GuruFocus -
- Cash on Hand: $23.8 million at the beginning of the quarter.
- Asset Sales: Sale of 10 Lower Spadina and 349 Carlaw for a net price of $30.1 million.
- Debt Repayment: $7 million credit facility repaid in full using sales proceeds.
- Debt Extensions: Extensions obtained for approximately $130 million of current debt.
- Net Loss: $7.6 million for the quarter, compared to $12.4 million in the same period last year.
- Same Property NOI: $1.7 million from rental assets, up from $1.4 million in the prior period.
- Commercial Assets NOI: $2.2 million, down from $2.7 million in the prior period.
- Development Segment: Nominal net loss compared to net income of $3.1 million in Q3 2023.
- Condo Occupancies: Over 250 condo occupancies achieved at Brightwater I and II and Ivy condos.
- Construction Debt Repayment: Over $100 million paid with condo closing proceeds.
- Leasing Launch: Burch House at Canary Landing with 238 rental units.
- Future Construction: Cherry House at Canary Landing with 850 multi-family units expected to start leasing in late 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dream Impact Trust (DDHRF) successfully closed the sale of two properties, generating $30.1 million, which was used to repay outstanding debt.
- The trust completed significant financing activities, obtaining extensions for approximately $130 million of current debt.
- Recurring income from rental assets increased, with same property NOI rising to $1.7 million from $1.4 million in the prior period.
- Dream Impact Trust has been able to secure favorable 10-year financing for affordable housing projects, reducing risk and ensuring reasonable returns.
- The trust is progressing well with major projects like Breton Flats and Canary Landing, which are expected to contribute significantly to future income.
- Dream Impact Trust reported a net loss of $7.6 million for the quarter, although this was an improvement from the previous year's loss.
- The trust faced a $5.2 million loss within equity accounted investments due to discount and cap rate expansion.
- NOI from commercial assets decreased to $2.2 million from $2.7 million in the prior period, impacted by asset sales and lease terminations.
- The real estate market remains uncertain, with slow housing starts and delayed condo projects due to high interest rates and construction costs.
- Office market conditions are weak, making it difficult to transact and sell office buildings or land.
A: Michael Cooper, President, Chief Responsible Officer, Non-Independent Director, explained that development charges are consequential, accounting for about 5% of development costs for rental projects. The reductions are meaningful for projects already meeting federal requirements for affordable housing financing, but not sufficient alone to make projects viable without other incentives.
Q: Is there a need for Dream Impact Trust to monetize assets to fund upcoming large projects?
A: Michael Cooper stated that while the trust owns 12.5% of Quayside and may require a bit more funding, they do not currently plan to sell assets to fund projects like 49 Ontario. They are exploring bringing in partners but believe they have enough equity in the land.
Q: What are the capital commitments for Dream Impact Trust over the next 12-24 months?
A: Meaghan Peloso, Chief Financial Officer, noted that capital commitments could range from $14 million to $18 million, primarily for land servicing costs. Michael Cooper added that they have sufficient cash on hand for 2025 and are comfortable with their capital sources and uses.
Q: How does the stabilized yield on completed residential projects compare to the average cost of debt?
A: Michael Cooper indicated that stabilized cap rates for new buildings in Toronto have moved from 3.75% to around 4.25%. With financing rates around 3.63% to 3.7%, the spread is attractive, and recent transactions suggest a positive trend in pricing.
Q: Why hasn't Dream Impact Trust purchased any units under the NCIB recently, and what are the expected IRR and cap rates for new builds?
A: Michael Cooper explained that starting projects often provides better returns, around 15% to 17%, compared to buying back stock, especially given the uncertainty in capital and values. They focus on reducing negative carry on land by initiating projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.