DUNDEE INTERNATIONAL REIT

DUNDEE INTERNATIONAL 2011 Third Quarter Report
Economic impact on the German real estate sector
The commercial real estate market in Germany has performed well since the beginning of the year and there
is no sign that the European debt crisis and concerns about a global economic slowdown have negatively
impacted the office sector. Demand for space continues to be strong and vacancies in the office markets
declined in all seven key markets. Overall vacancy rates in the office sector in Germany decreased to 9.8% at
the end of the third quarter 2011 (1) .
OUTLOOK
Since completing our IPO on August 3, 2011, our management team has taken full control of operations, with
the main focus on increasing occupancy rates, creating good relationships with key tenants and achieving
long-term income growth. We have already made some progress on these fronts, including increasing
occupancy rates to 87.7% from 87.2% at the time of our IPO. In addition to actively managing our properties,
we are also engaged in discussions with Deutsche Post with respect to their overall future leasing requirements
and their expectations regarding leasing or re-leasing additional space from us.
With respect to our capital structure, we focus on building and deepening relationships with lenders in the
markets in which we operate. Our debt strategy is to obtain secured mortgage financing on a fixed rate basis,
with a term to maturity that is appropriate in relation to the lease maturity profile of our portfolio. We intend
to target an overall debt level, including convertible debentures, of approximately 55% to 60%. Our preference
is to have staggered debt maturities to mitigate interest rate risk and limit refinancing exposure in any particular
period. We also intend to enter into long-term loans at fixed rates when borrowing conditions are favourable.
We have commenced discussions with several lenders in Germany to refinance a portion of our Term Loan
Credit Facility (“Facility”) and are pleased with their initial interest to refinance a portion of our Facility.
Our plan is to refinance up to €100 million of the Facility over the next twelve months.
Germany, Europe’s largest economy, remains an important global player. It recovered significantly during 2010,
expanding by 3.6% on a price-adjusted basis to a total GDP of €2.5 trillion. However, the more recent ongoing
uncertainty in Europe has impacted the global economy, causing volatility in the stock markets and decreasing
investor confidence. Recent downward adjustments to Germany’s GDP numbers were made to reflect declining
international demand. While year-over-year GDP growth in Germany has slowed significantly in the second
quarter, overall GDP growth is still expected to reach 2.9% in 2011. It is anticipated that domestic demand will
remain strong and will sustain Germany’s overall growth for the remainder of 2011 and 2012.
While we take the current uncertainty into consideration in all our business activities, we also believe that there
are many opportunities available to us. We are continuously evaluating potential acquisition opportunities
in our target markets and will consider opportunities that provide value and stability. Overall, we believe
that the current business environment, while not without risk, is an environment in which Dundee International
REIT can prosper. With our long-term creditworthy tenants, high proportion of fixed rate debt and long-term
fixed foreign exchange rate contracts, we have current cash flow stability that serves as a solid platform for
future growth.
(1) Jones Lang LaSalle Office Market Overview, Q3, 2011
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