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

Good afternoon, ladies and gentlemen, and welcome to Dream Unlimited and Dream Office REIT's virtual conference for Friday, April 17, 2020. During this call, management of Dream Unlimited and Dream Office REIT 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 scheduled -- subject to a number of risks and uncertainties, many of which are beyond Dream Unlimited and Dream Office REIT's control and 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's and Dream Office REIT's filings with security regulators, including the latest annual information forms and MD&A. These filings are also available on Dream Unlimited and Dream Office REIT's websites at www.dream.ca and www.dreamofficereit.ca. [Operator Instructions] The moderator today will be Mr. Sam Damiani of TD Securities. Mr. Damiani, please go ahead.

Thank you, and good afternoon, everyone. Sam Damiani here with TD Securities, and it's my pleasure to moderate today's live Q&A discussion. We at TD Securities have been hosting a series of fireside chats and live conference calls with leading management teams within key sectors in recent weeks, and we and our clients have found them very helpful and useful in navigating today's unprecedented times, and we trust you will as well. We want you to see -- we want to see lots of questions submitted through the feed, so we can address what's on people's minds today. So please type your questions into the feed as the operator said. Here with us this afternoon are Michael Cooper, President and Chief Responsible Officer of Dream Unlimited and Chairman and CEO of Dream Office; and Jay Jiang, CFO of Dream Office. On behalf of everyone watching and listening, thank you, Michael and Jay, for taking the time and answering our questions today. And maybe just to get things going, I'll start with a high-level macro question for you, Michael.

A flattening of new case counts and talk of reopening the economy have helped spur stocks up from their March lows with the REIT index up 35%, the S&P 500 and TSX both up about 25% and now the REIT index is just under 20% below its February highs. Do you agree with this? How optimistic are you? And what sort of things are you focusing on as we navigate the uncertainty today?

So I would start with I was born optimistic, and I continue to be optimistic. We're dealing with an exceptionally challenging time and it's very hard to figure out what it means for the value of businesses. It's hard to figure what it means for the value of future behavior. So what I would say is I was kind of giggling when I heard the forward-looking warning because we don't really have much to -- information that's -- about our company, about anything else that's really going to help the future. And I think that the really difficult part of this whole virus is even the epidemiologists have been wrong a lot. They've been saying things like what they thought they knew yesterday, they were wrong. And everybody's talking, but there's very, very little real information. So I start from it's going to get better, and it'll get back to normal. It'll be somewhere between 2 weeks and 18 months. It looks like it's going to get better gradually. It looks like construction is one of the first things that come back. I think we're going to see people back in offices doing something. That will take a long time. But I think it's going to settle down, and I think we're going to find much better times ahead than we've ever had before. It's just that this is the most uncertain time I've been through. I get struck a little bit by, although what's going on is terrible, we've dealt with things -- I mean AIDS, 36 million people died of that, and we sort of got through that without even stopping. So we'll get it later on. But I don't really think the stock market values tell you much right now because there's so little information other than it looks like there's a lot of money saying that things are going to be worse, but they'll be okay.

Yes. It's interesting to hear you say that this is the scariest thing you've seen because you've been in this business a long time. And a lot of money, as you know, has been made when you're buying when everyone else is selling. Michael, do you think we're going into a period where this is going to be one of the biggest buying opportunities in 10 years basically?

It's a great question, and just for everybody who's listening, we didn't -- we asked Sam not tell us the question just so we could have a conversation. In 2008, on September 15, Lehman Brothers went under, and in December 2009, we bought Adelaide Place, which turned out to be a phenomenal transaction for us. It was 15 months after the moment that the crisis hit. We're now into this by 3 or 4 weeks. I can tell you that anybody selling things want the same price they wanted from December. Anybody buying wants to get a much better deal. I would say I get 15 times as many calls from people who want to let us know that they'd be happy to invest with us. If we find great opportunities compared to anybody that contacts me about something to transact on and that people don't want to transact on, I don't think they're desirable at all. So there may be great opportunities, but I don't think it's going to happen for a long time, quite honestly. I think we're just absolutely frozen, and then we'll see what happens as we get more information over the next 6 to 9 months.

Are you seeing any money in the market today that is still interested in buying quality assets that they would have bought 3 months ago?

Probably $1 trillion. There's massive amounts of money still available. I mean I can't believe how many calls I get.

Well, that's good to hear. Maybe just getting into the REITs then on the current situation. Can you give us a sense as to how Dream and all the entities are set up and prepared to deal with the current uncertainty that we're dealing with today?

So Dream Unlimited, we've had to close our ski hill, 2 hotels and 10 restaurants -- a number of the restaurants related to the hotels and the ski hill. For the most part, each of those businesses have their own capital available to fund being closed. We've taken a number of steps over the last couple of years to try to reduce risk in our business. We've got about $310 million or $320 million liquidity for Dream Unlimited. We closed our deal on March 31 to sell 73% of Glacier Ridge, which is 460 acres in Calgary. And we've got a renewal power transaction that should net us somewhere around $60 million, and it closed -- it's firm. It's just waiting for some regulatory approvals. So Dream Unlimited has fantastic liquidity. And that $400 million that we're going to get to more or less, that doesn't include the cash that's in Dream, in the various entities like in Zibi or in A-Basin or the restaurant. So I think we're in pretty good shape financially. And on the revenue side, we're going to take some hits, but I think they're generally very, very manageable over a long period of time. I think we're set up quite well.

Where are you seeing the biggest revenue hits that you're experiencing across the businesses?

We're probably going to miss $10 million of revenue at Arapahoe Basin this year, and it's a real pity because we separated from Vail last year, and we had a very slow start on our own ski products as well as the limited Ikon Pass that are now allowed at our ski area. And then January and February, we did as well as last year. For the first 2 weeks of March, we were like 25% ahead of last year, and then we had to close the ski area. So that's pretty devastating. But -- so that's the biggest revenue loss. A lot of our fee income is good. We get a lot of distribution, so that's good. In Western Canada, the way we're managing this, we're spending less capital this year. And we're counting on less receivables, but we're expecting to net out the same cash. And so far, it looks like receivables will be ahead of our projection. So I think that we made adjustments, so that liquidity at year-end should probably be similar to what our liquidity would have been at the end of 2020 without this.

A number of REITs have put out these announcements, providing update on the April rents paid and rent deferral requests. And maybe this one is for Jay, if you could comment on what you're seeing at Dream Office or some of the other entities.

Sure. Looking at these questions, that's probably your #1 question, so let us get it over with. So as of April 15 in Dream Office, we had about 81% of our rent collected. This includes office, ground floor retail and contractual parking. And this is also for rent that we -- were contractually to be received in April, so doesn't include any application of deposits or TIs or other arrangements. Keep in mind that some of our larger tenants, like the government tenants, they typically do their draws in month end. So based on the current trend, we'll expect about 90% to 95%, probably closer to 95% for the month of April. Right now like everybody else, we're not sure what May is going to look like. But generally, our view on this is like we don't see it really as trying to post a certain number on top of a leaderboard. The numbers are what it is, and for us, it's more how can we support our tenants to have a viable business. So just because they're unable to pay the rent today that -- because they don't have the cash flows, we want to work with them, so they can come out of this. In Dream Office, we only have 530 tenants, so this allows us to have a very tailored discussion with each and every single one of them on their economic situation. So what we've done is also put together information that could help them. So we reached out with the various wage subsidy programs, what was announced yesterday on the CECRA. So we're going to try to help them solve their problems, so longer term, this solves our problem. So we don't have to re-lease the space as well. So if our goal is to maximize the value of these assets and the business, I think we need a healthy tenant-landlord relationship to make that happen.

How would those rent collection numbers compare to a typical month? I mean if you're 81%, what would you have been most months in the last year, at this point in the month?

So if we take the historicals of -- on a monthly basis, on the 15th of every month, we'd typically be around 89% to 90%.

And of that balance, do you think most of it is going to be -- like, come to a deferral agreement? Or do you think that most of it will be collected by the end of the month?

It's a bit early now. What we've done is -- the majority of the rents not collected are probably in the ground floor retail and small business space. Most of them have reached out. We had conversations, and collectively, we decided to probably push out some of the conversations to make when we could see sort of what's going on later in that month. But I think we'll deal with it on a case-by-case basis. There are opportunities to potentially use deposits or TIs, but ultimately, we're going to work with these tenants to make it work.

And so how is the industrial REIT looking in this regard?

Yes. So I think the industrial team will put out a detailed press release in May, but just speaking with the teams, I think they're really in a similar boat in terms of collections versus historical. I think what's also unique to them is they just integrated a European portfolio in the first quarter, so some of it was just setting up the bank accounts. But they expect to probably be around 85% to 90% by the month of May -- sorry, for the month of April. May, once again, we're -- they're probably not sure. Have to wait and see.

Right. Well, I've seen some questions coming in about how you guys view the valuations of the various Dream entities. Maybe, Michael, you could give us a comment, at least your thoughts in that regard.

I think that the Dream entities were doing really well prior to this, and I think they're off basically 1/3. And I think what happened on March 23 was there was a real squeeze, a margin squeeze or forward selling, and I think stocks recovered from that deleveraging. But I think that we need to be focused on running the business for the long term. We bought back about 11% of Dream Unlimited this year. We bought back a lot of stock of DRA. And I think that those companies are in pretty good shape, but we're going to want to really focused on the long-term viability of these companies given the enormous uncertainty. Dream Office, I think, has had a tremendous run. And just by the way, we can see the question, so I might answer some of the questions and other narratives. But with Dream Office, that restructuring is pretty much complete. The company is in great shape, and we're very happy with the quality of properties. We're very happy that we sold Alberta. We're very happy that we sold commodity real estate. And we think it'll do well over time. But it's been about a 12% or 13% IRR since we went public in 2003. So we feel okay with it, and it will get decided over time.

Okay. Maybe can you give us a sense -- I know it's early days here. But how has the leasing market, I guess, reacted? I assume everything went to a halt in March. Are leasing discussions percolating now? What's happening on the leasing front at that time?

Yes, sure. I mean for Dream Office, new leasing velocity, the activity is down simply because it's very hard to do tours and make decisions. So we're not sure when that's going to be able to pick up. Now in Dream Office, fortunately, before this all happened, we've already addressed about close to 80% of the expiries in 2020 for the whole portfolio, so that's less than 100,000 square feet that's left or 2% of the entire business. And also another sort of interesting fact is Gord and his team right now working on the renewals. They got about 300,000 square feet in the works, and the rates are probably pre-COVID. So it shows that demand for good office space and good locations, at least on the renewal side, the conversations are still going.

Sam, if it's okay with you, we've got a lot of questions. I want to try to answer a bunch of them. There's about 8 questions from one person, so I'll do my best on those.

Yes.

So I think some of those have to do with the rent collections, stuff like that. I hope that Jay has answered it. In Dream Office, we're doing exceptionally well on the office. On retail, it's not very good at all, but we're actually working very hard to help those tenants, and they're not a significant part of our business. So we consider it more of an amenity, and we're working with them. I think it'll work out fine, but I think we have 6% retail. I don't know the number but it's not that consequential. Let's see. There's a question here about Western Canada and condos. So Western Canada, we're getting some land sales. It is really slow. People can't go into show homes. The economy is getting absolutely beaten up after 6 years of being beaten up. But as I said earlier, we're probably going to get the same amount of cash out of Western Canada, not including the Glacier Ridge sale as we had been expecting. A great question here on timing of closing of condo sales, which is really interesting because we have 3 buildings that are pretty much finished. They're occupied by the new owners, and we can't get the municipality to register the condo corporation, so we can close the sale. So we don't know how long that will take. They're paying us the equivalent of rent for the amount of money they would otherwise pay us. But it is clear that getting stuff done with the municipalities now is quite limited. As far as construction schedules goes, I'm shocked that 2/3 of our projects are still under construction, and I suspect there's going to be more opportunity to continue construction on the ones that are stopped as the governments want to see more construction coming back. As far as stock purchases go, I would say that this is an extreme situation. We're 1 month into something that our Prime Minister is saying could take 18 months. We are buying back stock in Dream Alternatives Trust pretty aggressively. In Dream Office, we bought back a bunch at very low prices, quite happy about. In Dream Unlimited, we think we pretty much bought back enough this year at almost 11%. Oh, great question about people working from home. And the question there is now that people are working from home, if they like it, how is that going to affect office space? I don't know, most people I've spoken to don't like it. Most people can't wait to get back to the office. But it's a huge change. It's a huge behavioral change. I can tell you, as long as the schools are closed, we're going to have to have tremendous flexibility for people working from home. I don't do a lot of geometry, but I forgot how you calculate the area of a circle. So I went and I worked on that 2 nights ago, and it's pi times R squared. If R is the radius and it's 3 feet and everybody has a radius of 3 feet, you'll be 6 feet apart. So each person needs an area of a circle of about 30 square feet. We generally have 104 square feet per person. So I think that as far as getting back to work and having enough space, it should work. We're doing things like having -- any space over 2,000 square feet needs to have 2 exits, so we're making 1 exit to go out, 1 to come in. And we're sort of plotting it, but I think we're going to do okay with getting people back to work.

Are you seeing tenants wanting to make meaningful changes to their space as a result of the physical distancing that is now commonplace? And are they asking for assistance financially to pay for any such renovations or that could change sort of the decor or whatever?

Yes. We're not getting any of that at this point, but I think that, again, we're just futurizing. So for the lawyers, you don't have to worry about this being any real information. But it sure seems to me like what we need in office space is a lot of offices -- sorry, a lot of meeting rooms where people can get together. I could see not just through the recovery but even later on, having much more flexible time, much more staggered hours, but we're going to need a ton of meeting space. I think this idea of hotel is not going to be great. I'll tell you, in our office, I would bet people spend an hour a day cleaning a new desk. So I don't think that's going to work. I think people are going to work more at home, and I think people are going to want more space. So it will net out wherever it nets out, but I'm really pleased we sold 140 buildings, most of which were relatively commodity type, a lot of them didn't have great public transportation. I think those ones will suffer. So I think we'll probably see more of what we've seen before, which is buildings in great locations that are interesting will have a lot of demand and buildings that don't have great public transportation or older buildings aren't going to have a lot of demand. So I think that'll sort of continue the way it was but faster.

Right. Just on Dream Office, obviously, you have tight concentration on the downtown Toronto office market. The office market in Toronto has been helped by a lot of tech job growth. How do you think about the big picture demand for space in downtown Toronto given what's going on today, given what's going on with the economy and what might happen with the U.S. election this fall? Does this change at all your view on the success of downtown Toronto office, the market?

Well, I think -- again, this is just -- we're all surmising. I think Canada looks a lot better in the world today than most countries. I think we're doing better with this COVID than most countries. I think all of our governments are cooperating a lot better than either the individual countries in the EU or the states and the President of the United States. So I think a lot of things are looking quite good for Canada, and I would expect that it's going to continue to look good for Canada. I think Toronto is going to continue to look really good. So I think overall, I would -- probably as good or better competitively than we were before this.

Okay. And so no reason to change the strategy at Dream Office. Are you looking at any components of the strategy, revisiting them at any of the other Dream entities as a result of what's going on?

I think in Dream Office, we think the strategy we're on is a great one. I would say that, not just for us but for all the REITs, this is a real shock about what kind of risk that you can be forced to deal with. So I would suggest that development will be at a slower pace for us and everybody else than it might have been before this. But we're going to continue to develop 250 Dundas and 212 King and 220 -- 2200 Eglinton. They may be slower in Dream. We're going to keep going. But again, we might have less developments at any given time. Does that answer your question, Sam?

Yes. Yes, that's a good one.

There's some questions about 357 Bay and stuff. Jay, do you want to answer that?

Sure. I think there's a lot of questions of a similar topic on the timing and status of all developments, particularly with respect to 357 Bay, with the WeWork and 1900 Sherwood in Regina. So on the ongoing developments, for 357 Bay, our construction obligation actually finished last November, so we turned the building over to WeWork. So now it's in their fixturing period. Our expectation is that WeWork will pay us rent in November. But regardless, we're pretty confident in the building. It's 65,000 square feet heritage boutique. It will be brand new in one of the best-located intersections in the country. So I think if WeWork pays the rent, great. If something happens and we're required to re-lease the building, we'll do very well with it. 1900 Sherwood is similar. We're close to finishing our construction obligation. Co-operators has toured the building, and they're a great covenant, and they're happy with the progress. So I think the rent in that will commence in mid-2021, and we expect that to be okay. Other constructions are ongoing. We had earmarked $50 million for the Bay Street financial district. Interesting with that is none of the tenants are displaced or we're not working on speculative or empty space. So right now, construction will likely be delayed for a little bit, but it won't really impact the value or the timing of the cash flows as the tenants are already in place in the location. So we said initially it could be the end of 2020. So depending on how long construction gets pushed out, we'll be right back on track once everything goes back to normal.

Jay, can you also refer to these questions about how much expiries we have in 2020, maybe even 2021? Can you comment on how we're doing on those?

Sure. So earlier in 2020, we already addressed about 80% of the expiries. We had done a big deal in our single property Kansas City in the U.S. So that took a lot of the expiries down in other markets. In downtown Toronto, I think the number is 150,000 square feet of expiries which we addressed over half as of February. So the stats are looking pretty good. Collectively, there's only about 2% left in the whole business, and as I mentioned earlier, Gord's working on 300,000 square feet. Now that's obviously for 2021 and beyond, but typically, for these larger leases with government or larger tenants, they would start to hold discussions almost a year in advance just because they tend to get a bit more complicated, and both sides would want certainty on the lease. So I think right now new leasing has probably slowed down for the reason that tours are not happening, but on the renewals, our conversations are still going.

If you guys don't mind, I'd like to catch up on some of the other questions, again, from the same person. So there's one on renewals. The renewals are -- we're getting the highest rents we've ever had in the buildings that the renewals are happening. Generally, it's really quite impressive. One of the questions was has the planned European initiative to parallel the old Dream Global been affected. Within Dream Unlimited, we are focused. Jane is running our new asset management business that's focused on managing private capital, and we're -- it's interesting because there's not that much happening now, so we're putting more of the people who have been working on the public companies to start helping us on the asset management on the private side. So we're very excited about that. There's been a couple of questions also from the same person regarding the corporate structure with Dream Unlimited and Dream Alternatives Trust being separate. And I think they're going to stay separate. It would be very complicated to put them together, but that's how they were created. That's how they're going to stay. Cash-wise, Dream Alternatives Trust has about $90 million of cash, and I think that's a great thing. And we're going to continue to carry cash. I would say, generally, we are really focused on maintaining cash everywhere. We don't know what the value of the cash is going to be in the future. We've got great assets everywhere. So generally, if our assets do exceptionally well and we carry cash, that'll be great. If the world unfolds worse than we think it'll be great to have cash. So we think it's a pretty good hedge.

There's a question here on the financing environment. Do you feel a need to bolster any -- the liquidity position of Dream Office right now? What are you hearing from your lenders at the moment?

Sure. I'll take that one. Dream Office's liquidity position right now, we repaid $150 million unsecured debentures in January, so right now we have just over $200 million of liquidity and $100 million of unencumbered assets. This year, we only have $14.5 million of mortgage maturities, so we don't really have a lot to refinance. We had drawings on our credit facilities, but the benchmark has lowered. So we're looking at about 100 basis points savings. At the same time, we do keep in active discussions with all of our lenders, and we're finding that lenders -- they are being selective in what they are financing, but with the assets that we have, we don't anticipate it to be a problem once we're ready to have the conversations, but we just don't have a lot to refinance right now.

Yes. I think this is a really important point. So I'd like to add, Jay, that we've been contacted by all of our lenders, obviously all the big banks but also some of the smaller lenders, regional lenders. They're like the Four Seasons now. They are totally into service. They are making it clear that we've got what money we need, that they're going to take care of their existing clients, and it's quite clear that between the Central Bank, OSFI and the financial institutions, the word is to not call loans, to work with businesses, and it's coming through loud and clear. So I think that the financing environment is amazing for existing borrowers on existing business. We haven't seen much in terms of new business with lenders, and I don't think that they're really that interested in it right now. So if you went to somebody and said I want to do a new condo development, I don't think you're going to get airtime at this time or at least there'll be -- it'll be harder to get done because I don't think that they're ready yet to determine how to do a new loan. But as far as taking care of the existing businesses, it's remarkable. I've never seen anything like it.

And the second part, I see they're asking if there's a rate floor for our credit facility, I just -- I believe it just can't go negative, but maybe they'll have more floors on new financings or facilities going forward.

We are seeing floors on different pieces of debt, but none of them are -- all of the floors are at the lowest all-in rate we've ever seen.

A question here on dividend payouts. Do you want to comment on how you think about the different dividends on different entities?

Everything -- all the dividends are well capitalized, and we don't see any changes to them nor have there been any discussions at any level about any change to dividend policy.

So maybe just a switch on -- you mentioned construction of existing condos. Those are going ahead. How do you see the sale of new condos over the next 2 years in this environment? Do you think the consumer is going to be looking for something different as a result of everything that everyone's concerned about? Be it HVAC systems or wider hallways, I don't know what. Is there a design change that needs to be done to the condo -- the residential market?

I don't think there's any need to do wider hallways. I do think that air quality is going to be a big, big deal. When I say that, what I mean is I don't think we have social distancing for the next 100 years. I think having decent air quality is something that's going to be important for the next 100 years. We've done a good job in our office buildings and in our condos. In the West Don Lands, where we're doing the huge development with -- on behalf of the federal government, we've got 4 pipe systems, but I think we could see even more air filters and probably maybe some changes to the -- how the air intake works. But those -- we'll figure that out over time, but I think that, after this, people will probably be focused on things they weren't before. As far as condo sales go, we're seeing condo sales right now both in our developments and in other developments. It's not huge, but the prices are in line. There hasn't been -- there was one condo opening that was done virtually that did very well, and I forget where it was. It wasn't in the downtown core. It got a decent price and sold really well. We can see what's happening in apartment rents or condo rents, and they're okay. They're not exuberant, but they're okay. But in any event, what we'll have to -- when you build a condo, you get the presales. So you get to know how the selling goes before you start building.

Any comments on co-working and also co-living? That -- those types of concepts, are they -- have those kind of been taking a hit because of this virus?

My personal opinion is that people will be less -- it might have been really cool to have 40 square feet in WeWork before. I think people are going to be much more aware of not knowing who's around them, having people change all the time, being so close. So I think it's going to be challenging for some of the co-work, and I think some of them that do more enterprise work and stuff like that could have a great business still.

And how about co-living? Is that...

That is a great one because people do have their own space with locks on it and everything like that. They would share a kitchen. Look, here's the issue. The issue is things weren't affordable before. If you make it more expensive to create places for people to live, it's the wrong direction. So co-living is much more affordable than individual apartments. So we'll have to see how it plays out. But the thing I keep thinking about is there are some things that we would use to do that we're going to jump to do as soon as we can. There's other things that say, you know what, maybe I don't need it, maybe I don't want it, but maybe I'm comfortable with it. But I think co-living will have a good shot.

There's been a couple of questions on the European strategy, which you had very successfully with Dream Global and you've restarted with Dream Industrial, and you're also doing some private things. What are you seeing in that market? And how do you feel about opportunities resurfacing over there relative to here in Canada and the U.S.?

The Europe is generally slower to respond than the U.S. or Canada, so we really haven't seen much in terms of transactions yet. As far as the economy goes, it looks okay. I mean in terms of demand for industrial space, we're hoping that there's value-add opportunities. We think we've shown that we can do that well. But again, it is so early in this that it's hard know. And maybe there might be some more -- I suspect that in Canada it's so capital -- there's so little capital that you can deploy. I suspect it's going to go very well. In Europe, maybe there'll be more opportunities.

Let's see what else we have here.

There's tons coming in.

There's tons coming in, yes. I mean question on parking revenue in Dream Office. Obviously, that's -- I'm sure -- well, I guess you have some monthly. I don't know what...

Yes, parking is a top one. But I say, generally, total parking NOI across the whole portfolio equates to about 10% of NOI. Contractual of that amount would be just over half of it, and they would be included in the collection numbers I quoted earlier. So there's an amount that's left as transient parking, that's tougher now because there simply isn't a lot of cars in downtown Toronto. And what we've actually done and credit to Gord and his team is we reached out to the front lines and the hospital workers, and we donated those spots. So they can get to work a bit more safely and easily. So...

Yes. And when we do all start going back to work, there's a comment here and I agree. I mean there'll be less people maybe taking transit and more people jumping in their cars, so the traffic could be a lot worse and the parking revenues could actually be higher. Who knows?

Yes. Well, that one's tough because I guess you'll have to balance how long it takes to get to work. For me, I take the subway every single day. I think maybe people will try to have more flexible hours. And for me personally, I might get into work earlier, around 7:00, and try to avoid the rush hour. But driving in is really tough. For me, it takes me a lot longer to drive than to take the subway. But I can understand.

Any concerns about sourcing supplies for the construction side of the business? The question here about the border has been shut down and getting the materials you need to keep the developments active and proceeding on pace, has that become an issue? Or do you think that's going to become an issue in the near term?

First, it hasn't been an issue so far for us, but what I would say is we don't know what construction costs are going to be when this is done. There may be -- like the range could be that there's just a lot less developments or there could be so much demand plus only infrastructure dollars that it's going to be a competition to get labor and materials. So like we don't even know on that side of it. As far as the whole global chain, I -- personally, I think the goods are moving pretty well right now, and I think the kind of stuff we need is fine. I don't think there's going to be 3x more construction than there used to be. So we haven't seen that yet. But I can tell you that when you deal with contractors right now, they can't commit to anything that's based on how much it's going to cost to do something. So -- and that may be a bit of a broad statement. But if you're talking about, I want to build a building next year, you can't get significant commitments very easily.

Maybe just bigger picture. I know you mentioned about Alberta and Saskatchewan having a tough go right now. But Michael, longer term, what potential do you see for that economy to reinvent itself to a sufficient degree to make those up -- make that an attractive place to invest? And do you -- well, do you -- or do you have that confidence to eventually see putting more capital in that market?

I'd put it differently. Firstly, they've had a tremendously difficult time. Just about everything that could go wrong has gone wrong for the Prairies. I think that oil, I don't know what's going to happen, but I would suggest that it doesn't look very promising. I'm a little bit disappointed that they continue to focus on a hydrocarbon economy more than maybe diversifying. Having said that, I think it's time now that the country is going to care about it, and I think you're going to see a lot more emphasis on Alberta and Saskatchewan doing okay. So it is promising, but basically, it's been 6 years of things getting worse and worse. So that's -- it's pretty bad. And there's a reasonable expectation that it will get better. There's educated people. They've got a good work ethic, and it's surprising, like in Saskatoon, just how much tech start-ups there are. In Calgary, there's a lot of wonderful people. Housing costs are really cheap. Labor is cheap. Everything's cheap. So they've got a lot of potential to grow their economies, but I think they've got to grow them in different ways than they used to. As far as making money, we've been very aggressive to take out as much cash as we can while maintaining our operations. So last year, we reduced our G&A by more than 50%, and we've reduced our working capital probably by over $100 million. We've probably taken out another $100 million in the last 3 years. So if we had $800 million invested in our land and housing in Western Canada, we've probably taken out $300 million of that in the last 3 years. We'll probably take another $150 million in the next 2 or 3 years. So we're not investing more, but we do have excellent quality assets and we plan on trying to make the most of them.

Great.

One question that I wanted to clear up. It was the question saying that I was unclear on the liquidity in Dream Unlimited. Dream Unlimited has paid off like $300 million of debt over the last 6 months, and we've had some money coming in. So we're probably at about $310 million, $320 million of available liquidity, and that's going to go up. And most of our businesses, at this point, we don't think that they need cash. But we want to stay liquid through this and either take care of our business or be ready to pursue really great opportunities if they come up. But it's well capitalized and we're very relieved that we made a lot of the decisions we've made in the last 3 years.

Do you have any different views on industrial as a result of everyone shopping online right now? And the grocery online business has been -- the limits of that have been tested. Does this make you have a higher conviction in investing in that space going forward?

Jay, do you want to answer that?

Sure. I mean we're obviously very bullish, and our Dream Office is also a big unitholder in Dream Industrial. My personal view is I think all the fundamentals that have supported and -- industrial and the entire sector will continue to be there afterwards and probably will be a bit more amplified. I think what's also unique to Dream Industrial is most of their buildings are in very well-located urban areas, beside an airport and the highways and transportation. So if you look at the economic rents on a lot of those buildings, the way they cost to build them new, it would be a lot higher than simply owning and raising the rents now. So that adds another layer of cushion and safety. But I think there's a tremendous amount of runway on Industrial, and good asset classes or good assets specifically in those classes will perform very well and probably fall apart even further after this.

Jay, there's a question about Industrial's exposure out west. Do you see the question?

Yes. I think before Europe, it was around 22. It probably got diluted down a little bit. Once again, they're well located. I think the rents they're seeing is relatively close to expiry and in place. Looking at the collection stats when I was just talking to the team, there was not a lot of difference between what they were collecting in Alberta relative to the rest of the North American markets. But once again, that's just for April. So I think what they have now, I mean, there's obviously challenges in everything in Western Canada, but it seems like Industrial is holding in a bit better.

Maybe just on the rent collection that you stated for Dream Office earlier, Jay, was there any kind of regional sort of detail that would be of interest there that you'd be willing to share in terms of some of those tenants that didn't pay you, were they -- most of them perhaps out in the remaining western side of the portfolio there? Or...

So in our Western Canadian portfolio, in Calgary, our exposure to oil and gas is almost very nominal. It's almost 0. We have a lot of law firms out there, and they're operating. So if you look at collection patterns or stats across the board, you won't really see anything of interest. So a lot of the rent that's outstanding, as I mentioned earlier, it's more attributed to ground floor retail, restaurants in our office buildings in the Toronto CBD, and those are the ones that we're working with. And understandably, they're shut down right now, so they have no cash flows, but we'll work with them.

Yes. On that point, Sam, a month ago, we committed to our employees other than in the ski area, in the restaurants that we're not going to have any layoffs. We put a great team together, and we need them to stay with us. So we're not laying anybody off. We also gave a bonus at the end of March of $1,400 to basically everybody that makes below a threshold and asked people to spend if they need it. If they don't need it, share it with their family. And if their family doesn't need it, to prebuy haircuts, dinners, memberships to the gym, but help out the local businesses because we're all in this together. Similarly, our view is that at times like this, you have a chance to define your business and build great relationships by how you behave. So that's what we're doing with our employees. That's what we're doing with a lot of our tenants. So we don't want to be part of anything where we affect our tenant's ability to stay in business. So we're happy to work with them. And I want to be clear. We want to do -- we've done a lot of deferrals. That's to work with our tenants. I think people should be skeptical because if a business is closed and not having any revenue, then when they come back, maybe they'll have some revenue. But it's going to take some time just to have enough rent -- revenue to pay all of their costs and the rent, let alone -- then all of a sudden paying more rent than usual. So I think we're in it for the long term with our tenants. I think we're going to do very well. I think our buildings are very desirable, but I think we're trying to be a little bit gentler. Having said that, whenever we have a request, we look through financials. And one of the things we do, we check their website. We had one asking -- an office tenant asking for rent abatement or deferral. And we checked their website and the website said they're 100% remote. They're working and fully capable and business is full on, so we said no. I would say we've seen some bad behavior by tenants, but for the most part -- when I say that, what I mean is we're not partners with our tenants. They pay us rent. We get a very high multiple on it because it's -- and that you can count on it. And tenants have the obligation to pay the rent. So our view is if a tenant has the capital to pay for rent, then they should pay it. But if tenants are having a hard time, we'll work with them. I think we've got some good news this week that we're going to get additional benefits from the federal government, where they'll make forgivable loans available at least in part for smaller tenants, the [ type of loans in ] deferral. So I think that's going to work out great because we were very nice to them, and now we might get money from the federal government. So it didn't even cost anything. So that's going to work out fantastic. But I would say that our entire organization has been really focused on what kind of leaders we want to be, whatever corporate citizens we want to be and how to take care of our employees, our customers as well as our shareholders through this.

Just yesterday, the government announced this initiative to support landlords that are giving breaks to their tenants on the rent. I don't know if you've had a chance to see any of the details. But do you see that program directly benefiting any of the Dream entities?

Yes. Well, there's been very few details. It looks like they can't have a payroll of more than $1.5 million. But I think that's going to cover a lot of the tenants that we've been working with. So we don't know enough details to know exactly how it's going to work, but we have been involved in the government on this, and it'll help for sure.

Okay. Just a clarification. I think, Jay, earlier, you said the Dream Office has very little direct exposure to oil and gas companies. Do you know offhand Dream Industrial's exposure directly to oil and gas companies?

I wouldn't have that stat on hand, so maybe ask them on the May conference call. The other thing is what defines like exposure to oil and gas because some things are related, but they might not directly be in an industry. So I'd rather not give out a number that might be wrong. So check in with Lenis, Alex and Brian.

Okay. What else do we have here?

From what I can see, Sam, I think we've answered all the questions.

It looks like we're getting there. Yes. I guess one on -- do you see -- where do you see the biggest opportunities coming out of this, was a question. Hard to say but...

What I would say is that I've done some numbers. If you look at Dream Unlimited from 2003 to now, it's probably a 20% IRR up until the peak in February. If you take 1/3 of that off, the 20% IRR goes to 17%. I don't -- I never expected that we'd only have good days. Going from a 20% IRR to 17% IRR by losing 1/3 of your value does suck, but it's certainly something we can manage through. I would say the first opportunity is just to keep going with high-quality assets, taking good care of the assets and the people, so just hanging in there, I think, is a pretty good opportunity. Beyond that, what I would say is I keep thinking about if, in the last pandemic, we used to make horse buggies, and after everybody got healthier and everything returned to good and then I said, because of the pandemic, we went out of business on our horse buggy business. "No, oh, you went out of business because of the car." And I think that's what's happening now. I think a lot of the trends, 12,000 stores closed last year in the United States. So it's not COVID. The flip side of it is I think a lot of things are moving fast. There's tremendous opportunities. You mentioned online stuff. We're going to have great opportunities on experiences that maybe people feel safer than some of the old experiences. Technology is amazing, what's happening in it. Within our real estate, we got a big project in Port Credit, and I think that's going to be a blowout as soon as we start marketing it. And it's on the way close to a GO train station. I think people are going to have happy lives there. So I think there will be great opportunities in real estate. I think people are going to want to be downtown. And we've got a lot of buildings in Dream Office that have 4,000 to 10,000 square foot floor plates. I think people say, you know what, if I have a 5,000 square foot floor plate, I'm the only tenant. I'll make it customized for us. And basically you don't have to see anybody that's not in your office. I think there'll be some good things. As we get through this, there may be the opportunity to buy good assets cheap. But I would say that, over the last 15 years, the real deals, for the most part, have been in the stock market when people freak out and sell things cheap; and in the private markets, Blackstone has $40 billion of equity, so they need to pay -- buy $120 billion. I think Brookfield may have more. I think a lot of the pension funds still want to get more assets in alternative asset class. So I think there's a lot of depth. And by the way, as I've been saying for a long time, there are ultra-rich people that really want to own real estate. They're going to continue to want to own high-quality real estate. And if we're in a world where the risk-free rate is 70 basis points, we're going to maybe have slower growth or something, maybe have a little bit less net operating income, but it will probably be at a higher multiple because of the relative security real estate. So it is going to be an exciting time. And I would say there's going to be a lot of people to make a lot of money, so we've got our eyes open. And I mentioned Jane. We have a lot of people working on our existing business, but we also have a lot of people that are working really hard to find out where the next opportunities are going to be. We started that, and we will definitely find some.

We've had a couple of questions on the office -- or impact of all this on office space demand in terms of square foot per person. I think we've touched on this before. But maybe, Michael or Jay, just to make sure we've answered the question, do you see a direct impact on this on demand for office space as maybe office space layouts change?

You know what, it's just guessing. If I had to bet, I would say, just like the horse buggy, there's going to be buildings that are not going to be feasible. They'll be obsolete. People want to have a better experience. So it's going to be -- and I think people will pay more for specialness. So the office market can -- you could see vacancy rates increasing, but in the good buildings, they're decreasing. What is human behavior going to be? I agree with Jay. I could see people starting at 7:00, 8:00, 9:00, 10:00 in the morning, people leaving at 1:00, 2:00, 3:00, 4:00, 5:00, 6:00, 7:00 and being able to take public transportation without too many people around. I think we could see people saying, you know what, I'm going to be home when my kids come home from school now because I liked it or whatever. So I mean it's a lot of unknowns, but I think good assets are going to continue to be extremely highly valued.

On that topic right now, it's almost harder to comment as a landlord and as a tenant, but we have discussions internally more so as a tenant, how we feel about our space in our building. But when we talk to like all the employees, first of all, everybody wants to work at least a core number of hours at the office. But like, for us, we have -- our average employee age is pretty young. So most of those guys and girls are living in condos or apartments, which are getting smaller and smaller. So they see the office as an extension of their life, and they want to spend the day and night in a space that they want to be in. So it's not only the office space. They're looking at air quality, which we're paying a lot of attention to these days. It's also lighting, how well the space is designed. We want more collaborative space, and we want to be able to have an environment that they want to work in. So I think those are all going to be interesting topics. We've been spending a lot of time on it already, but I think it's going to be more of a focal point.

Okay. Looks like we've answered all the questions.

Great.

So we've covered a lot. There's a lot more we could discuss. Maybe we'll do it another time. It's a great way to end the week. As a reminder, this recording will be available on Dream's website. This has been an incredibly informative and insightful hour and a sincere pleasure for me. Great. Thank you to everyone watching and posing questions. Thank you, Michael and Jay, for doing this, and have a great weekend, everyone.

Sorry, last question that just came in late. Are the trips being suspended? Yes, quick answer is yes. Industrial, I think, suspended or Dream Office, we don't have a trip.

Sam, I'd like to thank you for helping us get this organized. You've been a great moderator. And for everybody listening, I think there's been a huge turnout. We've got tons of questions, and we've even had some wonderful comments for doing so. Thanks, everybody, for spending an hour on a Friday afternoon doing this. And let us -- please provide feedback, and we'll figure out how often to do this. I actually love the idea that this has nothing to do with quarterly results and just as a conversation about the business. So this has been a good experience for us, and let's see, think about how often we should do this. So thank you very much.

Thank you, everyone.

Take care. Bye-bye.

Bye-bye.