Mr. Michael Cooper reports

DREAM UNLIMITED CORP. REPORTS SECOND QUARTER RESULTS

Dream Unlimited Corp. has released its financial results for the three and six months ended June 30, 2023.

"In the first six months of 2023, we have taken steps to become not only safer but also tilt our portfolio to higher growth and more valuable recurring income business lines," said Michael Cooper, chief responsible officer. "We have increased our assets under management from $18-billion to $24-billion, our Western Canada development division is performing above expectations and we have sufficient commitments to expand Alpine Park and the Willows leading to an increased future opportunity set. Our directly owned investment and recreational properties totalling over $900-million, especially our apartment properties, are performing well and growing in the first half of the year with a pipeline that will continue to add momentum to this division. We have five purpose-built rental properties plus 21 single-family rental units being completed and marketed this year for a total of over 1,300 units which will also provide recurring income, development profits and growing income for years to come."

On Wednesday, Sept. 6, 2023, Dream Unlimited Corp., Dream Office REIT and Dream Impact Trust are welcoming investors for a joint investor session. The event will be hosted at the company's head office at 30 Adelaide St. East, suite 301, at 10 a.m. ET, please register on-line (a link is available in the original version of this release). This session will discuss each company's net asset value, capital allocation strategy and business plan, to provide better insight into how it views and manages the businesses.

A summary of the company's consolidated results for the three and six months ended June 30, 2023, is included in the attached table.

"During the quarter, we made the specific decision to significantly increase our liquidity to $351-million by reducing our stake in Dream Office REIT from 37 per cent to 30 per cent, while still maintaining exposure to the office sector," said Deb Starkman, chief financial officer. "We have positioned the business for better growth by concentrating our efforts on our asset management, Western Canada and income property divisions, which will make our business more profitable and safer. This sale generated cash proceeds of $109-million but for accounting purposes we are recognizing a non-cash pretax loss of $88-million. Our year-to-date results also include our proportionate share of losses on Dream Office REIT of $21-million, compared with income driven by fair value gains of $31-million in 2022. Adjusting for the non-cash element within equity accounted investments, the first half of the year has been a promising period."

Loss before income taxes for the three months ended June 30, 2023, was $88.0-million, down from earnings before taxes of $91.2-million in the comparative period. Adjusting for the losses on Dream Office REIT, the company generated earnings before income taxes of $21.3-million for the three months ended June 30, 2023, down by $62.2-million from the comparative period. The decrease in earnings is attributable to lower fair value gains on Dream Impact Trust units held by other unitholders, fair value losses on the company's investment property portfolio, and higher interest expense on its variable rate debt.

Loss before income taxes for the six months ended June 30, 2023, was $46.3-million, down from earnings before taxes of $148.3-million in the comparative period. Adjusting for the losses on Dream Office REIT, the company generated earnings before income taxes of $62.6-million for the six months ended June 30, 2023, down by $54.3-million from the comparative period, due to fair value losses on investment properties, higher interest expense and $36.6-million in income related to condominium occupancies at Canary Commons in 2022 with no comparable activity in 2023.

Dream consolidated funds from operations (FFO) for the three months ended June 30, 2023, was eight cents per share on a pretax basis, down from 50 cents per share in the comparative period, primarily due to lower development profits and lower net operating income from Arapahoe Basin. Dream consolidated FFO from the six months ended June 30, 2023, was 16 cents per share on a pretax basis, down from $1.37 per share in the comparative period, which included occupancies at Canary Commons.

As of June 30, 2023, the company has available liquidity of $350.8-million, up from $288.5-million as of March 31, 2023.

Highlights: recurring income

• Revenue and net operating income for the three months ended June 30, 2023, was $52.0-million and $20.9-million, respectively, compared with $47.3-million and $21.9-million, respectively, in 2022. The increase in revenue is primarily attributable to increased occupancy across the company's portfolio and a higher fee-earning asset base. This was offset by higher costs across the company's business lines as it invests to grow its platform and future recurring income that resulted in a $900,000 decrease in net operating income from the comparative period.
• Revenue and net operating income for the six months ended June 30, 2023, was $111.5-million and $46.1-million, respectively, an increase of $20.6-million and $6.8-million, respectively, from the comparative period. The increase in revenue and net operating income is primarily attributable to higher earnings in the current year in the company's asset management business due to an increase in fee-earning assets under management and strong year-to-date occupancy rates across the company's portfolio.
• Revenue for the three and six months ended June 30, 2023, includes $17.1-million and $31.4-million, respectively, in asset management fee revenue, compared with $16.2-million and $26.1-million, respectively, in the comparative period. Earnings were driven by the more highly valued recurring income base fees with less transactional revenue this year. As of June 30, 2023, assets under management totalled $24-billion, an increase of 35 per cent over year-end, and fee earning assets under management totalled $17-billion. The company's team is introducing its asset management business to private institutions, having met with approximately 180 institutions this year, and the company expects to see its investment drive an increase in its platform size in the coming years.
• In the six months ended June 30, 2023, Dream's portfolio of stabilized properties generated revenue and net operating income of $71.1-million and $29.6-million, an increase of $11.7-million and $2.2-million, respectively, over the prior period, largely driven by the growth in the company's multifamily portfolio in the GTA, National Capital Region and Western Canada. As of June 30, 2023, the company's portfolio comprises 1,800 apartment units (at project level) and is 98.3 per cent occupied. The company expects to add an additional 1,260 units to its portfolio in the second half of the year that the company expects to contribute to higher revenue and net operating income in the future.
• Standalone FFO generated by the company's holdings in the Dream group of companies in the three and six months ended June 30, 2023, totalled $5.5-million and $14.3-million, respectively, down from $9.3-million and $18.4-million, respectively, in the comparative period due to a lower distributions and the company's reduced ownership stake in Dream Office REIT. FFO from the company's holdings includes the company's proportionate share of FFO from its 30.3 per cent interest in Dream Office REIT and 11.9-per-cent interest in Dream Residential REIT, along with distributions earned from the company's 32.6-per-cent interest in Dream Impact Trust.
• In the second quarter, Dream Impact Trust received final rezoning approval on 49 Ontario St., a wholly owned 88,000-square-foot commercial building located in downtown Toronto in close proximity to the Distillery and Canary District communities. The rezoning provides for approximately 809,000 square feet of residential gross floor area (or 1,250 residential units) and 68,000 square feet of commercial space. Since acquiring the site initially in 2014 and through the rezoning process, over $90-million in value has been created.
• Across the Dream group platform, which includes assets held through the company, Dream Impact Trust, Dream Impact Fund, Dream Office REIT and Dream Residential REIT, the company has a growing portfolio of 8,200 apartment units and 13.8 million square feet of gross leasable area (GLA) in stabilized rental, retail and commercial properties, in addition to the company's recreational properties. Over the next four years, an additional 3,077 apartment units comprising 2.6 million square feet of residential GFA is expected to be added to the company's recurring income portfolio (at project level) primarily relating to Canary Landing, Zibi, LeBreton Flats and Western Canada.

Highlights: development

• In the three months ended June 30, 2023, Dream's development business generated $22.4-million in revenue and incurred negative net margin of $4.0-million, an increase in revenue of $1.9-million and a decrease in net margin of $2.0-million from the comparative period, in line with management's expectations and primarily driven by the product mix sold in 2023 with higher condominium occupancies at Riverside Square was partially offset by lower lot and acre sales. Net margin decreased due to higher sales commissions related to Riverside Square and the product mix sold in 2023 in Western Canada.
• In the second quarter of 2023, the company achieved 22 lot sales and 22 housing occupancies primarily across its Eastbrook, Brighton, High River and Vista Crossing communities in Regina, Saskatoon and Calgary. As of Aug. 8, 2023, the company has secured commitments for an additional 412 lots, 39 houses and 12 acres across its Western Canada communities that it expects to contribute to earnings in the second half of the year and have seen increased home buyer interest and activity in the company's communities since March, 2023.
• This quarter, Dream received council approval to develop its Willows neighbourhood in Saskatoon, Sask. The company plans to redevelop the former 36-hole golf course into a 113-acre residential development, inclusive of a redesigned 18-hole golf course. This development will comprise approximately 285 lots and three multifamily parcels. The company commenced servicing of the first phase in July and expects to deliver 21 lots and 7.5 acres by the end of the year. Reconstruction of the golf course will begin in 2025, along with extensive upgrades to the clubhouse and creation of additional outdoor amenities for members and residents.
• The company commenced servicing of the next 208 acres of its development at Alpine Park in Calgary, Alta., this quarter. This area is expected to comprise approximately 615 lots, six multifamily parcels, an auto dealership along 162nd Avenue and 37 acres of green space. Further, this includes the company's Alpine Park Village Centre which consists of over 1,300 purpose-built rental units and 215,000 square feet of retail space. To date, the company has signed agreements to sell $46-million in serviced parcels, collecting $13-million in deposits to date with all sales expected to be firm by the third quarter.
• In the second quarter, the company closed on its first CMHC-insured MLI Select construction loan at Common at Zibi (Block 206), a 25-storey multifamily rental development which includes 19 high-quality affordable units operated by Ottawa Community Housing and 11,000 square feet of ground floor retail space. Common at Zibi will commence occupancies in the fourth quarter of 2023.
• From a planning perspective, over the second quarter the company made progress at its Quayside development located on Toronto's waterfront. On June 28, 2023, the company submitted municipal applications for the entire 12-acre site to accommodate 3.5 million square feet of density, approximately 4,600 units including 869 affordable units, 240,000 square feet of non-residential space, including 130,000 square feet of institutional and community space, and 55,000 square feet of retail. Dream's interest in Quayside is through Dream Impact Fund's 37.5-per-cent interest and Dream Impact Trust's 12.5-per-cent interest.
• Subsequent to June 30, 2023, leasing activity began at Aalto Suites II, a 148-unit purpose-built rental located on the shores of the Ottawa River with condo-like finishes and amenities. Occupancy will commence in the fall of 2023 and the company has leased six suites as of Aug. 8, 2023, with tremendous demand for appointments to view the building.

Select financial operating metrics for Dream's segments for the three and six months ended June 30, 2023, are summarized in the attached table.

Other information

Information appearing in this press release is a select summary of results. The financial statements and MD&A (management's discussion and analysis) for the company are available on the company website and on SEDAR+.

About Dream Unlimited Corp.

Dream is a leading developer of exceptional office and residential assets in Toronto, owns stabilized income-generating assets in both Canada and the United States, and has an established and successful asset management business, inclusive of $24-billion of assets under management across four Toronto Stock Exchange-listed trusts, its private asset management business and numerous partnerships. Dream Unlimited also develops 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 record for being innovative and for its ability to source, structure and execute on compelling investment opportunities.

We seek Safe Harbor.