Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DREAM Unlimited Corp (DRUNF, Financial) is on track to end 2024 on a strong note with significant prebuild volume and commitments for additional lot and acre sales.
- The company maintains a solid liquidity position with $257 million in total liquidity and a conservative leverage position of 39%.
- Western Canada development is performing exceptionally well, with high presales for future years and strong demand and margins.
- The income properties segment is growing steadily, with expectations of adding $200 million in income properties annually over the next few years.
- The asset management division has grown to $27 billion in assets under management, with a significant portion generating fees.
Negative Points
- The third quarter saw a pretax loss of $1.9 million, down from pretax earnings of $11.4 million in the previous year, primarily due to timing issues and higher interest costs.
- There was less development and transactional activity across the asset management platform, impacting revenue and margins.
- The asset management division's margin was down relative to the prior year due to development activity and transactional noise.
- The company faces challenges in Toronto with office buildings and land, although they possess excellent assets.
- The uncertainty in the US and fluctuating interest rates present challenges for future planning and capital allocation.
Q & A Highlights
Q: Meaghan, you mentioned that asset management income will fluctuate. Are there items that weren't in this quarter that will appear in the next quarters? Can you quantify how much management fees should grow when the European apartment acquisition closes?
A: I don't want to provide guidance on the European part yet, but for this quarter, there's probably a couple of million dollars of noise and timing that affected Q3 results. We can update once the transaction closes in the next three months.
Q: Michael, you mentioned starting new projects in Toronto in the next year or two. Are these condo projects or new rental apartments? What returns do you expect from these projects?
A: None of the projects are condos. We believe the condo inventory surplus will clear, but it's too early to start condos economically. We are focused on affordable housing, working with CMHC, and leveraging HST waivers and ACTL financing. We aim for around a 5% cap rate on new apartments, which we find attractive.
Q: With the upcoming closing of the Apple Basin sale, you mentioned having more liquidity than ever. Will some of this liquidity be used for share repurchases?
A: We will have significant liquidity, but I prefer to think about it and provide a more detailed answer in February. Historically, we have been active in stock buybacks, and we will consider it as part of our capital strategy.
Q: How are new home sales in Western Canada given the recent interest rate changes? Does this affect your outlook for lot absorption over the next few years?
A: We are seeing reasonable sales, and overall, this year is good. In Alberta and Saskatchewan, things are going well, and we do not see a slowing of opportunities. If anything, we think it's increasing.
Q: Regarding the ABs and sale, you seem confident it will close by year-end. What gives you this confidence? Also, could you clarify your comments about the proceeds and dividend?
A: We expect the sale to close by year-end. The dividend will be about 25% of the cash we receive, which aligns with our general approach of distributing 25% of cash or net income. The remaining proceeds will be used to pay down debt and maintain liquidity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
