Despite COVID-19’s impact on the economy, this REIT’s Toronto properties should continue to attract tenants without the need for deep rent discounts.
The REIT’s recently completed restructuring plan has shifted its focus to more-promising properties in higher value areas. That will also help it maintain its current distributions for investors.
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DREAM OFFICE REIT (Toronto symbol D.UN; www.dream.ca/office) has 31 office properties, including two under development. These properties have a total of 5.5 million square feet of gross leasable area. Also, the highly profitable downtown Toronto market supplies 84% of the REIT’s rental revenue.
The company launched a three-year strategic initiative in 2016. As part of that plan, it 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. As a result, it focuses on office building in the Greater Toronto Area and other big urban centres with lower vacancies and higher rents.
As a result of non-core asset sales, the trust’s overall revenue in the three months ended June 30, 2020, decreased 2.6%, to $50.7 million from $52.7 million a year earlier. Cash flow per unit fell 9.3%, to $0.38 a unit (or a total of $23.1 million) from $0.39 (or $24.1 million). Its occupancy rate as of June 30, 2020, was 88.3%.
Dividend Stocks: Activist investor could help boost the share price
Back 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.
Due to COVID-19, Dream let several of its smaller tenants defer some of their rent payments in the second quarter. Even so, from March through July, it rented over 250,000 square feet of office space at rates 40% higher than expiring leases. Currently, the REIT is working on new leases for an additional 400,000 square feet.
In July 2017, as part of a strategic plan, Dream cut its monthly distribution by 50.6%, to $0.0833 a unit from $0.125. It has also held that new rate—yielding a high 4.9%— steady since then.
The company’s Dividend Sustainability Rating is Average.
We do let investors know that REITs or other trusts like Dream Office REIT pay distributions rather than dividends.
In this recent analysis, for example, we say “In July 2017, as part of a strategic plan, Dream cut its monthly distribution by 50.6%, to $0.0833 a unit from $0.125. It has also held that new rate—yielding a high 4.9%— steady since then.”
We make sure to refer to “distribution” in the analysis of REITs and other distribution payers. We also do outline the difference between distributions and dividends in Special Reports that we send to new subscribers as well as periodically to all subscribers.
Our proprietary Dividend Sustainability Rating system is applied to both dividend and distribution payers as a way to help explain our recommendations and better inform readers. Changing its name, or the name of our TSI Dividend Advisor newsletter, is not something we are currently considering.
Thanks again for your feedback and we look forward to continuing to serve you.
We do let investors know that REITs or other trusts like Dream Office REIT pay distributions rather than dividends.
In this recent analysis, for example, we say “In July 2017, as part of a strategic plan, Dream cut its monthly distribution by 50.6%, to $0.0833 a unit from $0.125. It has also held that new rate—yielding a high 4.9%— steady since then.”
We make sure to refer to “distribution” in the analysis of REITs and other distribution payers. We also do outline the difference between distributions and dividends in Special Reports that we send to new subscribers as well as periodically to all subscribers.
Our proprietary Dividend Sustainability Rating system is applied to both dividend and distribution payers as a way to help explain our recommendations and better inform readers. Changing its name, or the name of our TSI Dividend Advisor newsletter, is not something we are currently considering.
Thanks again for your feedback and we look forward to continuing to serve you.
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You say
The company’s Dividend Sustainability Rating is Average.
It does not pay a dividend
Thanks for your comment.
We do let investors know that REITs or other trusts like Dream Office REIT pay distributions rather than dividends.
In this recent analysis, for example, we say “In July 2017, as part of a strategic plan, Dream cut its monthly distribution by 50.6%, to $0.0833 a unit from $0.125. It has also held that new rate—yielding a high 4.9%— steady since then.”
We make sure to refer to “distribution” in the analysis of REITs and other distribution payers. We also do outline the difference between distributions and dividends in Special Reports that we send to new subscribers as well as periodically to all subscribers.
Our proprietary Dividend Sustainability Rating system is applied to both dividend and distribution payers as a way to help explain our recommendations and better inform readers. Changing its name, or the name of our TSI Dividend Advisor newsletter, is not something we are currently considering.
Thanks again for your feedback and we look forward to continuing to serve you.
We do let investors know that REITs or other trusts like Dream Office REIT pay distributions rather than dividends.
In this recent analysis, for example, we say “In July 2017, as part of a strategic plan, Dream cut its monthly distribution by 50.6%, to $0.0833 a unit from $0.125. It has also held that new rate—yielding a high 4.9%— steady since then.”
We make sure to refer to “distribution” in the analysis of REITs and other distribution payers. We also do outline the difference between distributions and dividends in Special Reports that we send to new subscribers as well as periodically to all subscribers.
Our proprietary Dividend Sustainability Rating system is applied to both dividend and distribution payers as a way to help explain our recommendations and better inform readers. Changing its name, or the name of our TSI Dividend Advisor newsletter, is not something we are currently considering.
Thanks again for your feedback and we look forward to continuing to serve you.
Dividend/Distribution Sustainability Rating?
Thanks for your comment.