Dream Industrial Real Estate Investment Trust

Welcome to the Dream Industrial REIT first quarter 2024 results conference call on Wednesday, May the 8th, 2024. Please be advised that all participants are currently in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. During this call, management of Dream Industrial REIT may make statements containing forward-looking information within the meaning of applicable securities legislation. 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. Additional information about these assumptions and risks and uncertainties is contained in Dream Industrial REITs filings with securities regulators, including its latest annual information form and MD&A. These filings are also available on Dream Industrial REITs website at www.dreamindustrialreit.ca. Your host for today will be Mr. Alexander Sanikov, CEO of Dream Industrial REIT. Mr. Sanikov, please proceed.

Thank you. Good morning, everyone. Thank you for joining us today for Dream Industrial REIT's first quarter 2024 conference call. Speaking with me today is Linus Kwan, our Chief Financial Officer. We started 2024 with strong operating and financial results. as we focused on executing on our key growth drivers. We reported 7.1% comparative properties NOI growth during the quarter, which drove FFO per unit to $0.24 for Q1, in line with our guidance provided on the last call. We saw a 20 basis points lift in committed occupancy over the last quarter, driven by healthy leasing momentum. Our balance sheet remains strong with conservative leverage and ample liquidity. The industrial leasing market is dynamic but healthy. On one hand, availability has risen across our core markets when compared to the historic lows prevalent in the last couple of years. This was due to delivery of anticipated new supply to the market and a rise in sublease activity by tenants, largely in the 3PL industry. On the other hand, construction starts have fallen significantly over the past year. Speculative space under construction currently stands at less than 1% of inventory in the GTA and GMA markets. We are also seeing healthy levels of leasing activity and user acquisition demand. As a result, we continue to expect balanced supply and demand dynamics in our markets. We remain focused on driving NOI growth through achieving strong ransom leases that are rolling over and driving new leasing in our development projects. We expect that this will translate into continued FFO per unit growth in 2024 and beyond. Our outlook for the year remains intact. We continue to expect that organic growth in 2024 will be primarily driven by growing in-place rents as opposed to occupancy levels. Since the beginning of 2024, we have signed over 2 million square feet of new leases and renewals at an average spread of 43%. In Canada, we signed 1.6 million square feet of leases at an average spread of 52%, And in Europe, we signed half a million square feet of leases at an average spread of 11%. Rental steps remain strong. Our recent development leasing activity has also been healthy, with approximately half a million square feet of new leases transacted or in final stages of negotiations across our pipeline in Ontario and Alberta. Furthermore, activity levels remain in good shape. We have been responding to multiple requirements for our development projects both on balance sheet and within our private ventures. Currently, we are engaging with prospective occupiers representing requirements of approximately 1 million square feet. Our 200,000 square foot net zero redevelopment at Courtney Park in Mississauga is a good example of this. The project has achieved substantial completion, and 60% of the building was leased in Q1 for a 10-year term with starting rent of $21 per square foot and annual steps of approximately 4%. We are in the process of finalizing a lease on the balance of the space at similar rates and terms. We expect this asset to contribute to over $4.5 million to our annual NOI on a run rate basis with rent commencement in Q4 2024. Our capital allocation priorities remain intact. Completion of our existing development project is the main use of our capital for the next 12 months. While our private capital partnerships do not require significant capital, these co-investment opportunities continue to drive incremental FFO per unit. Today, in 2024, we have completed over $180 million of acquisitions in the Dream Summit venture, which are accretive to our FFO per unit and our current total return pipeline profile. Our property management and leasing platform generated over $2.5 million in net margin for the quarter. We're also looking for opportunities to scale up our solar program, both in Canada and in Europe. We're advancing feasibility studies on multiple projects, resulting in yields on invested capital of over 10% on average. Our business is well funded to pursue these initiatives on a leverage neutral basis through existing liquidity and retained cash flow. In addition to these sources of liquidity, we are pursuing several disposition opportunities of non-strategic assets, We're currently in discussions to sell over $100 million of assets at compelling pricing metrics. Many of the prospective buyers are private groups, so the transactions may require longer execution timeframes. We expect to provide further details on these initiatives over the balance of 2024. I will now turn it over to Lennis to discuss our financial highlights.

Thank you, Alex. Our financial results for the first quarter were strong. Diluted FFO per unit was 24 cents, for the quarter driven by strong comparative properties NOI growth of 7.1% for the quarter and fee income generated from our property management platform. Our Q1 2023 FFO included 0.4 cents of lease termination income relating to an anticipated vacancy in Europe. Excluding this non-recurring income, our year-over-year FFO was relatively consistent with the prior year and in line with our guidance. Our net asset value per unit at quarter end was $16.72, a slight increase compared to the prior quarter due to higher asset values in Canada and stable values in Europe. We continue to actively pursue financing initiatives to optimize our cost of debt and maintain a strong and flexible balance sheet with ample liquidity. In January, we closed on a $200 million unsecured debt issuance via a reopening of our Series F unsecured bond at a lower implied interest rate than the original issuance in early 2023. The proceeds were partly used to repay $44 million of mortgage maturities and repay the outstanding $50 million balance on our credit facility, which bore an average rate of approximately 6.9%, with the remainder earmarked towards funding our development pipeline and contributions to our private capital partnerships. In May, we repaid an additional two European mortgages totaling $44 million, Our remaining unaddressed debt maturities of approximately $220 million for 2024 include our $200 million Series B unsecured debenture maturing in June at a floating interest rate, which is currently 4.5%, and a European mortgage maturing in August. We are in advanced discussions to refinance the Series B bond with a new unsecured term loan denominated in euros with a relationship lender. We expect to achieve a rate that is 50 basis points lower than the maturing bond based on the current market environment and more than 110 basis points lower than Canadian dollar-denominated debt. We ended Q1 with leverage in our targeted mid-30% range. With total available liquidity of over $600 million, we retained sufficient capital to execute on our strategic initiatives. Given our private joint ventures are reported on an equity-accounted basis, our net debt to EBITDA could fluctuate quarter over quarter. We expect net debt to EBITDA to average low eights on a run rate basis for 2024, which is lower than 2023 and the run rate prior to the summit transaction. For 2024, we expect our in-place rents to grow in the high single-digit percentage range by the end of the year. Our outlook for comparative properties NOI growth remains intact in the mid-single-digit range on a constant currency basis, primarily driven by contractual rent steps and rent spreads on leasing. We are expecting that in-place occupancy will remain largely flat on average for the year. We are expecting some space to come back to us in Q2 and Q3, so in-place occupancy levels may fluctuate quarter over quarter. we are reiterating our prior guidance of mid-single-digit FFO per unit growth in 2024, which is predicated on current foreign exchange rates, leverage levels, and interest rate expectations. Looking further out to 2025, we expect that the pace of organic growth within our portfolio will continue to exceed the pressure from higher interest rates as 93% of our debt maturities for next year occur in November and December 2025. With some development assets achieving stabilization by the end of this year, as well as upcoming lease maturities in late 24 and early 25, we expect both NOI and FFO per unit growth to accelerate into 2025. I will turn it back to Alex to wrap up.