DREAM RESIDENTIAL REAL ESTATE INVESTMENT TRUST (TSX: DRR.U, TSX: DRR.UN) (“Dream Residential REIT” or the “REIT” or “we” or “us”) today announced its financial results for the three and nine months ended September 30, 2024 (“Q3 2024”). Management will host a conference call to discuss the financial results on November 7, 2024 at 10:00 a.m. (ET).

HIGHLIGHTS

• Comparative properties net operating income (“comparative properties NOI”)¹ was $6.1 million in Q3 2024, a 2.5% increase when compared to $6.0 million in Q3 2023, primarily due to a $0.4 million increase in comparative investment properties revenue. Net rental income was $7.8 million in Q3 2024 or $0.4 million higher than the prior year comparative quarter, mainly due to a decrease in investment properties operating expenses.

• Diluted funds from operations (“FFO”) per Unit² was $0.18 for Q3 2024, consistent with Q3 2023.

• Portfolio occupancy was 93.3% as at September 30, 2024 compared to 94.0% at the end of Q2 2024, with Greater Oklahoma City region at 95.6%, Greater Dallas-Fort Worth region at 90.4% and Greater Cincinnati region at 93.3%. Occupancy was consistent with market conditions as management advanced rents late in the summer before shifting towards seasonal stability beginning in the fourth quarter.

• Average monthly rent at September 30, 2024 was $1,175 per unit, increasing 0.7% quarter-over-quarter, compared to $1,167 per unit at June 30, 2024.

• Maintaining conservative balance sheet and financial flexibility. Net total debt-to-net total assets³ was 32.7% as at September 30, 2024 compared to 31.6% as at December 31, 2023. Total mortgages payable were $138.5 million, consisting of 11 fixed rate mortgages with a weighted average contractual interest rate of 4.0%. Total assets (per condensed consolidated financial statements) were $407.8 million as at September 30, 2024. Total assets comprised primarily $396.4 million of investment properties and $7.7 million of cash and cash equivalents.

“In Q3 2024, the REIT delivered stable financial operational performance with a continued focus on the middle market,” said Brian Pauls, Chief Executive Officer of Dream Residential REIT. “Year-to-date comparative NOI growth was approximately 4.2% and in our targeted range for the year.”

• Q3 2024 net income (loss) was $(2.0) million, which comprises net rental income of $7.8 million, fair value adjustments to investment properties of $(3.0) million and fair value adjustments to financial instruments of $(3.8) million, primarily from the revaluation of Class B units of DRR Holdings LLC, a subsidiary of the REIT (“Class B Units” – together with the Trust Units, “Units”). Other income and expenses totalled $(3.0) million.
• Total equity (per condensed consolidated financial statements) was $237.9 million as at September 30, 2024, compared to $218.0 million as at December 31, 2023, primarily due to 3.3 million Class B Units exchanged for REIT Units for a total market value of $22.5 million for the nine months ended September 30, 2024.
• Net asset value (“NAV”)⁴ per Unit was $13.47 as at September 30, 2024, compared to $13.50 as at December 31, 2023.
• The REIT declared distributions totalling $0.105 per Unit during Q3 2024.
• During Q3 2024, 40,991 Class B Units were redeemed and exchanged for Trust Units for $0.3 million.

FINANCIAL HIGHLIGHTS

Net income (loss) for Q3 2024 was $(2.0) million compared to $(2.1) million in Q3 2023, primarily due to a change in fair value adjustments to investment properties of $(11.2) million and a change in fair value adjustments to financial instruments of $10.5 million from the comparative quarter. FFO for Q3 2024 and the prior year comparative quarter was $3.5 million, with an increase in comparative properties NOI partially offset by lower interest and other income. Q3 2024 diluted FFO per Unit was $0.18, consistent with the prior year comparative quarter.

Net rental income for Q3 2024 was $7.8 million compared to $7.4 million for the prior year quarter. Comparative properties NOI for Q3 2024 increased to $6.1 million compared to $6.0 million in the prior year quarter. Comparative properties NOI margin for Q3 2024 was 51.1% compared to 51.4% in the prior year quarter. Q3 2024 comparative properties NOI includes comparative investment properties revenue of $12.0 million, which increased $0.4 million from the prior year quarter as a result of rental rate growth combined with rental premiums from our value-add program. Investment properties operating expenses increased by $0.2 million from the prior year quarter (excluding the impact of IFRIC 21 and one sold property in Q4 2023). This was largely a result of increased property insurance and property taxes, partially offset by reduced maintenance expenses.

ORGANIC GROWTH

Weighted average monthly rent as at September 30, 2024 was $1,175 per unit compared to $1,167 at June 30, 2024. Rental rates increased 1.3% in the Greater Cincinnati region, 1.3% in the Greater Oklahoma City region and 0.3% in the Greater Dallas-Fort Worth region since June 30, 2024.

During Q3 2024, blended lease trade-outs averaged 2.5% compared to 2.2% in Q2 2024. This comprises an average increase on renewals of approximately 4.5% (June 30, 2024 – 3.7%) and an average increase on new leases of approximately 0.3% (June 30, 2024 – 0.1%). As at September 30, 2024, estimated market rents were $1,266 per unit, or an average gain-to-lease for the portfolio of 7.7%. The retention rate for the quarter ended September 30, 2024 was 53.8% compared to 59.2% for the three months ended June 30, 2024.

Value-add initiatives

During Q3 2024, renovations were completed on 42 suites across the portfolio, with 31 suites under renovation as at September 30, 2024. For the three months ended September 30, 2024, the average new lease trade-out on renovated suites was $82 per unit higher than expiring leases, or a lease trade-out of 6.9%.

“We were pleased with the increase in blended trade-outs in Q3 2024,” said Scott Schoeman, Chief Operating Officer of Dream Residential REIT. “Our focus heading into the winter leasing season will be on driving occupancy and continuing to manage controllable operating expenses.”

FINANCING AND CAPITAL INFORMATION

As at September 30, 2024, net total debt-to-net total assets was 32.7%, total mortgages payable were $138.5 million and total assets were $407.8 million. The REIT ended Q3 2024 with total available liquidity of approximately $77.7 million,⁽⁶⁾ comprising $7.7 million of cash and cash equivalents and $70.0 million available on its undrawn revolving credit facility.

Total equity of $237.9 million increased from December 31, 2023 by $19.9 million, primarily due to 3.3 million Class B Units exchanged for REIT Units in Q1 2024 for a total market value of $22.3 million. As at September 30, 2024, there were approximately 16.0 million Trust Units and 3.7 million Class B Units.

NAV per Unit as at September 30, 2024 was $13.47 compared to $13.50 as at December 31, 2023.

CONFERENCE CALL

Senior management will host a conference call to discuss the financial results on Thursday, November 7, 2024 at 10:00 a.m. (ET). To access the conference call, please dial 1-800-806-5484 (toll free) or 416-340-2217 (toll) and enter passcode 1741135#. To access the conference call via webcast, please go to Dream Residential REIT’s website at www.dreamresidentialreit.ca and click the link for the webcast. A taped replay of the conference call and the webcast will be available for ninety (90) days following the call.

OTHER INFORMATION

Information appearing in this press release is a select summary of financial results. The condensed consolidated financial statements and management’s discussion and analysis for the REIT will be available at www.dreamresidentialreit.ca and under the REIT’s profile on www.sedarplus.com.

Dream Residential REIT is an unincorporated, open-ended real estate investment trust established and governed by the laws of the Province of Ontario. The REIT owns a portfolio of garden-style multi-residential properties, primarily located in three markets across the Sunbelt and Midwest regions of the United States. For more information, please visit www.dreamresidentialreit.ca.

Non-GAAP financial measures, ratios and supplementary financial measures

The REIT’s condensed consolidated financial statements are prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”). In this press release, as a complement to results provided in accordance with IFRS, the REIT discloses and discusses certain non-GAAP financial measures and ratios, including FFO, diluted FFO per Unit, comparative properties NOI, comparative investment properties revenue, NOI, comparative properties NOI margin, net total debt-to-net total assets ratio, net total debt, net total assets, adjusted EBITDAFV, trailing 12-month adjusted EBITDAFV, trailing 12-month interest expense on debt, interest coverage ratio (times), available liquidity, total equity (including Class B Units) and NAV per Unit as well as other measures discussed elsewhere in this press release. These non-GAAP financial measures and ratios are not defined by or recognized under IFRS Accounting Standards and do not have a standardized meaning under IFRS Accounting Standards. The REIT’s method of calculating these non-GAAP financial measures and ratios may differ from other issuers and may not be comparable with similar measures presented by other issuers. The REIT has presented such non-GAAP financial measures and ratios as management believes they are relevant measures of the REIT’s underlying operating and financial performance. Certain additional disclosures such as the composition, usefulness and changes, as applicable, of the non-GAAP financial measures and ratios included in this press release are expressly incorporated by reference from Management’s Discussion and Analysis of the financial condition and results of operations of the REIT as at and for the three and nine months ended September 30, 2024, dated November 6, 2024 (the “Q3 2024 MD&A”) and can be found under the section “Non-GAAP Financial Measures and Ratios” and respective sub-headings labelled “FFO and diluted FFO per Unit”, “NAV per Unit”, “Comparative properties NOI and comparative properties NOI margin”, “Adjusted earnings before interest, taxes, depreciation, amortization and fair value adjustments (Adjusted EBITDAFV)”, “Trailing 12-month adjusted EBITDAFV”, “Trailing 12-month interest expense on debt”, “Available liquidity”, “Total equity (including Class B Units)”, “Interest coverage ratio (times)” and “Net total debt-to-net total assets”. In this press release, the REIT also discloses and discusses certain supplementary financial measures, including tenant retention ratio and weighted average number of units. The composition of supplementary financial measures included in this press release is expressly incorporated by reference from the Q3 2024 MD&A and can be found in the section “Supplementary Financial Measures and Other Disclosures”. The Q3 2024 MD&A is available on SEDAR+ at www.sedarplus.com under the REIT’s profile and on the REIT’s website at www.dreamresidentialreit.ca under the Investors section. Non-GAAP financial measures and ratios should not be considered as alternatives to net income (loss), net rental income, investment properties revenue, cash flows generated from (utilized in) operating activities, cash and cash equivalents, total assets, non-current debt, total equity, or comparable metrics determined in accordance with IFRS Accounting Standards as indicators of the REIT’s performance, liquidity, cash flow and profitability.

Forward-looking information

This press release may contain forward-looking information within the meaning of applicable securities legislation. Such information includes statements regarding our ability to drive rental rate growth; future market conditions; our ability to maintain a safe and flexible balance sheet which will drive operations; our anticipated investments in our properties and their effect on portfolio quality and rent growth; our intention to implement our value enhancing renovation initiatives across our portfolio; the resiliency of our portfolio; and the ability of our value-add program and regional diversification to enhance the safety of our business. Forward-looking information generally can be identified by the use of forward-looking terminology such as “will”, “expect”, “believe”, “plan” or “continue”, or similar expressions suggesting future outcomes or events. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dream Residential REIT’s control and could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, risks inherent in the real estate industry; financing risks; inflation, interest and currency rate fluctuations; global and local economic and business conditions; risks associated with unexpected or ongoing geopolitical events; changes in law; tax risks; competition; environmental and climate change risks; insurance risks; cybersecurity; and uncertainties surrounding public health crises and epidemics. Our objectives and forward-looking statements are based on certain assumptions, including that the general economy remains stable; that there are no unforeseen changes in the legislative and operating framework for our business; that we will have access to adequate capital to fund our future projects and plans and that we will receive financing on acceptable terms; that inflation and interest rates will not materially increase beyond current market expectations; and that geopolitical events will not disrupt global economies. All forward-looking information in this press release speaks as of the date of this press release. Dream Residential REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by law. Additional information about these assumptions, risks and uncertainties is contained in Dream Residential REIT’s filings with securities regulators, including its latest Annual Information Form and Management’s Discussion and Analysis. These filings are also available on the REIT’s website at www.dreamresidentialreit.ca.

Appendices

Reconciliation of FFO to net income (loss)

The table below reconciles FFO to net income (loss) for the three and nine months ended September 30, 2024 and September 30, 2023:

Reconciliation of NOI and Comparative properties NOI to net rental income

The table below reconciles NOI and Comparative properties NOI to net rental income for the three and nine months ended September 30, 2024 and September 30, 2023:

Reconciliation of adjusted EBITDAFV to net income (loss)

The table below reconciles adjusted earnings before interest, taxes, depreciation, amortization and fair value adjustments to net income (loss) for the three and nine months ended September 30, 2024 and September 30, 2023:

Reconciliation of available liquidity to undrawn credit facility

The table below reconciles available liquidity to undrawn credit facility as at September 30, 2024 and December 31, 2023:

Trailing 12-month adjusted EBITDAFV and trailing 12-month interest expense on debt

Interest coverage ratio (times)

Reconciliation of total equity (including Class B Units) and NAV per Unit to total equity

The table below reconciles total equity (including Class B Units) and NAV per Unit to total equity as at September 30, 2024 and December 31, 2023:

Reconciliation of net total debt to mortgages payable and net total assets to total assets, and calculation of net total debt-to-net total assets

The following table reconciles net total debt to mortgages payable and net total assets to total assets, and calculates net total debt-to-net total assets as at September 30, 2024 and December 31, 2023:

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