Dream Impact Trust Reports First 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. All dollar amounts in our tables are presented in thousands of Canadian dollars, except unit and per unit amounts, unless otherwise stated.

DREAM IMPACT TRUST (TSX: MPCT.UN) ("Dream Impact", "we", "our" or the "Trust") today reported its financial results for the three months ended March 31, 2023 ("first quarter").

After two years of work and a rigorous bidding competition, on March 1, 2023, the Trust, Dream and Great Gulf Group acquired phase one of the highly sought-after Quayside Development site in downtown Toronto, comprising 4.5 acres. Upon full build-out of the 12-acre site, Quayside is expected to provide over 4,000 residential units, including more than 800 affordable housing units with an emphasis on family sized accommodations, 3.5 acres of public green space and Canada’s largest residential mass timber structure. The Trust has a 12.5% interest in the project.

The acquisition of Quayside is an excellent example of public and private partnerships working together to address social and environmental needs. We believe the Trust’s success in acquiring this site was due to our dedicated impact mandate and development track record, and ability to collaboratively work with multiple government and community stakeholders.

As part of the Trust’s broader liquidity strategy, we completed two refinancings in the period relating to 49 Ontario Street (“49 Ontario”) and Victory Silos and amended the Trust’s corporate credit facility. The refinancings were supported by third-party appraisals and generated net proceeds to the Trust of $59.0 million. Details on financing activity are further described within the segmented discussion below.

“We are pleased that our assets are substantially all impact real estate and we have added the Quayside project to our exceptional development pipeline,” said Michael Cooper, Portfolio Manager. “During the quarter we have taken steps to make the company safer and increased our liquidity. We believe that our distributions are sustainable and we continue to make progress on the development of our income properties. With this progress, we are excited to have the opportunity to present our company to investors through a series of walking tours in downtown Toronto showcasing our best-in-class assets. The value of assets within this area make up roughly 80% of the Trust's market cap and will continue to grow as we build out our development blocks."

Selected financial and operating metrics for the three months ended March 31, 2023 are summarized below:

In the first quarter the Trust reported a net loss of $3.4 million relative to net income of $0.3 million in the comparative period. The change in earnings was primarily driven by fair value gains of $4.0 million on the Trust’s multi-family assets in the prior year, combined with a $2.2 million increase in interest expense due to financing activity and higher variable rates in the current period. Partially offsetting this was G&A expense savings due to fluctuations in the Trust’s unit price, foreign exchange losses incurred in the prior year, and an increase in the Trust’s income tax recovery related to the composition of earnings. Fair value adjustments may differ period to period as certain project or asset-level milestones are achieved such as construction completion or zoning achievement.

At March 31, 2023, the Trust had total liquidity of $43.1 million, comprised of cash-on-hand and funds available under the Trust’s credit facility, up from $10.2 million at December 31, 2022. As of period end, the Trust’s debt-to-asset value(1) based on IFRS values, was 35.5%, an increase compared to 31.0% as of December 31, 2022, and the Trust’s debt-to-total asset value, inclusive of project-level debt and market value adjustments(1) and assets within our development segment, including equity accounted investments, was 61.8% up from 57.8% as at December 31, 2022, as a result of the aforementioned 49 Ontario and Victory Silos refinancings. With our financings completed in the period, we have ample liquidity to fund our committed development spend inclusive of equity requirements for Quayside.

In light of the current interest rate environment, the Trust continues to actively pursue opportunities to reduce interest rate uncertainty. Inclusive of activity in and subsequent to the first quarter, the Trust has fixed over $138 million of variable debt (at share), resulting in approximately 65% of the Trust’s debt being subject to a fixed interest rate. As at March 31, 2023, inclusive of swap activity subsequent to quarter end, the Trust's weighted average interest rate was 5.5%.

Recurring Income

Net operating income ("NOI") from commercial properties was $2.6 million in the first quarter, up slightly from prior year. NOI from multi-family rental assets(1)was $1.4 million in the first quarter, up from $0.8 million in the comparative period due to increased occupancy, the timing of completion at Aalto Suites at Zibi and third-party acquisitions. As of March 31, 2023, the Trust’s multi-family rental assets were comprised of 1,592 units which were 94.8% occupied (March 31, 2022 – 1,359 units which were 78.0% occupied). Throughout the period, we have continued to see strong leasing momentum across our multi-family portfolio. Block 206 and Block 11, the next two multi-family buildings at Zibi comprising 355 units in total, are currently under construction and are expected to achieve first tenant occupancies later this year.

In the first quarter, the Trust’s recurring income segment generated a net loss of $0.5 million compared to net income of $6.2 million in the prior year. The fluctuation was due to the aforementioned multi-family asset gains and higher interest expense, and was partially offset by steady NOI growth.

In the first quarter, the Trust closed on the refinancing of 49 Ontario for gross proceeds of $80.0 million. The loan has a term of two years, and bears interest at the Banker's Acceptance ("BA") rate plus 2.65%, or the bank's prime rate plus 1.65%. Proceeds were used to repay the existing mortgage and the Trust’s credit facility. 49 Ontario is a wholly owned 88,000 square foot commercial building located in downtown Toronto with significant redevelopment potential. Over the period, we continued to make progress towards rezoning, receiving approval by Toronto East York Community Council subsequent to quarter end for a total gross floor area of 877,000 sf, subject to final adoption by City Council anticipated later this spring. The rezoning approval provides for approximately 809,000 sf of residential gross floor area (or 1,250 residential units) and 68,000 sf of commercial space. Effective April 3, 2023, the facility against 49 Ontario was fully hedged. This asset is a prime example of value creation for the Trust, initially acquired for $46.8 million and carried at $140.0 million as of March 31, 2023.

Development

In the first quarter, the development segment reported a net loss of $0.7 million, up from a $2.3 million loss in the comparative period. Prior year results included a fair value loss on certain development blocks at Zibi. Income from this segment will fluctuate period to period and not contribute meaningfully to earnings until development milestones are achieved and/or project inventory is available for occupancy.

The Trust continues to make progress on our active projects under construction, including West Don Lands ("WDL") Block 8 and WDL Block 3/4/7. Together, WDL Blocks 8 and 3/4/7 will bring online 1,625 rental units to Toronto's east end adjacent to the Canary and Distillery Districts over the next three years. Attractive construction financing for both blocks was obtained through CMHC's Rental Construction Financing Initiative, and include a fixed interest rate for a 10-year term. The Trust has a 25% ownership interest in the WDL development. For complete details on the Trust’s development pipeline, please refer to the section titled "Development and Investment Holdings" in the Trust's management's discussion and analysis for the three months ended March 31, 2023. WDL Block 8 is the next asset to be completed from our pipeline, with first tenant occupancies expected this summer.

In the three months ended March 31, 2023, we closed on the refinancing of the in-place loan at Victory Silos. The Trust has a 37.5% interest in the project, which is a 5.2-acre site located along downtown Toronto’s waterfront and immediately adjacent to the Trust’s Quayside development site. Due to the increase in land value since the acquisition in 2016 we were able to re-finance the in-place loan from $35 million to $150 million, covering capital requirements for Quayside and generating excess cash of $22 million for the Trust.

Other(2)

In the first quarter, the other segment generated a net loss of $2.1 million relative to $3.5 million in the comparative period. Notwithstanding the impact of higher interest expense, the segment had a lower loss in the period due to reduced G&A and tax recovery savings.

In the first quarter, the Trust renewed its normal course issuer bid (“NCIB”), allowing the Trust to repurchase up to a maximum of 4.6 million units. Under the NCIB, during and subsequent to the first quarter, the Trust has repurchased 182,600 units at an average price of $3.11.

As at May 1, 2023, the Trust’s asset manager, DAM, owns approximately 22.1 million units of the Trust, inclusive of 2.4 million units acquired under the Trusts’ distribution reinvestment plan, 5.5 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 32% of the Trust as at May 1, 2023.

Cash Utilized in Operating Activities

Cash utilized in operating activities in the first quarter was $2.4 million compared to $1.2 million in the comparative period. The increase was a result of higher interest payments in the current period and changes in non-cash working capital.

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 net income (loss) per unit, NOI - multi-family rental, and debt-to-total asset value, inclusive of project-level debt and market value adjustments,as well as other measures discussed elsewhere in this release. These specified financial measures are not defined by or recognized measures under 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. 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. Certain additional disclosures such as the composition, usefulness and changes as applicable are expressly incorporated by reference from the Trust’s MD&A for the three months ended March 31, 2023 in the section titled “Specified Financial Measures and Other Disclosures”, which has been filed and is available on SEDAR under the Trust’s profile.

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 belief that the distribution policy is sustainable and in line with recurring income; the expectation that the value of the Quayside project will continue to grow as we build development blocks; the Trust's plans and proposals for current and future development and redevelopment projects, construction initiation, rezoning, completion and occupancy dates, number of units, square footage and planned GLA; the fluctuation of fair value adjustments; our liquidity and our ability to fund committed development spend; the finalization of WDL Blocks 8 and 3/4/7 and number of units to be completed within the next three years; the Trust's expectation to earn more meaningful income from the development segment upon first tenant occupancies; and the Trust's ability to achieve its impact and sustainability goals, and implementing other sustainability initiatives throughout its projects. 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 2023; 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; 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 May 1, 2023. 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.

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