07:24 AM EST, 02/21/2025 (MT Newswires) -- DREAM OFFICE REIT (D-UN.TO) overnight Thursday said it had more than halved its net loss in the fourth quarter, but also reported lower funds from operations as it cited "significant macro-economic uncertainties and continuing challenges in the Canadian office real estate sector."

For the three months ended December 31, 2024, the Trust generated a net loss of $19.1 million, compared to a loss of $42.4 million a year earlier. Included in net loss for the three months ended December 31, 2024 are negative fair value adjustments to investment properties totalling $38.9 million across the portfolio, interest expense on debt of $17.3 million, impairment of vendor takeback mortgage receivables totalling $4.3 million, partially offset by net rental income totalling $27.3 million, fair value adjustments to financial instruments totalling $12.3 million primarily due to remeasurement of the carrying value of subsidiary redeemable units as a result of a decrease in the Trust's unit price over the quarter net of fair value losses on rate swap contracts due to declining market yield curves, net income from its investment in Dream Industrial REIT of $3.4 million and a net deferred tax recovery of $2.2 million relating to its sole investment property in the U.S.

It reported Diluted FFO per unit of $0.72 versus $0.75 a year earlier, driven by higher interest expense (-$0.07) and lower NOI from 438 University Avenue due to lower occupancy (-$0.02), partially offset by lower tenant provisions (+$0.03), higher income relating to properties sold in prior periods for post-closing adjustments (+$0.02) and higher FFO from Dream Industrial REIT (+$0.01). Included in FFO for the three months ended December 31, 2024, are year-end cash adjustments that are included in other income and income arising from properties sold in prior periods totalling $0.07 per unit, the amounts of which could vary from period to period. Excluding these items, diluted FFO per unit for the three months ended December 31, 2024 would have been $0.65 per unit.

"We continue to manage our business in a very uncertain environment with a focus on reducing risk, improving liquidity and increasing our occupancy," said Michael Cooper, Chief Executive Officer.

"The announced sale of 438 University is an attractive transaction for the Trust that will immediately reduce debt and increase liquidity. Our proposed plan to convert 606-4th Ave in Calgary from an office building to a new residential rental building will mitigate future office leasing risk in a very challenging market, diversify the Trust's source of income and improve the average quality of our portfolio. We will be very focused on leasing 74 Victoria and other vacancies in our portfolio to improve occupancy in 2025.

"In the midst of significant macro-economic uncertainties and continuing challenges in the Canadian office real estate sector, the Trust remains focused on delivering stable operational and financial performance in 2025 and beyond.

"We believe our portfolio is well-located, difficult to replace and uniquely positioned to outperform over the long term. Through our plan to invest capital in our best buildings over the past six years, the renovations across our best assets are substantially complete and we have created a uniquely competitive portfolio that is well positioned to attract high-quality tenants."

It edged up $0.06 to $18.51 yesterday.