Good afternoon, ladies and gentlemen. Welcome to the Dream Unlimited Corporation Year End Conference Call for Wednesday, February 24, 2021. During this call, management 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 latest annual information form and MD and A.
These filings are also available on Dream Unlimited Corporation's website at www.dream. Ca. Later in the presentation, we will have a question and answer session. To queue up for a question. Your host for today will be Mr.
Michael Cooper, CRO of Dream Unlimited Corporation. Please go ahead, sir.
Thank you very much, and good afternoon to everybody. I'd like 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 I hope 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. And the first one is we sold just about everything we owned Notwithstanding inventory in Western Canada.
We'll be developing more new launch this year than we have in many years. We have buyers, builder buyers who provide us with deposits to pay for the costs and we expect reasonable margins. And 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. And we expect that in 2021, We'll have an even better year.
Throughout all of our projects, construction is generally on time and on budget. 2021 will be a big year at Zibby with 2 renovated buildings coming online and our first new build office For the federal government and our first department. 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 of townhomes rentals, And they'll be done in 6 or 7 months. So we're going to get a real quick response to the demand. And if we continue to see demand in Right in another 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.
But 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 is continuing 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 But we continue to lease.
We've had a little bit of erosion in our occupancy, but we're very bullish on our portfolio. 357 Bay has been completed. We were to move the end of the paying rent. Our other large development is in Regina. It will be ready for occupancy in July.
So 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 2 huge initiatives for us that will have long Benefit to the company. The first initiative is our focus on impact investing. So we repositioned Dream Alternative Trust And to what we believe is the world's 1st 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. But in 2019, the World Bank created the operating principles for Impact Management of some of the largest investors in the world. And with this Impact Investing has become its own asset class.
It is an extremely fast growing asset class. Dream Impact Trust has $600,000,000 invested in Impact Investments, which will grow to $2,200,000,000 through completion. We're focused on 3 verticals affordable and attainable 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 am.
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 2 significant hires, Richard Florida, one of the world's leading futurists about cities, Urbanist is becoming a Vice Chair of Dream focusing on impact and Pino DiMascio, one of Canada's top urban planners And most recently at Sidewalk Labs in charge of how they create Better communities, communities that have a bigger impact. He's joining us and between the 2 of them and the rest of our team, we're going to have More capability to deliver on our promises. In addition, the other big initiative that we're doing is, Jane Gavin With the sale of Dream Global has become the head of our asset management.
She's working primarily on private equity asset management. And 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, asset 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 $300,000,000 U. S. Apartment platform.
It's got 2,000 units. And I think this will give us a real chance to grow a platform in the U. S. Apartment. We're particularly interested in the Sunbelt.
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 the Dream Unlimited's assets. We wanted to create an open ended fund because it is extremely difficult to Lineup Impact Investments and when we do, we'd like to be able to keep them. So the fund has no fixed We're seeding it with Dream Unlimited interest in the Indigenous Hub in Downtown Toronto, Block 8 in the West Don Lands, it's Affordable housing. The utility that we created at Zivi, Dream's interest in that, and also Dream's interest in the federal government office building. So that's a good work that they're all very sophisticated.
And once we get this closed, start to make a few more investments, we'll work to contact others who might be interested in investing and 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. And 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, 2 years ago, we decided that we would Separate from Vail's Pass program, so that Vail Resorts Passes, the Epic Pass will no longer be good at A Basin.
That was a very major change because we were actually their very first partner starting in 1997. So it took a lot of Thinking about anxiety around it and we decided in February of 2019 that we would go on our own. And on our 1st year, we started slow. We got momentum over Christmas. January was great.
February was great. March was even better and then on March 13, we were ordered by the governor to close. So we really didn't get feedback on what it meant to go on our own. So this year, we've had a whole bunch of obstacles, including we didn't have snow. We were 4 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 Unlimited Ski Rentals Limited. So 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 on our best year ever 2019, 2020 2018, 2019, the last year we failed.
So what's proving out is we are having a lot less gears. I think our yield for every lift ticket is up About 70%. So 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 there.
And I think that this year we're likely to have probably our 2nd best year ever. But 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. So 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 Shut down, people having to work from home and so much fear and concern. We actually had a pretty good year. But 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. And there's a lot of That we've been doing to make our company stronger, whether it's the construction of the income properties, 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.
So 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, and good afternoon. I'm Deb Starkman. I've I spent the last 25 years in 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 for our fun business. I'm enjoying working at Dream and I look forward to getting to know all of you.
For the 3 12 months ended December 31, 2020 earnings before income taxes after adjusting for fair value gains and losses taken on Dream Impact Trust units held by other unitholders with $29,000,000 $120,000,000 respectively, compared with $477,000,000 $554,000,000 in 2019. The change year over year is primarily due to the sale of Dream Global REIT that generated earnings before taxes of 4 $15,000,000 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 $116,000,000 of liquidity and $79,000,000 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 challenging 2020, we maintained strong liquidity and managed risk to address the difficult financial environment and market uncertainty.
As at December 31, we had $426,000,000 in liquidity and a conservative leverage ratio of 27%. I will now go through a brief overview of results by operating In the Q4, our recurring income statement generated revenue and net operating income of 20 $6,000,000 respectively compared to $309,000,000 $289,000,000 in the prior year comparative period. For the 12 months ended December 31, 2020, our recurring income segment generated revenue and net operating income of $92,000,000 and $27,000,000 respectively, down from $431,000,000 $348,000,000 in the prior year comparative period. As previously discussed, our 2019 results have included fees earned on the disposition of Dream Global REIT totaling $280,000,000 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 Aper Home 1, 2020, with $5,000,000 related to asset management and development contracts with Dream Industrial REIT, Now I'll talk about the Development segment. In 4th quarter, our Development segment generated revenue and net margins of $29,000,000 $600,000 respectively, compared to $74,000,000 and a loss of 12,000,000 in the prior period, inclusive of the $23,000,000 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 Q4 2019 included occupancies at Riverside Square, BT Towns with no activity in the current quarter. Year to date, revenue and net margin for the Development segment was up by $106,000,000 $68,000,000 respectively. Over the prior year, primarily due to Western Canada acre sales, including the sale of Glacier Ridge and condominium at Riverside Square, BT Town and Canel at Zivi. We achieved 335 lot sales, 107 housing occupancies and 526 Acres Sales in 2020 Inclusive of Glacier Ridge.
As of February 23, we have That in the 3 12 months ended December 31, 2020, we received government assistance through the Canadian emergency wage subsidy of $2,000,000 $6,000,000 respectively. Given the gap between our view on net asset value and share price, we believe that continuing to buy back stock It's an attractive use of our capital and a driver of value creation. In 2020, we purchased 7,700,000 subordinated voting shares for cancellation for total proceeds of $170,000,000 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 at the end of 2020. During 2020, we received $24,000,000 in distributions from the trust. As of February 23, the market value of our interest in the trust is $452,000,000 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
Thank you, Deb. And at this point, we would be very happy to to answer any questions people may have.
And thank you. We will now begin our question and answer session. And we have our first question from Mark Rothschild with Canaccord.
Thanks and good afternoon everyone. Michael or maybe same for Debbie, 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, funding development. How should we think about what your the most important uses to of the capital are or maybe the best use So the capital are over the next 6 months to a year. Is it buying back shares? Are there other areas that are more important such as investments maybe
So, thank you, Mark. Firstly, I don't think the company has actually That's it 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 On lands, very little is required at in Brightwater.
So a little bit of Sydney, but we're actually not using that much cash, which is really quite interesting. So Western Canada produces cash, a basin produces Development should produce cash. Obviously, asset management and our investments in Dream Impact, Dream Office should produce Cash. So we don't have a lot of demands for capital at all. And then as far as buying back stock, we've been we bought back about 2,000,000 Shares as of now on our issuer bid that started in September.
We're allowed to buy up to $2,700,000 so we'll buy a little bit more. And then next September, we can buy another $2,400,000 So we're really trying to maintain our liquidity. I think we've got liquidity between $350,000,000 $400,000,000 which we're Quite content with and we're going to try to maintain that liquidity and continue building our business.
So 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? Or is there something one time about the
Well, basically, we introduced a dividend 2 years ago And it was $0.20 a share and it was about $10,800,000 of cash. We've increased the dividend by 40 Percent from $0.20 to $0.28 but the actual cash payment has only gone up about 11%. So 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 and higher income in Western Canada and higher income from development. So 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.
So We don't have the type of plan you're talking about, but what we I'm saying we want to increase it by a certain amount each year. But we certainly will Increase it by at least the percentage of stock that we reduce and probably a little bit more.
Okay, great. And maybe just one 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 then 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. So we ran out of inventory and When you sell lots to builders, one of the things you have to look at is how are the builders In Saskatoon at Brighton, that community, all the buildings together sold more houses in December to users That we've ever sold in a single month. So we're seeing a major change in the housing market.
And 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, but It's been a massive change.
And are you seeing orders come in already for this year increasing?
Yes. We have so we have presales of houses that we build and I'm not Sure the number, but it's the highest we've had in years. And then 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 20 And we still will sell lots to builders, during the year that close that we can recognize in the year. Great.
Thank you so much. Thank you.
And we have our next question from Sam Damiani with TD Securities.
This came together well, it seems kind of rather quickly. And when you look forward, what's the how big is the 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. So together with Pulse, we put together a platform to acquire and operate apartments. The client we're working with now has a big appetite, but they're really buy, fix, sell. So it's very project oriented, very IRR driven and we're happy to do that.
We want to grow with them. But in addition to that, we'll probably be looking to Your base to acquire apartment buildings that we can work on and hold, get a quite a decent return, but more like an open
Okay. And that sort of leads into my next question. You've got The apartment fund and maybe a core 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 2?
Well, I think what we
want to do is I mean, 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 States. But there's a big difference between an impact fund and a buy and hold or buy and flip apartment fund. So, I don't think that's a conflict on geography or on theme.
So we think that the apartments in the U. S. Right now is quite distinct from what we're doing in Impact.
For sure. And the Assets that are being ceded 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. So The building we're building for the federal government in Ottawa, it benefits from everything about Zibby. It's got net zero heating and cooling. It's built to a very high environmental standard, and it's since it's part of Zibby, there's a lot that we've been doing with the indigenous. It's a whole community, which we think is quite inclusive.
And there's a lot of affordable housing on the site, but obviously an office building Affordable, but we think it's a way to showcase what we're doing at Sibby. The heating and cooling Utility that we own with Ottawa Hydro, I mean, that's just a net zero. That's an amazing thing, and it's going to allow the impact fund Potentially net 0 out of the chute. So 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.
And the Indigenous sub is also financially attractive. Oddly enough, it does not have government assistance or participation. It's just the result of 4 years of negotiating with the Anishinaabe Health Center and coming to terms that are good for everybody to build. So we thought that when we went out to see investors, those four investments basically showed Dream being able to create incredible impacts, incredible returns And they've ended in at market value, so I think it's good for everybody.
That's great. And last one for me is on A Basin. Great color on the I guess Top line sounds like it's very, very robust. This year looks good. How does that look at the EBITDA level with the new pass?
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 We're going to this year, maybe we have 370,000 skiers. 2 years ago, we had 600,000. But 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.
So in January, we generated more EBITDA than in 20 February so far, we're doing great. And last year was a great February. The year before was a great February, but I wouldn't be surprised if our EBITDA is highest ever this February. So we haven't even had the experience of what March, April, May or like when a basin is at its best, but it looks really promising on an EBITDA level, on the profitability level. The other thing I would mention is We introduced we built we completed our adventure park last summer and we also completed our mountain climbing, Stream mountain climbing.
We did 2 levels. It turns out both levels are extreme. One is more extreme than the other. It's kind of consistent with type of ski area that we have. But we're going to see between weddings, the adventure park and the Via Ferrata, which is the mountain climbing, how much revenue we get, but that's a lot of that's incremental.
I think we're going to see some a real step up in the normalized profitability of A Basin.
That's great color. Thank you very much. Thank you.
Our next question is from Dean Wilkinson with CIBC.
Thanks. Hi, Michael. Hi, Deb.
Hi, Dan.
Hi, Dean.
Michael, extreme mountain climbing is a redundant statement.
No, it's not. 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. And when I was When I was speaking to them recently, they were saying that mid level, it's too high. We should probably do a 3rd level now because it's really for athletes.
Yes. So I will see how it goes, but the ski area is known for it.
I'll watch the video. Just I want to talk about the impact in that. 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 sort of real estate development. Has it changed that sort of the cost of doing the right things has come down now? Or has the hurdle around just general returns come in so that you can now We do good and make money at the same time.
Like what's changed now? And 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 They call it an office building, some people put up a square box, they call it a condominium and others really build communities. And a wonderful example is Daniels. They've done some incredible work at Regent Park and they did it on a for profit basis. And there's quite a few people who do great work, but generally on a small So 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. So I think that there's always been some of it.
We're getting a new framework and there's a new approach to it. But I would say that there's 2 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 Both federal and provincial levels, there's total alignment. I would say that you're seeing a lot more alignment on climate change.
And what the governments are doing are using some sticks, but there's also a lot of incentives. So 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. So that was all without any government, but 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 here from Toronto and We'll probably going to have a why there. We've got affordable housing there. So I think that there are some incentives that make a difference. So I think one of the things that's different now is the government.
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. So I think a lot of things are aligned. I think
It's great. I definitely agree. It's a trend. It's not a fad.
And I think
We all ignore it at our own peril. That's all I had.
Thanks. I'll hand it back.
Thanks a lot, Gene.
And thank you. We have no further questions. I will now turn the call over to Michael Cooper for closing remarks.
Thank you, operator. And to everyone in 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. And in the meantime, if anybody has any follow-up questions, please don't hesitate to reach out to Deb or myself. So once again, thank you for your interest.
And hopefully, 2021 will be somewhat less eventful than 2020, and we'll get a bit of a rest. So 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.