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TORONTO--(BUSINESS WIRE)--Feb 16, 2023--
DREAM OFFICE REAL ESTATE INVESTMENT TRUST (D.UN-TSX) or (“Dream Office REIT”, the “Trust” or “we”) today announced its financial results for the three months ended December 31, 2022 and provided a business update. Management will host a conference call to discuss the financial results on February 17, 2023 at 10:00 a.m. (ET).
OPERATIONAL HIGHLIGHTS | |||||||||
| As at | ||||||||
| December 31, |
|
| September 30, |
|
| December 31, | ||
|
| 2022 |
|
| 2022 |
|
| 2021 | |
Total properties (1) |
|
|
|
|
|
|
|
| |
Number of active properties |
| 26 |
|
| 27 |
|
| 29 | |
Number of properties under development |
| 2 |
|
| 2 |
|
| 1 | |
Gross leasable area (“GLA”) (in millions of square feet) |
| 5.1 |
|
| 5.4 |
|
| 5.5 | |
Investment properties value | $ | 2,382,883 |
| $ | 2,596,815 |
| $ | 2,569,002 | |
Toronto downtown (2) |
|
|
|
|
|
|
|
| |
Occupancy rate – including committed (period-end) (3) |
| 87.7% |
|
| 88.9% |
|
| 89.6% | |
Occupancy rate – in-place (period-end) (3) |
| 82.7% |
|
| 83.3% |
|
| 87.9% | |
Total portfolio (2) |
|
|
|
|
|
|
|
| |
Occupancy rate – including committed (period-end) (3) |
| 84.4% |
|
| 85.7% |
|
| 85.5% | |
Occupancy rate – in-place (period-end) (3) |
| 81.0% |
|
| 81.8% |
|
| 82.9% | |
Average in-place and committed net rent per square foot (period-end) | $ | 24.90 |
| $ | 23.71 |
| $ | 23.25 | |
Weighted average lease term (“WALT”) (years) |
| 5.3 |
|
| 5.3 |
|
| 5.2 | |
See footnotes at end. |
|
| Three months ended | ||||
|
| December 31, |
|
| December 31, | |
|
| 2022 |
|
| 2021 | |
Operating results |
|
|
|
|
| |
Funds from operations (“FFO”) (4) | $ | 19,310 |
| $ | 21,751 | |
Comparative properties net operating income (“NOI”) (5) |
| 26,426 |
|
| 26,399 | |
Net rental income |
| 27,342 |
|
| 26,522 | |
Net income (loss) |
| (82,607) |
|
| 26,881 | |
Per unit amounts |
|
|
|
|
| |
Diluted FFO per Unit (6) | $ | 0.37 |
| $ | 0.40 | |
Distribution rate per Unit |
| 0.25 |
|
| 0.25 | |
See footnotes at end. |
“We are pleased with the assets that make up our portfolio. There is evidence that office use is increasing monthly although the return has taken much longer than anticipated. 720 Bay is an example of the value within our portfolio which we are unlocking by creating exciting places in great locations through renovations, redevelopments and leasing to restaurants that provide a meaningful draw,” said Michael Cooper, Chief Executive Officer of Dream Office REIT. “We believe the demand for office space is increasing and our portfolio is becoming even more desirable to tenants and their employees.”
BUSINESS UPDATE
As at December 31, 2022, the Trust had $3.1 billion of total assets, $2.4 billion of investment properties and $1.4 billion of total debt.
During Q4 2022, the Trust executed leases totalling approximately 180,000 square feet across our portfolio. In Toronto downtown, the Trust executed 175,000 square feet of leases at a weighted average initial net rent of $33.18 per square foot, or 28.7% higher than the weighted average prior net rent per square foot on the same space, with a weighted average lease term of 6.0 years. In the Other markets region, comprising our properties located in Calgary, Saskatoon, Regina, Mississauga, Scarborough, and the United States, we executed leases totalling 5,000 square feet at a weighted average net rent of $22.02 per square foot, an increase of 7.8% from the weighted average prior net rent on the same space, with a weighted average lease term of 4.7 years.
Over the course of 2022, we executed leases totalling approximately 659,000 square feet across our portfolio. In Toronto downtown, the Trust executed 575,000 square feet of leases, including a 54,000 square foot lease with a flexible workspace provider where rents comprise a share of the tenant’s net revenues. The remaining 521,000 square feet of leases were at a weighted average initial net rent of $34.64 per square foot, or 34.6% higher than the weighted average prior net rent per square foot on the same space, with a weighted average lease term of 6.2 years. In the Other markets region, we executed leases totalling 84,000 square feet at a weighted average initial net rent of $18.26 per square foot, or 3.8% higher than the weighted average prior net rents on the same space, with a weighted average lease term of 4.8 years. Subsequent to December 31, 2022 to today’s date, the Trust has secured a further 70,000 square feet of leases in Toronto downtown at a weighted average initial net rent of $42.01 per square foot, or 25.9% higher than the weighted average prior net rent per square foot on the same space, with a weighted average lease term of 8.6 years.
To date, the Trust has secured commitments for approximately 601,000 square feet, or 83%, of 2023 full-year natural lease expiries. In Toronto downtown, 29,000 square feet, or approximately 1% of the region’s gross leasable area, is currently being held intentionally vacant for retail repositioning and property improvement purposes.
We remain committed to investing in our well-located real estate portfolio in downtown Toronto to distinguish our assets and attract unique tenants. Despite supply chain and labour constraints in the construction industry, we have substantially completed the Bay Street revitalization redevelopment within the initial budget, with one façade and final work on the alley revitalization remaining to be completed.
Since 2020, our successful redevelopment program has completed two other projects on time and on budget that have significantly increased the value of the assets and delivered significant incremental income to the Trust. In Q4 2020, we completed our redevelopment of 357 Bay Street in Toronto downtown and in Q2 2021, Co-operators Place in Regina, Saskatchewan was completed. We previously took 366 Bay Street in Toronto offline to fully revitalize the asset and during Q2 2022, a negotiated termination at 67 Richmond Street West in Toronto presented an opportunity to undertake a similar project at that property.
At 67 Richmond Street West and 366 Bay Street, the development projects comprise full modernizations of the properties, including technical systems, interior lighting and elevators, along with enhanced common areas and larger floorplates. The Trust is targeting certain building and project certifications as part of the development projects. A portion of the development costs for these buildings will satisfy the terms of the Trust’s unsecured non-revolving credit facility and term credit facility with the Canada Infrastructure Bank under its Commercial Building Retrofit Initiative (the “CIB Facility”), which gives the Trust access to an attractive financing program to decarbonize the properties.
During Q4 2022, we obtained zoning approval for our development at 2200-2206 Eglinton Avenue and 1020 Birchmount Road property in Scarborough, Ontario. We are currently working through the subdivision program to plan out the prospective development. The approved zoning is for 2,705,000 square feet of gross floor area, comprising 2,505,000 square feet (or 3,208 units) of residential area, and 48,000 square feet of incremental commercial space. The existing commercial buildings at the property are expected to be maintained.
As at December 31, 2022, the Trust had approximately $171.6 million of available liquidity (7), comprising $8.0 million of cash, undrawn revolving credit facilities totalling $58.6 million and undrawn amounts on our CIB Facility of $105.0 million which offers low-cost fixed-rate financing for commercial property retrofits to achieve certain energy efficiency savings and greenhouse gas emission reductions. The Trust also had $116 million of unencumbered assets (7) and a level of debt (net total debt-to-net total assets) (9) of 44.6%. Subsequent to December 31, 2022, the Trust sold 720 Bay Street in Toronto, Ontario for $135 million, the proceeds of which were used to repay drawings on the $375 million revolving credit facility. As the property was pledged against the Trust's $375 million revolving credit facility, borrowing capacity on that facility decreased by $73 million from the $350 million of borrowing capacity as at December 31, 2022 to $278 million after the sale. As a result, the sale provided $62 million of incremental liquidity.
Rising input costs and interest rates, supply chain disruptions, uncertainty about future economic trends, the impact of geopolitical conflicts and the residual effects of the COVID-19 pandemic have made it difficult for our current and prospective tenants to plan for the future. The full impact that these disruptions will have on the market for office space in the near term and the wider economy in general is unclear and difficult to predict. However, we believe that there will continue to be demand for high-quality and well-located office space in urban markets in Canada, especially in Toronto. The Trust has ample financial resources to absorb near-term operational challenges and a program to drive value in the business through capital improvements and redevelopments to deliver best-in-class boutique office space to our tenants.
CAPITAL HIGHLIGHTS | ||||||
KEY FINANCIAL PERFORMANCE METRICS |
|
|
| As at | ||
(unaudited) |
| December 31, |
| December 31, | ||
|
| 2022 |
| 2021 | ||
Financing |
|
|
|
| ||
Weighted average face rate of interest on debt (period-end) (10) |
| 4.42% |
| 3.28% | ||
Interest coverage ratio (times) (11) |
| 2.5 |
| 3.0 | ||
Net total debt-to-normalized adjusted EBITDAFV ratio (years) (12) |
| 10.4 |
| 9.8 | ||
Level of debt (net total debt-to-net total assets) (9) |
| 44.6% |
| 41.8% | ||
Average term to maturity on debt (years) |
| 3.1 |
| 3.6 | ||
Undrawn credit facilities, available liquidity and unencumbered assets |
|
|
|
| ||
Undrawn credit facilities (in millions) | $ | 163.5 | $ | 192.4 | ||
Available liquidity (in millions) (7) |
| 171.6 |
| 201.1 | ||
Unencumbered assets (in millions) (8) |
| 115.7 |
| 178.3 | ||
Capital (period-end) |
|
|
|
| ||
Total number of REIT A and LP B units (in millions) (13) |
| 51.3 |
| 53.3 | ||
Net asset value (“NAV”) per unit (14) | $ | 31.36 | $ | 31.49 | ||
See footnotes at end. |
“We remain focused on maintaining ample liquidity and a stable balance sheet in times of market uncertainty,” said Jay Jiang, Chief Financial Officer of Dream Office REIT. “The sale of 720 Bay for $135 million closed on January 30, 2023 and has created additional flexibility to repay debt and repurchase our units on an opportunistic basis.”
ENVIRONMENTAL, SOCIAL AND GOVERNANCE UPDATE
On March 31, 2022, the Trust entered into the CIB Facility, under which the Canada Infrastructure Bank will lend the Trust up to $112.9 million for commercial property retrofits in order to achieve certain energy efficiency savings and GHG emission reductions. The non-revolving portion of the CIB Facility is available until the earlier of March 31, 2027 or the completion of all funded projects, at which point the aggregate drawings are converted to a 20-year amortizing term credit facility with an amended rate based on the GHG emission reductions achieved.
During 2022, the Trust, jointly with Dream Unlimited Corp., Dream Impact Trust and Dream Industrial REIT, unveiled its Net Zero by 2035 Action Plan. Under the plan, the Trust has indicated its commitment to achieving net zero scope 1 and 2 and select scope 3 (operational and development) GHG emissions by the year 2035. The Trust's plan to meet this goal includes transitioning to lower carbon energy sources; increasing building energy efficiency; on-premises energy generation, where possible; and the purchasing of carbon offsets.
During the second half of 2022, we drew $7.9 million on our CIB Facility. These draws represented 80% of the costs to date for capital retrofits at certain downtown Toronto properties for projects to reduce the operational carbon emissions in these buildings by an estimated 1,200 tonnes of CO 2, or 50.1%, per year on project completion.
In May 2022, the Trust was awarded a Platinum Level award by the Green Lease Leader program during the Better Buildings, Better Plants Summit by the Institute for Market Transformation and the U.S. Department of Energy’s Better Buildings Alliance, for ambitious building energy reduction and social impact goals. This is the first year that the Platinum Level award was implemented, and the Trust is one of the few applicants to achieve the highest level of recognition.
During 2022, we made our second submission to the GRESB assessment. We again achieved a five-star rating with a score of 92/100, an improvement from our prior year score of 91/100. Our higher score is attributable to policy updates to integrate ESG matters throughout the Trust and our work to align with the recommendations of the Task Force on Climate-related Financial Disclosures.
The Trust has also converted both of its revolving credit facilities to sustainability-linked credit facilities. The amended revolving credit facilities have certain performance targets relating to GHG intensity and green building certifications, with pricing for the facilities decreasing or increasing based on whether the Trust meets, or fails to meet, the targets.
CONFERENCE CALL
Management will host a conference call to discuss the results tomorrow, February 17, 2023 at 10:00 a.m. (ET). To access the conference call, please register at this link: https://register.vevent.com/register/BI1a5208fa14dc429f931477da61006868. Once registered participants will receive an email with dial-in details, including a unique PIN. A taped replay of the conference call and the webcast will be archived for 90 days and can be accessed from the events page of our website at www.dreamofficereit.ca.
OTHER INFORMATION
Information appearing in this press release is a selected summary of results. The consolidated financial statements and Management’s Discussion and Analysis (“MD&A”) of the Trust are available at www.dreamofficereit.ca and on www.sedar.com.
Dream Office REIT is an unincorporated, open-ended real estate investment trust. Dream Office REIT is a premier office landlord in downtown Toronto with over 3.5 million square feet owned and managed. We have carefully curated an investment portfolio of high-quality assets in irreplaceable locations in one of the finest office markets in the world. For more information, please visit our website at www.dreamofficereit.ca.
FOOTNOTES | ||
(1) | Excludes joint ventures that are equity accounted at the end of each period. | |
(2) | Excludes properties under development, properties held for sale and joint ventures that are equity accounted at the end of each period. | |
(3) | Occupancy figures as at December 31, 2022 exclude 720 Bay Street in Toronto, which was classified as an asset held for sale. Were 720 Bay Street included in the year-end occupancy figures, total portfolio in-place occupancy would have been 81.9% and in-place and committed occupancy would have been 85.1%. In Toronto downtown, in-place occupancy would have been 84.0% and in-place and committed occupancy would have been 88.6%. | |
(4) | FFO is a non-GAAP financial measure. The most directly comparable financial measure to FFO is net income. The tables included in the Appendices section of this press release reconcile FFO for the three months ended December 31, 2022 and December 31, 2021 to net income. For further information on this non-GAAP financial measure please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release. | |
(5) | Comparative properties NOI is a non-GAAP financial measure. The most directly comparable financial measure to comparative properties NOI is net rental income. The tables included in the Appendices section of this press release reconcile comparative properties NOI for the three months ended December 31, 2022 and December 31, 2021 to net rental income. For further information on this non-GAAP financial measure please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release. | |
(6) | Diluted FFO per unit is a non-GAAP ratio. Diluted FFO per unit is calculated as FFO (a non-GAAP financial measure) divided by weighted average number of units. For further information on this non-GAAP ratio, please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release. A description of the determination of the weighted average number of units can be found in the management’s discussion and analysis of the financial condition and results of operations of the Trust for the three months and year ended December 31, 2022, dated February 16, 2023 (“the MD&A for the fourth quarter of 2022”) in the section “Supplementary Financial Measures and Other Disclosures” under the heading “Weighted average number of units”. | |
(7) | Available liquidity is a non-GAAP financial measure. The most directly comparable financial measure to available liquidity is undrawn credit facilities. The tables included in the Appendices section of this press release reconcile available liquidity to undrawn credit facilities as at December 31, 2022 and December 31, 2021. For further information on this non-GAAP financial measure please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release. | |
(8) | Unencumbered assets is a supplementary financial measure. For further information on this supplementary financial measure, please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release. | |
(9) | Level of debt (net total debt-to-net total assets) is a non-GAAP ratio. Net total debt-to-net total assets comprises net total debt (a non-GAAP financial measure) divided by net total assets (a non-GAAP financial measure). The tables in the Appendices section reconcile net total debt and net total assets to total debt and total assets, the most directly comparable financial measures to these non-GAAP financial measures, respectively, as at December 31, 2022 and December 31, 2021. For further information on this non-GAAP ratio and these non-GAAP financial measures, please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release. | |
(10) | Weighted average face rate of interest on debt is calculated as the weighted average face rate of all interest-bearing debt balances excluding debt in joint ventures that are equity accounted. | |
(11) | Interest coverage ratio (times) is a non-GAAP ratio. Interest coverage ratio comprises trailing 12-month adjusted EBITDAFV (a non-GAAP financial measure) divided by trailing 12-month interest expense on debt. The tables in the Appendices section reconcile adjusted EBITDAFV to net income for the three months and years ended December 31, 2022 and December 31, 2021. For further information on this non-GAAP ratio and this non-GAAP financial measure, please refer to the statements under the heading “Non-GAAP Financial Measures and Ratios and Supplementary Financial Measures” in this press release. | |
(12) | Net total debt-to-normalized adjusted EBITDAFV ratio (years) is a non-GAAP ratio. Net total debt-to-normalized adjusted EBITDAFV comprises net total debt (a non-GAAP financial measure) divided by normalized adjusted EBITDAFV (a non-GAAP financial measure). Normalized adjusted EBITDAFV comprises adjusted EBITDAFV (a non-GAAP financial measure) adjusted for NOI from sold properties in the quarter. For further information on this non-GAAP ratio and these non-GAAP financial measures, please refer to the statements under the heading “Non-GAAP Financial Measures and Ratios and Supplementary Financial Measures” in this press release. | |
(13) | Total number of REIT A and LP B units includes 5.2 million LP B Units which are classified as a liability under IFRS. | |
(14) | NAV per unit is a non-GAAP ratio. NAV per unit is calculated as Total equity (including LP B Units) (a non-GAAP financial measure) divided by the total number of REIT A and LP B units outstanding as at the end of the period. Total equity (including LP B Units) is a non-GAAP measure. The most directly comparable financial measure to total equity (including LP B Units) is equity. The tables included in the Appendices section of this press release reconcile total equity (including LP B Units) to equity as at December 31, 2022 and December 31, 2021. For further information on this non-GAAP financial measure please refer to the statements under the heading “Non-GAAP Financial Measures, Ratios and Supplementary Financial Measures” in this press release. |
NON-GAAP FINANCIAL MEASURES, RATIOS AND SUPPLEMENTARY FINANCIAL MEASURES
The Trust’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, the Trust discloses and discusses certain non-GAAP financial measures, including FFO, comparative properties NOI, available liquidity, adjusted EBITDAFV, and total equity (including LP B Units or subsidiary redeemable units) and non-GAAP ratios, including diluted FFO per unit, level of debt (net total debt-to-net total assets), interest coverage ratio, net total debt-to-normalized adjusted EBITDAFV and NAV per unit, as well as other measures discussed elsewhere in this release. These non-GAAP financial measures and ratios are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. The Trust has presented such non-GAAP financial measures and non-GAAP ratios as Management believes they are relevant measures of the Trust’s underlying operating and financial performance. 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 are expressly incorporated by reference from the MD&A for the fourth quarter of 2022 and can be found under the section “Non-GAAP Financial Measures and Ratios" and respective sub-headings labelled “Funds from operations and diluted FFO per unit”, "Comparative properties NOI”, “Level of debt (net total debt-to-net total assets)”, “Net total debt-to-normalized adjusted EBITDAFV ratio (years)”, “Interest coverage ratio (times)”, “Available liquidity”, and “ NAV per Unit”. In this press release, the Trust also discloses and discusses certain supplementary financial measures, including unencumbered assets. The composition of supplementary financial measures included in this press release are expressly incorporated by reference from the MD&A for the fourth quarter of 2022 and can be found under the section “Supplementary financial measures and ratios and other disclosures”. The MD&A for the fourth quarter of 2022 is available on SEDAR at www.sedar.com under the Trust’s profile and on the Trust’s website at www.dreamofficereit.ca under the Investors section. Non-GAAP financial measures should not be considered as alternatives to net income, net rental income, cash flows generated from (utilized in) operating activities, cash and cash equivalents, total assets, non-current debt, total equity, or comparable metrics determined in accordance with IFRS as indicators of the Trust’s performance, liquidity, leverage, cash flow, and profitability. Reconciliations for FFO, comparative properties NOI, available liquidity, adjusted EBITDA, and total equity (including LP B Units) to the nearest comparable IFRS measure are contained at the end of this press release.
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 plans to improve the quality of our buildings and rental rates in the Toronto downtown region, and to reposition our assets in the Other markets region to improve occupancy and liquidity; expectations and plans for repositioning certain properties, including space held vacant for future occupancy; the effect of building improvements on tenant experience and building quality and performance; our expectations regarding future demand for office space in urban markets in Canada and the desirability of our portfolio to tenants and employees; our ability to achieve building and project certifications; our development, redevelopment and intensification plans and timelines, our commitment to invest in our downtown Toronto portfolio and retrofit our properties in the Bay Street corridor, and the effect of these plans on the value and quality of our portfolio; our future capital requirements and cost to complete development projects; the expectation that development costs for certain projects will satisfy the terms of the Canada Infrastructure Bank credit facility, allowing access to low-cost fixed-rate financing for such projects; our ability to increase building performance and achieve certain energy efficiency and greenhouse gas reduction goals, including in respect of specific properties and of retrofits made in connection with the Canada Infrastructure Bank’s credit facility; our commitment to achieve net zero scope 1 and 2 and select scope 3 (operational and development) greenhouse gas emissions by 2035; our ability to align with the recommendations of the Task Force on Climate-Related Financial Disclosures; the stability and flexibility of our balance sheet; the expected repayment of debt and repurchasing of our units on an opportunistic basis; our asset management strategies, including in respect of capital allocation and investments, and prospective leasing activity and our overall financial performance, profitability and liquidity for future periods and years. Forward-looking statements generally can be identified by words such as “outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “could”, “likely”, “plan”, “project”, “budget”, or “continue” or similar expressions suggesting future outcomes or events. 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 Office REIT’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, general and local economic and business conditions, including in respect of real estate; mortgage and interest rates and regulations; inflation; risks related to a potential recession economic slowdown in certain of the jurisdictions in which we operate and the effect inflation and any such recession economic slowdown may have on market conditions and lease rates; the uncertainties around the availability, timing and amount of future equity and debt financings; development risks including construction costs, the project timings and the availability of labour; NOI from development properties on completion; the impact of the COVID-19 pandemic on the Trust; the effect of government restrictions on leasing and building traffic; employment levels; the uncertainties around the timing and amount of future financings; leasing risks, including those associated with the ability to lease vacant space; rental rates on future leasing; and interest and currency rate fluctuations.
Our objectives and forward-looking statements are based on certain assumptions, which include but are not limited to: that the general economy remains stable; our interest costs will be relatively low and stable; that we will have the ability to refinance our debts as they mature; inflation and interest rates will not materially increase beyond current market expectations; conditions within the real estate market remain consistent; the timing and extent of current and prospective tenants’ return to the office; our future projects and plans will proceed as anticipated; that government restrictions due to COVID-19 on the ability of us and our tenants to operate their businesses at our properties will not be re-imposed in any material respects; competition for acquisitions remains consistent with the current climate; and that the capital markets continue to provide ready access to equity and/or debt to fund our future projects and plans. All forward-looking information in this press release speaks as of the date of this press release. Dream Office REIT 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 contained in Dream Office REIT’s filings with securities regulators, including its latest annual information form and MD&A. These filings are also available at Dream Office REIT’s website at www.dreamofficereit.ca.
APPENDICES
Funds from operations and diluted FFO per unit
The table below reconciles FFO to net income (the most directly comparable financial measure) for the three months ended December 31, 2022 and December 31, 2021.
|
| Three months ended | ||||
|
|
| 2022 |
|
| 2021 |
Net income (loss) for the period |
| $ | (82,607) |
| $ | 26,881 |
Add (deduct): |
|
|
|
|
|
|
Share of net loss (income) from investment in Dream Industrial REIT |
|
| 1,806 |
|
| (26,075) |
Share of FFO from investment in Dream Industrial REIT |
|
| 6,209 |
|
| 5,640 |
Depreciation and amortization |
|
| 2,904 |
|
| 2,880 |
Recovery attributable to sale of investment properties (1) |
|
| (732) |
|
| (3) |
Interest expense on subsidiary redeemable units |
|
| 1,309 |
|
| 1,309 |
Fair value adjustments to investment properties |
|
| 99,142 |
|
| 283 |
Fair value adjustments to investment properties held in joint ventures |
|
| 3 |
|
| 3 |
Fair value adjustments to financial instruments and DUIP included in G&A expenses |
|
| (9,322) |
|
| 10,288 |
Internal leasing costs |
|
| 383 |
|
| 543 |
Principal repayments on finance lease liabilities |
|
| (13) |
|
| (13) |
Deferred income taxes expense |
|
| 228 |
|
| 15 |
FFO for the period |
| $ | 19,310 |
| $ | 21,751 |
Diluted weighted average number of units (2) |
|
| 52,457 |
|
| 54,553 |
Diluted FFO per unit |
| $ | 0.37 |
| $ | 0.40 |
(1) Includes both continuing and discontinued operations. | ||||||
(2) Diluted weighted average number of units includes the weighted average of all REIT A Units, LP B Units, vested but unissued and unvested deferred trust units and associated income deferred trust units. |
Comparative properties NOI
The table below reconciles comparative properties NOI to net rental income (the most directly comparable financial measure) for the three months ended December 31, 2022 and December 31, 2021.
| Three months ended | Change in | Change in | ||||||||||||||
| December 31, |
| December 31, |
|
| Change | |||||||||||
| 2022 |
| 2021 |
|
| Amount |
| % | |||||||||
Toronto downtown | $ | 20,721 |
| $ | 20,879 |
| $ | (158) |
| (0.8) |
| (4.2) |
| 4.3 | |||
Other markets |
| 5,705 |
|
| 5,520 |
|
| 185 |
| 3.4 |
| 3.2 |
| (2.8) | |||
Comparative properties NOI |
| 26,426 |
|
| 26,399 |
|
| 27 |
| 0.1 |
| (1.6) |
| 1.8 | |||
Co-operators Place |
| 1,332 |
|
| 1,346 |
|
| (14) |
|
|
|
|
|
| |||
Properties under development |
| 38 |
|
| 160 |
|
| (122) |
|
|
|
|
|
| |||
Property management and other service fees |
| 626 |
|
| 405 |
|
| 221 |
|
|
|
|
|
| |||
Provisions net of government support |
| (296) |
|
| (856) |
|
| 560 |
|
|
|
|
|
| |||
Straight-line rent |
| 231 |
|
| 60 |
|
| 171 |
|
|
|
|
|
| |||
Amortization of lease incentives |
| (2,855) |
|
| (2,782) |
|
| (73) |
|
|
|
|
|
| |||
Lease termination fees and other |
| 381 |
|
| 113 |
|
| 268 |
|
|
|
|
|
| |||
Property held for sale |
| 1,428 |
|
| 1,433 |
|
| (5) |
|
|
|
|
|
| |||
Sold properties |
| 31 |
|
| 244 |
|
| (213) |
|
|
|
|
|
| |||
Net rental income | $ | 27,342 |
| $ | 26,522 |
| $ | 820 |
| 3.1 |
|
|
|
|
Adjusted EBITDAFV
The table below reconciles Adjusted EBITDAFV to net income (the most directly comparable financial measure) for the three months and years ended December 31, 2022 and December 31, 2021.
|
| Three months ended |
| Year ended | ||||||||
|
| December 31, |
| December 31, |
| December 31, |
| December 31, | ||||
|
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
Net income (loss) for the period |
| $ | (82,607) |
| $ | 26,881 |
| $ | 63,641 |
| $ | 154,207 |
Add (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest – debt |
|
| 15,081 |
|
| 10,926 |
|
| 51,836 |
|
| 43,372 |
Interest – subsidiary redeemable units |
|
| 1,309 |
|
| 1,309 |
|
| 5,234 |
|
| 5,234 |
Current and deferred income taxes expense (recovery), net |
|
| 193 |
|
| 15 |
|
| 672 |
|
| (203) |
Depreciation on property and equipment |
|
| 79 |
|
| 212 |
|
| 430 |
|
| 897 |
Fair value adjustments to investment properties |
|
| 99,142 |
|
| 283 |
|
| 95,171 |
|
| (47,926) |
Fair value adjustments to financial instruments |
|
| (9,104) |
|
| 10,297 |
|
| (60,834) |
|
| 29,922 |
Share of net loss (income) from investment in Dream Industrial REIT |
|
| 1,806 |
|
| (26,075) |
|
| (60,237) |
|
| (90,645) |
Distributions earned from Dream Industrial REIT |
|
| 4,656 |
|
| 4,656 |
|
| 18,622 |
|
| 18,622 |
Share of net loss from investment in joint ventures |
|
| 112 |
|
| 25 |
|
| 532 |
|
| 340 |
Non-cash items included in investment properties revenue (1) |
|
| 2,624 |
|
| 2,722 |
|
| 10,481 |
|
| 11,217 |
Provisions net of government support |
|
| 296 |
|
| 856 |
|
| 1,709 |
|
| 482 |
Lease termination fees and other |
|
| (381) |
|
| (113) |
|
| (1,233) |
|
| (836) |
Net loss (gain) on transactions and other items (2) |
|
| (349) |
|
| 540 |
|
| 1,890 |
|
| 3,732 |
Adjusted EBITDAFV for the period |
| $ | 32,857 |
| $ | 32,534 |
| $ | 127,914 |
| $ | 128,415 |
(1) Includes adjustments for straight-line rent and amortization of lease incentives. | ||||||||||||
(2) Includes both continuing and discontinued operations. |
Interest coverage ratio (times)
The table below calculates the interest coverage ratio for the trailing 12-month periods ended December 31, 2022 and December 31, 2021:
| For the trailing 12-month period ended | |||||
| December 31, |
|
| December 31, | ||
| 2022 |
|
| 2021 | ||
Trailing 12-month Adjusted EBITDAFV | $ | 127,914 |
| $ | 128,415 | |
Trailing 12-month interest expense on debt | $ | 51,836 |
| $ | 43,372 | |
Interest coverage ratio (times) |
| 2.5 |
|
| 3.0 |
Level of debt (net total debt-to-net total assets)
The table below reconciles net total debt to total debt (the most directly comparable measure) and net total assets to total assets (the most directly comparable measure) as at December 31, 2022 and December 31, 2021.
| Amounts included in condensed | |||||
| December 31, |
| December 31, | |||
|
| 2022 |
|
| 2021 | |
Non-current debt | $ | 1,106,816 |
| $ | 1,206,734 | |
Current debt |
| 265,967 |
|
| 76,539 | |
Total debt |
| 1,372,783 |
|
| 1,283,273 | |
Less: Cash on hand |
| (6,811) |
|
| (5,556) | |
Net total debt | $ | 1,365,972 |
| $ | 1,277,717 | |
Total assets |
| 3,066,892 |
|
| 3,065,560 | |
Less: Cash on hand |
| (6,811) |
|
| (5,556) | |
Net total assets | $ | 3,060,081 |
| $ | 3,060,004 | |
Net total debt-to-net total assets |
| 44.6% |
|
| 41.8% |
Available liquidity
The table below reconciles available liquidity to undrawn credit facilities (the most directly comparable financial measures) as at December 31, 2022 and December 31, 2021.
|
| As at | ||||
|
| December 31, |
| December 31, | ||
|
| 2022 |
| 2021 | ||
Cash and cash equivalents |
| 8,018 |
| 8,763 | ||
Undrawn revolving credit facilities | $ | 58,585 | $ | 192,355 | ||
Undrawn CIB Facility |
| 104,957 |
| — | ||
Available liquidity | $ | 171,560 | $ | 201,118 |
Net total debt-to-normalized adjusted EBITDAFV ratio (years)
The table below calculates the annualized net total debt-to-normalized adjusted EBITDAFV as at December 31, 2022 and December 31, 2021:
|
|
| December 31, | December 31, | ||
|
| 2022 |
| 2021 | ||
Non-current debt |
| $ | 1,106,816 | $ | 1,206,734 | |
Current debt |
|
| 265,967 |
| 76,539 | |
Total debt |
|
| 1,372,783 |
| 1,283,273 | |
Less: Cash on hand (1) |
|
| (6,811) |
| (5,556) | |
Net total debt |
| $ | 1,365,972 | $ | 1,277,717 | |
Adjusted EBITDAFV – quarterly |
|
| 32,857 |
| 32,534 | |
Less: NOI of disposed properties for the quarter |
|
| (31) |
| (4) | |
Normalized adjusted EBITDAFV – quarterly |
| $ | 32,826 | $ | 32,530 | |
Normalized adjusted EBITDAFV – annualized |
| $ | 131,304 | $ | 130,120 | |
Net total debt-to-normalized adjusted EBITDAFV ratio (years) |
|
| 10.4 |
| 9.8 | |
(1) Cash on hand represents cash on hand at period-end, excluding cash held in co-owned properties and joint ventures that are equity accounted. |
Total equity (including LP B Units)
The table below reconciles total equity (including LP B Units) to total equity for the years ended December 31, 2022 and December 31, 2021:
|
| Unitholders’ equity | ||||||||
|
| December 31, 2022 |
| December 31, 2021 | ||||||
|
| Number of Units |
|
| Amount |
| Number of Units |
|
| Amount |
Unitholders’ equity |
| 46,110,593 |
| $ | 1,842,010 |
| 48,034,754 |
| $ | 1,883,653 |
Deficit |
| — |
|
| (321,769) |
| — |
|
| (338,593) |
Accumulated other comprehensive income |
| — |
|
| 11,933 |
| — |
|
| 3,268 |
Equity per consolidated financial statements |
| 46,110,593 |
|
| 1,532,174 |
| 48,034,754 |
|
| 1,548,328 |
Add: LP B Units |
| 5,233,823 |
|
| 78,193 |
| 5,233,823 |
|
| 128,909 |
Total equity (including LP B Units) |
| 51,344,416 |
| $ | 1,610,367 |
| 53,268,577 |
| $ | 1,677,237 |
NAV per unit |
|
|
| $ | 31.36 |
|
|
| $ | 31.49 |
View source version on businesswire.com:https://www.businesswire.com/news/home/20230216005766/en/
CONTACT: For further information:Michael J. Cooper
Chairman and Chief Executive Officer
(416) 365-5145
mcooper@dream.caJay Jiang
Chief Financial Officer
(416) 365-6638
jjiang@dream.ca
KEYWORD: NORTH AMERICA CANADA
INDUSTRY KEYWORD: COMMERCIAL BUILDING & REAL ESTATE CONSTRUCTION & PROPERTY REIT
SOURCE: Dream Office Real Estate Investment Trust
Copyright Business Wire 2023.
PUB: 02/16/2023 06:39 PM/DISC: 02/16/2023 06:40 PM
http://www.businesswire.com/news/home/20230216005766/en