Annual Report 2014 Dream Office REIT 2014 ANNUAL REPORT

DREAM OFFICE REIT OFFICE DREAM Annual Report 2014 Dream Office REIT 2014 ANNUAL REPORT ANNUAL 2014 Letter to Unitholders In 2014, we remained focused on executing our strategy of improving the quality of our assets, building strong relationships with our tenants, and continually improving the service we provide. Dream Office REIT finished 2014 strong market. We will use the proceeds of the cross-border tenants expanding due to and we are off to a solid start for 2015. dispositions to repurchase units under a lower Canadian dollar. Excellent tenant retention and new our normal course issuer bid or to invest We presently estimate our in-place leasing momentum in the latter part in higher quality properties. rents to be approximately 8% below of 2014 have resulted in fourth quarter In the latter part of 2014, oil prices, the market rents. Our two largest markets, results that are reflective of the appeal Canadian dollar and interest rates have downtown Toronto and downtown of the Trust’s portfolio. Tenant retention declined and provinces are rewriting Calgary, presently have in-place rents of was high at 64% and new leasing their outlook for growth. Across the 10% and 15% below market, respectively, activity remained strong, resulting in country, we feel the impact of these providing both the opportunity for quarter-over-quarter positive absorption macro-events to varying degrees. The growth or a significant buffer, should we and in-place occupancy increasing by pace of activity in the office sector in see some softening of rental rates. 30 basis points in Q4 2014. Our portfolio Alberta has slowed somewhat, with continues to perform above the national While we continue to operate in a tenants, in particular in Calgary and average. We are keenly focused on challenging environment, we remain Edmonton, putting their decision- engaging tenants in renewal discussions focused on executing our strategy of making on hold. Fortunately, the as early as possible, resulting in a improving the quality of our assets, average lease term of our Calgary strong head start on 2015 and 2016 building strong relationships with our and Edmonton portfolios is almost four leasing. We have already addressed tenants, and continually improving years. Additionally, our average tenant over half of our 2015 lease expiries, our the service we provide. We are seeing size in each of these markets is small strongest pre-leasing performance over improved tenant retention and some in comparison to the tenancies of a the past five years. exciting new leasing. I believe that majority of other landlords. With our the buildings in our portfolio appeal We’re making more improvements average tenant size in Calgary and to tenants and, through the strength than ever to provide a better tenant in Edmonton less than 11,000 square of our platform, we will continue to experience. We view proactive investment feet, our exposure is diversified and, outperform the market. In our history, in our buildings as a key strategy to historically, these tenancies have we’ve never had a better quality improve tenant retention, attract new tended to experience higher retention portfolio or a stronger balance sheet tenants and reduce energy costs. For and are generally more sensitive to with embedded opportunities for growth 2015, we will be investing $75 million on incurring moving costs. In addition, and value creation. upgrades and sustainability initiatives, these tenancies are not typically the the largest annual investment ever made targeted customer for new buildings I would like to thank you for your by the REIT. presently under development. continued support and look forward to the upcoming year. We plan to further improve the overall In contrast to a somewhat slower asset quality of our portfolio by economy in Alberta, we continue to see disposing of non-core assets. In the robust activity in both downtown and fourth quarter of 2014, we undertook a suburban Toronto. In our Greater Toronto disciplined asset management review Area portfolio, tour activity in January of every building in the portfolio and was up almost 30% over the same time identified the assets that are not core last year, in part due to our marketing P. Jane Gavan to our business. Our disposition target initiatives as well as greater activity Chief Executive Officer for 2015 is $300 million, of which near the airport including a number of March 15, 2015 approximately 50% is currently on the 2% NORTHWEST TERRITORIES Portfolio at-a-Glance 27% DECEMBER 31, 2014 ALBERTA 5% 5% 6% BRITISH SASKATCHEWAN QUÉBEC COLUMBIA 52% Dream Office REIT owns and ONTARIO 1% ATLANTIC operates high-quality, well-located CANADA and competitively priced business 2% UNITED STATES premises. The portfolio comprises approximately 24.2 million square feet of central business district and suburban office properties located in Canada’s key office markets. Geographic Diversification (% of net operating income) Photos: 1. Adelaide Place, Toronto | 2. Gallery Building, Yellowknife | 3. Scotia Plaza, Toronto | 4. IBM Corporate Park, Calgary | 5. 13888 Wireless Way, Richmond, BC 1 2 $7.0B 7.8% TOTAL ASSETS MARKET RENTS ABOVE IN-PLACE RENTS 5 2.9x INTEREST COVERAGE RATIO Diversified, High-Quality Tenants GROSS WEIGHTED AVERAGE OWNED AREA RENTAL REVENUE REMAINING LEASE TERM TENANT (%) (%) (years) Bank of Nova Scotia 4.1 7.3 9.7 Government of Canada 5.9 6.1 3.1 Government of Ontario 2.8 3.3 4.6 Bell Canada 1.6 1.8 3.3 Government of Québec 2.7 1.7 12.2 Telus 1.2 1.5 2.1 Enbridge Pipelines Inc. 1.0 1.5 4.1 State Street Trust Company 1.0 1.4 7.3 Government of Saskatchewan 1.4 1.3 2.2 Government of British Columbia 1.2 1.2 4.6 Adjusted Funds from Operations (“AFFO”) Net Operating Income Breakdown (per unit) (Q4/2014) $2.60 $2.52 $2.50 $2.40 28% SUBURBAN OFFICE $2.30 $2.20 $2.10 72% CENTRAL BUSINESS $2.00 DISTRICT $1.90 2010 2011 2012 2013 2014 3 4 Payout Ratio AFFO/Unit Payout Ratio AFFO/Unit 93% OCCUPANCY 86.6% 2,200+ 5.0 47.5% TENANTS AVERAGE REMAINING LEVEL OF DEBT LEASE TERM (years) 0.21 0.20 0.19 0.18 0.17 0.16 0.15 Q4-12 Q1-13 Table of Contents Management’s discussion and analysis 1 Management’s responsibility for the consolidated 1 financial tatementss 79 2 3 Independent auditor’s report 80 Consolidated financial statements 81 Notes to the consolidated financial tatementss 85 Trustees IBC Corporate information IBC 4 Photos: 1. Barclay Centre, Calgary 2. 55 King Street West, Kitchener 3. 700 de la Gauchetière, Montréal 4. 720 Bay Street, Toronto Management’s discussion and analysis (All dollar amounts in our tables are presented in thousands, except for rental rates, unit and per unit amounts) SECTION I – FINANCIAL HIGHLIGHTS AND OBJECTIVES FINANCIAL OVERVIEW Total adjusted funds from operations (“AFFO”) for the year ended December 31, 2014 was $273.1 million, an increase of $11.3 million, or 4.3%, over the prior year (AFFO for the quarter was $68.6 million, an increase of $1.6 million, or 2.4%, over the prior year comparative quarter). AFFO on a per unit basis for the year ended December 31, 2014 increased to $2.52 from $2.47 over the prior year, an increase of 2.0% (AFFO on a per unit basis for the quarter increased to $0.63 from $0.62 over the prior year comparative quarter, an increase of 1.6%). Total funds from operations (“FFO”) for the year ended December 31, 2014 was $312.8 million, an increase of $6.6 million, or 2.1%, over the prior year (FFO for the quarter was $78.1 million, a marginal decline of $0.1 million, or 0.1%, over the prior year comparative quarter). Diluted FFO on a per unit basis for the year ended December 31, 2014 remained flat at $2.87 when compared to the prior year (diluted FFO on a per unit basis decreased to $0.71 from $0.72 over the prior year comparative quarter). The increase in basic AFFO per unit over the prior year and prior year comparative quarter resulted from: • 0.5% and 0.7% growth in comparative properties net operating income (“NOI”) over the prior year and prior year comparative quarter, respectively; • Incremental increase in AFFO from our investment in Dream Industrial REIT; • A full year of NOI from accretive acquisitions completed in 2013; and • Interest rate savings upon refinancing of maturing debt; Offset by: • Dispositions completed during 2014. The decrease in diluted FFO per unit over the prior year comparative quarter primarily resulted from the favourable points noted above, offset by the write-off of straight-line rent due to early lease terminations during 2014 and dispositions completed during 2014. For the year ended December 31, 2014, NOI from comparative properties increased over the prior year by $2.2 million, or 0.5% (NOI from comparative properties increased by $0.7 million, or 0.7%, over the prior year comparative quarter). The increase was mainly driven by higher rental rates achieved on new leasing completed during the quarter and over the past year, and the benefit of step rents, offset by lower occupancy on an overall basis. NOI from comparative properties decreased over the prior quarter by $0.3 million, or 0.2%, mainly due to a tenant in Calgary downtown that vacated approximately 100,000 square feet during the previous quarter. As at December 31, 2014, overall in-place occupancy is up 30 basis points (“bps”) to 91.4%, when compared to the prior quarter.

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