CIBCAlso have a $16.00 target. GLTA
EQUITY RESEARCH
November 5, 2024 Flash Research
DREAM INDUSTRIAL REIT
Q3/24 First Look: In Line; Occupancy Stable With 25% Lease
Spreads
DIR reported Q3/24 FFO/unit of $0.26, which was in line with our estimate
and consensus of $0.25. The third quarter saw a 10 bps sequential
occupancy increase to 95.5%. Year-on-year, occupancy was accordingly
down from ~97%. Leasing spreads remained wide at ~25%, albeit moderated from recent quarters. By market, Quebec leasing and SPNOI trends, while still healthy, came in below where recent quarters were tracking.
Conference Call: Wednesday, November 6 at 11:00 a.m. ET; 1-844-763-8274.
Organic Growth: Headline SPNOI on a constant currency basis was +3.3%,
or 3.2% excluding expansions. By region, Ontario was up 8.9%, Quebec was
up 4.4%, and Europe was down 0.5% (transitory vacancies). Additionally,
Western Canada increased by 1.2%, and the Dream Summit portfolio grew
by 3.4%.
Leasing Update: DIR completed ~1.9MM sq. ft. of leasing at an average
spread of 25.3%. In Canada, the average rental lift was ~38.6% (contractual
rent growth was >3%), while Europe spreads were ~9.9%. Leasing spreads
were ~60% for ON, ~31% for QC and ~9% for Western Canada. In-place and
committed occupancy was 95.5%, up from 95.4% last quarter. Stable overall
occupancy reflected a 300 bps decline in the Dream Summit JV on transitory
vacancies. DIR completed a 10-year lease for ~0.3MM sq. ft. of its Balzac
development at a starting rent of $9.75/sq. ft. with 2.5% rent steps. In
Germany, DIR signed a 10-year lease for ~0.2MM sq. ft. at a starting rent of
€4.35/sq. ft. The lease has a 20% spread to expiring rent, and is fully indexed to CPI.
Mark-to-market Estimates: Portfolio-wide, market rents exceed in-place
rents by ~30%. Total Canada mark-to-market was 37.5% (Ontario 45.4%,
Quebec 48.5%, Western Canada 3.7%), and Europe 7.6%.
Investments And Dispositions: DIR sold ~30k sq. ft. in the Netherlands for
~$4MM. The Development JV is under contract to acquire $226MM of assets
across Canada, with DIR’s share being $35MM. Subsequent to the quarter,
DIR sold ~90k sq. ft. in Montreal for ~$20MM, and Dream Summit JV
disposed of a ~128k sq. ft. asset for ~$49MM.
Financing Activity: DIR extended its $200MM unsecured term loan by two
years to March 2028, with no change to the interest rate at 4.85%. DIR
upsized its unsecured revolving facility from $500MM to $750MM, extending
it by two years. As of quarter end, the REIT had ~$821MM of liquidity (which
includes ~$78.7MM of cash), along with an additional $250MM that can be
exercised via an accordion.
Q/Q Cap Rate Moves: Stabilized portfolio cap rate was 6.06%, down 3 bps
from last quarter.