Dream Unlimited Corp. Reports Second Quarter Results and Increased Contribution From Its Recurring Income Business
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 and DRM.PR.A) ("Dream", "the Company" or "we") today announced its financial results for the three and six months ended June 30, 2019. Basic earnings per share ("EPS") for the three and six months ended June 30, 2019 was $0.10 and $0.27, respectively, down from $0.14 and $0.37 in the comparative periods on a standalone basis, which excludes operational income generated from and fair value adjustments attributable to Dream Hard Asset Alternatives Trust (TSX:DRA-UN.TO) ("Dream Alternatives"). At June 30, 2019, Dream's total equity on a standalone basis increased to $9.56 per share, up from $9.33 at December 31, 2018. Our recurring income business (comprised of stabilized income generating assets and asset management) has increased to 50% of book equity per share from 48% at the beginning of the year. Our urban development segment, which includes our Toronto and Ottawa development assets, has increased to 10% from 8% and our Western Canada community development segment declined to 40% from 45%, a trend that is expected to continue.
Michael Cooper, President & Chief Responsible Officer of Dream commented: "We are pleased to see that our strategic efforts over the last few years to increase our investments in high-quality recurring assets through internal growth, development and acquisition are coming to fruition, having increased to 50% of our book equity for the first time. We believe that our percentage of recurring income assets is even higher, as asset management and Arapahoe Basin are carried at cost within our financials. We have had a very successful quarter as many initiatives that we have started on are progressing. We entered into a new pass partnership at Arapahoe Basin, agreed to a 155,000 square foot lease with the federal government to build our first new commercial building in our Zibi project in Ottawa, received key approvals for Brightwater, our Port Credit development and received approval for the financing for our 750 unit purpose-built rental building in downtown Toronto, all of which contribute to growing the value of our business."
A summary of our results for the three and six months ended June 30, 2019 is included in the table below.
For the three months ended June 30, For the six months ended June 30, (in thousands of Canadian dollars, except per share amounts) 2019 2018 2019 2018 Consolidated Dream (including Dream Alternatives): Revenue $ 76,044 $ 61,600 $ 133,001 $ 121,421 Net margin $ 19,442 $ 13,221 $ 38,410 $ 29,010 Net margin % 25.6% 21.5% 28.9% 23.9% Earnings (loss) before income taxes $ (11,567) $ (31,334) $ (48,158) $ 120,063 Earnings (loss) for the period $ (11,089) $ (26,906) $ (44,613) $ 120,152 Basic earnings (loss) per share $ (0.11) $ (0.25) $ (0.42) $ 1.10 Diluted earnings (loss) per share $ (0.11) $ (0.25) $ (0.42) $ 1.08 Dream Standalone: Revenue $ 63,131 $ 48,795 $ 108,981 $ 98,430 Net margin $ 11,444 $ 6,206 $ 25,648 $ 17,533 Net margin % 18.1% 12.7% 23.5% 17.8% Earnings before income taxes $ 14,641 $ 20,341 $ 38,331 $ 49,826 Earnings for the period $ 10,607 $ 15,509 $ 29,073 $ 39,537 EBITDA $ 24,318 $ 28,671 $ 57,218 $ 65,798 Basic and diluted earnings per share $ 0.10 $ 0.14 $ 0.27 $ 0.37 Dream Standalone: June 30, 2019 December 31, 2018 Total assets $ 2,163,403 $ 2,056,028 Total liabilities $ 1,096,673 $ 1,010,776 Total equity (excluding non-controlling interest) $ 1,015,639 $ 1,001,317 Total equity per share $ 9.56 $ 9.33
(1) Total equity (excluding non-controlling interests) and total equity per share excludes $51.1 million of non-controlling interest as at June 30, 2019 ($43.9 million as at December 31, 2018) and includes the Company's investment in Dream Alternatives as at June 30, 2019 and December 31, 2018 of $91.3 million and $72.7 million, respectively. For further details refer to pages 25 and 26 in our management's discussion and analysis ("MD&A") for the three and six months ended June 30, 2019. (2) Net margin % (see the "Non-IFRS Measures" section of our MD&A for the three and six months ended June 30, 2019) represents net margin as a percentage of revenue. (3) EBITDA (see the "Non-IFRS Measures" section of our MD&A for the three and six months ended June 30, 2019) is calculated as earnings before interest, taxes, depreciation and amortization. (4) Basic EPS is computed by dividing Dream's earnings attributable to owners of the parent by the weighted average number of Class A Subordinate Voting Shares and Class B common shares outstanding during the period. Refer to Management's discussion below on consolidated results for the three and six months ended June 30, 2019. (5) Dream standalone represents the standalone results of Dream, excluding the impact of Dream Alternatives' consolidated results. Refer to the "Non-IFRS Measures" section of our MD&A for further details. Total assets as at June 30, 2019 and December 31, 2018 includes approximately $91.3 million and $72.7 million, respectively, relating to the Company's investment in Dream Alternatives.
In the three months ended June 30, 2019, on a consolidated basis the Company recognized a loss of $11.1 million, compared to a loss of $26.9 million in the comparative prior year period. Dream Alternatives trust units held by other unitholders are treated as a liability on the condensed consolidated statement of financial position of Dream and are fair valued each period under IFRS, generating losses (gains) as Dream Alternatives' unit price increases (decreases). Included in the current period were $30.1 million of fair value losses related to Dream Alternatives (as a result of the unit price increasing from $7.17 at March 31, 2019 to $7.68 at June 30, 2019), compared to $41.8 million of fair value losses in the comparative period (as a result of the unit price increasing from $6.21 at March 31, 2018 to $6.89 at June 30, 2018).Outside of these fair value changes, the variance was primarily due to higher margin generated from our operating segments and increased equity earnings from Dream Office REIT (TSX:D-UN.TO), which were partially offset by a prior year gain on the disposition of an asset held for sale.
In the six months ended June 30, 2019, on a consolidated basis, the Company recognized a loss before income taxes of $48.2 million, compared to earnings before taxes of $120.1 million in the prior year, due to adjustments relating to the Dream Alternatives trust units, partially offset by higher margin generated from our operating segments and increased equity earnings from Dream Office REIT. Results in the comparative period included a one-time net gain on acquisition of Dream Alternatives of $130.0 million. Fair value losses on the Dream Alternatives trust units were $85.9 million in the current period (due to the unit price increasing from $6.24 at December 31, 2018 to $7.68 at June 30, 2019), compared to losses of $34.4 million in the prior year (due to the unit price increasing from $6.33 at January 1, 2018 to $6.89 at June 30, 2018).
In the three months ended June 30, 2019, earnings before income taxes on a Dream standalone basis, decreased to $14.6 million from $20.3 million, due to lower fair value adjustments on financial instruments of $5.7 million and a gain on the disposition of an asset held for sale of $9.4 million included in prior period results. These were partially offset by $3.8 million of increased earnings from our investment in Dream Office REIT and $5.2 million higher net margin generated from our operating segments.
In the six months ended June 30, 2019, earnings before income taxes, on a Dream standalone basis, decreased to $38.3 million from $49.8 million in the prior year, due to lower fair value adjustments on financial instruments of $2.1 million, the aforementioned gain on disposition of an asset held for sale in the prior period of $9.4 million, and higher interest expense of $2.5 million, in addition to a one-time net gain of $12.6 million on the acquisition of Dream Alternatives in the comparative prior period. These were partially offset by $7.9 million of increased earnings from our equity accounted investments (including Dream Office REIT) and $8.1 million higher net margin generated from our operating segments.
Key Results Highlights: Stabilized Income Generating Assets & New Pass Partnership at Arapahoe Basin
Asset Management and Investments in Dream Publicly Listed Funds
Effective April 1, 2019, the Company will receive Dream Alternatives trust units in lieu of cash for management fees receivable until December 31, 2020, calculated based on the Trust's December 31, 2018 net asset value ("NAV") per unit of $8.74 for the purposes of determining the number of trust units to be received. For full details please refer to press release.
Key Results Highlights: Urban Development - Toronto & Ottawa
Key Results Highlights: Western Canada Development
Strong Liquidity Position, NCIB Activity & Return to Shareholders
Select financial operating metrics for Dream's segments for the three and six months ended June 30, 2019 are summarized in the table below.
For the three months ended June 30, 2019 (in thousands of dollars) Asset Stabilized income Urban Western Canada community Corporate Total Dream management generating assets development development and other standalone Revenue $ 10,052 $ 19,268 $ 17,728 $ 16,083 $ -- $ 63,131 % of total revenue 15.9% 30.5% 28.1% 25.5% --% 100.0% Net margin $ 7,216 $ 5,348 $ 500 $ (1,620) $ --% $ 11,444 Net margin (%) 71.8% 27.8% 2.8% n/a n/a 18.1% % of net margin 63.1% 46.7% 4.4% (14.2%) --% 100.0% EBITDA $ 18,020 $ 9,515 $ 943 $ (426) $ (3,734) $ 24,318 Adjusted EBITDA $ 14,674 $ 9,884 $ 931 $ (923) $ (3,682) $ 20,884 For the six months ended June 30, 2019 Revenue $ 22,987 $ 43,406 $ 18,997 $ 23,591 $ -- $ 108,981 % of total revenue 21.1% 39.8% 17.4% 21.6% --% 100.0% Net margin $ 15,958 $ 15,126 $ (1,159) $ (4,277) $ --% $ 25,648 Net margin (%) 69.4% 34.8% n/a n/a n/a 23.5% % of net margin 62.2% 59.0% (4.5%) (16.7%) --% 100.0% EBITDA $ 46,182 $ 18,292 $ 69 $ (21) $ (7,304) $ 57,218 Adjusted EBITDA $ 31,447 $ 21,118 $ 95 $ (3,037) $ (7,312) $ 42,311
As at June 30, 2019 Segment assets $ 602,643 $ 345,533 $ 420,871 $ 776,460 $ 17,896 $ 2,163,403 Segment liabilities $ 119,366 $ 127,349 $ 233,303 $ 210,737 $ 405,918 $ 1,096,673 Segment shareholders' equity $ 483,277 $ 218,184 $ 136,477 $ 565,723 $ (388,022 ) $ 1,015,639 Book equity per share $ 4.55 $ 2.05 $ 1.28 $ 5.33 $ (3.65 ) $ 9.56 % of book equity per share 34.4% 15.5% 9.8% 40.3% n/a 100.0%
For the three months ended June 30, 2018 (in thousands of dollars) Asset Stabilized income Urban Western Canada community Corporate Total Dream standalone management generating assets development development and other Revenue $ 9,313 $ 17,130 $ 691 $ 21,661 $ -- $ 48,795 % of total revenue 19.1% 35.1% 1.4% 44.4% --% 100.0% Net margin $ 7,021 $ 4,446 $ (2,216) $ (3,045) $ -- $ 6,206 Net margin (%) 75.4% 26.0% n/a n/a n/a 12.7% % of net margin 113.1% 71.6% (35.7%) (49.0%) --% 100.0% EBITDA $ 19,319 $ 8,178 $ 7,957 $ (2,302) $ (4,481) $ 28,671 Adjusted EBITDA $ 13,511 $ 8,464 $ 8,979 $ (3,155) $ (4,477) $ 23,322 For the six months ended June 30, 2018 Revenue $ 19,363 $ 39,800 $ 3,071 $ 36,196 $ -- $ 98,430 % of total revenue 19.7% 40.4% 3.1% 36.8% --% 100% Net margin $ 14,137 $ 13,277 $ (3,149) $ (6,732) $ -- $ 17,533 Net margin (%) 73.0% 33.4% n/a n/a n/a 17.8% % of net margin 80.6% 75.7% (18.0%) (38.3%) --% 100% EBITDA $ 54,359 $ 17,402 $ 7,398 $ (5,300) $ (8,061) $ 65,798 Adjusted EBITDA $ 25,845 $ 17,439 $ 8,718 $ (6,235) $ (7,488) $ 38,279 As at December 31, 2018 Segment assets $ 549,910 $ 350,631 $ 347,815 $ 787,018 $ 20,654 $ 2,056,028 Segment liabilities $ 113,974 $ 131,505 $ 193,082 $ 173,271 $ 398,944 $ 1,010,776 Segment shareholders' equity $ 435,936 $ 219,126 $ 110,738 $ 613,747 $ (378,290) $ 1,001,317 Book equity per share $ 4.06 $ 2.04 $ 1.03 $ 5.72 $ (3.52) $ 9.33 % of book equity per share 31.6% 15.9% 8.0% 44.5% n/a 100.0%
This metric is calculated on a Dream standalone basis. Refer to the "Non-IFRS Measures" section of our MD&A for further details. Net margin (%), EBITDA, adjusted EBITDA and book equity per share are non-IFRS measures. Refer to the "Non-IFRS Measures" section of our MD&A for further details, including a reconciliation of EBITDA and adjusted EBITDA to net segment earnings. This metric is calculated on a Dream standalone basis excluding Corporate and other, as this segment does not include amounts relevant to our operational segments.
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.
Senior management will host a conference call on August 14, 2019 at 10:00 am (ET). To access the call, please dial 1-888-465-5079 in Canada and the United States or 416-216-4169 elsewhere and use passcode 7124 889#. To access the conference call via webcast, please go to Dream's website at www.dream.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 Unlimited Corp.
Dream is one of Canada's leading real estate companies with over $16 billion of assets under management in North America and Europe. The scope of the business includes asset management and management services for four Toronto Stock Exchange ("TSX") listed trusts and institutional partnerships, condominium and mixed-use development, investments in and management of a renewable power portfolio, commercial property ownership, residential land development, and housing and multi-family development. Dream has an established track record for being innovative and for its ability to source, structure and execute on compelling investment opportunities. For further information, please contact:
Dream Unlimited Corp.
Pauline Alimchandani Kim Lefever EVP & Chief Financial Officer Director, Investor Relations (416) 365-5992 (416) 365-6339 email@example.com firstname.lastname@example.org
Dream's 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, Dream discloses and discusses certain non-IFRS financial measures, including: Dream standalone, net margin %, assets under management, fee-earning assets under management, net operating income, debt to total assets ratio, EBITDA, adjusted EBTIDA, book equity per share, and Dream Standalone basic earnings per share, as well as other measures discussed elsewhere in this release. These non-IFRS measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other issuers. Dream has presented such non-IFRS measures as Management believes they are relevant measures of our underlying operating performance and debt management. Non-IFRS measures should not be considered as alternatives to comparable metrics determined in accordance with IFRS as indicators of Dream's performance, liquidity, cash flow and profitability. For a full description of these measures and, where applicable, a reconciliation to the most directly comparable measure calculated in accordance with IFRS, please refer to the "Non-IFRS Measures" section in Dream's MD&A for the three and six months ended June 30, 2019.
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, 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; as well as specific statements in respect of our development plans and proposals for future retail and condominium and mixed-use projects and future stages of current retail and condominium and mixed-use projects, including projected sizes, density, uses and tenants; development timelines and anticipated returns or yields on current and future retail and condominium and mixed-use projects, including timing of construction, marketing, leasing, completion, occupancies and closings; anticipated current and future unit sales and occupancies of our condominium and mixed-use projects; our pipeline of retail, commercial, condominium and mixed-use developments projects; development plans and timelines of current and future land and housing projects, including projected sizes, density and uses; anticipated current and future lot and acre sales and housing unit occupancies in our land and housing divisions and the timing of margin contributions from such sales; projected population and density in our housing developments; our ability to increase development on our owned lands and the anticipated returns therefrom; our anticipated ownership levels of proposed investments, including investments in units of Dream Office REIT and Dream Alternatives and other Dream Publicly Listed Funds; the development plans and proposals for Dream Alternatives' current and future projects, including projected sizes, timelines, density, uses and tenants; anticipated levels of development, asset management and other management fees in future periods; expected number of skiers, skier yields, pass product sales and earnings at Arapahoe Basin; 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, 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, employment levels, regulatory risks, mortgage rates and regulations, 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 August 13, 2019. 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).