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Dream Impact Trust Reports Second Quarter Results & Further Growth of Its Multi-Family Rental Portfolio

·12-min read

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, August 02, 2022--(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, 2022 ("second quarter").

"We are pleased with our progress in creating further stability for our portfolio over the first half of the year," said Michael Cooper, Portfolio Manager. "With the current economic climate, securing one of the few public offerings in 2022 and continuing to expand our multi-family platform demonstrates our ability to execute on a transactional level and successfully navigate challenging markets. With half of the portfolio invested in recurring income, we continue to focus on making the company safer and sustainable for the long term and are well positioned for adapting to changes in the real estate environment."

Since January 1, 2021, the Trust has acquired $244.0 million of income properties and completed $103.0 million in development assets for a total of $347.0 million added to our recurring income portfolio. Aside from $108.0 million in commercial properties which are primarily at Zibi, the balance is exclusively best-in-class residential rental properties.

In the second quarter, the Trust closed on a $40.0 million convertible impact debenture offering (the "Offering"). The Offering bears a 5.75% coupon and an $8.00 per unit conversion price, maturing on December 31, 2027. This is the Trust’s second convertible impact debenture offering, for which proceeds will be used for eligible impact investments in accordance with the Trust’s Impact Financing Framework.

Subsequent to June 30, 2022, the Trust acquired a 50% interest in 70 Park, a 210-unit multi-family rental building located next to the Port Credit GO station, and in close proximity to our Brightwater development. The site includes land adjacent to the rental building which is slated for redevelopment and was acquired for net proceeds of $19.6 million (inclusive of deposits), or $381,000 on a per door basis. The building was 99% occupied upon closing of the transaction. Inclusive of 70 Park, in 2022 the Trust has invested $23.9 million to further grow our recurring income segment, adding an additional 290 multi-family rental units. As of June 30, 2022, nearly 50% of the Trust’s portfolio was invested in assets that generate recurring income.

Selected financial and operating metrics for the three and six months ended June 30, 2022, are summarized below:

Three months ended June 30,

Six months ended June 30,

2022

2021

2022

2021

Condensed consolidated results of operations

Net income (loss)

$

623

$

(1,451)

$

972

$

(7,663)

Net income (loss) per unit(1)

0.01

(0.02)

0.01

(0.12)

Distributions declared and paid per unit

0.10

0.10

0.20

0.20

Units outstanding – end of period

65,673,190

64,935,685

65,673,190

64,935,685

Units outstanding – weighted average

65,636,263

64,780,095

65,461,638

64,868,057

During the second quarter, the Trust reported net income of $0.6 million compared to a net loss of $1.5 million in the comparative period. The improvement in earnings was driven by the composition of fair value changes on income properties and financial and equity instruments across our segments, the impact of foreign exchange on our investment in the Virgin Hotels Las Vegas ("U.S. hotel"), and growth in our recurring income segment. This was partially offset by higher interest expense and marketing costs associated with the launch of Forma Condos, as further discussed in our segmented discussion below.

As at June 30, 2022, the Trust had $31.2 million of cash-on-hand, which included unused proceeds from the Trust's convertible debenture issuance. Subsequent to quarter-end, $18.5 million was deployed for the acquisition of 70 Park. The Trust’s debt-to-asset value(1) as at June 30, 2022 was 25.7%, an increase relative to 20.4% as of March 31, 2022, primarily due to draws on the credit facility, net of certain project-level financing in the period. For similar reasons, 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 57.4% as at June 30, 2022, compared to 54.5% as at March 31, 2022. This includes long-term high ratio government debt provided as part of creating affordable housing within our communities. As at June 30, 2022, the Trust had drawn $15.2 million on its $50.0 million credit facility.

Subsequent to quarter-end, the Trust refinanced an existing mortgage payable, upsizing the facility from $60 million to $65 million, at the Trust's share, extending the maturity date to 2027. At the time of closing, the Trust hedged half of the balance at a fixed interest rate of 4.91% per annum. Inclusive of the refinancing, approximately 75% of the Trust's consolidated debt was subject to a fixed interest rate.

As part of the Trust's ongoing risk management practices, the Trust monitors the impact of macroeconomic factors on the business. This includes assessing the impact of cost escalations on operations and construction projects, and the impact of rising interest rates on our portfolio. We continue to monitor our capital allocation on an ongoing basis, pursue refinancing opportunities which mitigate interest rate risk, and tender a significant portion of development costs prior to construction commencement which helps contain inflationary risk.

Recurring Income

During the second quarter, the Trust's recurring income segment generated net income of $2.3 million compared to $0.5 million in the comparative period. The increase relative to prior year was due to income contribution from the completion of commercial blocks at Zibi in the past year. In addition, the Trust recognized a provision on a loan within the lending portfolio in the prior year with no similar adjustment in the current period.

In the three months ended June 30, 2022, the Trust acquired a 50% interest in 111 Cosburn, a 23-unit multi-family rental building located in Toronto's East York neighbourhood, positioned close to the planned Ontario Subway Line. The multi-family building was acquired for $8.2 million ($4.1 million at the Trust's share).

Based on the Trust's current development pipeline, we have an additional 2,819 residential units and 153,000 square feet ("sf") of commercial and retail (at 100%) with an estimated value on completion of $496.6 million that will be completed and contribute to recurring income over the next three years. For further details, refer to the "Three-Year Recurring Income" table in Section 2.1, "Recurring Income", in the Trust's MD&A for the three and six months ended June 30, 2022.

Development

In the second quarter, the development segment generated net income of $0.5 million, compared to a net loss of $0.6 million in the comparative period. The improvement relative to prior year was driven by the net impact of foreign exchange on the U.S. hotel, partially offset by sales and marketing expenses at Forma Condos and fair value adjustments on income properties under development in the prior year.

In the second quarter, sales for the East tower at Forma Condos launched. To date, approximately half the units have been sold for the tower, designed by renowned Canadian architect Frank Gehry and located in the heart of downtown Toronto in the entertainment district. The development will feature two towers at 84 and 73 storeys, comprising over 2,000 units. The buildings will include unique views, luxurious finishes and elevated lifestyle amenities including entertainment, co-working and wellness spaces. The East tower is expected to be ready for occupancy in 2028. The Trust has a 25% interest in the development.

In addition, Bridge House, the next condominium building at Brightwater was brought to market. Bridge House is comprised of 468 units, of which nearly half are available for sale with an expected construction start date of 2023. Brightwater is a 72-acre waterfront community located in Port Credit which once completed will have nearly 3,000 residential units and over 350,000 sf of vibrant retail and commercial space, and will include 18 acres of parks and outdoor space. The Trust has a 23.25% interest in the development.

Other(2)

In the second quarter, the Other segment generated a net loss of $2.2 million compared to $1.4 million in the prior year. The increase was primarily driven by interest expense on the Trust's convertible debentures and credit facility.

Unit Buyback Activity

From the inception of the Trust's unit buyback program in December 2014 to August 2, 2022, the Trust has repurchased 15.4 million units for cancellation, for a total cost of $96.0 million.

As at August 2, 2022, the Trust's asset manager, DAM, owns 19.3 million units of the Trust, inclusive of 1.3 million units acquired under the Trust's previous distribution reinvestment plan, 4.2 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 August 2, 2022.

Cash Generated from Operating Activities

Cash utilized in operating activities for the three months ended June 30, 2022 was $2.0 million compared to $0.1 million in the prior year, an increase due to acquisition pipeline deposits and changes in non-cash working capital.

Distribution Reinvestment Plan ("DRIP")

Effective with the August 2022 distribution payable on September 15, 2022 to unitholders of record as at August 31, 2022, the Trust's DRIP will be reinstated, allowing unitholders to reinvest their distributions into new units of the Trust, with no bonus distribution and no commissions. Eligible unitholders that had not previously opted into the DRIP but now wish to do so may elect to participate by contacting their broker, investment dealer or financial institution holding their units. Refer to the Trust's website for a copy of the Distribution Reinvestment and Unit Purchase Plan.

Impact Update

In the second quarter, we were pleased to publish Dream's annual 2022 Impact Report. The report highlights the Trust's decarbonization and net zero initiatives, affordable housing case studies, inclusivity programs and annual impact metrics. Refer to the following link for the complete 2022 Impact Report.

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, net income (loss) 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)

Includes other Trust amounts not specifically related to the segments.

Conference Call

Senior management will host a conference call on Wednesday August 3 at 2:00 pm (ET). To access the call, please dial 1-866-455-3403 in Canada or 647-484-8332 elsewhere and use passcode 6397 7471#. 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. 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, debt-to-total asset value inclusive of project-level debt, NAV, NAV per unit and net income (loss) per unit, 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 and six months ended June 30, 2022.

"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

June 30,
2022

December 31,
2021

Total debt

$

189,062

$

133,150

Unamortized discount on host instrument of convertible debentures

1,218

809

Conversion feature

(460)

(357)

Unamortized balance of deferred financing costs

2,985

1,300

Total debt payable

$

192,805

$

134,902

Total assets

749,614

701,702

Debt-to-asset value

25.7%

19.2%

"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.

June 30,
2022

December 31,
2021

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

$

557,406

$

493,217

Total assets

749,614

701,702

Total assets, inclusive of project-level debt

$

1,307,020

$

1,194,919

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

557,406

493,217

Total debt payable

192,805

134,902

Total debt, inclusive of project-level debt

$

750,211

$

628,119

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

57.4%

52.6%

"Net income (loss) per unit" represents net income (loss) of the Trust divided by the weighted average number of units outstanding during the period.

Three months ended June 30,

Six months ended June 30,

2022

2021

2022

2021

Net income (loss)

$

623

$

(1,451)

$

972

$

(7,663)

Units outstanding – weighted average

65,636,263

64,780,095

65,461,638

64,868,057

Net income (loss) per unit

$

0.01

(0.02)

$

0.01

$

(0.12)

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; the Trust’s ability to execute on transactions and successfully navigate markets; the Trust’s focus on increasing safety and sustainability of its portfolio by investing in recurring income assets, and expected adaptability benefits thereof; expected use of proceeds of the Offering in accordance with the Trust’s Impact Financing Framework; expected growth of the Trust’s recurring income segment; the Trust’s goals of pursuing financing opportunities that mitigate interest rate risk and tender development costs prior to construction commencement to mitigate inflationary risk; our development pipeline; the expected construction commencement date and number of units of Bridge House; the expected total number of units, commercial and retail square footage, park acreage and outdoor space of Brightwater; the expected reinstatement of the Trust’s DRIP; the Trust's ability to achieve its impact and sustainability goals, and implementing other sustainability initiatives throughout its projects; and the 2,819 residential units and 153,000 sf of commercial and retail (at 100%) with an estimated value upon completion of $496.6 million which are expected to be completed and contribute to recurring income over the next three 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; 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 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 August 2, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220802006102/en/

Contacts

For further information:

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

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