Post Q3 Call Follow Up, as promised
Biggest news = 49 Ontario Construction Loan completing by end of year. This will likely mean a partnership will be announced soon, possibly in Q1. This will be the most important transaction in MPCT's history. For context, if as projected we sell 75%, and keep 25%, we will reduce MPCT's debt by 120-140 Million Dollars (Essentially cutting debt in half). All the debt we will be left with is likely 40M in Debentures and ~100M of mortgage debt at the corporate level. Our plans are to have 49 Ontario start construction in the next 12 months. News is imminent on this before year end.
"49 Ontario, we're doing pretty well working on getting the financing for that large project. We're working with the city, and we expect by year-end to wrap up the pieces we need to be able to solidify the pro forma. And I expect that we're going to start that project next year." - Mr. Cooper
Related news to 49 Ontario, on the same morning as earnings release the City of Toronto Executive Committee approved waiving of Development Charges as well as a large amount of property taxes, to select purpose built rental developments specifically targeting MPCTs business model. Although not officially, 49 Ontario, Quayside and 70 Park St developments will likely be receiving these waivers, saving 30-40 Million in development costs for 49 Ontario alone and lower operating costs through reduced property taxes. This makes this project very profitable, more profitable than originally expected. It is my belief Dream has been working with the City in regards to these development charge waivers to start 49 Ontario, or else 49 Ontario would have had construction financing done sooner.
The next biggest news IMO was NOI expectations. It was revealed NOI from just our current 3 developments leasing up in Q3 (Maple House, Aalto II and Common at Zibi) will be 6-7M annually by the end of 2025, vs the ~300,000 reported in Q3. All of these projects will be going from 0 income in 2023, to generating income and fully stabilized by around mid 2025 of around 6-7M. That is a huge improvement, and does not include NOI from Brightwater Retail, Birch House, or Cherry House which will starts producing NOI in 2025/2026 as well.
"But that was my point in terms of how significant that is compared to what we have." - Mr. Cooper said, referring to how significant this increase of just these 3 properties will be to the trust.
Cherry House was announced it will complete early, with occupancy starting in Q3 or Q4 vs Q1 2026. This will accelerate the timeline for this property to generate NOI. The reason why I believe this is important, as the earlier these developments start generating income, the sooner we get distributions reinstated. For context, Cherry House (855 Units at project level) will be our largest residential project to complete to date.
Interest rates were mentioned have dropped 1% since July 1st. MPCT was organized (through temporary distribution suspension and liquidity enhancements) to support interest rates at the BoC peak, of 5%. Now at 3.75%, we are saving approximately 5.625M per year, with another .25 or .50 cut coming in December (and more in 2025). In context, that is about half our entire distribution cost at .64 cents per unit. Another 1.25% reduction in rates from today and our entire distribution cut savings of 11M will be saved..
"So, since July 1, I think we've had 100 basis point cuts in Canada, 50 basis points in the States. That's great news. And you can see that it makes a big difference for the Impact Trust. I think we're going to save $4.5 million a year. Let's see. So that's a real positive. " - Mr Cooper
Distributions were not mentioned (as expected, it's too early). We need to have more residential properties leased up so we can reinstate distribution. It was reported on the call the "Low End" of NOI contributed from Aalto II, Maple House, and Common at Zibi will be 6-7M which will go a long ways. Holders of MPCT are not missing out on the distributions today, as the cash is being kept in our trust in the meantime. There is a possibility that when a 49 Ontario Deal closes, we can reinstate distributions then, as our interest costs will be cut in half, along with the reduction in interest rates will provide a secure and solid low leverage balance sheet with a strong income stream rising from all our apartments coming online. With 49 Ontario Deal Closing, reduced interest costs, and NOI from properties coming I will hold on my estimate for Distribution Reinstatement during the 2H of 2025. It is worth noting Common at Zibi is still listed as under development, and has not yet contributed anything to NOI yet. Maple House and Aalto II have, but still barely as the profits come after then get over 70-75% occupancy. After that, the real profit starts as outlined. Income is really about to surge going forward.
Brightwater Residential will not be moved from Build to Sell into Build to Hold Apartment Rentals, and will continue as Build to Sell. Next up at this site is marketing of a new phase of Townhomes (Current townhomes are 98% pre-sold). Townhomes and SFH are very active in Toronto and demand is rising, unlike condos. We have a pre-selling condo build called Bridge House, which is likely to start construction soon. Many units are already sold likely reaching the construction threshold now. Demand in this region for townhomes/SFH housing is very strong, and this location especially as its a Waterfront Community with its own Public School coming inside the development. Brightwater Towns and The Mason are two large completed projects which are expected to cash close (we will realize cash in bank) Mid 2025 (Q2 or Q3).
Brightwater also has 98,000 Sq feet of Retail that just opened up, of which 60% is already leased. NOI from this will likely start in early 2025, as most new leases have a 3-6 month fixturing or free rent period. However, this is not disclosed.
Zibi is about to start 2 new buildings. The rate received for financing is 3.2%. The profitability of our PBR's make a lot of sense here, and the optimism is being shown.
"in Ottawa, we're expecting to start Block 204 in the next -- we've actually started moving dirt and stuff, but we should get the loan done in the next -- we should do our first draw on the loan in the first quarter of the new year. And the interest rates on these loans are probably around 3.2%, maybe a little less, and we're able to make good returns. So we're happy to get those 2 buildings started" - Mr. Cooper.
TD has released their MPCT Q3 Report, Titled "Expecting and Impactful Year Ahead" - Clever name, with a "Slightly Positive" quarter report.
TD has a true NAV Estimate of $18, of course I am biased and would say that is likely too low based on my EAI research.
TD Estimates exclude the projections of 49 Ontario in their forecast (As details not confirmed yet)
In conclusion, we are making significant progress on all fronts. Income is rising very quickly, debt is falling, making a very attractive entry point during this inflection with significant news of 49 Ontario and distribution reinstatement as 2025 likely upside surprises. The partnership of 49 Ontario remains our single most important upcoming announcement. The government is throwing everything at Dream Impact that has further solidified MPCT's future, and best of all, Mr. Cooper sounded really optimistic on the earnings call vs his last few calls showing the turn around is here. Seeing what is coming down the pipe, the material growth in NOI, discount to NAV, and likelihood of distribution reinstatement are reasons why I want to own MPCT today, not after the news.
Always do your own DD. MPCT is not liquid, so do not trade it. If you buy, plan to hold for 12-24 months as the volume does not support trading.
Please like my post if you appreciate the write ups and feel free to PM me any errors or other information you find so I can continue to update the community.
Source:
Q3 Earnings Call Transcript:
https://www.alphaspread.com/security/tsx/mpct.un/earnings-calls/q3-2024
MPCT Research:
Our Developments, with Pictures
https://stockhouse.com/companies/bullboard?symbol=t.mpct.un&postid=36235736
Why EAI is worth much more than shown on the balance sheet, and how our EAI debt works
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36297398 New Toronto Rental Program Incentive (Development Charge Waiver for 49 Ontario). This will save us ten's of millions on our developments in Toronto.
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36292877
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36290006
Scarborough Junction, The Hidden Gem
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36281186
2025 MPCT-UN Catalysts & Path To No Land Loans
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36245063
MPCT 2026 Forecast with Slide Presentation Images
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36266982
Huge Increase to NOI over the next 12 months. Details:
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36263654
Insider Purchase Bhalla, Amar, ($50,000) Units on September 26
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36253768
Links to MPCT Property Development Photos
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36224127
Government is doing everything in MPCTs Favor.
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36226580
I will add to this, No GST on new apartment builds, as well as CMHC loans are non-recourse. Dream is one of very few on CMHCs fast approval regular developer program. Plus, Toronto's new rental incentive program waiving development charges