Dream Impact Trust : 2023 Q1 Report

Dream Impact Trust

Q1 Report 2023

Table of Contents

Management's Discussion and Analysis	1
Condensed Consolidated Financial Statements	30
Notes to the Condensed Consolidated Financial Statements	34

MANAGEMENT'S DISCUSSION AND ANALYSIS

(All dollar amounts in our tables are presented in thousands of Canadian dollars, except unit and per unit amounts, unless otherwise stated)

This Management's Discussion and Analysis ("MD&A") is dated as of, and reflects all material events up to, May 1, 2023, the date on which this MD&A was approved by the Board of Trustees.

When we refer to terms such as "we", "us" and "our", we are referring to Dream Impact Trust (the "Trust"), Dream Impact Master LP ("MPCT LP") and its subsidiaries. When we refer to "unitholders" we are referring to holders of the units of the Trust.

Certain comparative results have been reclassified to conform to the presentation adopted in the current period.

1. OVERVIEW AND OVERALL FINANCIAL PERFORMANCE

1.1 OVERVIEW OF THE TRUST

Dream Impact Trust is an open-ended trust dedicated to impact investing. Impact investing is the intention of creating measurable positive, social, or environmental change in our communities and for our stakeholders, while generating attractive financial returns. The Trust's underlying portfolio is comprised of exceptional real estate assets reported under two operating segments: development and investment holdings and recurring income. The units of the Trust are listed on the Toronto Stock Exchange ("TSX") under the symbol "MPCT.UN".

The Trust is managed by Dream Asset Management Corporation ("DAM" or the "Asset Manager"), a subsidiary of Dream Unlimited Corp. ("Dream Unlimited" or "Dream") (TSX: DRM), which is one of Canada's leading real estate companies, with approximately $23 billion of assets under management in North America and Europe. On January 1, 2018, Dream acquired control of the Trust, for accounting purposes, based on Dream's increased exposure to variable returns resulting from increased ownership through units held in the Trust and from new real estate joint venture agreements. The ultimate controlling party of the Trust is Michael Cooper, President and Chief Responsible Officer of DAM and Dream. As of March 31, 2023, Dream has a 32% ownership interest in the Trust.

1.2 OUR STRATEGY AND OPERATING SEGMENTS

Our fundamental objectives are to:

• Create positive and lasting impacts for our stakeholders through our three impact verticals: environmental sustainability and resilience, attainable and affordable housing, and inclusive communities;
• Balance the growth and stability of the portfolio, increasing cash flow, unitholders' equity and net asset value ("NAV") over time;
• Leverage our access to an experienced management team and strong partnerships in order to generate attractive returns for investors;
• Provide investors with a portfolio of high-quality real estate assets, concentrated in core geographic markets.

We work towards these objectives by operating our business under two distinct segments:

• Recurring income - comprised of a portfolio of stabilized office and commercial real estate income properties and multi-family rental assets in the Greater Toronto Area ("GTA") and Ottawa/Gatineau, a utility asset(1), and interest- paying corporate loans; and
• Development and investment holdings - comprised of direct and indirect investments in residential and mixed-use developments, a hospitality asset, and participating mortgage receivables.

1. Relates to Zibi Community Utility. For further details, refer to Section 10.1, "Summary of Impact Investments" of this MD&A.

Recurring income is important to our business as it provides stable returns in order to fund our ongoing fixed operating costs, interest cost and distributions. Over time, we expect this segment to grow and represent approximately 70% of our portfolio, as we build out our extensive development pipeline and further invest in best-in-class income properties.

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We believe the Trust's development segment represents a portfolio of high-quality assets located in core geographic markets that would not otherwise be accessible in a public vehicle. These assets represent a significant source of growth for the Trust, which we expect will generate future income and cash flows over time as the projects are developed. Assets may be built for sale or built to hold for the long term.

Due to the nature of development, the Trust expects fluctuations in earnings from period to period from this segment. Typically, assets may be acquired and held for a number of years before development commences or contribution to net income is realized. However, depending on a variety of factors, including location, market conditions, density, and asset class, the value of these projects may appreciate as we progress through the rezoning and pre-development process. Our development segment is expected to generate attractive returns and continued NAV accretion over time. We also believe our portfolio will be more resilient and valuable because it is comprised of assets that are considered impact investments.

In line with our overarching strategy to be a pure-play impact investment vehicle, we utilize assets in both operating segments to generate positive impact across our verticals. These verticals are aligned with the widely recognized and accepted United Nations Sustainable Development Goals and are:

• Environmental sustainability and resilience - develop sustainable real estate that optimizes energy use, limits greenhouse gas ("GHG") emissions, and reduces water use and waste while also creating resiliency against natural disasters and major climatic events.
• Attainable and affordable housing - invest in mixed-income communities that are transit-oriented, located close to employment opportunities, and support an overall lower relative cost of living with a high quality of life.
• Inclusive communities - intentionally design and program communities that are safe and inclusive for everyone. This includes creating spaces that encourage mental and physical health, and wellness.

As of March 31, 2023, over 95% of NAV(1) qualified under the Trust's definition of an impact investment or was in the impact planning stage. Over the next few years, we intend to deploy capital into new impact investment opportunities, wind down or exit remaining non-impact investments and increase our financial flexibility from our build-to-sell assets.

1. NAV is a non-GAAP financial measure. Please refer to the Specified Financial Measures and Other Disclosures section of this MD&A.

1.3 BUSINESS UPDATE - Q1 2023

After two years of work and a rigorous bidding competition, on March 1, 2023, the Trust, Dream and Great Gulf Group acquired phase one of the highly sought-after Quayside Development site in downtown Toronto, comprising 4.5 acres. Upon full build-out of the 12-acre site, Quayside is expected to provide over 4,000 residential units, including more than 800 affordable housing units with an emphasis on family sized accommodations, 3.5 acres of public green space and Canada's largest residential mass timber structure. The Trust has a 12.5% interest in the project.

The acquisition of Quayside is an excellent example of public and private partnerships working together to address social and environmental needs. We believe the Trust's success in acquiring this site was due to our dedicated impact mandate and development track record, and ability to collaboratively work with multiple government and community stakeholders.

As part of the Trust's broader liquidity strategy, we completed two refinancings in the period relating to 49 Ontario Street ("49 Ontario") and Victory Silos and amended the Trust's corporate credit facility. The refinancings were supported by third- party appraisals and generated net proceeds to the Trust of $59.0 million.

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FINANCIAL HIGHLIGHTS OF THE TRUST

Three months ended March 31,		2023		2022
Consolidated results of operations
Net income (loss)	$	(3,357)	$	349
Net income (loss) per unit(1)		(0.05)		0.01
Distributions declared and paid per unit		0.08		0.10
Units outstanding - end of period		67,785,350		65,337,152
Units outstanding - weighted average		67,577,410		65,285,072
As at		March 31, 2023 December 31, 2022
Consolidated financial position
Total unitholders' equity	$	473,252	$	478,732
Total unitholders' equity per unit⁽¹⁾		6.98		7.14
Total debt payable(2)		269,315		224,315
Total assets		759,560		724,169
Debt-to-asset value(3)		35.5%		31.0%
Cash		25,053		2,244

1. Total unitholders' equity per unit and net income (loss) per unit are supplementary financial measures. Please refer to the Specified Financial Measure and Other Disclosures section of this MD&A.
2. Total debt payable is a non-GAAP financial measure. Please refer to the Specified Financial Measures and Other Disclosures section of this MD&A. Total debt payable is not a standardized financial measure under IFRS and might not be comparable to similar measures disclosed by other issuers.
3. Debt-to-assetvalue is a non-GAAP ratio. Please refer to the Specified Financial Measures and Other Disclosures section of this MD&A. Debt-to-asset value is not a standardized financial measure under IFRS and might not be comparable to similar measures disclosed by other issuers.

During the three months ended March 31, 2023, the Trust reported a net loss of $3.4 million relative to net income of $0.3 million in the comparative period. The change in earnings was primarily driven by fair value gains of $4.0 million on the Trust's multi-family assets in the prior year, combined with a $2.2 million increase in interest expense due to financing activity and higher variable rates in the current period. Partially offsetting this was G&A expense savings due to fluctuations in the Trust's unit price, foreign exchange losses incurred in the prior year, and an increase in the Trust's income tax recovery related to the composition of earnings. Fair value adjustments may differ period to period as certain project or asset-level milestones are achieved such as construction completion or zoning achievement.

At March 31, 2023, the Trust had total liquidity of $43.1 million, comprised of cash-on-hand and funds available under the Trust's credit facility, up significantly from December 31, 2022. As of period end, the Trust's debt-to-asset value(1) based on IFRS values, was 35.5%, an increase compared to 31.0% as of December 31, 2022, and the Trust's debt-to-total asset value, inclusive of project-level debt and market value adjustments(1) and assets within our development segment, including equity accounted investments, was 61.8%, up from 57.8% as at December 31, 2022, as a result of the aforementioned 49 Ontario and Victory Silos refinancings. With our financings completed in the period, we have ample liquidity to fund our committed development spend, inclusive of equity requirements for Quayside.

In light of the current interest rate environment, the Trust continues to actively pursue opportunities to reduce interest rate uncertainty. Inclusive of activity in and subsequent to the first quarter, the Trust has fixed over $138 million of variable debt (at share), resulting in approximately 65% of the Trust's debt being subject to a fixed interest rate. As at March 31, 2023, inclusive of swap activity subsequent to quarter end, the Trust's weighted average interest rate was 5.5%.

1. Debt-to-assetvalue is a non-GAAP ratio. Debt-to-total asset value, inclusive of project-level debt and market value adjustments, is a supplementary financial measure. Please refer to the Specified Financial Measures and Other Disclosures section of this MD&A.

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