Michael Cooper - President, Chief Responsible Officer Pauline Alimchandani - CFO Dan Marinovic - SVP, Land & Housing

Mark Rothschild - Canaccord Dean Wilkinson - CIBC World Markets Sam Damiani - TD Securities Brett Reiss - Janney Montgomery Scott

Good morning and welcome to Dream Unlimited second quarter conference call. I am going to ask Pauline to speak first.

I am here with the business leaders of our various divisions. We've had an interesting quarter.

We're comparing it to an interesting half of the year last year and as we promised lumpy earnings and a lot of profit. So Pauline, please go ahead.

Thank you, Michael and good morning. Q2 was another significant quarter for Dream on a number of fronts.

We achieved approximately $16.8 million in net margins at our 50% share from 430 condominium unit occupancies within the Canary District in Downtown Toronto. Approximately 380 units are left to occupy, which are almost fully sold out.

We expect that two condominium buildings will be substantially occupied by the end of 2016. Together with our partner, the completion of Stage 1 of the Canary District, which includes the aforementioned condominium buildings, our 500-bed George Brown College student residence, 253 affordable housing units and 29,000 square feet of retail has been a remarkable accomplishment for Dream and has set the tone for the company's reputation as a successful builder of complicated urban project.

Our business lines outside of land and housing remain solid. Our Western Canadian retail projects continue to lease on pace with expectations.

A-Basin, our ski hill in Colorado continues to outperform and our asset management business continues to grow and diversify away from the REIT. Where our land and housing business has not generated much income year-to-date outside of the sale of the 172 acres to the Province of Alberta, which occurred in the first quarter of 2016, we are positive about the business and its future prospects.

To sum the Q2 results at a high levels our land and housing divisions generated $1.3 million of losses net of eliminations, down from $11.8 million of positive net margin in the prior year, due to achieving only 55 lot sales and no developed acre sales versus 102 lot sales in 17 developed acre sales in the prior year. While the first six months of activity has been slow, for the second half of 2016, we already have sales and deposits that are much higher than our sales in the first half of 2016, which are now disclosed in our materials.

Our housing division generated $1.7 million of losses in the quarter with only 24 occupancies during the period, which was not sufficient to offset our fixed overhead cost. We generated a $115.2 million of revenue and $21.1 million of net margin in the second quarter from 111 occupancies at the Carnaby and 215 occupancies at the Canary District at our share, the latter of which is equity accounted.

Our gross and net margin was 24% and 18% respectively across both projects. Our Q2 margins were impacted by $1.8 million in selling and marketing expenses during the period that relate to future projects.

Excluding this amount, our reported net margin would have been approximately 20%. Our asset management division drove $25 million of net margin in Q2 of 2016 from contracts with the publicly listed trusts and development and other management fee.

Our net margin as a percentage of revenue was 89.7%. Fees earned from development arrangement which is part -- which is a growing part of our asset management business may fluctuate from period to period depending on the development stage of our active projects.

We also recognized $1.5 million of income from distributions from the REITs in the second quarter. Commencing in Q1, Dream began to account for its investment in Dream Alternatives under the equity method.

Previously the investment in the units of Dream Alternatives were reported at fair value within other financial assets similar to the REIT. Under this equity method we take up 7% share of equity losses in Dream Alternatives in Q2, which amounted to $0.4 million primarily driven by some non-cash fair value losses in the portfolio.

All-in-all our Q2 results were solid due to income contribution from our non-land and housing business segment. In terms of a more detailed overview by division, net margin from land was $0.4 million in Q2, 2016, down from $11.7 million in the prior year.

As I previously mentioned, the volumes year-over-year were not comparable and led to depressed financial results in the second quarter. During Q2, Dream Wilson Brighton Development LP or Dream Wilson, a new equity accounted joint venture partnership between Dream and its 50% partner, acquired 21.78 acres of retail land located in our Brighton development in Saskatoon.

To form this partnership, we contributed 7.6 acres of retail land and $3.3 million of cash consideration to equalize each partner’s contribution to the joint venture at fair value. As a result of contributing these lands to the joint venture at fair value, we recognized $2.3 million of gross margin within the land division during the quarter.

Further fair value gains will be recognized as we develop and zone these lands in the joint venture and when our lands are effectively transferred to third parties when retail tenants begin to take occupancy in 2019 and 2020. With respect to housing, net losses from housing were $1 million this quarter, down from $1.8 million of positive net margins in the prior year on lower volumes and higher indirect cost.

Our housing margins are expected to improve commencing in 2017. For now we are continuing to see the results from the division in transition as almost all of the inventory that we have occupied year-to-date was constructed in prior years.

The housing divisions is in transition as the company continues to implement process changes that will enable Dream to focus on planning the best communities and having the most competitive housing platform in the markets in which we operate in terms of both product offerings, customer satisfaction and profitability. Accordingly, we expect to see the results of these efforts realized in feature years as new inventories developed and sold in line with our operating and in line with our new operating model.

With respect to condos, net margin from the Condo division was $21.1 million in Q2 of 2016, including equity account investments versus negative $1.2 million in the prior year. As I mentioned year-over-year results in our comparable as they were no occupancies in the prior year period.

We achieved 111 occupancies at the Carnaby in the second quarter, which is now almost fully sold out and expected to close in the third quarter of ’16. As I discussed in my opening remarks, we recognized $16.8 million of net margin in Q2, primarily as a result of our first occupancies at blocks 4 and 11 at the Canary District in Toronto.

In terms of new projects, we are pleased to report great sales success at our Riverside Square Development in Downtown Toronto. Riverside Square is a five acre, two phase, mixed used development located in Toronto’s Downtown East side.

We have a 32.5% interest in this project. Phase one of the project consists of 690 condominium units, which are 97% sold to date.

As state-of-the-art Autoplex with multiple car dealerships, which will sold to an automotive group in approximately 16,000 square feet of retail space. Construction at Phase 1 commenced in the quarter and with the sales to-date and the sale of the Autoplex we are confident in the success of the project.

Phase 2 of the project is expected to consist of a 55,000 square foot glossary incurred retail component together with a 140 condo units in 98 apartment units. Marketing for the condo units within Phase 2 launched in May of 2016 and we are already 91% sold out.

The first and second phases of the projects are anticipated to be completed by 2018 and 2020 respectively. Our future pipeline of units includes additional projects in the Distillery District, the Canary District and within our other East Downtown Toronto projects and also within our Zibi development in Ottawa all of which we are working on today with respect planning an approvals.

Moving to asset management, total fees from asset management were $27.9 million in Q2 of 2016 up significantly from $6.1 million in the prior year. The year-over-year increase was driven by fees earned on certain development projects and partnerships within the company.

We continue to grow and seek out new development partnerships, leveraging the very best of our expertise and track record in this area to increase our non-REIT related sources of growth for the asset management business. We are expecting an additional $10 million to $12 million of development-related fees in 2016 relating to projects under development or near completion.

At the end of the quarter, our debt to total asset ratio was 33% with up to $143 million of undrawn credit availability on our operating line, providing us with ample access liquidity. Overall, it was an excellent six months for Dream.

Our liquidity position and reoccurring income sources are very valuable and the benefits of operating a diverse business in the current environment is clearly visible in our second quarter financial results. With that, I will now turn the call back over Michael.

Thank you, Pauline. I don't have a lot to say, but I would start with our company has a tremendous amount of recurring income that’s from a base in the Distillery District through our asset management, our growing income property group, our renewable power of investment in public companies and that recurring income is sufficient to cover all of our costs.

Heading into 2016, the two events that we're looking forward to with the sale of 172 acres of land in the Province of Alberta for the construction of the Ring Road to the East of Providence and that was completed on February 1. The second big item was the completion of the conversion of the PanAm Athletes Village, the Canary District, which is partially completed and will continue throughout the rest of the year.

Those two big events are on schedule in every way and the recurring income has actually been very strong. Our condo division has been doing great and we have a lot more in our backlog We're very excited about and it's actually quite shocking that at our Board Meeting yesterday, our view was that the condominium industry in Toronto is in better shape than it's been for years and we're more confident about our ability to sell and develop condos than we have in years.

I think the market conditions are excellent. Western Canada is extremely challenging and it has a huge effect on the success of our business.

We sold 94 lots in the first half of the year. That is something we used to do on any given Thursday.

Having said that, as we look into the second half of the year, we’ve already sold I think more lots since June 30, than we did in the first six months. Basically the first six months all we did was sell-off old inventory.

We’re excited about the second half. We’ve got a lot of exciting thing happen -- exciting things happening.

We're starting a bunch of new communities. On September 10, we launched Vista Crossing, our community North of Calgary.

We're also launching Brighton on September 10 as well. We’re starting community in Regina called Eastbrook and it's a great success.

The planning approvals we’ve received at Regina. So as always, we build for the future.

The thing about Western Canada is that our confidence in the population growth in per-capita income remains intact. Currently in Alberta and Saskatchewan, the population growth and the per capita income is higher than the average for all of Canada.

We expect that it will continue to be so. Our business is a very long-term business and I think we are really well positioned and while we are struggling in the current time, we are making big decisions that will be great for our future.

Our retail business is progressing every day. In the Meadows we've been building Tamarack that’s a 180,000 square feet and that's every couple of months we have a new building completed there.

We're very excited about that. Save-On-Foods took over their land to build a grocery store in Kensington.

Shoppers Drug Mart has taken possession I think and as Pauline mentioned, our joint venture for 240,000 square feet in Brighton has commenced. We've done a lot of leasing there.

In the Distillery -- in the Canary District we now have 30,000 square feet of retail. I think we are up to over half million square feet of income properties in Toronto Area.

The Distillery is generating its highest earnings ever. So while our business maybe hard to follow, we had incredible earnings and what I would say is, if you go back to when we went public three years ago, we had a book value of $3.50 per share.

We now have a book value of $7 per share. I look at that and I feel that while I feel sometimes like I go to work in a suit and sit in the sun all day, it’s so hard sometimes.

A lot of people look better, but I don’t think there is many companies that have kind of compounded earnings that we're continuing to generate since the beginning of the company in 1994. And with that Pauline, the division leaders and I will be happy to answer any questions.

Thanks, good morning, everyone. I just -- lots of exciting things happening in regards to Western Canada business you also said that you have confidence -- continued confidence in population growth in those markets.

So maybe you can give us some more confidence in why you believe that there will be continued population growth over the next few years. And then as part of that if you can maybe just recap some of the major projects as far as what you’re targeting for lost sales over the next year?

I know you mentioned Eastbrook in that if you expect anything to start at Providence in 2017?

Okay. A number just came out of Alberta that their population growth exceeds the Canadian average for just over last two months.

So that’s why I believe that. Look, we're seeing a lot of indicators that people are -- the natural population growth in Alberta is continuing.

There is net migration out, but net-net Alberta is growing faster than the rest of Canada and literally that's up as of two weeks ago. As far as per capita growth, per capita income, all the numbers remain the same.

Alberta has been way ahead of everybody else and it continues. And we think that there are adjustments been made now in Alberta and Saskatchewan.

It's in pretty good shape as it is and we think that it's bottomed out and will get better. Both provinces are better financial position than the rest of Canada and I think there are very attractive places to live.

So I think it’s going to continue just fine. Your question in terms of lots, Dan Marinovic is writing the lots of notes.

I think that what we are going to find is the second half of the year will be better than just about any six-month period in the last three years. We're looking at maybe 400 to 500 lots being sold in the second half of the year, that’s our expectation.

I don’t really want to go through community-by-community, but I think Brighton and Eastbrook are going to be significant contributors to our growth where else it's been.

Those are the two big ones, Brighton and Eastbrook now.

Yeah, the Meadows in the Edmonton will be contributing just Maple or whatever we call it, but -- what happens to our business a lot is, before we record results, we have a lot of information about what’s happening and we’ve already got a lot in the books and lot of deposits and we’ll be presenting in the next four months finishing it up, but I think that we’re going to have a lot more revenue to cover our overheads in the second half of the year than we did in the first.

Okay. On a separate point, a press release came out just before the call about you purchasing special voting shares from Ned Goodman.

Some of it was a trade of other shares and some of it there was a price of I believe $9.40 per share, may you could talk about it and how that share price was arrived at?

I was allowed to pay Ned up to a 15% premium for his shares. So I paid that happily.

Ned and I have been partners since 1994. In fact, in 1992 when I was working for Walters-Wigg, we had a tenant who had 7,200 square feet at 44 Victoria.

The tenant was a partner of Ned, it's something called -- it was something [Preco], it was gold asset manager and when GST came in, the guy said, I am out of here, he moved to Aspen because he couldn’t recover the GST from any of his clients. And I did a deal with Ned where he took over the 7,200 square feet of office space in exchange for the management contract.

I think Ned told me that that may have been the most profitable deal he did and that led him to becoming partners. 22 years later, we built this company and yesterday he agreed to sell me control of the company.

So I am excited for it personally. But I think it doesn’t have any real significance to anything the company has done or will do in the future, happy to answer any question?

So that 15% premium is just the most that you would be allowed to purchase, is that a securities rule?

Yeah. I don’t want to sound like some guy late night TV, but I paid the maximum allowed by law.

Understood. Thank you very much.

Thank you.

Thanks, good morning, everyone. Pauline you said you expect under $10 million to $12 million in the asset management fees related to developments, over the rest of the year?

Yeah. That’s correct.

So that’s on top, so what are those related to -- can you give the specific around that or...

We are doing more and more development, sorry, when you think about asset management segment, our non-REIT income is growing. We're doing more and more asset management real estate developments.

We will not be disclosing the breakdown of where it comes from. There are some unusual things this quarter.

But I think you will see that our asset management fees from development will be more significant in the future than they have been in the past, that’s increase in business for us.

Okay. It will be a recurring item just again lumpy like the others...

Yeah, I probably have to give some guidance on it every year because it will be a little bit difficult to forecast but, yes, it will recurring to some time.

Not in this quarter was exceptional.

This one was exceptional. Okay, I got that.

And then just in terms of the timing of converting the $220 million in AR was that cash you would be expecting over the remainder of the year or is some of that perhaps longer dated?

Yeah, so that predominantly relates to condominium closings that will happen basically in Q3 and it’s as Canary closes. So that will be this year.

And there is also a lot of receivables from lot sales.

Yeah.

So we got a 15% deposit and we record a sale. The 85% becomes receivable and then we have cost to complete provision.

So as part of our business we carry our builders for a year and those receivables are a significant part of the business and they are necessary, they are -- what we need for working capital. So I don’t know if I can remember being under $170 million in any quarter.

So it’s really just part of our working capital. The condos we are adding to it right now, but if we're fortunate enough to have big growth in our lots, hence it will increase.

That will increase and then you'll convert those to cash anyway within the 12-month period.

Perfect got that. And then just looking at the margins on the condos from the stuff you own and the stuff at Dundee Kilmer, the margin of the 22.3% on the Canary, is that a gross or a net?

Like I am trying to compare it to the 24.4% gross of the 18.3% against the directly owned things.

I am just flipping to the section in the MD&A, but I believe we give you both gross and net. So for the quarter it was 25.7% gross and 21.9% net, but a lot of the sales and marketing expenses were already taken in prior periods.

So it's not a pure margin number, it's got recorded in this period.

So just to be clear on this Dean, if we have a project the last four years and we put up $10 million and after four years we got the $10 million back and a $10 million profit, the way it gets recorded is we make an investment of $10 million. If it's a joint venture, it could be on our books, it could be as an equity investment and that just deals whether the debt shows up or not, but we expense all of the marketing cost.

So in year one, two and three, let's say we lose $0.5 million a year because we have to expense the marketing cost. So instead of investing $10 million and having a $10 million profit, we actually $0.5 million loss for three years and then when it close we make $11.5 million.

So it's not that helpful the way we do the accounting compared to the way we look at the investment.

Got it. And would there have been more frontend loading of the marketing expenses with Canary?

There was a lot of upfront cost with Canary.

Okay. Fair enough.

The big bidding project with infrastructure Ontario, we spent more upfront on that. Somewhat was expensed, a lot of it was capitalized, but it's kind of a noisy project.

Got you. And then just turning quickly Pauline to the G&A run rate, is that $45 million, that's still a good number?

Yes, there were some severance cost of about $600,000 in the quarter, but aside from that, it's just pretty good run rate.

So it's closer to $4 million.

Yes.

And the same for the asset management salary is still running around $2 million a quarter.

Yes. That sounds all right.

Okay. So $4 million plus the $2 million.

And then just to be clear on buying out the position, with Mr. Goodman, that collapses the Class B shares or how does that work exactly?

I don't know what the Class B shares are.

We don't know the Class B shares yes.

The multiple bonding shares are common shares and no we're keeping the structure as it is for a few years, because we're planning on collapsing it in the three or four years.

Okay. So we don't have to adjust anything in terms of the share count or be something back to subordinated or just leave it the way it is.

There will be 2.8 million shares that I had to convert to pay Ned, from my Dream shares. So I think we'll end up -- the diluted number will be the same, but there will be I think instead of 75 million, it will be like 78 million subordinated voting shares.

Okay. So it's just shuffling the chairs around.

Okay. That's fair enough.

That's it for me. I'll turn it around.

Yeah, it's shuffling the chairs around, but it's kind of a big difference for me by the way.

It will be, absolutely.

For you it's a shuffling thing. I get it.

A big shuffle. Okay.

Thanks guys.

Thank you.

Thank you. Good morning.

Just on Providence, what's the offer for some initial development on that site within the next three years or so?

I would like to turn that question to Dan Marinovic, Dan?

Hi Sam. I think we're still -- we're still targeting it at 2018 date for sales at this point, but before we get there, we're involved in a pretty complicated development approval process.

We're getting more clarity each day as we go forward and we're just gearing up to get a submission in for October 1 for a consideration and hopefully we'll get some more clarity after that.

Sam to give an context, in 1997 we spent 19,000 acre on the first 320 acres. We expected development in 2002.

I would say since 2002, it's either been development income in the next 12 months or in the next 24 months. So I've been a bit [joint].

Having said that, we just sold 132 acres of 230,000 acres raw land. That's a pretty good return on the 19,000.

We did that in order for the providence to build a ring road. That get completed in 2021.

That ring road will have exits on to our farm and our expectation is we’re going to see development before that's finished. We’re getting a lot of tremendous feedback from the city and whether it’s in 2017 or 2019, we like it earlier than later, but the real issue is it’s going into production in the foreseeable future.

We’re very excited about that.

Is there anything that you need to see to ensure the development in sales start on that site for 22 I guess when the ring road is complete?

Oh, when I see that, what I meant was I think the city has a huge interest in seeing that our lands developed as opposed to us pushing a string, it's now a completely different conversation because of the ring road and we are working with the city very closely, our consultants and our people plus their engineers and planners. We’re having very good conversation.

It’s important to them. I don’t think there is anything that needs to happen.

There is no external stuff. It's just working with the city to get it -- to get the right plan and get their approval.

There is lot of stuff that you would off site, but I think that the city is on our team to get that project going. That’s actually -- it’s been a real turnaround in Calgary planning in the last couple of years and I think what we’re seeing is we’re getting approvals of lands that have 10 to 30 years of development during this really tough time left and there will be a day in a couple years I think when we have huge sales and we will have benefitted tremendously from working with the city when it’s been a weaker economy.

And early in the call Michael, you had mentioned that you saw the current piece as a loaf in the cycle in terms of lot sales. Was that just in reference to the mix of projects that you were able to put through the income statement in the first half or was that a comment on the overall market levels?

I think we're going to see a pickup in housing starts in the second half of the year in our markets generally. We were selling off old inventory.

We now have new inventory to sell. So I think that it's definitely our position has changed in the second half of the year and I do think we're seeing a pickup in Western Canada.

Okay. And just flipping over to Toronto condos, the projects that you've launched have virtually all been very successful selling out quickly and closing and making profit.

There is still I think a couple of sites on the Canary parcels there to develop. I'm just wondering on the status of taking those off and also are you in the market trying to buy new land in the City of Toronto to keep the machine going?

We've never had bigger supply of land to build condos on that we have now. We got two buildings we're working through planning at the Distillery.

We have three on the Canary and we've got a couple of big projects with Streetcar and we're looking to buying new projects. We've got one on Mutual Street.

It's a little project, but we're excited about that and we're looking at some significant projects as well. But I would say, we have more projects in the pipeline now than we've ever had and that has been a lot of work to develop that inventory and at the Distillery, we built out three buildings already.

We got two more to go and we basically have -- I think we bought the Distillery for $36 million in 2004. The commercial properties are worth over $100 million and now we got more to develop.

So that's good. The Canary District we got more land when we hit substantial completion.

So we never had a position like this before. We're pretty happy about that and we're looking for more land, but not necessarily -- we're not trying to buy land for sometime in the future the way we do at less.

We buy land in Toronto to develop immediately.

Good. Thank you.

Thanks.

Yes hi Michael, hi Pauline.

Good morning.

Good morning.

I just want to drill down the favorable demographic trends into the Western provinces, which you still look for that will happen whether or not oil prices recovering in the near or intermediate term?

I believe that. I don't know that -- I don't know if anybody else does, but I think the resiliency about West will surprise people, but the way we took a huge write-off in Dream office.

There is not a lot of office jobs in all of Canada. In Alberta it's terrible, but there is a lot of non-office jobs and I think it will be fine.

I think that what we're seeing is a lot of people from out of the country moving to Alberta Saskatchewan. We're seeing natural population growth, but we're seeing domestic migration out of the prairies.

So net, net, it's still pretty attractive.

Great. Thank you.

Good quarter.

Thanks Brett.

Thank you all for listening in. Brett, it's great to talk to you.

You and I have been talking since probably 1996 as a shareholder of Dundee Corp. It's great to hear from you.

Great to hear from everybody and we'll try to keep it interesting for our shareholders. Thank you.