TSX:DIR.UN - Post by User
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retiredcfon Jun 01, 2021 9:34am
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Another Upgrade
Another Upgrade They raise their target from $15.50 to $16.00. GLTA
Dream Industrial REIT
(DIR.UN-T) C$13.75
Equity Offering Supports $1.3Bln European Expansion Event
Completion of a $287.5mm equity raise to partially fund DIR's planned acquisition of a $1.3bln pan-European warehouse/logistics portfolio from Clarion Partners Europe ("Clarion Portfolio"). Please refer to our forthcoming bulletin for a more detailed analysis/review.
Impact: POSITIVE
European Portfolio Acquisition Represents a Transformational Move for DIR:
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Increases total portfolio 35% to $5bln; European portfolio triples to $1.9bln;
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Canada/Europe weighting to approach 90% (95% after U.S. dispositions);
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U.S. exposure set to drop below 10% as U.S. strategy shifts to include partnering with private equity;
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Development pipeline increases 50% to 3mm sf; and
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With a relatively 'young' average vintage of 15 years, the acquisition will enhance several quality metrics for DIR's property portfolio, as we later detail.
YTD acquisitions would increase to $1.8bln, arguably representing the most significant step to-date in overhauling DIR's asset profile that began over three years ago. DIR's pro forma asset profile stands in stark contrast to its 2017 portfolio which was over 50%-weighted in Atlantic and Western Canada.
Forecast: We have raised our FY2022 FFO/unit & AFFO/unit estimates by 3%, reflecting the accretion (leverage-neutral basis) from the acquisition and increased utilization of low-cost, euro-based debt. With our new $0.77 AFFO estimate for 2022, we now forecast a 15% two-year AFFO/unit CAGR (three-year: 6%), and a payout ratio improving to 91%. We expect favourable market fundamentals and a ramp-up of development completions to extend strong AFFO growth into 2023.
TD Investment Conclusion
DIR's narrowed focus on Canada and Europe offers investors the opportunity to access an industrial/logistics portfolio that is harder to replicate in the public markets, given the relatively short list of alternatives in these two regions. Additionally, the expanded development pipeline (to 3mmsf or 8% of existing GLA), and accelerated NAV growth that it can create, offers increasing potential for DIR to trade at higher relative valuations over time, in our view. We believe this is of particular significance in Europe, where developable land is in short supply and incumbent pure-play European REITs trade at 60%-plus premiums to NAV.