Recent Sale

         I have owned Dream Office REIT since 2013 inside my margin account. Dream Office REIT was formerly Dundee REIT. The REIT recently reported earnings during the last week.

• Net income  for Q2 2018 was $25.386 million compared to $32.521 million for Q1 2018, which represents a decrease of 21.9%.
• Net income of Q2 2017 was $34.556 million. The 2018 Q2 net income represents a decrease of 26.5% from same 3 month period of 2017.
• The diluted funds from operaton (FFO) was 0.40 for Q2 2018 compared to 0.46 for Q1 2018, which represents a decrease of 13.0%. 
• Diluted FFO of Q2 2017 was 0.53.  Therefore Q2 2018 FFO of 0.40 represents a decrease of 24.5% for the same 3 month period. 

      The distribution has been decreased a few times over the past couple of years. The distribution on Feb 2016 was $2.23992 per unit annually and then was  decreased 33% to $1.50 per unit annually starting March 2016.  The distribution was again decreased to $1.00 per unit annually on Aug 15 2017 payment date.  The second distribution represents another decrease of 33.3%.  Overall, the distribution was decreased by 55.4%.

        As shown above, the REIT has a couple of tough years.  With interest rates rising over the last year and the recession in Alberta started in late 2014 effected their bottom line. In fact, during the recession the office vacancy rate in Calgary, Alberta was around 33%.  That was like entire floors of office buildings were vacant.  Although Dream Office REIT did not have a large portfolio of Alberta properties, it did affect them. The REIT did sell some Alberta properties over the last couple of years. 

    On Aug 9, I sold all 631 units of Dream Office REIT inside my margin account. When you own units of a REIT, some of the distribution payments are in the form of Return of Capital. The return of capital is substracted from adjusted cost base and therefore gives you a bigger capital gain or smaller capital loss when you sell.  My capital gain is $2113.76 which included the ROC up to end 2017.  So the ROC on distributions received in 2018 will not be known until a tax slip is generated the end of March 2019.  So the capital gain will be even higher that the current $2113.76.

   This sale also pays off my margin loan of approximately $9600 at 7.2% interest rate.  That interest rate is not a typo.

    This sale decreased my annual dividend income by $631.00.  

Disclosure:  Own 168 units of Dream Office REIT inside TFSA

DISCLAIMER

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.