Dream Impact Trust

Good afternoon, ladies and gentlemen. Welcome to the Dream Impact Trust fourth quarter conference call for Tuesday, February 14th, 2023. During this call, management may make statements containing forward-looking information within the meaning of the 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 the trust 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 the trust filings with securities regulators, including its final long-form prospectus. These filings are also available on the website at www.dreamimpacttrust.ca. Later in the presentation, we will have a question and answer session. To queue up with your question, please press star 1 1 on your telephone keypad. Your host for today will be Mr. Michael Cooper, Portfolio Manager. Mr. Cooper, please go ahead.

Thank you, Operator, and good afternoon, everyone. Today I'm here with Megan Peloso, our CFO. Last night we released our results that included two difficult decisions and some other exciting progress. Our interest in the Las Vegas hotel is a passive interest, meaning we really don't have much of a say. While the investment went through a thorough due diligence in 2018, with COVID and a very restrictive lending environment in the United States, we are doubtful of the value of the asset, and our board determined it was reasonable and conservative to reduce the equity investment to zero, although we will continue to try to achieve a return of some capital along the way. Over the years, we have maintained a 40-cent distribution, generally we've been able to pay out the distribution and maintain or increase our net asset value. However, with the amount of development we have, the distribution was not generated entirely from recurring income. Some were generated by appreciation on our lands. After dialogue with the board and taking into account feedback from investors, the board decided to size the dividend to match the recurring income more or less generated by our income assets. This decision means that the company will maintain more capital than before, but it does not affect the intrinsic value of the business. During 2022, we added about $100 million of new income properties that included completed developments and new acquisitions. Our apartments that we have bought and developed are performing very well. Over the next three years, we have another $500 million of completed buildings that will change the nature of the trust as we double the amount of income properties. About $300 million of completed developments over this time period are in the West Donlands. These properties are best-in-class, purpose-built rentals and will also have about 500 affordable housing units, an Indigenous health centre, and many amenities for the city and the nearby residents. The other $200 million is primarily purpose-built rental at Zibi, which provides net-zero residences and affordable housing. Subsequent to these developments, we are making some very special and valuable new projects. Victory Silos was acquired for $58 million with a value today of $250 million for an increase of $192 million or $72 million at the trust shares. During the time we've owned this site, Victory Silos has been rezoned for 1.3 million square feet on Toronto's waterfront. It will be an amazing development. 49 Ontario is a site that we acquired for $47 million and we are nearing rezoning for an excess of 800,000 square feet. The value of this site has increased by $93 million and is 100% owned by Impact Trust. We're expecting to develop this site into a purpose-built rental with a partner to manage the equity requirements. In December, we finalized definitive documents to acquire Keysight, the world-class 13-acre site on Toronto's waterfront. We expect to close on the first phase next month. We are very pleased with the progress with governments and anticipate progressing through other approvals relatively quickly as a site is so important to all of the government agencies that we deal with. The assets described that will be completed soon and the longer term developments will create exceptional portfolio of income properties. In addition, our Frank Gehry Design Forma launched in June of 2022 is one of the most successful launches ever with over $800 million of sales at a very high price per square foot. We have fixed 45% of the construction costs already and are finalizing the construction loan, and we've even started construction. Although we have owned the site for five years, with the improvements we have made to the design, our current pro forma is showing the highest profit since we bought the site. Megan, can you provide a review of our year-end results?

Thank you, Michael. Good afternoon, everyone. I'll start by briefly speaking to our financial results, liquidity position, and significant activities in the period. In the fourth quarter, the Trust recognized a net loss of $44.9 million. Results included a fair value write-down on the Trust's investment in the Virgin Hotel of $59.2 million. Excluding this write-down, the Trust generated earnings of $14.3 million, down from $27 million in the prior year. This was driven by the composition of fair value adjustments on commercial properties in each period and higher interest expense, partially offset by an increased income contribution from our multifamily portfolio. As previously disclosed, the Trust has a 10% minority interest in the Virgin Hotel. This investment has always been passive in nature and considered non-core to the Trust portfolio. We originally acquired the investment in 2018 and the intent was always to exit the asset upon stabilization. The hotel was closed for most of 2020 for significant renovations and reopened in early 2021 in an environment with ongoing COVID restrictions. As of period end, we are required to fair value our investment in the hotel. The fair value loss incurred in the fourth quarter was driven by operating performance, near-term financing needs, capital needs, and a contemplated capital reorganization by the hotel investor group, among other factors. At this point in time, the trust has no further capital obligations as it relates to this investment. Should additional capital be needed, we would not intend to contribute further as the hotel is not aligned with our impact strategy. Results on a segmented basis were as follows. In the fourth quarter, adjusting for the fair value loss in the hotel, the development segment generated net income of $0.5 million down from $1.2 million in the comparative period. Income from this segment will fluctuate period to period and not contribute meaningfully to earnings until development milestones are achieved and or project inventory is available for occupancy. Based on the trust's current development pipeline, we anticipate more meaningful income from this segment upon first tenant occupancies at WDL Block 8 in the spring and Brightwater towards the end of 2023. As it relates to our recurring income segment, NOI from commercial properties was $2.7 million in the fourth quarter, down slightly from prior year due to a decline in occupancy rates. NOI from multifamily rental assets was $1.7 million in the fourth quarter, up from $0.8 million in the prior year, primarily due to the timing of third-party acquisitions and the completion of development blocks. In 2022, the trust added an additional $98 million of assets to its recurring income segment, either through third-party acquisitions or block completions from its development pipeline. Based on our current development pipeline, we expect to bring on an additional $500 million of high-quality residential assets by 2026, which will contribute meaningfully to this segment. Included in results for this segment was a fair value gain of $29 million on Fortnum, Ontario, driven by an increase in land value and density, partially offset by a fair value loss of $14.9 million on south-south vendors due to cap rate expansion. Fortnum, Ontario is an 88,000 square foot commercial property owned 100% by the trust, located in downtown Toronto. We've applied for over 800,000 square feet of density on the site and anticipate achieving rezoning by mid-2023. Inclusive of their recently acquired Berkeley Land Assembly, the site was acquired for $47 million compared to its carrying value of $140 million as of December 31st and an appraised value of $160 million. NAV per unit as of December 31st was $825 down from $931 in the prior year. The most significant driver of this year-over-year change was the write-down on the hotel. Approximately 70% of NAV was supported by a third-party appraisal at year-end. That is higher than book equity per unit due to market value adjustments taken on our investments in Lakeshore East, Brightwater, and Hundred Steels. In the period, a market value adjustment of $7 million was recognized relating to 100 Steels specifically. This investment is a leasehold interest in a retail shopping center and future residential and mixed-use development located near the future steel station on the Yonge North subway extension. We believe the site continues to be more valuable given its proximity to the subway line, and we anticipate achieving approximately 1.5 million square feet of GSA once rezoned in 2023. As of December 31st, the Trust had $16 million of consolidated debt presented as current, which related to a mortgage on 49 Ontario and the Trust credit facility. Subsequent to year end, we closed on the refi of 49 Ontario for gross proceeds of $80 million. First, these were earmarked to repay the in-place mortgage in the trust credit facility. In addition, the trust amended its credit facility, reducing the borrowing capacity from $50 million to $25 million and extending the maturity date to April 2025. Upon completion of these two financing activities, the trust had approximately $30 million in available liquidity, up significantly from December 31st. We've also been working through the refinancing of Victory Silos, and have now upsized the in-place loan from $35 million to $150 million. Given the site's increase in value, through the completed refinancing, we will be able to cover the trust equity requirement for Keysight with excess proceeds. The trust has a 37.5% interest in victory silos. Effective with the trust February 2023 distribution, we have revised our distribution from $0.40 per unit to $0.16 per unit on an annualized basis. We believe the revised distribution preserves additional liquidity for the trust development commitments and is better aligned with our strategy. In 2022, we generated roughly $15 million of NOI from our current recurring income assets. By 2026, with an additional $500 million of assets completed from development, we expect stabilized NOI to be over 2.5 times our current level, which will be more than adequate to sustain our revised distribution level. On that note, I will turn the call back over to you, Michael.