Opinions
Steve DiGregorio
Dream Impact Trust
MPCT.UN-T
TOP PICK
Oct 30, 2015
Stock price when the opinion was issued
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It's managed by Dream Unlimited. They own a lot of condos and mixed-use properties in Toronto. It trades far below NAV and pays nearly an 8% dividend which is safe. It's incredibly cheap now compared to the quality of the assets. Management keeps buying back a lot of shares in the open market. If things don't work out, they could privatize this REIT. But she's confident about it.
We would consider it a decent update; the Trust is indeed making progress and the asset sales and liquidity have improved things. That being said, the equity value is likely quite overstated. The Toronto assets will likely see a writedown. Investors remain cautious, and the stock is down 42% YTD. Its small size adds risk, and a Bloomberg all-in default ratio is nearly 7%, which is very high. Principal repayments for 2024 are 'probably' OK, but there remains significant maturities over the next three years. Essentially, we would consider units a high-risk bet on the real estate markets in Ottawa and Toronto. While there is recovery potential under the right conditions, its small size, risk and lack of distribution may continue to keep investors away, so units might still lag. It is hard for us to endorse it still.
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He likes this because it has a big discount to NAV. The NAV on this is a little above $9.50 and it is trading at $5.80, that is about a 50% return to NAV. He doesn’t think it will get to 50%, but he could see a 15%-20% discount to NAV. That is a healthy return. Dividend yield of 6.92%.