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Dream Office Reit (Otc) (TSE:D.UN)
:D.UN
RESEARCH TOOLSreports
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Dream Office Real Estate Investment
(OTC:D.UN)
53Neutral
Positive Factors
Financial Performance
FFO per unit rises 10% year-over-year, driven by same-property NOI growth and higher straight line rent from occupancy.
Leasing Activity
Leasing activity appears to be improving with significant new leases signed and an increase in in-place occupancy.
Valuation
The REIT’s units currently trade at an implied cap rate of 8.0% or a 20.6% discount to our NAV estimate, compared to the average discount of 10.2% for peers.
Negative Factors
Interest Expense
Greater interest expense from mortgage refinancing and exposure to variable-rate debt partially offset positive factors.
Occupancy
Lower same-property occupancy offsets rent growth.
Other Markets Performance
The ‘other markets’ portfolio experienced a decrease in same-property NOI due to increased vacancy, particularly in the GTA.
Dream Office Real Estate Investment (D.UN) vs. S&P 500 (SPY)
Market Cap
C$333.22M
Dividend Yield6.43%
Average Volume (3M)22.43K
Price to Earnings (P/E)―
Beta (1Y)1.84
Revenue Growth4.16%
EPS Growth-57.38%
CountryCA
Employees500
SectorReal Estate
Sector Strength73
IndustryREIT - Office
Share Statistics
EPS (TTM)-5.44
Shares Outstanding16,337,349
10 Day Avg. Volume32,387
30 Day Avg. Volume22,432
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.63
Price to Cash Flow (P/CF)4.90
P/FCF Ratio3.70
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$19.50Price Target Upside9.62% Upside
Rating ConsensusHold
Number of Analyst Covering6
Dream Office Real Estate Investment Business Overview & Revenue Model
Company DescriptionDream Office REIT is an unincorporated, open-ended real estate investment trust. Dream Office REIT owns well-located, high-quality office properties, primarily in downtown Toronto.
How the Company Makes MoneyDream Office REIT generates revenue primarily through leasing its office properties to tenants, collecting rental income. The company enters into lease agreements with businesses that require office space, offering flexible leasing solutions to accommodate different tenant needs. Additionally, Dream Office REIT may benefit from ancillary services, such as parking and property management fees, which enhance overall income. The trust's financial performance is influenced by factors such as occupancy rates, rental rates, property valuations, and market conditions. Strategic partnerships with real estate service providers and a focus on maintaining high-quality properties also contribute to its ability to attract and retain tenants, thus driving revenue growth.
Dream Office Real Estate Investment Financial Statement Overview
Summary
Dream Office REIT is facing profitability challenges with declining net income and margins. The balance sheet shows moderate leverage and a shrinking equity base, indicating potential financial pressure. However, cash flows remain stable, offering essential liquidity.Income Statement
The company's income statement reveals challenges in profitability, with a declining trend in net income, particularly in the most recent year. The gross profit margin has been stable, but the net profit margin is negative, indicating operational inefficiencies or high non-operating expenses. Revenue growth is minimal, showcasing little top-line expansion.45
Neutral
Balance Sheet
The balance sheet presents a mixed picture with moderate leverage, as indicated by the debt-to-equity ratio. Stockholders' equity has been declining, reflecting potential financial strain. The equity ratio remains within a reasonable range, suggesting a balanced approach between debt and equity financing, but the declining equity could pose future risks.55
Neutral
Cash Flow
Cash flow analysis shows a stable generation of operating cash flows, though free cash flow growth has been inconsistent. The operating cash flow to net income ratio indicates reliance on cash flow for sustaining operations, amidst negative net income. Despite challenges, the company maintains a positive free cash flow to net income ratio, suggesting efficient cash management relative to net losses.60
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 196.11M | 190.45M | 196.27M | 195.93M | 206.59M | Gross Profit |
| 106.13M | 102.33M | 106.12M | 107.13M | 112.94M | EBIT |
| 0.00 | 62.88M | 154.09M | 186.64M | 138.54M | EBITDA |
| -40.74M | -14.27M | 158.04M | 199.13M | 152.15M | Net Income Common Stockholders |
| -104.93M | -77.20M | 63.64M | 154.21M | 177.28M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 18.27M | 13.27M | 8.02M | 8.76M | 13.07M | Total Assets |
| 2.58B | 2.67B | 3.07B | 3.07B | 2.89B | Total Debt |
| 1.31B | 1.34B | 1.38B | 1.29B | 1.20B | Net Debt |
| 1.29B | 1.33B | 1.37B | 1.28B | 1.19B | Total Liabilities |
| 1.50B | 1.47B | 1.53B | 1.52B | 1.39B | Stockholders Equity |
| 1.08B | 1.20B | 1.53B | 1.55B | 1.50B |
| Cash Flow | Free Cash Flow | |||
| 41.61M | 45.62M | 41.24M | 54.69M | 59.58M | Operating Cash Flow |
| 72.39M | 70.72M | 76.67M | 95.81M | 94.29M | Investing Cash Flow |
| -21.07M | 286.12M | -19.24M | -29.38M | -4.50M | Financing Cash Flow |
| -47.15M | -351.41M | -58.59M | -70.74M | -172.15M |
Dream Office Real Estate Investment Technical Analysis
Neutral
17.79
Price Trends
17.88
Negative
18.08
Negative
18.68
Negative
Market Momentum
-0.02
Negative
50.92
Neutral
25.18
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:D.UN, the sentiment is Neutral. The current price of 17.79 is above the 20-day moving average (MA) of 17.58, below the 50-day MA of 17.88, and below the 200-day MA of 18.68, indicating a neutral trend. The MACD of -0.02 indicates Negative momentum. The RSI at 50.92 is Neutral, neither overbought nor oversold. The STOCH value of 25.18 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:D.UN.
Dream Office Real Estate Investment Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | C$4.30B | 19.01 | 4.50% | 7.32% | 9.46% | -42.77% | |
72 Outperform | C$7.01B | 24.86 | 3.20% | 3.41% | 4.45% | ― | |
63 Neutral | C$2.62B | ― | -2.29% | 6.01% | -6.92% | -310.05% | |
61 Neutral | $4.70B | 17.65 | -3.00% | 11.43% | 5.99% | -19.07% | |
53 Neutral | C$333.22M | ― | -9.20% | 6.43% | 4.16% | -57.38% |
* Real Estate Sector Average
Performance Comparison
TSE:D.UN
Dream Office Real Estate Investment
17.79
2.43
15.81%
RIOCF
RioCan Real Estate Investment
11.91
-0.83
-6.51%
TSE:CAR.UN
Canadian Apartment
43.14
-1.29
-2.90%
TSE:HR.UN
H&R Real Estate ate Staple
10.05
1.64
19.50%
TSE:SRU.UN
SmartCentres Real Estate Investment Trust
25.29
3.97
18.62%
ARESF
Artis Real Estate Investment
5.40
1.10
25.58%
Dream Office Real Estate Investment Earnings Call Summary
Earnings Call Date: Feb 20, 2025 | % Change Since: -2.98% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Neutral
The call highlighted strong leasing activity and successful debt refinancing, signaling resilience despite high downtown vacancy rates and increased leasing costs. The REIT is innovatively managing its portfolio with conversion projects and strategic tenant relocations. However, the decline in funds from operations indicates financial pressures.Highlights
Leasing Activity Surge
Dream Office REIT had its most active leasing year since pre-COVID with 114 deals completed in 2024, surpassing 98 in 2023 and 93 in 2022. This included 54 new deals and 60 renewals totaling over 635,000 square feet.
Debt Refinancing Success
Dream Office REIT successfully refinanced or received credit approval for $711 million of maturing debt without any paydowns, covering almost 60% of its total debt stack.
Increase in Net Rental Rates
Rental rates remained strong with net rents in Toronto holding steady at $30 to $35 per square foot, yielding a 20% spread against expiring rents.
Occupancy Management
Despite high vacancy rates downtown, Dream Office REIT managed to maintain a committed occupancy of just under 85%, outperforming the overall market Class A occupancy at 83%.
Innovative Conversion Project in Calgary
Dream Office REIT announced a potential conversion of its office building into a 166-unit rental apartment, targeting a 6% development yield.
Lowlights
High Vacancy Rates
Downtown areas continue to experience high vacancy rates, currently at almost 20%, due to potential additional space entering the market as tenants rightsize or expire.
Increased Leasing Costs
Higher material and labor costs along with increased commissions on new deals compressed net effective rents to the mid-teens in Toronto.
FFO Decline
Diluted funds from operations dropped to $0.72 per unit from $0.75 in Q4 2023, primarily due to higher total interest expenses.
Company Guidance
During the Q4 2024 conference call, Dream Office REIT provided several metrics and insights into their performance and future guidance. Michael Cooper, Chair and CEO, highlighted that about 60% of their debt maturing in 2025 has been effectively managed under favorable terms. Gordon Wadley, COO, noted a significant leasing activity for 2024, including 114 deals totaling over 635,000 square feet, with 54 new deals and 60 renewals. Rental rates in Toronto remained robust, with net rents ranging from $30 to $35 per square foot. The committed occupancy in downtown Toronto stood at just under 85%, despite a high vacancy rate of nearly 20% in the area. Jay Jiang, CFO, reported a diluted FFO of $0.72 per unit for the quarter and $2.98 for the year, marking a 4% increase from 2023. The company anticipates downtown occupancy to dip to 81% in 2025 but rise to the high 80s in 2026, with a stabilization above 90% by 2027. Dream Office REIT aims for $2.60 to $2.70 of recurring FFO per unit in 2025 and expects comparative property NOI to remain flat or show low single-digit growth. The company also addressed refinancing risks with $744 million of maturing debt in 2025 and announced a $105 million sale of a property at 438 University.Dream Office Real Estate Investment Corporate Events
Dividends
Dream Office REIT Declares March 2025 Distribution
Positive
Mar 20, 2025
Dream Office REIT announced its March 2025 monthly distribution of 8.333 cents per REIT Unit, Series A, payable on April 15, 2025, to unitholders of record as of March 31, 2025. This announcement reflects the company’s ongoing commitment to delivering consistent returns to its stakeholders, reinforcing its strong position in the competitive Toronto office market.
Business Operations and StrategyFinancial Disclosures
Dream Office REIT Navigates Market Challenges with Strategic Initiatives
Neutral
Feb 20, 2025
Dream Office REIT reported its Q4 2024 financial results, highlighting a decrease in occupancy rates and property values amidst a challenging market environment. The company is focusing on strategies like reducing debt, improving liquidity, and diversifying income sources by converting office space to residential rentals, aiming to stabilize operations and improve portfolio quality in 2025.
DividendsBusiness Operations and Strategy
Dream Office REIT Declares February 2025 Distribution
Positive
Feb 19, 2025
Dream Office REIT has announced its monthly distribution for February 2025, set at 8.333 cents per REIT Unit, Series A, amounting to $1.00 on an annualized basis. This distribution will be paid to unitholders on March 14, 2025, with the record date being February 28, 2025. This announcement underscores the company’s ongoing commitment to providing value to its stakeholders through consistent financial returns, reflecting its strong market positioning and asset management strategy in the competitive real estate sector.
Financial Disclosures
Dream Office REIT to Announce Q4 2024 Financial Results
Neutral
Jan 27, 2025
Dream Office REIT announced that it will release its financial results for the quarter ended December 31, 2024, on February 20, 2025. The company will hold a conference call on February 24, 2025, to discuss these results, providing stakeholders with insights into the company’s financial performance and strategic direction.
M&A TransactionsBusiness Operations and Strategy
Dream Office REIT Sells 438 University Avenue to Boost Profitability
Positive
Jan 24, 2025
Dream Office REIT has announced the sale of its 438 University Avenue property in Toronto for approximately $105.6 million, enhancing its strategic portfolio management. The transaction, which includes tenant relocations to other Trust properties and a property management agreement, is set to bolster net operating income and reduce development costs, thereby improving profitability and liquidity by paying down debt.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.