Dream Office REIT Reports Q1 2025 Results
This press release contains forward-looking information that is based upon assumptions and is subject to risks and uncertainties as indicated in the cautionary note contained within this press release. All dollar amounts in our tables are presented in thousands of Canadian dollars, except for rental rates and per unit amounts, unless otherwise stated.
TORONTO--(BUSINESS WIRE)--May 08, 2025--
DREAM OFFICE REAL ESTATE INVESTMENT TRUST (D.UN-TSX) ("Dream Office REIT", the "Trust" or "we") today announced its financial results for the three months ended March 31, 2025. The Trust's annual meeting of unitholders will be held on Tuesday, June 3, 2025 at 12:00 p.m. $(ET)$.
OPERATIONAL HIGHLIGHTS AND
UPDATE
(unaudited)
As at
-------------------------------------
March 31, December 31, March 31,
2025 2024 2024
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Total properties(1)
Number of active properties 24 24 26
Number of properties under
development 2 2 2
Gross leasable area (in
millions of square feet) 4.8 4.8 5.1
Investment properties value $2,171,584 $ 2,175,015 $2,336,685
Total portfolio(2)
Occupancy rate -- including
committed (period-end) 81.2% 81.1% 83.5%
Occupancy rate -- in-place
(period-end) 78.4% 77.5% 79.3%
Average in-place and
committed net rent per
square foot (period-end) $ 27.39 $ 27.20 $ 26.78
Weighted average lease term
(years) 5.8 5.5 5.2
Occupancy rate -- including
committed -- Toronto
(period-end) 84.2% 83.8% 88.5%
Occupancy rate -- in-place --
Toronto (period-end) 80.0% 80.2% 83.7%
----------------------------- --------- ------------ ---------
See footnotes at end.
Three months ended
---------------------
March 31, March 31,
2025 2024
------------------------------------------------ --------- ---------
Operating results
Funds from operations ("FFO")(3) $ 13,276 $ 14,106
Comparative properties net operating income
("NOI")(4) 24,965 24,925
Net rental income 25,001 25,453
Net income (loss) (33,183) 11,866
Per unit amounts
Diluted FFO per unit(5)(6) $ 0.68 $ 0.73
Distribution rate per Unit(6) 0.25 0.33
------------------------------------------------ --------- ---------
See footnotes at end.
"In the first quarter of 2025, we made significant progress in reducing risk, enhancing liquidity and increasing our occupancy to strengthen our business and remain safe amidst a highly uncertain economic landscape," said Michael Cooper, Chief Executive Officer of Dream Office REIT. "We closed the transaction of 438 University Ave during the quarter and sold our interest in a vendor take-back mortgage receivable in Calgary subsequent to the quarter to immediately reduce debt and increase liquidity. We have also successfully completed all of our refinancings in 2025 and improved both our overall in-place and committed occupancy rates. This quarter marked one of our highest leasing velocity quarters since the end of 2019 with the Trust executing leases totalling approximately 255,000 square feet across our portfolio. We look forward to continuing to increase our committed occupancy and net operating income over the course of 2025."
In the midst of significant macro-economic and geopolitical uncertainties and ongoing challenges in the Canadian office real estate sector, the Trust remains committed to reducing risk and delivering stable operational and financial performance.
We believe our portfolio is strategically located, difficult to replace and uniquely positioned for long-term outperformance. Over the past seven years, we have invested capital in our best buildings in downtown Toronto, and the renovations are now substantially complete. This has resulted in a uniquely competitive portfolio that is well-positioned to attract high-quality tenants.
Relative to Q4 2024, our in-place occupancy increased from 77.5% to 78.4% and our in-place and committed occupancy rate increased slightly from 81.1% to 81.2%. The quarter-over-quarter increase of 0.9% in total portfolio in-place occupancy was primarily attributable to 47,000 square feet of positive absorption in Other markets. The quarter-over-quarter increase of 0.1% in total portfolio in-place and committed occupancy was primarily driven by a 0.4% increase in Toronto downtown due to positive leasing velocity during the quarter, partially offset by a decline of 0.5% in Other markets due to a net decrease in future leases committed in the region.
Year-over-year, total portfolio in-place occupancy decreased from 79.3% in Q1 2024 to 78.4% in Q1 2025 and our in-place and committed occupancy declined from 83.5% in Q1 2024 to 81.2% in Q1 2025. The decrease in total portfolio in-place occupancy was due to a 3.7% decline in Toronto downtown in-place occupancy year-over-year, partially offset by a year-over-year 4.0% increase in in-place occupancy in Other markets. The decrease in in-place occupancy in Toronto downtown was primarily driven by the lease expiry at 74 Victoria Street in Q4 2024 (-4.9%) and the sale of 438 University Avenue in Q1 2025 (-1.0%), partially offset by positive absorption in the remainder of the region totalling 67,000 square feet (+2.0%) and the effect of the reclassification of the fully occupied 366 Bay Street to active properties in Q3 2024 (+0.2%). The increase in in-place occupancy in Other markets was primarily driven by positive absorption in the region of 78,000 square feet (+4.3%) and the positive effect of the sale of the Saskatoon parking lot in Q3 2024 (+0.1%), net of the negative impact of the reclassification of 606-4th Building & Barclay Parkade to properties under development in Q4 2024 (-0.4%). The year-over-year decrease in total portfolio in-place and committed occupancy of 2.3% was primarily driven by negative absorption in Toronto downtown, partially offset by positive absorption in Other markets for the same reasons noted above. In addition, the Trust has conditional leases or leases in advanced stages of negotiation at 74 Victoria Street in Toronto downtown totalling 50,000 square feet, which are not currently reflected in occupancy in the region.
The Trust has 125,000 square feet of vacancy committed for future occupancy. In Toronto downtown, 74,000 square feet, or 2.6% of the region's total gross leasable area, is scheduled to commence in 2025 at net rents 25.1% higher than prior net rents on the same space with a weighted average lease term of 8.2 years, while 46,000 square feet is scheduled to commence in 2026 at net rents 25.1% higher than prior net rents on the same space with a weighted average lease term of 11.7 years.
In the Other markets region, 5,000 square feet, or 0.3% of the region's total gross leasable area, is scheduled to commence in 2025 at net rents 70.4% higher than prior net rents on the same space with a weighted average lease term of 9.1 years.
Q1 2025 has seen one of the highest leasing velocity quarters since the end of 2019 with the Trust executing leases totalling approximately 255,000 square feet across its portfolio. In Toronto downtown, the Trust executed 246,000 square feet of leases at a weighted average initial net rent of $30.18 per square foot, or 0.9% higher than the weighted average prior net rent per square foot on the same space, with a weighted average lease term of 8.5 years. In the Other markets region, comprising the Trust's properties located in Calgary, Saskatoon, Regina, Mississauga, Scarborough and the United States ("U.S."), the Trust executed leases totalling 9,000 square feet at a weighted average initial net rent of $19.04 per square foot, or 1.7% higher than the weighted average prior net rent per square foot on the same space, with a weighted average lease term of 11.0 years. Subsequent to March 31, 2025, the Trust executed a further 30,000 square feet of leases in Toronto downtown at a weighted average initial net rent of $27.41 per square foot, with a weighted average lease term of 5.3 years.
REDEVELOPMENT PROJECTS UPDATE
The development project at 606-4th Building & Barclay Parkade will convert the existing 126,000 square foot office building into a brand new 166-unit, purpose-built rental residential apartment building. Concurrently, the Trust is working to relocate the office tenants within 606-4th Building to the adjacent 444-7th Building. With apartment market vacancy at 4.6%(7) and office vacancy at 30.2%(8) in Calgary, this pivot in strategy will derisk the portfolio while unlocking value. In addition, this strategy will allow the Trust to improve the occupancy of 444-7th while creating a new residential rental building in downtown Calgary, thereby reducing the operational and financial risk of both buildings.
In relation to the project, The Trust has entered into an agreement for a grant of up to $11 million from the City of Calgary for the residential conversion as part of their Calgary Downtown Development Strategy Incentive Program. On March 7, 2025, the Trust secured a non-revolving development facility of up to $64.3 million at an interest rate to be set at the time of the first drawdown but not to exceed the 10-year Government of Canada bond rate plus 0.40%. The Trust is currently in the process of finalizing a construction management contract following a market bid process and is also in discussions to potentially bring in a joint venture partner on the project to further reduce construction and balance sheet risk.
The development project at 67 Richmond Street West comprises full modernizations of the property, including technical systems, interior lighting and elevators, along with enhanced common areas and larger floorplates.
To date, we have spent $12.2 million on the project at 67 Richmond Street West, $6.3 million of which has been funded by the CIB Facility. As a result of the redevelopment, the Trust attracted Daphne restaurant, which has been awarded Best Upscale Restaurant by Hospitality Design, for the entire ground floor retail space for a term of ten years. In Q4 2024, the scope of the project at 67 Richmond Street West was expanded to include building out model suites for the remainder of the vacant space at the property to meet the current market demand for move-in ready space and reduce lease-up time.
In 2024, the Trust implemented a model suite program to invest capital in nine identified suites, representing 56,000 square feet across four buildings within its portfolio to create move-in ready spaces, which has led to increased lease-up velocity in the completed suites. In increasing the scope at 67 Richmond Street West, the Trust plans to replicate this same strategy and anticipates that it will attract high-quality tenants to this building. With the expansion in project scope, 67 Richmond Street West is expected to be completed at the end of Q2 2025.
FINANCING AND LIQUIDITY UPDATE
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KEY FINANCIAL PERFORMANCE METRICS As at
--------- ------------
(unaudited) March 31, December 31,
2025 2024
--------------------------------------------- --------- ------------
Financing
Weighted average face rate of interest on
debt (period-end)(9) 5.00% 4.75%
Interest coverage ratio (times)(10) 1.7 1.8
Net total debt-to-normalized adjusted
EBITDAFV ratio (years)(11) 11.5 12.1
Level of debt (net total debt-to-net total
assets)(12) 51.5% 52.9%
Average term to maturity on debt (years) 3.8 3.4
Liquidity
Cash and cash equivalents (in millions) $ 18.0 $ 18.3
Cash and undrawn revolving credit facilities
(in millions)(13) 70.8 56.5
Total liquidity (in millions)(14) 149.7 138.0
Capital (period-end)
Total number of REIT A and LP B units (in
millions)(6)(15) 19.0 19.0
Net asset value ("NAV") per unit(6)(16) $ 57.40 $ 59.47
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See footnotes at end.
As at March 31, 2025, the Trust had $2.4 billion of total assets, including $2.2 billion of investment properties and $1.3 billion of total debt.
During the quarter, the Trust amended and extended the maturity of its $375 million credit facility to September 30, 2027. The amended facility bears interest at the unadjusted one-month term CORRA plus 2.245% or at the bank's prime rate plus 0.950% before sustainability-linked loan adjustments.
On April 1, 2025, subsequent to the quarter, the Trust refinanced its last remaining 2025 debt maturity, a $30 million mortgage secured by a property in Toronto, Ontario. The refinanced mortgage totals $28 million and matures on April 1, 2028 bearing a floating interest rate based on daily CORRA. On April 21, 2025, the Trust entered into a fixed-for-variable interest rate swap to fix the interest rate on the mortgage at 5.26%.
The Trust's remaining 2026 debt maturities total $165.5 million across six mortgages. The Trust anticipates that it will be able to successfully address all of its 2026 debt expiries at or before maturity.
As at March 31, 2025, the Trust had approximately $149.7 million of total liquidity(14) , comprising cash and undrawn revolving credit facilities(13) of $70.8 million and additional liquidity related to undrawn amounts on our non-revolving term loan facility pertaining to the 15-year lease at 366 Bay Street totalling $0.4 million and undrawn amounts on our CIB Facility of $78.4 million, which provides low-cost, fixed-rate financing solely for the purpose of commercial property retrofits to achieve certain energy efficiency savings and greenhouse gas ("GHG") emission reductions. Cash and undrawn revolving credit facilities(13) of $70.8 million comprises $18.0 million of cash and cash equivalents and undrawn revolving credit facilities totalling $52.8 million.
During Q1 2025, the Trust drew $2.6 million against the CIB Facility. In total, we have drawn $34.5 million against the CIB Facility since 2022. These draws represent 80% of the costs to date for capital retrofits at certain properties in Toronto downtown for projects to reduce the operational carbon emissions in these buildings. Of the $34.5 million drawn on the CIB Facility, $8.8 million was used to fund the full building retrofit of 366 Bay Street to secure a full building lease for a term of 15 years.
On February 24, 2025, the Trust completed the sale of 438 University Avenue in Toronto, Ontario, for gross proceeds of $105.6 million, or approximately $327 per square foot, before adjustments and transaction costs. As previously disclosed, the transaction offered incremental benefits estimated to represent a value of over $20 million or $62 per square foot to the Trust. In connection with the sale, the Trust used the proceeds to repay the $68.9 million property mortgage outstanding and the balance of the proceeds was used to pay down the corporate credit facility.
On March 24, 2025, the Trust converted 5,893,083 Dream Industrial LP Class B limited partnership units to Dream Industrial REIT units. Subsequently, on March 27, 2025, the Trust completed the sale of 1,900,000 Dream Industrial REIT units for net proceeds of $21.4 million, or $11.27 per unit, after transaction costs and fees. Subsequent to the quarter, the Trust sold an additional 3,993,083 Dream Industrial REIT units, representing the remainder of the converted units from March 24, 2025 for total net proceeds of $40.4 million, or $10.13 per unit, after transaction costs and fees. The proceeds from both sales were used to pay down the Trust's corporate credit facility with the intent to improve liquidity and reduce the Trust's leverage.
On April 3, 2025, subsequent to the quarter, the Trust sold a vendor take-back ("VTB") mortgage receivable originating from a property sale in 2018 to a purchaser for $15 million before transaction costs. The proceeds of the sale were used to repay the corporate credit facility.
Over the course of 2024 and 2025 the Trust has crystallized certain tax losses from corporate reorganizations and the sale of the VTB mortgage that substantially offset the capital gains generated as a result of the conversion and sale of the Dream Industrial REIT units leading to a net neutral taxable income effect arising from these transactions.
SUMMARY OF KEY PERFORMANCE INDICATORS
-- Net loss for the quarter: For the three months ended March 31, 2025, the
Trust generated a net loss of $33.2 million. Included in net loss for the
three months ended March 31, 2025 are negative fair value adjustments to
investment properties totalling $18.8 million across the portfolio,
interest expense on debt of $16.4 million, a net loss from our investment
in Dream Industrial REIT of $8.2 million due to the effect of unit sales
over the quarter and negative fair value adjustments to financial
instruments totalling $6.1 million primarily due to fair value losses on
rate swap contracts as a result of declining market yield curves,
partially offset by net rental income totalling $25.0 million.
-- Diluted FFO per unit(5)(6) for the quarter: For the three months ended
March 31, 2025, diluted FFO per unit decreased by $0.05 per unit to $0.68
per unit relative to $0.73 per unit in Q1 2024, driven by lower NOI due
to the sale of 438 University Avenue partway through Q1 (-$0.07), higher
interest expense (-$0.05) and higher tenant provisions (-$0.01),
partially offset by higher straight-line rent from free-rent periods
(+$0.02), higher income from the completed development at 366 Bay Street
in Toronto (+$0.02), other cash income included in net rental income
(+$0.02), higher income from properties under development (+$0.01) and
higher FFO from Dream Industrial REIT (+$0.01).
-- Net rental income for the quarter: For the three months ended March 31,
2025, net rental income decreased by 1.8%, or $0.5 million, over the
prior year comparative quarter, primarily due to lower income from sold
properties relating to the sale of 438 University Avenue in February
2025.
-- Comparative properties NOI(4) for the quarter: For the three months ended
March 31, 2025, comparative properties NOI increased slightly by 0.2%, or
$40 thousand, over the prior year comparative quarter, as higher in-place
rents in Toronto downtown from rent step-ups and higher rates on new
leases, as well as higher weighted average occupancy, higher parking
income and lower non-recoverable expenses in Other markets were offset by
the lease expiry at 74 Victoria Street in Toronto downtown. For the three
months ended March 31, 2025, comparative properties NOI in Toronto
downtown decreased slightly by 0.4%, or $0.1 million, over the prior year
comparative quarter, primarily due to lower weighted average occupancy in
the region driven by the 206,000 square foot lease expiry at 74 Victoria
Street in October 2024, offset by higher in-place rents from rent
step-ups and free rent periods rolling off and higher occupancy at other
properties from new lease commencements.
-- In-place occupancy: Total portfolio in-place occupancy on a
quarter-over-quarter basis increased by 0.9% relative to Q4 2024. In the
Other markets region, in-place occupancy increased by 2.7% relative to Q4
2024 as 52,000 square feet of new lease commencements were partially
offset by 5,000 square feet of expiries. In Toronto downtown, in-place
occupancy decreased slightly by 0.2% relative to Q4 2024 as 92,000 square
feet of expiries were partially offset by 31,000 square feet of renewals
and 60,000 square feet of new lease commencements. Total portfolio
in-place occupancy on a year-over-year basis decreased from 79.3% in Q1
2024 to 78.4% this quarter, as in-place occupancy in Toronto downtown
declined by 3.7% year-over-year and was partially offset by an increase
in in-place occupancy in Other markets of 4.0% year-over-year. The
decrease in in-place occupancy in Toronto downtown was primarily driven
by the lease expiry at 74 Victoria Street in Q4 2024 (-4.9%) and the sale
of 438 University Avenue in Q1 2025 (-1.0%), partially offset by positive
absorption in the remainder of the region totalling 67,000 square feet
(+2.0%) and the effect of the reclassification of the fully occupied 366
Bay Street to active properties in Q3 2024 (+0.2%). The increase in
in-place occupancy in Other markets was primarily driven by positive
absorption in the region of 78,000 square feet (+4.3%) and the impact of
the sale of the Saskatoon parking lot in Q3 2024 (+0.1%), net of the
negative impact of the reclassification of 606-4th Building & Barclay
Parkade to properties under development in Q4 2024 (-0.4%).
-- Lease commencements for the quarter: For the three months ended March 31,
2025, excluding temporary leasing, 83,000 square feet of leases commenced
in Toronto downtown at net rents of $27.09 per square foot, or 47.3%
higher compared to the previous rent on the same space with a weighted
average lease term of 4.2 years. In the Other markets region, 44,000
square feet of leases commenced at $12.23 per square foot, or 27.2% lower
than the previous rent on the same space as current rates rolled down to
market with a weighted average lease term of 12.8 years.
-- NAV per unit(6)(16): As at March 31, 2025, our NAV per unit decreased to
$57.40 compared to $59.47 at December 31, 2024. The decrease in NAV per
unit relative to December 31, 2024 was driven by fair value losses on
investment properties primarily due to changes in assumptions and
maintenance capital and leasing costs write-offs in both regions,
impairment recognized on a VTB mortgage receivable, the sale of 1,900,000
Dream Industrial REIT units below carrying value, as well as fair value
losses on interest rate swap contracts, partially offset by cash flow
retention (FFO net of distributions). As at March 31, 2025, equity per
the condensed consolidated financial statements was $1.0 billion.
-- Fair value adjustments to investment properties for the quarter: For the
three months ended March 31, 2025, the Trust recorded a fair value loss
totalling $15.8 million, comprising fair value losses of $7.5 million in
Toronto downtown, $5.3 million in Other markets and $3.0 million in our
properties under development. Fair value losses in Toronto downtown were
primarily driven by write-downs at a few properties due to expansions in
cap rates and write-offs of maintenance capital spend, partially offset
by increases in in-place market rents at certain properties. Fair value
losses in the Other markets region were primarily driven by a write-down
at one property resulting from a change in valuation assumptions.
-- Fair value adjustments to financial instruments: For the three months
ended March 31, 2025, the Trust recorded fair value losses of $6.1
million. Fair value losses in the current quarter consisted of fair value
losses of $6.1 from remeasurements on rate swap contracts and $0.2
million in losses from the remeasurement of DTUs, offset by fair value
gains from the remeasurement of the carrying value of subsidiary
redeemable units of $0.2 million as a result of a decrease in the Trust's
unit price relative to December 31, 2024.
ANNUAL MEETING OF UNITHOLDERS
Dream Office REIT welcomes its investors to its annual meeting of unitholders at the TMX Market Centre, 120 Adelaide Street West, Toronto, Ontario M5H 1S3 on Tuesday, June 3, 2025 at 12:00 p.m. (ET). The audio webcast and digital replay can be accessed by going to www.dreamofficereit.ca, clicking on news and events and selecting events.
OTHER INFORMATION
Information appearing in this press release is a selected summary of results. The condensed consolidated financial statements and Management's Discussion and Analysis ("MD&A") of the Trust are available at www.dreamofficereit.ca and on www.sedarplus.com.
Dream Office REIT is an unincorporated, open-ended real estate investment trust. Dream Office REIT is a premier office landlord in downtown Toronto with over 3.5 million square feet owned and managed. We have carefully curated an investment portfolio of high-quality assets in irreplaceable locations in one of the finest office markets in the world. For more information, please visit our website at www.dreamofficereit.ca.
FOOTNOTES
(1) Excludes properties held for sale and investments in joint ventures
that are equity accounted at the end of each period.
(2) Excludes properties under development, properties held for sale and
investments in joint ventures that are equity accounted at the end of
each period.
(3) FFO is a non-GAAP financial measure. The most directly comparable
financial measure to FFO is net income. The tables included in the
Appendices section of this press release reconcile FFO for the three
months ended March 31, 2025 and March 31, 2024 to net income. FFO is
not a standardized financial measure under IFRS Accounting Standards
and might not be comparable to similar financial measures disclosed by
other issuers. For further information on this non-GAAP financial
measure please refer to the statements under the heading "Non-GAAP
Financial Measures, Ratios and Supplementary Financial Measures" in
this press release.
(4) Comparative properties NOI is a non-GAAP financial measure. The most
directly comparable financial measure to comparative properties NOI is
net rental income. The tables included in the Appendices section of
this press release reconcile comparative properties NOI for the three
months ended March 31, 2025 and March 31, 2024 to net rental income.
Comparative properties NOI is not a standardized financial measure
under IFRS Accounting Standards and might not be comparable to similar
financial measures disclosed by other issuers. For further information
on this non-GAAP financial measure, please refer to the statements
under the heading "Non-GAAP Financial Measures, Ratios and
Supplementary Financial Measures" in this press release.
(5) Diluted FFO per unit is a non-GAAP ratio. Diluted FFO per unit is
calculated as FFO (a non-GAAP financial measure) divided by diluted
weighted average number of units. Diluted FFO per unit is not a
standardized financial measure under IFRS Accounting Standards and
might not be comparable to similar financial measures disclosed by
other issuers. For further information on this non-GAAP ratio, please
refer to the statements under the heading "Non-GAAP Financial
Measures, Ratios and Supplementary Financial Measures" in this press
release. A description of the determination of the diluted weighted
average number of units can be found in the management's discussion
and analysis of the financial condition and results of operations of
the Trust for the three months and year ended December 31, 2024, dated
May 8, 2025 (the "MD&A for the first quarter of 2025") in the section
"Supplementary Financial Measures and Other Disclosures" under the
heading "Weighted average number of units".
(6) On February 22, 2024, the Trust implemented the Unit Consolidation of
all the issued and outstanding REIT Units, Series A, REIT Units,
Series B, Special Trust Units and subsidiary redeemable units on the
basis of one (1) post-consolidation unit for every two (2)
pre-consolidation units. All unit and per-unit amounts disclosed
reflect the post-Unit Consolidation units for all periods presented.
(7) CMHC Rental Market Survey.
(8) CBRE Canada Office Figures Q1 2025.
(9) Weighted average face rate of interest on debt is calculated as the
weighted average face rate of all interest-bearing debt balances
excluding debt in joint ventures that are equity accounted.
(10) Interest coverage ratio (times) is a non-GAAP ratio. Interest coverage
ratio comprises trailing 12-month adjusted EBITDAFV divided by
trailing 12-month interest expense on debt. Adjusted EBITDAFV,
trailing 12-month adjusted EBITDAFV and trailing 12-month interest
expense on debt are non-GAAP measures. The tables in the Appendices
section reconcile adjusted EBITDAFV to net income for the three months
ended March 31, 2025 and March 31, 2024 and for the year ended
December 31, 2024 and trailing 12-month adjusted EBITDAFV and trailing
12-month interest expense on debt to adjusted EBITDAFV and interest
expense on debt, respectively, for the trailing 12-month period ended
March 31, 2025. Interest coverage ratio (times), adjusted EBITDAFV,
trailing 12-month adjusted EBITDAFV and trailing 12-month interest
expense on debt are not standardized financial measures under IFRS and
might not be comparable to similar financial measures disclosed by
other issuers. For further information on this non-GAAP ratio and
these non-GAAP financial measures, please refer to the statements
under the heading "Non-GAAP Financial Measures and Ratios and
Supplementary Financial Measures" in this press release.
(11) Net total debt-to-normalized adjusted EBITDAFV ratio (years) is a
non-GAAP ratio. Net total debt-to-normalized adjusted EBITDAFV
comprises net total debt (a non-GAAP financial measure) divided by
normalized adjusted EBITDAFV (a non-GAAP financial measure).
Normalized adjusted EBITDAFV comprises adjusted EBITDAFV (a non-GAAP
financial measure) adjusted for NOI from sold properties in the
quarter. Net total debt-to-normalized adjusted EBITDAFV ratio (years)
and net total debt are not standardized financial measures under IFRS
and might not be comparable to similar financial measures disclosed by
other issuers. For further information on this non-GAAP ratio and
these non-GAAP financial measures, please refer to the statements
under the heading "Non-GAAP Financial Measures and Ratios and
Supplementary Financial Measures" in this press release.
(12) Level of debt (net total debt-to-net total assets) is a non-GAAP
ratio. Net total debt-to-net total assets comprises net total debt (a
non-GAAP financial measure) divided by net total assets (a non-GAAP
financial measure). The tables in the Appendices section reconcile net
total debt and net total assets to total debt and total assets, the
most directly comparable financial measures to these non-GAAP
financial measures, respectively, as at March 31, 2025 and December
31, 2024. Level of debt (net total debt-to-net total assets) and net
total debt-to-net total assets are not standardized financial measures
under IFRS and might not be comparable to similar financial measures
disclosed by other issuers. For further information on this non-GAAP
ratio and these non-GAAP financial measures, please refer to the
statements under the heading "Non-GAAP Financial Measures, Ratios and
Supplementary Financial Measures" in this press release.
(13) Cash and undrawn revolving credit facilities is a non-GAAP financial
measure. The most directly comparable financial measure to cash and
undrawn credit facilities is cash and cash equivalents. The tables
included in the Appendices section of this press release reconcile
cash and undrawn revolving credit facilities to cash and cash
equivalents as at March 31, 2025 and December 31, 2024. Cash and
undrawn revolving credit facilities is not a standardized financial
measure under IFRS and might not be comparable to similar financial
measures disclosed by other issuers. For further information on this
non-GAAP financial measure please refer to the statements under the
heading "Non-GAAP Financial Measures, Ratios and Supplementary
Financial Measures" in this press release.
(14) Total liquidity is a non-GAAP financial measure. The most directly
comparable financial measure to total liquidity is cash and cash
equivalents. The tables included in the Appendices section of this
press release reconcile total liquidity to cash and cash equivalents
as at March 31, 2025 and December 31, 2024. Total liquidity is not a
standardized financial measure under IFRS and might not be comparable
to similar financial measures disclosed by other issuers. For further
information on this non-GAAP financial measure please refer to the
statements under the heading "Non-GAAP Financial Measures, Ratios and
Supplementary Financial Measures" in this press release.
(15) Total number of REIT A and LP B units includes 2.6 million LP B Units
which are classified as a liability under IFRS Accounting Standards.
(16) NAV per unit is a non-GAAP ratio. NAV per unit is calculated as Total
equity (including subsidiary redeemable units) (a non-GAAP financial
measure) divided by the total number of REIT A and LP B units
outstanding at the end of the period. Total equity (including
subsidiary redeemable units) is a non-GAAP measure. The most directly
comparable financial measure to total equity (including subsidiary
redeemable units) is total equity. The tables included in the
Appendices section of this press release reconcile total equity
(including subsidiary redeemable units) to total equity as at March
31, 2025 and December 31, 2024. NAV per unit is not a standardized
financial measure under IFRS and might not be comparable to similar
financial measures disclosed by other issuers. For further information
on this non-GAAP financial measure please refer to the statements
under the heading "Non-GAAP Financial Measures, Ratios and
Supplementary Financial Measures" in this press release.
NON-GAAP FINANCIAL MEASURES, RATIOS AND SUPPLEMENTARY FINANCIAL MEASURES
The Trust's condensed consolidated financial statements are prepared in accordance with International Financial Reporting Accounting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards"). In this press release, as a complement to results provided in accordance with IFRS Accounting Standards, the Trust discloses and discusses certain non-GAAP financial measures, including FFO, comparative properties NOI, cash and undrawn revolving credit facilities, total liquidity, adjusted EBITDAFV, trailing 12-month adjusted EBITDAFV, trailing 12-month interest expense on debt, net total debt, net total assets, normalized adjusted EBITDAFV -- annualized and total equity (including subsidiary redeemable units) and non-GAAP ratios, including diluted FFO per unit, level of debt (net total debt-to-net total assets), interest coverage ratio, net total debt-to-normalized adjusted EBITDAFV and NAV per unit, as well as other measures discussed elsewhere in this release. These non-GAAP financial measures and ratios are not standardized financial measures under IFRS Accounting Standards and might not be comparable to similar financial measures disclosed by other issuers. The Trust has presented such non-GAAP financial measures and non-GAAP ratios as Management believes they are relevant measures of the Trust's underlying operating and financial performance. Certain additional disclosures such as the composition, usefulness and changes, as applicable, of the non-GAAP financial measures and ratios included in this press release are expressly incorporated by reference from the MD&A for the first quarter of 2025 and can be found under the section "Non-GAAP Financial Measures and Ratios" and respective sub-headings labelled "Funds from operations and diluted FFO per unit", "Comparative properties NOI", "Level of debt (net total debt-to-net total assets)", "Net total debt-to-normalized adjusted EBITDAFV ratio (years)", "Interest coverage ratio (times)", "Available liquidity", "Total equity (including subsidiary redeemable units)", "Adjusted earnings before interest, taxes, depreciation, amortization and fair value adjustments ("adjusted EBITDAFV")", "Trailing 12-month Adjusted EBITDAFV and trailing 12-month interest expense on debt", and "NAV per Unit". The MD&A for the first quarter of 2025 is available on SEDAR+ at www.sedarplus.com under the Trust's profile and on the Trust's website at www.dreamofficereit.ca under the Investors section. Non-GAAP financial measures should not be considered as alternatives to net income, net rental income, cash flows generated from (utilized in) operating activities, cash and cash equivalents, total assets, non-current debt, total equity, or comparable metrics determined in accordance with IFRS Accounting Standards as indicators of the Trust's performance, liquidity, leverage, cash flow, and profitability. Reconciliations for FFO, comparative properties NOI, available liquidity, adjusted EBITDA, and total equity (including subsidiary redeemable units) to the nearest comparable IFRS Accounting Standards measure are contained at the end of this press release.
FORWARD-LOOKING INFORMATION
This press release may contain 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; statements regarding the value and quality of our portfolio, the effect of the Trust's leasing strategy on the return on invested capital, occupancy at our buildings, property value, cash flows, liquidity and refinancing value; our strategies to reduce risk and improve the value of individual assets within the portfolio; the Trust's focus on delivering stable operational and financial performance by reducing risk, improving liquidity and increasing occupancy as demonstrated through the plan to convert 606-4th Ave and the focus on leasing 74 Victoria Street; future increases in committed occupancy and net operating income; the effect of portfolio positioning on long-term performance; the effect of portfolio renovations on portfolio competitiveness, tenant demand and tenant quality; the effect of building improvements on tenant experience and building quality and performance and higher rents; our ability to complete leases that are conditional or in an advanced stage of negotiation; our development, redevelopment, renovation and intensification plans, including timelines, square footage, our ability to lease properties under development and other project characteristics, including in respect of 67 Richmond Street West and 606-4th building; the profitability and value of contemplated development projects; the effect of redevelopment projects on leasing risk, income diversity, portfolio quality, portfolio risk and portfolio value; the effect of contemplated development projects on building operational and financial risk; market demand for modernized space and the effect of model suites on leasing demand, leasing timelines and tenant quality at 67 Richmond Street West; our future capital requirements and cost to complete development projects; the potential to find joint venture partners for contemplated developments and the effect of such joint ventures on construction and balance sheet risk; our plans to secure a construction management contract for the development project at 606-4th building; the expectation that we will be able to use our CIB Facility to fund development costs for certain projects; our ability to increase building performance and achieve certain energy efficiency and greenhouse gas reduction goals, including in respect of specific properties and of retrofits made in connection with the CIB Facility; expectations regarding our financing undertakings, including our ability to address future debt maturities; capital allocation, investments and expected benefits; the use of proceeds from dispositions and the effect of those uses on leverage and liquidity; prospective leasing activity, including with respect to our strategy to attract future potential tenants at 67 Richmond Street West; the safety of our business; and our overall financial performance, profitability, value, safety and liquidity for future periods and years. Forward-looking statements generally can be identified by words such as "outlook", "objective", "may", "will", "would", "expect", "intend", "estimate", "anticipate", "believe", "should", "could", "likely", "plan", "project", "budget", "continue" or similar expressions suggesting future outcomes or events. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dream Office REIT's control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, general and local economic and business conditions, including in respect of real estate; mortgage and interest rates and regulations; inflation; risks related to a potential economic slowdown in certain of the jurisdictions in which we operate and the effect inflation and any such economic slowdown may have on market conditions and lease rates; risks associated with unexpected or ongoing geopolitical events, including disputes between nations, war, terrorism or other acts of violence; the uncertainties around the availability, timing and amount of future equity and debt financings; development risks including construction costs, project timings and the availability of labour; NOI from development properties on completion; the impact of duties, tariffs and other trade restrictions on the Trust; the effect of government restrictions on leasing and building traffic; the ability of the Trust and its tenants to access government programs; the financial condition of tenants and borrowers; employment levels; the uncertainties around the timing and amount of future financings; leasing risks, including those associated with the ability to lease vacant space and properties under development; rental rates on future leasing; and interest and currency rate fluctuations.
Our objectives and forward-looking statements are based on certain assumptions, which include but are not limited to: that the general economy remains stable; our interest costs will be relatively low and stable; that we will have the ability to refinance our debts as they mature; inflation and interest rates will not materially increase beyond current market expectations; conditions within the real estate market remain consistent; the timing and extent of current and prospective tenants' return to the office; our future projects and plans will proceed as anticipated; that government restrictions on the ability of us and our tenants to operate their businesses at our properties will not be imposed in any material respects; competition for acquisitions remains consistent with the current climate; and that the capital markets continue to provide ready access to equity and/or debt to fund our future projects and plans. All forward-looking information in this press release speaks as of the date of this press release. Dream Office REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise except as required by law.
Additional information about these assumptions and risks and uncertainties is contained in Dream Office REIT's filings with securities regulators, including its latest annual information form and MD&A. These filings are also available at Dream Office REIT's website at www.dreamofficereit.ca.
APPENDICES
Funds from operations and diluted FFO
per unit
Three months ended March 31,
--------------------------------
2025 2024
------------------------------------- ------------- ------------
Net income (loss) for the period $ (33,183) $ 11,866
Add (deduct):
Net loss (income) from investment
in Dream Industrial REIT 8,220 (3,054)
Share of FFO from investment in
Dream Industrial REIT 3,435 3,268
Depreciation and amortization 3,327 3,038
Costs attributable to sale of
investment properties 2,727 30
Interest expense on subsidiary
redeemable units 654 872
Fair value adjustments to
investment properties 18,783 17,293
Fair value adjustments to
investment properties held in
joint ventures (2) (11)
Fair value adjustments to financial
instruments and DUIP included in
G&A expenses 6,001 (19,890)
Internal leasing costs 420 574
Principal repayments on finance
lease liabilities (15) (14)
Enterprise resource planning
software upgrade costs included in
G&A expenses 17 --
Deferred income taxes expense 99 134
Impairment of VTB mortgage
receivable 2,278 --
Debt settlement costs due to
disposal of investment properties,
net 515 --
------------------------------------- ------------- ------------
FFO for the period $ 13,276 $ 14,106
-------------------------------------- ------------- ------------
Diluted weighted average number of
units(1) 19,565 19,410
-------------------------------------- ------------- ------------
Diluted FFO per unit(1) $ 0.68 $ 0.73
-------------------------------------- ------------- ------------
(1) On February 22, 2024, the Trust implemented the Unit Consolidation
of all the issued and outstanding REIT Units, Series A, REIT Units,
Series B, Special Trust Units and subsidiary redeemable units on the
basis of one (1) post-consolidation unit for every two (2)
pre-consolidation units. All unit and per unit amounts disclosed reflect
the post-Unit Consolidation units for all periods presented.
Comparative properties NOI
Three months ended
----------------------------------- ----------- --------
March March
31, 31, Change
--------------
Change in Change
weighted in
average in-place
occupancy net
2025 2024 Amount % % rents %
-------------- -------- -------- ------- ----- ----------- --------
Toronto
downtown $ 18,899 $ 18,979 $ (80) (0.4) (3.5) 2.5
Other markets 6,066 5,946 120 2.0 3.1 (4.5)
-------------- ------- ------- ------- ----- ----------- --------
Comparative
properties
NOI 24,965 24,925 40 0.2 (1.0) (0.1)
366 Bay
Street,
Toronto 357 2 355
Properties
under
development 846 723 123
Property
management
and other
service fees 533 408 125
Lease
termination
fees and
other 331 3 328
Change in
provisions (164) (50) (114)
Straight-line
rent 494 186 308
Amortization
of lease
incentives (3,316) (3,010) (306)
Sold
properties 955 2,266 (1,311)
-------------- ------- ------- ------- ----- ----------- --------
Net rental
income $ 25,001 $ 25,453 $ (452) (1.8)
-------------- ------- ------- ------- ----- ----------- --------
Adjusted EBITDAFV
Three months ended Year ended
-------------------- --------------
March 31, March 31, December 31,
2025 2024 2024
----------------------------- -------- -------- ----------
Net income (loss) for the
period $(33,183) $ 11,866 $ (104,934)
Add (deduct):
Interest -- debt 16,351 15,422 65,051
Interest -- subsidiary
redeemable units 654 872 2,835
Current and deferred income
taxes expense (recovery),
net 124 157 (2,290)
Depreciation on property
and equipment 1 22 121
Fair value adjustments to
investment properties 18,783 17,293 114,589
Fair value adjustments to
financial instruments 6,114 (19,674) 221
Net loss (income) from
investment in Dream
Industrial REIT 8,220 (3,054) (10,425)
Distributions earned from
Dream Industrial REIT 2,258 2,369 9,477
Share of net loss (income)
from investment in joint
ventures 150 171 (336)
Non-cash items included in
investment properties
revenue(1) 2,822 2,824 9,122
Change in provisions 164 50 230
Lease termination fees and
other (331) (3) (1,202)
Impairment of VTB mortgage
receivable 2,278 -- 29,199
Internal leasing costs and
net losses on
transactions 3,662 604 3,122
------------------------------ -------- -------- ----------
Adjusted EBITDAFV for the
period $ 28,067 $ 28,919 $ 114,780
------------------------------ -------- -------- ----------
(1) Includes adjustments for straight-line rent and amortization of
lease incentives.
Trailing 12-month adjusted EBITDAFV and trailing 12-month interest expense
on debt
Trailing 12-month period
ended March 31, 2025
----------------------------------------------- ---------------------------
Adjusted EBITDAFV for the three months ended
March 31, 2025 $ 28,067
Add: Adjusted EBITDAFV for the year ended
December 31, 2024 114,780
Less: Adjusted EBITDAFV for the three months
ended March 31, 2024 (28,919)
------------------------------------------------ --- ---------------------
Trailing 12-month adjusted EBITDAFV $ 113,928
------------------------------------------------ --- ---------------------
Trailing 12-month period
ended March 31, 2025
----------------------------------------------- ---------------------------
Interest expense on debt for the three months
ended March 31, 2025 $ 16,351
Add: Interest expense on debt for the year ended
December 31, 2024 65,051
Less: Interest expense on debt for the three
months ended March 31, 2024 (15,422)
------------------------------------------------ --- ---------------------
Trailing 12-month interest expense on debt $ 65,980
------------------------------------------------ --- ---------------------
Interest coverage ratio
(times)
For the trailing 12-month period ended
------------------------------------------
March 31, December 31,
2025 2024
------------------------------ ------------------- --------------------
Trailing 12-month adjusted
EBITDAFV $ 113,928 $ 114,780
Trailing 12-month interest
expense on debt $ 65,980 $ 65,051
------------------------------ ---- ------------- --------------------
Interest coverage ratio
(times) 1.7 1.8
------------------------------ ---- ------------- --------------------
Level of debt (net total
debt-to-net total assets)
Amounts included in condensed
consolidated financial statements
--------------------------------------
March 31, December 31,
2025 2024
---------------------------------- ---------------- ---------------
Non-current debt $ 1,219,746 $ 956,076
Current debt 43,074 351,538
---------------------------------- ---------------- ---------------
Total debt 1,262,820 1,307,614
Add: Debt related to assets held
for sale -- 68,887
Less: Cash on hand(1) (17,324) (17,545)
---------------------------------- ---------------- ---------------
Net total debt $ 1,245,496 $ 1,358,956
---------------------------------- ---------------- ---------------
Total assets 2,437,215 2,584,927
Less: Cash on hand(1) (17,324) (17,545)
---------------------------------- ---------------- ---------------
Net total assets $ 2,419,891 $ 2,567,382
---------------------------------- ---------------- ---------------
Net total debt-to-net total assets 51.5% 52.9%
---------------------------------- ---------------- ---------------
(1) Cash on hand represents cash on hand at period-end, excluding cash
held in co-owned properties and joint ventures that are equity accounted.
Cash and undrawn revolving credit facilities and total liquidity
As at
-------------------------
March 31, December 31,
2025 2024
--------------------------------------------- --------- ------------
Cash and cash equivalents $ 18,047 $ 18,268
Undrawn revolving credit facilities 52,788 38,243
--------------------------------------------- --------- ------------
Cash and undrawn revolving credit facilities 70,835 56,511
--------------------------------------------- --------- ------------
Undrawn CIB Facility 78,402 81,029
Undrawn non-revolving term loan facility 428 428
--------------------------------------------- --------- ------------
Total liquidity $ 149,665 $ 137,968
--------------------------------------------- --------- ------------
Net total debt-to-normalized adjusted
EBITDAFV ratio (years)
March 31, December 31,
2025 2024
------------------------------------------- ---------- ----------
Non-current debt $1,219,746 $ 956,076
Current debt 43,074 351,538
-------------------------------------------- --------- ----------
Total debt 1,262,820 1,307,614
Add: Debt related to assets held for sale -- 68,887
Less: Cash on hand(1) (17,324) (17,545)
-------------------------------------------- --------- ----------
Net total debt $1,245,496 $ 1,358,956
-------------------------------------------- --------- ----------
Adjusted EBITDAFV -- quarterly 28,067 28,691
-------------------------------------------- --------- ----------
Less: NOI of disposed properties for the
quarter (955) (635)
-------------------------------------------- --------- ----------
Normalized adjusted EBITDAFV -- quarterly $ 27,112 $ 28,056
-------------------------------------------- --------- ----------
Normalized adjusted EBITDAFV -- annualized $ 108,448 $ 112,224
-------------------------------------------- --------- ----------
Net total debt-to-normalized adjusted
EBITDAFV ratio (years) 11.5 12.1
-------------------------------------------- --------- ----------
(1) Cash on hand represents cash on hand at period-end, excluding cash
held in co-owned properties and joint ventures that are equity
accounted.
Total equity (including subsidiary redeemable units) and NAV per unit
Unitholders' equity
----------------------------------------------
March 31, 2025 December 31, 2024
---------------------- ----------------------
Number of Number of
units Amount units(1) Amount
---------------------- ---------- --------- ---------- ---------
Unitholders' equity 16,360,972 $1,837,869 16,337,348 $1,837,446
Deficit -- (802,055) -- (764,786)
Accumulated other
comprehensive income -- 7,016 -- 7,863
------------------------ ---------- --------- ---------- ---------
Equity per condensed
consolidated financial
statements 16,360,972 1,042,830 16,337,348 1,080,523
------------------------ ---------- --------- ---------- ---------
Add: Subsidiary
redeemable units 2,616,911 46,555 2,616,911 46,738
------------------------ ---------- --------- ---------- ---------
Total equity (including
subsidiary redeemable
units) 18,977,883 $1,089,385 18,954,259 $1,127,261
------------------------ ---------- --------- ---------- ---------
NAV per unit(1) $ 57.40 $ 59.47
------------------------ ---------- --------- ---------- ---------
(1) On February 22, 2024, the Trust implemented the Unit Consolidation
of all the issued and outstanding REIT Units, Series A, REIT Units,
Series B, Special Trust Units and subsidiary redeemable units on the
basis of one (1) post-consolidation unit for every two (2)
pre-consolidation units. All unit and per unit amounts disclosed reflect
the post-Unit Consolidation units for all periods presented.
View source version on businesswire.com: https://www.businesswire.com/news/home/20250508880210/en/
CONTACT: Michael J. Cooper
Chairman and Chief Executive Officer
(416) 365-5145
mcooper@dream.ca
Jay Jiang
Chief Financial Officer
(416) 365-6638
jjiang@dream.ca
(END) Dow Jones Newswires
May 08, 2025 17:17 ET (21:17 GMT)
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