Good afternoon, ladies and gentlemen. Welcome to the Dream Unlimited Corporation year-end 2019 conference call for Tuesday, February 25, 2020. During this call, management out of Dream Unlimited Corporation may make statements containing forward-looking information within the meaning of applicable securities legislation. 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 Unlimited Corporation's control, that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information.
Additional information about these assumptions and risks and uncertainties is contained in Dream Unlimited Corporation's filings with securities regulators, including its annual information form and MD&A. These filings are also available on Dream Unlimited Corp.'s website at www.dream.ca. Later in the presentation, we'll have a question and answer session. To queue up for questions, please press star one on your telephone keypad. Your host for today will be Mr. Michael Cooper, CRO of Dream Unlimited Corp. Mr. Cooper, please go ahead.
Thank you very much, operator. Good afternoon. This is the Dream Unlimited Q4 conference call. I'm here with Pauline Alimchandani, the CFO. She's got some prepared remarks, and then I have a couple of comments, and then we'll be happy to answer questions. Pauline.
Thank you, Michael. In the three months ended December 31, 2019, the sale of Dream Global generated pre-tax earnings of CAD 421 million within our financial results and cash proceeds to Dream of approximately CAD 500 million in respect of our asset management agreement and units directly owned in the REIT. Proceeds were immediately used to pay down CAD 225 million on our corporate debt facilities, in addition to funding the redemption of all outstanding preference shares for aggregate proceeds of CAD 29.1 million and other working capital amounts.
On our balance sheet as of December 31, 2019, we had corporate level cash of CAD 233.4 million, of which most was used to fund a substantial issuer bid and corporate taxes due subsequent to year-end. As at December 31, our debt to total asset ratio on a standalone basis was 24.6%, down from 36.4% last quarter, and we had CAD 322.8 million of undrawn credit availability on our corporate facilities, the most excess liquidity we have ever had in our history since going public.
We remain committed to maintaining a conservative debt position and may use excess liquidity to purchase additional units in Dream Office REIT and Dream Alternatives as opportunities arise, fund potential new investments, and ongoing share repurchases as part of our normal course issuer bid. In the year ended December 31, 2019, on a consolidated basis, the company recognized earnings before income taxes of CAD 440.4 million, compared to CAD 213.5 million in the prior year, due to the Dream Global transaction, as previously mentioned.
Increased earnings from equity accounted investments of CAD 56.3 million as a result of higher condominium occupancies and increased fair value gains on projects under development and income properties. This was partially offset by reduced margin contribution from our Western Canada Community Development Division of CAD 18 million, a CAD 23.2 million write-down on land held for development in Regina, and losses relating to the unit depreciation of Dream Alternatives of CAD 93.8 million.
Fair value losses on the Dream Alternatives Trust units were CAD 113.5 million in 2019 as a result of the impact of the unit price increasing to CAD 7.75 at December 31, 2019, up from CAD 6.24 in 2018, which compared to a lower amount of losses in the prior year. Across our financials, the aforementioned pre-tax earnings amount of CAD 421 million in the fourth quarter relating to Dream Global transaction was split as follows.
280 million is presented with an asset management net margin comprised of a CAD 275 million incentive fee and a CAD 5 million disposition fee. CAD 135 million is presented within the net gain on disposition of Dream Global, comprised of a $120 million gain on sale of our asset management agreement, CAD 13 million of other amounts received, and a $2 million gain on disposition of properties that were co-owned with the REIT. CAD 5.9 million is presented within fair value changes in financial instruments due to the appreciation in the unit price in the fourth quarter.
Across the Dream Group platform, which includes assets held directly through the company, Dream Alternatives and Dream Office REIT, we have approximately 5.4 million sq ft of GLA in retail and commercial assets, which are fully stabilized, and 3.7 million of GLA and nearly 14,000 condominium or purpose-built rental units at the project level in our development pipeline across Toronto and Ottawa. We have disclosed a new table in our MD&A on page nine detailing our portfolio and relevant asset details. We are extremely pleased with our advancements and accomplishments achieved across our development portfolio in 2019.
We secured the first major tenant, the Government of Canada, for Block 211, our first commercial building at Zibi, our 34-acre waterfront community in the nation's capital. After extensive collaboration with the City of Mississauga and the community of Port Credit, we reached an agreement with the city to advance municipal approvals to Brightwater. We also closed on the acquisition of Block 10 in the Canary District, and we secured landmark financing for our first purpose-built affordable rental building in downtown Toronto, referred to as West Don Lands Block 8, through CMHC's Rental Construction Financing Initiative for CAD 357 million, and thereafter, we commenced construction. Each of these further advances the value of our business for the long term.
In 2019, we acquired 64 million of units of Dream Office REIT and 27 million of units of Dream Alternatives, and we have received CAD 17 million and CAD 6.3 million in cash distributions on these investments, respectively. As of February 24th, we currently own 17 million units, or CAD 612 million at fair value in Dream Office REIT, or a 28% interest, and 16.1 million units, or CAD 127 million at fair value in Dream Alternatives, a 23% interest, which in aggregate represented over 60% of our total market cap. I will now go through a brief overview of results by operating segment.
Total asset management fees in the 12 months ended December 31 was CAD 319.7 million, up from the prior year, primarily due to the incentive fee earned on the Dream Global REIT transaction. The asset management segment generated net margin of CAD 306.4 million in the 12-month period, up from the prior year, with the incentive fee also partially offset by higher platform costs as we are investing in additional resources to support growth opportunities within Dream Industrial and through other asset classes. In the year ended December 31, 2019, NOI from our stabilized income-generating assets was CAD 23.3 million, relatively consistent year-over-year, with higher earnings from our Ski Hill A- Basin, partially offset by less income from assets either expropriated or sold in 2018.
In the fourth quarter of 2019, we recorded fair value gains on our investment properties of CAD 28.7 million, an increase of CAD 21.1 million relative to the comparative period, primarily driven by cap rate compression and increases in net operating income at the Distillery District, as supported by a third-party appraisal. The Distillery District, which is 50% owned by Dream, comprises 395,000 sq ft of commercial and retail GLA and is 99% occupied as at December 31, 2019 and is carried at CAD 144.5 million at the company's balance sheet at year-end.
DREAM initially purchased the Distillery District in 2004 for CAD 7.75 million for our 50% share. In the year ended December 31, our urban development segment generated net margin and earnings from equity accounted investments of CAD 0.3 million and CAD 4.3 million, respectively. In the three months ended, we commenced first occupancies at Canary Block, our first substantially complete building in stage two of the Canary District. We achieved 54 condominium unit occupancies in 2019, or 27 units at our share. In addition, in the year ended, our results included 395 occupancies, primarily at phase I of Riverside Square or 136 units at our share.
We expect more meaningful results in the first half of 2020 as approximately 200 condo units at our share are expected to occupy across the remainder of Riverside Square, Canary Block 16, BT Towns, and Canal at Zibi, generating CAD 10 million- CAD 11 million of margin. Our Western Canada Community Development Division incurred negative net margin of CAD 20.4 million in the 12 months ended December 31, 2019. Results included a CAD 23.2 million write-down on land held for development in Regina, recorded in the fourth quarter based on revised assumptions and later start dates for development.
At the end of the year, Western Canada represented approximately 39% of the company's total book equity, a decrease from 44% from the prior year and 67% from 2013, when we went public. Despite expected growth in our Western Canada earnings in future years, we believe that the segment will continue to decline as a percentage of our overall earnings and assets as we repatriate capital from operations in Western Canada and continue to grow our other segments.
In 2019, we generated CAD 25 million of cash flow from the division and anticipate repatriating an additional CAD 200 million-CAD 250 million of cash flow over the next four years from both land sales and profits, thereby reducing our overall investment to a more reasonable exposure in Western Canada. We have recently partnered with a private developer, Qualico, to develop Glacier Ridge, our 480-acre residential community in Calgary. Under the partnership, we have agreed to sell 73% of our interests in our lands to Qualico at a value of CAD 175,000 per acre relative to the book value of CAD 82,000 per acre as of December 31, 2019.
In addition to the income generated by the acre sale, we will continue to earn our share of profits over the development period of the community on our retained interest. At closing, which is expected in the spring of 2020, we expect to receive CAD 24.5 million of cash and the balance in a vendor take-back mortgage to be repaid over four years. Overall, it was an exceptional year for the company with our balance sheet and financial flexibility now in the best position it has been over the course of our history. Effective Q1 2020, we intend to further simplify our segmented disclosure within our MD&A. Our results will be split between two segments, development assets and reoccurring income assets.
Our recurring income assets will continue to grow as we build out our development pipeline and hold more exceptional real estate income properties on our sites over the long term. We believe this will simplify our discussion of our business with external stakeholders. With that, I will now turn the call back over to Michael to conclude.
Thank you, Pauline. I don't have much to say other than just want to provide a little bit of insight onto our liquidity. As we said in the press release and other materials, with the cash we got from the Dream Global transaction, we paid off a tremendous amount of debt, we have to pay tax, and we bought back some stock. That basically gets us more or less to where we want to be. We intend on buying a little bit of stock back this year. Probably buy a little bit more Dream Office and a small amount of investments, but we want to be as liquid as possible. It's an uncertain world, and we're very happy with what we own.
I think in the MD&A, we showed a chart with everything that we own, and our view is if all we do is do a great job developing what we own, taking care of the operating segments, take care of Dream Office, grow our asset management business, we're going to continue to have a great company. Hopefully, we'll come up with some other good ideas, and we'll get extraordinary returns from that. I think we're really looking at reducing financial leverage. We're looking at creating liquidity from a few other assets this year. We've talked about renewable power before, Glacier Ridge, and we might sell a couple of retail assets. Altogether, hopefully that'll get us $130 million or $ 140 million.
We will be able to do the things I mentioned earlier in terms of buying back some stock, buying some more Dream Office, and maybe making a few investments and still have more liquidity than we have now. That's very much on our mind. With regards to Glacier Ridge, the valuation of CAD 84 million is quite good. It's about 220% of our book value. Even selling 73% of it, that alone is about 15% of our entire land holdings. We're going to sell a 75%, 73% interest in 460 acres, and we're going to end up repatriating 15% of the capital we have in land. We think that's great, and we're going to have 9,300 acres left over. We think we've got a great business.
We're getting lots of cash out of it, and we'll continue to take cash out from working capital as well as we sell land. This year is the first year since we bought A-Basin in 1997 that a Vail pass isn't accepted. It was a very big deal for us. We had 590,000 skiers last year, and we were way over capacity, and we were uncomfortable with the experience that we were able to offer our customers. We eliminated that pass, and we entered into an agreement with Ikon to have a restricted pass that gives their holders either five or seven days at A-Basin.
Our team was extremely excited about it i t's a huge change for us. We had hoped to reduce our skiers by about 25% and grow our income by increasing the yield per skier. We opened very early, opened October 13th o ur guys were aggressive. They made sure we had a full staff, almost nobody came to ski there. October, November, and the first half of December was very slow. We were down about 50% on skiers and had about 75% of last year's revenue. However, since then, we're seeing a lot more traffic. For February, I believe we're right on the same numbers for last year.
We expect to have 10% savings in costs. It'll turn out that we'll be more profitable than we were last year. On Saturday, we had something like $360,000 of revenue, which is the highest amount we've ever had. We're hoping that as the winter turns into spring, which is the season that people know A-Basin for, we'll see more improvement. Overall, I'm not sure where we're going to end up on EBITDA because we had such high expenses at the beginning of the year.
Our yields are much higher than they were, but I think they will be higher next year. Our view is that by adjusting to the changes, we should be able to make more money under the new arrangement than we did under the old arrangement. I think that we are able to provide our skiers with a great experience. I am not sure if we are going to be at CAD 6 million or CAD 8 million this year, but I think next year we will be above that in EBITDA in US dollars. We are excited about it. One other point I wanted to mention was that last year we had 107.5 million shares outstanding.
We had a CAD 0.10 dividend, which cost us CAD 10.75 million. This year, we have 95.5 million shares outstanding. The board today agreed to increase the distribution from CAD 0.10- CAD 0.12. We have less shares outstanding, it increases the total cost of the company by about CAD 700,000. What we're really doing is increasing the dividend by a little bit more than the number of shares reduced, and the burden on the company will still be very small. We think that's great for shareholders, and we're pleased with how the stock responded over last year.
We're pleased that this year started good. As Pauline mentioned, we've got tremendous value in our stocks, our asset management contracts, our land in Western Canada, our land in downtown Toronto, the ski hill, the distillery, Zibi, and we're pretty pleased with the company. We hope you guys are too. I'd be happy to answer any questions if anybody has any, and so will Pauline.
Thank you. We'll now begin the question and answer session. If you have a question, please press star then 1 on your touch tone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. There'll be a delay before the first question is announced. If using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star then 1 on your touch tone phone. Our first question comes from Mark Rothschild from Canaccord. Your line is open.
Thanks. Good afternoon. Maybe in regards to Glacier Ridge, can you just talk a little bit about how close is that land as far as ready for development? How long out would it be? How would you compare that land as far as value to maybe what you have in Providence? Is there an opportunity to do transactions like this with your land in Saskatchewan?
Okay. I hate three-part questions, so you'll have to remind me. I think that the land, just on January 30th, I think it was, the city said that they're prepared to look at what's necessary to develop it. I know that's not clear, but we probably think it's two to three years away, so we think that's pretty good. The way this land works is there's 320 acres that could be developed in the relatively near term, and then the land about, I think it's about another 300. There's 320 acres, two quarter sections that, if we get approval, they would be approved.
There's another 140 acres that would not be approved for a longer time. It's not in the growth plan. I think this one is about 175,000 per acre. It's in northern Calgary, Providence in southern Calgary, and it's zoned, so Providence will be worth a lot more. In Saskatchewan, I don't know if there'd be a chance to do deals like this. We haven't looked at it, but obviously, we're looking to get as much cash out of land and maintain as strong a presence as we can.
Okay, thanks. In regards to the balance sheet, clearly reducing debt has been a focus. Just one thing wasn't clear to me, the debt went down from Q3 to Q4. When you talked about paying down debt, was that already all done in Q4? Also on that, from the debt you have now currently, is there quite a bit more or any more that could be paid down? I realize much of it is in construction loans related to specific projects.
Yeah. We paid down debt when the transaction closed on December 10th, and we would've repaid all of our margin line and all of our operating line.
At this point, there really isn't much debt to be paid down further.
Right. There would be construction debt, there would be first mortgages, and there would be the term loan, which is a fixed three-year term loan.
The current cash balance would be primarily the year-end less the SIB?
Yes. We also paid taxes as well. We remit our tax installments in February, so most of the cash on the balance sheet, as of December 31, has now been used to fund the SIB and tax and some other working capital amounts.
There was almost CAD 400 million at the year-end. How much tax was paid now?
We had corporate-level cash of CAD 233.4 million at December 31. That was after we paid down debt. We funded the SIB for CAD 117.5 million.
Okay.
We had taxes to fund of CAD 105 million.
Okay, fine. I got it. Thank you.
Yeah.
Our next question comes from Sam Damiani from TD Securities. Your line is open.
Thank you. Good afternoon. Just wanted to start off maybe on the urban land development business. What's the status on Brightwater in terms of bringing that product to market for pre-sales?
It's coming this spring.
How do you see phasing that project?
Oh, my gosh. It's 3,000 market units. I think it's about 200 affordable units and 400,000 sq ft of commercial. It'll be phased over the next seven or eight years.
Is any of that going to be kept for rental, or is that all going to be for sale?
Based on the partnership, I think it's very likely that the great majority or all of it will be for sale, not for rental.
Okay. Maybe if you could just give us a sense of what your plans are over in Europe. Obviously, you've redeployed existing resources to support Dream Industrial's expansion there, but what else are you looking at doing, and in what asset classes?
We're looking at a couple things. Firstly, you're absolutely right. We've reallocated some of the Dream Global people to Dream Industrial, and Dream Industrial has started to grow in Europe. We are building a team out in Europe, and that'll be great to support the industrial. In addition to the industrial, we are looking at opportunities to do value-add office. Mostly value-add office or value-add mixed use.
Would those be with funds, with third-party capital?
Primarily, yes. We're looking at it as an asset management business in Europe.
Okay, great. I guess what prompted the write-up on the distillery? I don't think there was a refinancing, but what was the sort of reason for getting the new appraisal on it?
We get appraisals fairly frequently on our assets. I think we do every two to three years. We are currently looking at financing the distillery, although that has not been concluded.
Great. Thank you.
You're welcome.
As a reminder, to enter the queue, please press star then one on your touchtone phone. Our next question comes from Dean Wilkinson from CIBC. Your line's open.
Thanks. Afternoon, everyone.
Hi.
Michael, now that you're more than 60% outside of Western Canada, you face a bit of a, I'll call it an issue that everyone else who's got land sort of in Toronto does, that permitted buildable air rights are now pushing up towards $200 a foot or square or higher. What needs to happen for you to start to realize some of that in your book value, and how are you guys approaching that?
Well, it's an interesting question. The first one is Dream Office had 250 Dundas approved in the first quarter. I think it was January 29th.
Yeah.
It'll get valuation for the first quarter, and then Dream Unlimited will pick that up. That's one way. When we're building condos, you don't realize it until they're sold and closed. To the extent we're building commercial, you would realize them from the time that we're approved, and then you continue to get gains as we build out buildings. As an example, West Don Lands should have some increases over time as we get more and more complete. You'll start to see it, but I think it'll be later this year and into next year.
Right. I guess it really just comes down to construction milestones and then just sort of triggering a revaluation of the assets.
Yes.
I suppose. Yeah. Okay. Pauline, just an accounting question for you. On the Glacier Ridge, will you be booking a, call it CAD 31.5 million pre-tax gain on the vend-in of that property to that joint venture, or will you be able to hold your historical cost basis on that?
No, we'll be booking a gain.
You'll be booking a gain. Okay.
On the 73% sold. Yep.
Effectively, it's 350 acres at the difference between the 175 and the 82, right?
Yes.
Yes. Okay, perfect. That's it for me. Thanks.
We have no further questions. I'll now turn the call back over to Michael Cooper for final remarks.
Thank you very much for following the company, and we look forward to keeping you informed. Please feel free to call Pauline and I if you have any questions. Thank you very much.
Thank you, ladies and gentlemen. This concludes today's conference call and webinar.