Dream Unlimited is “seeing a surprising amount of strength” in Western Canada this year and started off Q1 2024 with strong results in what is typically a quieter quarter, said Michael Cooper, its chief responsible officer.
Q1 revenue and net operating income for the period ended March 31 were $61.5 million and $27.2 million, respectively, up by $2 million and $1.9 million year-over-year.
Dream (DRM-T) said the results were largely driven by strong results from the Arapahoe Basin ski resort in Colorado which in February and March delivered the highest income levels since the resort was acquired.
In February, Dream announced it had a deal to sell Arapahoe to U.S.-based resort operator Alterra Mountain Company.
Speaking to analysts about Q1, Cooper said Dream expects its “strong liquidity levels” to increase by about $110 million when the sale of Arapahoe Basin closes later this year.
Dream is “driving for more liquidity,” Cooper said during the call. “I think (with) every model we have at the company going forward, we expect to continually increase liquidity.”
The company’s Western Canada operations, development activities and income properties, which represent 90 per cent its business, have been key drivers of its growth.
Western Canada land pre-sales at historic highs
Cooper said Western Canada land pre-sales are tracking at historic highs.
Dream sold an 80 per cent interest of 146 acres of development land in Edmonton to builders and retained a 20 per cent interest so that it can continue to be the development manager. The transactions generated revenue of $39.5 million and net margin of $28.1 million, which will be reflected in Q2 2024 income results.
Dream has commitments for sales of an additional 370 lots and 106 acres through 2025, representing $162 million in revenue, the bulk of which will be realized this year.
Cooper said Dream is seeing “very strong sales” in Alpine Park, a 476-acre development in Calgary, which it describes as a “New Urbanist development.”
“In April, we had the second-highest number of sales to owners through all our builders and it’s got great momentum.” Cooper noted Alpine Park represents “a significant part of our entire land holdings.”
Cooper said Dream expects to soon begin developing its massive Homewood neighbourhood in Saskatoon. It will have high-density residential, single-family homes, retail and institutional uses.
He noted elementary and high schools and a community centre are slated for the site and “we think this is going to drive the population of this area maybe by 7,000 or 10,000 people.”
Significant pre-sales are expected at Homewood next year. “I think we’re going to go through the land in (the) Homewood area quicker than we expected and that’s going to result in profits that are probably higher, and we’ll get them sooner.”
Dream begins W. Canada apartment development
Cooper noted Dream has started to build apartments in Western Canada, including at its Brighton development in east-end Saskatoon.
Brighton accounts for about 40 per cent of the new home market in Saskatoon and is anticipated to be home to nearly 15,000 residents by 2030.
Cooper said Dream has completed two apartment buildings in Brighton and is starting construction of a third. “Basically, the math is we make about $4 million for each building,” he said.
Dream expects to build approximately 12 apartment buildings and 360 townhouses at the site, and has completed about 30 per cent of construction.
“This part of our business is very exciting,” Cooper said of the apartment buildings. “It pencils out to really good yields (on) Day 1. The rents are strong, the demand is strong. So I think we’re going to try to grow it as much as we can.”
Cooper said the Saskatoon and Calgary developments “are a huge part of our whole development business. They both have long life spans to go. They’re both going to create lots of income properties and lots of profits from development.
“We expect that we’re going to continue to make way more money in Western Canada than we did between 2014 and 2020.”
CFO reports elevated occupancy income
Meaghan Peloso, chief financial officer of Dream Unlimited, said Q1 revenue included occupancy income of nearly $24 million from Ivy Condos, Brightwater and Phase 2 of Riverside Square.
Brightwater is a 72-acre lakeside neighbourhood in the Port Credit area of Mississauga.
Riverside Square, a residential/commercial development at Queen Street East and the Don Valley Parkway in Toronto, will feature more than 2,500 condos, 400 townhouses and 300,000 square feet of retail and offices.
The 32-storey, 256-unit Ivy Condos on Mutual Street in downtown Toronto launched sales in 2017.
“Subsequent to launching, the market saw significant cost escalation,” Peloso said of Ivy. “While we anticipated a limited margin, we chose to continue the project to be fair to purchasers. We expect to close on the project and repay the construction debt this month.”
Dream does not have any other projects similiar to Ivy Condos in its pipeline.
Cooper said Dream’s asset management business is generating good returns.
“We’ve got good relationships with our investors and we are pursuing and catching some reasonable new asset management initiatives. And we expect that while that business will grow in a lumpy fashion, we do expect it to grow.”
Toronto-based Dream has $25 billion of assets under management, up 43 per cent since the end of 2022.