Dream Industrial Real Estate Investment Trust (DIR-UN-T) and Dream Unlimited Corp. (DRM-T) have formed a $1.5-billion develop-to-hold joint venture with a “leading global sovereign wealth fund” to buy development properties and build industrial facilities in the Greater Golden Horseshoe Area.

The strategy is to acquire $500 million worth of development sites and then build what the Dream partners call “high-quality, best-in-class industrial assets.” They will then continue to own the properties after stabilization.

Dream Industrial REIT will have a 25 per cent interest in the venture, with the wealth fund holding the other 75 per cent.

“We are excited to work with a reputed global partner in building best-in-class assets in one of the strongest industrial markets in the world,” said Alexander Sannikov, chief operating officer of Dream Industrial REIT, in the announcement.

“We are extremely bullish on the GTA industrial market due to the strong demographics and significant scarcity of buildable land.

“With older vintage well-located product trading at record high valuations, we will remain opportunistic in sourcing properties that are attractive against our target hurdles and screen well against economic rent and replacement cost.”

Brampton, Cambridge properties seed JV

A Dream Asset Management subsidiary will be the asset manager for the properties. The REIT is expected to provide property management and accounting, construction management and leasing services at market rates.

The REIT will also seed the venture with two development sites for $98 million:

– Brampton East Lands is a 30-acre parcel in Brampton, which can support a 550,000-square-foot-plus logistics facility with targeted completion date in 2025. Dream acquired the site in April 2021 and will contribute it for $70.5 million;

– Maple Grove Road is a 28-acre land parcel in Cambridge, which should support the development of approximately 420,000 square feet in the next 24 months. Dream acquired the property in December and it is being contributed for $27.5 million.

The joint venture will also acquire a 10-acre site immediately adjacent to the Brampton East Lands for $23 million.

Together with the existing 30-acre site, this land parcel can support a 300,000-square-foot building targeted for completion in 2025. It is expected to close in the coming weeks.

Following the vend-in and acquisition, Dream Industrial REIT expects to realize net proceeds of approximately $67 million. The closing of the initial vend-in to the joint venture is expected to occur later this month.

“We believe that developments are an attractive way to add brand-new product at attractive economics to the REIT,” Sannikov said in the release.

“We believe that this partnership will allow us to enhance our exposure to developments and allow us to improve the overall quality and value of the business quickly and safely.”

About Dream Industrial REIT and Dream

Dream Industrial REIT is an unincorporated, open-ended real estate investment trust. As of Dec. 31, the REIT owned, managed and operated a portfolio of 239 industrial assets (351 buildings) comprising approximately 43 million square feet of gross leasable area across Canada, Europe and the U.S.

The REIT’s objective is to continue to grow and upgrade the quality of its portfolio, which primarily consists of distribution and urban logistics properties.

Dream Unlimited Corp. is a developer of office and residential assets in Toronto, owns stabilized income generating assets in both Canada and the U.S., and has an established asset management business.

Its entities hold $15 billion of assets under management across three Toronto Stock Exchange-listed trusts, a private asset management business and numerous partnerships.

Dream also develops land and residential assets in Western Canada.