TSX:DIR.UN - Post by User
Post by
retiredcfon Feb 14, 2024 9:41am
114 Views
Post# 35879493
RBC
RBCFebruary 13, 2024
Dream Industrial REIT
Q4 in line; occupancy slipped, but still posting solid organic NOI growth
TSX: DIR.UN | CAD 13.15 | Outperform | Price Target CAD 16.00
Sentiment: Neutral
Our view: DIR reported Q4/23 FFOPU of $0.24, in line with RBC/Street at $0.24E/$0.24E and up 4% from $0.23 last year. Overall, an in-line quarter, albeit with a larger-than-forecast drop in occupancy. We believe 2024 guidance (typically provided on the call) will likely dictate the unit price reaction (RBC/Street 2024E FFOPU = $1.02/$1.03 vs. 2023A of $0.98). Despite the occupancy slippage, SP NOI growth remains strong supported by robust leasing spreads, with a still sizeable mark-to-market opportunity ahead. The balance sheet is in good form, while the IFRS NAV was fairly stable. CC Feb-14 @ 11 am ET (1-800-806-5484, ID 1104570).
Highlights:
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Excluding expansions, SP NOI rose a strong 7.8% YoY (+9.2% YTD), mainly from higher rents. Including expansions, SP NOI was +9.6% YoY (+11.3% YTD), led by Canada (+11.1% YoY), then Europe (+8.5%) and the US (+2.2%). In Canada, ON led (+14.1%), followed by QC (+11.5%) and Western Canada (+5.5%).
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Committed occupancy declined to 96.2% (-100 bps QoQ, -270 bps YoY), with Canada at 96.1% (-50 bps QoQ), Europe at 96.3% (-170 bps QoQ), US at 95.6% (flat QoQ), and Summit JV at 97.7% (-40 bps QoQ). The declines were driven by vacancies in the GTA, Montreal, Spain, and France, where re-leasing discussions are in progress. In-place fell to 96% (-90 bps QoQ, -190 bps YoY).
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Leasing spreads remain robust. Since Oct-2023, DIR has leased 1.3MM sf at blended new/renewal spreads of +42%, including +50% in Canada and +7% in Europe (Dream Summit JV spreads at +90%). Market rents for the portfolio are ~34% above in-place.
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IFRS NAVPU down slightly to $16.61 (-1% QoQ, -2% YoY). IFRS cap rate increased to 6.06% (+15 bps QoQ, +45 bps YoY) vs. the current 6.3% implied cap. In Q4, DIR booked a $44MM ($0.15/unit) portfolio fair value loss, mainly on the European portfolio.
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Active project pipeline sizeable at $352MM across 1.7MM sf, with target unlevered yield of 6.4%. Notably, DIR recently signed a 10-year conditional lease on 60% of the space at a 209K sf GTA project at a starting rent of >$20/sf (plus ~4% annual steps).
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Summit JV investments were active, with six income properties acquired in the GTA comprising 0.9MM sf, with a further 10 properties (2.5MM sf) in progress.
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Debt/GBV at 36% (+90 bps QoQ, +430 bps YoY), debt/EBITDA at 7.7x (-0.5x QoQ, -0.6x YoY). Available liquidity totals $492MM from cash ($50MM) and undrawn lines ($442MM).