Thread by @TaylorSugar

I can show you how to buy high quality commercial real estate located in Downtown Toronto for 50% below value and receive a passive 4.4% yield.

Dream Office is a real estate investment trust with a 1.1B Market Cap and a 1.5B Net Asset Value.

Let me break it down for you...🧵

@DreamOfficeREIT (D.un) can be broken down into three distinct portfolios of properties.

Toronto Core - 19 Buildings - $926M Equity (62%)

Non-Core Portfolio - 9 Buildings - $132M Equity (9%)

Dream Industrial Investment - 26.6M Shares - $441M Equity (29%)

Strategic Transformation

D.un has been selling off the non-core portfolio and using the proceeds to buyback shares increasing the concentration into the Toronto office buildings.

This declining share count is a rare and desirable investment trait in an inflationary world!

The downtown Toronto office building portfolio is the crown jewel of Dream Office and the primary driver behind my investment in the business.

The real estate in the downtown Toronto core is Boardwalk on the Monopoly Board of Canada. Easily available to purchase at a discount.

The portfolio contains 3,436,000 sqft of prime downtown real estate at a $611/SQFT valuation. This is well below comparable private sales ($900-$1000/SQFT), Downtown Condos ($1500/SQFT) and replacement costs.

It has a 90.9% Occupancy and a 4.5 Year Average Lease Term.

Rents in the Downtown Office real estate market steadily increased from 2010 to 2019.

Dream Office's Toronto portfolio is currently rented at $26 a square foot and will benefit from a 20% increase to rents as it catches up to the market rent over the next four years.

The Non-Core Portfolio consists of nine buildings with 1,792,000 square feet of office space located in Saskatoon, Calgary, Mississauga, Scarborough and Kansas.

Management plans to sell these buildings but is not pressured to do so.

The non-core portfolio has a low 75.3% occupancy level and market rents are 17% below current rents.

The portfolio is conservatively valued at $167/SQFT and generates a 7%+ yield. It no longer represents a significant part of Dream Office's long term future and will be recycled

Dream Office purchased and holds 26.6M shares of Dream Industrial Reit. This is worth $8.72 for each dream office share

$22.50 D.UN Share Price - $8.72 Industrial Investment =

$13.78 = Price of Office Buildings (a 51% Discount)

vs.

$20.89 = Office Building Equity

The DIR.UN investment has out-performed the TSX Capped Reit Index significantly and created this deep value that the market does not recognize in D.UN. Perhaps Michael Cooper should consider adding Industrial to the Dream Office name to capitalize on sector momentum.

2021 Share Buybacks 🚀

The Normal Course Issuer Bid targeting 10% of the public float began on August 19th and you can already see a positive divergence between Dream Office and XRE (reit index). Buybacks are likely to put positive pressure on the price over the next few months

The value of D.UN has been steadily increasing (green).

Prior to covid, Mr. Market was pricing Dream office at a premium (blue).

Today Mr. Market has the wrong price and dream office offers an excellent contrarian opportunity to buy $1 of prime real estate for 50 cents.

For transparency here is my asset allocation.

40% Dream Office Reit (D.UN)
50% Riocan Reit (REI.UN)
10% Bitcoin

Buy Hard Assets!

Thanks for reading, do your own due diligence, this is not professional investment advice.

More on Dream Office: wealthplaybook.ca/post/dream-off…

To learn more about Real Estate Investment Trusts and Real Estate as an asset class try following these great accounts that help me:

@HedgeyeREITs @realEstateTrent @Mr_Neutral_Man @Wealth_Theory @HoyaCapital @PrivateEyeCap @JussiAskola @thepupil11 @moseskagan @bobbyfijan

I realize now that I didn’t number the tweets in the thread so this is the link to the original thread.

https://twitter.com/taylorsugar/status/1430578537321275395?s=21

@ArtisREIT just in case you are looking for investment ideas. ; )