Currently have an $18.00 target. GLTA
DREAM INDUSTRIAL REIT
Q2/23 First Look: In Line, Growth Is Still There
DIR reported Q2/23 FFO/unit of $0.25, in line with our estimate and
consensus. IFRS NAV/unit was $16.97, stable from last quarter, and up 2.0%
from a year ago. Overall cap rate increased ~10bps sequentially, reflecting a
~13bps increase in ON, a ~4bps increase in QC, and a ~10bps increase in
Europe. Q2 reflected robust fundamentals with ~11% SPNOI growth, leasing
spreads of ~47% and a sequential improvement in estimated market rents.
CC: Wed. August 2 at 1:00 p.m. ET; 1-800-319-4610.
Organic Growth: Headline portfolio SPNOI on a constant-currency basis
was +11.4%. By region, Ontario was +19.4%, Quebec was up 8.5%, and
Europe was +11.4%. Western Canada increased by 4.9%.
Leasing Update: DIR completed 1.4MM sq. ft. of leasing at an average
spread of 47% over expiring rent. In Canada, the average rental lift was
~61%, while Europe spreads were ~4%. YTD leasing spreads were 83% for
ON, 56% for QC and 4.5% for Western Canada. Average in-place rents
increased by 14.6% for ON, 8.6% for QC, and 7.5% in Europe. In-place and
committed occupancy was 98.0%, down from 98.6% last quarter. The
slippage largely reflected an anticipated Montreal vacancy, and a fully
occupied property reclassified to development.
Investments: The Dream Summit JV acquired a 26-acre GTA site that
allows for 380k sq. ft. of industrial development. Subsequent to the quarter,
the JV also acquired a 21-acre outside storage property in Caledon and a
150k sq. ft. income-producing property in Brampton. The JV is under contract
or negotiation to acquire additional GTA assets totalling 900k sq. ft. The
Trust is anticipating a ~$25MM equity investment as its contribution and
expects to generate a 7.5%+ going-in yield (includes property management
fees and leasing income) with market rents ~40% above in-place rents.
Mark-to-market Estimates: Portfolio-wide, market rents exceed in-place
rents by over 37%, and increased by 6.1% from Q1. Total Canada mark-to-
market was 53.7% (Ontario 71.6%, Quebec 67.5%, Western Canada 3.5%),
and Europe was 5.8%.
Q/Q Cap Rate Moves: Stabilized portfolio cap rate was 5.82%, up from
5.72% last quarter. Fair value increases in ON and QC offset decreases in
Western Canada and Europe.
- ON: 5.77% from 5.64%;
- QC: 6.16% from 6.12%;
- Western Canada: 6.56% from 6.48%;
- Europe: 5.49% from 5.39%.