Market Overview

Dream Office REIT Reports Third Quarter Results and Substantial Completion of Disposition Program

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TORONTO, Nov. 09, 2017 (GLOBE NEWSWIRE) -- DREAM OFFICE REAL ESTATE INVESTMENT TRUST (TSX:D) or ("Dream Office REIT", the "Trust" or "we") today announced its financial results for the three and nine months ended September 30, 2017 and substantial completion of its disposition program. Management will host a conference call to discuss the results on November 10, 2017 at 8:00 a.m. (ET).

FINANCIAL HIGHLIGHTS

SELECTED FINANCIAL INFORMATION   Three months ended       Nine months ended
(unaudited)   September 30,       June 30,       September 30,       September 30,       September 30,  
($000's except per unit amounts)   2017       2017       2016       2017       2016  
Operating results                                      
Net income (loss) $ (637 )   $ 34,556     $ 28,580     $ 34,055     $ (779,034 )
Net operating income ("NOI")(1)   43,201       44,384       44,431       135,130       137,558  
Comparative properties NOI(1)   44,883       45,201       47,409       135,819       144,526  
Funds from Operations ("FFO")(1)   44,653       55,686       71,359       165,822       223,732  
EBITDFV   64,524       76,881       99,888       227,772       319,571  
Distributions                                      
Total distributions(5) $ 22,249     $ 39,175     $ 42,739     $ 102,495     $ 135,398  
Per unit amounts(6)                                      
Distribution rate(5) $ 0.25     $ 0.38     $ 0.38     $ 1.00     $ 1.19  
FFO (basic)(1)   0.48       0.53       0.62       1.61       1.96  
FFO (diluted)(1)   0.48       0.53       0.62       1.61       1.95  
Net asset value ("NAV")(1)
  22.40       22.25       23.46       22.40       23.46  
Footnotes: please refer to definitions on page 7.
 
  • Net income (loss) for the quarter and year-to-date: For the three months ended September 30, 2017, the Trust generated net loss of $0.6 million consisting primarily of net rental income of $60.2 million, offset by interest expense on debt and subsidiary redeemable units of $22.8 million, fair value adjustments to investment properties and financial instruments of $30.1 million, and net losses on transactions and other activities of $8.8 million.

    For the nine months ended September 30, 2017, the Trust generated net income of $34.1 million consisting primarily of net rental income of $216.3 million, offset by interest expense on debt and subsidiary redeemable units of $76.6 million, fair value adjustments to investment properties and financial instruments of $65.3 million, and net losses on transactions and other activities of $36.3 million.

  • Diluted FFO per unit(1) for the quarter and year-to-date: Diluted FFO on a per unit basis for the three months ended September 30, 2017 was $0.48, compared to $0.53 and $0.62 at Q2 2017 and Q3 2016, respectively. Diluted FFO on a per unit basis for the nine months ended September 30, 2017 was $1.61, compared to $1.95 for the nine months ended September 30, 2016. The decrease in diluted FFO per unit for the three and nine months ended September 30, 2017 when compared to the prior year respective periods was primarily as a result of allocating capital repatriated from property dispositions to reducing overall debt levels, net of unit buybacks (-$0.12 and -$0.31, respectively), along with a decrease in comparative properties NOI(1) (-$0.03 and -$0.09, respectively), partially offset by lease termination fees and other (+$0.01 and +$0.06, respectively).

    The decrease in diluted FFO per unit on a quarter-over-quarter basis was primarily as a result of allocating capital repatriated from property dispositions to reducing overall debt levels, net of unit buybacks (-$0.02), along with a decrease in lease termination fees and other (-$0.03).

  • Comparative properties NOI(1) for the quarter and year-to-date: For the three and nine months ended September 30, 2017, NOI from comparative properties decreased by 5.3% and 6.0%, respectively, over the prior year comparative periods, mainly driven by decreases in Calgary, 700 De la Gauchetière Street West ("700 DLG") in Montréal, and Saskatchewan within our Non-core markets, partially offset by increases in the Toronto downtown and Mississauga and North York regions. In Calgary, the decrease in comparative properties NOI was mainly driven by lower occupancies at 606 4th Building, Rocky Mountain Plaza and Life Plaza and lower net rental rates mainly in IBM Corporate Park. At 700 DLG, the decrease in comparative properties NOI was mainly driven by Bell Canada vacating approximately 0.2 million square feet at the beginning of Q2 2017, which was substantially backfilled by National Bank of Canada at lower net rents.  In Saskatchewan, the decrease in comparative properties NOI was mainly driven by lower occupancies at 1900 Sherwood Place with an early termination in March 2017 of approximately 21 thousand square feet and at Saskatoon Square with a tenant vacating approximately 30 thousand square feet at the beginning of Q3 2017. Partially offsetting this decline in comparative properties NOI is Toronto downtown and Mississauga and North York regions experiencing higher net rental rates and higher in-place occupancy in the Mississauga and North York region.

  • Fair value adjustments to investment properties for the quarter: For the three months ended September 30, 2017, the Trust recorded a fair value loss of $21.0 million, mainly driven by fair value losses totalling $6.9 million related to our assets held for sale, $8.0 million related to our properties held for redevelopment and $6.1 million related to our comparative portfolio. The fair value losses were for the most part due to final adjustments on properties sold during the quarter and bids received on properties held for sale and certain other properties.

  • Net Asset Value ("NAV") per unit(1): As at September 30, 2017, our NAV per unit when compared to June 30, 2017, was up $0.15 from $22.25 to $22.40. The increase in NAV per unit during the quarter was primarily driven by activities under our normal course issuer bid ("NCIB") and substantial issuer bid ("SIB"), offset by fair value losses, including investment properties that were sold during the period.

CAPITAL HIGHLIGHTS

KEY FINANCIAL PERFORMANCE METRICS                
(unaudited)             As at  
  September 30,
2017
  June 30,
2017
  December 31,
2016
  September 30,
2016
 
Financing                
Weighted average face interest rate (period-end)(7) 3.93%   3.82%   3.84%   3.89%  
Interest coverage ratio (times)(1)(8) 3.1   3.2   3.1   3.1  
Net debt-to-adjusted EBITDFV (years)(1) 6.5   7.6   7.7   7.3  
Net debt-to-gross book value(1) 39.5%   47.5%   52.3%   50.4%  
Net secured debt-to-gross book value(1) 29.9%   40.7%   44.2%   42.6%  
Debt – average term to maturity (years) 4.7   3.8   3.8   3.8  
Capital (period-end)                
Total number of REIT A Units and LP B Units (in millions)
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