Dream Industrial REIT Reports Strong Q2 2023 Financial Results

This press release contains forward-looking information that is based upon assumptions and is subject to risks and uncertainties as indicated in the cautionary note contained within this press release. All dollar amounts are in Canadian dollars unless otherwise indicated.

TORONTO--()--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 and six months ended June 30, 2023. Management will host a conference call to discuss the financial results on August 2, 2023 at 1:00 p.m. (ET).

HIGHLIGHTS

  • Diluted funds from operations (“FFO”) per Unit(1) was $0.25 in Q2-2023, a 14.0% increase when compared to $0.22 in Q2-2022;
  • Comparative properties net operating income (“CP NOI”) (constant currency basis)(2) was $78.5 million in Q2-2023, a 11.4% increase when compared to $70.5 million in Q2-2022. The Canadian portfolio posted a year-over-year CP NOI (constant currency basis) growth of 12.1%. The European portfolio saw a 11.4% year-over-year CP NOI (constant currency basis) growth.
  • Net rental income was $83.0 million in Q2-2023, a 20.8% increase when compared to $68.7 million in Q2-2022. Year-over-year net rental income increased by 24.4% in Ontario, 14.2% in Québec, 2.6% in Western Canada and 24.6% in Europe excluding disposed investment properties, primarily driven by strong comparative properties NOI (constant currency basis) growth in 2023 and 2022 and the impact of acquired investment properties in the past year.
  • Net income was $80.4 million in Q2-2023, a decrease of $91.1 million when compared to net income of $171.5 million in Q2-2022, mainly driven by fair value adjustments to financial instruments. The net income in Q2-2023 comprised of net rental income of $83.0 million, fair value adjustments to investment properties of $2.0 million, fair value adjustments to financial instruments of $9.1 million and other expenses of $13.7 million;
  • Total assets were $7.8 billion as at June 30, 2023, a 6.9% increase when compared to $7.3 billion as at December 31, 2022, driven by acquisitions and higher investment property values;
  • Total equity (including LP B Units)(2) and total equity (per condensed consolidated financial statements) was $4.7 billion and $4.5 billion as at June 30, 2023, respectively. This represents a 0.6% increase and 1.3% increase, respectively, when compared to December 31, 2022;
  • Net asset value (“NAV”) per Unit(1) was $16.97 as at June 30, 2023, a 2.0% increase when compared to the NAV per Unit of $16.64 as at June 30, 2022.

(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) and 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

Six months ended

 

June 30,

June 30,

June 30,

June 30,

(in thousands of dollars except per Unit amounts)

 

2023

 

2022

 

2023

 

2022

Operating results

 

 

 

 

Net rental income

$

83,035

$

68,729

$

164,495

$

134,042

CP NOI (constant currency basis)(1)

 

78,466

 

70,453

 

151,684

 

135,082

Net income

 

80,352

 

171,480

 

62,622

 

614,369

Funds from operations (“FFO”)(2)

 

67,821

 

58,925

 

135,953

 

115,563

Per Unit amounts

 

 

 

 

FFO – diluted(3)(4)

$

0.25

$

0.22

$

0.49

$

0.43

Distribution rate

$

0.17

$

0.17

$

0.35

$

0.35

See footnotes at end.

 

 

 

 

 

PORTFOLIO INFORMATION

 

 

 

As at

 

June 30,

December 31,

June 30,

(in thousands of dollars)

 

2023

 

2022

 

2022

Total portfolio

 

 

Number of assets(5)(6)

 

321

 

257

 

257

Investment properties fair value

$

6,835,012

$

6,759,425

$

6,407,001

Gross leasable area (“GLA”) (in millions of sq. ft.)(6)

 

70.3

 

47.3

 

46.0

Occupancy rate – in-place and committed (period-end)(7)

 

98.0%

 

98.9%

 

99.1%

Occupancy rate – in-place (period-end)(7)

 

97.6%

 

97.9%

 

98.6%

See footnotes at end.

 

 

FINANCING AND CAPITAL INFORMATION

 

 

 

 

As at

 

June 30,

December 31,

June 30,

(in thousands of dollars except per Unit amounts)

 

2023

 

2022

 

2022

FINANCING

 

 

 

Credit rating- DBRS

BBB (mid)

BBB (mid)

BBB (mid)

Net total debt-to-total assets (net of cash and cash equivalents) ratio(8)

 

36.2%

 

31.7%

 

29.7%

Net total debt-to-normalized adjusted EBITDAFV ratio (years)(9)

 

9.0

 

8.3

 

7.8

Interest coverage ratio (times)(10)

 

7.9

 

12.3

 

12.5

Weighted average face interest rate on debt

 

2.28%

 

1.21%

 

1.01%

Weighted average remaining term to maturity on debt (years)

 

2.8

 

3.0

 

3.3

Unencumbered investment properties(11)

$

5,869,611

$

5,313,083

$

4,916,710

Total assets

$

7,784,409

$

7,280,493

$

6,963,251

Cash and cash equivalents

$

43,491

$

83,802

$

81,311

Available liquidity (period-end)(12)

$

243,032

$

529,587

$

429,062

CAPITAL

 

 

 

Total equity (per condensed consolidated financial statements)

$

4,511,382

$

4,452,741

$

4,328,951

Total equity (including LP B Units)(13)

$

4,699,702

$

4,669,612

$

4,553,057

Total number of Units (in thousands)(14)

 

276,950

 

275,156

 

273,552

Net asset value (“NAV”) per Unit(15)

$

16.97

$

16.97

$

16.64

Unit price

$

14.11

$

11.69

$

12.08

See footnotes at end.

 

 

 

“DIR’s strong second quarter results reflect our recent strategic initiatives as we continue to deliver strong CP NOI and FFO per unit growth,” said Brian Pauls, Chief Executive Officer of Dream Industrial REIT. “The Dream Summit JV continues to positively impact our financial results and we are seeing the benefits of the added scale and enhanced market positioning. Our strong and flexible balance sheet, which is further improved by the resumption of our ATM program, allows us to execute on accretive capital deployment opportunities that strengthen the outlook of our business.”

ORGANIC GROWTH

  • Continued strong leasing momentum at attractive rental spreads – Since the end of Q1 2023, the Trust has transacted approximately 1.4 million square feet of leases across our portfolio at an average spread of 47% over prior or expiring rents.
    • In Canada, the Trust signed 951,500 square feet of leases, achieving an average spread to expiry of 60.8% and an annual contractual rent growth of over 4%.
    • In Europe, the Trust signed 427,000 square feet of leases at an average spread of 4%. All of the leases are fully indexed to local consumer price indices (“CPI”) or have contractual rent steps of 2%.

Since the closing of the Dream Summit JV transaction, the Trust has successfully integrated Dream Summit's operations with the Trust's operating platform and completed or finalized terms on over one million square feet of new leases and renewals at an average spread of approximately 125% over prior and expiring rents.

  • Solid pace of CP NOI (constant currency basis)(1) growth – CP NOI (constant currency basis) for the three and six months ended June 30, 2023 was $78.5 million and $151.7 million, respectively. For the same periods in 2022, CP NOI (constant currency basis) was $70.5 million and $135.1 million, respectively. This represents an increase of 11.4% for the three months ended June 30, 2023 and 12.3% for the six months ended June 30, 2023 compared to the prior year comparative periods.

    The Canadian portfolio posted a year-over-year CP NOI (constant currency basis) growth of 12.1%, driven by 19.4%, 8.5% and 4.9% CP NOI growth in Ontario, Québec and Western Canada, respectively.

    Year-over-year CP NOI (constant currency basis) growth in Ontario was primarily driven by increasing rental spreads on new and renewed leases and the lease-up of our completed expansion in the Greater Toronto Area (“GTA”) which increased the average in-place base rent by 14.6%, along with a 20 basis points (“bps”) increase in average occupancy.

    In Québec, year-over-year CP NOI (constant currency basis) growth was driven primarily by higher rents and two completed expansions in the Greater Montreal Area.

    In Europe, the lease-up of an expansion at our properties in Dresden, Germany, and The Hague, Netherlands, in addition to CPI indexation, led to a 7.5% and 8.2% increase in in-place base rent for the three and six months ended June 30, 2023, respectively, which drove year-over-year CP NOI (constant currency basis) growth of 11.4% and 11.9%, respectively.
  • In-place and committed occupancy – The Trust’s in-place and committed occupancy remained strong at 98.0%, compared to 98.6% as at March 31, 2023. The Trust has approximately 4% of its portfolio’s GLA maturing in 2023, including over 0.7 million square feet in Ontario and Québec, providing the Trust with significant opportunities to capture rent increases in these markets.
  • Continued growth in net rental income for the quarter and year-to-date – Net rental income for the three and six months ended June 30, 2023 was $83.0 million and $164.5 million, respectively, representing an increase of $14.3 million, or 20.8%, and $30.5 million, or 22.7%, relative to the prior year comparative periods. Year-over-year net rental income increased by 24.4% in Ontario, 14.2% in Québec, 2.6% in Western Canada and 24.6% in Europe, excluding disposed investment properties. The increase was mainly driven by strong comparative properties NOI (constant currency basis) growth in 2023 and 2022, and the impact of acquired investment properties in the past year.

INVESTMENT UPDATE

The Trust continues to evaluate investments that meet its objective of improving the cash flow growth profile and overall quality of the portfolio, while preserving balance sheet flexibility. The Dream Summit JV provides 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.

During the quarter, the Dream Summit JV acquired a 26-acre site located in the GTA, in close proximity to the QEW and Highway 403, which should allow for the development of over 380,000 square feet of industrial product. Subsequent to the quarter, two additional assets were acquired by the Dream Summit JV in the GTA West sub-market, including a 21-acre land parcel leased for outside storage in Caledon, and a 150,000 square foot income-producing property in Brampton.

Additionally, the Dream Summit JV is in exclusive negotiations or under contract to acquire six assets located in the GTA totalling 0.9 million square feet.

In total, the Trust’s equity investment to fund these acquisitions is expected to be approximately $25 million. Combined with the associated property management and leasing income, the Trust expects the income-producing assets to generate a going-in yield on equity in excess of 7.5% with further upside as the Trust estimates current market rents to be approximately 40% higher than in-place rents.

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 3.0 million square feet of development projects that are either currently underway or in planning stages.

  • Over the past 12 months, the Trust has completed and substantially completed approximately 0.9 million square feet of development projects across Canada and Europe at an unlevered yield of 7.5%. During the quarter, the Trust substantially completed the Trust’s inaugural 154,000 square foot greenfield development in Caledon and remains on track to generate an unlevered yield on cost of over 7%.
  • The Trust currently has an additional 1.7 million square feet of projects underway across Canada including the Trust’s share of projects held in our development joint venture (the “Development JV”). With a total expected cost of approximately $359 million (estimated costs to completion of $226 million), the Trust expects unlevered yield on development cost of approximately 6.4% upon completion. The Trust expects these projects to be completed in the next 12 to 24 months.

“Our high-quality portfolio continues to produce double-digit organic NOI growth with a strong runway for further growth,” said Alexander Sannikov, President and Chief Operating Officer of Dream Industrial REIT. “Our growing private capital partnerships as well as our development and value-add projects are increasingly contributing to our results and enhancing our overall business. With one of the largest industrial platforms in the country, we are focused on providing best-in-class service to our customers and surfacing value from our significant footprint.”

CAPITAL STRATEGY

The Trust continues to maintain significant financial flexibility as it executes on its strategy to grow and upgrade portfolio quality. During the quarter, €106 million of European mortgages matured and were temporarily refinanced using the Trust’s unsecured revolving credit facility. The Trust has executed a non-binding term sheet with an existing relationship lender for approximately €110 million in new financing to replace these matured mortgages. In addition, the Trust has executed a non-binding term sheet for a new €40 million mortgage financing in Germany and a binding term sheet for a €70 million refinancing to address the remaining 2023 mortgage maturities. Based on current interest rates, the Trust expects a weighted average interest rate of approximately 4.8% on these mortgages.

The Trust’s proportion of secured debt(16) is 4.6% of total assets and represents approximately 13% of total debt(17), compared to 7.6% and 25.2% one year ago, respectively. The Trust’s unencumbered asset pool(11) totalled $5.9 billion as at June 30, 2023, representing approximately 86% of the Trust’s investment properties value as at June 30, 2023.

The Trust ended Q2 2023 with available liquidity(12) of $243 million, and an additional $250 million that could be exercised through the accordion on its unsecured credit facility.

Subsequent to the quarter-end, the Trust resumed its at-the-market program (“ATM”). Since June 30, 2023, the Trust has issued 3.7 million units at an average price of $14.28 for total proceeds of $52.5 million. Proceeds were utilized to reduce the existing balance on the Trust’s credit facility which bore interest at a rate of just under 7%, and lowered the Trust’s net total debt-to-total assets (net of cash and cash equivalents) ratio by nearly 70 basis points.

“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. “We have recently raised $52 million through our ATM Program and used the proceeds to repay debt in the near term which was accretive to cash flows and lowered leverage by nearly 70 bps. This has enhanced the strength and flexibility of the balance sheet, creating additional capacity to fund strategic acquisitions, our private market joint ventures as well as our development and solar program.”

CONFERENCE CALL

Senior management will host a conference call to discuss the financial results on Wednesday, August 2, 2023, at 1:00 p.m. (ET). To access the conference call, please dial 1-800-319-4610 (toll free) or 416-915-3239 (toll). 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.sedarplus.ca.

Dream Industrial REIT is an unincorporated, open-ended real estate investment trust. As at June 30, 2023, Dream Industrial REIT owns, manages and operates a portfolio of 321 industrial assets totalling approximately 70.3 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

  1. CP NOI (constant currency basis) is a non-GAAP financial measure. The most directly comparable financial measure to CP NOI (constant currency basis) is net rental income. The table included in the Appendices section of this press release reconcile CP NOI (constant currency basis) for the three and six months ended June 30, 2023 and June 30, 2022 to net rental income. For further information on this non-GAAP measure, please refer to the statements under the heading “Non-GAAP financial measures, ratios and supplementary financial measures” in this press release.
  2. FFO is a non-GAAP financial measure. The most directly comparable financial measure to FFO is net income. The tables included in the Appendices section of this press release reconcile FFO for the three and six months ended June 30, 2023 and June 30, 2022 to net income. For further information on this non-GAAP measure, please refer to the statements under the heading “Non-GAAP financial measures, ratios and supplementary financial measures” in this press release.
  3. Diluted FFO per Unit is a non-GAAP ratio. Diluted FFO per Unit is comprised of FFO (a non-GAAP financial measure) divided by the weighted average number of Units. 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.
  4. 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, 2023 and June 30, 2022, in the section “Supplementary financial measures and ratios and other disclosures”, under the heading “Weighted average number of Units”.
  5. “Number of assets” comprise a building, or a cluster of buildings in close proximity to one another attracting similar tenants.
  6. Includes the Trust’s owned and managed properties as at June 30, 2023, December 31, 2022 and June 30, 2022.
  7. Includes the Trust’s share of equity accounted investments as at June 30, 2023, December 31, 2022 and June 30, 2022.
  8. Net total debt-to-total assets (net of cash and cash equivalents) ratio is a non-GAAP ratio. Net total debt-to-total assets (net of cash and cash equivalents) ratio is comprised of net total debt (a non-GAAP financial measure) divided by total assets (net of cash and cash equivalents) (a non-GAAP financial measure). The most directly comparable IFRS financial measure to net total debt is non-current debt, and the most directly comparable IFRS financial measure to total assets (net of cash and cash equivalents) is total assets. The tables included in the Appendices section of this press release reconcile net total debt to non-current debt and total assets (net of cash and cash equivalents) to total assets as at June 30, 2023, December 31, 2022 and June 30, 2022. For further information on this non-GAAP ratio and these non-GAAP financial measures, please refer to the statements under the heading “Non-GAAP financial measures, ratios and supplementary financial measures” in this press release.
  9. Net total debt-to-normalized adjusted EBITDAFV is a non-GAAP ratio. Net total debt-to-normalized adjusted EBITDAFV is comprised of net total debt (a non-GAAP financial measure) divided by normalized adjusted EBITDAFV (a non-GAAP financial measure). The most directly comparable IFRS financial measure to normalized adjusted EBITDAFV is net income. The tables included in the Appendices section of this press release reconcile adjusted EBITDAFV to net income (loss) for the three months ended June 30, 2023, December 31, 2022 and June 30, 2022, for the six months ended June 30, 2023, June 30, 2022 and June 30, 2021, and for the years ended December 31, 2022 and December 31, 2021. For further information on this non-GAAP ratio and this non-GAAP financial measure, please refer to the statements under the heading “Non-GAAP financial measures and ratios and supplementary financial measures” in this press release.
  10. Interest coverage ratio is a non-GAAP ratio. Interest coverage ratio is comprised of trailing 12-month period adjusted EBITDAFV (a non-GAAP financial measure) divided by trailing 12-month period interest expense on debt and other financing costs. The most directly comparable IFRS financial measure to adjusted EBITDAFV is net income. For further information on this non-GAAP ratio and non-GAAP financial measure, please refer to the statements under the heading “Non-GAAP financial measures and ratios and supplementary financial measures” in this press release.
  11. Unencumbered investment properties is a supplementary financial measure. For further information on this supplementary financial measure, please refer to the statements under the heading “Non-GAAP financial measures, ratios and supplementary financial measures” in this press release.
  12. Available liquidity is a non-GAAP financial measure. The most directly comparable financial measure to available liquidity is cash and cash equivalents. The tables included in the Appendices section of this press release reconcile available liquidity to cash and cash equivalents as at June 30, 2023, December 31, 2022 and June 30, 2022. 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.
  13. Total equity (including LP B Units or subsidiary redeemable units) is a non-GAAP financial measure. The most directly comparable financial measure to total equity (including LP B Units) is total equity (per condensed consolidated financial statements). The tables included in the Appendices section of this press release reconcile total equity (including LP B Units) to total equity (per condensed consolidated financial statements) as at June 30, 2023, December 31, 2022 and June 30, 2022. For further information on this non-GAAP measure, please refer to the statements under the heading “Non-GAAP financial measures, ratios and supplementary financial measures” in this press release.
  14. Total number of Units includes 13.3 million LP B Units that are classified as a liability under IFRS.
  15. NAV per Unit is a non-GAAP ratio. NAV per Unit is comprised of total equity (including LP B Units) (a non-GAAP financial measure) divided by the total number of Units. 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.
  16. Secured debt is a supplementary financial measure. Please refer to the statements under the heading “Non-GAAP financial measures, ratios and supplementary financial measures” in this press release.
  17. Total debt is a non-GAAP financial measure. The most directly comparable financial measure to total debt is non-current debt. The tables included in the Appendices section of this press release reconcile total debt to non-current debt as at June 30, 2023, December 31, 2022 and June 30, 2022. 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.

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 and six months ended June 30, 2023, dated August 1, 2023 (the “Q2 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 Q2 MD&A 2023 and can be found under the section “Supplementary financial measures and ratios and other disclosures”. The Q2 MD&A 2023 is available on SEDAR+ at www.sedarplus.ca 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 enhance the quality and organic cash flow growth profile while preserving balance sheet quality and flexibility the near-term capital deployment opportunities; the opportunities provided by the Trust’s diverse sources of capital; 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; the Dream Summit JV, including the integration of the venture, the status of new leases and renewals, the opportunities provided by the venture to pursue acquisitions and boost our property management and leasing fee stream, potential acquisitions and related average in-place cap rate, and the Trust’s expected investment and return on equity; the Trust’s expectations for further growth, growing cash flows, net asset value and overall returns to unitholders; the Trust’s accretive driver of growth; the process of refinancing upcoming European mortgage maturities; the Trust’s opportunities to access financing at attractive rates; the Trust’s ability to add high-quality assets in core markets at attractive economics; our development and intensification pipelines; 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; 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

All dollar amounts in the Appendices are presented in thousands of Canadian dollars, except for per square foot amounts, per Unit amounts, or unless otherwise stated.

Reconciliation of CP NOI (constant currency basis) to net rental income

The tables below reconcile CP NOI (constant currency basis) for the three and six months ended June 30, 2023 and June 30, 2022 to net rental income.

 

 

Three months ended

 

June 30,

 

June 30,

 

 

2023

 

 

2022

Ontario

$

20,803

 

$

17,420

Québec

 

12,646

 

 

11,657

Western Canada

 

12,133

 

 

11,567

Canadian portfolio

 

45,582

 

 

40,644

European portfolio (constant currency basis)

 

29,291

 

 

26,299

U.S. portfolio (constant currency basis)

 

3,593

 

 

3,510

CP NOI (constant currency basis)

 

78,466

 

 

70,453

Impact of foreign currency translation on CP NOI

 

 

 

(2,031)

NOI from acquired properties – Canada

 

2,119

 

 

417

NOI from acquired properties – Europe

 

3,212

 

 

1,167

NOI from acquired properties – Dream Summit JV

 

5,083

 

 

NOI from acquired properties – U.S.

 

415

 

 

1

NOI from disposed share of properties

 

 

 

137

Net property management and other income

 

2,383

 

 

885

Straight-line rent

 

1,855

 

 

1,568

Amortization of lease incentives

 

(713)

 

 

(502)

Lease termination fees and other

 

97

 

 

(381)

Bad debt provisions

 

(775)

 

 

(107)

NOI from properties transferred to properties held for development

 

 

 

672

Less: NOI from equity accounted investment

 

(9,107)

 

 

(3,550)

Net rental income from continuing operations

$

83,035

 

$

68,729

 
 

 

Six months ended

 

June 30,

 

June 30,

 

 

2023

 

 

2022

Ontario

$

40,293

 

$

33,273

Québec

 

24,541

 

 

22,714

Western Canada

 

24,062

 

 

22,456

Canadian portfolio

 

88,896

 

 

78,443

European portfolio (constant currency basis)

 

56,418

 

 

50,413

U.S. portfolio (constant currency basis)

 

6,370

 

 

6,226

CP NOI (constant currency basis)

 

151,684

 

 

135,082

Impact of foreign currency translation on CP NOI

 

 

 

(2,637)

NOI from acquired properties – Canada

 

4,842

 

 

841

NOI from acquired properties – Europe

 

7,647

 

 

1,854

NOI from acquired properties – Dream Summit JV

 

7,515

 

 

NOI from acquired properties – U.S.

 

1,608

 

 

624

NOI from disposed share of properties

 

74

 

 

269

Net property management and other income

 

4,025

 

 

2,096

Straight-line rent

 

3,940

 

 

3,046

Amortization of lease incentives

 

(1,453)

 

 

(1,131)

Lease termination fees and other

 

1,153

 

 

(478)

Bad debt provisions

 

(981)

 

 

(116)

NOI from properties transferred to properties held for development

 

185

 

 

1,424

Less: NOI from equity accounted investment

 

(15,744)

 

 

(6,832)

Net rental income from continuing operations

$

164,495

 

$

134,042

Appendices

Reconciliation of FFO to net income

The table below reconciles FFO for the three and six months ended June 30, 2023 and June 30, 2022 to net income.

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Net income for the period

$

80,352

 

$

171,480

 

$

62,622

 

$

614,369

Add (deduct):

 

 

 

 

 

 

 

Fair value adjustments to investment properties

 

(2,033)

 

 

(24,699)

 

 

(10,777)

 

 

(385,395)

Fair value adjustments to financial instruments

 

(9,131)

 

 

(84,242)

 

 

55,458

 

 

(111,903)

Share of net loss (income) from equity accounted investments

 

(13,091)

 

 

(23,031)

 

 

6,654

 

 

(41,425)

Interest expense on subsidiary redeemable units

 

2,639

 

 

3,247

 

 

5,885

 

 

6,493

Amortization and write-off of lease incentives

 

691

 

 

488

 

 

1,425

 

 

1,116

Internal leasing costs

 

973

 

 

1,073

 

 

2,097

 

 

2,164

Fair value adjustments to deferred trust units included in G&A

 

(18)

 

 

(18)

 

 

(58)

 

 

83

Foreign exchange (gain) loss

 

(1,194)

 

3,404

 

 

(143)

 

 

3,414

Share of FFO from equity accounted investments

 

6,707

 

 

2,579

 

 

11,593

 

 

4,573

Deferred income tax expense

 

1,701

 

 

8,073

 

 

455

 

 

21,503

Current income taxes expense related to dispositions

 

 

 

126

 

 

 

 

126

Transaction costs on acquisitions and dispositions

 

225

 

 

445

 

 

742

 

 

445

FFO for the period

$

67,821

 

$

58,925

 

$

135,953

 

$

115,563

Reconciliation of available liquidity to cash and cash equivalents

The table below reconciles available liquidity to cash and cash equivalents as at June 30, 2023, December 31, 2022 and June 30, 2022.

 

 

June 30, 2023

 

December 31, 2022

 

June 30, 2022

Cash and cash equivalents per condensed consolidated financial statements

$

43,491

$

83,802

$

81,311

Undrawn unsecured revolving credit facility(1)

 

199,541

 

445,785

 

347,751

Available liquidity

$

243,032

$

529,587

$

429,062

(1)

 

Net of letters of credit totalling $8,705, $2,414 and $2,249 as at June 30, 2023, December 31, 2022 and June 30, 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 June 30, 2023, December 31, 2022 and June 30, 2022.

 

 

As at

 

June 30, 2023

 

December 31, 2022

 

June 30, 2022

 

Number of

Units

 

Amount

 

Number of

Units

 

Amount

 

Number of

Units

 

Amount

REIT Units and unitholders’ equity

263,603,598

$

3,206,077

256,604,207

$

3,106,904

255,000,182

$

3,088,274

Retained earnings

 

1,246,144

 

1,274,974

 

1,273,573

Accumulated other comprehensive income (loss)

 

59,161

 

70,863

 

(32,896)

Total equity per condensed consolidated financial statements

263,603,598

 

4,511,382

256,604,207

 

4,452,741

255,000,182

 

4,328,951

Add: LP B Units

13,346,572

 

188,320

18,551,855

 

216,871

18,551,855

 

224,106

Total equity (including LP B Units)

276,950,170

$

4,699,702

275,156,062

$

4,669,612

273,552,037

$

4,553,057

Reconciliation of total debt to non-current debt

The table below reconciles total debt to non-current debt as at June 30, 2023, December 31, 2022 and June 30, 2022.

 

Amounts per condensed consolidated financial statements

June 30, 2023

 

December 31, 2022

 

June 30, 2022

Non-current debt

$

2,469,082

 

$

2,137,412

 

$

1,962,861

Current debt

 

397,102

 

 

275,536

 

 

250,193

Fair value of CCIRS(1)(2)

 

(51,472)

 

 

(75,581)

 

 

(125,690)

Total debt

$

2,814,712

 

$

2,337,367

 

$

2,087,364

(1)

 

As at June 30, 2023, the CCIRS were in a net asset position and $59,827 was included in “Derivatives and other non-current assets” and $(8,355) in “Derivatives and other non-current liabilities” in the condensed consolidated financial statements (as at 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 June 30, 2022, the CCIRS were in a net asset position and $125,870 were included in "Derivatives and other non-current assets" and $(180) in "Derivatives and other non-current liabilities" in the condensed consolidated financial statements.

Reconciliation of net total debt to non-current debt and total assets (net of cash and cash equivalents) to total assets

The table below reconciles net total debt to non-current debt and total assets (net of cash and cash equivalents) to total assets as at June 30, 2023, December 31, 2022 and June 30, 2022.

 

 

June 30, 2023

December 31, 2022

June 30, 2022

Non-current debt

$

2,469,082

 

$

2,137,412

 

$

1,962,861

Add (deduct):

 

 

 

 

 

Current debt

 

397,102

 

 

275,536

 

 

250,193

Fair value of CCIRS

 

(51,472)

 

 

(75,581)

 

 

(125,690)

Unamortized financing costs

 

7,919

 

 

7,426

 

 

6,944

Unamortized fair value adjustments

 

(577)

 

 

(1,881)

 

 

(3,253)

Cash and cash equivalents

 

(43,491)

 

 

(83,802)

 

 

(81,311)

Net total debt

$

2,778,563

 

$

2,259,110

 

$

2,009,744

Total assets

 

7,784,409

 

 

7,280,493

 

 

6,963,251

Less: Fair value of CCIRS

 

(59,827)

 

 

(75,581)

 

 

(125,690)

Less: Cash and cash equivalents

 

(43,491)

 

 

(83,802)

 

 

(81,311)

Total assets (net of cash and cash equivalents)

$

7,681,091

 

$

7,121,110

 

$

6,756,250

Reconciliation of adjusted EBITDAFV to net income (loss) and normalized adjusted EBITDAFV

The table below reconciles adjusted EBITDAFV to net income (loss) for the three months ended June 30, 2023, December 31, 2022 and June 30, 2022, for the six months ended June 30, 2023, June 30, 2022 and June 30, 2021, and for the years ended December 31, 2022 and December 31, 2021.

 

 

For the three months ended

 

For the six months ended

 

For the year ended

 

June 30,

2023

 

December 31,

2022

 

June 30,

2022

 

June 30,

2023

 

June 30,

2022

 

June 30,

2021

 

December 31,

2022

 

December 31,

2021

Net income (loss) for the period

$

80,352

$

(34,147)

$

171,480

$

62,622

$

614,369

$

255,559

$

705,885

$

608,345

Add (deduct):

 

 

 

 

 

 

 

 

Fair value adjustments to investment properties

 

(2,033)

 

65,503

 

(24,699)

 

(10,777)

 

(385,395)

 

(281,718)

 

(363,025)

 

(586,011)

Fair value adjustments to financial instruments

 

(9,131)

 

19,852

 

(84,242)

 

55,458

 

(111,903)

 

76,845

 

(122,532)

 

111,723

Share of net (income) loss from equity accounted investments

 

(13,091)

 

9,222

 

(23,031)

 

6,654

 

(41,425)

 

 

(38,482)

 

(39,270)

Interest expense on debt and other financing costs

 

13,919

 

6,349

 

5,028

 

24,494

 

9,085

 

15,496

 

20,622

 

24,820

Interest expense on subsidiary redeemable units

 

2,639

 

3,247

 

3,247

 

5,885

 

6,493

 

6,493

 

12,986

 

12,986

Other items included in investment properties revenue(1)

 

(1,155)

 

(1,391)

 

(746)

 

(3,305)

 

(1,418)

 

(211)

 

(4,792)

 

(2,372)

Distributions from equity accounted investment

 

3,254

 

2,066

 

1,077

 

5,150

 

2,152

 

 

6,026

 

1,931

Deferred and current income tax expenses (recovery), net

 

2,202

 

(11,855)

 

8,884

 

1,814

 

22,791

 

10,160

 

19,481

 

30,257

Net loss on transactions and other activities

 

94

 

8,673

 

5,027

 

2,772

 

6,203

 

2,646

 

16,805

 

3,066

Debt settlement costs

 

 

257

 

 

 

 

3,059

 

257

 

31,569

Adjusted EBITDAFV for the period

$

77,050

$

67,776

$

62,025

$

150,767

$

120,952

$

88,329

$

253,231

$

197,044

 

June 30, 2023

December 31, 2022

June 30, 2022

Adjusted EBITDAFV – quarterly

$

77,050

 

$

67,776

 

$

62,025

Add (deduct):

 

 

 

 

 

Normalized NOI of acquisitions and dispositions in the quarter

 

 

 

77

 

 

2,540

Normalized adjusted EBITDAFV – quarterly

 

77,050

 

 

67,853

 

 

64,565

Normalized adjusted EBITDAFV – annualized

$

308,200

 

$

271,412

 

$

258,260

 

Contacts

Dream Industrial REIT

Brian Pauls
Chief Executive Officer
(416) 365-2365
bpauls@dream.ca

Lenis Quan
Chief Financial Officer
(416) 365-2353
lquan@dream.ca

Alexander Sannikov
President & Chief Operating Officer
(416) 365-4106
asannikov@dream.ca

Contacts

Dream Industrial REIT

Brian Pauls
Chief Executive Officer
(416) 365-2365
bpauls@dream.ca

Lenis Quan
Chief Financial Officer
(416) 365-2353
lquan@dream.ca

Alexander Sannikov
President & Chief Operating Officer
(416) 365-4106
asannikov@dream.ca