Dream Industrial Real Estate Investment Trust (DIR.UN-TSX) (the “Trust” or “Dream Industrial REIT” or “Dream Industrial” or “we” or “us”) today announced its financial results for the three months ended March 31, 2023. Management will host a conference call to discuss the financial results on May 3, 2023 at 1:00 p.m. (ET).
HIGHLIGHTS
(1) Diluted FFO per Unit and NAV per Unit are non-GAAP ratios. For further information on this non-GAAP ratio, please refer to the statements under the heading “Non-GAAP financial measures, ratios and supplementary financial measures” in this press release. |
(2) CP NOI (constant currency basis), Total equity (including LP B Units) are non-GAAP financial measures. The tables included in the Appendices section of this press release reconcile these non-GAAP financial measures with their most directly comparable IFRS financial measures. For further information on this non-GAAP financial measure, please refer to the statements under the heading “Non-GAAP financial measures, ratios and supplementary financial measures” in this press release. |
FINANCIAL HIGHLIGHTS
SELECTED FINANCIAL INFORMATION |
|
|
|
|
|
|
Three months ended |
||||
|
|
March 31, |
|
March 31, |
|
(in thousands of dollars except per Unit amounts) |
|
2023 |
|
2022 |
|
Operating results |
|
|
|
|
|
Net rental income |
$ |
81,460 |
$ |
65,313 |
|
CP NOI (constant currency basis)(1) |
|
74,778 |
|
66,178 |
|
Net income |
|
(17,730) |
|
442,889 |
|
Funds from operations (“FFO”)(2) |
|
68,132 |
|
56,638 |
|
Per Unit amounts |
|
|
|
|
|
FFO – diluted(3)(4) |
$ |
0.25 |
$ |
0.22 |
|
Distribution rate |
$ |
0.17 |
$ | 0.17 |
|
See footnotes at end. |
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|
|
PORTFOLIO INFORMATION |
|
|
|
|
|
|
|
As at |
|||
|
|
March 31, |
|
December 31, |
|
(in thousands of dollars) |
|
2023 |
|
2022 |
|
Total portfolio |
|
|
|
|
|
Number of assets(5)(6) |
|
321 |
|
257 |
|
Investment properties fair value |
$ |
6,835,086 |
$ |
6,759,425 |
|
Gross leasable area (“GLA”) (in millions of sq. ft.)(6) |
|
70.4 |
|
47.3 |
|
Occupancy rate – in-place and committed (period-end)(7) |
|
98.6% |
|
98.9% |
|
Occupancy rate – in-place (period-end)(7) |
|
98.1% |
|
97.9% |
|
See footnotes at end. |
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|
|
|
FINANCING AND CAPITAL INFORMATION |
|||||
(unaudited) |
|
As at |
|||
|
|
March 31, |
|
December 31, |
|
(in thousands of dollars except per Unit amounts) |
|
2023 |
|
2022 |
|
FINANCING |
|
|
|
|
|
Credit rating- DBRS |
|
BBB (mid) |
|
BBB (mid) |
|
Net total debt-to-total assets (net of cash and cash equivalents) ratio(8) |
|
36.0% |
|
31.7% |
|
Net total debt-to-normalized adjusted EBITDAFV ratio (years)(9) |
|
9.3 |
|
8.3 |
|
Interest coverage ratio (times)(10) |
|
9.9 |
|
12.3 |
|
Weighted average face interest rate on debt |
|
1.96% |
|
1.21% |
|
Weighted average remaining term to maturity on debt (years) |
|
2.9 |
|
3.0 |
|
Unencumbered investment properties(11) |
$ |
5,403,303 |
$ |
5,313,083 |
|
Total assets |
$ |
7,812,257 |
$ |
7,280,493 |
|
Cash and cash equivalents |
$ |
77,726 |
$ |
83,802 |
|
Available liquidity (period-end)(12) |
$ |
430,634 |
$ |
529,587 |
|
CAPITAL |
|
|
|
|
|
Total equity (excluding LP B Units) |
$ |
4,427,254 |
$ |
4,452,741 |
|
Total equity (including LP B Units)(13) |
$ |
4,699,966 |
$ |
4,669,612 |
|
Total number of Units (in thousands)(14) |
|
276,015 |
|
275,156 |
|
Net asset value (“NAV”) per Unit(15) |
$ |
17.03 |
$ |
16.97 |
|
Unit price |
$ |
14.70 |
$ |
11.69 |
|
See footnotes at end. |
“Dream Industrial had a strong start to 2023 with several initiatives completed during the quarter,” said Brian Pauls, Chief Executive Officer of Dream Industrial REIT. “The acquisition of Summit has positioned us as one of the largest industrial platforms in the country with opportunities to grow accretively through our private capital partnerships and achieve synergies with tenants. Industrial fundamentals continue to be robust and our high-quality global portfolio continues to outperform. For the quarter, we delivered 13% CP NOI and FFO per unit growth, while preserving balance sheet quality and flexibility. Looking forward, we are well-positioned to continue to deliver sector-leading organic growth and create value for our unitholders.”
ORGANIC GROWTH
The Dream Summit JV completed or finalized terms on over 500,000 square feet of new leases and renewals at an average spread of 150% over prior/expiring rents, since the closing of the transaction on February 17, 2023.
INVESTMENT UPDATE
On February 17, 2023, Dream Summit Industrial LP, a limited partnership owned by a joint venture (“Dream Summit JV”), between GIC and the Trust in which the Trust has a 10% interest, acquired all of the assets and assumed all of the liabilities of Summit Industrial income REIT (“Summit REIT”) in a transaction valued at approximately $5.9 billion. The Trust acquired a 10% interest, representing an approximately $473 million total equity contribution, and provides property management and leasing services to the Dream Summit JV on market terms. The Dream Summit JV is expected to provide a new source of growth capital for the Trust to pursue strategic acquisitions and significantly boosts the Trust’s property management and leasing fee stream. For the quarter, including fees earned from the U.S. Industrial Fund and the Dream Summit JV since the close of the transaction on February 17, 2023, the Trust’s total property management and leasing margin was $1.6 million, 36% higher year-over-year. The Trust expects this income stream to continue to grow over time.
DEVELOPMENT UPDATE
The Trust’s development pipeline provides a significant opportunity to add high-quality assets in core markets at attractive economics to the Trust. The Trust has approximately 3.8 million square feet of development projects that are either currently underway or in planning stages.
“Comparative properties NOI growth from our portfolio strengthened further in the first quarter of 2023, after a record 2022,” said Alexander Sannikov, Chief Operating Officer of Dream Industrial REIT. “The gap between in-place and market rents remains wide and should allow for healthy organic growth as tenant demand for industrial space continues to remain strong. In addition to robust organic growth outlook, our development and solar panel program are accretive drivers of cash flow and NAV growth while improving the overall quality of our portfolio. Our increased focus on private capital partnerships has been successful and we now property manage 33 million square feet of industrial GLA for our institutional partners in Canada and the U.S., resulting in a strong and predictable revenue stream.”
CAPITAL STRATEGY
The Trust continues to maintain significant financial flexibility as it executes on its strategy to grow and upgrade portfolio quality. The Trust’s proportion of secured debt(16) is 6.7% of total assets and represents 18.4% of total debt(17), compared to 27.9% one year ago. Additionally, the Trust’s unencumbered asset pool(11) totalled $5.4 billion as at March 31, 2023, representing approximately 79.1% of the Trust’s investment properties value as at March 31, 2023.
During the quarter, the Trust enhanced its liquidity with the issuance of $200 million Series F unsecured debentures at an interest rate of 5.383%. The Trust utilized the proceeds to partly repay the outstanding balance on its unsecured credit facility. The Trust ended Q1 2023 with total available liquidity(12) of $430.6 million including cash and cash equivalents of $77.7 million. In addition, the Trust has access to an additional $250 million of liquidity through the accordion on its unsecured credit facility.
“We continue to focus on maintaining a strong and flexible balance sheet with ample liquidity as we execute on our strategic initiatives,” said Lenis Quan, Chief Financial Officer of Dream Industrial REIT. “Our near-term capital deployment opportunities are centered around funding our development and solar program, as well as growing through our private capital partnerships, both of which generate attractive returns and improve the overall quality of our portfolio and business.”
MANAGEMENT UPDATE
The Trust announced effective today the promotion of Alexander Sannikov to President and Chief Operating Officer. Mr. Sannikov has been the Chief Operating Officer for over three years and has progressively expanded his responsibilities including most recently the oversight of the Trust’s property management and leasing platform for the Dream Summit JV. Brian Pauls will continue his role as Chief Executive Officer.
CONFERENCE CALL
Senior management will host a conference call to discuss the financial results on Wednesday, May 3, 2023, at 1:00 p.m. (ET). To access the conference call, please register at https://register.vevent.com/register/BIf9c58e15509e460ba1a002d0017c6f1f. To access the conference call via webcast, please go to Dream Industrial REIT’s website at www.dreamindustrialreit.ca and click on the link for News, then click on Events. A taped replay of the conference call and the webcast will be available for ninety (90) days following the call.
OTHER INFORMATION
Information appearing in this press release is a select summary of financial results. The condensed consolidated financial statements and management’s discussion and analysis for the Trust will be available at www.dreamindustrialreit.ca and on www.sedar.com.
Dream Industrial REIT is an unincorporated, open-ended real estate investment trust. As at March 31, 2023, Dream Industrial REIT owns, manages and operates a portfolio of 321 industrial assets totalling approximately 70.4 million square feet of gross leasable area in key markets across Canada, Europe, and the U.S. Dream Industrial REIT’s goal is to deliver strong total returns to its unitholders through secure cash flows underpinned by its high-quality portfolio and an investment grade balance sheet as well as driving growth in its net asset value and cash flow per unit. For more information, please visit www.dreamindustrialreit.ca.
FOOTNOTES
Non-GAAP financial measures, ratios and supplementary financial measures
The Trust’s condensed consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). In this press release, as a complement to results provided in accordance with IFRS, the Trust discloses and discusses certain non-GAAP financial measures and ratios, including FFO, diluted FFO per Unit, CP NOI (constant currency basis), total debt, net total debt-to-total assets (net of cash and cash equivalents) ratio, net total debt, total assets (net of cash and cash equivalents, net total debt-to-normalized adjusted EBITDAFV ratio, adjusted EBITDAFV, normalized adjusted EBITDAFV – annualized, interest coverage ratio, available liquidity, total equity (including LP B Units) and NAV per Unit as well as other measures discussed elsewhere in this press release. These non-GAAP financial measures and ratios are not defined by IFRS and do not have a standardized meaning under IFRS. The Trust’s method of calculating these non-GAAP financial measures and ratios may differ from other issuers and may not be comparable with similar measures presented by other issuers. The Trust has presented such non-GAAP financial measures and ratios as Management believes they are relevant measures of the Trust’s underlying operating and financial performance. Certain additional disclosures such as the composition, usefulness and changes, as applicable, of the non-GAAP financial measures and ratios included in this press release have been incorporated by reference from the management’s discussion and analysis of the financial condition and results from operations of the Trust for the three months ended March 31, 2023, dated May 2, 2023 (the “Q1 MD&A 2023”) and can be found under the sections “Non-GAAP Financial Measures" and "Non-GAAP Ratios” and respective sub-headings labelled “Funds from operations (“FFO”)”, "Diluted FFO per Unit", "Comparative properties net operating income (“CP NOI”) (constant currency basis)”, “Net total debt-to-total assets (net of cash and cash equivalents) ratio”, “Net total debt-to-normalized adjusted EBITDAFV ratio (years)”, and “Interest coverage ratio”, “Available Liquidity”, "Total equity (including LP B Units or subsidiary redeemable units"), “Total debt”, “Net asset value (“NAV”) per Unit”, “Net total debt and total assets (net of cash and cash equivalents)”, “Adjusted earnings before interest, taxes, depreciation, amortization and fair value adjustments (“Adjusted EBITDAFV”) and Normalized adjusted EBITDAFV – Annualized”. The composition of supplementary financial measures included in this press release have been incorporated by reference from the Q1 MD&A 2023 and can be found under the section “Supplementary financial measures and ratios and other disclosures”. The Q1 MD&A 2023 is available on SEDAR at www.sedar.com under the Trust’s profile and on the Trust’s website at www.dreamindustrialreit.ca under the Investors section. Non-GAAP financial measures and ratios should not be considered as alternatives to net income, net rental income, cash flows generated from (utilized in) operating activities, cash and cash equivalents, total assets, non-current debt, total equity, or comparable metrics determined in accordance with IFRS as indicators of the Trust’s performance, liquidity, cash flow, and profitability.
Forward looking information
This press release may contain forward-looking information within the meaning of applicable securities legislation, including statements regarding the Trust’s objectives and strategies to achieve those objectives; the Trust’s opportunities to grow through private capital partnerships and ability to achieve synergies with tenants; the strength of the industrial market; the performance and quality of our portfolio; the Trust’s ability to grow organically and create value for unitholders; the Trust’s ability and expectations to achieve strong rental growth over time as it sets rents on expiring leases to market; the Trust’s expectations relating to the benefits to be realized from demand drivers for industrial space, including market rent increases; the expectation that our development pipeline is an accretive driver of cash flow and NAV growth; the Trust’s development, expansion and redevelopment plans, including the timing of construction and expansion, costs, square footage, unlevered yields and anticipated yields; expectations regarding the Trust’s provision of certain services to the Dream Summit JV and related fees, and the pursuit of strategic acquisitions through the Dream Summit JV; the Trust’s ability to add high-quality assets in core markets at attractive economics; our development and intensification pipelines; the development pipeline of Dream Summit JV; the Trust’s objective of and expected ability to provide attractive overall returns and long term value to unitholders; the expected growth of the Trust’s property management and leasing business; expectations regarding the quality of the Trust’s portfolio and the Trust’s strategy to upgrade portfolio quality; the strength, flexibility and liquidity of the Trust’s balance sheet; the Trust’s capital deployment opportunities, including in respect of funding its development and solar program and growing capital partnerships, and expected returns and improvement of the Trust’s portfolio quality and business; expectations regarding our ability to partner with private capital to grow our portfolio; expected occupancy; and similar statements concerning anticipated future events, financials, future leasing activity, including those associated with user demand relative to supply of quality industrial product in the Trust’s operating markets, the ability to lease vacant space, results of operations, performance, business prospects and opportunities, and the real estate industry in general.
Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Trust’s control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, general and local economic and business conditions; employment levels; mortgage and interest rates and regulations; inflation; risks related to a potential economic slowdown in certain of the jurisdictions in which we operate and the effect inflation and any such economic slowdown may have on market conditions and lease rates; uncertainties around the timing and amount of future financings; uncertainties surrounding the COVID-19 pandemic and other public health crises and epidemics; geopolitical events, including disputes between nations, war and international sanctions; the financial condition of tenants; leasing risks, including those associated with the ability to lease vacant space; rental rates and the strength of rental rate growth on future leasing; and interest and currency rate fluctuations. The Trust’s objectives and forward-looking statements are based on certain assumptions, including that the general economy remains stable; inflation and interest rates will not materially increase beyond current market expectations; conditions within the real estate market remain consistent; competition for acquisitions remains consistent with the current climate; and the capital markets continue to provide ready access to equity and/or debt. All forward-looking information in this press release speaks as of the date of this press release. The Trust does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise except as required by law. Additional information about these assumptions and risks and uncertainties is contained in the Trust’s filings with securities regulators, including its latest annual information form and MD&A. These filings are also available at the Trust’s website at www.dreamindustrialreit.ca.
Appendices
Reconciliation of CP NOI (constant currency basis) to net rental income
The tables below reconciles CP NOI (constant currency basis) for the three months ended March 31, 2023 and March 31, 2022 to net rental income.
Three months ended |
|||||||
March 31, |
March 31, |
||||||
|
|
2023 |
|
|
2022 |
|
|
Ontario |
$ |
20,029 |
|
$ |
16,381 |
|
|
Québec |
|
11,867 |
|
|
11,057 |
|
|
Western Canada |
|
11,929 |
|
|
10,889 |
|
|
Canadian portfolio |
|
43,825 |
|
|
38,327 |
|
|
European portfolio (constant currency basis) |
|
27,782 |
|
|
24,763 |
|
|
U.S. portfolio (constant currency basis) |
|
3,171 |
|
|
3,088 |
|
|
CP NOI (constant currency basis) |
|
74,778 |
|
|
66,178 |
|
|
Impact of foreign currency translation on CP NOI |
|
— |
|
|
(610 |
) |
|
NOI from acquired properties – Canada |
|
2,367 |
|
|
78 |
|
|
NOI from acquired properties – Europe |
|
3,780 |
|
|
85 |
|
|
NOI from acquired properties – Dream Summit JV |
|
2,432 |
|
|
— |
|
|
NOI from acquired properties – U.S. |
|
798 |
|
|
270 |
|
|
NOI from disposed share of properties |
|
74 |
|
|
133 |
|
|
Net property management and other income |
|
1,642 |
|
|
1,211 |
|
|
Straight-line rent |
|
2,087 |
|
|
1,478 |
|
|
Amortization of lease incentives |
|
(740 |
) |
|
(629 |
) |
|
Lease termination fees and other |
|
1,085 |
|
|
(160 |
) |
|
Bad debt provisions |
|
(206 |
) |
|
(10 |
) |
|
NOI from properties transferred to properties held for development |
|
— |
|
|
570 |
|
|
Less: NOI from equity accounted investment |
|
(6,637 |
) |
|
(3,281 |
) |
|
Net rental income from continuing operations |
$ |
81,460 |
|
$ |
65,313 |
|
Appendices
Reconciliation of FFO to net income
The table below reconciles FFO for the three months ended March 31, 2023 and March 31, 2022 to net income.
Three months ended March 31, |
|||||||
|
|
2023 |
|
|
2022 |
|
|
Net income for the period |
$ |
(17,730 |
) |
$ |
442,889 |
|
|
Add (deduct): |
|
|
|
|
|||
Fair value adjustments to investment properties |
|
(8,744 |
) |
|
(360,696 |
) |
|
Fair value adjustments to financial instruments |
|
64,589 |
|
|
(27,661 |
) |
|
Share of net loss (income) from equity accounted investments |
|
19,745 |
|
|
(18,394 |
) |
|
Interest expense on subsidiary redeemable units |
|
3,246 |
|
|
3,246 |
|
|
Amortization and write-off of lease incentives |
|
734 |
|
|
628 |
|
|
Internal leasing costs |
|
1,124 |
|
|
1,091 |
|
|
Fair value adjustments to deferred trust units included in G&A |
|
(40 |
) |
|
101 |
|
|
Foreign exchange loss |
|
1,051 |
|
|
10 |
|
|
Share of FFO from equity accounted investments |
|
4,886 |
|
|
1,994 |
|
|
Deferred income tax (recovery) expense |
|
(1,246 |
) |
|
13,430 |
|
|
Transaction costs on acquisitions and dispositions |
|
517 |
|
|
— |
|
|
FFO for the period |
$ |
68,132 |
|
$ |
56,638 |
|
Reconciliation of available liquidity to cash and cash equivalents
The table below reconciles available liquidity to cash and cash equivalents as at March 31, 2023, December 31, 2022 and March 31, 2022.
|
March 31, |
December 31, |
March 31, |
|||||
2023 |
2022 |
2022 |
||||||
Cash and cash equivalents per condensed consolidated financial statements |
$ |
77,726 |
$ |
83,802 |
$ |
290,088 |
||
Undrawn unsecured revolving credit facility(1) |
|
352,908 |
|
445,785 |
|
347,687 |
||
Available liquidity |
$ |
430,634 |
$ |
529,587 |
$ |
637,775 |
||
(1) Net of letters of credit totalling $3,539, $2,414 and $2,313 as at March 31, 2023, December 31, 2022 and March 31, 2022, respectively. |
Reconciliation of total equity (including LP B Units) to total equity (excluding LP B Units)
The table below reconciles total equity (including LP B Units) to total equity (excluding LP B Units) as at March 31, 2023, December 31, 2022 and March 31, 2022.
|
As at |
|||||||||||||
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
|||||||||
|
Number of Units |
|
Amount |
|
Number of Units |
|
Amount |
|
Number of Units |
|
Amount |
|||
REIT Units and unitholders’ equity |
257,463,403 |
$ |
3,118,759 |
|
256,604,207 |
$ |
3,106,904 |
|
254,173,170 |
$ |
3,076,757 |
|||
Retained earnings |
— |
|
1,211,924 |
|
— |
|
1,274,974 |
|
— |
|
1,146,968 |
|||
Accumulated other comprehensive income (loss) |
— |
|
96,571 |
|
— |
|
70,863 |
|
— |
|
(28,800) |
|||
Total equity per condensed consolidated financial statements |
257,463,403 |
|
4,427,254 |
|
256,604,207 |
|
4,452,741 |
|
254,173,170 |
|
4,194,925 |
|||
Add: LP B Units |
18,551,855 |
|
272,712 |
|
18,551,855 |
|
216,871 |
|
18,551,855 |
|
299,427 |
|||
Total equity (including LP B Units) |
276,015,258 |
$ |
4,699,966 |
|
275,156,062 |
$ |
4,669,612 |
|
272,725,025 |
$ |
4,494,352 |
|||
Reconciliation of total debt to non-current debt
The table below reconciles total debt to non-current debt as at March 31, 2023, December 31, 2022 and March 31, 2022.
Amounts per condensed consolidated financial statements |
|
March 31, |
December 31, |
March 31, |
||||
2023 |
2022 |
2022 |
||||||
Non-current debt |
$ |
2,554,305 |
$ |
2,137,412 |
$ |
1,912,214 |
||
Current debt |
|
337,408 |
|
275,536 |
|
111,821 |
||
Fair value of CCIRS(1)(2) |
|
(57,649) |
|
(75,581) |
|
(78,157) |
||
Total debt |
$ |
2,834,064 |
$ |
2,337,367 |
$ |
1,945,878 |
||
(1) As at March 31, 2023, the CCIRS were in a net asset position and $66,608 was included in "Derivatives and other non-current assets" and ($8,959) in "Derivatives and other non-current liabilities" in the condensed consolidated financial statements (December 31, 2022 - the CCIRS were in a net asset position and $76,593 was included in "Derivatives and other non-current assets" and ($1,012) in "Derivatives and other non-current liabilities" in the condensed consolidated financial statements). |
||||||||
(2) As at March 31, 2022, the CCIRS were in a net asset position and $85,629 were included in "Derivatives and other non-current assets" and $7,472 in "Derivatives and other non-current liabilities" in the condensed consolidated financial statements. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230502005865/en/
Dream Industrial REIT
Brian Pauls
Chief Executive Officer
(416) 365-2365
[email protected]
Lenis Quan
Chief Financial Officer
(416) 365-2353
[email protected]
Alexander Sannikov
President & Chief Operating Officer
(416) 365-4106
[email protected]