TSX:DIR.UN - Post by User
Post by
retiredcfon Feb 16, 2022 8:24am
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Post# 34432953
RBC
RBC Outperform
TSX: DIR.UN; CAD 15.99
Price Target CAD 19.00
Dream Industrial REIT
Q4 results a bit ahead, with solid fundamentals; amendments to Asset Management Agreement
Impact: Mixed
Our view: DIR ended 2021 on a strong note, with Q4 slightly ahead of our call and the Street. Fundamentals are in solid form, with robust leasing spreads, high occupancy, & strong organic growth, which coupled with cap rate compression, continue to fuel NAV growth. As well, the development program (~$500MM) continues to expand. That said, amendments to the Asset Management Agreement (AMA) with Dream Asset Management (DAM) will likely raise some questions and require some clarification on the Feb-16 conference call (11 am ET; 1-888-465-5079; 7492345#).
First impression
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Result a bit ahead. DIR reported Q4/21 FFOPU of $0.21, slightly ahead of RBC/Street at $0.20E/$0.20E, vs. $0.19 last year (+13% YoY).
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SP NOI (constant currency): +7.6% YoY (5.4% YTD).
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Committed occupancy: 98.2% (+20 bps QoQ, +260 bps YoY) with in-place
at 97.7% (+10 bps QoQ, +300 bps YoY).
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IFRS NAV: $15.13 (+5% QoQ, +21% YoY) vs. our $15 NAVPU. IFRS cap rate
5.02% (-3 bps QoQ, -73 bps YoY) vs. our 4.7% NAV cap/4.5% implied.
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Debt/GBV: 31.4% (-150 bps QoQ, +10 bps YoY).
Results slightly ahead; another strong print in SP NOI. The +$0.01/unit spread to our forecast was driven by a combination of higher NOI and lower G&A and interest costs. In Q4, DIR recorded $142MM ($0.58/unit) of portfolio fair value gains ($586MM YTD). Q4 SP NOI rose 7.6% YoY from higher occupancy and rents. Canadian Q4 SP NOI rose 8% YoY, led by ON (+17%), followed by QC (+5.2%), and Western Canada (+0.1%). US SP NOI increased 10.9% YoY, while Europe rose 3.9%.
Strong leasing momentum; occupancy edges up. Since the end of Q3/21, DIR has addressed 1.9MM sf of 2022 lease expiries at an average new/ renewal spread of ~20% over prior rents (30% in Canada, 12% in Europe). Committed occupancy edged up sequentially to 98.2%, as gains across Canada, more than offset slippage in the US and Europe.
Amendments made to AMA to clarify definitions, simplify administration
(effective Jan. 1/22). DIR noted the amendments do not materially change the overall financial impact to DIR and DAM, its external asset manager. Notable changes include 1) FFOPU replaces AFFOPU in calculations, 2) incorporating development costs into the historical purchase price of properties for the purpose of the incentive fee calculation (serves to reduce incentive fees), and 3) separating the contracts for North America and Europe to provide more flexibility to pursue strategic initiatives, capital allocation decisions, and performance measurement.
Acquisition pipeline active, along with ATM. DIR completed ~$500MM of acquisitions (~4.3% cap rate) in Q4, with a further ~$400MM in progress. Available liquidity totals $512M. Since Q3, DIR issued $56MM of units (@ $16.64/unit) using the ATM, with $43MM issued post Q4 ($16.27/unit).