Mr. Michael Cooper reports

DREAM UNLIMITED CORP. REPORTS FOURTH QUARTER RESULTS AND MANAGEMENT CHANGES

Dream Unlimited Corp. today released its financial results for the three and 12 months ended Dec. 31, 2023.

"For many years we have been expecting the end of the never-ending decline of interest rates. In 2023 we experienced the brunt of the reversal of interest rates to a 20-year high. The company weathered the severe adjustment well, however, our interest in income properties experienced fair value adjustments as capitalization rates increased and the value adjustments hit our office buildings the hardest," said Michael Cooper, chief responsible officer. "However, we currently have the highest presales of land in our history as a result of parcel sales in Alpine Park, Edmonton and Saskatoon, as well as our normal lot sales across all our communities. We also increased our assets under management by nearly 40 per cent from a year ago and completed over 950 apartment units with an expectation that we will start construction on 1,400 units in 2024. Upon completion of the sale of Arapahoe Basin, our liquidity will increase to among the highest in our history which is expected to be maintained. The transition of Dream to be primarily focused on asset management, owning and operating income properties with a strong weighting on purpose built rental and continued development of our core Western Canadian lands is becoming clearer."

Dream has published a supplemental information package on its website concurrent with the release of its fourth quarter results.

Subsequent to the fourth quarter, the company's board of directors approved an increase to the annual dividend per subordinate voting share and Class B share from 50 cents per share to 60 cents per share, effective with the dividend payable to shareholders on March 28, 2024.

Highlights: recurring income

• Revenue and net operating income for the three months ended Dec. 31, 2023, were $58.0-million and $25.6-million, respectively, up from $42.7-million and $14.3-million, respectively, in 2022. The increases are primarily attributable to higher fees earned in the company's asset management business as the fee-earning asset base has grown to $17-billion in 2023 from $11-billion in the comparative year. This was partially offset by lower net operating income from Arapahoe Basin. Similarly, revenue and net operating income for the year ended Dec. 31, 2023, were $45.4-million and $21.2-million higher than the comparative year due to the aforementioned reason and higher occupancies at Aalto Suites, the company's 162-unit rental building at its Zibi development, the launch of Aalto II in the fourth quarter of 2023 and higher occupancy rates in its retail property portfolio.
• During 2023, the company completed the most purpose-built rental buildings in its history (954 units in total), with the completion of 770 units at Maple House at Canary Landing in Toronto, Aalto II at Zibi in the National Capital Region, and 15 town homes and 21 single-family rentals at Brighton in Saskatoon. All of these buildings are being leased up as expected, with some product lines being leased above budget. In the next two years, the company expects to complete an additional 1,572 units including Cherry House and Birch House at Canary Landing (1,093 rental units), Common at Zibi (207 units), along with another 120-unit apartment building, 110 town homes and 42 single-family rentals in Saskatoon.
• In 2024, the company expects to start construction on its next apartments, town homes and single-family rentals in Saskatoon, along with Dream's first apartment building in Alpine Park in Calgary. The company has also received a financing commitment for LeBreton Flats Library Parcel and it expects to commence construction on the 608-unit development this spring. Dream is also making progress on financing commitments for two additional buildings at Zibi that would comprise an additional 439 units. Altogether, the company hopes to commence the development of 1,400 units in 2024. With the waiver of HST on purpose-built rentals and progress on pricing its construction costs, the company is seeing success in starting purpose-built rental projects across Canada. Dream continues to focus on these types of projects that can turn its land into income-generating properties with a desirable risk-adjusted return.
• The company's asset management revenue increased by $23.4-million, or nearly 50 per cent, largely driven by the growth of its industrial assets under management as well as the buildout of its industrial development pipeline. Based on development work that has been completed by the company's teams, Dream expects that its assets under management will continue to grow based on its expanding industrial portfolio, along with its growing multifamily rental portfolio.
• Adjusting for losses from Dream Office REIT, share of earnings from equity accounted investments for the three months and year ended Dec. 31, 2023, was $8.6-million and $10.8-million, respectively, up from $3.6-million and $7.1-million in 2022. The increase is attributable fair value gains at Maple House at Canary Landing, which commenced occupancy in September. Share of loss from equity accounted investments for the three months and year ended Dec. 31, 2023, was $64.3-million and $170.6-million, primarily driven by accounting losses taken on Dream Office REIT units as a result of the sustained lower unit price and the sale of a portion of the company's holdings in the second quarter of 2023.
• In the year ended Dec. 31, 2023, Dream's portfolio of stabilized properties generated revenue and net operating income of $122.2-million and $41.2-million, an increase of $15.5-million and a decrease of $1.0-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 Dec. 31, 2023, Dream's portfolio comprises 2,691 apartment units (at project level) and 83.9 per cent of available units are occupied.
• Subsequent to Dec. 31, 2023, the company announced an agreement to sell Arapahoe Basin to Alterra Mountain Company. Arapahoe Basin was purchased in 1997 and the company has invested significantly in the ski hill, including the installation of snowmakers, its first six-person chair lift, six restaurants and an aerial adventure park. The sale is expected to increase the company's liquidity by $150-million and focuses the business on its core asset base.
• 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 8,800 apartment units and 14.5 million square feet (sf) of gross leasable area (GLA) in stabilized rental, retail and commercial properties, in addition to Dream's recreational properties. Over the next four years, an additional 2,305 apartment units comprising 2.0 million sf 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 Dec. 31, 2023, Dream's development business generated $49.9-million in revenue and $3.1-million in net margin, a decrease of $75.1-million and $29.5-million, respectively, from the comparative period, primarily driven by the timing of sales in various communities in Western Canada. In 2023, the company recognized the majority of its sales volume in the third quarter, compared with the fourth quarter in 2022.
• In the fourth quarter of 2023, the company achieved 102 lot sales and 26 housing occupancies primarily across its Alpine Park, Eastbrook, Maple, Elan and Vista Crossing communities in Regina, Edmonton and Calgary. As of Dec. 31, 2023, Dream had approximately $146-million in land commitments for 2024 and 2025. Since the end of the year, the company has entered into agreements to sell an additional $40-million, increasing its highest-ever presale amount to $186-million, of which $148-million is expected to be recognized in income in 2024 and the remainder in 2025.
• In 2023 the company committed to the front ending costs at Alpine Park to start development of 200 acres of land. In the fourth quarter of 2023 the company completed the presale of three acres for $6-million for a multifamily site. Subsequent to the quarter, the company sold an additional 15 acres for $27-million that will be used for a private school and community hub that will further enhance its great community. Together with presales from 2023, the company now has $79-million of presales in these 200 acres, of which $44-million is expected to be recognized in 2024 with the remainder in 2025 which will repay the company's front ending costs and will be profitable. In addition, the front ending opens 1,400 apartment units and 230,000 square feet of retail which the company will develop ourselves. Dream is making significant progress on the retail leasing front and expect to start its first 200-unit purpose-built rental this year.
• Subsequent to year-end, the company completed two transactions in which it sold an interest in two parcels of land in Edmonton to builders in 2024 so that they can secure a pipeline of future building lots. The company sold 80 per cent and retained a 20-per-cent interest and it continues to be the development manager. The total sales price for the two sites is $39.5-million, resulting in profit in the first quarter of 2024 of $18-million and cash flow of $33-million over the next 12 to 18 months.
• The Teal, also known as Brighton Village Rentals II, commenced first occupancies this quarter. This property is the second multifamily building consisting of 120 studios, one- and two-bedroom rental units, and is located within Brighton Village Centre, an innovative 14-acre complex of townhomes, apartments, office and high street retail. As of Dec. 31, 2023, the company had 32 committed leases and 13 occupancies for a total of 26 per cent committed in the first 45 days of marketing. The retail component of this project is well under way with active interest on leasing.
• Brighton Towns on Delainey, also known as Block 124 Townhome Rentals, is Dream's 95 rental townhouse development located near the Brighton Village Centre. Construction on this project is reaching completion and is expecting first occupancy in the first quarter of 2024.

Consolidated results overview

A summary of the company's consolidated results for the year ended Dec. 31, 2023, is included in the attached table.

• Adjusted earnings (loss) before income taxes for the three months ended Dec. 31, 2023, was a loss of $4.6-million, up from a loss of $27.8-million in the comparative period. The decrease in losses is attributable to a fair value loss on a hospitality asset in 2022, growth of the company's asset management platform and fair value gains on Dream Impact Trust units held by other unitholders partially offset by fair value losses on the company's investment property portfolio and the timing of lot sales activity in Western Canada.
• Adjusted earnings before income taxes for the year ended Dec. 31, 2023, was $61.6-million, down from $105.3-million in the comparative period due to fair value losses on investment properties, higher interest expense on the company's variable rate debt and fewer lot and acres sales in Western Canada. The decrease was partially offset by growth of Dream's asset management platform and fair value gains on Dream Impact Trust units held by other unitholders.
• Adjusted Dream standalone funds from operations (FFO) for the three months ended Dec. 31, 2023, was 48 cents per share on a pretax basis, down from 72 cents per share in the comparative period, primarily due to fewer lot and acre sales from Western Canada partially offset by growth of the company's asset management platform. Adjusted Dream stand-alone FFO for the year ended Dec. 31, 2023, was $1.29 per share on a pretax basis, down from $2.36 per share in the comparative period, which included occupancies at Canary Commons.
• As of Dec. 31, 2023, the company has available liquidity of $325.1-million, an increase from $300.2-million as of Dec. 31, 2022. While the company's liquidity is ample compared with its historical levels and it appears that the economy is improving, with the uncertainty on interest rates, global politics, social uncertainty and geopolitical risks, the company's management team has intentionally increased its liquidity so that the company can pursue its business plan and manage through any shocks that arise in the economy. The company continues to pursue the sale of other non-core assets that would further increase its liquidity, with the majority of any such proceeds to be used to repay debt, facilitating the company's ability to return capital to shareholders in due course.
• In the year ended Dec. 31, 2023, 600,000 subordinate voting shares were purchased for cancellation by the company at an average price of $19.28 under a normal course issuer bid (NCIB) for total proceeds of $10.8-million (year ended Dec. 31, 2022 -- 400,000 subordinate voting shares at an average price of $39.53).
• Dividends of $21.3-million were declared and paid on the company's subordinate voting shares and Class B shares in year ended Dec. 31, 2023 (year ended Dec. 31, 2022 -- $38.3-million).

Management changes

Deb Starkman, chief financial officer, will be retiring effective March 28, 2024. Mr. Cooper commented: "On behalf of management and the board of directors, I would like to thank Deb for her strong leadership, partnership and commitment in executing our strategic vision during a transformational period of growth for the company. Deb will be missed, and we wish her the very best in the next chapter of her continuing endeavours, where she plans to use her extensive financial leadership experience in a wide range of industries to broaden her ongoing board work."

"I am extremely proud to have been part of Dream during this period of incredible growth and I cherish the relationships I've built with the talented team at Dream," added Ms. Starkman.

Dream will commence a search for a new chief financial officer both externally and internally from among the strong team of executives at Dream.

Conference call

Senior management will host a conference call to discuss the financial results on Wednesday, Feb. 21, 2024, at 5 p.m. ET. To access the conference call, please dial 1-800-319-4610 (toll-free) or 416-915-3239 (toll). To access the conference call via webcast, please go to Dream's website and click on the link for news, then click on events. A taped replay of the conference call and the webcast will be available for 90 days following the call.

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 fourth quarter of 2023 for the company are available at the Dream 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 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.