Invest With a Margin of Safety: 1 Cheap Asset Manager

Dream Unlimited Corp. (TSX:DRM) has an excellent track record in sourcing unique investment opportunities and generating high risk-adjusted returns through active asset management.

| More on:
Index funds

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Dream Unlimited (TSX:DRM) is a leading developer of high-quality office and residential assets in Toronto. The company owns stabilized income-generating assets in both Canada and the United States and has an established and successful asset management business, inclusive of $10 billion of assets under management.

The company develops land and residential assets in Western Canada. Dream expects to generate more recurring income in the future, as the company’s development properties are completed and held for the long term. Dream has a proven track record for being innovative and is known for its ability to source, structure, and execute compelling investment opportunities.

Diverse product portfolio

As the manager of three publicly listed funds and numerous development partnerships, Dream is well positioned to observe, in real time, the impact of economic trends on the drivers of demand for real property, such as demand for space, urbanization trends and employment levels in each of the markets in which it operates. This access to real-time economic data provides it with a competitive advantage.

The company’s asset management and management services team consists of real estate and infrastructure professionals with backgrounds in architecture, urban planning, engineering, development and redevelopment, construction, finance, accounting, and law. The team brings experience from a range of major organizations in Canada and is actively involved with internal training opportunities. Further, management has expertise in capital markets, structured finance, real estate investments, and management across a broad spectrum of property types in diverse geographic markets.

Powerful asset management arm

Research and analysis, financial modelling, due diligence, and financial planning is done in-house, and Dream has completed approximately $35 billion of commercial real estate transactions. A majority of the company’s asset management fees in 2020 were derived from Dream’s asset management contracts with the Dream publicly listed funds. Dream provides asset management services to various institutional partners, development projects, and partnerships. Dream has assets under management of approximately $10 billion, including fee-earning assets under management of approximately $5 billion.

The company receives revenues in respect of these services including base annual management fees, acquisition fees, financing fees, capital expenditure fees, and incentive fees, which are determined in accordance with a formula as outlined in the respective agreements.

Attractive valuation

As of December 31, 2020, Dream owns approximately $450 million of equity at fair value across the Dream publicly listed funds. Dream anticipates, over time, that he company’s ownership will continue to increase on an opportunistic basis. Dream’s asset management and investments in the publicly listed funds is a significant component of the company’s recurring income sources. Recurring income is an important measure used by management to manage the ongoing cash needs of Dream’s operating platform, including interest expense on debt facilities.

Dream has been very proactive in seeking out opportunities to independently manage assets of third parties and create new, unique investment vehicles or partnerships that can provide value to investors. The company has an excellent track record in sourcing unique investment opportunities and generating high risk-adjusted returns through active asset management. At current prices, the stock appears to be a bargain.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nikhil Kumar owns shares of DREAM Unlimited. The Motley Fool recommends DREAM Unlimited.

More on Investing

Cogs turning against each other
Investing

Top 2 Stocks That Could Beat the Recession

Recession-resistant stocks like Dollarama (TSX:DOL) should be on your radar in 2022.

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

The 3 Best Dividend Stocks for Monthly Passive Income

These three dividend stocks are the best options for those seeking high passive income in the next few years in…

Read more »

clock time
Dividend Stocks

Got $10,000 to Invest? 1 Cheap TSX Stock to Buy Right Now

This top TSX dividend stock is finally on sale and has made some savvy buy-and-hold investors quite rich.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Want Monthly Passive Income? These TSX Dividend Stocks Are for You

If you want monthly passive income from TSX stocks, you have to do a little digging. I've given you a…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Bank Stocks

The Most Valuable TSX Stock Out There Is up 10% This Month!

This TSX stock is the best value stock out there, expanding even during a downturn and setting itself up from…

Read more »

ETF chart stocks
Dividend Stocks

3 International ETFs to Buy for a Diversified Portfolio

Some international markets may prove more resilient against economic downturns, and exposure to them may strengthen your portfolio during crashes…

Read more »

Payday ringed on a calendar
Dividend Stocks

TFSA Pension: 3 Canadian Dividend Stocks to Buy for Monthly Passive Income

These high-yield Canadian stocks look good to buy right now for a TFSA focused on monthly passive income.

Read more »

A worker uses a laptop inside a restaurant.
Tech Stocks

2 U.S. Stocks Canadian Investors Can Buy and Hold Forever

Blue-chip companies such as Microsoft and Coca-Cola are forever stocks that have the potential to beat the market in 2022…

Read more »