Dream Unlimited Corp.
Annual Report 2020
Zibi,
Ottawa, ON / Gatineau, QC
Dream (TSX:DRM) is an award-
winning Canadian real estate company
with approximately $10 billion of assets
under management in North America
and Europe.
Dream Unlimited Corp.
Letter to Shareholders
Alpine Park,
Calgary, AB
As we reflect on 2020, there is a sense of pride and
Asset Alternatives Trust, would be the first public pure-play
accomplishment that resonates across the Dream platform.
impact investment vehicle in Canada. The impact asset
In the uncertainty and disruption we all experienced
class focuses on generating market returns while achieving
this past year, we focused on taking care of our people,
measurable and scalable impact in our communities. Our
tenants, communities and shareholders throughout this
impact will be defined, measured, and verified under a
time. We made significant advancements from a strategic
transparent and systematic approach which will be
perspective across the Dream group of companies, and
disclosed in our inaugural impact report in 2021. In
realized the benefits of having diverse business lines, as
addition, under the Dream Equity Partners umbrella, we
those directly impacted by COVID-19 measures were well
will be launching a private impact fund in the coming weeks.
supported by other areas of our business.
We believe Dream will have an increased opportunity set
During the year, we continued to expand our asset
management platform, creating Dream Equity Partners,
our private equity arm, to pursue opportunities investing
by providing an impact investment vehicle to both private
and public investors, while creating positive and lasting
change in the communities our assets intend to serve.
capital on behalf of institutional and retail clients. We have
We were pleased to see Dream Industrial REIT continue to
now entered into a partnership with a global investment
grow with the asset base increasing by over 25% through
manager with over $100 billion USD of assets under
a European expansion strategy this past year. With over
management to create a multi-family platform in the United
$620 million in acquisitions in 2020 and $355 million either
States. In aggregate, Dream is launching the US multi-family
completed, under contract or in exclusive negotiations, the
platform with 2,000 units worth $300 million USD and will
REIT is well positioned entering into 2021.
seek to grow the portfolio further in 2021.
As of December 31st, we held a 32% interest in Dream Office
As 2020 progressed it became clear to us that through real
REIT, or $349 million at fair market value. As the REIT’s
estate, we had an opportunity to contribute positively to
development manager, in 2020 we successfully achieved
certain challenges facing society. The concept of building
rezoning for 250 Dundas St. West, which now allows for
better communities has historically been a focus across our
over 500 residential units at the site. Across the real estate
business lines, which has driven strong financial returns
sector, office REITs have been hit particularly hard as work
for the Company. Accordingly, in 2020 we were proud
from home orders have altered the way individuals have
to announce Dream Impact Trust, formerly Dream Hard
been able to use commercial space. However, the REIT’s
Sustainability Report
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 focus on impact investing.
See our 2019 Sustainability Report
under the Sustainability section of our
website at dream.ca ↗
portfolio is comprised of high-quality assets located in core
Given the gap between our view of net asset value and
markets, which we believe will remain attractive for many
share price, we believe that continuing to buy back stock is
tenants as COVID-19 restrictions are eased.
an attractive use of capital and a driver of value creation. In
In 2020, we executed on the sale of an 86% interest in Glacier
Ridge in Calgary and the sale of our renewable power portfolio,
which in aggregate provided an additional $115.5 million of
liquidity and $78.7 million of pre-tax earnings for Dream. Aside
2020, we purchased 7.7 million Subordinate Voting Shares
for cancellation for total proceeds of $170.4 million under our
normal course issuer bid and through a substantial issuer bid
in January.
from Glacier Ridge, our sales volumes were below historical
With an emphasis on preserving liquidity and managing
trends in Western Canada. However, as we enter 2021, we have
risk throughout the year, we ended 2020 with $426 million in
the highest level of presales for lots and houses than we have
liquidity and a conservative leverage ratio of 27%. Overall, we
had in years. This past July, we broke ground on the first 36-
remain pleased with the safety of our Company and the return
acre phase of Alpine Park within our master-planned community
we are generating for shareholders. Our core operating business
Providence in Calgary. This was a significant milestone for our
has strong fundamentals and we believe there is a significant
Company as our first lands in this area were initially acquired
amount of value yet to be realized from the best-in-class assets
in 1997.
we own today.
Our development assets in both Toronto and Ottawa experienced
I would like to thank you for your ongoing support and interest
minimal delays despite the market disruption this past year. We
in Dream.
successfully achieved rezoning for Blocks 3/4/7 and 20 at the
West Don Lands development, which is a significant milestone
for our Company, as it allows us to deliver nearly 2,300 units of
which 30% will be affordable, under one of Canada’s largest
affordable housing programs. As of December 31st, across
Sincerely,
the Dream group platform, we have approximately 5.0 million
Michael J. Cooper
sf of GLA in retail or commercial properties and over 19,500
President & Chief Responsible Officer
condominium or purpose-built rental units (at the project level)
in our development pipeline.
February 23rd, 2021
Dream Unlimited Corp.
At a Glance*
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
$10 billion of assets under management across three Toronto Stock Exchange
listed trusts and numerous partnerships. We also develop land and residential
assets in Western Canada. 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.
$5 billion
$10 billion
of fee-earning assets under management
of assets under management
$35 billion
of commercial real estate and renewable
power transaction have been completed
by Dream
~21,000
condominium and purpose-built rental
units in the Dream group portfolio, inclusive
of our development pipeline
*As at December 31, 2020.
2.2 million
square feet of zoning approvals in 2020
across our development platform
11.8 million
square feet of commercial/retail
gross leasable area (GLA) across the
Dream group portfolio, inclusive of our
development pipeline
West Don Lands,
Toronto, ON
Dream Unlimited Corp.
Financials
Brightwater,
Mississauga (Port Credit), ON
Financial Highlights
Revenue
Earnings before income taxes
Earnings per period
Basic earnings per share(1)
2020
2019
$ 347,623
$ 580,430
$ 197,620
$ 440,426
$ 159,638
$ 331,745
$ 3.37
$ 6.25
Total equity (excluding non controlling interests)
$ 1,391,646
$ 1,410,960
Total equity per share(1)(2)
($ in millions)
$31.25/share
$27.21/share
$14.79/share $17.53share
$20.86/share
$12.75/share
$10.45/share
Dec. 2014
Dec. 2015
Dec. 2016
Dec. 2017
Dec. 2018
Dec. 2019
Dec. 2020
18%
CAGR in Total Equity to 2020
Note: We issued $55.0M of equity in 2014
(1) All periods prior to 2020 adjusted for the share consolidation.
(2) 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.
Dream Unlimited Corp.
Impact Investing
In 2020, Dream identified impact investing as an asset class that we
believe will continue to grow at increasing rates and which Dream
has over two decades of experience in and a strong track record.
The impact asset class focuses on generating market returns while
achieving measurable and scalable impact in our communities. Real estate
provides an opportunity for Dream to achieve competitive returns while
creating impact on housing, resource management and inclusiveness.
Our impact will be defined, measured and verified.
We are a signatory to the Operating
Principles for Impact Management and
have also joined the Global Impact
Investing Network.
Toronto, ON
West Don Lands
The West Don Lands is a LEED Gold, purpose-built,
multi-family rental apartment community in Toronto’s
downtown east end. The development is one of the
largest affordable housing projects in Canada and
the first within the Provincial Affordable Housing Lands
Program to break ground.
Canary District - Block 10, Toronto, ON
Indigenous Hub
The first Indigenous Hub in Canada is located in the
Canary District in downtown Toronto. It will serve the
needs of Toronto’s First Nations community and the
broader city.
Ottawa, ON / Gatineau QC
Zibi
Zibi will be one of Canada’s most sustainable
communities and the country’s first One Planet
master-planned community. In partnership
with Hydro Ottawa, we are developing the
District Thermal Energy System, the first post-
industrial waste heat recovery system in a
master-planned community in North America,
which will provide net-zero heating and cooling
for all tenants, residents and visitors at Zibi.
Dream Unlimited Corp.
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**
$15,692,000
$107,798,000
Property Related Taxes
$7,437,000
$8,524,000
2020
2019
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
$65,423,000
$33,564,000
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
$2,734,000
$3,056,000
Company’s share of various payroll taxes including government
pension, employment insurance, government health costs and
workers’ compensation
Total
$91,286,000
$152,942,000
* Represents Dream on a standalone basis
** The amount reported in 2020 includes payments of $1.0 million made by the Company in February 2021 for 2020 income taxes payable. (The amount reported
in 2019 includes payments of $102.1 million made by the Company in February 2020 for 2019 income taxes payable).
Table of Contents
Management’s Discussion
and Analysis
Management’s Responsibility for
Consolidated Financial Statements
Independent Auditor’s Report
Consolidated Financial Statements
Notes to the Consolidated
Financial Statements
1
33
34
39
44
Directors and Management Team
IBC
Corporate Information
IBC
Zibi,
Ottawa, ON / Gatineau, QC
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, 2020 and
December 31, 2019, which can be found under the Company’s profile on the System for Electronic Document Analysis and Retrieval ("SEDAR")
(www.sedar.com). The financial statements underlying this MD&A, including 2019 comparative information, have been prepared in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board ("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 23, 2021.
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 $10 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. Dream expects to generate
more recurring income in the future as its 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. An illustrative chart showing the structure and
diversity of our business is set out below and a comprehensive overview of our holdings is included in the "Summary of Dream's Assets and 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, the creation of Dream Global REIT, Dream Industrial REIT and Dream
Impact Trust ("Dream Impact"), formerly Dream Hard Asset Alternatives Trust, in 2011, 2012 and 2014, respectively, and the sale of the assets and
subsidiaries of Dream Global REIT in 2019.
Dream Unlimited Corp. – December 31, 2020 | 1
Summary of Results – Fourth Quarter and Year Ended 2020
Update on Dream Equity Partners
We created our private equity business in 2020 to pursue opportunities to invest capital on behalf of institutions and high net worth individuals through
funds that we create and segregated accounts. We are of the view that Dream will have increased opportunities if it has access to manage both private and
public capital. On February 2, 2021, Dream entered into a partnership with a global investment manager with over US$100 billion of assets under
management to create a multi-family platform in the United States. Dream and PaulsCorp sold 90% of the 1,200 Dallas apartments that were acquired
earlier in 2020 into the partnership and PaulsCorp and Dream will become the general partners, earning asset management fees, property management
fees and a promote on assets under management. Immediately after entering into this arrangement, we agreed to acquire 792 apartment units in Phoenix,
Arizona for US$120 million adding to our platform. In aggregate, Dream is launching the U.S. multi-family platform with 2,000 units worth approximately
US$300 million and will seek to grow the portfolio further in 2021.
In 2020, Dream identified impact investing as an asset class that we believe will continue to grow at increasing rates and which Dream has over two
decades of experience in and a strong track record. The impact investing asset class focuses on generating market returns while creating measurable
positive, social and environmental impact in our communities. Real estate provides an opportunity for Dream to achieve competitive returns while creating
impact on attainable/affordable housing, resource management and more inclusive communities. Our impact will be defined, measured and verified. We
are a signatory to the Operating Principles for Impact Management and have also joined the Global Impact Investing Network. Our impact framework will
be completed and made public in the second quarter of 2021.
Dream Impact Trust is Canada’s first public impact vehicle and was created from the former Dream Hard Asset Alternatives Trust in October. In addition, in
the coming weeks Dream will launch a private Impact Fund which will have a similar impact strategy to invest in real estate properties and projects that we
believe will have the ability to generate measurable social, environmental and financial returns. Dream will contribute its interest in the Indigenous Hub
(Canary Block 10), Block 8 in the West Don Lands, the Federal Government building under construction at Zibi and our interest in Zibi Community Utility,
the system created in partnership with Hydro Ottawa to provide net zero heating and cooling to the entire Zibi project. Dream is targeting a $250 million
capital raise for our private open-ended impact fund. We expect that we will have a first closing on at least $125 million from some of Canada’s leading
institutions and high net worth individuals and we intend to raise the balance subsequent to first close. Between the public Dream Impact Trust and the
proceeds following the first closing of the new private Impact Fund, Dream will have over $700 million of assets under management committed to impact
investing.
Dream will continue to focus on investing, managing and growing our apartment and impact platforms through 2021 and beyond, as well as seeking other
opportunities to grow the private equity division.
Recurring Income
In the three months ended December 31, 2020, our recurring income segment generated revenue and net operating income of $19.8 million and
$6.3 million, respectively, compared to $309.3 million and $289.3 million in the prior period. 2019 results included fees earned on the disposition of Dream
Global REIT totalling $280.2 million. The remaining decrease was primarily driven by reduced income from Dream Impact Trust's portfolio due to prior year
asset dispositions and scheduled loan repayments.
In the year ended December 31, 2020, our recurring income segment generated revenue and net operating income of $92.2 million and $27.2 million,
respectively, down from $431.1 million and $348.1 million in the comparative period. Along with the aforementioned disposition of Dream Global REIT and
Dream Impact Trust's dispositions, results were impacted by the ongoing capacity restrictions at Arapahoe Basin, our ski hill in Colorado, and the
Broadview Hotel in Toronto due to the COVID-19 pandemic.
Included in revenue for the three months ended December 31, 2020 was $5.1 million relating to asset management and development contracts with
Dream Industrial REIT, Dream Office REIT and our partnerships, which are expected to grow over time as we actively pursue new asset management
opportunities. Dream Industrial REIT’s asset base continues to grow, with over $620 million in acquisitions in 2020 and $355 million currently under
contract, in exclusive negotiations or closed in 2021. In the fourth quarter, Dream Industrial REIT was assigned an issuer rating of BBB with stable trend by
DBRS Limited, providing Dream Industrial REIT with access to new sources of capital to continue executing on its growth strategy.
We made great progress on repositioning Dream Impact Trust as the first public impact investment vehicle in Canada and became a signatory to the
Operating Principles for Impact Management in 2020. We will be establishing an impact framework to incorporate the Trust’s governance and monitoring
processes for identifying and measuring impact which will provide a systematic ranking methodology to be applied to the Trust’s portfolio. We are creating
pathways and KPIs for our three impact verticals, attainable and affordable housing, inclusive communities and resource efficiency. We expect to leverage
our impact expertise across our private asset management business and other areas of our business.
With the exception of the Broadview Hotel, one of our boutique hotels in Toronto, results for the quarter were minimally impacted by the ongoing
COVID-19 pandemic. Despite social distancing measures at Arapahoe Basin, strong ski pass sales have contributed to relatively consistent results in the
fourth quarter and early 2021 results are well ahead of 2020. Inclusive of retail in Western Canada, Dream’s average monthly rent collection in the three
months ended December 31, 2020 exceeded 89% and we have collected 89% of previously deferred rent due to the pandemic.
Dream Unlimited Corp. – December 31, 2020 | 2
Across the Dream group platform, which includes assets held through the Company, Dream Impact Trust and Dream Office REIT, we have approximately
6.7 million square feet ("sf") of gross leasable area ("GLA") in stabilized rental, retail and commercial properties, in addition to our recreational properties.
As at February 21, 2021, the Company had a 26% interest in Dream Impact Trust and 32% interest in Dream Office REIT.
Development
In the fourth quarter, our development segment generated revenue and net margin of $28.9 million and $0.6 million, respectively, compared to
$74.1 million and ($11.7 million) in the prior year, inclusive of a $23.2 million land writedown in Regina. Results were driven by lower lot and acre sales in
Western Canada relative to the prior year. Results for the fourth quarter of 2019 included occupancies at Riverside Square and BT Towns, with no activity
in the current quarter.
Year-to-date, revenue and net margin for the development segment were up by $106.1 million and $67.9 million, respectively, over the prior year primarily
due to Western Canada acre sales, including the sale of 480 acres in Glacier Ridge, and condominium occupancies at Riverside Square, BT Towns and
Kanaal at Zibi.
We achieved 335 lot sales, 107 housing occupancies and 526 acre sales in 2020, inclusive of the 480-acre sale of Glacier Ridge in the first quarter. 2020 saw
the groundbreaking on our first phase of Alpine Park, within the master-planned Providence community, located in southwest Calgary. The first phases of
Alpine Park comprise 136 acres, representing nearly 800 lots and 485 multi-family units on completion. Inclusive of Alpine Park, as of February 21, 2021,
we have secured commitments for 644 lots and 62 houses expected to close in 2021.
In the fourth quarter we completed Brighton Village Centre, our 121-unit purpose-built rental building in our master-planned community of Holmwood in
Saskatoon. The building is 46% leased as of February 21, 2021 and we expect to commence construction on the second 117-unit rental building and 15
rental townhomes this spring.
Across our development platform, we achieved a significant number of zoning approvals totalling 2.2 million sf in gross floor area ("GFA"). We expect 2021
to further contribute to our exceptional pipeline as outlined below, in addition to the overall site zoning approved for the Zibi master planned community
totalling 4 million sf of density.
2020 approvals:
Project
250 Dundas St. West
WDL Block 3/4/7
WDL Block 20
Total 2020
2021 pipeline:
City
Downtown Toronto & GTA
Calgary
Regina
Saskatoon
City
Toronto
Toronto
Toronto
Entity
Various
Dream
Dream
Dream
Entity
Dream Office REIT
Dream/Dream Impact
Dream/Dream Impact
Dream ownership(1)
31.6%
33.3%
33.3%
Dream ownership(1)
31.6% - 50.0%
Total residential units(2)
7,432
100.0%
100.0%
100.0%
TBD
TBD
TBD
Total residential units(2)
522
855
661
2,038
Total GFA(2)
6,444,000
TBD
TBD
TBD
Total GFA(2)
500,000
869,000
848,000
2,217,000
Gross acres
n/a
163
229
1,358
Total 2021
(1) Dream and Dream Impact Trust holdings at fully consolidated ownership. Dream Office REIT at 31.6% ownership as of December 31, 2020.
(2) Residential units and GFA are at 100% project level and include planned units. Planned residential units may be developed as condominium units or purpose-built rentals as supported by market demand, targeted studies and
return objectives.
6,444,000
7,432
1,750
In the year ended December 31, 2020, we achieved 306 condominium unit occupancies (99 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. The first phase of the project consists of 688 condominium units, a
multi-level auto-plex and 20,000 sf of retail GLA and is expected to close in the first half of 2021. Vertical construction on Phase 2, comprising 227
condominium units and an additional 36,000 sf of commercial space, began in late 2020 with first occupancies expected in 2022.
In 2020, we also achieved 133 condominium unit occupancies (67 units at Dream's share) and final closing at Canary Block, our first condominium building
on our Stage 2 Canary District lands in downtown Toronto's east end. Construction continues at Canary Commons, a 401-unit condominium building with
expected occupancies in 2022, and Block 8, the first building in our purpose-built rental project in the West Don Lands neighbourhood. With the Municipal
Zoning Order ("MZO") obtained in the fourth quarter of 2020, we expect to deliver 2,286 rental units, inclusive of 686 affordable units, and 300,000 sf of
commercial space across all three blocks in this neighbourhood.
During the three months ended December 31, 2020, Dream closed on a $444 million loan (at the project level) on Block 3/4/7 in the West Don Lands with
construction expected to commence in 2021. As a result of progress achieved to date on Block 3/4/7, a fair value gain was recognized in the fourth quarter
of 2020. Dream and Dream Impact Trust have an aggregate 33% interest in this development. The West Don Lands is adjacent to the Distillery District,
Canary District and future Lakeshore East development which in aggregate comprise over 7,200 condominium/rental units and 1.1 million sf of
commercial/retail space developed by Dream and its various partners. The area includes amenities such as the 18-acre Corktown Common Park, the
82,000 sf Cooper-Koo YMCA and numerous retail amenities and restaurants.
Dream Unlimited Corp. – December 31, 2020 | 3
Our Brightwater development reached another key milestone with the successful sales launch of its first two condominium buildings in late 2020. As at
December 31, 2020, all 311 units brought to market have been pre-sold, with occupancies commencing in 2023. Brightwater is our large master-planned
72-acre waterfront community in Mississauga's Port Credit area which will include approximately 3,000 residential units, 400,000 sf of retail and
commercial space, and 18 acres of parks and public spaces.
In the year ended December 31, 2020, construction continued to progress at Zibi, our 34-acre mixed-use development expected to comprise over 4.3
million sf of density upon completion. Key achievements in 2020 include 64 condominium unit occupancies at Kanaal, our first residential building in
Ottawa, and securing $10.0 million of non-traditional financing to support the building of affordable housing units for various blocks.
Across the Dream group platform, we have approximately 5.0 million sf of GLA in retail or commercial properties and over 19,500 condominium or
purpose-built rental units (at the project level) in our development pipeline.
Share Repurchase Activity, Return to Shareholders & Liquidity Update
Effective July 6, 2020, the Company completed a share consolidation of all issued and outstanding Class A subordinate voting shares ("Subordinate Voting
Shares") of Dream on the basis of one post-consolidation Subordinate Voting Share for every two pre-consolidation Subordinate Voting Shares, and all of
the issued and outstanding Class B common shares ("Class B Shares") of Dream on the basis of one post-consolidation Class B Share for every two pre-
consolidation Class B Shares ("the Share Consolidation"). Upon completion of the Share Consolidation, the number of Subordinate Voting Shares issued
and outstanding as of July 6, 2020 was consolidated from 91,641,438 to 45,820,395, and the number of Class B Shares issued and outstanding was
consolidated from 3,114,845 to 1,557,356. All share and per share amounts disclosed herein reflect the post-Share Consolidation shares for all periods
presented, unless otherwise specified.
In the year ended December 31, 2020, 7.7 million Subordinate Voting Shares were purchased for cancellation by the Company at an average price of
$22.07 under a substantial issuer bid ("SIB") and a normal course issuer bid ("NCIB") for total proceeds of $170.4 million (year ended December 31, 2019 –
1.0 million Subordinate Voting Shares at an average price of $16.14).
Dividends of $2.7 million and $11.2 million were declared and paid on its Subordinate Voting Shares and Class B Shares in the three and twelve months
ended December 31, 2020, respectively (three and twelve months ended December 31, 2019 - $2.6 million and $10.6 million). Subsequent to December
31, 2020, the Company’s board of directors approved an increase to the annual dividend from $0.24 to $0.28 per Subordinate Voting Share and Class B
Share, effective with the dividend payable to shareholders on March 31, 2021.
As of December 31, 2020, the Company had $426.1 million in corporate-level cash and available under its various revolving credit facilities and a
conservative leverage position with a debt to total assets ratio of 26.6%.
Dream Unlimited Corp. – December 31, 2020 | 4
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
•
Create positive and lasting impacts through our co-owned assets with Dream Impact Trust;
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 the goal of improving the safety, value and earnings quality of our business. Inclusive of assets held by Dream Impact Trust and Dream Office
REIT, our portfolio totals almost 21,000 residential units and 11.8 million sf of commercial/retail GLA as at December 31, 2020 (at 100% project level).
Commencing in the first quarter of 2020, we redefined our reporting segment information to better reflect how we manage our business, including Dream
Impact Trust. Comparative information has been reclassified in accordance with our new segment presentation.
The Company's reporting segments consist of the following:
•
•
Recurring income: Comprised of our asset management and development management agreements with Dream Industrial REIT, Dream Office
REIT and various development partners, a 32% equity interest in Dream Office REIT, Dream Impact Trust's lending portfolio, and our stabilized
income producing assets in the Greater Toronto Area ("GTA"), Western Canada and Colorado.
Development: Comprised of mixed-use developments in the GTA and Ottawa/Gatineau, land, housing, multi-family and retail/commercial
development in Saskatchewan and Alberta, and Dream Impact Trust's investment in the Virgin Hotels Las Vegas.
Recurring income is important to our business as it provides stable cash flows 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 and development management contracts, our 32% equity ownership in Dream Office REIT and our stabilized income generating assets,
such as the Distillery District in Toronto and Arapahoe Basin, our ski hill in Colorado. Our future recurring income properties will include those that are
currently being developed within our mixed-use developments in Toronto and Ottawa.
Our development assets, comprised of residential, commercial and retail buildings, 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, achievement of project milestones, 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.
While not considered an individual reportable segment, corporate and other includes: corporate-level cash and other working capital, consolidated tax
balances and expense, our term facility and related interest expense, general and administrative expenses not allocated to a particular segment and the
liability and fair value adjustments to Dream Impact Trust units held by other unitholders. Refer to the "Additional Information - Consolidated Dream"
section of this MD&A for segmented assets and liabilities and the segmented statement of earnings.
Selected Key Operating Metrics by Segment
Recurring income(1)
Development
Corporate and other
Total
For the three months ended December 31, 2020
(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(3)
Total issued and outstanding shares
$
$
$
$
$
19,758
$
40.6%
4,597
$
23.3%
92,229
$
26.5%
20,637
$
22.4%
28,881
$
59.4%
648
$
2.2%
255,394
$
73.5%
51,683
$
20.2%
1,118,871
$
1,560,924
$
164,578
$
313,274
805,597
452,100
1,093,858
672,387
(507,809)
Dream Unlimited Corp. – December 31, 2020 | 5
—
$
—%
—
$
n/a
48,639
100.0%
5,245
10.8%
For the year ended December 31, 2020
—
$
—%
—
$
n/a
347,623
100.0%
72,320
20.8%
As at December 31, 2020
2,844,373
1,437,761
1,391,646
45,011,928
For the three months ended December 31, 2019
(in thousands of dollars, except outstanding
share amounts)
Revenue
% of total revenue
Net margin
Net margin (%)(2)
(in thousands of dollars, except per share
amounts)
Revenue
% of total revenue
Net margin
Net margin (%)(2)
Segment assets
Segment liabilities
Segment shareholders' equity(3)
Total issued and outstanding shares(4)
$
$
$
$
$
Recurring income(1)
Development
Corporate and other
Total
309,277
$
80.7%
287,452
$
92.9%
74,083
$
19.3%
(11,659) $
n/a
—
$
—%
—
n/a
$
383,360
100.0%
275,793
71.9%
For the year ended December 31, 2019
Recurring income(1)
Development
Corporate and other
Total
431,142
$
74.3%
341,212
$
79.1%
149,288
$
25.7%
(16,216) $
n/a
1,133,201
$
1,546,373
$
255,863
877,338
444,407
1,080,317
—
$
—%
—
n/a
$
354,459
$
901,154
(546,695)
580,430
100.0%
324,996
56.0%
As at December 31, 2019
3,034,033
1,601,424
1,410,960
52,658,860
Asset management revenue and net margin from Dream Impact Trust are eliminated upon consolidation within this segment.
(1)
(2) Net margin (%) is a non-IFRS measure. Refer to the "Non-IFRS Measures" section of this MD&A for further details.
(3) Shareholders' equity for the development segment excludes $15.0 million of non-controlling interest as at December 31, 2020 (December 31, 2019 - $21.6 million).
(4) Number of shares reflects the Share Consolidation as at December 31, 2019.
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,
the Company’s results can vary significantly from quarter to quarter.
Dream Unlimited Corp. – December 31, 2020 | 6
Key Financial Information and Performance Indicators
Selected Financial Information
(in thousands of dollars, except per share and outstanding
share amounts)
Revenue
Gross margin
Gross margin (%)(1)
Net margin
Net margin (%)(2)
Earnings (loss) before income taxes
Earnings (loss) for the period
Basic earnings (loss) per share(3)(5)
Diluted earnings (loss) per share(3)(5)
Weighted average number of shares outstanding, basic(5)
Total earnings (loss) for the period attributable to:
Shareholders(4)
Total assets
Total liabilities
Total equity
Total issued and outstanding shares(5)
For the three months ended December 31,
For the year ended December 31,
$
$
$
$
$
$
$
2020
48,639 $
11,967 $
24.6%
5,245 $
10.8%
(31,181) $
(32,315) $
(0.70) $
(0.70) $
2019
383,360 $
286,095 $
74.6%
275,793 $
71.9%
458,329 $
349,191 $
6.65 $
6.43 $
2020
347,623
105,154
30.2%
$
$
72,320
$
20.8%
197,620
159,638
3.37
3.31
$
$
$
$
2019
580,430
364,234
62.8%
324,996
56.0%
440,426
331,745
6.25
6.09
45,728,250
52,675,624
47,262,426
53,143,526
$
(32,164) $
350,106 $
159,221 $
332,246
$
$
$
December 31, 2020
December 31, 2019
2,844,373 $
1,437,761 $
1,406,612 $
45,011,928
3,034,033
1,601,424
1,432,609
52,658,860
(1) 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.
(2) 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.
(3) See Note 33 of the Company’s consolidated financial statements for the year ended December 31, 2020 for further details on the calculation of basic and diluted earnings (loss) per share.
(4) Total earnings attributable to shareholders excludes the portion allocated to non-controlling interests.
(5) Shares and per share amounts reflect the Share Consolidation for all periods presented.
The Company evaluates its development segment using net margin. The Company's recurring income segment is 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 Results
Earnings before income taxes after adjusting for fair value gains/losses taken on Dream Impact Trust units held by other unitholders for the three months
ended December 31, 2020 was $28.9 million, a decrease of $447.9 million relative to the prior year. The change is primarily due to prior period
transactional activity, inclusive of the sale of Dream Global REIT that generated earnings before taxes of $415.6 million and lower fair value gains on
investment properties, including those held through equity accounted investments.
Earnings before income taxes for the year ended December 31, 2020 was $119.9 million, down from $553.9 million in the prior year after adjusting for fair
value gains/losses on Dream Impact Trust units. The decrease was primarily due to the aforementioned factors in addition to reduced earnings from the
temporary closure of our ski hill in Colorado and businesses impacting our Toronto income properties as a result of the COVID-19 pandemic. This was
partially offset by a gain on sale of the renewable power portfolio in the second quarter of 2020, the sale of 480 acres in Glacier Ridge in the first quarter of
2020 and lower interest expense as a result of reduced interest rates and lower debt levels.
Dream Impact 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 fair value losses (gains) with the fluctuation of Dream Impact Trust’s unit price. In the three months ended
December 31, 2020, the fair value loss on the Dream Impact Trust units was $60.1 million (as a result of the unit price increasing to $6.03 at December 31,
2020 from $4.88 at September 30, 2020), compared to a loss of $18.6 million in the comparative period (as a result of the unit price increasing to $7.75 at
December 31, 2019 from $7.50 at September 30, 2019). In the year ended December 31, 2020, the fair value gain on the Dream Impact Trust units was
$77.8 million (as a result of the unit price decreasing to $6.03 at December 31, 2020 from $7.75 at December 31, 2019), compared to a loss of $113.5
million in the comparative period (as a result of the unit price increasing to $7.75 at December 31, 2019 from $6.24 at December 31, 2018).
Dream Unlimited Corp. – December 31, 2020 | 7
Summary of Dream's Assets and Holdings
The following table includes supplementary information on our portfolio as at December 31, 2020.
Project/Property
Entity
Dream
ownership(1)
Status
Total
residential
units at
completion(2)
Residential
GFA(2)
(at 100%)
Total
commercial
and retail
GLA(2)
In-place/
committed
occupancy
Occupancy/
stabilization
date
—
—
—
—
—
—
—
—
—
—
—
—
—
—
TBD
—
—
—
—
TBD
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
658,000
96.6%
655,000
86.4%
442,000
58.5%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
TBD
—
—
—
—
TBD
—
—
—
—
—
—
—
—
—
—
—
—
—
414,000
395,000
323,000
301,000
266,000
248,000
214,000
165,000
158,000
121,000
101,000
88,000
83,000
73,000
65,000
61,000
59,000
58,000
50,000
53,000
53,000
36,000
35,000
34,000
32,000
32,000
24,000
24,000
22,000
290,000
100.0%
99.7%
99.1%
97.8%
98.9%
100.0%
98.2%
84.0%
96.5%
98.5%
72.4%
91.5%
97.5%
100.0%
100.0%
100.0%
96.4%
86.8%
94.4%
84.9%
94.8%
34.0%
86.2%
91.6%
89.2%
86.3%
100.0%
80.0%
83.4%
83.5%
91.1%
90.0%
95.2%
94.7%
95.8%
93.3%
100.0%
94.5%
—
—
—
—
—
5,633,000
—
300
252
244
216
180
—
1,192
—
297,000
218,000
215,000
201,000
144,000
—
1,075,000
n/a
185,000
185,000
RECURRING INCOME SEGMENT
Downtown Toronto & GTA
Commercial:
Adelaide Place
50 & 90 Burnhamthorpe Road West (Sussex
Centre)
2200-2206 Eglinton Avenue East &
1020 Birchmount Road
State Street Financial Centre
Distillery District
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
Victory Building
49 Ontario
425 Bloor Street East
212 King Street West
357 Bay Street
10 Lower Spadina
100 Steeles Avenue West
360 Bay Street
67 Richmond Street West
6 Adelaide Street East
350 Bay Street
366 Bay Street
Plaza Imperial
349 Carlaw
56 Temperance Street
Canary District - Stage 1 retail
Plaza Bathurst
Queen and Mutual
220 King Street West
Other GTA retail
Other:
The Broadview Hotel
The Gladstone Hotel
Total Downtown Toronto & GTA
U.S.
Arapahoe Basin ski hill, Colorado
Abbey at Vista Ridge, Texas
Tallows Apartments, Texas
Villas at Waterchase, Texas
Tall Timbers Apartments, Texas
Fieldcrest Apartments, Texas
12800 Foster Street, Overland Park, Kansas
Total U.S.
Dream Office REIT
Dream Office REIT/
Dream Impact
31.6%
65.8%
Income property
Income property
Dream Office REIT
31.6%
Income property
Dream Office REIT
Dream
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 Impact
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Impact
Dream/Dream Impact
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Impact
Dream Impact
Dream Office REIT
Dream
Dream Impact
Dream Impact
Dream Office REIT
Dream
31.6%
50.0%
31.6%
31.6%
31.6%
31.6%
31.6%
31.6%
31.6%
31.6%
31.6%
100.0%
31.6%
31.6%
31.6%
100.0%
50.0%
31.6%
31.6%
31.6%
31.6%
31.6%
40.0%
100.0%
31.6%
50.0%
40.0%
9.0%
15.8%
17.1-50.0%
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
Redevelopment
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
Dream
Dream
50.0%
50.0%
Income property
Income property
Dream
Dream
Dream
Dream
Dream
Dream
Dream Office REIT
100.0%
50.0%
50.0%
50.0%
50.0%
50.0%
31.6%
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Dream Unlimited Corp. – December 31, 2020 | 8
Project/Property
Type
Entity
Dream
ownership(1)
Status
Total
residential
units at
completion(2)
Residential
GFA(2)
(at 100%)
Total
commercial
and retail
GLA(2)
In-place/
committed
occupancy
Occupancy/
stabilization
date
Dream
100.0%
Income property
48
75,000
—
100.0%
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
234 - 1st Avenue South, Saskatoon
Other:
Willows, Saskatoon
Total Western Canada
Total Recurring Income Segment
DEVELOPMENT SEGMENT
Downtown Toronto & GTA
Residential and Mixed-Use:
Riverside Square - Phase 2
Canary Commons (Block 12)
WDL Block 8
Brightwater I and II
Canary House (Block 10 - Condo)
Canary Block 10 - Rental
Brightwater future blocks
WDL Block 3/4/7
Canary Block 13
WDL Block 20
Scarborough Junction
Frank Gehry
Lakeshore East
Distillery District - 31A Parliament
Seaton
Other
Total Downtown Toronto & GTA
Zibi (Ottawa/Gatineau)
Block 211
Block 2-3
Block 208
Block 10
Block 206
Block 11
Block 207
Future blocks
Total Zibi (Ottawa/Gatineau)
U.S.
Las Vegas industrial site
Virgin Hotels Las Vegas
Total U.S.
Western Canada
Residential:
Brighton Village Rentals 1, Saskatoon Hold
Brighton Village Rentals 2, Saskatoon Hold
Brighton Recreation, Saskatoon
Hold
Commercial:
1900 Sherwood Place, Regina
Brighton Marketplace, Saskatoon
Harbour Landing, Regina
Montrose, Calgary
Hampton Heights, Saskatoon
Total Western Canada
Hold
Hold
Hold
Hold
Hold
Hold
Sell
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream Office REIT
Dream
Dream Office REIT
31.6%
31.6%
31.6%
31.6%
31.6%
100.0%
31.6%
Income property
Income property
Income property
Income property
Income property
Income property
Income property
Dream
100.0%
Income property
Dream
Sell
Dream
Sell
Dream/Dream Impact
Hold
Dream/Dream Impact
Sell
Dream
Sell
Hold
Dream/Dream Impact
Various Dream/Dream Impact
Dream/Dream Impact
Hold
Dream
Hold
Dream/Dream Impact
Hold
Dream Impact
Sell
Dream/Dream Impact
Sell
Dream/Dream Impact
TBD
Dream
Hold
Dream Impact
Sell
Various
Sell
Dream/Dream Impact
Hold
Dream/Dream Impact
Hold
Dream/Dream Impact
Hold
Dream/Dream Impact
Hold
Dream/Dream Impact
Hold
Dream/Dream Impact
Hold
Hold
Dream/Dream Impact
Various Dream/Dream Impact
32.5%
50.0%
33.3%
31.0%
50.0%
33.3%
31.0%
33.3%
50.0%
33.3%
45.0%
33.3%
50.0%
50.0%
7.0%
Various
89.0%
89.0%
89.0%
89.0%
89.0%
89.0%
89.0%
89.0%
Planning
Under construction
Under construction
Planning
Planning
Planning
Planning
Planning
Planning
Planning
Planning
Planning
Planning
Planning
Planning
Various
Under construction
Under construction
Under construction
Under construction
Planning
Planning
Planning
Planning
Dream
Dream Impact
10.0%
10.0%
Planning
Under construction
Dream
Dream
Dream
Dream Office REIT
Dream
Dream
Dream
Dream
100.0%
100.0%
100.0%
31.6%
50.0%
100.0%
100.0%
100.0%
In occupancy
Planning
Under construction
Redevelopment
Under construction
Under construction
Under construction
Under construction
—
—
—
—
—
—
—
—
48
—
—
—
—
—
—
—
—
75,000
261,000
228,000
136,000
126,000
78,000
72,000
10,000
n/a
911,000
1,240
1,150,000
6,729,000
227
401
770
311
206
239
2,684
855
477
661
6,619
1,500
1,100
500
TBD
1,195
17,745
195,000
372,000
623,000
216,000
158,000
200,000
2,897,000
830,000
468,000
586,000
5,270,000
1,652,000
989,000
448,000
TBD
1,304,000
16,208,000
—
—
—
162
198
126
—
1,233
1,719
—
—
—
147,000
166,000
116,000
—
1,387,000
1,816,000
—
—
—
121
132
—
—
—
—
—
—
253
—
—
—
81,000
112,000
—
—
—
—
—
—
193,000
43,000
15,000
4,000
110,000
25,000
—
290,000
39,000
7,000
262,000
165,000
260,000
32,000
300,000
TBD
58,000
1,610,000
185,000
55,000
34,000
1,500
14,000
5,000
90,000
2,054,000
2,438,500
464,000
TBD
464,000
—
13,000
6,000
210,000
222,000
41,000
24,000
22,000
538,000
74.5%
64.2%
48.1%
76.5%
95.7%
96.4%
66.8%
73.9%
89.5%
100.0%
33.0%
30.7%
33.7%
86.0%
81.2%
79.8%
84.3%
12.4%
100.0%
100.0%
77.2%
58.2%
66.0%
91.0%
75.4%
63.7%
85.8%
2022
2022
2023
2023
2024
2024
2024-2032
2025
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
2021
2021
2022
2022
2023
2023
2023
TBD
TBD
2023
2021
2022-2023
2021
2021
2022
2022
2022
2022
Total Development Segment
Total Dream Platform
19,717
18,217,000
5,050,500
20,957
19,367,000
11,779,500
Dream Unlimited Corp. – December 31, 2020 | 9
Western Canada Land Holdings
City
Calgary
Edmonton
Saskatoon
Regina
Total(3)
Summary by Geography
Acre equivalents
1,892
858
3,116
3,321
9,187
In-place and
committed
occupancy
Location
87.1%
Downtown Toronto & GTA
84.3%
Ottawa/Gatineau
94.5%
U.S.
Western Canada(3)
74.5%
Total
85.8%
(1) Dream and Dream Impact Trust holdings at fully consolidated ownership. Dream Office REIT at 31.6% ownership as of December 31, 2020.
(2) Residential units, GFA and GLA are at 100% project level and include planned units, GFA 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.
Future GLA
under
development(2)
1,610,000
2,438,500
464,000
328,000
4,840,500
Residential
units at
completion(2)
17,745
1,719
1,192
301
20,957
Residential
GFA(2)
16,208,000
1,816,000
1,075,000
268,000
19,367,000
Current GLA
5,633,000
—
185,000
1,121,000
6,939,000
(3) Dream's acre equivalents in Western Canada represent an estimated 15,000 residential units that we plan to build out over time.
Recurring Income
A summary of the major asset types within our recurring income segment is included below.
Asset Management and Equity Ownership
We provide asset management and development management services to Dream Industrial REIT and Dream Office REIT, respectively, and on behalf of
various institutional partnerships/third-party real estate. Asset management fees earned from Dream Impact Trust and our 16.6 million units held in
Dream Impact Trust are eliminated on consolidation. As of December 31, 2020, we held an aggregate of 17.6 million units in Dream Office REIT,
representing a 31.6% interest, which generate monthly cash distributions for Dream. 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 may fluctuate depending on the number of active projects and on Dream achieving 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.
Our asset management and management services team consists of real estate 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 real estate alternatives transactions. We also act as
lead or co-lead developer on behalf of Dream Office REIT, Dream Impact Trust and our third-party partnerships.
Effective December 31, 2020, the Company has updated its calculation methodology for assets under management and fee earning assets under
management. Refer to the "Non-IFRS Measures" section of this MD&A for further details. Prior periods have been recast to reflect these updates. As at
December 31, 2020, Dream managed assets with a total value of approximately $10 billion (December 31, 2019 – $10 billion), including fee earning assets
under management of approximately $5 billion (December 31, 2019 - $6 billion).
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, and income producing assets in Toronto and Western Canada, the largest being the Distillery District. As of December 31, 2020, we
held over 7.9 million sf of GLA in retail, residential and mixed-use properties across the Dream platform and 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.
Lending Portfolio
Dream Impact Trust invests in mortgages and loans secured by all types of residential and commercial real estate property that represent an acceptable
underwriting risk. Working within these risk parameters, Dream Impact Trust also invests in higher-yielding development and construction loans and
bridge loans, where we are comfortable with the underlying security, guarantees and covenants of the borrower.
Dream Unlimited Corp. – December 31, 2020 | 10
Selected Segment Key Operating Metrics
(in thousands of dollars, unless otherwise noted)
Revenue
Net operating income(1)
Net margin
Net margin (%)(1)
Fair value changes in investment properties
Share of earnings from equity accounted investments
For the three months ended December 31,
2019
309,277
289,284
287,452
2020
19,758
6,267
4,597
$
$
$
23.3%
6,089
8,297
$
92.9%
49,711
29,522
$
$
For the year ended December 31,
2019
431,142
348,054
341,212
2020
92,229
27,222
20,637
$
22.4%
72
65,801
$
79.1%
40,239
63,025
(1) Net operating income and net margin (%) are non-IFRS measures. Refer to the "Non-IFRS Measures" section of this MD&A for further details.
Results of Operations
In the three months ended December 31, 2020, revenue and net operating income derived from recurring income sources decreased by $289.5 million and
$283.0 million, respectively, from the comparative period, primarily due to the incentive fee earned on the Dream Global REIT disposition in 2019 and
reduced contribution from Dream Impact Trust due to non-core asset dispositions and scheduled lending portfolio repayments. Similarly, in the twelve
months ended December 31, 2020, revenue and net operating income from recurring income sources decreased by $338.9 million and $320.8 million,
respectively, from the comparative period, due to the aforementioned factors in addition to reduced earnings from the 2019/2020 ski season at Arapahoe
Basin due to social distancing measures taken. Results for the three and twelve months ended December 31, 2019 included fees earned from Dream
Global REIT and related entities of $283.2 million and $297.5 million, respectively.
Arapahoe Basin abruptly closed on March 15, 2020 due to the COVID-19 pandemic. We re-opened for summer operations in June with our new Aerial
Adventure Park open to the public and for the 2020/2021 ski season on November 9, 2020. Over the past two years, we have invested US$4.4 million in
capital expenditures to support a new ski lift and expanded summer activities, including a climbing course, the Aerial Adventure Park and extended
mountain biking trails. We remain committed to maintaining the appropriate social distancing measures while providing a safe and enjoyable customer
experience.
Fair value gains on investment properties of $6.1 million and $0.1 million for the three and twelve months ended December 31, 2020, respectively were
driven by a gain on a redevelopment property held by Dream Impact Trust, partially offset by losses on retail and commercial properties due to revised
market growth assumptions.
Asset management revenues declined relative to the comparative period as a result of the sale of Dream Global REIT, partially offset by higher fees earned
from Dream Industrial REIT. In the three and twelve months ended December 31, 2020, total asset management and development management fees
generated from contracts with Dream Industrial REIT, Dream Office REIT and our partnerships were $5.1 million and $20.3 million, respectively. Net
operating income from our asset management business declined in the three and twelve months ended December 31, 2020, relative to prior periods, due
to the sale of Dream Global REIT in 2019 and increased platform costs as we invested in the expansion of our asset management business. This was
partially offset by transactional activity at Dream Industrial REIT and higher development management fees earned in 2020.
Earnings from equity accounted investments in the three months ended December 31, 2020 declined by $21.2 million relative to the comparative period as
a result of reduced earnings from our recurring income investments due to lower fair value adjustments to investment properties. Earnings from equity
accounted investments in the year ended December 31, 2020 increased by $2.8 million from the prior year primarily due to the pre-tax gain of $34.2
million, net of transaction costs, recognized on the sale of Dream's indirect interest in a renewable power portfolio. This was partially offset by the
aforementioned factors, a foregone deposit incurred in 2020 and prior year earnings from the renewable power portfolio.
Dream Unlimited Corp. – December 31, 2020 | 11
Over the next five years, an additional 2.3 million sf of residential GFA and 0.8 million sf of commercial/retail GLA will be added to our recurring income
segment (at the project level). Details of projects we expect to be completed during this time period include the following:
Dream
ownership(1)
Total residential
units(2)
Residential GFA(2)
(at 100%)
Commercial and retail
GLA(2) (at 100%)
Committed
occupancy
Occupancy
date
Project/Property
357 Bay Street
1900 Sherwood Place
Brighton Village Rental 1
Brighton Village Rental 2
Brightwater I and II
WDL Block 8
Canary Block 10 - Rental
WDL Block 3/4/7
Zibi
Block 2-3
Block 211
Block 208
Block 10
Block 206
Block 207
Block 11
Entity
Dream Office REIT
Dream Office REIT
Dream
Dream
Dream/Dream Impact
Dream/Dream Impact
Dream/Dream Impact
Dream/Dream Impact
Dream/Dream Impact
Dream/Dream Impact
Dream/Dream Impact
Dream/Dream Impact
Dream/Dream Impact
Dream/Dream Impact
Dream/Dream Impact
31.6%
31.6%
100.0%
100.0%
31.0%
33.3%
33.3%
33.3%
89.0%
89.0%
89.0%
89.0%
89.0%
89.0%
89.0%
—
—
121
132
—
770
239
855
—
—
—
162
198
—
126
—
—
81,000
112,000
—
623,000
200,000
830,000
—
—
—
147,000
166,000
—
116,000
2,275,000
65,000
210,000
—
13,000
110,000
4,000
—
39,000
55,000
185,000
34,000
1,500
14,000
90,000
5,000
100.0%
100.0%
12.4%
33.0%
81.2%
86.0%
79.8%
2021
2021
2021
2022-2023
2023
2023
2024
2025
2021
2021
2022
2022
2023
2023
2023
825,500
74.6%
Total
(1) Dream and Dream Impact Trust holdings at fully consolidated ownership. Dream Office REIT at 31.6% ownership as of December 31, 2020.
2,603
(2) Residential units, GLA and GFA are at 100% project level and include planned units. Planned residential units may be developed as condominium units or purpose-built rentals as supported by market demand, targeted studies
and return objectives.
Development
An overview of our development segment by geography is included below.
Urban Development - Toronto & Ottawa
Our urban development assets are comprised of exceptional development opportunities in various planning and construction phases across Toronto &
Ottawa and are comprised of condominium, purpose-built rental and mixed-use developments. 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. In addition,
through our equity ownership in Dream Impact Trust and Dream Office REIT, we have indirect investments in high-quality assets located in the GTA with
significant redevelopment potential.
Over the last five years, we have significantly expanded our investment pipeline in this segment. A number of these investments were acquired on a
25%/75% basis with Dream Impact Trust 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. Refer to the "Summary of Dream's Assets and Holdings" section of this
MD&A for a comprehensive overview of our Development holdings.
The developments that we hold today do not require a significant amount of capital and are financed primarily through project-specific debt including both
land loans and construction financing, providing us with additional financial flexibility. 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.
Development margin from these assets is earned in periods where we have inventory available for occupancies in condominium or investment properties.
With the repositioning of our development portfolio away from Western Canada to the GTA, we anticipate a larger proportion of our income to be derived
from this segment in future years.
As at December 31, 2020, our GTA and Ottawa pipeline across the Dream portfolio is comprised of over 19,500 residential units and approximately 4.0
million sf of commercial/retail GLA.
Dream Unlimited Corp. – December 31, 2020 | 12
We develop or co-develop all of the projects below with exceptional partners:
Project
Distillery District
Riverside Square and other mixed-use developments
Canary District - Blocks 12 and 13
Zibi
Lakeshore East
Brightwater
Frank Gehry
West Don Lands
100 Steeles Avenue West
Canary District - Block 10
Dream/Dream Impact
Ownership Interest %
50%
32.5%-50%
50%
89%
50%
31%
33%
33%
50%
33%-50%
Project Inception
2004
2007
2011
2014
2016
2017
2017
2018
2018
2019
Western Canada Community Development
Dream’s Western Canada community development is comprised of land, housing, multi-family and retail/commercial assets within our master-planned
communities in Saskatchewan and Alberta. We currently own approximately 9,200 acres of land in Western Canada, of which nearly 8,600 acres are in nine
large master-planned communities at various stages of approval. With our land bank, 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. As
at December 31, 2020, our Western Canada pipeline across the Dream portfolio is comprised of 253 purpose-built rental units and 0.6 million sf of
commercial/retail GLA.
Building on our own 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. With continued challenging market conditions in Western Canada and the impact of COVID-19 on global oil demand, we are closely monitoring
the fair values of our investment properties under development, customer demand, pricing trends and inventory supply across the division. Nevertheless,
we expect that we will generate profits from building on our own land in the future upon market stabilization.
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 multi-family development is financed through project-specific construction financing.
With the intent of diversifying our business, over the last few years we have focused on repatriating capital out of Western Canada and redeploying
proceeds to our Toronto developments.
Selected Segment Key Operating Metrics
(in thousands of dollars, except unit and acre amounts)
DIRECTLY OWNED
Revenue
Gross margin
Net margin
Fair value change on investment properties
Condominium occupancy units (project level) - Toronto & Ottawa
Condominium occupancy units (Dream's share) - Toronto & Ottawa
Acres sold - Western Canada
EQUITY ACCOUNTED INVESTMENTS
Share of earnings from equity accounted investments
Condominium occupancy units (project level) - Toronto & Ottawa
Condominium occupancy units (Dream's share) - Toronto & Ottawa
For the three months ended December 31,
2019
2020
For the year ended December 31,
2019
2020
$
28,881 $
5,700
648
322
2
2
5
74,083
(3,189)
(11,659)
(2,274)
229
77
11
$
255,394 $
77,932
51,683
1,651
421
190
525
$
20,499 $
—
—
$
11,643
62
28
16,893 $
133
67
149,288
16,180
(16,216)
722
395
136
16
30,326
626
111
Dream Unlimited Corp. – December 31, 2020 | 13
Results of Operations
In the three months ended December 31, 2020, we generated revenue and net margin of $28.9 million and $0.6 million, respectively, compared to revenue
of $74.1 million and negative net margin of $11.7 million in the comparative period. Results for the three and twelve months ended December 31, 2019
included a $23.2 million writedown of land held for development in Regina. Excluding the impact of the prior period writedown, reduced results were
driven by fewer lot and acre sales in Western Canada and prior period occupancies at Riverside Square and BT Towns, with limited occupancies in the
current quarter.
In the year ended December 31, 2020, revenue and net margin increased by $106.1 million and $67.9 million, respectively, from the prior year. These
increases were primarily driven by acre sales in Western Canada, including the sale of a 73% interest in our 480-acre land in Glacier Ridge, as well as
condominium unit occupancies at Riverside Square, BT Towns and Kanaal at Zibi. Prior period results include the aforementioned land writedown in
Regina. The sale of our 73% interest in Glacier Ridge generated revenue and net margin of $82.6 million and $43.9 million in the first quarter of 2020,
respectively. The Company sold an additional 13% interest in Glacier Ridge in the fourth quarter of 2020 for proceeds of $4.9 million.
Earnings from equity accounted investments for the three and twelve months ended December 31, 2020 were $20.5 million and $16.9 million,
respectively, driven by fair value gains on an equity accounted investment property and a one-time gain triggered by a project-level debt extinguishment.
In the year ended December 31, 2020, land and condominium inventory decreased by $53.7 million and $42.8 million, respectively, as a result of the
aforementioned land sales and occupancies, in addition to transfers of certain Zibi blocks to investment properties under development. This was partially
offset by spend across our active developments. Over the same period, equity accounted investments increased by $54.1 million primarily as a result of
increasing our interest in the Frank Gehry development to 33% as at December 31, 2020.
Minimal condominium occupancies are expected in 2021. Our development team remains focused on building out our exceptional development pipeline,
including Phase 2 of Riverside Square, Canary Commons, Brightwater I and II and West Don Lands Block 8 which are expected to occupy between 2022 to
2023; however, as the development manager for our projects, we are able to adjust, in real-time, should adverse changes to the market arise.
Active Projects
Zibi
In the three months ended December 31, 2020, vertical construction at Zibi continued on all active blocks. 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), over 2 million sf of commercial space
and 8 acres of riverfront parks and plazas. Zibi will be one of Canada's most sustainable communities and the country's first "One Planet Master-Planned
Community". In partnership with Hydro Ottawa, we are developing the District Thermal Energy System, the first post-industrial waste heat recovery
system in a master-planned community in North America, which will provide net-zero heating and cooling for all tenants, residents and visitors at Zibi.
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 and is fully occupied. 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. Vertical construction on the second phase commenced in late 2020 with first occupancies expected in 2022.
Downtown Toronto's East End
In the year ended December 31, 2020, Canary Block, our first condominium building on our Stage 2 Canary lands, completed unit occupancies. The Canary
District is developed in a 50/50 partnership with Kilmer Van Nostrand Co. Ltd. and is located in downtown Toronto’s east end. Construction is ongoing at
Canary Commons (Block 12), a 401-unit condominium building, and Block 8, the first building in our purpose-built rental community in the West Don Lands
neighbourhood. Block 8 will comprise 770 rental units, of which 30% are affordable, with first occupancies expected in 2023. Construction on West Don
Lands Block 3/4/7 is expected to commence in mid-2021. This block will add an additional 855 rental units (30% affordable), with initial occupancies
planned for 2025. This area is a significant development hub for Dream, as it includes the 35-acre Canary District, the adjacent West Don Lands and
Distillery District development assets, in addition to the future Lakeshore East site.
Brightwater
Brightwater is a 72-acre waterfront property for development in Mississauga's Port Credit area, with plans to transform the site into a complete, vibrant
and diverse waterfront community. The site is expected to be redeveloped into a large master-planned residential/mixed-use community. Highlights of the
draft master plan proposal include nearly 3,000 residential units and 400,000 sf of retail and commercial space. The source remediation program is
complete and vertical construction is expected to commence in 2021 on the project's first residential buildings, which are fully pre-sold as of December 31,
2020.
Other Items
Interest Expense
In the three and twelve months ended December 31, 2020, interest expense decreased by $5.6 million and $18.1 million, respectively, from the
comparative periods primarily due to a decline in interest rates, the redemption of Dream's Series 1, preference shares, and lower corporate debt levels.
Dream Unlimited Corp. – December 31, 2020 | 14
General and Administrative Expenses
In the three and twelve months ended December 31, 2020, general and administrative expenses were $3.8 million and $16.7 million, down from $6.6
million and $24.3 million, respectively, in the comparative periods largely due to government assistance received through the Canadian Emergency Wage
Subsidy in the current year, as well as a reduction in Dream Impact Trust's deferred unit incentive plan liability, as a result of a decrease in Dream Impact
Trust's unit price from $7.75 as at December 31, 2019 to $6.03 as at December 31, 2020. Included in general and administrative expenses for the three and
twelve months ended December 31, 2020 was government assistance received of $1.5 million and $3.6 million, respectively.
Income Tax Expense
The Company's effective income tax (recovery) rate was (3.6%) and 19.2% for the three months and year ended December 31, 2020 (three months and
year ended December 31, 2019 – 23.1% and (22.4%)). The effective income tax rate for the three months and year ended December 31, 2020 is different
than the statutory combined federal and provincial tax rate of 26.1% 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 objectives in managing our capital are 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. There have been no
material changes in future contractual obligations since December 31, 2020.
A summary of our working capital and financial assets and liabilities as at December 31, 2020 and December 31, 2019 is presented below. Project-specific
inventory and debt balances are excluded from the table below as the sale of inventory funds the repayment of project-specific construction facilities and
cash flow from investment properties is used to fund regular payments on mortgages and term debt.
December 31, 2020
December 31, 2019
Cash and cash equivalents
$
185,121 $
— $
Less than 12
months
Greater than
12 months
Non-
determinable
180,039
24,302
9,497
20,851
112,947
13,751
Total
185,121 $
200,890
137,249
23,248
Less than 12
months
Greater than
12 months
Non-
determinable
Total
388,521 $
— $
— $
388,521
164,105
11,365
51,216
38,053
118,091
13,489
—
—
—
202,158
129,456
64,705
— $
—
—
—
Accounts receivable
Other financial assets(1)
Lending portfolio
Equity accounted investment in Dream
Office REIT
Subtotal assets
Accounts payable and accrued liabilities
Income and other taxes payable
Provision for real estate development costs
Corporate debt facilities
Dream Impact Trust units
Subtotal liabilities
Net excess (deficiency)
—
—
398,959
147,549
476,686
476,686
476,686
1,023,194
—
—
615,207
169,633
433,373
433,373
433,373
1,218,213
120,480
58,091
31,040
—
—
35,531
42,824
198,835
—
—
202,452
—
—
—
—
289,330
58,091
31,040
202,452
289,330
209,611
237,983
$
189,348 $
(90,434) $
332,154
144,532 $
779,748
243,446 $
23,289
50,243
132,748
154,361
36,853
—
—
—
—
224,105
—
323,962
247,394
—
—
—
411,078
461,321
206,280
154,361
36,853
224,105
411,078
1,032,677
291,245 $
(77,761) $
(27,948) $
185,536
(1) Other financial assets as at December 31, 2020 excludes $40.0 million in project-specific investment holdings (December 31, 2019 – $nil).
As at December 31, 2020, 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. As at December 31, 2020, we had $426.1 million in
corporate-level cash and available under our revolving credit facilities.
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, 2020, on a consolidated basis, we had $185.1 million in cash and cash
equivalents (December 31, 2019 – $388.5 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. As at December 31, 2020, our debt maturing in 2020 is project-specific and is expected to
be funded through proceeds from condominium unit closings. 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.
Dream Unlimited Corp. – December 31, 2020 | 15
Debt
As at December 31, 2020, total debt was $755.9 million (December 31, 2019 – $699.0 million). A breakdown of project-specific and corporate debt facilities
is detailed in the table below.
(in thousands of Canadian dollars)
Operating line - Western Canada
Construction loans
Mortgages and term debt
Total project-specific debt
Non-revolving term facility
Margin facility
Operating line - Dream Impact Trust
Total corporate debt facilities
Total debt
Debt to total assets ratio(1)
December 31, 2020
December 31, 2019
December 31, 2020
December 31, 2019
Balance
Weighted average interest rate
$
$
$
$
$
— $
221,952
331,472
553,424 $
202,452 $
—
—
202,452 $
755,876 $
26.6%
—
217,341
257,509
474,850
224,105
—
—
224,105
698,955
23.0%
2.98%
3.17%
3.57%
3.41%
2.99%
2.98%
2.45%
2.99%
3.30%
4.64%
4.79%
4.23%
4.41%
5.08%
4.56%
3.95%
5.08%
4.63%
(1) Debt to total assets ratio is a non-IFRS measure. Refer to the "Non-IFRS Measures" section of this MD&A for further details.
As at December 31, 2020, $285.9 million (December 31, 2019 – $195.8 million) of aggregate development loans and term debt were subject to a fixed,
weighted average interest rate of 3.47% (December 31, 2019 – 4.08%) and will mature between 2021 and 2030. A further $470.0 million (December 31,
2019 – $503.2 million) of real estate debt was subject to a weighted average variable interest rate of 3.19% (December 31, 2019 – 4.91%) and will mature
between 2021 and 2023. Included within total debt is $178.7 million of variable debt that the Company has hedged through fixed interest rate swaps.
Contractual Obligations
Our liquidity is impacted by contractual debt and lease commitments as follows:
Project-specific debt(1)
Corporate debt facilities(1)
Lease commitments
2021
257,411 $
—
1,469
258,880 $
2022
107,402 $
202,452
1,097
310,951 $
$
$
2023
2024
2025
2026 and
thereafter
24,060 $
—
1,071
25,131 $
9,487 $
—
1,124
10,611 $
60,656 $
—
1,106
61,762 $
94,408 $
—
6,880
101,288 $
Total
553,424
202,452
12,747
768,623
(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 of
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, 2020,
there were 43,454,572 Subordinate Voting Shares and 1,557,356 Class B Shares outstanding (December 31, 2019 - 51,101,471 Subordinate Voting Shares
and 1,557,389 Class B Shares).
Including the Subordinate Voting Shares of Dream and Class B Shares held or controlled directly or indirectly, the President and Chief Responsible Officer
("CRO") owned an approximate 41% economic interest and 87% voting interest in the Company as at December 31, 2020.
Share Repurchases
The Company renewed its NCIB, which commenced on September 21, 2020, under which the Company has the ability to purchase for cancellation up to a
maximum number of 2,604,395 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 25,412 shares, except where purchases are made in accordance with block purchase
exemptions under applicable TSX rules.
In connection with the renewal of the NCIB, 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 NCIB 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 20,
2021.
In the year ended December 31, 2020, the Company completed a SIB and purchased for cancellation 5.0 million Subordinate Voting Shares at a price of
$23.50 per share for aggregate proceeds of $117.5 million. In addition, in the year ended December 31, 2020, 2.7 million Subordinate Voting Shares were
purchased for cancellation by the Company under its NCIB at an average price of $19.45, respectively (year ended December 31, 2019 – 1.0 million
Subordinate Voting Shares at an average price of $16.14).
Dream Unlimited Corp. – December 31, 2020 | 16
Subsequent to the year ended December 31, 2020, the Company repurchased for cancellation an additional 0.9 million Subordinate Voting Shares at a
total purchase price of $18.6 million.
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 35 of the consolidated financial statements for the year ended December 31, 2020.
Transactions with Related Parties
The Company has agreements for services and transactions with related parties, which are outlined in Note 36 of our consolidated financial statements for
the year ended December 31, 2020.
Critical Accounting Estimates
The preparation of the consolidated financial statements in accordance with IFRS requires the Company to make judgments in applying its accounting
policies, 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 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 revenues and expenses that are not readily apparent from other sources. Actual results may differ from those estimates under
different assumptions or conditions. A detailed summary of the most significant accounting judgments, estimates and assumptions 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,
2020.
Internal Control over Financial Reporting
As at December 31, 2020 financial year-end, the President and Chief Responsible Officer and the Chief Financial Officer (the "Certifying Officers"), 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, 2020, 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, 2020.
There were no changes in the Company's internal control over financial reporting in the year ended December 31, 2020 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
Refer to Note 3 of the consolidated financial statements for the year ended December 31, 2020 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, 2020. 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 3 of the consolidated financial statements for the year ended December 31, 2020.
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 was effective on
January 1, 2020 and applies to the Company's future business combinations.
Dream Unlimited Corp. – December 31, 2020 | 17
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, 2020 and our
most recent Annual Information Form filed on SEDAR (www.sedar.com). For a discussion of the risks and uncertainties identified specific to Dream Impact
Trust, published under the former name of Dream Hard Asset Alternatives Trust, please refer to the Dream Impact Trust Annual Report for the year ended
December 31, 2020 and the most recent Annual Information Form filed by Dream Impact Trust 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’ consent 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, 2020 | 18
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 ventures or partnerships.
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, 2020, 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.
In addition to our holdings in Saskatchewan and Alberta, a substantial portion of the projects in our Development segment are located in and around the
GTA and we have invested significantly in this region through both our Development segment and our investment in Dream Office REIT and Dream Impact
Trust, 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, 2020 | 19
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.
Dream Unlimited Corp. – December 31, 2020 | 20
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
on our investments of our own capital in our funds as a result of poor performance by our funds. Terminations 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 terminations 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 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 terms 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.
Dream Unlimited Corp. – December 31, 2020 | 21
Other Applicable Risk
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.
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 cyberattacks.
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, Chief Financial Officer, Vice-Chair, Development, 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.
Impact Investment Strategy Risk
In light of Dream Impact Trust’s new impact investment strategy, Dream Impact Trust will be adopting new objectives and deploying its capital into new
impact investment opportunities that are intended to align with Dream Impact Trust’s three impact verticals. Dream Impact Trust's ability to achieve its
investment objectives and to continue to pay distributions to us will be dependent on Dream Impact Trust's ability to successfully identify and realize on
investment opportunities that align with their investment framework. There can be no assurance that they will achieve these objectives or that its impact
investments or developments will generate positive returns in a timely manner. In addition, Dream Impact Trust will be creating their own impact investing
framework, which it believes will be aligned with existing frameworks in this field. However, these may or may not be interpreted differently from other
Dream Unlimited Corp. – December 31, 2020 | 22
issuers or other participants in the impact investing space. While Dream Impact Trust intends to responsibly create positive social and environmental
change in its communities, the success of its impact investment strategy and its ability to generate market returns will be based on various and
unpredictable factors, including investor perceptions and reactions and future economic or investment conditions.
Adverse Global Market, Economic and Political Conditions, Health Crises
Adverse Canadian, U.S., European and global market, economic and political conditions, including dislocations and volatility in credit markets and general
global economic uncertainty, could have a material adverse effect on our business, results of operations and financial condition with the potential to
impact, among others: (i) the value of our properties; (ii) the availability or the terms of financing that we have or may anticipate utilizing; (iii) our ability to
make principal and interest payments on, or refinance any outstanding debt when due; (iv) the occupancy rates in our properties; and (v) the ability of our
tenants to enter into new leasing transactions or to satisfy rental payments under existing leases.
In late 2019, the novel coronavirus (COVID-19) was reported and subsequently spread around the world, with resulting business and social disruption. On
March 11, 2020, the World Health Organization declared this outbreak a global pandemic. Public health crises, pandemics and epidemics, such as those
caused by new strains of viruses such as H5N1 (avian flu), severe acute respiratory syndrome (SARS) and, most recently, COVID-19, could, particularly if
prolonged, adversely impact our and our customers’ businesses, and thereby our and our customers’ ability to meet payment obligations, by disrupting
supply chains and transactional activities, causing reduced traffic at our properties, leading to mobility restrictions and other quarantine measures,
precipitating increased government regulation and negatively impacting local, national or global economies. Contagion in one of our properties or markets
or the quarantine of one of our properties could negatively impact our reputation, the reputation of our customers and the attractiveness of that market.
All of these factors may have a material adverse effect on our business, results of operations and our ability to pay cash dividends to shareholders.
The speed and extent of the spread of COVID-19, and the duration and intensity of resulting business disruption and related financial and social impact, are
uncertain, and such adverse effects may be material. Efforts to slow the spread of COVID-19 could severely impact the operation of our businesses,
properties and development projects. To date, a number of governments have declared states of emergency and have implemented restrictive measures
such as travel bans, quarantine and self-isolation. The Company is unable to accurately predict the impact that COVID-19 will have on its results of
operations, due to uncertainties including the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and
actions that may be taken by governmental authorities to contain COVID-19 or to treat its impact. While governmental agencies and private sector
participants will seek to mitigate the adverse effects of COVID-19, and the medical community is seeking to develop vaccines and other treatment options,
the efficacy and timing of such measures remains uncertain. If the outbreak of COVID-19 and related developments lead to a prolonged or significant
impact on global, national or local markets or economic growth, the Company’s cash flows, financial condition or results of operations and our ability to
pay cash dividends to shareholders may be materially and adversely affected.
Furthermore, the outbreak of COVID-19 may affect our and our customers’ businesses by disrupting supply chains and transactional activities. Many of the
Company’s customers rely on third-party suppliers and manufacturers, many of which are located outside of Canada. This outbreak has resulted, or may
result, in the extended shutdown of certain businesses, which may in turn result in disruptions, delays or reductions to our and our customers’ supply
chains. These may include disruptions from the temporary closure of third-party supplier and manufacturer facilities, interruptions in supply or restrictions
on the export, import or shipment of products, including those sourced from China, Europe or the United States The outbreak of COVID-19 may also
negatively impact consumer demand for our and our customers’ products or services as well as consumer spending, which may negatively impact our
business or the business of our customers. These factors may impact our customers’ ability to meet their payment and other obligations due to the
Company, which could have a material adverse effect on Dream.
Finally, the actual and threatened spread of COVID-19 globally could adversely affect global economies and financial markets resulting in a prolonged
economic downturn and a decline in the value of the Subordinate Voting Share price. The extent to which COVID-19 (or any other disease, epidemic or
pandemic) impacts business activity or financial results, and the duration of any such negative impact, will depend on future developments, which are
highly uncertain and cannot be predicted, including new information which may emerge concerning COVID-19 and the actions required to contain or treat
its impact, among others.
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 the COVID-19 pandemic and resulting disruptions; anticipated levels of development,
asset management and other management fees in future periods; the expansion of our asset management business; expectations that recurring income
generating assets will increase over time; our development plans and proposals for current and future projects, including projected sizes, density,
timelines, uses and tenants; the redevelopment potential of our assets and the assets held by Dream Office REIT and Dream Impact Trust; anticipated
current and future unit sales and occupancies of our condominium and mixed-use projects, including anticipated timing of closings of condominium unit
sales, and resulting revenue and debt repayments; the contribution of our development segment to our earnings in future periods and the proportion of
our income to be derived from this segment in future years; the total residential units at completion of our development projects, their anticipated
occupancy/stabilization date and our future GLA under development; expectations that distributions from Dream Office REIT and Dream Impact Trust may
increase over time; expectations of future profit contributions from Western Canada and our rate of investment in this division in the future; our
acquisition and development pipeline; the sustainability rating of Zibi upon completion and Zibi becoming the first One Planet community in Canada; the
District Thermal Energy System providing net-zero heating and cooling for all tenants, residents and visitors at Zibi; expectations that our private equity
portfolio will grow in 2021; expectations regarding a $250 million capital raise for our private open-ended impact fund, including the expectation that
Dream Unlimited Corp. – December 31, 2020 | 23
Dream will have over $700 million of assets under management committed to impact investing after the first close of the private impact fund; the
expectation that the first occupancies of Phase 2 of Riverside Square will take place in 2022; the expectation that our income generating assets will grow
over time; our expected sources of funding of current liabilities, short-term liquidity requirements, operating expenses and debt service requirements; 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", "target' 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 licences, 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; and 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, the impact of the COVID-19 pandemic on the Company and uncertainties surrounding the COVID-19 pandemic, including government measures
to contain the COVID-19 pandemic, employment levels, regulatory risks, mortgage rates and regulations, environmental risks, consumer confidence,
seasonality, adverse weather 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 23, 2021. 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.
Dream Unlimited Corp. – December 31, 2020 | 24
Additional Information - Consolidated Dream
Segmented Assets and Liabilities
Recurring
income
Development
Corporate and
other
Consolidated
Dream
Less: Dream
Impact Trust(1)
December 31, 2020
Less:
Consolidation
and fair value
adjustments(1)
Dream
standalone(1)
Assets
Cash and cash equivalents
$
13,136 $
21,630 $
Accounts receivable
Other financial assets(2)
Lending portfolio
Housing inventory
Condominium inventory
Land inventory
Investment properties
Recreational properties
Equity accounted investments
Capital and other operating assets
Intangible asset
Total assets
Liabilities
Accounts payable and other liabilities
Income and other taxes payable(3)
Provision for real estate development costs
Debt
Dream Impact Trust units(3)
Deferred income taxes(3)
Total liabilities
Non-controlling interest
Shareholders' equity
Total equity
15,205
41,240
23,248
—
—
764
426,632
60,560
531,113
6,973
—
179,257
135,989
—
29,195
248,506
484,074
193,240
—
231,539
37,494
—
150,355 $
6,428
185,121 $
200,890
—
—
—
—
—
—
—
—
7,795
—
177,229
23,248
29,195
248,506
484,838
619,872
60,560
762,652
52,262
—
110,671 $
1,306
73,662
23,248
—
—
—
213,352
—
3,840 $
(1,345)
(94,306)
—
—
17,190
—
15,496
—
224,390
(59,738)
1,885
—
417
(43,000)
(161,446) $
70,610
200,929
197,873
—
29,195
231,316
484,838
391,024
60,560
598,000
49,960
43,000
2,357,305
$
1,118,871 $
1,560,924 $
164,578 $
2,844,373 $
648,514 $
$
39,879 $
141,031 $
17,925 $
198,835 $
12,055 $
30,905 $
155,875
—
—
273,395
—
—
—
31,040
280,029
—
—
58,091
—
202,452
289,330
104,589
58,091
31,040
755,876
289,330
104,589
7
—
88,195
—
8,380
—
—
—
289,330
17,077
58,084
31,040
667,681
—
79,132
313,274 $
452,100 $
672,387 $
1,437,761 $
108,637 $
337,312 $
991,812
— $
14,966 $
— $
14,966 $
— $
(62,775) $
77,741
805,597
1,093,858
(507,809)
1,391,646
539,877
(435,983)
1,287,752
805,597 $
1,108,824 $
(507,809) $
1,406,612 $
539,877 $
(498,758) $
1,365,493
$
$
$
(1) Refer to the "Non-IFRS Measures" section of this MD&A for the definition of Dream Impact Trust, consolidation and fair value adjustments and Dream standalone.
(2) Other financial assets on a Dream standalone basis includes the Company's investment in Dream Impact Trust of $93.8 million, which is eliminated on a consolidated basis.
(3) Certain liabilities are included in Corporate and other as balances are reviewed on a consolidated basis.
Dream Unlimited Corp. – December 31, 2020 | 25
Assets
Cash and cash equivalents
$
11,518 $
31,327 $
345,676 $
388,521 $
117,787 $
1,244 $
Recurring
income
Development
Corporate and
other
Consolidated
Dream
Less: Dream
Impact Trust(1)
December 31, 2019
Less:
Consolidation
and fair value
adjustments(1)
Dream
standalone(1)
11,093
—
64,705
—
—
786
419,991
48,779
520,284
6,956
—
49,089
188,555
129,456
—
38,607
291,304
537,785
98,433
—
188,556
42,350
—
—
2,510
—
—
—
—
—
—
—
—
6,273
—
—
202,158
129,456
64,705
38,607
291,304
538,571
518,424
48,779
708,840
55,579
—
49,089
4,179
119,887
64,705
—
—
—
201,624
—
186,713
1,188
—
—
(2,240)
(94,249)
—
—
15,129
—
15,786
—
(41,651)
8,196
(43,000)
—
269,490
200,219
103,818
—
38,607
276,175
538,571
301,014
48,779
563,778
46,195
43,000
49,089
$
1,133,201 $
1,546,373 $
354,459 $
3,034,033 $
696,083 $
(140,785) $
2,478,735
$
52,413 $
136,154 $
17,713 $
206,280 $
35,087 $
22,926 $
—
—
203,450
—
—
—
154,361
36,853
271,400
—
—
—
224,105
411,078
93,897
154,361
36,853
698,955
411,078
93,897
(58)
—
88,988
—
4,515
—
—
24
411,078
6,985
148,267
154,419
36,853
609,943
—
82,397
$
$
$
255,863 $
444,407 $
901,154 $
1,601,424 $
128,532 $
441,013 $
1,031,879
— $
21,649 $
— $
21,649 $
— $
(43,297) $
64,946
877,338
1,080,317
(546,695)
1,410,960
567,551
(538,500)
1,381,910
877,338 $
1,101,966 $
(546,695) $
1,432,609 $
567,551 $
(581,797) $
1,446,856
Accounts receivable
Other financial assets(2)
Lending portfolio
Housing inventory
Condominium inventory
Land inventory
Investment properties
Recreational properties
Equity accounted investments
Capital and other operating assets
Intangible asset
Assets held for sale(4)
Total assets
Liabilities
Accounts payable and other liabilities
Income and other taxes payable(3)
Provision for real estate development costs
Debt(4)
Dream Impact Trust units(3)
Deferred income taxes(3)
Total liabilities
Non-controlling interest
Shareholders' equity
Total equity
(1) Refer to the "Non-IFRS Measures" section of this MD&A for the definition of Dream Impact Trust, consolidation and fair value adjustments and Dream standalone.
(2) Other financial assets on a Dream standalone basis includes the Company's investment in Dream Impact Trust of $93.8 million, which is eliminated on a consolidated basis.
(3) Certain liabilities are included in Corporate and other as balances are reviewed on a consolidated basis.
(4) Debt associated with assets held for sale totalling $30.1 million is classified as current within debt as at December 31, 2019.
Dream Unlimited Corp. – December 31, 2020 | 26
Segmented Statement of Earnings (Loss)
For the three months ended December 31, 2020
Recurring
income
Development
Corporate and
other
Less: Dream
Impact Trust(1)
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(2)
Adjustments related to Dream Impact Trust
units(3)
Income tax expense(2)
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
Net gain on disposition of Dream Global REIT
Loss on disposition of assets held for sale
Fair value changes in financial instruments
Share of earnings from equity accounted
investments
Net segment earnings (loss)
General and administrative expenses(2)
Adjustments related to Dream Impact Trust
units(3)
Income tax expense(2)
Net earnings (loss)(3)
Consolidated
Dream
48,639 $
(36,672)
11,967
Less:
Consolidation
and fair value
adjustments(1)
4,634 $
(2,036)
2,598
(1,518) $
(337)
(1,855)
(6,722)
5,245
6,411
1,401
(5,675)
(3,397)
28,796
32,781
(3,832)
—
2,598
10,165
186
(832)
(3,411)
13,541
22,247
(3,325)
(301)
(2,156)
(72)
(172)
87
—
813
(1,500)
1,619
— $
—
—
—
—
—
346
(2,808)
—
—
(2,462)
(3,832)
$
19,758 $
28,881 $
(13,491)
(23,181)
6,267
5,700
(1,670)
(5,052)
648
322
1,004
(190)
(3,411)
20,499
18,872
—
4,597
6,089
51
(2,677)
14
8,297
16,371
—
—
—
$
16,371 $
—
—
18,872 $
(60,130)
(1,134)
(67,558) $
(60,130)
(1,134)
(32,315) $
—
(4,054)
14,868 $
(60,130)
6,129
(53,882) $
Recurring
income
Development
Corporate and
other
Consolidated
Dream
Less: Dream
Impact Trust(1)
Less:
Consolidation
and fair value
adjustments(1)
$
309,277 $
74,083 $
— $
383,360 $
9,383 $
(2,023) $
For the three months ended December 31, 2019
(19,993)
289,284
(1,832)
287,452
49,711
131
(3,634)
135,474
(8,515)
3,468
29,522
493,609
—
—
—
(77,272)
(3,189)
(8,470)
(11,659)
(2,274)
521
(1,729)
—
—
(1,054)
11,643
(4,552)
—
—
—
—
—
—
—
—
175
(5,889)
—
—
125
—
(5,589)
(6,573)
(97,265)
286,095
(10,302)
275,793
47,437
827
(11,252)
135,474
(8,515)
2,539
41,165
483,468
(4,064)
5,319
—
5,319
21,119
830
(1,331)
—
—
(3,404)
8,685
31,218
(6,573)
(3,550)
(321)
(2,344)
—
(2,344)
(60)
(19)
24
—
(8,515)
—
1,498
(9,416)
2,402
$
493,609 $
(4,552) $
(139,866) $
349,191 $
25,868 $
(27,500) $
350,823
(18,566)
(18,566)
—
(109,138)
(109,138)
(1,800)
(18,566)
(1,920)
—
(105,418)
Dream
standalone(1)
45,523
(34,299)
11,224
(6,421)
4,803
(3,682)
1,387
(4,930)
14
14,442
12,034
(2,126)
—
(3,209)
6,699
Dream
standalone(1)
376,000
(92,880)
283,120
(10,302)
272,818
26,378
16
(9,945)
135,474
—
5,943
30,982
461,666
(5,425)
(1) Refer to the "Non-IFRS Measures" section of this MD&A for the definition of Dream Impact Trust, consolidation and fair value adjustments and Dream standalone.
(2) Certain line items are included in Corporate and other as balances are reviewed on a consolidated basis.
(3) Includes earnings attributable to non-controlling interest.
Dream Unlimited Corp. – December 31, 2020 | 27
Recurring
income
Development
Corporate and
other
Less: Dream
Impact Trust(1)
Recurring
income
Development
Corporate and
other
Consolidated
Dream
Less: Dream
Impact Trust(1)
Less:
Consolidation
and fair value
adjustments(1)
$
431,142 $
149,288 $
— $
580,430 $
52,229 $
(8,358) $
Revenue
Direct operating costs
Gross margin
$
92,229 $
255,394 $
(65,007)
(177,462)
27,222
77,932
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 (loss) from equity accounted
investments
Net segment earnings (loss)
General and administrative expenses(2)
Adjustments related to Dream Impact Trust
units(2)
Income tax expense(2)
Net earnings(3)
(6,585)
20,637
72
427
(9,706)
(2,949)
65,801
74,282
—
—
—
$
74,282 $
(26,249)
51,683
1,651
6,432
(3,189)
(1,981)
16,893
71,489
—
—
—
71,489 $
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 disposition of Dream Global REIT
Loss on disposition of assets held for sale
Share of earnings from equity accounted
investments
Net segment earnings (loss)
General and administrative expenses(2)
Adjustments related to Dream Impact Trust
units(2)
Income tax recovery (expense)(2)
Net earnings (loss)(3)
(83,088)
348,054
(133,108)
16,180
(6,842)
341,212
40,239
3,592
(17,672)
28,400
135,474
(8,515)
63,025
585,755
—
—
—
(32,396)
(16,216)
722
5,454
(6,776)
(4,844)
—
—
30,326
8,666
—
—
—
Consolidated
Dream
347,623 $
(242,469)
105,154
(32,834)
72,320
1,723
8,571
(23,841)
(4,930)
82,694
136,537
(16,681)
— $
—
—
—
—
—
1,712
(10,946)
—
—
(9,234)
(16,681)
77,764
(37,982)
13,867 $
77,764
(37,982)
159,638 $
—
(3,865)
16,339 $
For the year ended December 31, 2020
21,276 $
(9,265)
12,011
—
12,011
10,322
1,922
(3,284)
(4,863)
12,675
28,783
(8,579)
Less:
Consolidation
and fair value
adjustments(1)
(4,566) $
(1,474)
(6,040)
(469)
(6,509)
(364)
(132)
25
—
(8,101)
(15,081)
5,237
77,764
(10,092)
57,828 $
Dream
standalone(1)
330,913
(231,730)
99,183
(32,365)
66,818
(8,235)
6,781
(20,582)
(67)
78,120
122,835
(13,339)
—
(24,025)
85,471
For the year ended December 31, 2019
(17,455)
(41,903)
—
—
—
—
—
1,119
201
—
—
—
(16,135)
(24,348)
(216,196)
364,234
(18,158)
34,071
(39,238)
324,996
40,961
10,165
23,757
135,474
(8,515)
93,351
578,286
—
34,071
15,064
2,696
(8,470)
(7,194)
—
—
22,922
59,089
(24,348)
(16,455)
Dream
standalone(1)
536,559
(196,474)
340,085
(39,238)
300,847
26,367
7,029
(33,683)
30,951
135,474
—
68,545
535,530
(16,900)
(1,564)
(9,922)
—
(9,922)
(470)
440
250
—
—
(8,515)
1,884
(16,333)
9,007
$
585,755 $
8,666 $
(262,676) $
331,745 $
38,276 $
(109,023) $
402,492
(113,512)
(108,681)
(113,512)
(108,681)
—
(113,512)
—
(4,358)
11,815
(116,138)
(1) Refer to the "Non-IFRS Measures" section of this MD&A for the definition of Dream Impact Trust, consolidation and fair value adjustments and Dream standalone.
(2) Certain line items are included in Corporate and other as balances are reviewed on a consolidated basis.
(3) Includes earnings attributable to non-controlling interest.
Dream Unlimited Corp. – December 31, 2020 | 28
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
Operating activities
Earnings (losses) 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 (recovery)
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
Sale of condominium inventory, net of development
Advances on construction loans, net of repayments
Acquisition of land inventory
Fair value adjustment on Dream Impact Trust units
Development of land inventory, net of sales
Net cash flows (used in) provided by operating activities
Investing activities
Acquisitions and additions to investment properties and assets
held for sale
Acquisitions and additions to recreational properties and
renewable power assets, net
Investments in equity accounted investments
Contributions to equity accounted investments
Distributions and disposals of equity accounted investments
Disposal of investment properties
Acquisitions of financial assets and other assets
Distributions and disposals of financial assets and other assets
Proceeds on disposition of assets, net
Proceeds on disposition of asset management agreement and
other transaction costs, net
Loans receivable advances, net of 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
Advances from operating lines, net of repayments
Repayments of margin loan facility, net of advances
Repayments pursuant to non-revolving term facility
Advances from equity accounted investments
Contributions from non-controlling interest, net of
distributions
Dream Impact Trust units repurchased from other unitholders
Dividends paid
Repayments of lease obligations
Redemption of Preference shares, series 1
Shares repurchased
Net cash flows used in financing activities
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
For the three months ended December 31,
2019
2020
For the year ended December 31,
2019
2020
$
(32,315) $
349,191
$
159,638 $
331,745
549
(6,411)
(28,796)
(5,774)
4,941
—
—
55,272
—
1,549
(6,871)
(19,647)
—
55,320
1,610
19,427
(21,853)
(3,360)
—
10,232
12,001
—
(2,415)
8,070
46,330
—
(18,183)
13,462
44,284
10,797
(40,874)
—
—
—
595
—
(1,094)
(2,717)
(926)
—
(19,338)
(53,557)
10,154
174,967
185,121 $
1,974
(47,437)
(41,165)
7,053
21,140
8,515
(135,474)
63,168
—
4,495
20,000
24,673
—
13,260
13,237
302,630
(27,166)
(2,947)
(52,752)
(9,793)
4,107
(2,641)
8,499
71,158
101,236
133,127
127
71,822
294,777
(27)
(31,722)
(96,500)
(100,000)
—
3,599
2,519
—
(2,635)
(924)
(28,675)
(2,527)
(256,892)
340,515
48,006
388,521
$
7,119
(1,723)
(82,694)
11,223
(3,282)
—
—
(109,504)
(5,300)
12,848
23,488
4,603
—
(98,016)
(905)
(82,505)
(72,349)
(16,613)
(23,720)
(33,966)
106,023
—
(57,353)
61,470
46,330
—
(21,032)
41,986
30,776
131,431
(58,004)
—
—
(22,000)
6,815
—
(24,610)
(11,164)
(3,706)
—
(170,433)
(151,671)
(203,400)
388,521
185,121 $
9,456
(40,961)
(93,351)
(938)
(2,648)
8,515
(135,474)
85,866
(18,033)
21,558
(43,716)
39,305
(3,244)
90,931
7,059
256,070
(51,271)
(5,642)
(64,054)
(27,442)
21,912
—
(18,507)
111,026
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)
(3,694)
(28,675)
(16,478)
(233,402)
324,228
64,293
388,521
Dream Unlimited Corp. – December 31, 2020 | 29
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,
2019
2020
For the year ended December 31,
2019
2020
Western Canada
Alberta
British Columbia
Saskatchewan
Ontario
Quebec
Eastern Canada
Canada
United Kingdom
United States
Non-segmented (asset management)
Total
$
$
$
7,954
—
20,637
28,591
9,335
—
—
37,926
—
5,762
4,951
48,639
16.4% $
—%
42.4%
58.8% $
19.2%
—%
—%
78.0%
—%
11.8%
10.2%
100.0% $
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% $
116,168
983
61,810
178,961
119,168
946
—
299,075
—
24,217
24,331
347,623
33.4% $
0.3%
17.8%
51.5% $
34.2%
0.3%
—%
86.0%
—%
7.0%
7.0%
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%
19.3%
—%
0.8%
39.3%
0.5%
6.8%
53.4%
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,
2019
2020
For the year ended December 31,
2019
2020
Western Canada
Alberta
British Columbia
Saskatchewan
Ontario
Quebec
Eastern Canada
Canada
United Kingdom
United States
Non-segmented (asset management)
Total
$
$
$
1,572
—
1,066
2,638
1,319
106
—
4,063
—
(561)
1,743
5,245
30.0% $
—%
20.3%
50.3% $
25.2%
2.0%
—%
77.5%
—%
(10.7%)
33.2%
100.0% $
2,864
911
(17,747)
(13,972)
13,294
—
283
(395)
228
(1,263)
277,223
275,793
1.0% $
0.3%
(6.4%)
(5.1%) $
4.9%
—%
0.1%
(0.1%)
0.1%
(0.5%)
100.5%
100.0% $
46,999
983
6,401
54,383
16,621
154
—
71,158
—
(1,941)
3,103
72,320
65.0% $
1.4%
8.9%
75.3% $
23.0%
0.2%
—%
98.5%
—%
(2.7%)
4.2%
100.0% $
3,534
3,742
(19,480)
(12,204)
35,955
—
3,133
26,884
1,274
6,083
290,755
324,996
1.1%
1.2%
(6.0%)
(3.7%)
11.1%
—%
0.9%
8.3%
0.3%
1.9%
89.5%
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)
Dec 31,
2020
Sep 30,
2020
Jun 30,
2020
Mar 31,
2020
Dec 31,
2019
Sep 30,
2019
Jun 30,
2019
Mar 31,
2019
60,485 $
(4,653)
(0.11)
(0.11)
$
$
Revenue
Earnings (loss) for the period(1)
Basic earnings (loss) per share(1)
Diluted earnings (loss) per share(1)
(1) Per share amounts reflect the Share Consolidation for all periods presented.
48,639 $
(32,315)
(0.70)
(0.70)
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(1)
Diluted earnings per share(1)
Total assets
Total liabilities
Total equity
(1) Per share amounts reflect the Share Consolidation for all periods presented.
62,044 $
176,455 $
383,360 $
64,069 $
76,044 $
56,957
10,776
185,830
349,191
27,167
(11,089)
(33,524)
0.23
0.22
3.78
3.72
6.65
6.43
0.51
0.50
(0.22)
(0.22)
(0.62)
(0.62)
2020
347,623 $
197,620
159,638
159,221
3.37
3.31
2,844,373
1,437,761
1,406,612
2019
580,430 $
440,426
331,745
332,246
6.25
6.09
3,034,033
1,601,424
1,432,609
Year ended December 31,
2018
339,873
213,492
192,053
190,948
3.52
3.42
2,751,566
1,631,986
1,119,580
Dream Unlimited Corp. – December 31, 2020 | 30
Non-IFRS Measures
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 gross assets managed by the Company on behalf of its clients, investors or
partners under asset management agreements, development management agreements and/or management services agreements at 100% of the client's
total assets. All other investments are reflected at the Company's proportionate share of the investment's total assets without duplication. 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. Effective December 31, 2020, the Company has updated its
calculation methodology for assets under management and fee earnings assets under management. Management of the Company made this change as we
believe gross balances are a truer indicator of AUM and the size of our portfolio.
"Consolidation and fair value adjustments" represents certain IFRS adjustments required to reconcile Dream standalone and Dream Impact Trust results
to the consolidated results as at and for the year ended December 31, 2020 and 2019. Consolidation and fair value adjustments relate to business
combination adjustments on acquisition of Dream Impact Trust on January 1, 2018 and related amortization, elimination of intercompany balances
including the investment in Dream Impact Trust units, adjustments for co-owned projects, fair value adjustments to the Dream Impact Trust units held by
other unitholders, and deferred income taxes.
"Debt to total assets ratio" represents the Company's financial leverage and is calculated as debt as a percentage of total assets per the consolidated
financial statements. A reconciliation of the debt to total assets ratio can be found below.
Debt
Total assets
Debt to total assets ratio
$
December 31, 2020
December 31, 2019
$
755,876
2,844,373
26.6%
698,955
3,034,033
23.0%
"Dream standalone" represents the results of Dream, excluding the impact of Dream Impact Trust's consolidated results. Refer to the "Segmented Assets
and Liabilities" and "Segmented Statement of Earnings" sections of this MD&A for a reconciliation of Dream excluding Dream Impact Trust results to the
consolidated financial statements.
“Fee earning assets under management” represents assets under management that are managed under contractual arrangements that entitle the
Company to earn asset management revenue calculated as the total of: (i) 100% of the purchase price of client properties, assets and/or indirect
investments subject to asset management agreements; (ii) 100% of carrying value of gross assets of the underlying development project subject to
development management agreements; and (iii) 100% of carrying value of specific Dream Office REIT redevelopment properties subject to a development
management addendum under the shared services agreement with Dream Office REIT, without duplication.
“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.
“Net margin %” is an important measure of operating earnings in each business segment of Dream and represents net margin as a percentage of revenue.
“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 38 of the consolidated financial statements. Net operating income for the recurring income segment for
the year ended December 31, 2020 and 2019 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
Additional Information
For the three months ended December 31,
For the year ended December 31,
$
$
$
2020
19,758 $
(13,491)
(1,670)
4,597 $
1,196
474
6,267 $
2019
309,277 $
(19,993)
(1,832)
287,452 $
1,467
365
289,284 $
2020
92,229 $
(65,007)
(6,585)
20,637 $
4,740
1,845
27,222 $
2019
431,142
(83,088)
(6,842)
341,212
4,895
1,947
348,054
Additional information relating to Dream, including the Company's annual information form and consolidated financial statements and accompanying
notes, is available on SEDAR at www.sedar.com. The Subordinate Voting Shares trade on the TSX under the symbol “DRM”.
Dream Unlimited Corp. – December 31, 2020 | 31
Appendix - Supplemental Segmented Information
Recurring Income
Asset management
Stabilized properties
Arapahoe Basin
For the three months ended December 31, 2020
Dream Impact Trust &
consolidation and fair
value adjustments(1)
Total recurring income -
Dream consolidated
6,719 $
3,630
4,161 $
785
5,762 $
(561)
3,116 $
743
19,758
4,597
Asset management
Stabilized properties
Arapahoe Basin
For the year ended December 31, 2020
Dream Impact Trust &
consolidation and fair
value adjustments(1)
Total recurring income -
Dream consolidated
29,874 $
9,118
21,428 $
7,489
24,217 $
(1,941)
16,710 $
5,971
92,229
20,637
Asset management
Stabilized properties
Arapahoe Basin
288,214 $
283,590
6,261 $
2,150
7,442 $
(1,263)
Asset management
Stabilized properties
Arapahoe Basin
For the three months ended December 31, 2019
Dream Impact Trust &
consolidation and fair
value adjustments(1)
Total recurring income -
Dream consolidated
7,360 $
2,975
309,277
287,452
For the year ended December 31, 2019
Dream Impact Trust &
consolidation and fair
value adjustments(1)
Total recurring income -
Dream consolidated
319,741 $
300,585
28,198 $
10,395
39,332 $
6,083
43,871 $
24,149
431,142
341,212
$
$
$
$
Revenue
Net margin
Revenue
Net margin
Revenue
Net margin
Revenue
Net margin
(1) Dream Impact Trust, and consolidation and fair value adjustments are non-IFRS measures. Refer to the "Non-IFRS Measures" section of this MD&A for further details.
Development
Revenue
Net margin
Revenue
Net margin
Revenue
Net margin
Revenue
Net margin
Urban development
Western Canada
community development
For the three months ended December 31, 2020
Dream Impact Trust &
consolidation and fair
value adjustments(1)
Total development -
Dream consolidated
1,690 $
(1,524)
27,191 $
2,473
— $
(301)
28,881
648
Urban development
Western Canada
community development
For the year ended December 31, 2020
Dream Impact Trust &
consolidation and fair
value adjustments(1)
Total development -
Dream consolidated
87,318 $
2,631
168,076 $
49,521
— $
(469)
255,394
51,683
Urban development
Western Canada
community development
30,124 $
3,663
43,959 $
(15,322)
For the three months ended December 31, 2019
Dream Impact Trust &
consolidation and fair
value adjustments(1)
Total development -
Dream consolidated
— $
—
74,083
(11,659)
For the year ended December 31, 2019
Urban development
Western Canada
community development
Dream Impact Trust&
consolidation and fair
value adjustments(1)
Total development -
Dream consolidated
53,553 $
3,607
95,735 $
(19,823)
— $
—
149,288
(16,216)
$
$
$
$
(1) Dream Impact Trust, and consolidation and fair value adjustments are non-IFRS measures. Refer to the "Non-IFRS Measures" section of this MD&A for further details.
Dream Unlimited Corp. – December 31, 2020 | 32
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 as issued by the International Accounting Standards Board, 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 23, 2021
"Deborah Starkman"
Deborah Starkman
Chief Financial Officer
Dream Unlimited Corp. – December 31, 2020 | 33
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, 2020 and 2019, 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, 2020 and 2019;
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 significant accounting policies and
other explanatory information.
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.
PricewaterhouseCoopers LLP
PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2
T: +1 416 863 1133, F: +1 416 365 8215
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Dream Unlimited Corp. – December 31, 2020 | 34
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2020. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Valuation of investment properties
Refer to note 3 – Summary of significant accounting
policies, note 4 – critical accounting estimates,
judgments and assumptions and note 11 – investment
properties to the consolidated financial statements
The Company measures its investment properties at fair
value, and as at December 31, 2020, these assets were
valued at $620 million. Fair values of investment
properties are determined using valuations prepared by
management. One property was valued using the direct
comparison approach. The direct comparison approach
considered recent activity for similar
development/redevelopment sites. Fair values of the
remaining investment properties were calculated using
a discounted cash flow model plus a terminal value
based on the estimated cash flows in the final year.
Significant assumptions used in the discounted cash
flow model include estimates regarding the market
rents, discount rate and terminal capitalization rate.
Critical judgments are made in respect of the fair values
of investment properties by management.
We considered this a key audit matter due to: i)
significant audit effort required to assess the fair value
of investment properties; ii) critical judgments made by
management when determining the fair value including
the development of the significant assumptions, and; iii)
a high degree of complexity in assessing audit evidence
to support the significant assumptions made by
management. In addition, the audit effort involved the
use of professionals with specialized skill and
knowledge in the field of real estate valuations.
Our approach to addressing the matter included the
following procedures, among others:
For a sample of investment properties, tested how
management determined the fair value, which included
the following:
●
●
●
●
●
Evaluated the appropriateness of the valuation
methodology used (the direct comparison approach
or discounted cash flow model).
Tested the underlying data used in the discounted
cash flow model.
Evaluated the reasonableness of the estimated
future cash flows used in the discounted cash flow
model by comparing components of the year one
cash flows, such as contractual rents, to the
underlying accounting records.
Evaluated the reasonableness of the discount rate
and terminal capitalization rate by comparing to
external market and industry data.
Professionals with specialized skill and knowledge
in the field of real estate valuations further assisted
us:
For the investment property valued using the
direct comparison approach, in assessing the
transactions used by management and by
comparing to recent market transactions.
For the investment properties valued using the
discounted cash flow model, in evaluating the
reasonableness of the market rents, discount
rate and terminal capitalization rate by
comparing to externally available market data.
Dream Unlimited Corp. – December 31, 2020 | 35
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.
Dream Unlimited Corp. – December 31, 2020 | 36
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.
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.
Dream Unlimited Corp. – December 31, 2020 | 37
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.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Frank Magliocco.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
February 23, 2021
Dream Unlimited Corp. – December 31, 2020 | 38
Consolidated Statements of Financial Position
As at December 31, 2020 and 2019
(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
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
Dream Impact Trust units(1)
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
37
5
6
7
8
9
10
11
12
14
15
16
17
18
19
20
21
2, 22
32
24
$
$
$
$
2020
185,121
200,890
177,229
23,248
29,195
248,506
484,838
619,872
60,560
762,652
52,262
—
2,844,373
198,835
58,091
31,040
755,876
289,330
104,589
1,437,761
1,024,275
(944,577)
14,954
1,288,042
8,952
1,391,646
14,966
1,406,612
2,844,373
$
$
$
$
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
(1) Effective October 26, 2020 Dream Hard Asset Alternatives Trust changed its name to Dream Impact Trust.
See accompanying notes to the consolidated financial statements.
Commitments and contingencies (Note 35)
Subsequent events (Note 41)
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, 2020 | 39
Consolidated Statements of Earnings
For the years ended December 31, 2020 and 2019
(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 on disposition of assets held for sale
Interest expense
Net gain on disposition of Dream Global REIT
Adjustments related to Dream Impact 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(1)
Diluted earnings per share(1)
Note
25 $
26
27
28
11, 16
14
29
16
30
36
20
21
24
$
$
$
33 $
33 $
2020
347,623 $
(242,469)
105,154
(32,834)
72,320
(16,681)
1,723
82,694
8,571
—
(23,841)
—
77,764
(4,930)
197,620
(37,982)
159,638 $
159,221 $
417
159,638 $
3.37 $
3.31 $
2019
580,430
(216,196)
364,234
(39,238)
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
6.25
6.09
(1) Basic and diluted earnings per share reflect the Share Consolidation as described in Note 2 for the years ended December 31, 2020 and 2019.
See accompanying notes to the consolidated financial statements.
Dream Unlimited Corp. – December 31, 2020 | 40
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2020 and 2019
(in thousands of Canadian dollars)
Earnings for the year
Note
$
2020
159,638 $
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 loss from foreign currency translation (reclassified to earnings on partial or full
disposal of foreign operation)
Share of other comprehensive income (loss) from equity accounted investments
Total other comprehensive loss
Total comprehensive income
Total comprehensive income (loss) for the year attributable to:
Shareholders
Non-controlling interest
Total comprehensive income
See accompanying notes to the consolidated financial statements.
—
—
(1,977)
(259)
802
(1,434)
158,204 $
157,787 $
417
158,204 $
$
$
$
24
2019
331,745
(274)
1,906
(1,425)
(577)
(623)
(993)
330,752
331,253
(501)
330,752
Dream Unlimited Corp. – December 31, 2020 | 41
Consolidated Statements of Changes in Equity
For the years ended December 31, 2020 and 2019
(in thousands of Canadian
dollars)
Balance, January 1, 2020
Earnings for the year
Other comprehensive loss for the
year
Shares repurchased (Note 22)
Dividends paid (Note 22)
Share-based compensation
(Note 32)
Change in interest in subsidiary
(Note 24)
Balance, December 31, 2020
Dream share
capital
(Note 22)
1,193,562 $
$
—
—
(170,433)
—
1,146
—
$
1,024,275 $
Contributed
surplus
11,410 $
—
—
—
—
3,544
—
14,954 $
Reorganization
adjustment
Retained
earnings
(944,577) $ 1,140,179 $
—
—
—
—
—
—
159,221
—
—
(11,164)
(194)
—
(944,577) $ 1,288,042 $
Accumulated
other
comprehensive
income
10,386 $
—
(1,434)
—
—
—
—
8,952 $
Total
shareholders'
equity
1,410,960 $
159,221
(1,434)
(170,433)
(11,164)
4,496
—
1,391,646 $
Non-
controlling
Total equity
interest
21,649 $ 1,432,609
159,638
417
—
—
—
—
(1,434)
(170,433)
(11,164)
4,496
(7,100)
(7,100)
14,966 $ 1,406,612
(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, 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
Dividends paid
Share-based compensation
Distributions to non-controlling
interests
Contributions from non-
controlling interests
—
—
(16,478)
—
221
—
—
—
—
—
—
3,361
—
—
—
—
—
—
—
—
—
332,246
—
332,246
(501)
331,745
—
—
(10,615)
(33)
—
—
(993)
(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
See accompanying notes to the consolidated financial statements.
Dream Unlimited Corp. – December 31, 2020 | 42
Note
2020
2019
$
159,638
$
331,745
Consolidated Statements of Cash Flows
For the years ended December 31, 2020 and 2019
(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 expense (recovery)
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
Sale of condominium inventory, net of development
Advances on construction loans, net of repayments
Acquisition of land inventory
Fair value adjustment on Dream Impact 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
Acquisitions and additions to recreational properties and renewable power assets, net
Investments in equity accounted investments
Contributions to equity accounted investments
Distributions and disposals of equity accounted investments
Acquisitions of financial assets and other assets
Distributions and disposals of financial assets and other assets
Proceeds on disposition of assets, net
Proceeds on disposition of asset management agreement and other transaction costs, net
Loans receivable advances, net of 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
Advances from operating lines, net of repayments
Repayment of margin facility, net of advances
Repayments pursuant to non-revolving term facility
Advances from equity accounted investments
Contributions from non-controlling interest, net of distributions
Dream Impact Trust units repurchased from other unitholders
Dividends paid
Repayments of lease obligations
Redemption of Preference shares, series 1
Shares repurchased
Net cash flows used in financing activities
11, 16
14
21
37
37
9
8
9
19
10
20
10
11, 16
12
16
19
19
19
19
24
20
22
17
22
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.
37
$
Dream Unlimited Corp. – December 31, 2020 | 43
7,119
(1,723)
(82,694)
11,223
(3,282)
—
—
(109,504)
(5,300)
12,848
23,488
4,603
—
(98,016)
(905)
(82,505)
(72,349)
(16,613)
(23,720)
(33,966)
106,023
(57,353)
61,470
46,330
—
(21,032)
41,986
30,776
131,431
(58,004)
—
—
(22,000)
6,815
—
(24,610)
(11,164)
(3,706)
—
(170,433)
(151,671)
(203,400)
388,521
185,121
$
9,456
(40,961)
(93,351)
(938)
(2,648)
8,515
(135,474)
85,866
(18,033)
21,558
(43,716)
39,305
(3,244)
90,931
7,059
256,070
(51,271)
(5,642)
(64,054)
(27,442)
21,912
(18,507)
111,026
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)
(3,694)
(28,675)
(16,478)
(233,402)
324,228
64,293
388,521
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.
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").
Effective July 6, 2020, the Company completed a share consolidation of all issued and outstanding Class A subordinate voting shares ("Subordinate Voting
Shares") in the capital of Dream on the basis of one post-consolidation Subordinate Voting Share for every two pre-consolidation Subordinate Voting
Shares, and all of the issued and outstanding Class B common shares ("Class B Shares") in the capital of Dream on the basis of one post-consolidation Class
B Share for every two pre-consolidation Class B Shares ("the Share Consolidation"). Upon completion of the Share Consolidation, the number of
Subordinate Voting Shares issued and outstanding as of July 6, 2020 has been consolidated from 91,641,438 to 45,820,395, and the number of Class B
Shares issued and outstanding has been consolidated from 3,114,845 to 1,557,356. All share, per share and share-related amounts disclosed herein reflect
the post-Share Consolidation shares for all periods presented, unless otherwise specified.
All dollar amounts discussed herein are in thousands of Canadian dollars, unless otherwise stated.
The consolidated financial statements for the year ended December 31, 2020 were approved by the Board of Directors for issue on February 23, 2021,
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, 2020 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.
Dream Impact Trust, formerly Dream Hard Asset Alternatives Trust, is considered a subsidiary of the Company based on the Company's exposure to
variable returns from ownership through Dream Impact Trust units held and real estate joint venture agreements.
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.
Dream Unlimited Corp. – December 31, 2020 | 44
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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.
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. 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
Harlo Scarborough Junction LP, Toronto
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
Mixed-use development
Ownership interest
2019
50%
50%
50%
9% - 40%
50%
50%
20%
50%
50%
78%
25%
50%
50%
31%
25%
33%
40%
25%
50%
33%
10%
50%
n/a
2020
50%
50%
50%
9% - 40%
50%
50%
n/a
n/a
50%
78%
25%
50%
50%
31%
33%
33%
40%
25%
50%
33%
10%
50%
45%
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.
Dream Unlimited Corp. – December 31, 2020 | 45
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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
Millwoods Robertson, Edmonton
Streetcar, Toronto
Thornhill Woods, Toronto
Nature of business
Historical heritage district
Land
Condominiums
Land and housing
2020
50%
70%
25% - 50%
30% - 32%
Ownership interest
2019
50%
70%
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.
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, 2020 was 32% (December 31, 2019 - 27%) 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.
At the time of an acquisition of a property, the Company evaluates whether the acquisition is a business combination or an asset acquisition. IFRS 3 is only
applicable if it is considered that a business has been acquired. A business, according to IFRS 3, is defined as an integrated set of activities and assets
conducted and managed for the purpose of providing goods or services to customers, generating investment income (such as dividends or interest) or
generating other income from ordinary activities. In determining whether an acquired property meets the definition of a business, the Company assesses
whether substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar assets. If such a concentration
exists, the transaction is not viewed as an acquisition of a business and no further assessment of the business combination guidance is required. This is
relevant where the value of the acquired entity is concentrated in one property, or a group of similar properties. When an acquisition does not represent a
business as defined under IFRS 3, the Company classifies these properties as an asset acquisition.
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.
Dream Unlimited Corp. – December 31, 2020 | 46
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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 Impact Trust units, 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
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.
Dream Unlimited Corp. – December 31, 2020 | 47
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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, a bond portfolio, a vendor take-back mortgage
secured against land, 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. With the
exception of the bond portfolio, investment holdings and participating mortgages are classified as FVTPL as their contractual cash flows do not represent
solely payments of principal and interest. The bond portfolio is measured at amortized cost using the effective interest method and net of any impairment
losses. Income earned and the changes in fair value are recorded in the consolidated statements of earnings as fair value changes in financial instruments.
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 asset.
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 ECL model. If the credit adjusted approach ECL model 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 and lender fees 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. 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.
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.
Dream Unlimited Corp. – December 31, 2020 | 48
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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 if fair value is
reliably measurable, 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 or the direct comparison approach. Within the discounted cash flows, the significant unobservable inputs include: terminal
capitalization rates, discount rates and market rates. Other assumptions 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; 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. Within the direct comparison approach, the significant unobservable inputs include recent activity for similar development/
redevelopment sites.
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.
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 acquisitions, which are subsequently allocated to specific 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
Dream Unlimited Corp. – December 31, 2020 | 49
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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 year.
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 Impact Trust Units
The Company holds an effective 26% interest in Dream Impact Trust as at December 31, 2020 through ownership of 16,830,028 trust units (December 31,
2019 - 23% interest through ownership of 15,721,604 trust units). The remaining 47,981,722 trust units outstanding are held by other unitholders and have
been recognized on the consolidated statements of financial position to reflect the residual 74% interest held by other parties as at December 31, 2020.
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 Impact Trust units on a fair value basis. As a financial liability measured at fair value through profit or loss, the Company
recorded the Dream Impact 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 Impact Trust unit's closing trading price. Fair value changes are recorded within adjustments related to Dream Impact Trust
units in the consolidated statements of earnings in the period in which they arise. Distributions on Dream Impact 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 Impact Trust units in the
consolidated statements of earnings. Refer to Note 20 for additional details.
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
Rental income
Lending portfolio interest
and fees income
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.
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
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.
Dream Unlimited Corp. – December 31, 2020 | 50
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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.
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.
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. During the
holding period, which is between the grant date and the vesting date, PSUs earn dividends declared by the Company in the form of additional fractional
PSUs. 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.
Dream Unlimited Corp. – December 31, 2020 | 51
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Government Grants
Government grants are not recognized until there is reasonable assurance that the Company will comply with the associated conditions, and that the grant
will be received. Receipt of a grant does not of itself provide conclusive evidence that the conditions attached to the grant have or will be fulfilled.
Government grants are recognized in profit or loss on a systematic basis over the periods in which the entity recognizes the expenses or revenue for the
related costs or income for which the grants are intended to compensate. For those government grants that become receivable as compensation for
expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs, the grant is
recognized in profit or loss for the period in which it becomes receivable. The Company recognizes government assistance as a reduction in the related
expenses, through the consolidated statement of earnings.
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,
2020. 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.
IFRS 3, "Business Combinations" ("IFRS 3")
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 was effective on
January 1, 2020 and applies to the Company's future business combinations.
Future Accounting Policy Changes
Standards issued but not yet effective up to the date of issuance of the Company's consolidated financial statement that are likely to have an impact on
the Company are listed below. This listing is of standards and interpretations issued by the IASB which the Company reasonably expects to be applicable at
a future date. The Company intends to adopt those standards when they become effective.
Amendments to IAS 1, Presentation of Financial Statements
The amendments clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period.
Classification is unaffected by expectations of the entity or events after the reporting date. The amendments also clarify that the settlement of a liability
refers to the transfer of the counterparty of cash, equity instruments, and/or other assets or services. Early application is permitted. The Company intends
to adopt the amendments to IAS 1 on the required effective date of January 1, 2023. The Company is in the process of assessing the impact of this
amendment.
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, 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
Accounting for business combinations under IFRS 3 only applies if it is considered that a business has been acquired. Under IFRS 3, a business is defined as
an integrated set of activities and assets conducted and managed for the purpose of providing a return in the form of dividends, lower costs or other
economic benefits to investors. A business generally consists of inputs, processes applied to those inputs and resulting outputs that are, or will be, used to
generate revenues. In the absence of such criteria, a group of assets is deemed to have been acquired. If goodwill is present in a transferred set of
activities and assets, the transferred set is presumed to be a business. Judgment is used by the Company in determining whether an acquisition qualifies as
a business combination in accordance with IFRS 3 or as an asset acquisition.
Dream Unlimited Corp. – December 31, 2020 | 52
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
When determining whether an acquisition is a business combination or an asset acquisition, the Company applies judgment when considering whether the
acquisition is capable of producing outputs and whether the market participant could produce outputs if missing elements exist. In particular, the
Company considers whether employees were assumed in the acquisition and whether an operating platform has been acquired.
Significant judgment is required in applying the acquisition method of accounting for business combinations and, specifically, in identifying and
determining the fair value of assets and liabilities acquired, including intangible assets and residual goodwill, if any. 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 15 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, 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. Each investment is subject to an
appraisal by an independent valuator at least once every three years, if not earlier. Judgment is applied in determining the extent and frequency of
independent appraisals.
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.
Significant assumptions relating to the estimates of fair values of investment properties include terminal capitalization rates, discount rates and market
rents. Other assumptions include the receipt of contractual rents, renewal rates, maintenance requirements 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 significant assumptions related to
terminal capitalization rates, discount rates and market rent and other assumptions relate to the terms of the construction contract, the stage of
completion, the location, type and quality of the property, expected completion dates, the level of reliability of cash inflows after completion, the
Dream Unlimited Corp. – December 31, 2020 | 53
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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, 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.
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 19; 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, 2020 | 54
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
COVID-19
During the year ended December 31, 2020, the World Health Organization declared COVID-19 a global pandemic and the ensuing responses by
governments, including the closure of non-essential businesses and social distancing requirements, have increased the level of uncertainty in the economy
and caused significant disruptions to all businesses and daily life. The Company assessed the impact on its business, including the recoverability of its
lending portfolio, recoverability of accounts receivable, net realizable value of inventories, including land in Western Canada, carrying values of
recreational properties and equity accounted investments including Dream Office REIT, timing and amount of revenue recognized from investment
properties, the fair value of certain loan investments classified as FVTPL, investment properties, participating mortgages and investment holdings.
The significant global uncertainty has impacted the availability of reliable market metrics and, accordingly, the Company performed additional risk-based
procedures to assess the fair value of its participating mortgages and investment holdings, investment properties and certain loan investments to ensure
the Company applied sound judgment with respect to the various assumptions impacting the valuation. The Company took into consideration the market
conditions existing at the reporting date. The additional risk-based procedures included scenario testing to evaluate downside risk, reviewing risk profiles
of its tenant base, borrowers' creditworthiness and risk characteristics of its underlying developments.
The Company assessed the possibility and amount of any impairment loss or write-down as it relates to amounts receivable, equity accounted investments
and the lending portfolio. The estimates and judgements primarily relate to the timing and amount of future cash flows. In determining whether the
Company's financial assets require a provision for impairment, the Company reviewed its ECL model, including the following factors: the borrowers' credit
risk, term to maturity, status of the underlying project and market risk.
5. Accounts receivable
The details of accounts receivable by segment are summarized in the following table:
Development
Recurring income
Corporate and other
$
$
2020
179,257
15,205
6,428
200,890
$
$
2019
188,555
11,093
2,510
202,158
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 $1,052 (December 31,
2019 - $645).
6. Other financial assets
Other financial assets consisted of the following:
Investment holdings
Loans receivable
Participating mortgages
Other instruments
$
$
2020
92,940
62,205
22,084
—
177,229
$
2019
50,206
8,088
66,210
4,952
$
129,456
Participating Mortgages
Participating mortgages related to two long-term development loans secured by real property comprising two residential assets. Refer to Note 31 for the
valuation methodology used to determine the fair value of the participating mortgages. In the year ended December 31, 2020, the Company received
proceeds of $43,150, representing a return of capital for one of the participating mortgages.
Investment Holdings
As at December 31, 2020, investment holdings include one hospitality asset (the Virgin Hotels Las Vegas), a real estate development investment and a
portfolio of bonds.
In the year ended December 31, 2020, a portfolio of bonds totalling $41,568 was purchased. The bonds have been collateralized against certain project
specific debt.
During the year ended December 31, 2020 the Company invested an additional $4,035 into the Virgin Hotels Las Vegas. As at December 31, 2020 the cash
paid continues to approximate fair value, adjusted for foreign currency translation, supported by internal valuations.
Dream Unlimited Corp. – December 31, 2020 | 55
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Loans Receivable
Loans receivable are amounts owing to the Company pertaining to development partnerships in Toronto and Western Canada. In the year ended
December 31, 2020, the Company provided a $50,400 vendor take-back mortgage ("VTB") relating to the sale of 480 acres at Glacier Ridge in Calgary to an
equity accounted investment in which the Company retained a 14% interest. The VTB has an interest rate of 5% per annum and a maturity date of March
31, 2024.
7. Lending portfolio
Balance, beginning of year
Add (deduct):
Lending portfolio advances
Provision for lending portfolio losses
Interest capitalized to lending portfolio balance
Other
Principal repayments at maturity
Balance, end of year(1)
(1) Included is a loan of $6,762 that is classified as FVTPL (December 31, 2019 - $7,301).
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
$
$
2020
64,705
$
—
(2,882)
2,499
912
(41,986)
23,248
$
2019
144,095
119
(2,350)
5,029
1,024
(83,212)
64,705
2020
9.0%
40.5%/59.5%
2021 - 2025
126
8,757
$
2019
9.1%
47.7%/52.3%
2020 - 2025
130
40,128
$
During the year ended December 31, 2020, a loan investment classified as FVTPL, aggregating $6,762 (December 31, 2019 - $7,301), 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, 2019 - 17.5%), 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 was to increase by 25 basis points ("bps"), the fair value of the loan investments would decrease by $100. If the weighted average market rate
was to decrease by 25 bps, the fair value would increase by $100.
During the year ended December 31, 2020, an increase in the existing provision for the lending portfolio resulted in a loss of $2,882 (year ended December
31, 2019 - $2,350). The full provision related 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 ratio.
8. Housing inventory
The movement in housing inventory is as follows:
Balance, beginning of year
Transfers from land inventory (Note 10)
Development
Housing units occupied
Balance, end of year
$
$
2020
38,607
3,436
10,005
(22,853)
29,195
$
$
2019
56,605
3,560
6,082
(27,640)
38,607
Dream Unlimited Corp. – December 31, 2020 | 56
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
9. Condominium inventory
The movement in condominium inventory is as follows:
Balance, beginning of year
Acquisitions
Development
Condominium units occupied
Transfers to investment properties (Note 11)
Balance, end of year
10. Land inventory
The movement in land inventory is as follows:
Balance, beginning of year
Acquisitions
Development
Writedown of land held for development
Lot and acre sales(1)
Transfers to housing inventory (Note 8)
Transfers to investment properties (Note 11)
Balance, end of year
$
$
$
$
2020
291,304
5,300
52,451
(75,939)
(24,610)
248,506
2020
538,571
—
28,520
—
(78,015)
(3,436)
(802)
484,838
$
$
$
$
2019
239,621
47,467
85,168
(41,452)
(39,500)
291,304
2019
575,896
4,875
32,878
(23,159)
(39,937)
(3,560)
(8,422)
538,571
(1) Included in the lot and acre sales is $38,619 relating to our 480-acre Glacier Ridge site. The Company has retained a 14% interest in the underlying development, recorded within equity accounted
investments.
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.
11. Investment properties
The movement in investment properties by segment is as follows:
Balance, beginning of year
Additions to and transfers to/from investment properties:
Acquisitions
Land and building additions
Transfers from inventory (Notes 9 and 10)
Transfers from assets held for sale (Note 16)
Dispositions
Gains (losses) included in earnings:
Fair value changes in investment properties
Amortization and other
Change in straight-line rent
Balance, end of year
Recurring income
Development
$
419,995 $
98,429 $
—
4,452
—
—
—
3,027
(1,260)
418
426,632 $
—
67,722
25,412
—
—
1,651
(40)
66
193,240 $
$
Total
2020
518,424 $
—
72,174
25,412
—
—
4,678
(1,300)
484
619,872 $
Total
2019
412,771
8,339
46,092
47,922
5,708
(44,340)
43,389
(1,761)
304
518,424
Included in the recurring income segment as at December 31, 2020 is a right-of-use asset for the 100 Steeles leasehold interest of $10,101 (December 31,
2019 - $10,493).
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, 2020, investment properties with a fair
value of $212,435 were externally appraised at a value of $236,141 (December 31, 2019 - investment properties with a total fair value of $345,369 were
externally appraised at a value of $366,569). The net fair value gain primarily related to a wholly owned office property in Dream Impact's portfolio,
Dream Unlimited Corp. – December 31, 2020 | 57
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
whereby its highest and best use considered the asset's redevelopment potential due to its rezoning application submission, was determined by using the
direct comparison approach. The appraised value for this wholly owned property was higher than the fair value recorded in the consolidated statements of
financial position as it was adjusted for density and price per square foot based on certain management assumptions compared to the appraiser
assumptions, including zoning and timing. Generally, an increase in density and price per square foot would result in an increase in fair values. Investment
properties, other than the above noted, are measured at fair value using the discounted cash flow method.
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 following are the significant assumptions in the valuation of income properties, using the discounted cash flow method:
Terminal capitalization rate – capitalization rates used to estimate the resale value of the property at the end of the holding period
Discount rate – reflecting current market assessments of the uncertainty in the amount and timing of cash flows
•
•
• Market rents – year one rates in the discounted cash flow
Significant unobservable inputs were as follows for December 31, 2020 and December 31, 2019:
Input
Discount rate
Recurring income
Development
Terminal capitalization rate
Market rents (in dollars per square foot)(1)
Discount rate
Terminal capitalization rate
Market rents (in dollars per square foot)(1)
Range
5.25%-7.25%
4.50%-6.75%
$17.40-$28.00
5.75%-7.00%
5.00%-6.50%
$16.00-$41.15
2020
Weighted average
6.1%
5.5%
$21.36
6.4%
5.7%
$25.62
Range
5.25%-7.25%
4.50%-6.50%
$17.78–$29.93
6.00%-7.00%
5.25%-6.50%
$18.74–$38.53
2019
Weighted average
6.3%
5.6%
$22.46
6.6%
5.9%
$26.75
(1) Market rents represent year one rates in the discounted cash flow method. Market rents represent base rents only and do not include the impact of lease incentives.
Fair values of investment properties, which include commercial, retail and other properties held for the long term, are calculated using a discounted cash
flow (“DCF”) model, 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. As at December 31, 2020, the Company assessed all inputs to the DCF model by property, including cash flow assumptions, resulting in a
fair value gain of $4,678 on its investment properties in the year ended December 31, 2020.
Fair values of the Company's investment properties are most sensitive to changes in the discount and terminal capitalization rates. An increase in these
rates will result in a decrease in the fair value of an investment property and vice versa.
Input sensitivity
Impact of changes to weighted average discount rate
Impact of changes to weighted average terminal capitalization rate
$
Increase (decrease) in value
-25 bps
7,414
+25 bps
(7,252) $
(9,898)
10,854
Investment properties, including equity accounted investments with a fair value of $523,492 as at December 31, 2020 (December 31, 2019 - $420,457), are
pledged as security for mortgages and term debt. Investment properties, including equity accounted investments with a fair value of $243,074 as at
December 31, 2020 (December 31, 2019 - $143,496), are pledged as security for construction loans.
The Company's future minimum rental commitments, including joint operations, from non-cancellable tenant operating leases as at December 31, 2020
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
$
$
17,428
16,000
14,617
12,812
12,217
89,988
163,062
Dream Unlimited Corp. – December 31, 2020 | 58
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
12. Recreational properties
The movement in recreational properties is as follows:
Balance, beginning of year
Acquisition
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)
Gladstone Hotel (Ontario)
Willows Golf Course (Saskatchewan)
13. Renewable power assets
The movement in the December 31, 2019 renewable power assets is as follows:
Balance, beginning of year
Impact of changes in accounting policies
Adjusted balance, beginning of year
Dispositions
Depreciation
Foreign currency loss
Transferred to assets held for sale (Note 16)
Balance, end of year
Cost
Accumulated depreciation
Transferred to assets held for sale (Note 16)
Total renewable power assets
14. Equity accounted investments
$
$
$
$
$
$
2020
48,779
8,848
7,766
(4,828)
(5)
60,560
97,200
(36,640)
60,560
2020
33,043
13,374
11,529
2,614
60,560
$
$
$
$
$
$
$
$
$
$
$
$
2020
—
—
—
—
—
—
—
—
2020
— $
—
—
— $
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
2019
143,288
12,036
155,324
(41)
(2,610)
(1,054)
(151,619)
—
2019
171,632
(20,013)
(151,619)
—
The Company has entered into certain arrangements in the form of jointly controlled entities for various mixed-use 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, 2020, the carrying value of these arrangements was $762,652 (December 31, 2019 - $708,840).
In the year ended December 31, 2020, the Company indirectly disposed of its interest in a renewable power portfolio and exited the Firelight Infrastructure
Partners LP partnership, generating cash proceeds of $70,202 and a pre-tax gain of $34,164 included in earnings from equity accounted investments.
The following tables summarize the Company’s proportionate share of assets and liabilities in equity accounted investments (segregated between
development and recurring income investments) as at December 31, 2020 and December 31, 2019.
Dream Unlimited Corp. – December 31, 2020 | 59
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
Lakeshore East
Other development investment
Total development investments
Recurring income investments
Dream Office REIT
U.S. Multi-Family Portfolio
Other recurring income investments
Total recurring income investments
Total
At Dream's share
Development investments
Brighton Marketplace
Canary District
Frank Gehry
Brightwater(2)
Lakeshore East(2)
Other development investments(3)
Total development investments
Recurring income investments
Dream Office REIT (4)
U.S. Multi-Family Portfolio
Other recurring income investments
Total recurring income investments
Total
Assets
Liabilities
Net assets
2020
$
79,153 $
(52,674) $
210,284
381,370
308,606
67,687
563,954
(164,689)
(175,054)
(150,679)
(30,183)
(252,180)
1,611,054 $
(825,459) $
26,479
45,595
206,316
157,927
37,504
311,774
785,595
2,888,880 $
(1,286,247) $
1,602,633
239,435
228,381
(206,380)
(88,342)
3,356,696 $
4,967,750 $
(1,580,969) $
(2,406,428) $
33,055
140,039
1,775,727
2,561,322
$
$
$
$
Ownership
interest
Assets
Liabilities
Net assets
Difference
between net
assets and
deemed cost of
investments(1)
50% $
39,577 $
(26,337) $
13,240 $
33%-50%
33%
31%
50%
7%-78%
104,044
129,614
98,494
48,451
163,322
(82,149)
(60,852)
(45,451)
(15,092)
(119,796)
21,895
68,762
53,043
33,359
43,526
$
583,502 $
(349,677) $
233,825 $
32% $
50%
9%-50%
912,387 $
(406,232) $
506,155 $
119,717
62,510
$
$
1,094,614 $
1,678,116 $
(103,190)
(24,568)
(533,990) $
(883,667) $
16,527
37,942
560,624 $
794,449 $
(2,286) $
—
—
—
—
—
(2,286) $
(29,469) $
—
(42)
(29,511) $
(31,797) $
2020
Total
10,954
21,895
68,762
53,043
33,359
43,526
231,539
476,686
16,527
37,900
531,113
762,652
(1) 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 the end of the year.
(2) The Company's deemed cost of this investment includes fair value adjustments relating to the consolidation of Dream Impact Trust and as a result, may not reflect the Company's proportionate
share of project-level net assets.
(3) During the year ended December 31, 2020, the Company recorded $17,215 in distributions related to the completion of the Axis Condominiums project, which had been received as cash advances
in 2019.
(4) As at December 31, 2020, the fair value of the Company's interest in Dream Office REIT was $349,348.
Dream Unlimited Corp. – December 31, 2020 | 60
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
Lakeshore East
Other development investments
Total development investments
Recurring income investments
Dream Office REIT
Firelight Infrastructure Partners LP
Other recurring income investments
Total recurring income investments
Total
At Dream's share
Development investments
Brighton Marketplace
Canary District
Frank Gehry
Brightwater(2)
Lakeshore East(2)
Other development investments
Total development investments
Recurring income investments
Dream Office REIT(3)
Firelight Infrastructure Partners LP
Other recurring income investments
Total recurring income investments
Total
Assets
Liabilities
Net assets
2019
$
69,614 $
213,966
362,725
269,183
66,723
464,570
1,446,781 $
(44,546) $
(185,243)
(273,489)
(109,668)
(30,012)
(157,253)
(800,211) $
25,068
28,723
89,236
159,515
36,711
307,317
646,570
2,911,800 $
947,023
142,357
4,001,180 $
(1,270,492) $
(727,664)
(83,737)
(2,081,893) $
1,641,308
219,359
58,620
1,919,287
5,447,961 $
(2,882,104) $
2,565,857
$
$
$
$
Assets
Liabilities
Net assets
Difference between
net assets and
deemed cost of
investments(1)
Ownership
interest
50% $
30%-50%
25%
31%
50%
7%-78%
$
34,807 $
106,239
89,999
87,807
48,226
88,771
455,849 $
(22,273) $
(92,086)
(68,372)
(34,150)
(15,267)
(41,193)
(273,341) $
(345,680) $
(145,533)
(24,933)
(516,146) $
12,534 $
14,153
21,627
53,657
32,959
47,578
182,508 $
446,573 $
43,872
43,220
533,665 $
716,173 $
(2,286) $
—
8,334
—
—
—
6,048 $
(13,200) $
—
(181)
(13,381) $
(7,333) $
27% $
20%
9%-50%
$
792,253 $
189,405
68,153
1,049,811 $
$
1,505,660 $
(789,487) $
2019
Total
10,248
14,153
29,961
53,657
32,959
47,578
188,556
433,373
43,872
43,039
520,284
708,840
(1) 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 the end of the year.
(2) The Company's deemed cost of this investment includes fair value adjustments relating to the consolidation of Dream Impact Trust and, as a result, may not reflect the Company's proportionate
share of project-level net assets.
(3) As at December 31, 2019, the fair value of the Company's interest in Dream Office REIT was $520,635.
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, 2020 and 2019.
Project level (100%)
Development investments
Recurring income investments
Dream Office REIT
Firelight Infrastructure Partners LP
U.S. Multi-Family Portfolio
Other recurring income investments
Total recurring income investments
Total
Revenue
615,218 $
Earnings (losses)
124,834 $
2020
Earnings (losses)
before depreciation
125,495
206,623
61,940
10,555
18,319
297,437 $
912,655 $
123,211
3,334
926
6,798
134,269 $
259,103 $
125,138
5,058
926
8,336
139,458
264,953
$
$
$
Dream Unlimited Corp. – December 31, 2020 | 61
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
At Dream's share
Development investments
Recurring income investments
Dream Office REIT
Firelight Infrastructure Partners LP(1)
U.S. Multi-Family Portfolio(2)
Other recurring income investments
Total recurring income investments
Ownership interest
Revenue
Earnings (losses)
7%-50% $
33,578 $
16,893 $
2020
Earnings (losses)
before depreciation
16,983
32%
20%
50%
7%-78%
60,737
13,493
2,520
9,978
$
$
86,728 $
120,306 $
36,219
35,566
(4,735)
(1,249)
65,801 $
82,694 $
36,785
40,067
(4,735)
(483)
71,634
88,617
2019
Total
(1) Earnings in the year ended December 31, 2020 include $34,164 from the gain on sale of an underlying renewable power portfolio.
(2) Losses in the year ended December 31, 2020 relate primarily to a foregone deposit.
Project level (100%)
Development investments
Recurring income investments
Dream Office REIT
Firelight Infrastructure Partners LP
Other recurring income investments
Total recurring income investments
Total
At Dream's share
Development investments(1)
Recurring income investments
Dream Office REIT
Firelight Infrastructure Partners LP
Other recurring income investments
Total recurring income investments
Total
$
$
$
Revenue
Earnings (losses)
Earnings (losses)
before depreciation
581,344 $
127,436 $
127,473
229,018
136,154
42,296
407,468 $
988,812 $
168,821
27,393
17,107
213,321 $
340,757 $
170,712
73,299
18,563
262,574
390,047
2019
Ownership interest
Revenue
Earnings (losses)
Earnings (losses)
before depreciation
7%-50% $
99,183 $
30,326 $
30,336
27%
20%
17%-78%
$
$
60,800
27,231
19,388
107,419 $
206,602 $
44,819
5,479
12,727
63,025 $
93,351 $
45,321
14,659
13,095
73,075
103,411
(1) Earnings from development investments in the year ended December 31, 2019 relate primarily to the Company's share of earnings from Dream CMCC Capital Fund II and Axis Condominium due to
occupancies in the year.
15. 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
$
$
$
$
2020
15,751
13,576
7,392
8,560
2,042
4,941
52,262
2020
19,842
(11,282)
8,560
$
$
$
$
2019
13,876
13,576
11,884
9,716
3,914
2,613
55,579
2019
19,607
(9,891)
9,716
(1) Included in prepaid expenses as at December 31, 2020 is $1,671 of capitalized sales commissions relating to housing and condominium sales to be recognized in future periods (December 31, 2019 -
$6,371).
Dream Unlimited Corp. – December 31, 2020 | 62
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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
Additions
Depreciation
Derecognition(1)
Balance, end of year
(1) Derecognition of right-of-use assets primarily relates to the termination of an office building lease.
Refer to Note 11 for right-of-use assets relating to investment properties.
$
$
$
2020
3,914
65
(900)
(1,037)
2,042
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 Development 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, 2020 and did not identify an impairment for the Zibi CGU.
16. Assets held for sale
In the year ended December 31, 2020, management had committed to a plan of sale of certain properties, which were considered highly probable.
Assets held for sale
Balance, beginning of year
Transfers to investment properties (Note 11)
Transfer from renewable power assets (Note 13)
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
Amortization and 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
$
$
$
$
2020
49,089 $
—
—
—
—
(46,330)
175
21
(2,955)
— $
2020
— $
—
—
—
— $
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)
—
In the year ended December 31, 2020, the Company disposed of its interest in two investment properties, for net consideration of $46,330. No gain on
disposal was recognized in the consolidated statement of earnings for the year ended December 31, 2020 as the investment properties were carried at fair
value.
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.
Dream Unlimited Corp. – December 31, 2020 | 63
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 Impact marketed its economic interest in the Canadian and U.K. renewable power portfolio. These included
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 2019. At the time of
transfer, the assets had a carrying value of $151,619. 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.
17. Accounts payable and other liabilities
The details of accounts payable and other liabilities are as follows:
Accrued liabilities
Customer deposits
Trade payables(1)
Lease obligation
Deferred revenue
Interest rate swaps
(1) Included in trade payables were bank overdraft balances of $2,096 as at December 31, 2020 (December 31, 2019 - $2,170).
Lease Obligation
Maturity analysis - contractual undiscounted cash flows
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total undiscounted lease obligation as at December 31, 2020
Discounted using the lessee's incremental borrowing rate as at December 31, 2020
Total discounted lease obligation as at December 31, 2020
Current portion of lease obligation
Non-current portion of lease obligation
Total lease obligation
$
$
2020
81,765
42,824
48,420
12,747
10,343
2,736
198,835
$
2019
101,467
50,243
33,907
14,450
6,213
—
$
206,280
2020
1,721
1,359
1,329
1,424
1,331
10,224
17,388
(4,641)
12,747
1,468
11,279
12,747
$
$
$
$
There are no future cash outflows to which the Company is potentially exposed that are not reflected in the measurement of lease obligations.
18. 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
$
$
2020
36,853
3,922
(9,735)
31,040
$
$
2019
33,853
16,223
(13,223)
36,853
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.
Dream Unlimited Corp. – December 31, 2020 | 64
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
19. Debt
Project-Specific Debt
Balance, January 1, 2020
Borrowings
Repayments
Interest and other
Balance, December 31, 2020
Balance, January 1, 2019
Borrowings
Repayments
Assumed on disposition of assets held for sale
Interest and other
Balance, December 31, 2019
Corporate Debt Facilities
Balance, January 1, 2020
Repayments
Interest and other
Balance, December 31, 2020
Balance, January 1, 2019
Repayments
Interest and other
Balance, December 31, 2019
Construction loans
Operating Line -
Western Canada
Mortgages and
term debt
217,341 $
80,682
(76,079)
8
221,952 $
— $
79,000
(79,000)
—
— $
257,509 $
131,431
(58,004)
536
331,472 $
Construction loans
Operating Line -
Western Canada
Mortgages and
term debt
177,986 $
103,352
(64,047)
—
50
217,341 $
48,943 $
154,000
(203,000)
—
57
— $
336,594 $
55,305
(51,766)
(80,264)
(2,360)
257,509 $
$
$
$
$
Non-revolving
term facility
Margin facility
224,105 $
(22,000)
347
202,452 $
— $
—
—
— $
Non-revolving
term facility
224,083 $
—
22
224,105 $
Margin facility
100,000 $
(100,000)
—
— $
$
$
$
$
Total
474,850
291,113
(213,083)
544
553,424
Total
563,523
312,657
(318,813)
(80,264)
(2,253)
474,850
Total
224,105
(22,000)
347
202,452
Total
324,083
(100,000)
22
224,105
Further details on the weighted average interest rates and maturities are included in Note 31. In the year ended December 31, 2020, 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. 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, 2020, funds available under this facility were $252,830, as determined by the formula-based maximum calculation, with $35,827 of
letters of credit issued against the facility (December 31, 2019 - $259,004, with $46,162 of letters of credit issued against the facility).
In the year ended December 31, 2020, the Company amended the operating line, extending the maturity date to January 31, 2023, and revising certain
covenants of DAM.
Construction Loans and Mortgages and Term Debt
Construction loans relate to housing and commercial projects under development, project-specific financing and land servicing and may be due on demand
with recourse provisions and/or hold security against the underlying property. Mortgages and term debt are property-specific and may hold security
against the underlying property with or without recourse provisions.
Dream Unlimited Corp. – December 31, 2020 | 65
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Non-Revolving Term Facility
In the year ended December 31, 2020, 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.
Operating Line - Dream Impact Trust
Dream Impact Trust has a revolving term credit facility available, up to a formula-based maximum not to exceed $50,000, with a Canadian financial
institution. As at December 31, 2020, no funds were drawn on the revolving credit facility (December 31, 2019 – $nil) and funds available under this facility
was $nil (December 31, 2019 – $8,894), net of $nil (December 31, 2019 – $360) of letters of credit issued against the facility.
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, 2020, funds available under this facility were $110,000, as determined by the formula-based maximum calculation.
Interest Rate Swaps
The Company is exposed to interest rate risk primarily through its variable rate debt obligations. Excluding the operating line - Western Canada and margin
facility, variable rate debt represented 62% (December 31, 2019 - 72%) of the Company's total debt obligation as at December 31, 2020. In order to
manage the interest rate risk on certain variable rate debt, the Company has entered into interest rate swaps as detailed below:
Maturity date
January 14, 2023
February 28, 2022
Debt facility
Term debt
Non-revolving term facility
Notional amount
hedged
Fixed interest rate
Financial instrument
classification
Fair value of hedging
instrument
$
3,667
175,000
3.69%
4.51%
FVTPL $
Cash flow hedge
(51)
(2,685)
In the year ended December 31, 2020, the Company entered into an interest rate swap to effectively exchange the variable interest rate on $175,000 of
the non-revolving term facility for a fixed rate of 4.51% per annum through the use of forward-purchase contracts that mature on February 28, 2022. The
Company has applied hedge accounting to this relationship, whereby the change in fair value of the effective portion of the hedging derivatives is
recognized in accumulated other comprehensive income. Settlement of both the fixed and variable portions of the interest rate swap occurs on a monthly
basis. The full amount of the hedge was determined to be effective as at December 31, 2020 as all critical terms matched during the year.
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 30).
20. Dream Impact Trust units
The Company accounts for the 74% interest in Dream Impact Trust held by other unitholders as a financial liability measured at FVTPL (December 31, 2019
- 77%). As at December 31, 2020, the Trust units had a fair value of $289,330 based on the trading price on the TSX. The movement in Dream Impact Trust
units is as follows:
Balance, beginning of year
Units acquired by the Company in the year
Units issued to other unitholders through distribution reinvestment plan
Units repurchased and cancelled by Dream Impact Trust
Deferred units exchanged for Dream Impact Trust units
Fair value adjustment
Balance, end of year
Units
53,042,384
—
—
(5,185,995)
125,333
—
47,981,722
2020
Total
411,078
—
—
(24,610)
878
(98,016)
289,330
$
$
Units
2019
Total
60,454,099
$
377,234
(2,820,155)
142,818
(4,876,984)
142,606
—
(21,049)
940
(38,053)
1,075
90,931
53,042,384
$
411,078
In the year ended December 31, 2020, the Company, through Dream Impact Trust, declared cash distributions on the Trust units of $20,252 owing to other
unitholders (year ended December 31, 2019 - distributions of $22,581, of which $21,641 was paid in cash).
In the year ended December 31, 2020, the Company recognized a gain related to Dream Impact Trust units of $77,764 in the consolidated statements of
earnings, comprising a fair value gain of $98,016 due to a decrease in Dream Impact Trust's trading price, partially offset by distributions to other
unitholders of $20,252 (year ended December 31, 2019 - expense of $113,512 comprising a fair value loss of $90,931 due to changes in Dream Impact
Trust's trading price and distributions to other unitholders of $22,581).
Dream Unlimited Corp. – December 31, 2020 | 66
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
21. Income taxes
In the year ended December 31, 2020, the Company recognized an income tax expense of $37,982 (year ended December 31, 2019 – $108,681), 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 income 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
Income tax expense
2020
2019
17,995 $
984
7,780
26,759
10,750
200
273
11,223
37,982 $
107,201
(555)
2,973
109,619
898
(374)
(1,462)
(938)
108,681
$
$
Due to non-coterminous tax years of the Company’s partnership and trust interests, income of approximately $28,674 for the year ended December 31,
2020 (year ended December 31, 2019 – $1,123) relating to such partnership and trust interests will be included in computing the Company’s taxable
income for its 2021 and 2020 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 26.1% (December 31, 2019 - 26.6%) as presented in the table below. Cash paid for income taxes for the year ended
December 31, 2020 was $116,781 (year ended December 31, 2019 – $5,452).
Earnings before tax at statutory rate of 26.1% (2019 - 26.6%)
Effect on taxes of:
Non-deductible expenses
Adjustment in expected future tax rates
Tax adjustments in respect of prior years
Non-taxable portion of capital gains
Other items
Income tax expense
$
$
2020
51,579
873
273
1,184
(24,172)
8,245
37,982
$
2019
117,153
930
(1,462)
(930)
(9,050)
2,040
$
108,681
The movement in the deferred income taxes in the year ended December 31, 2020 and the year ended December 31, 2019, and the net components of the
Company’s net deferred income tax liabilities, are presented in the following table:
Asset (Liability)
Balance, January 1, 2019
(Charged) credited to:
Loss (earnings) for the year
Gain on sale of assets held for sale
Other comprehensive income
Balance, December 31, 2019
(Charged) credited to:
Loss (earnings) for the year
Other comprehensive loss
Balance, December 31, 2020
Accounts
receivable
Real estate and
assets held for
sale
Non-
coterminous
tax year
Financial
instruments/
equity
accounted
investments
Loss carry-
forwards
Total
$
(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)
$
(6,309) $
(59,394) $
(297) $
(33,699) $
5,802 $
(93,897)
(4,295)
—
(10,604) $
11,406
(55)
(48,043) $
(7,257)
—
(7,554) $
(15,932)
586
(49,045) $
4,855
—
10,657 $
(11,223)
531
(104,589)
$
As at December 31, 2020, the Company had tax losses of $13,427 (December 31, 2019 – $16,040) that expire between 2025 and 2040. 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.
Dream Unlimited Corp. – December 31, 2020 | 67
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
22. 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(1)
43,454,572
1,557,356
45,011,928
$
$
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 and PSUs exercised, net of withholding taxes
Subordinate Voting Shares repurchased
Issued and outstanding, end of year
Number of shares(1)
51,101,471
33
74,649
(7,721,581)
43,454,572
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(1)
1,557,389
(33)
1,557,356
$
$
$
$
2020
Amount
985,493
38,782
1,024,275
2020
Amount
1,154,779
1
1,146
(170,433)
985,493
2020
Amount
38,783
(1)
38,782
Number of shares(1)
51,101,471
$
1,557,389
52,658,860
$
2019
Amount
1,154,779
38,783
1,193,562
2019
Amount
Number of shares(1)
52,107,597
$
1,171,034
126
14,250
(1,020,502)
51,101,471
$
2
221
(16,478)
1,154,779
Number of shares(1)
1,557,515
$
(126)
1,557,389
$
2019
Amount
38,785
(2)
38,783
(1) Number of shares reflects the Share Consolidation as described in Note 2 for the years ended December 31, 2020 and 2019.
Share Repurchases
In the year ended December 31, 2020, the Company completed a substantial issuer bid and purchased for cancellation 5,000,000 Subordinate Voting
Shares at a price of $23.50 per share for aggregate proceeds of $117,500.
The Company renewed its normal course issuer bid ("NCIB"), which commenced on September 21, 2020, under which the Company has the ability to
purchase for cancellation up to a maximum number of 2,604,395 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 25,412 shares, except where purchases are made in
accordance with block purchase exemptions under applicable TSX rules.
In connection with the renewal of the NCIB, 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 NCIB 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 20,
2021.
In the year ended December 31, 2020, 2,721,581 Subordinate Voting Shares were purchased for cancellation by the Company under its NCIB at an average
price of $19.45 (year ended December 31, 2019 – 1,020,503 Subordinate Voting Shares at an average price of $16.14).
Subsequent to the year ended December 31, 2020, the Company purchased an additional 883,432 Subordinate Voting Shares for cancellation at a total
purchase price of $18,581.
Dividends
In the year ended December 31, 2020, the Company announced an increase to the annual dividend from $0.12 to $0.24 per Subordinate Voting Share and
Class B Share, effective with the dividend paid to shareholders on September 30, 2020. In the year ended December 31, 2020, the Company declared
dividends of $11,164 on its Subordinate Voting Shares and Class B Shares (year ended December 31, 2019 - $10,615).
Dream Unlimited Corp. – December 31, 2020 | 68
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
23. Accumulated other comprehensive income
The movement in AOCI is as follows:
Balance, January 1, 2019
Other comprehensive income (loss) during the year
Balance, December 31, 2019
Other comprehensive income (loss) during the year
Balance, December 31, 2020
24. Non-controlling interest
Interest rate
hedges
Foreign currency
translation
Equity
accounted
investments
$
$
(329)
$
9,742
$
1,966
$
329
—
(1,977)
(1,977)
$
(699)
9,043
(259)
8,784
$
(623)
1,343
802
2,145
$
Total
11,379
(993)
10,386
(1,434)
8,952
Non-controlling interest represents a third-party interest in the Company's Zibi investment, a 34-acre mixed-use waterfront community situated along the
Ottawa River in Gatineau, Quebec and Ottawa, Ontario. As of December 31, 2020, the Company holds an 88.9% economic interest in the project
(December 31, 2019 - 80.0%).
The movement in non-controlling interest is as follows:
Balance, beginning of year
Earnings (loss) for the year
Change in interest in subsidiary
Distributions to non-controlling interests
Contributions from non-controlling interests
Balance, end of year
25. Revenue
Revenue consisted of the following:
Revenue from contracts with customers
Revenue from other sources - lending portfolio
Revenue from other sources - rental income
Total revenue
Revenue from Contracts with Customers
The following table disaggregates revenue by major revenue stream and timing of revenue recognition:
$
$
$
$
2020
21,649 $
417
(7,100)
—
—
14,966 $
2020
317,872 $
4,103
25,648
347,623 $
Revenue
Less: Intercompany revenue
Revenue from external customers
Timing of revenue recognition
At a point in time
Over time
$
$
$
$
Land
140,214 $
(635)
139,579 $
Housing and
condominium
Investment
properties
Recreational
properties
Asset
management
125,045 $
(11,188)
113,857 $
11,556 $
28,549 $
—
—
11,556 $
28,549 $
29,874 $
(5,543)
24,331 $
139,579 $
113,857 $
— $
22,091 $
—
—
139,579 $
113,857 $
11,556
11,556 $
6,458
28,549 $
4,278 $
20,053
24,331 $
279,805
38,067
317,872
Dream Unlimited Corp. – December 31, 2020 | 69
2019
16,329
(501)
—
(1,879)
7,700
21,649
2019
540,538
12,809
27,083
580,430
2020
Total
335,238
(17,366)
317,872
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Revenue
Less: Intercompany revenue
Revenue from external customers
Timing of revenue recognition
At a point in time
Over time
$
$
$
$
Renewable
power
Land
Housing and
condominium
Investment
properties
Recreational
properties
Asset
management
15,853 $
63,253 $
—
—
15,853 $
63,253 $
96,799 $
(12,059)
84,740 $
15,674 $
50,355 $
319,741 $
—
—
(9,078)
15,674 $
50,355 $
310,663 $
— $
63,253 $
84,740 $
— $
42,003 $
8,487 $
15,853
15,853 $
—
—
63,253 $
84,740 $
15,674
15,674 $
8,352
302,176
50,355 $
310,663 $
2019
Total
561,675
(21,137)
540,538
198,483
342,055
540,538
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.
Aggregate amount of the transaction price allocated to contracts that are
partially or fully unsatisfied as at December 31, 2020
$
84,020 $
22,898 $
61,122 $
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.
Performance obligation expected to be fully satisfied by
Contract value at
Dream's share
2021
2022
2023
—
Revenue Recognized in Relation to Contract Liabilities
The following table summarizes revenue recognized in the current reporting year relating to the prior year's deferred revenue. There was no revenue
recognized in the current reporting year that relates to performance obligations satisfied in a prior year.
Revenue recognized that was included in deferred revenue at the beginning of the year
$
2020
6,213 $
2019
6,774
26. 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 development and asset management
Direct costs of renewable power
$
$
2020
176,807 $
44,434
21,228
—
242,469 $
2019
132,189
58,967
19,524
5,516
216,196
In the year ended December 31, 2020, the Company has qualified for certain government grants and has recognized a reduction in direct costs of operating
investment and recreational properties of $2,276 (December 31, 2019 - $nil).
27. 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
$
$
2020
13,075 $
13,024
6,735
32,834 $
2019
16,720
13,380
9,138
39,238
Dream Unlimited Corp. – December 31, 2020 | 70
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
28. 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
$
$
2020
9,033 $
5,564
2,084
16,681 $
2019
13,598
7,548
3,202
24,348
For the year ended December 31, 2020, the Company has qualified for certain government grants and has recognized a reduction in salary and other
compensation costs of $3,613 (December 31, 2019 - $nil).
29. Investment and other income
Investment and other income consisted of the following:
Interest and other income
Distributions from Dream Global REIT
30. 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 19)
Project-specific interest capitalized to real estate development projects
Total
$
$
$
$
2020
8,571 $
—
8,571 $
2020
22,933 $
9,803
—
1,400
—
(10,295)
23,841 $
2019
7,556
2,609
10,165
2019
30,102
16,662
1,948
2,082
1,935
(10,826)
41,903
Interest expense was capitalized to real estate development projects for the year ended December 31, 2020 at a weighted average effective borrowing
rate of 3.46% (year ended December 31, 2019 - 4.87%).
31. 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.
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. There were no transfers between hierarchy levels during the year.
Dream Unlimited Corp. – December 31, 2020 | 71
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Recurring measurement
Financial assets
Participating mortgages
Investment holdings
Other instruments
Lending portfolio
Financial liabilities
Dream Impact Trust units
Interest rate swaps
Fair values disclosed
Investment holdings
Lending portfolio
Construction loans
Mortgages and term debt
Non-revolving term facility
Fair value
hierarchy
Carrying value
Fair value
Carrying value
Fair value
2020
2019
Level 3
Level 3
Level 3
Level 3
Level 1
Level 3
Level 2
Level 3
Level 3
Level 3
Level 3
$
$
22,084
52,961
—
6,762
289,330
2,736
39,979
16,486
221,952
331,472
202,452
22,084
52,961
—
6,762
289,330
2,736
40,517
16,486
221,046
335,278
203,000
$
$
66,210
50,206
4,952
7,301
66,210
50,206
4,952
7,301
411,078
411,078
—
—
57,404
217,341
257,509
224,105
—
—
57,195
217,257
257,126
225,000
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 Impact Trust units is based on the listed market price on the TSX as at December 31, 2020 of $6.03 per share for the
47,981,722 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,
2020 is the discount rate of 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/(decrease) by 1%, the fair value of the participating mortgages would increase/
(decrease) by $100.
Interest Rate Swaps
The fair value measurements of the interest rate swaps were valued by qualified external valuators based on the present value of the estimated future
cash flow determined using observable yield curves.
Investment Holdings
The fair value of investment holdings is determined using a discounted cash flow method in which the income and expenses are projected over the
anticipated term of the investment plus a terminal value discounted using an appropriate discount rate. The significant unobservable input as at December
31, 2020 is the discount rate of 10.0% and terminal capitalization rate of 7.0%.
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,
2020 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%.
The market interest rates were determined taking into consideration similar instruments with corresponding maturity dates, plus a credit adjustment in
Dream Unlimited Corp. – December 31, 2020 | 72
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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 approximates the carrying value excluding unamortized financing costs given its 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. On a quarterly basis, management will review the valuation policies, procedures and analysis of changes in fair value
measurements. Refer to Note 7 for a continuity of the Company's lending portfolio balance.
Balance, December 31, 2019
Issued or acquired during the year:
Acquired during the year
Contributions (distributions)
Dispositions/extinguishment
Total gains or losses for the year included in net earnings:
Change in fair value
Amortization
Foreign currency gain (loss)
Included in other comprehensive income:
Change in fair value
Balance, December 31, 2020
Balance, December 31, 2018
Issued or received during the year:
DTUs
DTUs vested during the year
Contributions
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
Interest rate swaps
Participating mortgages
$
50,206 $
12 $
66,211
41,568
3,947
(189)
92
(1,588)
(1,096)
—
—
—
(67)
—
4
$
—
92,940 $
(2,685)
(2,736) $
—
(43,150)
—
(977)
—
—
—
22,084
Investment
holdings
Investment
in Dream
Global REIT -
DTUs
Redemption
option on
Preference
shares, series 1
Interest rate
swaps(1)
Participating
mortgages
Retraction
option on
Preference
shares, series 1
$
73,085 $
20,844 $
28 $
(527) $
64,765 $
(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 $
—
66,211 $
—
—
—
143
89
—
—
—
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.
Dream Unlimited Corp. – December 31, 2020 | 73
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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.
As a result of the economic impact of COVID-19, the Company has performed additional procedures to assess the fair value of its loan investments to
ensure the Company applied sound judgment with respect to the various assumptions impacting the valuation. The procedures included scenario testing
to evaluate downside risk, borrowers' creditworthiness and risk characteristics of its underlying developments, which impact the underlying valuation of
the asset. The Company took into consideration the market conditions existing at the reporting date and will continue to monitor changes in the market
and assumptions used to determine the fair value of the Company's assets. In the year ended December 31, 2020, the Company recognized an additional
$2,882 provision on its lending portfolio as a result of the value of underlying real estate properties and estimated transaction costs.
The Company’s liability associated with the Dream Impact Trust units is fair valued in reference to Dream Impact Trust's unit trading price as listed on the
TSX. A 10% absolute change in the market price of the Dream Impact Trust units would increase (decrease) the carrying amount of the liability by $28,933,
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.
Credit risk related to investment properties and certain investment holdings arises from the possibility that tenants may not fulfill their lease or contractual
obligations. The Company mitigates its credit risks from its tenants by attracting tenants of sound financial standing and by diversifying its tenant mix.
COVID-19 and the measures to reduce its impact have created significant uncertainty in the general economy. A deterioration in the economy may impact
the ability of tenants to meet their obligations under their leases or contracts due to the negative impact of the outbreak of COVID-19. The Company has
assessed the effect of the current economic conditions on the credit risk of our tenants and counterparties, which included the review of the risk profiles of
its tenant base. As at December 31, 2020, the Company determined there to be a minimal impact on the Company's financial results. For the three months
ended December 31, 2020, the Company's average monthly rental collection exceeded 89%.
Credit risk may also arise from a borrower that 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. Credit risk related to financial guarantees provided by the Company arises from the possibility that counterparties
default on their financial obligations. The Company mitigates these risks by actively monitoring the mortgage/loan receivables, loan investment and
financial guarantees, and initiating recovery procedures, in a timely manner, when required. Further considerations were taken on the fair value of certain
loans within the lending portfolio as discussed below.
Credit risk may also arise from a customer that may not be able to close financing on a land lot or condominium unit previously occupied and recognized in
revenue. The Company mitigates this risk by requiring deposits on signing, mortgage pre-approvals on initial deposit, actively monitoring collection of
interim occupancy payments, working closely with project-specific mortgage brokers, where applicable, retaining title to the underlying land or unit until
final closing, and initiating recovery procedures when required.
The maximum exposure to credit risk at December 31, 2020 was the fair value of the Company's accounts receivable from previously recognized land and
condominium revenue, participating mortgages, loans receivable, the contractual value of its lending portfolio which, including interest receivable, and
contingent liabilities for the obligation of other owners of the unincorporated joint operations and joint ventures was $577,744 (December 31, 2019 -
$413,257). The Company has recourse under these investments in the event of default by the counterparty, in which case the Company would have a claim
against the underlying collateral.
Dream Unlimited Corp. – December 31, 2020 | 74
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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,
variable rate debt represented 62% (December 31, 2019 – 72%) of total debt obligations as at December 31, 2020. 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 19 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, 2020, 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.
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 actively monitors both project-specific and corporate-level debt
covenant compliance in addition to the Company's availability under the operating lines and margin facility.
As at December 31, 2020, the Company had $426,136 in corporate-level cash and available under various revolving facilities. As at December 31, 2020, the
Company has sufficient liquidity available to cover obligations as they become due.
A summary of the Company’s weighted average effective interest rates as at December 31, 2020 is as follows:
Weighted average effective interest rates
Fixed rate
Construction loans
Mortgages and term debt
Total fixed rate debt
Variable rate
Construction loans
Mortgages and term debt
Operating line
Non-revolving term facility
Margin facility
Total variable rate debt
Total debt
2020
1.75%
3.53%
3.47%
3.24%
3.75%
2.98%
2.99%
2.98%
3.19%
3.30%
2019
Maturity dates
2020
—%
4.08%
4.08%
4.79%
4.70%
4.64%
5.08%
4.56%
4.91%
4.63%
2030 $
2021-2027
2021-2023
2021-2023
2023
2022
2021
$
10,000 $
275,889
285,889
211,952
55,583
—
202,452
—
469,987
755,876 $
The following table summarizes the aggregate of the scheduled principal repayments and debt maturities as at December 31, 2020:
2021
2022
2023
2024
2025 and thereafter
Discount/unamortized premium/financing costs
Construction loans Mortgages and term debt Non-revolving term facility
182,267 $
75,170 $
23,436
6,249
—
10,000
221,952
—
221,952 $
84,150
17,823
9,507
146,137
332,787
(1,315)
331,472 $
— $
203,000
—
—
—
203,000
(548)
202,452 $
$
$
Debt amount
2019
—
195,771
195,771
217,341
61,738
—
224,105
—
503,184
698,955
Total
257,437
310,586
24,072
9,507
156,137
757,739
(1,863)
755,876
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, 2020 | 75
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
32. 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
2020
Weighted average
exercise price
16.62
24.94
15.92
17.76
17.00
17.06
$
$
$
Options
1,006,470
42,145
(54,583)
(19,750)
974,282
821,747
2019
Weighted average
exercise price
16.78
14.36
15.52
15.52
16.62
17.28
Options
949,050
$
74,587
(14,250)
(2,917)
1,006,470
697,072
$
$
As at December 31, 2020, 974,282 options were outstanding under the stock option plan collectively. The fair value of the stock options granted in the year
ended December 31, 2020 was estimated on the historical grant date using the Black Scholes option pricing model with the following weighted average
assumptions:
Risk-free interest rate
Estimated volatility(1)
Expected life
Contractual life
Expected dividend yield
1.2%
21.5%
6.5 years
10 years
1.0%
(1) Estimated volatility is based on a blended rate of market comparables and the Company's historical volatility.
In the year ended December 31, 2020, the Company recognized an expense of $210 (year ended December 31, 2019 – $437) relating to share-based
compensation for stock options, recorded 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
PSUs added by performance factor
Reinvested
Exercised
Units outstanding, end of year
2020
Weighted average fair
value at grant date
14.16
24.94
18.30
13.20
16.30
13.20
16.27
$
$
Units
492,198
123,658
(33,708)
16,559
7,429
(28,558)
577,578
2019
Weighted average fair
value at grant date
14.06
14.36
—
—
14.16
—
14.16
Units
317,118
$
169,465
—
—
5,615
—
492,198
$
In the year ended December 31, 2020, compensation expense of $2,758 (year ended December 31, 2019 – $2,093) related to this plan was recognized in
general and administrative expense.
The fair value of PSUs granted in the year ended December 31, 2020 was estimated on the historical grant date with the following assumptions:
Risk-free interest rate
Expected life
Contractual life
Expected dividend yield
1.3%
3 years
10 years
1.0%
Dream Unlimited Corp. – December 31, 2020 | 76
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, 2020, there were 233,446 units outstanding (December 31, 2019 – 187,740 units outstanding). In the year ended
December 31, 2020, compensation expense of $799 (year ended December 31, 2019 – $798) related to this plan was recognized in general and
administrative expense.
Units outstanding, beginning of year
Granted
Reinvested
Units outstanding, end of year
2020
187,740
43,077
2,629
233,446
The net changes in contributed surplus relating to share-based compensation for the stock option plan, PSU plan and DSU plan were as follows:
Balance, beginning of year
Granted and added by performance factor, net of forfeitures
Dividends reinvested
Exercised
Balance, end of year
33. Earnings per share
$
$
2020
11,410
3,767
194
(417)
14,954
$
$
2019
136,849
49,013
1,878
187,740
2019
8,049
3,328
33
—
11,410
Basic earnings per share is calculated by dividing the Company’s earnings attributable to 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 shareholders of the Company by the weighted average
number of shares outstanding after the dilutive effect of the stock options, performance 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 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(1):
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 the end of the year:
Share-based compensation(2)
Preference shares, series 1
Total weighted average number of shares outstanding after dilution
Basic earnings per share(1)
Diluted earnings per share(1)
2020
159,221
—
159,221
$
$
45,705,065
1,557,361
47,262,426
783,557
—
48,045,983
3.37
3.31
$
$
$
$
$
$
2019
332,246
2,028
334,274
51,586,115
1,557,411
53,143,526
449,099
1,258,735
54,851,360
6.25
6.09
(1) Weighted average number of shares outstanding, basic earnings (loss) per share and diluted earnings (loss) per share reflect the Share Consolidation as described in Note 2. Accordingly, the
comparative years have been restated.
(2) For the year ended December 31, 2020, 121,997 stock options (including PSUs) were considered anti-dilutive (year ended December 31, 2019 – 500,149 stock options (including PSUs)).
Dream Unlimited Corp. – December 31, 2020 | 77
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
34. Capital management
The Company’s capital consists of debt and shareholders’ equity. The Company’s objectives in managing capital are to:
i)
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
ii)
iii)
iv) Generate a targeted rate of return on its investments.
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.
35. 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 $70,716 (December 31, 2019 – $82,627). 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 $8,970 (December 31, 2019 – $1,170) 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.
The Company is committed to remaining deposit payments to acquire assets in the future of $1,525 (December 31, 2019 - $nil) relating to land in
Saskatoon, Saskatchewan.
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 $356,195 as at
December 31, 2020 (December 31, 2019 – $159,088). These guarantees include contingent liabilities for certain obligations of our joint venture partners,
which are exclusive of our share of those guarantees that are included in our equity accounted investments on the statements of financial position.
However, the Company would have available to it the other co-venturers’ share of assets to satisfy any obligations that may arise. From time to time, the
Company may be required to fund capital contributions to its various investments.
In the year ended December 31, 2020, the requirement of the Company, through a subsidiary of Dream Impact Trust, to provide a guarantee pursuant to a
senior construction loan associated with a participating mortgage was extinguished with the repayment of the senior construction loan. Guarantees of the
other underlying development project loan amounts of third parties were $nil (December 31, 2019 - $34,423). As at December 31, 2020, the Company is
contingently liable under guarantees that are issued on certain debt assumed by purchasers of income properties up to an amount of $2,597 (December
31, 2019 - $2,729).
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.
36. Asset management and management services agreements and related party transactions
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.
Dream Unlimited Corp. – December 31, 2020 | 78
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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 year ended December 31, 2020 and 2019, the Company earned/recovered the following amounts pursuant to the asset management and shared
services agreements with Dream Industrial REIT:
Asset management fees charged by Dream(1)
Cost recoveries charged by Dream
$
2020
11,344 $
1,219
2019
8,232
716
(1) Included in asset management fees charged to Dream Industrial REIT for the year ended December 31, 2020 and 2019 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
$2,070 (December 31, 2019 - $935).
Dream Office REIT
In 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.
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 earned/recovered under the shared services agreement during the year ended December 31, 2020 and 2019 are as follows:
Cost recoveries charged by Dream to 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
$
2020
1,580 $
8,595
2,353
225
2019
1,897
7,064
1,473
221
The amount owing to Dream Office REIT as of December 31, 2020 was $42 (December 31, 2019 – $263).
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 provided 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
Distributions Earned from Investments
The Company earned distributions from Dream Office REIT (Note 14).
$
$
120,000
13,127
2,347
135,474
Dream Unlimited Corp. – December 31, 2020 | 79
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
Other Transactions
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, 2020, the Company had funded $1,133 into Range Road
(December 31, 2019 - $1,016).
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, 2020, the Company had funded $6,790 into Alate Partners (December 31, 2019 - $4,616).
Compensation of Key Management
Compensation expense for the year for key management personnel, including the President and Chief Responsible Officer, Chief Financial Officer, Chief
Investment Officer, Vice-Chair, Development, President of Asset Management, and the Company's directors, is shown in the table below.
Compensation and benefits
Share-based compensation
Directors' fees
37. 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
Non-cash contribution to equity accounted investment
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
$
$
$
$
$
$
$
$
2020
5,330 $
2,781
882
8,993 $
2020
—
(1,775)
3,544
4,930
—
(8,315)
—
(1,666)
(3,282)
2020
(6,276)
(1,433)
(96,270)
(5,813)
(2,456)
(1,875)
4,619
(109,504)
2020
184,954
167
185,121
$
$
$
$
$
$
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)
11,924
104,832
3,000
(508)
9,008
(5,812)
85,866
2019
388,337
184
388,521
Dream Unlimited Corp. – December 31, 2020 | 80
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
38. Segmented information
During the year ended December 31, 2020, the Company has reviewed and reassessed its segment reporting taking into consideration how the Company
presents information for financial reporting and management decision making. The Company has determined that a change in reportable operating
segments was required and has retrospectively applied the below segment presentation for all years presented.
The Company's new operating segments are as follows:
•
•
Recurring income: Comprised of our asset management and development management agreements with Dream Industrial REIT, Dream Office REIT
and various development partners, a 32% equity interest in Dream Office REIT, Dream Impact Trust's lending portfolio, and our stabilized income
producing assets in the Greater Toronto Area ("GTA"), Western Canada and Colorado.
Development: Comprised of mixed-use developments in the GTA and Ottawa/Gatineau, land, housing and retail/commercial development in
Saskatchewan and Alberta, and Dream Impact Trust's investment in the Virgin Hotels Las Vegas.
While not considered an individual reportable segment, Corporate and other includes: corporate-level cash and other working capital, consolidated tax
balances and expense, our term facility and related interest expense, general and administrative expenses not allocated to a particular segment and the
liability and fair value adjustments to Dream Impact Trust units held by other unitholders.
Management has determined the operating segments based on how the President and Chief Responsible Officer and senior management review the
business and manage risk. 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.
Segmented Statement of Earnings
Segmented revenue and expenditures for the year ended December 31, 2020 and 2019 are as follows:
Recurring income
Development
Corporate and other
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
Interest expense
Fair value changes in financial instruments
Net segment earnings (loss)
General and administrative expenses(1)
Adjustments related to Dream Impact Trust units(1)
Income tax expense(1)
Net earnings(2)
$
$
$
92,229 $
(65,007)
27,222
(6,585)
20,637
72
65,801
427
(9,706)
(2,949)
74,282 $
255,394 $
(177,462)
77,932
(26,249)
51,683
1,651
16,893
6,432
(3,189)
(1,981)
71,489 $
74,282 $
71,489 $
(1) Certain line items are included in Corporate and other as balances are reviewed on a consolidated basis.
(2) Includes earnings attributable to non-controlling interest.
— $
—
—
—
—
—
—
1,712
(10,946)
—
(9,234) $
(16,681)
77,764
(37,982)
13,867 $
2020
Consolidated Dream
347,623
(242,469)
105,154
(32,834)
72,320
1,723
82,694
8,571
(23,841)
(4,930)
136,537
(16,681)
77,764
(37,982)
159,638
Dream Unlimited Corp. – December 31, 2020 | 81
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
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(1)
Adjustments related to Dream Impact Trust units(1)
Income tax recovery(1)
Net earnings (loss)(2)
$
$
$
Recurring income
Development
Corporate and other
431,142 $
(83,088)
348,054
(6,842)
341,212
40,239
63,025
3,592
(8,515)
(17,672)
135,474
28,400
585,755 $
149,288 $
(133,108)
16,180
(32,396)
(16,216)
722
30,326
5,454
—
(6,776)
—
(4,844)
8,666 $
585,755 $
8,666 $
— $
—
—
—
—
—
—
1,119
—
(17,455)
—
201
(16,135) $
(24,348)
(113,512)
(108,681)
(262,676) $
(1) Certain line items are included in Corporate and other as balances are reviewed on a consolidated basis.
(2) Includes earnings attributable to non-controlling interest.
Segmented Assets and Liabilities
Segmented assets and liabilities as at December 31, 2020 and December 31, 2019 were as follows:
2019
Consolidated Dream
580,430
(216,196)
364,234
(39,238)
324,996
40,961
93,351
10,165
(8,515)
(41,903)
135,474
23,757
578,286
(24,348)
(113,512)
(108,681)
331,745
2020
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
Total assets
Liabilities
Accounts payable and other liabilities
Income and other taxes payable(1)
Provision for real estate development costs
Debt
Dream Impact Trust units(1)
Deferred income taxes(1)
Total liabilities
Non-controlling interest
Shareholders' equity
Total equity
Recurring income
Development
Corporate and other
Consolidated Dream
$
13,136 $
21,630 $
15,205
41,240
23,248
—
—
764
426,632
60,560
531,113
179,257
135,989
—
29,195
248,506
484,074
193,240
—
231,539
150,355 $
6,428
—
—
—
—
—
—
—
—
$
$
$
$
6,973
1,118,871 $
37,494
1,560,924 $
7,795
164,578 $
39,879 $
141,031 $
—
—
273,395
—
—
—
31,040
280,029
—
—
313,274 $
452,100 $
—
805,597
805,597 $
14,966
1,093,858
1,108,824 $
17,925 $
58,091
—
202,452
289,330
104,589
672,387 $
—
(507,809)
(507,809) $
185,121
200,890
177,229
23,248
29,195
248,506
484,838
619,872
60,560
762,652
52,262
2,844,373
198,835
58,091
31,040
755,876
289,330
104,589
1,437,761
14,966
1,391,646
1,406,612
(1) Certain liabilities are included in Corporate and other as balances are reviewed on a consolidated basis.
Dream Unlimited Corp. – December 31, 2020 | 82
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
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(1)
Provision for real estate development costs
Debt
Dream Impact Trust units(1)
Deferred income taxes(1)
Total liabilities
Non-controlling interest
Recurring income
Development
Corporate and other
Consolidated Dream
2019
$
$
$
$
11,518 $
11,093
—
64,705
—
—
786
419,991
48,779
520,284
6,956
49,089
31,327 $
188,555
129,456
—
38,607
291,304
537,785
98,433
—
188,556
42,350
—
345,676 $
2,510
—
—
—
—
—
—
—
—
6,273
—
388,521
202,158
129,456
64,705
38,607
291,304
538,571
518,424
48,779
708,840
55,579
49,089
1,133,201 $
1,546,373 $
354,459 $
3,034,033
52,413 $
136,154 $
—
—
203,450
—
—
—
36,853
271,400
—
—
17,713 $
154,361
—
224,105
411,078
93,897
206,280
154,361
36,853
698,955
411,078
93,897
255,863 $
444,407 $
901,154 $
1,601,424
Shareholders' equity
Total equity
(1) Certain liabilities are included in Corporate and other as balances are reviewed on a consolidated basis.
$
877,338 $
877,338
—
21,649
1,080,317
1,101,966 $
—
(546,695)
(546,695) $
21,649
1,410,960
1,432,609
Dream Unlimited Corp. – December 31, 2020 | 83
Notes to the Consolidated Financial Statements
(in thousands of Canadian dollars, except numbers of shares and per share amounts)
______________________________________________________________________________________________________________________________________________
39. 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
Total assets
Liabilities
Accounts payable and accrued liabilities
Income and other taxes payable
Provision for real estate development costs
Debt(1)
Dream Impact Trust units(2)
Deferred income taxes
Less than
12 months
Greater than
12 months
Non-determinable
$
185,121 $
— $
180,039
26,241
9,497
—
—
—
—
—
—
2,293
403,191 $
20,851
150,988
13,751
—
—
—
619,872
60,560
—
49,969
120,480 $
35,531 $
58,091
31,040
252,522
—
—
—
—
503,354
—
104,589
$
$
915,991 $
1,525,191 $
2020
Total
185,121
200,890
177,229
23,248
29,195
248,506
484,838
619,872
60,560
762,652
52,262
2,844,373
198,835
58,091
31,040
755,876
289,330
104,589
1,437,761
— $
—
—
—
29,195
248,506
484,838
—
—
762,652
—
42,824 $
—
—
—
289,330
—
332,154 $
Total liabilities
$
462,133 $
643,474 $
(1) The amounts presented are shown consistent with the contractual terms of repayment, which may be due on demand.
(2) Dream Impact Trust units may be redeemed at the option of the holder with no expiry date.
Dream Unlimited Corp. – December 31, 2020 | 84
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
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
Debt(1)
Dream Impact 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
—
—
December 31, 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 $
50,243 $
154,361
36,853
161,411
—
—
—
—
537,544
—
93,897
—
—
—
411,078
—
206,280
154,361
36,853
698,955
411,078
93,897
$
485,373 $
654,730 $
461,321 $
1,601,424
(1) The amounts presented are shown consistent with the contractual terms of repayment, which may be due on demand.
(2) Dream Impact Trust units may be redeemed at the option of the holder with no expiry date.
40. Comparative figures
Certain comparative balances have been reclassified from the consolidated financial statements previously presented to conform to the presentation of
the 2020 consolidated financial statements. Refer to Note 38 for details of the Company's new reportable operating segments.
41. Subsequent events
Subsequent to December 31, 2020, the Company entered into an agreement to dispose of 45% of its interest in the U.S. Multi-family portfolio to a newly
formed partnership with PaulsCorp and a global investment manager. The partnership entered into an agreement to acquire 792 apartment units in
Phoenix, Arizona for US$120 million.
Dream Unlimited Corp. – December 31, 2020 | 85
Dream Unlimited Corp. – December 31, 2020 | 86
Directors
Michael J. Cooper4
Toronto, Ontario
President & Chief Responsible Officer
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
P. Jane Gavan4
Toronto, Ontario
President, Asset Management
Dream Unlimited Corp.
Duncan JackmanInd.
Toronto, Ontario
Chairman, President & CEO
E-L Financial Corporation Limited
Jennifer Lee KossInd.,1,2
Toronto, Ontario
Co-Founder & 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
Management Team
Michael J. Cooper
President & Chief Responsible Officer
Deborah Starkman
Chief Financial Officer
P. Jane Gavan
President, Asset Management
Jason Lester
Vice Chair, Development
Jay Jiang
Executive Vice President, Corporate
Development and Strategy
Gordon Wadley
Executive Vice President, Commercial
Properties
Meaghan Peloso
Vice President and Chief Accounting Officer
Tsering Yangki
Vice President, Debt and Real Estate
Finance
Rahul Idnani
President, Dream Equity Partners
Robert Hughes
General Counsel and Corporate Secretary
30 Adelaide Street East,
Toronto, ON
Corporate Information
HEAD OFFICE
TRANSFER AGENT
CORPORATE COUNSEL
Dream Unlimited Corp.
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 Symbol: Subordinate Voting Shares:
DRM
For more information, please visit
dream.ca
Corporate Office
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