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Dundee
REIT
2013 Annual Report
Better Communities to Work In
We’d like to take the opportunity to thank
all our stakeholders for being part of our
continued success. Because of all the hard
work and dedication to keep doing things
better, 2013 was another strong year for us.
Dundee reit has been around since 2003,
and we’ve been investing in high quality
office properties in key markets across
Canada. This is so we can create sta ble
and growing cash flows for our investors.
Just over a decade later, we’re happy to
announce that we’re moving into a new
and exciting time in our business. We
want to let everyone know that starting
May 12, 2014, Dun dee reit’s name will
be Dream Office reit.
This change is exciting for us because we
are now bringing more clarity to our sto ry
and aligning all our efforts around one
core belief — creating better communities
for Canadians to work in — which will
result in a better investment for our unit
holders. This sums up what we do and
why we do it, and we think it’s a bet ter
articulation of who we are, which has
been such an inte gral part of our cul ture,
our work and our company’s ob jectives
since the beginning.
Starting May 12, 2014,
Dundee reit’s new name
will be Dream Office reit.
Stock Exchange Listing
On the Toronto Stock Exchange,
Dream Office REIT will continue to
trade under these listing symbols:
REIT Units:
D.UN
5.5% Series H
Convertible Debentures:
D.DB.H
5.95% Senior Unsecured Debentures,
Series K:
D.DB.K
125,000 people
working in our
Canadian office
buildings
Letter to unitholders
Our underlying business performed well in 2013 as we
increased operating cash flow, strengthened our balance
sheet and invested significantly in both our properties and our
management platform.
For 2013, adjusted funds from operations (“AFFO”) increased by
2.5% even though our overall debt level decreased. AFFO per
unit for the year was $2.47 compared to $2.41 in 2012. On a
leverage neutral basis, our 2013 AFFO per unit would have been
$2.51, reflecting 4.1% of AFFO growth. We further strengthened
our balance sheet by reducing our debt and refinancing
maturing debt with low-cost, long-term financing. We also
became an issuer of unsecured debt, completing three issuances
totalling $450 million to date. With this new source of capital,
we have been able to increase our pool of unencumbered assets
and strengthen our overall financial position. Our net operating
income from comparative properties increased by 1% over the
prior year. Leasing activity was strong, but with an increase
in the supply of office space combined with slowing tenant
demand, we saw our occupancy decline by 80 basis points over
the prior year. Even though our occupancy levels have declined,
our buildings have performed better than the national averages.
The foundation of our portfolio is solid with a significant
downtown presence and a high-quality tenant roster. The
current leasing environment is challenging and requires us
to look for new ways to retain tenants and increase revenue.
A key to this strategy is investing capital in our buildings and, as
a result, improve the value and attractiveness to tenants and
reduce operating costs. By doing so, our tenants will have a
better experience at our buildings, leading to improved tenant
retention, quicker leasing of available space and realization
of higher rental rates. We have been modernizing elevators,
upgrading lobbies and common areas and creating better
outdoor spaces for our tenants to enjoy, all of which increases
tenant satisfaction. We continue to invest in energy saving
initiatives across the portfolio. Designating capital to building
improvements such as lighting and water fixture retrofits,
boiler and machinery replacements reduces energy costs and
makes our buildings more competitive from a cost perspective.
These initiatives, combined with a team of 18 talented leasing
professionals across Canada who stay in close contact with
existing and prospective tenants, will contribute significantly to
keeping our buildings occupied.
We are also looking at ways to generate additional revenue and
value from our existing buildings through intensification and
alternative uses, especially in our downtown buildings where
urbanization allows for opportunities to increase revenue in both
office and retail space.
We plan to improve the overall quality of our portfolio by disposing
of non-core assets, such as those that are special purpose,
peripherally located or in declining locations with lower potential
for long-term income growth. We have underwritten and identified
these properties, which when sold could fund improvement
initiatives. We expect to start the selling process shortly.
By investing recoverable capital to retain and attract tenants,
having our experienced leasing team actively pursue renewals and
new deals, creating retail space to generate higher income, and
strategically selling non-core assets to invest in properties that
offer more long-term growth, we will make our portfolio stronger.
In May 2014, we will be introducing our new platform-wide
branding and the renaming of our Trust to Dream Office REIT. For
a preview, please refer to the insert in the inside front cover of the
printed annual report, or visit our website www.dundeereit.com.
As always, we thank you for your continued support and look
forward to the upcoming year.
Michael J. Cooper
Chief Executive Officer
March 15, 2014
At-a-glance
December 31, 2013
$7.1B
TOTAL ASSETS
8.9%
MARKeT RenTs ABove
in-PLACe RenTs
2.9x
INTEREST COVERAGE
RATIO
11,500
5.1
AVERAGE TENANT SIzE
(square feet)
AVERAGE REMAINING
LEASE TERM (years)
47.6%
LeveL oF DeBT
Dundee REIT owns and operates high-quality, well-located and competitively
priced business premises. The portfolio comprises approximately 24.6 million square
feet of central business district and suburban office properties located in Canada’s
key office markets.
Diversified, High-Quality Tenants
Tenant
% of gross
rental revenue
% of
owned area
Government of Canada
Bank of Nova Scotia
Government of Ontario
Bell Canada
Government of Québec
Enbridge Pipelines Inc.
Telus
Government of Saskatchewan
State Street Trust Company
Government of Alberta
7.3
7.3
3.1
1.9
1.8
1.5
1.4
1.4
1.4
1.2
6.6
4.0
2.7
1.5
2.8
1.0
1.2
1.5
1.0
1.3
Wtd. avg.
remaining
lease term
(years)
3.0
10.5
5.6
4.3
12.7
5.1
2.3
2.9
8.3
3.9
Adjusted Funds from Operations
(per unit)
$2.50
2.40
2.30
2.20
2.10
2.00
$2.47
2010
2011
2012
2013
94.3%
OCCUPANCy
Geographic Diversification
(% net operating income)
2%
NORTHWEST
TERRITORIES
27%
ALBERTA
5%
BRITISH
COLUMBIA
6%
SASKATCHEWAN
6%
QUEBEC
51%
ONTARIO
1%
ATLANTIC
CANADA
2%
UNITED STATES
Net Operating Income
Breakdown
Q4/13
30%
SUBURBAN
OFFICE
70%
CENTRAL BUSINESS
DISTRICT
Photos (left to right, top to bottom):
655 Bay Street, Toronto
Station Tower, Surrey
700 rue de la Gauchetière, Montreal
Barclay Centre I&II, Calgary
HSBC Bank Place, Edmonton
5001 Yonge Street, Toronto
Adelaide Place, Toronto
1083
5624
1095
11659
1948
265
330
944
Table of contents
Management’s discussion
and analysis
Management’s responsibility
for the consolidated
financial statements
Independent auditor’s report
Consolidated financial
statements
Notes to the consolidated
financial statements
Trustees and officers
Corporate information
1
56
57
58
62
IBC
IBC
Photos (top to bottom):
Scotia Plaza, Toronto
IBM Corporate Park, Calgary
Enbridge Place, Edmonton
Management’s
discussion
and
analysis
(All
dollar
amounts
in
our
tables
are
presented
in
thousands,
except
rental
rates,
unit
and
per
unit
amounts)
SECTION
I
–
OBJECTIVES
AND
FINANCIAL
HIGHLIGHTS
BASIS
OF
PRESENTATION
Our
discussion
and
analysis
of
the
financial
position
and
results
of
operations
of
Dundee
Real
Estate
Investment
Trust
(“Dundee
REIT”
or
the
“Trust”)
should
be
read
in
conjunction
with
the
audited
consolidated
financial
statements
of
Dundee
REIT
for
the
year
ended
December
31,
2013.
Unless
otherwise
indicated,
our
discussion
of
assets,
liabilities,
revenue
and
expenses
includes
our
investment
in
joint
ventures,
which
are
equity
accounted
at
our
proportionate
share
of
assets,
liabilities,
revenue
and
expenses.
During
Q4
2012,
the
Trust
sold
its
industrial
segment
comprising
77
properties
(the
“Industrial
Portfolio”)
to
Dundee
Industrial
Real
Estate
Investment
Trust
(“Dundee
Industrial”).
As
part
of
the
consideration,
the
Trust
received
in
return
limited
partnership
units
of
Dundee
Industrial
Limited
Partnership
(a
subsidiary
of
Dundee
Industrial),
which
are
exchangeable
for
units
of
Dundee
Industrial.
As
at
December
31,
2013,
Dundee
REIT’s
retained
interest
in
Dundee
Industrial
is
approximately
22.9%
and
is
accounted
for
as
an
equity
investment.
Unless
otherwise
indicated,
our
operating
metrics
and
financial
information
for
the
current
period
and
prior
periods
reflect
the
investment
property
portfolio
excluding
assets
sold
and
held
for
sale
as
well
as
the
77
industrial
properties
sold
to
Dundee
Industrial.
This
management’s
discussion
and
analysis
(“MD&A”)
is
dated
as
at
February
27,
2014.
For
simplicity,
throughout
this
discussion,
we
may
make
reference
to
the
following:
• “REIT
A
Units”,
meaning
the
REIT
Units,
Series
A
• “REIT
B
Units”,
meaning
the
REIT
Units,
Series
B
• “REIT
Units”,
meaning
the
REIT
Units,
Series
A,
and
REIT
Units,
Series
B
• “LP
B
Units”
and
“subsidiary
redeemable
units”,
meaning
the
LP
Class
B
Units,
Series
1
Certain
market
information
has
been
obtained
from
CBRE,
Canadian
Market
Statistics,
Fourth
Quarter
2013,
a
publication
prepared
by
a
commercial
firm
that
provides
information
relating
to
the
real
estate
industry.
Although
we
believe
this
information
is
reliable,
its
accuracy
and
completeness
is
not
guaranteed.
We
have
not
independently
verified
this
information
and
make
no
representation
as
to
its
accuracy.
Certain
information
herein
contains
or
incorporates
comments
that
constitute
forward-‐looking
information
within
the
meaning
of
applicable
securities
legislation.
Forward-‐looking
information
is
based
on
a
number
of
assumptions
and
is
subject
to
a
number
of
risks
and
uncertainties,
many
of
which
are
beyond
Dundee
REIT’s
control,
which
could
cause
actual
results
to
differ
materially
from
those
disclosed
in
or
implied
by
such
forward-‐looking
information.
These
risks
and
uncertainties
include,
but
are
not
limited
to,
general
and
local
economic
and
business
conditions;
the
financial
condition
of
tenants;
our
ability
to
refinance
maturing
debt;
leasing
risks,
including
those
associated
with
the
ability
to
lease
vacant
space;
our
ability
to
source
and
complete
accretive
acquisitions;
and
interest
rates.
Although
the
forward-‐looking
statements
contained
in
this
MD&A
are
based
on
what
we
believe
are
reasonable
assumptions,
there
can
be
no
assurance
that
actual
results
will
be
consistent
with
these
forward-‐looking
statements.
Forward-‐looking
information
is
disclosed
in
this
MD&A
as
part
of
our
Results
of
Operations
under
the
heading
“Adjusted
funds
from
operations”.
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;
and
our
continued
compliance
with
the
real
estate
investment
trust
(“REIT”)
exception
under
the
specified
investment
flow-‐through
trust
(“SIFT”)
legislation;
and
other
risks
and
factors
described
from
time
to
time
in
the
documents
filed
by
the
Trust
with
securities
regulators.
Dundee
REIT
2013
Annual
Report
|
1
All
forward-‐looking
information
is
as
of
February
27,
2014.
Dundee
REIT
does
not
undertake
to
update
any
such
forward-‐looking
information
whether
as
a
result
of
new
information,
future
events
or
otherwise.
Additional
information
about
these
assumptions
and
risks
and
uncertainties
is
contained
in
our
filings
with
securities
regulators,
including
our
latest
Annual
Information
Form.
Certain
filings
are
also
available
on
our
web
site
at
www.dundeereit.com.
OUR
OBJECTIVES
We
are
committed
to:
• managing
our
business
to
provide
growing
cash
flow
and
stable
and
sustainable
returns
through
adapting
our
strategy
and
tactics
to
changes
in
the
real
estate
industry
and
the
economy;
• building
and
maintaining
a
diversified,
growth-‐oriented
portfolio
of
office
properties
in
Canada,
based
on
an
established
platform;
• providing
predictable
and
sustainable
cash
distributions
to
unitholders
and
prudently
managing
distributions
over
time;
and
• maintaining
a
REIT
that
satisfies
the
REIT
exception
under
the
SIFT
legislation
in
order
to
provide
certainty
to
unitholders
with
respect
to
taxation
of
distributions.
Distributions
On
February
20,
2013,
we
announced
that
we
would
be
increasing
our
annual
distribution
rate
to
$2.24
per
unit
or
$0.187
per
unit
on
a
monthly
basis,
from
the
2012
annual
distribution
rate
of
$2.20
and
$0.183
on
a
monthly
basis.
The
new
rate
of
distribution
commenced
with
the
April
30,
2013
record
date.
At
December
31,
2013,
approximately
24%
of
our
total
units
were
enrolled
in
the
Distribution
Reinvestment
and
Unit
Purchase
Plan
(“DRIP”).
There
is
no
equivalent
program
for
the
REIT
B
Units
(for
a
description
of
distributions,
refer
to
the
section
“Our
Equity”).
Annualized
distribution
rate
Monthly
distribution
rate
Period-‐end
closing
unit
price
Annualized
distribution
yield
on
closing
unit
price
(%)
2013
Q4
2.24
$
0.187
$
28.82
$
Q3
2.24
$
0.187
$
29.04
$
Q2
2.24
$
0.187
$
32.64
$
Q1
2.20
$
0.183
$
36.65
$
$
$
$
Q4
2.20
$
0.183
$
37.43
$
Q3
2.20
$
0.183
$
37.66
$
Q2
2.20
$
0.183
$
38.19
$
2012
Q1
2.20
0.183
35.20
7.8%
7.7%
6.9%
6.0%
5.9%
5.8%
5.8%
6.3%
OUR
STRATEGY
With
the
sale
of
substantially
all
of
our
Industrial
Portfolio
in
the
fourth
quarter
of
2012,
Dundee
REIT’s
core
strategy
is
to
invest
in
office
properties
in
key
markets
across
Canada,
providing
a
solid
platform
for
stable
and
growing
cash
flows.
We
are
the
largest
pure-‐play
office
REIT
in
Canada.
The
majority
of
our
portfolio
comprises
central
business
district
office
properties
concentrated
in
nine
of
Canada’s
top
ten
office
markets.
The
execution
of
our
strategy
is
continuously
reviewed,
including
acquisitions
and
dispositions,
our
capital
structure
and
our
analysis
of
current
economic
conditions.
Our
executive
team
is
seasoned,
knowledgeable
and
highly
motivated
to
continue
to
increase
the
value
of
our
portfolio
and
provide
stable,
reliable
and
growing
returns
for
our
unitholders.
In
addition,
Dundee
REIT
is
steadfast
in
maintaining
its
status
as
a
REIT
under
the
SIFT
legislation.
Dundee
REIT’s
methodology
to
execute
its
strategy
and
to
meet
its
objectives
includes:
Investing
in
high-‐quality
office
properties
Dundee
REIT
has
an
established
presence
in
key
urban
markets
across
Canada.
Our
portfolio
comprises
high-‐quality
office
properties
that
are
well-‐located
and
attractively
priced
and
produce
consistent
cash
flow.
When
considering
acquisition
opportunities,
we
look
for
quality
tenancies,
strong
occupancy,
the
appeal
of
the
property
to
future
tenants,
how
it
complements
our
existing
portfolio
and
how
we
can
create
additional
value.
Dundee
REIT
2013
Annual
Report
|
2
Optimizing
the
performance,
value
and
cash
flow
of
our
portfolio
We
manage
our
properties
to
optimize
long-‐term
cash
flow
and
value.
With
a
fully
internalized
property
manager,
we
offer
a
strong
team
of
highly
experienced
real
estate
professionals
who
are
focused
on
achieving
more
from
our
assets.
Occupancy
rates
across
our
portfolio
have
remained
steady
and
strong
for
a
number
of
years
and
have
been
consistently
above
the
national
average.
We
view
this
as
compelling
evidence
of
the
appeal
of
our
properties
and
our
ability
to
meet
and
exceed
tenant
expectations.
Dundee
REIT
has
a
proven
ability
to
identify
and
execute
value-‐add
opportunities.
Diversifying
our
portfolio
to
mitigate
risk
Since
the
credit
crisis
in
2009,
we
have
carefully
repositioned
our
portfolio
through
a
significant
number
of
accretive,
high-‐
quality
acquisitions.
In
addition
to
expanding
and
diversifying
our
geographic
footprint
across
the
country,
the
acquisitions
have
served
to
enhance
the
stability
of
our
business,
diversifying
and
strengthening
the
quality
of
our
revenue
stream
and
increasing
cash
flow.
Our
existing
tenant
base
is
well
diversified,
representing
a
number
of
industries
and
different
space
requirements,
and
offers
strong
financial
covenants.
Our
lease
maturity
profile
is
well
staggered
over
the
next
ten
years.
We
will
continue
to
pursue
opportunities
for
growth
but
only
when
it
enhances
our
overall
portfolio,
further
improves
the
sustainability
of
our
distributions,
strengthens
our
tenant
profile
and
mitigates
risk.
We
have
experience
in
each
of
Canada’s
key
markets
and
have
the
flexibility
to
pursue
acquisitions
in
whichever
markets
offer
compelling
investment
opportunities.
Maintaining
and
strengthening
our
conservative
financial
profile
We
have
always
operated
our
business
in
a
disciplined
manner,
with
a
keen
eye
on
financial
analysis
and
balance
sheet
management
to
ensure
that
we
maintain
a
prudent
capital
structure.
We
continue
to
generate
cash
flow
sufficient
to
fund
our
distributions
while
maintaining
a
conservative
debt
ratio
and
staggered
debt
maturities.
Dundee
REIT
2013
Annual
Report
|
3
OUR
ASSETS
Dundee
REIT
provides
high-‐quality,
well-‐located
and
attractively
priced
business
premises.
Our
portfolio
comprises
central
business
district
and
suburban
office
properties
predominantly
located
in
major
urban
centres
across
Canada
including
Toronto,
Calgary,
Edmonton,
Montreal,
Ottawa
and
Vancouver.
At
December
31,
2013,
our
ownership
interests
included
186
office
properties
(218
buildings)
totalling
approximately
24.7
million
square
feet
of
gross
leasable
area
(“GLA”),
including
24.6
million
square
feet
of
office
properties
and
0.1
million
square
feet
of
properties
held
for
sale
and
redevelopment
properties.
The
occupancy
rate
across
our
office
portfolio
remains
high
at
94.3%,
well
ahead
of
the
national
industry
average
occupancy
rate
of
90.3%
(CBRE,
Canadian
Market
Statistics,
Fourth
Quarter
2013).
Our
occupancy
rates
include
lease
commitments
for
space
that
is
currently
being
readied
for
occupancy
but
for
which
rent
is
not
yet
being
recognized.
Western
Canada
Calgary
Toronto
Eastern
Canada(1)
Total(2)
(1)
Includes
two
properties
located
in
the
U.S.
(2)
Excludes
redevelopment
properties
and
properties
held
for
sale.
December
31,
2013
Owned
GLA
(sq.
ft.)
December
31,
2012
Total
5,100,835
3,959,943
11,175,423
4,325,590
24,561,791
%
21
16
45
18
100
Total
4,447,819
3,684,326
10,489,256
4,326,892
22,948,293
%
19
16
46
19
100
During
the
year
ended
December
31,
2013,
we
acquired
properties
totalling
approximately
1.7
million
square
feet
of
GLA
for
approximately
$604.9
million.
In
addition
to
pursuing
accretive
acquisitions,
management
remains
focused
on
portfolio
analysis
and
pruning
assets
that
may
no
longer
fit
within
our
strategy
or
that
we
believe
may
have
reached
their
maximum
growth
potential.
During
the
past
two
years,
we
completed
the
sale
of
approximately
$0.7
billion
of
non-‐strategic
and
other
non-‐core
assets,
comprising
5.9
million
square
feet.
The
proceeds
from
the
asset
sales
were
redeployed
in
a
variety
of
ways
to
strengthen
the
business,
including
redeeming
$126.5
million
of
convertible
debentures
on
December
31,
2012,
which
reduced
our
overall
level
of
debt
and
lowered
interest
costs.
Dundee
REIT
2013
Annual
Report
|
4
KEY
PERFORMANCE
INDICATORS
Performance
is
measured
by
these
and
other
key
indicators:
Operations
Occupancy
rate
(year-‐end)(1)
Average
in-‐place
net
rent
per
square
foot
(year-‐end)(1)
Operating
results
Investment
properties
revenue
Net
operating
income
(“NOI”)(2)(3)
Comparative
properties
NOI(2)(3)
Funds
from
operations
(“FFO”)(4)
Adjusted
funds
from
operations
(“AFFO”)(5)
Fair
value
adjustments
to
investment
properties,
excluding
transaction
costs(2)
Distributions
Declared
distributions
Distributions
paid
in
cash
DRIP
participation
ratio
Financing
Weighted
average
effective
interest
rate
on
debt
(year-‐end)
Weighted
average
face
rate
of
interest
on
debt
(year-‐end)
Level
of
debt
(net
debt-‐to-‐gross
book
value)(6)
Interest
coverage
ratio(6)
Net
average
debt-‐to-‐EBITDFV
(years)(6)
Net
debt-‐to-‐adjusted
EBITDFV
(years)(6)
Debt
–
average
term
to
maturity
(years)
Per
unit
amounts(7)
Distribution
rate
Basic:
FFO(4)
AFFO(5)
Diluted:
FFO(4)
Three
months
ended
December
31,
2013
2012
Years
ended
December
31,
2013
2012
$
$
208,418
115,899
69,747
78,242
66,984
191,999
105,471
69,628
68,905
58,060
$
$
$
$
94.3%
17.83
800,531
451,233
279,023
306,247
261,776
95.1%
17.22
686,564
384,192
276,600
263,488
221,960
(19,578)
49,719
135,292
123,363
$
$
59,989
45,433
24%
$
55,357
43,613
21%
$
235,751
187,291
21%
203,596
160,024
21%
4.18%
4.33%
4.22%
47.6%
2.92
times
8.0
8.0
4.6
4.50%
47.8%
2.70
times
8.4
8.1
5.1
$
0.56
$
0.72
0.62
0.72
0.55
0.68
0.57
0.68
$
2.23
$
2.88
2.47
2.87
2.20
2.86
2.41
2.85
77%
91%
Payout
ratio
(%)
FFO
(basic)
AFFO
(basic)
(1)
Includes
investments
in
joint
ventures
and
excludes
redevelopment
properties,
properties
sold,
assets
held
for
sale
and
discontinued
operations.
77%
90%
78%
90%
81%
96%
(2)
Includes
investments
in
joint
ventures
and
excludes
properties
sold,
assets
held
for
sale
and
discontinued
operations.
(3)
NOI
(non-‐GAAP
measure)
is
defined
as
total
of
net
rental
income,
including
the
share
of
net
rental
income
from
investment
in
joint
ventures
and
property
management
income,
excluding
net
rental
income
from
discontinued
operations,
properties
sold
and
assets
held
for
sale.
The
reconciliation
of
NOI
to
net
rental
income
can
be
found
in
section
“Our
results
of
operations”
under
the
heading
“Net
operating
income”.
(4)
FFO
(non-‐GAAP
measure)
–
The
reconciliation
of
FFO
to
net
income
can
be
found
in
section
“Our
results
of
operations”
under
the
heading
“Funds
from
operations
and
adjusted
funds
from
operations”.
(5)
AFFO
(non-‐GAAP
measure)
–
The
reconciliation
of
AFFO
to
cash
flow
from
operations
can
be
found
in
section
“Our
results
of
operations”
under
the
heading
“Funds
from
operations
and
adjusted
funds
from
operations”.
(6)
The
calculation
of
the
following
non-‐GAAP
measures,
level
of
debt,
interest
coverage
ratio,
net
average
debt-‐to-‐EBITDFV
and
net
debt-‐to-‐adjusted
EBITDFV
are
included
in
the
“Non-‐GAAP
measures”
section
of
the
MD&A.
(7)
A
description
of
the
determination
of
basic
and
diluted
amounts
per
unit
can
be
found
in
section
“Non-‐GAAP
measures”
under
the
heading
“Weighted
average
number
of
units”.
Dundee
REIT
2013
Annual
Report
|
5
FINANCIAL
OVERVIEW
Total
AFFO
for
the
quarter
was
$67.0
million,
an
increase
of
$8.9
million,
or
15.4%,
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
$261.8
million,
an
increase
of
$39.8
million,
or
17.9%,
over
the
prior
year
comparative
period).
AFFO
on
a
per
unit
basis
increased
from
$0.57
per
unit
to
$0.62
per
unit,
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
an
increase
from
$2.41
per
unit
to
$2.47
per
unit
over
the
prior
year
comparative
period).
Total
FFO
for
the
quarter
was
$78.2
million,
an
increase
of
$9.3
million,
or
13.6%,
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
$306.2
million,
an
increase
of
$42.8
million,
or
16.2%,
over
the
prior
year
comparative
period).
Diluted
FFO
on
a
per
unit
basis
increased
from
$0.68
per
unit
to
$0.72
per
unit
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
an
increase
from
$2.85
per
unit
to
$2.87
per
unit
over
the
prior
year
comparative
period).
The
increase
in
basic
AFFO
and
diluted
FFO
per
unit
over
the
prior
year
comparative
quarter
and
period
resulted
from:
• a
decrease
in
the
weighted
average
cost
of
debt
throughout
2013,
due
in
part
to
the
redemption
of
all
the
outstanding
6.5%
Debentures,
5.7%
Debentures,
6.0%
Debentures
and
7.0%
Debentures
totalling
$126.5
million
on
December
31,
2012;
•
the
sale
of
the
Industrial
Portfolio
to
Dundee
Industrial
at
the
beginning
of
Q4
2012
while
carrying
excess
cash
on
hand
on
and
off
throughout
2012
and
throughout
most
of
Q4
2012,
which
had
a
dilutive
impact
on
AFFO
per
unit
throughout
Q4
2012;
• 2.1
million
Units
purchased
for
cancellation
under
the
normal
course
issuer
bid
during
the
year;
• accretive
acquisitions
completed
in
2012
and
2013;
and
• 0.2%
growth
in
comparative
property
NOI
over
the
prior
year
comparative
quarter
and
0.9%
growth
over
the
prior
year
comparative
period.
Partially
offsetting
this
was:
•
the
effect
of
our
continuous
efforts
to
de-‐leverage
throughout
2012
and
2013,
to
further
strengthen
our
balance
sheet.
On
a
quarterly
basis,
NOI
from
comparative
properties
increased
by
$0.1
million,
or
0.2%,
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
$2.4
million,
or
0.9%,
increase
over
the
prior
year
comparative
period),
with
increases
across
all
regions
except
for
Western
Canada
where
it
had
a
decline
of
2.3%,
or
$0.4
million,
over
the
prior
year
comparative
quarter
and
a
decline
of
0.7%,
or
$0.4
million,
over
the
prior
year
comparative
period.
Overall,
the
increase
was
mainly
driven
by
higher
rental
rates
achieved
on
new
leasing
completed
over
the
past
year
and
the
benefit
of
step
rents,
all
offset
by
lower
occupancy
across
all
regions.
In-‐place
and
committed
occupancy
remains
strong
at
94.3%,
below
the
95.1%
at
Q4
2012,
yet
still
well
above
industry
averages.
Average
in-‐place
rents
continue
to
strengthen
across
the
portfolio.
We
ended
the
quarter
with
an
average
in-‐place
rent
of
$17.83
per
square
foot,
representing
a
$0.61
per
square
foot
increase
over
Q4
2012
of
$17.22
per
square
foot.
Estimated
average
market
rents
remain
about
9%
above
average
in-‐place
rents,
representing
an
opportunity
to
increase
NOI
as
space
is
renewed
or
leased.
During
the
fourth
quarter,
we
purchased
83
Yonge
Street,
in
Toronto,
for
a
total
purchase
price
of
$8.1
million
(before
transaction
costs).
This
property
is
adjacent
to
an
existing
building
owned
by
the
Trust.
We
ended
the
quarter
with
strong
debt
metrics,
repaying
two
mortgages
during
the
quarter.
Over
the
past
15
months,
our
net
debt-‐to-‐gross
book
value
improved
to
47.6%
compared
to
50.5%
at
the
beginning
of
Q4
2012.
During
Q4
2013,
our
weighted
average
face
rate
of
interest
remained
low
at
4.22%
and
our
interest
coverage
ratio
remained
solid
at
2.92
times.
On
January
21,
2014,
the
Trust
completed
the
issuance
of
$150
million
aggregate
principal
amount
of
Series
C
senior
unsecured
debentures
(“Series
C
Debentures”).
The
Series
C
Debentures
bear
interest
at
a
rate
of
4.074%
with
a
maturity
date
of
January
21,
2020.
The
net
proceeds
of
$148.6
million
from
the
Series
C
Debentures
were
mainly
used
to
pay
down
$87.5
million
of
the
demand
revolving
credit
facilities
and
five
mortgages
totalling
$59.3
million.
This
further
strengthened
the
Trust’s
debt
metrics
by
reducing
our
variable
rate
debt
from
8.7%
at
December
31,
2013
to
6.2%
of
total
debt,
and
prolonged
our
debt
maturity
from
4.6
years
at
December
31,
2013
to
4.7
years.
Dundee
REIT
2013
Annual
Report
|
6
OUTLOOK
Our
business
environment
changed
in
2013.
Concern
over
rising
interest
rates,
slowing
job
growth
and
increased
office
supply
led
to
a
significant
decline
in
our
unit
price.
The
underlying
business
performed
well
in
2013.
Our
AFFO
per
unit
for
the
year
was
$2.47
compared
to
$2.41
in
2012.
On
a
leverage
neutral
basis,
our
2013
AFFO
per
unit
would
have
been
$2.51,
reflecting
4.1%
of
AFFO
growth.
We
reduced
our
overall
debt
level
and
continued
to
take
advantage
of
low-‐cost,
longer
term
secured
financing.
We
also
became
an
issuer
of
unsecured
debt,
completing
three
issuances
totalling
$450
million.
With
this
new
source
of
capital,
we
have
been
able
to
increase
our
pool
of
unencumbered
assets
and
strengthen
our
overall
financial
position.
The
concerns
expressed
by
the
market
are
reasonable
and
we
have
responded
by
focusing
our
efforts
on
maintaining
occupancy
as
best
as
we
can.
Even
though
our
occupancy
levels
have
declined,
our
buildings
have
performed
better
than
the
national
averages.
While
the
foundation
of
our
platform
is
solid
with
our
significant
downtown
presence
and
high-‐quality
tenant
roster,
we
continue
to
look
for
new
ways
to
adapt
to
this
more
challenging
operating
environment.
We
are
looking
at
new
ideas
to
increase
the
income
and
value
of
our
properties
from
intensification
and
alternative
uses,
especially
in
our
downtown
buildings
where
urbanization
allows
for
opportunities
to
increase
revenue
in
both
office
and
retail
space.
We
have
also
made
changes
to
our
organizational
structure,
empowering
our
operating
group
to
be
more
aggressive
in
overall
portfolio
management.
We
are
also
looking
to
enter
into
strategic
partnerships
that
can
be
profitable
for
our
business.
Our
history
shows
we
have
been
able
to
adapt
as
the
operating
environment
changes.
With
the
significant
investments
we
are
making
in
our
buildings
and
our
people,
we
are
prepared
for
both
the
challenges
and
opportunities
that
lie
ahead.
Dundee
REIT
2013
Annual
Report
|
7
SECTION
II
–
EXECUTING
THE
STRATEGY
OUR
OPERATIONS
The
following
key
performance
indicators
related
to
our
operations
influence
the
cash
generated
from
operating
activities.
Performance
indicators(1)
Occupancy
rate
Average
in-‐place
net
rental
rates
(per
sq.
ft.)
Tenant
maturity
profile
–
average
term
to
maturity
(years)
(1)
Excludes
redevelopment
properties
and
properties
held
for
sale.
December
31,
2013
94.3%
17.83
5.13
December
31,
2012
95.1%
17.22
5.49
$
$
Occupancy
At
December
31,
2013,
the
overall
percentage
of
occupied
and
committed
space
across
our
total
portfolio
remained
strong
at
94.3%,
well
above
the
national
industry
average
of
90.3%
(CBRE,
Canadian
Market
Statistics,
Fourth
Quarter
2013).
Occupancy
rates
discussed
in
this
report
with
respect
to
our
portfolio
include
occupied
and
committed
space
at
December
31,
2013.
On
a
total
property
basis,
the
occupancy
rate
across
our
portfolio
declined
slightly
from
94.6%
at
September
30,
2013
and
95.1%
at
December
31,
2012
to
94.3%
at
December
31,
2013,
with
decreases
in
all
regions.
On
a
comparative
property
basis,
the
average
occupancy
level
for
the
quarter,
excluding
committed
space,
decreased
0.7%
compared
to
the
prior
quarter
and
1.7%
compared
to
the
prior
year
same
period.
December
31,
September
30,
Total
portfolio(1)
December
31,
Comparative
properties(2)
September
30,
December
31,
Comparative
properties(3)
December
31,
December
31,
(percentage)
2013
2013
2012
2013
2013
2013
2012
Office
Western
Canada
Calgary
Toronto
Eastern
Canada
Total
office
(1)
Excludes
redevelopment
properties
and
properties
held
for
sale.
93.0
93.5
94.5
96.1
94.3
93.3
94.2
94.7
96.1
94.6
94.3
94.4
94.7
97.8
95.1
93.0
93.5
94.5
96.1
94.3
93.3
94.2
94.7
96.1
94.6
92.3
93.0
94.2
96.1
94.0
94.3
94.5
94.7
97.8
95.2
(2)
Comparative
properties
include
all
properties
owned
by
the
Trust
at
September
30,
2013,
excluding
redevelopment
properties
and
properties
held
for
sale.
(3)
Comparative
properties
include
all
properties
owned
by
the
Trust
at
December
31,
2012,
excluding
redevelopment
properties
and
properties
held
for
sale.
The
table
below
details
the
percentage
of
occupied
and
committed
space
for
the
last
eight
quarters,
demonstrating
the
strength
and
consistency
of
our
leasing
profile.
(percentage)(1)
Office
Industrial(2)
Overall
National
industry
average(3)
(1)
Excludes
redevelopment
properties
and
properties
held
for
sale.
Q4
94.3
-‐
94.3
90.3
Q3
94.6
-‐
94.6
90.9
Q2
94.9
-‐
94.9
91.3
2013
Q1
94.7
-‐
94.7
91.5
Q4
95.1
-‐
95.1
91.5
Q3
95.1
-‐
95.1
91.7
Q2
95.2
97.1
95.6
91.8
2012
Q1
95.2
97.4
95.6
91.8
(2)
At
September
30,
2012,
the
industrial
properties
were
reclassified
as
discontinued
operations
and
subsequently
sold.
(3)
National
industry
average
occupancy
rates
obtained
from
CBRE,
Canadian
Market
Statistics
quarterly
reports.
Dundee
REIT
2013
Annual
Report
|
8
Vacancy
schedule
During
the
quarter,
vacancy
increased
by
approximately
224,000
square
feet.
The
increase
was
driven
mainly
by
Calgary
and
suburban
Toronto
which
accounted
for
approximately
103,000
square
feet
and
47,000
square
feet,
respectively.
Approximately
50%
of
the
negative
absorption
is
committed
for
future
occupancy
that
will
commence
in
the
second
half
of
the
year.
Leasing
activity
included
approximately
791,000
square
feet
of
renewals
and
approximately
174,000
square
feet
of
new
leases,
offset
by
approximately
1,189,000
square
feet
of
lease
expiries
and
terminations.
During
the
year,
vacancy
increased
by
approximately
414,000
square
feet,
mainly
in
Western
Canada,
Calgary
and
suburban
Toronto.
Leasing
activity
included
approximately
2,319,000
square
feet
of
renewals
and
approximately
1,014,000
square
feet
of
new
leases,
offset
by
approximately
3,747,000
square
feet
of
lease
expiries
and
terminations.
At
December
31,
2013,
vacant
space
committed
for
future
occupancy
increased
by
approximately
160,000
square
feet
over
the
prior
quarter
to
approximately
387,000
square
feet.
This
increase
in
leasing
activity
has
provided
the
Trust
the
opportunity
to
commit
to
longer-‐term
leases
and
to
capitalize
on
higher
in-‐place
rents
on
future
commitments.
(in
square
feet)
Available
for
lease
at
beginning
of
period
Vacancy
committed
for
future
leases
Vacant
space
at
beginning
of
period
Acquired
vacancy
Reclassified
to
held
for
sale
Re-‐measurements/reclassifications
Vacant
space
at
beginning
of
period
–
restated
Expiries
Early
terminations
and
bankruptcies
New
leases
Renewals
Vacant
space
–
December
31,
2013
Vacancy
committed
for
future
occupancy
Available
for
lease
–
December
31,
2013
(1)
Excludes
redevelopment
properties
and
properties
held
for
sale.
Three
months
ended
December
31,
2013(1)
1,334,959
227,363
1,562,322
3,360
-‐
(1,133)
1,564,549
1,165,865
23,476
(174,081)
(791,031)
1,788,778
386,783
1,401,995
As
a
%
of
total
Year
ended
GLA
December
31,
2013(1)
1,116,569
5.4%
163,533
0.9%
1,280,102
6.4%
46,762
0.0%
(12,165)
0.0%
60,215
0.0%
1,374,914
6.4%
3,676,265
4.7%
70,564
0.1%
(1,014,248)
(0.7)%
(2,318,717)
(3.2)%
1,788,778
7.3%
386,783
1.6%
1,401,995
5.7%
As
a
%
of
total
GLA
4.5%
0.7%
5.2%
0.2%
0.0%
0.2%
5.6%
15.0%
0.3%
(4.1)%
(9.4)%
7.3%
1.6%
5.7%
Dundee
REIT
2013
Annual
Report
|
9
In-‐place
net
rental
rates
Average
in-‐place
net
rents
across
our
total
portfolio
at
December
31,
2013
increased
to
$17.83
per
square
foot
from
$17.74
per
square
foot
at
September
30,
2013,
reflecting
accretive
acquisitions
and
rent
uplifts
in
all
regions.
We
believe
estimated
market
rents
are
approximately
9%
higher
than
our
portfolio
average
in-‐place
net
rents,
affording
us
a
competitive
advantage
in
attracting
and
retaining
tenants
as
well
as
the
opportunity
to
capture
additional
value
as
leases
roll
over.
Market
rents
are
determined
based
on
current
leasing
activities.
December
31,
2013(1)
Market
rent/
in-‐place
rent
(%)
Market
rent
Average
in-‐place
net
rent
September
30,
2013(1)
Market
rent/
in-‐place
rent
(%)
Market
rent(2)
Average
in-‐place
net
rent(1)
December
31,
2012
Market
rent/
in-‐place
rent
(%)
Market
rent(2)
Average
in-‐place
net
rent(1)
18.65
$
20.60
24.18
20.76
19.67
18.62
13.22
12.29
17.83
$
19.42
10.5
16.5
5.6
7.6
8.9
$
$
18.49
20.77
18.47
12.33
17.74
$
20.60
24.71
19.70
13.22
$
19.52
11.4
19.0
6.7
7.2
10.0
$
$
18.24
19.53
18.18
12.08
17.22
$
20.66
25.14
19.42
13.25
$
19.38
13.3
28.7
6.8
9.7
12.5
Total
office
portfolio
(in
square
feet)
Office
Western
Canada
$
Calgary
Toronto
Eastern
Canada
Total
$
(1)
Excludes
redevelopment
properties
and
properties
held
for
sale.
(2)
Comparative
figures
have
been
restated
to
conform
to
the
current
period
presentation.
Dundee
REIT
2013
Annual
Report
|
10
Leasing
and
tenant
profile
The
average
remaining
lease
term
and
other
portfolio
information
are
detailed
in
the
following
table.
The
portfolio
average
remaining
lease
term
at
December
31,
2013
is
5.13
years,
down
from
5.23
years
at
September
30,
2013
and
5.49
years
at
December
31,
2012,
largely
reflecting
the
impact
of
leases
rolling
off
in
the
quarter
and
during
2013.
December
31,
2013(1)
September
30,
2013(1)
December
31,
2012(1)
Average
Average
Average
Average
Average
Average
Average
Average
remaining
tenant
in-‐place
remaining
tenant
in-‐place
remaining
tenant
lease
term
size
net
rent
lease
term
size
net
rent
lease
term
size
Average
in-‐place
net
rent
Western
Canada
Calgary
Toronto
Eastern
Canada
Total
(years)
3.76
3.81
5.11
7.89
5.13
(sq.
ft.)
10,043
9,807
11,186
18,961
11,461
(per
sq.
ft.)
18.65
20.76
18.62
12.29
17.83
$
$
(years)
3.92
3.83
5.18
8.11
5.23
(sq.
ft.)
10,075
9,718
11,124
18,951
11,414
(per
sq.
ft.)
18.49
20.77
18.47
12.33
17.74
$
$
(years)
4.17
3.90
5.29
8.58
5.49
(sq.
ft.)
9,736
9,260
10,959
18,308
11,146
(per
sq.
ft.)
18.24
19.53
18.18
12.08
17.22
$
$
(1)
Excludes
redevelopment
properties
and
properties
held
for
sale.
The
following
table
details
our
lease
maturity
profile
by
geographic
segment
at
December
31,
2013.
The
table
distinguishes
between
lease
maturities
that
have
yet
to
be
renewed
or
re-‐leased
and
maturities
for
which
we
have
a
leasing
commitment.
The
uncommitted
line
should
be
referenced
when
considering
future
leasing
risks
or
opportunities,
and
the
committed
line
should
be
referenced
when
considering
the
impact
of
leasing
activity.
Our
lease
maturity
profile
remains
staggered,
with
11.8%
expiring
in
2014,
9.4%
expiring
in
2015,
16.1%
expiring
in
2016
and
13.7%
expiring
in
2017.
Approximately
1.0
million
square
feet
or
34.0%
of
the
space
expiring
in
2014
is
renewed
or
leased.
Current
monthly/
(in
square
feet)
Current
vacancy
short-‐term
tenancies
2014
2015
2016
2017
2018+
Total
Western
Canada
–
uncommitted
356,804
4,082
539,509
516,439
880,358
803,202
1,900,894
5,001,288
Western
Canada
–
committed
Total
Western
Canada
Calgary
–
uncommitted
Calgary
–
committed
Total
Calgary
Toronto
–
uncommitted
Toronto
–
committed
Total
GTA/Toronto
-‐
356,804
257,327
-‐
257,327
619,562
-‐
-‐
88,627
6,284
4,636
-‐
-‐
99,547
4,082
628,136
522,723
884,994
803,202
1,900,894
5,100,835
100,971
276,831
347,877
906,606
490,793
1,244,946
3,625,351
-‐
269,533
39,428
5,487
20,144
-‐
334,592
100,971
546,364
387,305
912,093
510,937
1,244,946
3,959,943
5,879
969,053
958,714
1,720,913
1,605,012
4,542,445
10,421,578
-‐
531,230
22,993
158,014
2,633
38,975
753,845
619,562
5,879
1,500,283
981,707
1,878,927
1,607,645
4,581,420
11,175,423
Eastern
Canada
–
uncommitted
168,302
Eastern
Canada
–
committed
Total
Eastern
Canada
Total
–
uncommitted
-‐
168,302
-‐
-‐
-‐
136,401
407,920
268,608
451,408
2,722,362
4,155,001
99,261
-‐
3,569
-‐
67,759
170,589
235,662
407,920
272,177
451,408
2,790,121
4,325,590
1,401,995
110,932
1,921,794
2,230,950
3,776,485
3,350,415
10,410,647
23,203,218
Total
–
committed
Total(1)
(1)
Excludes
redevelopment
properties
and
properties
held
for
sale.
1,401,995
-‐
-‐
988,651
68,705
171,706
22,777
106,734
1,358,573
110,932
2,910,445
2,299,655
3,948,191
3,373,192
10,517,381
24,561,791
Dundee
REIT
2013
Annual
Report
|
11
The
following
table
details
expiring
rents
across
our
portfolio
as
well
as
our
estimate
of
average
market
rents
based
on
current
leasing
activity
in
similar
properties
at
December
31,
2013.
Expiring
rents
and
market
rents
represent
base
rates
and
do
not
include
the
impact
of
lease
incentives.
Currently,
our
2014
expiring
rents
are
approximately
6.2%
below
market
and
our
2015
expiring
rents
are
approximately
11.7%
below
market,
which,
when
coupled
with
our
well-‐staggered
lease
rollover
profile,
positions
us
to
continue
capturing
rate
gains
with
new
leasing.
Current
monthly/
short-‐term
tenancies
2014
2015
2016
2017
2018+
$
-‐
12.78
48.21
4.31
16.98
21.52
14.68
15.82
16.39
Expiring
rents
Western
Canada
Calgary
Toronto
Eastern
Canada
Portfolio
average
Market
rents(1)
Office
Western
Canada
20.05
Calgary
21.55
21.02
Toronto
14.80
Eastern
Canada
20.03
Market
rent
average
(1)
Estimate
only;
based
on
current
market
rents
with
no
allowance
for
increases
in
future
years.
Subject
to
changes
in
market
conditions.
16.89
16.18
15.81
16.19
16.19
19.02
22.49
15.20
16.25
17.40
18.86
23.23
17.02
15.23
18.09
17.04
20.52
16.71
15.55
17.62
21.14
20.67
20.43
15.16
19.93
19.04
26.55
17.26
15.58
19.79
15.27
29.97
16.53
44.58
28.72
-‐
$
$
$
21.56
23.57
22.46
12.65
20.04
22.40
23.77
21.34
12.33
19.63
Initial
direct
leasing
costs
and
lease
incentives
Initial
direct
leasing
costs
include
leasing
fees
and
related
costs
and
broker
commissions
incurred
in
negotiating
and
arranging
tenant
leases.
Lease
incentives
include
costs
incurred
to
make
leasehold
improvements
to
tenant
spaces
and
cash
allowances.
Initial
direct
leasing
costs
and
lease
incentives
are
dependent
upon
asset
type,
lease
terminations
and
expiries,
the
mix
of
new
leasing
activity
compared
to
renewals,
portfolio
growth
and
general
market
conditions.
Short-‐term
leases
generally
have
lower
costs
than
long-‐term
leases,
and
leasing
costs
associated
with
office
space
are
generally
higher
than
costs
associated
with
flex
office
and
industrial
space.
For
the
year
ended
December
31,
2013,
we
incurred
approximately
$45.3
million
in
leasing
costs
and
lease
incentives,
of
which
$37.1
million
related
to
tenants
taking
occupancy
of
the
space
in
2013,
representing
an
average
cost
of
$11.12
per
square
foot
leased.
The
remaining
leasing
costs
and
lease
incentives
of
$8.2
million
related
to
tenants
taking
occupancy
of
the
space
in
2012.
Performance
indicators
Operating
activities
(continuing
portfolio)(1)
Portfolio
size
(sq.
ft.)
Occupied
and
committed
Square
footage
leased
and
occupied
in
2013
Lease
incentives
and
initial
direct
leasing
costs
(for
space
leased
and
occupied
in
2013)
Lease
incentives
and
initial
direct
leasing
costs
per
square
foot
(for
space
leased
and
occupied
in
2013)
(1) Excludes
redevelopment
properties
and
properties
held
for
sale.
Total
24,561,791
94.3%
3,332,965
37,078
11.12
$
$
Dundee
REIT
2013
Annual
Report
|
12
Tenant
base
profile
Our
tenant
base
includes
municipal,
provincial
and
federal
governments
as
well
as
a
wide
range
of
high-‐quality
large
international
corporations,
including
Canada’s
third-‐largest
bank
and
three
of
Canada’s
prominent
law
firms,
and
small
to
medium-‐sized
businesses
across
Canada.
With
approximately
2,300
tenants,
our
risk
exposure
to
any
single
large
lease
or
tenant
is
low.
The
average
size
of
our
office
tenants
is
approximately
11,500
square
feet.
Effectively
managing
this
diverse
tenant
base
is
one
of
our
key
strengths
and
has
helped
us
to
maintain
consistently
high
occupancy
levels
and
to
continually
capitalize
on
rental
rate
increases.
The
stability
and
quality
of
our
cash
flow
is
further
enhanced
by
the
fact
that
rental
revenue
from
government
and
government
agencies
comprises
approximately
17.5%
of
our
total
rental
revenue.
The
list
of
our
20
largest
tenants
includes
both
federal
and
provincial
governments
as
well
as
other
nationally
and
internationally
recognizable
high-‐quality
corporations
and
businesses.
The
following
table
outlines
their
contributions
to
our
rental
revenue.
Owned
area
Owned
area
revenue
remaining
lease
term
Gross
rental
Weighted
average
Tenant
Government
of
Canada
Bank
of
Nova
Scotia
Government
of
Ontario
Bell
Canada
Government
of
Québec
Enbridge
Pipelines
Inc.
Telus
Government
of
Saskatchewan
State
Street
Trust
Company
Government
of
Alberta
Aviva
Canada
Inc.
Newalta
Corporation
Government
of
British
Columbia
Borell
Management
Loyalty
Management
SNC-‐Lavalin
Inc.
Miller
Thomson
Winners
Merchants
International
Cenovus
Energy
Cassels
Brock
Blackwell
Total
(sq.
ft.)
1,620,774
988,979
670,353
376,694
695,629
248,577
287,803
374,736
244,936
325,208
335,900
187,297
272,867
124,795
194,018
209,002
137,049
219,685
140,605
94,507
7,749,414
(%)
6.6
4.0
2.7
1.5
2.8
1.0
1.2
1.5
1.0
1.3
1.4
0.8
1.1
0.5
0.8
0.9
0.6
0.9
0.6
0.4
(%)
7.3
7.3
3.1
1.9
1.8
1.5
1.4
1.4
1.4
1.2
1.1
1.1
1.1
1.0
1.0
0.8
0.8
0.8
0.8
0.7
31.6
37.5
(years)
3.0
10.5
5.6
4.3
12.7
5.1
2.3
2.9
8.3
3.9
2.6
5.8
3.7
3.0
3.8
6.4
9.7
1.5
9.5
11.0
5.8
Dundee
REIT
2013
Annual
Report
|
13
OUR
RESOURCES
AND
FINANCIAL
CONDITION
Our
discussion
of
assets
and
liabilities
below
includes
our
investment
in
joint
ventures
that
are
equity
accounted
for,
at
our
proportionate
share
of
assets
and
liabilities.
December
31,
2013
December
31,
2012
Amounts
per
consolidated
financial
statements
Share
from
investment
in
joint
ventures
Amounts
per
consolidated
financial
statements
Share
from
investment
in
joint
ventures
Total
Total
Assets
NON-‐CURRENT
ASSETS
Investment
properties
Investment
in
Dundee
Industrial
Investment
in
joint
ventures
Other
non-‐current
assets
CURRENT
ASSETS
Promissory
notes
receivable
Amounts
receivable
Prepaid
expenses
and
other
assets
Cash
and
cash
equivalents
Assets
held
for
sale
Total
assets
Liabilities
NON-‐CURRENT
LIABILITIES
Debt
Subsidiary
redeemable
units
Tenant
security
deposits
Deferred
Unit
Incentive
Plan
Other
financial
liabilities
Deferred
tax
liabilities
CURRENT
LIABILITIES
Debt
Amounts
payable
and
accrued
liabilities
Distributions
payable
Liabilities
related
to
assets
held
for
sale
Total
liabilities
$
6,241,685
166,317
527,255
104,822
7,040,079
$
1,061,436
-‐
(527,255)
2,804
536,985
$
7,303,121
166,317
-‐
107,626
7,577,064
$
5,477,560
160,976
490,770
95,301
6,224,607
$
1,038,867
-‐
(490,770)
2,940
551,037
$
6,516,427
160,976
-‐
98,241
6,775,644
-‐
28,476
9,450
31,017
68,943
15,921
7,124,943
2,884,481
101,978
18,848
18,535
19
5,167
3,029,028
$
$
$
$
-‐
2,520
432
2,862
5,814
-‐
542,799
496,410
-‐
235
-‐
-‐
-‐
496,645
-‐
30,996
9,882
33,879
74,757
15,921
7,667,742
3,380,891
101,978
19,083
18,535
19
5,167
3,525,673
$
$
42,000
31,106
10,714
24,014
107,834
20,547
6,352,988
2,470,337
132,078
16,847
18,754
1,772
4,492
2,644,280
$
$
$
$
-‐
2,100
440
7,179
9,719
-‐
560,756
489,976
-‐
354
-‐
-‐
-‐
490,330
42,000
33,206
11,154
31,193
117,553
20,547
6,913,744
2,960,313
132,078
17,201
18,754
1,772
4,492
3,134,610
$
$
264,535
11,678
276,213
308,089
36,992
345,081
88,749
19,493
372,777
34,476
-‐
46,154
123,225
19,493
418,931
76,896
18,056
403,041
33,434
-‐
70,426
110,330
18,056
473,467
-‐
3,401,805
$
$
-‐
542,799
-‐
3,944,604
$
9,268
3,056,589
$
$
-‐
560,756
9,268
3,617,345
$
Dundee
REIT
2013
Annual
Report
|
14
Investment
properties
For
the
year
ended
December
31,
2013,
the
value
of
our
investment
property
portfolio,
including
those
assets
held
in
joint
ventures
and
excluding
redevelopment
properties
and
assets
held
for
sale,
increased
to
$7.3
billion
from
$6.5
billion
at
December
31,
2012,
representing
a
weighted
average
cap
rate
of
6.19%
and
6.35%,
respectively.
During
Q4
2013,
we:
• acquired
an
office
property
for
$8.1
million,
excluding
transaction
costs;
•
• recorded
a
net
fair
value
loss
of
$14.4
million.
incurred
$11.7
million
in
building
improvements
and
$13.9
million
in
lease
incentives;
and
During
Q3
2013,
we:
• acquired
office
properties
for
$140.3
million,
excluding
transaction
costs;
•
• recorded
a
net
fair
value
gain
of
$1.6
million.
incurred
$13.8
million
in
building
improvements
and
$9.1
million
in
lease
incentives;
and
During
Q2
2013,
we:
• acquired
office
properties
for
$360.1
million,
excluding
transaction
costs;
•
• recorded
a
net
fair
value
gain
of
$54.8
million.
incurred
$6.3
million
in
building
improvements
and
$11.6
million
in
lease
incentives;
and
During
Q1
2013,
we:
• acquired
an
office
property
for
$84.0
million,
excluding
transaction
costs;
• sold
non-‐core
assets
for
gross
proceeds
of
$21.5
million;
•
• recorded
a
net
fair
value
gain
of
$78.6
million.
incurred
$4.4
million
in
building
improvements
and
$10.7
million
in
lease
incentives;
and
Fair
values
were
determined
using
the
direct
capitalization
method
and/or
the
discounted
cash
flow
method.
The
direct
capitalization
method
applies
a
cap
rate
to
stabilized
NOI
and
incorporates
allowances
for
vacancy
and
management
fees.
The
resulting
capitalized
value
is
further
adjusted
for
extraordinary
costs
to
stabilize
income
and
non-‐recoverable
capital
expenditures,
where
applicable.
Individual
properties
were
valued
using
cap
rates
in
the
range
of
5.15%
to
9.00%.
The
discounted
cash
flow
method
discounts
the
expected
future
cash
flows,
generally
over
a
term
of
ten
years,
and
uses
discount
rates
and
terminal
capitalization
rates
specific
to
each
property.
The
fair
value
of
our
investment
properties,
including
investment
in
joint
ventures,
is
set
out
below:
Western
Canada
Calgary
Toronto
Eastern
Canada
Total
Add:
Redevelopment
properties
Assets
held
for
sale
Total
portfolio
Less:
Investment
in
joint
ventures
Assets
held
for
sale
Total
per
consolidated
balance
sheets
December
31,
September
30,
December
31,
Total
portfolio
2013
1,491,535
1,396,921
3,565,210
839,455
7,293,121
10,000
20,481
7,323,602
1,061,436
20,481
6,241,685
$
$
$
$
$
$
2013
1,484,415
1,402,052
3,551,212
834,236
7,271,915
10,400
20,413
7,302,728
1,064,630
20,413
6,217,685
$
$
$
2012
1,272,704
1,148,522
3,257,009
827,492
6,505,727
10,700
20,295
6,536,722
1,038,867
20,295
5,477,560
Dundee
REIT
2013
Annual
Report
|
15
The
value
of
our
total
portfolio
increased
by
$20.9
million
in
Q4
2013,
of
which
$8.5
million
reflects
acquisitions
during
the
quarter,
and
$25.6
million
is
attributable
to
building
improvements,
initial
direct
leasing
costs
and
lease
incentives.
Offsetting
this
is
$14.4
million
of
fair
value
loss
recorded
during
the
quarter,
mainly
attributable
to
changes
in
leasing
assumptions
primarily
in
downtown
Calgary
and
the
Greater
Toronto
Area,
and
the
remainder
due
to
foreign
currency
translation
gains
net
of
amortization
of
lease
incentives.
The
weighted
average
cap
rate
across
our
portfolio
remained
flat
at
6.19%
compared
to
Q3
2013.
Western
Canada
Calgary
Toronto
Eastern
Canada
Total
Add:
Redevelopment
properties
Assets
held
for
sale
Total
portfolio
Less:
Investment
in
joint
ventures
Assets
held
for
sale
Total
comparative
properties
December
31,
September
30,
Comparative
properties(1)
2013
1,491,535
1,396,921
3,556,729
839,455
7,284,640
10,000
20,481
7,315,121
1,061,436
20,481
6,233,204
$
$
$
2013
1,484,415
1,402,052
3,551,212
834,236
7,271,915
10,400
20,413
7,302,728
1,064,630
20,413
6,217,685
$
$
$
$
$
$
Change
7,120
(5,131)
5,517
5,219
12,725
(400)
68
12,393
(3,194)
68
15,519
(1)
Comparative
properties
are
properties
owned
by
the
Trust
at
September
30,
2013.
On
a
comparative
property
basis
(excluding
redevelopment
properties
and
assets
held
for
sale),
the
fair
value
increased
by
$12.7
million
compared
to
Q3
2013.
The
value
of
our
Western
Canada
portfolio
increased
by
$7.1
million
during
the
quarter,
mainly
due
to
$2.1
million
of
building
improvements
and
initial
direct
leasing
costs
and
lease
incentive
additions,
as
well
as
a
$5.5
million
fair
value
gain,
which
reflects
changes
in
leasing
assumptions,
all
offset
by
the
amortization
of
lease
incentives.
The
value
of
our
Calgary
portfolio
decreased
by
$5.1
million,
mainly
due
to
a
$12.0
million
fair
value
loss
recorded
during
the
quarter,
which
reflects
a
3
basis
points
(“bps”)
weighted
average
cap
rate
increase
and
changes
in
leasing
assumptions,
offset
by
$7.1
million
of
building
improvements
and
initial
direct
leasing
costs
and
lease
incentive
additions.
The
value
of
our
Toronto
portfolio
increased
by
$5.5
million,
mainly
due
to
$14.8
million
of
building
improvements
and
initial
direct
leasing
costs
and
lease
incentive
additions,
offset
by
a
$7.9
million
fair
value
loss
recorded
during
the
quarter,
which
reflects
changes
in
leasing
assumptions.
The
value
of
our
Eastern
Canada
portfolio
increased
by
$5.2
million,
mainly
due
to
$3.1
million
of
foreign
currency
adjustments
to
the
U.S.
properties
and
$1.7
million
of
building
improvements
and
initial
direct
leasing
costs
and
lease
incentive
additions
recorded
during
the
quarter.
Dundee
REIT
2013
Annual
Report
|
16
Western
Canada
Calgary
Toronto
Eastern
Canada
Total
December
31,
2013
September
30,
2013
Range
(%)
5.75–8.75
5.50–7.50
4.83–9.00
6.00–7.75
5.15–9.00
Weighted
average
(%)
6.56
6.22
5.95
6.48
6.19
Range
(%)
5.75–8.75
5.50–7.75
5.15–9.25
6.00–7.75
5.15–9.25
Weighted
average
(%)
6.55
6.19
5.96
6.49
6.19
Investing
activities
Key
performance
indicators
in
the
management
of
our
investing
activities
include
the
following:
Capitalization
rates
Total
portfolio
December
31,
2012
Range
(%)
5.75–9.25
5.75–8.50
5.25–9.25
5.75–7.75
5.25–9.25
Weighted
average
(%)
6.63
6.76
6.05
6.48
6.35
Investing
activities(1)
Acquisition
of
investment
properties(2)
Acquisition
of
equity
accounted
interest
in
100
Yonge
Street,
Toronto(2)
Acquisition
of
equity
accounted
interest
in
Scotia
Plaza
Acquisition
of
Whiterock
investment
properties(2)
Building
improvements
Three
months
ended
December
31,
Years
ended
December
31,
2013
2012
2013
2012
$
8,481
$
154,561
$
548,658
$
336,265
-‐
-‐
-‐
-‐
-‐
11,737
-‐
-‐
9,609
-‐
56,273
-‐
-‐
36,229
-‐
-‐
875,509
1,419,899
20,410
1,945
Development
projects
(1)
Includes
investments
in
joint
ventures,
assets
related
to
discontinued
operations
and
properties
held
for
sale.
(2)
Amount
represents
purchase
price
including
transaction
costs.
Dundee
REIT
2013
Annual
Report
|
17
Acquisitions
During
the
year
ended
December
31,
2013,
we
completed
the
following
acquisitions:
Broadmoor
Plaza,
Edmonton
887
Great
Northern
Way,
Vancouver
(Discovery
Parks)
340–350
3rd
Avenue
North,
Saskatoon
(T&T
Towers)
and
14505–14555
Bannister
Road,
Calgary
(Parke
at
Fish
Creek)
20
Toronto
Street
and
137
Yonge
Street,
Toronto
212
King
Street
West,
Toronto
100
Yonge
Street,
Toronto
IBM
Corporate
Park,
Calgary
4561
Parliament
Avenue,
Regina
(Harbour
Landing
Business
Park)
83
Yonge
Street,
Toronto
Total
(1)
Includes
$14.7
million
in
transaction
costs.
Interest
Acquired
Occupancy
acquired
GLA
on
acquisition
Property
type
office
(%)
100.0
(sq.
ft.)
371,561
(%)
98.5
$
Purchase
price(1)
84,892
Date
acquired
March
15,
2013
office
100.0
164,364
100.0
68,068
April
8,
2013
office
office
office
office
office
100.0
100.0
100.0
66.7
66.7
191,147
422,990
73,277
161,525
238,171
99.1
99.4
100.0
99.4
98.1
62,610
145,983
38,730
56,273
124,377
April
12,
2013
April
30,
2013
May
24,
2013
June
26,
2013
August
13,
2013
office
office
100.0
100.0
38,975
11,521
1,673,531
100.0
71.2
98.9
$
15,517
September
16,
2013
December
2,
2013
8,481
604,931
During
the
year
ended
December
31,
2012,
we
completed
the
following
acquisitions:
5001
Yonge
Street,
Toronto
67
Richmond
Street
West,
Toronto
Whiterock
Portfolio
Parking
lots,
Saskatoon
1
Riverside
Drive,
Windsor
Scotia
Plaza,
Toronto
Trans
America
Group
properties,
Edmonton
30
Adelaide
Street
East
(State
Street
Financial
Centre),
Toronto
Total
Interest
Acquired
Occupancy
acquired
GLA
on
acquisition
Purchase
Property
type
office
office
office/
industrial/retail
office
office
office
(%)
100.0
100.0
100.0
100.0
100.0
66.7
(sq.
ft.)
309,138
44,996
(%)
100.0
100.0
$
(1)
price
112,984
14,464
Date
acquired
January
19,
2012
January
30,
2012
7,368,679
(2)
9,567
235,915
1,317,795
97.6
100.0
78.0
99.5
1,419,899
18,242
March
2,
2012
March
12,
2012
36,014
875,509
(3)
April
26,
2012
June
15,
2012
office/industrial
60.0
373,121
88.7
75,787
October
4,
2012
office
50.0
206,967
9,866,178
99.9
97.2
$
78,774
2,631,673
December
28,
2012
(1)
Includes
$41.8
million
in
transaction
costs.
(2)
Includes
437,715
square
feet
reclassified
to
assets
held
for
sale.
(3)
Equity
accounted
investment.
The
acquisition
of
Whiterock
was
completed
on
March
2,
2012,
and
was
accounted
for
as
a
business
combination.
The
acquisition
included
$1.4
billion
of
investment
properties.
The
purchase
was
funded
with
$159.8
million
in
cash
and
the
issuance
of
12,580,347
REIT
A
Units,
valued
at
$34.56
per
unit,
representing
a
total
consideration
of
$594.6
million.
Dundee
REIT
2013
Annual
Report
|
18
Building
improvements
Building
improvements
represent
investments
made
to
ensure
optimal
building
performance.
For
the
three
and
twelve
months
ended
December
31,
2013,
we
incurred
$11.7
million
and
$36.2
million,
respectively,
in
expenditures
related
to
building
improvements,
substantially
all
of
which
are
recoverable
from
tenants.
Recurring
recoverable
expenditures
for
the
three
and
twelve
months
ended
December
31,
2013
were
$2.4
million
and
$10.2
million,
respectively,
and
included
elevator,
roof
and
heating,
ventilation
and
air
conditioning
replacements
as
well
as
parking
upgrades.
Recoverable
enhancement
projects
for
the
three
and
twelve
months
ended
December
31,
2013
were
$8.1
million
and
$14.0
million,
respectively.
For
the
three
and
twelve
months
ended
December
31,
2013,
approximately
$0.9
million
and
$4.1
million,
respectively,
was
spent
on
sustainability
and
environmental
initiatives,
substantially
all
of
which
is
recovered
from
tenants.
Non-‐recurring
building
improvements
included
capital
expenditures
that
generally
would
not
be
expected
to
recur
over
the
useful
life
of
the
building.
The
table
below
represents
amounts
either
paid
or
accrued
during
the
period:
Building
improvements(1)
Recurring
recoverable
Recurring
recoverable
enhancement
projects
Recoverable
–
identified
upon
acquisition
Recurring
non-‐recoverable
Non-‐recurring
Sustainability
and
environmental
initiatives
Total
Three
months
ended
December
31,
2012
2013
Years
ended
December
31,
2013
2012
$
$
2,429
8,088
202
78
34
906
11,737
$
$
2,028
2,382
2,805
510
611
1,273
9,609
$
$
10,190
14,023
6,005
1,344
543
4,124
36,229
$
$
6,252
3,502
4,405
314
2,828
3,109
20,410
(1)
Includes
investment
in
joint
ventures
that
are
equity
accounted,
assets
related
to
discontinued
operations
–
industrial
properties
and
properties
held
for
sale.
Development
For
the
three
and
twelve
months
ended
December
31,
2013,
there
were
no
expenditures
for
development.
During
the
first
quarter
of
2012,
we
completed
construction
of
the
Gallery
Building,
an
office
property
in
Yellowknife
that
is
fully
leased
to
the
Government
of
Canada
for
a
ten-‐year
term,
which
commenced
in
March
2012.
Dispositions
Pursuant
to
the
strategic
repositioning
of
our
portfolio,
we
completed
the
following
dispositions
for
the
years
ended
December
31,
2013
and
December
31,
2012:
Year
ended
December
31,
2013
625
University
Park
Drive,
Regina
2640,
2510–2550
Quance
Street,
Regina
Total
(1)
Gross
proceeds
before
transaction
costs.
Property
type
office
office
Disposed
GLA
(sq.
ft.)
17,145
69,554
$
Gross
proceeds(1)
5,182
16,300
$
Mortgages/
term
loan
discharged
-‐
8,767
$
86,699
$
21,482
$
8,767
$
Loss
on
sale
(68)
(2)
(215)
(2)
(283)
Date
disposed
January
31,
2013
January
31,
2013
(2)
Loss
on
sale
recognized
is
related
to
the
write-‐off
of
financing
costs
and
fair
value
adjustments
associated
with
the
debt
discharged,
transaction
costs
and
the
write-‐off
of
goodwill
associated
with
the
cash-‐generating
unit.
Dundee
REIT
2013
Annual
Report
|
19
Year
ended
December
31,
2012
ARAM
Building,
Calgary
West
Chambers,
Edmonton
4250
Albert
Street,
Regina
885
Don
Mills
Road,
Toronto
12804–137th
Avenue,
Edmonton
Bisma
Centre,
Calgary
998
Parkland
Drive,
Halifax
193
Malpeque
Road,
Charlottetown
655
University
Avenue,
Charlottetown
Industrial
Portfolio
7102–7220
Barlow
Trail
SE,
Calgary
Total
Disposed
Property
GLA
type
office
office
retail
office
retail
office
retail
retail
retail
(sq.
ft.)
36,428
92,560
41,238
59,449
54,514
27,496
33,857
41,573
26,043
industrial
5,134,114
234,676
industrial
5,781,948
Gross
proceeds(1)
7,700
24,200
9,600
8,975
18,900
9,200
7,170
5,100
3,800
575,469
10,150
680,264
$
$
Mortgages/
term
loan
Net
gain
(loss)
discharged
-‐
6,786
5,126
4,547
12,633
-‐
4,624
-‐
2,357
225,592
-‐
261,665
$
$
$
$
on
sale
(314)
(2)
(849)
(2)
(11)
(2)
Date
disposed
February
2,
2012
August
15,
2012
August
15,
2012
August
30,
2012
1,770
September
14,
2012
(653)
(2)
September
19,
2012
2,054
October
4,
2012
67
October
4,
2012
(43)
(2)
October
4,
2012
25
October
4,
2012
1,147
(516)
(2)
November
30,
2012
2,677
(1)
Gross
proceeds
before
transaction
costs.
(2)
Loss
on
sale
recognized
is
related
to
the
write-‐off
of
financing
costs
and
fair
value
adjustments
associated
with
the
debt
discharged,
transaction
costs
and
the
write-‐off
of
goodwill
associated
with
the
cash-‐generating
unit.
OUR
FINANCING
Liquidity
and
capital
resources
Dundee
REIT’s
primary
sources
of
capital
are
cash
generated
from
operating
activities,
credit
facilities,
mortgage
financing
and
refinancing,
and
equity
and
debt
issues.
Our
primary
uses
of
capital
include
the
payment
of
distributions,
costs
of
attracting
and
retaining
tenants,
recurring
property
maintenance,
major
property
improvements,
debt
principal
repayments,
interest
payments
and
property
acquisitions.
We
expect
to
meet
all
of
our
ongoing
obligations
with
current
cash
and
cash
equivalents,
cash
flows
generated
from
operations,
conventional
mortgage
refinancing
and,
as
growth
requires
and
when
appropriate,
new
equity
or
debt
issues.
Our
discussion
of
financing
activities
will
be
based
on
the
debt
balances
below,
which
include
debt
related
to
investment
in
joint
ventures
that
are
equity
accounted,
at
our
proportionate
ownership,
and
debt
associated
with
assets
held
for
sale.
Debt
Less
debt
related
to:
Investment
in
joint
ventures
Assets
held
for
sale
Debt
(per
consolidated
financial
statements)
December
31,
2013
3,662,543
508,088
5,439
3,149,016
$
$
December
31,
2012
3,314,594
526,968
9,200
2,778,426
$
$
Dundee
REIT
2013
Annual
Report
|
20
Debt
The
key
performance
indicators
in
the
management
of
our
debt
are
as
follows:
Financing
activities(1)
Weighted
average
effective
interest
rate
(year-‐end)(2)
Weighted
average
face
rate
of
interest
(year-‐end)(3)
Level
of
debt
(net
debt-‐to-‐gross
book
value)(4)
Interest
coverage
ratio
(times)(4)
Net
average
debt-‐to-‐EBITDFV
(years)(4)
Net
debt-‐to-‐adjusted
EBITDFV
(years)(4)
Proportion
of
total
debt
due
in
following
year
Debt
–
average
term
to
maturity
(years)
Variable
rate
debt
as
percentage
of
total
debt
December
31,
2013
December
31,
Pro
forma(6)
2012
(5)
4.18%
4.22%
47.6%
2.92
8.0
8.0
7.7%
4.6
8.7%
4.19%
4.22%
47.6%
2.92
8.0
8.0
3.7%
4.7
6.2%
4.33%
4.50%
47.8%
2.70
8.4
8.1
10.5%
5.1
4.3%
(1)
The
key
performance
indicators
for
December
31,
2012
exclude
the
results
of
operations
and
the
debt
of
discontinued
operations.
(2)
Weighted
average
effective
interest
rate
is
calculated
as
the
weighted
average
face
rate
of
interest
net
of
amortization
of
fair
value
adjustments
and
financing
costs
of
all
interest
bearing
debt,
including
debt
related
to
investment
in
joint
ventures
that
are
equity
accounted.
(3)
Weighted
average
face
rate
of
interest
includes
debt
related
to
investment
in
joint
ventures
that
are
equity
accounted.
(4)
The
calculation
of
the
following
non-‐GAAP
measures
are
included
in
the
“Non-‐GAAP
Measures”
section
of
the
MD&A:
level
of
debt,
interest
coverage
ratio
and
net
average
debt-‐to-‐EBITDFV
and
net
debt-‐to-‐adjusted
EBITDFV.
(5)
Comparative
figures
have
been
restated
to
conform
to
the
presentation
in
the
current
year.
(6)
The
key
performance
indicators
include
pro
forma
adjustments
that
take
into
consideration
the
redeployment
of
the
net
proceeds
received
from
the
Series
C
Debentures
offering
on
January
21,
2014.
We
currently
use
cash
flow
performance
and
debt
level
indicators
to
assess
our
ability
to
meet
our
financing
obligations.
Our
current
interest
coverage
ratio
is
2.92
times,
demonstrating
our
ability
to
more
than
adequately
cover
interest
expense
requirements.
We
also
monitor
our
debt-‐to-‐EBITDFV
ratio
to
gauge
our
ability
to
repay
existing
debt.
Our
current
net
average
debt-‐to-‐EBITDFV
ratio
is
8.0
years.
Our
weighted
average
face
rate
of
interest
at
December
31,
2013
is
4.22%,
down
6
bps
from
4.28%
at
September
30,
2013,
and
down
28
bps
from
4.50%
at
December
31,
2012.
After
accounting
for
fair
value
adjustments
and
financing
costs,
the
weighted
average
effective
interest
rate
for
outstanding
debt
is
4.18%
at
December
31,
2013,
down
4
bps
from
4.22%
at
September
30,
2013,
and
down
15
bps
from
4.33%
at
December
31,
2012.
Variable
rate
debt
as
a
percentage
of
total
debt
increased
to
8.7%
from
5.8%
at
September
30,
2013
and
4.3%
at
December
31,
2012,
reflecting
the
draw
on
the
demand
revolving
credit
facilities
throughout
2013
and
the
issuance
of
Series
B
Debentures
during
the
quarter.
On
January
21,
2014,
the
Trust
completed
the
issuance
of
$150
million
aggregate
principal
amount
of
Series
C
senior
unsecured
debentures
(“Series
C
Debentures”).
The
Series
C
Debentures
bear
interest
at
a
rate
of
4.074%
with
a
maturity
date
of
January
21,
2020.
Interest
on
the
Series
C
Debentures
is
payable
semi-‐annually
on
January
21
and
July
21,
with
the
first
payment
commencing
on
July
21,
2014.
Costs
related
to
the
issuance
of
the
Series
C
Debentures
approximated
$1.4
million.
The
net
proceeds
of
$148.6
million
from
the
Series
C
Debentures
were
mainly
used
to
pay
down
$87.5
million
of
the
demand
revolving
credit
facilities
and
repay
five
mortgages
totalling
$59.3
million.
This
further
strengthened
the
Trust’s
debt
metrics
by
reducing
our
variable
rate
debt
from
8.7%
at
December
31,
2013
to
6.2%
of
total
debt,
and
prolonged
our
debt
maturity
from
4.6
years
at
December
31,
2013
to
4.7
years.
Dundee
REIT
2013
Annual
Report
|
21
$
Mortgages
Term
debt
Demand
revolving
credit
facilities
Term
loan
facility
Convertible
debentures
Debentures
Total
$
Fixed
2,901,120
825
-‐
181,530
51,885
209,312
3,344,672
$
$
$
December
31,
2013
Total(1)
2,990,710
825
103,946
181,530
51,885
333,647
3,662,543
$
Variable
89,590
-‐
103,946
-‐
-‐
124,335
317,871
Fixed
2,902,942
248
-‐
180,837
52,092
36,029
3,172,148
$
$
$
$
Variable
74,889
-‐
67,557
-‐
-‐
-‐
142,446
$
December
31,
2012
Total(1)
2,977,831
248
67,557
180,837
52,092
36,029
3,314,594
$
Percentage
(1)
Includes
debt
related
to
investment
in
joint
ventures,
which
are
equity
accounted,
and
assets
held
for
sale.
100.0%
91.3%
8.7%
95.7%
4.3%
100.0%
Mortgages
payable
include
$16.8
million
of
fair
value
adjustments
on
mortgages
assumed
in
connection
with
acquisitions
(December
31,
2012
–
$19.9
million).
Amounts
recorded
at
December
31,
2013
for
the
convertible
debentures
include
a
net
fair
value
adjustment
of
$0.8
million
(December
31,
2012
–
$1.0
million),
recorded
at
the
time
of
assumption.
The
fair
value
adjustments
and
premiums,
net
of
discounts,
are
amortized
to
interest
expense
over
the
term
to
maturity
of
the
related
debt
using
the
effective
interest
rate
method.
A
demand
revolving
credit
facility
is
available
up
to
a
formula-‐based
maximum
not
to
exceed
$171.5
million,
in
the
form
of
rolling
one-‐month
bankers’
acceptances
(“BAs”)
bearing
interest
at
the
BA
rates
plus
1.75%
or
at
the
bank’s
prime
rate
(3.0%
as
at
December
31,
2013)
plus
0.75%,
and
is
secured
by
nine
properties
as
first-‐ranking
mortgages.
The
demand
revolving
credit
facility
matured
on
March
5,
2013
and
was
extended
to
March
5,
2014.
At
December
31,
2013,
$104.0
million
was
drawn
(December
31,
2012
–
$54.0
million
drawn)
on
the
facility
and
the
formula-‐based
amount
available
under
this
facility
was
$67.5
million
(December
31,
2012
–
$117.5
million).
Subsequent
to
year-‐end,
the
Trust
repaid
the
entire
$104.0
million
outstanding
balance
of
this
facility
with
a
portion
of
the
net
proceeds
received
from
the
Series
C
Debentures
offering
and
cash
on
hand.
Furthermore,
on
February
25,
2014,
this
facility
was
extended
to
March
5,
2016
with
the
same
terms.
A
demand
revolving
credit
facility
is
available
up
to
a
formula-‐based
maximum
not
to
exceed
$40.0
million,
bearing
interest
at
the
bank’s
prime
rate
(3.0%
as
at
December
31,
2013)
plus
1.5%.
This
facility
is
secured
by
first-‐ranking
collateral
mortgages
on
two
properties.
The
facility
matured
on
April
30,
2013
and
was
subsequently
extended
to
April
30,
2014
with
the
interest
rate
revised
to
the
bank’s
prime
rate
plus
1.25%.
At
December
31,
2013,
nothing
was
drawn
(December
31,
2012
–
$13.7
million
drawn)
on
the
facility
and
the
formula-‐based
amount
available
under
this
facility
was
$27.7
million,
less
$1.5
million
in
the
form
of
letters
of
guarantee
(December
31,
2012
–
$26.3
million
less
$1.6
million
in
the
form
of
letters
of
guarantee).
A
demand
revolving
credit
facility
is
available
up
to
a
formula-‐based
maximum
not
to
exceed
$35.0
million,
bearing
interest
at
the
bank’s
prime
rate
(3.0%
as
at
December
31,
2013)
plus
0.85%.
This
facility
is
secured
by
second-‐ranking
mortgages
on
two
properties.
The
facility
matured
on
April
30,
2013.
On
April
29,
2013,
the
facility
was
extended
to
April
30,
2014
with
the
interest
rate
revised
to
the
bank’s
prime
rate
plus
0.75%
or
BA
rates
plus
1.75%.
This
facility
was
also
amended
to
include
a
bulge
facility
of
$90.0
million
for
the
period
from
April
29,
2013
to
May
2,
2013,
bearing
the
same
interest
rate.
On
April
30,
2013,
$90.0
million
was
drawn
on
the
bulge
facility
to
fund
the
acquisition
of
20
Toronto
Street
and
137
Yonge
Street
in
Toronto.
The
facility
was
repaid
in
full
with
the
net
proceeds
received
from
the
public
offering
completed
on
May
1,
2013.
The
bulge
facility
expired
on
May
2,
2013
and
was
not
subsequently
renewed.
At
December
31,
2013,
nothing
was
drawn
(December
31,
2012
–
$nil
drawn)
on
the
facility
and
the
formula-‐based
amount
available
under
this
facility
was
$35.0
million,
less
$2.2
million
in
the
form
of
letters
of
guarantee
(December
31,
2012
–
$35.0
million
less
$2.0
million
in
the
form
of
letters
of
guarantee).
On
February
20,
2014,
the
Trust
extended
this
facility
to
April
30,
2015
with
the
same
terms.
A
revolving
acquisition
and
operating
facility
is
available
up
to
$35.0
million.
The
facility
can
be
increased
by
up
to
an
additional
$20.0
million.
Interest
is
borne
generally
at
the
bank’s
prime
rate
(3.0%
as
at
December
31,
2013)
plus
0.85%
or
BA
rates
plus
1.85%.
The
facility
is
secured
by
a
first-‐ranking
collateral
mortgage
on
one
property
and
a
second-‐ranking
collateral
mortgage
on
one
property
and
the
guarantee
of
the
Trust.
The
facility
expired
on
August
23,
2013
and
was
subsequently
extended
to
April
30,
2014
with
the
interest
rate
revised
to
the
bank’s
prime
rate
plus
0.75%
or
BA
rates
plus
1.75%.
At
December
31,
2013,
nothing
was
drawn
(December
31,
2012
–
$nil
drawn)
on
the
facility
and
the
amount
available
under
this
facility
was
$35.0
million,
less
$0.3
million
in
the
form
of
letters
of
guarantee
(December
31,
2012
–
$35.0
million,
less
$0.3
million
in
the
form
of
letters
of
guarantee).
On
February
20,
2014,
the
Trust
extended
this
facility
to
April
30,
2015
with
the
same
terms.
Dundee
REIT
2013
Annual
Report
|
22
On
June
13,
2013,
the
Trust
completed
the
issuance
of
$175.0
million
aggregate
principal
amount
of
Series
A
senior
unsecured
debentures
(“Series
A
Debentures”).
The
Series
A
Debentures
bear
interest
at
a
face
rate
of
3.424%
per
annum
with
a
maturity
date
of
June
13,
2018.
The
Series
A
Debentures
were
rated
BBB
(low)
by
DBRS,
which
was
the
Trust’s
first
debt
offering
that
was
an
investment
grade
rated
entity.
Interest
on
the
Series
A
Debentures
is
payable
semi-‐annually
on
June
13
and
December
13,
with
the
first
payment
commencing
on
December
13,
2013.
Costs
related
to
the
issuance
of
the
Series
A
Debentures
totalled
$1.6
million.
On
October
9,
2013,
the
Trust
completed
the
issuance
of
$125.0
million
aggregate
principal
amount
of
Series
B
floating
senior
unsecured
debentures
(“Series
B
Debentures”).
The
Series
B
Debentures
bear
interest
at
a
rate
of
three-‐month
CDOR
plus
170
basis
points
with
a
maturity
date
of
January
9,
2017.
Interest
on
the
Series
B
Debentures
is
payable
quarterly
in
arrears
on
January
9,
April
9,
July
9
and
October
9,
with
the
first
payment
commencing
on
January
9,
2014.
Costs
related
to
the
issuance
of
the
Series
B
Debentures
totalled
$0.7
million.
We
also
have
a
$188.0
million
term
loan
facility
outstanding.
This
facility
expires
on
August
15,
2016,
and
bears
interest
monthly
at
BA
rates
plus
1.85%.
In
order
to
manage
the
interest
rate
fluctuations,
we
have
entered
into
two
interest
rate
swap
agreements
(the
“swaps”)
to
effectively
fix
the
interest
rate.
We
have
applied
hedge
accounting
to
the
swaps.
On
August
15,
2012,
we
repaid
$4.5
million
on
the
term
loan
facility
as
one
of
the
properties
securing
the
facility
was
sold.
As
at
December
31,
2013,
$183.5
million
was
drawn
on
the
term
loan
facility.
At
December
31,
2013,
we
had
$33.9
million
in
cash
(including
cash
held
in
investment
in
joint
ventures
that
are
equity
accounted)
and
$161.2
million
available
from
our
revolving
credit
facilities.
In
addition,
we
have
15
unencumbered
properties
as
at
December
31,
2013
that
may
be
leveraged
to
provide
additional
financing.
Subsequent
to
year-‐end,
an
additional
five
properties
were
added
to
the
unencumbered
list
subsequent
to
the
discharge
of
five
mortgages,
bringing
the
total
to
20
properties.
Dundee
REIT
2013
Annual
Report
|
23
Changes
in
debt
levels,
including
debt
related
to
investment
in
joint
ventures
that
are
equity
accounted
and
assets
held
for
sale,
are
as
follows:
Demand
revolving
credit
Term
loan
Convertible
Year
ended
December
31,
2013
Mortgages
2,977,831
$
$
Term
debt
248
$
facilities
67,557
$
facility
180,837
$
debentures
Debentures
52,092
$
36,029
$
Total
3,314,594
53,110
251,049
(77,049)
(206,834)
-‐
969
(366)
-‐
-‐
645,889
-‐
(609,567)
(8,767)
3,710
(2,340)
2,990,710
$
$
-‐
-‐
(26)
825
$
-‐
-‐
67
103,946
$
181,530
$
-‐
-‐
-‐
-‐
-‐
-‐
693
-‐
-‐
-‐
-‐
-‐
300,000
-‐
-‐
53,110
1,197,907
(77,415)
(816,401)
-‐
-‐
(207)
51,885
$
-‐
-‐
(2,382)
333,647
$
(8,767)
3,710
(4,195)
3,662,543
Debt
as
at
December
31,
2012
New
debt
assumed
on
rental
property
acquisitions
New
debt
placed
Scheduled
repayments
Lump
sum
repayments
Mortgages
discharged
on
property
dispositions
Foreign
exchange
Other
adjustments(1)
Debt
as
at
December
31,
2013
(1)
Other
adjustments
include
financing
costs
on
new
debt
placed,
fair
value
adjustments,
amortization
of
financing
costs
and
amortization
of
fair
value
adjustments.
For
the
year
ended
December
31,
2013,
the
Trust
completed
approximately
$251.0
million
of
secured
mortgages
with
an
average
face
rate
of
4.1%
and
an
average
term
of
8.8
years.
In
addition,
the
Trust
completed
$300.0
million
of
unsecured
debentures
with
an
average
face
rate
of
3.2%
and
an
average
term
to
maturity
of
4.3
years.
Overall,
this
resulted
in
a
weighted
average
face
rate
of
3.6%
and
a
weighted
average
term
to
maturity
of
6.3
years.
Three
months
ended
December
31,
2013
Demand
revolving
credit
Term
loan
Convertible
Debt
as
at
September
30,
2013
New
debt
placed
Scheduled
repayments
Lump
sum
repayments
Foreign
exchange
Other
adjustments(1)
Debt
as
at
December
31,
2013
Mortgages
3,031,619
$
$
-‐
(22,038)
(20,115)
1,894
(650)
$
2,990,710
$
Term
debt
993
$
-‐
(142)
-‐
-‐
(26)
825
$
facilities
119,876
$
105,823
-‐
(121,824)
-‐
71
103,946
$
181,385
$
facility
debentures
Debentures
51,939
$
-‐
-‐
-‐
-‐
(54)
51,885
$
209,307
$
125,000
-‐
-‐
-‐
(660)
333,647
$
-‐
-‐
-‐
-‐
145
181,530
$
Total
3,595,119
230,823
(22,180)
(141,939)
1,894
(1,174)
3,662,543
(1)
Other
adjustments
include
financing
costs
on
new
debt
placed,
fair
value
adjustments,
amortization
of
financing
costs
and
amortization
of
fair
value
adjustments.
Dundee
REIT
2013
Annual
Report
|
24
Our
current
debt
profile
is
balanced
with
staggered
maturities
over
the
next
15
years.
The
following
is
our
debt
maturity
profile
as
at
December
31,
2013:
Demand
revolving
credit
$
facilities
-‐
-‐
-‐
-‐
-‐
-‐
$
Outstanding
balance
97,913
446,217
567,367
454,299
374,861
1,178,257
3,118,914
-‐
3,118,914
-‐
104,000
104,000
$
$
Scheduled
principal
repayments
on
non-‐matured
%
4.9
14.2
17.3
13.9
11.6
35.3
97.2
2.8
100.0
debt
79,749
75,419
65,238
54,874
48,629
112,564
436,473
-‐
436,473
Amount(1)
177,662
521,636
632,605
509,173
423,490
1,290,821
3,555,387
104,000
3,659,387
18,248
(15,092)
3,662,543
$
$
$
Weighted
average
effective
interest
rate
on
balance
due
Weighted
average
face
rate
on
balance
due
at
maturity
(%)
5.27
3.90
4.37
4.16
4.00
4.29
at
maturity
(%)
5.83
4.16
4.39
4.42
3.93
4.16
4.23
2.98
4.18
4.26
2.98
4.22
Debt
maturities
2014
2015
2016
2017
2018
2019
and
thereafter
Subtotal
before
demand
revolving
credit
facilities
2014
Subtotal
Fair
value
adjustments
Financing
costs
Total
$
$
(1)
Includes
debt
related
to
investment
in
joint
ventures
which
are
equity
accounted
and
assets
held
for
sale.
Subsequent
to
year-‐end,
the
Trust
repaid
approximately
61%
of
the
mortgages
due
in
2014,
totalling
approximately
$59.3
million,
and
repaid
the
entire
$104
million
outstanding
balance
of
the
demand
revolving
credit
facilities.
Convertible
debentures
The
total
principal
amounts
outstanding
for
the
convertible
debentures
are
as
follows:
5.5%
Series
H
Debentures
December
9,
2011
March
31,
2017
$
Date
issued
Maturity
date
Outstanding
Outstanding
REIT
A
Units
principal
December
31,
2013
51,128
principal
February
27,
2014
51,128
if
converted
February
27,
2014
1,393,569
$
On
December
31,
2012,
we
redeemed
all
the
outstanding
6.5%
Debentures,
5.7%
Debentures,
6.0%
Debentures
and
7.0%
Debentures.
The
redemption
price
was
determined
in
accordance
with
the
provisions
of
the
indentures
and
supplemental
debentures
related
to
the
redeemed
convertible
debentures.
The
aggregate
principal
amount
redeemed
was
$126.5
million.
Debt
settlement
costs
of
$2.7
million
were
recorded
on
the
consolidated
statements
of
comprehensive
income
relating
to
the
write-‐off
of
financing
costs
and
fair
value
adjustments
related
to
the
redeemed
convertible
debentures.
The
fair
value
of
the
conversion
features
of
the
convertible
debentures
is
remeasured
each
period,
with
changes
in
fair
value
being
recorded
in
comprehensive
income.
At
December
31,
2013,
the
conversion
feature
amounted
to
a
$0.3
million
financial
asset
(December
31,
2012
–
$1.4
million
financial
liability).
Dundee
REIT
2013
Annual
Report
|
25
Debentures
The
total
principal
amounts
outstanding
for
debentures
as
at
December
31,
2013
are
as
follows:
Series
A
Series
B
Series
K
Series
L
Total
(1)
Variable
interest
rate
at
three-‐month
CDOR
rate
plus
1.7%.
Date
issued
June
13,
2013
October
9,
2013
April
26,
2011
August
8,
2011
Maturity
date
June
13,
2018
January
9,
2017
April
26,
2016
September
30,
2016
Interest
rate
3.42%
2.98%(1)
5.95%
5.95%
Outstanding
principal
December
31,
2013
175,000
125,000
25,000
10,000
335,000
$
$
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.
Dundee
REIT’s
future
minimum
commitments
under
operating
and
finance
leases,
including
investment
in
joint
ventures
that
are
equity
accounted,
are
as
follows:
No
longer
than
1
year
1–5
years
Longer
than
5
years
Total
No
longer
than
1
year
1–5
years
Longer
than
5
years
Total
December
31,
2013
Operating
lease
Finance
lease
payments
1,118
1,870
8,411
11,399
$
$
payments
28
111
2,238
2,377
December
31,
2012
Operating
lease
Finance
lease
payments
498
1,165
1,350
3,013
$
$
payments
237
-‐
-‐
237
$
$
$
$
During
the
year
ended
December
31,
2013,
we
paid
$1.1
million
(December
31,
2012
–
$1.5
million)
in
minimum
lease
payments,
which
have
been
included
in
comprehensive
income
for
the
period.
In
an
effort
to
manage
the
volatility
of
electricity
prices,
the
Trust
has
entered
into
fixed
price
contracts
to
purchase
electricity
over
the
next
three
years
as
follows:
Number
of
properties
Expiry
date
2014
2015
2016
Total
Minimum
payments
due
Electricity
Edmonton,
Parkland
County
and
Strathcona
County
Calgary,
Edmonton
and
Strathcona
County
Total
9
May
31,
2015
$
755
$
327
$
-‐
$
1,082
51
December
31,
2016
5,276
6,031
5,186
5,513
2,873
2,873
13,335
14,417
Dundee
REIT
2013
Annual
Report
|
26
OUR
EQUITY
Our
discussion
of
equity
includes
LP
Class
B
Units,
Series
1
(“subsidiary
redeemable
units”),
which
are
economically
equivalent
to
REIT
Units.
Pursuant
to
IFRS,
the
subsidiary
redeemable
units
are
classified
as
a
liability
in
our
consolidated
financial
statements.
REIT
Units,
Series
A
REIT
Units,
Series
B
Accumulated
other
comprehensive
income
(loss)
Add:
LP
B
Units
Total
December
31,
2013
Number
of
Units
103,420,221
-‐
-‐
103,420,221
3,538,457
106,958,678
$
$
Amount
3,721,454
-‐
1,684
3,723,138
101,978
3,825,116
Number
of
Units
97,618,625
16,316
-‐
97,634,941
3,528,658
101,163,599
$
$
Unitholders’
equity
December
31,
2012
Amount
3,295,983
713
(297)
3,296,399
132,078
3,428,477
Our
Declaration
of
Trust
authorizes
the
issuance
of
an
unlimited
number
of
two
classes
of
Units:
REIT
Units
and
Special
Trust
Units.
The
Special
Trust
Units
may
only
be
issued
to
holders
of
LP
B
Units,
are
not
transferable
separately
from
these
Units,
and
are
used
to
provide
voting
rights
with
respect
to
Dundee
REIT
to
persons
holding
LP
B
Units.
The
LP
B
Units
are
held
by
Dundee
Corporation
and
Dream
Asset
Management
Corp.
(“DAM”),
formerly
known
as
Dundee
Realty
Corporation,
related
parties
to
Dundee
REIT.
Both
the
REIT
Units
and
Special
Trust
Units
entitle
the
holder
to
one
vote
for
each
Unit
at
all
meetings
of
the
unitholders.
The
LP
B
Units
are
exchangeable
on
a
one-‐for-‐one
basis
for
REIT
B
Units
at
the
option
of
the
holder,
which
can
then
be
converted
into
REIT
A
Units.
The
LP
B
Units
and
corresponding
Special
Trust
Units
together
have
economic
and
voting
rights
equivalent
in
all
material
respects
to
REIT
A
Units.
The
REIT
A
Units
and
REIT
B
Units
have
economic
and
voting
rights
equivalent
in
all
material
respects
to
each
other.
At
December
31,
2013,
DREAM
Unlimited
Corp.,
directly
and
indirectly
through
its
subsidiaries,
held
773,939
REIT
A
Units
and
383,823
LP
B
Units
for
a
total
ownership
interest
of
approximately
1.1%.
The
following
table
summarizes
the
changes
in
our
outstanding
equity:
Total
Units
issued
and
outstanding
on
January
1,
2013
Units
issued
pursuant
to
public
offering
Units
issued
pursuant
to
the
Distribution
Reinvestment
and
Unit
Purchase
Plan
(“DRIP”)
Units
issued
pursuant
to
the
Unit
Purchase
Plan
Units
issued
pursuant
to
Deferred
Unit
Incentive
Plan
(“DUIP”)
REIT
B
Units
exchanged
for
REIT
A
Units
Normal
course
issuer
bid
Total
Units
outstanding
on
December
31,
2013
Percentage
of
all
Units
Units
issued
pursuant
to
DRIP
on
January
15,
2014
Units
issued
pursuant
to
DRIP
on
February
15,
2014
Units
issued
pursuant
to
Unit
Purchase
Plan
Normal
course
issuer
bid
Total
Units
outstanding
on
February
27,
2014
Percentage
of
all
Units
REIT
A
Units
97,618,625
6,353,750
1,509,148
12,212
44,970
16,316
(2,134,800)
103,420,221
96.7%
176,636
176,437
686
(11,000)
103,762,980
96.7%
REIT
B
Units
16,316
LP
B
Units
3,528,658
-‐
-‐
-‐
-‐
(16,316)
-‐
-‐
0.0%
-‐
-‐
-‐
-‐
-‐
0.0%
-‐
9,799
-‐
-‐
-‐
-‐
3,538,457
3.3%
-‐
-‐
-‐
-‐
3,538,457
3.3%
Total
101,163,599
6,353,750
1,518,947
12,212
44,970
-‐
(2,134,800)
106,958,678
100.0%
176,636
176,437
686
(11,000)
107,301,437
100.0%
On
May
1,
2013,
we
completed
a
public
offering
of
6,353,750
REIT
A
Units,
including
an
over-‐allotment
option,
at
a
price
of
$36.20
per
unit
for
gross
proceeds
of
$230.0
million.
Costs
related
to
the
offering
totalled
$9.7
million
and
were
charged
directly
to
unitholders’
equity.
Dundee
REIT
2013
Annual
Report
|
27
On
March
2,
2012,
Dundee
REIT
took
up
approximately
40.9%
of
the
outstanding
Whiterock
units
under
its
offer
to
acquire
any
and
all
Whiterock
units
in
consideration
for
$16.25
or
0.4729
REIT
A
Units,
as
elected
by
Whiterock
unitholders.
Approximately
9,832,563,
or
27%,
of
the
Whiterock
units
were
tendered
to
our
offer
for
cash
totalling
$159.8
million
and
the
remaining
Whiterock
units
were
redeemed
by
Whiterock
in
consideration
for
0.4729
REIT
A
Units
for
each
Whiterock
unit.
In
total,
we
issued
12,580,347
REIT
A
Units
in
connection
with
the
transaction,
which
were
recorded
at
$34.56
per
unit,
representing
total
equity
consideration
valued
at
$434.8
million.
On
March
28,
2012,
we
completed
a
public
offering
of
6,555,000
REIT
A
Units,
including
an
over-‐allotment
option,
at
a
price
of
$35.35
per
unit
for
gross
proceeds
of
$231.7
million.
Costs
related
to
the
offering
totalled
$9.4
million
and
were
charged
directly
to
unitholders’
equity.
On
June
12,
2012,
we
completed
a
public
offering
of
10,392,550
REIT
A
Units,
including
the
over-‐allotment
option,
at
a
price
of
$35.90
per
unit
for
gross
proceeds
of
$373.1
million.
Costs
related
to
the
offering
totalled
$14.6
million
and
were
charged
directly
to
unitholders’
equity.
Short
form
base
shelf
prospectus
On
November
26,
2012,
the
Trust
issued
a
short
form
base
shelf
prospectus,
which
is
valid
for
a
25-‐month
period,
during
which
time
the
Trust
may
offer
and
issue,
from
time
to
time,
units
and
debt
securities
convertible
into
or
exchangeable
for
Units
of
the
Trust,
or
any
combination
thereof,
with
an
aggregate
offering
price
of
up
to
$2.0
billion.
As
at
December
31,
2013,
no
units
and
$300
million
of
unsecured
debentures
have
been
issued
under
the
short
form
base
shelf
prospectus.
On
January
21,
2014,
an
additional
$150
million
of
unsecured
debentures
were
issued
under
the
short
form
base
shelf
prospectus.
Normal
course
issuer
bid
The
Trust
renewed
its
normal
course
issuer
bid,
which
commenced
on
May
14,
2013,
and
will
remain
in
effect
until
the
earlier
of
May
13,
2014,
or
the
date
on
which
the
Trust
has
purchased
the
maximum
number
of
REIT
A
Units
permitted
under
the
bid.
Under
the
bid,
the
Trust
has
the
ability
to
purchase
for
cancellation
up
to
a
maximum
of
8,849,219
REIT
A
Units
(representing
10%
of
the
Trust’s
public
float
of
88,492,185
REIT
A
Units
at
the
time
of
entering
the
bid
through
the
facilities
of
the
Toronto
Stock
Exchange).
At
December
31,
2013,
2,134,800
REIT
A
Units
had
been
purchased
under
the
bid
and
subsequently
cancelled
for
a
total
cost
of
$60.7
million.
Subsequent
to
year-‐end,
the
Trust
purchased
an
additional
11,000
REIT
A
Units
under
the
normal
course
issuer
bid
for
cancellation
for
a
total
cost
of
approximately
$0.3
million.
Dundee
REIT
2013
Annual
Report
|
28
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
distributable
income.
We
also
exclude
the
impact
of
leasing
costs,
which
fluctuate
with
lease
maturities,
renewal
terms
and
the
type
of
asset
being
leased.
We
evaluate
the
impact
of
leasing
activity
based
on
averages
for
our
portfolio
over
a
two-‐
to
three-‐year
time
frame.
We
exclude
the
impact
of
transaction
costs
expensed
on
business
combinations
as
these
costs
are
considered
part
of
the
acquisition
cost
of
the
properties.
Additionally,
we
exclude
the
impact
of
the
amortization
of
financing
costs
and
non-‐recoverable
costs
that
were
incurred
prior
to
the
formation
of
the
Trust,
but
deduct
amortization
of
non-‐real
estate
assets
such
as
software
and
office
equipment
incurred
after
the
formation
of
the
Trust.
We
include
the
impact
of
vendor
head
lease
income
that
has
not
been
recognized
in
net
income.
Three
months
ended
December
31,
2013
Year
ended
December
31,
2013
Declared
distributions
4%
bonus
distributions(2)
Declared
Total
distributions
4%
bonus
distributions(2)
Total
2013
distributions(1)
Paid
in
cash
or
reinvested
in
units
Payable
at
December
31,
2013
Total
distributions
2013
reinvestment(1)
Reinvested
to
December
31,
2013
Reinvested
on
January
15,
2014
Total
distributions
reinvested
Distributions
paid
in
cash(1)
Reinvestment
to
distribution
ratio
Cash
payout
ratio
(1)
Includes
distributions
on
LP
B
Units.
$
39,752
$
20,237
59,989
9,529
$
5,027
14,556
$
45,433
24.3%
75.7%
$
$
$
381
$
189
570
381
$
201
582
$
40,133
20,426
$
215,514
$
1,737
$
217,251
20,237
189
20,426
60,559
$
235,751
$
1,926
$
237,677
9,910
5,228
15,138
$
43,433
$
1,737
$
45,170
$
$
5,027
201
5,228
48,460
$
1,938
$
50,398
187,291
20.6%
79.4%
(2)
Unitholders
who
participate
in
the
DRIP
receive
an
additional
distribution
of
units
equal
to
4%
of
each
cash
distribution
that
was
reinvested.
Distributions
declared
for
the
three
months
ended
December
31,
2013
were
$60.0
million,
up
$4.6
million
over
the
comparative
prior
year
period.
Distributions
declared
for
the
year
ended
December
31,
2013
were
$235.8
million,
up
$32.2
million
over
the
comparative
prior
year
period.
The
increase
mainly
reflects
a
larger
number
of
Units
outstanding
as
a
result
of
the
equity
issues
completed
in
2012
and
2013,
distributions
reinvested
in
additional
Units
and
vested
deferred
trust
units
exchanged
for
REIT
A
Units,
as
well
as
an
increase
in
the
distribution
rate
commencing
Q2
2013.
Of
the
distributions
declared
for
the
three
months
ended
December
31,
2013,
$14.6
million,
or
approximately
24.3%,
were
reinvested
in
additional
Units
(year
ended
December
31,
2013
–
$48.5
million
or
approximately
20.6%),
resulting
in
a
three
months
ended
December
31,
2013
cash
payout
ratio
of
75.7%
(year
ended
December
31,
2013
–
79.4%).
As
required
by
National
Policy
41-‐201,
“Income
Trusts
and
Other
Indirect
Offerings”,
the
following
table
outlines
the
differences
between
cash
flow
from
operating
activities
and
cash
distributions
as
well
as
the
differences
between
net
income
and
cash
distributions,
in
accordance
with
the
guidelines.
Dundee
REIT
2013
Annual
Report
|
29
Net
income
Cash
flows
from
operating
activities(1)
Add:
$
Investment
in
lease
incentives
and
initial
direct
leasing
costs
Change
in
non-‐cash
working
capital
Adjusted
cash
flows
from
operating
activities
Distributions
paid
and
payable(2)
Excess
(shortfall)
of
net
income
over
distributions
paid
and
payable
Excess
(shortfall)
of
cash
flow
from
operating
activities
over
distributions
paid
and
payable
Excess
(shortfall)
of
adjusted
cash
flows
from
operating
14,011
1,990
82,474
60,559
(803)
5,914
Three
months
ended
December
31,
2012
100,542
45,394
2013
59,756
66,473
$
$
2013
445,011
234,098
$
Years
ended
December
31,
2012
291,073
178,295
16,136
40,037
234,468
205,350
5,908
3,447
54,749
55,838
38,706
12,090
284,894
237,677
44,704
207,334
85,723
(10,444)
(3,579)
(27,055)
activities
over
distributions
paid
and
payable
21,915
(1,089)
47,217
29,118
(1)
Cash
flows
from
operating
activities
exclude
cash
flows
from
transaction
costs
on
acquired
businesses,
and
include
operating
cash
flows
from
investment
in
joint
ventures
that
are
equity
accounted.
(2)
Includes
distributions
on
LP
B
Units.
When
establishing
distribution
payments,
we
do
not
take
into
consideration
fluctuations
in
working
capital
and
transaction
costs
on
business
combinations,
but
rather
use
a
normalized
amount
as
a
proxy
for
leasing
costs.
For
the
three
months
ended
December
31,
2013,
adjusted
cash
flows
from
operating
activities
exceeded
distributions
paid
and
payable
by
$21.9
million
($47.2
million
for
the
year
ended
December
31,
2013).
Net
income
is
not
used
as
a
proxy
for
distributions
as
it
includes
fair
value
changes
on
investment
properties
and
fair
value
changes
on
financial
instruments,
which
are
not
reflective
of
the
Trust’s
ability
to
make
distributions.
Dundee
REIT
2013
Annual
Report
|
30
OUR
RESULTS
OF
OPERATIONS
Investment
properties
revenue
Investment
properties
operating
expenses
Net
rental
income
from
continuing
operations
Other
income
and
expenses
General
and
administrative
Share
of
net
income
and
dilution
gain
from
Fair
value
adjustments
to
investment
properties
Net
loss
on
sale
of
investment
properties
Interest:
Debt
Subsidiary
redeemable
units
Debt
settlement
and
other
costs,
net
Depreciation
and
amortization
Interest
and
fee
income
Fair
value
adjustments
to
financial
instruments
Income
before
income
taxes
and
discontinued
operations
Deferred
income
taxes
recovery
(expense)
Income
from
continuing
operations
Income
from
discontinued
operations
Net
income
for
the
period
Other
comprehensive
income
(loss)
Unrealized
gain
(loss)
on
interest
rate
swap
agreements
Unrealized
foreign
currency
translation
gain
Comprehensive
income
for
the
period
$
Amounts
included
in
consolidated
financial
statements
Share
of
income
from
investment
in
joint
ventures
Three
months
ended
December
31,
2013
Total
Amounts
included
in
consolidated
financial
statements
Share
of
income
from
investment
in
joint
ventures
2012
Total
$
179,574
$
28,844
$
208,418
$
162,014
$
29,985
$
191,999
(78,732)
(13,439)
(92,171)
(71,623)
(13,941)
(85,564)
100,842
15,405
116,247
90,391
16,044
106,435
(6,155)
-‐
-‐
(6,155)
(5,774)
(81)
(5,855)
3,027
1,568
-‐
1,568
investment
in
Dundee
Industrial
3,027
Share
of
net
income
from
investment
in
joint
ventures
5,415
(5,415)
-‐
10,488
(10,488)
-‐
(8,898)
(5,484)
(14,382)
45,595
(487)
45,108
-‐
-‐
-‐
(1,289)
-‐
(1,289)
(33,857)
(1,981)
(4,508)
-‐
(38,365)
(1,981)
-‐
(2)
4
-‐
(693)
942
(33,239)
(1,944)
(3,066)
(613)
1,435
-‐
(691)
938
251
58,891
865
59,756
-‐
59,756
(480)
1,085
605
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
251
(4,179)
58,891
99,373
865
(263)
59,756
99,110
-‐
59,756
1,432
100,542
(480)
1,085
605
344
320
664
(5,028)
-‐
(38,267)
(1,944)
-‐
-‐
40
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
(3,066)
(613)
1,475
(4,179)
99,373
(263)
99,110
1,432
100,542
344
320
664
60,361
$
-‐
$
60,361
$
101,206
$
-‐
$
101,206
Dundee
REIT
2013
Annual
Report
|
31
Amounts
per
consolidated
financial
statements
Share
of
income
from
investment
in
joint
ventures
Years
ended
December
31,
2013
Total
Amounts
per
consolidated
financial
statements
Share
of
income
from
investment
in
joint
ventures
2012
Total
$
687,172
$
113,359
$
800,531
$
607,796
$
78,768
$
686,564
(295,672)
(51,971)
(347,643)
(259,249)
(36,175)
(295,424)
391,500
61,388
452,888
348,547
42,593
391,140
(23,859)
(202)
(24,061)
(21,132)
(82)
(21,214)
Investment
properties
revenue
Investment
properties
operating
expenses
Net
rental
income
from
continuing
operations
Other
income
and
expenses
General
and
administrative
Share
of
net
income
and
dilution
gain
from
investment
in
Dundee
Industrial
15,697
-‐
15,697
84,382
(84,382)
-‐
1,568
(254)
-‐
254
1,568
-‐
79,277
41,345
120,622
105,572
(23,964)
81,608
Share
of
net
income
(loss)
from
investment
in
joint
ventures
Fair
value
adjustments
to
investment
properties
Net
gain
(loss)
on
sale
of
investment
properties
Acquisition
related
costs
Interest:
Debt
Subsidiary
redeemable
units
Debt
settlement
costs
Depreciation
and
amortization
Interest
and
fee
income
Fair
value
adjustments
to
financial
instruments
Income
before
income
taxes
and
discontinued
operations
Deferred
income
taxes
Income
from
continuing
operations
Income
from
discontinued
operations
Net
income
for
the
year
Other
comprehensive
income
Unrealized
gain
on
(283)
-‐
(130,169)
(7,897)
(241)
(2,527)
4,635
34,840
445,355
(344)
445,011
-‐
445,011
interest
rate
swap
agreements
39
Unrealized
foreign
currency
translation
gain
Comprehensive
income
for
the
1,942
1,981
-‐
-‐
(283)
-‐
(18,200)
-‐
-‐
(4)
55
(148,369)
(7,897)
(241)
(2,531)
4,690
1,530
(17,549)
(125,118)
(7,758)
(3,798)
(2,042)
5,045
-‐
-‐
1,530
(17,549)
(13,779)
-‐
-‐
(4)
168
(138,897)
(7,758)
(3,798)
(2,046)
5,213
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
34,840
(16,588)
(5,186)
(21,774)
445,355
(344)
268,023
(1,849)
445,011
266,174
-‐
445,011
24,899
291,073
39
1,942
1,981
1,227
78
1,305
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
268,023
(1,849)
266,174
24,899
291,073
1,227
78
1,305
year
$
446,992
$
-‐
$
446,992
$
292,378
$
-‐
$
292,378
Dundee
REIT
2013
Annual
Report
|
32
Basis
of
accounting
Our
discussion
of
income
from
continuing
operations
includes
our
share
of
income
from
investment
in
joint
ventures
and
excludes
the
prior
year
comparative
quarter
and
year
results
of
the
77
industrial
properties
sold
to
Dundee
Industrial
REIT
on
October
4,
2012,
which
are
included
in
income
from
discontinued
operations.
Investment
properties
revenue
Investment
properties
revenue
includes
net
rental
income
from
investment
properties
as
well
as
the
recovery
of
operating
costs
and
property
taxes
from
tenants.
Revenues
generated
by
acquisitions
completed
in
2012
and
2013,
mainly
the
Whiterock
Portfolio,
Scotia
Plaza,
Trans
America
Group
properties,
30
Adelaide
Street
East,
20
Toronto
Street
and
137
Yonge
Street,
and
IBM
Corporate
Park
were
the
primary
drivers
of
the
$16.4
million,
or
8.6%,
increase
in
investment
properties
revenue
over
the
prior
year
comparative
quarter,
and
$114.0
million,
or
16.6%,
increase
in
investment
properties
revenue
over
the
prior
year.
Investment
properties
operating
expenses
Investment
properties
operating
expenses
comprise
occupancy
costs
and
property
taxes
as
well
as
certain
expenses
that
are
not
recoverable
from
tenants,
the
majority
of
which
are
related
to
leasing.
Operating
expenses
fluctuate
with
changes
in
occupancy
levels
and
levels
of
repairs
and
maintenance.
Operating
expenses
increased
by
$6.6
million,
or
7.7%,
over
the
prior
year
comparative
quarter,
and
increased
by
$52.2
million,
or
17.7%,
over
the
prior
year,
mainly
driven
by
the
acquisitions
of
the
Whiterock
Portfolio,
Scotia
Plaza,
Trans
America
Group
properties,
30
Adelaide
Street
East,
20
Toronto
Street
and
137
Yonge
Street,
and
IBM
Corporate
Park.
General
and
administrative
expenses
General
and
administrative
expenses
primarily
comprise
expenses
related
to
corporate
management,
Board
of
Trustees’
fees
and
expenses,
investor
relations
and
asset
management
fees.
For
Q4
2013,
general
and
administrative
expenses
included
a
$0.9
million
non-‐cash
component
relating
to
the
DUIP,
a
decrease
of
$0.1
million
over
the
prior
year
comparative
quarter
mainly
driven
by
a
fair
value
adjustment
to
the
DUIP.
On
a
cash
basis,
general
and
administrative
expenses
increased
$0.6
million
over
the
prior
year
comparative
quarter,
primarily
as
a
result
of
increased
asset
management
fees
related
to
acquisitions
completed
in
2012
and
2013,
along
with
higher
general
corporate
costs
and
professional
fees
resulting
from
the
growth
of
the
portfolio.
For
the
year
ended
December
31,
2013,
general
and
administrative
expenses
included
a
$4.1
million
non-‐cash
component
relating
to
the
DUIP,
representing
a
decrease
of
$0.1
million
over
the
prior
year
comparative
period,
primarily
as
a
result
of
fair
value
adjustments
to
the
DUIP,
offset
by
more
units
vesting.
On
a
cash
basis,
general
and
administrative
expenses
increased
$3.1
million
over
the
prior
year
comparative
period,
primarily
as
a
result
of
increased
asset
management
fees
related
to
acquisitions
completed
in
2012
and
2013,
along
with
higher
general
corporate
costs
and
professional
fees
resulting
from
the
growth
of
the
portfolio.
Fair
value
adjustments
to
investment
properties
During
Q4
2013,
a
$14.4
million
fair
value
loss
was
recorded,
reflecting
changes
to
leasing
assumptions.
For
the
year
ended
December
31,
2013,
a
$120.6
million
fair
value
gain
was
recorded,
primarily
reflecting
cap
rate
compression
in
all
major
central
business
districts
in
all
regions
since
last
year-‐end,
offset
by
fair
value
losses
recorded
during
Q4
2013
due
to
changes
to
leasing
assumptions.
For
the
year
ended
December
31,
2013,
the
weighted
average
cap
rate
across
our
portfolio
was
6.19%
(September
30,
2013
–
6.19%;
and
December
31,
2012
–
6.35%).
Net
gain
(loss)
on
sale
of
investment
properties
For
Q4
2013
and
the
prior
year
comparative
quarter,
there
were
no
dispositions
of
investment
properties.
For
the
year
ended
December
31,
2013,
the
Trust
recorded
a
$0.3
million
loss
on
the
disposition
of
two
non-‐core
investment
properties,
and
during
the
prior
year
comparative
period,
the
Trust
recorded
a
$1.5
million
net
gain
on
the
disposition
of
ten
non-‐core
investment
properties.
Net
gain
(loss)
on
the
disposition
of
investment
properties
have
been
mainly
driven
by
the
write-‐off
of
financing
costs
and
fair
value
adjustments
associated
with
the
debt
discharged,
transaction
costs
and
the
write-‐off
of
goodwill
associated
with
the
cash-‐generating
unit.
Acquisition
related
costs
For
Q4
2013
and
Q4
2012,
no
acquisition
related
costs
were
incurred.
For
the
year
ended
December
31,
2013,
no
acquisition
related
costs
were
incurred,
while
for
the
prior
year
comparative
period,
$17.5
million
in
acquisition
related
costs
attributable
to
the
business
acquisition
of
Whiterock
in
March
2012
were
recorded.
Dundee
REIT
2013
Annual
Report
|
33
Interest
expense
–
debt
Interest
expense
on
debt
increased
by
$0.1
million,
or
0.3%,
over
the
prior
year
comparative
quarter
and
increased
by
$9.5
million,
or
6.8%,
over
the
prior
year
comparative
period.
The
increase
in
interest
expense
resulted
mainly
from
new
debt
assumed
from
acquisitions
in
2012
and
for
the
year
ended
December
31,
2013,
as
well
as
new
financings
entered
into
in
2012
and
for
the
year
ended
December
31,
2013.
This
was
offset
by
interest
savings
resulting
from
the
refinancing
of
maturing
debt
at
lower
interest
rates
for
the
years
ended
December
31,
2013
and
December
31,
2012,
discharge
of
debt
due
to
dispositions
of
investment
properties
and
the
redemption
of
the
convertible
debentures
at
the
end
of
2012.
Interest
expense
–
subsidiary
redeemable
units
Interest
expense
on
subsidiary
redeemable
units
increased
marginally
over
the
prior
year
comparative
quarter
and
$0.1
million
over
the
prior
year
comparative
period,
reflecting
a
greater
number
of
subsidiary
redeemable
units
outstanding
as
a
result
of
the
Distribution
Reinvestment
Plan
up
to
the
end
of
Q1
2013
and
an
increase
in
the
distribution
rate
commencing
Q2
2013.
Depreciation
and
amortization
During
Q4
2013,
depreciation
and
amortization
expense
increased
by
$0.1
million,
or
13.1%,
over
the
prior
year
comparative
quarter
primarily
due
to
an
increase
in
property
and
equipment.
For
the
year
ended
December
31,
2013,
depreciation
and
amortization
expense
increased
by
$0.5
million,
or
23.7%,
over
the
prior
year
comparative
period
primarily
due
to
a
full
quarter
of
amortization
in
Q1
2013
of
external
management
contracts
acquired
as
part
of
the
acquisition
of
Whiterock
in
March
2012
and
an
increase
in
property
and
equipment.
Interest
and
fee
income
Interest
and
fee
income
comprises
fees
earned
from
third-‐party
property
management,
including
management,
construction
and
leasing
fees,
and
interest
earned
on
bank
accounts
and
related
fees.
Except
for
the
third-‐party
property
management
fees,
the
income
included
in
interest
and
fee
income
is
not
necessarily
of
a
recurring
nature
and
the
amounts
may
vary
quarter-‐over-‐
quarter.
During
Q4
2013,
interest
and
fee
income
decreased
by
$0.5
million,
or
34.3%,
over
the
prior
year
comparative
quarter
and
decreased
by
$0.5
million,
or
10.1%,
over
the
prior
year
comparative
period
primarily
due
to
the
$0.3
million
one-‐time
interest
income
earned
on
the
promissory
notes
receivable
in
Q4
2012
and
the
interest
income
earned
on
the
excess
cash
on
hand
during
Q4
2012.
Fair
value
adjustments
to
financial
instruments
Fair
value
adjustments
to
financial
instruments
include
re-‐measurement
on
the
conversion
feature
of
the
convertible
debenture,
re-‐measurement
of
the
carrying
value
of
subsidiary
redeemable
units
and
re-‐measurement
of
deferred
trust
units.
Our
re-‐measurement
of
the
conversion
feature
of
the
convertible
debenture
resulted
in
a
gain
of
$0.2
million
during
the
quarter
(gain
of
$1.7
million
for
the
year
ended
December
31,
2013),
mainly
as
a
result
of
fluctuations
in
the
inputs
used
to
value
the
conversion
feature
of
the
convertible
debenture.
Our
re-‐measurement
of
the
carrying
value
of
subsidiary
redeemable
units
resulted
in
a
gain
of
$0.8
million
during
Q4
2013
(a
gain
of
$30.5
million
for
the
year
ended
December
31,
2013),
mainly
as
a
result
of
unit
price
decline
throughout
the
year.
The
re-‐measurement
of
the
deferred
trust
units
resulted
in
a
loss
of
$0.7
million
during
Q4
2013,
mainly
as
a
result
of
the
unit
price
decline
over
the
prior
quarter.
For
the
year
ended
December
31,
2013,
the
re-‐measurement
of
the
deferred
trust
units
resulted
in
a
net
gain
of
$2.7
million,
mainly
due
to
the
pattern
of
vesting
of
units
during
the
year.
Related
party
transactions
From
time
to
time,
the
Trust
and
its
subsidiaries
enter
into
transactions
with
related
parties
that
are
conducted
under
normal
commercial
terms
and
as
disclosed
in
Note
27
to
the
consolidated
financial
statements.
During
Q4
2013,
we
received
$3.5
million
related
to
the
DAM
Services
Agreement
(year
ended
December
31,
2013
–
$8.5
million)
and
also
recovered
$4.5
million
for
operating
and
administrative
costs
(year
ended
December
31,
2013
–
$14.4
million)
for
expenses
incurred
by
the
Trust
on
behalf
of
related
parties,
pursuant
to
the
agreement.
Pursuant
to
the
Asset
Management
Agreement,
we
paid
$4.6
million
during
Q4
2013
(year
ended
December
31,
2013
–
$20.6
million),
including
$4.3
million
(year
ended
December
31,
2013
–
$16.6
million)
reported
in
general
administrative
expenses
for
asset
management
fees,
$0.1
million
(year
ended
December
31,
2013
–
$3.2
million)
related
to
property
acquisition
costs
and
$0.2
million
(year
ended
December
31,
2013
–
$0.8
million)
recorded
as
a
financing
cost.
Dundee
REIT
2013
Annual
Report
|
34
Deferred
income
taxes
recovery
(expense)
During
Q4
2013
and
for
the
year
ended
December
31,
2013,
$0.9
million
of
a
deferred
income
tax
recovery
and
$0.3
million
of
deferred
income
taxes,
respectively,
were
recognized
relating
to
the
two
investment
properties
located
in
the
United
States.
Income
from
discontinued
operations
During
Q4
2013
and
for
the
year
ended
December
31,
2013,
there
were
no
discontinued
operations.
Income
from
discontinued
operations
for
the
prior
year
comparative
quarter
and
period
related
to
the
77
industrial
properties
that
were
sold
as
of
October
4,
2012.
Other
comprehensive
income
Included
in
other
comprehensive
income
for
the
quarter
is
a
$0.5
million
unrealized
loss
on
interest
rate
swap
agreements
and
a
$1.1
million
unrealized
foreign
currency
translation
gain
related
to
the
two
properties
located
in
the
United
States.
For
the
year
ended
December
31,
2013,
a
$0.04
million
unrealized
gain
on
interest
rate
swap
agreements
resulting
from
changes
in
interest
rates,
and
a
$1.9
million
unrealized
foreign
currency
translation
gain
related
to
the
two
properties
located
in
the
United
States
resulting
from
the
appreciation
of
the
U.S.
dollar,
was
recorded.
Net
operating
income
(“NOI”)
We
define
NOI
as
the
total
of
net
rental
income,
including
the
share
of
net
rental
income
from
investment
in
joint
ventures
and
property
management
income,
excluding
net
rental
income
from
discontinued
operations,
properties
sold
and
assets
held
for
sale.
NOI
is
an
important
measure
used
by
management
in
evaluating
property
operation;
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.
Net
rental
income
(per
consolidated
financial
statements)
Add:
$
Share
of
net
rental
income
from
investments
in
joint
ventures
NOI
from
discontinued
properties
NOI
Less:
NOI
from
discontinued
properties
NOI
from
properties
sold
and
other
properties
held
for
sale
NOI
(excluding
discontinued
operations
and
properties
sold
Three
months
ended
December
31,
2012
90,391
2013
100,842
$
Years
ended
December
31,
2013
391,500
$
2012
348,547
$
15,405
-‐
116,247
-‐
348
16,044
395
106,830
395
964
61,388
-‐
452,888
-‐
1,655
42,593
28,111
419,251
28,111
6,948
and
other
properties
held
for
sale)
$
115,899
$
105,471
$
451,233
$
384,192
NOI
excluding
income
from
discontinued
operations,
properties
sold
and
properties
held
for
sale
for
the
three
months
ended
December
31,
2013
was
$115.9
million,
representing
a
9.9%
increase
over
the
prior
year
comparative
quarter
(for
the
year
ended
December
31,
2013
–
$451.2
million,
representing
a
17.4%
increase
over
the
prior
year
comparative
period).
The
increase
is
mainly
attributable
to
income
generated
by
investment
properties
acquired
in
2012
and
2013
as
well
as
comparative
property
NOI
growth.
Dundee
REIT
2013
Annual
Report
|
35
$
2013
25,312
$
21,697
54,415
14,475
115,899
-‐
Western
Canada
Calgary
Toronto
Eastern
Canada
NOI(1)
NOI
from
discontinued
operations(1)
NOI
from
properties
sold(1)
and
properties
held
for
sale
NOI
including
income
from
discontinued
operations,
properties
sold
and
assets
held
for
sale
116,247
$
$
(1)
Includes
straight-‐line
rents
and
amortization
of
lease
incentives.
348
Three
months
ended
December
31,
Years
ended
December
31,
Growth
2012
21,413
$
19,755
49,919
14,384
105,471
395
Amount
3,899
1,942
4,496
91
10,428
(395)
%
18.2
$
9.8
9.0
0.6
9.9
2013
95,410
$
80,789
216,221
58,813
451,233
-‐
2012
79,825
$
78,029
171,697
54,641
384,192
28,111
Amount
15,585
2,760
44,524
4,172
67,041
(28,111)
Growth
%
19.5
3.5
25.9
7.6
17.4
964
(616)
1,655
6,948
(5,293)
106,830
$
9,417
8.8
$
452,888
$
419,251
$
33,637
8.0
NOI
BY
REGION
(Three
months
ended
December
31,
2013)
Eastern
Canada,
12%
Western
Canada,
22%
Toronto,
47%
Calgary,
19%
Dundee
REIT
2013
Annual
Report
|
36
NOI
comparative
portfolio
NOI
shown
below
details
comparative
and
non-‐comparative
items
to
assist
in
understanding
the
impact
each
component
has
on
NOI.
The
comparative
properties
disclosed
in
the
following
table
are
properties
acquired
prior
to
January
1,
2012.
Income
from
discontinued
operations,
properties
sold
and
properties
held
for
sale
contributing
to
NOI
in
comparative
periods
are
shown
separately.
Comparative
NOI
and
NOI
attributed
to
acquisitions
exclude
lease
termination
fees,
bad
debt
expense,
straight-‐line
rents
and
amortization
of
lease
incentives.
On
a
quarterly
basis,
NOI
from
comparative
properties
increased
by
0.2%,
or
$0.1
million,
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
0.9%,
or
$2.4
million,
increase
over
the
prior
year
comparative
period),
with
increases
across
all
regions
except
for
Western
Canada.
The
overall
increase
was
mainly
driven
by
higher
rental
rates
achieved
on
new
leasing
completed
over
the
past
year
and
the
benefit
of
step
rents,
all
offset
by
lower
occupancy
across
all
regions.
Western
Canada
Calgary
Toronto
Eastern
Canada
Comparative
properties
Lease
termination
fees
and
other
Properties
held
for
redevelopment
Acquisitions
Straight-‐line
rent
Amortization
of
lease
incentives
NOI
NOI
from
discontinued
operations(1)
NOI
from
properties
sold
and
properties
held
for
sale(1)
NOI
including
income
from
discontinued
operations,
properties
sold
and
assets
held
for
sale
Three
months
ended
December
31,
Growth
%
(2.3)
0.3
1.8
0.3
0.2
2012
16,852
$
19,609
24,382
8,785
69,628
Amount
(386)
52
430
23
119
Years
ended
December
31,
$
2013
65,523
$
77,611
99,586
36,303
279,023
2012
65,965
$
77,116
98,249
35,270
276,600
Growth
Amount
(442)
495
1,337
1,033
2,423
%
(0.7)
0.6
1.4
2.9
0.9
$
2013
16,466
$
19,661
24,812
8,808
69,747
621
(131)
752
2,127
108
2,019
(113)
45,717
1,848
(94)
35,320
2,015
(19)
10,397
(167)
(532)
169,543
7,415
281
103,352
7,888
(813)
66,191
(473)
(1,921)
115,899
(1,267)
105,471
(654)
10,428
9.9
(6,343)
451,233
(4,037)
384,192
(2,306)
67,041
17.4
-‐
395
(395)
-‐
28,111
(28,111)
348
964
(616)
1,655
6,948
(5,293)
$
116,247
$
106,830
$
9,417
8.8
$
452,888
$
419,251
$
33,637
8.0
(1)
Includes
straight-‐line
rents
and
amortization
of
lease
incentives.
Western
Canada
decreased
by
2.3%,
or
$0.4
million,
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
0.7%,
or
$0.4
million,
decrease
over
the
prior
year
comparative
period)
primarily
due
to
declines
in
occupancy
in
downtown
Edmonton.
Offsetting
this
were
higher
occupancies
in
suburban
Edmonton,
higher
rents
on
renewals
and
step-‐up
in
rental
rates
for
certain
tenants.
Calgary
increased
by
0.3%,
or
$0.1
million,
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
0.6%,
or
$0.5
million,
increase
over
the
prior
year
comparative
period),
primarily
due
to
higher
rents
on
renewals
and
step-‐up
in
rental
rates
for
certain
tenants,
offset
by
lower
occupancies
across
Calgary.
Toronto
increased
by
1.8%,
or
$0.4
million,
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
1.4%,
or
$1.3
million,
increase
over
the
prior
year
comparative
period),
mainly
driven
by
higher
rents
on
renewals
and
step-‐up
in
rental
rates
for
certain
tenants,
offset
by
lower
occupancies
across
the
Toronto
region.
Dundee
REIT
2013
Annual
Report
|
37
Eastern
Canada
increased
by
0.3%,
or
$0.02
million,
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
2.9%,
or
$1.0
million,
increase
over
the
prior
year
comparative
period),
primarily
due
to
higher
rents
on
renewals
and
step-‐up
in
rental
rates
for
certain
tenants,
the
expiry
of
free
rent
periods,
and
lower
non-‐recoverable
expenses.
Offsetting
this
were
lower
occupancies
across
the
Eastern
Canada
region.
For
the
three
months
ended
December
31,
2013,
we
recognized
lease
termination
fees
and
other
adjustments
of
$0.6
million
(year
ended
December
31,
2013
–
$2.1
million).
NOI
prior
quarter
comparison
The
comparative
properties
disclosed
in
the
following
table
include
properties
acquired
prior
to
July
1,
2013.
Western
Canada
Calgary
Toronto
Eastern
Canada
Comparative
properties
Lease
termination
fees
and
other
Properties
held
for
redevelopment
Acquisitions
Straight-‐line
rent
Amortization
of
lease
incentives
NOI
NOI
from
properties
sold
and
properties
held
for
sale(1)
NOI
including
income
from
discontinued
operations,
properties
sold
and
assets
held
for
sale
(1)
Includes
straight-‐line
rent
and
amortization
of
lease
incentives.
Three
months
ended
Growth
December
31,
September
30,
$
$
2013
24,694
20,353
54,304
13,885
113,236
621
(113)
2,228
1,848
(1,921)
115,899
348
$
2013
24,410
20,547
54,839
14,304
114,100
620
(106)
1,020
1,859
(1,521)
115,972
468
Amount
284
(194)
(535)
(419)
(864)
1
(7)
1,208
(11)
(400)
(73)
(120)
%
1.2
(0.9)
(1.0)
(2.9)
(0.8)
(0.1)
$
116,247
$
116,440
$
(193)
(0.2)
As
measured
against
Q3
2013,
overall
comparative
property
NOI
decreased
by
0.8%,
or
$0.9
million,
driven
by
decreases
across
all
regions
except
for
Western
Canada.
Our
NOI
in
Western
Canada
increased
by
1.2%,
or
$0.3
million,
over
Q3
2013,
as
we
increased
occupancy
in
Metro
Vancouver,
downtown
Edmonton
and
Victoria
and
renewed
tenants
at
rents
above
those
previously
in
place.
Our
NOI
in
Calgary
decreased
by
0.9%,
or
$0.2
million,
over
Q3
2013,
primarily
due
to
a
decline
in
occupancy,
offset
by
higher
rents
on
renewals
and
step-‐up
in
rental
rates
for
certain
tenants.
Toronto
NOI
decreased
by
1.0%,
or
$0.5
million,
over
Q3
2013,
mainly
driven
by
a
slight
decline
in
occupancy
in
certain
suburban
properties,
offset
by
higher
rents
on
renewed
leases
and
higher
parking
revenue.
Eastern
Canada
NOI
decreased
by
2.9%,
or
$0.4
million,
over
Q3
2013,
mainly
driven
by
lower
occupancy
in
certain
properties
in
the
Maritimes,
downtown
Ottawa,
Montreal
and
Quebec
City.
For
the
three
months
ended
December
31,
2013,
we
recognized
lease
termination
fees
and
other
adjustments
of
$0.6
million.
Dundee
REIT
2013
Annual
Report
|
38
Funds
from
operations
and
adjusted
funds
from
operations
Net
income
for
the
period
Add
(deduct):
Share
of
net
income
and
dilution
gain
from
investment
in
Dundee
Industrial
Share
of
FFO
from
investment
in
Dundee
Industrial
Depreciation
of
property
and
equipment
Amortization
of
external
management
contracts
Amortization
of
lease
incentives
Loss
(gain)
on
sale
of
investment
properties
Interest
expense
on
subsidiary
redeemable
units
Acquisition
related
costs
Leasing
incentives
expensed
on
lease
terminations
Fair
value
adjustments
to
investment
properties
Fair
value
adjustments
to
investment
properties
held
in
joint
ventures
Fair
value
adjustments
to
financial
instruments
Fair
value
adjustments
of
DUIP
included
in
general
and
administrative
expenses
Hedge-‐break
fee
for
financial
instrument
held
in
equity
accounted
investments
Debt
settlement
costs
Deferred
income
taxes
expense
(recovery)
Other
FFO
Funds
from
operations
Add
(deduct):
Share
of
FFO
from
investment
in
Dundee
Industrial
Share
of
AFFO
from
investment
in
Dundee
Industrial
Amortization
of
fair
value
adjustments
on
assumed
debt
Deferred
unit
compensation
expense
Straight-‐line
rent
Revenue
supplement
from
vendor
on
acquisition
Other
Deduct:
Normalized
initial
direct
leasing
costs
and
lease
incentives
AFFO
Three
months
ended
December
31,
Years
ended
December
31,
$
2013
59,756
$
2012
100,542
$
2013
445,011
$
2012
291,073
(3,027)
3,860
370
323
1,936
-‐
1,981
-‐
-‐
8,898
5,484
(251)
(166)
-‐
-‐
(865)
(57)
78,242
(1,568)
3,458
254
359
1,278
142
1,944
-‐
-‐
(45,595)
487
4,179
(15,697)
15,104
1,193
1,338
6,347
283
7,897
-‐
45
(79,277)
(41,345)
(34,840)
(1,568)
3,458
851
1,321
4,383
(2,677)
7,758
17,551
287
(110,759)
23,964
16,588
181
(230)
745
-‐
3,066
263
(85)
68,905
$
-‐
241
344
(167)
306,247
$
5,186
3,798
1,849
(320)
263,488
$
78,242
$
68,905
$
306,247
$
263,488
(3,860)
3,116
(1,370)
1,109
(1,848)
-‐
(400)
74,989
(3,458)
2,597
(1,426)
904
(2,120)
-‐
(41)
65,361
(15,104)
12,052
(6,633)
4,317
(7,415)
-‐
(260)
293,204
(3,458)
2,597
(7,976)
3,415
(9,313)
1,495
(56)
250,192
$
$
8,005
66,984
$
7,301
58,060
$
31,428
261,776
$
28,232
221,960
$
Dundee
REIT
2013
Annual
Report
|
39
Funds
from
operations
FFO
FFO
per
unit
–
basic
FFO
per
unit
–
diluted
Three
months
ended
December
31,
Years
ended
December
31,
$
$
$
2013
78,242
0.72
0.72
$
$
$
2012
68,905
0.68
0.68
$
$
$
2013
306,247
2.88
2.87
$
$
$
2012
263,488
2.86
2.85
Total
FFO
for
the
quarter
was
$78.2
million,
an
increase
of
$9.3
million,
or
13.6%,
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
$306.2
million,
an
increase
of
$42.8
million,
or
16.2%,
over
the
prior
year
comparative
period).
Diluted
FFO
on
a
per
unit
basis
increased
from
$0.68
per
unit
to
$0.72
per
unit
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
an
increase
from
$2.85
per
unit
to
$2.87
per
unit
over
the
prior
year
comparative
period).
Adjusted
funds
from
operations
AFFO
AFFO
per
unit
–
basic
$
$
Three
months
ended
December
31,
2012
58,060
0.57
2013
66,984
0.62
$
$
Years
ended
December
31,
2013
261,776
2.47
$
$
2012
221,960
2.41
$
$
Total
AFFO
for
the
quarter
was
$67.0
million,
an
increase
of
$8.9
million,
or
15.4%,
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
$261.8
million,
an
increase
of
$39.8
million,
or
17.9%,
over
the
prior
year
comparative
period).
AFFO
on
a
per
unit
basis
increased
from
$0.57
per
unit
to
$0.62
per
unit
over
the
prior
year
comparative
quarter
(year
ended
December
31,
2013
–
an
increase
from
$2.41
per
unit
to
$2.47
per
unit
over
the
prior
year
comparative
period).
The
increase
in
basic
AFFO
and
diluted
FFO
per
unit
over
the
prior
year
comparative
quarter
and
period
resulted
from:
• a
decrease
in
the
weighted
average
cost
of
debt
throughout
2013,
due
in
part
to
the
redemption
of
all
the
outstanding
6.5%
Debentures,
5.7%
Debentures,
6.0%
Debentures
and
7.0%
Debentures
totalling
$126.5
million
on
December
31,
2012;
•
the
sale
of
the
Industrial
Portfolio
to
Dundee
Industrial
at
the
beginning
of
Q4
2012
while
carrying
excess
cash
on
hand
on
and
off
throughout
2012
and
throughout
most
of
Q4
2012,
which
had
a
dilutive
impact
on
AFFO
per
unit
throughout
Q4
2012;
• 2.1
million
Units
purchased
for
cancellation
under
the
normal
course
issuer
bid
during
the
year;
• accretive
acquisitions
completed
in
2012
and
2013;
and
• 0.2%
growth
in
comparative
property
NOI
over
the
prior
year
comparative
quarter
and
0.9%
growth
over
the
prior
year
comparative
period.
Partially
offsetting
this
was:
•
the
effect
of
our
continuous
efforts
to
de-‐leverage
throughout
2013,
to
further
strengthen
our
balance
sheet.
Dundee
REIT
2013
Annual
Report
|
40
Cash
generated
from
operating
activities
Add
(deduct):
Share
of
AFFO
from
investment
in
Dundee
Industrial
Share
of
net
income
(loss)
from
investment
in
joint
ventures
Initial
direct
leasing
costs
and
lease
incentives
Transaction
costs
on
acquired
businesses
including
those
recorded
in
investment
in
joint
ventures
Change
in
non-‐cash
working
capital
Adjustments
for
investment
in
joint
ventures:
Fair
value
adjustments
to
investment
properties
Straight-‐line
rent
Amortization
of
lease
incentives
Hedge-‐break
fee
for
financial
instrument
Revenue
supplement
from
vendor
on
acquisition
Normalized
initial
direct
leasing
costs
and
lease
incentives
Other
AFFO
Three
months
ended
December
31,
Years
ended
December
31,
$
2013
64,081
$
2012
32,574
$
2013
195,237
$
2012
134,950
3,116
5,415
7,244
-‐
(6,815)
5,484
170
30
-‐
-‐
2,597
10,488
8,859
-‐
11,649
487
189
137
-‐
-‐
12,052
84,382
37,502
-‐
9,066
(41,345)
648
328
-‐
-‐
2,597
(254)
23,577
17,551
44,074
23,964
214
406
5,186
1,495
(8,005)
(3,736)
66,984
$
(7,301)
(1,619)
58,060
$
(31,428)
(4,666)
261,776
$
(28,232)
(3,568)
221,960
$
SELECTED
ANNUAL
INFORMATION
The
following
table
provides
selected
financial
information
for
the
past
three
years:
Investment
properties
revenue
Income
from
continuing
operations
Net
income
Total
assets
Debt
Distributions
declared
Units
outstanding
REIT
Units,
Series
A
REIT
Units,
Series
B
LP
Class
B
Units,
Series
1
$
2013
800,531
$
445,011
445,011
7,667,742
3,662,543
235,751
2012
686,564
$
266,174
291,073
6,913,744
3,314,594
203,596
103,420,221
-‐
3,538,457
97,618,625
16,316
3,528,658
2011
407,272
355,110
400,920
4,466,467
2,254,756
131,168
66,193,060
16,316
3,506,107
Dundee
REIT
2013
Annual
Report
|
41
QUARTERLY
INFORMATION
The
following
tables
show
quarterly
information
since
January
1,
2012.
Q4
Q3
Q2
Investment
properties
revenue
Investment
properties
operating
$
179,574
$
175,044
$
170,589
$
161,965
2013
2012
Q1
Q4
Q1
Q3
$
162,014
$
157,421
$
156,684
$
131,677
Q2
expenses
(78,732)
(74,181)
(73,570)
(69,189)
(71,623)
(66,459)
(65,177)
(55,990)
Net
rental
income
from
continuing
operations
Other
income
and
expenses
General
and
administrative
Share
of
net
income
and
dilution
gain
from
investment
in
Dundee
Industrial
Share
of
net
income
(loss)
from
investment
in
joint
ventures
Fair
value
adjustments
to
investment
properties
Net
gain
(loss)
on
sale
of
investment
properties
Acquisition
related
costs
Interest:
Debt
Subsidiary
redeemable
units
Debt
settlement
and
other
costs,
net
Depreciation
and
amortization
Interest
and
fee
income
Fair
value
adjustments
to
financial
instruments
Income
before
income
taxes
and
discontinued
operations
Deferred
income
taxes
recovery
(expense)
Income
from
continuing
operations
Income
from
discontinued
operations
Net
income
Other
comprehensive
income
(loss)
Unrealized
gain
(loss)
on
interest
rate
swap
agreements
Unrealized
foreign
currency
translation
gain
(loss)
Comprehensive
income
$
100,842
100,863
97,019
92,776
90,391
90,962
91,507
75,687
(6,155)
(6,115)
(5,844)
(5,722)
(5,774)
(5,748)
(5,267)
(4,343)
3,027
3,454
2,884
6,332
1,568
-‐
-‐
-‐
5,415
12,474
38,977
27,516
10,488
12,105
(31,354)
8,507
(8,898)
68
26,745
61,362
45,595
17,307
11,213
31,457
-‐
-‐
-‐
-‐
-‐
-‐
(283)
-‐
(1,289)
-‐
2,988
(230)
-‐
-‐
(169)
(17,319)
(33,857)
(1,981)
(33,174)
(1,982)
-‐
(691)
938
-‐
(631)
1,488
(32,340)
(1,986)
(241)
(632)
1,001
(30,798)
(1,948)
-‐
(573)
1,208
(33,239)
(1,944)
(3,066)
(613)
1,435
(32,439)
(1,941)
(732)
(574)
1,413
(32,512)
(1,938)
-‐
(554)
1,255
(26,928)
(1,935)
-‐
(301)
942
251
16,389
18,852
(652)
(4,179)
4,144
(8,120)
(8,433)
58,891
92,834
144,435
149,218
99,373
87,255
24,230
57,165
865
(475)
(182)
(552)
(263)
(921)
(665)
-‐
59,756
92,359
144,253
148,666
99,110
86,334
23,565
57,165
-‐
59,756
-‐
92,359
-‐
144,253
-‐
148,666
1,432
100,542
4,634
90,968
8,278
31,843
10,555
67,720
(480)
(557)
1,511
(435)
344
259
(1,906)
2,530
1,085
605
60,361
$
(793)
(1,350)
91,009
$
1,194
2,705
146,958
$
456
21
320
664
148,687
$
101,206
$
(1,107)
(848)
90,120
$
588
(1,318)
30,525
$
277
2,807
70,527
Dundee
REIT
2013
Annual
Report
|
42
Calculation
of
funds
from
operations
(in
thousands
of
Canadian
dollars)
NET
INCOME
Add
(deduct):
Share
of
net
income
and
dilution
gain
from
investment
in
Dundee
Industrial
Share
of
FFO
from
investment
Q4
Q3
Q2
2013
Q1
Q4
Q3
Q2
$
59,756
$
92,359
$
144,253
$
148,666
$
100,542
$
90,968
$
31,843
$
2012
Q1
67,720
(3,027)
(3,454)
(2,884)
(6,332)
(1,568)
-‐
-‐
-‐
-‐
-‐
-‐
in
Dundee
Industrial
3,860
3,932
3,780
3,532
3,458
Depreciation
of
property
and
equipment
370
308
299
215
254
221
193
183
Amortization
of
property
management
contracts
Amortization
of
lease
incentives
Net
loss
(gain)
on
disposal
of
investment
properties
Interest
expense
on
subsidiary
redeemable
units
Acquisition
related
costs,
net
Leasing
incentives
expensed
on
lease
terminations
Fair
value
adjustments
to
investment
properties
Fair
value
adjustments
to
investment
properties
held
in
joint
ventures
Fair
value
adjustments
to
financial
instruments
Fair
value
of
DUIP
included
in
general
and
administrative
expenses
Debt
settlement
and
other
costs,
net
Hedge-‐break
fee
for
financial
instrument
held
in
joint
venture
323
1,936
323
1,542
335
1,625
358
1,244
359
1,278
413
1,068
412
1,023
138
1,014
-‐
-‐
-‐
283
142
(2,988)
-‐
169
1,981
-‐
1,982
-‐
1,986
-‐
1,948
-‐
1,944
-‐
1,941
230
1,938
2
1,935
17,319
-‐
-‐
42
3
-‐
45
13
229
8,898
(68)
(26,745)
(61,362)
(45,595)
(15,294)
(13,319)
(36,551)
5,484
(1,555)
(28,084)
(17,189)
487
(1,336)
30,438
(5,625)
(251)
(16,389)
(18,852)
652
4,179
(4,144)
8,120
8,433
(166)
(159)
(42)
137
181
188
203
173
-‐
-‐
241
-‐
3,066
732
-‐
-‐
-‐
-‐
-‐
-‐
-‐
5,186
-‐
-‐
Deferred
income
taxes
expense
(recovery)
Other
FFO
FFO
per
unit
–
basic(1)
FFO
per
unit
–
diluted(1)
(1)
The
LP
B
Units
are
included
in
the
calculation
of
basic
and
diluted
FFO
per
unit.
(865)
(57)
78,242
$
0.72
$
0.72
$
79,298
$
0.73
$
0.73
$
76,040
$
0.72
$
0.71
$
182
(96)
475
2
$
$
$
552
(38)
72,669
$
$
0.72
$
0.71
263
(85)
68,905
$
0.68
$
0.68
$
921
(86)
72,879
$
0.72
$
0.72
$
665
(84)
66,633
$
$
0.72
$
0.72
-‐
(66)
55,071
0.74
0.73
Dundee
REIT
2013
Annual
Report
|
43
FUNDS
FROM
OPERATIONS
Add
(deduct):
Q4
Q3
Q2
2013
Q1
Q4
Q3
Q2
$
78,242
$
79,298
$
76,040
$
72,669
$
68,905
$
72,879
$
66,633
$
2012
Q1
55,071
Share
of
FFO
from
investment
in
Dundee
Industrial
Share
of
AFFO
from
investment
(3,860)
(3,932)
(3,780)
(3,532)
(3,458)
in
Dundee
Industrial
3,116
3,154
3,050
2,732
2,597
Amortization
of
fair
value
-‐
-‐
-‐
-‐
-‐
-‐
adjustments
on
assumed
debt
(1,370)
(1,511)
(1,807)
(1,946)
(1,426)
(2,349)
(2,528)
(1,673)
Deferred
unit
compensation
expense
Straight-‐line
rent
Revenue
supplement
from
vendor
on
acquisition
Other
Deduct:
Normalized
initial
direct
leasing
1,109
(1,848)
1,108
(1,865)
1,129
(1,887)
971
(1,815)
904
(2,120)
904
(2,720)
858
(2,342)
749
(2,131)
-‐
(400)
74,989
-‐
250
76,502
-‐
(53)
72,692
-‐
(57)
69,022
-‐
(41)
65,361
299
(11)
69,002
598
(2)
63,217
598
(2)
52,612
$
$
8,204
68,298
8,005
66,984
$
0.62
$
costs
and
lease
incentives
Adjusted
funds
from
operations
AFFO
per
unit
–
basic(1)
Weighted
average
units
outstanding
for
FFO
and
AFFO
Basic
(in
thousands)
Diluted
(in
thousands)
(1)
The
LP
B
Units
are
included
in
the
calculation
of
basic
AFFO
per
unit.
108,082
109,691
108,671
110,290
$
0.63
$
7,812
64,880
$
0.61
$
7,407
61,615
$
0.61
$
7,301
7,716
58,060
$
0.57
$
61,286
$
0.61
$
7,256
55,961
0.61
$
$
5,959
46,653
0.63
106,226
107,861
101,564
103,171
101,184
106,021
100,564
105,536
91,948
97,011
74,527
78,663
Dundee
REIT
2013
Annual
Report
|
44
NON-‐GAAP
MEASURES
The
following
non-‐GAAP
measures
are
important
measures
used
by
management
in
evaluating
the
Trust’s
underlying
operating
performance
and
debt
management.
These
non-‐GAAP
measures
are
not
defined
by
IFRS,
do
not
have
a
standardized
meaning
and
may
not
be
comparable
with
similar
measures
presented
by
other
income
trusts.
Funds
from
operations
(“FFO”)
Management
believes
FFO
is
an
important
measure
of
our
operating
performance.
This
non-‐GAAP
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
GAAP,
and
is
not
necessarily
indicative
of
cash
available
to
fund
Dundee
REIT’s
needs.
In
compliance
with
Canadian
Securities
Administrators
Staff
Notice
52-‐306
(Revised),
“Non-‐GAAP
Financial
Measures”,
FFO
has
been
reconciled
to
net
income
in
section
“Our
results
of
operations”
under
the
heading
“Funds
from
operations
and
adjusted
funds
from
operations”.
Adjusted
funds
from
operations
(“AFFO”)
Management
believes
AFFO
is
an
important
measure
of
our
economic
performance
and
is
indicative
of
our
ability
to
pay
distributions.
This
non-‐GAAP
measurement
is
commonly
used
for
assessing
real
estate
performance;
however,
it
does
not
represent
cash
flow
from
operating
activities,
as
defined
by
GAAP,
and
is
not
necessarily
indicative
of
cash
available
to
fund
Dundee
REIT’s
needs.
Our
calculation
of
AFFO
includes
a
deduction
for
an
estimated
amount
of
normalized
initial
direct
leasing
costs
and
lease
incentives
that
we
expect
to
incur
based
on
our
current
portfolio
and
expected
average
leasing
activity.
Our
estimates
of
initial
direct
leasing
costs
and
lease
incentives
are
based
on
the
average
of
our
expected
leasing
activity
over
the
next
two
to
three
years
multiplied
by
the
average
cost
per
square
foot
that
we
incurred
and
committed
to
in
2013,
adjusted
for
properties
that
have
been
acquired
or
sold.
Our
estimates
of
normalized
non-‐recoverable
capital
expenditures
are
based
on
our
expected
average
expenditures
for
our
current
property
portfolio.
This
estimate
will
differ
from
actual
experience
due
to
the
timing
of
expenditures
and
any
growth
in
our
business
resulting
from
property
acquisitions.
In
compliance
with
Canadian
Securities
Administrators
Staff
Notice
52-‐306
(Revised),
“Non-‐GAAP
Financial
Measures”,
AFFO
has
been
reconciled
to
cash
generated
from
operating
activities
in
section
“Our
results
of
operations”
under
the
heading
“Funds
from
operations
and
adjusted
funds
from
operations”.
Weighted
average
number
of
units
The
basic
weighted
average
number
of
units
outstanding
used
in
the
FFO
and
AFFO
calculations
includes
the
weighted
average
of
all
REIT
Units,
LP
B
Units,
and
vested
but
unissued
deferred
trust
units
and
income
deferred
trust
units.
The
diluted
weighted
average
number
of
units
for
the
three
and
twelve
months
ended
December
31,
2013
assumes
the
conversion
of
the
5.5%
Series
H
Debentures,
as
they
are
dilutive.
The
diluted
weighted
average
number
of
units
for
the
three
and
twelve
months
ended
December
31,
2012
assumes
the
conversion
of
the
6.5%,
5.7%,
6.0%,
7.0%
and
5.5%
Series
H
Debentures,
as
they
are
dilutive.
Diluted
FFO
for
the
quarter
excludes
$0.7
million
(year
ended
December
31,
2013
–
$2.9
million)
in
interest
related
to
convertible
debentures.
Weighted
average
units
outstanding
for
basic
per
unit
amounts
(in
thousands)
Weighted
average
units
outstanding
for
diluted
per
unit
amounts
(in
thousands)
Three
months
ended
December
31,
Years
ended
December
31,
2013
2012
2013
108,082
109,691
101,184
106,164
106,021
107,773
2012
92,048
96,805
Dundee
REIT
2013
Annual
Report
|
45
Level
of
debt
(net
debt-‐to-‐gross
book
value)
Management
believes
this
non-‐GAAP
measurement
is
an
important
measure
in
the
management
of
our
debt
levels.
The
level
of
debt
as
shown
below
is
determined
as
total
debt
(net
of
cash
on
hand),
which
includes
debt
related
to
investment
in
joint
ventures
that
are
equity
accounted
and
debt
related
to
assets
held
for
sale,
divided
by
total
assets.
Total
assets
include
assets
of
investment
in
joint
ventures
that
are
equity
accounted
and
the
reversal
of
accumulated
depreciation
of
property
and
equipment
and
cash
on
hand).
In
compliance
with
Canadian
Securities
Administrators
Staff
Notice
52-‐306
(Revised),
“Non-‐GAAP
Financial
Measures”,
the
table
below
calculates
the
level
of
debt
(debt-‐to-‐gross
book
value).
Non-‐current
debt
Current
debt
Debt
before
undernoted
items
Add:
Debt
related
to
assets
held
for
sale
Less:
Cash
on
hand(3)
Total
debt
(net
of
cash
on
hand)
Total
assets
Add:
Accumulated
depreciation
of
property
and
equipment
Less:
Cash
on
hand(3)
Total
assets
(excluding
accumulated
depreciation
of
property
and
equipment
and
cash
on
hand)
Net
debt-‐to-‐gross-‐book
value
December
31,
2013
Amounts
per
consolidated
financial
statements
Share
of
amounts
from
investment
in
joint
ventures
$
2,884,481
$
264,535
3,149,016
-‐
(23,436)
3,125,580
7,124,943(1)
3,135
(23,436)
496,410
$
11,678
508,088
5,439
-‐
513,527
542,799
-‐
-‐
$
7,104,642
$
542,799
$
Total
3,380,891
276,213
3,657,104
5,439
(23,436)
3,639,107
7,667,742(2)
3,135
(23,436)
7,647,441
47.6%
(1)
Includes
net
assets
of
investment
in
joint
ventures
that
are
equity
accounted.
(2)
Total
assets
are
determined
as
total
assets,
including
assets
related
to
investment
in
joint
ventures
that
are
equity
accounted
for
and
assets
held
for
sale.
(3)
Cash
on
hand
represents
cash
at
year-‐end,
excluding
cash
held
in
joint
ventures
and
co-‐owned
properties.
Dundee
REIT
2013
Annual
Report
|
46
Non-‐current
debt
Current
debt
Debt
before
undernoted
items
Add:
Debt
related
to
assets
held
for
sale
(4)
Less:
Cash
on
hand
Total
debt
(net
of
cash
on
hand)
Total
assets
Add:
Accumulated
depreciation
of
property
and
equipment
Less:
Cash
on
hand
Total
assets
(excluding
accumulated
depreciation
of
property
and
equipment
and
cash
on
hand)
Net
debt-‐to-‐gross-‐book
value
(4)
(1)
Includes
net
assets
of
investment
in
joint
ventures
that
are
equity
accounted.
December
31,
2012(3)
Amounts
per
consolidated
financial
statements
Share
of
amounts
from
investment
in
joint
ventures
$
2,470,337
$
308,089
2,778,426
9,200
(15,704)
2,771,922
6,352,988(1)
1,946
(15,704)
489,976
$
36,992
526,968
-‐
-‐
526,968
560,756
-‐
-‐
$
6,339,230
$
560,756
$
Total
2,960,313
345,081
3,305,394
9,200
(15,704)
3,298,890
6,913,744
(2)
1,946
(15,704)
6,899,986
47.8%
(2)
Total
assets
are
determined
as
total
assets,
including
assets
related
to
investment
in
joint
ventures
that
are
equity
accounted
for
and
assets
held
for
sale.
(3)
Comparative
figures
have
been
restated
to
conform
to
the
presentation
in
the
current
period.
(4)
Cash
on
hand
represents
cash
at
year-‐end,
excluding
cash
held
in
joint
ventures
and
co-‐owned
properties.
Dundee
REIT
2013
Annual
Report
|
47
Interest
coverage
ratio
Management
believes
this
non-‐GAAP
measurement
is
an
important
measure
in
determining
our
ability
to
cover
interest
expense
based
on
our
operating
performance.
Interest
coverage
ratio
for
the
years
ended
December
31,
2013
and
December
31,
2012
include
the
results
from
investment
in
joint
ventures
that
are
equity
accounted.
Interest
coverage
ratio
as
shown
below
is
calculated
as
net
rental
income
from
continuing
operations
plus
interest
and
fee
income,
less
general
and
administrative
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
from
continuing
operations
Add:
Interest
and
fee
income
Less:
General
and
administrative
expenses
Total
Interest
expense
–
debt
Interest
coverage
ratio
(times)
Net
rental
income
from
continuing
operations
Add:
Interest
and
fee
income
Less:
General
and
administrative
expenses
Total
Interest
expense
–
debt
Interest
coverage
ratio
(times)
For
the
year
ended
December
31,
2013
Amounts
per
Share
of
amounts
consolidated
per
investment
financial
statements
in
joint
ventures
Total
391,500
$
4,635
(23,859)
372,276
130,169
$
61,388
$
452,888
55
(202)
61,241
18,200
$
4,690
(24,061)
433,517
148,369
2.92
For
the
year
ended
December
31,
2012
Amounts
per
consolidated
financial
statements
Share
of
amounts
per
investment
in
joint
ventures
348,547
$
5,045
(21,132)
332,460
125,118
$
42,593
$
168
(82)
42,679
13,779
$
Total
391,140
5,213
(21,214)
375,139
138,897
2.70
$
$
$
$
Net
average
debt-‐to-‐EBITDFV
Management
believes
this
non-‐GAAP
measurement
is
an
important
measure
in
determining
the
time
it
takes
the
Trust,
based
on
its
historical
operating
performance,
to
repay
our
average
debt.
Net
average
debt-‐to-‐EBITDFV
as
shown
below
is
calculated
as
total
average
debt
(net
of
cash
on
hand),
which
includes
debt
related
to
investment
in
joint
ventures
that
are
equity
accounted
and
debt
related
to
assets
held
for
sale,
divided
by
annualized
EBITDFV
for
the
current
quarter.
EBITDFV
is
calculated
as
income
from
continuing
operations
adjusted
for:
non-‐cash
items
included
in
investment
properties
revenue,
fair
value
adjustments
to
investment
properties
and
financial
instruments,
share
of
net
income
from
Dundee
Industrial,
distributions
received
from
Dundee
Industrial,
gain/loss
on
sale
of
investment
properties,
interest
expense,
depreciation
and
amortization
and
income
taxes.
Dundee
REIT
2013
Annual
Report
|
48
Net
debt-‐to-‐adjusted
EBITDFV
Management
believes
this
non-‐GAAP
measurement
is
an
important
measure
in
determining
the
time
it
takes
the
Trust,
on
a
go
forward
basis,
based
on
its
normalized
operating
performance
to
repay
our
debt.
Net
debt-‐to-‐adjusted
EBITDFV
as
shown
below
is
calculated
as
total
debt
(net
of
cash
on
hand),
which
includes
debt
related
to
investment
in
joint
ventures
that
are
equity
accounted
and
debt
related
to
assets
held
for
sale,
divided
by
adjusted
EBITDFV
–
annualized.
Adjusted
EBITDFV
–
annualized
is
calculated
as
EBITDFV
plus
normalized
NOI
of
acquired
properties
for
the
quarter.
In
compliance
with
Canadian
Securities
Administrators
Staff
Notice
52-‐306
(Revised),
“Non-‐GAAP
Financial
Measures”,
the
table
below
calculates
the
Net
debt-‐to-‐EBITDFV
–
average
for
the
year
and
Net
debt-‐to-‐EBITDFV
–
Q4
annualized.
December
31,
2013
Non-‐current
debt
Current
debt
Debt
before
undernoted
items
Add:
Debt
related
to
assets
held
for
sale
Less:
Weighted
average
debt
adjustment(1)
Less:
Cash
on
hand(2)
Total
weighted
average
debt
(net
of
cash
on
hand)
Add-‐back:
Weighted
average
debt
adjustment(1)
Total
debt
(net
of
cash
on
hand)
Income
from
continuing
operations
Non-‐cash
items
included
in
investment
properties
revenue(3)
Fair
value
adjustments
to
investment
properties
Fair
value
adjustment
to
financial
instruments
Share
of
net
income
from
Dundee
Industrial
Distributions
received
from
Dundee
Industrial
Interest
–
debt
Interest
–
subsidiary
redeemable
units
Depreciation
and
amortization
Deferred
income
taxes
recovery
EBITDFV
–
quarterly
Normalized
NOI
of
acquired
properties
for
the
quarter
Adjusted
EBITDFV
–
quarterly
EBITDFV
–
annualized
Adjusted
EBITDFV
–
annualized
Net
average
debt-‐to-‐EBITDFV
(years)
Net
debt-‐to-‐adjusted
EBITDFV
(years)
Amounts
per
consolidated
financial
statements
2,884,481
$
264,535
3,149,016
-‐
(5,249)
(23,436)
$
$
$
$
$
$
3,120,331
5,249
3,125,580
54,341
$
$
$
(127)
8,898
(253)
(3,027)
2,849
33,857
1,981
691
(865)
98,345
98
98,443
$
$
Share
of
amounts
per
investment
in
joint
ventures
496,410
11,678
508,088
5,439
-‐
-‐
513,527
-‐
513,527
5,415
200
5,484
-‐
-‐
-‐
4,508
-‐
2
-‐
15,609
-‐
15,609
$
$
$
$
$
$
$
$
Total
3,380,891
276,213
3,657,104
5,439
(5,249)
(23,436)
3,633,857
5,249
3,639,106
59,756
73
14,382
(253)
(3,027)
2,849
38,365
1,981
693
(865)
113,954
98
114,052
455,816
456,208
8.0
8.0
(1)
Weighted
average
debt
adjustment
reflects
outstanding
debt
at
period-‐end,
prorated
for
the
number
of
days
outstanding
during
the
period.
(2)
Cash
on
hand
represents
cash
at
year-‐end,
excluding
cash
held
in
joint
ventures
and
co-‐owned
properties.
(3)
Includes
adjustments
for
straight-‐line
rent
and
amortization
of
leasing
costs.
Dundee
REIT
2013
Annual
Report
|
49
December
31,
2012(4)
Share
of
amounts
per
investment
in
joint
ventures
$
Amounts
per
consolidated
financial
statements
2,470,337
308,089
2,778,426
9,200
109,080
(15,704)
$
$
$
$
$
$
$
$
$
489,976
36,992
526,968
2,881,002
(109,080)
2,771,922
88,622
-‐
(1,308)
-‐
525,660
1,308
526,968
10,488
Non-‐current
debt
Current
debt
Debt
before
undernoted
items
Add:
Debt
related
to
assets
held
for
sale
Add
(less):
weighted
average
debt
adjustment(1)
Less:
Cash
on
hand(2)
Total
weighted
average
debt
(net
of
cash
on
hand)
Add-‐back:
Weighted
average
debt
adjustment(1)
Total
debt
(net
of
cash
on
hand)
Income
from
continuing
operations
Non-‐cash
items
included
in
investment
properties
revenue(3)
Fair
value
adjustments
to
investment
properties
Fair
value
adjustment
to
financial
instruments
Share
of
net
income
from
Dundee
Industrial
Distributions
received
from
Dundee
Industrial
Loss
on
sale
of
investment
properties
Interest
–
debt
Interest
–
subsidiary
redeemable
units
Depreciation
and
amortization
Deferred
income
taxes
EBITDFV
–
quarterly
Normalized
NOI
of
acquired
properties
for
the
quarter
Adjusted
EBITDFV
–
quarterly
EBITDFV
–
annualized
Adjusted
EBITDFV
–
annualized
Net
average
debt-‐to-‐EBITDFV
(years)
Net
debt-‐to-‐adjusted
EBITDFV
(years)
(1)
Weighted
average
debt
adjustment
reflects
outstanding
debt
at
period-‐end,
prorated
for
the
number
of
days
outstanding
during
the
period.
(2)
Cash
on
hand
represents
cash
at
year-‐end,
excluding
cash
held
in
joint
ventures
and
co-‐owned
properties.
(52)
487
-‐
-‐
-‐
-‐
5,028
-‐
-‐
-‐
15,951
-‐
15,951
(789)
(45,595)
4,179
(1,568)
2,711
1,289
33,239
1,944
613
263
84,908
1,083
85,991
$
$
$
$
$
$
$
$
$
$
Total
2,960,313
345,081
3,305,394
9,200
107,772
(15,704)
3,406,662
(107,772)
3,298,890
99,110
(841)
(45,108)
4,179
(1,568)
2,711
1,289
38,267
1,944
613
263
100,859
1,083
101,942
403,436
407,768
8.4
8.1
(3)
Includes
adjustments
for
straight-‐line
rent
and
amortization
of
leasing
costs.
(4)
Comparative
figures
have
been
restated
to
include
adjustments
for
share
of
net
income
from
Dundee
Industrial,
distribution
received
from
Dundee
Industrial
and
normalized
NOI
of
acquired
properties
for
the
quarter.
Investment
in
joint
ventures
The
Trust’s
proportionate
share
of
the
financial
position
and
results
of
operation
of
its
investment
in
joint
ventures,
which
are
accounted
for
using
the
equity
method
in
the
financial
statements
and
as
presented
and
discussed
throughout
the
MD&A
using
the
proportionate
consolidation
method,
are
non-‐GAAP
measures.
A
reconciliation
of
the
financial
position
and
results
of
operations
to
the
consolidated
balance
sheets
and
consolidated
statements
of
comprehensive
income
can
be
found
in
“Our
Resources
and
Financial
Condition”
and
“Our
Results
of
Operations”
sections
of
the
MD&A,
respectively.
Dundee
REIT
2013
Annual
Report
|
50
SECTION
III
–
DISCLOSURE
CONTROLS
AND
PROCEDURES
AND
INTERNAL
CONTROL
OVER
FINANCIAL
REPORTING
For
the
December
31,
2013
financial
year-‐end,
the
Chief
Executive
Officer
and
the
Chief
Financial
Officer
(the
“Certifying
Officers”),
together
with
other
members
of
management,
have
evaluated
the
design
and
operational
effectiveness
of
Dundee
REIT’s
disclosure
controls
and
procedures,
as
defined
in
National
Instrument
52-‐109
–
Certification
of
Disclosure
in
Issuers’
Annual
and
Interim
Filings
(“NI
52-‐109”).
The
Certifying
Officers
have
concluded
that
the
disclosure
controls
and
procedures
are
adequate
and
effective
in
order
to
provide
reasonable
assurance
that
material
information
has
been
accumulated
and
communicated
to
management,
to
allow
timely
decisions
of
required
disclosures
by
Dundee
REIT
and
its
consolidated
subsidiary
entities,
within
the
required
time
periods.
Dundee
REIT’s
internal
control
over
financial
reporting
(as
defined
in
NI
52-‐109)
is
designed
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
consolidated
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles
(“GAAP”).
Using
the
framework
established
in
“Risk
Management
and
Governance:
Guidance
on
Control
(COCO
Framework)”,
published
by
The
Canadian
Institute
of
Chartered
Accountants,
the
Certifying
Officers,
together
with
other
members
of
management,
have
evaluated
the
design
and
operation
of
Dundee
REIT’s
internal
control
over
financial
reporting.
Based
on
that
evaluation,
the
Certifying
Officers
have
concluded
that
Dundee
REIT’s
internal
control
over
financial
reporting
was
effective
as
at
December
31,
2013.
There
were
no
changes
in
Dundee
REIT’s
internal
control
over
financial
reporting
during
the
financial
year
ended
December
31,
2013
that
have
materially
affected,
or
are
reasonably
likely
to
materially
affect,
Dundee
REIT’s
internal
control
over
financial
reporting.
SECTION
IV
–
RISKS
AND
OUR
STRATEGY
TO
MANAGE
Dundee
REIT
is
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.
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
from
operations
and
make
distributions
and
interest
payments.
Certain
significant
expenditures
(e.g.,
property
taxes,
maintenance
costs,
mortgage
payments,
insurance
costs
and
related
charges)
must
be
made
throughout
the
period
of
ownership
of
real
property,
regardless
of
whether
the
property
is
producing
sufficient
income
to
pay
such
expenses.
In
order
to
retain
desirable
rentable
space
and
to
generate
adequate
revenue
over
the
long
term,
we
must
maintain
or,
in
some
cases,
improve
each
property’s
condition
to
meet
market
demand.
Maintaining
a
rental
property
in
accordance
with
market
standards
can
entail
significant
costs,
which
we
may
not
be
able
to
pass
on
to
our
tenants.
Numerous
factors,
including
the
age
of
the
relevant
building
structure,
the
material
and
substances
used
at
the
time
of
construction,
or
currently
unknown
building
code
violations,
could
result
in
substantial
unbudgeted
costs
for
refurbishment
or
modernization.
In
the
course
of
acquiring
a
property,
undisclosed
defects
in
design
or
construction
or
other
risks
might
not
have
been
recognized
or
correctly
evaluated
during
the
pre-‐acquisition
due
diligence
process.
These
circumstances
could
lead
to
additional
costs
and
could
have
an
adverse
effect
on
our
proceeds
from
sales
and
rental
income
of
the
relevant
properties.
Dundee
REIT
2013
Annual
Report
|
51
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.
Concentration
of
properties
and
tenants
Currently,
principally
all
of
our
properties
are
located
in
Canada
and,
as
a
result,
are
impacted
by
economic
and
other
factors
specifically
affecting
the
real
estate
markets
in
Canada.
These
factors
may
differ
from
those
affecting
the
real
estate
markets
in
other
regions.
Due
to
the
concentrated
nature
of
our
properties,
a
number
of
our
properties
could
experience
any
of
the
same
conditions
at
the
same
time.
If
real
estate
conditions
in
Canada
decline
relative
to
real
estate
conditions
in
other
regions,
our
cash
flows
and
financial
condition
may
be
more
adversely
affected
than
those
of
companies
that
have
more
geographically
diversified
portfolios
of
properties.
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,
and
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
to
our
operations.
A
high
level
of
debt
will
reduce
the
amount
of
funds
available
for
the
payment
of
distributions
to
unitholders
and
interest
payments
on
our
debentures;
limit
our
flexibility
in
planning
for
and
reacting
to
changes
in
the
economy
and
in
the
industry,
and
increase
our
vulnerability
to
general
adverse
economic
and
industry
conditions;
limit
our
ability
to
borrow
additional
funds,
dispose
of
assets,
encumber
our
assets
and
make
potential
investments;
place
us
at
a
competitive
disadvantage
compared
to
other
owners
of
similar
real
estate
assets
that
are
less
leveraged
and,
therefore,
may
be
able
to
take
advantage
of
opportunities
that
our
indebtedness
would
prevent
us
from
pursuing;
make
it
more
likely
that
a
reduction
in
our
borrowing
base
following
a
periodic
valuation
(or
redetermination)
could
require
us
to
repay
a
portion
of
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.
Changes
in
law
We
are
subject
to
applicable
federal,
provincial,
municipal,
local
and
common
laws
and
regulations
governing
the
ownership
and
leasing
of
real
property,
employment
standards,
environmental
matters,
taxes
and
other
matters.
It
is
possible
that
future
changes
in
such
laws
or
regulations,
or
changes
in
their
application,
enforcement
or
regulatory
interpretation,
could
result
in
changes
in
the
legal
requirements
affecting
us
(including
with
retroactive
effect).
In
addition,
the
political
conditions
in
the
jurisdictions
in
which
we
operate
are
also
subject
to
change.
Any
changes
in
investment
policies
or
shifts
in
political
attitudes
may
adversely
affect
our
investments.
Any
changes
in
the
laws
to
which
we
are
subject
in
the
jurisdictions
in
which
we
operate
could
materially
affect
our
rights
and
title
in
and
to
the
properties
and
the
revenues
we
are
able
to
generate
from
our
investments.
Dundee
REIT
2013
Annual
Report
|
52
Interest
rates
When
entering
into
financing
agreements
or
extending
such
agreements,
we
depend
on
our
ability
to
agree
on
terms
for
interest
payments
that
will
not
impair
our
desired
profit,
and
on
amortization
schedules
that
do
not
restrict
our
ability
to
pay
distributions
on
our
Units
and
interest
payments
on
our
debentures.
In
addition
to
existing
variable
rate
portions
of
our
financing
agreements,
we
may
enter
into
future
financing
agreements
with
variable
interest
rates.
An
increase
in
interest
rates
could
result
in
a
significant
increase
in
the
amount
we
pay
to
service
debt,
which
could
limit
our
ability
to
pay
distributions
to
unitholders
and
could
impact
the
market
price
of
the
Units
and/or
the
debentures.
We
have
implemented
an
active
hedging
program
in
order
to
offset
the
risk
of
revenue
losses
and
to
provide
more
certainty
regarding
the
payment
of
distributions
to
unitholders
and
cash
interest
payments
under
the
debentures
should
current
variable
interest
rates
increase.
However,
to
the
extent
that
we
fail
to
adequately
manage
these
risks,
including
if
any
such
hedging
arrangements
do
not
effectively
or
completely
hedge
increases
in
variable
interest
rates,
our
financial
results,
our
ability
to
pay
distributions
to
unitholders
and
cash
interest
payments
under
our
financing
arrangements,
and
the
debentures
and
future
financings
may
be
negatively
affected.
Hedging
transactions
involve
inherent
risks.
Increases
in
interest
rates
generally
cause
a
decrease
in
demand
for
properties.
Higher
interest
rates
and
more
stringent
borrowing
requirements,
whether
mandated
by
law
or
required
by
banks,
could
have
a
significant
negative
effect
on
our
ability
to
sell
any
of
our
properties.
Environmental
risk
As
an
owner
of
real
property,
we
are
subject
to
various
federal,
provincial
and
municipal
laws
relating
to
environmental
matters.
Such
laws
provide
a
range
of
potential
liability,
including
potentially
significant
penalties,
and
potential
liability
for
the
costs
of
removal
or
remediation
of
certain
hazardous
substances.
The
presence
of
such
substances,
if
any,
could
adversely
affect
our
ability
to
sell
or
redevelop
such
real
estate
or
to
borrow
using
such
real
estate
as
collateral
and,
potentially,
could
also
result
in
civil
claims
against
us.
In
order
to
obtain
financing
for
the
purchase
of
a
new
property
through
traditional
channels,
we
may
be
requested
to
arrange
for
an
environmental
audit
to
be
conducted.
Although
such
an
audit
provides
us
and
our
lenders
with
some
assurance,
we
may
become
subject
to
liability
for
undetected
pollution
or
other
environmental
hazards
on
our
properties
against
which
we
cannot
insure,
or
against
which
we
may
elect
not
to
insure
where
premium
costs
are
disproportionate
to
our
perception
of
relative
risk.
We
have
formal
policies
and
procedures
to
review
and
monitor
environmental
exposure.
These
policies
include
the
requirement
to
obtain
a
Phase
I
Environmental
Site
Assessment,
conducted
by
an
independent
and
qualified
environmental
consultant,
before
acquiring
any
real
property
or
any
interest
therein.
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)
the
possibility
that
such
third
parties
may
at
any
time
have
economic
or
business
interests
or
goals
that
will
be
inconsistent
with
ours,
or
take
actions
contrary
to
our
instructions
or
requests
or
to
our
policies
or
objectives
with
respect
to
our
real
estate
investments;
(ii)
(iii)
(iv)
the
risk
that
such
third
parties
could
experience
financial
difficulties
or
seek
the
protection
of
bankruptcy,
insolvency
or
other
laws,
which
could
result
in
additional
financial
demands
on
us
to
maintain
and
operate
such
properties
or
repay
the
third
parties’
share
of
property
debt
guaranteed
by
us
or
for
which
we
will
be
liable,
and/or
result
in
our
suffering
or
incurring
delays,
expenses
and
other
problems
associated
with
obtaining
court
approval
of
the
joint
arrangement;
the
risk
that
such
third
parties
may,
through
their
activities
on
behalf
of
or
in
the
name
of
the
joint
arrangements,
expose
or
subject
us
to
liability;
and
the
need
to
obtain
third
parties’
consents
with
respect
to
certain
major
decisions,
including
the
decision
to
distribute
cash
generated
from
such
properties
or
to
refinance
or
sell
a
property.
In
addition,
the
sale
or
transfer
of
interests
in
certain
of
the
joint
arrangements
may
be
subject
to
rights
of
first
refusal
or
first
offer,
and
certain
of
the
joint
venture
and
partnership
agreements
may
provide
for
buy-‐sell
or
similar
arrangements.
Such
rights
may
be
triggered
at
a
time
when
we
may
not
desire
to
sell
but
may
be
forced
to
do
so
because
we
do
not
have
the
cash
to
purchase
the
other
party’s
interests.
Such
rights
may
also
inhibit
our
ability
to
sell
an
interest
in
a
property
or
a
joint
arrangement
within
the
time
frame
or
otherwise
on
the
basis
we
desire.
Dundee
REIT
2013
Annual
Report
|
53
Our
investment
in
properties
through
joint
arrangements
is
subject
to
the
investment
guidelines
set
out
in
our
Declaration
of
Trust.
Competition
The
real
estate
market
in
Canada
is
highly
competitive
and
fragmented,
and
we
compete
for
real
property
acquisitions
with
individuals,
corporations,
institutions
and
other
entities
that
may
seek
real
property
investments
similar
to
those
we
desire.
An
increase
in
the
availability
of
investment
funds
or
an
increase
in
interest
in
real
property
investments
may
increase
competition
for
real
property
investments,
thereby
increasing
purchase
prices
and
reducing
the
yield
on
them.
If
competing
properties
of
a
similar
type
are
built
in
the
area
where
one
of
our
properties
is
located
or
if
similar
properties
located
in
the
vicinity
of
one
of
our
properties
are
substantially
refurbished,
the
net
operating
income
derived
from
and
the
value
of
such
property
could
be
reduced.
Numerous
other
developers,
managers
and
owners
of
properties
will
compete
with
us
in
seeking
tenants.
To
the
extent
that
our
competitors
own
properties
that
are
in
better
locations,
of
better
quality
or
less
leveraged
than
the
properties
owned
by
us,
they
may
be
in
a
better
position
to
attract
tenants
who
might
otherwise
lease
space
in
our
properties.
To
the
extent
that
our
competitors
are
better
capitalized
or
financially
stronger,
they
would
be
in
a
better
position
to
withstand
an
economic
downturn.
The
existence
of
competition
for
tenants
could
have
an
adverse
effect
on
our
ability
to
lease
space
in
our
properties
and
on
the
rents
charged
or
concessions
granted,
and
could
materially
and
adversely
affect
our
cash
flows,
operating
results
and
financial
condition.
Insurance
We
carry
general
liability,
umbrella
liability
and
excess
liability
insurance
with
limits
that
are
typically
obtained
for
similar
real
estate
portfolios
in
Canada
and
otherwise
acceptable
to
our
trustees.
For
the
property
risks,
we
carry
“All
Risks”
property
insurance
including,
but
not
limited
to,
flood,
earthquake
and
loss
of
rental
income
insurance
(with
at
least
a
24-‐month
indemnity
period).
We
also
carry
boiler
and
machinery
insurance
covering
all
boilers,
pressure
vessels,
HVAC
systems
and
equipment
breakdown.
However,
certain
types
of
risks
(generally
of
a
catastrophic
nature
such
as
from
war
or
nuclear
accident)
are
uninsurable
under
any
insurance
policy.
Furthermore,
there
are
other
risks
that
are
not
economically
viable
to
insure
at
this
time.
We
partially
self-‐insure
against
terrorism
risk
for
our
entire
portfolio.
We
have
insurance
for
earthquake
risks,
subject
to
certain
policy
limits,
deductibles
and
self-‐insurance
arrangements.
Should
an
uninsured
or
underinsured
loss
occur,
we
could
lose
our
investment
in,
and
anticipated
profits
and
cash
flows
from,
one
or
more
of
our
properties,
but
we
would
continue
to
be
obligated
to
repay
any
recourse
mortgage
indebtedness
on
such
properties.
We
do
not
carry
title
insurance
on
our
properties.
If
a
loss
occurs
resulting
from
a
title
defect
with
respect
to
a
property
where
there
is
no
title
insurance
or
the
loss
is
in
excess
of
insured
limits,
we
could
lose
all
or
part
of
our
investment
in,
and
anticipated
profits
and
cash
flows
from,
such
property.
Dundee
REIT
2013
Annual
Report
|
54
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
to
the
carrying
amounts
of
the
asset
or
liability
affected
in
the
future.
Dundee
REIT’s
critical
accounting
judgments,
estimates
and
assumptions
in
applying
accounting
policies
are
described
in
Note
4
in
the
consolidated
financial
statements.
CHANGES
IN
ACCOUNTING
POLICIES
AND
FUTURE
ACCOUNTING
POLICY
CHANGES
Changes
in
accounting
policies
Dundee
REIT’s
changes
in
accounting
policies
are
described
in
Note
5
in
the
consolidated
financial
statements.
Future
accounting
policy
changes
Dundee
REIT’s
future
accounting
policy
changes
are
described
in
Note
6
in
the
consolidated
financial
statements.
Additional
information
relating
to
Dundee
REIT,
including
the
latest
annual
information
form
of
Dundee
REIT,
is
available
on
SEDAR
at
www.sedar.com.
Dundee
REIT
2013
Annual
Report
|
55
Management’s
responsibility
for
the
consolidated
financial
statements
The
accompanying
consolidated
financial
statements,
the
notes
thereto
and
other
financial
information
contained
in
this
Annual
Report
have
been
prepared
by,
and
are
the
responsibility
of,
the
management
of
Dundee
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
when
appropriate.
The
Board
of
Trustees
is
responsible
for
ensuring
that
management
fulfills
its
responsibility
for
financial
reporting
and
internal
control.
The
audit
committee,
which
comprises
trustees,
meets
with
management
as
well
as
the
external
auditors
to
satisfy
itself
that
management
is
properly
discharging
its
financial
responsibilities
and
to
review
its
consolidated
financial
statements
and
the
report
of
the
auditors.
The
audit
committee
reports
its
findings
to
the
Board
of
Trustees,
which
approves
the
consolidated
financial
statements.
PricewaterhouseCoopers
LLP,
the
independent
auditors,
have
audited
the
consolidated
financial
statements
in
accordance
with
Canadian
generally
accepted
auditing
standards.
The
auditors
have
full
and
unrestricted
access
to
the
audit
committee,
with
or
without
management
present.
Michael
J.
Cooper
Vice
Chairman
and
Chief
Executive
Officer
Mario
Barrafato
Senior
Vice
President
and
Chief
Financial
Officer
Toronto,
Ontario,
February
27,
2014
Dundee
REIT
2013
Annual
Report
|
56
Independent
auditor’s
report
To
the
Unitholders
of
Dundee
Real
Estate
Investment
Trust
We
have
audited
the
accompanying
consolidated
financial
statements
of
Dundee
Real
Estate
Investment
Trust
and
its
subsidiaries,
which
comprise
the
consolidated
balance
sheets
as
at
December
31,
2013
and
December
31,
2012
and
the
consolidated
statements
of
comprehensive
income,
changes
in
equity
and
cash
flows
for
the
years
then
ended,
and
the
related
notes,
which
comprise
a
summary
of
significant
accounting
policies
and
other
explanatory
information.
Management’s
responsibility
for
the
consolidated
financial
statements
Management
is
responsible
for
the
preparation
and
fair
presentation
of
these
consolidated
financial
statements
in
accordance
with
International
Financial
Reporting
Standards,
and
for
such
internal
control
as
management
determines
is
necessary
to
enable
the
preparation
of
consolidated
financial
statements
that
are
free
from
material
misstatement,
whether
due
to
fraud
or
error.
Auditor’s
responsibility
Our
responsibility
is
to
express
an
opinion
on
these
consolidated
financial
statements
based
on
our
audits.
We
conducted
our
audits
in
accordance
with
Canadian
generally
accepted
auditing
standards.
Those
standards
require
that
we
comply
with
ethical
requirements
and
plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
the
consolidated
financial
statements
are
free
from
material
misstatement.
An
audit
involves
performing
procedures
to
obtain
audit
evidence
about
the
amounts
and
disclosures
in
the
consolidated
financial
statements.
The
procedures
selected
depend
on
the
auditor’s
judgment,
including
the
assessment
of
the
risks
of
material
misstatement
of
the
consolidated
financial
statements,
whether
due
to
fraud
or
error.
In
making
those
risk
assessments,
the
auditor
considers
internal
control
relevant
to
the
entity’s
preparation
and
fair
presentation
of
the
consolidated
financial
statements
in
order
to
design
audit
procedures
that
are
appropriate
in
the
circumstances,
but
not
for
the
purpose
of
expressing
an
opinion
on
the
effectiveness
of
the
entity’s
internal
control.
An
audit
also
includes
evaluating
the
appropriateness
of
accounting
policies
used
and
the
reasonableness
of
accounting
estimates
made
by
management,
as
well
as
evaluating
the
overall
presentation
of
the
consolidated
financial
statements.
We
believe
that
the
audit
evidence
we
have
obtained
in
our
audits
is
sufficient
and
appropriate
to
provide
a
basis
for
our
audit
opinion.
Opinion
In
our
opinion,
the
consolidated
financial
statements
present
fairly,
in
all
material
respects,
the
financial
position
of
Dundee
Real
Estate
Investment
Trust
and
its
subsidiaries
as
at
December
31,
2013
and
December
31,
2012
and
their
financial
performance
and
their
cash
flows
for
the
years
then
ended
in
accordance
with
International
Financial
Reporting
Standards.
Chartered
Professional
Accountants,
Licensed
Public
Accountants
Toronto,
Ontario,
February
27,
2014
Dundee
REIT
2013
Annual
Report
|
57
Consolidated
balance
sheets
(in
thousands
of
Canadian
dollars)
Assets
NON-‐CURRENT
ASSETS
Investment
properties
Investment
in
Dundee
Industrial
Investment
in
joint
ventures
Other
non-‐current
assets
CURRENT
ASSETS
Promissory
notes
receivable
Amounts
receivable
Prepaid
expenses
and
other
assets
Cash
and
cash
equivalents
Assets
held
for
sale
Total
assets
Liabilities
NON-‐CURRENT
LIABILITIES
Debt
Subsidiary
redeemable
units
Tenant
security
deposits
Deferred
Unit
Incentive
Plan
Other
financial
liabilities,
net
Deferred
tax
liabilities,
net
CURRENT
LIABILITIES
Debt
Amounts
payable
and
accrued
liabilities
Distributions
payable
Liabilities
related
to
assets
held
for
sale
Total
liabilities
Equity
Unitholders’
equity
Retained
earnings
Accumulated
other
comprehensive
income
(loss)
Total
equity
Total
liabilities
and
equity
See
accompanying
notes
to
the
consolidated
financial
statements.
On
behalf
of
the
Board
of
Trustees
of
Dundee
Real
Estate
Investment
Trust:
JOANNE
FERSTMAN
Trustee
MICHAEL
J.
COOPER
Trustee
Dundee
REIT
2013
Annual
Report
|
58
December
31,
December
31,
Note
2013
2012
9
10
11
12
13
14
21
15
16
17
15
25
15
18
19
21
29
20
$
$
$
$
6,241,685
166,317
527,255
104,822
7,040,079
-‐
28,476
9,450
31,017
68,943
15,921
7,124,943
2,884,481
101,978
18,848
18,535
19
5,167
3,029,028
264,535
88,749
19,493
372,777
-‐
3,401,805
3,039,189
682,265
1,684
3,723,138
7,124,943
$
$
$
$
5,477,560
160,976
490,770
95,301
6,224,607
42,000
31,106
10,714
24,014
107,834
20,547
6,352,988
2,470,337
132,078
16,847
18,754
1,772
4,492
2,644,280
308,089
76,896
18,056
403,041
9,268
3,056,589
2,829,662
467,034
(297)
3,296,399
6,352,988
Consolidated
statements
of
comprehensive
income
(in
thousands
of
Canadian
dollars)
Investment
properties
revenue
Investment
properties
operating
expenses
Net
rental
income
from
continuing
operations
Other
income
and
expenses
General
and
administrative
Share
of
net
income
and
dilution
gain
from
investment
in
Dundee
Industrial
Share
of
net
income
(loss)
from
investment
in
joint
ventures
Fair
value
adjustments
to
investment
properties
Net
gain
(loss)
on
sale
of
investment
properties
Acquisition
related
costs
Interest:
Debt
Subsidiary
redeemable
units
Debt
settlement
and
other
costs,
net
Depreciation
and
amortization
Interest
and
fee
income
Fair
value
adjustments
to
financial
instruments
Income
before
income
taxes
and
discontinued
operations
Deferred
income
taxes
Income
from
continuing
operations
Income
from
discontinued
operations
Net
income
for
the
year
Other
comprehensive
income
Items
that
will
be
reclassified
subsequently
to
net
income:
Unrealized
gain
on
interest
rate
swap
agreements
Unrealized
foreign
currency
translation
gain
Comprehensive
income
for
the
year
See
accompanying
notes
to
the
consolidated
financial
statements.
Note
$
Years
ended
December
31,
2013
687,172
(295,672)
391,500
$
2012
607,796
(259,249)
348,547
10
11
9
21
7
22
22
23
24
25
21
29
29
(23,859)
15,697
84,382
79,277
(283)
-‐
(130,169)
(7,897)
(241)
(2,527)
4,635
34,840
445,355
(344)
445,011
-‐
445,011
(21,132)
1,568
(254)
105,572
1,530
(17,549)
(125,118)
(7,758)
(3,798)
(2,042)
5,045
(16,588)
268,023
(1,849)
266,174
24,899
291,073
39
1,942
1,981
446,992
$
1,227
78
1,305
292,378
$
Dundee
REIT
2013
Annual
Report
|
59
Consolidated
statements
of
changes
in
equity
(in
thousands
of
Canadian
dollars,
except
for
number
of
units)
Balance
at
January
1,
2013
Net
income
for
the
year
Distributions
paid
Distributions
payable
Public
offering
of
REIT
A
Units
Distribution
Reinvestment
Plan
Unit
Purchase
Plan
Deferred
units
exchanged
for
REIT
A
Units
Cancellation
of
REIT
A
Units
under
normal
course
issuer
bid
Issue
costs
Other
comprehensive
income
Balance
at
December
31,
2013
Attributable
to
unitholders
of
the
Trust
Accumulated
other
Note
19,
20
19,
20
20
20
20
Number
Unitholders’
Retained
comprehensive
$
of
Units
97,634,941
-‐
-‐
-‐
6,353,750
1,509,148
12,212
$
equity
2,829,662
-‐
-‐
-‐
230,006
47,899
429
earnings
467,034
445,011
(210,287)
(19,493)
-‐
-‐
-‐
$
income
(loss)
(297)
-‐
-‐
-‐
-‐
-‐
-‐
$
Total
3,296,399
445,011
(210,287)
(19,493)
230,006
47,899
429
17,
20
44,970
1,641
-‐
-‐
1,641
20
20
20,
29
(2,134,800)
-‐
-‐
103,420,221
$
(60,665)
(9,783)
-‐
3,039,189
$
-‐
-‐
-‐
682,265
$
-‐
-‐
1,981
1,684
$
(60,665)
(9,783)
1,981
3,723,138
Number
Unitholders’
Retained
Attributable
to
unitholders
of
the
Trust
Accumulated
other
comprehensive
Balance
at
January
1,
2012
Net
income
for
the
year
Distributions
paid
Distributions
payable
Public
offering
of
REIT
A
Units
REIT
A
Units
issued
for
Whiterock
transaction
Distribution
Reinvestment
Plan
Unit
Purchase
Plan
Deferred
units
exchanged
for
REIT
A
Units
Conversion
of
debentures
Conversion
feature
on
debentures
Issue
costs
Other
comprehensive
income
Balance
at
December
31,
2012
Note
19,
20
19,
20
20
$
of
Units
66,209,376
-‐
-‐
-‐
16,947,550
7,
20
20
20
12,580,347
1,200,028
15,296
17,
20
20
20
20
20,
29
25,290
657,054
-‐
-‐
-‐
97,634,941
$
equity
1,745,283
-‐
-‐
-‐
604,812
434,777
44,127
578
876
17,498
5,674
(23,963)
-‐
2,829,662
$
earnings
373,553
291,073
(179,536)
(18,056)
-‐
$
income
(loss)
(1,602)
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
467,034
$
$
-‐
-‐
-‐
-‐
-‐
-‐
-‐
1,305
(297)
Total
2,117,234
291,073
(179,536)
(18,056)
604,812
434,777
44,127
578
876
17,498
5,674
(23,963)
1,305
3,296,399
$
$
See
accompanying
notes
to
the
consolidated
financial
statements.
Dundee
REIT
2013
Annual
Report
|
60
Consolidated
statements
of
cash
flows
(in
thousands
of
Canadian
dollars)
Generated
from
(utilized
in)
operating
activities
Net
income
for
the
year
Non-‐cash
items:
Share
of
net
income
and
dilution
gain
from
investment
in
Dundee
Industrial
Share
of
net
loss
(income)
from
investment
in
joint
ventures
Amortization
and
depreciation
Other
adjustments
Net
loss
(gain)
on
sale
of
investment
properties
Deferred
unit
compensation
expense
Straight-‐line
rent
adjustment
Fair
value
adjustments
to
investment
properties
Fair
value
adjustments
to
financial
instruments
Deferred
income
taxes
Investment
in
lease
incentives
and
initial
direct
leasing
costs
Interest
paid
on
subsidiary
redeemable
units
Change
in
non-‐cash
working
capital
Generated
from
(utilized
in)
investing
activities
Investment
in
building
improvements
Investment
in
development
projects
Acquisition
of
Whiterock,
net
of
cash
acquired
Acquisition
of
investment
properties
Acquisition
deposits
on
investment
properties
Net
proceeds
from
disposal
of
investment
properties
Purchase
of
property
and
equipment
Acquisition
of
equity
accounted
investments
Distributions
from
investment
in
joint
ventures
Distributions
from
investment
in
Dundee
Industrial
Repayment
of
promissory
notes
receivable
Change
in
restricted
cash
Generated
from
(utilized
in)
financing
activities
Borrowings
Repayments
Financing
costs
additions
Mortgage
break
fees
Distributions
paid
on
Units
Interest
paid
on
subsidiary
redeemable
units
Cancellation
of
REIT
A
Units
under
normal
course
issuer
bid
Units
issued
for
cash
Unit
issue
costs
Increase
(decrease)
in
cash
and
cash
equivalents
Foreign
exchange
gain
(loss)
on
cash
held
in
foreign
currency
Cash
transferred
on
disposition
of
discontinued
operations
Cash
and
cash
equivalents,
beginning
of
year
Cash
and
cash
equivalents,
end
of
year
See
accompanying
notes
to
the
consolidated
financial
statements.
Dundee
REIT
2013
Annual
Report
|
61
Note
2013
2012
Years
ended
December
31,
$
445,011
$
291,073
10
11
28
28
21
17
9
24
25
22
28
9
7
8
15
15
15
23
19
22
20
20
20
$
(15,697)
(84,382)
5,399
120
283
4,087
(6,767)
(79,277)
(34,840)
344
(37,502)
7,524
(9,066)
195,237
(26,903)
-‐
-‐
(485,060)
(15,813)
11,469
(4,876)
(33,021)
2,700
10,345
42,000
(452)
(499,611)
1,197,881
(854,106)
(4,492)
-‐
(180,444)
(7,524)
(60,665)
230,435
(9,783)
311,302
6,928
75
-‐
24,014
31,017
$
(1,568)
254
2,029
4,624
(2,677)
4,160
(9,898)
(110,759)
16,588
1,849
(23,577)
6,926
(44,074)
134,950
(20,199)
(1,945)
(147,134)
(235,019)
(1,150)
212,486
-‐
(844,766)
443,888
-‐
-‐
181
(593,658)
950,102
(994,642)
(4,849)
(5,626)
(147,601)
(6,926)
-‐
605,390
(23,963)
371,885
(86,823)
(155)
(878)
111,870
24,014
Notes
to
the
consolidated
financial
statements
(All
dollar
amounts
in
thousands
of
Canadian
dollars,
except
for
unit
or
per
unit
amounts)
Note
1
ORGANIZATION
Dundee
Real
Estate
Investment
Trust
(“Dundee
REIT”
or
the
“Trust”)
is
an
open-‐ended
investment
trust
created
pursuant
to
a
Declaration
of
Trust,
as
amended
and
restated,
under
the
laws
of
the
Province
of
Ontario.
The
consolidated
financial
statements
of
Dundee
REIT
include
the
accounts
of
Dundee
REIT
and
its
consolidated
subsidiaries.
Dundee
REIT’s
portfolio
comprises
office
properties
located
in
urban
centres
across
Canada
and
the
United
States
(“U.S.”).
A
subsidiary
of
Dundee
REIT
performs
the
property
management
function.
The
Trust’s
registered
office
is
30
Adelaide
Street
East,
Suite
1600,
Toronto,
Ontario,
Canada
M5C
3H1.
The
Trust
is
listed
on
the
Toronto
Stock
Exchange
under
the
symbol
“D.UN”.
Dundee
REIT’s
consolidated
financial
statements
for
the
year
ended
December
31,
2013
were
authorized
for
issuance
by
the
Board
of
Trustees
on
February
27,
2014,
after
which
date
they
may
only
be
amended
with
the
Board
of
Trustees’
approval.
Equity
is
described
in
Note
20;
however,
for
simplicity,
throughout
the
Notes,
reference
is
made
to
the
following:
• “REIT
A
Units”,
meaning
the
REIT
Units,
Series
A
• “REIT
B
Units”,
meaning
the
REIT
Units,
Series
B
• “REIT
Units”,
meaning
the
REIT
Units,
Series
A,
and
REIT
Units,
Series
B,
collectively
• “Units”,
meaning
REIT
Units,
Series
A,
REIT
Units,
Series
B,
and
Special
Trust
Units,
collectively
Subsidiary
redeemable
units
classified
as
a
liability
are
described
in
Note
16;
however,
for
simplicity,
throughout
the
Notes,
reference
is
made
to
“subsidiary
redeemable
units”,
meaning
the
LP
Class
B
Units,
Series
1
of
Dundee
Properties
Limited
Partnership
(“DPLP”).
At
December
31,
2013,
DREAM
Unlimited
Corp.,
indirectly
through
its
subsidiaries,
held
773,939
REIT
A
Units
and
383,823
subsidiary
redeemable
units.
Note
2
SUMMARY
OF
SIGNIFICANT
ACCOUNTING
POLICIES
The
principal
accounting
policies
applied
in
the
preparation
of
these
consolidated
financial
statements
are
set
out
below.
These
policies
have
been
consistently
applied
to
all
years
presented,
unless
otherwise
stated.
Basis
of
presentation
and
statement
of
compliance
The
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
consolidation
The
consolidated
financial
statements
comprise
the
financial
statements
of
Dundee
REIT
and
its
subsidiaries.
Subsidiaries
are
fully
consolidated
from
the
date
of
acquisition,
the
date
on
which
the
Trust
obtains
control,
and
continue
to
be
consolidated
until
the
date
such
control
ceases.
Control
exists
when
the
Trust
is
exposed
to,
or
has
rights
to,
variable
returns
from
its
involvement
with
the
entity
and
has
the
ability
to
affect
those
returns
through
its
power
over
the
entity.
All
intercompany
balances,
income
and
expenses,
and
unrealized
gains
and
losses
resulting
from
intercompany
transactions
are
eliminated
in
full.
Equity
accounted
investments
Equity
accounted
investments
are
investments
over
which
the
Trust
has
significant
influence,
but
not
control.
Generally,
the
Trust
is
considered
to
exert
significant
influence
when
it
holds
more
than
a
20%
interest
in
an
entity.
However,
determining
significant
influence
is
a
matter
of
judgment
and
specific
circumstances
and,
from
time
to
time,
the
Trust
may
hold
an
interest
of
more
than
20%
in
an
entity
without
exerting
significant
influence.
Conversely,
the
Trust
may
hold
an
interest
of
less
than
20%
and
exert
significant
influence
through
representation
on
the
board
of
trustees,
direction
of
management
or
through
contractual
agreements.
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REIT
2013
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62
The
financial
results
of
the
Trust’s
equity
accounted
investments
are
included
in
the
Trust’s
consolidated
financial
statements
using
the
equity
method,
whereby
the
investment
is
carried
on
the
consolidated
balance
sheets
at
cost,
adjusted
for
the
Trust’s
proportionate
share
of
post-‐acquisition
profits
and
losses
and
for
post-‐acquisition
changes
in
excess
of
the
Trust’s
carrying
amount
of
its
investment
over
the
net
assets
of
the
equity
accounted
investments,
less
any
identified
impairment
loss.
The
Trust’s
share
of
profits
and
losses
is
recognized
in
the
share
of
net
earnings
from
equity
accounted
investments
in
the
consolidated
statements
of
comprehensive
income.
Dilution
gains
and
losses
arising
from
changes
in
the
Trust’s
interest
in
equity
accounted
investments
are
recognized
in
earnings.
If
the
Trust’s
investment
is
reduced
to
zero,
additional
losses
are
not
provided
for,
and
a
liability
is
not
recognized,
unless
the
Trust
has
incurred
legal
or
constructive
obligations,
or
made
payments
on
behalf
of
the
equity
accounted
investment.
At
each
reporting
date,
the
Trust
evaluates
whether
there
is
objective
evidence
that
its
interest
in
an
equity
accounted
investment
is
impaired.
The
entire
carrying
amount
of
the
equity
accounted
investment
is
compared
to
the
recoverable
amount,
which
is
the
higher
of
the
value
in
use
or
fair
value
less
costs
to
sell.
The
recoverable
amount
of
each
investment
is
considered
separately.
Where
the
Trust
transacts
with
its
equity
accounted
investments,
unrealized
profits
and
losses
are
eliminated
to
the
extent
of
the
Trust’s
interest
in
the
investment.
Balances
outstanding
between
the
Trust
and
equity
accounted
investments
in
which
it
has
an
interest
are
not
eliminated
in
the
consolidated
balance
sheets.
Joint
arrangements
The
Trust
enters
into
joint
arrangements
via
joint
operations
and
joint
ventures.
A
joint
arrangement
with
a
contractual
arrangement
pursuant
to
which
the
Trust
and
other
parties
undertake
an
economic
activity
that
is
subject
to
joint
control
whereby
the
strategic
financial
and
operating
policy
decisions
relating
to
the
activities
of
the
joint
arrangement
require
the
unanimous
consent
of
the
parties
sharing
control
is
referred
to
as
joint
operations.
Joint
arrangements
that
involve
the
establishment
of
a
separate
entity
in
which
each
venture
has
rights
to
the
net
assets
of
the
arrangements
are
referred
to
as
joint
ventures.
In
a
co-‐ownership
arrangement
the
Trust
owns
jointly
one
or
more
investment
properties
with
another
party
and
has
direct
rights
to
the
investment
property,
and
obligations
for
the
liabilities
relating
to
the
co-‐ownership.
The
Trust
reports
its
interests
in
joint
ventures
using
the
equity
method
of
accounting
as
previously
described
under
“Equity
accounted
investments”.
The
Trust
reports
its
interests
in
co-‐ownerships
as
joint
operations
by
accounting
for
its
share
of
the
assets,
liabilities,
revenues
and
expenses.
Under
this
method,
the
Trust’s
consolidated
financial
statements
reflect
only
the
Trust’s
proportionate
share
of
the
assets,
its
share
of
any
liabilities
incurred
jointly
with
the
other
venturers
as
well
as
any
liabilities
incurred
directly,
its
share
of
any
revenues
earned
or
expenses
incurred
by
the
joint
venture
and
any
expenses
incurred
directly.
Dundee
REIT
2013
Annual
Report
|
63
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
and
include
office
properties
held
to
earn
rental
income
and/or
for
capital
appreciation
and
properties
that
are
being
constructed
or
developed
for
future
use
as
investment
properties.
Investment
properties
and
properties
under
development
are
measured
at
fair
value,
determined
based
on
available
market
evidence,
at
the
consolidated
balance
sheet
dates.
Related
fair
value
gains
and
losses
are
recorded
in
comprehensive
income
in
the
period
in
which
they
arise.
The
fair
value
of
each
investment
property
is
based
on,
among
other
things,
rental
income
from
current
leases
and
assumptions
about
rental
income
from
future
leases
reflecting
market
conditions
at
the
consolidated
balance
sheet
dates,
less
future
estimated
cash
outflows
in
respect
of
such
properties.
To
determine
fair
value,
the
Trust
first
considers
whether
it
can
use
current
prices
in
an
active
market
for
a
similar
property
in
the
same
location
and
condition,
which
is
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
that
using
the
income
approach
is
more
appropriate.
The
income
approach
is
one
in
which
the
fair
value
is
estimated
by
capitalizing
the
net
rental
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.
Active
properties
under
development
are
measured
using
a
discounted
cash
flow
model,
net
of
costs
to
complete,
as
of
the
consolidated
balance
sheet
dates.
Development
sites
in
the
planning
phases
are
measured
using
comparable
market
prices
for
similar
assets.
The
initial
cost
of
properties
under
development
includes
the
acquisition
cost
of
the
property,
direct
development
costs,
realty
taxes
and
borrowing
costs
directly
attributable
to
properties
under
development.
Borrowing
costs
associated
with
direct
expenditures
on
properties
under
development
are
capitalized.
The
amount
of
capitalized
borrowing
costs
is
determined
first
by
reference
to
project-‐specific
borrowings,
where
relevant,
and
otherwise
by
applying
a
weighted
average
cost
of
borrowings
to
eligible
expenditures
after
adjusting
for
borrowings
associated
with
other
specific
developments.
Where
borrowings
are
associated
with
specific
developments,
the
amount
capitalized
is
the
gross
cost
incurred
on
those
borrowings
less
any
investment
income
arising
on
their
temporary
investment.
Borrowing
costs
are
capitalized
from
the
commencement
of
the
development
until
the
date
of
practical
completion
when
the
property
is
substantially
ready
for
its
intended
use
or
sale.
The
capitalization
of
borrowing
costs
is
suspended
if
there
are
prolonged
periods
when
development
activity
is
interrupted.
Practical
completion
is
when
the
property
is
capable
of
operating
in
the
manner
intended
by
management.
Generally,
this
occurs
on
completion
of
construction
and
receipt
of
all
necessary
occupancy
and
other
material
permits.
If
the
Trust
has
pre-‐leased
space
at
or
prior
to
the
start
of
the
development,
and
the
lease
requires
tenant
improvements
that
enhance
the
value
of
the
property,
practical
completion
is
considered
to
occur
when
such
improvements
are
completed.
Initial
direct
leasing
costs
incurred
in
negotiating
and
arranging
tenant
leases
are
added
to
the
carrying
amount
of
investment
properties.
Lease
incentives,
which
include
costs
incurred
to
make
leasehold
improvements
to
tenants’
space
and
cash
allowances
provided
to
tenants,
are
added
to
the
carrying
amount
of
investment
properties
and
are
amortized
on
a
straight-‐line
basis
over
the
term
of
the
lease
as
a
reduction
of
investment
properties
revenue.
Segment
reporting
A
reportable
operating
segment
is
a
distinguishable
component
of
the
Trust
that
is
engaged
either
in
providing
related
products
or
services
(business
segment)
or
in
providing
products
or
services
within
a
particular
economic
environment
(geographical
segment),
which
is
subject
to
risks
and
rewards
that
are
different
from
those
of
other
reportable
segments.
The
Trust’s
primary
format
for
segment
reporting
is
based
on
business
segments.
The
business
segments,
office
properties,
are
based
on
the
Trust’s
management
and
internal
reporting
structure.
Operating
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
operating
segments
derive
their
revenue
primarily
from
rental
income
from
lessees.
All
of
the
Trust’s
business
activities
and
operating
segments
are
reported
within
the
office
property
segments.
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REIT
2013
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64
Other
non-‐current
assets
Other
non-‐current
assets
include
property
and
equipment,
deposits,
restricted
cash,
straight-‐line
rent
receivables,
external
management
contracts
and
goodwill.
Property
and
equipment
are
stated
at
cost
less
accumulated
depreciation
and
accumulated
impairment
losses.
Depreciation
of
property
and
equipment
is
calculated
using
the
straight-‐line
method
to
allocate
their
cost,
net
of
their
residual
values,
over
their
expected
useful
lives
of
four
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
property
and
equipment
when
that
cost
is
incurred,
if
the
recognition
criteria
are
met.
Subsequent
costs
are
included
in
the
asset’s
carrying
amount
or
recognized
as
a
separate
asset,
as
appropriate,
only
when
it
is
probable
that
future
economic
benefits
associated
with
the
item
will
flow
to
the
Trust
and
the
cost
of
the
item
can
be
measured
reliably.
All
other
repairs
and
maintenance
are
charged
to
comprehensive
income
during
the
financial
period
in
which
they
are
incurred.
Other
non-‐current
assets
are
derecognized
on
disposal
or
when
no
future
economic
benefits
are
expected
from
their
use
or
disposal.
Any
gain
or
loss
arising
on
derecognition
of
an
asset
(calculated
as
the
difference
between
the
net
disposal
proceeds
and
the
carrying
amount
of
the
asset)
is
included
in
the
consolidated
statements
of
comprehensive
income
in
the
year
the
asset
is
derecognized.
Revenue
recognition
The
Trust
accounts
for
tenant
leases
as
operating
leases
given
that
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,
percentage
participation
rents,
lease
termination
fees,
parking
income
and
incidental
income.
Revenue
recognition
under
a
lease
commences
when
the
tenant
has
a
right
to
use
the
leased
asset.
The
total
amount
of
contractual
rent
to
be
received
from
operating
leases
is
recognized
on
a
straight-‐line
basis
over
the
term
of
the
lease;
a
straight-‐line
rent
receivable,
which
is
included
in
other
non-‐current
assets,
is
recorded
for
the
difference
between
the
rental
revenue
recognized
and
the
contractual
amount
received.
Recoveries
from
tenants
are
recognized
as
revenues
in
the
period
in
which
the
corresponding
costs
are
incurred
and
collectability
reasonably
assured.
Percentage
participation
rents
are
recognized
on
an
accrual
basis
once
tenant
sales
revenues
exceed
contractual
thresholds.
Other
revenues
are
recorded
as
earned.
Business
combinations
The
purchase
method
of
accounting
is
used
for
acquisitions
meeting
the
definition
of
a
business.
The
consideration
transferred
in
a
business
combination
is
measured
at
fair
value,
which
is
calculated
as
the
sum
of
the
acquisition
date
fair
values
of
the
assets
transferred
by
the
acquirer,
the
liabilities
incurred
by
the
acquirer
to
former
owners
of
the
acquiree,
and
the
equity
interests
issued
by
the
acquirer.
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
the
profit
or
loss
for
the
year
as
an
acquisition
gain.
Any
transaction
costs
incurred
with
respect
to
the
business
combination
are
expensed
in
the
period
incurred.
Goodwill
Goodwill
arises
on
the
acquisition
of
businesses
and
represents
the
excess
of
the
consideration
transferred
over
and
above
the
Trust’s
interest
in
the
fair
value
of
the
net
identifiable
assets,
liabilities
and
contingent
liabilities
of
the
acquiree
and
the
fair
value
of
the
non-‐controlling
interest
in
the
acquiree.
For
the
purpose
of
impairment
testing,
goodwill
acquired
in
a
business
combination
is
allocated
to
each
of
the
cash-‐generating
units
or
groups
of
cash-‐generating
units
that
are
expected
to
benefit
from
the
synergies
of
the
combination.
Each
unit
or
group
of
units
to
which
the
goodwill
is
allocated
represents
the
lowest
level
within
the
entity
at
which
the
goodwill
is
monitored
for
internal
management
purposes.
Goodwill
is
monitored
by
the
Trust
at
the
operating
segment
level.
Goodwill
impairment
reviews
are
undertaken
annually
or
more
frequently
if
events
or
changes
in
circumstances
indicate
a
potential
impairment.
The
carrying
value
of
goodwill
is
compared
to
the
recoverable
amount,
which
is
the
higher
of
value
in
use
and
the
fair
value
less
costs
to
sell.
Any
impairment
is
recognized
immediately
as
an
expense
and
is
not
subsequently
reversed.
Dundee
REIT
2013
Annual
Report
|
65
External
property
management
contracts
External
property
management
contracts
assumed
in
a
business
combination
are
recorded
on
the
consolidated
balance
sheets
and
arise
when
the
Trust
acquires
less
than
100%
of
an
investment
property,
but
manages
the
investment
property
and
earns
a
property
management
fee
from
the
co-‐owner.
External
property
management
contracts
are
in
place
as
long
as
the
property
is
co-‐owned
by
the
Trust
and
are
amortized
on
a
straight-‐line
basis
into
comprehensive
income
over
ten
years.
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
reduction
of
retained
earnings.
Income
taxes
Dundee
REIT
is
taxed
as
a
mutual
fund
trust
for
Canadian
income
tax
purposes.
The
Trust
expects
to
distribute
all
of
its
taxable
income
to
its
unitholders,
which
enables
it
to
deduct
such
distributions
for
income
tax
purposes.
As
the
income
tax
obligations
relating
to
the
distributions
are
those
of
the
individual
unitholder,
no
provision
for
income
taxes
is
required
on
such
amounts.
The
Trust
expects
to
continue
to
distribute
its
taxable
income
and
to
qualify
as
a
real
estate
investment
trust
(“REIT”)
for
the
foreseeable
future.
For
U.S.
subsidiaries,
income
taxes
are
accounted
for
using
the
asset
and
liability
method.
Under
this
method,
deferred
income
taxes
are
recognized
for
the
expected
future
tax
consequences
of
temporary
differences
between
the
carrying
value
of
balance
sheet
items
and
their
corresponding
tax
values.
Deferred
income
taxes
are
computed
using
substantively
enacted
income
tax
rates
or
laws
for
the
years
in
which
the
temporary
differences
are
expected
to
reverse
or
settle.
Unit-‐based
compensation
plan
As
described
in
Note
17,
the
Trust
has
a
Deferred
Unit
Incentive
Plan
(“DUIP”)
that
provides
for
the
granting
of
deferred
trust
units
and
income
deferred
trust
units
to
trustees,
officers,
employees
and
affiliates
and
their
service
providers
(including
the
asset
manager).
Unvested
deferred
trust
units
are
recorded
as
a
liability,
and
compensation
expense
is
recognized
over
the
vesting
period
at
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
REIT
A
Units,
with
changes
in
fair
value
recognized
in
comprehensive
income
as
a
fair
value
adjustment
to
financial
instruments.
Deferred
trust
units
and
income
deferred
units
are
only
settled
in
REIT
A
Units.
Cash
and
cash
equivalents
Cash
and
cash
equivalents
include
all
short-‐term
investments
with
an
original
maturity
of
three
months
or
less,
and
exclude
cash
subject
to
restrictions
that
prevent
its
use
for
current
purposes.
Excluded
from
cash
and
cash
equivalents
are
amounts
held
for
repayment
of
tenant
security
deposits,
as
required
by
various
lending
agreements.
Deposits
are
included
in
other
non-‐current
assets.
Dundee
REIT
2013
Annual
Report
|
66
Financial
instruments
Designation
of
financial
instruments
The
following
summarizes
the
Trust’s
classification
and
measurement
of
financial
assets
and
financial
liabilities:
Financial
assets
Promissory
notes
receivable
Amounts
receivable
Restricted
cash
and
deposits
Cash
and
cash
equivalents
Financial
liabilities
Mortgages
Term
debt
Debentures
Subsidiary
redeemable
units
Deposits
Deferred
Unit
Incentive
Plan
Amounts
payable
and
accrued
liabilities
Distributions
payable
Convertible
debentures
–
host
instrument
Convertible
debentures
–
conversion
feature
Interest
rate
swaps
Classification
Measurement
Loans
and
receivables
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
Fair
value
through
profit
or
loss
Cash
flow
hedge
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
Fair
value
Fair
value
Financial
assets
The
Trust
classifies
its
non-‐derivative
financial
assets
with
fixed
or
determinable
payments
that
are
not
quoted
in
an
active
market
as
loans
and
receivables.
All
financial
assets
are
initially
measured
at
fair
value,
less
any
related
transaction
costs,
and
are
subsequently
measured
at
amortized
cost.
Promissory
notes
receivable
are
initially
measured
at
fair
value
and
are
subsequently
measured
at
amortized
cost
less
impairment
losses.
The
amount
of
the
loss
is
measured
as
the
difference
between
the
promissory
notes
receivable’s
carrying
amount
and
the
present
value
of
estimated
future
cash
flows
(excluding
future
credit
losses
that
have
not
been
incurred)
discounted
at
the
financial
asset’s
original
effective
interest
rate
and
the
amount
of
the
loss
is
recognized
in
the
consolidated
statements
of
comprehensive
income.
Amounts
receivable
are
initially
measured
at
fair
value
and
are
subsequently
measured
at
amortized
cost
less
provision
for
impairment.
A
provision
for
impairment
is
established
when
there
is
objective
evidence
that
collection
will
not
be
possible
under
the
original
terms
of
the
contract.
Indicators
of
impairment
include
payment
delinquency
and
significant
financial
difficulty
of
the
tenant.
The
carrying
amount
of
the
financial
asset
is
reduced
through
an
allowance
account,
and
the
amount
of
the
loss
is
recognized
in
the
consolidated
statements
of
comprehensive
income
within
investment
properties
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
properties
operating
expenses
in
the
consolidated
statements
of
comprehensive
income.
Trade
receivables
that
are
less
than
three
months
past
due
are
not
considered
impaired
unless
there
is
evidence
collection
is
not
possible.
If
in
a
subsequent
period
when
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
amount
of
the
asset
does
not
exceed
its
amortized
cost
at
the
reversal
date.
Any
subsequent
reversal
of
an
impairment
loss
is
recognized
in
profit
or
loss.
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.
Dundee
REIT
2013
Annual
Report
|
67
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
are
initially
recognized
at
fair
value
less
related
transaction
costs.
Financial
liabilities
classified
as
other
liabilities
are
measured
at
amortized
cost
using
the
effective
interest
rate
method.
Under
the
effective
interest
rate
method,
any
transaction
fees,
costs,
discounts
and
premiums
directly
related
to
the
financial
liabilities
are
recognized
in
comprehensive
income
over
the
expected
life
of
the
debt.
The
Trust’s
financial
liabilities
that
are
classified
as
fair
value
through
profit
or
loss
are
initially
recognized
at
fair
value
and
are
subsequently
remeasured
at
fair
value
each
reporting
period,
with
changes
in
the
fair
value
recognized
in
comprehensive
income.
Mortgages,
term
debt
and
debentures
are
initially
recognized
at
fair
value
less
related
transaction
costs,
or
at
fair
value
when
assumed
in
a
business
or
asset
acquisition.
Subsequent
to
initial
recognition,
mortgages
and
term
debt
are
recognized
at
amortized
cost.
Borrowing
costs
that
are
directly
attributable
to
investment
properties
under
development
are
capitalized.
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
REIT
Units
that,
except
for
the
available
exemption
under
International
Accounting
Standard
(“IAS”)
32,
“Financial
Instruments:
Presentation”
(“IAS
32”),
would
normally
be
presented
as
a
financial
liability
because
of
the
redemption
feature
attached
to
the
REIT
A
Units.
Both
components
are
measured
based
on
their
respective
estimated
fair
values
at
the
date
of
issuance.
The
fair
value
of
the
host
instrument
is
net
of
any
related
transaction
costs.
The
fair
value
of
the
host
instrument
is
estimated
based
on
the
present
value
of
future
interest
and
principal
payments
due
under
the
terms
of
the
debenture
using
a
discount
rate
for
similar
debt
instruments
without
a
conversion
feature.
Subsequent
to
initial
recognition,
the
host
instrument
is
accounted
for
at
amortized
cost.
The
conversion
feature
is
accounted
for
at
fair
value
with
changes
in
fair
value
recognized
in
comprehensive
income
each
period.
When
the
holder
of
a
convertible
debenture
converts
its
interest
into
REIT
A
Units,
the
host
instrument
and
conversion
feature
are
reclassified
to
unitholders’
equity
in
proportion
to
the
units
converted
over
the
total
equivalent
units
outstanding.
Deferred
trust
units
and
the
subsidiary
redeemable
units
are
measured
at
amortized
cost
because
they
are
settled
in
REIT
A
Units
and
REIT
B
Units,
which
in
accordance
with
IAS
32
are
considered
liabilities.
Consequently,
the
deferred
units
and
subsidiary
redeemable
units
are
remeasured
each
reporting
period
based
on
the
fair
value
of
REIT
Units,
with
changes
in
the
liabilities
recorded
in
comprehensive
income.
Distributions
paid
on
subsidiary
redeemable
units
are
recorded
as
interest
expense
in
comprehensive
income.
A
financial
liability
is
derecognized
when
the
obligation
under
the
liability
is
discharged,
cancelled
or
expired.
Derivative
financial
instruments
and
hedging
activities
Derivative
financial
instruments
are
initially
recognized
at
fair
value
on
the
date
a
derivative
contract
is
entered
into
and
subsequently
remeasured
at
fair
value.
The
method
of
recognizing
the
resulting
gain
or
loss
depends
on
whether
the
derivative
financial
instrument
is
designated
as
a
hedging
instrument
and,
if
so,
the
nature
of
the
item
being
hedged.
The
Trust
has
designated
its
interest
rate
swaps
as
a
hedge
of
the
interest
under
the
term
loan
facility.
At
the
inception
of
the
transaction,
the
Trust
documents
the
relationship
between
hedging
instruments
and
hedged
items,
as
well
as
its
risk
management
objectives
and
strategy
for
undertaking
various
hedging
transactions.
The
Trust
also
documents,
both
at
hedge
inception
and
on
an
ongoing
basis,
its
assessment
of
whether
the
derivatives
used
in
hedging
transactions
are
highly
effective
in
offsetting
changes
in
cash
flows
of
hedged
items.
The
effective
portion
of
changes
in
the
fair
value
of
derivatives
that
are
designated
and
qualify
as
cash
flow
hedges
is
recognized
in
other
comprehensive
income.
The
gain
or
loss
relating
to
the
ineffective
portion
is
recognized
immediately
in
the
consolidated
statements
of
comprehensive
income.
Amounts
accumulated
in
equity
are
reclassified
to
other
comprehensive
income
or
loss
in
the
periods
when
the
hedged
item
affects
profit
or
loss.
When
a
hedging
instrument
expires
or
is
sold,
or
when
a
hedge
no
longer
meets
the
criteria
for
hedge
accounting,
any
cumulative
gains
or
losses
existing
in
equity
at
that
time
are
recognized
in
the
consolidated
statements
of
comprehensive
income
immediately.
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REIT
2013
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68
Interest
on
debt
Interest
on
debt
includes
coupon
interest,
amortization
of
premiums
allocated
to
the
conversion
features
of
the
convertible
debentures,
and
amortization
of
ancillary
costs
incurred
in
connection
with
the
arrangement
of
borrowings.
Finance
costs
are
amortized
to
interest
expense
unless
they
relate
to
a
qualifying
asset
in
which
case
they
are
capitalized.
Equity
The
Trust
presents
REIT
Units
as
equity,
notwithstanding
the
fact
that
the
Trust’s
REIT
Units
meet
the
definition
of
a
financial
liability.
Under
IAS
32,
the
REIT
Units
are
considered
a
puttable
financial
instrument
because
of
the
holder’s
option
to
redeem
REIT
Units,
generally
at
any
time,
subject
to
certain
restrictions,
at
a
redemption
price
per
unit
equal
to
the
lesser
of
90%
of
a
20-‐day
weighted
average
closing
price
prior
to
the
redemption
date
or
100%
of
the
closing
market
price
on
the
redemption
date.
The
total
amount
payable
by
Dundee
REIT
in
any
calendar
month
will
not
exceed
$50
unless
waived
by
Dundee
REIT’s
Board
of
Trustees
at
their
sole
discretion.
The
Trust
has
determined
the
REIT
Units
can
be
presented
as
equity
and
not
financial
liabilities
because
the
REIT
Units
have
all
of
the
following
features,
as
defined
in
IAS
32
(hereinafter
referred
to
as
the
“puttable
exemption”):
• REIT
Units
entitle
the
holder
to
a
pro
rata
share
of
the
Trust’s
net
assets
in
the
event
of
its
liquidation.
Net
assets
are
those
assets
that
remain
after
deducting
all
other
claims
on
the
assets.
• REIT
Units
are
the
class
of
instruments
that
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
is
subordinate
to
all
other
classes
of
instruments
have
identical
features.
• Apart
from
the
contractual
obligation
for
the
Trust
to
redeem
the
REIT
Units
for
cash
or
another
financial
asset,
the
REIT
Units
do
not
include
any
contractual
obligation
to
deliver
cash
or
another
financial
asset
to
another
entity,
or
to
exchange
financial
assets
or
financial
liabilities
with
another
entity
under
conditions
that
are
potentially
unfavourable
to
the
Trust,
and
it
is
not
a
contract
that
will
or
may
be
settled
in
the
Trust’s
own
instruments.
• The
total
expected
cash
flows
attributable
to
the
REIT
Units
over
their
lives
are
based
substantially
on
the
profit
or
loss,
and
the
change
in
the
recognized
net
assets
and
unrecognized
net
assets
of
the
Trust
over
the
life
of
the
REIT
Units.
REIT
Units
are
initially
recognized
at
the
fair
value
of
the
consideration
received
by
the
Trust.
Any
transaction
costs
arising
on
the
issuance
of
REIT
Units
are
recognized
directly
in
unitholders’
equity
as
a
reduction
of
the
proceeds
received.
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
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.
Where
there
are
a
number
of
similar
obligations,
the
likelihood
an
outflow
will
be
required
in
settlement
is
determined
by
considering
the
class
of
obligations
as
a
whole.
A
provision
is
recognized
even
if
the
likelihood
of
an
outflow
with
respect
to
any
one
item
included
in
the
same
class
of
obligations
may
be
small.
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
risks
specific
to
the
obligation.
The
increase
in
the
provision
due
to
passage
of
time
is
recognized
as
interest
expense.
Assets
held
for
sale
and
discontinued
operations
Assets
and
liabilities
(or
disposal
groups)
are
classified
as
held
for
sale
when
their
carrying
amount
is
to
be
recovered
principally
through
a
sale
transaction
and
a
sale
is
considered
highly
probable.
Investment
properties
continue
to
be
measured
at
fair
value
and
the
remainder
of
the
disposal
group
is
stated
at
the
lower
of
the
carrying
amount
and
fair
value
less
costs
to
sell.
A
discontinued
operation
is
a
component
of
the
Trust
that
either
has
been
disposed
of
or
is
classified
as
held
for
sale,
and:
•
•
•
represents
a
separate
major
line
of
business
or
geographical
area
of
operations;
is
part
of
a
single
coordinated
plan
to
dispose
of
a
separate
major
line
of
business,
or
geographical
area
of
operations;
or
is
a
subsidiary
acquired
exclusively
with
a
view
to
resell.
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2013
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69
Foreign
currencies
The
consolidated
financial
statements
are
presented
in
Canadian
dollars,
which
is
the
functional
currency
of
the
Trust
and
the
presentation
currency
for
the
consolidated
financial
statements.
Assets
and
liabilities
related
to
properties
held
in
a
foreign
entity
with
a
functional
currency
other
than
the
Canadian
dollar
are
translated
at
the
rate
of
exchange
at
the
consolidated
balance
sheet
dates.
Revenues
and
expenses
are
translated
at
average
rates
for
the
period,
unless
exchange
rates
fluctuate
significantly
during
the
period,
in
which
case,
the
exchange
rates
at
the
dates
of
the
transactions
are
used.
The
resulting
foreign
currency
translation
adjustments
are
recognized
in
other
comprehensive
income.
Note
4
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
amounts
reported.
Management
bases
its
judgments
and
estimates
on
historical
experience
and
other
factors
it
believes
to
be
reasonable
under
the
circumstances,
but
which
are
inherently
uncertain
and
unpredictable,
the
result
of
which
forms
the
basis
of
the
carrying
amounts
of
assets
and
liabilities.
However,
uncertainty
about
these
assumptions
and
estimates
could
result
in
outcomes
that
could
require
a
material
adjustment
to
the
carrying
amount
of
the
affected
asset
or
liability
in
the
future.
Critical
accounting
judgments
The
following
are
the
critical
accounting
judgments
used
in
applying
the
Trust’s
accounting
policies
that
have
the
most
significant
effect
on
the
amounts
in
the
consolidated
financial
statements:
Investment
in
Dundee
Industrial
Real
Estate
Investment
Trust
(“Dundee
Industrial”)
Management
has
assessed
the
level
of
influence
the
Trust
has
on
Dundee
Industrial
and
has
determined
it
has
significant
influence.
Management
assessed
whether
or
not
the
Trust
has
control
over
Dundee
Industrial
based
on
whether
the
Trust
has
the
practical
ability
to
direct
the
relevant
activities
of
Dundee
Industrial
unilaterally.
In
making
its
judgment,
management
considered
the
Trust’s
initial
absolute
44.1%
interest
in
Dundee
Industrial
combined
with
the
2.1%
absolute
interest
held
by
the
CEO
of
the
Trust,
together
totalling
46.2%
(identified
as
a
de
facto
agent
of
the
Trust)
(December
31,
2013
–
22.9%
and
1.5%,
respectively,
and
together
totalling
24.4%;
and
December
31,
2012
–
30.9%
and
1.4%,
respectively,
and
together
totalling
32.3%)
as
well
as
the
relative
dispersion
of
the
remaining
interests
in
Dundee
Industrial.
Management
also
reviewed
Dundee
Industrial’s
Amended
and
Restated
Declaration
of
Trust
to
determine
what
decisions
with
respect
to
relevant
activities
are
required
to
be
put
to
a
unitholder
vote
and
the
level
of
approvals
required
by
those
votes.
Management
concluded
that
the
Trust,
combined
with
the
CEO
of
the
Trust,
does
not
have
the
ability
to
control
the
voting
interest
to
direct
the
relevant
activities
of
Dundee
Industrial,
and
therefore
has
concluded
the
Trust
does
not
control
Dundee
Industrial.
Investment
properties
Critical
judgments
are
made
in
respect
of
the
fair
values
of
investment
properties
and
the
investment
properties
held
in
equity
accounted
investments.
The
fair
values
of
these
investments
are
reviewed
regularly
by
management
with
reference
to
independent
property
valuations
and
market
conditions
existing
at
the
reporting
date,
using
generally
accepted
market
practices.
The
independent
valuators
are
experienced,
nationally
recognized
and
qualified
in
the
professional
valuation
of
office
buildings
in
their
respective
geographic
areas.
Judgment
is
also
applied
in
determining
the
extent
and
frequency
of
independent
appraisals.
At
each
annual
reporting
period,
a
select
number
of
properties,
determined
on
a
rotational
basis,
will
be
valued
by
qualified
valuation
professionals.
For
properties
not
subject
to
independent
appraisals,
internal
appraisals
are
prepared
by
management
during
each
reporting
period.
The
Trust
makes
judgments
with
respect
to
whether
lease
incentives
provided
in
connection
with
a
lease
enhance
the
value
of
the
leased
space,
which
determines
whether
or
not
such
amounts
are
treated
as
tenant
improvements
and
added
to
investment
properties.
Lease
incentives,
such
as
cash,
rent-‐free
periods
and
lessee-‐
or
lessor-‐owned
improvements,
may
be
provided
to
lessees
to
enter
into
an
operating
lease.
Lease
incentives
that
do
not
provide
benefits
beyond
the
initial
lease
term
are
included
in
the
carrying
amount
of
investment
properties
and
are
amortized
as
a
reduction
of
rental
revenue
on
a
straight-‐
line
basis
over
the
term
of
the
lease.
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REIT
2013
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70
Judgment
is
also
applied
in
determining
whether
certain
costs
are
additions
to
the
carrying
amount
of
the
investment
property
and,
for
properties
under
development,
identifying
the
point
at
which
practical
completion
of
the
property
occurs
and
identifying
the
directly
attributable
borrowing
costs
to
be
included
in
the
carrying
amount
of
the
development
property.
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.
Judgment
is
used
by
management
in
determining
whether
the
acquisition
of
an
individual
property
qualifies
as
a
business
combination
in
accordance
with
IFRS
3
or
as
an
asset
acquisition.
When
determining
whether
the
acquisition
of
an
investment
property
or
a
portfolio
of
investment
properties
is
a
business
combination
or
an
asset
acquisition,
the
Trust
applies
judgment
when
considering
the
following:
• whether
the
investment
property
or
properties
are
capable
of
producing
outputs
• whether
the
market
participant
could
produce
outputs
if
missing
elements
exist
In
particular,
the
Trust
considers
the
following:
• whether
employees
were
assumed
in
the
acquisition
• whether
an
operating
platform
has
been
acquired
Currently,
when
the
Trust
acquires
properties
or
a
portfolio
of
properties
and
not
legal
entities,
does
not
take
on
or
assume
employees,
or
does
not
acquire
an
operating
platform,
it
classifies
the
acquisition
as
an
asset
acquisition.
Impairment
The
Trust
assesses
the
possibility
and
amount
of
any
impairment
loss
or
write-‐down
as
it
relates
to
the
Investment
in
Dundee
Industrial,
promissory
notes
receivable,
amounts
receivable,
property
and
equipment,
external
management
contracts,
and
goodwill.
IAS
39,
“Financial
instruments:
Recognition
and
measurement”,
requires
management
to
use
judgment
in
determining
if
the
Trust’s
financial
assets
are
impaired.
In
making
this
judgment,
the
Trust
evaluates,
among
other
factors,
the
duration
and
extent
to
which
the
fair
value
of
the
investment
is
less
than
its
carrying
amount;
and
the
financial
health
of
and
short-‐term
business
outlook
for
the
investee,
including
factors
such
as
industry
and
sector
performance,
changes
in
technology
and
operational
and
financing
cash
flow.
IAS
36,
“Impairment
of
Assets”
(“IAS
36”),
requires
management
to
use
judgment
in
determining
the
recoverable
amount
of
assets
tested
for
impairment,
including
goodwill.
Judgment
is
involved
in
estimating
the
fair
value
less
cost
to
sell
or
value-‐in-‐
use
of
the
cash-‐generating
units
(“CGUs”)
to
which
goodwill
has
been
allocated,
including
estimates
of
growth
rates,
discount
rates
and
terminal
rates.
The
values
assigned
to
these
key
assumptions
reflect
past
experience
and
are
consistent
with
external
sources
of
information.
The
Trust’s
goodwill
balance
is
allocated
to
the
office
properties
group
of
CGUs
(herein
referred
to
as
the
goodwill
CGU).
The
recoverable
amount
of
the
Trust’s
goodwill
CGU
is
determined
based
on
the
value-‐in-‐use
approach.
For
the
purpose
of
this
impairment
test,
the
Trust
uses
cash
flow
projections
forecasted
out
for
a
ten-‐year
period,
consistent
with
the
internal
financial
budgets
approved
by
management
on
a
property-‐by-‐property
basis.
The
key
assumptions
used
in
determining
the
value-‐in-‐use
of
the
goodwill
CGU
are
the
estimated
growth
rate,
discount
rate
and
terminal
rate.
In
arriving
at
the
growth
rate,
the
Trust
considers
past
experience
and
inflation,
as
well
as
industry
trends.
The
Trust
utilizes
weighted
average
cost
of
capital
(“WACC”)
to
determine
the
discount
rate
and
terminal
rate.
The
WACC
reflects
specific
risks
that
would
be
attributable
to
the
Trust.
As
the
Trust
is
not
subject
to
taxation,
no
adjustment
is
required
to
adjust
the
WACC
on
a
pre-‐tax
basis.
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
earnings
for
the
period.
Actual
results
could
differ
from
these
estimates.
The
estimates
and
assumptions
that
are
critical
in
determining
the
amounts
reported
in
the
consolidated
financial
statements
relate
to
the
following:
Dundee
REIT
2013
Annual
Report
|
71
Valuation
of
investment
properties
Critical
assumptions
relating
to
the
estimates
of
fair
values
of
investment
properties
include
the
receipt
of
contractual
rents,
expected
future
market
rents,
renewal
rates,
maintenance
requirements,
discount
rates
that
reflect
current
market
uncertainties,
capitalization
rates
and
current
and
recent
property
investment
prices.
If
there
is
any
change
in
these
assumptions
or
regional,
national
or
international
economic
conditions,
the
fair
value
of
investment
properties
may
change
materially.
Valuation
of
financial
instruments
The
Trust
makes
estimates
and
assumptions
relating
to
the
fair
value
measurement
of
the
subsidiary
redeemable
units,
the
deferred
trust
units,
the
convertible
debenture
conversion
feature,
interest
rate
swaps
and
the
fair
value
disclosure
of
the
convertible
debentures,
mortgages
and
term
debt.
The
critical
assumptions
underlying
the
fair
value
measurements
and
disclosures
include
the
market
price
of
REIT
Units,
market
interest
rates
for
mortgages,
term
debt
and
unsecured
debentures,
and
assessment
of
the
effectiveness
of
hedging
relationships.
For
certain
financial
instruments,
including
cash
and
cash
equivalents,
promissory
notes
receivable,
amounts
receivable,
amounts
payable
and
accrued
liabilities,
deposits
and
distributions
payable,
the
carrying
amounts
approximate
fair
values
due
to
their
immediate
or
short-‐term
maturity.
The
fair
values
of
mortgages,
term
debt
and
interest
rate
swaps
are
determined
based
on
discounted
cash
flows
using
discount
rates
that
reflect
current
market
conditions
for
instruments
with
similar
terms
and
risks.
The
fair
value
of
convertible
debentures
is
determined
by
reference
to
quoted
market
prices
from
an
active
market.
Note
5
CHANGES
IN
ACCOUNTING
POLICIES
AND
DISCLOSURES
The
Trust
has
adopted
the
following
new
and
revised
standards,
along
with
any
consequential
amendments,
effective
January
1,
2013.
These
changes
were
made
in
accordance
with
the
applicable
transitional
provisions.
Financial
instruments:
disclosures
IFRS
7,
“Financial
Instruments:
Disclosures”
(“IFRS
7”),
has
been
amended
to
require
annual
disclosure
of
information
on
rights
to
offset
financial
instruments
and
related
arrangements.
The
Trust
adopted
this
amendment
effective
January
1,
2013.
The
amendments
to
IFRS
7
had
no
impact
on
the
amounts
recognized
in
the
Trust’s
consolidated
financial
statements
or
note
disclosures
for
the
year
ended
December
31,
2013,
but
resulted
in
additional
disclosures
in
the
consolidated
financial
statements
for
the
year
ended
December
31,
2013.
Refer
to
Note
15
for
further
details.
The
new
disclosures
are
required
for
all
recognized
financial
instruments
that
are
offset
in
accordance
with
IAS
32.
They
also
apply
to
recognized
financial
instruments
that
are
subject
to
an
enforceable
master
netting
arrangement,
irrespective
of
whether
the
financial
instruments
are
offset
in
accordance
with
IAS
32.
Impairment
The
IASB
published
an
amendment
to
IAS
36
in
May
2013
on
the
recoverable
amount
disclosures
for
non-‐financial
assets.
This
amendment
removed
certain
disclosures
of
the
recoverable
amount
of
CGUs
which
had
been
included
in
IAS
36
by
the
issue
of
IFRS
13.
The
amendment
is
not
mandatory
for
the
Trust
until
January
1,
2014;
however,
the
Trust
has
early
adopted
the
amendment
as
at
January
1,
2013.
Consolidated
financial
statements
IFRS
10,
“Consolidated
Financial
Statements”
(“IFRS
10”),
replaces
the
guidance
on
control
and
consolidation
in
IAS
27,
Interpretations
Committee
(“SIC-‐12”),
“Consolidated
and
Separate
Financial
Statements”
(“IAS
27”),
and
Standing
“Consolidation
–
Special
Purpose
Entities”.
IFRS
10
requires
consolidation
of
an
investee
only
if
the
investor
possesses
power
over
the
investee,
has
exposure
to
variable
returns
from
its
involvement
with
the
investee
and
has
the
ability
to
use
its
power
over
the
investee
to
affect
its
returns.
The
accounting
requirements
for
consolidation
have
remained
largely
consistent
with
IAS
27.
The
Trust
assessed
its
consolidation
conclusions
on
January
1,
2013,
and
determined
that
the
adoption
of
IFRS
10
did
not
result
in
any
change
in
the
consolidation
status
of
any
of
its
subsidiaries
and
investees.
Dundee
REIT
2013
Annual
Report
|
72
Joint
arrangements
IFRS
11,
“Joint
Arrangements”
(“IFRS
11”),
supersedes
IAS
31,
“Interests
in
Joint
Ventures”,
and
requires
joint
arrangements
to
be
classified
either
as
joint
operations
or
joint
ventures
depending
on
the
contractual
rights
and
obligations
of
each
investor
that
jointly
controls
the
arrangement.
For
joint
operations,
the
Trust
recognizes
its
share
of
assets,
liabilities,
revenues
and
expenses
of
the
joint
operation.
An
investment
in
a
joint
venture
is
accounted
for
using
the
equity
method
as
set
out
in
IAS
28,
“Investments
in
Associates
and
Joint
Ventures”
(“IAS
28”)
(amended
in
2011).
The
other
amendments
to
IAS
28
did
not
affect
the
Trust.
The
Trust
has
classified
its
joint
arrangements
and
concluded
that
the
adoption
of
IFRS
11
did
not
result
in
any
changes
in
the
accounting
for
its
joint
arrangements.
Disclosures
of
interests
in
other
entities
In
May
2011,
the
IASB
issued
IFRS
12,
“Disclosure
of
Interests
in
Other
Entities”
(“IFRS
12”),
to
create
a
comprehensive
disclosure
standard
to
address
the
requirements
for
subsidiaries,
joint
arrangements
and
associates,
including
the
reporting
entity’s
involvement
with
other
entities.
It
also
includes
the
requirements
for
unconsolidated
structured
entities
(i.e.,
special
purpose
entities).
The
Trust
adopted
IFRS
12
effective
January
1,
2013.
The
adoption
of
IFRS
12
resulted
in
disclosures
of
condensed
financial
statements
of
associates,
subsidiaries,
and
joint
arrangements
in
the
Trust’s
consolidated
financial
statements
for
the
year
ended
December
31,
2013.
Refer
to
Note
11
for
further
details.
Fair
value
measurement
IFRS
13,
“Fair
Value
Measurement”
(“IFRS
13”),
provides
a
single
framework
for
measuring
fair
value.
The
measurement
of
the
fair
value
of
an
asset
or
liability
is
based
on
assumptions
that
market
participants
would
use
when
pricing
the
asset
or
liability
under
current
market
conditions,
including
assumptions
about
risk.
The
Trust
adopted
IFRS
13
on
January
1,
2013,
on
a
prospective
basis.
The
adoption
of
IFRS
13
did
not
require
any
adjustments
to
the
valuation
techniques
used
by
the
Trust
to
measure
fair
value
and
did
not
result
in
any
measurement
adjustments
as
at
January
1,
2013.
Refer
to
Note
32
for
further
details
on
the
fair
value
of
financial
instruments.
The
adoption
of
IFRS
13
also
resulted
in
incremental
disclosures
with
respect
to
unobservable
inputs
and
sensitivity
of
fair
value
measurements
of
Level
3
non-‐financial
assets
in
the
Trust’s
consolidated
financial
statements
for
the
year
ended
December
31,
2013.
Refer
to
Note
33
for
further
details.
Presentation
of
items
of
other
comprehensive
income
The
Trust
has
adopted
the
amendments
to
IAS
1,
“Presentation
of
Items
of
Other
Comprehensive
Income”
(“IAS
1”),
effective
January
1,
2013.
These
amendments
required
the
Trust
to
group
other
comprehensive
income
items
by
those
that
will
be
reclassified
subsequently
to
the
consolidated
statements
of
comprehensive
income
and
those
that
will
not
be
reclassified.
These
changes
did
not
result
in
any
adjustments
to
other
comprehensive
income.
Note
6
FUTURE
ACCOUNTING
POLICY
CHANGES
Financial
instruments
IFRS
9,
“Financial
Instruments”
(“IFRS
9”),
addresses
the
classification,
measurement
and
recognition
of
financial
assets
and
financial
liabilities.
IFRS
9
was
issued
in
November
2009,
updated
and
further
amended
in
October
2010
and
November
2013.
It
replaces
the
parts
of
IAS
39
that
relate
to
the
classification
and
measurement
of
financial
instruments.
IFRS
9
requires
financial
assets
to
be
classified
into
two
measurement
categories:
those
measured
as
at
fair
value
and
those
measured
at
amortized
cost.
The
determination
is
made
at
initial
recognition.
The
classification
depends
on
the
entity’s
business
model
for
managing
its
financial
instruments
and
the
contractual
cash
flow
characteristics
of
the
instrument.
For
financial
liabilities,
the
standard
retains
most
of
the
IAS
39
requirements.
The
main
change
is
that,
in
cases
where
the
fair
value
option
is
taken
for
financial
liabilities,
the
part
of
fair
value
change
due
to
an
entity’s
own
credit
risk
is
recorded
in
other
comprehensive
income
rather
than
the
consolidated
statement
of
net
income
(loss),
unless
this
creates
an
accounting
mismatch.
IFRS
9
was
amended
to
(i)
include
guidance
on
hedge
accounting,
(ii)
allow
entities
to
early
adopt
the
requirement
to
recognize
changes
in
fair
value
attributable
to
changes
in
an
entity’s
own
credit
risk,
from
financial
liabilities
designated
under
the
fair
value
option,
in
other
comprehensive
income
(without
having
to
adopt
the
remainder
of
IFRS
9)
and
(iii)
remove
the
previous
mandatory
effective
date
of
January
1,
2015,
although
the
standard
is
available
for
early
adoption.
The
Trust
has
yet
to
assess
IFRS
9’s
full
impact
and
intends
to
adopt
IFRS
9
in
the
accounting
period
beginning
on
or
after
January
1,
2015.
The
Trust
will
also
consider
the
impact
of
the
remaining
phases
of
IFRS
9
when
completed
by
the
IASB.
Dundee
REIT
2013
Annual
Report
|
73
Consolidated
financial
statements
Amendments
to
IFRS
10,
IFRS
12
and
IAS
27,
“Separate
financial
statements
–
Investment
entities”:
The
amendments
define
an
investment
entity
and
introduce
an
exception
to
consolidating
particular
subsidiaries
for
investment
entities.
These
investments
require
an
investment
entity
to
measure
those
subsidiaries
at
fair
value
through
profit
or
loss,
in
accordance
with
IFRS
9,
in
its
consolidated
and
separate
financial
statements.
The
amendments
also
introduce
new
disclosure
requirements
for
investment
entities
in
IFRS
12
and
IAS
27.
Entities
are
required
to
apply
the
amendments
for
annual
periods
beginning
on
or
after
January
1,
2014.
The
Trust
is
currently
evaluating
the
impact
of
these
amendments
on
the
consolidated
financial
statements.
Accounting
for
levies
imposed
by
governments
IFRIC
21,
“Levies”
(“IFRIC
21”),
provides
guidance
on
accounting
for
levies
in
accordance
with
IAS
37,
“Provisions,
Contingent
Liabilities
and
Contingent
Assets”.
The
interpretation
defines
a
levy
as
an
outflow
from
an
entity
imposed
by
a
government
in
accordance
with
legislation
and
confirms
that
an
entity
recognizes
a
liability
for
a
levy
only
when
the
triggering
event
specified
in
the
legislation
occurs.
IFRIC
21
is
effective
for
annual
periods
beginning
on
or
after
January
1,
2014
and
should
be
applied
retrospectively.
The
Trust
is
currently
assessing
the
impact
of
this
interpretation
on
the
consolidated
financial
statements.
Note
7
BUSINESS
COMBINATIONS
Business
combination
in
the
year
ended
December
31,
2012
On
March
2,
2012,
Dundee
REIT
acquired
Whiterock
Real
Estate
Investment
Trust
(“Whiterock”)
for
total
cash
consideration
of
$159,779
and
the
issuance
of
12,580,347
REIT
A
Units
for
$434,777,
representing
total
consideration
of
$594,556.
On
closing,
the
fair
value
of
the
net
identifiable
assets
and
liabilities
acquired
equalled
$532,498.
The
total
consideration
exceeded
the
net
identifiable
assets
and
liabilities
by
$62,058,
which
has
been
recorded
as
goodwill
on
acquisition.
The
Whiterock
portfolio
consisted
of
7.4
million
square
feet
of
office,
industrial
and
retail
properties.
Dundee
REIT
took
up
approximately
40.9%
of
the
outstanding
units
of
Whiterock
under
its
offer
to
acquire
any
and
all
units
in
consideration
for
$16.25
per
unit,
or
0.4729
units
of
Dundee
REIT,
as
elected
by
depositing
unitholders.
Approximately
9,832,563,
or
27%,
of
the
Whiterock
units
were
tendered
to
Dundee
REIT’s
offer
for
cash
totalling
$159,779.
No
elections
were
pro-‐rated
under
the
offer.
The
remaining
outstanding
units
of
Whiterock
were
redeemed
by
Whiterock
in
consideration
for
0.4729
units
of
Dundee
REIT,
or
12,580,347
REIT
A
Units.
The
fair
value
of
the
12,580,347
REIT
A
Units
issued
as
part
of
the
consideration
for
Whiterock
was
$34.56
per
unit,
being
the
published
share
price
at
8
a.m.
on
March
2,
2012,
the
time
Dundee
REIT
acquired
control.
Dundee
REIT
2013
Annual
Report
|
74
The
following
are
the
recognized
amounts
of
identifiable
assets
acquired
and
liabilities
assumed,
measured
at
their
respective
fair
values
on
the
date
of
acquisition:
Investment
properties,
including
$106,754
classified
as
assets
held
for
sale
on
date
of
acquisition
Other
non-‐current
assets
Amounts
receivable
Cash
and
cash
equivalents
Prepaid
expenses
External
management
contracts
Amounts
payable
and
accrued
liabilities
assumed
Deposits
Deferred
tax
net
liabilities
Financial
instruments
Assumed
debt
Total
identifiable
net
assets
and
liabilities
Goodwill(1)
Fair
value
of
consideration
Note
$
12
$
1,419,889
2,802
6,243
12,645
2,799
16,512
(29,989)
(3,855)
(2,633)
(3,363)
(888,552)
532,498
62,058
594,556
(1)
Goodwill
arises
principally
from
the
ability
to
realize
synergies
on
integration
of
the
Trust’s
operating
platform
with
Whiterock’s
as
well
as
projected
future
growth.
Acquisition
related
costs
comprise
of
$17,549
in
transaction
costs.
Included
in
the
acquired
amounts
receivable
are
trade
receivables
with
a
fair
value
of
$433
and
other
amounts
receivable
with
a
fair
value
of
$5,810.
The
gross
contractual
amount
for
trade
receivables
is
$2,833,
of
which
$2,400
is
expected
to
be
uncollectible.
During
the
year
ended
December
31,
2012,
the
Trust
recognized
$125,970
of
revenue
and
$59,348
of
comprehensive
income,
before
fair
value
adjustments,
related
to
the
acquisition
of
Whiterock.
Had
the
acquisition
occurred
on
January
1,
2012,
the
Trust
would
have
recognized
an
additional
$26,481
of
revenue
and
$7,691
of
comprehensive
income,
before
fair
value
adjustments.
Dundee
REIT
2013
Annual
Report
|
75
Note
8
PROPERTY
ACQUISITIONS
Detailed
below
are
the
acquisitions
completed
during
the
years
ended
December
31,
2013
and
December
31,
2012.
Year
ended
December
31,
2013
Broadmoor
Plaza,
Edmonton
887
Great
Northern
Way,
Vancouver
(Discovery
Parks)
340–350
3rd
Avenue
North,
Saskatoon
(T&T
Towers)
and
14505–14555
Bannister
Road,
Calgary
(Parke
at
Fish
Creek)
20
Toronto
Street
and
137
Yonge
Street,
Toronto
212
King
Street
West,
Toronto
IBM
Corporate
Park,
Calgary
4561
Parliament
Avenue,
Regina
(Harbour
Landing
Business
Park)
83
Yonge
Street,
Toronto
Total
(1)
Includes
transaction
costs.
Year
ended
December
31,
2012
5001
Yonge
Street,
Toronto
67
Richmond
Street
West,
Toronto
Parking
lots,
Saskatoon
1
Riverside
Drive,
Windsor
Trans
America
Group
properties,
Edmonton(2)
30
Adelaide
Street
East
(State
Street
Financial
Centre),
Toronto(3)
Total
(1)
Includes
transaction
costs.
Property
type
office
Interest
acquired
(%)
100.0
$
Purchase
price(1)
84,892
$
Fair
value
of
mortgage
assumed
-‐
Date
acquired
March
15,
2013
office
100.0
68,068
31,405
April
8,
2013
office
100.0
62,610
office
office
office
office
office
Property
type
office
office
office
office
office/
industrial
office
100.0
100.0
66.7
100.0
100.0
Interest
acquired
(%)
100.0
100.0
100.0
100.0
60.0
50.0
145,983
38,730
124,377
15,517
8,481
-‐
-‐
-‐
-‐
April
12,
2013
April
30,
2013
May
24,
2013
August
13,
2013
September
16,
2013
-‐
-‐
December
2,
2013
$
548,658
$
31,405
$
Purchase
price(1)
112,984
14,464
18,242
36,014
$
Fair
value
of
mortgage
assumed
-‐
6,104
Date
acquired
January
19,
2012
January
30,
2012
-‐
March
12,
2012
April
26,
2012
-‐
75,787
41,780
October
4,
2012
78,774
27,045
December
28,
2012
$
336,265
$
74,929
(2)
Prior
to
October
4,
2012,
the
Trust
held
its
40%
interests
in
these
nine
co-‐ownerships
through
a
partnership
interest
acquired
with
the
Whiterock
transaction
and
they
were
accounted
for
as
co-‐ownerships.
On
October
4,
2012,
the
Trust
acquired
the
remaining
60%
interests
previously
held
by
the
co-‐owners.
The
cost
to
acquire
the
60%
interests
not
previously
owned
by
the
Trust,
including
transaction
costs,
was
$75,787.
(3)
Prior
to
December
28,
2012,
the
Trust
held
its
50%
interest
in
30
Adelaide
Street
East
(State
Street
Financial
Centre)
in
Toronto
through
a
partnership
interest
which
was
accounted
for
as
a
joint
venture.
On
December
28,
2012,
the
Trust
acquired
the
remaining
50%
interest
previously
held
by
the
partner.
The
cost
to
acquire
the
50%
interest
not
previously
owned
by
the
Trust,
including
transaction
costs,
was
$78,774.
Dundee
REIT
2013
Annual
Report
|
76
The
consideration
paid
for
the
acquisitions
completed
during
the
years
ended
December
31,
2013
and
December
31,
2012
consisted
of:
Cash:
Paid
during
the
year
Deposits
applied
Assumed
mortgages
at
fair
value
Assumed
non-‐cash
working
capital
and
accrued
transaction
costs
Total
consideration
2013
2012
485,060
16,813
501,873
31,405
15,380
548,658
$
$
235,019
6,150
241,169
74,929
20,167
336,265
$
$
Dundee
REIT
2013
Annual
Report
|
77
Note
9
INVESTMENT
PROPERTIES
Balance
as
at
January
1,
2013
Additions:
Property
acquisitions
Transfer
of
interest
from
investment
in
joint
ventures(1)
Building
improvements
Lease
incentives
and
initial
direct
leasing
costs
Total
additions
to
investment
properties
Gains
and
losses
included
in
net
income:
Fair
value
adjustments
to
investment
properties
Amortization
of
lease
incentives
Total
gains
included
in
net
income
Gains
and
losses
included
in
other
comprehensive
income
Foreign
currency
translation
gain
Total
gains
included
in
other
comprehensive
income
Balance
as
at
December
31,
2013
Change
in
unrealized
gains
included
in
net
income
for
the
year
ended
December
31,
2013
Change
in
fair
value
of
investment
properties
Note
8
Year
ended
December
31,
2013
5,477,560
$
548,658
61,823
31,023
43,910
685,414
79,277
(6,471)
72,806
5,905
5,905
6,241,685
79,277
$
$
(1)
On
August
13,
2013,
the
Trust
acquired
the
remaining
66.7%
interest
in
IBM
Corporate
Park
in
Calgary.
Prior
to
August
13,
2013,
the
Trust
held
a
33.3%
interest
in
the
property
through
a
partnership
interest
and
accounted
for
it
as
a
joint
venture.
Balance
as
at
January
1,
2012
Additions:
Acquisitions
from
business
combinations
Property
acquisitions
Transfer
of
interest
from
investment
in
joint
ventures(2)
Building
improvements
Lease
incentives
and
initial
direct
leasing
costs
Development
projects
Amortization
of
lease
incentives
Investment
properties
disposed
Investment
properties
classified
as
held
for
sale
Foreign
currency
translation
gain
Fair
value
adjustments
to
investment
properties
–
continuing
operations
Fair
value
adjustments
to
investment
properties
–
discontinued
operations
Balance
as
at
December
31,
2012
Note
7
8
Year
ended
December
31,
2012
4,154,179
$
1,419,889
336,265
77,692
20,199
23,577
1,945
(3,976)
(643,367)
(20,295)
693
105,572
5,187
5,477,560
$
(2)
On
December
28,
2012,
the
Trust
acquired
the
remaining
50%
interest
in
30
Adelaide
Street
East
(State
Street
Financial
Centre)
in
Toronto.
Prior
to
December
28,
2012,
the
Trust
held
a
50%
interest
in
the
property
through
a
partnership
interest
and
accounted
for
it
as
a
joint
venture.
Investment
properties
have
been
reduced
by
$29,661
(December
31,
2012
–
$21,002)
related
to
straight-‐line
rent
receivables,
which
have
been
reclassified
to
other
non-‐current
assets.
Dundee
REIT
2013
Annual
Report
|
78
The
key
valuation
metrics
for
investment
properties,
including
investment
in
joint
ventures,
and
excluding
assets
related
to
discontinued
operations
and
assets
held
for
sale,
are
set
out
below:
Investment
properties
December
31,
2013
December
31,
2012
Input
Stabilized
NOI
Capitalization
rate
(“cap
rate”)
(%)
Discount
rate
(%)
Terminal
rate
(%)
Cash
flows
n/a
–
not
applicable
Investment
in
joint
ventures
Input
Stabilized
NOI
Capitalization
rate
(“cap
rate”)
(%)
Discount
rate
(%)
Terminal
rate
(%)
Cash
flows
n/a
–
not
applicable
Total
portfolio
Input
Stabilized
NOI
Capitalization
rate
(“cap
rate”)
(%)
Discount
rate
(%)
Terminal
rate
(%)
Cash
flows
n/a
–
not
applicable
Class
office
Class
office
Class
office
Range
n/a
5.25–9.00
6.50–10.50
5.75–9.75
n/a
Weighted
average
$
407,405
6.34
7.48
6.73
$
365,827
Range
n/a
5.50–9.25
6.50–10.50
5.75–9.75
n/a
Weighted
average
n/a
6.49
7.64
6.80
n/a
December
31,
2013
Weighted
December
31,
2012
Weighted
Range
n/a
5.15–6.00
6.25–7.50
5.25–6.75
n/a
average
$
55,318
5.29
6.44
5.50
$
55,373
Range
n/a
5.25–8.50
6.75–9.00
5.25–8.25
n/a
average
n/a
5.49
6.97
5.54
n/a
December
31,
2013
December
31,
2012
Range
n/a
5.15–9.00
6.25–10.50
5.25–9.75
n/a
Weighted
average
$
462,723
6.19
7.33
6.55
$
421,200
Range
n/a
5.25–9.25
6.50–10.50
5.25–9.75
n/a
Weighted
average
n/a
6.35
7.53
6.62
n/a
Generally,
an
increase
in
stabilized
NOI
will
result
in
an
increase
to
the
fair
value
of
an
investment
property.
An
increase
in
the
cap
rate
will
result
in
a
decrease
to
the
fair
value
of
an
investment
property.
The
cap
rate
magnifies
the
effect
of
a
change
in
stabilized
NOI,
with
a
lower
rate
resulting
in
a
greater
impact
to
the
fair
value
of
an
investment
property
than
a
higher
rate.
Under
the
discounted
cash
flow
methods,
an
increase
in
cash
flows
will
result
in
an
increase
to
the
fair
value
of
an
investment
property.
An
increase
in
the
discount
rate
will
result
in
a
decrease
to
the
fair
value
of
an
investment
property.
The
discount
rate
magnifies
the
effect
of
a
change
in
cash
flows,
with
a
lower
discount
rate
resulting
in
a
greater
impact
to
the
fair
value
of
an
investment
property.
If
the
cap
rate
were
to
increase
by
25
basis
points
(“bps”),
the
value
of
investment
properties
(excluding
assets
held
for
sale)
would
decrease
by
$245,100.
If
the
cap
rate
were
to
decrease
by
25
bps,
the
value
of
investment
properties
(excluding
assets
held
for
sale)
would
increase
by
$264,300.
Investment
properties,
including
investment
in
joint
ventures
and
excluding
assets
related
to
discontinued
operations
and
assets
held
for
sale,
with
an
aggregate
fair
value
of
$2,045,384
for
the
year
ended
December
31,
2013
(December
31,
2012
–
$2,951,306)
were
valued
by
qualified
external
valuation
professionals.
Investment
properties,
including
investment
in
joint
ventures
and
excluding
assets
related
to
discontinued
operations
and
assets
held
for
sale,
with
a
fair
value
of
$5,939,978
(December
31,
2012
–
$5,869,242)
are
pledged
as
security
for
the
mortgages.
Dundee
REIT
2013
Annual
Report
|
79
Investment
properties,
including
investment
in
joint
ventures
and
excluding
assets
related
to
discontinued
operations
and
other
assets
held
for
sale,
pledged
as
security
for
demand
revolving
credit
facilities
and
the
term
loan
facility,
are
as
follows:
Facility
Demand
revolving
credit
facilities:
Formula-‐based
maximum
not
to
Number
of
properties
Fair
value
December
31,
December
31,
December
31,
December
31,
Ranking
2013
2012
2013
2012
exceed
$171,500
first
ranking
Formula-‐based
maximum
not
to
exceed
$40,000
first
ranking
second
ranking
Formula-‐based
maximum
not
to
exceed
$35,000
second
ranking
Formula-‐based
maximum
not
to
exceed
$35,000
Term
loan
facility
first
ranking
second
ranking
first
ranking
9
2
-‐
2
1
1
8
9
2
1
2
1
1
8
$
259,158
$
248,459
42,700
-‐
39,846
81,349
212,209
181,349
36,400
114,100
308,050
972,617
$
37,486
111,861
269,602
969,952
$
Note
10
INVESTMENT
IN
DUNDEE
INDUSTRIAL
Dundee
Industrial
is
an
unincorporated,
open-‐ended
real
estate
investment
trust
listed
on
the
Toronto
Stock
Exchange
under
the
symbol
“DIR.UN.”
Dundee
Industrial
owns
a
portfolio
of
206
primarily
light
industrial
properties
comprising
approximately
15.7
million
square
feet
of
gross
leasable
area.
On
March
6,
2013,
Dundee
Industrial
issued
10,465,000
Units
in
an
underwritten
public
offering
at
a
price
of
$11.00
per
unit.
Dundee
REIT
did
not
participate
in
the
offering
and,
as
a
result,
its
share
in
Dundee
Industrial
was
diluted
to
25.8%.
On
May
15,
2013,
Dundee
Industrial
issued
7,460,654
Units
in
satisfaction
of
the
purchase
of
95%
of
the
outstanding
common
shares
of
C2C
Industrial
Properties
Inc.
(“C2C”)
at
a
price
of
$10.56
per
unit.
Dundee
REIT
did
not
participate
in
the
offering
and,
as
a
result,
its
share
in
Dundee
Industrial
was
diluted
to
23.1%.
On
July
19,
2013,
Dundee
Industrial
issued
387,399
Units
to
acquire
the
remaining
outstanding
common
shares
of
C2C
by
way
of
an
amalgamation.
On
October
4,
2012,
Dundee
REIT
completed
the
sale
of
77
industrial
properties
to
Dundee
Industrial
for
a
total
sale
price
of
approximately
$575,469
(including
working
capital
adjustments).
The
sale
price
of
the
77
industrial
properties
was
satisfied
by
cash
consideration
of
approximately
$136,267;
the
receipt
of
$160,346
of
Class
B
limited
partnership
units
of
Dundee
Industrial
Limited
Partnership
(“DILP”)
(a
subsidiary
of
Dundee
Industrial),
which
are
exchangeable
for
units
of
Dundee
Industrial;
and
promissory
notes
receivable
from
Dundee
Industrial
of
$42,000,
offset
by
an
amount
due
to
Dundee
Industrial
of
$457
and
mortgages
assumed
on
disposition.
Dundee
REIT’s
initial
interest
in
Dundee
Industrial
was
approximately
44.1%.
On
December
13,
2012,
Dundee
Industrial
issued
13,570,000
units
in
an
underwritten
public
offering
at
a
price
of
$10.60
per
unit.
Dundee
REIT
did
not
participate
in
the
offering
and,
as
a
result,
its
share
in
Dundee
Industrial
was
diluted
to
30.9%.
Dundee
REIT
2013
Annual
Report
|
80
Investment
in
Dundee
Industrial,
beginning
of
year
Initial
purchase
of
limited
partnership
units
of
Dundee
Industrial
Limited
Partnership
Units
purchased
through
Distribution
Reinvestment
Plan
Distributions
received
Share
of
net
income
from
investment
in
Dundee
Industrial
Dilution
gain
Investment
in
Dundee
Industrial,
end
of
year
Dundee
Industrial
units
held,
end
of
year
Ownership
%,
end
of
year
$
$
Year
ended
December
31,
2013
160,976
-‐
939
(11,295)
13,720
1,977
166,317
16,282,096
22.9%
$
$
2012
-‐
160,346
1,773
(2,711)
1,052
516
160,976
16,198,745
30.9%
At
December
31,
2013,
the
fair
value
of
the
Trust’s
interest
in
Dundee
Industrial
was
$144,097
(December
31,
2012
–
$181,426).
The
following
amounts
represent
the
ownership
interest
in
the
assets,
liabilities,
revenues,
expenses
and
cash
flows
in
the
investment
in
Dundee
Industrial,
in
which
the
Trust
participates.
At
100%
At
%
ownership
interest
December
31,
2013
2012
2013
December
31,
2012(1)
Non-‐current
assets
Investment
properties
Other
non-‐current
assets
Deferred
income
tax
assets
Current
assets
Amounts
receivable
Prepaid
expenses
and
other
assets
Cash
and
cash
equivalents
Total
assets
Non-‐current
liabilities
Debt
Subsidiary
redeemable
units
Tenant
security
deposits
Conversion
feature
on
the
convertible
debentures
Deferred
Unit
Incentive
Plan
Current
liabilities
Debt
Amounts
payable
and
accrued
liabilities
Distributions
payable
Total
liabilities
Net
assets
(liabilities)
Add-‐back:
Subsidiary
redeemable
units
Investment
in
Dundee
Industrial
$
$
$
$
$
1,540,791
39,416
1,075
1,581,282
4,051
4,214
258
8,523
1,589,805
728,341
144,096
9,357
973
1,028
883,795
$
$
112,041
19,949
3,204
135,194
1,018,989
570,816
$
$
$
1,147,410
36,595
$
-‐
1,184,005
2,860
3,378
2,306
8,544
1,192,549
548,959
181,426
5,750
6,228
51
742,414
100,886
20,999
2,039
123,924
866,338
326,211
$
$
$
$
$
(1)
Comparative
figures
have
been
reclassified
to
conform
to
the
current
year
presentation.
Dundee
REIT
2013
Annual
Report
|
81
358,449
9,170
250
367,869
942
980
60
1,982
369,851
169,441
144,096
2,177
226
239
316,179
26,065
4,641
745
31,451
347,630
22,221
144,096
166,317
$
$
$
$
$
$
363,853
11,605
-‐
375,458
907
1,071
731
2,709
378,167
174,080
181,426
1,823
1,975
16
359,320
31,992
6,659
646
39,297
398,617
(20,450)
181,426
160,976
$
Investment
properties
revenue
Investment
properties
operating
expenses
Net
rental
income
Other
income
and
expenses
General
and
administrative
Fair
value
adjustments
to
investment
properties
Acquisition
related
costs
Interest
on
debt
Interest
on
subsidiary
redeemable
units
Debt
settlement
gains
Depreciation
and
amortization
Interest
and
fee
income
Fair
value
adjustments
to
other
financial
instruments
Fair
value
adjustments
to
subsidiary
redeemable
units
Deferred
income
taxes
Net
income
(loss)
before
the
undernoted
adjustments
Add-‐back:
$
Interest
on
subsidiary
redeemable
units
Fair
value
adjustments
to
subsidiary
redeemable
units
Share
of
net
income
from
investment
in
Dundee
Industrial
At
100%
At
%
ownership
interest
Period
from
Period
from
Year
ended
July
20,
2012
to
Year
ended
July
20,
2012
to
December
31,
December
31,
December
31,
December
31,
2013
142,944
(44,017)
98,927
$
(7,346)
1,151
(11,018)
(30,100)
(11,295)
36
(46)
244
6,320
38,268
(1,160)
83,981
$
2012
17,202
(4,667)
12,535
(855)
6,048
(11,528)
(3,244)
(2,711)
-‐
-‐
16
(1,827)
(19,307)
-‐
(20,873)
2013
34,402
(10,593)
23,809
(1,768)
277
(2,652)
(7,244)
(11,295)
9
(11)
58
1,521
38,268
(279)
40,693
11,295
(38,268)
13,720
$
$
$
2012
6,345
(1,717)
4,628
(322)
2,278
(3,641)
(1,208)
(2,711)
-‐
-‐
5
(688)
(19,307)
-‐
(20,966)
2,711
19,307
1,052
$
$
$
Note
11
JOINT
ARRANGEMENTS
The
Trust
participates
in
partnerships
(“joint
ventures”)
with
other
parties
that
own
investment
properties
and
accounts
for
its
interests
using
the
equity
method.
On
June
26,
2013,
the
Trust
acquired
a
two-‐thirds
interest
in
100
Yonge
Street,
an
office
building
in
downtown
Toronto,
for
approximately
$56,273
(including
transaction
costs).
The
Trust
has
entered
into
a
joint
venture
with
H&R
REIT,
the
owner
of
the
remaining
one-‐third
interest
in
this
office
building.
The
acquisition
was
funded
by
the
assumption
of
a
mortgage
of
$25,477
(at
fair
value)
with
the
balance
funded
by
cash.
On
August
13,
2013,
the
Trust
acquired
the
remaining
66.7%
interest
in
IBM
Corporate
Park
in
Calgary
for
approximately
$124,377
(including
transaction
costs).
Prior
to
August
13,
2013,
the
Trust
held
a
33.3%
interest
in
the
property
through
a
partnership
interest
and
accounted
for
it
as
a
joint
venture.
On
June
15,
2012,
the
Trust
acquired
a
two-‐thirds
interest
in
the
Scotia
Plaza
complex
in
downtown
Toronto
for
$844,339.
Dundee
REIT
has
entered
into
a
joint
venture
with
H&R
REIT,
the
owner
of
the
remaining
one-‐third
interest
in
the
complex.
The
acquisition
was
financed
with
seven-‐year
first
mortgage
bonds
contracted
by
the
joint
venture,
of
which
the
portion
attributable
to
the
Trust
is
$433,333,
and
proceeds
from
the
June
12,
2012
public
equity
offering.
Acquisition
costs
attributable
to
the
Trust
amounted
to
$31,170.
On
December
28,
2012,
the
Trust
acquired
the
remaining
50%
interest
in
30
Adelaide
Street
East
(State
Street
Financial
Centre)
in
Toronto.
Prior
to
December
28,
2012,
the
Trust
held
a
50%
interest
in
the
property
through
a
partnership
interest
and
accounted
for
it
as
a
joint
venture.
Dundee
REIT
2013
Annual
Report
|
82
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.
Ownership
interest
(%)
December
31,
December
31,
2013
66.7
66.7
50.0
-‐
-‐
-‐
-‐
-‐
2012
66.7
-‐
50.0
33.3
25.0
25.0
25.0
25.0
Net
assets
at
%
ownership
interest
December
31,
2013
430,681
68,093
28,481
-‐
527,255
$
$
2012
393,905
54,414
-‐
42,451
490,770
$
$
Share
of
net
income
(loss)
at
%
ownership
interest
Years
ended
December
31,
2013
57,441
17,676
(3,359)
12,624
84,382
$
$
2012
(19,298)
10,261
-‐
8,783
(254)
$
$
Location
Name
Scotia
Plaza
100
Yonge
Street
Telus
Tower
IBM
Corporate
Centre
Capital
Centre(1)
Plaza
124(1)
Riverbend
Atrium(1)
Stockman
Centre(1)
(1)
As
at
December
31,
2013,
these
joint
ventures
were
reclassified
as
assets
held
for
sale.
Toronto,
Ontario
Toronto,
Ontario
Calgary,
Alberta
Calgary,
Alberta
Edmonton,
Alberta
Edmonton,
Alberta
Calgary,
Alberta
Calgary,
Alberta
Name
Scotia
Plaza
Telus
Tower
100
Yonge
Street
Other
Total
net
assets
Name
Scotia
Plaza
Telus
Tower
100
Yonge
Street
Other
Share
of
net
income
(loss)
from
investment
in
joint
ventures
Dundee
REIT
2013
Annual
Report
|
83
The
following
amounts
represent
100%
and
the
Trust’s
ownership
interest
in
the
assets,
liabilities,
revenues,
expenses
and
cash
flows
in
the
equity
accounted
investments
in
which
the
Trust
participates,
excluding
the
interest
in
Dundee
Industrial
which
is
disclosed
separately
in
Note
10.
Scotia
Plaza
At
100%
Scotia
Plaza
At
66.7%
December
31,
December
31,
2013
2012
2013
2012
$
1,305,919
2,623
1,308,542
$
1,265,509
1,000
1,266,509
$
870,612
1,748
872,360
$
$
$
$
$
$
Non-‐current
assets
Investment
properties
Other
non-‐current
assets
Current
assets
Amounts
receivable
Prepaid
expenses
Cash
and
cash
equivalents
Total
assets
Non-‐current
liabilities
Debt
Tenant
security
deposits
Current
liabilities
Debt
Amounts
payable
and
accrued
liabilities
Total
liabilities
Net
assets
Investment
properties
revenue
Investment
properties
operating
expenses
Net
rental
income
Other
income
and
expenses
General
and
administrative
Fair
value
adjustments
to
investment
properties
Interest
on
debt
Interest
and
fee
income
Fair
value
adjustments
to
financial
instruments
Net
income
(loss)
for
the
year
$
3,518
541
1,247
5,306
1,313,848
612,329
274
612,603
13,793
41,428
55,221
667,824
646,024
$
$
$
$
2,292
551
2,889
5,732
1,272,241
625,470
279
625,749
13,359
42,273
55,632
681,381
590,860
Scotia
Plaza
At
100%
December
31,
2013
132,138
(61,927)
70,211
(420)
37,513
(21,189)
46
-‐
86,161
$
$
2012
72,566
(34,279)
38,287
(124)
(47,755)
(11,647)
71
(7,779)
(28,947)
$
$
$
$
$
$
843,672
666
844,338
1,528
367
1,926
3,821
848,159
416,980
186
417,166
8,906
28,182
37,088
454,254
393,905
2,345
361
831
3,537
875,897
408,219
183
408,402
9,195
27,619
36,814
445,216
430,681
$
$
$
$
Scotia
Plaza
At
66.7%
December
31,
2013
88,092
(41,285)
46,807
(280)
25,009
(14,126)
31
-‐
57,441
$
$
2012
48,377
(22,853)
25,524
(82)
(31,836)
(7,765)
47
(5,186)
(19,298)
Dundee
REIT
2013
Annual
Report
|
84
Cash
flow
generated
from
(utilized
in):
Operating
activities
Investing
activities
Financing
activities
Increase
(decrease)
in
cash
and
cash
equivalents
Non-‐current
assets
Investment
property
Other
non-‐current
assets
Current
assets
Amounts
receivable
Prepaid
expenses
Cash
and
cash
equivalents
Total
assets
Non-‐current
liabilities
Debt
Tenant
security
deposits
Current
liabilities
Debt
Amounts
payable
and
accrued
liabilities
Total
liabilities
Net
assets
Investment
property
revenue
Investment
property
operating
expenses
Net
rental
income
Other
income
and
expenses
Fair
value
adjustments
to
investment
properties
Interest
on
debt
Depreciation
and
amortization
Interest
and
fee
income
$
$
$
$
$
$
$
Scotia
Plaza
At
100%
Scotia
Plaza
At
66.7%
December
31,
December
31,
2013
2012
2013
2012
44,502
(1,310)
(44,834)
(1,642)
$
$
22,755
-‐
(19,866)
2,889
$
$
29,668
(873)
(29,890)
(1,095)
$
$
15,170
-‐
(13,244)
1,926
Telus
Tower
At
100%
Telus
Tower
At
50%
December
31,
December
31,
2013
2012
2013
2012
$
277,978
2,036
280,014
$
246,894
3,042
249,936
$
138,989
1,018
140,007
164
79
4,147
4,390
284,404
131,685
76
131,761
3,708
12,750
16,458
148,219
136,185
$
$
$
$
978
106
6,217
7,301
257,237
135,152
76
135,228
3,566
9,614
13,180
148,408
108,829
$
$
$
$
82
40
2,073
2,195
142,202
65,842
38
65,880
1,854
6,375
8,229
74,109
68,093
$
$
$
$
123,447
1,521
124,968
489
53
3,108
3,650
128,618
67,576
38
67,614
1,783
4,807
6,590
74,204
54,414
Telus
Tower
At
100%
Telus
Tower
At
50%
December
31,
December
31,
$
2013
29,651
(11,194)
18,457
$
2012
26,289
(10,815)
15,474
$
22,817
(5,957)
-‐
36
35,353
$
11,130
(6,105)
(9)
30
20,520
$
2013
14,826
(5,597)
9,229
11,409
(2,979)
-‐
17
17,676
$
$
2012
13,145
(5,407)
7,738
5,565
(3,053)
(4)
15
10,261
Net
income
for
the
year
$
Dundee
REIT
2013
Annual
Report
|
85
Cash
flow
generated
from
(utilized
in):
Operating
activities
Investing
activities
Financing
activities
Increase
(decrease)
in
cash
and
cash
equivalents
Non-‐current
assets
Investment
property
Other
non-‐current
assets
Current
assets
Amounts
receivable
Prepaid
expenses
Total
assets
Non-‐current
liabilities
Debt
Tenant
security
deposits
Current
liabilities
Debt
Amounts
payable
and
accrued
liabilities
Bank
indebtedness
Total
liabilities
Net
assets
Investment
property
revenue
Investment
property
operating
expenses
Net
rental
income
Other
income
and
expenses
Fair
value
adjustments
to
investment
properties
Interest
on
debt
Net
loss
for
the
year
Telus
Tower
At
100%
Telus
Tower
At
50%
December
31,
December
31,
2013
2012
2013
2012
$
$
17,548
(8,060)
(11,558)
(2,070)
$
$
14,466
(55)
(13,280)
1,131
$
$
8,774
(4,030)
(5,779)
(1,035)
$
$
7,233
(27)
(6,640)
566
100
Yonge
Street
At
100%
100
Yonge
Street
At
66.7%
December
31,
December
31,
2013
2012
2013
2012
$
$
$
$
$
$
77,752
57
77,809
140
46
186
77,995
33,523
21
33,544
944
723
63
1,730
35,274
42,721
$
$
$
$
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
$
$
$
$
$
$
51,835
38
51,873
93
31
124
51,997
22,349
14
22,363
629
482
42
1,153
23,516
28,481
$
$
$
$
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
100
Yonge
Street
At
100%
100
Yonge
Street
At
66.7%
December
31,
December
31,
$
$
2013
6,090
(3,785)
2,305
(6,732)
(612)
(5,039)
$
$
$
2012
-‐
-‐
-‐
-‐
-‐
-‐
$
2013
4,060
(2,523)
1,537
(4,488)
(408)
(3,359)
$
$
2012
-‐
-‐
-‐
-‐
-‐
-‐
Dundee
REIT
2013
Annual
Report
|
86
Cash
flow
generated
from
(utilized
in):
Operating
activities
Investing
activities
Financing
activities
Increase
in
bank
indebtedness
100
Yonge
Street
At
100%
100
Yonge
Street
At
66.7%
December
31,
December
31,
2013
2012
2013
2012
$
$
1,847
-‐
(1,910)
(63)
$
$
-‐
-‐
-‐
-‐
$
$
1,231
-‐
(1,273)
(42)
$
$
-‐
-‐
-‐
-‐
Co-‐owned
investment
properties
The
Trust’s
interests
in
co-‐owned
investment
properties
are
accounted
for
based
on
the
Trust’s
share
of
interest
in
the
assets,
liabilities,
revenues
and
expenses
of
the
properties.
The
co-‐owned
investment
properties
acquired
in
the
year
ended
December
31,
2012
relate
to
the
acquisition
of
Whiterock,
as
described
in
Note
7.
Name
10199-‐101st
Street
NW
St.
Albert
Trail
Centre
2810
Matheson
Boulevard
East
50
and
90
Burnhamthorpe
(Sussex
Centre)
300–304
The
East
Mall
(Valhalla
Executive
Centre)
Tillsonburg
Gateway
Centre
185–195
The
West
Mall
460
Two
Nations
Crossing
350–450
Lansdowne
Street
275
Dundas
Street
West
(London
City
Centre)
80
Whitehall
Drive
6501–6523
Mississauga
Road
6531–6559
Mississauga
Road
2010
Winston
Park
Drive
219
Laurier
Avenue
West
55
Norfolk
Street
South
10
Lower
Spadina
Avenue
49
Ontario
Street
401–405
The
West
Mall
(Commerce
West)
2261
Keating
Cross
Road
117
Kearney
Lake
Road
Centre
70
Location
Edmonton,
Alberta
Edmonton,
Alberta
Mississauga,
Ontario
Mississauga,
Ontario
Mississauga,
Ontario
Tillsonburg,
Ontario
Toronto,
Ontario
Fredericton,
New
Brunswick
Kamloops,
British
Columbia
London,
Ontario
Markham,
Ontario
Mississauga,
Ontario
Mississauga,
Ontario
Oakville,
Ontario
Ottawa,
Ontario
Simcoe,
Ontario
Toronto,
Ontario
Toronto,
Ontario
Toronto,
Ontario
Victoria,
British
Columbia
Halifax,
Nova
Scotia
Calgary,
Alberta
Ownership
interest
(%)
December
31,
December
31,
2013
50.0
50.0
49.9
49.9
49.9
49.9
49.9
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
35.0
15.0
2012
50.0
50.0
49.9
49.9
49.9
49.9
49.9
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
40.0
35.0
15.0
Dundee
REIT
2013
Annual
Report
|
87
The
following
amounts
represent
the
ownership
interest
in
the
assets,
liabilities,
revenues
and
expenses
of
the
co-‐owned
properties
in
which
the
Trust
participates.
Non-‐current
assets
Investment
properties
Other
non-‐current
assets
Current
assets
Amounts
receivable
Prepaid
expenses
and
other
assets
Cash
and
cash
equivalents
Total
assets
Non-‐current
liabilities
Debt
Deposits
Current
liabilities
Debt
Amounts
payable
and
accrued
liabilities
Total
liabilities
Investment
properties
revenue
Investment
properties
operating
expenses
Net
rental
income
from
continuing
operations
Other
income
and
expenses
General
and
administrative
Fair
value
adjustments
to
investment
properties
Interest
on
debt
Interest
and
fee
income
Income
from
continuing
operations
Income
from
discontinued
operations
Net
income
(loss)
for
the
year
December
31,
December
31,
2013
2012
$
450,837
1,787
452,624
1,918
456
7,581
9,955
462,579
213,424
1,363
214,787
18,877
7,285
26,162
240,949
$
$
$
454,703
1,106
455,809
8,251
453
8,310
17,014
472,823
183,678
1,635
185,313
52,514
8,676
61,190
246,503
Years
ended
December
31,
2013
52,790
(25,564)
27,226
$
-‐
(9,308)
(9,518)
3
8,403
-‐
8,403
$
2012
48,204
(22,721)
25,483
(3)
(16,515)
(8,909)
-‐
56
(4,782)
(4,726)
$
$
$
$
$
$
Dundee
REIT
2013
Annual
Report
|
88
Note
12
OTHER
NON-‐CURRENT
ASSETS
Property
and
equipment,
net
of
accumulated
depreciation
of
$3,135
(December
31,
2012
–
$1,946)
Deposits
Restricted
cash
Straight-‐line
rent
receivable
External
management
contracts,
net
of
accumulated
amortization
of
$2,457
(December
31,
2012
–
$1,119)
Goodwill
Total
December
31,
December
31,
2013
2012
$
$
$
6,709
2,919
2,617
29,661
10,545
52,371
104,822
$
3,022
4,858
2,165
21,002
11,883
52,371
95,301
Deposits
largely
represent
amounts
provided
by
the
Trust
in
connection
with
utility
deposits.
Restricted
cash
primarily
represents
tenant
rent
deposits
and
cash
held
as
security
for
certain
mortgages.
The
Trust
leases
various
vehicles
and
machinery
under
non-‐cancellable
finance
lease
agreements.
The
lease
terms
are
between
four
and
ten
years.
External
management
contracts
and
goodwill
As
at
January
1,
2012
Amounts
recorded
on
acquisition
of
Whiterock
Amounts
allocated
to
discontinued
operations
Write-‐off
on
termination
of
contracts
Derecognition
of
goodwill
due
to
properties
disposed
Reclassified
to
assets
held
for
sale
Amortization
of
external
management
contracts
–
discontinued
operations
Amortization
of
external
management
contracts
–
continuing
operations
As
at
December
31,
2012
Amortization
of
external
management
contracts
–
continuing
operations
As
at
December
31,
2013
Note
7
21
23
$
External
management
contracts
-‐
16,512
(2,053)
(1,255)
-‐
-‐
(125)
(1,196)
11,883
(1,338)
10,545
$
Goodwill
-‐
62,058
(8,064)
-‐
(1,369)
(254)
-‐
-‐
52,371
-‐
52,371
$
$
The
Trust
performed
its
annual
goodwill
impairment
test
as
at
December
31,
2013
in
accordance
with
the
methodology
set
out
in
IAS
36,
by
comparing
the
recoverable
amount
of
the
goodwill
CGU
using
the
value-‐in-‐use
approach
to
its
carrying
amount.
For
the
purpose
of
this
impairment
test,
the
key
assumptions
used
included
an
estimated
growth
rate
of
3.0%,
a
discount
rate
of
5.8%
and
a
terminal
rate
of
5.8%.
The
Trust
performed
a
sensitivity
analysis
on
each
of
the
key
assumptions,
assuming
a
1%
unfavourable
change
for
each
individual
assumption
while
holding
the
other
assumptions
constant,
and
determined
that
none
of
these
scenarios
would
result
in
the
carrying
amount
of
the
goodwill
CGU
to
exceed
the
recoverable
amount
for
sensitivity
purposes.
Based
on
the
impairment
test
performed,
the
Trust
concluded
that
no
goodwill
impairment
existed
as
at
December
31,
2013.
As
a
result
of
the
disposition
of
the
industrial
properties
portfolio
during
2012,
goodwill
of
$8,064
and
property
management
contracts
of
$2,053
were
allocated
to
the
disposal
group
and
included
in
the
determination
of
the
net
gain
on
sale
(see
Note
21).
Goodwill
amounting
to
$1,369
was
further
derecognized
as
a
result
of
other
properties
disposed
during
2012
and
$254
was
reclassified
to
assets
held
for
sale.
In
connection
with
the
acquisition
of
the
co-‐owner’s
interest
in
the
Trans
America
Group
properties
during
2012,
the
external
management
contracts
for
these
properties
were
terminated,
resulting
in
the
write-‐
off
of
the
intangible
asset
of
$1,255
(see
Note
23).
Dundee
REIT
2013
Annual
Report
|
89
Note
13
PROMISSORY
NOTES
RECEIVABLE
Promissory
notes
receivable
December
31,
December
31,
$
2013
-‐
$
2012
42,000
On
October
4,
2012,
the
Trust
entered
into
promissory
notes
receivable
from
a
subsidiary
of
Dundee
Industrial
totalling
$42,000.
The
promissory
notes
receivable
bore
interest
at
3.1%.
On
January
10,
2013,
the
promissory
notes
receivable
and
accrued
interest
were
fully
repaid
by
Dundee
Industrial.
Note
14
AMOUNTS
RECEIVABLE
Amounts
receivable
are
net
of
credit
adjustments
aggregating
$11,450
(December
31,
2012
–
$7,010).
Trade
receivables
Less:
Provision
for
impairment
of
trade
receivables
Trade
receivables,
net
Other
amounts
receivable
December
31,
December
31,
Note
27
$
$
2013
9,671
(2,113)
7,558
20,918
28,476
$
$
2012
12,772
(1,993)
10,779
20,327
31,106
The
movement
in
the
provision
for
impairment
of
trade
receivables
during
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
As
at
December
31
Years
ended
December
31,
2013
1,993
813
(693)
2,113
$
$
2012
955
1,424
(386)
1,993
$
$
The
carrying
value
of
amounts
receivable
approximates
fair
value
due
to
their
current
nature.
As
at
December
31,
2013,
trade
receivables
of
approximately
$3,205
(December
31,
2012
–
$7,161)
were
past
due
but
not
considered
impaired
as
the
Trust
has
ongoing
relationships
with
these
tenants
and
the
aging
of
these
trade
receivables
is
not
indicative
of
expected
default.
The
Trust
leases
office
properties
to
tenants
under
operating
leases.
Minimum
rental
commitments,
including
investment
in
joint
ventures,
on
non-‐cancellable
tenant
operating
leases
over
their
remaining
terms
are
as
follows:
$
December
31,
2013
393,528
919,753
784,027
2,097,308
$
2014
2015
to
2017
2018
to
2031
Dundee
REIT
2013
Annual
Report
|
90
Note
15
DEBT
Mortgages(1)(2)
Term
debt
Demand
revolving
credit
facilities(2)
Term
loan
facility(2)
Convertible
debentures
Debentures
Total
Less:
Current
portion
Non-‐current
debt
(1) Net
of
financing
costs
of
$8,079.
(2) Secured
by
charges
on
specific
investment
properties
(refer
to
Note
9).
Convertible
debentures
5.5%
Series
H
Debentures
December
31,
December
31,
2013
2,477,183
825
103,946
181,530
51,885
333,647
3,149,016
264,535
2,884,481
$
$
2012
2,441,663
248
67,557
180,837
52,092
36,029
2,778,426
308,089
2,470,337
$
$
Carrying
value
December
31,
December
31,
2013
51,885
$
2012
52,092
$
5.5%
Series
H
Debentures
December
9,
2011
March
31,
2017
$
51,650
5.5%
$
Date
issued
Maturity
date
issued
rate
2013
51,128
$
2012
51,128
Original
principal
Interest
December
31,
December
31,
Outstanding
principal
amount
5.5%
Series
H
Debentures
The
5.5%
Series
H
Debentures
are
convertible
at
the
request
of
the
holder,
subject
to
certain
terms
and
conditions,
into
27.25648
REIT
A
Units
per
one
thousand
dollars
of
face
value,
representing
a
conversion
price
of
$36.69
per
unit.
The
5.5%
Series
H
Debentures
are
redeemable
at
the
principal
amount
at
the
Trust’s
option,
subject
to
certain
terms
and
conditions,
from
March
31,
2015,
and
prior
to
March
31,
2016,
provided
the
20-‐day
weighted
average
trading
price
of
the
Units
is
at
least
$45.87,
and
at
their
principal
amount
on
and
after
March
31,
2016.
Interest
on
the
5.5%
Series
H
Debentures
is
payable
semi-‐annually
on
March
31
and
September
30.
Principal
redemptions
On
December
31,
2012
(the
“Redemption
Date”),
the
Trust
completed
the
redemption
of
its
remaining
6.5%
Debentures,
5.7%
Debentures,
6.0%
Debentures
and
7.0%
Series
G
Debentures
(the
“Redeemed
Debentures”),
in
accordance
with
the
provisions
of
the
indentures
and
supplemental
indentures
related
to
the
Redeemed
Debentures.
The
redemption
price
was
paid
in
cash
and
was
equal
to
the
aggregate
of
(i)
$1
for
each
$1
principal
amount
of
Redeemed
Debentures
issued
and
outstanding
on
the
Redemption
Date
and
(ii)
all
accrued
and
unpaid
interest
on
the
Redeemed
Debentures
up
to,
but
excluding,
the
Redemption
Date.
Debt
settlement
costs
incurred
are
described
in
Note
23.
Dundee
REIT
2013
Annual
Report
|
91
Details
of
the
convertible
debentures
redeemed
on
December
31,
2012
are
as
follows:
6.5%
Debentures
5.7%
Debentures
6.0%
Debentures
7.0%
Series
G
Debentures
Interest
rate
6.5%
5.7%
6.0%
7.0%
6.0%
$
$
Principal
redeemed
452
1,139
124,785
118
126,494
Debentures
The
principal
amount
outstanding
and
the
carrying
value
for
each
series
of
debentures
are
as
follows:
Series
A
Debentures
Series
B
Debentures
Series
K
Debentures
Series
L
Debentures
Date
issued
Maturity
date
issued
face
rate
principal
Original
principal
Interest
Outstanding
Carrying
value
Carrying
value
December
31,
2013
December
31,
2012
June
13,
2013
June
13,
2018
$
175,000
3.42%
$
175,000
$
173,582
$
October
9,
2013
January
9,
2017
125,000
2.98%(1)
125,000
124,335
April
26,
2011
April
26,
2016
35,000
5.95%
25,000
25,526
August
8,
2011
September
30,
2016
$
10,000
345,000
5.95%
10,000
$
335,000
$
10,204
333,647
$
-‐
-‐
25,741
10,288
36,029
(1)
Variable
interest
rate
at
three-‐month
CDOR
rate
plus
1.7%.
Series
A
Debentures
On
June
13,
2013,
the
Trust
completed
the
issuance
of
$175,000
aggregate
principal
amount
of
Series
A
senior
unsecured
debentures
(“Series
A
Debentures”).
The
Series
A
Debentures
bear
interest
at
a
coupon
rate
of
3.424%
per
annum
with
a
maturity
date
of
June
13,
2018.
Interest
on
the
Series
A
Debentures
is
payable
semi-‐annually
on
June
13
and
December
13,
with
the
first
payment
commencing
on
December
13,
2013.
Costs
related
to
the
issuance
of
the
Series
A
Debentures
totalled
$1,590.
The
Trust
has
the
option
to
redeem
the
Series
A
Debentures
at
a
redemption
price
equal
to
the
greater
of
Canada
Yield
Price
and
par
plus
any
accrued
and
unpaid
interest.
The
Canada
Yield
Price
is
defined
as
the
amount
that
would
return
a
yield
on
investment
for
the
remaining
term
to
maturity
equal
to
the
Canada
bond
rate
with
equal
term
to
maturity
plus
a
spread
of
0.475%.
Series
B
Debentures
On
October
9,
2013,
the
Trust
completed
the
issuance
of
$125,000
aggregate
principal
amount
of
Series
B
floating
senior
unsecured
debentures
(“Series
B
Debentures”).
The
Series
B
Debentures
bear
interest
at
a
three-‐month
CDOR
rate
plus
1.7%
per
annum
with
a
maturity
date
of
January
9,
2017.
Interest
on
the
Series
B
Debentures
is
payable
quarterly
in
arrears
on
January
9,
April
9,
July
9
and
October
9,
with
the
first
payment
commencing
on
January
9,
2014.
Costs
related
to
the
issuance
of
the
Series
B
Debentures
totalled
$720.
Series
K
and
Series
L
Debentures
The
Series
K
and
Series
L
Debentures
are
redeemable
at
the
Trust’s
option,
subject
to
certain
terms
and
conditions.
Interest
is
payable
monthly.
Dundee
REIT
2013
Annual
Report
|
92
Demand
revolving
credit
facilities
A
demand
revolving
credit
facility
is
available
up
to
a
formula-‐based
maximum
not
to
exceed
$171,500,
in
the
form
of
rolling
one-‐month
bankers’
acceptances
(“BAs”)
bearing
interest
at
the
BA
rates
plus
1.75%
or
at
the
bank’s
prime
rate
(3.0%
as
at
December
31,
2013)
plus
0.75%,
and
is
secured
by
nine
properties
as
first-‐ranking
mortgages.
The
demand
revolving
credit
facility
matured
on
March
5,
2013
and
was
extended
to
March
5,
2014.
At
December
31,
2013,
$104,000
was
drawn
(December
31,
2012
–
$54,000
drawn)
on
the
facility
and
the
formula-‐based
amount
available
under
this
facility
was
$67,500
(December
31,
2012
–
$117,535).
Subsequent
to
year-‐end,
the
Trust
repaid
in
full
$104,000
of
this
facility
with
the
net
proceeds
received
from
the
Series
C
Debentures
offering
and
cash
on
hand.
Furthermore,
on
February
25,
2014,
this
facility
was
extended
to
March
5,
2016
with
the
same
terms.
A
demand
revolving
credit
facility
is
available
up
to
a
formula-‐based
maximum
not
to
exceed
$40,000,
bearing
interest
at
the
bank’s
prime
rate
(3.0%
as
at
December
31,
2013)
plus
1.5%.
This
facility
is
secured
by
first-‐ranking
collateral
mortgages
on
two
properties.
The
facility
matured
on
April
30,
2013
and
was
subsequently
extended
to
April
30,
2014
with
the
interest
rate
revised
to
the
bank’s
prime
rate
plus
1.25%.
At
December
31,
2013,
nothing
was
drawn
(December
31,
2012
–
$13,677
drawn)
on
the
facility
and
the
formula-‐based
amount
available
under
this
facility
was
$27,690,
less
$1,534
in
the
form
of
letters
of
guarantee
(December
31,
2012
–
$26,323,
less
$1,626
in
the
form
of
letters
of
guarantee).
A
demand
revolving
credit
facility
is
available
up
to
a
formula-‐based
maximum
not
to
exceed
$35,000,
bearing
interest
at
the
bank’s
prime
rate
(3.0%
as
at
December
31,
2013)
plus
0.85%.
This
facility
is
secured
by
second-‐ranking
mortgages
on
two
properties.
The
facility
matured
on
April
30,
2013.
On
April
29,
2013,
the
facility
was
extended
to
April
30,
2014
with
the
interest
rate
revised
to
the
bank’s
prime
rate
plus
0.75%
or
BA
rates
plus
1.75%.
This
facility
was
also
amended
to
include
a
bulge
facility
of
$90,000
for
the
period
from
April
29,
2013
to
May
2,
2013,
bearing
the
same
interest
rate.
On
April
30,
2013,
$90,000
was
drawn
on
the
bulge
facility
to
fund
the
acquisition
of
20
Toronto
Street
and
137
Yonge
Street
in
Toronto.
The
facility
was
repaid
in
full
with
the
net
proceeds
received
from
the
public
offering
completed
on
May
1,
2013.
The
bulge
facility
expired
on
May
2,
2013
and
was
not
subsequently
renewed.
At
December
31,
2013,
nothing
was
drawn
(December
31,
2012
–
$nil
drawn)
on
the
facility
and
the
formula-‐based
amount
available
under
this
facility
was
$35,000,
less
$2,181
in
the
form
of
letters
of
guarantee
(December
31,
2012
–
$35,000,
less
$2,031
in
the
form
of
letters
of
guarantee).
On
February
20,
2014,
the
Trust
extended
this
facility
to
April
30,
2015
with
the
same
terms.
A
revolving
acquisition
and
operating
facility
is
available
up
to
$35,000.
The
facility
can
be
increased
by
up
to
an
additional
$20,000.
Interest
is
borne
generally
at
the
bank’s
prime
rate
(3.0%
as
at
December
31,
2013)
plus
0.85%
or
BA
rates
plus
1.85%.
The
facility
is
secured
by
a
first-‐ranking
collateral
mortgage
on
one
property
and
a
second-‐ranking
collateral
mortgage
on
one
property
and
the
guarantee
of
the
Trust.
The
facility
expired
on
August
23,
2013
and
was
subsequently
extended
to
April
30,
2014
with
the
interest
rate
revised
to
the
bank’s
prime
rate
plus
0.75%
or
BA
rates
plus
1.75%.
At
December
31,
2013,
nothing
was
drawn
(December
31,
2012
–
$nil
drawn)
on
the
facility
and
the
amount
available
under
this
facility
was
$35,000,
less
$300
in
the
form
of
letters
of
guarantee
(December
31,
2012
–
$35,000,
less
$300
in
the
form
of
letters
of
guarantee).
On
February
20,
2014,
the
Trust
extended
this
facility
to
April
30,
2015
with
the
same
terms.
Term
loan
facility
On
August
15,
2011,
the
Trust
entered
into
a
term
loan
facility
for
$188,000
in
the
form
of
rolling
one-‐month
BA
rates.
The
term
loan
facility
bears
interest
at
BA
rates
plus
1.85%
payable
monthly.
The
term
loan
facility
was
originally
secured
by
first-‐ranking
collateral
mortgages
on
nine
properties.
On
August
15,
2012,
the
Trust
repaid
$4,547
on
the
term
loan
facility
as
one
of
the
properties
securing
the
facility
was
sold.
At
December
31,
2013,
$183,453
was
outstanding
on
the
term
loan
facility,
secured
by
first-‐ranking
collateral
mortgages
on
eight
properties.
The
term
loan
facility
expires
on
August
15,
2016.
On
August
15,
2011,
the
Trust
entered
into
interest
rate
swap
agreements
to
modify
the
interest
rate
profile
of
the
current
variable
rate
debt
on
the
$188,000
term
loan
facility,
without
an
exchange
of
the
underlying
principal
amounts.
On
December
31,
2013,
the
notional
amount
of
interest
rate
swap
agreements
hedged
against
the
term
loan
facility
was
$183,453.
The
Trust
has
applied
hedge
accounting
to
this
relationship,
whereby
the
change
in
fair
value
of
the
effective
portion
of
the
hedging
derivative
is
recognized
in
other
comprehensive
income.
Settlement
of
both
the
fixed
and
variable
portions
of
the
interest
rate
swaps
occurs
on
a
monthly
basis.
Dundee
REIT
2013
Annual
Report
|
93
The
following
tables
provide
a
continuity
of
debt
for
the
years
ended
December
31,
2013
and
December
31,
2012:
Demand
revolving
credit
Term
loan
Convertible
Year
ended
December
31,
2013
$
Term
debt
Mortgages
2,441,663
$
Balance
as
at
January
1,
2013
251,049
Borrowings
(244,173)
Repayments
(1,904)
Financing
cost
additions
29,839
Assumed
debt
3,707
Foreign
exchange
adjustments
Other
adjustments(1)
(2,998)
Balance
as
at
December
31,
2013
2,477,183
$
(1)
Other
adjustments
include
fair
value
adjustments,
amortization
of
financing
costs
and
amortization
of
fair
value
adjustments.
facility
180,837
$
-‐
-‐
-‐
-‐
-‐
693
645,889
(609,567)
(278)
-‐
-‐
345
248
$
943
(366)
-‐
-‐
-‐
-‐
825
$
52,092
$
-‐
-‐
-‐
-‐
-‐
(207)
51,885
$
facilities
67,557
$
181,530
$
103,946
$
$
36,029
$
300,000
-‐
(2,310)
-‐
-‐
(72)
333,647
$
Total
2,778,426
1,197,881
(854,106)
(4,492)
29,839
3,707
(2,239)
3,149,016
debentures
Debentures
$
Balance
as
at
January
1,
2012
Borrowings
Repayments
Financing
cost
additions
Assumed
debt
Discharge
of
debt
(dispositions)
Conversion
to
unitholders’
equity
Foreign
exchange
adjustments
Debt
classified
as
assets
held
for
sale
Other
adjustments(1)
Balance
as
at
December
31,
Mortgages
1,805,571
$
474,789
(408,442)
(4,220)
821,156
(250,896)
-‐
450
(9,200)
12,455
Year
ended
December
31,
2012
Demand
revolving
credit
Term
loan
Convertible
Term
debt
504
$
24
(280)
-‐
-‐
facilities
2,435
$
255,289
(224,347)
(629)
34,300
facility
184,654
$
-‐
(4,547)
-‐
-‐
debentures
Debentures
-‐
$
-‐
(10,340)
-‐
45,000
131,353
$
-‐
(126,686)
-‐
59,927
Bridge
loan
facility
220,000
(220,000)
Total
-‐
$
2,124,517
950,102
(994,642)
(4,849)
960,383
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
(17,498)
-‐
-‐
-‐
-‐
-‐
509
-‐
730
-‐
4,996
-‐
1,369
-‐
(250,896)
-‐
-‐
(17,498)
450
-‐
-‐
(9,200)
20,059
2012
$
2,441,663
$
248
$
67,557
$
180,837
$
52,092
$
36,029
$
-‐
$
2,778,426
(1)
Other
adjustments
include
fair
value
adjustments,
amortization
of
financing
costs
and
amortization
of
fair
value
adjustments.
Dundee
REIT
2013
Annual
Report
|
94
Debt
weighted
average
effective
interest
rates
and
maturities
Weighted
average
effective
interest
rates(1)
December
31,
December
31,
Maturity
December
31,
December
31,
Debt
amount
2013
2012
dates
2013
2012
$
$
4.56%
7.83%
3.83%
3.80%
5.02%
4.50%
4.53%
5.91%
3.83%
3.80%
3.89%
4.42%
2014–2028
2016
2016
2017
2016–2018
Fixed
rate
Mortgages
Term
debt
Term
loan
facility(2)
Convertible
debentures
Debentures
Total
fixed
rate
debt
Variable
rate
Mortgages
Demand
revolving
credit
facilities
Series
B
Debentures
Total
variable
rate
debt
Total
debt
(1)
The
effective
interest
rate
method
includes
the
impact
of
fair
value
adjustments
on
assumed
debt
and
financing
costs.
(2)
Under
a
hedging
arrangement,
the
Trust
has
entered
into
two
interest
rate
swap
agreements
to
fix
the
interest
rate
of
the
term
loan
facility:
a
five-‐year
interest
rate
swap
on
a
notional
balance
of
$129,783,
fixing
interest
at
a
bankers’
acceptance
rate
of
1.67%
plus
a
spread
of
185
bps;
and
a
three-‐year
interest
rate
swap
on
a
notional
balance
of
$53,670,
fixing
interest
at
a
bankers’
acceptance
rate
of
1.18%
plus
a
spread
of
185
bps.
The
effective
interest
rate
on
the
term
loan
facility
is
3.83%
after
accounting
for
financing
costs.
2,387,593
825
181,530
51,885
209,312
2,831,145
2,392,766
248
180,837
52,092
36,029
2,661,972
89,590
103,946
124,335
317,871
3,149,016
48,897
67,557
-‐
116,454
2,778,426
2015–2018
2014
2017
3.64%
2.97%
3.09%
3.20%
4.30%
4.26%
3.90%
-‐
4.05%
4.48%
$
$
The
scheduled
principal
repayments
and
debt
maturities
are
as
follows:
2014
2015
2016
2017
2018
2019
and
thereafter
Financing
costs
Fair
value
adjustments
Demand
revolving
$
Mortgages
160,234
$
509,244
339,284
322,233
217,717
919,788
2,468,500
(8,079)
16,762
8,683
$
2,477,183
$
Term
debt
301
$
317
207
-‐
-‐
-‐
825
-‐
-‐
$
credit
Term
loan
Convertible
facilities
104,000
$
-‐
-‐
-‐
-‐
-‐
104,000
(54)
-‐
facility
-‐
$
-‐
183,453
-‐
-‐
-‐
183,453
(1,923)
-‐
debentures
Debentures
-‐
-‐
$
-‐
-‐
35,000
-‐
51,128
125,000
-‐
175,000
-‐
-‐
51,128
335,000
(2,082)
729
-‐
757
-‐
825
$
(54)
103,946
$
(1,923)
181,530
$
757
(1,353)
51,885
$
333,647
$
Total
264,535
509,561
557,944
498,361
392,717
919,788
3,142,906
(12,138)
18,248
6,110
3,149,016
Dundee
REIT
2013
Annual
Report
|
95
Other
financial
instruments
The
Trust
has
other
financial
instruments
as
follows:
Fair
value
of
interest
rate
swaps
–
liability
Fair
value
of
interest
rate
swaps
–
asset
Conversion
feature
on
the
convertible
debentures
–
liability
(asset)
Other
financial
instruments
–
liability
December
31,
December
31,
$
$
2013
365
(29)
(317)
19
$
$
2012
549
(174)
1,397
1,772
The
Trust’s
interest
rate
swap
agreements
are
subject
to
master
netting
agreements
that
create
a
legally
enforceable
right
to
offset,
by
the
counterparty,
the
related
interest
rate
swap
financial
assets
and
liabilities.
Interest
rate
swaps
The
following
table
summarizes
the
details
of
the
interest
rate
swaps
that
are
outstanding
at
December
31,
2013:
Transaction
date
August
15,
2011
August
15,
2011
Non-‐current
debt
Term
loan
facility
principal
amount
(notional)
129,783
53,670
183,453
$
$
Fixed
interest
rate
3.52%
3.03%
3.38%
Financial
instrument
Maturity
date
August
15,
2016
August
15,
2014
classification
Cash
flow
hedge
Cash
flow
hedge
Fair
value
365
(29)
336
$
$
For
those
interest
rate
swaps
designated
as
cash
flow
hedges,
the
Trust
has
assessed
that
there
is
no
ineffectiveness
in
the
hedges
of
its
interest
rate
exposure.
The
effectiveness
of
the
hedging
relationship
is
reviewed
on
a
quarterly
basis.
As
an
effective
hedge,
unrealized
gains
or
losses
on
the
interest
rate
swap
agreements
are
recognized
in
other
comprehensive
income.
At
December
31,
2013,
the
aggregate
fair
value
of
the
interest
rate
swaps
amounted
to
a
$336
financial
liability
(December
31,
2012
–
$375
financial
liability).
The
associated
unrealized
gains
or
losses
that
are
recognized
in
other
comprehensive
income
will
be
reclassified
into
net
income
in
the
same
period
or
periods
during
which
the
interest
payments
on
the
hedged
item
affect
net
income.
Conversion
feature
on
the
convertible
debentures
The
movement
in
the
conversion
feature
on
the
convertible
debentures
for
the
year
is
as
follows:
Balance
as
at
January
1
Assumed
from
business
combination
Reduction
of
conversion
feature
on
the
convertible
debentures
converted
during
the
year
Remeasurement
of
conversion
feature
on
convertible
debentures
Balance
as
at
December
31
Year
ended
Year
ended
December
31,
December
31,
Note
24
$
$
2013
1,397
-‐
-‐
(1,714)
(317)
$
$
2012
6,426
3,363
(5,674)
(2,718)
1,397
Dundee
REIT
2013
Annual
Report
|
96
Note
16
SUBSIDIARY
REDEEMABLE
UNITS
The
Trust
has
the
following
subsidiary
redeemable
units
outstanding:
Balance
as
at
January
1
Distribution
Reinvestment
Plan
Remeasurement
of
carrying
value
of
subsidiary
redeemable
units
Balance
as
at
December
31
Note
24
Year
ended
December
31,
2013
Year
ended
December
31,
2012
Number
of
units
issued
Number
of
units
issued
and
outstanding
3,528,658
9,799
$
Amount
132,078
361
and
outstanding
3,506,107
22,551
$
Amount
114,445
826
-‐
3,538,457
$
(30,461)
101,978
-‐
3,528,658
$
16,807
132,078
During
the
year
ended
December
31,
2013,
the
Trust
incurred
$7,897
(December
31,
2012
–
$7,758)
in
distributions
on
the
subsidiary
redeemable
units,
which
is
included
as
interest
expense
in
comprehensive
income
(see
Note
22).
DPLP,
a
subsidiary
of
Dundee
REIT,
is
authorized
to
issue
an
unlimited
number
of
LP
Class
B
limited
partnership
units.
These
units
have
been
issued
in
two
series:
subsidiary
redeemable
units
and
LP
Class
B
Units,
Series
2.
The
subsidiary
redeemable
units,
together
with
the
accompanying
Special
Trust
Units,
have
economic
and
voting
rights
equivalent
in
all
material
respects
to
REIT
A
Units.
Generally,
each
subsidiary
redeemable
unit
entitles
the
holder
to
a
distribution
equal
to
distributions
declared
on
REIT
Units,
Series
B,
or
if
no
such
distribution
is
declared,
on
REIT
Units,
Series
A.
Subsidiary
redeemable
units
may
be
surrendered
or
indirectly
exchanged
on
a
one-‐for-‐one
basis
at
the
option
of
the
holder,
generally
at
any
time
subject
to
certain
restrictions,
for
REIT
Units,
Series
B.
Holders
of
the
LP
Class
B
Units,
Series
2
are
entitled
to
vote
at
meetings
of
the
limited
partners
of
DPLP
and
each
Unit
entitles
the
holder
to
a
distribution
equal
to
distributions
on
the
subsidiary
redeemable
units.
As
at
December
31,
2013
and
December
31,
2012,
all
issued
and
outstanding
LP
Class
B
Units,
Series
2
are
owned
indirectly
by
Dundee
REIT
and
have
been
eliminated
in
the
consolidated
balance
sheets.
Special
Trust
Units
are
issued
in
connection
with
subsidiary
redeemable
units.
The
Special
Trust
Units
are
not
transferable
separately
from
the
subsidiary
redeemable
units
to
which
they
relate
and
will
be
automatically
redeemed
for
a
nominal
amount
and
cancelled
on
surrender
or
exchange
of
such
subsidiary
redeemable
units.
Each
Special
Trust
Unit
entitles
the
holder
to
the
number
of
votes
at
any
meeting
of
unitholders
that
is
equal
to
the
number
of
REIT
B
Units
that
may
be
obtained
on
the
surrender
or
exchange
of
the
subsidiary
redeemable
units
to
which
they
relate.
As
at
December
31,
2013,
3,538,457
Special
Trust
Units
were
issued
and
outstanding
(December
31,
2012
–
3,528,658).
Note
17
DEFERRED
UNIT
INCENTIVE
PLAN
The
Deferred
Unit
Incentive
Plan
(“DUIP”)
provides
for
the
grant
of
deferred
trust
units
to
trustees,
officers
and
employees
as
well
as
affiliates
and
their
service
providers,
including
the
asset
manager.
Deferred
trust
units
are
granted
at
the
discretion
of
the
trustees
and
earn
income
deferred
trust
units
based
on
the
payment
of
distributions.
Once
issued,
each
deferred
trust
unit
and
the
related
distribution
of
income
deferred
trust
units
vest
evenly
over
a
three-‐
or
five-‐year
period
on
the
anniversary
date
of
the
grant.
Subject
to
an
election
option
available
for
certain
participants
to
postpone
receipt
of
REIT
A
Units,
such
units
will
be
issued
immediately
on
vesting.
As
at
December
31,
2013,
up
to
a
maximum
of
1.75
million
(December
31,
2012
–
1.75
million)
deferred
trust
units
are
issuable
under
the
DUIP.
Dundee
REIT
2013
Annual
Report
|
97
The
movement
in
the
DUIP
balance
was
as
follows:
As
at
January
1,
2012
Compensation
during
the
year
REIT
A
Units
issued
for
vested
deferred
trust
units
Remeasurements
of
carrying
value
of
deferred
trust
units
As
at
December
31,
2012
Compensation
during
the
year
REIT
A
Units
issued
for
vested
deferred
trust
units
Remeasurements
of
carrying
value
of
deferred
trust
units
As
at
December
31,
2013
Note
$
20
24
20
24
$
12,971
4,160
(876)
2,499
18,754
4,087
(1,641)
(2,665)
18,535
During
the
year
ended
December
31,
2013,
$4,087
of
compensation
expense
was
recorded
(December
31,
2012
–
$4,160)
and
included
in
general
and
administrative
expenses.
For
the
same
period,
a
fair
value
gain
of
$2,665
(December
31,
2012
–
fair
value
loss
of
$2,499)
was
recognized,
representing
the
remeasurement
of
the
DUIP
liability
during
the
year.
Outstanding
at
January
1,
2012
Granted
during
the
year
REIT
A
Units
issued
Fractional
Units
paid
in
cash
Outstanding
at
December
31,
2012
Granted
during
the
year
REIT
A
Units
issued
Fractional
Units
paid
in
cash
Cancelled
Outstanding
and
payable
at
December
31,
2013
Vested
but
not
issued
at
December
31,
2013
Deferred
Income
deferred
trust
units
388,855
125,391
(21,204)
-‐
493,042
143,159
(37,050)
-‐
(1,771)
597,380
231,816
trust
units
100,813
30,077
(4,086)
(21)
126,783
49,878
(7,920)
(26)
(57)
168,658
127,548
Total
units
489,668
155,468
(25,290)
(21)
619,825
193,037
(44,970)
(26)
(1,828)
766,038
359,364
On
February
20,
2013,
131,300
deferred
trust
units
were
granted
to
trustees,
officers
and
employees
as
well
as
affiliates
and
their
service
providers,
including
the
asset
manager.
Of
the
units
granted,
32,000
relate
to
key
management
personnel.
The
grant
date
value
of
these
deferred
trust
units
was
$37.54
per
unit
granted.
On
May
8,
2013,
11,859
deferred
trust
units
were
granted
to
trustees
who
elected
to
receive
their
2013
annual
retainer
in
the
form
of
deferred
trust
units
rather
than
cash.
The
grant
date
value
of
these
deferred
trust
units
was
$36.68
per
unit
granted.
On
February
23,
2012,
114,100
deferred
trust
units
were
granted
to
trustees,
officers
and
employees
as
well
as
affiliates
and
their
service
providers,
including
the
asset
manager.
Of
the
units
granted,
29,000
relate
to
key
management
personnel.
The
grant
date
value
of
these
deferred
trust
units
was
$34.54
per
unit
granted.
On
June
25,
2012,
an
additional
11,291
deferred
trust
units
were
granted
to
trustees
who
elected
to
receive
their
2012
annual
retainer
in
the
form
of
deferred
trust
units
rather
than
cash.
The
grant
date
value
of
these
deferred
trust
units
was
$37.64
per
unit
granted.
Dundee
REIT
2013
Annual
Report
|
98
Note
18
AMOUNTS
PAYABLE
AND
ACCRUED
LIABILITIES
Trade
payables
Accrued
liabilities
and
other
payables
Accrued
interest
Rent
received
in
advance
Total
December
31,
December
31,
Note
27
27
$
$
2013
10,215
51,684
11,565
15,285
88,749
$
$
2012
6,571
51,905
10,858
7,562
76,896
Note
19
DISTRIBUTIONS
Dundee
REIT’s
Declaration
of
Trust
endeavours
to
maintain
monthly
distribution
payments
to
unitholders
payable
on
or
about
the
15th
day
of
the
following
month.
The
amount
of
the
annualized
distribution
to
be
paid
is
based
on
a
percentage
of
distributable
income.
Distributable
income
is
defined
in
the
Declaration
of
Trust
and
the
percentage
is
determined
by
the
trustees,
at
their
sole
discretion,
based
on
what
they
consider
appropriate
given
the
circumstances
of
the
Trust.
Distributions
may
be
adjusted
for
amounts
paid
in
prior
periods
if
the
actual
distributable
income
for
those
prior
periods
is
greater
or
lesser
than
the
estimates
used
for
those
prior
periods.
In
addition,
the
trustees
may
declare
distributions
out
of
the
income,
net
realized
capital
gains,
net
recapture
income
and
capital
of
the
Trust,
to
the
extent
such
amounts
have
not
already
been
paid,
allocated
or
distributed.
Distributable
income
is
not
a
measure
defined
by
IFRS
and
therefore
may
not
be
comparable
to
similar
measures
presented
by
other
real
estate
investment
trusts.
The
following
table
breaks
down
distribution
payments
for
the
years
ended
December
31:
Paid
in
cash
Paid
by
way
of
reinvestment
in
REIT
A
Units
Less:
Payable
at
December
31,
2012
(December
31,
2011)
Plus:
Payable
at
December
31,
2013
(December
31,
2012)
Total
REIT
Units,
Series
A
180,426
47,899
(18,053)
19,493
229,765
$
$
REIT
Units,
Series
B
$
18
-‐
(3)
-‐
15
$
$
$
2013
180,444
47,899
(18,056)
19,493
229,780
$
$
Total
2012
147,601
44,127
(12,192)
18,056
197,592
On
December
18,
2013,
the
Trust
announced
a
cash
distribution
of
$0.18666
per
REIT
A
Unit
for
the
month
of
December
2013.
The
amount
payable
at
December
31,
2013
was
satisfied
on
January
15,
2014
by
$14,277
in
cash
and
$5,228
in
connection
with
the
issuance
of
176,636
REIT
A
Units.
On
January
17,
2014,
the
Trust
announced
a
cash
distribution
of
$0.18666
per
REIT
A
Unit
for
the
month
of
January
2014.
The
January
2014
distribution
was
satisfied
on
February
15,
2014
by
$14,387
in
cash
and
$5,147
in
connection
with
the
issuance
of
176,438
REIT
A
Units.
On
February
21,
2014,
the
Trust
announced
a
cash
distribution
of
$0.18666
per
REIT
A
Unit
for
the
month
of
February
2014.
The
February
2014
distribution
will
be
payable
on
March
15,
2014
to
unitholders
of
record
at
February
28,
2014.
During
2013,
the
Trust
declared
monthly
distributions
of
$0.183
per
unit
up
to
March
31,
2013
and
$0.18666
per
unit
thereafter,
or
$2.229
per
unit
for
the
year
ended
December
31,
2013,
and
declared
monthly
distributions
of
$0.183
per
unit,
or
$2.196
per
unit
for
the
year
ended
December
31,
2012.
Dundee
REIT
2013
Annual
Report
|
99
Note
20
EQUITY
REIT
Units,
Series
A
REIT
Units,
Series
B
Accumulated
other
comprehensive
income
(loss)
Total
December
31,
2013
December
31,
2012
Number
of
Units
103,420,221
$
-‐
-‐
103,420,221
$
Amount
3,721,454
-‐
1,684
3,723,138
Number
of
Units
97,618,625
$
16,316
-‐
97,634,941
$
Amount
3,295,983
713
(297)
3,296,399
Dundee
REIT
Units
Dundee
REIT
is
authorized
to
issue
an
unlimited
number
of
REIT
Units
and
an
unlimited
number
of
Special
Trust
Units.
The
REIT
Units
are
divided
into
and
issuable
in
two
series:
REIT
Units,
Series
A
and
REIT
Units,
Series
B.
The
Special
Trust
Units
may
only
be
issued
to
holders
of
subsidiary
redeemable
units.
REIT
Units,
Series
A
and
REIT
Units,
Series
B
represent
an
undivided
beneficial
interest
in
Dundee
REIT
and
in
distributions
made
by
Dundee
REIT.
No
REIT
Unit,
Series
A
or
REIT
Unit,
Series
B
has
preference
or
priority
over
any
other.
Each
REIT
Unit,
Series
A
and
REIT
Unit,
Series
B
entitles
the
holder
to
one
vote
at
all
meetings
of
unitholders.
Dundee
REIT
2013
Annual
Report
|
100
REIT
Units,
Series
A
REIT
Units,
Series
B
Total
Number
of
Units
97,618,625
-‐
-‐
-‐
6,353,750
$
Amount
3,295,983
444,969
(210,272)
(19,493)
230,006
1,509,148
12,212
47,899
429
44,970
1,641
Accumulated
other
Number
of
comprehensive
Number
of
Units
16,316
-‐
-‐
-‐
-‐
$
Amount
713
42
(15)
-‐
-‐
income
(loss)
(297)
$
-‐
-‐
-‐
-‐
Units
97,634,941
-‐
-‐
-‐
6,353,750
$
Amount
3,296,399
445,011
(210,287)
(19,493)
230,006
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
1,509,148
12,212
47,899
429
44,970
1,641
-‐
-‐
16,316
740
(16,316)
(740)
(2,134,800)
-‐
-‐
103,420,221
$
(60,665)
(9,783)
-‐
3,721,454
-‐
-‐
-‐
-‐
$
-‐
-‐
-‐
-‐
$
-‐
-‐
1,981
1,684
(2,134,800)
-‐
-‐
103,420,221
(60,665)
(9,783)
1,981
3,723,138
$
REIT
Units,
Series
A
REIT
Units,
Series
B
Total
Accumulated
other
Number
of
Units
66,193,060
$
-‐
-‐
-‐
Amount
2,118,116
291,044
(179,503)
(18,053)
Number
of
Units
16,316
-‐
-‐
-‐
$
comprehensive
Number
of
Units
Amount
income
(loss)
(1,602)
-‐
-‐
-‐
66,209,376
$
-‐
-‐
-‐
Amount
2,117,234
291,073
(179,536)
(18,056)
16,947,550
604,812
12,580,347
434,777
1,200,028
15,296
44,127
578
25,290
657,054
876
17,498(1)
-‐
-‐
-‐
-‐
-‐
-‐
720
$
29
(33)
(3)
-‐
-‐
-‐
-‐
-‐
-‐
-‐
16,947,550
604,812
-‐
12,580,347
434,777
-‐
-‐
-‐
-‐
1,200,028
15,296
25,290
657,054
44,127
578
876
17,498
5,674
(23,963)
1,305
3,296,399
-‐
-‐
-‐
5,674
(23,963)
-‐
3,295,983
-‐
-‐
-‐
16,316
$
-‐
-‐
-‐
713
$
-‐
-‐
1,305
(297)
-‐
-‐
-‐
97,634,941
$
97,618,625
$
Equity,
January
1,
2013
Net
income
for
the
year
Distributions
paid
Distributions
payable
Public
offering
of
REIT
A
Units
Distribution
Reinvestment
Plan
Unit
Purchase
Plan
Deferred
units
exchanged
for
REIT
A
Units
REIT
B
Units
exchanged
for
REIT
A
Units
Cancellation
of
REIT
A
Units
under
normal
course
issuer
bid
Issue
costs
Other
comprehensive
income
Equity,
December
31,
2013
Equity,
January
1,
2012
Net
income
for
the
year
Distributions
paid
Distributions
payable
Public
offering
of
REIT
A
Units
REIT
A
Units
issued
for
Whiterock
transaction
Distribution
Reinvestment
Plan
Unit
Purchase
Plan
Deferred
units
exchanged
for
REIT
A
units
Conversion
of
debentures
Conversion
feature
on
debentures
Issue
costs
Other
comprehensive
income
Equity,
December
31,
2012
(1)
Amount
represents
carrying
value
of
convertible
debentures
on
conversion.
Dundee
REIT
2013
Annual
Report
|
101
Public
offering
of
REIT
A
Units
On
May
1,
2013,
the
Trust
completed
a
public
offering
of
6,353,750
REIT
A
Units,
including
an
over-‐allotment
option,
at
a
price
of
$36.20
per
unit,
for
gross
proceeds
of
$230,006.
Costs
related
to
the
offering
totalled
$9,700
and
were
charged
directly
to
unitholders’
equity.
On
March
2,
2012,
Dundee
REIT
took
up
approximately
40.9%
of
the
outstanding
Whiterock
units
under
its
offer
to
acquire
any
and
all
Whiterock
units
in
consideration
for
$16.25
or
0.4729
REIT
A
Units,
as
elected
by
Whiterock
unitholders.
Approximately
9,832,563,
or
27%,
of
the
Whiterock
units
were
tendered
to
the
Trust’s
offer
for
cash
totalling
$159,779
and
the
remaining
Whiterock
units
were
redeemed
by
Whiterock
in
consideration
for
0.4729
REIT
A
Units
for
each
Whiterock
unit.
In
total,
the
Trust
issued
12,580,347
REIT
A
Units
in
connection
with
the
transaction,
which
were
recorded
at
$34.56
per
unit,
representing
total
equity
consideration
valued
at
$434,777.
On
March
28,
2012,
the
Trust
completed
a
public
offering
of
6,555,000
REIT
A
Units,
including
an
over-‐allotment
option,
at
a
price
of
$35.35
per
unit
for
gross
proceeds
of
$231,719.
Costs
related
to
the
offering
totalled
$9,353
and
were
charged
directly
to
unitholders’
equity.
On
June
12,
2012,
the
Trust
completed
a
public
offering
of
10,392,550
REIT
A
Units,
including
the
over-‐allotment
option,
at
a
price
of
$35.90
per
unit
for
gross
proceeds
of
$373,093.
Costs
related
to
the
offering
totalled
$14,564
and
were
charged
directly
to
unitholders’
equity.
Distribution
Reinvestment
and
Unit
Purchase
Plan
The
Distribution
Reinvestment
and
Unit
Purchase
Plan
(“DRIP”)
allows
holders
of
REIT
A
Units
or
subsidiary
redeemable
units,
other
than
unitholders
who
are
resident
of
or
present
in
the
United
States,
to
elect
to
have
all
cash
distributions
from
Dundee
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
REIT
A
Units
on
the
Toronto
Stock
Exchange
(“TSX”)
preceding
the
relevant
distribution
date,
which
typically
is
on
or
about
the
15th
day
of
the
month
following
the
declaration.
For
the
year
ended
December
31,
2013,
1,509,148
REIT
A
Units
were
issued
under
the
DRIP
for
$47,899
(December
31,
2012
–
1,200,028
REIT
A
Units
for
$44,127).
The
Unit
Purchase
Plan
feature
of
the
DRIP
facilitates
the
purchase
of
additional
REIT
A
Units
by
existing
unitholders.
Participation
in
the
Unit
Purchase
Plan
is
optional
and
subject
to
certain
limitations
on
the
maximum
number
of
additional
REIT
A
Units
that
may
be
acquired.
The
price
per
unit
is
calculated
in
the
same
manner
as
the
DRIP.
No
commission,
service
charges
or
brokerage
fees
are
payable
by
participants
in
connection
with
either
the
reinvestment
or
purchase
features
of
the
DRIP.
For
the
year
ended
December
31,
2013,
12,212
REIT
A
Units
were
issued
under
the
Unit
Purchase
Plan
for
$429
(December
31,
2012
–
15,296
REIT
A
Units
for
$578).
Debenture
conversions
For
the
year
ended
December
31,
2013,
there
were
no
debenture
conversions.
For
the
year
ended
December
31,
2012,
the
following
REIT
A
Units
were
issued
on
the
conversion
of
principal
amounts
of
the
convertible
debentures.
6.5%
Debentures
5.7%
Debentures
6.0%
Debentures
6.0%
Series
F
Debentures
7.0%
Series
G
Debentures
Total
Year
ended
December
31,
2012
REIT
A
Units
issued
Principal
amount
$
98,520
213,311
4,347
232,332
108,544
2,463
6,400
180
6,495
1,994
657,054
$
17,532
Dundee
REIT
2013
Annual
Report
|
102
Normal
course
issuer
bid
The
Trust
renewed
its
normal
course
issuer
bid,
which
commenced
on
May
14,
2013
and
will
remain
in
effect
until
the
earlier
of
May
13,
2014
or
the
date
on
which
the
Trust
has
purchased
the
maximum
number
of
REIT
A
Units
permitted
under
the
bid.
Under
the
bid,
the
Trust
has
the
ability
to
purchase
for
cancellation
up
to
a
maximum
of
8,849,219
REIT
A
Units
(representing
10%
of
the
Trust’s
public
float
of
88,492,185
REIT
A
Units
at
the
time
of
entering
the
bid
through
the
facilities
of
the
TSX).
At
December
31,
2013,
2,134,800
REIT
A
Units
had
been
purchased
and
subsequently
cancelled
under
the
bid
for
a
total
cost
of
$60,665.
Subsequent
to
year-‐end,
the
Trust
purchased
an
additional
11,000
REIT
A
Units
under
the
normal
course
issuer
bid
for
cancellation
for
a
total
cost
of
$298.
Short
form
base
shelf
prospectus
On
November
26,
2012,
the
Trust
issued
a
short
form
base
shelf
prospectus,
which
is
valid
for
a
25-‐month
period,
during
which
time
the
Trust
may
offer
and
issue,
from
time
to
time,
units
and
debt
securities
convertible
into
or
exchangeable
for
units
of
the
Trust,
or
any
combination
thereof,
with
an
aggregate
offering
price
of
up
to
$2,000,000.
As
at
December
31,
2013,
no
units
and
$300,000
of
unsecured
debentures
have
been
issued
under
the
short
form
base
shelf
prospectus.
On
January
21,
2014,
the
Trust
completed
the
issuance
of
$150,000
aggregate
principal
amount
of
Series
C
senior
unsecured
debentures.
Refer
to
Note
34,
“Subsequent
events”,
for
further
discussion.
Note
21
DISCONTINUED
OPERATIONS
AND
ASSETS
AND
RELATED
LIABILITIES
HELD
FOR
SALE
Discontinued
operations
–
industrial
properties
On
October
4,
2012,
the
Trust
completed
the
sale
of
its
entire
Industrial
segment
(77
industrial
properties
in
total)
to
Dundee
Industrial
for
a
total
sale
price
of
approximately
$575,469
(including
working
capital
adjustments).
The
sale
price
of
the
77
industrial
properties
was
satisfied
by
cash
consideration
of
approximately
$136,267,
the
issuance
of
$160,346
of
limited
partnership
units
of
Dundee
Industrial
Limited
Partnership
(a
subsidiary
of
Dundee
Industrial),
which
are
exchangeable
for
units
of
Dundee
Industrial,
promissory
notes
receivable
from
Dundee
Industrial
of
$42,000,
offset
by
an
amount
due
to
Dundee
Industrial
of
$457
and
the
assumption
of
mortgages.
The
Trust
is
now
discharged
from
all
rights
and
obligations
relating
to
the
77
industrial
properties.
As
a
result
of
the
sale,
the
Trust
recognized
a
net
gain
of
$1,147
in
income
from
discontinued
operations.
The
Trust
currently
owns
a
22.9%
interest
in
Dundee
Industrial.
The
revenues
and
expenses
are
as
follows:
Investment
properties
revenue
Investment
properties
operating
expenses
Net
rental
income
Other
income
and
expenses
General
and
administrative
Fair
value
adjustments
to
investment
properties
Net
gain
on
sale
of
investment
properties
Acquisition
related
costs
Interest
on
debt
Depreciation
and
amortization
Interest
and
fee
income
Income
from
discontinued
operations
Years
ended
December
31,
$
2013
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
$
2012
37,628
(9,517)
28,111
(970)
5,187
1,147
(2)
(8,448)
(127)
1
24,899
$
$
Dundee
REIT
2013
Annual
Report
|
103
Assets
and
related
liabilities
held
for
sale
As
at
December
31,
2013,
the
Trust
reclassified
certain
investment
in
joint
ventures
totalling
$15,921
as
assets
held
for
sale.
The
Trust’s
proportionate
share
of
these
joint
ventures’
assets
and
liabilities
were
$21,619
and
$5,698,
respectively.
At
December
31,
2013,
management
had
committed
to
a
plan
of
sale
of
the
underlying
properties,
and
therefore
the
investment
in
these
joint
ventures
have
been
reclassified
as
non-‐current
assets
held
for
sale.
As
at
December
31,
2012,
the
Trust
reclassified
three
retail
buildings
as
held
for
sale.
At
December
31,
2012,
management
had
committed
to
a
plan
of
sale,
and
therefore
the
properties
have
been
reclassified
as
non-‐current
assets
held
for
sale.
Investment
properties
Investment
in
joint
ventures
Other
non-‐current
assets
Prepaid
expenses
Assets
held
for
sale
Debt
Deposits
Accounts
payable
and
accrued
liabilities
Liabilities
related
to
assets
held
for
sale
Net
assets
Investment
properties
held
for
sale
Balance
as
at
January
1
Add
(deduct):
Investment
properties
reclassified
as
held
for
sale
Investment
properties
disposed
of
during
the
year
Balance
as
at
December
31
December
31,
December
31,
$
2013
-‐
15,921
-‐
-‐
2012
$
20,295
-‐
249
3
15,921
20,547
-‐
-‐
-‐
-‐
9,200
17
51
9,268
$
15,921
$
11,279
Years
ended
December
31,
2013
$
20,295
$
2012
7,700
-‐
(20,295)
111,952
(99,357)
$
-‐
$
20,295
For
the
year
ended
December
31,
2013,
the
following
dispositions
were
completed:
Property
Year
ended
December
31,
2013
625
University
Park
Drive,
Regina
2640,
2510–2550
Quance
Street,
Regina
type
office
office
Total
(1)
Gross
proceeds
before
transaction
costs.
Disposed
GLA
(sq.
ft.)
17,145
69,554
Gross
proceeds(1)
5,182
16,300
$
$
Mortgages/
term
loan
discharged
-‐
8,767
$
86,699
$
21,482
$
8,767
$
Loss
on
sale
(68)(2)
(215)(2)
(283)
Date
disposed
January
31,
2013
January
31,
2013
(2)
Loss
on
sale
recognized
is
related
to
the
write-‐off
of
financing
costs
and
fair
value
adjustments
associated
with
the
debt
discharged,
transaction
costs
and
the
write-‐off
of
goodwill
associated
with
the
cash-‐generating
unit.
Dundee
REIT
2013
Annual
Report
|
104
For
the
year
ended
December
31,
2012,
the
following
dispositions
were
completed:
Year
ended
December
31,
2012
ARAM
Building,
Calgary
West
Chambers,
Edmonton
4250
Albert
Street,
Regina
885
Don
Mills
Road,
Toronto
12804
-‐
137th
Avenue,
Edmonton
Bisma
Centre,
Calgary
998
Parkland
Drive,
Halifax
193
Malpeque
Road,
Charlottetown
655
University
Avenue,
Charlottetown
7102–7220
Barlow
Trail
SE,
Calgary
Total
Property
type
office
office
retail
office
retail
office
retail
retail
retail
industrial
Disposed
GLA
(sq.
ft.)
36,428
92,560
41,238
59,449
54,514
27,496
33,857
41,573
26,043
234,676
647,834
$
$
Gross
proceeds(1)
7,700
24,200
9,600
8,975
18,900
9,200
7,170
5,100
3,800
10,150
104,795
Mortgages/
term
loan
Net
gain
(loss)
$
$
discharged
-‐
6,786
5,126
4,547
12,633
-‐
4,624
-‐
2,357
-‐
$
36,073
$
on
sale
(314)
(2)
(849)
(2)
(11)
(2)
1,770
(653)
(2)
2,054
67
(43)
(2)
25
Date
disposed
February
2,
2012
August
15,
2012
August
15,
2012
August
30,
2012
September
14,
2012
September
19,
2012
October
4,
2012
October
4,
2012
October
4,
2012
(516)
(2)
November
30,
2012
1,530
(1)
Gross
proceeds
before
transaction
costs.
(2)
Loss
on
sale
recognized
is
related
to
the
write-‐off
of
financing
costs
and
fair
value
adjustments
associated
with
the
debt
discharged,
transaction
costs
and
the
write-‐off
of
goodwill
associated
with
the
cash-‐generating
unit.
Note
22
INTEREST
Interest
on
debt
Interest
on
debt
incurred
and
charged
to
comprehensive
income
is
recorded
as
follows:
Interest
expense
incurred,
at
contractual
and
hedged
rate
of
debt
Amortization
of
financing
costs
Amortization
of
fair
value
adjustments
on
assumed
debt
Interest
capitalized
to
investment
properties
Interest
expense
Add
(deduct):
Amortization
of
financing
costs
Amortization
of
fair
value
adjustments
on
assumed
debt
Cash
interest
paid
for
discontinued
operations
Change
in
accrued
interest
Interest
capitalized
to
investment
properties
Cash
interest
paid
Years
ended
December
31,
2013
2012
$
133,768
$
3,034
(6,633)
-‐
130,169
(3,034)
6,633
-‐
(580)
-‐
$
133,188
$
129,310
3,280
(7,396)
(76)
125,118
(3,280)
7,396
8,844
(2,998)
76
135,156
Certain
debts
assumed
in
connection
with
acquisitions
have
been
adjusted
to
fair
value
using
the
estimated
market
interest
rate
at
the
time
of
the
acquisition
(“fair
value
adjustment”).
This
fair
value
adjustment
is
amortized
to
interest
expense
over
the
expected
life
of
the
debt
using
the
effective
interest
rate
method.
Interest
capitalized
includes
interest
on
specified
and
general
debt
attributed
to
a
property
considered
to
be
under
redevelopment.
Non-‐cash
adjustments
to
interest
expense
are
recorded
as
a
change
in
non-‐cash
working
capital
in
the
consolidated
statements
of
cash
flows.
Dundee
REIT
2013
Annual
Report
|
105
Interest
on
subsidiary
redeemable
units
Interest
payments
charged
to
comprehensive
income
are
recorded
as
follows:
Paid
in
cash
Paid
by
way
of
reinvestment
in
subsidiary
redeemable
units
Less:
Interest
payable
at
December
31,
2012
(December
31,
2011)
Plus:
Interest
payable
at
December
31,
2013
(December
31,
2012)
Total
Years
ended
December
31,
2013
7,524
$
361
2012
6,926
826
(648)
(642)
660
7,897
$
648
7,758
$
$
Note
23
DEBT
SETTLEMENT
AND
OTHER
COSTS,
NET
Debt
settlement
costs
include
mortgage
break
fees,
costs
incurred
on
redemption
of
convertible
debentures
and
fair
value
adjustments
written
off
on
debt
extinguishment.
Other
costs
consist
of
the
write-‐off
of
the
external
management
contracts
associated
with
the
Trust’s
acquisition
of
its
co-‐
owner’s
interest
in
the
Trans
America
Group
properties
on
October
4,
2012,
which
resulted
in
the
termination
of
the
external
management
contracts
for
these
properties.
Mortgage
break
fees
Debt
settlement
costs
incurred
on
redemption
of
convertible
debentures
Fair
value
adjustments
written
off
on
debt
extinguishment
Write-‐off
of
external
management
contracts
Total
Note
24
FAIR
VALUE
ADJUSTMENTS
TO
FINANCIAL
INSTRUMENTS
Remeasurement
of
conversion
feature
on
convertible
debentures
Remeasurement
of
carrying
value
of
subsidiary
redeemable
units
Remeasurement
of
deferred
trust
units
Years
ended
December
31,
2013
-‐
$
-‐
241
-‐
241
$
2012
5,626
2,713
(5,796)
1,255
3,798
$
$
Note
15
16
17
Years
ended
December
31,
2013
2012
$
1,714
$
2,718
30,461
2,665
34,840
$
(16,807)
(2,499)
(16,588)
$
Dundee
REIT
2013
Annual
Report
|
106
Note
25
INCOME
TAXES
The
Trust
is
subject
to
taxation
in
the
U.S.
on
the
taxable
income
earned
by
its
investment
properties
located
in
the
U.S.
at
a
rate
of
approximately
38.46%
(December
31,
2012
–
38.46%).
A
deferred
tax
asset
arises
from
the
loss
carry-‐forwards
of
the
U.S.
subsidiaries.
A
deferred
tax
liability
arises
from
the
temporary
differences
between
the
carrying
value
and
the
tax
basis
of
the
net
assets
of
the
U.S.
subsidiaries.
The
tax
effects
of
temporary
differences
arise
from
investment
properties.
The
loss
carry-‐
forwards
and
the
tax
effects
of
temporary
differences
that
give
rise
to
the
recognition
of
deferred
tax
assets
and
liabilities
are
presented
below:
Deferred
tax
assets
Loss
carry-‐forwards
Deferred
tax
liabilities
Investment
properties
Deferred
tax
liabilities,
net
December
31,
December
31,
2013
1,484
$
2012
389
(6,651)
(5,167)
$
(4,881)
(4,492)
$
$
A
reconciliation
between
the
expected
income
taxes
based
upon
the
2013
and
2012
statutory
rates
and
the
income
tax
expense
recognized
during
the
years
ended
December
31,
2013
and
December
31,
2012
are
as
follows:
Income
taxes
computed
at
the
statutory
rate
of
nil
that
is
applicable
to
the
Trust
Deferred
income
taxes
December
31,
December
31,
$
$
2013
-‐
344
344
$
$
2012
-‐
1,849
1,849
Note
26
SEGMENTED
INFORMATION
The
Trust
completed
the
sale
of
77
industrial
properties
on
October
4,
2012.
As
a
result,
the
Trust
no
longer
has
an
industrial
segment.
For
the
year
ended
December
31,
2012,
the
Trust’s
investment
properties
were
segmented
into
office
and
industrial
components.
Investment
properties
classified
as
held
for
sale
were
included
in
“Other”
for
segment
disclosure.
The
Trust
did
not
allocate
interest
expense
to
these
segments
since
leverage
is
viewed
as
a
corporate
function.
The
decision
as
to
where
to
incur
the
debt
is
largely
based
on
minimizing
the
cost
of
debt
and
is
not
specifically
related
to
the
segments.
Similarly,
general
and
administrative
expenses,
interest
and
fee
income,
and
fair
value
adjustments
to
financial
instruments
were
not
allocated
to
the
segment
expenses.
For
the
year
ended
December
31,
2012,
the
segments
include
the
Trust’s
proportionate
share
of
its
joint
ventures.
The
column
entitled
“Reconciliation”
adjusts
the
segmented
results
to
account
for
these
joint
ventures
using
the
equity
method
of
accounting
as
applied
in
these
consolidated
financial
statements.
Dundee
REIT
2013
Annual
Report
|
107
Year
ended
December
31,
2012
Operations
Investment
properties
revenue
Investment
properties
operating
Office
Industrial
Segment
total
Other(1)
Subtotal
Reconciliation(2)
Total
$
684,808
$
37,628
$
722,436
$
1,756
$
724,192
$
(116,396)
$
607,796
expenses
(294,849
)
(9,517)
(304,366)
(575)
(304,941)
45,692
(259,249)
Net
rental
income
from
continuing
operations
Share
of
net
loss
from
investment
in
joint
ventures
Fair
value
adjustments
to
investment
properties
Segment
income
Other
income
(expenses)
General
and
administrative
Share
of
net
income
and
dilution
gain
from
investment
in
Dundee
Industrial
Net
gain
on
sale
of
investment
properties
Acquisition
related
costs
Interest:
Debt
Subsidiary
redeemable
units
Debt
settlement
and
other
costs,
net
Depreciation
and
amortization
Interest
and
fee
income
Fair
value
adjustments
to
financial
instruments
Income
before
income
taxes
and
discontinued
operations
Deferred
income
taxes
Income
from
continuing
operations
Income
from
discontinued
operations
Net
income
Capital
expenditures
Year
ended
December
31,
2012
Investment
in
building
improvements
Investment
in
lease
incentives
and
initial
direct
leasing
costs
Investment
in
development
projects
Acquisition
of
investment
properties
Acquisition
of
Whiterock
Total
capital
expenditures
389,959
28,111
418,070
1,181
419,251
(70,704)
348,547
-‐
-‐
-‐
-‐
-‐
(254)
(254)
82,587
472,546
5,187
33,298
87,774
505,844
(979)
202
86,795
506,046
18,777
(52,181)
105,572
453,865
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
(22,184)
(22,184)
1,052
(21,132)
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
-‐
1,568
2,677
(17,551)
1,568
2,677
(17,551)
(147,345)
(7,758)
(3,798)
(2,173)
5,214
(147,345)
(7,758)
(3,798)
(2,173)
5,214
-‐
(1,147)
2
22,227
-‐
-‐
131
(169)
1,568
1,530
(17,549)
(125,118)
(7,758)
(3,798)
(2,042)
5,045
(21,774)
(21,774)
5,186
(16,588)
472,546
-‐
472,546
-‐
$
472,546
$
-‐
-‐
-‐
33,298
33,298
$
472,546
-‐
472,546
33,298
(204,523)
(1,849)
(206,372)
(8,399)
505,844
$
(214,771)
$
268,023
(1,849)
266,174
24,899
291,073
$
-‐
-‐
-‐
-‐
-‐
$
268,023
(1,849)
266,174
24,899
291,073
Office
(20,203)
$
$
Industrial
(101)
$
Segment
total
(20,304)
$
Other(1)
-‐
$
Subtotal
Reconciliation(3)
$
(20,304)
105
$
Total
(20,199)
(23,979)
(1,945)
(235,019)
(129,408)
$
(410,554)
$
(956)
-‐
-‐
(17,726)
(18,783)
$
(429,337)
$
(24,935)
(1,945)
(235,019)
(147,134)
(95)
-‐
-‐
-‐
(25,030)
(1,945)
(235,019)
(147,134)
(95)
$
(429,432)
1,453
-‐
-‐
-‐
(23,577)
(1,945)
(235,019)
(147,134)
1,558
$
(427,874)
$
(1)
Includes
corporate
amounts
not
specifically
related
to
the
segments
and
amounts
for
assets
held
for
sale.
(2)
Includes
the
Trust's
proportionate
share
of
its
joint
ventures,
accounted
for
using
the
equity
method
of
accounting
and
discontinued
operations
–
industrial
properties.
(3)
Includes
the
Trust’s
proportionate
share
of
its
joint
ventures,
accounted
for
using
the
equity
method
of
accounting.
Dundee
REIT
2013
Annual
Report
|
108
Note
27
RELATED
PARTY
TRANSACTIONS
AND
ARRANGEMENTS
From
time
to
time,
Dundee
REIT
and
its
subsidiaries
enter
into
transactions
with
related
parties
that
are
conducted
under
normal
commercial
terms.
Dundee
REIT,
Dundee
Management
Limited
Partnership
(a
wholly
owned
subsidiary
of
DPLP)
and
DREAM
Asset
Management
Corp.
(“DAM”),
formerly
known
as
Dundee
Realty
Corporation,
a
subsidiary
of
DREAM
Unlimited
Corp.,
are
parties
to
an
administrative
services
and
cost
sharing
agreement
(the
“Services
Agreement”).
Effective
August
24,
2007,
Dundee
REIT
also
has
an
asset
management
agreement
(the
“Asset
Management
Agreement”)
with
DAM
pursuant
to
which
DAM
provides
certain
asset
management
services
to
Dundee
REIT
and
its
subsidiaries.
Asset
Management
Agreement
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
0.25%
of
the
gross
asset
value
of
properties,
defined
as
the
fair
value
of
the
properties
at
August
23,
2007
(the
date
of
the
sale
of
our
portfolio
of
properties
in
Eastern
Canada)
plus
the
purchase
price
of
properties
acquired
subsequent
to
that
date,
adjusted
for
any
properties
sold;
incentive
fee
equal
to
15%
of
Dundee
REIT’s
adjusted
funds
from
operations
per
unit
in
excess
of
$2.65
per
unit;
•
• capital
expenditures
fee
equal
to
5%
of
all
hard
construction
costs
incurred
on
each
capital
project
with
costs
in
excess
of
$1,000,
excluding
work
done
on
behalf
of
tenants
or
any
maintenance
capital
expenditures;
• acquisition
fee,
calculated
over
a
fiscal
year
based
on
the
anniversary
date
of
the
Asset
Management
Agreement,
equal
to:
(i)
1.0%
of
the
purchase
price
of
a
property
on
the
first
$100,000
of
properties
acquired;
(ii)
0.75%
of
the
purchase
price
of
a
property
on
the
next
$100,000
of
properties
acquired;
and
(iii)
0.50%
of
the
purchase
price
of
a
property
acquired
in
excess
of
$200,000
of
properties
acquired;
and
financing
fee
equal
to
the
lesser
of
actual
expenses
incurred
by
DAM
in
supplying
services
relating
to
financing
transactions
and
0.25%
of
the
debt
and
equity
of
all
financing
transactions
completed
on
behalf
of
Dundee
REIT.
•
Pursuant
to
the
Asset
Management
Agreement,
the
Trust
paid
fees
to
DAM
as
follows:
Fees
paid
Fees
paid
by
Dundee
REIT
under
the
Asset
Management
Agreement:
Base
annual
management
fee
(included
in
general
and
administrative
expenses)
Acquisition
fee
(included
in
acquisition
related
costs/investment
properties)
Expense
reimbursements
related
to
financing
arrangements
(included
in
debt/unitholders’
equity)
Capital
expenditures
fee
(included
in
properties
under
development)
Total
fees
paid
under
the
Asset
Management
Agreement
$
$
16,568
3,201
825
-‐
20,594
$
$
14,946
14,199
694
69
29,908
Years
ended
December
31,
2013
2012
Dundee
REIT
2013
Annual
Report
|
109
Shared
Services
and
Cost
Sharing
Agreement
The
existing
Asset
Management
Agreement
provides
the
Trust
and
DAM,
from
time
to
time,
the
opportunity
to
agree
on
additional
services
to
be
provided
to
the
Trust
for
which
DAM
is
to
be
reimbursed
for
its
costs.
To
formalize
and
expand
this
arrangement,
the
Trust
entered
into
a
Shared
Services
and
Cost
Sharing
Agreement
with
DAM
on
December
1,
2013.
The
agreement
is
for
a
one-‐year
term
and
will
be
automatically
renewed
for
further
one-‐year
terms
unless
and
until
the
agreement
is
terminated
in
accordance
with
its
terms
or
by
mutual
agreement
of
the
parties.
Pursuant
to
the
agreement,
DAM
will
be
providing
additional
administrative
and
support
services
in
order
to
expand
and
improve
DAM’s
service
capability
in
connection
with
the
provision
of
its
asset
management
services.
DAM
will
receive
an
annual
fee
sufficient
to
reimburse
it
for
all
the
expenses
incurred
in
providing
these
additional
administrative
and
support
services.
Additionally,
the
Trust
will
also
reimburse
DAM
in
each
calendar
year
for
its
share
of
costs
incurred
in
connection
with
certain
business
transformation
services
provided
by
DAM.
During
the
year
ended
December
31,
2013,
the
Trust
paid
$nil
to
DAM
pursuant
to
the
Shared
Services
and
Cost
Sharing
Agreement.
There
are
no
amounts
due
to
DAM
as
at
December
31,
2013
pertaining
to
this
agreement.
The
Trust’s
future
commitment
under
the
Shared
Services
and
Cost
Sharing
Agreement
over
the
next
seven
years
is
$6,590.
Services
Agreement
Pursuant
to
the
Services
Agreement,
the
Trust
received
from
or
paid
to
DAM
costs
incurred
on
behalf
of
the
other
party.
For
the
year
ended
December
31,
2013,
the
Trust
processed
on
behalf
of
DAM
certain
costs
and
shared
services
totalling
$8,525
(year
ended
December
31,
2012
–
$3,951).
The
Trust
also
processed
on
behalf
of
DAM,
at
cost,
operating
and
administration
costs
of
regional
offices
of
$14,412
(year
ended
December
31,
2012
–
$12,723).
For
the
year
ended
December
31,
2013,
DAM
processed
certain
costs
on
behalf
of
the
Trust
of
$1,429
(year
ended
December
31,
2012
–
$1,403).
Amounts
due
to
and
from
related
parties
Included
in
amounts
receivable
at
December
31,
2013
is
$2,815
(December
31,
2012
–
$1,532)
related
to
the
Services
Agreement
and
$2,386
(December
31,
2012
–
$3,267)
related
to
parking
revenue
DAM
received
on
behalf
of
the
Trust
and
other
cost
reimbursements.
Amounts
payable
and
accrued
liabilities
at
December
31,
2013
include
$3,332
(December
31,
2012
–
$4,129)
related
to
the
Asset
Management
Agreement.
Included
in
amounts
receivable
is
a
distribution
receivable
from
Dundee
Industrial
of
$950
(December
31,
2012
–
$938)
related
to
the
cash
distribution
of
$0.05833
per
Dundee
Industrial
REIT
Unit,
for
the
month
of
December
2013.
Furthermore,
included
in
amounts
receivable
at
December
31,
2013
is
$917
(December
31,
2012
–
$4,207)
related
to
ongoing
shared
service
cost
recoveries
from
Dundee
Industrial.
Amounts
payable
at
December
31,
2013
include
$75
(December
31,
2012
–
$4,248)
related
to
the
industrial
properties.
In
2012,
the
Trust
entered
into
promissory
notes
receivable
with
a
subsidiary
of
Dundee
Industrial
totalling
$42,000
(see
Note
13).
The
promissory
notes
receivable
were
repaid
in
January
2013.
Other
reimbursements
from
related
parties
For
the
year
ended
December
31,
2013,
the
Trust
processed
on
behalf
of
Dundee
Industrial
certain
costs
and
shared
services
of
$5,130
(year
ended
December
31,
2012
–
$572).
Compensation
of
key
management
personnel
Compensation
of
key
management
personnel
for
the
years
ended
December
31
is
as
follows:
Years
ended
December
31,
Unit-‐based
awards(1)
(1)
Deferred
trust
units
granted
vest
over
a
five-‐year
period
with
one-‐fifth
of
the
deferred
trust
units
vesting
each
year.
Amounts
are
determined
based
on
the
$
$
2013
1,201
2012
998
grant
date
fair
value
of
deferred
trust
units
multiplied
by
the
number
of
deferred
trust
units
granted
in
the
year.
Dundee
REIT
2013
Annual
Report
|
110
Note
28
SUPPLEMENTARY
CASH
FLOW
INFORMATION
The
components
of
the
changes
in
non-‐cash
working
capital
under
operating
activities
include:
Continuing
operations
Decrease
(increase)
in
amounts
receivable
Decrease
in
prepaid
expenses
and
other
assets
Decrease
(increase)
in
other
non-‐current
assets
Decrease
in
amounts
payable
and
accrued
liabilities
Increase
in
tenant
security
deposits
Change
in
non-‐cash
working
capital
The
components
of
amortization
and
depreciation
under
operating
activities
include:
Amortization
of
lease
incentives
Amortization
of
external
management
contracts
Amortization
of
financing
costs
Amortization
of
fair
value
adjustments
on
assumed
debt
Depreciation
on
property
and
equipment
Total
Note
9
12
22
22
The
components
of
changes
in
other
adjustments
to
operating
activities
include:
Reinvestment
in
subsidiary
redeemable
units
Mortgage
break
fees
Debt
settlement
costs
incurred
on
redemption
of
convertible
debentures
Write-‐off
of
external
management
contracts
Fair
value
adjustments
written
off
on
debt
extinguishment
Other
adjustments
to
operating
activities
Note
16
23
23
23
23
Discontinued
operations
Cash
flow
generated
from
(utilized
in):
Operating
activities
Investing
activities
Financing
activities
Decrease
in
cash
and
cash
equivalents
Years
ended
December
31,
2013
2,642
264
47
(12,896)
877
(9,066)
$
$
2012
(12,269)
2,700
(4,498)
(31,509)
1,502
(44,074)
Years
ended
December
31,
2013
6,471
1,338
3,034
(6,633)
1,189
5,399
$
$
2012
3,976
1,321
3,280
(7,396)
848
2,029
Years
ended
December
31,
2013
361
-‐
-‐
-‐
(241)
120
$
$
2012
826
5,626
2,713
1,255
(5,796)
4,624
Years
ended
December
31,
2013
2012
-‐
-‐
-‐
-‐
$
$
9,591
78,493
(88,159)
(75)
$
$
$
$
$
$
$
$
Dundee
REIT
2013
Annual
Report
|
111
The
following
amounts
were
paid
on
account
of
interest:
Interest
Debt
Subsidiary
redeemable
units
Note
Years
ended
December
31,
2013
2012
$
22
22
133,188
7,524
$
135,156
6,926
There
were
no
cash
income
taxes
paid
during
the
years
ended
December
31,
2013
and
2012.
Note
29
SUPPLEMENTAL
OTHER
COMPREHENSIVE
INCOME
(LOSS)
INFORMATION
2013
Net
change
during
the
Closing
balance
year
December
31
Opening
balance
January
1
Opening
balance
January
1
Years
ended
December
31,
2012
Net
change
during
the
Closing
balance
year
December
31
$
(375)
$
78
$
39
1,942
(336)
2,020
$
(1,602)
$
-‐
$
1,227
78
(375)
78
Unrealized
gain
(loss)
on
interest
rate
swap
agreements
Unrealized
foreign
currency
translation
gain
Accumulated
other
comprehensive
income
(loss)
$
(297)
$
1,981
$
1,684
$
(1,602)
$
1,305
$
(297)
Note
30
COMMITMENTS
AND
CONTINGENCIES
Dundee
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
Dundee
REIT.
At
December
31,
2013,
Dundee
REIT’s
future
minimum
commitments
under
operating
and
finance
leases
are
as
follows:
No
longer
than
1
year
1–5
years
Longer
than
5
years
Total
Operating
Finance
lease
payments
1,118
1,870
8,411
11,399
$
$
lease
payments
28
111
2,238
2,377
$
$
During
the
year
ended
December
31,
2013,
the
Trust
paid
$1,122
(December
31,
2012
–
$1,472)
in
minimum
lease
payments,
which
has
been
included
in
comprehensive
income
for
the
period.
At
December
31,
2013
and
December
31,
2012,
the
Trust
had
no
contribution
commitments
with
respect
to
its
investment
in
joint
ventures.
Dundee
REIT
2013
Annual
Report
|
112
The
Trust’s
share
of
contingent
liabilities
arising
from
its
investments
in
joint
ventures
is
as
follows:
Contingent
liabilities
for
the
obligation
of
the
other
owners
of
investments
in
joint
ventures
December
31,
December
31,
2013
2012
$
305,850
$
353,468
Purchase
and
other
obligations
The
Trust
has
entered
into
lease
agreements
that
may
require
tenant
improvement
costs
of
approximately
$15,328.
The
Trust
has
entered
into
fixed
price
contracts
to
purchase
electricity
as
follows:
Number
of
properties
Expiry
date
2014
2015
2016
Total
Minimum
payments
due
Electricity
Edmonton,
Parkland
County
and
Strathcona
County
Calgary,
Edmonton
and
Strathcona
County
Total
9
May
31,
2015
$
755
$
327
$
-‐
$
1,082
51
December
31,
2016
5,276
6,031
5,186
5,513
2,873
2,873
13,335
14,417
Note
31
CAPITAL
MANAGEMENT
The
primary
objectives
of
the
Trust’s
capital
management
are
to
ensure
it
remains
within
its
quantitative
banking
covenants
and
to
improve
its
credit
rating.
The
Trust
was
assigned
for
the
first
time
a
credit
rating
of
BBB
(low)
with
a
stable
trend
as
part
of
the
Series
A
and
Series
B
Debentures
offering
during
2013.
The
Trust’s
capital
consists
of
debt,
including
mortgages,
convertible
debentures,
debentures,
subsidiary
redeemable
units
and
demand
revolving
credit
facilities,
and
unitholders’
equity.
The
Trust’s
objectives
in
managing
capital
are
to
ensure
adequate
operating
funds
are
available
to
maintain
consistent
and
sustainable
unitholder
distributions,
to
fund
leasing
costs
and
capital
expenditure
requirements,
and
to
provide
for
resources
needed
to
acquire
new
properties.
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
ratio
and
net
debt-‐to-‐gross
carrying
value.
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.
Various
mortgages
have
debt
covenant
requirements
that
are
monitored
by
the
Trust
to
ensure
there
are
no
defaults.
These
covenants
include
loan-‐to-‐value
ratios,
cash
flow
coverage
ratios,
interest
coverage
ratios
and
debt
service
coverage
ratios.
These
covenants
are
measured
at
the
subsidiary
limited
partnership
level,
and
all
have
been
complied
with.
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
$2.24
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
percent
of
distributable
income
and
distributable
income
per
unit.
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.
Dundee
REIT
2013
Annual
Report
|
113
Note
32
FINANCIAL
INSTRUMENTS
Risk
management
IFRS
7,
“Presentation
of
Financial
Statements”
(“IFRS
7”),
places
emphasis
on
disclosures
about
the
nature
and
extent
of
risks
arising
from
financial
instruments
and
how
the
Trust
manages
those
risks,
including
market,
credit
and
liquidity
risks.
Market
risk
is
the
risk
the
fair
value
or
future
cash
flows
of
a
financial
instrument
will
fluctuate
because
of
changes
in
market
prices.
Market
risk
consists
of
interest
rate
risk,
currency
risk
and
other
market
price
risk.
The
Trust
has
some
exposure
to
interest
rate
risk
primarily
as
a
result
of
its
variable
rate
debt.
In
addition,
there
is
interest
rate
risk
associated
with
the
Trust’s
fixed
rate
debt
due
to
the
expected
requirement
to
refinance
such
debts
in
the
year
of
maturity.
The
Trust
is
exposed
to
the
variability
in
market
interest
rates
on
maturing
debt
to
be
renewed.
Variable
rate
debt
at
December
31,
2013
was
10.1%
of
the
Trust’s
total
debt
(December
31,
2012
–
4.2%).
Included
in
fixed
rate
debt
is
the
term
loan
facility
of
$183,453,
which
has
a
variable
rate
of
interest
at
bankers’
acceptances
plus
1.85%
payable
monthly.
The
Trust
has
entered
into
two
interest
rate
swap
agreements,
one
for
three
years
at
3.03%
for
a
notional
value
of
$53,670
and
one
for
five
years
at
3.52%
for
a
notional
value
of
$129,783,
fixing
the
rate
of
interest
at
3.38%.
In
order
to
manage
exposure
to
interest
rate
risk,
the
Trust
endeavours
to
maintain
an
appropriate
mix
of
fixed
and
variable
rate
debt,
manage
maturities
of
fixed
rate
debt
and
match
the
nature
of
the
debt
with
the
cash
flow
characteristics
of
the
underlying
asset.
The
following
interest
rate
sensitivity
table
outlines
the
potential
impact
of
a
1%
change
in
the
interest
rate
on
variable
rate
financial
assets
and
liabilities
for
the
prospective
12-‐month
period.
A
1%
change
is
considered
a
reasonable
level
of
fluctuation
on
variable
rate
financial
assets
and
liabilities.
Amount
Income
-‐1%
Equity
Income
Interest
rate
risk
1%
Equity
$
31,017
$
(310)
$
(310)
$
310
$
310
Financial
assets
Cash
and
cash
equivalents(1)
Financial
liabilities
Fixed
rate
debt
due
to
mature
in
2014
and
total
variable
debt
$
406,936
$
407
$
407
$
(407)
$
(407)
(1)
Cash
and
cash
equivalents
are
short-‐term
investments
with
an
original
maturity
of
three
months
or
less,
and
exclude
cash
subject
to
restrictions
that
prevent
the
Trust’s
use
for
current
purposes.
These
balances
generally
receive
interest
income
at
the
bank’s
prime
rate
less
1.85%.
Cash
and
cash
equivalents
are
short
term
in
nature
and
the
current
balance
may
not
be
representative
of
the
balance
for
the
rest
of
the
year.
The
Trust
is
not
exposed
to
significant
foreign
exchange
risks.
The
Trust’s
assets
consist
of
office
properties.
Credit
risk
arises
from
the
possibility
that
tenants
in
investment
properties
may
not
fulfill
their
lease
or
contractual
obligations.
The
Trust
mitigates
its
credit
risks
by
attracting
tenants
of
sound
financial
standing
and
by
diversifying
its
mix
of
tenants.
It
also
monitors
tenant
payment
patterns
and
discusses
potential
tenant
issues
with
property
managers
on
a
regular
basis.
Cash
and
cash
equivalents,
deposits
and
restricted
cash
carry
minimal
credit
risk
as
all
funds
are
maintained
with
highly
reputable
financial
institutions.
Liquidity
risk
is
the
risk
the
Trust
will
encounter
difficulty
in
meeting
obligations
associated
with
the
maturity
of
financial
obligations.
The
Trust
manages
maturities
of
the
fixed
rate
debts,
and
monitors
the
repayment
dates
to
ensure
sufficient
capital
will
be
available
to
cover
obligations
as
they
become
due.
Dundee
REIT
2013
Annual
Report
|
114
Derivatives
and
hedging
activities
The
Trust
uses
interest
rate
swaps
to
manage
its
cash
flow
risk
associated
with
changes
in
interest
rates
on
variable
rate
debt.
As
at
December
31,
2013,
the
Trust
had
the
following
interest
rate
swaps
outstanding
(December
31,
2012
–
$183,453):
Hedging
item
Interest
rate
swap
Notional
53,670
$
Rate
(%)
Maturity
3.03
August
15,
2014
$
Fair
value
365
Interest
rate
swap
$
129,783
3.52
August
15,
2016
$
(29)
Hedged
item
Interest
payments
on
forecasted
issuance
of
bankers’
acceptances
Interest
payments
on
forecasted
issuance
of
bankers’
acceptances
The
maximum
term
over
which
interest
rate
hedging
gains
and
losses
reflected
in
other
comprehensive
income
will
be
recognized
is
five
years
as
the
hedged
interest
payments
occur.
Note
33
FAIR
VALUE
MEASUREMENTS
Quoted
market
prices
represent
a
Level
1
valuation.
When
quoted
market
prices
are
not
available,
the
Trust
maximizes
the
use
of
observable
inputs.
When
all
significant
inputs
are
observable,
the
valuation
is
classified
as
Level
2.
Valuations
that
require
the
significant
use
of
unobservable
inputs
are
considered
Level
3.
The
Trust’s
policy
is
to
recognize
transfers
into
and
transfers
out
of
fair
value
hierarchy
levels
as
of
the
date
of
the
event
or
change
in
circumstances
that
caused
the
transfer.
There
were
no
transfers
between
Levels
1,
2
and
3
during
the
year.
The
following
tables
summarize
fair
value
measurements
recognized
in
the
consolidated
financial
statements
by
class
of
asset
or
liability
and
categorized
by
level
according
to
the
significance
of
the
inputs
used
in
making
the
measurements.
Recurring
measurements
Non-‐financial
assets
Investment
properties
Financial
liabilities
(assets)
Conversion
feature
on
the
convertible
debentures
Interest
rate
swaps
Financial
liabilities
Conversion
feature
on
the
convertible
debentures
Interest
rate
swaps
Carrying
value
as
at
Fair
value
as
at
December
31,
2013
December
31,
2013
Level
1
Level
2
Level
3
$
$
$
6,241,685
$
-‐
$
-‐
$
6,241,685
(317)
336
$
$
-‐
-‐
$
$
(317)
336
$
$
-‐
-‐
Carrying
value
as
at
December
31,
2012
Level
1
Level
2
Level
3
December
31,
2012
$
$
1,397
375
$
$
-‐
-‐
$
$
-‐
375
$
$
1,397
-‐
Dundee
REIT
2013
Annual
Report
|
115
Financial
instruments
carried
at
amortized
cost
where
the
carrying
value
does
not
approximate
fair
value
are
noted
below:
Fair
values
disclosed
Mortgages
Term
loan
facility
Convertible
debentures
Debentures
Investment
in
Dundee
Industrial
Mortgages
Term
loan
facility
Convertible
debentures
Debentures
Carrying
value
as
at
Fair
value
as
at
December
31,
2013
December
31,
2013
Level
1
Level
2
Level
3
$
2,477,183
$
181,530
51,885
333,647
166,317
-‐
$
-‐
52,718
335,311
144,097
-‐
$
-‐
-‐
-‐
-‐
2,507,543
184,635
-‐
-‐
-‐
$
December
31,
2012
Carrying
value
2,441,663
180,837
52,092
36,029
$
Fair
value
2,520,972
183,453
56,113
35,975
Promissory
notes
receivable,
amounts
receivable,
cash
and
cash
equivalents,
subsidiary
redeemable
units,
tenant
security
deposits,
the
Deferred
Unit
Incentive
Plan,
amounts
payable
and
accrued
liabilities,
and
distributions
payable
are
carried
at
amortized
cost
which
approximates
fair
value
due
to
their
short-‐term
nature.
Investment
properties
The
Trust’s
accounting
policy
as
indicated
in
Note
3
is
to
fair
value
investment
properties
using
the
income
approach
which
is
derived
from
two
methods:
overall
capitalization
rate
method
and
discounted
cash
flow
method,
which
result
in
these
measurements
being
classified
as
Level
3
in
the
fair
value
hierarchy.
Valuations
of
investment
properties
are
most
sensitive
to
changes
in
discount
rates
and
capitalization
rates.
In
applying
the
overall
capitalization
rate
method,
the
stabilized
net
operating
income
(“stabilized
NOI”)
of
each
property
is
divided
by
any
appropriate
capitalization
rate
(“cap
rate”).
The
key
assumptions
in
the
valuation
of
investment
properties
are
as
follows:
• Cap
rate
–
based
on
actual
location,
size
and
quality
of
the
properties
and
taking
into
account
any
available
market
data
at
the
valuation
date.
• Stabilized
NOI
–
revenues
less
property
operating
expenses
adjusted
for
items
such
as
average
lease-‐up
costs,
long-‐term
vacancy
rates,
non-‐recoverable
capital
expenditures,
management
fees,
straight-‐line
rents
and
other
non-‐recurring
items.
• Discount
rate
–
reflecting
current
market
assessments
of
the
uncertainty
in
the
amount
and
timing
of
cash
flows.
• Terminal
rate
–
taking
into
account
assumptions
regarding
vacancy
rates
and
market
rents.
• Cash
flows
–
based
on
the
actual
location,
type
and
quality
of
the
properties
and
supported
by
the
terms
of
any
existing
lease,
other
contracts
or
external
evidence
such
as
current
market
rents
for
similar
properties.
In
accordance
with
IFRS
5,
“Non-‐current
assets
held
for
sale
and
discontinued
operations”,
the
Trust
classified
certain
investment
in
joint
ventures
totalling
$15,921
as
assets
held
for
sale.
The
fair
value
of
the
assets
held
for
sale
approximates
the
carrying
value
of
the
net
assets.
Investment
properties
are
valued
on
a
highest
and
best
use
basis.
For
all
of
the
Trust’s
investment
properties,
the
current
use
is
considered
the
highest
and
best
use.
Dundee
REIT
2013
Annual
Report
|
116
Investment
properties
valuation
process
The
Trust
is
responsible
for
determining
the
fair
value
measurements
included
in
the
consolidated
financial
statements.
The
Trust
includes
a
valuations
team
that
prepares
a
valuation
of
each
investment
property
every
quarter.
The
valuations
team
is
headed
by
an
experienced
valuator.
On
a
quarterly
basis,
the
Trust
engages
independent
professionally
qualified
valuators
who
hold
a
recognized
relevant
professional
qualification
and
have
recent
experience
in
the
locations
and
categories
of
the
investment
properties
to
complete
valuations
of
selected
properties.
The
Trust’s
objective
is
to
have
each
property
valued
by
an
independent
valuator
at
least
once
every
three
years.
For
properties
subject
to
an
independent
valuation
report,
the
valuations
team
verifies
all
major
inputs
to
the
valuation
and
reviews
the
results
with
the
independent
valuators.
The
valuations
team
reports
directly
to
the
Chief
Financial
Officer
(“CFO”)
of
the
Trust.
Discussion
of
valuation
processes,
key
inputs
and
results
are
held
between
the
CFO
and
the
valuations
team
at
least
once
every
quarter,
in
line
with
the
Trust’s
quarterly
reporting
rules.
Changes
in
Level
3
fair
values
are
analyzed
at
each
reporting
date
during
the
quarterly
valuation
discussions
between
the
CFO
and
the
valuations
team.
Convertible
debentures
and
interest
rate
swaps
The
convertible
debentures
have
two
components
of
value
–
a
conventional
bond
and
a
call
on
the
equity
of
the
Trust
through
conversion.
Based
on
its
terms
(see
Note
15)
the
conversion
feature
is
an
embedded
derivative
and
has
been
separated
from
the
host
contract
and
classified
as
a
financial
liability
through
profit
and
loss.
The
fair
value
of
the
conversion
feature,
categorized
in
Level
2,
is
calculated
based
on
the
paper
by
K.
Tsiveriotis
and
C.
Fernandes,
beginning
January
1,
2013.
In
this
model,
a
convertible
bond
consists
of
two
components,
an
equity
component
and
a
debt
component,
and
these
components
have
different
default
risks.
The
equity
component
is
discounted
at
the
risk-‐free
rate.
The
equity
component
has
no
default
risk
since
the
Trust
can
always
issue
its
own
units.
The
debt
component
is
discounted
at
the
risk-‐free
rate
plus
a
credit
spread.
Previously,
in
2012,
this
was
considered
to
be
a
Level
3
financial
instrument.
The
fair
value
of
the
conversion
feature
on
the
convertible
debentures
was
determined
using
critical
inputs,
some
of
which
are
not
directly
observable
based
on
market
data.
The
critical
inputs
are
the
unit
price
and
the
units’
distribution
yield,
the
underlying
unit
volatility,
the
risk-‐free
rate
and
the
assumed
credit
spread.
A
qualified
independent
consultant
calculates
the
fair
value
measurement
for
the
financial
liability
classified
as
Level
2.
The
valuation
processes
and
results
are
determined
and
reviewed
by
senior
management.
The
inputs
and
processes
used
in
the
valuation
and
the
results
thereof
are
reviewed
by
senior
management
and
discussed
with
the
qualified
independent
consultant
to
ensure
conformity
with
IFRS.
The
significant
observable
inputs
used
in
the
fair
value
measurement
of
the
conversion
feature
as
at
December
31,
2013
are
the
following:
• Volatility:
Historical
volatility
as
at
December
31,
2013
was
derived
from
the
historical
prices
of
the
Trust
with
maturity
equal
to
the
term
to
maturity
of
the
convertible
debentures.
• Credit
spread:
The
credit
spread
of
the
convertible
debentures
was
imputed
from
the
traded
price
of
the
convertible
debentures
as
at
December
31,
2013.
5.5%
Series
H
Debentures
Credit
spread
2.54%
Volatility
14.2%
A
higher
volatility
will
increase
the
value
of
the
conversion
option.
A
lower
credit
spread
will
decrease
the
value
of
the
conversion
option.
The
following
table
shows
the
changes
in
fair
value
of
the
conversion
option
from
a
5%
increase
or
decrease
in
volatility
and
a
100
bps
increase
or
decrease
in
credit
spread,
holding
all
other
inputs
constant.
Increase
(decrease)
in
fair
value
as
at
December
31,
2013
$
Impact
of
change
to
volatility
-‐5%
(229)
+5%
542
$
Impact
of
change
to
credit
spread
+100
bps
481
$
$
-‐100
bps
(510)
Dundee
REIT
2013
Annual
Report
|
117
The
Trust
also
uses
the
following
techniques
in
determining
the
fair
value
disclosed
for
the
following
financial
liabilities
classified
as
Level
1,
2
and
3:
Mortgages
and
term
loan
facility
The
fair
value
of
mortgages
and
term
loan
facility
as
at
December
31,
2013
is
determined
by
discounting
the
expected
cash
flows
of
each
mortgage
and
term
loan
facility
using
spreads
ranging
from
1.85%
to
2.00%.
The
spreads
are
determined
using
the
Government
of
Canada
benchmark
bond
yield
for
instruments
of
similar
maturity
adjusted
for
the
Trust’s
specific
credit
risk.
In
determining
the
adjustment
for
credit
risk,
the
Trust
considers
market
conditions,
the
value
of
the
properties
that
the
mortgage
is
secured
by
and
other
indicators
of
the
Trust’s
creditworthiness.
Convertible
debentures
The
fair
value
of
convertible
debentures
as
at
December
31,
2013
is
based
on
the
convertible
debentures’
trading
price
on
or
about
December
31,
2013.
Debentures
The
fair
value
of
debentures
that
are
traded
as
at
December
31,
2013
is
based
on
the
debentures’
trading
price
on
or
about
December
31,
2013.
The
fair
values
of
debentures
that
are
non-‐trading
as
at
December
31,
2013
are
based
on
the
debentures’
par
value.
Demand
revolving
credit
facilities
The
fair
value
of
the
demand
revolving
credit
facilities
as
at
December
31,
2013
approximates
their
carrying
value
due
to
their
short-‐term
nature.
Note
34
SUBSEQUENT
EVENTS
On
January
21,
2014,
the
Trust
completed
the
issuance
of
$150,000
aggregate
principal
amount
of
Series
C
senior
unsecured
debentures
(“Series
C
Debentures”).
The
Series
C
Debentures
bear
interest
at
a
rate
of
4.074%
with
a
maturity
date
of
January
21,
2020.
Interest
on
the
Series
C
Debentures
is
payable
semi-‐annually
on
January
21
and
July
21,
with
the
first
payment
commencing
on
July
21,
2014.
Costs
related
to
the
issuance
of
the
Series
C
Debentures
approximated
$1,400.
The
net
proceeds
of
$148,600
from
the
Series
C
Debentures
were
mainly
used
to
pay
down
$87,500
of
the
demand
revolving
credit
facilities
and
five
mortgages
totalling
$59,300.
Dundee
REIT
2013
Annual
Report
|
118
Trustees
Detlef Bierbaum 1, 2, 4
Köln, Germany
Corporate Director
Donald K. Charter 1
Toronto, Ontario
Corporate Director
Michael J. Cooper 2
Toronto, Ontario
Chief Executive Officer
Dundee REIT
Peter A. Crossgrove 1, 3, 4
Toronto, Ontario
Corporate Director
Joanne Ferstman 5
Toronto, Ontario
Corporate Director
Corporate information
Head office
DUNDEE REAL ESTATE
INVESTMENT TRUST
State Street Financial Centre
30 Adelaide Street East, Suite 1600
Toronto, Ontario M5C 3H1
Phone: (416) 365-3535
Fax: (416) 365-6565
Transfer agent
(for change of address, registration
or other unitholder enquiries)
COMPUTERSHARE TRUST
COMPANy Of CANADA
100 University Avenue, 9th Floor
Toronto, Ontario M5J 2Y1
Phone: (514) 982-7555 or
1 800 564-6253
Fax: (416) 263-9394 or
1 888 453-0330
E-mail: service@computershare.com
Auditors
PRICEWATERHOUSECOOPERS LLP
PwC Tower, 18 York Street, Suite 2600
Toronto, Ontario M5J 0B2
Corporate counsel
OSLER, HOSKIN & HARCOURT LLP
Box 50, 1 First Canadian Place, Suite 6100
Toronto, Ontario M5X 1B8
Robert G. Goodall 1, 3
Mississauga, Ontario
President
Canadian Mortgage Capital Corporation
David J. Goodman
Toronto, Ontario
Corporate Director
Duncan Jackman 1, 3, 4
Toronto, Ontario
Chairman, President and CEO
E-L Financial Corporation Limited
Robert Tweedy 4
Toronto, Ontario
Corporate Director
Officers
Joanne Ferstman
Chair
Michael J. Cooper
Chief Executive Officer
Mario Barrafato
Senior Vice President and
Chief Financial Officer
Ana Radic
Chief Operating Officer
1 Member of the Audit Committee
2 Member of the Investment Committee
3 Member of the Compensation Committee
4 Member of the Governance and
Environmental Committee
5 Chair of the Board of Trustees
Investor relations
Phone: (416) 365-3536
Toll free: 1 877 365-3535
E-mail: info@dundeereit.com
Website: www.dundeereit.com
Taxation of distributions
Distributions paid to unitholders in respect
of the tax year ended December 31, 2013
are taxed as follows:
Other income: 25.7%
Capital gains: 20.6%
Return of capital: 53.7%
Management estimates that 65% of the
distributions to be made by the REIT in 2014
will be tax deferred.
Stock exchange listing
THE TORONTO STOCK EXCHANGE
Listing symbols:
REIT Units, Series A: D.UN
5.5% Series H Convertible Debentures:
D.DB.H
5.95% Senior Unsecured Debentures,
Series K: D.DB.K
Annual meeting of
unitholders
Thursday, May 8, 2014 at 4:00 pm (EST)
St. Andrew’s Club and Conference Centre
150 King Street West
Garden Hall
Toronto, Ontario, Canada
Distribution Reinvestment
and Unit Purchase Plan
The purpose of our Distribution Reinvestment
and Unit Purchase Plan (“DRIP”) is to provide
unitholders with a convenient way of
investing in additional units without incurring
transaction costs such as commissions,
service charges or brokerage fees. By
participating in the Plan, you may invest in
additional units in two ways:
Distribution reinvestment: Unitholders will
have cash distributions from Dundee REIT
reinvested in additional units as and when
cash distributions are made. If you register
in the DRIP you will also receive a “bonus”
distribution of units equal to 4% of the
amount of your cash distribution reinvested
pursuant to the Plan. In other words, for
every $1.00 of cash distributions reinvested
by you under the Plan, $1.04 worth of units
will be purchased.
Cash purchase: Unitholders may invest in
additional units by making cash purchases.
To enrol, contact:
COMPUTERSHARE TRUST
COMPANy Of CANADA
100 University Avenue, 9th 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
For more information please visit
www.dundeereit.com