  since  2002,  and  average  market  rents  increased  on  average  by  2%(3)  in  these  markets     in  2014.     ILO  labour  market  statistics  overview,  Destatis  –  Germany’s  Federal  Statistical  Office   (1) (2) CBRE  MarketView,  Germany  Investment  Quarterly  Q4  2014   (3) Jones  Lang  LaSalle  Office  Market  Overview  Q4  2014   SECTION  II  –  EXECUTING  THE  STRATEGY   OUR  OPERATIONS     Occupancy   Overall  in-­‐place  and  committed  occupancy  was  85.3%  at  the  end  of  2014,  a  year-­‐over-­‐year  decrease  of  1.1%  from  86.4%  at  the   end   of   2013   and   a   decrease   of   1.8%   quarter-­‐over-­‐quarter   from   87.1%   at   the   end   of   Q3   2014.   The   year-­‐over-­‐year   decrease   results   primarily   from   the   2014   Deutsche   Post   terminations,   which   were   effective   July   1,   2014.   The   quarter-­‐over-­‐quarter   decrease  was  largely  the  result  of  the  expiry  of  short-­‐term  lease  extensions  entered  into  by  Deutsche  Post  for  space  originally   terminated  as  at  July  1,  2014.  Occupancy  in  our  Initial  Properties  decreased  from  83.2%  at  the  end  of  2013  to  80.1%  at  the  end   of  2014,  primarily  due  to  the  2014  Deutsche  Post  terminations,  offset  by  strong  leasing  performance  in  2014.  Occupancy  in  our   Acquisition  Properties  increased  from  96.3%  at  the  end  of  2013  to  97.9%  at  the  end  of  2014,  primarily  due  to  the  acquisitions   we  completed  in  2014  as  well  as  leasing  activity  in  2014,  which  more  than  offset  the  impact  from  the  sale  of  a  50%  interest  in   seven  assets  to  POBA.       Dream  Global  REIT  2014  Annual  Report    |    10       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,  2013  and  December  31,  2014,   and  excludes  properties  that  were  acquired  or  sold  during  2014.   Comparative  portfolio     December  31,     Portfolio  (%)   2013   Initial  Properties   82.5   Acquisition  Properties   96.4   Total   85.8   (1) Occupancy  in  Q4  2014  includes  space  covered  by  a  head  lease  that  was  classified  as  vacant  space  prior  to  Q1  2014.  This  change  in  presentation  results  in  a   December  31,                         2014(1)   80.1   98.2     84.4   2014(1)   80.1         97.9  (2)   85.3   Total  portfolio     December  31,         2013   83.2     96.3         86.4         December  31,             27  bps  increase  in  overall  occupancy  in  Q4  2014.     (2) Reflects  the  REIT’s  Owned  Share.   Vacancy  schedule   The  tables  below  highlight  our  leasing  activity  for  the  three-­‐month  and  twelve-­‐month  periods  ended  December  31,  2014.  During   Q4   2014,   our   overall   space   available   for   lease   increased   by   approximately   128,200   square   feet.   The   primary   reason   for   the   increase  in  vacancy  was  negative  leasing  absorption  of  approximately  236,700  square  feet,  largely  due  to  the  expiry  of  short-­‐ term   lease   extensions   in   connection   with   Deutsche   Post’s   2014   terminated   space.   The   negative   impact   was   significantly   mitigated   by   an   otherwise   high   retention   rate   across   the   entire   portfolio   of   73%   and   high   overall   leasing   volumes   during     Q4  2014.   For  the  three  months  ended  December  31,  2014   (in  square  feet)   Available  for  lease  –  September  30,  2014   Change  in  vacancy  due  to  acquisitions   Change  in  vacancy  due  to  dispositions(2)   Remeasurements   Subtotal  –  Available  for  lease   Expiries   Early  termination  and  bankruptcies   Deutsche  Post  extension  expiries   New  leases   Renewals   Future  leases  for  the  period   Initial  Properties   1,954,677   -­‐   (91,792)   (10,952)   1,851,933   82,316   5,207   231,311   (24,582)   (42,857)   (17,712)       Acquisition  Properties(1)   96,280   -­‐   (6,022)   264   90,522   128,007   13,007   -­‐   (13,007)   (110,947)   (14,061)   Available  for  lease  –  December  31,  2014   (1) Reflects  the  REIT’s  Owned  Share.   (2) The  reduction  in  vacancy  in  our  Acquisition  Properties  resulted  from  the  sale  of  a  50%  interest  in  seven  properties  to  POBA.   2,085,616     93,521     Total   2,050,957   -­‐   (97,814)   (10,688)   1,942,455   210,323   18,214   231,311   (37,589)   (153,804)   (31,773)   2,179,137   Dream  Global  REIT  2014  Annual  Report    |    11                                                                                                                                                                                             For  the  twelve  months  ended  December  31,  2014   Total   2,051,021   37,870   (162,110)   (13,681)   1,913,100   702,229   89,975   1,855,803   231,311   (194,220)   (482,855)     (1,592,200)   (344,006)   2,179,137   (in  square  feet)   Available  for  lease  –  January  1,  2014   Change  in  vacancy  due  to  acquisitions   Change  in  vacancy  due  to  dispositions(2)   Remeasurements   Subtotal  –  Available  for  lease   Expiries   Early  termination  and  bankruptcies   Deutsche  Post  terminations   Deutsche  Post  extension  expiries   New  leases   Renewals   Deutsche  Post/Postbank  renewals  and  extensions   Future  leases  for  the  period   Initial  Properties   1,984,185   -­‐   (156,088)   (6,771)   1,821,326   231,900   39,747   1,855,803   231,311   (160,185)   (106,891)   (1,592,200)   (235,195)      Acquisition  Properties(1)   66,836   37,870   (6,022)   (6,910)   91,774   470,329   50,228   -­‐   -­‐   (34,035)   (375,964)   -­‐   (108,811)   Available  for  lease  –  December  31,  2014   (1) Reflects  the  REIT’s  Owned  Share.   (2) The  reduction  in  vacancy  in  our  Acquisition  Properties  resulted  from  the  sale  of  a  50%  interest  in  seven  properties  to  POBA.   2,085,616     93,521     Excluding  the  Deutsche  Post  terminations,  the  Trust  was  able  to  achieve  a  69%  tenant  retention  rate  in  2014.   Dream  Global  REIT  2014  Annual  Report    |    12                                                                                                                                                               The   table   below   highlights   our   occupancy,   leasing   activity   and   rental   rates   for   the   last   eight   quarters.   Committed   occupancy   includes  in-­‐place  occupancy  as  well  as  space  for  which  leases  have  been  signed  but  do  not  commence  until  a  future  quarter.     Q4  2014(1)(2)   Q3  2014(1)   Q2  2014(1)   Q1  2014(1)   Q4  2013   Q3  2013   Q2  2013   Q1  2013   Occupancy   Committed  occupancy   (square  feet)     12,660,524   13,788,078   13,787,918   13,874,523   13,577,298   13,403,456   13,205,395   12,686,411   Committed  occupancy     85.3%   87.1%   87.9%   87.7%   86.4%   86.2%   85.7%   84.7%   In-­‐place  occupancy   (square  feet)   In-­‐place  occupancy   Leasing  activity   Expiries     Early  termination  and   bankruptcies     New  leases     Renewals     Future  leases   Net  leasing  absorption   (before  DP  terminations)   Deutsche  Post   terminations   Expiries  of  Deutsche   Post  extensions   Deutsche  Post/  Postbank   renewals  and  extensions   Net  leasing  absorption   Average  in-­‐place  rent   (€/sq.  ft./year)   %  change     12,568,632   13,603,696   13,644,620   13,753,248   13,496,358   13,183,857   13,010,931   12,578,484   84.7%   85.9%   87.0%   86.9%   85.9%   84.8%   84.5%   83.9%   (210,323)   (203,087)   (175,716)   (113,105)   (168,754)   (130,075)   (89,824)   (113,970)   (18,214)   (38,709)   37,589   153,804   89,075   143,271   31,773   101,670   (8,908)   21,370   133,149   68,328   (24,143)   46,185   52,633   142,236   (2,489)   35,285   115,914   30,840   (22,021)   51,992   111,609   60,250   (7,418)   36,689   75,373   98,003   (556)   41,198   41,985   38,118   (5,371)   92,220   38,223   103,806   10,796   71,755   112,823   6,775   (99,214)   (1,756,589)   (231,311)   -­‐   99,214   1,492,986   (171,383)   (236,682)   €8.86   (0.4)%   €8.90   1.8%   -­‐   -­‐   -­‐   38,223   €8.74   0.3%   -­‐   -­‐   -­‐   103,806   €8.72   3.0%   -­‐   -­‐   -­‐   10,796   €8.46   3.5%   (22,021)   -­‐   -­‐   49,734   €8.17   0.4%   -­‐   -­‐   -­‐   112,823   €8.14   3.5%   -­‐   -­‐   -­‐   6,775   €7.87   25.8%   (1) Occupancy  includes  space  covered  by  a  head  lease  that  was  previously  classified  as  vacant  space.     (2) Reflects  the  REIT’s  Owned  Share.   In-­‐place  rental  rates   In-­‐place  rents  have  increased  from  approximately  €8.46  per  square  foot/year  at  December  31,  2013  to  approximately  €8.86  per   square  foot/year  at  December  31,  2014,  reflecting  higher  in-­‐place  rents  in  the  Acquisition  Properties  as  well  as  leasing  activity   across   the   portfolio.   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  2.9%  above   in-­‐place   rents   at   December   31,   2014.   The   difference   between   in-­‐place   rents   and   market   rents   in   our   Initial   Properties   is   approximately  12.5%,  allowing  for  rental  growth  in  this  segment  of  our  portfolio,  which  has  approximately   0.8   million  square   feet  expiring  over  the  next  two  years.     For  certain  Acquisition  Properties,  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.   The   gap   between   market   and   in-­‐place   rental   rates   is   narrowing,  reflecting  the  underlying  market  conditions,  a  trend  which  is  expected  to  continue.  The  weighted  average  remaining   lease  term  is  5.3  years  for  this  category  of  assets,  which  allows  for  sufficient  time  for  the  market  rents  to  increase.     Dream  Global  REIT  2014  Annual  Report    |    13                                                                   The  table  below  provides  a  comparison  between  in-­‐place  rents  and  market  rents  in  our  portfolio  as  at  December  31,  2014.     (per  square  foot/year)   Initial  Properties  –  Deutsche  Post     Initial  Properties  –  third  party   Total  Initial  Properties   Acquisition  Properties(1)     Overall   (1) Reflects  the  REIT’s  Owned  Share.   In  $     (as  at  December  31,  2014)   In  €     (as  at  December  31,  2014)   In-­‐place  rent     Market  rent     $      8.54       8.74   8.59   21.05   $  12.80   $      7.47         8.18   7.63   21.83   $  12.44   In-­‐place  rent     €    5.32   5.82   5.44   15.55   €    8.86   Market  rent     €    6.08   6.23   6.12   14.99   €  9.12   %  of  market  rents   above  (below)     in-­‐place  rents   14.3   7.0   12.5   (3.0)   2.9   Market   rent   represents   management’s   best   estimate   of   the   net   rental   rate   that   would   be   achieved   in   the   event   that   a   unit   becomes   vacant   in   a   new   arm’s   length   lease   after   a   reasonable   marketing   period   with   an   inducement   and   lease   term   appropriate   for   the   particular   space.  Market   rent   by   property   is   determined   on   a   quarterly   basis   by   our   leasing   and   portfolio   management   teams.  The   basis   of   calculating   market   rents   depends   on   leasing   deals   that   are   completed   for   similar   space   in   comparable   properties   in   the   area.  Market   rents   may   differ   by   property   or   by   unit   within   the   property   and   depend   upon   a   number  of  factors.  Some  of  the  factors  include  the  condition  of  the  space,  the  location  within  the  building,  the  extent  of  office   build-­‐out  for  the  units,  appropriate  lease  term  and  normal  tenant  inducements.  Market  rental  rates  are  also  compared  against   the  external  appraisal  information  that  is  gathered  on  a  quarterly  basis,  as  well  as  other  external  market  data  sources.     At   December   31,   2014,   the   weighted   average   remaining   lease   term   (“WALT”)   of   all   leases   was   approximately   4.4   years.   The   WALT  of  the  Acquisition  Properties  was  5.3  years.     (years)(1)   Initial  Properties  –  Deutsche  Post     Initial  Properties  –  third  party   Total  Initial  Properties   Acquisition  Properties(2)   Overall   WALT  at                 December  31,  2014   WALT  at   December  31,  2013   3.5   5.4   3.9   5.3   4.4   4.1   5.1   4.3   6.0   4.8   (1) For  the  purpose  of  calculating  WALT,  month-­‐to-­‐month  leases  are  reflected  as  leases  with  a  one-­‐year  term.   (2) Reflects  the  REIT’s  Owned  Share.   The  WALT  for  the  Initial  Properties  declined  in  2014,  reflecting  the  Deutsche  Post  terminations,  partially  offset  by  strong  leasing   activity.  The  WALT  for  the  Acquisition  Properties  declined  in  2014,  primarily  due  to  the  sale  of  a  50%  interest  in  seven  assets     to  POBA.   Leasing  and  tenant  profile   Lease  rollover  profile   The   following   table   outlines   our   lease   maturity   profile   by   asset   type   as   at   December   31,   2014.   Our   lease   maturity   profile   remains  staggered  with  only  approximately  16%  (excluding  space  leased  on  a  month-­‐to-­‐month  basis)  of  our  portfolio  expiring   prior  to  2018.   (in  square  feet)   Initial  Properties     Acquisition   Properties   Total     Total  (%)   Current   vacancy   2,085,616   Month-­‐to-­‐ month     296,060   2015     614,892   2016     204,559   2017     177,763   2018     5,026,640       2019  to  2039   2,055,783   Total   10,461,313   93,521   2,179,137   14.7%   35,106       331,166   2.2%   212,480   827,372   5.6%   597,922   802,481   5.4%     544,098     721,861   4.9%   331,764   5,358,404   36.1%   2,563,457   4,619,240   31.1%   4,378,348   14,839,661   100%   Dream  Global  REIT  2014  Annual  Report    |    14                                                                                                                                         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),   and   contractual   extensions   described   below   comprise   approximately   43%   of   the   portfolio’s   GLA   and   account   for   approximately   29.5%   of   the   portfolio’s   GRI.   Of   the   total   leases,   less   than   7%   expire   prior     to  2018.       Deutsche  Post  lease  expiries   Q1  2015     Q2  2015   Q3  2015   Q4  2015   Total  near-­‐term  lease  expiries   2016   2017   2018(1)   2019   2020   2023   Total  Deutsche  Post  lease  expiries   (1)  Subject  to  lease  extensions.   Total  GLA  (sq.  ft.)   308,765   45,069   13,307   -­‐   367,141   37,091   29,145   4,971,982   679,581   325,026   5,745   6,415,711   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   4.3   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,  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  exceed  107.2  index  points  before  the  next  adjustment  will  become  effective.  CPI   numbers  from  December  2014  indicate  that  the  CPI  has  reached  106.7  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.  These  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  lease  are  limited  by  various  tests  that  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  or  waived  their  termination  rights  with  respect  to  2012  and  2014.   In  addition,  by  June  30,  2017,  Deutsche  Post  is  required  to  provide  the  REIT  with  a  list  of  Deutsche  Post  leases  and/or  Caroline   DP  Leases  that  have  no  termination  options  and  for  which  the  term  of  such  lease  shall  be  extended  for  two  additional  years.   This   list   must   amount   to   at   least   33.33%   of   the   total   Reference   Rent   of   all   Deutsche   Post   leases   and   Caroline   DP   Leases,   considered  as  a  whole,  that  at  the  beginning  of  the  lease  had  no  termination  options.   2012  termination  rights   One  of  the  opportunities  that  Deutsche  Post  terminations  afforded  the  REIT  is  the  ability  to  take  advantage  of  the  large  blocks   of  contiguous  vacant  space  that  the  tenant  left,  making  the  terminated  space  more  attractive  for  re-­‐leasing  to  some  prospective   tenants.   When   combined   with   higher   rents   that   we   generally   achieve   on   the   terminated   space,   we   see   this   reflected   in   the   overall  performance  of  the  terminated  properties.  Through  our  leasing  efforts,  as  of  December  31,  2014,  we  have  been  able  to   successfully  replace  approximately  79%(1)  of  the  GRI  generated  by  the  terminated  properties  prior  to  the  2012  terminations.     (1) Compared  to  GRI  of  the  terminated  properties  as  of  Q2  2012,  excluding  properties  sold,  under  contract  for  sale.  GRI  as  of  December  31,  2014  includes  in-­‐ place  leases  and  leases  committed  for  future  occupancy.   Dream  Global  REIT  2014  Annual  Report    |    15           2014  termination  rights   On   July   1,   2014,   Deutsche   Post   terminated   a   total   of   approximately   1,757,000   square   feet   of   space,   of   which   approximately   1,493,000   square   feet   were   either   extended   by   Deutsche   Post   or   re-­‐leased   to   Postbank.   Of   the   1,493,000   square   feet,   approximately  812,000  square  feet  will  not  expire  until  2019  or  later.   Through   our   efforts   in   negotiating   lease   extensions   with   Deutsche   Post   and   Postbank,   as   well   as   third-­‐party   leases   for   2014   terminated   buildings,   we   have   been   able   to   replace   approximately   77%(1)   of   the   GRI   generated   from   the   2014   terminated   properties  as  at  December  31,  2014.   (1) Compared  to  GRI  of  the  terminated  properties  as  of  Q2  2014,  excluding  properties  sold,  under  contract  for  sale  and  a  redevelopment  asset  in  Mannheim.   GRI  as  of  December  31,  2014  includes  in-­‐place  leases  and  leases  committed  for  future  occupancy.   2016  termination  rights   Excluding  dispositions  and  early  renewals,  Deutsche  Post  has  the  right  to  terminate  up  to  approximately   484,000   square  feet   effective  as  at  June  30,  2016.  In  2014,  the  Trust  reduced  its  exposure  to  2016  terminable  space  from  approximately  821,000  to   484,000   square   feet   through   lease   negotiation   leading   to   Deutsche   Post   waiving   its   termination   rights   for   six   properties   amounting  to  approximately  85,000  square  feet  and  the  sale  of  properties  comprising  252,000  square  feet  of  space.   OUR  RESOURCES  AND  FINANCIAL  CONDITION   Investment  properties     As  at  December  31,  2014,  the  value  of  our  investment  property  portfolio  was  $2.1  billion  (December  31,  2013  –  $2.4  billion).   The  primary  reason  for  the  decrease  compared  to  December  31,  2013  was  the  sale  of  a  50%  interest  in  seven  assets  to  POBA,   which  is  subject  to  equity  accounting,  offset  by  acquisitions  during  the  year.  For  IFRS  reporting  purposes,  as  a  result  of  the  sale   and   the   co-­‐ownership   arrangement   with   POBA   over   these   assets,   the   REIT   must   derecognize   the   investment   properties.   The   REIT’s  retained  50%  interest  in  these  assets  is  reflected  as  an  investment  in  joint  ventures.     The   REIT’s   management   is   responsible   for   determining   fair   value   measurements   included   in   the   consolidated   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.   The   results   of   both   methods   are   evaluated   by   considering   the   reasonableness   of   the   range   of   values   calculated   under   both   methods.  Fair  value  of  a  property  is  determined  at  the  point  within  that  range  that  is  most  representative  of  the  fair  value  in  the   circumstances.   Dream  Global  REIT  2014  Annual  Report    |    16       Changes  in  the  value  of  our  investment  properties  for  the  year  ended  December  31,  2014  and  for  the  year  ended  December  31,   2013  are  summarized  in  the  table  below  as  follows:   Balance  at  beginning  of  year   Additions     Acquisitions     Building  improvements   Lease  incentives  and  initial  direct  leasing  costs   Amortization  of  lease  incentives   Disposals  (Initial  Properties)   Reclassified  to  assets  held  for  sale     POBA  joint  venture  assets  reclassified  to  assets  held  for  sale   Fair  value  adjustments   Foreign  currency  translation   Balance  at  end  of  year  (per  consolidated  financial  statements)   Investment  properties  held  for  sale   Balance  at  beginning  of  year   Building  improvements   Lease  incentives  and  initial  direct  leasing  costs   Investment  properties  reclassified  as  held  for  sale   Investment  properties  reclassified  as  held  for  sale  –  POBA  joint  venture  assets   Fair  value  adjustments   Disposals   Disposals  –  POBA  joint  venture  assets   Foreign  currency  translation   Balance  at  end  of  year   For  the  year     ended     December  31,     2014     2,390,244    $   For  the  year   ended   December  31,     2013    1,182,757   $   422,166   12,730   14,908   (1,458)    (144)   (161,174)   (573,521)   76,639   (100,719)   2,079,671   For  the  year     ended   December  31,   2014    21,147    11    (131)    161,174    573,521    (4,392)    (130,746)    (573,521)    (4,166)    42,897    $    $    $    1,075,558    5,821    6,055    (616)    (23,943)    (21,147)    -­‐    (57,032)    222,791    2,390,244   For  the  year     ended   December  31,   2013    -­‐    -­‐    -­‐    21,147    -­‐    -­‐    -­‐   -­‐    -­‐    21,147   $    $    $   During  the  year  ended  December  31,  2014,  seven  of  the  Acquisition  Properties  were  reclassified  as  assets  held  for  sale  and  then   subsequently  sold  to  POBA  at  a  fair  value  of  $573.5  million.  In  addition,  we  reclassified  other  properties  from  the  initial  portfolio   valued   at   $161.2   million   as   assets   held   for   sale.   We   acquired   one   property   during   Q4,   bringing   our   year-­‐to-­‐date   total   to   five   property  acquisitions  valued  at  $419.9  million  (including  transaction  costs).  In  addition,  we  recorded  $2.3  million  of  acquisition   cost  adjustments  related  to  2013  acquisitions.     During  the  year  ended  December  31,  2014,  due  primarily  to  capitalization  rate  (“cap  rate”)  compression,  the  fair  value  of  the   Acquisition   Properties   increased   by   $110.7   million,   partially   reduced   by   a   write-­‐off   of   $20.9   million   of   capitalized   transaction   costs,  resulting  in  a  net  increase  in  fair  value  adjustments  of  $89.8  million.  During  the  year  ended  December  31,  2014,  the  fair   value  of  the  Initial  Properties  decreased  by  $13.2  million,  primarily  due  to  an  increase  in  vacancies  relating  to  the  Deutsche  Post   terminations.  Due  to  depreciation  of  the  euro  against  the  Canadian  dollar  since  December  31,  2013,  the  investment  property   value  decreased  by  $100.7  million,  representing  an  unrealized  foreign  exchange  loss.   Dream  Global  REIT  2014  Annual  Report    |    17                                                                                                                                                                                                                                                                                                                                                                                         Acquisitions     During  the  year  ended  December  31,  2014,  we  completed  the  following  acquisitions:   Office  property     Werner-­‐Eckert-­‐Straße  8,  10,  12,  Munich   My  Falkenried,  Hamburg   Liebknechtstr.  33/35,  Heßbrühlstr.  7  (Officium),  Stuttgart     Robert-­‐Bosch-­‐Str.  9–11  (Europahaus),  Darmstadt   Im  Mediapark  8  (Cologne  Tower),  Cologne   Total   (1)   Excludes  transaction  costs  of  $18.2  million.   Acquired  GLA   (sq.  ft.)   64,735     221,243     268,034     210,662     296,699     1,061,373     Occupancy  at   acquisition  (%)   91   100   89   99   100   96   Purchase  price(1)    22,120      92,183      68,410      57,045      161,923      401,681     $     $   Date  acquired   February  14,  2014   March  31,  2014   July  31,  2014   September  30,  2014   November  14,  2014   Dispositions   The   REIT   completed   the   sale   of   14   properties,   excluding   the   seven   properties   sold   to   POBA,   during   the   last   quarter   ended   December   31,   2014,   for   an   aggregate   sales   price   of   approximately   $69.4   million.   A   portion   of   the   net   proceeds   of     $31.2  million  was  used  to  reduce  our  term  loan  credit  facility.  During  2014,  we  disposed  a  total  of  35  investment  properties   for   $130.7   million,   which   represented   101%   of   book   value   at   the   last   reporting   period   date   prior   to   their   sale.   Five   of   the   assets  were  reclassified  as  assets  held  for  sale  at  December  31,  2013.  As  of  December  31,  2014,  we  have  also  entered  into   agreements  to  dispose  of  an  additional  12  properties  with  a  total  fair  value  of  $42.9  million.  These  12  properties  have  been   reclassified  as  assets  held  for  sale  on  the  balance  sheet  and  excluded  from  the  value  of  investment  properties,  as  the  REIT  has   committed  to  a  plan   of  sale  for   these  investment  properties.  In  total,  we  realized  a  fair   value  loss  of  $4.4   million  on   these   properties  and  dispositions.     Building  improvements   Building  improvements  represent  investments  made  in  our  investment  properties  to  ensure  our  buildings  are  operating  at  an   optimal   level.   During   the   three   and   twelve   months   ended   December   31,   2014,   we   spent   $4.9   million   and   $12.7   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  external  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,  2014,  we  incurred  $4.9  million  and  $14.9  million,  respectively,  of   lease   incentives   and   initial   direct   leasing   costs.   As   at   December   31,   2014,   we   had   outstanding   initial   direct   leasing   cost   commitments  of  $3.2  million,  on  average  for  lease  terms  in  excess  of  ten  years.   Dream  Global  REIT  2014  Annual  Report    |    18                                             OUR  CAPITAL   Liquidity  and  capital  resources   Dream  Global  REIT’s  primary  sources  of  capital  are  cash  generated  from  operating  activities,  a  credit  facility,  mortgage  financing   and  refinancing  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   amortization   and   interest   payments,   and   property   acquisitions.   We   expect   to   meet   all   of   our   ongoing   obligations   through   current   cash   and   cash   equivalents,  cash  flows  from  operations,  credit  facility,  debt  refinancings  and,  as  growth  requires  and  when  appropriate,  new   equity  or  debt  issues.   As   at   December   31,   2014,   we   had   $121.9   million   of   cash   on   hand.   After   reserving   for   current   payables   and   operating   requirements,  and  the  equity   required  for   the  Millerntorplatz  acquisition,  approximately  $25.0  million  is  available  for   general   purposes.   Our   debt-­‐to-­‐book   value   excluding   cash,   at   December   31,   2014,   is   51%.   Excluding   cash   and   convertible   debentures,   our  debt-­‐to-­‐book  value  (non-­‐GAAP  measure)  is  45%.     Debt   Total  debt   Less  debt  related  to:   Investment  in  joint  venture   Debt  (per  consolidated  financial  statements)   Mortgage  debt   Less  mortgage  debt  related  to:   Investment  in  joint  ventures   Mortgage  debt  (per  consolidated  financial  statements)   December  31,   December  31,   2014   $    1,381,132     $   2013    1,424,312    152,736      1,228,396     $    -­‐    1,424,312   December  31,     2014      854,061     December  31,   2013    825,014    152,736      701,325      -­‐    825,014   $   $   $   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   targeted   debt-­‐to-­‐book   value   range   of   50%   to   60%   (net   of   cash).  The  decrease  in  the  debt-­‐to-­‐book  value  ratio  at  December  31,  2014  compared  to  December  31,  2013  reflects  the  increase   in   cash   on   hand   compared   to   December   31,   2013   as   well   as   the   increase   in   the   underlying   valuation   of   the   investment   properties  during  2014.   During  the  fourth  quarter  of  2014,  the  Trust  entered  into  agreements  to  refinance  a  $23.2  million  mortgage  on  Grammophon   Business  Park  located  at  Podbielskistrasse  158–168  in  Hannover  for  a  term  of  eight  years.  In  addition,  we  extended  the  term  to   maturity   on   three   additional   mortgages   comprising   $150.5   million   by   two   years   for   Cäcilienkloster   2–10,   Moskauer   Strasse     25–27  and  My  Falkenried.  The  weighted  average  interest  rate  for  these  four  mortgages  was  1.99%,  representing  an  interest  rate   reduction  of  44  bps  before  mark-­‐to-­‐market  adjustments.         Dream  Global  REIT  2014  Annual  Report    |    19                                                                                               The  key  performance  indicators  in  the  management  of  our  debt  are  as  follows:   For  the  year   For  the  year    ended   ended   December  31,   December  31,   2014     2013   3.23%   45%   51%   3.26  times    9.2   5.3%    4.3   1%   3.37%   48%   54%   3.40  times    8.8   1.4%    4.6   5%   Financing  activities   Weighted  average  interest  rate(1)(2)   Level  of  debt  (debt-­‐to-­‐book  value,  net  of  cash,  net  of  convertible  debentures)(2)(3)   Level  of  debt  (debt-­‐to-­‐book  value,  net  of  cash)(2)(3)   Interest  coverage  ratio(2)(3)   Debt-­‐to-­‐adjusted  EBITDFV  (years)(2)(3)(4)   Proportion  of  total  debt  due  in  current  year(2)   Debt  –  average  term  to  maturity  (years)(2)   Variable  rate  debt  as  percentage  of  total  debt(2)   (1) Weighted  average  interest  rate  is  calculated  as  the  weighted  average  face  rate  of  all  interest  bearing  debt.   (2) Reflects  the  REIT’s  Owned  Share.   (3) Level   of   debt,   interest   coverage   ratio   and   debt-­‐to-­‐adjusted   EBITDFV   are   non-­‐GAAP   measures.   Calculations   for   each   reconciled   to   IFRS   balances   can   be   found  commencing  on  page  42.   (4) Calculated  as  total  debt  divided  by  adjusted  EBITDFV.   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  3.26  times  and  reflects  our  ability  to  cover  interest  expense  requirements.  We  also   monitor  our  debt-­‐to-­‐adjusted  EBITDFV  ratio  to  gauge  our  ability  to  pay  off  existing  debt.  Our  current  debt-­‐to-­‐adjusted  EBITDFV   ratio  is  9.2  years,  and  reflects  the  approximate  amount  of  time  to  pay  off  all  debt  from  operating  cash  flows.     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.   New  debt   During  the  year  ended  December  31,  2014,  we  obtained  the  following  new  mortgages:   Property     Werner-­‐Eckert-­‐Straße  8,  10,  12,  Munich   My  Falkenried,  Hamburg   Liebknechtstr.  33/35,  Heßbrühlstr.  7  (Officium),        Stuttgart   Robert-­‐Bosch-­‐Str.  9–11  (Europahaus),  Darmstadt   Im  Mediapark  8  (Cologne  Tower),  Cologne   Total   Mortgage   ($000s)    13,237   €    55,765   Mortgage   (€000s)    8,700    36,840    41,556    35,317    97,500    243,375   €    28,500    24,500    69,100    167,640     $   $   Face  rate   1.98%   2.33%   Date  of  funding   March  28,  2014   April  29,  2014   Date  of  maturity   March  31,  2019   February  26,  2021   July  31,  2014   January  31,  2022   1.99%   1.82%   October  20,  2014   September  30,  2022   1.77%   November  14,  2014   November  14,  2024   On  November  14,  2014,  the  Trust  withdrew  a  mortgage  with  a  principal  balance  of  €69.1  million  ($97.5  million)  at  a  fixed  rate  of   1.77%  per  annum,  maturing  on  November  14,  2024,  in  connection  with  the  acquisition  of  Im  Mediapark  8  (Cologne  Tower).   During  the  last  quarter  of  2014,  the  REIT  sold  a  50%  interest  in  seven  Acquisition  Properties  as  part  of  a  joint  venture  agreement   with  POBA.  In  conjunction  with  this  sale,  $314.4  million  of  the  mortgage  debt  relating  to  the  seven  assets  was  sold  to  the  joint   venture  (net  of  deferred  financing  costs  –  $310.8  million).  As  the  REIT  still  retained  a  50%  interest  in  the  POBA  joint  venture,  the   REIT  still  owed  a  $157.2  million  mortgage  debt  through  its  obligations  in  the  joint  venture  investments.   Subsequent   to   year-­‐end   on   February   6,   2015,   the   Trust   drew   down   a   mortgage   with   a   principal   balance   of   €59.4   million     ($84.3   million)   at   a   fixed   rate   of   1.71%   per   annum,   maturing   on   February   6,   2025,   in   connection   with   the   acquisition   of   Millerntorplatz  in  Hamburg.     Dream  Global  REIT  2014  Annual  Report    |    20                                                                           Debt  composition   Term  loan  credit  facility(1)   Mortgage  debt(1)(3)   Debentures(1)   Total   Reclass  debt  related  to     assets  held  for  sale   $   $   $   Variable     7,957    -­‐    -­‐   7,957     $     $   Fixed   366,749  (2)   $   854,061   152,365   1,373,175   December  31,  2014   Total   374,706   854,061   152,365   1,381,132     $    -­‐    -­‐    -­‐   Variable     74,474    -­‐    -­‐   74,474     $     $   Fixed   384,604  (2)   $   825,014   150,326   1,359,944   December  31,  2013   Total   459,078   825,014   150,326   1,434,418     $    (10,106)    -­‐     $   64,368   5%   1,359,944   95%     $    (10,106)   1,424,312   100%     $     $     $   Percentage   (1)   Balance  shown  is  net  of  deferred  financing  costs  and  mark-­‐to-­‐market  adjustments.     $   7,957   1%   1,373,175   99%     $   1,381,132   100%   (2)   As  at  December  31,  2014,  98%  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  facility  agreement,  we  are  required  to  have  a  minimum  of  80%  subject  to  an  interest  rate  swap.  The  portion  subject  to  the  swap  has  been  presented   as  fixed  rate  debt.   Includes  the  REIT’s  share  of  mortgages  related  to  the  POBA  joint  venture.   (3)   Amounts   recorded   as   at   December   31,   2014   for   the   Debentures   are   net   of   $4.7   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  $448.4  million  (€328.5  million).  During  the  year  ended  December  31,  2014,   we  repaid  $67.0  million  (€46.6  million)  in  connection  with  the  disposition  of  35  properties  as  well  as  mandatory  repayments.  As   at  December  31,  2014,  the  remaining  principal  balance  on  the  term  loan  credit  facility  was  $375.0  million  (€267.2  million).  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,  2014,  the  weighted  average  rate  of  the  Facility  was  4.21%.  Including  financing  costs,  the  effective  interest   rate   under   the   Facility   was   4.21%.   At   December   31,   2013,   the   weighted   average   rate   was   4.09%   and   the   effective   rate     was  4.13%.     The  Facility  requires  that,  at  each  interest  rate  payment  date,  the  debt  service  coverage  ratio  be  equal  to  or  above  145%  and   that  the  loan-­‐to-­‐value  ratio  not  exceed  59%  during   the  first  three  years  the  loan  is  outstanding  and  54%  during   the  final  two   years.  As  at  December  31,  2014,  we  were  in  compliance  with  these  covenants.   Under  the  terms  of  the  Facility,  we  were  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   $87.2   million   (€61.3   million)   in   principal   payments  including  prepayment  amounts  on  various  property  dispositions.  Opportunities  to  repay  the  balance  of  €53.7  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  a  credit  agreement  with  a  Canadian  bank  to  provide  a  revolving  credit  facility  not  to   exceed   €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.   On  August  14,  2014,  the  Trust  entered  into  an  amending  agreement  to  increase  this  facility  to  €50  million  with  no  changes  in   the   interest   rate   spreads   or   covenant   requirements.   The   revised   facility   expires   on   September   25,   2016.   The   revolving   credit   facility  was  undrawn  at  December  31,  2014,  except  for  a  letter  of  credit  commitment  for  €1.2  million.   Dream  Global  REIT  2014  Annual  Report    |    21                                                                                                                                                                                                                                                     Convertible  debentures     As   at   December   31,   2014,   the   total   principal   amount   of   Debentures   outstanding   was   $161.0   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-­‐month  period  ended  December  31,  2014,  the  fair  value  loss  attributed  to   the  conversion  feature  increased  by  $0.9  million.  During  the  twelve-­‐month  period  ended  December  31,  2014,  the  fair  value  gain   attributed  to  the  conversion  feature  increased  by  $0.2  million.   The  table  below  highlights  our  debt  maturity  profile:   2015   2016   2017   2018   2019   2020  and  thereafter   Acquisition  date  fair  value  adjustments   Transaction  costs   Total(1)   (1)  Includes  the  REIT’s  share  of  mortgages  related  to  the  POBA  joint  venture.   Scheduled  principal   repayments  on     non-­‐matured  debt   Debt  maturities   $   $    48,930   $    332,399    70,143    343,347    30,781    481,148    1,306,748   $    24,573   $    20,153    14,752    11,099    9,829    13,433    93,839   $   $   Total    73,503    352,552    84,895    354,446    40,610    494,581    1,400,587    (4,682)    (14,773)    1,381,132   Commitments  and  contingencies   We   are   contingently   liable   with   respect   to   guarantees   that   are   issued   in   the   normal   course   of   business   and   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  condensed  consolidated  financial  statements.   As  at  December  31,  2014,  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    730    1,151    -­‐   1,881   $   During  the  three  and  twelve  months  ended  December  31,  2014,  the  Trust  paid  $0.2  million  and  $0.9  million  in  minimum  lease   payments,  respectively,  which  have  been  included  in  comprehensive  income  for  the  period.   Dream  Global  REIT  2014  Annual  Report    |    22     Foreign  currency  contracts   At   December   31,   2014,   we   had   various   currency   forward   contracts   in   place   to   sell   euros   for   Canadian   dollars   for   the   next   36   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  gain  of  $1.1  million  and  $6.4  million  for  the  three-­‐  and   twelve-­‐month  periods  ended  December  31,  2014,  respectively.  The  Trust  currently  has  foreign  exchange  forward  contracts  to   sell  €121.2  million  in  total  from  January  2015  to  December  2017  at  an  average  exchange  rate  of  $1.417  per  euro.   Equity   The  table  below  highlights  our  outstanding  equity:     Units   December  31,  2014     Unitholders’  equity   December  31,  2013   Number  of  Units    111,466,697   Amount    1,120,220     $    Number  of  Units    109,698,977   Amount    1,034,005     $   Units   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  Dream  Global  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,  2013   Units  issued  pursuant  to  the  DUIP   Units  issued  pursuant  to  the  DRIP(1)   Total  Units  outstanding  on  December  31,  2014   Units  issued  pursuant  to  the  DRIP  on  January  15,  2015   Total  Units  outstanding  on  January  31,  2015   (1)  Distribution  Reinvestment  and  Unit  Purchase  Plan.   Units    109,698,977    86,415    1,681,305    111,466,697    134,206    111,600,903   For  the  year  ended  December  31,  2014,  86,415  Units  were  issued  pursuant  to  the  Deferred  Unit  Incentive  Plan  (December  31,   2013  –  17,632  Units)  to  trustees,  officers  and  employees.   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,  2014,  distributions  declared  amounted  to  $22.3  million.  Of  this  amount,  $3.5  million  was   reinvested  in  additional  Units  pursuant  to  the  DRIP,  resulting  in  a  cash  payout  ratio  of  84.5%.  Distributions  declared  for  the  year   ended  December  31,  2014  were  $88.5  million.  Of  this  amount,  $14.5  million  was  reinvested  in  additional  units  pursuant  to  the   DRIP,  resulting  in  a  cash  payout  ratio  of  83.6%.   Dream  Global  REIT  2014  Annual  Report    |    23                                 Three  months  ended  December  31,  2014     Year  ended  December  31,  2014   Declared   amounts   4%  bonus   distribution   Total   Declared   amounts   4%  bonus   distribution   2014  distributions     Paid  in  cash  or  reinvested  in  Units   Payable  at  December  31,  2014   Total  distributions     2014  reinvestment   Reinvested  to  December  31,  2014   Reinvested  on  January  15,  2015   Total  distributions  reinvested   Distributions  paid  in  cash   Reinvestment  to  distribution  ratio        (for  the  period)   Cash  payout  ratio   $   $   $   $   $     $     $     $     $    14,832    7,431    22,263    2,320    1,131    3,451   18,812   15.5%   84.5%    93    -­‐    93    93    45    138     $     $     $     $    14,925    7,431    22,356    2,413    1,176    3,589     $     $     $     $     $    535    -­‐    535    535    45    580     $     $     $     $     $     $     $     $    81,116    7,431    88,547    13,365    1,131    14,496   74,051   16.4%   83.6%   Total    81,651    7,431    89,082    13,900    1,176    15,076   We   currently   pay   monthly   distributions   to   unitholders   of   $0.06667   per   unit,   or   $0.80   per   unit   on   an   annual   basis.   At     December  31,  2014,  approximately  15.2%  of  our  total  Units  were  enrolled  in  the  DRIP.           Dream  Global  REIT  2014  Annual  Report    |    24                                                                                                                                                                                                                                                                           OUR  RESULTS  OF  OPERATIONS   Basis  of  accounting   Our  discussion  of  results  of  operations  includes  our  share  of  income  from  investments  in  joint  ventures.  Refer  to  “Non-­‐GAAP   measures  and  other  disclosures”  for  a  reconciliation  to  our  consolidated  financial  statements.   Investment  properties  revenue   Investment  properties  operating  expenses   Net  rental  income     Other  income   Interest  and  other  income   Share  of  net  income  from  investment  in  other  joint  ventures   Other  expenses     Portfolio  management   General  and  administrative   Depreciation  and  amortization   Interest  expense   Fair  value  adjustments,  loss  on  sale  of  investment          properties  and  other  activities   Fair  value  adjustments  to  investment  properties   Fair  value  adjustments  to  financial  instruments   Internal  direct  leasing  costs   Gain  (loss)  on  sale  of  investment  properties   Contract  termination  fees  incurred  on  sale  to  POBA     Income  before  income  taxes   Current  income  taxes  recovery  (expense)   Deferred  income  taxes  recovery  (expense)   Recovery  of  (provision  for)  income  taxes   Net  income   Total  earnings  for  the  year  attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries   Net  income   Foreign  currency  translation  adjustments  for  the  period        attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries   Three  months  ended  December  31,   2013(1)    62,528     $   2014(1)    61,690     $   $    (18,621)      43,069      (20,656)      41,872     Year  ended  December  31,   2013(1)    220,220    (75,367)    144,853   2014(1)    257,725     $    (78,261)      179,464      396      7      403      (1,067)      (4,763)      (45)      (12,063)      (17,938)      (11,173)      876      (324)      44,332      (510)      33,201      58,735      107      1,455     1,562      60,297     $    59,388     $    909      60,297      352      10      362      (409)      (3,332)      (16)      (11,288)      (15,045)      891      (9,460)      (679)      (550)      -­‐      (9,798)      17,391      (142)      (2,019)      (2,161)      15,230     $    15,230     $    -­‐      15,230      432      26      458      (4,571)      (17,058)      (138)      (48,571)      (70,338)      73,950      3,056      (1,954)      41,873      (510)      116,415      225,999      (1,328)      (15,734)      (17,062)      208,937     $    208,028     $    909      208,937      (10,068)      (98)      (10,166)      57,950      -­‐      57,950      (54,671)      (98)      (54,769)      1,547    28    1,575    (3,173)    (12,226)    (88)    (38,506)    (53,993)    (57,032)    (11,450)    (2,191)    (1,142)    -­‐    (71,815)    20,620    (689)    2,834    2,145    22,765    22,765    -­‐    22,765    109,133    -­‐    109,133   $   $   Comprehensive  income  for  the  year  attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries    131,898    -­‐    131,898   (1)   Results  from  operations  were  converted  into  Canadian  dollars  from  euros  using  the  following  average  exchange  rates:  the  three-­‐  and  twelve-­‐month  periods   ended  December  31,  2014  were  converted  at  $1.419:€1  and  $1.467:€1,  respectively;  for  2013,  the  three-­‐  and  twelve-­‐month  periods  ended  December  31,   2013  were  converted  at  $1.430:€1  and  $1.369:€1,  respectively.    153,357      811      154,168     $    49,320      811      50,131     $    73,180      -­‐      73,180     $   $   Dream  Global  REIT  2014  Annual  Report    |    25                                                                                                                                                                                                                                                                                                                                                                                                                                                       Investment  properties  revenue   Investment  properties  revenue  includes  net  rental  income  from  investment  properties  as  well  as  the  recovery  of  operating  costs   and  property  taxes  from  tenants.     Investment   properties   revenue   for   the   quarter   was   $61.7   million,   a   decrease   of   $0.8   million,   or   1.3%,   over   the   prior   year   comparative   quarter.   Excluding   the   $0.5   million   negative   impact   of   foreign   currency   translation,   the   decrease   of   $0.3   million   was  mainly  the  result  of  a  $6.2  million  negative  impact  caused  by  our  disposition  program  with  respect  to  our  Initial  Properties,   largely   offset   by   a   $5.9   million   increase   in   revenue   due   to   acquisitions.   For   the   year   ended   December   31,   2014,   investment   properties   revenue   was   $257.7   million,   an   increase   of   $37.5   million,   or   17.0%,   over   the   prior   year   comparative   period.   The   increase   was   mainly   attributable   to   acquisitions   completed   in   2013   and   2014,   offset   by   the   disposition   of   some   of   our   Initial   Properties.   Investment  properties  operating  expenses   Investment  properties  operating  expenses  comprises  occupancy  costs  and  property  taxes  as  well  as  certain  expenses  that  are   not   recoverable   from   tenants,   the   majority   of   which   are   related   to   major   repairs   and   maintenance.   Operating   expenses   fluctuate  with  changes  in  occupancy  levels  and  levels  of  repairs  and  maintenance.     Investment  properties  operating  expenses  for  the  quarter  was  $18.6  million,  a  decrease  of  $2.0  million,  or  9.9%,  over  the  prior   year  comparative  quarter  mainly  due  to  dispositions  of  some  Initial  Properties,  partially  offset  by  an  increase  due  to  acquisitions   in   2013   and   2014.   For   the   year   ended   December   31,   2014,   investment   properties   operating   expenses   were   $78.3   million,   an   increase  of  $2.9  million,  or  3.8%,  over  the  prior  year.  The  increase  was  mainly  attributable  to  the  acquisitions  completed  in  2013   and  2014,  offset  by  dispositions  during  2014.   Interest  and  other  income   Interest  and  other  income  comprises  interest  earned  on  notes  receivable,  the  POBA  loan  facility  and  bank  accounts.  Except  for   the  interest  earned  on  the  notes  receivable  and  the  POBA  loan  facility,  the  income  included  in  interest  income  is  not  necessarily   of  a  recurring  nature  and  the  amounts  may  vary  quarter-­‐over-­‐quarter.     Interest  and  other  income  for  the  quarter  was  $0.4  million,  unchanged  from  the  prior  year  comparative  quarter.  Interest  and   other  income  for  the  year  ended  December  31,  2014  was  $0.4  million,  a  decrease  of  $1.1  million  from  the  previous  year.  The   decrease  is  mainly  due  to  lower  overall  excess  cash  on  hand  in   2014  compared  to  2013,  resulting  in  lower  interest  income  in   2014,  partially  offset  by  interest  earned  on  the  notes  receivable  and  the  POBA  loan  facility.   Statement  of  comprehensive  income  results   Net  rental  income   Initial  Properties   Acquisition  Properties   Net  rental  income   $   $   Three  months  ended  December  31,   2013   20,033   21,839   41,872   2014   16,537   26,532   43,069     $     $     $     $   Year  ended  December  31,   2013   2014   79,126   76,202   65,727   103,262   144,853   179,464     $     $   For  the  three  months  ended  December  31,  2014,  net  rental  income  was  $43.1  million,  representing  an  increase  of  $1.2  million   compared   to   the   same   quarter   in   2013.   Excluding   the   $0.3   million   negative   impact   of   a   weaker   euro   against   the   dollar,   net   rental  income  increased  by  $1.5  million  compared  to  the  same  quarter  last  year,  mainly  as  a  result  of  contributions  from  new   acquisitions  since  October  2013,  neutralizing  the  impact  from  the  Deutsche  Post  terminations  as  well  as  the  end  of  scheduled   Lonestar  head  lease  payments  in  July  2014.  On  a  comparative  property  basis,  net  rental  income  for  the  Acquisition  Properties   was  6.4%  higher  in  2014  compared  to  2013.   Dream  Global  REIT  2014  Annual  Report    |    26                                             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,     2013    43,738      (14,449)      29,289     2014    43,487     €    (13,126)      30,361     €   €   €   Year  ended  December  31,   2013    160,885    (55,061)    105,824   2014    175,670     €    (53,344)      122,326     €   €   €   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  $1.1  million  for  the  three  months  ended  December  31,  2014,  higher  than  that  of  the  same   period  in  2013  due  to  an  increase  in  staff  costs  to  support  our  growth.  For  the  year  ended  December  31,  2014,  an  expense  of   $4.6  million  was  recorded,  representing  an  increase  of  $1.4  million  compared  to  the  same  period  in  2013,  reflecting  the  need  to   add  resources  to  support  our  business  growth  and  corporate  strategy.   General  and  administrative   General   and   administrative   expenses   totalled   $4.8   million   and   $17.1   million   for   the   three   and   twelve   months   ended     December  31,  2014,  respectively,  representing  increases  of  $1.4  million  and  $4.8  million  over  the  same  periods  last  year.  The   increase  mainly  resulted  from  higher  asset  management  fees,  regulatory  and  corporate  compliance  costs  associated   with  the   new   acquisitions,   and   higher   corporate   general   and   administrative   expenses,   as   well   as   the   impact   of   a   strengthening   euro   against  the  dollar.     Interest  expense   Interest  expense  was  $12.1  million  for  the  three-­‐month  period  ended  December  31,  2014,  an  increase  of  $0.8  million  compared   to   the   same   quarter   last   year.   New   mortgage   debt   placed   on   properties   we   acquired   in   2013   and   2014   accounted   for   a     $1.0   million   increase.   The   increasing   use   of   our   revolving   credit   facility   to   bridge   the   investing   and   financing   activities   contributed  to  a  $0.3  million  increase.  These  increases  were  partially  reduced  by  repayments  on  our  term  credit  facility  during   the  year  relating  to  property  dispositions,  resulting  in  interest  savings  of  $0.5  million.   Interest  expense  was  $48.6  million  for  the  year  ended  December  31,  2014,  an  increase  of  $10.1  million  compared  to  the  same   period  last  year.  Excluding  the  unfavourable  exchange  rate  impact  of  $2.5  million,  interest  expense  increased  by  $6.9  million  as   a  result  of  new  mortgage  debt  placed  on  properties  we  acquired  in  2013  and  2014.  In  addition,  included  in  interest  expense  is  a   $0.5   million   increase   related   to   our   revolving   credit   facility   and   a   $0.2   million   increase   related   to   the   term   credit   facility   reflecting  the  additional  1%  interest  payable  on  $100  million  (plus  15%  prepayment  amount)  principal  effective  August  3,  2013,   offset  by  interest  savings  from  term  debt  repayment  over  the  course  of  2014  relating  to  our  property  dispositions.       We   currently   have   interest   rate   swaps   in   place   that   fix   the   interest   rate   payable   on   €260.1   million   at   an   underlying   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,  $1.7  million  of   swaps  were  settled,  the  same  amount  as  in  the  same  quarter  last  year.  During  the  year  ended  December  31,  2014,  $6.5  million   of  swaps  were  settled  compared  to  $6.2  million  in  the  same  period  last  year.  Excluding  the  impact  of  the  strengthening  of  the   euro,  the  swap  settlement  was  slightly  higher,  reflecting  the  slight  decrease  in  underlying  interest  rates.  Including  the  swaps  and   the  additional  1%  interest  rate  on  the  Facility,  the  actual  weighted  average  interest  rate  on  the  Facility  as  at  December  31,  2014   is   4.21%.   Any   adjustments   arising   from   the   interest   rate   swaps   are   reflected   in   the   fair   value   adjustments   to   financial   instruments  and  not  in  interest  expense.     Dream  Global  REIT  2014  Annual  Report    |    27                                 Fair  value  adjustment  to  investment  properties   For  the  three  months  ended  December  31,  2014,  a  loss  of  $11.2  million  was  recognized  compared  to  a  gain  of  $0.9  million  in  the   comparative   quarter   last   year.   The   loss   in   the   current   quarter   was   driven   by   a   $12.6   million   fair   value   loss   on   the   Initial   Properties   due   to   an   increase   in   vacancies   relating   to   the   Deutsche   Post   terminations   and   a   $7.7   million   fair   value   loss   on   properties   sold   and   properties   under   contract   for   sale   (properties   held   for   sale)   during   the   quarter.   A   $12.9   million   gain   is   recognized   for   Acquisition   Properties   due   to   yield   compressions   experienced   in   certain   markets,   offset   by   a   $4.0   million   fair   value  loss  mainly  related  to  transaction  costs  of  the  two  properties  acquired  in  the  period.  The  gain  in  the  comparative  quarter   in  2013  comprised  a  $0.9  million  gain  in  fair  value  due  to  an  increase  in  fair  value  of  Acquisition  Properties  net  of  transaction   costs   incurred   on   properties.   For   the   year   ended   December   31,   2014,   the   fair   value   adjustment   to   investment   properties   amounted  to  a  gain  of  $74.0  million  compared  to  a  loss  of  $57.0  million  during  the  same  period  in  2013.  The  gain  for  the  year   ended   December   31,   2014   comprises   a   $112.4   million   gain   recognized   for   Acquisition   Properties   due   to   yield   compressions   experienced  in  certain  markets  and  positive  leasing  developments  for  some  assets,  reduced  by  a  $13.2  million  fair  value  loss  on   the  Initial  Properties,  a  $4.4  million  loss  related  to  properties  sold  and  properties  under  contract  for  sale  and  a  $20.9  million  loss   on   transaction   costs   incurred   on   properties   acquired   during   the   year   ended   December   31,   2014.   The   loss   for   the   year   ended   December  31,  2013  was  mainly  due  to  the  write-­‐off  of  transaction  costs  related  to  the  acquisition  of  18  assets  during  2013.   Fair  value  adjustment  to  financial  instruments   For   the   three   months   ended   December   31,   2014,   we   incurred   an   unrealized   gain   in   the   fair   value   of   financial   instruments   of     $0.9   million   compared   to   a   loss   of   $9.5   million   in   the   comparative   period.   The   fair   value   adjustments   in   the   quarter   mainly   comprise  the  following  components:   • • • • a  $0.1  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  $1.7  million  and  a  decrease  in  the  forward  price  of  interest  rates.  A  $1.1  million  loss  was   recognized  in  the  comparative  quarter  last  year  due  to  a  similar  decrease  in  the  forward  price  of  interest  rates;     a   $0.9   million   fair   value   loss   recognized   on   the   conversion   feature   of   the   convertible   debentures   mainly   reflecting   an   increase  in  the  credit  spread  and  risk-­‐free  interest  rate  applicable  to  our  Units,  compared  to  a  similar  loss  of  $0.4  million  in   the  same  period  in  2013;   an  unrealized  gain  of  $1.1  million  was  recognized  related  to  our  foreign  currency  forward  contracts  due  to  a  depreciation  of   the  euro  compared  to  the  Canadian  dollar,  versus  a  $8.0  million  unrealized  loss  during  the  comparative  quarter  due  to  a   depreciation  of  the  Canadian  dollar  compared  to  the  euro;  and     a   $0.7   million   gain   was   recognized   related   to   our   DUIP,   mainly   reflecting   a   decrease   in   the   market   price   of   our   Units,   compared  to  a  loss  of  $0.1  million  in  the  same  period  in  2013.   For  the  year  ended  December  31,  2014,  we  incurred  an  unrealized  gain  in  the  fair  value  of  financial  instruments  of  $3.1  million   compared   to   a   loss   of   $11.5   million   in   the   comparative   period.   The   fair   value   adjustments   in   the   year   mainly   comprise   the   following  components:   • • • • a  $3.9  million  loss  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  $6.5  million  and  a  decrease  in  the  forward  price  of  interest  rates.  A  $0.2  million  gain  was   recognized  in  the  comparative  period  last  year  due  to  an  increase  in  the  forward  price  of  interest  rates;     a   $0.2   million   fair   value   gain   recognized   on   the   conversion   feature   of   the   convertible   debentures   mainly   reflecting   a   decrease   in   credit   spread   and   risk-­‐free   interest   rate   applicable   to   the   valuation   of   our   Units,   compared   to   a   gain   of     $3.8  million  in  the  same  period  in  2013  reflecting  a  decrease  in  the  price  of  our  Units;   an  unrealized  gain  of  $6.4  million  was  recognized  related  to  our  foreign  currency  forward  contracts  due  to  a  depreciation  of   the  euro  compared  to  the  Canadian  dollar,  versus  a  $16.0  million  unrealized  loss  during  the  comparative  quarter  due  to  a   depreciation  of  the  Canadian  dollar  compared  to  the  euro;  and     a  $0.3  million  gain  was  recognized  related  to  our  DUIP,  mainly  reflecting  a  change  in  discounts  applied  in  valuating  of  our   Units,  compared  to  a  gain  of  $0.6  million  in  the  same  period  in  2013.   Dream  Global  REIT  2014  Annual  Report    |    28     Internal  direct  leasing  costs   During  the  first  quarter  of  2014,  we  adopted  a  change  in  accounting  policy  regarding  the  accounting  treatment  of  incremental   internal  leasing  costs  governed  by  International  Accounting  Standard  (“IAS”)  17,  after  consideration  of  an  IFRS  Interpretations   Committee   agenda   decision   issued   in   April   2014.   Incremental   internal   leasing   costs   are   now   expensed   during   the   period   incurred.   Prior   to   adopting   this   interpretation,   incremental   leasing   costs   were   capitalized   to   investment   properties;   however,   we  have  restated  all  affected  prior  periods  to  give  effect  to  this  change  in  accounting  policy.  This  interpretation  does  not  affect   the  accounting  treatment  of  leasing  costs  paid  to  third  parties,  which  will  continue  to  be  capitalized  in  accordance  with  IAS  17.   In  accordance  with  IAS  17,  a  total  of  $0.3  million  and  $2.0  million  of  incremental  internal  leasing  staff  costs  incurred  during  the   three   and   twelve   months   ended   December   31,   2014   have   been   classified   as   internal   direct   leasing   costs   of   the   respective   properties.  In  the  comparative  periods  in  2013,  leasing  staff  costs  of  $0.7   million  and  $2.2   million  were  incurred,  which  were   originally  capitalized  but  have  been  restated  to  remain  consistent  with  the  policy  adopted  in  the  current  year.   Gain  (loss)  on  sale  of  investment  properties   Gain   on   sale   of   investment   properties   for   the   quarter   was   $44.3   million,   an   increase   of   $44.9   million   over   the   prior   year   comparative   quarter.   For   the   twelve   months   ended   December   31,   2014,   gain   on   sale   of   investment   properties   was     $41.9  million,  an  increase  of  $43.0  million  over  the  prior  year  comparative  period.  The  increase  was  mainly  attributable  to  the   $46.3  million  gain  on  sale  of  seven  Acquisition  Properties  to  the  POBA  joint  venture  during  the  quarter,  reduced  by  loss  on  sale   of   investment   properties   during   the   quarter   and   sale   of   35   properties   during   the   year.   This   compares   to   $0.6   million   and     $1.1   million   loss   on   the   sale   of   investment   properties   during   the   same   quarter   last   year   and   15   properties   for   the   entire     2013  year.   Contract  termination  fee   Under  the  terms  of  the  POBA  joint  venture  agreement,  the  REIT  terminated  an  asset  management  agreement  that  was  in  place   on  certain  of  the  Acquired  Portfolio  assets  including  three  joint  venture  assets  and  was  required  to  pay  a  cancellation  fee.  The   portion  of  the  cancellation  fee  relating  to  the  non-­‐joint  venture  assets  has  been  recorded  as  a  one-­‐time  contract  termination   fee  of  $0.5  million.     Income  taxes   We   recognized   current   income   tax   recovery   of   $0.1   million   and   income   tax   expenses   of   $1.3   million   for   the   three   and     twelve   months   ended   December   31,   2014,   respectively,   compared   to   current   income   tax   expenses   of   $0.1   million   and     $0.7  million  for  the  comparative  periods  in  2013.     We   also   recognized   deferred   income   tax   recovery   of   $1.5   million   and   income   tax   expense   of   $15.7   million   for   the   three   and     twelve  months  ended  December  31,  2014,  respectively,  compared  to  a  deferred  income  tax  expense  of  $2.0  million  and  income   tax  recovery  of  $2.8  million  for  the  comparative  periods  in  2013.  The  difference  is  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. 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  months  ended  December  31,  2014,  asset  management  expenses  pertaining  to  the  Initial  Properties   were   $0.6   million   and   $2.5   million,   respectively.   A   total   of   86,716   and   422,171   deferred   units   were   granted   during   the   respective   periods   as   compensation   for   the   fees.   An   additional   30,410   deferred   units   were   granted   on   January   1,   2015   pertaining  to  the  asset  management  fee  for  the  month  of  December  2014.  As  at  January  1,  2015,  1,364,659  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   in   cash   an   asset   management   fee   of   $1.3   million   and   $4.9   million,   respectively,   for   the   three   and     twelve  months  ended  December  31,  2014,  for  properties  acquired  since  the  acquisition  of  our  Initial  Properties.  It  further  paid  a   financing   fee   of   $0.1   million   and   $0.4   million   related   to   mortgage   financing   services   provided   during   the   three   and     twelve   months   ended   December   31,   2014,   respectively,   and   acquisition   fees   of   $1.2   million   and   $2.8   million   related   to   properties  acquired  during  the  three  and  twelve  months  ended  December  31,  2014,  respectively.   Dream  Global  REIT  2014  Annual  Report    |    29   During  the  three  and  twelve  months  ended  December  31,  2014,  the  REIT  also  reimbursed  DAM  for  out-­‐of-­‐pocket  and  incidental   costs  of  $0.1  million  and  $0.6  million  for  the  three  and  twelve  months  ended  December  31,  2014,  respectively.   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,   2014,   the   Trust   recorded   an   amount   of   $0.2   million   payable   to   DAM   pursuant   to   the   Shared  Services  and  Cost  Sharing  Agreement.   The  Trust’s  future  commitment  under  the  Shared  Services  and  Cost  Sharing  Agreement  over  the  next  six  years  is  $1.2  million.   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     2013   2014   -­‐0.8%   1.430   1.419   -­‐4.2%   1.466   1.404   2014   1.467   1.404   Year  ended  December  31,   Change   7.2%   -­‐4.2%   2013   1.369   1.466   Comprehensive  income  was  impacted  by  a  foreign  currency  translation  loss  of  $10.1  million  and  $54.7  million  for  the  three  and   twelve  months  ended  December  31,  2014,  respectively.  The  exchange  rates  decreased  from  $1.466:€1  as  at  December  31,  2013   to  $1.404:€1  as  at  December  31,  2014.  The  quarterly  results  of  our  euro-­‐denominated  operations  included  in  net  income  were   translated  at  an  average  exchange  rate  of  $1.419:€1  compared  to  $1.430:€1  in  the  same  quarter  last  year.  For  the  year  ended   December   31,   2014,   results   were   translated   at   an   average   exchange   rate   of   $1.467:€1   compared   to   $1.369:€1   in   the   same   period  last  year.   Dream  Global  REIT  2014  Annual  Report    |    30               Funds  from  operations  and  adjusted  funds  from  operations   Net  income  for  the  period   Add  (deduct):   Net  income  attributable  to  non-­‐controlling  interest   Net  FFO  impact  attributable  to  non-­‐controlling  interests   Amortization  of  lease  incentives   Internal  direct  leasing  costs   Net  (gain)  loss  on  sale  of  investment  properties   Tax  on  gains  on  sale  of  investment  properties   Deferred  income  taxes   Cash  settlement  on  interest  rate  swap   Loss  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   Amortization  of  initial  discount  on  convertible  debentures   Amortization  of  fair  value  adjustment  on  acquired  debt   Contract  termination  fees  incurred  on  sale  to  the  POBA  joint   venture   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   Funds  from  operations   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,     2013      15,230   2014      60,297     $   Year  ended  December  31,   2014     2013    22,765    208,937     $     $    (909)    634    554    324    (44,332)    (159)    (1,455)    (1,695)    (128)    11,173    (876)    23,428    859    281    (96)    510    377    616    (129)    25,846     $     $    -­‐    3    259    679    550    (33)    2,019    (1,585)    (1,456)    (891)    9,460    24,235    794    260    (92)    -­‐    313    539    (440)    25,609     $     $    (909)    535    1,467    1,954    (41,873)    342    15,734    (6,493)    (5,192)    (73,950)    (3,056)    97,496    3,484    1,092    (387)    510    1,648    2,541    (657)    105,727     $     $    (1,938)    (1,507)    22,401     $    (1,884)    (1,466)    22,259     $    (8,076)    (6,281)    91,370     $    -­‐    3    616    2,191    1,142    62    (2,834)    (6,179)    (1,826)    57,032    11,450    84,422    2,651    1,008    (402)    -­‐    1,313    2,113    (1,510)    89,595    (6,518)    (5,070)    78,007   Three  months  ended  December  31,     2013      24,235    0.22    0.22   2014      23,428    0.21    0.21     $     $     $   Year  ended  December  31,   2014     2013    84,422    97,496    0.85    0.88    0.84    0.87     $     $     $     $     $     $    0.22      0.22     $   $    0.24      0.24     $   $    0.89    0.88     $     $    0.94    0.93   Total   FFO   for   the   quarter   was   $23.4   million,   a   decrease   of   $0.8   million   or   3.3%   over   the   prior   year   comparative   quarter,   reflecting  the  impact  from  Deutsche  Post  lease  terminations  and  Lonestar  head  lease  payments  cessation  starting  in  July  2014,   largely  offset  by  completed  acquisition  and  leasing  activity.  Total  FFO  for  the  year  ended  December  31,  2014  was  $97.5  million,   an  increase  of  $13.1  million,  or  15.5%,  over  the  prior  year  comparative  period.  For  the  quarter  ended  December  31,  2014,  basic   FFO  on  a  per  unit  basis  was  $0.21  per  unit,  slightly  lower  than  prior  year  comparative  quarter.  For  the  year  ended  December  31,   2014,  basic  FFO  increased  to  $0.88  per  unit  from  $0.85  per  unit  over  the  prior  year  comparative  period.  For  the  quarter  ended   December  31,  2014,  diluted  FFO  on  a  per  unit  basis  was  also  $0.21  per  unit,  also  slightly  lower  than  the  prior  year  comparative   quarter.  For  the  year  ended  December  31,  2014,  diluted  FFO  increased  to  $0.87  per  unit  from  $0.84  per  unit  over  the  prior  year   comparative  period,  a  3.6%  increase.  Assuming  this  excess  cash  had  been  invested,  basic  FFO  per  unit  would  have  been  $0.22   per  unit  for  the  quarter  and  $0.89  per  unit  for  the  year.   Dream  Global  REIT  2014  Annual  Report    |    31                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Adjusted  funds  from  operations   AFFO     AFFO  per  unit  –  basic   AFFO  per  unit  –  diluted   Excluding  the  impact  of  undeployed  cash:   AFFO  per  unit  –  basic   AFFO  per  unit  –  diluted   $   $   $   $   $   Three  months  ended  December  31,     2013      22,259   2014      22,401   Year  ended  December  31,   2014     2013    78,007    91,370     $     $     $   0.20   0.20     $     $     $   0.20   0.20     $     $     $   0.83   0.82   0.79   0.79   0.21   0.20     $     $   0.22   0.22     $     $   0.84   0.83     $     $   0.88   0.87   Total   AFFO   for   the   quarter   ended   December   31,   2014   was   $0.1   million   higher   than   the   prior   year   comparative   quarter,   reflecting  the  impact  of  acquisitions  completed  subsequent  to  the  second  quarter  of  2013,  reduced  by  the  impact  of  terminated   Deutsche  Post  space  as  well  as  the  cessation  of  the  Lonestar  head  lease  payments,  both  coming  into  effect  on  July  1,  2014.  Total   AFFO   for   the   year   ended   December   31,   2014   was   $91.4   million,   an   increase   of   $13.4   million,   or   17.1%,   over   the   prior   year   comparative  period.  For  the  quarter  ended  December  31,  2014,  basic  AFFO  on  a  per  unit  basis  was  $0.20  per  unit,  same  as  the   prior  year  comparative  quarter.  For  the  year  ended  December  31,  2014,  diluted  AFFO  on  a  per  unit  basis  increased  from  $0.79   per   unit   to   $0.82   per   unit   over   the   prior   year   comparative   period,   an   increase   of   3.8%.   Assuming   this   excess   cash   had   been   invested,  basic  AFFO  per  unit  would  have  been  $0.21  per  unit  for  the  quarter  and  $0.84  per  unit  for  the  year.   SELECTED  ANNUAL  INFORMATION   The  following  table  provides  selected  information  for  the  past  three  years:   Investment  properties  revenue(1)   Net  income   Total  assets(1)   Non-­‐current  liabilities(1)   Distributions  declared       REIT  Units   (1)  Reflects  the  REIT’s  Owned  Share.   For  the  year   ended   December  31,   2014      257,725     $    208,937      2,588,425      1,323,081     $    89,134     $   For  the  year   ended   December  31,   2013    220,220     $    22,765      2,558,674      1,428,461     $    80,173     $    111,466,697     109,698,977     $   $   $   For  the  year   ended   December  31,   2012    138,661    10,916    1,400,269    752,846    43,568    72,232,494   Dream  Global  REIT  2014  Annual  Report    |    32                                                                                                                                       QUARTERLY  INFORMATION  (per  consolidated  financial  statements)   The  following  table  shows  quarterly  information  since  January  1,  2013:   Investment  properties  revenue   Investment  properties  operating  expenses   Net  rental  income     Other  income   Interest  and  other  income   Share  of  net  losses  from  investment  in  joint  ventures   Other  expenses   Portfolio  management   General  and  administrative   Amortization  and  depreciation   Interest  expense   Fair  value  adjustments,  loss  on  sale  of  investment          properties  and  other  activities   Fair  value  adjustments  to  investment  properties   Fair  value  adjustments  to  financial  instruments   Internal  direct  leasing  costs   Gain  (loss)  on  sale  of  investment  properties   Contract  termination  fees   Income  (loss)  before  taxes   Current  income  taxes  recovery  (expense)   Deferred  income  taxes  recovery  (expense)   Recovery  of  (provision  for)  income  taxes   Net  income  (loss)   Total  income  for  the  period  attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries   Net  income  (loss)   Add  (deduct):   Income  allocated  to  non-­‐controlling  interest   Net  FFO  impact  attributable  to  non-­‐controlling        interests   Amortization  of  lease  incentives   Internal  direct  leasing  costs   (Gain)  loss  on  sale  of  investment  properties   Tax  on  gains  on  sale  of  investment  properties   Deferred  income  taxes   Term  debt  swap  settlement   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  fair  value  adjustment  of  debt   Contract  termination  fees  incurred  on  sale  to        the  POBA  joint  venture   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  2014      60,042     $    (18,325)        41,717         Q3  2014       Q2  2014       Q1  2014       Q4  2013       Q3  2013       Q2  2013      61,388     $    (17,872)        43,516        67,514     $    (20,435)        47,079        67,133     $    (21,333)        45,800        62,528     $    (20,656)        41,872        56,915     $    (17,436)        39,479        54,413     $    (18,222)        36,191         Q1  2013    46,364    (19,053)    27,311    382        2,494        2,876        (1,067)        (4,557)        (45)        (11,690)        (17,359)        (12,876)        876        (324)        44,332        (510)        31,498        58,732        110        1,455       1,565        60,297     $    8        7        15        (1,019)        (4,295)        (30)        (12,221)        (17,565)        49,335        6,914        (577)        (1,172)        -­‐        54,500        80,466        (857)        (8,223)        (9,080)        71,386     $    (28)        9        (19)        (1,207)        (4,350)        (38)        (12,273)        (17,868)        42,011        3,434        (541)        (811)        -­‐        44,093        73,285        (383)        (8,140)        (8,523)        64,762     $    56        3        59        (1,278)        (3,650)        (25)        (12,014)        (16,967)        (6,223)        (8,168)        (512)        (476)        -­‐        (15,379)        13,513        (195)        (826)        (1,021)        12,492     $    352        10        362        (409)        (3,332)        (16)        (11,288)        (15,045)        891        (9,460)        (679)        (550)        -­‐        (9,798)        17,391        142        (2,019)        (2,161)        15,230     $    351        (2)        349        (1,006)        (3,399)        (33)        (10,441)        (14,879)        (3,901)        (1,808)        (586)        (79)        -­‐        (6,374)        18,575        100        (983)        (883)        17,692     $    446        13        459        (882)        (3,045)        (24)        (9,700)        (13,651)        (8,352)        (4,570)        (374)        (252)        -­‐        (13,548)        9,451        (316)        (128)        (444)        9,007     $    398    7    405    (876)    (2,450)    (15)    (7,077)    (10,418)    (45,670)    4,388    (552)    (261)    -­‐    (42,095)    (24,797)    (331)    5,964    5,633    (19,164)    59,388     $    909        60,297     $    71,386     $    64,762     $    12,492     $    15,230     $    17,692     $    9,007     $    -­‐        -­‐        -­‐        -­‐        -­‐        -­‐        71,386     $    64,762     $    12,492     $    15,230     $    17,692     $    9,007     $    (19,164)    -­‐    (19,164)    (909)        -­‐        -­‐        -­‐        -­‐        -­‐        -­‐        -­‐    634        554        324        (44,332)        (159)        (1,455)        (1,695)        (128)        11,173        (876)        23,428     $    0.21     $    0.21        23,428     $    859        281        (96)        510        377        616        (129)        25,846        (29)        110        577        1,172        337        8,223        (1,628)        (666)        (49,335)        (6,914)        23,233     $    0.21     $    0.21        23,233     $    904        276        (96)        -­‐        394        638        (182)        25,167        (34)        424        541        811        98        8,140        (1,567)        (1,651)        (42,011)        (3,434)        26,079     $    0.24     $    0.23        26,079     $    909        270        (97)        -­‐        538        645        (378)        27,966        (36)        379        512        476        66        826        (1,603)        (2,747)        6,223        8,168        24,756     $    0.23     $    0.22        24,756     $    812        265        (98)        -­‐        339        642        32        26,748        3        259        679        550        (33)        2,019        (1,585)        (1,456)        (891)        9,460        24,235     $    0.22     $    0.22        24,235     $    794        260        (92)        -­‐        313        539        (440)        25,609        -­‐        108        586        79        (126)        983        (1,574)        (456)        3,901        1,808        23,001     $    0.21     $    0.21        23,001     $    744        254        (88)        -­‐        356        529        (268)        24,528        -­‐        112        374        252        79        128        (1,533)        52        8,352        4,570        21,393     $    0.22     $    0.21        21,393     $    666        250        (84)        -­‐        378        523        (623)        22,503        -­‐    137    552    261    142    (5,964)    (1,487)    34    45,670    (4,388)    15,793    0.20    0.20    15,793    447    244    (138)    -­‐    266    522    (179)    16,955    (1,938)        (1,958)        (2,119)        (2,061)        (1,884)        (1,776)        (1,629)        (1,229)   $   $   $   $   $   $   $   $    (1,507)        22,401     $    0.20     $    0.20        (1,523)        21,686     $    0.20     $    0.20        (1,648)        24,199     $    0.22     $    0.22        (1,603)        23,084     $    0.21     $    0.21        (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    111,301,061      125,355,097      110,878,351      124,824,789      110,469,257      124,295,625      109,987,243      123,638,848      109,482,435      123,028,441      109,116,985      122,552,770      99,037,061      112,358,396      1.419        1.442        1.496        1.512        1.430        1.376        1.337        79,267,113    92,382,159    1.332   Dream  Global  REIT  2014  Annual  Report    |    33                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             NON-­‐GAAP  MEASURES  AND  OTHER  DISCLOSURES   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.   Funds  from  operations  (“FFO”)   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  Dream  Global  REIT’s  needs.   In  compliance  with  Canadian  Securities  Administrators  Staff  Notice  52-­‐306  (Revised),  “Non-­‐GAAP  Financial  Measures”,  FFO  has   been   reconciled   to   net   income   in   the   section   “Our   results   of   operations”   under   the   heading   “Funds   from   operations   and   adjusted  funds  from  operations”.   Adjusted  funds  from  operations  (“AFFO”)   Management   believes   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  Dream   Global  REIT’s  needs.   Our   calculation   of   AFFO   includes   an   estimated   amount   (8%   of   net   rental   income)   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  over  time.  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.   In  compliance  with  Canadian  Securities  Administrators  Staff  Notice  52-­‐306  (Revised),  “Non-­‐GAAP  Financial  Measures”,  AFFO  has   been  reconciled  to  cash  generated  from  operating  activities  in  this  section  under  the  heading  “Cash  generated  from  operating   activities  to  AFFO  reconciliation”.   Net  operating  income  (“NOI”)   NOI  is  defined  by  the  Trust  as  the  total  investment  property  revenue  less  investment  property  operating  expenses,  including  the   share  of  net  rental  income  from  investment  in  joint  ventures.  This  non-­‐GAAP  measurement  is  an  important  measure  used  by   the  Trust  in  evaluating  property  operating  performance;  however,  it  is  not  defined  by  IFRS,  does  not  have  a  standard  meaning   and  may  not  be  comparable  with  similar  measures  presented  by  other  income  trusts.  In  compliance  with  Canadian   Securities   Administrators  Staff  Notice  52-­‐306  (Revised),  “Non-­‐GAAP  Financial  Measures”,  NOI  has  been  reconciled  to  net  rental  income  in   the  table  below:   Net  rental  income  (per  consolidated  financial  statements)   Add:  Share  of  net  rental  income  from  investments  in  joint          ventures   NOI   $   $   Three  months  ended  December  31,     2013      41,872     $   2014      41,717     $   Year  ended  December  31,   2014     2013    144,853    178,112     $    1,352      43,069     $    -­‐      41,872     $    1,352      179,464     $    -­‐    144,853   Dream  Global  REIT  2014  Annual  Report    |    34                                                     Weighted  average  number  of  units   The  basic  weighted  average  number  of  Units  outstanding  used  in  the  FFO  and  AFFO  calculations  includes  all  Units.  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,   2014   is   noted   in   the   table   below.   Diluted   FFO   and   AFFO   include   interest   and   amortization   adjustments   related   to   the   Debentures   of   $2.2   million   and   $10.3   million   for   the   three   and   twelve  months  ended  December  31,  2014.     Weighted  average  Units  outstanding  for  basic  per  unit  amounts     Weighted  average  Units  outstanding  for  diluted  per  unit  amounts     Three  months  ended  December  31,     2013     109,482,435     123,028,441     2014     111,301,061     125,355,097     Year  ended  December  31,   2014     2013   99,335,779   110,663,178     112,691,725   124,534,099     Over  the  course  of  the  quarter,  the  REIT  had  approximately  $39.6  million  on  average  of  excess  undeployed  cash  available  for   acquisitions.   We   estimate   that   these   funds,   if   invested,   would   generate   a   return   on   equity   of   approximately   9.5%,   which   is   consistent  with  historic  returns  for  acquired  investment  properties,  and  would  have  contributed  $0.9  million  to  FFO  and  AFFO   for  the  quarter  ended  December  31,  2014.   Dream  Global  REIT  2014  Annual  Report    |    35                                   Investment  in  joint  ventures   The  Trust’s  proportionate  share  of  the  financial  position  and  results  of  operation  of  its  investment  in  joint  ventures,  which  are   accounted  for  using  the  equity  method  in  the  consolidated  financial  statements  and  as  presented  and  discussed  throughout  the   MD&A   using   the   proportionate   consolidation   method,   is   a   non-­‐GAAP   measure.   A   reconciliation   of   the   financial   position   and   results  of  operations  to  the  consolidated  balance  sheets  and  consolidated  statements  of  comprehensive  income  is  included  in   the  following  tables.   Balance  sheet  reconciliation  to  consolidated  financial  statements   Assets   NON-­‐CURRENT  ASSETS   Investment  properties   Investment  in  joint  ventures   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   Deposits   Derivative  financial  instruments   Deferred  Unit  Incentive  Plan   Deferred  income  tax  liabilities   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   December  31,  2014     Amounts  per   consolidated   financial   statements   Share  from   investment   in  POBA  joint   ventures   Total   December  31,   2013   $   $   $   $    2,079,671     $    159,967      4,930      -­‐      1,698      2,246,266      17,455      2,360      -­‐      121,939      141,754      44,363      2,432,383     $    1,157,882     $    1,802      3,420      9,365      719      1,173,188      70,514      49,485      1,268      -­‐      8,853      7,431      137,551      1,424      1,312,163     $    284,417     $    (134,237)      -­‐      -­‐      484      150,664      2,364,088     $    25,730      4,930      -­‐      2,182      2,396,930      2,228      28      -­‐      3,122      5,378      -­‐      156,042     $    19,683      2,388      -­‐      125,061      147,132      44,363      2,588,425     $    149,747     $    146      -­‐      -­‐      -­‐      149,893      1,307,629     $    1,948      3,420      9,365      719      1,323,081      2,989      3,111      49      -­‐      -­‐      -­‐      6,149      -­‐      156,042     $    73,503      52,596      1,317      -­‐      8,853      7,431      143,700      1,424      1,468,205     $    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   Dream  Global  REIT  2014  Annual  Report    |    36                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       During  Q3  2014,  the  REIT  entered  into  a  joint  venture  agreement  with  POBA  to  sell  a  50%  interest  in  seven  of  the  Acquisition   Properties,   which   were   each   held   in   separate   subsidiaries.   The   closings   were   completed   in   three   tranches   over   the   course   of     Q4  2014.  Pursuant  to  this  arrangement,  the  REIT  co-­‐owns  these  seven  assets  and,  as  such,  has  classified  its  50%  interest  in  each   of  these  entities  as  investments  in  joint  ventures  and  accounted  for  the  investment  using  the  equity  method.  As  a  result,  seven   Acquisition   Properties   valued   at   $573.5   million,   and   the   related   mortgages   valued   at   $314.5   million   were   derecognized   at   December  31,  2014.   The   total   consideration   to   the   REIT   for   the   50%   interest   in   the   investment   properties   was   $311.3   million.   The   consideration   consisted   of   the   assumption   of   working   capital   of   $2.2   million,   POBA   assuming   50%   of   the   outstanding   mortgages,   which   totalled   $157.2   million,   with   the   balance   of   $156.3   million   paid   to   the   REIT   in   cash.   The   REIT   incurred   transaction   costs   of     $4.5  million  relating  to  the  sale,  resulting  in  net  proceeds  to  the  REIT  of  $151.9  million.     In  selling  a  50%  interest  in  the  seven  properties,  the  REIT  and  POBA  entered  into  a  co-­‐ownership  arrangement  regarding  these   assets.  Under  these  circumstances,  IFRS  requires  the  REIT  to  derecognize  the  assets  and  record  the  gain  that  accrued  prior  to   selling   control   on   100%   of   the   assets   sold.   The   purchase   price   consideration   paid   by   POBA   and   the   fair   value   of   the   REIT’s   retained  interest  in  the  joint  venture  exceeded  the  carrying  value  of  the  net  assets  held  within  each  subsidiary  entity.  As  such,   the  REIT  recorded  a  gain  on  the  sale  of  $46.3  million,  net  of  transaction  costs  of  $4.5  million,  of  which  $25.6  million  relates  to   remeasuring  the  retained  interest  in  the  joint  venture  at  fair  value.  The  gain  on   sale  also  includes  $3.1   million  relating  to  the   derecognition  of  deferred  tax  liability  on  the  sale.  As  at  December  31,  2014,  the  carrying  value  of  the  investment  in  the  POBA   joint  venture  is  $159.8  million,  which  includes  the  fair  value  remeasurement  of  $25.6  million.   As   part   of   the   arrangement   with   POBA,   the   REIT   has   extended   a   loan   facility   to   POBA   to   fund   POBA’s   share   of   the   loan   amortization  payments  over  the  term  of  the  outstanding  mortgages  assumed   on   the  seven  properties.  The  REIT  has  received   prepaid  interest  of  $2.8  million,  which  will  be  amortized  over  the  term  of  the  respective  mortgages.  In  addition,  POBA  will  pay   the  REIT  the  interest  savings  on  its  50%  share  of  the  interest  saved  from  the  loan  amortization  payments.  The  balance  of  the   loan  facility  outstanding  at  the  time  of  maturity  of  the  respective  mortgages  is  due  and  payable  to  the  REIT.   Dream  Global  REIT  2014  Annual  Report    |    37   Statement  of  comprehensive  income  reconciliation  to  consolidated  financial  statements   Investment  properties  revenue   Investment  properties  operating  expenses   Net  rental  income     Other  income   Interest  and  other  income     Share  of  net  income  from  investment  in  joint  ventures   Share  of  net  income  from  investment  in  other  joint  ventures   Other  expenses     Portfolio  management   General  and  administrative   Depreciation  and  amortization   Interest  expense   Fair  value  adjustments,  loss  on  sale  of  investment        properties  and  other  activities   Fair  value  adjustments  to  investment  properties   Fair  value  adjustments  to  financial  instruments   Internal  direct  leasing  costs   Gain  (loss)  on  sale  of  investment  properties   Contract  termination  fees  incurred  on  sale  to        the  POBA  joint  venture   Income  before  income  taxes   Current  income  taxes  recovery  (expense)   Deferred  income  taxes  recovery  (expense)   Recovery  of  (provision  for)  income  taxes   Net  income   Total  earnings  for  the  year  attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries   Net  income   Three  months  ended  December  31,   2013   2014     Amounts   included  in   consolidated   financial   statements   Share  of   income  from   investments     in  POBA     joint  ventures   $    60,042     $    (18,325)      41,717      1,648     $    (296)      1,352     Total    61,690     $    (18,621)      43,069      62,528    (20,656)    41,872    382      2,487      7      2,876      (1,067)      (4,557)      (45)      (11,690)      (17,359)      (12,876)      876      (324)      44,332      (510)      31,498      58,732      110      1,455      1,565     $   $    60,297     $    59,388     $    909      60,297      14      (2,487)      -­‐      (2,473)      -­‐      (206)      -­‐      (373)      (579)      1,703      -­‐      -­‐      -­‐      396      -­‐      7      403      (1,067)      (4,763)      (45)      (12,063)      (17,938)      (11,173)      876      (324)      44,332      -­‐      1,703      3      (3)      -­‐      (3)      -­‐     $    (510)      33,201      58,735      107      1,455      1,562      60,297     $    352    -­‐    10    362    (409)    (3,332)    (16)    (11,288)    (15,045)    891    (9,460)    (679)    (550)    -­‐    (9,798)    17,391    (142)    (2,019)    (2,161)    15,230    -­‐     $    -­‐      -­‐      59,388     $    909      60,297      15,230    -­‐    15,230   Foreign  currency  translation  adjustments  for  the  year  attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries    (10,068)      (98)      (10,166)      -­‐      -­‐      -­‐      (10,068)      (98)      (10,166)      57,950    -­‐    57,950   Comprehensive  income  for  the  year  attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries    49,320      811      50,131     $   $    -­‐      -­‐      -­‐     $    49,320      811      50,131     $    73,180    -­‐    73,180   Dream  Global  REIT  2014  Annual  Report    |    38                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Investment  properties  revenue   Investment  properties  operating  expenses   Net  rental  income     Other  income   Interest  and  other  income     Share  of  net  income  from  investment  in  joint  ventures   Share  of  net  income  from  investment  in  other  joint  ventures   Other  expenses     Portfolio  management   General  and  administrative   Depreciation  and  amortization   Interest  expense   Fair  value  adjustments,  loss  on  sale  of  investment          properties  and  other  activities   Fair  value  adjustments  to  investment  properties   Fair  value  adjustments  to  financial  instruments   Internal  direct  leasing  costs   Gain  (loss)  on  sale  of  investment  properties   Contract  termination  fees  incurred  on  sale  to        the  POBA  joint  venture   Income  before  income  taxes   Current  income  taxes  expense   Deferred  income  taxes  recovery  (expense)   Recovery  of  (provision  for)  income  taxes   Net  income   Total  earnings  for  the  year  attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries   Net  income   Amounts  per     consolidated     financial     statements      256,077     $    (77,965)      178,112     $   Share  of     income  from     investments       in  POBA     joint  ventures      1,648     $    (296)      1,352     Year  ended  December  31,   2013   2014   Total    257,725     $    (78,261)      179,464      220,220    (75,367)    144,853    418      2,487      26      2,931      (4,571)      (16,852)      (138)      (48,198)      (69,759)      72,247      3,056      (1,954)      41,873      (510)      114,712      225,996      (1,325)      (15,734)      (17,059)      208,937     $    208,028     $    909      208,937     $   $    14      (2,487)      -­‐      (2,473)      -­‐      (206)      -­‐      (373)      (579)      1,703      -­‐      -­‐      -­‐      432      -­‐      26      458      (4,571)      (17,058)      (138)      (48,571)      (70,338)      73,950      3,056      (1,954)      41,873      -­‐      1,703      3      (3)      -­‐      (3)      -­‐     $    (510)      116,415      225,999      (1,328)      (15,734)      (17,062)      208,937     $    1,547    -­‐    28    1,575    (3,173)    (12,226)    (88)    (38,506)    (53,993)    (57,032)    (11,450)    (2,191)    (1,142)    -­‐    (71,815)    20,620    (689)    2,834    2,145    22,765    -­‐     $    -­‐      -­‐      208,028     $    909      208,937      22,765    -­‐    22,765   Foreign  currency  translation  adjustments  for  the  year  attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries    (54,671)      (98)      (54,769)      -­‐      -­‐      -­‐      (54,671)      (98)      (54,769)      109,133    -­‐    109,133   Comprehensive  income  for  the  year  attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries    153,357      811      154,168     $   $    -­‐      -­‐      -­‐     $    153,357      811      154,168     $    131,898    -­‐    131,898   Dream  Global  REIT  2014  Annual  Report    |    39                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Cash  generated  from  operating  activities  to  AFFO  reconciliation   AFFO   is   not   defined   by   IFRS   and,   therefore,   may   not   be   comparable   to   similar   measures   presented   by   other   real   estate   investment   trusts.   In   compliance   with   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  net  income  from  investment  in  POBA  joint  venture   $   Internal  direct  leasing  costs     Non-­‐cash  impact  of  income  attributable  to  non-­‐controlling     interest     Depreciation  and  amortization     Unrealized  loss  (gain)  on  settlement  of  foreign  exchange     contracts     Tax  on  gains  on  sale  of  investment  properties   Investment  in  lease  incentives  and  initial  direct  leasing  costs     Contract  termination  fees     Adjustments  for  investment  in  joint  ventures:     Fair  value  adjustments  to  investment  properties     Amortization  of  lease  incentives     Normalized  leasing  costs  and  tenant  incentives     Normalized  non-­‐recoverable  recurring  capital  expenditures   AFFO   $   Three  months  ended  December  31,     2013      29,798   2014      29,366     $   Year  ended  December  31,   2014     2013    85,228    96,065     $     $    (10,507)    2,487    324    (271)    (45)    975    (159)    4,859    510    (1,703)    10    (1,938)    (1,507)    22,401     $    (6,704)    -­‐    679    13    (16)    (519)    (33)    2,391    -­‐    -­‐    -­‐    (1,884)    (1,466)    22,259     $    (11,092)    2,487    1,954    (351)    (138)    2,866    342    14,777    510    (1,703)    10    (8,076)    (6,281)    91,370     $    (2,568)    -­‐    2,191    31    (88)    (1,316)    62    6,055    -­‐    -­‐    -­‐    (6,518)    (5,070)    78,007   Net  income,  cash  flows  from  operating  activities  and  distributions  declared   In  any  given  period,  actual  distributions  declared  may  differ  from  cash  generated  from  (utilized  in)  operating  activities,  primarily   due  to  seasonal  fluctuations  in  non-­‐cash  working  capital  and  the  impact  of  leasing  costs,  which  fluctuate  with  lease  maturities,   renewal  terms  and  the  type  of  asset  being  leased.  These  seasonal  or  short-­‐term  fluctuations  are  funded,  if  necessary,  with  our   existing  credit  facilities.  The  Trust  determines  the  distribution  rate  by,  among  other  considerations,  its  assessment  of  cash  flow   as   determined   using   adjusted   cash   flows   from   operating   activities   (a   non-­‐GAAP   measure),   which   includes   cash   flows   from   operating   activities   of   our   investments   in   joint   ventures   that   are   equity   accounted   and   excludes   the   fluctuations   in   non-­‐cash   working  capital,  transaction  costs  on  business  combinations  and  investment  in  lease  incentives  and  initial  direct  leasing  costs.     In  any  given  period,  the  Trust  anticipates  that  actual  distributions  declared  will,  in  the  foreseeable  future,  continue  to  vary  from   net   income   as   net   income   includes   non-­‐cash   items   such   as   fair   value   adjustments   to   investment   properties   and   fair   value   adjustments  to  financial  instruments.  Accordingly,  the  Trust  does  not  use  net  income  as  a  proxy  for  distributions.   Dream  Global  REIT  2014  Annual  Report    |    40                                                                                                                                                                                                                                                                                                                           As  required  by  National  Policy  41-­‐201,  “Income  Trusts  and  Other  Indirect  Offerings”,  the  following  table  outlines  the  differences   between   cash   generated   from   (utilized   in)   operating   activities   (per   condensed   consolidated   financial   statements)   and   distributions   declared,   as   well   as   the   differences   between   net   income   and   distributions   declared,   in   accordance   with   the   guidelines.   When   the   Trust   determines   its   cash   available   for   distribution,   it   uses   adjusted   cash   flows   from   operating   activities,   which   excludes   fluctuations   in   working   capital,   transaction   costs   on   business   combinations   and   investment   in   lease   incentives   and   initial  direct  leasing  costs.  The  Trust  funds  its  working  capital  needs  and  investments  in  lease  incentives  and  initial  direct  leasing   costs   with   cash   and   cash   equivalent   on   hand   and   its   credit   facilities.   Accordingly,   management   believes   adjusted   cash   flows   from   operating   activities   is   an   important   measure   that   reflects   our   ability   to   pay   cash   distributions.   This   non-­‐GAAP   measurement  does  not  represent  cash  flow  from  operating  activities,  as  defined  by  GAAP.   Net  income  for  the  period   Cash  generated  from  operating  activities  (per     consolidated  financial  statements)   Add:   Investment  in  joint  ventures’  cash  flows  from          operating  activities   Cash  flow  from  operating  activities  (including  investment   $   in  joint  ventures)   Add  (deduct):   Lease  incentives  and  initial  direct  leasing  costs     Change  in  non-­‐cash  working  capital   Adjusted  cash  flows  from  operating  activities   Distributions  declared   Adjusted  surplus  of  cash  flow  from  operating  activities  over     distributions  declared   Surplus  (shortfall)  of  net  income  (loss)  over  distributions     declared   Surplus  of  cash  flow  from  operating  activities  over     distributions  declared   Surplus  of  cash  flow  from  operating  activities  (per  consolidated     Three  months  ended  December  31,     2013    15,230   2014    60,297     $   Year  ended  December  31,   2013   2014    22,765    208,937     $     $    29,366    29,798    96,065    85,228    518    -­‐    518    -­‐    29,884    29,798    96,583    85,228    5,088    (10,430)    24,542    22,263    2,391    (6,704)    25,485    21,910    15,006    (11,015)    100,574    88,547    6,055    (2,568)    88,715    79,784    2,279    3,575    12,027    8,931    38,034    (6,680)    120,390    (57,019)    7,621    7,888    8,036    5,444   financial  statements)  over  distributions  declared   $    7,103     $    7,888     $    7,518     $    5,444   Adjusted  cash  flow  from  operating  activities  exceeded  distributions  paid  and  payable  for  the  three  months  ended  December  31,   2014   by   $2.3   million   and   net   income   exceeded   distributions   paid   and   payable   by   $38.0   million   for   the   same   period.   This   compares  to  a  surplus  of  $3.6  million  of  adjusted  cash  flow  from  operations  over  distributions  paid  and  payable  for  the  three   months  ended  December  31,  2013  and  a  shortfall  of  $6.7  million  of  net  income  over  distributions  paid  and  payable  for  the  same   period  in  2013.     Adjusted  cash  flow  from  operating  activities  exceeded  distributions  paid  and  payable  for  the  year  ended  December  31,  2014  by   $12.0  million  and  net  income  exceeded  distributions  paid  and  payable  by  $120.4  million  for  the  same  period.  This  compares  to  a   surplus   of   $8.9   million   of   adjusted   cash   flow   from   operations   over   distributions   paid   and   payable   for   the   year   ended     December   31,   2013   and   a   shortfall   of   $57.0   million   of   net   income   over   distributions   paid   and   payable   for   the   same   period     in  2013.     As  a  general  rule,  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  in  establishing  our  distribution  policy.  The  surplus  or  shortfall  in  net  income  for  each   period  reflects  mainly  fair  value  adjustments  to  financial  instruments  and  investment  properties.  These  non-­‐cash  items  do  not   impact  cash  flows  and  are  not  considered  when  we  establish  our  distribution  policy.     Dream  Global  REIT  2014  Annual  Report    |    41                                                                                                                                                                                                                                                                                                                                                                                         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.   In  compliance  with  Canadian  Securities  Administrators  Staff  Notice  52-­‐306  (Revised),  “Non-­‐GAAP  Financial  Measures”,  the  table   below  calculates  the  level  of  debt.   Non-­‐current  debt(1)   Current  debt   Total  debt   Debt  related  to  assets  held  for  sale   Total  adjusted  debt   Less  cash   Total  adjusted  debt,  net  of  cash   Total  assets   Adjustments:  Investment  in  joint  ventures   Amounts  per     consolidated     financial  statements     $   December  31,  2014     Share  of  amounts     from  investment       in  joint  ventures     Total      1,157,882     $    70,514      1,228,396      -­‐      1,228,396      121,939      1,106,457      2,432,383      (159,967)      2,272,416      121,939      2,150,477     $    149,747     $    2,989      152,736      -­‐      152,736      3,122      149,614      156,042      159,967      316,009      3,122      312,887     $    1,307,629     $    73,503      1,381,132      -­‐      1,381,132      125,061      1,256,071      2,588,425      -­‐      2,588,425      125,061      2,463,364     $   December  31,   2013    1,403,956    20,356    1,424,312    10,106    1,434,418    106,292    1,328,126    2,558,674    -­‐    2,558,674    106,292    2,452,382   56%   54%   48%   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  $152,365  and  $150,326  at  December  31,  2014  and  December  31,  2013,  respectively.   53%     51%     45%     $   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.   In  compliance  with  Canadian  Securities  Administrators  Staff  Notice  52-­‐306  (Revised),  “Non-­‐GAAP  Financial  Measures”,  the  table   below  calculates  the  interest  coverage  ratio.   Net  rental  income   Add:  Interest  and  other  income   Less:  General  and  administrative  expenses   Less:  Portfolio  management  expenses   Interest  expense   Interest  coverage  ratio   Amounts  per     consolidated     financial  statements     $    178,112     $    418      16,852      4,571      157,107     For  the  year  ended  December  31,  2014     Share  of  amounts     from  investment       in  joint  ventures      1,352     $    14      206      -­‐      1,160      373     $   Total      179,464     $    432      17,058      4,571      158,267      48,571     $    3.26     For  the  year   ended   December  31,   2013    144,853    1,547    12,226    3,173    131,001    38,506    3.40   $    48,198     $   Dream  Global  REIT  2014  Annual  Report    |    42                                                                                                                                                                                                                                                     Debt-­‐to-­‐adjusted  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  its  debt.  Debt-­‐to-­‐adjusted  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.   In  compliance  with  Canadian  Securities  Administrators  Staff  Notice  52-­‐306  (Revised),  “Non-­‐GAAP  Financial  Measures”,  the  table   below  calculates  the  debt-­‐to-­‐adjusted  EBITDFV.     Amounts  per   consolidated   financial  statements    1,157,882   $    70,514    1,228,396    -­‐    1,228,396    57,810    12,876    (876)    324    (44,332)    45    11,690    (1,565)    892    36,864   Non-­‐current  debt   Current  debt   Total  debt   Debt  related  to  assets  held  for  sale   Total  adjusted  debt   Net  income  for  the  quarter   Fair  value  adjustments  to  investment  properties   Fair  value  adjustments  to  financial  instruments   Internal  direct  leasing  costs   (Gain)  loss  on  sale  of  investment  properties   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(1)   Debt-­‐to-­‐adjusted  EBITDFV  (three  months  ended)   Debt-­‐to-­‐adjusted  EBITDFV  (years)  annualized   (1)  EBITDFV  is  adjusted  to  the  period-­‐end  exchange  rate  from  the  quarterly  average  exchange  rate.   $    $     Share  of  amounts   from  investment     in  joint  ventures    149,747    2,989    152,736    -­‐    152,736    2,487    (1,703)    -­‐    -­‐    -­‐    -­‐    373    3    -­‐    1,160     $   December  31,  2014      $    $    $   Total      1,307,629     $    73,503      1,381,132      -­‐      1,381,132      60,297      11,173      (876)      324      (44,332)      45      12,063      (1,562)      892      38,024     $    37,627     $    36.7      9.2     December  31,   2013    1,403,956    20,356    1,424,312    10,106    1,434,418    15,230    679    9,460    (891)    550    16    11,288    2,161    1,296    39,789    40,788    35.2    8.8   Dream  Global  REIT  2014  Annual  Report    |    43                                                                                                                                                                                                                                                     SECTION  III  –  DISCLOSURE  CONTROLS  AND  PROCEDURES  AND  INTERNAL  CONTROLS     OVER  FINANCIAL  REPORTING   For   the   December   31,   2014   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   Dream   Global   REIT’s   disclosure   controls   and   procedures,   as   defined   in   National   Instrument   52-­‐109,   “Certification   of   Disclosure   in   Issuers’   Annual   and   Interim   Filings”   (“NI   52-­‐109”).   The   Certifying   Officers   have   concluded   that   the   disclosure   controls   and   procedures   are   adequate   and   effective   in   order   to   provide   reasonable   assurance   that   material   information   has   been   accumulated  and  communicated  to  management,  to  allow  timely  decisions  of  required  disclosures  by  Dream  Global  REIT  and  its   consolidated  subsidiary  entities,  within  the  required  time  periods.     Dream   Global   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   Dream   Global   REIT’s   internal   control   over   financial   reporting.   Based   on   that   evaluation,   the   Certifying   Officers   have   concluded   that   Dream   Global  REIT’s  internal  control  over  financial  reporting  was  effective  as  at  December  31,  2014.     There   were   no   changes   in   Dream   Global   REIT’s   internal   control   over   financial   reporting   during   the   financial   year   ended   December   31,   2014   that   have   materially   affected,   or   are   reasonably   likely   to   materially   affect,   Dream   Global   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.   The   following   is   a   review   of   the   material  risks  and  uncertainties  that  could  materially  affect  our  operations  and  future  performance.  A  more  detailed  description   of   our   business   environment   and   risks   is   contained   in   our   Annual   Information   Form,   which   is   posted   on   our   website   at   www.dreamglobalreit.ca  or  at  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.     Dream  Global  REIT  2014  Annual  Report    |    44   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  twelve  months’  prior  notice.  As  of  the  date  hereof,  these  termination  rights  pertain  to   approximately  3%  of  the  Trust’s  GLA  at  December  31,  2014.   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.     CHANGE  IN  INDEXATION  FOR  INFLATION     The  rents  payable  under  the  Deutsche  Post  leases  are  automatically  adjusted  if  the  consumer  price  index  for  Germany  changes   by   more   than   4.3   index   points.   This   means   that   our   rental   income   will   increase   if   the   consumer   price   index   for   Germany   increases   by   more   than   4.3   index   points.   However,   it   also   means   that   our   rental   income   will   decrease   if   the   consumer   price   index  for  Germany  decreases  by  more  than  4.3  index  points.  As  a  result,  a  significant  decrease  in  the  consumer  price  index  for   Germany  could  have  a  material  and  adverse  effect  on  our  cash  flows,  operating  results  and  financial  condition.  The  fixed  rents   payable  under  other  lease  agreements  in  respect  of  the  Initial  Properties  and  other  properties  we  may  acquire  will  not  normally   provide  for  adjustments  following  a  general  change  in  prices.  As  a  result,  our  revenues  adjusted  for  inflation  could  be  materially   and   adversely   affected   from   an   unexpected   rise   in   inflation,   which   could   have   a   materially   adverse   effect   on   our   cash   flows,   operating  results  or  financial  condition.   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.   Dream  Global  REIT  2014  Annual  Report    |    45       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.     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   fonds   communs   de   placement   –   “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  to  and  title  in  the  properties  and  the  revenues  we  are  able  to  generate  from  our  investments.   Dream  Global  REIT  2014  Annual  Report    |    46         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.     INTEREST  RATES   When  entering  into  financing  agreements  or  extending  such  agreements,  we  depend  on  our  ability  to  obtain  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  or  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.   Dream  Global  REIT  2014  Annual  Report    |    47       JOINT  ARRANGEMENTS   We  are  a  participant  in  jointly  controlled  entities  and  co-­‐ownerships,  combined  (“joint  arrangements”)  with  third  parties.  A  joint   arrangement  involves  certain  additional  risks,  including:     (i) (ii) (iii) (iv) the   possibility   that   such   third   parties   may   at   any   time   have   economic   or   business   interests   or   goals   that   will   be   inconsistent  with  ours,  or  take  actions  contrary  to  our  instructions  or  requests  or  to  our  policies  or  objectives  with  respect   to  our  real  estate  investments;     the  risk  that  such  third  parties  could  experience  financial  difficulties  or  seek  the  protection  of  bankruptcy,  insolvency  or   other  laws,  which  could  result  in  additional  financial  demands  on  us  to  maintain  and  operate  such  properties  or  repay  the   third   parties’   share   of   property   debt   guaranteed   by   us   or   for   which   we   will   be   liable,   and/or   result   in   our   suffering   or   incurring  delays,  expenses  and  other  problems  associated  with  obtaining  court  approval  of  the  joint  arrangement;   the  risk  that  such  third  parties  may,  through  their  activities  on  behalf  of  or  in  the  name  of  the  joint  arrangements,  expose   or  subject  us  to  liability;  and   the  need  to  obtain  third  parties’  consents  with  respect  to  certain  major  decisions,  including  the  decision  to  distribute  cash   generated  from  such  properties  or  to  refinance  or  sell  a  property.  In  addition,  the  sale  or  transfer  of  interests  in  certain  of   the   joint   arrangements   may   be   subject   to   rights   of   first   refusal   or   first   offer,   and   certain   of   the   joint   venture   and   partnership  agreements  may  provide  for  buy-­‐sell  or  similar  arrangements.  Such  rights  may  be  triggered  at  a  time  when   we   may   not   desire   to   sell   but   may   be   forced   to   do   so   because   we   do   not   have   the   cash   to   purchase   the   other   party’s   interests.  Such  rights  may  also  inhibit  our  ability  to  sell  an  interest  in  a  property  or  a  joint  arrangement  within  the  time   frame  or  otherwise  on  the  basis  we  desire.   Our  investment  in  properties  through  joint  arrangements  is  subject  to  the  investment  guidelines  set  out  in  our  Declaration  of   Trust.   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.     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.     Dream  Global  REIT  2014  Annual  Report    |    48   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.   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.  Dream  Global  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     Dream  Global  REIT’s  future  accounting  policy  changes  are  described  in  Note  5  to  the  audited  consolidated  financial  statements.   Additional  information  relating  to  Dream  Global  REIT,  including  our  Annual  Information  Form  dated  March  31,  2014,  is  available   on  SEDAR  at  www.sedar.com.   Dream  Global  REIT  2014  Annual  Report    |    49   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  Dream  Global  Real  Estate  Investment  Trust.   These   consolidated   financial   statements   have   been   prepared   in   accordance   with   International   Financial   Reporting   Standards,   using  management’s  best  estimates  and  judgments  as  appropriate.   The  Board  of  Trustees  is  responsible  for  ensuring  that  management  fulfills  its  responsibility  for  financial  reporting  and  internal   controls.   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  18,  2015   Rene  D.  Gulliver   Chief  Financial  Officer   Dream  Global  REIT  2014  Annual  Report    |    50             Independent  auditor’s  report     To  the  Unitholders  of  Dream  Global  Real  Estate  Investment  Trust     We   have   audited   the   accompanying   consolidated   financial   statements   of   Dream   Global   Real   Estate   Investment   Trust   and   its   subsidiaries,   which   comprise   the   consolidated   balance   sheets   as   at   December   31,   2014   and   December   31,   2013   and   the   consolidated   statements   of   net   income   and   comprehensive   income,   changes   in   equity   and   cash   flows   for   the   years   ended   December  31,  2014  and  December  31,  2013  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   Dream   Global   Real   Estate   Investment   Trust   and   its   subsidiaries   as   at   December   31,   2014   and   December   31,   2013   and   their   financial   performance  and  their  cash  flows  for  the  years  then  ended  in  accordance  with  International  Financial  Reporting  Standards.   Chartered  Professional  Accountants,  Licensed  Public  Accountants   Toronto,  Ontario,  February  18,  2015   Dream  Global  REIT  2014  Annual  Report    |    51   Consolidated  balance  sheets   (in  thousands  of  Canadian  dollars)   Assets   NON-­‐CURRENT  ASSETS   Investment  properties   Investment  in  joint  ventures   Notes  receivable   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   Deposits   Derivative  financial  instruments   Deferred  Unit  Incentive  Plan   Deferred  income  tax  liabilities   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   Total  Unitholders’  equity   Non-­‐controlling  interest   Total  equity   Total  liabilities  and  equity   See  accompanying  notes  to  the  consolidated  financial  statements.   On  Behalf  of  the  Board  of  Trustees  of  Dream  Global  Real  Estate  Investment  Trust:   MICHAEL  J.  COOPER     Trustee     P.  JANE  GAVAN   Trustee   Dream  Global  REIT  2014  Annual  Report    |    52   December  31,     December  31,   Note   2014     2013   7   9   22   21   10   11   8   18   12   13   14   21   12   15   8   13   16   18   22   17     $     $     $   $   $   $    2,079,671    159,967    4,930    -­‐    1,698    2,246,266    17,455    2,360    -­‐    121,939    141,754    44,363    2,432,383    1,157,882    1,802    3,420    9,365    719    1,173,188    70,514    49,485    1,268    -­‐    8,853    7,431    137,551    1,424    1,312,163    1,091,317    (8,808)      31,516    1,114,025    6,195    1,120,220    2,432,383     $   $    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    -­‐    1,034,005    2,558,674                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           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   Interest  and  other  income   Share  of  net  income  from  investment  in  joint  ventures   Other  expenses     Portfolio  management   General  and  administrative   Depreciation  and  amortization   Interest  expense   Fair  value  adjustments,  loss  on  sale  of  investment  properties  and  other  activities   Fair  value  adjustments  to  investment  properties   Fair  value  adjustments  to  financial  instruments   Internal  direct  leasing  costs   Gain  (loss)  on  sale  of  investment  properties   Contract  termination  fees  incurred  on  sale  to  the  joint  venture   Income  before  income  taxes   Current  income  taxes  expense   Deferred  income  taxes  recovery  (expense)   Recovery  of  (provision  for)  income  taxes   Net  income   Total  earnings  for  the  year  attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries   Net  income   Foreign  currency  translation  adjustments  for  the  year  attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries   Comprehensive  income  for  the  year  attributable  to:   Unitholders  of  the  Trust   Shareholders  of  the  subsidiaries   See  accompanying  notes  to  the  consolidated  financial  statements.   Note     $   Year  ended  December  31,   2013   2014    220,220    256,077     $    (75,367)    (77,965)      144,853    178,112     9   19   7,  18   20   3   7,  9   9   21   22     $     $    418      2,513      2,931      (4,571)      (16,852)      (138)      (48,198)      (69,759)      72,247      3,056      (1,954)      41,873      (510)      114,712      225,996      (1,325)      (15,734)      (17,059)      208,937     $    208,028     $    909      208,937      (54,671)      (98)      (54,769)      153,357      811      154,168     $     $    1,547    28    1,575    (3,173)    (12,226)    (88)    (38,506)    (53,993)    (57,032)    (11,450)    (2,191)    (1,142)    -­‐    (71,815)    20,620    (689)    2,834    2,145    22,765    22,765    -­‐    22,765    109,133    -­‐    109,133    131,898    -­‐    131,898   Dream  Global  REIT  2014  Annual  Report    |    53                                                                                                                                                                                                                                                                                                                                                                                                                                                           Consolidated  statements  of  changes  in  equity     (in  thousands  of  Canadian  dollars,   except  number  of  Units)   Note     Number       of  Units       Unitholders’       equity     Attributable  to  unitholders  of  the  Trust      Accumulated     other         comprehensive     income     Deficit     Total       unitholders’     equity     Non-­‐       controlling     interest     Total     $    1,075,520     $    (127,702)     $    86,187     $    1,034,005     $    -­‐     $    1,034,005   Balance  at  January  1,  2014   Net  income  for  the  year   Distributions  paid   Distributions  payable        109,698,977    -­‐    -­‐    -­‐   16   16   Contribution  from  non-­‐controlling        interest   Distribution  Reinvestment  Plan   Unit  Purchase  Plan   Deferred  Unit  Incentive  Plan   6,  22     17   17   17    -­‐    1,677,622    3,683    86,415   Issue  costs   Reclassification  from  amounts        payable  and  accrued  liabilities   Foreign  currency  translation          adjustment   Balance  at  December  31,  2014    -­‐    -­‐    -­‐      111,466,697     $    -­‐    -­‐    -­‐    -­‐    15,222    34    793    (252)      -­‐    208,028    (81,703)      (7,431)      -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    208,028    (81,703)      (7,431)      -­‐    15,222    34    793    (252)      909    -­‐    -­‐    4,599    -­‐    -­‐    -­‐    -­‐    208,937    (81,703)    (7,431)    4,599    15,222    34    793    (252)    -­‐    785    785    -­‐    1,091,317     $    -­‐    (8,808)     $    (54,671)      31,516     $    (54,671)      (98)      1,114,025     $    6,195     $    (54,769)    1,120,220   (in  thousands  of  Canadian  dollars,   Number       Unitholders’       Attributable  to  unitholders  of  the  Trust     Accumulated     other       comprehensive     except  number  of  Units)   Note     of  Units     equity     Deficit     income  (loss)     Total     Balance  at  January  1,  2013        72,232,494     $    689,318     $    (70,294)     $    (22,946)     $    596,078   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   16   16   17   17   17    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    22,765    (72,859)      (7,314)      36,375,000    1,066,792    7,059    17,632    393,859    10,145    72    164    -­‐    (18,038)      -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    22,765    (72,859)      (7,314)      393,859    10,145    72    164    (18,038)      109,133    86,187     $    109,133    1,034,005    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐      109,698,977     $    -­‐    1,075,520     $    (127,702)     $   See  accompanying  notes  to  the  consolidated  financial  statements.   Dream  Global  REIT  2014  Annual  Report    |    54                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Consolidated  statements  of  cash  flows   (in  thousands  of  Canadian  dollars)   Generated  from  (utilized  in)  operating  activities   Net  income   Non-­‐cash  items:   Share  of  net  income  from  investment  in  joint  ventures     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   (Gain)  loss  on  sale  of  investment  properties     Depreciation  and  amortization     Deferred  unit  compensation  expense  and  deferred  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   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   Net  proceeds  from  sale  of  interest  to  POBA   Cash  disposed  to  the  POBA  joint  venture   Notes  receivable   Net  proceeds  from  disposal  of  investment  properties   Distributions  from  investment  in  joint  ventures   Generated  from  (utilized  in)  financing  activities   Mortgage  proceeds   Financing  costs  on  debts  placed   Mortgage  principal  repayments   Repayment  of  term  loan  credit  facility   Drawdown  on  revolving  credit  facility   Revolving  credit  facility  repayments   Units  issued  for  cash   Unit  issue  costs   Distributions  paid  on  Units   Increase  (decrease)  in  cash   Effect  of  exchange  rate  changes  on  cash   Cash,  beginning  of  year   Cash,  end  of  year   See  accompanying  notes  to  the  consolidated  financial  statements.   Dream  Global  REIT  2014  Annual  Report    |    55   Note   Year  ended  December  31,   2013   2014     $    208,937     $    22,765    (2,513)      15,734      1,458      3,453      (387)      1,092      (41,873)      138      4,189      (624)      (3,056)      (72,247)      (8,058)      (6,493)      (14,777)      11,092      96,065      (12,741)      (411,077)      151,889      (7,604)      (4,930)      126,425      682      (157,356)      243,374      (4,459)      (16,467)      (67,036)      164,223      (164,209)      34      (252)      (73,795)      81,413      20,122      (4,475)      106,292      121,939      (28)    (2,834)    616    2,651    (402)    1,008    1,142    88    3,426    (1,510)    11,450    57,032    (510)    (6,179)    (6,055)    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   $   14   20   7,  18   23   7,  18   6   9   7   17   16     $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Notes  to  the  consolidated  financial  statements   (All  dollar  amounts  in  thousands  of  Canadian  dollars,  except  unit  amounts)   Note  1   ORGANIZATION   Dream  Global  Real  Estate  Investment  Trust  (the  “REIT”  or  the  “Trust”),  formerly  called  Dundee  International  REIT,  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  DRG.UN.  The  Trust’s  consolidated  financial  statements  for  the  year   ended   December   31,   2014   were   authorized   for   issue   by   the   Board   of   Trustees   on   February   18,   2015,   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   future  accounting  standards  and  guidelines  relevant  to  the  Trust  that  were  issued  at  the  date  of  approval  of  the  consolidated   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,  and  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.   Where  the  REIT  consolidates  a  subsidiary  in  which  it  does  not  have  100%  ownership,  the  non-­‐controlling  interest  is  classified  as   a  component  of  equity.     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.       Dream  Global  REIT  2014  Annual  Report    |    56       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  income  from  investments  in  joint  venture  in  the  consolidated   statements  of  comprehensive  income.     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.   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   dates.   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   dates,   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.   Dream  Global  REIT  2014  Annual  Report    |    57     Third-­‐party  initial  direct  leasing  costs  incurred  in  negotiating  and  arranging  tenant  leases  are  added  to  the  carrying  amount  of   investment  properties.  Internal  direct  leasing  costs  are  expensed  as  incurred  in  the  consolidated  statements  of  net  income  and   comprehensive  income.  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.   Fair  value  hierarchy   Fair   value   measurements   recognized   in   the   consolidated   balance   sheets   or   disclosed   in   the   Trust’s   consolidated   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  reported  in  equity.   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   30%   of   the   gross   rental   income   generated   by   the   Trust’s  properties  for  the  year  ended  December  31,  2014  (December  31,  2013  –  37%).     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   the   euro.   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   year-­‐end   exchange   rates   of   monetary   assets   and   liabilities   denominated   in   foreign   currencies,   are   recognized   in   the   consolidated   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.   Dream  Global  REIT  2014  Annual  Report    |    58     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   (iii) all  resulting  exchange  differences  are  recognized  in  other  comprehensive  income.   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  net  income  as  part  of  the  gain  or  loss  on  sale.   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   on   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  is  reasonably  assured.  Other  revenues  are  recorded  as  earned.   Dream  Global  REIT  2014  Annual  Report    |    59     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.   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  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  consolidated  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   consolidated   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  17,  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.  The  grants  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   recognized   in   comprehensive   income,   as   a   fair   value   adjustment   to   the   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   year  for  accounting  purposes  as  they  relate  to  services  provided  during  the  year,  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  option   pricing  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  recognized  in  comprehensive  income  as  a  fair  value  adjustment  to  financial  instruments.   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.     Dream  Global  REIT  2014  Annual  Report    |    60   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   Loans  and  receivables   Loans  and  receivables   Other  liabilities   Other  liabilities   Other  liabilities   Other  liabilities   Other  liabilities   Other  liabilities   Other  liabilities   Other  liabilities   Measurement   Amortized  cost   Amortized  cost   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  or  loss   Fair  value  through  profit  or  loss   Fair  value  through  profit  or  loss   Fair  value   Fair  value   Fair  value   Financial  assets   The  Trust  classifies  its  financial  assets  on  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   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   consolidated   statements   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   on   initial   recognition   as   either   fair   value   through   profit   or   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.   Dream  Global  REIT  2014  Annual  Report    |    61                                                                     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.   On   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   year.   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   year   based   on   the   fair   value   of   Units,   with   changes   in   the   liabilities   recorded   in   comprehensive  income.     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   sheets   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,  mortgage  debt,  revolving  credit  facilities  and  debentures,  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.   Finance   costs   are   amortized  to  interest  expense  unless  they  relate  to  a  qualifying  asset.   Internal  direct  leasing  costs   Prior  to  January  1,  2014,  the  Trust  capitalized  incremental  internal  leasing  costs  within  initial  direct  leasing  costs  to  investment   properties,   where   these   costs   would   not   be   incurred   had   no   leasing   activity   taken   place   and   are   directly   attributable   to   the   leasing  activity.     On  April  2,  2014,  IFRIC  issued  an  agenda  decision  indicating  that  internal  leasing  costs,  such  as  salary  costs  of  permanent  staff   involved   in   negotiating   and   arranging   new   leases,   do   not   qualify   as   incremental   costs.   As   a   result,   the   Trust   has   adopted   an   accounting  policy  of  recognizing  all  salary  costs  of  permanent  staff  involved  in  negotiating  and  arranging  new  leases  in  internal   direct   leasing   costs   as   incurred.   This   accounting   policy   has   been   applied   retrospectively.   The   impact   to   the   years   ended   December  31,  2014  and  December  31,  2013  is  an  incurrence  of  internal  direct  leasing  costs  of  $1,954  and  $2,191,  respectively,   and   a   corresponding   decrease   in   fair   value   adjustments   to   investment   properties   of   $1,954   and   $2,191,   respectively.   This   change  did  not  result  in  an  impact  to  the  consolidated  balance  sheets.   Dream  Global  REIT  2014  Annual  Report    |    62     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.   • 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.     Dream  Global  REIT  2014  Annual  Report    |    63     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  on  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.   • 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.   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.     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   its   remaining   initial   properties   through   15   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.     The   German   federal   government   has   indicated   it   intends   to   reform   the   Investment   Tax   Act   in   the   future.   It   is   unclear   what   exactly   the   consequences   of   the   reform   would   be   and   how   it   would   impact   the   FCPs   or   the   FCP   unitholders.   Currently,   the   German   fiscal   authorities   view   foreign   investment   funds   such   as   the   FCPs   or   the   FCP   unitholders   as   potentially   subject   to   corporate  income  tax  in  Germany.  However,  the  REIT  believes  that  the  consequences  of  the  uncertainty  of  the  tax  status  of  the   FCPs  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.   Dream  Global  REIT  2014  Annual  Report    |    64     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  and  the  use  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.     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  uses  judgments,  estimates  and  assumptions  when  it  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   the   carrying   amounts   of   assets   and   liabilities,   the   disclosure   of   contingent   assets   and   liabilities,   and   the   reported   amount   of   other   comprehensive   income   for   the   year.   Actual   results   could   differ   from   those   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   DUIP,   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.   Dream  Global  REIT  2014  Annual  Report    |    65   Note  5       FUTURE  ACCOUNTING  POLICY  CHANGES   The  following  are  future  accounting  policy  changes  to  be  implemented  by  the  Trust  in  future  years:   Revenue  recognition   IFRS  15,  “Revenue  from  Contracts  with  Customers”  (“IFRS  15”),  provides  a  comprehensive  five-­‐step  revenue  recognition  model   for  all  contracts  with  customers.  The  IFRS  15  revenue  recognition  model  requires  management  to  exercise  significant  judgment   and   make   estimates   that   affect   revenue   recognition.   IFRS   15   is   effective   for   annual   periods   beginning   on   or   after   January   1,   2017,   with   earlier   application   permitted.   The   Trust   is   currently   evaluating   the   impact   of   adopting   this   standard   in   the   consolidated  financial  statements.   Financial  instruments   The   final   version   of   IFRS   9,   “Financial   Instruments”   (“IFRS   9”),   was   issued   by   the   IASB   in   July   2014   and   will   replace   IAS   39,   “Financial  Instruments:  Recognition  and  Measurement”.  IFRS  9  introduces  a  model  for  classification  and  measurement,  a  single,   forward-­‐looking  “expected  loss”  impairment  model  and  a  substantially  reformed  approach  to  hedge  accounting.  The  new  single,   principle-­‐based   approach   for   determining   the   classification   of   financial   assets   is   driven   by   cash   flow   characteristics   and   the   business  model  in  which  an  asset  is  held.  The  new  model  also  results  in  a  single  impairment  model  being  applied  to  all  financial   instruments,   which   will   require   more   timely   recognition   of   expected   credit   losses.   It   also   includes   changes   in   respect   of   own   credit  risk  in  measuring  liabilities  elected  to  be  measured  at  fair  value,  so  that  gains  caused  by  the  deterioration  of  an  entity’s   own  credit  risk  on  such  liabilities  are  no  longer  recognized  in  profit  or  loss.  IFRS  9  is  effective  for  annual  periods  beginning  on  or   after  January  1,  2018;  however,  it  is  available  for  early  adoption.  In  addition,  the  own  credit  changes  can  be  early  adopted  in   isolation   without   otherwise   changing   the   accounting   for   financial   instruments.   The   Trust   has   yet   to   assess   the   full   impact   of     IFRS  9  and  has  not  yet  determined  when  it  will  adopt  the  new  standard.   Note  6   PROPERTY  ACQUISITIONS   Detailed  below  are  the  acquisitions  completed  during  the  year  ended  December  31,  2014:   Werner-­‐Eckert-­‐Straße  8,  10,  12,  Munich   My  Falkenried,  Hamburg   Liebknechtstr.  33/35,  Heßbrühlstr.  7  (Officium),  Stuttgart     Robert-­‐Bosch-­‐Str.  9–11  (Europahaus),  Darmstadt   Im  Mediapark  8  (Cologne  Tower),  Cologne   Greifswalder  Str.  154–156  and  Erich-­‐Weinert-­‐Str.  145  (Goldpunkt-­‐Haus),          Berlin  –  earnout  amount   Prior  year  acquisition  cost  adjustments   Total   (1)  Includes  transaction  costs.   Property  type   Office   Office   Office   Office   Office   Interest   acquired       100%     $   100%       100%       100%       95%         $   Date  acquired   February  14,  2014   March  31,  2014   July  31,  2014   September  30,  2014   November  14,  2014   Purchase   price(1)    23,431    97,578    72,893    61,204    164,748    419,854      933      1,379      422,166     On  February   14,   2014,  the  REIT   acquired  Werner-­‐Eckert-­‐Straße  8,  10,  12,   an  office   property  located  in  Munich,  Germany,  for   $23,431.  In  connection  with  the  acquisition,  the  REIT  entered  into  a  mortgage  agreement  with  a  principal  balance  of  $13,237.   The  mortgage  was  drawn  on  March  28,  2014.     On   March   31,   2014,   the   REIT   acquired   Strassenbahnring   15,   17–19,   Hoheluftchaussee   18-­‐20   and   Lehmweg   8,   8a,   7   (“My   Falkenried”),  an  office  property  located  in  Hamburg,  Germany,  for  $97,578.  In  connection  with  the  acquisition,  the  REIT  entered   into  a  mortgage  agreement  with  a  principal  balance  of  $55,765.  The  mortgage  was  drawn  on  April  29,  2014.     On   July   31,   2014,   the   REIT   acquired   Liebknechtstr.   33/35,   Heßbrühlstr.   7   (Officium),   an   office   property   located   in   Stuttgart,   Germany,  for  $72,893.  The  acquisition  was  partially  financed  by  a  new  mortgage  of  $41,556.   Dream  Global  REIT  2014  Annual  Report    |    66                                                               On   September   30,   2014,   the   REIT   acquired   Robert-­‐Bosch-­‐Str.   9–11   (Europahaus),   an   office   property   located   in   Darmstadt,   Germany,  for  $61,204.  In  connection  with  the  acquisition,  the  REIT  entered  into  a  mortgage  agreement  with  a  principal  balance   of  $35,317.  The  mortgage  was  drawn  on  October  20,  2014.   On  November  14,  2014,  the  REIT  acquired  Im  Mediapark  8  (Cologne  Tower),  an  office  property  located  in  Cologne,  Germany,  for   $164,748.  The  acquisition  was  partially  financed  by  a  new  mortgage  of  $97,500.     Pursuant  to  the  terms  of  the  purchase  and  sale  agreement  related  to  the  acquisition  of  Goldpunkt-­‐Haus,  Berlin  on  December  7,   2012,   the   REIT   paid   a   final   purchase   price   adjustment   of   $933   to   the   vendor   for   successfully   leasing   certain   vacant   space   on     April  14,  2014  (December  31,  2013  –  $2,074).     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  acquisition  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   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   Interest   acquired     100%   100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     100%     95%     100%     100%     $   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    2,074    547   $    1,075,558     The  assets  acquired  and  liabilities  assumed  in  the  transactions  were  allocated  as  follows:   Investment  properties(1)   Total  purchase  price   The  consideration  paid  consists  of:   Cash   Working  capital  adjustments   Net  transaction  costs   Non-­‐controlling  interest   Total  consideration   (1)  Includes  transaction  costs.   Dream  Global  REIT  2014  Annual  Report    |    67   For  the  year   For  the  year   ended   ended   December  31,   December  31,   2014   2013    422,166    422,166     $     $    1,075,558    1,075,558    411,077    2,641    3,849    4,599    422,166     $     $    1,080,279    763    (5,484)    -­‐    1,075,558   $   $   $   $                                                                                                                             Note  7   INVESTMENT  PROPERTIES   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  subsequent  to  2011.   Acquisition  Properties   These  investment  properties  were  acquired  during  2012  to  2014,  consist  of  high-­‐quality  office  buildings  located  in  Germany’s   largest  office  markets  and  are  generally  newer  or  recently  refurbished  buildings.   Total     $    2,390,244     $   Initial   Properties    985,212     $   Acquisition   Properties    1,405,032    422,166      12,730      14,908      449,804      -­‐      9,949      11,085      21,034      422,166    2,781    3,823    428,770    (144)      (144)      -­‐    (573,521)      (161,174)      (734,839)      76,639      (1,458)      75,181      -­‐      (161,174)      (161,318)      (13,186)      (1,247)      (14,433)      (573,521)    -­‐    (573,521)    89,825    (211)    89,614    (100,719)      (100,719)      2,079,671     $    (35,133)      (35,133)      795,362     $    (65,586)    (65,586)    1,284,309    36,405     $    (11,541)     $    47,946   Balance  as  at  January  1,  2014   Purchase  of  investment  properties:     Acquisition  of  properties     Building  improvements   Lease  incentives  and  initial  direct  leasing  costs   Total  additions  to  investment  properties   Disposal  of  investment  properties:   Sales  of  investment  properties   Transfers  to  disposal  groups  classified  as  assets  held  for  sale  –  POBA        joint  venture  assets(1)   Transfers  to  disposal  groups  classified  as  assets  held  for  sale   Total  disposal  of  investment  properties   Gains  and  losses  included  in  net  income:     Change  in  fair  value  of  investment  properties     Amortization  of  lease  incentives   Total  gains  (losses)  included  in  net  income   Gains  and  losses  included  in  other  comprehensive  income:   Foreign  currency  translation  loss   Total  losses  included  in  other  comprehensive  income   Balance  as  at  December  31,  2014   Changes  in  unrealized  gain  (loss)  included  in  net  income  for  the  year  ended          December  31,  2014:     Change  in  fair  value  of  investment  properties   (1)  POBA  joint  venture  refers  to  the  Public  Officials  Benefit  Association  joint  venture.   $   $   Dream  Global  REIT  2014  Annual  Report    |    68                                                                                                                                                                                                                                 Balance  as  at  January  1,  2013   Purchase  of  investment  properties:     Acquisition  of  properties     Building  improvements   Lease  incentives  and  initial  direct  leasing  costs   Total  additions  to  investment  properties   Disposal  of  investment  properties:   Sales  of  investment  properties   Transfers  to  disposal  groups  classified  as  assets  held  for  sale(1)   Total  disposal  of  investment  properties   Losses  included  in  net  income:     Change  in  fair  value  of  investment  properties     Amortization  of  lease  incentives   Total  losses  included  in  net  income   Gains  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   (1)  Of  the  total  transferred  to  assets  held  for  sale,  $21,147  were  subsequently  sold.   $   $   Total     $    1,182,757     $   Initial     Properties      919,814     $   Acquisition   Properties    262,943    1,075,558      5,821      6,055      1,087,434      (23,943)      (21,147)      (45,090)      (57,032)      (616)      (57,648)      -­‐      5,057      5,120      10,177      (23,943)      (21,147)      (45,090)      (5,580)      (530)      (6,110)      1,075,558    764    935    1,077,257    -­‐    -­‐    -­‐    (51,452)    (86)    (51,538)    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,   composed   of   free   rent   and   contractual   rent   increases   accrued   to   rental   revenue,   of   $1,429   (December  31,  2013  –  $1,896)  has  been  included  in  other  non-­‐current  assets.   During  the  year  ended  December  31,  2014,  the  balances  of  the  investment  properties  went  down  by  $310,573,  reflecting  the   reclassification  to  assets  held  for  sale  of  $161,174  and  the  sale  of  Acquisition  Properties  to  POBA,  partially  offset  by  acquisitions   during  the  year  totalling  $422,166.  (Refer  to  Note  6  for  details  of  the  acquisitions.)  Seven  of  the  Acquisition  Properties  were  sold   to  the  POBA  joint  venture  at  a  fair  value  of  $573,521.  The  REIT  retained  a  50%  interest  in  those  entities,  which  is  classified  as  an   investment  in  joint  ventures.  The  REIT  recognized  a  gain  of  $46,337  on  the  sale  transaction.  (Refer  to  Note  9  for  details  on  joint   arrangements.)     During  the  year  ended  December  31,  2014,  the  fair  value  of  the  Acquisition  Properties  increased  by  $110,691,  partially  reduced   by  a  write-­‐off  of  $20,866  of  capitalized  transaction  costs,  resulting  in  a  net  increase  in  fair  value  adjustments  of  $89,825.  Of  the   increase  in  fair  value,  $41,880  was  recorded  in  Q2  in  relation  to  the  seven  assets  sold  to  POBA.  During  Q3,  the  remaining  assets   in  the  Acquisition  Properties  not  part  of  the  POBA  sale  increased  in  value  by  $57,595.  During  Q4,  the  fair  value  of  the  Acquisition   Properties  increased  by  a  further  $11,216.  During  the  year  ended  December  31,  the  fair  value  of  the  Initial  Properties  decreased   by  $13,186.   During  the  year  ended  December  31,  2014,  the  REIT  disposed  of  35  investment  properties  that  were  acquired  in  2011  as  part  of   the  Initial  Properties,  five  of  which  were  reclassified  as  assets  held  for  sale  as  at  December  31,  2013.  Net  proceeds  of  $126,425   (December  31,  2013  –  $22,801)  were  received  on  these  sales  and  a  loss  on  sale  of  $4,464  (December  31,  2013  –  $1,142)  related   to   the   transaction   costs   incurred   was   recorded.   As   at   December   31,   2014,   the   REIT   entered   into   binding   purchase   and   sale   agreements   to   sell   12   additional   properties   valued   at   $42,897   and   these   properties   have   been   reclassified   as   assets   held   for   sale.  In  total,  The  REIT  also  recorded  a  fair  value  loss  of  $4,392  on  these  properties.  (Refer  to  Note  18  for  details  on  the  assets   held  for  sale.)   Dream  Global  REIT  2014  Annual  Report    |    69                                                                                                                                                                                                           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,   2014(1)    142,033    390,571    168,727   $    701,331   Fair  value  hierarchy   Investment  properties  measured  at  fair  value  in  the  consolidated  balance  sheets  are  categorized  by  level  according  to  the   significance  of  the  inputs  used  in  making  the  measurements.   Recurring  measurements   Investment  properties   Initial  Properties   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)   December  31,     2014     $   $   $    795,362     $    1,284,309      2,079,671     $    -­‐     $    -­‐      -­‐     $    -­‐     $    -­‐      -­‐     $    795,362    1,284,309    2,079,671    42,897     $    -­‐     $    42,897     $    -­‐   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.   For   the   year   ended   December   31,   2014,   investment   properties   valued   at   $42,897  were  transferred  out  of  Level  3  fair  value  measurements  to  Level  2  fair  value  measurements  as  these  properties  were   under  contract  for  sales  during  the  year.     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   methods,  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   consolidated   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   $1,284,309   (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.   Dream  Global  REIT  2014  Annual  Report    |    70                                                                                                                                                         Investment  properties  with  a  value  of  $795,362  (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  ten-­‐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   ten-­‐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.       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   1.4%   to   2.0%.   The   weighted   average   growth   rate   used   for   the   Initial   Properties   is   1.7%.   Valuation  processes   Initial  Properties   At  December  31,  2014  and  2013,  the  REIT  obtained  external  valuations  for  the  Initial  Properties  including  assets  held  for  sale,   representing  approximately  39%  of  the  investment  property  portfolio.  In  2014,  properties  with  a  value  of  $838,259  (€597,136)   were   valued   externally   (2013   –   $1,006,359   [€686,700]).   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   Annual  cash  flow   Range   5.0%–25.7%   4.0%–20.0%   n/a   December  31,  2014    Weighted  average   8.4%   7.3%    58,370     $   If  both  the  discount  rate  and  exit  capitalization  rate  were  to  increase  by  25  bps,  the  value  of  Initial  Properties  would  decrease  by   $35,080.   If   both   the   discount   rate   and   exit   capitalization   rate   were   to   decrease   by   25   bps,   the   value   of   the   Initial   Properties   would  increase  by  $38,096.   Acquisition  Properties   At  December  31,  2014  and  2013,  the  REIT  performed  internal  valuations  for  Acquisition  Properties.  In  2014,  properties  with  a   value  of  $1,284,309  (€914,880)  were  subject  to  internal  valuations  (2013  –  $1,405,032  [€958,739]).  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   Annual  cash  flow   Range   4.7%–7.7%   n/a   December  31,  2014     Weighted  average   6.2%    83,140     $   If   the   capitalization   rate   were   to   increase   by   25   bps,   the   value   of   Acquisition   Properties   would   decrease   by   $52,067.   If   the   capitalization  rate  were  to  decrease  by  25  bps,  the  value  of  Acquisition  Properties  would  increase  by  $56,699.   Dream  Global  REIT  2014  Annual  Report    |    71                                     Note  8   AMOUNT  IN  ESCROW  AND  DEFERRED  RENT   Amount  in  escrow   Deferred  rent     December  31,     December  31,     $   2014      -­‐      -­‐     $   2013    6,220    6,220   Note  9   JOINT  ARRANGEMENTS   The  Trust  participates  in  partnerships  (“joint  ventures”)  with  other  parties  that  own  investment  properties  and  accounts  for  its   interests  using  the  equity  method.   During  Q3  2014,  the  REIT  entered  into  a  joint  venture  agreement  with  POBA  to  sell  a  50%  interest  in  seven  of  the  Acquisition   Properties,  which  were  each  held  in  separate  subsidiaries.  The  closings  were  completed  in  three  tranches  over  the  course  of  Q4   2014.  Pursuant  to  this  arrangement,  the  REIT  no  longer  has  control  of  these  property  subsidiaries  and  as  such,  has  classified  its   50%   interest   in   each   of   these   entities   as   investments   in   joint   ventures   and   accounted   for   the   investment   using   the   equity   method.   As   a   result,   seven   Acquisition   Properties   valued   at   $573,521   and   the   related   mortgages   valued   at   $314,454   were   derecognized  at  December  31,  2014.   The  total  consideration  to  the  REIT  for  the  50%  interest  in  the  investment  properties  was  $311,326.  The  consideration  consisted   of  the   assumption   of  working  capital  of  $2,246,  POBA  assuming   50%  of  the  outstanding  mortgages,  which  totalled  $157,227,   with   the   balance   of   $156,345   paid   to   the   REIT   in   cash.   The   REIT   incurred   transaction   costs   of   $4,456   relating   to   the   sale,   resulting  in  net  proceeds  to  the  REIT  of  $151,889.     In  selling  a  50%  interest  in  the  seven  properties,  the  REIT  and  POBA  entered  into  a  co-­‐ownership  arrangement  regarding  these   assets.  Under  these  circumstances,  IFRS  requires  the  REIT  to  derecognize  the  assets  and  record  the  gain  that  accrued  prior  to   selling   control   on   100%   of   the   assets   sold.   The   purchase   price   consideration   paid   by   POBA   and   the   fair   value   of   the   REIT’s   retained  interest  in  the  joint  venture  exceeded  the  carrying  value  of  the  net  assets  held  within  each  subsidiary  entity.  As  such,   the  REIT  recorded  a  gain  on  the  sale  of  $46,337,  including  $3,099  of  deferred  tax  gain  and  net  of  transaction  costs  of  $4,456.  Of   this  total  gain,  $25,570  relates  to  remeasuring  the  retained  interest  in  the  joint  venture  at  fair  value.  As  at  December  31,  2014,   the   carrying   value   of   the   investment   in   the   POBA   joint   venture   is   $159,807,   which   includes   the   fair   value   remeasurement     of  $25,570.   As   part   of   the   arrangement   with   POBA,   the   REIT   has   extended   a   loan   facility   to   POBA   to   fund   POBA’s   share   of   the   loan   amortization  payments  over  the  term  of  the  outstanding  mortgages  assumed   on   the  seven  properties.  The  REIT   has  received   prepaid  interest  of  $2,807,  which  will  be  amortized  over  the  term  of  the  respective  mortgages.  In  addition,  POBA  will  pay  the   REIT  the  interest  savings  on  its  50%  share  of  the  interest  saved  from  the  loan  amortization  payments.  The  balance  of  the  loan   facility  outstanding  at  the  time  of  maturity  of  the  respective  mortgages  is  due  and  payable  to  the  REIT.   Under  the  terms  of  the  POBA  joint  venture  agreement,  the  REIT  terminated  an  asset  management  agreement  that  was  in  place   on   certain   Acquisition   Properties,   including   three   POBA   joint   venture   assets,   and   paid   a   cancellation   fee.   The   portion   of   the   cancellation   fee   relating   to   the   non-­‐POBA   joint   venture   assets   has   been   recorded   as   a   contract   termination   fee   for   $510   and   included  in  the  statements  of  income  and  comprehensive  income.   The  investment  properties  that  the  joint  ventures  hold  are  consistent  in  terms  of  the  class  and  type  of  properties  held  in  the   Trust’s  portfolio.   Dream  Global  REIT  2014  Annual  Report    |    72                 Name   POBA  joint  venture   Löwenkontor     Vordernbergstrasse  6/Heilbronner  Strasse  35  (Z-­‐UP)   Speicherstrasse  55  (Werfthaus)     Derendorfer  Allee  4–4a  (doubleU)     Neue  Mainzer  Strasse  28  (K26)     ABC-­‐Strasse  19  (ABC  Bogen)     Marsstrasse  20–22   Lorac  Investment  Management  S.à  r.l.   Location   Berlin,  Germany   Stuttgart,  Germany   Frankfurt,  Germany   Düsseldorf,  Germany   Frankfurt,  Germany   Hamburg,  Germany   Munich,  Germany   Luxembourg,  Luxembourg   Name   Löwenkontor   Vordernbergstrasse  6/Heilbronner  Strasse  35  (Z-­‐UP)   Speicherstrasse  55  (Werfthaus)   Derendorfer  Allee  4–4a  (doubleU)   Neue  Mainzer  Strasse  28  (K26)   ABC-­‐Strasse  19  (ABC  Bogen)   Marsstrasse  20–22   Investment  in  POBA  joint  venture   Lorac  Investment  Management  S.à  r.l.(1)   Total  investment  in  joint  ventures   (1)  The  prior  year  Lorac  balance  is  included  in  other  non-­‐current  assets  on  the  consolidated  balance  sheet.   Name   Löwenkontor   Vordernbergstrasse  6/Heilbronner  Strasse  35  (Z-­‐UP)   Speicherstrasse  55  (Werfthaus)   Derendorfer  Allee  4–4a  (doubleU)   Neue  Mainzer  Strasse  28  (K26)   ABC-­‐Strasse  19  (ABC  Bogen)   Marsstrasse  20–22   Share  of  net  income  from  POBA  joint  venture   Lorac  Investment  Management  S.à  r.l.   Share  of  net  income  from  investment  in  joint  ventures   December  31,   2014   Ownership  interest  (%)     December  31,   2013    50      50      50      50      50      50      50      50      -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    50   Net  assets  at  %  ownership  interest     December  31,   2013    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    203    203   December  31,   2014      21,038     $    11,553      21,064      20,162      28,170      33,830      23,990      159,807      160      159,967     $   Share  of  net  income  (loss)  at     %  ownership  interest   for  year  ended  December  31,   2013    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    -­‐    28    28   2014      1,713     $    (36)      704      202      (217)      (40)      161      2,487      26      2,513     $   $   $   $   $   Dream  Global  REIT  2014  Annual  Report    |    73                                                                                                                         The  following  amounts  represent  100%  and  the  Trust’s  ownership  interest  in  the  assets,  liabilities,  revenues,  expenses  and  cash   flows  in  the  equity  accounted  investments  in  which  the  Trust  participates.   Non-­‐current  assets   Investment  properties   Other  non-­‐current  assets   Current  assets   Amounts  receivable   Prepaid  expenses   Cash   Total  assets   Non-­‐current  liabilities   Debt   Deposits   Current  liabilities   Debt   Amounts  payable  and  accrued  liabilities   Income  tax  payable   Total  liabilities   Net  assets   Investment  properties  revenue   Investment  properties  operating  expenses   Net  rental  income   Other  income     Interest  income  and  other  income   Other  expenses   General  and  administrative   Interest  expense   Fair  value  adjustments  to  investment  properties   Fair  value  adjustments  to  investment  properties   Income  before  income  taxes   Current  income  taxes   Net  income  for  the  year   POBA  joint  venture  December  31,  2014   At  50%   At  100%   $    568,834     $    968      569,802      4,456      56      6,244      10,756      580,558      299,494      292      299,786      5,978      6,222      98      12,298      312,084      268,474     $   $    284,417    484    284,901    2,228    28    3,122    5,378    290,279    149,747    146    149,893    2,989    3,111    49    6,149    156,042    134,237   $   POBA  joint  venture  December  31,  2014   At  50%    1,648    (296)    1,352   At  100%      3,296     $    (592)      2,704      28      28      (412)      (746)      (1,158)      3,406      4,980      (6)      4,974     $   $    14    14    (206)    (373)    (579)    1,703    2,490    (3)    2,487   Dream  Global  REIT  2014  Annual  Report    |    74                                                                                                                                                                                                                           POBA  joint  venture  December  31,  2014   At  50%   At  100%      1,036     $    (500)      (1,896)      (1,360)     $    518    (250)    (948)    (680)   Cash  flow  generated  from  (utilized  in):(1)     Operating  activities   Investing  activities   Financing  activities   $   Decrease  in  cash   (1)  The  decrease  in  cash  reflects  payments  made  by  the  joint  venture  entities  relating  to  working  capital  items  that  were  in  existence  prior  to  the  joint  venture   $   being  formed.     Note  10   OTHER  NON-­‐CURRENT  ASSETS   Other  assets   Fixtures  and  computer  equipment   Straight-­‐line  rent  receivable   Total   Note  11   AMOUNTS  RECEIVABLE     Trade  receivables   Less:  Provision  for  impairment  of  trade  receivables   Trade  receivables,  net   Other  amounts  receivable     Total   December  31,     2014      37      232    1,429    1,698   $   $   $     December  31,     2013    240    152    1,896    2,288     $   December  31,     2014      12,509    (1,165)    11,344    6,111    17,455   $   $     $     $   December  31,   2013    8,071    (655)    7,416    10,733    18,149   As   at   December   31,   2014,   other   amounts   receivable   include   amounts   receivable   from   tenants   in   relation   to   operating   cost   recoveries  of  $2,244  (December  31,  2013  –  $7,358).   The  carrying  amount  of  amounts  receivable  approximates  fair  value  due  to  their  current  nature.  As  at  December  31,  2014,  trade   receivables  of  approximately  $3,599  (December  31,  2013  –  $741)  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  default.   Note  12   DEBT   Mortgage  debt   Convertible  debentures   Term  loan  credit  facility   Total   Less:  Current  portion   Non-­‐current  debt   December  31,   2014    701,325    152,365    374,706    1,228,396    70,514    1,157,882     $     $   December  31,     2013    825,014    150,326    448,972    1,424,312    20,356    1,403,956     $     $   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.   Dream  Global  REIT  2014  Annual  Report    |    75                                                                                                                                                                                                           Mortgage  debt   On  February   14,  2014,  the  Trust  committed  to  a  mortgage  agreement  with  a  principal  balance  of  €8,700   ($13,237)  at  a  fixed   rate  of  1.98%  per  annum,  maturing  on  March  31,  2019,  in  connection  with  the  acquisition  of  Werner-­‐Eckert-­‐Straße  8,  10,  12,   Munich.  The  Trust  received  the  proceeds  of  the  mortgage  on  March  28,  2014.  The  mortgage  requires  quarterly  repayments  with   a  principal  amortization  of  1.75%  per  annum  of  the  initial  loan  amount.       On  March  4,  2014,  the  Trust  committed  to  a  mortgage  agreement  with  a  principal  balance  of  €36,840  ($55,765)  at  a  fixed  rate   of  2.33%  per  annum,  maturing  on  February  26,  2021,  in  connection  with  the  acquisition  of  My  Falkenried  in  Hamburg.  The  Trust   received   the   proceeds   of   the   mortgage   on   April   29,   2014.   The   mortgage   requires   quarterly   repayments   with   a   principal   amortization  of  1%  per  annum  of  the  initial  loan  amount.     On   July   31,   2014,   the   Trust   drew   on   a   mortgage   with   a   principal   balance   of   €28,500   ($41,556)   at   a   fixed   rate   of   1.99%   per   annum,   maturing   on   January   31,   2022,   in   connection   with   the   acquisition   of   Officium   in   Stuttgart.   The   mortgage   requires   quarterly  repayments  with  a  principal  amortization  of  1.6%  per  annum  of  the  initial  loan  amount.       On  September  30,  2014,  the  Trust  committed  to  a  mortgage  agreement  with  a  principal  balance  of  €24,500  ($35,317)  at  a  fixed   rate  of  1.819%  per  annum,  maturing  on  September  30,  2022,  in  connection  with  the  acquisition  of  Europahaus  in  Darmstadt.   The   Trust   received   the   proceeds   of   the   mortgage   on   October   20,   2014.   The   mortgage   requires   quarterly   repayments   with   a   principal  amortization  of  1.00%  per  annum  of  the  initial  loan  amount.       On  November  14,  2014,  the  Trust  drew  on  a  mortgage  with  a  principal  balance  of  €69,100  ($97,500)  at  a  fixed  rate  of  1.77%  per   annum,  maturing  on  November  14,  2024,  in  connection  with  the  acquisition  of  Im  Mediapark  8  (Cologne  Tower),  Cologne.  The   mortgage  requires  quarterly  repayments  with  a  principal  amortization  of  1.6%  per  annum  of  the  initial  loan  amount.       During  the  last  quarter  of  2014,  the  REIT  sold  a  50%  interest  in  seven  Acquisition  Properties  as  part  of  a  joint  venture  agreement   with  POBA.  In  conjunction  with  this  sale,  50%  of  the  mortgage  debt  relating  to  the  seven  assets  was  assumed  by  POBA.  Since   the   investment   in   the   joint   venture   is   equity   accounted,   100%   of   the   debt   on   the   seven   properties   has   been   removed   from   mortgage  debt  in  the  Trust’s  financial  statements.  (Refer  to  Note  9  for  details  on  investment  in  joint  ventures.)   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  sheets   as  debt  of  $152,894   less  costs  of  $6,931.  In  addition,  the  Trust  allocated  $8,106  to  the  conversion  feature  on  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,   2014,  the  outstanding  principal  amount  is  $161,000  (December  31,  2013  –  $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.   Dream  Global  REIT  2014  Annual  Report    |    76   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  was  required  to  pay  the  additional  interest  of  1%  on   the  portion  of  the  €100,000  plus  a  15%  prepayment  amount,  less  any  amounts  repaid.  Additionally,  an  applicable  prepayment   fee  of  0.6%  is  payable  for  repayments  made  prior  to  August  3,  2014  and  0.25%  for  repayments  made  prior  to  August  3,  2015.   No  repayment  fee  is  payable  for  repayments  made  in  the  final  year  of  the  Facility.  During  the  year  ended  December  31,  2014,   the  Trust  repaid  €46,561  ($67,036)  in  connection  with  the  disposed  properties  including  prepayment  amounts,  and  mandatory   repayments,   in   accordance   with   the   terms   of   the   Facility.   For   the   year   ended   December   31,   2012,   the   Trust   repaid   €2,665   ($3,426)   in   connection   with   the   disposition   of   five   properties.   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   and   made   a   lump   sum   repayment  of  €2,000  ($2,772).  As  a  result  of  these  dispositions,  the  €100,000  plus  15%  prepayment  portion  has  been  reduced   to  €53,659  as  at  December  31,  2014,  of  which  €47,986  ($67,363)  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   €53,659  ($75,327),  the  Trust  paid  a  rate  of  4.23%  (December  31,  2013  –  4.24%)  on  the  Fixed  Rate  Portion  of  €261,486  and  a  rate   of  3.23%  (December  31,  2013  –  3.37%)  on  the  €5,673  variable  portion  of  the  Facility  (December  31,  2013  –  €50,921),  resulting  in   a  blended  rate  of  4.21%  as  at  December  31,  2014  (December  31,  2013  –  4.09%).       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.   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.  On  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,  2014,  the  Trust  was  in  compliance  with  its  loan  covenants.     In   addition,   the   Facility   required   that   DAM   and   Dundee   Corporation   combined   maintained   at   least   $120,000   of   equity   in   the   REIT  for  a  two-­‐year  period  until  August  3,  2013   and  continue  to  maintain  at  least  $48,000   of  equity  for   the  remainder  of  the   term   of   the   Facility.   As   at   December   31,   2014,   DAM   and   Dundee   Corporation   combined   are   in   compliance   with   the   requirements.   Revolving  credit  facility   On   October   10,   2013,   the   REIT   entered   into   an   agreement   with   a   Canadian   bank   to   provide   a   revolving   credit   facility   not   to   exceed  €25,000.  The  REIT  increased  the  revolving  credit  facility  to  €50,000  on  August  14,  2014,  with  no  change  to  the  covenants   or  interest  rate  spreads,  and  the  term  has  been  extended  to  September  25,  2016.  The  requirement  to  provide  a  pledge  of  10%   of   outstanding   equity   of   a   subsidiary   as   collateral   has   been   removed.   Instead,   the   REIT   has   provided   a   general   security   agreement.  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  $765  as  at  December  31,  2014.  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  $700,000.   During   the   year,   the   revolving   credit   facility   had   been   drawn   and   repaid   multiple   times   to   bridge   investing   and   mortgage   financing  activities.  As  at  December  31,  2014,  the  outstanding  balance  of  the  credit  facility  was  €nil  ($nil)  and  the  Trust  was  in   compliance   with   the   covenants   of   the   revolving   credit   facility.   As   at   December   31,   2014,   the   Trust   had   an   undrawn   letter   of   credit  in  the  amount  of  $1,684  committed  against  the  credit  facility.   Dream  Global  REIT  2014  Annual  Report    |    77       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,   2013   2014     December  31,   December  31,   2013   2014   Maturity     dates     December  31,     2014     Debt  amount   December  31,     2013   Fixed  rate   Mortgage  debt   Term  loan  credit  facility(1)   Convertible  debentures   Total  fixed  rate  debt   Variable  rate   Term  loan  credit  facility    64,368   Total  variable  rate  debt    64,368    1,424,312   Total  debt   (1)  As  at  December  31,  2014,  98%  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    701,325   $    366,749    152,365    1,220,439    825,014    384,604    150,326    1,359,944    7,957    7,957    1,228,396   $   2015–2024   2016   2018   2.33%   4.23%   5.50%   3.30%   2.49%   4.23%   7.31%   3.61%   2.84%   4.28%   7.31%   3.74%   2.57%   4.24%   5.50%   3.37%   3.22%   3.22%   3.61%   3.23%   3.23%   3.30%   3.40%   3.40%   3.72%   3.37%   3.37%   3.37%   2016     $     $   facility  agreement,  and  has  been  presented  as  fixed  rate  debt.   The  scheduled  principal  repayments  and  debt  maturities  are  as  follows:   Mortgages    32,486    12,511    65,036    146,760    38,730    414,525    710,048    $    $   $   $   Term  loan    38,028    337,010    -­‐    -­‐    -­‐    -­‐    375,038     $     $   Convertible     debentures    -­‐    -­‐    -­‐    161,000    -­‐    -­‐    161,000   Total    70,514    349,521    65,036    307,760    38,730    414,525    1,246,086    (4,682)    (13,008)    1,228,396     $     $   2015   2016   2017   2018   2019   2020  and  thereafter   Acquisition  date  fair  value  adjustments   Transaction  costs   Note  13   DERIVATIVE  FINANCIAL  INSTRUMENTS   Interest  rate  swaps  (Note  26)   Interest  rate  cap  (Note  26)   Foreign  exchange  forward  contracts  (Note  26)   Conversion  feature  of  the  Debentures  (Notes  12  and  26)   Total   Less:  Current  portion   Non-­‐current  portion   December  31,     2014   December  31,     2013   $    10,623     $    13,764    -­‐    1,492    158    12,273    8,853   $    3,420     $    (18)    15,941    384    30,071    13,772    16,299   For  the  year  ended   December  31,   2014     $     $    384    (226)    158   The  movement  in  the  conversion  feature  on  the  convertible  debentures  was  as  follows:   Balance  at  beginning  of  year   Remeasurement  of  conversion  feature   Balance  at  end  of  year   Dream  Global  REIT  2014  Annual  Report    |    78                                                                                                                                                                                                                                                                                                                                                                                                                                                 Foreign  currency  contracts   The  Trust  has  various  currency  forward  contracts  in  place  to  sell  euros  for  Canadian  dollars  for  the  next  36  months.  The  Trust   currently   has   foreign   exchange   forward   contracts   to   sell   €121,166   total   from   January   2015   to   December   2017   at   an   average   exchange  rate  of  $1.417  per  euro.     Note  14   DEFERRED  UNIT  INCENTIVE  PLAN   The  movement  in  the  Deferred  Unit  Incentive  Plan  balance  was  as  follows:   As  at  January  1,  2013   Compensation  during  the  year   Asset  management  fees  during  the  year   Issue  of  deferred  units   Remeasurements  of  carrying  value   As  at  December  31,  2013   Compensation  during  the  year   Asset  management  fees  during  the  year   Issue  of  deferred  units   Remeasurements  of  carrying  value   As  at  December  31,  2014   $   $    3,629    1,313    2,113    (164)    (585)    6,306    1,648    2,541    (793)    (337)    9,365   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.   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.   The   fair   value   of   the   deferred   trust   units   is   based   on   the   market   price   of   Dream   Global   REIT   units   and   the   application   of   an   appropriate   discount   rate   to   reflect   the   vesting   period.   The   significant   unobservable   inputs   used   in   determining   the   discount   include  the  following:   Risk-­‐free  rate   Expected  volatility   2014   1.3%–1.5%   27%   2013   2.0%–2.3%   28%   The  volatility  of  the  units  is  estimated  based  on  comparable  companies  in  both  the  German  and  Canadian  real  estate  markets.   The   discount   rate   used   to   value   the   deferred   trust   units   is   determined   by   a   put-­‐and-­‐call   model   calculated   using   the     Black  Scholes  option   pricing   model.  A  higher  volatility  or  risk-­‐free  rate  will  decrease  the  value  of  the  deferred   trust  units  and   vice  versa.   Dream  Global  REIT  2014  Annual  Report    |    79                       Units  at  December  31,  2014,  closing  price  of  $8.57  per  unit   Discount  rate  of  24%  per  unit  for  units  issued  in  2011   Discount  rate  of  25%  per  unit  for  units  issued  in  2012   Discount  rate  of  46%  per  unit  for  units  issued  in  2013   Discount  rate  of  49%  per  unit  for  units  issued  in  2014   Units  at  December  31,  2013,  closing  price  of  $8.42  per  unit   Discount  rate  of  35%  per  unit  for  units  issued  in  2011   Discount  rate  of  37%  per  unit  for  units  issued  in  2012   Discount  rate  of  38%  per  unit  for  units  issued  in  2013   Fair  value  as  at  December  31,  2014    11,695   $    (244)    (771)    (1,576)    (2,043)    7,061   $   Fair  value  as  at  December  31,  2013    7,680   $    (345)    (1,113)    (1,403)    4,819   $   During   the   year   ended   December   31,   2014,   $2,541   of   asset   management   fees   were   recorded   (December   31,   2013   –   $2,113)   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   422,171   deferred   trust   units   during  the  year  (December  31,  2013  –  373,160)  and  30,410  deferred  trust  units  granted  on  January  1,  2015  (January  1,  2014  –   34,031).  As  at  January  1,  2014,  1,364,659  unvested  deferred  trust  units  and  income  deferred  units  (January  1,  2014  –  912,078)   were  outstanding  with  respect  to  the  asset  management  fee.  Compensation  expense  of  $1,648  for  the  period  (December  31,   2013  –  $1,313)  was  also  included  in  general  and  administrative  expenses.   On   February   26,   2014,   110,300   deferred   trust   units   were   granted   to   senior   management   and   trustees.   Of   the   110,300   units   granted,  67,000  relate  to  trustees  and  key  management  personnel.  The  grant  date  value  for  the  deferred  trust  units  of  the  grant   was  $8.88.   On   May   7,   2014,   26,000   deferred   trust   units   were   granted   to   trustees   and   an   additional   23,723   deferred   trust   units   were   granted  to  trustees  who  elected  to  receive  their  2014  annual  retainer  in  the  form  of  deferred  units  rather  than  cash.   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  15   AMOUNTS  PAYABLE  AND  ACCRUED  LIABILITIES   Trade  payables   Accrued  liabilities  and  other  payables   Accrued  interest   Total   December  31,     December  31,   2014    11,473    34,253    3,759    49,485     $     $   2013    9,447    19,589    3,904    32,940   $   $   Dream  Global  REIT  2014  Annual  Report    |    80                                             Note  16   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,  2013  (December  31,  2012)   Plus:  Payable  at  December  31,  2014  (December  31,  2013)   Total   $     $   2014    73,795    15,222    (7,314)    7,431   2013    67,530    10,145    (4,816)    7,314   $    89,134     $    80,173   The   distribution   for   the   month   of   December   2014   in   the   amount   of   $0.0667   per   unit,   declared   on   December   17,   2014   and   payable  on  January  15,  2015,  amounted  to  $7,431.  The  amount  payable  as  at  December  31,  2014  was  satisfied  on  January  15,   2014   by   $6,301   cash   and   $1,130   through   the   issuance   of   128,771   Units.   The   distribution   for   the   month   of   January   2015   was   declared  in  the  amount  of  $0.0667  per  unit,  payable  on  February  15,  2015.   The  Trust  declared  distributions  of  $0.0667  per  unit  per  month  for  the  months  of  January  2014  to  December  2014.   Note  17   EQUITY   Total   December  31,  2014     December  31,  2013   Number  of  Units     111,466,697     $   Amount    1,120,220     Number  of  Units   109,698,977     $   Amount    1,034,005   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.   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,   2014,   1,677,622   Units   were   issued   pursuant   to   the   DRIP   for   $15,222     (December  31,  2013  –  1,066,792  Units  for  $10,145).   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,  2014,  3,683  Units  were  issued  under  the  Unit  Purchase  Plan  for  $34  (December  31,  2013  –  7,059  Units  for  $72).   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  on  vesting.   Up  to  a  maximum  of  2,074,000  deferred  trust  units  are  issuable  under  the  DUIP.   For  the  year  ended  December  31,  2014,  86,415  Units  were  issued  to  trustees,  officers  and  employees  pursuant  to  the  DUIP  for   $793  (December  31,  2013  –  17,632  Units  for  $164).   Dream  Global  REIT  2014  Annual  Report    |    81                                         Note  18   ASSETS  HELD  FOR  SALE   As  at  December  31,  2014,  the  Trust  classified  12  properties  as  held  for  sale.  Management  has  committed  to  a  plan  of  sale,  and   therefore,  the  properties  have  been  reclassified  as  current  assets  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   Investment  properties  held  for  sale   Balance  at  beginning  of  year   Building  improvements   Lease  incentives  and  initial  direct  leasing  costs   Investment  properties  reclassified  as  held  for  sale   Investment  properties  reclassified  as  held  for  sale  –  POBA  joint  venture  assets   Fair  value  adjustments   Disposals   Disposals  –  POBA  joint  venture  assets   Foreign  currency  translation   Balance  at  end  of  year   Note  19   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   Standby  fees  on  revolving  credit  facility   Amortization  of  financing  costs,  discounts  and  fair  value  adjustments  on  acquired  debt   Interest  expense   December  31,   2014    42,897    1    1,465    44,363    -­‐    (1,424)    (1,424)    42,939    $    $   December  31,   2013    21,147    13    46    21,206    (10,106)    (4,977)    (15,083)    6,123   $   $   For  the  year     ended   December  31,   2014      21,147     $    11      (131)      161,174      573,521      (4,392)      (130,746)      (573,521)      (4,166)      42,897     $   For  the  year     ended   December  31,   2013    -­‐    -­‐    -­‐    21,147    -­‐    -­‐    -­‐    -­‐    -­‐    21,147       $       $   Year  ended  December  31,   2014    11,972    8,862    22,371    835    4,158    48,198     $     $   2013    10,940    8,862    15,114    333    3,257    38,506   $   $   Dream  Global  REIT  2014  Annual  Report    |    82                                                                                                                                                                                                                                                                                                                 Note  20   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  on  Deferred  Unit  Incentive  Plan   Fair  value  gain  (loss)  on  foreign  exchange  forward  contracts   Note  21   INCOME  TAXES   Reconciliation  of  tax  expense   Income  before  income  taxes   Income  attributable  to  shareholders  of  subsidiaries   Income  before  income  taxes  attributable  to  Unitholders  of  the  Trust   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   Impact  from  sale  of  assets       Other  items   Provision  for  (recovery  of)  income  taxes   Deferred  income  tax  assets  (liabilities)  consist  of  the  following:   Deferred  tax  asset  (liability)  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   Deferred  tax  liability  related  to  investment  in  joint  venture   Total  deferred  income  tax  assets  (liabilities)   $   Year  ended  December  31,     $   2014    (3,898)    226    337    6,391   2013    226    3,761    585    (16,022)   $    3,056     $    (11,450)   Year  ended  December  31,   2014   2013    20,620    225,996   (909)    -­‐   20,620   225,087    3,263   35,620     $    436    (526)    (9,710)    (110)    (8,488)    (163)    17,059     $    424    (546)    (5,286)    (33)   -­‐    33    (2,145)   December  31,     December  31,     2014      (14,619)    2,110    11,443    390    (43)    (719)     $     $   2013    1,813    3,001    6,744    755    -­‐    12,313   $   $   $   $   Dream  Global  REIT  2014  Annual  Report    |    83                                                                                                                                             Note  22     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.   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  year  and  the  corresponding  expense  is  recognized  during  the  year.  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   expenses   during  the  year  as  they  relate  to  services  provided  during  the  year,  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   option   pricing   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,  2014,  the  REIT  recognized  $7,432  (year  ended  December  31,  2013  –  $5,438)  in  relation  to   asset   management   fees   under   the   Asset   Management   Agreement   with   DAM,   which   is   included   in   general   and   administrative   expenses.  Of  this  total,  $2,541  (year  ended  December  31,  2013  –  $2,113)  was  payable  in  deferred  trust  units  and  $4,891  (year   ended  December  31,  2013  –  $3,325)  was  payable  in  cash.  As  at  January  1,  2015,  1,364,659  (January  1,  2014  –  912,077)  deferred   trust   units   and   income   deferred   trust   units   were   granted   under   this   agreement   and   remained   unvested.   The   REIT   also   paid   $2,845   for   asset   acquisition   fees   incurred   on   acquisitions   completed   in   the   year   ended   December   31,   2014   (year   ended   December   31,   2013   –   $5,892),   which   were   capitalized   as   acquisition   costs   and   then   written   off   on   remeasurement   of   the   investment  properties.  The  REIT  also  incurred  $421  in  financing  fees  related  to  the  mortgage  financing  service  during  the  year   (year  ended  December  31,  2013  –  $518).  The  fees  were  either  charged  to  prepaid  financing  costs  or  deferred  financing  costs   and  amortized  over  the  term  of  the  mortgage  financing.  During  the  year  ended  December  31,  2014,  the  REIT  also  reimbursed   DAM   for   out-­‐of-­‐pocket   and   incidental   costs   of   $585,   pursuant   to   the   terms   of   the  Asset   Management   Agreement,   which   has   been  included  in  general  and  administrative  expenses.   Dream  Global  REIT  2014  Annual  Report    |    84   Included   in   amounts   payable   as   at   December   31,   2014   is   $3,871   (December   31,   2013   –   $2,523)   related   to   the   Asset   Management  Agreement  with  DAM.  Included  in  amounts  receivable  as  at  December  31,  2014  is  $1,185  (December  31,  2013  –   $nil)  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,   2014,   the   Trust   recorded   an   amount   of   $240   payable   to   DAM   pursuant   to   the   Shared   Services  and  Cost  Sharing  Agreement.   The  Trust’s  future  commitment  under  the  Shared  Services  and  Cost  Sharing  Agreement  over  the  next  six  years  is  $1,160.   Non-­‐controlling  interest  and  notes  receivables   DAM  has  co-­‐invested  with  the  Trust  in  properties  with  their  share  of  interest  ranging  from  0.26%  to  5.2%.  At  the  year  ended   December   31,   2014,   the   non-­‐controlling   interest   and   net   income   attributable   to   DAM   amounted   to   $6,195   and   $909,   respectively.  As  part  of  the  co-­‐investing  transactions,  the  Trust  provided  interest  bearing  loans  to  DAM  for  financing  its  equity   interests,  bearing  interest  at  8.5%  per  annum  for  a  ten-­‐year  term.  At  the  year  ended  December  31,  2014,  the  notes  receivable   outstanding  and  interest  accrued  amounted  to  $4,930  and  $111,  respectively.   Note  23   SUPPLEMENTARY  CASH  FLOW  INFORMATION   Increase  (decrease)  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   $   $   $     $   Year  ended  December  31,   2014   2013    (1,701)    5,640    2,365    (1,968)    899    7,222    1,005    198    2,568    11,092     $   Year  ended  December  31,   2013   2014    35,306    44,175     $   Note  24     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.   Dream  Global  REIT  2014  Annual  Report    |    85                                       As  at  December  31,  2014,  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   $   $    730    1,151    -­‐    1,881   During   the   year   ended   December   31,   2014,   the   Trust   paid   $885   in   minimum   lease   payments,   respectively,   which   have   been   included  in  comprehensive  income  for  the  year.   The  REIT  also  has  commitments  for  lease  incentives  and  initial  direct  leasing  costs  of  approximately  $3,195.   Note  25     CAPITAL  MANAGEMENT   At  December  31,  2014,  the  Trust’s  capital  consists  of  debt  and  unitholders’  equity.  The  primary  objective  of  the  Trust’s  capital   management   is   to   ensure   it   remains   within   its   quantitative   banking   covenants   as   well   as   to   ensure   the   Trust   can   meet   its   obligations  and  continue  to  grow.  Specifically,  the  Trust  intended  to  ensure  adequate  operating  funds  are  available  to  maintain   consistent  and  sustainable  unitholder  distributions,  to  fund  capital  expenditure  requirements  and  to  meet  debt  obligations.   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.     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   ratios   include   the   proportion   of   distributions   paid   in   cash,   DRIP   participation  ratio,  and  total  distributions  as  a  percentage  of  adjusted  funds  from  operations  (“AFFO”).   The   Trust   monitors   debt   capital   primarily   using   a   debt-­‐to-­‐book   value   ratio,   which   is   calculated   as   the   amount   of   outstanding   debt  divided  by  total  assets.  During  the  year,  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,  which  relates  only  to  the  Initial  Properties,   requires  the  debt  service  coverage  ratio  to  be  equal  to  or  above  145%  at  each  interest  rate  payment  date  as  well  as  debt-­‐to-­‐ book  value  ratio  not  to  exceed  59%.  For  the  year  ended  December  31,  2014,  the  REIT’s  debt  service  coverage  ratio  was  258%,   and  the  debt-­‐to-­‐book  value  ratio  was  44%,  and  therefore,  in  compliance  with  the  term  loan  credit  facility’s  requirement.     Note  26     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.   Dream  Global  REIT  2014  Annual  Report    |    86       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   twelve-­‐month   period.   A   1%   change   is   considered   a   reasonable   level   of   fluctuation   on   variable   rate   assets  and  debts.     Carrying   amount   Income   -­‐1%   Equity   Interest  rate  risk   1%   Equity   Income   Financial  assets   Cash(1)   Financial  liabilities   Term  loan  credit  facility   $   $    121,939     $    (1,219)     $    (1,219)     $    1,219     $    1,219    7,957     $    80     $    80     $    (80)     $    (80)   (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  year-­‐ end,  and  comprehensive  income  is  translated  at  the  average  rate  for  the  year.  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  has  various   currency  forward  contracts  in  place  to  sell  euros  for  Canadian  dollars  for  the  next  36  months.  The  Trust  currently  has  foreign   exchange   forward   contracts   to   sell   €121,166   total   from   January   2015   to   December   2017   at   an   average   exchange   rate   of     $1.4175  per  euro.     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,  2014:   Interest  rate  swaps   Interest  rate  cap   Notional    367,074    46,115    413,189   $   $   Rate   4.05%   5.00%   Maturity   2016   2016   Carrying  value    (10,623)    -­‐    (10,623)     $   $   Dream  Global  REIT  2014  Annual  Report    |    87                                                                                                                                                                                     Foreign  currency  derivatives   The   following   table   provides   details   on   foreign   currency   forward   contracts   outstanding   as   at   December   31,   2014   and     December  31,  2013:   Hedging  currency   Euro   Hedging  currency   Euro   €   €   Notional  amount  of   future  contracts     Blended  exchange  rate   Forward  contracts     start  date   Forward  contracts     end  date     Carrying  value    121,166    1.417   January  15,  2015     December  15,  2017   $    (1,492)   For  the  year  ended  December  31,  2014   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   $    (3,715)   For  the  year  ended  December  31,  2013   Fair  value  measurements   The   following   tables   summarize   fair   value   measurements   recognized   in   the   consolidated   balance   sheets   or   disclosed   in   the   Trust’s  consolidated  financial  statements  by  class  of  asset  or  liability  and  categorized  by  level  according  to  the  significance  of  the   inputs  used  in  making  the  measurements.   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   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,  2014   Level  1   Fair  value  as  at  December  31,  2014   Level  3   Level  2   $   $    (10,623)      (1,492)      (158)      (701,325)      (152,365)      -­‐      -­‐      -­‐      -­‐      -­‐     $   $    (10,623)      (1,492)      -­‐      -­‐    -­‐    (158)    -­‐      -­‐      (722,208)    (160,037)   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)   Amounts   receivable,   amounts   in   escrow,   cash,   the   Deferred   Unit   Incentive   Plan,   deposits,   amounts   payable   and   accrued   liabilities,  income  taxes  payable  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  year.     Valuation  processes   The   REIT’s   management   is   responsible   for   determining   fair   value   measurements   included   in   the   consolidated   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.     Dream  Global  REIT  2014  Annual  Report    |    88                                                                                                                                                                                                                                                                                                                                                                         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.   The   implied   floating   rates   ranged   from   0.05%   to   0.08%,   and   the   discount   rate   applied   ranged   from   0.06%  to  0.07%.   A  higher  implied  floating  rate  will  decrease  the  value  of  the  interest  rate  derivatives.     The  following  table  shows  the  changes  in  fair  value  of  the  interest  rate  derivatives  from  a  5%  increase  or  5%  decrease  in  implied   floating  rates,  all  other  inputs  being  constant:   Increase/(decrease)  in  fair  value  as  at  December  31,  2014   Impact  of  change  to  implied  floating  rates     Decrease  -­‐5%    19   Increase  +5%    (19)     $   $   Foreign  currency  derivatives   The   fair   value   of   foreign   currency   derivatives   was   determined   using   forward   exchange   market   rates   ranging   from   $1.404   to   $1.465  to  €1  at  the  measurement  date,  with  the  resulting  value  discounted  back  to  present  value  using  the  risk-­‐free  Canadian   bond  rate  of  1%,  plus  a  credit  spread  of  411  basis  points.   A  higher  forward  exchange  market  rate  will  increase  the  value  of  the  foreign  currency  derivatives.   The  following  table  shows   the  changes   in  fair  value  of  the  foreign  currency   derivatives  from  a  5%  increase  or  5%  decrease  in   forward  exchange  market  rates,  all  other  inputs  being  constant:   Increase/(decrease)  in  fair  value  as  at  December  31,  2014   Impact  of  change  to  forward  exchange  market  rates     Decrease  -­‐5%    (8,104)    8,104     $   Increase  +5%   $   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  or  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.   The  significant  unobservable  inputs  used  in  the  fair  value  measurement  of  the  conversion  feature  of  the  convertible  debentures   as  at  December  31,  2014  are  the  following:   • Volatility:  Expected  volatility  as  at  December  31,  2014  was  derived  from  the  historical  prices  of  the  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,  2014.  The  volatility  used  was  17.2724%.   • Credit   spread:   The   credit   spread   of   the   convertible   debentures   was   imputed   from   the   traded   price   of   the   convertible   debenture  as  at  December  31,  2014.  The  credit  spread  used  was  4.1092%.   A   higher   volatility   will   increase   the   value   of   the   conversion   feature.   A   lower   credit   spread   will   decrease   the   value   of   the   conversion  feature.     Dream  Global  REIT  2014  Annual  Report    |    89                               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,  2014   $    578     $    (151)     $   Impact  of  change  to  volatility     Decrease  -­‐5%   Increase  +5%   Increase  +1%   Impact  of  change  in  credit  spread     Decrease  -­‐1%    (1,712)    79     $   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,   2014   has  been   calculated  by  discounting  the  expected  cash  flows  of   each  debt  using  discount  rates  ranging  from  1.235%  to  2.660%.  The  discount  rates  are  determined  using  the  six-­‐month  EURIBOR   rate  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  27     SUBSEQUENT  EVENTS   On  January  30,  2015,  the  REIT  closed  the  sale  of  a  property  to  a  joint  venture  with  POBA.  The  property  was  Officium,  located  in   Stuttgart,  and  the  sale  resulted  in  net  proceeds  of  €11,527.   On   February   6,   2015,   the   REIT   completed   the   acquisition   of   an   office   building,   Millerntorplatz   in   Hamburg,   Germany,   for   €95,944,  excluding  transaction  costs.  The  acquisition  was  partially  financed  by  a  new  mortgage  of  €59,400  with  a  fixed  interest   rate  of  1.71%  for  a  term  of  ten  years.   Dream  Global  REIT  2014  Annual  Report    |    90                         Appendix   Address   Acquisition  Properties:   Im  Mediapark  8   Karl-­‐Martell-­‐Straße  60   Liebknechtstraße  33/35,  Heßbrühlstraße  7     Feldmuhleplatz  1+15   Greifswalder  Str.  154-­‐156   Straßenbahnring  15,  17-­‐19/Hoheluftchausee  18-­‐20/   Lehmweg  8,  8a,  7   Moskauer  Str.  25-­‐27   Podbielskistraße  158-­‐168   Robert-­‐Bosch-­‐Str.  9-­‐11   Cäcilienkloster  2,  6,  8,  10   Hammer  Str.  30-­‐34   Oasis  III   Schlossstr.  8   Leopoldstr.  252   Beuthstraße  6-­‐8/Seydelstraße  2-­‐5   Westendstr.  160-­‐162/Barthstr.  24-­‐26   Bertoldstr.  48/Sedanstr.  7   Marsstraße  20-­‐22   Am  Sandtorkai  37   Reichskanzler-­‐Müller-­‐Str.  21-­‐25   Am  Stadtpark  2   Dillwächterstr.  5/Tübinger  Str.  11   ABC-­‐Str.  19   Speicherstr.  55   Derendorfer  Allee  4   Werner-­‐Eckert-­‐Straße  8-­‐12   Neue  Mainzer  Str.  28   Lörracher  Str.  16/16a   Vordernbergstr.  6/Heilbronner  Str.  35   Total  Acquisition  Properties   Initial  Properties:   Grüne  Str.  6-­‐8/Kurfürstenstr.  2   Am  Hauptbahnhof  16-­‐18   Poststr.  4-­‐6/Göbelstr.  30,  Bismarckstr.  156   H-­‐v-­‐Stephan-­‐Str.  1-­‐15/W-­‐Brandt-­‐Pl.  13   Kurfürstenallee  130   Gradestr.  22   Karlstal  1-­‐21/Werftstr.  201   Franz-­‐Zebisch-­‐Str.  15   E.-­‐Kamieth-­‐Str.  2b   Überseering  17/Mexikoring  22   Am  Neumarkt  40/Luetkensallee  49   City   Köln   Nürnberg   Stuttgart   Düsseldorf   Berlin   Hamburg   Düsseldorf   Hannover   Darmstadt   Köln   Hamburg   Stuttgart   Hamburg   München   Berlin   München   Freiburg   München   Hamburg   Mannheim   Nürnberg   München   Hamburg   Frankfurt     Düsseldorf   München   Frankfurt   Freiburg   Stuttgart   Dortmund   Saarbrücken   Darmstadt   Mannheim   Bremen   Hannover   Kiel   Weiden   Halle   Hamburg   Hamburg   State   Nordrhein-­‐Westfalen   Bavaria   Baden-­‐Württemberg   Nordrhein-­‐Westfalen   Berlin   Hamburg   Nordrhein-­‐Westfalen   Niedersachsen   Hessen   Nordrhein-­‐Westfalen   Hamburg   Baden-­‐Württemberg   Hamburg   Bavaria   Berlin   Bavaria   Baden-­‐Württemberg   Bavaria   Hamburg   Baden-­‐Württemberg   Bavaria   Bavaria   Hamburg   Hessen   Nordrhein-­‐Westfalen   Bavaria   Hessen   Baden-­‐Württemberg   Baden-­‐Württemberg   Nordrhein-­‐Westfalen   Saarland   Hessen   Baden-­‐Württemberg   Bremen   Niedersachsen   Schleswig-­‐Holstein   Bavaria   Sachsen-­‐Anhalt   Hamburg   Hamburg   Owned  GLA    (sq.  ft.)     Occupancy     (Dec.  31,  2014)   296,693   268,931   267,901   246,376   242,779   221,391   217,173   211,882   209,357   200,915   172,306   170,120   165,534   154,773   129,179   122,102   121,553   115,322   113,391   100,603   94,652   81,907   79,218   75,911   71,114   64,727   61,641   56,582   44,317   4,378,348   299,567   293,737   232,300   227,298   203,949   195,783   180,837   166,601   161,156   160,785   160,397   100%   100%   88%   100%   98%   100%   97%   90%   100%   99%   100%   100%   97%   99%   99%   98%   100%   100%   99%   98%   100%   87%   100%   100%   99%   100%   95%   100%   100%   97.9%   100%   12%   82%   96%   93%   4%   96%   100%   39%   93%   89%   Dream  Global  REIT  2014  Annual  Report    |    91                                         Address   Bahnhofstr.  82-­‐86   Czernyring  15   Marienstr.  80   Rüppurrer  Str.  81,  87,  89/Ettlinger  67   Gerokstr.  14-­‐20   Hindenburgstr.  9/Heeserstr.  5   Zimmermannstr.  2/Eisenstr.   Friedrich-­‐Karl-­‐Str.  1-­‐7   Blücherstr.  12   Kaiserstr.  24   Bahnhofsplatz  2,  3,  4/Pepperworth  7   Klubgartenstr.  10   Pausaer  Str.  1-­‐3   Am  Hauptbahnhof  2   Bahnhofstr.  33   Husemannstr.  1   Kapellenstr.  44   Kommandantenstr.  43-­‐51   Stresemannstr.  15   Bahnhofsring  2   Heinrich-­‐von-­‐Bibra-­‐Platz  5-­‐9   Kaiser-­‐Karl-­‐Ring  59-­‐63/Dorotheenstr.  103   Bürgerreuther  Str.  1   Bahnhofplatz  10   77er  Str.  54   Wiener  Str.  43   Logenstr.  37   Bahnhofsplatz  1   Rathausplatz  2   Auhofstr.  21   Bahnhofstr.  40   Joachim-­‐Campe-­‐Str.  1/3/5/7,  Posthof  15   Heinrich-­‐von-­‐Stephan-­‐Str.  8-­‐10   Am  Bahnhof  5   Friedrich-­‐Ebert-­‐Str.  28   Paulinenstr.  52   Postplatz  3   Ostbahnstr.  5   Poststr.  2  U.  3   Poststr.  5-­‐7   Bahnhofsplatz  9   Kavalierstr.  30-­‐32   Friedrich-­‐Ebert-­‐Str.  75-­‐79   Hainstr.  5  A   Baarstr.  5   Marktstr.  9   City   Gießen   Heidelberg   State   Hessen   Baden-­‐Württemberg   Offenbach  am  Main   Hessen   Karlsruhe   Dresden   Siegen   Marburg   Oberhausen   Koblenz   Gütersloh   Hildesheim   Goslar   Plauen   Mülheim   Böblingen   Gelsenkirchen   Einbeck   Duisburg   Wuppertal   Leer   Fulda   Bonn   Bayreuth   Fürth   Celle   Stuttgart   Kaiserslautern   Schweinfurt   Wilhelmshaven   Aschaffenburg   Flensburg   Salzgitter   Leverkusen   Zwickau   Pinneberg   Detmold   Bautzen   Landau   Helmstedt   Heide   Emden   Dessau   Bremerhaven   Bad  Hersfeld   Iserlohn   Völklingen   Baden-­‐Württemberg   Sachsen   Nordrhein-­‐Westfalen   Hessen   Nordrhein-­‐Westfalen   Rheinland-­‐Pfalz   Nordrhein-­‐Westfalen   Niedersachsen   Niedersachsen   Sachsen   Nordrhein-­‐Westfalen   Baden-­‐Württemberg   Nordrhein-­‐Westfalen   Niedersachsen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Niedersachsen   Hessen   Nordrhein-­‐Westfalen   Bavaria   Bavaria   Niedersachsen   Baden-­‐Württemberg   Rheinland-­‐Pfalz   Bavaria   Niedersachsen   Bavaria   Schleswig-­‐Holstein   Niedersachsen   Nordrhein-­‐Westfalen   Sachsen   Schleswig-­‐Holstein   Nordrhein-­‐Westfalen   Sachsen   Rheinland-­‐Pfalz   Niedersachsen   Schleswig-­‐Holstein   Niedersachsen   Sachsen-­‐Anhalt   Bremen   Hessen   Nordrhein-­‐Westfalen   Saarland   Dream  Global  REIT  2014  Annual  Report    |    92   Owned  GLA    (sq.  ft.)     Occupancy     (Dec.  31,  2014)   150,866   133,379   114,114   111,778   110,434   101,498   99,751   97,606   94,569   94,488   87,330   86,571   85,443   84,303   82,628   80,591   80,500   80,122   79,215   78,627   77,606   75,815   75,534   73,631   73,391   72,192   71,465   67,503   64,970   64,264   61,826   61,602   61,011   60,738   59,218   57,614   57,571   53,645   53,468   53,363   53,327   52,206   51,781   51,207   51,027   49,577   57%   64%   96%   97%   87%   92%   98%   94%   68%   61%   52%   47%   76%   81%   100%   94%   91%   100%   60%   82%   100%   100%   100%   72%   62%   92%   36%   87%   97%   96%   98%   46%   79%   67%   100%   20%   68%   98%   20%   92%   98%   83%   94%   100%   93%   9%             Address   Rathausplatz  4   Europaplatz  17   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   Lippertor  6   Südbrede  1-­‐5   Münchener  Str.  1   Bahnhofstr.  169   Vegesacker  Heerstr.  111   Palleskestr.  38   Koblenzer  Str.  67   Kardinal-­‐Galen-­‐Ring  84/86   Martinistr.  19   Kalkumer  Str.  70   Robert-­‐Wahl-­‐Str.  7/7a   Poststr.  2   Falkenbergstr.  17-­‐23   Balhornstr.  15,  17/B.  Köthenbürger-­‐Str.   August-­‐Bebel-­‐Str.  6   Cavaillonstr.  2   City   Lüdenscheid   Bad  Kreuznach   Halberstadt   Schwabach   Peine   Auerbach   Cham   Neuss   Arnsberg   Rastatt   Heidenheim   Gummersbach   Rottweil   Hamburg   Lippstadt   Ahlen   State   Nordrhein-­‐Westfalen   Rheinland-­‐Pfalz   Sachsen-­‐Anhalt   Bavaria   Niedersachsen   Sachsen   Bavaria   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Baden-­‐Württemberg   Baden-­‐Württemberg   Nordrhein-­‐Westfalen   Baden-­‐Württemberg   Hamburg   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Bad  Kissingen   Bavaria   Bietigheim-­‐Bissingen   Baden-­‐Württemberg   Bremen   Frankfurt  am  Main   Bonn   Rheine   Recklinghausen   Düsseldorf   Balingen   Deggendorf   Norderstedt   Paderborn   Torgau   Weinheim   Bremen   Hessen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Baden-­‐Württemberg   Bavaria   Schleswig-­‐Holstein   Nordrhein-­‐Westfalen   Sachsen   Baden-­‐Württemberg   Hauptstr.  279/Hommelstr.  2   Idar-­‐Oberstein   Rheinland-­‐Pfalz   Bismarckstr.  21-­‐23   Hindenburgstr.  8/Hohenstauf  9,  17,  19   Steinerother  Str.  1  U.  1a   Heinrich-­‐von-­‐Stephan-­‐Platz  6   Mühlenstr.  5-­‐7   Alsenberger  Str.  61   Lübecker  Str.  23-­‐25   Apostelweg  4-­‐6   Brückenstr.  21   Lönsstr.  20-­‐22   Friedrich-­‐Wilhelm-­‐Str.  52  U.  54   Kurt-­‐Schumacher-­‐Str.  5   Lilienstr.  3   Stadtring  3-­‐5   Ölmühlweg  12   Bünde   Bocholt   Betzdorf   Naumburg   Delmenhorst   Hof   Bad  Oldesloe   Hamburg   Neunkirchen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Rheinland-­‐Pfalz   Sachsen-­‐Anhalt   Niedersachsen   Bavaria   Schleswig-­‐Holstein   Hamburg   Saarland   Castrop-­‐Rauxel   Nordrhein-­‐Westfalen   Eschwege   Lünen   Leipzig   Nordhorn   Königstein   Hessen   Nordrhein-­‐Westfalen   Sachsen   Niedersachsen   Hessen   Dream  Global  REIT  2014  Annual  Report    |    93   Owned  GLA    (sq.  ft.)     Occupancy     (Dec.  31,  2014)   49,529   48,549   47,145   46,877   46,532   46,512   46,129   46,128   45,820   45,659   45,656   45,558   45,494   45,371   44,341   44,130   43,971   43,620   43,484   43,409   42,774   42,191   41,847   41,781   41,487   41,378   41,249   40,927   40,745   40,540   39,192   38,276   37,925   37,679   37,612   37,266   36,687   36,290   36,273   35,971   35,795   35,433   35,290   35,234   35,189   34,984   27%   39%   15%   78%   56%   56%   61%   95%   99%   92%   83%   98%   88%   90%   89%   91%   74%   99%   90%   64%   100%   76%   97%   52%   89%   97%   98%   93%   86%   91%   48%   96%   99%   95%   91%   99%   65%   15%   97%   100%   90%   27%   100%   97%   81%   100%             Address   Bahnhofsplatz  10,  12,  14   Goethestr.  2-­‐6   Im  Bungert  6-­‐8   Gerstenstr.  5   Gustav-­‐König-­‐Str.  42   Große  Str.  29-­‐33   Worthingtonstr.  15   Zwieseler  Str.  27-­‐29   Markendorfer  Str.  10   Hellersdorfer  Str.  78   Kreuzstr.  20-­‐24   City   Kleve   Duisburg   State   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Bergisch  Gladbach   Nordrhein-­‐Westfalen   Neubrandenburg   Mecklenburg-­‐Vorpommern   Sonneberg   Rotenburg   Crailsheim   Regen   Thüringen   Niedersachsen   Baden-­‐Württemberg   Bavaria   Frankfurt  an  der  Oder   Brandenburg   Berlin   Bonn   Berlin   Nordrhein-­‐Westfalen   Bahnhofstr.  6/Luisenstr.  4-­‐5   Villingen-­‐Schwenningen   Baden-­‐Württemberg   Tunnelweg  1   Waschgrabenallee  3-­‐5   Poststr.  30   Bahnhofsplatz  2   König-­‐Heinrich-­‐Str.  11   Poststr.  24-­‐26   Konrad-­‐Adenauer-­‐Str.  49-­‐51   Feldschlößchenstr./Kunadstr.  o.  Nr.   Bahnhofstr.  29   Poststr.  12   Petristr.  26   Dr.-­‐Friedrich-­‐Uhde-­‐Str.  18   Augsburger  Str.  380   Gartenstr.  29/30   Poststr.  1-­‐3   Poststr.  48   Bahnhofstr.  2   Ruthenstr.  19/21   Bahnhofanlage  2-­‐4   Königswiese  1   Saßstr.  12   Wilhelmstr.  11/Kamperdickstr.  29   Kaiserstr.  140   Ludwigsplatz  1   Goldbacher  Str.  74   Klosterstr.  6-­‐10   In  der  Trift  10/12   Bahnhofstr.  6   Zwickauer  Str.  438   Alleestr.  6   Uferstr.  2   Lindenstr.  11   Bahnhofsplatz  8   Bahnhofstr.  32   Husum   Neustadt   Albstadt   Herborn   Merseburg   Ratingen   Tübingen   Dresden   Meppen   Lehrte   Schleswig-­‐Holstein   Schleswig-­‐Holstein   Baden-­‐Württemberg   Hessen   Sachsen-­‐Anhalt   Nordrhein-­‐Westfalen   Baden-­‐Württemberg   Sachsen   Niedersachsen   Niedersachsen   Heilbad  Heiligenstadt   Thüringen   Einbeck   Stuttgart   Pirna   Korbach   St  Ingbert   Gifhorn   Hameln   Schwetzingen   Gelsenkirchen   Leipzig   Kamp-­‐Lintfort   Radevormwald   Alsfeld   Aschaffenburg   Annaberg-­‐Buchholz   Olpe   Quakenbrück   Chemnitz   Neustadt   Höxter   Bitterfeld   Niedersachsen   Baden-­‐Württemberg   Sachsen   Hessen   Saarland   Niedersachsen   Niedersachsen   Baden-­‐Württemberg   Nordrhein-­‐Westfalen   Sachsen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Hessen   Bavaria   Sachsen   Nordrhein-­‐Westfalen   Niedersachsen   Sachsen   Bavaria   Nordrhein-­‐Westfalen   Sachsen-­‐Anhalt   Marktredwitz   Sulzbach-­‐Rosenberg   Bavaria   Bavaria   Dream  Global  REIT  2014  Annual  Report    |    94   Owned  GLA    (sq.  ft.)     Occupancy     (Dec.  31,  2014)   34,871   34,839   34,737   34,347   33,959   33,296   33,136   32,676   32,330   32,296   32,253   32,191   31,116   30,188   30,014   29,746   29,472   29,445   29,341   29,236   29,056   28,764   28,205   27,793   27,775   27,771   27,502   27,051   26,922   26,895   26,658   26,468   26,214   26,159   25,643   25,477   25,153   25,084   24,894   24,446   23,640   23,495   23,240   23,183   22,710   22,634   100%   86%   100%   100%   46%   94%   100%   89%   97%   75%   99%   97%   89%   94%   14%   91%   13%   100%   98%   100%   90%   88%   68%   65%   93%   67%   100%   96%   92%   93%   100%   100%   79%   94%   74%   98%   95%   72%   94%   97%   77%   100%   79%   86%   95%   77%             Address   Bahnhofstr.  46   Marktplatz  5   Poststr.  19-­‐23   Bahnhofsplatz  o.  Nr.   Brückenstr.  26   Bahnhofstr.  27   Lindenstr.  15   Lindenstr.  42   Hörder  Semerteichstr.  175   Am  Plärrer  11   Innungsstr.  57-­‐59   Wilhelmstr.  5   Geistmarkt  17   Lyoner  Passage  14   Moltkestr.  6   City   Unna   Nordenham   Hilden   Oranienburg   Miltenberg   Öhringen   Landstuhl   Grevenbroich   Dortmund   Lauf   Berlin   Ibbenbüren   Emmerich   Köln   Hattingen   State   Nordrhein-­‐Westfalen   Niedersachsen   Nordrhein-­‐Westfalen   Brandenburg   Bavaria   Baden-­‐Württemberg   Rheinland-­‐Pfalz   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Bavaria   Berlin   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Martin-­‐Pöhlmann-­‐Str.  5/Friedrich-­‐Ebert-­‐Str.  34   Selb   Bavaria   Steinstr.  6   Am  Markt  4-­‐5   Am  Stadtpark  5   Leistikowstr.  19   Saarbrücker  Str.  292-­‐294   Poststr.  12   Speckweg  24-­‐26   Kasseler  Str.  1-­‐7   Lübecker  Str./Wedringer  Str.  o.  Nr.   Pulheim   Norden   Papenburg   Fürstenwalde   Saarbrücken   Schmölln   Mannheim   Warburg   Magdeburg   Nordrhein-­‐Westfalen   Niedersachsen   Niedersachsen   Brandenburg   Saarland   Thüringen   Baden-­‐Württemberg   Nordrhein-­‐Westfalen   Sachsen-­‐Anhalt   Ooser  Karlstr.  21/23/25   Baden-­‐Baden   Baden-­‐Württemberg   Güterstr.  2-­‐4   Eisenbahnstr.  15   Poststr.  6   Bismarckstr.  12/Fr.  Hoffmann-­‐Str.   Lagerstr.  1   Bahnhofstr.  3   Bahnhofstr.  43   Bahnhofstr.  33  U.  33A   Friedrichstr.  2   Königstr.  20   Kornmarkt  15   Marktstr.  51   Übacher  Weg  4   Niederwall  3   Hochstr.  31/Postgasse  5   Sattigstr.  33   Robert-­‐Koch-­‐Str.  3   Kaiserstr.  35   Bahnhofstr.  8-­‐10   Poststr.  28   Bitburg   Tuttlingen   Beckum   Steinfurt   Meschede   Osterburken   Riesa   Stendal   Monheim   Brilon   Osterode   Essen   Alsdorf   Lübbecke   Bochum   Görlitz   Laatzen   Minden   Borken   Hemer   Rheinland-­‐Pfalz   Baden-­‐Württemberg   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Baden-­‐Württemberg   Sachsen   Sachsen-­‐Anhalt   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Niedersachsen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Sachsen   Niedersachsen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Dream  Global  REIT  2014  Annual  Report    |    95   Owned  GLA    (sq.  ft.)     Occupancy     (Dec.  31,  2014)   22,627   22,480   22,454   22,153   22,017   21,801   21,726   21,668   21,659   21,603   21,187   21,031   20,942   20,742   20,681   20,681   20,670   20,668   20,578   20,437   20,433   20,403   20,128   19,985   19,454   19,444   19,340   19,047   18,831   18,800   18,683   18,498   18,275   18,200   18,156   17,733   17,690   17,661   16,991   16,563   16,359   16,279   16,126   16,043   15,893   15,782   100%   100%   87%   76%   89%   96%   99%   64%   96%   100%   100%   100%   100%   100%   100%   75%   100%   81%   17%   59%   92%   88%   90%   86%   100%   93%   99%   97%   100%   87%   100%   100%   90%   93%   100%   76%   100%   100%   100%   100%   100%   100%   100%   99%   98%   100%             Address   Bahnhofstr.  33   Am  Bahnhof  2   Melanchthonstr.  96   Hauptstr.  141   Republikstr.  34   Poststr.  1/2   Im  Kusterfeld  1   Herrlichkeit  7   Grenzstr.  24   Mercedesstr.  5   Am  Buchhorst  35   Bahnhofstr.  41   Kolpingstr.  4   Münchner  Str.  50   Schönbornstr.  1   Langener  Landstr.  237-­‐239   Löbauer  Str.  63   Albert-­‐Steiner-­‐Str.  10   Fritz-­‐Brandt-­‐Str.  25   Dahmestr.  17   Bünder  Str.  36   Poststr.  1   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   Melcherstätte  8   Wetterstr.  20/Poststr.  2   Total  Initial  Properties   Total  Portfolio   City   Sulz   Meldorf   Bretten   State   Baden-­‐Württemberg   Schleswig-­‐Holstein   Baden-­‐Württemberg   Rheda-­‐Wiedenbrück   Nordrhein-­‐Westfalen   Schönebeck   Spremberg   Backnang   Syke   Halle   Hannover   Potsdam   Eberbach   Sachsen-­‐Anhalt   Brandenburg   Baden-­‐Württemberg   Niedersachsen   Sachsen-­‐Anhalt   Niedersachsen   Brandenburg   Baden-­‐Württemberg   Georgsmarienhütte   Niedersachsen   Fürstenfeldbruck   Geisenheim   Bremerhaven   Bautzen   Herzogenrath   Zerbst   Mittenwalde   Löhne   Erftstadt   Bremen   Alpirsbach   Düsseldorf   Jüterbog   Barsinghausen   Dannenberg   Seevetal   Aalen   Titisee-­‐Neustadt   Bochum   St.  Georgen   Bavaria   Hessen   Bremen   Sachsen   Nordrhein-­‐Westfalen   Sachsen-­‐Anhalt   Brandenburg   Nordrhein-­‐Westfalen   Nordrhein-­‐Westfalen   Bremen   Baden-­‐Württemberg   Nordrhein-­‐Westfalen   Brandenburg   Niedersachsen   Niedersachsen   Niedersachsen   Baden-­‐Württemberg   Baden-­‐Württemberg   Nordrhein-­‐Westfalen   Baden-­‐Württemberg   Porta  Westfalica   Nordrhein-­‐Westfalen   Germersheim   Bad  Schwartau   Bad  Säckingen   Rheinland-­‐Pfalz   Schleswig-­‐Holstein   Baden-­‐Württemberg   Bad  Neuenahr-­‐Ahrweiler   Rheinland-­‐Pfalz   Dillingen   Springe   Stuhr   Herdecke   Saarland   Niedersachsen   Niedersachsen   Nordrhein-­‐Westfalen   Dream  Global  REIT  2014  Annual  Report    |    96   Owned  GLA    (sq.  ft.)     Occupancy     (Dec.  31,  2014)   15,774   15,549   15,501   15,178   14,985   14,763   14,634   14,560   14,533   14,504   14,042   13,936   13,725   13,326   13,117   12,803   12,686   12,667   12,654   12,631   12,625   12,498   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   8,196   7,702   82%   97%   90%   100%   77%   80%   99%   94%   100%   100%   100%   100%   100%   100%   90%   100%   100%   79%   100%   100%   100%   100%   100%   65%   100%   100%   100%   95%   100%   100%   100%   100%   100%   100%   100%   100%   100%   100%   100%   100%   100%   100%   10,461,313   14,839,661   80.1%   85.3%                   Trustees Detlef Bierbaum 1, 2, 3, 4 Köln, Germany Corporate Director Michael J. Cooper 2 Toronto, Ontario Vice Chairman Dream Global REIT P. Jane Gavan 2 Park City, Utah, United States of America President and Chief Executive Officer Dream Global REIT Duncan Jackman 1, 3 Toronto, Ontario Chairman, President and CEO E-L Financial Corporation Limited Johann Koss 2, 3 Toronto, Ontario Chief Executive Officer Right to Play John Sullivan 1 Toronto, Ontario President and Chief Executive Officer Cadillac Fairview Corporation Limited Corporate Information HEAD OFFICE 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, 2014 are taxed as follows: Foreign non-business income: 48.3% Capital gains: 1.4% Return of capital: 50.3% STOCK EXCHANGE LISTING The Toronto Stock Exchange Listing symbols: REIT Units: DRG.UN 5.5% Convertible Debentures: DRG.DB ANNUAL MEETING OF UNITHOLDERS Wednesday, May 6, 2015 at 4:00 pm (EST) Corporate office of Dream Global REIT 30 Adelaide Street East, Suite 300 Toronto, Ontario, Canada Dream Global 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: globalinfo@dream.ca Website: www.dreamglobalreit.ca 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 AUDITORS PricewaterhouseCoopers LLP PwC Tower, 18 York Street, Suite 2600 Toronto, Ontario M5J 0B2 m o c . n g i s e d s k r o w w w w . . d t L s n o i t a c i n u m m o C n g i s e D s k r o W e h T : n g i s e D 1 Member of the Audit Committee 2 Member of the Executive Committee 3 Member of the Governance, Compensation and Environmental Committee 4 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 Dream Global 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. D R E A M G L O B A L R E I T 2 0 1 4 A N N U A L R E P O R T dream.ca/global 

Continue reading text version or see original annual report in PDF format above