Release Date: February 19, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dream Industrial Real Estate Investment Trust (DREUF, Financial) achieved its operating and financial targets for the fourth quarter and full year of 2024, demonstrating business resilience.
- The company reduced leverage on a net debt to EBITDA basis from 7.7 times to 7 times in 2024, marking the fourth consecutive year of FFO per unit and free cash flow growth.
- Average in-place rents increased by 7% in 2024, outpacing the pressure from lower occupancy and driving comparative properties NOI growth of 4.6% for the full year.
- DREUF signed over 7.3 million square feet of leases in 2024, exceeding 2023 in total leasing volume, with a consistent spread, and continued leasing momentum into 2025.
- Significant progress was made on the development pipeline, with substantial completion of four projects at an average expected yield on cost of 6.3%, adding more than 1.6 million square feet of high-quality space.
Negative Points
- The company dealt with 600,000 square feet of unplanned lease terminations in 2024, impacting financial performance.
- Despite growth, the FFO per unit growth was on the lower end of initial guidance due to unplanned lease terminations and higher average cash balances.
- The Montreal market experienced several quarters of negative absorption, although vacancy rates have begun leveling off.
- The national construction pipeline has fallen by over 25 million square feet since mid-2023, indicating a slowdown in new construction.
- There is ongoing uncertainty with respect to trade in North America and Europe, which could lead to volatility in the near term.
Q & A Highlights
Q: Does the guidance include any disposition assumptions?
A: Alexander Sannikov, CEO: The guidance does not explicitly factor in disposition assumptions. However, our capital recycling program is ongoing, and we continue pursuing dispositions. We don't expect these to materially impact the overall FFO outlook, and any completed dispositions will be accretive to our results.
Q: What is the timing for the blend and extend refinancing?
A: Lenis Quan, CFO: We are looking to complete the refinancing early, ahead of the late November maturity, likely in late Q1 or early Q2.
Q: Can you provide details on the acquisitions within the Summit JV, specifically the cap rates?
A: Alexander Sannikov, CEO: The Vancouver deal has a cap rate north of 6%, with upside from mark-to-market. For the GTA portfolio, we haven't disclosed detailed cap rates due to vendor confidentiality, but metrics are consistent with our previous Summit JV transactions.
Q: How is the Quebec market performing, especially with Amazon's operations?
A: Alexander Sannikov, CEO: We don't have Amazon exposure in Quebec. The Amazon announcement has led to an uptick in large bay requirements as their footprint is reallocated to other logistics providers. Demand from small and mid-bay tenants remains solid.
Q: What is the expectation for CPNOI growth and occupancy in 2025?
A: Alexander Sannikov, CEO: The CPNOI guidance of 6% to 8% assumes relatively flat average occupancy for the year. We expect occupancy to increase as the year progresses, but this is not factored into the guidance.
Q: Can you provide an update on the data center power initiatives?
A: Alexander Sannikov, CEO: We are advancing power applications and pursuing more opportunities. We are engaging with potential joint venture partners, and the execution of the strategy can proceed in parallel with power procurement.
Q: What is the outlook for market rents and potential acquisitions in Vancouver?
A: Alexander Sannikov, CEO: We see market rents as stable. The 6% cap rate for the Vancouver acquisition is partly due to its industrial outside storage nature. We are interested in similar assets, which are rare and offer attractive economics.
Q: How does the FFO guidance account for potential tariffs or trade uncertainties?
A: Alexander Sannikov, CEO: The guidance is not explicitly tied to tariffs but factors in broader uncertainty. The 9% FFO guidance does not assume zero reserves, but reflects a reasonable range of outcomes considering the trade environment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
