Dream Impact Trust Reports Third 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 and nine months ended September 30, 2023 ("third quarter").

"We are pleased with the progress on our developments this quarter with leasing commencing for two purpose built rental properties with another property, Common in Ottawa, starting leasing in the fourth quarter," said Michael Cooper, Portfolio Manager. "We are creating value with the completion of these rental properties and our pipeline of completions continues to move well. The last 90 days have been very difficult generally in the economy and MPCT has been very hard hit in the stock market. We are disappointed in our unit price and are reviewing all of our assets to identify methods to demonstrate the value of our business and reviewing our capital allocation strategy.”

In the third quarter, the Trust achieved a number of important milestones across its residential development assets.

In downtown Toronto, first residents were welcomed at Maple House in Canary Landing (previously West Don Lands Block 8). Maple House is comprised of 770 multi-family units of which one-third are dedicated as affordable, with nearly 40,000 square feet ("sf") of amenity space, including 17,000 sf of outdoor terraces, co-working lounges, and sustainable features incorporated throughout the development. This was a significant achievement for the Trust as construction for the project commenced in 2019 and was the first of the Trust’s developments financed through CMHC’s Rental Construction Financing Initiative. As of November 3, 2023, 30% of Maple House was leased. Given the size of Maple House and timing of construction completion for all three towers, we anticipate transferring the asset to our recurring income segment in the fourth quarter of 2023, generating meaningful income for the Trust over the next 18-month period as the asset stabilizes. The Trust has a 25% interest in Canary Landing.

In the period, leasing and first tenant occupancies occurred at Aalto II, a 148-unit purpose-built rental building located in Gatineau. This is the Trust’s second rental building within the net-zero Zibi community along the Ottawa River. As of November 3, 2023, 26% of the building was leased. Construction is progressing well on the next rental building, Common at Zibi located in Ottawa, which will commence leasing later this year. Common at Zibi is a 25-storey, 207-unit rental building that will offer a mix of unit typologies including traditional bedroom suites as well as co-living apartments.

Our pipeline of developments are progressing through municipal zoning, pre-development and construction. Once stabilized, we expect Maple House, Aalto II and Common at Zibi will add $200 million (at share) to the Trust's recurring income segment assets. With the GST exemption legislation tabled in Parliament in September, the Trust is now better positioned to commence construction on 3,000 units from its pipeline now through 2025, accelerating the development of these assets while simultaneously contributing to much needed purpose-built rental supply.

Selected financial and operating metrics for the three and nine months ended September 30, 2023 are summarized below:

In the third quarter, the Trust reported a net loss of $12.4 million relative to net income of $0.3 million in the comparative period. The change in earnings was primarily driven by fair value losses of $10.1 million on the Trust's commercial properties and higher interest expense due to financing activity, partially offset by the Trust’s income tax recovery position in the period. Refer to the segmented discussion below for details on fair value changes in the period. Similarly, for the nine months ended September 30, 2023, the Trust reported a net loss of $24.4 million relative to net income of $1.3 million in the comparative period due to the net impact of fair value adjustments and higher interest expense, partially offset by general and administrative ("G&A") expense savings.

At September 30, 2023, the Trust had total liquidity(1) of $28.6 million, comprised of cash-on-hand and funds available under the Trust’s credit facility. As of period-end, the Trust’s debt-to-asset value(1) was 37.0%, an increase compared to 36.1% at June 30, 2023, and the Trust’s debt-to-total asset value, inclusive of project-level debt and market value adjustments and assets within our development segment, including equity accounted investments(1), was 65.5%, compared to 64.0% as at June 30, 2023. The change is primarily due to fair value adjustments in the quarter, as well as movement in the Trust's debt balance.

In the nine months ended September 30, 2023, the Trust has fixed over $210.8 million of variable debt (at share) to reduce interest rate uncertainty amidst the current environment. As of September 30, 2023, 67% of the Trust’s debt was subject to a fixed interest rate at a weighted average interest rate of 4.2%.

Recurring Income

Net operating income ("NOI") from commercial properties(1) was $2.7 million in the third quarter, down slightly from the prior year due to higher operating expenses from assets within equity accounted investments combined with lower revenues on an income property currently under renovation. For the nine months ended September 30, 2023, NOI from commercial properties was $8.2 million, an increase from the prior period due to increased revenue related to higher occupancy for Zibi Block 211.

NOI from multi-family rental assets(1)was $1.5 million in the third quarter, up from $1.3 million in the comparative period due to increased tenant occupancy, the timing of completion at Aalto Suites at Zibi and third-party acquisitions. As of September 30, 2023, the Trust’s multi-family rental assets were comprised of 1,616 units which were 95.9% occupied (September 30, 2022 – 1,592 units, which were 88.7% occupied).

In the third quarter, the Trust’s recurring income segment generated a net loss of $16.6 million compared to net income of $1.2 million in the prior year. The fluctuation was driven by fair value adjustments on the Trust's office portfolio due to increases in discount rate assumptions, as well as higher interest expense in the current period. For similar reasons, in the nine months ended September 30, 2023, the Trust's recurring income segment generated a net loss of $26.2 million compared to net income of $9.7 million in the prior year.

Development

In the third quarter, the development segment reported net income of $3.1 million, up from $2.9 million in the comparative period although the composition of earnings differed in each year. Current year results included a fair value gain on Maple House as tenant occupancies commenced in the period. Prior year results included a foreign currency gain on an investment holding with no comparable activity. 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 development segment reported net income of $1.6 million in the nine months ended September 30, 2023, up from the prior year.

In the third quarter, Phase I of Brightwater (“Brightwater I”), a 76-unit condominium building in Port Credit commenced tenant occupancies. Brightwater I is the first building to welcome residents to the waterfront community. Nearly half of the building was occupied in the period with the remaining occupancies anticipated next quarter. Sales for the building were originally launched in September 2020. There are currently 480 residential units and 114,600 sf of retail/commercial GLA currently under construction at Brightwater comprising five buildings.

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 ("MD&A") for the three and nine months ended September 30, 2023.

Other(2)

In the third quarter, the other segment generated earnings of $1.0 million relative to a loss of $3.8 million in the comparative period. Earnings in the current period were driven by a tax recovery and G&A savings related to the impact of a reduced asset management fee and deferred compensation expense driven by the Trust's share price.

Unit Buyback Activity

In the nine months ended September 30, 2023, under its normal course issuer bid (“NCIB”), the Trust repurchased 0.1 million units for total proceeds of $1.2 million. The NCIB allows the Trust to purchase up to a maximum of 1.2 million units to January 31, 2024.

As at November 6, 2023, the Trust’s asset manager, DAM, owns approximately 6.0 million units of the Trust, inclusive of 1.6 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 34.1% of the Trust as at November 6, 2023.

Conference Call

Senior management will host a conference call on Wednesday, November 8 at 10:00 am (ET). To access the call, please dial 1-800-319-4610 (toll free) or 416-915-3239. 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, total debt payable, net income (loss) per unit, NOI — commercial properties, 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 and nine months ended September 30, 2023 dated November 6, 2023 in the section titled “Specified Financial Measures and Other Disclosures”, subsection “Non-GAAP Ratios”, heading “Debt-to-asset value”, subsection “Supplementary Financial Measures and Other Measures”, headings “Net income (loss) per unit”, “Debt-to-total asset value, inclusive of project-level debt and market value adjustments and assets within our development segment, including equity accounted investments”, "total liquidity", "NOI — commercial properties", and “NOI – multi-family rental”, and subsection “Non-GAAP Measures”, heading “Total debt payable”,. which has been filed and is available on SEDAR+ under the Trust’s profile.

"Total debt payable" is defined by the Trust as the balance due at maturity for its debt instruments. Total debt payableis a non-GAAP measure and is included as part of the definition of debt-to-asset value, a non-GAAP ratio. Total debt payable is an important measure used by the Trust 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. Total debt payable is reconciled to total debt, the most directly comparable financial measure, below.

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”, "timeline", "potential", "strategy", "targets", “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 leasing activities and the expected results thereof; our review of all our assets and capital allocation strategy and the expected results thereof; the transfer of Maple House to our recurring income segment and the Trust's income generation expectations for such property; our development plans, including in respect of Maple House, Aalto II and Common at Zibi, and the expectation that these projects will add approximately $200 million (at share) to the Trust's recurring income segment assets, the impact of tax changes on the Trust position to construct 3,000 units and other expected impacts of such tax changes; the impact of the Trust's approach to using fixed interest rate debt; remaining occupancies; Brightwater's construction status including units and GLA under construction; the Trust’s NCIB program and expectations regarding future purchases under the NCIB; Dream Impact's objectives of creating 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; expectations regarding our municipal applications; stabilization timelines; the expectation that development income will fluctuate and not contribute meaningfully to earnings until development milestones and occupancy are achieved; 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; and the Trust's ability to achieve its impact and sustainability goals, and implement 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; liquidity risk; financing and risks relating to access to capital; interest rate risks; public health risks; 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; the risk that corporate activities and reviews will not have the desired impact; 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 and into 2024; 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; our expectations regarding the availability and competition for acquisitions remains consistent with the current climate.

All forward-looking information in this press release speaks as of November 6, 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.sedarplus.ca), 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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