Bay Street News

Dream Unlimited Corp. Reports Third Quarter 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.

TORONTO, Nov. 13, 2018 (GLOBE NEWSWIRE) — Dream Unlimited Corp. (TSX: DRM and DRM.PR.A) (“Dream”, “the Company” or “we”) today announced its financial results for the three and nine months ended September 30, 2018. Basic earnings per share (“EPS”) for the three months ended September 30, 2018 was $0.13, down from $0.18 for the three months ended September 30, 2017, on a standalone basis, excluding income earned on the Company’s investment in Dream Alternatives. Basic EPS for the nine months ended September 30, 2018 was $0.50, up from $0.28 relative to the prior year, on a standalone basis. At September 30, 2018, Dream’s total equity on a standalone basis, increased to $977.1 million ($9.04 per share), up 15% from $857.9 million ($7.86 per share) one year ago, on a comparable basis(1).

“Our standalone financial results year to date are solid despite very little contribution from our development business, demonstrating the strength of our diverse business lines and assets,” said Michael Cooper, President & Chief Responsible Officer of Dream. “With signs of softness in our Western Canadian residential land and housing business and limited condominium inventory available for sale in Toronto this year due to timing, income from our development business in 2018 is not a meaningful indicator of what we expect to generate in the future. In Western Canada, we expect Providence in Calgary to produce income in 2020 and become a big contributor. In Toronto, we are working on quality, large-scale profitable developments which are currently in the planning stages including: the Canary District, Distillery District, West Don Lands, Port Credit West Village and the Frank Gehry sites. In addition, we are generating solid earnings from our recurring income assets. All else equal, we view our business to be more valuable today than when we went public in 2013, despite our lower earnings from Western Canada, as a result of owning more highly sought after recurring income assets and an irreplaceable development portfolio in Toronto.”

A summary of our results for the three and nine months ended September 30, 2018 is included in the table below. 

  Three months ended September 30,
      Nine months ended September 30,  
(in thousands of Canadian dollars, except per share amounts)   2018     2017       2018     2017  
Consolidated Dream (including Dream Alternatives):                  
Revenue $ 64,091   $ 115,305     $ 178,938   $ 212,378  
Net margin $ 11,838   $ 26,944     $ 34,274   $ 48,235  
Net margin (%)(2)   18.5 %   23.4 %     19.2 %   22.7 %
Earnings before income taxes $ 22,769   $ 26,482     $ 142,832   $ 47,385  
Earnings for the period $ 15,279   $ 19,132     $ 135,431   $ 32,571  
                   
Basic earnings per share(3) $ 0.14   $ 0.18     $ 1.24   $ 0.31  
Diluted earnings per share $ 0.14   $ 0.17     $ 1.22   $ 0.30  
                   
Dream Standalone(1):
Revenue $ 51,885   $ 115,305     $ 150,315   $ 212,378  
Net margin $ 5,707   $ 26,944     $ 23,240   $ 48,235  
Net margin (%)(2)   11.0 %   23.4 %     15.5 %   22.7 %
Earnings before income taxes $ 18,627   $ 26,642     $ 68,453   $ 49,998  
Earnings for the period $ 13,648   $ 19,292     $ 53,185   $ 35,184  
                   
Basic earnings per share(3) $ 0.13   $ 0.18     $ 0.50   $ 0.28  
Diluted earnings per share $ 0.13   $ 0.17     $ 0.49   $ 0.27  
                   
Dream Standalone(3):        September 30, 2018    December 31, 2017  
Total assets           $ 2,061,752   $ 1,904,007  
Total liabilities           $ 1,047,374   $ 946,523  
Total equity (excluding non-controlling interests)(4)       $ 977,109   $ 919,394  
Total equity per share(4)           $ 9.04   $ 8.42  

(1) Dream standalone represents the standalone results of Dream, excluding the impact of Dream Alternatives’ equity accounted/consolidated results. Refer to the “Non-IFRS Measures” section of our MD&A for further details. Total assets as of September 30, 2018 and December 31, 2017 includes approximately $72.7 million and $48.3 million, respectively, relating to the Company’s investment in Dream Alternatives.
(2) Net margin % (see “Non-IFRS Measures” section of our management’s discussion and analysis (“MD&A”) for the three and nine months ended September 30, 2018) represents net margin as a percentage of revenue.
(3) Basic EPS is computed by dividing Dream’s earnings attributable to owners of the parent by the weighted average number of Dream Subordinate Voting Shares and Dream Class B shares outstanding during the period. Refer to Management’s discussion below on consolidated results for the three and nine months ended September 30, 2018.
(4) Total equity (excluding non-controlling interests) and total equity per share excludes $37.3 million of non-controlling interest as at September 30, 2018 ($38.1 million as at December 31, 2017). For further details refer to pages 10 and 11 in our MD&A for the three and nine months ended September 30, 2018.

On January 1, 2018, the Company was deemed to acquire control of Dream Hard Asset Alternatives Trust (TSX: DRA.UN) (“Dream Alternatives”). As a result, the Company has consolidated Dream Alternatives’ financial results effective January 1, 2018. As at September 30, 2018, Dream owned 11.9 million units of Dream Alternatives or 17% of total units outstanding. Refer to the “Dream Alternatives” section of our MD&A for a discussion of Dream Alternatives’ results.

Revenue for the three months ended September 30, 2018 decreased by $51.2 million relative to the prior year, primarily due to decreased contribution from our land and housing development business in Western Canada and limited condominium occupancies during the period. In the three months ended September 30, 2018, on a consolidated basis, the Company recognized earnings of $15.3 million, down from $19.1 million in the prior year. The decrease in earnings on a consolidated basis was primarily driven by the aforementioned decrease in contribution from our land and housing operations, partially offset by increased contribution from consolidating Dream Alternatives results, earnings from equity accounted investments and fair value gains.

In the nine months ended September 30, 2018, on a consolidated basis, the Company generated earnings of $135.4 million, up significantly from $32.6 million in the prior year, primarily due to adjustments relating to the consolidation of Dream Alternatives. For additional consolidation details, refer to the “Dream Alternatives” section of our MD&A.

With continued challenging market conditions in Western Canada and increased pressures from government policies, we are closely monitoring customer demand, pricing trends and inventory supply across the division. We are seeing slower absorption rates and have adjusted our sales expectations for 2018 accordingly. To mitigate risk, we are committed to our ongoing development strategy to secure deposits or pre-sale commitments ahead of commencing any new developments. As of today, assuming no material change in market conditions, we expect our earnings from the land and housing divisions to increase again come 2020, as we commence earning income from land sales in Providence, our most valuable land position in Western Canada. Dream shares CMHC’s view that while still very difficult, the Saskatoon, Regina and Calgary markets will recover more meaningfully over the next few years. Even still, we expect the proportion of income driven by Western Canada to decrease over time due to the increased diversification of our business and growth in recurring income generating assets. Our recurring business, including asset management and income properties supports all the costs of our operating platform as contributions from our development segments may be limited in periods.  Refer to the “Sources of Recurring Income” section of our MD&A for further details on our recurring income and assets.

Key Results Highlights: Urban Development – Toronto & Ottawa

Key Results Highlights: Western Canada Development & Updated 2018 Guidance

Asset Management, Management Services and Investments in Dream Publicly Listed Funds

Strong Liquidity Position & NCIB Activity

Select financial operating metrics for Dream’s segments for the three and nine months ended September 30, 2018 are summarized in the table below.

  Three months ended September 30,
  Nine months ended September 30,
 
(in thousands of Canadian dollars, except units and per share amounts) 2018     2017       2018     2017  
WESTERN CANADA DEVELOPMENT                  
LAND DEVELOPMENT                  
Lot revenue $ 13,007   $ 47,574     $ 23,920   $ 67,815  
Acre revenue   1,575     4,850       1,575     4,850  
Total revenue(1) $ 14,582   $ 52,424     $ 25,495   $   72,665  
Net margin(1) $ 1,819   $ 13,322     $ (574 ) $ 12,540  
Net margin (%)(3)   12.5 %   25.4 %     n/a     17.3 %
Lots sold   108     362       206     520  
Average selling price – lot $ 120,000   $ 131,000     $ 116,000   $ 130,000  
Acres sold   2.4     7.0       2.4     7.0  
Average selling price – acre $ 659,000   $ 723,000     $ 659,000   $ 723,000  
HOUSING DEVELOPMENT                  
Housing units occupied   64     86       168     163  
Revenue $ 15,071   $ 23,676     $ 40,103   $ 46,510  
Net margin(1) $ (1,477 ) $ 451     $ (4,329 ) $ (1,716 )
Net margin (%)(3)   n/a     1.9 %     n/a     n/a  
Average selling price – housing units $ 312,000   $ 366,000     $ 327,000   $ 371,000  
INCOME PRODUCING AND DEVELOPMENT PROPERTIES                  
Revenue $ 2,314   $ 1,712     $ 6,711   $ 4,220  
Net operating income $ 1,881   $ 1,253     $ 4,501   $ 2,943  
Net margin(2) $ 501   $ 63     $ 969   $ (638 )
Net margin (%)(3)   21.7 %   3.7 %     14.4 %   n/a  
URBAN DEVELOPMENT – TORONTO & OTTAWA                  
CONDOMINIUM AND MIXED-USE DEVELOPMENT                  
Revenue attributable to Dream – directly owned $ 754   $ 14,590     $ 3,825   $ 15,095  
Net margin $ (1,870 ) $ 1,246     $ (5,011 ) $ (728 )
Net margin (%)(3)   n/a     8.5 %     n/a     n/a  
INCOME PROPERTIES                  
Revenue $ 2,949   $ 3,134     $ 9,446   $ 8,897  
Net operating income $ 1,789   $ 1,756     $ 5,416   $ 4,876  
Net margin $ 1,420   $ 1,564     $ 4,422   $ 4,087  
Net margin (%)(3)   48.2 %   49.9 %     46.8 %   45.9 %
Total net margin from Urban Development – Toronto & Ottawa(2) $ (450 ) $ 2,812     $ (589 ) $ 3,361  
ASSET MANAGEMENT & INVESTMENTS IN DREAM PUBLICLY LISTED FUNDS                  
Fee earning assets under management(3) $ 8,394,000   $ 7,738,000     $ 8,394,000   $ 7,738,000  
Revenue $ 11,084   $ 15,187     $ 30,447   $ 35,724  
Net margin $ 8,320   $ 12,756     $ 22,457   $ 29,220  
Net margin (%)(3)   75.1 %   84.0 %     73.8 %   81.8 %
Income from investments in Dream Publicly Listed Funds – Dream Global REIT units and deferred trust units $ 884   $ 819     $ 2,429   $ 2,110  
Income from investments in Dream Publicly Listed Funds – Dream Office REIT   n/a   $ 1,549       n/a   $ 7,550  
Share of earnings from equity accounted investments – Dream Office REIT $ 8,508     n/a     $ 20,712     n/a  

DREAM ALTERNATIVES
Share of losses from equity accounted investments – Dream Alternatives   n/a   $ (160 )     n/a   $ (2,613 )
Net income $ 1,008     n/a     $ 6,907     n/a  
Net asset value per unit(4) $ 8.69     n/a     $ 8.69     n/a  
Net gain on acquisition of control of Dream Alternatives $     n/a     $ 129,992     n/a  
                           
RENEWABLES AND RECREATIONAL PROPERTIES                  
Recreational properties:                  
Revenue $ 5,131   $ 4,582     $ 34,288   $ 29,267  
Net operating income(3) $ (1,831 ) $ (1,372 )   $ 8,539   $ 8,290  
Net margin(3) $ (3,006 ) $ (2,460 )   $ 5,306   $ 5,468  
Net margin (%)(3)   n/a     n/a       15.5 %   18.7 %
Renewables:                  
Share of earnings from equity accounted investments – Firelight Infrastructure $ 2,924   $ 3,308     $ 6,088   $ 5,772  

(1) Results include housing land sales to external customers, which are recognized in the land division results. The average selling price of housing units occupied includes the land revenue component which is eliminated on consolidation.
(2) Net margin from Urban Development – Toronto & Ottawa includes net margin from condominium & mixed-use development and income properties.
(3) Net operating income, net margin %, assets under management and fee earning assets under management are non-IFRS measures used by management in evaluating operating performance. Please refer to the cautionary statements under the heading “Non-IFRS Measures” in this press release. Refer to the “Non-IFRS Measures” section of our MD&A for further details on gross margin % and net margin %.
(4) Net asset value per unit is a non-IFRS measure used by management in evaluating the operating performance of Dream Alternatives. Please refer to the “Non-IFRS Measures” section of our MD&A for further details.

Other Information
Information appearing in this press release is a select summary of results. The financial statements and MD&A for the Company are available at www.dream.ca and on www.sedar.com.

Conference Call
Senior management will host a conference call on November 14, 2018 at 2:00 pm (ET). To access the call, please dial 1-888-465-5079 in Canada and the United States or 416-216-4169 elsewhere and use passcode 7354 665#. To access the conference call via webcast, please go to Dream’s website at www.dream.ca and click on the link for News and Events, then click on Calendar of Events. A taped replay of the conference call and the webcast will be available for 90 days.

About Dream Unlimited Corp.

Dream is one of Canada’s leading real estate companies with approximately $14 billion of assets under management in North America and Europe. The scope of the business includes residential land development, housing and condominium development, asset management for four TSX-listed trusts, investments in and management of Canadian renewable energy infrastructure and commercial property ownership. Dream has an established track record for being innovative and for its ability to source, structure and execute on compelling investment opportunities.

For further information, please contact:

Dream Unlimited Corp.

Pauline Alimchandani Kim Lefever
EVP & Chief Financial Officer Senior Manager, Investor Relations
(416) 365-5992 (416) 365-6339
palimchandan@dream.ca klefever@dream.ca

Non-IFRS Measures

Dream’s 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, Dream discloses and discusses certain non-IFRS financial measures, including: Dream standalone, net margin %, assets under management, fee-earning assets under management, net operating income and debt to total assets ratio, 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. Dream 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 comparable metrics determined in accordance with IFRS as indicators of Dream’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” section in Dream’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, but not limited to, statements regarding our objectives and strategies to achieve those objectives; our beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, future growth, results of operations, performance, business prospects and opportunities, acquisitions or divestitures, tenant base, future maintenance and development plans and costs, capital investments, financing, the availability of financing sources, income taxes, vacancy and leasing assumptions, litigation and the real estate industry in general; as well as specific statements in respect of our development plans and proposals for future retail and condominium and mixed-use projects and future stages of current retail and condominium and mixed-use projects, including projected sizes, density, uses and tenants; development timelines and anticipated returns or yields on current and future retail and condominium and mixed-use projects, including timing of construction, marketing, leasing, completion, occupancies and closings; anticipated current and future unit sales and occupancies of our condominium and mixed-use projects; our pipeline of retail, commercial, condominium and mixed-use developments projects; development plans and timelines of current and future land and housing projects, including projected sizes, density and uses; anticipated current and future lot and acre sales and housing unit occupancies in our land and housing divisions and the timing of margin contributions from such sales; projected population and density in our housing developments; the recovery of the Saskatoon, Regina and Calgary markets; our anticipated ownership levels of proposed investments, including investments in units of Dream Office REIT and Dream Alternatives; anticipated levels of development, asset management and other management fees in future periods; our expectations of future income, earnings and net margin of our land and housing divisions; and our overall financial performance, profitability and liquidity for future periods and years. 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’s control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These assumptions include, but are not limited to: the nature of development lands held and the development potential of such lands, our ability to bring new developments to market, anticipated positive general economic and business conditions, including low unemployment and interest rates, positive net migration, oil and gas commodity prices, our business strategy, including geographic focus, anticipated sales volumes, performance of our underlying business segments and conditions in the Western Canada land and housing markets. Risks and uncertainties include, but are not limited to, general and local economic and business conditions, employment levels, regulatory risks, mortgage rates and regulations, environmental risks, consumer confidence, seasonality, adverse weather conditions, reliance on key clients and personnel and competition. All forward looking information in this press release speaks as of November 13, 2018. Dream 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 filings with securities regulators filed on SEDAR (www.sedar.com).