Dream Industrial Real Estate Investment Trust

Good morning, ladies and gentlemen, and welcome to Dream and Residential REIT's third quarter conference call for Thursday, November 3rd, 2022. During this call, management of Dream Residential REIT make make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and it's subject to a number of risks and uncertainties, many of which are beyond Dream Residential REIT's control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Additional information about these assumptions and risk and uncertainties is contained in Dream Residential REIT's filings with securities regulators, including its MDNA. These filings are also available on Dream Residential REIT's website at www.dreamresidentialreit.ca. Later in the presentation, we will have a question and answer session. To queue up for a question, press 01 on your telephone keypad. Your host for today will be Ms. Jane Gavin, CEO of Dream and Residential REIT. Ms. Gavin, please go ahead.

Thank you, Operator, and good morning, everybody. Welcome to the third quarter 2022 conference call for Dream Residential REIT. With me today are Scott Schuman, Chief Operating Officer, and Derek Glau, Chief Financial Officer. I'm going to keep my comments brief, since really the focus this quarter is on our operating performance, the markets, and how those are reflected in our financial results. I note, however, that in these very uncertain times, the resilience of the U.S. multi-residential asset class, especially in our markets, has never been more appreciated by owners. Its disconnect with the stock market has never been so wide. I'm not sure in my career I've seen a bigger gap between private and public market valuations. The current unit price implies an 8.5% cap rate, which we haven't seen replicated in the property markets. I also note that despite the turbulence in global economies, interest rate disruption, and stock market declines, DRR has delivered on the forecast in the IPO for our first full quarter. Thematically, we continue to run our business well, taking care of our residents, and allocating capital thoughtfully. We're managing our occupancy to capture mark-to-market upside coupled with the returns we get on the money we invest in upgrading suites. With returns on this value-add program approaching the high 30% range, it makes sense to continue to do more of that. As compared to other acquisition opportunities, it's the highest returning risk-adjusted use of our money. We're investing in the assets we know. Furthermore, higher interest rates continue to aggravate the supply-side shortfall of reasonably priced rental accommodation while simultaneously putting homeownership out of reach for more modest income earners. So we believe our portfolio is exceptionally well-positioned in this uncertain time. I'm going to turn it over to Scott to give you more color. Scott.

Thank you, Jane. With our first full quarter now complete, we remain competent in the U.S. multi-residential sector and specifically Dream Residential's markets and assets. The portfolio is performing in line with expectations year to date, and we are well positioned to achieve our forecast through the remainder of the year and to the end of our initial forecast period, June 30th, 2023. Q3 NOI was in line with forecast at $5.5 million. Leasing activity and rent rate both held strong, and the value-add program proved effective in driving in-place rents, which we will touch upon later. As a result, property revenue was also largely in line at $11 million. Operating expenses of $5.5 million were consistent with our IPO forecast, leading to an NOI margin of approximately 50%, again, corresponding with expectations. Lease tradeouts demonstrated continued momentum, outpacing both the first quarter and the IPO second quarter stub period, with 13.6% blended lease over lease growth during Q3. This blended figure is comprised of 16.2% average increase on new leases, equivalent to $163 per unit more than the expiring lease, and 11.1% higher on renewals. Bolstered by interior suite renovations, Dallas-Fort Worth led all regions with 19.6% new lease tradeouts during the third quarter, which in turn drove 11.1% rent growth in Dallas-Fort Worth from December 31st, 2021. Cincinnati's rent growth was strong at only one percentage point less than Dallas-Fort Worth from December 2021. without any benefit of value-add initiatives. The Oklahoma assets led the portfolio with 11.8% growth on third quarter renewal leases and rent growth at 10.8% over the nine months from December 2021. Quarter over quarter, portfolio rents grew 4.1% higher in Q3. Dallas-Fort Worth and Oklahoma City led at 4.3% and 4.2% respectively. Cincinnati finished at 3.9% higher than Q2, occurring organically without having yet begun any value-add. As a result of this sustained strength, in-place rents grew over 10% spanning the first nine months of this year, rising to $1,060 per suite, up $101 from the end of 2021. Gain-to-lease spreads held at 7%. However, after only eight months, 94% of the pre-IPO embedded gain-to-lease has now been recaptured. The narrowing of the gain-to-lease spread reflects our ability to grow in-place rents faster than asking rents. A part of our overall leasing strategy is to ensure we are capturing rent growth while maintaining ideal levels of occupancy and with intentional consideration to renovations and seasonal leasing norms. The REITs Value Add Program is a major value creation component in our business plan. To that end, we invested $1.5 million towards the upgrade of interior suites during the third quarter. As communicated at the time of IPO and during Q2 reporting, management accelerated the Value Add Program to take advantage of the strong summer leasing season. After completing 24 suites in the second quarter, We rotated nearly five times as many suites into construction during the third quarter, renovating 117 more apartments across seven communities in two markets through the end of September. Since IPO, we have completed 141 suite renovations, with 45 more under construction at the end of the third quarter. Dream Residential expects to invest $1 million more during the fourth quarter, and holds firm to our projection to value add more than 200 suites by the end of 2022 and more than 300 suites by the end of the forecast period. Year to date, these renovations have commanded a $429 rent increase per suite, which equates to a 37% premium above the outgoing expired leases. With average costs coming in better than planned, Our returns on invested capital are meeting or beating our IPO projected 12 to 16% ROIC target range. We expect to complete around 70 more renovations in Q4, sustaining returns within our target range. Value Add is proving out as intended a worthy allocation of capital and one that our vertically integrated team remains poised to execute over the long run. As a result of the higher renovation intake during summer leasing, Portfolio occupancy for the third quarter finished at 93.7%. The ramp-up of value-add suites in Dallas-Fort Worth and Oklahoma City was the primary driver of this occupancy level. Throughout the quarter, some 70 to 90 suites were typically either under construction or pending lease-up and move-in following the suite upgrades, thus purposefully contributing 2 to 3% of total vacancy. In Cincinnati, where renovations have yet to begin, stabilized occupancy neared 97%. Even with value-add ongoing, current occupancy is now collectively trending higher as properties prepare for normalized fourth quarter seasonal operations. Looking forward, we see conditions moderating as one would expect in historical fourth quarter fashion. Our residents are sticky and renewals strong. present conditions seem to reflect a combination of two reasonably anticipated scenarios, moderation of the unprecedented rent growth over the past 15 months and the return of pre-pandemic seasonal leasing norms. Within that framework, we will continue to focus intensely upon operations, renovations, and preparing our team and assets for the return of spring leasing season early next year. These priorities keep us on track with IPO forecasts and ready for the macroeconomic bumps and uncertainty that may lay ahead. Externally, the transactional market has practically halted, and the price discovery stalemate between sellers and buyers seems to be holding things in check until interest rates and inflation stabilize to foster less uncertainty. We are looking with discretion and discipline for acquisition opportunities but that time may yet be just over the horizon. The upcoming U.S. elections and the war in Ukraine are, of course, only adding to this global uncertainty. Housing unaffordability has gone from bad to worse, and while recently completed luxury supply is hitting across Sunbelt markets, new construction of all housing is largely slowed, even halted. Among other things, our portfolio is designed with a defensive nature for just such times as these, and we are well positioned to deal with potential economic uncertainty. We like the resilience of our portfolio, and we are confident that our ground team can respond to a changing economic environment. It's good to be in the middle of the middle. Now I'm pleased to turn things over to Derek Lau, our Chief Financial Officer.