TSX:DIR.UN - Post Discussion
Post by
retiredcf on Aug 02, 2023 9:29am
TD
Currently have a $16.50 target. GLTA
Dream Industrial REIT
(DIR.UN-T) C$14.20
Q2/23 First Look: Results Slightly Ahead; Acquisitions Resume
Event
Q2/23 Results. Conference call is at 1:00 pm (1-800-319-4610; Webcast Link).
Impact: SLIGHTLY POSITIVE
Our Take: DIR reported another strong quarter, highlighted by +11.4% SPNOI growth and supported by strong fundamentals across its key markets.
Q2/23 diluted FFO/unit of $0.245 (+14% y/y) was slightly ahead of our estimate/ consensus at $0.238/$0.24.
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In-place occupancy slipped 50bps q/q to 97.6% (committed occupancy -60bps q/q to 98.0%), largely due to the delivery of DIR's 40%-leased 'Abbotside' development in Caledon, ON. (We expect near-term full lease-up.)
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Y/Y SPNOI growth (constant currency basis) was +11.4% (+9.2% excluding expansions), with Canada at +12.1%, driven by +19.4% in Ontario, +8.5% in Quebec, and +4.9% in Western Canada. Europe SPNOI was +11.4% on CPI indexation and the lease-up of expansion properties.
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Canadian market rents were +3.4% q/q to $13.83 (+53.7% vs. in-place rents), while European rents were +0.5% q/q (+5.8% vs. in-place rents).
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Blended (new and renewal) leasing rental uplifts were +60.8% in Canada (Ontario +81.1%, Quebec +91.4%, Western Canada +5.5%) inclusive of +4% annual rent bumps, while Europe was +4.0%. Blended rental rate uplifts on the Summit JV portfolio since the February 17 closing were +125% on over 1mmsf of leases (vs. 53% in FY2022).
Acquisitions resume via the Dream Summit JV. During and post Q2, the JV acquired a 26-acre site in the GTA (380,000sf of development potential), along with two GTA-west assets (150,000sf building in Brampton plus 21 acres of land leased for outside storage in Caledon). A further six GTA assets spanning 0.9mmsf are under contract/in exclusive negotiations. DIR's aggregate equity investment (for its 10% interests) of $25mm is expected to earn a 7.5% going-in yield (with fee income) on income-producing properties (8.5% excluding land with leased storage).
ATM, Balance Sheet:
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Post Q2, DIR resumed its ATM equity issuance program, issuing 3.7mm units for $52.5mm ($14.28/unit). While slightly dilutive vs. DIR's $16.97/unit IFRS NAV (-0.4% q/q), we see FFO accretion with proceeds being used to repay the credit facility (~7% interest rate) and earn the aforementioned acquisition yields.
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Net debt/assets was +20bps q/q to 36.2%, while debt/EBITDA was 9.0x (q/q: 9.3x).
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