Good afternoon, ladies and gentlemen. Welcome to the DREAM Unlimited Corp. year-end conference call for Wednesday, February 24, 2021. During this call, management of DREAM Unlimited Corp. 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 Corp.'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 Corp.'s filings with securities regulators, including its latest 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 will have a question and answer session.
Your host for today will be Mr. Michael Cooper, CRO of DREAM Unlimited Corp. Please go ahead, sir.
Thank you very much, good afternoon to everybody. I'd like to welcome you to DREAM Unlimited's year-end conference call. I would also like to welcome Deb Starkman, who is our CFO, and this is the first conference call we've hosted together. 2020 was a remarkable year beyond anything that I had anticipated. I think probably beyond anybody's expectations. It was a very difficult year in many, many regards, and I hope that everybody is well, and all your families are well. Throughout the year, we tried to focus on people's well-being and managing our business the best we could. It's been a crazy year. A lot of things happened that we weren't expecting. The first one is we sold just about everything we owned that was standing inventory in Western Canada. We'll be developing more new lots this year than we have in many years.
We have builder buyers who have provided us with deposits to pay for the costs. We expect reasonable margins. We expect that we'll probably have the best year that we've had profit-wise since 2017. In Toronto developments, we've had our most successful year of development approvals that we've ever had. We expect that in 2021, we'll have an even better year. Throughout all of our projects, construction's generally on time and on budget. 2021 will be a big year at Zibi, with two renovated buildings coming online and our first new build office for the federal government and our first apartment. In December of 2020, our first purpose-built rental building was completed in Saskatoon. In under 90 days, it's already 50% leased out with the rents that are expected or better.
We'll start the next building in May, and we're also starting in the same Brighton Village, our first purpose-built townhomes rentals, and they'll be done in six or seven months. We're going to get a real quick response to the demand. If we continue to see demand in Brighton and other communities for apartments and townhouses, we've got a tremendous amount of capacity to build. It's becoming clearer and clearer now that we have income properties being completed every year. The visibility through 2025 is very clear, as many of those buildings are already under construction. Even behind that, we have many more projects to build and they'll all work to increase our recurring income. DREAM Industrial has grown in Canada, the U.S., and Europe, and has continued to see lots of opportunities to grow profitably and has good access to capital.
DREAM Office has performed surprisingly well, considering that so few people are in office buildings, but we continue to lease. We've had a little bit of a erosion in our occupancy, but we're very bullish on our portfolio. 357 Bay has been completed. We worked, moved into the paying rent. Our other large development is in Regina. It'll be ready for occupancy in July. We're making a lot of progress on our developments, and DREAM Office is holding up pretty well. We've seen some big trades and, Downtown Toronto office space, office buildings are very valuable. I would think there's been two huge initiatives for us that will have long-lasting benefits to the company. The first initiative is our focus on impact investing. We repositioned DREAM Alternatives Trust into what we believe is the world's first public impact fund.
We are dedicated to achieving market real estate returns or better, plus significant impact for our society. We want to achieve both. DREAM has always managed our business this way. In 2019, the World Bank created the operating principles for impact management with some of the largest investors in the world. With this, impact investing has become its own asset class. It is an extremely fast-growing asset class. DREAM Impact Trust has CAD 600 million invested in impact investments, which will grow to CAD 2.2 billion through completion. We're focused on three verticals, affordable and obtainable housing, resource management, and inclusivity. We are currently creating a very detailed, thorough framework for setting goals, measuring, and verifying our impact management.
The leading investors in this asset class are among the largest, most sophisticated investors in the world, and we want to show them the quality of our work and prove the impacts that we're providing. Impact analysis will be part of our due diligence for any new acquisitions. We will be doing that in addition to the financial analysis. All of our annual business plans will include financial expectations as well as impact expectations, and both our financial outcomes and our impact outcomes will be audited and the audits will be made public. For more information, I ask you to tune in for tomorrow's DREAM Impact Trust conference call at 10:30 A.M.
My personal belief is that being a leader in impact investing is one of the best opportunities I've seen in my career, and I'm looking forward to the work that all of us at DREAM are going to do on this area. We announced two significant hires. Richard Florida, one of the world's leading futurists about cities, urbanist, is becoming a vice chair of DREAM, focusing on impact. Pino Di Mascio, one of Canada's top urban planners, and most recently at Sidewalk Labs in charge of how they create better communities and communities that have a bigger impact. He's joining us, and between the two of them and the rest of our team, we're going to have a lot more capability to deliver on our promises. In addition, the other big initiative that we're doing is Jane Gavan with CEO of DREAM Global has become the head of our asset management.
She's working primarily on private equity asset management. In 2020, we got started. In 2020, we had costs setting the company up, but we've made a lot of progress. In this month, in February, we've entered into a transaction with a large international assets investor, and we're selling them 90% of the portfolio of apartments that we bought in July that are located in Dallas. We bought some more assets with them. We've contracted them. They're in Phoenix. Altogether, we've created a $300 million US apartment platform. It's got 2,000 units. I think this will give us a real chance to grow a platform in a US apartment. We're particularly interested in the Sun Belt. In addition to that, over the next month, we're expecting that we will close an open-ended impact fund that will be seeded with some of DREAM Unlimited's assets.
We wanted to create an open-ended fund because it is extremely difficult to line up impact investments, and when we do, we'd like to be able to keep them. The fund has no fixed term. We're seeding it with DREAM Unlimited's interest in the Indigenous hub in downtown Toronto, Block 8 in the West Don Lands, that's affordable housing, the utility that we created at Zibi, DREAM's interest in that, and also DREAM's interest in the federal government office building. That's a good participants. They're all very sophisticated. Once we get this closed and start to make a few more investments, we'll work to contact others who might be interested in investing in impact through us. We're also working on a couple more investment themes, and I expect that we'll be able to report to you throughout the year on our progress.
I'm very excited about the opportunities that we're working on with Jane. Just like Impact, there's a very significant team working on asset management, private equity asset management, and we have high expectations. The last area I wanted to mention was Arapahoe Basin, our ski area. Just for background, two years ago, we decided that we would separate from Vail's Pass program so that Vail Resorts passes, the Epic Pass, would no longer be good at A-Basin. That was a very major change because we were actually their very first partner, starting in 1997. It took a lot of thinking about it, anxiety around it, and we decided in February of 2019 that we would go on our own. On our first year, we started slow. We got momentum over Christmas. January was great. February was great. March was even better.
On March 13th, we were ordered by the governor to close. We really didn't get feedback on what it meant to go on our own. This year we've had a whole bunch of obstacles, including we didn't have snow. We were four weeks late opening. When we opened, we weren't allowed to have any people inside. Now we're allowed to have 25%. The Ski School business is limited, Ski Rentals limited, and we also have a restriction on the amount of people we can have at A-Basin. Notwithstanding that, in January, we earned more money than we did last year, and we also earned more money than we did in our best year ever, 2018, 2019, the last year with Vail. What's proving out is we are having a lot less skiers. I think our yield for every lift ticket is up about 70%.
We're getting quality. People are really enjoying the ski area. Our overall yield, including ski school and food and beverage, is about the same as it was last year, and it's way up from when we were Vail. I think that this year we're likely to have probably our second-best year ever. You can see that as we are able to open the ski area up on time, have people getting food from us, have ski school lessons and ski rental, it looks as if we're going to be able to have new highest years ever starting either for the full calendar of 2021 or for the 2021-2022 season. A-Basin is turning into a big contributor for our company. I would say that we're very pleased with the progress that we made in 2020.
It's really quite unexpected that given the shutdown, people having to work from home and so much fear and concern, we actually had a pretty good year. I would say that for those who have followed our company for a while, we consistently focus on how do we increase our overall value and how do we make sure that we do better in the future than we did in the past. There's a lot of initiatives that we've been doing to make our company stronger, whether it's the construction of the income properties to get more recurring income, growing the asset management business, the Impact initiative, what we're doing in Western Canada. I do believe that the future looks better than it has in the past.
I'd like to turn it over to Deb to walk you through the financials, and then we'd be happy to answer questions.
Thank you, Michael. Good afternoon. I'm Deb Starkman. I've spent the last 25 years of my career in capital markets and the last 14 at GMP. I've always had a strong interest in real estate and have a background that's useful for our fund business. I'm enjoying working at DREAM. I look forward to getting to know all of you. For the three and 12 months ended December 31st, 2020, earnings before income taxes, after adjusting for fair value gains and losses taken on DREAM Impact Trust units held by other unitholders was CAD 29 million and CAD 120 million, respectively, compared with CAD 477 million and CAD 554 million in 2019. The change year-over-year is primarily due to the sale of DREAM Global REIT that generated earnings before taxes of CAD 416 million in 2019.
While the pandemic had adverse effects across our recreational and leisure business segments, we were pleased to complete the sale of 86% interest in our 480 acres at Glacier Ridge, as well as the sale of Firelight infrastructure assets, which provided an additional CAD 116 million of liquidity and CAD 79 million of pre-tax earnings. In addition, the company benefited year-over-year due to lower interest expense as a result of reduced interest rates as well as lower debt levels. Amidst a challenging 2020, we maintained strong liquidity and managed risk to address the difficult financial environment and market uncertainty. As at December 31st, we had CAD 426 million in liquidity and a conservative leverage ratio of 27%. I will now go through a brief overview of results by operating segment.
In the fourth quarter, our recurring income segment generated revenue and net operating income of CAD 20 million and CAD 6 million, respectively, compared to CAD 309 million and CAD 289 million in the prior year comparative period. For the 12 months ended December 31st, 2020, our recurring income segment generated revenue and net operating income of CAD 92 million and CAD 27 million, respectively, down from CAD 431 million and CAD 348 million in the prior year comparative period. As previously discussed, our 2019 results had included fees earned on the disposition of DREAM Global REIT, totaling CAD 280 million. The remaining decrease was primarily driven by reduced income from DREAM Impact Trust portfolio due to prior year asset dispositions and scheduled loan repayments, as well as the ongoing capacity restrictions at Arapahoe Basin and The Broadview Hotel in Toronto due to COVID-19 pandemic.
It's worth noting that inclusive of retail in Western Canada, DREAM's average monthly rent collection in Q4 2020 exceeded 89%, and we have collected 89% of previously deferred rent due to the pandemic. Included in revenue for the three months ended December 31, 2020, was CAD 5 million related to asset management and development contracts with DREAM Industrial REIT, DREAM Office REIT, and our partnerships, which are expected to grow over time as we actively pursue new asset management opportunities. Now we'll talk about the development segment.
In fourth quarter, our development segment generated revenue and net margin of CAD 29 million and CAD 600,000, respectively, compared to CAD 74 million and a loss of CAD 12 million in the prior period, inclusive of a CAD 23 million land write-down in Regina in 2019. Results were driven by lower lot and acre sales in Western Canada relative to the prior year comparative period.
Results for fourth quarter of 2019 included occupancies at Riverside Square, Birchcliff Urban Towns, with no activity in the current quarter. Year to date, revenue and net margin for the development segment was up by CAD 106 million and CAD 68 million respectively. Over the prior year, primarily due to Western Canada acre sales, including the sale of Glacier Ridge and condominium occupancies at Riverside Square, Birchcliff Urban Towns and Kanaal at Zibi. We achieved 335 lot sales, 107 housing occupancies and 526 acre sales in 2020 inclusive of Glacier Ridge. As of February 23rd, we have secured commitments for over 700 lot and housing sales expected to close in 2021. It's also worth mentioning that in the three and 12 months ended December 31, 2020, we received government assistance through the Canada Emergency Wage Subsidy of CAD 2 million and CAD 6 million respectively.
Given the gap between our view on net asset value and share price, we believe that continuing to buy back stock is an attractive use of our capital and a driver of value creation. In 2020, we purchased 7.7 million subordinated voting shares for cancellation for total proceeds of CAD 170 million. We also continue to increase our investment in both DREAM Office REIT and DREAM Impact Trust, increasing our ownership during the year from 27% to 32% in DREAM Office REIT and from 23% to 26% in DREAM Impact Trust at the end of 2020. During 2020, we received CAD 24 million in distributions from the trust. As of February 23rd, the market value of our interest in the trust is CAD 452 million, which is approximately 48% of DREAM's current market cap.
We remain committed to maintaining a conservative debt position and may use excess liquidity to purchase additional units in DREAM Office REIT and DREAM Impact Trust as opportunities arise, fund potential new investments and ongoing share repurchases as part of our NCIB. Now I'll turn it back over to Michael.
Thank you, Deb. At this point, we would be very happy to answer any questions people may have.
Thank you. We will now begin our question and answer session. If you have a question, please enter the queue by pressing star then one on your touchtone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. If you are using a speakerphone, please pick up the handset first before pressing the numbers. Once again, if you have a question, please press star then one on your touchtone phone. We have our first question from Mark Rothschild with Canaccord.
Thanks and good afternoon, everyone. Michael, or maybe the same for Deb, there's plenty of different ways that you spent money over the past year, whether it's buying back shares of DREAM Unlimited, buying units of DREAM Office REIT, funding development. How should we think about what the most important uses to you of the capital are or maybe the best uses of capital are over the next six months to a year? Is it buying back shares? Are there other areas that are more important, such as investments maybe in DREAM Impact Trust?
Thank you, Mark. Firstly, I don't think the company's actually invested that much money in anything other than buying back shares of DREAM Unlimited, at least since COVID hit. The way we're set up, DREAM Impact is investing in developments. DREAM Unlimited has very little. Very little is required in addition at West Don Lands. Very little is required in Brightwater. A little bit at Zibi, but we're actually not using up much cash, which is really quite interesting. Western Canada produces cash. A-Basin produces cash. Development should produce cash. Obviously asset management and our investments in DREAM Impact and DREAM Office should produce cash. We don't have a lot of demands for capital at all. Then as far as buying back stock, we bought back about 2 million shares as of now on our issuer bid that started in September.
We're allowed to buy up to 2.7 million, so we'll buy a little bit more. Then next September we can buy another 2.4 million. We're really trying to maintain our liquidity. I think we've got liquidity between CAD 350 million and CAD 400 million, which we're quite content with. We're going to try to maintain that liquidity and continue building our business.
Just to understand, you can only buy another 700,000 or so shares back of DREAM Unlimited before September before you renew the bid?
Yes.
Okay. Moving on to the dividend increase. Is this something that we should look at as what you would expect or hope to be an annual pace of growth? Is there something one time about the % increase in the dividend, or how should we view that?
We introduced a dividend two years ago, and it was CAD 0.20 a share, and it was about CAD 10.8 million of cash. We've increased the dividend by 40% from CAD 0.20 to CAD 0.28, but the actual cash payment has only gone up about 11%. We haven't really been committing too much more money to the dividend, but because there's so many less shares outstanding, it's easy to raise it. Going forward, I think we're expecting to see higher income from asset management, higher income in Western Canada and higher income from development. I think we're going to try to raise the dividend consistently, but the total amount of dollars isn't even close to what we get from our dividend just in DREAM Office.
We don't have the type of plan you're talking about of saying we want to increase it by a certain amount each year. We certainly will increase it by at least the percentage of stock that we reduce and probably a little bit more.
Okay, great. Maybe just one more question. We've seen in many markets in North America an increase in demand for single-family housing. You have a large land bank, obviously, in Saskatchewan and in Alberta. Can you just maybe talk a little bit more about the trends you're seeing in those markets? Saskatchewan obviously had too much supply for some time. Are you more optimistic now about the next couple of years, or it's going to take longer for those markets to strengthen as well?
Oh, no, quite the opposite. That's what I was trying to get at. Everything we had available for sale was sold in 2020, which to me was completely the opposite I would have expected with a financial crisis and a health crisis. We ran out of inventory and when you send lots to builders, one of the things you have to look at is how are the builders doing. In Saskatoon at Brighton, that community, all the builders together sold more houses in December to users than we've ever sold in a single month. We're seeing a major change in the housing market. Because the builders have sold through their lots as well as us, we know that it's going to be very strong this year, and we'll be watching to see if it's gaining momentum or if it's a bit of a one-time thing.
It's been a massive change.
Are you seeing orders come in already for this year increasing?
Yeah. We have pre-sales of houses that we build, and I'm not sure of the number, but it's the highest we've had in years. We've got commitments from builders for our new subdivisions, and as we said in the press release, we have significantly more commitments with deposits and contracts than we actually sold in 2020. We still will sell lots to builders during the year that we can recognize in the year.
Great. Thank you so much.
Thank you.
We have our next question from Sam Damiani with TD Securities.
Thanks. Good afternoon, everyone.
Hi Damiani.
Hi there. Just on the U.S. apartment platform, this came together, well, it seems kind of rather quickly. When you look forward, how big is this sandbox? How big can this fund be? Is there any sort of limit on the size given the investor that you have, or are you seeking additional investors to grow the size of the fund?
Those are great questions. Together with Pauls, we've put together a platform to acquire and operate apartments. The client we're working with now has a big appetite, they're really buy, fix, sell. It's very project-oriented, very IRR-driven, and we're happy to do that. We want to grow with them. In addition to that, we'll probably be looking to find investor base to acquire apartment buildings that we can work on and hold to get quite a decent return, but more like an open-ended structure, ideally.
Okay, that sort of leads into my next question. You've got the apartment fund and maybe, call it a core apartment fund in your mind as well, and then you've got the impact fund that you're launching, call it imminently. How many other fund categories are you sort of looking at over the next year or two? What else you can say about that?
I think what we want to do is I think we don't want to have a lot of funds. I think we'd like to have a select number of funds that we can grow to scale. We're talking about an impact fund in Canada, and we think there may be opportunities in the U.S., but there's a big difference between an impact fund and a buy and hold or buy and flip apartment fund. I don't think that's a conflict on geography or on theme. We think that the apartments in the U.S. right now is quite distinct from what we're doing in impact.
For sure. The assets that are being seeded into the impact fund, how are they selected? Primarily for their sort of time to completion, or what was the criteria?
The criteria was we wanted to showcase our ability to create very good returns and significant impact. The building we're building for the federal government in Ottawa, it benefits from everything about Zibi. It's got net zero heating and cooling. It's built to a very high environmental standard. Since it's part of Zibi, there's a lot that we've been doing with the Indigenous. It's a whole community which we think is quite inclusive. There's a lot of affordable housing on the site, but obviously an office building isn't affordable, but we think it's a way to showcase what we're doing at Zibi. The heating and cooling utility that we own with Hydro Ottawa, I mean, that's just a net zero. That's an amazing thing, and it's going to allow the impact fund to potentially be net zero out of the chute.
We think that's a great way to showcase it. Block 8 is our affordable housing in Downtown Toronto, and it shows how we can do affordable housing, inclusive community that's financially attractive. The Indigenous hub is also financially attractive. Oddly enough, it does not have government assistance or participation. It's just the result of four years of negotiating with the Anishnawbe Health Toronto and coming to terms that are good for everybody to build it. We thought that when we went out to see investors, those four investments basically show DREAM being able to create incredible impacts, incredible returns, and they're vended in at market value. I think it will be good for everybody.
That's great. Last one for me is on A-Basin. A great color on the top line. Sounds like it's very robust. This year looks good. How does that look at the EBITDA level with the new pass?
Oh, I'm glad you asked that because I was really referring to the EBITDA number, not the top line. The revenue numbers aren't that great because this year, maybe we have 370,000 skiers. Two years ago, we had 600,000. The revenue per skier is going way up, the quality is going way up, and the cost of operating is coming way down because we don't have as many skiers. In January, we generated more EBITDA than in 2019. February so far, we're doing great. Last year was a great February. The year before was a great February. I wouldn't be surprised if our EBITDA is highest ever this February. We haven't even had the experience of what March, April, May are like when A-Basin's at its best, but it looks really promising on an EBITDA level, on the profitability level.
The other thing I would mention is we completed our adventure park last summer. We also completed our mountain climbing. It's extreme mountain climbing. We did two levels. It turns out both levels are extreme, one more extreme than the other. It's kind of consistent with the type of ski area that we have. We're going to see between weddings, the adventure park, and the Via Ferrata, which is the mountain climbing, how much revenue we get. A lot of that's incremental. I think we're going to see a real step up in the normalized profitability of A-Basin.
That's great color. Thank you very much.
Thank you.
As a reminder, if you have a question, please press star then one to enter the queue. Our next question is from Dean Wilkinson with CIBC.
Thanks. Hi Michael. Hi Deb.
Hi Dean.
Hi Dean.
Michael, extreme mountain climbing is a redundant statement.
No, it's not. I got to tell you, it's a funny story because we have one level, and then we have a higher level. When I was speaking to them recently, they were saying that mid-level, it's too high. We should probably do a third level now because it's really for athletes.
Yeah.
We'll see how it goes, but the ski area is known for it.
I'll watch the video. I want to talk about the impact invest. I think historically, and maybe it's been more perception than reality, that the cost of doing good has been dilutive to the financial returns of real estate development. Has it changed that the cost of doing the right thing has come down now, or has the hurdle around just general returns come in so that you can now actually do good and make money at the same time? What's changed now? I think that we're in a much better position to be able to do that.
Well, I actually think that within real estate, some people just build something, they put up a square box, they call it an office building. Some people put up a square box, they call it a condominium. Others really build communities. A wonderful example is Daniels. They've done some incredible work at Regent Park, and they did it on a for-profit basis. There's quite a few people who do great work, but generally on a small scale. What we're trying to do is institutionalize it, come out with a framework that will provide the large institutions with the belief that what we're doing isn't diluted. I think that there's always been some of it where we're getting a new framework and there's a new approach to it. I would say that there's two huge changes from the past.
One of them is every level of government is focused on affordable housing. It is a serious issue, and it's one of the few issues that at the municipal, federal, and provincial levels, there's total alignment. I would say that you're seeing a lot more alignment on climate change. What the governments are doing are using some sticks, but there's also a lot of incentives. When we do some of our work, we try to line up a number of incentives from different governments, and that can make it quite attractive. Brightwater, we bought from Exxon, a very polluted site that used to be a refinery, and turned it into, last year, in 2020, it was Toronto's award-winning community, the number one community in the city.
That was all without any government, but because there was some skill involved with it, we designed a community that really does provide a lot of impact. We're opening up the waterfront to the residents of Port Credit. You'll be able to bike there from Toronto, and it'll be different. We're probably going to have a Y there. We've got affordable housing there. I think that there are some incentives that make a difference. I think one of the things that's different now is the governments. I would say the other part is the providers of capital and the customers are more attuned to wanting to pay fair value for projects that provide impact. I think a lot of things are aligned, I think to be really big.
No, that's great. I definitely agree. It's a trend. It's not a fad. I think that we all ignore it at our own peril. That's all I had. Thanks. I'll hand it back.
Thanks a lot, Dean.
Thank you. We have no further questions. I will now turn the call over to Michael Cooper for closing remarks.
Thank you, operator. To everyone on the call, really appreciate you continuing to follow our company. As it sounds, we have a lot of things cooking, and I think that we'll be happy to speak again, and go through what we've achieved. In the meantime, if anybody has any follow-up questions, please don't hesitate to reach out to Deb or myself. Once again, thank you for your interest. Hopefully 2021 will be somewhat less eventful than 2020, and we'll all get a bit of a rest. Thank you all very much. Looking forward to our next meeting.
Thank you. Ladies and gentlemen, this concludes our conference. Thank you for participating. You may now disconnect.