Dream Impact Trust Reports Fourth Quarter Results & Growth in Recurring Income Segment

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 unit and per unit amounts, unless otherwise stated.

TORONTO--()--DREAM IMPACT TRUST (TSX: MPCT.UN) ("Dream Impact", "we", "our" or the "Trust") today reported its financial results for the three months ("fourth quarter") and year ended December 31, 2021.

2021 has been a year of significant accomplishment for the Trust,” said Michael Cooper, Portfolio Manager. “During the year, we've added over $240 million of income property assets to the recurring income segment through the completion of developments and acquisitions. The Trust has participated in innovative financing strategies, including the issuance of the first impact convertible debenture in Canada and financing programs dedicated to the decarbonization of our income properties. The Trust also made significant advancements with respect to our impact goals, releasing both our impact framework and social procurement strategy this year. We intend to carry this momentum into 2022 with the announcement of our 2035 net-zero roadmap this spring. Together, these efforts have created a more resilient and valuable business for our unitholders and are closely aligned with the most significant issues facing every level of government in our country today.”

Selected financial and operating metrics for the three months and year ended December 31, 2021, are summarized below:

 

 

Three months ended December 31,

 

 

Year ended December 31,

 

 

2021

 

2020

 

 

2021

 

2020

Consolidated results of operations

 

 

 

 

   

 

 

 

Net income

 

$

26,959

 

$

14,868

   

$

21,450

 

$

16,339

Cash generated from (utilized in) operating activities

 

 

5,240

 

 

(2,373)

   

 

15,425

 

 

6,331

 

 

 

 

 

   

 

 

 

Distributions declared and paid per unit

 

 

0.10

 

 

0.10

   

 

0.40

 

 

0.40

Units outstanding – end of period

 

 

65,071,762

 

 

64,811,749

   

 

65,071,762

 

 

64,811,749

Units outstanding – weighted average

 

 

65,179,813

 

 

64,869,389

   

 

64,996,594

 

 

67,182,838

During the fourth quarter, the Trust reported net income of $27.0 million compared to net income of $14.9 million in the prior year. The change in earnings was primarily driven by the net increase in fair value adjustments on income properties and developments, specifically 49 Ontario Street, the Trust's wholly owned income property located in downtown Toronto that is subject to a rezoning application. In addition, the increase in earnings was driven by fluctuations in our income tax position, foreign exchange on the Trust's investment in the Virgin Hotels Las Vegas ("U.S. hotel"), and income contribution from the Natural Sciences Building ("Zibi Block 211"), which achieved first tenant occupancy during the period.

As at December 31, 2021, the Trust had $8.4 million of cash-on-hand. The Trust’s debt-to-asset value(1) as at December 31, 2021 was 19.2%, relatively consistent with the debt-to-asset value(1) as at September 30, 2021 of 19.9%, and an increase relative to 13.6% as at December 31, 2020. The increase year over year was driven by the issuance of convertible debentures and 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 52.6% as at December 31, 2021 compared to 38.5% as at December 31, 2020, primarily due to additional project-level financing, including financing available through our impact financing framework. As at December 31, 2021, the Trust had access to a credit facility to borrow up to $50.0 million.

Recurring Income
In the fourth quarter, the recurring income segment generated net income of $29.6 million compared to $11.8 million in the comparative period. The increase is primarily related to net fair value adjustments on commercial income properties. The Trust recognized a fair value gain of $25.0 million on 49 Ontario Street, driven by increases in land values and supported by a third-party appraisal. 49 Ontario Street is an 88,000 sf commercial property in the rezoning process, which we expect to be completed within two years.

Over the quarter the Trust continued to expand its recurring income segment through acquisitions and development execution.

The Natural Sciences Building at Zibi achieved first tenant occupancy, adding 186,000 sf to the Trust's recurring income segment. The Natural Sciences Building is currently 86% leased to the Federal Government of Canada with a lease term of 15 years. Situated at the gateway of the development and with direct views of the Ottawa River and Parliament Hill, the Natural Sciences Building represents the state-of-the-art, class A office product that will be brought to market at Zibi. The Trust has a 50% ownership interest in the asset.

In addition, the Trust closed on an additional 228 multi-family rental units (at 100%) located in downtown Toronto in the fourth quarter. Including this acquisition, in 2021 the Trust acquired a 33% interest in 1,140 multi-family rental units. Across this multi-family portfolio, the Trust will support over 300 affordable units and pursue various sustainability initiatives, in line with our impact strategy.

A complete summary of the Trust's sources of growth for the recurring income segment in the year are as follows:

 

 

Ownership interest

 

Purchase
price(2)

 

Residential units
(at 100%)

 

Residential GFA
(at 100%)

 

Commercial GLA
(at 100%)

Acquisitions:

 

 

 

 

 

 

 

 

 

 

Weston Common

 

33.3%

 

$

112,700

 

841

 

692,000

 

52,000

Robinwood Portfolio

 

33.3%

 

 

27,300

 

228

 

123,000

 

262 Jarvis

 

33.3%

 

 

7,800

 

71

 

35,000

 

Total multi-family rental acquisitions

 

 

 

 

147,800

 

1,140

 

850,000

 

52,000

76 Stafford

 

100%

 

 

17,000

 

 

 

25,000

68-70 Claremont

 

100%

 

 

15,000

 

 

 

30,000

Total commercial acquisitions

 

 

 

 

32,000

 

 

 

55,000

Total acquisitions

 

 

 

$

179,800

 

1,140

 

850,000

 

107,000

Development blocks completed:

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

Natural Sciences Building (Block 211)

 

50.0%

 

$

49,000

 

 

 

186,000

15 Rue Jos-Montferrand (Block 2-3)

 

50.0%

 

 

12,200

 

 

 

53,000

Total commercial

 

 

 

 

61,200

 

 

 

239,000

Total development blocks completed

 

 

 

 

61,200

 

 

 

239,000

Total growth in recurring income segment

 

 

 

$

241,000

 

1,140

 

850,000

 

346,000

Based on the Trust's current development pipeline, we have an additional 2,380 residential units and 169,000 sf of retail and commercial GLA (at 100%) that will be completed and contribute to recurring income over the next four years. For further details, refer to the "Four Year Recurring Income" table in Section 2.1, "Recurring Income" in the Trust's MD&A for the three months and year ended December 31, 2021.

Development
In the fourth quarter, the development segment generated net income of $1.2 million, compared to net income of $10.2 million in the comparative period. The decrease in earnings was primarily attributable to the change in net fair value gains on development projects under construction, in addition to a gain on extinguishment of debt in the prior year. This was partially offset by the impact of foreign exchange on the U.S. hotel and fair value losses on a legacy investment in the prior year.

On January 20, 2022, the National Capital Commission ("NCC") announced in partnership with CMHC, that the Trust, along with Dream Unlimited, was selected to develop the first phase of the Building LeBreton project in Ottawa, Ontario. The project, "Dream LeBreton", will be part of Canada's largest residential zero-carbon project with approximately 600 new rental housing units, of which over 40% will be affordable. The transit-oriented site is adjacent to the Pimisi light-rail station, various pedestrian pathways and neighbouring the Trust's 34-acre Zibi development.

Subsequent to December 31, 2021, Zibi Community Utility ("ZCU"), our District Energy System at Zibi, commenced operations. ZCU relies on energy recovery from a paper plant for heating and the Ottawa river for cooling, and will enable the entire Zibi development to reach its goal of being carbon-neutral.

Other(3)
In the fourth quarter, the Other segment generated a net loss of $3.9 million compared to $7.2 million in the prior year. The variance was primarily driven by fluctuations in our tax expense in each period, deferred compensation expense and the asset management fee.

In 2021, the Trust renewed its arrangement to satisfy the management fees payable to Dream Asset Management Corp. ("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 per unit as at December 31, 2020), and recorded for accounting purposes based on the trading price on the date of settlement. The amended management agreement permits the Trust to settle its asset management fee in units of the Trust until December 31, 2023. In 2021, the Trust settled the asset management fee in 1.4 million units (2020 - 1.1 million units). Subsequent to December 31, 2021, the Trust settled its management fee for the fourth quarter of 2021 with the issuance of 0.4 million units. By extending the asset management fee settlement in units until 2023, the arrangement supports the Trust's liquidity objectives and further demonstrates the alignment of DAM with the Trust's overall impact strategy. In 2022, management fees payable to DAM will be settled in units converted at $9.31 per unit in line with the management agreement.

Unit Buyback Activity
From the inception of the Trust's unit buyback program in December 2014 to February 14, 2022, the Trust has repurchased 15.4 million units for cancellation, for a total cost of $95.7 million.

As at February 14, 2022, the Trust's asset manager, DAM, owns 18.6 million units of the Trust, inclusive of 1.3 million units acquired under the Trust's distribution reinvestment plan, 3.6 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 29% of the Trust as at February 14, 2022.

Net Asset Value ("NAV")
As at December 31, 2021, NAV per unit was $9.31 compared with $8.99 in the prior year, an increase of $0.32 per unit or an approximate 9% total return (including distributions after adjusting for losses on legacy assets(4)). The increase in NAV growth was largely attributable to the aforementioned fair value gains and market value adjustments recognized on our Lakeshore East and Brightwater developments, driven by increases in land value and density relative to the prior year. As at December 31, 2021, total unitholders' equity per unit was $8.25 per unit compared with $8.33 per unit in the prior year. The decrease was largely driven by the Trust's income contribution in 2021 offset by distributions and activity under the Trust's NCIB as market value adjustments are only recognized by the Trust in NAV.

NAV is a non-GAAP measure. NAV and NAV per unit are updated annually. NAV and NAV per unit are not standardized financial measures under IFRS and might not be comparable to similar measures disclosed by other issuers. See the Specified Financial Measures section at the end of this press release for a reconciliation of NAV to total unitholders’ equity. Management considers NAV to be an important measure of intrinsic value for the Trust. The Trust believes that incorporating an annual market value adjustment is a useful measure to value certain development assets that would not ordinarily be captured within IFRS and the Trust's consolidated financial statements as they are accounted for under the equity accounted method and the underlying properties are carried at cost. The Trust obtains independent third-party appraisals annually or as significant development milestones are achieved, to determine the annual market value adjustment to those investments. Assuming consistent market conditions, the development projects are expected to continue to generate market value increases as they continue to advance closer to their completion dates.

Cash Generated from Operating Activities
Cash generated from operating activities for the fourth quarter was $5.2 million compared to cash utilized of $2.4 million in the comparative period. The increase in cash generated from operating activities was driven by the timing of proceeds received from development and investment holdings, and changes in non-cash working capital.

Impact
During the fourth quarter, the Trust announced its new social procurement strategy. This provides a model for diversity in the supply chain cycle and commits to working with suppliers and partners that share the same ESG goals. Further details are included in the Trust's 2020-2021 Sustainability Report released in December 2021, which can be found on www.dreamimpacttrust.ca.

Trustee Appointed to the Board
The Trust is pleased to announce the appointment of Dr. Catherine Brownstein to the Board of Trustees ("the Board"). Dr. Brownstein is an Assistant Professor at the Harvard Medical School Department of Pediatrics, Boston Children’s Hospital, and a recipient of Harvard Medical School’s Diversity Inclusion and Community Partnership Faculty Fellowship in 2017. Amar Bhalla, Chair of the Board for Dream Impact, commented “We are pleased to welcome Dr. Brownstein to the Board and believe her perspective on social inclusion and well-being will add significant value to the Trust's impact strategy.”

 

Footnotes

(1)

For the Trust's definition of the following specified financial measures: debt-to-asset value, debt-to-total asset value inclusive of project-level debt, NAV and NAV per unit, 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.

(2)

Purchase price is presented at the Trust's share for acquisitions. For development blocks completed, purchase price represents the fair value of the property on the date of transfer to the recurring income segment.

(3)

Includes other Trust amounts not specifically related to the segments

(4)

Relates to loan provision of $1.5 million and write down on Empire Lakeshore of $6.3 million recognized during the year ended December 31, 2021.

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 financial returns. 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 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.

Specified Financial Measures and Other Measures
The Trust’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, the Trust discloses and discusses certain specified financial measures, including debt-to-asset value, debt-to-total asset value inclusive of project-level debt, NAV, NAV per unit and NOI, as well as other measures discussed elsewhere in this release. These specified financial 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 specified financial measures as management believes they are relevant measures of our underlying operating performance and debt management. 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. 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 Section 6, “Specified Financial Measures and Other Disclosures” section in the Trust’s MD&A for the three months and year ended December 31, 2021.

"Debt-to-asset value" represents the total debt payable for the Trust divided by the total asset value of the Trust as at the applicable reporting date. This non-GAAP ratio is an important measure 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.

As at

 

December 31, 2021

 

December 31, 2020

Total debt

 

$

133,150

 

$

88,195

Unamortized discount on host instrument of convertible debentures

 

 

809

 

 

Conversion feature

 

 

(357)

 

 

Unamortized balance of deferred financing costs

 

 

1,300

 

 

197

Total debt payable

 

$

134,902

 

$

88,392

Total assets

 

 

701,702

 

 

648,514

Debt-to-asset value

 

 

19.2%

 

 

13.6%

"Debt-to-total asset value, inclusive of project-level debt" represents the Trust’s total debt payable plus the debt payable within our development and investment holdings, and equity accounted investments, divided by the total asset value of the Trust plus the debt payable within our development and investment holdings, and equity accounted investments, as at the applicable reporting date. This specified financial measure is an important measure in evaluating the amount of debt leverage inclusive of project-level debt within our development and investment holdings, and equity accounted investments; 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.

 

 

December 31, 2021

 

December 31, 2020

Debt payable within our development and investment holdings, and equity accounted investments

 

$

493,217

 

$

262,221

Total assets

 

 

701,702

 

 

648,514

Total assets, inclusive of project-level debt

 

$

1,194,919

 

$

910,735

 

 

 

 

 

Debt payable within our development and investment holdings, and equity accounted investments

 

 

493,217

 

 

262,221

Total debt payable

 

 

134,902

 

 

88,392

Total debt, inclusive of project-level debt

 

$

628,119

 

$

350,613

 

 

 

 

 

Debt-to-total asset value, inclusive of project-level debt and assets within our development segment, including equity accounted investments

 

 

52.6%

 

 

38.5%

"Net asset value ("NAV")", a non-GAAP measure, represents total unitholders' equity per the consolidated financial statements, adjusted for market value adjustments for equity accounted investments (including applicable deferred income tax adjustments). The market value adjustments account for the applicable deferred income tax estimates considering the timing of their realization and, if appropriate, will be incorporated into the determination of the NAV. The applicable deferred income tax estimates related to the market value adjustments are calculated either based on income or capital gain rates or a combination thereof. The income tax rates used to determine NAV are dependent on various factors such as anticipated development plans, stage of development and current market trends applicable to the future development plans, and will be reviewed on a regular basis and are subject to change. Excluded from the NAV calculation are any market value adjustments with respect to liabilities as well as commitments/contracts that are not otherwise recorded as liabilities on the Trust's consolidated statements of financial position. The Trust has not appraised the lending portfolio, as the Trust intends to hold certain investments in the lending portfolio until maturity and its term to maturity is over the next one to four years; as such, this portfolio is considered fairly liquid and fair value approximates amortized cost. This non-GAAP measure is an important measure used by the Trust in evaluating the Trust’s and Asset Manager’s performance as it is an indicator of the intrinsic value of the Trust; 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.

As at December 31, 2021

 

Total unitholders' equity

 

Market value adjustment to equity
accounted investments

 

Deferred income taxes
adjustment

 

NAV

 

NAV per
unit

 

% of total
NAV

Development and investment holdings

 

$

296,709

 

$

81,428

 

$

 

$

378,137

 

$

5.81

 

62.4%

Recurring income

 

 

283,612

 

 

 

 

 

 

283,612

 

 

4.36

 

46.8%

Cash and other

 

 

(43,390)

 

 

 

 

(12,363)

 

 

(55,753)

 

 

(0.86)

 

(9.2)%

Total

 

$

536,931

 

$

81,428

 

$

(12,363)

 

$

605,996

 

$

9.31

 

100.0%

As at December 31, 2020

 

Total unitholders' equity

 

Market value adjustment to equity
accounted investments

 

Deferred income taxes
adjustment

 

NAV

 

NAV per
unit

 

% of total
NAV

Development and investment holdings

 

$

276,725

 

$

50,652

 

$

 

$

327,377

 

$

5.05

 

56.2%

Recurring income

 

 

169,040

 

 

 

 

 

 

169,040

 

 

2.61

 

29.0%

Cash and other

 

 

94,112

 

 

 

 

(7,659)

 

 

86,453

 

 

1.33

 

14.8%

Total

 

$

539,877

 

$

50,652

 

$

(7,659)

 

$

582,870

 

$

8.99

 

100.0%

"Net asset value ("NAV") per unit" represents the net asset value of the Trust divided by the number of units outstanding at the end of the period. This non-GAAP ratio is an important measure used by the Trust in evaluating the Trust’s performance as it is an indicator of the intrinsic value of the Trust; 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 unitholders' equity per unit" represents the total unitholders' equity of the Trust divided by the number of units outstanding at the end of the year.

As at

 

December 31, 2021

 

December 31, 2020

Total unitholders' equity

 

$

536,931

 

$

539,877

Units outstanding – end of year

 

 

65,071,762

 

 

64,811,749

Total unitholders' equity per unit

 

$

8.25

 

$

8.33

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: our development pipelines; the Trust's focus on impact investing and expectations; the Trust's ability to achieve its impact and sustainability goals, including the Trust’s goal of achieving net zero GHG by 2035, that the Dream LeBreton project will be part of Canada’s largest residential zero-carbon project, and implementing other sustainability initiatives throughout its projects; the Trust’s plans and proposals for current and future development projects, including their expected sustainability impact; development timelines, including commencement of construction and/or revitalization of our development projects; the anticipated growth in our recurring income segment; and the 2,380 residential units and 169,000 sf of retail and commercial GLA (at 100%) which are expected to be completed and contribute to recurring income over the next four 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 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 2022; 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; interest rates remain stable; 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 February 14, 2022. 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.

Contacts

For further information, please contact:

Meaghan Peloso
Chief Financial Officer
416 365-6322
mpeloso@dream.ca

Kimberly Lefever
Director, Investor Relations
416 365-6339
klefever@dream.ca

Contacts

For further information, please contact:

Meaghan Peloso
Chief Financial Officer
416 365-6322
mpeloso@dream.ca

Kimberly Lefever
Director, Investor Relations
416 365-6339
klefever@dream.ca