TORONTO, ONTARIO–(Marketwired – Feb. 23, 2015) –
This news 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 Hard Asset Alternatives Trust (TSX:DRA.UN) (the “Trust”) today announced its financial results for the three months and six months ended December 31, 2014. Adjusted funds available for distribution (AFAD) per Unit for the three and six months period ended December 31, 2014 were $0.09 and $0.18, respectively.
“We are very pleased with the Trust’s results since its inception in July 2014,” said Michael Cooper, Portfolio Manager. “We are ahead of our expectations in repatriating capital from the original loan portfolio and have committed to approximately $125 million of equity in new investments at more attractive risk-adjusted returns. We are pleased with the progress we have made in generating AFAD in the six months ended December 31, 2014 to a level that almost covers distributions, notwithstanding the cash on hand.”
Selected financial and operating metrics for the three and six months period ended December 31, 2014 are summarized below:
(All dollar amounts are presented in thousands of Canadian dollars, except Unit and per Unit amounts unless otherwise stated)
| For the periods ended December 31, 2014 | Three months ended | Six months ended (1) |
| Results of operations | ||
| Total income | $ 14,163 | $ 36,146 |
| Adjusted funds available for distribution (“AFAD”)(2)(3) | 6,290 | 12,870 |
| Annualized AFAD return on net assets(3)(4) | 3.5% | 3.6% |
| Trust Unit information | ||
| Distributions declared per Unit | 0.10 | 0.19 |
| AFAD per Unit (basic and fully diluted)(3) | 0.09 | 0.18 |
| As at | December 31, 2014 (1) | September 30, 2014 (1) |
| Financial position | ||
| Cash | $ 80,157 | $ 95,423 |
| Net assets attributable to Unitholders of the Trust (5) | 712,207 | 721,930 |
| Total assets | 997,260 | 1,002,871 |
| Debt-to-gross book value(6) | 25.15% | 25.14% |
| Units outstanding – end of period | 73,666,978 | 73,632,332 |
| Market capitalization(7) | 499,462 | 538,989 |
| As at | December 31, 2014 (1) | September 30, 2014 (1) |
| Income properties | $ 3.40 | $ 3.34 |
| Lending portfolio | 2.91 | 2.94 |
| Development and Investment holdings | 2.29 | 2.37 |
| Renewable power | 0.27 | 0.15 |
| Cash and other Trust consolidated working capital | 0.88 | 1.10 |
| Adjusted net asset value per Unit (8) | $ 9.75 | $ 9.90 |
During the six months ended December 31, 2014, Michael Cooper and Dream Asset Management Corporation (“DAM” or “Asset Manager”) purchased an aggregate 871,500 Units in the Trust.
2014 HIGHLIGHTS:
Strong Lending Portfolio Performance:
We are pleased with the performance of the mortgage portfolio. To date, approximately one-half of the original portfolio has been repaid, including loans which were previously considered to be of higher risk. The proceeds from these repayments have been redeployed into attractive lending opportunities that provide for more favourable risk-adjusted returns. To date, the Trust has committed to funding eight mortgages for aggregate proceeds of $77 million at a weighted average face rate of 8.2% and a weighted average term of 1.7 years. Of this amount, $55 million has been funded as at December 31, 2014, with most of the remaining $22 million expected to be funded through the first half of 2015. There are $133 million of expected repayments in 2015, inclusive of the original portfolio and new loan maturities.
At December 31, 2014, the weighted average term of new mortgage investments funded was 1.6 years with a weighted average effective interest rate of 8.8%, which compares to the weighted average term to maturity of the entire portfolio of 0.9 years and weighted average effective interest rate on the portfolio of 8.4%.
Comparable Properties NOI up 2.5% over Q3 2014:
The Trust’s portfolio of real estate properties co-owned with Dream Office REIT (TSX:D.UN) delivered solid results, ending the year with an in-place occupancy rate of 90.1%, up 150 bps from the third quarter of 2014. The in-place and committed occupancy was 91.2%, which compares favourably with the office market industry average of 86.6%(9) applicable to the Trust’s portfolio. For the three months ended December 31, 2014, comparable properties NOI and AFAD increased by 2.5% and 7.3%, respectively, largely due to an increase in the weighted average in-place occupancy and higher rental rates on lease renewals.
During the quarter, the portfolio recorded 61,682 sf of positive absorption (34,695 sf at the Trust’s share), consisting of 209,418 sf of renewals and new leases (116,058 sf at the Trust’s share) and 147,736 of expiries and terminations (81,363 sf at the Trust’s share). In addition to the leasing activity for the quarter, a future renewal was completed on approximately 241,000 sf of leased space (144,000 sf at the Trust’s share) which expires in 2018 for an average term of nine years, at a rate above the expiring rent.
Increasing Renewable Power Equity Allocation:
Renewable power continues to be a key focus of the Trust. We remain optimistic that we will be able to source and execute new renewable power investments which provide contractual, long term, high returns. To date, the Trust has committed $43.0 million of equity in renewable projects, of which $19.2 million has been funded as at December 31, 2014. Committed projects include an operational solar rooftop power portfolio, a ground mount solar power portfolio, and a wind power portfolio that is currently under development. All projects within the solar and wind power portfolios have 20-year regulated utility power purchase agreements, allowing the projects to sell the generated electricity at a fixed contract rate; providing stable and predictable cash flows to the Trust. All committed projects are expected to reach commercial operation within 2015, and generate an average yield on equity of approximately 12%.
Development and Investment Holdings Update:
The Trust’s development and investment holdings continue to progress in line with our expectations. Leases in place on the retail development projects have increased from 35.6% in Q3 2014 to 39.8% at December 31, 2014. Empire Lakeshore is 75.5% pre-sold as at December 31, 2014, up from 68.6% in September 30, 2014 and Empire’s low rise development in Brampton is 50.0% pre sold as at December 31, 2014, up from 46.5% in September 30, 2014.
The Trust recognized a net fair value loss of $5.3 million during the three month period ended December 31, 2014, attributable mainly to higher than expected construction costs, changes in expected development timelines and offset by fair value increases on the residential developments from being three months closer to completion.
Appointment of Chief Financial Officer (CFO):
The Trust announced the appointment of Pauline Alimchandani as CFO. Ms. Alimchandani is currently the CFO of DAM and Dream Unlimited Corp. and is responsible for the strategic development and ongoing financial management of the business. Ms. Alimchandani led the negotiation and structuring of the Trust’s initial public offering (IPO) and oversaw all aspects of the transaction to closing. She has also served as a Director on the Board of the General Partner of Dream Alternatives Master LP since the IPO and maintains this position. Ms. Alimchandani joined Dream in 2013 as Vice President, Corporate Strategy. Prior to joining Dream, she covered the Canadian real estate sector as a Vice President in equity research at BMO Capital Markets. Prior to that, she worked at PricewaterhouseCoopers LLP in both the Audit & Assurance and Consulting & Deals practices. She is both a Chartered Accountant and CFA charterholder and was recently recognized as one of the Top 50 under 40 award by the Real Estate Forum.
About Dream Hard Asset Alternatives Trust
Dream Hard Asset Alternatives Trust provides an opportunity for Unitholders to invest in diversified hard asset alternative investments, including real estate, real estate loans and infrastructure, including renewable power, managed by an experienced team with a successful track record in these areas. The objectives of the Trust are to provide predictable and sustainable cash distributions to Unitholders on a tax efficient basis, and re-position and grow its assets to increase the value of its business and its distributions to Unitholders over time. For more information, please visit: www.dreamalternatives.ca.
Conference Call
Senior management will be hosting a conference call.
| Date: | Thursday, March 5, 2015 at 3:00pm (ET) |
| Dial: | For Canada and USA please dial: 1-866-229-4144 |
| For International please dial: 416-216-4169 | |
| Passcode: | 9147 557# |
A taped replay of the call will be available for ninety (90) days. For access details, please go to Dream Alternatives Trust’s website at www.dreamalternatives.ca and click on Calendar of Events in the News and Events section.
Webcast:
To access the conference call via webcast, please go to Dream Alternatives Trust’s website at www.dreamalternatives.ca and click on Calendar of Events in the News and Events section. The webcast will be archived for ninety (90) days.
Non-IFRS 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-IFRS financial measures including adjusted funds available for distribution (“AFAD”), annualized AFAD return on net assets, net assets attributable to unitholders of the Trust, debt-to-gross book value, adjusted net asset value per unit, and average yield on equity, as well as other measures discussed elsewhere in this release. These non-IFRS measure are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other issuers. The Trust 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 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. 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” in the Trust’s Management’s Discussion and Analysis for the year ended December 31, 2014.
Forward-Looking Information
This press release may contain forward-looking information within the meaning of applicable securities legislation. 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 general and local economic and business conditions, employment levels, mortgage and interest rates and regulations, regulatory risks, environmental risks, consumer confidence, the financial condition of tenants and borrowers, local real estate conditions, adverse weather conditions and variability in wind conditions and solar irradiation, reliance on key clients, partners and personnel, the uncertainties of acquisitions and new projects, inflation and competition. All forward-looking information in this press release speaks as of February 23, 2015. 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 applicable law. Additional information about these assumptions and risks and uncertainties is disclosed in filings with securities regulators filed on SEDAR (www.sedar.com). These filings are also available at the Trust’s website at www.dreamalternatives.ca.
| (1) | Results prior to July 8, 2014 include those of the ROI Canadian High Income Mortgage Fund, and have been excluded from these financial highlights. Refer to our MD&A pages 7 and 8, basis of presentation for details |
| (2) | AFAD – the reconciliation of this non-IFRS measures can be found in our MD&A “Section II Executing the Strategy” under the heading “Reconciliation of FAD and AFAD” |
| (3) | AFAD, annualized AFAD return on net assets and AFAD per Unit for the three month period ended September 30, 2014 have been restated to include accrued interest on the contractual value of participating mortgages held on the Empire residential developments as discussed in Section II under the heading Development and investment holdings AFAD and cash receipts on page 17. The AFAD, AFAD per Unit and annualized AFAD return on net assets measures were impacted by average cash held by the Trust during the six months ending December 31, 2014 of $93,110. The Asset Manager does not believe that these measures represent the cash flow generating ability of our assets once the cash is invested in accordance with the Trust’s investment strategy |
| (4) | Annualized AFAD return on net assets is AFAD for the applicable period divided by total net assets attributable to Unitholders of the Trust at the end of the period calculated on an annualized basis by prorating the AFAD for the period over 12 months (for example, the quarterly results are multiplied by four to derive the annualized AFAD). The measure is not adjusted to reflect the timing of when the AFAD was earned or for fluctuations in the balance of net assets attributable to Unitholders of the Trust over the period |
| (5) | Net assets attributable to Unitholders of the Trust as at December 31, 2014 and September 30, 2014 represents total Unitholders’ equity excluding non-controlling interests |
| (6) | Our debt-to-gross book value is calculated as the contractual balance of debt payable of $250,822 divided by the gross asset value of the Trust of $997,260 |
| (7) | Market capitalization is the total market value of the Units based on the number of the Units outstanding and the closing price on the Toronto Stock Exchange as at December 31, 2014 |
| (8) | Adjusted net asset value (“Adjusted NAV”) per Unit represents the net assets of the Trust adjusted to add back deferred income taxes payable, Deferred Unit Incentive Plan payable, and the unamortized balance of net lending portfolio discounts and mortgages payable premiums. For more detail, please refer to page 32 under the heading Non-IFRS Measures. Adjusted NAV per Unit is calculated as the total adjusted net assets of the Trust divided by the number of Units issued and outstanding as at the applicable reporting date. For a reconciliation of Adjusted NAV and Adjusted NAV per Unit for December 31, 2014 and September 30, 2014, please refer to pages 21 and 22 |
| (9) | The calculation of the market specific industry average occupancy rate applicable to the Trust’s portfolio was calculated using CBRE’s Canadian Market Statistics, fourth quarter 2014 report. Please refer to page 9 of our MD&A for the detailed calculation |
Michael J. Cooper
Portfolio Manager
(416) 365-5145
mcooper@dream.ca
Dream Hard Asset Alternatives Trust
Pauline Alimchandani
Chief Financial Officer
(416) 365-5992
palimchandani@dream.ca
Dream Hard Asset Alternatives Trust
Kim Lefever
Investor Relations
(416) 365-6339
klefever@dream.ca