Dream Impact Trust — Management Reports 2020

Feb 19, 2020

MANAGEMENT’S DISCUSSION AND ANALYSIS

(All dollar amounts in our tables are presented in thousands of Canadian dollars, except unit and per unit amounts, unless otherwise stated)

1. OVERVIEW AND OVERALL FINANCIAL PERFORMANCE

1.1 OVERVIEW OF THE TRUST

Dream Hard Asset Alternatives Trust ("Dream Alternatives" or the "Trust") is an open-ended trust focused on hard asset alternative investments comprising real estate development, real estate lending, and income-producing real estate. In the Trust’s reportable operating segments, these investments are referred to as development and investment holdings, lending portfolio, and income properties, respectively. The Trust is managed by Dream Asset Management Corporation ("DAM" or the "Asset Manager"), a subsidiary of Dream Unlimited Corp. ("Dream") (TSX: DRM), which is one of Canada’s leading real estate companies, with approximately $9 billion of assets under management in North America and Europe. The Trust is listed on the Toronto Stock Exchange ("TSX") under the symbol "DRA.UN". On January 1, 2018, Dream acquired control of the Trust, for accounting purposes, based on Dream's increased exposure to variable returns resulting from increased ownership through units held in the Trust and from new real estate joint venture agreements. The ultimate controlling party of the Trust is Michael Cooper, President and Chief Responsible Officer of DAM and Dream.

This Management's Discussion and Analysis ("MD&A") is dated as of, and reflects all material events up to February 18, 2020, the date on which this MD&A was approved by the Board of Trustees. This MD&A should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the years ended December 31, 2019 and December 31, 2018, which have been prepared in accordance with International Financial Reporting Standards ("IFRS").

When we refer to terms such as "we", "us" and "our", we are referring to the Trust, Dream Alternatives Master LP and its subsidiaries. When we refer to the term "units" we are referring to the units of the Trust. When we refer to "unitholders" we are referring to holders of the units of the Trust.

The Basis of Presentation section of this MD&A includes important information concerning certain information found in this MD&A that contains or incorporates comments that constitute forward-looking information within the meaning of applicable securities laws. Readers are encouraged to read the Basis of Presentation and Risks and Risk Management sections of this MD&A for a discussion of the risks and uncertainties regarding this forward-looking information as there are a number of factors that could cause actual results to differ materially from those disclosed or implied by such forward-looking information.

As at December 31, 2019, the Trust presented the renewable power segment as discontinued operations with the results being presented separately from the Trust's ongoing operating activities. As at December 31, 2019, our operating segments from continuing operations consist of the following:

• Development and investment holdings — participating mortgages receivable, and direct and indirect investments in developments and income-producing properties which included certain income-producing properties with redevelopment potential;

• Lending portfolio — interest-paying mortgages, mezzanine and corporate loans;

• Income properties — a portfolio of office and commercial real estate properties in the Greater Toronto Area ("GTA").

1.2 OUR OBJECTIVES

Our objectives are to:

• provide investors with access to an exceptional portfolio of real estate development opportunities and alternative assets that would not otherwise be available in a public and fully transparent vehicle, managed by an experienced team with a successful track record in these areas;

• build and maintain a growth-oriented portfolio;

• provide predictable cash distributions to unitholders on a tax-efficient basis; and

• grow and reposition the portfolio to increase cash flow, unitholders' equity and net asset value ("NAV")[(1)] per unit[(1)] over time.

• (1) For the Trust's definition of the following non-IFRS measures: NAV, NAV per unit, and a reconciliation to total unitholders' equity, please refer to the Non-IFRS Measures and Other Disclosures section and Financial Overview- Reconciliation of Net Asset Value to Total Unitholders' Equity section of this MD&A.

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1.3 PORTFOLIO SUMMARY

The table below provides a summary of the Trust's portfolio as at December 31, 2019, including total unitholders' equity and NAV. Going forward, the Trust will disclose NAV on an annual basis only, timed with the external appraisal process, which occurs on an annual basis. With the Trust's focus on development investments that will generate higher growth and cash flow over a period of time, annual NAV per unit is considered to be a useful metric of value creation and unitholders' return. The determination of NAV incorporates a market value[(1)] adjustment to equity accounted investments to take into consideration market comparables and a change in risk profile. The risk profile can change as a result of various factors including the progression of each project toward completion and/or the reflection of new information from recent market transactions that indicate a change in the investment value. For additional details on NAV per unit, a non-IFRS measure, and a reconciliation to total unitholders' equity, please refer to the Reconciliation of Net Asset Value to Total Unitholders' Equity in the Financial Overview section of this MD&A.

						Total
	Accounting treatment(2)		Assets	Debt		unitholders' equity(3)	NAV(1)		NAV per unit⁽¹⁾	Percentage of total NAV
Development and investment holdings, including equity	Fair value/ Equity
accounted investments	accounted	$	301,660		$	292,447 $	**332,853 **	$	4.84	55.0%
Lending portfolio	Amortized cost(4)	$	64,705		$	64,705 $	**64,705 **	$	0.94	11.0%
Income properties	Fair value	$	200,869 $	**88,988 **	$	111,175 $	**111,175 **	$	1.62	19.0%
Other(5)
Cash and consolidated working capital						99,224	99,224		1.44
Deferred income tax adjustment(6)							(6,365)		(0.09)
					$	99,224 $	**92,859 **	$	1.35	15.0%
Total unitholders' equity / NAV(1)					$	567,551 $	601,592
Total unitholders' equity per unit(1) / NAVper unit(1)					$	8.25		$	8.75	100.0%

(1) For the Trust's definition of the following non-IFRS measures NAV, NAV per unit, market value and total unitholders' equity per unit, please refer to the Non-IFRS Measures and Other Disclosures section and Financial Overview-Reconciliation of Net Asset Value to Total Unitholders' Equity section of this MD&A.

(2) Equity accounted investments are recognized initially at cost and subsequently adjusted for the Trust's share of the profit or loss.

(3) Total unitholders' equity includes working capital for each segment. Working capital is excluded from the Assets and Debt balances disclosed for each investment, as applicable. (4) As at December 31, 2019, the balance includes a loan of $7.3 million classified as fair value through profit and loss ("FVTPL").

(5) Includes the Trust and other segment level cash and net working capital balances.

(6) The deferred income tax adjustment is related to the equity accounted investment market value adjustments.

For a list of the development and investment holdings, and income properties, refer to section 1.6 of this MD&A.

SUMMARY OF DEVELOPMENT AND INVESTMENT HOLDINGS PARTNERS

We continue to leverage our relationships and expertise to attract world-class partners and investment opportunities. As a result of our partners and relationships, the Trust has access to unparalleled investment opportunities across North America. The table below provides an overview of some of the Trust's key partners within its development/redevelopment investments:

				Partner
Project		Partners		since
Empire Lakeshore & Brampton		Empire Communities		2014
Axis Condominiums		CentreCourt Developments		2016
Lakeshore East development		Dream Unlimited, Great Gulf Residential		2016
Brightwater development(8)		Dream Unlimited, Kilmer Van Nostrand Co. Ltd, Diamond Corp., FRAM + Slokker		2017
Zibi development		Dream Unlimited, Theia Partners(7)		2017
Frank Gehry development		Dream Unlimited, Great Gulf Residential, Westdale Construction Co Ltd		2017
Seaton development		Fieldgate Homes, Mattamy Homes, Paradise Developments, TACC Construction Ltd		2018
Hard Rock/Virgin Hotels Las Vegas		Juniper Capital Partners, Fengate Real Asset Investments, Virgin Hotels		2018
100 Steeles		Dream Unlimited, Westdale Construction Co. Ltd		2018
WestDonLands		Dream Unlimited, Kilmer van Nostrand Co.Ltd, Tricon Capital Group		2018

(7) Formerly known as Windmill development

(8) Formerly known as Port Credit development

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1.4 FINANCIAL OVERVIEW - FOURTH QUARTER AND YEAR ENDED 2019

For the three months ended December 31, 2019, the Trust reported net income of $19.9 million up significantly from $7.0 million in the comparative period. The increase of $12.9 million was attributable to an increase in net fair value gains of $20.6 million in the period, primarily due to an increase in value of 49 Ontario Street, due to the asset's redevelopment potential. Additionally, during the three months ended December 31, 2019, the Trust recognized an increase of $7.4 million of income from equity accounted investments, which was primarily driven by net fair value gains recorded at the investment level, as supported by third-party appraisals. Partially offsetting the above-noted net fair value gains were $5.9 million of losses related to non-core asset dispositions, a $2.4 million provision on the lending portfolio, an increase in foreign exchange losses of $3.0 million and an increase of $4.3 million of income taxes related to fair value gains in the period.

For the year ended December 31, 2019, the Trust recognized net income of $32.3 million, an increase of $18.4 million from the prior year due to an increase in net fair value gains of $17.3 million on income properties, increased income of $22.1 million from equity accounted investments driven by income contributions from Axis Condominiums which occupied during the year and the aforementioned fair value gains at the investment level, partially offset by $5.9 million of losses related to non-core asset dispositions, a $2.4 million provision on the lending portfolio, an increase in foreign exchange losses of $4.2 million and an increase of $7.4 million of deferred income taxes in the year.

KEY ACHIEVEMENTS

As announced in February 2019, management of the Trust committed to a strategic plan to narrow the gap between the trading price of the Trust’s units and net asset value ("NAV")[(2)] , while continuing to build the underlying value of the business. We are pleased with our progress to date as discussed below.

In the year ended December 31, 2019, the Trust successfully disposed of all its non-core assets, including its entire renewable power segment and certain non-core income properties comprising over 380,000 square feet ("sf") of gross leasable area ("GLA"). Aggregate cash proceeds of $111.5 million were generated from these asset sales.

During the year ended December 31, 2019, the Trust successfully completed its first substantial issuer bid ("SIB"), which was the first tranche of the Trust's commitment to repurchase up to $100 million of units. The Trust purchased for cancellation 4.0 million units for an aggregate purchase price of $32.0 million. Subsequent to December 31, 2019, the Trust announced its intention to commence its second SIB, pursuant to which the Trust has offered to purchase from unitholders of the Trust up to 4.0 million units at a price of $8.25 per unit for an aggregate purchase price of $33.0 million. The offer commenced on February 7, 2020 and will expire on March 16, 2020.

As at December 31, 2019, the Trust had a cash balance of $117.8 million and funds available under its revolving credit facility of $9.3 million, which will fund the upcoming SIB and future investments in the Trust’s existing development projects. The Trust’s debt to total asset value as at December 31, 2019 was 12.8%, down from 19.0% as at September 30, 2019 and 24.4% as at December 31, 2018.

During the three months and year ended December 31, 2019, the Trust invested $20.5 million and $47.4 million, respectively, including transaction costs, into its existing development opportunities which have continued to progress towards key milestones and/or completion. Notable highlights for the Trust’s development projects are detailed below.

During the three months and year ended December 31, 2019, the Trust’s equity investment in Axis Condominiums in downtown Toronto generated earnings of $1.4 million and $16.3 million, respectively, as the project completed unit occupancies. We are extremely pleased with the success of the investment, which has generated an internal rate of return ("IRR") for the Trust of approximately 60%.

During the three months and year ended December 31, 2019, the Trust invested an additional $10.8 million in the Trust's Hard Rock/Virgin Hotels Las Vegas ("Hard Rock") investment. As at December 31, 2019, the Trust's 10% investment in Hard Rock had a fair value of $48.6 million. Subsequent to December 31, 2019, the Hard Rock closed to the public and construction began on the redevelopment/conversion of the property. The grand re-opening as The Virgin Hotels Las Vegas is slated for late 2020.

In the year ended December 31, 2019, development continued to progress on our Zibi development. Zibi is a 34-acre mixed-use waterfront development along the Ottawa River in Gatineau, Quebec and Ottawa, Ontario. The project is a multi-phase development that includes over 4.0 million sf of density consisting of over 1,800 residential units and over 2.0 million sf of commercial space. Land servicing on both the Ontario and Quebec lands continues and construction is underway on the project's next residential building, Kanaal, a 71-unit condominium building in Ottawa that is expected to occupy in 2020. In total, there is over 630,000 sf of residential rental, retail and commercial space in various planning / development stages at Zibi, of which 78% of the retail and commercial space has been pre-leased as of December 31, 2019. Tenants include the Federal Government of Canada and Spaces, an Amsterdam-based creative workspace provider. Spaces will open two new co-working facilities in the Zibi

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development with approximately 29,000 sf of vibrant flexible workspace in downtown Gatineau and approximately 26,000 sf of co-working space in the Ottawa waterfront, which will be connected by a second storey walkway.

During the year ended December 31, 2019, the Trust, as part of CMHC's Rental Construction Financing initiative, closed on $357 million of financing (at the project level) on its first block ("Block 8") of its purpose-built rental community in Toronto’s West Don Lands neighbourhood (''West Don Lands''). Construction on Block 8 commenced in the fourth quarter of 2019 and will comprise 770 rental units, of which 30% are affordable. As a result of progress achieved to date on Block 8, a fair value gain of $21.3 million (at 100% project level) was recognized in the fourth quarter of 2019, as supported by a third-party appraisal. The Trust has a 25% interest in the development.

During the year ended December 31, 2019, the Brightwater development reached a key development milestone as Mississauga City Council unanimously approved the rezoning of the entire site. Brightwater is a 72-acre waterfront development in Mississauga's Port Credit. Highlights of the draft master plan proposal include nearly 3,000 residential units and 400,000 sf of commercial space upon completion. In 2019, significant advancements were also made on environmental clean-up with the source remediation program now complete and vertical construction expected to commence in 2021. The Trust has a 23.3% interest in the project.

Development projects are key drivers of future growth for the Trust and are expected to generate attractive returns and future cash flows as milestones are achieved. The Trust expects its development projects will provide attractive profits to the Trust upon their respective completion dates and will contribute to increased value for unitholders over the longer term. The Trust generally targets a pre-tax IRR of at least 15-20% on new equity investments in residential and mixed-use development projects.

RESULTS HIGHLIGHTS

DEVELOPMENT AND INVESTMENT HOLDINGS

For the three months and year ended December 31, 2019, development and investment holdings generated net income of $8.0 million and $19.4 million, respectively, compared with $3.8 million and $0.9 million, respectively, in the same periods in the prior year. During the three months and year ended December 31, 2019, the Trust's share of income from equity accounted investments included income generated from the completion of the Axis Condominium project and net fair value gains recorded at the investment level supported by third-party appraisals, with no similar adjustments recorded in the comparative periods.

LENDING PORTFOLIO

During the three months and year ended December 31, 2019, the Trust recognized a net loss of $0.4 million and net income of $10.4 million, respectively, on the lending portfolio, a decrease from net income of $3.6 million and $15.6 million, respectively, in the same periods in the prior year. The decrease was primarily attributable to a lower loan balance outstanding compared with the prior periods. Additionally, in the three months ended December 31, 2019, a loan loss provision of $2.4 million was recognized relating to a loan, the value of which was determined based on the net realizable value of the underlying real estate properties and estimated transaction costs.

INCOME PROPERTIES

During the three months ended December 31, 2019, the Trust recorded net income of $22.8 million compared with $2.1 million in the same period in the prior year from its income properties portfolio. The increase relative to the comparative period was driven by net fair value gains of $21.1 million in the period, primarily due to an increase in value of 49 Ontario Street. The Trust has recently submitted a rezoning application in respect of the site to pursue increased density of the asset.

During the year ended December 31, 2019, the Trust generated net income of $21.1 million compared with $9.3 million in the prior year. The increase was primarily due to the above-mentioned net fair value gains, partially offset by fair value losses of $6.1 million recorded on non-core income properties which were sold in 2019. In addition, the variance was due to $4.8 million of income and fair value gains recorded in the prior period related to marketable securities, which were disposed at the end of the second quarter of 2018.

OTHER[(1) ]

The Other segment recorded a net loss of $6.2 million for the three months ended December 31, 2019 compared with a net loss of $2.2 million in the same period in the prior year. The Other segment recorded a net loss of $23.0 million for the year ended December 31, 2019 compared with a net loss of $14.9 million in the prior year. The variances were primarily due to an income tax expense of $3.0 million and $7.1 million recorded for the three months and year ended December 31, 2019, respectively, related to the above noted increase in net income.

(1) Includes other Trust amounts amounts not specifically related to the segments.

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UNITHOLDERS' EQUITY

As at December 31, 2019, total unitholders' equity per unit of $8.25 increased compared to total unitholders' equity per unit of $7.99 as at September 30, 2019 and $8.13 per unit as at December 31, 2018. The increase in total unitholders' equity per unit for the three months and year ended December 31, 2019, was primarily due to the aforementioned increase in net income which exceeded the Trust's distributions to unitholders.

NET ASSET VALUE ("NAV")

AAs at December 31, 2019, the NAV per unit was $8.75 compared with total unitholders' equity of $8.25 per unit. The variance was due to a market value adjustment of $34.0 million (September 30, 2019 - $29.9 million) which included the net impact of market value gains on equity accounted investments. Market value gains recorded during the fourth quarter of 2019 primarily related to the Brightwater and Lakeshore East developments, as supported by independent third-party appraisals. The market value gain on the Lakeshore East development was the result of land appreciation, as supported by market comparables, including Waterfront Toronto’s appraisal for the 12-acre Quayside site, which is immediately adjacent to our 5.3-acre Lakeshore East development. The market value gain on the Brightwater development was a result of progress on the investment along with significant milestones met during the period which included the achievement of municipal approvals, as discussed above. The above-mentioned market value gains were partially offset by a corresponding increase in the related deferred tax adjustments and the decrease in the market value adjustment related to the completion of the Axis Condominium project and the disposition of the renewable power portfolio as the realization of income and losses, respectively, are now reflected in book value.

As at December 31, 2019, the NAV per unit of $8.75 was comparable with NAV per unit of $8.74 in the prior year. As discussed above, fair value gains recorded during the year were offset by the Trust's distributions to unitholders as well as the net decrease in market value adjustments primarily related to the sale of the renewable power portfolio. Given the long-term nature of the Trust's development investments the Trust believes providing annual updates to NAV is more useful to readers. Going forward, the Trust will disclose NAV on an annual basis only, timed with the external appraisal process which occurs at year end.

Market value adjustments are reflected only in NAV, which is a non-IFRS measure. The Trust believes that incorporating an annual market value adjustment is a more useful measure to value development assets. As development projects progress toward completion and/or reflect information from recent market transactions, we expect both unitholders' equity and NAV to increase based on expected growth and cash flows from these investments. The Trust relies on annual NAV per unit as a measure of value creation including the market value adjustments on its equity accounted investments. The closest IFRS measure to NAV per unit is unitholders' equity per unit. For further details and reconciliations regarding non-IFRS measures, where applicable, to the consolidated financial statements, please refer to the "Financial Overview" section in the Management's Discussion and Analysis ("MD&A") under the heading "Reconciliation of Net Asset Value to Total Unitholders' Equity".

CASH GENERATED FROM OPERATING ACTIVITIES - CONTINUING OPERATIONS

Cash generated from operating activities (continuing operations) for the three months ended December 31, 2019 was $3.1 million compared with a minimal balance generated from operating activities in the same period in the prior year. The increase was due to the settlement of the asset management fees payable to DAM, pursuant to the Management Agreement, in units which commenced during the second quarter of 2019.

Cash generated from operating activities (continuing operations) for the year ended December 31, 2019 was $28.6 million, an increase of $21.0 million compared to the prior year due to the net impact of working capital changes primarily related to the receipt of cash advances from the Axis Condominium development.

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FINANCIAL HIGHLIGHTS OF THE TRUST

FINANCIAL HIGHLIGHTS OF THE TRUST
For the periods endedDecember 31,	Three months endedDecember 31,	Year-endedDecember 31,
	2019 2018	2019 2018
Consolidated results of operations Net income Net income from continuing operations Net operating income ("NOI")(1)(2) Cash generated from operating activities from continuing operations Net income per unit(1) Net income from continuing operations per unit(1) Cash generated from operating activities from continuing operations per unit (1) Distributions declared and paid per unit Units outstanding – end of period Units outstanding–weighted average	$ 19,923 6,995 24,133 7,293 5,372 8,092 3,062 7 0.29 0.10 0.35 0.10 0.04 — 0.10 0.10 68,763,987 72,592,822 68,581,227 72,437,648	$ 32,331 $ 13,902 27,977 10,865 38,915 28,717 28,597 7,609 0.47 0.19 0.41 0.15 0.42 0.10 0.40 0.40 68,763,987 72,592,822 66,690,503 72,361,187

(1) For the Trust's definition of the following non-IFRS measures: NOI, net income per unit, net income from continuing operations per unit, and cash generated from operating activities from continuing operations per unit and a reconciliation of NOI to net income (loss), please refer to the Non-IFRS Measures and Other Disclosures section of this MD&A.

(2) Excludes the renewable power-discontinued operations.

	December 31,	December 31,	September 30,	September 30,	December 31,	December 31,
As at		2019		2019		2018
Consolidated financial position
Total unitholders' equity	$	567,551	$	546,948	$	590,258
Total unitholders' equity per unit		8.25		7.99		8.13
NAV⁽¹⁾		601,592		576,852		634,650
NAV per unit⁽¹⁾		8.75		8.43		8.74
Total debt		89,269		123,000		198,654
Total assets		696,141		795,384		813,307
Cash		117,787		7,610		46,730
Debt-to-asset value⁽¹⁾		12.8%		19.0%		24.4%

(1) For the Trust's definition of the following non-IFRS measure: NAV, NAV per unit and debt-to-asset value, and a reconciliation of NAV to total unitholders' equity, please refer to the Non- IFRS Measures and Other Disclosures section and Financial Overview-Reconciliation of Net Asset Value to Total Unitholders' Equity section of this MD&A.

NET INCOME (LOSS) BY OPERATING SEGMENTS FROM CONTINUING OPERATIONS

For the periods endedDecember 31,	Three months ended	Year-ended
	2019 2018(2)	2019 2018(2)
Development and investment holdings Lending portfolio Income properties Other(1)	$ 7,967 $ 3,801 (427) 3,607 22,770 2,098 (6,177) (2,213)	$ 19,427 $ 903 10,445 15,550 21,097 9,315 (22,992) (14,903)
Total	$ 24,133 $ 7,293	$ 27,977 $ 10,865

(1) Includes other Trust amounts not specifically related to the segments.

(2) Certain prior year comparative results have been reclassified to conform to the current year's consolidated financial statement presentation.

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RECONCILIATION OF NET ASSET VALUE TO TOTAL UNITHOLDERS' EQUITY

The closest IFRS measure to NAV is total unitholders' equity. The table below provides the reconciliation of NAV to total unitholders' equity:

		Development	Development
			and
As at December 31, 2019			investment holdings			Lending portfolio			Income properties			Other(1)			Total
TOTAL UNITHOLDERS' EQUITY(2)		$	292,447		$	64,705		$	111,175		$	99,224		$	567,551
Market value adjustment to equity accounted investments(3)			40,406			—			—			—			40,406
Deferred income taxes adjustment			—			—			—			(6,365)			(6,365)
NAV		$	**332,853 **		$	**64,705 **		$	**111,175 **		$	**92,859 **		$	601,592
NAV PER UNIT		$	**4.84 **		$	**0.94 **		$	**1.62 **		$	**1.35 **		$	8.75

		Development	Development									Renewable
			and									power-
As at December 31, 2018			investment holdings			Lending portfolio			Income properties		discontinued operations				Other(1)			Total
TOTAL UNITHOLDERS' EQUITY(2)		$	254,804		$	142,220		$	101,962		$	64,184		$	27,088		$	590,258
Market value adjustment to equity accounted investments(3)			39,870			—			—			—			—			39,870
Market value adjustment to renewable power assets			—			—			—			10,527			—			10,527
Deferred income taxes adjustment			—			—			—			—			(6,005)			(6,005)
NAV		$	**294,674 **		$	**142,220 **		$	**101,962 **		$	**74,711 **		$	**21,083 **		$	634,650
NAV PER UNIT		$	**4.06 **		$	**1.96 **		$	**1.40 **		$	**1.03 **		$	**0.29 **		$	8.74

(1) Other includes Trust and segment level cash and net working capital balances.

(2) Total unitholders' equity includes working capital balances as allocated to each respective segment.

(3) For additional details on the Trust's equity accounted investments market value adjustment, please refer to Equity Accounted Investments Market Value Adjustments Included in NAV - Methodology within section 2.1 of this MD&A.

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1.5 HIGHLIGHTS BY REPORTABLE OPERATING SEGMENTS FROM CONTINUING OPERATIONS

The charts and tables below summarize our consolidated net assets attributable to unitholders of the Trust[(1)] as at December 31, 2019 by operating segment and geographic allocation, excluding cash and the Trusts' other consolidated working capital, including tax.

OPERATING SEGMENT ALLOCATION

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• (1) For the Trust's definition of net assets attributable to unitholders of the Trust, please refer to the Non-IFRS Measures and Other Disclosures section of this MD&A.

• (2) As at December 31, 2019, this segment includes under development and completed investments of 47.8% (December 31, 2018 - 36.7%) and income-producing investments with redevelopment potential of 14.7% (December 31, 2018 - 13.8%).

GEOGRAPHIC ALLOCATION

GEOGRAPHIC ALLOCATION
	December 31,	December 31,
As at	2019	2018⁽³⁾
Toronto and GTA	71.3%	66.9%
Ottawa / Gatineau	11.5%	7.7%
United States	10.4%	8.0%
British Columbia	4.0%	8.2%
Saskatchewan	2.6%	3.5%
Other Ontario	0.2%	2.9%
Other Western Canada	—%	2.8%
Total	100.0%	100.0%

(3) Excludes the renewable power segment. As at December 31, 2019, the Trust sold its renewable power portfolio for gross cash proceeds of $63.7 million.

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1.6 SUMMARY OF DEVELOPMENT AND INVESTMENT HOLDINGS AND INCOME PROPERTIES

DEVELOPMENT HOLDINGS (Total assets of $66.2 million)

Empire Lakeshore (Etobicoke, Ontario)

Empire Lakeshore, in which the Trust has an 80% interest in relation to participating loans, is a condominium development located in Etobicoke, Ontario. The development consists of two towers: the Water Tower and the Sky Tower, at 49 and 66 storeys, respectively. With 99% of the 1,280 total condominium units sold, the project is expected to be completed and occupied in phases through to the second quarter of 2020.

Empire Brampton (Brampton, Ontario)

Empire Brampton, in which the Trust has an interest of 78.8%, is a low-rise project that is substantially completed. Amounts outstanding pertaining to this investment represent customary cash hold backs expected to be released in 2020.

INVESTMENT HOLDINGS (Total assets of $48.7 million)

Hard Rock/Virgin Hotels Las Vegas (Las Vegas, Nevada)

The Hard Rock in Las Vegas, Nevada, in which the Trust has a 10% interest, is planning to open as a re-conceptualized and revitalized Virgin Hotels in late 2020. The hotel will include 1,504 suites, a 60,000 sf fully renovated casino and world class restaurants. The property is located at 4455 Paradise Road in Las Vegas on 30 acres of land and is situated 1 mile east of the strip and 2 miles from the McCarran International Airport.

EQUITY ACCOUNTED INVESTMENTS (Net assets of $186.7 million)

Canary Block 10 (Toronto, Ontario)

The Trust's investment in Canary Block 10 includes a proposed 225-unit residential rental building, located within the Canary District, adjacent to the West Don Lands and Distillery District in downtown Toronto.

Zibi Development (Ottawa, Ontario)

Zibi is a 34-acre mixed-use waterfront development along the Ottawa River in Gatineau, Quebec and Ottawa, Ontario. The project is a multi-phase development that includes over 4.0 million sf of density consisting of over 1,800 residential units and over 2.0 million sf of commercial space. Land servicing on both the Ontario and Quebec lands continues and construction is underway on the project's next residential building, Kanaal, a 71-unit condominium building in Ottawa, expected to occupy in 2020. In total, there is over 630,000 sf of residential rental, retail and commercial space in various planning / development stages at Zibi, of which 78% of the retail and commercial space has been pre-leased as of December 31, 2019.

Brightwater Development (Mississauga, Ontario)

Brightwater (formerly referred to as ''Port Credit'') is a 72-acre waterfront property for development in Mississauga's Port Credit area, with plans to transform the site into a complete, vibrant and diverse waterfront community. The site is expected to be redeveloped into a large master-planned residential/mixed-use community. Highlights of the draft master plan proposal include nearly 3,000 residential units and 400,000 sf of retail and commercial space. During the year ended December 31, 2019, significant advancements were made on the remediation program with the environmental cleanup; the source remediation program is now complete and vertical construction is expected to commence in 2021.

Frank Gehry Development (Toronto, Ontario)

The Frank Gehry development, designed by renowned architect Frank Gehry, is slated to comprise two landmark residential towers, each in excess of 80 storeys. The project will consist of over 80,000 sf of multi-level luxury retail opportunities, including a potential hotel component and an art gallery. The development is located at the intersection of King Street West and Duncan Street in downtown Toronto.

Lakeshore East Development (Toronto, Ontario)

The Lakeshore East development is a 5.3-acre waterfront property in downtown Toronto adjacent to a planned investment by Sidewalk Labs, a sister company of Google. The project is in the pre-development and planning stages and has approximately 1 million sf of density to be realized.

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100 Steeles (Toronto, Ontario)

100 Steeles is currently a 59,000 sf income-producing retail property that is 97.1% leased, located north of Toronto, steps away from the proposed Yonge-North subway extension. 100 Steeles is planned for much higher density beyond current zoning that would include over 1 million sf of residential and mixed-use development.

West Don Lands (Toronto, Ontario)

West Don Lands is a purpose-built multi-family rental apartment community in Toronto's downtown east end adjacent to the Distillery District and the Canary District. The development will feature approximately 1,500 rental units including an affordable component, as well as ancillary retail and potential office space. The first fully-zoned block for development (Block 8) commenced construction in the fall of 2019 and features 770 rental units and 4,000 sf of retail space.

Plaza Bathurst Development (Toronto, Ontario)

The Plaza Bathurst investment includes two properties which are located at 6035 Bathurst Street and 388-390 Dupont Street in the GTA. The Bathurst property is a 6,000 sf commercial property and the Dupont property is a 19,000 sf fully leased distribution centre.

Plaza Imperial Development (Toronto, Ontario)

The Plaza Imperial investment includes two properties which are located at 25 Imperial Street and 374 Dupont Street. The Imperial Street property is a 23,000 sf office property and the Dupont Street property is an 11,000 sf fully leased commercial property.

Seaton Development (Pickering, Ontario)

The Seaton development is a fully-zoned 395-acre land and housing development in the city of Pickering, Ontario.

Axis Condominiums (Toronto, Ontario)

Axis Condominiums is a 38 storey development, located in downtown Toronto, comprising over 500 units and retail space on the ground floor. The project is now fully occupied and completed.

Queen & Mutual (Toronto, Ontario)

Queen & Mutual is a mixed-use condominium development, located in downtown Toronto. The building is designed by IBI Architects and is expected to include 356 residential condo units, retail uses and community space. The investment acquired various retail investment properties located at the Mutual Street and Queen Street East intersection.

IVY Condominiums (Toronto, Ontario)

IVY Condominiums is located in downtown Toronto’s garden district close to the Eaton Centre, Dundas subway station and many restaurants.

INCOME-PRODUCING CORE PROPERTIES ($200.9 million)

49 Ontario Street (Toronto, Ontario)

49 Ontario Street is an office property wholly owned by the Trust. The 87,000 sf income property is located in downtown Toronto close to the financial district in an area undergoing extensive redevelopment.

10 Lower Spadina (Toronto, Ontario)

10 Lower Spadina is an office property wholly owned by the Trust. This 60,000 sf, 7-storey building is located on Toronto's prime waterfront, in close proximity to the financial district and transit, with redevelopment potential.

349 Carlaw (Toronto, Ontario)

349 Carlaw is an office property wholly owned by the Trust. This 33,000 sf, 3-storey building is located in a mixed commercial and residential neighbourhood in close proximity to Toronto's Queen Street neighbourhood.

Sussex Centre (Mississauga, Ontario)

Sussex Centre is a 50.1% co-owned income property with Dream Office Real Estate Investment Trust ("Dream Office REIT"). The 652,000 sf centre includes 2 buildings located in Mississauga, Ontario, offering prime office and retail space.

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2. REPORTABLE OPERATING SEGMENTS RESULTS OF OPERATIONS

2.1 DEVELOPMENT AND INVESTMENT HOLDINGS, INCLUDING EQUITY ACCOUNTED INVESTMENTS

As at December 31, 2019, our development and investment holdings, including equity accounted investments, consisted of approximately $301.7 million (December 31, 2018 - $251.1 million) of net assets. The following represents the Trust's net assets, which include the following investments:

Investment Sector Accounting treatment Status Economic interest(1)% Expected completion(2)	Asset value	At 100%project level
	December 31, 2019 December 31, 2018	% of sold or leased / occupied Units (#) or sq. ft. (000s)
Investment holdings
Hard Rock/Virgin Hotels Las Vegas(3) Hospitality Fair value Income-producing 10.0% 2020 Other Retail Fair value Income-producing N/A N/A	$ 48,640 $ 39,965 96 13,879	86.3% 1,504 suites N/A 279 sf
Total investment holdings	$ 48,736 $ 53,844
Development holdings
Empire Brampton Residential Fair value Substantially completed 78.8% Q3 2017⁽⁴⁾ Empire Lakeshore Residential Fair value Construction 80.0% Q4 2019 - Q2 2020	$ 2,126 $ 3,430 64,085 61,335	100.0% 685 units 99.3% 1,280 units
Total development holdings	$ 66,211 $ 64,765
Total development and investment holdings(5)	$ 114,947 $ 118,609
Total equity accounted investments(5) Total development and investment holdings, including equity accounted investments Market value adjustments to equity accounted investments included in NAV(6) NAV per unit	$ 186,713 $ 132,528 $ 301,660 $ 251,137 $ 40,406 $ 39,870 $ 4.84 $ 4.06

(1) Represents debt and equity interests in the underlying projects.

(2) The expected completion dates are estimated by the Asset Manager. The estimates are based on information provided by the development project manager regarding the expected completion dates and development status as at December 31, 2019 and are subject to change.

(3) % occupied based on a year to date average for the year ended December 31, 2019.

(4) The Empire Brampton low-rise project was considered substantially complete during the third quarter of 2017. The amount outstanding represents customary cash hold backs expected to be received by the Trust during 2020.

(5) For additional details on the Trust's assets, please refer to the Summary of Development and Investment Holdings, and Income Properties, within section 1.6 of this MD&A.

(6) For additional details on the Trust's market value adjustments to equity accounted investments, please refer to Equity Accounted Investments Market Value Adjustments Included in NAV - Methodology within section 2.1 of this MD&A.

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A summary of the development and investment holdings results, including equity accounted investments, is below:

For the periods endedDecember 31,	Three months ended	Year-ended
	2019 2018	2019 2018
Net income (loss) - development holdings and equity accounted investments Net income (loss)-investment holdings	$ 9,109 $ 1,325 (1,142) 2,476	$ 24,741 $ (2,164) (5,314) 3,067
Total net income	$ 7,967 $ 3,801	$ 19,427 $ 903

For the three months and year ended December 31, 2019, development and investment holdings generated net income of $8.0 million and $19.4 million, respectively, compared to $3.8 million and $0.9 million, respectively, in the comparative periods. During the three months and year ended December 31, 2019, development holdings and equity accounted investments generated income from the completion of the Axis Condominiums project and net fair value gains at the investment level supported by third party appraisals, with no similar adjustments recorded in the comparative periods. During the year ended December 31, 2019, investment holdings generated a fair value loss of $3.3 million due to the disposal of the Trust's non-core legacy retail investment and foreign currency losses of $2.1 million related to the Hard Rock investment. To date, the Hard Rock investment has recognized cumulative foreign exchange losses of $0.1 million.

DEVELOPMENT HOLDINGS, INCLUDING EQUITY ACCOUNTED INVESTMENTS

The tables below provide a continuity of the development holdings balance, including equity accounted investments, for the periods indicated:

												Equity
			Empire			Empire						accounted
For the three months ended December 31, 2019			Brampton			Lakeshore			Subtotal			investments			Total
Balance as at September 30, 2019		$	2,578		$	64,085		$	66,663		$	170,141		$	236,804
Advances/investments/share of income			—			—			—			17,056			17,056
Distribution/capital repayment			(540)			—			(540)			(484)			(1,024)
Fair value adjustments			88			—			88			—			88
Balance as at December 31, 2019		$	**2,126 **		$	**64,085 **		$	**66,211 **		$	**186,713 **		$	252,924

												Equity
			Empire			Empire						accounted
For the year ended December 31, 2019			Brampton			Lakeshore			Subtotal			investments			Total
Balance as at December 31, 2018		$	3,430		$	61,335		$	64,765		$	132,528		$	197,293
Advances/investments/share of income			—			2,750			2,750			54,669			57,419
Distribution/capital repayment			(1,778)			—			(1,778)			(484)			(2,262)
Fair value adjustments			474			—			474			—			474
Balance as at December 31, 2019		$	**2,126 **		$	**64,085 **		$	**66,211 **		$	**186,713 **		$	252,924

DEVELOPMENT HOLDINGS

As at December 31, 2019, approximately $86.5 million of the Trust’s total assets were advanced to Empire-related development projects or debt representing approximately 12.4% of the Trust's total assets, excluding the Trust's financial guarantee associated with Empire Lakeshore, which is discussed in Note 27 of the consolidated financial statements.

To date, the Trust has received $30.9 million from the Empire Brampton project, of which $12.0 million represented profit to the Trust in excess of its initial contribution. The timing of the remaining $2.2 million in cash distributions on the project is expected to be released during 2020.

EQUITY ACCOUNTED INVESTMENTS

The Trust participates in various partnerships with other parties for the purpose of investing in residential and mixed-use development projects, which are accounted for using the equity accounted method. As at December 31, 2019, the carrying value of these arrangements was $186.7 million (December 31, 2018 - $132.5 million).

During the three months and year ended December 31, 2019, the Trust contributed $8.4 million and $31.7 million, respectively, to its equity accounted investments, primarily related to the Zibi and Brightwater developments.

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EQUITY ACCOUNTED INVESTMENTS MARKET VALUE ADJUSTMENT INCLUDED IN NAV - METHODOLOGY

As part of its NAV calculation, a non-IFRS measure, the Trust recognized cumulative market value gains of $40.4 million related to equity accounted investments as at December 31, 2019 (September 30, 2019 - $27.0 million; December 31, 2018 - $39.9 million). During the three months ended December 31, 2019, the market value adjustment to equity accounted investments increased by $13.4 million from the prior quarter primarily due to market value gains on Lakeshore East and Brightwater developments, as supported by independent third-party appraisals. During the three months ended December 31, 2019, market value gains of $10.1 million and $5.2 million, respectively, were recognized on the Lakeshore East and Brightwater developments, resulting in cumulative market value gains of $30.9 million and $9.5 million, respectively, as at December 31, 2019. The market value gain on the Lakeshore East development was the result of land appreciation, as supported by market comparables, including Waterfront Toronto’s appraisal for the 12-acre Quayside site, which is immediately adjacent to the 5.3-acre Lakeshore East development. The market value gain on the Brightwater development was a result of progress on the investment along with significant milestones met during the period which included the achievement of municipal approvals. During the year ended December 31, 2019, the market value adjustment increased by $0.5 million from the prior year due to the aforementioned market value gains offset by a market value decrease related to the completion of the Axis Condominium project as the realization of income is now reflected in book value.

The market value adjustment is considered an important element that the Trust has included in its NAV calculation to address the change in risk profile taking into consideration various factors including the progression of each project toward completion and/or reflecting information from recent market transactions that indicate a change in the investment value. Under IFRS and in the Trust’s consolidated financial statements these development investments are equity accounted and are initially recognized at cost and subsequently include the Trust's share of profit or loss. The Trust believes that incorporating an annual market value adjustment is a more useful measure to value these development assets that would not ordinarily be captured within IFRS and the Trust's consolidated financial statements. In calculating the annual market value adjustment on the equity accounted development investments, the Trust obtains independent third-party appraisals annually or as significant development milestones are achieved. For those projects in active development or construction, the Trust uses the discounted cash flow methodology in determining the market value adjustment. The discounted cash flow model utilizes various assumptions including, but not limited to: the risk and timing of expected cash flows, and the successful completion of the projects on time and on budget. Assuming consistent market conditions, the development projects are expected to continue to generate market value increases as they continue to advance closer to their completion dates.

INVESTMENT HOLDINGS

The tables below provide a continuity of the investment holdings balance for the periods indicated:

			Hard Rock/
			Virgin Hotels
For the three months ended December 31, 2019			Las Vegas			Other			Total
Balance as at September 30, 2019		$	38,807		$	276		$	39,083
Advances/investments			10,795			—			10,795
Fair value adjustments			(962)			(180)			(1,142)
Balance as at December 31, 2019		$	**48,640 **		$	**96 **		$	48,736

			Hard Rock/
			Virgin Hotels
For the year ended December 31, 2019			Las Vegas			Other			Total
Balance as at December 31, 2018		$	39,965		$	13,879		$	53,844
Advances/investments			10,795			—			10,795
Distribution/capital repayment/disposal			—			(10,307)			(10,307)
Fair value adjustments			(2,120)			(3,476)			(5,596)
Balance as at December 31, 2019		$	**48,640 **		$	**96 **		$	48,736

During the three months and year ended December 31, 2019, the Trust invested an additional $10.8 million in the Hard Rock. Subsequent to the year ended December 31, 2019, construction began on the redevelopment/conversion of the property to The Virgin Hotels Las Vegas with a grand re-opening slated for late 2020.

In the year ended December 31, 2019, the Trust sold components of its non-core legacy retail investment for cash proceeds of $10.3 million, recognizing a fair value loss of $3.3 million upon disposition.

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2.2 LENDING PORTFOLIO

The Trust invests in mortgages and loans secured by all types of residential and commercial real estate property that represent an acceptable underwriting risk. Working within these risk parameters, the Trust also invests in higher-yielding development and construction loans, bridge loans and mezzanine loans, where we are comfortable with the underlying security, guarantees and covenants of the borrower.

A summary of the lending portfolio segment results follows:

For the period endedDecember 31,	Three months ended	Year-ended
	2019 2018	2019 2018
Net income (loss)	$ (427) $ 3,607	$ 10,445 $ 15,550
As at		December 31, 2019 December 31, 2018
Number of loans outstanding Lending portfolio balance at amortized cost⁽¹⁾ NAV(2) NAV per unit(2) Security allocation (first mortgages/other) Weighted average effective interest rate (period-end) Weighted average face interest rate (period-end)		7 10 $ 64,705 $ 144,095 64,705 142,220 0.94 1.96 47.7% / 52.3% 69.8% / 30.2% 9.1% 9.6% 6.9% 8.8%
Weighted average remaining term to maturity (period-end) (years)		0.80 1.28

(1) Lending portfolio balance included a loan of $7.3 million (December 31, 2018 - $16.6 million) that is classified as FVTPL.

(2) For the Trust's definition of the following non-IFRS measures: NAV, NAV per unit, and a reconciliation to total unitholders' equity, please refer to the Non-IFRS Measures and Other Disclosures section and Financial Overview-Reconciliation of Net Asset Value to Total Unitholders' Equity section of this MD&A.

During the three months and year ended December 31, 2019, the Trust recognized a net loss of $0.4 million and net income of $10.4 million, respectively, on the lending portfolio a decrease from $3.6 million and $15.6 million, respectively, in the same periods in the prior year. The decrease was primarily attributable to a lower loan balance outstanding compared with the prior periods. Additionally, in the three months ended December 31, 2019, the Trust recognized a loan loss provision of $2.4 million, the value of which was determined based on the net realizable value of the underlying real estate properties and estimated transaction costs.

The table below provides a continuity of the lending portfolio balance for the periods indicated:

			December 31,			December 31,
For the years ended			2019			2018
Balance, beginning of year		$	144,095		$	161,432
Add (Deduct):
Lending portfolio advances			119			35,042
Changes in accrued interest balance			(111)			(776)
Provision for lending portfolio losses			(2,350)			—
Interest capitalized to lending portfolio balance			5,029			6,113
Premium (discount) on lending portfolio			752			(3,546)
Lender fees and extension fees received			383			318
Principal repayments at maturity, contractual repayments and prepayments			(83,212)			(54,488)
Balance, end of year⁽¹⁾		$	64,705		$	144,095
Less: current portion			51,216			96,968
Non-current portion of lending portfolio		$	13,489		$	47,127

(1) Lending portfolio balance includes a loan of $7.3 million (December 31, 2018 - $16.6 million) that is classified as FVTPL.

During the year ended December 31, 2019, scheduled loan repayments of $83.2 million were received by the Trust. During the year ended December 31, 2019, the Trust renewed a $10.7 million loan in the Greater Vancouver Area, extending the maturity date to 2020.

We continue to leverage our relationships and expertise to identify opportunities with attractive yields to balance the returns within the lending portfolio and our future expected capital requirements on our development projects. The Asset Manager actively manages the lending portfolio and may decide to renew and extend loans, including those with a maturity date of 12 months from the balance sheet date, in the normal course of business.

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Development loans have historically provided very attractive returns. We believe that we benefit from the Asset Manager's position as an active developer, such that our risk associated with originating development loans is reduced to a certain extent. As a result, the Trust's exposure to residential development and land loans located within the Greater Vancouver Area and the GTA has increased since inception. We believe that real estate lending continues to be valuable by providing a base return while also supporting the overall liquidity objectives of the Trust.

2.3 INCOME PROPERTIES

Revenue from income properties includes base rents, operating expenses and property tax recoveries, lease termination fees, parking income and ancillary income. Revenue recognition under a lease commences when the tenant has a right to use the leased asset. The total amount of contractual rent to be received from operating leases is recognized on a straight-line basis over the term of the lease; a straight-line rent receivable is recorded for the difference between the rental revenue recognized and the contractual amount received. Recoveries from tenants are recognized as revenues in the period that the corresponding costs are incurred and collectability is reasonably assured. Other revenues are recorded as earned.

As at December 31, 2019, the Trust's income property segment was solely comprised of core income properties. Total income properties include three wholly owned office properties and one office property co-owned with Dream Office REIT (TSX: D.UN).

A summary of income property segment results is included in the table below:

As at	December 31, 2019 December 31, 2018	December 31, 2019 December 31, 2018
NAV(1) NAV per unit(1) Income properties at IFRS fair value Amortized balance of mortgages payable	$ 111,175 $ 101,962 1.62 1.40 200,869 224,310 88,988 122,214
(1)For the Trust's definition of the following non-IFRS measures: NAV, NAV per unit, and Measures and Other Disclosures section and Financial Overview-Reconciliation of Ne For the periods endedDecember 31,	a reconciliation to total unitholders' equity, please refer to the Non-IFRS t Asset Value to Total Unitholders' Equity section of this MD&A. Three months ended Year ended 2019 2018 2019 2018 $ 5,848 $ 6,316 $ 23,568 $ 24,071 2,473 3,002 10,618 11,536 22,770 2,098 21,097 4,549 $ 4,359 $ 4,356 $ 16,460 $ 16,233 2,189 2,223 8,001 7,980 22,525 2,180 25,947 4,599
	2019 2018	2019 2018
Income properties revenue NOI(1) Net income(2) Core income properties⁽3⁾ Income properties revenue NOI(1) Net income	$ 5,848 $ 6,316 2,473 3,002 22,770 2,098 $ 4,359 $ 4,356 2,189 2,223 22,525 2,180	$ 23,568 $ 24,071 10,618 11,536 21,097 4,549 $ 16,460 $ 16,233 8,001 7,980 25,947 4,599

(1) For the Trust's definition of the following non-IFRS measures: NOI and a reconciliation of NOI to net income (loss), please refer to the Non-IFRS Measures and Other Disclosures section of this MD&A.

(2) Net income for the year ended December 31, 2018 excludes a fair value adjustment to the Trust's investment in Dream Office REIT units of $3.7 million and dividend income of $1.1 million.

(3) Core income properties are those that the Trust plans to hold for the long-term and non-core income properties are considered non-strategic to management's longterm business plan.

During the three months ended December 31, 2019, the Trust recorded net income of $22.8 million compared with $2.1 million in the same period in the prior year. The increase relative to the comparative period was driven by net fair value gains of $21.1 million in the period, primarily due to an increase in value of 49 Ontario Street. The Trust has recently submitted a rezoning application in respect of the site to pursue increased density of the asset.

During the year ended December 31, 2019, the Trust generated net income of $21.1 million compared with $4.5 million in the prior year. The increase was primarily due to the above-mentioned net fair value gains, partially offset by fair value losses of $6.1 million recorded on non-core income properties which were sold in 2019.

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Operating statistics for core income properties portfolio are as follows:

		December 31,		September 30,		December 31,
As at		2019		2019		2018
Total core income properties portfolio
Number of properties		4		4		10
Owned GLA (in millions of sf)		0.5		0.5		0.6
Occupancy rate (period-end) — including committed		92.8%		92.8%		88.9%
Occupancy rate (period-end) — in-place		88.7%		87.3%		88.0%
Average tenant size (in sf)		8,732		8,567		9,865
Average in-place and committed base rent per sf (period-end)		18.27		18.07		16.98
Weighted average remaining lease term (years)		5.6		5.8		5.2

As at December 31, 2019, the committed occupancy rate for the core income properties was 92.8%, up from 88.9% as at December 31, 2018, primarily due to new lease arrangements on certain core income properties. The weighted average remaining lease term increased to 5.6 years at December 31, 2019, compared to 5.2 years at December 31, 2018, due to the above-mentioned new leasing arrangements as well as the renegotiation of renewal extensions with longer maturity dates.

INCOME PROPERTIES FAIR VALUES AND CONTINUITY

The table below provides a continuity of the income properties balance for the periods indicated:

			December 31,			December 31,
For the years ended			2019			2018
Balance, beginning of period		$	224,310		$	219,656
Add (deduct):
Building improvements			4,195			1,250
Lease incentives and initial direct leasing costs			3,266			6,859
Amortization of lease incentives			(1,626)			(1,260)
Fair value adjustments to income properties			15,064			(2,195)
Disposition of properties			(44,340)			—
Balance, end of period		$	200,869		$	224,310

During the year ended December 31, 2019, the Trust disposed of its remaining non-core income properties for gross proceeds of $44.3 million. Net proceeds were $10.5 million, after the repayment by the Trust or assumption of the mortgages payable by the purchaser.

As at December 31, 2019, the fair value of one income property, 49 Ontario Street, was based on land value when considering the property and its highest and best use. The highest and best use for this property considered the redevelopment potential due to its recent rezoning application submission, thereby the property was valued using the direct comparison approach. The direct comparison approach considered recent activity for similar development/redevelopment sites in downtown Toronto. The appraised value for this wholly owned property was at a higher value than the fair value recorded in the consolidated statements of financial position as it was adjusted for factors specific to the property which included zoning, density and timing assumptions.

During the year ended December 31, 2019, income properties with a total fair value of $200.9 million (December 31, 2018 - $224.3 million) were valued by an independent third-party appraiser at $222.1 million (December 31, 2018 - $224.3 million).

Certain income properties, other than the above noted, are measured at fair value using the income approach, which is derived from the overall capitalization rate method or discounted cash flow method. The fair values of certain income properties at December 31, 2019 were determined by using capitalization rates ("cap rates") of 5.0% to 6.3% (December 31, 2018 – 4.3% to 7.5%), resulting in a weighted average cap rate of 5.9% (December 31, 2018 – 5.9%) and discount rates of 6.0% to 7.3% (December 31, 2018 – 5.8% to 8.8%).

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2.4 CONSOLIDATED TRUST REVIEW OF TOTAL COMPREHENSIVE INCOME (LOSS)

The table below presents summarized consolidated statements of comprehensive income (loss) for the periods indicated:

For the periods endedDecember 31,	Three months ended	Year-ended
	2019 2018	2019 2018
TOTAL INCOME TOTAL EXPENSES Fair value adjustments to income properties	$ 15,404 $ 13,453 (9,672) (8,330) 21,119 505	$ 54,454 $ 39,275 (35,245) (32,863) 15,064 (2,195)
OPERATING INCOME Interest and other income Transaction costs Fair value adjustments to marketable securities	26,851 5,628 821 610 (552) (227) — —	34,273 4,217 2,312 3,313 (1,521) (375) — 3,366
EARNINGS BEFORE INCOME TAX RECOVERY (EXPENSE) INCOME TAX RECOVERY (EXPENSE) Current income tax recovery Deferred income tax recovery (expense)	27,120 6,011 1,469 18 (4,456) 1,264	35,064 10,521 — 18 (7,087) 326
TOTAL INCOME TAX RECOVERY (EXPENSE)	(2,987) 1,282	(7,087) 344
NET INCOME FROM CONTINUING OPERATIONS Income (loss) from discontinued operations Income tax recovery (expense) from discontinued operations - current Income tax recovery (expense) from discontinued operations-deferred	24,133 7,293 (5,397) (333) 7 (3) 1,180 38	27,977 10,865 1,625 4,065 — (9) 2,729 (1,019)
NET INCOME (LOSS) FROM DISCONTINUEDOPERATIONS	(4,210) (298)	4,354 3,037
NET INCOME Other comprehensive income from discontinued operations	19,923 6,995 5,034 575	32,331 13,902 3,979 566
TOTAL COMPREHENSIVE INCOME	$ 24,957 $ 7,570	$ 36,310 $ 14,468

TOTAL INCOME FROM CONTINUING OPERATIONS

Total income for the three months and year ended December 31, 2019, of $15.4 million and $54.5 million, respectively, increased by $2.0 million and $15.2 million, respectively, when compared with the same periods in the prior year. The increase was primarily attributable to an increase in the Trust's share of income from its equity accounted investments. As previously discussed, the increase was due to occupancy income at Axis Condominiums and fair value gains recorded within equity accounted investments.

TOTAL EXPENSES

During the three months ended December 31, 2019, total expenses of $9.7 million increased by $1.3 million compared with the same period in the prior year. During the year ended December 31, 2019, total expenses of $35.2 million increased by $2.4 million compared with the same period in the prior year. This increase was primarily due to a provision for lending portfolio losses recorded within the Trust's lending portfolio.

FAIR VALUE ADJUSTMENTS TO INCOME PROPERTIES

For the three months and year ended December 31, 2019, the Trust recorded fair value gains of $21.1 million and $15.1 million, respectively, compared with $0.5 million and a net fair value loss of $2.2 million, respectively, in the comparative periods. For additional details, refer to the Reportable Operating Segments Results of Operations - Income Properties section of this MD&A.

TRANSACTION COSTS

Transaction costs during the three months and year ended December 31, 2019, were $0.6 million and $1.5 million compared with $0.2 million and $0.4 million in the same periods in the prior year. The year-over-year variance was mainly due to nonrecurring costs related to the Trust's disposition of its non-core income properties and the renewable power portfolio, with no similar activity in the comparative periods.

FAIR VALUE ADJUSTMENT TO MARKETABLE SECURITIES

During the year ended December 31, 2019, the Trust did not record any fair value adjustments in marketable securities compared with fair value gains of $3.4 million in the prior year as all marketable securities were disposed of mid-2018.

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INCOME TAX RECOVERY (EXPENSE)

For the three months ended December 31, 2019, income tax expense was $3.0 million compared to an income tax recovery of $1.3 million in the comparative period. For the year ended December 31, 2019, income tax expense was $7.1 million compared to an income tax recovery of $0.3 million in the comparative period. The year over year variances were primarily due to an increase in deferred tax expense related to the above noted increase in net income driven by fair value gains to income properties and the Trust's share of income from its equity accounted investments recorded during the current periods.

Due to the Trust’s diversified asset mix and active asset management strategy, we expect some degree of variability in current and deferred income tax expense recognized each quarter through the consolidated statement of net income (loss) resulting in an income tax expense (recovery) position. The Trust intends to actively manage the portfolio in a tax-efficient manner.

We are subject to income taxes both federally and provincially in Canada and the United States. Significant judgments and estimates are required in the determination of the Trust's tax balances. Our income tax expense/recovery and deferred tax liabilities/assets reflect management's best estimate of current and future taxes to be paid/recovered. The Trust is subject to tax audits from various government and regulatory agencies on an ongoing basis. As a result, from time to time, taxing authorities may disagree with the interpretation and application of tax laws taken by the Trust in its tax filings.

TAX ATTRIBUTES

INCOME PROPERTIES

We deduct mortgage interest and available tax depreciation on our buildings from our Canadian income properties that generate taxable net operating income. These deductions contribute to the overall tax efficiency of our structure and the tax depreciation helps provide the Trust with tax-sheltered cash flow. Any change in the fair value of income properties is not recognized in the determination of current taxes until the sale of the asset.

NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS

For the three months ended December 31, 2019, the renewable power portfolio recorded a net loss of $4.2 million compared to $0.3 million in the same period in the prior year. For the year ended December 31, 2019, the renewable power portfolio recorded net income of $4.4 million compared to $3.0 million in the prior year. The year over year variances were a result of the aggregate impact of the sale of the renewable power segment. As at December 31, 2019, the Trust sold its renewable power portfolio for gross cash proceeds of $63.7 million where the buyer assumed the assets and liabilities. The Trust recorded a net loss of $1.1 million and realized losses of $4.8 million related to the realization of both the foreign currency translation reserve and the loss from the derivative financial liability hedge.

OTHER COMPREHENSIVE INCOME FROM DISCONTINUED OPERATIONS

During the three months and year ended December 31, 2019, the Trust recorded other comprehensive income from discontinued operations of $5.0 million and $4.0 million compared to $0.6 million in both comparative periods in the prior year. As previously mentioned, during the three months and year ended December 31, 2019, the Trust disposed of its renewable power portfolio, resulting in the realization of both the foreign currency translation and loss from the derivative financial liability hedge into the consolidated statements of net income (loss).

2.5 RELATED PARTY TRANSACTIONS

The Trust and its subsidiaries enter into transactions with related parties that are disclosed in Note 25 of the consolidated financial statements.

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2.6 SELECTED ANNUAL INFORMATION

The Trust's consolidated financial statements have been prepared in accordance with IFRS and are presented in Canadian dollars.

For the years endedDecember 31,			2019					2018(1)					2017(1)
Total income		$	54,454				$	39,275				$	50,002
Net income (loss) from continuing operations			27,977					10,865					(13,040)
Net income from discontinued operations			4,354					3,037					3,568
Net income (loss)			32,331					13,902					(9,472)
TOTAL NET INCOME ATTRIBUTABLE TO
Unitholders		$	32,121				$	13,160				$	(10,319)
Non-controlling interest			210					742					847
Total net income (loss)		$	32,331				$	13,902				$	(9,472)
For the years endedDecember 31,			2019					2018(1)					2017(1)
Total assets		$	696,141				$	813,307				$	852,432
Total non-current liabilities			95,586					165,012					196,618
Total unitholders' equity			567,551					590,258					604,706
NAV			601,592					634,650					641,427
Annualized distributions per unit			0.40					0.40					0.40
Net income (loss) per unit			0.47					0.19					(0.13)
Net income (loss) from continuing operations per unit			0.41					0.15					(0.18)
Total unitholders' equity per unit			8.25					8.13					8.35
NAV per unit			8.75					8.74					8.86

(1) Certain prior period comparative results have been reclassified to conform to the current year's consolidated financial statement presentation.

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3. DISTRIBUTION MEASURES

In any given period, the Trust anticipates that actual distributions paid and payable may differ from cash generated from (utilized in) operating activities. This difference is driven by a number of factors including the impact of leasing incentives and initial direct leasing costs which can fluctuate with lease maturities, renewal terms and the type of asset being leased; changes in non-cash working capital; cash flow from certain development holdings; and the longer-term nature and investment return profile of development holdings.

With the transformation of the business to a core focus on the development and investment holdings segment of our portfolio, the Trust expects that for the foreseeable future, cash generated from (utilized in) operating activities will fluctuate from period to period and may differ from distributions paid and payable in a single reporting period. Because of the long-term nature of the projects in the development and investment holdings segment, cash generated from (utilized in) operating activities from this segment generally does not occur until later in the operating life cycle of the developments. However, these cash flows are relevant in the determination of distributions, as cash flows relating to the project will ultimately be fully received at project completion. The Trust considers these factors among others in evaluating its distribution policy as well as its assessment of cash generated from (utilized in) operating activities over the longer term.

As required by National Policy 41-201, "Income Trusts and Other Indirect Offerings", the following tables outline the differences between cash generated from operating activities, and distributions paid and payable in accordance with the guidelines:

For the periods endedDecember 31,	Three months ended	Year-ended
	2019 2018	2019 2018
Cash generated from operating activities from continuing operations Distributions paid and payable	$ 3,062 $ 7 6,876 7,343	$ 28,597 $ 7,609 28,381 29,300
Excess (shortfall) of cash generated from operating activities over distributionspaid andpayable	$ (3,814) $ (7,336)	$ 216 $ (21,691)

For the three months ended December 31, 2019, distributions paid and payable exceeded cash utilized in operating activities from continuing operations by $3.8 million (three months ended December 31, 2018 – shortfall of $7.3 million). For the year ended December 31, 2019, distributions paid and payable exceeded cash generated from operating activities from continuing operations by $0.2 million (year ended December 31, 2018 – shortfall of $21.7 million).

The following table summarizes net income (loss) from continuing operations and total distributions paid and payable for the periods indicated:

For the periods endedDecember 31,	Three months ended	Year-ended
	2019 2018	2019 2018
Net income from continuing operations Distributions paid and payable	$ 24,133 $ 7,293 6,876 7,343	$ 27,977 $ 10,865 28,381 29,300
Excess (shortfall) of net income from continuing operations over distributionspaid andpayable	$ 17,257 (50)	$ (404) $ (18,435)

For the three months ended December 31, 2019, the Trust's net income from continuing operations exceeded the distributions paid and payable by $17.3 million (three months ended December 31, 2018 – shortfall of $0.1 million).

For the year ended December 31, 2019, distributions paid and payable exceeded the Trust's net income from continuing operations by $0.4 million (year ended December 31, 2018 – shortfall of $18.4 million).

Certain assets and liabilities are recognized at fair value in the consolidated financial statements. Unrealized fair value adjustments and other non-cash items are included in net income (loss) and can fluctuate from period to period. As a result, the Trust anticipates that distributions declared will, in the foreseeable future, continue to vary from net income (loss). The total unrealized fair value adjustments and other non-cash items included in net income (loss) in the consolidated financial statements for the periods indicated are summarized in the following table:

For the periods ended	Three months ended	Year-ended
	2019 2018	2019 2018
Total adjustments to fair values and other non-cash items included in net income from continuing operations	$ (23,976) $ (998)	$ (24,043) $ 3,943

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The total adjustments to fair values and other non-cash items included in net income (loss) from continuing operations comprise: deferred income tax expense/recovery, fair value adjustments in development and investment holdings, share of income (loss) from equity accounted investments, deferred compensation expense, and other non-cash items.

The Trust funds its working capital needs and investment in lease incentives and initial direct leasing costs with cash on hand and its existing revolving credit facility. As at December 31, 2019, the Trust had cash on hand of $117.8 million and $9.3 million of undrawn credit capacity on its revolving credit facility.

To the extent that there are shortfalls in cash flows relative to distributions paid and payable, the Trust may use the existing revolving credit facility as a source of funding. The use of the Trust’s revolving credit facility may involve risks as compared to using cash on hand as a source of funding, such as the risk that interest rates may rise in the future, which may make it more expensive for the Trust to borrow under its revolving credit facility, and the risk associated with increasing the overall indebtedness of the Trust. The Trust will review its distribution policy over time, to ensure the distribution policy is reflective of the Trust’s business and asset profile. The Trust does not anticipate cash distributions will be suspended in the foreseeable future. Accordingly, distributions are considered an economic return of capital until cash distributions from completed development projects are received in future years. The Asset Manager reviews the estimated annual distributable cash flow with the Board of Trustees to assist the Board in determining the targeted distribution amount, taking into consideration the duration of the current assets within the Trust's portfolio and the future investment strategy.

4. CAPITAL RESOURCES AND LIQUIDITY

Our financial position is summarized below:

			December 31,			December 31,
As at			2019			2018
Consolidated financial position
Total unitholders' equity		$	567,551		$	590,258
Total unitholders' equity per unit			8.25			8.13
NAV⁽¹⁾			601,592			634,650
NAV per unit(1)			8.75			8.74
Total debt payable			89,269			198,654
Total assets			696,141			813,307
Cash			117,787			46,730

(1) For the Trust's definition of the following non-IFRS measures: NAV, NAV per unit, and a reconciliation to total unitholders' equity, please refer to the Non-IFRS Measures and Other Disclosures" section and "Financial Overview - Reconciliation of Net Asset Value to Total Unitholders' Equity" section of this MD&A.

The Trust’s primary sources of financing are cash generated from operating activities, lending activities, debt financing and refinancing, and project financing. Our primary uses of capital include: investments in development and investment holdings, equity accounted investments, debt principal repayments, interest payments, mortgage lending, distributions, costs of attracting and retaining tenants, recurring property maintenance, and major property improvements. It is the Trust’s objective to meet all our ongoing obligations with current cash, cash flows generated from operating activities, cash from maturing lending portfolio investments, and cash from financing and refinancing activities. The Trust's revolving credit facility provides additional liquidity and flexibility in support of operations.

SUMMARY OF DEBT

As at December 31, 2019 and December 31, 2018, total debt comprised of the following:

			December 31,			December 31,
As at			2019			2018
Mortgages payable		$	89,269		$	122,684
Term loans			—			75,970
Total debt payable		$	89,269		$	198,654
Unamortized balance of deferred financing costs			(281)			(3,162)
Total debt		$	88,988		$	195,492

As at December 31, 2019, total debt was $89.0 million, a decrease of $106.5 million from December 31, 2018 mainly due to the term loans related to renewable power assets, which were assumed by the purchaser.

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We use the following cash flow performance and debt level indicators to assess our ability to meet or refinance our debt obligations:

			December 31,			December 31,
As at			2019			2018
Weighted average effective interest rate (period-end)⁽¹⁾			3.6%			3.8%
Weighted average face rate of interest (period-end)			3.6%			3.8%
Debt due within one year		$	878		$	32,646
Total assets			696,141			813,307
Debt-to-asset value(2)			12.8%			24.4%
Debt–average term to maturity (years)			2.54			8.06

(1) Weighted average effective interest rate is calculated as the weighted average face rate of interest, net of financing costs of interest-bearing debt, weighted by the size of the respective interest bearing debt instruments in the portfolio.

(2) For the Trust's definition of the following non-IFRS measures: debt-to-asset value, please refer to the Non-IFRS Measures and Other Disclosures section of this MD&A.

The debt-to-asset value as at December 31, 2019 was 12.8%, lower than 24.4% at December 31, 2018 as a result of the disposition of the renewable power portfolio during the year.

Principal repayments and maturity balances on total debt to be repaid each year are as follows:

									Total
									maturity	% of total debt
			Outstanding			Scheduled			balance and	maturities and	Weighted
			balance due			principal			principal	principal	average interest
Debt maturities			at maturity			repayments			repayments	repayments	rate (face)
Mortgages payable
2020		$	—		$	878		$	878	1.0%	3.2%
2021			10,329			645			10,975	12.3%	3.1%
2022			77,318			99			77,416	86.7%	3.7%
Subtotal before undernoted		$	87,647		$	1,622		$	89,269	100.0%	3.6%
Unamortized balance of deferred financing costs (net)			(281)			—			(281)
Total debt		$	**87,366 **		$	**1,622 **		$	88,988

(1) The revolving credit facility matures on July 31, 2021.

As at December 31, 2019, no funds were drawn on the revolving credit facility (December 31, 2018 – $nil) and the funds available under the facility were $8.9 million (December 31, 2018 – $38.0 million), net of $0.4 million (December 31, 2018 – $1.4 million) of letters of credit issued against the facility. During the year ended December 31, 2019, the revolving credit facility was renewed with certain financial covenant requirements amended and the maturity date extended to July 31, 2021.

For the three months and year ended December 31, 2019, regular repayments of mortgages payable and term loans totaled $0.2 million and $1.0 million, respectively (three months and year ended December 31, 2018 - $1.8 million and $4.7 million). During the three months and year ended December 31, 2019, there was $27.0 million of lump sum repayments of mortgages payable related to a non-core income property, which was paid by the Trust.

FINANCIAL COVENANTS

The revolving credit facility, the financial guarantees and certain mortgages on income properties contain financial covenants that require the Trust and/or its subsidiaries to meet certain financial ratios and financial condition tests. A failure to meet these tests could result in default and, if not cured or waived, could result in an acceleration of the repayment in the underlying financing.

The following are financial covenants required to be met by Dream Alternatives Master LP ("DAM LP"), a wholly owned subsidiary of the Trust, under the terms of the revolving credit facility, as at December 31, 2019:

Financial covenant	Financial covenant requirement
Unitholders' equity	≥ $450,000
Interest service coverage ratio(1)	> 2.00
Debt-to-total assets	≤ 50.0%

(1) Calculated on a rolling four fiscal quarter basis.

As at December 31, 2019, the Trust was in compliance with these financial covenants.

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TOTAL EQUITY

As at December 31, 2019, the Trust had 68,763,987 units outstanding and a total unitholders’ equity balance of $567.6 million.

As at	December 31, 2019	December 31,2018
	Number of units Amount	Number of units Amount
Unitholders' equity Retained earnings Accumulated other comprehensive loss	68,763,987 $ 559,370 8,181 —	72,592,822 $ 591,094 3,143 (3,979)
Total unitholders' equity Non-controlling interests	68,763,987 $ 567,551 —	72,592,822 $ 590,258 1,669
Total equity	$ 567,551	$ 591,927

The following table summarizes the changes in the outstanding units and unitholders' equity:

		Units		Unitholders' equity	Unitholders' equity
Total units outstanding on December 31, 2018		72,592,822		$	591,094
Units issued pursuant to the DRIP		271,551			1,779
Deferred units exchanged for Trust units		142,606			1,075
Cancellation of Trust units		(4,876,984)			(39,351)
Units issued as settlement of asset management fee withDAM		633,992			4,773
Total units outstanding on December 31, 2019		**68,763,987 **		$	559,370

As at February 18, 2020, 69,122,857 Trust units were outstanding.

The Deferred Unit Incentive Plan ("DUIP") provides for the grant of deferred trust units ("DTUs") to trustees of the Trust, officers and employees, as well as affiliates, including the Asset Manager. DTUs are granted at the discretion of the trustees of the Trust and receive distributions in the form of income deferred trust units as they are declared and paid by the Trust. As at December 31, 2019, up to a maximum of 3.0 million DTUs were issuable under the DUIP. Distributions on the unvested DTUs are paid in the form of units converted at the market price on the date of distribution. As at December 31, 2019, there were 477,605 deferred trust units and income deferred trust units outstanding (December 31, 2018 – 457,488 units). As at February 18, 2020, 481,691 deferred trust units and income deferred trust units were outstanding.

During the year ended December 31, 2019, the Trust announced that until December 31, 2020, management fees payable to DAM pursuant to the asset management agreement ("Management Agreement") will be satisfied in Trust units. The Trust units will be valued at a NAV per unit of $8.74, the NAV as at December 31, 2018, for purposes of determining the number of units to be issued. DAM agreed to accept units in satisfaction of the management fees in order to increase its ownership stake in the Trust and to preserve the business’s cash to support the cash distributions by the Trust while the Trust executes on its strategic plan. During the year ended December 31, 2019, 633,992 Trust units were issued as settlement of these asset management fees. Subsequent to December 31, 2019, the Trust settled its management fee payable to DAM with the issuance of 358,870 units.

DISTRIBUTION REINVESTMENT AND UNIT PURCHASE PLAN ("DRIP")

On February 20, 2019, the Trust announced the suspension of its Distribution Reinvestment and Unit Purchase Plan ("DRIP") until further notice effective from the February 2019 distribution. Our DRIP entitled unitholders to reinvest all cash distributions into additional units. Of the distributions paid and payable, for the three months and year ended December 31, 2019, $nil and $1.8 million, respectively (three months and year ended December 31, 2018 - $2.5 million and $9.2 million), was reinvested into the DRIP.

DISTRIBUTIONS

The distributable cash flow and amount of monthly distributions to unitholders are determined by the Board of Trustees of the Trust based on distributions received from DAM LP, net of general and administrative expenses, operating and other expenses, and income tax expenses. The Asset Manager forecasts the annual distributable cash flow from the Trust’s operating segments to assist the Board of Trustees in determining the targeted distribution amount.

Our Declaration of Trust provides our trustees with the discretion to determine the percentage payout of income that would be in the best interest of the Trust, which allows for any unforeseen expenditures. As at December 31, 2019, our monthly distribution rate was $0.033 per unit.

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As at	2019 2018
	Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Annualized distribution amount Monthly distribution amount Annualized distribution rate of return⁽¹⁾ DRIP units issued during the quarter	$ 0.400 $ 0.400 $ 0.400 $ 0.400 $ 0.400 $ 0.400 $ 0.400 $ 0.400 0.033 0.033 0.033 0.033 0.033 0.033 0.033 0.033 5.2% 5.3% 5.2% 5.6% 6.4% 5.9% 5.8% 6.4% — — — 271,552 383,952 362,693 360,287 293,323

(1) Annualized distribution rate of return is calculated as the annualized distribution amount divided by the closing price per unit on the TSX at the date specified.

During the year ended December 31, 2019, as previously mentioned, the Trust announced an agreement to satisfy the asset management fees payable to DAM in units of the Trust until December 2020, confirming its commitment to maintain the existing distribution policy at $0.40 per unit on an annual basis.

UNIT BUYBACK PROGRAM

The following table summarizes the Trust's unitholders' equity activity under its SIB and its Normal Course Issuer Bid ("NCIB") program for the periods ended as indicated:

For the periods endedDecember 31,	Three months ended	Year-ended
	2019 2018	2019 2018
Units repurchased (number of units) Total cash consideration	— 140,331 $ — $ 918	4,876,984 1,273,109 $ 38,053 $ 8,350

During the year ended December 31, 2019, the Trust successfully completed a SIB pursuant to which the Trust purchased for cancellation 4.0 million units at a price of $8.00 per unit, for an aggregate purchase price of $32.0 million. Subsequent to December 31, 2019, on February 3, 2020, the Trust announced its second SIB to purchase for cancellation up to 4.0 million units at a price of $8.25 per unit.

From January 1, 2019 to February 18, 2020, a total of 4,876,984 units were purchased at a cost of $38.1 million, including the SIB. From the inception of the Trust's unit buyback program in December 2014 to February 18, 2020, the Trust purchased for cancellation 8.8 million units for a total cost of $62.3 million. From 2014 to February 18, 2020, the Trust's asset manager, DAM, purchased an aggregate of 16.1 million of the Trust's units, including 1.3 million units repurchased under the DRIP and the rest in the open market for its own account, representing approximately 23% of the total units outstanding.

The Trust received acceptance of its Notice of Intention to renew its prior NCIB from the TSX on January 11, 2019. The bid commenced on January 15, 2019 and expired on January 14, 2020. Under the bid the Trust purchased for cancellation 876,984 units through the facilities of the TSX at a weighted average price of $6.90 for a total cost of $6.1 million.

Subsequent to December 31, 2019, the Trust received acceptance of its Notice of Intention to renew its prior NCIB from the TSX on January 16, 2020. The bid commenced on January 20, 2020 and will remain in effect until the earlier of January 19, 2021 or the date on which the Trust has purchased the maximum number of units permitted under the bid. Under the bid the Trust has the ability to purchase for cancellation up to a maximum of 5,256,231 units (representing 10% of the Trust’s public float of 52,562,317 units at the time of entering the bid through the facilities of the TSX). Daily purchases will be limited to 8,281 units which equals 25% of the average daily trading volume during the last six calendar months (being 33,126 units per day), other than purchases pursuant to applicable block purchase exceptions. As at December 31, 2019, the number of issued and outstanding units is 68,763,987.

During the year ended December 31, 2019, the Trust entered into an automatic securities repurchase plan (the "Plan") in order to facilitate purchases of its units under the NCIB. The Plan allows for purchases by Dream Alternatives of units at any time including, without limitation, times when the Trust would ordinarily not be permitted to make purchases due to regulatory restrictions or self-imposed blackout periods. Purchases will be made by the Trust based upon the parameters prescribed by the TSX and the terms of the parties' written agreement. Outside of such restricted or blackout periods, the units may also be purchased in accordance with management’s discretion. The Plan terminated on January 14, 2020. Subsequent to December 31, 2019, the Trust renewed the Plan which will expire on January 19, 2021.

Dream Hard Asset Alternatives Trust 2019 Annual Report | 24

LIQUIDITY

The following table summarizes the Trust's consolidated statements of cash flows from continuing operations for the periods indicated:

For the periods endedDecember 31,	Three months ended	Year-ended
	2019 2018	2019 2018
Cash generated from operating activities Cash generated from investing activities Cash generated utilized in financing activities	$ 3,062 $ 7 87,209 6,199 (40,626) (6,079)	$ 28,597 $ 7,609 83,197 3,370 (92,804) (29,542)

Cash generated from operating activities (continuing operations) for the three months ended December 31, 2019 was $3.1 million compared with a minimal balance generated from operating activities in the same period in the prior year. The increase was due to the settlement of the asset management fees payable to DAM, pursuant to the Management Agreement, in units which commenced during the second quarter of 2019.

Cash generated from operating activities (continuing operations) for the year ended December 31, 2019 was $28.6 million, an increase of $21.0 million compared to the prior year, due to the net impact of working capital changes primarily related to the receipt of cash advances from the Axis Condominium development.

Cash generated from investing activities for the three months and year ended December 31, 2019, was $87.2 million and $83.2 million, respectively, compared to $6.2 million and $3.4 million, respectively, in the comparative periods. The increase was primarily due to the receipt of cash proceeds on non-core asset dispositions and repayments received from the lending portfolio.

Cash utilized in financing activities for the three months and year ended December 31, 2019, was $40.6 million and $92.8 million, respectively, compared to $6.1 million and $29.5 million, respectively, in the comparative periods. The increase for the three month period was due to repayment of the credit facility and the lump sum mortgage repayment on the non-core income property disposed of in the period. For similar reasons, the increase relative to the prior year was driven by above noted repayments as well as the funding of the SIB.

COMMITMENTS AND CONTINGENCIES

Dream Alternatives and its operating subsidiaries are contingently liable under guarantees that are issued in the normal course of business and with respect to litigation and claims that arise from time to time. In the opinion of the Asset Manager, any liability that may arise from such contingencies would not have a material adverse effect on the consolidated financial statements of Dream Alternatives.

COMMERCIAL MORTGAGE SERVICING AGREEMENT

On July 8, 2014, Dream Alternatives Lending Services LP ("Lending Services LP"), a subsidiary of the Trust, entered into a commercial mortgage servicing agreement ("Mortgage Servicing Agreement") with Canadian Mortgage Servicing Corporation ("CMSC") to manage and service the loan portfolio and select other debt investments for the following fees:

• A monthly fee of 1.25 basis points ("bps") (15 bps annually), calculated on the principal amount of each mortgage in the loan portfolio outstanding at the beginning of each month; and

• Origination fees paid by a borrower of up to 1% of the principal amount of each new mortgage investment originated by CMSC and up to 50% of the origination fee paid by a borrower in excess of 1%.

In addition, Lending Services LP reimburses CMSC for all reasonable third-party disbursements and expenses made or incurred in connection with the performance of the services described in the Mortgage Servicing Agreement. The agreement can be terminated upon 90 days' written notice.

OTHER COMMITMENTS

During the year ended December 31, 2019, the Trust, through a subsidiary, continued to provide a guarantee for up to $45.0 million (December 31, 2018 - $45.0 million) pursuant to the requirements of a senior construction loan associated with the Empire Lakeshore residential project. The guarantee will be in place for the term of the construction loan and will proportionately scale down as the construction loan is repaid as unit closings begin to occur. Guarantees of the other underlying development project

Dream Hard Asset Alternatives Trust 2019 Annual Report | 25

loan amounts of third parties are $34.4 million (December 31, 2018 - $7.5 million). As at December 31, 2019, the Trust is contingently liable under guarantees that are issued on certain debt assumed by purchasers of income properties up to an amount of $2.7 million (December 31, 2018 - $44.2 million).

The Trust is contingently liable for letters of credit in the amount of $0.4 million (December 31, 2018 - $1.4 million) that have been provided to support third-party performance.

The Trust may also be contingently liable for certain obligations of joint venture partners. However, the Trust would have available to it the other joint venture partners’ share of assets to satisfy any obligations that may arise.

The Trust has entered into lease agreements that may require tenant improvement costs of approximately $0.1 million (December 31, 2018 - $0.1 million).

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5. QUARTERLY FINANCIAL INFORMATION

	2019 2018(1)
	Q4 Q3 Q2 Q1(1) Q4 Q3 Q2 Q1
TOTAL INCOME TOTAL EXPENSES Fair value adjustments to income properties	$ 15,404 $ 14,574 $ 15,703 $ 8,773 $ 13,453 $ 9,676 $ 4,791 $ 11,355 (9,672) (8,320) (8,457) (8,796) (8,330) (8,053) (8,408) (8,072) 21,119 (6,316) 261 — 505 (476) (114) (2,110)
OPERATING INCOME (LOSS) Interest and other income Transaction costs Fair value adjustments to marketable securities EARNINGS (LOSS) BEFORE INCOME TAX EXPENSE INCOME TAX RECOVERY (EXPENSE) Current income tax recovery (expense) Deferred income tax recovery (expense)	26,851 (62) 7,507 (23) 5,628 1,147 (3,731) 1,173 821 405 446 640 610 612 857 1,235 (552) (539) (445) 15 (227) (12) (60) (77) — — — — — — 615 2,751 27,120 (196) 7,508 632 6,011 1,747 (2,319) 5,082 1,469 (1,469) — — 18 — — — (4,456) 1,089 (3,262) (458) 1,264 (1,905) 965 2
TOTAL INCOME TAX RECOVERY (EXPENSE)	(2,987) (380) (3,262) (458) 1,282 (1,905) 965 2
Net income (loss) from continuing operations Net income (loss) from discontinued operations before income tax recovery (expense) INCOME TAX RECOVERY (EXPENSE) FROM DISCONTINUED OPERATIONS Income tax recovery (expense) from discontinued operations - current Income tax recovery (expense) from discontinued operations - deferred	$ 24,133 $ (576) $ 4,246 $ 174 $ 7,293 $ (158) $ (1,354) $ 5,084 $ (5,397) $ 3,724 $ 2,542 $ 756 $ (333) $ 1,547 $ 1,965 $ 886 7 (3) (3) (1) (3) (2) (4) — 1,180 (290) 2,054 (215) 38 (379) (492) (186)
TOTAL INCOME TAX RECOVERY (EXPENSE) FROM DISCONTINUED OPERATIONS	$ 1,187 $ (293) $ 2,051 $ (216) $ 35 $ (381) $ (496) $ (186)
NET INCOME(LOSS) FROMDISCONTINUEDOPERATIONS	$ (4,210) $ 3,431 $ 4,593 $ 540 $ (298) $ 1,166 $ 1,469 $ 700
TOTAL NET INCOME	$ 19,923 $ 2,855 $ 8,839 $ 714 $ 6,995 $ 1,008 $ 115 $ 5,784
Total other comprehensive income (loss) from discontinued operations	5,034 (302) (765) 12 575 (478) (770) 1,239
TOTAL COMPREHENSIVE INCOME (LOSS)	$ 24,957 $ 2,553 $ 8,074 $ 726 $ 7,570 $ 530 $ (655) $ 7,023
NET INCOME PER UNIT⁽²⁾ NET INCOME (LOSS) FROM CONTINUING OPERATIONS PER UNIT⁽²⁾ TOTAL UNITHOLDERS' EQUITY PER UNIT⁽²⁾ NAV PER UNIT(2)	$ 0.29 $ 0.04 $ 0.12 $ 0.01 $ 0.10 $ 0.01 $ — $ 0.08 0.35 (0.01) 0.06 — 0.10 — (0.02) 0.07 8.25 7.99 8.05 8.04 8.13 8.14 8.23 8.34 8.75 8.43 8.55 8.71 8.74 8.69 8.77 8.86

(1) Certain prior period comparative results have been reclassified to conform to the current year's consolidated financial statement presentation.

(2) For the Trust's definition of the following non-IFRS measures: net income (loss) per unit, net income (loss) per unit from continuing operations, total unitholders' equity per unit, and NAV per unit, please refer to the Non-IFRS Measures and Other Disclosures section of this MD&A.

As a result of the Trust's implementation of its long-term strategy to expand its development and investment holdings segment, the Trust expects that the quarterly/annual results of operations will fluctuate from period to period. This is due to the long-term nature of the projects in the development and investment holdings segment.

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6. NON-IFRS MEASURES AND OTHER DISCLOSURES

We have presented certain non-IFRS measures because we believe these non-IFRS measures are important in evaluating the Trust's underlying operating performance, debt management and our ability to earn and pay cash distributions to unitholders. These non-IFRS measures do not have standardized meanings prescribed by IFRS and may not be comparable with similar measures presented by other issuers. Investors are cautioned not to view non-IFRS measures as alternatives to financial measures calculated in accordance with IFRS.

"Cash generated from (utilized in) operating activities from continuing operations per unit" represents cash generated from (utilized in) operating activities from continuing operations of the Trust divided by the number of units outstanding at the end of the period.

"Debt-to-asset value" represents the total debt payable for the Trust or operating segment divided by asset value of the Trust or operating segment as at the applicable reporting date. This non-IFRS measure is an important measure in evaluating the amount of debt leverage; however, it is not defined by IFRS, does not have a standardized meaning and may not be comparable with similar measures presented by other issuers. A calculation of debt-to-asset value can be found in the Capital Resources and Liquidity section of this MD&A under the heading "Summary of Debt".

"Internal rate of return ("IRR")" for residential development projects is calculated based on the estimated net pre-tax cash flow expected to be generated from each project considering real estate development revenues, expenditures, construction timeline and sale dates; however, it is not defined by IFRS, does not have a standardized meaning and may not be comparable with similar measures presented by other issuers. This non-IFRS measure is an important measure used by the Trust in evaluating the performance of its investments.

"Net assets attributable to unitholders' of the Trust" refers to the net difference between total assets and total liabilities less the amount of assets and liabilities attributable to non-controlling interests. This non-IFRS measure is an important measure in evaluating the Trust’s and Asset Manager’s performance. It is not defined by IFRS, does not have a standardized meaning and may not be comparable with similar measures presented by other issuers. A reconciliation of net assets attributable to unitholders of the Trust can be found in the "Financial Overview-Reconciliation of Net Asset Value to Total Unitholders' Equity" section of this MD&A.

"Market value" represents the carrying value as per the consolidated statements of financial position adjusted for external appraisal values or a discounted cash flow methodology, incorporating expected future cash flows, discount rates, other applicable market information and the reduction in the risk profile of the renewable power projects and equity accounted investments as they are developed or achieve completion milestones by the Trust. The Trust believes that incorporating this adjustment in determining the market value of the asset is a more useful measure to value the renewable power portfolio and equity investments that would not ordinarily be captured within IFRS and the Trust's consolidated financial statements. This non-IFRS measure is an important measure used by the Trust in evaluating the Trust’s and Asset Manager’s performance as it is an indicator of the intrinsic value of the Trust; however, it is not defined by IFRS, does not have a standardized meaning and may not be comparable with similar measures presented by other issuers.

"Net asset value ("NAV")", a non-IFRS measure, represents total unitholders' equity per the consolidated financial statements, adjusted for market value adjustments for both renewable power projects and equity accounted investments (including applicable deferred income tax adjustments) and the unamortized balance of the mortgages payable premiums. A market value adjustment for renewable power projects developed by the Trust is reflected once they become operational and long-term financing is arranged as well as reflecting recent market information that would indicate a change in the renewable power portfolio market value (subject to appraisals). A market value adjustment for equity accounted investments is included to address the reduction in risk profile as each project progresses toward completion and/or reflect information from recent market transactions that indicate a change in the equity investment market value (subject to appraisals). The mortgages payable premiums represent the current unamortized balance of fair value adjustments recorded for these instruments at the Trust's listing date. Since the Trust intends to repay the mortgages at maturity, this historical fair value adjustment is removed for the calculation of the NAV. The Trust believes that incorporating a market value adjustment is a more useful measure to value both the renewable power portfolio and equity accounted investments that would not ordinarily be captured within IFRS and the Trust's consolidated financial statements. The market value adjustments account for the applicable deferred income tax estimates considering the timing of their realization and, if appropriate, will be incorporated into the determination of the NAV. The applicable deferred income tax estimates related to the market value adjustments is calculated either based on income or capital gain rates or a combination thereof. The income tax rates used to determine NAV are dependent on various factors such as anticipated development plans, stage of development and current market trends applicable to the future development plans and will be reviewed on a regular

Dream Hard Asset Alternatives Trust 2019 Annual Report | 28

basis and are subject to change. Excluded from the NAV calculation are any market value adjustments with respect to liabilities as well as commitments/contracts that are not otherwise recorded as liabilities on the Trust's balance sheet. The Trust has not appraised the lending portfolio, as the Trust intends to hold the investments in the lending portfolio until maturity and its term to maturity is within one year, as such this portfolio is considered fairly liquid and fair value approximates amortized cost.

This non-IFRS measure is an important measure used by the Trust in evaluating the Trust’s and Asset Manager’s performance as it is an indicator of the intrinsic value of the Trust; however, it is not defined by IFRS, does not have a standardized meaning and may not be comparable with similar measures presented by other issuers. A reconciliation of NAV to unitholders' equity can be found in the "Financial Overview-Reconciliation of Net Asset Value to Total Unitholders' Equity" section of this MD&A.

"Net asset value ("NAV") per unit" represents the net asset value attributable to unitholders of the Trust divided by the number of units outstanding at the end of the period. This non-IFRS measure is an important measure used by the Trust in evaluating the Trust’s performance as it is an indicator of the intrinsic value of the Trust; however, it is not defined by IFRS, does not have a standardized meaning and may not be comparable with similar measures presented by other issuers. A reconciliation of NAV per unit to total unitholders' equity per unit can be found in the "Financial Overview-Reconciliation of Net Asset Value to Total Unitholders' Equity" section of this MD&A.

"Net income (loss) per unit" represents net income (loss) of the Trust divided by the number of units outstanding at the end of the period.

"Net income (loss) from continuing operations per unit" represents net income (loss) from continuing operations of the Trust divided by the number of units outstanding at the end of the period. The Trust excludes the renewable power segment from its continuing operations as it is classified as discontinued operations.

For the periods endedDecember 31,	Three months ended	Year-ended
	2019 2018	2019 2018
Net income Net income from continuing operations Total units outstanding Net income per unit Net income per unit from continuing operations	$ 19,923 6,995 24,133 7,293 68,763,987 72,592,822 0.29 0.10 0.35 0.10	$ 32,331 $ 13,902 27,977 10,865 68,763,987 72,592,822 0.47 0.19 0.41 0.15

"Net operating income ("NOI")" is defined by the Trust as net income (loss) per the consolidated financial statements adjusted for: income tax expense (recovery), interest expense net of other interest income, depreciation and amortization, transaction costs, debt settlement costs, provision for lending portfolio losses, general and administrative expenses, fair value adjustments to income properties, fair value adjustments to development and investment holdings, and fair value adjustments to marketable securities. This non-IFRS measure is an important measure used by the Trust in evaluating operating performance; however, it is not defined by IFRS, does not have a standardized meaning and may not be comparable with similar measures presented by other issuers. Reconciliations of NOI to net income (loss) can be found in the Non-IFRS Measures and Other Disclosures section of this MD&A under the heading "Reconciliation of Net Income (Loss) to Net Operating Income".

"Total unitholders' equity per unit" represents the total unitholders' equity of the Trust divided by the number of units outstanding at the end of the period.

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RECONCILIATION OF NET INCOME (LOSS) TO NET OPERATING INCOME

			Development and												Total			Renewable -
For the three months ended December 31, 2019			investment holdings			Lending portfolio			Income properties			Other⁽¹⁾			continuing operations			discontinued operations			Total
NET INCOME (LOSS)		$	7,967		$	(427)		$	22,770		$	(6,177)		$	24,133		$	(4,210)		$	19,923
Add (Deduct):
Income tax expense (recovery)			—			—			—			2,987			2,987			(1,187)			1,800
Interest expense net of other interest income			(337)			—			735			(269)			129			372			501
Fair value adjustments to income properties			—			—			(21,119)			—			(21,119)			—			(21,119)
Transaction costs			—			3			87			462			552			—			552
Fair value adjustments to equity accounted investments			(7,711)			—			—			—			(7,711)						(7,711)
Provision for lending portfolio losses			—			2,350			—			—			2,350			—			2,350
General and administrative expenses			—			—			—			2,997			2,997			—			2,997
Fair value adjustments to development and investment holdings			1,054			—			—			—			1,054			—			1,054
Loss on sale of renewable power portfolio			—			—			—			—			—			1,099			1,099
Realized loss from derivative financial liabilities			—			—			—			—			—			2,233			2,233
Realized foreign currency translation loss			—			—			—			—			—			2,613			2,613
NET OPERATING INCOME		$	**973 **		$	**1,926 **		$	**2,473 **		$	**— **		$	**5,372 **		$	**920 **		$	6,292

(1) Other includes Trust and segment level cash and net working capital balances.

			Development and												Total			Renewable -
For the three months ended December 31, 2018			investment holdings			Lending portfolio			Income properties			Other⁽¹⁾			continuing operations			discontinued operations			Total
NET INCOME (LOSS)		$	3,801		$	3,607		$	2,098		$	(2,213)		$	7,293		$	(298)		$	6,995
Add (Deduct):
Income tax recovery			—			—			—			(1,282)			(1,282)			(35)			(1,317)
Interest expense net of other interest income			(278)			—			1,189			(240)			671			909			1,580
Fair value adjustments to income properties			—			—			(505)			—			(505)			—			(505)
Depreciation and amortization			—			—			—			—			—			1,533			1,533
Transaction costs			—			7			220			—			227			—			227
General and administrative expenses			—			—			—			3,735			3,735			—			3,735
Fair value adjustments to development and investment holdings			(2,047)			—			—			—			(2,047)			—			(2,047)
NET OPERATING INCOME		$	**1,476 **		$	**3,614 **		$	**3,002 **		$	**— **		$	**8,092 **		$	**2,109 **		$	10,201

(1) Other includes Trust and segment level cash and net working capital balances.

			Development and												Total			Renewable -
For the year ended December 31, 2019			investment holdings			Lending portfolio			Income properties			Other⁽¹⁾			continuing operations			discontinued operations			Total
NET INCOME (LOSS)		$	19,427		$	10,445		$	21,097		$	(22,992)		$	27,977		$	4,354		$	32,331
Add (Deduct):
Income tax expense (recovery)			—			—			—			7,087			7,087			(2,729)			4,358
Interest expense net of other interest income			(1,350)			—			4,290			(241)			2,699			3,075			5,774
Fair value adjustments to income properties			—			—			(15,064)			—			(15,064)			—			(15,064)
Depreciation and amortization			—			—			—			—			—			2,310			2,310
Transaction costs			—			14			295			1,212			1,521			—			1,521
Fair value adjustments to equity accounted
investments			(7,711)			—			—			—			(7,711)			—			(7,711)
Provision for lending portfolio losses			—			2,350			—			—			2,350			—			2,350
General and administrative expenses			—			—			—			14,934			14,934			—			14,934
Fair value adjustments to development and investment holdings			5,122			—			—			—			5,122			—			5,122
Loss on sale of renewable power portfolio			—			—			—			—			—			1,099			1,099
Realized loss from derivative financial liabilities			—			—			—			—			—			2,233			2,233
Realized foreign currency translation loss			—			—			—			—			—			2,613			2,613
NET OPERATING INCOME		$	**15,488 **		$	**12,809 **		$	**10,618 **		$	**— **		$	**38,915 **		$	**12,955 **		$	51,870

(1) Other includes Trust and segment level cash and net working capital balances.

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			Development and												Total			Renewable -
For the year ended December 31, 2018			investment holdings			Lending portfolio			Income properties			Other⁽¹⁾			continuing operations			discontinued operations			Total
NET INCOME (LOSS)		$	903		$	15,550		$	9,315		$	(14,903)		$	10,865		$	3,037		$	13,902
Add (Deduct):
Income tax expense (recovery)			—			—			—			(344)			(344)			1,028			684
Interest expense net of other interest income			(1,350)			—			3,409			(80)			1,979			3,672			5,651
Fair value adjustments to income properties			—			—			2,195			—			2,195			—			2,195
Depreciation and amortization			—			—			—			—			—			6,103			6,103
Transaction costs			—			101			274			—			375			—			375
Fair value adjustments to marketable securities			—			—			(3,657)			291			(3,366)			—			(3,366)
General and administrative expenses			—			—			—			15,036			15,036			—			15,036
Fair value adjustments to development and investment holdings			1,977			—			—			—			1,977			—			1,977
NET OPERATING INCOME		$	**1,530 **		$	**15,651 **		$	**11,536 **		$	**— **		$	**28,717 **		$	**13,840 **		$	42,557

(1) Other includes Trust and segment level cash and net working capital balances.

7. DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING

The Trust does not have a Chief Executive Officer or a Chief Financial Officer. At December 31, 2019, the President and Chief Responsible Officer and Chief Financial Officer of DAM (the "Certifying Officers"), are responsible for and, along with the assistance of senior management of the Asset Manager, have designed or caused to be designed under the Certifying Officer’s supervision, disclosure controls and procedures ("DC&P") as defined in National Instrument 52-109, “Certification of Disclosure in Issuers’ Annual and Interim Filings” to provide reasonable assurance that material information relating to the Trust is made known to the Certifying Officers in a timely manner and information required to be disclosed by the Trust is recorded, processed, summarized and reported within the time periods specified in securities legislation, and have designed internal controls over financial reporting ("ICFR") to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with IFRS.

As at December 31, 2019, the Certifying Officers, together with other members of management, have evaluated the design and effectiveness of the Trust’s DC&P. Based on that evaluation, the Certifying Officers have concluded that, as at December 31, 2019, the DC&P are adequate and effective in order to provide reasonable assurance that material information has been accumulated and communicated to management to allow timely decisions of required disclosures by the Trust and its consolidated subsidiary entities within the required time periods.

The Trust’s ICFR is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS. Using the framework established in “2013 Committee of Sponsoring Organizations (COSO) Internal Control Framework”, published by the Committee of Sponsoring Organizations of the Treadway Commission, the Certifying Officers, together with other members of management, have evaluated the design and operation of the Trust’s ICFR. Based on that evaluation, the Certifying Officers have concluded that the Trust’s ICFR was effective as at December 31, 2019.

During the year ended December 31, 2019, there have not been any changes that have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.

8. RISKS AND RISK MANAGEMENT

Dream Alternatives is exposed to various risks and uncertainties, many of which are beyond our control. The following is a review of material factors that may impact our business operations. Additional risks and uncertainties are described in our most recent Annual Report and our current Annual Information Form, which are posted on our website at www.dreamalternatives.ca and on SEDAR at www.sedar.com. The occurrence of any of such risks could materially and adversely affect our investments, future prospects, cash flows, results of operations or financial condition and our ability to make cash distributions to Unitholders. Although we believe that the risk factors described below and in our Annual Information Form are the most material risks that we will face, they are not the only risks. Additional risk factors not presently known to us or that we currently believe are immaterial could also materially adversely affect our investments, future prospects, cash flows, results of operations or financial condition and our ability to make cash distributions to Unitholders and thereby adversely affect the value of our units.

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GENERAL INVESTMENTS RISK

Our investments include direct and indirect investments in real estate, mortgages and other loans, and development and investment holdings, each of which can be relatively illiquid. While investments in illiquid assets have the potential to produce above-average growth opportunities, they may be difficult to value or sell at the time and price preferred by the owner. Accordingly, there is a risk that we would be unable to dispose of our illiquid assets in a timely way in response to changing economic or investment conditions. In recessionary times it may be difficult to dispose of certain of our assets, including certain types of real estate. The costs of holding certain of our assets, including real estate, are considerable and during an economic recession we may be faced with ongoing expenditures with a declining prospect of rental income. In such circumstances, it may be necessary for us to dispose of properties, or interests in properties, at discounted prices in order to generate sufficient cash for operations and making distributions. Where we are unable to dispose of illiquid assets, or we are forced to sell such assets at a discounted price, our ability to make cash distributions, our financial results and the value of our units may be adversely affected.

The Trust may undertake strategic property dispositions from time to time in order to recycle its capital and maintain an optimal portfolio composition but may experience significant delays in the repositioning of our portfolio as a result of the certain illiquid assets. The Trust may also be subject to unexpected costs or liabilities related to such dispositions, which could adversely affect the Trust's financial position and results of operations and its ability to meet its obligations.

DEVELOPMENT RISK

The Trust is involved in several residential and mixed-use development projects, often set up as joint ventures or partnerships. These developments are often carried out with an experienced developer or co-developers as the Trust's co-ventures/partners. The Trust expects to be increasingly involved in investments that develop residential and mixed-use developments.

Before a development project generates any revenues, material expenditures are incurred. This includes, but is not limited to, expenditures incurred to acquire land, obtain development approvals and construct significant portions of project infrastructure, amenities, model suites and sales facilities. It generally takes several fiscal periods for a development to achieve cumulative positive cash flow. If the development projects in which we participate are not developed and marketed successfully or costs of development exceed original estimates and do not generate positive cash flows in a timely manner, this may have a material adverse effect on our business and results of operations.

There are also several factors that impact development risk, including, but not limited to, rising construction costs and development charges, shortage of experienced labour in certain construction related trades, and structure for municipal zoning approvals due to its unclear mandate at an early stage of development. These factors could impact our development profit margin or development yield potential. As a result, there can be no assurance that all of our proposed residential projects as described herein will be undertaken, and if so, with what mix of residential and commercial development, at what costs, and generating what profit margin or development yield. There could also be changes to the mix of condominium versus residential rental units or air rights sales for certain projects. As well, any change in the revenue or costing estimates or development timeline could have a significant impact on the value of the development and investment holdings.

In addition, purchaser demand with regards to residential condominiums is cyclical and is significantly affected by changes in general and local economic and industry conditions, such as employment levels, availability of financing for home buyers, interest rates, consumer confidence, levels of new and existing homes for sale, demographic trends and housing demand. As well, an oversupply of homes or residential condominium units in the market, such as resale properties, including properties held for sale by investors and speculators, foreclosed homes and rental properties, may reduce the Trust’s ability to sell residential development units and may depress prices and reduce margins from the sale of residential development units .

The Trust is also subject to the risk that purchasers of such properties may become unable or unwilling to meet their obligations or that the Trust may not be able to close the sale of a significant number of units in a development project on economically favourable terms. To mitigate these risks, the Trust monitors the market trends and development risks to adapt to any changes to market conditions.

RESIDENTIAL RENTAL BUSINESS RISK

The Trust expects to be increasingly involved in mixed-use development projects that include residential rentals. Purchaser demand for residential rentals is cyclical and is affected by changes in general market and economic conditions, such as consumer confidence, employment levels, availability of financing for home buyers, interest rates, demographic trends, housing supply and housing demand. As a landlord in its properties that include rental apartments, the Trust is subject to the risks inherent in the multi-unit residential rental business, including, but not limited to, fluctuations in occupancy levels, individual credit risk, heightened reputation risk, tenant privacy concerns, potential changes to rent control regulations, increases in operating costs including the costs of utilities and the imposition of new taxes or increased property taxes.

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JOINT VENTURE RISK

Several investments, including the Trust’s mortgage loan portfolio, property developments and income properties, are often made or developed as joint ventures or partnerships with third parties. These structures involve certain additional risks, including, but not limited to, co-venturers/partners that might experience financial difficulties or fail to fund their share of required capital contributions or suffer reputational damage that could have an adverse impact on the Trust.

In addition, our co-venturers/partners may, at any time, have economic or business interests inconsistent with ours and we may be required to take actions that are in the interest of the partners collectively, but not in the Trust’s sole best interests. Accordingly, we may not be able to favourably resolve issues with respect to such decisions or we could become engaged in a dispute with any of them that might affect our ability to develop or operate the business or assets in question efficiently. Any failure of the Trust or our co-venturers and partners to meet their obligations, or disagreements with respect to strategic decision making, could have an adverse effect on the joint ventures or partnerships, which may have an adverse effect on the Trust.

We attempt to mitigate these risks by performing due diligence procedures on potential partners and contractual arrangements, and by closely monitoring and supervising the joint ventures or partnerships.

GENERAL REAL ESTATE RISK

Returns on real estate and real estate related assets and investments are generally subject to a number of factors and risks, including changes in general economic conditions (which could affect the availability, terms and cost of mortgage financings and other types of credit), changes in local economic conditions (such as an oversupply of properties or a reduction in demand for real estate in a particular area), the attractiveness of properties to potential tenants or purchasers, competition with other landlords with similar available space, and the ability of the owner to provide adequate maintenance at competitive costs.

These factors and risks could cause fluctuations in the value of the real estate and real estate related assets and investments owned by us or in the value of the real estate securing mortgages and other loans we issue. These fluctuations could materially adversely affect us.

LEASE RENEWALS AND RENTAL RATES RISK

The income-producing properties in our investment portfolio generate income through rent payments made by our tenants. Upon the expiry of any lease, there can be no assurance that the lease will be renewed or that the tenant will be replaced. Furthermore, the terms of any subsequent lease may be less favourable than those of the existing lease. The Trust’s income and cash flows would be adversely affected if we were unable to lease a significant amount of the available space in any particular property on economically favourable lease terms or on a timely basis.

TENANT DEFAULT RISK

In the event of default by a tenant, we may experience delays or limitations in enforcing our rights as the lessor and incur substantial costs in protecting our investment. Furthermore, at any time, a tenant may seek the protection of bankruptcy, insolvency or similar laws, which could result in the rejection and termination of the lease of the tenant and, thereby, cause a reduction in the cash flows available to us, which may adversely affect us.

CREDIT RISK

There is a risk that a borrower or issuer of an investment security will not make a payment on debt or that an originating lender will not make its payment on a loan participation interest purchased by us or that an issuer or an investment security or an originating lender retaining the original loan in which it grants participations may suffer adverse changes in financial condition, lowering the credit quality of its security or participation and increasing the volatility of the security or participation price. Such changes in the credit quality of a security or participation can affect its liquidity and make it more difficult to sell if we wish to do so. In addition, with respect to loans made or held by us, a change in the financial condition of a borrower could have a negative financial impact on us.

While we intend to diversify our investments to ensure that we do not have excessive concentration in any single borrower/ counterparty or related group of borrowers/counterparties, the Trust currently holds various lending instruments and investments with the same counterparty or related counterparties within its lending portfolio and development and investment holdings portfolio, as discussed in Note 29 to the consolidated financial statements. A change in the financial condition of any single borrower/counterparty or related group of borrowers/counterparties to which the Trust has concentrated exposure could significantly and adversely affect the overall performance of the Trust.

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LENDING PORTFOLIO DEFAULT RISK

If a borrower under a loan defaults under any terms of the loan, we may have the ability to exercise our enforcement remedies in respect of the loan. Exercising enforcement remedies is a process that requires a significant amount of time to complete, which could adversely impact our cash flow. In addition, as a result of potential declines in real estate values, there is no assurance that we will be able to recover all or substantially all of the outstanding principal and interest owed to us in respect of such loans by exercising our enforcement remedies. Our inability to recover the amounts owed to us in respect of such loans could materially adversely affect us.

There can be no assurance that any of the loans comprising our borrowers' portfolio can or will be renewed at the same interest rates and terms, or in the same amounts as are currently in effect. The lenders, the borrowers or both may elect to not renew any loan. If loans are renewed, the principal balance, the interest rates and the other terms and conditions will be subject to negotiation between the lenders and the borrowers at the time of renewal.

In addition, the composition of our lending portfolio may vary widely from time to time and may be concentrated by type of security, industry or geography, resulting in it being less diversified during certain periods. A lack of diversification may result in exposure to economic downturns or other events that have an adverse and disproportionate effect on particular types of securities, industries or geographies.

CONCENTRATION RISKS AND OTHER SIMILAR RISKS

While our intention is to diversify our investments, our current investments are relatively concentrated in a limited number of market sectors or asset types or in a limited number of issuers. An investment in the Trust may therefore involve greater risk and volatility than an investment in an issuer with a broader portfolio of assets since the performance of one particular industry, market or issuer could significantly and adversely affect the overall performance of the Trust.

COMPETITION FOR INVESTMENT OPPORTUNITIES AND ABILITY TO SOURCE SUITABLE INVESTMENTS

Our performance depends on our ability to source or acquire assets including mortgage and other loans, real estate, and other investment opportunities at favourable yields or potential rates of return. We will compete with other investors, managers, corporations, institutions, developers, and owners of real estate for investment opportunities in the financing and/or acquisition of assets, including real estate and real estate and other lending. Certain competitors may have a higher risk tolerance, greater financial and other resources, and greater operating flexibility than us, allowing these competitors to more aggressively pursue investment opportunities. Accordingly, we may be unable to acquire sufficient real property, real property lending assets, or other assets or investment opportunities at favourable yields or terms or at all.

Our strategy involves investing and reinvesting in suitable investment opportunities, pursuing such opportunities, consummating investments and, in the case of real estate property, effectively leasing and operating such properties and assets. There can be no assurance as to the pace of growth through investments and/or acquisitions or that we will be able to acquire assets on an accretive basis, which could adversely impact our financial performance.

ENVIRONMENTAL AND CLIMATE CHANGE RISKS

As an owner of real estate property, we are subject to various federal, provincial, municipal and state laws relating to environmental matters. Such laws provide that we could be liable for the costs of removal and remediation of certain hazardous, toxic substances released on or in our properties or disposed of at other locations, as well as potentially significant penalties. We have insurance and other policies and procedures in place to review and monitor environmental exposure, which we believe mitigates these risks to an acceptable level. Some of the properties in which we have an interest currently have or have had occupants that use hazardous substances or create waste. Such uses can potentially create environmental liabilities. A few issues have been identified through site assessments, including the need to remediate or otherwise address certain contaminations. These issues are being carefully managed with the involvement of professional consultants. Where circumstances warrant, designated substance surveys and/or environmental assessments are conducted. Although environmental assessments provide some assurance, we may become liable for undetected pollution or other environmental hazards on our properties against which we cannot insure, or against which we may elect not to insure where premium costs are disproportionate to our perception of relative risk.

The Trust has formal policies and procedures which cause DAM to review and monitor environmental exposure. These policies include the requirement to conduct a Phase I environmental site assessment, or review a current Phase I, before we acquire real properties or originate any real estate lending.

Climate change continues to attract the focus of governments and the general public as an important threat, given the emission of greenhouse gases and other activities continue to negatively impact the planet. We face the risk that our properties will be

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subject to government initiatives aimed at countering climate change, such as reduction of greenhouse gas emissions, which could impose constraints on our operational flexibility or cause us to incur financial costs to comply with various reforms. Any failure to adhere and adapt to climate change reform could result in fines or adversely affect our reputation, operations or financial performance. Furthermore, our properties may be exposed to the impact of events caused by climate change, such as natural disasters and increasingly frequent and severe weather conditions. Such events could interrupt our operations and activities, damage our properties and may potentially decrease our property values or require us to incur additional expenses including an increase in insurance costs to insure our properties against natural disasters and severe weather.

FOREIGN EXCHANGE RISKS

The Trust is exposed to foreign exchange risks, particularly with respect to fluctuations of the U.S. dollar against the Canadian dollar, in respect of our investment in the Hard Rock/Virgin Hotel in Las Vegas, Nevada. The Trust's results are reported in Canadian dollars and the Trust pays distributions to unitholders in Canadian dollars; therefore, fluctuations in the value of the U.S. dollar impacts the fair value or future cash flows of these investments and our ability to pay cash distributions to unitholders. The Trust does not hedge this exposure.

UNEXPECTED CAPITAL EXPENDITURES AND OTHER FIXED COSTS

Certain significant expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and related charges, must be made throughout the period of ownership of real property, regardless of whether the property is producing sufficient income to pay such expenses. This may include expenditures to fulfill mandatory requirements for energy efficiency. In order to retain desirable rentable space and to generate adequate revenue over the long term, the condition of the properties in which we have an interest must be maintained or, in some cases, improved to meet market demand. Maintaining or upgrading a rental property in accordance with market standards can entail significant costs, which we may not be able to pass on to our tenants. Numerous factors, including the age of the relevant building structure, the material and substances used at the time of construction or currently unknown building code violations, could result in substantial unbudgeted costs for refurbishment or modernization.

If the actual costs of maintaining or upgrading a property in which we have an interest exceed our estimates, or if hidden defects are discovered during maintenance or upgrading which are not covered by insurance or contractual warranties, or if we are not permitted to raise rents due to legal constraints, we will incur additional and unexpected costs. If competing properties of a similar type are built in the area where one of our properties is located or similar properties located in the vicinity of one of our properties are substantially refurbished, the net operating income derived from and the value of such property could be reduced.

Any failure to undertake appropriate maintenance and refurbishment work in response to the factors described above could materially adversely affect the rental income that we earn from such properties; for example, such a failure could entitle tenants to withhold or reduce rental payments or even to terminate existing leases. Any such event could have a material adverse effect on our cash flows, financial condition and results of operations and our ability to make distributions on units.

UNEXPECTED COSTS OR LIABILITIES RELATED TO ACQUISITIONS

Our external growth prospects depend in part on identifying suitable acquisition opportunities, pursuing such opportunities and consummating acquisitions, including direct or indirect acquisitions of real estate. Notwithstanding pre-acquisition due diligence, it is not possible to fully understand a property before it is owned and operated for an extended period of time and there may be undisclosed or unknown liabilities concerning the acquired properties, and the Trust may not be indemnified for some or all of these liabilities. To mitigate this risk, our Asset Manager conducts an appropriate level of due diligence and investigation in connection with its acquisition of properties and seeks through, contractual arrangements, to ensure that risks lie with the appropriate party.

FINANCING RISKS, LEVERAGE AND RESTRICTIVE COVENANTS

Ownership of certain of our assets and the industries in which we operate are capital intensive. We will require access to capital to maintain the real estate and other assets in which we have an interest, as well as to fund our growth strategy and significant capital expenditures from time to time. There is no assurance that capital will be available when needed or on favourable terms. Our access to third-party financing will be subject to a number of factors, including general market conditions; the market’s perception of our growth potential; our current and expected future earnings; our cash flow and cash distributions, and cash interest payments; and the market price of our units. Our failure to access required capital could materially adversely impact our investments, cash flows, operating results or financial condition, our ability to make distributions on the units and our ability to implement our growth strategy.

A significant portion of our financing is debt. Accordingly, we are subject to the risks associated with debt financing, including the risk that our cash flows will be insufficient to meet required payments of principal and interest, and that, on maturities of

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such debt, we may not be able to refinance the outstanding principal under such debt or that the terms of such refinancing will be more onerous than those of the existing debt. If we are unable to refinance debt at maturity on terms acceptable to us or at all, we may be forced to dispose of one or more of our properties on disadvantageous terms, which may result in losses and could alter our debt-to-equity ratio or be dilutive to unitholders. Such losses could have a material adverse effect on our financial position or cash flows.

The degree to which we are leveraged could have important consequences to our operations. A high level of debt will reduce the amount of funds available for the payment of distributions to unitholders; limit our flexibility in planning for and reacting to changes in the economy and in the industry, and increase our vulnerability to general adverse economic and industry conditions; limit our ability to borrow additional funds, dispose of assets, encumber our assets and make potential investments; place us at a competitive disadvantage compared to other owners of similar assets that are less leveraged and, therefore, may be able to take advantage of opportunities that our indebtedness would prevent us from pursuing; make it more likely that a reduction in our borrowing base following a periodic valuation (or redetermination) could require us to repay a portion of then outstanding borrowings; and impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general trust or other purposes.

INTEREST RATE RISK

When negotiating financing agreements or extending such agreements, we will depend on our ability to agree on terms, including in respect of interest payments and amortization. In addition, we may enter into financing agreements with variable interest rates. An increase in interest rates could result in a significant increase in the amount paid by us to service debt, that could materially adversely affect our cash flows.

We may implement hedging programs in order to offset the risk of revenue losses and to provide more certainty on our cash flows should current variable interest rates increase. However, to the extent that we fail to adequately manage these risks, our financial results and our ability to make interest payments under future financings may be adversely affected. Increases in interest rates generally cause a decrease in demand for properties. Higher interest rates and more stringent borrowing requirements, whether mandated by law or required by financial institutions, could have a material adverse effect on our ability to sell any of our investments.

In addition, the value of our lending portfolio at any given time may be affected by the level of interest rates prevailing at such time. The income we earn on our lending portfolio is primarily from interest payments. If there is a decline in interest rates (as measured by the indices upon which the interest rates of our mortgages are based), we may find it difficult to make additional mortgages bearing rates sufficient to achieve our investment objectives. This could have a materially adverse impact to the Trust’s cash flows. A decline in interest rates could depress the housing market, which may affect our investment holding mortgage investments in condominium and home development and have a materially adverse impact on our cash flows. As well, if interest rates increase, the value of our lending portfolio may be negatively impacted.

GOVERNMENT AND REGULATORY RISKS

We are subject to laws and regulations governing the development, ownership, operation and leasing of certain of our assets, employment standards, environmental matters, taxes and other matters. It is possible that future changes in applicable federal, provincial, municipal, state, local, or common laws or regulations, or changes in their enforcement or regulatory interpretation, could result in changes in the legal requirements affecting us (including with retroactive effect). Any changes in the laws to which we are subject could materially adversely affect the distributions received by the Trust from DAM LP or by unitholders from the Trust. It is not possible to predict whether there will be any further changes in any regulatory regime to which we are subject or the effect of any such change on our investments.

The real estate development process is subject to a variety of laws and regulations. In particular, governmental authorities regulate such matters as zoning and permitted land uses, levels of density and building standards. We will have to continue to obtain approvals from various governmental authorities and comply with local, provincial and federal laws, including laws and regulations concerning the protection of the environment in connection with such development projects. Obtaining such approvals and complying with such laws and regulations may result in delays which may cause us to incur additional costs which impact the profitability of a development project, or may restrict development activity altogether with respect to a particular project.

INCOME TAX RISK

There can be no assurance that Canadian federal income tax laws and the administrative policies and assessing practices of the Canada Revenue Agency ("CRA") respecting the treatment of "mutual fund trusts" will not be changed in a manner that adversely affects unitholders. If we cease to qualify as a "mutual fund trust" under the Tax Act, the income tax considerations applicable

Dream Hard Asset Alternatives Trust 2019 Annual Report | 36

to us would be materially and adversely different in certain respects, including that units may cease to be qualified investments for Plans.

Although we are of the view that all expenses to be claimed by us will be reasonable and deductible and that the cost amount and capital cost allowance claims of entities indirectly owned by us will have been correctly determined, there can be no assurance that the Tax Act, or the interpretation of the Tax Act, will not change, or that the CRA will agree with our determinations. If the CRA successfully challenges the deductibility of such expenses, our taxable income will increase or change.

The extent to which distributions will be non-taxable in the future will depend in part on the extent to which entities indirectly owned by us are able to deduct depreciation, interest and loan expenses relating to our investments for purposes of the Tax Act.

We will endeavour to ensure that units continue to be qualified investments for Plans; however, there can be no assurance that this will occur. The Tax Act imposes penalties for the acquisition or holding of non-qualified investments.

We are subject to tax audits from various government and regulatory agencies on an ongoing basis. As a result, from time to time, taxing authorities may disagree with the interpretation and application of tax laws taken by the Trust, which could lead to reassessments. These reassessments could have a material impact on the Trust in future periods.

INSURANCE RISKS

We carry, or cause to be carried, general liability, umbrella liability and excess liability insurance with limits which are typically obtained for similar operations in Canada and otherwise acceptable to the Trust Board on the recommendation of DAM. For the property risks we cause “All Risks” property insurance, including, but not limited to, flood, earthquake and loss of rental income insurance (with at least a 24-month indemnity period), to be carried. We also cause boiler and machinery insurance, covering all boilers, pressure vessels, HVAC systems and equipment breakdown, to be carried. There are, however, certain types of risks (generally of a catastrophic nature such as from war or nuclear accident) which are uninsurable under any insurance policy. Furthermore, there are other risks that are not economically viable to insure at this time. Should an uninsured or underinsured loss occur, we could lose our investment in, and anticipated profits and cash flows from, one or more of our properties, but we would continue to be obligated to repay any recourse mortgage indebtedness on such properties. We may carry, or may cause to be carried, title insurance on certain of our real estate assets but will not necessarily insure all titles. If a loss occurs resulting from a title defect with respect to a property where there is no title insurance or the loss is in excess of insured limits, we could lose all or part of our investment in, and anticipated profits and cash flows from, such property.

RELIANCE ON DAM FOR MANAGEMENT SERVICES

We rely on DAM with respect to the asset management of our investments. Consequently, our ability to achieve our investment objectives depends in large part on DAM and its ability to properly advise us. Although the management agreement we have entered into with DAM (the "management agreement") does not have a fixed term, DAM has the right to terminate the management agreement with 180 days’ prior written notice if DAM LP and/or the Trust defaults in the performance or observance of any material term, condition or agreement of the management agreement in a manner that results in material harm and such default continues unremedied for a period of 60 days. The management agreement may also be terminated in other circumstances, such as upon the occurrence of an event of default or insolvency of DAM within the meaning of such agreement. Accordingly, there can be no assurance that DAM will continue to be our Asset Manager. If DAM should cease for any reason to be our Asset Manager, our ability to meet our objectives and execute our strategy may be adversely affected. We may be unable to duplicate the quality and depth of management available to DAM by becoming a self-managed Trust or by hiring another asset manager. In addition, the cost of obtaining substitute services may be greater than the fees we will pay DAM under the management agreement.

We depend on the management and administration services provided by DAM under the management agreement. DAM personnel and support staff that provide services to us under the management agreement are not required to have as their primary responsibility the management and administration of the Trust or Dream Alternatives Master LP or to act exclusively for either of us, and the management agreement does not require that the services we receive be provided to us by any specific individuals employed by DAM. Any failure to effectively manage our operations or to implement our strategy could materially adversely affect us.

RELIANCE ON DAM LP

The Trust’s sole material asset is its limited partnership interest in DAM LP. The cash distributions to unitholders are dependent on the ability of DAM LP to pay distributions in respect of its LP A Units. The ability of DAM LP to pay distributions or make other payments or advances to us may be subject to contractual restrictions contained in any instruments governing the indebtedness of DAM LP or investments held by it. The ability of DAM LP to pay distributions or make other payments or advances is also

Dream Hard Asset Alternatives Trust 2019 Annual Report | 37

dependent on the ability of DAM LP’s subsidiaries to pay distributions or make other payments or advances to DAM LP. The Trust depends on distributions and other payments from DAM LP and, indirectly, its subsidiaries and investments, to provide the Trust with the funds necessary to pay distributions to its unitholders and to meet its financial obligations.

CYBER SECURITY RISK

Cyber security has become an increasing area of focus for issuers and businesses in Canada and globally, as reliance on digital technologies to conduct business operations has grown significantly. As we continue to increase our dependence on information technologies to conduct our operations, the risks associated with cyber security also increase. We rely on management information systems and computer control systems. Business interruptions, utility outages, and information technology system and network disruptions due to cyber-attacks could seriously harm our operations and materially adversely affect our operating results. Cyber attacks against organizations are increasing in sophistication and can include but are not limited to intrusions into operating systems, theft of personal or other sensitive data and/or cause disruptions to business operations. Such cyber attacks could compromise the Trust’s confidential information as well as that of the Trust’s employees, customers and third parties with whom the Trust interacts and may result in negative consequences, including remediation costs, loss of revenue, additional regulatory scrutiny, litigation and reputational damage. Our exposure to cyber security risks includes exposure through third parties on whose systems we place significant reliance for the conduct of our business. We have implemented security procedures and measures in order to protect our systems and information from being vulnerable to cyber-attacks. However, we may not have the resources or technical sophistication to anticipate, prevent, or recover from rapidly evolving types of cyber-attacks. Compromises to our information and control systems could have severe financial and other business implications.

9. SIGNIFICANT ACCOUNTING POLICIES

9.1 CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

Refer to Note 4 of the consolidated financial statements for the year ended December 31, 2019, for a summary of Dream Alternatives’ critical accounting judgments, estimates and assumptions in applying accounting policies.

9.2 ADOPTION OF ACCOUNTING STANDARDS

CURRENT ACCOUNTING POLICY CHANGES

Refer to Note 5 of the consolidated financial statements for the year ended December 31, 2019, for information pertaining to accounting standards adopted during the period.

9.3 FUTURE CHANGES TO SIGNIFICANT ACCOUNTING POLICIES

Refer to Note 5 of the consolidated financial statements for the year ended December 31, 2019 for information pertaining to accounting standards that will be effective in future years.

10. BASIS OF PRESENTATION

This MD&A contains a discussion of the operating results, cash flows and financial position of Dream Alternatives and should be read in conjunction with the consolidated financial statements of Dream Alternatives for the years ended December 31, 2019 and December 31, 2018, prepared in accordance with IFRS.

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 and strategies to achieve those objectives; the Trust’s beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, future growth and drivers thereof, results of operations, performance, business prospects and opportunities, market conditions, acquisitions or divestitures, leasing transactions, future maintenance and development plans and costs, capital investments, financing, the availability of financing sources, income taxes, litigation and the real estate and lending industries in general, in each case, that are not historical facts, as well as statements regarding our strategic plan; our unit buyback program (including the amounts to be deployed, and the timing, price and size of any offers to unitholders); our commitment to maintaining the current distribution policy; our expectations regarding future purchases of units by the Trust under our NCIB; our expectations regarding the commencement of the second SIB and the terms thereof, including the maximum

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number of units we may purchase under the offer and timing for completion of the offer; our plans and proposals for current and future development and investment holdings projects, including equity accounted investments and income properties redevelopment projects, including projected sizes, densities, uses, costs and manner of funding, and development milestones; development timelines on current and future development and investment holdings projects, including equity accounted investments and income properties redevelopment projects, including expected commencement, completion and occupancy dates; anticipated returns and profits from our development and investment holdings projects, including equity accounted investments, as well as their future contributions to NAV and unitholder value and their ability to drive the Trust’s growth; timing of distributions or future cash return from our development and investment holdings portfolio; our targeted return on equity (levered and unlevered), income and cash flow growth, NAV growth and targeted pre-tax IRR; our methodologies for valuing investments, including market value adjustments, and timing of appraisals; anticipated effect of our developments on our NAV, unitholders' equity, growth and cash flows in future periods; expected profits from our development projects; our expectations of changes in our NAV in future periods; the anticipated future variability in our results of operations, including cash from operating activities and net income; expected debt financings and the timing thereof; our expectations regarding the Trust’s income tax expense/recovery and deferred tax liabilities/assets. Forward-looking statements generally can be identified by words such as "objective", "may", "will", "would", "expect", "intend", "estimate", "anticipate", "believe", "should", "could", "likely", "plan", "project", "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 the Trust's control, which could cause actual results to differ materially from those disclosed in or implied by such forward-looking information. The assumptions, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth herein as well as assumptions relating to general and local economic and business conditions; the regulatory environment; the real estate market in general; the financial condition of tenants and borrowers; interest and mortgage rates; timing and amount of future loan financings and deposit commitments; leasing risks, including those associated with the ability to lease vacant space; and the development, construction and operation of our real estate projects on anticipated terms.

All 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. Factors or risks that could cause actual results to differ materially from those set forth in the forward-looking statements and information include, but are not limited to, general economic conditions; changes to the regulatory environment; environmental risks; local real estate conditions, including the development of properties in close proximity to the Trust’s properties and changes in real estate values; timely leasing of vacant space and re-leasing of occupied space upon expiration; dependence on tenants’ and borrowers’ financial condition; the uncertainties of acquisition activity; the ability to effectively integrate acquisitions; dependence on our partners in the development, construction and operation of our real estate projects; uncertainty surrounding the development and construction of new projects and delays and cost overruns in the design, development, construction and operation of projects; our ability to execute strategic plans and meet financial obligations; interest and mortgage rates and regulations; inflation; availability of equity and debt financing; foreign exchange fluctuations; and other risks and factors described from time to time in the documents filed by the Trust with securities regulators.

All forward-looking information is as of February 18, 2020. Dream Alternatives does not undertake to update any such forwardlooking information, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information about these assumptions and risks and uncertainties is contained in our filings with securities regulators. Certain filings are also available on our website at www.dreamalternatives.ca.

Certain market information has been obtained from Standard & Poor’s publications prepared by independent, third-party commercial firms that provide information relating to the real estate industry. Although we believe this information is reliable, the accuracy and completeness of this information is not guaranteed. We have not independently verified this information and make no representation as to its accuracy.

In addition, certain disclosures incorporated by reference into this report including, but not limited to, information regarding our development and investment holdings' development partners were obtained from publicly available information. We have not independently verified any such information.

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11. ADDITIONAL INFORMATION 11.1 TAX INFORMATION

The Trust pays a monthly distribution to its unitholders of which only a portion is taxable. A taxable Canadian holder of the Trust units is required to include the taxable portion of the distribution in income. Any amount in excess of the after-tax net income of the Trust payable to the unitholder will generally not be included in the unitholders' income for the year. The non-taxable portion of the distribution received by a unitholder will reduce the unitholders' tax cost of their investment. On an annual basis, the unitholders will be provided with information relating to the tax treatment of the monthly distributions.

The Trust has determined that the distributions should be treated in the following manner:

		2018		2017		2016		2015
Non-eligible dividends		0.02%		0.06%		—%		—%
Eligible dividends		—%		—%		—%		28.60%
Return of capital		95.00%		99.94%		100.00%		71.40%
Foreign non-business income		4.98%		—%		—%		—%

11.2 ADDITIONAL INFORMATION

Additional information relating to Dream Hard Asset Alternatives Trust, including the Trust's Annual Information Form and audited consolidated financial statements and accompanying notes is available on SEDAR at www.sedar.com. The Trust’s voting units trade on the TSX under the symbol "DRA.UN".

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11.3 ASSET LISTING

The following table includes supplementary information for our portfolio as at December 31, 2019.

											Total	Total
											residential	commercial	In-place
						DAT					units at completion	and retail GLA (1)	and committed		Occupancy/ stabilization
Project/Property				Entity		Ownership		Status			(at 100%)	(at 100%)	occupancy			date
Recurring income
Downtown Toronto & Greater Toronto Area (GTA)
Commercial:
50 & 90 Burnhamthorpe Road West (Sussex Centre)				Dream Office REIT/DAT		50.1%		Income property			—	652,000	91.0%
49 Ontario				DAT		100.0%		Income property			—	87,000	91.5%
Queen & Mutual				DAT		9.0%		Income property			—	24,000	84.4%
10 Lower Spadina				DAT		100.0%		Income property			—	60,000	100.0%
349 Carlaw				DAT		100.0%		Income property			—	33,000	100.0%
Plaza Imperial				DAT		40.0%		Income property			—	34,000	100.0%
Plaza Bathurst				DAT		40.0%		Income property			—	25,000	100.0%
100 Steeles Avenue West				Dream/DAT		37.5%		Redevelopment			—	59,000	97.1%			TBD
Total Downtown Toronto & GTA											—	974,000	92.7%
Total recurring income											—	974,000	92.7%
											Total	Total
											residential	commercial	In-place
						DAT					units at completion	and retail GLA (1)	and committed		Occupancy/ stabilization
Project/Property		Type		Entity		Ownership		Status			(at 100%)	(at 100%)	occupancy			date
Development segment
Downtown Toronto & GTA
Residential and Mixed-Use:
Canary Block 10		Build to hold		Dream/DAT		25.0%		Planning			425	28,000				TBD
WDL	Block 8	Build to hold		Dream/DAT		25.0%		Under construction			770	4,000			2022
WDL	Block 3/4/7	Build to hold		Dream/DAT		25.0%		Planning			827	37,000			2025
WDL	Block 20	Build to hold		Dream/DAT		25.0%		Planning			272	280,000				TBD
Lakeshore East		TBD		Dream/DAT		37.5%		Planning			1,100	32,000				TBD
Frank Gehry		Build to sell		Dream/DAT		18.8%		Planning			1,500	260,000				TBD
Empire Lakeshore		Build to sell		DAT		80.0%		In occupancy			1,280	55,000	28%		2020
Brightwater		Build to sell		Dream/DAT		23.3%		Planning			3,000	400,000			2023-2032
Ivy		Build to sell		Dream/DAT		75.0%		Planning			253	—				TBD
Seaton		Build to sell		DAT		7.0%		Planning			TBD	TBD				TBD
Total Downtown Toronto & GTA											9,427	1,096,000	n/a
Zibi (Ottawa/Gatineau):
Kanaal		Build to sell		Dream/DAT		40.0%		In occupancy			71	8,500			Q4 2019
Block 2-3		Build to hold		Dream/DAT		40.0%		Under construction			—	55,000	53.8%		Q1 2020
Block 208		Build to hold		Dream/DAT		40.0%		Under construction			—	34,000	75.8%		2020
Block 10		Build to hold		Dream/DAT		40.0%		Under construction			162	1,500			2021
Block 211		Build to hold		Dream/DAT		40.0%		Under construction			—	185,000	85.4%		2021
Future blocks		Various		Dream/DAT		40.0%		Planning			1,617	1,716,000				TBD
Total Ottawa/Gatineau											1,850	2,000,000	77.9%
U.S.
Hard	Rock/Virgin
Hotel,Las Vegas		Build to sell		DAT		10.0%		Redevelopment			—	TBD			2023
Total U.S.											—	—
Total development											11,277	3,096,000
Total DAT platform											11,277	4,070,000
Summary by Geography
				Future	GLA	In-place
				under		and		Residential units at
		Current	GLA	development		committed		completion
Location		(at 100%)		(at 100%)		occupancy		(at	100%)
Downtown Toronto & GTA		974,000		1,096,000		92.7%			9,427
Ottawa/Gatineau			—	2,000,000		77.9%			1,850
U.S.			n/a		n/a	n/a				n/a
Total		974,000		3,096,000		n/a		11,277

(1) Total commercial and retail GLA includes planned GLA which are subject to change pending various development approvals.

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