Dream Industrial REIT (DIR.UN-T)

Attractive valuation, about 25-30% undervalued. Last-mile distribution. Europe is seeing positive fundamentals, especially in the Netherlands and Germany. Add on weakness, sell on strength.

He focuses on supply and demand, and then goes bottom-up looking for discounts. Fundamentals in industrials in Canada and Europe are far superior today to US multi-family, especially in the Sunbelt. 

It's a new construction supply problem, and demand won't be able to keep up. DRR.UN owns an older portfolio in key Sunbelt markets. Wide discount to NAV. Low liquidity, so no premium.

DIR.UN has stellar internal growth prospects. Spread between in-place rents and market rents gives them an advantage. He'd choose this one. New construction will fall off 15% into next year, and empty space will be absorbed.

Great setup. Will capture the spread on market rents. Book value is near $17, so it's at near a 25% discount to NAV. Single-digit growth this year and next. Europe is a great story, logistics of e-commerce really starting to have an impact.

Short-term moves are quite hard to predict, but on the monthly, momentum is currently negative. This means over the next month or more we might expect the probabilities of lower prices to be a bit higher than higher prices. On a weekly basis, momentum is bouncing back, and we might see a slight bounce over the next week or two, but there is resistance at $13. We expect there to be fairly strong support at $12.3, and if that is broken, then $11.5 may be up next. If it can break $13, then $14 is the next area of resistance. Overall, it's been in a downtrend for over a year, but we continue to like its fundamentals, and it pays a strong distribution yield.
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DIR.UN has a portfolio of 327 industrial assets, it has a 96% occupancy rate, a 5.4% yield, 10% FFO year-over-year growth rate, forward sales and earnings growth estimates are strong, and its FFO/debt ratio has been climbing over the past few years. We continue to like industrial REITs due to long-term tailwinds such as increased demand for data centers and the AI theme. We would be comfortable buying DIR.UN here for a long-term hold. We like its current price in the low $13s. 
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Cheapest play on industrial anywhere. 2/3 portfolio in Canada, 1/3 in Europe. Investment in the US. Likes it because spaces are really close to the population. Big gap of 46% between in-place rents and market rents. Robust internal  growth of 9-10% annually, with 20% discount to NAV. Yield is 5.4%.

Stock very interest rate sensitive (higher debt loads are expensive). But, could be a good time to buy given share price. Would recommend a small position. 

Industrial REIT sector very attractive right now. Doesn't own shares, but good sector. eCommerce and tight market driving business ahead. If interest rates fall, will drive shares higher. 

Wide discount to private market value. Thinks it will have the highest cashflow growth (estimated at 9%) of any REIT globally. Share price worth north of $18. Will benefit from dynamics of e-commerce, onshoring, reshoring.

Prefers GRT.UN, a better investment than DIR.UN. Steadier assets. Backed more by management. Only weakness is that US properties are suffering a bit. 

DIR.UN has good numbers, but issued equity in September, instead of selling assets, to get leverage down. Motivated by externally managed contract remuneration based on assets under management. Stock fell. Can't support management on any level. Supply's coming on, so the story's getting tired.

Europe and Canada, with major focus on Toronto and Montreal, which are seeing market rent growth of 40-50%. Strong internal cashflow growth, discount to NAV of $17-18. Quality. Yield is 5.40%.

Industrial REIT's are still a good investment. Dream has done well with its holdings in large cities. REIT's are under pressure with rising interest rates but it has been able to pass along some of this through increased rents.

In the Q2-2023, DIR.UN’s FFO per unit grew 14% compared to the same period last year to $0.25 per share. In addition, NAV grew 20% to $16.97 per unit compared to $16.64 last year, DIR.UN is trading at a wide discount to NAV. DIR.UN’s portfolio focuses on high-quality industrial properties. As a result, the occupancy level is consistent over the years, with the occupancy rate slightly down to 97.6% compared to last year of 98.6%, which indicates the stickiness in the company’s portfolio. DIR.UN has a track record of acquiring and managing properties to increase cash flow per unit, and generate consistent FFO per unit growth, also trading at a discount to NAV is an attractive valuation. We would be quite comfortable holding this name.
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In its Q1 2023, FFO per unit grew 13% compared to the same period last year. In addition, DIR.UN is trading at a discount to NAV of $17.

DIR.UN’s portfolio focuses on high-quality industrial properties. As a result, the occupancy level is still solid, with the occupancy rate in line with last year, around 98.6%, which indicates the stickiness in the company’s portfolio.

DIR.UN has a track record of acquiring and managing properties to increase cash flow per unit. We think going forward the investment thesis is still intact. We would be comfortable holding this name.
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EPS was ($0.06) and revenue was $81.46M for the recent quarter. Diluted funds from operations per unit was $0.25, an increase of 13.3%, and net rental income rose by 24.7%. Its net loss was largely driven by a fair value adjustment to financial instruments of ($64.6M) and other expenses of $43.3M. Since the previous quarter, DIR.UN has signed 0.9 million square feet of new leases and renewals at an average spread of 41% over prior or expiring rents. 

These were decent numbers, although, Dream Office REIT (D.UN) recently announced an agreement to sell 12.5M units of DIR.UN (roughly 50% of Dream Office's holdings of DIR) at a price of $14.20 per DIR unit. Dream Office then intends to use these proceeds to purchase 12.5M units of its outstanding D.UN units at a price of $15.50 per unit. For DIR.UN, this caused its price to fall to $14.20, the sale price of units, and for D.UN, this caused its price to jump by 18% to ~$14.9, slightly below the purchase price of $15.50. Dream Office has made this move as it mentioned the NAV per unit of D.UN as of March 31, 2023 was $31.50, and this move would increase its NAV to $35.85. Management is taking advantage of the steep discount to NAV on its D.UN units by selling some of its DIR.UN holdings.  

We would be OK buying here, given that the sale price was not at too significant of a discount to its recent close, and management is looking to capitalize on DIR.UN's success and buy its D.UN units at a steep discount.
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