DIR.UN Dream Industrial Real Estate Investment Trust

ROBUST ACQUISITION ACTIVITY

Since the end of Q3 2020, the Trust has closed, waived conditions, or is currently in exclusive negotiations on over $465 million of high-quality acquisitions across its target markets in Canada, Europe and the U.S. The acquisitions comprise 20 assets totalling 2.9 million square feet of gross leasable area (“GLA”), with a weighted average lease term (“WALT”) of seven years and a weighted average going-in capitalization rate (“cap rate”) of 4.75% with growth potential from intensification, rent mark-to-market and lease-up of vacancy. One property in Montreal has significant excess land, which provides an opportunity to add over 220,000 square feet of prime logistics space in the near term. In addition, these acquisitions have over 100,000 square feet of high-quality vacant space in strong markets in Ontario and Quebec, and in-place rents are approximately 10% below market, leading to further NOI and NAV upside potential.  

These acquisitions allow the Trust to add scale in its target markets with approximately $270 million of assets in Ontario and Quebec, over $180 million in Europe, and $15 million in the Midwest U.S. Out of the approximately $460 million of aforementioned acquisitions, the Trust has closed on approximately $112 million, waived conditions on $180 million, and is under contract or in exclusive negotiations on assets totalling approximately $175 million.

“These acquisitions are high quality properties that are well-suited for e-commerce use. We continue to execute on our strategy to acquire highly functional, well-located, modern logistics assets that offer strong organic growth potential and are targeted to improve our overall portfolio quality,” said Brian Pauls, Chief Executive Officer of Dream Industrial REIT. “Our local on-the-ground acquisition platforms allow us to consistently source attractive investment opportunities for the REIT. We continue to transform the company with over $620 million of acquisitions in 2020, increasing our portfolio by over 25%. Paired with our access to euro-equivalent debt at interest rates well below 1% currently, our capital deployment initiatives have materially improved our growth outlook for 2021 and future years.”

ACQUISITION HIGHLIGHTS

Since Q3 2020, the Trust has closed on five acquisitions in Europe for a gross purchase price totalling approximately €72 million ($112 million). These acquisitions were funded with cash on hand, including proceeds from the five-year $250 million Series A unsecured debenture that closed in December 2020, which bears interest at an effective average fixed rate of approximately 0.49%, after swapping to Euros.

• The Trust completed the previously announced acquisition of a 302,000 square foot urban logistics property in the Greater Frankfurt Area in Germany for €20 million ($32 million). The building has a clear height of 34 feet and is currently 93% occupied by five tenants in the logistics and healthcare sectors, with a WALT of approximately four years. Furthermore, there is expansion potential through development of over 40,000 square feet of additional warehouse space;
• The Trust closed on an 86,000 square foot urban logistics property located in close proximity to Schiphol Airport near Amsterdam, Netherlands for approximately €10 million ($16 million). Built in 2017, the building has a clear height of 39.5 feet and is occupied by a tenant specializing in logistics for the healthcare sector, with a WALT of approximately seven years; and
• In late December 2020, the Trust completed the acquisition of a 191,000 square foot recently built property, located near Arnhem, Netherlands for €25 million ($39 million). The high-quality distribution property has a clear height of 36 feet and is occupied by Toyota Material Handling with 10 years of term remaining on a fully indexed lease. 

The Trust has waived conditions on the acquisition of six assets across North America and Europe for a total gross purchase price of approximately $181 million. The Trust expects over 80% of these assets to close in the next 30 to 60 days.

• The Trust waived all conditions on a 527,000 square foot Class A distribution facility in the Greater Montreal Area. The property is situated on 38.4 acres of land with site coverage of 31%, offering the opportunity to increase the property’s footprint by approximately 221,000 square feet. The asset is 100% occupied by three tenants in the logistics and food & beverage sectors, with a WALT of seven years and the average in-place rent over 15% below current market rent. Built in the mid-2000s and recently refurbished, the asset has 30 foot clear ceiling height and includes approximately 160,000 square feet of refrigerated space. 

• In addition, the Trust is expected to waive conditions on a brand new 140,000 square foot building located in Cincinnati. Built in 2020, the Class A distribution facility has 32 foot clear ceiling height and is in close proximity to the Amazon Prime Air hub as well as the Trust’s existing properties in the sub-market. The asset is 100% occupied. 

The Trust is also currently under contract or in exclusive negotiations on approximately $175 million of acquisitions in the Trust’s target markets of Ontario and Quebec in Canada, Germany and the Netherlands. These acquisitions are expected to close in early 2021, subject to completion of due diligence.

“We are excited to add high-quality properties to the portfolio which we expect will allow us to surface value in a short span of time by adding density or driving rents higher on lease roll-over,” said Alexander Sannikov, Chief Operating Officer of Dream Industrial REIT. “Our latest acquisition in Montreal will further enhance our near-term development pipeline. We expect the intensification to occur over two phases, with the first phase forecast to commence in 2021. We expect to achieve a yield on construction costs of over 6.5%, which would result in meaningful accretion to our net asset value. Including the intensification projects in our existing portfolio and our Las Vegas development, we expect to be in the position to commence construction on approximately 1 million square feet of high-quality logistics space in 2021.”

FINANCING

The Trust announced that it has entered into an agreement to sell, on a bought deal basis, 17,600,000 units of the Trust (“Units”) at a price of $12.80 per Unit (the “Issue Price”) to a syndicate of underwriters led by TD Securities Inc. (the “Underwriters”) for total gross proceeds of approximately $225 million (the “Offering”). In addition, the Trust has granted the Underwriters an over-allotment option to purchase up to an additional 2,640,000 Units, exercisable in whole or in part, for a period of 30 days following closing of the Offering. If the over-allotment option is exercised in full, the gross proceeds of the Offering will total approximately $260 million. Closing of the Offering is subject to certain customary conditions, including the approval of the Toronto Stock Exchange. The Offering is expected to close on or about January 29, 2021.

The Trust intends to use the net proceeds from the Offering, together with cash on hand: (i) to fund acquisition and development opportunities, (ii) to repay indebtedness, and (iii) for general trust purposes.

The Trust has identified approximately $130 million of existing Canadian mortgage debt maturing in 2021 and 2022 currently bearing interest at an average rate of 3.60% which it intends to prepay to realize immediate interest cost savings. This will continue to improve the Trust’s capital structure by increasing its pool of unencumbered assets to approximately $2.0 billion (including the aforementioned acquisitions), representing 58% of the Trust’s pro forma investment properties value. Pro forma the equity offering, closing of aforementioned acquisitions, and pre-payment of the mortgages, the Trust’s unsecured debt to total debt ratio will increase to 38% from 9% as at September 30, 2020, and its secured debt to assets ratio should decline to approximately 20%, providing greater financial flexibility.

“This equity offering allows us to continue to high-grade the portfolio while maintaining a strong and flexible balance sheet,” said Lenis Quan, Chief Financial Officer of Dream Industrial REIT. “We expect our current near-term acquisition pipeline as well as the repayment of debt to fully utilize the proceeds from the equity offering. Our pro forma leverage is estimated to be in the low 30% range and we expect to retain approximately $250 million of acquisition capacity to pursue additional opportunities in our acquisition pipeline while keeping leverage in our targeted mid-to-high 30% range.”

The Units will be offered by way of a shelf prospectus supplement to the Trust's base shelf prospectus dated October 11, 2019, to be filed on or about January 22, 2021 with the securities commissions and other similar regulatory authorities in each of the provinces of Canada.

This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction in which such offer or solicitation is unlawful. This news release is not an offer of securities for sale in the United States (“U.S.”). The securities being offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and accordingly are not being offered for sale and may not be offered, sold or delivered, directly or indirectly within the U.S., its possessions and other areas subject to its jurisdiction or to, or for the account or for the benefit of a U.S. person, except pursuant to an exemption from the registration requirements of that Act.

About Dream Industrial Real Estate Investment Trust

Dream Industrial REIT is an unincorporated, open-ended real estate investment trust. As at September 30, 2020, the Trust owns and operates a portfolio of 172 assets (266 industrial buildings) comprising approximately 26.6 million square feet of gross leasable area in key markets across North America and a growing presence in strong European industrial markets. The Trust’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.

Forward Looking Information  

This news 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 news release may include, among other things, the details, status and anticipated timing of closing of the acquisitions and potential acquisitions referred to in this press release; the development and expansion potential of our properties and the acquisition properties and our ability to add density to such properties; statements regarding our development and acquisition pipelines; the amount of development and redevelopment activity we anticipate undertaking in 2021 and future years; our expected yield on construction cost for developments and redevelopments and the resulting effect on our net asset value; the Trust’s intention to repay approximately $130 million of its Canadian mortgage debt; the expectation that such prepayment will realize immediate interest cost savings and improve the Trust’s capital structure by increasing its pool of unencumbered assets to approximately $2 billion and representing 58% of the Trust’s pro forma investment properties value; the Trust’s expected leverage and unsecured debt to total debt ratio pro forma the Offering referred to in this press release and anticipated debt repayments; the Trust’s expected acquisition capacity and leverage levels; the Trust’s ability to obtain new Euro-denominated debt and the estimated interest rates relating to such debt; the Trust’s materially improved growth outlook for 2021 and future years; the intended use of proceeds of the Offering and the anticipated timing for the closing of the Offering. 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 that 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, global and local economic and business conditions; uncertainties surrounding the COVID-19 pandemic; the financial condition of tenants; our ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; interest and currency rate fluctuations; competition; the risk that the Trust may not be able to obtain some or all of the Euro-denominated financing it intends to obtain, or that it may take longer than anticipated to obtain such financing, or that the interest rates for such financing may be higher than the estimated range or that the terms of such financing may be less favourable than anticipated; and the risk that there may be unforeseen events that cause the Trust’s actual capital structure, overall cost of debt and results of operations to differ from what the Trust currently anticipates. Our objectives and forward-looking statements are based on certain assumptions with respect to each of our markets, including that the general economy remains stable, the gradual recovery and growth of the general economy continues over the remainder of 2021, interest rates remain stable, conditions within the real estate market remain consistent, competition for and availability of acquisitions remains consistent with the current climate, the capital markets continue to provide ready access to equity and/or debt, the timing and ability to sell certain properties remains in line with the Trust’s expectations, valuations to be realized on property sales will be in line with current IFRS values, occupancy levels remain stable, and the replacement of expiring tenancies will remain consistent. All forward-looking information in this news release speaks as of the date of this news 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.

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