Bay Street News

Dream Office REIT Reports Q3 2018 Results

TORONTO, Nov. 08, 2018 (GLOBE NEWSWIRE) — DREAM OFFICE REAL ESTATE INVESTMENT TRUST (D.UN-TSX) or (“Dream Office REIT”, the “Trust” or “we”) today announced its financial results for the three and nine months ended September 30, 2018. Management will host a conference call to discuss the results at 4:00 p.m. (ET) today, November 8, 2018.

FINANCIAL HIGHLIGHTS

SELECTED FINANCIAL INFORMATION   Three months ended       Nine months ended  
(unaudited)   September 30,
    June 30,     September 30,       September 30,   , September 30  
(In thousands of dollars except per unit amounts)   2018 
    2018     2017       2018     2017  
Operating results                                
Net income (loss) $ 41,382   $ 25,386   $ (637 )   $ 99,289   $ 34,055  
Comparative properties net operating income (“NOI”)(1)   35,306     35,794     36,604       106,734     110,572  
Funds from operations (“FFO”)(1)   26,688     27,912     44,653       90,060     165,822  
Per unit amounts                    
Net asset value (“NAV”)(1) $ 24.40   $ 23.95   $ 22.40     $ 24.40   $ 22.40  
FFO (diluted)(1)(2)   0.40     0.40     0.48       1.27     1.61  
Distribution rate(3)   0.25     0.25     0.25       0.75     1.00  
Footnotes: please refer to definitions at end.

SELECTED FINANCIAL INFORMATION   As at  
(unaudited)   September 30,     June 30,     September 30,  
    2018     2018     2017  
Units            
REIT A Units (in thousands)   60,037     60,188     75,878  
LP B Units (in thousands)   5,234     5,234     5,234  
Total units (in thousands)(4)   65,271     65,422     81,112  
Portfolio information            
Total number of properties(5)   34     38     46  
Total number of properties under development   2          
Total number of properties held for future redevelopment   1     3     1  
Total gross leasable area (“GLA”) (in thousands of sq. ft.)(5)   6,619     7,382     8,544  
Total investment properties value (in thousands of dollars)(5) $ 2,614,693   $ 2,750,839   $ 2,837,363  
Comparative occupancy rate – including committed (period-end)(6)   94.2%     94.1%     94.6%  
Footnotes: please refer to definitions at end.                  

The table below summarizes select financial information related to the two properties under development as at September 30, 2018.

SELECTED FINANCIAL INFORMATION
(unaudited)
                         
(in millions of dollars)
 
Property
  Carrying value at
time of
reclassification
    Capital invested
to date
    Estimated capital remaining     Estimated NOI*     Estimated yield on
cost and original carrying value
357 Bay Street, Toronto $ 24.1   $   $ 29   $ 2.9     5.5%
1900 Sherwood Place, Regina   42.2     2.6     23     5.4     8.0%
*Does not include contractual annual escalators over the term of the leases                            

CAPITAL HIGHLIGHTS

KEY FINANCIAL PERFORMANCE METRICS                
(unaudited)               As at  
    September 30,
2018
    June 30,
2018
    December 31,
2017
    September 30,
2017
 
Financing                
Weighted average face rate of interest on debt (period-end)(7) 3.94%   3.85%   3.90%   3.93%  
Interest coverage ratio (times)(1)(8) 2.8   2.8   3.2   3.2  
Net total debt-to-adjusted EBITDAFV (years)(1) 9.1   9.3   7.1   6.5  
Level of debt (net total debt-to-net total assets)(1)(8) 46.2%   48.1%   39.6%   39.7%  
Level of debt (net secured debt-to-net total assets)(1)(8) 41.4%   43.4%   30.6%   30.0%  
Average term to maturity on debt (years) 4.0   4.1   4.5   4.7  
Available liquidity and unencumbered assets                
Cash and cash equivalents on hand (in millions) $ 12.3   $ 15.5   $ 97.0   $ 259.8  
Undrawn demand revolving credit facilities (in millions) 220.5   213.6   396.6   406.9  
Available liquidity (in millions)(1) $ 232.8   $ 229.1   $ 493.6   $ 666.7  
Unencumbered assets (in millions)(1) $ 140.0   $ 113.0   $ 299.0   $ 160.0  
Footnotes: please refer to definitions at end.                        

“Over the next year, Dream Office REIT will continue to sell non-core assets, with net proceeds used to reduce debt, reinvest into our best assets and repurchase units on an opportunistic basis,” said Jay Jiang, Chief Financial Officer of Dream Office REIT. “Our capital allocation strategy will prioritize NAV growth and improvement of our balance sheet over the long term.”

OPERATIONAL HIGHLIGHTS

SELECTED FINANCIAL INFORMATION    
(unaudited) As at  
    September 30,
2018
    June 30,
2018
    September 30,
2017
 
Comparative Portfolio(6)            
Occupancy rate – including committed (period-end) 94.2%   94.1%   94.6%  
Occupancy rate – in-place (period-end) 88.3%   88.2%   91.1%  
Average in-place and committed net rent per square foot (period-end) $ 20.87   $ 20.94   $ 20.60  
Weighted average lease term (years) 5.0   4.9   5.0  
Footnotes: please refer to definitions at end.

CALL

Management will host a conference call to discuss the results today, November 8, 2018 at 4:00 p.m. (ET). To access the conference call, please dial 1-888-465-5079 in Canada and the United States or 416-216-4169 elsewhere and use passcode 5098 584#. To access the conference call via webcast, please go to Dream Office REIT’s website at www.dreamofficereit.ca and click on the link for News & Events, then click on Calendar of Events. A taped replay of the conference call and the webcast will be archived for 90 days.

OTHER INFORMATION

Information appearing in this news release is a select summary of results. The condensed 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 owns well-located, high-quality central business district office properties in major urban centres across Canada, with a focus on downtown Toronto. For more information, please visit our website at www.dreamofficereit.ca.

FOOTNOTES

(1) Comparative properties NOI, FFO, diluted FFO per unit, NAV per unit, interest coverage ratio, net total debt-to-adjusted EBITDAFV, level of debt (net total debt-to-net total assets), level of debt (net secured debt-to-net total assets), available liquidity, and unencumbered assets are non-GAAP measures used by Management in evaluating operating and financial performance. Please refer to the cautionary statements under the heading “Non-GAAP Measures” in this press release.
(2) A description of the determination of diluted amounts per unit can be found in section “Our Equity” under the heading “Weighted average number of units” of the MD&A.
(3) Effective with the July 2017 distribution, the Trust revised its monthly distribution to $0.08333 per unit, or $1.00 on an annualized basis.
(4) Total units includes 5.2 million LP B Units which are classified as a liability under IFRS.
(5) Excludes properties held for sale and future redevelopment and properties under development at the end of each period.
(6) Comparative occupancy rate and comparative portfolio excludes properties sold, held for sale and future redevelopment and properties under development at the end of Q3 2018.
(7) Weighted average face rate of interest on debt is calculated as the weighted average face rate of all interest bearing debt on balance.
(8) Interest coverage ratio, level of debt (net total debt-to-net total assets), and level of debt (net secured debt-to-net total assets) have been restated in the comparative periods to conform to current period presentation. For further details, please refer to the “Non-GAAP Measures and Other Disclosures” under the heading “Interest coverage ratio” and “Level of debt (net total debt-to-net total assets and net secured debt-to-net total assets)” in Dream Office REIT’s MD&A for the three and nine months ended September 30, 2018.

NON-GAAP 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 comparative properties NOI, FFO, diluted FFO per unit, NAV per unit, interest coverage ratio, net total debt-to-adjusted EBITDAFV, level of debt (net total debt-to-net total assets), level of debt (net secured debt-to-net total assets), available liquidity, unencumbered assets, as well as other measures discussed elsewhere in this release.  These non-GAAP measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other income trusts. The Trust has presented such non-GAAP measures as Management believes they are relevant measures of the Trust’s underlying operating performance and debt management. Non-GAAP 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, 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-GAAP Measures and Other Disclosures” in Dream Office REIT’s MD&A for the three and nine months ended September 30, 2018.

FORWARD LOOKING INFORMATION

This press release may contain forward-looking information within the meaning of applicable securities legislation, including statements regarding our objectives and strategies to achieve those objectives, future asset sales and use of proceeds from asset sales, our expected future operating cash flows, the future composition of our portfolio, future development plans, our expected cost to complete development activities, our expected income and yield from properties under development, the terms of and duration of secured tenant renewals, anticipated market rents, the volatility of our operating performance through the remainder of 2018 and 2019, our capital allocation strategy, and the future strength of our balance sheet. 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; the financial condition of tenants; our ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; and interest and currency rate fluctuations. Our objectives and forward-looking statements are based on certain assumptions, including that the general economy remains stable, interest rates remain stable, conditions within the real estate market remain consistent, competition for acquisitions remains consistent with the current climate and that the capital markets continue to provide ready access to equity and/or debt. 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.

For further information, please contact:

Michael J. Cooper Jay Jiang
Chairman and Chief Executive Officer Chief Financial Officer
(416) 365-5145
mcooper@dream.ca
(416) 365-6638
jjiang@dream.ca