Dream Unlimited’s announcement of the sale of its Arapahoe Basin Ski Resort mentioned: “Dream is also evaluating other investments throughout the Company to maximize shareholder value and increase liquidity.” Dream previously suggested sale of Arapahoe Basin was unlikely because it would trigger a significant tax liability.
Regarding fees charged to MPCT by DRM: both DRR and DIR have 15% incentive fees, MPCT does not. Also DRM is acting as the developer for MPCT. Developers might typically receive 3-4% of the end value of each project. I think if you adjust for that the differences in fees that DRM charges its subs may not be very meaningful.
That's an interesting perspective. I wrote "If MPCT achieved extraordinary returns then this expense might be affordable, but instead it has simply added to destruction of unitholder value." I calculate that MPCT has paid cumulative fees of $111mm to DRM over 10 years and incurred a cumulative loss of $20mm. So I don't see MPCT's agreement as comparable to DIR.
Any thoughts on Impact’s latest developments? I watched the Nov 5 City of Toronto meeting and the exec committee led by the mayor overwhelmingly supported Michael Cooper-backed development fee waiver, property tax deferral which should allow for 49 Ontario to go ahead by year-end if all goes to plan. It may also help other projects. They also as you know have a major land opportunity at Zibi with the Capital View Lands in Gatineau, near the bridge which links Ontario next to future Ottawa Sens arena. It’s hard for me to value as I don’t understand their loan structure completely but seems promising, perhaps for the first time in Impact’s inception.. Would love your thoughts here.
Buy first, ask questions later? I'll probably write something about it next month. IIRC the development fee waiver relied on getting equivalent funds from the federal government. That might work out, but it was easy for the mayor and executive committee to approve a change if somebody else will pay for it. The sharp drop in Toronto apartment rents makes it difficult to value PBR projects. is there even a housing shortage if prices are -9.7% yoy? I continue to hold the controversial opinion that a REIT cannot have a 4% expense ratio. In March I wrote: "Dream Impact is likely to be a bad investment unless it achieves tremendous development success in the next two years (possible, but insiders are not betting on it)". In recent weeks I've seen several twitter posters pushing a simplistic narrative that MPCT is on the verge of achieving such success. What is project approval for 49 Ontario worth? Cooper was asked about project returns on the cc and evaded the question. I could also point to some positives for MPCT, and will probably do so next month.
Well the Chair also recently added $50k so perhaps my timing can't be bad - I've never added it before. But yes, I'm no expert at Impact. Never saw it as compelling - until now, where Cooper has multiple levels of government throwing cash and incentives at him, something Impact strived for since inception. Guaranteed rock bottom BOC rate bond yields under the CMCH apartment loan construction program/frequent builder is also compelling, other developers don't have this options; plus the Development fee waiver plus the Property Tax waiver which will be voted on the 13th together. Based on the Nov 5 meeting the proposal has strong support. Zibi lands on Capital View are another huge liquidity source for next year. But he also has the recurring revenue jump from the lease up of apartments which will spike big into 2026. Sounds like Cooper has JVs in the wings. These City of Toronto / Fed gov measures seem to also open up the door to other Impact projects such as Queyside.
But if we take just the known: recurring income spike into 2026, sufficient capital requirements for 2025, probable ability to sell the Capital View Lands at Zibi, what do you see as the greatest risks here? On Nov 13, we will know the outcome of the City of Toronto proposals which has a lot of support in my opinion after having watched that first meeting entirely. Look forward to your write-up.
The risks continue to be debt and expenses. MPCT needs to create value faster than it bleeds out in interest and overhead. Do you remember the slide from the DRM investor day (page 83)? Showed 2Q23 NAV of $31.70/unit and an arrow pointing up to demonstrate all the value that would be created over the next 9 years. Now at 3Q24 BVPU is down to $22.10 due to the burden of expenses and interest and slower than expected development progress. You can still draw an arrow pointing up. But you asked what are the risks? More of the same. Operating cash flow was ($11mm) in 9M24. That's before capex, investments, and equity dilution. Gotta turn that around.
Just to clarify, the "Phase 1" part of the program is purely City of Toronto supported; this supports the immediate construction of 7,000 new units. "Phase 2" uses Intergovernmental (Ontario) support which would allow for another 13,000 units. I'm not sure this is Federal based? You can see the description in a graph here:
Good article. I am in for "the plunge" with Cooper on Dream Office. Can't see how you lose from current valuation and feeling good about my position with a recent add prior to the cut of course, which I always thought was a possibility albeit likely to be accompanied with asset sales. Seems like major asset sales could be coming this year plus a joint venture residential deal. Excited for this and won't be surprised to see it as a top winner if Cooper can execute the asset sales.
D would be in strong shape if it did not do the SIB last year and instead put the DIR proceeds towards NCIB, capex, and debt reduction. However the SIB was a way for DRM to extract a significant amount of capital and raise its liquidity.
I have had a small position of D-UN.TO for many years 2013 ( 100 shares purchased for a unit price $37.38) being a income investor . Sorry But i cant agree with any of this positive discussion. It is not a value, and i don't see any bright future for this security ever. Now it has done another desperate move to further erode value with a unit consolidation... Its down another 3% today. There are many other REIT's with much better metrics and qualities. Honestly with REITS, better to buy a basket of them with an ETF like ZRE or MREL. They (single Reits) are obviously not diversified enough to be reliable year after year.
I'm sorry for your loss. I didn't own D.UN in 2013 so I can't comment on why people believed it was attractive at that time. My investments and commentary focus on value rather than dividends which are just an arbitrary management decision.
Regarding fees charged to MPCT by DRM: both DRR and DIR have 15% incentive fees, MPCT does not. Also DRM is acting as the developer for MPCT. Developers might typically receive 3-4% of the end value of each project. I think if you adjust for that the differences in fees that DRM charges its subs may not be very meaningful.
That's an interesting perspective. I wrote "If MPCT achieved extraordinary returns then this expense might be affordable, but instead it has simply added to destruction of unitholder value." I calculate that MPCT has paid cumulative fees of $111mm to DRM over 10 years and incurred a cumulative loss of $20mm. So I don't see MPCT's agreement as comparable to DIR.
Any thoughts on Impact’s latest developments? I watched the Nov 5 City of Toronto meeting and the exec committee led by the mayor overwhelmingly supported Michael Cooper-backed development fee waiver, property tax deferral which should allow for 49 Ontario to go ahead by year-end if all goes to plan. It may also help other projects. They also as you know have a major land opportunity at Zibi with the Capital View Lands in Gatineau, near the bridge which links Ontario next to future Ottawa Sens arena. It’s hard for me to value as I don’t understand their loan structure completely but seems promising, perhaps for the first time in Impact’s inception.. Would love your thoughts here.
Buy first, ask questions later? I'll probably write something about it next month. IIRC the development fee waiver relied on getting equivalent funds from the federal government. That might work out, but it was easy for the mayor and executive committee to approve a change if somebody else will pay for it. The sharp drop in Toronto apartment rents makes it difficult to value PBR projects. is there even a housing shortage if prices are -9.7% yoy? I continue to hold the controversial opinion that a REIT cannot have a 4% expense ratio. In March I wrote: "Dream Impact is likely to be a bad investment unless it achieves tremendous development success in the next two years (possible, but insiders are not betting on it)". In recent weeks I've seen several twitter posters pushing a simplistic narrative that MPCT is on the verge of achieving such success. What is project approval for 49 Ontario worth? Cooper was asked about project returns on the cc and evaded the question. I could also point to some positives for MPCT, and will probably do so next month.
Well the Chair also recently added $50k so perhaps my timing can't be bad - I've never added it before. But yes, I'm no expert at Impact. Never saw it as compelling - until now, where Cooper has multiple levels of government throwing cash and incentives at him, something Impact strived for since inception. Guaranteed rock bottom BOC rate bond yields under the CMCH apartment loan construction program/frequent builder is also compelling, other developers don't have this options; plus the Development fee waiver plus the Property Tax waiver which will be voted on the 13th together. Based on the Nov 5 meeting the proposal has strong support. Zibi lands on Capital View are another huge liquidity source for next year. But he also has the recurring revenue jump from the lease up of apartments which will spike big into 2026. Sounds like Cooper has JVs in the wings. These City of Toronto / Fed gov measures seem to also open up the door to other Impact projects such as Queyside.
But if we take just the known: recurring income spike into 2026, sufficient capital requirements for 2025, probable ability to sell the Capital View Lands at Zibi, what do you see as the greatest risks here? On Nov 13, we will know the outcome of the City of Toronto proposals which has a lot of support in my opinion after having watched that first meeting entirely. Look forward to your write-up.
The risks continue to be debt and expenses. MPCT needs to create value faster than it bleeds out in interest and overhead. Do you remember the slide from the DRM investor day (page 83)? Showed 2Q23 NAV of $31.70/unit and an arrow pointing up to demonstrate all the value that would be created over the next 9 years. Now at 3Q24 BVPU is down to $22.10 due to the burden of expenses and interest and slower than expected development progress. You can still draw an arrow pointing up. But you asked what are the risks? More of the same. Operating cash flow was ($11mm) in 9M24. That's before capex, investments, and equity dilution. Gotta turn that around.
Just to clarify, the "Phase 1" part of the program is purely City of Toronto supported; this supports the immediate construction of 7,000 new units. "Phase 2" uses Intergovernmental (Ontario) support which would allow for another 13,000 units. I'm not sure this is Federal based? You can see the description in a graph here:
https://secure.toronto.ca/council/agenda-item.do?item=2024.EX18.2
I presume that 49 Ontario would be included in the first order, Phase 1, but it is not a guarantee.
Good article. I am in for "the plunge" with Cooper on Dream Office. Can't see how you lose from current valuation and feeling good about my position with a recent add prior to the cut of course, which I always thought was a possibility albeit likely to be accompanied with asset sales. Seems like major asset sales could be coming this year plus a joint venture residential deal. Excited for this and won't be surprised to see it as a top winner if Cooper can execute the asset sales.
D would be in strong shape if it did not do the SIB last year and instead put the DIR proceeds towards NCIB, capex, and debt reduction. However the SIB was a way for DRM to extract a significant amount of capital and raise its liquidity.
I have had a small position of D-UN.TO for many years 2013 ( 100 shares purchased for a unit price $37.38) being a income investor . Sorry But i cant agree with any of this positive discussion. It is not a value, and i don't see any bright future for this security ever. Now it has done another desperate move to further erode value with a unit consolidation... Its down another 3% today. There are many other REIT's with much better metrics and qualities. Honestly with REITS, better to buy a basket of them with an ETF like ZRE or MREL. They (single Reits) are obviously not diversified enough to be reliable year after year.
I'm sorry for your loss. I didn't own D.UN in 2013 so I can't comment on why people believed it was attractive at that time. My investments and commentary focus on value rather than dividends which are just an arbitrary management decision.