TSX:DIR.UN - Post Discussion
Post by
retiredcf on Jun 29, 2023 9:32am
TD
Dream Industrial REIT
(DIR.UN-T) C$13.40
GTA Property Tour Reveals Continuing Strong Growth
Event
We attended DIR's Greater Toronto Area property tour on June 27.
Impact: SLIGHTLY POSITIVE
Overview. DIR has the highest concentration in the strong GTA industrial market and is the only larger-cap Industrial REIT with majority exposure to the overall Canadian industrial property market. (DIR's NOI is 29%-concentrated in Ontario — nearly all of which is the GTA.) This exposure has benefited DIR with average AFFO/unit growth of ~15% in 2021/2022. We forecast DIR's AFFO/unit to grow at a two-year CAGR of 8% through 2024 (which incorporates D/EBITDA falling from ~9x to ~8x), representing one of the highest in our entire coverage.
Property Tour Highlights (see Exhibits 1 through 6)
GTA Market Rents Continue to Grow: We repeatedly heard examples of submarkets and specific properties where YTD market rent growth has meaningfully exceeded expectations (e.g., +10% vs +5% budgeted). Indicative rents/sf in DIR's portfolio include: Guelph $15, Brampton $18.50 to $20.00-plus, Caledon $18.50, Vaughan $19-$20, and Hamilton $14 (vs. $11 budgeted). Some of these are slightly above what was shown in the Colliers presentation. Additionally, DIR's GTA leasing now consistently includes annual rent escalators of 4.5%-5.0%.
Developments Progressing Well: DIR recently concluded a 69,000sf lease at the Abbotside Way development in Caledon that was in discussions at the Q1/23 conference call (and has 100,000sf of conditional deals in the Calgary project). Steel is being erected at the 1100 Courtneypark Drive East redevelopment in Mississauga, and earth works are ongoing at the 7475 McLean development in Guelph. We believe DIR will soon add more projects to its pipeline of GTA developments.
Acquisitions Resume within Canadian JVs: Both the Dream-Summit JV (DIR ownership: 10%) and the GTA Development JV (DIR ownership: 25%) are actively pursuing acquisitions currently with meaningful deal pipelines. Property tour highlights continued on page 2.
TD Investment Conclusion
DIR is currently trading at a 16.1x P/AFFO (2023E) and a 15% discount to NAV. At these levels, we continue to see good value in DIR units. We reiterate our BUY recommendation and $17.00 target price.
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