2017 Annual Report Dream Alternatives Trust

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2017 Annual Report Dream Alternatives Trust 2017 Annual Report Dream Alternatives Trust Dream Hard Asset Alternatives Trust (“DAT”) is a mutual fund trust focused on hard asset alternative investments comprising real estate development, real estate lending, real estate and renewable power. Letter to Unitholders We are proud of our accomplishments achieved in 2017, with Over the last 15 months, we invested $111 million of equity, and the fourth quarter financials reflecting solid results following the $226 million inclusive of equity accounted investment project-level successful repatriation of $190.0 million of equity and committed debt, in exceptional real estate opportunities in Toronto, Ottawa investments of over $220.0 million with higher cash flow and and the greater Toronto area, including: 10 Lower Spadina Avenue net asset value appreciation potential. The Trust has undergone a and 49 Ontario Street both located in downtown Toronto with significant repositioning and we believe that our disclosed NAV considerable redevelopment potential in future years; a 5.3-acre per unit of $8.89, although largely supported by independent Lakeshore East site located adjacent to a planned investment by third-party appraisals, still remains conservative against what we Sidewalk Labs, a sister company of Google; a 72-acre waterfront are seeing in recent industry and private market transactions for property in Port Credit to be developed into a large master-planned real estate located in Toronto. The portfolio has been transformed residential/mixed-use community; 37 acres of lands for the purpose with over 70% of the Trust’s net assets located in Toronto. We of developing into a mixed-use master-planned community located believe our unitholders’ equity and NAV per unit financial metrics in Ottawa and Quebec, which includes over 3 million square feet will continue to appreciate in future quarters with continued of density that consists of over 2,000 residential units and over progress on our current development and future re-development one million square feet of commercial space; and the iconic Frank opportunities. Gehry designed Mirvish-King West development located at the intersection of King Street West and Duncan Street in downtown Toronto slated to be re-developed to include two landmark In 2017, we completed the sale of substantially all of the Trust’s residential towers, each in excess of 80 storeys, over 80,000 square non-core legacy assets including 14 non-core income properties feet of multi-level luxury retail opportunities with a potential and the Villarboit investment holdings. This was a key turning hotel component and an art gallery. We believe this portfolio of point for the Trust as these were difficult legacy assets that were investments represents irreplaceable real estate in core markets and not in line with the Trust’s long term strategy. More importantly, these development opportunities are expected to be key drivers of following the sale of substantially all of the non-core assets, the future growth to provide attractive returns on equity. Trust strategically focused on allocating capital to core assets that offer future long-term growth and opportunity from both an increase in cash flow perspective and through appreciation in our Over the course of the year many of these development projects net asset value per unit. have contributed to the appreciation in NAV per unit which supports the Trust’s position that its assets, in particular in Toronto, We are proud of our accomplishments achieved in 2017, with the fourth quarter financials reflecting solid results following the successful repatriation of $190 million of equity and committed investments of over $220 million with higher cash flow and net asset value appreciation potential. We believe our unitholders’ equity and NAV per unit financial metrics will continue to appreciate in future quarters with continued progress on our current development and future re-development opportunities. represent exceptional real estate that will generate higher value and properties also generate cash flow to support the distributions cash flows in the long term. in the short term and also provide for future re-development opportunities in the longer term. Our Lakeshore East investment located on Toronto’s waterfront is becoming an exciting investment both on a local and global We are excited about the achievements to date in the Trust and its front. Between the $1.25 billion of infrastructure spend announced current asset portfolio which we expect to deliver an attractive by the government and planned investment by Sidewalk Labs, a return on equity to unitholders. We continue to expect the net asset sister company of Google, this development offers a remarkable value to increase in future quarters through the progression in the opportunity and we are thrilled to be a part of it. development process with respect to our current projects as well as our access to future development opportunities in the pipeline. Our Empire projects are legacy assets in line with our long-term strategy. Each project is progressing in line with expectations Thank you for your continued support for our business. and key milestones are being achieved. As expected, the Empire Brampton project was substantially completed in 2017. The Empire Lakeshore project, consisting of 1,285 units that are 99% Sincerely, sold out continues to progress on schedule, with the construction currently above grade. We expect this project to start contributing income in the next couple of years upon its anticipated completion in phases between late 2019 and mid-2020. Michael J. Cooper Portfolio Manager We are optimistic about DAT’s future and are actively pursuing February 26, 2018 preferred real estate development opportunities to add to our asset mix ensuring that they are in line with our long-term strategy. We continue to look to our renewable power and lending portfolio to support our cash distributions. In addition, our core income Michael J. Cooper Portfolio Manager Dream Alternatives Trust Dream Alternatives at-a-Glance* APPROXIMATELY MANAGED BY $853 Million* AN EXPERIENCED ASSET MANGER WITH A IN TOTAL ASSETS SUCCESSFUL TRACK RECORD TAX EFFICIENT 70% OF ASSETS ARE IN TORONTO 100% AND THE GTA RETURN OF CAPITAL IN 2016 Redevelopment Potential Axis Condos , Toronto, ON 49 Ontario Street, Toronto, ON Development project Income property * As of December 31, 2017 Zibi Community - Gatineau, QC World-Class Community 22.4 MW Development: Zibi Zibi is a world-class sustainable OF INSTALLED CAPACITY IN DAT’S community and development project by Dream Unlimited Corp. and RENEWABLE POWER PORTFOLIO Windmill Green Properties. Dream Unlimited and Dream Alternatives have a combined 80% economic interest in Zibi, split equally. The 37-acre site is located along the Ottawa River 1 kilometre from Parliament Hill. Through this multi-phase development, Windmill and Dream will transform the land into a blend of residential housing types of low- and high-rise condominium towers and townhomes, commercial and office space, unique waterfront plazas and outdoor squares, Renewable Power, Wind Portfolio recreational facilities, and more. The development of Zibi, represents one of the largest urban redevelopments in Canada. Upon completion, Zibi will feature over 3.0 million square feet of density with more than 2,000 residential units and over 1 million square feet of commercial space. West Vancouver Lands, Vancouver, BC Lending portfolio Zibi Community, Gatineau, QC Port Credit: Port Credit, West Village, Mississauga, ON West Village This highly desirable waterfront community, located on 72 acres Frank Gehry Development in the heart of the Port Credit waterfront, will be developed by a Transforming the consortium of leading developers. Toronto Skyline Dream Unlimited and Dream Alternatives have a combined 31% economic interest in the Dream Unlimited and Dream Alternatives have a combined development, split 25% and 75%, 25% economic interest split 6.25% and 18.75%, respectively, respectively. in this groundbreaking development in downtown Toronto. Ideally located at the intersection of King Street West and The much anticipated master plan Duncan Street in the heart of the entertainment district, this for this irreplaceable site includes a landmark site is slated to be redeveloped into two residential vibrant mixed-use community that towers, each in excess of 80 storeys housing over 1,500 units. emphasizes architectural excellence, The development is designed by the world-renowned architect connectivity, a high-quality public Frank Gehry, best known for the Guggenheim museum realm, community gathering places in Bilbao and the AGO in Toronto, amongst others. Upon and a series of green parks and completion, this development will completely transform the open spaces. look and feel of this area of King Street West. Upon completion, this unique community will host 2,500 residential units as well as 350,000 square feet of commercial development including office and retail. King Street West, Toronto ON King Street West, Toronto, ON Port Credit, West Village, Mississauga, ON Financial Highlights Net Asset Value Per Unit(1) DEC. 31, 2017 SEPT. 30, 2017(2) Development and investment holdings(3) $2.84 $2.45 Lending portfolio $2.19 $2.37 Income properties $2.16 $1.21 Renewable power(4) $1.09 $1.01 Cash and other Trust consolidated working capital(5) $0.61 $1.60 NAV per unit $8.89 $8.64 (1) For the above-noted non-IFRS measures, please refer to the Non-IFRS measure and other disclosure section of the MD&A. (2) NAV per unit has been restated in the comparative periods to conform to current period presentation. Please refer to the Non-IFRS measure and other disclosure section of the MD&A. (3) Net asset value for the development and investment holdings as at December 31, 2017 includes a fair value gain of $29.2 million relating to the equity accounted investments. For additional details on the Trust’s equity accounted investments, please refer to page 14 of the MD&A.
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