Dream REIT Looks to Restaurants to Beat Office Glut

Dream Office Real Estate Investment Trust, the worst-performing REIT in Canada over the past year, is banking on tower renovations and adding retail to keep tenants amid a wave of new office supply.

Dream Office, the largest office REIT in Canada, is seeking to sell as much as C$150 million ($138 million) of properties this year in smaller markets, and to upgrade its buildings and add retail space in its Toronto and Montreal properties, according to Chief Executive Officer Jane Gavan.

It used to be pure office -- thats all we looked at, Gavan said in Bloombergs Toronto office on Aug. 27. For us, theres going to be a lot of opportunity to develop the things we own and add retail.

Dream Office units have dropped 0.3 percent to C$28.95 over the past 12 months, for a yield of 7.7 percent, the worst performance among the 15-member Standard & Poors/TSX Capped REIT Index, which has gained 13 percent on average in the same period.

Significant multiple expansion is unlikely to take place in the near term given expected challenges in the Canadian office market, Matt Kornack, an analyst at National Bank Financial who rates the stock a buy, said in an Aug.10 note to clients. Kornack said Dream Office has longer-term value because of the quality and location of its portfolio, and offers an attractive yield for investors.

Dream Office, the largest office REIT in Canada, is seeking to sell as much as C$150 million ($138 million) of properties this year in smaller markets, and to upgrade its buildings and add retail space in its Toronto and Montreal properties, according to Chief Executive Officer Jane Gavan. Close

Dream Office, the largest office REIT in Canada, is seeking to sell as much as C$150... Read More

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Dream Office, the largest office REIT in Canada, is seeking to sell as much as C$150 million ($138 million) of properties this year in smaller markets, and to upgrade its buildings and add retail space in its Toronto and Montreal properties, according to Chief Executive Officer Jane Gavan.

About 7.9 million square feet of commercial space will hit the market in Toronto, Vancouver, Calgary, Montreal, and Ottawa, this year and next, weighing on rental rates, according to New York-based real estate-services firm Cushman & Wakefield Inc. Toronto-based Dream Office is preparing for the crunch by adding shops and restaurants that net higher rents, Gavan said.

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Dream REIT Looks to Restaurants to Beat Office Glut