What Dream Industrial Real Estate Invest Trst (DIR.UN) Said on Its Q3 Earnings Call

Key Points

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• Q3 operating performance improved: Diluted FFO rose 3.8% year over year to CAD 0.28 per unit, while comparative-property NOI increased 8.5%. Leasing spreads remained strong, including a 32.4% weighted average spread on leases transacted since the start of Q3.

• Management maintained its 2026 outlook for average occupancy above 94%, comparative-property NOI growth toward the high end of its 7%–8% range, and FFO per unit slightly above the midpoint of CAD 1.08–1.10, subject to foreign exchange and interest-rate assumptions.

• The company completed CAD 569 million in acquisitions and reported pro forma liquidity of about CAD 640 million after issuing CAD 300 million of debentures. Management also flagged uncertain trade and interest-rate conditions and said negotiations for power delivery at two sites remain an early-stage opportunity.

Dream Industrial Real Estate Invest Trst (TSE:DIR.UN) reported higher third-quarter funds from operations as rising rents and leasing activity helped offset the cost of refinancing debt at higher interest rates. Management reiterated its 2026 outlook while pointing to a more uncertain economic backdrop.

The industrial property owner reported diluted funds from operations, or FFO, of CAD 0.28 per unit for the quarter, up 3.8% from a year earlier, Chief Financial Officer Lenis Quan said on the earnings call. Comparative properties net operating income, or NOI, rose 8.5% both for the quarter and year to date.

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Chief Executive Officer Alexander Sannikov said long-term interest rates rose sharply in the second half of the quarter and that Canada-U.S. trade conditions remain uncertain. Still, he said leasing activity and absorption in Canada had been encouraging, while European occupier markets were performing well.

Leasing Spreads Support Growth

From the start of the year through the end of October, Dream Industrial transacted 4.6 million square feet of leases across its wholly owned portfolio at a weighted average spread of 22.9%, Chief Operating Officer Gord Wadley said. The total included 1.7 million square feet of new leasing.

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Since the beginning of the third quarter, the company transacted nearly 1.6 million square feet at a weighted average spread of 32.4%, including spreads of 59% in Ontario and 55% in Québec. Canadian deals included average annual contractual rent increases of approximately 3%, Wadley said.

Canadian in-place occupancy was 95.5% at quarter-end, 200 basis points higher than a year earlier but slightly lower than in the preceding quarter. Wadley attributed the sequential decline primarily to an anticipated tenant departure from a 100,000-square-foot building in the Greater Toronto Area. The company is evaluating leasing and sale options for the property and expects a re-leasing spread of approximately 100%.

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Western Canada led regional comparative properties NOI growth at 19.8%, followed by Québec at 17.6% and Ontario at 6%. Wadley said Western Canadian vacancy was at record lows, while Toronto-area incentives had been trending lower. In Europe, he cited healthy absorption and rent growth in the U.K. and the Netherlands, although he described the French big-box market as relatively soft.

Sannikov said he expects positive leasing spreads in 2027 and on the vast majority of leases expiring in 2028. He did not provide a growth forecast for those years, but said contractual rent increases and potential occupancy gains should also contribute to NOI growth.

Acquisitions and Venture Growth

Dream Industrial has completed CAD 569 million of acquisitions in its wholly owned portfolio since the start of the year, adding more than 2.7 million square feet in Canada and Europe, along with five development sites. Excluding the Chancerygate assets, the acquisitions had an approximately 6% going-in yield and a 7% mark-to-market yield, Sannikov said.

The August Chancerygate transaction marked the company’s entry into the U.K. multi-let industrial sector. Sannikov said leasing at the development projects was tracking in line with plan and that the wholly owned projects were expected to achieve an approximately 8% unlevered yield on cost upon stabilization.

In its private ventures, the Dream Summit joint venture acquired a 1.5 million-square-foot Edmonton portfolio during the quarter, while the DCI joint venture acquired a 2.1 million-square-foot Greater Toronto Area logistics portfolio after quarter-end. The combined purchase price was just over CAD 800 million, at an approximately 6% going-in capitalization rate.

Net property management and other income rose 29% from a year earlier to CAD 3.3 million in the quarter. Sannikov said the company expects its net property management margin to exceed CAD 16 million on an annualized run-rate basis by the end of 2026.

Liquidity, Outlook and Tenant Watch

Dream Industrial ended the quarter with leverage of 38.5% and net debt to EBITDA of 7.3 times. After quarter-end, it issued CAD 300 million of unsecured debentures maturing in October 2030, with proceeds swapped into euros. Quan said the company’s liquidity was approximately CAD 640 million on a pro forma basis, positioning it to address CAD 250 million of debentures due in December and fund development and solar programs.

Quan reiterated expectations for full-year average in-place occupancy above 94%, comparative properties NOI growth at the higher end of the previously discussed 7% to 8% range, and FFO per unit slightly above the midpoint of the CAD 1.08 to CAD 1.10 range. The outlook remains dependent on current foreign exchange rates and interest-rate expectations, she said.

Management also addressed Québec tenant Spectra, which is operating under Companies’ Creditors Arrangement Act protection. Quan said Spectra was current on rent and that there was nothing noteworthy on the broader tenant watch list. Sannikov said he was encouraged by the tenant’s prospects but cautioned that the outcome was not certain; if the property is returned, the company would be more likely to pursue a user sale than re-lease it.

Separately, Sannikov said Dream Industrial was in advanced negotiations for binding commitments for near-term power delivery totaling approximately 100 megawatts across two sites. The company is marketing the sites to potential users, though he said progress has been slower than management would like and described the opportunity as early-stage.

About Dream Industrial Real Estate Invest Trst (TSE:DIR.UN)

Dream Industrial REIT is an owner, manager and operator of a global portfolio of well-located, diversified industrial properties. As at June 30, 2026, Dream Industrial REIT has an interest in and manages a portfolio which comprises 348 industrial assets (565 buildings) totalling approximately 75.7 million square feet of gross leasable area in key markets across Canada, Europe, and the U.S. Dream Industrial REIT’s objective is to deliver strong total returns to its unitholders through secure distributions as well as growth in net asset value and cash flow per unit underpinned by its high-quality portfolio and an investment grade balance sheet.

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