DUNDEE INTERNATIONAL REIT

DUNDEE INTERNATIONAL 2011 Third Quarter Report
Deutsche Post leases
The leases with Deutsche Post, which generally expire on June 30, 2018 (many of which provide Deutsche
Post with an option to extend the term until June 30, 2023), comprise approximately 75% of the GLA and
account for more than 85% of the portfolio’s GRI.
Rent indexation
The rents under the Deutsche Post leases are indexed to inflation if the consumer price index for Germany
changes (up or down) by more than 4.7 index points as compared to the index at the commencement of the
CONSUMER
PRICE INDEX
lease. As of September 30, 2011, the consumer price index in Germany stood at 111.1 index points, which is
0.6 points below the hurdle rate required for an upward adjustment to the rental rates in the Deutsche Post
leases which commenced on July 1, 2008. Once the hurdle rate is reached, rent payable under the Deutsche
Post leases will be increased by 100% of the 4.7 point index change. This increase would translate into a 4.4%
rental rate increase under the Deutsche Post leases.
Termination rights and rent guarantee
In general, the Deutsche Post leases have a fixed term of 10 years, expiring on June 30, 2018. 129 of the leases
entitle Deutsche Post to terminate space in June 2012, 2014 and 2016, subject to certain limitations and
requirements, including that Deutsche Post provide 12 months’ prior written notice to us. With respect to the
2012 termination rights, Deutsche Post gave notice to terminate 17 leases, comprising approximately 13% of the
GRI and a GLA of approximately 1.1 million square feet, and waived its second termination right in respect of
21 leases (effective June 30, 2014). At the same time, representatives of Deutsche Post expressed their desire
to lease back some of the space, in particular space used for the mail delivery and sorting components and
areas used by Postbank’s operations. This will allow us to capture mark-to-market adjustments on new leases.
To the extent that Deutsche Post does not exercise all of its early termination rights with respect to any
particular effective termination date, the unused portion may be carried forward. This means that Deutsche Post
has the right to terminate up to 91 leases in 2014 and up to 112 leases in 2016, subject to certain limitations.
The vendor of the properties has agreed to pay us an amount equal to the lost gross rent resulting from all 2012
terminations for the period commencing on July 1, 2012, to and including June 30, 2014.
For a more detailed description of the Deutsche Post leases and termination rights, please refer to our
prospectus dated July 21, 2011, which is available on SEDAR at www.sedar.com.
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113
111
109
107
June 2008
107.0
105
June 08
4.7 CPI point increase
Dec. 08 June 09 Dec. 09 June 10 Dec. 10 June 11
September 2011
111.1