Dream Hard Asset Alternatives Trust Reports Second Quarter Results, Substantial Progress on Disposition of Legacy Assets and Continued Portfolio Repositioning

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TORONTO, Aug. 11, 2017 (GLOBE NEWSWIRE) -- (TSX:DRA.UN) ("Dream Alternatives", "we" or the "Trust") today reported its financial results for the three and six months ended June 30, 2017.

For the three months ended June 30, 2017, the Trust’s net asset value ("NAV") per unit was $8.79, up $0.10 from last quarter. The increase relative to the prior quarter was driven primarily by market value adjustments recognized on the Trust’s investments in its downtown Toronto developments, which more than offset IFRS fair value losses on non core co-owned office properties and investments in the Villarboit retail income producing and development holding properties ("Villarboit investments"), pursuant to completed or pending dispositions. In the second quarter, as part of its NAV calculation, a non IFRS measure, the Trust recognized a market value adjustment of $25.2 million attributable to the following development investments: Mutual Street Development ("IVY Condominiums"), Church/Wood Residences ("Axis Condominiums") and 351-369 Lakeshore Boulevard East ("Lakeshore East Development"). Under IFRS and in the Trust’s condensed consolidated financial statements these development investments are accounted and reflected at cost and considered equity investments. This favourable market value adjustment was a result of the Trust identifying market trend progress and/or the achievement of development milestones in relation to these equity investments. The Trust has included this market value adjustment in its NAV calculation to better demonstrate the value of these assets since acquisition and/or to incorporate the achievement of development or sales milestones. The Trust has made substantial progress towards investing in assets with higher growth potential, including its development investments in downtown Toronto, and expects that these development investments will be a key driver of future growth for the Trust.

"The Trust has made exceptional strides in delivering on its disposition program in 2017 ahead of its initial target which was to be executed over a period of two to three years," said Michael Cooper, Portfolio Manager. "During the second quarter, the Trust closed or entered into contracts to sell 14 income properties which are considered non-core to the long term strategy. The Trust also entered into an agreement to sell its Villarboit investments. The sale of the Villarboit investments represents the last of the Trust's under-performing legacy assets that we intended to recycle. With the completion of these sale transactions the Trust has successfully aligned itself to meet its longer term strategy to reinvest capital to generate higher value and cash flow to unitholders. On this front, the Trust has already executed on development investment opportunities in 2016 and 2017, which contributed to a $25.2 million market value increase within net asset value (or $0.35 per unit) in the second quarter, with further value creation expected to be generated in future quarters from these and other development investments. We intend to continue to grow the Trust's NAV while generating enough AFAD to cover current distributions over the next four years."

For the three months ended June 30, 2017, AFAD of $0.09 per unit was down $0.02 per unit when compared to the same quarter in the prior year, although year over year results are not comparable due to $142.5 million of completed income property dispositions year to date, pursuant to the Trust's previously announced asset repositioning program. The Trust has substantially completed its disposition strategy announced earlier this year and continues to identify and execute on opportunities to redeploy capital into higher growth and yield investments. Over the past year, the Trust has successfully repositioned its portfolio toward development assets with significantly higher growth potential than assets disposed or expected to be disposed of, which includes its non core co-owned office properties and Villarboit investments. As a result of such repositioning activities, AFAD per unit is expected to be lower in 2017 relative to 2016. However, management believes that upon execution of its strategy, the Trust’s portfolio will not only generate enough AFAD per unit cumulatively over the next four years to sustain the current distribution level, but also generate market value gains as development milestones are achieved. As the Trust’s portfolio continues to shift toward owning more development assets, growth in NAV per unit is expected to be a more useful measure of value creation.

The market value adjustment was attributable to the following equity investments: IVY Condominiums, Axis Condominiums and the Lakeshore East Development. In calculating the market value adjustment on the equity accounted development investments, on a going forward basis, the Trust intends to obtain independent third party appraisals annually or as significant development milestones are achieved. For those projects in active development or construction, the Trust intends to use the discounted cash flow methodology in determining the market value adjustment on a quarterly basis. The aggregate market value increase for both IVY and Axis Condominiums amounted to $10.8 million (representing a 172% increase relative to the aggregate equity accounted investment of $6.3 million at June 30, 2017) and was the result of using a discounted cash flow approach with a discount rate of 12%, similar to the methodology utilized to value the Empire high-rise condominium residential developments. Both IVY and Axis Condominium sales programs were launched in late 2016/early 2017 and are 100% sold with expected completion dates in 2020. Key assumptions in valuing both projects include but are not limited to: the risk and timing of expected cash flows; and the successful completion of the projects on time and on budget. The projects are expected to continue to generate market value increases on a quarterly basis, as they continue to advance closer to their completion dates. IVY Condominiums is currently being co-developed by Dream Asset Management Corp., the Trust’s asset manager. Axis Condominiums is currently being developed by Centre Court Developments, a well-established Toronto developer with eight high-rise residential projects in various stages of development, representing over 5,000 homes and $1.5 billion of development value.

The Lakeshore East Development, a 5.3 acre waterfront property in downtown Toronto had a market value increase of $14.4 million (representing a 121% increase relative to the equity accounted investment of $11.9 million at June 30, 2017) based on favourable market trends and comparative market transactions and an independent third party appraisal at quarter end.

There were no market value adjustments recorded on the Trust’s equity investments in Port Credit West Village Partners LP ("Port Credit") or the Trust's equity ownership interest in two properties, 6035 Bathurst Street and 388 - 390 Dupont Street ("Plaza Development") as there have been no significant milestones or market transactions since the acquisition date to indicate a market value adjustment as at June 30, 2017. As development milestones are achieved and/or market trends change, the Trust also intends to fair value these investments. For additional details on the Trust’s equity accounted investments, please refer to page 19 of the MD&A.

The Trust’s development holdings (including equity accounted investments) are expected key drivers of future growth with the Trust targeting attractive returns on equity (measured by pre-tax IRR) of between 15-20% and strong future cash flows upon completion. The targeted returns on the development are within the Trust’s strategy to pursue NAV accretive opportunities over the long term.

The Empire Lakeshore high-rise condominium development project continues to progress on schedule. The Trust has recognized a further fair value increase of $1.9 million on the Empire Lakeshore project during the second quarter of 2017 as the project continues to advance steadily to completion and payout.

Since the Trust’s inception, $32.3 million of cumulative fair value gains have been recognized on the Empire projects. At June 30, 2017, the aforementioned Empire projects had an IFRS fair value of $90.0 million, net of the aforementioned cash distribution that was received during the period as return of capital.

Selected financial and operating metrics for the three months ended June 30, 2017, year ended December 31, 2016 and three months ended June 30, 2016 are summarized below:

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Globe Newswire: 00:22 GMT Saturday 12th August 2017

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