Dream Office Real Estate Investment Trust : 2024 Annual Report

About this update from Dream Office Real Estate Investment Trust Class A

Dream Office REIT Annual Report 2024 Dream Office REIT is an unincorporated, open-ended real estate investment trust. Dream Office REIT is a premier office landlord in downtown Toronto with over 3.5 million square feet owned and managed. We have carefully curated an investment portfolio of high-quality assets in irreplaceable locations in one of the finest office markets in the world. 212 King Street W Toronto, ON Dream Office REIT Letter to Unitholders While 2024 proved to be another challenging year for office landlords, Dream Office REIT has shown resilience in our annual financial performance. Amid economic uncertainties and new challenges resulting from macroeconomic volatility, we successfully executed several key refinancing, disposition, and redevelopment goals during the year to reduce the risk in our business and improve liquidity. Since before COVID, we decided to upgrade our downtown Toronto portfolio, renovate the buildings, amenitize them, and make them environmentally friendly so that our boutique office buildings would be in high demand and very valuable. After all these years our capital program is substantially complete and the buildings are revitalized. We have not only reduced our carbon footprint but also fully leased out our retail space to leading restaurants across our portfolio, including Milos, Daphne, Sushi Yugen, and Adrak. In addition, our work at 366 Bay St. has attracted a global institution to lease the entire building for a term of 15 years. This lease was recognized as the first Platinum Team Transaction in Canada by the Institute for Market Transformation and Better Buildings and was awarded "Office Lease of the Year" at the 22nd Annual REX Awards. We look forward to furthering our redevelopment strategies in 2025 with the completion of 67 Richmond in Toronto and advancing the redevelopment of 606 4th Ave. in Calgary, where we intend to convert the existing 126,000 square foot office building into a brand new 166-unit, purpose-built rental residential apartment. We are in the advanced stages of securing a grant from the City of Calgary, ten-year government financing at attractive rates and a partner for this project. This will not only provide for an economically attractive project to the REIT but also improve our value and income profile. We recently announced the disposition of 438 University for $105.6 million which secured an additional $20 million of incremental value through tenant relocations to our other buildings and maintaining a property management agreement with the purchaser to generate additional income. We intend to use the proceeds to repay the existing mortgage and reduce the amount owing on our revolving credit facility, thereby reducing leverage and improving liquidity for the REIT. We have made substantial progress over the past 12 months in refinancing our mortgages and loans to eliminate near-term refinancing risk for the REIT. Notably, we closed a $225 million mortgage for Adelaide Place and secured refinancings across multiple assets. We have also obtained conditional credit approval for an extension of our $375 million credit facility with our existing syndicate of lenders. This addresses substantially all of our $744 million debt maturities for 2025, and we have only $165 million of mortgage maturities in 2026, which we believe we will be able to refinance at or above the expiring loan amount based on the quality of the assets and relatively low loan to value on expiry. Since the beginning of the year, conversations around the office sector have become increasingly more constructive. Our leasing team has seen an increase in tours, and we are optimistic that the work we have put into our space will attract tenants to our buildings. Looking ahead, the management team will remain focused on navigating the complexities of the economy and adopting flexible and creative strategies to improve our occupancy and the value of the business. We are very pleased with the improvements that we have already made to our buildings and expect that they will require lower capital in the future. We are making great progress renewing our expiring mortgages and we are pleased with our asset dispositions to date. While the leasing market has been stubbornly soft, with more people back to work we anticipate improved occupancy in 2025 or 2026 and as our occupancy and net operating increase, we believe the company is positioned to do very well. Thank you for your continued support and trust in Dream Office REIT. Sincerely, "Michael J. Cooper" Michael J. Cooper Chief Executive Officer February 20, 2025 366 Bay Street Toronto, ON Dream Office REIT At a Glance (1) Dream Office REIT owns well-located, high-quality central business district office properties in major urban centres across Canada, with a focus on downtown Toronto. 26 4.8 million investment properties (2) square feet of gross leasable area (2) 81.1% $2.6 billion in-place and committed occupancy ( 3 ) in total assets $59.47 NAV per unit 438 University Toronto, ON All figures as at December 31, 2024. Excluding assets held for sale. Excluding assets held for sale and properties under development. Dream Office REIT At a Glance Geographic Diversification (1) 3% CALGARY 3 PROPERTIES 6% OTHER (2) 3 PROPERTIES 82% GREATER 9% TORONTO AREA 2 PROPERTIES TORONTO DOWNTOWN 18 PROPERTIES Top Ten Tenants with a Weighted Average Lease Term of 6.1 Years Tenant Gross rental Owned area Owned Credit Rating (3) revenue (%) (thousands of sf) area (%) Government of Canada 5.9 179 3.9 AAA/A-1+ Government of Ontario 2.0 73 1.6 AA-/A-1+ 36 Toronto Street 30 Adelaide Street E International Financial Data Services 3.9 137 3.0 N/R Toronto, ON Toronto, ON International Language Academy of Canada 4.0 132 2.9 N/R State Street Trust Company 3.1 82 1.8 AA-/A/A-1+ Co-operators Life Insurance 2.8 119 2.6 A- Comparative Properties NOI by Region (4) Gross Leasable Area by Region (5) U.S. Bank National Association 3.0 185 4.0 A+/A-1 Medcan Health Management Inc. 2.7 69 1.5 N/R 24% 37% WeWork 2.0 65 1.4 N/R ICICI Bank Canada 1.6 40 0.9 BBB-/A-3 Other Markets Other Markets Total 31.6 1,081 23.6 76% 63% (1) This chart illustrates the fair value of investment properties by region, excluding properties held for sale and investments in joint ventures, as at December 31, 2024. (2) Other includes Saskatchewan and U.S., based on investment property fair value. 76+ 24 63+ 37 (3) As at December 31, 2024. Credit ratings are obtained from Standard & Poor's Rating Services Inc. and may reflect the parent's or guarantor's credit rating. N/R - not rated. Toronto Downtown Toronto Downtown (4) This chart illustrates comparative properties NOI by region for the year ended December 31, 2024, excluding sold properties, properties held for sale, completed properties under development, properties under development and investments in joint ventures that are equity accounted. (5) This chart illustrates the gross leasable area of investment properties by region, excluding properties under development, properties held for sale and investments in joint ventures that are equity accounted as at December 31, 2024. Dream Office REIT Table of Contents Section I Key Performance Indicators 1 at a Glance Basis of Presentation 2 Unit Consolidation 2 Forward-looking Disclaimer 3 Our Objectives 4 Operational Update 4 Financing and Liquidity Update 7 Section II Our Properties 8 Our Operations 9 Our Results of Operations 17 Section III Investment Properties 22 Investment in Dream Industrial REIT 24 Our Financing 25 Our Equity 28 Section IV Non-GAAP Financial Measures 33 and Ratios Supplementary Financial Measures 38 and Other Disclosures Selected Annual Information 38 Quarterly Information 39 Section V Disclosure Controls and 42 Procedures Section VI Risks and Our Strategy to Manage 42 Section VII Critical Accounting Judgments 49 Changes in Accounting Policies 50 Future Accounting Policies 51 Additional Information 51 Section VIII Asset Listing 52 Consolidated Financial Statements Independent Auditor's Report 53 Consolidated Balance Sheets 58 Consolidated Statements of 59 Comprehensive Loss Consolidated Statements of 60 Changes in Equity Consolidated Statements of 61 Cash Flows Notes to the Consolidated 62 Financial Statements Trustees and Management Team IBC Corporate Information IBC 36 Toronto Street Toronto, ON Management's discussion and analysis (All dollar amounts in our tables are presented in thousands of Canadian dollars, except for rental rates and per unit amounts, or unless otherwise stated) SECTION I KEY PERFORMANCE INDICATORS AT A GLANCE Performance is measured by these and other key indicators: As at December 31, September 30, December 31, 2024 2024 2023 Total properties (1) 24 Number of active properties 26 26 Number of properties under development 2 1 2 Gross leasable area ("GLA") (in millions of square feet) 4.8 5.1 5.1 Investment properties value $ 2,175,015 $ 2,303,308 $ 2,342,374 Total portfolio (2) 81.1% Occupancy rate - including committed (period-end) 84.5% 84.4% Occupancy rate - in-place (period-end) 77.5% 80.9% 82.0% Average in-place and committed net rent per square foot (period-end) $ 27.20 $ 26.37 $ 26.35 Weighted average lease term (years) 5.5 5.2 5.2 Three months ended Year ended December 31, December 31, December 31, December 31, 2024 2023 2024 2023 Operating results $ (19,101) $ (104,934) Net loss $ (42,424) $ (77,196) Funds from operations ("FFO") (3) 14,104 14,588 58,058 64,518 Net rental income 27,286 25,760 106,133 102,335 Comparative properties net operating income ("NOI") (3)(4) 24,742 24,756 100,488 98,449 Per unit amounts $ 0.72 $ 2.98 Diluted FFO per unit (3)(5)(6) $ 0.75 $ 2.88 Distribution rate per Unit (6) 0.25 0.50 1.08 2.00 As at December 31, December 31, 2024 2023 Financing 4.75% Weighted average face rate of interest on debt (period-end) (7) 4.53% Interest coverage ratio (times) (3) 1.8 2.0 Total debt $ 1,307,614 $ 1,339,461 Total assets $ 2,584,927 $ 2,668,330 Net total debt-to-normalized adjusted EBITDAFV ratio (years) (3) 12.1 11.5 Level of debt (net total debt-to-net total assets) (3) 52.9% 50.0% Average term to maturity on debt (years) 3.4 3.3 Undrawn credit facilities, available liquidity and unencumbered assets $ 119,700 Undrawn credit facilities $ 173,955 Available liquidity (3) $ 137,968 $ 187,228 Unencumbered assets (3) $ 2,276 $ 17,117 Capital (period-end) 19.0 Total number of REIT A Units and subsidiary redeemable units (in millions) (6)(8) 18.9 Equity per consolidated financial statements $ 1,080,523 $ 1,200,311 Net asset value ("NAV") per unit (3)(6) $ 59.47 $ 66.31 Total properties excludes properties held for sale and investments in joint ventures that are equity accounted at the end of each period. Total portfolio excludes properties held for sale, properties under development and investments in joint ventures that are equity accounted at the end of each period. Dream Office REIT 2024 Annual Report | 1 FFO, comparative properties NOI and available liquidity are non-GAAP financial measures. Diluted FFO per unit, interest coverage ratio (times), net total debt-to-normalized adjusted EBITDAFV ratio (years), level of debt (net total debt-to-net total assets) and NAV per unit are non-GAAP ratios. These non- GAAP financial measures and non-GAAP ratios are not standardized financial measures under IFRS Accounting Standards and might not be comparable to similar measures disclosed by other issuers. Unencumbered assets is a supplementary financial measure. Please refer to the sections "Non-GAAP Financial Measures and Ratios" and "Supplementary Financial Measures and Other Disclosures" for details of these measures. Current and comparative period excludes acquired properties, properties sold and held for sale, properties under development, completed properties under development and joint ventures that are equity accounted as at December 31, 2024. Properties acquired and properties under development completed subsequent to January 1, 2023, along with properties under development, are excluded from comparative properties NOI. Diluted weighted average number of units is used in the calculation of diluted FFO per unit. Diluted weighted average number of units is defined in the "Supplementary Financial Measures and Other Disclosures" section under the heading "Weighted average number of units". On February 22, 2024, the Trust implemented the Unit Consolidation of all the issued and outstanding REIT Units, Series A, REIT Units, Series B and Special Trust Units of the REIT on the basis of one (1) post-consolidation Unit for every two (2) pre-consolidation Units. All per unit amounts disclosed reflect the post-Unit Consolidation units for all periods presented. Weighted average face rate of interest on debt is calculated as the weighted average contractual face rate of all interest-bearing debt balances, excluding debt in joint ventures that are equity accounted. Total number of REIT A Units and subsidiary redeemable units includes 2.6 million subsidiary redeemable units that are classified as a liability under IFRS Accounting Standards. BASIS OF PRESENTATION Our discussion and analysis of the financial position and results of operations of Dream Office Real Estate Investment Trust ("Dream Office REIT" or the "Trust") should be read in conjunction with the audited consolidated financial statements of Dream Office REIT and the accompanying notes for the year ended December 31, 2024. Such consolidated financial statements have been prepared in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards). The Canadian dollar is the functional and reporting currency for the purposes of preparing the consolidated financial statements. This management's discussion and analysis (this "MD&A") is dated February 20, 2025. For simplicity, throughout this discussion, we may make reference to the following: "REIT A Units", meaning the REIT Units, Series A of the Trust; "REIT B Units", meaning the REIT Units, Series B of the Trust; "REIT Units", meaning the REIT A Units and REIT B Units, collectively; "Units", meaning the REIT Units and Special Trust Units, collectively; and "subsidiary redeemable units", meaning the LP Class B, Series 1 limited partnership units of Dream Office LP (a subsidiary of the Trust). When we use terms such as "we", "us" and "our", we are referring to Dream Office REIT and its subsidiaries. Certain figures in this document are presented on a comparative portfolio basis. Comparative portfolio figures represent the results of investment properties that the Trust has owned in all periods presented. Properties acquired and properties under development completed subsequent to January 1, 2023, along with properties under development and assets held for sale, are excluded from comparative portfolio figures. Except as specifically noted, the results of investments that are equity accounted are excluded from disclosures in this document. Market rents disclosed throughout this MD&A are management's estimates as at December 31, 2024 and are subject to change based on future market conditions. In addition, certain disclosures incorporated by reference into this MD&A include information regarding our largest tenants that has been obtained from available public information. We have not verified any such information independently. UNIT CONSOLIDATION Effective February 22, 2024, the Trust completed a unit consolidation of all the issued and outstanding Units on the basis of one post-consolidation Unit for every two (2) pre-consolidation Units (the "Unit Consolidation"). Upon completion of the Unit Consolidation, the number of REIT A Units as of February 22, 2024 was consolidated from 32,626,435 to 16,313,022. There were no REIT B Units outstanding. The general partner of Dream Office LP also took steps to effect a consolidation of the LP Class A Units and LP Class B Units of Dream Office LP on a proportionate basis effective as of February 22, 2024 ("the effective date"). As a result, the subsidiary redeemable units were also consolidated on the basis of one (1) post-consolidation subsidiary redeemable unit for every two (2) pre-consolidation subsidiary redeemable units on the effective date. Upon completion of the Unit Consolidation, the number of subsidiary redeemable units, as of February 22, 2024, was consolidated from 5,233,823 to 2,616,911. Dream Office REIT 2024 Annual Report | 2 All unit, per unit and unit-related amounts disclosed herein reflect the post-Unit Consolidation units for all periods presented, unless otherwise noted. FORWARD-LOOKING DISCLAIMER Certain information herein contains or incorporates comments that constitute forward-looking information within the meaning of applicable securities legislation, including but not limited to statements relating to the Trust's objectives, strategies to achieve those objectives, the Trust's beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, future growth, stability of NOI at our properties, results of operations, performance, business prospects and opportunities, acquisitions or divestitures, tenant base, rent collection, future maintenance and development plans and costs, capital investments, financing, the availability of financing sources, income taxes, vacancy, renewal and leasing assumptions, future leasing costs and lease incentives, litigation and the real estate industry in general; as well as specific statements regarding our distributions and net income, including but not limited to statements regarding the Trust's annualized distribution rate, its annualized distribution amount, the retainment and investment of funds; and the effect on occupancy and liquidity; our committed future occupancy, net rents and weighted average lease term; our ability to renew the VTB mortgage and loan facility at terms agreeable to the Trust; our strategies to reduce risk and improve the value of individual assets within the portfolio; our development, redevelopment, renovation and intensification plans and timelines, including in respect of type and number of units; expectations regarding occupancy levels in our portfolio and in certain locations, occupancy commitments and related timelines; our expectations regarding tenant requirement trends in respect of workspace preferences and upgrades; expectations and plans for repositioning certain properties; our modernization, engineer-certified decarbonization and retrofit plans for certain properties, including 67 Richmond Street West, 606-4th Building & Barclay Parkade, and 74 Victoria; our expectation to secure government financing and grants to fund development projects; our plans to bid for a construction management contract; the profitability and value of contemplated development projects; the expected disposition of 438 University Avenue and property management services to be provided for a period of three years, including expected increase in net operating income, profit and value of our purpose-built rental development site, incremental benefits, use of proceeds and the effect on the Trust's leverage and liquidity, and disposition timeline; expected capital requirements, commitment amounts, and cost to complete development projects; the potential to find joint venture partners for contemplated developments and the effect of such joint ventures on construction and balance sheet risk; timing of project completion, including in respect of modernization and renovation projects; the effect of building improvements and redevelopments on tenant experience, building quality, performance, reduction of operating costs and higher rents; our ability to attract and retain tenants, including in respect of ongoing prospective tenant negotiations and ongoing construction to attract future high-quality potential tenants at the highest possible rents; our acquisition, disposition and leasing pipeline; leasing velocity, square footage expected to be leased, property operating costs and rates on future leasing; expected progress on leasing, including with respect to 74 Victoria; our ability to relocate tenants within our portfolio and the benefits thereof, including the effect of such relocations on occupancy, net operating income and the operational and financial risk of our buildings; increasing our occupancy, enhancing the value of our assets, and improving our financial metrics; our conviction that the quality and location of our assets will result in certain benefits; our ability to increase building performance and achieve energy efficiency and greenhouse gas reduction goals, including in respect of retrofits made in connection with the CIB Facility; our expectation that operating cash flows less cash interest paid may be less than total distributions; the expectation that net income will vary from total distributions; the expectation that there could be timing differences on distributions as a result of intensification and redevelopment projects; the future composition of our portfolio; our ability and strategy to mitigate and manage certain risks; expected tax obligations; our capital commitments in respect of certain investment properties; future cash flows, debt levels, liquidity and leverage; including any extensions on mortgages and discussions to renew or refinance mortgages or credit facilities and anticipated timing thereof; our ability to refinance our debt; the use of proceeds from disposition and the effects of those uses on leverage and liquidity, including the use of proceeds from the disposition of 438 University Avenue; our estimates of market rents; our ability to meet obligations with current cash and cash equivalents on hand, cash flows generated from operations, revolving credit facilities and conventional mortgage refinancing; our ability to address commitments and contingencies; our ability to make normal course issuer bid under the renewed bid; our internal control over financial reporting; our future capital requirements and ability to meet those requirements; anticipated changes in accounting policies; and our overall financial performance, profitability and liquidity for future periods and years. Forward-looking statements generally can be identified by words such as "outlook", "objective", "may", "will", "would", "expect", "intend", "estimate", "anticipate", "believe", "should", "could", "likely", "plan", "project", "budget", "continue" or similar expressions suggesting future outcomes or events. 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 Dream Office REIT's control, which could cause actual results to differ materially from those disclosed in or implied by such forward-looking information. These assumptions include, but are not limited to: that no unforeseen changes in the legislative and operating framework for our business will occur, including unforeseen changes to tax laws; that we will meet our future objectives and priorities; that we will have access to adequate capital to fund our future projects and plans; that our future projects and plans will proceed as anticipated; that duties, tariffs and other trade restrictions, if any, will not materially impact the ability of our tenants to meet their obligations under their leases with us; that inflation and interest rates will not materially increase beyond current market expectations; that we will have the ability to refinance our debts as they mature; and that future market and economic conditions will develop as expected. Risks and uncertainties include, but are not limited to, Dream Office REIT 2024 Annual Report | 3 general and local economic and business conditions, including in respect of real estate; our ability to sell investment properties at a price that reflects fair value; our ability to source and complete accretive acquisitions; the ability to effectively integrate acquisitions; risks related to a potential economic slowdown in certain of the jurisdictions in which we operate and the effect inflation and any such economic slowdown may have on market conditions and lease rates; inflation; employment levels; political conditions; risks associated with unexpected or ongoing geopolitical events, including disputes between nations, war, terrorism or other acts of violence; risks related to the imposition of duties, tariffs and other trade restrictions and their impacts; consumer confidence; leasing risks, including those associated with the ability to lease vacant space and rental rates on future leases; the financial condition of tenants and borrowers; development risks, including construction costs, project timings and the availability of labour; NOI from development properties on completion; the uncertainties around the availability, timing and amount of future equity and debt financings; mortgage and interest rates and regulations; cyber security risks; tax risks, including our continued compliance with the real estate investment trust ("REIT") exception under the specified investment flow-through trust ("SIFT") legislation; changes in laws or regulations; regulatory risks; insurance risks; public health crises, pandemics and epidemics; the effect of government restrictions on leasing and building traffic; environmental risks; reliance on Dream Asset Management Corporation for management services; risks associated with jointly controlled entities and co- ownerships; foreign exchange rates; and other risks and factors described from time to time in the documents filed by the Trust with securities regulators. 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 the sections "Our Objectives", "Business Update" and "Comparative Properties NOI". All forward-looking information is as of February 20, 2025. Dream Office REIT does not undertake to update any such forward- looking information whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information about these assumptions, risks and uncertainties is contained in our filings with securities regulators, including our latest Annual Report and Annual Information Form available on the System for Electronic Document Analysis and Retrieval+ ("SEDAR+") at www.sedarplus.com. Certain filings are also available on our website at www.dreamofficereit.ca. OUR OBJECTIVES We have been and remain committed to: Managing our business and assets to provide both yield and growth over the longer term; Driving superior risk-adjusted returns and growth in our net asset value by investing in our assets through upgrades, intensification and redevelopment, and selectively disposing of assets with lower long-term return potential; Building and maintaining a strong, flexible and resilient balance sheet; and Maintaining a REIT status that satisfies the REIT exception under the SIFT legislation. OPERATIONAL UPDATE In the midst of significant macro-economic uncertainties and continuing challenges in the Canadian office real estate sector, the Trust remains focused on delivering stable operational and financial performance in 2025 and beyond. We believe our portfolio is well located, difficult to replace and uniquely positioned to outperform over the long term. Through our plan to invest capital in our best buildings over the past six years, the renovations across our best assets are substantially complete and we have created a uniquely competitive portfolio that is well positioned to attract high-quality tenants Relative to Q3 2024, our in-place occupancy decreased from 80.9% to 77.5% and our in-place and committed occupancy rate decreased from 84.5% to 81.1%. The quarter-over-quarter decrease of 3.4% of total portfolio in-place occupancy was attributable to the reclassification of 438 University Avenue to properties held for sale (-1.2%), 23,000 square feet of negative absorption in Other markets (-0.5%) partially offset by the reclassification of 606-4th Building & Barclay Parkade to properties under development (+0.5%), and 142,000 square feet of net negative absorption at 74 Victoria Street for a previously known and announced lease expiry during Q4 2024 (-3.1%). Despite this lease expiry, occupancy in Toronto downtown only decreased by 98,000 square feet as the Trust had positive absorption totalling 43,000 square feet over the remainder of the region quarter- over-quarter (+0.9%). Subsequent to the quarter, the Trust signed a conditional lease for approximately 54,000 square feet at 74 Victoria Street for a term of 5 years at approximately $28.50 net rent per square foot to increase the committed occupancy at 74 Victoria from 46% to 67%. The Trust is also in negotiations with prospective tenants for up to an additional 50,000 square feet. As part of the leasing strategy at 74 Victoria, the Trust is undergoing a renovation program to modernize the lobby and is constructing built-out space on certain floors to help attract future potential tenants. Dream Office REIT 2024 Annual Report | 4

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