2016 Annual Report
Letter to
Unitholders
In 2016, Dream Global
accomplished a number of
significant milestones, laying the
groundwork for strong financial
performance in 2017 and beyond.
Throughout the year, the Trust’s balance sheet was
reshaped with the early redemption of the convertible
debentures, raising and deploying equity into high
quality office buildings and refinancing mortgage
debt with lower interest rates and longer maturities. In
addition, two major initiatives, a dual listing for Dream
Global REIT’s units on the Frankfurt Stock Exchange under
the trading symbol DRG, and receiving an investment
grade credit rating from Moody’s, further helped to
position Dream Global for the future.
One of the Trust’s key initiatives between the end
of August and year-end was the refinancing of 14
mortgages, reducing their weighted average face interest
rate to 1.29% from 2.43%, and extending their average
maturity to 8.4 years from 2.7 years. Year-over-year,
the average face interest rate of all of the Trust’s debt
obligations declined to 1.85% at the end of 2016, from
2.49% at the end of 2015, and the average debt term
increased to 5.7 years at the end of 2016 from 5.0 years at
the end of 2015.
With the tailwinds of an exceptionally strong German
economy, evidenced by record low unemployment, the
fundamentals in the office sector continued to improve.
The REIT finished the year at the highest occupancy in its
history, with in-place and committed occupancy reaching
90%. Q4 2016 also marked the Trust’s eighth consecutive
quarter of occupancy growth. Year-over-year, in-place
rents increased by 7% to €10.29 per square foot, largely
due to rental rate increases for renewals and new leases
P. Jane Gavan
President and Chief Executive Officer
as well as a consumer price index (“CPI”) adjustment
across all of our leases with Deutsche Post in early 2016.
We have continued our capital recycling program in 2016
by selling over $100 million of Deutsche Post assets and
redeploying the proceeds into higher quality buildings.
In total, we acquired four assets for $215 million, at an
average 7.4% cap rate, financed at 1.3% for 8 years.
We’ve further reduced our tenant concentration, with
Deutsche Post now representing 18.9% of our GRI, down
from 22.4% at the end of 2015.
Dream Global’s business is in the best shape it has ever
been. The combination of exceptionally strong market
fundamentals, attractive financing rates, our successful
capital recycling program and the REIT’s recent corporate
initiatives, position us very well heading into 2017 and
beyond.
On behalf of our management team and our Board of
Trustees, I would like to thank you for your continued
support.
Sincerely
P. Jane Gavan
President & Chief Executive Officer
February 22, 2017
$2.9 billion
TOTAL ASSESTS
4%
INCREASE IN AFFO/UNIT IN 2016
15%
HAMBURG
3%
HANNOVER
7%
BERLIN
13%
DÜSSELDORF
9%
COLOGNE
GERMANY
Portfolio
at-a-Glance
DECEMBER 31, 2016
Dream Global REIT is the owner and operator of
13 million square feet of office and mixed-use space
in Germany and Austria. It provides a wide range of
investors with the opportunity to invest in real estate
exclusively outside of Canada.
Diversified High-Quality Tenants
TENANT COMPOSITION
Deutsche Post Immobilien GmbH
Siemens Aktiengesellschaft
Freshfields Bruckhaus Deringer
Ergo Direkt Lebensversicherung AG
City of Hamburg
Deutsche Rentenversicherung Knappschaft Bahn See
BNP Paribas SA/NV
Deutsche Postbank AG
Google Germany GmbH
CinemaxX Entertainment GmbH & Co. KG
Other third-party tenants
Total
8%
FRANKFURT
4%
STUTTGART
8%
NUREMBERG
7%
MUNICH
2%
VIENNA
AUSTRIA
Geographic Diversification
(% of gross rental income (“GRI”) in key markets)
TOTAL ANNUALIZED
GRI (%)
18.9%
3.9%
3.4%
3.0%
3.1%
2.1%
1.8%
1.7%
1.6%
1.5%
59.0%
100.0
CREDIT RATING
BBB+
A+
n/a
AA-
AAA
n/a
A+
BBB+
AA
n/a
n/a
Committed Occupancy
In-place Rent
(per square foot per year)
2016 Adjusted Funds from Operations
(“AFFO”)
(Q4/2016)
€10.29
€9.61
€8.46 €8.86
90.0%
87.5%
86.4%
85.3%
83.0%
0.92
0.9
0.88
0.86
0.84
0.82
0.80
0.78
0.76
0.74
0.72
€6.25
€12
€10
€8
€6
€4
€2
€0
2012
2013
2014
2015
2016
2012
2013
2014
2015
2016
9%
INITIAL
PROPERTIES
91%
ACQUISITION
PROPERTIES
* As at December 31, 2016
$2.9 billion
TOTAL ASSESTS
4%
INCREASE IN AFFO/UNIT IN 2016
Europa-Center,
Bremen
Dual listed
TORONTO STOCK EXCHANGE AND
FRANKFURT STOCK EXCHANGE
1.5 million
SQUARE FEET OF
NEW LEASING IN 2016
$10.82
TOTAL EQUITY PER UNIT
€7.64
Rivergate,
Vienna
ABC Bogen,
Hamburg
Table of Contents
Management’s Discussion & Analysis
Management’s Responsibility for
Financial Statements
Independent Auditor’s Report
Consolidated Financial Statements
Notes to the Consolidated
Financial Statements
Appendix
Directors
Corporate Information
1
51
52
53
57
91
IBC
IBC
Management’s discussion and analysis
All dollar amounts in our tables are presented in thousands of Canadian dollars, unless otherwise indicated.
SECTION I – OVERVIEW AND FINANCIAL HIGHLIGHTS
KEY PERFORMANCE INDICATORS
Portfolio
Number of properties (excluding properties held for sale)(1)
Gross leasable area (“GLA”) (in square feet)(1)
Occupancy rate – including committed (period-end)(1)
Occupancy rate – in-place (period-end)(1)
Average in-place net rent per square foot (period-end)(1)
Market rents above in-place net rents(1)
December 31,
2016
September 30,
2016
December 31,
2015
173
13,025,346
90.0 %
88.6 %
10.29 €
3.3 %
181
12,580,821
89.1 %
86.7 %
10.26 €
3.8 %
208
13,428,169
87.5 %
86.8 %
9.61
6.1 %
€
December 31,
2016(1)
September 30,
2016(1)
Three months ended
December 31,
2015(1)
Year ended December 31,
2016(1)
2015(1)
Operating results – in €
Investment properties revenue(2)
Total portfolio
Initial Properties
Acquisition Properties
Net operating income (“NOI”)(3)
Total portfolio
Initial Properties
Acquisition Properties
Operating results – in $(4)
Investment properties revenue(2)
Total portfolio
Initial Properties
Acquisition Properties
Net operating income (“NOI”)(3)
Total portfolio
Initial Properties
Acquisition Properties
Funds from operations (“FFO”)(5)
Adjusted funds from operations (“AFFO”)(6)
Average exchange rate
(Canadian dollars to one euro)
Distributions
Declared distributions
DRIP participation ratio (for the period)
Per unit amounts(7)
Distribution
Basic:
FFO
AFFO
Diluted:
FFO
€
$
$
$
39,064 €
13,051
26,013
40,657 €
15,541
25,116
37,692 €
14,996
22,696
160,466 €
59,584
100,882
26,925
5,780
21,145
27,240
7,608
19,632
25,780
7,739
18,041
109,032
29,149
79,883
56,250 $
18,843
37,407
59,200 $
22,629
36,571
55,081 $
21,888
33,193
235,312 $
87,447
147,865
38,769
8,361
30,408
25,463
22,820
39,649
11,064
28,585
24,205
22,969
37,692
11,303
26,389
21,338
20,548
159,946
42,851
117,095
95,338
90,595
157,493
66,656
90,837
107,881
34,603
73,278
223,169
94,336
128,833
152,855
48,981
103,874
86,660
81,524
1.438
1.456
1.461
1.466
1.419
25,068 $
13 %
24,267 $
13 %
22,578 $
14 %
94,745 $
13 %
89,858
15 %
0.20 $
0.20 $
0.20 $
0.80 $
0.20
0.18
0.20
0.20
0.19
0.20
0.19
0.18
0.19
0.80
0.76
0.80
0.80
0.77
0.73
0.77
Dream Global REIT 2016 Annual Report | 1
Financing
Weighted average face rate of interest on debt (period-end)(8)
Interest coverage ratio(8)(9)
Level of debt (net debt-to-gross book value, net of cash) at period-end(8)(9)
Average level of debt, net of cash(8)(2)
Debt – average term to maturity (years)(8)
Unsecured convertible debentures
December 31,
2016
September 30,
2016
December 31,
2015
1.85 %
2.95 times
52 %
53 %
5.7
— $
1.93 %
2.80 times
50 %
53 %
5.6
— $
2.49 %
3.08 times
54 %
52 %
5.0
154,558
$
(1) Includes the joint venture properties but excludes properties classified as assets held for sale.
(2) 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”.
(3) NOI (non-GAAP measure) is defined as total of investment properties revenue less investment properties operating expenses, including the share of net rental income from
investment in joint ventures from the date of closing of the sale of the respective properties. The reconciliation of NOI to net rental income can be found in the section “Non-
GAAP measures and other disclosures” under net operating income.
(4) Results from operations were converted into Canadian dollars from euros using the average exchange rates found on page 30.
(5) 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”.
(6) AFFO (non-GAAP measure) – The reconciliation of AFFO to cash generated from (utilized in) operating activities can be found in the section “Non-GAAP measures and other
disclosures” under the heading “Cash generated from operating activities to AFFO reconciliation”.
(7) 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”.
(8) Reflects the REIT’s Owned Share of Joint Ventures. Joint venture properties are accounted for using the equity method in our consolidated financial statements.
(9) The calculations of the interest coverage ratio and level of debt (net debt-to-gross book value) are included in the section “Non-GAAP measures and other disclosures” under
the headings “Interest coverage ratio” and “Level of debt (net debt-to-gross book value, net of cash)”.
FINANCIAL OVERVIEW
The fourth quarter and year-end results were in line with our expectations with funds from operations (“FFO”) of $25.5 million
and $95.3 million, respectively. By comparison, FFO for the three months and year ended December 31, 2015 were
$21.3 million and $86.7 million, respectively. Adjusted funds from operations (“AFFO”) increased by $2.3 million and
$9.1 million for the quarter and year ended December 31, 2016, respectively, compared to the same periods in 2015. The
increases in both FFO and AFFO in 2016 compared to 2015 reflect the impact of acquisitions, strong leasing, lower effective
interest costs and additional asset management fees from our joint ventures.
On a per unit basis, FFO for the three months and year ended December 31, 2016 were 20 cents and 80 cents, respectively,
compared to 19 cents and 77 cents in the same periods in 2015. Despite the impact of a lower euro against the Canadian
dollar in Q4 2016 versus Q4 2015, AFFO per unit remained flat year-over-year in the fourth quarter. For the year, AFFO
increased by 3 cents to 76 cents in 2016 compared to 2015.
Our leasing momentum and the overall leasing pipeline remained strong during the fourth quarter, buoyed by solid market
fundamentals in Germany’s office markets. We completed approximately 334,000 square feet of new leases and renewals in
Q4 2016 and achieved a tenant retention rate of 81%. Overall in-place and committed occupancy increased to 90.0% in Q4
2016, compared to 89.1% at the end of Q3 2016. Year-over-year occupancy increased by 250 basis points from 87.5% at the
end of 2015, partially as a result of strong leasing in addition to the sale of Initial Properties (as defined under “Basis of
Presentation” below) which, in general, have lower occupancy rates.
In 2016, we further reduced our exposure to Deutsche Post, our largest tenant, who now contributes less than 19% to the
Trust’s overall gross rental income (“GRI”), largely due to our capital recycling program. During the fourth quarter, we disposed
of 16 Initial Properties for an aggregate gross sales price of approximately $57.0 million, increasing sales completed in 2016 to
approximately $103.0 million. In addition, we had 11 properties under contract for sale as at December 31, 2016 for
$45.5 million.
Year-over-year, in-place rents increased by 7% to €10.29 per square foot at the end of 2016 from €9.61 per square foot at the
end of 2015. The increase demonstrates management’s ability to align leasing initiatives to strong market fundamentals. It
also reflects an increase across all of our leases with Deutsche Post, which were subject to an automatic adjustment linked to
the German Consumer Price Index (“CPI”) in March 2016.
The Trust took further advantage of a favourable lending environment in the second half of 2016 and completed the
refinancing of 14 mortgages between the end of August and year-end, decreasing their weighted average face interest rate to
1.29% from 2.43% and extending their average maturity to 8.4 years from 2.7 years. Year-over-year, the average face interest
Dream Global REIT 2016 Annual Report | 2
rate of all of the Trust’s debt obligations declined to 1.85% at the end of 2016 from 2.49% at the end of 2015, with the average
debt term increasing to 5.7 years from 5.0 years at the end of 2015.
OUTLOOK
The German economy continues to benefit from a very robust labour market, fuelled by domestic demand and government
spending. Germany’s unemployment rate reached a new record low of 3.5% at the end of 2016, further dropping from 3.9% a
month earlier and 4.5% at the end of 2015. German GDP grew by 1.9% in 2016, ahead of expectations and reaching a five-year
high.
The fundamentals in the German office sector are strong, with office vacancy rates continuing to decrease across the major
office markets. In the Big 7 German office markets, vacancy rates declined to a record low of 5.5% at the end of 2016, down 90
basis points since the end of 2015. Fuelled by strong market fundamentals as well as our committed leasing efforts, in-place
and committed occupancy in the Trust’s portfolio rose to 90% for the first time in Dream Global REIT’s history. Q4 2016 also
marked the Trust’s eighth consecutive quarter of occupancy growth.
Throughout the fourth quarter of 2016 and the beginning of 2017, we have continued our discussions with Deutsche Post with
respect to the tenant’s 2018 lease expiries. Drawing on past experience and our discussions with Deutsche Post to date, we
are confident that we will be able to retain a significant portion of the expiring GRI. We will continue our strategy with respect
to these expiries, which includes our ongoing asset recycling plan, active leasing and pursuing redevelopment opportunities in
addition to our proactive discussions.
Dream Global REIT reached a number of significant milestones in 2016, including the refinancing of $332.0 million of our
mortgages at lower rates and with a longer term; early redemption of the Trust’s $161.0 million convertible debenture to
achieve significant interest rate savings; a dual listing for Dream Global REIT’s units on the Frankfurt Stock Exchange under the
trading symbol DRG; and receiving an investment-grade credit rating from Moody’s, reflecting our track record in Europe,
strong German economic fundamentals, the quality of the platform as well as a solid balance sheet.
With the momentum we created in 2016 through a number of key strategic initiatives, supported by solid economic conditions
and strong real estate fundamentals in our target markets, we are well positioned to further improve our business and
improve the stability of our cash flow in 2017 and beyond.
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 years ended December 31, 2016 and December 31, 2015.
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 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.
This MD&A has been dated as at February 22, 2017. For simplicity, throughout this discussion, we may make reference to the
following:
• “Debentures”, meaning the 5.5% convertible unsecured subordinated debentures of the Trust, which were redeemed on
September 15, 2016;
• “GLA”, meaning gross leasable area;
• “GRI”, meaning gross rental income, including basic rent per lease agreements, parking contracts and miscellaneous
contracts relating to the properties, but excluding contributions made by tenants towards the recovery of operating
expenses;
• “Initial Properties”, meaning the income-producing properties we acquired on August 3, 2011;
Dream Global REIT 2016 Annual Report | 3
• “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, a South Korean pension fund.
Certain information has been obtained from Jones Lang LaSalle (“JLL”) and CBRE, commercial firms that provide information
relating to the German and Austrian real estate industries. Although we believe this information is reliable, the accuracy and
completeness of this information is not guaranteed. We have not independently verified this information and make no
representation as to its accuracy.
When we use 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 AG. Deutsche Post AG has provided a letter of
support with respect to DPI and its ability to carry out its obligations under leases for the Initial Properties.
Estimated 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, including but not limited to statements relating to the Trust’s objectives, strategies
to achieve those objectives, the Trust’s beliefs, plans, estimates, projections and intentions, and similar statements concerning
anticipated future events, future growth, results of operations, performance, business prospects and opportunities,
acquisitions or divestitures, tenant base, future maintenance and development plans and costs, capital investments, financing,
the availability of financing sources, income taxes, vacancy and leasing assumptions, litigation and the real estate industry in
general (including statements regarding our future acquisitions and the timing thereof, our disposition strategy, our leasing
strategies with respect to the 2018 Deutsche Post lease expiries, the Deutsche Post renewal obligations and the Postbank
subleases), in each case that are not historical facts. Forward-looking statements generally can be identified by words such as
“outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “could”,
“likely”, “plan”, “project”, “budget” or “continue” or similar expressions suggesting future outcomes or events. Forward-
looking information is based upon a number of assumptions and is subject to a number of risks and uncertainties, including
but not limited to statements regarding our objectives and strategies, proposed acquisitions and dispositions, development of
our portfolio, stability and growth of our cash flows and distributions, future financings, future maintenance and leasing
expenditures, projected costs, economic performance or expectations, or the assumptions underlying any of the foregoing,
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 MD&A 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 22, 2017, 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.
Dream Global REIT 2016 Annual Report | 4
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 the Trust’s asset manager. Our
Units are listed on the Toronto Stock Exchange under the trading symbol DRG.UN and the Frankfurt Stock Exchange under the
trading symbol DRG.
As at December 31, 2016, our portfolio consisted of 173 properties (excluding 11 assets that are held for sale) and comprises
approximately 13.0 million square feet of GLA. Of this total, 172 of the properties are located in Germany and one property is
located in Vienna, Austria. Nine properties, including the asset in Austria, are held within joint ventures in which Dream Global
REIT holds a 50% ownership interest.
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 will be exempt from the SIFT rules. We do not rely on the real estate
investment trust exception (“REIT exception”) under the Income Tax Act (Canada) in order to be exempt from the SIFT rules. As
a result, we are not subject to the same restrictions on our activities as those that apply to Canadian real estate investment
trusts that do rely on the REIT exception. This gives us flexibility in terms of the nature and scope of our investments and other
activities. Because we do not own taxable Canadian property, as defined in the Income Tax Act (Canada), we are not subject to
restrictions on our ownership by non-Canadian investors.
OUR OBJECTIVES
We are committed to:
• managing our investments to provide stable, sustainable and growing cash flows through investments in commercial real
estate located outside of Canada;
• building a diversified 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.
OUR STRATEGY
To meet our stated objectives, we implemented the following strategy:
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 enhance our tenant and geographic profile. We focus on adding high-quality tenants in the most desirable
office markets in addition to increasing our overall asset base in our target markets. A key criterion when considering potential
acquisitions is the multi-tenant nature of a property.
Dream Global REIT 2016 Annual Report | 5
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 these 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.
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 objective is 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.
OUR ASSETS
Throughout this document, we make reference to the following two asset categories:
Initial Properties
As at December 31, 2016, this category included 136 properties (excluding 11 assets held for sale). The assets can be
characterized as national and regional administration offices, mixed use retail and distribution properties, and regional
logistics headquarters of Deutsche Post as well as other third-party tenants, including Postbank and municipal and state
government agencies. 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, 2016, this category included 37 office properties, which were acquired since our initial public offering in
2011. Of this total, 36 properties are located in cities across Germany. A 50% interest in eight properties was sold in late 2014
and early 2015 to POBA, a South Korean pension fund. In addition, one of the Trust’s properties, jointly owned with an Asian
sovereign wealth fund, is located in Vienna, Austria. In comparison to the Initial Properties, the Acquisition Properties are
generally larger, newer or recently refurbished multi-tenant buildings.
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.)
874,218
815,097
1,665,832
915,483
1,222,214
585,377
626,792
1,116,203
467,506
4,736,624
13,025,346
Total GLA (%)
7
6
13
7
9
4
5
8
4
37
100
Total GRI (%)
7
9
13
8
15
3
7
8
4
26
100
Dream Global REIT 2016 Annual Report | 6
TENANTS
Through our active acquisitions, dispositions and leasing program, we continue to focus on the diversification of our tenant
base. The table below highlights the diversification away from the single-tenant nature of our Initial Properties. At the end of
2016, Deutsche Post’s GRI was approximately 18.9% of the Trust’s overall occupied and committed GRI, down from 22.4% at
the end of 2015.
Tenant composition(1)
Deutsche Post
Siemens AG
Freshfields Bruckhaus Deringer
City of Hamburg
ERGO Group AG
Deutsche Rentenversicherung Knappschaft Bahn-See
BNP Paribas Fortis SA/NV
Deutsche Postbank AG
Google Germany GmbH
CinemaxX Entertainment GmbH & Co. KG
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 (%)
18.9
4.0
3.4
3.1
3.0
2.1
1.8
1.7
1.6
1.5
58.9
100.0
Credit rating(2)(3)
BBB+
n/a
n/a
AAA
AA-
n/a
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 500,000 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. 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, 2016, our portfolio featured approximately 97 Postbank
branches, allowing for the delivery of integrated financial and postal services. Leases for 34 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.
Siemens AG (“Siemens”)
Siemens, the Trust’s second largest tenant, is headquartered in Germany and is one of the world’s largest engineering and
technology companies, employing over 350,000(2) people worldwide with nearly one-third of its workforce located in
Germany. Siemens occupies the entire space in our property located at Gleiwitzer Strasse 555 (Siemens Office Campus) in
Nuremberg and approximately 6% of the space in Officivm, our property located at Liebknechtstrasse 33/35 and
Hessbrühlstrasse 7, and generated approximately 4.0% of the REIT’s overall annualized GRI as at December 31, 2016.
Freshfields Bruckhaus Deringer (“Freshfields”)
Freshfields is the third 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.(3) Freshfields occupies 71% of the space in our property located at
Feldmühleplatz 1 and generated approximately 3.4% of the REIT’s overall annualized GRI as at December 31, 2016.
City of Hamburg
The City of Hamburg, Germany’s second largest municipality with a population of 1.8 million,(4) is one of the 16 federal states
of Germany and is considered the economic centre of northern Germany. The City of Hamburg occupies approximately 20% of
the space in our property at Millerntorplatz 1, 9% of the space in our property at Schlossstrasse 8, and the entire space at our
property located at Hammer Strasse 30–34. The City of Hamburg contributes approximately 3.1% to the REIT’s overall
annualized GRI based on total GRI as at December 31, 2016.
Dream Global REIT 2016 Annual Report | 7
ERGO Group AG (“ERGO”)
ERGO is one of the largest insurance companies in Germany with approximately 43,000 employees in over 30 countries
concentrated in Europe and Asia.(5) ERGO, which belongs to the Munich RE group of companies, occupies the entire space in
our property located at Karl-Martell-Strasse 60 in Nuremberg and generated approximately 3.0% of the REIT’s overall
annualized GRI as at December 31, 2016.
Deutsche Rentenversicherung Knappschaft Bahn-See (“Deutsche Rentenversicherung”)
Deutsche Rentenversicherung is Germany’s state pension fund covering approximately 54 million people. Nearly €290 billion
was paid to recipients in 2015 alone.(6) Deutsche Rentenversicherung occupies approximately 37% of the space in our property
located at Millerntorplatz 1 in Hamburg and generated approximately 2.1% of the REIT’s overall annualized GRI as at
December 31, 2016.
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.(7) The company, with strong roots in Europe’s economic history, occupies
approximately 55% of the space in Cäcilienkloster in Cologne as well as 8% in Z-UP in Stuttgart and generated approximately
1.8% of the REIT’s overall annualized GRI as at December 31, 2016.
Deutsche Postbank AG (“Postbank”)
Postbank is one of Germany’s largest financial service providers with approximately 14 million clients, nearly 19,000
employees and total assets of approximately €148 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 1,000 of its own branches and
over 4,500 Deutsche Post partner branches as well as 700 Postbank advisory centres.(8) As at December 31, 2016, Postbank
generated approximately 1.7% of the REIT’s overall annualized GRI.
Google Germany GmbH (“Google”)
Google is an American multinational corporation specializing in internet-related services and products and employs over
60,000 people worldwide.(9) Google Hamburg is the company’s commercial headquarters for Germany, Austria, Switzerland
and the Nordics and occupies approximately 88% of the GLA in ABC Bogen, our property located in the heart of Hamburg at
ABC Strasse 19. Google generated approximately 1.6% of the REIT’s overall annualized GRI as at December 31, 2016.
CinemaxX Entertainment GmbH & Co. KG (“CinemaxX”)
CinemaxX is a well-known cinema chain in Germany and Denmark with 29 cinemas and approximately 2,000 employees.(10)
CinemaxX occupies approximately 62% of the GLA in our property located at Bertoldstrasse 48/Sedanstrasse 7 in Freiburg and
generated approximately 1.5% of the REIT’s overall annualized GRI as at December 31, 2016.
(1) As disclosed at Deutsche Post DHL’s website at www.dpdhl.com
(2) As disclosed at Siemens’ website at www.siemens.com
(3) As disclosed at Freshfields’ website at www.freshfields.com
(4) As disclosed at the Destatis – Germany’s Federal Statistical Office website at www.destatis.de
(5) As disclosed at ERGO’s website at www.ergo.com
(6) As disclosed at Deutsche Rentenversicherung’s website at www.deutsche-rentenversicherung.de
(7) As disclosed at BNP Paribas’ website at www.bnpparibas.com
(8) As disclosed at Deutsche Postbank AG’s website at www.postbank.com
(9) As disclosed at Google’s website at www.google.com and www.statistica.com/topics/1001/google/
(10) As disclosed at CinemaxX’s website at www.cinemaxx.com
Dream Global REIT 2016 Annual Report | 8
MARKET OVERVIEW – GERMANY AND AUSTRIA
German economy
Germany, Europe’s largest economy, 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.
Overall, the German economy continues to be the main driving force of Europe and benefits from a robust labour market.
German GDP has grown by 1.9% in 2016, slightly ahead of expectations. Growth is largely driven by low interest rates as well
as increased household and government spending. Germany’s unemployment reached a record low of 3.5%(1) in December
2016, further dropping from 3.9% a month earlier and 4.5% at the end of 2015. This is a strong signal that the German
economy continues to strengthen.
The German real estate sector
Germany remains a highly sought-after real estate investment market in Europe, benefiting from strong local and international
investor demand. The investment market picked up significantly in the second half of 2016, ending the year with
€52.9 billion(2) of transactions, only slightly below 2015. The active second half of 2016 was largely driven by low interest rates
and the perception of Germany as a safe harbour, resulting in strong investor demand. Office properties remained the top
choice for investors with approximately 45% of all transactions taking place in this segment. Demand from international
investors remained high at 48%(2) in 2016.
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. At December 31, 2016, the average vacancy rate in the Big 7 office markets was
5.5%,(3) a 90 basis point decline since the end of 2015, with Stuttgart and Berlin experiencing the most significant declines in
vacancy rates.
Austrian economy
The Austrian economy is closely linked to Germany and features a skilled labour force and a high standard of living. Similar to
Germany, it has a high degree of financial stability, a reliable protection of property rights and a transparent legal system.
Economic growth is expected to have kept up the pace in Q4 2016 following a strong third quarter with confidence indicators
at multi-year highs at the end of 2016.(4)
The Austrian real estate sector
In 2016, the total investment volume for commercial real estate in Austria reached €2.8 billion, a decrease of 29% compared
to a record high in 2015 but 16% above the five-year average investment volume. Approximately 60% of all transactions took
place in Vienna. Office properties were the most sought-after asset class with approximately 40% of all transactions taking
place in this sector.(5)
The underlying fundamentals in the office sector in Vienna remain very strong. The average vacancy rate in this market
declined to 5.3%(6) at the end of 2016, a 110 basis point decline compared to the end of 2015. Strong demand and limited new
construction of office space were responsible for the year-over-year improvement.
(1) Destatis – Germany’s Federal Statistical Office
(2)
JLL Investment Market Overview Q4 2016
(3)
JLL Office Market Overview Q4 2016
(4) Focus Economics – Austria Economy Data
(5) CBRE Market View – Investments Austria, Q4 2016
(6) CBRE Market View – Vienna Office Market, Q4 2016
Dream Global REIT 2016 Annual Report | 9
SECTION II – EXECUTING THE STRATEGY
OUR OPERATIONS
Occupancy
Overall, the occupancy rate (including committed) was 90.0% at December 31, 2016, an increase of 250 basis points from the
end of 2015 and 90 basis points quarter-over-quarter compared to Q3 2016. Occupancy in our Initial Properties increased
from 81.8% at the end of 2015 to 83.9% at December 31, 2016, due to our leasing efforts as well as property dispositions,
including properties that were sold but had not closed as at December 31, 2016. These properties are classified under “Assets
held for sale” in our financial statements and have been removed from our property-level metrics disclosed under “Our
Operations”, including occupancy and vacancy rates, lease maturities, weighted average remaining lease term (“WALT”) and
rental rates. Occupancy in our Acquisition Properties remained fairly flat at 96.3% at December 31, 2016 compared to 96.4%
at the end of 2015. Quarter-over-quarter, occupancy in our Acquisition Properties slightly increased by 10 basis points due to
strong leasing activity, offset by some acquired vacancy.
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, 2016 and December 31, 2015,
and excludes properties that were acquired or sold in 2016.
Portfolio (%)
Initial Properties
Acquisition Properties(1)
Total portfolio
(1) Reflects the REIT’s Owned Share.
December 31,
2016
83.9
96.3
90.0
Total portfolio
December 31,
2015
81.8
96.4
87.5
Comparative portfolio
December 31,
2016
83.9
96.6
89.5
December 31,
2015
81.8
96.4
88.2
Vacancy schedule
The tables below highlight our leasing activity for the three-month and twelve-month periods ended December 31, 2016.
During Q4 2016, our overall space available for lease decreased by 69,819 square feet. The decrease in vacancy was largely the
result of dispositions and strong leasing, offset by acquired vacancy in our Acquisition Properties. Overall, we achieved a high
retention rate of 81% across the entire portfolio in Q4 2016.
(in square feet)
Available for lease – October 1, 2016
Change in vacancy due to acquisitions
Change in vacancy due to dispositions
Remeasurements
Subtotal – available for lease
Expiries(2)
Early termination and bankruptcies
New leases
Renewals(1)
Future leases committed in the period(2)
Available for lease – December 31, 2016
Initial Properties
1,165,144
—
(51,361)
(10,350)
1,103,433
20,947
10,890
(59,141)
(9,493)
—
1,066,636
For the three months ended December 31, 2016
Total(1)
1,370,514
51,784
(51,361)
(9,962)
1,360,975
248,004
25,411
(69,044)
(191,453)
(73,198)
1,300,695
Acquisition Properties(1)
205,370
51,784
—
388
257,542
227,057
14,521
(9,903)
(181,960)
(73,198)
234,059
(1) Reflects the REIT’s Owned Share.
(2) For the purposes of calculating tenant retention, 10,171 square feet currently included in new and future leases were added back to renewals, reflecting
tenant expansions and related company lease takeovers.
Dream Global REIT 2016 Annual Report | 10
(in square feet)
Available for lease – January 1, 2016
Change in vacancy due to acquisitions
Change in vacancy due to dispositions
Remeasurements
Subtotal – available for lease
Expiries
Early termination and bankruptcies
New leases
Renewals
Future leases committed in the period
Available for lease – December 31, 2016
(1) Reflects the REIT’s Owned Share.
Initial Properties
1,496,262
—
(303,800)
(31,920)
1,160,542
332,409
28,650
(107,389)
(221,015)
(126,561)
1,066,636
Acquisition Properties(1)
187,114
64,148
—
13,083
264,345
1,020,911
42,327
(40,041)
(750,445)
(303,038)
234,059
For the year ended December 31, 2016
Total(1)
1,683,376
64,148
(303,800)
(18,837)
1,424,887
1,353,320
70,977
(147,430)
(971,460)
(429,599)
1,300,695
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 2016(1)(2)
Q3 2016(1)(2)
Q2 2016(1)(2)
Q1 2016(1)(2)
Q4 2015(1)(2)
Q3 2015(1)(2)
Q2 2015(1)(2)
Q1 2015(1)(2)
Occupancy
In-place and committed
occupancy (square feet)
In-place and committed
occupancy
In-place occupancy
(square feet)
In-place occupancy
Leasing activity
Expiries
Early termination and
bankruptcies
New leases
Renewals
Future leases
Net leasing absorption
(before Deutsche Post
terminations)
11,724,651
11,210,306
11,686,420
11,841,472
11,744,793
11,478,813
11,523,398
11,920,554
90.0%
89.1%
88.3%
88.0%
87.5%
86.8%
86.1%
86.0%
11,545,792
88.6%
10,901,405
86.7%
11,386,217
86.0%
11,644,004
86.5%
11,653,086
86.8%
11,403,146
86.2%
11,488,609
85.8%
11,867,554
85.6%
(248,004 )
(397,638 )
(355,812 )
(351,866 )
(269,929 )
(235,519 )
(330,102 )
(232,711 )
(25,411 )
69,044
191,453
73,198
(3,037 )
24,243
288,926
136,353
—
20,932
283,300
57,584
(42,529 )
33,211
207,780
162,464
(179,917 )
52,794
128,283
297,643
(3,584 )
49,346
124,820
71,803
(2,898 )
44,309
225,341
70,626
(15,819 )
21,725
143,968
35,150
60,280
48,847
6,004
9,060
28,874
6,866
7,276
(47,687 )
Deutsche Post leasing activity
Deutsche Post terminations
Expiries of Deutsche Post
extensions
Deutsche Post/Postbank
renewals and extensions
Net leasing absorption
(incl. DP terminations)
Average in-place rent
(€/sq. ft./year)
% change
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(30,363 )
(105,515 )
—
—
60,280
48,847
6,004
9,060
28,874
6,866
(23,087 )
(153,202 )
€10.29
0.3%
€10.26
3.0%
€9.95
3.0%
€9.66
0.5%
€9.61
1.6%
€9.46
0.7%
€9.39
1.4%
€9.26
4.5%
(1) Reflects the REIT’s Owned Share.
(2) Excludes properties held for sale.
Dream Global REIT 2016 Annual Report | 11
In-place rental rates
Average in-place rents increased slightly from €10.26 per square foot/year at September 30, 2016 to €10.29 per square
foot/year at December 31, 2016, largely reflecting dispositions of assets with below-average in-place rents in Q4. Year-over-
year, in-place rents increased by 7% as a result of strong leasing and dispositions of assets with below-average in-place rents in
our Initial Properties portfolio. Average market rents remain above in-place rents as at December 31, 2016, with an overall
spread between in-place rents and market rents of 3.3%. The difference between in-place rents and market rents in our Initial
Properties is approximately 10.6%, allowing for rental rate growth in this segment of our portfolio. For our Acquisition
Properties, market rents exceeded in-place rents by 0.7% as at December 31, 2016.
The table below provides a comparison between in-place rents and estimated market rents in our portfolio as at
December 31, 2016.
(per square foot/year)
Initial Properties – Deutsche Post(1)
Initial Properties – third party
Total Initial Properties(2)
Acquisition Properties(3)
Overall
In $
(as at December 31, 2016)
In-place rent Market rent
8.74
9.58
8.98
20.56
15.06
7.82 $
8.88
8.12
20.42
14.58 $
$
$
In €
(as at December 31, 2016)
In-place rent Market rent
6.17
6.76
6.34
14.51
10.63
5.52 €
6.27
5.73
14.41
10.29 €
€
€
% of market rents
above (below)
in-place rents
11.8
7.8
10.6
0.7
3.3
(1) Includes renewals of space relating to the Deutsche Post 2016 termination rights.
(2) Excludes properties held for sale.
(3) Reflects the REIT’s Owned Share.
Market rent represents management’s best estimate of the net rental rate that would be achieved in a new arm’s length lease
in the event a unit becomes vacant after a reasonable marketing period with an inducement and a 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 on 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, 2016, the WALT of all leases was approximately 4.5 years.
(years)(1)
Initial Properties – Deutsche Post
Initial Properties – third party
Total Initial Properties(3)
Acquisition Properties(4)
Overall
WALT at
December 31, 2016
1.8 (2)
6.1
3.1
5.7
4.5
WALT at
December 31, 2015
2.8
5.7
3.5
5.6
4.4
(1) For the purpose of calculating WALT, month-to-month leases are reflected as leases with a one-year term.
(2) Includes renewals of space relating to the Deutsche Post 2016 termination rights.
(3) Excludes properties held for sale.
(4) Reflects the REIT’s Owned Share.
Dream Global REIT 2016 Annual Report | 12
Leasing and tenant profile
Lease rollover profile
The following table outlines our lease maturity profile by asset type as at December 31, 2016. Our lease maturity profile
remains staggered with less than 7% (excluding space leased on a month-to-month basis) of our portfolio expiring prior
to 2018.
(in square feet)
Initial
Current
vacancy
Month-to-
month
2017
2018
2019
2020
2021+
Total
Properties(1)
1,066,636
170,738
156,230
3,135,331
815,295
285,046
999,274
6,628,550
Acquisition
Properties
Total GLA
Total GLA (%)
Total GRI ($)
Total GRI (%)
234,059
1,300,695
10.0%
57,981
228,719
1.8%
3,313,840
1.8%
299,580
455,810
3.5%
432,394
3,567,725
27.4%
610,661
1,425,956
10.9%
7,895,995 33,877,800 21,538,112
12.0%
18.8%
4.4%
654,847
939,893
7.2%
15,940,867
8.9%
4,107,274
5,106,548 —
38.4%
6,396,796
13,025,346
100.0%
97,339,770 179,906,385
100.0%
54.1%
(1) Includes renewals of space relating to the Deutsche Post 2016 termination rights.
Deutsche Post leases
The majority of the Trust’s leases with Deutsche Post have a ten-year term that commenced on July 1, 2008. Many of the
leases provide Deutsche Post with an option to extend the term until June 30, 2023, as described in more detail below.
Deutsche Post is contractually required to extend a portion of its total leases. At December 31, 2016, leases with Deutsche
Post comprised approximately 30.8% of the portfolio’s GLA and accounted for approximately 18.9% of the portfolio’s GRI.
Below is a detailed expiry schedule for all Deutsche Post leases within our Initial Properties:
Total GLA (sq. ft.)
Number of leases
Deutsche Post lease expiries
2017
2018
2019
2020
2021
2022
2023
Total Deutsche Post lease expiries
14,324
3,055,734
603,730
209,906
57,890
18,920
23,962
3,984,466
1
83
27
12
4
2
2
131
2018 Lease maturity
Management of the Trust is in discussions with Deutsche Post with respect to the tenant’s 2018 lease expiries. As of
December 31, 2016, the Trust had 83 Deutsche Post leases in its initial portfolio with a maturity date of June 30, 2018. These
leases have a combined GLA of approximately 3.1 million square feet, corresponding to annualized GRI from Initial Properties
of approximately €16.7 million, or approximately 13.2% of the portfolio’s GRI as of December 31, 2016.
Drawing on past experience and discussions with the tenant to date, we are confident that we will be able to retain a
significant portion of the expiring GRI. Until the renewal date, we will continue our comprehensive strategy with respect to
this expiry, which includes:
• Ongoing asset recycling plan through the disposition of non-core assets and reinvestment of proceeds into income-
producing assets.
• Active leasing, including proactive lease negotiations with Deutsche Post and Postbank.
• Pursuit of redevelopment opportunities.
Individual asset strategies
The majority of the Initial Properties by value consist of core assets that management believes will provide cash flow and net
asset value (“NAV”) growth over the mid to long term through a combination of retention of Deutsche Post and Postbank, re-
leasing of any vacant space, rezoning, intensification or redevelopment.
Dream Global REIT 2016 Annual Report | 13
The Trust intends to continue disposing of the non-core Initial Properties where it sees an opportunity to recycle capital and
reinvest the proceeds into high-quality assets in its target markets. Since 2012, the Trust has disposed of 155 Initial Properties
for total gross proceeds of approximately €250 million. Subject to the outcome of the lease renewal negotiations with
Deutsche Post, the Trust intends to address up to 45% of GRI expiring in 2018 through dispositions.
Proactive negotiations with Postbank
60 Deutsche Post properties with leases maturing in 2018 have a Postbank branch under a sublease arrangement with
Deutsche Post. While the sublease arrangements have not been disclosed to the REIT, based on prior experience,
management expects that regardless of Deutsche Post renewing its leases in 2018, Postbank will continue to lease space it
currently occupies in our properties as this well-located space is integral to Postbank’s operations.
Historically, the Trust achieved a retention ratio of 100% with respect to Postbank leases for properties subject to termination
rights in 2012, 2014 and 2016. Management estimates that space occupied by Postbank currently represents approximately
10% to 15% of the GRI expiring in 2018.
Contractual lease extension of Deutsche Post
For all Deutsche Post leases maturing on June 30, 2018, the tenant has a renewal option to extend the leases for a fixed term
of five years to June 30, 2023 at its expiring rents. Deutsche Post is required to exercise this option by June 30, 2017. In
addition, by June 30, 2017, Deutsche Post is required to extend certain leases for two additional years to June 30, 2020 (the
“DP Renewal Obligation”), representing approximately one-third of all fixed-term Deutsche Post leases(1) by rent that formed
part of the 2008 sale-and-leaseback transaction involving over 1,200 properties. Management estimates that the total GLA
subject to this contractual lease extension amounts to approximately 1.5 million square feet and the total GRI amounts to
approximately €8.4 million per annum. Although the renewal obligation does not only relate to the REIT’s leases, management
believes that as one of the largest landlords to Deutsche Post, the Trust is well positioned to maximize the number of leases
renewed in our portfolio.
Rent adjustment
The rent payable under the Deutsche Post leases is subject to automatic adjustments (up or down) in relation to the German
CPI. If the CPI 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. The last such adjustment took place in March 2016.
The threshold was met when the CPI reached 107.3 index points. As a result, Deutsche Post’s rent payable under the Deutsche
Post leases increased by 4.3%. The CPI has to exceed 111.5 index points before the next adjustment comes into effect. German
inflation rates increased in 2016, reaching 108.8 index points at year-end. A rent adjustment in 2017 is not expected.
Historic termination rights
Deutsche Post was entitled to terminate some of its leases in 2012, 2014 and 2016, subject to certain limitations and
requirements. The Trust’s experience has been that the retention of Deutsche Post and Postbank has been progressively
increasing with each termination option. As such, management believes that the properties with a longer original contractual
lease terms have greater value to the tenant’s operations:
Of the leases that were terminated, the REIT has had success leasing the space to new tenants. One of the opportunities that
the Deutsche Post terminations afforded the REIT was the ability to take advantage of the large blocks of contiguous vacant
space 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, the GRI generated by the terminated
properties actually improves.
The chart below sets out the last three terminations, including the retention percentage and the percentage of terminated GRI
that was replaced through subsequent leasing.
Expiry
July 2012
July 2014
July 2016
GLA
Retention
GRI replacement
(million square feet)
1.10
1,76
0.39
GLA
0.20
1.49
0.34
%
18%
85%
99%
as at December 31, 2016
90%
94%
n/a
In summary, our experience with previous terminations gives us confidence that the impact of the 2018 terminations can be
mitigated through our recycling strategy, Deutsche Post and Postbank renewals, leasing activity and development.
Dream Global REIT 2016 Annual Report | 14
OUR RESOURCES AND FINANCIAL CONDITION
Investment properties
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. Valuations are
prepared by either external independent appraisers or the REIT’s asset management team. For properties subject to an
external appraiser’s report, the asset management team verifies all major inputs in valuation models and reviews the results
with the external appraiser.
The REIT obtained external appraisals for 100% of the Acquisition Properties in 2016 and for 100% of the Initial Properties
either at December 31, 2016 or December 31, 2015. Changes in the value of our investment properties for the year ended
December 31, 2016 and for the year ended December 31, 2015 are summarized in the table below as follows:
December 31, 2016
December 31, 2015
Amounts per
consolidated
financial
statements
$ 2,394,739 $
Share from
investment
in joint
ventures
Total
518,349 $ 2,913,088 $ 2,081,100 $
Amounts per
consolidated
financial
statements
Share from
investment
in joint
ventures
Total
284,901 $ 2,366,001
229,942
27,094
11,244
1,883
(2,951 )
(2,141 )
(121,335 )
—
1,378
703
309
(259 )
—
—
229,942
28,472
11,947
2,192
(3,210 )
(2,141 )
(121,335 )
237,019
14,375
8,332
1,029
(2,245 )
(252 )
(96,411 )
142,805
181
627
778
(116 )
—
—
379,824
14,556
8,959
1,807
(2,361 )
(252 )
(96,411 )
—
94,669
—
20,171
—
114,840
(69,368 )
79,837
34,684
30,805
(34,684 )
110,642
(14,354 )
(137,204 )
$ 2,481,586 $
—
(14,354 )
(167,534 )
(30,330 )
510,321 $ 2,991,907 $ 2,394,739 $
(11,401 )
152,724
—
(11,401 )
176,408
23,684
518,349 $ 2,913,088
Balance at January 1, 2016
Additions
Acquisitions
Building improvements
Lease incentives and initial direct leasing costs
Change in straight-line rents
Amortization of lease incentives
Disposition of vacant land (Initial Properties)
Reclassified to assets held for sale
POBA joint venture assets reclassified to assets
held for sale
Fair value adjustments
Transaction and other costs related to
acquisition
Foreign currency translation
Balance at December 31, 2016
As at December 31, 2016, the REIT’s portfolio consisted of 173 properties, including 37 Acquisition Properties and 136 Initial
Properties (excluding 11 assets held for sale), with a combined fair value of $3.0 billion (€2.1 billion), an increase from
$2.9 billion (€1.9 billion) at December 31, 2015. The comparative portfolio, which includes properties which were owned on
December 31, 2015 as well as December 31, 2016, represents 92.9%, or approximately $2,779,245 of the portfolio. The
comparative portfolio experienced a 5.8% increase in value since December 31, 2015 as a result of increased occupancy rates
(1.3%), in-place rental rates (7%) and a compression of capitalization rates.
Due to the depreciation of the euro against the Canadian dollar from $1.503 at the end of 2015 to $1.417 at the end of 2016,
the investment property value decreased by $167.5 million as a result of this unrealized foreign exchange loss.
Dream Global REIT 2016 Annual Report | 15
Investment properties held for sale
During the year ended December 31, 2016, we reclassified 38 properties from the Initial Properties portfolio valued at
$121.3 million as assets held for sale. As at December 31, 2016, the REIT had entered into binding purchase and sale
agreements for 11 properties totalling $45.5 million, representing the assets’ approximate fair value. These properties are
reclassified as assets held for sale on the balance sheet and excluded from the value of investment properties.
Balance at January 1, 2016
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
Change in straight-line rents
Dispositions
Dispositions – POBA joint venture assets
Foreign currency translation
Balance at December 31, 2106
For the year
ended
December 31,
2016
32,549
32
2
121,335
—
(1 )
(100,826 )
—
(7,630 )
45,461
$
$
For the year
ended
December 31,
2015
42,898
50
—
96,411
69,368
5
(110,665 )
(69,368 )
3,850
32,549
$
$
Acquisitions
During the year ended December 31, 2016, we completed the following acquisitions:
Office property
Europa-Center, Essen
Werner-Eckert-Str. 14, 16, 18, Munich
Siemens Office Campus, Nuremberg
Europa-Center, Bremen
Transaction costs
Total
Acquired GLA
(sq. ft.)
147,188
63,895
579,777
358,906
1,149,766
Occupancy at
acquisition (%)
96
96
100
86
95
Financed by
Date acquired
mortgage
February 3, 2016
24,884
February 29, 2016
14,108
51,165
October 31, 2016
47,501 December 21, 2016
137,658
Purchase
price
41,474 $
23,170
73,093
77,754
215,491 $
14,451
229,942
$
$
$
Detailed below are the acquisitions completed during the year ended December 31, 2015:
Millerntorplatz 1, Hamburg
Anger Entrée, Erfurt
Zimmer 56, Berlin
Transaction costs
Total
Acquisition through joint venture
Rivergate, Vienna, Austria(2)
(1) Excludes transaction costs of $0.1 million.
(2) Represents the REIT’s 50% interest in Rivergate joint venture.
Acquired GLA
(sq. ft.)
374,477
131,116
169,424
Occupancy at
acquisition (%)
88 $
96
99
$
Purchase
price
133,351 $
27,481
64,678
225,510 $
11,509
237,019
Financed by
Date acquired
mortgage
84,283
February 6, 2015
15,358 September 4, 2015
38,807 October 27, 2015
138,448
Acquired GLA
(sq. ft.)
287,144
Occupancy at
acquisition (%)
94 $
Purchase
price(1)
142,676 $
Financed by
mortgage
Date acquired
78,472 December 16, 2015
Dispositions
During the three months ended December 31, 2016, the REIT disposed of 16 investment properties for an aggregate gross
sales proceeds of $57.0 million (2015 – 11 properties sold for $40.9 million). During the year ended December 31, 2016, the
REIT disposed of 39 properties (2015 – 51 properties) and a parcel of excess land for aggregate gross proceeds of
approximately $103.0 million (2015 – $110.9 million), reflecting the properties’ fair value at the last reporting period prior to
their sale. A portion of the net sales proceeds of $97.5 million was used to reduce our term loan credit facility.
Dream Global REIT 2016 Annual Report | 16
Building improvements
Building improvements represent investments made in our investment properties to ensure our buildings are operating at an
optimal level. During the three months and year ended December 31, 2016, we spent $12.6 million and $28.5 million,
respectively, on building improvements, compared to $7.0 million and $14.6 million during the three months and year ended
December 31, 2015, respectively. The year-over-year increase in building improvements is due to value-add redevelopment
projects initiated in 2016. 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. They generally help to attract and put in place high value tenancies or to improve the quality of the asset. 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.
During the three months and year ended December 31, 2016, we incurred $3.5 million and $11.9 million, respectively, of lease
incentives and initial direct leasing costs, compared to $2.4 million and $9.0 million for the three months and year ended
December 31, 2015, respectively. As at December 31, 2016, we had outstanding initial direct leasing cost commitments of
$15.4 million, for lease terms in excess of ten years on average, including commitments related to a 20-year lease deal with
the City of Hamburg for the entire 172,000 square feet of space at our property located at Hammer Strasse 30–34 in Hamburg.
Investment in joint ventures and associates
As at December 31, 2016, the carrying amount of the REIT’s investment in joint ventures and associates was $265.3 million
(December 31, 2015 – $272.7 million).
The Trust participates in partnerships (“joint ventures”) with respect to a number of investment properties and accounts for its
interests using the equity method in the consolidated financial statements. The discussion of our operations includes our
share of the joint ventures. Refer to the section “Non-GAAP measures and other disclosures” for a reconciliation to the
consolidated financial statements.
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
Liebknechtstr. 33/35, Heßbrühlstr. 7 (Officivm)
Rivergate joint venture
Dream Technology Ventures LP
Location
Berlin, Germany
Stuttgart, Germany
Frankfurt, Germany
Düsseldorf, Germany
Frankfurt, Germany
Hamburg, Germany
Munich, Germany
Stuttgart, Germany
Vienna, Austria
Toronto, Canada
December 31,
2016
Ownership interest (%)
December 31,
2015
50
50
50
50
50
50
50
50
50
10
50
50
50
50
50
50
50
50
50
n/a
As at December 31, 2016, the REIT has a total of eight Acquisition Properties under a co-ownership arrangement with POBA
(“POBA joint venture”) and one Acquisition Property under a similar co-ownership agreement with an Asian sovereign wealth
fund (“Rivergate joint venture”). Pursuant to these arrangements, the REIT does not have control of these property
subsidiaries and, as such, has classified its 50% interest in the entities as investment in joint ventures and accounted for the
investment using the equity method.
During the year ended December 31, 2016, the fair value of the investment properties held through joint ventures increased
by $40.4 million. The REIT’s 50% share of this increase was $20.2 million, which was reflected in the investment in joint
ventures as at December 31, 2016.
During the year ended December 31, 2016, the REIT recorded fee income relating to joint ventures of $5.2 million (year ended
December 31, 2015 – $3.2 million), which is included in interest and other income.
The investment properties held through the Trust’s joint ventures are consistent in terms of the class and type of properties
held in the Trust’s portfolio.
Dream Global REIT 2016 Annual Report | 17
OUR CAPITAL
Liquidity and capital resources
The REIT’s primary sources of capital include cash generated from operating activities, a credit facility, mortgage financing and
refinancing, and equity or 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
generated from (utilized in) operations, draws on the credit facilities, debt refinancings and, as growth requires and when
appropriate, new equity or debt issues.
As of December 31, 2016 and at the REIT’s Owned Share, our current liabilities exceed our current assets by $145.5 million,
which includes the draw of $87.1 million on our revolving credit facility as at December 31, 2016. Typically, real estate entities
seek to address liquidity needs by having a balanced debt maturity schedule and revolving credit facilities. We are able to use
our credit facility on short notice, which eliminates the need to hold a significant amount of cash and cash equivalents on
hand. Working capital balances fluctuate significantly from period to period depending on the timing of receipts and
payments. Scheduled mortgage principal repayments that are due within one year amount to $15.6 million, and a
$31.9 million mortgage is maturing within one year. A total of $26.8 million of our term loan credit facility is payable within
one year in connection with assets sold or held for sale, and will be financed with proceeds from dispositions. The debt
maturities are typically refinanced with mortgages of terms between five and ten years. Amounts payable outstanding at the
end of any reporting period depend primarily on the timing of leasing costs, capital expenditures incurred as well as the
impact of transaction costs incurred on any acquisitions or dispositions completed during the reporting period. The REIT fully
expects that it will be able to meet its debt and payable obligations on their respective due dates.
Debt
Total debt
Less debt related to:
Investment in joint ventures
Debt (per consolidated financial statements)
Mortgage debt
Less mortgage debt related to:
Investment in joint ventures
Mortgage debt (per consolidated financial statements)
December 31,
2016
1,662,385 $
December 31,
2015
1,647,967
262,923
1,399,462 $
267,075
1,380,892
December 31,
2016
1,286,053 $
December 31,
2015
1,108,176
262,923
1,023,130 $
267,075
841,101
$
$
$
$
Debt strategy
Our debt strategy is to obtain non-recourse secured mortgage financing, with a term to maturity that is appropriate in relation
to the lease maturity profile of our portfolio, as well as to utilize the unsecured debt market. Having received Moody’s
investment-grade issuer rating, the Trust will be able to fund acquisitions and maturing debt with unsecured debentures,
creating an unencumbered pool of assets. Our objective 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 floating rate credit facilities. We operate within
a targeted debt-to-gross book value (net of cash) range of 50% to 60%. As at December 31, 2016, the debt-to-gross book value
ratio (net of cash) was 52%, a decrease from 54% at December 31, 2015, largely resulting from the equity issue completed in
August 2016.
Dream Global REIT 2016 Annual Report | 18
The key performance indicators in the management of our debt are as follows:
Financing activities
Weighted average interest rate(1)(2)
Weighted average effective interest rate(2)(3)
Level of debt (debt-to-gross book value, net of cash, net of Debentures)(2)(4)
Level of debt (debt-to-gross book value, net of cash) at period-end(2)(4)
Average level of debt, net of cash(2)(4)
Interest coverage ratio(2)(4)
Debt – average term to maturity (years)(2)
For the year
ended
December 31,
2016
For the year
ended
December 31,
2015
1.85 %
2.18 %
52 %
52 %
53 %
2.95 times
5.7
2.49 %
3.02 %
48 %
54 %
52 %
3.08 times
5.0
(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) Weighted average effective interest rate is calculated as the weighted average face rate of interest net of amortization of fair value adjustments and
financing costs of all interest bearing debt.
(4) Level of debt and interest coverage ratio are non-GAAP measures. Calculations for each reconciled to IFRS balances can be found under “Non-GAAP
measures and other disclosures”.
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 ended December 31, 2016 is 2.95 times and reflects our ability to cover
interest expense requirements. The interest coverage ratio dropped slightly year-over-year, due to the new mortgages in
connection with acquisitions completed in 2016 and the use of the revolving credit facility. On a Q4 2016 annualized basis, the
interest coverage ratio is 3.55 times, resulting from interest savings on the repayment of convertible debentures and the
refinancing of mortgages.
Financing activities
We finance our ownership of assets using equity as well as conventional mortgage financing, term debt, floating rate credit
facilities. The credit rating will allow the REIT to issue unsecured debt in the future.
Equity issue
On August 6, 2016, we completed a public offering of 10,867,500 Units, including an over-allotment option of 1,417,500 Units,
all of which were sold to the syndicate of underwriters at a price of $9.00 per unit. The Trust received gross proceeds of
$97.8 million.
New debt
During the year ended December 31, 2016, we obtained the following new mortgages:
Property
Debt on new acquisitions
Friedrichstraße 45, 47 (Europa-Center), Essen
Werner-Eckert-Str. 14, 16, 18, Munich
Gleiwitzer Str. 555 (Siemens Office Campus), Nuremberg
Flughafenallee 13–17 (Europa-Center), Bremen
Additional debt on existing properties
Greifswalder Str. 154–156, Berlin
Reichskanzler-Müller-Str. 21–2, Mannheim
Speicherstrasse 55, Frankfurt
Total
(1) Reflects the REIT’s Owned Share.
$
$
Mortgage
($000s)
Mortgage
(€000s) Face rate
Date of funding
Date of maturity
24,884 €
14,108
51,165
47,501
16,260
9,600
34,825
34,000
January 31, 2026
1.62 %
February 3, 2016
1.07 % February 29, 2016
February 28, 2023
1.20 % October 31, 2016 September 30, 2024
1.36 % December 21, 2016 December 21, 2023
16,252
3,364
4,752
11,200
2,307
3,258
162,026 € 111,450
1.40 %
1.75 %
1.75 %
August 17, 2016 December 7, 2022
March 13, 2023
August 25, 2016
March 13, 2023
August 25, 2016
On August 25, 2016, the Trust increased the loan of an existing mortgage on Speicherstrasse 55 in Frankfurt, a property in
which we have a 50% interest held in a joint venture with POBA, by $9.5 million (€6.5 million) at a fixed rate of 1.75%, which
reduced the overall face rate of the entire mortgage to 3.08% from 3.32%. Our share of the loan increase was $4.8 million
(€3.3 million).
Dream Global REIT 2016 Annual Report | 19
In addition, the REIT has completed the following 14 refinancings in the period from August 26, 2016 to December 27, 2016:
Oasis III, Stuttgart
Property Name
Schlossstrasse 8, Hamburg
Am Sandtorkai 37, Hamburg
Bertoldstrasse 48/Sedanstrasse 7, Frankfurt
Werner-Eckert-Straße, München
Lörracher Strasse 16/16a, Frankfurt
Am Stadtpark 2 (Parcside), Nuremberg
Westendstrasse 160–162/Barthstrasse, Munich
Feldmühleplatz 1, Düsseldorf
ABC-Strasse 19, Hamburg(1)
Vordernbergstr. 6/Heilbronner, Stuttgart(1)
Leopoldstrasse 252, Munich
Dillwächterstrasse 5/Tübinger Strasse 11, Munich
Hammer Strasse 30–34, Hamburg
Total ($)
Total (€)
(1) Reflects the REIT’s Owned Share.
New maturity date
Financing date
August 26, 2016
August 4, 2025 $
August 4, 2025
August 26, 2016
August 4, 2024
August 26, 2016
August 31, 2026
September 1, 2016
February 28, 2023
September 1, 2016
August 31, 2026
September 1, 2016
August 31, 2026
September 1, 2016
August 31, 2026
September 1, 2016
September 27, 2016 September 22, 2023
August 4, 2024
August 26, 2016
August 31, 2026
September 1, 2016
December 9, 2016 November 30, 2024
December 9, 2016 November 30, 2024
December 27, 2016 December 27, 2024
$
€
In Canadian $
New loan
amount
38,121 $
37,103
28,373
32,278
14,525
8,803
23,622
26,850
80,185
35,866
13,938
31,913
19,425
42,249
433,251 $
298,650 €
Old mortgage
discharged
Net
proceeds
12,205
25,916 $
13,704
23,399
5,369
23,004
6,793
25,485
2,272
12,253
1,618
7,185
2,882
20,740
6,245
20,605
13,795
66,390
6,616
29,250
2,484
11,454
11,785
20,128
5,631
13,794
32,437
9,812
332,040 $ 101,211
70,046
228,604 €
The 14 refinancings decreased the weighted average face rate of such mortgages to 1.29% from 2.43% and extended the
average maturity to 8.4 years from 2.7 years.
The new proceeds of $263.2 million from our mortgage financing and refinancing activities in 2016, together with proceeds
from the August 6, 2016 equity offering, were deployed in the redemption of the Debentures on September 15, 2016 and
used for financing new acquisitions.
Debt composition
Term loan credit facility(1)
Revolving credit facility
Mortgage debt(1)(2)
Debentures(3)
Total
Percent
$
$
$
Variable
289,193 $
87,139
36,618
—
December 31, 2016
Total
289,193 $
87,139
1,286,053
—
Fixed
—
—
1,249,435
—
412,950 $ 1,249,435 $ 1,662,385 $
75%
100%
25%
Variable
355,325 $
29,908
39,267
—
Fixed
—
—
1,068,909
154,558
424,500 $ 1,223,467 $
26%
74%
$
December 31, 2015
Total
355,325
29,908
1,108,176
154,558
1,647,967
100%
(1) Balance shown is net of deferred financing costs.
(2) Includes the REIT’s share of mortgages related to the joint ventures.
(3) Balance shown is net of deferred financing costs and mark-to-market adjustments.
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. On December 14, 2015, we successfully refinanced the Facility with a new, interest-
only facility with a major U.S. financial institution (the “New Facility”) for gross proceeds of $369.5 million (€244.1 million) and
fully repaid and discharged the remaining outstanding balance under the Facility. The New Facility has a term of five years and
a variable interest rate calculated and payable quarterly at a rate equal to the aggregate of the three-month EURIBOR plus a
margin of 225 basis points. Pursuant to the requirement of the New Facility, we purchased EURIBOR interest rate caps with a
weighted average strike rate of 1.03% to cover 95% of the New Facility. Costs relating to the New Facility were $12.7 million
(€8.4 million).
As at December 31, 2016, the weighted average rate of the New Facility was 2.25%. Including financing costs, the effective
interest rate under the Facility was 3.16%.
Dream Global REIT 2016 Annual Report | 20
The New Facility agreement requires that at each interest payment date, and each date of prepayment of the New Facility, the
interest coverage ratio be equal to or above 2.35 times and that the loan-to-value ratio does not exceed 60%. As at
December 31, 2016, the Trust was in compliance with these loan covenants.
There are no prepayment fees on property dispositions for up to 25% of the portfolio value within the first two years of the
loan and up to 40% of the portfolio value during the term of the loan. On property dispositions, 110% of the loan amount
allocated to a disposed property has to be repaid. The prepayment amount exceeding the established thresholds for property
dispositions within the first two years of the loan is subject to a prepayment fee equal to a yield maintenance fee.
Commencing in year three, a prepayment fee of 2.0% is payable, which subsequently drops to 1.5% in year four, and no
prepayment fee is payable in the final year of the New Facility.
During the year ended December 31, 2016, the Trust repaid $48.7 million (€34.1 million) in connection with the disposition of
the 39 properties, in accordance with the terms of the New Facility.
Revolving credit facility
On November 20, 2015, the REIT obtained lender approval to increase the principal amount of the revolving credit facility from
€75 million to €100 million, with no change in the covenants or interest rate spreads. The interest rate on Canadian dollar
advances is prime plus 200 basis points or bankers’ acceptance rates plus 300 basis points. The interest rate for euro advances is
300 basis points over the three-month EURIBOR rate. In addition, the term was extended by one year to September 25, 2017. As
at December 31, 2016, there was a drawn balance of $87.1 million (€61.50 million) on the revolving credit facility. There was also
an undrawn letter of credit commitment for €1.2 million against the facility as at December 31, 2016.
Debentures
On September 15, 2016, we redeemed all of the $161.0 million principal outstanding of the Debentures and repaid accrued
interest of $1.1 million, totalling $162.1 million in cash.
The conversion feature of the Debentures was remeasured in each reporting period to fair value, with changes in fair value
recorded in comprehensive income. The Trust recorded a fair value gain of $nil and $1.4 million, respectively, for the three and
twelve months ended December 31, 2016, attributed to the conversion feature.
Debt maturity profile
The table below highlights our debt maturity profile:
2017
2018
2019
2020
2021
2022 and thereafter
Financing costs
Total(1)
(1) Includes the REIT’s share of mortgages related to the joint ventures.
Scheduled
principal
repayments on
non-matured debt
Debt maturities
$
$
145,882 $
—
—
384,175
92,123
943,795
1,565,975 $
15,592 $
16,239
17,927
16,404
15,916
35,889
117,967
$
Total
161,474
16,239
17,927
400,579
108,039
979,684
1,683,942
(21,557 )
1,662,385
Dream Global REIT 2016 Annual Report | 21
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 consolidated financial statements.
As at December 31, 2016, 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
918
612
—
1,530
$
During the three months and year ended December 31, 2016, the Trust paid $0.3 million and $1.0 million in minimum lease
payments, respectively, which have been included in comprehensive income for the period.
Foreign currency contracts
In order to manage the exposure to currency risk of unitholders, the Trust has entered into foreign exchange forward
contracts. At December 31, 2016, 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 to market the contracts quarterly and recorded an unrealized gain of $11.3 million and $20.1 million for
the three months and year ended December 31, 2016, respectively.
At December 31, 2016, the Trust had foreign exchange forward contracts to sell €185.8 million in total from January 2017 to
December 2019 at an average exchange rate of $1.513 per euro.
The table below highlights the forward contracts outstanding as at December 31, 2016:
Contracts by quarter
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Total
Equity
The table below highlights our outstanding equity:
Units
Hedge value
17,559
17,600
17,214
17,508
16,884
17,304
17,023
17,155
11,799
11,673
11,854
12,179
185,752
€
€
Weighted average
hedge rate
1.453
1.448
1.484
1.462
1.520
1.487
1.515
1.499
1.601
1.596
1.600
1.600
1.513
Number of Units
125,456,199 $
December 31, 2016
Amount
1,357,724
Unitholders’ equity
December 31, 2015
Amount
1,289,158
Number of Units
113,024,465 $
Dream Global REIT 2016 Annual Report | 22
Units
Our amended and restated declaration of trust dated May 7, 2014 (the “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. No Special Trust Units are currently outstanding.
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 and 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, 2015
Units issued pursuant to public offerings
Units issued pursuant to the DUIP
Units issued pursuant to the DRIP
Conversion of Debentures
Total Units outstanding on December 31, 2016
Units issued pursuant to the DUIP
Units issued pursuant to the DRIP on January 15, 2017
Total Units outstanding on January 31, 2017
Units
113,024,465
10,867,500
107,400
1,454,911
1,923
125,456,199
57,135
118,761
125,632,095
For the year ended December 31, 2016, 107,400 Units were issued pursuant to the DUIP to trustees, officers and employees
(December 31, 2015 – 61,920 Units). A total of 2,893,914 deferred trust units and income deferred trust units were
outstanding as at December 31, 2016.
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. In order to manage the exposure to currency risk of
unitholders, the Trust has entered into foreign exchange forward contracts.
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, 2016, approximately 13.4% of our total Units were enrolled in the Distribution Reinvestment and Unit Purchase
Plan (“DRIP”).
Annualized distribution rate
Monthly distribution rate
Period-end closing unit price
Annualized distribution yield
on closing unit price
2016
0.80 $
December 31,
2015
0.80 $
March 31,
2015
$
0.80
$ 0.0667 $ 0.0667 $ 0.0667 $ 0.0667 $ 0.0667 $ 0.0667 $ 0.0667 $ 0.0667
9.84
$
September 30,
2015
0.80 $
June 30,
2015
0.80 $
2016
0.80 $
2016
0.80 $
2016
0.80 $
9.01 $
8.71 $
9.45 $
9.38 $
9.93 $
8.66 $
8.84 $
8.47 %
9.24 %
8.88 %
9.05 %
8.53 %
8.06 %
9.19 %
8.13 %
Dream Global REIT 2016 Annual Report | 23
For the quarter ended December 31, 2016, distributions declared amounted to $25.1 million. Of this amount, $3.2 million was
reinvested in additional Units pursuant to the DRIP, resulting in a cash payout ratio of 87.2%. Distributions declared for the
year ended December 31, 2016 were $94.7 million. Of this amount, $12.4 million was reinvested in additional Units pursuant
to the DRIP, resulting in a cash payout ratio of 86.9%.
Three months ended December 31, 2016
Year ended December 31, 2016
Declared
amounts
4% bonus
distribution
Total
Declared
amounts
4% bonus
distribution
2016 distributions
Paid in cash or reinvested in Units
Payable at December 31, 2016
Total distributions
2016 reinvestment
Reinvested to December 31, 2016
Reinvested on January 15, 2017
Total distributions reinvested
Distributions paid in cash
Reinvestment to distribution ratio
(for the period)
Cash payout ratio
$
$
$
$
$
16,704 $
8,364
25,068 $
2,125 $
1,078
3,203 $
21,865
12.8%
87.2%
85 $
—
85 $
85 $
43
128 $
16,789 $
8,364
25,153 $
86,381 $
8,364
94,745 $
2,210 $
1,121
3,331 $
$
11,303 $
1,078
12,381 $
82,364
452 $
—
452 $
452 $
43
495 $
13.1%
86.9%
Total
86,833
8,364
95,197
11,755
1,121
12,876
Normal course issuer bid
On December 18, 2015, the Trust renewed its normal course issuer bid (the “Bid”). No purchases have been made under the
Bid, which expired on December 17, 2016, and to date, the Trust has not renewed its Bid.
Dream Global REIT 2016 Annual Report | 24
OUR RESULTS OF OPERATIONS
Basis of accounting
Our discussion of results of operations includes our proportionate 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 gain to investment properties
Fair value gain (loss) to financial instruments
Internal direct leasing costs
Debt settlement costs
Loss on sale of investment properties
Income before income taxes
Current income tax expense
Deferred income tax expense
Provision for income taxes
Net income
Total net income for the period attributable to:
Unitholders of the Trust
Shareholders of subsidiaries
Net income
Foreign currency translation adjustments for the period
attributable to:
Other operations
Investment in joint ventures
Unitholders of the Trust
Shareholders of subsidiaries
Comprehensive income for the period attributable to:
Unitholders of the Trust
Shareholders of subsidiaries
$
Three months ended December 31,
2015(1)
55,081 $
(17,389 )
37,692
2016(1)
56,250 $
(17,481 )
38,769
Year ended December 31,
2015(1)
223,169
(70,314 )
152,855
2016(1)
235,312 $
(75,366 )
159,946
1,416
5
1,421
(1,379 )
(5,963 )
(21 )
(9,247 )
(16,610 )
19,223
10,553
(716 )
(3,253 )
(2,547 )
23,260
46,840
(157 )
(15,968 )
(16,125 )
30,715 $
3,500
4
3,504
(1,412 )
(5,063 )
(31 )
(11,434 )
(17,940 )
8,339
19
8,358
(6,031 )
(23,866 )
(111 )
(46,988 )
(76,996 )
25,587
(568 )
(556 )
(6,074 )
(108 )
18,281
41,537
(627 )
(3,332 )
(3,959 )
37,578 $
100,486
15,190
(3,181 )
(23,295 )
(5,482 )
83,718
175,026
(475 )
(33,217 )
(33,692 )
141,334 $
7,685
20
7,705
(5,630 )
(18,616 )
(118 )
(44,255 )
(68,619 )
99,241
(11,034 )
(2,471 )
(6,074 )
(2,893 )
76,769
168,710
(999 )
(21,885 )
(22,884 )
145,826
29,870 $
845
30,715
37,188 $
390
37,578
139,733 $
1,601
141,334
144,747
1,079
145,826
$
$
(44,386 )
(9,954 )
(54,340 )
(430 )
(54,770 )
7,726
1,481
9,207
115
9,322
(67,354 )
(15,644 )
(82,998 )
(650 )
(83,648 )
84,519
12,775
97,294
670
97,964
(24,470 )
415
(24,055 ) $
46,395
505
46,900 $
56,735
951
57,686 $
242,041
1,749
243,790
$
(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, 2016 were converted at $1.438:€1 and $1.466:€1, respectively; for 2015, the three- and twelve-month periods ended
December 31, 2015 were converted at $1.461:€1 and $1.419:€1, respectively.
Dream Global REIT 2016 Annual Report | 25
Investment properties revenue
Investment properties revenue includes 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 €39.1 million ($56.3 million), an increase of €1.4 million ($1.2 million
including foreign exchange effect), or 3.6%, over the prior year comparative quarter. This increase was net of a €2.5 million
($3.7 million) reduction in revenue as a result of a lease expiry and a tenant insolvency with respect to two former top ten
tenants (Maersk, whose lease expired at the beginning of 2016, and Imtech, who declared insolvency in August 2015 and
vacated its space in Q2 2016), lower amounts recovered from tenants and the impact of Initial Properties dispositions in 2015
and 2016. Excluding the impact of these factors, investment properties revenue for the quarter increased by €3.9 million ($4.9
million) over the prior year comparative quarter as a result of acquisitions completed in 2015 and 2016, an increase in rental
rates in our Deutsche Post portfolio due to a CPI adjustment, and solid leasing performance.
For the year ended December 31, 2016, investment property revenue was €160.5 million ($235.3 million), an increase of
€3.0 million ($12.1 million increase including foreign exchange effect), or 1.9%, over the prior year comparative period.
Excluding the effects of Maersk’s lease expiry, Imtech’s insolvency and dispositions completed in 2015 and 2016, investment
properties revenue in 2016 increased by €14.5 million ($27.9 million) over the prior year, reflecting the impact of acquisitions
completed in 2015 and 2016, an increase in rental rates in our Deutsche Post portfolio due to a CPI adjustment, and solid
leasing performance.
Investment properties operating expenses
Investment properties operating expenses comprise 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. Investment properties
operating expenses fluctuate with changes in occupancy levels and levels of repairs and maintenance.
Investment properties operating expenses for the quarter were €12.1 million ($17.5 million), an increase of €0.2 million
($0.1 million including foreign exchange effect), or 1.9%, over the prior year comparative quarter, mainly due to acquisitions
completed in 2015 and 2016, partially offset by dispositions completed in 2015 and 2016. The lease expiry of Maersk and the
insolvency of Imtech did not have a significant impact on investment properties operating expenses in Q4 2016 compared to
Q4 2015. For the year ended December 31, 2016, investment properties operating expenses were €51.4 million
($75.4 million), an increase of €1.8 million ($5.1 million including foreign exchange effect), or 3.7%, over the prior year, for
similar reasons that caused the quarterly increase.
Net operating income
Investment properties revenue
Investment properties operating expenses
Net operating income(1)
Three months ended December 31,
2015
37,692 €
(11,912 )
25,780 €
2016
39,064 €
(12,139 )
26,925 €
€
€
Year ended December 31,
2016
2015
157,493
160,466 €
(51,434 )
(49,612 )
107,881
109,032 €
(1) Net operating income is a non-GAAP measure. See “Non-GAAP measures and other disclosures” for the definition of NOI.
Net operating income for the quarter was €26.9 million ($38.8 million), an increase of €1.1 million (increase of $1.1 million
including foreign exchange effect), or 4.4%, over the comparative quarter in the prior year. This increase was net of a
€1.6 million ($2.4 million) NOI decrease as a result of Maersk’s lease expiry, the insolvency of Imtech, lower amounts
recovered from tenants and the dispositions in 2015 and 2016. Excluding the impact of these factors, NOI for the quarter
increased by €2.7 million ($3.5 million) over the prior year comparative quarter as a result of acquisitions completed in 2015
and 2016, an increase in rental rates in our Deutsche Post portfolio due to a CPI adjustment, and solid leasing performance.
For the year ended December 31, 2016, net operating income was €109.0 million ($159.9 million), a €1.2 million increase
($7.1 million increase including foreign exchange effect) over the prior year comparative period. Excluding the effects of the
Maersk lease expiry, the Imtech insolvency, lower amounts recovered from tenants and dispositions completed in 2015 and
2016, NOI for the year ended December 31, 2016 increased by €8.5 million ($17.2 million) over the prior year, reflecting the
impact of acquisitions completed in 2015 and 2016, an increase in rental rates in our Deutsche Post portfolio due to a CPI
adjustment, and solid leasing performance.
Dream Global REIT 2016 Annual Report | 26
The table below summarizes our revenue and operating expenses in Canadian dollars:
Initial Properties
Acquisition Properties
Net operating income(1)
Three months ended December 31,
2015
11,303 $
26,389
37,692 $
2016
8,361 $
30,408
38,769 $
$
$
Year ended December 31,
2016
2015
48,981
42,851 $
103,874
117,095
152,855
159,946 $
(1) Net operating income is a non-GAAP measure. See “Non-GAAP measures and other disclosures” for the definition of NOI and a reconciliation to net rental
income.
Interest and other income
Interest and other income comprises interest earned on notes receivable, the management fees and loan facility income
earned with respect to the POBA and Rivergate joint ventures, as well as other fees. Except for the fees earned from our third-
party joint venture agreements, the income included in interest and other income is not necessarily of a recurring nature and
the amounts may vary quarter-over-quarter.
Interest and other income was $1.4 million and $8.3 million for the three months and year ended December 31, 2016,
respectively, representing a $2.1 million decrease and a $0.7 million increase compared to the prior year comparative periods.
Other income in 2015 was higher as a result of a $3.5 million compensation payment from a vendor for vacant spaces in the
Acquisition Properties, of which $1.7 million was received in the last quarter of 2015. Higher fees generated from managing
joint ventures contributed a $0.1 million and $0.8 million increase, respectively, for the three months and year ended
December 31, 2016. Timing of refinancing activities generated a $0.4 million decrease and a $1.3 million increase in income
from mortgage refinancing services provided to POBA for the three months and year ended December 31, 2016, respectively,
pursuant to terms of the POBA loan amortization facility. During the three months and year ended December 31, 2016, we
also received higher lease termination fees and other payments of $0.1 million and $2.1 million, respectively, which are non-
recurring in nature.
Portfolio management
Our portfolio management team comprises the employees of our advisory subsidiaries in Germany and Luxembourg who are
responsible for providing operational management services for the investment properties, including leasing activities,
oversight of the third-party property managers and facility managers, reporting and compliance.
Portfolio management expense was $1.4 million and $6.0 million, respectively, for the three months and year ended
December 31, 2016, being $nil and $0.4 million higher than the amounts incurred in the comparative periods in 2015,
primarily due to currency fluctuations of the euro in the comparative periods.
General and administrative
General and administrative expenses totalled $6.0 million and $23.9 million, respectively, for the three months and year
ended December 31, 2016, representing an increase of $0.9 million and $5.3 million, respectively, over the comparative
periods in 2015. The increases mainly resulted from higher corporate and compliance costs and asset management fees due
to completed acquisitions.
Interest expense
Interest expense was $9.2 million for the quarter ended December 31, 2016, a decrease of $2.2 million compared to the prior
year comparative quarter. The decrease was a result of interest cost savings arising from the redemption of convertible
debentures and mortgages refinanced in the second half of 2016, partially offset by the amortization of higher deferred
financing costs associated with the term loan credit facility refinanced in December 2015, and higher drawn balances on the
revolving credit facility.
Interest expense was $47.0 million for the year ended December 31, 2016, an increase of $2.7 million compared to the same
period last year. Excluding the impact of a higher euro on average in 2016 compared to 2015, interest expense increased by
$1.5 million. This comprised a $1.5 million increase in mortgage interest resulting from 2015 and 2016 acquisitions,
$1.5 million of higher deferred financing costs associated with the term loan credit facility, and $1.7 million of interest
resulting from higher drawn balances on the revolving credit facility during the year, offset by the redemption of convertible
debentures on September 15, 2016 which decreased interest expenses by $3.2 million.
Dream Global REIT 2016 Annual Report | 27
Fair value gain (loss) to investment properties
For the three months ended December 31, 2016, a gain of $19.2 million was recognized compared to a gain of $25.6 million in
the comparative quarter last year. The gain in the current quarter was primarily driven by a $47.6 million increase in the fair
value of the Acquisition Properties, primarily due to capitalization rate compression and improved leasing, partially offset by a
$9.5 million fair value loss related to transaction costs of properties acquired during the quarter, an $11.4 million fair value
adjustment on the Initial Properties, and a fair value loss of $7.5 million on investment properties held for sale.
For the year ended December 31, 2016, a gain of $100.5 million was recognized compared to a gain of $99.2 million in the
comparative period last year. The gain in the current year was primarily driven by a $138.9 million increase in the fair value of
the Acquisition Properties, largely due to capitalization rate compression and improved leasing, a $1.4 million increase in fair
value of a plot of surplus land adjacent to an existing Initial Property, partially offset by a $14.4 million fair value loss related to
transaction costs of properties acquired during the year, a $12.5 million fair value adjustment on the Initial Properties due to
increases in capitalization rates, and a fair value loss of $12.9 million on investment properties held for sale.
Fair value gain (loss) to financial instruments
For the three months ended December 31, 2016, we incurred a gain in the fair value of financial instruments of $10.6 million
compared to a loss of $0.6 million in the prior comparative period. The fair value adjustments in the quarter mainly comprise
the following components:
• A $0.6 million gain was recognized on the fair value change in the interest rate cap as a result of an increase in the
forward price of interest rates. A $4.1 million gain was recognized in the comparative period last year due to the
settlement of all outstanding swap contracts on repayment of the old term loan credit facility in mid-December 2015;
• No fair value change was recognized on the conversion feature of the Debentures, as the Debentures were redeemed on
September 15, 2016, compared to a loss of $3.0 million in the same period in 2015;
• An unrealized gain of $11.3 million was recognized related to our foreign currency forward contracts due to the
depreciation of the euro compared to the Canadian dollar since the end of Q3 2016, versus a $1.7 million unrealized loss
during the comparative quarter due to an appreciation of the euro compared to the Canadian dollar; and
• A $1.3 million loss was recognized related to our DUIP, mainly reflecting an increase in the market price of our Units
compared to $nil in the same period in 2015.
For the year ended December 31, 2016, we incurred a gain in the fair value of financial instruments of $15.2 million compared
to a loss of $11.0 million in the prior comparative period. The fair value adjustments in the period mainly comprise the
following components:
• A $2.8 million loss was recognized on the fair value change in the interest rate cap as a result of a decrease in the forward
price of interest rates. A $3.8 million gain was recognized in the comparative period last year due to the settlement of all
outstanding swap contracts on repayment of the old term loan credit facility in mid-December 2015;
• A $1.4 million fair value gain was recognized on the conversion feature of the Debentures, mainly reflecting a decrease in
the credit spread and a decrease in the risk-free interest rate applicable to our Units, compared to a gain of $0.1 million in
the same period in 2015;
• An unrealized gain of $20.1 million was recognized related to our foreign currency forward contracts due to the
depreciation of the euro compared to the Canadian dollar since the end of 2015, versus a $13.4 million unrealized loss
during the comparative period due to an appreciation of the Canadian dollar compared to the euro; and
• A $3.5 million loss was recognized related to our DUIP, mainly reflecting an increase in the market price of our Units
compared to a loss of $1.5 million in the same period in 2015.
Debt settlement costs
For the three months ended December 31, 2016, we incurred debt settlement costs of $3.3 million compared to $6.1 million
in the prior comparative period. The debt settlement costs in the quarter mainly comprise the following components:
• $2.4 million was recognized on refinancing of three mortgages during the quarter, comprising $2.0 million in cancellation
charges and $0.4 million of unamortized deferred financing costs in the current quarter, compared to $0.6 million
recognized on refinancing of mortgages during the same quarter last year; and
Dream Global REIT 2016 Annual Report | 28
• $0.9 million was recognized as unamortized deferred financing costs with respect to term loan facility repayments on the
sale of Initial Properties and was written off in the current quarter, compared to $5.5 million recognized on the interest
rate swap settlement in connection with the refinancing of the old term loan credit facility in the same quarter last year.
For the year ended December 31, 2016, we incurred debt settlement costs of $23.3 million compared to $6.1 million in the
prior year. The debt settlement costs in the current year mainly comprise the following components:
• $6.1 million was recognized on redemption of the Debentures on September 15, 2016, comprising $2.2 million of
unamortized deferred financing costs, $2.6 million of an unamortized initial discount on the Debentures, and a
$1.3 million loss on redemption in connection with the conversion feature of the Debentures;
• $15.8 million was recognized on refinancing of 14 mortgages during the period, comprising $13.5 million of cancellation
charges and $2.3 million of unamortized deferred financing costs; and
• $1.4 million was recognized as unamortized deferred financing costs with respect to term loan facility repayments on the
sale of Initial Properties and was written off.
Internal direct leasing costs
A total of $0.7 million and $3.2 million of internal leasing staff costs for the three months and year ended December 31, 2016
have been incurred. In the comparative periods in 2015, $0.6 million and $2.5 million were incurred, respectively. The increase
of $0.2 million and $0.7 million for the three months and year ended December 31, 2016, respectively, reflect an appreciation
of the euro compared to the Canadian dollar as well as additional resources needed to support increased leasing volumes in
connection with growing leasing activities.
Loss on sale of investment properties
Loss on sale of investment properties for the quarter was $2.5 million, compared to a $0.1 million loss on sale of investment
properties in the same quarter last year. For the year ended December 31, 2016, loss on sale of investment properties was
$5.5 million, compared to a $2.9 million loss in the prior year.
Income taxes
We recognized a current income tax expense of $0.2 million and $0.5 million for the three months and year ended
December 31, 2016, respectively, compared to a current income tax expense of $0.6 million and $1.0 million for the
comparative periods in 2015.
We also recognized deferred income tax expenses of $16.0 million and $33.2 million, respectively, for the three months and
year ended December 31, 2016, compared to deferred income tax expenses of $3.3 million and $21.9 million for the
comparative periods in 2015. The higher deferred tax in 2016 was mainly a result of the impact associated with fair value
adjustments related to investment properties net of tax depreciation, fair value changes related to financial instruments and a
deferred tax asset valuation provision.
Related-party transactions
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.
Costs paid to DAM under the Asset Management Agreement are outlined below:
Incurred under the Asset Management Agreement:
Asset management fees in deferred units (included in
general and administrative expenses)
Asset management fees in cash (included in general
and administrative expenses)
Asset acquisition fees (capitalized as acquisition costs, and
then written off on remeasurement of investment
properties)
Financing fees (included in debt/unitholders’ equity)
Reimbursement for out-of-pocket and incidental costs
(included in general and administrative expenses)
Total incurred under the Asset Management Agreement
Three months ended December 31,
2015
2016
Year ended December 31,
2016
2015
$
260 $
460 $
1,613 $
2,522
1,677
8,647
1,382
214
1,633
254
1,705
490
256
4,634 $
273
4,297 $
1,002
13,457 $
$
1,870
6,385
2,588
553
918
12,314
Dream Global REIT 2016 Annual Report | 29
As at December 31, 2016, the Trust has recorded $3.2 million (December 31, 2015 – $3.8 million) in amounts payable and
$1.5 million (December 31, 2015 – $0.1 million) in amounts receivable related to the Asset Management Agreement with
DAM.
The Trust also entered into a Shared Services and Cost Sharing Agreement with DAM on December 1, 2013. Fees paid to DAM
under this agreement are on a cost recovery basis. As at January 1, 2016, the Shared Services and Cost Sharing Agreement was
amended such that future funding costs incurred in respect of technology personnel and technology-related platforms cease
subsequent to December 31, 2015. There were no other material changes to the agreement.
Three months ended December 31,
2015
2016
Year ended December 31,
2016
2015
Incurred under the Shared Services and Cost Sharing
Agreement:
Agreement:
Branding, process improvements and technology
transformations (included in general and administrative)
Total incurred under the Shared Services and Cost Sharing
Agreement
$
$
266 $
91 $
491 $
266 $
91 $
491 $
347
347
The Trust’s future commitment under the Shared Services and Cost Sharing Agreement over the remaining term to 2017 is
$nil.
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
2015
2016
(1.6 )%
1.461
1.438
(5.7 )%
1.503
1.417
Year ended December 31,
Change
3.4%
(5.7 )%
2015
1.419
1.503
2016
1.466
1.417
Comprehensive income was impacted by a foreign currency translation loss of $54.8 million and $83.6 million for the three
months and year ended December 31, 2016, respectively. The exchange rate decreased from $1.503:€1 as at December 31,
2015 to $1.417:€1 as at December 31, 2016. The quarterly results of our euro-denominated operations included in net income
were translated at an average exchange rate of $1.438:€1 compared to $1.461:€1 in the same quarter last year. For the year
ended December 31, 2016, results were translated at an average exchange rate of $1.466:€1 compared to $1.419:€1 in the
same period last year.
Dream Global REIT 2016 Annual Report | 30
Funds from operations and adjusted funds from operations
Net income for the period
Add (deduct):
Net loss attributable to non-controlling interest
Net FFO impact attributable to non-controlling interest
Amortization of lease incentives
Internal direct leasing costs
Debt settlement costs
Loss on sale of investment properties
Deferred income tax expense
Cash settlement on interest rate swap
Gain (loss) on settlement of foreign currency contracts
Fair value gain to investment properties
Fair value (gain) loss to financial instruments
FFO(1)
Add (deduct):
Amortization of financing costs
Amortization of initial discount on Debentures
Amortization of fair value adjustment on acquired debt
Deferred unit compensation expense
Deferred asset management fees
Straight-line rent
Deduct:
Normalized initial direct leasing costs and lease incentives
Normalized non-recoverable recurring capital expenditures
AFFO(1)
Three months ended December 31,
2016
30,715 $
2015
37,578 $
$
Year ended December 31,
2016
2015
145,826
141,334 $
(845 )
636
949
716
3,253
2,547
15,968
—
1,300
(19,223 )
(10,553 )
25,463 $
1,200 $
—
—
668
261
(1,670 )
25,922
(1,745 )
(1,357 )
22,820 $
(390 )
199
631
556
6,074
108
3,332
(1,218 )
(513 )
(25,587 )
568
21,338 $
1,050 $
306
—
516
460
(107 )
23,563
(1,696 )
(1,319 )
20,548 $
(1,601 )
766
3,210
3,181
23,295
5,482
33,217
—
2,129
(100,485 )
(15,190 )
95,338 $
5,873 $
893
—
2,151
1,613
(2,476 )
103,392
(7,198 )
(5,599 )
90,595 $
(1,079 )
360
2,361
2,471
6,074
2,893
21,886
(6,368 )
443
(99,241 )
11,034
86,660
3,696
1,183
(30 )
1,972
1,870
(1,600 )
93,751
(6,878 )
(5,349 )
81,524
$
$
$
(1) FFO and AFFO are non-GAAP measures. See “Non-GAAP measures and other disclosures”.
Funds from operations
FFO
FFO per unit – basic
FFO per unit – diluted
Three months ended December 31,
2016
25,463 $
0.20 $
0.20 $
2015
21,338 $
0.19 $
0.19 $
$
$
$
Year ended December 31,
2016
2015
95,338 $
86,660
0.80 $
0.77
0.80 $
0.77
Total FFO for the quarter was $25.5 million, an increase of $4.1 million, or 19.3%, over the prior year comparative quarter,
mainly reflecting the impact of favourable foreign exchange contract settlements, completed acquisitions net of dispositions,
solid leasing performance, lower effective interest costs from the term loan credit facility refinancing in December 2015, lower
interest costs from the mortgage refinancing activities and the Debenture redemption in the second half of 2016, and
additional fees from our joint ventures, partially offset by higher general and administrative expenses. Total FFO for the year
ended December 31, 2016 was $95.3 million, an increase of $8.7 million, or 10.0%, over the prior year, primarily due to a
higher euro in 2016 compared to 2015, and the reasons noted above that impacted the quarter.
For the quarter ended December 31, 2016, basic and diluted FFO on a per unit basis was 20 cents compared to 19 cents in the
prior year comparative quarter. For the year ended December 31, 2016, basic and diluted FFO on a per unit basis increased to
80 cents per unit from 77 cents per unit over the prior year.
Dream Global REIT 2016 Annual Report | 31
Adjusted funds from operations
AFFO
AFFO per unit – basic
Three months ended December 31,
2016
22,820 $
0.18 $
2015
20,548 $
0.18 $
$
$
Year ended December 31,
2016
2015
90,595 $
81,524
0.76 $
0.73
Total AFFO for the quarter ended December 31, 2016 increased by $2.3 million over the prior year comparative quarter,
mainly reflecting the impact of favourable foreign exchange contract settlements, completed acquisitions net of dispositions,
strong leasing performance, lower effective interest costs as a result of the refinancing of the term loan credit facility in
December 2015 and additional fees from our joint ventures, partially offset by higher general and administrative expenses.
Total AFFO for the year ended December 31, 2016 was $90.6 million, an increase of $9.1 million, or 11.1%, over the prior year,
primarily due to a higher euro in 2016 compared to 2015, and the reasons noted above that impacted the quarter.
For the quarter ended December 31, 2016, basic AFFO on a per unit basis was 18 cents per unit, same as the prior year
comparative quarter. For the year ended December 31, 2016, basic AFFO on a per unit basis increased to 76 cents per unit
from 73 cents per unit in the prior year.
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
$
For the year
ended
December 31,
2016
235,312 $
141,334
3,167,493
1,585,480
95,239
125,456,199
For the year
ended
December 31,
2015
223,169 $
145,826
3,045,780
1,639,178
90,384
113,024,465
For the year
ended
December 31,
2014
257,725
208,937
2,588,425
1,323,081
89,134
111,466,697
(1) Reflects the REIT’s Owned Share. For a reconciliation of the Trust’s results and statement of financial position, please see “Non-GAAP measures and other
disclosures” in the MD&A.
Dream Global REIT 2016 Annual Report | 32
QUARTERLY INFORMATION (per consolidated financial statements)
The following table shows quarterly information since January 1, 2015:
Investment properties revenue
Investment properties operating expenses
Net rental income
Other income
Interest and other income (expense)
Share of net income 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 gain (loss) to investment properties
Fair value gain (loss) to financial instruments
Internal direct leasing costs
Debt settlement 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 (loss) 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
interest
Amortization of lease incentives
Internal direct leasing costs
Debt settlement costs
(Gain) loss on sale of investment properties
Tax on gains on sale of investment properties
Deferred income tax expense (recovery)
Term debt swap settlement
Gain (loss) on settlement of Forex contracts
Fair value gain (loss) to investment properties
Fair value gain (loss) 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 initial direct leasing costs and lease
incentives
Normalized non-recoverable recurring
capital expenditures
AFFO
AFFO per unit – basic
Weighted average number of Units:
Basic
Diluted
Quarterly average exchange rate ($:€1)
$
Q4 2016
48,576 $
(16,162 )
32,414
Q3 2016
51,254 $
(17,953 )
33,301
Q2 2016
52,009 $
(18,351 )
33,658
Q1 2016
51,726 $
(16,854 )
34,872
Q4 2015
49,025 $
(16,186 )
32,839
Q3 2015
49,798 $
(16,423 )
33,375
Q2 2015
49,761 $
(15,846 )
33,915
Q1 2015
51,458
(17,573 )
33,885
1,230
2,791
4,021
(1,379 )
(5,013 )
(21 )
(7,791 )
(14,204 )
20,740
10,553
(716 )
(3,253 )
(2,547 )
—
24,777
47,008
(156 )
(16,137 )
(16,293 )
30,715 $
29,870 $
845
30,715 $
2,312
12,213
14,525
(1,474 )
(5,265 )
(24 )
(10,262 )
(17,025 )
3,727
(11,302 )
(815 )
(18,141 )
(1,020 )
—
(27,551 )
3,250
14
(1,591 )
(1,577 )
1,673 $
1,590 $
83
1,673 $
1,767
10,305
12,072
(1,602 )
(5,046 )
(26 )
(11,213 )
(17,887 )
2,136
5,502
7,638
(1,576 )
(4,928 )
(40 )
(11,544 )
(18,088 )
3,211
4,992
8,203
(1,412 )
(4,335 )
(31 )
(10,148 )
(15,926 )
52,743
8,358
(786 )
(153 )
(1,291 )
—
58,871
86,714
12
(9,963 )
(9,951 )
76,763 $
76,293 $
470
76,763 $
3,105
7,581
(864 )
(93 )
(624 )
—
9,105
33,527
(345 )
(999 )
(1,344 )
32,183 $
31,980 $
203
32,183 $
24,295
(568 )
(556 )
(5,541 )
(108 )
—
17,522
42,638
(586 )
(4,474 )
(5,060 )
37,578 $
37,188 $
390
37,578 $
2,547
2,626
5,173
(1,521 )
(3,520 )
(27 )
(9,813 )
(14,881 )
(5,185 )
(17,550 )
(697 )
—
(1,728 )
—
(25,160 )
(1,493 )
(284 )
(863 )
(1,147 )
(2,640 ) $
(2,776 ) $
136
(2,640 ) $
480
17,126
17,606
(1,247 )
(3,997 )
(30 )
(9,562 )
(14,836 )
41,586
(604 )
(676 )
—
(2,033 )
—
38,273
74,958
63
(7,503 )
(7,440 )
67,518 $
67,101 $
417
67,518 $
1,014
10,931
11,945
(1,450 )
(4,049 )
(30 )
(9,834 )
(15,363 )
7,740
7,688
(542 )
—
976
—
15,862
46,329
(185 )
(2,774 )
(2,959 )
43,370
43,234
136
43,370
(845 )
(83 )
(470 )
(203 )
(390 )
(136 )
(417 )
(136 )
636
949
716
3,253
2,547
—
15,968
—
1,300
(19,223 )
(10,553 )
25,463 $
0.20 $
0.20
25,463 $
1,200
—
—
—
668
261
(1,670 )
25,922
(128 )
841
815
19,796
1,020
—
4,318
—
857
(16,206 )
11,302
24,205 $
0.20 $
0.20
24,205 $
1,287
267
—
—
393
367
(378 )
26,141
265
718
786
153
1,291
—
11,334
—
918
(60,397 )
(8,358 )
23,003 $
0.20 $
0.20
23,003 $
1,698
315
—
—
557
524
(222 )
25,875
(7 )
702
864
93
624
—
1,597
—
(946 )
(4,659 )
(7,581 )
22,667 $
0.20 $
0.20
22,667 $
1,688
311
—
—
533
461
(206 )
25,454
199
631
556
6,074
108
—
3,332
(1,218 )
(513 )
(25,587 )
568
21,338 $
0.19 $
0.19
21,338 $
1,050
306
—
—
516
460
(107 )
23,563
(37 )
617
697
—
1,728
—
1,015
(1,825 )
(222 )
5,252
17,550
21,999 $
0.20 $
0.20
21,999 $
950
298
—
—
500
467
(448 )
23,766
254
580
676
—
2,033
—
14,765
(1,663 )
686
(62,957 )
604
22,079 $
0.20 $
0.20
22,079 $
833
292
—
—
507
462
(676 )
23,497
(56 )
533
542
—
(976 )
—
2,774
(1,662 )
492
(15,949 )
(7,688 )
21,244
0.19
0.19
21,244
863
287
(30 )
—
449
481
(369 )
22,925
$
$
$
$
$
$
(1,745 )
(1,784 )
(1,800 )
(1,869 )
(1,696 )
(1,715 )
(1,744 )
(1,723 )
(1,357 )
22,820 $
0.18 $
(1,388 )
22,969 $
0.19 $
(1,400 )
22,675 $
0.20 $
(1,454 )
22,131 $
0.20 $
(1,319 )
20,548 $
0.18 $
(1,334 )
20,717 $
0.18 $
(1,356 )
20,397 $
0.18 $
(1,340 )
19,862
0.18
$
$
125,482,713
128,135,174
1.438
120,958,186 113,847,191
133,786,314 128,736,432
1.455
1.456
113,401,973
128,153,728
1.516
112,939,520 112,541,940
127,561,321 127,047,118
1.457
1.461
112,174,846
126,540,665
1.360
111,760,819
125,953,069
1.397
Dream Global REIT 2016 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
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. As
it is not defined by IFRS, it does not have a standardized 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”, 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
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 generated from (utilized in) operating activities as defined by IFRS and is not necessarily indicative of cash
available to fund Dream Global REIT’s needs. As it is not defined by IFRS, it does not have a standardized meaning and may not
be comparable with similar measures presented by other income trusts.
Our calculation of AFFO includes an estimated amount (8% of net rental income) of normalized non-recoverable recurring
capital expenditures, as well as initial direct leasing costs and lease incentives that we expect to incur based on our current
property portfolio and expected average leasing activity over the next two to three years. This estimate may differ from actual
amounts incurred due to the timing of expenditures and the related leasing activities.
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 is defined by the Trust as the total investment properties revenue less investment properties 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. 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,
2015
32,839 $
2016
32,414 $
Year ended December 31,
2016
2015
134,014
134,245 $
6,355
38,769 $
4,853
37,692 $
25,701
159,946 $
18,841
152,855
Dream Global REIT 2016 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 FFO and AFFO and
diluted FFO calculations for the three months and year ended December 31, 2016 are noted in the table below. Diluted FFO
includes interest and amortization adjustments related to the Debentures of $nil and $7.9 million for the three months and
year ended December 31, 2016, respectively.
2016
125,482,713
Weighted average Units outstanding for basic per unit amounts
Weighted average Units outstanding for diluted per unit amounts 128,135,174
Three months ended December 31,
2015
112,939,520
127,561,321
Year ended December 31,
2016
2015
112,358,025
118,450,945
126,781,027
129,709,388
Investment in joint ventures
The Trust’s proportionate share of the financial position and results of operations of its investment in joint ventures, which are
accounted for using the equity method under IFRS in the consolidated financial statements, are presented and discussed
throughout the MD&A using the proportionate consolidation method, which is not in accordance with IFRS. These non-GAAP
measures are referred to as the REIT’s Owned Share throughout this MD&A. In compliance with Canadian Securities
Administrators Staff Notice 52-306 (Revised), “Non-GAAP Financial Measures”, a reconciliation of the financial position and
results of operations to the consolidated balance sheets and consolidated statements of net income and comprehensive
income is included in the following tables.
Dream Global REIT 2016 Annual Report | 35
Balance sheet reconciliation to consolidated financial statements
December 31, 2016
December 31, 2015
Amounts per
consolidated
financial
statements
Share from
investment
in joint
ventures and
associates
Amounts per
consolidated
financial
statements
Share from
investment
in joint
ventures
Total
Total
$ 2,481,586 $
265,255
6,250
10,414
4,680
169
2,768,354
510,321 $ 2,991,907 $ 2,394,739 $
272,720
30,521
(234,734 )
6,621
6,250
—
4,377
10,414
—
3,788
4,680
—
265
172
3
2,682,510
3,043,944
275,590
518,349 $ 2,913,088
29,738
(242,982 )
6,621
—
4,377
—
3,788
—
265
—
2,957,877
275,367
16,391
4,219
2,392
50,283
73,285
45,722
$ 2,887,361 $
1,100
40
—
3,402
4,542
—
15,706
17,491
4,430
4,259
—
2,392
28,700
53,685
48,836
77,827
32,855
45,722
280,132 $ 3,167,493 $ 2,764,201 $
1,561
48
—
4,603
6,212
—
17,267
4,478
—
33,303
55,048
32,855
281,579 $ 3,045,780
$ 1,241,110 $
3,466
—
20,490
49,507
1,314,573
158,352
46,515
910
—
8,364
214,141
923
$ 1,529,637 $
259,800 $ 1,500,910 $ 1,324,889 $
2,395
3,715
6,295
—
14,150
20,490
20,644
60,365
1,368,373
1,585,480
249
—
—
10,858
270,907
263,732 $ 1,588,621
2,591
6,295
14,150
27,521
1,639,178
196
—
—
6,877
270,805
3,123
6,115
(13 )
—
—
9,225
—
56,003
35,613
1,976
5,022
7,535
106,149
521
280,132 $ 1,809,769 $ 1,475,043 $
161,475
52,630
897
—
8,364
223,366
923
3,343
7,442
(11 )
—
—
10,774
—
59,346
43,055
1,965
5,022
7,535
116,923
521
281,579 $ 1,756,622
Assets
NON-CURRENT ASSETS
Investment properties
Investment in joint ventures and associates
Notes receivable
Derivative financial instruments
Deferred income tax assets
Other non-current assets
CURRENT ASSETS
Amounts receivable
Prepaid expenses
Derivative financial instruments
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 (receivable)
Derivative financial instruments
Distributions payable
Liabilities related to assets held for sale
Total liabilities
Dream Global REIT 2016 Annual Report | 36
Statement of net income and comprehensive income (loss) reconciliation to consolidated financial statements
Share of
income from
investments
in joint
ventures and
associates
Amounts per
consolidated
financial
statements
$
48,576 $
(16,162 )
32,414
7,674 $
(1,319 )
6,355
2016
Three months ended December 31,
2015
Amounts per
consolidated
financial
statements
Share of
income from
investments
in joint
ventures
49,025 $
(16,186 )
32,839
6,056 $
(1,203 )
4,853
Total
56,250 $
(17,481 )
38,769
Total
55,081
(17,389 )
37,692
1,230
186
1,416
3,211
289
3,500
2,786
(2,786 )
—
4,988
(4,988 )
5
4,021
(1,379 )
(5,013 )
(21 )
(7,791 )
(14,204 )
20,740
10,553
(716 )
(3,253 )
(2,547 )
24,777
47,008
(156 )
(16,137 )
(16,293 )
30,715 $
—
(2,600 )
—
(950 )
—
(1,456 )
(2,406 )
(1,517 )
—
—
—
—
(1,517 )
(168 )
(1 )
169
168
— $
5
1,421
(1,379 )
(5,963 )
(21 )
(9,247 )
(16,610 )
19,223
10,553
(716 )
(3,253 )
(2,547 )
23,260
46,840
(157 )
(15,968 )
(16,125 )
30,715 $
4
8,203
(1,412 )
(4,335 )
(31 )
(10,148 )
(15,926 )
24,295
(568 )
(556 )
(5,541 )
(108 )
17,522
42,638
(586 )
(4,474 )
(5,060 )
37,578 $
—
(4,699 )
—
(728 )
—
(1,286 )
(2,014 )
1,292
—
—
(533 )
—
759
(1,101 )
(41 )
1,142
1,101
— $
—
4
3,504
(1,412 )
(5,063 )
(31 )
(11,434 )
(17,940 )
25,587
(568 )
(556 )
(6,074 )
(108 )
18,281
41,537
(627 )
(3,332 )
(3,959 )
37,578
29,870 $
845
30,715
— $
—
—
29,870 $
845
30,715
37,188 $
390
37,578
— $
—
—
37,188
390
37,578
(44,386 )
(9,954 )
(54,340 )
(430 )
(54,770 )
—
—
—
—
—
(44,386 )
(9,954 )
(54,340 )
(430 )
(54,770 )
7,726
1,481
9,207
115
9,322
—
—
—
—
—
7,726
1,481
9,207
115
9,322
$
$
(24,470 )
415
(24,055 ) $
$
—
—
— $
(24,470 )
415
(24,055 ) $
46,395
505
46,900 $
—
—
— $
46,395
505
46,900
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 and associates
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 gain (loss) to investment properties
Fair value gain (loss) to financial instruments
Internal direct leasing costs
Debt settlement costs
Loss on sale of investment properties
Income (loss) before income taxes
Current income tax expense
Deferred income tax recovery (expense)
Provision for income taxes
Net income
Total net income for the period
attributable to:
Unitholders of the Trust
Shareholders of subsidiaries
Net income
Foreign currency translation adjustments for
the period attributable to:
Other operations
Investment in joint ventures
Unitholders of the Trust
Shareholders of subsidiaries
Comprehensive income (loss) for the period
attributable to:
Unitholders of the Trust
Shareholders of subsidiaries
Dream Global REIT 2016 Annual Report | 37
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 and associates
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 gain to investment properties
Fair value gain (loss) to financial instruments
Internal direct leasing costs
Debt settlement costs
Loss on sale of investment properties
Income before income taxes
Current income taxes expense
Deferred income taxes expense
Provision for income taxes
Net income
Total net income for the year
attributable to:
Unitholders of the Trust
Shareholders of subsidiaries
Net income
$
$
Foreign currency translation adjustments for
the year attributable to:
Other operations
Investment in joint ventures
Unitholders of the Trust
Shareholders of subsidiaries
Comprehensive income for the year
attributable to:
Unitholders of the Trust
Shareholders of subsidiaries
Amounts per
consolidated
financial
statements
203,565 $
(69,320 )
134,245
$
Share of
income from
investments
in joint
ventures and
associates
31,747 $
(6,046 )
25,701
2016
Year ended December 31,
2015
Amounts per
consolidated
financial
statements
200,042 $
(66,028 )
134,014
Share of
income from
investments
in joint
ventures
23,127 $
(4,286 )
18,841
Total
235,312 $
(75,366 )
159,946
Total
223,169
(70,314 )
152,855
7,445
894
8,339
7,252
433
7,685
30,792
(30,792 )
—
35,655
(35,655 )
—
19
38,256
—
(29,898 )
19
8,358
20
42,927
—
(35,222 )
20
7,705
(6,031 )
(20,252 )
(111 )
(40,810 )
(67,204 )
—
(3,614 )
—
(6,178 )
(9,792 )
(6,031 )
(23,866 )
(111 )
(46,988 )
(76,996 )
(5,630 )
(15,901 )
(118 )
(39,357 )
(61,006 )
80,315
15,190
(3,181 )
(21,640 )
(5,482 )
65,202
170,499
(475 )
(28,690 )
(29,165 )
141,334 $
20,171
—
—
(1,655 )
—
18,516
4,527
—
(4,527 )
(4,527 )
— $
100,486
15,190
(3,181 )
(23,295 )
(5,482 )
83,718
175,026
(475 )
(33,217 )
(33,692 )
141,334 $
68,436
(11,034 )
(2,471 )
(5,541 )
(2,893 )
46,497
162,432
(992 )
(15,614 )
(16,606 )
145,826 $
—
(2,715 )
—
(4,898 )
(7,613 )
30,805
—
—
(533 )
—
30,272
6,278
(7 )
(6,271 )
(6,278 )
— $
(5,630 )
(18,616 )
(118 )
(44,255 )
(68,619 )
99,241
(11,034 )
(2,471 )
(6,074 )
(2,893 )
76,769
168,710
(999 )
(21,885 )
(22,884 )
145,826
139,733 $
1,601
141,334
— $
—
—
139,733 $
1,601
141,334
144,747 $
1,079
145,826
— $
—
—
144,747
1,079
145,826
(67,354 )
(15,644 )
(82,998 )
(650 )
(83,648 )
—
—
—
—
—
(67,354 )
(15,644 )
(82,998 )
(650 )
(83,648 )
84,519
12,775
97,294
670
97,964
—
—
—
—
—
84,519
12,775
97,294
670
97,964
56,735
951
57,686 $
$
—
—
— $
56,735
951
57,686 $
242,041
1,749
243,790 $
—
—
— $
242,041
1,749
243,790
Dream Global REIT 2016 Annual Report | 38
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 joint ventures and
associates
Internal direct leasing costs
Non-cash impact of income attributable to non-controlling
interest
Depreciation and amortization
Unrealized loss on settlement of foreign exchange contracts
Investment in lease incentives and initial direct leasing costs
Adjustments for investment in joint ventures:
Fair value adjustments to investment properties
Amortization of lease incentives
Debt settlement costs
Deferred income tax expense attributable to joint ventures
Normalized initial direct leasing costs and lease incentives
Normalized non-recoverable recurring capital expenditures
AFFO
$
Three months ended December 31,
2015
23,050 $
2016
17,238 $
$
Year ended December 31,
2015
53,024
2016
59,533 $
(415 )
(5,787 )
8,461
15,184
2,786
716
(629 )
(21 )
1,243
3,575
1,517
81
—
(169 )
(1,745 )
(1,357 )
22,820 $
4,988
556
(183 )
(31 )
964
1,872
(1,292 )
35
533
(1,142 )
(1,696 )
(1,319 )
20,548 $
30,792
3,181
(625 )
(111 )
4,644
11,246
(20,170 )
259
1,655
4,527
(7,198 )
(5,599 )
90,595 $
35,655
2,471
(980 )
(118 )
4,068
8,332
(30,805 )
116
533
6,271
(6,878 )
(5,349 )
81,524
Net income, cash generated from (utilized in) operating activities and distributions declared
As required by National Policy 41-201, “Income Trusts and Other Indirect Offerings”, the table below outlines the differences
between net income and total distributions declared, in accordance with the guidelines.
For the three months ended December 31, 2016, net income exceeded total distributions by $5.6 million (surplus of
$14.9 million for the comparative quarter in 2015). For the year ended December 31, 2016, net income exceeded total
distributions by $46.1 million (surplus of $55.5 million for 2015).
Net income for the period
Total declared distributions
Surplus of net income over total distributions
Three months ended December 31,
2015
37,578 $
22,666
14,912 $
2016
30,715 $
25,153
5,562 $
$
$
Year ended December 31,
2016
2015
145,826
141,334 $
90,341
95,197
55,485
46,137 $
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. These non-cash items do not impact cash flows and accordingly, the Trust does not use
net income as a proxy for distributions to determine its distribution policy.
Further, as required by National Policy 41-201, “Income Trusts and Other Indirect Offerings”, the table below outlines the
differences between cash generated from (utilized in) operating activities (per consolidated financial statements) and total
distributions declared, in accordance with the guidelines.
Three months ended December 31,
2015
2016
Year ended December 31,
2016
2015
Cash generated from operating activities
(per consolidated financial statements)
Total declared distributions
Surplus (shortfall) of cash flow from operating activities (per
consolidated financial statements) over total distributions
$
$
17,238
25,153
$
23,050 $
22,666
59,533 $
95,197
53,024
90,341
(7,915 )
$
384 $
(35,664 ) $
(37,317 )
Dream Global REIT 2016 Annual Report | 39
For the three months and year ended December 31, 2016, the Trust recorded a shortfall of cash generated from operating
activities (per consolidated financial statements) over total declared distributions of $7.9 million and $35.7 million,
respectively. In comparison, a surplus of $0.4 million and a shortfall of $37.3 million was recorded for the three months and
year ended December 31, 2015, respectively.
The Trust believes cash generated from (utilized in) operating activities (per consolidated financial statements) does not take
into consideration certain relevant factors and, accordingly, does not reflect its ability to pay distributions, particularly cash
distributions. The Trust believes its distributions are not an economic return of capital, but a distribution of sustainable
adjusted cash generated from (utilized in) operating activities (including investment in joint ventures), a non-GAAP measure.
In making this determination, the Trust has considered, among other things, the following three key factors in addition to cash
generated from (utilized in) operating activities (per consolidated financial statements):
•
Investment in joint ventures’ cash flows from operating activities. Investment in joint ventures’ cash flows from operating
activities is not included in the Trust’s cash generated from (utilized in) operating activities (per consolidated financial
statements) because those investments are equity accounted, even though this cash is effectively from the Trust’s
operating activities. The Trust believes it is appropriate to add this as a source of cash available to fund distributions.
• Lease incentives and initial direct leasing costs. These costs fluctuate with lease maturities, renewal terms and the type of
asset being leased and are not considered by the Trust in determining our distribution policy. We evaluate the impact of
leasing activity based on averages for our portfolio over a two- to three-year time frame. The Trust believes it is
appropriate to exclude these costs in determining the sources of cash available to fund distributions.
• Changes in non-cash working capital. These changes fluctuate from period to period and are not considered by the Trust
in determining our distribution policy. The Trust believes it is appropriate to exclude these changes in determining the
sources of cash available to fund distributions.
The Trust has also considered that non-cash distributions are a component of the shortfall and continues to assess the
sustainability of cash and non-cash distributions in each financial reporting period.
Management believes adjusted cash generated from (utilized in) operating activities (including investment in joint ventures) is
an important measure that better reflects our ability to pay cash distributions. Adjusted cash generated from operating
activities (including investment in joint ventures) is a non-GAAP measure. It does not represent cash generated from (utilized
in) operating activities, as defined by IFRS and as such, does not have a standardized meaning and may not be comparable
with similar measures presented by other income trusts. The following table outlines the differences between adjusted cash
generated from (utilized in) operating activities (including investment in joint ventures) and declared distributions, after the
three adjustments noted above are taken into account.
Cash generated from operating activities
(per consolidated financial statements)
Add:
Investment in joint ventures’ cash flows from operating
activities
Cash generated 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 generated from operating activities
(including investment in joint ventures)
Total declared distributions
Shortfall of adjusted cash generated from (utilized in)
operating activities over total distributions
Three months ended December 31,
2015
2016
Year ended December 31,
2016
2015
$
17,238 $
23,050 $
59,533 $
53,024
7,452
5,898
17,886
24,690
28,948
77,419
3,514
(3,772 )
24,432
25,153
2,046
(20,239 )
10,755
22,666
11,949
5,781
95,149
95,197
10,478
63,502
8,612
4,973
77,087
90,341
$
(721 ) $
(11,911 ) $
(48 ) $
(13,254 )
Dream Global REIT 2016 Annual Report | 40
Once the investment in joint ventures’ cash flows from operating activities has been included, and the fluctuations in lease
incentives and initial direct leasing costs and changes in our non-cash working capital have been excluded, total declared
distributions exceeded the adjusted cash generated from (utilized in) operating activities (including investment in joint
ventures), a non-GAAP measure, by $0.7 million and $nil for the three months and year ended December 31, 2016,
respectively (shortfall of $11.9 million and $13.3 million for the comparative periods in 2015). We anticipate the impact of
completed acquisitions net of dispositions, strong leasing, CPI rent increases from our Deutsche Post leases, lower effective
interest costs resulting from the mortgage refinancing during the year, the term loan facility refinancing in December 2015,
the redemption of the Debentures in Q3, and additional asset management fees from our joint ventures will lead to an
increase in the adjusted cash flow generated from (utilized in) operating activities (including investment in joint ventures).
Furthermore, a portion of our declared distributions are paid through our DRIP program, which does not require cash
payment. After taking into consideration the DRIP, as outlined in the table below, the surplus of adjusted cash generated from
(utilized in) operating activities (including investment in joint ventures) over cash distributions was $2.6 million and
$12.8 million, respectively, for the three months and year ended December 31, 2016. Over time, reinvestments pursuant to
the DRIP will increase the number of Units outstanding, which may result in upward pressure on the total amount of cash
distributions. 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, which allows for any unforeseen expenditures and the variability in cash
distributions as a result of additional Units issued pursuant to the Trust’s DRIP.
Three months ended December 31,
2015
2016
Year ended December 31,
2016
2015
Adjusted cash generated from operating activities
(including investment in joint ventures)
Declared distributions paid in cash
Surplus (shortfall) of adjusted cash generated from (utilized in)
operating activities over distributions paid in cash
$
$
24,432 $
21,865
10,755 $
19,363
95,149 $
82,364
77,087
76,775
2,567 $
(8,608 ) $
12,785 $
312
To the extent that there are shortfalls in the adjusted cash generated from (utilized in) operating activities (including
investment in joint ventures) and cash distributions, the Trust uses its existing revolving credit facilities as a source of funding.
The use of the Trust’s revolving credit facilities may involve risks as compared with using cash or cash equivalents on hand as a
source of funding, such as the risk of additional interest payable on amounts borrowed, the risk that interest rates may rise in
the future, which may make it more expensive for the Trust to borrow under its revolving credit facilities, and the risk of
increasing the overall indebtedness of the Trust.
Dream Global REIT 2016 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.
December 31, 2016
Non-current debt(1)
Current debt
Total debt
Less cash
Total adjusted debt, net of cash
Total assets
Adjustments: Investment in joint ventures
Less cash
Total assets, net of cash
Debt-to-gross book value
Debt-to-gross book value, net of cash
Average level of debt, net of cash
Non-current debt(1)
Current debt
Total debt
Less cash
Total adjusted debt, net of cash
Total assets
Adjustments: Investment in joint ventures
Less cash
Total assets, net of cash
Debt-to-gross book value
Debt-to-gross book value, net of cash
Average level of debt, net of cash
Debt-to-gross book value, net of cash, net of Debentures
(1) Non-current debt includes Debentures valued at $154,558 at December 31, 2015.
$
Amounts per
consolidated
financial statements
$
Share of amounts
from investment
in joint ventures
1,241,110 $
158,352
1,399,462
50,283
1,349,179
2,887,361
(265,255 )
2,622,106
50,283
2,571,823 $
259,800 $
3,123
262,923
3,402
259,521
280,132
265,255
545,387
3,402
541,985 $
$
December 31, 2015
Amounts per
consolidated
financial statements
$
Share of amounts
from investment
in joint ventures
1,324,889 $
56,003
1,380,892
28,700
1,352,192
2,764,201
(272,720 )
2,491,481
28,700
2,462,781 $
263,732 $
3,343
267,075
4,603
262,472
281,579
272,720
554,299
4,603
549,696 $
Total
1,500,910
161,475
1,662,385
53,685
1,608,700
3,167,493
—
3,167,493
53,685
3,113,808
52 %
52 %
53 %
Total
1,588,621
59,346
1,647,967
33,303
1,614,664
3,045,780
—
3,045,780
33,303
3,012,477
54 %
54 %
52 %
48 %
Dream Global REIT 2016 Annual Report | 42
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 other 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
Net rental income
Add: Interest and other income(1)
Less: General and administrative expenses
Less: Portfolio management expenses
Interest expense
Interest coverage ratio
(1) Includes one-time income items totalling $3.5 million.
Amounts per
consolidated
financial statements
$
For the year ended December 31, 2016
Share of amounts
from investment
in joint ventures
134,245 $
7,445
20,252
6,031
115,407
40,810 $
25,701 $
894
3,614
—
22,981
6,178 $
$
$
Amounts per
consolidated
financial statements
$
For the year ended December 31, 2015
Share of amounts
from investment
in joint ventures
134,014 $
7,252
15,901
5,630
119,735
39,357 $
18,841 $
433
2,715
—
16,559
4,898 $
Total
159,946
8,339
23,866
6,031
138,388
46,988
2.95
Total
152,855
7,685
18,616
5,630
136,294
44,255
3.08
Dream Global REIT 2016 Annual Report | 43
SECTION III – DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS
OVER FINANCIAL REPORTING
For the December 31, 2016 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 Certified Public Accountants (CPA) Canada, 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, 2016.
There were no changes in Dream Global REIT’s internal control over financial reporting during the financial year ended
December 31, 2016 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 2016 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. As at December 31, 2016, Deutsche Post’s GRI was approximately
18.9% of the Trust’s overall occupied and committed GRI.
CONCENTRATION OF PROPERTIES AND TENANTS
Currently, all but one 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 2016 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 CONSIDERATIONS
We intend to continue to qualify as a “unit trust” and a “mutual fund trust” for purposes of the Income Tax Act (Canada).
There can be no assurance that Canadian federal income tax laws and the administrative policies and assessing practices of
the Canada Revenue Agency respecting the treatment of mutual fund trusts will not be changed in a manner that adversely
affects the unitholders. If we cease to qualify as a “mutual fund trust” under the Income Tax Act (Canada), the income tax
considerations applicable to us would be materially and adversely different in certain respects, including that the Units may
cease to be qualified investments for registered plans under the Income Tax Act (Canada).
Although we have been structured with the objective of maximizing after-tax distributions, tax charges and withholding taxes
in 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 and Austria, which will subject us to legal and political risks specific to those countries, any of
which could adversely impact our investments, cash flows, operating results or financial condition, our ability to make
distributions on the Units and our ability to implement our growth strategy. The taxable income portion of our distributions is
affected by a variety of factors, including the amount of foreign accrual property income that we recognize annually, gains
and losses, if any, from the disposition of properties and the results of our operations. These components will change each
year and therefore, the taxable income allocated to our unitholders each year will also change accordingly.
In November 2013, the two chambers of the German Parliament had completed the revised “Investment Tax Act” applicable
to all Alternative Investment Funds under the Alternative Investment Fund Managers Directive of the European Commission,
which has become effective as of December 24, 2013. The new law does still not contain specific rules or clarifying guidance
regarding the taxation of foreign investment funds, such as the Luxembourg entities through which we hold our real property
investment in Germany (our fonds communs de placement – the “Dundee FCPs”) used in our Lorac holding structure for
German non-resident taxation purposes with regard to German assets directly held. In our view, the Dundee FCPs should be
transparent from a German corporate income tax perspective under the current law, thus all income should be attributable to
the unitholders of the Dundee FCPs (the “Dundee FCP Unitholders”). However, the tax authorities are aiming to tax income at
the level of the Dundee FCPs. Under the Tax Amendments, which were passed by the German federal government in the
regular legislation process on February 24, 2016 and will become effective as of January 1, 2018, foreign funds investing into
German assets through fonds communs de placement will generally be treated as quasi-corporate tax payers. We intend to
manage our tax affairs with a view to minimizing, to the extent possible, the amount of taxable income from operations in
Germany. In light of the above-mentioned new tax law, it is uncertain whether the Dundee FCPs or the Dundee FCP
Unitholders, respectively, will be subject to tax with respect to all taxation periods or only future periods.
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. There are several rules
in German tax laws restricting 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.
Dream Global REIT 2016 Annual Report | 46
We have structured our affairs to ensure that none of the Dundee FCP Unitholders, the Dundee FCPs nor the corporate
entities which acquired additional properties have permanent establishments in Germany, which is relevant for determining
whether they would also be liable to municipal trade tax, unless they qualify for an exemption from such 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 tax legislation, administrative practice or case law could have adverse tax consequences for us. Despite a general
principle prohibiting retroactive changes, amendments to applicable laws, orders and regulations can be issued or altered
with retroactive effect. Additionally, divergent interpretations of tax laws by the tax authorities or the tax courts are possible.
These interpretations may be changed at any time with adverse effects on our taxation. A number of our Subsidiaries are
subject to taxation in Luxembourg, Germany and Austria. Longstanding international norms that determine each country’s
jurisdiction to tax cross-border activities are evolving. For example, the Base Erosion and Profit Shifting project (“BEPS”)
currently being undertaken by the G20 and the Organization for Economic Cooperation and Development reflects concern
about what is considered to be the inappropriate shifting of profits from high tax jurisdictions to low tax jurisdictions. Further,
partly in response to the BEPS initiative, the European Union (“EU”) Commission early in 2016 issued a seven-part Anti-Tax
Avoidance Package (“ATAP”). Part of the ATAP includes an Anti-Tax Avoidance Directive, which received political agreement
from the EU Member States in June 2016. Further, as part of the ATAP, Member States are required to introduce, among
other measures, a general anti-avoidance rule. Luxembourg introduced such a rule in 2016. Tax changes arising from BEPS
and/or the ATAP could adversely affect our tax position. Given the uncertainty around any possible changes and their
potential interdependency, it is difficult at this point to assess the overall negative impact that these changes may have on
our cash flow.
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.
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 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. 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, 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.
Dream Global REIT 2016 Annual Report | 47
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. 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 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 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.
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)
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;
(iii)
the risk that such third parties may, through their activities on behalf of or in the name of the joint arrangements,
expose or subject us to liability; and
Dream Global REIT 2016 Annual Report | 48
(iv)
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.
As manager of the other fund since 2008, Lorac has incurred and will continue to incur liabilities as a result of managing that
other fund and its assets. To the extent that the other fund is unable to satisfy such liabilities, a third party could seek recourse
against Lorac. If Lorac is unable to satisfy such liabilities, Lorac could be required to seek protection from creditors under
applicable bankruptcy or insolvency legislation. Taking such steps could result in Lorac being replaced as the manager of our
FCPs, with the result that legal title to our properties would be required to be transferred to a new manager. This would result
in the payment of RETT in Germany. The amount of such taxes could have a material and adverse effect on our cash flows,
financial condition and results of operations. We have negotiated certain limited indemnities from the other fund in
connection with any prior existing liabilities of the other fund and with those that may arise as a result of actions or omissions
of the other fund. In addition to the foregoing, we have been advised by our Luxembourg counsel that creditors of the other
fund could only seek recourse against the assets of the other fund and could not seek recourse against the assets of our FCPs
regardless of the fact that Lorac may have entered into the contract on behalf of the other fund or our FCPs creating such right
to a claim.
New properties acquired by the Trust are held through Luxembourg limited liability entities outside of the Lorac arrangement.
COMPETITION
The real estate market in Germany is highly competitive and fragmented and we compete for real property acquisitions with
individuals, corporations, institutions and other entities that may seek real property investments similar to those we desire.
An increase in the availability of investment funds or an increase in interest in real property investments may increase
competition for real property investments, thereby increasing purchase prices and reducing the yield on them. If competing
properties of a similar type are built in the area where one of our properties is located or if similar properties located in the
vicinity of one of our properties are substantially refurbished, the net operating income derived from and the value of such
property could be reduced.
Dream Global REIT 2016 Annual Report | 49
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
audited consolidated financial statements of the Trust for the year ended December 31, 2016.
CHANGES IN ACCOUNTING ESTIMATES AND CHANGES IN ACCOUNTING POLICIES
Dream Global REIT’s future accounting policy changes are described in the audited consolidated financial statements available
on Dream Global REIT’s website.
Additional information relating to Dream Global REIT, including our Annual Information Form dated March 28, 2016, is
available on SEDAR at www.sedar.com.
Dream Global REIT 2016 Annual Report | 50
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 22, 2017
Tamara Lawson
Chief Financial Officer
Dream Global REIT 2016 Annual Report | 51
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, 2016 and December 31, 2015 and the
consolidated statements of net income and comprehensive income, changes in equity and cash flows for the years ended
December 31, 2016 and December 31, 2015 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, 2016 and December 31, 2015 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 22, 2017
Dream Global REIT 2016 Annual Report | 52
Consolidated balance sheets
(in thousands of Canadian dollars)
Assets
NON-CURRENT ASSETS
Investment properties
Investment in joint ventures and associates
Notes receivable
Derivative financial instruments
Deferred income tax assets
Other non-current assets
CURRENT ASSETS
Amounts receivable
Prepaid expenses
Derivative financial instruments
Cash
Assets held for sale
Total assets
Liabilities
NON-CURRENT LIABILITIES
Debt
Deposits
Derivative financial instruments
Deferred Unit Incentive Plan
Deferred income tax
CURRENT LIABILITIES
Debt
Amounts payable and accrued liabilities
Income tax payable
Derivative financial instruments
Distributions payable
Liabilities related to assets held for sale
Total liabilities
Equity
Unitholders’ equity
Retained earnings
Accumulated other comprehensive income
Total unitholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
Note
December 31,
2016
December 31,
2015
6
7
19
10
18
8, 19
10
15
9
10
11
18
9
12, 19
10
13
15
19
14
$
$
$
2,481,586 $
265,255
6,250
10,414
4,680
169
2,768,354
16,391
4,219
2,392
50,283
73,285
45,722
2,887,361 $
1,241,110 $
3,466
—
20,490
49,507
1,314,573
158,352
46,515
910
—
8,364
214,141
923
1,529,637
1,211,588
90,049
45,812
1,347,449
10,275
1,357,724
2,887,361 $
$
2,394,739
272,720
6,621
4,377
3,788
265
2,682,510
15,706
4,430
—
28,700
48,836
32,855
2,764,201
1,324,889
2,395
6,295
14,150
20,644
1,368,373
56,003
35,613
1,976
5,022
7,535
106,149
521
1,475,043
1,105,485
45,555
128,810
1,279,850
9,308
1,289,158
2,764,201
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 2016 Annual Report | 53
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 and associates
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
Debt settlement costs, net
Loss on sale of investment properties
Income before income taxes
Current income tax expense
Deferred income tax expense
Provision for income taxes
Net income
Total net income for the year attributable to:
Unitholders of the Trust
Shareholders of subsidiaries
Net income
Foreign currency translation adjustments for the year attributable to:
(subsequently reclassified to Consolidated statement of net income)
Other operations
Investment in joint ventures
Unitholders of the Trust
Shareholders of subsidiaries
Comprehensive income for the year attributable to:
Unitholders of the Trust
Shareholders of subsidiaries
See accompanying notes to the consolidated financial statements.
Note
$
Year ended December 31,
2016
2015
200,042
203,565 $
(69,320 )
(66,028 )
134,014
134,245
7
19
16
6, 15
17
9
6
18
19
$
$
7,445
30,811
38,256
(6,031 )
(20,252 )
(111 )
(40,810 )
(67,204 )
80,315
15,190
(3,181 )
(21,640 )
(5,482 )
65,202
170,499
(475 )
(28,690 )
(29,165 )
141,334 $
7,252
35,675
42,927
(5,630 )
(15,901 )
(118 )
(39,357 )
(61,006 )
68,436
(11,034 )
(2,471 )
(5,541 )
(2,893 )
46,497
162,432
(992 )
(15,614 )
(16,606 )
145,826
139,733 $
1,601
141,334
144,747
1,079
145,826
(67,354 )
(15,644 )
(82,998 )
(650 )
(83,648 )
84,519
12,775
97,294
670
97,964
56,735
951
57,686 $
242,041
1,749
243,790
$
Dream Global REIT 2016 Annual Report | 54
Consolidated statements of changes in equity
Number Unitholders’
equity
of Units
1,105,485 $
113,024,465 $
—
—
—
—
—
—
—
1,452,789
2,122
107,400
10,867,500
1,923
—
—
12,793
19
918
97,808
18
(5,453 )
Attributable to unitholders of the Trust
Accumulated
Retained
other
earnings comprehensive
income
(deficit)
128,810 $
45,555 $
—
139,733
—
(86,875 )
—
(8,364 )
Total
unitholders’
equity
1,279,850 $
139,733
(86,875 )
(8,364 )
Non-
controlling
interest
9,308 $
1,601
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12,793
19
918
97,808
18
(5,453 )
16
—
—
—
—
—
—
Total
1,289,158
141,334
(86,875 )
(8,364 )
16
12,793
19
918
97,808
18
(5,453 )
(in thousands of Canadian dollars,
except number of Units)
Balance at January 1, 2016
Net income for the year
Distributions paid
Distributions payable
Contribution from
non-controlling interest
Distribution Reinvestment Plan
Unit Purchase Plan
Deferred Unit Incentive Plan
Public offering of Units
Conversion of debentures
Unit issue costs
Foreign currency translation
Note
13
13
14
14
14
14
adjustment
Balance at December 31, 2016
—
125,456,199 $
—
1,211,588 $
—
90,049 $
(82,998 )
45,812 $
(82,998 )
1,347,449 $
(650 )
10,275 $
(83,648 )
1,357,724
Number
of Units
111,466,697 $
—
—
—
Unitholders’
equity
1,091,317 $
—
—
—
—
1,493,617
2,231
61,920
—
—
13,745
20
576
(173 )
Attributable to unitholders of the Trust
Accumulated
Retained
other
earnings comprehensive
income
(deficit)
31,516 $
—
—
—
(8,808 ) $
144,747
(82,849 )
(7,535 )
Total
unitholders’
equity
1,114,025 $
144,747
(82,849 )
(7,535 )
Non-
controlling
interest
6,195 $
1,079
—
—
—
—
—
—
—
—
—
—
—
—
—
13,745
20
576
(173 )
1,364
—
—
—
—
Total
1,120,220
145,826
(82,849 )
(7,535 )
1,364
13,745
20
576
(173 )
Note
(in thousands of Canadian dollars,
except number of Units)
Balance at January 1, 2015
Net income for the year
Distributions paid
Distributions payable
Contribution from
non-controlling interest
Distribution Reinvestment Plan
Unit Purchase Plan
Deferred Unit Incentive Plan
Unit issue costs
Foreign currency translation
13
13
14
14
14
adjustment
Balance at December 31, 2015
—
113,024,465 $
—
1,105,485 $
—
45,555 $
97,294
128,810 $
97,294
1,279,850 $
670
9,308 $
97,964
1,289,158
See accompanying notes to the consolidated financial statements.
Dream Global REIT 2016 Annual Report | 55
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 and associates
Deferred income tax expense
Amortization of lease incentives
Amortization of financing costs
Amortization of fair value adjustment on acquired debt
Amortization of initial discount on convertible debentures
Loss on sale of investment properties
Depreciation and amortization
Deferred unit compensation expense and asset management fees
Straight-line rent adjustment
Fair value adjustments to financial instruments
Fair value adjustments to investment properties
Debt settlement costs
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 assumed on property entity acquisition
Investment in joint ventures
Notes receivable
Cash sold to the POBA joint venture
Net proceeds from disposal of investment properties
Distributions from investment in joint ventures
Generated from (utilized in) financing activities
Purchase of interest rate caps
Debt cancellation charge
Mortgage proceeds
Financing costs on debts placed
Mortgage principal repayments
Term loan repayment on property dispositions and amortization
Lump sum repayment on mortgage refinancings
Drawdown on revolving credit facility
Revolving credit facility repayments
Repayment of convertible debentures, net of costs
Proceeds of term debt
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.
See supplementary cash flow information (Note 20).
Note
Year ended December 31,
2016
2015
$
141,334 $
145,826
7
6
11
17
10
6, 15
20
6, 15
6
6
7
9
9
9
14
13
$
(30,811 )
28,690
2,951
5,299
—
893
5,482
111
3,765
(2,093 )
(15,190 )
(80,315 )
21,640
(2,516 )
—
(11,246 )
(8,461 )
59,533
(24,432 )
(228,802 )
—
—
(879 )
—
—
97,486
28,398
(128,229 )
—
(702 )
540,721
(6,150 )
(12,819 )
(48,720 )
(291,334 )
95,868
(35,026 )
(160,975 )
—
97,827
(5,453 )
(81,617 )
91,620
22,924
(1,341 )
28,700
50,283 $
(35,675 )
15,614
2,245
3,305
(30 )
1,184
2,893
118
3,842
(928 )
11,034
(68,436 )
5,541
(3,625 )
(6,368 )
(8,332 )
(15,184 )
53,024
(14,425 )
(236,401 )
16,006
872
(67,078 )
(1,274 )
(5,186 )
104,838
17,326
(185,322 )
(5,228 )
—
161,558
(15,268 )
(33,380 )
(83,009 )
(316,352 )
101,587
(72,132 )
—
369,543
20
(173 )
(76,535 )
30,631
(101,667 )
8,428
121,939
28,700
Dream Global REIT 2016 Annual Report | 56
Notes to the consolidated financial statements
(All dollar and euro amounts in thousands of Canadian dollars and euros, except unit amounts)
Note 1
ORGANIZATION
Dream Global Real Estate Investment Trust (the “REIT” or the “Trust”) is an open-ended investment trust created pursuant to a
Declaration of Trust dated April 21, 2011, under the laws of the Province of Ontario, and is domiciled in Ontario. The
consolidated financial statements of the REIT include the accounts of the REIT and its consolidated subsidiaries. The REIT’s
portfolio comprises office, industrial and mixed use properties located in Germany and Austria.
The principal office and centre of administration of the Trust is 30 Adelaide Street East, Suite 301, State Street Financial
Centre, Toronto, Ontario, Canada M5C 3H1. The Trust is dual listed on the Toronto Stock Exchange under the symbol DRG.UN
and on the Frankfurt Stock Exchange under the symbol DRG. The Trust’s consolidated financial statements for the year ended
December 31, 2016 were authorized for issue by the Board of Trustees on February 22, 2017, 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 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 and associates
Associates 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 contractual agreements.
Dream Global REIT 2016 Annual Report | 57
The financial results of the Trust’s associates 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 ventures and associates in the
consolidated statements of net 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. The Trust reports its interests in joint ventures using the equity method of accounting as described under
“Equity accounted investments and associates” above. 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. 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 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 net 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.
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 statement of net 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.
Dream Global REIT 2016 Annual Report | 58
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 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. Liabilities that are to be assumed by the buyer on disposition of the asset are also classified
as held for sale, separately on the consolidated balance sheets. 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 and Austria. 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 18.9% of the gross rental income generated by the
Trust’s properties as at the year ended December 31, 2016 (December 31, 2015 – 30%).
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 and joint ventures 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 of the REIT 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 net 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 net income.
Group companies
The results and financial position of all the group entities that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
(i)
(ii)
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the rate on the dates of the transactions); and
(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.
Dream Global REIT 2016 Annual Report | 59
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 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 net 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 net 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.
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
net 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 a decrease in retained earnings.
Dream Global REIT 2016 Annual Report | 60
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 for the year related to non-Canadian taxable subsidiaries 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. The carrying amount of a deferred tax asset is reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that
deferred tax asset to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable
profit will be available.
Unit-based compensation plan
The Trust has a Deferred Unit Incentive Plan (“DUIP”), as described in Note 14, 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 net 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 when
incurred 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 net 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 2016 Annual Report | 61
Financial instruments
Designation of financial instruments
The following summarizes the Trust’s classification and measurement of financial assets, liabilities and financial derivatives:
Financial assets
Notes receivable
Amounts receivable
Cash
Financial liabilities
Mortgage debt
Revolving credit facility
Term loan credit facility
Convertible debentures – host instrument
Deposits
Deferred Unit Incentive Plan
Amounts payable and accrued liabilities
Distributions payable
Income tax payable
Classification
Loans and receivables
Loans and receivables
Loans and receivables
Other liabilities
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
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 of all principal and
interest due under the original terms of the contract is unlikely. 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 statement of net 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 statement of net
income. Trade receivables that are less than three months past due are not considered impaired unless there is evidence
collection of all of the amount due is unlikely. 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 statement of net 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 net income over the expected life of the debt.
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.
Dream Global REIT 2016 Annual Report | 62
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 net 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 net
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
The Trust expenses all salary costs of permanent staff involved in negotiating and arranging new leases as internal direct
leasing costs in the statement of net income as incurred.
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.
Dream Global REIT 2016 Annual Report | 63
• 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.
Certain comparative balances have been reclassified from the consolidated financial statements previously presented to
conform to the presentation of the 2016 consolidated financial statements.
Note 4
CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS IN APPLYING ACCOUNTING POLICIES
The preparation of the consolidated financial statements requires management to make judgments, estimates and
assumptions that affect the amounts reported. Management bases its judgments and estimates on experience in the industry
and other various factors it believes to be reasonable under the circumstances, but which are inherently uncertain and
unpredictable, the result of which forms the basis of the carrying values of assets and liabilities. However, uncertainty about
these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of
the asset or liability affected in the future.
Critical accounting judgments
The following are the critical judgments made in applying the Trust’s accounting policies that have the most significant effect
on the amounts in the consolidated financial statements:
Valuation of investment properties
Critical judgments are made by the Trust in respect of the fair values of investment properties. The fair value of these
investments is reviewed regularly by management with reference to independent property valuations and market conditions
existing at the reporting date, using generally accepted market practices. Judgment is also applied in determining the extent
and frequency of independent appraisals.
The determination of fair values requires management to make estimates and assumptions that affect the values presented,
such that actual values in sales transactions may differ from those presented. The Trust’s critical assumptions relating to the
estimates of fair values of investment properties include the receipt of contractual rents, expected future market rents,
renewal rates, non-recoverable capital expenditures, 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:
• 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.
Dream Global REIT 2016 Annual Report | 64
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. From the latest
draft bill issued at the beginning of 2016, foreign funds investing in German assets through FCPs shall be treated as quasi-
corporate taxpayers. 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.
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
• 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.
Dream Global REIT 2016 Annual Report | 65
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.
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, 2018, with earlier application permitted. The Trust is currently evaluating the impact of adopting this standard on
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 an entity’s 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. The entity’s own credit
changes can be early adopted in isolation without otherwise changing the accounting for financial instruments. Lastly, a third
measurement category for financial assets – “fair value through other comprehensive income” – will exist. IFRS 9 is effective
for annual periods beginning on or after January 1, 2018; however, it is available for early adoption. The Trust is currently
evaluating the impact of adopting this standard on the consolidated financial statements.
Financial instruments – disclosures
IFRS 7, “Financial Instruments: Disclosures” (“IFRS 7”), has been amended by the IASB to require additional disclosures on
transition from IAS 39 to IFRS 9. The amendment to IFRS 7 is effective for periods beginning on or after January 1, 2018. The
Trust is currently evaluating the impact of adopting this standard on the consolidated financial statements.
Leases
IFRS 16, “Leases” (“IFRS 16”), sets out the principles for the recognition, measurement and disclosure of leases. IFRS 16
provides revised guidance on identifying a lease and for separating lease and non-lease components of a contract. IFRS 16
introduces a single accounting model for all lessees and requires a lessee to recognize right-of-use assets and lease liabilities
for leases with terms of more than twelve months, unless the underlying asset is of low value. Under IFRS 16 lessor accounting
for operating and finance leases will remain substantially unchanged. IFRS 16 is effective for annual periods beginning on or
after January 1, 2019, with earlier application permitted for entities that apply IFRS 15. The Trust does not expect the
amendments to have a material impact on the financial statements.
Dream Global REIT 2016 Annual Report | 66
Income taxes
IAS 12, “Deferred Tax” (“IAS 12”), clarifies the recognition of deferred tax assets for unrealized losses. It was amended to
specify (i) the requirements for recognizing deferred tax assets on unrealized losses; (ii) deferred tax where an asset is
measured at a fair value below the asset’s tax base, and (iii) certain other aspects of accounting for deferred tax assets. The
amendments to IAS 12 are effective for years beginning on or after January 1, 2017. The Trust does not expect the
amendments to have a material impact on the financial statements.
Note 6
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, acquired on August 3, 2011, consist of national and regional administration offices, mixed use retail and
distribution properties and regional logistics headquarters of Deutsche Post. The properties are dispersed throughout
Germany, are generally strategically located near central train stations and main retail areas, and are easily accessible by public
transportation.
Acquisition Properties
The Acquisition Properties, acquired since the Trust’s Initial Public Offering in 2011, consist of high-quality office buildings
located in Germany’s largest office markets. The REIT participates in two joint venture partnerships which hold a 50% interest
in a total of nine Acquisition Properties. During 2015, the REIT sold a 50% interest in an Acquisition Property to a South Korean
pension fund. There were no comparable transactions in 2016. Refer to Note 7 for the details regarding the jointly owned
properties.
Balance as at January 1, 2016
Additions:
Acquisition of investment properties
Building improvements
Lease incentives and initial direct leasing costs
Disposals of investment properties
Transfers to disposal groups classified as assets held for sale
Fair value adjustments to investment properties
Change in straight-line rents
Amortization of lease incentives
Foreign currency translation loss
Balance as at December 31, 2016
Note
Total
2,394,739 $
$
229,942
27,094
11,244
(2,141 )
(121,335 )
80,315
1,883
(2,951 )
(137,204 )
2,481,586 $
15
$
Initial
Properties
761,479 $
Acquisition
Properties
1,633,260
—
10,536
2,141
(2,141 )
(121,335 )
(24,076 )
337
(2,085 )
(36,183 )
588,673
$
229,942
16,558
9,103
—
—
104,391
1,546
(866 )
(101,021 )
1,892,913
Dream Global REIT 2016 Annual Report | 67
Balance as at January 1, 2015
Additions:
Acquisition of investment properties
Building improvements
Lease incentives and initial direct leasing costs
Disposals 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
Fair value adjustments to investment properties
Change in straight-line rents
Amortization of lease incentives
Foreign currency translation loss
Balance as at December 31, 2015
Note
Total
2,081,100 $
$
Initial
Properties
796,160 $
Acquisition
Properties
1,284,940
237,019
14,375
8,332
(252 )
—
9,130
6,119
(252 )
237,019
5,245
2,213
—
15
15
(69,368 )
(96,411 )
68,436
1,029
(2,245 )
152,724
2,394,739 $
—
(96,411 )
(1,223 )
(75 )
(1,931 )
49,962
761,479 $
(69,368 )
—
69,659
1,104
(314 )
102,762
1,633,260
$
(1) POBA joint venture refers to the Public Officials Benefit Association joint venture.
During the year ended December 31, 2016, the REIT acquired four office properties for a total of $229,942 (€158,135)
including transaction costs (December 31, 2015 – three properties for a total of $237,019 [€164,777]). The acquisitions were
partially financed by new mortgages totalling $137,658 (€94,685).
The assets acquired and liabilities assumed in the transactions were allocated as follows:
Investment properties(1)
Net working capital assumed
Accrued transaction costs
Contributions from non-controlling interest
Total cash consideration
(1) Includes transaction costs.
For the year
ended
December 31,
2016
229,942 $
—
1,140
—
231,082 $
For the year
ended
December 31,
2015
237,019
(246 )
(468 )
1,332
237,637
$
$
Investment properties includes $4,341 (December 31, 2015 — $2,458) related to straight-line rent receivables.
During the year ended December 31, 2016, the REIT disposed of 39 investment properties that were acquired in 2011 as part
of the Initial Properties, 11 of which were reclassified as assets held for sale as at December 31, 2015. Net proceeds of
$97,486 (December 31, 2015 – $104,838) were received on these sales and a loss on sale of $5,482 (December 31, 2015 –
$6,079) related to the transaction costs incurred was recorded. As at December 31, 2016, the REIT had entered into binding
purchase and sale agreements to sell 11 properties totalling $45,461. These properties have been reclassified as assets held
for sale. In total, the REIT also recorded a fair value loss of $12,884 on these properties. (Refer to Note 15 for details on the
assets held for sale.)
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)
(1) Includes income from head lease.
Dream Global REIT 2016 Annual Report | 68
$
December 31,
2016
176,186
461,587
247,155
884,928
$
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)
December 31,
2016
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
$
$
588,673 $
1,892,913
2,481,586 $
— $
—
— $
— $
—
— $
588,673
1,892,913
2,481,586
45,461 $
— $
45,461 $
—
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, 2016, investment properties valued at
$45,461 were transferred out of Level 3 fair value measurements to Level 2 fair value measurements as these properties were
under contract for sales as at the balance sheet date.
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. The REIT’s management is responsible for determining fair value measurements included in the consolidated
financial statements. 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.
In applying the direct income capitalization 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
Stabilized NOI
based on location, size and quality of the property and taking into account any available market
data at the valuation date.
revenue less property operating expenses, adjusted for items such as expected future market rents,
renewal rates, new leasing, average lease up costs, long-term vacancy rates, non-recoverable
capital expenditures, management fees, straight-line rents and other non-recurring items, as
applicable.
Generally, an increase in stabilized NOI will result in an increase in the fair value of an investment property. The fair value of an
investment property has an inverse relationship with capitalization rates: an increase in the capitalization rate will result in a
decrease in the fair value, and vice versa. The capitalization rate magnifies the effect of a change in stabilized NOI, and a lower
capitalization rate results in a greater impact to fair value than a higher capitalization rate.
In applying the discounted cash flow (“DCF”) method, a ten-year hold is assumed, and the projected income and expenditures
of a specific property plus the forecasted net proceeds from the sale of the property at the end of the hold period are
discounted using a rate which reflects the risk profile of the specific property. The significant assumptions incorporated into
the DCF include 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
generally based on the average increase in the consumer price index for Germany over the past
three years, the average growth rate used is 2%.
Dream Global REIT 2016 Annual Report | 69
Valuation processes
Initial Properties
During the year ended December 31, 2016, the REIT obtained external valuations for approximately 68%, or $406,074
(€286,593), of the Initial Properties. For the balance of properties, the REIT performed internal valuations. During 2015, 100%,
or $761,479 (€506,673), of the Initial Properties portfolio was externally valued. 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
Valuation method
Discounted cash flow
Input
Discount rate
Exit capitalization rate
Range
5.25%–19.50%
4.25%–18.50%
Input
Discount rate
Exit capitalization rate
Range
5.0%–20.5%
4.0%–19.5%
December 31, 2016
Weighted average
7.5 %
6.4 %
December 31, 2015
Weighted average
7.3 %
6.1 %
If both the discount rate and exit capitalization rate were to increase by 25 basis points, the value of Initial Properties would
decrease by $18,975. If both the discount rate and exit capitalization rate were to decrease by 25 basis points, the value of the
Initial Properties would increase by $13,680.
Acquisition Properties
During the year ended December 31, 2016, the REIT obtained external valuations for 100%, or $1,892,912 (€1,335,954), of the
Acquisition Properties. During 2015, approximately 40%, or $657,143 (€437,250), was valued externally. For the balance of
properties, the REIT performed internal valuations. 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
Valuation method
Direct income capitalization
Input
Capitalization rate
Range
4.10%–6.56%
Input
Capitalization rate
Range
4.2%–7.0%
December 31, 2016
Weighted average
5.55 %
December 31, 2015
Weighted average
5.6 %
If the capitalization rate were to increase by 25 basis points, the value of Acquisition Properties would decrease by $90,891. If
the capitalization rate were to decrease by 25 basis points, the value of Acquisition Properties would increase by $108,732
Note 7
JOINT ARRANGEMENTS AND ASSOCIATES
The Trust participates in partnerships (“joint ventures”) with other parties that own investment properties and accounts for its
interests using the equity method.
As at December 31, 2016, the REIT has a total of eight Acquisition Properties under a co-ownership arrangement with POBA
(POBA joint venture) and one Acquisition Property under a similar co-ownership arrangement with an Asian sovereign wealth
fund (Rivergate joint venture). Pursuant to these arrangements, the REIT does not have control of these property subsidiaries
and, as such, has classified its 50% interest in the entities as investment in joint ventures and accounted for the investment
using the equity method.
Dream Global REIT 2016 Annual Report | 70
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.
Location
Berlin, Germany
Stuttgart, Germany
Frankfurt, Germany
Düsseldorf, Germany
Frankfurt, Germany
Hamburg, Germany
Munich, Germany
Stuttgart, Germany
Vienna, Austria
Luxembourg, Luxembourg
Toronto, Canada
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
Liebknechtstr. 33/35, Heßbrühlstr. 7 (Officium)
Rivergate joint venture
Lorac Investment Management S.à r.l.
Dream Technology Ventures LP
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
Liebknechtstr. 33/35, Heßbrühlstr. 7 (Officium)
Investment in POBA joint venture
Rivergate joint venture
Lorac Investment Management S.à r.l.
Dream Technology Ventures LP
Total investment in joint ventures and associates
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
Liebknechtstr. 33/35, Heßbrühlstr. 7 (Officium)
Share of net income from POBA joint venture
Rivergate joint venture
Lorac Investment Management S.à r.l.
Dream Technology Ventures LP
Share of net income from investment in joint ventures and associates
Dream Global REIT 2016 Annual Report | 71
December 31,
2016
Ownership interest (%)
December 31,
2015
50
50
50
50
50
50
50
50
50
50
10
50
50
50
50
50
50
50
50
50
50
n/a
Net assets at % ownership interest
December 31,
December 31,
2016
2015
23,343
23,654 $
13,973
11,582
26,106
21,408
19,104
19,014
30,171
29,126
39,707
34,748
30,405
33,562
23,106
23,312
205,915
196,406
66,613
68,638
192
199
12
—
272,720
265,255 $
Share of net income (loss) at
% ownership interest for
year ended December 31,
2016
2015
6,139
2,750 $
2,233
2,007
5,661
1,162
3,395
1,830
350
1,032
5,975
4,041
5,688
5,560
6,383
2,607
35,824
20,989
9,970
(169 )
20
19
—
(167 )
35,675
30,811 $
$
$
$
$
In selling a 50% interest in an Acquisition Property in 2015, the REIT and POBA entered into a co-ownership arrangement
regarding the asset. IFRS required the REIT to derecognize the asset and record the gain prior to selling control on 100% of the
asset sold. As a result, the REIT recorded a gain of $3,186, including $397 of deferred tax loss.
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 eight properties. As at December 31,
2016, the loan amounted to $378 (December 31, 2015 – $740). During the year ended December 31, 2016, the REIT recorded
fee income relating to the POBA and Rivergate joint ventures of $5,226 (year ended December 31, 2015 – $3,150), which is
included in interest and other income.
The following amounts represent 100% as well as the Trust’s respective share of the assets, liabilities, revenues, expenses and
cash flows in the equity accounted investments in which the Trust participates.
Non-current assets
Investment properties
Current assets
Amounts receivable
Prepaid expenses
Cash
Total assets
Non-current liabilities
Debt
Deposits
Deferred income tax payable
Current liabilities
Debt
Amounts payable and accrued liabilities
Income tax receivable
Total liabilities
Net assets
Fair value remeasurement on the retained interest
Investment in POBA joint venture
POBA joint venture at 100%
December 31,
2015
December 31,
2016
December 31,
2016
POBA joint venture at 50%
December 31,
2015
$
739,040 $
739,040
752,650 $
752,650
369,520 $
369,520
1,070
80
4,916
6,066
745,106
374,024
498
17,484
392,006
1,830
96
5,514
7,440
760,090
373,494
392
13,716
387,602
535
40
2,458
3,033
372,553
187,012
249
8,742
196,003
6,246
9,404
(26 )
15,624
407,630
337,476 $
$
6,686
9,330
(22 )
15,994
403,596
356,494 $
$
3,123
4,702
(13 )
7,812
203,815
168,738 $
27,668
196,406 $
376,325
376,325
915
48
2,757
3,720
380,045
186,747
196
6,858
193,801
3,343
4,665
(11 )
7,997
201,798
178,247
27,668
205,915
Dream Global REIT 2016 Annual Report | 72
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 and other
activities
Fair value adjustments to investment properties
Debt settlement costs
Income before income taxes
Current income tax expense
Deferred income tax expense
Net income for the year
Foreign currency translation adjustments for the year
Comprehensive income for the year
Cash flow generated from (utilized in):
Operating activities
Investing activities
Financing activities (excluding owners’ distributions)
Cash flow before owners’ distributions
Joint ventures’ distributions to owners
Increase (decrease) in cash
POBA joint venture at 100%
Year ended December 31,
2015
2016
45,568 $
46,330 $
(8,470 )
(9,348 )
37,098
36,982
POBA joint venture at 50%
Year ended December 31,
2016
2015
22,784
23,165
(4,674 )
(4,235 )
18,549
18,491
$
1,804
1,804
(5,708 )
(9,452 )
(15,160 )
26,356
(3,310 )
23,046
46,672
2
(4,696 )
41,978 $
(23,168 )
18,810 $
866
866
(5,374 )
(9,662 )
(15,036 )
62,304
(1,066 )
61,238
84,166
(14 )
(12,504 )
71,648 $
26,122
97,770 $
902
902
(2,854 )
(4,726 )
(7,580 )
13,178
(1,655 )
11,523
23,336
1
(2,348 )
20,989
(11,584 )
9,405
$
$
433
433
(2,687 )
(4,831 )
(7,518 )
31,152
(533 )
30,619
42,083
(7 )
(6,252 )
35,824
13,061
48,885
POBA joint venture at 100%
Year ended December 31,
2015
2016
POBA joint venture at 50%
Year ended December 31,
2016
2015
28,484 $
(2,756 )
21,276
47,004
(47,600 )
(596 ) $
19,282 $
4,566
10,074
33,922
(34,652 )
(730 ) $
14,242 $
(1,378 )
10,638
23,502
(23,800 )
(298 ) $
9,641
2,283
5,037
16,961
(17,326 )
(365 )
$
$
$
$
$
Dream Global REIT 2016 Annual Report | 73
Non-current assets
Investment properties
Current assets
Amounts receivable
Cash
Total assets
Non-current liabilities
Debt
Deferred income tax payable
Current liabilities
Amounts payable and accrued liabilities
Total liabilities
Net assets
Carrying costs attributable to joint venture
Investment in Rivergate joint venture
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 tax expense
Deferred income tax expense
Net income (loss) for the year
Foreign currency translation adjustments for the year
Comprehensive income (loss) for the year
Cash flow generated from:
Operating activities
Investing activities
Financing activities (excluding owners’ distributions)
Cash flow before owners’ distributions
Joint ventures’ distributions to owners
Increase (decrease) in cash
Rivergate joint venture at 100%
December 31,
2015
December 31,
2016
Rivergate joint venture at 50%
December 31,
2015
December 31,
2016
$
281,602 $
281,602
284,048 $
284,048
140,801 $
140,801
1,162
1,784
2,946
284,548
145,576
4,232
149,808
1,292
3,692
4,984
289,032
153,970
38
154,008
2,772
2,772
152,580
131,968 $
5,554
5,554
159,562
129,470 $
$
$
581
892
1,473
142,274
72,788
2,116
74,904
1,386
1,386
76,290
65,984 $
2,654
68,638 $
142,024
142,024
646
1,846
2,492
144,516
76,985
19
77,004
2,777
2,777
79,781
64,735
1,878
66,613
Rivergate joint venture at 100%
Year ended December 31,
2015
2016
686 $
17,164 $
(102 )
(2,744 )
584
14,420
Rivergate joint venture at 50%
Year ended December 31,
2016
2015
343
8,582 $
(1,372 )
(51 )
292
7,210
$
(16 )
(16 )
(1,186 )
(2,904 )
(4,090 )
13,986
13,986
24,300
(2 )
(4,358 )
19,940 $
(8,096 )
11,844 $
—
—
(56 )
(134 )
(190 )
(694 )
(694 )
(300 )
—
(38 )
(338 ) $
(598 )
(936 ) $
(8 )
(8 )
(593 )
(1,452 )
(2,045 )
6,993
6,993
12,150
(1 )
(2,179 )
9,970 $
(4,048 )
5,922 $
—
—
(28 )
(67 )
(95 )
(347 )
(347 )
(150 )
—
(19 )
(169 )
(299 )
(468 )
Rivergate joint venture at 100%
Year ended December 31,
2015
2016
Rivergate joint venture at 50%
Year ended December 31,
2016
2015
7,288 $
—
—
7,288
(9,196 )
(1,908 ) $
1,674 $
2,018
27,168
30,860
(27,168 )
3,692 $
3,644 $
—
—
3,644
(4,598 )
(954 ) $
837
1,009
13,584
15,430
(13,584 )
1,846
$
$
$
$
Dream Global REIT 2016 Annual Report | 74
Note 8
AMOUNTS RECEIVABLE
Trade receivables
Less: Provision for impairment of trade receivables
Trade receivables, net
Other amounts receivable
Total
December 31,
2016
5,895 $
(1,095 )
4,800
11,591
16,391 $
December 31,
2015
9,966
(2,127 )
7,839
7,867
15,706
$
$
The movement in the provision for impairment of trade receivables for the year ended December 31, 2016 was as follows:
As at January 1
Provision for impairment of trade receivables
Receivables written off during the year as uncollectible
Total
Year ended December 31,
2016
2015
1,165
2,127 $
1,001
165
2,166
2,292
(1,197 )
(39 )
2,127
1,095 $
$
$
As at December 31, 2016, other amounts receivable include unbilled amounts from tenants in relation to operating cost
recoveries of $3,544 (December 31, 2015 – $3,623).
As at December 31, 2016, trade receivables relates primarily to billed amounts to tenants for operating cost recoveries of
approximately $4,800, all of which (December 31, 2015 – $4,419) were past due. These amounts are not considered impaired
as the Trust has ongoing relationships with these tenants and the aging of these trade receivables is not indicative of default.
The carrying amount of amounts receivable approximates fair value due to their current nature.
Note 9
DEBT
Mortgage debt
Convertible debentures
Revolving credit facility
Term loan credit facility(1)
Total
Less: Current portion(1)
Non-current debt
December 31,
2016
1,023,130 $
$
—
87,139
289,193
1,399,462
158,352
1,241,110 $
$
December 31,
2015
841,101
154,558
29,908
355,325
1,380,892
56,003
1,324,889
(1) The current portion of debt includes $26,806 (2015 – $11,209) of the term loan credit facility associated with the assets sold or held for sale. This balance
will be paid from the proceeds from disposition when the respective asset sales close as required under terms of the credit facility agreement.
First-ranking mortgages on all of the investment properties have been provided as security for either the mortgage debt or the
term loan credit facility.
Mortgage debt
On February 3, 2016, the Trust drew on a mortgage with a principal balance of $24,884 (€16,260) at a fixed rate of 1.62% per
annum, maturing on January 31, 2026, in connection with the acquisition of Friedrichstraße 45, 47, in Essen. The mortgage
requires quarterly repayments with a principal amortization of 1.50% per annum of the initial loan amount.
On February 29, 2016, the Trust drew on a mortgage with a principal balance of $14,108 (€9,600) at a fixed rate of 1.07% per
annum, maturing on February 28, 2023, in connection with the acquisition of Werner-Eckert-Str. 14, 16, 18, in Munich. The
mortgage requires quarterly repayments with a principal amortization of 1.25% per annum of the initial loan amount.
Dream Global REIT 2016 Annual Report | 75
On August 17, 2016, the Trust increased the loan of an existing mortgage by $16,252 (€11,200) at a fixed rate of 1.40% per
annum, maturing on December 7, 2022, in connection with Greifswalder Str. 154–156, in Berlin. The mortgage requires
quarterly repayments with a principal amortization of 3.25% per annum of the initial loan amount.
On August 25, 2016, the Trust increased the loan of an existing mortgage on Reichskanzler-Müller-Str. 21–2, in Mannheim, by
$3,364 (€2,307), while reducing the overall face rate of the entire mortgage from 3.32% to 3.07%.
On October 31, 2016, the Trust drew on a mortgage with a principal balance of $51,165 (€34,825) at a fixed rate of 1.20% per
annum, maturing on September 30, 2024, in connection with the acquisition of Gleiwitzer Str. 555, an office property located
in Nuremberg, Germany. The mortgage requires quarterly repayments with a principal amortization of 3.25% per annum of
the initial loan amount.
On December 21, 2016, the Trust drew on a mortgage with a principal balance of $47,501 (€34,000) at a fixed rate of 1.36%
per annum, maturing on December 21, 2023, in connection with the acquisition of Flughafenallee 13–17, an office property
located in Bremen, Germany. The mortgage requires no principal amortization over the term of the loan.
In addition, the REIT has completed the following twelve refinancings in the period from August 26, 2016 to December 27,
2016:
Property name
Financing date
New maturity date
Oasis III, Stuttgart
August 26, 2016
August 4, 2025
August 26, 2016
August 4, 2025
Deferred
financing
costs
incurred
140
127
€
New loan
amount
€ 26,200
25,500
New face
rate
1.37 %
1.33 %
New principal
amortization
rate per
annum
Cancellation
charge
490
237
2.00 % €
2.00 %
Unamortized
deferred
financing costs
written off
156
85
€
Total debt
settlement
costs
646
322
€
August 26, 2016
August 4, 2024
19,500
108
1.38 %
2.00 %
167
100
267
September 1, 2016
August 31, 2026
22,000
131
1.31 %
1.50 %
1,486
134
1,620
September 1, 2016
February 28, 2023
9,900
Frankfurt
September 1, 2016
August 31, 2026
6,000
Am Stadtpark 2 (Parcside),
Nuremberg
September 1, 2016
August 31, 2026
16,100
September 1, 2016
August 31, 2026
18,300
September 27, 2016 September 22, 2023
54,000
December 9, 2016 November 30, 2024
23,000
73
48
100
112
353
179
0.79 %
1.25 %
1.31 %
1.50 %
285
419
1.31 %
1.50 %
1,209
1.31 %
1.50 %
1,201
1.24 %
nil %
1,385
1.46 %
1.50 %
592
96
38
111
106
287
85
381
457
1,320
1,307
1,672
677
Schlossstrasse 8, Hamburg
Am Sandtorkai 37,
Hamburg
Bertoldstrasse 48/
Sedanstrasse 7,
Frankfurt
Werner-Eckert-Straße,
Munich
Lörracher Strasse 16/16a,
Westendstrasse 160–162/
Barthstrasse, Munich
Feldmühleplatz 1,
Düsseldorf
Leopoldstrasse 252,
Munich
Dillwächterstrasse 5/
Tübinger Strasse 11,
Munich
Hammer Strasse 30–34,
December 9, 2016 November 30, 2024
14,000
118
1.50 %
1.50 %
549
76
625
Hamburg
December 27, 2016 December 27, 2024
30,000
€ 264,500
$ 383,446
304
1,793
2,589
€
$
1.11 %
1.29 %
1.29 %
nil %
1.15 % €
1.15 % $
297
8,317
12,126
€
$
117
1,391
2,022
€
$
414
9,708
14,147
In total, the REIT repaid $291,334 (€200,694) with new mortgages of $383,446 (€264,500), at a blended fixed rate of 1.29%
per annum. The mortgages require quarterly repayments with a blended principal amortization of 1.15% per annum of the
initial loan amount. The refinancings carried total cancellation charges of $12,125 (€8,317). Except for Hammer Strasse 30–34,
Hamburg, for which the cancellation charge was paid in cash, the cancellation charge for the others amounting to $11,707
(€8,020) were recorded as amounts payable and accrued liabilities. They are to be paid along with the regular mortgage
repayments over the term of the loans. Together with the unamortized deferred financing costs of the old mortgages of
$2,022 (€1,391), the REIT incurred debt settlement costs of $14,147 (€9,708).
Convertible debentures
On August 3, 2011, the Trust issued a $140,000 principal amount of the 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. 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.
Dream Global REIT 2016 Annual Report | 76
On September 15, 2016, the Trust redeemed $160,975, being all of the principal outstanding of the Debentures as at that date
and paid the accrued interest of $1,092, totalling $162,067 in cash. Prior to the redemption, $25 Debentures were converted
into 1,923 REIT Units on exercise of a debenture holder’s right to convert. As a result of the redemption, the REIT incurred a
debt settlement cost of $6,114, comprising $2,164 of unamortized deferred financing costs, $2,634 of unamortized initial
discount on convertible debentures, $1,322 loss on redemption of conversion feature of the convertible debentures, offset by
a gain of $6 on an earlier redemption. As at December 31, 2016, the outstanding principal amount was $nil (December 31,
2015 – $161,000).
Term loan credit facility
On December 14, 2015, the Trust fully refinanced the then term loan credit facility in the amount of $316,352 (€208,965) by a
new term loan credit facility (the “New Facility”) for gross proceeds of $369,543 (€244,100). The New Facility has a term of
five years and there are no principal amortization payments required during the term. Variable rate interest is calculated and
payable quarterly under the New Facility at a rate equal to the aggregate of the three-month EURIBOR plus a margin of
225 basis points (the “margin”). Pursuant to the requirements of the New Facility, the Trust purchased interest rate caps with a
weighted average strike rate of 1.03% (excluding the margin) to cover 95% of the New Facility loan amount. Transaction costs
relating to the New Facility were $12,680 (€8,376).
The New Facility includes covenants requiring the Trust to maintain certain loan-to-value and debt service coverage ratios,
each of which is calculated on a quarterly basis. The New Facility agreement requires the debt service coverage ratio to be
equal to or above 235% at each interest payment date and the loan-to-value ratio not to exceed 60%. As at December 31,
2016, the Trust was in compliance with its loan covenants.
There are no prepayment fees on property disposals for up to 25% of the portfolio value within the first two years of the loan
and up to 40% of the portfolio value during the term of the loan. On property disposals, 110% of the loan amount allocated to
the disposed property has to be repaid. Prepayment amounts exceeding the established thresholds for property disposals
within the first two years of the loan are subject to a prepayment fee equal to a yield maintenance fee. Commencing in year
three, a prepayment fee of 2.0% is payable, which subsequently drops to 1.5% in year four, and no prepayment fee is payable
in the final year of the New Facility. As of December 31, 2016, the Trust is in compliance with the terms of the New Facility.
During the year ended December 31, 2016, the REIT repaid $48,720 (€34,121) in connection with the disposition of
39 properties in accordance with the terms of the New Facility. At the same time, the REIT also wrote off the unamortized
deferred financing costs associated with the debt and recorded them as debt settlement costs. For the year ended
December 31, 2016, the amount charged was $1,379.
Revolving credit facility
On November 20, 2015, the REIT increased its revolving credit facility to €100,000, with no change to the covenants or interest
rate spreads, and the term has been extended to September 25, 2017. The REIT has provided a general security agreement as
collateral for the revolving credit facility. 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 $1,277 as at December 31, 2016. 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. As at December 31, 2016, the outstanding balance of the credit facility was
$87,139 (€61,500) and the Trust was in compliance with the covenants of the revolving credit facility. As at December 31,
2016, the Trust had an undrawn letter of credit in the amount of $1,700 committed against the revolving credit facility.
Dream Global REIT 2016 Annual Report | 77
The weighted average interest rates for the fixed and floating components of debt are as follows:
Face interest rates
December 31, December 31,
2015
2016
Weighted average
effective interest rate
December 31, December 31,
2015
2016
1.64 %
—
1.64 %
0.95 %
3.00 %
2.25 %
2.29 %
1.83 %
2.17 %
5.50 %
2.71 %
0.95 %
3.00 %
2.25 %
2.18 %
2.55 %
1.82 %
—
1.82 %
1.17 %
3.00 %
3.16 %
2.95 %
2.15 %
2.47 %
7.31 %
3.25 %
1.17 %
3.00 %
3.01 %
2.84 %
3.13 %
Maturity
dates
December 31,
2016
Debt amount
December 31,
2015
2017–2026 $
2018
986,512 $
—
986,512
801,834
154,558
956,392
2022
2016
2020
$
36,618
87,139
289,193
412,950
1,399,462 $
39,267
29,908
355,325
424,500
1,380,892
Fixed rate
Mortgage debt
Convertible debentures
Total fixed rate debt
Variable rate
Mortgage debt(1)
Revolving credit facility
Term loan credit facility(1)
Total variable rate debt
Total debt
(1) Subject to interest rate cap.
The scheduled principal repayments and debt maturities are as follows:
2017
2018
2019
2020
2021
2022 and thereafter
Transaction costs
Note 10
DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate caps
Foreign exchange forward contracts
Conversion feature on the convertible debentures
Total
Mortgages
Term loan
$
$
44,407 $
12,719
14,007
103,151
12,436
847,100
1,033,820 $
26,806 $
—
—
270,713
—
—
297,519 $
Revolving
credit facility
87,139 $
—
—
—
—
—
87,139
Total
158,352
12,719
14,007
373,864
12,436
847,100
1,418,478
(19,016 )
1,399,462
$
Note
23
23
23
December 31,
2016
1,453
11,353
—
12,806
$
$
December 31,
2015
4,377
(11,284 )
(33 )
(6,940 )
$
$
Dream Global REIT 2016 Annual Report | 78
Current assets
Foreign exchange forward contracts
Non-current assets
Interest rate cap
Foreign exchange forward contracts
Total derivative assets
Current liabilities
Foreign exchange forward contracts
Non-current liabilities
Foreign exchange forward contracts
Conversion feature on the convertible debentures
Total derivative liabilities
Total derivative financial instruments
The movement in the conversion feature on the convertible debentures was as follows:
Balance at beginning of year
Remeasurement of conversion feature on redemption date
Redemption of conversion feature
Balance at end of year
The movement in the interest rate caps was as follows:
Balance at beginning of year
Fair value change
Foreign currency translation
Balance at end of year
December 31,
2016
December 31,
2015
$
2,392 $
2,392
1,453
8,961
10,414
12,806
—
—
—
—
—
—
12,806 $
$
—
—
4,377
—
4,377
4,377
(5,022 )
(5,022 )
(6,262 )
(33 )
(6,295 )
(11,317 )
(6,940 )
For the year
ended
December 31,
2016
(33 )
1,355
(1,322 )
—
$
$
For the year
ended
December 31,
2016
4,377
(2,793 )
(131 )
1,453
$
$
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 €185,752 from January 2017 to December 2019 at an average
exchange rate of $1.513 per euro.
The movement in the foreign exchange forward contracts was as follows:
Balance at beginning of year
Loss on settlement
Fair value change
Balance at end of year
Dream Global REIT 2016 Annual Report | 79
For the year
ended
December 31,
2016
(11,284 )
2,516
20,121
11,353
$
$
Note 11
DEFERRED UNIT INCENTIVE PLAN
The movement in the Deferred Unit Incentive Plan balance was as follows:
As at January 1, 2015
Compensation during the year
Asset management fees during the year
Issue of deferred units
Remeasurements of carrying value
As at December 31, 2015
Compensation during the year
Asset management fees during the year
Issue of deferred units
Remeasurements of carrying value
As at December 31, 2016
$
$
9,365
1,972
1,870
(577 )
1,520
14,150
2,152
1,613
(918 )
3,493
20,490
DAM elected to receive the first $3,500 of 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 in each year for the first five years.
The deferred trust units granted to DAM vest annually over five years, commencing on the sixth anniversary date of the units
being granted. As of August 2016, DAM started receiving cash for base asset management fees payable on the Initial
Properties, instead of deferred trust units.
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 German real estate equity markets, the respective holding period of the deferred units, and the risk-free interest rate. The
fair 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
For the year
ended
December 31,
2016
For the year
ended
December 31,
2015
0.82%–1.44% 0.56%–1.10%
17%–36%
18%–21%
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 weighting 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 2016 Annual Report | 80
Units at December 31, 2016, closing price of $9.45 per unit
Discount rate of 17% per unit for units issued in 2011
Discount rate of 20% per unit for units issued in 2012
Discount rate of 22% per unit for units issued in 2013
Discount rate of 26% per unit for units issued in 2014
Discount rate of 28% per unit for units issued in 2015
Discount rate of 38% per unit for units issued in 2016
Units at December 31, 2015, closing price of $8.66 per unit
Discount rate of 19% per unit for units issued in 2011
Discount rate of 21% per unit for units issued in 2012
Discount rate of 25% per unit for units issued in 2013
Discount rate of 30% per unit for units issued in 2014
Discount rate of 53% per unit for units issued in 2015
Fair value as at December 31, 2016
20,169
$
(190 )
(646 )
(794 )
(1,078 )
(1,108 )
(1,037 )
15,316
$
Fair value as at December 31, 2015
15,522
$
(195 )
(654 )
(866 )
(1,186 )
(2,103 )
10,518
$
During the year ended December 31, 2016, $1,613 of asset management fees were recorded (December 31, 2015 – $1,870)
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 341,945 deferred trust units
during the period (December 31, 2015 – 403,819). No deferred trust units were granted on January 1, 2017 (January 1, 2016 –
23,866) as DAM started receiving cash for base asset management fees for the Initial Properties in August 2016. As at
January 1, 2017, 2,134,289 unvested deferred trust units and income deferred units (January 1, 2016 – 1,792,344) were
outstanding with respect to the asset management fee. Compensation expense of $2,152 for the year (December 31, 2015 –
$1,972) was also included in general and administrative expenses.
In 2016, 178,366 deferred trust units were granted to senior management and trustees. The grant date value for the deferred
trust units ranged from $7.97 to $9.40.
Note 12
AMOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade payables
Accrued liabilities and other payables
Accrued interest
Total
December 31,
2016
8,999 $
36,500
1,016
46,515 $
December 31,
2015
4,199
26,568
4,846
35,613
$
$
Accrued liabilities and other payables include $10,990 (2015 – $nil) of mortgage cancellation charges. These charges will be
paid along with regular mortgage payments over the term of the loans.
Note 13
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 January 1
Plus: Payable at December 31
Total
2016
81,617 $
12,793
(7,535 )
8,364
95,239 $
2015
76,535
13,745
(7,431 )
7,535
90,384
$
$
Dream Global REIT 2016 Annual Report | 81
The distribution for the month of December 2016 in the amount of 6.67 cents per unit, declared on December 19, 2016 and
payable on January 15, 2017, amounted to $8,364. The amount payable as at December 31, 2016 was satisfied on January 15,
2017 by $7,286 cash and $1,078 through the issuance of 118,761 Units. The distribution for the month of January was
declared in the amount of 6.67 cents per unit. It was paid on February 15, 2017. The February 2017 distribution was declared
in the amount of 6.67 cents per unit on February 16, 2017, payable on March 15, 2017.
The Trust declared distributions of 6.67 cents per unit per month for the months of January 2016 to December 2016.
Note 14
EQUITY
Total
December 31, 2016
Number of Units
125,456,199 $
Amount
1,357,724
Number of Units
113,024,465 $
December 31, 2015
Amount
1,289,158
REIT Units
The REIT is authorized to issue an unlimited number of Units and an unlimited number of Special Trust Units. The Special Trust
Units may only be issued to holders of Exchangeable Notes.
Public offering of REIT Units
On August 6, 2016, the REIT completed a public offering of 10,867,500 Units, including an overallotment option, at a price of
$9.00 per unit. The Trust received gross proceeds of $97,808. Costs related to the offering totalled $4,763 and were charged
directly to unitholders’ equity.
Distribution Reinvestment and Unit Purchase Plan
The Distribution Reinvestment Plan (“DRIP”) allows holders of Units, other than unitholders who are resident of or present in
the United States of America, to elect to have all cash distributions from the REIT reinvested in additional Units. Unitholders
who participate in the DRIP receive an additional distribution of Units equal to 4% of each cash distribution that was
reinvested. The price per unit is calculated by reference to a five-day weighted average closing price of the Units on the
Toronto Stock Exchange preceding the relevant distribution date, which is typically on or about the 15th day of the month
following the declaration. For the year ended December 31, 2016, 1,452,789 Units were issued pursuant to the DRIP for
$12,793 (December 31, 2015 – 1,493,617 Units for $13,745).
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, 2016, 2,122 Units were issued under the Unit Purchase Plan for $19 (December 31, 2015 – 2,231 Units for $20).
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 vests 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. On May 6, 2015, the unitholders of the Trust approved the increase of the number of deferred units that may be
granted or credited under the plan by a further 1,626,000 Units, increasing the maximum issuable under the DUIP to
3,700,000 deferred trust units. As at December 31, 2016, 3,170,920 deferred trust units were granted.
For the year ended December 31, 2016, 107,400 Units were issued to trustees, officers and employees pursuant to the DUIP
for $918 (December 31, 2015 – 61,920 Units for $576).
Dream Global REIT 2016 Annual Report | 82
Note 15
ASSETS HELD FOR SALE
As at December 31, 2016, the Trust classified 11 properties as held for sale. Management has committed to a plan of sale, and
therefore the properties have been reclassified as assets held for sale.
Investment properties
Prepaid expenses and other assets
Assets held for sale
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
Change in straight-line rents
Dispositions
Dispositions – POBA joint venture assets
Foreign currency translation
Balance at end of year
Note 16
INTEREST EXPENSE
Interest on debt
Interest on debt incurred and charged to comprehensive income is recorded as follows:
Interest on term loan credit facility
Interest on convertible debentures
Interest on mortgage debt
Interest and stand-by fees on revolving credit facility
Amortization of financing costs, discounts and fair value adjustments on acquired debt
Interest other
Interest expense
Note 17
FAIR VALUE ADJUSTMENTS TO FINANCIAL INSTRUMENTS
Fair value gain (loss) on interest rate swaps and caps
Fair value gain on conversion feature of convertible debentures
Fair value loss on Deferred Unit Incentive Plan
Fair value gain (loss) on foreign exchange forward contracts
Fair value gain (loss) adjustment to financial instruments
Dream Global REIT 2016 Annual Report | 83
December 31,
2016
45,461 $
261
45,722
(923 )
(923 )
44,799 $
December 31,
2015
32,549
306
32,855
(521 )
(521 )
32,334
$
$
For the year
ended
December 31,
2016
32,549 $
32
2
121,335
—
(1 )
(100,826 )
—
(7,630 )
45,461 $
For the year
ended
December 31,
2015
42,898
50
—
96,411
69,368
5
(110,665 )
(69,368 )
3,850
32,549
$
$
Year ended December 31,
2016
2015
8,259
8,065 $
8,862
6,223
16,773
17,639
898
2,630
4,459
6,192
106
61
39,357
40,810 $
$
$
Note
10
10
11
10
$
$
Year ended December 31,
2016
2015
3,778
(2,793 ) $
125
1,355
(3,493 )
(1,520 )
20,121
(13,417 )
15,190 $
(11,034 )
Note 18
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:
Income related to equity accounted investments
Effect of different tax rates in countries in which the group operates
Income distributed and taxable to unitholders
Tax benefits (costs) not previously recognized
Impact from sale of assets
Taxes not based on profit – minimum taxes
Change in unrecognized deferred tax asset
Foreign exchange adjustment and other items
Provision for income taxes
German deferred income tax assets (liabilities) consist of the following:
Deferred tax liability related to difference in tax and book basis of investment properties
Deferred tax asset (liability) related to difference in tax and book basis of financial instruments
Deferred tax asset related to tax loss carry-forwards
Deferred tax liability related to differences in tax and book basis of financing costs
Deferred tax liability related to investment in joint venture
Total deferred income tax liabilities
Austrian and Luxembourg deferred income tax assets consist of the following:
Deferred tax asset related to tax loss carry-forwards for Austria
Deferred tax asset related to tax loss carry-forwards for Luxembourg
Total deferred income tax assets
Year ended December 31,
2016
2015
162,432
170,499 $
(1,601 )
(1,079 )
161,353
168,898
25,534
26,728
(3,747 )
(488 )
(9,412 )
(30 )
—
199
15,511
404
29,165 $
(5,099 )
(487 )
(4,750 )
396
(348 )
256
—
1,104
16,606
December 31,
2016
(65,350 ) $
307
16,357
(778 )
(43 )
(49,507 ) $
December 31,
2015
(42,158 )
(45 )
22,713
(1,108 )
(46 )
(20,644 )
December 31,
2016
4 $
4,676
4,680 $
December 31,
2015
61
3,727
3,788
$
$
$
$
$
$
As at December 31, 2016, there were unused tax losses of $98,015, for which no deferred tax asset is recognized
(December 31, 2015 – $nil).
Dream Global REIT 2016 Annual Report | 84
Note 19
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 93 cents 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 had 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. As
of August 2016, DAM started receiving cash for base asset management fees payable on the Initial Properties, instead of
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.
Incurred under the Asset Management Agreement:
Asset management fees in deferred units (included in general and administrative expenses)
Asset management fees in cash (included in general and administrative expenses)
Asset acquisition fees (capitalized as acquisition costs, and then written off on remeasurement
of investment properties)
Financing fees (included in debt/unitholders’ equity)
Reimbursement for out-of-pocket and incidental costs (included in general and administrative
expenses)
Total incurred under the Asset Management Agreement
Year ended December 31,
2015
2016
1,613 $
8,647
1,705
490
1,870
6,385
2,588
553
1,002
13,457 $
918
12,314
$
$
Dream Global REIT 2016 Annual Report | 85
As at December 31, 2016, the Trust has recorded $3,195 (December 31, 2015 – $3,794) in amounts payable and $1,472
(December 31, 2015 – $117) in amounts receivable 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 was 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. As of January 1, 2016, the shared services agreements were amended such that future funding costs incurred in respect
of technology personnel and technology-related platforms cease subsequent to December 31, 2015. There were no other
material changes to the agreement.
Effective January 1, 2016, a limited partnership (Dream Technology Ventures LP or “DTV LP”) was established by a wholly
owned subsidiary of DAM acting as general partner and DAM, Dream Office REIT, Dream Industrial REIT, Dream Global REIT,
and Dream Alternatives as Limited Partners. Each of the Limited Partners, including Dream Global REIT, will fund DTV LP for
costs incurred relating to technology personnel and technology-related platforms and will license the technology through DTV
LP. The REIT accounted for this investment in an associate using the equity method and it is included in investment in joint
venture and associates.
Incurred under the Shared Services and Cost Sharing
Agreement:
Branding, process improvements and technology
transformations (included in general and administrative)
Total incurred under the Shared Services and Cost Sharing
Agreement
Year ended December 31,
2015
2016
$
$
491 $
491 $
347
347
The Trust’s future commitment under the Shared Services and Cost Sharing Agreement over the remaining term to 2017 is
$nil.
Non-controlling interest and notes receivable
DAM has co-invested with the Trust in properties with their share of interest ranging from 0.26% to 5.2%. For the year ended
December 31, 2016, the non-controlling interest and net income attributable to DAM amounted to $10,275 (December 31,
2015 – $9,308) and $1,601 (December 31, 2015 – $1,079), 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. As at December 31, 2016, the notes receivable outstanding and interest accrued amounted to $6,250 (December 31,
2015 – $6,621) and $1,139 (December 31, 2015 – $636), respectively.
Note 20
SUPPLEMENTARY CASH FLOW INFORMATION
Cash provided by (used in)
Amounts receivable
Prepaid expenses and other assets
Amounts payable and accrued liabilities
Tenant deposits
Change in non-cash operating working capital
The following amounts were paid on account of interest:
Debt
Dream Global REIT 2016 Annual Report | 86
Year ended December 31,
2016
2015
1,317
(314 ) $
168
(889 )
(9,386 )
(10,704 )
633
1,071
(8,461 ) $
(9,643 )
Year ended December 31,
2016
2015
33,871
38,450 $
$
$
$
Note 21
COMMITMENTS AND CONTINGENCIES
The REIT and its operating subsidiaries are contingently liable under guarantees that are issued in the normal course of
business and with respect to litigation and claims that arise from time to time. In the opinion of management, any liability that
may arise from such contingencies would not have a material adverse effect on the consolidated financial statements of the
REIT.
As at December 31, 2016, the REIT’s future minimum commitments under operating leases are as follows:
No longer than 1 year
1–5 years
Longer than 5 years
Total
$
Operating lease payments
918
612
—
1,530
$
During the year ended December 31, 2016, the Trust paid $1,026 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 $15,370.
Note 22
CAPITAL MANAGEMENT
At December 31, 2016, 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 80 cents 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 and was in full compliance with all loan facilities.
Note 23
RISK MANAGEMENT
Interest rate risk
The Trust has exposure to interest rate risk as a result of its term loan credit facility, revolving credit facility and mortgage debt
that is subject to 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 caps to mitigate the
impact of interest rate increases on the variable rate debt.
Dream Global REIT 2016 Annual Report | 87
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.
Financial assets
Cash(1)
Financial liabilities
Mortgage debt
Revolving credit facility
Term loan credit facility(2)
Carrying
amount
Income
-1 %
Equity
Income
Interest rate risk
+1 %
Equity
$
50,283 $
(503 ) $
(503 ) $
503 $
503
36,618
87,139
289,193 $
$
366
871
2,892 $
366
871
2,892
$
(366 )
(871 )
(2,892 ) $
(366 )
(871 )
(2,892 )
(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.
(2) Subject to interest rate cap.
Interest rate derivatives
The following table provides details on the interest rate derivatives outstanding as at December 31, 2016:
Hedging item
Interest rate cap
Total
Notional
$365,596
$365,596
Rate
1.03%
Maturity
2020–2022
Carrying value
$1,453
$1,453
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, the Trust has
entered into various foreign exchange forward contracts, and currently holds contracts to sell €185,752 from January 2017 to
December 2019 at an average exchange rate of $1.513 per euro.
Foreign currency derivatives
The following table provides details on foreign currency forward contracts outstanding as at December 31, 2016 and
December 31, 2015:
Hedging currency
Euro
Hedging currency
Euro
€
€
Notional
185,752
Blended
exchange rate
1.513
Forward contracts
start date
January 17, 2017
Notional
163,893
Blended
exchange rate
1.450
Forward contracts
start date
January 15, 2016
The Trust does not use derivatives for speculative purposes.
For the year ended December 31, 2016
Forward contracts
end date
Carrying value
11,353
December 16, 2019 $
For the year ended December 31, 2015
Forward contracts
end date
Carrying value
(11,284 )
December 14, 2018 $
Credit risk
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.
Liquidity risk
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.
Dream Global REIT 2016 Annual Report | 88
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 (except as described in Note 7 – “Investment properties”), 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 assets
Interest rate caps
Foreign exchange forward contracts
Fair values disclosed
Mortgage debt
Recurring measurements
Financial assets (liabilities)
Interest rate swaps
Foreign exchange forward contracts
Conversion feature on the convertible debentures
Fair values disclosed
Mortgage debt
Convertible debenture excluding conversion feature
Carrying value as at
December 31, 2016
Level 1
Fair value as at December 31, 2016
Level 3
Level 2
$
1,453 $
11,353
(1,023,130 )
— $
—
—
1,453 $
11,353
—
—
—
(1,021,206 )
Carrying value as at
December 31, 2015
Level 1
Fair value as at December 31, 2015
Level 3
Level 2
$
4,377 $
(11,284 )
(33 )
(841,101 )
(154,558 )
— $
—
—
—
—
4,377 $
(11,284 )
—
—
—
(33 )
—
—
(864,129 )
(160,162 )
Amounts receivable, notes receivable, 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, except for certain investment properties. There were no transfers in or out of Level 3 fair value
measurements during the year.
The Trust uses the following techniques to determine the fair value measurements disclosed above:
Interest rate derivatives
The fair value of the interest rate caps was valued by qualified banks using assumptions regarding market conditions and
established valuation methods and models such as the discounted cash flow method or LIBOR Market Model as well as bank
proprietary models.
A higher volatility will increase the value of the interest rate caps. A higher underlying rate will increase the value of the
interest rate caps.
The following table shows the changes in fair value of the interest rate caps from a 5% increase or 5% decrease in volatility and
a 1% increase or decrease in underlying rates, all other inputs being constant:
Increase (decrease) in fair value as at December 31, 2016
$
Impact of change to volatility
-5%
(136 ) $
+5%
140 $
Impact of change to underlying rates
-1%
(428 )
+1%
3,765 $
Dream Global REIT 2016 Annual Report | 89
Foreign currency derivatives
The fair value of foreign currency derivatives was determined using forward exchange market rates ranging from $1.417 to
$1.488 to €1 at the measurement date, with the resulting value discounted back to present value using the risk-free Canadian
bond rate of 0.73%, plus a credit spread of 300 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, 2016
Impact of change to forward exchange market rates
-5%
(12,778 )
+5%
12,778 $
$
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, 2016 has been calculated by discounting the expected cash flows of
each debt using discount rates ranging from 0.98% to 1.99%. 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.
Dream Global REIT 2016 Annual Report | 90
Appendix
Address
City
Ownership
Owned GLA
(sq. ft.)
Occupancy
(%)
Nürnberg
Hamburg
Bremen
Köln
Vienna
Nürnberg
Düsseldorf
Berlin
Düsseldorf
Darmstadt
Hannover
Köln
Stuttgart
Hamburg
Berlin
Hamburg
München
Essen
Stuttgart
Erfurt
Berlin
München
Freiburg
München
Hamburg
Mannheim
Nürnberg
München
Hamburg
Frankfurt
München
Düsseldorf
München
Frankfurt
Freiburg
Stuttgart
Acquisition Properties:
Gleiwitzer Straße 555 (Siemens Campus)
Millerntorplatz 1
Airbus-Allee 3-5 (Europa Center)
Im Mediapark 8 (Cologne Tower)
1200 Wien, Handelskai 92 (Rivergate)
Karl-Martell-Straße 60 (Ergo Direkt Building)
Feldmuhleplatz 1+15
Greifswalder Str. 154-156 (Goldpunkt Haus)
Straßenbahnring 15, 17-19/Hoheluftchausee 18-20/Lehmweg 8, 8a, 7 (My Falkenried) Hamburg
Moskauer Str. 25-27 (M25)
Robert-Bosch-Str. 9-11 (Europahaus)
Podbielskistraße 158-168 (Grammophon Office Park)
Cäcilienkloster 2, 6, 8, 10 (Cäcilium)
Heilbronner Strasse/Leitzstrasse 45 (Oasis III)
Hammer Str. 30-34
Zimmerstrasse 56/Schützenstrasse 15-17 (Zimmer 56)
Schlossstr. 8
Leopoldstr. 252
Am Fernmeldeamt, Friedrichstr. 45-47/Am Europa Center 8-10
Liebknechtstraße 33/35, Heßbrühlstraße 7 (Officivm)
Anger 81, Krämpferstraße 2, 4, 6
Beuthstraße 6-8/Seydelstraße 2-5 (Löwenkontor)
Westendstr. 160-162/Barthstr. 24-26
Bertoldstr. 48/Sedanstr. 7
Marsstraße 20-22
Am Sandtorkai 37 (Humboldt-Haus)
Reichskanzler-Müller-Str. 21-25
Am Stadtpark 2
Dillwächterstr. 5/Tübinger Str. 11
ABC-Str. 19 (ABC Bogen)
Speicherstr. 55 (Werfthaus)
Werner-Eckert-Straße 14, 16, 18
Derendorfer Allee 4 (douleU)
Werner-Eckert-Straße 8-12
Neue Mainzer Str. 28 (K26)
Lörracher Str. 16/16a
Vordernbergstr. 6/Heilbronner Str. 35 (Z-Up)
Total Acquisition Properties
Initial Properties:
Grüne Str. 6-8/Kurfürstenstr. 2
Am Hauptbahnhof 16-18
Kurfürstenallee 130
Poststr. 4-6, Göbelstr. 30, Bismarckstr.
Karlstal 1-21/Werftstr. 201
Franz-Zebisch-Str. 15
E.-Kamieth-Str. 2 b
Bahnhofstr. 82-86
Czernyring 15
Marienstr. 80
Rüppurrer Str. 81, 87, 89/Ettlinger 67
Gerokstr. 14-20
Hindenburgstr. 9/Heeserstr. 5
Friedrich-Karl-Str. 1-7
Blücherstr. 12
Pausaer Str. 1-3
Klubgartenstr. 10
Dortmund
Saarbrücken
Bremen
Darmstadt
Kiel
Weiden
Halle
Gießen
Heidelberg
Offenbach am Main
Karlsruhe
Dresden
Siegen
Oberhausen
Koblenz
Plauen
Goslar
Dream Global REIT 2016 Annual Report | 91
100%
100%
100%
95%
50%
100%
95%
100%
100%
100%
100%
100%
100%
100%
100%
95%
100%
100%
100%
50%
100%
50%
100%
100%
50%
100%
100%
100%
100%
50%
50%
100%
50%
100%
50%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
579,777
387,017
358,906
296,735
287,144
268,931
246,376
242,823
226,932
217,282
214,794
213,205
200,915
172,692
172,306
169,424
165,801
155,180
147,184
134,736
131,056
129,179
124,932
121,553
115,400
113,391
100,613
94,649
81,714
79,244
75,914
71,469
71,114
64,772
61,765
57,606
44,266
6,396,796
299,567
293,737
203,949
197,428
180,794
166,601
161,105
149,499
131,776
114,114
111,778
110,755
102,410
97,606
94,569
87,164
86,572
100.0%
82.2%
85.6%
96.7%
93.7%
100.0%
100.0%
98.3%
99.8%
96.2%
99.0%
96.2%
99.2%
87.1%
100.0%
99.5%
94.5%
97.4%
93.5%
95.8%
93.2%
98.5%
81.9%
100.0%
99.5%
78.5%
97.7%
95.3%
99.2%
99.7%
97.2%
96.6%
84.0%
89.8%
91.8%
98.9%
100.0%
96.3%
100.0%
36.6%
87.8%
79.5%
95.7%
100.0%
55.8%
55.7%
76.4%
96.1%
97.0%
86.9%
83.7%
93.7%
67.6%
76.6%
55.5%
Address
Am Hauptbahnhof 2
Husemannstr. 1
Kapellenstr. 44
Kommandantenstr. 43-51
Stresemannstr. 15
Bahnhofsring 2
Kaiser-Karl-Ring 59-63/Dorotheenstr.
Bürgerreuther Str. 1
Bahnhofplatz 10
77er Str. 54
Wiener Str. 43
Kaiserstr. 24
Bahnhofsplatz 2, 3, 4, Pepperworth 7
Rathausplatz 2
Joachim-Campe-Str. 1.3/5/7, Posthof
Am Bahnhof 5
Ostbahnstr. 5
Poststr. 5-7
Bahnhofsplatz 9
Friedrich-Ebert-Str. 75-79
Baarstr. 5
Rathausplatz 4
Schützenstr. 17, 19
Willy-Brandt-Str. 6
Stembergstr. 27-29
Poststr. 14
Bahnhofplatz 3, 5
Poststr. 2
Lippertor 6
Südbrede 1-5
Bahnhofstr. 169
Vegesacker Heerstr. 111
Koblenzer Str. 67
Kardinal-Galen-Ring 84/86
Martinistr. 19
Kalkumer Str. 70
Falkenbergstr. 17-23
Balhornstr. 15, 17/B. Köthenbürger-Str.
August-Bebel-Str. 6
Cavaillonstr. 2
Hauptstr. 279/Hommelstr. 2
Bismarckstr. 21-23
Hindenburgstr. 8/Hohenstauf 9, 17, 19
Steinerother Str. 1 U 1a
Heinrich-von-Stephan-Platz 6
Mühlenstr. 5-7
Apostelweg 4-6
Brückenstr. 21
Kurt-Schumacher-Str. 5
Lilienstr. 3
Stadtring 3-5
Gerstenstr. 5
Ölmühlweg 12
Worthingtonstr. 15
Palleskestr. 38
Hellersdorfer Str. 78
Markendorfer Str. 10
Bahnhofstr. 6/Luisenstr. 4-5
Bahnhofsplatz 2
Poststr. 24-26
Bahnhofstr. 29
City
Mülheim
Gelsenkirchen
Einbeck
Duisburg
Wuppertal
Leer
Bonn
Bayreuth
Fürth
Celle
Stuttgart
Gütersloh
Hildesheim
Wilhelmshaven
Salzgitter
Zwickau
Landau
Heide
Emden
Bremerhaven
Iserlohn
Lüdenscheid
Peine
Auerbach
Arnsberg
Rastatt
Heidenheim
Gummersbach
Lippstadt
Ahlen
Bietigheim-Bissingen
Bremen
Bonn
Rheine
Recklinghausen
Düsseldorf
Norderstedt
Paderborn
Torgau
Weinheim
Idar-Oberstein
Bünde
Bocholt
Betzdorf
Naumburg
Delmenhorst
Hamburg
Neunkirchen
Lünen
Leipzig
Nordhorn
Neubrandenburg
Königstein
Crailsheim
Frankfurt am Main
Berlin
Frankfurt an der Oder
Villingen-Schwenningen
Herborn
Ratingen
Meppen
Ownership
Owned GLA
(sq. ft.)
Occupancy
(%)
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
84,303
80,591
80,500
80,122
79,478
78,627
75,815
75,534
73,818
73,391
72,192
69,935
68,117
64,970
62,041
60,738
53,645
53,363
53,327
52,165
51,027
49,529
46,532
46,512
45,820
45,659
45,656
45,558
44,341
44,130
43,620
43,484
43,157
42,191
41,847
41,781
41,249
40,927
40,745
40,648
39,192
38,761
37,925
37,679
37,612
37,266
36,273
35,971
35,290
35,234
35,189
34,347
33,716
33,136
33,119
33,013
32,330
32,191
29,746
29,445
29,056
81.1%
94.0%
68.3%
100.0%
78.0%
81.6%
99.8%
100.0%
74.5%
52.0%
91.8%
83.1%
66.4%
97.2%
74.6%
66.9%
97.1%
91.9%
97.9%
80.4%
92.8%
26.7%
48.8%
56.3%
98.8%
92.4%
86.0%
97.6%
93.4%
79.5%
98.3%
84.6%
100.0%
97.5%
97.3%
55.4%
98.1%
92.7%
86.5%
88.2%
57.2%
95.6%
98.8%
94.9%
91.0%
85.7%
97.3%
100.0%
100.0%
97.3%
80.5%
100.0%
100.0%
100.0%
83.6%
76.0%
97.5%
96.5%
90.6%
100.0%
89.7%
Dream Global REIT 2016 Annual Report | 92
Address
Poststr. 12
Dr.-Friedrich-Uhde-Str. 18
Poststr. 1-3
Poststr. 48
Bahnhofstr. 2
Ruthenstr. 19/21
Wilhelmstr. 11/Kamperdickstr. 29
Kaiserstr. 140
In der Trift 10/12
Bahnhofstr. 6
Alleestr. 6
Uferstr. 2
Poststr. 19-23
Brückenstr. 26
Lindenstr. 15
Innungsstr. 57-59
Wilhelmstr. 5
Geistmarkt 17
Steinstr. 6
Am Markt 4-5
Saarbrücker Str. 292-294
Speckweg 24-26
Lübecker Str./Wedringer Str. o. Nr.
Ooser Karlstr. 21/23/25
Güterstr. 2-4
Lagerstr. 1
Friedrichstr. 2
Königstr. 20
Kornmarkt 15
Marktstr. 51
Übacher Weg 4
Niederwall 3
Hochstr. 31/Postgasse 5
Robert-Koch-Str. 3
Kaiserstr. 35
Bahnhofstr. 8-10
Bahnhofstr. 41
Hauptstr. 141
Herrlichkeit 7
Mercedesstr. 5
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
Gorsemannstr. 22
Bahnhofstr. 11
Gutachstr. 56
Unterstr. 14
Am Markt 4
Hauptstr. 40
Sandstr. 4
De-Lenoncourt-Str. 2
Rosenstr. 1/Fünfhausenstr. 19/21
Melcherstätte 8
Total Initial Properties
Total Portfolio
City
Lehrte
Einbeck
Korbach
St Ingbert
Gifhorn
Hameln
Kamp-Lintfort
Radevormwald
Olpe
Quakenbrück
Neustadt
Höxter
Hilden
Miltenberg
Landstuhl
Berlin
Ibbenbüren
Emmerich
Pulheim
Norden
Saarbrücken
Mannheim
Magdeburg
Baden-Baden
Bitburg
Meschede
Monheim
Brilon
Osterode
Essen
Alsdorf
Lübbecke
Bochum
Laatzen
Minden
Borken
Eberbach
Rheda-Wiedenbrück
Syke
Hannover
Fürstenfeldbruck
Geisenheim
Bremerhaven
Bautzen
Herzogenrath
Zerbst
Mittenwalde
Löhne
Bremen
Alpirsbach
Titisee-Neustadt
Bochum
St. Georgen
Porta Westfalica
Germersheim
Dillingen
Springe
Stuhr
Ownership
Owned GLA
(sq. ft.)
Occupancy
(%)
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
28,764
27,793
27,577
27,051
26,922
26,895
26,159
25,643
24,894
24,446
23,495
23,248
22,454
22,017
21,726
21,187
21,031
20,942
20,670
20,668
20,433
20,128
19,454
19,444
19,340
18,683
18,156
17,733
17,690
17,661
16,991
16,563
16,359
16,126
16,043
15,893
15,634
15,178
14,560
14,504
13,326
13,117
12,803
12,686
12,667
12,654
12,631
12,625
12,379
12,112
10,813
10,732
10,324
10,315
10,132
8,995
8,881
8,196
6,628,550
13,025,346
97.6%
64.8%
99.8%
86.6%
92.2%
92.9%
93.9%
73.8%
93.5%
97.1%
100.0%
79.3%
86.7%
88.9%
99.2%
100.0%
100.0%
100.0%
100.0%
80.9%
92.0%
89.8%
100.0%
92.9%
99.3%
100.0%
100.0%
100.0%
45.5%
100.0%
100.0%
100.0%
100.0%
100.0%
98.7%
98.2%
100.0%
100.0%
94.3%
100.0%
100.0%
90.2%
100.0%
100.0%
79.3%
95.8%
100.0%
100.0%
100.0%
76.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
83.9%
90.0%
Dream Global REIT 2016 Annual Report | 93
Address
Properties held for sale
Zimmermannstr. 2/Eisenstr.
Langfuhren 9
Am Neumarkt 40/Luetkensallee 49
Tunnelweg 1
Poststr. 1
Kasseler Str. 1–7
Bahnhofstr. 2
Bahnhofstr. 43
Lönsstr. 20–22
Bahnhofsplatz 1
Goethestr. 2–6
Total properties held for sale
City
Marburg
Bad Säckingen
Hamburg
Husum
Erftstadt
Warburg
Cham
Riesa
Castrop-Rauxel
Schweinfurt
Duisburg
Owned GLA
(sq. ft.)
Occupancy
(%)
99,751
9,717
160,397
31,116
12,498
19,985
46,129
18,275
36,289
34,839
67,503
536,499
97.9%
99.0%
86.9%
88.7%
100.0%
84.6%
61.5%
89.8%
93.0%
85.8%
87.0%
87.7%
Dream Global REIT 2016 Annual Report | 94
Trustees
Dr. R. Sacha BhatiaInd.,3
Toronto, Ontario
Director of the Institute for Health System
Solutions and Virtual Care (“WIHV”) at
Women’s College Hospital
Detlef BierbaumInd.,1,2,3,4
Köln, Germany
Corporate Director
Michael J. Cooper2
Toronto, Ontario
President and Chief Responsible Officer
Dream Unlimited Corp.
P. Jane Gavan2
Toronto, Ontario
President and Chief Executive Officer
Dream Global REIT
Corporate Information
HEAD OFFICE
Dream Global
Real Estate Investment Trust
30 Adelaide Street East, Suite 301
Toronto, Ontario M5C 3H1
Phone: (416) 365-3535
Fax: (416) 365-6565
INVESTOR RELATIONS
Phone: (416) 365-3535
Toll free: 1 877 365-3535
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, 8th Floor
Toronto, Ontario M5J 2Y1
Phone: (514) 982-7555 or 1 800 564-6253
Fax: (416) 263-9394 or 1 888 453-0330
E-mail: service@computershare.com
Duncan JackmanInd.,1
Toronto, Ontario
Chairman, President and CEO
E-L Financial Corporation Limited
J. Michael KnowltonInd.,1
Whistler, British Columbia
Corporate Director
Johann KossInd.,2,3
Toronto, Ontario
Chief Executive Officer
Right to Play
John SullivanInd.,1
Toronto, Ontario
President and Chief Executive Officer
Cadillac Fairview Corporation Limited
AUDITORS
PricewaterhouseCoopers LLP
PwC Tower, 18 York Street, Suite 2600
Toronto, Ontario M5J 0B2
CORPORATE COUNSEL
Osler, Hoskin & Harcourt LLP
Box 50, 1 First Canadian Place, Suite 6200
Toronto, Ontario M5X 1B8
STOCK EXCHANGE LISTING
The Toronto Stock Exchange
Listing Symbol: DRG.UN
The Frankfurt Stock Exchange
Listing Symbol: DRG
Ind. Independent
1 Member of the Audit Committee
2 Member of the Executive Committee
3 Member of the Governance,
Compensation and Environmental
Committee
4 Chair 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. 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.
Cash purchase: Unitholders may invest in
additional units by making cash purchases.
To enroll, contact: Computershare Trust
Company of Canada, 100 University Avenue,
8th Floor Toronto, Ontario M5J 2Y1
Attention: Dividend Reinvestment Services or
call their Customer Contact Centre at 1-800-
564-6253 (toll free) or (514) 982-7555
Corporate Office
State Street Financial Centre
30 Adelaide Street East, Suite 301
Toronto, Ontario M5C 3H1
Phone: 416.365.3535
Fax: 416.365.6565
dreamglobalreit.ca