Dream Unlimited Corp. 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.

Dream Unlimited Corp. (TSX: DRM) (“Dream”, “the Company” or “we”) today announced its financial results for the three months ended March 31, 2023 (“first quarter”).

“Our asset management division had increasing revenue and profits with the closing of the Summit transaction bringing our assets under management to $24 billion, Arapahoe Basin had record profits with the introduction of our high speed six passenger chairlift and with a good snow year provided skiers with an exceptional experience, our residential revenue properties had record revenue, and the fiscal condition and population growth in western Canada position us well for years to come,” said Michael Cooper, Chief Responsible Officer. “Our urban development business is progressing well with us indirectly closing on Quayside this quarter, our projects under development are progressing well and new developments will be started cautiously. Since 2016 we have sold $11 billion of $13 billion of office properties and the remaining $2 billion of assets are currently maintaining occupancy in a challenging market. Overall, Dream is positioned very well to thrive in the future.”

A summary of our consolidated results for the three months ended March 31, 2023 is included in the table below.

Earnings before income taxes for the three months ended March 31, 2023 was $41.7 million, down from earnings before taxes of $57.2 million in the comparative period. Prior year earnings included higher fair value gains across our portfolio, including within equity accounted investments, as well as condominium unit occupancies at Canary Commons. While we had stronger results from Arapahoe Basin and a fair value gain on Dream Impact Trust units held by other unitholders, this was offset by higher interest costs across our business lines.

Dream consolidated funds from operations(1) (“FFO”) for the three months ended March 31, 2023 was $0.19 per share on a pre-tax basis, down from $0.88 per share in the first quarter of 2022. The decrease in FFO per unit is driven by the aforementioned factors, excluding fair value changes.

As of March 31, 2023 the Company has available liquidity(2) of $258.5 million, down from $285.7 million as of December 31, 2022.

Highlights: Recurring Income

• Revenue and net operating income(1) for the three months ended March 31, 2023 was $59.5 million and $25.3 million, respectively, an increase of $16.0 million and $7.8 million, respectively, from the comparative period. The increase is primarily attributable to higher earnings in the current quarter in our asset management business due to an increase in fee earning assets under management and stronger performance at Arapahoe Basin.

• On February 17, 2023, GIC and Dream Industrial REIT through a joint venture (“Dream Summit JV”) acquired all the assets and assumed all of the liabilities of Summit Industrial Income REIT in a transaction valued at approximately $5.9 billion. Following the transaction, Dream manages one of the largest portfolios of industrial assets in Canada with 43.3 million square feet of quality properties, primarily located in the Greater Toronto Area, Greater Golden Horseshoe Area, and Greater Montreal Area. In addition, Dream Industrial REIT’s near-term development pipeline in Canada is over 6 million sf (at 100% project level), with anticipated completion within the next 2 years.

• Revenue for the three months ended March 31, 2023 includes $14.4 million in asset management fee revenue, compared to $9.9 million in the comparative period. The increase in the period is largely driven by the growth in the asset management base from the addition of Dream Residential REIT and Dream Summit JV to the Company’s asset management platform, in addition to development activity at Dream Industrial REIT. As of March 31, 2023, assets under management(1) totaled $24 billion and fee earning assets under management(1) totaled $17 billion, both up $6 billion from year-end.

• In the first quarter of March 31, 2023, our portfolio of stabilized properties generated revenue and net operating income(1) of $40.2 million and $17.9 million, an increase of $9.3 million and $3.4 million, respectively, over the prior period, largely driven by the growth in our multi-family portfolio in the GTA, National Capital Region and Western Canada. As of March 31, 2023, our portfolio comprises 1,599 apartment units (at project level) and is 96.0% occupied.

• In the three months ended March 31, 2023, Arapahoe Basin had its strongest quarter ever, generating standalone FFO(1) of $11.8 million, up from $9.1 million in 2022. The improved results are due to higher skier visits and stronger yields on the IKON pass.

• Standalone FFO(1) generated by our holdings in the Dream group of companies totaled $8.8 million this quarter, down slightly from $9.1 million in the comparative period due to a reduction in Dream Impact Trust’s annual distribution from $0.40 to $0.16 per unit. FFO from our holdings includes our proportionate share of FFO from our 36.8% interest in Dream Office REIT and 11.8% interest in Dream Residential REIT, along with distributions earned from our 31.8% interest in Dream Impact Trust.

• Across the Dream group platform, which includes assets held through the Company, Dream Impact Trust, Dream Impact Fund, Dream Office REIT and Dream Residential REIT, we have over 8,000 apartment units and 13.7 million sf of gross leasable area (“GLA”) in stabilized rental, retail and commercial properties, in addition to our recreational properties. Over the next four years, an additional 2.6 million sf of residential GFA is expected to be added to our recurring income portfolio (at project level) primarily relating to Canary Landing, Zibi and LeBreton Flats.

Highlights: Development

• After two years of work and rigorous bidding competition, on March 1, 2023, Dream Impact Trust, Dream Impact Fund 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 will 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. Dream has an indirect interest in the project through our 41% interest in Dream Impact Fund.

• In the three months ended March 31, 2023, our development business generated $12.7 million in revenue and incurred negative net margin of $5.2 million, an increase in revenue of $3.0 million and a nominal decrease in net margin from the comparative period. The increase in revenue is primarily due to higher housing occupancies within our Western Canada communities, partially offset by fewer lot sales.

• In the first quarter of 2023, we achieved 30 lot sales primarily across our Eastbrook, Brighton, High River and Vista Crossing communities in Regina, Saskatoon and Calgary. As of May 8, 2023, we have secured commitments for an additional 413 lots and 17 acres across our Western Canada communities that we expect to contribute to earnings later this year.

• Across the Dream group platform, we have approximately 4.1 million sf of GLA in retail or commercial properties and 25,900 condominium or purpose-built rental units (at the project level) in our development pipeline. For further details on our development pipeline, refer to the “Summary of Dream’s Assets & Holdings” section of our MD&A.

Select financial operating metrics for Dream’s segments for the three months ended March 31, 2023 are summarized in the table below.

Other Information

Information appearing in this press release is a select summary of results. The financial statements and MD&A for the Company are available at www.dream.ca and on www.sedar.com.

About Dream Unlimited Corp.

Dream is a leading developer of exceptional office and residential assets in Toronto, owns stabilized income generating assets in both Canada and the U.S., and has an established and successful asset management business, inclusive of $24 billion of assets under management(1) across four Toronto Stock Exchange ("TSX") listed trusts, our private asset management business and numerous partnerships. We also develop land and residential assets in Western Canada. Dream expects to generate more recurring income in the future as its urban development properties are completed and held for the long term. Dream has a proven track record for being innovative and for our ability to source, structure and execute on compelling investment opportunities. A comprehensive overview of our holdings is included in the "Summary of Dream's Assets and Holdings" section of our MD&A.

Non-GAAP Measures and Other Disclosures

In addition to using financial measures determined in accordance with IFRS, we believe that important measures of operating performance include certain financial measures that are not defined under IFRS. Throughout this press release, there are references to certain non-GAAP financial measures and ratios including Dream standalone FFO per share, Dream consolidated FFO per share, Dream standalone FFO, Dream consolidated FFO, net operating income, Dream Impact Trust and consolidation and fair value adjustments, which management believes are relevant in assessing the economics of the business of Dream. These performance and other measures are not financial measures under IFRS and may not be comparable to similar measures disclosed by other issuers. However, we believe that they are informative and provide further insight as supplementary measures of financial performance, financial position or cash flow, or our objectives and policies, as applicable. Certain additional disclosures such as the composition, usefulness and changes, as applicable, of the non-GAAP financial measures and ratios included in this press release have been incorporated by reference from the management’s discussion and analysis of Dream for the three months ended March 31, 2023, dated May 9, 2023 (the “MD&A for the first quarter of 2023”) and can be found under the section “Non-GAAP Ratios and Financial Measures”, subheadings “Dream standalone FFO” and “Dream consolidated FFO”, “Dream standalone FFO per share”, “Dream consolidated FFO per share”, “Net operating income”, and “Dream Impact Trust & Consolidation and fair value adjustments”. The composition of supplementary financial measures included in this press release has been incorporated by reference from the MD&A for the first quarter of 2023 and can be found under the section “Supplementary and Other Financial Measures”. The MD&A for the first quarter of 2023 is available on SEDAR at www.sedar.com under Dream’s profile and on Dream’s website at www.dream.ca under the Investors section.

Non-GAAP Ratios and Financial Measures

"Dream Impact Trust & Consolidation and fair value adjustments" are two separate non-GAAP financial measures and represent certain IFRS adjustments required to reconcile Dream standalone and Dream Impact Trust results to the consolidated results as at March 31, 2023 and December 31, 2022 and for the three months ended March 31, 2023 and 2022. Management believes Dream Impact Trust & Consolidation and fair value adjustments provides investors useful information in order to agree it to the Dream Impact Trust financial statements.

Consolidation and fair value adjustments relate to business combination adjustments on acquisition of Dream Impact Trust on January 1, 2018 and related amortization, elimination of intercompany balances including the investment in Dream Impact Trust units, adjustments for co-owned projects, fair value adjustments to the Dream Impact Trust units held by other unitholders, and deferred income taxes.

"Dream standalone FFO" and "Dream consolidated FFO" are key measures of our financial performance. We use Dream standalone FFO and Dream consolidated FFO to assess operating results and the pre-tax performance of our businesses on a divisional basis. The sum of FFO for all our divisions, or Dream consolidated FFO, is a non-IFRS measure. Refer to the "Non-GAAP Measures and Other Disclosures" section of the MD&A for further details.

The following tables breakdown FFO by division and reconcile total FFO to net income:

“Dream standalone FFO per share” and “Dream consolidated FFO per share” are non-GAAP ratios. Dream standalone FFO per share is calculated as Dream standalone FFO divided by the weighted average number of Dream shares outstanding. Dream consolidated FFO per share is calculated as Dream consolidated FFO divided by weighted average number of Dream shares outstanding. We use these ratios to assess operating results and the pre-tax performance of our businesses on a per share basis.

Dream standalone FFO per unit and Dream consolidated FFO per unit are not financial measures under IFRS and may not be comparable to similar measures disclosed by other issuers. Dream standalone FFO per unit and Dream consolidated FFO per unit for the three months ended March 31, 2023 and 2022, and the year ended December 31, 2022 are shown in the table included under the "Funds From Operations" section of the MD&A.

“Net operating income" represents revenue less direct operating costs and is equal to gross margin as per Note 26 of the consolidated financial statements. Net operating income excludes general, administrative and overhead expenses, and amortization, which are included in net margin per Note 26 of the consolidated financial statements. The most directly comparable financial measure to net operating revenue is net margin. This non-GAAP measure is an important measure used to assess the profitability of the Company’s recurring income segment. Net operating income for the recurring income segment for the three months ended March 31, 2023 and 2022 is calculated as follows:

Supplementary and Other Financial Measures

"Assets under management (“AUM”)" is the respective carrying value of gross assets managed by the Company on behalf of its clients, investors or partners under asset management agreements, development management agreements and/or management services agreements at 100% of the client's total assets. All other investments are reflected at the Company's proportionate share of the investment's total assets without duplication. Assets under management is a measure of success against the competition and consists of growth or decline due to asset appreciation, changes in fair market value, acquisitions and dispositions, operations gains and losses, and inflows and outflows of capital.

"Available liquidity" represents Dream's standalone corporate cash and revolving debt facilities, including the operating line – Western Canada and margin loan, to cover the Company’s capital requirements including acquisitions. This financial measure is used by the Company to forecast and plan to hold adequate amounts of available liquidity to allow for the Company to settle obligations as they come due.

“Fee earning assets under management” represents assets under management that are managed under contractual arrangements that entitle the Company to earn asset management revenue calculated as the total of: (i) 100% of the purchase price of client properties, assets and/or indirect investments subject to asset management agreements; (ii) 100% of the carrying value of gross assets of the underlying development project subject to development management agreements; and (iii) 100% of the carrying value of specific Dream Office REIT redevelopment properties subject to a development management addendum under the shared services agreement with Dream Office REIT, without duplication.

Forward-Looking Information

This press release may contain forward-looking information within the meaning of applicable securities legislation, including, but not limited to, statements regarding our objectives and strategies to achieve those objectives; our beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, future growth, expected net proceeds from sales or transactions, results of operations, performance, business prospects and opportunities, acquisitions or divestitures, tenant base, future maintenance and development plans and costs, capital investments, financing, the availability of financing sources, income taxes, vacancy and leasing assumptions, litigation and the real estate industry in general; expectations regarding the effects that the fiscal condition and growth of western Canada will have on our business; our urban development business’ projects under development and new development progress, and our approach in terms of initiating new development projects; our expectation that Dream will thrive in the future; expectations regarding near-term industrial developments, including square footage and completion dates; as well as specific statements in respect of expectations regarding our Quayside development; our development plans and proposals for current and future projects, including number of units, green space, construction materials, square footage, retail and commercial GLA to our recurring income portfolio over the next four years in connection with Canary Landing, Zibi and LeBreton projects, and projected sizes, density, GLA, timelines, units at completion and uses; Quayside featuring Canada’s largest residential mass timber structure; the commitments for a certain number of lots and acres in Saskatchewan and Alberta and expectation that the latter will contribute to earnings; Dream’s and the Dream group platform’s development pipeline, including square footage of GLA in retail and commercial properties, and number of condominium and purpose-built rental units; the expectation that recurring income generation will increase as urban development properties are completed and held for the long term; the expected growth of our asset management platform; and our overall financial performance, profitability and liquidity for future periods and 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 Dream’s control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These assumptions include, but are not limited to: the nature of development lands held and the development potential of such lands, interest rates and inflation remaining in line with management expectations, our ability to bring new developments to market, anticipated positive general economic and business conditions, including low unemployment and interest rates, positive net migration, oil and gas commodity prices, our business strategy, including geographic focus, anticipated sales volumes, performance of our underlying business segments and conditions in the Western Canada land and housing markets. Risks and uncertainties include, but are not limited to, general and local economic and business conditions, the impact of the COVID-19 pandemic on the Company and uncertainties surrounding the COVID-19 pandemic, including government measures to contain the COVID-19 pandemic employment levels, risks associated with unexpected or ongoing geopolitical events, including disputes between nations, terrorism or other acts of violence, international sanctions and the disruption of movement of goods and services across jurisdictions, inflation or stagflation, regulatory risks, mortgage and interest rates and regulations, risks related to a potential economic slowdown in certain of the jurisdictions in which we operate and the effect inflation and any such economic slowdown may have on market conditions and lease rates, environmental risks, consumer confidence, seasonality, adverse weather conditions, reliance on key clients and personnel and competition. All forward-looking information in this press release speaks as of May 9, 2023. Dream 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 filings with securities regulators filed on SEDAR (www.sedar.com).

Endnotes:

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