Dream Industrial to buy four properties, issue $144M in stock

IMAGE: Dream Industrial REIT logo.Dream Industrial REIT (DIR-UN-T) plans to purchase four industrial properties in Toronto and Ottawa, as well as Columbus, Ohio, and is issuing a $144-million share offering in conjunction with the transactions.

In a release, Dream says it is in advanced, exclusive negotiations with several vendors to acquire the four multi-tenant industrial properties. It expects to pay approximately $107 million for the properties, though it has not provided any specific details on the potential purchase sites.

Two of the assets are located in the Greater Toronto Area, with the others in Ottawa and Columbus.

“We continue to make good progress and quickly execute on our strategies to add further scale in our target markets and to improve our overall portfolio quality,” said Brian Pauls, CEO of Dream Industrial REIT, in the release.

“Following the completion of these four acquisitions, we will continue to be well-positioned with a strong balance sheet and ample liquidity to pursue future investment opportunities, including an additional $200 million of acquisitions in our pipeline.”

The combined gross leasable area of these properties is approximately 797,000 square feet.

High-quality, well-located assets

Dream considers the assets high-quality and well-located in strong industrial markets. They contain diverse tenant bases, including logistics and consumer goods companies.

Overall occupancy is 99.4 per cent with a weighted average lease term of 6.5 years. The expected going-in capitalization rate is approximately 5.7 per cent, and the properties have weighted average annual rental escalators of approximately 1.3 per cent.

Dream also estimates in-place rents are 15 per cent below current market rates.

Dream has already waived conditions on one property in the GTA, and expects to close all four acquisitions in the second quarter.

The bought-deal offering is for 10,850,000 shares at a price of $11.55 per unit, and would raise about $125 million. The syndicate of underwriters led by TD Securities has an over-allotment option to purchase up to an additional 1,627,500 units, meaning the offering would raise $144 million if fully exercised.

Closing of the offering is subject to the customary conditions, including the approval of the Toronto Stock Exchange. It’s expected to close on or about April 25.

Dream plans to use the offering to fund the four acquisitions, to pay down its revolving credit facility and for general trust purposes.

About Dream Industrial REIT

Dream Industrial REIT owns and operates a portfolio of 244 geographically diversified industrial distribution and warehousing properties.

The portfolio comprises approximately 23.7 million square feet of gross leasable area in key markets across Canada and the U.S.

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