Dream Industrial REIT (DIR.UN-TSX) or (the “Trust” or “Dream Industrial” or “we”) today announced its financial results for the three and six months ended June 30, 2021. Management will host a conference call to discuss the financial results on August 4, 2021 at 11:00 a.m. (ET).
HIGHLIGHTS
FINANCIAL HIGHLIGHTS |
|||||||||||||||
SELECTED FINANCIAL INFORMATION |
|
|
|
||||||||||||
(unaudited) |
Three months ended |
|
|
|
Six months ended |
||||||||||
|
|
June 30, |
|
|
|
June 30, |
|
|
|
June 30, |
|
|
|
June 30, |
|
(in thousands of dollars except per Unit amounts) |
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Operating results |
|
|
|
|
|
|
|
|
|||||||
Net income |
$ |
160,295 |
$ |
2,944 |
$ |
255,559 |
$ |
44,961 |
|||||||
Funds from operations (“FFO”)(1) |
|
39,158 |
|
29,558 |
|
74,066 |
|
57,552 |
|||||||
Net rental income |
|
51,095 |
|
42,378 |
|
97,757 |
|
82,119 |
|||||||
CP NOI (constant currency basis)(1)(2) |
|
43,972 |
|
42,350 |
|
73,870 |
|
71,623 |
|||||||
Per Unit amounts |
|
|
|
|
|
|
|
|
|||||||
Distribution rate |
$ |
0.17 |
$ |
0.17 |
$ |
0.35 |
$ |
0.35 |
|||||||
FFO – diluted(1)(3) |
$ |
0.19 |
$ |
0.17 |
$ |
0.38 |
$ |
0.34 |
|||||||
See footnotes at end. |
|||||||||||||||
PORTFOLIO INFORMATION |
|
||||||||||
(unaudited) |
As at |
||||||||||
|
June 30, |
|
|
December 31, |
|
|
June 30, |
||||
(in thousands of dollars) |
|
2021 |
|
|
|
2020 |
|
|
|
2020 |
|
Total portfolio |
|
|
|
|
|
|
|||||
Number of assets(4) |
|
215 |
|
177 |
|
169 |
|||||
Investment properties fair value(5) |
$ |
4,689,801 |
$ |
3,241,601 |
$ |
2,897,409 |
|||||
Gross leasable area (“GLA”) (in millions of sq. ft.) |
|
38.5 |
|
27.3 |
|
25.8 |
|||||
Occupancy rate – in-place and committed (period-end) |
|
98.0 % |
|
95.6% |
|
95.6% |
|||||
Occupancy rate – in-place (period-end) |
|
97.4% |
|
94.7% |
|
95.0% |
|||||
See footnotes at end. |
|||||||||||
FINANCING AND CAPITAL INFORMATION |
|
||||||||||
(unaudited) |
As at |
||||||||||
|
June 30, |
|
|
December 31, |
|
|
June 30, |
||||
(in thousands of dollars) |
|
2021 |
|
|
|
2020 |
|
|
|
2020 |
|
Credit rating – DBRS |
|
BBB (mid) |
|
BBB (mid) |
|
— |
|||||
Net total debt-to-assets ratio(1) |
|
37.9 % |
|
31.3% |
|
28.1% |
|||||
Net total debt-to-adjusted EBITDAFV (years)(1) |
|
8.6 |
|
6.2 |
|
5.4 |
|||||
Interest coverage ratio (times)(1) |
|
5.2 |
|
4.4 |
|
4.1 |
|||||
Weighted average face interest rate on debt(6) (period-end) |
|
1.49 % |
|
2.57% |
|
3.57% |
|||||
Weighted average term to maturity on debt (years) |
|
4.4 |
|
4.8 |
|
5.6 |
|||||
Unencumbered assets (period-end)(1)(5) |
$ |
2,322,719 |
$ |
1,441,589 |
$ |
1,107,427 |
|||||
Available liquidity (period-end)(1) |
|
663,249 |
|
573,235 |
|
395,437 |
|||||
Net asset value (“NAV”) per Unit (period-end)(1) |
|
13.69 |
|
12.55 |
|
11.75 |
|||||
See footnotes at end. |
|||||||||||
“We continue to take significant steps to create a more resilient, valuable, and growing business for our unitholders,” said Brian Pauls, Chief Executive Officer of Dream Industrial REIT. “Since mid-2017, we have transformed Dream Industrial from a small-cap Canadian industrial REIT into a $5 billion global REIT with high-quality, well-diversified assets located in some of the most sought-after logistics markets in the world, along with a primarily unsecured financing model and an investment grade balance sheet. Our focus going forward will continue to be growing through high-quality acquisitions and developing best-in-class assets, in order to generate solid organic growth over time and become the premier industrial REIT in each of our operating markets.”
STRATEGIC HIGHLIGHTS
Acquisitions – Since the end of Q1 2021, the Trust has closed on 41 income-producing high-quality logistics assets across Canada, the U.S., and Europe totalling $1.5 billion, including the 31-property Pan-European logistics portfolio with a total value of $1.3 billion that closed on June 24, 2021. These acquisitions have added over 10.4 million square feet of high quality, well-located and functional logistics space to the Trust’s portfolio. Built on average in 2006, these assets are above the average quality of the Trust’s portfolio, with an average clear ceiling height of 35 feet, and occupied by high-quality tenants primarily in the logistics and food and beverage industry.
The pipeline for future acquisitions remains strong with over $200 million in deals currently being underwritten and the Trust has waived conditions on an asset in Canada for approximately $18 million. Pro forma these acquisitions, the Trust will have acquired approximately $1.8 billion of assets in 2021, adding 12 million square feet of high-quality GLA to the Trust’s portfolio.
U.S. Industrial venture – On July 30, 2021, the Trust sold 18 of its U.S. assets (29 buildings in total) to a private open-ended U.S. industrial fund (the “Fund”) in consideration for approximately $215 million in cash and an approximately 25% retained interest in the Fund. A subsidiary of the Trust will provide property management, construction management, and leasing services to the Fund at market rates. This is expected to provide a growing income stream to the Trust as the Fund scales in attractive U.S. industrial markets. This transaction allows the Trust to continue to grow in attractive U.S. industrial markets, improving overall portfolio quality and diversification, while maintaining an enhanced geographic mix.
Development pipeline – The Trust has initiated a structured development program that allows it to add high-quality assets to its portfolio in markets with steep barriers to entry. The Trust is focused on building and executing on a development program that capitalizes on its predominantly urban portfolio across North America and Europe. The Trust has commenced three projects totalling 700,000 square feet in Las Vegas, Nevada, Richmond Hill, Ontario and Montréal, Québec, which are expected to be completed in the next 12 months. Overall, the Trust’s near-term development pipeline exceeds 3.5 million square feet and the Trust expects to have up to 5% of its total assets under active development at any point of time, with targeted yields on construction cost of over 6%.
The Trust has provided some highlights on its near-term development activities below:
Capital strategy – The Trust continues to focus on growing and upgrading portfolio quality while increasing financial flexibility. Since announcing its debt strategy at the beginning of 2020, the Trust has raised over $1.2 billion of unsecured debt, while repaying approximately $300 million of secured debt. The Trust’s European expansion has allowed the Trust to swap these unsecured borrowings into euro-equivalent borrowings at an average interest rate under 0.5%, including $800 million of unsecured debentures swapped into euros at an average interest rate of only 0.35% during Q2 2021. The Trust’s debt strategy has allowed it to reduce its average interest rate on its total debt outstanding by approximately 200 basis points or nearly 60%, from over 3.5% to approximately 1.5% over this time period.
In the quarter the Trust finalized the Green Financing Framework and completed the successful issuance of $400 million in Series C Debentures (Green Bonds). Financing proceeds will be allocated to sustainable projects which may include green buildings, energy efficiency, renewable energy, sustainable water and waste-water management, and clean transportation. The deployment of the proceeds is well underway and the Trust has already financed/refinanced or have identified over $300 million of eligible projects to date, including over $200 million of Green-certified assets acquired as part of the Pan-European logistics portfolio transaction.
Subsequent to quarter end, the Trust repaid approximately $168 million of Canadian mortgages bearing interest at an average interest rate of 3.65% with a remaining term to maturity of 2.4 years. This is expected to result in the level of secured debt as a proportion of total debt dropping to approximately 40%, while the unencumbered asset pool is expected to increase to over $2.8 billion, representing approximately 60% of total assets. Pro forma the mortgage repayments and the U.S. fund transaction, the Trust’s net total debt-to-assets ratio(1) will decline to the mid-30% range and the Trust will retain over $550 million of liquidity, which will allow it to acquire over $200 million of assets as well as repay secured debt, while maintaining its net total debt-to-assets ratio(1) in the targeted mid-to-high 30% range.
“We continue to execute on significant strategic initiatives to grow and upgrade the quality of our portfolio and the business,” said Lenis Quan, Chief Financial Officer of Dream Industrial REIT. “Our European expansion and debt strategy have allowed us to significantly improve geographic diversity, portfolio stability, as well as financial flexibility. With the average interest rate on our total debt declining over 200 basis points or 60% in under 18 months of announcing our strategy, we have significantly outperformed our initial expectations. Looking forward, with our balance sheet in the mid-to-high 30% targeted leverage range, we expect FFO and NAV per unit growth to accelerate.”
OPERATIONAL HIGHLIGHTS
The following table summarizes selected operational statistics with respect to the last three quarters, all presented as a percentage of recurring contractual gross rent as at August 3, 2021:
SELECTED OPERATIONAL STATISTICS |
||||||
(unaudited) |
|
Q2 2021 |
|
Q1 2021 |
|
Q4 2020 |
Cash collected from tenants |
|
99.2 % |
|
99.6% |
|
99.5% |
Deferrals (with defined repayment schedule) |
|
0.2 % |
|
—% |
|
—% |
Cash collected on deferrals |
|
(0.1 %) |
|
—% |
|
—% |
Sub-total of cash collected |
|
99.3 % |
|
99.6% |
|
99.5% |
Remaining to be collected |
|
0.7 % |
|
0.4% |
|
0.5% |
Total |
|
100.0 % |
|
100.0% |
|
100.0% |
“Our high-quality urban portfolio continues to attract strong tenants and we continue to be market leaders in terms of occupancy and rental rates,” said Alexander Sannikov, Chief Operating Officer of Dream Industrial REIT. “Our pace of organic growth has been strong and we expect it to strengthen further in the second half of the year. Our recent Pan-European logistics portfolio acquisition has significantly improved portfolio quality and we look forward to enhancing returns with a structured development program, and we currently have a pipeline of projects in excess of three million square feet. With pricing on well-located high quality assets at record levels, we expect our development activity to significantly increase FFO and NAV per unit, and allow us to generate strong returns for our stakeholders.”
FINANCIAL HIGHLIGHTS
CONFERENCE CALL
Senior management will host a conference call to discuss the financial results on Wednesday, August 4, 2021 at 11:00 a.m. (ET). To access the conference call, please dial 1-888-465-5079 in Canada or 416-216-4169 elsewhere and use passcode 7492 345#. 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 June 30, 2021, Dream Industrial REIT owns and operates a portfolio of 215 industrial assets (317 properties) comprising approximately 38.5 million square feet of gross leasable area in key markets across North America and a growing presence in strong European industrial markets. Dream Industrial REIT’s objective is to continue to grow and upgrade the quality of its portfolio and to provide attractive overall returns to its unitholders. For more information, please visit www.dreamindustrialreit.ca.
FOOTNOTES |
||
(1) | FFO, diluted FFO per Unit, CP NOI (constant currency basis), net total debt-to-assets ratio, net total debt-to-adjusted EBITDAFV, interest coverage ratio, unencumbered assets, available liquidity and NAV per Unit are non-GAAP measures used by Management in evaluating operating and financial performance. Please refer to the cautionary statements under the heading “Non-GAAP Measures” in this press release. |
|
(2) | CP NOI (constant currency basis) for the three months ended June 30, 2021 and June 30, 2020 excludes properties acquired after April 1, 2020 and properties disposed of prior to the current quarter. CP NOI (constant currency basis) for the six months ended June 30, 2021 and June 30, 2020 excludes properties acquired after January 1, 2020 and properties disposed of prior to the current quarter. |
|
(3) | A description of the determination of diluted amounts per Unit can be found in the Trust’s Management’s Discussion and Analysis for the three and six months ended June 30, 2021, in the section “Non-GAAP measures and other disclosures”, under the heading “Weighted average number of Units”. |
|
(4) | The term “Number of properties” in prior period has been renamed to “Number of assets” and redefined as a building, or a cluster of buildings in close proximity to one another attracting similar tenants. Accordingly, the number of assets in prior periods has been revised to reflect the change in definition. |
|
(5) | Excludes assets held for sale in the current period. |
|
(6) | Weighted average face interest rate on debt is calculated as the weighted average face interest rate of all interest bearing debt as at period-end. |
|
Non-GAAP 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, including FFO, diluted FFO per Unit, CP NOI (constant currency basis), net total debt-to-assets ratio, net total debt-to-adjusted EBITDAFV, interest coverage ratio, unencumbered assets, available liquidity and NAV per Unit as well as other measures discussed elsewhere in this press release. These non-GAAP measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other income trusts. The Trust has presented such non-GAAP measures as Management believes they are relevant measures of the Trust’s underlying operating and financial performance. Non-GAAP measures 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. For a full description of these measures and, where applicable, a reconciliation to the most directly comparable measure calculated in accordance with IFRS, please refer to the “Non-GAAP measures and other disclosures” section in Dream Industrial REIT’s MD&A for the three and six months ended June 30, 2021.
Forward looking information
This press release may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking information generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans”, or “continue”, or similar expressions suggesting future outcomes or events. Some of the specific forward-looking information in this press release may include among other things, including statements regarding the Trust’s objectives and strategies to achieve those objectives; the Trust’s expectations relating to the benefits to be realized from demand drivers for industrial space; the Trust’s ability to accretively acquire high-quality assets while maintaining a conservatively financed balance sheet; the Trust’s ability to deliver attractive overall returns to its unitholders over the long-term; the Trust’s total acquisitions in 2021; the effect of acquisitions on its leverage levels; the anticipated timing of closing of the acquisitions referred to in this press release; the Trust’s acquisition pipeline; the provision of property management, construction management and leasing services to the Fund by a subsidiary of the Trust; the expectation of the Trust’s growing income stream by having a subsidiary of the Trust provide property management, construction management, and leasing services to the Fund; the pro forma composition of our portfolio after the completion of the acquisitions and potential development opportunities, including the GLA to be added to the Trust’s portfolio following the acquisitions; our unencumbered assets ratio and our level of secured debt as a proportion of total debt after the completion of acquisitions and debt repayments; the Trust’s net total debt-to-assets ratio pro forma the mortgage repayments and the U.S. fund transaction and the resulting liquidity which is expected to be used for the acquisition of assets as well as the repayment of secured debt; our development and redevelopment plans, including timing of construction commencement and intensification, timing for commencing construction and completion of our developments, anticipated development yields and the percentage of the Trust’s total assets it expects to have under active development; anticipated density and GLA that our excess land can accommodate; the Trust’s ability to deliver on environmental, social and governance initiatives; the Trust's ability to obtain green building certifications for its portfolio and the expansion of its green building certification program over time; the implementation and results of the Trust's solar power programs; and the Trust's ability to obtain green bond framework financing and the allocation of financing proceeds from the offering of Series C Debentures (Green Bonds) to sustainable projects. 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 Dream Industrial REIT’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; the uncertainties around the timing and amount of future financings; uncertainties surrounding the COVID-19 pandemic; the financial condition of tenants; leasing risks, including those associated with the ability to lease vacant space; rental rates 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, interest rates remain stable, conditions within the real estate market remain consistent, competition for acquisitions remains consistent with the current climate and that 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. Dream Industrial REIT 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 Dream Industrial REIT’s filings with securities regulators, including its latest annual information form and MD&A. These filings are also available at Dream Industrial REIT’s website at www.dreamindustrialreit.ca.
View source version on businesswire.com: https://www.businesswire.com/news/home/20210803006142/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
Chief Operating Officer
(416) 365-4106
[email protected]