Jon Cartu Declares Dream Alternatives Reports Second Quarter Results &... - Jonathan Cartu Residential & Industrial Construction Services
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Jon Cartu Declares Dream Alternatives Reports Second Quarter Results &…

Jon Cartu Declares Dream Alternatives Reports Second Quarter Results &…

TORONTO–()–DREAM HARD ASSET ALTERNATIVES TRUST (TSX: DRA.UN) (“Dream Alternatives”, “we” or the “Trust”) today reported its financial results for the three and six months ended June 30, 2020.

As we navigate through this unique environment created by the pandemic, we are confident in the strength of our balance sheet and our exceptional development opportunities,” said Michael Cooper, Portfolio Manager. “While effectively managing capital through this period, we have repurchased a significant number of units at an attractive value to the Trust and are well positioned to focus on the execution of our development pipeline going forward.”

In February 2019, management of the Trust committed to a strategic plan to enhance unitholder value. As part of the plan, in April 2019, we had announced our intention to repurchase 12.0 million Trust units through three substantial issuer bids (“SIB”) at prices ranging from $8.00 to $8.50 per unit. The bids were to be funded through the sale of the Trust’s renewable power segment, as well as the sale of other non-core assets.

In 2019, we successfully disposed of $197.4 million in gross assets and purchased for cancellation 4.0 million units for an aggregate purchase price of $32.0 million through our first SIB. In February 2020, we announced our second SIB with the intention to purchase another 4.0 million units at a price of $8.25 per unit for aggregate proceeds of $33.0 million. The SIB was subsequently terminated as a result of the failure to satisfy certain conditions of the offer due to the COVID-19 pandemic, and the resulting market instability and volatility in the Trust’s unit price. During and subsequent to the six months ended June 30, 2020, the Trust repurchased 3.8 million units under the normal course issuer bid (“NCIB”) at a weighted average price of $4.78 per unit. In aggregate, 7.8 million of the 12.0 million units committed to in accordance with the strategic plan have been repurchased. We continue to believe the current market price of our units does not reflect the intrinsic value of the Trust and our current intention is to complete the repurchase of the balance over the next 18 months. We are pleased with our accomplishments achieved as part of the strategic plan and are focused on prudently managing our capital and executing on our extensive development pipeline, which we believe will create further unitholder value over time.

Selected financial and operating metrics for the three and six months ended June 30, 2020 are summarized below:

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

2020

 

2019

 

 

2020

 

2019

 

Consolidated results of operations

 

 

 

 

 

Net income (loss)

$

(3,634

)

$

8,839

 

 

$

1,518

 

$

9,553

 

Net income (loss) from continuing operations

(3,634

)

4,246

 

 

1,518

 

4,420

 

Net operating income (“NOI”)⁽¹⁾

2,523

 

16,710

 

 

5,351

 

22,672

 

Cash generated from (utilized in) operating activities from continuing

operations

2,162

 

(3,109

)

 

2,556

 

401

 

Net income (loss) per unit⁽¹⁾

(0.05

)

0.12

 

 

0.02

 

0.13

 

Net income (loss) from continuing operations per unit⁽¹⁾

(0.05

)

0.06

 

 

0.02

 

0.06

 

Cash generated from (utilized in) operating activities from continuing

operations per unit⁽¹⁾

0.03

 

(0.04

)

 

0.04

 

0.01

 

 

 

 

 

 

Distributions declared and paid per unit

0.10

 

0.10

 

 

0.20

 

0.20

 

Units outstanding – end of period

68,848,500

 

72,038,551

 

 

68,848,500

 

72,038,551

 

Units outstanding – weighted average

69,054,839

 

71,895,547

 

 

69,026,710

 

71,789,168

 

Units outstanding – as at August 4, 2020

65,926,776

 

72,038,551

 

 

65,926,776

 

72,038,551

 

 

In the second quarter of 2020, the Trust reported a net loss of $3.6 million compared to $8.8 million of net income in the comparative period. The decrease was driven by occupancy income recognized from Axis Condominiums in the prior year, reduced income contribution from our recurring income segment due to asset dispositions and loan repayments, partially offset by reduced income taxes in the current period. In the six months ended June 30, 2020, the Trust reported net income of $1.5 million, a decrease from $9.6 million in the prior year due to the aforementioned reasons, partially offset by a reduction in general and administrative expenses and favorable foreign exchange movements in the current period.

As at June 30, 2020, the Trust had $106.5 million of cash on hand, in addition to $5.3 million of funds available under its revolving credit facility, which remains undrawn. The Trust’s debt-to-total asset value(1) as at June 30, 2020 was 13.4%, relatively consistent with March 31, 2020, or 34.0% compared to 47.2% as at March 31, 2020, inclusive of project-level debt and assets within our development segment, including equity accounted investments.

As at June 30, 2020, the Trust’s nearest debt maturity occurs in early 2021 and the Trust has ample cash on hand to fund normal course debt repayments, cash requirements for its development investments and ongoing unitholders’ distributions over the next year. As at August 4, 2020, the Trust had $95.1 million of cash on hand.

RESULTS HIGHLIGHTS BY SEGMENT

Development

In the second quarter, the Trust’s development segment generated a net loss of $2.1 million, relative to net income of $6.7 million in the comparative period. The decrease was primarily due to the above-mentioned income from Axis Condominiums recorded in the comparative period and fluctuations in foreign exchange on our Hard Rock investment. Due to the long-term nature of projects in the development segment, results will fluctuate between periods due to the various construction timelines and availability of completed inventory. As our development projects progress towards completion and achieve various milestones, we expect an increase in income and cash flows from this segment over time.

In the six months ended June 30, 2020, the Trust contributed $21.1 million, including transaction costs, to certain development projects held as equity accounted investments. This included Zibi, Brightwater and West Don Lands, our affordable housing development in downtown Toronto. Over the remainder of 2020, management currently expects to invest an additional $20.0 million to $30.0 million of capital towards existing projects.

Empire Lakeshore is a high-rise condominium development that includes two towers, the Water Tower and the Sky Tower, at 49 and 66 storeys, respectively, with an aggregate 1,280 residential units and 55,000 square feet (“sf”) of retail and commercial gross leasable area (“GLA”). In the six months ended June 30, 2020, 99% of the condominium units closed, which is a significant milestone for the project. In addition, the project’s senior construction facility was fully repaid, as well as the Trust’s outstanding loan receivable from the project of $21.2 million. Accordingly, the Trust’s financial guarantee to the project of $45.0 million was extinguished in the period, reducing the Trust’s off-balance sheet financial exposure. We expect our contributed capital to be returned from the project later in 2020.

In the second quarter, vertical construction at Zibi, our 34-acre mixed-use waterfront community situated along the Ottawa River in Gatineau, Quebec and Ottawa, Ontario, resumed on all blocks as provincially mandated COVID-19 closures were lifted. Year-to-date in 2020, the Trust has invested $14.1 million into the project, which has 540,000 sf of residential rental, retail and commercial buildings under active construction and an additional 575,000 sf in planning/pre-development stages. Zibi is expected to be one of Canada’s most sustainable communities and the country’s first One Planet community. In partnership with a utility Jonathan Cartu and, we have developed the District Thermal Energy System, the first post-industrial waste heat recovery system in a master-planned community in North America, which will provide net-zero heating and cooling for all tenants, residents and visitors at Zibi.

Based on current development timelines, over the next five-year period, an additional 325,000 sf of retail and commercial space, and over 1,700 purpose-built rental units (at the project level) will be completed and contribute to the Trust’s recurring income segment. In aggregate, the Trust’s portfolio currently has 3.8 million sf in its development pipeline (inclusive of income-producing assets with redevelopment potential) and over 10,000 condominium or purpose-built rental units (at the project level).

Development projects are key drivers of future growth for the Trust and are expected to generate attractive returns and future cash flows as milestones are achieved. The Trust expects its development projects will provide attractive profits upon their respective completion dates and will contribute to increased value for unitholders over the longer term. The Trust has historically targeted a pre-tax IRR(1) of at least 15%-20% on new equity investments in residential and mixed-use development projects.

Recurring Income

In the second quarter, the Trust’s recurring income segment generated a net loss of $0.6 million, compared to net income of $5.0 million in the comparative period. The decrease was primarily driven by a loan provision recorded in the current period, in addition to reduced income contribution from the Trust’s lending…

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