Mr. Michael Cooper reports

DREAM ALTERNATIVES REPORTS FOURTH QUARTER AND YEAR END RESULTS AND ANNOUNCES STRATEGIC PLAN TO ENHANCE UNITHOLDER VALUE

Dream Hard Asset Alternatives Trust has released its financial results for the three months and year ended Dec. 31, 2018.

The completion of 2018 marked a successful year of operations for the trust, as it continued to advance capital toward significant development investments in Toronto. For the year ended Dec. 31, 2018, the trust reported net income of $13.9-million compared with a net loss of $9.5-million in the prior year. The year-over-year financial results benefited from the transformational growth the trust has achieved, with the prior year impacted by losses associated with the disposal of approximately $338.5-million of the trust's non-core legacy assets throughout 2017.

"We are pleased with the trust's results in 2018, which represented our first financial year operating substantially with our new portfolio," said Michael Cooper, portfolio manager. "During the year, the trust was successful in acquiring additional highly valuable real estate development opportunities in Toronto, as well as continuing to invest in its existing development portfolio. We are excited with the steady progress on the trust's development projects, alongside our high-calibre partners with exceptional track records. All of these achievements within our development portfolio are key steps towards achieving increased value for our unitholders."

Announcement of strategic plan to enhance unitholder value

Since taking over management of the trust's legacy assets in 2014, the trust has repatriated equity capital from the original portfolio in the amount of approximately $450-million. It has reinvested this capital into irreplaceable, world-class development assets, alongside exceptional partners, such as Westdale, Kilmer, Great Gulf, Fengate, Tricon Capital Group, FRAM + Slokker, Diamond Corp, Fieldgate and CentreCourt, among others. Some of these developments include:

• A 5.3-acre Lakeshore East site in downtown Toronto, located adjacent to a planned investment by Sidewalk Labs, a sister company of Google;
• A 72-acre waterfront property in Port Credit planned to be developed into a large master planned residential/mixed-use community;
• 34 acres of lands, located in Ottawa and Gatineau, planned to be developed into a mixed-use master-planned community, with over three million square feet of density comprising over 2,000 residential units and over one million square feet of commercial space;
• 10 Lower Spadina Ave. and 49 Ontario St., both located in downtown Toronto, with considerable redevelopment potential;
• The West Don Lands rental apartment community in downtown Toronto, which will be built in stages and is expected to include approximately 1,500 residential units, as well as retail and office space;
• The iconic Frank Gehry-designed Mirvish-King West development, located at the intersection of King Street West and Duncan Street in downtown Toronto, which is slated to be redeveloped to include two landmark residential towers, each in excess of 80 storeys.

The trust has also reinvested capital into higher-returning income-producing assets, such as real estate, real estate loans and renewable power. These assets have supported the cash flow objectives of the trust, including maintaining its distribution since going public in 2014. Its new investments in developments, real estate and renewable power assets have also contributed to increases in net asset value (NAV) per unit (2), partially mitigating $119-million of losses (16 per cent of the trust's original equity) on the trust's non-core legacy assets, which were incurred since it acquired the assets in July, 2014, and largely sold by the end of 2017. Disposing of the legacy assets was a key turning point for the trust as these assets were not in line with the trust's target portfolio quality or long-term strategy. To maximize the value of the legacy assets, the trust strategically sold certain office assets as part of larger portfolio transactions with its co-owner Dream Office REIT to achieve the highest possible price and worked with borrowers and development partners to unwind certain legacy investments at good value to the trust, notwithstanding the inferior rights within inherited agreements. Following the sale of substantially all of these non-core legacy assets, the trust repatriated the capital to higher-quality, core assets that offer stronger future long-term growth and opportunity to increase both its cash flow and net asset value per unit.

Notwithstanding the successes achieved, management believes that the trust's unit price performance has not reflected the value creation within the business and that the public markets continue to value the trust's assets and business below NAV. During the course of 2018 and early 2019, management and the board of trustees reviewed a number of potential strategic alternatives to narrow the gap between the trading price of the trust's units and NAV, while continuing to build the underlying value of the business. To achieve these goals, the board has approved a strategic plan that includes continuing the recycling of capital from the disposition of select non-core assets into the trust's real estate developments. In addition, given current market conditions, management and the board believe the units of the trust are an attractive investment opportunity and are prepared to deploy up to $100-million toward the trust's unit buyback program (representing approximately 21 per cent of current market capitalization) over the next three years. The actual number of units that may be purchased and the timing of such purchases will be determined by the trust. Decisions regarding purchases will be based on market conditions, unit prices, expected proceeds from capital recycling, and best use of available cash and other factors.

The trust is currently in the process of marketing certain renewable power assets and intends to investigate the potential sale of its entire renewable power segment at full value. It believes it is an opportune time to explore a sale as there are limited opportunities to increase its current portfolio in Canada due to recent changes in the regulatory environment and government policy, but at the same time, there is good demand from many institutions and investors to acquire long-duration renewable power assets with predictable, contracted cash flows that are fully operational. The trust currently finances its normal course issuer bid (NCIB) primarily using cash on hand. The trust expects that it will require proceeds from asset sales and/or future loan repayments for larger repurchases, in line with its strategic plan, which may be effected through one or more substantial issuer bids. The trust also announced today the suspension of its distribution reinvestment and unit purchase plan (the DRIP) (currently at a 35.5-per-cent participation ratio) until further notice, to eliminate dilution and to preserve value. The board intends to review the distribution policy of the trust over time as management executes on the strategic plan to increase NAV of the trust, which includes the sale of yield assets and a focus on longer-term development assets, to ensure the distribution policy is reflective of the trust's business and asset profile.

"Our strategic goal over the next three years is to achieve a balance between reducing the number of units outstanding and maintaining a strong balance sheet to meet and exceed our covenants supporting our ongoing capital requirements for development activities. This balance will allow us to build a high-quality real estate business and maximize value for our unitholders," said Michael Cooper. "Since 2014, we have transformed the trust's portfolio to substantially increase the quality of the assets and the underlying value of the business. We remain committed to continuing to improve the value of the trust's business for the benefit of unitholders."

Results highlights

During the year ended Dec. 31, 2018, the trust invested approximately $93.1-million of capital, including transaction costs, into its development investments either through successful acquisitions or financing toward its existing projects. Over the course of the year, the development projects have progressed steadily toward various milestones and/or completion. In addition to investing into its existing development portfolios, the trust entered into significant development and redevelopment opportunities, including acquiring a 10-per-cent interest in the 1,500-room Hard Rock Hotel/Virgin Hotel Las Vegas and a 25-per-cent interest in the West Don Lands purpose-built rental development, comprising 1,500 units, which is adjacent to the Canary and Distillery districts in downtown Toronto.

For the three months ended Dec. 31, 2018, the trust reported net income of $7.0-million, down from $16.4-million in the same period in the prior year. The year-over-year variance was primarily due to the trust recording net fair value gains in income properties of $500,000 during the fourth quarter of 2018 compared with $11.0-million in the same period in the prior year. As well, there were no fair value gains related to marketable securities recorded in the fourth quarter of 2018 compared with $2.8-million in the same period in the prior year due to the disposal of the trust's investment in the publicly traded units of Dream Office REIT earlier in 2018. During the year ended Dec. 31, 2018, the trust recorded a fair value gain of $3.7-million related to this investment. Including distributions received, the trust generated a total return of $8.8-million or 16.8 per cent on its gross investment of the Dream Office REIT units.

In the three months ended Dec. 31, 2018, Zibi, the 34-acre mixed-use development located in Ottawa and Gatineau, progressed with the commencement of occupancy at the project's first condominium building, O, comprising 70 units, which are 83 per cent sold. In addition to O, land servicing on both the Ontario and Quebec lands is well under way, and construction has started on the project's next residential building, Kanaal, comprising 71 units, along with 105,000 square feet of commercial space.

As at Dec. 31, 2018, the Axis Condominiums project had been topped off, signifying it has reached its ultimate height but is still under construction. The project remains on schedule with first occupancy slated for the fall of 2019, accelerated from an initial timing of 2020, and includes completion of the lobby and amenities. The project is 100 per cent sold. Upon completion, the internal rate of return (IRR (2)) on Axis Condominiums is expected to be well in excess of 50 per cent on the trust's initial investment of $5.4-million, including transaction costs.

Subsequent to Dec. 31, 2018, the Hard Rock signed a franchise agreement with Hilton Hotels & Resorts to join the Curio Collection following the redevelopment/conversion of the property to the Virgin Hotel Las Vegas in 2020, as well as participate in Hilton's award-winning guest loyalty program, Hilton Honors. Curio Collection by Hilton is an upper upscale, global portfolio of more than 65 one-of-a-kind hotels and resorts across the world. As a result of the agreement, the property will be on the Hilton booking system upon its reopening as a Virgin hotel and will have access to a large distribution channel through the Hilton platform, where there has historically been significant unmet room demand -- estimated to be 900,000 unmet Las Vegas rooms per year.

Over the coming year, in line with the current projections for the progression of the trust's various development projects, management expects to invest a further $45-million to $55-million toward financing existing development projects in Toronto and Ottawa. The trust expects to finance its current development portfolio capital requirements from existing cash on hand, cash generated from operations, future loan repayments and, to the extent needed, its credit facility. The funds are expected to be used toward predevelopment costs, development costs and other planned future payments. This aggregate capital call forecasted for the next year includes assumptions related to the following: timing and amount of expected loan financings, deposit commitments, timing of sales and/or construction commencement, revenue and cost estimates, and leasing activity, all of which are based on current information and are subject to change. As at Dec. 31, 2018, the trust had a cash balance of $46.7-million and funds available under its revolving credit facility of $38.0-million (net of $1.4-million of letters of credit).

Development projects are key drivers of future growth for the trust and are expected to generate attractive returns and future cash flows as milestones are achieved. The trust expects its development projects will provide attractive profits to the trust upon their respective completion dates and will contribute to increased value for unitholders. The trust generally targets a pretax IRR of at least 15 to 20 per cent on new equity investments in residential and mixed-use development projects.

Net asset value (1)

NAV per unit of $8.74 as at Dec. 31, 2018, increased by 0.6 per cent compared with $8.69 as at Sept. 30, 2018. The increase was as a result of the following: the redemption of the trust's investment in Hotel Pur thereby receiving total distributions of $4.9-million, which included return of capital plus a 9-per-cent preferred return; a $2.0-million fair value gain on its investment in Hard Rock related to foreign exchange; and market value gains of $7.1-million related to both its Axis Condominiums and Lakeshore East developments. The market value gain on the Axis Condominiums development was attributed to the project being closer to completion. The market value gain on the Lakeshore East development was a result of continued favourable market trends and comparable market transactions, as supported by independent third party appraisals. Fair value adjustments are reflected in the trust's consolidated financial statements. Market value adjustments are reflected only in NAV, which is a non-international financial reporting standard measure.

The trust relies on growth in the NAV per unit as a measure of value creation, including the market value adjustments on its equity-accounted investments and renewable power projects. For additional details on the trust's equity accounted investments and renewable power projects, please refer to equity investments market value adjustment included in NAV -- methodology -- within Section 2.2 and renewable power market value adjustment included in NAV -- methodology -- within Section 2.5 of management's discussion and analysis, respectively.

The closest IFRS measure to NAV per unit is unitholders' equity per unit. For further details regarding non-IFRS measures and a reconciliation, where applicable, to the consolidated financial statements, please refer to "Non-IFRS Measures" in management's discussion and analysis under the heading "Non-IFRS Measures and Other Disclosures."

Unitholders' equity (1)

As at Dec. 31, 2018, total unitholders' equity of $8.13 per unit has remained relatively consistent compared with $8.14 per unit as at Sept. 30, 2018.

Cash generated from operating activities

Cash generated from operating activities for the three months ended Dec. 31, 2018, was $1.7-million compared with $7.3-million in the same period in the prior year. During the three months ended Dec. 31, 2018, cash distributions of $1.2-million, which represented profit to the trust and related to the trust's investment in Hotel Pur, were received compared with $2.4-million related to Empire Brampton in the same period in the prior year. Cash generated from operating activities for the year ended Dec. 31, 2018, was $17.3-million compared with $11.4-million for the prior year. The increase in cash generated from operating activities was primarily due to lower investment toward lease incentives and initial direct leasing costs due to the sale of the non-core income properties in the prior year, as well as changes in non-cash working capital.

Selected financial metrics for the three months and year ended Dec. 31, 2018, are summarized in the attached table.

                                           FINANCIAL HIGHLIGHTS
                            
                                                             Three months ended                   Year ended         
                                                       Dec. 31, 2018    Dec. 31, 2017    Dec. 31, 2018    Dec. 31, 2017
Consolidated results of operations
Net income (loss)                                             $6,995          $16,377          $13,902          ($9,472)
Net income (loss) before depreciation (2)                      8,528           17,906           20,005           (3,614)
Cash generated from (utilized in) operating activities         1,669            7,285           17,251           11,350
Net income (loss) per unit (2)                                  0.10             0.23             0.19            (0.13)
Net income (loss) per unit before depreciation (2)              0.12             0.25             0.28            (0.05)
Distributions paid and payable                                 7,343            7,918           29,300           29,155
Trust unit information
Distributions declared and paid per unit                        0.10             0.10             0.40             0.40

About Dream Hard Asset Alternatives Trust

Dream Alternatives provides an opportunity for unitholders to invest in hard asset alternative investments, real estate development, real estate lending, real estate and renewable power managed by an experienced team with a successful record in these areas. The objectives of the trust are to build and maintain a growth-oriented portfolio, provide predictable cash distributions to unitholders on a tax-efficient basis, and expand and reposition the portfolio to increase NAV per unit over time.

Footnotes

(1) The trust has revised certain comparative figures. Refer to Note 2, basis of presentation and statement of compliance, in the consolidated financial statements.

(2) Net income (loss) per unit, net income (loss) before depreciation, net income (loss) per unit before depreciation, IRR, market value, NAV and NAV per unit are non-IFRS measures.

We seek Safe Harbor.