Dream Unlimited (TSE:DRM) reported higher third-quarter net margin as growth in asset management and income properties offset a softer sales mix in Western Canada. Management also outlined plans to expand its European asset management business and work toward a longer-term solution for Dream Impact Trust.
Chief Financial Officer Meaghan Peloso said standalone net margin rose to CAD 32.6 million from CAD 24.1 million a year earlier. After-tax earnings were CAD 13.1 million, and Peloso said the company expects fourth-quarter margin to be its strongest of the year.
Chief Responsible Officer Michael Cooper said Dream’s shares trade at a substantial discount to net asset value, even as the company builds its asset management and income property businesses. He said Dream intends to continue repurchasing shares but is prioritizing investment in its divisions and preserving cash amid an uncertain interest-rate environment.
Asset management growth
The asset management division generated third-quarter revenue of CAD 23.2 million and net margin of CAD 17.8 million. Net margin increased by CAD 6.8 million from a year earlier, driven by growth in assets under management and performance fees, Peloso said.
Including acquisitions after quarter-end, assets under management stood at CAD 31 billion, according to Peloso. The figure includes mandates acquired through the Chancerygate platform and capital deployed across other mandates during the year.
Cooper said Dream closed its Chancerygate acquisition during the quarter, expanding its European asset management capabilities. The company is close to completing documentation for its first new European joint venture since the acquisition and is pursuing other prospects, he said.
Peloso cautioned against using third-quarter base fees as a forward run rate. Chancerygate was acquired near the end of August, and while its contribution should increase base fees slightly, she said Dream does not expect it to affect overall margin this year.
Cooper expects asset management to be Dream’s largest division by profit this year and throughout the company’s budgeting period.
Development and rental properties
Western Canada development generated CAD 8.9 million in net margin, down modestly from a year earlier because of the mix and volume of sales. Activity was primarily driven by lot and acre sales at Alpine Park in Calgary, Peloso said.
Based on presales commitments, Dream has secured CAD 100 million in Western Canada revenue for the fourth quarter, she said. Cooper added that preparatory work is underway at the Homewood development, although final zoning approvals remain outstanding. He said Dream and the city are working toward full approval in 2027.
Income property net operating income increased to CAD 7.6 million from CAD 6.5 million, largely because of apartment lease-ups. The result included a CAD 550,000 bad debt expense related to a retail tenant.
Dream had approximately 1,100 operational multifamily units at period-end and expects to deliver another 930 units at its share during 2027 in Saskatoon, Ottawa and Calgary, Peloso said. Cooper estimated that income property net operating income would grow at roughly a 30% compounded annual rate over the next three years, though he did not provide a near-term quarterly forecast.
Impact Trust and debt maturities
Cooper said Dream continues to support Dream Impact Trust, whose development and apartment holdings are concentrated in Ontario. He said Dream has been lending to the trust with security and believes the underlying assets remain attractive despite difficult market conditions.
Cooper said Impact Trust had approximately CAD 900 million of debt, including CAD 630 million of Canada Mortgage and Housing Corp.-insured loans. He identified master-planned communities at Zibi and Brightwater, along with Forma East, as areas requiring particular attention. He said progress has been slow on Zibi’s Gatineau land and that Brightwater has stalled.
Dream and Impact Trust hope to have a longer-term solution by year-end, Cooper said. In response to an analyst’s question, he said he was highly confident of a significant update around that time, though it would not necessarily be a complete solution and would require agreement between the two boards. The goal is to provide at least a year and a half of runway, he said.
Separately, Peloso said Dream had CAD 264 million available under its corporate credit facilities as of Sept. 30 and approximately CAD 596 million of consolidated debt classified as current. Approximately CAD 205 million matures in the first quarter of 2027, including an insured apartment mortgage and a land loan for which construction financing discussions are advanced. She said management sees little refinancing risk in the remaining 12-month maturities.
Quayside financing and capital allocation
Asked whether financing for the Quayside development had been finalized and construction would begin before year-end, Cooper said more than 25 documents covering the project, including its debt, were nearing completion. The company then needs to lock in an interest rate that works for the project, he said.
Cooper said interest-rate volatility has become a significant consideration: a one-basis-point change represents about CAD 1.3 million in costs over 20 years. Dream will try to get the project underway over the next seven weeks, he said, but deal terms among the parties must first be completed.
On buybacks, Cooper said Dream has repurchased roughly 1% to 2% of the company annually. He said the company would continue buying shares, while weighing those purchases against development opportunities and the need to retain cash.
About Dream Unlimited (TSE:DRM)
Dream is a leading real estate developer and has an established and successful asset management business, inclusive of $28 billion of assets under management (1) across three Toronto Stock Exchange (‘TSX’) listed trusts, our private asset management business and numerous partnerships. We develop land and housing in our master planned communities in Western Canada and hold a growing portfolio of income generating properties across Canada. Dream expects this area of our business to grow as investment properties under construction are completed and held for the long-term.
