RE:concernsDream Office says on page 8 of their Q2 2023 financial report that there was a 54,000 square foot lease with a flexible workspace provider so I think that is who received the large lease incentives. 357 Bay had considerable money spent on it to ready it for WeWork in the recent past. I think it's a good strategy to get companies like these in Dream Office buildings. It provides Dream Office with lots of smaller companies in their buildings which can then rent space directly from Dream Office in the future when they outgrow what companies like WeWork provide. I believe this is a 10 year lease (page 10, Dream Office Q2 2023).
I'm not sure what the lease incentives offered to the restaurants were. The restaurant leases are for a weighted average of 14.1 years (page 4 of the Dream Office Q2 2023). The restaurants and the flexible workspace providers will drive additional future tenants to Dream Office properties so it makes sense to spend more money attracting these types of tenants.
The higher interest rate environment makes development very expensive unless partners are found like Dream Office has done with Eglinton which will require no cash contribution from Dream Office for Phase 1. It would make sense to sell a few office properties to pay down debt and might make sense to explore selling developments once they are completed.
There is around $400 million of debt with maturities in 2027 or later so there is a lot of time for Dream Office to increase income or for interest rates to go lower on that portion. The DIR units are worth around $190 million and could be sold to pay down the 2025 credit facility. That leaves around $700 million in debt that matures before 2027 if we assume the DIR units are sold. The mortgage debt maturing in 2023 has a weighted average interest rate of 5.20% so new debt at 6.2% is only a 1% difference. Dream Office has lower interest rate debt maturing in 2024 and later years which will be more expensive when refinanced compared to present interest rates (page 23 of Dream Office Q2 2023).