2019 Annual Report
Zibi
Ottawa, ON / Gatineau, QC
Dream (TSX:DRM) is an award-
winning Canadian real estate
company with approximately
$9 billion of assets under
management in North America
and Europe.
Dream is a leading developer of exceptional office
and residential assets in Toronto, owns stabilized
income generating assets in both Canada and the
U.S., and has an established and successful asset
management business, inclusive of $9 billion of
assets under management across three TSX listed
trusts and numerous partnerships. We also develop
land and residential assets in Western Canada
for immediate sale. Dream expects to generate
more recurring income in the future as its urban
development properties are completed and held
for the long term. Dream has a proven track record
for being innovative and for our ability to source,
structure and execute on compelling investment
opportunities.
Letter to Shareholders
Over the last 14 months, we have delivered a total return of 83%
to shareholders and repurchased over $130 million of stock.
While we are pleased with the increase in market price year-
over-year, we believe that continuing to buy back stock under
our normal course issuer bid is a good use of capital and a driver
of value creation. As of February 21, 2020, we held $743 million
units at fair value in Dream Office REIT and Dream Alternatives,
which accounts for over 60% of our current market cap before
considering our extensive land holdings in downtown Toronto
which are carried at cost on our balance sheet or the value of our
remaining asset management contracts. In 2019, we acquired
an aggregate of $91 million in Dream Office REIT and Dream
Alternatives, and the fair value of our holdings appreciated over
$150 million while generating cash distributions of $21 million.
We intend to continue investing in both Trusts on an opportunistic
basis.
On December 10th, we closed on the sale of Dream Global REIT to
Blackstone. This transaction was a pivotal event for our Company.
The sale itself generated proceeds of $500 million, which was
used to reduce our debt by $254 million, including redeeming
our preference shares and fund a $117.5 million substantial issuer
bid, making our balance sheet even stronger and the Company
more valuable. As at December 31, 2019, our debt to total asset
ratio was approximately 25%, a record low for the Company
and down 10% from a year ago. The sale also demonstrated our
ability to execute and create value within our asset management
business. From the time of Dream Global REIT’s IPO eight years
ago, we have sourced incredible assets to grow the portfolio,
completed significant capital recycling programs and capitalized
on market fundamentals across Europe. We are now deploying
our global asset management team to lead Dream Industrial
REIT’s European expansion strategy and utilizing our expertise
and relationships to grow our asset management business
through new private opportunities.
Dream is one of the most significant developers and owners of
real estate in Toronto with 7.1 million square feet of retail and
commercial GLA in fully stabilized assets or in our development
pipeline and nearly 12,000 residential units (at project level).
Our assets include: Dream Office REIT’s income producing
and redevelopment properties, our mixed-use developments at
Brightwater, the Canary and Distillery Districts and the West
Don Lands. As the development manager for Dream Office REIT,
we are leading the rezoning and intensification process for the
REIT’s redevelopment assets. This includes 250 Dundas St. West,
which recently obtained council zoning approval to convert the
property to a multi-use development comprising commercial
office, multi-residential rental and retail components.
In 2019, we achieved several advancements and key approvals
across our Toronto & Ottawa development portfolio. We secured
the first major tenant, the Federal Government of Canada, for
our first commercial building at Zibi, our 34-acre waterfront
community in the Nation’s Capital. After extensive collaboration
with the City of Mississauga and community of Port Credit,
we reached an agreement with the City to advance municipal
approvals for Brightwater. We also closed on Block 10 in the
Canary District and secured landmark financing on our first
purpose-built affordable rental building in downtown Toronto
(West Don Lands Block 8) through CMHC’s Rental Construction
Financing initiative for $357 million and thereafter commenced
construction. Each of these further advances the value of our
business for the long term.
Overall, we are pleased with the safety of our Company and the
return we are generating for shareholders. Our core operating
business has strong fundamentals and there is a significant
amount of value yet to be realized from assets we already own
on our balance sheet today.
Thank you for your continuing support.
Sincerely,
Michael J. Cooper
President & Chief Responsible Officer
February 25, 2020
250 Dundas Street
Toronto, ON
At a Glance
$9 B
~$35 B
IN ASSETS UNDER MANAGEMENT
AS AT DECEMBER 31, 2019
OF REAL ESTATE & RENEWABLE
POWER TRANSACTIONS COMPLETED
~14,000
CONDOMINIUM & PURPOSE-BUILT
RENTAL UNITS UNDER CONSTRUCTION
OR IN OUR DEVELOPMENT PIPELINE
$742.9 M
OF EQUITY HELD IN DREAM
PUBLICLY LISTED FUNDS AS AT
FEBRUARY 21, 2020
Brightwater
Port Credit, ON
Financial Highlights Dream Standalone(1)
Revenue
Earnings before income taxes
Earnings per period
Basic earnings per share(2)
2019
2018
$ 536,559
$ 294,071
$ 518,630
$ 402,492
$ 3.81
$109,334
$ 83,093
$ 0.76
Total equity (excluding non controlling interests
$1,001,317
$919,394
(1) Dream standalone represents the standalone results of Dream, excluding the impact of Dream Alternatives’ equity accounted/consolidated results. Refer to the “Non-IFRS Measures”
section of our MD&A for further details.
(2) Basic earnings per share is computed by dividing Dream’s earnings attributable to owners of the parent by the weighted average number of Dream Subordinate Voting Shares and
Dream Class B shares outstanding during the period and has been adjusted to include the non-controlling interest relating to Sweet Dream Corp.
(3) Total equity (excluding non-controlling interests) excludes $64.9 million of non-controlling interest as at December 31, 2019 ($43.9 million as at December 31, 2018) and includes the
Company’s investment in Dream Alternatives as at December 31, 2019 of $93.8 million ($72.7 million as at December 31, 2018). For further details refer to the “Segmented Assets and
Liabilities” section of our MD&A.
Total equity per share(3)
($ in millions)
$13.12/share
$7.39/share
$8.42share
$9.33/share
$6.38/share
$5.21/share
21%
CAGR IN TOTAL
EQUITY TO 2019
Dec. 2014
Dec. 2015
Dec. 2016
Dec. 2017
Dec. 2018
Dec. 2019
* Total equity per share is calculated based on total shareholder’s equity, including SDC’s non-controlling
interest for years prior to December 31, 2018.
Note: We issued $55.0M of equity in 2014
Our Values
Courageous ideas
Meaningful relationships
Fierce diligence
Social responsibility
These values provide the foundation for our
corporate culture – acting as a strong platform
on which to build sustainability into Dream’s
DNA.
About Our Sustainability
Reporting
To align with best practice sustainability
reporting, we have divided the information
across three areas — environment, social
and governance.
Zibi
Ottawa, ON / Gatineau, QC
Sustainability
Focus on Sustainability
We focus on promoting
the highest standards of
corporate governance,
social responsibility and
ethical behaviour throughout
our organization.
Sustainability is ingrained in how we run our
business both internally and externally. It fits
naturally with Dream’s purpose to Build Better
Communities and with our values. Building better
communities guides how we think, live and work.
We strive to make positive impacts on the natural
environment and the communities in which we
operate, work and live.
As property owners, operators and developers,
we believe building a better community is
bigger than ourselves and our own assets, it
encompasses the greater community at large
and the cities in which we live and operate.
Building a better community means more than
just limiting environmental impact, it applies to
social benefits, such as promoting inclusivity,
diversity and health and wellness.
As a developer we have a legacy of building
communities that showcase best practices
in sustainability. Brightwater in Port Credit,
as well as the LEED Gold Canary District, and
West Don Lands in Toronto, are all examples of
our commitment to sustainable design in urban
centres. Our communities cater to buyers seeking
a green, urban lifestyle where transit and public
spaces have premium value.
Affordable housing is intrinsic to this vision. The
integration of market and affordable units within
a vibrant mixed-income community is an integral
part of creating a complete, family focused
community that provides access to housing for
people of all income levels. Whether building
new communities, making new investments or
operating our existing assets, we always keep
in mind the impact we have on our customers,
tenants, employees and homebuyers, as well as
the greater community and residents in general.
From our ongoing dialogue with stake holders,
we know that they care about our sustainability
platform, best practic es and results. Our investors
want to be confident that they are investing in a
corporate entity which uses land and resources
responsibly, minimizes carbon emissions and
is in good standing with its employees and
communities.
Our focus is to directly tie sustainability to
our corporate values, our culture and the way
in which we conduct our busi ness. We have
been making progress in how we manage our
environmental impacts, engage employees and
conduct social out-reach programs by adopting
a formal approach to sustainability.
We are also continuing to invest in the development
of our employees, which contributes to the strong
execution of our business strategies. Further, it is
increasingly important to employees that they
feel good about the company for which they work.
Our commitment to strong governance ensures
that we attain the highest ethical standards,
which includes how we manage and mandate
sustainability. We continue to implement
strategies to manage our impact and measure
our performance in attaining targets.
Our continued focus on sustainability is fostering
a culture of innovation and collaboration with
external business partners and the community at
large. We look forward to continued engagement
with our stakeholders as we move forward with
our sustainability initiatives.
Environmental
Pro-active
implementation
of sustainability
best practices
throughout our
portfolio.
Our environmental initiatives include:
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Developing sustainable and inclusive
communities and properties where people
are proud to live and work.
Monitoring our resource consumption to reduce
the environmental impact of our operations and
our carbon footprint.
Green Building Certifications
According to the Canadian Green Building Council (CaGBC),
green-certified buildings or communities with lower operating
costs and superior indoor environmental quality are more
attractive to a growing group of customers. High-performing
buildings and communities are becoming a material factor when
tenants and home buyers make leasing and buying decisions.
Affirming Strong Sustainability
Practices and Responding to Market
Demands
Dream is working hard to integrate sustainability into every
aspect of our operations. Green building certifications help us
incorporate a range of sustainability features into our physical
properties and our daily practices.
Sustainability initiatives increase occupancy and rental rates,
ultimately increasing rental income. Studies have shown that
certified buildings produce higher capital and income growth
relative to industry benchmarks.
We are very proud of the fact that 100% of Dream Office REIT
properties over 100,000 square feet are BOMA BEST certified.
In addition, several of the communities we develop are built
to attain LEED status: West Don Lands, The Canary District,
Brightwater and The Distillery District, to name a few.
LEED
The Leadership in Energy and Environmental
Design (LEED) certification
LEED provides independent, third-party verification that a
building was built using strategies aimed at achieving high
performance in key areas of human and environmental health.
It is administered by the CaGBC.
BOMA BEST
BOMA BEST is a leading certification program for existing
buildings in Canada. Over 3,150 buildings, totalling 594 million
square feet of Canadian commercial real estate are certified.
Brightwater
Mississauga, ON
LEED Gold Certified
438 University
Toronto, ON
WIRED Gold Certified
Adelaide Place
Toronto, ON
Canary District
Toronto, ON
Sustainable Development
Affordability and Mixed-income
Neighbourhoods
Creating inclusive and vibrant urban
communities that people are proud to
live and work in.
At Dream, we develop a wide range of housing types to meet the
needs of varying age and income groups and lifestyles. Dream
believes building mixed-use and mixed income projects within our
master-planned communities is smart business and aligns with our
values, as well as our commitment to shareholders and communities.
Building long-term affordable housing in
prime locations, close to transit and employment.
Integrating market and affordable units to create diverse,
mixed-income, family-focused communities.
Committing to sustainable design in urban centres – LEED Gold
or higher.
Partnering with First Nation communities.
Sustainability is a Key Driver of Our New Communities
Sustainable Planning
Sustainable Design
To integrate sustainability, it all starts with planning. We consult with
the public to identify community needs that can be incorporated
into the overall plan prior to starting the development application
process.
One of our design objectives is to integrate our communities into
the natural environment. To do this, we build around important
environmental landmarks. We use native plants and grasses where
possible.
We also work with world leaders in urban design and master
community planning to create attractive, community-oriented and
environmentally sustainable concepts and designs that advance
the approval process.
The street network of Dream neighbourhoods are designed in
an urban grid-like pattern with limited roads. Our communities
also boast extensive pathway systems. For example, our Harbour
Landing community has 16 km of pedestrian trails. These factors
encourage pedestrian mobility and health as well as achieve better
traffic flow.
Sustainable Materials
Dream continues to lead the industry as one of Canada’s largest
Energy Star-certified builders. Energy Star is administered by
Natural Resources Canada and promotes homes that are at least
20% more efficient than a house built to code. However, we go
beyond regulatory requirements by integrating sustainability
into technical design and procurement. Standard benchmarks for
Dream Homes include:
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Triple-paned windows, LED lights and 92-96% efficient furnaces
to improve building energy efficiency
Energy Star appliances to reduce electricity and water usage
Long-lasting polyvinyl chloride water pipes to prevent water
leakage
Low VOC interior paints and materials to improve air quality
Heat recovery ventilator to supply fresh air to homes in colder
months
Timber certified by the Forest Stewardship Council
Strategic positioning to allow for optimal sunlight
Energuide rating of 82 for all Homes by Dream built homes in
the Calgary community of Evansridge
Sustainable Construction
Dream aims to develop local supply chains as a way to minimize our
transportation footprint and create local jobs. During procurement,
we make a conscious effort to use 50% local trades and raw
materials originating within an 800-kilometre radius. We are also
trying to align ourselves with suppliers that have sustainability
policies and values.
In Regina, we have developed a Builder Standards Manual that is
enforced during construction to ensure a safer environment and a
more attractive neighbourhood. We employ consultants to monitor
and they prepare monthly summaries of builder activity. Based on
the report, we administer fines for infractions that must be paid
before further lots are contracted to the builder. As a result, the
cleanliness of construction sites has improved and there is less
damage to concrete walkways and streets from heavy machines
and equipment.
Evansridge
Calgary, AB
Sustainable Development
Creating an innovative and affordable
sustainable community that provides equal
access to all amenities for residents.
LEED Gold Certified
LEED Gold Certified
West Don Lands
Toronto, ON
West Don Lands
Affordable housing, accessibility
and energy efficiency
Affordable housing and energy efficiency is key to the
development plan for our LEED Gold designed West Don
Lands development. In addition to offering sustainability and
affordability, West Don Lands residents can take advantage of
the proximity to public transit, schools and services as well as
the many neighbourhood amenities in the nearby Canary and
Distillery Districts.
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One of the largest affordable housing projects in Canada.
First mixed-use, purpose-built rental community in the area
(1,869 purpose-built rentals of which 30% will be affordable).
Public-private partnership to create long-term affordable
units.
• Won a competitive bidding process by ensuring long-
term affordability and our plan to manage without further
government incentives.
•
Secured $357 million of financing as part of CMHC’s Rental
Construction Financing initiative.
Silver Certified
Sustainable Development
Partnering with Toronto’s First Nations
community in the Canary District & bringing
current sustainable practices to The Historic
Distillery District.
Distillery District
Sustainability in historical buildings
BOMA Certified
The historic Distillery District is a Toronto landmark featuring 40 heritage buildings on 13 acres in
Toronto’s east end. We achieved BOMA BEST Certification in 2020 and are proud to be a leader
in embracing sustainability for heritage buildings despite the intrinsic obstacles.
Canary District
Innovative partnership with Anishnawbe
Health Toronto
Dream has entered into an agreement with Anishnawbe Health Toronto to develop Canary
Block 10, a mixed-use project in the Canary District. Canary Block 10 will be comprised of: a
proposed 200-unit condominium building, a 225-unit residential rental building, heritage retail
space, a community health centre and a mixed-use commercial building that includes a training,
education and employment centre, and a city daycare. Canary Block 10 is an important part of
the Indigenous Hub which will celebrate indigenous culture and serve the needs of Toronto’s First
Nations community as well as the broader city.
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LEED Gold Certified
Canary District, Block 10
Toronto, ON
Sustainable Development
The Zibi development will be one of Canada’s
most sustainable communities and Canada’s
first One Planet community.
Zibi
District Thermal Energy System
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First post industrial waste heat recovery system in a master-
planned community in North America
First zero-carbon-emission District Thermal Heating and
Cooling System in the National Capital Region
The District Thermal Energy System will provide self-sufficient,
net-zero heating and cooling for all tenants, residents and visitors
of Zibi. It will contribute to Zibi being the region’s first zero-carbon-
emission community, allowing for equitable access to a sustainable
community which provides environmental, social and economic
benefits to all.
Zibi
Ottawa, ON / Gatineau, QC
2019 Year in Review
In 2019, at Zibi, we began to lay the foundation of our community
with residents moving into the project’s first condominium building,
O, in Gatineau. Unlike most other development projects, Zibi’s
involvement in the community does not end at the completion
of the development. As a One Planet Living Community we are
not only here to design and build sustainable infrastructure, but
through the role of the One Planet Ambassador, a position that
exists to build change through sustainable culture, residents are
inspired to lessen their impact on the planet. In 2019, the One
Planet Ambassador hosted a series of events including an evening
snowshoe, a talk on zero carbon, an organic gardening workshop
and a hands-on introduction to Zibi’s honey bees, the Zibees.
The intent of these events is to foster a sense of appreciation for
the planet and to create a sense of community among residents.
In the spring of 2019, the National Capital Region experienced
unprecedented and catastrophic flooding. As a project
building on islands and the shores of the Ottawa River, climate
change vulnerability is top of mind. In response, our buildings
are constructed to accommodate a 1-in-1000-year flood and
incorporate additional climate resilient mitigation measures
including waterproofing of underground infrastructure. As a
result, we were spared from the flooding of 2019 and will continue
to follow climate change science closely to adapt to future
changes.
Zibi undertook a major infrastructure project in 2019 that will have
significant positive impact on the region. Working with many land
managers, Zibi closed a major commuting corridor connecting
Gatineau and Ottawa in order to install site services and to
modernize active transportation infrastructure. The corridor
which was previously a harrowing experience on a bike will now
facilitate relevant and safe cycling and pedestrian access across
the Ottawa River to and from our project. This project also marks
significant investment in our district thermal energy system which
ultimately solidifies our commitment to our long-term goal of
operating as a zero-carbon community.
Lastly, with our One Planet Design and Contractor Specifications
in place, we became better at systemizing our approach to
sustainability. Throughout the year, we developed procedures that
allow for us to track our progress on our One Planet Action Plan,
building by building. Ultimately, this enhances accountability
and allows for us to boast about our leadership in sustainability
with confidence.
Arapahoe Basin Ski Resort
Colorado, USA
Sustainable
Ski Development
Arapahoe Basin’s Strategic
Sustainability Plan: 7 Goals in 7 Years
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Become Carbon Neutral by 2025
100% Renewable Electricity
75% Landfill Diversion Rate
No Net Increase in Domestic Water Use
Increase Carpooling and Public Transportation Ridership
Be a leader in Watershed and Wildlife Stewardship
Centralize Purchasing
In 2018, Arapahoe Basin’s Senior Leadership Team met numerous
times with the Brendle Group, a Colorado-based environmental
consulting firm, to create a strategic plan to bolster the mountain’s
sustainability goals and to help guide Arapahoe Basin’s many
sustainability initiatives and projects. The plan features seven
sustainability-related goals, all to be achieved in seven short
years – by 2025.
Just two years into implementation, serious headway has been
made towards all seven of these goals. A new collaboration with the
Colorado Carbon Fund has made it possible for Arapahoe Basin to
address fuel-related emissions during 2019, offsetting the
emissions from all diesel, gasoline, and propane use. Also, new
programs with Xcel Energy, our electricity provider, have helped
us get to 54% renewable electricity, well on our way to achieving
100% by 2025.
Continued emphasis on our waste reduction efforts has led to a
landfill diversion rate of over 50% for the second year in a row as
we creep ever closer to our 75% goal, while a major bathroom
remodel, featuring waterless urinals and low-flow and automated
fixtures, led to significant water savings in our base area lodge.
We’ve renewed our commitment to public transportation and
carpooling, with a designated parking lot for carpoolers and
discounted lift tickets for visitors who share a ride.
The Beavers, a terrain expansion that grew the ski area by more
than 30%, remains a shining example of how to responsibly
manage and develop a large piece of terrain for improved skiing
and snowboarding, while maintaining important wildlife habitat
and avoiding major impacts to sensitive wetlands and alpine
ecosystems.
Lastly, significant efforts have been made towards centralizing
our purchasing process and greening our supply chain across
the ski area. We look forward to continuing these efforts and are
excited to see where our refocused commitments get us by 2025.
Resource Management
Real estate properties consume significant
amounts of resources. Resource use directly
and/or indirectly impacts profitability,
operating margins, tenant demand and asset
values. This section mainly focuses on Dream
Office REIT’s initiatives.
Management of Tenant
Sustainability Impacts
Resource consumption, waste generation and other sustainability
issues (occupant health and safety) are often driven by the activities
of the occupant. However, real estate owners can exert influence
in a manner that may increase tenant demand and satisfaction,
decrease direct operating costs, decrease risks related to building
codes and regulations, and drive asset value appreciation.
Management process, controls and measurement
Virtually all leases in the portfolio are structured in a manner
whereby the tenant pays for their share of resource utilization.
Leases generally contain clauses that allow for the recovery of
certain capital expenditures (amortized over a period), some of
which relate to energy efficiency and HVAC upgrades.
Beyond this, Dream Office REIT engages with its tenants in a variety
of ways to share best practices and raise tenant awareness. Onsite
teams are in continual communication with occupants through a
work order management platform to address issues specific to
tenant spaces.
Performance and progress
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Dream Office REIT partnered with Tesla Motors to provide
80 electric vehicle chargers at several downtown properties.
The Bay Street repositioning program is expected to have a
positive impact on occupant health and well-being and to
reduce total resource consumption.
The robust tenant engagement program should continue to
have a positive impact.
11.6%
REDUCTION IN ENERGY CONSUMPTION
FROM 2014 TO 2018
Energy
Focus on energy efficiency is yielding results
Performance and progress
Reducing our energy consumption is a key initiative across all
of the Dream entities. It is an important part of our operational
strategy. It reduces costs and decreases our contribution to carbon
emissions and climate change. We enable energy efficiency and
conservation through capital investments, process changes and
modifying behaviours. Proactive energy management provides
Dream with the ability to mitigate the adverse impacts of new
regulation, compliance costs and carbon pricing.
Management process, controls and measurement
Energy audits were recently performed across the portfolio to
find opportunities to increase energy efficiency and optimize
the operation and management of our properties. This process
resulted in a series of recommendations, including: (1) LED
retrofits; (2) heating and air conditioning upgrades; and (3) retro-
commissioning; each of these has incorporated into a ten year
capital plan.
Virtually all of Dream Office REIT’s properties are equipped with a
real-time operating system that enables property managers to view
consumption data in 15-minute intervals to better manage each
building’s environmental impact and stress on the grid.
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41% of GLA is separately metered or sub-metered for energy
consumption sourced from the grid.
Total energy consumed in 2018 was 587,572 GJ.
Reduced total energy consumption by 11.6% on a like-for-like
basis since 2014.
At the end of 2019, 100% of the portfolio was ENERGY STAR
certified, 12% was LEED-certified and all Canadian properties
of over 100,000 square feet were BOMA BEST–certified.
LED retrofits were completed in 10 buildings in 2019.
A smart building technology strategy is under development,
with a pilot planned for 2020.
Additional LEED certifications are underway; once complete
portfolio-wide LEED certifications will increase to 25%.
External battery storage solutions at eligible sites along with
bidirectional EVs through our partnership with Peak Power.
Greenhouse Gas Emissions
Climate change
Leading scientists agree that human activities are contributing to
a warming climate. Governments around the world are enacting
legislation to reduce greenhouse gas emissions. For example, there
are now carbon pricing systems in many Canadian provinces which
provide incentives for businesses that take action.
Dream’s primary source of greenhouse gas emissions stems from
energy consumption at our properties. We are reducing our impact
through technological and operational improvements in energy
efficiency.
15,000
tonnes
REDUCTION IN GREENHOUSE GAS EMISSIONS,
EQUIVALENT TO REMOVING 3,200 CARS FROM
THE ROAD PER YEAR
15.9%
REDUCTION IN WATER CONSUMPTION
FROM 2014 TO 2018
Water & Waste
Efficient water and waste management
Performance and progress
Real estate properties consume significant amounts of water.
Efficient water and waste management directly and indirectly
impacts profitability, operating margins, tenant demand and asset
values. On the other hand, poor management can lead to flood
damage, increase operating expenses and/or capital expenditures
and negatively impact asset values.
Managing our water use
Dream Office REIT invests in water-efficient technologies and
practices where we have the largest impact. For example, in older
buildings, we have implemented improved cooling tower controls
to reduce water evaporation and we have invested in rain sensors,
perennial landscaping and mulch to reduce water consumption due
to irrigation in landscaping practices.
All Dream Office REIT BOMA BEST-certified properties also need to
comply with our water reduction policy. The policy outlines target
fixture flow rates and requirements for landscaping practices.
Dream has developed a policy for helping us achieve our water
reduction target. An important part of this strategy is our alignment
with the best practices for water management as defined by the
BOMA BEST process.
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From 2014 to 2018, Dream Office REIT experienced a 15.9%
reduction in annual water consumption on a per square foot
basis.
12.1% of Dream Office REIT’s portfolio is in regions classified
as High or Extremely High Baseline Water Stress as determined
by the Aqueduct Water Risk Atlas tool.
Dream Office REIT continues to be proactive in its approach
to reducing water consumption. Leak detection systems have
been implemented at two properties and the potential rollout
to additional sites is being evaluated. Management is also
looking into the installation of smart water meters to enhance
its tracking ability and to manage consumption.
Affecting waste diversion
All Dream Office REIT BOMA BEST certified properties follow our
solid waste management policy, which strives to reduce the amount
of waste sent to landfills. The policy requires proper disposal of
different types of waste. It also stipulates that large properties
must regularly conduct waste audits, which is our primary tool for
measuring and tracking waste output.
Resource Management
Innovative landscape irrigation in Dream’s
Brighton community and Peak Power
partnership in Dream Office REIT.
Brighton Community,
Saskatoon, SK
Brighton
Landscape irrigation in Brighton
The City of Saskatoon currently uses potable water from the municipality’s water mains for
park irrigation. In designing the new park in Brighton, our master-planned Saskatoon community,
we decided to try a new approach and collect rain water in ponds. The ponds are used for storm
water management and use the water collected to irrigate the surrounding parks and sports fields.
Peak Power
Dream Office REIT takes leading role with
vehicle-to-grid and energy storage
As part of Dream’s sustainability goals and our ongoing effort, Dream Office REIT tenants at
Adelaide Place and State Street Financial Centre have the opportunity to purchase an electric
vehicle at a discounted lease thanks to an innovative partnership with Peak Power. Peak Power
has installed bi-directional (two-way) charging infrastructure at these buildings which allows
electric vehicles to send electricity back to the building during key “peak” times. This reduces
the building’s overall energy costs with a portion of the savings going to the driver participants.
The technology is being developed by Peak Power along with Ontario Power Generation to help
make the transition to electric vehicles more attractive to consumers.
Peak Power uses machine learning (a form of Artificial Intelligence) to predict these moments of
high electricity demand, which can form over 65% of a typical electricity bill. This technology
will also help Dream Office REIT reduce its environmental footprint. By charging at night and
discharging during peak moments, we reduce our reliance on natural gas peaker plants in
favour of non-emitting hydro and nuclear sources. Peak Power is currently in the design phase
to expand this technology to various other Dream Office REIT properties in downtown Toronto,
which would create a virtual power plant that can respond to grid needs while lowering Dream
Office REIT’s energy costs.
Alate Partners
Using technology to rethink real estate
Dream Unlimited Corp., along with Dream Office REIT, entered into a strategic
partnership with Relay Ventures to create Alate Partners to invest in technology
companies that are rethinking how real estate is designed, built and managed. In
addition to capital, Alate Partners provides entrepreneurs with unique access to
real estate expertise, customers and partners that can help accelerate their growth.
By embracing emerging technologies and new approaches to how we build and
manage real estate, we can reduce our environmental impact and improve the
quality of life in our communities.
Select Alate Investment: Bird Rides
Stage: Growth
Founded: 2017
HQ: Santa Monica
Bird’s mission is to make cities more livable by reducing car usage, traffic and
carbon emissions.
Along with Alate Partners’ investment in Bird Rides, the company partnered with
Relay Ventures and Obelysk to launch Bird Canada, a Canadian-owned and
operated company that holds the exclusive licence to operate Bird’s micro-mobility
platform in Canada. Bird Canada complements public transit options to provide
safe and reliable mobility options between destinations in urban areas.
Select Alate Investment: Branch
Stage: Early
Founded: 2019
HQ: New York
Alate Partners has recently invested in Branch, an office furniture startup based in
New York. Branch delivers inexpensive furniture that can be delivered within 48 hours
compared to traditional wait times of 8–16 weeks. In addition, it offers a trade-in program
allowing office furniture to be reused rather than disposed of. Currently, the vast majority
of office furniture is single-use only and 17 billion pounds of office furniture ends up in
landfill every year.
Social
Building
a thriving,
people-centric
organization.
Our social initiatives encompass three key areas:
1
2
3
Employees: Committed to the development
of employees through continuous learning
and promotion of healthy workplaces and
lifestyles.
The Greater Community:
Actively committed to the community and
local charitable organizations.
Tenants: Committed to tenant satisfaction
and engagement.
A Diverse Group of Employees
Demonstrating a Culture of
Sustainability
A future-oriented workforce
Dream’s potential as an organization comes from our strong and
diverse workforce. We have more than 500 employees across
our business that possess expertise in a wide variety of areas
that benefit our business, from real estate management and
development to capital markets, risk and insurance, and many
more.
Our people come from a range of backgrounds and places,
bringing many valuable skills and perspectives to our team. The
people we hire all have one thing in common: they share our
company values and contribute to our company culture.
We are very proud to have a strong female presence in our
workforce – 49% of our employees are women. In addition,
we have many women in senior management roles across our
company.
A gender-diverse company
Female employees
Female directors & above
38%49+
49%38+
44%44+
Female managers & above
56
62
51
Dream in the Community
Our company values are aligned with
sustainability
As a major Canadian real estate and development company,
we recognize the integral role that Dream plays in building and
strengthening the communities where we work. We are involved
with a range of community organizations across Canada and we
engage community members wherever we are present.
Dream Employees
Making an impact
Our employees are connected to the communities where they work.
Dream creates opportunities for employees to volunteer through
our relationships with charitable organizations. We have Community
Leaders in each city who identify local volunteering opportunities
and organize team volunteering days for their colleagues. We also
encourage our employees to contribute to their local communities
and boost their efforts through an employee donation program.
Dream will contribute $500 per employee annually to a charitable
organization that employees are actively involved with.
Healthy Workplaces and Lifestyle
Employees health and wellness is important to Dream and
there are a large number of initiatives and programs to encourage
employees to lead healthy lifestyles. We provide free fresh fruit in all
our offices, and selected healthy snacks are available for purchase
at an affordable price.
Throughout the year, Dream also supports fundraising events that
encourage employees to be active for a good cause – bike rides,
stair climbing, runs and walks – and sponsors employee teams so
they can play soccer, hockey or volleyball together in corporate
leagues.
Health and safety is a priority
Ensuring the health and safety of our employees, tenants and
others on all our sites is something we never compromise on:
we target zero injuries. We also seek to exceed health and safety
regulatory requirements by implementing programs focused on
accident investigation and prevention and other types of health
and safety training.
Building Better Leaders
We take great pride in our people and know that investing in
them is a smart decision with great payback. We are focused
on developing leaders throughout our company by providing
opportunities for employees to grow personally and professionally.
Goal-setting
Dream employee goal-setting takes place at the beginning of
each year. Employees discuss goals with their managers that are
aligned with corporate or department objectives as well as personal
development goals. All leadership team goals are visible through
our internal employee website for any employee to view across all
of our business lines.
Tenant Collaboration
Strengthening relationships through joint
initiatives with our tenants.
As a major landlord, we understand our responsibility to act as a
model citizen and positively influence our communities and work
with our tenants. Our initiatives support our business objective
of being a premier community partner. We aspire to uphold our
positive reputation in the communities where we are present and
actively seek out partnership opportunities with our tenants. This
also helps us to become a builder and landlord of choice.
Partnering with Tenants on the
Tree of Dreams
For the fourth consecutive year, we hosted the Tree of Dreams campaign,
in support of local charities that care for underprivileged seniors. Through this
campaign, Dream and its tenants can send gifts to seniors in our communities
who might otherwise not receive gifts or visits during the holidays. The feedback
from tenants was overwhelmingly positive. With their help, we distributed over
400 gifts to seniors in need, right here in our community.
Select Alate Investment: Lane
Delivering a superior tenant experience
using technology
Lane is a tenant experience platform for commercial office buildings.
Headquartered in Toronto, Lane helps leading property owners and managers
unlock the full value of their assets and deliver a superior experience for everyone
at their properties. By bringing together the entire workplace ecosystem, the
platform allows tenants to access everything they need in one place, including
building information, services, software and amenities. Lane is a scalable solution
designed for buildings of all sizes.
Governance
Strong
governance
practices &
high ethical
standards.
Our governance initiatives include:
1
2
Diverse and experienced Board with
majority of independent trustees.
Strong governance. Transparency in all
aspects of our business.
Commitment to Good Governance
Dream is committed to sound and effective corporate
governance. Our goal is to not only meet the requirements
established by regulators, but also to uphold the spirit of good
corporate governance.
Good governance is a key aspect
of sustainability
Good governance is regarded as an important part of
corporate sustainability. As one of Canada’s leading real
estate organizations, Dream is committed to maintaining
the highest standards as it relates to board governance and
ethical business conduct.
All of our public companies have diverse and experienced
Boards of directors, with a high ratio of independent directors
and trustees.
75% Independent
71% Independent
71% Independent
75% independent
50% Female
43% Female
43% Female
25% Female
Sound Board composition and
committees that oversee sustainability
Code of Business Conduct and Ethics
Each of the Dream entities has a code of business conduct and
ethics. The code has guidelines for expected behaviours and
practices in day-to-day business activities. While it does not
specifically address corrupt or anti-competitive business situations
that employees may be exposed to, it directs employees to report
conflicts of interest to a manager and it is also supported by a
whistleblower policy.
We anticipate expanding our business ethics guidelines with
explicit guidance about bribery and anti-competitive situations in
the upcoming year. You can find out more information about the
Code of Conduct and the Whistleblower Policy on our website at
www.dream.ca.
Among the four Boards of directors and trustees that oversee
our four listed entities, we are achieving strong marks on board
independence and we are making progress in gender diversity.
Dream and Dream Industrial have the highest ratio of independent
representation, at 75%. At Dream Unlimited, 50% of board of
directors are female, exceeding our 30% target.
We are also starting to embed elements of sustainability in
our board mandates. For example, at Dream Unlimited the
Governance Committee oversees environmental property risks,
the Organizational Design and Culture Committee works to
enhance culture and employee satisfaction, and the Leaders and
Mentors Committee oversees diversity and inclusion at all levels
of organization.
Driving Sustainability Progress
Our vision is to integrate sustainability in all our businesses’ strategic
plans, enterprise management systems and, most importantly, in
our culture. Good sustainability governance is important as this is
an emerging area of management and value creation.
Bevi, Reducing Can and Bottle
Consumption at Head Office
Bevi is a water system which replaces canned and bottled
beverages for employees at Dream’s head office. It was chosen
as an alternative to canned and bottled beverages to provide a
fun and engaging way to stay hydrated while doing our part for
the environment. Bevi not only allows us to customize the water
we’re drinking, but it has also allowed us to avoid the waste from
thousands of cans per year.
Sustainability Highlights
Environmental
—
Reducing Impact
on the environment through
monitoring our operations and
reducing our carbon footprint
—
Sustainable Development
principles are embedded in
the design and construction
of our communities
—
Public Collaboration
to identify community needs
that can be incorporated to
the overall development plan
—
West Don Lands
community will offer purpose-built
rentals that include affordable options
—
Zibi is 1 of 10 Endorsed
One Planet communities in the world
based on 10 sustainable principles
—
Tenant Engagement
on energy management through
education and awareness
Social*
—
~1,300+ Shoeboxes
and ~$11,000
were donated to The Shoebox Project for
Women’s Shelters by Dream employees
—
~$700,000
was donated to charities
and communities
—
~$302,000
in tuition and professional
development fees were
reimbursed to employees
—
449 Gifts
were donated to seniors in need
through the Tree of Dreams
with Dream tenants
—
Tenant Focused
We are committed to tenant
satisfaction and are continually
looking for ways to improve their
experience in our buildings
—
Community Engagement
We are actively engaged with the
community through strong
partnerships and support for
local charitable organizations
—
National Sponsor
of The Shoebox Project
for Women’s Shelters
—
Peer Recognition
Ethos Award recognizes employee
contributions and their demonstration
of core values, culture and initiatives
to build better communities
—
Employee Development,
Education & Well-being
Committed to the development of
employees through continuous
learning and promotion of healthy
workplaces and lifestyles
Governance
—
50%
of Dream Unlimited Board
members are women
—
75%
of Dream Unlimited Board
members are independent
—
Strong Governance
policies and transparency in all
aspects of our business
—
Whistleblower
procedures and
reporting guidelines
—
Board Mandated
and supported
sustainability initiatives
* Social highlights are based on all Dream entities combined.
Since Dream became the
National Sponsor for
The Shoebox Project for
Women in 2014, Dream
employees have donated
over 6,000 shoeboxes
to women in shelters.
Tax Contribution*
The Company is subject to a range of federal, provincial, municipal and other local
taxes, fees, charges and levies. The following chart summarizes amounts paid by the
Company in the normal course of operations. We highlight our contribution because
we see this as an important measure of our specific financial contribution to the
overall Canadian economy.
Income Taxes**
$ 107,798,000
$ 15,237,000
Property Related Taxes
$ 8,524,000
$ 7,527,000
2019
2018
Taxes paid on leased and owned property, school taxes,
provincial/municipal land transfer tax or property
registration taxes paid on the purchase of real property.
Development & Other Charges
$ 33,564,000
$ 62,528,000
Development charges/fees paid, building permits, levies
and the cost of municipal services installed on lands related
primarily to the Company’s land and housing business in
western Canada.
People Taxes
$ 3,056,000
$ 3,189,000
Company’s share of various payroll taxes including
government pension, employment insurance, government
health costs and workers’ compensation.
Total
$152,942,000
$ 88,481,000
* Represents Dream on a standalone basis.
** The amount reported in 2019 includes payments of $102.1 million made by the Company in February 2020 for 2019 income taxes payable
(The amount reported in 2018 includes payments of $1.4 million made by the Company in February 2019 for 2018 income taxes payable).
Table of Contents
Management’s Discussion
and Analysis
Management’s Responsibility for
Consolidated Financial Statements
Independent Auditor’s Report
1
38
39
Consolidated Financial Statements
41
Notes to the Consolidated
Financial Statements
46
Directors and Management Team
IBC
Corporate Information
IBC
West Don Lands
Toronto, ON
Management’s Discussion and Analysis
The Management’s Discussion and Analysis ("MD&A") is intended to assist readers in understanding Dream Unlimited Corp. (the "Company" or "Dream"),
its business environment, strategies, performance and risk factors. This MD&A should be read in conjunction with the audited consolidated financial
statements ("consolidated financial statements") of Dream,
including the notes thereto, as at and for the year ended December 31, 2019 and
December 31, 2018, which can be found in the Company’s annual filings on the System for Electronic Document Analysis and Retrieval ("SEDAR")
(www.sedar.com). The financial statements underlying this MD&A, including 2018 comparative information, have been prepared in accordance with
International Financial Reporting Standards ("IFRS"). Certain disclosures included herein are non-IFRS measures. Refer to the "Non-IFRS Measures" section
of this MD&A for further details.
All dollar amounts in tables within this MD&A are in thousands of Canadian dollars, unless otherwise specified. Unless otherwise specified, all references to
"we", "us", "our" or similar terms refer to Dream and its subsidiaries. This MD&A is dated as of, and reflects all material events up to, February 25, 2020.
The “Forward-Looking Information” section of this MD&A includes important information concerning certain information found in this MD&A that contains
or incorporates statements that constitute forward-looking information within the meaning of applicable securities laws. Readers are encouraged to read
the “Forward-Looking Information” and “Risk Factors” sections of this MD&A for a discussion of the risks and uncertainties regarding this forward-looking
information as there are a number of factors that could cause actual results to differ materially from those disclosed or implied by such forward-looking
information.
Business Overview
Dream is a leading developer of exceptional office and residential assets in Toronto, owns stabilized income generating assets in both Canada and the U.S.,
and has an established and successful asset management business, inclusive of $9 billion of assets under management across three Toronto Stock
Exchange ("TSX") listed trusts and numerous partnerships. We also develop land and residential assets in Western Canada for immediate sale. Dream
expects to generate more recurring income in the future as its urban development properties are completed and held for the long term. Dream has a
proven track record for being innovative and for our ability to source, structure and execute on compelling investment opportunities. A comprehensive
overview of our holdings is included in the "Summary of Dream's Assets & Holdings" section of this MD&A.
From the outset, we have successfully identified and executed on opportunities for the benefit of the business and shareholders, including the creation of
Dream Asset Management Corporation ("DAM") in 1996 as a public company, its subsequent privatization in 2003 and reorganization in 2013, the creation
of Dream Office REIT in 2003, the establishment of our asset management business, and the creation of Dream Global REIT, Dream Industrial REIT and
Dream Hard Asset Alternatives Trust ("Dream Alternatives" or "DAT") in 2011, 2012 and 2014, respectively. In the three and twelve months ended
December 31, 2019, the Company sold Dream Global REIT to affiliates of real estate funds managed by The Blackstone Group Inc. (collectively,
"Blackstone") in one of the largest real estate mergers and acquisitions transactions in Canada.
Dream Unlimited Corp. – December 31, 2019 | 1
Summary of Achievements – Fourth Quarter and Year Ended 2019
Completion of the Sale of Dream Global REIT & Liquidity Update
The sale of Dream Global REIT to affiliates of real estate funds managed by the Blackstone Group Inc. successfully closed in the fourth quarter of 2019 (the
“transaction”). In the three months ended December 31, 2019, the transaction generated pre-tax earnings of $421.6 million ($446.5 million in the twelve
months ended December 31, 2019) and net cash proceeds to Dream of approximately $500.0 million in respect of the Company’s asset management
agreement and units directly owned in the REIT. The proceeds were used to pay down $225.0 million on corporate debt facilities, in addition to funding the
redemption of all outstanding Preference shares, series 1 for aggregate proceeds of $29.1 million and for other working capital purposes. As of December
31, 2019, we had corporate level cash of $233.4 million, most of which was used to fund a substantial issuer bid (“SIB”) and corporate taxes subsequent to
year end. As at December 31, 2019, our debt to total asset ratio on a Dream standalone basis, was 24.6%, down from 36.4% as at September 30, 2019 and
34.9% as at December 31, 2018. As at December 31, 2019 we had $322.8 million of undrawn credit availability on our corporate facilities, the most excess
liquidity we have ever had in our history since going public.
The Company remains committed to maintaining a conservative debt position and may use excess liquidity to purchase additional units in Dream Office
REIT and Dream Alternatives as opportunities arise and to fund potential new investments and ongoing share repurchases under the Company’s normal
course issuer bid (“NCIB”).
Share Repurchase Activity & Return to Shareholders
In the three and twelve months ended December 31, 2019, 0.3 million and 2.0 million Subordinate Voting Shares were purchased for cancellation by the
Company for $2.5 million and $16.5 million, respectively, under its NCIB representing 12% of annual trade volume.
In the three months ended December 31, 2019, the Company announced its intention to repurchase up to 10.0 million shares at a price of $11.75 per
share under a SIB. On January 22, 2020, the SIB was successfully completed, and the Company repurchased the full amount of shares for an aggregate
purchase price of $117.5 million.
Dividends of $2.6 million and $10.6 million were declared and paid on its Subordinate Voting Shares and Class B common shares ("Class B Shares") in the
three and twelve month periods, respectively.
Asset Management and Investments in Dream Publicly Listed Funds
Post-closing of the Dream Global REIT transaction, the Company has committed its global asset management team to lead Dream Industrial REIT’s overseas
expansion by leveraging their expertise and local relationships in Europe. On this front on January 22, 2020, Dream Industrial REIT announced a European
expansion strategy into Germany and the Netherlands, which will allow the REIT to capitalize on purchasing high quality assets with a low cost of debt. To
date, the REIT has completed or is in exclusive negotiations or under contract to complete approximately $327 million (€223 million) in acquisitions in the
first half of 2020. In addition to industrial properties, we will continue to seek out growth opportunities in Europe across other asset classes.
At December 31, 2019, the total fair value of units held in the Dream Publicly Listed Funds (comprising Dream Alternatives and Dream Office REIT) was
$642.5 million, representing 52% of the Company’s total market capitalization (compared to $457. 5 million as at December 31, 2018, inclusive of Dream
Global REIT units). The increase in value from 2018 was driven by acquisitions in the open market of $64.1 million of Dream Office REIT units, $26.7 million
of Dream Alternatives units, and an increase in fair value of $182.0 million due to unit price appreciation, partially offset by the redemption of the Dream
Global REIT units as part of the transaction of $86.1 million. As of February 21, 2020, Dream currently owns 17.0 million units or $615.7 million at fair value
in Dream Office REIT (a 28% interest, or 30% interest inclusive of units held by the President and Chief Responsible Officer ("CRO")) and 16.1 million units
or $127.2 million at fair value in Dream Alternatives (a 23% interest), comprising 61% of our market capitalization.
Toronto & Ottawa Development & Stabilized Income Generating Assets
Across the Dream group platform, which includes assets held directly through the Company, Dream Alternatives and Dream Office REIT, we have
approximately 5.4 million square feet (“sf”) of gross leasable area (“GLA”) in retail or commercial assets which are fully stabilized, and approximately 3.7
million sf of GLA and nearly 14,000 condominium or purpose-built rental units (at the project level) in our development pipeline across Toronto & Ottawa.
For further details by asset class, refer to the “Summary of Dream’s Assets & Holdings” section of this MD&A.
In the fourth quarter of 2019, we recorded fair value gains on our investment properties of $28.7 million, an increase of $21.1 million relative to the
comparative period, primarily driven by capitalization rate compression and increases in net operating income at the Distillery District, as supported by a
third party appraisal. The Distillery District (owned 50% by Dream) comprises 395,000 sf of commercial/retail GLA, is 99.3% occupied as at December 31,
2019 and is carried at $144.5 million on the Company’s balance sheet at year end. Dream initially purchased the Distillery District in 2004 for $7.75 million
for our 50% ownership.
Dream Unlimited Corp. – December 31, 2019 | 2
In the year ended December 31, 2019, we achieved 375 condominium unit occupancies (122 units at Dream's share) at Phase 1 of Riverside Square, our 5-
acre, two-phase, mixed-use development located in the east end of downtown Toronto. Phase 1 of the project comprises 688 condominium units, which
are 99% pre-sold as at February 21, 2020 and are expected to occupy through 2020, a state-of-the-art multi-level auto-plex, and 20,000 sf of retail GLA.
In the three months ended December 31, 2019, we commenced first occupancies at Canary Block, our first substantially complete building in Stage 2 of the
Canary District. We achieved 54 condominium unit occupancies in 2019 (27 units at Dream's share), with the remaining units expected to occupy in the
first quarter of 2020. In total on the 37-acre site, we expect to develop over 1,480 residential units and 58,000 sf of retail on the Stage 2 lands, which is in
addition to the completed 810 condominium units and 30,000 sf of retail in Stage 1, which initially served as the Pan Am Athletes’ Village in 2015. In
addition to retail amenities, the Canary District includes the 18-acre Corktown Common Park and the 82,000 sf Cooper-Koo YMCA.
During the year ended December 31, 2019, Dream through CMHC's Rental Construction Financing initiative, closed on $357 million of financing (at the
project level) on Block 8 of its purpose-built rental community in Toronto’s West Don Lands neighbourhood. Construction on Block 8 commenced in the
fourth quarter of 2019 and will comprise 770 rental units, of which 30% are affordable. As a result of progress achieved to date on Block 8, a fair value gain
of $21.3 million (at the project level) was recognized in the fourth quarter of 2019, as supported by a third-party appraisal. Dream, along with Dream
Alternatives has a 33% interest in the development.
Including the West Don Lands, Canary District and Distillery District, Dream owns approximately 62 acres alongside its development partners in the
downtown Toronto pocket, which will comprise 3,100 condominium units, 2,600 purpose-built rental units and 1.1 million sf of retail and commercial GLA
upon completion.
In the year ended December 31, 2019, construction continued to progress on our Zibi development. The project is a multi-phase development that
includes over 4 million sf of density consisting of over 1,800 residential units and over 2 million sf of commercial space. Land servicing on both the Ontario
and Quebec lands continues and construction is underway on the project's next residential building, Kanaal, a 71-unit condominium building in Ottawa
expected to occupy in 2020. In total, there is over 630,000 sf of residential rental, retail and commercial space in various planning/development stages at
Zibi, of which 78% of the retail and commercial space has been pre-leased as of December 31, 2019. Dream, along with Dream Alternatives, has an 80%
interest in the development.
Dream Unlimited Corp. – December 31, 2019 | 3
Our Operating Segments and Strategy
As an asset manager, owner and developer of real estate, our objectives are to:
Develop best-in-class properties and communities that attract exceptional businesses, residents and visitors;
Own our newly developed income producing assets for the long term;
•
•
• Maintain a conservative balance sheet and liquidity position;
• Work with exceptional partners and stakeholders to maximize the value of our assets and developments;
• Manage our asset mix and profile to maximize long term value to shareholders; and
•
Generate solid returns for our shareholders over the long term.
We have achieved our goals in the past as a result of our expertise and high quality asset base, combined with a track record in our ability to source,
structure and execute on compelling investment opportunities while maintaining conservative debt levels. Over the last few years, we have actively
focused on differentiating our asset base by growing assets that contribute to recurring income and investing in development assets and real estate in
Toronto, with a goal of improving the safety, value and earnings quality of our business. Inclusive of assets held by Dream Alternatives and Dream Office
REIT, our portfolio totals nearly 14,000 residential units and 11.6 million sf of commercial/retail GLA as at December 31, 2019 at 100% project level.
Recurring income is important to our business as it provides stable returns in order to fund our ongoing interest, fixed operating costs and dividends. This
provides enhanced stability and financial flexibility as we continue to execute on our development pipeline. Assets that contribute to recurring income
include our asset management contracts, our 27% equity ownership in Dream Office REIT and our stabilized income generating assets, such as the Distillery
District in Toronto and our ski hill in Colorado, Arapahoe Basin. Our future recurring income properties will include those that are currently being
developed within our mixed-use developments in Toronto and Ottawa and our master-planned communities in Western Canada.
Our development assets, comprised of residential, commercial, retail and raw land, are located across Toronto, Ottawa and Western Canada. We believe
our development pipeline includes exceptional assets that will contribute to income and cash flow over time as they are developed and completed. Income
and cash flow generated from these assets can vary from period to period, due to a variety of factors including the timing of construction, availability of
inventory, timing of completion and end customer occupancy. As we execute on completing our development properties, we anticipate our recurring
income assets will increase over time.
The Company's operating segments are as follows:
•
Recurring income segments:
•
•
Asset management and investments in the Dream Publicly Listed Funds ("asset management") includes various agreements with the
Dream Publicly Listed Funds, and various development partnerships, in addition to a 27% equity interest in Dream Office REIT.
Stabilized income generating assets includes Arapahoe Basin, a ski hill in Colorado, income producing assets in Western Canada and
Toronto, and the ownership of a renewable power portfolio.
•
Development segments:
•
Urban development - Toronto & Ottawa ("urban development")
development in the Greater Toronto Area ("GTA") and Ottawa/Gatineau regions.
includes condominium, purpose-built rental and mixed-use
• Western Canada community development includes land, housing and retail/commercial/multi-family development in Saskatchewan
•
and Alberta.
As income properties are built and completed within our developments, they will transfer to our recurring income segments.
Dream Alternatives includes the operating activity of Dream Alternatives' portfolio of real estate development opportunities and recurring
income assets.
•
Commencing in the first quarter of 2019, we redefined our segment information to better reflect how we manage our business. Comparative information
has been reclassified in accordance with our new segment presentation.
Dream Unlimited Corp. – December 31, 2019 | 4
Selected Key Operating Metrics by Segment(1)
(in thousands of dollars,
except outstanding
share amounts)
Asset management
Stabilized income
generating assets
Urban development -
Toronto and Ottawa
Western Canada
community
development
For the three months ended December 31, 2019
Corporate and other
Total Dream standalone
Revenue
% of total revenue
Net margin
Net margin (%)
(2)
Revenue
% of total revenue
Net margin
Net margin (%)
(2)
Segment assets
Segment liabilities
Segment shareholders'
equity
Total issued and
outstanding shares
(in thousands of dollars,
except outstanding
share amounts)
Revenue
% of total revenue
Net margin
Net margin (%)
(2)
Revenue
% of total revenue
Net margin
Net margin (%)
(2)
Segment assets
Segment liabilities
Segment shareholders'
equity
Total issued and
outstanding shares
$
$
$
$
$
$
$
$
$
$
$
$
$
$
288,214 $
76.7%
285,618 $
99.1%
319,741 $
59.6%
306,389 $
95.8%
593,154 $
20,002 $
13,703 $
3.6%
35 $
0.3%
67,530 $
12.6%
14,638 $
21.7%
30,124 $
8.0%
2,772 $
9.2%
53,553 $
10.0%
257 $
0.5%
378,310 $
133,766 $
529,920 $
306,231 $
43,959 $
11.7%
(15,607) $
n/a
95,735 $
17.8%
(20,437) $
n/a
736,044 $
103,119 $
— $
—%
— $
n/a
376,000
100.0%
272,818
72.6%
For the year ended December 31, 2019
— $
—%
— $
n/a
536,559
100.0%
300,847
56.1%
As at December 31, 2019
241,307 $
468,761 $
2,478,735
1,031,879
573,152 $
244,544 $
158,743 $
632,925 $
(227,454) $
1,381,910
105,318,501
For the three months ended December 31, 2018
Asset management
Stabilized income
generating assets
Urban development -
Toronto and Ottawa
Western Canada
community
development
Corporate and other
Total Dream standalone
13,587 $
9.5%
10,856 $
79.9%
44,034 $
15.0%
33,313 $
75.7%
16,420 $
11.4%
2,724 $
16.6%
66,429 $
22.6%
15,861 $
23.9%
19,742 $
13.7%
1,040 $
5.3%
23,567 $
8.0%
(3,971) $
n/a
549,910 $
113,662 $
351,890 $
124,705 $
352,216 $
199,846 $
94,007 $
65.3%
28,039 $
29.8%
160,041 $
54.4%
20,696 $
12.9%
788,392 $
173,590 $
— $
—%
— $
n/a
143,756
100.0%
42,659
29.7%
For the year ended December 31, 2018
— $
—%
— $
n/a
294,071
100.0%
65,899
22.4%
As at December 31, 2018
13,620 $
398,973 $
2,056,028
1,010,776
436,248 $
227,185 $
108,435 $
614,802 $
(385,353) $
1,001,317
107,331,005
(1)
(2)
All metrics are calculated on a Dream standalone basis. Refer to the “Non-IFRS Measures” section of this MD&A for further details.
Net margin (%) is a non-IFRS measure. Refer to the "Non-IFRS Measures" section of this MD&A for further details.
Dream Unlimited Corp. – December 31, 2019 | 5
Asset Management and Investments in Dream Publicly Listed Funds
We provide asset management and development management services to the Dream Publicly Listed Funds and on behalf of various institutional
partnerships/third-party real estate and development assets. As of December 31, 2019, we held an aggregate of $642.5 million of units in Dream Office
REIT and Dream Alternatives at fair value, which generate monthly distributions for Dream. In the year ended December 31, 2019, the Company closed on
the sale of Dream Global REIT to Blackstone.
It is important to note that fees earned on transactional activity in a period are not recurring in nature and accordingly will impact related margins. Fees
related to development activities and partnerships included within this segment can fluctuate depending on the number of active projects and on Dream
meeting certain milestones as the development manager. We expect that development and other management fees will continue to increase in future
years as our existing developments progress through construction milestones.
In addition, we expect that distributions received from Dream Office REIT and Dream Alternatives will increase over time as we intend to further invest in
both companies on an opportunistic basis as both companies focus on core Toronto assets.
Stabilized Income Generating Assets
Dream owns a number of income generating assets which are key contributors to our sources of recurring income. These assets include Arapahoe Basin,
our ski hill in Colorado, income producing assets in Toronto and Western Canada, the largest being the Distillery District, and a 20% investment in a
renewable power portfolio. We expect assets in this segment to grow over time, as we intend to hold stabilized investment properties that are developed
by Dream in the core markets in which we operate.
Urban Development - Toronto & Ottawa
Our core development business consists of predominantly large scale developments in Toronto and Ottawa, with nearly 14,000 condominium and
purpose-built rental units and 3.7 million sf of retail and commercial density in our pipeline (at 100% project level interest). Significant projects in this
segment include the West Don Lands, Canary District, Distillery District and Riverside Square in Toronto's east end, as well as Zibi in Ottawa/Gatineau. We
expect our profitability to increase as we develop and complete these sites in phases, with certain income properties expected to contribute to recurring
income while other developments will contribute to our results upon occupancy.
Western Canada Community Development
Dream actively develops and services land in the cities of Saskatoon, Regina, Calgary and Edmonton, converting unentitled raw land to the stage where
homes and commercial properties can ultimately be constructed on the land by Dream and other third parties as part of master-planned communities.
With our land bank, comprising over 9,600 acres, market share, liquidity position and extensive experience as a developer, we are able to closely monitor
and have the flexibility to increase or decrease our inventory levels to adjust to market conditions in any year. We also construct houses, multi-family,
retail and commercial properties to maximize returns from building on our own lands.
Dream Alternatives
Dream Alternatives provides investors with access to an exceptional portfolio of real estate development opportunities and recurring income assets that
would not otherwise be available in a public and fully transparent vehicle, managed by an experienced team with a successful track record in these areas
with net asset value ("NAV") of $601.6 million. For additional details on NAV, a non-IFRS measure, refer to the "Non-IFRS Measures" section of this MD&A.
Dream Alternatives' objectives are to build and maintain a growth-oriented portfolio, provide predictable cash distributions to unitholders on a tax
efficient basis, and grow and reposition its portfolio to increase cash flow, unitholders' equity and net asset value per unit over time. As of December 31,
2019, Dream owns 23% of Dream Alternatives' outstanding trust units or $121.8 million at fair value and is Dream Alternatives' largest unitholder. We fully
consolidate Dream Alternatives within our financial results.
Timing of Income Recognition and Impact of Seasonality
The Company’s housing and condominium operations recognize revenue at the time of occupancy and, as a result, revenue and direct costs vary
depending on the number of units occupied in a particular reporting period. The Company’s land operations recognize revenue generally when a 15%
deposit has been received from the third-party purchaser, ultimate collection of the full purchase price is reasonably assured and certain other
development milestones are substantially met. Revenue from land is deferred until occupancy by a third-party customer, when the land is sold as part of a
home constructed by our housing division. Certain marketing expenses for condominiums and homes are incurred prior to the occupancy of these units
and accordingly are not tied to the number of units occupied in a particular period as they are expensed as incurred. Commissions are capitalized as
contract assets, and expensed when condominium and housing revenue is recognized.
Based on our geographic location, most of our development activity in Western Canada takes place between April and October due to weather constraints,
while sales orders vary depending on the rate at which builders work through inventory, which is affected by weather and market conditions. Traditionally,
our highest sales volume quarter for our land and housing divisions has been the fourth quarter, while our lowest has been the first quarter.
As a result of the above, the Company’s results can vary significantly from quarter to quarter. Due to the seasonal nature of wind and solar renewable
power assets, we expect higher returns on our renewable power portfolio in the spring and summer months, compared to the fall and winter, although the
annual income level is recurring in nature.
Dream Unlimited Corp. – December 31, 2019 | 6
Key Financial Information and Performance Indicators
Selected Financial Information – Consolidated Dream
(in thousands of dollars, except per share and outstanding share
amounts)
Revenue
Gross margin
Gross margin (%)
(1)
Net margin
Net margin (%)
(2)
Earnings before income taxes
Earnings for the period
Basic earnings per share
(3)
Diluted earnings per share
(3)
Weighted average number of shares outstanding, basic
Total issued and outstanding shares
Total earnings for the period attributable to:
Shareholders
(4)
Total assets
Total liabilities
Total equity
(1)
For the three months ended December 31,
For the year ended December 31,
2019
383,360 $
288,124 $
75.2%
275,793 $
71.9%
458,329 $
349,191 $
3.32 $
3.21 $
2018
153,955 $
57,905 $
37.6%
46,414 $
30.1%
70,660 $
56,622 $
0.52 $
0.50 $
2019
580,430 $
370,038 $
63.8%
324,996 $
56.0%
440,426 $
331,745 $
3.13 $
3.05 $
2018
339,873
134,782
39.7%
87,668
25.8%
213,492
192,053
1.76
1.71
105,352,030
105,318,501
107,679,021
107,331,005
106,287,834
105,318,501
108,450,962
107,331,005
350,106 $
55,742 $
332,246 $
190,948
$
$
$
$
$
$
$
$
December 31, 2019
December 31, 2018
$
$
$
3,034,033 $
1,601,424 $
1,432,609 $
2,751,566
1,631,986
1,119,580
(2)
(3)
(4)
Gross margin % (a non-IFRS measure) represents gross margin as a percentage of revenue. For additional details, refer to the "Non-IFRS Measures" section of this MD&A.
Net margin % (a non-IFRS measure) represents net margin as a percentage of revenue. For additional details, refer to the "Non-IFRS Measures" section of this MD&A.
See Note 35 of the Company’s consolidated financial statements for the year ended December 31, 2019 for further details on the calculation of basic and diluted earnings per share.
Total earnings attributable to shareholders excludes the portion allocated to non-controlling interests.
The Company evaluates its Western Canada community development, urban development and asset management segments using net margin. The
Company's stabilized income generating assets are evaluated using net operating income. Stated as a percentage to evaluate operational efficiency, these
metrics are used as fundamental business considerations for updating budgets, forecasts and strategic planning.
Overview of Consolidated Results
In the year ended December 31, 2019, on a consolidated basis, the Company recognized earnings before income taxes of $440.4 million, compared to
$213.5 million in the prior year, due to the Dream Global REIT transaction, which generated $446.5 million of income, increased earnings from equity
accounted investments of $56.3 million as a result of higher condominium occupancies and increased fair value gains on projects under development. This
was partially offset by reduced margin contribution from our Western Canada land and housing business of $18.0 million, a $23.2 million write-down on
land held for development in Regina and a higher fair value change relating to the unit appreciation of Dream Alternatives trust units of $93.8 million.
Results in the comparative period included a one-time net gain on acquisition of Dream Alternatives of $130.0 million. Dream Alternatives trust units held
by other unitholders are treated as a liability on the consolidated statements of financial position of Dream and are fair valued each period under IFRS,
generating losses (gains) as Dream Alternatives’ unit price increases (decreases). Fair value losses on the Dream Alternatives trust units were $113.5 million
in the current year (as a result of the impact of the unit price increasing to $7.75 at December 31, 2019 from $6.24 at December 31, 2018), compared to
losses of $19.7 million in the prior year.
For similar reasons, in the three months ended December 31, 2019, earnings before income taxes increased by $387.7 million over the comparative
period.
Dream Unlimited Corp. – December 31, 2019 | 7
Selected Financial Information – Dream Standalone(1)
Based on how we operate our business and evaluate our economic ownership of Dream Alternatives, we believe reviewing Dream's standalone results
excluding the impact of consolidating Dream Alternatives provides relevant information for a user to understand the value and performance of Dream's
assets. Accordingly, unless otherwise noted, all segment discussions hereafter are presented on this basis. Refer to the "Segmented Assets and Liabilities"
and "Segmented Statement of Earnings" sections in this MD&A for a reconciliation of Dream standalone to the consolidated financial statements as at
December 31, 2019.
For the three months ended December 31,
For the year ended December 31,
(in thousands of dollars, except per share and outstanding share
amounts)
Revenue
Gross margin
Gross margin (%)
(2)
Net margin
Net margin (%)
(2)
Earnings before income taxes
Earnings for the period
Basic earnings per share
(3)
Diluted earnings per share
Weighted average number of shares outstanding
Total issued and outstanding shares
Total earnings for the period attributable to:
Shareholders
Total assets
Total liabilities
Total shareholders' equity (excluding non-controlling interest)
(1)
(4)
2019
376,000 $
285,149 $
75.8%
272,818 $
72.6%
456,241 $
350,823 $
3.35 $
3.24 $
2018
143,756 $
54,150 $
37.7%
42,659 $
29.7%
40,881 $
29,908 $
0.26 $
0.25 $
2019
536,559 $
345,889 $
64.5%
300,847 $
56.1%
518,630 $
402,492 $
3.81 $
3.71 $
2018
294,071
113,013
38.4%
65,899
22.4%
109,334
83,093
0.76
0.75
105,352,030
105,318,501
107,679,021
107,331,005
106,287,834
105,318,501
109,230,724
107,331,005
353,017 $
28,043 $
404,559 $
82,048
$
$
$
$
$
$
$
$
December 31, 2019
December 31, 2018
$
$
$
2,478,735 $
1,031,879 $
1,381,910 $
2,056,028
1,010,776
1,001,317
(2)
(3)
(4)
Dream standalone represents the standalone results of Dream, excluding the segment impact of Dream Alternatives’ consolidated results. Refer to the “Non-IFRS Measures” section of this MD&A
for further details. Total assets as of December 31, 2019 includes the Company's investment in Dream Alternatives of 15,721,604 units at $5.97 per unit totalling $93.8 million (December 31, 2018
- 12,138,723 units at $5.99 per unit totalling $72.7 million). The Company’s investment in Dream Alternatives is recorded at cost less return of capital.
Gross margin (%) and net margin (%) are non-IFRS measures. Refer to the "Non-IFRS Measures" section of this MD&A for further details.
Basic earnings per share is computed by dividing Dream’s earnings attributable to owners of the parent by the weighted average number of Dream Subordinate Voting Shares and Class B Shares
outstanding during the period.
Total shareholders' equity (excluding non-controlling interest) excludes $64.9 million of non-controlling interest as at December 31, 2019 ($43.9 million as at December 31, 2018) and includes the
Company's investment in Dream Alternatives as at December 31, 2019 of $93.8 million ($72.7 million as at December 31, 2018). For further details refer to the "Segmented Assets and Liabilities"
section of this MD&A.
Dream Unlimited Corp. – December 31, 2019 | 8
Summary of Dream's Assets & Holdings
The following table includes supplementary information on our portfolio as at December 31, 2019.
Project/Property
Entity
Dream
Ownership
(1)
Status
Total residential
units at
(2)
completion
Total
commercial and
(2)
retail GLA
In-place and
committed
occupancy
Occupancy/
stabilization
date
Dream Office REIT
Dream Office REIT
RECURRING INCOME SEGMENTS
Downtown Toronto & GTA
Commercial:
Adelaide Place
50 & 90 Burnhamthorpe Road West (Sussex Centre) Dream Office REIT/DAT
2200-2206 Eglinton Avenue East &
1020 Birchmount Road
State Street Financial Centre
438 University Avenue
655 Bay Street
74 Victoria Street/137 Yonge Street
720 Bay Street
36 Toronto Street
330 Bay Street
20 Toronto Street/33 Victoria Street
250 Dundas Street West
Distillery District
Victory Building
49 Ontario
425 Bloor Street East
Queen and Mutual
212 King Street West
10 Lower Spadina
100 Steeles Avenue West
360 Bay Street
67 & 69 Richmond Street West
6 Adelaide Street East
350 Bay Street
366 Bay Street
349 Carlaw
56 Temperance Street
Canary District - Stage 1 retail
Plaza Imperial
Plaza Bathurst
220 King Street West
Other GTA retail
Other:
The Broadview Hotel
Total Downtown Toronto & GTA
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream
Dream Office REIT
DAT
Dream Office REIT
DAT
Dream Office REIT
DAT
Dream/DAT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
DAT
Dream Office REIT
Dream
DAT
DAT
Dream Office REIT
Dream
Dream
27.2%
63.7%
27.2%
Income property
Income property
Income property
27.2%
27.2%
27.2%
27.2%
27.2%
27.2%
27.2%
27.2%
27.2%
50.0%
27.2%
100.0%
27.2%
9.0%
27.2%
100.0%
50.0%
27.2%
27.2%
27.2%
27.2%
27.2%
100.0%
27.2%
50.0%
40.0%
40.0%
13.6%
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Redevelopment
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
18.0-50.0% Income property
50.0%
Income property
U.S.
Arapahoe Basin ski hill, Colorado
12800 Foster Street, Kansas
Total U.S.
Western Canada
Residential and Mixed-Use:
Kensington, Saskatoon
Commercial:
444 - 7th Building, Calgary
Saskatoon Square, Saskatoon
Princeton Tower, Saskatoon
606 - 4th Building & Barclay Parkade, Calgary
Kensington House, Calgary
Shops of South Kensington, Saskatoon
Preston Centre, Saskatoon
234 - 1st Avenue South, Saskatoon
Other:
Willows, Saskatoon
Total Western Canada
Total Recurring Income
Dream
Dream Office REIT
100.0%
27.2%
Income property
Income property
Dream
100.0%
Income property
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream
Dream Office REIT
Dream Office REIT
27.2%
27.2%
27.2%
27.2%
27.2%
100.0%
27.2%
27.2%
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Dream
100.0%
Income property
Dream Unlimited Corp. – December 31, 2019 | 9
TBD
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
48
—
—
—
—
—
—
—
—
—
48
48
658,000
652,000
442,000
414,000
323,000
301,000
266,000
248,000
214,000
165,000
158,000
122,000
395,000
101,000
87,000
83,000
24,000
73,000
60,000
59,000
58,000
54,000
53,000
53,000
36,000
33,000
32,000
32,000
34,000
25,000
22,000
105,000
—
5,382,000
n/a
185,000
185,000
—
261,000
228,000
134,000
126,000
78,000
72,000
62,000
10,000
n/a
971,000
6,538,000
98.4%
90.0%
60.4%
100.0%
100.0%
98.4%
98.9%
100.0%
99.2%
90.5%
99.5%
98.9%
99.3%
79.7%
91.5%
100.0%
84.4%
98.6%
100.0%
97.1%
100.0%
93.3%
96.7%
97.4%
54.3%
100.0%
100.0%
97.0%
100.0%
100.0%
83.4%
79.0%
93.2%
100.0%
100.0%
85.7%
74.2%
49.8%
85.5%
95.7%
92.0%
100.0%
66.8%
80.0%
91.4%
Project/Property
Type
Entity
Dream
Ownership
(1)
Status
Total residential
units at
(2)
completion
Total
commercial and
(2)
retail GLA
In-place and
committed
occupancy
Occupancy/
stabilization
date
DEVELOPMENT SEGMENTS
Downtown Toronto & GTA
Residential and Mixed-Use:
Riverside Square
Canary Block (Block 16)
Canary Commons (Block 12)
Canary Block 13
Canary Block 10
WDL Block 8
WDL Block 3/4/7
WDL Block 20
Distillery District - 31A Parliament
Lakeshore East
Frank Gehry
Empire Lakeshore
Brightwater
Seaton
Other
Commercial:
357 Bay Street
Total Downtown Toronto & GTA
Zibi (Ottawa/Gatineau):
Kanaal
Block 2-3
Block 208
Block 10
Block 211
Future blocks
Total Zibi (Ottawa/Gatineau)
U.S.
Las Vegas industrial site
Hard Rock/Virgin Hotel, Las Vegas
Total U.S.
Western Canada
Residential and Mixed-Use:
Brighton Village Centre, Saskatoon
Commercial:
Brighton Marketplace, Saskatoon
1900 Sherwood Place, Regina
Harbour Landing, Regina
Hampton Heights, Saskatoon
Montrose, Calgary
Total Western Canada
Total Development
Dream
Build to sell
Dream
Build to sell
Dream
Build to sell
Build to hold Dream
Various
Dream/DAT
Build to hold Dream/DAT
Build to hold Dream/DAT
Build to hold Dream/DAT
Build to hold Dream
TBD
Build to sell
Build to sell
Build to sell
Build to sell
Build to sell
Dream/DAT
Dream/DAT
DAT
Dream/DAT
DAT
Various
32.5%
50.0%
50.0%
50.0%
In occupancy
In occupancy
Under construction
Planning
33.0-50.0% Planning
33.0%
33.0%
33.0%
50.0%
50.0%
25.0%
80.0%
31.0%
7.0%
Various
Under construction
Planning
Planning
Planning
Planning
Planning
In occupancy
Planning
Planning
Planning
540
133
401
470
425
770
827
272
500
1,100
1,500
1,280
3,000
TBD
752
210,000
7,000
15,000
8,000
28,000
4,000
37,000
280,000
340,000
32,000
260,000
55,000
400,000
TBD
26,000
49.5%
91.8%
100.0%
29.4%
28.0%
Q2 2019
Q4 2019
2021
TBD
TBD
2022
2025
TBD
TBD
TBD
TBD
2020
2023-2032
TBD
TBD
Build to hold Dream Office REIT
27.2%
Redevelopment
—
11,970
65,000
1,767,000
100.0%
44.2%
2020
Build to sell
Dream/DAT
Build to hold Dream/DAT
Build to hold Dream/DAT
Build to hold Dream/DAT
Build to hold Dream/DAT
Dream/DAT
Various
80.0%
80.0%
80.0%
80.0%
80.0%
80.0%
In occupancy
Under construction
Under construction
Under construction
Under construction
Planning
Build to hold Dream
Build to sell
DAT
10.0%
10.0%
Planning
Redevelopment
Build to hold Dream
100.0%
Under construction
Build to hold Dream
Build to hold Dream Office REIT
Build to hold Dream
Build to hold Dream
Build to hold Dream
50.0%
27.2%
100.0%
100.0%
100.0%
Under construction
Redevelopment
Under construction
Under construction
Under construction
71
—
—
162
—
1,617
1,850
—
—
—
121
—
—
—
—
—
121
8,500
55,000
34,000
1,500
185,000
1,716,000
2,000,000
438,000
TBD
438,000
—
223,500
210,000
41,000
27,500
24,500
526,500
13,941
13,989
4,731,500
11,269,500
53.8%
75.8%
85.4%
77.9%
Q1 2020
Q1 2020
2020
2021
2021
TBD
TBD
2023
2022
2021
2021
2021
2020
2020
80.1%
100.0%
57.4%
72.4%
78.7%
85.8%
65.1%
86.5%
Total Dream platform
(1)
Dream and DAT holdings at fully consolidated ownership. Dream Office REIT at 27.2% ownership as of December 31, 2019.
(2)
Residential units and GLA are at 100% project level and include planned units and GLA which are subject to change pending various development approvals. Planned residential units may be developed as condominium units or
purpose-built rentals as supported by market demand, targeted studies and return objectives. For projects currently in occupancy, residential units reflect remaining units in inventory to be occupied in future periods.
Western Canada Land Holdings
City
Calgary
Edmonton
Saskatoon
Regina
Total
Summary by Geography
Acre Equivalents
2,368
857
3,149
3,303
9,677
Location
Downtown Toronto & GTA
Ottawa/Gatineau
U.S.
Western Canada
Total
(3)
(3)
Current GLA
5,447,000
—
185,000
1,181,000
6,813,000
Future GLA under
(2)
development
1,702,000
2,000,000
438,000
316,500
4,456,500
In-place and
committed
occupancy
87.6%
77.9%
100.0%
82.0%
86.5%
Residential units at
(2)
completion
11,970
1,850
—
169
13,989
Dream's acre equivalents in Western Canada represent an estimated 15,000 residential units that we plan to build out over time.
Dream Unlimited Corp. – December 31, 2019 | 10
Recurring Income Sources
Asset Management and Investments in Dream Publicly Listed Funds
As the asset manager or service provider to the Dream Publicly Listed Funds (inclusive of Dream Office REIT, Dream Alternatives and Dream Industrial REIT)
and numerous development partnerships, we are well-positioned to observe, in real time, the impact of economic trends on the drivers of demand for real
property, such as demand for space, urbanization trends and employment levels in each of the markets in which we operate. We also provide asset
management services to various institutional partnerships. The majority of our asset management fees in 2019 were derived from our agreements with
the Dream Publicly Listed Funds and the Dream Global REIT transaction. Management expects development and other asset management arrangements to
become more significant in the future.
Our asset management and management services team consists of real estate and energy/infrastructure professionals with backgrounds in architecture,
urban planning, engineering, development and redevelopment, construction, finance, accounting and law. The team brings experience from a range of
major organizations in Canada; is actively involved with internal training opportunities; and has expertise in capital markets, structured finance, real estate
investments and management across a broad spectrum of property types in diverse geographic markets. We carry out our own research and analysis,
financial modelling, due diligence, and financial planning, and have completed approximately $35 billion of commercial real estate and renewable power
transactions. We also act as lead or co-lead developer on behalf of Dream Office REIT, Dream Alternatives and our third-party partnerships.
We made a strategic decision to increase our ownership position in both Dream Office REIT and Dream Alternatives commencing in 2017, as their
businesses were transformed and are focused on owning core assets primarily in downtown Toronto and the GTA, both through dispositions of assets
outside of these markets and new investments. As of December 31, 2019, we own approximately $642.5 million of equity at fair value across the Dream
Publicly Listed Funds, and anticipate that, over time, our ownership interests will continue to increase on an opportunistic basis.
As at December 31, 2019, Dream managed assets with a total value of approximately $9 billion (December 31, 2018 – $15 billion), including fee earning
assets under management of approximately $4.0 billion (December 31, 2018 - $8.4 billion). The decrease from the comparative period is primarily driven
by the Dream Global REIT transaction.
Selected Segment Key Operating Metrics
(in thousands of dollars, unless otherwise noted)
Fees earned on Dream Publicly Listed Funds
Fees earned on dispostion of Dream Global REIT
Development and other asset management fees
Total asset management revenue
Net margin
Net margin (%)
Net gain on disposition of Dream Global REIT
Distributions received from Dream Publicly Listed Funds - Dream
Global REIT, Dream Office REIT, Dream Alternatives
(2)
(1)
Share of earnings from equity accounted investments - Dream
Office REIT
(in thousands of dollars)
Total fee-earning assets under management
Fair value of units held in Dream Publicly Listed Funds
(1)
(1)
$
$
2019
6,979 $
For the three months ended December 31,
2018
10,614
—
2,973
13,587
10,856
79.9%
280,156
1,079
288,214
285,618
99.1%
$
2019
33,687 $
For the year ended December 31,
2018
37,683
—
6,351
44,034
33,313
75.7%
280,156
5,898
319,741
306,389
95.8%
135,474 $
— $
135,474 $
5,491
22,231
5,487
11,690
22,471
44,819
—
20,424
32,402
December 31, 2019
$
4,210,000 $
642,476
December 31, 2018
8,356,000
457,492
(2)
Net margin (%) and fee-earning assets under management are non-IFRS measures. Refer to the "Non-IFRS Measures" section of this MD&A for further details.
Distributions received from the Dream Publicly Listed Funds include cash distributions and incremental units earned through distribution reinvestment plans where applicable.
Sale of Dream Global REIT to Blackstone
On December 10, 2019, Blackstone acquired all of Dream Global REIT's subsidiaries and assets. Simultaneously, DAM executed a separation agreement
with Blackstone with respect to its asset management agreement. Upon transaction close, Dream received aggregate net proceeds of approximately
$500.0 million both in respect of its asset management agreement and units owned directly in Dream Global REIT. Proceeds included $275.2 million in
satisfaction of the obligation to pay the incentive fee provided for in the asset management agreement, which was recognized within asset management
revenue, $120.0 million to purchase the asset management agreement, which was recognized within the net gain on disposition of Dream Global REIT,
$86.1 million in respect of units and deferred trust units owned and $26.4 million for expenses to be incurred as part of the separation of Dream Global
REIT from the Dream platform, some of which were incurred in the fourth quarter of 2019 and some of which will occur in future periods.
Results of Operations – Asset Management
In the three and twelve months ended December 31, 2019, revenue from asset management arrangements increased by $274.6 million and $275.7 million,
respectively, from the prior year primarily due to the aforementioned incentive fee earned on the Dream Global REIT transaction in 2019.
Effective April 1, 2019, the Company agreed that fees payable by Dream Alternatives pursuant to the management agreement would be satisfied by the
delivery of units of Dream Alternatives converted at $8.74 per unit, which are subsequently measured at the unit trading price for accounting purposes,
Dream Unlimited Corp. – December 31, 2019 | 11
resulting in a decrease in asset management revenue of $0.3 million and $1.0 million for the three and twelve months ended December 31, 2019,
respectively.
Net margin for the three and twelve months ended December 31, 2019 increased by $274.8 million and $273.1 million, respectively, relative to the
comparative periods due to the aforementioned incentive fee revenue earned on the Dream Global REIT transaction, partially offset by increased costs.
In the year ended December 31, 2019, Dream and Dream Office REIT entered into a shared services agreement pursuant to which Dream will act as the
development manager for Dream Office REIT's future development projects for fees equal to 3.75% of the net revenue of the development or, for rental
properties, 3.75% of the IFRS value upon completion, without any promote or other incentive fees. In the three and twelve months ended December 31,
2019, Dream recognized development management fees of $0.6 million and $1.5 million, respectively, under this shared services agreement.
Investments in Dream Publicly Listed Funds
As at December 31, 2019, the Company held $642.5 million in the Dream Publicly Listed Funds, up from $457.5 million at December 31, 2018. Although for
accounting purposes the treatment of these investments differ, management believes the fair value and distributions generated from holding these
investments are important measures to include herein.
Dream Office REIT is an unincorporated, open-ended real estate investment trust. It is focused on owning, leasing and managing well-located, high-quality
central business district and suburban office properties. The Company's investment in Dream Office REIT is recorded in equity accounted investments.
Details of the Company’s investments in the Dream Publicly Listed Funds at fair value are presented below.
(in thousands of dollars, except unit and per
unit amounts)
Opening, January 1, 2019
Acquisitions/(dispositions)
Unit price appreciation
Closing, December 31, 2019
(2)
Market price
Ownership %
Annual distribution per unit
Annualized distributions per year
(3)
Total distributions received in 2019
(4)
Dream Office REIT
Dream Alternatives
Units
14,518,761 $
2,205,764
—
16,724,525 $
$
$
$
$
Value
323,623
64,056
132,955
520,634
31.13
27%
1.00
16,725
14,998
Units
12,138,723 $
3,582,881
—
Value
75,746
26,661
19,435
15,721,604 $
121,842
$
$
$
$
7.75
23%
0.40
6,289
5,801
Dream Global REIT
As at December 31, 2019
(1)
Units
Value
Total Value
457,492
2,968
182,016
642,476
5,214,244 $
58,123 $
(5,214,244)
—
— $
(87,749)
29,626
— $
n/a
n/a
n/a
n/a
$
1,672 $
22,471
(1)
(2)
(3)
(4)
Dream Global REIT holdings include nil deferred trust units as of December 31, 2019 (January 1, 2019 - 2,081,517). As announced on September 15, 2019, Dream Global REIT suspended its
monthly distribution effective for the September 2019 distribution.
Dream's investment in Dream Alternatives is included in other financial assets on a Dream standalone basis at $93.8 million, which is eliminated on a consolidated basis, and our investment in
Dream Office REIT is included in equity accounted investments on a Dream standalone basis at $433.4 million (January 1, 2019 - $72.7 million and $340.3 million, respectively).
Annualized pre-tax cash flows are based on the respective distribution rates and units held as at December 31, 2019.
Distributions on the deferred trust units were received in the form of additional income deferred trust units and are not included above. The fair value of additional deferred trust units received in
the year ended December 31, 2019 was $1.1 million.
Included in this segment for the three and twelve months ended December 31, 2019 is a gain of $5.8 million and $30.9 million, respectively, relating to fair
value changes in financial instruments, primarily due to the appreciation of Dream Global REIT's unit price.
Share of Earnings from Equity Accounted Investment - Dream Office REIT
As at December 31, 2019, Dream held approximately $520.6 million or 16.7 million units in Dream Office REIT (approximately 27% of units outstanding of
Dream Office REIT).
A summary of Dream Office REIT's results is presented below.
(at 100%, unless otherwise noted)
Operating results
Net income
Net rental income
Fair value adjustments to investment properties
Comparative properties NOI
(1)
Dream's share of Dream Office REIT's net income
(2)
Cash distributions received from Dream Office REIT
(1)
For the three months ended December 31,
2018
2019
For the year ended December 31,
2018
2019
$
$
$
63,193 $
31,083
33,707
31,438 $
22,231 $
3,920
58,489 $
31,115
24,568
29,072 $
11,690 $
3,621
117,320 $
127,575
68,201
124,191 $
44,819 $
14,998
157,778
131,832
53,486
110,679
32,402
13,347
(2)
Comparative properties NOI is a non-IFRS measure. Refer to the "Non-IFRS Measures" section of this MD&A for further details.
Dream's share of Dream Office REIT's net income is adjusted for fair value changes and distributions on the Dream Office REIT LP B units.
Dream Unlimited Corp. – December 31, 2019 | 12
In the three and twelve months ended December 31, 2019, Dream’s share of equity income from its 27% investment in Dream Office REIT was $22.2
million and $44.8 million, compared to $11.7 million and $32.4 million in the comparative period, respectively. For the three and twelve months ended
December 31, 2019, comparative properties NOI increased by $2.4 million and $13.5 million from the comparative period, respectively, driven by higher
occupancy across the portfolio and higher rents in downtown Toronto, partially offset by lower rents in Dream Office REIT's "Other markets" segment.
In the year ended December 31, 2019, we became the development manager for Dream Office REIT, leading the rezoning and intensification process for
the REIT’s redevelopment assets. On January 29, 2020, we received council zoning approval for the existing 122,000 sf office building at 250 Dundas St. W.,
which permits the REIT to convert the property to a multi-use development comprising commercial office, multi-residential rental and retail components
totalling over 456,000 sf of GLA (inclusive of the residential component).
Stabilized Income Generating Assets
Our stabilized income generating assets include Arapahoe Basin, a ski hill in Colorado, income producing assets in Toronto and Western Canada, and a 20%
investment in Firelight Infrastructure, a renewable power portfolio. Included within income producing assets in Toronto and Western Canada are certain
recreational assets held at depreciated cost.
Selected Segment Key Operating Metrics
(1)
(1)
(1)
(in thousands of dollars, unless otherwise noted)
ARAPAHOE BASIN
Revenue
Net operating income
(2)
Net margin
Net margin (%)
INCOME PROPERTIES - URBAN DEVELOPMENT
Revenue
Net operating income
(3)
Net margin
Net margin (%)
Fair value gains on investment properties
INCOME PROPERTIES - WESTERN CANADA
Revenue
Net operating income
(4)
Net margin
Net margin (%)
Fair value gains (losses) on investment properties
RENEWABLES
Share of earnings (losses) from equity accounted investments - Firelight
(1)
(1)
(1)
(1)
For the three months ended December 31,
2018
2019
For the year ended December 31,
2018
2019
$
$
$
$
$
$
7,442 $
(70)
(1,263)
n/a
4,348 $
2,187
1,186
27.3%
28,107 $
1,913 $
602
112
5.9%
545 $
(814) $
9,490
1,517
528
5.6%
4,541
1,976
1,484
32.7%
11,994
2,389
980
712
29.8%
(4,403)
(875)
$
$
$
$
$
$
39,332 $
10,552
6,083
15.5%
16,638 $
7,878
5,099
30.6%
27,863 $
11,560 $
4,890
3,456
29.9%
(2,218) $
34,470
8,459
4,941
14.3%
19,410
8,710
6,704
34.5%
19,271
12,549
5,453
4,216
33.6%
(2,961)
5,479 $
5,212
(2)
(3)
(4)
Net margin (%) and net operating income are non-IFRS measures. Refer to the "Non-IFRS Measures" section of this MD&A for further details.
Included in net margin for Arapahoe Basin for the three and twelve months ended December 31, 2019 is depreciation of $1.0 million and $3.9 million (three and twelve months ended December
31, 2018 - $0.9 million and $3.0 million).
Included in net margin for Income Properties - Urban Development for the three and twelve months ended December 31, 2019 is depreciation of $0.2 million and $0.6 million (three and twelve
months ended December 31, 2018 - $0.2 million and $0.6 million).
Included in net margin for Income Properties - Western Canada for the three and twelve months ended December 31, 2019 is depreciation of $0.1 million and $0.4 million (three and twelve
months ended December 31, 2018 - $0.1 million and $0.3 million).
Arapahoe Basin
Arapahoe Basin comprises over 1,400 acres of skiable terrain, inclusive of the Beavers expansion completed in 2018. In the year ended December 31,
2019, we announced that Arapahoe Basin entered into a restricted pass arrangement with the Ikon pass. The Ikon pass was introduced in 2018 and
provides unlimited or restricted access to 40 ski areas including Aspen, Deer Valley, Copper Mountain and many more. With the change from an unlimited
pass to a restricted pass, we expect more one-time skiers to ski on Arapahoe Basin tickets and pass products and we expect our skier yields to increase
over time.
In the three months ended December 31, 2019, revenue and net operating income from Arapahoe Basin decreased from the prior year, by $2.0 million
and $1.6 million, respectively, due to lower skier volumes. In the year ended December 31, 2019, revenue and net operating income increased by $4.9
million and $2.1 million, respectively, due to growth in skier visits in the first half of the year, which was partially offset by incremental operational costs
associated with our expanded operations.
Income Properties - Urban Development
Our urban development income properties include interests in commercial and retail properties comprising over 535,000 sf of GLA, inclusive of 390,000 sf
in the Distillery District and the Broadview Hotel in downtown Toronto.
Dream Unlimited Corp. – December 31, 2019 | 13
In the three months ended December 31, 2019, both revenue and net operating income were relatively consistent with the comparative period. In the
year ended December 31, 2019, revenue and net operating income decreased by $2.8 million and $0.8 million, respectively, primarily due to the
expropriation of a commercial site in Toronto in the third quarter of 2018 (the "Obico property").
In the year ended December 31, 2018, the Company received an offer of compensation from the City of Toronto upon expropriation of the Obico property
in the amount of $48.0 million, pursuant to Section 25 of the Expropriations Act (Ontario). The Company intends to pursue a higher amount of
compensation under the Expropriations Act (Ontario) in respect of the expropriation of the Obico property.
Results for the three and twelve months ended December 31, 2019 included a $28.3 million fair value gain on our 50% investment in Downtown Toronto's
Distillery District. The fair value increase was primarily driven by capitalization rate compression and increases in net operating income as supported by an
external appraisal at year-end. The Distillery District comprises 395,000 sf of commercial/retail GLA and is 99.3% occupied as at December 31, 2019. Fair
value gains in the year ended December 31, 2018 included a $12.0 million increase on the Distillery District and an $8.0 million increase on the Obico
property upon expropriation.
Income Properties - Western Canada
Our Western Canada income properties include interests in stabilized properties comprising over 185,000 sf of GLA, including assets held for sale.
In the three months ended December 31, 2019, both revenue and net operating income remained relatively consistent with the comparative period. In the
year ended December 31, 2019, revenue and net operating income decreased by $1.0 million and $0.6 million, respectively, primarily due to the sale of a
retail property, which closed in the third quarter of 2018. Fair value losses on investment properties of $2.2 million in the year ended December 31, 2019
were driven by losses on certain properties classified as held for sale.
Renewables - Firelight
For the three and twelve months ended December 31, 2019, Firelight generated losses of $0.8 million and earnings of $5.5 million (three and twelve
months ended December 31, 2018 – losses of $0.9 million and earnings of $5.2 million, respectively). Earnings were relatively consistent with the
comparative periods as current year power production was relatively consistent with 2018. Typically, earnings for Firelight are higher in the second and
third quarters of a fiscal year due to the seasonal nature of wind and solar renewable power assets.
Development Assets
Urban Development - Toronto & Ottawa
Our urban development segment is comprised of exceptional development opportunities in various planning and construction phases across Toronto and
Ottawa. A large proportion of assets carried within this segment are held at cost and will contribute meaningfully to the Company's earnings in future
periods as properties are developed and completed. Development margin from these assets is earned in periods where we have inventory available for
occupancy or have investment properties in occupancy. The developments are financed primarily through project-specific loans and include both land
loans and construction financing. In cases where we are developing investment properties for hold, fair value gains are recognized as key milestones are
achieved through the development period over the time frame to stabilization and/or completion.
We have expanded our investment in this segment in recent years and have a number of projects in early stages of development. Some of our significant
investments were acquired on a 25/75% basis with Dream Alternatives including Brightwater, West Don Lands, the Frank Gehry development and the
Lakeshore East development, in which Dream is the co-developer alongside its partners for each of these sites. Please refer to the "Summary of Dream's
Assets & Holdings" section of this MD&A for a comprehensive overview of our Urban Development holdings. The following discussion excludes Dream
Alternatives' investment in the aforementioned developments.
Selected Segment Key Operating Metrics
(in thousands of dollars, except unit amounts)
DIRECTLY OWNED
Revenue
Gross margin
Net margin
Condominium occupancy units (project level)
Condominium occupancy units (Dream's share)
EQUITY ACCOUNTED INVESTMENTS
Share of earnings (losses) from equity accounted investments
Condominium occupancy units (project level)
Condominium occupancy units (Dream's share)
For the three months ended December 31,
2018
2019
For the year ended December 31,
2018
2019
$
$
30,124 $
6,661
2,772
229
77
4,194 $
54
27
$
$
19,742
3,688
1,040
52
52
35
—
—
53,553 $
12,101
257
395
136
4,334 $
54
27
23,567
5,219
(3,971)
60
56
(616)
—
—
Dream Unlimited Corp. – December 31, 2019 | 14
A summary of our major active projects and their development status is described below.
Zibi
Zibi is a 34-acre mixed-use waterfront development along the Ottawa River in Gatineau, Quebec and Ottawa, Ontario. The project is a multi-phase
development that includes over 4 million sf of density consisting of over 1,800 residential units (inclusive of purpose-built rental units) and over 2 million sf
of commercial space. Land servicing on both the Ontario and Quebec lands continues and construction is underway on the project's next residential
building, Kanaal, a 71-unit condominium building in Ottawa, which is 90% pre-sold as of December 31, 2019 with occupancies commencing subsequent to
year-end. Construction has also commenced on the site's first commercial and residential rental buildings. In total, there is over 630,000 sf of residential
rental, retail and commercial space in various planning/development stages at Zibi, of which 78% of the retail and commercial space has been pre-leased
as of December 31, 2019.
Riverside Square
Riverside Square is a 5-acre, two-phase, mixed-use development located in Toronto’s downtown east end on the south side of Queen Street East and
immediately east of the Don Valley Parkway. Dream has a 32.5% interest in the project alongside its partners. The first phase of the project consists of 688
residential condominium units, a state-of-the-art multi-level auto-plex and approximately 20,000 sf of retail GLA. The second phase is planned to consist of
approximately 36,000 sf of multi-tenant commercial space with a proposed grocery-anchored component together with 227 condominium units. In the
year ended December 31, 2019, 375 units (at the project level) occupied in Phase 1, with the remaining units expected to occupy through 2020.
Canary District Stage 2
Our Stage 2 lands in the Canary District, first developed in 50/50 partnership with Kilmer Van Nostrand Co. Ltd., comprise Canary Block (Block 16), Canary
Commons (Block 12), a future residential block currently referred to as “Block 13" and Block 10, a mixed-use site comprised of several components,
including a condominium building, heritage retail, a residential rental building, along with a community health centre and a training, education and
employment centre. Dream and Kilmer Van Nostrand Co. Ltd. will develop the condominium and retail components of Block 10 in a 50/50 partnership, as
well as act as the development manager for the training, education and employment centre. Dream and Dream Alternatives, together, have a 33.3%
interest in the residential rental component of Block 10, with the remainder owned by Kilmer Van Nostrand Co. Ltd. and Tricon Capital Group.
In total on the 37 acre site, we expect to develop over 1,480 residential units and 58,000 sf of retail on the Stage 2 lands, which is in addition to the
completed 810 condominium units and 30,000 sf of retail in Stage 1, which initially served as the Pan Am Athletes’ Village in 2015. In addition to retail
amenities, the Canary District includes the 18-acre Corktown Common Park and the 82,000 sf Cooper-Koo YMCA. Canary Block comprises 187 units, with
54 units occupied in the fourth quarter of 2019 (at the project level). Canary Commons comprises 401 units and is currently under construction with initial
occupancies expected to commence in 2021.
We develop or co-develop all of the projects below with exceptional partners:
Project
Distillery District
Partners
Cityscape
Riverside Square, BT Towns and other mixed-use developments
Streetcar, other private investors
Canary District - Blocks 12, 13, 16
Canary District - Block 10
Zibi
Lakeshore East
Brightwater
Frank Gehry development
West Don Lands
100 Steeles Avenue West
Kilmer Van Nostrand Co. Ltd.
Dream Alternatives, Kilmer Van Nostrand Co. Ltd., Tricon Capital Group
Dream Alternatives, Theia Partners
Dream Alternatives, Great Gulf Residential
Dream Alternatives, Kilmer Van Nostrand Co. Ltd., Diamond Corp., FRAM + Slokker
Dream Alternatives, Great Gulf Residential, other private investors
Dream Alternatives, Kilmer Van Nostrand Co. Ltd., Tricon Capital Group
Dream Alternatives, Westdale Construction Co. Ltd.
Partner since
2004
2007
2011
2019
2014
2016
2017
2017
2018
2018
A comprehensive overview of our holdings is included in the "Summary of Dream's Assets & Holdings" section of this MD&A.
Results of Operations – Condominium and Mixed-Use
In the year ended December 31, 2019, condominium inventory increased by $36.6 million, due to development costs incurred primarily related to spend at
Riverside Square and Zibi, in addition to investments in a land assembly in downtown Toronto expected to total 2.6 acres, partially offset by occupancies in
the period. Development spend was primarily funded through project-level debt facilities.
In the three months ended December 31, 2019, we generated net margin and earnings from equity accounted investments of $2.8 million and $4.2 million,
respectively, primarily driven by unit occupancies at Riverside Square and Canary Block in the period. For similar reasons in the year ended December 31,
2019, the division generated net margin and earnings from equity accounted investments of $0.3 million and $4.3 million, respectively. The increase in
both the three and twelve months ended December 31, 2019 relative to the comparative period is a result of minimal product available for occupancy in
2018, partially offset by the fixed and other operating costs of the division.
The division is focused on the planning, development and execution of upcoming projects, including 2020 occupancies at Phase 1 of Riverside Square,
Canary Block, BT Towns and Kanaal at Zibi comprising 540 units at the project level (240 units at Dream's share).
Dream Unlimited Corp. – December 31, 2019 | 15
Western Canada Community Development
Dream's Western Canada community development team focuses on land development, housing and multi-family construction and the development of
income producing retail and commercial properties within our master-planned communities.
We currently own 9,677 acres of land in Western Canada, of which nearly 9,100 acres are in nine large master-planned communities at various stages of
approval.
Dream actively develops land in Alberta (Calgary and Edmonton) and Saskatchewan (Saskatoon and Regina). Land development involves the conversion of
raw land to the stage where homes and commercial buildings may be constructed on the land. This process begins with the purchase or control of raw
land, generally known as land held for development, and is followed by the entitlement and development of the land. Once the process of converting raw
or undeveloped land for end use has begun, that portion of the land that we conduct activity on is generally known as land under development. We also
have housing operations in Alberta (Calgary) and Saskatchewan (Saskatoon and Regina) which we consider complementary to our land development
business, in addition to our retail and commercial assets across our communities.
Building on our owned land delays the recognition of revenue, as the land sale is not recognized until the property is occupied by a third-party purchaser or
tenant. In comparison, when selling land to a third party, revenue is generally recognized on receipt of a 15% deposit from the land buyer and when there
is substantial completion of the underground servicing work. Due to the economic conditions in Western Canada, we may not make new investments in
undeveloped land at the same rate as in past years unless management considers the lands to be strategic to existing land positions already owned by the
Company. Nevertheless, we expect that we will generate profits from building on our owned land in the future. Land development is financed through our
operating line, which is secured by our lands in Western Canada and associated trade receivables. Housing, retail, commercial and purpose-built rental
development is financed through project-specific construction financing.
With continued challenging market conditions in Western Canada and increased pressures from government policies, we are closely monitoring customer
demand, pricing trends and inventory supply across the division. We believe the proportion of income driven by Western Canada will continue to decline.
We expect the majority of our income over the next few years will be derived from Providence in Calgary, Brighton (Holmwood) in Saskatoon and the
Meadows in Edmonton. We are seeing ongoing slowdowns in the Regina market and accordingly recorded a write-down in the three months ended
December 31, 2019.
Selected Segment Key Operating Metrics
(in thousands of dollars, except for average selling prices and acre, lot and
unit statistics)
2019
2018
2019
2018
For the three months ended December 31,
For the year ended December 31,
LAND & HOUSING
Revenue
Net margin
Lots sold
Average selling price per lot
Acres sold
Average selling price per acre
Housing units sold
Average selling price per housing unit
DEVELOPMENT PROPERTIES
Revenue
Net operating income
Net margin
Fair value gains (losses) on investment properties
Share of earnings (losses) from equity accounted investments
(1)
$
$
$
$
$
43,649 $
(14,637)
264
117,000 $
10.7
610,000 $
25
344,000 $
310 $
(82)
(970)
(160)
617
93,758 $
28,679
561
123,000 $
17.7
739,000 $
47
333,000 $
249 $
129
(640)
1,194
92
94,440 $
(17,773)
472
113,000 $
16.3
571,000 $
132
328,000 $
1,295 $
376
(2,664)
2,836
4,628
159,356
23,776
767
121,000
20.1
729,000
215
329,000
685
437
(3,080)
1,194
(484)
(1)
Net operating income is a non-IFRS measure. Refer to the "Non-IFRS Measures" section of this MD&A for a reconciliation between net operating income and net margin.
Land & Housing Development
In the three and twelve months ended December 31, 2019, negative net margin of $14.6 million and $17.8 million was incurred, compared to net margin
of $28.7 million and $23.8 million generated in the comparative periods, respectively. Negative net margins were driven by lower sales volumes and $23.2
million relating to a write-down of land held for development in Regina, reflective of updated assumptions on absorptions and deferred development start
dates on our new phases/communities.
Development Properties
Included in Dream's share of earnings from equity accounted investments for the year ended December 31, 2019 was a $3.9 million fair value gain on
Brighton Marketplace (at Dream's 50% equity interest). Brighton Marketplace is a 223,500 sf retail development located in our Holmwood master-planned
community in Saskatoon and is 80% leased as at December 31, 2019, to tenants such as Landmark Cinemas, Save-on Foods and Motion Fitness, with
stabilization expected in mid-2021.
Dream Unlimited Corp. – December 31, 2019 | 16
Dream Alternatives
Dream owned 15.7 million units of Dream Alternatives as at December 31, 2019 (23% of units outstanding), which were acquired primarily through
purchases on the open market. Dream is the asset manager of Dream Alternatives and also has several co-owned development investments with Dream
Alternatives, which are described in the "Urban Development Inventory and Pipeline" section of this MD&A.
Selected Segment Key Operating Metrics
(in thousands of dollars, except for per unit amounts)
Revenue
Net margin
Net margin (%)
(1)
Net income
Net asset value per unit - Dream Alternatives
(1)
(1)
For the three months ended December 31,
2018
13,194 $
7,192
54.5%
6,995 $
2019
9,383 $
5,319
56.7%
19,923 $
$
$
For the year ended December 31,
2018
57,596
34,924
60.6%
13,902
2019
52,229 $
34,071
65.2%
32,331 $
December 31, 2019
$
8.75 $
December 31, 2018
8.74
Net margin % and net asset value per unit - Dream Alternatives are non-IFRS measures. Refer to the "Non-IFRS Measures" section of this MD&A for further details.
Financial Overview
For the three months ended December 31, 2019, Dream Alternatives reported net income of $19.9 million up significantly from $7.0 million in the
comparative period. The increase of $12.9 million was attributable to an increase in net fair value gains of $20.6 million in the period, primarily due to an
increase in value of 49 Ontario Street, due to the asset's redevelopment potential. Additionally, during the three months ended December 31, 2019,
Dream Alternatives recognized an increase of $7.4 million of income from equity accounted investments which was primarily driven by net fair value gains
recorded at the investment level, as supported by third-party appraisals. Partially offsetting the above-noted net fair value gains were $5.9 million of losses
related to non-core asset dispositions, a $2.4 million provision on the lending portfolio, an increase in foreign exchange losses of $3.0 million and an
increase of $4.3 million of deferred income taxes related to fair value gains in the period.
For the year ended December 31, 2019, Dream Alternatives recognized net income of $32.3 million, an increase of $18.4 million from the prior year due to
an increase in net fair value gains of $17.3 million on income properties, increased income of $22.1 million from equity accounted investments driven by
income contribution from Axis Condominiums which occupied during the year and the aforementioned fair value gains at the investment level, partially
offset by $5.9 million of losses related to non-core asset dispositions, a $2.4 million provision on the lending portfolio, an increase in foreign exchange
losses of $4.2 million and an increase of $7.4 million of deferred income taxes in the year.
As announced in February 2019, management of Dream Alternatives committed to a strategic plan to narrow the gap between the trading price of Dream
Alternatives' units and net asset value, while continuing to build the underlying value of the business. In the year ended December 31, 2019, Dream
Alternatives successfully disposed of all its non-core assets, including its entire renewable power portfolio and certain non-core income properties
comprising over 380,000 sf of GLA. Aggregate cash proceeds of $111.5 million were generated from these asset sales.
During the year ended December 31, 2019, Dream Alternatives successfully completed its first SIB, which was the first tranche of its commitment to
repurchase up to $100 million of Dream Alternatives units. Pursuant to the SIB, Dream Alternatives purchased for cancellation 4.0 million units for an
aggregate purchase price of $32.0 million. Subsequent to December 31, 2019, Dream Alternatives announced its intention to commence its second SIB,
pursuant to which Dream Alternatives has offered to purchase from unitholders up to 4.0 million units at a price of $8.25 per unit for an aggregate
purchase price of $33.0 million. The offer commenced on February 7, 2020 and will expire on March 16, 2020.
During the three and twelve months ended December 31, 2019, Dream Alternatives invested $20.5 million and $47.4 million, respectively, including
transaction costs, into its existing development opportunities which have continued to progress towards key milestones and/or completion.
During the three and twelve months ended December 31, 2019, Dream Alternatives' equity investment in Axis Condominiums in downtown Toronto
generated earnings of $1.4 million and $16.3 million, respectively, as the project completed unit occupancies.
During the three and twelve months ended December 31, 2019, Dream Alternatives invested an additional $10.8 million in its Hard Rock/Virgin Hotels Las
Vegas ("Hard Rock") investment. As at December 31, 2019, Dream Alternatives' 10% investment in Hard Rock had a fair value of $48.6 million. Subsequent
to December 31, 2019, Hard Rock closed to the public and construction began on the redevelopment/conversion of the property. The grand re-opening as
The Virgin Hotels Las Vegas is slated for late 2020.
For further details on Dream Alternatives, refer to the Dream Alternatives consolidated financial statements and Management's Discussion & Analysis for
the year ended December 31, 2019 filed on SEDAR.
Dream Unlimited Corp. – December 31, 2019 | 17
Corporate and Other Items
Interest Expense
In the three months ended December 31, 2019, interest expense was $9.9 million, an increase of $1.9 million over the comparative period as a result of a
one-time break fee incurred on the extinguishment of an interest rate swap. Interest expense for the year ended December 31, 2019 increased $4.5 million
from the prior year, primarily due to the impact of higher drawings on corporate debt facilities with fixed interest rates, as well as the aforementioned
one-time fee.
Investment and Other Income
During the year ended December 31, 2019, the Company earned investment income of $7.0 million, a decrease of $2.3 million from the prior year,
primarily due to lower distributions received from Dream Global REIT with the suspension of distributions effective September 2019 and income earned on
an expropriated property included in prior year results.
Income Tax Expense
The Company's effective income tax rate was 23.1% and 22.4% for the three and twelve months ended December 31, 2019 (three and twelve months
ended December 31, 2018 – 26.8% and 24.0%). The effective income tax rate for the year ended December 31, 2019 is lower than the statutory combined
federal and provincial tax rate of 26.6% mainly due to the non-taxable portion of capital gains, partially offset by a combination of non-deductible expenses
and other items.
We are subject to income taxes in Canada, both federally and provincially, and the United States. Significant judgments and estimates are required in the
determination of the Company's tax balances. Our income tax expense and deferred tax liabilities reflect management's best estimate of current and
future taxes to be paid. The Company is subject to tax audits from various government and regulatory agencies on an ongoing basis. As a result, from time
to time, taxing authorities may disagree with the interpretation and application of tax laws taken by the Company in its tax filings.
Liquidity and Capital Resources
Our capital consists of debt facilities and shareholders’ equity. Our objective in managing capital is to ensure adequate operating funds are available to
fund development costs; to cover leasing costs, overhead and capital expenditures for income generating assets; to provide for resources needed to fund
capital calls for existing developments; to generate a target rate of return on investments; and to cover dividend payments. In the three months ended
December 31, 2019, the Company repaid $218.7 million of corporate debt and redeemed all of the outstanding Preference shares, series 1. There have
been no material changes in future contractual obligations since December 31, 2019.
A summary of selected information as at December 31, 2019 and December 31, 2018 is presented below on a Dream standalone basis.
Less than 12
months
Greater than
12 months
December 31, 2019
Non-
determinable
Total
Less than 12
months
Greater than
12 months
Non-
determinable
December 31, 2018
Cash and cash equivalents
$
269,490 $
— $
Accounts receivable
Other financial assets
Investment in Dream Office REIT
Subtotal assets
Accounts payable and accrued liabilities
Provision for real estate development costs
Corporate debt facilities
Preference shares, series 1
Subtotal liabilities
Net excess (deficiency)
Debt to total assets ratio
(1)
162,166
11,365
—
38,053
92,453
—
443,021
130,506
92,790
36,853
—
—
23,145
—
224,105
—
— $
—
—
433,774
433,774
32,332
—
—
—
269,490 $
200,219
17,444 $
145,353
103,818
433,774
8,111
—
— $
32,581
153,031
—
1,007,301
170,908
185,612
148,267
36,853
224,105
—
85,380
33,853
100,000
—
13,637
—
224,083
—
219,233
237,720
— $
—
—
341,516
341,516
34,110
—
—
28,672
62,782
(48,325) $
(52,108) $
278,734 $
129,643
247,250
$
313,378 $
(116,744) $
32,332
401,442 $
409,225
598,076 $
24.6%
Total
17,444
177,934
161,142
341,516
698,036
133,127
33,853
324,083
28,672
519,735
178,301
34.9%
(1)
Debt to total assets ratio is calculated as debt (inclusive of Preference shares, series 1) as a percentage of total assets on a Dream standalone basis.
As at December 31, 2019, there were adequate resources to address the Company’s short-term liquidity requirements. Certain financial instruments that
are callable or due on demand are presented as due within 12 months, which is inconsistent with the repayment timing expected by management. Due to
the nature of our development business, in addition to the above resources, the Company expects to fund a portion of our current liabilities through sales
of housing, condominium and land inventories, which cannot be classified and accordingly are not presented above. Management continuously reviews
the timing of expected debt repayments and actively pursues refinancing opportunities as they arise. In addition, as at December 31, 2019, we had up to
$322.8 million of undrawn credit availability on Dream’s Western Canada operating line and margin facility. Refer to the "Investments in Dream Publicly
Listed Funds" section of this MD&A for further details on marketable securities held by the Company.
Dream Unlimited Corp. – December 31, 2019 | 18
Cash Requirements
The nature of the real estate business is such that we require capital to fund non-discretionary expenditures with respect to existing assets, as well as to
fund growth through acquisitions and developments. As at December 31, 2019, we had $269.5 million in cash and cash equivalents (December 31, 2018 –
$17.4 million). Our intention is to meet short-term liquidity requirements through cash on hand, cash from operating activities, working capital reserves
and operating debt facilities. In addition, we anticipate that cash from operations and recurring income will continue to provide the cash necessary to fund
operating expenses and debt service requirements.
Debt and Preference Shares
As at December 31, 2019, total debt was $609.9 million (December 31, 2018 – $738.6 million). A breakdown of project-specific debt and corporate debt
facilities is detailed in the table below.
(in thousands of Canadian dollars)
December 31, 2019
December 31, 2018
December 31, 2019
December 31, 2018
Balance
Weighted average interest rate
Construction loans and mortgages and term debt
Operating line - Western Canada
Total project-specific debt
Non-revolving term facility
Margin facility
Preference shares, series 1
Total corporate debt facilities
Total debt and Preference shares, series 1
$
$
$
$
385,838 $
—
385,838 $
224,105
—
—
224,105 $
609,943 $
315,200
48,943
385,838
224,083
100,000
28,672
352,755
738,593
4.68%
4.64%
4.68%
5.08%
4.56%
n/a
5.08%
4.83%
4.47%
4.48%
4.47%
4.36%
4.35%
7.00%
4.57%
4.52%
As at December 31, 2019, $106.8 million (December 31, 2018 – $104.2 million) of aggregate development loans and term debt were subject to a fixed,
weighted average interest rate of 4.47% (December 31, 2018 – 4.53%) and will mature between 2020 and 2025. A further $503.1 million (December 31,
2018 – $584.0 million) of real estate debt was subject to a weighted average variable interest rate of 4.91% (December 31, 2018 – 4.39%) and will mature
between 2020 and 2023. Included within total debt is $5.4 million of variable debt that the Company has hedged through fixed interest rate swaps.
Preference Shares, Series 1
In the year ended December 31, 2019, the Company redeemed all of its outstanding Preference Shares, series 1, in accordance with their terms. The cash
redemption price for the Preference shares, series 1 was $7.16 per share, plus all accrued and unpaid dividends from September 30, 2019 up to and
including the redemption date of December 20, 2019, for aggregate proceeds of $29.1 million. The Preference Shares, series 1 were delisted from the TSX
on the redemption date.
Contractual Obligations
Our liquidity is impacted by contractual debt and lease commitments as follows:
Project-specific debt
(1)
Corporate debt facilities
(1)
Lease commitments
2020
2021
2022
2023
2024
2025 and
thereafter
$
$
197,834 $
—
1,354
199,188 $
121,154 $
—
1,185
122,339 $
6,679 $
2,216 $
9,064 $
48,891 $
224,105
797
231,581 $
—
767
2,983 $
—
716
9,780 $
—
3,567
52,458 $
Total
385,838
224,105
8,386
618,329
(1)
The amounts presented are shown consistent with the contractual terms of repayment, which may be due on demand.
In addition to the commitments above, we may be required to fund capital to our development projects as part of the Company's normal course
operations.
Shareholders’ Equity
Dream is authorized to issue an unlimited number of Subordinate Voting Shares and an unlimited number of Class B Shares. As at December 31, 2019,
there were 102,203,590 Subordinate Voting Shares and 3,114,911 Class B Shares outstanding (December 31, 2018 - 104,215,841 Subordinate Voting
Shares and 3,115,164 Class B Shares).
In the three and twelve months ended December 31, 2019, the Company declared dividends of $2.6 million and $10.6 million, respectively, on its
Subordinate Voting Shares and Class B Shares (three and twelve months ended December 31, 2018 - $nil).
Share Repurchases
In the three and twelve months ended December 31, 2019, 0.3 million and 2.0 million Subordinate Voting Shares were purchased for cancellation by the
Company for $2.5 million and $16.5 million at an average price of $9.87 and $8.07, respectively, under the Company's NCIB (year ended December 31,
2018 – 1.9 million Subordinate Voting Shares for $16.0 million at an average price of $8.31).
On November 12, 2019, the Company announced its intention to purchase for cancellation up to 10.0 million Subordinate Voting Shares at a price of
$11.75 per share (the "purchase price"), for an aggregate purchase price not to exceed $117.5 million (the "offer").
Dream Unlimited Corp. – December 31, 2019 | 19
Subsequent to the year ended December 31, 2019, the Company announced the final results of its offer, which expired on January 22, 2020. In accordance
with the terms and conditions of the offer, the Company took up and paid for 10.0 million shares at the purchase price, for an aggregate cost of
approximately $117.5 million, excluding expenses relating to the offer. Immediately after giving effect to the offer, 92,203,590 Subordinate Voting Shares
remained outstanding.
Including the Subordinate Voting Shares of Dream and Class B Shares held or controlled directly or indirectly, the President and CRO owned an
approximate 40% economic interest and 85% voting interest in the Company as at February 21, 2020.
Off Balance Sheet Arrangements, Commitments and Contingencies
We conduct our real estate activities from time to time through joint arrangements with third-party partners. A discussion of our off balance sheet
arrangements, commitments and contingencies is included in Note 37 of the consolidated financial statements for the year ended December 31, 2019.
Transactions with Related Parties
The Company has agreements for services and transactions with related parties, which are outlined in Note 38 of our consolidated financial statements for
the year ended December 31, 2019.
Critical Accounting Estimates
The preparation of the consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue and expenses and the related disclosure of contingent assets and liabilities. Critical accounting estimates
represent estimates made by management that are, by their very nature, uncertain. We evaluate our estimates on an ongoing basis. Such estimates are
based on historical experience and on various other assumptions that we believe are reasonable under the circumstances, and these estimates form the
basis for making judgments about the carrying value of assets and liabilities and the reported amount of revenue and expenses that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A detailed summary of the
significant judgments and estimates made by management in the preparation and analysis of our financial results is included in Note 4 of our consolidated
financial statements for the year ended December 31, 2019.
Internal Control over Financial Reporting
As at the December 31, 2019 financial year-end, the President and Chief Responsible Officer and the Chief Financial Officer (the "Certifying Officers"), along
with the assistance of senior management, have evaluated the design and effectiveness of the Company’s disclosure controls and procedures (“DC&P”), as
defined in National Instrument 52-109, “Certification of Disclosure in Issuers’ Annual and Interim Filings” (“NI 52-109”). Based on that evaluation, the
Certifying Officers have concluded that, as at December 31, 2019, the DC&P are adequate and effective in order to provide reasonable assurance that
material information has been accumulated and communicated to management, to allow timely decisions of required disclosures by the Company and its
consolidated subsidiary entities, within the required time periods.
The Company’s internal control over financial reporting (“ICFR”) (as defined by NI 52-109) is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with IFRS. Using the
framework established in “2013 Committee of Sponsoring Organizations (COSO) Internal Control Framework”, published by the Committee of Sponsoring
Organizations of the Treadway Commission, the Certifying Officers, together with other members of management, have evaluated the design and
operation of the Company’s ICFR. Based on that evaluation, the Certifying Officers have concluded that the Company’s ICFR was effective as at
December 31, 2019.
There were no changes in the Company’s internal control over financial reporting in the year ended December 31, 2019 that have materially affected, or
are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
Accounting Standards Adopted During the Period and Future Accounting Standards
Refer to Note 3 of the consolidated financial statements for the year ended December 31, 2019 for information pertaining to accounting pronouncements
that will be effective in future years. The Company has adopted the following new or revised standards, including any consequential amendments thereto,
for the period effective January 1, 2019. Changes in accounting policies adopted by the Company were made in accordance with the applicable transitional
provisions as provided in those standards and amendments. As required by IAS 8, "Accounting Policies, Changes in Accounting Estimates and Errors", the
nature and the effect of these changes are disclosed below and in Note 43 of the consolidated financial statements for the year ended December 31, 2019.
IFRS 16, “Leases” (“IFRS 16”)
IFRS 16 sets out the principles for the recognition, measurement and disclosure of leases. IFRS 16 provides revised guidance on identifying a lease and for
separating lease and non-lease components of a contract. IFRS 16 introduces a single accounting model for most lessees and requires a lessee to recognize
right-of-use assets and lease liabilities for leases with terms of more than 12 months, unless the underlying asset is of low value. The Company has adopted
IFRS 16 effective January 1, 2019. Expanded disclosures required by IFRS 16 are included in Notes 16 and 18 and the impact of changes due to the adoption
of IFRS 16 is included in Note 43 of the consolidated financial statements for the year ended December 31, 2019.
Dream Unlimited Corp. – December 31, 2019 | 20
Risk Factors
We are exposed to various risks and uncertainties, many of which are beyond our control and could have an impact on our business, financial condition,
operating results and prospects. Shareholders should consider those risks and uncertainties when assessing our outlook in terms of investment potential.
For a discussion of the risks and uncertainties identified by the Company, please refer to our Annual Report for the year ended December 31, 2019 and our
most recent Annual Information Form filed on SEDAR (www.sedar.com). For a discussion of the risks and uncertainties identified specific to the Dream
Alternatives segment, please refer to the Dream Alternatives Annual Report for the year ended December 31, 2019 and the most recent Annual
Information Form filed by Dream Alternatives on SEDAR.
Ownership of Real Estate
Development Risk
The development industry is cyclical in nature and is significantly affected by changes in general and local economic and industry conditions, such as
employment levels, availability of financing for homebuyers, government regulations, interest rates, consumer confidence, levels of new and existing
homes for sale, demographic trends, housing demand and competition from other real estate companies.
An oversupply of alternatives to new homes and condominium units, such as resale properties, including properties held for sale by investors and
speculators, foreclosed homes and rental properties, may reduce the Company's ability to sell new homes and condominium units and may depress prices
and reduce margins from the sale of new homes and condominium units. Depending on market conditions, the Company may not be able, or may not
wish, to develop its land holdings. Development of land holdings and properties that are to be constructed are subject to a variety of risks, not all of which
are within the Company's control. Such risks include lack of funding, variability in development costs and unforeseeable delays.
Real estate assets, particularly raw land, are relatively illiquid in down markets. Such illiquidity tends to limit the Company's ability to vary its real estate
portfolio promptly in response to changing economic or investment conditions. If there are significant adverse changes in economic or real estate market
conditions, the Company may have to sell properties at a loss or hold undeveloped land or developed properties in inventory longer than planned.
Inventory carrying costs can be significant and may result in losses in a poorly performing project or market.
Delays and Cost Over-Runs
Delays and cost over-runs may occur in completing the construction of development projects, prospective projects and future projects that may be
undertaken. A number of factors that could cause such delays or cost over-runs include, but are not limited to, permitting delays, changing engineering
and design requirements, the performance of contractors, labour disruptions, adverse weather conditions and the availability of financing.
Supply of Materials and Services
The construction industry has from time to time experienced significant difficulties in the supply of materials and services, including with respect to
shortages of skilled and experienced contractors and tradespeople, labour disputes, shortages of building materials, unforeseen environmental and
engineering problems, and increases in the cost of certain materials. If any of these difficulties should occur, we may experience delays and increased costs
in the construction of homes and condominiums.
Competition
The residential home and condominium building industry is highly competitive. Residential home and condominium builders compete for buyers, desirable
properties, building materials, labour and capital. We compete with other local, regional and national homebuilders. Any improvement in the cost
structure or service of these competitors will increase the competition we face. We also compete with sellers of existing homes, housing speculators and
investors in rental housing. Competitive conditions in the homebuilding industry could result in: difficulty in acquiring desirable land at acceptable prices,
increased selling incentives, lower sales volumes and prices, lower profit margins, impairments in the value of our inventory and other assets, increased
construction costs and delays in construction.
Our ability to successfully expand asset management activities in the future is dependent on our reputation with clients. We believe that our track record,
the expertise of our asset management team and the performance of the assets currently under management will enable us to continue to develop
productive relationships with these companies and to grow the assets under management. However, if we are not successful in doing so, our business and
results of operations may be adversely affected.
Joint Venture Risks
Real estate investments are often made as joint ventures or partnerships with third parties. These structures involve certain additional risks, including the
possibility that the co-venturers/partners may, at any time, have economic or business interests inconsistent with ours, the risk that such co-venturers/
partners could experience financial difficulties that could result in additional financial demands on us to maintain and operate such properties or repay
debt in respect of such properties, and the need to obtain the co-venturers’/partners’ consents with respect to certain major decisions in respect of such
properties.
In addition, our co-venturers/partners may, at any time, have economic or business interests inconsistent with ours and we may be required to take
actions that are in the interest of the partners collectively, but not in Company’s sole best interests. Accordingly, we may not be able to favourably resolve
issues with respect to such decisions or we could become engaged in a dispute with any of them that might affect our ability to develop or operate the
business or assets in question efficiently. Any failure of the Company or our co-venturers and partners to meet their obligations, or disagreements with
respect to strategic decision making, could have an adverse effect on the joint ventures or partnerships, which may have an adverse effect on the
Company.
Dream Unlimited Corp. – December 31, 2019 | 21
We attempt to mitigate these risks by performing due diligence procedures on potential partners and contractual arrangements, and by closely monitoring
and supervising the joint venture or partnership.
Geographic Concentration
Our land development and housing operations are concentrated in Saskatchewan and Alberta. Some or both of these regions could be affected by severe
weather; natural disasters; shortages in the availability or increased costs of obtaining land, equipment, labour or building supplies; changes to the
population growth rates and therefore the demand for homes in these regions; and changes in the regulatory and fiscal environment. Due to the
concentrated nature of our expected land development and housing operations, negative factors affecting one or a number of these geographic regions at
the same time could result in a greater impact on our financial condition or results of operations than they might have on other companies that have a
more diversified portfolio of operations.
Given the prominence of the oil and gas industry in Alberta and Saskatchewan, the economies of these provinces can be significantly impacted by the price
of oil. Similarly, because of our substantial land and housing development operations in Alberta and Saskatchewan, any substantial decline in the price of
oil could also adversely affect the Company's operating results. We continuously evaluate the economic health of the markets in which we operate
through various means to ensure that we have identified and, where possible, mitigated risks to the Company, including the potential impacts of changes
in the price of oil. Additionally, the land development process is longer term in nature, which, to some extent, mitigates the impacts of short-term
fluctuations in the health of the economies in which we operate. As of December 31, 2019, the Company had not identified any material adverse effect on
our business as a result of the current softening of oil prices.
Our Saskatchewan and Alberta operations have historically focused on the Company's land and housing businesses, as well as a golf course reported under
our recreational properties. The Company has also recognized the potential of our substantial land holdings in these markets for retail and multi-family
residential development opportunities, and we expect to continue to increase the activity for these types of developments in the future. Our retail
developments utilize the Company’s existing land inventory to develop assets that will derive cash flows over a longer term.
Similarly, a substantial portion of the projects in our Urban Development segment are located in and around the GTA and we have invested significantly in
this region through both our Urban Development segment and our investment in Dream Office REIT and Dream Alternatives, whose portfolios are
concentrated in Toronto. Accordingly, any negative fluctuation in Toronto market fundamentals could result in a greater impact on our financial condition
or results of operations than they might have on other companies that have a more diversified portfolio of operations.
Risks Related to Acquisitions
Our external growth prospects depend in large part on our ability to identify suitable investment opportunities, pursue such opportunities and
consummate acquisitions, including direct or indirect acquisitions of real estate.
Risks Related to Master-Planned Communities
Before a master-planned community generates any revenues, material expenditures are incurred to acquire land, obtain development approvals and
construct significant portions of project infrastructure, amenities, model homes and sales facilities. It generally takes several periods for a master-planned
community development to achieve cumulative positive cash flow. If we are unable to develop and market our master-planned communities successfully
and generate positive cash flows from these operations in a timely manner, this may have a material adverse effect on our business and results of
operations.
Real Estate Ownership
An investment in real estate is relatively illiquid. Such illiquidity tends to limit our ability to vary our commercial property portfolio promptly in response to
changing economic or investment conditions. In recessionary times, it may be difficult to dispose of certain types of real estate. The costs of holding real
estate are considerable, and during an economic recession we may be faced with ongoing expenditures with a declining prospect of incoming receipts. In
such circumstances, it may be necessary to dispose of properties at lower prices in order to generate sufficient cash for operations.
Certain significant expenditures (e.g., property taxes, maintenance costs, mortgage payments, insurance costs and related charges) must be made
regardless of whether or not a property is producing sufficient income to pay such expenses. In order to retain desirable rentable space and to generate
adequate revenue over the long term, properties must be maintained or, in some cases, improved to meet market demand. Maintaining a rental property
in accordance with market standards can entail significant costs, which may not be able to be passed on to tenants. Numerous factors, including the age of
the relevant building structure, the material and substances used at the time of construction, or currently unknown building code violations, could result in
substantial unbudgeted costs for refurbishment or modernization. Any failure by us to ensure appropriate maintenance and refurbishment work is
undertaken could materially adversely affect the rental income that we earn from such properties; for example, such a failure could entitle tenants to
withhold or reduce rental payments or even terminate existing leases. Any such event could have an adverse effect on our cash flows, financial condition
and results of operations.
Rollover of Leases
Revenue properties generate income through rent received from tenants. Upon the expiry of any lease, there can be no assurance that the lease will be
renewed or the tenant replaced for a number of reasons. Furthermore, the terms of any subsequent lease may be less favourable than those of the
existing lease. Our cash flows and financial position could be adversely affected if tenants were to become unable to meet their obligations under their
leases or if a significant amount of available space in our revenue properties could not be leased on economically favourable lease terms. In the event of
default by a tenant, we may experience delays or limitations in enforcing our rights as lessor and incur substantial costs in protecting our investment. In
addition, at any time, a tenant may seek the protection of bankruptcy, insolvency or similar laws, which could result in the rejection and termination of the
lease of the tenant and, thereby, cause a reduction in the cash flows available to us.
Dream Unlimited Corp. – December 31, 2019 | 22
Market Conditions
Revenue properties are subject to economic and other factors affecting the real estate markets in the geographic areas where we own and manage
properties. These factors include government policies, demographics and employment patterns, the affordability of rental properties, competitive leasing
rates and long term interest and inflation rates. These factors may differ from those affecting the real estate markets in other regions. If real estate
conditions in areas where these properties are located decline relative to real estate conditions in other regions, our cash flows and financial condition
may be more adversely affected than those of companies that have more geographically diversified portfolios of properties.
Residential Rental Business Risk
The Company expects to be increasingly involved in mixed-use development projects that include residential rentals. Purchaser demand for residential
rentals is cyclical and is affected by changes in general market and economic conditions, such as consumer confidence, employment levels, availability of
financing for home buyers, interest rates, demographic trends, housing supply and housing demand. As a landlord in its properties that include rental
apartments, the Company is subject to the risks inherent in the multi-unit residential rental business, including, but not limited to, fluctuations in
occupancy levels, individual credit risk, heightened reputation risk, tenant privacy concerns, potential changes to rent control regulations, increases in
operating costs including the costs of utilities and the imposition of new taxes or increased property taxes.
Regulatory Risks
The real estate development process is subject to a variety of laws and regulations. In particular, governmental authorities regulate such matters as zoning
and permitted land uses, levels of density and building standards. We will have to continue to obtain approvals from various governmental authorities and
comply with local, provincial and federal laws, including laws and regulations concerning the protection of the environment in connection with such
development projects. Obtaining such approvals and complying with such laws and regulations may result in delays which may cause us to incur additional
costs that impact the profitability of a development project, or may restrict development activity altogether with respect to a particular project.
Environmental and Climate Change Risks
As an owner of real estate property, we are subject to various federal, provincial and state laws relating to environmental matters. Such laws provide that
we could be liable for the costs of removal and remediation of certain hazardous, toxic substances released on or in our properties or disposed of at other
locations, as well as potentially significant penalties. We have insurance and other policies and procedures in place to review and monitor environmental
exposure, which we believe mitigates these risks to an acceptable level. Some of the properties in which we have an interest currently have or have had
occupants that use hazardous substances or create waste. Such uses can potentially create environmental liabilities. A few issues have been identified
through site assessments, including the need to remediate or otherwise address certain contaminations. These issues are being carefully managed with the
involvement of professional consultants. Where circumstances warrant, designated substance surveys and/or environmental assessments are conducted.
Although environmental assessments provide some assurance, we may become liable for undetected pollution or other environmental hazards on our
properties against which we cannot insure, or against which we may elect not to insure where premium costs are disproportionate to our perception of
relative risk. We do not currently anticipate material expenditures in respect of any required remediation.
Climate change continues to attract the focus of governments and the general public as an important threat, given the emission of greenhouse gases and
other activities continue to negatively impact the planet. We face the risk that our properties will be subject to government initiatives aimed at countering
climate change, such as reduction of greenhouse gas emissions, which could impose constraints on our operational flexibility or cause us to incur financial
costs to comply with various reforms. Any failure to adhere and adapt to climate change reform could result in fines or adversely affect our reputation,
operations or financial performance. Furthermore, our properties may be exposed to the impact of events caused by climate change, such as natural
disasters and increasingly frequent and severe weather conditions. Such events could interrupt our operations and activities, damage our properties and
may potentially decrease our property values or require us to incur additional expenses including an increase in insurance costs to insure our properties
against natural disasters and severe weather.
Home Warranty and Construction Defect Claims
As a homebuilder, we are subject to construction defect and home warranty claims arising in the ordinary course of our business. These claims are
common in the homebuilding industry and can be costly. Where we act as the general contractor, we will be responsible for the performance of the entire
contract, including work assigned to subcontractors. Claims may be asserted against us for construction defects, personal injury or property damage
caused by the subcontractors, and if successful these claims give rise to liability. Where we hire a general contractor, if there are unforeseen events such as
the bankruptcy of, or an uninsured or under-insured loss claimed against our general contractor, we will sometimes become responsible for the losses or
other obligations of the general contractor. The costs of insuring against construction defect and product liability claims are high, and the amount of
coverage offered by insurance companies may be limited. There can be no assurance that this coverage will not be further restricted and become more
costly. If we are not able to obtain adequate insurance against these claims in the future, our business and results of operations may be adversely affected.
Seasonality
The nature of our land development and housing business is inherently seasonal as it depends on sales of specific projects dictated by the marketplace and
the availability of buyers as well as weather-related delays. We have historically experienced, and we expect that we will continue to experience, variability
in our results on a quarterly basis. We generally have more homes under construction, close more home sales and have greater revenues and operating
income from our housing business in the fourth quarter of our fiscal period. Therefore, although new home contracts are obtained throughout the period,
a significant portion of our home closings occur in the second fiscal quarter. Our revenues from our land and housing development business therefore may
fluctuate significantly on a quarterly basis, and we must maintain sufficient liquidity to meet short-term operating requirements.
Asset Management Risks
Our ability to successfully expand our asset management activities is dependent on a number of factors, including certain factors that are outside our
control. In the event that the asset base of our funds were to decline, our management fees could decline as well. In addition, we could experience losses
Dream Unlimited Corp. – December 31, 2019 | 23
on our investments of our own capital in our funds as a result of poor performance by our funds. Termination of an asset management agreement in
accordance with its terms by any of our funds would also result in a decline in our management fees.
Our revenues from the asset management segment are dependent on agreements with a few key clients. Although we have long term, stable management
contracts with clients that may only be terminated in limited circumstances, any such termination could have a material adverse effect on our revenue
from management fees.
Lending Portfolio and Investment Holdings
Default Risk
If a borrower under a loan defaults under any terms of the loan, we may have the ability to exercise our enforcement remedies in respect of the loan.
Exercising enforcement remedies is a process that requires a significant amount of time to complete, which could adversely impact our cash flow. In
addition, as a result of potential declines in real estate values, there is no assurance that we will be able to recover all or substantially all of the outstanding
principal and interest owed to us in respect of such loans by exercising our enforcement remedies. Our inability to recover all or substantially all of the
principal and interest owed to us in respect of such loans could materially adversely affect us.
There can be no assurance that any of the loans comprising our borrowers' portfolio can or will be renewed at the same interest rates and terms, or in the
same amounts as are currently in effect. The lenders, the borrowers or both may elect to not renew any loan. If loans are renewed, the principal balance,
the interest rates and the other terms and conditions will be subject to negotiation between the lenders and the borrowers at the time of renewal.
In addition, the composition of our lending portfolio may vary widely from time to time and may be concentrated by type of security, industry or
geography, resulting in it being less diversified at some times than at other times. A lack of diversification may result in exposure to economic downturns
or other events that have an adverse and disproportionate effect on particular types of securities, industries or geographies.
Credit Risk and Concentration Risk
There is a risk that a borrower or issuer of an investment security will not make a payment on debt or that an originating lender will not make its payment
on a loan participation interest purchased by us or that an issuer or an investment security or an originating lender retaining the original loan in which it
grants participations may suffer adverse changes in financial condition, lowering the credit quality of its security or participation and increasing the
volatility of the security or participation price. Such changes in the credit quality of a security or participation can affect its liquidity and make it more
difficult to sell if we wish to do so. In addition, with respect to loans made or held by us, a change in the financial condition of a borrower could have a
negative financial impact on us.
While we intend to diversify our investments to ensure that we do not have excessive concentration in any single borrower or counterparty, or related
group of borrowers or counterparties, the Company currently holds various lending instruments and investments with the same counterparty or related
counterparties within its lending portfolio and development and investment holdings portfolio. A change in the financial condition of a single borrower or
counterparty or related group of borrowers or counterparties to which the Company has concentrated exposure could significantly and adversely affect
the overall performance of the Company.
Financial and Liquidity Risk
Financing Risk
We will require access to capital to ensure properties are maintained, as well as to fund our growth strategy and significant capital expenditures. There is
no assurance that capital will be available when needed or on favourable terms. Our access to third-party financing will be subject to a number of factors,
including general market conditions, the market’s perception of our growth potential, our then current and expected future earnings and our cash flows.
Upon the expiry of the term of the financing of any particular property, refinancing may not be available or may not be available on reasonable terms.
Ability to Obtain Performance, Payment, Completion and Surety Bonds and Letters of Credit
We may often be required to provide performance, payment, completion and surety bonds or letters of credit to secure the completion of our
construction contracts, development agreements and other arrangements. We have obtained facilities to provide the required volume of performance,
payment, completion and surety bonds and letters of credit for our expected growth in the medium term; however, unexpected growth may require
additional facilities. Our ability to obtain further performance, payment, completion and surety bonds and letters of credit primarily depends on our
perceived creditworthiness, capitalization, working capital, past performance and claims record, management expertise and certain external factors,
including the capacity of the performance bond markets. If our future claims record or our providers’ requirements or policies are different, if we cannot
obtain the necessary consent from lenders to renew or amend our existing facilities, or if the market’s capacity to provide performance and completion
bonds is not sufficient, we could be unable to obtain further performance, payment, completion and surety bonds or letters of credit when required, which
could have a material adverse effect on our business, financial condition and results of operations.
Other Applicable Risks
Cyber Security Risk
Cyber security has become an increasing area of focus for issuers and businesses in Canada and globally, as reliance on digital technologies to conduct
business operations has grown significantly. As we continue to increase our dependence on information technologies to conduct our operations, the risks
associated with cyber security also increase. We rely on management information systems and computer control systems. Business disruptions, utility
outages and information technology system and network disruptions due to cyber-attacks could seriously harm our operations and materially adversely
affect our operating results. Cyber attacks against organizations are increasing in sophistication and can include but are not limited to intrusions into
operating systems, theft of personal or other sensitive data and/or cause disruptions to business operations. Such cyber attacks could compromise the
Company’s confidential information as well as that of the Company’s employees, customers and third parties with whom the Company interacts and may
result in negative consequences, including remediation costs, loss of revenue, additional regulatory scrutiny, litigation and reputational damage.
Dream Unlimited Corp. – December 31, 2019 | 24
Our exposure to cyber security risks includes exposure through third parties on whose systems we place significant reliance for the conduct of our
business. We have implemented security procedures and measures in order to protect our systems and information from being vulnerable to cyber-
attacks. However, we may not have the resources or technical sophistication to anticipate, prevent, or recover from rapidly evolving types of cyber-attacks.
Compromises to our information and control systems could have severe financial and other business implications.
Tax Risk
We are subject to tax audits from various government and regulatory agencies on an ongoing basis. As a result, from time to time, taxing authorities may
disagree with the interpretation and application of Canadian tax laws taken by the Company in its tax filings, which could lead to reassessments. These
reassessments could have a material impact on the Company in future periods.
Adverse Weather Conditions and Natural Disasters
Adverse weather conditions and natural disasters such as hurricanes, tornadoes, earthquakes, droughts, floods, fires, extreme cold, snow and other
natural occurrences could have a significant effect on our ability to develop land. These adverse weather conditions and natural disasters could cause
delays and increase costs in the construction of new homes and the development of new communities. If insurance is unavailable to us or is unavailable on
acceptable terms, or if the insurance is not adequate to cover business interruption or losses resulting from adverse weather or natural disasters, our
business and results of operations could be adversely affected. In addition, damage to new homes caused by adverse weather or a natural disaster could
cause our insurance costs to increase.
Adverse weather conditions and natural disasters could also limit the ability to generate or sell power. In certain cases, some events may not excuse us
from performing obligations pursuant to agreements with third parties, and we may be liable for damages or suffer further losses as a result. In addition,
many of our power generation assets are located in remote areas, which makes access for repair of damage difficult.
Uninsured Losses
The Company carries comprehensive general liability, environmental, fire, flood, extended coverage and rental loss insurance with policy specifications,
limits and deductibles customarily carried for similar properties. There are, however, certain types of risks (including, but not limited to, environmental
contamination or catastrophic events such as war or acts of terrorism) which are either uninsurable, in whole or in part, or not insurable on an
economically viable basis. Should an uninsured or underinsured loss occur, the Company could lose its investment in, and anticipated profits and cash
flows from, one or more of its properties, and the Company would continue to be obliged to repay any recourse mortgage indebtedness on such
properties.
Key Personnel
The Company’s executive and other senior officers have a significant role in our success and oversee the execution of our strategy. Our ability to retain our
management team or attract suitable replacements should any members of the management group leave is dependent on, among other things, the
competitive nature of the employment market. The Company has experienced departures of key professionals in the past and may do so in the future, and
we cannot predict the impact that any such departures will have on its ability to achieve its objectives. The loss of services from key members of the
management team or a limitation in their availability could adversely impact our financial condition and cash flow. We rely on the services of key personnel
on our executive team, including our President and CRO, Executive Vice President and Chief Financial Officer, Chief Development Officer, Chief Investment
Officer, President of Asset Management, and the Company's directors. The loss of their services could have an adverse effect on the Company. We
mitigate key personnel risk through succession planning, but do not maintain key personnel insurance.
Changes in Law
We are subject to laws and regulations governing the ownership and leasing of real property (including the expropriation thereof), employment standards,
environmental matters, taxes and other matters. It is possible that future changes in such laws or regulations or changes in their application, enforcement
or regulatory interpretation could result in changes in the legal requirements affecting commercial properties (including with retroactive effect). Any
changes in the laws to which we are subject or in the political environment in the jurisdictions where the commercial properties in which we have an
interest are operated could adversely affect us and the revenues we are able to generate from our investments.
Renewable Power
Contract Performance
The renewable power operations are highly dependent upon parties to certain agreements fulfilling their contractual obligations, including counterparties
to power purchase agreements ("PPAs") or Feed in Tariff contracts and other key suppliers. An inability or failure of any such party to meet its contractual
commitments may adversely affect our financial condition, results of operations and cash flow, as it may not be possible to replace the agreement with an
agreement on equivalent terms and conditions. The ability of our facilities to generate the maximum amount of power that can be sold to purchasers of
electricity under PPAs is an important determinant of the revenues of our renewable power business. If one of these facilities delivers less than the
required quantity of electricity in a given contract period, penalty payments may be payable to the relevant purchaser. The payment of any such penalties
could adversely affect the revenues and profitability of our renewable power business.
Changes in Technology
There are other alternative technologies that can produce renewable power, such as fuel cells and micro-turbines. Research and development activities
are ongoing to seek improvements in such alternative technologies, and their cost of producing electricity is gradually declining. It is possible that advances
will further reduce the cost of alternative methods of power generation. If this were to happen, the competitive advantage of our projects may be
impaired and our business, financial condition, results of operations and cash flow could be materially adversely affected.
Dream Unlimited Corp. – December 31, 2019 | 25
Assessment of Wind Resource and Associated Wind Energy
The strength and consistency of the wind resource at any project site may vary from the anticipated wind resource. Weather patterns could change, or the
historical data could prove to be an inaccurate reflection of the strength and consistency of the wind in the future. The conclusions of wind studies and
energy production estimates are based on a particular methodology and a set of assumptions about the existence of certain conditions, and the
assumption that these conditions will continue in the future. The assumptions and factors are inherently uncertain and may result in actual energy
production being different from estimates. A decline in wind conditions at our wind energy facilities could materially adversely affect revenues and cash
flows from such facilities.
Transmission Capacity and Curtailment
Electrical distribution grid systems have finite capacity to accommodate additional electricity that is supplied to the system. In order for projects to be
developed, they need to be connected to the distribution grid system in a location where there is sufficient capacity to handle the additional electricity
produced by the project. In most cases, the distribution grid system can be upgraded in order to accommodate such increased capacity; however, we are
generally required to cover all or a portion of costs and expenses in connection with any construction and/or upgrades that are required, which impacts
the financial viability of such projects. There is also a potential risk associated with transmission curtailment measures being contemplated by the Ontario
transmission system operator. These measures could be imposed in the future on renewable energy generators in Ontario. The curtailments may reduce
the amount of annual revenue generated by our projects below the forecasted financial models, thus reducing the expected investment return from these
projects.
Regulatory Regime, Political Environment and Permits
The development and operation of renewable power projects is subject to extensive regulation by various government agencies at the municipal,
provincial and federal levels. As legal requirements frequently change and are subject to interpretation and discretion, we are unable to predict the
ultimate cost of compliance with these requirements or their effect on our operations. Any new law or regulation could require additional expenditure to
achieve or maintain compliance or could adversely affect the ability to generate and deliver energy. In addition, delays may occur in obtaining necessary
government approvals required for future power projects. We hold permits and licences from various regulatory authorities for the construction and
operation of our renewable power facilities. These licences and permits are critical to the operation of the renewable power business. It may not be
possible to renew, maintain or obtain all necessary licences, permits and governmental approvals required for the continued operation or further
development of projects, which could adversely impact our business, results of operations and cash flow. The profitability of any wind project will be in
part dependent upon the continuation of a favourable regulatory climate with respect to the continuing operations, future growth and development of the
independent power industry. Government regulations and incentives currently have a favourable impact on the building of wind power facilities. Should
the current governmental regulations or incentive programs be modified, our business, operating results, financial condition or prospects may be adversely
affected.
Forward-Looking Information
Certain information herein contains or incorporates statements that constitute 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 beliefs, plans, estimates,
projections and intentions, and similar statements concerning anticipated future events, future growth, expected net proceeds from sales or transactions,
results of operations, performance, business prospects and opportunities, acquisitions or divestitures, tenant base, future maintenance and development
plans and costs, capital investments, financing, the availability of financing sources, income taxes, vacancy and leasing assumptions, litigation and the real
estate industry in general; as well as specific statements in respect of our development plans, proposals and development timelines for future retail and
condominium and mixed-use projects and future stages of current retail and condominium and mixed-use projects, including projected sizes, density, uses
and tenants; anticipated current and future unit sales and occupancies of our condominium and mixed-use projects; our anticipated ownership levels of
proposed investments, including investments in units of Dream Office REIT and Dream Alternatives and other Dream Publicly Listed Funds; anticipated
levels of development, asset management and other management fees in future periods; expectations that recurring income assets will increase over
time; expectations that distributions from Dream Office REIT and Dream Alternatives may increase over time; and our overall financial performance,
profitability and liquidity for future periods and years.
Forward-looking statements generally can be identified by words such as "objective", "may", "will", "would", "expect", "intend", "estimate", "anticipate",
"believe", "should", "could", "likely", "plan", "project", "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 the Company’s control,
which could cause actual results to differ materially from those disclosed in or implied by such forward-looking information. The assumptions, which may
prove to be incorrect, include, but are not limited to, the various assumptions set forth herein as well as assumptions relating to: that no unforeseen
changes in the legislative and operating framework for the respective businesses will occur; that we will meet our future objectives, priorities and growth
targets; that we receive the licenses, permits or approvals in necessary connection with our projects; that we will have access to adequate capital to fund
our future projects, plans and any potential future acquisitions; that our future projects and plans will proceed as anticipated; that we are able to identify
high quality investment opportunities; that we find suitable partners with which to enter into joint ventures or partnerships; that we do not incur any
material environmental liabilities and that future market, demographic and economic conditions will occur as expected; the nature of development lands
held and the development potential of such lands, our ability to bring new developments to market, anticipated positive general economic and business
conditions, including low unemployment and interest rates, positive net migration, oil and gas commodity prices, our business strategy, including
geographic focus, anticipated sales volumes, performance of our underlying business segments and conditions in the Western Canada land and housing
markets.
All the forward-looking statements contained in this MD&A are based on what we believe are reasonable assumptions; there can be no assurance that
actual results will be consistent with these forward-looking statements. Factors or risks that could cause actual results to differ materially from those set
forth in the forward-looking statements and information include, but are not limited to, adverse changes in general and local economic and business
conditions, employment levels, regulatory risks, mortgage rates and regulations, environmental risks, consumer confidence, seasonality, adverse weather
Dream Unlimited Corp. – December 31, 2019 | 26
conditions, reliance on key clients and personnel and competition and other risks and factors described from time to time in the documents filed by the
Company with the securities regulators.
All forward-looking information is as of February 25, 2020. Dream 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 contained in our filings with securities regulators. Certain filings are also available on our website at www.dream.ca.
Additional Information - Consolidated Dream
Segmented Assets and Liabilities
Recurring income
Development
Asset
management
Stabilized
income
generating
assets
Urban
development
- Toronto &
Ottawa
Western
Canada
community
development
Corporate
and other
Dream
standalone
Dream
Alternatives
Consolidation
and fair value
adjustments
(1) Consolidated
Dream
December 31, 2019
Assets
Cash and cash equivalents
$
— $
5,767 $
28,016 $
2,303 $ 233,404 $
Accounts receivable
Other financial assets
Lending portfolio
Housing inventory
Condominium inventory
Land inventory
Investment properties
Recreational properties
4,495
93,849
—
—
—
—
—
—
Equity accounted investments
451,810
—
43,000
—
7,859
12
—
—
—
786
202,581
48,779
56,635
6,802
—
49,089
87,476
9,957
—
—
270,528
2,131
59,710
—
44,175
27,927
—
—
97,725
2,664
—
—
38,607
5,647
535,654
38,723
—
11,158
6,227
—
—
—
—
—
—
—
—
—
5,239
—
593,154 $
378,310 $
529,920 $
—
—
736,044 $ 241,307 $ 2,478,735 $
49,089
269,490 $
200,219
103,818
—
38,607
276,175
538,571
301,014
48,779
563,778
46,195
43,000
117,787 $
4,179
119,887
64,705
—
—
—
201,624
—
186,713
1,188
—
—
1,244 $
(2,240)
(94,249)
—
—
15,129
—
15,786
—
(41,651)
8,196
(43,000)
—
388,521
202,158
129,456
64,705
38,607
291,304
538,571
518,424
48,779
708,840
55,579
—
49,089
696,083 $
(140,785) $
3,034,033
20,002 $
19,328 $
82,803 $
18,294 $
7,840 $
148,267 $
35,087 $
22,926 $
206,280
—
—
—
—
—
—
—
—
8,748
114,438
214,680
—
—
—
—
20,002 $
133,766 $
306,231 $
—
—
64,946
573,152 $
244,544 $
158,743 $
—
154,419
154,419
28,105
56,720
—
36,853
224,105
609,943
—
—
—
82,397
103,119 $ 468,761 $ 1,031,879 $
—
82,397
—
—
632,925 $ (227,454) $ 1,381,910 $
64,946
(58)
—
88,988
—
4,515
128,532 $
—
567,551 $
—
—
24
411,078
6,985
441,013 $
154,361
36,853
698,955
411,078
93,897
1,601,424
(43,297)
(538,501) $
21,649
1,410,960
(2)
Refer to the "Non-IFRS Measures" section of this MD&A for the definition of consolidation and fair value adjustments.
Debt associated with assets held for sale totalling $30.1 million is classified as current within debt as at December 31, 2019.
Capital and other operating
assets
Intangible asset
Assets held for sale
(2)
Total assets
Liabilities
Accounts payable and other
liabilities
Income and other taxes
payable
Provision for real estate
development costs
(2)
Debt
Dream Alternatives trust units
Deferred income taxes
Total liabilities
Non-controlling interest
Total shareholders' equity
(1)
$
$
$
$
Dream Unlimited Corp. – December 31, 2019 | 27
Recurring income
Development
Asset
management
Stabilized
income
generating
assets
Urban
development
- Toronto &
Ottawa
Western
Canada
community
development
Corporate
and other
Dream
standalone
Dream
Alternatives
Consolidation
and fair value
adjustments
(1) Consolidated
Dream
December 31, 2018
Assets
Cash and cash equivalents
$
— $
7,897 $
6,255 $
1,606 $
1,686 $
17,444 $
46,730 $
119 $
Accounts receivable
Other financial assets
Lending portfolio
Housing inventory
Condominium inventory
Land inventory
Investment properties
Recreational properties
Renewable power assets
8,329
149,854
—
—
—
—
—
—
—
Equity accounted investments
348,727
—
43,000
—
8,101
610
—
—
—
843
159,784
49,241
—
47,067
5,760
—
72,587
34,492
10,650
—
—
233,974
1,742
—
—
—
33,657
31,446
—
—
121,400
5,612
—
—
56,605
5,647
573,311
18,171
—
—
6,534
28
—
—
—
—
—
—
—
—
5,118
6,294
—
—
—
—
177,934
161,142
—
56,605
239,621
575,896
177,955
49,241
—
435,985
48,618
43,000
72,587
2,821
122,908
144,095
—
—
—
224,921
—
132,251
132,528
5,023
—
—
(3,341)
(71,699)
—
—
—
—
9,895
—
11,037
(18,753)
3
(43,000)
—
64,293
177,414
212,351
144,095
56,605
239,621
575,896
412,771
49,241
143,288
549,760
53,644
—
72,587
549,910 $
351,890 $
352,216 $
788,392 $
13,620 $ 2,056,028 $
811,277 $
(115,739) $
2,751,566
13,662 $
12,852 $
55,452 $
31,841 $
19,320 $
133,127 $
25,888 $
1,938 $
160,953
—
—
51,236
51,236
(1,707)
—
—
—
—
3,338
30,515
—
100,000
111,853
141,056
111,234
224,083
—
—
—
—
—
—
—
—
—
—
—
—
28,672
—
75,662
75,662
33,853
688,226
28,672
—
—
195,492
—
—
(323)
—
—
3,888
—
377,234
18,800
49,529
33,853
887,606
28,672
377,234
94,139
113,662 $
124,705 $
199,846 $
173,590 $ 398,973 $ 1,010,776 $
219,350 $
401,860 $
1,631,986
—
—
43,935
—
—
43,935
1,669
(29,275)
16,329
436,248 $
227,185 $
108,435 $
614,802 $ (385,353) $ 1,001,317 $
590,258 $
(488,324) $
1,103,251
Capital and other operating
assets
Intangible asset
Assets held for sale
(2)
Total assets
Liabilities
Accounts payable and other
liabilities
Income and other taxes
payable
Provision for real estate
development costs
(2)
Debt
Preference shares, series 1
Dream Alternatives trust units
Deferred income taxes
Total liabilities
Non-controlling interest
Total shareholders' equity
(1)
$
$
$
$
(2)
Refer to the "Non-IFRS Measures" section of this MD&A for the definition of consolidation and fair value adjustments.
Debt associated with assets held for sale totalling $35.4 million is classified as current within debt as at December 31, 2018.
Dream Unlimited Corp. – December 31, 2019 | 28
Segmented Statement of Earnings
Recurring income
Stabilized
income
generating
assets
13,703 $
Development
Urban
development -
Toronto &
Ottawa
30,124 $
Western
Canada
community
development
Asset
management
$
288,214 $
(2,596)
(10,984)
285,618
2,719
(23,463)
6,661
For the three months ended December 31, 2019
Corporate
and other
Dream
(1)
standalone
Dream
Alternatives
Consolidation
(2)
adjustments
Consolidated
Dream
43,959 $
(53,808)
(9,849)
(5,758)
(15,607)
(160)
617
(27)
—
— $
—
—
—
—
—
—
(151)
—
—
—
—
125
376,000 $
(90,851)
285,149
9,383 $
(4,064)
5,319
(12,331)
272,818
—
5,319
(2,023) $
(321)
(2,344)
—
(2,344)
383,360
(95,236)
288,124
(12,331)
275,793
26,378
21,119
(60)
47,437
30,982
16
—
8,685
830
(5,945)
(1,331)
135,474
—
5,943
(3,404)
25,273
1,498
(19)
(2,570)
24
—
—
(3,471)
41,165
827
(8,515)
(11,252)
135,474
2,539
483,468
(1,808)
(5,832)
(9,945)
—
(2,684)
285,618
35
—
28,652
22,055
4,116
(91)
—
55
—
(1,286)
(1,074)
135,474
5,818
447,588
—
—
(3,889)
2,772
(2,114)
4,194
230
—
55
—
—
31,784
5,137
(16,985)
(5,858)
461,666
$
447,588 $
31,784 $
5,137 $
(16,985) $ (116,701) $
(105,418)
(105,418)
350,823 $
(1,800)
19,923 $
(1,920)
(21,555) $
—
—
—
(18,566)
(18,566)
(109,138)
349,191
(5,425)
(5,425)
(3,550)
2,402
(6,573)
Recurring income
Development
Asset
management
Stabilized
income
generating
assets
Urban
development -
Toronto &
Ottawa
Western
Canada
community
development
Corporate
and other
Dream
(1)
standalone
Dream
Alternatives
Consolidation
(2)
adjustments
Consolidated
Dream
$
13,587 $
16,420 $
19,742 $
94,007 $
— $
143,756 $
13,194 $
(2,995) $
153,955
For the three months ended December 31, 2018
(11,947)
4,473
(16,054)
3,688
(2,731)
10,856
—
10,856
—
960
(1,489)
(1,749)
2,724
7,591
836
(1,328)
(11,030)
(79)
9,890
9,187
(852)
8,892
(58,874)
35,133
(7,094)
28,039
1,194
649
(1,489)
—
92
(2,648)
1,040
—
1,123
(11)
—
35
—
—
—
—
—
(797)
(3,713)
(89,606)
54,150
(11,491)
42,659
8,785
2,771
(6,002)
7,192
—
7,192
505
610
(8,030)
(2,190)
(128)
(11,237)
2,208
(442)
(3,437)
—
(3,437)
(47)
25
52
—
2,187
28,485
(4,638)
—
9,165
44,113
1,315
9,640
(1,138)
(4,545)
$
9,187 $
8,892 $
2,187 $
28,485 $
(18,843) $
29,908 $
6,995 $
19,719 $
—
—
(10,973)
(10,973)
—
1,317
25,918
(4,382)
25,918
(14,038)
56,622
(3,232)
(3,232)
(3,962)
2,728
(4,466)
(96,050)
57,905
(11,491)
46,414
9,243
3,406
(10,168)
(9,029)
9,342
49,208
Revenue
Direct operating costs
Gross margin
Selling, marketing, depreciation
and other operating costs
Net margin
Fair value changes in
investment properties
Share of earnings from equity
accounted investments
Investment and other income
Loss on disposition of assets
held for sale
Interest expense
Net gain on disposition of
Dream Global REIT
Fair value changes in financial
instruments
Net segment earnings (loss)
General and administrative
expenses
Adjustments related to Dream
Alternatives trust units
Income tax recovery (expense)
Net earnings (loss)
(3)
Revenue
Direct operating costs
Gross margin
Selling, marketing, depreciation
and other operating costs
Net margin
Fair value changes in
investment properties
Investment and other income
Interest expense
Fair value changes in financial
instruments
Share of earnings from equity
accounted investments
Net segment earnings (loss)
General and administrative
expenses
Adjustments related to Dream
Alternatives trust units
Income tax recovery (expense)
Net earnings (loss)
(1)
(3)
(2)
(3)
Dream standalone does not include any net earnings impact relating to the Company's investment in Dream Alternatives. Refer to the "Dream Alternatives" section of this MD&A for further details.
Refer to the "Non-IFRS Measures" section of this MD&A for the definition of consolidation and fair value adjustments.
Includes earnings attributable to non-controlling interest.
Dream Unlimited Corp. – December 31, 2019 | 29
Recurring income
Stabilized
income
generating
assets
67,530 $
Development
Urban
development -
Toronto &
Ottawa
53,553 $
Western
Canada
community
development
Asset
management
$
319,741 $
For the year ended December 31, 2019
Corporate
and other
Dream
(1)
standalone
Dream
Alternatives
Consolidation
(2)
adjustments
Consolidated
Dream
(13,352)
306,389
—
306,389
—
48,326
2,479
(44,210)
23,320
(8,682)
14,638
25,645
11,257
621
—
—
(5,053)
(4,697)
135,474
30,896
518,511
—
(146)
47,318
(41,452)
12,101
(11,844)
257
(2,114)
4,334
2,641
—
31
—
—
52,229 $
(18,158)
34,071
(8,358) $
(1,564)
(9,922)
95,735 $
(91,656)
4,079
(24,516)
(20,437)
2,836
4,628
958
—
— $
—
536,559 $
(190,670)
—
—
—
—
—
330
—
345,889
(45,042)
300,847
26,367
68,545
7,029
—
(7,057)
(16,907)
(33,683)
—
34,071
15,064
22,922
2,696
(5,945)
(8,470)
580,430
(210,392)
370,038
(45,042)
324,996
40,961
93,351
10,165
(8,515)
(41,903)
135,474
23,757
578,286
—
(9,922)
(470)
1,884
440
(2,570)
250
—
—
(10,388)
—
—
—
201
135,474
—
30,951
535,530
(7,194)
53,144
5,149
(19,072)
(16,376)
$
518,511 $
47,318 $
5,149 $
(19,072) $ (149,414) $
(116,138)
(116,138)
402,492 $
(4,358)
32,331 $
11,815
(103,078) $
—
—
—
(113,512)
(113,512)
(108,681)
331,745
(16,900)
(16,900)
(16,455)
9,007
(24,348)
Recurring income
Development
Asset
management
Stabilized
income
generating
assets
Urban
development -
Toronto &
Ottawa
Western
Canada
community
development
Corporate
and other
Dream
(1)
standalone
Dream
Alternatives
Consolidation
(2)
adjustments
Consolidated
Dream
$
44,034 $
66,429 $
23,567 $
160,041 $
— $
294,071 $
57,596 $
(11,794) $
339,873
For the year ended December 31, 2018
(10,721)
33,313
(43,807)
22,622
(18,348)
(108,182)
5,219
51,859
(181,058)
113,013
(22,672)
34,924
(1,361)
(13,155)
(205,091)
134,782
—
33,313
—
3,389
(3,906)
4,958
12,555
—
31,393
81,702
(6,761)
15,861
16,310
1,170
(5,889)
13
—
—
4,332
31,797
(9,190)
(3,971)
—
2,737
(126)
—
—
9,422
(616)
7,446
(31,163)
20,696
1,194
1,773
—
—
—
(484)
(47,114)
65,899
17,504
9,321
—
—
34,924
(13,155)
(2,195)
3,313
(8,964)
(47)
68
234
(47,114)
87,668
15,262
12,702
(37,931)
(6,094)
(13,186)
(29,201)
(485)
4,486
2,106
(7,169)
(577)
12,555
9,422
34,625
124,611
—
—
117,437
129,992
—
9,422
813
29,997
1,591
98,959
37,029
253,567
17,085
(13,419)
$
81,702 $
31,797 $
7,446 $
17,085 $
(54,937) $
83,093 $
13,902 $
95,058 $
192,053
(15,277)
(15,277)
(15,411)
10,293
(20,395)
—
—
(26,241)
(26,241)
—
(684)
(19,680)
5,486
(19,680)
(21,439)
—
—
—
—
—
252
—
—
—
Revenue
Direct operating costs
Gross margin
Selling, marketing, depreciation
and other operating costs
Net margin
Fair value changes in
investment properties
Share of earnings from equity
accounted investments
Investment and other income
(Loss) gain on disposition of
assets held for sale
Interest expense
Net gain on disposition of
Dream Global REIT
Fair value changes in financial
instruments
Net segment earnings (loss)
General and administrative
expenses
Adjustments related to Dream
Alternatives trust units
Income tax recovery (expense)
Net earnings (loss)
(3)
Revenue
Direct operating costs
Gross margin
Selling, marketing, depreciation
and other operating costs
Net margin
Fair value changes in
investment properties
Investment and other income
Interest expense
Fair value changes in financial
instruments
Net gain on acquisition of
Dream Alternatives
Gains from disposition of assets
held for sale
Share of earnings from equity
accounted investments
Net segment earnings (loss)
General and administrative
expenses
Adjustments related to Dream
Alternatives trust units
Income tax recovery (expense)
Net earnings (loss)
(1)
(3)
(2)
(3)
Dream standalone does not include any net earnings impact relating to the Company's investment in Dream Alternatives. Refer to the "Dream Alternatives" section of this MD&A for further details.
Refer to the "Non-IFRS Measures" section of this MD&A for the definition of consolidation and fair value adjustments.
Includes earnings attributable to non-controlling interest.
Dream Unlimited Corp. – December 31, 2019 | 30
Segmented Statement of Cash Flows
Operating activities
Earnings for the period
Adjustments for non-cash items:
Depreciation and amortization
Fair value changes in investment properties
Share of earnings from equity accounted investments
Deferred income tax expense
Other adjustments
Loss on disposition of assets
Net gain on disposition of Dream Global REIT
Changes in non-cash working capital
Acquisition of condominium inventory, net of acquired cash and
working capital
Sale of housing inventory, net of development
Development of condominium inventory, net of sales
Advances for construction loan, net of repayments
Fair value adjustment on Dream Alternatives trust units
Development of land inventory, net of sales
Net cash flows provided by (used in) operating activities
Investing activities
Acquisitions and additions to investment properties and assets held
for sale, net of disposals
Additions to recreational properties and renewable power assets,
net
Investments in equity accounted investments
Contributions to equity accounted investments
Distributions from equity accounted investments
Distributions from and disposals of financial assets and other assets,
net of acquisitions
Additions to assets held for sale
Proceeds on disposition of assets, net
Proceeds on disposition of asset management agreement and other
transaction costs, net
Loans receivable repayments
Lending portfolio repayments, net of advances
Net cash flows provided by investing activities
Financing activities
Borrowings from mortgage and term debt facilities
Repayments of mortgage and term debt facilities
Repayments of operating lines, net of advances
Repayments of margin loan facility, net of advances
Advances from equity accounted investments
Contributions from non-controlling interest, net of distributions
Dividends paid
Redemption of Preference shares, series 1
Shares repurchased under normal course issuer bid
Net cash flows used in financing activities
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
For the three months ended December 31, 2019
For the three months ended December 31, 2018
Dream
Alternatives and
consolidation
adjustments
Dream
standalone
Consolidated
Dream
Dream
standalone
Dream
Alternatives and
consolidation
adjustments
Consolidated
Dream
$
350,823 $
(1,632) $
349,191
$
29,909 $
26,713 $
56,622
1,974
(26,378)
(30,982)
1,857
13,165
—
(135,474)
68,740
—
4,495
20,224
24,673
—
13,237
306,354
(24,251)
(2,947)
(52,752)
(8,485)
4,107
91,580
—
—
133,127
127
—
140,506
(27)
(4,494)
(90,000)
(100,000)
2,900
9,885
(2,635)
(28,675)
(2,527)
(215,573)
231,287
38,203
—
(21,059)
(10,183)
5,196
7,975
8,515
—
(6,496)
—
—
(224)
—
13,260
—
(4,648)
1,974
(47,437)
(41,165)
7,053
21,140
8,515
(135,474)
62,244
—
4,495
20,000
24,673
13,260
13,237
301,706
(2,915)
(27,166)
—
—
(1,308)
—
(11,923)
—
98,595
—
—
71,822
154,271
—
(27,228)
(6,500)
—
699
(7,366)
—
—
—
(2,947)
(52,752)
(9,793)
4,107
79,657
—
98,595
133,127
127
71,822
294,777
(27)
(31,722)
(96,500)
(100,000)
3,599
2,519
(2,635)
(28,675)
(2,527)
(40,395)
(255,968)
109,228
9,803
119,031 $
340,515
48,006
388,521
2,180
(8,785)
(9,165)
2,647
12,056
—
—
1,686
(458)
(177)
3,080
(6,066)
—
—
3,866
(9,243)
(9,342)
5,727
5,990
—
—
(84,758)
(6,305)
(91,063)
—
—
—
—
(32,020)
—
(13,547)
(324)
4,833
(6,281)
20,572
(32,020)
29,821
(20,842)
32,510
30,325
32
—
(2,278)
—
(24,368)
—
—
—
(1,379)
15,185
19,702
—
(1,841)
—
—
—
(3,303)
—
—
(918)
(6,062)
93
46,756
(4,079)
(1,199)
(6,165)
6,758
(30,554)
923
48,000
—
(920)
15,185
58,274
60
(25,231)
(7,000)
—
—
1,497
—
—
(6,478)
(37,152)
280
64,013
64,293
(324)
4,833
(6,281)
20,572
—
29,821
(7,295)
(2,185)
(4,111)
(1,199)
(3,887)
6,758
(6,186)
923
48,000
—
459
—
38,572
60
(23,390)
(7,000)
—
—
4,800
—
—
(5,560)
(31,090)
187
17,257
Cash and cash equivalents, end of period
$
269,490 $
$
17,444 $
46,849 $
Dream Unlimited Corp. – December 31, 2019 | 31
Operating activities
Earnings (losses) for the year
Adjustments for non-cash items:
Depreciation and amortization
Fair value changes in investment properties
Share of earnings from equity accounted investments
Deferred income tax expense (recovery)
Other adjustments
Loss (gain) on disposition of assets
Net gain on disposition of Dream Global REIT
Net gain on acquisition of Dream Alternatives
Changes in non-cash working capital
Acquisition of condominium inventory, net of acquired cash
and working capital
Sale of housing inventory, net of development
Development of condominium inventory, net of sales
Advances for construction loan, net of repayments
Acquisition of land inventory
Fair value adjustment on Dream Alternatives trust units
Development of land inventory, net of sales
Net cash flows provided by (used in) operating activities
Investing activities
Acquisitions and additions to investment properties and
assets held for sale, net of disposals
Additions to recreational properties and renewable power
assets, net
Investments in equity accounted investments
Contributions to equity accounted investments
Distributions from equity accounted investments
Distributions from and disposals of financial assets and
other assets, net of acquisitions
Proceeds on disposition of assets, net
Proceeds on disposition of asset management agreement
and other transaction costs, net
Cash acquired in business combination
Loans receivable repayments
Lending portfolio repayments, net of advances
Net cash flows provided by (used in) investing activities
Financing activities
Borrowings from mortgage and term debt facilities
Repayments of mortgage and term debt facilities
Repayments of operating lines, net of advances
Repayments of margin loan facility, net of advances
Borrowings pursuant to non-revolving term facility
Advances from equity accounted investments
Contributions from non-controlling interest, net of
distributions
For the year ended December 31, 2019
For the year ended December 31, 2018
Dream
standalone
Dream
Alternatives and
consolidation
adjustments
Consolidated
Dream
Dream
standalone
Dream
Alternatives and
consolidation
adjustments
Consolidated
Dream
$
402,492 $
(70,747) $
331,745
$
83,093 $
108,960 $
192,053
6,846
(26,367)
(68,545)
6,519
(10,182)
—
(135,474)
—
95,362
(18,009)
21,558
(43,354)
39,305
(3,244)
—
7,059
273,966
2,610
(14,594)
(24,806)
(7,457)
7,534
8,515
—
—
(13,190)
(24)
—
(362)
—
—
90,931
—
(21,590)
9,456
(40,961)
(93,351)
(938)
(2,648)
8,515
(135,474)
—
82,172
(18,033)
21,558
(43,716)
39,305
(3,244)
90,931
7,059
252,376
6,340
(17,504)
(34,625)
13,925
(4,918)
(9,422)
—
—
(37,502)
(694)
20,541
(67,414)
14,545
(960)
(12,555)
(23,806)
(70,956)
6,717
2,242
(2,404)
(4,793)
(3,348)
—
—
(129,992)
(11,120)
—
—
—
—
—
7,552
—
(26,186)
13,057
(15,262)
(37,029)
9,132
(8,266)
(9,422)
—
(129,992)
(48,622)
(694)
20,541
(67,414)
14,545
(960)
(5,003)
(23,806)
(97,142)
(40,133)
(11,138)
(51,271)
(10,359)
(12,578)
(22,937)
(5,683)
(64,054)
(17,864)
21,912
72,808
15,323
133,127
—
3,097
—
118,533
48,492
(21,662)
(49,000)
(100,000)
—
14,400
23,085
41
—
(9,578)
—
19,711
101,236
—
—
—
82,755
183,027
—
(30,104)
—
—
—
17,215
(17,264)
(5,642)
(64,054)
(27,442)
21,912
92,519
116,559
133,127
—
3,097
82,755
301,560
48,492
(51,766)
(49,000)
(100,000)
—
31,615
5,821
(59,102)
(10,615)
(28,675)
(16,478)
(229,708)
324,228
64,293
388,521
(9,557)
(76,509)
(9,078)
40,768
(19,180)
71,508
—
—
3,514
—
(8,893)
69,489
(51,378)
(45,000)
60,000
50,000
—
(571)
59,504
(16,516)
1,960
(12,581)
—
—
60,927
(1,379)
23,830
102,596
—
(4,664)
—
—
—
—
4,800
(4,221)
(10,128)
(17,005)
(25,594)
42,728
(31,761)
71,508
—
60,927
2,135
23,830
93,703
69,489
(56,042)
(45,000)
60,000
50,000
—
579
(12,221)
(12,221)
—
—
—
(16,026)
71,885
(7,964)
25,408
—
—
(8,455)
(29,561)
46,849
—
—
—
(24,481)
42,324
38,885
25,408
64,293
$
17,444 $
46,849 $
Dream Alternatives trust units repurchased from other
unitholders
—
(59,102)
Dividends paid
Redemption of Preference shares, series 1
Shares repurchased under normal course issuer bid
Net cash flows provided by (used in) financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
(10,615)
(28,675)
(16,478)
(140,453)
252,046
17,444
Cash and cash equivalents, end of year
$
269,490 $
—
—
—
(89,255)
72,182
46,849
119,031 $
Dream Unlimited Corp. – December 31, 2019 | 32
Revenue by Geographic Region
The Company’s revenue segmented by geographic region, net of eliminations, is as follows:
For the three months ended December 31,
2018
2019
For the year ended December 31,
2018
2019
Western Canada
Alberta
British Columbia
Saskatchewan
Ontario
Quebec
Eastern Canada
Canada
United Kingdom
United States
Non-segmented (asset management)
Total
$
$
$
18,163
911
27,709
46,783
42,186
—
347
89,316
667
7,442
285,935
383,360
4.7% $
0.2%
7.2%
12.1% $
11.0%
—%
0.1%
23.2%
0.2%
1.9%
74.7%
100.0% $
21,714
964
74,877
97,555
32,872
1,234
1,565
133,226
798
9,490
10,441
153,955
14.1% $
0.6%
48.6%
63.3% $
21.4%
0.8%
1.0%
86.5%
0.5%
6.2%
6.8%
100.0% $
39,337
3,742
68,532
111,611
111,675
—
4,456
227,742
2,857
39,332
310,499
580,430
6.8% $
0.6%
11.8%
19.2% $
19.2%
—%
0.8%
39.2%
0.5%
6.8%
53.5%
100.0% $
44,788
4,021
128,666
177,475
86,255
1,234
5,943
270,907
2,696
34,469
31,801
339,873
13.2%
1.2%
37.9%
52.3%
25.4%
0.3%
1.7%
79.7%
0.8%
10.1%
9.4%
100.0%
Net Margin by Geographic Region
The Company’s net margin segmented by geographic region is as follows:
For the three months ended December 31,
2018
2019
For the year ended December 31,
2018
2019
Western Canada
Alberta
British Columbia
Saskatchewan
Ontario
Quebec
Eastern Canada
Canada
United Kingdom
United States
Non-segmented (asset management)
Total
$
$
$
2,249
911
(17,745)
(14,585)
7,883
—
283
(6,419)
228
(1,263)
283,247
275,793
0.8% $
0.3%
(6.4%)
(5.3%) $
2.9%
—%
0.1%
(2.3%)
0.1%
(0.5%)
102.7%
100.0% $
6,801
964
22,040
29,805
2,392
1,234
3,434
36,865
(2,441)
581
11,409
46,414
14.6% $
2.1%
47.5%
64.2% $
5.1%
2.7%
7.4%
79.4%
(5.3%)
1.3%
24.6%
100.0% $
2,919
3,742
(19,478)
(12,817)
30,544
—
3,133
20,860
1,274
6,083
296,779
324,996
0.9% $
1.2%
(6.0%)
(3.9%) $
9.4%
—%
1.0%
6.5%
0.4%
1.9%
91.2%
100.0% $
5,332
4,021
20,176
29,529
27,918
1,234
3,491
62,172
(81)
4,941
20,636
87,668
6.1%
4.6%
23.0%
33.7%
31.8%
1.4%
4.0%
70.9%
(0.1%)
5.7%
23.5%
100.0%
Quarterly Business Trends
A summary of revenue, earnings (loss), and basic and diluted earnings (loss) per share for the previous eight quarters is presented below.
(in thousands of dollars,
except per share amounts)
Revenue
Earnings (loss) for the period
Basic earnings (loss) per share
Diluted earnings (loss) per share
Dec 31,
2019
Sep 30,
2019
Jun 30,
2019
Mar 31,
2019
Dec 31,
2018
Sep 30,
2018
Jun 30,
2018
Mar 31,
2018
$
383,360 $
349,191
64,069 $
76,044 $
56,957 $
153,955 $
64,497 $
61,600 $
59,821
27,167
(11,089)
(33,524)
56,622
15,279
(26,906)
147,058
3.32
3.21
0.26
0.25
(0.11)
(0.11)
(0.31)
(0.31)
0.52
0.50
0.14
0.14
(0.25)
(0.25)
1.35
1.30
Dream Unlimited Corp. – December 31, 2019 | 33
Selected Annual Information
(in thousands of dollars, except per share amounts)
Revenue
Earnings before income taxes
Earnings for the year
Earnings for the year attributable to shareholders
Basic earnings per share
Diluted earnings per share
Total assets
Total liabilities
Total equity
Non-IFRS Measures
$
2019
580,430 $
440,426
331,745
332,246
3.13
3.05
3,034,033
1,601,424
1,432,609
Year ended December 31,
2017
2018
339,873 $
213,492
192,053
190,948
1.76
1.71
2,751,566
1,631,986
1,119,580
356,964
115,576
82,839
79,645
0.81
0.79
1,904,007
946,523
957,484
In addition to using financial measures determined in accordance with IFRS, we believe that important measures of operating performance include certain
financial measures that are not defined under IFRS and, as such, may not be comparable to similar measures used by other companies. Throughout this
MD&A, there are references to certain non-IFRS measures, including those described below, which management believes are relevant in assessing the
economics of the business of Dream. While these performance measures are not defined by IFRS, do not have a standardized meaning and may not be
comparable with similar measures presented by other companies, we believe that they are informative and provide further insight as supplementary
measures of earnings for the period and cash flows.
"Assets under management (“AUM”)" is the respective carrying value of total assets managed by the Company on behalf of its clients, investors or
partners under asset management agreements and/or management services agreements. Assets under management is a measure of success against the
competition and consists of growth or decline due to asset appreciation, changes in fair market value, acquisitions and dispositions, operations gains and
losses, and inflows and outflows of capital.
"Comparative properties NOI" includes the net rental income of the same properties owned by Dream Office REIT in the current and prior year
comparative periods and excludes: property management and lease termination fees; one-time property adjustments, if any; bad debt expenses; NOI of
sold properties, properties held for sale and properties held for future development; straight-line rent; amortization of lease incentives; and property
management and other service fees. The metric is used by management to evaluate the performance of investment properties held by Dream Office REIT.
"Consolidation and fair value adjustments" represents certain IFRS adjustments required to reconcile Dream standalone and Dream Alternatives results
to the consolidated results as at and for the three and twelve months ended December 31, 2019 and 2018. Consolidation and fair value adjustments
relate to business combination adjustments on acquisition of Dream Alternatives on January 1, 2018 and related amortization, elimination of
intercompany balances including the investment in Dream Alternatives units, adjustments for co-owned projects, fair value adjustments to the Dream
Alternatives units held by other unitholders, and deferred income taxes.
"Dream standalone" represents the results of Dream, excluding the impact of Dream Alternatives' consolidated results. Metrics calculated on a Dream
standalone basis are used by management in evaluating the overall performance and managing risk of the Company. Refer to the "Dream standalone
basic earnings per share" definition below, and the "Segmented Assets and Liabilities" and "Segmented Statement of Earnings" sections of this MD&A for
a reconciliation of Dream excluding Dream Alternatives results to the consolidated financial statements.
Dream Unlimited Corp. – December 31, 2019 | 34
"Dream standalone basic earnings per share" represents earnings per share on a standalone basis, a metric used by management in evaluating the
overall performance of the Company. A reconciliation of this non-IFRS measure to basic earnings (loss) per share is presented below.
(in thousands of dollars, except per share amounts)
Dream (consolidated) basic earnings per share
Dream Alternatives income attributable to shareholders
(2)
Adjustments related to Dream Alternatives trust units
Other consolidation adjustments
Dream standalone basic earnings per share
(1)
Dream (consolidated) basic earnings per share
Dream Alternatives income attributable to shareholders
Gain on acquisition of Dream Alternatives
Adjustments related to Dream Alternatives trust units
(2)
Other consolidation adjustments
Dream standalone basic earnings per share
(1)
(1)
For the three months ended December 31, 2019
For the year ended December 31, 2019
$
$
Per share
3.32
(0.19)
0.18
0.04
3.35
$
$
$
Total
350,106
(20,101)
18,566
4,446
Per share
3.13
$
(0.30)
1.07
(0.09)
353,017
$
3.81
$
Total
332,246
(32,121)
113,512
(9,078)
404,559
For the three months ended December 31, 2018
For the year ended December 31, 2018
$
$
Per share
0.52
$
(0.07)
—
(0.24)
0.05
0.26
Total
55,742
$
(6,753)
—
(25,918)
4,972
$
28,043
$
Per share
1.76
$
(0.12)
(1.08)
0.18
0.02
0.76
$
Total
190,948
(13,160)
(117,437)
19,680
2,017
82,048
(2)
Dream standalone represents the standalone results of Dream, excluding the impact of Dream Alternatives’ consolidated results. For a further description of the Dream standalone results, refer
above under "Dream standalone".
In accordance with the Company's accounting policy described in Note 3 of our consolidated financial statements for the year ended December 31, 2019, Dream accounted for the 77% interest in
Dream Alternatives trust units held by other unitholders as a financial liability measured at fair value through profit and loss. Accordingly, we expect adjustments related to Dream Alternatives
trust units to vary period to period, based on fluctuations in the listed market price and changes in the outstanding number of trust units at period-end. Refer to Note 22 of our consolidated
financial statements for the year ended December 31, 2019 for a continuity of the liability related to the Dream Alternatives trust units.
“Fee-earning assets under management” represents assets under management that are managed under contractual arrangements that entitle the
Company to earn asset management revenue.
“Gross margin %” is an important measure of operating earnings in each business segment of Dream and represents gross margin as a percentage of
revenue. Gross margin represents revenue, less direct operating costs, excluding selling, marketing, depreciation and other operating costs.
"Market value" represents Dream Alternatives' carrying value as per Dream Alternatives' consolidated statements of financial position adjusted for
external appraisal values or a discounted cash flow methodology, incorporating expected future cash flows, discount rates, other applicable market
information and the reduction in the risk profile of the renewable power projects and equity accounted investments as they are developed or achieve
completion milestones by Dream Alternatives. Dream Alternatives believes that incorporating this adjustment in determining the market value of the asset
is a more useful measure to value the renewable power portfolio and equity investments that would not ordinarily be captured within IFRS and Dream
Alternatives' consolidated financial statements.
"Net asset value ("NAV") of Dream Alternatives", a non-IFRS measure, represents total unitholders' equity per the Dream Alternatives segment, adjusted
for market value adjustments for both renewable power projects and equity accounted investments (including applicable deferred income tax adjustment)
and the unamortized balance of the mortgages payable premiums. A market value adjustment for renewable power projects developed by Dream
Alternatives is reflected once they become operational and long-term financing is arranged as well as reflecting recent market information that would
indicate a change in the renewable power portfolio market value (subject to appraisals). A market value adjustment for equity accounted investments is
included to address the reduction in risk profile as each project progresses toward completion and/or reflect information from recent market transactions
that indicate a change in the equity investment market value (subject to appraisals). The mortgages payable premiums represent current unamortized
balance of fair value adjustments recorded for these instruments at Dream Alternatives' listing date. Since Dream Alternatives intends to repay the
mortgages at maturity, this historical fair value adjustment is removed for the calculation of the NAV. Dream Alternatives believes that incorporating a
market value adjustment is a more useful measure to value both the renewable power portfolio and equity accounted investments that would not
ordinarily be captured within IFRS and Dream Alternatives' consolidated financial statements. The market value adjustments account for the applicable
deferred income tax estimates considering the timing of their realization and, if appropriate, will be incorporated into the determination of the NAV. The
applicable deferred income tax estimates related to the market value adjustments is calculated either based on income or capital gain rates or a
combination thereof. The income tax rates used to determine NAV are dependent on various factors such as anticipated development plans, stage of
development, and current market trends applicable to the future development plans and will be reviewed on a regular basis and are subject to change.
Excluded from the NAV of Dream Alternatives calculation are any market value adjustment with respect to liabilities as well as commitments/contracts
that are not otherwise recorded as liabilities on Dream Alternatives' balance sheet. Dream Alternatives has not appraised the lending portfolio, as Dream
Alternatives intends to hold the investments in the lending portfolio until maturity and its term to maturity is within one year; as such, this portfolio is
considered fairly liquid and fair value approximates amortized cost. This non-IFRS measure is an important measure used by the Company in evaluating
Dream Alternatives' performance as it is an indicator of the intrinsic value of Dream Alternatives; however, it is not defined by IFRS, does not have a
standardized meaning and may not be comparable with similar measures presented by other issuers. A reconciliation of NAV to total unitholders' equity
can be found below.
Dream Unlimited Corp. – December 31, 2019 | 35
"Net asset value ("NAV") per unit - Dream Alternatives" represents the net asset value attributable to unitholders of Dream Alternatives divided by the
number of units outstanding at the end of the period. This non-IFRS measure is an important measure used by the Company in evaluating Dream
Alternatives' performance as it is an indicator of the intrinsic value of Dream Alternatives. A reconciliation of NAV to total unitholders' equity can be found
below.
Total unitholders' equity
(1)
Market value adjustment to equity accounted investments
Market value adjustment to renewable power assets
Deferred income taxes adjustment
NAV of Dream Alternatives
NAV per unit - Dream Alternatives
(1)
Dream Alternatives' unitholders' equity is eliminated upon consolidation.
December 31, 2019
December 31, 2018
$
$
$
567,551 $
40,406
—
(6,365)
601,592 $
8.75 $
590,258
39,870
10,527
(6,005)
634,650
8.74
“Net margin %” is an important measure of operating earnings in each business segment of Dream and represents net margin as a percentage of revenue.
This non-IFRS measure is an important measure in evaluating the Company's performance; however, it is not defined by IFRS, does not have a standard
meaning and may not be comparable with similar measures presented by other issuers.
“Net operating income" represents revenue less direct operating costs. Net operating income less general, administrative and overhead expenses, and
amortization, is equal to net margin as per Note 40 of the consolidated financial statements. Net operating income for the income generating assets,
including stabilized assets and properties under development for the three and twelve months ended December 31, 2019 and 2018, is calculated as
follows:
Revenue
Less: Direct operating costs
Less: Selling, marketing, depreciation and other indirect costs
Net margin
Add: Depreciation
Add: General and administrative expenses
Net operating income
Revenue
Less: Direct operating costs
Less: Selling, marketing, depreciation and other indirect costs
Net margin
Add: Depreciation
Add: General and administrative expenses
Net operating income
Revenue
Less: Direct operating costs
Less: Selling, marketing, depreciation and other indirect costs
Net margin
Add: Depreciation
Add: General and administrative expenses
Net operating income
Stabilized income
generating assets -
Urban Development
Stabilized income
generating assets -
Western Canada
Stabilized income
generating assets -
Arapahoe Basin
Development
properties -
Western Canada
For the three months ended December 31, 2019
$
$
$
$
$
$
$
$
$
4,348
(2,161)
(1,001)
1,186
153
848
2,187
Stabilized income
generating assets -
Urban Development
4,541
(2,565)
(492)
1,484
153
339
1,976
Stabilized income
generating assets -
Urban Development
16,638
(8,760)
(2,779)
5,099
612
2,167
7,878
$
$
$
$
$
$
$
$
$
1,913
(1,311)
(490)
112
85
405
602
$
$
$
7,442
(7,512)
(1,193)
(1,263)
1,019
174
(70)
$
$
$
310
(392)
(888)
(970)
3
885
(82)
For the three months ended December 31, 2018
Stabilized income
generating assets -
Western Canada
Stabilized income
generating assets -
Arapahoe Basin
Development
properties -
Western Canada
2,389
(1,409)
(268)
712
76
192
980
Stabilized income
generating assets -
Western Canada
11,560
(6,670)
(1,434)
3,456
434
1,000
4,890
$
$
$
$
$
$
9,490
(7,973)
(989)
528
874
115
1,517
$
$
$
249
(120)
(769)
(640)
45
724
129
For the year ended December 31, 2019
Stabilized income
generating assets -
Arapahoe Basin
Development
properties -
Western Canada
39,332
(28,780)
(4,469)
6,083
3,947
522
10,552
$
$
$
1,295
(919)
(3,040)
(2,664)
51
2,989
376
Dream Unlimited Corp. – December 31, 2019 | 36
Revenue
Less: Direct operating costs
Less: Selling, marketing, depreciation and other indirect costs
Net margin
Add: Depreciation
Add: General and administrative expenses
Net operating income
Additional Information
Stabilized income
generating assets -
Urban Development
Stabilized income
generating assets -
Western Canada
Stabilized income
generating assets -
Arapahoe Basin
Development
properties -
Western Canada
For the year ended December 31, 2018
$
$
$
19,410
(10,700)
(2,006)
6,704
605
1,401
8,710
$
$
$
12,549
(7,096)
(1,237)
4,216
257
980
5,453
$
$
$
34,470
(26,011)
(3,518)
4,941
3,041
477
8,459
$
$
$
685
(248)
(3,517)
(3,080)
121
3,396
437
Additional information relating to Dream, including the Company's annual information form and consolidated financial statements and accompanying
notes, are available on SEDAR at www.sedar.com. The Subordinate Voting Shares trade on the TSX under the symbol “DRM”.
Dream Unlimited Corp. – December 31, 2019 | 37
Management's responsibility for consolidated financial statements
The accompanying consolidated financial statements, the notes thereto and management's discussion and analysis contained in this Annual
Report have been prepared by, and are the responsibility of, the management of Dream Unlimited Corp. These consolidated financial
statements have been prepared in accordance with International Financial Reporting Standards, using management's best estimates and
judgments when appropriate.
The Board of Directors is responsible for ensuring that management fulfills its responsibility for financial reporting and internal controls.
The Board of Directors carries out these responsibilities primarily through an Audit Committee, which is composed entirely of independent
directors. The Audit Committee meets with management as well as the external auditor to satisfy itself that management is properly
discharging its financial responsibilities and to review its consolidated financial statements and the report of the auditor. The Audit
Committee reports its findings to the Board of Directors, which approves the consolidated financial statements.
PricewaterhouseCoopers LLP, the independent auditor, has audited the consolidated financial statements in accordance with Canadian
generally accepted auditing standards. The auditor has full and unrestricted access to the Audit Committee, with or without management
present.
"Michael J. Cooper"
Michael J. Cooper
President and Chief Responsible Officer
Toronto, Ontario
February 25, 2020
"Pauline Alimchandani"
Pauline Alimchandani
EVP and Chief Financial Officer
Dream Unlimited Corp. – December 31, 2019 | 38
Independent auditor’s report
To the Shareholders of Dream Unlimited Corp.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Dream Unlimited Corp.
and its subsidiaries (together, the Company) as at December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended
in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).
What we have audited
The Company's consolidated financial statements comprise:
•
•
•
•
•
•
the consolidated statements of financial position as at December 31, 2019 and 2018;
the consolidated statements of earnings for the years then ended;
the consolidated statements of comprehensive income for the years then ended;
the consolidated statements of changes in equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, which include a summary of significant accounting policies.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in
Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.
Other information
Management is responsible for the other information. The other information comprises the Management's Discussion and Analysis and the information,
other than the consolidated financial statements and our auditor's report thereon, included in the annual report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so,
consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such
internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these consolidated financial statements.
Dream Unlimited Corp. – December 31, 2019 | 39
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express
an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and
to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Frank Magliocco.
(Signed) "PricewaterhouseCoopers LLP"
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
February 25, 2020
Dream Unlimited Corp. – December 31, 2019 | 40
Consolidated Statements of Financial Position
As at December 31, 2019 and 2018
(in thousands of Canadian dollars)
Assets
Cash and cash equivalents
Accounts receivable
Other financial assets
Lending portfolio
Housing inventory
Condominium inventory
Land inventory
Investment properties
Recreational properties
Renewable power assets
Equity accounted investments
Capital and other operating assets
Assets held for sale
Total assets
Liabilities
Accounts payable and other liabilities
Income and other taxes payable
Provision for real estate development costs
Debt
Preference shares, series 1
Dream Alternatives trust units
Deferred income taxes
Total liabilities
Shareholders’ equity
Share capital
Reorganization adjustment
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Total shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
Note
39
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
34
25
26
$
$
$
$
2019
388,521
202,158
129,456
64,705
38,607
291,304
538,571
518,424
48,779
—
708,840
55,579
49,089
3,034,033
206,280
154,361
36,853
698,955
—
411,078
93,897
1,601,424
1,193,562
(944,577)
11,410
1,140,179
10,386
1,410,960
21,649
1,432,609
3,034,033
$
$
$
$
2018
64,293
177,414
212,351
144,095
56,605
239,621
575,896
412,771
49,241
143,288
549,760
53,644
72,587
2,751,566
160,953
49,529
33,853
887,606
28,672
377,234
94,139
1,631,986
1,209,819
(944,577)
8,049
818,581
11,379
1,103,251
16,329
1,119,580
2,751,566
See accompanying notes to the consolidated financial statements.
Commitments and contingencies (Note 37)
Subsequent events (Note 44)
On behalf of the Board of Directors of Dream Unlimited Corp.:
"Michael J. Cooper"
Michael J. Cooper
Director
"Joanne Ferstman"
Joanne Ferstman
Chair
Dream Unlimited Corp. – December 31, 2019 | 41
Consolidated Statements of Earnings
For the years ended December 31, 2019 and 2018
(in thousands of Canadian dollars, except for per share amounts)
Revenue
Direct operating costs
Gross margin
Selling, marketing, depreciation and other operating costs
Net margin
Other income (expenses):
General and administrative expenses
Fair value changes in investment properties
Share of earnings from equity accounted investments
Investment and other income
(Loss) gain on disposition of assets held for sale
Interest expense
Net gain on acquisition of Dream Alternatives
Net gain on disposition of Dream Global REIT
Adjustments related to Dream Alternatives trust units
Fair value changes in financial instruments
Earnings before income taxes
Income tax expense
Earnings for the year
Total earnings (loss) for the year attributable to:
Shareholders
Non-controlling interest
Earnings for the year
Basic earnings per share
Diluted earnings per share
See accompanying notes to the consolidated financial statements.
Note
27 $
28
29
30
12, 17
15
31
17
32
5
38
22
23
26
$
$
$
35 $
35 $
2019
580,430 $
(210,392)
370,038
(45,042)
324,996
(24,348)
40,961
93,351
10,165
(8,515)
(41,903)
—
135,474
(113,512)
23,757
440,426
(108,681)
331,745 $
332,246 $
(501)
331,745 $
3.13 $
3.05 $
2018
339,873
(205,091)
134,782
(47,114)
87,668
(20,395)
15,262
37,029
12,702
9,422
(37,931)
129,992
—
(19,680)
(577)
213,492
(21,439)
192,053
190,948
1,105
192,053
1.76
1.71
Dream Unlimited Corp. – December 31, 2019 | 42
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2019 and 2018
(in thousands of Canadian dollars)
Earnings for the year
Other comprehensive income (loss)
Reversal of gains reclassified to net income on disposition of assets held for sale
Reversal of losses on interest rate hedge reclassified to net income, net of tax
Unrealized loss on interest rate hedge, net of tax
Unrealized gain (loss) from foreign currency translation (reclassified to earnings on partial or
full disposal of foreign operation)
Reversal of losses reclassified to net income upon consolidation of Dream Alternatives
Share of other comprehensive income (loss) from equity accounted investments
Total other comprehensive income (loss)
Total comprehensive income
Total comprehensive income for the year attributable to:
Shareholders
Non-controlling interest
Total comprehensive income
See accompanying notes to the consolidated financial statements.
Note
$
2019
331,745 $
(274)
1,906
(1,425)
(577)
—
(623)
(993)
330,752 $
331,253 $
(501)
330,752 $
25
26
$
$
$
2018
192,053
—
99
(983)
3,210
68
802
3,196
195,249
194,144
1,105
195,249
Dream Unlimited Corp. – December 31, 2019 | 43
Consolidated Statements of Changes in Equity
For the years ended December 31, 2019 and 2018
(in thousands of Canadian
dollars)
Dream share
capital
(Note 24)
Contributed
surplus
Reorganization
adjustment
Retained
earnings
Accumulated
other
comprehensive
income
Total
shareholders'
equity
Non-
controlling
interest
Total equity
Balance, January 1, 2019
$
1,209,819 $
8,049 $
(944,577) $
818,581 $
11,379 $
1,103,251 $
16,329 $
1,119,580
Earnings for the year
Other comprehensive loss for the
year
Shares repurchased under normal
course issuer bid (Note 24)
Dividends paid (Note 24)
Share-based compensation
(Note 34)
Distributions to non-controlling
interests (Note 26)
Contributions from non-
controlling interests (Note 26)
—
—
(16,478)
—
221
—
—
—
—
—
—
3,361
—
—
—
—
—
—
—
—
—
332,246
—
—
(10,615)
(33)
—
—
—
(993)
—
—
—
—
—
332,246
(501)
331,745
(993)
(16,478)
(10,615)
3,549
—
—
—
—
—
—
(993)
(16,478)
(10,615)
3,549
(1,879)
(1,879)
7,700
7,700
Balance, December 31, 2019
$
1,193,562 $
11,410 $
(944,577) $
1,140,179 $
10,386 $
1,410,960 $
21,649 $
1,432,609
(in thousands of Canadian
dollars)
Dream share
capital
Contributed
surplus
Reorganization
adjustment
Retained
earnings
Accumulated
other
comprehensive
income
Total
shareholders’
equity
Non-
controlling
interest
Total equity
Balance, January 1, 2018
$
1,225,651 $
5,341 $
(944,577) $
601,098 $
31,881 $
919,394 $
38,090 $
957,484
Impact of changes in accounting
policies
—
Adjusted balance, January 1, 2018
1,225,651
Earnings for the year
Other comprehensive income for
the year
Shares repurchased under normal
course issuer bid
Share-based compensation
Distributions to non-controlling
interests
Contributions from non-
controlling interests
Non-controlling interest related to
business combination
Change in interest in subsidiary
—
—
(16,026)
194
—
—
—
—
—
5,341
—
—
—
2,708
—
—
—
—
—
(944,577)
—
—
—
—
—
—
—
—
34,144
635,242
190,948
—
—
—
—
—
—
(7,609)
(23,698)
8,183
—
3,196
—
—
—
—
—
—
10,446
929,840
190,948
3,196
(16,026)
2,902
—
—
—
—
38,090
1,105
—
—
—
10,446
967,930
192,053
3,196
(16,026)
2,902
(1,021)
(1,021)
1,600
1,948
1,600
1,948
(7,609)
(25,393)
(33,002)
Balance, December 31, 2018
$
1,209,819 $
8,049 $
(944,577) $
818,581 $
11,379 $
1,103,251 $
16,329 $
1,119,580
See accompanying notes to the consolidated financial statements.
Dream Unlimited Corp. – December 31, 2019 | 44
Note
2019
2018
$
331,745
$
192,053
Consolidated Statements of Cash Flows
For the years ended December 31, 2019 and 2018
(in thousands of Canadian dollars)
Operating activities
Earnings for the year
Adjustments for non-cash items:
Depreciation and amortization
Fair value changes in investment properties
Share of earnings from equity accounted investments
Deferred income tax recovery
Other adjustments
Loss (gain) on disposition of assets
Net gain on disposition of Dream Global REIT
Net gain on acquisition of Dream Alternatives
Changes in non-cash working capital
Acquisition of condominium inventory, net of acquired cash and working capital
Sale of housing inventory, net of development
Development of condominium inventory, net of sales
Advances for construction loan, net of repayments
Acquisition of land inventory
Fair value adjustment on Dream Alternatives trust units
Development of land inventory, net of sales
Net cash flows provided by (used in) operating activities
Investing activities
Acquisitions and additions to investment properties and assets held for sale
Additions to recreational properties and renewable power assets, net
Investments in equity accounted investments
Contributions to equity accounted investments
Distributions from equity accounted investments
Distributions from and disposals of financial assets and other assets, net of acquisitions
Proceeds on disposition of assets, net
Proceeds on disposition of asset management agreement and other transaction costs, net
Cash acquired in business combination
Loans receivable repayments
Lending portfolio repayments, net of advances and lender fees
Net cash flows provided by investing activities
Financing activities
Borrowings from mortgages and term debt facilities
Repayments of mortgages and term debt facilities
Repayments of operating lines, net of advances
Repayments of margin facility, net of advances
Borrowings pursuant to non-revolving term facility
Advances from equity accounted investments
Contributions to non-controlling interest, net of distributions
Dream Alternatives trust units repurchased from other unitholders
Dividends paid
Redemption of Preference shares, series 1
Shares repurchased under normal course issuer bid
Net cash flows provided by (used in) financing activities
12, 17
15
23
39
39
10
9
10
20
11
22
11
12, 17
12, 17
20
20
20
20
26
22
24
24
9,456
(40,961)
(93,351)
(938)
(2,648)
8,515
(135,474)
—
82,172
(18,033)
21,558
(43,716)
39,305
(3,244)
90,931
7,059
252,376
(51,271)
(5,642)
(64,054)
(27,442)
21,912
92,519
116,559
133,127
—
3,097
82,755
301,560
48,492
(51,766)
(49,000)
(100,000)
—
31,615
5,821
(59,102)
(10,615)
(28,675)
(16,478)
(229,708)
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
See accompanying notes to the consolidated financial statements.
324,228
64,293
388,521
$
39
$
Dream Unlimited Corp. – December 31, 2019 | 45
13,057
(15,262)
(37,029)
9,132
(8,266)
(9,422)
—
(129,992)
(48,622)
(694)
20,541
(67,414)
14,545
(960)
(5,003)
(23,806)
(97,142)
(22,937)
(10,128)
(17,005)
(25,594)
42,728
(31,761)
71,508
—
60,927
2,135
23,830
93,703
69,489
(56,042)
(45,000)
60,000
50,000
—
579
(12,221)
—
—
(24,481)
42,324
38,885
25,408
64,293
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
1. Business and structure
Dream Unlimited Corp. ("Dream" or "the Company"), through its wholly owned subsidiary, Dream Asset Management Corporation (“DAM”), is a leading
developer of exceptional office and residential assets in Toronto, owns stabilized income generating assets in both Canada and the U.S., and has an
established and successful asset management business, inclusive of assets under management across three Toronto Stock Exchange ("TSX") listed trusts
and numerous partnerships. The Company also develops land and residential assets in Western Canada for immediate sale.
The principal office and centre of administration of the Company is 30 Adelaide Street East, Suite 301, State Street Financial Centre, Toronto, Ontario, M5C
3H1. The Company is listed on the TSX and is domiciled in Canada.
2. Basis of preparation
The consolidated financial statements are prepared in compliance with International Financial Reporting Standards as issued by the International
Accounting Standards Board (“IFRS”).
All dollar amounts discussed herein are in thousands of Canadian dollars, unless otherwise stated.
The consolidated financial statements for the year ended December 31, 2019 were approved by the Board of Directors for issue on February 25, 2020,
after which date they may be amended only with the Board of Directors’ approval.
3. Summary of significant accounting policies
The significant accounting policies adopted by the Company in the preparation of its consolidated financial statements are set out below. The Company
has consistently applied these accounting policies throughout all years presented in the consolidated financial statements, except for new standards
adopted during the year ended December 31, 2019 and related accounting policies as described below.
Basis of Measurement
The consolidated financial statements have been prepared under the historical cost convention, except for investment properties, other financial assets
and financial instruments classified as fair value through profit or loss, which are measured at fair value as determined at each reporting date.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions have been eliminated in the
consolidated financial statements.
Subsidiaries are those entities the Company controls through the power to govern the financial and operating policies of the entity and by having exposure
or rights to variable returns from its involvement with the entity. The existence and effect of potential voting rights that are currently exercisable are
considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is obtained by
the Company and are subsequently deconsolidated on the date control ceases.
Goodwill
Goodwill arises on the acquisition of businesses and represents the excess of the consideration transferred over and above the Company's interest in the
fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the measurement of the non-controlling interest in the
acquiree.
For the purposes of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units ("CGUs") or groups of
CGUs that are expected to benefit from the synergies of the combination. Each CGU or group of CGUs to which goodwill is allocated represents the lowest
level within the Company at which the goodwill is monitored for internal management purposes. Goodwill is monitored by the Company at an operating
segment level. Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential
impairment. The carrying value of goodwill is compared to the recoverable amount of the CGU, which is the higher of value-in-use and the fair value less
costs to sell. Any impairment is recognized immediately as an expense and is not subsequently reversed.
Segmented Reporting
Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision maker. The chief operating
decision maker has been identified as the President and Chief Responsible Officer of the Company.
Joint Arrangements and Associates
Investments in Joint Arrangements
A joint arrangement is a contractual arrangement, pursuant to which the Company and other parties undertake an economic activity that is subject to joint
control, whereby the strategic financial and operating policy decisions relating to the activities of the joint arrangement require the unanimous consent of
the parties sharing control. Joint arrangements are of two types: joint ventures and joint operations.
Dream Unlimited Corp. – December 31, 2019 | 46
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Investments in Joint Ventures
Joint ventures involve the establishment of a separate entity in which each co-venturer has an interest in the net assets of the arrangement and are
accounted for using the equity method of accounting, whereby the Company recognizes its share of earnings or losses and of other comprehensive income
("OCI") of the equity accounted investment in its own earnings or OCI, as applicable. Dilution gains and losses arising from changes in the Company's
interest in equity accounted investments are recognized in earnings. If the Company's investment is reduced to zero, additional losses are not provided for,
and a liability is not recognized, unless the Company has incurred legal or constructive obligations or made payments on behalf of the equity accounted
investment.
The Company's investments in joint ventures are as follows:
Name of joint venture and location
Bear Valley Mountain Resort LLC, California
Corktown Commercial Inc., Toronto
Distillery Restaurants LP, Toronto
Dream CMCC Funds I and II, Toronto
Dundee Kilmer Developments Limited, Toronto
Dundee Kilmer Developments LP, Toronto
Firelight Infrastructure Partners LP, Toronto
Firelight Infrastructure Partners Management LP, Toronto
S/D Commercial Corporation, Toronto
Westland Properties Ltd., Western Canada
Dream VHP Limited Partnership, Toronto
Dream Wilson Brighton Development LP, Western Canada
GulfDream LP, Toronto
Port Credit West Village Partners LP, Toronto
GG Duncan LP, Toronto
Dream WDL LP, Toronto
Zibi Community Utility LP, Ottawa
2632691 Ontario Inc ("Alate Partners"), Toronto
DK B10 LP, Toronto
DKT B10 LP, Toronto
Pauls/Dream Industrial Range Road LLC ("Range Road"), Nevada
Dream/Pauls Castle LLC, Texas
Nature of business
Ski facilities
Investment properties
Restaurant
Mixed-use development
Condominiums
Condominiums
Renewable energy
Renewable energy
Investment properties
Land
Mixed-use development
Mixed-use development
Mixed-use development
Mixed-use development
Mixed-use development
Residential rental
Utilities
Property Technology
Condominiums
Residential rental
Development property
Income properties
Ownership interest
2019
50%
50%
50%
2018
50%
50%
50%
9% - 40%
9% - 40%
50%
50%
20%
50%
50%
78%
25%
50%
50%
31%
25%
33%
40%
25%
50%
33%
10%
50%
50%
50%
20%
50%
50%
78%
25%
50%
50%
31%
25%
33%
40%
25%
n/a
n/a
n/a
n/a
Investments in Joint Operations
Where the Company undertakes its activities as a joint operation through a direct interest in the joint operation's assets and a direct obligation for the
joint operation's liabilities, rather than through the establishment of a separate entity, the Company's proportionate share of the joint operation's assets,
liabilities, revenues, expenses and cash flow is recognized in the consolidated financial statements and classified according to its nature.
The following table summarizes joint operations in which the Company participates and for which it recognizes its proportionate interest in the underlying
assets, liabilities, revenues, expenses and cash flows:
Name of joint operation and location
Distillery District, Toronto
Millswoods Robertson, Edmonton
Streetcar, Toronto
Thornhill Woods, Toronto
Nature of business
Historical heritage district
Land
Condominiums
Land and housing
Ownership interest
2019
50%
70%
2018
50%
70%
25% - 50%
30% - 32%
25% - 50%
30% - 32%
Investments in Associates
Investments in associates comprise those investments over which the Company has significant influence but not control. Generally, the Company is
considered to exert significant influence when it holds more than a 20% interest in an entity. However, determining significant influence is a matter of
judgment and specific circumstances and, from time to time, the Company may hold an interest of more than 20% in an entity without exerting significant
influence.
Dream Unlimited Corp. – December 31, 2019 | 47
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Conversely, the Company may hold an interest of less than 20% and exert significant influence through representation on the Board of Directors, through
direction of management or through contractual agreements. The Company accounts for its investments in associates using the equity method of
accounting.
The Company's interest in Dream Office REIT as at December 31, 2019 was 27% (December 31, 2018 - 23%) and the Company is deemed to be able to
exercise significant influence over the investee. The carrying amount and earnings from the Company's investment in Dream Office REIT has been recorded
in equity accounted investments in the consolidated statements of financial position and share of earnings from equity accounted investments in the
consolidated statement of earnings, respectively.
Impairment of Equity Accounted Investments
The Company assesses, at each reporting date, whether there is objective evidence that its interest in an equity accounted investment is impaired. If
impaired, the carrying value of the Company's share of the underlying assets of the equity accounted investment is written down to its estimated
recoverable amount, with any difference charged to earnings.
Business Combinations
The Company uses the acquisition method to account for business combinations. The consideration transferred for the acquisition is measured as the
aggregate of the fair values of assets transferred, liabilities incurred or assumed, and any equity instruments of the Company issued in exchange for control
of the acquiree. Acquisition costs are recorded as an expense in earnings as incurred. The acquiree’s identifiable assets, liabilities and contingent liabilities
that meet the conditions for recognition under IFRS 3, “Business Combinations” (“IFRS 3”), are recognized at their fair values at the acquisition date.
The interest of non-controlling shareholders in the acquiree, if any, is initially measured at the non-controlling shareholders’ share of the net assets of the
acquiree, or the fair value of the non-controlling interest, as applicable. To the extent the fair value of consideration paid exceeds the fair value of the net
identifiable tangible and intangible assets acquired, the excess is recorded as goodwill. If the consideration transferred is less than the fair value of net
identifiable tangible and intangible assets, the excess is recognized in earnings.
Where a business combination is achieved in stages, previously held interests in the acquired entity are remeasured to fair value at the acquisition date,
which is the date control is obtained, and the resulting gain or loss, if any, is recognized in earnings. Amounts arising from interests in the acquiree prior to
the date of acquisition of control that have previously been recognized in OCI are reclassified to earnings. Changes in the Company’s ownership interest of
a subsidiary that do not result in a loss of control are accounted for as equity transactions and are recorded as a component of equity.
Foreign Currency Translation
Functional and Presentation Currency
The consolidated financial statements are presented in Canadian dollars, which is also the Company’s functional currency.
Functional Currency of Subsidiaries and Equity Accounted Investments
The monetary assets and liabilities on the financial statements of consolidated subsidiaries and equity accounted investments that have a functional
currency that is different from that of the Company are translated into Canadian dollars using the exchange rate at year-end for items included in the
consolidated statements of earnings and OCI, and the rates in effect at the dates of the consolidated statements of financial position for assets and
liabilities. All resulting changes are recognized in OCI as foreign currency translation adjustments.
If the Company’s interest in the foreign operations of a subsidiary or an equity accounted investment is diluted, but the foreign operations remain a
subsidiary or an equity accounted investment, a pro rata portion of the cumulative translation adjustment related to those foreign operations is
reallocated between controlling and non-controlling interests, in the case of a subsidiary, or is recognized as a dilution gain or loss in the case of an equity
accounted investment. When the Company disposes of its entire interest in the foreign operations, or when it loses control, joint control or significant
influence, the cumulative translation adjustment included in accumulated other comprehensive income (“AOCI”) related to the foreign operations is
recognized in the consolidated statements of earnings on a pro rata basis.
Foreign Currency Transactions
Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Generally,
foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation of monetary assets and liabilities
denominated in currencies other than an entity’s functional currency at each year-end date are recognized in the consolidated statements of earnings,
except when deferred in OCI as qualifying cash flow hedges and qualifying net investment hedges.
Financial Instruments
The Company’s financial instruments include cash and cash equivalents, accounts receivable, other financial assets, lending portfolio, financial instruments
within accounts payable and other liabilities, customer deposits, debt, Dream Alternatives trust units, and Preference shares, series 1, including related
redemption and retraction options that have been separately recognized and deposits and restricted cash that have been included in the consolidated
financial statements within capital and other operating assets.
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are no
longer recognized when the rights to receive cash flows from the assets have expired or are assigned and the Company has transferred substantially all
Dream Unlimited Corp. – December 31, 2019 | 48
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
risks and rewards of ownership in respect of an asset to a third party. Financial assets are recognized at settlement date less any related transaction costs.
Financial liabilities are no longer recognized when the related obligation expires, or is discharged or cancelled.
Classification of financial instruments in the Company’s consolidated financial statements depends on the purpose for which the financial instruments
were acquired or incurred. Management determines the classification of financial instruments at initial recognition.
Fair Value Through Profit or Loss ("FVTPL")
Financial instruments in this category are initially and subsequently recognized at fair value. Gains and losses arising from changes in fair value are
presented within earnings in the consolidated statements of earnings in the period in which they arise, unless they are derivative instruments that have
been designated as hedges.
Financial Liabilities at Amortized Cost
Financial liabilities classified at amortized cost are initially measured at the amount required to be paid, less, when material, a discount to reduce the
liabilities to fair value. Subsequently, these financial liabilities are measured at amortized cost using the effective interest method.
Financial Liabilities at Fair Value through Profit or Loss
Certain financial liabilities are designated as FVTPL as they are managed and evaluated on a fair value basis. These financial liabilities are initially and
subsequently measured at fair value. Gains and losses arising from changes in fair value are recorded within earnings in the consolidated statements of
earnings in the period in which they arise, with the exception of changes in the liability's credit risk, which are recorded in OCI in the period in which they
arise.
Hedging Instruments and Activities
At the inception of a hedging transaction, the Company documents the relationship between hedging instruments and hedged items, as well as its risk
management objectives and strategy for undertaking various hedging transactions. The Company also documents its assessment, both at hedge inception
and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash
flows of hedged items.
The effective portion of changes in the fair value of derivatives that are hedges of a particular risk associated with a recognized asset or liability or a highly
probable forecasted transaction is recognized in OCI. The gain or loss relating to the ineffective portion, if any, is recognized immediately in the
consolidated statements of earnings.
The realized gain or loss recognized on settlement of a hedging instrument designated as a cash flow hedge will be reclassified to earnings over the same
basis as the cash flows received from the hedged item. When a hedging instrument no longer meets the criteria for hedge accounting, any cumulative
gains or losses existing in OCI at that time are recognized in earnings immediately.
Impairment of Financial Assets
The Company applies an appropriate impairment model approach for financial assets depending on the category of financial assets or liabilities. The three
impairment models applicable under IFRS 9 include the general approach, the simplified approach and the credit-adjusted approach. The Company uses
the simplified approach, which recognizes expected credit losses (“ECLs”) based on lifetime ECLs for accounts receivable and the general approach for
loans receivable. The general approach uses the ECLs estimated at the 12-month ECL unless the credit risk has increased significantly relative to the credit
risk at the date of initial recognition.
Investment Holdings and Participating Mortgages
Investment holdings and participating mortgages include limited partnership interests, a hospitality asset, and mortgage receivables secured against
residential development properties and include participation rights in the profits of the underlying development. At initial recognition, the Company
measures a financial asset at its fair value, plus any related transaction costs. Subsequent measurement depends on the Company’s business model for
managing the financial assets and the contractual terms of the cash flows. Investment holdings and participating mortgages are classified as FVTPL as their
contractual cash flows do not represent solely payments of principal and interest. Income earned and the changes in fair value are recorded in the
consolidated statements of earnings as revenue.
Lending Portfolio
The lending portfolio is primarily comprised of fixed-interest-rate and interest-only mortgage and loan investments that the Company intends on holding
until maturity. They are recognized initially at fair value, plus any directly attributable transaction costs. The Company classifies all loan investments that
give rise to specified payments of principal and interest as amortized cost. All other loan investments are classified as FVTPL. For those loan investments
classified as amortized cost, subsequent to initial recognition, the lending portfolio investments are measured at amortized cost using the effective interest
rate method, less any provision for impairment, if applicable. A provision for impairment on the lending portfolio is established based on the general
approach ECL model. Under the general approach ECL model, the Company estimates possible default scenarios for the next 12 months on its lending
portfolio investments. The Company established a provision matrix that considers various factors including the borrower’s credit risk, term to maturity,
status of the underlying project and market risk. The results of the general approach ECL model are used to reduce the carrying amount of the financial
asset through an allowance account, and the changes in the measurement of the allowance account are recognized in the consolidated statements of
earnings. If a significant increase in credit risk occurs on a loan investment, an estimate of default is considered over the entire remaining life of the assets.
Dream Unlimited Corp. – December 31, 2019 | 49
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
In circumstances when an entity acquires a loan investment that is credit impaired at the date of initial recognition the credit adjusted approach will be
applied. The credit adjusted approach results in expected credit losses calculated considering an estimate of default over the life of the asset.
The Company recognizes interest, lender fees and other income from the lending portfolio in the consolidated statements of earnings using the effective
interest rate method for the general or simplified approach regardless if evidence of impairment exists. If the credit adjusted method approach is used
then a credit adjusted effective interest rate is used in calculating the applicable interest, lender fees and other income. Interest and other income includes
the Company's share of any fees received, as well as the effect of any premium or discount received on the mortgage. The effective interest rate method
discounts the future cash payments and receipts through the expected life of the lending portfolio mortgage or loan to its carrying amount before any
allowance for expected credit losses. Under the general and simplified approach, if no evidence of impairment exists interest income is calculated on the
carrying amount at the beginning of the period before any allowance for expected credit loss, otherwise interest income is calculated after an allowance
for expected credit loss.
Real Estate Inventory
Housing and Condominiums
Housing and condominium inventory, which may, from time to time, include commercial property, is acquired or constructed for sale in the ordinary
course of business and is held as inventory and measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in
the ordinary course of business, based on prevailing market prices at each reporting date and discounted for the time value of money, if material, less
estimated costs of completion and estimated selling costs.
Land
Land inventory includes land held for development and land under development and is measured at the lower of cost and net realizable value.
Capitalized Costs
Capitalized costs include all expenditures incurred in connection with the acquisition of property, direct development and construction costs, certain
borrowing costs and property taxes.
Provision for Real Estate Development Costs
The provision for real estate development costs reflects management’s estimate of costs to complete for land, housing and condominium projects for
which revenue has been recognized. These amounts have not been discounted, as the majority of the costs are expected to be expended within
approximately one year.
Investment Properties
Investment properties include properties held to earn rental income or for capital appreciation, or both. Investment properties are measured initially at
cost, which includes all expenditures incurred in connection with the acquisition of property, direct development and construction costs, borrowing costs
and property taxes. Subsequent to initial recognition, investment properties are measured at their fair value at each reporting date. Gains or losses arising
from changes in fair value are recorded in earnings in the period in which they arise.
Development Investment Properties
Once appropriate evidence of a change in use of land held or under development is established, the land is transferred from inventory to investment
properties. At that time, the land is recognized at fair value in accordance with the Company's accounting policy for investment properties, and any gain or
loss is reflected in fair value changes in investment properties within the consolidated statements of earnings, in the period the transfer occurs. The gain or
loss recorded represents the difference between the fair value of the transferred property and the accumulated costs of development.
The fair value of development investment properties is determined by management on a property-by-property basis using a discounted cash flow
valuation methodology. Within the discounted cash flows, the significant unobservable inputs include: forecasted net operating income based on the
location, type and quality of the property, supported by the terms of actual or anticipated future leasing, current market rents for similar properties,
adjusted for market allowances; discount rates based on market terms at the valuation date, adjusted for property-specific risks; estimated costs to
complete based on internal budgets, terms of construction contracts and market conditions; expected completion dates; development and leasing risks
specific to the property; and the status of approvals and/or permits.
Recreational Properties
Recreational properties are owner-occupied properties used in the production or supply of goods or services. Recreational properties are stated at cost
less accumulated depreciation and accumulated impairment losses, if any. Costs of recreational properties include all expenditures incurred in connection
with the acquisition of the property, direct development and construction costs, borrowing costs and property taxes. The Company uses the straight-line
method of depreciation for recreational properties, including major expansions and renovations. The estimated useful life of the properties is between two
and forty years.
Renewable Power Assets
Renewable power assets are measured at cost less accumulated depreciation and impairment charges, if any. Cost includes expenditures that are directly
attributable to the acquisition and construction of the asset including interest costs paid or accrued during construction. The Company uses the straight-
line method of depreciation for renewable power assets including major replacements. The estimated useful life of the assets is between twenty and
twenty-five years.
Dream Unlimited Corp. – December 31, 2019 | 50
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Real Estate Borrowing Costs
Real estate borrowing costs include interest and other costs incurred in connection with the borrowing of funds for operations. Borrowing costs directly
attributable to the acquisition, development or construction of qualifying real estate assets that necessarily take a substantial period of time to prepare for
their intended use or sale are capitalized as part of the cost of the respective real estate asset. For real estate construction and development projects, the
Company considers a substantial period of time to be a period longer than one year to complete. All other borrowing costs are expensed in the period in
which they occur.
Borrowing costs that are directly attributable to investment properties under development or to the development of condominiums and commercial
properties are capitalized. Borrowing costs related to land or housing developments are recognized in earnings as incurred. Where borrowing costs are
specific to a qualifying asset, the amount is directly capitalized to that asset. Otherwise, borrowing costs are aggregated and pro-rated to qualifying assets
using the Company’s weighted average cost of borrowing. Borrowing costs are capitalized during periods of active development and construction, starting
from the commencement of the development work until the date on which all of the activities necessary to prepare the real estate asset for its intended
use or sale are complete. Thereafter, borrowing costs are charged to earnings.
Capital and Other Operating Assets
Capital assets are recorded at cost, net of accumulated depreciation and impairment, if any, and are depreciated on a straight-line basis. Annual
depreciation rates estimated by management have a range of two to twenty years. The Company reviews the depreciation method, residual values and
estimates of the useful life of its capital assets at least annually. On sale or retirement, a capital asset and its related accumulated depreciation are
removed from the consolidated financial statements and any related gain or loss is reflected in earnings.
Other operating assets consist primarily of prepaid amounts, which are generally amortized to earnings over the expected service period; deposits made in
connection with potential future land acquisitions, which are subsequently allocated to specific land inventory on completion of the acquisition; and
restricted cash amounts, which comprise cash-securing letters of credit provided to various government agencies to support development activities,
certain customer deposits and amounts held as security against accounts receivable.
Impairment of Non-financial Assets
Non-financial assets are assessed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be
recoverable. An impairment loss, if any, is recognized for the amount by which the asset’s carrying value exceeds its recoverable amount. The recoverable
amount of an asset is the greater of an asset’s fair value, less costs to sell, and its value in use. For the purposes of assessing impairment, assets are
grouped at the CGU level. If their carrying value is assessed as not recoverable, an impairment loss is recognized.
An assessment is made, at each reporting date, as to whether there is any indication that previously recognized impairment losses may no longer exist or
may have decreased. If such indication exists, the Company makes an estimate of the recoverable amount and, if appropriate, reverses all or part of the
impairment. If the impairment is reversed, the carrying amount of the asset is increased to the newly estimated recoverable amount. This increased
carrying amount may not exceed the carrying amount that would have resulted after taking into account depreciation if no impairment loss had been
recognized in prior years. The amount of any impairment reversal is recorded immediately in earnings for the period.
Assets Held for Sale
Assets and liabilities (or disposal groups) are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction
and a sale is considered highly probable. Investment properties continue to be measured at fair value and the remainder of the disposal group is stated at
the lower of the carrying amount and fair value less costs to sell.
Dream Alternatives Trust Units
The Company holds an effective 23% interest in Dream Alternatives as at December 31, 2019 through ownership of 15,721,604 trust units (December 31,
2018 - 17% interest through ownership of 12,138,723 trust units). The remaining 53,042,384 trust units outstanding are held by other unitholders and have
been recognized on the consolidated statements of financial position to reflect the residual 77% interest held by other parties as at December 31, 2019.
The units are redeemable at the option of the holder and, therefore, are considered a puttable instrument in accordance with IAS 32, "Financial
Instruments - Presentation" ("IAS 32"), and must be presented as a financial liability. The holder has the option to redeem units, generally at any time, at a
redemption price per unit equal to the lesser of 90% of the 20-day weighted average closing price prior to the redemption date or 100% of the closing
market price on the redemption date.
The Company manages the Dream Alternatives units on a fair value basis. As a financial liability measured at fair value through profit or loss, the Company
recorded the Dream Alternatives trust units at fair value on acquisition of control. Subsequent to initial recognition, the liability is remeasured to fair value
each period based on the Dream Alternatives trust unit's closing trading price. Fair value changes are recorded within adjustments related to Dream
Alternatives trust units in the consolidated statements of earnings in the period in which they arise. Distributions on Dream Alternatives trust units not
held by the Company are recognized in the period in which they are approved and are recorded as an expense within adjustments related to Dream
Alternatives trust units in the consolidated statements of earnings. Refer to Note 22 for additional details.
Dream Unlimited Corp. – December 31, 2019 | 51
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Revenue Recognition
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The
Company recognizes revenue when it transfers control over a product or service to a customer. The Company capitalizes all commissions paid to an
intermediary as a cost to obtain a contract when they are expected to be recovered. These costs are amortized consistently with the pattern of recognition
for the related revenue. The following is a description of principal activities from which the Company generates its revenues, including the nature of
revenues, timing of satisfaction of performance obligations and significant payment terms.
Product and services
Nature and timing of satisfaction of performance obligations
Land
Revenue relating to sales of land is recognized when control over the property has been transferred to the customer - typically when the
customer can begin construction on the property. Until this criterion is met, any proceeds received are accounted for as customer
deposits. Revenue is measured based on the transaction price agreed to under the contract and is typically recognized upon receipt of 15%
of the transaction price.
Condominiums and housing
projects
Revenue relating to sales of condominiums and housing projects is recognized when control of the property has been transferred to the
customer - typically when the customer occupies the property. Until these criteria are met, any proceeds received are accounted for as
customer deposits. Revenue is measured based on the transaction price agreed to under the contract.
Other revenue from investment
properties (excluding base rent)
Other revenue from investment properties includes recoveries of operating expenses including percentage participation rents, lease
cancellation fees, parking income and other incidental income. The Company recognizes revenue as the related services are performed.
The unsatisfied performance obligation resulting from other investment property revenue has a variable consideration that is constrained
by the underlying performance of the property.
Recreational properties
Amounts received for the sale of annual season passes to recreational properties are deferred and amortized on a straight-line basis over
the term of the season. Other amounts received from the use of recreational properties are recognized as revenue when earned.
Real estate asset management
and advisory services
Revenue from real estate asset management and advisory services is calculated based on a fee that is a formula specific to each advisory
client and may include fee revenue calculated as a percentage of the capital managed, capital expenditures incurred, the purchase price of
properties acquired and the value of financing transactions completed. These fees are recognized on an accrual basis over the period
during which the related service is rendered. Asset management and advisory services fee arrangements may also provide the Company
with an incentive fee when the investment performance of the underlying assets exceeds established benchmarks. Incentive fees and
other revenues are recognized in earnings when it is highly probable there will not be a significant reversal of revenue.
Renewable power
Rental income
Revenue from renewable power assets is recognized based on the amount of energy generated at the contracted rates and is recognized
when the energy produced is received by the client and the performance obligation is satisfied. Several power-generating sites are eligible
for additional payments under government programs designed to provide additional fees based on the supply of renewable energy. These
amounts are related to energy generated and are based on the megawatt hours ("MWh") of electricity supplied. These amounts are
recorded as revenue in the period in which the energy produced is received by the client. Amounts are determined based on a fixed
amount per MWh generated, depending on the location of where the energy is produced. The unsatisfied performance obligation
resulting from contracted rates has a variable consideration that is constrained by the MWh of energy produced.
The Company uses the straight-line method of rental revenue recognition on investment properties whereby any contractual free-rent
periods and rent increases over the term of a lease are recognized in earnings evenly over the lease term. Initial direct leasing costs
incurred in negotiating and arranging tenant leases are added to the carrying amount of the investment properties and are amortized over
the term of the lease. Lease incentives, which include costs incurred to make leasehold improvements to tenants’ space and cash
allowances provided to tenants, are added to the carrying amount of investment properties and are amortized on a straight-line basis over
the term of the lease as a reduction in revenue from investment properties
Lending portfolio interest and
fees income
Mortgage interest and fees revenues are recognized in the consolidated statements of earnings using the effective interest method.
Mortgage interest and fees revenues include the discount or premium incurred by the Company at the time the mortgages were acquired,
if any. The effective interest method derives the interest rate that discounts the estimated future cash payments and receipts over the
expected life of the mortgages to its carrying amount. When calculating the effective interest rate, future cash flows are estimated
considering all contractual terms of the financial instrument, but not future credit losses. The calculation of the effective interest rate
includes all fees and transaction costs paid or received, including the incremental revenues and costs that are directly attributable to the
acquisition or issuance of the mortgage.
Direct Operating Costs
Inventory costs associated with land held for development or land under development, including the estimated costs to complete the development of the
asset, are allocated to direct operating costs on a per lot basis, pro-rated based on the street frontage of each lot. Inventory costs associated with the
development of condominiums are allocated to direct operating costs on a per unit basis, pro-rated based on the sales value of the unit relative to the
sales value of all units in a condominium project. Direct operating costs associated with the construction of housing inventory and commercial property are
specific to each project.
Direct operating costs related to specific investment or recreational properties include property management costs and operating expenses, as well as
management and administrative expenses, and are recorded on an accrual basis.
Dream Unlimited Corp. – December 31, 2019 | 52
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Income Taxes
The Company follows the balance sheet liability method to provide for income taxes on all transactions recorded in its consolidated financial statements.
The balance sheet liability method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying
amounts of assets and liabilities and their tax bases. Deferred income tax assets and liabilities are determined for each temporary difference and for
unused tax losses and unused tax credits, as applicable, at rates expected to be in effect when the asset is realized or the liability is settled.
The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the substantive
enactment date. Deferred tax assets are recognized to the extent that it is probable that the assets can be recovered.
Due to uncertainties in the estimation process, particularly with respect to changes in facts and circumstances in future reporting periods (carry forward
period assumptions), it is reasonably possible that actual results could differ from the estimates used in the Company’s historical analysis. If the Company’s
results of operations are less than projected and there is insufficient objectively verifiable evidence to support the likely realization of its deferred tax
assets, adjustments would be required to reduce or eliminate its deferred tax assets.
Non-controlling Interest
The non-controlling interest represents equity interests of subsidiaries owned by other shareholders. The share of net assets, net retained earnings and
accumulated other comprehensive income of these subsidiaries attributable to a non-controlling interest is presented as a component of equity.
Preference Shares, Series 1
The Preference shares, series 1, were classified and accounted for as a financial liability, as they were convertible at the sole discretion of the Company
into a variable number of Dream's Class A Subordinate Voting Shares ("Subordinate Voting Shares") or were otherwise retractable at the option of the
holder, at or after a particular date, for a fixed amount per share.
The redemption and retraction option features of the Preference shares, series 1, met the definition of embedded derivatives requiring separate
recognition, as the economic risks and characteristics of the redemption and retraction options are not closely related to those of the Preference shares,
series 1. Accordingly, the embedded redemption and retraction options were bifurcated from the Preference shares, series 1, and were recognized as
derivative financial instruments included with other financial assets and accounts payable and other liabilities, respectively, with a corresponding increase
or decrease in the initial carrying value of the Preference shares, series 1.
Earnings per Share
Basic earnings per share is computed by dividing Dream’s earnings attributable to owners of the parent by the weighted average number of Subordinate
Voting Shares and Dream Class B common shares ("Class B Shares") outstanding during the year. Diluted earnings per share, where applicable, is calculated
by adjusting the weighted average number of shares outstanding for dilutive instruments by applying the treasury stock method.
Share-Based Compensation
Stock Option Plan
Management issues share-based compensation to certain employees in the form of stock options that vest evenly over a three to five-year period. The fair
value of the options on the grant date is determined using an option pricing model. The estimated fair value of options on the grant date is recognized as
compensation expense on a graded vesting basis over the period in which the employee services are rendered.
Performance Share Unit Plan
Management issues share-based compensation to certain employees in the form of performance share units (“PSUs”) that are subject to either time
vesting only, or time and performance vesting. PSUs subject to performance vesting provide the holder with a minimum of 0 and a maximum of 1.5
Subordinate Voting Shares based on the achievement of predetermined Company performance goals. In lieu of receiving Subordinate Voting Shares on
vesting, PSU holders may request a cash payment equal to the five-day trailing weighted average share price of the Company’s Subordinate Voting Shares
on the vesting date or settlement date, when applicable; however, the form of payment on vesting is ultimately the decision of the Company. The fair
value of the PSUs on the grant date is determined using an option pricing model. The estimated fair value of the PSUs on the grant date is recognized as
compensation expense on a straight-line basis over the period in which the employee services are rendered.
Deferred Share Incentive Plan
The Company has a deferred share incentive plan that provides for the grant of deferred share units ("DSUs") and income deferred share units to eligible
directors, senior management and their service providers. Grants to directors, officers and employees are recognized as compensation expense and are
included in general and administrative expenses in the period in which they are granted. During the holding period, which is between the grant date and
the vesting date, DSUs earn dividends declared by the Company in the form of additional fractional DSUs. On settlement of DSUs and earned fractional
DSUs, the amount recognized in contributed surplus for the grant is reclassified to share capital.
Adoption of Recent Accounting Pronouncements
The Company has adopted the following new or revised standards, including any consequential amendments thereto, for the year effective January 1,
2019. Changes in accounting policies adopted by the Company were made in accordance with the applicable transitional provisions as provided in those
standards and amendments. As required by IAS 8, "Accounting Policies, Changes in Accounting Estimates and Errors", the nature and the effect of these
changes are disclosed below and in Note 43.
Dream Unlimited Corp. – December 31, 2019 | 53
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
IFRS 16, “Leases” (“IFRS 16”)
IFRS 16 sets out the principles for the recognition, measurement and disclosure of leases. IFRS 16 provides revised guidance on identifying a lease and for
separating lease and non-lease components of a contract. IFRS 16 introduces a single accounting model for most lessees and requires a lessee to recognize
right-of-use assets and lease liabilities for leases with terms of more than 12 months, unless the underlying asset is of low value. The Company has adopted
IFRS 16 effective January 1, 2019. Expanded disclosures required by IFRS 16 are included in Notes 16 and 18 and the impact of changes due to the adoption
of IFRS 16 is included in Note 43.
IFRS 3, “Business Combinations” (“IFRS 3”)
IFRS 3 clarifies that when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved
in stages, including remeasuring previously held interest in the assets and liabilities of the joint operation at fair value. The amendments to IFRS 3 are
effective for annual periods beginning on or after January 1, 2019. There was no impact to the consolidated financial statements on application of this
amendment, as IFRS 3 will apply to the Company's future business combinations.
IFRIC 23, “Uncertainty over Income Tax Treatments” (“IFRIC 23”)
IFRIC 23 clarifies the application of the recognition and measurement requirements in IAS 12, “Income Taxes” (“IAS 12”), for situations where there is
uncertainty over income tax treatments. IFRIC 23 specifically addresses whether an entity considers income tax treatments separately; assumptions that
an entity makes regarding the examination of tax treatments by taxation authorities; how an entity determines taxable income or loss, tax bases, unused
tax losses or credits and tax rates; and how an entity considers changes in facts and circumstances. IFRIC 23 does not apply to taxes or levies outside the
scope of IAS 12. IFRIC 23 is effective for annual periods beginning on or after January 1, 2019. The adoption of IFRIC 23 did not have a material impact on
the Company's consolidated financial statements.
Future Accounting Standards
IFRS 3, “Business Combinations”
IFRS 3 sets out to emphasize that the output of a business is to provide goods and services to customers, whereas the previous definition focused on
returns in the form of dividends, lower costs or other economic benefits to investors and others. The amended definition of a business is effective on or
after January 1, 2020, with earlier application permitted. These amendments will apply to the Company's future business combinations.
4. Critical accounting estimates, judgments and assumptions
The preparation of these consolidated financial statements in accordance with IFRS requires the Company to make judgments in applying its accounting
policies and estimates and assumptions about the future. These judgments, estimates and assumptions affect the reported amounts of assets, liabilities,
revenues and expenses, and the related disclosure of contingent assets and liabilities included in the Company’s consolidated financial statements. The
Company evaluates its estimates on an ongoing basis. Such estimates are based on historical experience and on various other assumptions the Company
believes are reasonable under the circumstances, and these estimates form the basis for making judgments about the carrying value of assets and
liabilities and the reported amount of revenues and expenses that are not readily apparent from other sources. Actual results may differ from those
estimates under different assumptions or conditions. The following discusses the most significant accounting judgments, estimates and assumptions the
Company has made in the preparation of its consolidated financial statements.
Joint Arrangements and Associates
The Company holds investments in various assets, and its ownership interest in these investments is established through diverse structures. Significant
judgment is applied in assessing whether the investment structure results in control, joint control or significant influence over the operations of the
investment, or whether the Company’s investment is passive in nature. The assessment of whether the Company exerts control, joint control or significant
influence over an investment will determine the accounting treatment for the investment. In making this assessment, the Company considers its
ownership interest in the investment as well as its decision-making authority with regard to the operating, financing and investing activities of the
investment as specified in the contractual terms of the arrangement. The Company also considers any agreements with the investee that expose the
Company to variable returns from its involvement with the investee. Joint arrangements that involve the establishment of a separate entity in which each
venture has an interest are set up as joint ventures, whereas investments in associates are those investments over which the Company has significant
influence but no control.
Business Combinations and Goodwill
The Company uses significant judgment to conclude whether an acquired set of activities and assets is a business, and such judgment can lead to
significantly different accounting results. If an acquired set of activities and assets does not meet the definition of a business, the transaction is accounted
for as an asset acquisition.
There are many differences in accounting for a business combination versus an asset acquisition, including the recognition of goodwill and deferred tax
amounts, the initial measurement of assets and accounting for transaction costs. These differences not only affect the accounting as at the acquisition
date, but will also affect future depreciation and possible impairment analysis. Accordingly, the conclusion as to whether a business has been acquired can
have a significant effect on the Company’s reported financial position and results of operations.
Significant judgment is required in applying the acquisition method of accounting for business combinations and, specifically,
determining the fair value of assets and liabilities acquired, including intangible assets and residual goodwill, if any.
in identifying and
Dream Unlimited Corp. – December 31, 2019 | 54
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
The Company’s goodwill balance is allocated to the particular CGU to which it relates (herein referred to as the “goodwill CGU”). The recoverable amount
of the Company’s goodwill CGU is determined based on the fair value less costs of disposal approach. Refer to Note 16 for further details.
Consolidation
In determining if an entity is a subsidiary of the Company, the Company makes significant judgments about whether it has power and control over such an
entity. In addition to voting rights, the Company considers the contractual rights and obligations arising from other arrangements, and other relevant
factors relating to an entity in determining if the Company has the power and ability to affect returns from an investee. The contractual rights and
obligations considered by the Company include, among others, the approvals and decision-making process over significant operating, financing and
investing activities, the responsibilities and scope of decision-making power of the Company, the termination provisions of applicable agreements, the
types and determination of fees paid to the Company and the significance, if any, of any investment made by the Company. The Company reviews its prior
conclusions when facts and circumstances change.
Net Realizable Value
Land, including land under development and land held for development, as well as housing and condominium inventory, are stated at the lower of cost
and net realizable value. In calculating net realizable value, management must estimate the selling price of these assets based on prevailing market prices
at the dates of the consolidated statements of financial position, discounted for the time value of money, if material, less estimated costs of completion
and estimated selling costs. If estimates are significantly different from actual results, the carrying amounts of these assets may be overstated or
understated on the consolidated statements of financial position and, accordingly, earnings in a particular period may be overstated or understated.
Provisions
Provisions are recorded by the Company when it has determined it has a present obligation, whether legal or constructive, and it is probable that an
outflow of resources will be required to settle the obligation, provided a reliable estimate can be made of the amount of the obligation. Management must
use judgment in assessing the magnitude and timing of the potential economic exposure and the likelihood of a future event occurring. Actual results may
differ significantly from those estimates. The consolidated financial statements include a significant provision for costs to complete land, housing and
condominium projects. The stage of completion of any development project, and the remaining costs to be incurred, are determined by management,
considering relevant available information at each reporting date. In making such determination, management makes significant judgments about
milestones, actual work performed and the estimates of costs to complete the work.
Fair Value of Investment Holdings and Participating Mortgages
Critical judgments are made in determining the fair value of investment holdings and participating mortgages. The fair values of these investments are
reviewed regularly by the Company with reference to the applicable local market conditions and in discussion with the development’s construction
management company. The Company makes judgments with respect to the completion dates of the developments, and the leasing and management cost
assumptions for the buildings and/or unit sales in order to determine the Company’s interest and participating income. Generally, the investment holdings
and participating mortgages are valued using a number of approaches that typically include a discounted cash flow analysis, direct capitalization approach
and direct comparison approach. The discounted cash flow model is calculated based on future interest and participating profit payments as determined
by the Company and project managers’ estimates of unit sales proceeds and/or net operating income of the development properties. With the direct
capitalization rate method, the fair value is determined by applying a capitalization rate to stabilized net operating income. Each investment is subject to
an appraisal by an independent valuator at least once every three years, if not earlier.
Critical judgments are made in respect of the fair values of co-owned commercial assets. Assumptions related to the estimates of fair values of these
investment holdings include discount rates that reflect current market uncertainties, capitalization rates and recent investment holding transaction prices,
if any. If there is any change in these assumptions or regional, national or international economic conditions, the fair value of investment holdings may
change materially.
Fair Value of Investment Properties
Critical judgments are made in respect of the fair values of investment properties and the investment properties held in equity accounted investments.
Assumptions relating to the estimates of fair values of investment properties include the receipt of contractual rents, expected future market rents,
renewal rates, maintenance requirements, discount rates that reflect current market uncertainties, capitalization rates and current and recent investment
property transaction prices, if any. If there is any change in these assumptions or regional, national or international economic conditions, the fair value of
investment properties may change materially.
On a rotational basis, the Company engages independent, professionally qualified appraisers who are experienced, nationally recognized and qualified in
the professional valuation of real estate in their respective geographic areas. Judgment is applied in determining the extent and frequency of independent
appraisals. A select number of properties are valued by an independent appraiser on a rotational basis at least once every three years. For properties
subject to an independent valuation report, management verifies all major inputs to the valuation and reviews the results with the independent
appraisers.
Fair Value of Development Investment Properties
Fair value measurement of an investment property under development is applied only if the fair value is considered to be reliably measurable. Under
specific circumstances, investment properties under development may be carried at cost until their fair value becomes reliably measurable. It may
sometimes be difficult to determine reliably the fair value of investment properties under development. In order to evaluate whether the fair value of an
investment property under development can be determined reliably, management considers various factors, including the terms of the construction
Dream Unlimited Corp. – December 31, 2019 | 55
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
contract, the stage of completion, the location, type and quality of the property, expected completion dates, current market rents for similar properties,
the level of reliability of cash inflows after completion, the development risks specific to the property, past experience with similar constructions, status of
approvals and/or permits, estimated costs to complete and market conditions.
Impairment of Non-Financial Assets
Recreational properties, renewable power assets, capital assets and intangible assets with finite lives are tested for impairment whenever events or
changes in circumstances indicate the carrying amounts may not be recoverable. Intangible assets with indefinite lives are tested at least annually.
Management uses judgment in performing this impairment test. Imprecision in any of the assumptions and estimates used could affect the valuation of
these assets and the assessment of performance.
IAS 36, "Impairment of Assets", requires management to use judgment in determining the recoverable amount of assets tested for impairment. Judgment
is involved in estimating the fair value less the cost to sell or value-in-use of the CGUs, including estimates of growth rates, discount rates and terminal
rates. The values assigned to these key assumptions reflect past experience and are consistent with external sources of information.
Income Taxes
The determination of the Company’s income and other tax liabilities requires interpretation of complex laws and regulations, often involving multiple
jurisdictions. Judgment is required in determining whether deferred income tax assets should be recognized on the consolidated statements of financial
position. Deferred income tax assets are recognized to the extent the Company believes it is probable that the assets can be recovered. Furthermore,
deferred income tax balances are recorded using enacted or substantively enacted future income tax rates. Changes in enacted income tax rates are not
within the control of management. However, any such changes in income tax rates may result in actual income tax amounts that may differ significantly
from estimates recorded in deferred tax balances.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation
and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Fair Value and Impairment of Financial Instruments
Certain financial
instruments are recorded in the Company’s consolidated statements of financial position at values that are representative of or
approximate fair value. The fair value of a financial instrument that is traded in active markets at each reporting date is determined by reference to its
quoted market price or dealer price quotations. The fair value of co-owned commercial assets is based on the fair value of the Company's proportionate
net assets of the underlying investment.
IFRS 9 requires management to use judgment in determining if the Company's financial assets are impaired. The Company's financial assets are subject to
the ECL model whereby the Company estimates on a forward looking basis possible default scenarios and establishes a provision matrix that considers
various factors including industry and sector performance, economic and technological changes and other external market indicators.
The fair value of certain other financial instruments is determined using valuation techniques. By their nature, these valuation techniques require the use
of assumptions. Changes in the underlying assumptions could materially impact the determination of the fair value of a financial instrument. Imprecision in
determining fair value using valuation techniques may affect the amount of earnings recorded in a particular period.
The Company classifies the fair value of its financial instruments according to the following hierarchy, which is based on the amount of observable inputs
used to value the instrument:
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for
the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Fair Value of Hedging Instruments and Effectiveness
Critical judgments are made in respect of assumptions used to estimate the fair value of hedging instruments and to assess the effectiveness of the
hedging arrangement. The basis of valuation and assessment of effectiveness for the Company's derivatives is set out in Note 20; however, the fair values
reported may differ from how they are ultimately recognized if there is volatility in interest rates between the valuation date and settlement date.
Transfer of Inventory to Development Investment Properties
Raw land is usually unentitled property without the regulatory approvals that allow the construction of residential, industrial, commercial and mixed-use
developments. When development plans are formulated, the Company may decide that specific land holdings will be developed into investment
properties. Once appropriate evidence of a change in use is established, the land is transferred to investment properties. This also applies to multi-family
rental properties, which are transferred to investment properties from condominium inventory.
Dream Unlimited Corp. – December 31, 2019 | 56
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
5. Business combination
Dream Alternatives
On January 1, 2018, the Company acquired control of Dream Alternatives based on the increase in the Company's exposure to variable returns resulting
from increased ownership through units held in Dream Alternatives and from new real estate joint venture agreements. The Company remeasured its
existing 13% equity interest in Dream Alternatives to its fair value of $60,891 at the acquisition date. As a result of the remeasurement, the Company
recorded a non-cash gain of $12,555 and realized losses reclassified from AOCI of $78 in the year ended December 31, 2018.
The acquisition of control also resulted in a non-cash net bargain purchase gain of $117,437 in the year ended December 31, 2018. This amount
represented the difference between the fair value of net assets of Dream Alternatives relative to the implied financial consideration for the transaction. As
part of the acquisition of control, the Company derecognized the intangible asset of $43,000 related to the right to manage Dream Alternatives and
eliminated amounts receivable from Dream Alternatives of $23,107.
The following table summarizes the identifiable assets and liabilities assumed, which were measured at fair value at the date of acquisition of control of
Dream Alternatives, as well as the components of the net gain on acquisition of Dream Alternatives:
Cash and cash equivalents
Accounts receivable
Other financial assets
Lending portfolio
Investment properties
Renewable power assets
Equity accounted investments
Capital and other operating assets
Deferred income taxes
Total assets
Less:
Accounts payable and other liabilities
Debt
Dream Alternatives trust units (87% held by other unitholders as at January 1, 2018)
Deferred income taxes
Net assets acquired
Consideration:
Deemed disposal of previously held equity accounted investment at fair value
Total consideration
Net assets acquired
Less: Consideration
Bargain purchase gain
Derecognition of intangible asset
Elimination of amounts receivable from Dream Alternatives
Adjustment for non-controlling interests in Dream Alternatives
Net bargain purchase gain
Non-cash gain on deemed disposal of previously held equity accounted investment
Net gain on acquisition of Dream Alternatives
$
$
$
$
$
$
60,927
5,645
157,231
161,399
220,240
148,901
133,406
4,515
111
892,375
(21,050)
(203,967)
(397,620)
(23,355)
(645,992)
246,383
60,891
60,891
246,383
(60,891)
185,492
(43,000)
(23,107)
(1,948)
117,437
12,555
129,992
The fair values at the date of acquisition of control of Dream Alternatives' current assets, capital and other operating assets, and current liabilities
approximated their carrying values due to their short-term nature. The Dream Alternatives trust units held by other unitholders are measured at the fair
value of units outstanding.
Dream Unlimited Corp. – December 31, 2019 | 57
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
6. Accounts receivable
The details of accounts receivable by segment are summarized in the following table:
Western Canada community development
Urban development - Toronto & Ottawa
Stabilized income generating assets
Asset management
Dream Alternatives
Corporate and other
$
$
2019
97,725
87,476
7,859
4,495
4,179
424
202,158
$
$
2018
121,400
34,492
8,101
8,329
2,821
2,271
177,414
Accounts receivable for contracted sales of land under development and housing and condominium sales are secured by the underlying real estate assets
and have various terms of repayment. The carrying value of accounts receivable is reported net of a provision for impairment of $645 (December 31, 2018
- $762).
7. Other financial assets
Other financial assets consisted of the following:
Participating mortgages
Investment holdings
Loans receivable
Other instruments
Marketable securities - Dream Global REIT
Note
33
$
$
2019
66,210
50,206
8,088
4,952
—
129,456
$
$
2018
64,764
73,085
11,894
4,485
58,123
212,351
Marketable Securities
Marketable securities as at December 31, 2018 included the Company's investment in 3,132,727 Dream Global REIT units and 2,081,517 deferred trust
units ("DTUs") with an aggregate fair value of $58,123, which were disposed of in the year ended December 31 2019. The Company recorded a fair value
gain of $29,626 on the marketable securities in the consolidated statement of earnings for the year ended December 31, 2019 (year ended December 31,
2018 - loss of $525).
Participating Mortgages
Participating mortgages related to two long-term development loans secured by real property comprising two residential assets under development. Refer
to Note 33 for the valuation methodology used to determine the fair value of the participating mortgages.
In the year ended December 31, 2019, the Company recorded a net fair value gain of $474 related to the participating mortgages. As at December 31,
2019, the discount rates applied for the participating mortgages were 7.0% to 8.0% (December 31, 2018 - 7.0% to 8.0%). The Company determined the fair
value of the participating mortgages by using a discounted cash flow analysis which is calculated based on future interest and participating profit payments
as determined by the Company and the project managers' estimates of unit sales proceeds and/or net operating income of the development properties.
Investment Holdings
As at December 31, 2019, investment holdings include one hospitality asset (Hard Rock/Virgin Hotels Las Vegas) and a real estate development investment.
In the year ended December 31, 2018, the Company, through Dream Alternatives, invested US$29,000 ($37,526) for an approximate 10% interest in the
Hard Rock/Virgin Hotels in Las Vegas, Nevada, with a consortium of partners, led by Juniper Capital Partners and Fengate Real Estate Asset Investments.
During the year ended December 31, 2019, the Company invested an additional $10,795 into the investment. As at December 31, 2019, the cash
consideration continues to approximate fair value, adjusted for foreign currency translation.
Loans Receivable
Loans receivable are amounts owing to the Company pertaining to development partnerships in Toronto.
Dream Unlimited Corp. – December 31, 2019 | 58
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
8. Lending portfolio
Balance, beginning of year
Acquired through business combination
Add (deduct):
Lending portfolio advances
Provision for lending portfolio losses
Interest capitalized to lending portfolio balance
Other
Principal repayments at maturity and contractual repayments and prepayments
Balance, end of year
(1)
(1)
Included is a loan of $7,301 that is classified as FVTPL (December 31, 2018 - $16,574).
The table below provides a summary of the Company's lending portfolio:
Weighted average effective interest rate (year-end)
Security allocation (1st mortgages/other)
Maturity dates
Balance of accrued interest
Loans with prepayment options
$
$
$
2019
144,095
$
—
119
(2,350)
5,029
1,024
(83,212)
64,705
$
2018
—
161,399
35,042
—
6,113
(3,971)
(54,488)
144,095
2019
9.1%
47.7%/52.3%
2020 - 2025
130
30,877
$
2018
9.6%
69.8%/30.2%
2019 - 2025
241
37,127
During the year ended December 31, 2019, an increase in the existing provision for the lending portfolio resulted in a loss of $2,350 (December 31, 2018 -
$nil). The full provision relates to one loan, the value of which was determined based on the net realizable value of the underlying real estate properties,
net of related transaction costs, based on internal valuations. The provision for impairment on this loan was established based on the credit adjusted
approach ECL model which results in expected credit losses calculated considering an estimate of default over the life of the asset. There was no provision
recorded on the remainder of the lending portfolio due to the value of the collateralized properties and the loan to value ratios.
During the year ended December 31, 2019, a loan investment classified as FVTPL, aggregating $7,301 (December 31, 2018 - $16,574), was measured at fair
value using a discounted cash flow method. The fair value was determined by discounting the expected cash flows of the loan using an interest rate of
17.5% (December 31, 2018 - 17.6%), which took into consideration similar instruments with corresponding maturity dates plus a credit adjustment in
accordance with the borrowers' creditworthiness, as well as the risk profile of the underlying securities. Generally, under this method, a decrease in the
market rate will result in an increase to the fair value and an increase in the market rate will result in a decrease to the fair value. If the weighted average
market rate were to increase by 25 basis points ("bps"), the fair value of the loan investments would decrease by $100. If the weighted average market
rate were to decrease by 25 bps, the fair value would increase by $100.
Dream Unlimited Corp. – December 31, 2019 | 59
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
9. Housing inventory
The movement in housing inventory is as follows:
Balance, beginning of year
Transfers from land inventory
Development
Housing units occupied
Balance, end of year
10. Condominium inventory
The movement in condominium inventory is as follows:
Balance, beginning of year
Acquisitions
Development
Condominium units occupied
Transfers to investment properties (Note 12)
Balance, end of year
$
$
$
$
2019
56,605
3,560
6,082
(27,640)
38,607
$
$
2019
239,621
$
47,467
85,168
(41,452)
(39,500)
291,304
$
2018
59,619
17,527
23,992
(44,533)
56,605
2018
171,513
694
85,817
(18,403)
—
239,621
In the year ended December 31, 2019, inventory totalling $39,500 relating to the Company's Zibi development and retail portions of closed condominium
projects were transferred to investment properties.
11. Land inventory
The movement in land inventory is as follows:
Balance, beginning of year
Acquisitions
Development
Write-down of land held for development
Lot and acre sales
Transfers to housing inventory
Transfers to investment properties (Note 12)
Balance, end of year
$
$
2019
575,896 $
4,875
32,878
(23,159)
(39,937)
(3,560)
(8,422)
538,571 $
2018
574,898
960
86,761
—
(62,955)
(17,527)
(6,241)
575,896
In the year ended December 31, 2019, inventory totalling $8,422 relating to the Company's Hampton Heights and Brighton Village Centre developments
was transferred to investment properties under development.
In the year ended December 31, 2019, the Company recorded a write-down on land held for development located in Regina for $23,159 to net realizable
value, which reflects updated assumptions on absorptions and deferred development start dates on our new phases/communities.
Dream Unlimited Corp. – December 31, 2019 | 60
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
12. Investment properties
The movement in investment properties by type is as follows:
Balance, beginning of year
$
159,784
$
18,171
$
234,816
$
412,771
$
Stabilized assets
Properties under
development
Dream
(1)
Alternatives
Total
2019
Additions to and transfers to/from investment properties:
Properties acquired through business combination
Acquisitions
Land and building additions
Transfers from inventory (Notes 10 and 11)
Transfers (to)/from assets held for sale (Note 17)
Dispositions
Gains (losses) included in earnings:
Fair value changes in investment properties
Amortization and other
Change in straight-line rent
Balance, end of year
(1)
—
2,082
1,700
5,206
5,708
—
28,067
(66)
104
202,585
$
$
—
—
36,826
42,716
—
—
728
(68)
56
98,429
$
—
6,257
7,566
—
—
—
8,339
46,092
47,922
5,708
(44,340)
(44,340)
14,594
(1,627)
144
217,410
43,389
(1,761)
304
$
518,424
$
Dream Alternatives includes consolidation adjustments relating to a 50% leasehold interest co-owned with Dream.
Total
2018
241,977
220,240
13,525
14,948
6,241
(53,732)
(48,000)
18,660
(1,306)
218
412,771
In the year ended December 31, 2018, Dream, along with Dream Alternatives, acquired a 33.3% leasehold interest in a retail shopping centre and
residential mixed-use development investment located at 100 Steeles Ave. West ("100 Steeles") in Toronto, split 25%/75% between Dream and Dream
Alternatives, respectively. The investment is currently a stabilized retail property with redevelopment potential in future years. During the year ended
December 31, 2019, Dream, along with Dream Alternatives, increased its ownership in the project to 50% for a total cost of $8,339.
Included in stabilized assets as at December 31, 2019 is a right-of-use asset for the 100 Steeles leasehold interest of $10,493 (December 31, 2018 - $7,299).
In the year ended December 31, 2019, Dream Alternatives sold its co-owned industrial properties to Dream Industrial REIT and sold an income property,
which was co-owned with Dream Office REIT, to a third party for gross proceeds of $44,340.
Fair value changes for the year ended December 31, 2019 for investment properties were $43,389 (year ended December 31, 2018 – $18,660), primarily
comprised of gains on the Company's stabilized assets and a fair value gain on a wholly owned office property within Dream Alternatives' portfolio.
In the year ended December 31, 2018, the Company received a Notice of Expropriation and Notice of Possession from the City of Toronto for its 73-acre
commercial site in Toronto (the “Obico Property”), and accordingly, ownership of the property was deemed to be passed to the City of Toronto on the date
of the expropriation registration. The Company received an offer of compensation from the City of Toronto in the amount of $48,000 in respect of its
interest in the Obico Property, pursuant to Section 25 of the Expropriations Act (Ontario). The Company accepted the consideration in order to repay the
outstanding first mortgage obligation of $21,917, but has the right to claim additional compensation as provided for in the Expropriations Act (Ontario).
Based on the consideration offered, the Company recorded a corresponding fair value gain of $7,580 in the consolidated statements of earnings for the
year ended December 31, 2018 and collected the net proceeds in the year ended December 31, 2018.
Fair Value of Investment Properties
Fair values of investment properties are determined using valuations prepared by management using inputs that are Level 3 on the fair value hierarchy. To
supplement the assessment of fair value, management obtains valuations of selected investment properties on a rotational basis from qualified external
valuation professionals and verifies the results of such valuations with the external appraisers. As at December 31, 2019, investment properties with a total
fair value of $345,369 (December 31, 2018 - $340,560) were externally appraised at a value of $366,569 (December 31, 2018 - $340,560).
The discount rate is based on the weighted average cost of capital of the Company and is used to determine the net present value of cash flows. The
terminal capitalization rate is based on the location, size and quality of the investment property and takes into account any available market data at the
valuation date. The terminal capitalization rate is used to estimate the value of a property at the end of the holding period.
The following are the significant assumptions used under the discounted cash flow method:
•
•
Terminal capitalization rate – taking into account assumptions regarding vacancy rates and market rents
Discount rate – reflecting current market assessments of the uncertainty in the amount and timing of cash flows
Dream Unlimited Corp. – December 31, 2019 | 61
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Significant unobservable inputs were as follows for December 31, 2019 and December 31, 2018:
Stabilized assets
Properties under
development
Dream Alternatives
Input
Discount rate
Terminal capitalization rate
Discount rate
Terminal capitalization rate
Discount rate
Terminal capitalization rate
Range
5.25%-7.00%
4.50%-6.50%
6.00%-7.00%
5.25%-6.50%
6.00%-7.25%
5.00%-6.25%
2019
Weighted average
5.6%
4.8%
6.6%
5.9%
6.9%
5.9%
Range
6.00%-7.00%
5.25%-6.50%
7.00%
6.25%-6.50%
5.80%-8.80%
4.75%-8.00%
2018
Weighted average
6.2%
5.4%
7.0%
6.4%
6.9%
6.3%
A property within the Dream Alternatives portfolio was valued using the direct comparison approach, whereby its highest and best use considered the
asset's redevelopment potential due to its recent rezoning application submission. The direct comparison approach considered recent activity for similar
development/redevelopment sites. The appraised value for this wholly owned property was a higher value than the fair value recorded in the consolidated
statement of financial position as it was adjusted for factors specific to the property which included zoning, density and timing assumptions.
Fair values of investment properties other than the above noted, which include commercial, retail and other properties held for the long term, are
primarily calculated using a discounted cash flow (“DCF”) model, generally over an average period of ten years, plus a terminal value based on the
estimated cash flow in the final year. The DCF model incorporates, among other things, expected rental income from current leases, assumptions about
rental income from future leases and implied vacancy rates, general inflation and projections of required cash outflows with respect to such leases. The
significant unobservable inputs for the fair value of the Company’s investment properties are provided above.
Fair values of the Company's investment properties are most sensitive to changes in the terminal capitalization rates. An increase in the terminal
capitalization rate will result in a decrease in the fair value of an investment property and vice versa. If the capitalization rate were to increase or decrease
by 25 bps, the value of investment properties would decrease by $21,737 and increase by $24,569, respectively, as at December 31, 2019.
Investment properties, including equity accounted investments and excluding assets held for sale, with a fair value of $420,457 as at December 31, 2019
(December 31, 2018 - $373,270) are pledged as security for mortgages and term debt. Investment properties, including equity accounted investments,
with a fair value of $143,496 as at December 31, 2019 (December 31, 2018 - $37,646) are pledged as security for construction loans.
The Company's future minimum rental commitments, including joint operations and excluding investment properties classified as held for sale, from non-
cancellable tenant operating leases as at December 31, 2019 were as follows:
No longer than 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Longer than 5 years
$
$
17,508
17,017
15,880
15,908
14,901
158,291
239,505
Dream Unlimited Corp. – December 31, 2019 | 62
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
13. Recreational properties
The movement in recreational properties is as follows:
Balance, beginning of year
Additions
Depreciation
Other
Balance, end of year
Cost
Accumulated depreciation
Balance, end of year
Operational recreational properties:
Arapahoe Basin ski hill (Colorado)
The Broadview Hotel (Ontario)
Willows Golf Course (Saskatchewan)
14. Renewable power assets
The movement in renewable power assets is as follows:
Balance, beginning of year
Impact of changes in accounting policies (Note 43)
Adjusted balance, beginning of year
Acquired through business combination
Additions/(dispositions)
Depreciation
Foreign currency gain (loss)
Transferred to assets held for sale (Note 17)
Balance, end of year
$
$
Cost
Accumulated depreciation
Transferred to assets held for sale (Note 17)
Total renewable power assets
$
$
$
$
$
$
2019
49,241
5,683
(4,981)
(1,164)
48,779
80,591
(31,812)
48,779
2019
31,923
13,952
2,904
48,779
$
$
$
$
$
$
Right-of-use
assets
Solar power
Wind power
— $
84,779 $
12,036
12,036
—
—
(236)
(219)
(11,581)
—
84,779
—
(41)
(1,310)
—
(83,428)
58,509 $
—
58,509
—
—
(1,064)
(835)
(56,610)
2019
143,288
$
12,036
155,324
—
(41)
(2,610)
(1,054)
(151,619)
2018
40,617
9,557
(3,891)
2,958
49,241
76,072
(26,831)
49,241
2018
32,103
14,554
2,584
49,241
2018
—
—
—
148,901
584
(6,717)
520
—
— $
— $
— $
— $
143,288
$
$
2019
171,632
$
(20,013)
(151,619)
— $
2018
160,691
(17,403)
—
143,288
Dream Unlimited Corp. – December 31, 2019 | 63
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
15. Equity accounted investments
The Company has entered into certain arrangements in the form of jointly controlled entities for various residential and investment property
developments, as well as renewable energy investments. These arrangements include restrictions on the ability to access assets without the consent of all
partners and include distribution conditions outlined in partnership agreements. These arrangements are accounted for under the equity method. The
equity method of accounting is also applicable to investments in common stock in which the Company is deemed to be able to exercise significant
influence over the investee company. As at December 31, 2019, the carrying value of these arrangements was $708,840 (December 31, 2018 – $549,760).
The following tables summarize the Company’s proportionate share of assets and liabilities in equity accounted investments (segregated between
development and income producing investments) as at December 31, 2019 and December 31, 2018.
Project level (100%)
Development investments
Brighton Marketplace
Canary District
Frank Gehry
(2)
Brightwater
Lakeshore East
Other development investments
Total development investments
Income producing investments
Dream Office REIT
Firelight Infrastructure Partners LP
Other income producing investments
Total income producing investments
Total
At Dream's share
Development investments
Brighton Marketplace
Canary District
Frank Gehry
Brightwater
(2),(3)
Lakeshore East
(3)
Other development investments
Total development investments
Income producing investments
Dream Office REIT
(4)
Firelight Infrastructure Partners LP
Other income producing investments
Total income producing investments
Total
(1)
Assets
Liabilities
Net assets
2019
$
69,614 $
(44,546) $
213,966
362,725
269,183
66,723
464,570
(185,243)
(273,489)
(109,668)
(30,012)
(157,253)
1,446,781 $
(800,211) $
25,068
28,723
89,236
159,515
36,711
307,317
646,570
2,911,800 $
(1,270,492) $
1,641,308
947,023
142,357
(727,664)
(83,737)
4,001,180 $
(2,081,893) $
5,447,961 $
(2,882,104) $
219,359
58,620
1,919,287
2,565,857
$
$
$
$
Ownership
interest
Assets
Liabilities
Net assets
50% $
34,807 $
(22,273) $
12,534 $
33%-50%
106,239
25%
31%
50%
7%-50%
89,999
87,807
48,226
99,562
(92,086)
(68,372)
(34,150)
(15,267)
(41,531)
14,153
21,627
53,657
32,959
58,031
$
466,640 $
(273,679) $
192,961 $
27% $
20%
17%-78%
792,253 $
(345,680) $
446,573 $
189,405
57,362
$
$
1,039,020 $
1,505,660 $
(145,533)
(24,595)
(515,808) $
(789,487) $
43,872
32,767
523,212 $
716,173 $
Difference
between net
assets and
deemed cost of
(1)
investments
(2,286) $
—
8,334
—
—
—
6,048 $
(13,200) $
—
(181)
(13,381) $
(7,333) $
2019
Total
10,248
14,153
29,961
53,657
32,959
58,031
199,009
433,373
43,872
32,586
509,831
708,840
(2)
(3)
(4)
The difference between net assets and the deemed cost of investments is due to the Company's proportionate share of the joint venture's net assets being either higher or lower than the
Company's cost of the investment at year-end.
Previously referred to as "Port Credit".
The Company's deemed cost of this investment includes fair value adjustments relating to the consolidation of Dream Alternatives (Note 5) and as a result, may not reflect the Company's
proportionate share of project level net assets.
The ownership interest in Dream Office REIT increased throughout the year ended December 31, 2019 and was approximately 27% as at December 31, 2019 (December 31, 2018 - 23%). The fair
value of the Company's interest in Dream Office REIT as at December 31, 2019 was $520,635 (December 31, 2018 - $323,623).
Dream Unlimited Corp. – December 31, 2019 | 64
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Project level (100%)
Development investments
Brighton Marketplace
Canary District
Frank Gehry
Brightwater
(2)
Lakeshore East
Other development investments
Total development investments
Income producing investments
Dream Office REIT
Firelight Infrastructure Partners LP
Other income producing investments
Total income producing investments
Total
At Dream's share
Development investments
Brighton Marketplace
Canary District
Frank Gehry
Brightwater
(2),(3)
Lakeshore East
(3)
Other development investments
Total development investments
Income producing investments
Dream Office REIT
Firelight Infrastructure Partners LP
Other income producing investments
Total income producing investments
Total
(1)
Assets
Liabilities
Net assets
2018
$
46,465 $
(30,646) $
125,057
345,011
259,819
63,575
319,370
(105,090)
(259,265)
(122,827)
(30,040)
(202,031)
1,159,297 $
(749,899) $
15,819
19,967
85,746
136,992
33,535
117,339
409,398
3,122,932 $
(1,509,310) $
1,613,622
944,846
140,545
(752,188)
(85,788)
4,208,323 $
(2,347,286) $
5,367,620 $
(3,097,185) $
192,658
54,757
1,861,037
2,270,435
$
$
$
$
Ownership
interest
Assets
Liabilities
Net assets
Difference between
net assets and
deemed cost of
(1)
investments
50% $
23,233 $
(15,323) $
7,910 $
(2,286) $
50%
25%
31%
50%
62,529
85,773
84,902
46,383
7%-50%
104,288
(52,545)
(64,816)
(38,076)
(15,021)
(75,057)
9,984
20,957
46,826
31,362
29,231
—
7,656
—
—
—
2018
Total
5,624
9,984
28,613
46,826
31,362
29,231
7%-50% $
407,108 $
(260,838) $
146,270 $
5,370 $
151,640
23% $
20%
17%-78%
700,581 $
(339,199) $
361,382 $
(21,125) $
188,969
45,486
$
$
935,036 $
1,342,144 $
(150,494)
(26,098)
(515,791) $
(776,629) $
38,475
19,388
419,245 $
565,515 $
—
—
(21,125) $
(15,755) $
340,257
38,475
19,388
398,120
549,760
(2)
(3)
The difference between net assets and the deemed cost of investments is due to the Company's proportionate share of the joint venture's net assets being either higher or lower than the
Company's cost of the investment at year-end.
Previously referred to as "Port Credit".
The Company's deemed cost of this investment includes fair value adjustments relating to the consolidation of Dream Alternatives (Note 5) and as a result, may not reflect the Company's
proportionate share of project level net assets.
Dream Unlimited Corp. – December 31, 2019 | 65
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
The following tables summarize the Company’s proportionate share of revenue, earnings (losses) and earnings (losses) before depreciation in equity
accounted investments for the years ended December 31, 2019 and 2018.
Project level (100%)
Total development investments
(1)
Income producing investments
Dream Office REIT
Firelight Infrastructure Partners LP
(2)
Other income producing investments
Total income producing investments
Total
At Dream's share
Total development investments
(1)
Income producing investments
Dream Office REIT
Firelight Infrastructure Partners LP
(2)
Other income producing investments
Total income producing investments
Total
(1)
$
$
$
Ownership interest
7%-50% $
27%
20%
17%-78%
$
$
Revenues
581,344 $
229,018
136,154
42,296
407,468 $
988,812 $
Revenue
97,436 $
60,800
27,231
21,135
109,166 $
206,602 $
2019
Earnings before
depreciation
127,473
170,712
73,299
18,563
262,574
390,047
2019
Earnings before
depreciation
33,743
45,321
14,659
9,688
69,668
103,411
Earnings
127,436 $
168,821
27,393
17,107
213,321 $
340,757 $
Earnings
33,731 $
44,819
5,479
9,322
59,620 $
93,351 $
Earnings from development investments in the year ended December 31, 2019 relate primarily to the Company's share of earnings from Canary District, Dream CMCC Capital Fund II and Axis
Condominiums due to occupancies in the period and fair value gains on certain investment properties.
The ownership interest in Dream Office REIT increased throughout the year ended December 31, 2019 and averaged 27% (year ended December 31, 2018 - 18%).
(2)
Project level (100%)
Total development investments
Income producing investments
Dream Office REIT
Firelight Infrastructure Partners LP
Other income producing investments
Total income producing investments
Total
At Dream's share
Development investments
Income producing investments
Dream Office REIT
Firelight Infrastructure Partners LP
Other income producing investments
Total income producing investments
Total
$
$
$
Revenues
Earnings (losses)
4,407 $
6,671 $
285,208
132,673
41,127
459,008 $
463,415 $
163,906
26,063
(1,222)
188,747 $
195,418 $
2018
Earnings before
depreciation
6,685
166,103
69,563
186
235,852
242,537
2018
Ownership interest
Revenue
Earnings (losses)
Earnings (losses)
before depreciation
7%-50% $
707 $
(13) $
(13)
18%
20%
17%-78%
$
$
54,658
26,827
20,364
101,849 $
102,556 $
32,402
5,213
(573)
37,042 $
37,029 $
32,805
13,913
130
46,848
46,835
Dream Unlimited Corp. – December 31, 2019 | 66
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
16. Capital and other operating assets
Capital and other operating assets consisted of the following:
Restricted cash
Goodwill
Prepaid expenses
(1)
Capital assets
Right-of-use assets
Other
Total capital and other operating assets
Capital assets
Accumulated depreciation
Total capital assets
(1)
Note
43
$
$
$
$
2019
13,876
13,576
11,884
9,716
3,914
2,613
55,579
2019
19,607
(9,891)
9,716
$
$
$
$
2018
14,832
13,576
9,203
12,291
—
3,742
53,644
2018
20,317
(8,026)
12,291
Included in prepaid expenses as at December 31, 2019 is $2,903 of capitalized sales commissions relating to housing and condominium sales to be recognized in future periods (December 31, 2018 -
$3,507).
Restricted cash represents cash advanced by the Company to secure letters of credit provided to various government agencies to support development
activity, certain customer deposits on land, housing and condominium sales required for specific statutory requirements before closing, and cash held as
security.
Right-of-use assets
The movement in right-of-use assets relating to property and equipment is as follows:
Balance, beginning of year
Impact of changes in accounting policies (Note 43)
Adjusted balance, beginning of year
Depreciation
Balance, end of year
$
$
2019
—
4,831
4,831
(917)
3,914
Refer to Note 12 for right-of-use assets relating to investment properties.
Goodwill
Goodwill arising from business combinations is allocated at the lowest level within the Company at which it is monitored by management to make business
decisions and, therefore, has been allocated to the Zibi CGU within the Urban Development - Toronto & Ottawa operating segment.
The recoverable amount of the Zibi CGU has been estimated using fair value less costs of disposal. The CGU's inventory was fair valued using a third party
appraisal, whereby the direct comparison approach was used to compare Zibi with similar sites classified as vacant for development that have been
recently sold or offered for sale. The fair value measurement is categorized in Level 3 of the fair value hierarchy.
The Company performed its annual impairment test as at October 1, 2019 and did not identify an impairment for the Zibi CGU.
Dream Unlimited Corp. – December 31, 2019 | 67
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
17. Assets held for sale
As at December 31, 2019, management had committed to a plan of sale of certain properties, which were considered to be highly probable. As a result,
these properties were classified as assets held for sale totalling $49,089.
Assets held for sale
Balance, beginning of year
Transfers (to)/from investment properties (Note 12)
Transfer from renewable power assets (Note 14)
Transfer of other assets associated with renewable power
Change in other assets associated with renewable power
Assets sold during the year
Additions to assets held for sale
Change in straight-line rent and other
Fair value changes in investment properties classified as assets held for sale
Balance, end of year
Liabilities associated with assets held for sale
Balance, beginning of year
Transfer of liabilities associated with renewable power
Change in liabilities associated with renewable power
Liabilities sold during the year
Balance, end of year
$
$
$
$
2019
72,587 $
(5,708)
151,619
7,248
4,303
(178,493)
420
(459)
(2,428)
49,089 $
2019
— $
89,263
1,182
(90,445)
— $
2018
34,118
53,732
—
—
—
(14,086)
1,763
458
(3,398)
72,587
2018
—
—
—
—
—
In the year ended December 31, 2019, the Company disposed of its interest in two investment properties, for total consideration of $15,323. No gain on
disposal was recognized in the consolidated statement of earnings for the year ended December 31, 2019 as the investment properties were carried at fair
value.
In the year ended December 31, 2019, Dream Alternatives began marketing its economic interest in the Canadian and U.K. renewable power portfolio.
These include two solar and one wind property in Canada and one wind property in the U.K., which were reclassified into assets held for sale in the year. At
the time of transfer, the assets had a carrying value of $151,619 ($143,288 as at December 31, 2018). In the year ended December 31, 2019, both the
Canadian and U.K. renewable power portfolio components were sold for gross cash proceeds of $63,730, before transaction costs, resulting in a net loss of
$8,515 recognized in the consolidated statement of earnings for the year ended December 31, 2019.
In the year ended December 31, 2018, the Company disposed of its interest in two properties, for total consideration of $23,508. The resulting gain on
disposal of $9,422 was recognized in the consolidated statement of earnings for the year ended December 31, 2018.
18. Accounts payable and other liabilities
The details of accounts payable and other liabilities are as follows:
Accrued liabilities
Customer deposits
(1)
Trade payables
Lease obligation
Deferred revenue
Other
Note
$
$
$
2019
101,467
50,243
33,907
14,450
6,213
—
2018
87,422
34,111
24,549
7,180
6,774
917
206,280
$
160,953
(1)
Included in trade payables were bank overdraft balances of $2,170 as at December 31, 2019 (December 31, 2018 - $7,602).
Dream Unlimited Corp. – December 31, 2019 | 68
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Lease Obligation
Maturity analysis - contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease obligation as at December 31, 2019
Discounted using the lessee's incremental borrowing rate as at December 31, 2019
Total discounted lease obligation as at December 31, 2019
Current portion of lease obligation
Non-current portion of lease obligation
Total lease obligation
2019
1,916
5,790
11,554
19,260
(4,810)
14,450
2,283
12,167
14,450
$
$
$
$
There are no future cash outflows to which the Company is potentially exposed that are not reflected in the measurement of lease obligations.
19. Provision for real estate development costs
The movement in the provision for real estate development costs is as follows:
Balance, beginning of year
Additional provisions
Utilized during the year
Balance, end of year
$
$
2019
33,853
16,223
(13,223)
36,853
$
$
2018
34,756
11,845
(12,748)
33,853
The provision for real estate development costs includes accrued costs based on the estimated costs to complete land, housing and condominium
development projects for which revenue has been recognized. These amounts have not been discounted, as the majority are expected to be substantially
utilized within one year.
20. Debt
Project-Specific Debt
Construction loans -
Western Canada
Construction loans -
Urban Development -
Toronto & Ottawa
Operating Line -
Western Canada
Mortgages and term
debt - Dream
Mortgages and term
debt - Dream
Alternatives
Balance, January 1, 2019
$
Borrowings
Repayments
Assumed on disposition of
assets held for sale
Interest and other
61,421 $
35,805
(43,414)
—
—
116,565 $
67,547
(20,633)
—
50
Balance, December 31, 2019
$
53,812 $
163,529 $
48,943 $
137,214 $
154,000
(203,000)
—
57
— $
55,305
(21,662)
—
(2,360)
168,497 $
199,380 $
—
(30,104)
(80,264)
—
89,012 $
Construction loans -
Western Canada
Construction loans -
Urban Development -
Toronto & Ottawa
Operating Line -
Western Canada
Mortgages and term
debt - Dream
Mortgages and term
debt - Dream
Alternatives
Balance, January 1, 2018
$
Borrowings
Repayments
Assumed through business
combination (Note 5)
Interest and other
98,706 $
62,642
(99,927)
—
—
64,697 $
73,090
(21,260)
—
38
93,225 $
116,824 $
212,000
(257,000)
—
718
69,489
(51,378)
—
2,279
— $
—
(4,664)
203,967
77
Balance, December 31, 2018
$
61,421 $
116,565 $
48,943 $
137,214 $
199,380 $
Total
563,523
312,657
(318,813)
(80,264)
(2,253)
474,850
Total
373,452
417,221
(434,229)
203,967
3,112
563,523
Dream Unlimited Corp. – December 31, 2019 | 69
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Corporate Debt Facilities
Balance, January 1, 2019
Repayments
Interest and other
Balance, December 31, 2019
Balance, January 1, 2018
Borrowings
Repayments
Interest and other
Balance, December 31, 2018
Non-revolving term
facility
Margin facility
$
$
224,083 $
—
22
224,105 $
100,000 $
(100,000)
—
— $
Operating Line -
Dream Alternatives
Non-revolving term
facility
Margin facility
$
$
— $
35,000
(35,000)
—
— $
174,799 $
50,000
—
(716)
40,000 $
75,000
(15,000)
—
224,083 $
100,000 $
Total
324,083
(100,000)
22
224,105
Total
214,799
160,000
(50,000)
(716)
324,083
Further details on the weighted average interest rates and maturities are included in Note 33. In the year ended December 31, 2019, there were no events
of default on any of the Company's obligations under its debt facilities.
Operating Line - Western Canada
The Company's revolving term credit facility (the "operating line") is primarily used to finance land servicing activity in Saskatchewan and Alberta. The
operating line is available up to a formula-based maximum not to exceed $290,000, with a syndicate of Canadian financial institutions. In the year ended
December 31, 2019, the Company amended the operating line, extending the maturity date to January 31, 2021 and revising certain covenants of DAM.
The operating line bears interest, at the Company's option, at a rate per annum equal to either the bank's prime lending rate plus 1.25% or at the bank's
then prevailing bankers' acceptance rate plus 2.50%. The operating line is secured by a general security agreement and a first charge against various real
estate assets in Western Canada.
As at December 31, 2019, funds available under this facility were $259,004, as determined by the formula-based maximum calculation, with $46,162 of
letters of credit issued against the facility.
Other Project-Specific Debt
Western Canada construction loans relate to housing, retail and commercial projects under development and are all due on demand with recourse
provisions. Urban development construction loans relate to project-specific financing for residential and mixed-use development and land servicing and
hold security against the underlying land. Mortgages and term debt for both Dream and Dream Alternatives are provided by a variety of lenders. In the
year ended December 31, 2019, $80,264 of mortgages and term debt relating to Dream Alternatives was assumed by the purchasers on disposition of
assets held for sale. The balance of interest and other primarily includes accrued interest adjustments, foreign exchange and amortization of deferred
financing costs.
Non-Revolving Term Facility
In the year ended December 31, 2019, the Company executed on an amendment to its $225,000 non-revolving term facility with a syndicate of Canadian
financial institutions, extending the maturity date to February 28, 2022 and revising certain covenants of DAM. The non-revolving term facility bears
interest, at the Company's option, at a rate per annum equal to either the bank's prime lending rate plus 1.50% or at the bank's then prevailing bankers'
acceptance rate plus 2.75%. The facility is secured by a general security agreement and a first charge against various real estate assets and other financial
assets of the Company.
Margin Facility
The Company's margin facility is due on demand and bears interest, at the Company's option, at a rate per annum equal to either the bank's prime lending
rate plus 1.25% or the bank's then prevailing bankers' acceptance rate plus 2.50%. The facility is secured by a first charge against certain marketable
securities. As at December 31, 2019, funds available under this facility were $110,000, as determined by the formula-based maximum calculation.
Operating Line - Dream Alternatives
Dream Alternatives has a revolving term credit facility available, up to a formula-based maximum not to exceed $50,000, with a Canadian financial
institution. During the year ended December 31, 2019, the facility was renewed with certain financial covenant requirements amended and the maturity
date extended to July 31, 2021. As at December 31, 2019, $nil was drawn on the revolving credit facility (December 31, 2018 – $nil) and funds available
under this facility were $8,894 (December 31, 2018 – $38,000), net of $360 (December 31, 2018 – $1,395) of letters of credit issued against the facility.
Interest Rate Swap
In order to manage the interest rate risk on certain variable debt, the Company entered into a seven-year interest rate swap agreement that fixed the
interest rate on a term loan at 3.69%. As at December 31, 2019, the aggregate value of the interest rate swap amounted to $12 and is presented in other
financial assets. The Company did not apply hedge accounting to this relationship, and therefore the change in fair value of the swap is recognized in
Dream Unlimited Corp. – December 31, 2019 | 70
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
earnings within fair value changes in derivative financial instruments in the year ended December 31, 2019. As as December 31, 2019, the outstanding
amount on the hedged facility was $5,435 (December 31, 2018 - $7,560).
The following table summarizes the details of the interest rate swap outstanding as at December 31, 2019:
Maturity date
January 14, 2023
Debt facility
Term debt
Notional amount
hedged
Fixed interest rate
Financial instrument
classification
Fair value of hedging
instrument
$
5,435
3.69 %
FVTPL $
12
In the year ended December 31, 2019, the Company extinguished an interest rate swap on the non-revolving term facility, resulting in a break fee of
$1,935 recognized within interest expense in the consolidated statement of earnings (Note 32).
21. Preference shares, series 1
As part of the reorganization of the Company's share capital in 2013, the Company issued 6,000,000, 7% Cumulative Redeemable First Preference shares,
series 1 (“Preference shares, series 1”), with a liquidation amount of $7.16 per share. The shares were classified and accounted for as a financial liability as
they were retractable at the option of the holder for a fixed amount per share. The shares were also retractable by the Company for a fixed amount per
share.
In the year ended December 31, 2019, the Company redeemed all of its outstanding Preference shares, series 1, in accordance with their terms. The cash
redemption price for the Preference shares, series 1 was $7.16 per share, plus all accrued and unpaid dividends from September 30, 2019 up to and
including the redemption date, for aggregate proceeds of $29,123. The Preference shares, series 1 were delisted from the TSX.
The Preference shares, series 1, issued and outstanding are as follows:
Balance, January 1, 2018
Accretion using the effective interest method
Balance, December 31, 2018
Redemption of shares
Accretion using the effective interest method
Balance, December 31, 2019
Number of shares
4,005,729
—
4,005,729
(4,005,729)
—
—
$
$
$
Par value
28,681
—
28,681
(28,681)
—
—
$
$
$
Carrying value
28,668
4
28,672
(28,675)
3
—
In the year ended December 31, 2019, the Company declared and paid dividends on the Preference shares, series 1 of $1,948 (year ended December 31,
2018 – $2,008).
22. Dream Alternatives trust units
The Company accounts for the 77% interest in Dream Alternatives trust units held by other unitholders as a financial liability measured at FVTPL
(December 31, 2018 - 83%). As at December 31, 2019, the trust units had a fair value of $411,078 based on the trading price on the TSX. The movement in
Dream Alternatives trust units is as follows:
Balance, beginning of year
Assumed through business combination
Units acquired by the Company in the year
Units issued to other unitholders through distribution reinvestment plan
Units repurchased and cancelled by Dream Alternatives
Deferred units exchanged for Dream Alternatives trust units
Fair value adjustment
Balance, end of year
Units
2019
Total
60,454,099
$
377,234
Units
—
$
—
(2,820,155)
142,818
(4,876,984)
142,606
—
—
(21,049)
940
(38,053)
1,075
90,931
62,815,176
(1,875,426)
756,348
(1,289,889)
47,890
—
2018
Total
—
397,620
(12,221)
4,984
(8,455)
309
(5,003)
53,042,384
$
411,078
60,454,099
$
377,234
In the year ended December 31, 2019, the Company, through Dream Alternatives, declared distributions on the trust units of $22,581 owing to other
unitholders, of which $21,641 was paid in cash (year ended December 31, 2018 - distributions of $24,683, of which $19,699 was paid in cash).
In the year ended December 31, 2019, the Company recognized an expense related to Dream Alternatives trust units of $113,512 in the consolidated
statements of earnings, comprising distributions to other unitholders of $22,581 and a fair value gain of $90,931, respectively, due to changes in Dream
Alternatives' trust unit trading prices (year ended December 31, 2018 - expense of $19,680, comprising distributions to other unitholders of $24,683 offset
by a fair value loss of $5,003).
Dream Unlimited Corp. – December 31, 2019 | 71
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
In the year ended December 31, 2019, Dream Alternatives announced the suspension of its distribution reinvestment plan effective for the February 2019
distribution.
23. Income taxes
In the year ended December 31, 2019, the Company recognized an income tax expense of $108,681 (year ended December 31, 2018 – $21,439), the major
components of which include the following items:
Current income taxes:
Current income taxes with respect to profits during the year
Current tax adjustments with respect to prior years
Other items affecting current tax expense
Current income tax expense
Deferred income taxes:
Origination and reversal of temporary differences
Recovery arising from previously unrecognized temporary difference
Impact of changes in income tax rates
Deferred income tax expense (recovery)
Income tax expense
2019
$
107,201
$
(555)
2,973
109,619
898
(374)
(1,462)
(938)
$
108,681
$
2018
10,243
(987)
3,051
12,307
9,134
(148)
146
9,132
21,439
Due to non-coterminous tax years of the Company’s partnership and trust interests, income of approximately $1,123 for the year ended December 31,
2019 (year ended December 31, 2018 – $13,271) relating to such partnership and trust interests will be included in computing the Company’s taxable
income for its 2020 and 2019 taxation years.
The income tax expense amount on pre-tax earnings differs from the income tax expense amount that would arise using the combined Canadian federal
and provincial statutory tax rate of 26.6%, as presented in the table below. Cash paid for income taxes for the year ended December 31, 2019 was $5,452
(year ended December 31, 2018 – $38,649).
Earnings before tax at statutory rate of 26.6% (2018 - 26.7%)
Effect on taxes of:
Non-deductible expenses
Adjustment in expected future tax rates
Non-taxable gain on acquisition of Dream Alternatives
Tax adjustments in respect of prior years
Rate differences
Other items
Income tax expense
$
2019
117,153
$
930
(1,462)
—
(930)
(9,050)
2,040
$
108,681
$
2018
57,002
3,105
146
(34,713)
(1,135)
(3,806)
840
21,439
Dream Unlimited Corp. – December 31, 2019 | 72
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
The movement in the deferred income taxes in the years ended December 31, 2019 and 2018, and the net components of the Company’s net deferred
income tax liabilities, are presented in the following table:
Asset (Liability)
Accounts
receivable
Real estate
and assets
held for sale
Non-
coterminous
tax year
Financial
instruments/
equity
accounted
investments
Loss carry-
forwards
Equity
issuance
Total
Balance, December 31, 2018
$
(9,005) $
(26,238) $
(3,337) $
(22,514) $
1,226 $
149 $
(59,719)
Impact of changes in accounting policies
Adjusted balance, January 1, 2018
(Charged) credited to:
Loss (earnings) for the year
Assumed through business combination
Tax effect of business combination
Other comprehensive income
Balance, December 31, 2018
(Charged) credited to:
Loss (earnings) for the year
Gain on sale of assets held for sale
Other comprehensive income (loss)
—
(9,005)
(1,743)
(27,981)
325
—
—
—
(8,857)
(5,994)
5,469
357
—
(3,337)
(210)
—
—
—
(869)
(23,383)
1,717
(2,758)
(28,824)
211
—
1,226
(1,958)
8,863
—
—
—
149
(149)
—
—
—
(2,612)
(62,331)
(9,132)
111
(23,355)
568
$
(8,680) $
(37,006) $
(3,547) $
(53,037) $
8,131 $
— $
(94,139)
2,371
(22,403)
—
—
143
(128)
3,250
—
—
20,049
—
(711)
(2,329)
—
—
—
—
—
938
143
(839)
Balance, December 31, 2019
$
(6,309) $
(59,394) $
(297) $
(33,699) $
5,802 $
— $
(93,897)
As at December 31, 2019, the Company had tax losses of $16,040 (December 31, 2018 – $15,764) that expire between 2025 and 2039. Deferred income
tax assets have not been recognized in respect of these losses, as it is not probable that the Company will be able to utilize all of the losses against taxable
profits in the future.
24. Share capital
The Company is authorized to issue an unlimited number of Subordinate Voting Shares and an unlimited number of Class B Shares. Holders of Subordinate
Voting Shares and Class B Shares are entitled to one vote and 100 votes, respectively, for each share held. The Class B Shares are convertible into
Subordinate Voting Shares on a one-for-one basis at any time. Holders of Subordinate Voting Shares and Class B Shares are entitled to receive and
participate equally as to dividends, share for share, as and when declared by the directors of the Company. In the event of a liquidation, dissolution or
winding up of the Company, holders of Subordinate Voting Shares and Class B Shares will be entitled to the remaining property and assets of the Company.
Issued and outstanding
Subordinate Voting Shares
Class B Shares
Number of shares
102,203,590
3,114,911
105,318,501
$
$
The following table summarizes the changes in the Subordinate Voting Shares issued:
Issued and outstanding, beginning of year
Class B Shares converted into Subordinate Voting Shares
Stock options exercised
Subordinate Voting Shares repurchased
Issued and outstanding, end of year
Number of shares
104,215,841
$
253
28,500
(2,041,004)
102,203,590
$
The following table summarizes the changes in the Class B Shares issued:
Issued and outstanding, beginning of year
Class B Shares converted into Subordinate Voting Shares
Issued and outstanding, end of year
Number of shares
3,115,164
(253)
3,114,911
$
$
2019
Amount
1,154,779
38,783
1,193,562
2019
Amount
1,171,034
2
221
(16,478)
1,154,779
2019
Amount
38,785
(2)
38,783
Number of shares
104,215,841
3,115,164
107,331,005
$
$
Number of shares
106,120,323
$
135
24,583
(1,929,200)
104,215,841
$
Number of shares
3,115,299
(135)
3,115,164
$
$
2018
Amount
1,171,034
38,785
1,209,819
2018
Amount
1,186,865
1
194
(16,026)
1,171,034
2018
Amount
38,786
(1)
38,785
Dream Unlimited Corp. – December 31, 2019 | 73
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Including the Subordinate Voting Shares of Dream and Class B Shares held or controlled directly or indirectly, the President and CRO owned an
approximate 35% economic interest and 83% voting interest in the Company as at December 31, 2019.
Share Repurchases
The Company renewed its normal course issuer bid (the "Bid"), which commenced on September 20, 2019, under which the Company has the ability to
purchase for cancellation up to a maximum number of 6,604,023 Subordinate Voting Shares through the facilities of the TSX at prevailing market prices
and in accordance with the rules and policies of the TSX. The actual number of Subordinate Voting Shares that may be purchased, and the timing of any
such purchases as determined by the Company, are subject to a maximum daily purchase limitation of 15,029 shares, except where purchases are made in
accordance with block purchase exemptions under applicable TSX rules.
In the year ended December 31, 2019, 2,041,004 Subordinate Voting Shares were purchased for cancellation by the Company at an average price of $8.07,
respectively (year ended December 31, 2018 – 1,929,200 Subordinate Voting Shares at an average price of $8.31).
In connection with the renewal of the Bid, the Company has established an automatic securities purchase plan (the “Plan”) with its designated broker to
facilitate the purchase of Subordinate Voting Shares under the Bid at times when the Company would ordinarily not be permitted to purchase its
Subordinate Voting Shares due to regulatory restrictions or self-imposed blackout periods. Purchases will be made by the Company's broker based on the
parameters prescribed by the TSX and the terms of the parties’ written agreement. Outside of such restricted or blackout periods, the Subordinate Voting
Shares may also be purchased in accordance with management’s discretion. The Plan was pre-cleared by the TSX and will terminate on September 19,
2020.
On November 12, 2019, the Company announced its intention to purchase for cancellation up to 10,000,000 Subordinate Voting Shares at a price of $11.75
per share, for an aggregate purchase price not to exceed $117,500.
Dividends
In the year ended December 31, 2019, the Company declared dividends of $10,615 on its Subordinate Voting Shares and Class B Shares (year ended
December 31, 2018 - $nil).
Reorganization Adjustment
On May 16, 2013, shareholders of Dundee Corporation unanimously voted in favour of a corporate restructuring, through a tax-efficient Plan of
Arrangement, which resulted in Dundee Corporation transferring its 70.05% interest in DAM, formerly Dundee Realty Corporation, including DAM common
shares and DAM Class C shares, to the Company, in exchange for shares of Dream (the "Arrangement").
The Arrangement was accounted for as a corporate reorganization, and the Company recognized the identifiable assets and liabilities of DAM transferred
to Dream pursuant to the Arrangement at DAM’s historical carrying values, with no fair value adjustments. The difference between the stated capital of
Dream's issued shares and the previously recorded share capital and contributed surplus of DAM, and other minor adjustments, of $944,577 was reflected
as a separate component of equity described as "Reorganization adjustment".
25. Accumulated other comprehensive income
The movement in AOCI is as follows:
Balance, January 1, 2018
Other comprehensive income (loss) during the year
Balance, December 31, 2018
Other comprehensive loss during the year
Reversal of losses realized on disposition of interest rate hedge
Reversal of gains realized on disposition of assets held for sale
Balance, December 31, 2019
Interest rate
hedges
Foreign currency
translation
$
555
(884)
(329)
(1,425)
1,906
(152)
6,532
3,210
9,742
(577)
—
(122)
Equity
accounted
investments
$
1,096
$
870
1,966
(623)
—
—
— $
9,043
$
1,343
$
$
$
Total
8,183
3,196
11,379
(2,625)
1,906
(274)
10,386
Dream Unlimited Corp. – December 31, 2019 | 74
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
26. Non-controlling interest
The movement in non-controlling interest is as follows:
Balance, beginning of year
Earnings (loss) for the year
Change in interest in subsidiary related to business combination
Distributions to non-controlling interests
Contributions from non-controlling interests
Non-controlling interest related to business combination
Balance, end of year
27. Revenue
Revenue consisted of the following:
Revenue from contracts with customers
Revenue from other sources - rental income
Revenue from other sources - lending portfolio
Total revenue
$
$
Zibi
14,660 $
(711)
—
—
7,700
—
21,649 $
Other
1,669 $
210
—
(1,879)
—
— $
Total
2019
16,329 $
(501)
—
(1,879)
7,700
—
21,649 $
$
$
2019
540,538 $
27,083
12,809
580,430 $
Revenue from Contracts with Customers
The following table disaggregates revenue by major revenue stream and timing of revenue recognition:
Land
Housing and
condominium
Investment
properties
Recreational
properties
Asset
management
Renewable
power
Revenue
$
63,253 $
Less: Intercompany revenue
—
Revenue from external customers $
63,253 $
96,799 $
(12,059)
84,740 $
15,674 $
50,355 $
319,741 $
—
—
(9,078)
15,674 $
50,355 $
310,663 $
15,853 $
—
15,853 $
Total
2018
38,090
1,105
(25,393)
(1,021)
1,600
1,948
16,329
2018
294,343
29,846
15,684
339,873
2019
Total
561,675
(21,137)
540,538
Timing of revenue recognition
At a point in time
Over time
Revenue
Less: Intercompany revenue
Revenue from external customers
Timing of revenue recognition
At a point in time
Over time
$
$
$
$
$
$
63,253 $
84,740 $
—
—
63,253 $
84,740 $
— $
15,674
15,674 $
42,003 $
8,352
8,487 $
302,176
50,355 $
310,663 $
— $
15,853
15,853 $
198,483
342,055
540,538
Land
107,458 $
—
107,458 $
Housing and
condominium
Investment
properties
Recreational
properties
Asset
management
Renewable
power
94,215 $
(18,750)
75,465 $
15,856 $
45,889 $
—
—
15,856 $
45,889 $
44,034 $
(12,233)
31,801 $
17,874 $
—
17,874 $
2018
Total
325,326
(30,983)
294,343
107,458 $
75,465 $
—
—
107,458 $
75,465 $
— $
15,856
15,856 $
38,564 $
7,325
45,889 $
5,434 $
26,367
31,801 $
— $
17,874
17,874 $
226,921
67,422
294,343
Dream Unlimited Corp. – December 31, 2019 | 75
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Unsatisfied Contracts
The following table summarizes unsatisfied performance obligations resulting from the sale of condominium units, excluding equity accounted
investments. The timing of revenue recognition upon occupancy is subject to uncertainty due to a number of variables throughout the construction
process. Any revenue attributable to unsatisfied performance obligations subject to a variable constraint have been excluded from the table below.
Contract value at
Dream's share
Performance obligation expected to be fully satisfied by
2020
2021
2022
Aggregate amount of the transaction price allocated to contracts that are partially
or fully unsatisfied as at December 31, 2019
$
228,663 $
86,003 $
35,618 $
107,042
As permitted under IFRS 15, the transaction price allocated to unsatisfied contracts for sales contracts for periods of one year or less is not disclosed.
Revenue Recognized in Relation to Contract Liabilities
The following table summarizes revenue recognized in the current reporting period relating to prior period deferred revenue. There was no revenue
recognized in the current reporting period that relates to performance obligations satisfied in a prior year.
Revenue recognized that was included in deferred revenue at the beginning of the year
$
2019
6,774 $
2018
3,624
28. Direct operating costs
Direct operating costs consisted of the following:
Direct costs of real estate inventory
Direct costs of operating investment and recreational properties
Direct costs of asset management
Direct costs of renewable power
29. Selling, marketing, depreciation and other operating costs
Selling, marketing, depreciation and other operating costs consisted of the following:
Salary and other compensation
General office and other
Selling and marketing costs
30. General and administrative expenses
General and administrative expenses consisted of the following:
Salary and other compensation
Corporate, service and professional fees
General office and other
$
$
$
$
$
$
2019
132,189 $
58,967
13,720
5,516
210,392 $
2019
21,067 $
14,837
9,138
45,042 $
2019
13,598 $
7,548
3,202
24,348 $
2018
126,282
56,894
11,164
10,751
205,091
2018
23,074
15,299
8,741
47,114
2018
11,545
5,597
3,253
20,395
Dream Unlimited Corp. – December 31, 2019 | 76
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
31. Investment and other income
Investment and other income consisted of the following:
Interest and other income
Distributions from Dream Publicly Listed Funds
Losses reclassified to earnings on accounting changes (Note 5)
$
$
2019
7,556 $
2,609
—
10,165 $
2018
9,392
3,388
(78)
12,702
Investment income on Dream Publicly Listed Funds includes the income portion of distributions earned on the Company’s previously held investment in
Dream Global REIT.
32. Interest expense
Interest expense consisted of the following:
Interest on project-specific debt
Interest on corporate debt facilities
Dividends on Preference shares, series 1
Amortization of deferred financing costs and accretion of effective interest
Interest rate swap break fee (Note 20)
Project-specific interest capitalized to real estate development projects
Total
$
$
2019
30,102 $
16,662
1,948
2,082
1,935
(10,826)
41,903 $
2018
22,723
17,393
2,008
1,696
—
(5,889)
37,931
Interest expense was capitalized to real estate development projects for the year ended December 31, 2019 at a weighted average effective borrowing
rate of 4.87% (year ended December 31, 2018 - 4.64%).
33. Financial instruments fair value and risk management
Fair Value of Financial Instruments
The following table categorizes financial assets or liabilities measured or disclosed at fair value by level according to the significance of inputs used in
making measurements. Quoted market prices represent a Level 1 valuation. When quoted market prices are not available, the Company maximizes the use
of observable inputs. When all significant inputs are observable, the valuation is classified as Level 2. Valuations that require the significant use of
unobservable inputs are considered Level 3.
Dream Unlimited Corp. – December 31, 2019 | 77
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Recurring measurement
Financial assets
Dream Global REIT units
Dream Global REIT deferred trust units
Participating mortgages
Investment holdings
Other instruments
Lending portfolio
Financial liabilities
Dream Alternatives trust units
Retraction option on Preference shares, series 1
Interest rate swap
Fair values disclosed
Lease obligation
Lending portfolio
Construction loans
Mortgages and term debt - Dream
Mortgages and term debt - Dream Alternatives
Operating line - Western Canada
Non-revolving term facility
Margin facility
Operating line - Dream Alternatives
Preference shares, series 1
December 31, 2019
December 31, 2018
Fair value
hierarchy
Carrying value
Fair value
Carrying value
Fair value
Level 1
Level 3
Level 3
Level 3
Level 3
Level 3
Level 1
Level 3
Level 3
Level 3
Level 3
Level 3
Level 3
Level 3
Level 3
Level 3
Level 3
Level 3
Level 2
$
— $
—
66,210
50,206
4,952
7,301
— $
—
66,210
50,206
4,952
7,301
37,279 $
20,844
64,764
73,085
4,485
16,574
37,279
20,844
64,764
73,085
4,485
16,574
411,078
411,078
377,234
377,234
—
—
14,450
57,404
217,341
168,497
89,012
—
224,105
—
—
—
—
—
232
685
232
685
14,450
57,195
217,257
167,518
89,608
—
225,000
—
—
—
7,180
127,521
177,986
137,214
199,380
48,943
224,083
100,000
—
28,672
7,180
126,825
177,953
136,591
200,500
49,000
225,000
100,000
—
28,838
The fair values of cash and cash equivalents, accounts receivable, loans receivable, deposits, restricted cash and certain financial instruments included in
accounts payable and other liabilities, with the exception of lease obligations, are carried at amortized cost, which approximates their fair values due to
their short-term nature.
The fair value of the Dream Alternatives trust units is based on the listed market price on the TSX as at December 31, 2019 of $7.75 per share for the
53,042,384 outstanding trust units not held by the Company.
Level 3 Fair Value Measurements
The Company used the following techniques to determine the fair value measurements categorized in Level 3:
Participating Mortgages
The fair value of participating mortgages is determined using a discounted cash flow analysis. The discounted cash flow model is calculated based on future
interest and participating profit payments and the project managers’ estimates of unit sales proceeds and/or net operating income of the underlying
development. In determining the discount rate, the Company considered market conditions, time to completion of the development, the market
capitalization rate, the percentage of space leased on units sold and other available information. The significant unobservable input as at December 31,
2019 is the discount rate of 7.0% - 8.0% (December 31, 2018 - 7.0% - 8.0%).
Generally, an increase in anticipated proceeds from unit closings or an increase in stabilized net operating income will result in an increase in fair values.
An increase in the capitalization rates or in the discount rates will result in a decrease in fair values. The capitalization rate magnifies the effect of a change
in stabilized net operating income, with a lower rate resulting in a greater impact to the fair value than a higher rate. Any change in the revenue or costing
estimates or development timeline could have a significant impact on the value of the development and investment holdings.
If the discount rates applied for participating mortgages were to increase by 1%, the fair value of the participating mortgages would decrease by $300. If
the discount rate were to decrease by 1%, the fair value would increase by $300.
Lending Portfolio
There are no quoted prices in an active market for the lending portfolio investments. The Company determines fair value based on its assessment of the
current lending market for lending portfolio investments of the same or similar terms in consultation with Canadian Mortgage Servicing Corporation
("CMSC"), the manager and servicer of the lending portfolio, and other available information. The fair value of the lending portfolio as at December 31,
2019, was determined by discounting the expected cash flows of each loan using an assessment of the market interest rate ranging from 5.0% to 17.5%.
Dream Unlimited Corp. – December 31, 2019 | 78
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
The market interest rates were determined taking into consideration similar instruments with corresponding maturity dates, plus a credit adjustment in
accordance with the borrower's creditworthiness as well as considering the risk characteristic of the underlying development. For certain loans the fair
value was determined based on the net realizable value of the underlying real estate property and related transaction costs based on internal valuations
which used the most appropriate valuation methodology determined for each underlying development on a highest and best use basis consistent with the
income properties valuation methodology.
Corporate Debt Facilities
The fair value measurement of the non-revolving term facility, margin facility and Dream Alternatives operating line approximate the carrying value
excluding unamortized financing costs given their variable rate.
Project-Specific Debt and Lease Obligation
The fair value of the operating line - Western Canada, construction loans, mortgages and term debt and lease obligation has been calculated by
discounting the expected cash flows of each loan using a discount rate specific to each individual loan or obligation. The discount rate is determined using
the bond yield for similar instruments of similar maturity adjusted for each individual project’s specific credit risk. In determining the adjustment for credit
risk, the Company considers current market conditions and other indicators of the Company’s creditworthiness.
Valuation Process
The Company’s finance department is responsible for performing the valuation of fair value measurements or reviewing the fair value measurements
provided by third-party appraisers. The Company has determined that third-party appraisers will be utilized for recurring measurements of derivative
instruments, such as the redemption and retraction options on the Preference shares, series 1, on a quarterly basis. On a quarterly basis, management will
review the valuation policies, procedures and analysis of changes in fair value measurements. Refer to Note 8 for a continuity of the Company's lending
portfolio balance.
The Company recognizes transfers into and transfers out of fair value hierarchy levels as at the date of the event or change in circumstances that caused
the transfer.
Balance, December 31, 2018
Issued or received during the year:
DTUs
DTUs vested during the year
Contributions/(distributions)
Dispositions/extinguishment
Total gains or losses for the year included in net earnings:
Change in fair value
Foreign currency loss
Included in other comprehensive income:
Change in fair value
Balance, December 31, 2019
(1)
Included within other instruments in other financial assets.
Investment
holdings
Investment
in Dream
Global REIT -
DTUs
Redemption
option on
Preference
shares, series 1
Interest rate
(1)
swaps
Participating
mortgages
Retraction
option on
Preference
shares, series 1
$
73,085 $
20,844 $
28 $
(527) $
64,764 $
(232)
—
—
12,076
(29,359)
(3,477)
(2,119)
1,070
(1,144)
—
(35,087)
14,317
—
—
—
—
—
—
—
(137)
2,263
$
109
—
(146)
—
—
—
974
—
472
—
—
50,206 $
$
—
— $
—
— $
(1,578)
12 $
—
66,210 $
—
—
—
143
89
—
—
—
Dream Unlimited Corp. – December 31, 2019 | 79
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Balance, December 31, 2017
Impact of changes in accounting policies
Adjusted balance, January 1, 2018
Issued or received during the year:
DTUs
Acquired through business combination on January 1, 2018
Acquired during the year
DTUs vested during the year
Contributions/(distributions)
Dispositions/extinguishment
Total gains or losses for the year included in net earnings:
Change in fair value
Foreign currency loss
Included in other comprehensive income:
Change in fair value
Balance, December 31, 2018
(1)
Investment
holdings
Investment
in Dream
Global REIT -
DTUs
Redemption
option on
Preference
shares, series 1
Interest rate
(1)
swaps
Participating
mortgages
Retraction
option on
Preference
shares, series 1
$
7,054 $
6,518
13,572
20,589 $
—
20,589
—
18,451
37,526
—
(4,886)
—
6,383
2,039
1,369
—
—
(1,435)
—
—
321
—
280 $
—
280
—
—
—
—
—
—
(252)
—
785 $
—
785
—
—
—
—
—
—
31
—
— $
—
—
—
75,668
—
—
(3,060)
—
(7,844)
—
—
73,085 $
—
20,844 $
$
—
28 $
(1,343)
(527) $
—
64,764 $
—
—
—
—
—
—
—
—
—
(232)
—
—
(232)
Included within other instruments in other financial assets and within accounts payable and other liabilities.
Risk Management
The Company is exposed to financial risks due to the nature of its business and the financial assets and liabilities that it holds. The Company’s overall risk
management strategy seeks to minimize potential adverse effects on the Company’s financial performance.
Market Risk
Market risk is the risk a material loss may arise from fluctuations in the fair value of a financial instrument. For purposes of this disclosure, the Company
segregates market risk into two categories: fair value risk and interest rate risk.
Fair Value Risk
Fair value risk is the risk of a potential loss from adverse movements in the values of assets and liabilities, excluding movements relating to changes in
interest rates and foreign exchange currency rates, because of changes in market prices.
The Company’s liability associated with the Dream Alternatives trust units is fair valued in reference to Dream Alternatives' unit trading price as listed on
the TSX. A 10% absolute change in the market price of the Dream Alternatives units would increase (decrease) the carrying amount of the liability by
$41,108, before associated taxes, with a corresponding decrease (increase) in earnings before income taxes.
Credit Risk
Credit risk is the risk one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation. Credit risk arises
from the possibility that builders or other third-party purchasers of the Company’s real estate inventory, or other entities to which the Company may have
advanced funds, may not fulfill their contractual obligations to repay amounts due to the Company. The Company mitigates its credit risk by requiring
graduated deposits from buyers and withholding real estate titles until final payments are received. The Company also mitigates credit risk by dealing only
with builders and other third-party buyers the Company considers to have secure financial standing and by diversifying the mix of builders and markets.
Credit risk also arises from the possibility that tenants in investment properties may not fulfill their lease or contractual obligations. The Company
mitigates this credit risk by attracting tenants of sound financial standing and diversifying its mix of tenants. It also monitors tenant payment patterns and
discusses potential tenant issues with property managers on a regular basis.
Credit risk related to the lending portfolio and investment holdings arises from the possibility that a borrower may not be able to honour its debt
commitments as a result of a negative change in market conditions that could result in a loss to the Company. The Company mitigates risk by actively
monitoring the mortgage and loan investments and initiating recovery procedures, in a timely manner, when required.
The maximum exposure to credit risk at December 31, 2019 was the fair value of the Company's investment holdings and the contractual value of its
lending portfolio, which, including interest receivable, was $189,129. The Company has recourse under these investments in the event of default by the
borrower, in which case, the Company would have a claim against the underlying collateral.
Interest Rate Risk
Interest rate risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest
rates. The Company is exposed to interest rate risk primarily through its variable rate debt obligations. Excluding the demand facility and margin facility,
Dream Unlimited Corp. – December 31, 2019 | 80
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
variable rate debt represented 72% (December 31, 2018 – 71%) of total debt obligations as at December 31, 2019. Interest rate risk is mitigated, in part, by
borrowing long-term fixed rate mortgages with relatively consistent interest expense. The Company has entered into an interest rate swap to further
mitigate interest rate risk. See Note 20 for further details.
The Company has exposure to the variability in market interest rates on its lending portfolio investments with variable-rate loans and fixed-rate loans
maturing within the next 12 months. As at December 31, 2019, there are no variable-rate loans within the lending portfolio. The Company invests in
mortgages and loans secured by all types of residential and commercial real estate property that represent an acceptable underwriting risk. As a result, the
Company's lending portfolio investments are not exposed to significant market interest risk.
Liquidity Risk
Liquidity risk is the risk the Company will encounter difficulty in meeting obligations associated with the maturity of financial liabilities. The Company
manages its liquidity risk primarily through the management of its financial leverage. The Company uses various debt and equity ratios to monitor its
capital adequacy and debt requirements, including interest coverage, minimum net worth, average term to debt maturity, and the ratio of variable rate
debt to aggregate debt. These ratios assist the Company in assessing the debt level maintained by the Company in order to ensure adequate cash flows for
real estate development. The Company manages maturities of outstanding debt by matching them to project closing dates and monitoring the repayment
dates to ensure sufficient capital will be available to cover obligations. Management also monitors the Company's availability under the operating lines and
margin facility.
A summary of the Company’s weighted average effective interest rates as at December 31, 2019 is as follows:
Weighted average effective interest rates
2019
2018
Maturity dates
2019
Debt amount
2018
Fixed rate
Mortgages and term debt
Mortgages and term debt - Dream Alternatives
Preference shares, series 1
Total fixed rate debt
Variable rate
Construction loans - Western Canada
Construction loans - Urban development
Mortgages and term debt
Mortgages and term debt - Dream Alternatives
Operating line
Non-revolving term facility
Margin facility
Total variable rate debt
Total debt
4.47%
3.63%
—%
4.08%
4.43%
4.90%
4.70%
—%
4.64%
5.08%
4.56%
4.91%
4.63%
4.53%
4.08%
7.00%
4.61%
4.05%
4.63%
4.44%
3.60%
4.48%
4.36%
4.35%
4.29%
4.38%
2020-2025 $
2020-2022
n/a
2020-2022
2020-2021
2020-2023
n/a
2021
2022
2020
$
106,759 $
89,012
—
195,771
53,812
163,529
61,738
—
—
224,105
—
503,184
698,955 $
The following table summarizes the aggregate of the scheduled principal repayments and debt maturities as at December 31, 2019:
2020
2021
2022
2023
2024 and thereafter
Discount/unamortized premium/financing costs
Construction
loans - Western
Canada
Construction
loans - Urban
development
Mortgages and
term debt -
Dream
Mortgages and
term debt -
Dream
Alternatives
Non-revolving
term facility
$
44,667 $
6,232
2,913
—
—
53,812
—
80,949 $
82,580
—
—
—
163,529
—
72,218 $
878 $
32,343
3,756
2,216
58,574
169,107
(610)
10,975
76,878
—
—
88,731
281
— $
—
225,000
—
—
225,000
(895)
$
53,812 $
163,529 $
168,497 $
89,012 $
224,105 $
104,216
112,637
28,672
245,525
61,421
116,565
32,998
86,743
48,943
224,083
100,000
670,753
916,278
Total
198,712
132,130
308,547
2,216
58,574
700,179
(1,224)
698,955
The contractual payments above include the principal repayments owing in future periods. The amounts presented above are shown consistent with their
contractual repayments. Certain facilities may be due on demand.
Dream Unlimited Corp. – December 31, 2019 | 81
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
34. Share-based compensation
Stock Option Plan
The Company has a stock option plan under which key officers and employees are granted options to purchase Subordinate Voting Shares. Each option
granted can be exercised for one Subordinate Voting Share.
Options outstanding, beginning of year
Granted
Exercised
Forfeited
Options outstanding, end of year
Options exercisable, end of year
2019
Weighted average
exercise price
8.39
7.18
7.76
7.76
8.31
8.64
Options
1,898,100
$
149,175
(28,500)
(5,833)
2,012,942
1,394,147
$
$
2018
Weighted average
exercise price
8.44
7.44
7.93
7.55
8.39
8.87
Options
1,815,050
$
147,050
(24,583)
(39,417)
1,898,100
1,061,663
$
$
As at December 31, 2019, 2,012,942 options were outstanding under the stock option plan collectively. The fair value of the stock options granted in the
year ended and outstanding as at December 31, 2019 was estimated on the historical grant date using the Black-Scholes option pricing model with the
following weighted average assumptions:
Risk-free interest rate
(1)
Estimated volatility
Expected life
Contractual life
Expected dividend yield
(1)
Estimated volatility is based on a blended rate of market comparables and the Company's historical volatility.
1.9%
22.0%
6.5 years
10 years
—%
In the year ended December 31, 2019, the Company recognized $437 (year ended December 31, 2018 – $621) of share-based compensation expense
related to stock options, primarily recognized in general and administrative expense.
Performance Share Unit Plan
PSUs may be granted to current employees and are subject to either time vesting only, or time and performance vesting. PSUs subject to performance
vesting provide the holder with a minimum of 0 and a maximum of 1.5 Subordinate Voting Shares based on the achievement of predetermined Company
performance goals. In lieu of receiving Subordinate Voting Shares on vesting, PSU holders have the right to request a cash payment equal to the five-day
trailing weighted average share price of the Company’s Subordinate Voting Shares on the vesting date or settlement date, when applicable; however, the
form of payment on vesting is ultimately the decision of the Company.
Units outstanding, beginning of year
Granted
Forfeited
Reinvested
Units outstanding, end of year
2019
Weighted average fair
value at grant date
7.03
7.18
—
7.08
7.08
$
Units
634,252
338,930
—
11,230
984,412
$
2018
Weighted average fair
value at grant date
6.62
7.44
7.03
—
7.03
$
Units
328,526
334,130
(28,404)
—
634,252
$
In the year ended December 31, 2019, compensation expense of $2,093 (year ended December 31, 2018 – $1,428) related to this plan was primarily
recognized in general and administrative expense.
The fair value of PSUs granted and outstanding as at December 31, 2019 was estimated on the historical grant date with the following assumptions:
Risk-free interest rate
Expected life
Contractual life
Expected dividend yield
1.8%
3 years
10 years
—%
Dream Unlimited Corp. – December 31, 2019 | 82
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Deferred Share Unit Plan
The Company has a deferred share unit incentive plan pursuant to which DSUs may be granted to eligible directors, senior management and certain service
providers. As at December 31, 2019, there were 375,610 units outstanding (December 31, 2018 – 273,839 units outstanding). During the year ended
December 31, 2019, compensation expense of $798 (year ended December 31, 2018 – $779) related to this plan was recognized in general and
administrative expense.
Units outstanding, beginning of year
Granted and reinvested
Units outstanding, end of year
2019
273,839
101,771
375,610
2018
186,546
87,293
273,839
The net changes in contributed surplus relating to share-based compensation for the stock option plan, preferred share unit plan and deferred share unit
plan were as follows:
Balance, beginning of year
Granted
Dividends reinvested
Balance, end of year
35. Earnings per share
$
$
2019
8,049
3,328
33
11,410
$
$
2018
5,341
2,708
—
8,049
Basic earnings per share is calculated by dividing the Company’s earnings attributable to outside shareholders of the Company by the weighted average
number of shares outstanding in the year.
Diluted earnings per share is calculated by dividing the Company’s earnings attributable to the outside shareholders of the Company by the weighted
average number of shares outstanding after the dilutive effect of the Preference shares, series 1, stock options, preferred share units and deferred share
units. The diluted weighted average number of shares used in the diluted earnings per share calculation is determined by assuming that the total proceeds
received for the conversion of such units is used to repurchase Subordinate Voting Shares at the average selling price of such publicly traded units over the
term of the calculation.
The following table summarizes the basic and diluted earnings per share and the weighted average number of shares outstanding:
Earnings attributable to the outside shareholders of the Company
Diluted earnings per share adjustments for Preference shares, series 1
Earnings for diluted earnings per share
Weighted average number of shares outstanding:
Dream Subordinate Voting Shares
Dream Class B Shares
Total weighted average number of shares
Effect of dilutive securities on weighted average number of shares outstanding at year-end:
Share-based compensation
(1)
Preference shares, series 1
Total weighted average number of shares outstanding after dilution
Basic earnings per share
Diluted earnings per share
(1)
2019
332,246
2,028
334,274
$
$
2018
190,948
2,496
193,444
103,172,878
3,114,956
106,287,834
898,198
2,517,470
109,703,502
105,335,690
3,115,272
108,450,962
466,248
4,399,351
113,316,561
3.13
3.05
$
$
1.76
1.71
$
$
$
$
For the year ended December 31, 2019, 1,000,298 stock options (including PSUs) were considered anti-dilutive (year ended December 31, 2018 – 997,883 stock options (including PSUs).
36. Capital management
The Company’s capital consists of debt and shareholders’ equity. The Company’s objectives in managing capital are to:
i)
ii)
iii)
iv)
Ensure adequate operating funds are available to fund the development of real estate inventory and other assets, including investments
through joint ventures and joint operations;
Ensure the Company is able to meet its lease and capital expenditure obligations relating to its investment and recreational properties;
Ensure the Company has adequate resources available to benefit from acquisition opportunities, should they arise; and
Generate a targeted rate of return on its investments.
Dream Unlimited Corp. – December 31, 2019 | 83
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
The Company continuously monitors its debt structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics
of the underlying real estate industry.
37. Commitments and contingencies
Letters of Credit and Surety Bonds
The Company is contingently liable for letters of credit and surety bonds that have been provided to support land developments, equity accounted
investments and other activities in the amount of $82,267 (December 31, 2018 – $91,672). The Company is also contingently liable for bonds that have
been provided to support certain urban development condominium partnerships that expire at the end of a specified warranty period.
The Company is committed to pay levies in the future of up to $1,170 (December 31, 2018 – $1,252) relating to signed municipal agreements on
commencement of development of certain real estate assets. Additional development costs may also be required to satisfy the requirements of these
municipal agreements.
Joint Operations, Co-ownerships, Joint Ventures and Associates
The Company may conduct its real estate activities from time to time through joint operations and joint ventures with third-party partners. The Company
was contingently liable for the obligations of the other owners of the unincorporated joint operations and joint ventures in the amount of $79,689 as at
December 31, 2019 (December 31, 2018 – $15,609). The Company would have available to it the other co-venturers’ share of assets to satisfy any
obligations that may arise.
Capital & Other Commitments
As at December 31, 2019, the Company had capital commitments in the amount of $3,509, which will be fully satisfied in 2020. The Company may enter
into commitments for development costs at the project level, which are primarily financed through project-specific debt facilities.
Dream Alternatives
In the year ended December 31, 2019, the Company, through a subsidiary of Dream Alternatives, continued to provide a guarantee for up to $45,000
pursuant to the requirements of a senior construction loan associated with a participating mortgage. The guarantee will be in place for the term of the
construction loan and will proportionately scale down as the construction loan is repaid as unit closings begin to occur. Guarantees of the other underlying
development project loan amounts of third parties are $34,423 (December 31, 2018 - $7,500). As at December 31, 2019, the Company is contingently
liable under guarantees that are issued on certain debt assumed by purchasers of income properties up to an amount of $2,729 (December 31, 2018 -
$44,157).
Dream Alternatives is contingently liable for letters of credit in the amount of $360 (December 31, 2018 - $1,395) that have been provided to support third
party performance.
Legal Contingencies
The Company and its operating subsidiaries may become liable under guarantees that are issued in the normal course of business and with respect to
litigation and claims that arise from time to time. In the opinion of management, any liability that may arise from such contingencies would not have a
material adverse effect on the consolidated financial statements of the Company.
38. Asset management and management services agreements and related party transactions
Dream Global REIT
In the year ended December 31, 2019, affiliates of real estate funds managed by The Blackstone Group Inc. ("Blackstone") acquired all of Dream Global
REIT's subsidiaries and assets (the "Dream Global REIT transaction"). Simultaneously, DAM executed a separation agreement with Blackstone with respect
to its asset management agreement. Upon transaction close, Dream received proceeds in respect of its asset management agreement and units owned
directly in Dream Global REIT. Proceeds included $275,150 in satisfaction of the obligation to pay the incentive fee provided for in the asset management
agreement, which was recognized within asset management revenue, $120,000 to purchase the asset management agreement, which was recognized
within the net gain on disposition of Dream Global REIT, $86,125 in respect of units and deferred trust units owned and $26,433 for expenses to be
incurred as part of the separation of Dream Global REIT from the Dream platform, some of which were incurred in 2019 and some of which will occur in
future periods.
Concurrently with the execution of the separation agreement, DAM entered into a transition services agreement, pursuant to which DAM will provide
certain transition services until March 31, 2020.
The following table summarizes the components of the net gain on disposition of Dream Global REIT recognized in the year ended December 31, 2019:
Proceeds on sale of asset management agreement
Other reimbursements, net of transaction costs
Gain on disposition of co-owned commercial assets
$
$
120,000
13,127
2,347
135,474
Dream Unlimited Corp. – December 31, 2019 | 84
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
As a result of the acquisition of Dream Global REIT, the Company's asset management agreement and shared services and cost sharing agreement ("shared
services agreement") with Dream Global REIT were terminated. In the years ended December 31, 2019 and 2018 the Company earned/recovered the
following amounts pursuant to these agreements with Dream Global REIT:
Asset management fees charged by Dream
(1)
2019
$
292,536 $
Cost recoveries charged by Dream
(1)
Included in asset management fees charged to Dream Global REIT for the year ended December 31, 2019 were incentive fees of $277,396 (2018 - $2,000).
617
2018
20,890
1,173
Dream Industrial REIT
The Company entered into an asset management agreement with Dream Industrial REIT effective October 2012, pursuant to which the Company provides
a range of management and advisory services. The Company receives revenue in respect of these services including base annual management fees,
acquisition fees, financing fees, capital expenditure fees and incentive fees, determined in accordance with the formulas set forth in the agreement. The
incentive fee is payable in respect of each 12-month period during the term of the agreement in an amount equal to 15% of Dream Industrial REIT’s
adjusted funds from operations per unit as defined in the asset management agreement, inclusive of gains on the disposition of any properties, in excess
of a hurdle amount. The amount of the incentive fee payable by Dream Industrial REIT is contingent on a variety of factors, including, but not limited to,
changes in the fair value of investment properties, timing of dispositions and foreign exchange rates. The asset management agreement has an initial term
of 10 years and is renewable for further five-year terms. Subject to the termination provisions in the agreement, the Company is automatically reappointed
at the expiration of each five-year term. Upon termination of the asset management agreement, all accrued fees, including the incentive fee, become
payable to the Company in accordance with the provisions of the agreement. In such circumstances or if Dream Industrial REIT is acquired, the incentive
fee is calculated as if all of Dream Industrial REIT’s properties were sold on the applicable date.
In addition, the Company has entered into a shared services agreement with Dream Industrial REIT. Pursuant to the agreement, Dream Industrial REIT
reimburses the Company for shared costs allocated in each calendar year on a cost recovery basis.
In the years ended December 31, 2019 and 2018, the Company earned/recovered the following amounts pursuant to these agreements with Dream
Industrial REIT:
$
2019
8,232 $
716
2018
6,546
657
Asset management fees charged by Dream
(1)
Cost recoveries charged by Dream
(1)
Included in asset management fees charged to Dream Industrial REIT for the years ended December 31, 2019 and 2018 were incentive fees of $nil.
Included in accounts receivable are balances due from Dream Industrial REIT related to asset management agreements and cost sharing agreements of
$935 (December 31, 2018 - $606).
Dream Office REIT
During the year ended December 31, 2019, the Company and Dream Office REIT entered into a shared services agreement pursuant to which the Company
will act as the development manager for Dream Office REIT's future development projects and Dream Office REIT will act as the property manager for the
Company's stabilized investment properties. The shared services agreement maintains certain resource sharing arrangements between the Company and
Dream Office REIT. Concurrently with the execution of the shared services agreement, the Company and Dream Office REIT terminated the existing
Management Services Agreement and administrative services agreement. Under the shared services agreement,
in connection with each future
development project, the Company earns a development fee equal to 3.75% of the total net revenue of the development or, for rental properties, 3.75%
of the IFRS value upon completion, without any promote or other incentive fees. In connection with the property management services provided by Dream
Office REIT, the Company pays a fee up to 3.5% of gross revenue of the portfolio.
Amounts charged under both agreements during the years ended December 31, 2019 and 2018 are as follows:
Costs recovered from Dream Office REIT
Cost recoveries charged by Dream Office REIT to Dream
Fees charged by Dream to Dream Office REIT
Fees charged by Dream Office REIT to Dream
$
2019
1,897 $
7,064
1,473
221
2018
3,477
6,391
—
—
The amount owing from Dream Office REIT as of December 31, 2019 was $263 (December 31, 2018 – amount owed to Dream Office REIT was $457).
Distributions Earned from Investments
The Company earned distributions from Dream Global REIT and Dream Office REIT (Notes 7 and 15).
Other Transactions
In the year ended December 31, 2019, two project-level property management agreements with Dream Industrial REIT were terminated.
Dream Unlimited Corp. – December 31, 2019 | 85
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
In the year ended December 31, 2019, the Company, along with Dream Industrial REIT, entered into a partnership, Range Road, to develop an income
property in Las Vegas, Nevada. The Company owns 10% and Dream Industrial REIT owns 80% with the remainder held by a third party. The investment is
included in other development properties in equity accounted investments. As at December 31, 2019, the Company had funded $1,016 into Range Road.
In the year ended December 31, 2018, the Company, along with Dream Office REIT, entered into a strategic partnership, Alate Partners, focused on the
property technology market. The Company and Dream Office REIT each hold a 25% interest in Alate Partners, included within other development interests
in equity accounted investments. As at December 31, 2019, the Company had funded $4,616 into Alate Partners (December 31, 2018 - $1,541).
Compensation of Key Management
Compensation expense for the year for key management personnel, including the President and Chief Responsible Officer, Executive Vice President and
Chief Financial Officer, Chief Development Officer, Chief Investment Officer, President of Asset Management, and the Company's directors, is shown in the
table below.
Compensation and benefits
Share-based compensation
Directors' fees
39. Supplementary cash flow information
Components of other adjustments include:
Dream Global REIT deferred trust units
Accrued interest on loans receivable and other expenses
Share-based compensation expense
Fair value changes in financial instruments
Non-cash acquisition of properties, net
Write-down of land held for development
Other
Components of changes in non-cash working capital include:
Accounts receivable
Accounts payable and other liabilities
Income and other taxes payable
Provision for real estate development costs
Deposits
Restricted cash
Inventory, prepaid expenses and other assets
The breakdown of cash and cash equivalents is as follows:
Cash
Money market funds, term deposits and GICs
$
$
2019
12,260
$
2,321
799
15,380
$
$
$
$
$
$
$
2019
(1,070)
(4,847)
3,361
(23,757)
(7,777)
23,159
8,283
(2,648)
2019
(36,578)
8,230
104,832
3,000
(508)
9,008
(5,812)
82,172
2019
388,337
184
388,521
$
$
$
$
$
$
2018
5,892
1,821
780
8,493
2018
(1,369)
(5,567)
2,902
577
(7,299)
—
2,490
(8,266)
2018
8,863
(24,564)
(25,456)
(903)
(1,204)
(5,029)
(329)
(48,622)
2018
63,955
338
64,293
Dream Unlimited Corp. – December 31, 2019 | 86
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
40. Segmented information
Management has determined the operating segments based on the reports reviewed by the President and Chief Responsible Officer and senior
management. Gross margin represents revenue, less direct operating costs, excluding selling, marketing and other operating costs. Net margin represents
gross margin, as defined above, including selling, marketing and other operating costs. Used as a percentage of revenue to evaluate operational efficiency,
these margins are employed as fundamental business considerations in updating budgets, forecasts and strategic planning. The allocation of other
components of earnings would not assist management in the evaluation of the segments’ contributions to earnings and are categorized as Corporate and
other.
The Company has reviewed its segment reporting taking into consideration how the Company presents information for financial reporting and
management decision making. The Company has retrospectively applied the below segment presentation for all years presented.
The Company's operating segments are as follows:
•
•
•
Asset management and investments in publicly listed funds ("asset management") includes managing the publicly listed funds and various
development partnerships, in addition to an equity interest in Dream Office REIT.
Stabilized income generating assets includes Arapahoe Basin, a ski hill in Colorado, income producing assets in Western Canada and Toronto, and
the ownership of a renewable power portfolio.
Urban development - Toronto & Ottawa includes condominium, purpose-built residential and mixed-use development in the Greater Toronto
Area and Ottawa/Gatineau regions.
• Western Canada community development includes land, housing and retail/commercial/multi-family development in Saskatchewan and Alberta.
Dream Alternatives includes the operating activity of Dream Alternatives' portfolio of real estate development opportunities and alternative
•
assets.
Segmented Statement of Net Earnings
Segmented revenue and expenditures for the years ended December 31, 2019 and 2018 are as follows:
Asset
management
Stabilized
income
generating
assets
Urban
development -
Toronto &
Ottawa
Western
Canada
community
development
Corporate and
other
Dream
Alternatives
Consolidation
adjustments
Consolidated
Dream
$
319,741 $
(13,352)
306,389
67,530 $
(44,210)
23,320
53,553 $
(41,452)
12,101
95,735 $
(91,656)
4,079
— $
—
—
52,229 $
(18,158)
34,071
(8,358) $
(1,564)
(9,922)
580,430
(210,392)
370,038
2019
Revenue
Direct operating costs
Gross margin
Selling, marketing,
depreciation and other
operating costs
Net margin
Fair value changes in
investment properties
Share of earnings from
equity accounted
investments
Investment and other
income
Loss on disposition of assets
held for sale
Interest expense
Net gain on disposition of
Dream Global REIT
Fair value changes in
financial instruments
—
306,389
(8,682)
14,638
(11,844)
257
(24,516)
(20,437)
—
25,645
(2,114)
2,836
48,326
11,257
2,479
—
(5,053)
135,474
30,896
621
—
(4,697)
—
(146)
4,334
2,641
—
31
—
—
—
—
—
—
330
—
4,628
958
—
(7,057)
(16,907)
—
—
—
201
—
34,071
15,064
22,922
2,696
(5,945)
(8,470)
—
(7,194)
Net segment earnings (loss) $
518,511 $
47,318 $
5,149 $
(19,072) $
(16,376) $
53,144 $
General and administrative expenses
Adjustments related to Dream Alternatives trust units
Income tax recovery (expense)
Net earnings (loss)
(1)
(1)
Includes earnings attributable to non-controlling interest.
(16,900)
(16,455)
—
(116,138)
(149,414) $
$
—
(4,358)
32,331 $
Dream Unlimited Corp. – December 31, 2019 | 87
—
(9,922)
(45,042)
324,996
(470)
40,961
1,884
440
(2,570)
250
—
—
(10,388) $
9,007
(113,512)
11,815
(103,078) $
93,351
10,165
(8,515)
(41,903)
135,474
23,757
578,286
(24,348)
(113,512)
(108,681)
331,745
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Asset
management
44,034 $
(10,721)
33,313
Stabilized
income
generating
assets
66,429 $
(43,807)
Urban
development -
Toronto &
Ottawa
23,567 $
(18,348)
22,622
5,219
Western Canada
community
development
Corporate and
other
Dream
Alternatives
Consolidation
adjustments
Consolidated
Dream
2018
160,041 $
(108,182)
51,859
— $
—
—
57,596 $
(22,672)
34,924
(11,794) $
(1,361)
(13,155)
339,873
(205,091)
134,782
Revenue
Direct operating costs
$
Gross margin
Selling, marketing,
depreciation and other
operating costs
Net margin
Fair value changes in
investment properties
Share of earnings from
equity accounted
investments
Investment and other
income
Gain from disposition of
assets held for sale
—
33,313
—
31,393
3,389
—
(6,761)
15,861
16,310
4,332
1,170
—
(9,190)
(3,971)
(31,163)
20,696
—
1,194
(616)
2,737
9,422
(484)
1,773
—
—
—
—
—
252
—
—
34,924
(2,195)
813
3,313
—
—
(13,155)
(47,114)
87,668
(47)
15,262
1,591
68
—
234
37,029
12,702
9,422
(37,931)
Interest expense
(3,906)
(5,889)
(126)
(6,094)
(13,186)
(8,964)
Net gain on acquisition of
Dream Alternatives
Fair value changes in
financial instruments
Net segment earnings
(loss)
12,555
4,958
—
13
—
—
—
—
—
(485)
—
117,437
129,992
2,106
(7,169)
(577)
$
81,702 $
31,797 $
7,446 $
17,085 $
(13,419) $
29,997 $
98,959 $
253,567
General and administrative expenses
Adjustments related to Dream Alternatives trust units
Income tax recovery (expense)
Net earnings (loss)
(1)
(1)
Includes earnings attributable to non-controlling interest.
(15,277)
—
(26,241)
(15,411)
—
(684)
10,293
(19,680)
5,486
(20,395)
(19,680)
(21,439)
$
(54,937) $
13,902 $
95,058 $
192,053
Dream Unlimited Corp. – December 31, 2019 | 88
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Segmented Assets and Liabilities
Segmented assets and liabilities as at December 31, 2019 and December 31, 2018 were as follows:
Assets
Cash and cash equivalents
Accounts receivable
Other financial assets
Lending portfolio
Housing inventory
Condominium inventory
Land inventory
Investment properties
Recreational properties
Asset
(1)
management
$
— $
4,495
93,849
—
—
—
—
—
—
Equity accounted investments
451,810
—
43,000
—
Capital and other operating
assets
Intangible asset
Assets held for sale
Total assets
Liabilities
Accounts payable and other
liabilities
Income and other taxes
payable
Provision for real estate
development costs
Debt
Dream Alternatives trust units
Deferred income taxes
$
$
Stabilized
income
generating
assets
Urban
development -
Toronto &
Ottawa
Western
Canada
community
development
Corporate and
other
Dream
Alternatives
Consolidation
and fair value
adjustments
Consolidated
Dream
2019
5,767 $
7,859
12
—
—
—
786
202,581
48,779
56,635
6,802
—
49,089
28,016 $
2,303 $
233,404 $
117,787 $
87,476
9,957
—
—
270,528
2,131
59,710
—
44,175
97,725
2,664
—
—
38,607
5,647
535,654
38,723
—
11,158
—
—
—
—
—
—
—
—
4,179
119,887
64,705
—
—
—
201,624
—
186,713
27,927
6,227
5,239
1,188
—
—
—
—
—
—
—
—
1,244 $
(2,240)
(94,249)
—
—
15,129
—
15,786
—
(41,651)
8,196
(43,000)
—
388,521
202,158
129,456
64,705
38,607
291,304
538,571
518,424
48,779
708,840
55,579
—
49,089
593,154 $
378,310 $
529,920 $
736,044 $
241,307 $
696,083 $
(140,785) $
3,034,033
20,002 $
19,328 $
82,803 $
18,294 $
7,840 $
35,087 $
22,926 $
206,280
—
—
—
—
—
—
—
114,438
—
—
—
—
154,419
8,748
214,680
—
—
28,105
56,720
—
—
—
224,105
—
82,397
(58)
—
88,988
—
4,515
Total liabilities
$
20,002 $
133,766 $
306,231 $
103,119 $
468,761 $
128,532 $
Non-controlling interest
Shareholders' equity
—
—
573,152
244,544
64,946
158,743
—
—
—
632,925
(227,454)
567,551
Total equity
$
573,152 $
244,544 $
223,689 $
632,925 $
(227,454) $
567,551 $
(1)
Included in other financial assets is $93,849 relating to the Company's investment in Dream Alternatives trust units that is eliminated in the consolidation and fair value adjustments column.
Dream Unlimited Corp. – December 31, 2019 | 89
—
—
24
411,078
6,985
441,013 $
154,361
36,853
698,955
411,078
93,897
1,601,424
(43,297)
(538,501)
(581,798) $
21,649
1,410,960
1,432,609
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Asset
(1)
management
Stabilized
income
generating
assets
Urban
development -
Toronto &
Ottawa
Western
Canada
community
development
Corporate and
other
Dream
Alternatives
Consolidation
and fair value
adjustments
Consolidated
Dream
2018
Assets
Cash and cash equivalents
$
— $
7,897 $
6,255 $
1,606 $
46,730 $
119 $
Accounts receivable
Other financial assets
Lending portfolio
Housing inventory
Condominium inventory
Land inventory
Investment properties
Recreational properties
Renewable power assets
8,329
149,854
—
—
—
—
—
—
—
Equity accounted investments
348,727
—
43,000
—
$
$
Capital and other operating
assets
Intangible asset
Assets held for sale
Total assets
Liabilities
Accounts payable and other
liabilities
Income and other taxes
payable
Provision for real estate
development costs
Debt
Preference shares, series 1
Dream Alternatives trust units
Deferred income taxes
8,101
610
—
—
—
843
159,784
49,241
—
47,067
5,760
—
72,587
34,492
10,650
—
—
233,974
1,742
—
—
—
33,657
31,446
—
—
121,400
—
—
56,605
5,647
573,311
18,171
—
—
6,534
5,118
—
—
1,686 $
5,612
28
—
—
—
—
—
—
—
—
2,821
122,908
144,095
—
—
—
224,921
—
132,251
132,528
6,294
5,023
—
—
—
—
(3,341)
(71,699)
—
—
—
—
9,895
—
11,037
(18,753)
3
(43,000)
—
64,293
177,414
212,351
144,095
56,605
239,621
575,896
412,771
49,241
143,288
549,760
53,644
—
72,587
549,910 $
351,890 $
352,216 $
788,392 $
13,620 $
811,277 $
(115,739) $
2,751,566
13,662 $
12,852 $
55,452 $
31,841 $
19,320 $
25,888 $
1,938 $
160,953
—
—
—
—
100,000
111,853
—
—
—
—
—
—
—
—
51,236
(1,707)
3,338
141,056
30,515
111,234
—
—
—
—
—
—
—
224,083
28,672
—
75,662
—
195,492
—
—
(323)
—
—
3,888
—
377,234
18,800
49,529
33,853
887,606
28,672
377,234
94,139
Total liabilities
$
113,662 $
124,705 $
199,846 $
173,590 $
398,973 $
219,350 $
401,860 $
1,631,986
Non-controlling interest
Shareholders' equity
—
—
436,248
227,185
43,935
108,435
—
—
614,802
(385,353)
1,669
590,258
(29,275)
(488,324)
16,329
1,103,251
Total equity
$
436,248 $
227,185 $
152,370 $
614,802 $
(385,353) $
591,927 $
(517,599) $
1,119,580
(1)
Included in other financial assets is $72,678 relating to the Company's investment in Dream Alternatives trust units that is eliminated in the consolidation and fair value adjustments column.
Dream Unlimited Corp. – December 31, 2019 | 90
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
41. Classification of items in consolidated statements of financial position
A summary of the classification between current and non-current assets and liabilities is presented below.
Assets
Cash and cash equivalents
Accounts receivable
Other financial assets
Lending portfolio
Housing inventory
Condominium inventory
Land inventory
Investment properties
Recreational properties
Equity accounted investments
Capital and other operating assets
Assets held for sale
Total assets
Liabilities
Accounts payable and accrued liabilities
Income and other taxes payable
Provision for real estate development costs
(1)
Debt
Dream Alternatives trust units
(2)
Deferred income taxes
Total liabilities
Less than 12 months
Greater than 12
months
Non-determinable
$
388,521 $
— $
164,105
11,365
51,216
—
—
—
—
—
—
13,081
49,089
38,053
118,091
13,489
—
—
—
518,424
48,779
—
42,498
—
— $
—
—
—
38,607
291,304
538,571
—
—
708,840
—
—
2019
Total
388,521
202,158
129,456
64,705
38,607
291,304
538,571
518,424
48,779
708,840
55,579
49,089
$
$
$
677,377 $
779,334 $
1,577,322 $
3,034,033
132,748 $
23,289 $
154,361
36,853
161,411
—
—
—
—
537,544
—
93,897
485,373 $
654,730 $
50,243 $
—
—
—
411,078
—
461,321 $
206,280
154,361
36,853
698,955
411,078
93,897
1,601,424
(1)
(2)
The amounts presented are shown consistent with the contractual terms of repayment, which may be due on demand.
Dream Alternatives trust units may be redeemed at the option of the holder with no expiry date.
Dream Unlimited Corp. – December 31, 2019 | 91
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Assets
Cash and cash equivalents
Accounts receivable
Other financial assets
Lending portfolio
Housing inventory
Condominium inventory
Land inventory
Investment properties
Recreational properties
Renewable power assets
Equity accounted investments
Capital and other operating assets
Assets held for sale
Total assets
Liabilities
Accounts payable and accrued liabilities
Income and other taxes payable
Provision for real estate development costs
(1)
Debt
Preference shares, series 1
(2)
Dream Alternatives trust units
(2)
Deferred income taxes
Total liabilities
(1)
Less than 12 months
Greater than 12
months
Non-determinable
$
64,293 $
— $
146,461
8,111
96,968
—
—
—
—
—
—
—
10,406
72,587
30,953
204,240
47,127
—
—
—
412,771
49,241
143,288
—
43,238
—
— $
—
—
—
56,605
239,621
575,896
—
—
—
549,760
—
—
2018
Total
64,293
177,414
212,351
144,095
56,605
239,621
575,896
412,771
49,241
143,288
549,760
53,644
72,587
398,826 $
930,858 $
1,421,882 $
2,751,566
107,426 $
19,416 $
34,111 $
49,529
33,853
301,196
—
—
—
492,004 $
—
—
586,410
—
—
94,139
699,965 $
—
—
—
28,672
377,234
—
160,953
49,529
33,853
887,606
28,672
377,234
94,139
440,017 $
1,631,986
$
$
$
(2)
The amounts presented are shown consistent with the contractual terms of repayment, which may be due on demand.
Dream Alternative trust units and Preference shares, series 1 may be redeemed at the option of the holder with no expiry date.
42. Comparative figures
Certain comparative balances have been reclassified from the consolidated financial statements previously presented to conform to the presentation of
the 2019 consolidated financial statements.
43. Changes in accounting policies
IFRS 16
The Company leases various office equipment, land and vehicles. Rental contracts are typically made for fixed periods of 1 to 25 years but may have
extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do
not impose any covenants, but leased assets may not be used as security for borrowing purposes.
Prior to January 1, 2019, leases of property or equipment (including land leases) were classified as either finance or operating leases. Payments made
under operating leases (net of any incentives received from the lessor) were charged to the consolidated statement of earnings on a straight-line basis
over the period of the lease.
Effective January 1, 2019, leases are recognized as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use
by the Company. Each lease payment is allocated between the liability and the finance cost. The finance cost is charged to the consolidated statement of
earnings over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-
use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease
payments: fixed payments (including in-substance fixed payments), less any lease incentives receivable; variable lease payments that are based on an
index or a rate; amounts expected to be payable by the lessee under residual value guarantees; the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Dream Unlimited Corp. – December 31, 2019 | 92
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate
is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on January 1,
2019 was 4.4%.
Right-of-use assets are measured at cost comprising the following: the amount of the initial measurement of lease liability; any lease payments made at or
before the commencement date less any lease incentives received; any initial direct costs; and restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in the consolidated
statements of earnings. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise individual assets with a value less
than $10.
For leases previously classified as finance leases, the Company recognized the carrying amount of the lease asset and lease liability immediately before
transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16
are only applied after that date.
The Company is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor. The Company accounts for its leases in
accordance with IFRS 16 from the date of initial application.
Operating lease commitments disclosed as at December 31, 2018
Finance lease liabilities recognized as at December 31, 2018
Non-lease commitments disclosed as at December 31, 2018
Discounted using the lessee's incremental borrowing rate as of the date of initial application
Less: Short-term & low value leases recognized on a straight-line basis as expense
Less: Adjustments as a result of a different treatment of extension and termination options
Less: Non-lease commitments
Lease liability recognized as at January 1, 2019
Of which are due in:
(1)
2019
2020
2021
2022
2023
2024+
(1)
Lease liability of $24,047 recognized as at January 1, 2019 includes finance lease liabilities of $7,180 previously recognized as at December 31, 2018.
$
$
$
Total
24,793
7,180
5,674
37,647
(5,899)
(952)
(1,075)
(5,674)
24,047
1,991
1,939
1,736
1,388
1,384
15,609
The associated right-of-use assets for leases were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued
lease payments relating to that lease recognized in the statement of financial position as at December 31, 2018. There were no onerous lease contracts
that would have required an adjustment to the right-of-use assets at the date of initial application.
The recognized right-of-use assets relate to the following types of assets:
Property and equipment
Land leases related to assets held for sale
Total right-of-use assets
December 31, 2019
January 1, 2019
3,914 $
—
3,914 $
4,831
12,036
16,867
$
$
In applying IFRS 16 for the first time, the Company has used the following practical expedients permitted by the standard: the reliance on previous
assessments on whether leases are onerous; and the accounting for operating leases with a remaining lease term of less than 12 months as at January 1,
2019 as short-term leases.
The Company has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application. Instead, for contracts entered
into before the transition date, the Company relied on its assessment made under IAS 17 and IFRIC 4, "Determining whether an Arrangement contains a
Lease".
Dream Unlimited Corp. – December 31, 2019 | 93
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Impact on Date of Initial Application
Assets
Capital and other operating assets
Renewable power assets
Liabilities
Accounts payable and other liabilities
44. Subsequent events
December 31, 2018
IFRS 16
January 1, 2019
53,644 $
143,288
4,831 $
12,036
58,475
155,324
160,953 $
16,867 $
177,820
$
$
Subsequent to the year ended December 31, 2019, the Company announced the final results of its substantial issuer bid to purchase for cancellation up to
10,000,000 of its outstanding Subordinate Voting Shares at a price of $11.75 per share (the “purchase price”), for an aggregate purchase price not to
exceed $117,500 (the “offer”), which expired on January 22, 2020.
In accordance with the terms and conditions of the offer, the Company has taken up and paid for 10,000,000 Subordinate Voting Shares at the purchase
price, for an aggregate cost of approximately $117,500, excluding expenses relating to the offer. After giving effect to the offer, 92,203,590 Subordinate
Voting Shares remain outstanding.
Subsequent to December 31, 2019, the Company executed an agreement to sell a portion of its interest in 480 acres in Calgary.
Dream Unlimited Corp. – December 31, 2019 | 94
Dream Unlimited Corp. – December 31, 2019 | 95
Directors
Michael J. Cooper4
Toronto, Ontario
President & Chief Responsible Officer
Dream Unlimited Corp.
P. Jane Gavan4
Toronto, Ontario
President, Asset Management
Dream Unlimited Corp.
James EatonInd.
Toronto, Ontario
Corporate Director
Joanne FerstmanInd.,1,3,4,5
Toronto, Ontario
Corporate Director
Richard GatemanInd.,2, 3
Calgary, Alberta
Vice President, Major Projects
Business Development
TransCanada Pipelines Limited
Duncan JackmanInd.
Toronto, Ontario
Chairman, President and CEO
E-L Financial Corporation Limited
Jennifer Lee KossInd.,1,2
Toronto, Ontario
Co-Founder and Builder of Business
BRIKA
Vincenza SeraInd.,1, 2, 3,4
Toronto, Ontario
Corporate Director
Legend:
Ind. Independent
1. Member of the Audit Committee
2. Member of the Governance and
Nominating Committee
3. Member of the Organization,
Design and Culture Committee
4. Member of Leaders and
Mentors Committee
5. Chair of the Board
Corporate Information
HEAD OFFICE
TRANSFER AGENT
CORPORATE COUNSEL
Dream Unlimited Corp.
State Street Financial Centre
30 Adelaide Street East, Suite 301
Toronto, Ontario M5C 3H1
Phone: (416) 365-3535
Fax: (416) 365-6565
Website: www.dream.ca
INVESTOR RELATIONS
Phone: (416) 365-3535
Toll free: 1 877 365-3535
Email: info@dream.ca
Website: www.dream.ca
(for change of address, registration
or other unitholder enquiries)
Computershare Trust
Company of Canada
100 University Avenue, 8th Floor
Toronto, Ontario M5J 2Y1
Phone: (514) 982-7555 or
1 800 564-6253
Fax: (416) 263-9394 or
1 888 453-0330
Website: www.computershare.com
Email: service@computershare.com
AUDITOR
PricewaterhouseCoopers LLP
PwC Tower, 18 York Street, Suite 2600
Toronto, Ontario M5J 0B2
Osler, Hoskin & Harcourt LLP
Box 50, 1 First Canadian Place, Suite 6200
Toronto, Ontario M5X 1B8
STOCK EXCHANGE LISTING
The Toronto Stock Exchange
Listing Symbols:
Subordinate Voting Shares: DRM
For more information, please visit
www.dream.ca
Corporate Office
State Street Financial Centre
30 Adelaide Street East, Suite 301
Toronto, Ontario M5C 3H1
Phone: 416.365.3535
Fax: 416.365.6565
Website: www.dream.ca
Email: info@dream.ca