BUY
Dream Industrial REIT(DIR.UN-T)
05/05/2023
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research.
EPS was ($0.06) and revenue was $81.46M for the recent quarter. Diluted funds from operations per unit was $0.25, an increase of 13.3%, and net rental income rose by 24.7%. Its net loss was largely driven by a fair value adjustment to financial instruments of ($64.6M) and other expenses of $43.3M. Since the previous quarter, DIR.UN has signed 0.9 million square feet of new leases and renewals at an average spread of 41% over prior or expiring rents.
These were decent numbers, although, Dream Office REIT (D.UN) recently announced an agreement to sell 12.5M units of DIR.UN (roughly 50% of Dream Office's holdings of DIR) at a price of $14.20 per DIR unit. Dream Office then intends to use these proceeds to purchase 12.5M units of its outstanding D.UN units at a price of $15.50 per unit. For DIR.UN, this caused its price to fall to $14.20, the sale price of units, and for D.UN, this caused its price to jump by 18% to ~$14.9, slightly below the purchase price of $15.50. Dream Office has made this move as it mentioned the NAV per unit of D.UN as of March 31, 2023 was $31.50, and this move would increase its NAV to $35.85. Management is taking advantage of the steep discount to NAV on its D.UN units by selling some of its DIR.UN holdings.
We would be OK buying here, given that the sale price was not at too significant of a discount to its recent close, and management is looking to capitalize on DIR.UN's success and buy its D.UN units at a steep discount.
REAL ESTATE
$14.220