Article content

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.

Article content

TORONTO — 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 and nine months ended September 30, 2021 and provided a business update related to the COVID-19 pandemic.

OPERATIONAL HIGHLIGHTS

“The COVID-19 pandemic has lasted much longer than expected which has affected our building occupancy over the past 20 months, but we are collecting rents, renewing tenants and doing some new lease deals. Increased traffic in downtown Toronto and at our buildings suggests that we are approaching the end of the pandemic and we expect to see this trend continue. We have used our time during COVID to improve our portfolio and believe our tenants will be very pleased when they come to our buildings,” said Michael J. Cooper, Chief Executive Officer of Dream Office REIT. “We have also made progress on our development plans which continue to add value to the business. During the pandemic our core investment property values have held steady and we have recognized development property gains. Our net asset value has continued to increase and our investment in Dream Industrial REIT, which has grown to 35% of our market cap, is a meaningful contributor to our earnings metrics. While there continues to be uncertainty in the office sector, we are confident that we will benefit from the portfolio of office buildings we have created, our development sites and our investment in Dream Industrial REIT.”

Article content

Article content

Article content

Article content

BUSINESS UPDATE

As at September 30, 2021, the Trust had approximately $118 million of available liquidity ⁽³⁾ , $393 million of unencumbered assets ⁽³⁾ and a level of debt (net total debt-to-net total assets) ⁽³⁾ of 40.7%.

Since March 2020, the COVID-19 pandemic has continued to cause significant economic and social disruptions to Canadian residents and businesses. Until June 11, 2021, the province of Ontario was under an emergency shutdown under the Emergency Management and Civil Protection Act . We are currently undergoing various stages of reopening, but we still do not know the duration and extent of the pandemic, whether there will be additional shutdowns, the effect of variants, or the impact these factors may have on the financial performance of the Trust for the next two years and beyond. Since we announced the launch of our strategic plan in 2016, we have transformed Dream Office REIT into a safer, higher quality company. As a result of these initiatives, we believe Dream Office REIT is currently well positioned, with a portfolio of exceptional real estate, primarily located in downtown Toronto, combined with a strong balance sheet and ample liquidity.

Article content

Despite COVID-19’s disruption to the leasing market and our tenants’ abilities to make decisions for their businesses, the Trust is continuing to manage an active pipeline of renewals and new leases with existing and prospective tenants. During Q3 2021 touring activity returned to pre-COVID levels. Towards the end of the quarter we also began to see increased building traffic and parking lot utilization indicating tenants are returning to the office. We believe that these are favourable indicators for future leasing activity.

During the third quarter of 2021, the Trust executed leases totalling approximately 145,000 square feet across our portfolio. In Toronto downtown 106,000 square feet of leases were executed at a weighted average net rent of $33.93 per square foot, or 34.1% higher than the weighted average prior net rent per square foot on the same space, with a weighted average lease term of 9.3 years. In Other markets, we executed leases totalling 39,000 square feet at a weighted average net rent of $12.97 per square foot, a decrease of 19.1% from the weighted average prior net rent on the same space, with a weighted average lease term of 2.8 years. Since the beginning of the year, we have executed leases in Toronto downtown totalling approximately 184,000 square feet at a weighted average net rent of approximately $33.48 per square foot, 27.3% higher than the weighted average prior net rent on the same space, with a weighted average lease term of 7.0 years. In the Other markets region, the Trust has secured leases for approximately 197,000 square feet at a weighted average net rent of $14.14 per square foot, a decrease of 13.5% relative to prior rents primarily due to new deals rolling down to market rates in western Canada, with a weighted average lease term of 4.9 years. To date, the Trust has secured commitments for approximately 912,000 square feet, or 100%, of 2021 full-year portfolio lease expiries. In addition, the Trust has conditional deals in Toronto downtown for approximately 53,000 square feet, or 1.5% of the region’s gross leasable area, of currently vacant space.

Approximately 2.0% of the Trust’s total portfolio is currently sublet, a decrease of 0.2% from the prior quarter, with a weighted average in-place net rent of just over $25 per square foot. This is the lowest level of sublet space in our portfolio since the beginning of the COVID-19 pandemic.

Article content

The following table summarizes selected operational statistics with respect to the trailing four quarters and the month of October 2021 as at November 4, 2021, all presented as a percentage of recurring contractual gross rent:

Our tenant relations team continues to engage with and support our tenants through the pandemic so that they can recover quickly with an economically viable business for the long term. We have been educating tenants on government-led relief initiatives and assisting tenants with back-to-work planning for their employees. In certain instances, the Trust has granted deferrals and rent repayment arrangements to select tenants on a case-by-case basis.

For the three months ended September 30, 2021, the Trust recorded COVID-related provisions totalling approximately $0.4 million which are included in the line item “Government assistance, net of COVID-related provisions” within net rental income. These provision balances represent an estimate of potential credit losses on our trade receivables for all uncollected rent during the three months ended September 30, 2021. Partially offsetting the impact of provisions included in “Government assistance, net of COVID-related provisions” is the impact of government programs totalling $0.2 million that the Trust qualified for during the quarter.

CAPITAL HIGHLIGHTS

Article content

“Our balance sheet remains solid with ample liquidity to execute on our investment and capital program,” said Jay Jiang, Chief Financial Officer of Dream Office REIT . “We had a successful year in financing by securing over $500 million of debt and financing commitments at a weighted average interest rate of 2.28% including the extension and upsizing of our revolving credit facility post quarter. We will have very minimal refinancing risk in 2022 with only $60 million of mortgage expiries.”

CONFERENCE CALL

Dream Office REIT holds semi-annual conference calls following the release of second and fourth quarter results.

OTHER INFORMATION

Information appearing in this press release is a selected summary of results. The condensed 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 approximately 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. We intend to enhance these properties to elevate their desirability to tenants and investors and improve the overall community experience. For more information, please visit our website at www.dreamofficereit.ca .

Article content

NON-GAAP 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 non-GAAP financial measures, including FFO, comparative properties NOI, diluted FFO per unit, available liquidity, level of debt (net total debt-to-net total assets), unencumbered assets, interest coverage ratio, net total debt-to-adjusted EBITDAFV and NAV per unit, as well as other measures discussed elsewhere in this release. These non-GAAP measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other income trusts. The Trust has presented such non-GAAP measures as Management believes they are relevant measures of the Trust’s underlying operating performance and debt management. Non-GAAP 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. 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-GAAP Measures” section in Dream Office REIT’s MD&A for the three and nine months ended September 30, 2021.

FORWARD-LOOKING INFORMATION

This press release may contain forward-looking information within the meaning of applicable securities legislation, including statements regarding our objectives and strategies to achieve those objectives, our expectations regarding parking revenues and comparative properties NOI after the COVID-19 pandemic, the future structure of our Alate investment, our ability to increase the desirability of our buildings, our asset management strategies and prospective leasing activity. 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; employment levels; mortgage and interest rates and regulations; the uncertainties around the timing and amount of future financings; uncertainties surrounding the COVID-19 pandemic; the effect of government restrictions on leasing and building traffic; the ability of the Trust and its tenants to access government programs; the financial condition of tenants; the timing of current and prospective tenants ’ return to the office and its effect on leasing activity, building traffic and comparative properties NOI, our ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; rental rates on future leasing; future parking revenues and interest and currency rate fluctuations. Our objectives and forward-looking statements are based on certain assumptions, including that the general economy remains stable, interest rates remain stable, conditions within the real estate market remain consistent, competition for acquisitions remains consistent with the current climate and that the capital markets continue to provide ready access to equity and/or debt. 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211104006374/en/

Contacts

Michael J. Cooper
Chairman and Chief Executive Officer
(416) 365-5145
mcooper@dream.ca

Jay Jiang
Chief Financial Officer
(416) 365-6638
jjiang@dream.ca

#distro