DUNDEE INTERNATIONAL REAL ESTATE INVESTMENT TRUST ...

work in the short term. A further internal review of these properties has been undertaken and an
environmental management plan, guided by the principles established in the REIT’s Environmental
Policy, was instituted for all of the Initial Properties.
We negotiated an indemnity from Sub-Fund I for any claims against us resulting from environmental
damage for two other Initial Properties to a maximum of €3 million and a further indemnity from Sub-
Fund I for claims against us resulting from environmental damage of which on Closing Sub-Fund I had
knowledge and we did not.
We have a comprehensive environmental impairment liability insurance policy covering the Initial
Properties which will reduce our exposure to any unforeseen incidents or historical issues.
Property Condition Assessments
The Initial Properties have been the subject of certain property condition assessment reports prepared
between 2007 and 2011. A German-based consultant that had previous experience with many of the
Initial Properties was selected in order to investigate compliance with applicable jurisdictional standards
and best practices during completion of the assessments and reports. The consultant had previously
inspected the majority of the Initial Properties in 2008. Any Initial Properties not physically inspected by
the consultant in 2008 were physically inspected in 2011. As well, approximately 10% of the Initial
Properties physically inspected in 2008 were re-inspected in 2011. Reports on properties inspected in
2008 were updated through a review of due diligence materials provided by Caroline Holdings,
incorporating a specific analysis of maintenance expenditures for the years 2008 through 2010.
Property condition assessment reports were prepared for each of the Initial Properties for the purpose of
assessing and documenting the existing conditions of each building and major building operating
components and systems forming part of the Initial Properties. The reports catalogued ongoing repairs,
maintenance and replacement of capital items in respect of the Initial Properties, and also identified and
quantified major defects in materials or systems which would likely necessitate capital expenditures over
the next ten years. Based on the property condition assessment reports and DRC’s own inspections, the
Initial Properties appear to be well maintained, in accordance with their use.
As part of our annual asset review program, we will monitor the appropriate level of repairs and
maintenance and capital expenditures to ensure that the Initial Properties remain competitive. We intend
to manage capital expenditures prudently and maintain the physical improvements of the Initial Properties
in good condition. We will also expend capital on upgrades where appropriate, especially if we believe
such spending will accelerate lease-up of vacant space and assist in the retention of expiring tenants.
INDEBTEDNESS
For the year ended December 31, 2011, our interest coverage ratio was 2.7 times. This ratio is calculated
by dividing (i) net operating income from continuing operations plus interest and fee income less general
and administrative expenses by (ii) interest expense from continuing operations less interest on
Exchangeable Notes. As at the same date, our floating rate indebtedness was approximately 15% of total
debt.
Concurrent with the closing of our initial public offering, we obtained a term loan credit facility (the
“Facility”) from a syndicate of German and French banks for gross proceeds of $448.4 million (€328.5
million). The term of the Facility is five years with a two-year renewal option. Variable rate interest is
payable quarterly under the Facility at a rate equal to the three-month EURIBOR, plus a margin of 200
bps and agency fees of 10 bps. Pursuant to the requirements of the Facility, we entered into an interest
rate swap to fix 80% of the interest payments at 1.89% plus margin and agency fees and purchased an
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