Dream Industrial REIT (DIR.UN-TSX) or (the “Trust” or “DIR” or the “REIT” or “we”) today announced its financial results for the three months and year ended December 31, 2020. Management will host a conference call to discuss the financial results on February 17, 2021 at 11:00 a.m. (ET).
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210216006220/en/
Figure 1, Q4-2020 Acquisitions (Photo: Business Wire)
HIGHLIGHTS
FINANCIAL HIGHLIGHTS
SELECTED FINANCIAL INFORMATION |
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(unaudited) |
Three months ended |
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Year ended |
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December 31, |
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December 31, |
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December 31, |
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December 31, |
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(in thousands of dollars except per Unit amounts) |
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2020 |
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2019 |
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2020 |
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2019 |
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Operating results |
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Net income |
$ |
81,513 |
$ |
106,642 |
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$ |
200,136 |
$ |
179,432 |
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Funds from operations (“FFO”)(1) |
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31,935 |
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25,809 |
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119,646 |
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105,036 |
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Net rental income |
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44,512 |
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36,224 |
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168,883 |
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139,026 |
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CP NOI (constant currency basis)(1)(2) |
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36,554 |
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36,012 |
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123,825 |
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124,131 |
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Per Unit amounts |
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Distribution rate |
$ |
0.17 |
$ |
0.17 |
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$ |
0.70 |
$ |
0.70 |
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FFO – diluted(1)(3) |
$ |
0.19 |
$ |
0.18 |
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$ |
0.71 |
$ |
0.78 |
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Financing and Capital |
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Net total debt-to-assets ratio(1) |
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End of period |
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31.3% |
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23.7% |
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31.3% |
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23.7% |
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Beginning of period |
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29.6% |
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31.4% |
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23.7% |
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43.5% |
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Net asset value (“NAV”) per Unit (year-end)(1) |
$ |
12.55 |
$ |
11.76 |
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See footnotes at end. |
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PORTFOLIO INFORMATION |
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(unaudited) |
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As at |
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December 31, |
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December 31, |
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(in thousands of dollars) |
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2020 |
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2019 |
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Total portfolio |
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Number of assets(4) |
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177 |
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130 |
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Investment properties fair value |
$ |
3,241,601 |
$ |
2,428,664 |
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Gross leasable area (“GLA”) (in millions of sq. ft.) |
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27.3 |
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21.9 |
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Occupancy rate – in-place and committed (year-end) |
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95.6% |
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95.8% |
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Occupancy rate – in-place (year-end) |
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94.7% |
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94.9% |
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See footnotes at end. |
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FINANCING INFORMATION |
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(unaudited) |
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As at |
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December 31, |
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December 31, |
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(in thousands of dollars) |
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2020 |
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2019 |
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DBRS credit rating |
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BBB (mid) |
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— |
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Net total debt-to-assets ratio(1) |
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31.3% |
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23.7% |
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Net total debt-to-adjusted EBITDAFV (years)(1) |
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6.2 |
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4.3 |
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Interest coverage ratios (times)(1) |
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4.4 |
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3.8 |
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Weighted average face interest rate on debt (year-end)(5) |
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2.57% |
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3.59% |
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Weighted average remaining term to maturity on debt (years) |
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4.8 |
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5.5 |
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Unencumbered assets (year-end)(1) |
$ |
1,441,589 |
$ |
96,251 |
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Available liquidity (year-end)(1) |
$ |
573,235 |
$ |
591,537 |
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See footnotes at end. |
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“The DIR team successfully navigated through a challenging year and achieved transformational milestones across all aspects of the business,” said Brian Pauls, Chief Executive Officer of Dream Industrial REIT. “We announced our European expansion at the beginning of the year and we now have nearly $475 million, or 15% of our portfolio, located in the strong industrial markets of Germany and the Netherlands. We successfully implemented our debt strategy with nearly $450 million of euro-equivalent debt at an average rate of 0.65%. Leasing activity was strong in the last half of 2020 and the pace of rental rate growth continues in our portfolio with over 4.5 million square feet of leases signed at double-digit rental spreads since the beginning of 2020. Moreover, we advanced our development pipeline significantly and completed over $620 million of high quality acquisitions. Our initiatives have positioned us well to grow FFO per unit and continue to create long-term value for our unitholders.”
STRATEGIC HIGHLIGHTS
Acquisitions – During the quarter, the Trust completed five acquisitions in Europe totalling approximately $112 million. For the full year, the Trust completed $623 million of acquisitions, and thus far in 2021, has closed, is under contract or in exclusivity on $355 million of assets in the U.S., Germany, the Netherlands, and its target Canadian markets. These acquisitions allow the Trust to add scale in its target markets adding approximately 7.5 million square feet of high quality, well-located and functional logistics space to the Trust’s portfolio. Built on average in the late 2000s, these assets are above the average quality of the Trust’s portfolio, with an average clear ceiling height of over 30 feet and occupied by high quality tenants mainly in the logistics and consumer goods sectors. Thus far in 2021, the Trust has closed just over $138 million of assets in Québec, Germany, and the U.S., with the remainder expected to close in the next 30-60 days. Please refer to the Trust’s press release (link) dated January 20, 2021 for further details on these acquisitions.
Acquisitions closed during Q4 2020
See Figure 1, Q4-2020 Acquisitions
Capital strategy – The Trust’s strong and flexible balance sheet, along with its superior portfolio and tenant diversification, resulted in the Trust receiving an issuer rating of BBB (mid) with stable trend from DBRS during Q4 2020. The investment grade rating immediately lowers borrowing costs for the Trust and enhances access to debt capital markets. During the quarter, the Trust obtained nearly $450 million of unsecured debt at an average interest rate of approximately 0.65%, and lowered its average in-place interest rate by 100 basis points over the year to 2.57%. On January 29, 2021, the Trust closed on a $259 million equity offering, and utilized the net proceeds to pre-pay $130 million of Canadian mortgages with an average interest rate of 3.59% on February 1, 2021, increasing the Trust’s unencumbered asset pool to over $2.0 billion, or approximately 58% of investment properties fair value, after factoring in the $355 million of acquisitions that have closed, are under contract, or in exclusive negotiations.
“After significantly reducing leverage over the last three years, we have increased financial flexibility to support the continued growth and high-grading of our portfolio,” said Lenis Quan, Chief Financial Officer of Dream Industrial REIT. “Our geographic diversity provides us flexibility to allocate capital towards the most attractive opportunities across our markets, and to access capital at the most optimal cost for the REIT, allowing us to achieve attractive returns as we execute on our strategic initiatives. We continue to maintain a strong balance sheet with over $250 million of acquisition capacity to further grow our portfolio in conjunction with generating cash flow per unit and NAV per unit growth.”
The Trust also intends to establish an at-the-market equity program (the “ATM Program”) that would allow the Trust to issue REIT Units to the public from time to time at prevailing market prices, directly on the Toronto Stock Exchange or on other marketplaces to the extent permitted. The Trust intends to use the net proceeds from the ATM Program, if any, to fund acquisitions, for repayment of indebtedness, and for general trust purposes. Given the current acquisition capacity available to the Trust, the Trust does not anticipate using the ATM Program while that acquisition capacity is being deployed.
Development pipeline – The Trust continues to build and execute on a development pipeline across its target markets. Within its existing portfolio, the Trust has identified 21 sites in its portfolio with over 67 acres of excess land. The Trust estimates that this excess land could accommodate up to 1.5 million square feet of additional GLA over the medium term. The Trust also identified several properties with redevelopment potential. These properties are currently improved with approximately one million square feet of GLA on over 70 acres. The Trust estimates that over time, these sites can accommodate significant intensification with more valuable uses.
The Trust has provided some highlights on its near-term development activities below:
401 Marie Curie Boulevard, Greater Montréal Area - Project Rendering
See Figure 2, 401 Marie Curie Boulevard, Greater Montréal Area - Project Rendering
100 East Beaver Creek, Greater Toronto Area – Project Rendering
See Figure 3, 100 East Beaver Creek, Greater Toronto Area - Project Rendering
OPERATIONAL HIGHLIGHTS
SELECTED OPERATIONAL STATISTICS |
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(unaudited) |
Q2 2020 |
Q3 2020 |
Q4 2020 |
Jan-21 |
Cash collected from tenants |
95.8% |
96.3% |
99.0% |
97.7% |
CECRA cash collected from government |
2.4% |
2.0% |
0.0% |
0.0% |
Sub-total of cash collected from tenants and government* |
98.2% |
98.3% |
99.0% |
97.7% |
Deferrals granted (with defined repayment schedule) |
3.5% |
0.0% |
0.0% |
0.0% |
Cash collected on deferrals granted |
(3.2%) |
0.0% |
0.0% |
0.0% |
Sub-total of deferrals granted (net of cash collected)* |
0.3% |
0.0% |
0.0% |
0.0% |
CECRA (the Trust's portion) |
1.2% |
1.0% |
0.0% |
0.0% |
Sub-total of cash collected, adjusted for CECRA and deferrals granted* |
99.7% |
99.3% |
99.0% |
97.7% |
Remaining to be collected |
0.3% |
0.7% |
1.0% |
2.3% |
Total* |
100.0% |
100.0% |
100.0% |
100.0% |
*includes applicable taxes |
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“Our robust operating results showcase the quality of our well-located urban portfolio, which continues to attract major national and global e-commerce occupiers,” said Alexander Sannikov, Chief Operating Officer of Dream Industrial REIT. “Our leasing momentum has significantly improved the outlook for our operating results in 2021 and future years and we intend to increase our focus on strategic development and intensification initiatives that should result in meaningful NAV per unit growth over the long term. At the same time, we remain dedicated to following through on our sustainability goals outlined in our Corporate Sustainability Report.”
FINANCIAL HIGHLIGHTS
CONFERENCE CALL
Senior management will host a conference call to discuss the financial results on Wednesday, February 17, 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 8684 600#. 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 & Events, then click on Calendar of 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 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 December 31, 2020, Dream Industrial REIT owns and operates a portfolio of 177 industrial assets (271 properties) comprising approximately 27.3 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 |
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(1) |
FFO, diluted FFO per Unit, CP NOI (constant currency basis), net total debt-to-assets ratio, net total debt-to-adjusted EBITDAFV, available liquidity, NAV per Unit, interest coverage ratio and unencumbered assets 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. |
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(2) |
CP NOI (constant currency basis) for three months ended December 31, 2020 and December 31, 2019 excludes properties acquired after October 1, 2019 and properties held for sale or disposed of prior to December 31, 2020. CP NOI (constant currency basis) for the years ended December 31, 2020 and December 31, 2019 excludes properties acquired after January 1, 2019 and properties held for sale or disposed of prior to December 31, 2020. |
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(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 months and year ended December 31, 2020, in the section “Non-GAAP measures and other disclosures”, under the heading “Weighted average number of Units”. |
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(4) |
Number of assets has been restated to conform to current period presentation. An asset has been redefined to include a building or a cluster of buildings in close proximity to one another attracting similar tenants. |
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(5) |
Weighted average face interest rate on debt is calculated as the weighted average face interest rate of all interest bearing debt. |
Non-GAAP Measures
The Trust’s 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, comparative properties NOI (constant currency basis), net total debt- to-assets ratio, available liquidity, NAV per Unit, net total debt-to-adjusted EBITDAFV, interest coverage ratio and unencumbered assets 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 months and year ended December 31, 2020.
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 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 expected acquisitions and anticipated additional square footage resulting from such acquisitions; the effect of acquisitions on its leverage levels; the anticipated timing of closing of the acquisitions referred to in this press release; the expected going-in cap rate of the acquisitions; the Trust’s acquisition pipeline; the Trust’s FFO per Unit in future periods; the pro forma composition of the Trust’s portfolio after the completion of the acquisitions and potential development opportunities; the expectation that Amazon will be the Trust’s 6th largest tenant; the Trust’s development and redevelopment plans, including the timing of construction, timing of completion of the Trust’s developments and anticipated yields; the Trust’s ability to access debt markets more efficiently in order to continue to execute on its strategy to grow and upgrade the quality of the portfolio; expected interest rates and costs of debt; the intended use of proceeds of the term loan; expected debt and liquidity levels and unencumbered asset pool; the Trust’s intent to establish the ATM Program and the intended use of proceeds from such program and the Trust’s expectations of the extent of rent deferrals and repayment from tenants. 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 and government measures related thereto; 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/20210216006220/en/
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]