2017
Annual Report
Dream Global REIT
Dream Global REIT invests in exceptional
properties in attractive markets in Europe through
an established European platform with a track
record of value creation.
Letter to Unitholders
Through our growth initiatives in 2017, we increased the scale
and depth of our European operating platform, providing more
opportunities than ever to add value in the future. With an asset base
of over $4 billion and a market capitalization of more than $2 billion,
Dream Global’s increased size is attracting a wider range of global
investors.
Properties. Many of these assets are well located near central train
stations or prime retail areas and have excess density and potential
for conversion to residential, office or mixed use properties. At the
end of 2017, we commenced the development of a 100-room hotel
project, scheduled to be completed at the end of 2018 on our site in
Hildesheim.
2017 was a very productive year for Dream Global, resulting in the
addition of $1.3 billion of high quality real estate in Germany, Belgium
and the Netherlands. The scale of this transformation was larger than
in any prior year, surpassing the size of Dream Global’s IPO portfolio,
and supporting our continued growth and expansion into strong and
improving markets at an opportune time.
Finding new ways to manage and operate our assets in order to
drive value remains a focal point for Dream Global. The addition of
our platform in the Netherlands has enhanced the team’s depth and
innovation, creating efficiencies and enhancing customer service in
order to drive the Trust’s performance across all markets in the years
to come.
The Trust’s fourth quarter results were the first quarterly results which
included the full impact of Dream Global’s $963 million expansion
into the Netherlands and highlighted the transaction’s contribution.
On a per unit basis, fully diluted funds from operations (“FFO”)
increased to 25 cents in Q4 2017, an increase of 5 cents, or 25%,
compared to Q4 2016, and by 15 cents, or 19%, for the full year
in 2017 compared to 2016. The Trust’s comparative portfolio also
performed well, supported by strong market fundamentals, proactive
asset management and lower interest rates. Comparative properties net
operating income increased by 3.1% in 2017 compared to 2016.
The market fundamentals in the Trust’s key markets continued to be
strong in 2017 with consistent economic growth and unemployment
levels remaining low. Vacancy rates in the Big 7 German office markets
reached a record low of 4.7%. The Dutch office market continued its
positive trend of declining vacancy rates, which reached a 10-year low
at the end of 2017. In each of these markets, new office supply remains
moderate.
We continue to find opportunities in our portfolio to enhance asset
value and have been reviewing development opportunities in our Initial
We ended 2017 with our company in the best shape it has ever been in.
We demonstrated our ability to execute on our strategy and increased
the scale and depth of our platform. Not surprising, our unit price
responded as we significantly outperformed the REIT index. With
market fundamentals expected to remain strong in 2018, we are
excited about the future of Dream Global REIT.
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 and Chief Executive Officer
February 21, 2018
Through our growth initiatives in 2017,
we significantly increased the scale
and depth of our operating platform,
providing more opportunities than ever
to add value.
P. Jane Gavan
Chief Executive Officer,
Dream Global REIT
Portfolio at-a-Glance*
Polaris, Hoofddorp, Netherlands
$4.7 Billion
GROSS ASSET VALUE
19%
INCREASE IN FULLY DILUTED
FFO/UNIT IN 2017
4.1 Million
SQUARE FEET OF
LEASING IN 2017
$12.10
TOTAL EQUITY PER UNIT
€8.04
Bollwerk, Stuttgart, Germany
Apollo, Amsterdam, Netherlands
*Our portfolio refers to the properties that we have invested in indirectly by way of equity and/or debt.
Portfolio information in the at-a-Glance section includes the Trust’s proportionate share of properties held through joint ventures and associates
Geographic
Diversification
% of fair market value in key markets
Dream Global REIT is the
owner and operator of over
20 million square feet of
office, industrial and mixed-
use space in Germany,
Netherlands, Belgium and
Austria. It provides a wide
range of investors the
opportunity to invest in real
estate exclusively outside
of Canada.
NETHERLANDS
21%
3%
BELGIUM
Diversified High-Quality Tenants
TENANT COMPOSITION
Deutsche Post Immobilien GmbH
Siemens Aktiengesellschaft
Freshfields Bruckhaus Deringer
City of Hamburg
ERGO Group AG
BNP Paribas SA/NV
Deutsche Rentenversicherung Knappchaft Bahn-See
LBBW Immobilien Management GmbH
Deutsche Postbank AG
Google Germany GmbH
Other third-party tenants
Total
73%
GERMANY
3%
AUSTRIA
CREDIT RATING
BBB+
A+
n/a
AAA
AA-
A+
n/a
A-
A-
AA+
n/a
TOTAL ANNUALIZED
GROSS RENTAL INCOME
(%)
9.0
2.4
2.0
1.8
1.8
1.3
1.3
1.1
0.9
0.9
77.6
100.0
Level of Debt
(% of net debt-to-gross book value,
net of cash)
In-place Rent
(per square foot per year)
Total Equity per Unit
(per units outstanding at Dec. 31, 2017)
54%
52%
51%
49%
60%
55%
54%
50%
45%
40%
€12
€10
€8
€6
€4
€2
€0
€10.29
€10.79
€9.61
€8.46
€8.86
$14.00
$12.00
$10.00
$9.43
$11.41
$10.05
$12.10
$10.82
$8.00
$6.00
$4.00
$2.00
-
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
Sustainability:
Environmental, Social & Governance
Our Values
Integrity
Teamwork
Dealing with stakeholders
Social responsibility
Opportunities
Fun
These values provide the foundation
for our corporate culture – acting as
a strong platform on which to build
sustainability into Dream’s DNA.
Embedding
Sustainability
Our ambition is to integrate sustain-
ability objectives throughout our
business. We set quantitative and
qualitative targets to help focus on
reaching our goals.
Our aim is to directly tie sustain-
ability to our corporate values, our
culture and the way in which we
conduct our business.
Airport Plaza, Brussels, Belgium
DoubleU, Dusseldorf, Germany
Sustainability:
Environmental, Social & Governance
Focus on sustainability
Our sustainability strategy guides
us in how we run our business and
how we manage our environmental
and social obligations, including
managing our brand, business
risks and operations. We strive
to integrate sustainability at both
the corporate and property levels,
focusing on internal and external
initiatives to benefit all stakeholders.
We believe that a long-term
sustainable approach is imperative
to create value.
From our ongoing dialogue with
stakeholders, we know that they
care about our sustainability
platform, best practices and
results. Our unitholders want to be
confident that they are investing in
a corporate entity which uses land
and resources responsibly, minimizes
carbon emissions and is in good
standing with its employees and
communities.
As property owners and operators,
we are well positioned to implement
meaningful changes within each of
our companies through a progressive
approach and collaboration.
Tenants generally are becoming
more curious about the energy
performance, cost and footprint of
the specific building they are leasing.
Building and maintaining high-
quality, resilient buildings allows
us to protect our asset value and
sustain high occupancy rates – an
environmentally sound building is a
desirable building. These are just a
few examples of how business and
sustainability go hand in hand.
As a company, we are internalizing
sustainable business practices. We
are densifying our office space,
which in turn makes energy
efficiency, waste diversion and
sustainable procurement easier.
In addition, we are continuing to
invest in the development of our
employees, which contributes to the
strong execution of our business
strategies. We are committed to
sound and effective corporate
governance practices.
Finally, it is increasingly important
to employees that they feel good
about the company for which they
work. Many employees ask about
best practices for energy, water and
carbon management, waste recycling
rates, our community commitments
and what they can do to contribute.
Whatever we do, we always keep
in mind the impact we have not
only on our customers and tenants,
but on anyone who comes into our
buildings or neighbourhoods.
Our continued focus on
sustainability is fostering a culture
of innovation and collaboration
with internal employees, external
business partners and the
community at large. We continue to
implement strategies to manage our
sustainability initiatives.
Netherlands
Portfolio
Dream Global’s Netherlands
portfolio (Merin) is one of the largest
commercial real estate platforms in
the Netherlands, comprising more
than 100 office and industrial assets
located around the country. We
focus on creating a high-quality,
sustainable and modern working
environment in each of our buildings.
Our goal is to be the most customer-
friendly provider of office and
industrial space in the Netherlands.
Currently, we are considering
installing solar panels on seven
buildings that will generate 9 MW
of power. In addition to solar, we
are also focused on other energy
savings initiatives. For example,
when a tenant is moving in, we
fit their space with LED lighting
and motion detection as a way to
conserve energy. We also look to
strategically replace HVAC systems
(chillers and boilers) to improve the
building’s operational efficiency.
Integrating sustainability into our buildings
According to the German Sustain-
able Building Council (DGNB),
green-certified buildings with lower
operating costs and superior indoor
environ mental quality are more
attractive to a growing group of
customers. High-performing build-
ings are becoming a material factor
when tenants and buyers make
leasing and buying decisions.
In Germany, three of our proper-
ties in the Dream Global portfolio
are DGNB certified. DGNB is a
prestigious international certifica-
tion system that covers key aspects
of sustainability in a building:
environ mental, economic, socio-
cultural and functional aspects;
tech nology; processes; and site. The
assessments are based on a building
life-cycle.
Improving energy efficiency is an
important part of our operational
strategy for our buildings. It reduc-
es costs and decreases our contri-
bution to carbon emissions and
climate change. We enable energy
efficiency and conservation through
capital improvements, process
changes and modifying behaviours.
Our continued focus on sustain-
ability is fostering a culture of
innovation and collaboration with
external business partners and the
community at large. We continue to
implement strategies to manage our
impacts and measure our perfor-
mance in attaining targets, and we
look forward to continued engage-
ment with our stakeholders in our
sustainability initiatives.
RIVERGATE
Vienna
Case Study
Situated on the Danube water front
in Vienna, Rivergate was the first
property in Austria to be certified
LEED Platinum. The property has
state-of-the-art conference facilities,
restaurants, meeting areas, and
bicycle storage, with change rooms
and showers for tenants. Addition-
ally, it has excellent transport links
from the major public transportation
hubs.
The entire building system makes
use of geothermal heat and ground-
water as natural energy sources and
additional econom ic district heating.
Heating and cooling is carried out
via thermal activation of building
compo nents, with heat pumps being
provided for the purpose of basic
supply.
COLOGNE TOWER
Germany
Case Study
Cologne Tower is a landmark
property in its namesake city in
Germany that was certified LEED
Gold in 2013. The certification
emphasizes that older buildings
can also be excellent environmental
choices.
To support its LEED EB:OM certifica-
tion, Cologne Tower implemented a
variety of sustainability best practic-
es in both the physical building and
its operations.
Renewable Power
Sustainability Highlights
Environmental*
Airport Plaza, Brussels
certified BREEAM Gold
Double U, Düsseldorf
certified DGNB Gold through our
proactive solutions we reduced
the energy consumption by over 30%
Rivergate, Vienna
Austria’s first LEED
Platinum building
Millerntorplatz, Hamburg
obtained LEED Gold certification
following upgrade of the building
Cologne Tower
certified LEED Gold
9 MW
of renewable power generation is
currently under development in the
Netherlands portfolio
Governance
Embedded elements of
sustainability in Board mandates
Dream Global is one of the
few companies on the TSX with
a female CEO and CFO
71%
of Dream Global Board members
are independent
Social**
$800,000 donated to charities by Dream
employees; and, 30+ community projects
have been supported through the volunteer
work of Dream Global employees in Europe
over the last year
~150 employees
participated in health and wellness
initiatives or participated on Dream
employee sports teams
$300K
in tuition and professional
development fees reimbursed
Awarded Employer of the Year in 2017 by
Community Living Toronto in recognition
of outstanding practices in furthering
employment opportunities for people with
an intellectual disability
1,500 shoeboxes were donated to the
Shoebox Project for Women’s Shelter by Dream;
and, over 150 gifts were donated annually
to children at Christmas by Dream Global
employees in Europe
Major Sponsor
of the Invictus Games;
and Dream employees attended the
sporting events in support of the athletes
* Environmental highlights are based on 2016
**Social highlights are based on all Dream entities combined
Table of Contents
Section I
Overview & Financial Highlights
Key Performance Indicators
Financial Overview
Outlook
Basis of Presentation
Background
Our Strategy
Our Assets
Tenants
Market Overview
Section II
Executing The Strategy
Our Operations
Our Resources & Financial Condition
Our Capital
Our Financial Results
Quarterly Information
Non-GAAP Measures &
other Disclosures
1
2
3
3
5
5
6
7
8
9
12
14
21
29
30
Section III
Disclosure Controls & Procedures &
Internal Controls Over Financial
Reporting
Section IV
Risks & Our Strategy To Manage
Real Estate Ownership
Rollover of Leases
Change in Indexation for Inflation
Financing
Tax Considerations
Changes in Law
Foreign Exchange Rate Fluctuations
Interest Rates
Environmental Risks
Joint Arrangements
Organizational Structure
Competition
Insurance
37
38
38
38
39
40
40
41
41
41
42
42
43
Section V
Critical Accounting Policies
Critical accounting judgements,
estimates and assumptions in
applying accounting policies
Changes in accounting estimates
and changes in accounting policies
Management’s Responsibility For
Financial Statements
Independent Auditors Report
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Net
Income & Comprehensive Income
Consolidated Statements of
Changes in Equity
Consolidated Statements of
Cash Flows
Notes to the Consolidated Financial
Statements
Appendix - Property Listing
Trustees
Corporate Information
43
43
44
45
46
46
47
48
49
50
83
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 and properties held
through joint ventures and associates)
Number of properties held through joint ventures and associates
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,
2017
September 30,
2017
December 31,
2016
265
9
20,080,644
88.0 %
87.5 %
10.78 €
2.9 %
273
9
20,369,253
87.5 %
87.1 %
10.71 €
2.3 %
164
9
13,025,346
90.0 %
88.6 %
10.29
3.3 %
€
(1) Includes the REIT’s proportionate share of properties held through joint ventures and associates, but excludes assets held for sale.
December 31,
2017
September 30,
2017
Three months ended
December 31,
2016
December 31,
2017
Year ended
December 31,
2016
Operating results (IFRS) – in €
Investment properties revenue(1)
Net rental income
Operating results (IFRS) – in $
Investment properties revenue(1)
€
$
Net rental income
Cash from operating activities
Net income
Operating results including share from investment
in joint ventures and associates – in €
Investment properties revenue(1)(2)
Net operating income(2)
Operating results including share from investment
in joint ventures and associates – in $
Investment properties revenue(1)(2)
€
$
Net operating income(2)
56,224 €
39,269
50,910 €
36,011
33,728 €
22,505
179,430 €
125,345
84,303 $
58,789
44,024
119,438
74,981 $
53,040
27,795
121,572
48,576 $
32,414
17,238
30,715
263,728 $
184,210
101,495
295,676
138,821
91,511
203,565
134,245
59,533
141,334
61,561 €
43,709
56,143 €
40,257
39,064 €
26,925
200,588 €
142,738
160,466
109,032
92,298 $
65,440
82,683 $
59,288
56,250 $
38,769
294,715 $
209,684
235,312
159,946
Average exchange rate
(Canadian dollars to one euro)
Funds from operations (“FFO”)(2)
Adjusted funds from operations (“AFFO”)(2)
1.498
1.472
1.438
1.465
$
45,139 $
43,215
42,722 $
40,785
25,463 $
22,820
146,996 $
140,362
1.466
95,338
90,595
$
19 %
25,068 $
35,263 $
35,123 $
Distributions
Declared distributions
Distribution Reinvestment and Unit Purchase
Plan (“DRIP”) participation ratio (for the period)
Per unit amounts(3)
Distribution
Basic:
FFO
AFFO
Diluted:
FFO
(1) Investment properties revenue includes gross rental income (“GRI”) as well as the recovery of operating costs and property taxes from tenants (as applicable).
(2) Non-GAAP measures. A description of the non-GAAP measures referred to above, including investment properties revenue, net operating income, FFO and AFFO, and reconciliation to the
consolidated financial statements, can be found in the section “Our Financial Results” under the headings “Net operating income”, “Funds from operations” and “Adjusted funds from
operations” and “Non-GAAP Measures and Other Disclosures”.
124,061 $
0.26
0.24
0.97
0.92
0.20
0.18
0.26
0.25
0.80 $
0.20 $
0.20 $
0.20 $
0.80
0.76
94,745
17 %
0.25
0.95
16 %
13 %
0.20
0.25
0.80
0.80
13 %
$
(3) 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”.
Dream Global REIT 2017 Annual Report | 1
Financing excluding the Trust’s proportionate share of properties held
through joint ventures and associates
Weighted average face rate of interest on debt (period-end)
Weighted average effective interest rate
Interest coverage ratio(1)
Level of debt (net debt-to-gross book value, net of cash) at period-end(1)
Average level of debt, net of cash(1)
Debt – average term to maturity (years)
Financing including the Trust’s proportionate share of properties held
through joint ventures and associates
Level of debt (net debt-to-gross book value, net of cash) at period-end(1)
Average level of debt, net of cash(1)
Unencumbered assets, percentage of fair value
Unsecured debt
December 31,
2017
September 30,
2017
December 31,
2016
1.64 %
1.98 %
4.52 times
46 %
46 %
5.6
49 %
50 %
20 %
556,583
1.64 %
1.99 %
4.40 times
48 %
46 %
5.8
51 %
50 %
22 %
544,674
1.83 %
2.15 %
2.83 times
48 %
49 %
6.5
52 %
53 %
n/a
—
(1) A description of the non-GAAP measures referred to above, including the calculations of interest coverage ratio, average level of debt, net of cash, and level of debt (net debt-
to-gross book value, net of cash) 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)”.
FINANCIAL OVERVIEW
Funds from operations (“FFO”) and adjusted funds from operations (“AFFO”) for the quarter ended December 31, 2017
increased to $45.1 million and $43.2 million, respectively, compared to $25.5 million and $22.8 million in the prior year
comparative period. FFO for the year was $147.0 million compared to $95.3 million in 2016. AFFO increased to $140.4 million
during 2017 from $90.6 million in the prior year. Increases in FFO and AFFO were largely driven by investments in the
Netherlands, Belgium and Germany, and strong operating performance.
Diluted FFO per unit increased by 19% year-over-year to 95 cents for the year ended December 31, 2017, from 80 cents in
2016. Per unit diluted FFO for Q4 2017 was 25 cents, a 25% increase from 20 cents in Q4 2016.
Comparative properties NOI increased by 2.8% in Q4 2017 compared to Q4 2016. Including the foreign exchange impact,
comparative properties NOI increased by 7.0%. For the year ended December 31, 2017, comparative properties NOI increased
by $4.4 million, or 3.1%, compared to the year ended December 31, 2016. The year-over-year increase was a result of strong
leasing activity and higher rents.
Average in-place rents increased to €10.78 per square foot at December 31, 2017 from €10.29 per square foot at the end of 2016.
This 4.8% increase is largely due to higher average rental rates for properties acquired in 2017, rental rate increases on lease
renewals and the Trust’s active capital recycling program. Excluding the impact of the Dutch Properties, average in-place rents in our
Initial Properties and Acquisition Properties increased by 8.6% year-over-year to €11.18 per square foot at the end of 2017.
The Trust’s portfolio was further diversified by its recent investments in Brussels, Berlin, Stuttgart and the Netherlands,
adding approximately $1.3 billion of assets. These transactions diversified the asset classes it directly or indirectly invests in,
increasing the industrial composition to over 5% of the total portfolio, and mixed use to almost 10%.
Financing initiatives and a favourable lending environment in Europe enabled the Trust to reduce the weighted average face
interest rate of debt to 1.64% at the end of 2017 from 1.83% at the end of 2016, excluding properties held through joint
ventures and associates. The Trust completed an inaugural European debt offering of senior unsecured notes (“Senior Notes”)
to finance the investment in the Dutch Properties. The Senior Notes were issued by a finance subsidiary of the Trust at a
discount price of €99.575 from the principal amount of €100.0. Through its debt offering, the Trust created its first pool of
unencumbered assets. At the end of 2017, the Trust’s level of debt was 46%, down from 48% at the end of 2016. Including
our share of debt on properties held through joint ventures and associates, the level of debt was 49%, down from 52% at the
end of 2016.
Dream Global REIT 2017 Annual Report | 2
OUTLOOK
The economic outlook in our key markets in Europe remains promising for 2018. Forecasts for economic growth in Germany,
our largest market, indicate that GDP growth rates are expected to be at or slightly above the multi-year high of 2017, with
business confidence remaining at an all-time high. Growth rates in the Netherlands, our second largest market, are also
expected to remain robust and are estimated to reach levels just slightly below the growth rate of 3.1% in 2017.
Vacancy rates in the German and Dutch office sector have reached a record low of 4.7% in the Big 7 German office markets
and a 10-year low of 11.7% in the Dutch office market, respectively, and are expected to further decline in 2018.
As we continue our integration of the Dutch platform into Dream Global‘s overall business, we will leverage the team’s
extensive background and skill in terms of asset management, creating efficiencies and enhancing customer service in order
to drive the Trust’s performance across all platforms.
We continue to find opportunities in our portfolio to surface value and have been reviewing development opportunities.
Many of the assets are strategically well-located near central train stations or main retail areas and have excess density and
the potential for conversion to residential, office or mixed use properties.
With the increased scale of our business, solid economic conditions and strong real estate fundamentals in our target
markets, we are well-positioned to further grow and improve our business.
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, 2017 and December 31, 2016, respectively.
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 and associates in its
consolidated financial statements using the equity method of accounting. As at December 31, 2017, the Trust held nine
properties through joint ventures, which we sometimes refer to as “joint venture properties”. This management’s discussion
and analysis (“MD&A”), refers to certain non-GAAP financial measures reflecting 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 and associates have been proportionately consolidated. For a reconciliation
of the Trust’s results of operations and statement of financial position, please see “Our Financial Results” and “Non-GAAP
Measures and Other Disclosures”, respectively, in this MD&A. The Trust has significant influence over its joint ventures and
associates, which are accounted for using the equity method, and the Trust’s proportionate share of the financial position and
results of operations of its investments in joint ventures and associates, where presented and discussed in this MD&A using
proportionate consolidation, does not necessarily represent the Trust’s legal claim to such items. Proportional consolidation
refers to the accounting for joint ventures, including items of income, expense, assets and liabilities, in proportion to the
Trust’s percentage of participation in the venture, which in the case of the Trust’s two joint ventures, is a 50% interest.
In addition, certain information in this MD&A with respect to our portfolio, including information with respect to tenants,
occupancy, vacancies, in-place rental rates, WALT and leasing and tenant profile, includes the Trust’s proportionate share of
properties held through joint ventures and associates. These metrics are important measures used by the Trust to evaluate
property operating performance of all the assets in its portfolio, whether invested in directly or indirectly, and whether
controlled or under significant influence.
As part of the Ontario Securities Commission’s review of Dream Global REIT’s continuous disclosure documents, we have
revised our approach with respect to our disclosure of certain non-GAAP financial measures in order to give greater
prominence to GAAP financial measures and to clearly identify the nature of the financial measure being reported. As part of
this revised approach, we have made revisions to certain metrics and the presentation of certain disclosures, including
discussion and analysis of our resources and financial condition, our capital, and our financial results.
This MD&A is dated as at February 21, 2018. For simplicity, throughout this discussion, we may make reference to the
following:
• “Acquisition Properties”, meaning the income-producing properties acquired subsequent to the Trust’s initial public
offering on August 3, 2011, and excluding the Dutch Properties;
• “Debentures”, meaning the 5.5% convertible unsecured subordinated debentures of the Trust, which were redeemed on
September 15, 2016;
Dream Global REIT 2017 Annual Report | 3
• “Dutch Properties”, meaning the income-producing properties located in the Netherlands in which the Trust indirectly
invested on July 27, 2017;
• “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;
• “POBA”, meaning Public Officials Benefit Association, a South Korean pension fund;
• “Senior Notes”, meaning the 1.375% senior unsecured notes issued by a finance subsidiary of the REIT, maturing on
December 21, 2021;
• “Transaction Agreement”, meaning the sale and purchase agreement between the REIT’s subsidiaries and the vendors of
the Dutch Properties dated July 17, 2017; and
• “Units”, meaning the Units of the Trust.
Certain information has been obtained from BNP Paribas, CBRE, Cushman & Wakefield and Jones Lang LaSalle (“JLL”),
commercial firms that provide information relating to the German, Austrian, Belgian and Dutch real estate markets, as well as
the European Commission’s economic forecast, Statistics Netherlands and Destatis. 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.
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 disclosures incorporated by reference into this report include 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, and our
disposition and leasing strategies), which are in each case not historical fact. 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. Among other sections, forward-looking information is disclosed in this MD&A under the sections
“Outlook” and “Our Strategy” and some of the specific forward-looking statements included in this MD&A include, but are
not limited to, statements with respect to the effect of the Dutch Properties on our balance sheet, capital structure, payout
ratio, expectations of management to revise FFO and AFFO in 2018, expectations regarding the REIT’s ability to meet ongoing
obligations through current cash and cash equivalents or cash generated from operations, draws on credit facilities, debt
refinancings and new equity or debt issues, and expected office development locations in Germany. 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.
Dream Global REIT 2017 Annual Report | 4
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 21, 2018, except where otherwise noted. Dream Global REIT does not
undertake to update any such forward-looking information whether as a result of new information, future events or
otherwise, except as required by law. Additional information about these assumptions and risks and uncertainties is
contained in our filings with securities regulators. These filings are also available on our website at www.dreamglobalreit.ca.
BACKGROUND
Dream Global REIT is an unincorporated, open-ended real estate investment trust that was formed to provide investors with
the opportunity to invest in real estate exclusively outside of Canada. Dream Global REIT was founded by Dream Asset
Management Corporation (“DAM”), a subsidiary of Dream Unlimited Corp. (TSX: DRM), which is 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 long as we comply at all times with our investment guidelines which, among other things, permit us to invest only 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 STRATEGY
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.
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 established management
teams in Europe with deep market knowledge and established relationships with other market participants. Leasing, capital
expenditure and construction initiatives are either internally managed or overseen by us.
Until the end of 2017, property management services, including general maintenance, rent collection and administration of
operating expenses and tenant leases, were carried out by a number of third-party service providers under the oversight of
our internal team. Commencing in January 2018, property management of the Trust’s assets located in Germany is now
performed by a newly formed joint venture between Dream Global and Vivanium, an established German property
management company. Property management services for our Dutch Properties will continue to be performed by our team in
the Netherlands.
We will also pursue value enhancement opportunities in our portfolio through redevelopment, intensification or conversion
to alternative uses of suitable properties.
Dream Global REIT 2017 Annual Report | 5
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
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.
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 three asset categories:
Initial Properties
As at December 31, 2017, this category included 110 properties (excluding two 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 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, 2017, this category included 40 office properties, which were acquired since our initial public offering in
2011. Of this total, 38 properties are located in cities across Germany, including eight properties owned through a joint
venture with POBA, a South Korean pension fund. In addition, the Trust owns two properties outside of Germany. One of the
Trust’s properties, owned through a joint venture with an Asian sovereign wealth fund, is located in Vienna, Austria. The
second property is located in Brussels, Belgium. In comparison to the Initial Properties, the Acquisition Properties are
generally larger, newer or recently refurbished, multi-tenant buildings. See “Basis of Presentation” for information about how
we report our joint venture properties.
Dutch Properties
As at December 31, 2017, this category included 124 properties (excluding three assets held for sale). The assets include
102 office properties of which over two-thirds are located in the Randstad, which constitutes the Netherlands’ largest urban
regions and primary office markets, including Amsterdam, Rotterdam, the Hague and Utrecht. In addition, the portfolio
consists of 22 light industrial properties that are primarily located in the Netherlands’ five largest industrial hubs.
Dream Global REIT 2017 Annual Report | 6
The majority of our portfolio is concentrated in large office markets:
Geographic composition of portfolio
Berlin
Cologne
Düsseldorf
Frankfurt
Hamburg
Hannover
Munich
Nuremberg
Stuttgart
Other, including Brussels
Total Germany and other markets
Amsterdam
Utrecht
Rotterdam
Eindhoven
Other Randstad
Other
Total Netherlands
Portfolio excluding joint venture properties
Add: Properties held through joint ventures and associates
Total portfolio
Total GLA
(square feet)
674,564
797,990
1,480,356
777,300
1,101,946
451,392
512,671
1,017,174
650,356
4,237,750
11,701,499
1,438,931
516,885
653,387
395,435
2,240,546
2,135,108
7,380,292
19,081,791
998,853
20,080,644
Total GLA
(%)
3
4
7
4
5
2
3
5
3
22
58
7
3
3
2
11
11
37
95
5
100
Total GRI
(%)
4
6
8
3
8
2
4
5
4
15
59
7
3
2
1
11
7
31
90
10
100
TENANTS
Through our active acquisitions, dispositions and leasing program, we continue to focus on the diversification of our tenant
base. At December 31, 2017, Deutsche Post’s total annualized GRI was approximately 9.0% of the Trust’s overall occupied and
committed GRI, down from 18.9% at the end of 2016.
Tenant composition
Deutsche Post
Siemens AG
Freshfields Bruckhaus Deringer
City of Hamburg
ERGO Group AG
BNP Paribas Fortis SA/NV
Deutsche Rentenversicherung Knappschaft Bahn-See
LBBW Immobilien Management GmbH
Deutsche Postbank AG
Google Germany GmbH
Other third-party tenants
Total
Industry
Postal services and global logistics
Engineering and technology
Legal services
Municipality
Insurance
Financial services
Pension fund
Real estate
Financial services
Technology
Mixed
(1) Includes the REIT’s proportionate share of properties held through joint ventures and associates.
(2) Source: Standard & Poor’s, Fitch
(3) n/a means they are not rated by a credit rating agency.
Total annualized
GRI (%)(1)
9.0
2.4
2.0
1.8
1.8
1.3
1.2
1.1
0.9
0.9
77.6
100.0
Credit rating(2)(3)
BBB+
A+
n/a
AAA
AA-
A+
n/a
A-
A-
AA+
n/a
Dream Global REIT 2017 Annual Report | 7
MARKET OVERVIEW
Germany
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.
Germany’s GDP grew by 2.2%(1) in 2017, which was the highest growth rate since 2011 when the economy was recovering
from the global financial crisis. This growth was driven by fixed capital investment and household consumption and was
supported by low interest rates. Government spending and net exports also played a role in the GDP growth.
The growth in the economy was accompanied by a 1.5%(1) increase in the number of people employed in December 2017
compared to December 2016, resulting in an unemployment rate of 3.5%(1), unchanged from December 2016 and Q3 2017
and ranking among the lowest in the European Union.
Business confidence continues to be very strong. In January 2018, Germany’s Ifo Business Climate Index, which surveys
7,000 companies for its monthly index, returned to its all-time high of 117.6 points first reached in November 2017.
The German real estate sector
Germany remains a highly sought-after real estate investment market, benefiting from strong local and international investor
demand. In 2017, the total volume for commercial real estate transactions reached €56.8 billion(2), a 7% increase compared to
2016 and €1.7 billion(2) higher than the record achieved in 2015. A total of €31.1 billion(2) of these transactions took place in
the Big 7 office markets, representing a 5% increase compared to 2016. Germany continues to be perceived as a safe harbour,
resulting in significant foreign investor demand. Nearly half of the commercial real estate investments in 2017 were
completed by foreign investors. Office properties remained the top choice for investors with approximately 44%(2) of all
transactions taking place in this segment during 2017.
Increasing employment in Germany had a positive impact on the office leasing markets with the office vacancy rate
decreasing to 4.7%(3) at the end of 2017, a decline of 80 basis points year-over-year and the lowest level in 15 years.
New office completions fell in all the Big 7 office markets except for Düsseldorf and declined overall by 22%(3) in 2017. In 2018,
it is expected that 40%(3) of all the new office development will be concentrated in Berlin and Munich. Strong demand and
limited availability led to rising rental rates with prime rents increasing in 2017 in all the Big 7 office markets except Cologne.
The biggest increases in rental rates took place in Berlin, Stuttgart, Munich and Hamburg.
Austria
The Austrian economy is closely linked to Germany and features a skilled labour force and a high standard of living. It has a
high degree of financial stability, a reliable protection of property rights and a transparent legal system. The Austrian
economy grew by an estimated 3.1%(4) in 2017, compared to 1.5%(4) in 2016, the country’s strongest economic growth in ten
years. Similar to Germany, the strength of the economy is evidenced by record consumer confidence, a strong labour market,
good financing conditions and strong external demand.
The real estate sector in Vienna
The underlying fundamentals in the office sector in Vienna remain strong. The average vacancy rate in the Viennese market
declined to 4.9%(5) at the end of 2017, a 40 basis point decline compared to the end of 2016. While new office supply
increased in 2017, strong demand for office space as a result of economic growth was the key factor for the decline in office
vacancy.
Belgium
Belgium is centrally located in Europe, bordered by Germany, the Netherlands, Luxembourg and France, and is a corporate
gateway serving as the European and regional headquarters for many international companies. Belgium has a robust and
highly developed transportation network, with extensive connections to neighbouring countries, including Germany.
The real estate sector in Brussels
Brussels, Belgium’s capital, is a top six European office market, a preferred location for international organizations and among
the largest global centres for international cooperation, serving as the headquarters for both NATO and the European Union.
With an office inventory totalling 143 million square feet, Brussels is comparable in size to Hamburg or Frankfurt in Germany.
The fundamentals in the office sector in Brussels are strong with the average vacancy rate declining to 8.3%(6) in Q4 2017, a
70 basis point decrease compared to Q4 2016. After years of stable prime rents, rents have been rising in 2017.
Dream Global REIT 2017 Annual Report | 8
Netherlands
The Netherlands is located in northwestern Europe, bordered by Germany, Belgium and the North Sea. It is the second largest
exporter in the eurozone, with a robust infrastructure network and one of the highest population densities of any European
country. The Dutch economy, which is closely linked to the German economy, is estimated to have grown by 3.1%(7) in 2017.
The Netherlands’ unemployment rate has experienced significant improvement over the last few years, having declined from
over 7.0% in 2014 to 4.4%(8) in December 2017.
The real estate sector in the Netherlands
The underlying fundamentals in the office sector in the Netherlands are strong, resulting in declining yields and average rental
rate growth. In 2017, €6.7 billion were invested in the Dutch office sector, an increase of 11% compared to 2016. Overall
office vacancy rates declined to 11.7%(9) at the end of 2017, the lowest level since 2007.
The industrial sector has also performed well with a 13%(10) increase in take-up in 2017 compared to the same period in 2016,
driven by strong growth in the manufacturing industry and transport sector. Investor demand for industrial space remained
high in 2017 with 81% of all transactions carried out by foreign investors.
(1) Destatis – Germany’s Federal Statistical Office
(2)
JLL Investment Market Overview Q4 2017
(3)
JLL Office Market Overview Q4 2017
(4) European Commission – Economic forecast
(5) CBRE Marketview, H2 2017
(6) BNP Paribas Research, Q4 2017
(7) Statistics Netherlands
(8) Trading Economics
(9) Cushman & Wakefield Office Market Snapshot
(10) Cushman & Wakefield Industrial Market Snapshot
SECTION II – EXECUTING THE STRATEGY
OUR OPERATIONS
In this MD&A, properties that are under contract for sale but that have not closed as at December 31, 2017 are classified
under “Assets held for sale” in our financial statements and have been removed from the property level metrics disclosed
under “Our Operations”, including occupancy and vacancy rates, lease maturities, weighted average remaining lease term
(“WALT”) and rental rates.
The Trust’s investment in the Dutch Properties, a 135-property portfolio in the Netherlands, and the acquisitions completed
since 2016 grew the Trust’s asset base significantly. Some of the metrics disclosed below are therefore not directly
comparable to prior periods.
Occupancy
The occupied and committed occupancy of our total portfolio was 88.0% at December 31, 2017, representing a decrease of
200 basis points since the end of 2016, due to the inclusion of the Dutch Properties. On a comparative portfolio basis,
occupancy increased by 50 basis points to 90.7% at December 31, 2017 from 90.2% at December 31, 2016. The comparative
portfolio comprises properties owned by the Trust at December 31, 2017 and December 31, 2016, and excludes properties
that were acquired, sold or held for sale in 2017.
The Acquisition Properties’ occupied and committed occupancy increased by 50 basis points to 96.8% as a result of property
acquisitions with a high average occupancy level of 99% in 2017. The Dutch Properties had an increase in committed
occupancy of 70 basis points since September 30, 2017, resulting from leasing activity and dispositions.
Dream Global REIT 2017 Annual Report | 9
The table below details the percentage of occupied and committed space for the total portfolio as well as the comparative
portfolio.
Portfolio (%)
Initial Properties
Acquisition Properties(1)
Subtotal portfolio
Dutch Properties
Total portfolio
December 31,
2017
83.9
96.8
91.2
82.7
88.0
Total portfolio
December 31,
2016
83.9
96.3
90.0
n/a
90.0
December 31,
2017
83.9
96.7
90.7
n/a
90.7
Comparative portfolio
December 31,
2016
83.2
96.3
90.2
n/a
90.2
(1) Includes the REIT’s proportional share of properties held through joint ventures and associates.
Vacancy schedule
The tables below highlight our leasing activity for the three months and year ended December 31, 2017. During Q4 2017, our
overall space available for lease decreased by 137,419 square feet due to strong leasing activity and dispositions in the quarter.
(in square feet)
Available for lease – October 1, 2017
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, 2017
Initial
Properties
908,824
—
(4,815)
(6,638)
897,371
34,314
—
(23,485)
(1,544)
(11,066)
895,590
(1) Includes the REIT’s proportionate share of properties held through joint ventures and associates.
For the three months ended December 31, 2017
Dutch
Properties
1,375,093
—
(85,408)
34,520
1,324,205
488,923
40,006
(229,721)
(328,217)
(16,672)
1,278,524
Total(1)
2,540,282
—
(90,223)
28,130
2,478,189
673,385
40,006
(258,932)
(413,715)
(116,070)
2,402,863
Acquisition
Properties(1)
256,365
—
—
248
256,613
150,148
—
(5,726)
(83,954)
(88,332)
228,749
(in square feet)
Available for lease – January 1, 2017
Change in vacancy due to acquisitions
Change in vacancy due to dispositions
Remeasurements
Subtotal – available for lease
Expiries(3)
Early termination and bankruptcies
New leases
Renewals
Future leases committed in the period(3)
Available for lease – December 31, 2017
For the year ended December 31, 2017
Initial
Properties
1,066,636
—
(134,525 )
(35,653)
896,458
2,417,533
17,581
(64,495)
(102,823)
(2,268,664)
895,590
Acquisition
Properties(1)
234,059
9,655
—
1,269
244,983
718,119
16,531
(37,820)
(494,778)
(218,286)
228,749
Dutch
Properties(2)
n/a
1,477,154
(106,473 )
35,494
1,406,175
712,380
49,747
(300,046)
(505,090)
(84,642)
1,278,524
Total(1)
1,300,695
1,486,809
(240,998)
1,110
2,547,616
3,848,032
83,859
(402,361)
(1,102,691)
(2,571,592)
2,402,863
(1) Includes the REIT’s proportionate share of properties held through joint ventures and associates.
(2) Reflects leasing activity since the Trust’s consolidation on July 27, 2017.
(3) Includes the renewal of 2,212,974 square feet of space pertaining to Deutsche Post’s 2018 lease expiry.
Dream Global REIT 2017 Annual Report | 10
In-place rental rates
Average in-place rents increased to €10.79 per square foot/year at December 31, 2017, from €10.29 per square foot/year at
December 31, 2016, reflecting strong leasing market conditions, dispositions of assets in our Initial Properties portfolio with
below average in-place rents, and acquisitions of high-quality assets with above average in-place rents. This was offset by
below average in-place rents in our Dutch Properties portfolio due to the nature of this portfolio, which includes industrial
properties that operate in a market with generally lower rents than the rents in the Trust’s German portfolio. Average market
rents remain above in-place rents as at December 31, 2017, with an overall spread of 3.0%.
The table below provides a comparison between in-place rents and estimated market rents as at December 31, 2017.
(per square foot/year)
Initial Properties(1)
Acquisition Properties(2)
Dutch Properties(1)
Overall
In $
(as at December 31, 2017)
In-place rent Market rent
9.93
$
22.75
15.04
$ 16.71
8.84
22.17
15.13
$ 16.23
$
In €
(as at December 31, 2017)
In-place rent Market rent
6.60
€
15.11
9.99
€ 11.10
5.88
14.73
10.05
10.78
€
€
% of market rents
above (below)
in-place rents
12.2
2.6
(0.6 )
3.0
(1) Excludes properties held for sale.
(2) Includes the REIT’s proportionate share of properties held through joint ventures and associates.
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 calculation of market rents is based 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, 2017, the WALT of all leases was approximately 4.8 years.
(years)(1)
Initial Properties(2)
Acquisition Properties(3)
Dutch Properties(2)
Overall
WALT at
December 31, 2017
4.8
5.5
4.1
4.8
WALT at
December 31, 2016
3.1
5.7
n/a
4.5
(1) For the purpose of calculating WALT, month-to-month leases are reflected as leases with a one-year term.
(2) Excludes properties held for sale.
(3) Includes the REIT’s proportionate share of properties held through joint ventures and associates.
Leasing and tenant profile
Lease rollover profile
The following table outlines our lease maturity profile by asset type as at December 31, 2017.
(in square feet)
Initial
Properties
Acquisition
Properties(1)
Dutch
Properties
Total GLA(1)
Total GLA (%)
Total GRI ($)(1)(2)
Total GRI (%)
Current
vacancy
Month-to-
month
2018
2019
2020
2021
2022+
Total
895,590
117,645
374,670
860,271
542,925
306,585
2,453,811
5,551,497
228,749
58,780
256,693
519,574
683,166
999,242
4,402,651
7,148,855
1,278,524
2,402,863
12.0 %
71,461
247,886
1.2 %
5,000,399
1.7%
776,023
1,407,386
6.9 %
914,813
2,294,658
11.4 %
21,877,472 38,111,614
12.8%
7.3%
971,145
2,197,236
11.0 %
31,479,922
10.5%
1,244,996
2,550,823
12.7 %
2,123,330
8,979,792 —
44.8 %
45,546,356 156,671,466
52.5%
15.2%
7,380,292
20,080,644
100.0 %
298,687,229
100.0 %
(1) Includes the REIT’s proportionate share of properties held through joint ventures and associates.
(2) Annualized in-place and committed GRI pertaining to lease agreements as at December 31, 2017.
Dream Global REIT 2017 Annual Report | 11
Our lease maturity profile, including committed occupancy, is staggered. Lease expiries, as a percentage of total GLA,
between 2017 and 2021 range from approximately 7% to 13%. During the year, the Trust and Deutsche Post finalized
negotiations with respect to the DPI 2018 lease expiries, comprising 2.8 million square feet. The renewal of those leases
reduced 2018 lease expiries, as a percentage of GLA, from 19% as at December 31, 2016 to 7% at the end of 2017.
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 all of the Acquisition Properties and Initial Properties as at December 31, 2017. The
Dutch properties were externally appraised during the year as part of the Dutch Properties transaction.
Changes in the value of our investment properties for the year ended December 31, 2017 and for the year ended
December 31, 2016 are summarized in the table below as follows:
December 31, 2017
December 31, 2016
Balance at January 1
Additions
Acquisitions
Dutch Properties
Building improvements
Lease incentives and initial direct leasing
costs
Change in straight-line rents
Amortization of lease incentives
Disposition of vacant land
Reclassified to assets held for sale
Fair value adjustments
Transaction and other costs related to
acquisition
Foreign currency translation
Balance at December 31
Amounts per
consolidated
Share from
investment
in joint
financial ventures and
associates
statements
$ 2,481,586 $
Amounts per
consolidated
Share from
investment
in joint
financial ventures and
associates
Total
518,349 $ 2,913,088
Total
510,321 $ 2,991,907 $ 2,394,739 $
statements
332,528
963,348
41,668
6,994
(362 )
(3,690 )
—
(117,470 )
185,389
(14,266 )
185,352
$ 4,061,077 $
—
—
1,713
1,523
(162 )
(418 )
—
—
53,195
332,528
963,348
43,381
8,517
(524 )
(4,108 )
—
(117,470 )
238,584
229,942
—
27,094
11,244
1,883
(2,951 )
(2,141 )
(121,335 )
94,669
—
—
1,378
703
309
(259 )
—
—
20,171
229,942
—
28,472
11,947
2,192
(3,210 )
(2,141 )
(121,335 )
114,840
—
(14,266 )
32,445
217,797
598,617 $ 4,659,694 $ 2,481,586 $
(14,354 )
(137,204 )
—
(14,354 )
(30,330 )
(167,534 )
510,321 $ 2,991,907
As at December 31, 2017, the REIT’s portfolio consisted of 274 properties, excluding five assets held for sale. The portfolio
comprises 31 Acquisition Properties, nine Acquisition Properties held through joint ventures and associates, 110 Initial
Properties, and 124 Dutch Properties, for a combined fair value of $4.7 billion (€3.1 billion).
Excluding joint venture properties, the portfolio grew by $1.6 billion to $4.1 billion as at December 31, 2017 primarily as a
result of the additions of $963.3 million of Dutch Properties and $332.5 million of acquisitions, $185.4 million in fair value
adjustments, and a $185.4 million increase due to foreign currency translation; partially offset by approximately $117.5
million of assets reclassified to assets held for sale.
Dream Global REIT 2017 Annual Report | 12
Investment properties held for sale
As at December 31, 2017, the REIT had committed to sell two Initial Properties and three Dutch Properties valued at
$16.8 million, representing the assets’ approximate fair value. These properties are classified as assets held for sale on the
balance sheet and excluded from investment properties.
Balance at January 1
Building improvements
Lease incentives and initial direct leasing costs
Investment properties reclassified as held for sale
Change in straight-line rents
Dispositions
Foreign currency translation
Balance at December 31
2017
45,461
89
1
117,470
(50 )
(151,872 )
5,726
16,825
$
$
$
$
2016
32,549
32
2
121,335
(1 )
(100,826 )
(7,630 )
45,461
Dutch Properties
On July 27, 2017, the REIT completed an indirect investment in 135 assets located in the Netherlands. The portfolio, which is
complementary to our existing platform, is well diversified by asset type, geography and size. On the closing date of the
transaction, the Dutch Properties portfolio consisted of 101 office properties, comprising approximately 4.8 million square
feet of GLA, and 34 industrial properties, comprising approximately 2.9 million square feet of GLA.
The following is a summary of key metrics as of July 27, 2017:
Dutch Properties
Number of
tenants
734
GLA (square
feet)
7,704,259
Occupancy at
transaction
date (%)
82.0 % $
Total fair value
963,348
Transaction date
July 27, 2017
According to the business combination requirements, transaction costs relating to the Dutch Properties were expensed
through net income rather than capitalized to the respective properties. The REIT also assumed certain assets and liabilities,
which were recognized at their respective fair values.
Acquisitions
In addition to the Dutch Properties, during the year ended December 31, 2017, we completed the following acquisitions:
Airport Plaza, Brussels, Belgium
Siemens Land, Nuremberg, Germany
Bollwerk, Stuttgart, Germany
M22, Berlin, Germany
Transaction costs
Total
Acquired GLA
(square feet)
387,479
n/a
306,211
55,521
Occupancy at
acquisition (%)
Purchase
price
97 % $ 143,161 $
10,104
n/a
133,751
100%
31,609
100%
$ 318,625 $
13,903
$ 332,528
Financed by
mortgage
Date acquired
79,456
May 15, 2017
7,178
June 15, 2017
80,451
July 17, 2017
17,385 December 29, 2017
184,470
Dispositions
During the three months ended December 31, 2017, the REIT disposed of four Initial Properties and six Dutch Properties, for
an aggregate gross sales price of $44.9 million (€29.7 million), increasing total sales during 2017 to 43 investment properties,
for approximately $151.9 million (€102.9 million), reflecting the properties’ fair value at the last reporting period prior to their
sale. A portion of the net sales proceeds of $146.6 million was used to reduce our term loan credit facility.
Building improvements
Building improvements represent investments made in our existing properties to ensure our buildings are operating at an
optimal level, as well as development capital used for expansion or redevelopment projects. During the three months and
year ended December 31, 2017, we spent $21.0 million and $41.7 million, respectively, on building improvements (including
joint venture properties – $21.7 million and $43.4 million, respectively). The increase in building improvements is primarily
driven by value-enhancing redevelopment projects in 2017, including Millerntorplatz 1, Saarbrücken as well as development
in our Dutch Properties. In general, building improvements are non-recoverable from the tenants unless specifically provided
for in the lease agreement.
Dream Global REIT 2017 Annual Report | 13
The table below summarizes the building improvements incurred for the years ended December 31, 2017 and December 31,
2016.
Building improvements
Recoverable
Non-recoverable
Value-enhancing redevelopment projects(1)
Total comparative portfolio(2)
Annual building improvements on assets classified as held for sale and sold properties
Total portfolio
Less: Building improvements on properties held through joint ventures
Total building improvements included per financial statements
December 31,
2017
1,134 $
7,755
33,939
42,828 $
553
43,381
1,713
41,668 $
$
$
$
December 31,
2016
1,225
7,047
19,612
27,884
588
28,472
1,378
27,094
(1) Value-add redevelopment projects are defined as those which result in additional gross leasable area, and include projects commissioned for the purpose
of repositioning the assets.
(2) Excludes sold properties and properties held for sale and includes the REIT’s proportionate share of properties held through joint ventures and associates.
Initial direct leasing costs and lease incentives
Initial direct leasing costs include external leasing fees, 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.
During the three months and year ended December 31, 2017, we incurred $3.7 million and $7.0 million, respectively, of lease
incentives and initial direct leasing costs (including the joint venture properties – $4.1 million and $8.5 million, respectively).
As at December 31, 2017, we had outstanding initial direct leasing cost commitments of $10.2 million, and $2.8 million on the
REIT’s share of joint venture properties.
Investment in joint ventures and associates
As at December 31, 2017, the REIT had a total of eight Acquisition Properties held through a joint venture with POBA (“POBA
joint venture”) and one Acquisition Property held through a similar joint venture with an Asian sovereign wealth fund
(“Rivergate joint venture”). Pursuant to these arrangements, the REIT has joint control of these joint ventures and, as such,
has classified its 50% interest in the joint ventures as investment in joint ventures and associates and accounted for the
investment using the equity method.
As at December 31, 2017, the carrying amount of the REIT’s investment in joint ventures and associates was $319.5 million
(December 31, 2016 – $265.3 million).
During the year ended December 31, 2017, the value of investment properties held through joint ventures and associates
increased by $88.3 million, primarily driven by $53.2 million of fair value adjustments and $32.4 million of foreign exchange
translation.
During the year ended December 31, 2017, the REIT recorded fee income relating to the POBA and Rivergate joint ventures of
$4.2 million (year ended December 31, 2016 – $5.2 million), which is included in interest and other income.
OUR CAPITAL
Liquidity and capital resources
The REIT’s primary sources of capital include cash generated from operating activities, credit facilities, mortgage financing,
and equity or debt issues, such as the unsecured Senior Notes. 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 refinancing
and, as growth requires and when appropriate, new equity or debt issues.
Dream Global REIT 2017 Annual Report | 14
As of December 31, 2017, our current liabilities exceed our current assets by $47.9 million, which includes $5.5 million of term
loan credit facility repayments associated with assets held for sale. Repayments will be financed with proceeds from dispositions.
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 reduces 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 $16.0 million.
Amounts payable outstanding at the end of any reporting period depend primarily on the timing of leasing costs and capital
expenditures incurred as well as the impact of transaction costs incurred on 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
Debt (per consolidated financial statements)
Add: Proportionate share of debt related to:
Investment in joint ventures and associates
Total debt including proportionate share of debt relating to properties held through joint
ventures and associates
Mortgage debt (per consolidated financial statements)
Add: Proportionate share of mortgage debt related to:
Investment in joint ventures and associates
Mortgage debt including proportionate share of mortgage debt relating to properties held
through joint ventures and associates
December 31,
2017
2,114,069 $
$
December 31,
2016
1,399,462
285,312
262,923
$
2,399,381
$
1,662,385
December 31,
2017
1,288,731 $
$
December 31,
2016
1,023,130
285,312
262,923
$
1,574,043
$
1,286,053
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. Our objective is to have
staggered debt maturities to mitigate interest rate risk and limit refinancing exposure in any particular period. Including the
REIT’s share of debt on properties held through joint ventures, we operate within a targeted debt-to-gross book value (net of
cash), range of 50% to 55%. As at December 31, 2017, the debt-to-gross book value ratio (net of cash) was 49%, a decrease
from 52% at December 31, 2016.
The key performance indicators in the management of our debt are as follows:
Financing excluding the Trust’s proportionate share of properties held through joint ventures
and associates
Weighted average face rate of interest on debt (period-end)
Weighted average effective interest rate(1)
Level of debt (net debt-to-gross book value, net of cash) at period-end(2)
Average level of debt (net debt-to-gross book value, net of cash)(2)
Interest coverage ratio(2)
Debt – average term to maturity (years)
Financing including share of debt from investment in joint ventures and associates
Level of debt (net debt-to-gross book value, net of cash) at period-end(2)
Average level of debt, net of cash(2)
For the year
ended
December 31,
2017
For the year
ended
December 31,
2016
1.64 %
1.98 %
46 %
46 %
4.52 times
5.6
49 %
50 %
1.83 %
2.15 %
48 %
49 %
2.83 times
6.5
52 %
53 %
(1) Weighted average effective interest rate is calculated as the weighted average face rate of interest, net of amortization of fair value adjustments,
discounts and financing costs.
(2) Level of debt (net debt-to-gross book value, net of cash), average level of debt (net debt-to-gross book value, net of cash) 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”.
Dream Global REIT 2017 Annual Report | 15
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, 2017 is 4.52 times and reflects our ability to cover interest
expense requirements. The increase was a result of higher cash flow from operations and interest savings due to the
convertible debenture repayment and the refinancing of mortgages during 2016.
Financing activities
We finance our acquisitions using equity as well as conventional mortgage financing, term debt and floating rate credit
facilities, in addition to issuing unsecured debt.
Equity issue
On March 21, 2017, we completed a public offering of 11,983,000 Units, including an over-allotment option of 1,563,000
Units, all of which were sold to the syndicate of underwriters at a price of $9.60 per unit. The Trust received gross proceeds of
$115 million.
On July 27, 2017, we completed a public offering of 28,575,000 Units, all of which were sold to the syndicate of underwriters
at a price of $10.50 per unit. The Trust received gross proceeds of $300 million. The net proceeds of the public offering were
used to partially finance the investment in the Dutch Properties, as disclosed in the business acquisition report of the Trust
dated August 13, 2017.
Senior Notes
As part of the Dutch Properties transaction, we also completed an inaugural European debt offering of Senior Notes to
finance the investment. The Senior Notes issued by a finance subsidiary of the Trust have an aggregate principal of €375
million, a face interest rate of 1.375%, and mature on December 21, 2021. Through this debt offering, the REIT created its first
pool of unencumbered assets. As at December 31, 2017, the Trust was in compliance with its Senior Notes covenants.
New debt
During the year ended December 31, 2017, we obtained the following new mortgages:
Property
Debt on new acquisitions
Siemens additional land, Nuremberg(1)
Airport Plaza, Brussels, Belgium
Bollwerk, Stuttgart, Germany
M22, Berlin, Germany
Additional debt on existing properties
Millerntorplatz 1, Hamburg
Total
Mortgage
($000s)
Mortgage
(€000s)
Face rate
Date of funding
Date of maturity
$
7,178 €
79,456
80,451
17,385
4,775
54,000
55,350
11,550
June 12, 2017 September 30, 2024
1.20 %
July 3, 2024
1.86 %
June 30, 2027
1.83 %
1.76 % December 29, 2017 December 30, 2027
July 5, 2017
July 17, 2017
14,847
$ 199,317 €
10,000
135,675
1.71 %
April 25, 2017
February 6, 2025
(1) Variable interest rate loan at three-month EURIBOR plus 1.2% per annum, with an interest rate cap of 2.5% on 80% of the amortizing loan balance.
In addition, the REIT completed the following mortgage refinancings during the year:
Property name
Marsstrasse 20-22, Munich(1)
ERGO, Nuremberg
Financing date
February 27, 2017
May 18, 2017
New maturity date
October 31, 2025 $
March 31, 2024
$
€
(1) Reflects the REIT’s proportionate share of mortgage debt on a property held through a joint venture.
New loan
amount
32,434 $
49,922
82,356 $
56,300 €
Old mortgage
discharged
24,658 $
34,368
59,026 $
40,432 €
Net
proceeds
7,776
15,554
23,330
15,868
The Marsstrasse refinancing decreased the face rate of the mortgage from 2.69% to 1.49% and extended the maturity to
8.7 years from 3.3 years.
The ERGO refinancing decreased the face rate of the mortgage from 2.45% to 1.34% and extended the maturity of the
mortgage for 6.76 years.
On December 19, 2017, we secured financing of €7.5 million for the refinancing of our Hildesheim property and the
construction of a 100-room hotel on the site. Part of the loan will be used to repay financing currently provided for this asset
by the term loan credit facility. The loan is split into two tranches, and carries an interest rate of 1.78% for a term of ten years.
As at December 31, 2017, no amounts had been drawn.
Dream Global REIT 2017 Annual Report | 16
Debt composition
Term loan credit facility(1)
Revolving credit facility
Mortgage debt(1)
Mortgage debt on
properties held through
joint ventures(1)
Senior Notes
Land lease obligations
Total
Percent
$
$
Variable
242,044 $
—
45,409
Fixed
— $
—
1,243,322
December 31, 2017
Total
242,044 $
—
1,288,731
Variable
289,193 $
87,139
36,618
December 31, 2016
Fixed
— $
—
986,512
Total
289,193
87,139
1,023,130
—
—
—
287,453 $
12%
285,312
556,583
26,711
2,111,928 $
88%
285,312
556,583
26,711
2,399,381 $
100%
—
—
—
412,950 $
25%
262,923
—
—
1,249,435 $
75%
262,923
—
—
1,662,385
100%
(1) Balance shown is net of deferred financing costs.
Term loan credit facility
The REIT’s term loan credit facility (the “Facility”) is structured as an interest-only facility with a major U.S. financial
institution. The Facility was refinanced on December 14, 2015 for a term of five years and has 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 requirements of the Facility, we purchased EURIBOR interest rate caps with a weighted average strike rate of
0.5% to cover 99% of the Facility.
As at December 31, 2017, the weighted average rate of the Facility was 2.25%. Including financing costs, the effective interest
rate under the Facility was 3.29%.
The Facility agreement requires that at each interest payment date, and each date of prepayment of the 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,
2017, 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 Facility.
Revolving credit facility
On June 6, 2017, the REIT renewed the €100 million revolving credit facility on favourable terms, resulting in a reduction of the
margin paid by the REIT of 100 basis points. The interest rate on Canadian dollar advances under the revolving credit facility is
now prime plus 100 basis points or bankers’ acceptance rates plus 200 basis points. The interest rate for euro advances is
200 basis points over the three-month EURIBOR rate. The revised terms also allow the REIT to enter into swap arrangements
with an effective borrowing rate at the EURIBOR rate plus swap spread, further reducing borrowing costs. The term was
extended to June 6, 2019. The revolving credit facility was undrawn at December 31, 2017. There was an undrawn letter of
credit commitment for €1.2 million against the facility as at December 31, 2017.
Dream Global REIT 2017 Annual Report | 17
Debt maturity profile
The table below highlights the debt maturity profile of the REIT’s contractual obligations, including mortgages on the nine
joint venture properties held by the REIT:
2018
2019
2020
2021
2022
2023 and thereafter
Senior Notes discount
Financing costs
Total
Scheduled
principal
repayments on
non-matured debt
Debt maturities
$
$
5,502 $
—
416,458
584,080
184,322
1,072,959
2,263,321 $
20,346 $
22,285
21,039
21,837
19,977
60,873
166,357 $
$
Total
25,848
22,285
437,497
605,917
204,299
1,133,832
2,429,678
(2,720 )
(27,577 )
2,399,381
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, 2017, 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(1)
782
419
—
1,201
$
(1) Excludes land leases which are accounted for in debt as land lease obligations.
During the three months and year ended December 31, 2017, the Trust paid $0.2 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, 2017, 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 mark to market the contracts quarterly and recorded fair value losses of $17.5 million.
At December 31, 2017, the Trust had foreign exchange forward contracts to sell €243.3 million in total from January 2018 to
December 2020 at an average exchange rate of $1.528 per euro.
Dream Global REIT 2017 Annual Report | 18
The table below highlights the forward contracts outstanding as at December 31, 2017:
Contracts maturing by quarter
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Total
Equity
The table below highlights our outstanding equity:
Units
Hedge value
22,452
22,877
22,969
23,882
23,304
23,197
22,735
19,813
18,735
17,981
15,324
10,069
243,338
€
€
Weighted average hedge rate
1.506
1.482
1.505
1.497
1.538
1.549
1.562
1.574
1.507
1.535
1.535
1.579
1.528
Number of Units
176,500,343
December 31, 2017
Amount
2,135,100
$
Unitholders’ equity
December 31, 2016
Number of Units
125,456,199
$
Amount
1,357,724
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, 2016
Units issued pursuant to public offerings
Units issued pursuant to private placements in connection with the Dutch Properties transaction
Units issued to certain executives and senior staff in connection with the Dutch Properties
Units issued pursuant to the DUIP
Units issued pursuant to the DRIP(1)
Total Units outstanding on December 31, 2017
Units issued pursuant to the DRIP on January 15, 2018
Total Units outstanding on January 31, 2018
(1) Distribution Reinvestment and Unit Purchase Plan.
Units
125,456,199
40,558,000
7,935,395
191,581
435,786
1,923,382
176,500,343
201,732
176,702,075
For the year ended December 31, 2017, 435,786 Units were issued pursuant to the DUIP to trustees, officers and employees
(December 31, 2016 – 107,400 Units). A total of 2,892,474 deferred trust units and income deferred trust units were
outstanding as at December 31, 2017.
Dream Global REIT 2017 Annual Report | 19
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, 2017, approximately 19.6% 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
December 31,
2016
0.80 $
September 30,
2016
0.80 $
2017
0.80 $
2017
0.80 $
$
$ 0.0667 $ 0.0667 $ 0.0667 $ 0.0667 $ 0.0667 $ 0.0667 $ 0.0667 $
9.62 $
$
2017
0.80 $
2017
0.80 $
12.22 $
10.92 $
11.01 $
9.38 $
9.45 $
9.01 $
June 30,
2016
0.80 $
March 31,
2016
0.80
0.0667
8.71
6.55 %
8.47 %
7.27 %
8.88 %
7.33 %
8.53 %
8.32 %
9.19 %
For the quarter ended December 31, 2017, distributions declared amounted to $35.3 million. Of this amount, $6.7 million was
reinvested in additional Units pursuant to the DRIP, resulting in a cash payout ratio of 81.1%. Distributions declared for the
year ended December 31, 2017 were $124.1 million. Of this amount, $20.9 million was reinvested in additional Units pursuant
to the DRIP, resulting in a cash payout ratio of 83.2%.
Three months ended December 31, 2017
Year ended December 31, 2017
Declared
amounts
4% bonus
distribution
Total
Declared
amounts
4% bonus
distribution
2017 distributions
Paid in cash or reinvested in Units
Payable at December 31, 2017
Total distributions
2017 reinvestment
Reinvested to December 31, 2017
Reinvested on January 15, 2018
Total distributions reinvested
Distributions paid in cash
Reinvestment to distribution ratio
(for the period)
Cash payout ratio
$
$
$
$
$
23,496 $
11,767
35,263 $
4,372 $
2,310
6,682 $
28,581
18.9%
81.1%
174 $
—
174 $
174 $
92
266 $
23,670 $
11,767
35,437 $
112,294
11,767
124,061
4,546 $
2,402
6,948 $
$
18,586
2,310
20,896
103,165
$
$
$
$
742 $
—
742 $
742 $
92
834 $
16.8%
83.2%
Total
113,036
11,767
124,803
19,328
2,402
21,730
Dream Global REIT 2017 Annual Report | 20
OUR FINANCIAL RESULTS
Statement of net income and comprehensive income reconciliation to consolidated financial statements
Amounts per
consolidated
financial
statements
Share of
income from
investments
in joint
ventures and
associates
$
84,303 $
(25,514 )
58,789
7,995 $
(1,344 )
6,651
2017
Three months ended December 31,
2016
Share of
income from
investments
in joint
ventures and
associates
Amounts per
consolidated
financial
statements
Total
92,298 $
(26,858 )
65,440
48,576 $
(16,162 )
32,414
7,674 $
(1,319 )
6,355
Total
56,250
(17,481 )
38,769
2,241
117
2,358
1,230
186
1,416
28,444
(28,444 )
—
2,786
(2,786 )
—
7
30,692
—
(28,327 )
7
2,365
(3,775 )
(6,972 )
(37 )
(10,506 )
(21,290 )
—
(924 )
—
(1,457 )
(2,381 )
(3,775 )
(7,896 )
(37 )
(11,963 )
(23,671 )
85,614
(7,654 )
(1,167 )
(224 )
(1,652 )
12
74,929
143,120
(693 )
(22,989 )
(23,682 )
119,438 $
29,122
—
—
—
—
—
29,122
5,065
(108 )
(4,957 )
(5,065 )
— $
114,736
(7,654 )
(1,167 )
(224 )
(1,652 )
12
104,051
148,185
(801 )
(27,946 )
(28,747 )
119,438 $
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
117,948 $
1,490
119,438
— $
—
—
117,948 $
1,490
119,438
29,870 $
845
30,715
— $
—
—
29,870
845
30,715
34,467
5,655
40,122
260
40,382
—
—
—
—
—
34,467
5,655
40,122
260
40,382
(44,386 )
(9,954 )
(54,340 )
(430 )
(54,770 )
—
—
—
—
—
(44,386 )
(9,954 )
(54,340 )
(430 )
(54,770 )
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 adjustment to investment properties
Fair value adjustment to financial instruments
Internal direct leasing costs
Debt settlement costs, net
Loss on sale of investment properties
Acquisition related gain, net
Income before income taxes
Current income tax expense
Deferred income tax (expense) recovery
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
158,070
1,750
159,820 $
$
—
—
— $
158,070
1,750
159,820 $
(24,470 )
415
(24,055 ) $
—
—
— $
(24,470 )
415
(24,055 )
Dream Global REIT 2017 Annual Report | 21
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 adjustment to investment properties
Fair value adjustment to financial instruments
Internal direct leasing costs
Debt settlement costs, net
Loss on sale of investment properties
Acquisition related gain, net
$
$
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
263,728 $
(79,518 )
184,210
$
Share of
income from
investments
in joint
ventures and
associates
30,987 $
(5,513 )
25,474
2017
Total
294,715 $
(85,031 )
209,684
Year ended December 31,
2016
Share of
income from
investments
in joint
ventures and
associates
Amounts per
consolidated
financial
statements
203,565 $
(69,320 )
134,245
31,747 $
(6,046 )
25,701
Total
235,312
(75,366 )
159,946
7,768
492
8,260
7,445
894
8,339
58,433
(58,433 )
—
30,792
(30,792 )
—
28
66,229
—
(57,941 )
28
8,288
19
38,256
—
(29,898 )
19
8,358
(9,343 )
(23,575 )
(86 )
(35,201 )
(68,205 )
—
(3,325 )
—
(5,694 )
(9,019 )
(9,343 )
(26,900 )
(86 )
(40,895 )
(77,224 )
(6,031 )
(20,252 )
(111 )
(40,810 )
(67,204 )
171,123
(23,193 )
(4,041 )
(1,443 )
(5,286 )
23,817
160,977
343,211
(1,650 )
(45,885 )
(47,535 )
295,676 $
53,194
—
—
(1,699 )
—
—
51,495
10,009
(105 )
(9,904 )
(10,009 )
— $
224,317
(23,193 )
(4,041 )
(3,142 )
(5,286 )
23,817
212,472
353,220
(1,755 )
(55,789 )
(57,544 )
295,676 $
80,315
15,190
(3,181 )
(21,640 )
(5,482 )
—
65,202
170,499
(475 )
(28,690 )
(29,165 )
141,334 $
—
(3,614 )
—
(6,178 )
(9,792 )
20,171
—
—
(1,655 )
—
—
18,516
4,527
—
(4,527 )
(4,527 )
— $
(6,031 )
(23,866 )
(111 )
(46,988 )
(76,996 )
100,486
15,190
(3,181 )
(23,295 )
(5,482 )
—
83,718
175,026
(475 )
(33,217 )
(33,692 )
141,334
292,576 $
3,100
295,676
— $
—
—
292,576 $
3,100
295,676
139,733 $
1,601
141,334
— $
—
—
139,733
1,601
141,334
86,522
15,533
102,055
438
102,493
—
—
—
—
—
86,522
15,533
102,055
438
102,493
(67,354 )
(15,644 )
(82,998 )
(650 )
(83,648 )
—
—
—
—
—
(67,354 )
(15,644 )
(82,998 )
(650 )
(83,648 )
394,631
3,538
398,169 $
$
—
—
— $
394,631
3,538
398,169 $
56,735
951
57,686 $
—
—
— $
56,735
951
57,686
Dream Global REIT 2017 Annual Report | 22
Net operating income
Investment properties revenue includes rental income from investment properties as well as recovery income on operating
costs and property taxes from tenants.
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 primarily fluctuate with changes in occupancy levels and levels of repairs and maintenance.
NOI is defined as investment properties revenue less investment properties operating expenses, including the share of net
rental income from investments in joint ventures and associates. The following table shows a breakout of NOI for the three
and twelve months ended December 31, 2017.
Initial Properties
Acquisition Properties
Dutch Properties
Net operating income(1)
Less: Net rental income from joint venture properties
Net rental income
$
$
Three months ended December 31,
2016
8,361 $
30,408
—
38,769 $
6,355
32,414
2017
8,404 $
37,495
19,541
65,440 $
6,651
58,789
Year ended December 31,
2017
36,057 $
141,056
32,571
209,684 $
25,474
184,210
2016
42,851
117,095
—
159,946
25,701
134,245
(1) Net operating income (“NOI”) is a non-GAAP measure. See “Non-GAAP Measures and Other Disclosures” for the definition of NOI.
Comparative properties cash NOI
The NOI shown below details both comparative and non-comparative items. The comparative properties cash NOI disclosed in
the following table pertains to properties acquired prior to January 1, 2016 and excludes properties sold in 2016 and 2017, as
well as assets classified as held for sale as at December 31, 2017. Comparative properties cash NOI excludes accounting
adjustments such as straight-line rent, amortization of lease incentives and other.
Comparative properties cash NOI(1)
Cash NOI(1) from:
Property acquisitions
Dutch Properties
Properties held for sale/sold
Cash net operating income(1)
Straight-line rent
Amortization of lease incentives
Net operating income(1)
Less: Net rental income from joint venture properties
Net rental income
$
$
December 31,
December 31,
2017
151,041 $
2016
142,603 $
Amount
8,438
26,671
31,538
5,489
214,739
(930 )
(4,125 )
209,684
(25,474 )
184,210 $
5,118
—
12,929
160,650
2,476
(3,180 )
159,946
(25,701 )
134,245 $
21,553
31,538
(7,440 )
54,089
(3,406 )
(945 )
49,738
227
49,965
Year ended
Change
%
5.9
421.1
100.0
(57.5 )
33.7
(0.9 )
37.2
(1) NOI, cash NOI and comparative properties cash NOI are non-GAAP measures. See “Non-GAAP Measures and Other Disclosures” for their definition.
Overall, the comparative properties cash NOI increased by $8.4 million, or 5.9%, from December 31, 2016. Growth in the
comparative properties cash NOI was driven by an increase in in-place rents of 8.6% since December 31, 2016, an increase in
average occupancy, and lower free-rent periods in 2017 compared to 2016. When adjusting comparative properties cash NOI
for straight-line rent and amortization of lease incentives, the increase in NOI was $4.4 million, or 3.1%.
Net rental income, excluding the REIT’s share of joint venture properties, was $184.2 million, an increase of $50.0 million, or
37.2%, compared to the prior year. The increase primarily comprises $31.5 million in net rental income from the Dutch
Properties, $21.6 million attributable to acquisitions completed throughout 2016 and 2017, and $8.4 million from comparative
properties cash NOI. This was offset by a $7.4 million decrease due to property dispositions, and a $3.4 million decrease in
straight-line rent resulting from future free rent periods granted in 2017 relating to the renewal of Deutsche Post and a few
other tenants, compared to free rent periods granted to various tenants in the portfolio in the prior year. The increase in
investment properties revenues was a result of the same factors discussed above.
Dream Global REIT 2017 Annual Report | 23
Investment properties revenue and investment properties operating expenses
The table below summarizes our revenue and operating expenses in euros:
Investment properties revenue(1)
Investment properties operating expenses(1)
Net operating income(1)(2)
Three months ended December 31,
2016
39,064 €
(12,139 )
26,925 €
2017
61,561 €
(17,852 )
43,709 €
€
€
Year ended December 31,
2017
200,588 €
(57,850 )
142,738 €
2016
160,466
(51,434 )
109,032
(1) Includes the REIT’s proportionate share of properties held through joint ventures and associates and is considered a non-GAAP measure.
(2) Net operating income (“NOI”) is a non-GAAP measure. See “Non-GAAP Measures and Other Disclosures” for the definition of NOI.
Interest and other income
Interest and other income comprises interest earned on notes receivable, 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.
Management fees, loan facility income and interest earned was $0.9 million for the three months ended December 31, 2017
compared to $1.0 million in the comparative quarter of 2016. For the twelve months ended December 31, 2017, management
fees, loan facility income and interest earned were $4.8 million, compared to $5.8 million for the comparative period in 2016.
The decrease was primarily due to the suspension of the credit facility in early 2017.
Other income and fees was $1.3 million for the three months ended December 31, 2017, compared to $0.2 million for the
comparative quarter of 2016. For the twelve months ended December 31, 2017, other income was $3.0 million compared to
$1.6 million for the twelve months ended December 31, 2016. Other income for the three and twelve months ended
December 31, 2017 included a $1.3 million termination fee relating to a Dutch Property, as well as other smaller termination
fees, and various settlements with vendors and tenants.
Portfolio management
Our portfolio management team comprises the employees of our advisory subsidiaries in Europe 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 $3.8 million for the three months ended December 31, 2017, a $2.4 million increase from
the comparative quarter in the prior year. Portfolio management expense for the year ended December 31, 2017 was
$9.3 million, or $3.3 million higher than the amounts incurred for the comparative period in 2016. The increase for the three
and twelve months ended December 31, 2017 is primarily due to $2.3 million and $3.4 million, respectively, of portfolio
management costs relating to the Dutch Properties platform.
General and administrative
General and administrative expenses totalled $7.0 million and $23.6 million for the three months and year ended
December 31, 2017, respectively. The increase of $2.0 million for the three months ended December 31, 2017 was a result of
asset management fees for acquisitions completed in 2017, and for the Dutch Properties. The increase of $3.3 million for the
twelve months ended December 31, 2017 relates to asset management fees of approximately $1.5 million for the Dutch
Properties and $1.1 million of asset management fees for other acquisitions which closed late in 2016 and 2017. The
remainder of the increase is due to fees paid in cash instead of deferred units which were valued at a discount since August
2016. There were no changes in general and administrative expenses incurred on properties held through joint ventures and
associates year-over-year.
Interest expense
Interest expense was $10.5 million for the quarter ended December 31, 2017, an increase of $2.7 million compared to the
prior year comparative quarter. The increase is due to interest expense of $2.4 million on the Senior Notes and $1.2 million
for new mortgages resulting from acquisitions and capital leases in the quarter. This was partially offset by a $0.9 million
decrease in interest expense from lower outstanding balances on the revolving credit facility and term loan credit facility. The
remaining increase is a result of higher average euro to Canadian dollar exchange rates in the comparative quarter. Interest
expense on our share of debt on properties held through joint ventures stayed flat for the quarter ended December 31, 2017
compared to the prior year comparative quarter.
Dream Global REIT 2017 Annual Report | 24
Interest expense was $35.2 million for the twelve months ended December 31, 2017, a decrease of $5.6 million compared to
the same period last year. The decrease was a result of interest savings of $7.9 million due to the redemption of the
Debentures in Q3 2016, $2.0 million due to repayments of the term loan facility relating to property dispositions, and
$1.0 million in interest savings from lower drawn balances on the revolving credit facility. This was partially offset by
$1.2 million of interest expense for new acquisitions and capital leases, and $4.1 million of interest on the Senior Notes.
Interest expense on our share of debt on properties held through joint ventures decreased by $0.5 million to $5.7 million, compared
to the prior year. The decrease was driven by refinancing of mortgages late in 2016, and mortgage principal repayments.
Fair value adjustments to investment properties
Fair value adjustment is determined by taking the fair value gain or loss resulting from internal or external valuations of the
investment properties, adjusted for (i) building improvements, lease incentives and initial direct leasing costs, net of
amortization, (ii) changes in straight-line rent and (iii) transaction costs on acquisitions.
For the three months ended December 31, 2017, a gain of $85.6 million was recognized compared to a gain of $20.7 million in
the comparative quarter last year. The fair value gain resulted from a $105.0 million increase in value of the Acquisition
Properties due to improved occupancy rates, higher in-place rental rates, compression in capitalization rates and value-add
improvements. The gain was partially offset by a negative fair value adjustment in our Initial Properties and the Dutch
Properties, which had relatively flat fair values in the quarter but resulted in a negative fair value adjustment due to capital
expenditures and leasing costs.
For the twelve months ended December 31, 2017, a gain of $171.1 million was recognized compared to a gain of $80.3 million
in the comparative period last year. The $4.3 million gain pertaining to the Initial Properties was driven by the Deutsche Post
lease renewal of 2.5 million square feet executed in 2017. The $175.8 million gain pertaining to the Acquisition Properties
resulted from similar factors listed above for the three-month period ended December 31, 2017. The Dutch Properties fair
values were flat since closing of the transaction, which resulted in a negative fair value adjustment of approximately
$9.0 million as a result of capital expenditures and leasing costs for the period.
Fair value adjustments on properties held through joint ventures are discussed under “Our Resources and Financial Condition”.
Fair value adjustments to financial instruments
For the three months ended December 31, 2017, we incurred a loss in the fair value of financial instruments of $7.7 million
compared to a gain of $10.6 million in the prior year comparative quarter. The fair value adjustments in the current period
mainly comprise the following:
• A $0.2 million loss was recognized on the fair value change in the interest rate caps as a result of a decrease in the
forward price of interest rates, compared to a $0.6 million gain recognized in the comparative period last year;
• An unrealized loss of $6.9 million was recognized related to our foreign currency forward contracts due to the
appreciation of the euro compared to the Canadian dollar since the end of Q3 2017, versus an $11.3 million unrealized
gain during the comparative period due to the depreciation of the euro compared to the Canadian dollar; and
• A $0.6 million loss was recognized related to our DUIP, mainly reflecting an increase in the market price of the REIT’s
Units, compared to a loss of $1.3 million in the same period in 2016.
For the year ended December 31, 2017, we incurred a loss in the fair value of financial instruments of $23.2 million compared
to a gain of $15.2 million in the prior comparative period. The fair value adjustments in the current period mainly comprise
the following:
• A $3.1 million loss was recognized on the fair value of interest rate caps and swap, $2.3 million of which was related to the
purchase of an interest rate swap entered into in relation to the Senior Notes and expired within the same period, as compared
to a $2.8 million loss recognized on the valuation of interest rate caps in the comparative period last year;
• The Debentures were redeemed on September 15, 2016 and, as a result, no fair value change was recognized on the
conversion feature in 2017, compared to a gain of $1.4 million in 2016;
• An unrealized loss of $17.5 million was recognized related to our foreign currency forward contracts due to the
appreciation of the euro compared to the Canadian dollar since the end of 2016, versus a $20.1 million unrealized gain
during the comparative period due to the depreciation of the euro compared to the Canadian dollar; and
• A $2.5 million loss was recognized related to our DUIP, mainly reflecting an increase in the market price of the REIT’s
Units, compared to a loss of $3.5 million in the same period in 2016.
Dream Global REIT 2017 Annual Report | 25
Debt settlement costs
For the three months ended December 31, 2017, we incurred debt settlement costs of $0.2 million compared to $3.3 million
in the prior year comparative quarter. The debt settlement costs in 2017 relate to the unamortized deferred financing costs
written off with respect to repayments of the term loan facility on disposition of Initial Properties for the quarter.
For the twelve months ended December 31, 2017, we incurred debt settlement costs of $1.4 million compared to
$21.6 million in the prior year comparative period. The debt settlement costs mainly comprise the following:
•
•
$1.3 million was recognized as unamortized deferred financing costs with respect to term loan credit facility repayments
on the sale of Initial Properties and was written off in the current period; and
$0.1 million in refinancing charges ($1.8 million including the Trust’s ownership share in the joint venture property with
POBA, comprising $1.6 million in cancellation charges and $0.2 million of unamortized deferred financing costs).
Internal direct leasing costs
The Trust incurred a total of $1.2 million and $4.0 million of internal leasing costs for the three months and year ended
December 31, 2017, respectively. The increase of $0.5 million and of $0.9 million was primarily a result of the Dutch
Properties, as well as additional resources used to support increased leasing volumes during the current year.
Loss on sale of investment properties
Loss on sale of investment properties for the quarter ended December 31, 2017 was $1.7 million, compared to a $2.5 million
loss in the same quarter last year. For the twelve months ended December 31, 2017, there was a loss on sale of investment
properties of $5.3 million, compared to $5.5 million in the prior year. Loss on sale of investment properties is mainly
attributable to transaction costs for property dispositions. As part of the capital recycling program, we disposed of
43 properties, including eight Dutch Properties, during the twelve months ended December 31, 2017, compared to a total
of 39 properties during 2016.
Income taxes
The Trust recognized current income tax expenses of $0.7 million and $1.7 million for the three and twelve months ended
December 31, 2017, respectively, compared to $0.2 million and $0.5 million for the comparative periods in 2016. There was
no significant current income tax expense on properties held through joint ventures and associates.
We also recognized deferred income tax expenses of $23.0 million and $45.9 million, respectively, for the three months and
year ended December 31, 2017, compared to $16.1 million and $28.7 million, respectively, for the comparative periods in
2016. Deferred income tax expenses are primarily impacted by fluctuations from (i) investment properties’ fair values
compared to tax values and (ii) fair value adjustments on financial instruments.
Deferred income tax expense on properties held through joint ventures and associates for the three and twelve months
ended December 31, 2017 were $5.0 million and $9.9 million, respectively, an increase from $0.2 million and $4.5 million
compared to the three and twelve months ended December 31, 2016. Increases are primarily driven by the change in
investment properties’ fair value compared to tax values.
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 during the three months
and year ended December 31, 2017.
Average exchange rate (Cdn. dollars to one euro)
Exchange rate at period-end (Cdn. dollars to one euro)
Three months ended December 31,
Change
2016
2017
4.1 %
1.438
1.498
6.2 %
1.417
1.505
2017
1.465
1.505
Year ended December 31,
2016
1.466
1.417
Change
(0.1 )%
6.2 %
Comprehensive income was impacted by a foreign currency translation gain of $40.4 million and $102.5 million for the three
months and year ended December 31, 2017. The exchange rate increased from $1.417:€1 as at December 31, 2016 to $1.505:€1
as at December 31, 2017. The quarterly results of our euro-denominated operations included in net income were translated at
an average exchange rate of $1.498:€1 compared to $1.438:€1 in the same quarter last year. For the year ended December 31,
2017, results were translated at an average rate of $1.465:€1 compared to $1.466:€1 in the same period last year.
Dream Global REIT 2017 Annual Report | 26
Funds from operations and adjusted funds from operations
Net income for the period
Add (deduct):
Net income attributable to non-controlling interest
Net FFO impact attributable to non-controlling interest
Amortization of lease incentives
Internal direct leasing costs
Debt settlement costs
Acquisition related gain, net
Loss on sale of investment properties
Deferred income tax expense
Gain (loss) on settlement of foreign currency contracts
Fair value adjustment to investment properties
Fair value adjustment to financial instruments
FFO(1)
Add (deduct):
Amortization of financing costs
Amortization of initial discount on Debentures
Amortization of the discount on Senior Notes
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,
2017
119,438 $
$
2016
30,715 $
Year ended December 31,
2017
295,676 $
2016
141,334
(1,490 )
1,321
1,172
1,167
224
(12 )
1,652
27,946
803
(114,736 )
7,654
45,139 $
1,449 $
—
163
783
322
594
48,450
(2,945 )
(2,290 )
43,215 $
(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 $
(3,100 )
2,261
4,108
4,041
3,142
(23,817 )
5,286
55,789
4,734
(224,317 )
23,193
146,996 $
5,070 $
—
270
2,573
1,297
930
157,136
(9,436 )
(7,338 )
140,362 $
(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) FFO and AFFO are non-GAAP measures. See “Non-GAAP Measures and Other Disclosures”.
Capital expenditures, or ‘building improvements’ as referred to in the investment properties continuity schedule, including our
share from joint ventures, were $43.4 million for the twelve months ended December 31, 2017. Management has included a
detailed breakdown of the components of capital expenditures in the Investment Properties section under the heading “Building
Improvements”. As disclosed, approximately $7.7 million of the total spent on building improvements for the year relate to non-
recoverable recurring capital expenditure (“capex”), which is comparable to the amount used in the reserve above.
Funds from operations
FFO(1)
FFO per unit – basic
FFO per unit – diluted(2)
Three months ended December 31,
2017
45,139 $
0.26 $
0.25 $
2016
25,463 $
0.20 $
0.20 $
$
$
$
Year ended December 31,
2017
146,996 $
0.97 $
0.95 $
2016
95,338
0.80
0.80
(1) FFO is a non-GAAP measure. See “Non-GAAP Measures and Other Disclosures”. FFO has been reconciled to net income in the section “Our Financial
Results” under the heading “Funds from operations and adjusted funds from operations”.
(2) The Debentures are dilutive for the three months and year ended December 31, 2016; therefore, debenture interest of $2,257 and $7,867, respectively, is
added to FFO.
Total FFO for the quarter was $45.1 million, an increase of $19.7 million, or 77.3%, over the prior year comparative quarter.
The increase is due to funds from operations on the Dutch Properties, an increase in net rental income as a result of
acquisitions completed late 2016, and an increase in same-property net rental income.
Total FFO for the twelve months ended December 31, 2017 was $147.0 million, an increase of $51.7 million, or 54.2%, over
the prior year comparative period. The increase is due to funds from operations on the Dutch Properties, an increase in net
rental income as a result of acquisitions completed in 2016 and 2017, growth in same-property net rental income, and lower
interest expense resulting from refinancing activities in late 2016.
Dream Global REIT 2017 Annual Report | 27
Adjusted funds from operations
AFFO(1)
AFFO per unit – basic
Three months ended December 31,
2017
43,215 $
0.24 $
2016
22,820 $
0.18 $
$
$
Year ended December 31,
2017
140,362 $
0.92 $
2016
90,595
0.76
(1) AFFO is a non-GAAP measure. See “Non-GAAP Measures and Other Disclosures”. AFFO has been reconciled to net income in the section “Our Financial
Results” under the heading “Funds from operations and adjusted funds from operations”.
Total AFFO for the quarter ended December 31, 2017 increased by $20.4 million, or 89.4%, over the prior year comparative
quarter, reflecting an increase in funds from operations from the Dutch Properties, and an increase in net rental income as a
result of acquisitions completed in late 2016 and 2017.
Total AFFO for the twelve months ended December 31, 2017 was $140.4 million, an increase of $49.8 million, or 54.9%, over
the prior year comparative period. The increase is driven by five months of operations on the Dutch Properties, an increase in
net rental income as a result of acquisitions completed in 2016 and 2017 and lower interest expense resulting from
refinancing activities in late 2016.
Selected annual information
The following table provides selected information for the past three years:
Investment properties revenue(1)
Net income
Total assets(1)
Non-current liabilities(1)
Distributions declared
REIT Units
$
For the year
ended
December 31,
2017
294,715 $
295,676
4,815,125
2,531,588
124,847
176,500,343
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
(1) Includes the REIT’s proportionate share of properties held through joint ventures and associates. For a reconciliation of the Trust’s results and statement
of financial position, please see “Our Financial Results” under the heading “Statement of net income and comprehensive income reconciliation to
consolidated financial statements” and “Non-GAAP Measures and Other Disclosures” under the heading “Balance sheet reconciliation to consolidated
financial statements” in the MD&A.
Dream Global REIT 2017 Annual Report | 28
QUARTERLY INFORMATION (per consolidated financial statements)
The following table shows quarterly information since January 1, 2016:
Investment properties revenue
Investment properties operating expenses
Net rental income
Other income
Interest and other income
Share of net income from investment in joint ventures
Other expenses
Portfolio management
General and administrative
Amortization and depreciation
Interest expense
Fair value adjustments, loss on sale of investment
properties and other activities
Fair value adjustments to investment properties
Fair value adjustments to financial instruments
Internal direct leasing costs
Debt settlement costs
Loss on sale of investment properties
Acquisition related gain, net
Income before taxes
Current income taxes recovery (expense)
Deferred income tax expense
Provision for income taxes
Net income
Total income for the period attributable to:
Unitholders of the Trust
Shareholders of the subsidiaries
Net income
Add (deduct):
Income allocated to non-controlling interest
Net FFO impact attributable to non-controlling
interest
Amortization of lease incentives
Internal direct leasing costs
Acquisition related gain, net
Debt settlement costs
Loss on sale of investment properties
Deferred income tax expense
Gain (loss) on settlement of Forex contracts
Fair value adjustments to investment properties
Fair value adjustments to financial instruments
FFO
FFO per unit – basic
FFO per unit – diluted
Funds from operations
Add (deduct):
Amortization of financing costs
Accretion of debenture conversion feature
Amortization of the discount on Senior Notes
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 2017
84,303 $
(25,514 )
58,789
Q3 2017
74,981 $
(21,941 )
53,040
Q2 2017
54,001 $
(16,373 )
37,628
Q1 2017
50,443 $
(15,690 )
34,753
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
2,241
28,451
30,692
(3,775 )
(6,972 )
(37 )
(10,506 )
(21,290 )
85,614
(7,654 )
(1,167 )
(224 )
(1,652 )
12
74,929
143,120
(693 )
(22,989 )
(23,682 )
119,438 $
117,948 $
1,490
119,438 $
2,769
21,315
24,084
(2,566 )
(6,382 )
(14 )
(9,739 )
(18,701 )
60,111
(2,489 )
(996 )
(431 )
(1,273 )
23,805
78,727
137,150
(534 )
(15,044 )
(15,578 )
121,572 $
120,525 $
1,047
121,572 $
1,175
3,226
4,401
(1,532 )
(5,221 )
(16 )
(7,511 )
(14,280 )
18,684
(12,965 )
(1,034 )
(420 )
(847 )
—
3,418
31,167
(230 )
(4,789 )
(5,019 )
26,148 $
25,988 $
160
26,148 $
1,583
5,469
7,052
(1,470 )
(5,000 )
(19 )
(7,445 )
(13,934 )
6,714
(85 )
(844 )
(368 )
(1,514 )
—
3,903
31,774
(193 )
(3,063 )
(3,256 )
28,518 $
28,115 $
403
28,518 $
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 )
52,743
8,358
(786 )
(153 )
(1,291 )
—
58,871
86,714
12
(9,963 )
(9,951 )
76,763 $
76,293 $
470
76,763 $
(1,490 )
(1,047 )
(160 )
(403 )
(845 )
(83 )
(470 )
1,321
1,172
1,167
(12 )
224
1,652
27,946
803
(114,736 )
7,654
45,139 $
0.26 $
0.25
45,139 $
1,449
—
163
783
322
594
48,450
813
1,033
996
(23,805 )
431
1,273
18,598
1,081
(80,712 )
2,489
42,722 $
0.26 $
0.25
42,722 $
1,388
—
107
696
318
297
45,528
(65 )
919
1,034
—
420
847
5,086
1,005
(18,119 )
12,965
30,080 $
0.22 $
0.21
30,080 $
1,131
—
—
592
322
307
32,432
191
984
844
—
2,067
1,514
4,160
1,845
(10,750 )
85
29,055 $
0.23 $
0.22
29,055 $
1,102
—
—
502
335
(268 )
30,726
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
$
$
$
$
$
$
2,136
5,502
7,638
(1,576 )
(4,928 )
(40 )
(11,544 )
(18,088 )
3,105
7,581
(864 )
(93 )
(624 )
—
9,105
33,527
(345 )
(999 )
(1,344 )
32,183
31,980
203
32,183
(203 )
(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
(2,945 )
(2,668 )
(1,979 )
(1,844 )
(1,745 )
(1,784 )
(1,800 )
(1,869 )
(2,290 )
43,215 $
0.24 $
(2,075 )
40,785 $
0.25 $
(1,539 )
28,914 $
0.21 $
(1,434 )
27,448 $
0.22 $
(1,357 )
22,820 $
0.18 $
(1,388 )
22,969 $
0.19 $
(1,400 )
22,675 $
0.20 $
(1,454 )
22,131
0.20
$
$
176,444,464 165,420,871 138,697,601
179,085,118 168,005,161 141,188,735
1.479
1.472
1.498
127,413,033 125,482,713 120,958,186
130,084,788 128,135,174 133,786,314
1.410
1.438
1.456
113,847,191 113,401,973
128,736,432 128,153,728
1.516
1.455
Dream Global REIT 2017 Annual Report | 29
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.
In March 2017, the Real Estate Property Association of Canada (“REALPAC”) published a whitepaper on FFO and AFFO for IFRS
dated February 2017. REALPAC also issued a whitepaper to introduce a new metric referred to as Adjusted Cashflow from
Operations (“ACFO”). ACFO is intended to be used as a sustainable economic cash flow metric, while AFFO is defined as a
recurring economic earnings measure. Management has evaluated the impact of adopting the recently issued FFO and AFFO
definitions, and is expected to implement revised FFO and AFFO calculations commencing in the first quarter of 2018.
Management is still evaluating the impact of introducing ACFO.
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 Financial Results” under the heading “Funds from operations and
adjusted funds from operations”.
Adjusted funds from operations
AFFO 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.
The Trust believes that AFFO is a measure of recurring economic earnings, and therefore it is indicative, along with adjusted
cash generated from operating activities, of the Trust’s ability to pay distributions.
Our calculation of AFFO includes a deduction of an estimated amount for normalized non-recoverable recurring capital
expenditures and initial direct leasing costs and lease incentives (3.5% and 4.5% of net rental income, respectively). These are
amounts 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. Overall, current capital maintenance expenditure levels reasonably reflect expected capital maintenance
expenditure levels, unless stated otherwise.
In compliance with Canadian Securities Administrators Staff Notice 52-306 (Revised), “Non-GAAP Financial Measures”, AFFO
has been reconciled to net income for the period in “Our Financial Results” under the heading “Funds from operations and
adjusted funds from operations”. AFFO has also been reconciled to cash generated from operating activities for the period in
this section under the heading “Cash generated from operating activities to AFFO reconciliation”.
Net operating income and comparative properties NOI
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 “Our Financial Results” under the heading “Net operating income”.
Comparative properties is defined by the Trust as properties which were acquired prior to January 1, 2016, and exclude any
properties sold during 2016 and 2017, as well as assets classified as held for sale as at December 31, 2017. Comparative
properties cash net operating income excludes accounting adjustments such as straight-line rent, amortization of lease
incentives and other. Comparative properties cash NOI has been reconciled to net rental income in “Our Financial Results”
under the heading “Net operating income”. 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.
Dream Global REIT 2017 Annual Report | 30
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 unvested deferred trust units related to the Deferred Unit
Incentive Plan and the conversion of the Debentures in the comparative prior year periods. The weighted average number of
Units outstanding for basic FFO and AFFO and diluted FFO calculations for the year ended December 31, 2017 are noted in the
table below.
Weighted average Units outstanding for basic per unit amounts
Weighted average Units outstanding for diluted per unit amounts
Three months ended December 31,
2016
125,482,713
128,135,174
2017
176,444,464
179,085,118
Year ended December 31,
2017
152,165,111
154,761,949
2016
118,450,945
129,709,388
Balance sheet reconciliation to consolidated financial statements
December 31, 2017
December 31, 2016
Amounts per
consolidated
financial
statements
Share from
investment
in joint
ventures and
associates
Amounts per
consolidated
financial
statements
Share from
investment
in joint
ventures and
associates
Total
Total
$ 4,061,077 $
319,465
6,640
785
7,064
274
4,395,305
598,617 $ 4,659,694 $ 2,481,586 $
265,255
30,587
(288,878 )
6,250
6,640
—
10,414
785
—
4,680
7,064
—
169
276
2
2,768,354
4,705,046
309,741
510,321 $ 2,991,907
30,521
(234,734 )
6,250
—
10,414
—
4,680
—
172
3
3,043,944
275,590
26,524
6,217
—
56,533
89,274
16,851
$ 4,501,430 $
472
124
—
3,358
3,954
—
16,391
26,996
4,219
6,341
2,392
—
50,283
59,891
73,285
93,228
45,722
16,851
313,695 $ 4,815,125 $ 2,887,361 $
1,100
40
—
3,402
4,542
—
17,491
4,259
2,392
53,685
77,827
45,722
280,132 $ 3,167,493
$ 2,091,848 $
8,935
4,004
22,617
100,686
2,228,090
22,221
99,518
1,503
2,211
11,767
137,220
1,020
$ 2,366,330 $
281,685 $ 2,373,533 $ 1,241,110 $
3,466
9,167
—
4,004
20,490
22,617
49,507
122,267
1,314,573
2,531,588
232
—
—
21,581
303,498
259,800 $ 1,500,910
3,715
—
20,490
60,365
1,585,480
249
—
—
10,858
270,907
3,627
6,485
85
—
—
10,197
—
158,352
25,848
46,515
106,003
910
1,588
—
2,211
8,364
11,767
214,141
147,417
923
1,020
313,695 $ 2,680,025 $ 1,529,637 $
3,123
6,115
(13 )
—
—
9,225
—
161,475
52,630
897
—
8,364
223,366
923
280,132 $ 1,809,769
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 2017 Annual Report | 31
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
Share of net income from investment in other joint ventures
Internal direct leasing costs
Non-cash impact of income attributable to non-controlling
interest
Depreciation and amortization
Unrealized gain 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,
2016
17,238 $
2017
44,024 $
$
Year ended December 31,
2017
101,495 $
2016
59,533
(6,244 )
(415 )
22,808
8,461
28,444
7
1,167
(64 )
(37 )
1,465
3,703
(29,122 )
150
—
4,957
(2,945 )
(2,290 )
43,215 $
2,786
5
716
(634 )
(21 )
1,243
3,575
1,517
81
—
(169 )
(1,745 )
(1,357 )
22,820 $
58,433
28
4,041
(109 )
(86 )
4,704
6,995
(53,194 )
418
1,699
9,904
(9,436 )
(7,338 )
140,362 $
30,792
19
3,181
(644 )
(111 )
4,644
11,246
(20,170 )
259
1,655
4,527
(7,198 )
(5,599 )
90,595
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 and twelve months ended December 31, 2017, there was a surplus of net income over total
distributions of $84.0 million and $170.9 million, respectively (surplus of $5.6 million and $46.1 million, respectively, for the
comparative periods in 2016).
Net income for the period
Total declared distributions
Surplus of net income over total distributions
Three months ended December 31,
2016
30,715 $
25,153
5,562 $
2017
119,438 $
35,437
84,001 $
$
$
Year ended December 31,
2017
295,676 $
124,803
170,873 $
2016
141,334
95,197
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,
2016
2017
Year ended December 31,
2017
2016
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
$
$
44,024
35,437
$
17,238 $
25,153
101,495 $
124,803
59,533
95,197
8,587
$
(7,915 ) $
(23,308 ) $
(35,664 )
Dream Global REIT 2017 Annual Report | 32
For the three months and year ended December 31, 2017, the Trust recorded a surplus of cash generated from operating
activities (per consolidated financial statements) over total declared distributions of $8.6 million and shortfall of $23.3 million,
respectively. In the prior year comparative periods, the Trust recorded shortfalls of $7.9 million and $35.7 million,
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 longer 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
Surplus (shortfall) of adjusted cash generated from (utilized in)
operating activities over total distributions
Three months ended December 31,
2016
2017
Year ended December 31,
2017
2016
$
44,024 $
17,238 $
101,495 $
59,533
4,516
7,452
16,721
48,540
24,690
118,216
4,081
(6,443 )
46,178
35,437
3,514
(3,772 )
24,432
25,153
8,518
20,934
147,668
124,803
17,886
77,419
11,949
5,781
95,149
95,197
$
10,741 $
(721 ) $
22,865 $
(48 )
Dream Global REIT 2017 Annual Report | 33
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, the adjusted cash
generated from (utilized in) operating activities (including investment in joint ventures), a non-GAAP measure, exceeded total
declared distributions by $10.7 million and $22.9 million for the three months and year ended December 31, 2017,
respectively (shortfall of $0.7 million and $nil, respectively, for the comparative periods in 2016).
Furthermore, a portion of our declared distributions is 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 $17.6 million and $44.5 million,
respectively, for the three months and year ended December 31, 2017. 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,
2016
2017
Year ended December 31,
2017
2016
Adjusted cash generated from operating activities
(including investment in joint ventures)
Declared distributions paid in cash
Surplus of adjusted cash generated from (utilized in) operating
activities over distributions paid in cash
$
$
46,178 $
28,581
24,432 $
21,865
147,668 $
103,165
95,149
82,364
17,597 $
2,567 $
44,503 $
12,785
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 2017 Annual Report | 34
Debt-to-book value, debt-to-gross book value, net of cash, and average level of debt, net of cash
Management believes that debt-to-gross book value, debt-to-gross book value, net of cash, and average level of debt (debt-
to-gross book value, net of cash), a non-GAAP measurement, is an important measure in the management of our debt levels.
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. Level of debt as shown below is determined as total debt, divided by total assets.
In compliance with the Canadian Securities Administrators Staff Notice 52-306 (Revised), “Non-GAAP Financial Measures”, the
table below is a reconciliation of debt-to-gross book value, debt-to-gross book value, net of cash, and average level of debt,
net of cash, expressed as a ratio from line items in the financial statements.
December 31, 2017
Non-current debt
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
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
Amounts per
consolidated
financial statements
$
Share of amounts
from investment
in joint ventures
281,685 $
3,627
285,312
3,358
281,954 $
633,160
(319,465 )
313,695
3,358
$
2,091,848 $
22,221
2,114,069
56,533
2,057,536 $
4,501,430
—
4,501,430
56,533
4,444,897
47.0%
46.3%
46.3%
$
$
December 31, 2016
Amounts per
consolidated
financial statements
$
Share of amounts
from investment
in joint ventures
259,800 $
3,123
262,923
3,402
259,521 $
545,387
(265,255 )
280,132
3,402
$
1,241,110 $
158,352
1,399,462
50,283
1,349,179 $
2,887,361
—
2,887,361
50,283
2,837,078
48.5%
47.6%
48.6%
Total
2,373,533
25,848
2,399,381
59,891
2,339,490
5,134,590
(319,465 )
4,815,125
59,891
4,755,234
49.8%
49.2%
49.9%
Total
1,500,910
161,475
1,662,385
53,685
1,608,700
3,432,748
(265,255 )
3,167,493
53,685
3,113,808
52.5%
51.7%
52.7%
$
$
Dream Global REIT 2017 Annual Report | 35
Interest coverage ratio
Management believes that interest coverage ratio, a non-GAAP measurement, is an important measure in determining our
ability to cover interest expense based on our operating performance. 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. 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
Less: General and administrative expenses
Less: Portfolio management expenses
Interest expense
Interest coverage ratio
Amounts per
consolidated
financial statements
$
For the year ended December 31, 2017
Share of amounts
from investment
in joint ventures
184,210 $
7,768
23,575
9,343
159,060
35,201 $
4.52
25,474 $
492
3,325
—
22,641
5,694 $
$
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 $
2.83
25,701 $
894
3,614
—
22,981
6,178 $
Total
209,684
8,260
26,900
9,343
181,701
40,895
4.44
Total
159,946
8,339
23,866
6,031
138,388
46,988
2.95
$
Dream Global REIT 2017 Annual Report | 36
SECTION III – DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS
OVER FINANCIAL REPORTING
For the December 31, 2017 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”). In accordance with section 3.3(1)(b) of NI 52-109, the Certifying Officers
have limited the scope of the design of the Trust’s disclosure controls and procedures and internal control over financial
reporting to exclude controls, policies and procedures related to the Dutch Properties on July 27, 2017. The results of the
Dutch Properties are included in our consolidated financial statements for the year ended December 31, 2017. We intend to
complete our design of disclosure controls and procedures and internal control over financial reporting with respect to the
Dutch Properties by the end of the third quarter in 2018.
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, 2017.
There were no changes in Dream Global REIT’s internal control over financial reporting during the financial year ended
December 31, 2017 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.
Dream Global REIT 2017 Annual Report | 37
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.
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.
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.
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; 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.
Dream Global REIT 2017 Annual Report | 38
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, the Netherlands, Belgium 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 legislative body on July 19,
2016 and became 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 continue managing 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 the Initial 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. With respect to
Germany, there are several rules in German tax law 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. The tax deductibility of interest expenses depends on, among other things, the details of the
security structure for debt financings, the annual amount of tax net-debt interest, the amounts and terms of shareholder or
affiliate financings and our general tax structure. There is a risk of additional taxes being triggered on the rental income and
capital gains in case the tax authorities or the tax courts adopt deviating views on the above. If this were the case, this would
result in a higher tax burden and, consequently, could have a material adverse effect on our cash flows, financial condition
and results of operations, and ability to pay distributions on the Units.
As a result of the so-called Brexit, the status of Gibraltar vis-a-vis the EU is uncertain. Should Gibraltar leave the EU, dividends
paid by our Luxembourg holding company may be subjected to Luxembourg withholding tax, which would adversely affect
the cash flow available for distribution to our unitholders.
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.
Dream Global REIT 2017 Annual Report | 39
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, Belgium and Austria. Further, Dutch taxation
rules are relevant in determining the capacity of Merin/Motta to pay interest and principal on the debt instruments held by
our subsidiaries in Luxembourg and Cayman. 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 Commission early in 2016 issued a seven-part Anti-Tax Avoidance
Package (“ATAP”). Part of the ATAP includes an Anti-Tax Avoidance Directive (“ATAD”), which received political agreement
from the European Union member states in June 2016. Further, as part of the ATAD, member states are required to
introduce, among other measures, a general anti-abuse rule. Luxembourg introduced such a rule in 2016. Tax changes arising
from BEPS and/or the ATAD, which, in the case of the ATAD, with certain exceptions are scheduled to become effective in
2019, could limit the ability of our subsidiaries or Merin/Motta to deduct the interest they pay on inter-company loans,
thereby potentially increasing their foreign tax liability; it is also possible that European Union member states could increase
their withholding taxes on dividends and interest or levy withholding taxes where none were levied previously. Given the
uncertainty surrounding some of the 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 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 2017 Annual Report | 40
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. 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 current and future financing arrangements, 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 2017 Annual Report | 41
(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 the Trust’s key markets 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 2017 Annual Report | 42
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 the Trust’s key markets 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, 2017.
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 most recent Annual Information Form, is available on
SEDAR at www.sedar.com.
Dream Global REIT 2017 Annual Report | 43
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”
P. Jane Gavan
President and Chief Executive Officer
Toronto, Ontario, February 21, 2018
“Tamara Lawson”
Tamara Lawson
Chief Financial Officer
Dream Global REIT 2017 Annual Report | 44
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, 2017 and December 31, 2016 and the
consolidated statements of net income and comprehensive income, changes in equity and cash flows for the years ended
December 31, 2017 and December 31, 2016 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 as issued by the International Accounting Standards Board, 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, 2017 and December 31, 2016 and their financial
performance and their cash flows for the years then ended in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
(Signed) “PricewaterhouseCoopers LLP”
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario,
February 21, 2018
Dream Global REIT 2017 Annual Report | 45
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 liabilities
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
December 31,
December 31,
Note
2017
2016
7
8
20
11
19
9, 20
11
16
$
$
4,061,077 $
319,465
6,640
785
7,064
274
4,395,305
26,524
6,217
—
56,533
89,274
16,851
4,501,430 $
10
$
11
12
19
2,091,848 $
8,935
4,004
22,617
100,686
2,228,090
10
13, 20
11
14
16
20
15
$
22,221
99,518
1,503
2,211
11,767
137,220
1,020
2,366,330
1,715,642
257,778
147,867
2,121,287
13,813
2,135,100
4,501,430 $
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
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 “
Michael J. Cooper
Trustee
“P. Jane Gavan”
P. Jane Gavan
Trustee
Dream Global REIT 2017 Annual Report | 46
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
Acquisition related gain, net
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:
Other operations
Investment in joint ventures and associates
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,
2017
263,728 $
(79,518 )
184,210
2016
203,565
(69,320 )
134,245
8
20
17
7
18
10
7
6
19
$
$
20
7,768
58,461
66,229
(9,343 )
(23,575 )
(86 )
(35,201 )
(68,205 )
171,123
(23,193 )
(4,041 )
(1,443 )
(5,286 )
23,817
160,977
343,211
(1,650 )
(45,885 )
(47,535 )
295,676 $
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
292,576 $
3,100
295,676
139,733
1,601
141,334
86,522
15,533
102,055
438
102,493
(67,354 )
(15,644 )
(82,998 )
(650 )
(83,648 )
394,631
3,538
398,169 $
56,735
951
57,686
$
Dream Global REIT 2017 Annual Report | 47
Consolidated statements of changes in equity
(in thousands of Canadian dollars,
except number of Units)
Note
Balance at January 1, 2017
Net income for the year
Distributions paid
Distributions payable
Distribution Reinvestment Plan 14, 15
Unit Purchase Plan
Deferred Unit Incentive Plan
Public offering of Units
Private placement
Units subscribed by executives
and senior staff
Unit issue costs
Foreign currency translation
adjustment
Balance at December 31, 2017
(in thousands of Canadian dollars,
except number of Units)
Note
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
adjustment
Balance at December 31, 2016
Number Unitholders’
equity
of Units
1,211,588 $
125,456,199 $
—
—
—
—
—
—
20,450
1,921,386
21
1,996
4,279
435,786
415,074
40,558,000
81,576
7,935,395
14
14
15
15
15
15
Attributable to unitholders of the Trust
Accumulated
other
Retained comprehensive
income
earnings
45,812 $
—
—
—
—
—
—
—
—
90,049 $
292,576
(113,080 )
(11,767 )
—
—
—
—
—
Total
unitholders’
equity
1,347,449 $
292,576
(113,080 )
(11,767 )
20,450
21
4,279
415,074
81,576
Non-
controlling
interest
10,275 $
3,100
—
—
—
—
—
—
—
15
191,581
—
2,090
(19,436 )
—
—
—
—
2,090
(19,436 )
—
—
—
176,500,343 $
—
1,715,642 $
—
257,778 $
102,055
147,867 $
102,055
2,121,287 $
438
13,813 $
102,493
2,135,100
Attributable to unitholders of the Trust
Accumulated
other
Retained comprehensive
income
earnings
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
—
—
Unitholders’
equity
1,105,485 $
—
—
—
Number
of Units
113,024,465 $
—
—
—
14
14
15
15
15
—
1,452,789
2,122
107,400
10,867,500
1,923
—
—
12,793
19
918
97,808
18
(5,453 )
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12,793
19
918
97,808
18
(5,453 )
16
—
—
—
—
—
—
—
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
Total
1,357,724
295,676
(113,080 )
(11,767 )
20,450
21
4,279
415,074
81,576
2,090
(19,436 )
Total
1,289,158
141,334
(86,875 )
(8,364 )
16
12,793
19
918
97,808
18
(5,453 )
See accompanying notes to the consolidated financial statements.
Dream Global REIT 2017 Annual Report | 48
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 discount on Senior Notes
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
Acquisition related gain, net
Cash settlement on foreign exchange contracts
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
Business combination
Investment in joint ventures and associates
Net proceeds from disposal of investment properties
Distributions from investment in joint ventures
Generated from (utilized in) financing activities
Purchase of interest rate cap
Debt cancellation charges
Mortgage proceeds
Financing costs on debts placed
Mortgage principal repayments
Term loan repayment on property dispositions
Lump sum repayment on mortgage refinancings
Drawdown on revolving credit facility
Revolving credit facility repayments
Land lease principal repayment
Issue of Senior Notes, net
Repayment of convertible debentures, net of costs
Units subscribed by executives and senior staff
Units issued for cash
Unit issue costs
Distributions paid on Units
Increase 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.
Note
Year ended December 31,
2017
2016
$
295,676 $
141,334
8
7
10
7
12
18
6
11
7, 16
21
7, 16
7
6
7
8
10
10
10
10
10
10
10
10
10
15
14
(58,461 )
45,885
3,690
4,597
270
—
5,286
86
3,870
673
23,193
(171,123 )
1,443
(23,817 )
30
(6,995 )
(22,808 )
101,495
(41,757 )
(330,113 )
(767,211 )
(29 )
146,586
19,814
(972,710 )
(2,366 )
(1,398 )
249,239
(10,920 )
(14,034 )
(66,839 )
(34,368 )
148,073
(234,727 )
(319 )
545,381
—
2,090
415,095
(19,436 )
(100,994 )
874,477
3,262
2,988
50,283
56,533 $
(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
$
Dream Global REIT 2017 Annual Report | 49
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, Austria, Belgium and the Netherlands.
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, 2017 were authorized for issue by the Board of Trustees on February 21, 2018, 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.
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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 and comprehensive income.
At each reporting date, the Trust evaluates whether there is objective evidence that its interest in an equity accounted
investment is impaired. The entire carrying amount of the equity accounted investment is compared to the recoverable
amount, which is the higher of the value in use or fair value less costs to sell. The recoverable amount of each investment is
considered separately.
Where the Trust transacts with its equity accounted investments, unrealized profits and losses are eliminated to the extent of
the Trust’s interest in the investment. Balances outstanding between the Trust and equity accounted investments in which it
has an interest are not eliminated in the consolidated balance sheets.
Joint arrangements
The Trust enters into joint arrangements via joint operations and joint ventures. A joint arrangement is 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. 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.
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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. Assets held for sale continue to be measured at fair value.
Segment reporting
The Trust owns and operates investment properties located in Germany, Austria, Belgium and the Netherlands. In measuring
performance, the Trust distinguishes its operations on a geographic basis and, accordingly, has identified two reportable
segments for disclosure purposes. Segments include (i) Germany and other markets, which includes the assets in Austria and
Belgium, and (ii) the Netherlands.
The Trust’s major tenant is Deutsche Post, accounting for approximately 9.0% of the gross rental income generated by the
Trust’s properties as at the year ended December 31, 2017 (December 31, 2016 – 18.9%).
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.
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On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of
borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive
income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are
recognized in the consolidated statements of net income as part of the gain or loss on sale.
Fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate.
Other non-current assets
Other non-current assets include office furniture and computer equipment. 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 investment properties, 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.
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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 15, 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.
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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
Senior Notes
Land lease obligations
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
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
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 and comprehensive income within
investment property operating expenses.
Bad debt write-offs occur when the Trust determines collection is not possible. Any subsequent recoveries of amounts
previously written off are credited against investment property operating expenses in the consolidated statement of net
income and comprehensive 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 and comprehensive income.
Financial assets are derecognized only when the contractual rights to the cash flows from the financial asset expire or the
Trust transfers substantially all risks and rewards of ownership.
Financial liabilities
The Trust classifies its financial liabilities on initial recognition as either fair value through profit or loss or other liabilities
measured at amortized cost. Financial liabilities classified as other liabilities are initially recognized at fair value (net of
transaction costs) and are subsequently measured at amortized cost using the effective interest rate method. Under the
effective interest rate method, any transaction fees, costs, discounts and premiums directly related to the financial liabilities
are recognized in net income over the expected life of the debt.
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Term loans are initially recognized at fair value less attributable transaction costs, or at fair value when assumed in a business
or asset acquisition. Subsequent to initial recognition, term loans are recognized at amortized cost.
On issuance, convertible debentures are separated into two financial liability components: the host instrument and the
conversion feature. This presentation is required because the conversion feature permits the holder to convert the debenture
into Units that, except for the available exemption under IAS 32, “Financial Instruments: Presentation” (“IAS 32”), would
normally be presented as a liability because of the redemption feature attached to the Units. Both components are measured
based on their respective estimated fair values at the date of issuance. The fair value of the host instrument is net of any
related transaction costs. The fair value of the host instrument is estimated based on the present value of future interest and
principal payments due under the terms of the debenture using a discount rate for similar debt instruments without a
conversion feature. Subsequent to initial recognition, the host instrument is accounted for at amortized cost. The conversion
feature is accounted for at fair value with changes in fair value recognized in 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, Senior Notes and
Debentures, amortization of premiums allocated to the conversion features of the Debentures and discount on Senior Notes,
amortization of ancillary costs incurred in connection with the arrangement of borrowings, interest in land lease obligations
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 and comprehensive 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.
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• Apart from the contractual obligation for the Trust to redeem the Units for cash or another financial asset, the Units do
not include any contractual obligation to deliver cash or another financial asset to another entity, or to exchange financial
assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Trust, and it is
not a contract that will or may be settled in the Trust’s own instruments.
• The total expected cash flows attributable to the Units over their life are based substantially on the profit or loss, the
change in the recognized net assets and unrecognized net assets of the Trust over the life of the Units.
In addition to the Units meeting all of the above criteria, the REIT has determined it has no other financial instrument or
contract that has total cash flows based substantially on the profit or loss, the change in the recognized assets, or the change
in the fair value of the recognized and unrecognized net assets of the REIT. The REIT also has no other financial instrument or
contract that has the effect of substantially restricting or fixing the residual return to unitholders.
Units are initially recognized at the fair value of the consideration received by the Trust. Any transaction costs arising on the
issue of Units are recognized directly in unitholders’ equity as a reduction of the proceeds received.
Note 4
CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS IN APPLYING ACCOUNTING POLICIES
The preparation of the consolidated financial statements requires management to make judgments, estimates and
assumptions that affect the amounts reported. Management bases its judgments and estimates on experience in the industry
and other various factors it believes to be reasonable under the circumstances, but which are inherently uncertain and
unpredictable, the result of which forms the basis of the carrying values of assets and liabilities. However, uncertainty about
these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of
the asset or liability affected in the future.
Critical accounting judgments
The following are the critical judgments made in applying the Trust’s accounting policies that have the most significant effect
on the amounts in the consolidated financial statements:
Valuation of investment properties
Critical judgments are made by the Trust in respect of the fair values of investment properties. The fair value of these
investments is reviewed regularly by management with reference to independent property valuations and market conditions
existing at the reporting date, using generally accepted market practices. Judgment is also applied in determining the extent
and frequency of independent appraisals. The Trust’s management is committed to having external appraisals done on an
annual basis.
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 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.
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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 is 15.825%, including a 5.5% solidarity surcharge on German taxable income; 25% on
Austrian taxable income; 20% on Dutch taxable income below €200 and 25% above it; and 33.99% on Belgian taxable
income;
• Taxable income for European corporate income tax purposes, in general, 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;
•
•
In Germany, 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. There is no such limit in other jurisdictions; and
In the Netherlands, parent and subsidiaries are taxed as a single tax entity, provided they have the same financial year-
end and are both established in the Netherlands.
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; and
• whether an operating platform has been acquired.
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Currently, when the Trust acquires properties or a portfolio of properties and does not take on or assume employees or does
not acquire an operating platform, it classifies the acquisition as an asset acquisition.
Impairment
The Trust uses judgments, estimates and assumptions when it assesses the possibility and amount of any impairment loss or
write-down as it relates to amounts receivable and other assets.
Estimates and assumptions
The Trust makes estimates and assumptions that affect the carrying amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported amount of other comprehensive income for the year. Actual results could
differ from those estimates. The estimates and assumptions critical to the determination of the amounts reported in the
consolidated financial statements relate to the following:
Valuation of financial instruments
The Trust makes estimates and assumptions relating to the fair value measurement of the DUIP, derivative instruments, land
lease obligations and the fair value disclosure of the mortgage debt and Senior Notes. The critical assumptions underlying the
fair value measurements and disclosures include the market price of Units, market interest rates for debt, interest rate
derivatives 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. Management is responsible for overseeing the Trust’s transition to IFRS 15 and is
performing an in-depth assessment of IFRS 15 and the impact the adoption of the standard will have on the Trust’s
consolidated financial statements. Management has completed the review of contracts with its tenants and assessed the
impact that adopting IFRS 15 has on service revenue (common area maintenance charges and fee income). The Trust does not
expect a material impact to the timing, recognition and measurement of service revenue recognized in a given reporting
period as a result of adopting this standard. Rental revenue earned from leases is outside of the scope of IFRS 15 and will
therefore not be impacted by its adoption. IFRS 15 is effective for annual periods beginning on or after January 1, 2018.
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. Management is
responsible for overseeing the Trust’s transition to IFRS 9 and is performing an in-depth assessment of IFRS 9 and the impact
the adoption of the standard will have on the Trust’s consolidated financial statements. The Trust is focused on identifying
mortgages which were previously accounted for as a debt modification; IFRS 9 requires that a gain or loss is calculated as the
difference between the original contractual cash flows and the modified cash flows discounted at the original effective
interest rate. The Trust is also focused on developing an impairment model that takes into consideration forward-looking
information, as required by IFRS 9. Based on the assessments completed, the Trust does not expect there to be a material
impact to the carrying value of its trade receivables given past default rates and receivable balances, and there will be
immaterial impact on recognition and measurement of allowance for bad debts as a result of adopting this standard. The
Trust also does not expect material changes to the measurement of its financial assets or liabilities. Additional disclosures may
be required to comply with IFRS 9. IFRS 9 is effective for annual periods beginning on or after January 1, 2018.
Dream Global REIT 2017 Annual Report | 59
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 does not expect this standard to have a material impact on the 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.
Note 6
BUSINESS COMBINATIONS
On July 27, 2017, the REIT indirectly, through a wholly owned subsidiary, invested in 135 office and light industrial properties
(the “Dutch Properties”) located in the Netherlands.
The total purchase price for the transaction was $876,057 (€600,000). The REIT used the net proceeds of the European debt
offering (Note 10), together with a portion of the July 27, 2017 equity offering proceeds (Note 15), as consideration for the
REIT’s purchase of the shares and debt of a corporation that held the vendors’ interests in outstanding shareholders’ loans
extended to certain of the acquired entities holding the Dutch assets. Through the REIT’s indirect ownership of these
shareholders’ loans, the REIT will receive all of the income generated by the Dutch assets.
The REIT also indirectly acquired 1% of the shares of the holding companies of the portfolio. The consideration for the
acquisition of 1% of the shares of the holding companies had been satisfied with a nominal payment and a promissory note
issued to one of the vendors. These holding companies were transferred to a Dutch legal entity without share capital (the
“Foundation”).
The Foundation has acquired the legal ownership of the shares in the vendors’ newly incorporated companies that will own
99% of the holding companies. As referred to above, the REIT indirectly owns 1% of the shares of the holding companies. The
vendors will have no voting or other governance rights with respect to the Foundation, except for certain rights relating to the
preservation of the economic value of the depositary receipts for assets that the REIT did not invest. The REIT has the right to
appoint the board of the Foundation, which has the power to administer the Foundation and determine its activities.
The following are the recognized amounts of identifiable assets acquired and liabilities assumed, measured at their respective
fair values:
Investment properties
Amounts receivable
Prepaid expenses
Deposits
Amounts payable and accrued liabilities
Current income tax receivable
Land lease obligations
Total net assets acquired
Considerations paid/payable:
REIT Units issued to vendors
Cash paid on closing
Amounts payable
Foreign exchange adjustments
Total consideration
Bargain purchase gain
Acquisition costs incurred
Acquisition related gain, net
Dream Global REIT 2017 Annual Report | 60
$
$
$
$
$
$
963,348
8,695
2,040
(3,933 )
(33,056 )
151
(26,259 )
910,986
81,576
767,211
27,287
(17 )
876,057
34,929
(11,112 )
23,817
To partially finance the transaction, the REIT completed a public offering of 28,575,000 Units at a price of $10.50 per unit to a
syndicate of underwriters. The REIT also completed the European unsecured bond offering of €375,000 aggregate principal
amount at a discount price of €99.575 per €100.00 principal amount of Senior Notes. The REIT also satisfied part of the
purchase price through the issuance of 7,935,395 Units to the vendors. The transaction was closed based on a preliminary
estimate of working capital and other items that are subject to further adjustments. The purchase price allocations have not
been finalized. In addition, the REIT is contingently liable for an amount payable of €18,663 related to the transaction.
Costs relating to the transaction were $11,112 and were charged directly to net income. Bargain purchase gain related to the
transaction was $34,929, being the excess of net assets acquired over total consideration paid.
During the year ended December 31, 2017, the REIT recognized $45,577 of revenue and $20,188 of net income. If the
transaction had occurred on January 1, 2017, the investment properties revenue and net income for the REIT for the year
ended December 31, 2017 are estimated to be $323,440 and $322,125, respectively.
Note 7
INVESTMENT PROPERTIES
Balance, beginning of year
Additions:
Acquisition of investment properties
Acquisitions through business combinations
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) gain
Balance, end of year
For the year
ended
December 31,
2017
2,481,586 $
For the year
ended
December 31,
2016
2,394,739
Note
$
6
16
$
332,528
963,348
41,668
6,994
—
(117,470 )
171,123
(362 )
(3,690 )
185,352
4,061,077 $
229,942
—
27,094
11,244
(2,141 )
(121,335 )
80,315
1,883
(2,951 )
(137,204 )
2,481,586
During the year ended December 31, 2017, the balance of the investment properties increased by $1,579,491, mainly due to
the addition of 135 properties in the Netherlands through a business combination for $963,348 (Note 6) and four property
acquisitions.
The assets acquired and liabilities assumed in the acquisition of investment properties were allocated as follows:
Investment properties(1)
Net working capital assumed
Accrued transaction costs
Total cash consideration
(1) Includes transaction costs.
For the year
ended
December 31,
2017
332,528 $
(1,369 )
(1,046 )
330,113 $
$
$
For the year
ended
December 31,
2016
229,942
—
(1,140 )
228,802
During the year ended December 31, 2017, the REIT disposed of 43 investment properties, including eight Dutch Properties
and nine Initial Properties, which were classified as assets held for sale as at December 31, 2016. Net proceeds of $146,586
(December 31, 2016 – $97,486) were received on these sales and a loss on sale of $5,286 (December 31, 2016 – $5,482)
related to transaction costs incurred was recorded. As at December 31, 2017, the REIT had committed to sell five properties
totalling $16,825. These properties have been reclassified as assets held for sale. In total, the REIT also recorded a fair value
loss of $1,330 on these properties. Refer to Note 16 for details on the assets held for sale.
Dream Global REIT 2017 Annual Report | 61
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
$
December 31,
2017
201,289
669,980
383,537
1,254,806
$
Fair value hierarchy
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 Austria, Belgium and Germany. The REIT participates in two joint venture partnerships which hold a 50% interest in
a total of nine Acquisition Properties. Refer to Note 8 for the details regarding the jointly owned properties.
Dutch Properties
The Dutch Properties, an investment made in July 2017, consist of office and light industrial properties located in the
Netherlands. The properties are dispersed throughout the Netherlands and are generally strategically located near areas
easily accessible by public transportation.
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
Dutch Properties
Total
Non-recurring measurements
Properties reclassified to assets held for sale
Quoted prices in
active markets for
identical
instruments
(Level 1)
December 31,
2017
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
$
$
557,635 $
2,551,483
951,959
4,061,077 $
— $
—
—
— $
— $
—
—
— $
557,635
2,551,483
951,959
4,061,077
16,825 $
— $
16,825 $
—
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, 2017, investment properties valued at
$16,825 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.
Dream Global REIT 2017 Annual Report | 62
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
based on location, size and quality of the property and taking into account any available market
data at the valuation date.
Stabilized NOI
revenue less property operating expenses, adjusted for items such as 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 per respective geography over
the past three years, ranging from 1.5% to 3%; the average growth rate used is 2%.
Valuation processes
During the year ended December 31, 2017, the REIT obtained external appraisals for 100% of the Initial and Acquisition
Properties. For the Dutch Properties the REIT relied on the external appraisals performed around the transaction date,
July 27, 2017. 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 including assets held for sale are as follows:
Initial Properties
Acquisition Properties
Dutch Properties
Total portfolio
$
Fair value
557,635
2,551,483
951,959
$ 4,061,077
December 31, 2017
Implied weighted average
capitalization rates
6.9 %
4.9 %
8.2 %
6.0 %
December 31, 2016
Implied weighted average
capitalization rates
7.3 %
5.6 %
n/a
6.5 %
If the implied capitalization rate was to increase by 25 basis points, the total value of the portfolio would decrease by
$163,481. If the implied capitalization rate was to decrease by 25 basis points, the value of the portfolio would increase by
$177,796.
Dream Global REIT 2017 Annual Report | 63
Note 8
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.
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.
Name
POBA joint venture
Rivergate joint venture
Lorac Investment Management S.à r.l.
Dream Technology Ventures LP
Location
Vienna, Austria
Luxembourg, Luxembourg
Toronto, Canada
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
Ownership interest (%)
December 31,
2017
50
50
50
10
December 31,
2016
50
50
50
10
Net assets at % ownership interest
December 31,
December 31,
2017
2016
23,654
38,152 $
11,582
14,188
21,408
21,202
19,014
17,618
29,126
38,813
34,748
50,115
33,562
35,053
23,312
28,744
196,406
243,885
68,638
75,337
199
236
12
7
265,255
319,465 $
Share of net income (loss) at
% ownership interest for
year ended December 31,
2017
14,581 $
2,647
(643 )
(1,961 )
8,280
15,363
7,382
4,822
50,471
7,967
28
(5 )
58,461 $
2016
2,750
2,007
1,162
1,830
1,032
4,041
5,560
2,607
20,989
9,970
19
(167 )
30,811
$
$
$
$
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,
2017, the loan amounted to $nil (December 31, 2016 – $378), as it has been repaid in the first quarter of the year. During the
year ended December 31, 2017, the REIT recorded fee income relating to the POBA and Rivergate joint ventures of $4,211
(year ended December 31, 2016 – $5,226), which is included in interest and other income.
Dream Global REIT 2017 Annual Report | 64
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.
POBA joint venture at 100%
December 31,
2016
December 31,
2017
POBA joint venture at 50%
December 31,
2017
December 31,
2016
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 payable (receivable)
Total liabilities
Net assets
Fair value remeasurement on the retained interest
Investment in POBA 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 and other
activities
Fair value adjustments to investment properties
Debt settlement costs
Income before income taxes
Current income tax recovery (expense)
Deferred income tax expense
Net income for the year
Foreign currency translation adjustments for the year
Comprehensive income for the year
$
888,668 $
888,668
739,040 $
739,040
444,334 $
444,334
894
196
4,524
5,614
894,282
408,272
464
35,258
443,994
7,254
10,430
170
17,854
461,848
432,434 $
1,070
80
4,916
6,066
745,106
374,024
498
17,484
392,006
447
98
2,262
2,807
447,141
204,136
232
17,629
221,997
6,246
9,404
(26 )
15,624
407,630
337,476 $
$
3,627
5,215
85
8,927
230,924
216,217 $
27,668
243,885 $
369,520
369,520
535
40
2,458
3,033
372,553
187,012
249
8,742
196,003
3,123
4,702
(13 )
7,812
203,815
168,738
27,668
196,406
POBA joint venture at 100%
Year ended December 31,
2017
2016
46,330 $
44,830 $
(9,348 )
(8,656 )
36,982
36,174
990
990
(5,440 )
(8,472 )
(13,912 )
97,834
(3,398 )
94,436
117,688
(210 )
(16,536 )
100,942 $
21,634
122,576 $
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 $
POBA joint venture at 50%
Year ended December 31,
2017
22,415
(4,328 )
18,087
2016
23,165
(4,674 )
18,491
$
495
495
(2,720 )
(4,236 )
(6,956 )
48,917
(1,699 )
47,218
58,844
(105 )
(8,268 )
50,471
10,817
61,288
$
$
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
$
$
$
$
Dream Global REIT 2017 Annual Report | 65
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
Decrease in cash
POBA joint venture at 100%
Year ended December 31,
2016
2017
POBA joint venture at 50%
Year ended December 31,
2017
2016
$
$
21,036 $
(3,330 )
9,522
27,228
(27,620 )
(392 ) $
28,484 $
(2,756 )
21,276
47,004
(47,600 )
(596 ) $
10,518 $
(1,665 )
4,761
13,614
(13,810 )
(196 ) $
14,242
(1,378 )
10,638
23,502
(23,800 )
(298 )
Rivergate joint venture at 100%
December 31,
2016
December 31,
2017
Rivergate joint venture at 50%
December 31,
2017
December 31,
2016
281,602 $
—
281,602
154,283 $
1
154,284
140,801
—
140,801
581
—
892
1,473
142,274
72,788
2,116
74,904
1,386
1,386
76,290
65,984
2,654
68,638
22
27
1,085
1,134
155,418
77,549
3,952
81,501
1,263
1,263
82,764
72,654 $
2,683
75,337 $
Non-current assets
Investment properties
Other non-current assets
Current assets
Amounts receivable
Prepaid expenses
Cash
Total assets
Non-current liabilities
Debt
Deferred income tax payable
$
308,566 $
2
308,568
44
54
2,170
2,268
310,836
155,098
7,904
163,002
1,162
—
1,784
2,946
284,548
145,576
4,232
149,808
Current liabilities
Amounts payable and accrued liabilities
Total liabilities
Net assets
Carrying costs attributable to joint venture
Investment in Rivergate joint venture
2,526
2,526
165,528
145,308 $
2,772
2,772
152,580
131,968 $
$
$
Dream Global REIT 2017 Annual Report | 66
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 for the year
Foreign currency translation adjustments for the year
Comprehensive income for the year
Cash flow generated from:
Operating activities
Investing activities
Cash flow before owners’ distributions
Joint ventures distributions to owners
Increase (decrease) in cash
Note 9
AMOUNTS RECEIVABLE
Trade receivables
Less: Provision for impairment of trade receivables
Trade receivables, net
Other amounts receivable
Total
Rivergate joint venture at 100%
Year ended December 31,
2016
2017
17,164 $
17,144 $
(2,744 )
(2,370 )
14,420
14,774
Rivergate joint venture at 50%
Year ended December 31,
2017
8,572 $
(1,185 )
7,387
2016
8,582
(1,372 )
7,210
$
(6 )
(6 )
(1,200 )
(2,916 )
(4,116 )
8,554
8,554
19,206
—
(3,272 )
15,934 $
9,414
25,348 $
(16 )
(16 )
(1,186 )
(2,904 )
(4,090 )
13,986
13,986
24,300
(2 )
(4,358 )
19,940 $
(8,096 )
11,844 $
(3 )
(3 )
(600 )
(1,458 )
(2,058 )
4,277
4,277
9,603
—
(1,636 )
7,967 $
4,707
12,674 $
(8 )
(8 )
(593 )
(1,452 )
(2,045 )
6,993
6,993
12,150
(1 )
(2,179 )
9,970
(4,048 )
5,922
Rivergate joint venture at 100%
Year ended December 31,
2016
2017
Rivergate joint venture at 50%
Year ended December 31,
2017
2016
12,488 $
(96 )
12,392
(12,008 )
384 $
7,288 $
—
7,288
(9,196 )
(1,908 ) $
6,244 $
(48 )
6,196
(6,004 )
192 $
3,644
—
3,644
(4,598 )
(954 )
$
$
$
$
December 31,
2017
8,693 $
(1,500 )
7,193
19,331
26,524 $
December 31,
2016
5,895
(1,095 )
4,800
11,591
16,391
$
$
As at December 31, 2017, other amounts receivable include unbilled amounts from tenants in relation to operating cost
recoveries of $5,688 (December 31, 2016 − $3,544).
The movement in the provision for impairment of trade receivables for the year ended December 31 was as follows:
As at January 1
Provision for impairment of trade receivables
Receivables written off during the year as uncollectible
Total
2017
1,095 $
1,440
2,535
(1,035 )
1,500 $
2016
2,127
165
2,292
(1,197 )
1,095
$
$
Dream Global REIT 2017 Annual Report | 67
Note 10
DEBT
Mortgage debt
Revolving credit facility
Term loan credit facility(1)
Senior Notes
Land lease obligations
Total
Less: Current portion(1)
Non-current debt
December 31,
2017
1,288,731
—
242,044
556,583
26,711
2,114,069
22,221
2,091,848
December 31,
2016
1,023,130
87,139
289,193
—
—
1,399,462
158,352
1,241,110
$
$
$
$
(1) The current portion of debt includes $5,502 (2016 − $26,806) 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 the terms of the credit facility agreement.
First-ranking mortgages on all of the investment properties, other than the Dutch Properties, have been provided as security
for either the mortgage debt or the term loan credit facility.
Mortgage debt
On April 25, 2017, the REIT drew an additional mortgage on Millerntorplatz 1, in Hamburg, with a principal balance of $14,847
(€10,000) at a fixed rate of 1.71% per annum, maturing on February 6, 2025, to finance the renovation project underway. The
mortgage requires quarterly repayment with a principal amortization of 1.25% per annum of the initial loan amount.
On May 18, 2017, the REIT completed the refinancing of ERGO, in Nuremberg. The REIT discharged the remaining balance of
the old mortgage in the principal amount of $34,368 (€22,718), by obtaining a new mortgage in the principal balance amount
of $49,922 (€33,000) at a fixed rate of 1.34%, maturing March 31, 2024. The mortgage requires monthly repayment with a
principal amortization of 2.20% per annum of the initial loan amount. The REIT incurred a debt breakage fee of $111 and has
written off unamortized deferred financing costs of $5. Total debt settlement costs amounted to $116.
On June 12, 2017, the REIT drew on a mortgage with a principal balance of $7,178 (€4,775) at a variable rate of three-month
EURIBOR plus 1.2% per annum, maturing on September 30, 2024, in connection with the acquisition of Siemens Land,
Nuremberg. Concurrent with the closing of the mortgage, the REIT purchased an interest rate cap that covers 80% of the
mortgage principal, with a 2.5% strike price, which effectively limits the mortgage interest rate to a maximum of 3.7%. The
mortgage requires quarterly repayment with a principal amortization of 3.25% per annum of the initial loan amount.
On July 5, 2017, the REIT drew on a mortgage with a principal balance of $79,456 (€54,000) at a fixed rate of 1.86% per
annum, maturing on July 3, 2024, in connection with the acquisition of Airport Plaza, Brussels. The mortgage requires
quarterly repayment with a principal amortization of 1.0% per annum of the initial loan amount.
On July 17, 2017, the REIT drew on a mortgage with a principal balance of $80,451 (€55,350) at a fixed rate of 1.83% per
annum, maturing on June 30, 2027, in connection with the acquisition of Bollwerk, Stuttgart. The mortgage requires quarterly
repayment with a principal amortization of 1.5% per annum of the initial loan amount, starting in June 2023.
On December 29, 2017, the REIT drew on a mortgage with a principal balance of $17,385 (€11,550) at a fixed rate of 1.76%
per annum, maturing on December 30, 2027, in connection with the acquisition of Markgrafenstrasse 22, Berlin. The
mortgage requires quarterly repayment with a principal amortization of 1.35% per annum of the initial loan amount, starting
in March 2019.
Term loan credit facility
During the year ended December 31, 2017, the REIT repaid $66,839 (€45,500) in connection with the disposition of 35
properties in accordance with the terms of the term loan credit 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, 2017, the amount charged was $1,327.
As at December 31, 2017, the Trust was in compliance with its loan covenants.
Dream Global REIT 2017 Annual Report | 68
Revolving credit facility
On June 6, 2017, the REIT entered into an amendment agreement with regard to its €100,000 revolving credit facility. The
interest rate on Canadian dollar advances is now prime plus 100 basis points or bankers’ acceptance rates plus 200 basis
points. The interest rate for euro advances is 200 basis points over the EURIBOR rate. The revised terms also allow the REIT to
enter swap arrangements where the effective borrowing rate would be the EURIBOR rate plus swap spread, which can further
reduce borrowing costs. The term was extended to June 6, 2019.
As at December 31, 2017, the outstanding balance of the credit facility was $nil and the Trust was in compliance with the
covenants of the revolving credit facility. As at December 31, 2017, the Trust had an undrawn letter of credit in the amount of
$1,806 committed against the revolving credit facility.
Senior unsecured notes (“Senior Notes”)
On July 27, 2017, the REIT completed the European debt offering of a $548,288 (€375,000) aggregate principal amount of
Senior Notes, at a face rate of 1.375%, maturing on December 21, 2021. The Senior Notes were sold at a discount of $2,907
(€1,988) and brokerage fees on the bond issue amounted to $5,486 (€3,750). Factoring in these costs, the effective interest
rate on the Senior Notes is 1.74%. In connection with the bond issuance, the REIT purchased an interest rate swap for $2,308
(€1,579), which expired shortly after issuance of the Senior Notes.
As at December 31, 2017, the Trust was in compliance with its loan covenants.
Land lease obligations
On July 27, 2017, the REIT assumed six land leases as part of the Dutch Properties transaction. Under IAS 40, the REIT has
elected to treat all land leases where the REIT is a lessee and the property meets the definition of investment property as a
finance lease. The REIT has recognized these land lease obligations and thereby recorded an asset and the corresponding
liability of $26,259, respectively. These land leases require monthly, quarterly or semi-annual payments over the lease terms.
The weighted average interest rates for the fixed and floating components of debt are as follows:
Face interest rates
December 31, December 31,
2016
2017
Weighted average
effective interest rate
December 31, December 31,
2016
2017
Maturity
dates
December 31,
December 31,
2017
2016
Debt amount
1.63 %
1.38 %
2.83 %
1.57 %
0.99 %
2.00 %
2.25 %
2.05 %
1.64 %
1.64 %
0.00 %
0.00 %
1.64 %
0.95 %
3.00 %
2.25 %
2.29 %
1.83 %
1.85 %
1.74 %
2.83 %
1.83 %
1.23 %
2.00 %
3.29 %
2.96 %
1.98 %
1.82 %
0.00 %
0.00 %
1.82 %
1.17 %
3.00 %
3.16 %
2.95 %
2.15 %
2020–2027 $
2021
2037–2064
2022–2024
2019
2020
$
1,243,322 $
556,583
26,711
1,826,616
45,409
—
242,044
287,453
2,114,069 $
986,512
—
—
986,512
36,618
87,139
289,193
412,950
1,399,462
Fixed rate
Mortgage debt
Senior Notes
Land lease obligations
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 caps with a notional amount of $288,823; 0.61% rate maturing 2020–2024, and carrying value of $785 as at December 31, 2017.
Dream Global REIT 2017 Annual Report | 69
The scheduled principal repayments and debt maturities are as follows:
2018
2019
2020
2021
2022
2023 and thereafter
Senior Note discount
Financing costs
Mortgages
16,011
17,483
112,201
16,780
135,520
1,005,615
1,303,610
$
$
$
$
Term loan
Senior Notes
5,502 $
—
242,072
—
—
—
247,574 $
— $
—
—
564,450
—
—
564,450
$
Land lease
obligations
708 $
759
780
801
823
22,840
26,711
$
Total
22,221
18,242
355,053
582,031
136,343
1,028,455
2,142,345
(2,720 )
(25,556 )
2,114,069
Continuity of debt
The following tables provide continuity for the year ended December 31, 2017 and the year ended December 31, 2016:
Balance as at January 1, 2017
Borrowings
Principal repayments
Lump sum repayments
Lump sum repayments on property
disposition
Senior Notes discount
Amortization of notes discount
Financing costs additions
Amortization of financing costs
Financing costs written off on debt
settlement
Foreign exchange adjustments
Balance as at December 31, 2017
Mortgages
$ 1,023,130 $
249,239
(14,034 )
(34,368 )
Term loan
289,193 $
—
—
—
Revolving
credit facility
87,139 $
148,073
—
(234,727 )
—
—
—
(5,415 )
1,940
(66,839 )
—
—
—
1,896
—
—
—
—
—
Senior
Notes
Land lease
obligations
— $
— $
548,288
—
—
—
(2,907 )
270
(5,505 )
511
26,259
(319 )
—
—
—
—
—
—
Total
1,399,462
971,859
(14,353 )
(269,095 )
(66,839 )
(2,907 )
270
(10,920 )
4,347
5
68,234
$ 1,288,731 $
1,327
16,467
242,044 $
—
(485 )
— $
—
15,926
556,583 $
—
771
26,711 $
1,332
100,913
2,114,069
Balance as at January 1, 2016
Borrowings
Principal repayments
Lump sum repayments
Lump sum repayments on property disposition
Financing costs additions
Amortization of financing costs
Amortization of fair value adjustments
Financing costs written off on debt settlement
Fair value adjustments written off on debt settlement
Foreign exchange adjustments
Balance as at December 31, 2016
$
$
Mortgages
841,101 $
540,721
(12,819 )
(291,334 )
—
(5,129 )
1,995
—
2,025
—
(53,430 )
1,023,130 $
Term loan
355,325 $
—
—
—
(48,720 )
(1,021 )
2,257
—
1,379
—
(20,027 )
289,193 $
Convertible
debentures
Revolving
credit facility
154,558 $
—
—
(161,000 )
—
—
751
893
2,164
2,634
—
— $
29,908 $
95,868
—
(35,026 )
—
—
—
—
—
—
(3,611 )
87,139 $
Total
1,380,892
636,589
(12,819 )
(487,360 )
(48,720 )
(6,150 )
5,003
893
5,568
2,634
(77,068 )
1,399,462
Dream Global REIT 2017 Annual Report | 70
Note 11
DERIVATIVE FINANCIAL INSTRUMENTS
Assets
Interest rate caps
Foreign exchange forward contracts
Total assets
Less: Current portion
Non-current portion
Liabilities
Foreign exchange forward contracts
Total liabilities
Less: Current portion
Non-current portion
Total net derivative financial instruments
December 31,
2017
December 31,
2016
$
$
$
$
785
—
785
—
785
$
$
$
6,215
6,215
2,211
4,004
(5,430 ) $
1,453
11,353
12,806
2,392
10,414
—
—
—
—
12,806
The REIT‘s financial instruments are carried at fair value, and are classified as Level 2 according to the significance of the
inputs used in making the measurements.
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 €243,337 from January 2018 to December 2020 at an average
exchange rate of $1.528 per euro.
The movement in the foreign exchange forward contracts was as follows:
Balance, beginning of year
Gain on settlement
Fair value change
Balance, end of year
Note 12
DEFERRED UNIT INCENTIVE PLAN
The movement in the Deferred Unit Incentive Plan balance was as follows:
As at January 1, 2016
Compensation during the year
Asset management fees during the year
Issue of deferred units
Remeasurements of carrying value
As at December 31, 2016
Compensation during the year
Asset management fees during the year
Issue of deferred units
Remeasurements of carrying value
As at December 31, 2017
Dream Global REIT 2017 Annual Report | 71
For the year
ended
December 31,
Note
$
18
$
2017
11,353
(30 )
(17,538 )
(6,215 )
Note
$
18
$
14,150
2,152
1,613
(918 )
3,493
20,490
2,573
1,297
(4,279 )
2,536
22,617
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 various fees, including a base annual management fee. See Note 20 for further
details on the Asset Management Agreement.
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 March 28, 2017, the REIT and DAM entered into an Acceleration Agreement, by which 231,593 of deferred trust units and
deferred trust income units granted to DAM for base asset management fees earned for August 2011 to December 2011
vested and were issued in April and May 2017.
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. 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.
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
For the year
ended
ended
December 31,
December 31,
2017
1.72%–1.94%
16%–18%
2016
0.82%–1.44%
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.
Units at December 31, 2017, closing price of $12.22 per unit
Discount rate of 14% per unit for units issued in 2012
Discount rate of 17% per unit for units issued in 2013
Discount rate of 19% per unit for units issued in 2014
Discount rate of 21% per unit for units issued in 2015
Discount rate of 24% per unit for units issued in 2016
Fair value as at December 31, 2017
25,171
$
(902 )
(1,064 )
(1,103 )
(922 )
(545 )
20,635
$
Dream Global REIT 2017 Annual Report | 72
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
Fair value as at December 31, 2016
20,169
$
(190 )
(646 )
(794 )
(1,078 )
(1,108 )
(1,037 )
15,316
$
During the year ended December 31, 2017, $1,297 of asset management fees were recorded (December 31, 2016 – $1,613)
based on the fair value of the deferred income units issued, with an appropriate discount to reflect the restricted period of
exercise, and are included in general and administrative expenses. The fees represented a grant of 172,414 deferred income
trust units during the year (December 31, 2016 – 341,945). As at January 1, 2018, 2,059,806 unvested deferred trust units and
income deferred units (January 1, 2017 – 2,134,289 unvested) were outstanding with respect to the asset management fees.
Compensation expense of $2,573 for the year (December 31, 2016 – $2,152) was also included in general and administrative
expenses.
During the year ended December 31, 2017, 218,880 deferred trust units were granted to senior management and trustees.
The weighted average grant date value for the deferred trust units was $10.12.
Note 13
AMOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade payables
Accrued liabilities and other payables
Accrued interest
Total
December 31,
2017
17,866 $
77,838
3,814
99,518 $
$
$
December 31,
2016
8,999
36,500
1,016
46,515
Accrued liabilities and other payables include $10,239 (2016 – $10,990) of mortgage cancellation charges. These charges will
be paid along with regular mortgage payments over the term of the loans. They also include $28,092 of amounts payable
related to the Dutch Properties.
Note 14
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
2017
100,994 $
20,450
(8,364 )
11,767
124,847 $
$
$
2016
81,617
12,793
(7,535 )
8,364
95,239
The distribution for the month of December 2017 in the amount of 6.67 cents per unit, declared on December 18, 2017 and
payable on January 15, 2018, amounted to $11,767. The amount payable as at December 31, 2017 was satisfied on
January 15, 2018 by $9,458 cash and $2,309 through the issuance of 193,934 Units. The distribution for the month of January
was declared in the amount of 6.67 cents per unit on January 22, 2018, payable on February 15, 2018.
The Trust declared distributions of 6.67 cents per unit per month for the months of January 2017 to December 2017.
Dream Global REIT 2017 Annual Report | 73
Note 15
EQUITY
REIT Units
Public offering of REIT Units
On March 21, 2017, the REIT completed a public offering of 11,983,000 Units, including an over-allotment option, at a price of
$9.60 per unit. The Trust received gross proceeds of $115,037. Costs related to the offering totalled $5,584 and were charged
directly to unitholders’ equity.
On July 27, 2017, the REIT completed a public offering of 28,575,000 Units, at a price of $10.50 per unit. The Trust received
gross proceeds of $300,037. Costs related to the offering totalled $13,602 and were charged directly to unitholders’ equity.
Private placement
On July 27, 2017 concurrent with the Dutch Properties transaction, the REIT issued 7,935,395 Units to the vendors for
$81,576 as part of the total consideration paid (Note 6). These Units are subject to a six-month lock-up period from the
transaction date.
Units subscribed by executives and senior staff
As part of the Dutch Properties transaction, several key executives and senior staff from the vendor joined the REIT on July 27,
2017. Per the terms of employment, these executives subscribed 191,581 Units for $2,090 and the distributions on these
Units are accrued and reinvested in additional Units.
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, 2017, 1,921,386 Units were issued pursuant to the DRIP for
$20,450 (December 31, 2016 – 1,452,789 Units for $12,793).
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, 2017, 1,996 Units were issued under the Unit Purchase Plan for $21 (December 31, 2016 – 2,122 Units for $19).
Deferred Unit Incentive Plan
The 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, 2017, 3,571,286 deferred trust units were granted.
For the year ended December 31, 2017, 435,786 Units were issued to trustees, officers and employees pursuant to the DUIP
for $4,279 (December 31, 2016 – 107,400 Units for $918).
Dream Global REIT 2017 Annual Report | 74
Note 16
ASSETS HELD FOR SALE
As at December 31, 2017, the Trust classified five 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
Deposits
Amounts payable and accrued liabilities
Liabilities related to assets held for sale
Net assets
Investment properties held for sale
Balance, beginning of year
Building improvements
Lease incentives and initial direct leasing costs
Investment properties reclassified as held for sale
Change in straight-line rents
Dispositions
Foreign currency translation
Balance, end of year
Note 17
INTEREST EXPENSE
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
Interest on Senior Notes
Interest on land lease obligations
Amortization of financing costs, discounts and fair value adjustments on acquired debt
Interest other
Interest expense
Note 18
FAIR VALUE ADJUSTMENTS TO FINANCIAL INSTRUMENTS
Fair value loss on interest rate caps and swap
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 2017 Annual Report | 75
December 31,
2017
16,825 $
26
16,851
(36 )
(984 )
(1,020 )
15,831 $
$
$
December 31,
2016
45,461
261
45,722
—
(923 )
(923 )
44,799
For the year
ended
December 31,
For the year
ended
December 31,
2017
45,461 $
89
1
117,470
(50 )
(151,872 )
5,726
16,825 $
2016
32,549
32
2
121,335
(1 )
(100,826 )
(7,630 )
45,461
$
$
Year ended December 31,
2017
6,455 $
—
18,554
1,652
3,324
312
4,862
42
35,201 $
2016
8,065
6,223
17,639
2,630
—
—
6,192
61
40,810
$
$
Note
$
12
11
$
Year ended December 31,
2017
(3,119 ) $
—
(2,536 )
(17,538 )
(23,193 ) $
2016
(2,793 )
1,355
(3,493 )
20,121
15,190
Note 19
INCOME TAXES
Reconciliation of income 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
Expenses not deductible for tax
Effect of different tax rates in countries in which the group operates
Income distributed and taxable to unitholders
Tax costs not previously recognized
Taxes not based on profit – minimum taxes
Change in unrecognized deferred tax asset
Foreign exchange adjustment and other items
Provision for income taxes
German, Dutch and Belgian 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 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,
2017
343,211 $
(3,100 )
340,111
53,823
2016
170,499
(1,601 )
168,898
26,728
(8,088 )
287
(1,018 )
(12,819 )
(361 )
465
14,339
907
47,535 $
(3,747 )
—
(488 )
(9,412 )
(30 )
199
15,511
404
29,165
December 31,
2017
(114,410 ) $
297
14,645
(1,172 )
(46 )
(100,686 ) $
December 31,
2016
(65,350 )
307
16,357
(778 )
(43 )
(49,507 )
December 31,
2017
— $
7,064
7,064 $
December 31,
2016
4
4,676
4,680
$
$
$
$
$
$
As at December 31, 2017, there were unused tax losses of $394,293 for which no deferred tax asset is recognized
(December 31, 2016 – $98,015).
Note 20
RELATED PARTY TRANSACTIONS AND ARRANGEMENTS
Pursuant to the Asset Management Agreement, 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;
Dream Global REIT 2017 Annual Report | 76
• 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 for the Initial Properties 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)
Capital expenditure fees
Reimbursement for out-of-pocket and incidental costs (included in general and administrative
expenses)
expenses)
Total incurred under the Asset Management Agreement
Year ended December 31,
2017
$
1,297 $
11,941
6,280
585
424
2016
1,613
8,647
1,705
490
—
1,110
21,637 $
1,002
13,457
$
As at December 31, 2017, the Trust has recorded $2,508 (December 31, 2016 – $3,195) in amounts payable and $346
(December 31, 2016 – $1,472) 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.
Dream Global REIT 2017 Annual Report | 77
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,
2017
— $
— $
2016
491
491
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, 2017, the non-controlling interest and net income attributable to DAM amounted to $13,813 (December 31,
2016 – $10,275) and $3,100 (December 31, 2016 – $1,601), 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, 2017, the notes receivable outstanding and interest accrued amounted to $6,640 (December 31,
2016 – $6,250) and $1,534 (December 31, 2016 – $1,139), respectively.
Note 21
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
Year ended December 31,
2017
(638 ) $
(340 )
(22,984 )
1,154
(22,808 ) $
2016
(314 )
168
(9,386 )
1,071
(8,461 )
Year ended December 31,
2017
27,581 $
2016
38,450
$
$
$
Note 22
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, 2017, 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
782
419
—
1,201
$
During the year ended December 31, 2017, the Trust paid $1,016 in minimum lease payments, 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 $10,241.
Dream Global REIT 2017 Annual Report | 78
Note 23
CAPITAL MANAGEMENT
At December 31, 2017, 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 intends 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.
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 24
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.
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
Term loan credit facility(2)
Carrying
amount
Income
-1 %
Equity
Interest rate risk
+1%
Equity
Income
$
56,533 $
(565 ) $
(565 ) $
565 $
565
45,409
242,044 $
$
454
2,420 $
454
2,420
$
(454 )
(2,420 ) $
(454 )
(2,420 )
(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%.
(2) Subject to interest rate cap.
Interest rate derivatives
The following table provides details on the interest rate derivatives outstanding as at December 31, 2017:
Hedging item
Interest rate cap
Total
Notional
288,823
288,823
$
$
Rate
0.61 %
Maturity
2020–2024 $
$
Carrying value
785
785
Dream Global REIT 2017 Annual Report | 79
Currency risk
The Trust’s functional and presentation currency is Canadian dollars. The Trust’s operating subsidiaries’ functional currency is
the euro; accordingly, the assets and liabilities are translated at the prevailing rate at year-end, and comprehensive income
is translated at the average rate for the year. In order to manage the exposure to currency risk of unitholders, the Trust has
entered into various foreign exchange forward contracts, and currently holds contracts to sell €243,337 from January 2018 to
December 2020 at an average exchange rate of $1.528 per euro.
Foreign currency derivatives
The following table provides details on foreign currency forward contracts outstanding as at December 31, 2017 and
December 31, 2016:
Hedging currency
Euro
Hedging currency
Euro
€
€
Notional
243,337
Blended
exchange rate
1.528
Forward contracts
start date
January 16, 2018
Notional
185,752
Blended
exchange rate
1.513
Forward contracts
start date
January 17, 2017
The Trust does not use derivatives for speculative purposes.
For the year ended December 31, 2017
Forward contracts
end date
Carrying value
(6,215 )
December 15, 2020 $
For the year ended December 31, 2016
Forward contracts
end date
Carrying value
11,353
December 16, 2019 $
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.
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 (liabilities)
Interest rate caps
Foreign exchange forward contracts
Fair values disclosed
Mortgage debt
Senior Notes
Land lease obligations
Carrying value as at
December 31, 2017
Fair value as at December 31, 2017
Level 1
Level 2
Level 3
$
785 $
(6,215 )
— $
—
785 $
(6,215 )
—
—
(1,288,731 )
(556,583 )
(26,711 )
—
(565,720 )
—
—
—
—
(1,336,027 )
—
(26,711 )
Dream Global REIT 2017 Annual Report | 80
Recurring measurements
Financial assets (liabilities)
Interest rate swaps
Foreign exchange forward contracts
Fair values disclosed
Mortgage debt
Carrying value as at
December 31, 2016
Fair value as at December 31, 2016
Level 1
Level 2
Level 3
$
1,453 $
11,353
(1,023,130 )
— $
—
—
1,453 $
11,353
—
—
—
(1,021,206 )
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, 2017
$
Impact of change to volatility
-5%
(74 ) $
+5%
82 $
Impact of change to underlying rates
+1%
3,906 $
-1%
(513 )
Foreign currency derivatives
The fair value of foreign currency derivatives was determined using forward exchange market rates ranging from $1.507 to
$1.611 to €1 at the measurement date.
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, 2017
Impact of change to forward exchange market rates
+5%
18,899 $
-5%
(18,899 )
$
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, 2017 has been calculated by discounting the expected cash flows of
each debt using discount rates ranging from 0.95% to 1.96%. 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 2017 Annual Report | 81
Note 25
SEGMENTED DISCLOSURES
The Trust operates in four geographical locations (Germany, Austria, Belgium and the Netherlands). The segments are
reported in a manner consistent with the internal reporting provided to the chief operating decision-maker, determined to be
the Chief Executive Officer (“CEO”) of the Trust. The CEO measures and evaluates the performance of the Trust based on net
operating income as presented by geographical location below, which shows the assets in Austria and Belgium aggregated
with German assets given their size and nature. Assets and all liabilities are reviewed on a consolidated basis by the CEO and
therefore are not included in the segmented disclosure below. The accounting policies of the segments presented here are
the same as the Trust’s accounting policies as described in Note 2.
Year ended December 31, 2017
Selected income statement items
Property rental revenue
Property operating expenses
Net rental income
Fair value adjustments to investment properties
Selected balance sheet items
Investment properties
Selected income statement items
Property rental revenue
Property operating expenses
Net rental income
Fair value adjustments to investment properties
Selected balance sheet items
Investment properties
$
$
$
$
$
$
$
$
Germany and
other markets
249,138
(72,025 )
177,113
233,341
$
Netherlands
45,577
(13,006 )
32,571
$
(9,024 ) $
$
$
$
Less:
Joint ventures
Consolidated financial
statements
263,728
(79,518 )
184,210
171,123
(30,987 ) $
5,513
(25,474 ) $
(53,194 ) $
3,707,735
$
951,959
$
(598,617 ) $
4,061,077
Germany and
other markets
235,312
(75,366 )
159,946
100,485
Netherlands
—
—
—
—
$
$
$
$
$
$
Year ended December 31, 2016
Less:
Joint ventures
(31,747 ) $
6,046
(25,701 ) $
(20,170 ) $
Consolidated
financial statements
203,565
(69,320 )
134,245
80,315
2,991,907
$
—
$
(510,321 ) $
2,481,586
Dream Global REIT 2017 Annual Report | 82
Appendix
Address
City
Ownership/
Interest
GLA
(sq. ft.)
Occupancy
(%)
Nürnberg
Brussels
Hamburg
Bremen
Stuttgart
Köln
Vienna
Nürnberg
Düsseldorf
Berlin
Acquisition Properties:
Gleiwitzer Straße 555 (Siemens-Buropark)
Leonardo Da Vincilaan 19 (Airport Plaza)
Millerntorplatz 1
Flughafenallee 13-17 (Europa Center)
Fritz-Elsas-Str. 31/33, Hohe Straße 26, Leuschnerstraße 25
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
Robert-Bosch-Str. 9-11 (Europahaus)
Podbielskistraße 158-168 (Grammophon Office Park)
Cäcilienkloster 2, 6, 8, 10 (Caecilium)
Oasis III
Hammer Str. 30-34
Zimmerstrasse 56/Schützenstrasse 15-17
Schlossstr. 8
Leopoldstr. 252
Am Fernmeldeamt, Friedrichstr. 45-47/Am Europa Center 8-10
Düsseldorf
Darmstadt
Hannover
Köln
Stuttgart
Hamburg
Berlin
Hamburg
München
Essen
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 (Humboldthaus)
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 (doubleU)
Werner-Eckert-Straße 8-12
Neue Mainzer Str. 28 (k26)
Lörracher Str. 16/16a
Markgrafenstrasse 22
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. 2b
Bahnhofstr. 82-86
Czernyring 15
Marienstr. 80
Stuttgart
Erfurt
Berlin
München
Freiburg
München
Hamburg
Mannheim
Nürnberg
München
Hamburg
Frankfurt
München
Düsseldorf
München
Frankfurt
Freiburg
Berlin
Stuttgart
Dortmund
Saarbrücken
Bremen
Darmstadt
Kiel
Weiden
Halle
Gießen
Heidelberg
Offenbach am Main
Dream Global REIT 2017 Annual Report | 83
100%
100%
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%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
579,777
387,479
387,190
359,160
306,208
297,046
286,974
268,931
246,376
242,823
226,985
217,560
214,906
213,924
200,915
172,814
172,306
168,889
165,801
156,266
147,184
134,736
131,051
129,179
124,932
121,553
115,572
113,391
100,613
94,649
81,907
79,244
75,914
71,469
71,129
64,772
61,838
57,606
55,522
44,266
7,148,855
299,567
270,432
204,238
197,428
180,794
166,601
162,060
148,883
131,777
114,114
100.0%
96.2%
85.3%
89.6%
100.0%
98.0%
95.7%
100.0%
100.0%
99.7%
95.2%
93.4%
99.1%
94.5%
99.2%
96.1%
100.0%
99.9%
96.5%
97.4%
96.3%
98.4%
93.5%
98.5%
94.1%
100.0%
99.4%
99.4%
97.9%
95.3%
98.9%
99.2%
99.9%
96.6%
95.9%
94.6%
100.0%
100.0%
100.0%
99.9%
96.8%
100.0%
47.3%
87.9%
78.4%
91.1%
100.0%
57.7%
63.0%
76.6%
96.1%
Address
Gerokstr. 14-20
Hindenburgstr. 9/Heeserstr. 5
Friedrich-Karl-Str. 1-7
Pausaer Str. 1-3
Klubgartenstr. 10
Am Hauptbahnhof 2
Kapellenstr. 44
Kommandantenstr. 43-51
Stresemannstr. 15
Blücherstr. 12
Kaiser-Karl-Ring 59-63/Dorotheenstr.
Bahnhofplatz 10
Wiener Str. 43
Bahnhofsplatz 2, 3, 4, Pepperworth 7
Rathausplatz 2
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
Südbrede 1-5
Bahnhofstr. 169
Vegesacker Heerstr. 111
Koblenzer Str. 67
Kardinal-Galen-Ring 84/86
Martinistr. 19
Kalkumer Str. 70
Balhornstr. 15, 17/B. Köthenbürger-Str.
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
Apostelweg 4-6
Brückenstr. 21
Lilienstr. 3
Gerstenstr. 5
Ölmühlweg 12
Worthingtonstr. 15
Palleskestr. 38
Hellersdorfer Str. 78
Markendorfer Str. 10
Poststr. 24-26
Bahnhofstr. 29
Poststr. 12
Poststr. 1-3
Poststr. 48
City
Dresden
Siegen
Oberhausen
Plauen
Goslar
Mülheim
Einbeck
Duisburg
Wuppertal
Koblenz
Bonn
Fürth
Stuttgart
Hildesheim
Wilhelmshaven
Zwickau
Landau
Heide
Emden
Bremerhaven
Iserlohn
Lüdenscheid
Peine
Auerbach
Arnsberg
Rastatt
Heidenheim
Gummersbach
Ahlen
Bietigheim-Bissingen
Bremen
Bonn
Rheine
Recklinghausen
Düsseldorf
Paderborn
Weinheim
Idar-Oberstein
Bünde
Bocholt
Betzdorf
Naumburg
Hamburg
Neunkirchen
Leipzig
Neubrandenburg
Königstein
Crailsheim
Frankfurt am Main
Berlin
Frankfurt an der Oder
Ratingen
Meppen
Lehrte
Korbach
St Ingbert
Ownership/
Interest
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%
110,755
102,410
97,606
87,164
86,621
84,303
80,500
80,122
79,478
77,151
75,815
73,818
72,192
68,117
64,970
60,738
53,645
53,363
53,327
52,165
51,027
49,529
47,259
46,512
45,820
45,659
45,656
45,558
44,130
43,620
43,484
43,157
42,191
41,847
41,781
40,927
40,648
39,192
38,761
37,925
37,679
37,612
36,273
35,971
35,234
34,347
33,716
33,136
33,119
33,013
32,330
29,445
29,056
28,764
27,577
27,051
77.3%
83.6%
93.7%
76.6%
59.6%
81.1%
68.3%
99.4%
63.2%
82.9%
99.8%
74.5%
91.8%
66.4%
97.2%
66.9%
97.1%
91.9%
93.4%
78.6%
92.8%
26.7%
64.2%
56.3%
98.8%
92.4%
83.3%
97.6%
79.5%
98.3%
84.6%
100.0%
97.5%
97.3%
55.4%
92.7%
88.2%
69.1%
95.6%
98.8%
94.9%
91.0%
97.3%
100.0%
97.3%
100.0%
100.0%
100.0%
83.6%
76.0%
97.5%
100.0%
89.7%
97.6%
99.8%
86.6%
Dream Global REIT 2017 Annual Report | 84
Address
Bahnhofstr. 2
Ruthenstr. 19/21
Wilhelmstr. 11/Kamperdickstr. 29
Kaiserstr. 140
In der Trift 10/12
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
Kasseler Str. 1-7
Ooser Karlstr. 21/23/25
Güterstr. 2-4
Lagerstr. 1
Königstr. 20
Marktstr. 51
Übacher Weg 4
Hochstr. 31/Postgasse 5
Robert-Koch-Str. 3
Kaiserstr. 35
Bahnhofstr. 41
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
Gorsemannstr. 22
Bahnhofstr. 11
Gutachstr. 56
Unterstr. 14
Am Markt 4
Sandstr. 4
De-Lenoncourt-Str. 2
Rosenstr. 1/Fünfhausenstr. 19/21
Total Initial Properties
Dutch Properties:
Cacaoweg 20
Galjoenweg 68
Rivium Boulevard 156-186
Kobaltweg 60
Cacaoweg 20
Gemeenschapspolderweg 26-48
Mercatorlaan 1200 (Domus Medica)
Hastelweg 251-273
Rivium Boulevard 200-230
Industrieweg 4
City
Gifhorn
Hameln
Kamp-Lintfort
Radevormwald
Olpe
Höxter
Hilden
Miltenberg
Landstuhl
Berlin
Ibbenbüren
Emmerich
Pulheim
Norden
Saarbrücken
Mannheim
Warburg
Baden-Baden
Bitburg
Meschede
Brilon
Essen
Alsdorf
Bochum
Laatzen
Minden
Eberbach
Syke
Hannover
Fürstenfeldbruck
Geisenheim
Bremerhaven
Bautzen
Herzogenrath
Zerbst
Mittenwalde
Bremen
Alpirsbach
Titisee-Neustadt
Bochum
St. Georgen
Germersheim
Dillingen
Springe
Amsterdam
Maastricht
Capelle a/d Ijssel
Utrecht
Amsterdam
Weesp
Utrecht
Eindhoven
Capelle a/d Ijssel
Roermond
Ownership/
Interest
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%
26,922
26,895
26,159
25,643
24,894
23,248
22,454
22,017
21,726
21,187
21,031
20,942
20,670
20,668
20,433
20,128
19,985
19,444
19,340
18,683
17,733
17,661
16,991
16,359
16,126
16,043
15,634
14,560
14,504
13,326
13,117
12,803
12,686
12,667
12,654
12,631
12,379
12,112
10,813
10,732
10,324
10,132
8,995
8,881
5,551,497
377,781
244,470
222,085
203,223
192,835
179,208
167,174
158,468
152,629
138,747
92.2%
92.9%
93.9%
73.8%
97.6%
79.3%
86.7%
84.1%
99.2%
100.0%
100.0%
100.0%
100.0%
80.9%
87.3%
82.4%
84.6%
92.9%
99.3%
100.0%
91.6%
100.0%
100.0%
100.0%
100.0%
82.4%
100.0%
80.5%
100.0%
100.0%
90.2%
100.0%
100.0%
79.3%
95.8%
100.0%
100.0%
76.0%
100.0%
100.0%
100.0%
89.7%
100.0%
100.0%
83.9%
95.0%
100.0%
51.5%
100.0%
100.0%
81.0%
84.2%
97.3%
50.6%
92.9%
Dream Global REIT 2017 Annual Report | 85
Address
Herikerbergweg 1-35
Tupolevlaan 2-24
Flight Forum 120-159
Joan Muyskenweg 22
Meander 901
Panovenweg 1-42
Siriusdreef 16
Bredewater 26
Fortunaweg
Plotterweg 38-40
Benjamin Franklinstraat 2
Stephensonweg 6-8
Tinweg 4
Schipholweg 55-89
Fortunaweg
Thebe 22
Reitscheweg 47
Hullenbergweg 278-308
Hambakenwetering 2-2a
Helmholtzstraat 61-63
Rietbaan 40-42
Bovenkerkerweg 10-12
Leemkuil 7
President Kennedylaan 104-108
Karspeldreef 8
Keurmeesterstraat 18
Olympia 1
Schurenbergweg 6
Chasseveld 3-13
Oude Apeldoornseweg 41-45 (Oak)
Westblaak 107-119 127-1
Tupolevlaan 65-79
Drechterwaard 100-104
Weizgtweg 11
Hogehilweg 8
Laan van Malkenschoten 40
Platinawerf 10
Rotterdamseweg 380
Nesland 1-5
Nieuwe Sluisweg 176-178
Sint Jacobsstraat 16
Mdme. Curielaan 6-8
Polarisavenue 130-148
Bezuidenhoutseweg 72-80
Munsterstraat 2
Nieuwe Sluisweg 200
Van Rensselaerweg 4
Nieuwe Oeverstraat 50
Wisselwerking 40-42
Pascalstraat 15
Keienbergweg 34-42
Luxemburglaan 2
Televisieweg 77-83
Hogehilweg 4
Amerikastraat 7
Ringersstraat 12-18
City
Amsterdam
Schiphol-Rijk
Eindhoven
Amsterdam
Arnhem
Helmond
Hoofddorp
Zoetermeer
Schiedam
Amersfoort
Zwolle
Gorinchem
Heerenveen
Leiden
Schiedam
Hilversum
Den Bosch
Amsterdam
Den Bosch
Amsterdam
Capelle a/d Ijssel
Amstelveen
Eindhoven
Velp
Amsterdam
Ridderkerk
Hilversum
Amsterdam
Breda
Apeldoorn
Rotterdam
Schiphol-Rijk
Alkmaar
Dordrecht
Amsterdam
Apeldoorn
Beuningen
Delft
Weesp
Rotterdam
Utrecht
Rijswijk
Hoofddorp
Den Haag
Deventer
Rotterdam
Spankeren
Arnhem
Diemen
Ede
Amsterdam
Zoetermeer
Almere
Amsterdam
Den Bosch
Sliedrecht
Ownership/
Interest
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%
132,142
127,972
125,722
123,445
117,180
108,438
106,266
102,011
95,616
94,399
93,420
86,987
85,035
84,120
82,419
81,612
80,762
79,855
72,603
71,391
70,611
70,224
69,503
65,531
62,374
62,162
60,025
58,623
58,588
58,466
58,437
57,460
57,452
56,511
56,388
55,908
54,810
54,175
53,000
52,975
52,041
52,034
51,696
49,690
48,721
48,524
47,899
47,544
46,974
46,565
46,489
45,725
45,248
44,078
44,014
43,594
84.2%
99.5%
100.0%
98.5%
9.7%
71.3%
87.3%
47.1%
96.7%
100.0%
100.0%
40.6%
100.0%
82.4%
100.0%
100.0%
63.4%
87.1%
83.8%
100.0%
64.9%
100.0%
100.0%
79.0%
100.0%
100.0%
42.3%
94.4%
79.6%
72.0%
86.6%
52.0%
35.3%
70.4%
100.0%
88.0%
100.0%
77.6%
76.2%
100.0%
100.0%
33.7%
65.1%
100.0%
32.3%
100.0%
100.0%
100.0%
100.0%
100.0%
70.2%
100.0%
100.0%
72.6%
91.2%
100.0%
Dream Global REIT 2017 Annual Report | 86
Address
Vossenstraat 6
Fellenoord 200
Coenecoop 7
Fultonbaan 30
Wilmersdorf 32
Henri Dunantstraat 32-40
Overschiestraat 186
Overschiestraat 184
Elisabethhof 21-23
De Waal 38-40
Olof Palmestraat 20-26
Vendelier 51-59
Dr. Klinkertweg 1-7
Pieter Mastenbroekweg 19
Overschiestraat 61
Olof Palmestraat 12-18
Naritaweg 12
Kuifmees 50-64
Slachthuisstraat 31-35
Voorerf 2-20
Hazenkamp 36
Aagje Dekenstraat 51-53
Hettenheuvelweg 4
Limburglaan 5
Takkebijster 3-3a
Europalaan 6
Kobaltweg 11
Burgemeester van Lierplein 1-3
Wolwevershaven 30
Ekkersrijt 4002-4012
Regulierenring 2
Noorderpoort 9
Rode Kruisstraat 22 en 24
Dr. Stolteweg 42-48
Munsterstraat 9
Schipholweg 66
Driemanssteeweg 31-39
Geograaf 7
Paardeweide 2-4
Leidse Rijn 10-16
Nautilusweg 10
Reactorweg 301
Atoomweg 400
De Molen 24-28
Televisieweg 75
Essebaan 7
Nieuwendijk 49
Atoomweg 350
Boterdiep 37
Leidse Rijn 39-53
Leidse Rijn 55-69
Science Park 5108
Leidse Rijn 25-37
Fokkerweg
Druivenstraat 17-23
Leidse Rijn 1-11
City
Arnhem
Eindhoven
Waddinxveen
Nieuwegein
Apeldoorn
Amersfoort
Amsterdam
Amsterdam
Leiderdorp
Best
Delft
Veenendaal
Zwolle
Meppel
Amsterdam
Delft
Amsterdam
Nieuwegein
Roermond
Breda
Arnhem
Zwolle
Amsterdam
Maastricht
Breda
Den Bosch
Utrecht
Vlaardingen
Dordrecht
Son
Bunnik
Venlo
Amsterdam
Zwolle
Deventer
Leiden
Rotterdam
Duiven
Breda
De Meern
Utrecht
Utrecht
Utrecht
Houten
Almere
Capelle a/d Ijssel
Geldrop
Utrecht
Rotterdam
De Meern
De Meern
Son
De Meern
Leiden
Breda
De Meern
Ownership/
Interest
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%
42,873
41,742
38,868
38,830
38,330
38,223
37,306
37,071
36,841
36,785
36,253
36,221
35,883
34,714
34,713
32,410
32,376
31,810
31,510
31,323
31,054
28,707
28,331
28,309
27,577
27,445
26,755
26,404
25,661
24,133
23,950
23,813
23,734
23,492
22,443
22,430
20,871
20,387
20,290
19,655
18,837
18,101
17,082
15,496
15,446
15,285
14,643
13,672
11,969
11,098
11,098
10,075
10,058
9,806
8,859
8,730
95.0%
61.0%
100.0%
42.7%
100.0%
93.4%
100.6%
100.0%
53.5%
17.1%
88.7%
78.9%
35.9%
100.0%
100.0%
61.5%
84.8%
64.6%
50.4%
66.4%
100.0%
100.0%
100.0%
100.0%
71.5%
45.7%
98.2%
61.7%
76.0%
82.2%
76.5%
42.2%
100.0%
77.2%
83.5%
100.0%
100.0%
100.0%
45.0%
74.8%
100.0%
55.2%
100.0%
55.5%
100.0%
100.0%
68.6%
62.0%
100.0%
78.7%
0.0%
100.0%
63.1%
94.3%
100.0%
100.0%
Dream Global REIT 2017 Annual Report | 87
Address
Leidse Rijn 13-23
Oude Apeldoornseweg 41-45 (Fizzion Parking)
Total Dutch Properties
Total Portfolio
City
De Meern
Apeldoorn
Ownership/
Interest
GLA
(sq. ft.)
Occupancy
(%)
100%
100%
8,445
-
7,380,292
20,080,644
90.4%
-
82.7%
88.0%
Dream Global REIT 2017 Annual Report | 88
Trustees
Management Team
Dr. R. Sacha BhatiaInd.,3
Duncan JackmanInd.,1
P. Jane Gavan
Chief Executive Officer
Tamara Lawson
Chief Financial Officer
Toronto, Ontario
Director of the Institute for Health
System Solutions and Virtual Care
(“WIHV”) at Women’s College Hospital
Detlef BierbaumInd.,2,3,4
Köln, Germany
Corporate Director
Michael J. Cooper2
Toronto, Ontario
President and Chief Responsible Officer
Dream Unlimited Corp.
Toronto, Ontario
Chairman, President and CEO
E-L Financial Corporation Limited
J. Michael KnowltonInd.,1,3
Whistler, British Columbia
Corporate Director
John SullivanInd.,1
Toronto, Ontario
President and Chief Executive Officer
Cadillac Fairview Corporation Limited
P. Jane Gavan2
Ind. Independent
Toronto, Ontario
President and Chief Executive Officer
Dream Global REIT
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
Corporate Information
HEAD OFFICE
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 LISTINGS
The Toronto Stock Exchange
Listing Symbol: DRG.UN
The Frankfurt Stock Exchange
Listing Symbol: DRG
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
Web: www.computershare.com
E-mail: service@computershare.com
DISTRIBUTION REINVESTMENT
AND UNIT PURCHASE PLAN
The purpose of our Distribution Reinvestment and
Unit Purchase Plan (“DRIP”) is to provide unithold-
ers with a convenient way of investing in addition-
al 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 addi-
tional 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
dream.ca/office