TORONTO--(BUSINESS WIRE)--DREAM IMPACT TRUST (TSX: MPCT.UN) ("Dream Impact", "we", "our" or the "Trust") today reported its financial results for the three ("second quarter") and six months ended June 30, 2021.
As we move into the second half of 2021, the Trust has made significant progress accelerating the composition of our portfolio through the ongoing execution of our development pipeline and our recent acquisitions. These include the acquisition of two office buildings, multi-family residential units, and significant achievements on our Zibi development with multiple blocks expected to be completed over the next twelve months. As at June 30, 2021, NOI(1) from income properties is approximately $10 million per year or $0.15/unit and growing from our acquisitions and development pipeline. In addition, the Trust expects to derive income from assets developed to sell.
"We are extremely pleased with the progress we've made in growing our business to date," said Michael Cooper, Portfolio Manager. "With the planned acquisition of the multi-family rental apartments and the two previously acquired office buildings earlier in the year, we are making progress towards our goal of 70% of our portfolio being recurring income more quickly than we had expected. This will make the Trust sustainable, safer and more valuable to our communities and investors for the long term."
Subsequent to the second quarter, the Trust announced the expected acquisition of over 900 multi-family residential units in the City of Toronto, for approximately $378 million of which $279 million is expected to be funded through debt financing at the project level. The Trust will have a 33% interest in the units, alongside Dream and its affiliates. Upon closing, these units will generate immediate returns to the Trust. The Trust will utilize an amount equal to the net proceeds from the $30 million private placement of impact convertible unsecured subordinated debentures ("Impact Debentures") with Fairfax Financial Holdings Limited and/or certain of its controlled affiliates, which closed subsequent to June 30, 2021, to fund this acquisition. The Impact Debentures are intended to be used to finance expenditures associated with eligible impact investments and will align with our Impact Financing Framework released earlier this year.
The Impact Financing Framework allows the Trust to issue impact investing instruments including green, social or sustainability bonds, green loans, social loans or financial instruments to finance or refinance eligible impact projects. The multi-family residential units align with the Trust's impact verticals that form the basis of the Dream Impact Management System. The Trust will continue to seek financing opportunities to grow the business, including our credit facility and other low-cost financing opportunities.
Selected financial and operating metrics for the three and six months ended June 30, 2021 are summarized below:
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Three months ended
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Six months ended
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2021 |
2020 |
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2021 |
|
2020 |
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Condensed consolidated results of operations |
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|
|
|
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Net income (loss) |
$ |
(1,451) |
|
$ |
(3,634) |
|
|
$ |
(7,663) |
|
$ |
1,518 |
|
Cash generated from (utilized in) operating activities |
(129) |
|
2,162 |
|
|
5,880 |
|
2,556 |
|
||||
Net income (loss) per unit⁽¹⁾ |
(0.02) |
|
(0.05) |
|
|
(0.12) |
|
0.02 |
|
||||
Cash generated from (utilized in) operating activities per unit |
— |
|
0.03 |
|
|
0.09 |
|
0.04 |
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||||
|
|
|
|
|
|
||||||||
Distributions declared and paid per unit |
0.10 |
|
0.10 |
|
|
0.20 |
|
0.20 |
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||||
Units outstanding – end of period |
64,935,685 |
|
68,848,500 |
|
|
64,935,685 |
|
68,848,500 |
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||||
Units outstanding – weighted average |
64,780,095 |
|
69,054,839 |
|
|
64,868,057 |
|
69,026,710 |
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During the second quarter, the Trust reported a net loss of $1.5 million compared to $3.6 million in the prior year comparative period. The improvement relative to the prior year was driven by fair value adjustments on our developments and lending portfolio, and foreign exchange fluctuations on our investment in the Virgin Hotels Las Vegas ("U.S. hotel"), partially offset by reduced income contribution from scheduled repayments on the Trust's lending portfolio and reduced tax recoveries since the prior year.
Due to the composition of the Trust's portfolio, we expect fluctuations in earnings from period to period until our development pipeline is further built out. For details on project occupancies and development timelines, refer to Section 1.4 "Summary of Portfolio Assets" and Section 10.1 "Summary of Impact Investments" of the Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2021.
As at June 30, 2021, the Trust had $70.1 million of cash-on-hand. The Trust’s debt-to-asset value(1) as at June 30, 2021 was 16.2%, an increase relative to 13.6% as at December 31, 2020, driven by financing obtained in relation to income properties acquired during the year. The Trust's debt-to-total asset value, inclusive of project-level debt(1) and assets within our development segment, including equity accounted investments, was 44.1% as at June 30, 2021, compared to 38.5% as at December 31, 2020. Year-over-year, the Trust has improved its liquidity position by gaining access of up to $80 million in new liquidity, through the closing of a new credit facility with the availability to borrow up to $50 million and the Impact Debentures for $30 million as noted above.
During the second quarter, the Dream Impact Management System, which is anchored by our three impact verticals: environmental sustainability and resilience, attainable and affordable housing, and inclusive communities, was verified by an independent third-party to determine the extent of its alignment with the Operating Principles for Impact Management (the "Impact Principles"). The results of the verification were in line with our expectations and industry averages. The Trust intends to incorporate feedback from the verification process to improve the results under each Impact Principle over the next three years. As at August 3, 2021, 80% of our portfolio of assets are classified as impact.
Development
During the second quarter, the development segment generated a net loss of $0.6 million, compared to a net loss of $2.1 million in the prior year comparative period. The improvement in results of $1.5 million was driven by lower foreign exchange losses related to the appreciation of the U.S. dollar in the current period compared to the prior year. The Trust expects the impact of foreign exchange on our investment in the U.S. hotel to fluctuate each period.
During the three months ended June 30, 2021, the Trust, along with Dream Asset Management Corporation ("DAM"), acquired the remaining third-party interest in Zibi, our 34-acre waterfront development in Ottawa, Ontario and Gatineau, Quebec, resulting in the development ownership being split 50/50 between the Trust and DAM. At the Trust's share, the purchase was settled by a cash payment of $9.1 million and a non-interest bearing promissory note with a discounted value of $5.3 million ($5.5 million face value) maturing in June 2023. During the three and six months ended June 30, 2021, Zibi recognized fair value gains of $0.8 million and $3.5 million, respectively, at the Trust's share, as construction nears completion on certain blocks, which has been reflected in the Trust's share of net income from Zibi in the period. To date, the Trust has invested $88.3 million in the Zibi development, including transaction costs.
On July 2, 2021, CMHC announced a $70.0 million investment at Zibi. The Trust's impact verticals are incorporated and realized in the development of environmentally sustainable, inclusive and affordable and attainable housing at Zibi as part of the overall mixed use and income community. Zibi Block 10, the Trust's first affordable purpose built rental at Zibi, is receiving a $60 million low cost loan, through the Rental Construction Financing Initiative for the construction of a 162-unit, 15-storey building. Zibi received a further $10 million low cost loan through the NHS Affordable Housing Innovation Fund, to help build 200 affordable units, which will have equitable access to the District Energy System, our net zero carbon heating-cooling system for the Zibi community. Zibi Block 10 will house the central plant of the District Energy System.
In the three and six months ended June 30, 2021, the Trust contributed $3.2 million and $6.8 million, respectively, to its developments, primarily related to West Don Lands and Zibi. We anticipate further capital investments in the range of $75 million to $85 million for our development projects over the next two years. These contributions exclude the aforementioned acquisition of the third-party interest in Zibi during the three months ended June 30, 2021.
During the second quarter, Brightwater, our 72-acre waterfront development in Port Credit, successfully launched Brightwater Towns, a 106-unit town home complex, and The Mason, a 162-unit 9-storey condominium building. To date, 100% of the released town homes at Brightwater Towns and 86% of the units at The Mason have sold, which is in addition to the 311 condominium units fully sold at Brightwater I and II, launched in 2020. Once completed, we expect Brightwater will have over 350,000 square feet ("sf") of retail and commercial space, approximately 3,000 residential units, 18 acres of new parks and green space, an elementary school and a YMCA and will be an environmentally friendly community with electric vehicle charging stations, bike lanes and bike parking. To date, the Trust has invested $38.4 million, including transaction costs, for a 23.25% interest in the development.
Recurring Income
During the three months ended June 30, 2021, the recurring income segment generated net income of $0.5 million compared to a net loss of $0.6 million in the prior year comparative period. The increase in earnings was primarily due to the income generated from the first commercial tenant occupancy at 15 Rue Jos-Montferrand (Zibi Block 2-3) and a lower loan provision in the current period, partially offset by reduced income contribution from the lending portfolio as a result of repayments in the prior year.
During the three months ended June 30, 2021, 15 Rue Jos-Montferrand, the first completed commercial block at the Zibi development, achieved first occupancy with Spaces, an Amsterdam-based creative workspace provider, which occupies over 80% of the building's gross leasable area. Zibi is on track for first occupancy at the Natural Sciences Building, which is over 80% leased to a Federal Government tenant and will add a further 186,000 sf to the recurring income segment. The Trust also expects to complete construction of the District Energy System later this year.
Other(2)
In the second quarter, the Other segment generated a net loss of $1.4 million compared to a net loss of $0.9 million in the prior year comparative period. The higher loss was primarily related to the fluctuation of the income tax recovery period over period as a result of the composition of income, primarily related to fair value adjustments, including those held as equity accounted investments. This was partially offset by a decrease in the asset management fee expense. In June 2021, the Trust renewed its arrangement to satisfy the management fees payable to DAM in units of the Trust converted at the most recent year-end NAV per unit(1) as determined and reported by the Trust ($8.99 as at December 31, 2020), and recorded for accounting purposes based on the trading price on the date of settlement. The discount for the trading price noted above was recognized year to date in the second quarter of 2021 following unitholder approval. Partially offsetting this recovery was the increase in the unit price year over year. The amended management agreement permits the Trust to settle its asset management fee in units of the Trust until December 31, 2023.
The Trust settled its asset management fees payable to DAM in the first quarter of 2021 with the issuance of 344,345 units during the second quarter of 2021 as the renewed arrangement was effective as at January 1, 2021. Subsequent to June 30, 2021, the Trust settled its management fee for the second quarter of 2021 with the issuance of 301,477 units.
Unit Buyback Activity
From the inception of the Trust's unit buyback program in December 2014 to August 3, 2021, the Trust has repurchased 14.7 million units for cancellation, for a total cost of $91.6 million.
As at August 3, 2021, the Trust's asset manager, DAM, owns 17.8 million units of the Trust, inclusive of 1.3 million units acquired under the Trust's distribution reinvestment plan, 2.7 million units acquired in satisfaction of the asset management fees and the remainder acquired on the open market for DAM's own account. In aggregate, DAM owns 27% of the Trust as at August 3, 2021.
Cash Generated from Operating Activities
Cash utilized in operating activities for the three months ended June 30, 2021 was $0.1 million compared with cash generated of $2.2 million in the prior year comparative period, a decrease of $2.3 million as a result of changes in non-cash working capital. Cash generated from operating activities for the six months ended June 30, 2021 was $5.9 million compared with $2.6 million in the prior year comparative period, an increase of $3.3 million, primarily related to distributions received from the Trust's Empire Lakeshore investment and changes in non-cash working capital.
The table below provides a summary of the Trust's portfolio as at June 30, 2021:
As at |
June 30, 2021 |
|
December 31, 2020 |
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Development |
$ |
285,635 |
|
$ |
276,725 |
|
Recurring income |
184,981 |
|
169,040 |
|
||
Other(2) |
49,350 |
|
94,112 |
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Total debt payable |
105,201 |
|
88,392 |
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Total assets |
649,003 |
|
648,514 |
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Cash |
70,102 |
|
110,671 |
|
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Footnotes |
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(1) |
For the Trust's definition of the following non-IFRS measures: NOI, debt-to-asset value, debt-to-total asset value inclusive of project-level debt, net income (loss) per unit, NAV, and NAV per unit, please refer to the cautionary statements under the heading "Non-IFRS Measures" in this press release and the Non-IFRS Measures and Other Disclosures section of the Trust's MD&A. |
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(2) |
Includes other Trust amounts not specifically related to the segments. |
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Conference Call
Senior management will host a conference call on Tuesday August 17, 2021 at 9:00 am (ET). To access the call, please dial 1-888-465-5079 in Canada or 416-216-4169 elsewhere and use passcode 6678 364#. To access the conference call via webcast, please go to the Trust's website at www.dreamimpacttrust.ca and click on Calendar of Events in the News and Events section. A taped replay of the conference call and the webcast will be available for 90 days.
About Dream Impact
Dream Impact is an open-ended trust dedicated to impact investing. Impact investing is the intention of creating measurable positive, social and environmental change in our communities and for our stakeholders, while generating attractive market returns. Dream Impact's underlying portfolio is comprised of exceptional real estate assets reported under two operating segments: development and recurring income, that would not be otherwise available in a public and fully transparent vehicle, managed by an experienced team with a successful track record in these areas. The objectives of the Trust are to create positive and lasting impacts for our stakeholders through our three impact verticals: environmental sustainability and resilience, attainable and affordable housing, and inclusive communities; balance growth and stability of the portfolio, increasing cash flow, unitholders' equity and NAV(1) over time; leverage access to an experienced management team and strong partnerships in order to generate attractive returns for investors; provide investors with a portfolio of high-quality real estate development opportunities, concentrated in core geographic markets; and provide predictable cash distributions to unitholders on a tax-efficient basis. For more information, please visit: www.dreamimpacttrust.ca.
Non-IFRS 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-IFRS financial measures, including debt-to-asset value, debt-to-total asset value inclusive of project-level debt, net income (loss) per unit, net operating income and NAV, as well as other measures discussed elsewhere in this release. These non-IFRS measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other issuers. The Trust has presented such non-IFRS measures as management believes they are relevant measures of our underlying operating performance and debt management. Non-IFRS measures should not be considered as alternatives to unitholders' equity, net income, total comprehensive income or cash flows generated from operating activities, or comparable metrics determined in accordance with IFRS as indicators of the Trust’s performance, liquidity, cash flow and profitability. For a full description of these measures and, where applicable, a reconciliation to the most directly comparable measure calculated in accordance with IFRS, please refer to the “Non-IFRS Measures and Other Disclosures” section in the Trust’s MD&A for the three and six months ended June 30, 2021.
Forward-Looking Information
This press release may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking information generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “would”, “could”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans”, or “continue”, or similar expressions suggesting future outcomes or events. Some of the specific forward-looking information in this press release may include, among other things, statements relating to the Trust's objectives and strategies to achieve those objectives, our 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: the details, anticipated timing of closing and expected returns of the Trust’s potential acquisitions of multi-family residential units, the anticipated purchase price and funding of the purchase price for such acquisitions and the Trust’s expectation of growing NOI; statements regarding our development and acquisition pipelines; the expected use of the Impact Debentures from the private placement; the Trust's focus on impact investing and expectations for formalizing its approach to impact management over the next year; the Trust's impact benchmarking strategy and its ability to achieve its impact and sustainability goals; the Trust’s plans to incorporate feedback from the third-party verification of the extent to which the Dream Impact Management System is aligned with the Impact Principles; the Trust’s plans and proposals for current and future development projects, including projected sizes, densities, uses, costs, timing for expected zoning approvals, development milestones and their expected sustainability impact; development timelines, including commencement of construction and/or revitalization of our development projects and completion and occupancy dates; anticipated returns from our development projects and the timing thereof; the Trust’s growth prospects; the Trust’s expectations for recurring income to comprise 70% of its portfolio; the Trust’s ability to generate attractive returns for unitholders; the Trust's expectations to use its amended credit facility to acquire income properties meeting its impact criteria; expectations for the Trust's development segment to generate returns and the timing thereof; the Trust's expectations to make further capital investments in the range of $75 million to $85 million to development projects over the next two years; anticipated effect of our developments on returns, earnings, profits and future cash flows as milestones are achieved; and the anticipated growth in our recurring income segment and its effect on the Trust's operating cash flows and distributions. 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 that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to: adverse changes in general economic and market conditions; the impact of the novel coronavirus (COVID-19 and variants thereof) pandemic on the Trust; the risk of adverse global market, economic and political conditions and health crises; risks inherent in the real estate industry; risks relating to investment in development projects; impact investing strategy risk; risks relating to geographic concentration; risks inherent in investments in real estate, mortgages and other loans and development and investment holdings; credit risk and counterparty risk; competition risks; environmental and climate change risks; risks relating to access to capital; interest rate risk; the risk of changes in governmental laws and regulations; tax risks; foreign exchange risk; acquisitions risk; and leasing risks. Our objectives and forward-looking statements are based on certain assumptions with respect to each of our markets, including that the general economy remains stable; the gradual recovery and growth of the general economy continues over the remainder of 2021; that no unforeseen changes in the legislative and operating framework for our business will occur; that we will meet our future objectives, priorities and growth targets; that we receive the licenses, permits or approvals necessary in connection with our projects; that we will have access to adequate capital to fund our future projects, plans and any potential acquisitions; that we are able to identify high quality investment opportunities and find suitable partners with which to enter into joint ventures or partnerships; that we do not incur any material environmental liabilities; interest rates remain stable; there will not be a material change in foreign exchange rates; conditions within the real estate market remain consistent; and competition for and availability of acquisitions remains consistent with the current climate. All forward-looking information in this press release speaks as of August 3, 2021. The Trust 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 disclosed in the Trust’s filings with securities regulators filed on the System for Electronic Document Analysis and Retrieval (www.sedar.com), including its latest annual information form and MD&A. These filings are also available at the Trust’s website at www.dreamimpacttrust.ca.
