Dream Unlimited Corp. (DRM) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Annual and Special Meeting of Shareholders for Dream Unlimited Corp. Your host for today's call is Ms. Joanne Ferstman, Chair of the Board of Dream Unlimited Corp. Ms. Ferstman, please go ahead.

Thank you, and good afternoon, everyone. As this meeting is held virtually via live audio webcast for the purposes of the meeting today, voting on all matters will be conducted by electronic ballot. Registered shareholders and duly appointed proxy holders will be asked to vote on each business item. At any time during the meeting, registered shareholders who have not already provided voting instructions or appointed a proxy holder that are logged on and wish to vote their shares may do so by clicking on the Vote Here button on your screen and following the instructions provided. We have been advised by Broadridge Financial Solutions, Inc., that based on the proxies already deposited with them, enough votes have been cast to carry each of the motions. Shareholders or proxy holders may ask questions at any time during the meeting by submitting the question and writing in the text box labeled Ask A Question. [Operator Instructions] We will now proceed with the formal portion of today's meeting. To expedite the formal part of the meeting, I will move and Shannon Macri will second all motion. I will act as Chair of the meeting. Robert Hughes will act as secretary of the meeting. For the purposes of this meeting, I appoint Leanne Branston and Rosemary Colakic of Broadridge Financial Solutions, Inc. to act as scrutineers to compute the votes of any polls taken at this meeting and to report thereon. The Board of Directors fixed May 21, 2020, as the record date for determining shareholders entitled to vote at this meeting. An affidavit has been delivered attesting to the mailing of the notice of availability of proxy materials and the voting instruction form or form of proxy. Our circular and other meeting materials were made available through the notice and access system. I would ask the secretary to place the affidavit before the meeting and to keep the affidavit with the corporate records. I'm pleased to announce that there are present by proxy a sufficient number of the voting shares of the company to constitute a quorum. Accordingly, this meeting is duly called to order and properly constituted for the transaction of business. After our formal business is concluded, our CRO will provide a few brief remarks, and then there will be an opportunity to ask questions. Please hold questions that do not relate to the formal business of the meeting until that time. The first item of business is the presentation of the company's 2019 annual report, which contains the company's audited financial statements for 2019. I note that the secretary has placed before the meeting a copy of the 2019 annual report. The next item of business is the election of directors. The 8 directors to be elected by the shareholders of the company shall hold office until the close of business of the first annual meeting of shareholders of the company following election or until their successors are elected or appointed. The 8 nominees are: Michael Cooper, James Eaton, Richard Gateman, Jane Gavan, Duncan Jackman, Jennifer Koss, Vincenza Sera and myself. Each of the persons nominated has confirmed that he or she is prepared to serve as a director. Mr. Hughes, have we received any other nominations?

No, we have not.

Since there are no other nominations, I declare the nominations closed, and I move a motion to elect the directors. The next item of business is the appointment of auditors. The Audit Committee and the Board of Directors have recommended the reappointment of PricewaterhouseCoopers LLP, chartered professional accountants, as auditors. I move that PricewaterhouseCoopers LLP be appointed auditors of the company until the next annual meeting of shareholders and that the Board of Directors be authorized to fix their remuneration. May I have a seconder?

I second the motion.

Thank you. The next item of business is to vote on a special resolution authorizing and approving an amendment to the company's articles to effect the share consolidation of: one, the issued and outstanding Class A subordinated voting shares on the basis of 1 post-consolidation subordinate voting share for every 2 pre-consolidation subordinated voting shares; and two, the issue and outstanding Class B common shares on the basis of 1 post consolidation common share for every 2 pre-consolidation of common shares in the Form set out in the circular dated May 15, 2020. In order to be effective, the share consolidation resolution must be approved by: one, not less than 2/3 of the votes cast by the shareholders represented at the meeting; two, not less than 2/3 of the votes cast by the holders of subordinate voting shares at the meeting, voting separately as a class; and three, not less than 2/3 of the vote cast by holders of common shares at the meeting voting separately as a class, all as more particularly described in the circular. If the share consolidation resolution is approved and all regulatory requirements are satisfied, the Board of Directors currently intend to pass the Board resolution following this meeting, authorizing the implementation of the proposed share consolidation with effect on July 2, 2020. Full details of the effective date of the share consolidation will be announced by way of press release after the Board has passed these authorizations following this meeting. I move to approve the share consolidation resolution in the form set out in the circular, starting on Page 28. May I have a seconder?

I second the motion.

Thank you. We will be closing the polls for voting momentarily. Before we do so, I will ask Mr. Hughes, whether we have received any questions relating to the formal items of business on our agenda today.

We have one question relating to the formal business of the meeting.

The intention is that once the consolidation is approved, the meeting is done. It mentions intention to proceed. We'll file articles of -- amendments of articles of incorporation, and with the next 10 or 15 days, it should be acted upon.

Thank you, Mr. Cooper. Now that everyone has had the opportunity to vote, I now declare the polls for the 2020 Annual and Special Meeting of Shareholders of Dream Unlimited Corp. closed. I have been advised by the scrutineers that a significant majority of the proxies received by management prior to the meeting have been voted for the election of directors, the appointment of auditors and that in excess of 2/3 of the proxies received by management prior to the meeting from each of the subordinate voting shares and the common shares have been voted for the share consolidation resolution. I adopt the scrutineers' report and, therefore, confirm that the 8 nominees for election as directors have been elected as directors and confirmed that the motion to appoint the auditors and the motion to amend the company's articles to effect the share consolidation have each carried. I would ask that the scrutineers compile the report regarding the results of voting on all business matters. The results of the vote will be published on SEDAR and will be disclosed in a press release that will be filed on SEDAR later today. The formal items of business, as set out in the notice of meeting, have now been dealt with. As there is no further business to come before the meeting, I declare the formal part of the meeting to be concluded. I now invite Mr. Michael Cooper, Chief Responsible Officer of the company, to provide a few brief remarks. After Mr. Cooper's remarks, we will have a question period. We ask that registered and beneficial shareholders or proxy holders who would like to ask a question, submit their questions in writing in the text box labeled Ask A Question. We will answer as many questions as time permits. Mr. Cooper, please go ahead.

Thank you, Madam Chairperson. It's been a surreal 12 months. The company has gone through massive changes. And for the most part, our company is in much better shape than it's ever been in before. We've repositioned the portfolio. We're building a lot of high quality properties. We've -- we are very fortunate in that we made the decision last spring we wanted to focus on increasing our liquidity. We've raised $700 million of cash after debt, and it's put our company in great shape. We've been able to continue to operate in Western Canada for land and housing business while we keep taking out a lot of money. We're building an office building in Ottawa that's leased to the federal government. We're building apartment building. We're completing 3 commercial buildings. All of these are going to be wonderful assets for us to hold for the long term. In addition to that, we're building 1,500 apartment units in downtown Toronto, saw as an indigenous hub. And again, these are going to be great buildings to own for the long term. Throughout Dream Office, through our 31% position, we have access to incredible assets in downtown Toronto, which we think will continue to be exceptional assets to hold or own over the long term. In February, we hit about $13.60 on our stock price, which was pretty amazing because we were up 73% last year during the calendar year. We started this year doing great. And then with COVID, we really took it on the chin as in many other companies that are similar to ours. Notwithstanding that, we are in great shape to deal with whatever comes up, and we're starting some new initiatives that are very exciting. And I think the market will end up being one that -- the real estate market will end up being one that our particular skills will be quite useful. As I mentioned, our stock was up 73% last year. It's up 17% over -- during 2019, it was up 73%. Today versus last year at this time, it's up 17%. Since we went public, we have an annualized increase in book value of 17%. And in February, we were trading above our book value. We're very excited. I think we're well positioned. We've got an incredible team. They're doing amazing. We're considering everything they have to deal with, with COVID, with the economic crisis and with social injustice protests. But I'm very proud of our team, and I think we're going to continue to generate very decent returns going forward. I have some questions that are all from 9 (924) 110-7199. I'll try to address them, but if that person wants to talk to me later, feel free.

Question number one. Can you comment, please, on progress in European initiative to build a portfolio of properties. We have made no progress. We haven't started that yet. The industrial REIT has over $300 million of properties. We're building a team there, and it's not our first initiative for Dream Equity Partners, but it's something we'd like to move on soon. Number two -- question number two. Can you comment, please, on progress and the initiative to develop a significant third-party asset management business that was discussed last quarter, and what management Board is seeing in terms of opportunities to purchase opportunities to attract third-party investors and competition with such heavyweights such as Brookfield who have similar platforms and strategies? When I started this company, Brookfield was much more intimidating compared to where I was than they are today. The market is very crowded. It's a very competitive field. We have an interesting track record. No promises, but I think we're putting together a great team, and I think we've got some great product ideas. But it's a very competitive field, and we'll see how that goes. Question number three. Can you please comment on how the huge holding company discount relative to NAV is influencing your decision-making and maintaining such large holding, Dream Unlimited and DIR, specifically what strategic value is there to our company other than this element to control those companies? Brookfield, as an example, achieves a control objective through very much smaller direct holdings. These investments seem to be overwhelming the asset base of our company while the strategic value is relatively unclear. Thank you. I don't know about Brookfield's holdings, but I think they're massively larger than ours in their managed subs. We think -- and by the way, Dream Unlimited, I do not believe owns one share in Dream Industrial REIT. Dream Unlimited owns a big stake in Dream Office. To us, the stake is particularly different than owning a percentage of a partnership that's building an office building in downtown Toronto or condos. So we've got 32 office buildings in the City of Toronto that we think are fantastic. We own our stake at a pretty low price. And we have optionality in terms of buying more, maybe 1 day selling. But we own a stake in Dream Office because we've shifted away from being a Western Canadian-based land and housing company to being a more balanced company and owning a lot of downtown Toronto. And Dream Offices are strategic and -- a strategic investment in terms of the upside in that portfolio, we think, is huge. And we own that portfolio -- the interest in that portfolio because we think we can generate quite attractive returns over a very long time period. The only comment I would make is we bought back 12% of the company in the last year. We'll continue to buy back stock as we feel more comfortable with the market conditions. But I think buying back 12% of the company is a pretty significant investment. So we've been buying back our stock aggressively. We bought Dream Office aggressive a couple of years ago. Before that, we were spending a lot of money in downtown Toronto. And we've been recycling capital to get a portfolio that we think will be great over the longer term. Next question. Can you comment, please, on whether -- what is pretty much a pure-play Toronto -- realize your opportunity with Dream is being reconsidered in light of the recent challenges with COVID and whether the lack of diversification is now a strategic objective with DRG go on. The concentration is now its greatest in the recent company history. Thank you. We started about 70% Western Canada in 2013. We've been moving our portfolio around. We haven't made any conclusions of what life will be like after COVID is resolved. We're quite happy with what we own. And if we think we should change the mix of the portfolio in the future, we would do that. Can you please comment on our company's liquidity position and what level of stressful assumptions be a significant challenge? Are we facing any reasonable possibility of this COVID situation, doing anything more than stretching our growth further into the future? That's a great question. I think as of last Thursday, we had $430 million of liquidity. That's a lot, and that's also $430 million of liquidity after spending $120 million paying tax and about $125 million buying back stock. So we've achieved a lot of our goals. We have lots of liquidity. I can't give you any answers on what the world is going to look like. I would say that we have been very aggressive stressing our company under unbelievable conditions, very, very pessimistic assumptions. And our company looks very strong. But I don't know if there will be a second wave. I don't know if there's going to be 40% unemployment. Whatever it is, we're ready to deal with. I would just say that between our own resources, our relationship with our banks and the quality of the assets, we're quite comfortable that we're building an excellent business. I think this is question #7. Has our company been approached by any third-party or by any company insider to take over the company or take it private, both formally or informally? No, they have not. Thank you very much, 9 (924) 110-7199 for your questions. As there are no questions, any other questions nor are there questions from anybody else, with that, we'd like to terminate this meeting. Thank you very much for your interest.