TORONTO--(BUSINESS WIRE)--DREAM IMPACT TRUST (TSX: MPCT.UN) ("Dream Impact", "we", "our" or the "Trust") today reported its financial results for the three and six months ended June 30, 2023 ("second quarter"). All unit and per unit amounts discussed herein reflect the unit consolidation completed on June 16, 2023.
“Despite an increase in interest rates, construction costs and inflation, the Trust made tremendous progress in the second quarter as we achieved municipal approvals, are completing purpose-built residential buildings, commenced the construction of Forma and have begun the approval process for Quayside", said Michael Cooper, Portfolio Manager. "Our plan to convert land holdings into a portfolio of high-quality income properties is becoming clear, with additional properties being built for sale to add to our returns. We look forward to providing further information on our current and future business at our investor day on September 6th."
In the second quarter, the Trust received final rezoning approval on 49 Ontario Street, a wholly owned 88,000 square foot (“sf”) commercial building located in downtown Toronto in close proximity to the Distillery and Canary District communities. The rezoning provides for approximately 809,000 sf of residential gross floor area (or 1,250 residential units) and 68,000 sf of commercial space. Since acquiring the site initially in 2014 and through the rezoning process, over $90 million in value has been created. With rezoning achieved, we will now pursue opportunities to bring in a partner to redevelop the site and crystalize on value created.
From a planning perspective, over the second quarter we made steady progress at the Trust’s Quayside development located on Toronto’s waterfront. On June 28, 2023, the Trust and its partners submitted municipal applications for the entire 12-acre site, to accommodate 3.5 million sf of density, approximately 4,600 units including 869 affordable units, and 240,000 sf of non-residential space, including 130,000 sf of institutional and community space and 55,000 sf of retail. The Trust has a 12.5% interest in the project and has closed on the first phase of the site, comprising 4.5 acres.
We are extremely pleased with the momentum we are gaining across our multi-family portfolio, as we continue to grow our recurring income segment and further diversify our asset composition. Construction continues to progress well at Maple House and Cherry House at Canary Landing (previously West Don Lands ("WDL") Blocks 8 and 3/4/7, respectively), and Aalto II (Block 11) and Common at Zibi (Block 206), which combined will add nearly 2,000 residential units (at 100%) to the Trust’s portfolio over the next three years.
Building off the success of our first multi-family rental property at Zibi, subsequent to quarter end, leasing was launched at Aalto II. The 148-unit purpose-built rental is located on the shores of the Ottawa River, with condo-like finishes and amenities. Following shortly behind, Common at Zibi, a 25-storey, 207-unit rental building which will offer a mix of unit typologies, will commence leasing this fall. This includes traditional 1 and 2 bedroom suites as well as co-living apartments, predominantly in the form of 3 to 5 bedroom units that are fully furnished and individually rented. The project has also partnered with Ottawa Community Housing Corporation to provide 19 high-quality affordable units as part of the building. We anticipate welcoming first tenants to both residential buildings this fall. The Trust has a 50.0% ownership interest in Zibi.
Selected financial and operating metrics for the three and six months ended June 30, 2023 are summarized below:
|
Three months ended June 30, |
Six months ended June 30, |
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|
2023 |
2022 |
2023 |
2022 |
||||||||
Consolidated results of operations |
|
|
|
|
||||||||
Net income (loss) |
$ |
(8,663) |
$ |
623 |
$ |
(12,020) |
$ |
972 |
||||
Net income (loss) per unit(1) |
|
(0.51) |
|
0.04 |
|
(0.71) |
|
0.06 |
||||
|
|
|
|
|
||||||||
Distributions declared and paid per unit |
|
0.16 |
|
0.40 |
|
0.48 |
|
0.80 |
||||
Units outstanding – end of period |
|
17,131,410 |
|
16,418,294 |
|
17,131,410 |
|
16,418,294 |
||||
Units outstanding – weighted average |
|
17,074,075 |
|
16,409,062 |
|
16,984,710 |
|
16,365,407 |
||||
As at |
June 30, 2023 |
March 31, 2023 |
December 31, 2022 |
||||||
Consolidated financial position |
|
|
|
||||||
Total assets |
$ |
745,776 |
$ |
759,560 |
$ |
724,169 |
|||
Total liabilities |
|
277,015 |
|
286,308 |
|
245,437 |
|||
Total unitholders' equity |
|
468,761 |
|
473,252 |
|
478,732 |
|||
In the second quarter the Trust reported a net loss of $8.7 million relative to net income of $0.6 million in the comparative period. The change in earnings was primarily driven by fair value losses of $9.8 million on select commercial properties within the Trust’s portfolio and higher interest expense due to financing activity, and was partially offset by the Trust’s tax position in the period. Refer to the segmented discussion below for details on commercial property fair value changes in the period. Similarly, for the six months ended June 30, 2023, the Trust reported a net loss of $12.0 million relative to net income of $1.0 million in the comparative period due to the net impact of fair value adjustments in each year and higher interest expense, partially offset by general and administrative ("G&A") expense savings.
At June 30, 2023, the Trust had total liquidity(1) of $34.1 million, comprised of cash-on-hand and funds available under the Trust’s credit facility. As of period end, the Trust’s debt-to-asset value(1) was 36.1%, an increase compared to 35.5% at March 31, 2023, and the Trust’s debt-to-total asset value, inclusive of project-level debt and market value adjustments and assets within our development segment, including equity accounted investments(1), was 64.0%, up from 61.8% as at March 31, 2023, as a result of project-level financing activity in the quarter. Approximately 24% of the Trust’s total debt profile, including project-level debt, is government affiliated debt.
In light of the current interest rate environment, the Trust has actively pursued opportunities to reduce interest rate uncertainty. To date in 2023, the Trust has fixed over $207.1 million of variable debt (at share). As of June 30, 2023, 66% of the Trust’s debt was subject to a fixed interest rate at a weighted average interest rate of 4.2%.
Recurring Income
Net operating income ("NOI") from commercial properties(1) was $2.9 million in the second quarter, up slightly from the prior year due to the Trust’s portfolio composition.
NOI from multi-family rental assets(1) was $1.8 million in the second quarter, up significantly from $0.6 million in the comparative period due to increased tenant occupancy, the timing of completion at Aalto Suites at Zibi and third-party acquisitions. As of June 30, 2023, the Trust’s multi-family rental assets were comprised of 1,616 units which were 95.2% occupied (June 30, 2022 – 1,382 units which were 80.0% occupied).
In the second quarter, the Trust’s recurring income segment generated a net loss of $9.1 million compared to net income of $2.3 million in the prior year. The fluctuation was driven by the aforementioned NOI growth, offset by higher interest expense and fair value losses on certain assets as further described below.
Results in the period included a $9.8 million fair value loss on select office properties, predominantly Sussex Centre in Mississauga and 76 Stafford Street in downtown Toronto, driven by increased capital requirements and lease terminations in the period.
Development
In the second quarter, the development segment reported a net loss of $0.8 million, down from earnings of $0.5 million in the comparative period. Prior year results included a foreign currency gain on an investment holding with no comparable activity in the current period. Income from this segment will fluctuate period to period and not contribute meaningfully to earnings until development milestones are achieved and/or project inventory is available for occupancy. The development segment reported a net loss of $1.6 million in the six months ended June 30, 2023, a slight improvement relative to prior year.
For complete details on the Trust’s development pipeline, please refer to the section titled "Development and Investment Holdings" in the Trust's management's discussion and analysis ("MD&A") for the three and six months ended June 30, 2023.
Other(2)
In the second quarter, the other segment generated earnings of $1.2 million relative to a loss of $2.2 million in the comparative period. The earnings in the current period were driven by a tax recovery and G&A savings.
Unit Buyback Activity
In the second quarter and subsequently, under its normal course issuer bid (“NCIB”), the Trust repurchased 0.04 million units at an average price of $9.99. The NCIB allows the Trust to purchase up to a maximum of 1.2 million units to January 31, 2024.
As at August 1, 2023, the Trust’s asset manager, DAM, owns approximately 5.7 million units of the Trust, inclusive of 0.6 million units acquired under the Trust's distribution reinvestment plan, 1.5 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 approximately 33% of the Trust as at August 1, 2023.
Investor Day
On Wednesday, September 6, 2023, Dream Unlimited Corp., Dream Office REIT and Dream Impact Trust are welcoming investors for a joint investor session. The event will be hosted at our head office at 30 Adelaide Street East, Suite 301, at 10:00 am EST. This session will discuss each company's net asset value, capital allocation strategy and business plan, to provide better insight into how we view and manage the businesses.
Footnotes |
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(1) |
Debt-to-asset value is a non-GAAP ratio, which is calculated as total debt payable (a non-GAAP financial measure) divided by the total asset value of the Trust as at the applicable reporting date. The most directly comparable financial measure to total debt payable is total debt. Net income (loss) per unit, total liquidity, debt-to-total asset value, inclusive of project-level debt and market value adjustments and assets within our development segment, including equity accounted investments, NOI - commercial properties, and NOI - multi-family rental are supplementary financial measures. Please refer to the cautionary statements under the heading "Specified Financial Measures and Other Measures" in this press release and the Specified Financial Measures and Other Disclosures section of the Trust’s MD&A for the three and six months ended June 30, 2023. |
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(2) |
Includes other Trust amounts not specifically related to the segments. |
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About Dream Impact
Dream Impact is an open-ended trust dedicated to impact investing. Dream Impact's underlying portfolio is comprised of exceptional real estate assets reported under two operating segments: development and investment holdings, 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 Dream Impact 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, while generating attractive returns for investors. For more information, please visit: www.dreamimpacttrust.ca.
Specified Financial Measures and Other 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 specified financial measures, including debt-to-asset value, total debt payable, net income (loss) per unit, NOI - commercial properties, NOI - multi-family rental, and debt-to-total asset value, inclusive of project-level debt and market value adjustments, as well as other measures discussed elsewhere in this release. These specified financial measures are not defined by or recognized measures under IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other issuers. The Trust has presented such specified financial measures as management believes they are relevant measures of our underlying operating performance. Specified financial 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. Certain additional disclosures such as the composition, usefulness and changes as applicable are expressly incorporated by reference from the Trust’s MD&A for the three and six months ended June 30, 2023 in the section titled “Specified Financial Measures and Other Disclosures”, subsection “Non-GAAP Ratios”, heading “Debt-to-asset value”, subsection “Supplementary Financial Measures and Other Measures”, headings “Net income (loss) per unit”, “Debt-to-total asset value, inclusive of project-level debt and market value adjustments and assets within our development segment, including equity accounted investments”, "total liquidity", "NOI - commercial properties", and “NOI – multi-family rental”, and subsection “Non-GAAP Measures”, heading “Total debt payable”. which has been filed and is available on SEDAR+ under the Trust’s profile.
"Total debt payable" is defined by the Trust as the balance due at maturity for its debt instruments. Total debt payable is a non-GAAP measure and is included as part of the definition of debt-to-asset value, a non-GAAP ratio. Total debt payable is an important measure used by the Trust 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. Total debt payable is reconciled to total debt, the most directly comparable financial measure, below.
As at |
June 30, 2023 |
December 31, 2022 |
||||
Total debt |
$ |
265,754 |
$ |
220,889 |
||
Unamortized discount on host instrument of convertible debentures |
|
954 |
|
1,086 |
||
Conversion feature |
|
(48) |
|
(449) |
||
Unamortized balance of deferred financing costs |
|
2,655 |
|
2,789 |
||
Total debt payable |
$ |
269,315 |
$ |
224,315 |
||
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 plan to convert land holdings into a portfolio of high-quality income properties; our intention to enter into a partnership to redevelop 49 Ontario Street; expectations regarding our municipal applications, including in respect of Quayside and its density, number and type of units, and residential, community, retail, and institutional square footage; our plan to continue growing our recurring income segment and diversifying our asset composition; our development plans, including in respect of Maple House and Cherry House, Aalto II and Common at Zibi, and the expectation that these projects will add approximately 2,000 residential units to the Trust’s portfolio over the next three years; our partnership with Ottawa Community Housing Corporation in respect of unit affordability; stabilization timelines; our goal of reducing interest rate uncertainty; the expectation that development income will fluctuate and not contribute meaningfully to earnings until development milestones and occupancy are achieved; the Trust's plans and proposals for current and future development and redevelopment projects, construction initiation, rezoning, completion and occupancy dates, number of units, square footage and planned GLA; and the Trust's ability to achieve its impact and sustainability goals, and implementing other sustainability initiatives throughout its projects. 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; risks associated with unexpected or ongoing geopolitical events, including disputes between nations, terrorism or other acts of violence, and international sanctions; inflation; the disruption of free movement of goods and services across jurisdictions; 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 2023; that no unforeseen changes in the legislative and operating framework for our business will occur; that there will be no material change to environmental regulations that may adversely impact our business; 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; there will not be a material change in foreign exchange rates; that the impact of the current economic climate and global financial conditions on our operations will remain consistent with our current expectations; our expectations regarding the impact of the COVID-19 pandemic and government measures to contain it; our expectation regarding ongoing remote working arrangements; 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 1, 2023. 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.sedarplus.ca), including its latest annual information form and MD&A. These filings are also available at the Trust’s website at www.dreamimpacttrust.ca.
