Dream Industrial REIT has released an update that outlines over $1 billion in investment and development activity currently in its pipeline, as well as an equity offering which could raise up to $230 million.

The update says Dream (DIR-UN-T) is in “exclusive and advanced negotiation” to acquire $469 million in industrial assets and land in Canada, Germany and the Netherlands. In addition, it is bidding on up to $350 million in additional properties.

On the development side, Dream is either constructing or in advanced planning for over $150 million of development and value-add projects and has an outstanding $74-million commitment toward its investment in an open-ended U.S. industrial fund.

Dream’s planned acquisitions

The acquisition activity includes 16 income-producing assets, for a total expected purchase price of $434 million:

– In Germany, there are 10 assets comprising 2.3 million square feet for $261 million. The properties are 98 per cent occupied by “strong credit-quality tenants” with in-place rents approximately 13 per cent below market rates.

– In Canada, there are three assets totalling 317,000 square feet in the Greater Toronto Area (GTA) for a price of $80 million. The average in-place rent of the assets is approximately 27 per cent below estimated market rents, allowing for significant organic revenue growth upon expiry of existing leases.

– In the Netherlands, there are three properties totalling 416,000 square feet for $93 million. One of the sites offers over 90,000 square feet of potential expansion – or 70 per cent of square footage – with a forecast yield on incremental cost of over five per cent.

The going-in capitalization rate on these assets is estimated at 4.7 per cent. All the acquisitions remain subject to diligence and are expected to close in the first half of 2022.

Although Dream Industrial has not provided any additional details, the $350 million in additional properties on which it is bidding are all in its target markets.

“Our ability to consistently source investment opportunities that are above the average quality of our portfolio and are accretive to our return profile allows us to maintain a high-quality portfolio that is well-positioned to generate strong organic growth over the long term,” Dream Industrial CEO Brian Pauls said in a prepared statement.

“Our strategy to upgrade the quality of the portfolio while maintaining a robust and flexible balance sheet has significantly improved the resiliency of our business, allowed us to generate solid diluted FFO-per-unit and NAV-per-unit growth, and we are poised to continue to deliver significant value to our unitholders.”

Two land parcels in Canada

The two land parcels it is to acquire are in the GTA and the Balzac sub-market of Calgary, totalling 30 acres. Together the sites are expected to be acquired for approximately $35 million with closings also expected in the first half of this year.

Dream plans to develop approximately 600,000 square feet of high-quality, well-located space at the two properties in the medium term.

Its ongoing development program includes projects planned to deliver 2.4 million square feet of new space in the GTA, the Greater Montreal Area and Germany.

In addition, on the sustainability front a solar panel installation program is underway in Alberta and the Netherlands, and the trust is pursuing value-add opportunities across its portfolio. Capital outlay for these initiatives in 2022 is forecast to be over $150 million.

In the U.S., Dream says its managed properties grew from 7.7 million square feet as of June 30, 2021 to 8.4 million square feet on Dec. 31.

$230-million equity offering

As part of its financing for the acquisitions and other activity, Dream Industrial will offer, on a bought-deal basis, 12,270,000 units at $16.30 per unit to a syndicate of underwriters led by TD Securities Inc. Including an over allotment option, the offering could raise up to $230 million.

It is expected to close on March 9.

Other financing for the acquisitions, development and other activity will be provided from cash on hand and Dream’s credit facility. Following completion of the offering and tis activity, Dream expects its net debt-to-total assets ratio to be in the mid-to-high 30 per cent range.

Dream Industrial and its 2021 performance

The REIT has been on a rapid growth trajectory during the past 15 months.

As of Dec. 31, 2021, it owned, managed and operated a $5.7 billion portfolio of 239 industrial assets (351 buildings) comprising approximately 43 million square feet of gross leasable area in Canada, Europe and the U.S. At the end of 2020, it had held 177 assets comprising 27.3 million square feet, with a fair value of $3.2 billion.

The portfolio primarily consists of distribution and urban logistics properties.

In its 2021 financials, Dream Industrial reported $2.4 billion in acquisitions during the year, which added over 15 million square feet to its portfolio across North America and Europe. It also seeded the U.S. industrial fund in partnership with other institutional investors.

The REIT acquired about 115 acres of industrial development land in the GTA and Calgary areas.

Net rental income for 2021 was $218 million compared to $169 million a year earlier, while funds from operations rose to $176.6 million from $119.6 million. Diluted FFO per unit rose to $0.81 per unit from $0.71.

Net income was $608.3 million compared to $200.1 million a year earlier.

It ended 2021 with over $500 million of total liquidity.

Dream Industrial reported its five-year cumulative total return to be 177 per cent.