Dream Office Real Estate Investment Trust (TSX: D.UN) is a real estate investment trust that acquires, manages, and leases primarily central business district and suburban office properties in urban areas throughout Canada. The majority of the company's real estate portfolio, in terms of revenue generation, is located in the Canadian province of Ontario. The province of Alberta also brings in a sizable percentage of revenue. The company generates nearly all of its revenue in the form of rental income from mid- to long-term lease agreements with tenants.
Key Highlights
Financial overview of Q1 2022 (in thousands of Canadian dollars)
Source: Company Filing
Top-5 Shareholders
The company’s top 5 shareholders hold around 48.87% of the total shareholding, where Cooper (Michael J) is the biggest shareholder, who owns 29.38% of total outstanding shares. Additionally, the company's institutional ownership stood at 31.22%, while the strategic entities ownership stood at 43.26%. Higher institutional and strategic entities holding boosts the confidence in the mind of retail investors.
Valuation Methodology (Illustrative): EV to Sales based Valuation Metrics
Risks associated with investment
The Trust's revenue and operating results depend significantly on the occupancy levels and rent collection; hence, the group is subject to general business risks. These risks include government regulation, fluctuations in occupancy levels and business volumes, competition from other players, and general economic conditions.
Stock Recommendation
Despite the challenges brought by the pandemic on the real estate industry, the company's operating and financial results demonstrated the resilience of its portfolio, driven by the strong performance and robust rent cash collection. The strong forecasted employment and population growth are expected to continue to contribute to healthy office demand. Furthermore, the trust continues to anticipate that many companies will return their employees to the office during 2022 and, with that, leasing activity and traffic flow to its properties will improve and the comparative properties NOI and parking revenues will begin to normalize, which is a significant plus.
Moreover, the stock offers a dividend yield of 4.30%, which is decent considering the current interest rate dynamics. Therefore, based on the above rationale and valuation, we recommend a "Buy" rating at the last closing price of CAD 23.43 as on May 16, 2022. Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
One-Year Technical Price Chart (as on May 16, 2022). Source: REFINITIV, Analysis by Kalkine Group
*Recommendation is valid on May 17, 2022, price as well.
Technical Analysis Summary
Disclaimer
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