Dream Residential Real Estate Investment Trust

Good morning, ladies and gentlemen. Welcome to the Dream Residential REIT First Quarter Conference Call for Thursday, May 4, 2023. During this call, management of Dream Residential 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 subject to a number of risks and uncertainties many of which are beyond DREAM residential REITs 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 residential REITs filings with securities regulators, including its latest annual information form and MDNA. These filings are also available on DREAM residential REITs website at www.dreamresidentialREIT.ca. Later in the presentation, we will have a question and answer session and to queue up for a question, please press star one one on your telephone keypad. Your host for today will be Ms. Jane Gavin, CEO of Dream Residential REIT. Ms. Gavin, please go ahead.

Thank you, operator. Good morning, everybody. Thank you for joining us for our first quarter conference call. It has been quite the roller coaster ride since we started discussing the idea of a dream residential REIT in the autumn of 2021. From both micro and macro perspectives, the world looks quite different than it did only 18 months ago. From the lack of availability of growth capital to the increase in the cost of debt to questions around the pace of rental growth and broader questions around the economy. No one foresaw the rapid negative change in sentiment. But through all that disruption, DRR's assets have proven steady and resilient. The business is well positioned to grow when the opportunity is right. In the meantime, we continue to deliver stable distributions with a safe balance sheet. Our biggest goal after launching DRR was to deliver the IPO forecast in the prospectus and to build confidence in the platform. Rounding the corner on the first anniversary of the formation of Dream Residential, Management is very pleased that the business is doing what it said and delivering the results forecast 18 months ago. Our value-add program is proving to be a very valuable growth engine in a period where growth by accretive acquisitions is challenging, and we have lots of inventory to continue that program. Against that solid backdrop, I am very pleased that Brian Pauls will be taking on the role of CEO of Dream Residential going forward into the next phase of its evolution. Brian is ideally suited to take over the helm. Well-known and respected in the capital markets and the U.S. multi-residential industry, he's very familiar with our business, the platform, and of course, the management team. For my part, I will continue focusing on growing DREAM's asset management platform and supporting this management team from the board. I'm going to hand the call over now to Scott and Derek to give you more color on the operating environment and our results. Scott, Derek, over to you.

Thank you, Jane. Before getting into more detail about the quarter, I would like to recognize Jane's leadership as CEO of Dream Residential. We have been in business for a year come this Saturday, but the genesis of DRR began 18 to 20 months ago. Dream and Paul's needed a unique leader to steer this private to public transition. Someone with exceptional real estate proficiency, connected capital markets wisdom, and top shelf executive aptitude. We are grateful she accepted this challenge and privileged to have her navigate the IPO and this subsequent black swan capital market of a year that has transpired around the globe. It has been an honor to work with and report to Jane. I am thankful that you remain at the helm of DRR with the Board of Trustees and I know you are invested and I know your investment matters. Thank you, Jane. DRR is delighted to open 2023 with solid first quarter performance. Net operating income over $6 million topped last quarter by 6% and beat IPO forecasts by 3%. Slightly stronger revenue growth and modest expense savings resulted in a 51.9% NOI margin that was 100 basis points better than planned and $181,000 ahead of forecast. Revenue of $11.6 million increased 2.4% over last quarter, driven by the REIT's 19.9% new lease trade-outs on renovated suites and 8.8% spread on renewals across the portfolio. Operating expenses, excluding the impact of IFRIC, held flat at $5.6 million as a result of deliberate cost controls combined with passive savings by virtue of increasing the suite count drafted into the renovation program leading into spring. Expenses will be impacted next quarter by rising insurance premiums. While increases have been budgeted, market conditions are pointing to further escalation that will not be finalized until renewal later in Q2. Collectively, through three full quarters of operations, DRR NOI is in line with the original IPO forecast and on track to achieve the full IPO forecast ending in Q2. Across the United States, national trends have included decreasing occupancy, decelerated but narrowly positive rent growth, and climbing costs. The apartment list national vacancy index escalated to 6.6% and national monthly rent growth indices edged on an average 20 basis points positive after five consecutive months of negative reversion. By comparison, dream residential rate ended Q1 at 94.0% occupancy approximately 60 basis points higher than the index, while still sustaining 1% to 2% of the portfolio suites offline under construction in our value-add program. Likewise, DRR rents increased approximately 50 basis points per month during Q1, better than double the national trend. Blended lease tradeouts of 7.9% pushed Q1 in-place rent up 1.5% during the quarter to $1,095 per month, sustaining double-digit year-over-year rent growth of 11.2% compared with March 31st, 2022. Our Cincinnati communities led renewal trade-out growth at 9.2% and the Dallas assets spurred by the value-add program led all regions with plus 8.9% new lease trade-outs. DRR's Oklahoma region increased rent 1.7% in the first quarter and led the entire portfolio with plus 11.8% year over year rent growth from March 31st, 2022. Cincinnati and Oklahoma both list nationally in the top 10 of fastest metro level rent growth over the past 12 months. DRR continues to create value in diverse markets where efficiently concentrated assets allow our own vertically integrated management and construction teams to grow income and provide safe, consistent cash flow. Over the past several quarters, we have described the seasonal nature of U.S. multi-residential operations and how it influences lease and investment activity. Rent control is not present in DRR markets, and our sophisticated revenue management software helps to optimize seasonal cycles common across our resident base. In the same way, our in-house construction teams forecast in-suite renovations to best time with the spring and summer leasing seasons. In the winter Q4 of 2022, 85 suites were completed. Starting this year in Q1, 94 suites completed construction, weighted toward the latter half of the quarter as we open spring. Next quarter, nearly 130 suites are planned starts for the summer. DRR projects to invest $7 to $7.5 million to value add 400 suites over the course of 2023. Of the 94 suites completed during Q1, 54 were in DFW and 40 in our Oklahoma City region. In fact, on March 31st this past quarter, over 2% of the 1,049 suites in our Dallas market were in the renovation phase preparing for spring leasing. Last summer, we were earning about 15 percentage point premiums on renovations compared to the same property classic trade-outs. In Q1, value-add renovations resulted in lease-to-lease growth of $216 per month per suite, a full 19 percentage points higher than same-property classic finished lease tradeouts. So it seems thus far that while market-wide organic growth has decelerated, the 19 percentage point premium across our value-add renovations points to an increasing benefit over time compared to same-property classics. With double-digit returns on capital, the value-add program continues to be one of the most attractive ways to reinvest in our business and to enhance the quality of our portfolio and generate returns for our investors. The larger economic environment ahead remains murky. As a result, first quarter multi-residential trading volume slumped roughly 70% off of last year, on balance with the pandemic quarter of quarter two 2020. Transactions in Q2 and Q3 this year may tick up in historical fashion, but brokerages see an overall down year compared with last and are not expecting a pointed bounce in deal volume. It is reasonable to conclude values will be difficult to pin down over the course of this calendar year. Rents nationally seem to be stable, leveling in the low to mid single-digit growth band. It has been speculated for months that the proverbial spring leasing season is would be a truth teller of economic direction. However, the early Q2 data leads to our house view that we may experience more of the same, meaning no trauma or downward counter cycle, but also perhaps a muted spring leasing season. More of the same could be mid single digit rent growth for DRR over 2023 on the heels of continued value add momentum. That is a range that beats pre-pandemic national index norms and positions DRR management to remain confident of our 2023 NOI forecast band from the upper $23 million range into the mid $24 million range. Acquisitions. That remains a near-term question mark. The bid-ask spread continues to be quite wide with today's cost of capital, though we have toured and underwritten a number of potential opportunities in each of our markets during Q1. Distress has appeared on a limited basis across older vintage, lower quality, highly levered assets, but bridge debt and recapitalization activities seem available to most. Economists speak to near-term headwinds in terms of both uncertainty and volatility, and that tells us there will be growth windows for which we continue to scour the markets with discipline and patience. Over the midterm and long term, The fundamentals for attainable middle-income apartments are why we are committed to this business. Housing shortfalls and unaffordability persist and could become more aggravated because of the pipeline-altering economic conditions which are delaying and degrading new supply. DRR's communities are in demand, and our operations and value creation continue to prove out. We are positioned to not only endure, but to thrive now and to grow when conditions make sense. Now I am pleased to turn things over to Derek Lau, our Chief Financial Officer.