Dream Office REIT offers an attractive risk-reward profile at a critical market inflection point, trading at just 7.8 times forward cash flow per share, with a 5.7% yield backed by a conservative payout ratio. The downtown Toronto office recovery is accelerating, driven by institutional return-to-office mandate.
The trust owns premium, irreplaceable assets in supply-constrained locations. With new office construction in downtown Toronto at a 20-year low (just 1.9 million sq ft under construction) and sublease space declining to 16.8% of vacancy (from pandemic peaks over 40%), the supply-demand dynamics strongly favor quality landlords. This REIT has invested heavily over seven years to renovate its best buildings and create what management describes as a “uniquely competitive portfolio” positioned for long-term outperformance.
DREAM OFFICE REAL ESTATE INVESTMENT TRUST (Toronto symbol D.UN; www.dream.ca) owns 26 office properties, including two under development. The downtown Toronto market supplies 76% of rental revenue and accounts for 83% of the portfolio’s value.
The REIT is embarking on an office conversion project in Calgary, after securing both a grant from the City and financing for the project.
The property is the 16-storey office tower known as 606-Fourth, located at 606 4th Street SW in the downtown core. Dream Office owns a 100% interest in the property, which also includes the adjacent three-level Barclay Parkade and is one of three properties the REIT owns in Calgary.
Dream Office intends to convert the building into a 166-unit rental building—and it will relocate the current tenants to 444 7th Avenue SW, the office building directly to the south, also owned by the REIT. This will let the REIT improve the occupancy of 444-7th while creating a new residential rental building in downtown Calgary, thereby reducing the operational and financial risk of both buildings.
Notably, for the conversion, Dream Office obtained a grant of up to $11 million from the City of Calgary via its Downtown Development Strategy Incentive Program; that’s a multi-pronged program, which includes its office conversion program. Additionally, Dream secured government financing for a 10-year loan at an interest rate lower than that of conventional development and mortgage loans.
Meanwhile, the REIT also has an agreement to sell its 438 University Ave. office tower in the heart of downtown Toronto for $105.6 million.
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The 20-storey class-A 438 University tower is directly connected to the St. Patrick station on the Toronto subway system. It contains 322,835 square feet of space and was 93% occupied when the building was listed for sale early in 2024.
To facilitate the transaction, Dream said in its announcement that it had secured agreements to relocate approximately 17,000 square feet of tenants from the building to vacant space in Dream’s other downtown Toronto properties.
Dream did not identify the buyer, but a published report points to a government agency. The largest tenant at 438 University Ave. is currently Infrastructure Ontario, which is leasing 59% of the space.
Dream will continue to manage the property, having secured an agreement to continue with these services for the next three years.
Meanwhile, moving several existing tenants to other Dream properties is expected to increase operating income in those buildings by over $1 million annually. It will also decrease vacant space in the buildings.
Dream Office REIT’s premier downtown Toronto portfolio trades at compelling valuation
In the three months ended September 30, 2025, the REIT’s overall revenue decreased 5.7%, to $24.6 million from $26.1 million a year earlier. That’s due to the sale of a Toronto property in February. Its occupancy rate at the end of the quarter was 81.7%, down from 84.5% a year earlier.
Cash flow fell 21.6%, to $11.7 million, or $0.60 a share, from $15.0 million, or $0.77.
The REIT consolidated its units on a 1-for-2 basis in February 2024. However, to conserve cash for debt repayments, Dream did not adjust the monthly distribution of $0.08333 a unit; that effectively cut the payment by 50%. Nonetheless, the current $1.00 annual rate yields 5.7%.
The units now trade at a reasonable 7.8 times Dream Office’s likely 2026 cash flow of $2.20 a unit.
Recommendation in The Successful Investor: Dream Office REIT is a buy.
