Dream Industrial Real Estate Investment Trust (DIR-UN) Investor Day 2024 summary

Market environment and capital markets

• Canadian industrial real estate is benefiting from strong population and employment growth, attracting global capital due to its resilience and positive fundamentals compared to other G7 countries.

• Trading volumes in Canada are rebounding, especially in industrial assets, with an optimistic outlook for 2025 as capital markets stabilize and interest rates decline.

• Foreign investors are increasingly active, as Canadian pension funds become net sellers and global capital seeks exposure to Canadian industrial assets.

• Industrial assets are favored for their risk-adjusted returns, with cap rates around 6% and unlevered IRRs near 9%, outperforming apartments and office.

• The disconnect between public and private valuations is narrowing, and liquidity is returning to both public and private markets.

Business strategy and growth drivers

• The platform has grown tenfold over the past decade, now managing CAD 15 billion in industrial real estate across Canada, the US, and Europe, with a focus on urban industrial assets.

• Growth is driven by organic rent increases, development, intensification of existing assets, and ancillary revenue streams such as solar, EV charging, and data centers.

• Mark-to-market rent opportunities, contractual rent escalators, and high occupancy rates are expected to deliver significant NOI growth through 2026.

• The development pipeline includes 1.2 million sq ft to be completed by 2026, $251M in near-term projects, and $200M+ in solar investments, with an expected yield on incremental capital over 8%.

• Private partnerships and co-investments with global investors provide scale and access to new opportunities, with management targeting further expansion in Europe and $8B in GLA value.

Financial outlook and capital allocation

• Leverage is maintained at 36%, with over $750 million in liquidity and a BBB mid credit rating, supporting refinancing of CAD 1.3 billion in euro-denominated debt maturing by 2026.

• Incremental NOI from growth drivers is projected to outpace incremental interest expense from refinancing, even under conservative assumptions with no market rent growth or speculative development.

• Capital allocation prioritizes high-yield development, solar intensification, and co-investment opportunities, while maintaining balance sheet strength and flexibility.

• The FFO payout ratio has declined to 70%, with retained cash flow reinvested to drive NAV growth and support sustainable distribution increases over time.

• Dispositions of non-core assets and user sales at premiums to carrying value are used to recycle capital into higher-return opportunities, with $100M in non-core asset dispositions in 2024.