Dream Industrial REIT
(DIR.UN-T) C$15.99
Q4/21 First Look: SPNOI +7.6%; Developments Progressing Well Event
Q4/21 Results. Conference call is at 11:00 a.m. (1-888-465-5079, passcode: 7492345#).
Impact: SLIGHTLY POSITIVE
DIR reported Q4/21 diluted FFO/unit of $0.21 (+13% y/y, -4% q/q), which was slightly ahead of our estimate/consensus of $0.205/$0.20 consensus. The variance versus our estimate was driven by slightly higher NOI and lower interest expense.
In-place occupancy increased +10bps q/q to 97.7% (+360bps since bottoming at 94.1% in Q3/20). Committed occupancy was 98.2% (+20bps q/q), driven by Ontario (+30bps), Western Canada (+170bps), and Quebec (+60bps).
SPNOI growth of +7.6% y/y represented another all-time high for the second consecutive quarter (constant currency basis). SPNOI growth was driven by +17.0% in Ontario, +10.9% in the U.S., +5.2% in Quebec, and +3.9% in Europe. Each of DIR's regions experienced increases in average rental rate while all but Western Canada (flat y/y) saw increases to average occupancy.
European Portfolio: Market rents reached €5.04 (+3% q/q) and are +6.8% above in- place rents. Rental rate spreads averaged 10.5% since January 2021. Within DIR's European portfolio, 90% of GLA is subject to leases that are indexed to CPI.
Developments Progressing Well: DIR leased the entire 130,000sf phase 1 expansion at 401 Marie-Curie in Montreal (commencing April), generating an 8.9% unlevered yield. The 96,000sf phase 2 is scheduled for completion late 2022 (7% combined yield for both phases). Five other projects have begun or are slated to commence in 2022-2023 spanning 623,000sf with unlevered yields of 5.6%-9.3%.
Land Acquisitions: In Q4, DIR acquired a 28-acre parcel in Cambridge for $26mm (~$929,000/acre), a 50-acre site in Calgary for $14mm ($280,000/acre), and is under contract to purchase a 20-acre site in Calgary for $12mm ($600,000/acre). These sites are expected to support 1.2mmsf of development with unlevered yields of 5.3%-6.0%.
Acquisitions in Canada and Europe under contract or in due diligence currently total $400mm.
Balance Sheet and Fair Values: N et-debt-to-assets ratio was -150bps to 31.4%. Fair value gains of $141.8mm were largely driven by Ontario and Quebec. The overall portfolio cap rate was -2bps to 5.02%. IFRS NAV/unit was +5% q/q and 21% y/y to $15.13.