• SP NOI (constant currency): +3.1% YoY
• Committed occupancy: 97.2% (+160 bps QoQ, +110 bps YoY) with in- place occupancy at 95.7% (+100 bps QoQ, -10 bps YoY).
• Debt/GBV: 28.7% (-260 bps QoQ, +50 bps YoY).
• IFRS NAV: $12.82 (+2% QoQ, +8% YoY) vs. our $12.50 NAVPU. IFRS cap rate 5.69% (-6 bps QoQ, -26 bps YoY) vs. our 5.85% NAV cap/5.5% implied.
First impression
Our view: Overall, an in-line, yet strong start to 2021, with minimal variances to our forecast. Importantly, SP NOI growth accelerated, aided by solid leasing velocity and particularly strong new and renewal leasing spreads. Acquisition activity remains robust, while the development program continues to advance with the recent purchase of GTA land that should setup a decent value creation opportunity. As well, the balance sheet remains in solid shape. Conference call May 5 (11 am ET; 1-888-465-5079; 6843075#).
Organic growth accelerates on strength in Ontario and the US. Q1 SP NOI increased 3.1% YoY as higher in-place rents more than offset lower SP occupancy. Regionally, the US led with SP NOI growth of 6.7% YoY, with Canada up 2%. In Canada, SP NOI growth was led by ON (+6.1% YoY), followed by W. CDA (+1.4%) and QC (-2.8%, due to Spectra lease; see below). Bad debts were effectively nil. The +160 bps QoQ in committed occupancy was driven by gains in all regions, except Calgary. In Q1, DIR recorded a $75MM portfolio FV gain ($0.40/unit) on higher market rents, strong ON leasing, and cap rate compression, mainly in QC.
Leasing momentum remains solid. Since the end of Q4/20, DIR has signed 1.1MM sf of new leases at a strong 19% spread over prior rates and 0.9MM sf of renewals at +20%. DIR re-leased 165K sf of Spectra Premium's vacancy in Laval at a higher rent starting in June. Rent collections were steady at 99.1% (-30 bps QoQ), with no further deferral arrangements since Q2/20.
Busy on the acquisition front, with developments also advancing. Since the end of Q4/20, DIR has completed $350MM of acquisitions at a 4.5% cap rate in Canada, the US, and Europe, with another $155MM under contract/ exclusive. With closings expected in the next 45-60 days, YTD acquisitions should tally ~$500MM across 3MM sf. Notably, post-Q1, DIR acquired a 30- acre land parcel in Brampton, ON for $35MM ($1.2MM/acre), with plans to develop 550K sf of logistics space at a decent unlevered yield of 6%