Mr. Alexander Sannikov reports

DREAM INDUSTRIAL REIT REPORTS STRONG Q4 2023 AND YEAR-END FINANCIAL RESULTS

Dream Industrial Real Estate Investment Trust today released its financial results for the three months and year ended Dec. 31, 2023. Management will host a conference call to discuss the financial results on Feb. 14, 2024, at 11 a.m. ET.

Highlights

• Diluted funds from operations (FFO) per unit was 98 cents in 2023, a 10.1-per-cent increase when compared with 89 cents in 2022. For the quarter, diluted FFO per unit was 24 cents, a 3.9-per-cent increase when compared with Q4 2022.
• Comparative properties net operating income (CP NOI) (constant currency basis) was $310.0-million in 2023, a 11.3-per-cent increase when compared with $278.5-million in 2022. The Canadian portfolio posted a year-over-year CP NOI (constant currency basis) growth of 12.6 per cent and the European portfolio saw 10.5-per-cent year-over-year CP NOI (constant currency basis) growth. For the quarter, CP NOI (constant currency basis) was $85.6-million, a 9.6-per-cent increase when compared with $78.1-million in Q4 2022, driven by 11.1-per-cent CP NOI (constant currency basis) growth in Canada and 8.5-per-cent CP NOI (constant currency basis) growth in Europe.
• Net rental income was $334.2-million in 2023, an 18.7-per-cent increase when compared with $281.6-million in 2022. For the year, net rental income increased by 20.5 per cent in Ontario, 10.1 per cent in Quebec, 5.6 per cent in Western Canada and 22.7 per cent in Europe excluding disposed investment properties, primarily driven by strong CP NOI (constant currency basis) growth in 2023, the impact of acquired investment properties in the past year and higher net property management fees. For the quarter, net rental income was $85.2-million, a 12.8-per-cent increase when compared with $75.6-million in Q4 2022, driven by 12.8 per cent in Ontario, 4.3 per cent in Quebec, 8.1 per cent in Western Canada and 13.5 per cent in Europe.
• Net income was $104.3-million in 2023, compared with net income of $705.9-million in 2022, mainly driven by fair value adjustments to financial instruments and investment properties. The net income in 2023 comprised net rental income of $334.2-million, fair value decrease in investment properties of $66.7-million, fair value decrease in financial instruments of $68.1-million and other expenses of $95.1-million. For the quarter, net loss was $8.8-million, compared with net loss of $34.1-million in Q4 2022.
• Total assets were $7.9-billion as at Dec. 31, 2023, a 7.9-per-cent increase when compared with $7.3-billion as at Dec. 31, 2022, driven by investments in the Dream Summit joint venture and development projects.
• Total equity (including LP B units) and total equity (per consolidated financial statements) was $4.8-billion and $4.6-billion as at Dec. 31, 2023, respectively. This represents a 2.0-per-cent increase and 2.7-per-cent increase, respectively, when compared with Dec. 31, 2022.
• Net asset value (NAV) per unit was $16.61 as at Dec. 31, 2023, compared with the NAV per unit of $16.97 as at Dec. 31, 2022.

"Dream Industrial achieved significant milestones in 2023, delivering over 11 per cent of CP NOI growth and over 10 per cent of FFO per-unit growth for the year," said Alexander Sannikov, president and chief executive officer of Dream Industrial REIT. "The successful integration of the Dream Summit portfolio into our operations has boosted our recurring property management revenue stream, and the advancement of our development and solar programs continues to drive our FFO and NAV growth. With our $7-billion industrial portfolio well located in tight industrial markets with in-place rents approximately 34-per-cent below market rent and staggered lease maturities, the organic growth outlook embedded within our portfolio remains intact with less reliance on near-term market rent growth. Our strong balance sheet allows us to continue focusing on driving cash flow growth and creating significant long-term value for our unitholders."

Organic growth

• Continued strong leasing momentum at attractive rental spreads -- From the end of Q3 2023 until Jan. 31, 2024, the trust has transacted approximately 1.3 million square feet of leases across its portfolio at an average rental rate spread of 41.6 per cent over prior or expiring rents.
  • In Canada, the trust signed 948,000 million square feet of leases, achieving an average rental rate spread to expiry of 50.3 per cent and an annual contractual rent growth of over 3 per cent.
  • In Europe, the trust signed 368,000 square feet of leases at an average rental rate spread of 7 per cent. All of the leases are fully indexed to local consumer price indices (CPI) or have contractual rent steps of 2 per cent.
• As at Dec. 31, 2023, estimated market rents exceeded the average in-place rent by nearly 34 per cent across the trust's overall portfolio, excluding United States assets held in a private U.S. industrial fund and assets held in a joint venture between GIC and the trust in which the trust has a 10-per-cent interest (the Dream Summit JV).
• Since the closing of the Dream Summit JV transaction in February, 2023, the trust has successfully integrated Dream Summit JV's operations with the trust's operating platform and completed or finalized terms on approximately 2.3 million square feet of new leases and renewals at an average spread of 90 per cent over prior and expiring rents.
  • Solid pace of CP NOI (constant currency basis) growth -- CP NOI (constant currency basis) for the three months and year ended Dec. 31, 2023, was $85.6-million and $310.0-million, respectively. For the same periods in 2022, CP NOI (constant currency basis) was $78.1-million and $278.5-million, respectively. This represents an increase of 9.6 per cent and 11.3 per cent for the three months and year ended Dec. 31, 2023, respectively, compared with the prior-year comparative periods.
• The Canadian portfolio posted a year-over-year CP NOI (constant currency basis) growth of 11.1 per cent for the three months ended Dec. 31, 2023, driven by 14.1-per-cent, 11.5-per-cent and 5.5-per-cent CP NOI growth in Ontario, Quebec and Western Canada, respectively. For the year, CP NOI (constant currency basis) growth was 12.6 per cent compared with 2022, driven by 18.3-per-cent, 10.0-per-cent and 6.6-per-cent CP NOI growth in Ontario, Quebec 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, which increased the average in-place base rent by 15.5 per cent and 15.2 per cent for the three months and year ended Dec. 31, 2023, respectively.
• In Quebec, year-over-year CP NOI (constant currency basis) growth was driven primarily by higher average in-place base rents of 15.9 per cent and 14.7 per cent for the three months and year ended Dec. 31, 2023, respectively, in addition to the lease-up of two completed expansions in the Greater Montreal Area.
• In Europe, year-over-year CP NOI (constant currency basis) growth was 8.5 per cent and 10.5 per cent for the three months and year ended Dec. 31, 2023, respectively. The increase was driven by the lease-up of expansions at the trust's properties in Dresden, Germany, and The Hague, Netherlands, in addition to CPI indexation, resulting in a 11.0-per-cent and 8.9-per-cent increase in in-place base rent for the three months and year ended Dec. 31, 2023, respectively.
• Excluding the impact of expansions in Canada and Europe, the year-over year CP NOI (constant currency basis) growth for the entire portfolio would have amounted to 7.8 per cent and 9.2 per cent for the three months and year ended Dec. 31, 2023, respectively.
  • Strong occupancy levels -- The trust's in-place and committed occupancy remained strong at 96.2 per cent as at Dec. 31, 2023, compared with 97.2 per cent as at Sept. 30, 2023, and 98.9 per cent as at Dec. 31, 2022. The decrease was primarily attributable to the recently completed 154,000-square-foot development in Caledon, which is 55 per cent leased, and transitory vacancies, including the 225,000-square-foot vacancy near the Port of Montreal and expected expiries in Europe. The company is in discussions with prospective tenants and the company expects significant opportunities to capture strong income growth as these spaces are leased.
• Over the next two years, the trust has nearly 8.4 million square feet of GLA maturing. Approximately six million square feet of this space is located in Canada, of which approximately 73 per cent is located in Ontario and Quebec where the average market rent is approximately double that of in-place rent.
  • Continued growth in net rental income for the quarter and year to date -- Net rental income for the three months and year ended Dec. 31, 2023, was $85.2-million and $334.2-million, respectively, representing an increase of $9.6-million, or 12.8 per cent, and $52.6-million, or 18.7 per cent, relative to the prior-year comparative periods. For the quarter, net rental income increased by 12.8 per cent in Ontario, 4.3 per cent in Quebec, 8.1 per cent in Western Canada and 13.5 per cent in Europe, excluding disposed investment properties. For the year, net rental income increased by 20.5 per cent in Ontario, 10.1 per cent in Quebec, 5.6 per cent in Western Canada and 22.7 per cent in Europe. The increase was mainly driven by strong CP NOI (constant currency basis) growth in 2023, the impact of acquired investment properties in the past year and higher net property management fees.

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 strengthens the trust's property management and leasing fee stream.

During the quarter, the Dream Summit JV acquired six income-producing assets located in the GTA totalling 900,000 square feet. Furthermore, the Dream Summit JV is in exclusive negotiations or under contract to acquire ten assets totalling 2.5-million square feet.

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 2.8 million square feet of development projects that are recently completed, currently under way or in advanced planning stages.

• Over the past 18 months, the trust has completed and substantially completed approximately 900,000 square feet of development projects across Canada and Europe. These completed developments are more than 92 per cent leased and the trust is targeting to achieve an unlevered yield of 7.4 per cent upon full stabilization.
• The trust currently has 1.7 million square feet of projects under way across Canada including the trust's share of projects held in its development JV. With total estimated costs to completion of $125-million, the trust expects unlevered yield on development cost of approximately 6.4 per cent upon completion. The trust expects these projects to be completed in the next six to 18 months and is currently engaging with prospective tenants. The trust recently signed a 10-year conditional lease at its 209,000-square-foot redevelopment project in Mississauga for over 60 per cent of the space, achieving a starting rent of over $20 per square foot with annual contractual rent growth of approximately 4 per cent.

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 is 7.4 per cent of total assets and represents 20.5 per cent of total debt. The trust's unencumbered asset pool totalled $5.4-billion as at Dec. 31, 2023, representing 78 per cent of the trust's investment properties value as at Dec. 31, 2023.

The trust ended 2023 with available liquidity of $492-million, including $50-million of cash and cash equivalents, and an additional $250-million that could be exercised through the accordion on its unsecured credit facility. Subsequent to year-end, the trust closed on its additional issuance of $200-million of Series F unsecured debentures at an offering yield to maturity of 5.259 per cent. The proceeds will be utilized to repay existing mortgage maturities and reduce the outstanding balance on the trust's credit facility that bore an average interest rate of approximately 6.9 per cent as well as general trust purposes. The trust's net debt-to-total asset (net of cash and cash equivalents) ratio was 36.0 per cent as at Dec. 31, 2023, compared with 35.1 per cent as at Sept. 30, 2023.

"Notwithstanding the higher interest rate environment, our focus on optimizing our cost of debt and maintaining financial flexibility have allowed us to successfully advance our development and solar pipeline, contribute towards our private capital partnerships, and execute on strategic initiatives that are accretive to our total return profile," said Lenis Quan, chief financial officer of Dream Industrial. "Pro forma the $200-million Series F reopening, our total available liquidity is nearly $700-million, positioning us well to deal with our near-term debt maturities while continuing to drive robust FFO per unit growth."

Conference call

Senior management will host a conference call to discuss the financial results on Wednesday, Feb. 14, 2024, at 11 a.m. ET. To access the conference call, please dial 1-800-806-5484 (toll-free) or 416-340-2217 (toll) and enter pass code 1104570 followed by the pound key. To access the conference call via webcast, please go to Dream Industrial REIT's website 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 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 the Dream Industrial website and on SEDAR+.

About Dream Industrial Real Estate Investment Trust

Dream Industrial REIT is an unincorporated, open-ended real estate investment trust. As at Dec. 31, 2023, Dream Industrial REIT owns, manages and operates a portfolio of 327 industrial assets totalling approximately 71.4 million square feet of gross leasable area in key markets across Canada, Europe and the United States. Dream Industrial REIT's goal is to deliver strong total returns to its unitholders through secure distributions as well as growth in net asset value and cash flow per unit underpinned by its high-quality portfolio and an investment grade balance sheet.

We seek Safe Harbor.