Michael J. Cooper is the president and chief responsible officer of Dream, as well as chair and CEO of Dream Office REIT. (Courtesy Dream)

Dream Unlimited has undergone major strategic changes since late last year and has continued to sharpen its focus through the COVID-19 crisis.

“We’ve added a lot more income properties and recurring income,” president and chief responsible officer Michael Cooper told RENX. “We’ve generally just been building a stronger company.

“We’ve got land, about 12,000 apartments and condos, and about five million square feet of office. We spend a lot of our time now on internal growth.”

Toronto-based Dream Unlimited (DRM-T) has approximately $9 billion of assets under management in North America and Europe. It provides asset management services for three funds: Dream Office REIT (D-UN-T); Dream Industrial REIT (DIR-UN-T); and Dream Alternatives (DRA-UN-T).

Dream Global, Dream Industrial moves

Dream Global REIT was created in 2011 to invest in European real estate and launched its initial public offering that same year.

After generating a total return of 214 per cent since inception, it was sold in 2019 to real estate funds managed by The Blackstone Group Inc. (BX-N) in an all-cash transaction worth $6.2 billion.

“For the shareholders, the value of the contract was very high and it really recapitalized Dream Unlimited and provided us the most liquidity we’ve ever had,” said Cooper.

Although this process began well prior to the onset of the global COVID-19 pandemic, he noted it’s beneficial to have plenty of capital in these uncertain times.

“Last February, we decided to try to increase our liquidity and raise some capital,” said Cooper. “In the last 15 months, we’ve raised internally over $700 million from our existing assets.”

Dream Unlimited has also paid down more than $300 million in debt.

Former Dream Global REIT executives Alexander Sannikov and Bruce Traversy joined Dream Industrial REIT in senior operating and investment roles, and the trust acquired $268 million of light industrial and logistics assets in the Netherlands and Germany during Q1 2020.

It’s also in exclusive negotiations, or under contract, to acquire more assets in those countries and is open to investing in other nations.

“We weren’t getting out of Europe, we just wanted to do it in a different way,” said Cooper. “It’s harder to build new, the yields are pretty good, and interest rates are much lower. So overall we think you get in at a nice starting price.”

Dream Equity Partners

Dream Unlimited recently created Dream Equity Partners to enter the private real estate space and act as an asset management business for institutional and retail investors such as pension funds, sovereign wealth funds and family offices.

Former Nuveen Real Estate executive Rahul Idnani was named president of the new entity, which will focus on managing and developing office, multifamily, industrial and mixed-use assets in Canada, the United States and Europe across core, core-plus and value-add strategies.

“We invest a lot of our own capital, plus we’ve started public companies that we manage, but I think the real growth in real estate asset management is on the institutional side or high net worth,” said Cooper.

“We concentrated so much on public companies and we’re really under-represented in terms of having funds. So we thought that with the sale of Dream Global, we should commit dedicated people and have a fund business.”

Dream Equity Partners will diversify Dream Unlimited’s capital and allow growth without concern for the whims of the public market.

Dream Unlimited and Dream Office REIT

Dream Unlimited became Dream Office’s development manager last year, leading the rezoning and intensification process for the REIT’s redevelopment assets.

Meanwhile, Dream Office became Dream Unlimited’s property manager.

Specialization has become a focus since Cooper said he doesn’t “want to have four different groups doing the same thing throughout the organization.”

While Dream Unlimited still develops residential condominiums, it’s turning its attention more to purpose-built rental apartments.

“If we build a condo, we end up with cash. Then we have to find another piece of land and we have to do it again,” he observed.

“If we build an apartment, we do it once and then they should be able to produce consistent cash-flow over a long period of time. It’s just an easier and more predictable business to run.”

Western Canada land and residential assets

Dream Unlimited develops land and residential assets in Western Canada for immediate sale.

While the company was built on the success of that business from the beginning of this century until 2013, it has reduced its working capital in Western Canada over the last few years.

Western Canada represented approximately 39 per cent of Dream’s total book equity at the end of 2019, down from 67 per cent two years earlier.

“I don’t think we’re going to be doing a lot of large land sales,” said Cooper. “I think we’ll continue to develop our way out.

“So if we continue to develop, reduce our inventory, take the cash out of Western Canada, and not buy significant amounts of land, we’ll end up growing the rest of our business and shrinking the land and housing in Western Canada.

“It’s a slow process, but we think we can get the maximum returns by doing it that way.”

Dream Unlimited has just approved the commencement of servicing for the first phase of Alpine Park in southwestern Calgary, the first phase of which was acquired in 1997.

It expects the initial phases, comprised of 136 acres of the total 1,600-acre landholding, to generate income between 2021 and 2026 and cash of approximately $70 million.

Ottawa and Toronto activity

Zibi is a major Ottawa mixed-use development being led by Dream Unlimited. (Courtesy Dream Unlimited)

“We bought hundreds of millions of dollars of land in Ontario over the last few years, basically in downtown Toronto and Ottawa,” said Cooper. “In Ottawa, we have 42 different development sites, and maybe four or five developments going on at all times.”

Dream Unlimited’s biggest project in the nation’s capital is Zibi, a 34-acre mixed-use community on the Ottawa River that includes land in Ottawa and Gatineau, Que.

It consists of four million square feet of density that’s expected to include 1,800 residential units, more than two million square feet of commercial space, and nearly eight acres of parks and plazas. Dream Unlimited has started Zibi site servicing so individual blocks can be built as soon as the company is ready to move forward.

There’s more than 630,000 square feet of residential rental, retail and commercial space in various planning and development stages. Eighty-three per cent of the retail and commercial space had been pre-leased as of March 31.

“We’re getting really good traction, so we’re expecting to see more opportunities as we get through the year to lease more space,” said Cooper.

Kanaal is the first condo building on the Ontario lands. More than half of the 71-unit building was occupied at the end of the first quarter.

Cooper said Dream Unlimited is advancing about 20 development sites in Toronto.

“When the time comes, we’ll do them in a responsible way, but a lot of them will be turned into income properties.”

Dream Unlimited owns just over 30 per cent of Dream Office, which has reduced its portfolio from 174 buildings across the country to 32, primarily in downtown Toronto.

Acquisitions aren’t a priority at the moment.

“When we find opportunities to grow through acquisition, we’ll do it, but most of the growth can be internal for Dream Unlimited,” said Cooper. “We’ve got to have a good idea first, and right now it seems like a hard time to navigate. So we’re pretty content to stay with what we have.”

Other recent Dream Unlimited activity

Dream Unlimited just closed on the sale of its indirect interest in a 67-megawatt renewable power portfolio of three Ontario ground-mount solar projects and four Nova Scotia wind farms to Potentia Renewables Inc.

It’s also nearing completion of the refinancing of its Distillery District property, which comprises 395,000 square feet of commercial and retail gross leasable area in downtown Toronto.

These transactions will generate cash of $130 million, which will be used to pay down debt and provide additional liquidity.

Dream Unlimited also just entered into an agreement to acquire a 50 per cent interest in a 1,200-unit portfolio of apartments in Dallas.

The deal, which is to close in July, is in partnership with The Pauls Corporation. The price is approximately $150,000 per unit.

“That’s our first foray into multifamily in the States,” said Cooper.

Dream Unlimited’s stock performance

Until COVID-19 made most REIT stock prices tumble in late March, before starting a gradual recovery, Cooper said Dream Unlimited had been performing very well.

“Now we’re in a different environment where it looks clear that we’re going to have really low interest rates and we may have some inflation, and those are ideal real estate conditions. So, I’m really bullish on real estate.

“I think that it’s a risky environment, so I want to make sure our balance sheet is good. But overall, I’m very excited about the opportunities in real estate, and the stock prices will follow.

“Right now the stock is going through a transition, but it will settle down.”

Dream Unlimited purchased some of its own shares last year and in Q1 2020, and Cooper said the company is always in the market to buy more if it makes sense.

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