Dream Unlimited Corp. ($DRM)

Welcome to Dream Unlimited Corp. First Quarter 2026 Conference Call for Wednesday, May 14, 2026. During this call, management of Dream Unlimited Corp. may make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dream Unlimited Corp.'s control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Additional information about these assumptions and risks and uncertainties is contained in Dream Unlimited Corp.'s filings with securities regulators, including its latest annual information form and MD&A. These filings are also available on Dream Unlimited Corp.'s website at www.dream.ca. [Operator Instructions] Your host for today will be Mr. Michael Cooper, CRO of Dream Unlimited Corp. Mr. Cooper, please go ahead.

Thank you, operator, and welcome to Dream Unlimited's first quarter conference call today. As always, I'm with Meaghan Peloso, and I'd like to call her to speak to the financials, and I'll make some comments afterwards.

Thanks, Michael. Good morning, everyone. Overall, our financial results for the quarter were very much in line with our expectations. In the period, we incurred a net loss of $4.8 million, which was an improvement from a loss of $8.1 million in the prior year. Due to seasonality, Western Canada was not a large contributor as most of the income from the division will occur in the back half of the year. Nonetheless, margin from our core divisions, being asset management, income properties and Western Canada, was $19.6 million in the quarter, which is an increase of 12% relative to prior year. At a segmented level, in the first quarter, our Asset Management division generated revenue and net margin of $15.6 million and $12.2 million, respectively, up significantly from $13 million and $9.3 million in the prior period. The increase versus prior year was driven by continued AUM growth and higher incentive fee income in 2026. Western Canada development generated net margin of $0.4 million in the first quarter, down modestly from prior year due to the specific product mix and volumes sold in each period. Since our last reporting in February, we've secured a further $32 million in presales commitments, which is strong activity for the period. Based on presales commitments secured to date, we have locked in revenue of $138.9 million for land sales to be recognized in 2026, which is in addition to the $13.3 million of revenue recognized already in the first quarter. In the first quarter, our income properties portfolio generated NOI of $7 million, up from $6.6 million in the prior year, largely driven by lease-up activity across our apartment portfolio. We currently have 950 apartment units under construction that will be completed now through the end of 2027 and expect to start at least another 200 units later this year, all of which will continue to support steady growth for the division. Our other investment segment generated $6.9 million of negative net margin in the first quarter, an improvement compared to $8.7 million of negative net margin in the comparative period. We expect the development fee income in this segment to increase over time as new projects come online. But for 2026 specifically, we don't anticipate earnings from this segment as we have minimal inventory available for sale. Over the course of and subsequent to the quarter, we spent $7.7 million in share repurchases. Now lastly, as of March 31, we had ample liquidity of $342 million. On a consolidated basis, the company had about $450 million of current debt. Of that amount, about $100 million rolls automatically on an annual basis. We're pretty active on another $165 million, which we were on track to be completed over the next couple of quarters. Of the remaining maturities, a significant balance relates to a CMHC insured loan that doesn't mature until the first quarter of 2027, which will be renewed or refinanced in normal course, but closer to the maturity. So overall, we feel very well positioned on our near-term maturities, and we'll provide further updates as we report this year. So with that, I'll turn the call back over to you, Michael.

Thanks, Meaghan. The first quarter is not a lot of relevance in the history of our company. In fact, I bet the fourth quarter produces maybe 10 or more times the profit historically. But today, what I want to talk about was some of the massive changes we're seeing since the beginning of the year. And there's really 2 things. One is government, government, government and the other one is tailwinds starting to sort of assemble. In housing, we're seeing tremendous involvement from the federal government, and most of it is very positive. And I think it's important because it is affecting a lot of our business, number one, and again, much to the better. But I'd also say it is probably quicker to get money into housing to the provinces, cities and developers than it is to do major projects. And I think that we're going to see a lot of benefit in our economy from what the government has already undertaken. So I'll get to that in a minute. And then as far as tailwinds go, we're living in a time of tremendous chaos, but I think we've adjusted pretty well and assuming this amount of chaos and not more, we're seeing a lot of positive things happening. So firstly, with the government, in housing, they've reduced HST in many situations. In Ontario, between the province and the Fed, they're putting up $8.8 billion to pay for infrastructure that will reduce development charges by half. In both those cases, the final legislation isn't complete. We're expecting it soon. But you can see already they're having benefits with the reduced HST. The Building Ontario fund has now become quite active, and it is putting money into the system. And that's been making a difference. I'll get to that in a second. Build Canada Housing is also being very active. They're working a lot with not-for-profit cities and provinces, but they're also benefiting private developers. Just yesterday, they announced in Alberta that the federal government and Alberta gotten together to create grants for affordable housing. And ACPL financing is one that's been around, but it's very, very positive. So that's just a small amount. But I would say that with reduced HST, we're seeing people starting to buy condos. There's been one that's been funded by -- in part by the Building Ontario Fund. There's been another group that is going to buy, I think, $500 million of condos. And they're going to benefit -- both groups will benefit from a 13% refund of HST, plentiful financing available from banks. And I'm just curious how 3,300 condominiums are going to be purchased and what that's going to do to pricing. And basically, the math works pretty well. Rents are a little bit lower, but they're still pretty good. You can borrow maybe 65% debt from banks that leaves 35%, and you get 13% back. And you can get some type of return on your capital in an initial instance. And then I think people are basically thinking if they can buy for $750 or $800 a foot, they can sell within 5 years for $1,000, and that will generate a 20% return. Why that's important is it's certainly putting a floor on the value of condominiums. And I think we're going to see a lot more demand from those 2 groups plus others saying, I think it's not a bad investment at these prices. So I think that's going to be very positive for condos. Another thing that's happening is we saw that the U.S. government approved a pipeline from Canada. It looks like Ottawa is getting close with Alberta on an MOU. And it looks like the TransCanada -- the Trans Mountain pipeline will probably be increased. These are not insignificant. Today, Canada will sell USD 600 million of oil, and they'll do it every day. It's a massive amount of money. Canada produces 6 million barrels a day of oil equivalents. That's up quite a bit from 10 years ago. The U.S. has done the best. They're at 20 million to 22 million barrels. It's a massive amount. Saudi Arabia and Russia are both between 10 million and 11 million. Canada is at 6 million. And with these pipelines, we could easily get beyond 8. So Canada is going to be approaching Russia and Saudi Arabia in terms of the revenue generated from oil and gas. This is having a massive effect on the Alberta budget, it was going to be a negative $9 billion. Now we're hearing numbers that this continues to be as high as $10 billion to $16 billion. That's a swing of about $6,000 per person in Alberta, which is pretty massive. The Fed is also doing better. We're hearing about defense. And I think that it's probably not a bad idea to take the federal government at their word that they're going to pump money into industries to encourage growth. And I think we're going to see it. And I think we're seeing it in housing first, but we're going to see it everywhere. I also think that with the Prime Minister doing a roadshow around the world promoting Canada, it's had a massive change in Canada's appeal for foreign investors. We're seeing that in our asset management business, but I think that's going to have a significant effect as well. Another area is the government -- the federal government is requiring people to go back to work 4 days a week. We've been told that, that actually means they need to lease a lot of space -- that will be good for both Zibi and Dream Office, although it may take at least a year before we get the outcomes. So we have 3 major groups that we've been talking about for years. And I hope that for investors, it's becoming clear. Our Western Canadian business has continued to be very strong and growing. Our income properties are getting more profitable every year. And our asset management business is growing by every metric every year as well. So some -- 80-something percent of our business is going strong and getting stronger, which I think is very, very positive. In Western Canada, in Saskatoon, we're hearing things like the trades are the busiest they've been in 10 years. Land prices are at all-time highs. The city is saying that over the next 10 years, they're expecting growth in population of 100,000 people in the city of Saskatoon, where it was I think just under 70,000 in the last 10 years. Our base numbers using that are that if that were true, we would use up twice the amount of land that we're planning on using, and that would be extremely profitable. So that's very exciting about Saskatoon. Regina is similar. Alberta is seeing quite strong in our business area. It's actually -- I don't think the benefits of the higher revenue from oil has gone through the economy yet. So, ironically, Saskatoon seems to be a bit stronger now than Alberta, but both are very positive. In Asset Management, we have lots of activity going on in the platform. We've been successful starting new ventures. We've got significant commitments. I think Meaghan referred to $5 billion of dry powder. And that includes Dream Industrial after the sale to CPP. And we've been very active on industrial across the board in Europe and in Canada. In apartments, it's -- the market because of the declining population, rents have been a little bit lower. There's also been a lot of condos added. So that's become a little bit less certain. That's been a little bit harder to deploy capital, but we expect to make progress throughout the balance of the year. So asset management looks really strong. This quarter, our income properties went through $1 billion, which was pretty exciting. Western Canada properties are doing well. We've done -- we've finished our third apartment. We have 2 townhouse sites. We've got 2 or 3 single-family rental sites. So it's certainly adding up. But we've just hit stabilization. I actually think we're 100% leased at Brighton Village Rentals 3. We're putting together our financing. It looks like when you compare our financing package to what we approved to build the property, we're hitting every number or doing better. So that's pretty exciting. BVR4 is now topped off, and it will be occupied by year-end. BVR5, I think it's just starting to come out of the ground. And BVR6 will start by year-end. So we're really getting it down into an assembly line. We're very pleased with that. In addition, we're expecting that Odenak in Ottawa, which is a building we own 1/3 of, will start to occupy by year-end. So most of -- like the buildings that we built, they're pretty much fully leased, and we've got -- our pipeline is really starting to work for us. So I think this year and next year are going to be very significant years. In fact, in 2027, our first building in Alpine Park will be approved. It will be finished and leasing and Block 204 in Ottawa, which is about 200 units to a little more than 200 units, will also be complete. So we're really going to see some growth in our apartments on the properties we own indirectly in Dream. Our Ontario apartments are filling up and the occupancy is pretty good. We're seeing less incentives, but the rents are still much lower than we would have liked. The biggest asset we own within our income property division is the Distillery District, and it continues to do very well, and it looks like it has quite good prospects. So we're pretty pleased with Western Canada asset management income properties. All of them look -- like they're going to do well this year and do better in future years. I would add that it was just announced yesterday that a 350-unit building at Alpine Park in Calgary that we want to build has been conditionally approved for a $31 million grant that would help us get that off the ground. It's not actually quite enough considering the affordability, but if we can put it together with another program, we're going to have a really great building to build that will have reduced risk because of the lower rents. So we're looking forward to getting that all together this year and starting next year. In our other category, our office business is -- we're quite pleased that it's stable now. We saw a 240 basis point increase in occupancy, and we're seeing good signs that it should stay around here or improve for the balance of the year. Zibi office, as I mentioned, is likely to benefit from the federal need for space in Ottawa. Impact Trust is one that we spend a lot of time on. We think it's got incredible assets. 49 Ontario, it is ahead of schedule. It's under budget. We're building without HST. We're not paying development charges and our construction costs are the best we've had in years. So we're going to end up with an excellent building across from the subway at a very low cost base, and it works at today's rents. But with the policy on immigration, I think we've probably got another 4 or 5 quarters before we start to see what I think is going to be between 1.5% and 1% population growth. I think that's going to make a really big difference on our -- on the rents in Toronto. And I think Ontario could be a real winner. We're working hard on Quayside. Impact is 25% in Quayside. I don't know if we made it clear, but Quayside is a joint venture with the City of Toronto and Waterfront Toronto. We're building 1,200 apartment units all market. And the City and Waterfront Toronto are working on 500 affordable units that they will own. But it's a joint venture in terms of -- we're the developer with Center Court, but we're doing them both together. And the City and Waterfront Toronto have been amazing. There's been so many challenges, but we're getting through them. We're getting through them as teammates, we're working together on debt with the Feds. And I think that's going to be an amazing asset. And then we've got a lot of -- we got West Don Lands. We've got some of the Ivy assets. So Impact Trust has great assets that we have too much debt, and we've got a lot of development, but we're really seeing the development go through the system and come out the other end. So I think it's going to be an excellent portfolio, but it's just the wrong time now and Dream has continued to support Impact. We're very confident that the money we're lending is well secured, and we will continue doing that, provided the conditions remain the same or better. So overall, I actually feel that we have better days ahead. We set our assumptions for our budget in October, maybe November. That's more than 6 months ago. We got our first quarter results, but we also have all kinds of other progress reports, and it looks like things are going as we had hoped. And the predevelopment or interest from builders for 2027 and beyond are looking better than we hoped. So we're pretty pleased with where we sit considering -- I would just say considering all the chaos, but I would say in spite of the chaos, things are looking better and better. And with that, operator, we'd be happy to answer questions.

[Operator Instructions] Your first question comes from the line of Sam Damiani from TD Cowen.

Thank you very much for the detailed business update and review. And glad to hear things are going well. Michael, you mentioned -- talked a lot about Western Canada. You're seeing good interest from builders. I think your outlook for 2027 is pretty constructive. Just curious on the quarter and on what you expect for 2026 with Coopertown up and running now, is it -- are you incurring -- are you recognizing lot sales on that project? And is it having an impact on the average sale price? I just saw that the average lot sale price did tick down a little bit in Q1.

Sam, I would say the Coopertown revenue would be later in the year. There wasn't anything specific to call out on the average sale price. It's really just based on the specifics of the lot and phase that goes on in the period. But on the overall, there isn't anything odd or irregular that we're expecting from the sales price when we look at the entire year.

And Sam, it's good because I left out that -- I mentioned the apartments are going -- firstly, with Western Canada, initially, we always meant that as land development. And that business is going well. But now we're developing more and more income properties, and it's adding up to a lot. And it is Western Canada exposure. So I think there's going to be very strong population growth. While the country is negative, Saskatoon and Alberta are still having positive growth. I think the apartments we're building are needed. So I think we're going to see -- our exposure to Western Canada is going to be both in income properties and in our land development business. What has happened is our Holmwood development, the approvals have been delayed. So we're going to miss selling single-family lots in that area. In fact, part of that is because in working with the City and the 3,400 student school, we've been trying to accommodate more public transportation, which will be better in the long term. But we're going to miss some sales because of government approvals in Saskatoon. But from our own numbers, we're able to make it up elsewhere for the most part. So Western Canada will be a little bit light this year, but it's all because of timing, and we'll get it back next year.

That is good color because I did notice the sort of lot commitments, and it's early in the year still, but the commitments are a little bit down from where they were a year ago. And so I guess that would explain it. And Michael, you mentioned a 350-unit rental property at Alpine Park. Is that all-in-one building, in one sort of tower that would be a large asset on that site.

This is part of our city center. And the Alpine Park is an incredible walkable community by one of the leaders of the urban modernism. And what we're doing is, we're having retail at grade and apartments above it. It's actually Block 1, 2 and 3. So it's 3 buildings. But because of the parking and how integrated it is, they're going to go more or less at the same time.

Got it. And that would be owned by Dream?

[indiscernible].

Okay. Interesting. That's great to see. Just over on asset management, the incentive fees recognized in Q1, just to be clear, I assume none of it was from the DCI joint venture. And if you can just confirm that. And then I guess, just what sort of things did contribute to incentive fees in Q1?

So the incentive fee would -- that was recognized in Q1 did not relate to the joint venture. All of that incentive fee was picked up in the fourth quarter of last year. There is some normal course dispositions from the industrial REIT that took place that was the biggest driver for that fee in the period.

[Operator Instructions] Your next question comes from the line of Mark Rothschild from Canaccord Genuity.

Michael, you spoke about, in particular -- one of the first you spoke about is the condo market and the investors that are coming in to purchase condos is something that's important. Can you maybe expand on how you feel that impacts Dream and why you think that's important for Dream?

I think it's going to bring some stability to the condo market and get rid of the excess supply. So I think that's good. So -- and I think really why it's happening is because there's a reasonable economic case to be buying condos and renting them out. So I think that means there may be pretty big demand. And hopefully, the condo market will become in better balance. And that will clear things out. So whether somebody could build apartments in the future or condos, the market will be more stable. It doesn't -- for us, I don't think it's a really big deal right now, but I think that it does suggest that the condo -- the balance of supply and demand in Toronto is likely to get better on the for-sale side.

Okay. And maybe just following up on the last point you spoke about, Sam, as far as fees earned that promotes on the Dream Industrial joint venture transaction or the new fund. You spoke about how some of those proceeds could be used for share buybacks. Has there been any change to what your target or range is maybe for the year, how you're looking at buying back shares?

I think we said we were looking at about 1 million shares or $18 million, $20 million depending on the share price, although it's been pretty much the same for most of my career.

This concludes the question-and-answer session. I would now like to turn the conference back over to Mr. Cooper for any closing remarks.

Thank you, Sam and Mark, for your intense interest in the company. And hopefully, people who didn't ask a question are also interested. Meaghan and I will be available if anybody has any questions after the call. So please feel free to contact us. Thank you very much.

This brings today to a close. You may now disconnect.