This REIT’s recently completed multi-year restructuring plan has shifted its focus to more promising properties in higher value areas.
At the same time, it has held its distribution steady for investors, which suggests even better long-term prospects lie ahead following short-term COVID-19 turmoil.
DREAM OFFICE REIT (Toronto symbol D.UN; www.dream.ca) cut its monthly distribution by 50.6% with the July 2017 payment, to $0.0833 a unit from $0.125. Even so, the new annual rate of $1.00 yields a high 4.5%.
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In 2016, Dream Office launched a three-year strategic initiative. As part of that plan, the REIT has now sold roughly 138 properties for $3.7 billion. It used $1.8 billion of the proceeds to pay down its high-interest debt. It also repurchased over $1.1 billion of its outstanding units.
That’s because the REIT recently completed a major transformation of its operations. As a result, it focuses on office building in the Greater Toronto Area and other big urban centres with lower vacancies and higher rents. Those key markets now account for 86.5% of its portfolio.
The trust now has 31 office properties, including two under development. The highly profitable downtown Toronto market supplies 76% of its rental revenue. Dream Office’s occupancy rate as of December 31, 2019, was 90.8%.
In February 2020, Vancouver-based activist investor Sandpiper Group announced that it had taken a 10% stake in the REIT. It believes the trust’s office buildings in downtown Toronto are worth considerably more than investors currently value them at.
Further, the activist believes the shares are worth between $42 and $48 a unit. That’s considerably higher than the current price, which in part reflects uncertainty surrounding the COVID-19 pandemic and its short-term impact for landlords. While that forecast may prove overly optimistic, the activist should continue to draw investor attention to Dream Office’s strong prospects.
Don’t you think that Dream Office Reit is an iffy buy as so many offices are not working now and many companies along with stores will go out of business and there will be a lot of office space for rent I don’t think that Dream office is a good buy now.
Thanks for your question. We recommend a number of REITs in our Canadian Wealth Advisor newsletter, including Dream Office REIT – and we plan to update our advice on the trust, and its prospects given an increase in work-from-home and other pandemic effects, in an upcoming issue.
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Don’t you think that Dream Office Reit is an iffy buy as so many offices are not working now and many companies along with stores will go out of business and there will be a lot of office space for rent I don’t think that Dream office is a good buy now.
Thanks for your question. We recommend a number of REITs in our Canadian Wealth Advisor newsletter, including Dream Office REIT – and we plan to update our advice on the trust, and its prospects given an increase in work-from-home and other pandemic effects, in an upcoming issue.