TD Currently have a $16.00 target. GLTA
Dream Industrial REIT
(DIR.UN-T) C$13.15
Q4/23 First Look: Results In-Line; FY2023 SPNOIG of +11.3%
Event
Q4/23 Results. Conference call is at 11:00 am (1-800-806-5484; Webcast Link)
Impact: NEUTRAL
Q4/23 diluted FFO/unit of $0.24 was +4% y/y and in-line with our estimate/
consensus. DIR met/exceeded expectations for 2023 with FY2023 FFO/unit
of $0.98 (+10.1% y/y) meeting management's revised high-$0.90's FFO/unit
guidance (originally mid-$0.90's), while FY2023 SPNOI growth of +11.3% slightly
exceeded management's 10%-11% target (originally 8%-10%). We expect
management will provide FY2024 guidance on the conference call.
Operational metrics (see Exhibit) in Q4 overall continued to moderate from recent
peaks (SPNOIG and Occupancy), with the exception of Western Canada which
was relatively stable q/q.
Since Q3/23 DIR has completed ~1.3mmsf of leases at an average blended rental
spread of ~42%, of which ~73% was in Canada at 50% blended uplifts. The
remaining leases executed in Europe were at a blended rental spread of 7%.
Y/Y SPNOI growth (constant currency basis) was +9.6% and +7.8% excluding
expansions. Canada was +11.1% and led by Ontario (+14.1%) and Quebec
(+11.5%), while Europe was +8.5%. We expect strong SPNOI growth in
2024-2025 with over 50% of the 8.4mmsf of expiries located in Ontario and
Quebec where market rents are double in-place rents.
In-place occupancy slipped 90bps q/q to 96.0% due to the 154,000sf development
in Caledon, Ontario coming online 55% leased along with some transitory
vacancies in the GTA. Committed occupancy was -100bps q/q to 96.2%.
DIR announced that it recently completed a 10-year conditional lease at its
209,000sf Courtneypark redevelopment project in Mississauga for over 60% of
the space at rents above $20/sf with 4% escalators.
During Q4, the Dream-Summit JV acquired six IPP assets in the GTA spanning
0.9mmsf and is under contract/exclusive negotiations for an additional 10
properties (2.5mmsf).
Balance Sheet
Leverage (Debt/Assets) was +90bps q/q to 36.0%, while Debt/EBITDA was -0.5x
q/q to 7.7x. Post-Q4, DIR issued a $200mm Series F debenture (5.259% coupon),
with the proceeds used to repay debt including its credit facility at 6.9%. Available
liquidity was nearly $700mm pro forma the debenture issuance.
IFRS NAV/unit was -1% q/q to $16.61, while the portfolio stabilized cap rate was
+15bps q/q to 6.06%.