Dream Office REIT Reports Q1 2023 Results

This press release contains forward-looking information that is based upon assumptions and is subject to risks and uncertainties as indicated in the cautionary note contained within this press release. All dollar amounts in our tables are presented in thousands of Canadian dollars, except for rental rates and per unit amounts, unless otherwise stated.

TORONTO--()--DREAM OFFICE REAL ESTATE INVESTMENT TRUST (D.UN-TSX) (“Dream Office REIT”, the “Trust” or “we”) today announced its financial results for the three months ended March 31, 2023 and provided a business update.

OPERATIONAL HIGHLIGHTS

(unaudited)

 

As at

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

2023

 

 

2022

 

 

2022

Total properties(1)

 

 

 

 

 

 

 

 

Number of active properties

 

26

 

 

26

 

 

29

Number of properties under development

 

2

 

 

2

 

 

1

Gross leasable area (in millions of square feet)

 

5.1

 

 

5.1

 

 

5.5

Investment properties value

$

2,386,395

 

$

2,382,883

 

$

2,596,240

Total portfolio(2)

 

 

 

 

 

 

 

 

Occupancy rate – including committed (period-end)(3)

 

84.0%

 

 

84.4%

 

 

85.0%

Occupancy rate – in-place (period-end)(3)

 

80.2%

 

 

81.0%

 

 

81.7%

Average in-place and committed net rent per square foot (period-end)

$

25.13

 

$

24.90

 

$

23.25

Weighted average lease term (years)

 

5.2

 

 

5.3

 

 

5.4

See footnotes at end.

 

 

Three months ended

 

 

March 31,

 

 

March 31,

 

 

2023

 

 

2022

Operating results

 

 

 

 

 

Funds from operations (“FFO”)(4)

$

18,857

 

$

21,043

Comparative properties net operating income (“NOI”)(5)

 

27,325

 

 

26,657

Net rental income

 

26,172

 

 

25,863

Net income

 

1,378

 

 

52,282

Per unit amounts

 

 

 

 

 

Diluted FFO per unit(6)

$

0.36

 

$

0.39

Distribution rate per Unit

 

0.25

 

 

0.25

See footnotes at end.

“After more than three years of COVID, the future of the office sector continues to remain uncertain although there are many ways to achieve value in Dream Office REIT through uses other than as traditional office buildings,” said Michael Cooper, Chief Executive Officer of Dream Office REIT. “The sale of 720 Bay to reduce debt and repurchase units was one such example and we will continue to identify opportunities to increase value for our unitholders.”

  • Net income for the quarter: For the three months ended March 31, 2023, the Trust generated net income of $1.4 million. Included in net income for the three months ended March 31, 2023 are net rental income totalling $26.2 million, net income from our investment in Dream Industrial Real Estate Investment Trust (“Dream Industrial REIT”) totalling $2.4 million and positive fair value adjustments to financial instruments totalling $2.8 million, primarily due to the revaluation of the subsidiary redeemable units as a result of a decrease in the Trust’s unit price, which were partially offset by negative fair value adjustments to investment properties totalling $12.1 million across the portfolio.
  • Diluted FFO per unit(6) for the quarter: For the three months ended March 31, 2023, diluted FFO per unit decreased by $0.03 per unit to $0.36 per unit relative to $0.39 per unit in Q1 2022, driven by higher interest expense (-$0.05), partially offset by higher FFO(4) from our investment in Dream Industrial REIT (+$0.01) and higher comparative properties NOI (+$0.01).
  • Net rental income for the quarter: Net rental income for the three months ended March 31, 2023 increased by $0.3 million relative to the prior year comparative quarter due to higher rental rates across the portfolio and a net decrease in provisions for bad debt during the quarter, partially offset by the sale of 720 Bay Street.
  • Comparative properties NOI(5) for the quarter: For the three months ended March 31, 2023, comparative properties NOI increased by 2.5%, or $0.7 million, over the prior year comparative quarter, primarily driven by higher in-place net rents across the portfolio from rent step ups, higher rates on new leases and renewals and overall higher parking revenues of $0.4 million across the portfolio. Partially offsetting the increases was lower weighted average in-place occupancy in both regions.

    We are actively managing our assets in the Toronto downtown region, which represent 82% of our active portfolio investment property fair values, to improve the quality of the buildings and to continue to improve rental rates in this market. For our assets in the Other markets region, which make up the remaining 18% of our active portfolio investment properties fair value, we are repositioning these assets to improve occupancy and liquidity in the private market.
  • In-place occupancy: Total portfolio in-place occupancy on a quarter-over-quarter basis decreased by 0.8% relative to Q4 2022. In the Other markets region, in-place occupancy decreased by 1.1% relative to Q4 2022 as 36,000 square feet of expiries were partially offset by 11,000 square feet of renewals and 2,000 square feet of new lease commencements. In Toronto downtown, in-place occupancy decreased by 0.6% relative to Q4 2022 as 123,000 square feet of expiries were partially offset by 59,000 square feet of renewals and 48,000 square feet of new lease commencements.

    Total portfolio in-place occupancy on a year-over-year basis decreased from 81.7% at Q1 2022 to 80.2% this quarter due to negative absorption in Toronto downtown and the sale of 720 Bay Street in Q1 2023 along with negative absorption in Other markets, partially offset by the sale of Princeton Tower in Saskatoon in Q3 2022.
  • Lease commencements for the quarter: For the three months ended March 31, 2023, 107,000 square feet of leases commenced in Toronto downtown at $30.47 per square foot, or 22.8% higher than the previous rent in the same space with a weighted average lease term of 7.1 years. In the Other markets region, 13,000 square feet of leases commenced at $21.55 per square foot, or 11.2% higher than the previous rents in the same space with a weighted average lease term of 5.1 years.

    The renewal and relocation rate to expiring rate spread for the quarter was 13.5% above expiring rates on 70,000 square feet of renewals.

BUSINESS UPDATE

As at March 31, 2023, the Trust had $2.9 billion of total assets, $2.4 billion of investment properties and $1.3 billion of total debt.

During Q1 2023, the Trust executed leases totalling approximately 184,000 square feet across our portfolio. In Toronto downtown, the Trust executed 178,000 square feet of leases at a weighted average initial net rent of $31.36 per square foot, or 9.8% higher than the weighted average prior net rent per square foot on the same space, with a weighted average lease term of 5.6 years. In the Other markets region, comprising our properties located in Calgary, Saskatoon, Regina, Mississauga, Scarborough, and the United States (“U.S.”), we executed leases totalling 6,000 square feet at a weighted average net rent of $21.43 per square foot, an increase of 4.4% from the weighted average prior net rent on the same space, with a weighted average lease term of 2.4 years.

To date, the Trust has secured commitments for approximately 705,000 square feet, or 103%, of 2023 full-year natural lease expiries. In Toronto downtown, 33,000 square feet, or approximately 1% of the region’s gross leasable area, is currently being held intentionally vacant for retail repositioning and property improvement purposes.

We remain committed to investing in our well-located real estate portfolio in downtown Toronto to distinguish our assets and attract unique tenants. During 2022, we took 366 Bay Street and 67 Richmond Street West in Toronto offline to fully revitalize the assets. The projects are expected to be completed and ready to lease in Q3 2023 and Q2 2024, respectively. We are currently in active discussions with potential tenants for the buildings on completion. At 67 Richmond Street West, we have completed a lease with a premium restaurant tenant for the ground floor retail space which commences during Q2 2023.

At 67 Richmond Street West and 366 Bay Street, the development projects comprise full modernizations of the properties, including technical systems, interior lighting and elevators, along with enhanced common areas and larger floorplates. The Trust is targeting certain building and project certifications as part of the development projects. A portion of the development costs for these buildings satisfy the terms of the unsecured non-revolving credit facility and term credit facility with the Canada Infrastructure Bank (the “CIB Facility”), which gives the Trust access to an attractive financing program to decarbonize the properties.

During Q1 2023, we settled our zoning by-law appeal with the City of Toronto for our development at 212-220 King Street West in Toronto, Ontario. We are currently working through next steps with our partner. The density approval is for 535,000 square feet of gross floor area, comprising 438,500 square feet of residential area and 96,500 square feet square feet of commercial space including office, retail and hotel, at the Trust's 50% interest.

As at March 31, 2023, the Trust had approximately $231.3 million of available liquidity(7), comprising $12.4 million of cash, undrawn revolving credit facilities totalling $116.6 million and undrawn amounts on our CIB Facility of $102.2 million which offers low-cost fixed-rate financing for commercial property retrofits to achieve certain energy efficiency savings and greenhouse gas emission reductions. The Trust also had $105 million of unencumbered assets(8) and a level of debt (net total debt-to-net total assets)(9) of 43.0%. On January 30, 2023, the Trust sold 720 Bay Street in Toronto, Ontario for $135 million, the net proceeds of which were used to repay drawings on the $375 million credit facility, reducing leverage from 44.6% as at December 31, 2022 to 43.0% as at March 31, 2023.

During Q1 2023, the Trust drew $2.7 million against the CIB Facility. Since entering into the facility in 2022, we have drawn $10.6 million against that facility. These draws represent 80% of the costs to date for capital retrofits at ten properties in Toronto downtown for projects to reduce the operational carbon emissions in these buildings by an estimated 1,805 tonnes of carbon dioxide, or 52.9%, per year on project completion.

“Dream Office REIT is pleased to deliver its first positive quarter of year-over-year comparative properties NOI growth in Toronto downtown since the pandemic,” said Jay Jiang, Chief Financial Officer of Dream Office REIT. “We are continuing to execute leases at a healthy spread against expiring rents, keeping committed occupancy relatively stable and have already secured leases for over 100% of 2023 lease expiries.”

CAPITAL HIGHLIGHTS

 

KEY FINANCIAL PERFORMANCE METRICS

 

 

 

As at

(unaudited)

 

March 31,

 

December 31,

 

 

2023

 

2022

Financing

 

 

 

 

Weighted average face rate of interest on debt (period-end)(10)

 

4.24%

 

4.42%

Interest coverage ratio (times)(11)

 

2.3

 

2.5

Net total debt-to-normalized adjusted EBITDAFV ratio (years)(12)

 

10.3

 

10.4

Level of debt (net total debt-to-net total assets)(9)

 

43.0%

 

44.6%

Average term to maturity on debt (years)

 

3.0

 

3.1

Undrawn credit facilities, available liquidity and unencumbered assets

 

 

 

 

Undrawn credit facilities (in millions)

$

218.8

$

163.5

Available liquidity (in millions)(7)

 

231.3

 

171.6

Unencumbered assets (in millions)(8)

 

104.8

 

115.7

Capital (period-end)

 

 

 

 

Total number of REIT A and LP B units (in millions)(13)

 

50.3

 

51.3

Net asset value (“NAV”) per unit(14)

$

31.50

$

31.36

See footnotes at end.

  • NAV per unit(14): As at March 31, 2023, our NAV per unit increased to $31.50 compared to $31.36 at December 31, 2022. The increase in NAV per unit relative to December 31, 2022 is driven by cash flow retention (FFO net of distributions) and the effect of accretive unit repurchases under our normal course issuer bid program, partially offset by fair value losses on investment properties in both regions due to maintenance capital spent but not capitalized. As at March 31, 2023, equity per the condensed consolidated financial statements was $1.5 billion.
  • Investment property disposition: On January 30, 2023, the Trust completed the sale of 720 Bay Street located in Toronto, Ontario for total gross proceeds before adjustments and transaction costs of $135.0 million. Proceeds from the disposition were used to repay drawings on the Trust’s revolving credit facilities.
  • Mortgage extension: On March 13, 2023, the Trust extended the maturity of a $44.3 million mortgage secured by an investment property in downtown Toronto to a new maturity date of May 31, 2025. In connection with the renewal, the Trust entered into a fixed-for-variable swap to fix the interest rate on the mortgage at 5.03%.
  • Demand revolving credit facility: On February 10, 2023, the Trust entered into a $20 million demand revolving credit facility secured by a property in Saskatoon, Saskatchewan. The demand revolving credit facility bears interest at the bankers’ acceptance rate plus 2.00% or at the bank’s prime rate plus 0.50%. The facility is due on demand with no fixed maturity.

CONFERENCE CALL

Dream Office REIT holds semi-annual conference calls following the release of second and fourth quarter results.

OTHER INFORMATION

Information appearing in this press release is a selected summary of results. The consolidated financial statements and Management’s Discussion and Analysis (“MD&A”) of the Trust are available at www.dreamofficereit.ca and on www.sedar.com.

Dream Office REIT is an unincorporated, open-ended real estate investment trust. Dream Office REIT is a premier office landlord in downtown Toronto with over 3.5 million square feet owned and managed. We have carefully curated an investment portfolio of high-quality assets in irreplaceable locations in one of the finest office markets in the world. For more information, please visit our website at www.dreamofficereit.ca.

FOOTNOTES

(1)

Excludes properties held for sale and joint ventures that are equity accounted at the end of each period.

(2)

Excludes properties under development, properties held for sale and joint ventures that are equity accounted at the end of each period.

(3)

Occupancy figures as at March 31, 2022 include sold properties 720 Bay Street in Toronto and Princeton Tower in Saskatoon. Excluding these properties from March 31, 2022 figures, total portfolio in-place occupancy would have been 81.7% and in-place and committed occupancy would have been 85.3%. In Toronto downtown, in-place occupancy would have been 83.5% and in-place and committed occupancy would have been 87.7%.

(4)

FFO is a non-GAAP financial measure. The most directly comparable financial measure to FFO is net income. The tables included in the Appendices section of this press release reconcile FFO for the three months ended March 31, 2023 and March 31, 2022 to net income. For further information on this non-GAAP financial measure please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release.

(5)

Comparative properties NOI is a non-GAAP financial measure. The most directly comparable financial measure to comparative properties NOI is net rental income. The tables included in the Appendices section of this press release reconcile comparative properties NOI for the three months ended March 31, 2023 and March 31, 2022 to net rental income. For further information on this non-GAAP financial measure, please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release.

(6)

Diluted FFO per unit is a non-GAAP ratio. Diluted FFO per unit is calculated as FFO (a non-GAAP financial measure) divided by diluted weighted average number of units. For further information on this non-GAAP ratio, please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release. A description of the determination of the diluted weighted average number of units can be found in the management’s discussion and analysis of the financial condition and results of operations of the Trust for the three months ended March 31, 2023, dated May 4, 2023 (the “MD&A for the first quarter of 2023”) in the section “Supplementary Financial Measures and Other Disclosures” under the heading “Weighted average number of units”.

(7)

Available liquidity is a non-GAAP financial measure. The most directly comparable financial measure to available liquidity is undrawn credit facilities. The tables included in the Appendices section of this press release reconcile available liquidity to undrawn credit facilities as at March 31, 2023 and December 31, 2022. For further information on this non-GAAP financial measure please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release.

(8)

Unencumbered assets is a supplementary financial measure. For further information on this supplementary financial measure, please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release.

(9)

Level of debt (net total debt-to-net total assets) is a non-GAAP ratio. Net total debt-to-net total assets comprises net total debt (a non-GAAP financial measure) divided by net total assets (a non-GAAP financial measure). The tables in the Appendices section reconcile net total debt and net total assets to total debt and total assets, the most directly comparable financial measures to these non-GAAP financial measures, respectively, as at March 31, 2023 and December 31, 2022. For further information on this non-GAAP ratio and these non-GAAP financial measures, please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release.

(10)

Weighted average face rate of interest on debt is calculated as the weighted average face rate of all interest-bearing debt balances excluding debt in joint ventures that are equity accounted.

(11)

Interest coverage ratio (times) is a non-GAAP ratio. Interest coverage ratio comprises trailing 12-month adjusted EBITDAFV divided by trailing 12-month interest expense on debt. Adjusted EBITDAFV, trailing 12-month adjusted EBITDAFV and trailing 12-month interest expense on debt are non-GAAP measures. The tables in the Appendices section reconcile adjusted EBITDAFV to net income for the three months ended March 31, 2023 and March 31, 2022 and for the year ended December 31, 2022 and trailing 12-month adjusted EBITDAFV and trailing 12-month interest expense on debt to adjusted EBITDAFV and interest expense on debt, respectively, for the trailing 12-month period ended March 31, 2023. For further information on this non-GAAP ratio and these non-GAAP financial measures, please refer to the statements under the heading “Non-GAAP Financial Measures and Ratios and Supplementary Financial Measures” in this press release.

(12)

Net total debt-to-normalized adjusted EBITDAFV ratio (years) is a non-GAAP ratio. Net total debt-to-normalized adjusted EBITDAFV comprises net total debt (a non-GAAP financial measure) divided by normalized adjusted EBITDAFV (a non-GAAP financial measure). Normalized adjusted EBITDAFV comprises adjusted EBITDAFV (a non-GAAP financial measure) adjusted for NOI from sold properties in the quarter. For further information on this non-GAAP ratio and these non-GAAP financial measures, please refer to the statements under the heading “Non-GAAP Financial Measures and Ratios and Supplementary Financial Measures” in this press release.

(13)

Total number of REIT A and LP B units includes 5.2 million LP B Units which are classified as a liability under IFRS.

(14)

NAV per unit is a non-GAAP ratio. NAV per unit is calculated as Total equity (including LP B Units) (a non-GAAP financial measure) divided by the total number of REIT A and LP B units outstanding as at the end of the period. Total equity (including LP B Units) is a non-GAAP measure. The most directly comparable financial measure to total equity (including LP B Units) is equity. The tables included in the Appendices section of this press release reconcile total equity (including LP B Units) to equity as at March 31, 2023 and December 31, 2022. For further information on this non-GAAP financial measure please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release.

NON-GAAP FINANCIAL MEASURES, RATIOS AND SUPPLEMENTARY FINANCIAL MEASURES

The Trust’s condensed consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). In this press release, as a complement to results provided in accordance with IFRS, the Trust discloses and discusses certain non-GAAP financial measures, including FFO, comparative properties NOI, available liquidity, adjusted EBITDAFV, trailing 12-month adjusted EBITDAFV, trailing 12-month interest expense on debt, net total debt, net total assets, normalized adjusted EBITDAFV – annualized and total equity (including LP B Units or subsidiary redeemable units) and non-GAAP ratios, including diluted FFO per unit, level of debt (net total debt-to-net total assets), interest coverage ratio, net total debt-to-normalized adjusted EBITDAFV and NAV per unit, as well as other measures discussed elsewhere in this release. These non-GAAP financial measures and ratios are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. The Trust has presented such non-GAAP financial measures and non-GAAP ratios as Management believes they are relevant measures of the Trust’s underlying operating and financial performance. Certain additional disclosures such as the composition, usefulness and changes, as applicable, of the non-GAAP financial measures and ratios included in this press release are expressly incorporated by reference from the MD&A for the first quarter of 2023 and can be found under the section “Non-GAAP Financial Measures and Ratios" and respective sub-headings labelled “Funds from operations and diluted FFO per unit”, "Comparative properties NOI”, “Level of debt (net total debt-to-net total assets)”, “Net total debt-to-normalized adjusted EBITDAFV ratio (years)”, “Interest coverage ratio (times)”, “Available liquidity”, “Total equity (including LP B Units or subsidiary redeemable units)”, “Adjusted earnings before interest, taxes, depreciation, amortization and fair value adjustments (“adjusted EBITDAFV”)”, “Trailing 12-month Adjusted EBITDAFV and trailing 12-month interest expense on debt”, and “ NAV per Unit”. In this press release, the Trust also discloses and discusses certain supplementary financial measures, including unencumbered assets. The composition of supplementary financial measures included in this press release are expressly incorporated by reference from the MD&A for the first quarter of 2023 and can be found under the section “Supplementary financial measures and ratios and other disclosures”. The MD&A for the first quarter of 2023 is available on SEDAR at www.sedar.com under the Trust’s profile and on the Trust’s website at www.dreamofficereit.ca under the Investors section. Non-GAAP financial measures should not be considered as alternatives to net income, net rental income, cash flows generated from (utilized in) operating activities, cash and cash equivalents, total assets, non-current debt, total equity, or comparable metrics determined in accordance with IFRS as indicators of the Trust’s performance, liquidity, leverage, cash flow, and profitability. Reconciliations for FFO, comparative properties NOI, available liquidity, adjusted EBITDA, and total equity (including LP B Units) to the nearest comparable IFRS measure are contained at the end of this press release.

FORWARD-LOOKING INFORMATION

This press release may contain forward-looking information within the meaning of applicable securities legislation, including, but not limited to, statements regarding our objectives and strategies to achieve those objectives; our ability to identify opportunities and uses for our assets other than as traditional office buildings and increase value for our unitholders; our plans to improve the quality of our buildings and rental rates in the Toronto downtown region, and to reposition our assets in the Other markets region to improve occupancy and liquidity; expectations and plans for repositioning certain properties, including space held vacant for future occupancy; the effect of building improvements on tenant experience and building quality and performance; our development, redevelopment and intensification plans, including timelines, square footage and other project characteristics, including in respect of 366 Bay Street and 67 Richmond Street West; our commitment to invest in our downtown Toronto portfolio and retrofit our properties in the Bay Street corridor, and the effect of these plans on the value and quality of our portfolio; our future capital requirements and cost to complete development projects; the expectation that development costs for certain projects will satisfy the terms of the Canada Infrastructure Bank credit facility, allowing access to low-cost fixed-rate financing for such projects; our ability to increase building performance and achieve certain energy efficiency and greenhouse gas reduction goals, including in respect of specific properties and of retrofits made in connection with the Canada Infrastructure Bank’s credit facility; our asset management strategies, including in respect of capital allocation, investments and expected benefits; and prospective leasing activity and our overall financial performance, profitability and liquidity for future periods and years. Forward-looking statements generally can be identified by words such as “outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “could”, “likely”, “plan”, “project”, “budget”, or “continue” or similar expressions suggesting future outcomes or events. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dream Office REIT’s control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, general and local economic and business conditions, including in respect of real estate; mortgage and interest rates and regulations; inflation; risks related to a potential recession economic slowdown in certain of the jurisdictions in which we operate and the effect inflation and any such recession economic slowdown may have on market conditions and lease rates; the uncertainties around the availability, timing and amount of future equity and debt financings; development risks including construction costs, the project timings and the availability of labour; NOI from development properties on completion; the impact of the COVID-19 pandemic on the Trust; the effect of government restrictions on leasing and building traffic; employment levels; the uncertainties around the timing and amount of future financings; leasing risks, including those associated with the ability to lease vacant space; rental rates on future leasing; and interest and currency rate fluctuations.

Our objectives and forward-looking statements are based on certain assumptions, which include but are not limited to: that the general economy remains stable; our interest costs will be relatively low and stable; that we will have the ability to refinance our debts as they mature; inflation and interest rates will not materially increase beyond current market expectations; conditions within the real estate market remain consistent; the timing and extent of current and prospective tenants’ return to the office; our future projects and plans will proceed as anticipated; that government restrictions due to COVID-19 on the ability of us and our tenants to operate their businesses at our properties will not be re-imposed in any material respects; competition for acquisitions remains consistent with the current climate; and that the capital markets continue to provide ready access to equity and/or debt to fund our future projects and plans. All forward-looking information in this press release speaks as of the date of this press release. Dream Office REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise except as required by law.

Additional information about these assumptions and risks and uncertainties is contained in Dream Office REIT’s filings with securities regulators, including its latest annual information form and MD&A. These filings are also available at Dream Office REIT’s website at www.dreamofficereit.ca

APPENDICES

Funds from operations and diluted FFO per unit

 

 

Three months ended March 31,

 

 

 

2023

 

 

2022

Net income for the period

 

$

1,378

 

$

52,282

Add (deduct):

 

 

 

 

 

 

Net income from investment in Dream Industrial REIT

 

 

(2,433)

 

 

(42,899)

Share of FFO from investment in Dream Industrial REIT

 

 

6,527

 

 

5,847

Depreciation and amortization

 

 

2,747

 

 

2,986

Costs (recovery) attributable to sale of investment properties

 

 

49

 

 

(12)

Interest expense on subsidiary redeemable units

 

 

1,308

 

 

1,308

Fair value adjustments to investment properties

 

 

12,068

 

 

(19,379)

Fair value adjustments to investment properties held in joint ventures

 

 

29

 

 

(23)

Fair value adjustments to financial instruments and DUIP included in G&A expenses

 

 

(2,990)

 

 

20,340

Internal leasing costs

 

 

395

 

 

517

Principal repayments on finance lease liabilities

 

 

(13)

 

 

(13)

Deferred income taxes expense (recovery)

 

 

(208)

 

 

89

FFO for the period

$

18,857

 

$

21,043

Diluted weighted average number of units

 

 

52,183

 

 

53,688

Diluted FFO per unit

 

$

0.36

 

$

0.39

Comparative properties NOI

 

Three months ended

 

Change in
weighted average
occupancy % 

 

Change in
in-place
net rents % 

 

March 31,

 

March 31,

 

 

Change

 

2023

 

2022

 

 

Amount

 

%

Toronto downtown

$

20,525

 

$

19,945

 

$

580

 

2.9

 

(1.0)

 

5.3

Other markets

 

6,800

 

 

6,712

 

 

88

 

1.3

 

(1.6)

 

0.7

Comparative properties NOI

 

27,325

 

 

26,657

 

 

668

 

2.5

 

(1.3)

 

4.2

Properties under development

 

102

 

 

213

 

 

(111)

 

 

 

 

 

 

Property management and other service fees

 

452

 

 

431

 

 

21

 

 

 

 

 

 

Change in provisions

 

342

 

 

(602)

 

 

944

 

 

 

 

 

 

Straight-line rent

 

283

 

 

129

 

 

154

 

 

 

 

 

 

Amortization of lease incentives

 

(2,905)

 

 

(2,902)

 

 

(3)

 

 

 

 

 

 

Lease termination fees and other

 

173

 

 

253

 

 

(80)

 

 

 

 

 

 

Sold properties

 

400

 

 

1,684

 

 

(1,284)

 

 

 

 

 

 

Net rental income

$

26,172

 

$

25,863

 

$

309

 

1.2

 

 

 

 

Adjusted EBITDAFV

 

 

Three months ended

 

Year ended

 

 

March 31,

 

March 31,

 

December 31,

 

 

 

2023

 

 

2022

 

 

2022

Net income for the period

 

$

1,378

 

$

52,282

 

$

63,641

Add (deduct):

 

 

 

 

 

 

 

 

 

Interest – debt

 

 

14,326

 

 

11,259

 

 

51,836

Interest – subsidiary redeemable units

 

 

1,308

 

 

1,308

 

 

5,234

Current and deferred income taxes expense (recovery), net

 

 

(208)

 

 

124

 

 

672

Depreciation on property and equipment

 

 

45

 

 

130

 

 

430

Fair value adjustments to investment properties

 

 

12,068

 

 

(19,379)

 

 

95,171

Fair value adjustments to financial instruments

 

 

(2,835)

 

 

20,282

 

 

(60,834)

Net income from investment in Dream Industrial REIT

 

 

(2,433)

 

 

(42,899)

 

 

(60,237)

Distributions earned from Dream Industrial REIT

 

 

4,623

 

 

4,655

 

 

18,622

Share of net loss from investment in joint ventures

 

 

53

 

 

72

 

 

532

Non-cash items included in investment properties revenue(1)

 

 

2,622

 

 

2,773

 

 

10,481

Change in provisions

 

 

(342)

 

 

602

 

 

1,709

Lease termination fees and other

 

 

(173)

 

 

(253)

 

 

(1,233)

Net loss on transactions and other items

 

 

444

 

 

505

 

 

1,890

Adjusted EBITDAFV for the period

 

$

30,876

 

$

31,461

 

$

127,914

(1)

 

Includes adjustments for straight-line rent and amortization of lease incentives.

Trailing 12-month Adjusted EBITDAFV and trailing 12-month interest expense on debt

 

Trailing 12-month period

 

ended March 31, 2023

Adjusted EBITDAFV for the three months ended March 31, 2023

 

$

30,876

Add: Adjusted EBITDAFV for the year ended December 31, 2022

 

 

127,914

Less: Adjusted EBITDAFV for the three months ended March 31, 2022

 

 

(31,461)

Trailing 12-month Adjusted EBITDAFV

 

$

127,329

 

Trailing 12-month period

 

ended March 31, 2023

Interest expense on debt for the three months ended March 31, 2023

 

$

14,326

Add: Interest expense on debt for the year ended December 31, 2022

 

 

51,836

Less: Interest expense on debt for the three months ended March 31, 2022

 

 

(11,259)

Trailing 12-month interest expense on debt

 

$

54,903

Interest coverage ratio (times)

 

For the trailing 12-month period ended

 

March 31,

 

 

December 31,

 

2023

 

 

2022

Trailing 12-month adjusted EBITDAFV

$

127,329

 

$

127,914

Trailing 12-month interest expense on debt

$

54,903

 

$

51,836

Interest coverage ratio (times)

 

2.3

 

 

2.5

Level of debt (net total debt-to-net total assets)

 

Amounts included in condensed
consolidated financial statements

 

March 31,

 

December 31,

 

 

2023

 

 

2022

Non-current debt

$

1,046,665

 

$

1,106,816

Current debt

 

220,932

 

 

265,967

Total debt

 

1,267,597

 

 

1,372,783

Less: Cash on hand(1)

 

(10,900)

 

 

(6,811)

Net total debt

$

1,256,697

 

$

1,365,972

Total assets

 

2,934,602

 

 

3,066,892

Less: Cash on hand(1)

 

(10,900)

 

 

(6,811)

Net total assets

$

2,923,702

 

$

3,060,081

Net total debt-to-net total assets

 

43.0%

 

 

44.6%

(1)

 

Cash on hand represents cash on hand at period-end, excluding cash held in co-owned properties and joint ventures that are equity accounted.

Available liquidity

 

 

As at

 

 

March 31,

 

December 31,

 

 

2023

 

2022

Cash and cash equivalents

$

12,420

$

8,018

Undrawn revolving credit facilities

 

116,611

 

58,585

Undrawn CIB Facility

 

102,226

 

104,957

Available liquidity

$

231,257

$

171,560

Net total debt-to-normalized adjusted EBITDAFV ratio (years)

 

March 31,

December 31,

 

2023

 

2022

Non-current debt

$

1,046,665

$

1,106,816

Current debt

 

220,932

 

265,967

Total debt

 

1,267,597

 

1,372,783

Less: Cash on hand(1)

 

(10,900)

 

(6,811)

Net total debt

$

1,256,697

$

1,365,972

Adjusted EBITDAFV – quarterly

 

30,876

 

32,857

Less: NOI of disposed properties for the quarter

 

(400)

 

(31)

Normalized adjusted EBITDAFV – quarterly

$

30,476

$

32,826

Normalized adjusted EBITDAFV – annualized

$

121,904

$

131,304

Net total debt-to-normalized adjusted EBITDAFV ratio (years)

 

10.3

 

10.4

(1)

 

Cash on hand represents cash on hand at period-end, excluding cash held in co-owned properties and joint ventures that are equity accounted.

Total equity (including LP B Units)

 

 

 

Unitholders’ equity

 

 

 

March 31, 2023

 

December 31, 2022

 

 

 

Number of Units

 

 

Amount

 

Number of Units

 

 

Amount

Unitholders’ equity

 

 

45,025,718

 

$

1,824,979

 

46,110,593

 

$

1,842,010

Deficit

 

 

 

 

(331,789)

 

 

 

(321,769)

Accumulated other comprehensive income

 

 

 

 

13,997

 

 

 

11,933

Equity per condensed consolidated financial statements

45,025,718

 

 

1,507,187

 

46,110,593

 

 

1,532,174

Add: LP B Units

 

 

5,233,823

 

 

76,099

 

5,233,823

 

 

78,193

Total equity (including LP B Units)

 

 

50,259,541

 

$

1,583,286

 

51,344,416

 

$

1,610,367

NAV per unit

 

 

 

 

$

31.50

 

 

 

$

31.36

 

Contacts

For further information:

Michael J. Cooper
Chairman and Chief Executive Officer
(416) 365-5145
mcooper@dream.ca

Jay Jiang
Chief Financial Officer
(416) 365-6638
jjiang@dream.ca

Contacts

For further information:

Michael J. Cooper
Chairman and Chief Executive Officer
(416) 365-5145
mcooper@dream.ca

Jay Jiang
Chief Financial Officer
(416) 365-6638
jjiang@dream.ca